Credit Engineering for Bankers, 2nd Edition

Introduction

Since 2007, U.S. banks have suffered significant losses brought on by one of the deepest crises ever to hit financial services. As a result, risk and loan management, loan valuation methods, and governance structures are being shaken top to bottom. McKinsey and Company¹ suggests that after two years the fallout from the financial crisis continues to afflict most banks, particularly those with significant levels of illiquid and difficult to sell securities—so-called toxic assets—collateralized mortgage and debt obligations, and credit default swaps. With toxic assets on bank balance sheets, banks are finding it difficult to raise funds from traditional capital suppliers. In response, many institutions are starting to exit capital-intensive, ...