Beschreibung Risk Management in Credit Portfolios: Concentration Risk and Basel II (Contributions to Economics). Risk concentrations play a crucial role for the survival of individual banks and for the stability of the whole banking system. Thus, it is important from an economical and a regulatory perspective to properly measure and manage these concentrations. In this book, the impact of credit concentrations on portfolio risk is analyzed for different portfolio types and it is determined, in which cases the influence of concentration risk has to be taken into account. Furthermore, some models for the measurement of concentration risk are modified to be consistent with Basel II and their performance is compared. Beyond that, this book integrates economical and regulatory aspects of concentration risk and seeks to provide a systematic way to get familiar with the topic of concentration risk from the basics of credit risk modeling to present research in the measurement and management of credit risk concentrations.
Principles for the Management of Credit Risk ~ credit risk management is to maximise a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits or transactions. Banks should also consider the relationships between credit risk and .
Basel Committee on Banking Supervision Working Paper No. 15 ~ Some employ sophisticated portfolio credit risk models that incorporate interactions between different types of exposures while some rely on simpler, ad hoc indicators of such risk. Multi-factor vendor models are also used as inputs or benchmarks to internal models. Management of concentration risk typically depends on a
Principles for the Management of Credit Risk ~ Credit risk management 1 Principles for the Management of Credit Risk I. Introduction 1. While financial institutions have faced difficulties over the years for a multitude of reasons, the major cause of serious banking problems continues to be directly related to lax credit standards for borrowers and counterparties, poor portfolio risk management, or a lack of attention to changes in .
A Comparative Assessment of Basel II/III and Solvency II ~ For Basel II/III, this includes but is not limited to credit risk, operational risk, market risk—including illiquidity and concentration risks—interest rate risk in the banking book, liquidity risk and other risks such as reputational and strategic risks. Where risks cannot be measured precisely, they should be estimated based on a reliable process.
What influences banks’ choice of credit risk management ~ Both advanced instruments can be used to manage credit risk such that a lending portfolio is diversified by reducing its credit risk concentration. 6 Düllmann and Masschelein (2007) show that it is necessary to take inter-sector dependency into account when measuring credit risk, for which credit portfolio models are a typical instrument.
Evaluating Credit Risk Models ~ Evaluating Credit Risk Models Jose A. Lopez Economic Research Department Federal Reserve Bank of San Francisco 101 Market Street San Francisco, CA 94105-1530 Phone: (415) 977-3894 Fax: (415) 974-2168 jose.a.lopez@sfb Marc R. Saidenberg Research and Market Analysis Group Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Phone: (212) 720-5958 Fax: (212) 720-8363 marc .
The evolving role of credit portfolio management / McKinsey ~ Credit portfolio management (CPM) is a key function for banks (and other financial institutions, including insurers and institutional investors) with large, multifaceted portfolios of credit, often including illiquid loans. Historically, its role has been to understand the institution’s aggregate credit risk, improve returns on those risks—sometimes by trading loans in the secondary market .
THINKING BEYOND BASEL III: NECESSARY SOLUTIONS FOR CAPITAL ~ Risk Weights Under Basel I and Basel II (Pillar I), % BASEL I BASEL II BASEL II BASEL II Advanced: Internal Ratings Based (IRB) Simplified Standardised 2004-05 QIS 4 2004-05 QIS 4 Standardised based on Avg % chg Median % External in portf. Chg in portf. SECURITY Ratings MRC MRC Basel II Advanced IRB Most Government/central bank 0 0 0 0 Comes close to letting banks set their own AAA to AA- 0 .
The regulatory treatment of sovereign exposures ~ In January 2015, the Basel Committee on Banking Supervision set up a high-level Task Force on Sovereign Exposures to review the regulatory treatment of sovereign exposures and recommend potential policy options. The Task Force's report analysed issues concerning the regulatory treatment of sovereign exposures in the Basel framework. This discussion paper is derived from the Task Force's report.
Basel III: Finalising post-crisis reforms ~ complementing the risk-weighted capital ratio with a finalised leverage ratio and a revised and robust capital floor; An accompanying document summarises the main features of these revisions. For more information on the Basel III reforms, see the Basel III webpage.
Risk Management Toolbox - MATLAB ~ Risk Management Toolboxâ„¢ provides functions for mathematical modeling and simulation of credit and market risk. You can model probabilities of default, create credit scorecards, perform credit portfolio analysis, and backtest models to assess potential for financial loss. The toolbox lets you assess corporate and consumer credit risk as well as market risk. It includes an app for automatic .
Basel II Definition - investopedia ~ The main innovation of Basel II in comparison to Basel I is that it takes into account the credit rating of assets in determining risk weights. The higher the credit rating, the lower the risk weight.
Concentration risk - Wikipedia ~ Concentration risk is a banking term describing the level of risk in a bank's portfolio arising from concentration to a single counterparty, sector or country.. The risk arises from the observation that more concentrated portfolios are less diverse and therefore the returns on the underlying assets are more correlated.. Concentration risk can be calculated for a single bank loan or whole .
An Introduction to Credit Risk Management / edX ~ According to the Basel Accords, a global regulation framework for financial institutions, credit risk is one of the three fundamental risks a bank or any other regulated financial institution has to face when operating in the markets (the two other risks being market risk and operational risk). As the 2008 financial crisis has shown us, a correct understanding of credit risk and the ability to .
Credit risk - Wikipedia ~ A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs.The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs.
(PDF) A Risk-Adjusted Pricing Model for Bank Loans ~ [Show full abstract] portfolio credit risk model underpinning the Basel II Internal Ratings-Based (IRB) approach does not account for name concentration. To measure the latter the literature .
Counterparty Risk Definition ~ Replacement Risk: The risk that a contract holder will know that the counterparty will be unable to meet the terms of a contract, creating the need for a replacement contract. Also known as .
Risk-adjusted return on capital - Wikipedia ~ Risk-adjusted return on capital (RAROC) is a risk-based profitability measurement framework for analysing risk-adjusted financial performance and providing a consistent view of profitability across businesses. The concept was developed by Bankers Trust and principal designer Dan Borge in the late 1970s. Note, however, that increasingly return on risk-adjusted capital (RORAC) is used as a .
Credit portfolio manager of the year: NatWest Bank - Risk ~ The success of the credit portfolio management team at NatWest Bank owes a lot to a historic failure. Its parent entity, Royal Bank of Scotland, bombed the 2016 edition of the annual stress tests run by the Bank of England, missing both its post-stress CET1 capital hurdle and its leverage ratio hurdle. The CPM team has since played a key role in propelling the bank from industry laggard to .
Operational risk - Wikipedia ~ Operational risk is "the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses". This positive definition, adopted by the European Solvency II Directive for insurers, is a variation from that adopted in the Basel II regulations for .
Credit conversion factor - Wikipedia ~ The key variables for (credit) risk assessment are the probability of default (PD), the loss given default (LGD) and the exposure at default (EAD). The credit conversion factor calculates the amount of a free credit line and other off-balance-sheet transactions (with the exception of derivatives) to an EAD amount [2] and is an integral part in the European banking regulation since the Basel II .
Basel Accord Definition ~ Basel III requires banks to have a minimum amount of common equity and a minimum liquidity ratio. Basel I The first Basel Accord, known as Basel I , was issued in 1988 and focused on the capital .
Risk Management Software, Enterprise Risk Management / SAS ~ Address Basel III/IV requirements for credit risk analytics. Measure the effects of risk-based capital requirements across future time horizons throughout the life of each exposure and across all portfolios. Create a consolidated data, modeling and reporting platform. Integrate existing risk models and data hierarchies into a streamlined, unified data infrastructure for measuring and reporting .
Basel I Definition - investopedia ~ Basel I, followed by Basel II and III, laid a framework for banks to mitigate risk as outlined by law. Basel I is considered too simplified, but was the first of the three "Basel accords."
Springer - International Publisher Science, Technology ~ Birkhäuser Basel This volume collects the contributions of a Conference held in June 2005 at the laboratoire Paul Painleve (UMR CNRS 8524) in Lille, France. The meeting was intended to review hot topics and future trends in fluid dynamics, with the objective to foster exchanges of various viewpoints (e.g. theoretical, and numerical) on the .