Markets may be worrying about the wrong things | Private equity lending tops previous record | Russia prepares first sale of yuan-denominated bonds
December 5, 2017
IACPM SmartBrief
Credit Markets
Markets may be worrying about the wrong things
Rising markets must always ascend a "wall of worry" when attempting to overcome risks large and small. However, writes Dan Kern, some of the risks that grab the most attention may obscure others that could be more consequential, such as an absence of discipline now evident in credit markets.
U.S. News & World Report (12/4) 
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Private equity lending tops previous record
The year isn't over, but November's US private equity lending at $588 billion easily exceeded the previous annual record set in 2013. Additionally, another $117.1 billion in loans is in process despite regulators' efforts to tamp down the market.
Reuters (12/1) 
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Russia prepares first sale of yuan-denominated bonds
The Russian government is signing up banks to help it conduct its first offering of bonds denominated in yuan, as it prepares for the possibility that US sanctions will cut off its access to other parts of the global debt market. The first offering is expected to be for $907 million worth of five-year yuan bonds, people familiar with the matter said.
Bloomberg (free registration) (11/30) 
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Pace of eurozone corporate lending picks up
Corporate lending growth in the eurozone saw its fastest post-crisis growth pace in October, up 2.9% from the previous month, the European Central Bank reported. However, lending remains well below pre-crisis levels as banks continue to beef up their balance sheets.
RTE (Ireland) (11/28) 
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Bank-Sourced Credit Indices
Credit Benchmark's latest research whitepaper presents a new and unique way of tracking real-world credit risk, using bank-sourced data to construct indices based on forward-looking credit risk estimates. Learn more
Regulatory and Accounting Issues
Global bank capital rules deal expected this week
The final elements of the Basel III package of bank capital reforms are expected to be agreed and announced when the Basel Committee on Banking Supervision meets later this week, says European Commission official John Berrigan. The deal, delayed by protracted disagreements between the US and Europe on capital floors, will be subject to further amendments post-introduction.
Reuters (11/30) 
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Fed's Quarles previews transparency in stress tests
Greater transparency is the goal of planned changes in bank stress tests, said Federal Reserve Vice Chairman for Supervision Randal Quarles. Quarles dismissed concerns that banks with insights into how the tests are conducted would try to game the system.
The Wall Street Journal (tiered subscription model) (12/1) 
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ECB's Nouy: Sales of nonperforming loans will drive up required capital
ECB's Nouy: Sales of nonperforming loans will drive up required capital
Nouy (Daniel Roland/AFP/Getty Images)
When European banks sell nonperforming loans, their losses must be reflected in higher capital requirements, said Daniele Nouy, head of the European Central Bank's supervisory arm. Financial institutions asked the ECB to waive capital-requirement changes due to loan sales, but Nouy said that under EU law, "the margin is narrow" for such waivers.
MLex (subscription required) (11/30) 
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Europe's banks need a full banking union
A wave of regulation and reform has left Europe's banks in better condition than they were before the financial crisis. But the eurozone's banking union, a vital component of risk mitigation, is only half complete and notably lacking a common plan for European deposit insurance.
The Economist (tiered subscription model) (11/30) 
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ECB urges banks to introduce instant payments
ECB urges banks to introduce instant payments
Mersch (Daniel Roland/AFP/Getty Images)
The European Central Bank has urged banks to introduce instant payment facilities to avert a shift toward cryptocurrencies such as bitcoin for transferring funds. ECB executive board member Yves Mersch expressed reservations over cryptocurrencies but said banks must be able to compete with them in terms of immediacy or risk losing control of money supply.
Reuters (11/30) 
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Bankers say IFRS 9 transition period doesn't help
The EU's offer of a five-year transition period after the International Financial Reporting Standard 9 takes effect in January is opposed by several bankers struggling to make the loss-provisioning calculations that the new rules will require. They say the option to use a dynamic calculation method adds to the complexity.
Risk (subscription required) (11/30) 
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Multi-Period Capital Planning
This paper proposes a multi-period capital planning framework to calculate a portfolio’s capital requirement and determine the appropriate capital buffer level under various economic scenarios
In the depths of winter, I finally learned that within me there lay an invincible summer.
Albert Camus,
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