Because the model captures the balance-sheet as a whole, the profit and loss or risk impact of changing any variable is immediately visible. The model readily quantifies the impact of the following

  • Lending for different maturities
  • Pricing for different LTV bands
  • Changes of regulatory risk weightings
  • Interest only versus repayment lending
  • Cost of the pipeline
  • Setting ERCs at a level that is fair both to the firm and to customers
  • If the asset price is known, solving for the optimal funding sources and price
  • Evaluating the costs and benefits of funding shorter or longer
  • Altering target RoC
  • Altering PD assumptions
  • Allowing for overheads
  • Calculating the cost of holding liquidity
  • Seeing the impact of altering the firm’s liquidity targets
  • Optimising the composition of the liquidity portfolio


This tool gives lending firms a rigorous framework for the valuation of new business. The model is driven by a clear and powerful logic that can be understood by staff at all levels, thus allowing informed management and oversight of the business.