Credit risk management and financial stability.

Abstract

The International Banking and Finance Institute (IBFI) of the Banque de France organised its sixth International Monetary Seminar on the subject of “Credit risk management and financial stability” from 7 to 11 June 2004. This seminar, opened by Governor Christian Noyer, brought together forty five representatives from central banks in developed and emerging countries and from international organisations (such as the Bank for International Settlements and the European Central Bank), as well as twenty speakers from central banks, international institutions and the private sector. The first two days of the seminar were devoted to conferences on: • risks and sources of macro-financial vulnerability, the latest developments on credit risk transfer markets and the presentation of the findings of the cross-sectoral survey on credit derivatives in France; • the technical, financial and legal aspects of securitisation and credit risk management; • the presentation of the French and European experiences with respect to the role of central banks in rating companies and their contribution to financial stability; • bad debts and their impact on financial stability (case of Japan); • Basel II, a prudential framework which better reflects credit risk, and the effect of ratings on market dynamics; • lastly, the macro-financial consequences of risk transfers from the perspective of financial interdependence. Over the next two days, participants attended two workshops on the subjects of “Basel II, credit risk provisioning and accounting standards” and “Credit risk management and its macro-financial consequences”. These gave rise to intensive and fruitful discussions on the following four points: 1. identification of the sources of risk or financial vulnerability 2. credit risk assessment 3. credit risk management 4. implications for economic policy This article summarises the debates held in the workshops and the round table discussions on the last day.