Saving for a rainy day

With global liquidity at its lowest level for four years, banks and regulators alike have begun to turn their attention to the risk of a funding drought. Is the issue being taken seriously enough? Gareth Gore reports

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Hubris may have been a crime in classical Athens, but the financial markets have their own ruthless way of punishing arrogance. As the market reacted to the Russian financial crisis in the third quarter of 1998, it took just days for previously profitable trading strategies at the hedge fund Long-Term Capital Management (LTCM) to unravel. Within a month, almost all the fund's $4.7 billion of assets had been wiped out.

It is now clear that traders had found themselves entangled in highly leveraged

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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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