Tag Archives: ifrs 9

Risk & Compliance FICO Is a Category Leader in IFRS 9 Solutions – Chartis

Chartis report cover
Jun222017

FICO has been named a Category Leader in IFRS 9 solutions by Chartis Research in its report IFRS 9 Technology Solutions: Market Update 2017. “Like other regulatory mandates of the past decade, IFRS 9 is another transformational event for all financial institutions (FIs),” the report states. “In all likelihood, it will reduce FIs’ profits and retained earnings, increase their loan loss provisions, and have a negative impact on their regulatory and economic capital. To mitigate these impacts, FIs will have to rely heavily on the rigor of their data management and the quality of their data, and on the application of Expected Credit Loss (ECL) modeling and overall governance.” The FICO® IFRS 9 Impairment Management Solution includes industry-leading predictive modeling for loss forecasting; software for high-speed model execution, loss reporting, process governance and “what-if” scenario analysis; and strategy consulting from advisors with extensive domain and analytics expertise. “Effectively addressing the challenges of this... [Read More]

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Collections & Recovery Collectors — Get Ready for the IFRS 9 Bucket Challenge

Ice bucket challenge photo
Jun012017

Remember the ice bucket challenge craze? Get ready for the IFRS 9 bucket challenge — it’s even more startling, and nobody’s standing by to give you a warm towel. Like GDPR, IFRS 9 poses major challenges for collectors, just as it does for accountants, IT, risk managers and anyone else in the credit business. So now let’s talk about what you can do. Note: While I’m just talking about IFRS 9 here, you do have to approach it and GDPR in concert, because in some areas they seem to be in conflict. You don’t want to gear up for IFRS 9 and then realize you have to undo some of your strategies or processes to avoid GDPR fines. Build your 30-day plan IFRS 9 says if a customer’s risk deteriorates — including becoming 31 days overdue — they go into Stage 2, and you have to start holding lifetime impairment.... [Read More]

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Risk & Compliance Unused Credit Card Lines Are a £90 Billion Problem in UK

Pile of credit cards
May302017

As the UK’s Financial Conduct Authority proposes that issuers reduce or waive interest rate charges for persistent credit card debt, it raises the question: Just how much credit card debt do Britons carry? The answer is: a lot more than they used to. FICO has just done research based on our FICO® Benchmark Reporting Service data, which includes the vast majority of cards issued in the UK. Our analysis shows that: Average credit lines on “Classic” cards (which excludes Premium cards, Student cards and Irish-issued cards) have grown 50% since 2002 to £5,062. The largest growth has been accounts which are 1 to 5 years on book (Established) and this vintage have the highest percentage of inactive accounts, 35%. Veteran (5+ years on book) has the highest % of unused credit on accounts which are spending. In January 2017 the average balance on accounts with limits £5,001 to £10,000, which... [Read More]

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Risk & Compliance Don’t Let “Averages” Mess Up Your IFRS 9 Impact Forecasts

IFRS 9 as digital clock display
May292017

The clock is ticking on IFRS 9 compliance. Preparing for Day 1 IFRS 9 impacts before models are fully built, tested and validated is a bit like preparing for a scheduled car crash: You know the event is going to happen and you know it will be expensive and painful, but you don’t yet know the exact amount of damage. It is tempting to seek comfort in averages from industry benchmarks or surveys. But just as you would never apply the brakes of your car during heavy rain based on the average stopping distance of an average car in average weather conditions, neither should you plan for your business’s IFRS 9 impacts based on average industry impacts alone. Don’t Go by Published Numbers A few widely published, well-intended surveys have attempted to prepare affected organisations for this event by providing estimated ranges and averages in respect of key impact measures.... [Read More]

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Collections & Recovery IFRS 9: Three Critical Areas of Focus for Collectors

May152017

My colleague Bruce Curry recently published a blog on “IFRS 9 & Collections – The 31 Day Time Bomb”. During my various client interactions, I can see that many businesses are developing and testing the impairment models that will give them a good understanding on the financial impacts that the new standard will have on their balance sheet performance, but the operational implications are currently less clear. From a practical perspective, I believe there are three areas across collections that should be reviewed to mitigate the increases in impairment that are expected to result from IFRS 9: 1. Pre-arrears strategy – These strategies have been a topic of conversation for a number of years and their success has been mixed. IFRS 9 means that it is now more important than ever to adopt a “prevention rather than cure” approach in mitigating the risk, and flow, of accounts into Stage 1... [Read More]

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Collections & Recovery IFRS 9 and Collections – The 31-Day Time Bomb

IFRS 9 as digital clock display
Apr052017

IFRS 9 may just be a new accounting standard, but accountants aren’t the only people scrambling to meet the January 2018 deadline. If you’re involved with consumer debt in any way, this regulation is going to change your world. (Unless, of course, you’re in the US – the name of the game for you will be CECL.) I recently presented a webinar on how IFRS 9 will impact collections, and in this post I’ll share two changes that will have a massive impact on everyone in debt collection, from in-house collectors to DCAs to debt purchasers. At 31 Days, Everything Changes When accounts roll from Stage 1 (low risk) to Stage 2 (impaired risk), it’s a big deal. 31 days is a hard trigger that sends an account from Stage 1 to Stage 2. Impairment for Stage 1 accounts is 12-month expected credit losses. Impairment for Stage 2 and 3 accounts... [Read More]

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