Navigating Private Credit Markets Risks with Better Data

Data has never been more essential to making informed decisions, particularly in private markets where internal data at financial institutions is typically thin.

Data is vital for financial institutions to make well-informed decisions as well as to meet regulatory requirements, particularly for internal credit risk modelling and benchmarking. Complete data is highly valuable, but in areas such as private credit, there are challenges to finding the sources that can help to model risk.

Amid the ongoing economic uncertainty brought on by the Covid-19 health crisis, regulators have been responding by encouraging (in some cases mandating) increasing lending to households and small businesses to help them stay afloat. As a result, the need for accurate credit risk assessment has become increasingly important – and this relies on data.

Credit risk data directly feeds into bank models, enabling them to assess if, and when, they may fall short of regulatory capital and liquidity requirements. The data consumed by the internal models also informs business and strategic decisions – which are increasingly important during times of uncertainty.

In private credit markets, credit risk data is often unavailable or incomplete within banks’ internal data sets. Where the data is available, banks are often hindered by its poor quality and barriers to accessing and using the data across business units. At the same time, there are inherent difficulties in sourcing … [read more]

 

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