Credit risk history

  • When did credit risk management start?

    The concept of risk management in the financial sector was revolutionized in the 1970s, when financial risk management became a priority for many companies including banks, insurers, and non-financial enterprises exposed to various price fluctuations such as risk related to interest rates, stock market returns, Sep 6, 2013.

  • Where does credit risk come from?

    In terms of loans and advances (for example mortgages, term loans and overdrafts) and contingent liabilities (for example credit instruments such as guarantees and documentary letters of credit), credit risk arises both from amounts advanced and commitments to extend credit to a customer or bank..

  • Who invented credit risk?

    In 1974, economist Robert C.
    Merton proposed a model for assessing the credit risk of a company by modeling its equity as a call option on its assets.
    The Merton model is used today by stock analysts, commercial loan officers, and others..

Nov 19, 2019Regulators first introduced new absolute measures of credit risk, with the new internal rating based approaches (IRB), in 2006. These Basel II 

What is a credit risk based approach?

Regulators first introduced new absolute measures of credit risk, with the new internal rating based approaches (IRB), in 2006.
These Basel II rules saw the advent of what are now the main credit risk components, Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EaD).


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