Monthly Archives: November 2015

When Fear of Bonds Exceeds Fear of Stocks

Worried about your bonds? You’re not alone.

In speaking with our investors in recent weeks, the most universal theme by far was concern over their bond holdings. Historically low interest rates coupled with the prospect of the first Fed rate hike since 2006 (“rising rates”) were causing anxiety. And most importantly, the average bond fund was down in the first half of the year. There’s nothing more fear inducing to investors than short-term losses.

 – See more at:

Credit Conversations: Trends and Hot Topics in Property & Casualty and Reinsurance, Dec 3, 2015, 11am ET

Join S&P Capital IQ, SNL Financial and Standard & Poor’s Ratings Services on Thursday, December 3, at 11am ET for a lively conversation on current trends and hot topics in property & casualty insurance, as well as the reinsurance world.

A panel of thought-leaders and practitioners will discuss:

  • A year-over-year industry analysis
  • Recent rating actions & outlook
  • Credit trends with unrated insurers
December 3, 2015

11:00 am – 12:00 pm ET


Tim Zawacki : Senior Editor, Insurance , SNL Financial

Tim has covered the insurance industry in various capacities since joining SNL Financial in 1999. Currently, he authors the annual US P&C Market Report, containing an historical overview and projections of industry results for key lines of business. He also writes regular weekly columns and periodic research covering topics that include P&C and life industry financials, M&A activity and various strategic developments impacting the insurance sector.

Tim also is a frequent speaker and moderator at SNL Knowledge Center programs on various insurance industry topics.

Previously, Tim served as writer and editor for various SNL publications, including the SNL Insurance Daily and Insurance Investor.

He is a graduate of the University of Virginia.

Tracy Dolin-Benguigui, Director, Insurance Ratings , Standard & Poor’s Ratings Services
Tracy Dolin-Benguigui is a Director in the North American Practice of Standard & Poor’s Insurance Ratings. She has analytic responsibilities for a portfolio of the largest property casualty insurance and reinsurance companies in North America and Bermuda. She also is the analytical lead for publication of commentaries related to the U.S. personal and commercial lines sectors, including the semi-annual P/C insurance sector & economic outlook and topical research including TRIA and cyber. In addition, she chairs the Americas analytical oversight consistency council, North American standing research council, and co-chairs a focus team covering the global multiline insurance market. Tracy has spoken on property casualty insurance industry and ratings trends at numerous conferences and maintains a regular dialogue with investors, media, industry groups, intermediaries, and rated insurers.

Prior to joining Standard & Poor’s in 2005, Tracy was an insurance broker at AON Risk Services. Her responsibilities included client relationship management and insurance placements for middle market, healthcare and Japan based clients.

Tracy holds a B.A. from Brandeis University with a double major in Economics and Health, Law and Society interdisciplinary program. Tracy acquired a New York Property & Casualty Insurance Brokerage License during her tenure at AON.

Jim Elder, Director, Market Development, Corporate and Financial institutions, S&P Capital IQ

James Elder is a Director in the Corporate and Financial Institutions Segment at S&P Capital IQ. His current responsibilities involve development of strategic solutions for the market. Jim focuses on the financial community through the publication of research related to credit professionals, the development of analytic methodologies and the application of innovative solutions to market problems. He has presented on topics ranging from municipal finance and corporate credit analysis to valuation methodologies at numerous industry conferences and webinars.

Jim’s twelve years of industry experience include positions in asset management, financial guaranty and structured finance. Prior to joining Standard & Poor’s in 2007, he has worked at J.P. Morgan and XL Capital Assurance.

Jim holds an M.B.A in finance from New York University’s Stern School of Management. Jim graduated with bachelor degrees in Computer Science and Management from Rensselaer Polytechnic Institute.


The Statement of Cash Flows: issues for Financial Institutions

EFRAG Short Discussion Series – The Statement of Cash Flows: issues for Financial Institutions

EFRAG has published a paper in the Short Discussion Series. This paper discusses the relevance of the Statement of Cash Flows for financial institutions and investigates alternatives that could either supplement or replace the information currently portrayed by these entities in the Statement of Cash Flows.
The EFRAG Short Discussion Series addresses topical and problematic issues with the aim of helping the IASB to address ways to improve financial reporting after having stimulated debate among European constituents and beyond.

The paper discusses how the nature of the business activities of financial institutions may affect the relevance of the statement of cash flows as required by IAS 7 Statement of Cash Flows and discusses two alternatives for these entities:

a)    To replace the statement of cash flows with other disclosures; or

b)    To modify some of the requirements in IAS 7.

Views of constituents are welcomed and requested by 31 March 2016. EFRAG notes that this period is longer than the period normally provided in other Discussion Papers. However, EFRAG is aware that there are a number of issues that will require the attention of European constituents in the coming months, especially the Exposure Draft Conceptual Framework for Financial Reporting, the IFRS Foundation Review, the IASB Agenda Consultation, the forthcoming standard on leases and the finalisation of the Insurance project. During the comment period, EFRAG also wants to gather information from users and preparers in order to build with them proposals after evaluating the alternatives presented in the Discussion Paper.

Document : EFRAG_SDS_The_Statement_of_Cash_Flows_Issues_for_Financial_Institutions.pdf

Two Minutes Concept Series – NPA and Restructured Assets

The asset quality of banks is an important indicator of their financial health; it also reflects the efficacy of their credit risk management and recovery environment. Asset quality is measured as NPAs (Non-Performing Assets).   click here to see video

ESG Risks In Corporate Credit Ratings–An Overview

Among the many categories of risk we examine within our ratings framework are environmental, social, and governance (ESG) risks. Since all rated entities operate in the natural and social worlds, we regard these risks as ubiquitous across the ratings spectrum. Our management and governance credit factors include our assessment of managements’ and directors’ oversight of environmental and social factors at the companies they lead. This includes the impact of–and their contribution to–matters like climate change, pollution, and resource depletion; their effectiveness in terms of maintaining employee and community relations; and their adherence to legal and regulatory requirements. In our ratings methodology, we allow for positive, neutral, and negative evaluations of management’s capabilities in those areas. In our corporate ratings framework, we differentiate between the incidence of environmental and social impacts associated with all entrepreneurial activities, and their management and oversight–the “G” in ESG.

Read more


Webinar : Factor Investing: It Works for Credits Too , 26 Nov 11am CET

Factor Investing: It Works for Credits Too

Thursday 26th November, 11am CET

Presented by:

– Patrick Houweling, PhD, Executive Director, Portfolio Manager Factor Credits & Senior Quantitative Researcher

– Jeroen van Zundert, Researcher

– Maaike Veen

Register now >>
Factor Investing: It Works for Credits Too

There is extensive academic research that confirms the existence of factor premiums. Much of the conversation to date has been about factor investing in equity markets. Many of the explanations that apply to equities are also relevant to corporate bonds.

We invite you to join our webcast with Patrick Houweling and Jeroen van Zundert from Robeco who will share their research findings and insights into this approach to investing in credits.

Constructing your portfolio in a disciplined way to gain exposure to Low Risk, Value, Momentum and Size factors can help to achieve better risk-adjusted returns for your portfolio, with volatility similar to the index.

Based on this research Robeco launched a Global Multi Factor Credit Capability which is live since June 2015.

Register now >>

Patrick Houweling, PhD, Executive Director, Portfolio Manager Factor Credits & Senior Quantitative Researcher
Mr. Houweling is Senior Portfolio Manager and Senior Quantitative Researcher. His areas of expertise are credits, credit derivatives and risk management. Prior to joining Robeco, Mr. Houweling was employed at the Risk Management and Modeling department of Rabobank International. Mr. Houweling has published several articles in the academic finance literature, including the Journal of Banking and Finance and the Journal of Empirical Finance. Mr. Houweling holds a Ph.D. in Finance as well as a Master’s degree in Financial Econometrics from Erasmus University Rotterdam.

Jeroen van Zundert, Researcher
Mr. van Zundert is Researcher at Robeco’s Quantitative Research department. His areas of expertise include credit selection research, stock selection and portfolio construction. After an internship, he joined Robeco in 2012. He holds a Master’s degree in Quantitative Finance & Actuarial Science (cum laude) and a Master’s degree in Operation Research & Management Science (cum laude) from Tilburg University.

Register now for the webcast >>


Webinar : How Does Indexing Make for Creative Asset Allocation?, 19th Nov 2pm EST

The breadth and depth of index-based tools offers creative ways for advisors to construct asset allocations. Today, the wide availability of index products lets advisors focus more directly on deriving alpha from the asset allocation mix.

Join S&P DJI and three innovative practitioners as we discuss their first-hand accounts of:

•   How index-based portfolio management affords the opportunity to focus on high-value client services, such as individualized planning and matching risk tolerance and time horizon with appropriate investment vehicles

•   Innovations in indices and products across the asset class spectrum that can help to simplify and optimize allocations

•   Unique risk-management techniques that help validate the value-add of the in-person, holistic advisor

Register now



Todd D. Green, CFA, Chief Investment Officer, Alesco Advisors

Jerry A. Miccolis, CFA, Chief Investment Officer, Giralda Advisors

Jared M. Rowley, CFA, Research Strategist, State Street Global Advisors

Speaker Bios


Webinar : Exposure Draft of the IFRS Practice Statement: Application of Materiality to Financial Statements, Nov 19, 10am GMT

This Thursday the IASB will give a live web presentation on the Exposure Draft of the IFRS Practice Statement Application of Materiality to Financial Statements.

IASB Executive Technical Director Hugh Shields and IASB staff will introduce the Exposure Draft, which was published on 28 October 2015, and answer questions from the public.

The Exposure Draft has been developed to assist management in applying the concept of materiality (as required by IFRS) in the preparation of financial statements. The Exposure Draft is open for comment until 26 February 2016.

The presentation will last approximately 45 minutes, including questions and answers.

Click on the icon below to register for the webinar.

Date/Time (GMT) Topic Register
Thursday 19 November 2015
10.00am GMT
Draft Practice Statement: Application of Materiality to Financial Statements

For more details, click here.

Crane Watch: The Big Map of Projects ? When does the Music Stop…

Tower cranes are perched all over the skyline, and I’m betting you’ve driven by a construction site recently and wondered, “What’s going there?” See the Crane Map at Nashville.

what’s going to happen when the music stops? Read more on Risks here at  “Crazy Canadian Credit Confronts Crude, Eh?”


IASB Investor perspective: ‘Taking a measured approach’

The question of how best to measure an asset or liability (cost versus current value) always provokes a heated debate. In this article Steve Cooper, a member of the IASB, explains the IASB’s proposals on measurement that are part of the Conceptual Framework project.

In particular, Cooper discusses the factors that the IASB should consider when selecting a measurement method.

Click here for the article


Interest Rate Risk: Lessons from 2 Decades of Low Interest Rates in Japan


In 2005, economist Richard Koo and The Economist warned that U.S. home prices were in for a collapse much like that seen in Japan after the bubble in real estate and stock prices peaked in December, 1989. “The U.S. is not Japan,” was a phrase used to dismiss any “foreign” data out of hand, much like the 1980s Japanese Minister of International Trade and Industry who stated that foreign ski makers could not compete in Japan because “Japanese snow is different.” In this note, we focus on a critical issue in many countries: what does the experience of other countries with very low interest rates tell us about what lies ahead for U.S. and European interest rates and interest rate risk analysis?

BIS : Corporate governance principles for banks

Effective corporate governance is critical to the proper functioning of the banking sector and the economy as a whole. While there is no single approach to good corporate governance, the Basel Committee’s revised principles provide a framework within which banks and supervisors should operate to achieve robust and transparent risk management and decision-making and, in doing so, promote public confidence and uphold the safety and soundness of the banking system.

The Committee’s revised set of principles supersedes guidance published by the Committee in 2010. The revised guidance emphasises the critical importance of effective corporate governance for the safe and sound functioning of banks. It stresses the importance of risk governance as part of a bank’s overall corporate governance framework and promotes the value of strong boards and board committees together with effective control functions. More specifically, the revised principles:

  • expand the guidance on the role of the board of directors in overseeing the implementation of effective risk management systems;
  • emphasise the importance of the board’s collective competence as well as the obligation of individual board members to dedicate sufficient time to their mandates and to keep abreast of developments in banking;
  • strengthen the guidance on risk governance, including the risk management roles played by business units, risk management teams, and internal audit and control functions (the three lines of defence), as well as underline the importance of a sound risk culture to drive risk management within a bank;
  • provide guidance for bank supervisors in evaluating the processes used by banks to select board members and senior management; and
  • recognise that compensation systems form a key component of the governance and incentive structure through which the board and senior management of a bank convey acceptable risk-taking behaviour and reinforce the bank’s operating and risk culture.

A consultative version of the Corporate governance principles for banks was published in October 2014. The Basel Committee wishes to thank all those who contributed time and effort to express their views during the consultation process.

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Active Versus Passive Through Municipal Bonds

Municipal bond mutual funds gathered USD 2.8 billion in the four-week period ending Oct. 28, 2015, according to the Investment Company Institute, while muni bond ETFs added USD 593 million of inflows in October, according to SSGA.  Despite this low number, at the recent S&P Dow Jones Indices Municipal and Global Bond Forum, various panelists highlighted the relative benefits of municipal bond ETFs.

Read more

Webinar : Multi-Period Credit Risk Analysis: A Macro-Scenario Approach. Nov 12, 9am ET

Multi-Period Credit Risk Analysis: A Macro-Scenario Approach

Host: Juan Licari
Date: November 12, 2015
Time: 9:00 a.m. ET / 2:00 p.m. GMT
Register now


Dynamic stress testing and multi-period credit portfolio analysis are increasingly becoming priorities for risk managers. However significant challenges emerge when it comes to building stochastic multi-period environments.

In this presentation, Dr. Juan Licari of Moody’s Analytics will present an innovative framework for stochastic scenario generation that allows risk managers and economists to build multi-period environments, integrating conditional credit and market risk modeling to meet dynamic stress testing needs.

Credit defaults most likely to occur in Asia, IACPM survey finds

View Of Credit Spreads Closer To Neutral

New York, NY – Respondents to the latest IACPM Credit Outlook Survey continue to forecast rising credit defaults over the next 12 months in every category of debt tracked by the survey and in every region of the world, just as they have every quarter since the second quarter in 2014 when respondents were neutral on their outlook for European corporate debt. The IACPM Aggregate Credit Default Outlook Index is negative -31.4, relatively unchanged from last quarter’s minus -34.6.

“The threat of rising defaults has been with us for some time” commented Som-lok Leung, the Executive Director of the IACPM. “Recently, we’ve seen a greater number of downgrades from the rating agencies and some transactions have been affected but, all things considered, not that many, nor has liquidity dried up in any meaningful way. The real question is what happens when interest rates rise. How extensive will be the impact?”

Indeed, even as survey respondents continue to be concerned about the prospect of rising defaults, their outlook for credit spreads over the next three months is decidedly mixed, with large numbers of respondents on both sides of the question: will spreads widen or tighten? The Aggregate Credit Spread Outlook Index is negative -7.0 which is considerably closer to neutral than last quarter’s reading of minus -45.2 which meant at that time significantly more respondents believed spreads would widen rather tighten.

“It’s possible we’re reaching an inflection point,” noted Mr. Leung. “Respondents aren’t so much worried about a downturn as much as they think economic expansion will slow down. Credits on the fringe, such as high yield energy companies, could be in for a rough patch, while other credits, such as investment grade debt, may not be as impacted.”

The credit outlook survey is conducted among members of the International Association of Credit Portfolio Managers, which is an association of credit portfolio managers at 103 financial institutions located in 17 countries in the U.S., Europe, Asia, Africa and Australia. Members include portfolio managers at many of the world’s largest commercial banks, investment banks and insurance companies, as well as a number of asset managers. Members are surveyed at the end of each quarter. The latest survey was conducted September 29 to October 12.

Survey results are calculated as diffusion indexes, which show positive and negative values ranging from 100 to minus -100, as well as no change which is in the middle of the scale and is recorded as “0.0.” Positive numbers signify an expectation for improved credit conditions, specifically fewer defaults and narrower spreads, while negative numbers indicate an expectation of deterioration with higher defaults and wider spreads.

Please click here to access a selection of aggregated survey data.


Webinar : The Impact of Oil Price: Risks & Opportunities, Thursday, 12 Nov 2015, 830am IST

S&P Capital IQ and Standard & Poor’s Ratings Services specialists will provide an overview of what they see happening in the energy sector in the Asia Pacific region, and how it may affect the industry going into 2016. Given what is going on in today’s markets, you won’t want to miss this important discussion!


Can’t make it? Register anyway and we’ll send you the recording

Lawrence Lu, from Standard & Poor’s Ratings Services, will provide an overview of the current state of the oil and gas industry in the Asia Pacific region, as well as a discussion on key issues as we look out to 2016. Topics to be discussed include:

  • Our pricing assumptions
  • Ratings actions for the past 12 months
  • Debt and Capex trends
  • Key risk factors looking out to the next year

Vickesh Mistry, from S&P Capital IQ will talk about:

  • Relative performance of energy sector stocks versus the price of oil
  • M&A and IPO deals and trends
  • Overview of current capital raising activities

Michelle Cheong, from S&P Capital IQ, will provide an update on:

  • Credit risk trends: how has the price of oil affected the credit quality of companies within the energy sector?
  • Historical M&A trends: credit characteristics of acquirers and target


Can auditors expand assurance to meet investors’ needs? Shouldn’t it be mandatory?

Can auditors expand assurance to meet investors’ needs?

A company’s audited financial statements are among the many pieces of information investors consider when they evaluate where to allocate resources.

But news releases, company presentations, additional information in annual reports, and non-GAAP key performance indicators and financial metrics are also sources of information available to investors.

Read the entire Article 

Webinar : Financial Crime Rings Have Grown to a Prevalent and Formidable Threat Nov 6, 12pm ET

Crime Rings Have Grown to a Prevalent and Formidable Threat

When: November 6, 2015 | 12:00 PM – 1:00 PM ET
The numerous crimes which currently threaten financial institutions have evolved in concert with the trend of collusive activities by today’s savvy and sophisticated financial criminals. Whether it’s fraud rings that inflict various types of losses (e.g. loan fraud, card fraud, online account takeover, check fraud, tax fraud, etc.); financial exploitation by drug cartels; “funnel accounts” used by human trafficking and smuggling organizations; or “money mules” who are instrumental in money launderers’ attempts to evade detection – the days of the lone financial criminal have become less common. The current financial crime landscape has become the domain of group criminal activity and organized efforts

Register now

Learning objectives:

  • Gain an understanding of the anatomy of an example, financial crime ring
  • Learn through several real-life cases how crime rings perpetrate numerous types of financial crimes
  • Best practices to extend a financial institution’s line of defense and strengthen its protective countermeasures against crime rings


Chris SweckerChris Swecker
Financial Crimes Consultant and Attorney; Assistant Director
FBI (retired)

Chris Swecker has more than 30 years of experience in law enforcement, national security, legal, and corporate security/risk management. Chris served 24 years with the Federal Bureau of Investigation (FBI) before retiring as one of the bureau’s top officials. As Assistant Director, Chris was responsible for eight FBI divisions encompassing more than half of the FBI’s total resources. He has appeared as a guest on numerous media programs including CNN, 60 Minutes, Good Morning America, C-SPAN’s Washington Journal, and The Oprah Winfrey Show. Chris is a frequent public speaker on financial crimes, money laundering and cyber-crimes.


Brendan BrothersBrendan Brothers

Brendan Brothers is a co-founder of Verafin, a leading provider of fraud detection and anti-money laundering software with more than 1200 financial institution customers across North America.

Brendan is a computer engineer with specialized knowledge and deep expertise in advanced analytics.

Webinar : Quantifying Risk Appetite in Limit Setting, 11am ET, Nov 3, 2015

Quantifying Risk Appetite in Limit Setting

Date: Tuesday, November 3, 2015
Time: 8:00 am (San Francisco) / 11:00 am (New York) / 4:00 pm (London)

Moderator: Andy Condurache, Director of Research and Publications

Presenter: Dr. Amnon Levy, Managing Director of Portfolio and Balance Sheet Research is responsible for research and model development for Moody’s Analytics portfolio and balance sheet models. Dr. Levy has led several research initiatives, including modeling credit portfolio risk, integrated models for balance sheet management and liquidity risk.

Risk appetite is a concept that many firms have trouble quantifying and incorporating into their management activity. In addition to prudent business practices, there are very specific capital requirements around having a clear statement of risk appetite and incorporating it into business decision making.

Webinar Highlights:

  • Overview of a number of approaches for setting risk- and macro scenario-based limits to quantify a risk appetite statement
  • How risk-based limits with risk-based metrics align with an organization’s risk appetite
  • Business applications and best practices for setting limits

Register Today