Presentation from 2013 NACUBO in Indianapolis with a focus on risk management. Co-presented with Thomas Richards (University of Missouri System) and Sherry Mondou (University of Puget Sound). My slides are pp3-12.
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
Ratios are relatively unimportant in isolation. For maximum value, we should monitor trends (e.g., ratio this quarter compared to the previous quarter) and compare our ratios to peer averages or another type of benchmark (i.e., ratio compared to other credit unions with similar characteristics).
This presentation discusses the impact of Basel III capital, liquidity, and reporting requirements on banking and non-banking organizations and what these organizations can do to prepare for the changes.
Assessing a bank’s culture is not an easy task, but there clearly is an increased emphasis on culture that is part of the regulators' broader focus on “heightened standards.” Learn what it takes to have a strong credit culture. Read about these 10 credit culture factors to assess your institution's credit culture.
Liquidity Risk is normally a crucial issue in a banking crisis, however, during the 2007-2010 period, Liquidity has not been as difficult for us as we may have thought. There are many reasons for this, but number one is the fact that today’s community bankers simply have a better understanding of the various techniques for raising both retail deposits and wholesale funds. What does make this crisis a bit different is the relative pricing efficiencies in the wholesale or non-core funding arena these days and our session will focus on how bankers can avoid those difficult examiner discussions about the use of FHLB Advances and Brokered Deposits. It’s all about process and we will provide guidance on what needs to be in your ALCO Policy as it relates to wholesale funding. We will also explore the April 2010 Liquidity and Funds Management Guidance to ensure your bank is up to speed on those requirements. Finally, we will provide specific guidance on both Ratio Analysis and creating your Contingency Funding Plan and will review a sample CFP.
Ratios are relatively unimportant in isolation. For maximum value, we should monitor trends (e.g., ratio this quarter compared to the previous quarter) and compare our ratios to peer averages or another type of benchmark (i.e., ratio compared to other credit unions with similar characteristics).
This presentation discusses the impact of Basel III capital, liquidity, and reporting requirements on banking and non-banking organizations and what these organizations can do to prepare for the changes.
Assessing a bank’s culture is not an easy task, but there clearly is an increased emphasis on culture that is part of the regulators' broader focus on “heightened standards.” Learn what it takes to have a strong credit culture. Read about these 10 credit culture factors to assess your institution's credit culture.
A set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets.
Frings SOA Annuity Risk Strategies Using Reinsurance 2013 Oct 20mfrings
Annuity reinsurance is useful for companies to manage annuity risk. This presentation I created for the Society of Actuaries 2013 Annual Meeting in San Diego. I discuss motivtion, opportunites and strategies for annuity reinsurance. I present a numerical case study on coinsurance and longveity swaps to mitiage longevity risk.
The impact of Basel III, also known as The Third Basel Accord, will vary by geography -- from potentially slowing down economies in emerging nations, to protecting the European Union from financial collapse, to increasing capital adequacy and improving risk management. Given the framework and timeline for implementing Basel III, the burden falls on national regulators to translate the international guidelines into national policies that suit and stabilize their economic environment and support economic growth.
A set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets.
Frings SOA Annuity Risk Strategies Using Reinsurance 2013 Oct 20mfrings
Annuity reinsurance is useful for companies to manage annuity risk. This presentation I created for the Society of Actuaries 2013 Annual Meeting in San Diego. I discuss motivtion, opportunites and strategies for annuity reinsurance. I present a numerical case study on coinsurance and longveity swaps to mitiage longevity risk.
The impact of Basel III, also known as The Third Basel Accord, will vary by geography -- from potentially slowing down economies in emerging nations, to protecting the European Union from financial collapse, to increasing capital adequacy and improving risk management. Given the framework and timeline for implementing Basel III, the burden falls on national regulators to translate the international guidelines into national policies that suit and stabilize their economic environment and support economic growth.
This presentations chalks out in detail information about ALM in Indian Bank. It starts with the basics of Balance sheet; applicability of ALM in real life; Evolution and then starts with main topics of ALM like structured statement; Liquidity risk, its management; currency risk and finally ends with Interest Risk management.
Links to Video’s in the ppt
Balance Sheet
http://www.investopedia.com/terms/b/balancesheet.asp
NII/NIM
http://www.investopedia.com/terms/n/netinterestmargin.asp
www.abhijeetdeshmukh.com
Nonprofit Services Center hosted Dione Alexander of NFF and a local panel of experts to explore how the financial health of nonprofits is changing, what is needed and what to look for in the evolving process of financial stability and sustainability.
Rather than shy away from some of the more efficient non-core funding techniques, we believe it wise to make certain your Board and your Examiners understand what is being accomplished through the use of wholesale funding tactics and our third webinar on the ALCO Process is designed to describe an approach to this issue. We will provide guidance on:
1. Where to describe your strategy.
2. Limits to place on non-core funding.
3. Reporting the use of non-core funding.
4. Non-core funding products and services that are in use today.
5. Pros and Cons of these funding sources.
This presentation provides complete study ofcredit risk management,how it was performed in yester years ,how it is taken care nowadays and what is the road ahead in future
Managing balance sheet liquidity & long term funding Dr Rajeev Jain
Managing balance sheet liquidity and long term funding
• Do the company have the right cash management processes?
• The importance of accurately forecast company cash flow with liquidity management
• Looking at your balance sheet frequently: Do the company has sufficient funding sources?
• Ensuring the right balance of credit and non-credit service utilisation for funding process
• Learning about rebuilding the balance sheet and turning their problem into growth
• Establishing long term stability and security of our funding in turn helps protect our liquidity position in the crisis
• Building necessary tools and methods to achieve properly structured balance sheet
• Managing complex situations precisely through flexible values (general direction), values with longer lifespan than goals or objectives and past and present corporate actions
Similar to Active Management of the Debt Portfolio - 2013 NACUBO Conference (20)
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
NO1 Uk Rohani Baba In Karachi Bangali Baba Karachi Online Amil Baba WorldWide...Amil baba
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
Active Management of the Debt Portfolio - 2013 NACUBO Conference
1. Active Management of the
Debt Portfolio
Remy Hathaway, Prager & Co., LLC
Sherry Mondou, University of Puget Sound
Thomas Richards, University of Missouri System
2. Prager & Co. LLC, Financial Advisor to two Very Different
Institutions
University of Missouri University of Puget Sound
3. Policy, Strategy and Implementation
Comprehensive policy covering debt, derivatives and
liquidity
Short—so people will read it
Establishes risk framework, then optimizes cost
Ongoing communication strategy at enterprise level
Financing strategy driven by (in order)
1. Mission
2. Existing portfolio and institutional risk
3. Transactional economics
Evaluation of outcomes—including extreme ones
4. Strategy – Risk-First Framework
Most debt policies use phrase “risk-adjusted cost of capital” or
“risk tolerance” but do not quantify it
Starting with risk—especially tail events—allows the
institution to elect where and how much risk is acceptable
Taking into account other institutional risks (e.g. market
rate risk and tax risk)
Compensation for risk must be considered. Is it worth it,
and where else might we be better compensated for risk?
6. Risk Assessment - Categorization
Debt Service Risk: “How much different could debt service be
from what’s in the budget?”
Market Rate Risk
Credit Risk
Tax Risk (and Basis Risk)
Liquidity Repricing Risk
Counterparty
Performance Risk
Liquidity Risk: “How much of the balance sheet is exposed to
the debt portfolio?
Reissuance/Remarketing Risk
Liquidity Facility Renewal/Failure Risk
Swap Collateralization Risk
Swap Termination Risk
7. One More Risk – Brain Damage Risk
How much management and staff time is dedicated to
managing the debt portfolio?
Issuance/refundings
Renegotiation of liquidity facilities
Managing puts/liquidity events
How much board/regent/trustee time is spent?
Is there an appropriate return on invested time? On future
expected demands on time?
8. Debt Service Risk – From Complex to Basic
Max
Rate Ratio Change Impact % of O.E.
Market Rate Risk
195 Tax-Exempt Variable-Rate 0.11% 2.9% 5.6
75 Taxable Variable-Rate 0.40% 4.6% 3.4
-165 LIBOR Fixed Payer Receipt 0.15% 67% 3.1% -5.1
LIBOR Fixed Receiver Payment
SIFMA Fixed Payer Receipt
SIFMA Fixed Receiver Payment
Basis Swap Payment
Basis Swap Receipt
4.0 0.6%
Tax Risk
195 Tax-Exempt Variable-Rate 1.7% 3.3
SIFMA Fixed Payer Receipt
SIFMA Fixed Receiver Payment
Basis Swap Payment
Basis Swap Receipt
BABs Subsidy
3.3 0.5%
Credit Risk
195 Tax-Exempt Variable Rate 0.11% 4.0% 7.8
75 Taxable Variable Rate 0.40% 7.0% 5.3
13.1 2.1% $ Millions % of O.E.
Liquidity Repricing Risk Maximum One-Year Risk: 15.1 2.4%
100 Liquidity Facility 2.0% 2.0 0.3% 50% of Maximum 11.2 1.8%
25% of Maximum 5.6 0.9%
Counterparty Performance Risk
-165 Swap Notional 0.0 0.0%
0%
1%
2%
3%
Market Rate
Risk
Tax Risk
Credit Risk
Liquidity
Repricing Risk
Counterparty
Performance
Risk
Max Debt Service Risk Components
(as percentage of 1 Year Operating Expenses)
9. Measuring Risk in Context
$ Millions % of O.E.
Maximum One-Year Risk: 4.6 4.6%
50% of Maximum 2.3 2.3%
25% of Maximum 1.2 1.1%
0%
1%
2%
3%
4%
Market Rate Risk
Tax Risk
Credit Risk
Liquidity
Repricing Risk
Counterparty
Performance
Risk
Max Interest Rate Risk Components
(as percentage of 1 Year Operating Expenses)
$ Millions % of E.R.
75.2 49.5%
50.1 33.0%
37.5 24.7%25% of Maximum
Maximum Three-Year Risk:
50% of Maximum
0%
10%
20%
30%
40%
Reissuance Risk
Facility Renewal
Risk
Collateralization
Risk
Swap Termination
Risk
Max Liquidity Risk Components
(as percentage of Expendable Resources)
10. Example: Collateralization/Termination Exposure
How useful are historical results?
(70%)
(60%)
(50%)
(40%)
(30%)
(20%)
(10%)
0%
10%
1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
Backward-Looking Maximum Percentage Declines in 10-Year Treasury
From One-Year Prior
From Three Years Prior
5/30/84-8/21/86:
51% decline within
three years
4/17/85-4/16/86:
38% decline within
one year
Source: Federal Reserve
11. Projecting Short-Term Rates using Fed Funds
(Fed Funds History + Projections = Potential Outcomes)
30Y Low:4.51%
Average: 5.21%
30Y High: 7.53%
0%
5%
10%
15%
20%
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
Source: Federal Reserve
0%
1%
2%
3%
4%
5%
6%
7%
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
12/31/2025
12/31/2026
12/31/2027
Fed Funds Expected Rate Range
(6/19/2013 Release)
Most hawkish governor up
to highest 30-year average
Median governor up
to 60-year average
Most dovish governor
up to lowest long-term
target rate.
12. “It is better to be vaguely right than exactly
wrong.”
-Carveth Read
13. The Experience of Two Very Different Institutions,
one large…
University of Missouri
System
Public research university with 4
campuses + health system
Enrollment 75,000
Endowment $1 billion
$2.7 billion operating expenses
$1.3 billion debt outstanding
Aa1 / AA+
Treasurer and Interim VP
Finance
14. Policy / Governance – University of Missouri
Recently adopted comprehensive policy for debt and
derivatives management
Outlines authority, responsibilities and reporting
Board approves any issuance of debt
Board receives quarterly comprehensive reporting on portfolio
Board receives annual evaluation of debt capacity, given anticipated
debt-financed projects within a five year timeframe
Establishes framework for evaluating risks in debt
portfolio as well as any new issuance of debt
Board receives annual debt portfolio risk assessment
Policy does not define specific limits, giving maximum
flexibility to management team and Board.
15. Strategic Restructuring – University of Missouri
Recently launched $350 million commercial paper program
capable of issuing either taxable or tax exempt paper.
CP provides particular flexibility during construction phase of
capital projects, allowing for low cost “just-in-time” financing
with ability to convert to permanent financing at any time.
CP program was structured in a manner that minimizes our
need to provide daily self-liquidity by establishing a $100
million cap on CP maturing within any seven day time period.
Even with $350 million in CP outstanding, daily liquidity
requirement remains $100 million due to the cap.
16. Strategic Restructuring – University of Missouri
Prior to CP Program
$100 million weekly reset VRDBs
$120 million daily reset VRDBs
$220 million daily self-liquidity requirement
Post CP Program Launch
$100 million weekly reset VRDBs remain outstanding
$120 million daily reset VRDBs converted to CP
$60 million new CP issued
$200 million daily self-liquidity requirement
Total variable rate debt increased from $220 million to $280
million, yet daily self-liquidity requirement decreased from
$220 million to $200 million
17. Strategic Restructuring – University of Missouri
By reducing our daily self-liquidity requirement and
essentially capping it at $200 million, we can better optimize
the investment of our working capital to generate additional
return.
Opportunity cost of holding daily self-liquidity could easily be
100-300bps when compared to other alternatives.
Our General Pool (essentially working capital) averages $1.7
billion throughout the year. Optimization of risk-adjusted
returns is a top priority as investment income helps fund
operations.
18. The Experience of Two Very Different Institutions,
one small…
University of Puget
Sound, Tacoma, WA
National residential liberal
arts college
Enrollment 2650
Operating budget $120
million
Endowment $275 million
$75 million debt outstanding
A1/A+ rating
VP Finance & Administration
with broad portfolio
19. Policy / Governance – University of Puget Sound
First adopted debt policy in 2005; now refined annually
Provides general framework
Based in mission and strategic goals, with the long term in mind
Debt is a valuable and scarce resource
Consider affordability, risks, financial structure
Monitor capital markets, refunding and other opportunities
No specific limits, allows flexibility
Clarifies responsibilities
Board approves issuance of debt, committee approves terms
Management, with expert counsel, monitors market and risk, makes
recommendations, negotiates terms, interfaces with external parties
Board receives annual review of debt portfolio risk
20. Goals of 2012 Transaction – University of Puget Sound
Improve student success
through strong residential
programming
Policy change, programs,
bed capacity
Manage debt portfolio risks
Within context of broad
institutional risks
Decrease debt portfolio
risk
Retain debt capacity at
A1/A+ rating
21. Risk Assessment and Strategic Restructuring –
University of Puget Sound
Comprehensive assessment of risk profile
A year in advance of anticipated debt financing
Changing market conditions
Changes in board’s risk tolerance or risk allocation?
Strategic residential objective, upcoming debt financing
Prager & Co. as financial advisor served as an extension of
university staff
Assessment of financial condition, risks, credit and debt capacity, peer
analysis, structures, etc
Quantitative analysis of options
22. Risk Assessment and Strategic Restructuring –
University of Puget Sound
The portfolio before the transaction:
$60 million VRDNs, all synthetically fixed, structured in
different rate environment, still low cost of capital,
performed well to date
$10 mil, 3.6% all-in, self-liquidity, Soc-Gen long-term swap
$50 mil ($20 + $30), 4.3% all-in, bank LOC, BoNY long-term swap
Board not as comfortable with debt risks as they once
were
Swap counterparty performance
Mismatch between 67% LIBOR and SIFMA
Failed remarketing, deterioration of LOC provider credit
Liquidity (LOC) renewal/repricing risk in 2012
23. Risk Assessment and Strategic Restructuring –
University of Puget Sound
Should we issue traditional fixed rate on new money for
residence hall?
Should we convert all or some of VRDNs to fixed rate?
How would we handle outstanding swaps?
What would be the budget impact?
Should we consider a direct bank purchase vs. new LOC
provider for all or some of our variable rate debt?
25. Risk Assessment and Strategic Restructuring –
University of Puget Sound
The Transaction
Issued new debt at fixed rate for residence hall
Refunded 30% of VRDNs and converted to fixed rate, retained
orphan swap with intent to terminate when conditions are
favorable
Refunded 50% of VRDNs through a 7-year direct purchase
transaction, retained swap
Retained 20% of VRDNs with self-liquidity, retained swap,
may terminate swap in future
26. Risk Assessment and Strategic Restructuring –
University of Puget Sound
End result
47% traditional fixed
40% variable rate direct bank purchase, synthetically fixed
13% VRDN with self liquidity, synthetically fixed
Reduced interest rate risk and liquidity risk
Expected WACC of 4.79% and within Board’s risk comfort
Level debt service affordable in budget, with new money
structured to accommodate temporary orphaned swap
27. Ongoing Monitoring and Reporting
Puget Sound assesses debt portfolio review annually,
including risk trend
28. Additional Considerations (at Issuance and Beyond)
Taxable vs Tax-Exempt
Cost differential
Reporting requirements
Value/cost of par call for tax-exempt debt
Term
Direct purchase: renewal risk at put date
Matched to project life
Longer to allow recycling/internal bank structures
Issuance Timing
Interest rate outlook
Negative arbitrage in refundings
Hedging efficacy/outcomes
29. Conclusions
Clear policy should drive debt portfolio decisions
Portfolio risks and outcomes must be monitored on an
ongoing basis
Quantitative frameworks should be established for budget
and balance sheet outcomes
Current and pro forma debt portfolio
30. Resources
University of Missouri System Debt Policy
http://www.umsystem.edu/ums/fa/treasurer/debt_policy
University of Missouri System Quarterly Debt Report
http://www.umsystem.edu/ums/fa/treasurer/debt_snapshot_reports
Federal Reserve Historical Data
http://www.federalreserve.gov/releases/h15/data.htm
Federal Reserve Interest Rate Projections
http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
(Click on “PDF” under Projections Materials)
31. Appendix – Why Fed Funds?
Quarterly average SIFMA rates (and LIBOR rates) correlate
very well with Fed Funds, but with more history.
y = 63.23%x + 0.37%
R² = 94.82%
0%
1%
2%
3%
4%
5%
6%
7%
8%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
SIFMA
Fed Funds (Effective, 3-Day Lag)
Least Squares Regression (Quarterly Average, n=88)
Source: Federal Reserve, SIFMA
32. Appendix – Why the 10-Year Treasury?
Good correlation with LIBOR Swap Rates…not so much MMD,
but even MMD is generally reasonable, and there’s more
history.
y = 1.0505x + 0.0073
R² = 0.9632
y = 0.4935x + 0.0254
R² = 0.6619
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
10-Year Treasury Rate
Interest Rate Correlations with 10-Year Treasury (1998-Present)
100% of 30 Yr LIBOR Swap Curve
30 Yr Tax-Exempt Fixed Rate
Linear (100% of 30 Yr LIBOR Swap Curve)
Linear (30 Yr Tax-Exempt Fixed Rate)
Source: Federal Reserve, Thompson, Bloomberg