Why You Should Consider Using a Qualitative Scoring Matrix
Jan 21, 2015
A scoring matrix can be used within the qualitative and environmental portion of the allowance calculation to add objectivity. This consists of assigning a specific scoring based upon trends in qualitative and environmental factors. For instance, if there is a "slight improvement" in the economy, institutions using a qualitative scoring matrix would then assign an adjustment in basis points equivalent to a "slight improvement." If in the next quarter there is a "decline," they would then adjust accordingly. This qualitative scoring matrix is a way to add objectivity and ensure directional consistency in the justification of qualitative and environmental factors.