The physical risk scenario analysis presented in this document is based on submissions from pilot CSA exercise participants of loan-level PD estimates for the scenarios prescribed in the Participant Instructions.
Participants estimated loan-level PDs for all in-scope RRE and CRE loans to U.S. obligors in relevant NCA regions. The loan population included loans and/or credit facilities reportable in the FR Y-14M, Schedule A.1 – Domestic First Lien Closed-end 1-4 Family Residential Loan Schedule and Schedule B.1 – Domestic Home Equity and Home Equity Line Schedule that are directly held on the participant's portfolio as defined by the FR Y-14M Instructions, and in the FR Y-14Q, Schedule H.2 – Commercial Real Estate Loan Schedule.
For the common shock, the relevant NCA region was the Northeast. For the idiosyncratic shock, the relevant NCA region was selected by each participant and may differ across participants.
Unless otherwise noted, the analysis excludes one participant's estimates due to methodological differences that prevented aggregation across participants or comparison to baseline scenario estimates.
The analysis excludes all loans with 100 percent PD in the baseline scenario.
Baseline scenario figures reflect participants' estimates before the impact of the physical shock is incorporated. The baseline represents PDs reported by participants as of December 31, 2022, in their FR Y-14M Schedules A.1 and B.1 filings and FR Y-14Q Schedule H.2 filings. If a participant chose to estimate risk parameters using a different measurement approach from the one used to estimate the advanced approaches risk parameters reported in the corresponding FR Y-14 schedules as of December 31, 2022, risk parameter estimates as of December 31, 2022, were restated, using a consistent and comparable measurement approach to the one used in the pilot CSA exercise.
The average of participant estimates of PD is calculated as the average of loan-level PDs for in-scope loans in the relevant NCA region.
All averages are unweighted.
Transition Risk Methodology
The transition risk scenario analysis presented in this document is based on submissions from pilot CSA exercise participants of facility-level and loan-level PD estimates for the scenarios prescribed in the Participant Instructions.
Participants estimated loan-level PDs for in-scope Corporate and CRE loans. The loan population included active loans reportable in the FR Y-14Q, Schedule H.1 – Corporate Loan Data Schedule, and the FR Y-14Q, Schedule H.2 – Commercial Real Estate Schedule. Active facilities corresponded to Disposition Flag option 0 on FR Y-14Q, Schedule H.1, Field 98, or FR Y-14Q, Schedule H.2, Field 61.
The analysis excludes loans with 100 percent PD as reported by participants as of December 31, 2022, in their FR Y-14Q H.1 and H.2. filings, or restated PDs if a participant chose to report risk parameter estimates using a different measurement approach from the one used to estimate the advanced approaches risk parameters reported in the corresponding FR Y-14 schedules as of December 31, 2022.
Transition risk impact for an individual loan is defined as the largest annual difference in PD between the Net Zero 2050 and Current Policies scenarios over the 10-year projection horizon. See box 2 for more detail.
The average of participant transition risk impacts is calculated as the average transition risk impact for all in-scope loans.
All averages are unweighted.
Common obligor is defined as an obligor that has a corporate facility at more than one participant (using the obligor's legal entity identifier).