One Decade Inflation Targetting In The World Frederic S.Mishkin 2001
Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (372.56 KB, 48 trang )
1%(5:25.,1*3$3(56(5,(6
21('(&$'(2),1)/$7,217$5*(7,1*,17+(:25/'
:+$7'2:(.12:$1':+$7'2:(1(('72.12:"
)UHGHULF60LVKNLQ
.ODXV6FKPLGW+HEEHO
:RUNLQJ3DSHU
KWWSZZZQEHURUJSDSHUVZ
1$7,21$/%85($82)(&2120,&5(6($5&+
0DVVDFKXVHWWV$YHQXH
&DPEULGJH0$
-XO\
:HWKDQN0DUN6WRQHIRUH[FHOOHQWFRPPHQWVDVZHOODV%HQ%HUQDQNH%HQQHWW0F&DOOXPDQGRWKHUSDUWLFLSDQWV
DWWKH&HQWUDO%DQNRI&KLOH&RQIHUHQFHRQ³7HQ<HDUVRI,QIODWLRQ7DUJHWLQJ'HVLJQ3HUIRUPDQFH&KDOOHQJHV´
1RYIRULQVLJKWIXOGLVFXVVLRQ:HDUHDOVRJUDWHIXOWR9HUyQLFD0LHVIRURXWVWDQGLQJUHVHDUFKDVVLVWDQFH
7KHYLHZVDQGFRQFOXVLRQVSUHVHQWHGGRQRWQHFHVVDULO\UHIOHFWWKHSRVLWLRQRI&ROXPELD8QLYHUVLW\WKH1DWLRQDO
%XUHDXRI(FRQRPLF5HVHDUFKRUWKH&HQWUDO%DQNRI&KLOH7KHYLHZVH[SUHVVHGKHUHLQDUHWKRVHRIWKHDXWKRUV
DQGQRWQHFHVVDULO\WKRVHRIWKH1DWLRQDO%XUHDXRI(FRQRPLF5HVHDUFK
E\)UHGHULF60LVKNLQDQG.ODXV6FKPLGW+HEEHO$OOULJKWVUHVHUYHG6KRUWVHFWLRQVRIWH[WQRWWR
H[FHHGWZRSDUDJUDSKVPD\EHTXRWHGZLWKRXWH[SOLFLWSHUPLVVLRQSURYLGHGWKDWIXOOFUHGLWLQFOXGLQJQRWLFH
LVJLYHQWRWKHVRXUFH
2QH'HFDGHRI,QIODWLRQ7DUJHWLQJLQWKH:RUOG
:KDW'R:H.QRZDQG:KDW'R:H1HHGWR.QRZ"
)UHGHULF60LVKNLQDQG.ODXV6FKPLGW+HEEHO
1%(5:RUNLQJ3DSHU1R
-XO\
-(/1R(((
$%675$&7
2QHGHFDGHRILQIODWLRQWDUJHWLQJLQWKHZRUOGRIIHUVOHVVRQVRQWKHGHVLJQDQGLPSOHPHQWDWLRQ
RILQIODWLRQWDUJHWLQJWKHFRQGXFWRIPRQHWDU\SROLF\DQGFRXQWU\SHUIRUPDQFHXQGHULQIODWLRQWDUJHWLQJ
7KLV SDSHU UHYLHZV EULHIO\WKHPDLQGHVLJQ IHDWXUHV RI LQIODWLRQ WDUJHWLQJ H[SHULHQFHV DQDO\]HV
VWDWLVWLFDOO\LIFRXQWULHVXQGHULQIODWLRQWDUJHWLQJDUHVWUXFWXUDOO\GLIIHUHQWIURPQRQLQIODWLRQWDUJHWLQJ
LQGXVWULDOFRXQWULHVDQGUHYLHZVH[LVWLQJHYLGHQFHDERXWWKHVXFFHVVRILQIODWLRQWDUJHWLQJ7KHLQWHUDFWLRQ
RILQIODWLRQWDUJHWLQJGHVLJQIHDWXUHVDQGWKHFRQGXFWRIPRQHWDU\SROLF\GXULQJWUDQVLWLRQWRORZLQIODWLRQ
DUHWDFNOHGQH[W7KHSDSHUHQGVE\IRFXVLQJRQXQUHVROYHGLVVXHVRQGHVLJQDQGLPSOHPHQWDWLRQRI
LQIODWLRQWDUJHWLQJDQGWKHLUUHODWLRQWRWKHFRQGXFWRIPRQHWDU\SROLF\±RSHQLVVXHVWKDWKDYHWREH
DGGUHVVHGLQWKHQH[WGHFDGHRILQIODWLRQWDUJHWLQJ
)UHGHULF60LVKNLQ .ODXV6FKPLGW+HEEHO
*UDGXDWH6FKRRORI%XVLQHVV &HQWUDO%DQNRI&KLOH
8ULV+DOO $JXVWLQDV
&ROXPELD8QLYHUVLW\ 6DQWLDJR&KLOH
1HZ<RUN1< NVFKPLGW#EFHQWUDOFO
DQG1%(5
IVP#FROXPELDHGX
,QWURGXFWLRQ
7KH HPHUJHQFH RI LQIODWLRQ WDUJHWLQJ RYHU WKH ODVW WHQ \HDUV KDV EHHQ DQ H[FLWLQJ
GHYHORSPHQWLQWKHDSSURDFKRIFHQWUDOEDQNVWRWKHFRQGXFWRIPRQHWDU\SROLF\$IWHULQLWLDO
DGRSWLRQ E\ 1HZ =HDODQG LQ LQIODWLRQ WDUJHWLQJ KDV EHHQ WKH FKRLFH RI D JURZLQJ
QXPEHU RI FHQWUDO EDQNV LQ LQGXVWULDO DQG HPHUJLQJ HFRQRPLHV DQG PDQ\ PRUH DUH
FRQVLGHULQJIXWXUHDGRSWLRQRIWKLVQHZQHZPRQHWDU\IUDPHZRUN
2QH GHFDGH RI LQIODWLRQ WDUJHWLQJ LQ WKH ZRUOG RIIHUV OHVVRQV RQ WKH GHVLJQ DQG
LPSOHPHQWDWLRQ RI LQIODWLRQ WDUJHWLQJ WKH FRQGXFW RI PRQHWDU\ SROLF\ DQG FRXQWU\
SHUIRUPDQFH XQGHU LQIODWLRQ WDUJHWLQJ ,Q VHFWLRQ WKLV SDSHU UHYLHZV EULHIO\ WKH PDLQ
GHVLJQIHDWXUHVRILQIODWLRQWDUJHWLQJH[SHULHQFHVDQDO\]HVVWDWLVWLFDOO\LIFRXQWULHVXQGHU
LQIODWLRQWDUJHWLQJDUHVWUXFWXUDOO\GLIIHUHQWIURPQRQLQIODWLRQWDUJHWLQJLQGXVWULDOFRXQWULHV
DQG UHYLHZV H[LVWLQJ HYLGHQFH DERXW WKH VXFFHVV RILQIODWLRQ WDUJHWLQJ7KHLQWHUDFWLRQ RI
LQIODWLRQWDUJHWLQJGHVLJQIHDWXUHVDQG WKHFRQGXFWRIPRQHWDU\SROLF\GXULQJWUDQVLWLRQWR
ORZ LQIODWLRQ DUH WDFNOHG LQ VHFWLRQ 7KHQ WKH SDSHU IRFXVHV RQ XQUHVROYHG LVVXHV RQ
GHVLJQ DQG LPSOHPHQWDWLRQ RI LQIODWLRQ WDUJHWLQJ DQG WKHLU UHODWLRQ WR WKH FRQGXFW RI
PRQHWDU\SROLF\VHFWLRQ%ULHIFRQFOXVLRQVFORVHWKHSDSHU
:KDW'R:H.QRZDERXW,QIODWLRQ7DUJHWLQJDIWHUD'HFDGHRI:RUOG([SHULHQFH"
:KRGRHVLQIODWLRQWDUJHWLQJDQGKRZ"
,QIODWLRQ WDUJHWLQJ VWDUWHG D GHFDGH DJR ZLWK SXEOLF DQQRXQFHPHQWV RI LQIODWLRQ
WDUJHWVLQ1HZ =HDODQGDQG&KLOH $FFRUGLQJWR RXUFRXQW LQIODWLRQ WDUJHWLQJFRXQWU\
FDVHVKDYHEHHQUHFRUGHGDVRI1RYHPEHU7KH\LQFOXGHDYDULHW\RIH[SHULHQFHVWKDW
FRPSULVHLQGXVWULDODQGHPHUJLQJHFRQRPLHVWUDQVLWLRQDQGVWHDG\VWDWHLQIODWLRQWDUJHWHUV
VHPL DQG IXOOIOHGJHG WDUJHWHUVROG DQG UHFHQWVWDUWHUVDQG FXUUHQW DQGIRUPHUWDUJHWHUV
&ODVVLI\LQJFRXQWU\FDVHVLQWRLQIODWLRQWDUJHWLQJDQGRWKHUPRQHWDU\UHJLPHVLQYROYHVVXEMHFWLYHFKRLFHVIRU
WZRUHDVRQV )LUVWWKHUH LV ODFN RIIXOO DJUHHPHQW RQ WKH PDLQFRQGLWLRQV DQGIHDWXUHVRI LQIODWLRQ WDUJHWLQJ
DQG KRZ WKH\ DSSO\ GXULQJ WUDQVLWLRQ WR ORZ LQIODWLRQ ± DQ LVVXH WKDW ZH GLVFXVV EHORZ 6HFRQG VRPH
FRXQWULHVKDYH XVHG VLPXOWDQHRXVO\ LQIODWLRQWDUJHWVDQGRWKHU QRPLQDODQFKRUVWKHH[FKDQJH UDWH DQGRU D
PRQHWDU\DJJUHJDWHSDUWLFXODUO\DWWKHLUHDUO\\HDUVRILQIODWLRQWDUJHWLQJ,0)0DKDGHYDDQG6WHUQH
DQG 6WHUQH GLVFXVV DQG SUHVHQW FRPSUHKHQVLYH FRXQWU\ FODVVLILFDWLRQV RI PRQHWDU\ UHJLPHV
5HIOHFWLQJ GLIIHUHQW FODVVLILFDWLRQ FULWHULD UHFHQW FURVVFRXQWU\ VWXGLHV RI ,7 H[SHULHQFHV GLIIHU LQ WKHLU
FRXQWU\ VDPSOHV ± HJ %HUQDQNH /DXEDFK 0LVKNLQ DQG 3RVHQ 6FKDHFKWHU 6WRQH DQG =HOPHU
&RUER/DQGHUUHWFKHDQG6FKPLGW+HEEHODQG&RUERDQG6FKPLGW+HEEHO
)LJXUHGHSLFWV DGRSWLRQGDWHVDQGLQLWLDO LQIODWLRQUDWHVDW\HDURIDGRSWLRQIRUWKH
FRXQWU\VDPSOH
:HLQWURGXFHWZRFRXQWU\JURXSVIRUFDUU\LQJRXWRXUHPSLULFDODQDO\VLVFRQGXFWHG
IRUWKHGHFDGHRIWKHV7DEOH±DVDPSOHRILQIODWLRQWDUJHWHUVDQGDFRQWUROJURXS
RI QRQWDUJHWHUV 7KH ILUVW VDPSOH RI LQIODWLRQ WDUJHWHUV ODEHOHG LQIODWLRQ WDUJHWHUV LV
FRPSULVHGE\ DKHWHURJHQHRXV JURXSRILQGXVWULDODQGHPHUJLQJHFRQRPLHV$XVWUDOLD
%UD]LO &DQDGD &KLOH &RORPELD &]HFK 5HSXEOLF )LQODQG ,VUDHO .RUHD 0H[LFR 1HZ
=HDODQG 3HUX 3RODQG 6RXWK $IULFD 6SDLQ 6ZHGHQ 7KDLODQG DQG WKH 8QLWHG .LQJGRP
)LQODQG DQG 6SDLQ GURSSHG RXW RI WKLV JURXS ZKHQ UHOLQTXLVKLQJ PRQHWDU\ SROLF\ DW
DGRSWLRQRIWKHHXURLQ
7KH VHFRQG VDPSOH LV D FRQWURO JURXS RI LQGXVWULDO HFRQRPLHV WKDW ZHUH QRW
LQIODWLRQ WDUJHWHUV GXULQJ WKH V 'HQPDUN )UDQFH *HUPDQ\ ,WDO\ -DSDQ 1RUZD\
3RUWXJDO 6ZLW]HUODQG DQG WKH 86 $PRQJ WKHVH DUH WZR FRXQWULHV *HUPDQ\ DQG
6ZLW]HUODQGWKDWKDGH[SOLFLWPRQHWDU\WDUJHWVLQSODFHGXULQJPRVWRIWKHV
FRXOGEH
FODVVLILHG DV LPSOLFLW LQIODWLRQ WDUJHWHUV DV DUJXHG E\ %HUQDQNH /DXEDFK 0LVKNLQ DQG
3RVHQWZRFRXQWULHVZLWKRXWH[SOLFLWWDUJHWV-DSDQDQGWKH86DQGWKHUHPDLQLQJ
(XURSHDQFRXQWULHVWKDWWDUJHWHGWKHLUH[FKDQJHUDWHWRWKHGHXWVFKPDUNEHIRUHDGRSWLQJ
WKHHXURLQ
,QIODWLRQ WDUJHWHUV H[KLELW VRPH FRPPRQDOLWLHV DQG PDQ\ GLIIHUHQFHV LQ LQIODWLRQ
WDUJHWLQJSUHFRQGLWLRQVWDUJHWGHVLJQDQGRSHUDWLRQDOIHDWXUHV)RXUVW\OL]HGIDFWVHPHUJH
IURPFRXQWU\H[SHULHQFHVDQGIHDWXUHVDVVXPPDUL]HGLQ7DEOH
6WDUWLQJ GDWHV DUH GHILQHG E\ WKH ILUVW PRQWK RI WKH ILUVW SHULRG IRU ZKLFK LQIODWLRQ WDUJHWV KDYH EHHQ
DQQRXQFHGSUHYLRXVO\)RUH[DPSOHWKHVWDUWLQJGDWHIRU&KLOHLV-DQXDU\WKHILUVWPRQWKRIFDOHQGDU
\HDU IRU ZKLFK WKH ILUVW LQIODWLRQ WDUJHW ZDV DQQRXQFHG LQ 6HS 7KH LQLWLDO LQIODWLRQ OHYHO LV
GHILQHGDVWKH\HDURQ\HDU&3,LQIODWLRQUDWHRIWKHODVW TXDUWHUEHIRUHWKHILUVWPRQWKRILQIODWLRQWDUJHWLQJ
IRUH[DPSOHWKHIRXUWKTXDUWHURILQWKHFDVHRI&KLOH
7KHQXPEHURILQIODWLRQWDUJHWHUVHLJKWHHQLVRQHOHVVWKDQWKHQLQHWHHQLQ)LJXUHDQG7DEOHEHFDXVH
6ZLW]HUODQGZDVQRWDQLQIODWLRQWDUJHWHULQWKHV
*HUPDQ\DGRSWHGWKHHXURLQHDUO\DQG6ZLW]HUODQGDGRSWHGLQIODWLRQWDUJHWLQJLQ
7KHXVHRIWKLVFRQWUROJURXSRIKLJKLQFRPHLQGXVWULDOHFRQRPLHVZLWKDOWHUQDWLYHPRQHWDU\IUDPHZRUNVLQ
SODFH UHIOHFWV RXU REMHFWLYH WR OLQN DGRSWLRQ RI LQIODWLRQ WDUJHWLQJ ZLWK VWUXFWXUDO IHDWXUHV REVHUYHG LQ WKH
ZRUOG VDPSOH RI LQGXVWULDO DQG KLJKHU PLGGOHLQFRPH FRXQWULHV %\ GHILQLQJ D FRQWURO JURXS RI KLJK
SHUIRUPLQJHFRQRPLHVZLWKVLPLODUIHDWXUHVWRWKRVHWKDWKDYHDGRSWHGLQIODWLRQWDUJHWLQJPDNHVLWVWDWLVWLFDOO\
PRUHGLIILFXOWWRLGHQWLI\VLJQLILFDQWGHWHUPLQDQWVRIWKHFKRLFHRILQIODWLRQWDUJHWLQJWKDQLIZHKDGFKRVHQD
FRQWUROJURXSLQFOXGLQJGHYHORSLQJFRXQWU\QRQLQIODWLRQWDUJHWHUV
L )XOOIOHGJHG LQIODWLRQ WDUJHWLQJLV EDVHG RQILYH SLOODUVDEVHQFHRI RWKHUQRPLQDO
DQFKRUVDQ LQVWLWXWLRQDOFRPPLWPHQWWR SULFHVWDELOLW\ DEVHQFHRI ILVFDOGRPLQDQFH
SROLF\ LQVWUXPHQW LQGHSHQGHQFH DQG SROLF\ WUDQVSDUHQF\ DQG DFFRXQWDELOLW\ :KLOH
SLOODUVWRDUHUHTXLUHPHQWVIRUHIIHFWLYHFRQGXFWRIPRQHWDU\SROLF\XQGHUDQ\UHJLPH
WKH\DUHSDUWLFXODUO\LPSRUWDQWSUHUHTXLVLWHVIRUHIIHFWLYHSROLF\XQGHULQIODWLRQWDUJHWLQJ
7KH UHDVRQ LV WKDW WKH VXFFHVV RI LQIODWLRQ WDUJHWLQJ GHSHQGV VR VWURQJO\ RQ KLJK PDUNHW
FUHGLELOLW\ LQ WKH FHQWUDO EDQN¶V UHVROYH DQG DELOLW\ WR SXW LQWR SODFH SROLFLHV JHDUHG DW
PHHWLQJWKHWDUJHW$QGFUHGLELOLW\LVIRVWHUHGE\WKHILYHLQVWLWXWLRQDOSLOODUV
LL,QIODWLRQDGRSWLRQUDQJHVIURPHYROXWLRQDU\WRUHYROXWLRQDU\0DQ\FRXQWULHVKDYH
DGRSWHG LQIODWLRQ WDUJHWLQJ ZLWKRXW VDWLVI\LQJ RQH RU PRUH RI WKH DERYH PHQWLRQHG
FRQGLWLRQV )RU H[DPSOH &KLOH DQG ,VUDHO WDUJHWHG WKH H[FKDQJH UDWH GXULQJ PRVW RI WKH
V ,VUDHO VWLOO GRHV LW WRGD\ 7KH %DQN RI (QJODQG VWDUWHG LQIODWLRQ WDUJHWLQJ ZHOO
EHIRUH DWWDLQLQJ LQVWUXPHQWLQGHSHQGHQFH 0RVWFRXQWULHV DGRSWHGLQIODWLRQ WDUJHWLQJZHOO
EHIRUH DFKLHYLQJ KLJK OHYHOV RI SROLF\ WUDQVSDUHQF\ LQFOXGLQJ SXEOLFDWLRQ RI LQIODWLRQ
UHSRUWVLQIODWLRQSURMHFWLRQVDQGPRQHWDU\SROLF\PHHWLQJPLQXWHVDQGIXOODFFRXQWDELOLW\
6RPHFRXQWULHV±LQFOXGLQJ&RORPELD,VUDHO.RUHD0H[LFR3HUXDQG6RXWK$IULFD±GR
QRWSXEOLVKLQIODWLRQIRUHFDVWV\HW2QWKHRWKHUH[WUHPHLV%UD]LOZKRDGRSWHGIXOOIOHGJHG
LQIODWLRQWDUJHWLQJULJKWIURPWKHVWDUW
&RXQWU\ H[SHULHQFH VXJJHVWV WKDW DGRSWLRQ RI LQIODWLRQ WDUJHWLQJ GXULQJ WKH V
KDV EHHQHTXLYDOHQW WRDPRQHWDU\SROLF\OHDUQLQJ SURFHVV2QO\E\QRZ WKHUHLV DEURDG
FRQVHQVXV DERXWWKHFRQGLWLRQV WKDW VKRXOGEHLQ SODFH IRU HIIHFWLYHIXOOIOHGJHG LQIODWLRQ
WDUJHWLQJ+RZHYHUWKHVHSUHUHTXLVLWHVZHUHOHVVREYLRXVLQWKHILUVWKDOIRIWKHVZKHQ
HDUO\LQIODWLRQWDUJHWHUVSHUIHFWHGWKHLUIUDPHZRUNE\OHDUQLQJIURPWKHLURZQDQGWKHRWKHU
LQIODWLRQWDUJHWHUV¶FXPXODWLYHH[SHULHQFH
LLL,QIODWLRQUDQJHVIURPPRGHUDWHO\KLJKWRYHU\ORZDWLQIODWLRQWDUJHWLQJDGRSWLRQ
GDWHV 6RPH FRXQWULHV DGRSWHG LQIODWLRQ WDUJHWLQJ ZKHQ WKHLU LQIODWLRQ UDWHV ZHUH ZHOO
DERYH VWHDG\VWDWH OHYHOV XVLQJ LQIODWLRQ WDUJHWLQJ DV WKH PDLQ GHYLFH WR EXLOG XS
FUHGLELOLW\EULQJGRZQLQIODWLRQH[SHFWDWLRQVDQGSXUVXHDSDWKRIFRQYHUJHQFHWRORZDQG
VWDWLRQDU\ LQIODWLRQ 7KLV LV WKH FDVH RI HDUO\ HPHUJLQJFRXQWU\ LQIODWLRQ WDUJHWHUV WKDW
VWDUWHG DW LQLWLDO LQIODWLRQ UDWHV RI &KLOH ,VUDHO 3HUX DQGVXEVHTXHQWHPHUJLQJ
FRXQWU\ DGRSWHUV ZKHUH LQLWLDO LQIODWLRQ ZDV LQ WKH UDQJH RI &]HFK 5HSXEOLF
&RORPELD 0H[LFR 3RODQG 7KLV VWDQGV LQ FRQWUDVW WR DOO LQGXVWULDOFRXQWU\ DQG VRPH
HPHUJLQJFRXQWU\LQIODWLRQ WDUJHWHUVWKDWVWDUWHG DW LQLWLDOLQIODWLRQFORVH WR VWDWLRQDU\ORZ
OHYHOV
0XOWL\HDU WUDQVLWLRQV WRZDUG VWHDG\VWDWH LQIODWLRQ SRVH VHULRXV FKDOOHQJHV DQG
GLIILFXOWLHVWRLQIODWLRQWDUJHWLQJLQFOXGLQJWKHQHHGIRUDQQRXQFLQJDQQXDOLQIODWLRQWDUJHWV
WKDWDUHPXFKKDUGHUWRPHHWXQGHUFRQGLWLRQVRIKLJKLQIODWLRQH[SHFWDWLRQVDQGOLPLWHG
SROLF\FUHGLELOLW\:HSRVWSRQHGLVFXVVLRQRIWKHLVVXHVUHODWHGWRWUDQVLWLRQWRORZLQIODWLRQ
WRVHFWLRQEHORZ
LY ,QIODWLRQ WDUJHWHUV YDU\ ZLGHO\ UHJDUGLQJ LQIODWLRQ WDUJHWLQJ LPSOHPHQWDWLRQ
IHDWXUHV LQFOXGLQJ WDUJHW SULFH LQGH[ WDUJHW ZLGWK WDUJHW KRUL]RQ HVFDSH FODXVHV
DFFRXQWDELOLW\ RI WDUJHW PLVVHV JRDO LQGHSHQGHQFH DQG RYHUDOO WUDQVSDUHQF\ DQG
DFFRXQWDELOLW\ UHJDUGLQJ FRQGXFW RI SROLF\ XQGHU LQIODWLRQ WDUJHWLQJ 6RPH RI WKHVH
GLIIHUHQFHVFDQEHDWWULEXWHGWRFRXQWU\YDULDWLRQLQLQVWLWXWLRQVDQGKLVWRU\RWKHUUHIOHFWWKH
GLIIHUHQFHV EHWZHHQ LQIODWLRQ WDUJHWLQJ LQ WUDQVLWLRQ WRZDUG DQG DW ORZ LQIODWLRQ DV
GLVFXVVHG EHORZ 0RUHRYHU VRPH GLIIHUHQFHV RI LQIODWLRQ WDUJHWLQJ GHVLJQ IHDWXUHV DOVR
UHIOHFW GLIIHUHQW YLHZV DPRQJ SROLF\ PDNHUV DQG DFDGHPLFV DERXW KRZ PRQHWDU\ SROLF\
XQGHULQIODWLRQWDUJHWLQJVKRXOGEHFRQGXFWHGLQFRQGLWLRQVRIORZLQIODWLRQ
$UHLQIODWLRQWDUJHWHUVGLIIHUHQW"
$UH FRXQWULHV WKDW DGRSW LQIODWLRQ WDUJHWLQJ GLIIHUHQW IURP LQGXVWULDO QRQLQIODWLRQ
WDUJHWHUVUHJDUGLQJVWUXFWXUDOFRQGLWLRQVDQGPDFURHFRQRPLFSHUIRUPDQFH"+HUHZHWDFNOH
WKLV TXHVWLRQE\ FRPSDULQJRXUVDPSOH RI LQIODWLRQ WDUJHWHUVWR WKHFRQWURO JURXSRI
LQGXVWULDOQRQWDUJHWHUVGHILQHGDERYH:HIRFXVRQWKHUHODWLRQEHWZHHQKDYLQJRUQRWDQ
LQIODWLRQ WDUJHWLQJ IUDPHZRUN LQ SODFH DQG D VHW RI VWUXFWXUDO LQVWLWXWLRQDO DQG
PDFURHFRQRPLFIHDWXUHV7KHHPSLULFDODQDO\VLVKHUHLVQHFHVVDULO\SUHOLPLQDU\EHFDXVHDV
GLVFXVVHG LQ IRRWQRWH LW LV QRW DOZD\V HDV\ WR GHFLGH ZKHWKHU D FRXQWU\ VKRXOG EH
FODVVLILHGDVHQJDJLQJLQLQIODWLRQWDUJHWLQJRUQRW
)XUWKHUPRUHGHWHUPLQLQJWKHH[DFWGDWH
RIDGRSWLRQRIDQLQIODWLRQWDUJHWLQJUHJLPHLVRIWHQTXLWHGLIILFXOW2IILFLDOVDWPDQ\FHQWUDO
EDQNV ZH KDYH FRQVXOWHG RIWHQ JLYH GDWHV IRU WKH DGRSWLRQ RI LQIODWLRQ WDUJHWLQJ WKDW DUH
HDUOLHU WKDQ RXWVLGHUV GR HJ %HUQDQNH HW DO 7KH XQFHUWDLQW\ RI GDWLQJ RIWHQ
IROORZV IURP WKH IDFW WKDW LQIODWLRQ WDUJHWLQJ LV DGRSWHG JUDGXDOO\ RYHU WLPH PDNLQJ WKH
H[DFWGDWHRIDGRSWLRQGLIILFXOWWRGHWHUPLQH
2XUGDWDVHWLVFRPSULVHGE\DQQXDOYDULDEOHVIRUFRXQWULHVDQG\HDUV
RI GDWD7KHIRFXVLVRQWKHGLVFUHWHLQIODWLRQWDUJHWLQJUHJLPHYDULDEOHWKDWWDNHVD
YDOXH RI ZKHQ DQ LQIODWLRQ WDUJHWLQJ UHJLPH LV LQ SODFH RU ZKHQ DQ DOWHUQDWLYH
PRQHWDU\UHJLPHLVLQSODFHDQGDVHWRIYDULDEOHVWKDWFRXOGEHDVVRFLDWHGZLWKWKHFKRLFH
RI DQ LQIODWLRQ WDUJHWLQJ UHJLPH
7KH ODWWHU YDULDEOHV LQFOXGH PHDVXUHV RI WKH XVH RI
DOWHUQDWLYHQRPLQDODQFKRUVDPHDVXUHRIH[FKDQJHUDWHEDQGZLGWKDQGDPRQHWDU\WDUJHW
GXPP\ VWUXFWXUDO FRQGLWLRQV WUDGH RSHQQHVV FHQWUDO EDQN LQGHSHQGHQFH PHDVXUHV
IRUPDO LQGHSHQGHQFH LQVWUXPHQW LQGHSHQGHQFH DQG JRDO LQGHSHQGHQFH DQG
PDFURHFRQRPLFYDULDEOHVWKHLQIODWLRQUDWHDQGWKHILVFDOVXUSOXVUDWLRWR*'3
7DEOH UHSRUWV FURVVFRXQWU\ DQG SDQHO VWDWLVWLFV DQG FRUUHODWLRQV IRU LQIODWLRQ
WDUJHWLQJ DQG UHODWHG YDULDEOHV 7KH GDWD UHIOHFW ODUJH YDULDWLRQ LQ DOO YDULDEOH FDWHJRULHV
DFURVVFRXQWULHVDQGRYHUWLPHLQRXUFRXQWU\VDPSOH3DQHOFRUUHODWLRQVDUHVRPHWLPHV
YHU\GLIIHUHQWIURPFURVVFRXQWU\FRUUHODWLRQVLQFOXGLQJFDVHVRIFKDQJHVLQVLJQV7KLVLVD
OLNHO\ UHVXOW RI WKH QRLVH HQFRXQWHUHG LQ DQQXDO FRXQWU\ GDWD ± KHQFH ZH IRFXVRQFURVV
FRXQWU\FRUUHODWLRQV
+DYLQJLQIODWLRQWDUJHWLQJLQSODFHLVSRVLWLYHO\DQGVLJQLILFDQWO\FRUUHODWHGZLWKQR
LQGLYLGXDOYDULDEOHDQGQHJDWLYHO\DQGVLJQLILFDQWO\FRUUHODWHGRQO\ZLWKPRQHWDU\JURZWK
WDUJHWV 07 ,QIODWLRQ WDUJHWLQJ LV SRVLWLYHO\ DQG QRW VLJQLILFDQWO\ FRUUHODWHG ZLWK WUDGH
RSHQQHVV2SHQWKHILVFDOVXUSOXVUDWLRWR*'3)LVFDOH[FKDQJHUDWHEDQGZLGWK%:
DQG FHQWUDOEDQN LQVWUXPHQW LQGHSHQGHQFH &%,, DQG QHJDWLYHO\ DQG QRW VLJQLILFDQWO\
)RUH[DPSOHDOWKRXJKWKHFHQWUDOEDQNVRI3HUXDQG&RORPELDGRDQQRXQFHLQIODWLRQWDUJHWVWKHLUPRQHWDU\
SROLF\ IUDPHZRUNV GR QRW FRQWDLQ PDQ\ FUXFLDO IHDWXUHV RI DQ LQIODWLRQ WDUJHWLQJ UHJLPH 0LVKNLQ DQG
6DYDVWDQR .RUHD LV FODVVLILHG DV DQ LQIODWLRQ WDUJHWHU EHFDXVH LW GRHV KDYH DQ DQQRXQFHG LQIODWLRQ
WDUJHW DQG \HW LW DSSHDUV WR KDYH EHHQ SXUVXLQJ D GH IDFWR H[FKDQJH UDWH SHJ LQ WKH ILUVW WZR \HDUV RI LWV
LQIODWLRQWDUJHWLQJUHJLPHZKLFKLVLQFRQVLVWHQWZLWKDQLQIODWLRQWDUJHWLQJUHJLPH1RWHWKDWLIZHGURSWKHVH
WKUHHFRXQWULHVIURPWKHVDPSOHWKHHPSLULFDOUHVXOWVUHSRUWHGDERYHDUHQRWDSSUHFLDEO\DIIHFWHG
6LPLODU GHILQLWLRQV DUH XVHG IRU RWKHU GLVFUHWH YDULDEOHV XVHG KHUH VHH WKH 'DWD $SSHQGL[ IRU YDULDEOH
GHILQLWLRQVDQGVRXUFHV
FRUUHODWHG ZLWK QRUPDOL]HG LQIODWLRQ ,QI FHQWUDO EDQN IRUPDO LQGHSHQGHQFH &%),DQG
FHQWUDOEDQNJRDOLQGHSHQGHQFH&%*,
1H[W ZH LQWURGXFH D PXOWLYDULDWH SURELW PRGHO IRU WKH OLNHOLKRRG RI KDYLQJ DQ
LQIODWLRQWDUJHWLQJ UHJLPH LQ SODFH EDVHG RQ WKH REVHUYDWLRQ RI WKH YDULDEOHV LGHQWLILHG
DERYH7KHPRGHOVSHFLILHVWKHSUREDELOLW\RIKDYLQJDQLQIODWLRQWDUJHWLQJUHJLPHLQSODFH
3U,7_DVDIXQFWLRQRIWKHYDULDEOHVLQWURGXFHGDERYH
3U,7_ I,QI2SHQ)LVFDO%:07&%),&%*,&%,,
([SHFWHG FRHIILFLHQW VLJQV DUH SRVLWLYH IRU )LVFDO%: DQG WKH WKUHH PHDVXUHV RI
FHQWUDOEDQNLQGHSHQGHQFHQHJDWLYHIRU07DQGDPELJXRXVIRU,QIDQG2SHQ
%HIRUHWXUQLQJWRWKHUHVXOWVZHQRWHWKDWFDXWLRQVKRXOGEHH[HUFLVHGLQWKHFDXVDO
LQWHUSUHWDWLRQ RI HTXDWLRQ :KLOH FHUWDLQ VWUXFWXUDO IHDWXUHV PD\ EH H[RJHQRXV WR WKH
FKRLFHRILQIODWLRQWDUJHWLQJLWLVYHU\OLNHO\WKDWDGRSWLRQRILQIODWLRQWDUJHWLQJUHTXLUHV±
DQGKHQFHFRQWULEXWHVWR± UHQRXQFLQJWKHXVHRIRWKHUQRPLQDOWDUJHWVLPSURYLQJPDFUR
SHUIRUPDQFHVXFKDVUHGXFLQJLQIODWLRQDQGLPSURYLQJWKHILVFDOVWDQFHDQGVWUHQJWKHQLQJ
FHQWUDO EDQN LQGHSHQGHQFH DV ZH DUJXH EHORZ +HQFH SRWHQWLDO UHYHUVH FDXVDWLRQ VKRXOG
OHDGWRFDUHIXOLQWHUSUHWDWLRQRIWKHHPSLULFDOUHVXOWV
1RLV\ UHVXOWV IRU WKH IXOO SDQHO SURELW UHJUHVVLRQ OHG XV WR UHSRUW FURVVFRXQWU\
UHVXOWVRQO\EDVHGRQFRXQWU\ GHFDGHDYHUDJHVIRUHDFKYDULDEOHLQFOXGLQJWKHGHSHQGHQW
YDULDEOHLHWKHLQIODWLRQWDUJHWLQJUHJLPHFKRLFH :HVWDUWE\GLVFXVVLQJWKHIXOOVDPSOH
UHVXOWVLQWKHILUVWFROXPQRI7DEOH
,QIODWLRQ WDUJHWLQJ LV SRVLWLYHO\ DQG VLJQLILFDQWO\ DVVRFLDWHG ZLWK WKH OHYHO RI
QRUPDOL]HG LQIODWLRQ D UHVXOW WKDW UHIOHFWV WKDW LQIODWLRQ WDUJHWLQJ KDV EHHQ DGRSWHG E\
FRXQWULHV WKDW RQ DYHUDJH KDYH H[KLELWHG KLJKHU OHYHOV RI LQIODWLRQ WKDQ LQGXVWULDO QRQ
LQIODWLRQ WDUJHWHUVKDYH ,QGHHGPRVW HPHUJLQJFRXQWULHVKDYHDGRSWHGLQIODWLRQ WDUJHWLQJ
DVDGHYLFHWREULQJLQIODWLRQGRZQWRORZVLQJOHGLJLWOHYHOV$QGPRVWLQIODWLRQWDUJHWHUV±
ERWKHPHUJLQJDQGLQGXVWULDOFRXQWU\WDUJHWHUV±PDGHPDMRUSURJUHVVLQUHGXFLQJLQIODWLRQ
7KHUH DUH RQO\ DIHZ ODUJH SRVLWLYH RU QHJDWLYH FRUUHODWLRQV DPRQJ YDULDEOHV RWKHU WKDQ LQIODWLRQ
WDUJHWLQJ ([FHSWLRQV DUH WKH WKUHHPHDVXUHV RI FHQWUDOEDQN LQGHSHQGHQFH ZKLFKDUH KLJKO\ DQG SRVLWLYHO\
FRUUHODWHGZLWKHDFKRWKHU
GXULQJRUVKRUWO\EHIRUHRUDIWHUDGRSWLQJLQIODWLRQWDUJHWLQJ%HUQDQNHHWDO&RUERHW
DO&RXQWULHVWKDWWUDGHUHODWLYHO\PRUHEHFDXVHWKH\DUHPRUHRSHQDQGRUVPDOOHU
WKDQ QRQLQIODWLRQ WDUJHWHUV DUH VLJQLILFDQWO\ PRUH OLNHO\ WR DGRSW LQIODWLRQ WDUJHWLQJ ± D
UHVXOWWKDWUHIOHFWVWKDWPRVWODUJHLQGXVWULDOFRXQWULHVDUHQRWLQIODWLRQWDUJHWHUV
,QIODWLRQ WDUJHWLQJ LV QHJDWLYHO\ DVVRFLDWHG ZLWK WKH ILVFDO VXUSOXV UDWLR WR *'3
DJDLQDUHVXOWWKDWIROORZVIURPKDYLQJDFRQWUROJURXSRIQRQLQIODWLRQWDUJHWHUVFRPSULVHG
E\ LQGXVWULDO FRXQWULHV WKDW RQ DYHUDJH VKRZ D VWURQJHU ILVFDO SRVLWLRQ WKDQ WKH
LQIODWLRQ WDUJHWHUV +RZHYHU WKLV DVVRFLDWLRQ GRHV QRW DWWDLQ FRQYHQWLRQDO VLJQLILFDQFH
OHYHOV
,QIODWLRQ WDUJHWLQJ LV SRVLWLYHO\ EXW QRW VLJQLILFDQWO\ DVVRFLDWHG WR WKH ZLGWK RI
H[FKDQJH UDWH EDQG $V H[SHFWHG LQIODWLRQ WDUJHWLQJ LV QHJDWLYHO\ DQG VLJQLILFDQWO\
DVVRFLDWHG WR WKH DGRSWLRQ RI PRQHWDU\ JURZWK WDUJHWV UHIOHFWLQJ WKH LQFRPSDWLELOLW\ RI
KDYLQJVLPXOWDQHRXVO\LQSODFHH[SOLFLWPRQHWDU\DQGLQIODWLRQWDUJHWV
)LQDOO\OHW¶VFRQVLGHUWKHLQIOXHQFHRIFHQWUDOEDQNLQGHSHQGHQFH7KHOLNHOLKRRGRI
KDYLQJ LQIODWLRQ WDUJHWLQJ LQ SODFH LV SRVLWLYHO\ DVVRFLDWHG WR FHQWUDOEDQN IRUPDO
LQGHSHQGHQFH DOWKRXJK LWV FRHIILFLHQW LV QRW VLJQLILFDQW DW FRQYHQWLRQDO OHYHOV DQG
VLJQLILFDQWO\ WR FHQWUDOEDQN LQVWUXPHQW LQGHSHQGHQFH +RZHYHU LQIODWLRQ WDUJHWLQJ LV
QHJDWLYHO\ DQG VLJQLILFDQWO\ DVVRFLDWHG ZLWK FHQWUDOEDQN JRDO LQGHSHQGHQFH 7KH ODWWHU
UHVXOWVXJJHVWVWKDWFHQWUDOEDQNV²ZKHQWKH\KDYHWKHIUHHGRPWRGHWHUPLQH WKHLUWDUJHW
OHYHOV² DUH PRUH OLNHO\ WR GR VR XQGHU H[FKDQJH UDWH RU PRQHWDU\JURZWK DQFKRUV WKDQ
ZKHQWKH\DGRSWLQIODWLRQWDUJHWV+HQFHLQIODWLRQWDUJHWLQJLVDVVRFLDWHGZLWKVXUUHQGHULQJ
JRDOLQGHSHQGHQFHWRJRYHUQPHQWV:HUHSRUWLQFROXPQDUHJUHVVLRQWKDWGURSVWKHOHVV
VLJQLILFDQWYDULDEOHV$OOILYHUHPDLQLQJUHJUHVVRUVEHFRPHPRUHVLJQLILFDQW
7KH SUHFHHGLQJ UHVXOWV DUH EDVHG RQ WKH IXOO FRXQWU\ VDPSOH WKDW LQFOXGHV WKUHH
FRXQWULHV ZLWK YHU\ KLJK LQIODWLRQ UDWHV LQ WKH HDUO\ V ± %UD]LO 3HUX DQG 3RODQG
'URSSLQJ WKH WKUHH ODWWHU IURP WKH VDPSOH \LHOGV UHJUHVVLRQ UHVXOWV IRU D UHVWULFWHG
FRXQWU\ VDPSOH UHSRUWHG LQ FROXPQV DQG RI 7DEOH &RHIILFLHQW VLJQV YDOXHV DQG
VLJQLILFDQFHOHYHOVFKDQJHOLWWOHIURPWKRVHUHSRUWHGIRUWKHIXOOVDPSOH+HQFHRXUUHVXOWV
DUHUREXVWWRH[FOXVLRQRIKLJKLQIODWLRQRXWOLHUV
3HUIRUPLQJRQHPRUHUREXVWQHVVWHVWZHGURS&RORPELD.RUHDDQG3HUXIURPWKH
VDPSOH $V GLVFXVVHG LQ IRRWQRWH WKHUH DUH VRPH TXHVWLRQV DERXW ZKHWKHU WKHVH WKUHH
FRXQWULHV VKRXOG EH FODVVLILHG DV LQIODWLRQ WDUJHWHUV 7KH UHJUHVVLRQ UHVXOWV IRU WKLV
DOWHUQDWLYH FRXQWU\ VDPSOH UHSRUWHG LQ FROXPQV DQG RI 7DEOH DOVRFRQILUP RXU
IXOOVDPSOHUHVXOWV
,VLQIODWLRQWDUJHWLQJDVXFFHVVVWRU\"
2Q RQH KDQG LW KDV EHHQ DUJXHG WKDW VWUXFWXUDO IHDWXUHV DQG PDFURHFRQRPLF
SHUIRUPDQFHRILQIODWLRQWDUJHWLQJFRXQWULHVGLIIHULQVRPHUHVSHFWVIURPWKRVHRIFRXQWULHV
WKDWKDYHDGRSWHGDOWHUQDWLYHPRQHWDU\IUDPHZRUNVLH%HUQDQNHHWDO&HFFKHWWL
DQG(KUPDQQ6FKDHFKWHU6WRQHDQG=HOPHU&RUERDQG6FKPLGW+HEEHO
&RUER/DQGHUUHWFKHDQG6FKPLGW+HEEHO2QWKHRWKHUKDQGLWKDVEHHQDUJXHGWKDW
VRPH LQGXVWULDO FRXQWULHV ZLWKRXW IRUPDO LQIODWLRQ WDUJHWV OLNH *HUPDQ\ EHIRUH WKH HXUR
6ZLW]HUODQG EHIRUH DQG WKH 86 SXUVXHD PRQHWDU\ SROLF\WKDW LV FORVHWRH[SOLFLW
LQIODWLRQ WDUJHWLQJ 0LVKNLQ E :RXOG WKLV LPSO\ WKDW LQIODWLRQ WDUJHWLQJ LV
REVHUYDWLRQDOO\ HTXLYDOHQW WR DOWHUQDWLYH PRQHWDU\ IUDPHZRUNV UHJDUGLQJ WKH FRQGXFW RI
SROLF\DQGLWVUHVXOWV":KDWGRHVDUHYLHZRIWKHUHFHQWHPSLULFDOOLWHUDWXUHWHOODERXWWKLV
LVVXH"
:H IRFXV RQ WKLV TXHVWLRQ E\ FRQGXFWLQJ D EULHI UHYLHZ RI UHFHQW HPSLULFDO ZRUN
HYDOXDWLQJDGHFDGHRIZRUOGZLGHH[SHULHQFHZLWKLQIODWLRQWDUJHWLQJ)DUIURPDWWHPSWLQJD
FRPSUHKHQVLYH HYDOXDWLRQ ZH LGHQWLI\ D IHZ VHOHFWLYH DQG WHQWDWLYH FRQFOXVLRQV WKDW
SURYLGHDSDUWLDOYLHZRIWKHUHODWLYHVXFFHVVRILQIODWLRQWDUJHWLQJ
&HQWUDO EDQN LQGHSHQGHQFH LV PXWXDOO\ UHLQIRUFHG ZLWK LQIODWLRQ WDUJHWLQJ &RXQWU\
H[SHULHQFH GXULQJ WKH V VXJJHVWV WKDW H[WHQGLQJ ODUJHU GHJUHHV RI LQGHSHQGHQFH WR
FHQWUDO EDQNV RIWHQ VXSSRUWV DGRSWLRQ RI LQIODWLRQ WDUJHWLQJ ,Q VRPH FRXQWULHV LQIODWLRQ
WDUJHWLQJZDVDGRSWHGDIWHUJUDQWLQJIRUPDODQGLQVWUXPHQWLQGHSHQGHQFHWRFHQWUDOEDQNV
DV ZDV WKH FDVH LQ 1HZ =HDODQG DQG &KLOH ,Q RWKHU FRXQWULHV OLNH WKH 8. LQVWUXPHQW
$PHWKRGRORJLFDOSRLQWLVLQRUGHU:HVKRXOGNHHSLQPLQGWKDWLQIHUHQFHVDERXWLQIODWLRQWDUJHWHUV¶VXFFHVV
DUHVWLOOKLJKO\WHQWDWLYHLQYLHZRIWKHDPELJXLWLHVVXUURXQGLQJWKHVDPSOHGHILQLWLRQVIRULQIODWLRQWDUJHWLQJ
FRXQWULHVWKH SRVVLEOHV\VWHPLFHTXLYDOHQFHRIVRPHIHDWXUHVRILQIODWLRQWDUJHWLQJZLWKWKRVHRIDOWHUQDWLYH
LQGHSHQGHQFH FDPH DIWHU LQIODWLRQ WDUJHWLQJ7KH SRVLWLYH DVVRFLDWLRQ KDVEHHQ FRQILUPHG
E\ RXU HPSLULFDO UHVXOWV IRU IRUPDO DQG LQVWUXPHQW LQGHSHQGHQFH EXW QRW IRU JRDO
LQGHSHQGHQFH
&RPPXQLFDWLRQ WUDQVSDUHQF\ DQG DFFRXQWDELOLW\ DUH PXWXDOO\ UHLQIRUFHG ZLWK
LQIODWLRQ WDUJHWLQJ $GRSWLRQ RI LQIODWLRQ WDUJHWLQJ KDV W\SLFDOO\ EHHQ IROORZHG DQG
VRPHWLPHVSUHFHGHGE\PDMRULPSURYHPHQWLQFHQWUDOEDQNFRPPXQLFDWLRQZLWKWKHSXEOLF
DQG WKH PDUNHWV DQG VLJQLILFDQW XSJUDGH LQ PRQHWDU\ SROLF\ WUDQVSDUHQF\ 0RVW LQIODWLRQ
WDUJHWHUVKDYHVWDUWHGSXEOLFDWLRQRILQIODWLRQUHSRUWVPRQHWDU\SROLF\VWDWHPHQWVFHQWUDO
EDQN ERDUG PHHWLQJ PLQXWHV FHQWUDOEDQN PRGHOV DQG LQIODWLRQ IRUHFDVWV VHH 7DEOH
7KLV PDMRU FRPPXQLFDWLRQ HIIRUW FRQGXFWHG E\FHQWUDO EDQNV LVDUJXDEO\PRUH LPSRUWDQW
XQGHU LQIODWLRQ WDUJHWLQJ WKDQXQGHU DOWHUQDWLYH PRQHWDU\ UHJLPHV FRQVLGHULQJ WKHFHQWUDO
UROH SOD\HG E\ SROLF\ FUHGLELOLW\ DQG LQIODWLRQ H[SHFWDWLRQV LQ DWWDLQLQJ LQIODWLRQ WDUJHWV
%HUQDQNHHWDO
,QIODWLRQ WDUJHWLQJKDV EHHQVXFFHVVIXO LQKHOSLQJ FRXQWULHVWRUHGXFHLQIODWLRQ ±EXW
QRWEHORZOHYHOVRILQGXVWULDOQRQLQIODWLRQWDUJHWHUV7KHHYLGHQFHVKRZVWKDWFRXQWULHV
WKDW KDYHDGRSWHGLQIODWLRQ WDUJHWLQJUHGXFH WKHLU ORQJUXQLQIODWLRQ EHORZWKH OHYHOVWKH\
ZRXOGKDYHDWWDLQHGLQWKHDEVHQFHRILQIODWLRQWDUJHWLQJ+RZHYHULQIODWLRQWDUJHWLQJGRHV
QRW\LHOGLQIODWLRQEHORZWKHOHYHOVDWWDLQHGE\LQGXVWULDOFRXQWULHVWKDWKDYHDGRSWHGRWKHU
PRQHWDU\UHJLPHVDVVKRZQE\%HUQDQNHHWDODQGRXURZQUHVXOWVDERYH$GRSWLRQ
RI LQIODWLRQ WDUJHWLQJ LV W\SLFDOO\ DVVRFLDWHG WR D PDMRU XSIURQW LQYHVWPHQW LQ LQIODWLRQ
UHGXFWLRQ&RUERHWDO
,QIODWLRQWDUJHWLQJKDVEHHQWHVWHGIDYRUDEO\E\DGYHUVHVKRFNV7KHVH[FHSWIRU
HPHUJLQJFRXQWU\ ILQDQFLDO FULVHV LQ KDYH EHHQ YHU\ IDYRUDEOH WR WKH ZRUOG
HFRQRP\OHGE\WKHODUJHVWSRVW::,,86H[SDQVLRQ7KLVIDFWKDVOHGPDQ\REVHUYHUVWR
DUJXHWKDWLQIODWLRQWDUJHWLQJLVD\HWXQWHVWHGIUDPHZRUNDVQRPDMRUDGYHUVHVKRFNVKDYH
SXW VWUDLQRQWKH DFKLHYHPHQW RIORZDQG VWDEOHLQIODWLRQ LQPDQ\LQIODWLRQ WDUJHWHUV%XW
PRQHWDU\ UHJLPHV WKH UHOHYDQW FRXQWHUIDFWXDO SRWHQWLDO VHOHFWLRQ ELDV DQG PXWXDO FDXVDWLRQ RI LQIODWLRQ
WDUJHWLQJDGRSWLRQDQGFRXQWU\SHUIRUPDQFH
WKLVLVLQFRUUHFW0DQ\LQIODWLRQWDUJHWHUVDUHVPDOORSHQHFRQRPLHVWKDWKDYHEHHQVXEMHFW
WR VHYHUH VKRFNV LQ WKH DIWHUPDWK RI WKH $VLDQ FULVLV ± DV RSSRVHG WR WKH ODUJH
LQGXVWULDOQRQLQIODWLRQWDUJHWHUVWKDWKDYHEHHQXQDIIHFWHGE\WKHVHVKRFNV7KHFRPELQHG
DGYHUVH ILQDQFLDO DQG WHUPVRIWUDGH VKRFNV VXIIHUHG E\$XVWUDOLD &KLOH ,VUDHO DQG1HZ
=HDODQG DPRQJ RWKHU LQIODWLRQ WDUJHWHUV KDYH OHG WR PDMRU H[FKDQJH UDWH GHYDOXDWLRQ LQ
WKHVH FRXQWULHV WHVWLQJ VLJQLILFDQWO\ WKH DWWDLQPHQW RI WKHLU LQIODWLRQ WDUJHWV 7KH\
ZHDWKHUHG WKLV VWRUP VXFFHVVIXOO\ E\ UHFRUGLQJ OLWWOH SDVVWKURXJK IURP GHYDOXDWLRQ WR
LQIODWLRQ 7KH RLO SULFH VKRFN UHSUHVHQWHG WKH VHFRQG WHVW IRU RLOLPSRUWLQJ
LQIODWLRQWDUJHWHUVLQFOXGLQJWKHDERYHPHQWLRQHGFRXQWULHVDQG%UD]LOWKH&]HFK5HSXEOLF
DQG 3RODQG DPRQJ RWKHUV 6LJQLILFDQW LQFUHDVHV LQ LPSRUWHG LQIODWLRQ ± WKURXJK ERWK
HQHUJ\ SULFHV DQG H[FKDQJHUDWH GHYDOXDWLRQ ± FRXOG SXW LQ MHRSDUG\ WKHVH FRXQWULHV¶
WDUJHWV +RZHYHU FXUUHQW FDVXDO HYLGHQFH IURP PDQ\ LQIODWLRQ WDUJHWHUV VXJJHVWV WKDW WKH
HIIHFWVRIWKHRLOVKRFNRQFRUHLQIODWLRQKDYHEHHQPLQRUZKLOHRQO\WHPSRUDU\DQGPRGHVW
LQFUHDVHVLQKHDGOLQHLQIODWLRQDUHREVHUYHG
,QIODWLRQ WDUJHWLQJ KDV KHOSHG LQ UHGXFLQJ VDFULILFH UDWLRV DQG RXWSXW YRODWLOLW\ LQ
FRXQWULHV WKDW KDYH DGRSWHG LQIODWLRQ WDUJHWLQJ WR OHYHOV FORVH WR WKRVH LQ LQGXVWULDO
QRQLQIODWLRQWDUJHWHUV%HUQDQNHHWDOIRXQGWKDWLQIODWLRQWDUJHWLQJGLGQRWPDNH
GLVLQIODWLRQ OHVV FRVWO\ DV VDFULILFH UDWLRV DQG 3KLOOLSV FXUYHV KDG QRW EHHQ DOWHUHG E\
LQIODWLRQ WDUJHWLQJ +RZHYHU EDVHG RQ QHZ HYLGHQFH IRU D ODUJHU VDPSOH RI LQIODWLRQ
WDUJHWHUVDQGQRQLQIODWLRQWDUJHWHUV&RUERHWDOFRQFOXGHWKDWVDFULILFHUDWLRVKDYH
GHFOLQHG LQ HPHUJLQJ FRXQWULHV DIWHU DGRSWLRQ RI LQIODWLRQ WDUJHWLQJ 7KH\ DOVR ILQG WKDW
RXWSXW YRODWLOLW\ KDV IDOOHQ LQ ERWK HPHUJLQJ DQG LQGXVWULDOL]HG HFRQRPLHV DIWHU DGRSWLQJ
LQIODWLRQWDUJHWLQJWROHYHOVWKDWDUHVLPLODUWRDQGVRPHWLPHVORZHUWKDQWKRVHREVHUYHG
LQLQGXVWULDOFRXQWULHVWKDWGRQRWWDUJHWLQIODWLRQ
,QIODWLRQ WDUJHWLQJ PD\ KDYH KHOSHG LQ EULQJLQJ GRZQ DQG JXLGLQJ LQIODWLRQ
H[SHFWDWLRQV DQG GHDOLQJ EHWWHU ZLWK LQIODWLRQ VKRFNV $FFRUGLQJ WR $OPHLGD DQG
*RRGKDUW DQG %HUQDQNHHW DO LQIODWLRQWDUJHWLQJ KDVQRW UHGXFHG LQIODWLRQ
H[SHFWDWLRQV TXLFNO\ RQO\ JUDGXDOO\ RYHU WLPH &RUER HW DO UHSRUW WKDW LQIODWLRQ
IRUHFDVW HUURUV EDVHG RQ FRXQWU\ 9$5 PRGHOV KDYH IDOOHQ FRQVLVWHQWO\ ZLWK DGRSWLRQRI
LQIODWLRQ WDUJHWLQJ WRZDUG WKH ORZ OHYHOV SUHYDOHQW LQ QRQWDUJHWLQJ LQGXVWULDO FRXQWULHV
7KH\ DOVRILQG WKDW LQIODWLRQSHUVLVWHQFH KDVGHFOLQHG VWURQJO\DPRQJWDUJHWHUV GXULQJWKH
VVXJJHVWLQJWKDWLQIODWLRQWDUJHWVKDYHVWUHQJWKHQHGIRUZDUGORRNLQJH[SHFWDWLRQVRQ
LQIODWLRQKHQFHZHDNHQLQJWKHZHLJKWRISDVWLQIODWLRQ
0RQHWDU\ SROLF\ XQGHU LQIODWLRQ WDUJHWLQJ LV IOH[LEOH LQDVPXFK LW UHVSRQGV
V\PPHWULFDOO\WRLQIODWLRQVKRFNVDQG GRHVDFFRPPRGDWHWHPSRUDU\LQIODWLRQVKRFNV
WKDWGRQRWDIIHFWWKHPHGLXPWHUPDWWDLQPHQWRIWKHWDUJHW,QIODWLRQWDUJHWHUVDUHQRW
³LQIODWLRQQXWWHUV´DSKUDVHGXHWR.LQJEHFDXVHWKH\W\SLFDOO\UHDFWV\PPHWULFDOO\
WRSRVLWLYHDQGQHJDWLYHVKRFNVSXUVXHGLVLQIODWLRQJUDGXDOO\DQGUHDFWWRWHPSRUDU\RXWSXW
VKRFNV (YLGHQFH E\ &HFFKHWWL DQG (KUPDQQ VKRZV WKDW RXWSXW GHYLDWLRQV KDYH D
SRVLWLYHZHLJKWLQDOOREMHFWLYHIXQFWLRQVRILQIODWLRQWDUJHWHUV
0RQHWDU\ SROLF\ LV PRUH FOHDUO\ IRFXVHG RQ LQIODWLRQ XQGHU LQIODWLRQ WDUJHWLQJ DQG
PD\ KDYH EHHQ WRXJKHQHG E\ LQIODWLRQ WDUJHWLQJ &HQWUDOEDQN PDQGDWHV WR IRFXV RQ
SULFH VWDELOLW\ WHQG WR EH VWUHQJWKHQHG E\ LQIODWLRQ WDUJHWLQJ %HUQDQNH HW DO
&HFFKHWWL DQG (KUPDQQ KDYH SURYLGHG HYLGHQFH WKDW FHQWUDOEDQN DYHUVLRQ WR
LQIODWLRQ VKRFNV UHODWLYH WR RXWSXW VKRFNV KDV EHHQ WRXJKHQHG ZLWK WKH DGRSWLRQ RI
LQIODWLRQWDUJHWLQJDFRQFOXVLRQSDUWO\FRQILUPHGE\&RUERHWDO
:H FRQFOXGH WKDW LQIODWLRQ WDUJHWLQJ KDV SURYHQ WR EH D YHU\ VXFFHVVIXO QHZ
PRQHWDU\ IUDPHZRUN ERWKLQ FRPSDULVRQ WRLQIODWLRQ WDUJHWHUV¶SUHFHGLQJH[SHULHQFHDQG
UHODWLYH WR DOWHUQDWLYH PRQHWDU\ UHJLPHV DGRSWHG E\ D FRQWURO JURXS RI KLJKO\ VXFFHVVIXO
LQGXVWULDOFRXQWULHVWKDWKDGLQSODFHRWKHUPRQHWDU\DUUDQJHPHQWVGXULQJWKHV
(UURU%RRNPDUNQRWGHILQHG5HYLVLWLQJ2SHUDWLRQDO'HVLJQ,VVXHV
2XUVXUYH\LQWKHSUHYLRXVVHFWLRQRXWOLQHVVRPHHOHPHQWVRIWKHRSHUDWLRQDOGHVLJQRI
LQIODWLRQ WDUJHWLQJ UHJLPHV +RZHYHU WKHUH DUH WKUHH GHVLJQ LVVXHV WKDW GHVHUYH GHWDLOHG
GLVFXVVLRQWKHLQWHUDFWLRQRIOHQJWKRIWKHWDUJHWKRUL]RQWKHZLGWKRIWKHWDUJHWUDQJHDQG
WKHXVHRIHVFDSHFODXVHVLQIODWLRQWDUJHWLQJGXULQJWKHWUDQVLWLRQIURPKLJKWRORZLQIODWLRQ
ZKRVKRXOGVHWWKHPHGLXPWHUPLQIODWLRQWDUJHWDQGWKHUROHRIWKHH[FKDQJHUDWHDQG
RWKHUDVVHWSULFHV:HGLVFXVVHDFKRIWKHVHLQWXUQ
,QWHUDFWLRQRIWKH7DUJHW+RUL]RQ:LGWKRI7DUJHW5DQJH(VFDSH&ODXVHVDQG&KRLFHRI
&RUH,QIODWLRQ7DUJHWV
$FHQWUDOSUREOHPIRUWKHGHVLJQRILQIODWLRQWDUJHWLQJUHJLPHVLVWKDWPRQHWDU\SROLF\
DIIHFWVWKHHFRQRP\DQGLQIODWLRQZLWKORQJODJV)RUFRXQWULHVWKDWDOUHDG\KDYHDFKLHYHGORZ
LQIODWLRQWKHODJVDUHHVWLPDWHGWREHTXLWHH[WHQGHG±WZR\HDUVRUHYHQORQJHU<HWVKRUWHU
WLPH KRUL]RQV VSHFLILFDOO\ DQQXDO LQIODWLRQ WDUJHWV KDYH EHHQ TXLWH FRPPRQ LQ LQIODWLRQ
WDUJHWLQJUHJLPHV
7KHXVHRIWRRVKRUWDWLPHKRUL]RQSDUWLFXODUO\ZKHQWKHUDQJHRIDQLQIODWLRQWDUJHWLV
QDUURZFDQOHDGWRDFRQWUROODELOLW\SUREOHP±WRRIUHTXHQWPLVVHVRIWKHLQIODWLRQWDUJHWHYHQ
ZKHQ PRQHWDU\ SROLF\ LV EHLQJ FRQGXFWHG RSWLPDOO\ )RU H[DPSOH H[DFWO\ WKLV RFFXUUHG LQ
1HZ=HDODQGLQZKHQWKH5HVHUYH%DQNRYHUVKRWLWVRQH\HDUKRUL]RQLQIODWLRQWDUJHW
UDQJHRI WR E\D IHZ WHQWKVRID SHUFHQWDJHSRLQW 7KLVRYHUVKRRWPDGH WKHJRYHUQRU
VXEMHFWWRGLVPLVVDOXQGHUWKHFHQWUDOEDQNLQJODZHYHQWKRXJKLWZDVZLGHO\UHFRJQL]HGWKDW
WKH RYHUVKRRWZDV OLNHO\WR EHVKRUWOLYHG DQGWKDW LQIODWLRQZRXOG VRRQIDOO DVLW ODWHUGLG
$OWKRXJKLQWKH1HZ=HDODQGFDVHWKHEUHDFKRIWKHLQIODWLRQWDUJHWUDQJHGLGQRWUHVXOWLQD
VXEVWDQWLDOORVVRIFUHGLELOLW\LQRWKHUFLUFXPVWDQFHVRUIRUDQHPHUJLQJPDUNHWFRXQWU\WKLV
FRXOGUHVXOWLQDVHULRXVORVVRIFUHGLELOLW\IRUWKHFHQWUDOEDQN
7RRVKRUWDKRUL]RQDQGDQDUURZWDUJHWUDQJHFDQDOVROHDGWRLQVWUXPHQWLQVWDELOLW\LQ
ZKLFKH[FHVVLYHVZLQJVLQWKHPRQHWDU\SROLF\LQVWUXPHQWVRFFXUZKHQWKHFHQWUDOEDQNWULHV
WRKLWWKHLQIODWLRQWDUJHW7KLV SUREOHPFDQEHHVSHFLDOO\ VHULRXVLQ DVPDOORSHQHFRQRP\
ZKHUH D VKRUW KRUL]RQ DQG QDUURZ UDQJH UHVXOWV LQ JUHDWHU UHOLDQFH RQ PDQLSXODWLQJ WKH
H[FKDQJHUDWHWRDFKLHYHWKHLQIODWLRQWDUJHWEHFDXVHH[FKDQJHUDWHPRYHPHQWVKDYHDIDVWHU
LPSDFWRQLQIODWLRQWKDQLQWHUHVWUDWHV7KHDQQXDOWDUJHWLQ1HZ=HDODQGDQGWKHSHUFHQWDJH
SRLQW UDQJH IRUWKH LQIODWLRQ WDUJHWZDVDQ LPSRUWDQWUHDVRQZK\WKH 5HVHUYH%DQNIRFXVHG
PRUH RQ H[FKDQJH UDWHV LQ WKH FRQGXFW RI PRQHWDU\ SROLF\ 7KLV UHVXOWHG LQ RYHUO\ WLJKW
PRQHWDU\SROLF\DWWKHHQGRIZLWKWKHRYHUQLJKWFDVKUDWHJRLQJWREHFDXVHRIIHDUV
WKDWLQIODWLRQZRXOGULVHDERYHWKHWDUJHWUDQJHLQ
7KHH[DPSOHRI1HZ=HDODQGLQDOVRLOOXVWUDWHVWKDWWRRVKRUWDKRUL]RQDQGWRR
QDUURZ DUDQJH FDQDOVR LQGXFH XQGHVLUHG RXWSXWIOXFWXDWLRQV $ FRQVHTXHQFH RIWKH RYHUO\
WLJKWPRQHWDU\SROLF\DWWKHHQGRIZDVWKDWLWFRQWULEXWHGWRWKHUHFHVVLRQLQDQG
ZKLFK ZDV PDGH ZRUVH E\ WKH QHJDWLYHWHUPVRIWUDGHVKRFN UHVXOWLQJ IURP WKH (DVW
$VLDQFULVLV
7R DYRLG FRQWUROODELOLW\ DQG LQVWUXPHQWLQVWDELOLW\SUREOHPVLQDQ LQIODWLRQWDUJHWLQJ
UHJLPHWKHUHDUHIRXUURXWHVWKDWFHQWUDOEDQNVFDQWDNH)LUVWWKH\FDQEXLOGLQIRUPDOHVFDSH
FODXVHV LQ WKHLU LQIODWLRQWDUJHWLQJ UHJLPH WR DOORZ IRU PLVVHV RI WKH LQIODWLRQ WDUJHW XQGHU
SDUWLFXODUFLUFXPVWDQFHV6HFRQGWKH\FDQWDUJHWFRUHLQIODWLRQUDWKHUWKDQKHDGOLQHLQIODWLRQ
7KLUGWKH\FDQZLGHQWKHUDQJHRIWKHLQIODWLRQWDUJHW)RXUWKWKH\FDQVHWLQIODWLRQWDUJHWVIRU
VHYHUDO\HDUVDKHDG
2QO\1HZ=HDODQGKDVSXWIRUPDOHVFDSHFODXVHVLQWRLWVLQIODWLRQWDUJHWLQJUHJLPHE\
DOORZLQJ IRU PLVVHV RI WKH LQIODWLRQ WDUJHW UDQJH ZKHQ WKHUH DUH VLJQLILFDQW FKDQJHV LQ WKH
WHUPVRIWUDGHFKDQJHVLQLQGLUHFWWD[HVWKDWDIIHFWWKHSULFHOHYHODQGVXSSO\VKRFNVVXFKDVD
PDMRUOLYHVWRFNHSLGHPLF1RWHWKDWWKH1HZ=HDODQGHVFDSHFODXVHVDUHGHVLJQHGWRGHDOZLWK
VXSSO\ VKRFNVRQO\EHFDXVHWKH\DUH WKHRQO\VKRFNV WKDWFDQ EHUHDGLO\LGHQWLILHG DVEHLQJ
H[RJHQRXV$JJUHJDWHGHPDQGVKRFNVPD\EHH[RJHQRXVEXWDUHMXVWDVOLNHO\WREHLQGXFHG
E\ PRQHWDU\ SROLF\ 7KXV DOORZLQJ FHQWUDO EDQNV WR DSSHDO WR WKHP WR MXVWLI\ PLVVHV RI DQ
LQIODWLRQWDUJHWZRXOGEHOLNHO\WRGHVWUR\FHQWUDOEDQNFUHGLELOLW\DQGXQGHUPLQHWKHLQIODWLRQ
WDUJHWLQJUHJLPH7KXVIRUPDOHVFDSHFODXVHVDOWKRXJKSURYLGLQJVRPHLQFUHDVHGIOH[LELOLW\
DUHRQO\DEOHWRSDUWLDOO\FRSHZLWKWKHFRQWUROODELOLW\DQGLQVWUXPHQWLQVWDELOLW\SUREOHPVIURP
WRRVKRUWDKRUL]RQDQGWRRQDUURZDWDUJHWUDQJH
$QDOWHUQDWLYHWRHVFDSHFODXVHVDVDPHWKRGRIFRSLQJZLWKVXSSO\VKRFNVLVWRWDUJHWD
FRUHW\SH LQIODWLRQ PHDVXUH ZKLFK H[FOXGHV LWHPV IURP WKH SULFH LQGH[ VXFK DV IRRG DQG
HQHUJ\WKDW DUHHVSHFLDOO\VXEMHFW WRVXSSO\VKRFNV 8VHRI DFRUH LQIODWLRQPHDVXUHKDVWKH
DGYDQWDJHRYHUHVFDSHFODXVHVWKDWLWLQYROYHVQRGLVFUHWLRQDIWHUDVXSSO\VKRFNRFFXUVZKLFK
PLJKW FDXVH WKH SXEOLF WR TXHVWLRQ WKH FHQWUDO EDQN¶V KRQHVW FRPPLWPHQW WR DFKLHYLQJ WKH
LQIODWLRQWDUJHWV,QVWHDGZKLFKLWHPVDUHWREHH[FOXGHGIURPWKHFRQVWUXFWLRQRIWKHLQIODWLRQ
PHDVXUHDUHGHFLGHGRQH[DQWH,WLVSUREDEO\ZK\FRUHPHDVXUHVRILQIODWLRQDVWDUJHWVKDYH
EHHQXVHGPRUHZLGHO\WKDQHVFDSHFODXVHV
+RZHYHU WDUJHWLQJ RQ FRUH LQIODWLRQ PHDVXUHV DOVR VKDUHV ZLWK HVFDSH FODXVHV WKH
GLVDGYDQWDJHWKDWLWRQO\GHDOVZLWKLQVWUXPHQWLQVWDELOLW\DQGFRQWUROODELOLW\SUREOHPVDULVLQJ
IURP VXSSO\ VKRFNV DQG QRW IURP DJJUHJDWH GHPDQG VKRFNV )XUWKHUPRUH FRUH LQIODWLRQ
PHDVXUHVKDYHWKHGLVDGYDQWDJHWKDWWKH\DUHQRWDVZHOOXQGHUVWRRGE\WKHSXEOLFDVKHDGOLQH
LQIODWLRQ PHDVXUHV WKXV PDNLQJ FRUH LQIODWLRQ WDUJHWV D VRPHZKDW ZHDNHU FRPPXQLFDWLRQ
YHKLFOHWKDQKHDGOLQHLQIODWLRQWDUJHWV,QDGGLWLRQFRUHLQIODWLRQPHDVXUHVH[FOXGHLWHPVWKDW
FRQVXPHUVFDUHDORWDERXWSDUWLFXODUO\SRRUHURQHVIRUZKLFKIRRGDQGHQHUJ\IRUPDODUJHU
VKDUHRIWKHLU EXGJHW,IWKHVH LWHPVDUH H[FOXGHGIURP WKHLQIODWLRQ PHDVXUHD FHQWUDOEDQN
WDUJHWVWKHFHQWUDOEDQNPD\EHVXEMHFWHGWRFULWLFLVPVWKDWLWGRHVQRWFDUHVXIILFLHQWO\DERXW
SRRUHUPHPEHUVLQWKHVRFLHW\
:LGHQLQJ WKH WDUJHW UDQJH E\ LWVHOI LV DOVR QRW D VROXWLRQ WR FRQWUROODELOLW\ DQG
LQVWUXPHQW LQVWDELOLW\SUREOHPV (VWLPDWHV RI WKHLUUHGXFLEOH XQFHUWDLQW\DURXQG DQ LQIODWLRQ
WDUJHW ZLWK D RQH\HDU KRUL]RQ DUH RQ WKH RUGHU RI SHUFHQWDJH SRLQWV HJ +DOGDQH DQG
6DOPRQ DQG 6WHYHQV DQG 'HEHOOH DOWKRXJK RYHU WLPH VXFFHVV ZLWK LQIODWLRQ
WDUJHWLQJPLJKWGHFUHDVHWKHYRODWLOLW\RILQIODWLRQH[SHFWDWLRQVDQGKHQFHLQIODWLRQ&KRRVLQJ
VXFKDZLGHUDQJHRQWKHLQIODWLRQWDUJHWLVKLJKO\SUREOHPDWLFEHFDXVHLWZLOOOLNHO\FRQIXVH
WKHSXEOLFDERXWWKHFHQWUDOEDQNVLQWHQWLRQVDQGWKH UHVXOWLQJKLJKFHLOLQJIRU WKHUDQJHLV
OLNHO\WRPDNHWKHFRPPLWPHQWWRORZLQIODWLRQOHVVFOHDUFXWWKHUHE\UHGXFLQJWKHFUHGLELOLW\
RIPRQHWDU\SROLF\7KLVW\SHRISUREOHPDFWXDOO\RFFXUUHGLQWKH8QLWHG.LQJGRPLQ
ZKHQ LQIODWLRQ H[FHHGHG WKH WDUJHW PLGSRLQW RI E\ RYHU RQH SHUFHQWDJH SRLQW EXW
ZLWKRXWEUHDFKLQJWKHFHLOLQJWKXVJLYLQJWKH&KDQFHOORURIWKH([FKHTXHUFRYHUWRUHVLVW
WKH%DQNRI(QJODQGVUHFRPPHQGDWLRQIRUWLJKWHQLQJRIPRQHWDU\SROLF\VHH%HUQDQNHHWDO
/HQJWKHQLQJ WKH WDUJHW KRUL]RQ WR FRUUHVSRQG PRUH FORVHO\ WR WKH ODJV RI PRQHWDU\
SROLF\ HIIHFWV RQ LQIODWLRQ ZRXOG VHHP WR EH WKH EHVW VROXWLRQ WR WKH FRQWUROODELOLW\ DQG
LQVWUXPHQWLQVWDELOLW\SUREOHPV,QGHHGJLYHQWKHSUREOHPVLWHQFRXQWHUHGLQDQG
WKH5HVHUYH%DQNRI1HZ=HDODQGQRZHPSKDVL]HVDWDUJHWKRUL]RQRIVL[WRHLJKWTXDUWHUVLQ
WKHLUGLVFXVVLRQRIPRQHWDU\SROLF\VHH6KHUZLQDQG'UHZDQG2UU2WKHUFHQWUDO
EDQNV LQFOXGLQJ WKH %DQN RI &DQDGD DQG WKH %DQN RI (QJODQG KDYH IRU D ORQJ WLPH
HPSKDVL]HGDWDUJHWKRUL]RQRIFORVHUWRWZR\HDUVDQGWKLVKDVUHFHQWO\EHFRPHDIHDWXUHRI
WKH&KLOHDQWDUJHWLQJUHJLPH&HQWUDO%DQNRI&KLOHD
+RZHYHU DV6YHQVVRQ KDV HPSKDVL]HG LI FHQWUDOEDQNV DUHFRQFHUQHG DERXW
RXWSXWIOXFWXDWLRQVLHSXWDZHLJKW RQRXWSXWIOXFWXDWLRQVLQWKHLUORVVIXQFWLRQWKHQ WKH
LQIODWLRQ IRUHFDVW VKRXOG DSSURDFK WKH ORQJUXQ LQIODWLRQ WDUJHW JUDGXDOO\ RYHU WLPH 7KLV
LPSOLHVWKDWDKRUL]RQHYHQORQJHUWKDQWKHSROLF\ODJVPLJKWEHDSSURSULDWHIRUWKHLQIODWLRQ
WDUJHW 6XFK D ORQJ KRUL]RQ IRU WKH LQIODWLRQ WDUJHW PD\ FUHDWH SUREOHPV IRU DQ LQIODWLRQ
WDUJHWLQJUHJLPHEHFDXVHWKHORQJSHULRGEHIRUHWKHUHLVYHULILFDWLRQRIKLWWLQJWKHWDUJHWPD\
ZHDNHQFUHGLELOLW\SDUWLFXODUO\LIFUHGLELOLW\RIWKHFHQWUDOEDQNLVQRWKLJKWREHJLQZLWK2QH
SRVVLEOHZD\WRGHDOZLWKWKLVLVWRUHFRJQL]HWKDWWKHUHLVDQLQWHUDFWLRQEHWZHHQWKHRSWLPDO
KRUL]RQ DQG UDQJH IRU WKH WDUJHW WKH WDUJHW KRUL]RQ FRXOG EH NHSW UHODWLYHO\ VKRUW VD\ WZR
\HDUV LI WKH WDUJHW UDQJH LV ZLGHQHG ,QGHHG ZLGHQLQJ RI WKH WDUJHW UDQJH IURP WR
SHUFHQWDJH SRLQWV LV QRZ VHHQ E\ WKH 5HVHUYH %DQNRI1HZ =HDODQG WRKDYH LPSURYHG WKH
LQIODWLRQWDUJHWLQJUHJLPHHYHQWKRXJKWKH%DQNZDVLQLWLDOO\QRWDVXSSRUWHURIWKLVFKDQJH
+RZHYHUZLGHQLQJWKHWDUJHWUDQJHLVQRWZLWKRXWLWVSUREOHPVDVPHQWLRQHGDERYHEHFDXVH
LWFDQDOVRLQFUHDVHFRQIXVLRQDQGZHDNHQWKHFUHGLELOLW\RIWKHWDUJHWLQJUHJLPH
$QRWKHUZD\WRDOORZIRUORQJHUKRUL]RQVLVWKHXVHRIPXOWL\HDUDQQXDOWDUJHWVVRWKDW
WKHSDWKRIWKHLQIODWLRQWDUJHWFDQDSSURDFKWKHORQJUXQLQIODWLRQJRDOPRUHJUDGXDOO\7KLVLV
WKHVWUDWHJ\WKDWKDVUHFHQWO\EHHQDGRSWHGE\ERWK%UD]LODQG0H[LFR%DQNRI%UD]LO
DQG %DQN RI 0H[LFR $Q DOWHUQDWLYH DSSURDFK LV IRU WKH FHQWUDO EDQN WR FRQWLQXH WR
DQQRXQFHRQO\RQHPHGLXPWHUPLQIODWLRQWDUJHWEXWWRDOVRDQQRXQFHDORQJUXQWDUJHWZLWKD
VSHFLILHGGDWHDVWRZKHQLWVKRXOGEHDFKLHYHG$WKLUGDOWHUQDWLYHIRUWKHFHQWUDOEDQNLVWR
DQQRXQFHRQO\RQHORQJWHUPLQIODWLRQWDUJHWDQGWRSXEOLVKLQIODWLRQIRUHFDVWVIRUIXWXUH\HDUV
WKXVGHVFULELQJWKHH[SHFWHGSDWKRILQIODWLRQWRZDUGWKHORQJUXQWDUJHW7KLVLVWKHDSSURDFK
WKDW KDV EHHQ UHFHQWO\ DGRSWHG E\ &KLOH &HQWUDO %DQN RI &KLOH E IROORZLQJ RWKHU
LQGXVWULDOFRXQWULHV
,QGHHGRQHRIWKHDXWKRUVRIWKLVSDSHUKDVDUJXHGHOVHZKHUH0LVKNLQDWKDWDSRLQWWDUJHWIRULQIODWLRQ
PD\EHPRUHGHVLUDEOHWKDQDWDUJHWUDQJHEHFDXVHHGJHVRIWKHWDUJHWUDQJHFDQWDNHRQDOLIHRIWKHLURZQ:LWK
WDUJHWUDQJHVLQSODFHSROLWLFLDQVILQDQFLDOPDUNHWVDQGWKHSXEOLFRIWHQIRFXVRQZKHWKHULQIODWLRQLVMXVWRXWVLGH
RU LQVLGH WKH HGJH RI D UDQJH UDWKHU WKDQRQ WKH PDJQLWXGH RI WKH GHYLDWLRQ IURP WKH PLGSRLQW $V GLVFXVVHG
DERYHWKHRSSRVLWHSUREOHPRFFXUUHGLQWKH8QLWHG.LQJGRPLQZKHQLQIODWLRQH[FHHGHGWKHWDUJHWPLGSRLQW
E\RYHU RQHSHUFHQWDJHSRLQWEXWZLWKRXWEUHDFKLQJWKHXSSHUEDQG7KHSUREOHPZLWKWRRPXFKIRFXVRQWKH
HGJHVRIWKHUDQJHLVWKDWLWFDQOHDGWKHFHQWUDOEDQNWRFRQFHQWUDWHWRRPXFKRQNHHSLQJWKHLQIODWLRQUDWHMXVW
ZLWKLQWKHEDQGVUDWKHUWKDQWU\LQJWRKLWWKHPLGSRLQWRIWKHUDQJH,WLVGLIILFXOWWRLPDJLQHDVHQVLEOHREMHFWLYH
IXQFWLRQIRUSROLF\PDNHUVWKDWZRXOGMXVWLI\VXFKDV\PPHWULFUHDFWLRQVWRLQIODWLRQUDWHVMXVWLQVLGHDQGRXWVLGH
WKHEDQGV
,QIODWLRQ7DUJHWLQJ'XULQJWKH7UDQVLWLRQIURP+LJKWR/RZ,QIODWLRQ
:KHQLQIODWLRQLVLQLWLDOO\ZHOODERYHWKHORQJUXQLQIODWLRQJRDOFRQVLVWHQWZLWKSULFH
VWDELOLW\ WKH FUHGLELOLW\ RI WKH FHQWUDO EDQN LV OLNHO\WREHORZ,QDGGLWLRQ DW LQLWLDOO\KLJK
LQIODWLRQUDWHVVD\RYHU LQIODWLRQLVQRW HDVLO\FRQWUROOHGE\WKHPRQHWDU\DXWKRULWLHV
7KXV LQIODWLRQ WDUJHWLQJ WR DFKLHYH D GLVLQIODWLRQ IURP D KLJK LQIODWLRQ UDWH IDFHV H[WUD
FKDOOHQJHV
2QH ZD\WR GHDO ZLWKWKHFRPSOLFDWLRQVDULVLQJ IURPDQ LQLWLDOO\KLJKLQIODWLRQ LVWR
SKDVHLQ LQIODWLRQWDUJHWLQJJUDGXDOO\PDNLQJLWPRUHIRUPDOZLWKLQFUHDVLQJVXFFHVVRQWKH
GLVLQIODWLRQIURQWDVVXJJHVWHGE\0DVVRQHWDO7KLVLVH[DFWO\WKHVWUDWHJ\WKDWKDV
EHHQSXUVXHGE\HPHUJLQJPDUNHWFRXQWULHVZLWKLQLWLDOO\KLJKLQIODWLRQ0LVKNLQEDQG
0LVKNLQDQG6DYDVWDQR
)RUH[DPSOHZKHQ&KLOHDGRSWHGLQIODWLRQWDUJHWLQJLQ
ZLWK LQIODWLRQ H[FHHGLQJ WKH LQIODWLRQ WDUJHW ZDV WUHDWHG PRUH DV DQ RIILFLDO LQIODWLRQ
SURMHFWLRQ UDWKHUWKDQDV D IRUPDOKDUG WDUJHW0RUDQGp DQG 6FKPLGW+HEEHO
0RUDQGp 2YHU WLPH WKH FHQWUDO EDQN SXW JUHDWHU HPSKDVLV RQ WKH SULFH VWDELOLW\
REMHFWLYH DQG ZLWK LWV VXFFHVV LQ ERWK GLVLQIODWLQJ DQG PHHWLQJ LWV LQIODWLRQ REMHFWLYHV WKH
SXEOLFEHJDQWRLQWHUSUHWWKRVHREMHFWLYHVDVKDUGWDUJHWVIRUZKLFKWKHFHQWUDOEDQNFRXOGEH
PDGH DFFRXQWDEOH )LQDOO\ LQ 0D\ RI WKH &HQWUDO %DQN RI &KLOH EHJDQ WR LVVXH DQ
LQIODWLRQ UHSRUWW\SHGRFXPHQW ZLWKDOOWKHEHOOVDQGZKLVWOHVVHHQLQVLPLODUGRFXPHQWVLQ
LQGXVWULDOL]HG FRXQWULHV )RU H[DPSOH WKLV 0RQHWDU\ 3ROLF\ 5HSRUW QRW RQO\ RXWOLQHV
GHYHORSPHQWVRQWKHLQIODWLRQIURQWDQGKRZWKH%DQNLQWHQGVWRDFKLHYHLWVLQIODWLRQWDUJHW
EXW DOVR LQFOXGHV LQIODWLRQ DQG RXWSXW IRUHFDVWV DORQJ ZLWK FRQILGHQFH LQWHUYDOV IRU WKHVH
IRUHFDVWVGLVSOD\HGLQWKHIDPRXVIDQFKDUWVSLRQHHUHGE\WKH%DQNRI(QJODQG
0H[LFR DOVR KDV EHHQ IROORZLQJ D JUDGXDO DSSURDFK WR LPSOHPHQWLQJ LQIODWLRQ
WDUJHWLQJ 6HQLRU RIILFLDOV RI WKH %DQN RI 0H[LFR UHFHQWO\FKDUDFWHUL]HG 0H[LFRVPRQHWDU\
SROLF\ IUDPHZRUN DV EHLQJ LQ D WUDQVLWLRQ SHULRG WRZDUGV D FOHDUFXW LQIODWLRQ WDUJHWLQJ
VFKHPH &DUVWHQV DQG :HUQHU )RU D QXPEHU RI \HDUV 0H[LFR KDV PDGH SXEOLF DQ
H[SOLFLW LQIODWLRQ REMHFWLYH DW WKH WLPH WKH 0LQLVWHU RI )LQDQFH VXEPLWWHG WR &RQJUHVV WKH
JRYHUQPHQW¶VHFRQRPLFSURJUDPIRUWKHIROORZLQJ\HDU7KH%DQNRI0H[LFRKDVLQFUHDVLQJO\
SXWDQHPSKDVLVRQWKHLQIODWLRQJRDODVWKHFHQWUDOREMHFWLYHRILWVPRQHWDU\SROLF\,Q
,WKDVHYHQEHHQDIHDWXUHRIWKHDGRSWLRQVWUDWHJ\RILQGXVWULDOL]HGFRXQWULHVZKRDGRSWHGLQIODWLRQWDUJHWLQJ
ZKHQLQIODWLRQKDVEHHQDWUDWHVOHVVWKDQ%HUQDQNHHWDO
DIWHUDQQXDOLQIODWLRQDW IHOOEHORZWKH WDUJHWIRUWKH ILUVWWLPHWKHFHQWUDOEDQN
DQQRXQFHGWKHLQIODWLRQWDUJHWIRUWKH\HDUEHIRUHWKH0LQLVWU\RI)LQDQFHVXEPLWWHG
WR&RQJUHVVWKHHFRQRPLFSURJUDPIRUWKH\HDU6WDUWLQJLQ$SULORIWKH%DQNRI0H[LFR
KDV EHHQ LVVXLQJ DQ ,QIODWLRQ 5HSRUW ZKLFK GRFXPHQWV ZKDW KDV EHHQ KDSSHQLQJ RQ WKH
LQIODWLRQIURQWDQGKRZWKH%DQNRI0H[LFRLQWHQGVWRDFKLHYHLWVLQIODWLRQREMHFWLYHVEXWGRHV
QRWSURYLGHLQIODWLRQDQGRXWSXWIRUHFDVWV,QLWVWKLUG,QIODWLRQ5HSRUWSXEOLVKHGLQ2FWREHU
WKH%DQNRI0H[LFRDQQRXQFHGPXOWL\HDUDQQXDOWDUJHWVZKLFKFRQYHUJHWRDORQJUXQ
WDUJHWRIWREHUHDFKHGE\'HFHPEHU
:HDN FUHGLELOLW\ ZKHQLQIODWLRQLVLQLWLDOO\ KLJKPDNHVLWPRUHOLNHO\WKDWWKHSXEOLF
DQG PDUNHWV PD\ QRW EHOLHYH WKDW WKH FHQWUDO EDQN LV VHULRXV DERXW KLWWLQJ LWV WDUJHWV LI
YHULILFDWLRQKDVWRZDLWIRUPRUHWKDQRQH\HDULQWKHIXWXUH7KLVSUREOHPPD\PDNHLWYHU\
GLIILFXOW IRU D FHQWUDO EDQN DGRSWLQJ LQIODWLRQ WDUJHWLQJ ZKHQ LQIODWLRQ LV KLJK WR FKRRVH
LQIODWLRQWDUJHWVZLWKKRUL]RQVORQJHUWKDQD\HDU$VZHKDYHVHHQLQWKHSUHYLRXVVXEVHFWLRQ
WKLV SUHVHQWV WKH FHQWUDO EDQN ZLWK D GLOHPPD EHFDXVH WKH ODJV IURP PRQHWDU\ SROLF\ WR
LQIODWLRQ DUH OLNHO\ WR EH ORQJHU WKDQ D RQH\HDU KRUL]RQ $ VROXWLRQ WR WKLV GLOHPPD LV WR
VSHFLI\DSDWKIRUWKHLQIODWLRQWDUJHWZLWKPXOWL\HDUWDUJHWVZKLFKLVZKDWWKHFHQWUDOEDQNV
RI%UD]LO&]HFK5HSXEOLF0H[LFRDQG3RODQGKDYHGRQHVLQFH+RZHYHUVSHFLI\LQJD
PXOWL\HDU SDWK IRU WKH DQQXDO LQIODWLRQ WDUJHWVFUHDWH WKH GDQJHUWKDW HYHQ WKRXJK DFHQWUDO
EDQNLVPDNLQJJRRGSURJUHVVWRZDUGLWVORQJUXQLQIODWLRQJRDOJLYHQWKHJUHDWHUXQFHUWDLQW\
RILQIODWLRQFRQWURODWKLJKLQIODWLRQUDWHVLWPLJKWVWLOOGHYLDWHVXEVWDQWLDOO\IURPWKHPXOWL\HDU
SDWK7KLVSUREOHPFDQKHOSH[SODLQZK\WKH&KLOHDQFHQWUDOEDQNFKRVHQRWWRVSHFLI\PXOWL
\HDULQIODWLRQWDUJHWVZKHQLWHPEDUNHGRQLWVLQIODWLRQWDUJHWLQJUHJLPHLQ
:KHQWUDQVLWLQJIURPKLJKWRORZLQIODWLRQWKHUHDSSHDUVWREHDVWURQJHUUDWLRQDOHIRU
DGRSWLQJD ZLGHUUDQJH IRULQIODWLRQ WDUJHWVWRUHIOHFWWKH VXEVWDQWLDOXQFHUWDLQW\RI LQIODWLRQ
FRQWUROZKHQLQIODWLRQLVLQLWLDOO\KLJK+RZHYHU DVGLVFXVVHG LQWKHSUHYLRXV VXEVHFWLRQD
ZLGH UDQJH IRUWKH LQIODWLRQWDUJHW FDQ OHDGWRFUHGLELOLW\SUREOHPVEHFDXVH WKH JRYHUQPHQW
PD\ EH ZLOOLQJ WR DGYRFDWH WKDW DOO LV ZHOO RQ WKH LQIODWLRQ IURQW ZKHQ WKH LQIODWLRQ UDWH LV
VXEVWDQWLDOO\DERYHWKHPLGSRLQWRIWKHWDUJHWUDQJHEXWLVVWLOOEHORZWKHFHLOLQJRIWKHUDQJH
$ SRLQW WDUJHW RQ WKH RWKHU KDQG PDNHV WKLV EHKDYLRU RQ WKH SDUW RI WKH JRYHUQPHQW OHVV
OLNHO\ 0DNLQJ VXUH WKDW WKH JRYHUQPHQW GRHV QRW ZHDNHQ WKH FRPPLWPHQW WR ORZHULQJ
LQIODWLRQLVHVSHFLDOO\LPSRUWDQWIRULQIODWLRQWDUJHWLQJUHJLPHVZKHQLQIODWLRQLVKLJKEHFDXVH
FUHGLELOLW\ LV VR PXFK PRUH SUHFDULRXV LQ WKHVH VLWXDWLRQV 7KHUH LV WKHUHIRUH D VWURQJHU
DUJXPHQWIRUFKRRVLQJDSRLQWWDUJHWRYHUDWDUJHWUDQJHLQDQLQIODWLRQWDUJHWLQJUHJLPHGXULQJ
WKH WUDQVLWLRQ IURP KLJK WR ORZ LQIODWLRQ ,QWHUHVWLQJO\ WKH &HQWUDO %DQN RI &KLOH VZLWFKHG
IURPWDUJHWUDQJHVWRSRLQWLQIODWLRQWDUJHWVLQLQWKHSURFHVVRIKDUGHQLQJLWVLQIODWLRQ
WDUJHWLQJUHJLPH
,PSHUIHFW FUHGLELOLW\GXULQJWUDQVLWLRQIURPPRGHUDWHO\ KLJKWR ORZLQIODWLRQ LPSOLHV
WKDW LQIODWLRQH[SHFWDWLRQVDUHPRUHJHDUHGWRKLJKHUSDVW LQIODWLRQWKDQWR ORZHURIILFLDO
LQIODWLRQWDUJHWV+HQFHLQIODWLRQLQHUWLDLVSRWHQWLDOO\ODUJHUDQGUDSLGGLVLQIODWLRQLVSRWHQWLDOO\
PRUH FRVWO\ LQ WUDQVLWLRQ WRZDUG ORZ LQIODWLRQ (YLGHQFH IRU &KLOH EDVHG RQ FRXQWHUIDFWXDO
VLPXODWLRQV FDUULHG RXW E\ &RUER HW DO DQG 0RUDQGp VXJJHVW WKDW D TXLFNHU
SDFH RI GLVLQIODWLRQ WRZDUG WKH ORQJWHUP WDUJHW ZRXOG KDYH LQYROYHG D ODUJHU RXWSXW
VDFULILFH
$V LV DUJXHG LQ 0LVKNLQ F DQ HPSKDVLV RQ DYRLGLQJ XQGHUVKRRWV RI WKH
LQIODWLRQ WDUJHWLV OLNHO\WRLPSURYH WKHSHUIRUPDQFH RILQIODWLRQ WDUJHWLQJUHJLPHV:KHQ
LQIODWLRQDSSURDFKHVOHYHOVWKDWDUHFRQVLVWHQWZLWKSULFHVWDELOLW\DV\PPHWULFDSSURDFKWR
LQIODWLRQ WDUJHWLQJLQZKLFKXQGHUVKRRWVDUHWREHDYRLGHGMXVWDV VWRQJO\DV RYHUVKRRWV
PDNHVRXWSXWGHFOLQHVDQGGHIODWLRQOHVVOLNHO\DQGLWDOVRLQGLFDWHVWKDW WKHFHQWUDOEDQN
DSSURSULDWHO\ FDUHV DERXW RXWSXW IOXFWXDWLRQV KHOSLQJ WR PDLQWDLQ VXSSRUW IRU LWV
LQGHSHQGHQFH +RZHYHUZHDNFUHGLELOLW\ZKHQ LQIODWLRQWDUJHWLQJLV DGRSWHGDW UHODWLYHO\
KLJK LQIODWLRQ UDWHV ZKLFK LV RIWHQ WKH VLWXDWLRQ IRU HPHUJLQJ PDUNHW FRXQWULHV DGRSWLQJ
LQIODWLRQ WDUJHWLQJ SURYLGHV DQ DUJXPHQW IRU ZK\ DQ DV\PPHWULF DSSURDFK WR LQIODWLRQ
WDUJHWLQJ DW KLJKHU LQIODWLRQ UDWHV PD\ KDYH VRPH DGYDQWDJHV 2YHUVKRRWV RI LQIODWLRQ
WDUJHWVZKHQLQIODWLRQLVVWLOOKLJKPD\FUHDWHIHDUVWKDWPRQHWDU\SROLF\LVJRLQJEDFNWRLWV
ROGKLJKLQIODWLRQZD\VDQGRYHUVKRRWVFRXOGWKXVKDYHGHYDVWDWLQJHIIHFWVRQFHQWUDOEDQN
FUHGLELOLW\ $W KLJK LQIODWLRQ WKH FHQWUDO EDQN PD\ WKHUHIRUH ZDQW WR EH SDUWLFXODUO\
DJJUHVVLYHLILWWKLQNVWKHUHLVDSRVVLELOLW\WKDWLQIODWLRQZLOORYHUVKRRWWKHWDUJHW7KLVELDV
WRSUHYHQWLQJRYHUVKRRWVRIWKHWDUJHWQHFHVVDULO\LPSOLHVWKDWWKHFHQWUDOEDQN¶VSUHIHUHQFHV
ZRXOG EH VRPHZKDW DV\PPHWULF ZLWK RYHUVKRRWV UHFHLYLQJ D JUHDWHU ZHLJKW LQ WKH ORVV
IXQFWLRQWKDQXQGHUVKRRWV)RUH[DPSOHWKHEHKDYLRURIWKH%DQNRI,VUDHOLQUHFHQW\HDUV
VHHPVWREHFRQVLVWHQWZLWKDV\PPHWULFSUHIHUHQFHVRIWKLVW\SH
+RZHYHU DV\PPHWULF SUHIHUHQFHV FDQ EH WDNHQ WRR IDU ,I WKH FHQWUDO EDQN LV QRW
VXIILFLHQWO\FRQFHUQHGDERXW XQGHUVKRRWVRIWKH WDUJHWVLWFDQSURGXFHJUHDWHUXQFHUWDLQW\
DERXW LQIODWLRQ ZKLFK LQWHUIHUHV ZLWK SULYDWH VHFWRU SODQQLQJ $OVR QRW DYRLGLQJ
XQGHUVKRRWVRIWKHWDUJHWFDQOHDGWRVKDUSGHFOLQHVLQDJJUHJDWHRXWSXWZKLFKFDQQRWRQO\
EH KDUPIXO WR WKH HFRQRP\ EXW FDQ DOVR OHDGWRGHFUHDVHGSXEOLF VXSSRUW IRU WKHFHQWUDO
EDQN DQG WKH LQIODWLRQ WDUJHWLQJ UHJLPH (YHQ LI DV\PPHWULF SUHIHUHQFHV ZKLFK VWUHVV
DYRLGLQJRYHUVKRRWVPRUHWKDQXQGHUVKRRWVRILQIODWLRQWDUJHWVPDNHVHQVHDWKLJKLQIODWLRQ
UDWHV RQFH WKH WUDQVLWLRQ IURP KLJK WR ORZ LQIODWLRQ LV FRPSOHWH WKH\ DUH QR ORQJHU
DSSURSULDWH
:KR6KRXOG6HWWKH0HGLXP7HUP,QIODWLRQ7DUJHW"
'HEHOOH DQG )LVFKHU DQG )LVFKHU PDNH WKH XVHIXOGLVWLQFWLRQEHWZHHQ
JRDOLQGHSHQGHQFHLQZKLFKWKHFHQWUDOEDQNVHWVWKHJRDOVRIPRQHWDU\SROLF\DQGLQVWUXPHQW
LQGHSHQGHQFH LQ ZKLFK WKH FHQWUDO EDQN FRQWUROV PRQHWDU\ SROLF\ LQVWUXPHQWV ,QVWUXPHQW
LQGHSHQGHQFH IRU FHQWUDO EDQNV LV VXSSRUWHG E\ WKH QHHG WR LQVXODWH WKH FHQWUDO EDQN IURP
VKRUWUXQSROLWLFDOSUHVVXUHVWKDWPD\OHDGLWWRSXUVXHWLPHLQFRQVLVWHQWH[SDQVLRQDU\SROLF\
WKDWSURGXFHVEDGORQJUXQRXWFRPHV+RZHYHUWKHDUJXPHQWWKDWDFHQWUDOEDQN¶VORQJUXQ
SUHIHUHQFHVVKRXOGFRLQFLGHZLWKVRFLHW\¶VSUHIHUHQFHVVXJJHVWVWKDWDFHQWUDOEDQNVKRXOGEH
JRDOGHSHQGHQW+DYLQJWKHJRYHUQPHQWGHFLGHRQWKHORQJUXQLQIODWLRQWDUJHWIRUWKHFHQWUDO
EDQNWKXVUHFHLYHVDORWRIVXSSRUW
:KHWKHU WKHJRYHUQPHQWVKRXOGVHW WKHPHGLXPWHUP LQIODWLRQWDUJHWUDWKHUWKDQWKH
FHQWUDOEDQNLVDWULFNLHUTXHVWLRQ,ILQIODWLRQLVFXUUHQWO\ORZWKHPHGLXPWHUPWDUJHWLVOLNHO\
WREHWKHVDPHDVWKHORQJUXQWDUJHWDQGVRWKHUHLVQRFRQIOLFWEHWZHHQWKHPPDNLQJLWHDVLHU
WRPDNHWKHFDVHWKDWWKHJRYHUQPHQWVKRXOGVHWWKHPHGLXPWHUPWDUJHWDVLWGRHVLQPDQ\
LQIODWLRQWDUJHWLQJUHJLPHV+RZHYHULILQIODWLRQLVFXUUHQWO\IDUIURPWKHORQJUXQWDUJHWZKR
VHWVWKHPHGLXPWHUPWDUJHWLVPRUHFRPSOLFDWHG7KHOHQJWKRIWKHODJVIURPPRQHWDU\SROLF\
WRLQIODWLRQLV DWHFKQLFDO LVVXHWKDWWKHFHQWUDOEDQNLVIDUPRUHTXDOLILHG WRGHWHUPLQHWKDQ
SROLWLFLDQV 7KXV KRZ ORQJ LW VKRXOG WDNH IRU LQIODWLRQ WR UHWXUQ WR WKH ORQJUXQ WDUJHW
QHFHVVDULO\ UHTXLUHV MXGJHPHQW DERXW WKHVH ODJV ZKLFK VKRXOG EH LQVXODWHG IURP VKRUWWHUP
SROLWLFDO SUHVVXUHLIWLPHLQFRQVLVWHQW SROLFLHV DUH WREH DYRLGHG7KLVDUJXHVIRU KDYLQJWKH
FHQWUDOEDQNVHWWKHPHGLXPWHUPLQIODWLRQWDUJHWEHFDXVHKRZTXLFNO\LWDSSURDFKHVWKHORQJ
UXQWDUJHWUHIOHFWVWKHODJVRIPRQHWDU\SROLF\HIIHFWVRQLQIODWLRQ
2QWKHRWKHUKDQGDV6YHQVVRQKDVVKRZQSUHIHUHQFHVRQWKHZHLJKWJLYHQWR
PLQLPL]LQJ RXWSXW IOXFWXDWLRQV UHODWLYH WR LQIODWLRQ IOXFWXDWLRQV DIIHFWV WKH VSHHG DW ZKLFK
LQIODWLRQ VKRXOG EH DGMXVWHG WRZDUG WKH ORQJUXQ JRDO 7KXV LI WKH JRYHUQPHQW¶V ORQJUXQ
SUHIHUHQFHVDUHWREH UHIOHFWHGLQ PRQHWDU\SROLF\WKHUH LVDQDUJXPHQWIRUWKHJRYHUQPHQW
KDYLQJ D UROH LQ VHWWLQJ WKH PHGLXPWHUP WDUJHW EHFDXVH WKLV GHWHUPLQHV WKH VSHHG RI
FRQYHUJHQFHRILQIODWLRQWRWKHORQJUXQWDUJHW
&OHDUO\ WKHUH LV D WUDGHRII RQ ZKR VKRXOG VHW PHGLXPWHUP LQIODWLRQ WDUJHWV ZKHQ
LQIODWLRQ LVIDU IURPWKHORQJUXQ JRDO7KH DUJXPHQW IRULQVWUXPHQW LQGHSHQGHQFHVXJJHVWV
WKDW WKH FHQWUDO EDQN VKRXOG VHW WKH PHGLXPWHUP WDUJHW ZKLOH WKH DUJXPHQW IRU JRDO
GHSHQGHQFH VXJJHVWVWKDWWKH JRYHUQPHQW VKRXOGVHW WKH PHGLXPWHUP WDUJHW)RULQGXVWULDO
FRXQWULHVWKLVPD\QRWEHWKDWPXFKRIDGLOHPPDEHFDXVHPHGLXPWHUPWDUJHWVDQGORQJUXQ
WDUJHWV DUH OLNHO\ WR EH TXLWH FORVH %XW IRU FRXQWULHV LQ WKH WUDQVLWLRQ IURP KLJK WR ORZ
LQIODWLRQ LW LV IDU OHVV REYLRXV WKDW WKH JRYHUQPHQW VKRXOG GHWHUPLQH WKH PHGLXPWHUP
LQIODWLRQWDUJHW
7KH5ROHRIWKH([FKDQJH5DWHDQG2WKHU$VVHW3ULFHV
0RYHPHQWV RI WKH H[FKDQJH UDWH DUH FOHDUO\ D PDMRU FRQFHUQ RI FHQWUDO EDQNV LQ
LQIODWLRQWDUJHWLQJDVZHOO DVQRQLQIODWLRQWDUJHWLQJFRXQWULHV&KDQJHVLQWKHH[FKDQJHUDWH
FDQ KDYH D PDMRU LPSDFW RQ LQIODWLRQ SDUWLFXODUO\ LQ VPDOO RSHQ HFRQRPLHV )RU H[DPSOH
GHSUHFLDWLRQVOHDGWRDULVHLQLQIODWLRQDVDUHVXOWRIWKHSDVVWKURXJKIURPKLJKHULPSRUWSULFHV
DQGJUHDWHUGHPDQGIRUH[SRUWVSDUWLFXODUO\LQDVPDOORSHQHFRQRP\,QDGGLWLRQWKHSXEOLF
DQGSROLWLFLDQVSD\DWWHQWLRQWRWKHH[FKDQJHUDWHDQGWKLVSXWVSUHVVXUHRQWKHFHQWUDOEDQNWR
DOWHUPRQHWDU\SROLF\$QDSSUHFLDWLRQRIWKHGRPHVWLFFXUUHQF\FDQPDNHGRPHVWLFEXVLQHVV
XQFRPSHWLWLYHZKLOHDGHSUHFLDWLRQLVRIWHQVHHQDVDVLJQDORIIDLOXUHRIWKHFHQWUDOEDQNDV
KDVUHFHQWO\EHHQWKHFDVHIRUWKH(XURSHDQ&HQWUDO%DQNHYHQLIWKLVYLHZLVDQXQIDLURQH
(PHUJLQJ PDUNHW FRXQWULHV TXLWH FRUUHFWO\ KDYH DQ HYHQ JUHDWHU FRQFHUQ DERXW
H[FKDQJH UDWH PRYHPHQWV 1RW RQO\ FDQ D UHDO DSSUHFLDWLRQ PDNH GRPHVWLF LQGXVWULHV OHVV
FRPSHWLWLYHEXWLWFDQOHDGWRODUJHFXUUHQWDFFRXQWGHILFLWVZKLFKFDQPDNHWKHFRXQWU\PRUH
YXOQHUDEOH WR FXUUHQF\ FULVLV LI FDSLWDO LQIORZV WXUQ WR RXWIORZV 'HSUHFLDWLRQV LQ HPHUJLQJ
PDUNHW FRXQWULHVDUHSDUWLFXODUO\GDQJHURXVEHFDXVH WKH\FDQ WULJJHUDILQDQFLDOFULVLV DORQJ
WKH OLQHV VXJJHVWHG LQ 0LVKNLQ D D 7KHVH FRXQWULHV KDYH PXFK RI WKHLU GHEW
GHQRPLQDWHG LQIRUHLJQ FXUUHQF\DQG ZKHQ WKH FXUUHQF\GHSUHFLDWHV WKLV LQFUHDVHVWKHGHEW
EXUGHQRIGRPHVWLFILUPV6LQFHDVVHWVDUHW\SLFDOO\GHQRPLQDWHGLQGRPHVWLFFXUUHQF\DQGVR
GRQRWLQFUHDVHLQYDOXHWKHUHLVDUHVXOWLQJGHFOLQHLQQHWZRUWK7KLVGHWHULRUDWLRQLQEDODQFH
VKHHWVWKHQLQFUHDVHVDGYHUVHVHOHFWLRQDQG PRUDOKD]DUG SUREOHPVZKLFKOHDGVWRILQDQFLDO
LQVWDELOLW\DQGDVKDUSGHFOLQHLQLQYHVWPHQWDQGHFRQRPLFDFWLYLW\7KLVPHFKDQLVPH[SODLQV
ZK\WKHFXUUHQF\FULVHVLQ0H[LFRLQDQG(DVW$VLDLQSXVKHGWKHVHFRXQWULHV
LQWRIXOOIOHGJHGILQDQFLDOFULVHVZKLFKKDGGHYDVWDWLQJHIIHFWVRQWKHLUHFRQRPLHV
7KH IDFW WKDW H[FKDQJH UDWH IOXFWXDWLRQV DUH D PDMRU FRQFHUQ LQ VR PDQ\ FRXQWULHV
UDLVHVWKHGDQJHUWKDWPRQHWDU\SROLF\HYHQXQGHUDQLQIODWLRQWDUJHWLQJUHJLPHPD\SXWWRR
PXFKIRFXVRQOLPLWLQJH[FKDQJHUDWHPRYHPHQWV7KHILUVWSUREOHPZLWKDIRFXVRQOLPLWLQJ
H[FKDQJH UDWH PRYHPHQWV LV WKDW LW UXQV WKH ULVN RI WUDQVIRUPLQJ WKH H[FKDQJH UDWH LQWR D
QRPLQDO DQFKRU WKDW WDNHV SUHFHGHQFH RYHU WKH LQIODWLRQ WDUJHW )RU H[DPSOH DV SDUW RI LWV
LQIODWLRQWDUJHWLQJUHJLPH,VUDHOKDG DQLQWHUPHGLDWH WDUJHWRI DTXLWH QDUURZH[FKDQJHUDWH
EDQG DURXQG D FUDZOLQJ SHJ ZKRVH UDWH RI FUDZO ZDV VHW LQ D IRUZDUGORRNLQJ PDQQHU E\
GHULYLQJ LW IURP WKH LQIODWLRQ WDUJHW IRU WKH FRPLQJ \HDU (YHQ WKRXJK WKH %DQN RI ,VUDHO
GRZQSOD\HGWKHH[FKDQJHUDWHWDUJHWUHODWLYHWRWKHLQIODWLRQWDUJHWRYHUWLPHLWGLGVORZWKH
%DQNV HIIRUWV WR ZLQ VXSSRUW IRU GLVLQIODWLRQ DQG ORZHULQJ RI WKH LQIODWLRQ WDUJHWV VHH
%HUQDQNHHWDO
7KH VHFRQG SUREOHP IURP D IRFXV RQ OLPLWLQJ H[FKDQJH UDWH IOXFWXDWLRQV LV WKDW WKH
LPSDFWRIFKDQJHVLQH[FKDQJHUDWHVRQLQIODWLRQDQGRXWSXWFDQGLIIHUVXEVWDQWLDOO\GHSHQGLQJ
RQWKHQDWXUHRIWKHVKRFNWKDWFDXVHVWKHH[FKDQJHUDWHPRYHPHQW'LIIHUHQWPRQHWDU\SROLF\
UHVSRQVHV DUH WKXV QHHGHG GHSHQGLQJ RQ WKH QDWXUH RI WKH VKRFN ,I WKH GRPHVWLF FXUUHQF\
GHSUHFLDWHV EHFDXVH RI D SXUH SRUWIROLR VKRFN LQIODWLRQ LV OLNHO\WRULVH DQG WKHDSSURSULDWH
UHVSRQVH WRNHHSLQIODWLRQ XQGHU FRQWURO LVIRU WKH PRQHWDU\ DXWKRULWLHVWR WLJKWHQPRQHWDU\
SROLF\DQGUDLVHLQWHUHVWUDWHV,IWKHGHSUHFLDWLRQRFFXUVLQDQHPHUJLQJPDUNHWFRXQWU\ZKLFK
KDVDVXEVWDQWLDODPRXQWRIIRUHLJQGHQRPLQDWHGGHEWWLJKWHQLQJPRQHWDU\SROLF\WRSUHYHQWD
VKDUSGHSUHFLDWLRQPD\EHHYHQPRUHQHFHVVDU\WRDYRLGILQDQFLDOLQVWDELOLW\IRUWKHUHDVRQV
PHQWLRQHGDERYH2QWKHRWKHUKDQGLIWKHH[FKDQJHUDWHGHSUHFLDWLRQRFFXUVEHFDXVHRIUHDO
VKRFNVWKHLPSDFWLVOHVVOLNHO\WREHLQIODWLRQDU\DQGDGLIIHUHQWPRQHWDU\SROLF\UHVSRQVHLV
ZDUUDQWHG EXW HYHQ KHUH LW GHSHQGV RQ WKH QDWXUH RI WKH VKRFN $ QHJDWLYH WHUPVRIWUDGH
VKRFNZKLFKORZHUVGHPDQGIRUH[SRUWVUHGXFHVDJJUHJDWHGHPDQGDQGLVWKXVOLNHO\WREH
GHIODWLRQDU\ ,Q WKLV VLWXDWLRQ WKH FRUUHFW LQWHUHVW UDWH UHVSRQVH LV WR ORZHU LQWHUHVW UDWHV WR
FRXQWHUDFWWKHGURSLQDJJUHJDWHGHPDQGDQGQRWWRUDLVHLQWHUHVWUDWHV,IWKHQHJDWLYHWHUPV
RIWUDGHVKRFNLQVWHDGLVGXHWRDULVHLQLPSRUWSULFHVWKHUHLVDQHJDWLYHLQFRPHHIIHFWZKLFK
FRXOG EH RIIVHW E\ ORZHULQJ LQWHUHVW UDWHV %XW WKHUH LV DOVR D GLUHFW LQIODWLRQDU\ HIIHFW
SDUWLFXODUO\LIWKHUHLVKLJKLQGH[DWLRQDQGSDVVWKURXJKWKDWPLJKWVXJJHVWWKDWLQWHUHVWUDWHV
VKRXOGULVHLQRUGHUWRSUHYHQWVHFRQGURXQGHIIHFWV
2QHJUDSKLFH[DPSOHRIZKHUHDIRFXVRQOLPLWLQJH[FKDQJHUDWHIOXFWXDWLRQVKHOSHG
LQGXFH WKH ZURQJ SROLF\ UHVSRQVH RFFXUUHG LQ 1HZ =HDODQG LQ DQG $V ZDV
PHQWLRQHG DERYHWKH VKRUWKRUL]RQIRU WKHLQIODWLRQ WDUJHWLQ 1HZ=HDODQG OHGWKH 5HVHUYH
%DQNWRIRFXVRQWKHH[FKDQJHUDWHDVDQLQGLFDWRURIWKHPRQHWDU\SROLF\VWDQFHEHFDXVHRI
WKHGLUHFWLPSDFWRIH[FKDQJHUDWHPRYHPHQWVRQLQIODWLRQ%\HDUO\WKH5HVHUYH%DQN
LQVWLWXWLRQDOL]HGWKLVIRFXVE\DGRSWLQJDVLWVSULPDU\LQGLFDWRURIPRQHWDU\SROLF\D0RQHWDU\
&RQGLWLRQV,QGH[0&,VLPLODUWRWKDWGHYHORSHGE\WKH%DQNRI&DQDGD7KHLGHDEHKLQGWKH
0&,ZKLFKLVDZHLJKWHGDYHUDJHRIWKHH[FKDQJHUDWHDQGDVKRUWWHUPLQWHUHVWUDWHLVWKDW
ERWKLQWHUHVWUDWHVDQGH[FKDQJHUDWHVRQDYHUDJHKDYHRIIVHWWLQJLPSDFWVRQLQIODWLRQRQWKH
DVVXPSWLRQWKDWSRUWIROLRVKRFNVGRPLQDWHH[FKDQJHUDWHPRYHPHQWV:LWKWKHQHJDWLYHWHUPV
RIWUDGHVKRFNLQWKHDGRSWLRQRIWKH0&,LQOHGWRDTXHVWLRQDEOHPRQHWDU\SROLF\
UHVSRQVH WRWKH(DVW $VLDQ FULVLV:LWKGHSUHFLDWLRQVHWWLQJ LQ DIWHUWKH FULVLV EHJDQLQ-XO\
DIWHUWKHGHYDOXDWLRQRIWKH7KDLEDKWWKH0&,EHJDQDVKDUSGHFOLQHLQGLFDWLQJWKDWWKH
5HVHUYH%DQNQHHGHGWRUDLVHLQWHUHVWUDWHVZKLFKLWGLGE\RYHUEDVLVSRLQWV7KHUHVXOW
ZDVYHU\WLJKWPRQHWDU\SROLF\ZLWKWKHRYHUQLJKWFDVKUDWHH[FHHGLQJE\-XQHRI
%HFDXVH WKH GHSUHFLDWLRQ ZDV GXH WR D VXEVWDQWLDO QHJDWLYH WHUPV RI WUDGH VKRFN ZKLFK
GHFUHDVHG DJJUHJDWH GHPDQG WKH WLJKWHQLQJ RI PRQHWDU\ SROLF\ QRW VXUSULVLQJO\ OHG WR D
UHFHVVLRQ DQG DQ XQGHUVKRRW RI WKH LQIODWLRQ WDUJHW UDQJH ZLWK DFWXDO GHIODWLRQ RFFXUULQJLQ
7KH5HVHUYH%DQNRI1HZ=HDODQGGLGHYHQWXDOO\UHYHUVHLWVFRXUVHVKDUSO\ORZHULQJ
LQWHUHVW UDWHV EHJLQQLQJ LQ -XO\ DIWHU WKH HFRQRP\ KDG HQWHUHG D UHFHVVLRQ ,W DOVR
12
7KHWHUPVRIWUDGHVKRFNKRZHYHUZDVQRWWKHRQO\QHJDWLYHVKRFNWKH1HZ=HDODQGHFRQRP\IDFHGGXULQJ
WKDW SHULRG ,WV IDUP VHFWRU H[SHULHQFHG D VHYHUH GURXJKW ZKLFK DOVR KXUW WKH HFRQRP\ 7KXV D PLVWDNH LQ
PRQHWDU\SROLF\ZDVQRWWKHRQO\VRXUFHRIWKHUHFHVVLRQ%DGOXFNSOD\HGDUROHWRR6HH'UHZDQG2UU
DQG%UDVK
UHFRJQL]HGWKHSUREOHPVZLWKXVLQJDQ0&,DVDQLQGLFDWRURIPRQHWDU\SROLF\DQGDEDQGRQHG
LW LQ 1RZ WKH 5HVHUYH %DQN RSHUDWHV PRQHWDU\ SROLF\ LQ D PRUH FRQYHQWLRQDO ZD\
XVLQJWKHRYHUQLJKWFDVKUDWHDVLWVSROLF\LQVWUXPHQWZLWKIDUOHVVHPSKDVLVRQWKHH[FKDQJH
UDWHLQLWVPRQHWDU\SROLF\GHFLVLRQV
$QRWKHU H[DPSOH LQ ZKHUH H[FKDQJH UDWH IOXFWXDWLRQV ZHUH OLPLWHG ZDV WKH FDVH RI
&KLOHLQ$WWKDWWLPH&KLOHVLQIODWLRQWDUJHWLQJUHJLPHDOVRLQFOXGHGDIRFXVRQOLPLWLQJ
H[FKDQJHUDWHIOXFWXDWLRQVE\KDYLQJDQH[FKDQJHUDWHEDQGZLWKDFUDZOLQJSHJZKLFKZDV
ORRVHO\WLHGWRODJJHGGRPHVWLFLQIODWLRQ,QUHVSRQVHWRWKHFRPELQHGILQDQFLDODQGWHUPVRI
WUDGHVKRFNGXHWRWKH$VLDQFULVLVWKH&HQWUDO %DQNRI&KLOHDGRSWHGDVWULQJHQWPRQHWDU\
SROLF\DQGDGHIHQVHRIWKHSHVRZLWKDQDUURZLQJRIWKHH[FKDQJHUDWHEDQGDQGLQWHUYHQWLRQ
LQWKHIRUHLJQH[FKDQJHPDUNHW:KHQWKHHFRQRP\HQWHUHGLQWRDPLOGUHFHVVLRQLQODWH
WKH WLJKW PRQHWDU\ SROLF\ ZDV UHYHUVHG ZKHQ LQWHUHVW UDWHV ZHUH ORZHUHG DQG WKH SHVR ZDV
DOORZHGWRGHFOLQH7KHH[FKDQJHUDWHEDQGZDV DEROLVKHGLQ6HSWHPEHU DQGWKH SHVR
IORDWVIUHHO\VLQFHWKHQ
7KH FRQWUDVW RI WKH H[SHULHQFH RI 1HZ =HDODQG DQG &KLOH GXULQJ WKLV SHULRG ZLWK
$XVWUDOLDDQRWKHUVPDOORSHQHFRQRP\ZLWKDQLQIODWLRQWDUJHWLQJUHJLPHLVUHYHDOLQJ3ULRU
WR DGRSWLRQ RI LWV LQIODWLRQWDUJHWLQJ UHJLPH LQ WKH 5HVHUYH %DQN RI $XVWUDOLD KDG
DGRSWHGDSROLF\RIDOORZLQJWKHH[FKDQJHUDWHWRIOXFWXDWHZLWKRXWLQWHUIHUHQFHSDUWLFXODUO\LI
WKH VRXUFHRIWKH H[FKDQJH UDWHFKDQJH ZDVD UHDOVKRFNOLNH DWHUPVRIWUDGHVKRFN 7KXV
ZKHQIDFHGZLWKWKHGHYDOXDWLRQLQ7KDLODQGLQ-XO\WKH5HVHUYH%DQNUHFRJQL]HGWKDWLW
ZRXOGIDFHDVXEVWDQWLDOQHJDWLYHWHUPVRIWUDGHVKRFNEHFDXVHRIWKHODUJHFRPSRQHQWRILWV
IRUHLJQWUDGHFRQGXFWHGZLWKWKH$VLDQUHJLRQDQGWKDWLWVKRXOGQRWILJKWWKHGHSUHFLDWLRQRI
WKH $XVWUDOLDQ GROODU WKDW ZRXOG LQHYLWDEO\ UHVXOW
7KXV LQ FRQWUDVW WR 1HZ =HDODQG LW
LPPHGLDWHO\ORZHUHGWKHRYHUQLJKWFDVKUDWHE\EDVLVSRLQWVWRDQGNHSWLWQHDUDWWKLV
OHYHOXQWLOWKHHQGRIZKHQLWZDVORZHUHGDJDLQE\DQRWKHUEDVLVSRLQWV
,QGHHG WKH DGRSWLRQ RI WKH LQIODWLRQWDUJHWLQJ UHJLPH SUREDEO\ KHOSHG WKH 5HVHUYH
%DQNRI$XVWUDOLDWREHHYHQPRUHDJJUHVVLYHLQLWVHDVLQJLQUHVSRQVHWRWKH(DVW$VLDQFULVLV
DQGKHOSVH[SODLQZK\WKHLUUHVSRQVHZDVVRUDSLG7KH5HVHUYH%DQNZDVDEOHWRPDNHFOHDU
WKDWHDVLQJZDVH[DFWO\ZKDWLQIODWLRQWDUJHWLQJFDOOHGIRULQRUGHUWRSUHYHQWDQXQGHUVKRRWLQJ
13
6HH0F)DUODQHDQG6WHYHQV
