Risk Management Tool Guide: Portfolio Quality Analysis (PQA)

What is the Tool?

  • The Portfolio Quality Analysis (PQA) tool is a written analysis of the most important trends and issues regarding the total loan portfolio or any sub-segment of interest (by product, customer characteristics, loan officer etc.)
  • As a core credit risk management tool, the PQA’s objective is to identify events that affect loan portfolio performance along with their causes and consequences, allowing the recommendation of appropriate action plans. These causes and recommendations are jointly determined by both the risk team and the commercial team. The PQA provides management with objective updates on credit risk and enables them to implement appropriate actions and track their effectiveness.
  • The PQA draws upon information in two underlying credit risk management tools:
    • Portfolio Quality Report (PQR) contains three reports (Trend report, Vintage report, Is-Was report), each with a number of charts, about past portfolio development.
    • Forecast Report (FCR) contains three reports (Productivity report, Quality report, Profitability report), each with a number of charts, about forecasted (future) portfolio development.

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