Credit Analytic Solutions
Transforming Credit Risk Management

PD Model Fundamentals – Banks: A Pioneer Model for Assessing Bank Creditworthiness

December 14, 2015   //   By Alma Chen and Giorgio Baldassarri

During the recent global economic downturn, the number of banks that defaulted rose to unprecedented levels. However, the high default rate for banks was not captured by most existing models developed in the marketplace, be it by model vendors or internally by financial institutions, corporations, or investors. This is partly because many existing models are based on the historical financial data collected by banks, and don’t take into account early warning signals or systemic risk factors such as the deterioration in the environment of a country’s banking industry and economy.

S&P Capital IQ’s new PD Model Fundamentals – Banks measures the creditworthiness of a bank in terms of its probability of default (PD) over a one-year time horizon. Our model is based on a new approach that combines cutting-edge modeling techniques with a comprehensive and up-to-date data set that goes far beyond standard financial ratios.

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