Exclusive: New data shows 'significant deterioration’ across a number of financial counterparties
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Exclusive: New data shows 'significant deterioration’ across a number of financial counterparties 15 April 2021UK Reporter: Maddie Saghir
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New data from Credit Benchmark, a privately owned financial data analytics company, has found signs of deterioration across entities that represent the core plumbing of financial markets as well as different banks among a number of different counterparts.
The data summarises the number of entities per counterpart category with a credit consensus rating, their month-on-month changes in credit distribution, and their transitioning credit quality.
The latest Financial Counterparts Monitor from Credit Benchmark ratios reveal 2.6:1 for central counterparty (CCP) members, 1.8:1 for custodians and sub custodians.
The data shows ratios of 1.5:1 for prime brokers, as well as 5:1 for Latin American banks and 3.5:1 for Asia Pacific (APAC) banks.
David Carruthers, head of research at Credit Benchmark, says the latest consensus data show “significant deterioration” across a number of different financial counterparties.
He explains: “The so-called ‘plumbing’ of the financial markets, including custodians and sub-custodians, prime brokers, and CCP members, many of which are unrated by main agencies, all saw credit quality declines.”
As seen in recent months, Carruthers notes these players are important for the orderly operation of markets. Ascertaining the creditworthiness of these intermediaries may allow counterparties to get ahead of potential challenges.
In addition, Carruthers identifies there was considerable deterioration in many regional banking sectors, including those in the APAC region and in Latin America.
“This comes on top of previous credit quality declines. These are two areas to watch in the months ahead,” he adds.
Credit Benchmark's Financial Counterparts Monitor is based on the contributed credit risk estimates from more than 40 global financial institutions and shows the changing creditworthiness of different groups of financial counterparts.
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