Government and Professional Notes
Should government and the professional financial industry be monitoring banks in detail? Heck yes! And they do. In addition to IRA there are a number of other firms that provide bank data and analysis to professionals. They are not household names either and no we’re not about to list them here. The breath of their coverage and the emphasis of their analysis changes depending on what part of the professional analysis community they seek to serve.
IRA’s emphasis is on regulatory safety and soundness analysis with particular emphasis on assessing banks as transaction counterparties. This is because when originally founded our goal in 2003 was to respond to the tenets of the Basel II initiative to promote greater transparency in cross border financial transactions as part of what at the time was a seemingly ever expanding global economy. These analyses now manifest in three top level measures.
IRA Bank Stress Index.
This indexing system enables apples-to-apples comparisons of the operational stresses on a bank likely to affect counter party risk. Note that depositors, who lend their money to a bank, are technically also counterparties. This is why we were able to use this stress testing approach to build IRA’s simplified A+ to F grading system.
IRA “Shadow” CAMELS.
This is our latest measurement tool built specifically in response to an SEC contract specification to build testing method emulating the FDIC’s CAMELS examination estimates but using objective public data. CAMELS stands for C –Capital Adequacy, A – Asset Quality, M – Management Quality, E – Earnings, L – Liquidity and S – Sensitivity to Market Risk and is reported as a numerical score between 1 and 5. The SEC contract includes deepening scoring granularity to discern differentiation to the first decimal.
The Market Value of Equity Ratio is IRA’s approach to measuring market confidence in a bank by comparing current market value of equity to the last balance sheet Tangible Common Equity benchmark of an institution. It’s basically a way to measure if the stock market thinks the bank is worth what it said it was worth in the last 10-K or 10-Q. The test has less to do with the fundamental operational soundness of a bank and more to do with being a way to measure the amount of “trust” and, because it is a metric measuring subjectivity, “hope” the market has in an institution.
All three measures along with an extensive library of screening tools are bundled in IRA’s Enterprise License version of the Professional IRA Bank Monitor.
IRA offers our Enterprise License service to government agencies on a simple GSA like formula. Each agency pays exactly what our benchmark contract pays. The terms are per the contract awarded to us by the Securities and Exchange Commission (SEC) and, as you’ll see from the record in the federal registry, is a firm fixed priced unlimited internal use service for $50,000 per year award renewable at the same fixed rate for four additional option periods. Per Federal Acquisition Regulations, each agency contracts with the vendor independently. You can pay us electronically via the CCR system at the federal level. We are happy to respond to your sole source RFP explicitly calling for the same terms of delivery. The same offer holds for any State, County or Municipal agency as well as any government agency of a member state of the United Nations.
Finance Professional Organizations
This includes brokerage research departments, insurance companies, audit firms and the like. Your annual data budget cost for an internal use only enterprise license is two times the government rate. Send a purchase order and we’ll get you going.
a service of Institutional Risk Analytics