On Downgrades & CLOs: in conversation with Former Director at Intesa Sanpaolo, Lukasz Rzeczskowski
By Unicast Entertainment
For the 7th episode of Unicast’s running series of video interviews featuring industry leaders from across the world, they held an insightful conversation with Lukasz Rzeczkowski – an interesting leader who moved from the world of finance and banking, to entrepreneurship in healthcare. From discussing what prompted this drastic shift in industry, to understanding what makes Poland and Singapore uniquely stand out in this climate and even the importance of morality in the world of banking, the conversation was varied and covered a diverse range of topics.
Yet, a financial discussion that stood out was regarding downgrading during the COVID crisis and how products such as CLOs have been impacted in this unique climate. Lukasz mentions, for example, how while in 2008 the question was why downgrading was not pre-emptive and more precautious, today it is incredibly rapid and happening “at the speed of light”. The lessons learnt from the GFC are such that all products seem to be far more susceptible to abrupt downgrades. Having said that, Lukasz does remain content with the regulatory changes we have seen since then. He states that the capital controls have obviously worked, as financial institutions seem to be more equipped to handle future crisis – ‘the ratios look good.’
When it comes to ABS's in a COVID era, Lukasz cites how CLO exposure to the especially ruined industries of aviation and hospitality during the COVID crisis remains significant despite diversified portfolios, which goes to show just how deeply hit these sectors are. These seem to be the pertinent ongoings in the ABS markets.
During this discussion on financial innovation, they also discussed how risky innovation is being perceived in a post-GFC world and Lukasz claims that there really oughtn’t to be a barrier on innovation. He believes that Asset Backed Securities get a bad reputation courtesy to the GFC, but they are essential for the way financial markets operate and especially for the housing market, where our ability to achieve financing for our homes is contingent upon the existence of this market that can facilitate greater capital-raising. He believes that the role of innovation in finance today is essential when it comes to smoothing operations and providing liquidity, and moving forward, the potential of such innovation is immense where Lukasz goes on to cite how AI can play a role in more optimally determining industry exposure and price.
Thus, through this conversation, Unicast explored an interesting array of discussions on ongoing developments in the world of these innovative financial products ranging from how downgrading has changed since the GFC, the strength of other regulatory changes, the ramifications of COVID-hit industries and the role of financial innovation moving ahead.
To check out the full conversation, go to: https://www.youtube.com/watch?v=oDrgDKQx8PU
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