BP oil spill “frightening reminder” of tail risk, say analysts

BP's Deepwater Horizon oil rig collapsed on April 22

The oil spill in the Gulf of Mexico, triggered by the collapse of BP’s Deepwater Horizon oil rig on April 22, has highlighted the issue of tail risk for credit investors.

BP’s market value plummeted as the crisis escalated: between April 21 and June 16, the company’s share price sank 47.7%, from 650 pence per share to 340. The company was downgraded by the major rating agencies: including a six notch downgrade (from AA to BBB) from Fitch Ratings on June 15. Although the announcement, on June 16

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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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