Technical advisory committee (TAC) for credit union data strategy and digital transformation
Date: Friday September 3, 2021
Time: 11:00 am – 12:00 pm
FSRA set up an optional information session with the Technical Advisory Committee (TAC) for Credit Union Data Strategy and Digital Transformation to discuss the modelling presented in the DIRF Adequacy Assessment Framework Consultation Paper. Other interested credit unions who are not members of the TAC and expressed interest were also invited.
The consultation closes September 9, 2021.
- FSRA staff reviewed the background to the DIRF Adequacy Assessment Framework Consultation Paper and work completed on this project thus far
- FSRA staff focused on the importance of FSRA’s statutory mandate and objects in maintaining the DIRF and its use
- FSRA staff also went over some recent sector numbers and trends to help contextualize the discussion
- The numbers are available on FSRA’s website in the regular quarterly reports
FSRA stochastic modelling
- FSRA modeling team provided a brief introduction and overview of its function and discussed the benefits of stochastic modeling.
- Stochastic modelling can assess the long-term sustainability of the DIRF:
- Assess adequacy of the DIRF (building off success of the Pension Benefits Guarantee Fund [PBGF])
- Inform the appropriateness of the premium and its investment strategy
- Enable flexible and forward-looking risk analysis
- The stochastic modelling work FSRA is pursuing uses risk data (implications for TAC and credit unions) + methodology (Deloitte) + economic scenario generator (e.g., COVID-19 fourth wave, fifth wave, etc.)
2021 enhancements to the DIRF adequacy assessment framework (Deloitte)
- Deloitte reviewed its macroeconomic forecasting model and scenario development process (i.e., how it forecasts and builds its scenarios).
- In the DIRF model proposed in the DIRF Adequacy Assessment Framework Consultation Paper…
- Use of monthly data instead of quarterly data to increase the sensitivity (included COVID-19 period to enhance the quality of the analysis)
- Segmented the residential mortgage portfolio based on available data for greater granularity of stress testing to enhance the output of the model and quality of the assessment
Meeting attendee Q&A:
TAC members in attendance asked questions. The questions focused on the various scenarios and how the model accounted for those scenarios. The TAC members were particularly interested in the sensitivity of the data given that there are still gaps in the data which is provided by the sector. FSRA staff and Deloitte provided explanations and also took away some suggestions/comments made by the TAC members.
FSRA emphasized the need for more data from the sector to move away from expert judgement and proxies. FSRA staff indicated that using monthly data will lead to more sensitive models. FSRA will continue to work with the sector on the DIRF adequacy assessment.
FSRA will provide a summary of the feedback received through the consultation on the DIRF Adequacy Assessment Framework paper at the next official meeting of the TAC for Credit Union Data Strategy and Digital Transformation.