EXPOSURE
MONITORING
CATEGORIES OF EXPOSURE
UNDER PMS: ACCOUNTING FOR DIFFERENT
INTRODUCTION
1
This paper sets out a proposed scheme for treating different categories of exposure under PMS controls (the Global Business Budget and Market Exposure Controls).
2
Any control on exposure, whether at the market or global level, requires a definition of the amount to be logged. For the major categories of ECGD exposure, medium and long term
buyer and supplier credits, it is evident that the total
exposure to future payments of principal and interest (ie DML) should be logged. However, for other categories, the position
is not so clear cut. For example, should we count the exposure on business secured by a CILC which effectively removes the
market risk? Is it logical to treat short term business,
which would normally escape rescheduling, in the same way as a buyer/supplier credit? Over the years, policy on the treatment
of this grey area has developed on an ad hoc basis with no
clearly defined logical framework. The lack of a clear policy
has been highlighted by our recent experience of reconciling an
ad hoc system with PMS.
3 Against this background ECGD has undertaken a detailed
review of the whole question. The aim has been to bring policy
into line with PMS.
CURRENT PRACTICE
been
4 Existing objectives have not, as mentioned above,
In general the question of whether a particular category of exposure should or should not be counted
clearly defined.