The magnitude of the current crisis makes it abundantly clear that there is significant room - and requirement - to improve current credit-assessment approaches. BTN asked a group of CTOs and analysts to weigh in on the issue. Excerpts of responses are below.
Q: What more is needed, from a technology or human perspective, to capture the full range of risk factors in the market?
Senior Executive, Accenture
Financial Services Risk Management Practice
Internal liquidity is the new calculation. This will take one of two approaches. The first is my internal liquidity. How liquid is my book, what is the cheapest way to deliver across all asset classes, and is my liquidity going up or down based on trades and market moves?.... The next pressing need is to look at credit risk and counterparty information. Internal credit assessment and market-derived ratings from spreads, derivatives, and equities need to be calculated across credit exposures.
EVP & CTO, BankPlus
Technology and the information it can provide are only useful when analyzed and acted upon. The issues we face did not just emerge, there has been a groundswell for some time. If, however, someone out there has a magic technology answer, I am all ears.
DANA A. WIKLUND
Research Director, Risk Management Practice, Financial Insights
If there is anything to be learned from the 2007 credit crisis it is that firms need to pay sufficient attention to the 'wild west' parts of a firm's portfolio-such as with OTC derivatives-where product innovation and complexity are rampant, and operational controls are comparatively less defined. Otherwise, the consequences can be dire.
VP, Enterprise Risk Services, Capgemini, Financial Services
The regulatory bodies can play a very constructive role in enforcing data standards and definitions, which will build transparency between parties and will make it easier for the industry to understand and process positions within any given portfolio. Further, the regulators will need to collect and monitor data from member institutions to provide meaningful oversight. (c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved. http://www.americanbanker.com/btn.html/ http://www.sourcemedia.com/