Future Loss Reserve Estimation

Current methods of provisioning for Allowance for Loan & Lease Losses (ALLL) are lagged processes as they are based on identified non-performing commercial loans or delinquent retail exposures. Since non-performing exposures are but a small fraction of a typical banking book, this lagged approach ignores the substantially larger segment of performing exposures and therefore underestimates losses and overestimates earnings. This is particularly true in a deteriorating portfolio.

Our Approach

For retail portfolios, our technology relies on more sophisticated processes beyond the traditional and more simplistic methods such as roll rate and vintage analysis. Our solution predicts potential loss rates for all accounts that are considered current and not just the accounts that are identified as being delinquent.


Our system facilitates rapid computation of loss rates for the full spectrum of risk classes that include both performing and non-performing categories. Loss rates can be generated for any future term or for the life of the portfolio pool.

Early Warning Indicator

As a predictive tool, PortfolioView™ provides an early warning of developing losses and a profile of these future losses. In contrast to the lagged historical basis for provisioning, PortfolioView™ calculates future expected losses based on embedded information about exposures. PortfolioView™ recognizes developing losses well in advance of delinquency or default when the exposures are identified as non-performing.

Our granular analysis of the commercial portfolios captures the earliest developing deteriorations to provide an accurate estimate of future loss rates by risk class for the entire banking book or for any segment of the portfolio such as industry, region, or cost center.

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