Capital Markets School - October 2023

Internal Use Only

Risks in the Investment Portfolio Credit

Market

Focus on Interest Rate Risk

Liquidity

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Internal Use Only

Credit Risk

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

Overall, the credit risk in an investment portfolio is low

• Municipal Securities • Corporate Securities • Private Label Mortgage Securities Credit Risk is concentrated in Credit-Related securities

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

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