Financial Risk in the Fund and the Level of Precautionary Balances

Financial Risk in the Fund and the Level of Precautionary Balances—Background Paper

Prepared by the Finance Department

In consultation with other departments

Approved by Eduard Brau

February 4, 2004

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Contents

Introduction
Assessing Credit Risk and Concentration for Financial Institutions
1. Introduction and Summary
2. Commercial Banks and Credit Risk Models
3. Risk Management at the Bank of England (BoE)
4. Risk Assessment at the Bank for International Settlements (BIS)
5. Risk Assessment at the International Bank for Reconstruction and Development (IBRD)
6. Risk Assessment at the Asian Development Bank (AsDB)
7. A Credit Ratings Agency Approach to Credit Risk Management
Credit risk models and application to the Fund
1. Introduction and Summary
2. Review of Credit Risk Models
3. Application of a Credit Risk Model at the Fund
Financial Scenario Analysis

Figures
1. Top Eight Country Exposures at Fund and IBRD

Tables
1. Expected Loss Analysis
2. Concentration Analysis