Risk Management
Banks' reassessment of risk management can impact ratings- S&P
Du : 29/04/2008
BANGALORE (Thomson Financial) - Standard & Poor's Ratings Services said the current effort by bank management and boards to reassess their risk management functions can, and do, impact the ratings agency's opinions of creditworthiness.
S&P said recent events have resulted in record losses at a number of banks, in turn requiring significant recapitalisations to preserve creditworthiness.
The ratings agency said it has identified the banks' 'originate and distribute' risk management model, lag between risk aggregation and identification, lack of enough stature in the risk management structures to the risk function versus the traders, and less focus on more basic risk exposure measures, such as nominal positions as additional areas of focus for the risk management review.
S&P also identified mark-to-market accounting resulting in shift in focus on short-term results, some traders' behaviour inconsistent with the institution's risk appetite, and problems resulting from ineffective identification of positions at the individual desk or trader level.
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S&P said recent events have resulted in record losses at a number of banks, in turn requiring significant recapitalisations to preserve creditworthiness.
The ratings agency said it has identified the banks' 'originate and distribute' risk management model, lag between risk aggregation and identification, lack of enough stature in the risk management structures to the risk function versus the traders, and less focus on more basic risk exposure measures, such as nominal positions as additional areas of focus for the risk management review.
S&P also identified mark-to-market accounting resulting in shift in focus on short-term results, some traders' behaviour inconsistent with the institution's risk appetite, and problems resulting from ineffective identification of positions at the individual desk or trader level.
Related Articles
[15/05/2008] USB shuffles investment bank, beefs up risk management
[31/05/2007] Bally Total Fitness Reaches Agreement in Principle on Proposed Terms of a Consensual Restructuring With Holders of Senior Subordinated Notes
[08/05/2006] Changes at ISM, IGDA, THQ, ELSPA & More