David Prowse’s Post

Many market participants have been asking Fitch's analysts questions around asset quality for banks in APAC. The team's latest report summarises and addresses the most common questions/themes.

The structural features of European asset-backed securities (ABS) and residential mortgage-backed securities (RMBS) transactions often rely on external liquidity support, such as reserves, which can provide liquidity and credit support. External liquidity support ensures the timely payment of interest on the notes and is usually calculated as a percentage of the closing asset balance. Generally, external liquidity measures always support the most senior notes. Support for junior notes differs by transaction. Eurozone interest rates have increased significantly since July 2022. The European Central Bank (ECB) increased its interest rate to 4.5% from 0.0% between July 2022 and January 2024, and the Bank of England (BoE) base rate increased to 5.3% from 0.3% over the same period. Consequently, transactions have relatively less external liquidity and less excess spread, diminishing their capacity to face potential external liquidity tension and shock, such as those deriving from commingling risk or cyber-attack. Read S&P Global Ratings article to learn more: https://ow.ly/6tEK50R1RJB #EuropeanABS #RMBStransactions #liquiditysupport

Check it out! "European ABS And RMBS External Liquidity Reserves Withstand Rising Rates" #structuredfinance #EuropeanABS #RMBStransactions #credit #finance #liquiditysupport #excessspread #insights #throughleadership

Fitch Ratings has revised the Outlook on the Long-Term Issuer Default Ratings (IDRs) of five Nigerian banks and one bank holding company to positive from stable. The Long-Term IDRs have also been affirmed at 'B-'.

Latest in Means & Ways Canada's financial regulator said Friday it will delay imposing stricter capital requirements on commercial banks for a year as part of a planned phase-in of Basel IV reforms. The Office of the Superintendent of Financial Institutions was scheduled to implement the higher capital requirements well ahead of peer countries, however the one-year delay will give the regulator time to consider the implementation timeline in other jurisdictions, according to a statement released on Friday. Scotiabank estimated the new capital rules could have forced banks to shed as much as $260 billion in assets by 2026. One-year won't be enough, and OSFI appears to be buying some time. But it’s nice to see that Canadian regulators occasionally recognize macroeconomic context and competitive landscapes. Here is link to statement: https://lnkd.in/eBN_2PV8 Here is Scotiabank report flagging concerns: https://lnkd.in/esegHYzj

Fitch Ratings has revised the Outlook on the Long-Term Issuer Default Ratings (IDRs) of five Nigerian banks and one bank holding company to positive from stable. The Long-Term IDRs have also been affirmed at 'B-'.

Capital Intelligence Ratings (CI Ratings or CI) announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Burgan Bank K.P.S.C. (“Burgan or “The Bank”) at ‘A+’ and ‘A1’ respectively. In addition, CI Ratings has affirmed the Bank’s Standalone Rating (BSR) of ‘bbb+’, Core Financial Strength (CFS) rating of ‘bbb+’, and Extraordinary Support Level (ESL) of High. CI also reported that the LT FCR and BSR outlook remain Stable, with no expectation of any of external or internal credit challenges to result in any downward changes to the ratings over the next 12 months. https://lnkd.in/d7PkzFst

A view from the market... Claire Cherrington, Head of Strategic Partners & National Accounts at Lloyds Banking Group said ‘Sentiment on whether MPC would cut bank rate in August was constantly changing since the committee last met in June, getting to a point of 50/50 expectation on the morning of Augusts meeting. And with the committee vote being 5 to 4 in favour of a cut, it was certainly a close one. The view is that the markets had already built a cut into the SWAP rates whether that came in August or September. Markets reacted to signalling for BOE and market expectation is suggesting we will see a further cut in 2024 which is now feeding through into the latest SWAPs. We’ve now also seen lenders start to make rate changes. Given the number of economic factors that feed into SWAP we will need to see how the markets react to future signalling from the US FED, BOE and potentially how tensions in the Middle East playout’.

The health of regional U.S. banks has recently been called into question, with ratings agency S&P Global downgrading five banks due to their exposure to commercial real estate (CRE). This move has reignited concerns among investors about the sector's stability. #Banks #Downgrades #Global #Negative #outlook #Regional #US

Deutsche Bank: The global interest rate reduction cycle is getting longer. Deutsche Bank has announced in a note that September was a turning point in the global interest rate reduction cycle. This shift started with the first interest rate cut by the US Federal Reserve, and other countries are expected to follow suit. This action of the Federal Reserve shows the significant impact of the US monetary policy on other world economies. Deutsche Bank predicts that if the markets are right, September could be the point where the cycle of gradual interest rate cuts turns into a more aggressive one. Many countries are already predicting further cuts in their interest rates. #bank #dollar #interestrate #federalreserve https://lnkd.in/dx_NXnBd