Compare courses
Register
Fitch Learning

Non-Bank Financial Institutions

Add course to comparison

Next dates

Apr 24—26
3 days
Singapore
USD 3895
USD 1298 per day
Jun 19—21
3 days
New York, NY, USA
USD 3795
USD 1265 per day
Jul 15—17
3 days
London, United Kingdom
GBP 2795 ≈USD 3632
GBP 931 per day

Description

The overall goal of this intensive three day case study based workshop is to give participants a structured approach to the credit analysis of different types of NBFI; finance and leasing companies, securities companies (brokers and broker dealers), and investment funds and asset managers (funds and investment managers).

Key Learning Outcomes:

  • Distinguish the key business risks, financial indicators and accounting issues by sector, business line, type of institution or fund structure
  • Use market indicators, quantitative and qualitative analysis to identify strong and weak performers
  • Appreciate how economic, structural, competitive and regulatory issues impact strategy and financial health
  • Understand performance indicators and financial statements for each business model to uncover key credit issues and the impact of differing accounting policies.

Module I: Securities Companies

Analytic Overview

Section aims: apply a structured approach to the credit analysis of securities companies and compare this with the perspectives of regulators, rating agencies and debt and equity investors.

  • Perspective on securities companies: regulators, rating agencies, debt and equity investors.
  • Purpose payback model – key issues in debt and counterparty exposures to securities companies.
  • Case study: Purpose Payback considerations for a securities company.

Operating environment

Section aims: understand the impact of macro competitive and regulatory issues on risk profile and strategy.

  • Securities markets: foreign exchange, equity, fixed income, futures and other derivatives, commodities, etc.
  • Differing business models: broker, broker dealer, wholesale, retail and internet based
  • Exercise: Identifying risks in brokerage companies
  • Regulation and supervision: focal points of international, regional and local regulation; compare and contrast key markets.

Management, franchise and ownership

  • Section aims: understand the key strategic, corporate governance and risk management challenges of securities companies.
  • Shareholders: quality of financial and business support
  • Strategy, risk management (VAR and other models)
  • Corporate governance and key man issues
  • Exercise: Corporate governance in a securities company
  • Operational risk challenges.

Financial Fundamentals

Section aims: benchmark key performance indicators of different types of securities companies in order to identify both strong and weak performers and recognise early warning signals of credit deterioration.

  • Statement logic: matching business model to expected financial statements; key accounting policies on fair valuation; risk of window dressing
  • Performance risk: revenue sources, earnings volatility and cost control
  • Business risk: risk profile of broking, trading underwriting, advisory, settlement and clearing
  • Market risk/asset quality: modelling market risk, securities haircuts, fair value techniques, off balance sheet exposures
  • Counterparty credit risk in brokerage and derivatives activities
  • Financial risk: managing funding stability and liquidity risk
  • Capital adequacy: regulatory and analytic tools to assess the strength of capital and the risks of leverage; net capital, working capital and core capital
  • Case study: financial indicators for a securities broker.

Module II: Regulated Funds and Fund Managers

Industry Overview

Section aims: differentiate the key features and investment strategies of regulated funds.

Orientation

  • Types of fund: regulated mutual funds/unit trusts, managed accounts, closed ended funds and investment trusts, tracker and exchange traded funds (ETFs), fund of funds, master feeders, REITs etc
  • Structure and legal status of funds and managed accounts.

Investment strategies

  • Investment strategies: risk profile of strategy, policies, practices and restrictions
  • Traditional strategies: fixed income (money market, bond, municipals) equity and specialist funds; growth, value and balanced strategies
  • Alternative investment strategies: use of derivatives and leverage.

Analytic overview

Section aims: apply the structured approach to analysis to fund transactions in order to recognise the key challenges of exposures to funds.

Structured approach to analysis

  • Purpose of transaction and sources of payback: Who is the counterparty? What assets or derivatives are being financed? How will the transaction be settled or the debt repaid at maturity?
  • Information sources: prospectus, financial statements, portfolio statements.

Risk Analysis

I. Operating environment

Section aims: understand the macro competitive and regulatory drivers of performance, strategy and financial strength.

Macro and competitive drivers

  • Sub-sectors of the industry: institutional, retail, wealth management
  • Competitive drivers: sources of advantage

Regulation and supervision

  • Regulation and supervision by region (focus depends on location of workshop)
  • Mutual fund regulations: investment and leverage restrictions, disclosure
  • Fund manager regulation; capital adequacy, licensing, business practices.

II. Financial fundamentals

Section aims: benchmark key performance indicators of different types of finance and leasing company in order to identify both strong and weak performers and recognise early warning signals of credit deterioration.

  • “S”: Size: reviewing size, diversification and market position of fund
  • “M”: Market risk: volatility measures e.g. standard deviation, VaR
  • “A”: Asset quality: liquidity and valuation of assets, haircuts
  • “L”: Liquidity: redemption risk on open ended funds
  • “L”: Leverage: use of financial and derivative leverage; funded status for pension funds
  • “P”: Performance: bench marking performance – NAV measures, information and Sharpe ratios
  • Case study: Assessing a fund using SMALLP approach.

III. Management

Section aims: evaluate the roles and responsibilities of key parties to a fund with a focus on the fund manager.

Key parties

  • Roles and responsibilities of various parties: manager, trustee, directors, administrator, custodian etc.

Due diligence fund manager

  • Business structure: staff and organisation: experience levels; size, affiliation
  • Independence and controls: affiliation; conflicts of interest
  • Investment process: structure and implementation of portfolio management decision making
  • Risk management: operational, market, credit and regulatory
  • Communication: disclosure and client relationships.

Fund manager as counterparty

  • Purpose payback: why do fund managers borrow and how do they service debt
  • Risk profiles of different business models
  • Financial analysis a) Performance measurement b) Cash-flow analysis c) Balance sheet strength.

Module III: Finance and Leasing Companies

Analytic overview

Section aims: apply the purpose payback model to understand the key credit issues of finance and leasing companies.

  • Perspective on finance and leasing companies: rating agencies, debt and equity investors and banks
  • Purpose payback model: dependence of finance companies on debt markets and refinance; warehouse and borrowing base facilities and other structural issues

Operating environment

Section aims: understand the impact of macro competitive and regulatory issues on risk profile and strategy.

  • Key risks and competitive issues by sub-sector: sales finance, direct finance, captive finance, equipment finance and leasing, credit cards
  • Impact of regulation and supervision.

Management, franchise and ownership

Section aims: evaluate the business model of different types of finance and leasing company to ensure they have adequate franchise value to succeed.

  • Franchise: assessing the validity of the business model, residual marketing and reliance on parent company
  • Critical management issues for finance and leasing companies: processes and systems, market knowledge, strategy, etc.
  • Shareholders: quality of financial and business support, risks and benefits of cross subsidies.

Financial fundamentals

Section aims: benchmark key performance indicators of different types of finance and leasing company in order to identify both strong and weak performers and recognise early warning signals of credit deterioration.

  • Statement logic: accounting policies for income, receivables, delinquencies and leases (finance versus capital leases)
  • Business risk: use of financial tools to assess quality of lease and loan book; reserve adequacy, owned versus managed book; residual risk
  • Funding risk: stability and variety of wholesale funding sources, gap management, availability of contingency funding, liquidity and capital adequacy
  • Securitization: benefits and risk of off balance sheet funding vehicles; residual risk, mortgage servicing rights and gain on sale accounting
  • Performance risk: balancing risk and return; income stability and expense control
  • Case study: apply the financial fundamentals to a leasing company.

Leasing companies

  • Issues specific to leasing companies: types of leasing companies, residual values, cash flow
  • Operating leases
  • Hire purchase agreements
  • Key ratios for leasing companies.

Files

Detailed Description
Detailed Description
Show more