Abstract
Earlier in 2002, the Basel Committee on Banking Regulation put forth new capital-requirement proposals that would penalize project finance based on the hypothesis that this class of loans is riskier than corporate loans. However, an initial study conducted by Standard & Poor's Risk Solutions based on project finance loans at ABN AMRO, Citibank, Deutsche Bank, and Société Générale confirms anecdotal evidence that project finance loans perform better than corporate loans in default situations. Therefore, less capital should be required to reserve against their expected losses. The project finance industry should expand the study to include more participants and create an ongoing industry-wide database useful for credit analysis, bank regulation, and credit rating agency analysis.
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