Capital Markets Examiner School, Providence, RI

Risks in the Investment Portfolio

 Credit

 Market

 Focus on Interest Rate Risk

 Liquidity

Credit Risk

 Do they have the ability (and intent) to repay

 Overall, the credit risk in an investment portfolio is low

 Credit Risk is concentrated in Credit-Related securities  Municipal Securities  Corporate Securities  Structured Securities

 Banks should consider doing a media check on every credit they review  The rating agencies can be slow to react and even the markets may lag particularly for thinly-traded securities.