Local Fund Management

Some local governments also use the notation to assess their client image from financial institutions.
Representing a significant market potential, and a limited risk of default, local authorities have benefited from the years 1990 positive effects of competition between banking intermediaries:

* Commoditization of credit to local authorities;
* Lowering the cost of credit;
* Strengthening innovation in the development of formulas to simplify the method of debt management and financing tailored to different aspects of local budgets.

With the strengthening of financial independence and their need for funding, the decentralization offers new opportunities and banks are continuing their efforts to penetrate while searching for a quality signature.

The landscape of local funding has therefore changed with the advent of increased competition between the banking intermediaries and diversification of the offer. The complexity of the financial environment for local communities contributes to the professionalization of their financial functions that adopt progressive methods of reasoning of private management to optimize and streamline the management of debt:

* Arbitrage rate to reduce the risk of exposure;
* Active management of cash;
* Tighter budgetary control which requires the identification of commitments vis-à-vis third parties and to book, upstream, the necessary funds;
* Taking into account the multi-annual dimension of public management in local part of a prospective approach.

These developments are a key factor in terms of financial innovation. The banks have set up the financing products (cash management, lending short-term interest rate hedging ...) and services (value of active management of debt, project financing, investment of windfall ...) enabling them meet the new budget and financial practices of local communities.

The rise of the finance function in different directions with a strong accounting is also an important vector of disintermediation. Funding for local government being deregulated, they can raise funds directly in financial markets. New financial instruments of capital markets are, therefore, supplements or alternatives to traditional bank financing. Faced with disintermediation of financing local authorities, banks offer services in financial engineering and step up their financial activities in addition to traditional banking activities.

It should however be noted that the financial instruments are much more complex than the traditional bank loan, they can be handled only by large communities that have the expertise and responsiveness necessary to make the most of market opportunities. The disintermediation is to funding of local remains generally high banked.

Financial Management

The recent decentralization movement thus results in the management by local authorities of new economic functions in a new accounting and budgetary framework. The resources that these functions will induce change in level as the budgets that structure.
Local authorities must seek new funding to implement investments related to the exercise of their economic function, despite a high savings capacity.


With a self-borrowing, local governments must make a tradeoff between own resources and resources of loans to finance their investments. The bond acts as an adjustment variable whose magnitude depends on both the level of savings and the relative level of debt earlier.

After several years of moderate changes, it appears that the dynamism of local public investment began in 2003 continues at an annual growth of 8% for 4 years. Local communities continue to invest heavily:

* The election cycle is conducive to investment communal;
* While nearly 70% of public investment is devoted to building and public works, costs in construction and public works experience sustained growth;
* The transfer of responsibilities will encourage communities to support heavy investments (railway equipment, road investment ...).

This increase in investment volume is characterized by a need for increased funding. This results in increases in taxation and an increased reliance on borrowing, facilitated by a context of interest rates still low. In late 2006, the amount of the debt of local authorities is around 111 billion Euros, equivalent to 6% of GDP. This proportion is low in light of European commitments on debt: according to the Maastricht Treaty, the debt cannot exceed 60% of global GDP. In addition, the "financial valve" that is the fiscal autonomy increases the flexibility of local authorities in terms of borrowing.


The principles governing the development of local budgets (principle of annual, principle of unity, and rule of balancing the budget ...) require local management framed.
Therefore, despite important differences, the level of risk and solvency of all local authorities is excellent.

Credit Rating Agencies the heart of global financial systems Part.III

In the United States is the SEC that accredits the rating agencies can note issuers, a special status, the NRSRO. It is now held by the five main rating agencies that represent 98% of the U.S. market. The two challengers were able to obtain this status, a prelude to any attempt to internationalize, in 2003 for the Canadian DBRS (Dominion Bond Rating Services) and 2005 to the American AM Best, which specializes in rating companies insurance.


This demand for self-regulation has led rating agencies to overhaul their practices in methodology and ethics. Indeed, quantitative approaches too opaque and often resulted in "very good" ratings of financial players to hidden risks, or having issued bonds such as "structured finance" in spite of the risks associated with the nature of these products.

So in March 2007, it revised its rating methodology for banks by reducing the inclusion of state support or supervisory authorities in order to avoid masking the credit risk inherent in each bank. In June of that year, S & P revised its criteria for assessing securitization vehicles financing leveraged to take into account the loan contracts with very lightweight protection clauses.
On June 25, 2007, the French Banking Commission released the list of ECAI distinguishes seven actors: the Bank of France, Coface, DBRS, Fitch Ratings, Moody's, S & P and Japan Credit Agency. This status enables credit institutions to use the notations of ECAIs mentioned above for France to determine regulatory capital requirements arising from Basel 2 regulations.

The market for credit ratings is changing in light of internal innovations, new regulations and fears of investors. This cache of new players those focus on different goals in the field.

Credit Rating Agencies the heart of global financial systems Part.II

The market for credit ratings in recent years is subject to much criticism. Indeed, it is the issuers that pay the agencies questioning the independence of these. How to be neutral given that the issuer needs only a single note? It will tend to compensate the agency assigning the highest rating. The multiple criteria analysis are, for obvious reasons of confidentiality, never disclosed which increases the opacity a little more of the rating process that can be conditioned on the purchase of related services commonly known as "notching."

By focusing on the area of credit institutions, that summarizes the scoring of key players reveals a strong tendency to align the ratings (all these establishments are located in the first five layers). This convergence makes difficult the choice of investors who may consider not having to provide a rating scale commensurate with the risks involved.

The three leaders in the market for credit ratings are today: Standard and Poor's, Moody's and Fitch Ratings. This virtual monopoly is that international organizations and regulators, the market is fragmented and anticompetitive. In addition, there may be twenty years since the ouster of the firms of smaller sizes, mainly through mergers and acquisitions process which may eventually become a disincentive to impartiality and innovation.


The existence of a thriving market and strongly oligopolistic have IOSCO to react on the limits of the rating agencies through the publication of a code of Conduct "IOSCO CRA Code". CESR has meanwhile called for a self-supervised after which the rating agencies have indicated their willingness to collaborate.

In January 2006, the European Commission considered the establishment of a regulatory framework to oversee the activities of rating agencies superfluous, and therefore formally requested in May 2006 at CESR to produce an annual report on the consideration by rating agencies the principles set out by IOSCO (quality and integrity of the rating process, independence and avoidance of conflicts of interest, transparency and relevance of the ratings, confidentiality of information).

Credit Rating Agencies the heart of global financial systems Part.I

The key player in financial markets over the last twenty years, the CRAs (Credit Rating Agencies) best known under the name of credit rating agencies have become indispensable in providing a double service: an evaluation of the financial solvency of debt issuers (states, local governments, financial institutions, insurance companies, businesses) and participating in the decision support by assessing the financial risk of bonds. These services, summarized in a note, reflect on their own assessment of an agency and its analysts and may result in the case of a "downgrade" or "upgrade" significant repercussions on the costs loan, refinancing or the share price of a company.


Appeared in the United States, the financial rating has grown exponentially due to the internationalization of the markets. The notation is a service agency charged by the issuer and allows investors to compare the financial situation of both sectors to facilitate access to foreign markets and to rapidly assess the overall financial situation of a company. This note is an indicator of default risk, which complements the analysis from audit firms and analysts for investment banks. It allows the emitting structure to negotiate its interest rates for financing bank or bond issues.


Despite common customers and investors, the rating system is not uniform between each agency, even if harmonization has often been stressed. Each agency therefore has its own rating system that distinguishes mainly long-term debt and short-term, and divided into several layers that distinguish investment grade (High Grade) to speculative grade (speculative grade) addressed the latter mainly to investors seeking a high level of performance.

The Private Equity Market Growth

This dynamic cache, however, concerns related to the evolution of the activity. One of the first consequences of market development of private equity buyout is the generalization of so-called secondary, tertiary and even quaternary view, consisting of leveraged acquisitions of companies already owned by one or more other funds. In 2006, the third type of LBO acquisitions was made through this resale between funds. This type of assembly raises serious concerns particularly related to the high level of debt in these successive operations, which raised fears of a bubble bursting. Indeed, the succession of holding recovery strengthens the total weight of debt in financing the acquisition. But a classic LBO average 70% funded by debt. We can now understand the anxieties expressed about the level of debt when several successive LBOs are made on the same entity.

On the other hand, in a context of rising interest rates, the sector should experience difficulties, but still far from an economic downturn. Indeed, this market should continue to grow in the coming years, particularly in France where many companies are to sell, LBO funds have gained credibility recognized, will no doubt key players in the market.

Finally, the IPO of a country, who is stated objective to identify a permanent source of capital and diversify the sources of fundraising, shows that the mutation is now facing the sector. The number of mega deals (i.e. acquisitions exceeding the one billion Euros) is more important, the private equity funds have no choice but to raise more funds. This requires, of course, on the one hand by increasing the resources collected from traditional capital providers. But also, for the sake of being less dependent on suppliers of capital and at the same time less sensitive to changes (particularly increased) interest rates on financial markets, the alternative "fund raising" on the stock market seems obvious. The money, usually so discrete and whose activity is based on the original financing of non hand, may now be found in the coast!

The Private Equity Market

Private Equity market has been experiencing four to five years an unprecedented dynamism. The figures for 2006 speak for themselves:

* 71% growth in business volume in 2006
* 71 billion of funds raised in 2006 or 22% over 2005
* 208 LBOs carried out in France in 2006, with two thirds of companies less than 100M € turnover,
* 1.5 million people now work for a company in France came under LBO, 9 to 10% of private sector employees,

The trend of 2007 is equally positive, as evidenced by recent events in the industry.


Private equity is one of the five main areas of activity of the market says private equity (intervention in the capital of unlisted companies generally to achieve horizon 3-10 years of strong capital gains), other activities are:

* Seed capital (or seed money) which represents the first stage since it is for investment projects still in its infancy, funded in order to develop a technology still in R & D to enable to go forward to a potential market,
* Venture Capital, also known as the Venture Capital (VC), which translates into a capital in innovative companies, being in the early stages of development and which have a high growth potential but also a very high risk,
* Capital reversal of investing in troubled companies to put in place a recovery plan.

The Private Equity, also known financing LBO (Leverage Buy-Out) groups for its funding and leveraged acquisitions of target companies, usually mature companies with strong growth potential. LBO funds - often associated with managers of the target - develop installation and operation of acquisition of the company with the objective to remain the capital of the latter ideally between 5 and 10 years while significantly improving the result of the business recovery. The solutions for output or funds are then variables: initial public offering; taken over by another fund, an industrial sale...

The Private Equity Market Governance

The event was followed by a steady evolution for twenty years, but no relation to the recent explosion. This momentum is the result of a combination of several positive key factors. The first of these is an abundance of liquidity in financial markets. Attracted by high yields (15-16% on average), liquidity providers (banks and insurance institutions, pension funds and private wealth) do not hesitate to fill the capital market allows investors to raise funds more increasingly important. Direct consequence, the number of LBOs has increased but more importantly, the number of very large transactions (over one billion Euros) also increased from 23 in 2006 in France. SMEs are no longer the only target of LBO financing transactions, large groups with a strong interest in the funds management, particularly in terms of activity. So after the frenzy of acquisitions recorded in recent years, these groups now intends to liquidate their related activities generate higher margins.

Then, the low cost of debt, due to low interest rates, gives montages leveraged a significant advantage over other types of acquisition financing transactions. They are based mainly on debt financing of target companies, the current environment when they are particularly favorable to more easily identify a margin between the cost of debt and the return on assets under management. However, this cannot alone suffice to explain the strong growth in activity. Private equity has above all recognition in the governance model in place in companies come under LBO financing. These companies are generally better managed and better valued, and even if some failures can be reported (ten more than 200 annual operations in France), we must recognize that the default rate of the sector is quite low and few are examples of clashes in the area of corporate governance.

Governance is indeed one of the key parameters of a company came under LBO financing. To repay debt must quickly generate cash flow. However, it is recognized that improving the economic value of a target company depends, in large part by the optimization model that will be applied. Therefore, LBO funds agree, from acquisition, to establish a mode of corporate governance more efficient and take the form of a greater focus, accountability of management (generally a shareholder as a result of the operation) and optimization of financial assets.

How To Prevent Identity Theft

Hello friends! Hope you all doing good Now, I am going to share you all information about the identity theft. As a matter of fact, I have enlightened about this very subject through by means of an article found in an online site at moneybusinessexpert.com. The Identity theft is the major threat that most of us may experience the pain of its fatal trap. This is easily avoidable, if you follow some Steps to Prevent Identity Theft and if we practice some simple precautions while using our credit cards. We must remain a follow up of our credit information on usual basis. Credit bureau makes available its client with credit report every year. So get benefit this flair and ensure our account on standard basis. On doing this, we can be clear in our mind that for fear that someone attempt to embezzle our identity, we would be capable to mark it at very near the beginning period. We have got also to save from harm our social security numbers. If you take some precaution then you may save your money and business. To stay behind out of harm's way, we have not to take documents on the subject of it contained by your folder. Memorizing the number will definitely solve this problem. You must as well make in no doubt that it is not written on some piece of paper which possibly will be simply available by others. Hope this information will remain useful for most of you! Thanks!!

The cross-selling and the customer loyalty

Faced with increased competition, banks and insurance companies must continually strengthen relationships with their customers. While 1 / 3 of the people have accounts in several banks, the challenge is to become the main bank or insurance client.

One way to be the leader is to increase the rate of multi-ownership: the interest is to provide diversified products to the customer to capture it while ensuring sufficient profitability during its life cycle. That is to increase revenue per customer (cheaper than acquiring new customers) by increasing the products held by clients and services sold.

The transformation of the sector as the penetration of bank assurance, the Finance assurance and banking-real estate agency promotes more cross-selling. Through tailor-made pricing, offers and services can be complementary and beneficial to customers who already own one or more products and thus meet all their needs (offer a discount on the purchase of a coupled auto and home insurance or credit coupled with car insurance, etc ...)

The additional sales are based on an understanding of the client, and updated as and when relationships are maintained. They depend on the life of the client's potential risk (credit risk) and value ("life time value"). The option to develop the relationship with customers most willing to deepen and extend this relationship is vital.

To stimulate the use and income of customers, relationship marketing must move towards a proactive logic by exploiting business opportunities with specific offers that will be triggered through key moments in the client's life: a real estate purchase, a change of vehicle a termination, etc.... These can be transmitted to the client, on the one hand, in "push" or direct marketing (e.g. on the web, it displays the customer area of the loan amount for which he is eligible, without having make any loan application), and second, in "pull" or sales rebound as enjoy a call from the client to provide a product or service selected by the system depending on its characteristics.

Customer knowledge will know what, how (on promotion campaign outgoing, etc.) and where to propose an offer. Thus, to develop, preserve and consolidate a position in a segment of customers, banks and insurance companies must be able to perform analytical work on the one hand, with qualitative studies to analyze customer needs and thus tailor products, services and associated discourses (e.g. the Net Promoter Score), and secondly, by building the individual marks for customer, quantitative studies, in:

* Potential and customer value ("life time value")
* Association (associated with mortgage insurance)
* Appetizing generic tenders / attrition (technical scoring)
* Segmentation behavioral, relational, or 360 ° C (type of clients)
* Financial risk (estimated probabilities of default, the outstanding event of default and loss associated)
* Textual analysis of the mail client
Ultimately, the challenge is to build a vision aggregate client level and thus part of a multi-logic products to promote adhesion of the client and / or from home to expand the panel of cross-selling .

The importance counterparty risk Part-3

Identify the characteristics of the third party repository brings out the different types of people (customers, prospects, guarantees ...), information (customer classification, signs of third party monitoring bodies ...), for which the required quality levels are not necessarily the same. Two examples: the rate of duplication, including the reduction can improve the consolidation process and risk capital allocation, the rate of third parties not identified as an affiliate of the bank, resulting in poor consolidation risk on intra banking group.

As part of the approval process with Basel 2 instances of trust, quality indicators should focus mainly on:

    * The validity of the SI risk management
    * The performance score of grant, the organization of the rating systems and delegation
    * Compliance with the risk strategy in terms of authorization and action limits

These include examples of indicators as the rate of customer doubtful with a healthy note, the rate of third unrated or with a note too old, or the rate of others rated their group.

To control effectively the quality of each indicator, it is essential to have previously defined a responsible business and responsible SI (the MOA) on each of the data information system. The process of defining indicators is iterative, since the priorities may change based on improvements. To control them properly, it is preferable to retain only 10 in the first place. The dashboard can be enriched progressively as the process will be better understood by employees and more mature. For an effective control, must not exceed twenty indicators, which requires the definition of arbitration process indicators to be adopted.

Once the dashboard as defined with the various indicators chosen, it must be operated and monitored on a recurring basis. Identified as significant variables of a state, the indicators need to restore an image quality of the management of risks by focusing on the area’s most sensitive to the context and business goals. As a minimum, an annual review to define the quality policy to hold, but the quality is a daily challenge; do not forget to make some adjustments over the water...

The importance counterparty risk Part-2

In the long run, it is best to think of more sustainable solutions and, in this regard, the levers are very diverse appointment of quality managers in the contributing entities, workflow validation of customer data, standardization of concepts, comparisons with external sources, management of several criteria of uniqueness. The possible solutions are many but their cost, period of implementation and impact on data quality is variable. However, the prioritization of these actions is often subjective: some effects more "visible" are given priority while others are ignored because their quality impacts are unknown.

The success of the business plan requires a continuous improvement in performance. It should be laid down in processes that involve the third party repository, a real cornerstone of the IF bank. Based on the quality approaches used in industry, the virtuous cycle is divided into five phases: definition of indicators and quality objectives of the standard, indicators measuring, analyzing results, identifying actions to improve the quality control of the effect of implemented solutions. We propose in this article, to limit ourselves to the first two phases that we consider most important.
The definition of indicators based on the combination of an empirical, research-based elements of non-quality in the device in place, and a theoretical approach, having as a starting point to identify key parameters management customer risk:
To invest in the improvement actions that correct the non-quality aspects of the most sensitive, the first step is to build a balanced scorecard indicators are most representative. It is an indispensable asset to the achievement of a critical diagnosis and appropriate vis-à-vis business strategies (risk, marketing, sales ...) defined. While some indicators can be retained only for statistical purposes, the others must be action-oriented: this means they must be involved in a lens quality (which will result in the definition of alert thresholds or levels of expected results ...) and an action plan to achieve the objective. The role of each business management and / or SI concerned to arrive at the expected level of quality must be so in a charter previously defined: it is one of the key success factors of the process.

The importance counterparty risk Part-1

Despite the efforts made by financial institutions to ensure compliance with the Basel 2, the internal audits and supervisory bodies highlight gaps in devices management. Beyond the third scoring models in place to comply with regulations (Basel II and Solvency II in particular), financial institutions must continue efforts to ensure a sustainable level of quality control and so effectively and Reliable customer risk. If there are relatively simple and fast to improve data quality, only a comprehensive approach and equipped keeps this level over time and create a culture of quality in financial services, with the image of the industry.

The banking and financial regulation on the internal control of credit institutions and investment firms provides an outline of points to watch it should be integrated within the device management of counterparty risk. To ensure compliance with regulations and ensure the proper level of control internally, branches wish to have the core quality indicators ensuring the validity of the information system risk management, validating the defined risk strategy and organization established to cover the risk client. The only way to dispose of is to use information systems to provide a quantitative analysis, but the relevance of these indicators is based on the quality of the IS.

System-level information, the presence of duplicates, unreliable links or combination obsolescence of customer identification are some of examples of non-referential quality of the third most frequently cited. If they do not prevent the IF function, these problems can have a significant impact on end users and in particular the process of consolidating risks, commercial pilot, the fight against money laundering and grant decisions. Shares of reliability, often initiated by the trades and in consultation with the project owners, are intended to identify areas of non-quality, identify the causes and identify pragmatic ways to mitigate or delete.

The first actions are almost always in the form of manual corrections. These projects mobilize substantial charges to align the repository with the reality-duplication, enhancement or correction of signs, etc ... In addition, these actions if they can have a satisfactory short-term, must be renewed frequently to maintain quality and fight against the progressive drift.

The key points of the implementation in PRC Part.II

Pressed for time; many institutions, even of large size, so consider the use of market solutions. However, uncertainties remain to be addressed regarding the maturity of the editors on this subject, including the ability to manage solutions in standard multiple levels of consolidation within international institutions. Nevertheless, difficulties in producing reliable and comprehensive reports on time are perhaps to be expected.

Reporting related to the Cooke ratio was traditionally produced and controlled by the Finance Department. However, since the implementation of Basel II and McDonough, new entities are involved in solvency calculations which are at the heart of the PRC.

This is the case of Risk Department, which focused knowledge of the risk-weighted assets for credit risk and operational risk (part of the calculation of McDonough). But it is also the case for Directions marketing, which often position themselves as providers of the data used for scoring Basel counterparts (also conditions the new ratio, for institutions using the "IRB").

It is therefore necessary to define now the control process and clarify the appropriate "service agreements" between the various entities. Indeed, the solvency ratio is at the heart of communication facilities and must follow a control circuit, validation, monitoring and operation, prior to its release or its internal operational use. In addition, aspects related to training will not be negligible in the success of the PRC, each actor in the "production line" to control the origin and impact of data it processes.

Therefore, the use of XBRL (data interchange format for technical interoperability) does not appear to be at the heart of the concerns of the banks. After all, it is only a computer translation of functional data model. This language is, moreover, already common in some international companies for internal reporting...

The key points of the implementation in PRC Part.I

Generally described as a technical project, including the use of exchange format "XBRL" PRC also includes business and organizational issues are often overlooked. Yet they are at least as important and appear to be at the heart of institutional concerns. The establishment of "production lines" PRC, as well as has responsibility for validation and controlling data, indeed require special attention.

From a business perspective, it is primarily the availability and reliability of data on the scope anticipated at the heart of the concerns. On the one hand, Basel II, which must come to power PRC data are not yet stabilized for most institutions (upgrades following the regulator's audits, review the quality of some data, adjusting assumptions modeling, implementation delayed for certain subsidiaries ...). On the other hand, some data expected by the PRC are not provided in standard areas of specific ventilation, presence of aggregates under Pillar II, or references to IAS
A "simple" translation between the PRC and the Basel II appears to be excluded, especially since it must incorporate data from the subsidiaries. The complexity of implementation is also increased for banking groups with entities abroad. In Europe, there will be no one single reporting. On the basis of a reference format defined by the CEBS, each national supervisor has established its own version of the PRC. Therefore, the parent company cannot simply broadcast a unique methodology and to manage complex rules for consolidation and verification. A true "challenge" for groups ADDITION consolidating subsidiaries is not subject to the PRC, nor even to Basel II.

Once key issues arise with regard to functional architecture; indeed, the options selected will be structural, not only because the PRC requires complex treatment (IRB cohabitation methods and standard collection of market risk, high volume ...) but also because it will be necessary to ensure the sustainability of production assumptions (audit ability and interpretability of data on the long term).

Subprime Loans and Crisis Management Part.3

In addition to the survival of the funds involved, the correction of the subprime loans crisis in the United States require "the finest tuning" in order not to fall from bad to worse:

* A massive intervention on behalf of borrowers bail out banks would prevent restoring forces to play their role in the crisis and resume cyclically in a few years.
* Conversely, an inadequate response - but allowing to clear the financial sector by eliminating litigation - would have a major impact on the U.S. economy, the real estate sector (in a city or 20% of loans are subprime, a price collapse would contaminate all borrowers), but also on consumption, the main engine of growth.

The consequences of this crisis will be dramatic for the hundreds of thousands of U.S. borrowers who find themselves in a situation of bankruptcy. The impact should also be very important on the U.S. economy, leading to a likely recession. The direct impact on the global economy has yet to understand the difficulties encountered in three areas.

(I) First of all in asset management systems credit derivatives played their part in spreading the risk. The investors then faced most of the losses.

(Ii) Then the current problems on the short-term liquidity should not continue, the central banks play their role as lender of last resort, and investors rediscovering the charm of the short-term investments.

(Iii) Finally, the credit business knows the beginning of a "flight to quality" that can only be healthy; all observers have denounced the excesses for several months, particularly in terms of investment funds whose growth should slow. You still have to remember that the currently observed spreads are still well below what they were from 2000 to 2001.

Nevertheless it is expected, in continental Europe, that governments use the crisis to demand an additional transparency on Asset Management. However, these trades have become so technical that it is difficult to make them accessible to the uninitiated to measure the risks actually incurred by the funds...