Status: Draft -- Not PublishedWill be live at 03/03/2015 00:00
IIF Response on Joint Forum Consultation: Developments in Credit Risk Management Across Sectors
The IIF has submitted a response letter to the BCBS-IOSCO-IAIS Joint Forum consultation on the'Developments in Credit Risk Management Across Sectors: Current Practices and Recommendations.
Significantly, the Joint Forum's consultative document refers to credit risk models and regulatory capital, which are the subject of two concurrent BCBS consultations, on revisions to the Standardized Approach and the proposed introduction of Capital Floors.
The IIF's response references the considerable analysis previously undertaken on credit risk modeling practices by the IIF RWA Task Force (IRTF), highlighting the valuable risk insights and appropriate incentives that sophisticated models provide, whereas simpler approaches can in fact mask risk-taking and encourage perverse outcomes.
The IIF supports the Joint Forum's observations on the availability of collateral for OTC derivatives and on the increasing importance of risk to central counterparties, while adding some further suggestions on these topics.