Financial Products & Associated Risk Management
Credit Risk Mitigation - Part 2
This eCourse consists of two modules on Credit Risk Mitigation. Module 1 examines other credit risk mitigation (CRM) tools and techniques that are used by banks and other lenders. It begins by describing the use of netting, which ?like collateral ?is a type of funded CRM technique. The module then describes the use of a number of unfunded credit risk mitigants, namely guarantees/standby letters of credit, credit insurance, and credit derivatives. Finally, the module looks at the eligibility of the various CRM techniques for lowering capital requirements under the Basel framework.
Module 2 looks at the key stages involved in effectively managing mitigants taken in support of a loan or other credit facility. It begins by outlining the assessment and approval stages of proposed mitigation, and the differences between disclosed and undisclosed mitigation. The importance of legal certainty and enforceability of mitigation is explained, as are the capital eligibility requirements under the Basel framework. Subsequent topics describe the key requirements in relation to CRM both before and after drawdown of credit facilities, as well as the process of actually realizing mitigation when necessary to do so.
On completion of this course, you will be able to:
- Describe the different types of credit risk mitigation (other than collateral) that can be used to reduce credit risk exposure
- Outline the key stages involved in effectively managing credit risk mitigation (CRM)
- Describe the key requirements in relation to CRM prior to drawdown of credit facilities as well as post-drawdown
- Describe the process for realizing both funded and unfunded mitigation
Module 1: Credit Risk Mitigation - Other Types of Mitigant
Topic 1: Other Types of Mitigant
Module 2: Credit Risk Mitigation - Management & Realization
Topic 1: Overview of Mitigation Management
Topic 2: Pre- & Post-Drawdown Requirements
Topic 3: Realizing Mitigation