Model Convergence in CCAR, DFAST, CECL, IFRS9, and Basel

First there was Basel II, with its subsequent years of interpretation, model development, review, documentation, and refinement. In retrospect, it’s surprising how much effort went into estimating 12-month forward default rates under an average economic scenario.

Then came stress testing. The Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Testing (DFAST) required banks to look further into …