April 20, 2021
IACPM SmartBrief
Credit Markets
Government stimulus has helped tamp down concerns about looming corporate credit defaults, according to the latest IACPM Credit Outlook Survey. "Defaults have been relatively low with some exceptions here and there, but overall, I think government stimulus -- not only in the US, but in multiple countries -- has had its predicted effect," said IACPM Executive Director Som-lok Leung.
Full Story: Pensions & Investments (free access for SmartBrief readers) (4/15),  International Association of Credit Portfolio Managers (4/15) 
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Banks' credit loss provisions in response to the coronavirus pandemic proved overly pessimistic as government support and prolonged forbearance measures helped avert loan losses on the scale they anticipated.
Full Story: Risk (subscription required) (4/19) 
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The 25 largest US banks curtailed their loan holdings by 8% from January to March, reducing the total held to $5.45 trillion, according to Federal Reserve data. Meanwhile, deposits rose 16% to $10.13 trillion, giving the lowest loan-to-deposit ratio since Fed data collection began 36 years ago.
Full Story: Bloomberg (4/12) 
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Direct lending in Europe by asset managers surged in the fourth quarter, recovering from a slump prompted by the coronavirus pandemic, according to data from Deloitte.
Full Story: Financial Times (subscription required) (4/13) 
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Barclays estimates issuance of leveraged loans might exceed sales of high-yield bonds by $20 billion this year, reaching a record high of $430 billion to $450 billion. New money leveraged loans are being issued at the fastest rate since at least 2013, according to Bloomberg data.
Full Story: Bloomberg (4/15) 
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Most derivatives contracts worldwide still incorporate Libor as their reference rate, despite warnings from regulators that the benchmark must be phased out. In the US, 4.7% of derivatives contracts traded in March were based on Libor's replacement benchmark, the Secured Overnight Financing Rate, down from 5% in February.
Full Story: Bloomberg (4/15) 
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Regulatory and Accounting Issues
The Basel Committee on Banking Supervision will take a close look at the circumstances surrounding the collapse of Archegos Capital Management. Secretary General Carolyn Rogers said the committee will likely raise scrutiny of total return swaps and structured products. "A case like this with losses of this magnitude at multiple global banks, all traced back to a single client or a single transaction, will always be something that gets discussed at the Basel Committee table," Rogers said.
Full Story: Bloomberg (4/16) 
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The Bank of England and the European Central Bank are, for the first time, testing banks they oversee to determine how effectively they respond to climate change stress.
Full Story: Financial Times (subscription required) (4/14) 
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A review by the European Central Bank shows the largest eurozone banks have underestimated capital requirements by using models that understate the riskiness of assets.
Full Story: Financial Times (subscription required) (4/19),  Reuters (4/19),  Risk (subscription required) (4/19),  GlobalCapital (subscription required) (4/19) 
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French Finance Minister Bruno Le Maire wants to help companies that borrowed heavily amid the coronavirus pandemic avoid bankruptcy. Bruno says policymakers will take a case-by-case approach to considering loan extensions or cancellations.
Full Story: Nasdaq (4/14) 
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Amid the onset of the credit crisis and the challenges in 2020, the IACPM conducted its second benchmarking study on Risk Appetite Framework practices. The White Paper was recently published and can be viewed here.
Full Story: International Association of Credit Portfolio Managers (4/20) 
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All of us want to do well. But if we do not do good, too, then doing well will never be enough.
Anna Quindlen,
writer, journalist, columnist
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The IACPM is an industry association established 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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