Enron: failure to deliver transparency Let me move to the Enron case. There seems to be a broad consensus that this incident points not only to truly illegal actions and infringements of ethical codes of conduct, but also to ineffective market discipline exercised by Enron’s equity and debt-holders, due to lack of adequate transparency.
Further, banks will have to start provisioning on the very day the loan is booked based on expected losses over a 12-month period, i.e. on Stage 1. Should credit risks increased significantly as a result of macroeconomic or financial factors relative to the initial recognition at stage 1, provisioning would increase accordingly based on lifetime expected losses computation.