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US Captives, Aircraft Lessors See Elevated Coronavirus Funding Risk

Coronavirus has increased funding risk for non-bank financial institutions (NBFIs), reflecting their reliance on wholesale sources and the continual need for balance sheet-intensive NBFIs to fund core operating activities. U.S. captive finance companies (captives) are most exposed to a disruption in the unsecured debt market, accounting for 77.9% of the aggregate 2020 debt maturities for the rated subsectors, followed by aircraft lessors at 13.9%.

Coronavirus to Pressure Business Development Company Leverage, Covenants

Fitch Ratings expects Business Development Companies' (BDCs) requirement to mark their portfolios to fair market value on a quarterly basis to be an increasing pressure point, in light of falling asset prices resulting from the global coronavirus pandemic. 

Aircraft Lessor Sector Outlook to Negative on Coronavirus Impact

Fitch Ratings has revised its sector outlook for global aircraft lessors to negative from stable, reflecting elevated downside risks from the global spread of the coronavirus. The dramatic reduction in global travel demand is already increasing financial pressure on airlines, which Fitch expects will result in increased lease deferrals or restructurings, airline bankruptcies, and ultimately, aircraft repossessions.

Assessing Global Financial Institutions' Vulnerability to Coronavirus Events

Fitch Ratings is actively assessing its global portfolio of bank, non-bank financial institution (NBFI), insurance company and fund ratings in light of the rapidly evolving coronavirus outbreak. As part of our portfolio assessment process, we are ranking institutions, sectors and regions from most to least vulnerable to the impact of the outbreak.


Fitch Ratings Publishes New Non-Bank Financial Institutions Rating Criteria

Fitch Ratings has updated its 'Non-Bank Financial Institutions (NBFI) Rating Criteria' and published a feedback report following the completion of the criteria exposure draft process. The main changes to criteria are: improvements to Fitch's quantitative benchmarks used in the financial profile assessment, a revised issue-level recovery rating framework, the replacement of Fitch Core Capital (FCC) with tangible equity and additional rating constraints for issuers with high market risk.

Sri Lanka Finance Companies Face Added Regulatory Pressure

Sri Lanka's finance and leasing sector will face added pressure for consolidation as deadlines for the implementation of tougher capitalisation requirements approach in 2021. We view further consolidation of the sector as positive for financial sector stability in Sri Lanka, but the process could be impeded by a challenging operating environment.

COVID-19 to Put Pressure on Small Independent Chinese Lessors

The ongoing COVID-19 coronavirus outbreak will increase the operating challenges for leasing companies in China, especially for small independent commercial lessors with more vulnerable funding profiles.




More on the Coronavirus


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Our new ESG monthly newsletter includes our global ESG perspectives across all rated sectors and countries, with commentary covering our views on ESG credit risk and the broader macro trends in ESG and the debt capital markets. 

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What Investors Want to Know: India Sovereign and Financial Institutions

Please Join Fitch Sovereigns and Financial Institutions analytical teams as they discuss their views on key issues affecting Indian sovereign, banks and NBFIs.

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Related Content
Indian FIs' Challenges Ongoing Amid Slowdown and Weak Funding

New Entrants May Force UK Financial Advisers to Cut Fees

UK financial advisers may be under pressure to reduce their fees as new entrants target their clients, Fitch Ratings says. This could dent the financial performance of leading firms such as St James's Place and Quilter as the market becomes more competitive. Fees are already under pressure from regulatory scrutiny and requirements for greater transparency.

US Financials See Rising Risk from Cash Products Amid Libor Sunset

The transition from U.S. dollar (USD) London Interbank Offered Rate (Libor) to its likely replacement, the Secured Overnight Funding Rate (SOFR), presents heightened risks for U.S. financial institutions (FIs), Fitch Ratings says. Banks may face greater legal, operational and reputational challenges from cash products, which have lagged derivatives in moving away from Libor.

Vietnam's New Consumer Finance Curbs to Challenge Business Models

Vietnam's new regulatory limits on unsecured consumer-finance personal loans will pressure the business models of more-exposed companies over the next few years.

Online Bank Deposit Growth Undeterred from Rate Cuts

Online banks have cut deposit rates meaningfully since the Federal Reserve began signaling rate cuts in the first quarter of 2019. However, despite their more aggressive rate cuts on retail savings accounts relative to traditional branch-based banks, deposits at the online banks have continued to grow at a strong pace and ahead of the broader industry growth rate.

Webinar on Demand

2020 Outlook: Latin American Banks and Non-Bank Financial Institutions

Fitch’s Latin America Financial Institutions Ratings team discussed the outlook for banks and non-bank financial institutions across the region on January 30. Senior analysts addressed key themes, including the macro outlook, and a review of the most important risks facing the region’s financial systems. Discussion was followed by a Q&A session. Listen Now

Outlook for Credit Quality in a Global Slowdown

Easier global financial conditions will do little to lift world growth, which remains constrained by trade uncertainty and rising political risk. Jeremy Carter, Chief Credit Officer, with Brian Coulton, Chief Economist, Katie Falconi, Regional Credit Officer, Americas, and James McCormack, Global Head of Sovereign & Supranational Ratings, explores what these risk factors may mean for Fitch’s ratings in 2020.


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Credit Outlooks 2020

Airline, Lessor, ABS Credit Unaffected by 737 MAX Suspension

The Boeing Company's decision to suspend production of the 737 MAX does not yet alter the credit profiles of large North American airlines or global aircraft lessors, nor does it affect the performance of outstanding aircraft lease asset-backed securities (ABS), says Fitch Ratings.

China's Stricter P2P Regulatory/Capital Rules a Credit Positive

The increased regulatory and capital requirements for China's peer-to-peer (P2P) lenders should continue to put pressure on the sustainability of business models across the sector in 2020, leading to further industry contraction.

Outlooks 2020: The Coming Storm

High Indebtedness, Low Growth Shapes 2020 Global Credit Outlook

A combination of slowing economic growth, sustained low interest rates and unprecedented levels of indebtedness will broadly influence the global credit outlook in 2020, says Fitch Ratings. The aggregate rise in global indebtedness in 2019, which occurred as monetary authorities reversed course on rate hikes, will increase vulnerabilities for key sectors in the event of a more rapid than expected economic downturn.

Read the ReportFitch Ratings 2020: The Coming Storm

Fitch Ratings Wins 2 Structured Finance Awards;Named Best in Financial Institutions & Public Finance

Fitch Ratings has been recognised as the best rating agency for structured finance at FinanceAsia's annual 2019 achievement awards and was also voted Australian structured finance rating agency of the year by KangaNews. FinanceAsia also named Fitch as the best credit ratings agency for financial institutions and public finance.

Credit Card Losses Stable as Profitability Nears Cyclical Highs

Credit card credit performance continues to be stable, which has helped drive industry profitability toward cyclical highs according to the latest Credit Card Asset Quality report from Fitch Ratings. In third-quarter 2019 (3Q19), net charge-off rates (NCOs) for general purpose card issuers were relatively flat, rising a modest two basis points (bps) yoy to 3.18%.

More Indian NBFCs to Go Offshore as Funding Crunch Continues

India's non-bank financial companies (NBFCs) will look increasingly to offshore financing in 2020 as local funding conditions are likely to remain under pressure, says Fitch Ratings. However, we expect offshore access to be confined to larger entities with stronger credit fundamentals.

outlooks 2020

Emerging Asia's Finance and Leasing Cos Face a Challenging 2020

The operating environment for finance and leasing companies in China, India and Indonesia is likely to remain challenging in 2020, with tight funding conditions, a weak economic background and deteriorating asset quality testing the resilience of issuers' financial profiles and business models, says Fitch Ratings. We have assigned a negative outlook to the sector.


Related Report: 2020 Outlook: APAC Emerging Market Finance and Leasing Companies

View all Outlooks: Credit Outlooks 2020

Outlooks 2020

Traditional Investment Mgrs See Continued Asset, Margin Downside

Global investment managers (IMs) face continued pressures in 2020, including elevated competition and a challenging investment environment. While these dynamics increase downside risk, particularly for traditional IMs relative to alternative IMs, larger, well-capitalized and diversified IMs are expected to withstand these multiple sector headwinds.

Outlooks 2020

Strong Franchises Back Stable Financial Market Infrastructure Outlook

Fitch Ratings' global rating and sector outlooks for financial market infrastructure companies (FMIs) are stable, reflecting strong franchises, increasingly diversified business models and generally strong financial metrics including solid capitalization, strong liquidity and moderate leverage.

FICO Score Variances Complicate Assessing Consumer Default Risk

Assessing downside risk of U.S. consumer credit can be more difficult if different versions of credit scores are used when lending, underwriting standards are relaxed amid a supportive economy, or when lenders are reaching for growth.

Outlooks 2020

Business Model Changes Support Stable 2020 Brokerage and Advisory Outlook

The stable sector outlook reflects the industry's progress in diversifying and adapting business models to become more efficient and resilient to on-going structural challenges, including subdued securities trading volumes and competitive revenue pressures, particularly for retail brokers. 

Outlooks 2020

Strong Consumer Underpins Stable Outlook for N.A. Finance and Leasing Companies

The 2020 sector and Ratings Outlooks for North American finance and leasing companies (FLCs) are stable, according to Fitch Ratings. The solid, albeit slowing, macroeconomic environment is expected to result in consistent credit loss performance and manageable residual value declines.

Outlooks 2020

2020 Student Lending Sector Outlook Revised To Negative

The 2020 outlook for the education finance (student lending) sector has been revised to negative from stable, according to Fitch Ratings. The negative revision reflects margin pressure and higher leverage in the loan consolidation segment, as well as emerging political risk ahead of a presidential election year. 

2020 Outlook

Competition to Maintain Pressure on BDC Lending Terms in 2020; Negative Sector Outlook

Business development companies (BDCs) will face continued challenges heading into 2020, including competitive underwriting conditions, earnings pressure from lower interest rates and unsustainable asset quality metrics, according to Fitch Ratings' 2020 BDC outlook report. Fitch believes competition in the middle market will continue to pressure deal structures and terms in 2020 as low interest rates drive elevated demand for higher-yielding middle-market paper.

Special Report

Indian NBFCs Show Mixed Resilience to Testing Conditions

India's non-bank financial company sector is highly diverse, and many companies have business models and financial profiles that should continue to underpin resilience to the liquidity pressures that have tested the sector since the failure of IL&FS in Sept 2018. 

Related Content:



Debt Purchasers: Evolving Business Models and Key Credit Trends

Webinar On-Demand

As European Debt Purchaser begin to consider their upcoming refinancing needs Fitch explores the industry’s different and evolving business models and some of the key credit themes facing the sector and ultimately driving credit ratings.


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Introducing our ESG Heat Map

Fitch Ratings has launched an ESG Heat Map covering 29 different sub-sectors for Financial Institutions to provide further insight into the relevance of ESG factors to credit ratings. The map is designed to help users understand how relevant individual ESG topics are to credit ratings across different sectors.

Woodford Fallout Shows Risks from Financial System Connectivity

Fallout from the suspension of redemptions (gating) from the Woodford Equity Income Fund is an example of how problems at one entity can quickly spread to related entities and other parts of the financial system. Problems can spread due to crossholdings in sister funds or reduced investor confidence in other funds with the same manager, affecting investors as well as banks and other counterparties providing leverage to funds.

Leveraged Loan, CLO Exposures Understate Risks for Financial Institutions

Financial institutions' leveraged loan and CLO exposures are manageable relative to sector capital but risks may rise sharply in a stress. Undrawn facilities may be called on leading up to or during a leveraged loan downturn. Banks extend a mixture of credit facilities to CLO managers, investment funds and other non-bank commercial lenders, which are collateralised by leveraged loans or CLOs. 

Rising Household Debt May Weigh on Medium-Term Chinese Growth

Chinese household debt has continued to rise rapidly, reaching 85% of disposable income at end-2018. Rising servicing costs will weigh on economic growth in the medium term and this is reflected in our latest GDP forecasts.


Related Press Release:
Rising Household Debt May Weigh on Medium-Term Chinese Growth

Webinar on Demand

European Leasing & Rental: Business Models and Key Credit Trends

European leasing and rental companies have become more prominent participants on both public and private debt markets. Business models, risk profiles and exposure to economic cycles differ widely between issuers. Topics include business models and key credit trends for:

  • Rolling stock lessors
  • Equipment rental companies
  • Fleet/car leasing companies

Mark Young - Managing Director, Head of EMEA and APAC NBFI
Christian Kuendig - Senior Director, Head of EMEA NBFI
Aslan Tavitov - Senior Director, NBFI David Pierce, Director, NBFI

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Fitch Publishes Dubai Aerospace Enterprise's 'BBB-' Rating; Outlook Stable

Fitch Ratings has published Dubai Aerospace Enterprise (DAE) Ltd's Long-Term Issuer Default Rating (IDR) of'BBB-' with Stable Outlook, DAE Funding LLC's senior unsecured long-term rating of 'BBB-' and DAE's senior secured long-termerm rating of 'BBB'.

Credit Card Asset Quality Weaker in First Quarter

Credit performance amongst the largest U.S. credit card issuers weakened in first-quarter 2019 (1Q19), but remains below historical averages. Both net charge-offs (NCOs) and 30+ day delinquencies for general purpose credit card issuers rose eight basis points (bps) year over year, according to latest credit card asset quality report. 

2019 Global Banking Conference NY - Fireside Chat - Regulatory View of Financial Stability

Kevin Duignan, Global Head of Financial Institutions, joins Michael S. Piwowar of Milken Institute and Richard Berner of NYU Stern School of Business at Fitch’s Global Banking Conference in New York, for a fireside chat on the banking regulatory environment.

Fulcrum Fees Not a Panacea for Active US Investment Managers

A broader adoption of incentive-based or "fulcrum" fee structures for investment funds could be a credit negative for traditional investment managers. Incentive-based fee structures under which the investment manager's base fee rate is a function of the fund's absolute or relative performance could help stem asset outflows, at least temporarily. 

Global Shadow Banking Growth Increases Systemic Risks

Shadow banking’s ascension may signal growing systemic risks. How shadow banks perform through the next credit cycle will determine whether this more diffuse but less transparent and more lightly regulated construct is more beneficial for the overall financial system versus the prior, more bank-concentrated model.


Related Materials
Special Report:
 Shadow Banking Implications for Financial Stability
Video: 2019 Risks to Watch – Shadow Banking

Financial Crime Compliance/Conduct Risk Drive High Financial ESG Scores

Financial crime compliance and conduct issues drive the highest impact Environmental, Social & Governance (ESG) relevance scores for bank credit ratings in developed markets, according to a new report that looks at specific financial institutions that have high ESG relevance scores (i.e. '4's and '5's). 

Higher BDC Leverage Increases Focus on Senior Loans, Funding

Leverage has slowly increased for business development companies (BDCs) following passage of The Small Business Credit Availability Act (SBCAA) in March 2018, which directionally Fitch views as a credit negative. However, ratings have been largely stable for the sector as BDCs utilizing higher debt capacity have opted to alter portfolio risk composition by moving the capital structure into more first-lien positions. 

Tighter Regulation Challenges Chinese Peer-to-Peer Business Models

Fitch Ratings expects China’s peer-to-peer (P2P) lending industry continues to shrink and suggests watching out the impacts on business models, asset quality, liquidity and funding.

China's Peer-to-Peer Lending Shrinks as Regulation Tightens

China's peer-to-peer lending industry will continue to shrink and consolidate as tighter regulation and weak investor sentiment drive out operators conducting the riskiest activities.


Related Materials:
Tighter Regulation Challenges Chinese Peer-to-Peer Business Models (English video)
监管趋严使中国的P2P业务模式面临挑战 (中文视频)

 U.S. Auto Loan Credit Improves; Prime and Subprime Trends Diverge

The credit performance of U.S. auto loans strengthened in 2018 with net charge-offs for the largest auto lenders declining on a year-over-year basis in 4Q18, according to the latest U.S. Auto Asset Quality Review report.

Global Non-Bank Financial ESG Risk Mostly Governance

Governance tends to have a higher relevance for emerging market NBFIs versus developed market NBFIs, where it is often associated with the implementation and/or execution of corporate strategies and structures. Developed market considerations related to governance include complex group structures, key person risk and transparency.


Nathan Flanders


Nathan Flanders

Analytical Global Head

+1 212 908 0827

Jose Santos


Jose Santos

Business Group Head

+34 93 323 9044

Javier Serrano


Javier Serrano


+1 212 908 9158

Mark Young


Mark Young

Analytical Head of NBFI

+65 6796 7229

Jonathan Lee


Jonathan Lee


+886 2 8175 7601

Sing Chan Ng


Sing Chan Ng


+65 6796 7210

Christian Kuendig


Christian Kuendig


+44 20 3530 1399

Erwin van Lümich


Erwin van Lümich


+34 93 323 8403

Claire Dopson

UK & Northern Europe

Claire Dopson


+44 20 3530 1405

Alejandro Garcia


Alejandro Garcia


+1 (212) 908 9137

Diego Alcazar


Diego Alcazar


+1 (212) 908-0396

Meghan Neenan

North America

Meghan Neenan


+1 212-908-9121

John Bareiss

North America

John Bareiss


+1 312 368 3162

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