1. In your opinion, what is the most pressing issue in credit risk management right now?
I will say nothing surprising, if I name regulations (from ECB, EBA, Basel Committee, European Commission and Local Legislation...) and the low interest rates environment as the two most pressing issues. Compliance with regulations is exceedingly costly and gradually takes the space for maneuvering away from the management. It also takes the focus away from servicing clients and products development, which normally should be in the absolute center of interest of a successful organization. From this point of view I see the low interest rate environment as only a temporary issue which may resolve itself; alternatively the banks must simply adapt their pricing and business models accordingly.
2. What do you see as the biggest current trends that will be shaping credit risk management in the future?
As I do not want to discuss regulations and low interest rates again, I'll go for increasing electronic communication versus the traditional personal visits of the branches, even for the credit area - and also new sophisticated methods which are brought to the old business of banking. Especially more sophisticated usage of various data and the increasing demand for a limited source of bright people, where the banks have tough competition with top technology and consulting companies.
3. After the global financial crisis there was a need for strengthening the principles of credit risk management. Is the environment ready to handle the next potential crisis? And what can banks do in order to prepare for it?
The banking environment is certainly better prepared. The banks are more capitalized and there are recovery plans and resolution plans in place. What is more dangerous is that the governments have even more debt than before the last crisis, thus they can help less to overcome the crisis, and some governments would inevitably send their debts to hardly manageable levels by doing so. Especially, if the rates rose. And how can the banks get prepared? Well, I am giving my presentation at the conference on this topic, so I want to keep something for the participants…
Learn more about how to prepare for the next crisis and more at the:
13th Annual Credit Risk Management Forum