Clearing the obstacles

Credit quality is essential to every energy firm’s success, as recent problems at Aquila and Dynegy attest. Couple this with the post-Enron threat of increased regulation for OTC energy derivatives and it is clear that the energy trading market needs redirection. Could clearing house initiatives such as EnergyClear, launched this month, be a solution?

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When does an energy trader favour tighter over-the-counter energy trading regulation? When the future of its trading business looks bleak. In July, Richard Green, Aquila’s chairman, said he fully supports US senator Dianne Feinstein’s proposal for more aggressive Commodity Futures Trading Commission (CFTC) oversight of energy derivatives trading (see box). Aquila is currently looking for a partner to buy into its merchant services risk management division, and is unwinding its derivatives

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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