How to Determine the Right Measure of Loss

Jan 21, 2015

The ALLL is only successful given the accurate calculation of reserves for ASC 45-20 (FAS 5) pools and determining the right measure of loss. However, there are various ways that banks and credit unions can calculate this portion of the ALLL. This whitepaper discusses the various methodologies used, pros and cons of historical loss, migration analysis, PD/LGD and loss discovery method, and provides a brief overview of how to determine which method is right for your institution.

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