Enhanced risk management for a safer financial system
EquitiesFirst shares global regulators’ commitment to protecting the financial system against systemic risks as well as corporate scandal and fraud.
The financial crisis of 2008 made it abundantly clear that poor risk management in the financial sector can have a very real impact on livelihoods and businesses in the real economy.
The collapse of the US sub-prime mortgage market, followed by the fallout from the bankruptcy of Lehman Brothers, triggered a global recession. Americans alone lost US$9.8 trillion of wealth in the crash and the recession caused a loss of nearly 4% of global Gross Domestic Product, according to Moody’s Analytics.
More recently, the build-up of debt in the Chinese property sector has captured global attention. Investment bank Nomura estimates that China’s developers have total debts worth US$5.2 trillion, with nearly half of that amount made up of bank loans.
Globally, a determination to guard against a repeat of the 2008 crisis and rebuild trust in the financial system has led to an ongoing focus on reducing risk. But episodes from Wirecard to Archegos and Evergrande have shown that the world is never far away from another financial scandal.
To protect the financial system and the real economy it serves, regulators globally have stepped up their monitoring of financial risks and taken action to prevent risk from building up across the system or in specific pockets.
One of the biggest post-2008 changes requires banks to hold more capital in reserve for every dollar they lend, reducing the risk that another bank will fail or need bailing out with taxpayers’ money.
The so-called Basel reforms led to core equity tier 1 (CET1) capital ratios for large international banks increasing by nearly 3% between 2013 and 2019, according to the Financial Stability Board (See Chart). Experts believe that these stronger capital buffers helped ensure the stability of the banking system as the Covid-19 pandemic emerged in early 2020.
Trust and integrity
Following scandals over the manipulation of key interest and foreign exchange rates, benchmark lending rates are also being reformed to make them more transparent. This has resulted in the phasing-out of Libor – the most widely used reference for floating-rate loans – from the end of 2021.
Furthermore, companies and individuals must now pass more stringent know-your-client processes before being onboarded by financial institutions. This enhanced scrutiny is intended to protect the integrity of the financial systems by preventing money-laundering, sanctions evasion and the terrorist financing.
This heightened focus on risk management has underpinned a recovery from the recession of 2008. However, the loss of public trust caused by the Global Financial Crisis must be fully reversed for the financial sector to fulfill its purpose of converting savings into productive economic activity.
Indeed, the Organisation for Economic Cooperation and Development (OECD) noted in 2019 that market integrity, transparency and sound oversight are important drivers of restoring faith in the financial system. “The behaviour of institutions and participants in markets is critically important to maintaining society’s trust in markets, and forms a distinct component of investor confidence,” it said.
A long-term partner
At EquitiesFirst, integrity and robust risk management is at the heart of our business.
We operate in global financial centers including the UK, Hong Kong and Australia and are subject to stringent regulatory standards. EquitiesFirst and its regional subsidiaries are licensed and regulated across multiple jurisdictions.
We are committed to helping prevent money-laundering, fraud, market manipulation and other forms of illicit activity in the equity markets. Our compliance process begins with a comprehensive onboarding procedure that requires prospective borrowers to provide personal or corporate documentation.
EquitiesFirst’s private ownership also helps to safeguard the stability of our capital. We do not rely on external financing or credit lines that could be withdrawn in times of crisis, nor do we manage capital for external investors.
We have also invested in our own in-house research capabilities to help ensure full vetting of every opportunity and careful collateral management. We only lend against shares after a thorough fundamental and technical analysis, and we run a diversified portfolio across sectors and geographies to mitigate broader market risks.
Financial markets will always have periods of volatility, but we believe robust risk management, at the macroeconomic and institutional level, will help ensure stability and orderly markets even during difficult times. This is a priority for regulators around the world – and for EquitiesFirst.
Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1681/2023) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.