Financial Products & Associated Risk Management

Credit Risk - Part 4


This eCourse consists of two modules on credit risk. Credit risk is largest risk type that banks are exposed to and is often the prime source of earnings. It is important to understand its life cycle. In addition, bank management should understand the size and nature of these exposures when accepting them and managing them until they are settled, canceled or written off.

Module 1 looks at the key stages in the credit risk lifecycle and the key factors that impact how the lifecycle operates. It also provides examples of how the lifecycle works in practice for different customer and product combinations.

Module 2 sets out some of the lessons learned from systemic and bank specific failures, why some banks didn’t fail, and how these learnings have been used to inform changes to regulatory requirements and management practices.


On completion of this course, you will be able to:
- Distinguish between the different stages of the credit risk lifecycle for all customer relationships or transactions
- List the factors that affect the credit risk lifecycle and how such risk is mitigated
- Identify some key examples of the credit key lifecycle, namely a new corporate customer, a retail mortgage loan, a credit card application, and a bank contract
- Recall how both banks and regulators failed to understand or quantify the risks that were building up in the system in the lead-up to the global financial crisis (GFC) and Greek debt crisis
- Identify the lessons learned from the failure of leading banks and from banks that didn't fail
- Recognise the response of regulators to the crisis, including updated regulatory requirements, strengthened regulatory oversight, and greater loan loss provisioning
- Recognise the response of bank management, including a review of business strategy and credit risk appetite limits, and enhanced balance sheet management


Module 1: Credit Risk - Lifecycle
Topic 1: Credit Risk Lifecycle
Topic 2: Factors Affecting Credit Risk Lifecycle
Topic 3: Examples of Credit Risk Lifecyle

Module 2: Credit Risk - Lessons From Mismanaging Risk
Topic 1: Lessons Learned from Systemic Events
Topic 2: Lessons Learned from Bank Failures
Topic 3: Regulatory Response
Topic 4: Response of Bank Management


Relevant Subject
SFC:2.00, PWMA:2.00
All Member: HK$610
Staff of Corporate Member: HK$610
Non-Member: HK$890