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Migration Analysis

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Credit Risk and Migration Analysis

The Increasing Credit Risk Challenge

Regulatory oversight continues to become increasingly stringent due to the history of broad deterioration in asset quality, liquidity constraints, CRE and mortgage exposure beyond the sub-prime market, economic impacts on borrowers, and the influence of Basel.

  • Stagnant domestic economic issues and new upheavals in world credit markets continue to keep regulatory oversight center stage, and economic and political forces have become powerful drivers for tighter regulation.
  • Deterioration in asset quality is increasing the demand for finer portfolio stratification and reporting transparency - especially for CRE concentrations.
  • The credit risk components of Basel are stimulating lenders to re-examine their existing credit risk management systems and develop better estimates of their loan portfolio’s overall credit quality.

Regulators consistently identify Risk Migration Analysis as a key component of the MIS tool set for managing and reporting on Credit Risk and establishing and substantiating ALLL.


Risk Migration Analysis

Risk Migration Analysis considers upgrades and downgrades in the credit quality of a subset or entire loan portfolio as well as the potential for significant financial stress and/or loan default. Historical Risk Rating Migration enables lenders to utilize their historical loan data to perform several mission critical activities, including:

  • Establishing loss factors for ALLL
  • Providing input to credit risk models
  • Identifying candidates for loan review
  • Preparing for regulatory review
  • Detecting adverse trends
  • Calibrating dual rating systems


Historical Risk Migration (from 3/31/06 to 3/31/07)

The Risk Migration Analysis System provides a powerful and intuitive tool for performing migration analysis at the portfolio, obligor and loan level including summary results and drill down detail. 


Contact us for additional information on Migration Metrics Products and Services.