Market Moves

FRTB consultation launched

Friday 22 November 2019 16:13 London/ 11.13 New York/ 00.13 (+ 1 day) Tokyo

Sector developments and company hires

APAC poll highlights key risks

More than 80% of market participants polled by Moody’s at its recent Asia Pacific Structured Finance Conference in Singapore identified slowing global economic growth as posing a key risk for the Asia Pacific finance sector in 2020. In particular, 54% of respondents said that trade tensions were the biggest threat to Asia Pacific economies next year – with such tensions leading to falls in GDP growth – while 29% of people surveyed indicated specifically that slowing economic growth will pose the largest risk. Poll results also showed that 45% of respondents believe ABS issuance in China will rise and 72% anticipate Japan’s aging population will weaken asset performance in structured finance deals. Almost half (45%) of those surveyed said the housing market in Australia will drive performance in the country’s structured finance sector in 2020.

FRTB consultation

The EBA has launched a consultation on specific supervisory reporting requirements for market risk, which are the first elements of the Fundamental Review of the Trading Book (FRTB) introduced by CRR2 in the prudential framework of the EU. The consultation paper includes proposals for a thresholds template, providing insights into the size of institutions’ trading books and the volume of their business subject to market risk, and a summary template, reflecting the own funds requirements under the ‘Alternative Standardised Approach’ for market risk (MKR-ASA). The reporting requirements on the new market risk framework will be gradually expanded over time. A public hearing will take place at the EBA premises on 2 December and comments should be submitted by 7 January 2020.

Portfolio lead hired

DECALIA Asset Management has hired Reji Vettasseri as lead portfolio manager for alternative funds and mandates invested in private markets. Vettasseri has more than 14 years’ experience of private debt and private equity investment. He was previously an executive director at Morgan Stanley Alternative Investment Partners in London, where he led the group’s private debt and special situations investment activities in Europe. Before Morgan Stanley, he worked at Bain & Company and Goldman Sachs.

Student loan benefit welcomed

Moody’s notes that the increasing use of employer-provided payments for employees' student loans will lower the risk of default and is therefore credit positive for ABS backed by such collateral. These benefits generally provide some or all of an employee's monthly student loan payment directly to the lender, reducing the risk of delinquency and default by providing an additional source of funds, as well as increasing the speed and certainty of payments. Faster pool amortisation improves the likelihood that the bonds backed by these loans will pay off before their legal final maturity dates, which is particularly beneficial for FFELP ABS, since such pools have high usage of deferment, forbearance and income-based repayment plans that typically slow payments to the ABS bonds. With unemployment rates near historical lows and competition for talent high, companies have been expanding benefits to retain their current workers and attract new talent.

22/11/2019 16:13:21