18 March 2018

Why were banks better off in the 2001 recession?

09 February 2004  |  626 views  |  0 New York skyscrapers

Improved risk management systems and relatively benign conditions helped the US banking industry weather the 2001 downturn better than the 1990-1991 recession says NY Fed economist Til Schuermann.

Schuermann finds that the improved performance in this most recent recession is attributable in large part to bank managers’ skill at managing risk more effectively. The author presents evidence that banks were well served by the adoption of risk-based pricing in several markets, and the use of credit derivatives to shift some of their credit exposure to insurers and asset managers.

The author states that increased use of risk management tools and techniques, in conjunction with revisions to the Basel Accord, has enabled banks to calibrate their pricing to reflect additional risk and also provide credit access to a wider pool of applicants.» Download the document now 135Kb - PDF

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