PD Models
FR-PDThrough-the-cycle PD calibration, lifetime curves and rating transitions
Documentation
PD term structure for Internal Grade 1 → 8 over Years 1 → 5. Cumulative default probabilities feed the Stage 1 (12-month) and Stage 2 (lifetime) ECL formulas. Per-segment macro scalars are applied to base PD when forward-looking scenarios are evaluated. Validation by Model Risk Committee (MRC); failed models trigger recalibration.
PD Term Structure
Cumulative default probability by Internal Grade · 5-year horizon (FR-PD-01)
Model Validation
Gini · KS · AR vs threshold (FR-PD-03)
| Model | Segment | Gini | KS | AR | Thr. | Result |
|---|---|---|---|---|---|---|
| PD-CORP-V23 | Corporate v2.3 | 0.62 | 0.46 | 0.71 | 0.40 | Pass |
| PD-SME-V18 | SME v1.8 | 0.58 | 0.41 | 0.66 | 0.40 | Pass |
| PD-MORT-V12 | Mortgage v1.2 | 0.55 | 0.38 | 0.62 | 0.40 | Pass |
| PD-TF-V09 | Trade Finance v0.9 | 0.36 | 0.27 | 0.39 | 0.40 | Fail — Review |
| PD-PERS-V14 | Personal Loans v1.4 | 0.61 | 0.44 | 0.69 | 0.40 | Pass |
Recalibration scheduled — Model Risk Committee
Trade Finance (PD-TF-V09): MRC review scheduled Q1 2026
Discriminatory power thresholds: Gini > 0.40, KS > 0.30, AR > 0.40. Governance: MRC quarterly review.
Annual Rating Transition Matrix
From Internal Grade × To Grade (incl. Default) · diagonals highlighted (FR-PD-02)
| From / To | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Default |
|---|---|---|---|---|---|---|---|---|---|
| Grade 1 | 85.0% | 10.0% | 3.0% | 1.0% | 0.5% | 0.3% | 0.1% | 0.1% | — |
| Grade 2 | 7.0% | 78.0% | 10.0% | 3.0% | 1.2% | 0.5% | 0.2% | 0.1% | — |
| Grade 3 | 2.0% | 10.0% | 74.0% | 9.0% | 3.0% | 1.3% | 0.5% | 0.1% | 0.1% |
| Grade 4 | 1.0% | 3.0% | 12.0% | 71.0% | 9.0% | 2.5% | 1.0% | 0.3% | 0.2% |
| Grade 5 | 0.5% | 1.5% | 4.0% | 13.0% | 70.0% | 8.0% | 2.0% | 0.7% | 0.3% |
| Grade 6 | 0.2% | 0.5% | 1.2% | 4.5% | 13.0% | 70.0% | 8.0% | 2.0% | 0.6% |
| Grade 7 | 0.1% | 0.2% | 0.5% | 1.3% | 4.5% | 15.0% | 69.0% | 8.0% | 1.4% |
| Grade 8 | — | 0.1% | 0.2% | 0.5% | 1.2% | 4.0% | 15.0% | 70.0% | 9.0% |
Diagonal (maintained rating)Default (absorbing state)Higher migration probability
Macro PD Adjustment Scalars
Multiplier applied to base PD per Scenario × Segment (FR-PD-05) · MRC approval
| Segment | Base | Upside | Mild Downside | Severe Downside |
|---|---|---|---|---|
| Corporate | 1.00× | 0.92× | 1.18× | 1.55× |
| SME | 1.00× | 0.90× | 1.22× | 1.62× |
| Mortgage | 1.00× | 0.95× | 1.12× | 1.42× |
| Trade Finance | 1.00× | 0.93× | 1.20× | 1.58× |
| Personal Loans | 1.00× | 0.88× | 1.25× | 1.65× |
Multipliers > 1.00× flagged as adverse macro overlay; values are applied to base PD by segment per scenario. Approval: Model Risk Committee.