Private banking
Standardization of Basel regulatory models

Supporting the modeling of Basel parameters (PD, EAD, LGD) and model validation.

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Published on : 06 July 2023

Bank – Standardization of Basel regulatory models


In a logic of continuous improvement, this project aims to perform statistical/technical studies on the Loss Given Default (LGD) in order to extinguish the various recommendations (obligations) of the ACPR/BCE.  The production of new modeling databases is necessary as well as reports and statistical/technical studies in the framework of the Backtesting of internal models estimating the loss. The reconstruction of “new” statistical models is essential.

Double business and technical skills engaged

Consortia has mobilized the necessary skills to support the team responsible for the modeling of the Basel parameters (PD, EAD, LGD), of the scoring center, in the evolution of the LGD models in response to the ACPR and ECB audits, as well as the new expectations of the prudential authorities:

  • risk analysis
  • modeling
  • business knowledge in the Basel regulations
  • mastery of SAS

Analysis and exploratory studies

  • Create the modeling bases (starting point of the LGD model redesign)
  • Identify different anomalies, new technical approaches (e.g. studies on flow or stock modeling)

Realization of the modeling steps

  • Manipulate and transform data (SAS, Python), Check performance indicators
  • Develop quantitative tools to arbitrate the choice of variables
  • Produce indicators to justify modeling choices

Backtesting of LGD models

  • Creation of backtesting bases and application of the models (application portfolio)
  • Analysis of performance indicators and writing of reports

Accompanying the validation process

Defend the work done in front of the model validation bodies

  • Respond to questions from the internal inspection through ad hoc analyses
  • Delivering audit trails and precise documentation in accordance with regulatory requirements
  • Accompany the production launch of the LGD models built
  • Carry out BackTesting of LGD models


years of support on basel parameters


LGD models developed

Implemented know-how

Data Expertise

Data expertise with the use of SAS software

Business expertise

of credit risk and Bâloise regulations

Mastery of quantitative and financial tools and methods

to interpret and exploit structured loss data

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