Fitch had better prepare for a crowd of sans culottes shouting ‘a la lanterne’:
Greece’s credit rating was cut three levels to Fitch Ratings’ lowest grade for any country in the world as the company followed rivals and said that a default is a “real possibility.”
The move to CCC from B+ “reflects the absence of a new, fully funded and credible” program by the International Monetary Fund and the European Union, the ratings company said yesterday in a statement in London. It also reflects “heightened uncertainty surrounding the role of private creditors in any future funding, as well as Greece’s weakening macroeconomic outlook.”
BIS continues its drive to make finance a cooperative game with its release of a Report on asset securitisation incentives:
The Report recognises regulators can play a role in establishing a framework for securitisation that ensures that it is conducted in a prudent manner, continues to be an alternative funding source for institutions, and contributes to the availability of credit to support the real economy. They can do this by building a regulatory and supervisory framework which addresses the misaligned incentives and conflicts of interest and which supports enhanced disclosure and transparency for investors. The Report encourages policy makers, regulators and supervisors to strive for internationally and cross-sectorally consistent supervisory frameworks, and to develop and implement regulations in a timely manner. The Report further sets out three recommendations (some of which build on earlier work of Parent Committees). These recommendations specify that:
- Authorities should employ a broad suite of tools to address misaligned incentives, which may include measures to improve loan origination standards, and to align compensation arrangements with long-term performance and asset quality.
- Authorities should encourage markets to improve transparency to ensure that investors, other market participants, and supervisors have access to relevant and reliable information.
- Authorities should encourage greater document standardisation and less product complexity, which should assist in reducing information asymmetries and stimulating liquidity in secondary securitisation markets.
OSFI is requiring quarterly disclosures of new information:
Enhancements to the Basel II Framework strengthen disclosure requirements under Pillar 3 in several key areas, including: securitisation exposures in the trading book; sponsorship of off-balance sheet vehicles; resecuritisation exposures; and, pipeline and warehousing risks with regard to securitisation exposures. Revisions to the Basel II Market Risk Framework incorporate additional disclosure requirements under Pillar 3 including disclosures on the incremental risk capital charge, the comprehensive risk capital charge and the stressed value-at-risk (VaR) requirement
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Further, while the Basel II text5 indicates that qualitative disclosures that provide a general summary of a bank’s risk management objectives and policies, reporting systems and definitions may be published on an annual basis, it is OSFI’s view that the qualitative disclosures enable investors and other users of financial statements to have a better understanding of the quantitative disclosures that are required in quarterly reports. As such, OSFI expects that the first quarter of fiscal 2012 disclosures should include full qualitative disclosures in Pillar 3 enhancements and revisions to complement the required quantitative disclosures.
These enhancements are described in the BCBS document Revisions to the Basel II market risk framework. It is noteworthy that the BCBS has entirely missed the whole point of the credit crisis: the aging of trading inventory. If a bank has a significant position in its trading book that it hasn’t turned over in three months, I want to know that. And if they’ve got stuff in their trading book that they haven’t turned over in a year … well then, that’s not really trading inventory, is it? That’s banking, not trading.
Tim Kiladze of the Globe noted that, in contrast to the European ETFs discussed on July 11, Canadian ETFs are less risky, and less profitable:
Because most Canadian ETFs are more vanilla, the fees earned are lower. Generally, for low cost products, ETF providers here will earn 5 to 7 basis points, while higher cost products bring in 20 to 30 basis points. Leveraged ETFs can earn more because they typically charge higher management fees that typically range from 1 to 1.25 per cent.
Those numbers differ drastically from Deutsche Bank’s report, which estimated profits around 60 basis points for traditional ETFs. Mr. Seif said that the big difference between North America and Europe is that the securities held in ETFs here don’t earn much money by the way of securities lending. The Deutsche Bank report’s authors estimated 26 basis points on securities lending.
Why such a big difference? In Europe, investment banks are the big providers of ETFs, with everyone from UBS to Deutsche Bank to Credit Suisse selling their own suite of products. Here in North America, the big ETF providers are largely independent fund management firms such as Claymore, Horizons BetaPro, Vanguard and State Street.
The NYSE / Deutsche Bourse deal is basically done, with a minimum of cry-babyism. Speaking of crybabies, the milkfare bums are whining about competition.
Other acquisitions, albeit more modest, include an advisor to ultra-high net worth clients and their families and a few global wealth management divisions. BNS has also been expanding its insurance offering by introducing new products and building additional retail insurance centres. DBRS expects Scotiabank will continue to expand its wealth management businesses in order to maintain proportional growth among its other segments such that the risk profile of the Bank does not materially change in the medium term. Global Wealth Management accounted for 15% of pre-tax earnings (excluding the gain related to the write-up of the original investment in DundeeWealth Inc. and the Other segment) in H1 2011.
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Scotiabank has a significant cost advantage relative to its Canadian banking peers. Although this differential has been narrowing over the last few years, it nevertheless is a key success factor and a contributor to earnings growth. Since 2000, except for one year, Scotiabank has had the lowest expense ratio of the largest five Canadian banks.
It was a quiet day for the Canadian preferred share market, with PerpetualDiscounts up 1bp, FixedResets down 1bp and DeemedRetractibles gaining 10bp. Volatility was low. Volume was slow.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3070 % | 2,433.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3070 % | 3,660.4 |
| Floater | 2.49 % | 2.37 % | 42,504 | 21.26 | 4 | -0.3070 % | 2,627.8 |
| OpRet | 4.86 % | 2.34 % | 64,596 | 0.21 | 9 | 0.1757 % | 2,449.0 |
| SplitShare | 5.24 % | 1.95 % | 53,328 | 0.62 | 6 | 0.0043 % | 2,508.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1757 % | 2,239.4 |
| Perpetual-Premium | 5.69 % | 4.80 % | 131,671 | 0.78 | 13 | 0.0076 % | 2,090.8 |
| Perpetual-Discount | 5.44 % | 5.54 % | 113,593 | 14.61 | 17 | 0.0149 % | 2,199.4 |
| FixedReset | 5.14 % | 3.13 % | 207,124 | 2.67 | 58 | -0.0072 % | 2,323.1 |
| Deemed-Retractible | 5.09 % | 4.88 % | 257,589 | 8.08 | 47 | 0.0993 % | 2,155.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.N | Perpetual-Discount | -2.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-14 Maturity Price : 21.41 Evaluated at bid price : 21.41 Bid-YTW : 5.60 % |
| PWF.PR.A | Floater | -2.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-07-14 Maturity Price : 21.78 Evaluated at bid price : 22.02 Bid-YTW : 2.37 % |
| IAG.PR.A | Deemed-Retractible | -1.55 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.30 Bid-YTW : 6.06 % |
| SLF.PR.A | Deemed-Retractible | 1.19 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.95 Bid-YTW : 5.86 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| RY.PR.I | FixedReset | 460,000 | RBC crossed 389,100 at 26.10, then bought 10,000 from anonymous at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.41 % |
| RY.PR.R | FixedReset | 132,570 | RBC crossed 45,000, then sold 10,000 to anonymous at the same price. RBC then repeated the two tickets at 27.20; then sold 11,700 to Nesbitt at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 27.25 Bid-YTW : 3.01 % |
| TD.PR.Y | FixedReset | 84,530 | Nesbitt crossed 75,000 at 26.08. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 3.13 % |
| IFC.PR.A | FixedReset | 83,070 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.04 Bid-YTW : 4.08 % |
| TD.PR.K | FixedReset | 79,750 | Nesbitt crossed 75,000 at 27.31. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.33 Bid-YTW : 2.95 % |
| IAG.PR.F | Deemed-Retractible | 25,300 | Desjardins crossed 25,000 at 26.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 5.64 % |
| There were 25 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| BAM.PR.N | Perpetual-Discount | Quote: 21.41 – 21.97 Spot Rate : 0.5600 Average : 0.3395 YTW SCENARIO |
| PWF.PR.A | Floater | Quote: 22.02 – 23.00 Spot Rate : 0.9800 Average : 0.7894 YTW SCENARIO |
| IAG.PR.C | FixedReset | Quote: 26.76 – 27.24 Spot Rate : 0.4800 Average : 0.3507 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 22.30 – 22.65 Spot Rate : 0.3500 Average : 0.2261 YTW SCENARIO |
| IAG.PR.E | Deemed-Retractible | Quote: 25.88 – 26.30 Spot Rate : 0.4200 Average : 0.3061 YTW SCENARIO |
| TD.PR.K | FixedReset | Quote: 27.33 – 27.59 Spot Rate : 0.2600 Average : 0.1533 YTW SCENARIO |