Getting the cycle to work

Regulators are keen for banks to take a through-the-cycle approach, as opposed to point-in-time, when calculating bank capital. But how are banks responding to the change? By Duncan Wood

Old-fashioned credit risk is back on the agenda, and it looks set to ignite a battle for the soul of bank capital rules. A record number of defaults is expected this year - losses that will gobble up capital at the same time the deteriorating health of other companies requires capital levels to be raised. The fear is that many banks will not be able to cope, triggering a further round of bail-outs