Sector developments and company hires

Long-term viability of QT questioned
US banks borrowed a record amount over the last week, demonstrating the extent to which they are under pressure and also, say analysts, raising questions about the long-term viability of QT. The US Fed released its balance sheet on 22 March and it shows that banks borrowed US$152.9bn during this period, US$11.9bn of which was through the newly established Bank Term Financing Program (BTFP).

The latter was put in place only 10 days ago in the wake of the collapse of SVB and Signature Bank and amid uncertainty surrounding several other US regionals (SCI passim). This sudden surge of borrowing also enlarged the balance sheet from US$8.4trn to US$8.7trn, unwinding much of the work undertaken in the last year to shrink Fed reserves.

In other news…

S&P fined for CRA Regulation breaches
ESMA has fined S&P €1.11m and issued a public notice for breaches of the Credit Rating Agencies (CRA) Regulation. ESMA found that S&P published credit ratings before the relevant securities were issued by the rated entities and announced to the market, due to internal control failures, and led to breaches of the rating agency’s transparency obligations.

The breaches covered by the fine relate to: deficiencies in S&P’s internal control mechanisms, which did not ensure compliance with its obligations regarding the timely disclosure of credit ratings; the failure by S&P to disclose on a non-selective basis and in a timely manner decisions to discontinue credit ratings; and the failure by S&P to submit up-to-date rating information to ESMA. All breaches were found to have resulted from negligence on the part of S&P.

In particular, ESMA found that between 5 June 2019 and 8 September 2021, S&P released solicited credit ratings regarding six issuers prematurely. Consequently, the authority fined S&P €825,000 for not having internal control mechanisms to ensure compliance with its obligations regarding the timely disclosure of credit ratings.

ESMA also found that between 2019 and 2021, in six instances, S&P removed - without providing explanations - credit ratings from its public platforms. Consequently, the authority fined S&P €210,000 for failing to disclose on a non-selective basis and in a timely manner decisions to discontinue credit ratings.

Finally, ESMA found that in relation to one rated entity, S&P did not ensure that the information it submitted to ESMA for publication on the European Rating Platform (ERP) was correct and up to date. Consequently, the authority fined S&P €75,000.

 In calculating the fine, ESMA considered both aggravating and mitigating factors provided for in the CRA Regulation. S&P may appeal the decision to the Board of Appeal of the European Supervisory Authorities.