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We are always interested in speaking to members of the media on news and events affecting the world of corporate credit risk. We look forward to hearing from you.
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For Immediate Release
Moody's KMV Launches CreditMark™, Allowing Banks To Mark To Market Corporate Loans
Tool Enables Commercial Banks To Value Illiquid Credits, With Big Implications For Improving Transparency, Portfolio Management And Risk Measurement
SAN FRANCISCO, February 4, 2004 - Moody's KMV, the world's leading provider of quantitative credit risk measurement and management tools to lenders, investors, and corporations, today introduced CreditMark™, a Web-based analytics tool that allows commercial banks to mark their corporate loans to market accurately. The product offers bank management real-time insight into loan-portfolio performance and provides originators a way to price new loans rationally.
Three institutions have already subscribed to CreditMark, including Bank of America, with a number of other banks now evaluating the tool.
"Bank of America has been using this product for more than a year now to run weekly valuations of portions of our commercial and middle market loan portfolios and to communicate the results to portfolio managers," said John Walter, senior vice president of Risk Capital & Portfolio Analysis at Bank of America. "They appreciate having a single site where they may view their portfolio valuations, browse data from multiple markets, and run scenario analysis to better understand the drivers of loan value."
Dr. Jeffrey Bohn, managing director at Moody's KMV, said, "This is the only credit valuation product combining timely information from both debt and equity markets, allowing clients to value illiquid credits such as bank loans using actual market data. With more than 50 percent of their balance sheets attributed to loans, commercial banks clearly need the accuracy this tool provides."
By combining their own portfolio information with daily CreditMark analytical market data, banks can - for the first time - reasonably value their portfolios daily on a loan-by-loan basis. In the current regulatory and economic climate, CreditMark could prove extremely useful to bank managements that want to provide greater balance sheet transparency to the investor community. Mark to market can also revolutionize the way banks handle their corporate loan portfolios, affecting not just valuation, but also opening up opportunities in origination, hedging, securitizing and selling.
To introduce clients to CreditMark technology, Moody's KMV performs bank loan portfolio valuations on a one-time, fee-for-service basis. In one recently completed analysis, a major European bank was able to value over half of its commitments - more than ever before - using observations from the loan, bond and CDS markets.
CreditMark builds upon the Moody's KMV's existing technologies, including its Expected Default Frequency (EDF™) credit measure and Portfolio ManagerTM, its portfolio credit risk engine. CreditMark can also employ RiskCalcTM for private firm EDF credit measures and LossCalcTM for loss given default estimates.
With debt trading infrequently, direct credit price observations are often nonexistent or stale. CreditMark uses multiple data sources to find the most up-to-date price available across markets and, in the many cases where no direct credit price is available, uses the EDF™ credit measure to value the debt exposure. In addition, CreditMark users can apply changes in EDF-based valuation estimates to older, observed credit market prices. CreditMark incorporates the latest valuation research from Moody's KMV on corporate bonds, credit default swaps and loans. The product includes a lattice valuation model that reflects the impact of credit options such as prepayment for term loans and variable usage and term-out options for revolving lines of credit.
CreditMark is compatible with data from CreditTrade and GFI, which provide credit default swap spreads, and with LoanX and the LPC/LSTA Mark-to-Market Pricing Service, which provide dealer quotes from the secondary loan market. CreditMark also incorporates bond spreads from Reuters EJV and NASD TRACE. To accommodate all the data from multiple markets and sources, CreditMark has its own daily production process and data server. In addition, CreditMark gives clients the capability to import their own proprietary credit price information, as well as the ability to store the detail on how a loan was marked for subsequent audit, controlling and regulatory requirements. Moody's KMV offers subscribers a full range of implementation support services, including installation support and the option of hosting data-base and application servers off-site.
About Moody’s KMV
Moody’s KMV, a wholly owned subsidiary of Moody's Corporation, is the world’s leading provider of quantitative credit risk analysis tools to lenders, investors, and corporations. Moody’s KMV's tools provide current default probabilities, recovery estimates, valuations and correlations, and are widely used to assess portfolio risk/return. Serving over 2,000 clients in 80 countries, including most of the world's 100 largest financial institutions, Moody’s KMV maintains the largest and cleanest database of corporate defaults in the world. In addition to its San Francisco headquarters, Moody’s KMV has offices around the world to serve its global customer base.
About Moody's Corporation
Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and Moody's KMV, the leading provider of market-based quantitative services for banks and investors in credit-sensitive assets serving the world's largest financial institutions. The corporation, which reported revenue of $1.2 billion in 2003, employs approximately 2,300 people worldwide and maintains offices in 18 countries. Further information is available at www.moodys.com.
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