Credit Portfolio Management: A Practitioner’s Guide to the by Michael Hünseler

By Michael Hünseler

Credits Portfolio administration is a topical textual content on methods to the energetic administration of credits dangers. The publication is a worthwhile, brand new advisor for portfolio administration practitioners. Its content material contains of 3 major components: The framework for coping with credits dangers, lively credits Portfolio administration in perform and Hedging innovations and toolkits.

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Extra resources for Credit Portfolio Management: A Practitioner’s Guide to the Active Management of Credit Risks

Sample text

Measuring, modelling, managing and monitoring credit risk have become the ‘4m’ mantra of modern banking. Although banks have been encouraged by regulators to step up their efforts in order to comply with Basel II and the upcoming Basel III rules, sound credit risk management practices are not just a formal requirement but a condition for relevance to management decision taking, thereby contributing to enhance the business performance. Of course, the introduction of Basel II supported a harmonization of the risk language, where Probability of Default (PD), Loss given Default (LGD), Exposure at Default (EAD) and Expected Loss (EL) have become standards, allowing all parties to communicate efficiently and for increased comparability of risk assessments between various business segments and even whole financial institutions.

Disclosure and transparency, Principle 14, Article 130. 3 Standard and Poors (2011b). 4 Approaches to harmonize risk and regulatory capital differ in that for example some firms include forecasted profit, goodwill or the net present value of capitalized tax while others do not. Moreover, internal capital is derived from confidence levels and risk horizons which in turn is indicative of the target credit quality an institution wants to achieve. 2 20 Credit Portfolio Management the survival of the firm.

4 Numerous initiatives accompany the Dodd-Frank Reform Act and Basel III, but international and domestic approaches appear to be not well coordinated. After decades of spectacular growth, the new Basel III rules will let the banks tighten their belts. 3 trn has to be raised by banks worldwide until 2015 to comply with the standards. If no new capital is available or is available but too expensive, lenders will have to shed assets. Cutting risk-weighted assets, or optimizing the balance sheet as banks prefer to call it, often takes place by adjusting models and parameters rather than squeezing the asset base or raise equity when share prices are battered.

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