A crisis of identity

Recent news stories have highlighted a controversy over identification of the specific reference entity in certain credit derivatives contracts. Troubling as this is, it reflects a more pervasive lack of discipline among financial institutions. In this second of four related columns, David Rowe argues that improved quality control of legal information is vital for the success of integrated credit risk management

Recent news stories have described two disputes surrounding credit derivatives written on Armstrong World Industries, a company that declared bankruptcy in December 2000 over rising asbestos-related claims (see, for example, The Economist, May 23, 2002). Writers of the protection argued that the contracts actually related to Armstrong Holdings, which had not filed for bankruptcy, and of which Armstrong World Industries is the biggest subsidiary. Fearing that outdated or confusing names may