What we do: Credit risk frameworks | borrower risk rating methodologies | continuous monitoring | industry studies | bench-marking | portfolio monitoring | credit assessments | pricing studies | capital allocation studies
Let's recognize that this is a once-in-a-half-century, probably once-in-a-century type of event. And indeed we shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers. - ALAN GREENSPAN, FORMER US FEDERAL RESERVE BOSS
The IaS team anticipated Lehman Brothers default and raised a red flag to enable preemptive action. Leverage the IaS capability.
It can be very costly to have an inadequate credit risk or investment assessment process. The IaS team predicted many of the following credit failures and helped avoid credit losses. The failure of credit risk assessment is one of the key reasons banks, investors and funds incur significant losses. Some of the biggest failures in history have been due to weak credit risk assessment protocols from the days of the tulip bubble to today. Examples abound were billions have been lost including - Lehman Brothers, Citibank, Countrywide, Washington Mutual, Anglo Irish Bank, Bank of Ireland, HBOS, Northern Rock, Ulster Bank.
History does repeat itself. In 1981, Continental Illinois Bank was the 6th largest bank in the U.S. and had the country's largest commercial and industrial loan portfolio. The bank collapsed in 1984 due to a significant increase in losses stemming from nonperforming loans. At the time of Washington Mutual's failure in 2008, it had $30bn of assets.
On Sept. 15, 2008, Lehman Brothers filed for bankruptcy. With $639 billion in assets and $619 billion in debt, Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide. It's demise was due to inadequate credit risk assessment on sub-prime assets.
Ken and his team predicted Lehman's failure well in advance using advanced credit risk assessment capabilities. We also identified and mitigated credit problems and risk rating declines of the Monolines, CDOs, CDO squared - all related to our monitoring of systemic risk and contagion. Previously, Ken predicted the largest real estate defaults in Canadian history and helped avoid material credit losses.
The IaS team has a wide breadth of expertise and decades of experience covering real estate, structured credit, forest products, technologies & .coms, pharmaceuticals, financial services, insurance, retail, energy and industrial products. Ken applied a wide-lens perspective and was able to spot that Lehman Brothers was going to collapse because he was monitoring the mortgage market in California.
IaS digs deep and canvases wide when it performs credit risk assessments. We identified that Bank of Ireland was going collapse using a balance sheet review along with with our proprietary intelligence system. As Ken emphasised at the time, "It is going to happen.", and it did.
"Effective application of IaS's credit risk frameworks, borrower risk rating methodologies, continuous monitoring, industry studies, bench-marking, portfolio monitoring and credit assessments is probably the foremost way to avoid material losses by financial institutions." Terence Yhip, Partner