Managing in a multi-model world
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A client is looking at running one set of credit risk models for local regulator and one for global / parent regulator
Have we seen others do this? e.g. I believe some EU banks have done this for their UK mortgage portfolios for IRB given differences in regulatory opinions. Not sure whether we’ve seen similar in wholesale
If so, is there a nice framework to apply around which model to use for what purpose?
Or a set of key considerations?
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There is certainly precedent for this in loss forecasting, given various companies that need to follow both IFRS9 and CECL at different legal entity levels, and/or to follow different stress testing guidance for different regulators. I can’t think of a case where I’ve seen it for the primary credit risk rating models however (at least not for literally the same exposures receiving two different ratings)