Model Validation Services for Commercial Credit Risk
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Moody’s Analytics independent and unbiased model validation solutions improve and automate your firm's model risk management processes.
Independent model validation is an integral component of model risk management in today’s highly regulated financial environment. Poorly designed and functioning models can undermine otherwise solid financial reporting, underwriting performance, expected loss calculations, capital allocation, and strategic decision making. Regulatory guidance has placed more scrutiny on model validation and model risk management practices. It has fostered a company-wide view of models, the modeling process, and model governance practices.
Moody’s Analytics best-in-class model validation solutions help management and regulators stay up-to-date on model performance and associated risks. Our offering includes, data validation, model analytics and pricing, remediation, regulatory reporting and documentation, suitability assessments, workflow, and predictive sensitivity testing.
Make better, faster decisions with transparent, explainable, and interpretable models:
- Evaluate conceptual soundness of your internally- or externally-built models, using your portfolio’s data or external sample with similar characteristics
- Assess performance of the model through leading industry practices leveraging statistical analysis
- Validate material model assumptions, methodologies and, associated parameters on a recurring basis
- Conduct outcomes analysis to determine the accuracy of the model output based on model objectives
- Verify that the model assesses material risks of the portfolio and ensures reasonable mitigation actions
- Evaluate model interaction and integration within the enterprise-wide risk management system
- Provide comprehensive documentation for third party review
- Assess model compliance with established regulatory guidance on model risk management
We can help in validating and automating the monitoring process for various models, including:
- Internal credit risk rating models (i.e., PD, LGD, EAD)
- Market risk, pricing and valuation models (e.g., bonds, derivatives, etc.)
- Financial reporting models, regulatory capital and economic capital models
- Managerial decision making models
- Top-down, bottom-up and probability transition stress testing models
- Liquidity risk and operational risk models
- Catastrophic risk and insurance risk models (e.g., Underwriting, Reserving, Policy Behavior, etc.)
Proactively monitoring the financial health of borrowers and the risk level of your loan portfolio increases the profitability of your lending business.
Credit Risk Modeling
Moody’s Analytics delivers award-winning credit models and expert advisory services to provide you with best-in-class credit risk modeling solutions.
Current Expected Credit Loss Model (CECL)
Moody’s Analytics provides tools for the most crucial aspects of the expected loss impairment model, with robust solutions to aggregate data, calculate expected credit losses, and derive and report provisions.
Quantify diversification benefits across portfolios and define risk types that inform risk management and active asset allocation decisions.
Moody’s Analytics helps financial institutions develop collaborative, auditable, repeatable, and transparent stress testing programs to meet regulatory demands.
Automating the process of financial spreading and credit scoring increases loan application volume and helps lenders make better credit decisions.
Credit Risk Advisory Services
Moody's Analytics credit risk advisory services enable faster, better informed credit decisions through a holistic and consistent assessment of risk.