Crack Down on Shadow Banking in China to Impact Supply of Credit to Real Economy

The impact of stricter regulations in China is impacting its shadow banking sector, including slowing the aggregate growth of entrusted loans, trust loans and undiscounted bankers' acceptances, according to a new Moody's Investors Service report. Financial flows to the nation's social financing will be reduced this year as a result. "What started a...
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Less Volatility Expected for Banking Ratings in 2018

A shift in global bank ratings at the end of last year indicates less volatility in 2018, as Fitch Ratings reports stable outlooks are at their highest mark in recent years. According to a Fitch report on Feb. 9, the share of positive outlooks nearly doubled year-over-year, despite being outweighed by negative outlooks toward the end of 2017. Upgra...
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Increased M&A in European Pharma to Hit Credit Metrics of Large Firms

Europe's six-largest pharmaceutical companies will face increased credit quality risks from mergers and acquisitions this year, while any benefits to operating performance are also likely to take a hit, according to a new report by Moody's Investors Service. These firms include: GlaxoSmithKline, AstraZeneca, Roche Holding, Novartis and Novo Nordisk...
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Improved Earnings Doesn’t Mean Corporate Debt is out of the Woods

Corporate debt levels will remain an issue in 2018, according to S&P Global Ratings analysts, despite corporations seeing relief in their earnings and cash flow, some of which is thanks to the recent U.S. tax bill. In a 2018 study of 13,000 corporate issuers, analysts reported that although corporate earnings have improved and default rates are...
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Cyber Insurance ‘Profitable,’ but Could Be Credit Negative for Insurers

Cyber security studies confirmed a significant increase in data breaches last year and, now, property/casualty (P&C) insurers are scouring for ways to protect their policyholders in the likelihood cyber attacks occur in 2018. But according to Fitch Ratings, cyber insurance could be credit negative for insurers in the demanding market. The Equif...
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Asian Liquidity Stress Indicator Improves Again in January

Moody's Investors Service's Asian Liquidity Stress Indicator (Asian LSI) improved for the third consecutive month to 24.7% in January—its lowest level since July 2015—from 26.2% in December 2017. The Asian LSI measures the percentage of high-yield companies with Moody's weakest speculative-grade liquidity score of SGL-4 as a proportion of high-yiel...
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Companies Could Spend Accumulated Cash Soon, Survey Finds

If all goes well, U.S. businesses may be set to deploy some of their cash piles on capital expenditures, wage increases, dividends and buyback and mergers and acquisitions, according to a recent report from the Association for Financial Professionals (AFP). The organization saw companies accumulating cash and short-term investment holdings at a les...
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Liquidity-Stress Indicator Remains Low, Despite Rising in January

Despite economic growth and healthy credit markets in the U.S., the January 2018 results from Moody's Investors Service's Liquidity-Stress Indicator (LSI) show a potentially weakened corporate liquidity after increasing for the first time in a year. The indicator, which generally falls when corporate liquidity improves and rises when it weakens, re...
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As U.S. Hotel Market Peaks, Loan Transfers to Special Services Increases

After four years of warning signs that pointed to a peaking U.S. hotel market, Fitch Ratings' prediction is coming to fruition as more hotel properties in the country's top metropolitan markets transfer loans to special services in the midst of facing pressures from oversupply. An increasing number of hotel properties transferred to special servici...
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China’s Debt-for-Equity Swap Framework Provides Companies Time, Turnaround Plans Still Needed

China's debt-for-equity swap framework provides near-term liquidity relief to Chinese corporates that need it, offering much-needed time to restore their business and credit profiles. Still, these debt-for-equity swaps need to be combined with well-planned and closely monitored turnaround plans to allow companies to improve cash flow and recapitali...
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U.K. Insolvency Levels Hit Four-Year High in 2017, Credit Insurance Should Be Considered

Insolvency numbers in the United Kingdom (U.K.) were recorded just shy of 17,250 in 2017, reaching the highest levels in the past four years. According to the Association of British Insurers (ABI), this 4.2% rise from 2016 should make trade credit insurance that much more appealing to businesses, insurers and brokers. In an Insurance Times article ...
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Indian Demonetization Highlighted a Significant Liquidity Risk

Moody's Investors Service recently looked into the types of transactions by country that pose the greatest liquidity risk. Their findings? Indian structure finance transactions, particularly as highlighted during the demonetization process. "This higher liquidity risk occurs because most Indian transactions pay both interest and principal to invest...
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Less than Half of Businesses Aware of GDPR as Deadline Closes In

Less than four months before the General Data Protection Regulation (GDPR) takes effect in the U.K., a recent government survey indicates that only 38% of businesses are aware of the upcoming data protection laws. GDPR will commence on May 25 and, according to ZDNet, "those who are found to misuse, exploit, lose, or otherwise mishandle personal dat...
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