South African banks grumble over credit pricing discrepancies

Basel III has forced banks across the globe to look closely at how they price counterparty credit risk in derivatives trades. But some South African banks appear not to be charging for it rigorously, leading to complaints from those that are. By Matt Cameron


It’s a simple choice: faced with two quotes for a swap from two banks perceived to be of a similar credit, where one quote is several basis points cheaper, most people would go for the low-cost option. End-users across the globe face this kind of decision every day – and there are various explanations for the discrepancies. The two dealers might be using different discount rates to value the swap; they might have different views on the credit of the customer; one might be willing to swallow

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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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