The End of an Era

1 min read

Identifying 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 Impact Corporate Cash Investors,” continue to impact the overall investment and risk landscape for many companies.

At Capital Advisors Group, we combine credit research with techniques that identify and manage risk exposures within separately managed accounts, money market funds and enterprise counterparty risk. At this time, the environment for bank credits is evolving rapidly, and adjustments to one’s exposure in bank debt may be prudent if one is to maintain the constant risk aversion approach outlined in last month’s research. Massive reregulation within the banking sector is underway, and we alerted our readers to this transition several months ago in our research, “The New Normal of Riskier Mega Banks.” With last week’s announcement that Moody’s is “reassessing” bank ratings due to the elimination of systemic government support, the latest evolution of the banking industry is nearly complete.

With these major changes afoot, one should examine his or her exposures and ask if investment risks have been accurately assessed and adjusted or if exposures have instead increased in recent months. To help answer these questions, this month we offer another chapter in the tale of “Too-Big-To-Fail.”

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Best Regards,

Ben Campbell
President & CEO

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