Credit risk
Government bond swaptions and how they might work
Payoffs based on bond yields instead of swap rates could offer new hedging tool, argue Crédit Agricole execs
Strange new world of Covid economics upends loan-loss models
Models wrong-footed by government support, slumps in whole sectors and differences within industries
Would margin rules have checked Archegos? Perhaps not
Regulator-prescribed margin methodology permits six-times leverage on equity swaps
Share of small EU bank assets under standardised approach grew in 2020
At small banks, SA covered 88% of credit exposures
EU banks’ credit risk estimates stabilised at year-end
Weighted average corporate borrower PD across countries climbed to 2.15%
EU systemic banks added €9bn to capital through IFRS 9 break
UniCredit was the top beneficiary with an 82 basis points CET1 ratio boost
Securitisations lowered Intesa’s credit RWAs in Q4
Synthetic securitisation shaved €2.2 billion off of credit RWAs alone
EU banks saw distressed loans heap up in Q4
‘Stage two’ assets make up 9.1% of banks’ total
A numerical simulation approach to study systemic risk in banking systems
The authors introduce a simple numerical algorithm to study banking systems subject to credit risk. The algorithm is based on a model that is completely defined by only two parameters.
The cost of hedging XVA
HVA is framed consistently with other valuation adjustments
SocGen’s STS securitisations hit €9 billion in 2020
‘Simple, transparent and standardised’ exposures had half the capital charges of the rest of the book
At 40% of EU banks, credit risk own-funds deviate from benchmarks
Eleven banks lowballed capital requirements without justification in latest exercise
Portfolio shifts aided credit RWA reductions at Dutch banks in 2020
At ING, 0% risk-weighted sovereign exposures kept a lid on RWA inflation
Risk density of Santander’s securitisation book hits five-year high
Synthetic securitisations helped cap credit RWAs last year
Deutsche Börse eyes quantum computing
Pilot application to model enterprise risks cuts computation time from 10 years to 30 minutes
Credit migration: generating generators
A stochastic time change helps the modelling of rating transition
At systemic US banks, corporate default risk ebbed in Q4
Median PD of corporate portfolios down to 1.6% from 1.73%
Riskiness of internationally-active UK banks edged up in 2020
Risk density across top five UK banks fell year on year
EU banks expect OTC trading conditions to tighten
Credit conditions had eased in Q3 and Q4 2020, but were expected to get tougher in Q1
Swaps, repo counterparties of US banks grew riskier in 2020
At Citi, counterparty credit RWAs for OTC portfolios increased 51%
IFRS 9 relief added £8bn to UK banks’ capital buffers in 2020
Lloyds’ CET1 ratio reaped a 120bp benefit
High-earning banks set aside more Covid provisions – BIS
Provisions across 70 banks in H1 2020 were almost quadruple those taken in H2 2019
Ailing loans added $15bn to StanChart’s RWAs in 2020
Effects of credit deterioration offset by disposals, portfolio reductions
Research on listed companies’ credit ratings, considering classification performance and interpretability
This study uses the correlation coefficient and F-test to select the initial features of a credit evaluation system, and then a validity index for a second selection to ensure that the feature system has the optimum ability to discriminate in determining…