Part II Commercial Banking, 7 Credit Risk
- Credit risk — Basel 2
7.01 Of all the risks that banks are exposed to, credit risk is the most important and the most intuitively obvious. A one-sentence definition of a banker might be a man who judges credit; a judgement which can be characterized as a decision on how much to lend to whom on what terms. It is, however, important to remember that credit means more than simply loans. If I lend money, I have a credit exposure to the borrower. However, if I buy debt securities I have a credit claim on the issuer; if I enter into a derivative I have a credit claim on the counterparty; if...