Elements of the Credit Decision

As we have seen above, exposure to a given counterparty will not be incurred if an institution elects not to transact business

Erik Banks

2015

Scholarcy highlights

  • As we have seen above, exposure to a given counterparty will not be incurred if an institution elects not to transact business
  • In order for a bank to arrive at the decision of whether or not to transact, it must consider a series of factors: counterparty credit quality, risk, return, maturity, motivation and enhancement
  • The bank will arrive at a decision; we term this the credit decision
  • The decision will commit a bank to a given transaction in a certain structure; if negative, it will avoid commitment to the transaction

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