IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2025-228.html
   My bibliography  Save this paper

Credit Loss in Translation: Informing Bank Provisions and Capital Buffer Requirements with Forward-Looking Credit Loss Distributions

Author

Listed:
  • Mr. Marco Gross
  • Laurent Millischer

Abstract

We develop a model framework that can be used to derive the forward-looking credit loss distributions for banks' credit exposures, to use it for (1) assessing the adequacy of provisions at the bank-portfolio level; (2) macro stress testing; and (3) informing the sufficiency of capital requirements, both from a micro- and macro-prudential perspective. The model is semi-structural and simulation-based, entailing a large number of simulated macro-financial scenarios instead of employing handpicked scenarios and ad-hoc scenario weights. The way the model-based credit loss distributions are generated can be made compatible with IFRS 9 or any other accounting regime. The model codes are made available online along with this paper.

Suggested Citation

  • Mr. Marco Gross & Laurent Millischer, 2025. "Credit Loss in Translation: Informing Bank Provisions and Capital Buffer Requirements with Forward-Looking Credit Loss Distributions," IMF Working Papers 2025/228, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/228
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=571625
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2025/228. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.