Former chairman of Australian regulator urges credit risk rethink

Carmichael made his call for a greater concentration on credit risk management during an address at the World Bank in Washington, DC. His talk was part of a workshop on assessing, managing and supervising financial risk, focusing on emerging markets.

“A lot of focus is now on the IT [information technology] systems that measure risk,” said Carmichael, who is now a consultant. He told the audience of risk professionals from emerging markets that, while a credit risk model is a set of procedures involving measurement and management, the latter should be the model’s main goal.

Banks calculate quantities such as loss-given default and probability of default, and even calculate correlations after taking on credit risk, but Carmichael said they need to go further and make greater use of this kind of information to help them decide whether or not to take on the risk in the first place. During his address, Carmichael cautioned that, though mark-to-market models are “the way of the future”, a lack of pricing information is leading some banks into making “[potentially problematic] heroic assumptions”.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here