A key theme of the Financial Stability Board’s eighth annual global monitoring report was summarized by Klaas Knot, Chair of the FSB Standing Committee on Assessment of Vulnerabilities, “Non-banks play a growing role in the financial system, and their share of the financial system is the largest on record. They are becoming important players in areas where banks traditionally have played dominant roles.”
Credit to non-bank borrowers, especially those in emerging and developing economies, continues a five-year trend of divergence between Euro and U.S. dollar credit extension. BIS global liquidity indicators at end-September 2018 released today by The Bank for International Settlements showed that after slowing in the first half of 2018, Euro-denominated credit to non-bank borrowers outside the euro area rose by 9% year on year.
Fintech companies are increasingly turning to a wide array of products that help automate transactions in capital markets trading, retail banking, fund raising, investment and wealth management, and money transfers. More than anything in the last few years, fintech has changed the dynamics in banking and how customers and clients can be served.
U.S. corporates’ speculative and investment grade debt maturing in five years has now risen to over $2 trillion. According to the Federal Reserve, as of the end of 2018, private non-financial institutions corporate debt is about $15 trillion, or about 70% of U.S. GDP; hence the remaining $13 trillion does not refinance until after 2023.
I am very pleased that today the International Organization of Securities Commissions (IOSCO) published important guidance, Report on Good Practices for Audit Committees in Supporting Audit Quality. These recommendations from IOSCO, the leading international policy forum for securities regulators and the global standard setter for securities regulation, are based on good practices for audit committees of listed companies in supporting external audit quality.
The Group of Central Bank Governors and Heads of Supervision (GHOS) approved today the Basel Committee for Banking Supervision’s revisions to the market risk framework. The Basel Committee (BCBS) recommended that the newly approved market risk framework take effect as of 1 January 2022. The BCBS also published a description of the background, objectives and overall impact of the market risk framework in an explanatory note.
The majority of central banks around the world are considering issuing central bank digital currencies (CBDC), but not in the short term. In a Bank for International Settlement report, Proceeding with caution- a survey on central bank digital currency, released today, survey results show that, “although a majority of central banks are researching CBDCs, this work is primarily conceptual and only a few intend to issue a CBDC in the short to medium term.” Over 85% of central banks see themselves as either somewhat unlikely or very unlikely to issue any type of CBDC.
For its ‘20th State of American Business,’ President and CEO of the U.S. Chamber of Commerce, Thomas Donohue, had good news about the U.S. economy to audience members and to those listening on a live webcast. While the economic news have been good, the Chamber’s ambitious agenda for 2019 shows that challenges to maintain our economic growth abound.
Moody’s Investors Services and S & P Global are sounding the alarm not only about the continued rise in leverage lending and issuance of Collateralized Loan Obligations(CLOs), but also about signals that point to the deteriorating credit quality of both.
2019 is likely to be a year of volatility in Latin America, but markets look promising for long-term investors. Given banks’ and other financial institutions’ significant exposure to Latin America, analysts and investors will have to be very attentive to external and domestic factors that will influence the performance of Latin American bonds, equities and foreign exchange markets.