...Internship Report Impact of Credit Rating on Corporate and Banking Sectors of Bangladesh A Study based on Ratings of Credit Rating Agency of Bangladesh Limited (CRAB) Exam Roll: 091127 Internship Report on Impact of Credit Rating on Corporate and Banking Sector of Bangladesh A Study based on Ratings of Credit Rating Agency of Bangladesh Ltd. (CRAB) Prepared For: Chairman Internship Placement Committee Prepared by: Exam Roll Number: 019927 Class ID: 892 4th year, 8th semester Batch Number: 18th, BBA Program Academic Session: 2008-09 Institute of Business Administration (IBA-JU) Jahangirnagar University, Savar, Dhaka 1342 Date: 16.02.2013 Letter of Transmittal February 16, 2013 Chairman Internship Placement Committee Institute of Business Administration Jahangirnagar University Savar, Dhaka 1342. Subject: Submission of Internship Report Dear Sir, It is an event of great pleasure for me to prepare and present the internship report on ‘Impact of Credit Rating on Corporate and Banking Sectors of Bangladesh: A Study based on Rating of Credit Rating Agency of Bangladesh Limited (CRAB)’ which is a requirement for the completion of BBA program. In this report I have tried to identify different aspects of the credit rating service and its impact on the corporate and banking sectors of the country. I have tried my best to organize all relevant information and do according to the instructions of preparing...
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...Introduction Credit rating agencies play a key role in todays and the last century’s financial life. Their function is to analyze and then publish country’s and firm’s or basically any financial entity’s/product’s creditworthiness. However, their defining impact on today’s economics is goes way beyond their definition. The Three Big, Moody’s, S&P and Fitch are in possession of 95% market share, that means the competition is negligible. The lack of competition multiplies their individual effect on the markets and raises the question of whether they work with the moral standards today’s stakeholders are expecting from them. (The Role Played by Credit Rating Agencies in the Financial Crisis, Asian Development Bank Institute, 2012) Major investors and creditors are knowingly deciding about their financial moves based on a very narrow and far from comprehensive information. The three bigs ratings are certainly part of these data and they do have major consequences on whether a company will invest in a certain country or on what terms will a bank lend capital to a given enterprise. If we go even further, we can see that credit ratings will have impact on a country’s fiscal and monetary policies, industries’ success or in many case failure, and through that, on people’s everyday life and economic well-being. Now that the concept of ratings are not so abstract, let’s take a look at how they relate to the financial crises. The 2007 credit crisis were caused by the overvaluation...
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...MGT-435B Bond Markets – Final Project Report: The Economic Function of Credit Rating Agencies - What does the Watchlist tell us? Christina E. Bannier, Christian W. Hirsch (2010) Executive Summary In the “Economic Function of Credit Rating Agencies” by Christina Bannier and Christian Hirsch (2010), the authors researched whether the economic role of credit rating agencies have been enhanced after the introduction of Watchlists. Therefore, the focus of this paper is to analyze the shift in function of credit rating agencies from a passive player providing creditworthiness certification to a more active credit monitoring entity. First, the paper examines if the Watchlist instrument changes the informational content of credit ratings. Next, the paper tested between two different explanatory lines regarding the function of the rating agencies by analyzing their use of the Watchlist as delivering information to market participants and creating an implicit contract to influence a firm’s risk choices via the threat of a credit downgrade. They find that the general market reaction to downgrades is stronger in the post-Watchlist period, which is consistent with previous research conclusions. These results hence indicate that the informational content of rating downgrades has strongly risen after the introduction of Watchlist. Additionally, the authors find that direct rating downgrades trigger a much stronger market reaction than watch-preceded downgrades. These findings support...
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...of credit rating agencies such as Standard and Poor’s and Moody’s in promoting well-functioning capital markets. How well are the agencies performing their roles?” – December 2013 past paper Credit rating agencies are private profit oriented entities that earn revenues for issuing opinions on the credit worthiness of sovereign governments, corporations and a variety of specific debt issues and issuers. They enjoy a high level of credibility in the investment community and their opinions are extremely influential. Credit rating agencies first emerged in the United States in 1909. They initially issued ratings solely for the debt obligations of the railroad, which had catalysed the development of a global bond market to finance their expansion. The advent of credit rating agencies in the early 20th Century reflected the emergence of highly capital intensive industries in the USA and the corresponding expansion of capital markers to finance them. Over recent decades, global capital flows have accelerated as sovereign borrowers, notably in the developing world, turn to private capital markets for financing needs previously met by commercial and development banks, as well as multilateral agencies. The two major credit rating agencies are Standard and Poor’s and Moody’s Corporation. Standard and Poor’s is now a wholly owned subsidiary of the McGraw Hill Group of companies,, while Moody’s Corporation is the parent company of Moody’s Investor Services. Credit rating agencies...
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...accordance with auditing standards generally accepted in the United States of America. Those statements require the planning and performing of the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The auditor did express unqualified opinions based on the audit and the reports of other auditors, on the respective financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information. However, the financial statements of the San Francisco International Airport, San Francisco Water Enterprise, Hetch Hetchy Water and Power, San Francisco Municipal Transportation Agency, San Francisco Wastewater Enterprise, San Francisco Market Corporation, and the Health Service System were not audited. The City of San Francisco’s organization chart contains several levels: the citizens elect a mayor and the city administrator is appointed. Also elected is the assessor/recorder, Board of Supervisors, City Attorney, District Attorney, Public Defender, Sherriff, Superior Court, and the Treasurer/Tax Collector. Furthermore, the CAFR contains a list of principal officials: • Mayor - Edwin M. Lee o Board of Supervisors: • President - David Chiu • Supervisor - Eric L. Mar • Supervisor - Mark Farrell • Supervisor - Carmen Chu • Supervisor - Ross Mirkarimi • Supervisor - Jane Kim • Supervisor - Sean Elsbernd • Supervisor...
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...The Pakistan Credit Rating Agency Limited CEMENT – AN OVERVIEW FEBRUARY 2014 CEMENT The Pakistan Credit Rating Agency Limited CEMENT – AN OVERVIEW SECTOR STUDY STUDY CONTENTS Summary Sector Study: Global Cement Industry Pakistan Industry Business Risk Financial Risk Outlook PAGE 1 2 2 4 6 7 February 2014 www.pacra.com SECTOR STUDY The Pakistan Credit Rating Agency Limited CEMENT – AN OVERVIEW (FEBRUARY 2014) SECTOR DYNAMICS Business Risk Outlook Medium Stable to Positive OVERVIEW Pakistan’s cement industry has an oligopolistic structure – top five players (out of a total of 18) controls above 55% share. Geographically production facilities are concentrated in north (83%) of the country, while south has around 17%. During the last decade, the Pakistani cement industry has expanded its production capacity significantly; while gradually making inroads into the exports markets. The cement production capacity of Pakistan stood 44.8mln tons in FY13. Demand dynamics, playing key role in cement manufacturing, kept capacity utilization at ~75%, a behavior observed in past few years. Currently, Pakistan is ranked among the world's top 10 cement exporting countries. Pakistan Cement - Production and Capacity Utilization 50 45 40 35 Mln Tons HIGHLIGHTS FY13 Total Companies No. of listed Companies Share of listed Companies (based on capacity) Cement Production Capacity Utilization Market Capitalization Revenue* Net Income* Cement Sector Loans Share...
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...Tarunkumar Patel MGMT 407-10 Executive Leadership Course Paper Topic: Crisis Management Instructor: Mr. Cleamon Moorer Introduction: I decide to work on a topic of Crisis Management. It is the process of preparing for and responding to an unpredictable negative event to prevent it from escalating into an even bigger problem, or worse, exploding into a full-blown, widespread, life-threatening disaster. Crisis management involves the execution of well-coordinated actions to control the damage and preserve or restore public confidence in the system under crisis. Crises are no longer an aberrant, rare, random or peripheral feature of today’s society. They are built into very fabric and fiber of modern societies. While not all crises can be foreseen, let alone prevented, all of them can be managed far more effectively if we understand and practice the best of what is humanly possible. Crisis management is no longer only for those assigned to the task; it is for each and every person. Every experience of a disaster has shown how ordinary people have to rise to the challenges of a crisis. Crisis management efforts should be directed towards helping the organization recover and rise from the embers of the crisis and ensure continuity. The field of crisis management deals with human-caused crisis and natural disasters. It’s hard for human to stop natural disasters to happen but definitely with the advancement of technology we can now take some pre steps to cause a big loss...
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...Policy #2 The history of the American economy has been greatly impacted by the industrial revolution. Life as the people of this time knew it would have a big change ahead of them. The normal life of using your hands to produce products would become more of machines doing the manual work. There was a boom in population and income stemming from the economy becoming more efficient. The Industrial Revolution increased the supply of goods dramatically from the invention of a mass-production technique that was represented by Henry Ford. The majority of the increase of supply was largely seen in mining, steel, oil, transportation networks, communications networks, industrial cities, and financial centers, but also consumer goods. The concept of people not having to use their hands as much anymore was an important advancement. The time being saved was significant not to mention how efficient these steam powered machines were in production. Now the overall work time is being cut dramatically considering they could now have settings for machines to produce the work. At the same time, the workers needed to realize this meant there would be less jobs available for employees. There would be less work to manage, but this led to creating a bigger profit since there was not as much man power needed in the factory. This idea of having the machine do the dirty work sparked the importance of profits for the business leaders, which over time has arguably led to the greedy business leaders we...
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...Clear policies required on: 1. Which customers should receive credit? A- 5C’S-useful checklist • CAPITAL: the customer must appear to be financially sound before any credit is extended. If the customer is a business, its financial statement should be examined. Particular regards should be given to the customer’s likely future profitability and liquidity. • CAPACITY: the customer must appear to have the capacity to pay for the goods acquired on credit. The payment record of the customer to date should be examined to provide important clues. • COLLATERAL: It may be necessary to ask for some kind of security for goods supplied on credit. The customer should be able to offer a satisfactory form of security. • CONDITIONS: the state of the industry in which the customer operates, as well as the general economic conditions of the particular region or country, should be taken into account. The economic-conditions can have an important influence on the ability of the customer to pay on time. • CHARACTER : make some assessment of the customer’s character. The willingness to pay will depend of the honesty and integrity of the individual whom the business is dealing. When the customer is a business, this will mean assessing the characters of its senior managers as well as their reputation within the industry. The selling business must feel confident that the customer will make every effort to pay any amounts owing. A business will need to gather information...
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...financial meltdown. According to frontline, "It all started one sunny afternoon in Florida while the employees of JPMorgan conducted meetings on how they can manage and lower risk. They concluded that separating the risk from the loan by credit default swaps would ultimately make the financial system safer for not only them but for everyone involved ("Money, Power and Wall Street")." JPMorgan was the first to execute this plan when the infamous Exxon crisis took place a few short years back. They decided to take Exxon under their wing and help them out of the crisis but instead of setting aside the capital needed they went and found a company in London to take on the risk of Exxon's loan. This event allowed companies to create more credit and allowed them to give out more and more loans. This marks only the beginning of the downfall to our financial system that occurred in 2008. While JPMorgan was the spark and brains behind the start of our crisis, who is really to blame in this situation? The bankers and regulators who lent out subprime mortgages to the American people are to blame. They knew that certain homeowner's credit and financial stability wasn't up to par for a usual loan. "Sub-prime mortgages were lent out to people who's credit was inferior ("Money, Power and Wall Street")." Taking on these mortgages created a much higher risk. At first though, "subprime mortgages seemed like a full proof plan and they didn't take into account that the...
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...behalf, notified the Non-Banking Companies (Acceptance of Deposits through Commercial Paper) Directions 1989 vide Notification No.IECD.1/87(CP)-89/90 dated December 11, 1989; And whereas the said directions having been amended from time to time vide Notification No.IECD.14/08.15.01/96-97 dated September 6, 1996; Notification No.IECD.21/08.15.01/97-98 dated June 17, 1998, and Notification No IECD 3/08.15.01/2000-2001 dated October 10, 2000 respectively; And whereas Section 45W of the Reserve Bank of India Act provides that the Bank may, in public interest, or to regulate the financial system of the country to its advantage, determine the policy relating to interest rates or interest rate products and give directions in that behalf to all agencies or any of them, dealing in securities, money market instruments, foreign exchange, derivatives, or other...
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...The Larson Family Story FAS 331 Darrell Carson 11 October 2012 Academy Award winning actress, Gwyneth Paltrow stated in an interview that marriage is hard. She was referring to her union with the Coldplay front man, Chris Martin. Both Martin and Paltrow are in lines of work that help them to live relatively comfortable lives financially. Yet, by her own admission, without major financial burdens, marriage for them is still difficult (Heller, 2011). American poet and rapper, Notorious B.I.G. said in one of his most popular songs “Mo’ money, Mo’ problems” (Wallace, 1997). In this simple lyric, he was trying to convey the fact the money does not solve everything. In fact, it brings its own set of problems. While he may have been correct, the absence of money brings its own set of unique obstacles, especially within the family dynamic. Many marriage counselors will say that there are numerous pitfalls for all families. Children becoming teenagers, managing the day to day workings of a household, and parents getting older are just a few of the obstacles that families can face. However, financial stress can be one of the largest obstacles that a family has to tackle. In a poor economy, these problems are magnified. For the case of this paper, an imaginary family will be used to illustrate these problems. Jason and Janet Larson have been married for ten years. They have three school aged children. Jason works for a construction company as an electrician. Janet works...
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...CREDIT RATING * A credit rating evaluates the credit worthiness of a debtor, especially a business (company) or a government. It is an evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default.[3] * Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts. * Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations. * A poor credit rating indicates a credit rating agency's opinion that the company or government has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of long term economic prospects. In India there are 5 credit rating agencies. First, Credit Rating InformationServices Of India Limited (CRISIL) set up by ICICI AND UTI in 1988. Secondly InvestmentInformation and Credit Rating Agency of India limited (ICRA) set up by IFCI in 1991. Thirdly,Credit Analysis...
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...1.State the administrative agency which controls the regulation. Explain why this agency and your proposed regulation interests you (briefly). Will this proposed regulation affect you or the business in which you are working? If so, how? The proposed regulation that is of interest is “Removing Any References to or Reliance on Credit Ratings in Commission Regulations; Proposing Alternatives to the Use of Credit” submitted by Commodity Futures Trading Commission or CFTC. I am interested in this regulation because I deal with swaps trading every day. This proposed regulation will most likely not affect my company because we invest in the more standardized derivatives. We also have internal auditors to oversee how we invest our clients’ funds. 2. Describe the proposal/change. The proposed change is about clarifying and standardizing the current legislation on swaps. As it stands now, the regulations on swaps trading on few and far between. Along with those regulations are privately-run, for-profit credit rating agencies. These two problems combined are how Goldman Sachs was able to swindle their investors and likely why this regulation was originally proposed. Many investors looking to engage in a swap transaction first have to decided what type of swap they would like to enter into. I will use an Interest Rate Swap or IRS as reference for my example (although an IRS is one of the more basic and regulated swaps). An IRS is a swap where investors decide on a notional...
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...CRAB Rating Scale CRAB Long Term Rating Scale CRAB Short Term Rating Scale CRAB Long Term Rating Scale Rating Methodologies: It’s different for several sectors. Such as several methodologies for bank rating, financial institution rating, corporate rating, general insurance rating, life insurance rating, government owned enterprise rating and securitization rating. Other services: 1. Grading Services 2. Advisory & Consulting Services 3. Information Service National Credit Ratings Ltd National Credit Ratings Limited (NCR) is a credit rating agency in Bangladesh. It was incorporated as a public limited company under the Registrar of Joint Stock Companies in August 2010 and received its certificate for commencement of business in July 2010. It was granted a licence by the Securities & Exchange Commission (SEC) of Bangladesh for operating as a credit rating company in September 2010. The formal launching of the company was held on 18 October 2010. Managing director & CEO: MD. Momin Ullah Patwary, BP, is a former secretary to the Govt. of Bangladesh. Services: The services provide by the agency are followings: Entity Rating, Instrument Rating, Insurance Company rating, Asset Manager Rating, Sectoral Grading and Ranking. Methodology A true and fair opinion is our responsibility. NCR gives opinion as to the ability of an entity to meet its financial obligations. The rating process primarily concentrates on business and financial risks...
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