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European Sovereign Debt Crisis: Measuring your collateral now

It may seem meaningless paper from the previous analysis, but defenders of the collateral will continue to rule risk management. Most banks adopt internal ratings based models to value loans in rating baskets, price them uniformly and then assign the degree of deviation to trader and lender decisions of pricing with the assigned ratings basket and hedge risks.  The DVA on the loan portfolio shows up as profit ont he balance sheet at the end of the reporting period.

This blogger for example, would like the transparent discourse from banks based on their above analysis for all loans  in its portfolio,

ECB President Mario Draghi at the EP

Image by European Parliament via Flickr

so everyone could know, how much of your tweaking of a loanee’s Ext credit rating is to ECB’s and my benefit and how much of it is to hide empty unbacked obligations in secure tranches or the many other ways. Banks would of course provide a degree of their IRB approach to the ECB and they should make it at least transparent enough that it makes sense, whether colllateral in hand is worth afew pennies esp now that Eur 11-12 Tln of collateral is available in loan books and a run on the banks is impossible to action (Citi) any takers?

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One comment on “European Sovereign Debt Crisis: Measuring your collateral now

  1. Pingback: European Sovereign Debt Crisis: Debt Saturday in Greek letters () | The Banking and Strategy Initiative

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This entry was posted on January 17, 2012 by in Amitonomics, Banking, European Sovereign Debt crisis, US.

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