Risk's CreditRisk Summit 2005: Bottom-of-the-cycle LGD criticised
Speaking yesterday at Risk 's CreditRisk Summit USA, Bogie Ozdemir, a New York-based senior director in the risk solutions group at Standard and Poor’s, argued that Basel II’s suggested approach to defining loss-given-default (LGD) can lead to an overly conservative capital requirement.
With this bottom-of-the-cycle definition, LGD reflects the amount of regulatory capital needed during the worst-case scenario of an economic downturn.
“The bottom-of-the-cycle LGD approach significantly
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