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PRESS ANNOUNCEMENT |
Thomas Murray Affirms the Central Securities Depository Rating for CDS Clearing and Depository Services Inc. at 'AA'
LONDON - Thomas Murray, the specialist custody rating, risk management and research firm has affirmed the CDS Clearing and Depository Services Inc (CDS) rating as 'AA' which represents very low risk overall. The rating is made up of the following components:
The 'AA' rating as assigned by Thomas Murray recognises CDS's ongoing commitment to minimise risk for market participants. The outlook has been assigned as 'Stable' which suggests that there are no imminent developments that may change the rating at this stage.
Although the overall rating has remained unchanged, CDS has made significant progress during the past year in taking steps to mitigate risk and as a result Operational Risk has been upgraded to 'AA+'. The significant developments that have led to the improved rating in Operational Risk are:
- The scope of the Canadian Institute of Chartered Accountants (CICA) 5970 audit has been expanded to include risk management. This has resulted in an increased level of comfort that the appropriate controls and procedures are in place. The 2007 audit results gave a very high level of assurance in this respect
- Some computer hardware has been upgraded to take advantage of technology developments to increase: reliability, processing speed, and capacity. The systems have been installed in a new and improved production system site that is resilient to environmental and infrastructure failure
- Business continuity arrangements have been enhanced with increased capacity for staff to work from an alternative site
CDS operates a sophisticated credit risk model, to protect participants against the risk of default of their counterparties. The model is based on loss-sharing arrangements designed in a way in which the defaulter's collateral is sufficient to cover its obligations in the vast majority of cases. This highly collateralised risk model proved resilient during the recent period of market volatility in Canada, and CDS's comprehensive internal stress testing demonstrated the robustness of the model under a variety of extreme conditions.
Other notable improvements that have been made by CDS or the market to help mitigate risk during the year are:
- The introduction of a CAD 50 million limit on the size of debt trades which has lessened the pressure on end of day settlement of large trades with a view to reducing trade settlement failures
- The wider use of third party electronic matching utilities coupled with the introduction of trade matching target times supported by the regulator is a further step to reduce the risk of failed trades
- Another profitable year in which further rebates were given to participants and fee reductions were implemented
Although governance is not presently rated, CDS has strong governance arrangements that support the public interest borne out by their commitment to system development, ongoing fee reductions and healthy fee rebates to its participants.
Simon Thomas, CEO and Chief Ratings Officer of Thomas Murray said when announcing the CSD rating of CDS Clearing and Depository Services Inc, "CDS remains one of the top rated CSDs in the world. The strength of CDS confirms the excellence of Canada's capital market infrastructure. The rating reflects the confidence the Canadian market has in CDS's complex and sophisticated risk model which has proved robust during periods of market volatility during the past year".
Ian Gilhooley, President and CEO of CDS Clearing and Depository Services Inc, said "CDS is pleased to have again worked with Thomas Murray in order to obtain an independent view of our existing capabilities and processes. The rating process involved a thorough review of CDS's clearing and settlement process and gave special focus to the improvements that CDS and the Canadian market have implemented over the past year". Mr Gilhooley indicated that he was particularly pleased to see that the efforts made had resulted in an improvement in the rating given to Operational Risk. He noted that the affirmation of the overall rating of AA demonstrates that CDS remains in an excellent position to support Canada's capital markets.
The Central Securities Depository rating assesses the risk exposures for investors associated with the processes the CSD has in place to facilitate the safekeeping and the clearing and settlement of securities, where applicable. It assesses six key risks. The methodology considers the capabilities of the depository and the quality and effectiveness of its operational infrastructure. It also assesses the depository's willingness and ability to protect its participants or clients from losses. As part of the rating, the scope and quality of the depository's services is assessed. The ratings are on a consistent global scale, using the familiar AAA to C ratings scale. Once the rating is assigned there is an ongoing surveillance process to monitor the depository.
Separately, Thomas Murray maintains proprietary assessments of over 140 CSDs globally as part of the Thomas Murray Depository Risk Assessment services. These reports are available via Thomas Murray at www.thomasmurray.com.
For further information contact:
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Simon Thomas or John Woodhouse |
Janet Comeau |
About Thomas MurrayThomas Murray is a specialist custody rating, risk management and research firm specialising in the global securities services industry. Thomas Murray was established in 1994. The Company tracks and analyses over 250 custodians globally and monitors the risk of over 100 capital market infrastructures. The Company has a strong position as a provider of public and private ratings and risk assessments on global custodians, domestic custodian banks and capital market infrastructures. About CDS Clearing and Depository Services Inc.CDS Clearing and Depository Services Inc. is Canada's national securities depository, clearing and settlement hub - supporting Canada's equity, fixed income and money markets, holding over $3 trillion on deposit and handling over 150 million securities trades annually. CDS Clearing is a subsidiary of The Canadian Depository for Securities Limited - a valued partner to securities market participants, providing reliable, cost-effective depository, clearing, settlement, regulatory and information services. CDS delivers innovative, value-added solutions that help stakeholders maintain a competitive capital market in Canada and build a strategic global advantage. |
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Registered office: Holbrook Court, Northumberland Road, Portsmouth, PO5 1DS. |
© Thomas Murray Ltd. 2008 |