Post by sweetpea33 on Jan 25, 2024 4:40:13 GMT
Relationship banking is also valuable to banks because it helps them determine the creditworthiness of their customers. Public information on this is often imperfect, creating market inefficiency that banks can exploit. A sustained relationship gives banks private information about their clients (such as through credit agreements) and reinforces loyalty because it isn't easy for clients to prove their creditworthiness to other banks. This relationship banking can help banks maintain profitability despite competitive pressure. Research shows that it increases in more competitive lending markets, such as the U.S.
To assess the risk of individual corporate loans in isolation. That would misleadingly suggest that because loans only last 25 months on average, it’s Email List possible for a bank to just walk away when that time is up. In reality, because client relationships typically generate revenue from many products and services over decades, a different unit of analysis and a longer time horizon for risk management and strategic planning are required.
Recommendation: When evaluating climate risk, the unit of analysis banks should use is the client relationship, including all the revenue derived from that relationship over time. Recommendation: To effectively assess the financial impact of climate change on client relationships, banks should extend their planning and risk management time horizons to include a 10-year view. This longer term view is uncommon in the U.S., where the regulatory framework is built around time horizons of nine and 20 quarters.
To assess the risk of individual corporate loans in isolation. That would misleadingly suggest that because loans only last 25 months on average, it’s Email List possible for a bank to just walk away when that time is up. In reality, because client relationships typically generate revenue from many products and services over decades, a different unit of analysis and a longer time horizon for risk management and strategic planning are required.
Recommendation: When evaluating climate risk, the unit of analysis banks should use is the client relationship, including all the revenue derived from that relationship over time. Recommendation: To effectively assess the financial impact of climate change on client relationships, banks should extend their planning and risk management time horizons to include a 10-year view. This longer term view is uncommon in the U.S., where the regulatory framework is built around time horizons of nine and 20 quarters.