SC5-Chapter 12-Credit Risk-Loan Portfolio and Concentration Risk1

SC5-Chapter 12-Credit Risk-Loan Portfolio and Concentration Risk1

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1 Credit Risk: Loan Portfolio and Concentration Risk SC5-Chapter 12 Saunders and Cornett, 5th Edition Financial Institutions Management
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2 Introduction This chapter discusses the management of credit risk in a loan (asset) portfolio context. Often times banks get into trouble because they have heavy loan concentration in a particular type of loan. It is important to consider the impact of a loan of the risk and return of the loan portfolio
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3 Chapter Focus Migration Analysis Concentration Limits Systematic Loan Loss Risk Modern Portfolio Theory
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4 Risk Concentration Basel Framework defines a risk concentration as any single exposure or group of exposures with the potential to produce losses large enough(relative to the bank’s capital, total assets, or overall risk level) to threaten a bank’s health or ability to maintain its core operations.
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5 US Regulators on Risk Concentration Historically, US Regulatory agencies have not provide banks with a lot of detail on risk concentrations they have defined a concentration of credit to include both direct and indirect obligations of the same or affiliated
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This note was uploaded on 03/16/2011 for the course FIN 4324 taught by Professor Clark during the Spring '11 term at FSU.

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SC5-Chapter 12-Credit Risk-Loan Portfolio and Concentration Risk1

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