IRA has published actual performance and Basel II credit metrics for the top 50 US bank holding companies for year-end 2004. The report is based on data from the FDIC. These profiles represent a "bank only" view of the BHC, excluding non-bank activities, rolled up and weighted by the total assets of each US bank subsidiary. A copy of the report is attached.
Under Basel II, banks must not only rate the credit worthiness of each client, but the institution must also provide to regulators specific projections for future financial and credit performance, by loan type for each business unit. It is no longer sufficient for a bank to estimate, for example, that five percent of a loan portfolio will go into loss in a given year. Instead, the Basel Committee wants the bank to identify which specific borrowers in a given portfolio of loans are most likely to default.
In the US, detailed aggregate projections provided to regulators will be part of a BHC's public disclosure under Basel II. These projections, in turn, will be compared against the actual results for each bank subsidiary of a given BHC. Under this revolutionary, "self-rating" regime, investors and regulators will have an independent means of assessing the performance of a given bank against the Basel II projections provided to regulators by that institution's management.
Some of the performance and Basel II metrics in the report include:
Coverage = Provision for loan losses as % total defaults. Results < 50% generate a flag and are shown in red.
Probability of Default ("P(D)") = actual LTM gross defaults expressed as bond equivalent rating using industry break points.
Defaults = LTM observed loan and lease defaults in basis points.
Loss Given Default ("LGD") = percent loss after default per dollar lent.
WAM = weighed average maturity of the aggregate loan portfolio.
Exposure at Default ("EAD") = amount obligor could borrow immediately prior to default expressed as % of existing credit line.
IRA is a custom designer of risk analysis and valuation tools for credit officers, auditors, corporate lenders, regulators and other financial decision makers. The IRA Bank Monitor is the first commercially available Basel II benchmarking system for US banks, using âas filedâ data and calculations from taken from bank regulatory agencies.