Thanks in no small part to Chinese investment, things may be looking up for Pakistan’s economy. The feature from Alexander Mondorf, Regional Head Indian Subcontinent & ASEAN and Country Relationship Manager, Financial Institutions at Commerzbank, outlines the importance of the China-Pakistan Economic Corridor.
Following Global Credit Data’s recent Loss Given Default (LGD) report, Nina Brumma, Head of Research and Analytics at Global Credit Data, explores what happens when a corporate defaults and how banks can manage the risk in Global Banking & Finance Review.
Despite a slow but steady remission from the global economic crisis at the end of the last decade, global debt has reached a record-breaking $237 trillion. As a result, the International Monetary Fund (IMF) voiced concern in its latest Global Financial Stability Report, stating, “the prolonged period of loose financial conditions in recent years has raised concerns that financial intermediaries and investors … may have extended too much credit to risky borrowers.”
This serves as a warning to banks and corporates, asking them to consider the consequences of corporates beginning to default on their debts. Especially with less familiar or riskier borrowers, it is therefore essential for financial institutions to seek collateral for their loans, and for the debt to take seniority if the borrowing body defaults. This maximizes the chances of a near-full recovery in the case of a default.
This said, Global Credit Data’s recent LGD report, which compiles statistics from over 50 member banks since 2000, reveals that, on average, banks recover 75% of defaulted corporate debt. And given that defaulted debt accounts for just 1% of the average bank’s loan book, it means banks recover a total of 99.75% of all corporate debt – before factoring in profit from interest payments and coupons. If a company has taken the right precautions, a bank can feel comfortable in a climate of low LGD.
Compliance costs in emerging markets are rising, as are fears of protectionism in developed markets. But Michael Duval, Chief Business Officer at Bank Leumi (UK), notes that Israel provides importers and exporters with sustained opportunities in an article for The Global Treasurer.
With ongoing advances in sustainability, the risk of being unable to monetise carbon assets grows by the day. A new book from Routledge, Stranded Assets and the Environment: Risk, Resilience and Opportunity, explores the ramifications of asset stranding across various sectors of the global economy.
Mike Wilkins, Head of Sustainable Finance at S&P Global Ratings, supplies chapter 8, drawing on research and real-world corporate case studies to focus on the credit implications of stranded assets.
Ethiopia and Kenya are doing much to bring the region closer together, according to Commerzbank’s Regional Head of Africa. Read more on page 16 of the new issue.
Michael Duval, the Bank’s Chief Business Officer, explains in a targeted article why companies are choosing Israel for their importing and exporting activity.
The spring issue of Commerzbank’s interactive financial institutions newsletter is out now. It brings together all the major cash and trade finance updates in a range of exclusive articles and interviews.
See how evolving technology can further transform the trade finance industry, prepare for important updates at SWIFT, get ready for the impact of new developments in the payments sector, and learn why Commerzbank is convinced of the need to invest in the future.
In the magazine’s spotlight features on emerging markets, learn from Commerzbank’s regional experts about Pakistan’s increasing integration into the global economy, and the challenges facing the nations of Southern Africa. Explore the reasons behind newfound optimism in Uzbekistan – and discover how Commerzbank’s close partnership with a local bank eases the flow of trade in the country.
Moorgate has produced FI.News since 2013.
In an era of de-risking, Albert Maasland, CEO of Crown Agents Bank, explains why investing in improved compliance and better on-boarding procedures can help banks in smaller jurisdictions become bankable. An
d while many are making significant progress in this respect, there is still much more to be done.
You can read the full article here (with subscription).
Greece has done more than any other bailout recipient country – and by extension any country in the eurozone – to reform its economy. Yet, for all its hard work, it remains the laggard of the continent, the distance to the summit remaining dauntingly insurmountable.
In an interview for IFR, Jesus Castillo, senior economist at Natixis, comments: “Greece’s economy looks far healthier than it did three years ago, but each indicator still gives its own reason to be pessimistic. Debt is still high and unemployment is nearly 20%. GDP is growing but the investment rate is only 12% of GDP, compared to around 22% 10 years ago. It is still not clear, for an investor considering lending to Greece, what its future growth model is.”
To read more, click here.
The countries of East Africa – led by Kenya and Ethiopia – need to integrate. In an article for Banker Africa, Commerzbank’s regional head argues that they can do so by investing in transport, energy and customs infrastructure.