Risk Diversification in the Credit Portfolio : An Overview of Country Practices

December 1, 2001

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Format: Chicago

JoAnne Morris. Risk Diversification in the Credit Portfolio : An Overview of Country Practices, (USA: International Monetary Fund, 2001) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews the rules in place in selected countries to limit risk concentrations in the credit portfolio. The paper focuses on a number of issues suggested by international organizations for countries and bank supervisors to consider in imposing standards for risk diversification in the credit portfolio. The issues reviewed for each country are the large exposure limits, the definition of credit exposure (including application on a consolidated basis), and the definition of a group of related borrowers. The paper concludes that most of the countries reviewed set limits on large exposures for banks and define a related group of borrowers in line with recommended international standards. The major differences identified among countries include how to determine the credit exposure, the application of the exposure limits on a consolidated basis, and whether to impose limits on exposure to a specific sector.

Subject: Credit risk

Keywords: Bank for international settlements, Banking, Banking supervision, Capital adequacy, Capital base, Credit concentration, Large credit exposure, Risk diversification

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 01/200
Stock No:

WPIEA2002001
ISBN:

9781451860160
ISSN:

1018-5941

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