Suppose that the assets of a bank consist of 200 million euros of retail loans.

The PD is 1% and the LGD is estimated to be 70%.

The WCDR is equal to

140 million euros.

Did you know?

the default rate that the bank expects to experience within a one-year period for its retail loans. It is an important metric that helps assess the credit risk of the bank's loan portfolio. Did you know? The WCDR, or Weighted Average Cumulative Default Rate, is a measure that indicates the overall probability of default for a portfolio of loans. It takes into account the probability of default (PD) and the loss given default (LGD) for each loan. For example, if a bank has 200 million euros of retail loans with a PD of 1% and an LGD estimate of 70%, the WCDR would be the total expected default rate for the entire portfolio. This information is crucial for banks to effectively manage their credit risk and make informed decisions about loan provisioning and capital requirements.