Capital Markets School

Internal Use Only

Risks in the Investment Portfolio Credit

Market

Focus on Interest Rate Risk

Liquidity

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