Fred Vacelet, MBA, FRM/PRM, CTM, IFQ, is an international Financial Risk Management Consultant with an expertise in Risk Management methodological frameworks. His experience spans some 25 years, advising international banks and software houses on risk management. Fred holds various degrees, including from London Business School, England, with post-graduate studies at the Technische (then West)-Berlin, Germany, and Keio, Japan, universities. His client list includes ABN Amro, Barclays, Credit Suisse, National Bank of Egypt. He is a published author on risk management and Basel Accords, and a regular speaker at international conferences. Fred writes and presents training courses and workshops on risk management and the Basel Accords.
The reactions to the 2007 crisis have amply shown that, for most people who had to react as regulators, lenders or investors, the body of crisis-fighting knowledge was picked up essentially from the last 10 years. Few people referred to the main precedent, the 1929 crisis, to pick up wisdom from precedents: it was deemed too old to be relevant. Regulators’ reactions indicated that little was done to envisio..
Impairment in any form of lending is but a usual mishap that will typically occur, as a rule of the game. For bankers, loan impairment is something to prepare for, as early as before setting up operations, and to permanently upgrade. Failure to do that reveals costly. Refusal to do that, though, deprives the bank of lending premiums, in that the bank will not lend to credit-risky borrowers. Hence it is miss..
Financial institutions most often inherit some implicit view on their risks and then add elements as time goes by, as mishaps occur and as regulators demand. The result is all too often the spectacle of a claim at consistency, whilst risk priorities are more the result of interdepartmental relationships, and some risks can be misunderstood. However, when setting up a complete framework, pitfalls are legion...
Ignoring the difference between risk control and management is akin to, on the road, mixing upside barriers and the steering wheel: the former aims at keeping the car on the path whatever comes, whilst the latter helps to keep the car at the optimal place on the road at all times. Such confusion inevitably leads to using soothing risk management patches rather than fully understood solutions, to ..