At one time, a loan portfolio manager’s role was simple. At first, the task was simply to measure credit risk. The portfolio manager may have had some say over whether to do a deal or not based on this analysis, but not very often. Once a credit decision was made, hedging was limited to loan sales and loan participations. In theory, a portfolio approach was followed, but the reality was that it was exit clients that were hedged.
Then there was securitisation. Though securitisation is thought of as a risk transfer tool, such transactions often do not reduce credit risks for originating banks. As such, these structures are used mostly to manage regulatory capital (and/or lock in term funding).
