what Could Happen?
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Economic conditions rarely affect every market, sector, or borrower in the same way.
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BBA Scenario Intelligence translates forward-looking economic and market information into localized scenarios that can be used to assess how credit risk may evolve.
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BBA's scenario framework incorporates established stress-testing approaches, including Federal Reserve DFAST scenarios, which are adapted and localized for relevant markets, sectors and portfolio applications.
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The framework considers:
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Base
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Moderate Stress
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Adverse
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Severe
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1. SCENARIO INTELLIGENCE
1. SCENARIO INTELLIGENCE
FROM SCENARIO → CREDIT RISK
PREDICTIVE DEFAULT RATES
ECONOMIC INPUTS
LOCALIZED SCENARIOS
CREDIT-RISK DECISIONS
2. DEFAULT RATE INTELLIGENCE
What Happens to Credit Risk?
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Merton-Based Point In Time Default Intelligence
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Scenario-driven Point-in-Time (PIT) default rates mapped across 5–25 rating buckets.
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Key distinction: PIT rates reflect the expected credit environment under each scenario, rather than the Through-the-Cycle (TTC) approach typically used for regulatory capital purposes.
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Optional Factor Intelligence: Extend scenario-driven PIT default rates into predictive credit factors - such as DSCR, leverage, liquidity, LTV and sector risk - to identify why credit risk changes.
3. INSTITUTIONAL VALIDATION
2. DEFAULT RATE INTELLIGENCE
What BBA Can Validate?
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PD | LGD | EAD
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Credit models need ongoing validation to demonstrate that they remain accurate, discriminatory and stable over time.
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BBA’s Institutional Validation capability provides a structured framework for validating PD, LGD and EAD models, supporting regulatory expectations and internal model-risk governance.  ​
3. INSTITUTIONAL VALIDATION
Validation covers three core dimensions:
1. Discriminatory Power
Does the model correctly rank-order higher- and lower-risk obligors? decision.
2. Accuracy & Calibration
Do predicted risk parameters accurately reflect observed outcomes and rating-level default experience?
3. Stability
Are the relationships between risk factors and credit quality stable over time?
