FIN625 - Credit & Risk Management GDB No. 1 Solution and Discussion Spring 2018 Due Date: May 22, 2018
|Starting Date||Wednesday, May 16, 2018|
|Closing Date||Tuesday, May 22, 2018|
|Question Title||Credit Administration, Measurement, and Monitoring Process|
A research study was published in Bank for International Settlements (BIS) Quarterly Review in 2005 in which the Committee on the Global Financial System compiled survey results on the stress-testing practices of 64 banks and securities firms across 16 countries. At that time, the authors found that: “The exercise illustrated the wide range of stress test practices at banks and securities firms. The use of stress tests continues to broaden from the exploration of exceptional, but plausible events—the traditional focus of stress testing—to cover a much wider range of applications. The expanded usage of stress testing derives from its wider acceptance within firms. Aside from its inherent flexibility, it benefits from explicitly linking potential impacts to specific events.”
Suppose that ABC Bank (a recently established bank) hires you as a Credit Risk Analyst and gives you the responsibility of credit administration, measurement & monitoring of the processes. In your first formal meeting with the management of the bank you accentuate that the bank should take into consideration potential future changes in economic conditions when assessing individual credits and their credit portfolios, and should assess their credit risk exposures under stressful conditions.
Now upon discussion with the CEO; you are required to further explicate that why it is really important for the bank to assess its credit portfolios under stress conditions? And also need to specify the areas that then bank could usefully examine in this regard?
Note: Your discussion should be based on logical reasonong/ facts. It should not be too lengthy. You need to to be specific and conise while writing the discussion answers.
For Detailed Instructions, please read the GDB announcement.
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