Chap011_Saunders7e_SLIDES-1

Chap011_Saunders7e_S - Ch-11 Credit Risk OverviewThis chapter discusses types of loans and the analysis and measurement of credit risk on

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Unformatted text preview: Ch-11 Credit Risk OverviewThis chapter discusses types of loans, and the analysis and measurement of credit risk on individual loansImportant for purposes of:Pricing loans and bondsSetting limits on credit risk exposure11-1Credit Quality ProblemsProblems with junk bonds, LDC loans, and residential and farm mortgage loans Late 1990s, credit card and auto loansCrises in other countries such as Argentina, Brazil, Russia, and South Korea 2006-2007: Mortgage delinquencies and subprime loansEmphasizes importance of managing credit riskOver the early to mid 1990s, improvements in NPLs for large banks and overall credit qualityLate 1990s and early 2000s: Telecom companies, tech companiesMid 2000s, economic growth accompanied by reduction in NPLsMortgage crisis, CountrywideIncreased emphasis on credit risk evaluation11-2Nonperforming Asset Ratio for U.S. Commercial Banks11-3Types of LoansC&I loans: Secured and unsecuredSyndicationSpot loans, loan commitmentsDecline in C&I loans originated by commercial banks and growth in commercial paper marketDowngrades of Ford, General Motors, and TycoEffect of financial crisis on commercial paper marketRE loans: Primarily mortgagesFixed-rate, ARMMortgages can be subject to default risk when loan-to-value declines11-4ARMs:Share of Total Loans Closed, 1992-200911-5Consumer LoansIndividual (consumer) loans: personal, auto, credit cardNonrevolving loansAutomobile, mobile home, personal loansGrowth in credit card debtVisa, MasterCard Proprietary cards such as Sears, AT&TConsolidation among credit card issuersBank of America & MBNARisks affected by competitive conditions and usury ceilingsBankruptcy Reform Act of 200511-6Annual Net Charge-Off Rates on Loans11-7Other loans...
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This note was uploaded on 11/10/2011 for the course ECON 4620 taught by Professor Victorwakeling during the Fall '11 term at Kennesaw.

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Chap011_Saunders7e_S - Ch-11 Credit Risk OverviewThis chapter discusses types of loans and the analysis and measurement of credit risk on

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