Risk transformation, banking (bank risk transformation)

Banks address risks mainly by: – choosing interest rates so that each credit risk class bears the defaults itself, and – addressing major loan defaults through appropriate provisioning and capital adequacy policies, – transferring any default loss to institutional investors through loan securitization, – sharing high-risk loans with partner institutions through syndicated lending, – selling the claims on loans granted to special purpose vehicles, and in general – introducing appropriately tailored credit derivatives into the market. – See assets, illiquid, credit default swap, credit linked notes, credit derivative, loan securitization,
Liquidity risk, retrocession, risk mitigation techniques, extended, risk assumption rule, kickback effect, single master liquidity conduit, total return swaps, underwriter, submarine effect, securitization structure, warehousing risk. – Cf. ECB Monthly Report of August 2002, p. 56 f., BaFin Annual Report 2003, p. 21 f., p. 33 f. as well as the respective BaFin Annual Report (section “Risk Models”), Deutsche Bundesbank Monthly Report of June 2006, p. 35 ff. (calculation of concentration risks).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/