Solid values and licensed procedures
Along with creditworthiness, the potential loss amount is another key parameter. As credit defaults usually only affect a part of the total amount owed, professional risk measurement takes into account both risk components: the probability of default (PD) and the loss given default (LGD).
RSU provides a powerful toolkit to assess both. Our procedures permit a statistically valid estimate, even in the context of IFRS 9 and the lifetime principle.
For the secured part of the amount owed, our loss given default (LGD) model uses a range of forecasting methods for the different collateral categories (real estate, securities, etc.). For the unsecured portion, we use statistical methods to estimate the recovery per customer segment (corporates, banks, etc.). Results are combined into a loss rate per customer or transaction.
Our credit conversion factor (CCF) model calculates the extent to which any open credit lines will have been used up by the assumed default date.