Turning on tables

The downgrade of billions of dollars of asset-backed securities referenced to US subprime mortgage loans has raised questions about the accuracy of credit ratings. For the new Basel capital Accord, much of which is based on rating inputs, it has raised doubts over certain aspects of the framework. Duncan Wood reports


The Biblical parable of the two builders recounts the contrasting fortunes of two men - a wise man who builds his house on rock, and a foolish man who builds on sand. At first, all seems fine, but then the heavens open, the rain falls heavily and the house on the sand collapses. After building parts of their new regulatory framework upon apparently sound rating inputs, the Basel Committee will be able to empathise: mass downgrades of structured credit deals since July has revealed ratings to be

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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.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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