SAARC FINANCE,
REGIONAL SEMINAR, ISLAMABAD
39
LGD Approach
Final LGD
Admin Cost
Cure Rates
Collateral Recovery Rates (CRR)
(e.g. land, plant & machinery)
Should represents the portion of defaults that are
upgraded back to
ORR 1-9 and returned to NIB Good Book.
ORR 1-9 and returned to NIB Good Book.
As such, not all
defaults result in a loss.
Product Recovery Rates (PRR)
(e.g. control over traded goods)
(e.g. control over traded goods)
Unsecured Recovery Rates (URR)
Historical recovery rates on an economic loss basis,
reflect, for example, time to recovery through
discounting of cash-flows
reflect, for example, time to recovery through
discounting of cash-flows
How to
justify that
LGD are downturn?
LGD are downturn?
§A
significant part of data for ‘economic’ recoveries
from downturn periods (2007/09) can be
used.
§Estimates
are first derived from analysis of asset specific
internal averages and supplemented with industry
benchmarks.
§These are
then fine-tuned by applying expert judgement.