Policy implications of the Federal Reserve study of credit risk models at major US banking institutions

Global Financial Crises

“…One increasingly popular way for banks to do this is through asset securitizations, which remove loans from balance sheets and thereby lower the amount ofrequired capital, but still may entail some sharing ofrisks by the banks (Jones, 1998;Mingo, 1998). Finally, the committee has been concerned about the fast pace of change in the markets and whether the standards can keep up.…”

Comparing the Reliability of Accounting-Based and Market-based Prediction Models

“…Stockholders' equity position and lenders' claim are also not guaranteed if companies are defaulting. Government, as a regulator in a competitive market, has concerns about the consequences of financial distress for companies, which will cause unrest to the society through unemployment and job insecurity (Mingo 2000). Therefore, a model predicting companies' failure would serve to reduce such losses by providing a pre-warning to these stakeholders.…”

Ratings-based credit risk modelling: An empirical analysis

“…Surveys of the techniques employed may be found in Basel Committee on Banking Supervision (2004) and Crouhy, Galai, and Mark (2000). Discussion of issues related to the regulatory use of credit risk models is provided by Mingo (2000), Jones (2000), and Jackson and Perraudin (2000).…”