Flying blind with rules that encourage fudge
Private credit and banking rules increasingly distort risk signals. Mark-to-model (ASC 820) enables wide valuation discretion. New delinquency rules erase long-term stress after 12 months, improving NPLs mechanically while weakening analysis and delaying warning signals (NIM impact). CDS lacks coverage in private credit. LIBOR’s narrative is contested, yet SOFR replaces a forward-looking rate with a backward-looking one, removing embedded market expectations and degrading visibility of risk.