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| Linking Global Economic Dynamics to a South African Specific Credit Portfolio by Albert H. De Wet of FirstRand Bank, South Africa, and September 2007 Abstract: Driven by intense competition for market share banks across the globe have increasingly allowed credit portfolios to become less diversified (across all dimensions - country, industry, sector and size) and were willing to accept lesser quality assets on their books. As a result, even well capitalised banks could come under severe solvency pressure when global economic conditions turn. The banking industry have realised the need for more sophisticated loan origination, credit and capital management practices. To this end, the reforms introduced by the Bank of International Settlement through the New Basel Accord (Basel II) aim to include exposure specific credit risk characteristics within the regulatory capital requirement framework. The new regulatory capital framework still does not allow diversification and concentration risk to be fully recognised within the credit portfolio because it does not account for systematic and idiosyncratic risk in a multifactor framework. Published in: Economic Modelling, Vol. 26, No. 5, (September 2009), pp. 1000-1011. Books Referenced in this paper: (what is this?)
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