Credit Contagion: Potential Channel

At the latest GFMI Model Risk conference, delegates heard from regulators regarding their perspectives on SR11-7 and how it can be implemented 9 years on. 

The pandemic and accompanying decline in commercial activity have highlighted the interconnectedness of economies around the world. The impact of the outbreak are still evolving. Non-monotonic recovery scenarios may amplify economic spillovers (credit contagion). Such contagion can be materialized via two channels: Counterparty risk and funding liquidity shocks. Modifying risk monitoring plan could help banks with the actionable information to avert elevated losses. Ozzy Akay, Quantitative Analytics and Risk Management Lead at Guidehouse discusses the timeliness of COIVID-19 for regulators and practitioners. Watch the webinar recording.

credit contagion
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Banks should consider the likelihood of potential spillovers in their credit exposures within and across industries and the steps to mitigate further systemic lending issues.

Ozzy Akay, Associate Director

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