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Financial institutions annually go through a budget allocation process, with business heads competing for capital and other resources. They give their projections on how much capital they need and...
April 19, 2024 | By Alla Gil
If compound interest is humanity’s greatest invention, insurance may be a close contender. Today, activities we take for granted – such as securing a home loan – would be significantly more expensive...
April 5, 2024 | By Cristian deRitis
Credit risk modelers today face a myriad of challenges, ranging from scenario analysis to forecasting to validation. But when modelers use a loose definition of the term “data,” bad habits can form...
March 28, 2024 | By Tony Hughes
The latest update to the capital requirements regulation under Basel 3.1 reinforces the notion that EU supervisors strongly favor a standardized approach (SA) to credit risk measurement over an...
March 22, 2024 | By Marco Folpmers
Leading the charge into what has become known as private credit, private equity (PE) firms are “originating loans at scale and holding on to them – an activity traditionally done by banks.” One of...
March 22, 2024 | By John Hintze
Spurred in part by last year’s regional bank failures, the Federal Reserve has added two exploratory scenarios to the 2024 CCAR stress test. These scenarios cover issues like bank deposits, funding...
March 1, 2024 | By Alla Gil
Now that we've experienced a pandemic-driven recession, it seems as good a time as any to assess whether the CECL and IFRS 9 reporting standards for expected credit losses (ECL) have had their...
February 23, 2024 | By Tony Hughes
European banks experienced record-breaking profitability and capitalization toward the end of last year, according to a recent report from the European Banking Authority (EBA). But in volatile...
February 9, 2024 | By Marco Folpmers
Over the past year, European courts have been grappling with the way data privacy laws impact the credit scoring industry on the continent. The rulings of the Court of Justice of the European Union...
January 19, 2024 | By Tony Hughes
Buy Now, Pay later (BNPL) applications offer consumers the opportunity to defer payment on goods and services. The usage of BNPL has increased six-fold globally since 2019, and now represents a...
January 12, 2024 | By Marco Folpmers
In the digital age, where financial transactions have become the lifeblood of businesses, payment and transaction fraud have emerged as significant threats. Our recent Financial Security Trends...
December 15, 2023 | By Johnny Deutsch
Earlier this year, during the regional banking crisis, the banks in the Federal Home Loan Bank system (FHLBanks) suddenly found themselves at the center of controversy. When several unstable...
December 15, 2023 | By Clifford Rossi
Trends in interest rates, deposit flows and loan demand have put a spotlight on banks’ balance sheets and, in turn, on their asset-and-liability management. While tapping brokered deposits and...
December 8, 2023 | By John Hintze
Regulators have set their sights on improving stress testing in the wake of the mini banking crisis that unfolded in the U.S. earlier this year. One idea is for banks to consider a wider range of...
December 8, 2023 | By Tony Hughes
The implosions of major regional banks this year prompted reexaminations of risk management not only in the banking industry, but also among corporations concerned about their bank-counterparty risks...
December 1, 2023 | By John Hintze
The failures earlier this year of a group of midsized U.S. banks grabbed headlines and yielded many questions about the effectiveness of their risk management programs. But how big was this crisis,...
November 17, 2023 | By Marco Folpmers
To what extent have rules developed in the aftermath of the Great Recession enhanced the reliability of credit loss forecasts? This is a complex question. On the one hand, banks now have access to a...
November 10, 2023 | By Cristian deRitis
Slower economic growth, inflation and rising interest rates have taken a toll on real estate markets, and risk managers are on high alert. An October 2023 GARP Benchmarking Initiative (GBI) survey...
November 10, 2023 | By John Hintze
Disruptions in the market for U.S. Treasuries, the most liquid of government securities markets and one that plays an indispensable role in the financial system, led the Securities and Exchange...
October 27, 2023 | By John Hintze
European banks, amid the current environment of rising interest rates, inflation volatility and geopolitical risk, now face the tall task of calculating expected credit losses (ECL) in compliance...
October 6, 2023 | By Marco Folpmers
The Basel III Endgame is on in the U.S. The rewriting of risk-based capital standards for the biggest banks, formally proposed by regulators in July, is open for public comment through November, and...
September 29, 2023 | By John Hintze
A few weeks back, U.S. regulators proposed a suite of new rules designed to strengthen capital requirements for large banks. The most consequential proposal was a dramatic scaling back of banks’...
September 22, 2023 | By Tony Hughes
Generative AI has been a smash hit with consumers. Earlier this year, for example, OpenAI’s ChatGPT chatbot set a record by racking up 100 million users within two months of its launch. But does this...
September 1, 2023 | By Marco Folpmers
Extreme tail-risk events cannot be predicted, as demonstrated by the many unforeseen, rare or unprecedented events that have occurred over recent years. However, it is possible to prepare for their...
August 25, 2023 | By Alla Gil
Concerns are growing among lenders that regulatory initiatives at the National Association of Insurance Commissioners (NAIC) could interfere with financings of riskier companies in the collateralized...
August 18, 2023 | By John Hintze
Imagine a world where risk modelers turn conventional wisdom upside down and use fixed economic scenarios with dynamic probabilities to calculate expected credit losses. This unconventional approach...
August 4, 2023 | By Cristian deRitis
As financial transactions grow more sophisticated and complex, managing collateral extends beyond a regulatory exercise to one that brings strategic value – ensuring optimal asset pledges and...
July 21, 2023 | By Steven Castleton and Siddharth Basu
By now, we all know the drill with respect to forecasting expected credit losses (ECL). When a recession is predicted, for example, banks must increase their loan-loss reserves in compliance with...
July 21, 2023 | By Tony Hughes
Now more than ever, banks need to bolster their commercial real estate (CRE) risk management capabilities, as more and more cracks have emerged in CRE portfolios. Several market factors are driving...
July 14, 2023 | By Clifford Rossi
Banks are going to be required to use the so-called foundation approach (F-IRB) to credit risk measurement, for some key asset classes, under the Basel III accord. But is removing the option for...
June 16, 2023 | By Marco Folpmers
In the post-COVID era, in the midst of a mini-banking crisis, we’re at something of a crossroads in modeling and model risk management. Figuring out a way to improve financial risk modeling, which...
May 26, 2023 | By Tony Hughes
Banks typically benefit from rising interest rates as spreads widen between assets and liabilities, yielding better profit margins. But the current cycle, defined by a series of increases that...
May 26, 2023 | By John Hintze
Credit risk models that are adaptable, flexible and fast, one could argue, are what’s needed in the current financial environment of uncertainty and volatility. Banks need to be able to respond to...
May 19, 2023 | By Marco Folpmers
What’s the best approach for assessing a bank’s capital and liquidity adequacy? Moreover, what tools can we use to more accurately forecast tail risk, and do traditional stress tests still have...
April 28, 2023 | By Alla Gil
One of the key factors behind the 2007-08 global financial crisis was an overreliance on external ratings. Could we be heading down a similar road after the expected January 2025 implementation of...
April 14, 2023 | By Marco Folpmers
Risks tend to linger in obscure, unexpected places. So, even when your firm seemingly makes safe investments, things can go suddenly and terribly wrong if you don’t practice prudent risk management...
April 6, 2023 | By Cristian deRitis
European banks that must comply with the IFRS 9 financial reporting standard suffer today from a lack of supervisory guidance on how, exactly, they should go about weighting the scenarios they use to...
March 10, 2023 | By Marco Folpmers
Are we on the verge of another housing bubble, rife with spiraling prices? As we transition to a higher interest rate, low-growth world, risk managers and bank regulators are rightly concerned about...
March 3, 2023 | By Cristian deRitis
The problems with credit loss-projection methodologies that rely on historical data have been illuminated over the past three years. Regression-based credit risk models have, indeed, been failing,...
January 27, 2023 | By Alla Gil
Catastrophe (cat) bond and insurance-linked securities (ILS) issuance appeared to be on its way to a record this year. That was before Hurricane Ian, a game changer that may hinder start-of-year...
December 2, 2022 | By John Hintze
In October, two regulatory studies of great interest to credit risk managers were published: the Basel Committee on Banking Supervision’s (BCBS) paper on buffer usability and procyclicality, and a...
November 11, 2022 | By Marco Folpmers
American consumers are the main pillar of support for both the U.S. and global economies. Indeed, in the current environment of restrained business investment and constrained government finances,...
November 4, 2022 | By Cristian deRitis
The global economy is not yet in a recession, but things sure feel miserable. In the context of strong demand and low unemployment, inflation is currently elevated in all major economies. After 30...
October 28, 2022 | By Tony Hughes
In these volatile and unpredictable times, European banks continue to face a major obstacle in their efforts to comply with the IFRS 9 accounting standard for expected credit losses (ECL): assessing...
October 21, 2022 | By Marco Folpmers
Explosive growth in buy-now-pay-later programs is disrupting point-of-purchase consumer credit, in the process highlighting the use of alternative data, underwriting and risk management approaches...
October 14, 2022 | By John Hintze
The amount of capital that is needed for an institution to be resilient through the rough times, while remaining competitive, is one of the key issues being discussed by the risk community today....
September 30, 2022 | By Alla Gil
CECL and IFRS 9, a pair of next-generation accounting standards, were supposed to provide a solution to credit loss estimation problems that became apparent during the global financial crisis (GFC)....
September 23, 2022 | By Tony Hughes
Banks’ internal ratings-based (IRB) processes for validating credit risk models have historically been subject to rules-based supervision established by the European Banking Authority (EBA). However,...
September 9, 2022 | By Marco Folpmers and Gerrit Reher
Expanding access to credit for millions of consumers with limited or no credit experience has been a long sought-after goal among policymakers and consumer advocates. Doing so in a manner that...
August 26, 2022 | By Clifford Rossi
Economic capital has always been a key measure of a bank’s solvency. But under Basel III, the set of international banking regulations that are scheduled for implementation next January, proper...
August 12, 2022 | By Marco Folpmers
“Demography is destiny.” These words, attributed to French philosopher Auguste Comte nearly two centuries ago, apply well to today’s economy. Population size has been – and continues to be – a direct...
August 5, 2022 | By Cristian deRitis
With approval from the Securities and Exchange Commission to provide central clearing of securities financing transactions (SFTs), the National Securities Clearing Corp. (NSCC) aims to give buy-side...
July 22, 2022 | By John Hintze
Financial institutions and regulators have demonstrated their adaptability amid the volatile market conditions sparked by the pandemic, but COVID-19 also reminded us that there is still more work to...
July 8, 2022 | By Marco Folpmers
Consumer credit lenders need to prepare for the impact of inflation and higher interest rates on their portfolios. However, loss forecasting models trained on recent history may be blind to both...
July 1, 2022 | By Cristian deRitis
While at the World Economic Forum meeting in Davos, Bank of America CEO Brian Moynihan expressed strong optimism about consumer spending going forward. Other observers view the consumer differently...
June 10, 2022 | By Charles Wendel
Challenged by lockdowns, temporary or permanent closures of businesses, and cash-flow shortfalls for many of their business clients, European banks have faced an unprecedented “real-life” stress test...
June 10, 2022 | By Marco Folpmers
The Federal Reserve’s sudden pivot towards tightening monetary policy this spring has sent interest rates skyward and stock investors to their bunkers. After the sharp run up in real estate prices...
June 3, 2022 | By Cristian deRitis
After a pandemic-induced delay, Financial Accounting Standards Board (FASB) guidance is allowing banks and others greater flexibility to hedge fixed-income assets and potentially benefiting those...
May 27, 2022 | By John Hintze
Stress testing for banks seems like a straightforward exercise: assume a series of economic and financial conditions that would hamstring a bank’s performance, then project whether the bank has...
May 20, 2022 | By Tod Ginnis
A loan portfolio with zero defaults over, say, the past 12 months, is generally considered excellent – as long as the return on the portfolio is strong, of course. However, for credit risk...
May 13, 2022 | By Marco Folpmers
Risk modelers around the financial services industry are grappling with the question of how to handle pandemic-era data. As is well known, the vast majority of pre-COVID models dramatically overshot...
May 6, 2022 | By Tony Hughes
Consumer price inflation is rising at rates we haven’t seen since the early 1980s. The odds of a recession, moreover, have increased considerably, with central banks focusing all their attention on...
May 6, 2022 | By Cristian deRitis
The Federal Housing Finance Agency (FHFA) is considering changes to how government-sponsored entities (GSEs), like Fannie Mae and Freddie Mac, apply credit scores in their assessment of mortgage...
April 8, 2022 | By Clifford Rossi
The time is ripe to reflect on whether we’ve extracted all we can from traditional stress tests, and to then consider some alternative strategies for future installments. On the heels of the recent...
April 1, 2022 | By Tony Hughes
Forecasting is a key tool used in stress tests and in projections for expected credit losses. The length of a perfect forecast horizon, however, has always been a source of contention in business....
March 11, 2022 | By Deniz Tudor
Should stress-testing downturn scenarios developed by regulators take into account potential government bailouts? If they do not, do risk modelers still need to consider what could happen to banks,...
March 4, 2022 | By Cristian deRitis
The Current Expected Credit Losses (CECL) accounting standard may have enabled a quicker reaction by banks to the pandemic economy, but whether it successfully bolsters lending during downturns is...
February 18, 2022 | By John Hintze
In 2023, as part of a Capital Requirements Regulation (CRR3) amendment, the probability of default (PD) input floor will rise from three basis points (bps) to five. While this may not seem like a...
February 11, 2022 | By Marco Folpmers
It is difficult to gauge the performance of loss-given default (LGD) models, partly because it’s hard to discern the difference between estimated and realized LGD. But the generalized area under the...
January 14, 2022 | By Marco Folpmers
Robinhood and other brokerages restricted trading last January in GameStop and other so-called meme stocks when they faced significant capital calls by Depository Trust & Clearing Corp.’s National...
December 3, 2021 | By John Hintze
Throughout 2021, European banks have devoted considerable time to reassessing and recalibrating their probability-of-default (PD) and loss-given-default (LGD) models. Consequently, irregularities in...
November 12, 2021 | By Marco Folpmers
The larger of two sets of asset managers implementing new initial margin rules by September for uncleared, over-the-counter derivatives faced significant challenges marshaling adequate resources and...
November 12, 2021 | By John Hintze
Lockdown restrictions during the COVID-19 pandemic have given many of us time to reflect on what matters in our careers and what we might hope to achieve in life once the crisis subsides. For some,...
November 5, 2021 | By Cristian deRitis
Whether climate risk is actually a threat to financial stability has been a subject of ongoing debate. But a recent regulator-driven stress test has offered some clarity on this hot-button subject. A...
October 29, 2021 | By Tony Hughes
Continuing to decline after a temporary rise last year, the largest banks' weighted average supplementary leverage ratios (SLRs) fell in the third quarter as changes from the Federal Reserve are...
October 29, 2021 | By John Hintze
As a general rule, the bigger the bank, the more sophisticated its credit-risk models. But determining the size of a bank is very dependent on one's measurement approach. The same holds true, on a...
October 8, 2021 | By Marco Folpmers
Financial institutions need scenarios to measure future risks and returns, as well as to understand how to prepare for whatever comes their way. Given the latest regulations and accounting rules...
September 24, 2021 | By Alla Gil
When narrative scenarios first became a standard tool for risk management, around the time of SCAP in 2009, I was frankly skeptical that the technique would last. Having emerged from academia, I was...
September 17, 2021 | By Tony Hughes
Sometimes you perceive something as a major risk, but the reality exposed by the data just doesn't live up to your expectations. This is, in fact, what many modelers (myself included) experienced...
August 27, 2021 | By Tony Hughes
Transition matrices measure the transition probabilities for credit-risk ratings over specific time intervals, and are among the most vital tools at the disposal of a credit risk manager for...
August 13, 2021 | By Marco Folpmers
Nearly every civilization since antiquity has developed the concept of a “trickster.” This god, spirit, demon or spirit animal plays tricks on unsuspecting humans to tempt them, test them, or just...
August 6, 2021 | By Cristian deRitis
In the financial services community, surprises aren't to everyone's taste. Sometimes, like the pandemic and the lockdowns it caused, they're nasty. Sometimes, like the rapid market recovery prompted...
July 23, 2021 | By Alla Gil
The Jeffreys test is the most important diagnostic tool for assessing the calibration of the bucket probability of default (PD). However, it actually has a wider range of applications. Potentially,...
July 9, 2021 | By Marco Folpmers
Bigger is better. At least, it seems, with respect to the riskiness of banks. The capital, profitability and credit risk differences between small and large banks were highlighted in a European Bank...
June 11, 2021 | By Marco Folpmers
Was the downfall in March of Archegos Capital Management a case of financial-crisis dÉjÀ vu? It conjured up memories of past panics, notably the 1998 collapse of Long-Term Capital Management and,...
May 28, 2021 | By L.A. Winokur
Banks ramped up loan-loss reserves at the onset of the pandemic because of the current expected credit losses (CECL) accounting standard that went into effect at the start of 2020. Although losses...
April 30, 2021 | By John Hintze
Every risk professional knows that price shifts can widely diverge. Daily or weekly returns can go up or down in a more significant way than predicted by a normal distribution. When assessing and...
April 9, 2021 | By Marco Folpmers
In credit risk management, it is common to distinguish between point-in-time (PIT) and through-the-cycle (TTC) estimates of default probability or expected loss. But amid a unique pandemic, TTC loss...
March 26, 2021 | By Tony Hughes
“The future is not set,” said Kyle Reese, the hero in The Terminator movie. That, believe it or not, may turn out to be the most valuable lesson COVID-19 has taught the risk community and business...
March 26, 2021 | By Alla Gil
Over the past 12 months, bank have faced a myriad of difficulties, ranging from data deficiencies to dwindling profits to rising default risk and falling interest rates. Complicating matters further,...
March 12, 2021 | By Marco Folpmers
How should we handle stress testing when we are already experiencing stress? If the objective is to identify weaknesses before shocks happen, we might conclude that there is limited value to running...
March 5, 2021 | By Cristian deRitis
Bad loans and deteriorating asset quality continue to plague banks in India. Last September, the gross non-performing assets ratio (GNPA) at Indian banks stood at 7.5%, but that number potentially...
March 5, 2021 | By Nupur Pavan Bang
The COVID-19 saga has caused real difficulties for risk modelers. Loss projections made using pre-pandemic models soared in mid-2020, as global economic data spiraled downward. Portfolio performance,...
February 26, 2021 | By Tony Hughes
Now more than ever, with COVID-19 rendering historical data mostly irrelevant for loss forecasting, estimation of expected credit losses must be forward looking. This presents significant challenges...
February 26, 2021 | By Alla Gil
Large-scale government interventions like the ones we've experienced recently can provide essential support in an emergency, preventing a recession from developing into a depression. However, they...
February 5, 2021 | By Cristian deRitis
All banks need to meet quality standards for their probability of default (PD) rating systems, and the Population Stability Index (PSI) is an easy-to-use PD stability assessment tool. However, it's...
January 29, 2021 | By Marco Folpmers
COVID-19 has yielded a crisis of confidence in models employed by financial institutions. Too many proved over-reliant on historical data in a year of unprecedented circumstances, and even...
January 22, 2021 | By Alla Gil
Credit market observers are expecting a bull run to continue well into 2021. Volatility is seen as likely to persist as the pandemic continues to rage, and it may deepen if political divisions...
January 8, 2021 | By John Hintze
Positive news on vaccine development from Pfizer/BioNTech, Moderna and AstraZeneca/Oxford is a major step in combating the COVID-19 public health and economic crises. At the same time, coronavirus...
January 8, 2021 | By Cristian deRitis and Amnon Levy
Over the past year, amid the COVID-19 pandemic, India's banking system has been plagued by increases in non-performing loans and credit write-offs. Public-sector banks (PSBs) are struggling to raise...
December 28, 2020 | By Michael Sell
In response the pandemic, borrowers across Europe were given more time to repay their loans in 2020, with the help of government-support programs and guidelines issued by the European Banking...
December 11, 2020 | By Marco Folpmers
2020 is a year we will never forget, but will gladly put behind us. Although our short-term prospects remain uncertain given the recent acceleration of the spread of COVID-19, the announcement of...
December 4, 2020 | By Cristian deRitis
The unprecedented trading volume and volatility spikes in the U.S. Treasuries market in March, in response to the COVID-19 pandemic, rekindled an ongoing discussion around the ideal market structure...
November 25, 2020 | By Murray Pozmanter
In response to COVID-19, the Reserve Bank of India recently announced it would defer implementation of certain Basel III capital and funding provisions until April 2021. The intent is to give Indian...
November 25, 2020 | By Shashi Ramachandra
When validating models, to separate riskier and less risky customers, banks need to assess the discriminatory power of their credit risk models to rank obligors. Kendall's tau is a statistical test...
November 13, 2020 | By Marco Folpmers
2020 has been a challenging year for risk modelers, rife with uncertainty. What have we learned about the effectiveness of existing stress tests and the scenarios that drive them? After the global...
October 30, 2020 | By Tony Hughes
Critics of CECL, the current expected credit losses accounting standard, warned that it would exacerbate an economic downturn. In fact, it enabled banks to build their loan-loss reserves more quickly...
October 23, 2020 | By John Hintze
In September, to further test bank balance sheets for stress, the Federal Reserve took the unprecedented step of releasing a second set of 2020 scenarios for its Comprehensive Capital Analysis and...
October 23, 2020 | By Alla Gil
In the aftermath of the 2008 global financial crisis (GFC), economic capital (EC) - a popular tool for calculating capital requirements across different risk types - fell into disfavor at some banks....
October 9, 2020 | By Marco Folpmers
After a relatively quiet August, September brought forward significant risk management challenges - ranging from the estimation of losses for another quarterly CECL submission to the Federal...
October 2, 2020 | By Cristian deRitis
Proper back-testing is crucial for any bank that submits its PD and LGD models to its supervisor for approval. To meet the requirements of regulators like the European Central Bank (ECB), banks must...
September 18, 2020 | By Marco Folpmers
As we enter the peak of one the busiest US North Atlantic hurricane seasons in history, now is the time to reflect on the prospective effects of hurricanes on a major asset class of many financial...
September 11, 2020 | By Clifford Rossi
Just as COVID-19 has accelerated trends in online shopping, remote working and videoconferencing, the measurement and provision of credit is bound to experience a transformation in coming years....
September 4, 2020 | By Cristian deRitis
During the 2008/09 global financial crisis, loan-loss accounting methods were unable to provide timely, accurate information to investors about the quality of loans held by banks. CECL and IFRS 9...
August 28, 2020 | By Tony Hughes
The COVID-19 pandemic has had a significant impact on our lives and our livelihood. It has forced businesses into bankruptcy and exposed a wide range of socio-economic issues. The financial sector is...
August 28, 2020 | By Vivek Agarwal
In today's Covid-19 world - plagued by high unemployment, historic debt and soaring bankruptcies - a return to basics for loan and credit review has never been more important. Severe credit risks are...
August 28, 2020 | By Thomas Day
The early returns on the impact of the pandemic on credit performance are now in, with some surprising results. The unprecedented spike in unemployment caused by COVID-19 naturally yielded...
August 14, 2020 | By Cristian deRitis
When working earlier this year in San Francisco, I found myself in a small breakfast restaurant in the Embarcadero area, where I was enjoying breakfast and the newspaper. Since the place was...
August 14, 2020 | By Marco Folpmers
In 2020, for the first time in 11 years, a U.S. stress test was conducted while the economy was actually in recession. The test has been criticized by detractors who have argued that it did not take...
July 31, 2020 | By Tony Hughes
Adoption of the Current Expected Credit Loss (CECL) standard couldn't have come at a worse time. Earlier this year, companies and investors were just getting used to the idea of embedding...
July 10, 2020 | By Cristian deRitis
Contending with the economic shocks of COVID-19 - including unemployment, decreasing revenues and high projected credit losses - banks must now overcome unprecedented credit risk management...
June 19, 2020 | By Marco Folpmers
If there is any good that can come from a crisis like the coronavirus, it's that it causes us to reexamine our actions and decisions. “Am I on the right road?” That's a question today that pertains...
June 5, 2020 | By Cristian deRitis
One of the most important attributes of a good risk manager is the ability to see what others do not see: to be able to peer around corners, search for the unexpected and act as ballast for new ideas...
May 29, 2020 | By Thomas Day
For years, lenders have signed on to commercial loans with fewer and more flexible covenants. This has enabled borrowers in today's challenging business environment to pursue distressed exchanges...
May 22, 2020 | By John Hintze
As a result of the current economic crisis, banks, pensions, insurance companies, funds and other institutional investors and investment managers are at the early stage of a massive increase in...
May 1, 2020 | By Thomas Day
The two-fisted punch of the coronavirus pandemic and a collapse in oil prices to 20-year lows have ended the 11-year bull market. Assuredly, these factors will fuel government bailouts and bring the...
April 24, 2020 | By Mark Carey
On the heels of its launch late last year of total return swaps trading, EquiLend has gone live with a collateral trading service, with workflows supporting trade negotiation, execution and...
April 24, 2020 | By John Hintze
Housing finance experts from the American Enterprise Institute are warning that a proposed change in the Qualified Mortgage (QM) rule would exacerbate existing risk management difficulties and ensure...
March 20, 2020 | By Ted Knutson
[Editor's Note: We would like to welcome Cristian deRitis, the Deputy Chief Economist at Moody's Analytics, as our new Modeling Risk columnist. Cris, who has 20 years of experience as a modeler and a...
March 6, 2020 | By Cristian deRitis
In February, the Federal Reserve Board is expected to release scenarios for its 2020 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test (DFAST) exercises. Moreover, the...
January 31, 2020 | By John Thackeray
The second-to-last batch of participants in the uncleared, over-the-counter (OTC) derivatives market is scheduled to begin complying with new initial margin rules by September 2020, with the rest to...
December 20, 2019 | By John Hintze
The longstanding trend of weak commercial loan covenants has begun to turn, according to Moody's Investors Service. However, “credit documentation remains extremely loose and new weaknesses continue...
September 13, 2019 | By John Hintze
It has been almost two years since the massive Equifax data breach came to light. In the aftermath, the CEOs of the three major credit reporting companies (CRCs) - Equifax, Experian and TransUnion -...
August 30, 2019 | By Frank Tian
As the implementation deadline for the Current Expected Credit Loss (CECL) accounting standard nears, financial institutions are now feeling the compliance heat. However, calculating future losses is...
August 23, 2019 | By Alla Gil
While regulatory attention is turning increasingly toward operational, cyber and other growing non-financial risk categories, the Federal Deposit Insurance Corp.'s 2019 Risk Review shines a spotlight...
August 9, 2019 | By Ted Knutson
The industry is currently a hive of CECL-related activity. Many banks are busily testing their systems or finalizing their preparations for the go-live date, which is either in January 2020 or...
August 9, 2019 | By Tony Hughes
Smaller banks may get three more years to comply with the new Current Expected Credit Loss (CECL) accounting standard, but other banks still will have to adopt it next year, even as more of them...
August 2, 2019 | By John Hintze
While signaling increased concern about leveraged lending as a corporate-credit - and potential financial-stability - risk, senior regulators have lacked a complete picture of the exposure....
July 26, 2019 | By Jeffrey Kutler
Last year, the US Congress and President Trump enacted major revisions to the Dodd-Frank Act that dramatically reduced the scope of stress-testing regulations. Now, with the Comprehensive Capital...
July 12, 2019 | By Tony Hughes
Reviews of the Financial Accounting Standards Board's recent hedge accounting changes have been highly favorable, and they're likely to become even more so should additional changes, soon to be...
June 28, 2019 | By John Hintze
Following expressions of investor concern and reports of significant impacts on banks, members of Congress have introduced legislation to require reconsideration of the CECL (Current Expected Credit...
June 21, 2019 | By John Hintze
During the financial crisis, hundreds of nonbank mortgage lenders and servicers went bankrupt. In the decade since, they have enjoyed a renaissance of sorts. Clifford Rossi The rise of nonbanks in...
May 9, 2019 | By Clifford Rossi
More than a decade after the financial crisis, senior managers of financial institutions face two challenging tasks. They must deal with evolving regulations and new accounting standards, while...
April 26, 2019 | By Alla Gil
The Qualified Mortgage (QM) rule is a good example of well‐intended but poorly designed policy. QM came about as part of the Dodd‐Frank Act to address serious issues during the mortgage boom...
April 18, 2019 | By Clifford Rossi
As the December 2019 deadline for the Current Expected Credit Loss (CECL) standard draws nearer, financial institutions need to think beyond compliance. Meeting all the rules for the new accounting...
April 12, 2019 | By Varun Agarwal
Post-financial-crisis mandates for central clearing of derivatives have had the intended effect. Cleared U.S. interest rate derivatives volume, for example, exceeded 88% in 2018, according to the...
April 5, 2019 | By Jeffrey Kutler
Smaller lending institutions face a dilemma. The primary motivation behind the Current Expected Credit Loss (CECL) standard is to provide investors with enhanced forward-looking information about the...
April 5, 2019 | By Tony Hughes
The recent Congressional hearings on U.S. credit reporting companies (CRCs) put the spotlight again on a corner of the consumer credit market sorely in need of market and regulatory reform. A...
March 15, 2019 | By Clifford Rossi
Stress testing, up until now, has basically been a theoretical exercise. Growth has been slow but steady and the imbalances that can trigger recessions have largely been absent. However, with many...
March 8, 2019 | By Tony Hughes
Amid a generally healthy run of economic indicators, the conversation at the American Enterprise Institute in Washington, D.C. was strikingly alarmist. The panelists at a February 12 discussion on...
February 25, 2019 | By Ted Knutson and Jeffrey Kutler
The Federal Reserve's signaling that future rate hikes are on hold is a relief to corporate borrowers who must refund debt over the next few years. But debt-refunding challenges have not gone away....
February 22, 2019 | By John Hintze
Banks originating and participating in leveraged loans should ensure that risk management processes keep pace with changes in that market, the Federal Reserve Board, Office of the Comptroller of the...
February 8, 2019 | By Ted Knutson
In an ideal world, we would develop CRE credit risk models using a complete data set representing loans from commercial banks, insurance companies, asset managers and CMBS. However, CRE loan-level...
February 2, 2019 | By Eric Bao and Sumit Grover
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