Credit risk refers to the risk that a borrower will default on any type of debt by failing to make required payments.[1] The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances.[2] For example:
An insolvent bank won't return funds to a depositor
A government grants bankruptcy protection to an insolvent consumer or business
To reduce the lender's credit risk, the lender may perform a credit check on the prospective borrower, may require the borrower to take out appropriate insurance, such as mortgage insurance or seek security or guarantees of third parties. In general, the higher the risk, the higher will be the interest rate that the debtor will be asked to pay on the debt.
Credit default risk — The risk of loss arising from a debtor being unlikely to pay its loan obligations in full or the debtor is more than 90 days past due on any material credit obligation; default risk may impact all credit-sensitive transactions, including loans, securities and derivatives.
Concentration risk — The risk associated with any single exposure or group of exposures with the potential to produce large enough losses to threaten a bank's core operations. It may arise in the form of single name concentration or industry concentration.
Country risk — The risk of loss arising from a sovereign state freezing foreign currency payments (transfer/conversion risk) or when it defaults on its obligations (sovereign risk); this type of risk is prominently associated with the country's macroeconomic performance and its political stability.
Significant resources and sophisticated programs are used to analyze and manage risk.[4] Some companies run a credit risk department whose job is to assess the financial health of their customers, and extend credit (or not) accordingly. They may use in house programs to advise on avoiding, reducing and transferring risk. They also use third party provided intelligence. Companies like Standard & Poor's, Moody's, Fitch Ratings, Dun and Bradstreet, Bureau van Dijk and Rapid Ratings International provide such information for a fee.
Most lenders employ their own models (credit scorecards) to rank potential and existing customers according to risk, and then apply appropriate strategies.[5] With products such as unsecured personal loans or mortgages, lenders charge a higher price for higher risk customers and vice versa.[6][7] With revolving products such as credit cards and overdrafts, risk is controlled through the setting of credit limits. Some products also require collateral,
Credit scoring models also form part of the framework used by banks or lending institutions to grant credit to clients. For corporate and commercial borrowers, these models generally have qualitative and quantitative sections outlining various aspects of the risk including, but not limited to, operating experience, management expertise, asset quality, and leverage and liquidity ratios, respectively. Once this information has been fully reviewed by credit officers and credit committees, the lender provides the funds subject to the terms and conditions presented within the contract (as outlined above).
Sovereign risk is the risk of a government being unwilling or unable to meet its loan obligations, or reneging on loans it guarantees. Many countries have faced sovereign risk in the late-2000s global recession. The existence of such risk means that creditors should take a two-stage decision process when deciding to lend to a firm based in a foreign country. Firstly one should consider the sovereign risk quality of the country and then consider the firm's credit quality.[8]
Five macroeconomic variables that affect the probability of sovereign debt rescheduling are:[9]
The probability of rescheduling is an increasing function of debt service ratio, import ratio, variance of export revenue and domestic money supply growth.[9] The likelihood of rescheduling is a decreasing function of investment ratio due to future economic productivity gains. Debt rescheduling likelihood can increase if the investment ratio rises as the foreign country could become less dependent on its external creditors and so be less concerned about receiving credit from these countries/investors.[10]
Counterparty risk increases due to positively correlated risk factors. Accounting for correlation between portfolio risk factors and counterparty default in risk management methodology is not trivial.[13]
Covenants:[14] Lenders may write stipulations on the borrower, called covenants, into loan agreements:
Periodically report its financial condition
Refrain from paying dividends, repurchasing shares, borrowing further, or other specific, voluntary actions that negatively affect the company's financial position
Credit insurance and credit derivatives: Lenders and bond holders may hedge their credit risk by purchasing credit insurance or credit derivatives. These contracts transfer the risk from the lender to the seller (insurer) in exchange for payment. The most common credit derivative is the credit default swap.
Tightening: Lenders can reduce credit risk by reducing the amount of credit extended, either in total or to certain borrowers. For example, a distributor selling its products to a troubled retailer may attempt to lessen credit risk by reducing payment terms from net 30 to net 15.
Diversification:[15] Lenders to a small number of borrowers (or kinds of borrower) face a high degree of unsystematic credit risk, called concentration risk. Lenders reduce this risk by diversifying the borrower pool.
Deposit insurance: Many governments establish deposit insurance to guarantee bank deposits in the event of insolvency and encourage consumers to hold their savings in the banking system instead of in cash.
^"Principles for the Management of Credit Risk - final document". Basel Committee on Banking Supervision. BIS. September 2000. Retrieved 13 December 2013. "Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms."
^Brigo, Damiano and Andrea Pallavicini (2007). Counterparty Risk under Correlation between Default and Interest Rates. In: Miller, J., Edelman, D., and Appleby, J. (Editors), Numerical Methods for Finance. Chapman Hall. ISBN1-58488-925-X.Related SSRN Research Paper
^Duan, Jin-Chuan; Gauthier, Geneviève; Simonato, Jean-Guy. "On the equivalence of the KMV and maximum likelihood methods for structural credit risk models". CiteSeerX: 10.1.1.154.6371.Missing or empty |url= (help)
In most common law jurisdictions, the attorney general or attorney-general is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement, public prosecutions or even ministerial responsibility for legal affairs generally. In practice, the extent to which the attorney-general personally provides legal advice to the government varies between jurisdictions, and even between individual office-holders within the same jurisdiction, often depending on the level and nature of the office-holder's prior legal experience.
The term was originally used to refer to any person who holds a general power of attorney to represent a principal in all matters. In the common law tradition, anyone who represents the state, especially in criminal prosecutions, is such an attorney. Although a government may designate some official as the permanent attorney general, anyone who comes to represent the state in the same way may, in the past, be referred to as such, even if only for a particular case. Today, however, in most jurisdictions the term is largely reserved as a title of the permanently appointed attorney general of the state. The term is pluralized attorneys general or attorneys-general.
Civil law jurisdictions have similar offices, who may be variously called "procurators", "advocates general", "public attorneys", and other titles. Many of these offices also use "attorney general" or "attorney-general" as the English translation of the title, although because of different historical provenance the nature of such offices is usually different from that of attorneys-general in common law jurisdictions
Attorneys-General in common law and hybrid jurisdictions[edit]
Attorneys-General in common law jurisdictions, and jurisdictions with a legal system which is partially derived from the common law tradition, share a common provenance.
Functions of the state and federal attorneys-general include the administration of the selection of persons for nomination to judicial posts, and authorizing prosecutions. In normal circumstances, the prosecutorial powers of the Attorney-General are exercised by the Director of Public Prosecutions and staff; however, the Attorney-General maintains formal control, including the power to initiate and terminate public prosecutions and take over private prosecutions. Statutory criminal law provides that prosecutions for certain offences require the individual consent of the Attorney-General. This is generally for offences whose illegality is of a somewhat controversial nature or where there is perceived to be a significant risk that prosecutions of a political nature may be embarked upon. The Attorney-General also generally has the power to issue certificates legally conclusive of certain facts (e.g., that the revelation of certain matters in court proceedings might constitute a risk to national security); the facts stated in such certificates must be accepted by the courts and cannot legally be disputed by any parties. The Attorney-General also has the power to issue a nolle prosequi with respect to a case, which authoritatively determines that the state (in whose name prosecutions are brought) does not wish to prosecute the case, so preventing any person from doing so.
The Attorney General of Canada (French: Procureur général du Canada) is a separate title held by the CanadianMinister of Justice (Ministre de la Justice), a member of the Cabinet. The Minister of Justice is concerned with questions of policy and their relationship to the justice system. In his role as attorney general, he is the chief law officer of the Crown.
A separate cabinet position, the Minister of Public Safety (Ministre de la Sécurité publique), formerly the "Solicitor General", administers the police, prisons, and security agencies of the federal government.
In Fiji, the role of the Attorney General is defined as "providing essential legal expertise and support to the Government". More specific functions include "legislative drafting", "legal aid", "the prerogative of mercy" (advising the President), "liquor licensing" and "film censorship".[1]
The current Attorney General is Aiyaz Sayed-Khaiyum. In January 2008, he sparked controversy by accepting other government positions in addition to his role as Attorney General; Sayed-Khaiyum is currently responsible also for "Public Enterprise, Electoral Reform and Anti-Corruption". An article in the Fiji Times pointed out that "never before in the history of this nation has the Attorney-General held a portfolio dealing with matters other than the law and the judiciary", and criticised the decision.[2]
"The Mission of the Office of the Attorney General is to provide the highest standard of professional legal services to Government, Departments and Offices."
The Attorney General of Ireland is the legal adviser to the Government and is therefore the chief law officer of the State. The Office of the Attorney General, is made up of a number of different offices:
The Attorney General's Office (located at Merrion Street, Dublin 2) containing the Advisory Counsel to the Attorney General
The Office of Parliamentary Counsel to the Government (also located at Merrion Street, Dublin 2) containing the Parliamentary Counsel who draft legislation and have responsibilities in the area of Statute Law revision
The Chief State Solicitor's Office (CSSO) (located at Little Ship Street, Dublin 8) containing the solicitors representing the Attorney and the State
Since the enactment of the Prosecution of Offences Act 1974 the responsibility for the prosecution of indictable criminal offences is mostly in the hands of the Director of Public Prosecutions who is by law independent of the Attorney General and the State. The current attorney general is IS Máire Whelan,
The Attorney General of Israel is the head of the public prosecution from the state, the person who advises the government in legal matters, the person who represents the state's authorities in the courts, and advises in preparation of law memoranda of the government in general and the Justice Minister in particular (likewise he examines and advises for private proposals for a law of Knesset members).
In Kenya the Attorney General is the Principal Legal Adviser to the Government and ex officioMember of Parliament and Cabinet. His duties include the formulation of legal policy and ensuring proper administration of Kenya's legal system including professional legal education. Assisting the Attorney General in the performance of his duties as Principal Legal Adviser to the Government are:
In Kiribati, the Attorney General is defined by section 42 of the Constitution as "the principal legal adviser to the Government". The Constitution specifies: "No person shall be qualified to hold or to act in the office of Attorney-General unless he is qualified to practise in Kiribati as an advocate in the High Court." The current Attorney General, as of 2007, is the Honourable Titabu Tabane.
In Malaysia the Attorney-General or Peguam Negara (as he is referred to in Bahasa Malaysia) is the principal legal adviser to the Government. He is also the principal public prosecutor in the country, and is also known as the Public Prosecutor. He has the power, exercisable at his discretion, to institute, conduct or discontinue any proceedings for an offence, other than proceedings before a Syariah court, a native court or a court-martial. The current Attorney-General is Tan Sri Datuk Seri Panglima Dr. Abdul Gani Patail.
In Mauritius, the Attorney-General who should be a Barrister, is the principal legal adviser to the Government and holds the office of a Minister.
The Attorney-General‟s Office is also responsible for the drafting of legislation, and vetting of all contracts or agreements of which the Government is a party, including international agreements, treaties or conventions.
In Nepal, the Attorney General is the chief legal adviser of Government of Nepal as well as its chief public prosecutor. An Attorney General is appointed by the President on the recommendation of Prime Minister. The Attorney General's Office is a Constitutional body under the Interim Constitution of Nepal. For a person to be eligible for the post of Attorney General, he/she also has to be qualified to be appointed as a judge of the Supreme Court.[3]
In New Zealand, the Attorney-General is the chief law officer and primary legal advisor of the New Zealand government. Historically, the post could be held either by a politician or by a senior jurist, but today, it is invariably held by a member of Parliament. The Attorney-General attends Cabinet, but the post is not the same as the Minister of Justice. The Attorney-General has departmental responsibility for the Crown Law Office, the Parliamentary Counsel Office, and the Serious Fraud Office. By tradition, persons appointed to the position of Attorney-General have almost invariably been lawyers. Only two former Attorneys-General have not been lawyers, most recently Dr Michael Cullen who held the post in 2005, and again from 2006. Cullen's appointment was controversial at the time because of his non-legal background.
The Attorney-General of Pakistan is the legal adviser to the government of the Pakistan and its public prosecutor. Currently Munir A. Malik is serving as the Attorney General of Pakistan.
The Attorney General of the Philippines was an office that existed from 1901 until 1932, when the office was abolished and its functions taken over by the Minister of Justice. Since then, the Solicitor General of the Philippines, previously the second law officer, has been the principal law officer and legal defender of the Philippine Government. The Office of the Solicitor General is the law firm of the Republic of the Philippines. It is tasked with representing the Philippines, the Philippine Government, and all its officials in any litigation or matter requiring the services of a lawyer especially before appellate courts.[4] It is an independent and autonomous office attached to the Department of Justice for budgetary purposes.[5]
The office of Attorney General was established in Tonga in 1988, and was held jointly with the portfolio of Justice Minister until the two were separated in 2009.[7][8] The Attorney General is defined as the "Chief Legal Advisor to Government".[9]
According to the Constitution of Trinidad and Tobago, the supreme law of the nation, The Attorney General shall be responsible for the administration of legal affairs in Trinidad and Tobago and legal proceedings for and against the State shall be taken— (a) in the case of civil proceedings, in the name of the Attorney General; (b) in the case of criminal proceedings, in the name of the State.
The Attorney General for England and Wales is similarly the chief law officer of the Crown in England and Wales, and advises and represents the Crown and government departments in court. In practice, the Treasury Solicitor (who also has the title of Procurator General) normally provides the lawyers or briefs Treasury Counsel to appear in court, although the Attorney General may appear in person. The person appointed to this role provides legal advice to the Government, acts as the representative of the public interest and resolves issues between government departments.
The Attorney General has supervisory powers over the prosecution of criminal offences, but is not personally involved with prosecutions; however, some prosecutions (e.g. Riot) cannot be commenced without his/her consent, and he/she has the power to halt prosecutions generally. Criminal prosecutions are the responsibility of the Crown Prosecution Service, headed by the Director of Public Prosecutions. The Attorney General may appeal cases to the higher courts where, although the particular case is settled, there may be a point of law of public importance at issue.
The Attorney General of the Duchy of Cornwall is the chief legal adviser to the Prince of Wales, and there is a separate Attorney General for the Duchy of Lancaster, an appointment that is held by the Crown.
In the federal government of the United States, the Attorney General is a member of the Cabinet and as head of the Department of Justice is the top law enforcement officer and lawyer for the government. The attorney general may need to be distinguished from the Solicitor General, a high Justice Department official with the responsibility of representing the government before the Supreme Court. In cases of exceptional importance, however, the Attorney General may choose to represent the government himself or herself to the Supreme Court.
The individual U.S. states and territories, as well as the Federal capital of Washington, D.C. also have attorneys general with similar responsibilities. The majority of state Attorneys General are chosen by popular election, as opposed to the U.S. Attorney General who is a presidential appointee.
Non-common law jurisdictions usually have one or more offices which are similar to attorneys-general in common law jurisdictions, some of which use "attorney-general" as the English translation of their titles.
The Attorney General's of Afghanistan (AGO) is the legal advisor to the Government of Islamic Republic of Afghanistan (GIRoA). It also monitors the implementation of laws in order to promote peace and prosperity through the rule of law, and to enhance the quality of life of the Afghan people. Currently Mohammad Ishaq Aloko is the Attorney General of Islamic Republic of Afghanistan.
The AGO’s mission is to serve all of the people of Afghanistan, without discrimination, by defending the people’s right to safety and security, and ensuring fairness, impartiality, and justice when investigating and prosecuting criminality. This also requires monitoring the implementation of laws in order to promote peace and prosperity through the rule of law, and to enhance the quality of life of the Afghan people.
In the Dominican Republic the Procuraduría General de la República is an institution belonging to the executive branch that is responsible for representing the Dominican State in courts of law, defending public interest, assuring respect for the due process of law and overseeing penitentiaries in the Republic.[11]
The Attorney General of Indonesia is responsible to advise the Government about law problems. The Attorney General is also a Solicitor General. So, the Attorney General can represent the Government in the Supreme Court. The current Attorney General of Indonesia is Basrief Arief.
In Italy there is no strict equivalent of an Attorney General, and all comparisons risk being misleading due to the differences in the constitutional and legal systems. The very approximate equivalent of an U.S. A-G would be the Ministro della Giustizia, who is a member of the government and head of the Italian Department of Justice. Also the English A-G has no direct equivalent, as the function of legal adviser to the government does not exist as such, and we find part of its responsibilities in the Avvocato Generale dello Stato, who is in charge of representing the State in any civil, criminal or administrative lawsuit, but not in charge of prosecution.
Prosecution in Italy enjoys constitutional independence from the Government, and is entrusted to a district attorney, the Procuratore della Repubblica (one for every ordinary court), the Procuratore Generale (every Court of Appeal), the Procuratore Distrettuale Antimafia, the Procuratore Generale (Court of Cassation) and the Procura Nazionale Antimafia.
In Mexico the Procuraduría General de la República is an institution belonging to the federal executive branch that is responsible for the investigation and prosecution of federal crimes.
In the Netherlands, there are two types of attorneys-general, that are only historically related.
The first type of attorney-general ("advocaat-generaal" in Dutch) is the public prosecutor in criminal cases at appellate courts.
The second type of attorney-general is an independent advisor to the Supreme Court. These people give an opinion on cases (called "conclusies") in any field of law (not just criminal law), supported by a scientific staff. The Supreme Court may either follow or reject the opinion of the attorney-general (which is published together with the eventual decision). In a way, an attorney-general acts as yet another judge, but in the Dutch system that does not allow dissenting opinions to be published, it is the only way to reflect different perceptions on a case.
Dutch attorneys-general do not normally advise the government.[citation needed]
In Serbia is called Public Attorney of the Republic of Serbia. It's the person who represents the state's authorities in the courts and administrative bodies, and advises the government in civil law matters. Crimes and offences are prosecuted by Public Prosecutor.
