PayNet Absolute Expected LossTM enables lenders to derive Probability of Default, Exposure at Default, and Loss Given Default values to calculate Expected Loss and to determine prudent and defensible reserves for CECL.
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Expected Loss is a recognized best practice that facilitates active portfolio management and rationally objective risk based pricing. Lenders that manage accurate Expected Loss are consistently more profitable and carry better business valuation through the credit cycle. The requirements of CECL do not represent a minor evolution in your reserve process. For most lenders, CECL will require a whole new infrastructure of data and analysis. PayNet believes, properly implemented, Expected Loss will revolutionize your risk management practices.
Download Preparing for Current Expected Credit Loss - White Paper
Download Preparing for Current Expected Credit Loss - Abstract
Download Preparing for Current Expected Credit Loss - Executive Summary
View CECL Overview - Webinar
Probability of Default
Expected Loss requires empirically derived forecasts of the Probability of Default of each borrower in your portfolio. The question is how to create an accurate forecast with the limited loss experience available in your portfolio. PayNet delivers empirical data for your market footprint from the business cycles of the last decade. Furthermore, PayNet can provide you with the ultimate granularity of a distinct, quarterly calibrating, Probability of Default forecast for each borrower in your portfolio.
Download Measuring Default Risk - White Paper
View Establishing and Maintaining the Probabilities of Default - Webinar
Exposure at Default
Expected Loss requires prudent estimates of Exposure at Default backed up by historical performance data. The conservative answer is that all available credit will have been accessed at the time of default so the challenge is to provide data that will allow a better estimate. Realistically, most banks either do not have that data or they do not have enough of it to provide a statistically meaningful answer. PayNet can provide data on prepayments on good loans as well as bad ones that corresponds to a similar business profile to support a position on EAD.
Download Estimating Exposure at Default - White Paper
View Effectively Estimating Exposure at Default - Webinar
Loss Given Default
Expected Loss requires informed estimates of Loss Given Default that recognize not only the nature of the facility but the capability and practice of the lender. Estimates of Loss Given Default will have to be calibrated to the economic cycle just like Probability of Default. Financial institutions will need access to data that can provide the depth needed to persuade auditors and regulators of the most probable outcomes. PayNet can help you build and maintain cycle-calibrated Loss Given Default using our database of over 23 million commercial loan histories.
Download Loss Given Default - White Paper
View CECL LGD: How Much is This Going to Cost? - Webinar
CECL in Business Planning, Strategy & Reporting
It is critical that the information and calculation required for CECL becomes a key element in the planning process, communication to management and the Board, and ongoing monitoring of the credit portfolio. The intent of this paper is to look at the new information that has or will become available for the revised accounting procedures and observe how this can and should be used by three important audiences: the Boards of Directors, the Chief Executive Officers and the Chief Risk Officers who have the same objectives to protect the shareholders from loss while at the same time manage the institution profitably.
Download CECL: A Key Element in the Planning Process - White Paper
Download CECL: A Key Element in the Planning Process - Executive Summary
View The Role of CECL in Business Planning, Strategy & Reporting - Webinar