Moody's CreditCycle^TM

Integrating Regional Economics With Industry-Leading Consumer Credit Forecasting & Stress Testing

Overview

Moody's CreditCycle is an industry-leading solution to any stress testing or loss forecasting need. By linking a series of consumer credit models to econometric and statistical forecasting tools—and then combining them with our regional, national and international economic forecasting and analytic capabilities—the result is the most comprehensive consumer credit solution available: integrated consumer credit analytics and regional economics, driven by your own strategies and assumptions.

White Papers

• Macro Dynamics and Loan-Level Credit Risk Models
• Forecasting and Stress Testing Using Model Pool-Level Data
• Portfolio Stress Testing
• Vintage View of Mortgage Quality
• Macroeconomics of Consumer Credit Scores

Our Unique Approach

• How do your profit and loss forecasts incorporate regional business cycles?
• How do you stress test your consumer loan portfolio with consistent scenarios of underlying economic conditions and projections?
• How do you localize marketing and pricing to maximize effectiveness and returns while managing risks?

With Moody's CreditCycle, you can:

• Quantify risks and opportunities under different regional economic environments.
• Simulate the impact of policy adjustments you may be considering.
• Disaggregate performance by measuring the impact of key components and understanding their evolution based on assessments of underlying drivers:
  • Quality at origination.
  • Lifecycle component .
  • Prevailing conditions faced by existing account holders.
• Integrate Moody's Economy.com economic forecasts at the macro and regional levels.
• Customize economic scenarios and assumptions.
• Forecast the performance of existing as well as future vintages.
• Enjoy access to transparent and fully documented methodology.
• Customize model estimation and calibration to particular loan characteristics.
• Benefit from extensive in- and out-of-sample validation.

Applications

By incorporating regional economic forecasts with alternative scenarios, Moody's CreditCycle helps you improve your consumer credit functions such as:

Profit and Loss Forecasting

• Improve accuracy by incorporating economic impact and cross-product correlation at the regional level.

"What-If" Scenarios

• Enhance risk management processes by incorporating economically consistent scenarios.
• Quantify risk exposure using proven data and modeling techniques for both internal & external constituents
• Increase confidence in your analysis by incorporating standard downside scenarios (1in 10-year recession, 1 in 25-year recession) updated monthly and by creating your own economically consistent scenarios.

Scoring and Credit Decisions

• Improve the predictive ability of customer scores by incorporating economic forecasts from highly experienced economists into credit decisions.

Sensitivity Analysis

• Quantify the impact of economic changes on credit quality.
• Adjust your strategy and policies to minimize risk and maximize opportunity from business cycle variations.

Investing

• Evaluate opportunities and risks in the asset-backed securities markets
• Do interest rate spreads on ABS and MBS pools adequately reflect current and prospective economic and credit conditions?
• Are interest rate spreads appropriately discounting regional economic and credit differences across pools?
• What institutions may underperform or outperform based on the economic fundamentals of the regions in which they operate?

Benchmarking

• Measure the performance of your portfolio against the industry in your operating regions as well as in target markets.

Who Benefits from Moody's CreditCycle?

• Loss forecasting teams
• Consumer loan portfolio managers
• Credit officers
• Risk managers
• Regulatory and compliance
• Collection departments
• ABS & RMBS investors

Solution Highlights

• User-friendly, graphics-based, and point-and-click application interface.
• Multiple graphic and tabular ways to visualize data.
• Flexible and secure data entry, updating and exporting environment.
• Easily integrated with portfolio management tools such as RiskFrontier.
• Accommodates explicit assumptions on internal credit policy to road-test management actions.
• Access to our highly experienced economists and consumer credit practitioners.
• Two conferences a year and quarterly newsletters focused on the latest in consumer credit.