1 / 45

PricewaterhouseCoopers Credit Derivatives: Understanding the Impact on Financial Statements

1. Agenda. ObjectivesAnalyzing financial statements to assess credit derivativesGround rules of FAS 133Credit derivatives used for credit risk managementInvestments in credit linked notes (CLNs)Special Purpose Vehicles / Special Purpose EntitiesFASB's SPE consolidation project. Objectives . 3

eron
Download Presentation

PricewaterhouseCoopers Credit Derivatives: Understanding the Impact on Financial Statements

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. PricewaterhouseCoopers Credit Derivatives: Understanding the Impact on Financial Statements David Lukach, Partner Chip Currie, Senior Manager Structured Finance Group

    2. 1 Agenda Objectives Analyzing financial statements to assess credit derivatives Ground rules of FAS 133 Credit derivatives used for credit risk management Investments in credit linked notes (CLNs) Special Purpose Vehicles / Special Purpose Entities FASB’s SPE consolidation project

    3. Objectives

    4. 3 Objectives Understand how financial statements are affected by credit derivatives The accounting treatment of credit derivatives Special Purpose Vehicles FASB Consolidation Project

    5. Analyzing financial statements to assess credit derivatives

    6. 5 Analyzing Financial Statements: Where do you start? Footnotes to financial statements – serve as the roadmap Accounting Policy footnotes Financial Instruments and Fair Value footnotes Trading Revenues and Assets and Liabilities Investment Securities Loans Credit Related Products / Derivative Contracts Management’s Discussion and Analysis Value at Risk Disclosures

    7. 6 What am I looking for? Discussion of the Banks’ derivative activities Risk management strategies and objectives Trading Hedging Information regarding where the derivative transactions are presented in the financial statements Balance Sheet Income Statement

    8. 7 Where will this likely point me to? Balance Sheet Trading Account Assets Allowance for credit losses Investment Securities Derivatives (asset or liability) Income Statement Interest Revenues and Expenses Provision for Loan Losses Trading Revenues Investment Securities Revenue Other Comprehensive Income (stockholders’ equity)

    9. Ground rules of FAS 133

    10. 9 Credit Products Most credit products are considered derivatives subject to the requirements of FAS 133 Credit Default Swaps Total Return Swaps Financial guarantees contacts are not considered derivatives

    11. 10 FAS 133 Model Overview

More Related