The Practice of Lending: A Guide to Credit Analysis and Credit Risk

by Terence M. Yhip, Bijan M. D. Alagheband

Overview

This book provides a comprehensive treatment of credit risk assessment and credit risk rating that meets the Advanced Internal Risk-Based (AIRB) approach of Basel II. Credit risk analysis looks at many risks and this book covers all the critical areas that credit professionals need to know, including country analysis, industry analysis, financial analysis, business analysis, and management analysis. Organized under two methodological approaches to credit analysis—a criteria-based approach, which is a hybrid of expert judgement and purely mathematical methodologies, and a mathematical approach using regression analysis to model default probability—the book covers a cross-section of industries including passenger airline, commercial real estate, and commercial banking. In three parts, the sections focus on hybrid models, statistical models, and credit management. While the book provides theory and principles, its emphasis is on practical applications, and will appeal to creditpractitioners in the banking and investment community alongside college and university students who are preparing for a career in lending.

Product Details

ISBN-13:	9783030321963
Publisher:	Springer International Publishing
Publication date:	02/28/2020
Edition description:	1st ed. 2020
Pages:	451
Product dimensions:	6.10(w) x 9.25(h) x 0.00(d)

About the Author

Terence M. Yhip started his banking career in 1986 after finishing his PhD in Economics at McGill University, Canada. He has had 35 years of experience in risk modelling, credit underwriting, risk management, and internal auditing, and has held senior positions in these areas. He retired from the Royal Bank of Canada (RBC), the country’s largest commercial bank, in 2015. He was a lecturer in International Trade and Finance at Ryerson University in the 1980s. At RBC he played a leading role implementing the AIRB approach in the process of the bank’s becoming a Basel II-compliant institution in Q1-2010. After retiring from RBC, Terence was appointed Visiting Fellow at the Department of Economics of the University of the West Indies in Mona, Jamaica. He taught Credit Analysis & Lending, Public Finance, and Caribbean Economies, and represented the university in many public forums on economic development issues related to government budget, foreign borrowing, and exchange rates. He is a Partner of Ideal Advisory Services, a global provider of audit, financial advisory, enterprise-risk management, AML, and related services.

Bijan Alagheband earned a PhD in Economics from McGill University in 1988, specializing in Econometrics and Economic Development. In 2001, he earned the CFA designation. While completing his PhD, he worked as a consultant in applied econometric analysis and computer programming at McGill University. In 1989, he joined Ontario Hydro—a Crown corporation until its breakup in 1998—as the company’s energy economist responsible for load forecasting and uncertainty analysis using Monte Carlo simulations. He also contributed to resource planning. After Ontario Hydro split into five companies, he relocated to one of them, Hydro One Ltd that is responsible for electricity transmission and distribution. In his role as strategic planner and, later on, as manager, he prepares the economic and load forecasts as well as market and risk analysis. He also prepares load forecasts for local and regional planning. In addition to his fulltime work at Hydro One Ltd, he taught statistics and financial econometrics at McMaster University’s MBA and Master of Finance programs throughout the past 9 years.

Table of Contents

Part I. The Criteria-based Approach to Credit Assessment and Crdit Rating.- Chapter 1. Credit Analysis and Credit Management.- Chapter 2. Financial Statement Analysis.- Chapter 3. The Criteria-based Approach to Credit Assessment and Credit Risk Rating.- Chapter 4. The Building Blocks of Credit Analysis and Credit Risk Rating.- Chapter 5. How it all Fits.- Chapter 6. Credit Risk Analysis and Credit Risk Rating of Commercial Real Estate.- Chapter 7. Bank Credit Risk Analysis and Bank Credit Rating.- Part II. Statistical Methods on Credit Scoring.- Chapter 8. Statistical Methods of Credit Risk Analysis.- Chapter 9. Statistical Methods of Country Debt Crisis.- Part III. Credit Management.- Chapter 10. Credit Monitoring and Compliance.- Chapter 11. Problem Loan Management.

What People are Saying About This

From the Publisher

“A timely and comprehensive guide for credit-risk rating analysts, and credit professionals who model default risks. All banks that plan to implement a risk-rating system that conforms to Basel II will find the book very useful. It includes a refreshing method to factor into a rating, asymmetric information risk buried in potentially fraudulent financial reporting. Such reporting has become a significant risk factor following numerous financial scandals involving some of the world’s largest corporations.” (Garbis Iradian, Chief Economist for MENA and Central Asia, Institute of International Finance, USA)

“Credit analysis is a critical skill for anyone in banking, audit, investments or credit regulations, whether starting out in a career or as a refresher for regulators and executives. This is a unique book as it merges academic rigour with practical examples. The 2008 credit crisis could have been avoided if the principles outlined in this book hadbeen applied by all the banks that had to bailed out at huge taxpayer expense. Where have you been all my life.” (Kenneth Clarke, Chartered Accountant and Certified Internal Auditor)

“Written by professionals, The Practice of Lending fills a gap and stands out from the textbook landscape with a unique emphasis on practicality and immediate applicability in this area. The book covers the most relevant aspects of the credit analysis and lending business comprehensively and thoroughly. Students and other readers will easily notice the authors’ experience in the field. I believe that The Practice of Lending can be an invaluable resource for many courses internationally.” (Jan Keil, Professor and Research Associate, School of Business and Economics, Humboldt Universität zu Berlin, Germany)

“A comprehensive, practical guide to credit analysis and risk rating, with applications to businesses in various industries. Yhip and Alagheband have delivered a well-timed book exploring how companies can improve their credit assessments to balance risk and return. It is ideal for both students and professionals looking to gain insights into credit analysis and risks.” (Victor Yu, Professor, HELP University, Malaysia)

“This book contributes significantly to the increasingly complex area of banking currently facing heightened regulations. The chapters on financial statement analysis, cash flow projection, corporate credit assessment, and statistical methods, are rigorous and straightforward. Risk rating is the foundation of risk pricing, loan provisioning and the calculation of economic capital; and the book focuses on the criteria-based rating methodology. I highly recommend the Practice of Lending to junior credit officers and credit professionals looking for a refresher. It contributes significantly to the complex area of lending and risk rating, covering the fundamental areas of financial statement analysis, cash flow projection, credit assessment based on the criteria-based mythology, and statistical modelling.” (Shamim A. Malik, SVP/Director, Corporate & Investment Banking Credit Risk – Financial Institutions, Public Finance, ABS and Country Risk)