7 Answers About Trends In Credit Risk Management. Interview with Brett Ayers

Trends In Credit Risk ManagementAbout Brett Ayers, Senior Credit and Risk Review Officer at PNC Innovative and highly experienced senior level risk analyst with 18 years of accutane on comedonal acne commercial, corporate and investment bank experience. 1. What awaits a banking business in the current year? What changes? What awaits banks, depending upon their scope, national or international, investment accutanegeneric-reviews bank or commercial bank, will vary, though all of these banks will continue to be negatively influenced via Dodd-Frank and its continued roll out, as well as constant gyrations coming from regulators and from Washington D.C. There is also potentially extreme volatility in rates, though only on the margins relative to deposits as the ten year continues to rise, most likely. Another growing concern will be the constant liquidity injections, in different forms, from Central Banks world wide that now fall into a globally connected world and can effect even the smallest banks without them even being aware of it. Lastly, a potential crisis world wide, like what is currently going on in Iraq, really has a chance to affect banks. We live in a petroleum economy, all that we do, all that we are involved with, is tied to oil and gas. The rise in the price of oil and ultimately gas will put greater pressure on companies that have borrowed from banks to generate sufficient cash flow to repay loans/bonds. This really has a chance, along with rising treasury rates, to really alter the repayment landscape for banks. 2. Risk evaluation procedures – what has changed after the crisis? Everything, though very little of it is about truly improving the quantifying, analyzing and mitigating of risk within the financial institutions, both domestically and internationally. It is cymbalta cost about pay days for accountants, lawyers and regulators. It is exponential growth in regulation that will in the end do absolutely nothing to stop another major downturn centered in the financial markets. The disconnection between regulators and understanding what the true nature and risks are within the banking world has not gotten any better and in fact has perhaps gotten worse. 3. How should a risk evaluation procedure (that keeps pace with a business development) be developed and what are the major steps? The first and foremost step is actually understanding the risk itself. What is a real risk and what is just a “paper occurrence” that ultimately poses little or no threat. What within a risk has the ability to ultimately be realized on the B/S or I/S of a company? Keeping an eye on pending regulation at all levels will often be the cornerstone of any new risk that a company may face followed by increased or decreased competition within a certain business sector. 4. Is a “D-paper” segment interesting for banks and large lending institutions? If yes, what are the major differences when working with a mass segment and such borrowers? If no, how will banks react to a prospective proliferation of a large amount of competitors (in a number of countries, we observed small lending institutions grow, develop, and start really competing with banks)? I think this will remain, unless it pertains to residential mortgages, not necessarily a big go after for the banks, though with a lot of banks they have specialized LOB’s that do this from the commercial side (FILO, Tranche B or even C loans), and it is done in part because it has the richest yield by far in this current margin compressed environment. 5. Covenant Lite Loans are back in a big way. Is it a good trend or a bad trend? It is a dangerous trend that, coupled with the completely out of whack risk premium in pricing right now, will, along with several other highly leveraged LOB’s, i.e. student loans, auto loans, multi-family R/E projects, come back to haunt the commercial world in a way that may well make the Subprime turn down look like a walk in the park. 6. What is your opinion of a prospective development of P2P lending? I like it. What sort of legs it will have is hard to say. A lot of particulars to sort out. I think it reflects, on a small scale, something I think may well become the next revenue avenue for many companies and that is captive financing, not only for their own products and services but also branching out, though never expanding out in the way GE capital has. 7. Importance of statistical-based Credit Risk Management for SME and Corporate Lending: is it growing or declining? It is exploding, and the stress test, the regulations are making it all the more important. However, still so much of regulation and its compliance is tied to the amount of paper that can be thrown at any one regulation and/or compliance component as to render so much of it rather useless in truly measuring and capturing a true ongoing risk profile for any financial institution. [wpsocialite]

One thought on “7 Answers About Trends In Credit Risk Management. Interview with Brett Ayers

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    As a banker with almost 30 year originating and managing commercial relationships for large and small banks, the expected result on more and more regulation is coming to fruit. As noted above, no real improvement to credit management but a huge cost to banks (and their customers) in wasted effort, time and paperwork.

    Instead of bailing out and micro-managing the weak, allow the market to remove those who make mistakes and not strangle the ones who have done things correctly.

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