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Banks are exposed to credit risk in all areas of business: loans, letters of credit, guarantees and foreign exchange settlement to name a few. The arrival of credit default swaps in the mid 1990s transformed bank credit portfolio management by allowing banks to lay off the credit risk that, in its raw form, was virtually unsellable.

The very nature of illiquid non-standard credit instruments (and most credit risk fits this definition) means that the instrument itself often cannot be hedged or even sold: it is the credit risk of the instrument that is being hedged. The “liquidity” that is brought by credit derivatives is risk liquidity, not cash liquidity.

Banks tend to specialise in regions, industries and products, and the bulk of their business is often done with a small percentage of their clients. Over time this can produce very lumpy credit portfolios that, before the arrival of credit derivatives, could only be managed (not hedged) by imposing limits and by striving for diversification.

To ban CDS altogether would virtually remove a bank’s ability to manage credit risk; to ban naked shorts would completely remove the ability to find proxy hedges for the huge array of credit risk that cannot be sold or directly hedged. More
Ban will restrict ability to manage credit risk, Financial Times, Letter, Robert Reoch, New College Capital, London
Jhonalex1 meinte am 12. Feb, 11:05:
Good post
You have shared good post about Credit Portfolio Management. I don't know more about credit portfolio before read this post. This is short but have enough content to understand the basic concept of credit portfolio. any how, Actually, i am looking writing service in uk but i fail to find a company where i can get such service according to my demand. any suggestion helpful for me. 
Chris_12121 antwortete am 1. Apr, 09:57:
Great post
Commercial banks take deposits, make loans, issue credit cards. They deal directly with consumers. Your local community bank is a commercial bank. Investment activity is usually pretty basic and part of trust operations. I would not expect sophisticated investment work. Write research paper - Irish Essays