Roundtable on expert judgment and overrides in behavioral modelling


Share challenges and ideas regarding the application of expert judgment and overrides in behavioral modeling of prepayments and savings.


P&P observes that banks are currently facing lots of challenges in predicting client behavior, e.g.:

  • Due to a long trend of declining interest rates, the historic data provides limited information about client behavior under an increasing interest rate;
  • COVID-19 has led to an increase in client savings despite a zero- or negative interest rate;
  • The elasticity of savings may change in the future, g., due to aggregators or PSD2;
  • Historical prepayment behavior may not be representative of the future, due to changes in portfolio composition, rate fixing tenors, legal changes, and housing market

P&P deems it is challenging to combine existing models, calibrated on historical behavior, with available expertise and expectations on future behavior. When should expert opinion be used, and how do you substantiate its use?


A total of 9 Dutch retail banks joined the roundtable. Each bank was invited to bring two ALM colleagues, one with experience in modelling and the other with experience in the first line. Two rounds of parallel sessions were held. During the first-round participants could choose between discussing prepayment- or savings modeling. The second round focused on governance of expert judgment and overrides. As the level of governance is related to the balance sheet size of a bank, a split was made between larger and smaller banks. Each parallel session was supported by several statements to guide the discussion.