Prescio Consulting was retained to complete a validation of the Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD) models of a major U.S. bank.

The PD models were based on scorecard and logistic regression methods with other major third party vendor products used in some cases, and the LGD models were collateral based. The modeling process was reviewed based on the latest Basel II banking regulations and industry standard methodologies, including factor selection, scorecard and weight development, logit transformations, and back-testing techniques. The model maintenance and governance procedures were also reviewed for the validation.