2014 CDS Independent Price Verification (IPV) Survey

Transcription

1 2014 CDS Independent Price Verification (IPV) Survey

2 Structured Credit Investor (SCI), in conjunction with Fitch Solutions, has undertaken a global survey of independent price verification (IPV) and valuation professionals in order to gather intelligence on current market practices and attitudes within this increasingly important banking function. SCI interviewed 26 IPV and valuation heads from financial institutions around the world with the following geographic break-down: Europe 54%, North America 38% and Asia 8%. Job titles included VP of product control, IPV valuations manager, credit product control, senior investment strategist, and others. All respondents took part in the survey on the understanding that their answers would be treated anonymously. With often surprising results, themes explored included the importance, relevance and number of data sources used by IPV desks; vendor transparency; IPV processes particularly in the case of names lacking market data; and the impact of new regulation on auditing and valuation processes. Transparency Conundrum A dominant theme uncovered by the survey was the continued importance of transparency in CDS pricing data, whether that concerns the data vendor s collation methodology, the granularity of prices in a consensus service, or the way in which the data is presented to clients. At the same time, however, the survey also exposed unwillingness from many banks to disclose their CDS pricing data due to litigation fears and damages stemming from the Libor scandal. I think all banks undertook a review of the submissions they make following the Libor scandal consensus-driven or anything else, says one survey respondent. I believe a lot of banks now shy away from giving information to these sorts of services, and I think there are fewer submissions as a result. There are differing internal policies at banks in terms of the internal department that owns the responsibility to contribute or not to consensus pricing. In some instances, the decision resides with the valuations or compliance departments. In other institutions, the more extreme examples show that responsibility lies solely with the front office. These different approaches suggest that there is no industry standard. This potentially worrying development, and its ultimate resolution by the regulators and the CDS industry itself, is yet to be played out. Banks are seeking reassurance from vendors around the scrutiny and data cleaning of submitted data through increasing due diligence on vendor processes and enhanced documentation, says Fitch Solutions director of CDS pricing and analytics, Diana Allmendinger. This gives banks some level of comfort with the data submission process but even then the nervousness remains. Where this is the case there is little we can do to combat the banks reticence other than try to meet with the decision-makers and educate them about the importance of submitting and receiving CDS consensus pricing. Allmendinger also suggests that regulators could issue a directive to encourage banks to cooperate, but adds that all of these avenues currently prove challenging. While offering more transparency for regulators, submitting pricing data to trade repositories is not akin to nor a replacement for consensus pricing services as banks do not receive data back to use in their IPV processes. Multiple pricing sources Away from transparency issues, the survey revealed that the vast majority of IPV desks use more than one data source for verification processes and reserving methodologies, thereby highlighting the need for multiple data sources for the prudent valuation of CDS. Varying sources are used by institutions, including trade, executable, consensus vendor and clearing house prices, as well as quote vendors. Each institution noted that they utilise a hierarchy of pricing sources, with trade data tending to appear at the top of most lists. Proxy pricing and modelled prices tended to be used as a last resort where no other data are available. However, there were variations. A trade price, for example, was not always deemed the most reliable if the trade was small. And while quote vendors were low in the hierarchy of usage, their importance was highlighted thus making it systematically possible to cover a large number of names. With so many pricing options available to IPV desks, the survey s findings highlighted a potential need to be able to view multiple pricing sources simultaneously (i.e. trade, executable and consensus). This would be particularly useful if a firm s typical first port of call (e.g. trade price) was not always going to be the most reliable. September

3 The importance of multiple pricing sources was also underscored by the fact that pricing data is not always available for certain securities. CDS with very long or very short tenors (less than one year or more than 10 years), as well as illiquid or distressed names, were often cited as black spots for accurate data. We see gaps in illiquid areas or distressed names, says one valuation head. However, we have so many data sources that if they are missing from one area we can usually find a price from a different source. Data quality, granularity, transparency, coverage, the price of the service and ease of use were all cited as important factors when IPV teams select their primary pricing sources, according to the survey. One respondent commented that his institution s process focused on minimal valuation uncertainty and maximum transparency around the assumptions or prices used. When we do our IPV process, we also look at the uncertainty within the IPV process, he explains. If we are given an independent price, we have to look at how happy we are with that independent price. The best independent prices are those that are closest to the executable price, where the prices are reflective of trading levels. With executable pricing unavailable for a large universe of CDS names that need to be verified, access to quality consensus pricing is of the utmost importance. Striking the right balance when deciding how much data to include in the price discovery process is challenging, as more is not always better. In fact, Fitch Solutions found that more data does not necessarily add to the overall quality of consensus CDS pricing. After careful analysis, Fitch Solutions determined that including only tier 1 market-making banks in its pricing consortium yielded better results than when second- and third-tier banks prices were included. We found that prices from non-market-making institutions were often stale and less reflective of market levels and so would dilute the quality of our consensus pricing, says Allmendinger. IPV professionals attitudes towards data vendors services appeared fairly positive, based on survey responses. The majority of respondents were satisfied with the vendors approach and methodology in collecting and aggregating CDS pricing, with just a small number requiring more transparency. The majority of respondents were also happy with the quality and presentation of data provided by vendors, with a minority seeking further clarity or clarification to vendors data. Among suggestions to vendors for improvement was a request for better interfaces, a need for a standardised automated format for s or delivery method, and for standard deviation data to be used in pruval calculations. However, as UK banks prepare for the implementation of new prudential valuation requirements later this year, data vendors will inevitably need to tailor their data services. Vendors have been making a lot of progress to deal with the prudent valuations directive and the whole space is in flux as to what people want from their data providers on that front, comments one UK IPV head. But generally speaking, I don t need any more data. Regulation and audit The financial crisis and ensuing regulatory changes have, inevitably, had an impact on IPV teams and their processes. One institution interviewed for the survey noted, for example, that its IPV department did not formally exist before the crisis, while another firm commented that organisational changes had resulted in a more influential role for the IPV team within the bank. In the past it used to come down to who was more thick-skinned the traders or the IPV team, comments one IPV head. But due to organisational changes, the P&L, product control and risk sections are now working together. While the trader does have some input into the valuations process, it is now our say at the end of the day. Another respondent noted more trader involvement in the IPV process since the crisis not because they are worried about the IPV, but rather because they are worried about the ramifications of being seen to have mis-marked by regulators. Respondents commented that audit both internal and external have some impact on their institution s pricing and validation process. Survey respondents indicated that auditors would request clarification on pricing of certain securities and demanded transparency in both generating IPV data and the process by which it was reached. In several cases, respondents commented that auditors may challenge their data vendor choice. New Fitch CDS Portal Fitch Solutions is launching a web-based CDS portal to provide clients with additional transparency into consensus CDS spreads. The Fitch CDS Portal will contain various data quality statistics, customisable enhanced reporting capabilities as well as graphical analysis to help streamline the IPV workflow and allow a deep dive analysis of CDS pricing. The ability to drive workflow will help make valuations teams more efficient while also enhancing their control environments. 3 September 2014

4 1. How many pricing sources does your IPV desk utilise in its pricing verification process and reserving methodologies? 3. Which of the following price sources do you use and by which method do you access them in the valuation process? A wide variety of responses were given to the survey s opening question. While the majority of institutions tend to use three pricing sources in their pricing verification processes, a large number of IPV desks use five or more sources. Several respondents noted that the number of sources used would depend on the product or name in question and the availability of relevant pricing data. 2. Have the number of sources increased or decreased in the last 12 months? Survey respondents were asked to indicate the method by which they access data in the valuation process, including consensus vendor prices, quote vendor prices, trade prices, executable prices, clearing house prices and evaluated/model prices. The results indicate that consensus vendor price data was most often accessed by FTP, Bloomberg or vendor websites; quote vendor prices are accessed most often via or Bloomberg; trade prices are accessed via Bloomberg or internal databases; executable prices are accessed most often via Bloomberg; clearing house prices via FTP, Bloomberg or vendor website; and evaluated/model price via internal databases or Bloomberg. 4. Is there a hierarchy to your pricing source usage? If so, can you describe the hierarchy? A hierarchy in pricing source usage was confirmed by an overwhelming majority of respondents. The vast majority said that trade price would always take priority in the hierarchy, followed by executable price, then consensus/vendor price. A proxy or modelled price would usually come at the bottom of the list. Although the majority of respondents confirmed that the number of sources used by their IPV desk had not changed within the last year, almost a quarter of desks have increased the number of pricing sources that they employ. Just 8% of respondents said that they had lowered the number of pricing sources used. However, there was some variance. Some U.S. institutions, for example, noted that in certain instances clearinghouse data would be used as a first-option pricing source, but this does not necessarily cover the IPV requirements of the firms entire portfolio. For derivatives which are not systemically cleared like single-name CDS, this would apply to only a small universe of names, leaving IPV teams to rely heavily on indicative pricing provided by consensus pricing providers. One asset manager noted that his firm would use vendor price first, followed by executable price, then model price. Trade price, he noted, would only come in if it were significantly different to vendor price, in which case it would be over-ridden. September

5 For every product, we have a hierarchy, said one bank IPV head. Trades are the number one priority; then we ll pick a vendor or external price that we think is most reliable. While trade vendors tended to come quite low in the hierarchy of usage, respondents highlighted their importance for making it systematically possible to cover a large number of names. It was also observed that the use of trade data could be problematic if the trades were small for example, a retail trade that would not be deemed as reliable as a large trade. In addition, respondents noted that the product in question would affect the order of the hierarchy. A global waterfall is applied, commented one UK IPV executive. This takes into account independency, reliability, staleness, ageing and the number of contributors to rank the sources. Some sources may appear multiple times within the waterfall with different quality requirements. Vendors tend to be at the bottom of our hierarchy, added another European valuation executive. We rely more on quotes/dealer consensus, followed by vendors. We try to triangulate the price of one security, given other similar security prices, using in-house cashflow models. 5. How are primary pricing sources selected? Data quality, granularity, transparency, coverage, the price of the service and ease of use are all factors that are taken into consideration when IPV teams select their primary pricing sources, according to the survey. Many firms also stressed the importance of historical back-testing of prices and due diligence being carried out on providers before selection. For any chosen pricing source, we will have typically done a lot of back-testing and looked at historical pricing and live pricing, said one U.S. IPV executive. There is a certain amount of regression testing. The pricing sources are effectively beta tested through monthly usage. Another respondent commented that the process focused on minimal valuation uncertainty and maximum transparency around the assumptions or prices used. When we do our IPV process, we also look at the uncertainty within the IPV process, he explained. If we are given an independent price, we have to look at how happy we are with that independent price. The best independent prices are those that are closest to the executable price. In terms of quality, many respondents said they looked to whether the data provided was executable or not, as well as looking at the volume size of the quote in question. Price appeared to also play an important role, too. Some respondents commented that certain pricing providers were ridiculously expensive, and noted that where contracts with certain providers had expired, they had not renewed because of this. Coverage provided by pricing sources was, in some cases, deemed patchy or better in some jurisdictions than others. One provider was deemed to have good CDS coverage in the U.S. but poor coverage in Europe, while the opposite was true for another provider. Some respondents said that they rarely changed pricing provider, while others appear to carry out reviews periodically. We do an annual vendor review, one valuation executive confirmed. We make sure we re comfortable with the vendor s valuation process and how they eliminate outliers. The vendors that fit most are the ones that are prioritised. We don t change vendor often, but there is a possibility that we would change a vendor based on our review. One respondent noted that providers are reviewed at least annually, while another commented that primary pricing sources are selected through a due diligence process organised by the valuations committee. 6. Where are you seeing gaps in coverage from your primary data vendors? What is your process for covering these gaps? Over half of the survey s respondents said they were not currently seeing any major gaps in data coverage. Of those that did report gaps, however, the same types of securities and tenors i.e. illiquid and distressed names, or very long or very short tenors (more than 10 years or less than one year) cropped up repeatedly in responses. We see gaps in illiquid areas or distressed names, said one valuation head. However, we have so many data sources that if they are missing from one area, we can usually find a price from a different source. He added: CDS with tenors of less than one year can be lacking in data, but people only care about that for distressed trades, or when they are trying to hedge gap risk. For example, when Greece was trading wide, there was just one price for six-month risk and one-year risk. Clearinghouse data was criticised for having limited tenors and limited names available and consensus services were criticised for having prices that are not always executable, while others said coverage was vendor-dependent. As described earlier, some vendors appear to be stronger in the U.S. than Europe, and vice-versa. 5 September 2014

6 It s not only the breadth of coverage, but also the number of contributors and the liquidity and score of the curve, says one U.S. IPV head. Of the various methods reported for covering gaps in data, none were deemed perfect. Several respondents said they calculate a proxy value using internal databases. Others either escalate to the vendor which will go out to dealers and get a consensus price or if that s not possible, proxy methods will be used. One bank noted that in some cases where there was no satisfactory data for an illiquid CDS, it would be marked as untested. provider to trade a security. Trading securities is a very marketdependent function. If firms have the budget to employ such things and compare internal valuations with external valuations, then it s good back-up. 8. How well do they respond to individual price challenges? Respondents noted that in certain cases where coverage was lacking, these issues would be challenged with the vendor. However, answers were not always received early enough to meet deadlines. We try to look at trade reviews, proxies, benchmark levels, change-over times (e.g. a trade we did three months ago and do a proxy with that), explained one participant. Another respondent stated, We do due diligence and look at independent broker quotes, firms executed trades, historical data and trends and any other vendor data if available. Longer-term, respondents said they remain in discussion with the vendors to improve their processes for addressing gaps in coverage. 7. How well is your vendors approach and methodology in collecting and aggregating CDS pricing understood? An overwhelming proportion of survey respondents were generally satisfied with the challenge process, while 12% of respondents said the process needs improvement. 9. Should improvements be made in the quality, quantity or presentation of data supplied by your vendors? The majority of respondents said that vendors do a good or satisfactory job of explaining their approach and methodology in collecting and aggregating CDS pricing, while a small proportion (8%) said that more transparency is needed. Understanding vendors methodologies is one thing, but knowing how to use this data is another, commented a UK bank valuations executive. By no means would I ever use a pricing The majority of respondents to this question said that no improvements were needed in the quality, quantity or presentation of data supplied by their vendors. But it was a marginal majority, with 38% of respondents seeking further clarity or clarification to vendors data. Among the suggestions for improvement was a request for better interfaces, a need for a standardised automated format for s or delivery method, and for standard deviation data to be used in pruval calculations. September

7 One respondent noted that there is always room for improvement. We need more data covering the gaps that we see, he said. The presentation of the data that they do have is fine, although it would be good to see flows and the quantity of a particular product that has been traded. A number of respondents stressed that the one thing that they did not need from vendors was more data. It s hard to know how to use all the data all the time, said one IPV head. Vendors have been making a lot of progress to deal with the prudent valuations directive and the whole space is in flux as to what people want from their data providers on that front, added another. But generally speaking, I don t need any more data. 10. What is the process of valuing a trade position where there is no readily available market data? reserve against that to deal with any uncertainty, he says. We have to have a methodology for each type of adjustment that we make. We have a fair value adjustment to reflect our view of fair value, but this would be backed up by a methodology that would go through our modelling team and go through audit. It s a formalised process. Building a spread curve internally and using Intex alongside this curve was also an option cited by more than one respondent. Marking to model was one of the least popular answers. This option tended to be a secondary option if proxy pricing was not possible. 11. In price challenges, does the burden of proof lie with the trading desk or IPV team? The majority of respondents use proxy to value a trade position where there is no readily available market data. Of those that use the proxy method, a number reported using an internallydeveloped proxy pricing system or in-house models. According to the survey results, proxy pricing could reference corresponding bond or loan spreads, collateral values, or CDS based within the same or similar industry. We value via proxy relationship to another reference entity or group of entities, explained one respondent. We benchmark the traded level to the proxies and maintain a constant relationship until a further data point is found - i.e. a secondary traded level. If there s no vendor or dealer mark that we can find, we are typically going to go through an enterprise value of the company and value the position that way with comparables - by proxy, added another. As with several other questions in the survey, respondents stressed that each valuation would be treated individually with different approaches for different types of CDS. One CVA executive said that it depends on the underlying product. If it was an exotic name, for example, his institution would start by looking at the model risk involved and mark to model, then they would look at which hedges are on the position and how to flatten the risk. We d do it piece by piece, he explained. For a CDO, we d look at comparable names and data. For a CDS, we d pinpoint the rating and market sector in terms of seniority and currency. You won t pinpoint anything, but you can triangulate to a range. Another IPV head said that his institution has a hierarchy of data sources again dependent on each type of product. If it is a vanilla product, we use proxy market data and have a trading Responses to this question showed that the burden of proof in price challenges tends to lie with the trading desk, rather than the IPV team. In almost a quarter of cases, the burden of proof was shown to lie with both the IPV team and trading desk. 12. Has the burden of proof changed since the financial crisis and how? Two key trends emerged from the second part to this question: the first was the increased presence and influence of the IPV team within a bank. Respondents commented on the fact that IPV teams are more involved now than ever before and that other sectors of the bank are now taking them more seriously. 7 September 2014

8 In the past it used to come down to who was more thick-skinned the trader or the IPV person, said one IPV head. But due to organisational changes, the P&L, product control and risk sections are all working together. While the trader does have some input into the valuations process, it is now our say at the end of the day. 14. What portion of your price reconciliation process, to the nearest % range, is automated versus manual? A U.S.-based structured credit IPV head noted that the IPV team is the first stop for data as a source of independence, while another IPV executive pointed out that his institution s current IPV process was created post-crisis. The previous process was irregularly performed and did not calculate a P&L impact. The second theme that emerged was increased scrutiny of traders pricing within this process. One firm noted that it had seen much more trader involvement since the crisis not because they are worried about the IPV, but rather because they are worried about the ramifications of being seen to have mis-marked by regulators. There were a wide variety of responses to this question, highlighting the varied systems and practices currently used by IPV desks across the globe. While the majority of respondents (23%) said that their institution used a combination of 70% automated to 30% manual, it was not an overriding majority. 13. In addition to the month-end process, how frequently are traders marks checked against consensus? 15. How frequently are your IPV methodologies re-evaluated or recalibrated? The majority of respondents said that traders marks are checked against consensus daily, while a small portion said they were checked against consensus annually or not at all. Those that chose the other option, where clarified, said that marks tended to be checked monthly and not at any other interval. There was not one clear trend within the IPV space when it comes to regularity of methodology recalibration or reevaluation. However, most desks (62%) appear to address their methodologies either quarterly or annually, with a small proportion (12%) confirming that they never re-evaluate their methodologies. September

9 16. Does your bank employ the same IPV process in all locations or do you see regional differences? 18. What are the key drivers in determining the positions that are price challenged? Three key responses were heard when valuation professionals were asked what the key drivers are in determining the positions that are price-challenged. They included the impact on P&L, a discrepancy between desk and vendor prices, and the materiality of the position in question. One respondent suggested a position would be price-challenged depending on whether a trader had a position or not in that particular product and how the position would affect his P&L. It s a cynical view, but an accurate one, he added. Responses to this question were almost evenly split, with a marginal majority of institutions (54%) indicating that they use the same process everywhere. 17. How do you track and analyse price variances? There was no clear-cut response to the question of how institutions track and analyse price variances. Many respondents said they have an automated system, while a good number of others track pricing manually. Nearly all respondents said they use a proprietary internal database to collate price variances, with a set of thresholds that would trigger a warning, should they be breached. The frequency of tracking price variances ranges from daily to monthly. There is an automated process where our system picks up variances, said one IPV head. There are certain thresholds that we set within the system anything over those levels will be flagged. Once they are flagged, they are escalated. Another IPV head noted that when tracking and analysing price variances, his institution tends to work at a portfolio level. We quantify valuation uncertainty at a portfolio level, he explains. It is unlikely that we would be concerned by small price variances on a small position, but we would be if there were big differences on a big position. By quantifying it at a portfolio level, we re able to see how much uncertainty there is. The majority of respondents said a position would be pricechallenged if there was a discrepancy between prices from different sources. We find that we don t challenge a lot of prices, but those that we do challenge, we will flag up if we see a much different price. The materiality of a position would also have some bearing as to whether it is price-challenged, noted one. Another respondent clarified this by saying that if his team recorded a 1% in aggregate difference to the investment manager in P&L for the month but one that was taken over 200 positions his team probably would not challenge any of those prices. On the other hand, if they had a percentage difference that was based on only two positions, those positions would be challenged. One IPV executive further qualified this: If you ve got a 7m difference and it comes down to a third of a basis point, we ll challenge it differently to a 7m difference due to a 150bp difference. If it s a 150bp difference, we know that something is wrong, but if it s a third of a basis point, it s more likely to be timing issues. 19. Has your bank s governance practices changed as a result of new regulatory requirements? An overwhelming majority of respondents said that their bank s governances had changed as a result of new regulatory requirements. 9 September 2014

10 20. Have the recent banking scandals, most notably Libor, had any impact on your data suppliers and in-house pricing contributors? One representative commented that benchmarking services and indices required integrity, and that banks should be encouraged to submit data to consensus services. However, he also noted that a lot of focus has been towards the upcoming implementation of reporting requirements such as the revised MIFID/MFIR legislation in Europe and the new requirements for transaction data reporting to trade repositories. While offering more transparency for regulators, submitting pricing data to trade repositories is not akin to nor a replacement for consensus pricing services as banks do not receive data back to use in their IPV processes. 21. How does an audit impact your pricing validation process? Although a marginal majority of respondents said that recent banking scandals had not impacted their data suppliers and in-house pricing contributors, SCI s survey uncovered an unwillingness from many banks to disclose much of their CDS pricing data due to litigation fears and damages stemming from the Libor scandal. One respondent also noted additional costs for provisions following the Libor scandal and a reduction in services. All banks undertook a review of the submissions they make consensus-driven or anything else, said one European IPV head. I believe a lot of banks now shy away from giving information to these sorts of services and I think there are fewer submissions as a result of the Libor scandal. This unintended consequence of the regulatory response to the recent benchmark scandals is thereby making markets less transparent across all asset classes. We ve stopped supplying prices to certain vendors where they are not executable, added another. We now give away less data, confirmed a third, while another IPV head suggested that there is a lot more scrutiny about what gets submitted following the scandal. A UK-based IPV head also commented on the lack of information on repo following the Libor scandal. That s a key variable, he said. We see that as an important gap. He explained that the BBA used to offer information on repo spreads, but since the Libor scandal, they have stopped publishing Sterling repo and took away a lot of their minor currencies as well. SCI approached a number of national and international regulators on this topic. None were able to give an official position on the situation, and informal conversations uncovered that the problem with banks submissions to consensus services across all asset types particularly as a result of the Libor and FX scandals was not something that had been flagged up with regulators as yet. Survey respondents indicated that auditors would request clarification on pricing of certain securities and demanded transparency in both generating IPV data and the process by which it was reached. In several cases, respondents commented that auditors may challenge their data vendor choice. Audits impact our validation process, as our auditors ask us to review our data vendors to make sure we re happy with the valuations and prices we re getting, which was new for us a couple of years ago, said one respondent. So it s not just the process, but also the methodology and what we use for validation. Another respondent noted that auditors may ask if due diligence has been carried out on the vendor providing a certain price, and what their methodology is. A further respondent commented that higher regulation on the audit side has subsequently resulted in a greater need for vendor due diligence and documentation. There was positive and negative feedback surrounding auditors involvement in the pricing validation process too. Several respondents noted that an audit could slow up the process or that the auditors would focus so much on the process of validation that they would fail to take note of the market in general. One respondent even suggested that auditors don t understand the pricing process used by his institution, while another said that both types of auditors have a hard time grasping the complicated matter in which the illiquid and unobservable products are modelled. On the positive side, several respondents said they appreciate having another opinion on their pricing process and auditors opinions on how they could improve their process. Whether or not I agree is another matter, said one IPV executive. September

11 Another respondent noted that auditors involvement does actually help them overall. An audit is generally in our favour and we are usually happy to follow their recommendations, he said. IPV has so many external strands of data to collect, so it s good to have an audit process to actually check that what we are doing is working correctly. 22. What are the main differences you see between internal and external audits? Respondents implied that internal audits tend to be more process-oriented, whereas external audits would take a more high-level view. For example, where an internal audit would focus on ensuring that set procedures and policy are followed or look at the stability of an institution s spreadsheet process, an external audit would seek to ensure not only that procedures are followed, but also if they make sense. Internal audits are more process-oriented, commented one IPV executive. They ask questions such as are the buttons clicked? and have you IPV d everything that you re supposed to? Internal audit requires a lot more detail than external audit. Another respondent commented that an internal audit is more focused on internal management policies, broadly speaking, versus external which focuses on whether it is in line with Bank of England or FCA requirements. External audits take a pretty high-level review and depend a lot on internal auditors forensic work, added another respondent. Another IPV head concluded that while external auditors are more interested in completeness of coverage, internal audit is processdriven and focuses on the stability of his institution s spreadsheet process. Audit is a key part of our process here, as we will go out and resolve/investigate any points that are raised by them. About SCI SCI is a media and information company bringing readers an independent and impartial perspective on the global securitisation markets. SCI covers all aspects of securitisation and its constituent asset classes ABS, CDOs, CLOs, CMBS and RMBS through a powerful combination of News, Market Data and Events. About Fitch Solutions Fitch Solutions delivers credit market data, analytical tools and risk services to the global financial community. In addition to offering proprietary market-based content, Fitch Solutions distributes the ratings, research and financial data of Fitch Ratings through a variety of flexible platforms. With innovation and experience behind every solution, Fitch Solutions helps financial professionals meet the diverse and evolving needs of today s global markets. Fitch Group is a global leader in financial information services with operations in more than 30 countries. In addition to Fitch Solutions, the group includes Fitch Ratings, a global leader in credit ratings and research; Fitch Learning, a provider of learning and development solutions for the global financial services industry; and Business Monitor International, a provider of country risk and industry analysis specializing in emerging and frontier markets. Fitch Group is jointly owned by Paris-based Fimalac, S.A. and New York-based Hearst Corporation. 11 September 2014

12