Sunday 24th May 2015
NEWS TICKER: FRIDAY, MAY 22ND: The California Public Employees' Retirement System (CalPERS) has named Beliz Chappuie as CalPERS' Chief Auditor, effective July 31, 2015 - Saudi Arabia's oil minister has said the country will switch its energy focus to solar power as the nation envisages an end to fossil fuels, possibly around 2040-2050, Reuters reports. "In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels, I don't know when, in 2040, 2050... we have embarked on a program to develop solar energy," Ali Al-Naimi told a business and climate conference in Paris, the news service reports. "Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts, electric ones. Does that sound good?" The minster is also reported to say he still expects the world's energy mix to be dominated by fossil fuels in the near future - Barclays has appointed Steve Rickards as head of offshore funds. He will lead the creation and implementation of the bank’s offshore funds strategy and report directly to Paul Savery, managing director of personal and corporate banking in the Channel Islands. For the last four years Mr Rickards has been heading up the Guernsey Funds team providing debt solutions for private equity and working with locally based fund administrators. Savery says: “Barclays’ funds segment has seen some terrific cross functional success over the past year or so. Specifically, the offshore business has worked hand in hand with the funds team in London to bring the very best of Barclays to our clients, and Steve has been a real catalyst to driving this relationship from a Guernsey perspective.” - Moody's has downgraded Uzbekistan based Qishloq Qurilish Bank's (QQB’s) local-currency deposit rating to B2, and downgraded BCA to b3 and assigned a Counterparty Risk Assessment of B1(cr)/Not prime(cr) to the bank. The agency says the impact on QQB of the publication of Moody's revised bank methodology and QQB's weak asset quality and moderate loss-absorption capacity are the reasons for the downgrades. Concurrently, Moody's has confirmed QQB's long-term B2 foreign-currency deposit rating and assigned stable outlooks to all of the affected long-term ratings. The short-term deposit ratings of Not-prime were unaffected - Delinquencies of the Dutch residential mortgage-backed securities (RMBS) market fell during the three-month period ended March 2015, according to Moody's. The 60+ day delinquencies of Dutch RMBS, including Dutch mortgage loans benefitting from a Nationale Hypotheek Garantie, decreased to 0.85% in March 2015 from 0.92% in December 2014. The 90+ day delinquencies also decreased to 0.66% in March 2015 from 0.71% in December 2014.Nevertheless, cumulative defaults increased to 0.65% of the original balance, plus additions (in the case of master issuers) and replenishments, in March 2015 from 0.56% in December 2014. Cumulative losses increased slightly to 0.13% in March 2015 from 0.11% in December 2014 – Asset manager Jupiter has recruited fund manager Jason Pidcock to build Asian Income strategy at the firm. Pidcock J has built a strong reputation at Newton Investment Management for the management of income-orientated assets in Asian markets and, in particular the £4.4bn Newton Asian Income Fund, which he has managed since its launch in 2005. The fund has delivered a return of 64.0% over the past five years compared with 35.9% for the IA Asia Pacific Ex Japan sector average, placing it 4th in the sector. Since launch it has returned 191.4 against 154.1% for the sector average. Before joining Newton in 2004, Jason was responsible for stock selection and asset allocation in the Asia ex-Japan region for the BP Pension Fund.

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Regulatory Update

The Euro: Preparing for the Unthinkable

Tuesday, 26 June 2012 Written by 
The Euro: Preparing for the Unthinkable One day in 1974, payments failed to move across the leading US dollar payment mechanism, CHIPS, operated by The New York Clearing House. Earlier that day, German regulators had closed a relatively small bank, Bank Herstatt, in Cologne.  Following this closure, banks stopped sending funds to one another; no bank knew whether the recipient might have exposure to Herstatt (and thus might experience unacceptable losses). To their credit, bank regulators spent much of the following decades addressing this risk, both in the payments market and in the FX market through the CLS system. http://www.ftseglobalmarkets.com/

One day in 1974, payments failed to move across the leading US dollar payment mechanism, CHIPS, operated by The New York Clearing House. Earlier that day, German regulators had closed a relatively small bank, Bank Herstatt, in Cologne.  Following this closure, banks stopped sending funds to one another; no bank knew whether the recipient might have exposure to Herstatt (and thus might experience unacceptable losses). To their credit, bank regulators spent much of the following decades addressing this risk, both in the payments market and in the FX market through the CLS system.

Although I was General Counsel of the Clearing House and CLS, participating in these and related developments, it took the events of 2007 and 2008 to drive home their significance. Now, with  a slow-down in the world economy and even the possible demise of the euro, do we once again need to prepare for the unthinkable? And how can any individual firm do so?

At the very least firms need to recognize that these types of risks cannot be managed in silos; there must be a cohesive approach across all business areas and breakpoints – from liquidity and credit risks to regulatory and reputational risks.  If the euro is redenominated, businesses may face market closures, reversion to and rapid devaluation of legacy currencies, mandatory bank holidays, restrictions on convertibility, and a lack of liquidity.  A scenario analysis can help identify how such developments might impact key clients, key markets, and most critically –in the short term – liquidity needs. The information gathered in this analysis should be factored into credit and risk management plans. But most importantly, it needs to be communicated to key people. Your board and your staff need to be prepared for various scenarios, and you may also need to communicate with regulators and suppliers.  A careful analysis of and preparation for all contingencies can help a firm survive even the unthinkable.

Deborah Prutzman

Deborah Prutzman is the founder and CEO of The Regulatory Fundamentals Group (RFG), a New York-based firm that designs and implements business and risk solutions for alternative asset managers and institutional investors. RFG's senior-led team employs a robust suite of tools, including practical alerts on new and potential industry developments and its powerful RFG Pathfinder® knowledge management platform which simplifies the challenges of operating in a regulated environment.  To learn more about The Regulatory Fundamentals Group call (212) 537-4058, email a representative at Information@RegFG.com or visit RegFG.com

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