|Moody’s Teleconference : Australian 2016 Credit Outlook – Impact of External Risks and Domestic Rebalancing on Australian Credit
Wednesday, 17 February 2016, 11:00 Hong Kong / 12:00 Tokyo / 14:00 Sydney
· Australia’s economic and sovereign outlook within a global context
· Recent market volatility and credit implications
· China, commodities, currency and confidence
· Real estate, interest rates and regulation
Patrick Winsbury, Associate Managing Director, Corporate Finance and Financial Institutions Groups
Arnon Musiker, Vice President – Senior Credit Officer, Infrastructure Finance 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.
Registration Is Required
Replay information will be provided to registrants after the teleconference.
Submit Questions in Advance
Participants are encouraged to submit questions in advance of the teleconference by clickinghere.
The Financial Stability Board (FSB) today published two reports and a statement from the Enhanced Disclosure Task Force (EDTF). The 2015 Progress Report on Implementation of the EDTF Principles and Recommendations is the EDTF’s fourth report and third progress report on implementation of the EDTF recommendations; it covers 40 global or domestic systemically important banks. The FSB also published an EDTF report on the Impact of Expected Credit Loss Approaches on Bank Risk Disclosures which highlights issues with the implementation of new accounting standards on expected credit loss (ECL). Furthermore, the EDTF provided a statement on the treatment of emergency liquidity provision under the EDTF disclosure recommendations.
Compliance risk has become one of the most significant ongoing concerns for financial-institution executives. Since 2009, regulatory fees have dramatically increased relative to banks’ earnings and credit losses (Exhibit 1). Additionally, the scope of regulatory focus continues to expand. Mortgage servicing was a learning opportunity for the US regulators that, following the crisis, resulted in increasingly tight scrutiny across many other areas (for example, mortgage fulfillment, deposits, and cards). New topics continue to emerge, such as conduct risk, next-generation Bank Secrecy Act and Anti-Money Laundering (BSA/AML) risk, risk culture, and third- and fourth-party (that is, subcontractors) risk, among others. Read full Article
Following months of uncertainty, the U.S. Federal Reserve has indicated that there could soon be a hike in the Federal Funds Target Rate. Interest rates have been kept in a range between zero and one-quarter of a percent since December 2008 and have not risen since June 2006.
As interest rates have been at historically low levels for nearly the last seven years, some fixed income investors have shifted their focus to senior loan securities with floating-rate characteristics, such as interest rate floors, to protect themselves in the event of falling rates. Interest rate floors protect the loan interest rate by increasing the loan interest rate to the spread plus the floor if the reference rate ever falls below the floor. Simply put, the formula for loan rates in these structures can be stated as follows.
Loan Interest Rate = Maximum of (Reference Rate or Floor) + Spread
Genpact partners with AIWMI to build talent for Credit Risk Analytics
Genpact, the architect of the Lean Digital enterprise, announced that it has strengthened its Risk Academy, a comprehensive learning and development program, by including Certified Credit Research Analyst (CCRA) certification offered by Association of International Wealth Management of India (AIWMI) as part of an extensive training curriculum.
Solvency II is a transformative regulation for the European insurance industry, as it harmonizes the regulatory regime across all 28 member states of the EU and forces insurers to better manage the risks they face while also better protecting policyholders and shareholders. Adopted in 2009 and coming into effect on January 1, 2016, it has been a long, tough journey for many European insurers as they have worked hard to comply with the new regulations.
However, insurers all around the globe will also be watching carefully as Solvency II takes effect, to see whether the regulations meet their intended objectives and to learn from both the successes and failures. But it is a complex regulatory framework – and to benefit from the lessons learned in Europe, practitioners first need to understand the core principles and important details of the directive.
On Wednesday, October 14th featured speaker Luca Trussoni Senior Financial Engineer at Numerix, presented an introduction to Solvency II to help insurance practitioners around the world better understand the “big picture” of the directive.
Mr. Trussoni Addressed:
- Why Solvency?
- Solvency I and Solvency II
- The Three Pillars of Solvency II
- Key Aspects of the Three Pillars
Luca Trussoni, FRM, Senior Financial Engineer, Numerix
Luca Trussoni is a senior member of the Financial Engineering team in Europe, and he works with clients to help solve their derivative pricing and risk management challenges. Before joining Numerix, Mr. Trussoni was a risk manager in bank and insurance groups in Italy (like Sanpaolo IMI, Fondiaria SAI and Banca Mediolanum), mainly working of quantitative aspect of risk management both in Basel and Solvency II contexts. He holds an MSc in Mathematics from University of Turin, an MA in Banking and Finance from CUOA Business School, and an FRM certification from GARP.
Moderator: Jim Jockle, Chief Marketing Officer
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 and to the Numerix partner network through the company’s branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Prior to joining Numerix, he served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, Mr. Jockle built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. He also oversaw the brand development of a new company dedicated to the enhancement of credit derivative and structured-credit ratings, products and services. Prior to Fitch, Mr. Jockle was a member of the communications team at Moody’s Investors Service.
The ambitions and provisions of the Paris Agreement are clear, as is its future impact on returns. Investors responding to growing and changing risks can contribute to stabilising both the climate and capital markets in the coming decades. And as Jane Ambachtsheer writes, the ball is now in the court of the world’s fiduciaries – strong governance is a prerequisite for the effective management of climate risk.
We re-assess the view that sovereigns with a history of default are charged only a small and/or short-lived premium on the interest rate warranted by observed fundamentals. Our reassessment uses a metric of such a “default premium” (DP) that is consistent with asymmetric information models and nests previous metrics, and applies it to a much broader dataset relative to earlier studies. We find a sizeable and persistent DP: in 1870-1938, it averaged 250 bps upon market re-entry, tapering to around 150 bps five years out; in 1970- 2011 the respective estimates are about 400 and 200 bps. We also find that: (i) these estimates are robust to many controls including on actual haircuts; (ii) the DP accounts for as much as 60% of the sovereign spread within five years of market re-entry; (iii) the DP rises with market exclusion spells. These findings help reconnect theory and evidence on why sovereign defaults are infrequent and earlier debt settlements are desirable.
Several Fed policy-makers are focusing their comments and analyses on the neutral rate of interest – a level of the real (inflation-adjusted) Fed funds rate that will neither slow down nor speed up the economy. If the Fed funds were set at this level, inflation and unemployment would be stable. The neutral rate changes depending on economic conditions and is ultimately unknown. Despite the measurement problems, it is useful in setting and evaluating monetary policy.
Invitation: Seminar ‘Prospects for Green Bond market 2016’ + ‘How Green Infra Investment (GII) Coalition can help capital flow’. Wed 3 Feb, 14:00-18:00. At London Stock Exchange
Invitation: Seminar on ‘Prospects for #GreenBond market’ and the ‘Green Infra Investment Coalition’. Wed 3 Feb, 14:00-18:00. At @LSEG
The first session will be on ‘Next steps for the green bonds market’.
Then we will explore how the Green Infrastructure Investment (GII) Coalition, announced at COP, can help capital flows to climate solutions.
Wednesday 3 February 2016
London Stock Exchange, 10 Paternoster Square, London EC4M 7LS
14.00 – 18.00hrs
It will be a roundtable/workshop format, but we do have speakers confirmed:
– Nick Robins, UNEP Inquiry into the Design of a Sustainable Financial Market
– Meryam Omi, head of sustainability, Legal & General Investment Managers
– Shaun Tarbuck, CEO, International Cooperative Mutual Insurers Federation
– Nathan Fabian, policy director, UN Principles for Responsible Investment
– Martin Schoeberg, Institutional Investor Group on Climate Change
– Ulrik Ross, head of green bonds, HSBC
– Nigel Labram, CEO, Low Carbon
– Sean Kidney, CEO Climate Bonds Initiative
Plus a bevy of banker and investors.
The $100 trillion global debt markets are a dominant source of capital and are a core component of the capital investment pipeline. Bonds account for a significant share of institutional investors’ portfolios. The proportion that is labelled green is a small, but growing rapidly.
With low carbon and climate resilient infrastructure investment an increasing global priority, the market potential for green bonds is enormous – but where and how?
Federal Reserve Bank of New York President William Dudley supports the creation of a searchable database that would inform hiring managers of bankers’ misconduct. The proposal has received industry support amid issues related to the foreign exchange market and interest-rate benchmarks. Bloomberg (12/22)
In late December, the Azerbaijani currency, the manat, lost a third of its value in a single day. This was after the central bank decided to float the manat, which had previously been fixed to the dollar. The move has angered the population and made ripple waves across the Caucasus region. Soon after, the prime minister in neighboring Georgia resigned, currency fluctuations being cited as one of the reasons for his abrupt departure. This may be just the beginning of a painful restructuring period in the region’s public finances.
Rising financial stress in the U.S. energy sector has prompted some suppliers and vendors to take unusual legal action to collect unpaid debts: forcing struggling companies with billions of dollars in debt into bankruptcy.
Since August, creditors have filed petitions for involuntary bankruptcy against three energy producers with nearly $2 billion in combined debt: Miller Energy Resources Inc, Black Elk Energy Offshore Operations and Energy & Exploration Partners Inc.
The Overnight Money Market by Ben Chabot and Stefania D’Amico
This video presentation provides a simple overview of the recent evolution of the U.S. overnight money market and how the Federal Reserve’s tools to implement monetary policy have evolved with the market. The visualization and narration of the money market’s main financial instruments, participants and respective interactions are meant to simplify complex concepts and relation networks that constitute the foundation of short-term borrowing and lending in U.S. financial markets. For more details, please see the video transcript and references therein. Read more
In an entertaining and informative session at the Fiduciary Investors Symposium at Chicago Booth School of Business, the John P. Birkelund ’52 Professor in History and International Affairs at Princeton University, Stephen Kotkin, said geopolitical risk is largely priced in to markets.
“Geopolitical risk is about incompetence of decision makers, which is mostly an unknown and unpriceable. This remans the key variable,” he says.
Raising of funds by issuance of Compulsorily Convertible Debentures (“CCD”), also known as convertible notes in common parlance, is one of the ways that start-ups can raise money during the early stages of investments and bridge round investments. Primarily because of the flexibility that such an instrument offers with respect to conversion into shares, at a later point of time, without having to fix a valuation of the investee company straight away.
Credit rating agencies have been criticized for their role in the 2007 sub-prime crisis, which led to the global financial crisis, but it wasn’t until a recent lawsuit exposed their internal emails that it became clear to what extent they were responsible.
While the global financial crisis can’t be blamed on any one in particular, there was widespread criticism for the role that credit rating agencies played in the credit bubble preceding it. After all, these agencies had assigned AAA ratings to collaterised debt obligations (CDOs) that collapsed a month later. Yet they were able to get away for years after the crisis, with the argument that credit ratings were just opinions…and opinions can turn out to be wrong. Read more