Canadian risk management outfit Algorithmics has landed a contract to provide credit risk data services and analytics for a consortium of European banks.
The Pan-European Credit Data Consortium (PECDC) has been established to create a shared database of historical credit loss data for use in risk analysis and effective allocation of economic capital in line with Basel II requirements. The PECDC currently has the participation of many European top 15 and several global top 10 banks.
Algorithmics has been selected to provide a suite of advice, tools and services relating to data pool design, source data collection, data-point validation, quality control and data normalisation. The end deliverable to PECDC member banks will be time-series data pools relating to all Basel corporate exposure categories.
In the initial phase of the project, loss and recovery observation data will be pooled and Algorithmics' software will be used to calculate benchmark exposure at default (EaD), recovery rate and loss given default (LGD) values for each exposure.
Default observation data is planned for a later phase, from which probability of default (PD) benchmark values will be calculated. Algorithmics will also produce aggregate statistics and analytical reporting by industry sector/geography in accordance with guidelines developed with PECDC member banks. Analytical reporting and graphing tools will be provided to PECDC members via a dedicated Web portal.