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The solution supports the configuration of segments. Each segment will contain customers' individual deals with similar risk characteristics. It ensures that different models can be applied for deals with different credit risk characteristics during ECL characteristics during Expected Credit Loss calculation.
This component is necessary if
- segmentation has not already been performed in the source and has not been delivered from a source
- a heterogenous portfolio requires the application of various statistical methods for ECL for Expected Credit Loss calculation
In FlexFinance segments can be configured taking criteria such as product type, cost center, type of customer, customer rating etc. into account.
The configuration is organised in set sets of rules. A set helps to determine, at a later point in time, which parameter and which characteristics were relevant for segmentation at the time when ECL when Expected Credit Loss calculation was performed.
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- selecting and applying the appropriate ECL appropriate Expected Credit Loss model including PD, LGD and EAD as well as
- considering the historical default information that is linked to the segment.
For example: if a segment "retail loans" and a segment "corporate loans" are considered during ECL during Expected Credit Loss calculation, segment-specific historical default information should be used for the calculation of PD and LGD.
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On the basis of the combination of segment and stage, the appropriate parameters for ECL for Expected Credit Loss calculation can be identified, taking the availability and relevance of performance data into account. For details about stage assignment, please refer to Stage Assignment.