Morgan Stanley 2009 Annual Report Download - page 103

0
1
2
3
4
5
<-200
-200 to -175
-175 to -150 -150 to -125
-125 to -100
-100 to -75
-75 to -50
-50 to -25
-25 to 0
0 to 25
25 to 50 50 to 75
75 to 100
100 to 125 125 to 150
150 to 175
175 to 200
>200
Number of Days
One Month Ended December 31, 2008
Daily Net Trading Revenue
(excluding primary revenue)
(dollars in millions)
(Loss) Gain
Credit Risk.
Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial
obligations. The Company is exposed to two distinct types of credit risk in its businesses. The Company incurs
“single name” credit risk exposure through the Institutional Securities business and to a lesser extent through its
lending activities in its Global Wealth Management Group. This type of risk requires credit analysis of specific
counterparties, both initially and on an ongoing basis. The Company also incurs “individual consumer” credit
risk in the Global Wealth Management Group business segment lending to individual investors, including margin
and non-purpose loans collateralized by securities and through single-family residential prime mortgage loans in
jumbo or home equity lines of credit (“HELOC”) form.
The Company has structured its credit risk management framework to reflect that each of its businesses generates
unique credit risks, and Credit Risk Management establishes company-wide practices to evaluate, monitor and
control credit risk exposure both within and across business segments. The Credit Limits Framework is one of
the primary tools used to evaluate and manage credit risk levels across the Company and is calibrated within the
Company’s risk tolerance. The Credit Limits Framework includes single name limits and portfolio concentration
limits by country, industry and product type. Credit Risk Management is responsible for ensuring transparency of
material credit risks, ensuring compliance with established limits, approving material extensions of credit, and
escalating risk concentrations to appropriate senior management. Credit risk exposure is managed by Credit Risk
Management and through various risk committees, whose membership includes Credit Risk Management.
Accordingly, Credit Risk Management also works closely with the Market Risk Department to monitor risk
exposures, including margin loans, mortgage loans and credit sensitive, higher risk transactions.
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