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Forecasting the Impact of COVID 19 on Credit Portfolios

ARTICLE| Tue Jul 21 2020

This article focuses on developing an approach to determine the impact of COVID 19 on credit portfolios.

In recent months, credit institutions (banks, credit unions and FinTechs) have seen disruption in a large portion of their credit portfolios due to COVID19. For most part, these organizations managed COVID-trigerred disruption of interest and principal repayments by either deferring principal repayments or by capitalizing both interest and principal repayments. In some cases, the retail portfolios were allowed a 1- month payment reprieve and the non-retail borrowers were authorized a 3-months period to normalize.

As economic activity begins to resume and some businesses begin to reopen under the new normal, a large cross-section of the economy still remains closed or is operating well below capacity, e.g., hospitality, entertainment and shared accommodation.

Regulatory authorities now require organizations to provide additional information covering the impact of COVID 19, such as:

The following worksteps can help us develop probabilities of cure, restructuring and default for the deferred loan obligations:

At BankingBook Analytics (, we work closely with our clients to determine the impact of COVID19 on their capital position, assist with refreshing strategy and improving collections and recoveries. Our software solution, Scenario Frontier ( helps businesses incorporate more severe scenarios both in terms of the scale and duration of the impact, helps develop budgets, forecasts and also quantifies risks. We meet our clients anywhere they are in their journey to become data-driven, implement the solution in the sandbox, and get clients' buy-in, and offer support 24X7.

Author - Sohail Saad

To learn more about BBA’s Scenario Frontier,