Early-warning signal
A dated sign that a borrower who is still paying may be deteriorating, raised early enough for the lender to act.
Category
How a model is chosen and adapted
Related terms
An early-warning signal is a dated sign that a borrower who is still current on payments may be deteriorating, raised early enough for the lender to act before a default.
Where signals come from
Account turnover against the same months last year, rising utilization, overdraft days, returned checks, limits cut at other banks, group signals, and what documents say: interim financials, auditor notes, gazette notices, and news. A model turns the numbers into a probability with reason codes; a small language model turns the documents into dated, cited signals.
What a signal is not
It is not a stage, a provision, or a restructuring decision. Hard triggers written in policy fire on the same feed regardless of the model, and a person records the action taken before any alert is cleared. The early warning on the loan book use case shows signals checked in parallel and gathered into one file for the watch-list committee.
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