Depository Risk Assessments

Depository Risk Assessment - a structured and rigorous evaluation of CSD risks

Supporting regulatory and commercial requirements to track CSD risk, the depository indicative risk ratings and assessments evaluate the related risks of CSDs associated with local market transaction processing, tracking every equity and fixed income depository worldwide (over 140 CSDs)

The design, ownership and structure of a CSD has a major impact on the asset safety of investments held in domestic markets. Thomas Murray Depository Risk Assessments provide a response to both commercial and regulatory pressures, such as SEC Rule 17f-7 (US) and FSA COB rules (UK), to assess the risks to which investors are exposed when their securities are settled and held with Central Securities Depositories (CSDs). The Depository Service is designed to provide detailed risk analysis on CSD operations and procedures in order to allow users to identify potential risk exposures suffered by asset owners.

The Depository Risk Assessments provide much needed information on the protection of assets and risk minimisation to institutional investors, asset managers, custodian banks, and regulators.

Depository Service Risk Assessments

Structured against a set of market-defined risks, the Depository Service Risk Assessments evaluate the risks of CSDs related to local market transaction processing. The scope of the Depository Risk Assessments includes settlement and custody risks linked to equity and fixed income transaction processes in local markets. The risks analysed cover:

• Asset commitment risk - the risk associated with the period of time from which control of securities or cash is given up before receipt of countervalue
• Liquidity risk - the risk that insufficient securities and / or funds are available to meet commitments
• Counterparty risk - the risk that a counterparty (an entity) will not settle its obligations for full value at any time, and the risk that such a failure will trigger a chain reaction
• Asset Servicing risk - the risk of the corporate action, proxy voting, and income collection/distribution services offered by depositories
• Financial risk - the risk associated with the ability of the CSD to operate as a going concern
• Operational risk - the risk that deficiencies in information systems or internal controls, human errors or management failures will result in unexpected losses
• CSD on CSD credit risk - the risk that a CSD is taking when settling transactions with another CSD.

Surveillance

We provide on-going daily surveillance of the depositories, whereby all material changes are notified to subscribers as they become known and verified in the market. Information is distributed through news flashes which are sent by email and available on the website and through RSS feeds. Thomas Murray also updates the Depository Service Risk Assessments to reflect ongoing changes, including those notified by email flashes.