1 min readIdentifying credit trends and translating these trends into risk management practices, whether in the management of a buy list or in the management of counterparty risk, is a key function within treasury departments. The negative trends in bank ratings we discussed more than a year ago, “Bank Ratings Headed for BBB, How the Megatrend May…
2 min readAbstract As Federal banking authorities work to implement rules to allow for the quick and efficient dissolution of too-big-to-fail banks, ratings once again are under assault, and most large U.S. banks could lose their access to the short-term markets toward the end of 2013. The anticipated negative rating moves will be the direct result of…
1 min readThis month I attended a client’s audit committee meeting to review cash investment strategies and an interesting question was raised; the treasurer asked if it was time to start evolving their risk tolerance away from a Government-only strategy. This was a provocative question and one that we hear frequently these days. Although this particular company…
2 min readAbstract In this paper, we discuss the concept and benefits of constant risk aversion in cash portfolio construction. The process may help treasurers understand, gauge and rationalize investment decisions to achieve consistent risk characteristics and to avoid the whiplash that can result from drastic pendulum swings between high-risk and no-risk. The Need for a Constant…
1 min readOver the last decade, the “too big to fail” or systemically important status of banks, combined with the FDIC’s Transaction Account Guarantee (TAG) program, has allowed many of the country’s largest banks to grow even larger. Treasury professionals who may have been reassured by a bank’s brand and size also may have increased counterparty exposures…
2 min readAbstract Global banking authorities’ moves to resolve systemically important financial institutions (SIFIs) may result in first losses being borne by bank creditors in the event of a failure. Under the new resolution authority, size no longer may be an indication of safety for bank credit. Instead, one should look to a bank’s fundamental business condition…
2 min readAbstract Deposits at the 20 largest U.S. banks are generally concentrated in banks with Tier 2 ratings, many of which are just one step away from BBB status. Significant cross-concentration of bank names also exists in large prime money market funds. The dominance of bank exposure in corporate portfolios through deposits and money market funds…
1 min readDecember’s arrival brings with it tidings of uncertainty for Treasury professionals. The looming fiscal cliff and the December 31st expiration of the Transaction Account Guarantee (TAG) program bracket a variety of outcomes for tax policy, spending and deposit regulations that could have wide-ranging repercussions for businesses. One challenge we explored last month was the expiration…
2 min readAbstract The expiration of transaction account guarantees requires actions from treasury cash managers. While essentially all of the $2.0 trillion growth in domestic deposits since 2007 went to the 20 largest banks, the banks’ deposit credit strength declined by almost three ratings notches over the same period. Although 13 of the 20 had Aaa deposit…
1 min readSince 2008, the cash markets have been positively impacted by a massive regulatory overhaul and supported through a multitude of government programs that led to credit generation and stability in the markets. Investors reacted positively to these programs, sifting through a variety of new choices that now offered government guarantees of principal and interest on…