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  Issue 16 | Archive August 2013

RMI Publishes Volume 3 of the Global Credit Review

A joint publication of RMI and World Scientific

The volume 3 of the Global Credit Review (GCR), a joint publication of RMI and World Scientific, was published in July 2013. This journal, aiming to provide an overview of the most important developments in the global credit markets and the regulatory landscape, covers theoretical and empirical research on credit ratings and credit risk, and reports on recent findings and evolutions of the RMI's Credit Research Initiative(CRI). More specifically, this annual publication touches on current topics in credit markets, provides some critical analysis and reviews of new regulations and offers new insights to address the challenges ahead. The journal can be accessed here.

This volume includes a topical article "Systemic Risk in Europe" by Prof. Eric Jondeau and Prof. Michael Rockinger, both from the Institute of Banking and Finance, University of Lausanne and Swiss Finance Institute. In this article, the authors describe a newly developed measure for systemic risk and use this to identify the financial institutions and countries in Europe that carry the highest systemic risk. Dr. Markus Bingmer and Dr. Laura Auria, both of the Deutsche Bundesbank in Germany, contribute an article on "The Implementation of the Basel II Default Definition by Credit Risk Assessment Systems: An Analysis of Possible Aggregation Procedures", which looks at different aggregation procedures that national banking supervisors can implement. In the article "Can Credit-Scoring Models Effectively Predict Microloans Default? Statistical Evidence from the Tunisian Microfinance Bank", Dr. Ibtissem Baklouti and Prof. Abdelfettah Bouri of the University of Sfax, Tunisia present a credit-scoring framework for microfinance institutions. In a joint article by International Association of Credit Portfolio Managers and KPMG ¡ª "Stepping Up to the Liquidity Challenge: The Changing Role of Credit Portfolio Management", the results of a survey regarding funding liquidity management and credit portfolio management are presented. RMI articles in this volume of the GCR include "Changes in the Ratings Game ¡ª An Update on Various Developments" and the updated "NUS-RMI Credit Research Initiative (CRI) Technical Report" which offers technical details on the implementation of the current CRI corporate default prediction model and its performance.

In "Reserve Requirements as Window Guidance in China", Violaine Cousin, a Chinese banks analyst and researcher, provides insights into the effect of reserve requirements on bank asset quality in China. The article reviews the impact of China¡¯s reserve requirement ratio (RRR) on the asset quality of commercial banks since 2005. The RRR is a tool often used by central banks in emerging markets to ensure sufficient liquidity in the banking sector. The same is true of China, where the People¡¯s Bank of China had changed the RRR 38 times between 2006 and mid-2012. By applying the technique of robust regression on a large data set that included the most important commercial financial institutions in China, this paper concludes that setting reserve requirements does indeed have an impact on banks¡¯ asset quality. The RRR policy improved asset quality in the short term, but may be considered merely as window guidance.

With its distinctive focus on topics related to credit markets and credit risk, the GCR is targeted to finance professionals, policy makers and academics with an interest in credit markets. The editorial team of GCR is pleased to invite original papers in all areas of credit risk and credit risk markets. Papers can be rigorous original research or review articles/case studies of interest to credit risk professionals. Commentaries can be views on the regulatory landscape and market developments. The ultimate objective of the GCR is to advance the state of research and development in the critical area of credit risk and rating systems. To submit a paper to this journal, please visit here.

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Published quarterly by Risk Management Institute, NUS
Editor: Ivy Wang (rmiwy@nus.edu.sg)