1 / 9

CREDITORS AND CREDIT AGENCIES

CREDITORS AND CREDIT AGENCIES. Types of Creditors. Institutional lenders e.g. Commercial Banks, Insurance Companies, Pension Company Individual Investor. Why should Creditors Monitor Firms?. Their money is at a high risk . Why Don’t Creditor see the importance of monitoring.

cullen
Download Presentation

CREDITORS AND CREDIT AGENCIES

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CREDITORS AND CREDIT AGENCIES

  2. Types of Creditors • Institutional lenders e.g. Commercial Banks, Insurance Companies, Pension Company • Individual Investor

  3. Why should Creditors Monitor Firms? • Their money is at a high risk

  4. Why Don’t Creditor see the importance of monitoring • Creditors are the ones who are paid first - In the Hindu Credit Union, NIB and BIR would be paid after banks are paid • The legal system protects them - In 2009, the GOTT entered into a MOU with CL Financial “to protect interest of depositors, policyholders and creditors ……..”

  5. Effects of CL Financial and HCU Creditors Central Bank of T&T • Due to a mandate that requires The Central Bank of T&T to adhere to conservative reserve management principles they have not suffered any capital losses • Risk Mitigation measures were in place Commercial Banks • Minimal effect; the system remains well capitalized with a capital to asset ratio of 18% and relatively low level of non performing loans • Majority of lending is done by domestically which has limited the exposure of the crisis

  6. Creditors and investor s want to reduce the risk of capital losses or losses of debts value. BUT They are not able to gain full access to information about companies’ interest and need support by tools to evaluate risk. Therefore they use CREDIT RATINGS

  7. Credit Rating Agency (CRA) Roles • Provide standardized and condensed information about the creditworthiness of various corporations’ bond • Assign a letter rating AAA to D to a corporation ‘s debt securities CariCRIS is a CRA which was formed in Trinidad in 2004.

  8. Trinidad Ratings History • Early 2009 T&T was placed on an international investment watch • February 2009, the then government had passed amendments to Central Bank Act and Insurance Act to give Central Bank additional jurisdiction over financial institution. • July 2nd 2010, CariCRIS give T&T AAA rating • January 14th 2011, Standard and Poor’s gave an ‘A’ for foreign currency and ‘A+’ local currency long term sovereign credit ratings

  9. Recommendations • CRAs should not postpone the downgrading or upgrading of ratings as it guides creditors and government to intercede quickly • Creditors should analyze financial statement for off balance sheet transactions and review Annual reports • Establish Credit Committee that enables creditors to actively participate in the insolvency process • Creditors should include covenants in debt contracts • Creditors can claim precedents over new creditors • Implementation and enforcement of legislation

More Related