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Calculating the Capital Buffer in Volatile Times: How Much is Enough?

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


Are CECL and IFRS 9 Reasonable and Supportable?

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


Model Validation: Dissecting the Boundaries of a Rules-Based World

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


Multiple Credit Scores in Mortgage Lending: Understanding the Risks

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: The Power of Diversification

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


A Date with Destiny: The Importance of Demographics for Risk Modelers

“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


SEC Approval Sets Stage for Central Clearing in Securities Finance

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


The Problems with Ritualistic Risk Management

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


Let’s Get Real: Managing Consumer Credit Risk in a Time of Inflation

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


Consumer Outlook: Continued Growth, or Putting on the Brakes?

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


EBA’s Latest Risk Report for European Banks: Interesting, But Mistimed

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


Will the Housing Bubble Pop or Fizzle?

  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


FASB Update Facilitates Hedging of Fixed-Income Risk

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 Uncertainty: What Does It Mean for FRMs?

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


Model Validation for Credit Risk: A Critical Deficiency in the Jeffreys Test

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


The Pandemic Will Improve Risk Modeling – If We Let It

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


Calibrating Recession Risks

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


Credit Access and Risk: A Balancing Act

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


How to Fix Stress Testing

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


Stress Testing and ECL: The Illusory Concept of Perfect Forecasting

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


2022 Stress Testing Expectations

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


Fed Study: CECL Boosted Banks’ Reserves, but Impact on Lending Is Unclear

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


Basel III: The Impact of the New Probability of Default Input Floor

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


How to Improve LGD: Unlocking the Generalized Area Under the Curve

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


U.S. Securities Industry Gets Behind Plan to Curtail Settlement Risk

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


The Changing Credit Risk Management Landscape at European Banks

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


Buy Side Faces Initial-Margin Bottleneck

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


What Time Is It? Practical Considerations for Risk Modelers

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


Climate Risk: Short-Term and Long-Term Credit Consequences

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


Biggest U.S. Banks' SLRs Continue Trending Down

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


Model Risk: Why Size Matters for Banks

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


How Effective are Your Scenarios?

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


The Case for Monte Carlo Simulations

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


The Modeling Dilemma: Great Expectations and Cold Reality

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


Probability of Default: The Pluses and Minuses of Transition Matrices

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


Should We Centralize Stress Testing?

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


How to Stress Test for Extremely Unexpected Scenarios

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


Beyond Probability of Default: How to Expand the Use of the Jeffreys Test

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


The Riskiness of Small Banks vs. Large Banks: Size Matters

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


The Archegos Collapse: Not Just a Family Office Affair

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


With CECL in Force, Banks Remain Cautious on Loss Reserves

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


The Skewed Generalized T Distribution: A Swiss Army Knife for Tail Risk

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


Should COVID-19 Change Through-the-Cycle Calculations for ECL?

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


How to Prepare for Future Crises: A Multi-Scenario Approach to Tail Risk

“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


Pros and Cons of the Six Sigma Approach for Credit Risk Management

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


Stress Testing in Volatile Times: A Logical Approach

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


Perspectives on the Banking Dilemma in India: A Q&A with Vivek Kaul

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


In Search of a Post-Pandemic Modeling Paradigm

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


Credit-Loss Forecasting: A Practical Guide to CECL Implementation in Uncertain Times

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


Too Much of a ‘Good Thing': How to Manage Government Stimulus Risk

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


Probability of Default: Pros and Cons of the Population Stability Index

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


Cyborg Model Validation

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


Positive Credit Market Outlook Carries Over

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


The Hope and Challenge of Vaccines: Implications for Credit Loss Forecasting

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


Credit Risk Insights from India's Frontline: A Q&A with Shashi Ramachandra

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


The Uncertain Future of Credit Risk in Europe: Banks, Borrowers, and Expiring Moratoria

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


What Lies Ahead: Credit Risk Under a Biden Administration

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 U.S. Treasuries Clearing Challenge: Finding the Right Incentives

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


COVID-19, Basel III and the Current State of India's Banking System

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


Model Validation: Breaking Down the Glitch in a Key Tool

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


Scenario Analysis in the Age of COVID-19: Do We Need a Different Approach?

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


CECL's Downside Averted - for Now

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


Putting Stress Tests in the Blender

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


Economic Capital in Times of COVID-19

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


CECL and CCAR Updates: COVID-19 Effects, and the Future of Risk

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


Probability of Default: How to Pass the Jeffreys Test and Improve Predictive Ability

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


Defaults, Delinquencies and Credit Losses: The Potential Impact of Rising Hurricanes on Mortgage Risk

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


The End of Credit Scores?

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


How to Address CECL and IFRS 9 Weaknesses Exposed by COVID-19

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


Uncleared Margin Rules: Don't Let the Reprieve Go to Waste

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


Credit Risk Management in a Pandemic Era

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


COVID-19 Broke My Credit Loss Model

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


The Role of AI in Credit Risk: A Conversation

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


Stress Testing in War and Peace: How to be Better Prepared for Future Crises

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


Will COVID-19 Kill CECL?

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


The Effects of COVID-19 on Expected Credit Loss Modeling

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


Managing the Risk Multiverse with Scenarios: How to Be Better Prepared for the Next Pandemic

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


COVID-19 Contagion: Why Risk Managers Need a More Aggressive Approach to Economic Recovery

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


J. Crew Bankruptcy Sets Stage for More Distressed Debt Exchanges

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


COVID-19: Emerging Credit Risk Challenges for Main Street Business Lending

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


Financial Innovation May Cause the Next Recession as Protection-Lite Loans Falter

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


Technologies and Partner Ecosystems Transform Collateral Management

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


AEI: CFPB Misses Mark in Qualified Mortgage Proposal

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


Stress Testing, CECL and Coronavirus: The Importance of Telling the Story Behind the Numbers

[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


Stress Testing: A Practical Guide

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


Firms Covered by Next Phases of Margin Rules Need to Get Moving

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


Moody's: Loan Covenants Stronger but Still in the ‘Weak' Range

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


Why the 3 Credit Reporting Companies Are Still Standing

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


Diving Deeper Into CECL: The Best Strategy for Forecasting Expected Credit Losses

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


Credit and Market Risks in FDIC Spotlight as Economic Expansion Ages

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


Will CECL Ultimately Be Worth All the Fuss?

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


Amid Mounting Criticism of CECL, a Partial Reprieve

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


Who Owns CLOs? Fed Research Sheds Some Light

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


The Real Value of Stress Testing: Has CCAR Been Validated?

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


FASB Plans Further Hedge Accounting Adjustments

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


Congress Enters the Fray on CECL Delay

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


How to Prevent Another Crisis: Mitigating the Risk of Nonbank Mortgage Lenders and Servicers

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


A Proactive, Integrated Approach to Capital Planning

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


Mortgage Risk: Why We Should Eliminate the Debt-to-Income Ratio Limit

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


How to Leverage CECL to Improve Operations

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


CCPs and the Risk of Concentration

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


Finding a CECL Solution for Smaller Banks

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


How to Reduce Risk from Credit Reporting Companies

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


Commercial Lending Imbalances and the Looming Recession

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


The Next Time Bomb: All Eyes on Debt

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


Corporate Refunding Challenges Could Mushroom in Economic Downturn

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


Regulators Caution on Leveraged Lending

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


A Novel Approach to the European CRE Credit Risk Dilemma

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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