German banks get to grips with a new lending reality

Removal of state guarantees and pressure from shareholders for better returns means German banks can no longer churn out uneconomically priced loans to clients. Now they are starting to introduce sophisticated loan pricing systems, writes Duncan Wood

If you were looking for a story that encapsulates the problems that have hobbled the German banking industry in recent years, you could do worse than an anecdote recounted by one former forex dealer.

The dealer, working for an investment bank in Frankfurt during the early 1990s, hoped to win business from Swedish/Swiss engineering giant ABB. His hopes were high. Not only was the bank offering almost suicidally low spreads of 2 basis points, but ABB had just made one of his old colleagues the

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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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