Capital Markets Examiner School, Providence, RI

Credit Risk

 A bank’s due diligence process is a key safeguard to mitigating credit risk.

 Banks should be able to demonstrate a professional level of credit analysis for all credit-related (i.e. non-US Treasury or explicitly supported) securities.

 Per the Uniform Agreement on the Classification and Appraisal of Securities Held by Depository Institutions:  “The depth of analysis should be a function of the security’s risk characteristics, including its size, nature, and complexity. Individual security analysis should form the basis of any classification determination.”

Credit Risk

• Most banks set the minimum bar at the OCC grid: