Case Study 1
Due to COVID-19, a top tier UK bank suspended litigation across all of their secured assets leading to an increase in size and worsening of Stage 3a balances. Additionally, as the forward look element of IFRS 9 models feeds in deterioration of an economic outlook over the next 2 years, the portfolio P&L charge saw a material raise.
The client requested delivery of a litigation restart strategy which would distribute losses stemming from repossessions of collateral so that they can be partially offset by provision releases through portfolio cures.
The second part of this request was to look at Expert Judgments and Model Overlays and, where prudent, release redundant conservatism from ECL estimates.
Perform COVID-19 ECL impact assessment covering the next two years with subsequent banding into cure and repossession cohorts.
Cohorts mapped to select collection & recoveries segments to help formulate a litigation restart plan with several restart options built out.
Revised strategy implemented to operational teams with Risk and Finance colleagues upskilled to operate to the new standard.
Model and model validation documentation plan developed to enable potential ‘hot spots’ to be identified and benchmarking against industry standards.
Ability to prudently and efficiently manage provision stock as well as be well prepared for upcoming stress test exercises.
Expert Judgement benchmarking will bring modelling infrastructure in line with an industry standard.
Capability to demonstrate to the Regulator an enhanced provision management capability and foresight.