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Managing economic volatility — loss forecasting in a new era
In June 2009, the Federal Reserve Board mandated that the top 20 lending organizations perform risk stress testing based on certain economic scenarios. This requirement is expected to eventually expand to all banks.

As a result, companies can no longer rely on manual processes that consider past performance to determine future risk. Instead, lenders must rely on forward-looking tools that allow for economically stressed outcomes and include industry and performance benchmarking.

Experian’s Decision Analytics has partnered with Moody’s Analytics to provide organizations with better strategic and tactical planning tools. CreditCycle Plus, which is an enhancement to Moody’s CreditCycle™, allows lenders to assess how policy decisions and external drivers will influence future performance of consumer portfolios, measured against industry benchmarks.

Integrating regional economic factors with credit behaviors can help businesses more fully assess a consumer’s propensity for risk by responding quickly to expected market volatility and modifying underwriting policy, addressing high-risk segments within an existing portfolio and maximizing growth through strategic asset class selection.

Specifically, lenders can perform more robust loss forecasting predictions over a 24-month window. These forecasts allow clients to perform a number of loss forecasting functions, such as attrition rate; 30, 60 and 90+ days past due delinquency rate; the probability of default; and loss given default.

Advanced loss forecasting, stress testing and performance benchmarking capabilities can enhance an organization’s strategic and tactical planning and give lenders the tools they need to continue to succeed in a dynamic economy. To learn more, download the Moody’s CreditCycle Plus product sheet here or contact your Experian representative at 1 888 414 1120.

 

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