Buy-side firms say collateral crunch is real | Credit-risk management becomes increasingly important | Overseas lenders aren't catching on in China
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November 13, 2012
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Credit Markets
Buy-side firms say collateral crunch is real
Buy-side representatives said at an industry conference that despite the opinion of a Bank of England official, rules pushing over-the-counter derivatives through central counterparties will create a squeeze on high-quality liquid collateral. An industry report projects a need for $15.7 trillion to $29.9 trillion in initial margin. Risk.net (subscription required) (11/7)
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Credit-risk management becomes increasingly important
Suspect credit agency ratings and the likelihood of a sovereign-debt default in the eurozone have elevated the importance of credit-risk management. "People assumed that certain organizations that got into trouble would never get into trouble. ... The process of credit-risk management has become far more important, rigorous and demanding," Royal London Asset Management Chief Investment Officer Robert Talbut said. Consequently, insurers and asset managers can no longer rely solely on a quantitative approach. Risk.net (subscription required) (11/12)
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Overseas lenders aren't catching on in China
Banks in Europe, the US and elsewhere continue to invest in China, but they are not gaining much traction. Their market share -- 7% -- is about the same as it was in 2007. Financial Times (tiered subscription model) (11/8)
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Federal Reserve survey finds increased loan demand
Demand for commercial real estate loans, residential mortgages and auto loans are up even as lending standards remain mostly unchanged, according to a loan officer survey by the Federal Reserve. The report covered 68 domestic banks and 23 U.S. branches of foreign institutions. It also noted that, although net demand for residential mortgage loans was up, ?the fractions of banks that reported an increase in demand for both prime and nontraditional residential mortgage loans declined from their levels" in July. DSNews.com (11/2)
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Cable touts plan involving securitisation renaissance
UK Business Secretary Vince Cable said the government is developing an agency for business lending. The agency would securitise loans and sell them as government-guaranteed bonds to investors. AFME conducted a feasibility study on the securitisation plan and said it would add sources of funding for companies. The Telegraph (London) (tiered subscription model) (11/9)
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Regulatory and Accounting Issues
U.S. regulators delay implementation of Basel III
The Federal Reserve and other regulators have decided to postpone implementation of Basel III capital rules for banks. The rules were supposed to go in effect Jan. 1. Regulators seek to align U.S. rules with standards determined by the Basel Committee on Banking Supervision. Bloomberg (11/9), MarketWatch (11/9), CNBC/The Associated Press (11/9)
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U.K. firms at disadvantage because U.S. will miss Basel III deadline
The U.S. Treasury Department said Wall Street banks will miss a Basel III deadline in January, giving U.S. companies an advantage over UK counterparts. Concerns are growing about London's position as a global financial hub. The Telegraph (London) (tiered subscription model) (11/9)
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EU lawmakers step up pace to meet Basel III deadline
European lawmakers remain committed to implementing standards to meet Basel III capital requirements by a Jan. 1 deadline, accelerating a schedule of meetings on the subject. Even so, some lawmakers say they might have to extend the deadline to February. U.S. regulators recently said they won't be able to implement Basel III by Jan. 1. Reuters (11/12), The Wall Street Journal (tiered subscription model) (11/12)
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Fed gives banks second chance on stress tests
The Federal Reserve announced it will give banks a second chance when it comes to capital stress tests. The 19 largest institutions will get a preliminary result. They can then take measures, such as altering stock-buyback or dividend policies, to put themselves in a position to pass. The Fed will still publish the initial capital proposal results. Bloomberg (11/9)
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FSA urges wider ring fencing of banks
As envisioned, ring-fencing legislation for U.K. banks could leave key commercial functions, such as small-business lending, exposed in non-ring-fenced sections, the Financial Services Authority said. Unless this is addressed, the legislation might create "unwanted incentives for the authorities to support [non-ring-fenced banks] in times of stress," the FSA told a parliamentary commission. The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (11/8)
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Bankers face competing demands from regulators, accountants
Increased attention from regulators is causing some bankers to adjust their reserve methodology, which in turn runs the risk of raising questions by accountants concerned about the bottom line. Thus bankers find themselves in an increasingly difficult situation, wedged between the competing demands of both sides. AmericanBanker.com (subscription required)/American Banker (11/8)
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IACPM News
New Speakers Added -- Walk-Ins are Welcome -- IACPM Annual Fall Conference, Nov. 15 to 16 The Roosevelt Hotel, East 45th Street and Madison Avenue, New York
Leading Practitioners come together, topical keynote presentations, three concurrent streams, networking opportunities, cocktail receptions, gala dinner and much more.
  • Eugene Ludwig, Founder and CEO, Promontory, former US Comptroller of the Currency
  • Toos Daruvala, Director, McKinsey & Company
  • Paul Huck, Director, Wholesale Credit Risk Center, Federal Reserve Bank of Chicago
  • Lisa Ryu, Assistant Director, Stress Testing, Board of Governors of the Federal Reserve System
  • Simon Adamson, Senior Analyst European Banks, CreditSights
  • Hank Calenti, Head of Bank Credit Research, Societe Generale
  • Til Schuermann, Partner, Financial Services Risk Management, Oliver Wyman
For more information our website at www.iacpm.org.
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The IACPM is an industry association established in 2001 to further the practice of credit exposure management by providing an active forum for its member institutions to exchange ideas on topics of common interest. Learn more at www.iacpm.org.

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