Thursday, January 22, 2015

Here’s a crazy real life scene from “Banking in times of the Basel Committee”

Jr. Credit Officer Martin: “But Sir, I believe that borrower to be riskier than what the credit rating agencies and we perceive” 

Bank President Wally: “That might be Martin, but that possible extra risk is more than compensated by the fact that having to hold less equity against it, produces us anyhow a higher risk adjusted return on equity than many of our other loans… and so you better keep that perception to yourself… don’t forget our bonuses”

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