Resource Library

Author: various

As financial markets shift back to growth and future opportunities, risk management will be priority # 1. That’s where we come in. Standard & Poor’s in the Asia-Pacifi c region has an extensive offering of products and services including financial market data, risk evaluation services and credit research and benchmarks designed to help investors make informed financial decisions. In Asia-Pacific, we combine our global experience with our rich understanding of local markets to deliver timely and effective solutions for our customers. But that’s just the tip of the iceberg — look deeper and see how Standard & Poor’s can deliver the financial solutions that your business is seeking.

Author: Risk Advisory Services

"A overview on the Basel II versus the IFRS approach. This presentation seeks to answer the question “Can banks use the Basel II models for the purposes of performing their provisioning calculations?”

Keywords: IFRS, Basel II, loan impairment, IAS

Author: Joanne Y. Cleaver

As the weight of the corporate world shifts to the credit function's shoulders, savvy credit managers are seizing the opportunity to demonnstrate how they can strengthen their company's financial position.

Keywords: credit problems, bankruptcies, credit managers, credit function, alliances, assertiveness

Author: Brian Dvorak

Points made within this presentation: “Banks must regularly calculate regulatory capital requirements and ensure that adequate capital is available to meet these requirements. Regulatory capital is an accounting concept; it does not correspond with economic capital. Major banks have transitioned away from using required regulatory capital toward required economic capital as the basis for making a wide variety of decisions. Required economic capital has emerged as the language of risk at major banks

Keywords: regulatory capital, economic capital, banking, loss distribution, portfolio risk

Author: Mathias Drehmann, Rodrigo Alfaro

Few, if any, of the macro stress tests undertaken before the current crisis uncovered significant vulnerabilities. This article examines the reasons for the poor performance by comparing the outcomes of simple stress tests with actual events for a large sample of historical banking crises. The results highlight that the structural assumptions underlying stress testing models do not match output growth around many crises. Furthermore, unless macro conditions are already weak prior to the eruption of the crisis, the vast majority of stress scenarios based on historical data are not severe enough. Last, stress testing models are not robust, as statistical relationships tend to break down during crises. These insights have important implications for the design and conduct of stress tests in the future.

Keywords: stress tests, macro stress tests, crisis, stress testing models

Author: Association for Payment Clearing Services

In the last 12 months, the credit card industry has been the subject of intense scrutiny on issues of transparency and competitiveness. The industry has welcomed this scrutiny. Although we are already one of the most regulated sectors in the UK, we treat seriously our responsibilities as credit providers and are constantly seeking to improve further our policies and performance.

Keywords: credit cards, credit card industry, competition, transparency, credit card industry, UK

Author: Jesús Saurina

"The Spanish system allows for an earlier detection of credit losses building up in the banks’ loan portfolio. It is a transparent system (rule-based, formula based, with disclosures) and provides information that is comparable across banks. Early warning system for financial statement users; it signals the build up of credit risk and credit losses, It delivers the proper information to investors to gauge the true financial condition of the firm, The proper recognition of the increase in credit risk/collective incurred losses since the inception of the dynamic provision, has been very useful for Spanish banks under the current crisis… although it is not a silver bullet."

Keywords: spanish system, economic approach, accouting framework, spanish provisioning model, transparency

Author: GARP

Inaugural Risk Index valued at 109, indicating a higher than average environment for systemic risk. Leverage and bank capital ratios seen as having greatest potential for triggering systemic risk in the U.S., with equity values ranked lowest on the risk scale. Respondents from China are the least concerned with the threat of systemic risk in the U.S. Pessimism about U.S. economic growth continues to influence the global risk management community.

Keywords: Inaugural Risk Index, risk index, leverage, bank capital, US market conditions, systemic risk assessment

Author: George L. Head

While it seems intimidating to many businesspeople—possibly because of the unique vocabulary that risk and insurance professionals use—the risk management process is not really difficult to understand. It is simply a common-sense approach to using a number of readily available tools to handle an organization’s risk in the most cost-efficient manner possible. To be truly successful, however, risk management must permeate an organization. A risk manager or even a department full of risk managers cannot maximize the benefits of the process without the understanding, cooperation, and active support of others within the organization.

Keywords: risk management, probability, loss, peril, hazard, loss exposures, flow charts

Author: International Finance Corporation

Credit bureaus are essential to creating sound financial infrastructures that facilitate lending to a significant share of the population. In many emerging market countries, agencies that compile and distribute credit and personal information to creditors are underdeveloped or nonexistent. Credit bureaus support the retail lending business by providing objective information on the credit worthiness of individual customers or small businesses. They allow lenders to make faster and more accurate credit decisions, thereby lowering their default rates and increasing their credit lending volumes. The IFC Global Credit Bureau Program, in partnership with IFC Facilities, is the international leader in credit bureau development throughout the world. It helps close the information gap between lenders and borrowers, creating greater access to finance for underserved populations.

Keywords: Credit bureaus, IFC Global Credit Bureau, Private Credit Bureaus Program, Positive Credit Burea, Customer Data

Author: Risk Reward Limited

In our lead article we discuss the changing face of regulation and what are the likely outcomes from the current process. The limited global vision is particularly highlighted and the changing roles that are required. I remain hopeful that new organisational responsibilities will be implemented which will significantly reduce the level of risk in the system – what cannot be appropriate is for the capital levels within firms to be distributed at stress levels globally. A major change to the UK regulatory structure is the Bribery Act, whose implementation has been delayed by six months. This places significant additional responsibilities on firms which they need to be aware of.  David Blackmore’s article considers the impact of this important legislation. Solvency 2 for the insurance industry has many parallels to Basel 2 for the banking industry. It is a major change programme which impacts both risk management and consequently internal audit as discussed by John Webb. Developing a programme to efficiently deal with these issues while adding value to your firm will remain a prime issue for insurers.

Keywords: Bank for International, regulatory structure, Basel III, global risk, regulation, crisis Settlements

Author: Grigoris Karakoulas

The purpose of stress testing: What will happen to your mortgage portfolio if property prices fall by 30%? What will happen to your credit card portfolio if interest rates rise by 300bps? Do you need to readjust your existing limit management system and capital buffer?

Keywords: stress testing, consumer credit, unexpected loss, value-at-risk, retail portfolios, behavioral parameters