Credit Portfolio versus Loan Portfolio

Credit Portfolio versus Loan Portfolio

The two terms are used some time interchangeably but more accuracy is required when the types of Lending products involved in a portfolio varies. A loan portfolio is best understood as a subset of the broader credit portfolio class that only involves loans.

Differences

• The primary distinction between a Credit Portfolio and a Loan Portfolio stems from the fact that a wide array of Financial Products, beyond the traditional Lending products category involve Credit Risk. Such products and/or contracts that may carry substantial credit risk are Derivatives, bonds, Securitisation etc.
• The different markets and nature of the product involved means that there are also differences in portfolios are managed, for example
  • Risk assessment (e.g. based on market information or client information)
  • Risk management (tools available for risk mitigation)
  • Possible trading strategies
  • Accounting Regime
  • Regulatory Regime (including required risk capital)

Similarities

• Despite the potentially significant differences, a unifying feature of all credit portfolios is that the core underlying risk is the credit risk of borrowers
• The machinery for quantitative analysis of credit portfolio risk is broadly similar-- --