WOULD THE CCAR CATCH WAMU? - MOODY'S ANALYTICS
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economic & COnsumer credit Analy tics
July, 2012
Moody’s analytics
Would the CCAR Catch WaMu?
Prepared by
Tony Hughes
Senior Director
610.235.5000Would the CCAR Catch WaMu?
By Tony Hughes
I
n 2008, as a result of massive losses in its risky mortgage portfolio, Washington Mutual, better known as
WaMu, failed. The bank had been in existence for more than 100 years, surviving the Great Depression, myriad
smaller recessions, two world wars and many other tribulations. As the institution of bank stress-testing be-
comes more entrenched with every passing month, the episode becomes a salient and stark example of why such
an exercise is desirable. This is true for regulators, who are charged with avoiding the need for future bank bailouts,
and for bank managers, who want to avoid the ignominy of following WaMu down the sinkhole while still earning
good returns for shareholders.
WaMu was not the only bank to fail in it was instead the collective actions of many used by the Fed in carrying out the CCAR.
the 2008/2009 recession though it was, by WaMus that triggered the financial crisis and Bear in mind that the public documentation
far, the biggest. the subsequent recession that we are all still on the methodology employed is relatively
According to FDIC data, the history of trying to shake off. scant, so some details will need to be in-
large-scale bank failures in the U.S. since One of the Fed’s responses to the reces- ferred1. We will then outline aspects of our
the formation of the Federal Reserve is sion has been the institution of the Com- approach to bankwide stress-testing by
marked by only three distinct events. Fail- prehensive Capital Analysis and Review describing the way our methodology devi-
ures spiked during the Great Depression of stress-testing exercise. The purpose of the ates from the inferred view of the CCAR.
the 1930s, the savings and loans crisis of the CCAR—an annual test—is to determine the As motivation for the analysis, we will seek
late 1980s and early 1990s, and the recent soundness of banks and thus the robustness to answer the question of whether either
period between 2008 and 2010. These eras of the U.S. banking industry. Applying the approach would have been able to identify
are interesting because in each case the test to the biggest banks, the failure of any problems at WaMu during the last few years
stresses were caused, at least in part, by the of which could have macroeconomic con- of the bank’s existence. Our basic conclusion
actions of the banks themselves; lack of ef- sequences, Fed officials want to ascertain is that, even under ideal conditions, a pro-
fective regulation was also central. All three whether the banks hold sufficient capital to cess like the CCAR would have been unlikely
events were sparked by the overly generous cover losses that might arise under an ad- to identify the WaMu failure in a manner
provision of credit through a boom and the verse economic scenario. One could argue, that would have allowed the bank to survive
subsequent rise in defaults that followed a given that the Great Recession has already and flourish. It is our contention, though,
correction in asset values. In the Great De- exposed banks to severe stress, that survi- that a process that incorporates the features
pression, it was margin lending on stocks, vors are likely to be basically sound. With we describe would have a far better chance
and the S&L and subprime crises were due that said, we feel that the Fed is correct in than one that does not. We hope to there-
mainly to mortgage lending. To add fuel to trying to establish a stress-testing institu- fore influence the Fed’s approach to design-
the argument, the same thing happened in tion that will have solid foundations and ing future installments of the CCAR.
commercial real estate and stocks in Japan widespread acceptance the next time a truly The main features we will focus on will
in the late 1980s, triggering a decade-long stressful situation arises in the banking in- be the need to take a dynamic, rather than a
banking crisis. A deep recession in the U.S. in dustry. The new test has apparently caused static, view of the portfolio, the endogeneity
the early 1980s, meanwhile, did not trigger angst in many banks. This is not necessarily of the economy in the context of a manic
major banking sector problems. Bank fail- a bad thing—regulators are, after all, sup- banking industry, the prejudice toward an
ures, simply, are not caused by recessions. posed to be pebbles in the shoes of those unnecessarily granular view of the portfolio,
Rather, it is banks causing recessions that being regulated.
causes banks to fail. WaMu could not have The purpose of this article is to describe, 1 Should the Fed release these details, we will make the in-
caused the 2008-2009 recession on its own; insofar as can be ascertained, the process formation available and if necessary revise our comparison.
MOODY’S ANALYTICS / Copyright© 2012 1ANALYSIS �� Would the CCAR Catch WaMu?
and the need to quantitatively assess the to identify the linkages between credit per- two banks with books that are currently
entire profit-and-loss statement of banks formance and the modeled macroeconomic identical in every respect. Under CCAR, at
rather than just risks related to the as- drivers and thus project credit performance least in terms of the statistical analysis used,
set side of the balance sheet. We will first conditional on the adverse events actually both banks will be required to hold exactly
describe the salient features of the CCAR occurring. We have numerous quibbles with the same amount of capital against any
exercise as it was implemented in 2011. We the exact nature of the SSS: that it should be future losses. Now suppose that one bank
will then outline our key arguments in turn defined regionally, cover more factors, and has adopted an aggressive, some might say
before concluding with policy directions the should be delivered with an accompanying reckless, growth policy and that the average
Fed might consider when moving forward narrative describing the circumstances of the quality of the assets held by the bank has
with the task of bank stress-testing. event. These minor points are not the main been declining rapidly for the past couple
thrust of this article. of years. The second bank appointed a new
How the CCAR Was Implemented In each major credit product category, chief executive officer a year or so back who,
The CCAR seeks to answer the question the Fed gives a very brief description of how chastised by the events of the subprime
of whether the capital position of each bank the models were developed. In general, the crisis, has adopted a sober, defensive strat-
is sufficient to withstand the effects of a Fed sought to use a single, industrywide ge- egy of careful loan underwriting; this bank
severe downturn in the macroeconomy. As neric model to forecast each bank’s portfolio is therefore seeing average loan quality get
part of the process, each bank submitted so that the comparison was made on a fair better with every passing quarter. Which
a detailed capital plan covering activities and equitable basis. The models use indus- bank is more likely to fail? The bank stress
over the nine quarters through early 2014. try-level information derived from very high test should assume that banks have ongoing
The Fed is keen to determine whether banks quality data sources and, where possible, concerns and thus will continue to originate
have capital planning procedures in place use loan-level specifications to determine new and extend existing loans both now and
to enable them to continue operations even the relationships between credit variables in the future3. It should thus consider dy-
in a severe downturn. The banks submitted and economic data2. Where loan-level data namics in the nature of each bank’s portfolio
detailed information about the nature and are insufficient or unavailable, portfolio- position and not merely undertake a static
volume of loans in a wide variety of loan level data are used instead. Each broad analysis of the current book. The Fed could
categories, and projections of credit losses, product category, ranging from sandy credit argue that this point is already covered by
revenues, expenses and capital ratios were cards, through rocky commercial mortgages the more qualitative aspects of the CCAR—
then constructed using a severe economic to mountainous commercial loans, uses a banks need to justify future capital provi-
scenario supplied to the banks. somewhat different methodology. We note sioning plans—but we feel that the rigorous,
The Supervisory Stress Scenario is at the that all rock forms are mineral deposits of more objective, analytical parts of the CCAR
heart of the analytical components of the one form or another so the discussion here should incorporate analysis of future loan
CCAR. The balance sheet position of each covers all credit categories. Our purpose in originations. Though we do not know which
bank was determined assuming both a base- this article requires only a broad-brush view specific loans will be undertaken in a future
line and stressed outcome for the economy of the CCAR process. period, we can estimate the relationship
and the results were compared. The Fed as- Once the loan loss and revenue projec- between economic conditions and overall
sumed that all of the cash flows described tions are aggregated for each bank, the Fed lending activity and use this as the basis to
in each bank’s capital plan would be fulfilled compares the results with the capital held. project future overall loan volume and the
even if the adverse scenario was playing If this is deemed insufficient, the Fed may underlying average quality thereof. If we
itself out. It was thus making the conserva- limit capital disbursement from the bank, can then ascertain the relative risk appetite
tive assumption that dividend payments and mainly in the form of denying requests for of banks, both planned and present, we can
the like would take place even if the bank dividend increases or payments. Indeed, in further determine the share of this activity
was suffering extreme credit losses. Under the 2012 installment of the CCAR several that each is likely to capture.
the SSS, the economy is assumed to suffer banks were required to reduce plans to offer It is highly likely that the next stressful
an immediate, severe recession with an in- a dividend to shareholders. banking event will be sparked by loans that
determinate cause. The unemployment rate do not exist today. Imagine an alterna-
spikes to 13% very quickly after the start of Future Loans Are a Must tive reality where the CCAR exercise was
the hypothetical scenario and median exist- The CCAR process quantitatively judges conducted in October 2004. Further sup-
ing house prices fall by an additional 20% the soundness only of loans currently held pose that the SSS employed at the time
to 25% across the U.S. This is quite a severe on the balance sheets of the banks. Imagine exactly matched the economic data that
event and is comparable to the Moody’s An-
alytics S4 scenario, which is very dire in na- 2 The models are, in many cases, very reminiscent of many 3 Indeed the Fed has a mandate to ensure that lending and bor-
ture. The Fed takes these scenarios and seeks existing Moody’s Analytics tools. rowing do not cease, even (or especially) in a deep recession.
MOODY’S ANALYTICS / Copyright© 2012 2ANALYSIS �� Would the CCAR Catch WaMu?
were actually observed between that date embedded in the WaMu portfolio. Going The Fed is obviously concerned with the
and WaMu’s demise4. Even WaMu, at that forward, the Fed could induce a bubble in identification of banks at risk of failure, but
point, had relatively few subprime, option each of the major lending categories in- it should also be tasked with taking action
ARM and NegAm mortgages on its books. It dependently—commercial and industrial, to avert such failures. Banks, and by exten-
is no coincidence that in October 2004, in a commercial real estate and retail—and then sion regulators, can exert far more control
bid to boost its flagging mortgage business, assess whether each bank would survive over loans that have yet to be booked. If the
WaMu announced option ARM mortgages given existing and proposed business strate- Fed is interested in using the stress test as
as its new flagship product. Over the subse- gies. The lesson of Japan also highlights the a means to influence risk-taking behavior
quent 2½ years, WaMu would initiate most potential for multiple simultaneous bubbles, in banks, it should seek to understand such
of the loans that would ultimately cause the and such a test should also be applied to risks before the genie is let out of the bottle.
bank’s demise. each bank. A stress test involving multiple
Is it possible to design a stress test, un- bubbles would almost certainly cause many Endogeneity
der these hypothetical circumstances, that banks to fail but, at the end of the day, this is All the evidence points to the Fed’s using
would have identified the susceptibility of the very point of conducting the test in the a “tailpipe” model to conduct the stress test.
WaMu without a lot of false positives? first place. A specific, generic stress scenario is delivered
The CCAR process should be able to The technology to conduct this type of to banks and this is used by the Fed to con-
achieve this: if not, the process is danger- stress test already exists. In CreditForecast. struct stressed forecasts. The exact genesis of
ously flawed. The key is to take the bank’s com, Moody’s Analytics constructs, using the assumed stress is not stated. The econo-
publicly stated 2004 strategy at face value, Equifax data, forecasts and scenarios for the my experiences a sharp recession under the
assume a successful ramp-up of its business industrywide aggregate consumer loan port- scenario—we can only hazard guesses as to
in subprime and option ARM mortgages un- folio that include the nature, volume and the causes of this hypothetical recession.
der rising asset prices and then project how subsequent performance of future cohorts. The economy does not boom in the lead-up
these loans would have gone under subse- We can predict the nature of demand for to the event, so it is fair to assume that the
quent recession conditions and falling house new loans at a future point in time—such stress event is really a “double dip” version of
values5. Researchers in 2004 probably would demand is strongly pro-cyclical. We can also the 2008-2009 Great Recession.
have understated the rise in mortgage activ- predict the overall aggregate balance sheet Tailpipe models are so called because
ity during the boom, though a significant rise position of banks and the supply of liquid- they assume that the economy can affect
in volume would have been predicted given ity provided by the Fed and bond markets. the behavior of the entities being modeled,
the strength of house price appreciation We can predict inflation. Putting all this but that the behavior of the entities them-
from 2005 to 2007 implied by the scenario. together allows us to infer, with some accu- selves cannot affect the performance of the
Further, in terms of the loan-level assess- racy, the future price and volume of credit in economy. If loans in the portfolio start to
ment of relative risk appetite, even if you a variety of different retail markets. A similar default en masse, in the world defined by the
restrict yourself to loan data as they existed approach could be applied to commercial Fed scenario, the fallout generated will not
back in 2004, we suspect that the folly of and industrial loans; indeed this is a feature feed back to the behavior of asset markets
WaMu’s strategy would be fairly clear. It was of the recently released Moody’s Analytics and thus the economy. Given that we have
well known even then that alternative mort- Stressed EDF product. In the approach to just gone through a subprime-mortgage-
gage products aimed at low income clients modeling bank portfolios that is contained triggered monster recession, one would think
were substantially riskier than traditional in the Moody’s CreditCycle product, indi- that making the economy endogenous in any
products (i.e. the relative riskiness of vari- vidual bank loan underwriting criteria are bank stress-testing paradigm would be at the
ous loan types was quite well understood at then combined with forecasts of economic very top of the Fed’s analytical to-do list.
the time). A combination of stronger than conditions to project bank-level future origi- The ability of the analyst to endogenize
normal loan growth, albeit weaker than that nations in terms of volume, quality and per- the economy in modeling single portfolios
which actually occurred, combined with a formance. The structure here is that while or single loans is highly doubtful. In macro-
reasonably accurate view of relative credit banks cannot influence the aggregate credit economic analysis, individual entities such
risk would have suggested elevated losses supply curve in any given industry, they can as banks are typically assumed to be price
determine their own appetite to provide takers, unable to influence overall economic
4 This scenario was obviously severe enough to fell a lot of funding to various clients. We routinely find outcomes. If one bank chooses not to extend
banks, including WaMu. It’s worth noting that such a sce- that the highest losses occur when a short a loan to a broadly creditworthy individual,
nario would have been criticized as being too tough had it
been imposed back then. boom occurs, allowing the bank to ramp up another bank will fill the breach. In model-
5 Note that in this 2004 scenario, the economy experiences volume in its portfolio, followed by a deep ing industry-level aggregates, however, it is
two years of solid growth followed by a very serious recession.
A pure recession scenario applied to the static 2004 WaMu
recession. In our view, the SSS should em- straightforward to have feedback between
portfolio would not have caused any red flags to appear. body similar dynamics. the economy, credit volumes and loan per-
MOODY’S ANALYTICS / Copyright© 2012 3ANALYSIS �� Would the CCAR Catch WaMu?
formance. Such interdependencies allow vi- the Fed seems very concerned with classify- The Fed has, however, made it clear that
cious cycles, such as the three U.S. examples ing the relative riskiness of any number of such a granular view of the portfolio is re-
cited in the introduction, to be accurately different fragments of the banks’ loan port- quired. The speculation in the industry is that
represented. In our view, the Fed should folios. In the document describing how first the next round of stress tests will apply loan-
have designed a stress test that provides mortgages are treated, for example, the Fed level models—the ultimate in granular port-
internally consistent baseline and stressed asked banks to quantify exposures in 19,440 folio views, encompassing literally hundreds
projections of industry-level lending volume, different portfolio segments. For HELOCs, of millions of prediction errors.
industry-level average loan quality and thus meanwhile, 25,920 different segments were Granularity is not an end in itself. Indeed,
industry-level PD, EAD and LGD for each required. The implication, we guess, is that focusing exclusively on individual trees, or
asset category. In stress-testing individual WaMu was destroyed by a metaphorical even individual species of tree, in a dying for-
banks’ portfolios, assumptions of market bomb in a third-floor broom closet and that est is a proverbially bad idea. In the subprime
share and loan-level empirical assessments sifting through the building with a fine- crisis, all different species of mortgages
of relative risk appetite could then be used to tooth comb would have been the only way experienced elevated default and loss rates.
allocate industry-level credit loss projections to defuse the situation. Would WaMu have Some species were strong enough to survive
to individual banks. Because the aggregate survived the CCAR if, say, 10 portfolio seg- while others are, quite literally, on the road
projections would then imbed vicious cycles, mentations were used for analysis in place of to extinction. It is important to know how
individual bank or individual loan projections the 45,360 different segments actually used robust particular species will be in the con-
would implicitly do so too. by the Fed? The reality, of course, is that text of a dying forest; this is very worthy of
These macroeconomic principles of endo- picking apart bank portfolios to that extent research and it is what the Fed’s CCAR test
geneity should be central to any bank stress- clouds more than it illuminates. Show the apparently achieves. It is more crucial to
testing exercise. The CCAR project itself CCAR description to William of Ockham and understand why the forest is dying and if it’s
does seem to reflect some macroeconomic the Gordian nature of the Fed modelers’ task the loggers who are responsible.
principles, though details are unquestionably would have been immediately apparent. Interestingly, a granular view is also avail-
(and almost certainly deliberately) sketchy. At the end of the day, the Fed needs a able in another key factor that the Fed seeks
The description of the Fed’s approach to prediction of portfolio level aggregates. It to forecast and stress-test: inflation. In our
mortgage stress-testing, for example, first needs to know, under the SSS, if expected databases, there are more than 40 different
outlines the basic structure of the microeco- portfolio losses exceed reserved capital. If sub categories of the CPI, in areas such as
nomic loan-level models that it presumably the Fed looked only at a time series of past used vehicles and alcoholic beverages. Go-
uses to assess relative loan default likelihood. bank losses relative to economic factors, it ing further, the Fed could use data sets such
It then goes on to say: “resulting estimates could achieve its goal while committing only as that developed in the Billion Price Proj-
are combined with industry-wide informa- a single, though possibly large, prediction er- ect and base its national core CPI inflation
tion about the characteristics of outstanding ror. In modeling 45,360 different segments6, forecasts on the dynamic behavior of every
residential mortgage loans as of September it will commit 45,360 different errors. Even one of those prices. It does not follow this
30, 2011, and the variables defining the Su- if these individual errors prove to be tiny, approach, preferring simple macro models
pervisory Stress Scenario…” adding up so many different errors will likely that appropriately capture feedback loops
To us, this description approximates a result in the overall prediction error variance and business cycles. Empirical studies have
hybrid approach, using a loan-level model exceeding the rate of error committed under shown that even a small amount of granular-
to find relative concentrations in the banks’ the simple modeling approach. Note that we ity in inflation forecasting can be detrimen-
portfolios while using industrywide macro are not advocating the simple approach— tal. No one has yet proposed forecasting the
data to pin down the broader performance such a method would vastly understate national core rate of inflation by using the
of the industry should a stressful scenario the importance of concentrations in the billion separate prices contained in the BPP.
unfold. Exactly how the estimates are “com- portfolio, which is typically heterogeneous One wonders why the Fed views granularity
bined” is, however, unclear. Our approach to in nature. We are instead asking the ques- as crucial in one of its endeavors and fatally
such combination of loan-level results with tion of whether 45,360 segmentations is the poisonous in another. Prices, after all, are
industry-level aggregates, which we have optimal number or whether something lower arguably far more heterogeneous than bank
previously documented, is to calibrate the would achieve greater modeling precision. It credit portfolios.
loan-level results to industry-level baseline seems clear to us that the optimal number Parsimony is a golden rule in forecast-
and stressed projections. would be in the tens or hundreds and cer- ing, of which stress-testing is a new, key
tainly not the tens of thousands. sub-branch. Every prediction comes with
Granularity and Red Herrings error, so making 45,360 distinct errors in
6 This number is only for the mortgage portfolio; the total
The scant methodological descriptions of number of portfolio segments considered would actually be
assessing a portfolio carries a high degree of
CCAR that exist in the public sphere indicate around 100,000. forecast risk. If these individual predictions
MOODY’S ANALYTICS / Copyright© 2012 4ANALYSIS �� Would the CCAR Catch WaMu?
are calibrated to a separate industry- or sions—though the effect seems fairly weak. of each bank’s liabilities book headed into a
portfolio-level prediction, this problem is far Looking through the demand for money stressful event.
less serious. A hybrid modeling approach en- balances literature, which is a very old strand
sures that loan-level granularity can still be in economics, splits the demand for bal- Conclusion
achieved without compromising the accura- ances between transactions demand—the Had WaMu been the only bank engaged in
cy of key industry- or bank-level projections. cash that people need on hand to conduct risky subprime lending, an entirely different
normal business—and the so-called specula- story would now be playing itself out. Under
Liabilities Also Sink Banks tive demand. Transactions demand declines this reality, WaMu would still exist and indeed
The final months of WaMu were appar- in recessions as nominal GDP growth slows could well be seen as a model institution with
ently marked by two distinct bank runs. Both or backtracks and rises in booms. Specula- strong asset growth and elevated profitabil-
occurred at a time when senior executives ei- tive demand for money depends crucially on ity. It would likely be seen as a bank with a
ther thought that survival was possible or that prevailing interest rates and the potential strong social conscience given its willingness
a sale of the bank could still be made without spoils that could be earned from alternative to lend to individuals otherwise locked out of
FDIC intervention. The first run occurred in investment options. In the current environ- the mortgage market by blemishes in their
July 2008 as similar events were unfolding ment where stock prices are stagnant and former credit history. Indeed it could by now
at IndyMac. A total of $9.4 billion was with- house prices are falling, we would expect have even achieved CEO Kerry Killinger’s aim
drawn from WaMu during the month, even retail speculative balances to be quite high of being viewed as the Walmart, Starbucks,
though most of the funds taken out would given the lack of alternative investments. The Costco or Lowes/Home Depot of the banking
have been guaranteed by the federal govern- proportion of people holding cash stuffed in industry. WaMu failed not because of sub-
ment. The second run occurred in September mattresses would also be quite high though prime lending per se but because it was one of
in the weeks leading up to the failure, reaching this effect is difficult to measure accurately. the biggest and most egregious participants
a crescendo on September 18 when $2.8 bil- On the commercial side, meanwhile, busi- in a dangerous game that many were playing.
lion was withdrawn in a single day. These bank ness investment has recovered somewhat It is this collective behavior that is crucial in
runs were arguably the final nail in the coffin since the end of the recession though cor- understanding the circumstances under which
for WaMu, and within days the FDIC sold the porate profitability has been very strong, banks are bound to fail.
bank to JP Morgan for a paltry sum. yielding a large amount of corporate cash on The existing CCAR methodology does not
In WaMu’s case, you could argue that the hand. Putting all this together, one starts to adequately take account of collective behav-
bank run would not have occurred without build up a model of aggregate, or economy- ior in its structure. The economy is seemingly
the asset losses that had already become ap- wide, demand for liquidity. The supply side, treated as an exogenous driver of credit perfor-
parent. This presents a very interesting model- meanwhile, is largely controlled by the cen- mance and it overwhelming relies on an aggre-
ing problem whereby the capital adequacy tral bank through the interest rate mecha- gation of many separate credit decisions in de-
position of the bank—which you are trying to nism and associated novel procedures such termining the likelihood and severity of future
model and predict under stress—is directly as quantitative easing. credit losses. Future lending behavior is not
affected by public perceptions of the bank’s At the bank level, meanwhile, the abil- factored in to the quantitative portfolio analy-
capital adequacy position. Failures, when they ity of one bank to attract deposits more sis, meaning that by the time WaMu might
come, will therefore happen with ferocity as successfully than competing banks would have been identified as at-risk by the CCAR,
the bank’s ability to raise new capital dwindles crucially rest on the relative price and qual- the seeds of its failure would have already been
in the face of mounting credit losses. The final ity of the services offered. Factors such as sprouting. One could reasonably argue that
death throes of a bank under stress probably deposit interest rates would obviously be booms rather than recessions cause banks to
cannot be predicted, especially in terms of relevant but service related drivers such as fail, and yet the SSS does not factor in a credit
timing; this is certainly true for an institution loyalty schemes, branch and ATM spread, boom in the lead-up to the hypothetical severe
that is currently healthy and solvent. and branch staffing would all be critical. Fee recession. We feel that future installments of
What can be predicted, though, is the structure would also be important in deter- the CCAR should adequately consider these
bank’s deposit book on the eve of the crisis. mining the price of services offered by the kinds of macro-dynamic behavior in assessing
Assessment of aggregate bank deposits bank in question. Using reasoning such as individual bank capital adequacy.
shows that some counter cyclicality is evi- that presented, one should be able to rea- No bank is an island unto itself. Future
dent—deposits tend to decline during reces- sonably forecast the size and dynamic nature CCARs should fully reflect this.
MOODY’S ANALYTICS / Copyright© 2012 5AUTHOR BIO �� www.economy.com
About the Authors
Tony Hughes
Tony Hughes is senior director of Credit Analytics at Moody’s Analytics, where he manages the company’s credit analysis consulting projects
for global lending institutions. An expert applied econometrician, Dr. Hughes also oversees the Moody’s CreditCycle and manages CreditForecast.
com. His varied research interests have lately focused on problems associated with loss forecasting and stress-testing credit portfolios.
Now based in the U.S., Dr. Hughes previously headed the Moody’s Analytics Sydney office, where he was editor of the Asia-Pacific edition
of the Dismal Scientist web site and was the company’s lead economist in the region. He retains a keen interest in emerging markets and in
Asia-Pacific economies.
A former academic, Dr. Hughes held positions at the University of Adelaide, the University of New South Wales, and Vanderbilt University
and has published a number of articles in leading statistics and economics journals. He received his PhD in econometrics from Monash Univer-
sity in Melbourne, Australia.
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