Thursday, August 11, 2011
Credit Conference attracts national attention, focus on prevention of future financial meltdowns
Scholars and practitioners from across the world gathered at Oakland University (OU) School of Business Administration (SBA) in late July for the inaugural International Conference on Credit Analysis and Risk Management. The three-day conference focused on expanding knowledge of credit analysis, and encouraging the development of new and effective models to make credit-granting decisions.
Hosted by the SBA’s Department of Accounting and Finance, the conference offered nearly 60 academics and field experts with the opportunity to present individual research projects and interject in open-form discussion.
Offering keynote and panel discussions from experts around the world, the conference is attracting national attention. In fact, The Journal of Credit Risk has committed to devoting one or more special issues to the conference, and Cambridge Scholar’s Publishing has contracted to publish an entire book on the conference.
An open forum for discussion
Presentation and panel discussions over the three-day conference explored state-of-the-art credit analysis methods as well as techniques to manage financial risk. When used in practice, this analysis would help experts avoid financial disasters, such as the credit crisis in 2008.
Opening remarks set the tone for the conference, and invited all participants to be actively involved in discussion, encouraging them to share views from all perspective on the issue.
“All views are stated without inhibitions or worries, and nothing is taken personally, despite some clear differences of opinion on professional issues,” said Austin Murphy, conference co-chair and professor, finance, OU SBA. “Such varying views help open up everyone’s minds to different perspectives so that we can all carry out our jobs better in the future.”
While the majority of the conference featured speakers and participants in OU's Elliott Hall, the conference launched with an interactive teleconference presentation by Johanna Pleus, from Switzerland, sharing research findings about the empirical analysis on the efficiency of CDS pricing, which was co-authored with Simone Westerfeld, a professor from the Swiss Institute of Banking and Finance
Luncheon keynote speaker Uday Rajan, associate professor, finance, Stephen M. Ross School of Business at the University of Michigan, gave an inspiring talk on his research into the importance of qualitative analysis in evaluating credit and the benefit of including more information into statistical models of the lending decision.
The dinner reception at OU’ s Meadow Brook Hall, featured Lawrence Mielnicki of PNC Bank, where he spoke about the evolution of credit scoring markets and usefulness of purely statistical data. As Executive Vice President and Head of Retail Risk Analytics at PNC, Mielnicki has nearly 30 years of experience in various aspects of economics and forecasting in the telecommunications and financial service industries.
“We have fairly good models to predict credit risk in the large corporations, consumers and even small business. There is what bankers call the middle market that is relatively unserved,” Mielnicki explained. “I have some research that is done at my organization that tries to create a hybrid to bridge that gap so we can use some of the modeling technology to help assess the risk in that area.”
Another featured speaker, Patrick Sperti, vice president, Fifth Third Bank, East Michigan Affiliate, provided insightful examples of the type of analysis used in making individual credit decisions.
Erik Heitfield, chief, risk analysis, division of research and statistics, Board of Governors of the Federal Reserve System, and Joseph Breeden, chief executive officer and co-founder, Strategic Analytics, also contributed information on collateralized mortgage obligations and the effect of seasoning on defaults, respectively.
Participants discussed a variety of other topics, including the possibility of offering a certificate in credit analysis through Oakland University. Such a certificate could potentially be useful for bank trainees, as well as for the Chartered Financial Analyst (CFA) given the need for more instruction in that particular area of study for the CFA exam.
Global discussion valued on annual basis
Attendees valued the global exchange of ideas and placed strong emphasis on continuing the conversation through an annual conference in different locations, such as Germany and Australia or another meeting at Oakland University.
“It could mean the difference between a future financial collapse and preventing one,” Murphy said. “The dissemination of knowledge and the free flow of ideas are vital in finance and in credit analysis.”
With representation from around the world, the conference brought more than 60 participants from 13 countries. The majority of attendees were from the United States, while 20 came from other countries, including, Canada, Chile, France, Germany, India, South Korea, Netherlands, New Zealand, Switzerland, Thailand, Turkey and the United Kingdom. Within the United States representation included Florida, Illinois, Indiana, Michigan, New York, Ohio, Pennsylvania and Texas.
The conference lived up to its billing, offering perspective from and for academics and practitioners with three-fourths of attendees from educational institutions around the world and the remainder from corporate settings such as PNC Bank, Federal Reserve Bank, Strategic Initiatives, Munder Capital, Ford Motor Credit, Kresge Foundation, Comerica Bank, Citi Bank, GE Capital, Strategic Analytics, Central Bank of Chile, Deutsche Bank, Bank of Thailand, ICICI Bank, U.S Departments of Treasury, Morgan Stanley, GMX and Ace Cash Express.
The conference was possible, in part, thanks to its sponsors: PNC Bank and OU's School of Business Administration, including its Center for Integrated Business Research and Education, Executive MBA program, Department of Accounting and Finance, and Enterprise Risk Analysis Institute.
Full conference coverage
Check the conference website at www.oakland.edu/internationalcreditconference for a complete program of presentations, pictures from the event, updates on the publication of the book and journal and plans for future conferences.
By Emily Black