Tag: Credit Selection

The Top and Bottom 10 Industries For Credit Selection Risk

Credit Selection Risk

Many community banks don’t underwrite with enough granularity to take into account major differences in credit between borrowers. This can hurt banks as credit spreads get tighter and banks add even more leverage to their balance sheets.  When banks underwrite a particular borrower, the actual probability of default is usually within a defined range. Some industries, such as banking itself, have a very homogeneous set of companies.

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