Credit Risk of Climate Change on Residential Mortgages
The ECB 2022 Stress Test
In this webinar, we present a case study for the Dutch residential mortgages based on the European Central Bank (ECB) climate stress test scenarios released in January. A key challenge associated with this bottom-up stress test exercise is the expansion of the physical risk scenarios. The impact of acute physical risk needs be incorporated at the location level to accurately reflect a property’s exposure.
Leveraging on the Moody’s ESG (formerly 427) scores, we translate the ECB’s regional assumptions into property-specific impact by projecting HPIs at the property level based on exposure to flooding risk. We employ the Moody’s Dutch Mortgage Portfolio Analyzer© to calculate the impact of transition and physical risks on projections of credit risk metrics (PDs, LGDs, and credit losses). We will demonstrate how the approach can be adopted to analyse the impact of climate change beyond regulatory stress test.
- Location-specific climate risk across Europe
- ECB scenarios
- Effect of climate transition risk
- Acute physical risk climate event
- Climate-adjusted credit risk metrics
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SpeakersPetr Zemcik Senior Director - Research Moody's Analytics
Cecilia Bocchio Associate DIrector - Research Moody's Analytics
Leonie Chatain Associate Director, Climate Product Specialist Moody's ESG Solutions
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Dr. Petr Zemcik is a Senior Director at the Moody’s Analytics London office who supervises a focused applied research team of risk modelers and data scientists located in the UK, the US, Czechia, and UAE. Petr leverages on his extensive experience as an engagement lead for internal and external projects to design and validate retail and corporate PD/LGD/EAD credit risk models for IFRS 9, A-IRB, and stress testing, as well as macroeconomic country and regional models for economic forecasting. His team currently concentrates on linking climate change scenarios to credit risk and on embedding macroeconomic scenarios across credit risk models, while also working on projects and products related to regulatory compliance for stress testing & ICAAP and CECL & IFRS 9. The team con tributes to the support of the following Moody’s credit risk products and models: Corporate Expected Default Frequency (EDF) for Risk Calc and Credit Edge; Credit Transition Model (CTM) & Moody’s Market Implied Ratings (MIR); and PD/Prepayment/LGD/EAD for retail portfolios in the Portfolio Analyzer (PA) platform. Petr previously worked at CERGE-EI, a joint workplace of the Center for Economic Research and Graduate Education of Charles University in Prague and the Economics Institute of the Academy of Sciences of the Czech Republic, and at Southern Illinois University in Carbondale. He holds a PhD and an MA in Economics from the University of Pittsburgh and an MSc in Econometrics and Operations Research from the University of Economics in Prague.
En Moody's ESG Solutions, Léonie es la especialista en productos climáticos para la región EMEA. Ella apoya a clientes asset manager, bancos centrales y bancos privados en su integración de datos climáticos con las estrategias de inversión, obligación de informar y procesos de evaluación de riesgos. Léonie trabajó anteriormente para la afiliada de Moody's, Four Twenty Seven, donde proporcionó datos y desarrolló análisis sobre el impacto físico del cambio climático para las instituciones financieras europeas. Graduada de la escuela francesa Sciences Po, Léonie tiene experiencia en ciencias políticas y gobernanza urbana, con un enfoque en ciudades sustentables y gestión de datos urbanos. Anteriormente, brindó consultoría sobre sostenibilidad urbana para una empresa constructora francesa.