B&K Consulting Pty Limited’s Post

Superannuation funds are on the rise as APRA intensifies regulatory oversight. Chairperson John Lonsdale highlights the sector's rapid growth at a recent banking forum. https://lnkd.in/g_vqRAdM #fsonews #SuperannuationFunds #APRA #InvestmentStrategies

APRA recently confirmed that there will be an end to banks issuing quasi equity Hybrid bonds to retail investors. These structures are the lowest ranked interest bearing debt instruments issued by banks. For a long period APRA has been concerned that the risks were not well understood by retail investors. Some market participants are noting that there have not been any hiccups in the banks, so why should APRA have concerns? In many ways this highlights why APRA had to move. Credit investing should be focused on assessing risk and earning a return that is appropriate. It is not about lending money, hoping things will stay the same and that the borrower will repay. Some of those most vocal in their dismay are currently earning underwriting and exchange fees for placing and broking these instruments, or running a fund excessively exposed to Hybrids. The hybrid market investors, and advisors, took the view that the Australian Banks were unassailable; understanding and pricing for the inherent (rather than observed) risk was not important.  As we have learnt across the years in financial markets, regulation and rules will change, but investors with excess cash will continue to invest. As one door closes, investors will be quickly looking for the next door to open. Our credit offerings take a different approach. iPartners always aims to deliver a superior risk adjusted return based on fundamental credit analysis and global market awareness. Our suite of products include the Bond Income Fund, targeting a return of the RBA Cash rate +3-4%, with an 80% investment grade portfolio. That is the kind of return that wholesale investors in hybrids issued by comparable non-Aussie banks may be able to earn. The end of the hybrid market in Australia is not the end of the opportunity to earn solid floating rate returns. https://lnkd.in/g7gc7cCP

Superannuation funds are on the rise as APRA intensifies regulatory oversight. Chairperson John Lonsdale highlights the sector's rapid growth at a recent banking forum. https://lnkd.in/gQVeRWAi #fsonews #SuperannuationFunds #APRA #InvestmentStrategies

An interesting article on the place of Private Credit (non bank lending) as the banks retreat. There is much to learn in this space. What is not widely known is that the sector has become ‘institutionalised’ over the last few years. The institutionalisation of the sector has led to the influx of quality borrowers, investors and managers. And with it, strong governance protocols and strategic investment planning. These quality managers, such as Madigan Capital, have created an institutional investment class in ‘Commercial Real Estate Debt’ (CRED) that delivers amongst others, three investment attributes that investors are actively seeking in this volatile market. - A structure to protect underlying capital - Stable risk-adjusted returns; and - Regular liquidty via the natural roll off of loans Given the institutionalisation of the sector, the retreat of the Australian banks and the attractive attributes available with a loan facility investment, we see this asset class only growing in interest from institutional investors. As the article suggests, the Australian superannuation investors have an opportunity to to fill the void and provide strong outcomes for their members at the same time. #realestatedebt #privatecredit #realestate #fundsmanagement #superannuationfunds

NBFIs now manage more assets than banks, but lighter regulation increases systemic risk. Non-banking financial institutions (NBFIs), such as investment funds, pension funds and private equity firms, control a staggering 41% of total EU financial assets. 📉 Why it matters - Recent events have shown how risks in NBFIs spill over and impact everyone: 🏦 The UK pension fund crisis (2022): Rising interest rates triggered a mass sell-off of government bonds (gilts), imposing huge losses on the leveraged pension funds and bringing the gilt market to the brink of collapse. 💸 The “dash for cash” during COVID-19: Investment funds rushed to sell assets, worsening market chaos and liquidity shortages. These incidents highlight how risks in the NBFI sector can create domino effects, impacting everyone, from small businesses to individual savers. ⚠️ The lesson - Differences between bank and non-bank regulation must be levelled up where risks are the same. That’s why Finance Watch recently responded to the European Commission’s consultation on NBFIs, calling for: 🔍 Enhanced transparency on the risks of NBFIs and their interconnectedness with banks. 📑Oversight for unregulated entities like family offices and sovereign wealth funds, where they pose risks to the stability of the financial system. 💪 System-wide stress tests to uncover hidden risks. 🌍 Better climate risk rules to stop vulnerabilities from migrating to unregulated areas. Finance Watch’s recommendations aim to reduce risks and ensure a safer, fairer financial system for all. 📖 Read our full response for more insights: https://lnkd.in/ewZinVKu #NoMoreCrises  #FinanceWatch #FinancialStability #Regulation #SustainableFinance #NBFI

Financial statements are a critical tool for understanding a company's financial health and making informed business decisions. My project topic during my undergraduate days at the prestigious Delta State University, Abraka in 2005, was "The impact of effective interprepation of financial statements on profitability of commercial banķs in Nigeria using Zenith bank published financial statement as my case study at the time and the conclusion from findings was, the impact of its effective interpretation, cannot be overemphazied, it is important as other crucial factors to her business growth. Interestingly, Heritage bank Plc financial statement for the year ended 31st December 2018, showed that Bank had a persistent problem of negative net assets, implying that the bank had a negative debt to equity ratio, indicating that the banks weak operation had wiped out shareholder's funds. It imdicated that the bank had a debt/equity ratio of -16.8% as against the +54.5% ratio of Stanbic IBTC. An infusion of fresh equity to improve the debt/equity ratio should have been explored in 2018. This would have meant that net assets and liquidity would have improved substantially thereby reducing the bank's operating cost/operating income ratio. Heritage bank's financials for 2018 were so far gone in respect of weak loan assets, equity- eroding losses, high leverage and falling liquidity that it would take a rare optimist to have been convinced of the bank's soundness even with series of complaints and inefficiencies in 2024. Against this backdrop indications emerged that attendant issues like questionable acquisition deals, poor or absence of corporate governance,recession,bad loans,operating inefficiency, competitive subsitutes like Fintech companies,it was obvious that no investor was willing to take the plunge to revive the ailing bank, hence the winding up of Heritage bank became imperative as the last option. It was expected that AMCON would have taken over by adopting the Polaris bank model appointed a receiver/manager while it works at restoring balance sheet stability by warehousing her bad debts and pursuing recovery. This would have been a better deal for staff and depositors as opposed to outright liquidation. From the Heritage bank experience, it is hoped that other Regulatory bodies and banks consider and pay more attenrion to key indicators in their financial statements and follow timely cues to take better practical steps in curbing future issues of this nature, so as to avert possible bank run and other possible threats of the banking industry.

Reducing opaqueness in Private Credit… In case you missed it, The Reserve Bank of Australia released a bulletin around the rapid global growth of private credit last month. In their summary they say: “…private credit markets remain opaque and are expected to continue to grow rapidly. Work by regulators to improve transparency will assist in monitoring growth in private credit and the potential risks to financial stability.” Technology can come to the rescue, particularly around assessing and monitoring credit - but private credit firms are likely going to need to bring more standardisation to their processes too. What do you think? Agree or disagree? https://lnkd.in/gZeYQ-VC #Credit #PrivateCredit #Lending

The European Union’s new Capital Requirements Directive 6 (CRD6), expected to take effect by the end of 2026, introduces significant regulatory changes for non-EU banks operating within the European Union. This Legal Update explores the impact of CRD6 on US lenders providing fund finance credit facilities to EU borrowers, notably in Luxembourg and Ireland. Read here: https://lnkd.in/gP-PnadA #FundFinance #PrivateEquity #MayerBrown

Ruh Roh "One increasingly common practice is “amend and extend” (A&E), in which lenders agree to push back a loan’s maturity, usually in return for an even higher yield. “Payment-in-kind” practices (Piks), where borrowers with poor cash flow issue new debt in order to meet interest payments on the old debt, are also becoming widespread. This is Ponzi-type lending in which our old friends, the credit rating agencies – star players in the deteriorating standards of risk assessment that led up to the financial crisis – are again frequently complicit by assigning investment grade status. As one seasoned credit analyst put it to me: “Write what you like about private credit, but I would strongly advise you not to invest in it.” https://lnkd.in/ekXcsn5k

"Private credit managers are the new banks." The rise of bank regulations and concerns around a 'liquidity mismatch' where banks lend longer than the deposit they hold, has seen private credit grow to a staggering 85% of all lending to US corporations. These same dynamics are at play in Australia #privatecredit #directlending #agriculturaldebt https://lnkd.in/gEUFMQPJ