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Managing Europe’s Deflation Risk Calls for a Cross-Country Credit Risk Score

During a session at Davos, the president of the European Central Bank indicated a willingness to buy loans of households and companies as part of managing deflationary risk in Europe. He will need a market to be created should the ECB be required to operate a monetary programme to thwart deflation in Europe.

One of the key prerequisites for this market is a transparent and internationally recognised benchmark that can measure credit risks at a loan level, and so enable a wide circle of investors to confidently invest. This is something that FICO has been working on for some time with major lenders, putting in a common credit score methodology across regions. This methodology also enables the risk, at a granular level, to be stressed under economic scenarios of the users own choice.

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