Exclusive: Credit Benchmark finds further deterioration across financial markets
17 May 2021 UK
Image: MIND AND I/adobe.stock.com
Credit Benchmark’s Financial Counterparts Monitor has found more credit deterioration across the core plumbing of financial markets, as well as different banking sectors.
According to the financial data analytics company, on top of other deterioration seen in previous months, it represents a big drop in credit quality.
Ratios of deteriorations compared to improvements reveal 0 for central counterparty (CCP) members, 2.6:1 for custodians and sub custodians, and 1:1 for prime brokers.
The latest ratios also demonstrate widespread deterioration across banking sub-groups including banks – global and banks Europe, the Middle East and Africa at 1.8:1.
Additionally, the results show .7:1 for Latin American banks and 3.6:1 for Asia Pacific (APAC) banks.
Meanwhile, the results also identify that for buy side managers, deterioration has been observed in asset managers at 1.2:1 and mutual funds at 1.7:1.
Credit Benchmark explains that the larger the ratio figure, the more deterioration.
David Carruthers, head of research at Credit Benchmark, explains: “Broker dealers, CCP members, and custodians all saw declines in credit quality from the prior update, as did sub custodians that had the worst ratio of deteriorations to improvements of the intermediaries.”
According to Carruthers, an even bigger warning sign came from APAC banks. He notes that many of the firms examined in this report are unrated by the main rating agencies, so the increased risk may not be apparent to most.
“On the positive side, prime brokers saw improvement after last month’s deterioration. Pension funds also registered overall improvement,” 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.
Last month's data revealed 2.6:1 for central counterparty (CCP) members, 1.8:1 for custodians and sub custodians.
According to the financial data analytics company, on top of other deterioration seen in previous months, it represents a big drop in credit quality.
Ratios of deteriorations compared to improvements reveal 0 for central counterparty (CCP) members, 2.6:1 for custodians and sub custodians, and 1:1 for prime brokers.
The latest ratios also demonstrate widespread deterioration across banking sub-groups including banks – global and banks Europe, the Middle East and Africa at 1.8:1.
Additionally, the results show .7:1 for Latin American banks and 3.6:1 for Asia Pacific (APAC) banks.
Meanwhile, the results also identify that for buy side managers, deterioration has been observed in asset managers at 1.2:1 and mutual funds at 1.7:1.
Credit Benchmark explains that the larger the ratio figure, the more deterioration.
David Carruthers, head of research at Credit Benchmark, explains: “Broker dealers, CCP members, and custodians all saw declines in credit quality from the prior update, as did sub custodians that had the worst ratio of deteriorations to improvements of the intermediaries.”
According to Carruthers, an even bigger warning sign came from APAC banks. He notes that many of the firms examined in this report are unrated by the main rating agencies, so the increased risk may not be apparent to most.
“On the positive side, prime brokers saw improvement after last month’s deterioration. Pension funds also registered overall improvement,” 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.
Last month's data revealed 2.6:1 for central counterparty (CCP) members, 1.8:1 for custodians and sub custodians.
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