New York, NY, USA
July 2, 2008

Preparing for the credit downturn 

Table of Contents

Return to report Abstract

Introduction 3
Signs of a looming credit downturn 5
Risk measurement is necessary, but not sufficient 7
Effective credit portfolio management structure 8
Essential levers in a credit downturn 10
  Develop a plan for tightening lending standards 10
  Develop a plan for changing approval processes 10
  Review and test the effectiveness of early warning systems 11
  Recognise the limitations of economic capital and ask common-sense "what if" questions 11
  Pursue opaque and hidden risks 12
  Conduct a comprehensive balance sheet and risk transfer review 13
  Ensure your workout department is prepared 13
Conclusion 15
 

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally experienced analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

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