13 Attribution Analysis

Attribution Analysis enables institutions and regulators to monitor the quality and health of financial institutions through identifying reasons for higher provisions, which result from a varied range of factors including but not limited to strategic decisions, quality of customers, and economic circumstances.

The Attribution Analysis feature offered in the OFS Loan Loss Forecasting and Provisioning application enables you to compare the results of two Runs (Processes) and understand the contribution of each factor that is involved in the computation process to the change in the result value.

The attribution analysis component is integrated into the OFS AAI application’s Process Modelling Framework (PMF). PMF is a design and execution framework that enables Process Pipeline developers to implement various pipelines modeled by business analysts. PMF consists of process modeling components for modeling pipelines and process monitor components to monitor instantiated pipelines of OFSAA applications. For detailed information about the usage of PMF, see the OFS Analytical Applications Infrastructure Process Modeling Framework Orchestration Guide.

Attribution analysis requires access to OFSAA and defining the attribution pipeline in PMF. Preparation of an attribution analysis definition and execution of the attribution pipeline are the final steps in attribution analysis. For detailed information about the usage of Attribution Analysis, see the OFS Attribution Analysis User Guide.

Specific to the Expected Credit Loss (ECL) computation, the Attribution Analysis process compares the account level ECL of two dates or Runs and computes the contribution of any or all factors to the actual change in ECL either in the same date or different dates. Later the reasons for the change in ECL are also calculated. The sum of all such contributions by each factor sums up the actual change in the ECL.

You can derive insights about changes in ECL potentially caused by any or all the following causes:

  • Change in IFRS 9 Stage
  • Change due to Carrying Amount
  • Change due to Undrawn Amount
  • Change in Credit Conversion Factor
  • Change in the Probability of Default (Marginal or Cumulative)
  • Change in the Loss Given Default
  • Change in the Exchange Rate
  • Change in the Provision Rate
  • Change due to Cash Flows or Forward Exposures
  • Change due to Effective Interest Rate
  • Change in the Time Factor (Bucket)
  • Historical Cash Flows changes (Cash Flows paid off)
  • Other changes are not covered in the preceding causes.

If an account is moved from one Classification category to another (reclassified), the account is treated as derecognized under the first category and newly recognized under the second category.

Detailed Attribution Analysis is performed for CVB and Collateral dependent methods, based on Mitigant Effect on Specific Provision, Forward Exposure, and CVB. Specific Provision and Forward Exposure methods use collateral. New factors such as Mitigant Value, Amortized Cost, and Deferred Balance are introduced and are used for Attribution Analysis performed on Specific Provision, Forward Exposure, and CVB.

The variable to the column mapping must be additionally configured in the FSI_LLFP_ATTR_COMP_VAR_MAPPING table that allows multiple columns to a single variable. This configuration is required if you are adding additional variables apart from the out-of-the-box provided variables.