Topic:
banks
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Credit Regimes, Risk Management, and the Value of Stress Testing
In loss forecasts, especially stress tests, banks estimate what they could lose, but most stop there. Credit losses exist in regimes — long stretches of nothing punctuated by sharp, severe transitions — and the only value of stress testing is deciding what to do before the shift happens. Most banks … Continue Reading
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SR 26-2 to SR 11-7 Mapping: From 21 ‘Sound Practices’ to 179 ‘Shoulds’
The revised MRM guidance (SR 26-2) replaced 179 “should” statements with 21 “sound practice” statements. We built the complete SR 26-2 to SR 11-7 mapping. Free spreadsheet download.… Continue Reading
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Was Private Credit Fooled by Its Own Success?
The biggest impetus for Private Credit’s early growth was when regulated banks retreated from making riskier loans. Given the difference in capital structures, PC maintains an incentive to make riskier loans than banks. Credit losses tend to be either microscopic or traumatic–there’s generally been no in-between. Losses in most loan … Continue Reading