Several topics came up in this week’s International Treasurer editorial meeting. These include a look at what the Securities and Exchange Commission will be doing about ratings following its roundtable meeting May 14; also in light of all the JP Morgan Chase issues with risk, we’ll look at risk committees. We’ll also take a look at Bloomberg’s PORT function, which was a topic of discussion at the NeuGroup’s Treasury Investment Managers’ Meeting.
Ratings Fixes.
As we’ve noted recently issuer-pays ratings are once again in the spotlight. The SEC wants to prevent “ratings shopping” that it feels happens often. As such, it is planning to hold a roundtable on credit ratings on May 14 at its headquarters in Washington. The roundtable will consist of three panels. The first two will relate to the agency’s approach to asset backed securities ratings. The third, however, will likely be of more interest to treasurers. It will address, “alternatives to the current issuer-pay business model in which the issuer selects and pays the firm it wants to provide credit ratings for its securities.”
We’ll keep an eye on it.
Risk Committee.
JP Morgan has been getting a lot of flak lately for its risk controls, or lack, thereof. We’ll take a look at what makes a good committee, based on a recent NeuGroup Corporate ERM Group discussion. The questions posed at a recent meeting included who should be in control and what business/functional unit heads should do as owners of risk; how can they keep the RC best informed. There was also discussion of creating a secondary risk committee, made up of senior individuals representing each business unit/function. These people must be high enough up the chain to know what is going on within the unit. This committee should also meet monthly and share knowledge and recent developments.
Bloomberg PORT.
The credit crisis reinforced the need to vigilantly monitor risk and compliance. Nonetheless, many members in the NeuGroup universe have expressed ongoing frustration with most systems’ inability provide assurance. Everyone is still searching for a system that does it all and this might be why so many members use Excel because one can download data and manipulate it or combine data from multiple systems. The problem of course, is that Excel isn’t error-proof – see Harvard’s Carmen Reinhart and Kenneth Rogoff and their austerity study with the flawed cells.
There could be an answer, however. One member at a recent NeuGroup peer group meeting shared he had found a system that looks promising: the Bloomberg terminal and the PORT function, which has been able to solve some of this member’s system woes.