Video: BHP Billiton’s Proposed Demerger: What Are The Implications For Creditworthiness?

See video on http://www.spratings.com/?video=272104791

BHP Billiton, one of the world’s biggest miners, has announced plans to demerge some of its assets. Join May Zhong, a director in our Corporate Ratings group, as she discusses the proposed demerger, including the implications for the company’s credit quality.

Moody’s Teleconference Invitation: What Normalizing US Monetary Policy Means for Asian Credit, 22 September 2014, 12pm IST

Discussion Items

  • How will the end of Fed tapering and higher US rates in 2015 impact Asian credit?
  • Can Asian sovereigns weather the tightening in global liquidity?
  • Will Asian banking systems prove resilient in the new environment?
  • How exposed are Asian corporates to FX volatility and higher borrowing costs?

 

Speakers

Michael Taylor, Managing Director and Chief Credit Officer

Rahul Ghosh, Vice President – Senior Research Analyst

 

The entire session — with prepared remarks and the Q&A — will last about one hour. If you wish to participate, please RSVP early. Dial-in numbers will be provided.

REGISTER HERE

Registration Is Required.

Replay information will be provided after the teleconference.

 

Submit Questions in Advance

Participants are encouraged to submit questions in advance of the teleconference by
clicking here.

Related Research and Methodologies

A complete list of Moody’s methodologies may be found here.

 

The changing nature of fixed income

As the fixed income asset class undergoes rapid change and the opportunity set expands, unconstrained bond funds have become popular. But as this article examines, with that expanded opportunity set comes new considerations including a wider risk/return spectrum among managers.

Trends in the global investment universe tend to come around every six months or so. Think risk parity, smart beta, and now, unconstrained bond funds. As measured by Morningstar in the US, assets in unconstrained bond funds grew by 80 per cent in 2013 to $123 billion, and of the 70-odd funds measured, more than 50 have track records of less than five years.

Read more at  http://www.top1000funds.com/insider/2014/08/29/the-changing-nature-of-fixed-income/

 

Institutional Investors Struggle To Find Investable Infrastructure Projects In Asia – CreditMatters

 Institutional Investors Struggle To Find Investable Infrastructure Projects In Asia

Institutional investors awash with funds bemoan the lack of commercially viable infrastructure projects in Asia. Pension and sovereign funds see infrastructure as a good fit because it offers long tenors and stable, predictable cash flows. Yet, many infrastructure projects aren’t currently attractive to institutional investors. First, the risk-reward equation does not justify the huge political and economic challenges of Asia’s emerging countries, on top of project construction, design, and technical risks. Second, the lack of a strong credit culture and legislative framework in some Asian countries make enforcement of contractual rights uncertain and untested. And lastly, banks have largely soaked up project financing, offering low financing costs that capital markets aren’t able or willing to match. Private-sector participation can lift a project’s credit standards, and ultimately its commercial viability. Infrastructure projects that provide social, economic, and environmental benefits to the wider community are particularly attractive to investors with ethical mandates.

 

EPFO Declares 8.75% Rate of Interest for 2014-15, Impact on Credit Markets

The Union Minister for Labour and Employment, Steel and Mines, Shri Narendra Singh Tomar has chaired the meeting of Central Board of Trustees (CBT), Employees’ Provident Fund (EPF) here in New Delhi today. The Minister of State for Labour & Employment, Steel and Mines & Vice-Chairman, CBT, EPF, Shri Vishnu Deo Sai and the Secretary, Ministry of Labour & Employment, Smt. Gauri Kumar were also present on the occasion.

In the meeting, the Central Board of Trustees, EPF decided to recommend 8.75% as the interest rate on EPF deposits for the year 2014-15.

The service charges levied by the SBI on collection amount of EPF (remittances made by establishments as EPF contribution) have been reduced from the existing uniform rate of Rs 3 per Rs 1000. The charges have been reduced to Rs 1.80 per Rs 1000 for net based transaction and Rs. 2.40 per Rs. 1000 for physical transaction. It is expected that this reduction in rates shall result in substantial savings to the tune of around Rs 100 crores per annum for the Organisation.

The proposed pattern of investment by Ministry of Finance was discussed and deliberated by the Board and the Board was not in favour of investing in equities and Exchange Traded Funds (ETFs). It was decided to recommend the make the pattern more flexible to further increase the percentage of investment in government securities. Further, it was decided to appoint CRISIL as consultant for the selection of fund managers of EPFO.

The Board also discussed the feasibility of deployment of EPF funds in AAA rated CPSUs (Central Public Sector Undertaking) and SPSUs (State Public Sector Undertaking) through mutual agreement.

It was also decided to go in for short term (not exceeding 15 days) borrowing of funds for participation in primary auction of securities. This move is expected to result in EPFO getting to invest in securities at more profitable rates. The funds would be borrowed by means of CBLO, Corporate Term Repo and other such instruments for participation in primary auction of government securities and corporate bonds. 

It was decided that the report of the actuary on the evaluation of the EPF shall be examined by the Finance, Investment and Audit Committee of the CBT. The Committee shall examine the fluctuations in deficit / surplus in the pension fund for taking further corrective action.

It was decided to constitute a Sub Committee for construction and contract workers. The Committee shall examine the various issues regarding the coverage of employees engaged in this sector and shall recommend strategies to widen the coverage and enrollment in this area.

The Board also took stock of the various new developments and initiatives taken by EPFO like provision of Universal Account Number (UAN) which shall greatly contribute to improvement in service delivery and the New Inspection Scheme which gives primacy to transparence and accountability in conducting inspections and which also includes the formation of a Central Intelligence and Analysis Unit (CAIU) for effective monitoring of compliance functions.

Please find enclosed notification for your reference.

http://pib.nic.in/newsite/PrintRelease.aspx?relid=109091

Webinar : Liquidity Management: From Crisis to Opportunity, Sept 18, 11am ET

Liquidity Management: From Crisis to Opportunity

This webinar is complimentary for all participants and is organized and presented by Misys. 

Date: September 18, 2014

Time: 11 a.m. – 12:00 p.m. EST

Presenters:

  • Dereck Rajack, Group Risk Manager, First Citizens Bank Trinidad & Tobago
  • David Rowe, Senior Advisor, Risk & Regulation, Misys
  • CRO, US-based bank, TBD

About the Webinar:
The next few months will deliver key regulatory changes to the US banking industry and these will affect ‘best practice’ risk management. Misys will be hosting a series of webinars to help market participants prepare for the regulatory and risk challenges ahead. Risk experts will be discussing the implications and how best to prepare for the amended liquidity rules for the United States.

 

Investor Education video: What investors need to know about financial instruments offsetting in a post-crisis world

22 August 2014

In December 2011, the International Accounting Standards Board (IASB) introduced new disclosure requirements to help investors evaluate the effect or potential effect on an entity’s financial position of netting arrangements—sometimes referred to as offsetting arrangements—related to financial instruments.

At the same time, the IASB amended its application guidance for applying the criteria for offsetting of financial assets and liabilities.

The new disclosures and amended application guidance are designed to help investors better assess the risk exposures related to financial instruments; in addition, the disclosures will allow investors to compare IFRS financial statements more effectively with US GAAP financial statements. The new disclosures became effective 1 January, 2013 and the new application guidance became effective 1 January 2014.

You can access the video here.

Credit Rating Agencies Again Playing a Vital Role in the Marketplace?

In an op-ed about high-frequency trading in Monday’sWall Street Journal, former hedge-fund manager Andy Kessler suggests that poor pricing of collateralized debt obligations between 2006 and mid-2008 were a significant reason for the crisis that arose just two years later. On the basis of that bad information, he contends, the market continued to buy these toxic instruments until better models appeared two years later. He concludes that the “financial crisis was mainly driven by the drop in value of mortgages from these last two years.”

Read full blog at http://spectruminvestors.wordpress.com/2014/06/23/credit-rating-agencies-again-playing-a-vital-role-in-the-marketplace/

Webinar : Are you getting the most out of high-conviction investing in your portfolio? Sept 18, 2pm ET, 1130pm IST

Are you getting the most out of high-conviction investing in your portfolio?
Join Matthew Scanlan, Laurence Siegel and Richard Sloan to explore the role of high-conviction investing and the implications for institutional portfolios.

Register now or click on http://bit.ly/highconvictionwebcast

Join this webcast and you will learn:

  • What defines a high-conviction manager?
  • What is the role for high-conviction managers in a diversified portfolio?
  • Can investors differentiate luck from skill and choose the right managers?

Live Q & A to follow. Audience members will have the opportunity to submit questions during the live webcast.

Let’s Continue the Conversation: For more information on this webcast or any other Institutional Investor Journals’product, please contact Bhuvna Doshi at 212.224.3016 orbdoshi@iijournals.com

Moody’s Teleconference Invitation (APAC – English): Proposed Bank Rating Methodology – 11 September 2014, 12pm IST

Moody’s Investors Service will be hosting a series of teleconferences in light of our Proposed Bank Rating Methodology – Request for Comment.

Discussion Items

  • Key changes and highlights
  • Macro profiles
  • BCA financial profile and qualitative adjustments
  • Support and structural analysis
  • Impact analysis

Speakers

Brian Cahill, Managing Director, Corporate Finance & Financial Institutions Group

Nick Hill, Managing Director, Financial Institutions Analytics

Stephen Long, Managing Director, APAC – Financial Institutions Group

The entire session — with prepared remarks and the Q&A — will last about one hour.

If you wish to participate, please RSVP early. Dial-in numbers will be provided.

REGISTER HERE

Registration Is Required

Replay information will be provided after the teleconference.

Submit Questions in Advance

Participants are encouraged to submit questions in advance of the teleconference by clickinghere.

Below is a list of dates covering all other regions

EMEA: Wednesday, 10 September 2014 10:00 EDT / 15:00 BST / 16:00 CEST 

 Americas: Wednesday, 10 September 2014 15:00 EDT / 20:00 BST / 21:00 CEST

 Japan – Japanese: Friday, 12 September 2014 10:00 HKT / 11:00 JST / 12:00 AEST

 APAC – Putonghua: Wednesday, 17 September 2014 14:30 HKT / 15:30 JST / 16:30 AEST

 A complete list of Moody’s methodologies may be found here.

 

GARP Webinar : Basel III Standardized Approach – New Capital Requirements for Mid-Tier Banks . 16 Sept 830pm IST

Basel III Standardized Approach – New Capital Requirements for Mid-Tier Banks

Date: Tuesday, September 16, 2014
Time: 11:00 am EDT | 4:00 pm BST | 11:00 pm HKT
Duration: 60 minutes
Register here
Abstract:
US Basel III requirements will have a significant impact on over 1,000 U.S. banks with asset sizes of over $500 million. With effect from 2015, these banking organizations are expected to comply with US Basel III minimum regulatory capital ratios, and apply the Standardized Approach for calculating RWAs. Moving to the Basel III Standardized Approach from Basel I can be a quantum leap for many banks. Mid-tier banks must have the ability to manage granular data elements and compute RWAs for different asset classes.

In this webcast, our experts will focus on:

  • How small-to-mid sized banks can avoid regulatory pitfalls
  • Making accurate capital calculations
  • Producing regulator-ready reports without huge ramp-up times, staff, and costs.

Moderator:
Eric Kavanagh, The Bloor Group
Presenters:
Tom Kimner, Head of Americas Risk Practice, SAS Institute

 

IASB : Dynamic risk management-accounting in an age of complexity

Steve Cooper, a member of the IASB, discusses an accounting approach for dynamic risk management.

One area of financial reporting that may leave investors struggling today is the accounting for risk management—particularly, dynamic risk management. Many entities are exposed to market price movements that affect their profitability. For example, a bank’s net interest income is often the most significant contributor to profitability. However, net interest income is exposed to changes in interest rates. How well a bank manages this risk affects its profitability. Managing these risks on a continuous and dynamic basis is one of the key elements of financial risk management. Dynamic management of interest rate risk is therefore a critical component of a bank’s ongoing risk management activities.

Read the full article: Dynamic risk management-accounting in an age of complexity

Regulatory worries hit lev loans

Three long-time banks for private equity firm KKR have snubbed a request for a US$725m buyout loan as a result of concerns that it is too risky to pass muster with US regulators, people familiar with the situation said.

The banks had funded a similar deal six months earlier.

Read full article at http://www.ifre.com/regulatory-worries-hit-lev-loans/21148517.article

Webinar : Challenges in Low Volatility Investing Hide details, 4 Sept 7pm IST

Contrary to conventional finance theory, research shows it is possible to generate higher risk-adjusted returns for investors with a low-volatility investment strategy. Many organizations offer solutions that seek to capture this return opportunity, but do so in ways that lead to high concentration in certain sectors, poor liquidity and high turnover costs. RAFI Low Volatility is a smart beta product built from the ground up to exploit the low volatility anomaly while preserving the benefits of passive investing.

Moody’s Analytics Webinar: How Moody’s Analysts Perform Peer Comparisons on Banks, 1230pm IST, 4 Sept 2014

Take advantage of our new Bank Financials and Analytics platform to achieve global comparability and superior data accuracy on the financials and credit metrics for Moody’s rated banks.

Join us in this webinar and learn how to:

»      Analyze peers through Moody’s single global view of bank financials.

»      Assess a bank’s credit risk profile with unprecedented levels of account detail in both reported and adjusted form.

»      Gain transparency into how Moody’s analysts adjust a bank’s reported financials.

Speakers:

Eric Girma, Senior Product Strategist, Product Strategy, Moody’s Analytics

Irene Chau, Senior Associate Product Specialist, Moody’s Analytics

Register here

Standard & Poor’s Sovereign Ratings Anchored Expectations In The Depths Of Eurozone Crisis

Government bond markets in the eurozone have rallied since the depths of the sovereign debt crisis in 2011 and 2012. Yields have declined ever since European Central Bank President Mario Draghi said the bank will do “whatever it takes to preserve the euro” on July 26, 2012. Since early this year, sovereign issuers on the so-called periphery have been able to borrow at or close to all-time lows. In this article we define the countries on the periphery as ItalySpain,PortugalIrelandGreece, and Slovenia. Even Greece, which defaulted twice in recent years, has been able to tap the capital markets again to a limited extent, a far cry from 2010 to 2012, when it and other sovereigns in the European Economic and Monetary Union (EMU or eurozone) had lost access.

Although market sentiment has improved, Standard & Poor’s Ratings Services’ ratings on eurozone sovereigns haven’t risen commensurately. Indeed, since the market recovery, we have raised the ratings by one notch only on Spain andLatvia in May 2014, and then on Ireland in June (other than Greece and Cyprus following their respective emergence from default). Overall, the sovereign ratings remain well below pre-crisis levels. We currently have only one positive outlook (on the ‘A-‘ rating on Ireland) and two negative ones (on the ‘BBB’ rating on Italy and the ‘AAA’ rating on Finland). The remaining 15 outlooks on the sovereigns are stable. These outlooks together indicate that we don’t anticipate many rating actions on eurozone sovereigns within the next year or two. Our ratings, therefore, reflect a cautious view about the credit outlook, which in turn is based on our view that growth will remain subdued because deleveraging across much of the region will continue for several years (see “The Long Haul: Eurozone Deleveraging Could Stunt Growth For Years,” published on June 10, 2014, on RatingsDirect).

Fiscal forensics – Detecting irregularities in Asian financial statements

A number of accounting scandals involving Asian companies in recent years have left investors with costly lessons about financial reporting failures. Why did savvy institutional investors fail to see through the falsified financial statements of Satyam Computer Services, Sino-Forest, Olympus Corporation, and others? As global investors set their sights on Asia, and particularly China, there is greater need for professionals to master how to detect accounting fraud and make solid investment decisions.

Read more

Ind-Ra: Senior Bonds Key to Cure Banks’ ALM Gaps, Improve Liquidity

Link to Ind-Ra: Senior Bonds: A Structural Fix for Banks

Ind-Ra-Mumbai – 8 July 2014: Permitting banks to issue senior long-term bonds will help correct asset-liability mismatches (ALMs) and provide a tool to improve liquidity coverage ratio by extending funding outflows, says India Ratings and Research (Ind-Ra). Growing divergence in the tenors of loans and deposits has resulted in rising ALMs in government banks. For some banks, there is even a shortage of ready collateral that could be used to repo with the Reserve Bank of India in a liquidity squeeze.

Senior bonds are rated at the same level as banks’ Long-Term Issuer Rating in the absence of a bank resolution regime and are not treated like loss-absorbing hybrid capital. Government banks have easy access to long-term investors such as insurance and pension funds and hence are well placed to tap this market.

The existing guideline that permits banks to issue ‘infrastructure bonds’ has not found favour with investors, perhaps due to the implicit link with a sector that has been struggling to perform for some time. Senior bonds issued globally by Indian banks have a good investor base. A similar (and possibly larger) market can be created among domestic investors. Indeed, investors take comfort from the benefits of government support, which is reflected in Ind-Ra’s stable Long-Term Issuer Rating of government banks during the economic slowdown in FY13 and FY14.

The Indian banking system’s dependence on short-term liabilities has grown to a point where refinancing pressures are hurting margins. This also poses unique policy challenges, including diluted monetary transmission, a persistently flat-to-inverted yield curve and crowding out corporates from the commercial paper market. Deposits maturing within one year increased to almost 50% of the total deposits in 2014, up from 33% in 2002. The ratio dipped in 2013 after growth in advances had moderated, before rising in 2014. A significant part of these deposits had maturities within six months and, for some banks, included a growing share of wholesale money market borrowings. The share has grown independent of the interest rate cycle and will likely be explained, paradoxically, as a strategy by banks to preserve margins by remaining at the short end of liability tenor.

The domestic yield curve is likely to remain flat to inverted, unless issuance volumes shift to the long-end of the curve. Regulatory initiatives that help banks address this challenge and push long-term savings will benefit the economy in the long run.