PROJECTS

TFRS 9 Financial Instruments Project

Ziraat Participation Bank, which provides service with the products and systems in accordance with participation banking principles, needed IFRS 9 validation and calibration studies in order to ensure the compliance with the regulations. During the project that started in December 2018, macroeconomic model and probability of default (PD) models were validated with statistical analyses recommended in literature and best practice documents. These analyses were finalized with the Bank’s expert opinion. Model methodologies were reviewed, and calibration studies for models were conducted with respect to these validation results and Bank’s maturing portfolio. As a result of the project, which was conducted within the limited time and finalized in January 2019, the Bank calculates IFRS 9 provisions with the models that represent its portfolio and comply with the standards.

 

 


Challenge

The need was validation of Macroeconomic and PD Models with appropriate statistical methods recommended in the literature and regulations and calibration of these models with respect to validation results and maturing portfolio of the Bank.

Solution

Validation of IFRS 9 models was conducted with the statistical methods. Within the calibration scope, various model scenarios were generated and calibration studies were finalized with the model that business units were agree on. All these studies were carried out through SAS Enterprise Guide and the model monitoring system for business units was structured on the tool.

Benefits

With the IFRS 9 Model Validation and Calibration studies,

  • Performance of the IFRS 9 models in last one year has been validated by statistical tests.
  • Calibration of macroeconomic model has been conducted with last one year data which includes economic fluctuations so that the model has been updated in line with current market conditions.
  • The methodologies and external data used for low default portfolio case, were replaced with matured and up-to-date internal data for calibration studies of PD Models.
  • Consistency of the calibrated models has been validated by analyzing the effects of new models on IFRS 9 provision calculations.
  • The compliance with IFRS 9 standards is ensured and IFRS 9 provisions calculations are conducted in line with up-to-date Bank and market data.