Ex-Im Needs Improved Risk Management Despite Business Growth, GAO Says
The Export-Import Bank needs to improve its risk management and financial performance analysis, given its ballooning exposure to loans in the past several years, said a June 13 Government Accountability Office report. A May 2013 report found "weaknesses” in Ex-Im's exposure forecasting (see 13053106). Another GAO report from March said that Ex-Im has already started addressing recommendations by its Inspector General about portfolio stress testing, thresholds for managing portfolio concentrations, and risk governance. However, these techniques “merit continued attention” for an improved process.
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The need for improved risk management includes risk modeling, the report said. Ex-Im currently uses a loss-estimation model that uses historical data and “takes credit, political, and other risks into account,” with factors added in 2012 to adjust for any circumstances that could cause estimated credit losses to differ from historical experience, GAO said.
GAO said Ex-Im should also improve analysis of its portfolio’s financial performance because it contains many recent transactions that have not reached their peak default periods. In addition, Ex-Im has not kept the data needed to compare the performance of newer books of business “with more seasoned books at comparable points in time,” as federal banking regulators recommend, the report said.