Critical Elements of Risk Data Aggregation BCBS 239. S&P Capital IQ capabilities

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Not for distribution to the public. Copyright © 2014 by Standard & Poor’s Financial Services LLC (S&P). All rights reserved.
Rick Kanungo, CFA, FRM
Senior Director, Enterprise Solutions, S&P Capital IQ
May 15, 2014
Adopting Principles For Effective Risk Data Aggregation
and Internal Risk Reporting Practices

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Data Challenges In Risk Management
• Real-Time Risk Management
– Nimble response to intra-day developments globally
• Risk Aggregation and Reporting
– Entity hierarchy mapping across subsidiaries and vendor IDs (e.g., across rating agencies)
– Securities mapping across instrument identifiers and asset classes
– Mapping various sector classification systems
• Obligor Identification vs Ownership – Who is backstopping the issuer?
• Alternative interpretations of Investment Grade
– Use of Market Implied Credit Measures (CDS, Bond Yields)
• Quantifying Market Activity for Corporate Bonds
– Market Activity Score
• Country Risk vs Sovereign Risk
– Challenges faced by a corporate in doing business in a country can be different from that
faced by the government in that country

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Real Time Risk Management
26th Feb:
161 quotes
27th Feb:
157 quotes
28th Feb:
74 quotes
3rd Mar: 282
quotes
4th Mar: 221
quotes
Quote Volume Spiked on
Monday March 3rd and
spreads widened sharply
Cox
Communications
August 2, 2013
Intra-Day Credit Default Swap (CDS) Moves
Russian
Sovereign CDS
March 3rd, 2014
For illustrative purposes only. Source: S&P Capital IQ CDS data.
CDS Spread
doubled within
one hour

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Real Time Risk Management
Standard & Poor’s WatchNeg Ratings Actions – Sample
Company Name Exchange:Ticker WatchNeg Date
WatchNeg Time
(GMT)
AerCap Holdings N.V. (NYSE:AER) NYSE:AER 12/16/2013 16:41:19.516
Banco Safra S.A. - 03/26/2014 5:16:13.254
Banco Votorantim S.A. - 03/26/2014 5:16:29.036
Bco Estado do Rio Grande do Sul SA
(BOVESPA:BRSR6)
BOVESPA:BRSR6 03/26/2014
5:17:02.795
China Development Financial Holding Corporation
(TSEC:2883)
TSEC:2883 02/12/2014
8:06:30.421
Energen Corp. (NYSE:EGN) NYSE:EGN 04/09/2014 17:02:50.059
International Lease Finance Corp. - 12/16/2013 16:50:14.803
Leighton Holdings Limited (ASX:LEI) ASX:LEI 03/11/2014 4:05:48.795
Oi SA (BOVESPA:OIBR4) BOVESPA:OIBR4 10/02/2013 21:38:49.745
SLM Corporation (NasdaqGS:SLM)* NasdaqGS:SLM 05/29/2013 14:30:25.595
Telemar Norte Leste SA - 10/02/2013 17:38:49.741
Market Participants Are Requesting Low Latency Notifications
Source: S&P Capital IQ data. As-of April 28, 2014.
Credit ratings and analyses are provided by Standard & Poor’s Ratings Services, which is analytically and editorially independent from any other analytical group at McGraw
Hill Financial, including S&P Capital IQ.
* SLM Corp was downgraded to ‘BB’ on Apr 30, 2014. The company separated into two entities via a spin-off transaction--an education loan management business (to be
named Navient Corp.) and a consumer banking business (SLM Corp., which S&P Ratings will not rate).

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Consolidated View Of Exposure
ISIN
LEI
Markit
RED
S&P Compustat
GVKEY
Parent
Valor SEDOL Other…
D&B
DUNS
Other…
GICS SIC ICB ANZSIC Other….
Ultimate Parent
BSYM
Industry
Classifications
Organizational
Hierarchy
Entity
Identifiers
Instrument
Identifiers
For illustrative purposes only. Not all classification codes shown.
Lattice Of Mappings
Subsidiary Tree

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Data Challenge: Mapping Entity Identifiers
Entity ID Type Value
S&P RatingsXpress Entity ID 336214
Moody's Issuer Number 600050279
Fitch Issuer ID 80089821
Markit Red Code 7FC86R
CMA Entity ID 2797
S&P Compustat GVKey 10121
LEI – GMEI 4K8SLPBF5DXXGPW03H93
D&B DUNS 160002218
Leighton Holdings Ltd.
Entity ID Type Value
S&P RatingsXpress Entity ID 127018
Moody's Issuer Number 39700
Markit Red Code QVA6A9
S&P Compustat GVKey 101603
D&B DUNS 750855918
SLM Corp.
For illustrative purposes only. Not all codes are shown
Source: S&P Capital IQ Enterprise data

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Organizational Hierarchy
Leighton Holdings (ASX:LEI)
• Leighton Holdings (ASX:LEI) is
majority owned (58.7% ) by
HOCHTIEF Australia Holdings Ltd.
which is Private
• HOCHTIEF Australia in turn is 100%
owned by German parent Hochtief AG
(DB:HOT)
• Hochtief AG in turn is majority owned
(50.35%) by Spanish firm Actividades
de Construcción y Servicios, S.A.
(CATS:ASX)
• Besides global parents, Leighton
Holdings Ltd. has 112 subsidiaries in
Asia/ Pacific and 2 in the Middle-East
1
2
3
Truncated list of subsidiaries
3
2
1
Source: S&P Capital IQ Enterprise data

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Data Challenge: Mapping Industry Identifiers
Type Industry Code Description
GICS 40202010 Consumer Finance
SIC 6111 Federal & Fed.-Sponsored Credit
NAICS 522294 Secondary Market Financing
ICB 8773 Consumer Finance
Type Industry Code Description
GICS 20103010 Construction & Engineering
SIC 1081 Metal Mining Services
NAICS 213114 Support Activities for Metal Mining
ANZSIC 310 Heavy and Civil Engineering Construction
ICB 2357 Heavy Construction
Leighton Holdings Ltd.
SLM Corporation
For illustrative purposes only. Not all codes are shown
Source: S&P Capital IQ Enterprise data

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Data Challenge: Instrument Mapping
ISIN: AU000000LEI5
ISO NNA
Vendor IDENTIFIER
AT 856187
B2 BBG001S5ZN24
BE 8592378
CH 641370
DE 856187
FR 955040
GB 6511227
ISIN AU000000LEI5
US Q55190104
XS 11490034
MARKET SEDOL
MUN 5412031
PIN B02P228
ASX 6511227
Exchange
Alpha Code MIC Exchange Name Symbol
ASX XASX Australian Stock Exchange LEI
BEB XBER Berlin-Bremen LTH
BWB XSTU
Baden-Wurttembergische
Wertpapierborse, Stuttgart LTH
FRA XFRA Frankfurter Wertpapierborse LTH
MUC XMUN Bayerische Borse in Munchen LTH
OTN XOTC Other OTC Market, Washington LGTHF
TGT TGAT Tradegate AG, Wertpapierhandelsbank LTH
ETR XETRA, Frankfurt LTH
• A single instrument can have multiple IDs
from vendors, numbering agencies and
exchanges
• Issuing Company: Leighton Holdings (ASX:LEI)
• Issue Classification(ISO CFI): ESXUFR
NNA: National Numbering Agency.
CFI: Classification of Financial Instruments per ISO 10962.
MIC: Market Identifier Codes per ISO 10383.

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Market Based Credit Indicators
SLM Corporation CDS Market Signal
• S&P Ratings put SLM Corp on BBB- WatchNeg on 5/29/2013
• SLM Corp. was downgraded by S&P Ratings to ‘BB’ on 4/30/2014
• CDS based Market Signal deemed SLM Corporation as below
investment grade prior to downgrade
Source: S&P Capital IQ. For illustrative purposes only.

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Market Based Credit Indicators
The Interpublic Group Of Companies
• Regulations have removed reliance on Ratings for determination of
Investment-Grade
• S&P Ratings (‘BB+’ ) puts Interpublic in High-Yield Zone
• CDS and PD based Market Signals deem Interpublic as Investment-Grade
Source: S&P Capital IQ. For illustrative purposes only.

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Market Activity Score
Issuer: SLM Corp (now Navient)
Different Market Activity For Two Bonds From Same Issuer
CUSIP Description
Market Activity Score
(MAS) *
MAS Date Terms & Conditions
78442FEK0
US$2 bil 6.25% med-
term notes ser A due
01/25/2016 1
5/2/2014 Issued: 1/14/2011
Optional Put in Event of Change in Rating or Poison Put 05/12/2014 @101.
Make whole call at any time at the greater of Par or PV of Interest and Principal
Discounted by Treasury Rate + 50 bps
78490GAU1
US$1.396 mil 5.65%
Ed nts due
06/15/2022
5 5/2/2014 Issued: 3/22/2007
Par Call: 06/05/2014 @100
* For corporate and government bonds, S&P Capital IQ Market Activity Scores are based on trades from FINRA’s Trade Reporting and Compliance Engine® (TRACE®) and Xtrakter, and quotes from Xtrakter
Quotes, S&P Capital IQ Quote, Tullet Prebon Government Bonds, and JSDA (Japan Securities Dealers Association) where relevant.
• No. of Trades in Last 30 days (FINRA/TRACE)
• Bus. days since last Trade (FINRA/TRACE)
• Bus. days since last Quote (Xtrakter)
• Bus. days since last Trade (Xtrakter)
Market Activity Score – Factors and Sources
• No. of Market Makers (Xtrakter)
• Bus. Days since last quote (S&P Capital IQ)
• No. of Dealers (S&P Capital IQ)

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Country Country Risk S&P Rating
S&P Rating
Outlook
CDS-Implied
Market Signal
China bb+ AA- Stable a-
Kuwait bbb AA Stable
Russia bb- BBB+ Stable bbb-
Chile a- AA+ Stable a-
Philippines b+ BBB- Stable bbb+
Kazhakstan bb BBB+ Stable
Qatar a AA Stable aa-
Saudi Arabia a- AA- Positive aa-
India bb- BBB- Negative bb+
Sovereign Risk
Country Country Risk S&P Rating
S&P Rating
Outlook
CDS-Implied
Market Signal
Cyprus a+ B- Stable b
Portugal aa- BB Negative bb+
Iceland aa BBB- Stable bb+
Ireland aaa BBB+ Positive a-
Spain aa- BBB- Stable bbb
Greece bb+ B- Stable b
United Kingdom aaa AAA Negative aaa
Sovereign Risk
Country Risk
Country Risk Distinct From Sovereign Risk
Source: S&P Capital IQ. Lowercase nomenclature is used to differentiate these scores from actual Standard & Poor’s Rating Services credit ratings, these scores differ
significantly from Standard & Poor’s rating criteria. For illustrative purposes only.
Country Risk Lower than Sovereign Risk Country Risk Higher than Sovereign Risk
As of February 27, 2014.
Samples for illustration only. Not complete list of countries

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Addendum

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Probability of Default (PD)
Alternate measures of Credit Risk – Market signal based
https://www.capitaliq.com/CIQDotNet/help/chp/PD_Model_Market_Signals.pdf
Entity Name
Rating
when put
on Watch
Credit
Watch
CreditWatch
Date
Eventual
Rating
Eventual
Rating
Action Date
PD (%) 7
weeks prior
to
WatchNeg
PD (%) 1
day prior to
WatchNeg
PD
Increase
(%)
GICS4 Country
DBA Telecommunication (Asia) Holdings
Ltd. BB- NEG 06/21/2013 B 08/07/2013 0.009 0.854 9,266
4520 CYM
Dun & Bradstreet Corp. (The) A- NEG 05/23/2012 BBB+ 07/13/2012 0.011 0.864 7,436 2020 USA
Exide Technologies CCC+ NEG 05/03/2013 D 06/11/2013 0.480 9.948 1,973 2510 USA
Qantas Airways Ltd. BBB NEG 06/07/2012 BBB- 09/07/2012 0.669 7.551 1,028 2030 AUS
Navistar International Corp. B+ NEG 06/07/2012 B 07/09/2012 0.489 5.332 991 2010 USA
Valeant Pharmaceuticals International
Inc. BB NEG 05/28/2013 BB- 06/19/2013 0.005 0.049 933
3520 CAN
Asahi Glass Co. Ltd. A NEG 07/18/2012 A- 08/09/2012 0.408 3.549 769 2010 JPN
PT Bakrie Sumatera Plantations Tbk. CC NEG 06/27/2012 CCC- 07/18/2012 2.396 17.949 649 3020 IDN
James River Coal Co. B NEG 02/29/2012 B- 03/22/2012 4.299 24.488 470 1010 USA
Hidili Industry International Development
Ltd. B+ NEG 06/26/2012 B 09/11/2012 1.714 9.444 451
1010 CYM
Lonking Holdings Ltd. BB NEG 06/05/2012 BB- 07/04/2012 0.998 5.030 404 2010 CYM
Entity Name
Rating
when put
on Watch
Credit
Watch
CreditWatch
Date
Eventual
Rating
Eventual
Rating
Action Date
PD (%) 7
weeks prior
to
WatchNeg
PD (%) 1
day prior to
WatchNeg
PD
Increase
(%)
GICS4 Country
Hovnanian Enterprises Inc. CCC- POS 09/19/2012 CCC+ 11/05/2012 3.112 0.179 -94 2520 USA
T-Mobile US Inc. B+ POS 10/03/2012 BB 05/01/2013 3.952 0.236 -94 5010 USA
Nexstar Broadcasting Group Inc. B POS 10/05/2012 B+ 10/24/2012 1.604 0.158 -90 2540 USA
Axiall Corp. BB- POS 04/25/2012 BB 01/15/2013 2.373 0.248 -90 1510 USA
RONA Inc. BBB- POS 07/31/2012 BB+ 04/12/2013 0.931 0.123 -87 2550 CAN
Pentair Inc. BBB- POS 03/28/2012 BBB 09/28/2012 0.085 0.016 -81 2010 USA
Reliance Steel & Aluminum Co. BBB- POS 04/17/2012 BBB 07/31/2012 0.103 0.046 -55 1510 USA
Kodiak Oil & Gas B POS 06/05/2013 B+ 07/19/2013 0.719 0.371 -48 1010 USA

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Surveillance
Early Warning From Standard & Poor’s Ratings Services MDS
Source: S&P Capital IQ. Lowercase nomenclature is used to differentiate these scores from actual Standard & Poor’s Rating Services credit ratings, these cores differ
significantly from Standard & Poor’s rating criteria. For illustrative purposes only.
Norske Skogindustrier ASA Market Derived Signal
(CDS signal mapped to Standard & Poor’s Ratings Services ratings scale)
• The Market Derived Signals were below Standard & Poor’ Rating, suggesting the
market’s view of a possible downgrade
• Nov. 21st, 2012 and Aug. 2nd, 2013 ratings downgrades

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Sovereign Risk
• Slovenia’s CDS-Implied score was below S&P Ratings level, which was on
Outlook Negative, before series of downgrades
Sovereign Ratings And CDS Spread
Source: S&P Capital IQ. Lowercase nomenclature is used to differentiate these scores from actual Standard & Poor’s Rating Services credit ratings, these cores differ
significantly from Standard & Poor’s rating criteria. For illustrative purposes only.

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