S&P calls for more risk disclosure

Standard & Poor's has called on financial institutions to provide more risk disclosure about potential losses from worst-case financial events. The ratings agency, which started factoring in market risk management statistical analysis as an important component when determining credit ratings last year, specifically requested institutions to provide more expected shortfall disclosure.

Expected shortfall – also called mean excess loss or tail-conditional expectation – looks at situations outside the purview of the most commonly used market risk statistical tool, value-at-risk. VAR measures the probabilistic bound of market losses over a given period of time expressed in terms of a specific degree of certainty, but does not deal with worst-case events at the so-called 'tails of probability distributions'. Expected shortfall calculates this mean loss of the percentage of worst