Developing an IFRS 9 compliant model monitoring and validation suite with CHL Mortgages

2018 saw firms investing a colossal amount of time into finalising the first generation of IFRS 9 models to ensure they satisfied regulatory requirements. Implementation was no easy task.

Years on and the challenges from IFRS 9 remain prevalent. Enhancing existing models, managing and understanding provision volatility and quantifying model and forecasting error have emerged as key themes now that lenders have executed their models over several reporting points.

That's why mortgage provider, CHL Mortgages, has engaged with Jaywing to develop a comprehensive IFRS 9 model monitoring solution. Jaywing’s IFRS 9 model monitoring will cover a range of CHL’s residential and Buy-to-Let (BTL) products.

Jaywing began work on the project by providing independent model validation to CHL. It has now also developed a bespoke monitoring suite, which provides an up-to-date view of model performance. Our solution has now been fully implemented for CHL’s impairment calculations under IFRS 9.

“We chose Jaywing because they understood our specific business challenges. Jaywing quickly integrated with our teams to deliver IFRS 9 compliant monitoring, MI and validation, all on time and to budget.”

Kuan Ang, Head of Finance at CHL Mortgages

The complexities of IFRS 9 present new monitoring challenges for lenders and other financial service providers, particularly around longer-term, forward-looking models. These introduce a new dimension that is tricky to manage in a practical and informative way. The economic forecasts embedded in the models lead to a further difficulty of isolating sources of error to extract meaningful insight. We are uniquely placed to help lenders overcome these challenges, given its considerable experience in IFRS 9 monitoring and MI projects.