Managing the credit risk inherent to a corporate credit line is similar to that of a term loan, but with one key difference. For both instruments, the bank should know the borrower's probability of default (PD) and the facility's loss given default (LGD). However, since a credit line allows the...

This Economic Letter examines the rise in commercial real estate (CRE) lending concentration at commercial banks and the performance of CRE loans since the early 1990s. The analysis shows that while concentration in CRE lending has increased substantially at many banks, for those banks with CRE...

Bank supervisors in the United States conduct comprehensive on-site inspections of bank holding companies (BHCs) and assign them a supervisory rating meant to summarize their overall condition. We develop an empirical forecasting model of these ratings that combines supervisory and securities...

We examine whether equity market variables, such as stock returns and equity-based default probabilities, are useful to bank supervisors for assessing the condition of bank holding companies. Using an event study framework, we find that equity market variables anticipate supervisory ratings...

The U.S. bank supervisory agencies recently issued for public comment revised guidance regarding the implementation of the proposed Basel II-related, risk-based capital requirements. Among the revisions is an important update to guidance regarding operational risk management. Operational risk...