VideoJune 27, 2005
Annual report
Issued by the Bank for International Settlements
Warns that risks involved in structured-credit products may not be fully understood by all market participants. Reiterates that credit ratings may be misleading, adding that standard portfolio risk models may also be inadequate. Also warns that credit conditions fostering growth of CDS and CDO markets may not continue, and that it remains to be seen how these "markets would handle a string of credit blow-ups or a sharp turn in the credit cycle."
July 18, 2005
"Hedge Funds: An Emerging Force in the Global Credit Markets"
Issued by Fitch Ratings
Warns that the impact of hedge funds on credit markets is poorly understood and that a forced deleveraging could be felt across multiple credit-market segments, reducing access to high-yield debt and structured-finance securities.
July 27, 2005
"Toward Greater Financial Stability: A Private Sector Perspective"
Issued by the Counterparty Risk Management Policy Group II
Issued by the same group that autopsied Long-Term Capital Management in 1999, this report suggests that operational risks pose the greatest current threat to the financial system. It also warns banks and others to make sure investors — including corporations — understand the derivatives they buy.
August 2005
"Don't Bank on Strong Governance: Observations on Corporate Governance in U.S. Banks"
Issued by Moody's
Notes that corporate governance is an increasingly important consideration in bank ratings. Among other conclusions, notes that Basel II's requirement to identify and mitigate risk — including operational risk — is "becoming harder as the pace of innovation in financial instruments quickens."
August 2005
"Systemic Risk and Hedge Funds"
Issued by Nicholas Chan et al., MIT
Concludes that "systemic risk is currently on the rise" for hedge funds and that their "symbiotic relationship with the banking sector" means that hedge-fund risk exposures "may have a material impact on the banking sector."
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