Introduction

Why the need for a book on retail credit risk management? The first, and probably the most important, reason is the perceived usefulness of investigating risk management not only in terms of the general theory on modeling and methods, but also to gauge its managerial implications and its interconnections with other bank operations and with the firm’s organizational structure. Risk management is not simply a tool; it is a managerial action. In fact, risk management materializes in a series of concrete daily actions, and it cannot be limited to risk modeling and regulatory compliance (Basel II and III above all). The insight here is to overcome the merely quantitative risk management approach with two prior aims: on the one hand, to consider risk management as a continuous forecasting action not limited to single events; and on the other hand, to prevail over the common misinterpretation that risk management is solely a necessitated, and to a certain extent annoying, consequence of the regulatory risk-control discipline (Basel II and III).