Webinar : The Effect of IFRS 9 on the Banks’ Credit Business

The Effect of IFRS 9 on the Banks’ Credit Business 
 
Date: April 6, 2017
Time: 10:00 a.m. GMT
Speakers: 
Dan Bolland, Director in Banking, KPMG
Arnaud Picut, Head of Risk Practice, Misys
Other speakers will be announced shortly.

The new accounting standard will have significant impact on the credit business and the way credit decisions will be made in the future, starting from credit origination to final accounting. In this webinar, business experts will look at the way the new accounting standard will be impacting the decision making process from beginning to end, including the changing roles of CROs, Finance and Treasury.

In this webinar business experts will explore:

  • What are the practical implications that IFRS 9 will bring to financial institutions?
  • Which considerations should credit institutions take into account to arrive at a more aligned credit decision process beyond IFRS 9?
  • As a consequence, how will the roles between risk, finance and treasury change?
  • How extensive is the change of systems and processes and what should banks consider in their technology and implementation?

Asia Fixed Income: From Implicit Guarantees to Bond Defaults

Chinese authorities will allow market participants to buy onshore bonds through transactions carried out in Hong Kong, which will further broaden foreign access to China’s onshore bond market. While no additional details have been provided, a “bond connect” scheme that provides cross-border cash bond trading is anticipated by market participants.

Despite currency volatilities, China bonds offer better yields and diversification benefits. However, foreign investors are concerned with the potential credit risk.  Besides the non-parallel rating systems between local and the international standards, the implicit government guarantees prevented bond defaults, which had made it difficult to analyze the true underlying credit risk.

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Emerging East Asian Bond Yields Fall as Region Withstands Global Uncertainty

MANILA, PHILIPPINES (22 March 2017) — Bond yields in emerging East Asian markets fell between 31 December and mid-February despite the risk of accelerated pace of interest rate hikes in the United States (US), the Asian Development Bank’s (ADB) latest Asia Bond Monitor said.

“Emerging East Asia’s improved growth outlook and strong fundamentals have buffeted the region from risks of possible capital outflows,” said Yasuyuki Sawada, ADB Chief Economist. “Policies to improve the transparency of financial markets and encourage long-term investment can help countries face future external shocks.”

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Exchange-Traded Protection

New exchange-traded funds (ETFs) are being created, and while that means we can expect innovation throughout the fund and indexing industries, “a proliferation of new funds could mean heightened risks for investors, particularly regarding ETFs, because many of those funds don’t trade frequently, making them more volatile.”[1]  ETFs are arguably responsible for a rapidly democratizing investment landscape.  Today, almost any firm can launch an index to be tracked by an ETF; one does not need to be an asset manager with billions under management.  Furthermore, market participants of any size can access strategies through an ETF that previously had been only available through hedge funds and investment banks.  However, with the increasing number of ETFs, it is imperative to better understand these funds and make informed decisions.

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ARE CONVERTIBLE BONDS MORE LIKE EQUITIES?

Convertible bonds have “bonds” in their name but in reality they are complicated corporate securities with risk characteristics that often have little to do with straight bonds. Are they more like stocks or bonds? And how can investors evaluate and model them?

In today’s convertible bond market, the key driver of returns relates to the value of the underlying equity. In contrast, bond market exposure (in the form of yield curve and spread risk) has played a relatively minor role in driving convertible bond risk and return in the recent past and seems likely to play a minor role in the year ahead, based on our model.

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Monetary Cycles and the Fixed Income Market – What Can the Past Tell Us About the Current Cycle?

Rising rates are generally seen as bad news by fixed income market participants.  As rates go up, prices of fixed income assets are expected to go down.  However, returns (or losses) can vary depending on characteristics of the cycle, as well as the amount of income or carry available to cushion the decline in price.

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High Yield Bonds in a Rising Rate Environment

Since the “taper tantrum” back in 2013, the prospect of the Fed easing monetary policy has been one of the top concerns for global market participants.  The Fed has increased rates twice since then: once in December 2015 and again in 2016.  With more rate hikes expected and U.S. inflation firming up, long-term interest rates have risen from their low of July 2016 and the market is watchful for more potential increases.

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Asia Infrastructure Needs Exceed $1.7 Trillion Per Year, Double Previous Estimates

HONG KONG, CHINA (28 February 2017) — Infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year, if the region is to maintain growth momentum, according to a new flagship report by the Asian Development Bank (ADB). The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.

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Junk loans are suffering from their popularity

Investors are falling back in love with the U.S. leveraged-loan market.

In the first three weeks of 2017, investors plowed $2.5 billion into loans to speculative-grade companies, accounting for almost 2 percent of total assets managed by these funds, according to Bank of America Merrill Lynch data. Investors are looking to take advantage of the fact that these loans pay higher rates as benchmark yields rise, as opposed to bonds, which are generally pegged to fixed yields. Read more

Bank of America Says European Credit Is ‘Mispricing’ Inflation

Global reflation and fading central-bank stimulus herald a new dawn for the European corporate debt market that will buoy high-yield paper at the expense of high-grade, according to analysts at Bank of America Corp., citing an upcoming portfolio shift among investors.

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Rating agencies appear to have learned from past errors: ECB study

Global rating agencies appear to have learned from past errors and their current assessment may better reflect euro zone vulnerabilities before the continent’s debt crisis, a European Central Bank research paper concluded.

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America’s Biggest Creditors Dump Treasuries in Warning to Trump

In the age of Trump, America’s biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.

In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance’s most recent figures show. What’s striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it’s not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before. Read more

EU financial services chief warns U.S. against unpicking bank rules

Some U.S. financial institutions could be locked out of the European market if Donald Trump’s administration repeals global rules imposed in the wake of the financial crisis, a top EU official said on Friday.

Valdis Dombrovskis, vice president of the European Commission and the EU’s financial services chief, said international rules agreed during the 2007-09 crisis must be upheld to avoid undermining financial stability. Read more

The Walking Dead: Zombie Firms Stifle Economic Recovery Prospects

With the global economy stuck in a low growth trap, it is crucial to understand the factors behind the weak recovery in potential output growth, and particularly the barriers to productivity growth. New research shows that this dynamic can be partly understood in terms of the increasing survival of zombie firms – i.e. those firms that would typically exit in a competitive market but are being kept alive by creditors or policy weakness. Today, a key risk is that zombie firms may depress creative destruction, crowd-out growth opportunities for healthy firms and underpin a period of macroeconomic stagnation, just as they did in Japan in the 1990s (Caballero et al., 2008).

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Happy Valentine’s Day: Cocoa Hits Lowest Since 2008

If you buy a little extra chocolate this year for your Valentine, your wallet will be as happy as your sweetheart.  The S&P GSCI Cocoa is at its lowest level (closing Feb. 10, 2017) since Nov. 13, 2008.  It is down 31.3% since last year and is the single commodity with the biggest loss in the past 12 months.  

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Index Basics: Calculating an Index’s Total Return

Total return indices deserve more attention.  They more closely represent what an investor participant actually takes home: the return of an index, plus dividends paid and reinvested in the index.  Their better-known counterparts, which only track price changes in securities—often called “price return indices”1—get all the fanfare (see “Dow Hits 20,000 for the First Time”).  Total return indices, on the other hand, are often quietly downloaded and placed in a chart halfway through a financial advisor’s presentation.

OECD Survey of Corporate Governance Frameworks in Asia

The OECD has just published its OECD Survey of Corporate Governance Frameworks in Asia. Covering 14 different economies in Asia, the Survey covers various aspects of corporate governance from ownership structures, regulatory issues, board matters, shareholder rights, and the like that are prominent in relation to corporate governance of companies in those countries. The key is that in most of these jurisdictions, there is concentration of ownership (at varying levels) and hence corporate governance issues may be different from that faced in an Anglo-American context. Although the Survey is a top-level one containing an examination of key parameters in corporate governance, it is nevertheless useful for academics or practitioners looking at Asia from a broader comparative perspective.