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BACRS, Borrower’s Advanced Collateral & Recovery Solutions, was founded to help lenders surmount the challenges to grow, control their credit and compliance risks, and protect their capital. With more than 150 years of cumulative senior experience on our team in banking, accounting, tax, insurance, investments, corporate finance, and risk management, we have intimate, first-hand experience of what is required when a credit exposure deteriorates.
The simple solution is collateral. Collateral is always the solution. Or, rather, it is the general solution.
BACRS allows you to trade into the right collateral solution. The amount you need. When you need it. At the price you select. Maximum flexibility.
BACRS allows you to trade collateral just right. Just for you. Simple.
Many finance professionals believe the best way to protect capital placed at risk in credit portfolios is to use models that predict levels of default one may expect over some future time period.
Default prediction models, however, do not reduce or eliminate the risk of default encountered in your portfolios. They do not reduce or eliminate the costs associated with your risk experience.
No matter who developed them.
No matter how much they cost.
No matter how large the database from which they draw and weight their key variables.
In any case, regardless of the accuracy of the models, it’s still your earnings and capital that are expected to absorb the credit costs.
Today, BACRS gives you a choice between models that neither reduce risk or the costs of risk, and the ability to reduce or eliminate your credit costs by trading risk in your well-managed portfolios.
BACRS also creates a third choice for you: use both. Ask us how.
What’s important about collateral? As a lender, you know.
Collateral is financial oxygen. At all times. In all places. In all circumstances.
Cash collateral is the purest form. It doesn’t lose value in secondary markets and liquidation scenarios.
Collateral offered by your borrowers is always limited. It is always at risk of losing value or evaporating when you need it most. If you manage capital at risk, you need a backup collateral source. With low-risk availability. Now.
The more collateral you have, the more you will protect your capital, the better you will sustain the life of your institution, and the stronger financial partner you are to your customers and communities.
BACRS allows you to trade into favorable collateral positions.
BACRS trading may be used for nearly any risk management purpose.
Use it as a first-loss buffer.
Use it as an additional source of cash for repayment or recovery.
Use it as cash collateral to reduce your capital requirement dollar-for-dollar for any loan or lease assets you select.
Use it to comply with reserve requirements.
Use it to compete for new borrowers.
When you trade risk using BACRS, your position does not expire or disappear. Unapplied BACRS positions may be perpetually re-applied. BACRS can accumulate over time. Or returned to you. You choose.
BACRS trading does not involve swap-type payments.
If you are in a swap, you know your payments are not returned at the end of a swap agreement.
Circumstances that can move a swap in your favor are almost always beyond your control. They may depend on narrowly-defined events that have a low probability of happening.
BACRS positions are not hedging instruments. Such products include expiration dates. As with swaps, conditions moving hedge positions in your favor are beyond your control. At the expiration date, your hedge instruments are mere expenses if they cannot be exercised.
Swaps and hedges are probability-based. Gambles. Not simple.
Swaps and hedges expire. Their cash flows disappear. There are no enduring capital benefits.
Swaps and hedges require complex and expensive accounting treatment. BACRS does not.
BACRS. No gambles.
Let’s assume you are able to execute your right to receive cash flows under a swap or hedge.
If you are executing on your instrument, how many others are also executing at the same time?
Does your counterparty have the liquidity to send your cash flows to you?
Will your counterparty be able to make good on their obligations?
Will they even be around?
BACRS positions carry no counterparty risk. Zero.
BACRS maintains a completely private relationship with you. No one needs to know you receive BACRS services except you, BACRS, and your regulators. Private.
Housed in your institution, your BACRS position is available for conversion from collateral to recovery or repayment when you choose.
When you make the decision that any loan or lease asset no longer complies with your credit policy, execute your conversion. Simple.
Example: Your credit policy requires cash flow coverage of debt service of at least 110% for C&I loans. A borrower’s cash flow falls below this threshold with little hope for timely replenishment. With BACRS, you will execute up to four repayments or recoveries of your exposure totaling up to 59% of the outstanding asset’s notional amount.
Execute your BACRS repayments or recoveries when it suits you best. Before the borrower defaults. With complete and sole retention of all original collateral and security rights. Assured.
BACRS services are intended and designed to be free to lenders.
Lender cost = $0.
BACRS is unique in today’s lending environment. Our approach gives you improved control over the consequences of credit risk in any portfolio. With BACRS, you will:
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JM Arysson, the Arysson logo, BACRS, and the BACRS logo are registered trademarks and service marks of JM Arysson, Ltd.