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The determination of reserves based on the collective impairment concept, which represents the best estimate of the bank’s potential losses, is an integral part of the management decision making process.
- Development of loss default models to calculate impairment provisions
─ Development of models which make it possible to estimate the probability of default (PD) parameters and of loss given default (LGD) parameters, including analysis of the bank’s available statistics for loan development history and experience with collateral recovery
- Analysis of the bank’s approach to evaluating loan loss provisions
─ Analysis of the bank’s methodology of evaluating loan loss provisions for their compliance with the requirements of IAS 39 and market best practices
─ Review of the bank’s calculations and analysis of loan development statistics
─ Development of necessary recommendations aimed at improving the bank’s methodology and calculations
- Development of methodology for evaluating loan loss provisions in compliance with the requirements of IAS 39
- Assessment of credit default risk on the bank’s loan portfolio
─ Alternative assessment of the bank’s credit default risk and the amount of impairment provisions in accordance with the directives of IAS 39
- Benchmarking of the bank’s provision rates
─ Comparison of the bank’s provision rates with the current market rates
─ Benchmarking of the probability of default (PD) and loss given default (LGD) parameters