Preparing for the Credit Downturn
Since banks have become accustomed to a low default environment, they run the risk of not being adequately prepared for a downturn, despite having invested significantly in credit risk measurement techniques in recent years.
discusses what banks can do to prepare for the next credit downturn. It outlines some of the management structures that need to be in place and provides seven recommendations aimed at ensuring that levers for managing credit risk exposure are effective and appropriate.
A credit downturn also offers an upside, such as opportunities to acquire weaker competitors, expand distressed debt trading, and offer third party workout services. To seize these opportunities, a bank will have to have its own house in order and be in a position of relative strength.
The report is 16 pages and has three figures. A table of contents is available online.
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