Credit ratings and risk weightings must undergo a thorough process of review and revision. No security or instrument on the planet should have a zero risk weighting.
This quote emphasizes the importance of continuous assessment in financial risk management. It suggests that assigning a zero risk weight to any security or instrument is unrealistic, as all assets carry some degree of risk. Regular review and revision of credit ratings ensure that financial institutions understand and account for the inherent uncertainties involved. Emphasizing scrutiny promotes transparency and helps prevent complacency, which can lead to overlooking potential vulnerabilities. A dynamic approach to risk assessment fosters a more resilient financial system capable of adapting to market changes and unforeseen events.
---Paul Singer---
