Reconstructing loan management

European banks are taking advantage of the benign credit environment to overhaul the way they manage their loan portfolios. With credit spreads at record lows, banks are increasing their use of credit derivatives for hedging. By Rachel Wolcott

Tight spreads in the credit default swap (CDS) market, combined with rapacious investor appetite for loan assets, have persuaded a growing number of banks to change the way they manage the credit risk of their loan portfolios. While some have taken advantage of low spreads to bolster their credit derivatives hedge books, others have created credit portfolio management teams from scratch.

Banks such as BNP Paribas and Spain's Grupo BBVA and Banco Santander Centro Hispano are among those that have