Provision matrix calculator for credit decisions
Enter monthly loan movements between delinquency buckets, balances and loss given default to calculate a coefficient and provision for each bucket. The generated example compares the matrix run forward twelve months with the roll chain.
Total provision
The matrix over 12 months gives €4,371,532, 2.2 times the roll chain provision of €2,005,398, because loans that cure and fall behind again are counted.
Coefficient by bucket
Each pair of bars shows a bucket's chance of reaching 90+ on the roll chain and on the matrix run over the horizon.
Provisions by bucket
| Bucket | Balance | Roll chain | Coefficient | Provision rate | Provision |
|---|---|---|---|---|---|
| Current | €80,026,000 | 0.34% | 4.05% | 2.63% | €2,108,677 |
| 1-30 | €1,794,000 | 18.8% | 35.5% | 23.1% | €413,831 |
| 31-60 | €914,000 | 45.5% | 71.5% | 46.5% | €424,749 |
| 61-90 | €676,000 | 70.5% | 89.8% | 58.4% | €394,675 |
| 90+ | €1,584,000 | 100.0% | 100.0% | 65.0% | €1,029,600 |
| Book | €84,994,000 | 5.1% | €4,371,532 |
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Use each bucket's coefficient in the credit decision to know the provision a new loan will need before it is booked. Start free
See the formulas
Share = Loans moved ÷ Row total Roll chain (1-30) = 1-30→31-60 × 31-60→61-90 × 61-90→90+ Coefficient, Months h = Power h, 90+ Column Coefficient, Lifetime = (I − Q)⁻¹ × R Provision = Balance × Coefficient × Loss given default Provision (90+) = Balance × Loss given default
The calculation uses past months and assumes future months behave the same. It uses no staging, forward-looking adjustment or discounting. The coefficients are not a regulatory or accounting requirement.
Provision matrix and coefficients
A provision matrix uses loan movements between delinquency buckets to calculate a coefficient for each bucket. The transition matrix records how many loans move from each bucket to the next, including loans that reach 90+ or close.
The coefficient estimates the chance that a loan in a bucket reaches 90+ over the selected horizon. Combine it with the bucket's balance and loss given default to calculate the provision for each bucket.
Common questions
What is a provision matrix?
A provision matrix uses loan movements between delinquency buckets to calculate provisioning coefficients. Each coefficient represents the chance that a loan in that bucket reaches 90+ over the selected horizon.
How do I calculate provisioning coefficients from roll rates?
Enter the loan movements in a transition matrix, with each row divided by its total. Run the matrix forward over the selected horizon to calculate the chance of reaching 90+ from each bucket.
How do I build a transition matrix for delinquency buckets?
Count how many loans move from each bucket to each bucket in a month. Divide each cell by the total for its row to get the transition shares.
What is the difference between a roll chain and a Markov chain?
A roll chain counts loans that move directly down the buckets toward 90+. A transition matrix also counts loans that cure and later fall behind again, and can be run forward over the horizon.
How do I calculate provision for each bucket?
Multiply the bucket's balance by its coefficient and loss given default. For the 90+ bucket, the provision is its balance times loss given default.