Private equity scrambles for low leveraged loan rates | Banks search for ways to comply with new capital requirements | Analysis: Crisis spurred Europe's high-yield bond market
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March 12, 2013
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Private equity scrambles for low leveraged loan rates
The record low yields in the global leveraged loan markets have triggered a race by private equity funds to take advantage of them. The downward repricings started in the U.S. but arrived in Europe in the last few weeks. Financial Times (tiered subscription model) (3/6)
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Banks search for ways to comply with new capital requirements
Banks are finding it a serious challenge to comply with the increased capital requirements for their derivatives businesses imposed by Basel III. Regulators have imposed particularly heavy capital requirements for credit value adjustments. Reuters (3/11)
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Analysis: Crisis spurred Europe's high-yield bond market
Since 2008, Europe's high-yield bond market has more than doubled in size, making it about 11% of the region's corporate-bond market. Still, the European market doesn't come close to matching its U.S. counterpart. The Wall Street Journal (3/5)
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European banks welcome possible exemption to CVA charge
Officials in Europe are moving toward granting banks a three-pronged exemption to Basel III's capital charge for credit-valuation adjustment, sources say. The exemption would cover trades with sovereigns, pension funds and corporates. However, it could cause a rift between Europe and other jurisdictions, which have gone with a blanket CVA charge. (subscription required) (3/6)
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ISDA giving traders a look at proposed changes to credit default swaps
The International Swaps and Derivatives Association is sending market participants proposed rules pertaining to credit default swaps. "This will involve a redraft of the entire credit derivatives booklet. We want to get feedback on the key changes before we do that," said Mark New, assistant general counsel at ISDA. Among the changes: allowing sovereign-debt restructurings to tap nonfinancial assets. For example, debt holders could be promised the rights to certain exported commodities in exchange for their participation. The Wall Street Journal/MarketBeat blog (3/5)
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Other News
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Regulatory and Accounting Issues
IASB seeks to change when banks recognize credit losses
The International Accounting Standards Board says banks should recognize losses on credit portfolios earlier, instead of waiting until they near default. "We believe the model leads to a more timely recognition of credit losses," Chairman Hans Hoogervorst said. "At the same time, it avoids excessive front-loading of losses, which we think would not properly reflect economic reality." Read the IASB news release. Learn more at The Telegraph (London) (tiered subscription model) (3/7), Bloomberg (3/7), Reuters (3/7)
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U.K. banks should face higher leverage ratio, panel says
The Parliamentary Commission on Banking Standards says the Bank of England's Financial Policy Committee should determine the leverage ratio required of banks and that it should be higher than the 3% being considered. Parliament is discussing 3%, which aligns with Basel III rules. The Telegraph (London) (tiered subscription model) (3/11), The Wall Street Journal/Dow Jones Newswires (3/10)
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OCC's Pasch voices concerns about banks' capital models
Ron Pasch, an official at the U.S. Office of the Comptroller of the Currency, says regulation of financial institutions should be adjusted to ensure greater consistency in capital models. "What you hope -- when you ask banks to run the same trades through their models -- is that you get similar results, and that was really about trying to ensure we have consistency in the application of the Basel standards," said Pasch, a member of the standards-implementation group at the Basel Committee on Banking Supervision. "What we found, though, was that even when we have the same portfolio running through various models, there were a range of outcomes. And the range was significant." (subscription required) (3/7)
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17 of 18 biggest financial companies pass stress tests
Most banks have sufficient capital to survive another financial downturn, the Federal Reserve said as it released results of the latest stress tests. "Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty," said Daniel Tarullo, a Fed governor. Ally Financial is the only bank that did not meet the Fed's standards. The Wall Street Journal (3/7), The Wall Street Journal/Deal Journal blog (3/7)
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Some EU countries want more time to implement Basel III
Ireland hopes to publish Basel III rules in the EU Official Journal by July 1, with the aim of implementation by Jan. 1. Some EU nations are concerned about the timeline. "A number of delegations maintain their reservations and indicate that under any circumstances 12 months would be needed between publication in the Official Journal and the date of application/transposition," according to an EU document. Bloomberg (3/5)
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Clearinghouse requirement for swaps starts in Europe and U.S.
Big users of swaps now have to process transactions through a clearinghouse, a major step in derivatives regulation that Group of 20 nations agreed upon in 2010. Financial Times (tiered subscription model) (3/10)
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Derivatives rules need gradual implementation, ESMA says
European Securities and Markets Authority Chairman Steven Maijoor says derivatives rules need to be rolled out gradually, so implementation might extend into next year. "It is a phasing-in and this is only logical, because it is such an enormous change to the whole sector," Maijoor said. The first step is registering central counterparties. Reuters (3/11)
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Other News
2013 IACPM Annual Spring Meeting Registration is Open
The IACPM Spring Conference will be held this year in London on May 22-23. Speakers (in order of appearance) will include: Bob Janjuah, Co-Head of Global Asset Allocation, Nomura International PLC, Jim Reid, Head of Global Fundamental Credit Strategy, Deutsche Bank, Olivier Khayat, Deputy Head of Global Corporate and Investment Banking, UniCredit, Bob Scanlon, Group Chief Credit Officer, Standard Chartered Bank, Bill Winters, CEO, Renshaw Bay LLP, Laurent Clamagirand, Chief Investment Officer, AXA, Steve Sterling, Managing Director and Global Head of Capital Markets, Blackrock, and many others.

Registration is now open and the IACPM is offering a discount for early registration until April 15, 2013. Group rates are also offered.

For more details, and to view the agenda as it is developing, please visit our website at
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