Credit managers hope for new accounting blueprint

Mark-to-market accounting has frustrated credit portfolio managers at the largest international banks. It’s made their loan books more volatile and their derivatives hedges less efficient. But accounting standards setters may be ready to review the rules. By Rachel Wolcott


The creation of a liquid credit derivatives market revolutionised the way banks manage the credit risk in their loan books. Since the last economic downturn, they have become aggressive users of credit derivatives to selectively and actively hedge their loan portfolios to reduce corporate default risk. JP Morgan Chase, for example, now has a $132 billion wholesale loan book, hedged approximately 28% with a notional of $38 billion of credit derivatives positions.

Barclays Capital is another big

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

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