TIISETSO MOTSOENENG: Bank rules to calculate risk need tweaking in an era of Covid-19
Standards that work to avert crises might not be appropriate for disasters if they suppress economic activity
01 April 2020 - 18:11
If banking regulators have learnt anything in the past few weeks, it is that a relatively new proactive accounting rule to prevent the banking industry from underreporting risky loans might need to be tweaked.
Under the rule, which became binding at the beginning of 2018, lenders have to partly book losses for a loan from day one in expectation of losses after taking into account the forward-looking diagnosis of the health the economy. It is a seismic change in how lenders model losses by customers failing to paying money they owe. ..
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