Banking

Paper Summary:

This paper examines the principle business of banking, the making of loans and how the correct assessment of risk in this all-important activity is the principle challenge facing bank management today. It explains that loans make up some 60 percent of US bank overall assets. The author expands that in times of low inflation and low interest rates, the demand for loans is very high.

From the Paper:

"This paper examines the principle business of banking--the making of loans- and how the correct assessment of risk in this all important activity is the principle challenge facing bank management today. Loans make up some 60 percent of U.S. bank's overall assets. In times of low inflation and low interest rates, the demand for loans is very high. The extended "housing boom" and the glut in available commercial real estate has regulators worried that as time went by completion among banks caused many to lower their loan approval standards to far, underwriting too many mortgages that could well in up in default in the process. The paper concludes with an examination of a new credit risk evaluation scheme published in the Basel II Accords aimed at systematically tightening the criteria applied in evaluating credit risk.. "

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