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Credit Risk issues at your finger tips

Over the recent two months, we have had a large number of signups to our website. Aside from the 5 Mistakes in Credit Application articles, many subscribers checked and read the various articles on Credit Risk which we have published on the site. So I
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What does IRB Compliance really mean in Credit Risk?

To us, an IRB compliant bank has to pass through the several hurdles, including amongst others: Calculation of PDs There are several issues here to consider: 1. Definition of PDs. Any risk rating system should provide ratings to show potential defaults for both, forward looking
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How we make Credit Risk decisions

A bank entered into a lending proposition some 8 years back in which it financed the importation of cars. Despite the high collateral security (the cars), the deal was a disaster, with the cars still held by the bank unsold to date. In a more
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Are all schools in the GCC low Credit Risk rated?

GEMS recently issued a perpetual subordinated Sukuk for USD 200 million, carrying a coupon of 12% (http://goo.gl/G54cz3). This is a company that has a Financial Rating of 3.6 (6 Sigma), a Category 1 obligor in terms of credit risk, and should command very fine pricing.
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Why Standardized banks should operate as IRB for managing Credit Risk

Assume you had a bank that operated under Basel’s Standardized approach (which is essentially the majority of banks worldwide today). Also if it were an average commercial bank, its Revenue to Expense ratio would be 2:1. With a Capital Adequacy of 10.5%, and a Return
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Ponzi Schemes: A special Credit Risk feature

It may happen to individuals, and is also prevalent with companies. With individuals it is a case where a schemer lures investors with high returns, and with the proceeds pays off previous investors. The scheme requires an ever increasing cash inflows to pay off a
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How Risky is a Saudi Portfolio? A selection of Credit Risk Ratings

In our previous article on Kuwaiti companies, we addressed the point that given the relative wealth in the country, why were almost half of the listed companies we sampled in Kuwait risk rated above 6.5; i.e. watch listed or worse in terms of credit risk,
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Is there a Credit Risk characteristic to the Retail sector?

In our previous article on EMKE and Walmart, we referred to Deloitte’s recent publication titled Global Powers of Retailing 2014 (http://goo.gl/Wj4FEP), in which 250 of the largest retail stores in the world were listed, and of which EMKE Group (the Lulu chain) was reported as
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Beauty is certainly in the eye of the Credit Risk beholder.

According to the company’s website L’Oreal Group is the world’s largest cosmetics and beauty company with a portfolio of 27 international brands including Lancôme, Maybelline, and Redken. With an organizational structure based on distribution channels and a strong sales force, it aims to please customers
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Middle East Complex (MEC) – How banks got the Credit Risk all wrong.

It is not that banks fell into the trap of looking at traditional ratios and got it all wrong. It is that they ignored the advice altogether at a time when they could have done something to avoid the high Credit Risk.
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