ADB : Emerging East Asia’s Bond Markets Face Rising Risks

KUALA LUMPUR, MALAYSIA – Emerging East Asia’s bond markets were volatile due to rising global concerns over the unresolved Greek debt crisis and the possibility of an interest rate hike in the United States, the Asian Development Bank’s (ADB) latest Asia Bond Monitor said.

“Low liquidity in the region’s bond markets could worsen the impact of an outflow of funds leading to more volatile price swings,” said ADB Chief Economist Shang-Jin Wei. “Undertaking policies to improve efficiency and transparency of financial markets, coupled with some appropriate prudential regulation, can help countries strengthen resilience against external shocks.”

 

Read more and watch video

Getting a better handle on currency risk

Recent swings in global currencies have brought exchange-rate risk back to the forefront for companies working with suppliers, production, or customers in different currencies. Although official, or “nominal,” exchange rates tend to draw the most attention, what really matters to companies are changes in real terms—that is, when currency changes are adjusted for differences in inflation. In an ideal world, if prices were to fall as currency values rose, or vice versa, then the purchasing power of companies’ cash flows would be stable, and there would be no real currency risk. That often works itself out over the long term, but not for all currencies and not necessarily in the short term. 

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IASB Webcast Series : Proposed Conceptual Framework : measurement

The IASB staff are creating a series of recorded web presentations to help those with an interest in the Conceptual Framework get a better understanding of the proposed changes that are currently being consulted on.

Each presentation provides a detailed walk-through of the different parts of the Exposure Draft, providing further insight into the IASB’s thinking and the rationale behind the proposals. The Exposure Draft proposes a number of enhancements to the existing Conceptual Framework, for example:

  • refining the definitions of the basic building blocks of financial statements—assets, liabilities, equity, income and expenses;
  • a new chapter on measurement that describes appropriate measurement bases (historical cost and current value, including fair value), and the factors to consider when selecting a measurement basis; and
  • confirming that the statement of profit or loss is the primary source of information about a company’s performance, and adding guidance on when income and expenses could be reported outside the statement of profit or loss, in ‘Other Comprehensive Income (OCI)’.

A new presentation will be published every week and can be viewed on demand. Each presentation consists of slides and voice and runs approximately 10–25 minutes.

Chapter 6—measurement Thursday 20 August Watch here

Ind-Ra: Nearly Half of Top 500 Listed Borrowers Vulnerable to Weak Rupee

Ind-Ra: Nearly Half of Top 500 Listed Borrowers Vulnerable to Weak Rupee

Link to Ind-Ra’s report: Dollarisation of Top 500 Listed Corporate Borrowers

Ind-Ra-Mumbai-16 July 2015: The vulnerability of the top 500 listed corporate borrowers (ex-banking and financial services) to rupee depreciation remained high during FY14 despite a marginal improvement in sensitivity over previous years, says India Ratings and Research (Ind-Ra). 234 of the 500 largest, listed corporate borrowers have a negative sensitivity to rupee (INR) depreciation. If rupee depreciates by 1% (against the US dollar (USD)), it would shave off their absolute EBITDA by 0.19% (median). However, this is lower than the 0.28% (median) observed across 237 negatively sensitive corporates in FY13.

To read the complete press release, CLICK HERE

RBI : Basel III implementation assessments of India published by Basel Committee

The Basel Committee on Banking Supervision (BCBS) under the aegis of the Bank for International Settlements has published, on its website, assessment reports on the implementation of the Basel risk-based capital framework and the Liquidity Coverage Ratio (LCR) for India as part of the ongoing Regulatory Consistency Assessment Program (RCAP) for its member jurisdictions. BCBS has thus far published assessment on 13 jurisdictions (including India).

The assessment has rated the standards adopted by the Reserve Bank (RBI) with regard to risk-based capital requirements as ‘Compliant’ with the minimum Basel capital standards. Each of the 14 components of the Basel capital framework included in the assessment has been assessed as compliant.

The Liquidity Coverage Ratio (LCR) requirements have been assessed as ‘Largely Compliant’ with the minimum Basel liquidity standards. The two components of the LCR framework, viz. the LCR standard and the LCR disclosure requirements, are assessed as ‘largely compliant’ and ‘compliant’ with the Basel standard, respectively.

The Reserve Bank believes that the RCAP reports bring in transparency about the national adoption and implementation of Basel standards and promote an international level playing field.

Did you know CCRA Curriculum has content from BIS reproduced with permissions to keep you up to date on Basel norms.

S&P Webinar : Ringgit Depreciation: What’s The Possible Impact On Rated Malaysia Companies?, Monday Aug 24 2015 Hong Kong/China 3.30 p.m, India 1.00 p.m.

Please join us for a webcast and Q&A on August 24, 2015 on the credit implications of the ringgit depreciation for Malaysian companies.

Register now. This webcast is provided on a complimentary basis. You will receive the replay as long as you register, even if you end up missing it.

Key discussion points:

  • How prevalent is foreign currency funding for rated Malaysian companies
  • Why the ringgit depreciation, by itself, is unlikely to affect corporate ratings
  • Why rated Malaysian companies are better equipped to deal with currency fluctuations than their Indonesian counterparts

Speakers:

  • Xavier Jean, CFA, Director, Corporate Ratings, Asia-Pacific
  • Yee Farn Phua, Associate Director, Sovereign Ratings Asia-Pacific

 

You will need computer speakers or headphones to listen to the webcast. You may submit your questions for the speakers in real time via the web interface. Please test your system here at least 15min before the scheduled start time.

If you are not able to view a short flash video play with audio on both Internet Explorer and Firefox, you can still join the webcast via dial-in numbers provided in the confirmation email you will receive once you have registered online . Participants who listen by phone only will NOT be able to submit a question over the phone. Please email us your questions instead

 

IFRS9: A Major Change in Determining Risk

IFRS9 sets out a new model for the classification and measurement for banks’ ‘banking and trading books’ that represent significant revisions from past methods. An ‘expected loss’ impairment model and a transformed approach to hedge accounting sets out a new methodology.

“The new model is designed to increase clarity,” said Anthony Harbinson, Global President, ACCA (Association of Chartered Certified Accountants). “IFRS9 is more principles based rather than being driven by numerical and objective standards.”

IFRS9 will utilise the ‘expected loss’ model to replace the ‘incurred loss’ model of IAS39. The difference in principle between the two is that in IAS39 ‘incurred’ meant there needed to be objective evidence of loss before making a provision. IFRS9 will require all of those losses to be provided for, plus a provision at least for losses that are expected to arise in the next 12 months.

“Some of the failures in 2008 were caused by compliance standards that were too rules based rather than being driven by principles.”

Banks would have to make loan loss provisions in the ‘banking book’ (i.e. on loans and advances to customers). Assets in the ‘trading book’ should be assessed at fair value, which means their value should already reflect any impairment. The other concept, expected loss, is an attempt to value the position. It is really not the same as ‘value at risk’, for example.

The standard introduces a principle-based system for the classification and measurement of financial assets, which depends upon the entity’s business model for managing the financial asset and the financial asset’s contractual cash flow characteristics.

Harbinson emphasises, “Accounting standards are moving forward based on principles based criteria. For example, ‘fair value’ assessments should mean that impairment of the asset should be built into that value. The concept of ‘expected shortfall’ is a more conservative measure than the current ‘value at risk.’”

The main impact of the changes to hedge accounting in IFRS9 will affect corporates outside the financial sector. The changes are designed to better align hedge accounting with the hedging strategies of companies.

Firstly, the sort of risks and the type of hedging instruments that can be used have been widened. This makes it easier to hedge more commodity risks – such as jet fuel for airlines.

Secondly the bureaucracy around hedge accounting has been relaxed. Hedged and hedging items must still be designated and documented. However, testing for effectiveness has been distilled in a single, more general test rather than several specific numerical ones, that is, within the range of 80% – 125%.

According to Harbinson, “Hedging tests also need to be more general rather than quantitative. This forces risk managers to think more holistically about their activities. Many corporates have not used hedge accounting in the past because of its complexity. More may do so in the future if it is simpler.”

The aim is to make things clearer and simpler. However, this appears to be challenging. The IASB, has been frank with its assessment that the “biggest difference under the new standard will be in the accounting for impairment.” It states that entities are required “to estimate and account for expected credit losses for all relevant financial assets, starting from when they first lend money or invest in a financial instrument.” They must also use “all relevant information that is available to them.”

“The impairment of a hedge is where there is not perfect negative correlation or loans to counterparties who cannot possibly pay back,” says Harbinson.

The regulation also requests banks to assess credit risks at the very beginning of the lending process. All companies should assess the recoverability of their receivables and banks would not be an exception. Most banks are doing this, but now they are required to disclose the information in a more structured way. What analysts want is clarity and that is the aim with this standard.

Harbinson believes participants need to assume a holistic attitude towards risk and compliance activities. “In practice, a bank’s risk management activities such as a dealing room should not represent an adversarial compliance and business environment. Rather it should be constructively challenging with some healthy skepticism.”

– See more at: http://www.regulationasia.com/article/ifrs9-major-change-determining-risk#sthash.0njrc85r.dpuf

IASB Webcast Series : Proposed Conceptual Framework : a closer look at liabilities and executory contracts

The IASB staff are creating a series of recorded web presentations to help those with an interest in the Conceptual Framework get a better understanding of the proposed changes that are currently being consulted on.

Each presentation provides a detailed walk-through of the different parts of the Exposure Draft, providing further insight into the IASB’s thinking and the rationale behind the proposals. The Exposure Draft proposes a number of enhancements to the existing Conceptual Framework, for example:

  • refining the definitions of the basic building blocks of financial statements—assets, liabilities, equity, income and expenses;
  • a new chapter on measurement that describes appropriate measurement bases (historical cost and current value, including fair value), and the factors to consider when selecting a measurement basis; and
  • confirming that the statement of profit or loss is the primary source of information about a company’s performance, and adding guidance on when income and expenses could be reported outside the statement of profit or loss, in ‘Other Comprehensive Income (OCI)’.

A new presentation will be published every week and can be viewed on demand. Each presentation consists of slides and voice and runs approximately 10–25 minutes.

Below is an overview of the topics that are covered and the dates the presentations will become available.

Chapter 4—a closer look at liabilities and executory contracts Thursday 13 August Watch here

What do Berkshire Hathaway, MasterCard and Toyota Have in Common?

While the Federal Reserve’s Comprehensive Capital Analysis and Review is a key component of regulatory risk assessment, market-based risk assessments like credit spreads and modern reduced form default probabilities are more accurate and more responsive to the changes in the financial services environment.  In our March 3 ranking of major financial services firms by their funding costs, we found that 25 institutions had lower funding costs than the best of the four “too big to fail” financial institutions in the United States.

We update that analysis in this post, using all fixed rate senior non-call bond trades for financial services firms on July 20, 2015.

Click Here To Read More.

 

Factors the same in credit and equities

Robeco will launch the world’s first multi-factor credit fund, after academic research by its quantitative research team reveals that size, low-risk, value and momentum factors have economically meaningful and statistically significant risk-adjusted returns in the corporate bond market. David Blitz, co-head of quantitative strategies at Robeco in Rotterdam, tells Amanda White why an active approach makes sense in credit.

Read more

 

China update: central bank’s new green bond market regulations drafted; big banks queuing to issue

China update: central bank’s new green bond market regulations drafted; big banks queuing to issue

Today I’m in Beijing. I’ve just had a meeting with a humungous bank – everything is just so over-sized in this country, with this bank having over 300,000 staff and assets of more than US$1 trillion.

Evene the central bank has 400,000 staff for goodness sake! And my friends at the Beijing City Finance Bureau – still housed in a basic 1970s building a bit like the high school I went to – are now handling a trillion dollar infrastructure investment plan for 120 million people (in the newly merged economic zone of Beijing, Tianjin and Hebei).

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S&P Webinar : Sales Recovery And Onshore Funding Aids China Property Sector, Aug 14, 10am HKT

Live Webcast And Q&A

register-now

Date & Time:

Friday
August 14, 2015

China / Hong Kong/
Singapore
10.30 a.m.

Thailand/Indonesia
9.30 a.m.

 

 

Please join us for a webcast and Q&A on Friday August 14, 2015 on the credit outlook for the Chinese property sector.

Key discussion points:

  • Sales growth expectations for the China property sector
  • Trends in financing conditions and refinancing risks
  • The impact of rising onshore bonds issuance
  • Potential influence on credit quality

Register for the webcast now.

Speakers:

  • Christopher Yip, Director, Corporate Ratings
  • Matthew Kong, Director, Corporate Ratings

You will need computer speakers or headphones to listen to the webcast. You may submit your questions for the speakers in real time via the web interface. Please test your system here at least 15min before the scheduled start time.

If you are not able to view a short flash video play with audio on both Internet Explorer and Firefox, you can still join the webcast via dial-in numbers provided in the confirmation email you will receive once you have registered online. Participants who listen by phone only will NOT be able to submit a question.

 

 

Webinar : The Fundamentals of Basel III Bank Capital Regulations, Aug 13, 10am EDT

The Fundamentals of Basel III Bank Capital Regulations

Extensions and revisions of bank capital requirements under Basel III have given rise to increased interest in capital calculations and the methods employed. For example, the requirement to use stressed exposures for Counterparty Credit Risk (CCR) capital requirements, the inclusion of the Credit Valuation Adjustment (CVA) capital charge, and the conservative treatment of certain hedging benefits have made many OTC trading businesses more capital intensive.

As a result, a grasp of how the marginal risk of a potential trade impacts the overall capital requirements is critical to making informed trading decisions, and also provides guidance on how to reflect the associated capital utilization in the pricing of trades. But the capital regulations can be difficult to navigate and must be well understood before tackling complex computations such as trade-level Capital Valuation Adjustment (KVA).

Date:
August 13, 2015
Time:
10:00am EDT
Speaker:
Andrew McClelland, Phd
Moderator:
Jim Jockle
Don’t Miss Out:
Register Now to Reserve Your Spot!

Register Now

JOIN NUMERIX on Thursday, August 13th at 10am EDT as featured speaker Dr. Andrew McClelland, Director of Quantitative Research at Numerix, provides an overview of Basel III bank capital regulations, clarifying and demystifying less intuitive aspects of the regulations and laying the foundations for a forthcoming webinar on KVA.

Dr. McClelland will cover:

  • Brief recap of risk-weighted assets and capital ratios
  • Splitting capital requirements into primary sources: market risk, counterparty credit risk and CVA risk
  • Comparing the standardized and advanced approaches
  • Digging deeper into the advanced approaches: historical Value at Risk (HS-VaR), stressed effective expected positive exposure (EEPE) and CVA-VaR
  • Expected exposure profiles as building blocks for advanced CCR and CVA capital
  • Looming revisions to the calculations: Standardized Approach for CCR (SA-CCR), Fundamental Review of the Trading Book for Market Risk (FRTB-MR) and FRTB-CVA

 

Andrew McClelland, PhD, Director of Quantitative Research, Numerix

Andrew McClelland, PhD, Director of Quantitative Research, Numerix
Andrew McClelland’s quantitative research at Numerix focuses on XVA pricing and hedging, generating counterparty credit risk metrics for structured products, and estimating risk model parameters via time-series estimation. He earned his PhD in finance at the Queensland University of Technology for a thesis on financial econometrics…. Read more

Jim Jockle, CMO, Numerix

Moderator: Jim Jockle, Chief Marketing Officer, Numerix
Mr. Jockle leads the company’s global marketing efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to customers in the largest global financial markets… Read more

Register Now

IASB Webcast Series : Proposed Conceptual Framework : The elements of financial statements: definitions and recognition

The IASB staff are creating a series of recorded web presentations to help those with an interest in the Conceptual Framework get a better understanding of the proposed changes that are currently being consulted on.

Each presentation provides a detailed walk-through of the different parts of the Exposure Draft, providing further insight into the IASB’s thinking and the rationale behind the proposals. The Exposure Draft proposes a number of enhancements to the existing Conceptual Framework, for example:

  • refining the definitions of the basic building blocks of financial statements—assets, liabilities, equity, income and expenses;
  • a new chapter on measurement that describes appropriate measurement bases (historical cost and current value, including fair value), and the factors to consider when selecting a measurement basis; and
  • confirming that the statement of profit or loss is the primary source of information about a company’s performance, and adding guidance on when income and expenses could be reported outside the statement of profit or loss, in ‘Other Comprehensive Income (OCI)’.

A new presentation will be published every week and can be viewed on demand. Each presentation consists of slides and voice and runs approximately 10–25 minutes.

Below is an overview of the topics that are covered and the dates the presentations will become available. View here or click on link below

Chapter 4 and 5—the elements of financial statements: definitions and recognition Thursday 6 August Watch here

 

 

S&P Webinar : Sector Strategies for Riding the Market’s Ups and Downs, 13th August, 2pm ET

As investors confront concerns generated by Greece default and a shrinking China, as well as the possibility of a U.S. recession despite earnings season revving up, many wonder how and whether they should reposition their portfolios. While some may cash out and wait on the sidelines, historical data shows how sector-based strategies do at times outperform their parent benchmarks in bear market cycles, or over longer-term horizons.

Register now

Session topics will include:

    • Learning how to use various sector strategies in your capital preservation toolbox
    • Drilling into sector strategies based not only on the S&P 500®, but also the S&P SmallCap 600®, S&P Global 1200, and S&P 500 Equal Weight Indices
    • Discovering through real-life examples how put and call options can act as complements to long-only sector plays

Speakers:
Luke King, Vice President of Trading, Main Management
Randy Swan, Portfolio Manager, Swan Global Investments
Sam Stovall, U.S. Equity Strategist, S&P Capital IQ

Speaker Bios

Webinar – Changing Notions of Risk Management in Current Markets, August 10th 2015 at 6:00 PM IST / 8:30 PM SGT

    Webinar – Changing Notions of Risk Management in Current Markets

In this webinar which will be held on August 10th 2015 at 6:00 PM IST / 8:30 PM SGT, co-Founder & Director of QuantInsti Mr. Rajib Borah will be discussing the following:

Segment 1: Case Studies of Algorithmic Trading Risk Management Failures

  • How did Knight Capital lose $460 million in 45 minutes?
  • Why did Deutsche Bank close their Algorithmic Trading desk in Tokyo ?
  • What went wrong at Infinium Capital while trading Crude ETFs and why were they fined $850,000 ?
  • What mistake caused HanMag Securities of Korea to lose 57 billion Korean Won in a few minutes ?
  • And many more …

Segment 2: Special Risk Management Checks for Algorithmic Trading Operations:

  • Access
  • Consistency
  • Quality
  • Algorithmic
  • Technological
  • Scalability

Segment 3: Risk and Regulations

Regulations related to risk management for trading algorithmically

and a many more … click below to register for this webinar

Register Now!

 

Invitation: National Australia Bank and Climate Bonds Initiative co-hosted webinar on the Climate Bonds Standard V2.0 and opportunities for scaling-up low carbon investment in Australia – 12 Aug; 1130am IST

Join us for a presentation on the updated version of the Climate Bond Standard V2.0 (now out for public consultation) and the latest developments in low carbon criteria including a discussion with NAB on their experience issuing and arranging climate bonds.

The market for climate and green bonds in Australia is growing rapidly.  New issuers and investors are combining to drive massive investments into low carbon businesses and infrastructure. More than ever, the market needs robust standards and a trusted approach to certification of these labelled debt securities to ensure that issuers know what to do, and investors can have confidence in what they are funding.

We will be co-hosting the webinar with NAB on Wednesday 12 August at:

4pm Sydney / 2pm Shanghai / 11:30am Delhi / 10am Dubai / 7am London

To participate please register here

A recording will be available for those unable to attend.

Speakers:

  • David Jenkins, NAB
  • Justine Leigh-Bell, Climate Bonds Initiative
  • Rob Fowler, Climate Bonds Initiative

Objectives:

  • Learn about NAB’s experience issuing and arranging climate bonds
  • Update from the Climate Bonds Initiative on the Climate Bond Standards & Certification Scheme
  • Hear about developments in low carbon criteria such as Low Carbon Buildings, Low Carbon Transport, Water etc.

Discover the opportunities for Municipalities, Multi-Asset Pools, Securitisation and more!

Here’s a Bond Backed by Dirty Laundry – Another esoteric deal to hit the market

Coming soon to markets: a bond deal backed by … dirty laundry?

The $400 million of asset-backed securities (ABS) from Alliance Laundry Systems is thelatest example of wacky assets being bundled into bonds that are then put up for sale to yield-hungry investors. According to a ratings report from Standard & Poor’s, the bond’s payments ultimately depend on people’s dirty laundry, or at least on their washing it. The deal is backed by a pool of equipment loans used to finance the purchase of washing machines.

Read more

India Ratings : Decoding India – A Macro-economic Perspective’, Bengaluru, Friday, August 7th, 2015 , 6:30 pm

We take great pleasure in inviting you to India Ratings Friday in Bengaluru, on Friday, August 7th, 2015 from 6:30 pm onwards, followed by cocktails and dinner

The theme of the event is ‘Decoding India – A Macro-economic Perspective’

“India’s economic growth is set to accelerate as capital investments gather pace and the government tackles bottlenecks that have stalled industrial projects”, says Reserve Bank of India Governor. The recent rebound in industrial production, better-than-expected monsoons, pick-up in corporate hiring activity and push to government spending for infrastructure – all seem to indicate that economic and industrial revival has begun, despite global headwinds. However, some issues still remain that pose a challenge to economic growth.

Join Dr. Sunil Kumar Sinha, Principal Economist and Director – Public Finance, India Ratings and Research, as we discuss the outlook for the Indian economy going ahead.

The presentation will be followed by an interactive Q & A session and cocktails with dinner.

Venue:
The Park, Bangalore
14/7, MG Road, Bangalore- 560042.

We are confident that you will find this interaction useful and look forward to your participation!. However, registration for the event is compulsory

Register soon, limited seats available.

RSVP: investor.services@indiaratings.co.in

Wave of Defaults, Bankruptcies Spook Bond Investors

First things first: Investor desperation for yield, any discernible yield no matter what the risks, and blind confidence that all this will work out somehow are waning.

Now questions pop up here and there, and investors are beginning to open their eyes just a tad amid waves of defaults and bankruptcies, after years of worriless fixed-income bliss during which cheap new money made investors forgive and forget all sins of the past. But now investors are pulling big chunks of money out.

 

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