Q-factors and forecasting for basic entities - your questions answered

Key takeaways:

• Complexity of forecasting should be consistent with complexity of method​
• Incorporating time-series forecast may not be necessary
• Can be a simple adjustment after historical loss calculation

Key takeaways:

• Don’t need to be “boxed” into any specific factors, use what impacts your portfolio the most 
• May not need to use any qualitative factors if forecasting is incorporated into model 
• Understand how your market compares to national metrics.  ​

Key takeaways:

• Q-factors may make up a large portion of CECL estimate if historical losses are low
• Changes in q-factors are a key factor in volatility of CECL estimate
• Can you support and document why your Q-factors make up a large percentage of CECL?

Key takeaways:

• Can be determined in a quantifiable way, but doesn’t mean it has to be (i.e. unemployment)
• Look at what caused large loss events to identify triggers
• Not all economic metrics impact every institution. Some portfolios are more correlated to certain metrics than others.