Credit Risk Measurement and Models: Credit Risk Models

Credit risk models are tools that banks use to support and inform decision-making at customer, business, and strategic levels. In addition to addressing governance requirements, investment is needed in systems and staff training to ensure models are effectively implemented and used correctly. Here we look at the key components of a credit model, the uses of credit model outputs, and the different stages of the credit model lifecycle. We also examine the challenges that banks face to ensure that model outputs are robust and effectively used by decision makers.