Asia Regulatory Review | 10 - 17 September 2013

10 - 17 Sep 2013 | Issue 171 Spotlight China eyes private funds to tackle bad-debt build up, and avoid bailout Faced with a chorus of warnings that China risks choking on bad debts, Beijing is pushing banks to raise private capital in an effort to head off the need for a second government bailout in as many decades. (Reuters) FSB warns over lack of Emerging Market regulatory expertise The global regulatory body’s comments come as regulators in emerging Asian economies grapple with increasingly complex and aggressive cross-border rules drawn up in the US and the EU. In a report, the FSB said there was a “lack of adequate resources and expertise in emerging market and developing economies to adequately respond to the numerous post-crisis global regulatory initiatives”. (Financial News) Update CHINA China needs reforms for economic development: Premier Li Premier Li Keqiang said that China will have to rely on reforms to achieve long-term, sustainable and healthy development of its economy, while underscoring future reforms to be carried out in multiple fields. In pushing reforms, Li warned, China must guard against financial risks by improving its regulatory regime and make it more scientific and effective. (Global Times) PBOC seeks wider role for private sector Central bank governor Zhou Xiaochuan is calling for more private-sector financing to help smooth the mainland's credit supply-and-demand curve. To "moderately" widen market access to the banking sector, Beijing would support the establishment of private banks, boost the development of micro-credit companies and encourage internet and mobile-phone banking, the People's Bank of China chief said in an article in the Communist Party'sSeeking Truth magazine yesterday. (SCMP) China to expand margin trading and short-selling programme China's securities regulator has approved a plan to expand participation in a pilot programme allowing margin trading and short selling and triple the number of stocks that can be traded on margin, as Beijing moves to deepen and diversify investor participation in its equities markets. (Reuters) Shanghai Free Trade Zone tests China's currency liberalization The world's second largest economy announced it would build a free trade zone on the shore of the East China Sea. The zone will be a test bed for pushing forward full convertibility of the Chinese yuan and the opening of financial services. (China Daily) Shadow banking won’t lead to collapse: IMF official China's shadow banking issue is a concern, Zhu Min, deputy managing director of the IMF, said Friday at the Summer Davos Forum, held in Dalian, Northeast China's Liaoning Province, urging more tangible moves from the government to facilitate financial reforms, of which the shadow banking sector has been under the spotlight. (Global Times) World Bank president expects China to hit GDP growth target but warns of tapering risk China should hit its GDP growth target of 7.5 percent this year, World Bank Group President Jim Yong Kim said on Sunday. But he warned that rising interest rates in emerging markets in response to reports that the U.S. is preparing to scale back its quantitative easing (QE) program show that significant risk remains. (Reuters) HONG KONG Interim Reporting Requirements for OTC derivative transactions – Enrolment status of HKTR membership Based on the position as of 9 September 2013, 145 institutions have enrolled as HKTR members, of which 141 are banks (out of a total of 156 banks). Those banks that are still in the process of enrolment are expected to complete the process without further delay. Foreign Exchange turnover involving the Hong Kong dollar and Hong Kong dollar marginalisation Monetary Authority Chief Executive Norman Chan refuted commentators' suggestions that the Hong Kong dollar has been marginalised, saying they may have overlooked some of the city's characteristics as an international financial centre. HKEx publishes new statement on enforcement of listing rules and implements new procedures for disciplinary action on listing rules The enforcement statement outlines, amongst other matters, the SEHK’s approach towards the enforcement of the listing rules and the criteria for assessing the appropriate level of enforcement action. The enforcement statement also contains a number of reminders on the SEHK’s continuing expectations with respect to compliance related matters. SINGAPORE Deutsche Börse plans derivatives clearing house in Asia Deutsche Börse, the German exchange operator, is planning to build a derivatives clearing house in Asia, based in Singapore, as part of a strategic push into the region, two people familiar with the matter said. (FT) Vietnam, Singapore Form Strategic Partnership Vietnam and Singapore upgraded relations Wednesday to a strategic partnership as their leaders stressed the need to maintain peace and stability in Southeast Asia, including the South China Sea area where China has increasingly asserted sovereignty. (WSJ) TAIWAN Taiwan bolsters its Renminbi market Taiwanese regulators and investment banks hope the popularity of china currency will lead to a boom in issuance of renminbibi Formosa bonds. (Finance Asia) INDIA RBI announces changes to FDI norms to attract foreign investments Under the revised norms, the FDI limit in the telecom sector has been raised to 100% and more than 26% FDI has been allowed in the defence sector on case to case basis. In addition, the government has put several sectors in which the FDI limit is 49% on the automatic route. Change likely in RBI's forex stance The Reserve Bank of India (RBI) has been cautious in using its foreign exchange reserves to stem the rupee’s depreciation through the last two years. Now, however, market participants expect the central bank to adopt a more aggressive stance to defend the currency. (Business Standard) Banks with 12% capital ratio can borrow more from abroad RBI said only banks with a capital adequacy ratio (CAR) of at least 12 per cent could avail of the higher foreign borrowing facility. Last week, the central bank announced the current foreign borrowing limit for banks had been raised from 50 per cent of unimpaired Tier-I capital to 100 per cent. (Business Standard) SEBI finalises easier rules for foreign investors Under the new rules, which are likely to be announced in next few days, Sebi is creating a new class of investors -- to be called Foreign Portfolio Investors (FPIs) -- and would classify them in three categories as per their risk profile, senior officials said. The KYC (Know Your Client) and other regulatory compliance requirements for the FPIs would depend on their risk category and the norms would be easier for lower-risk investors. (Hindustantimes) SEBI to announce steps to improve debt market liquidity: UK Sinha With an aim to bolster the bond market, Sebi today said it will soon announce some measures to improve liquidity and trading mechanism for the debt market. "We are currently working on a couple of more options, which will be announced in a day or two, to improve the liquidity and trading mechanism in the debt market," Sebi Chairman U K Sinha said. (Economic Times) Rupee turns the tide, becomes best-performing Asian currency Before and after he took over as the 23rd governor of the Reserve Bank of India (RBI), Raghuram Rajan has been tirelessly saying he doesn’t have a magic wand. But the market seems to be banking precisely on the opposite. (Business Standard) JAPAN This time, Japan keen to learn from Fed's policy exit As markets tune into how the Federal Reserve is going to rein in its massive stimulus program, so is the Bank of Japan. (Reuters) Japan Government Upgrades View: Economy Has Started Recovering The Japanese government on Friday revised up its overall assessment in light of higher business investment and better Chinese indicators, saying, "The economy has started recovering moderately." (MNI) Japan finance minister: will mull economy stimulus without resorting to government debt Japanese Finance Minister Taro Aso said that the government will consider offering a stimulus package for the economy without issuing new bonds to finance it. (Reuters) Japan retakes top spot for overseas bank lending Japanese banks have once again become the biggest overseas lenders, returning to a position they last occupied in the late 1990s before a deep banking crisis forced them to pull back from international markets. (Reuters) AUSTRALIA ASIC releases report on Australian hedge fund sector and systemic risk The Australian Securities and Investments Commission (ASIC) has published a report on the Australian hedge funds sector and systemic risk. The report concludes that Australian hedge funds do not currently pose a systemic risk to the Australian financial system. Australia clears first OTC interest rate swap ASX's OTC Derivatives Clearing Service cleared its first Australian dollar interest rate swap trade today - an over- the-counter transaction between Commonwealth Bank of Australia and Deutsche Bank - marking an important milestone in ensuring Australia has world-class financial market infrastructure. (4-Traders) Australian Department of Foreign Affairs and Trade: Australia's trade and investment with APEC grows This publication provides a concise summary of Australia's trade and investment relationship with the APEC region and APEC's trade with the world. SOUTH KOREA FSC authorises Korea Exchange as OTC derivatives central counterparty the KRX has become the central counterparty offering clearing services for both exchange-traded and OTC market products. The authorisation follows an amendment to the Capital Market Act in July 2013 that reflected Korea's commitment made at the Pittsburgh G20 summit to clear OTC derivatives through central counterparties. Korea Probes Bond Sales by Foreign Banks South Korea's financial regulators are investigating Goldman Sachs Group Inc, Credit Suisse Group AG and Royal Bank of Scotland Group PLC to see whether they violated local laws in the process of selling bonds of foreign firms to local investors, people familiar with the matter said Tuesday. (WSJ) MALAYSIA Call to further widen financial access Prime Minister Datuk Seri Najib Razak wants to see more efforts undertaken by relevant parties to create a wider access to credit and financial facilities for the people. (Business Times) INDONESIA Bank Indonesia And The Provincial Goverment of DKI Jakarta Coordinate Four Strategic Measure to Control Inflation In Jakarta Four strategic measures to control inflation in Jakarta were discussed at the coordination meeting. First, developing an Information Centre for Strategic Food Prices (PIHPS). Second, strengthening cooperation between traders and the suppliers of strategic foodstuffs. Third, building infrastructure to support trade and logistics and, fourth, advocating MSME development. Indonesia Lawmakers Pick Adityaswara for Central Bank Deputy Job Indonesia lawmakers picked Mirza Adityaswara for Bank Indonesia’s number two job, approving an outsider as the central bank grapples with accelerating inflation and a sliding currency. (Bloomberg) INTERNATIONAL FSB publishes monitoring note on the effects of regulatory reforms on EMDEs The FSB published on 12 September 2013 a monitoring note on the effects of regulatory reforms on Emerging Market and Developing Economies (EMDEs). The note, which has been prepared in collaboration with standard-setting bodies and international financial institutions, provides an update of monitoring developments since the FSB's June 2012 study. Economic Research Institute for ASEAN and East Asia: SME Development and Innovation Crucial for Sustainable Growth This year's symposium focused on "SME Development and Innovation Towards a People-Centered ASEAN Community". The important topics for the discussion: "Accelerating ASEAN economic community building", "Ensuring an equitable, people-centered, stable and robust growth of ASEAN", and "Enhancing innovation and technology capability toward a competitive ASEAN SMEs" - are key areas that are important for moving the ASEAN Community forward into 2015 and beyond. Bank for International Settlement BIS Quarterly Review, September 2013 Speech: Assessing the macroeconomic impact of OTC derivatives regulatory reforms Speech: Global Consistency in Financial Regulation: Is the glass half full, half empty, or just more transparent? Remarks at panel discussion on OTC derivatives reform and broader financial reforms agenda Speech: The global monetary policy stance - what are the risks? Speech: OTC derivatives reform - lessons from the financial market regulatory reform process UNITED STATES Complying With U.S. Tax Evasion Law Is Vexing Foreign Banks Treasury Department officials say they are moving apace in getting the world’s banks on board with the law, the Foreign Account Tax Compliance Act. They say they have reached agreements with some large countries, are working on deals with others and are refining parts of the law, which is set to take effect on June 30, 2014. (NY Times) Stocks, bonds jump after Summers drops Fed bid Stocks and bonds on major markets rose on Monday after former U.S. Treasury Secretary Lawrence Summers withdrew from consideration to be the next chairman of the Federal Reserve, leading investors to believe U.S. monetary policy might stay looser for longer. (Reuters) EUROPE Draghi Says EU Needs ‘Strong’ Authority to Resolve Banks European Central Bank President Mario Draghi said the European Union needs a strong central authority to handle failing lenders, after the region’s leaders failed to agree on plans to overhaul bank resolution. ESMA updates EMIR implementation timetable The key change in the implementation timeline relates to the registration of the first trade repositories, which was not expected to occur until at least 24 September 2013. ESMA now expects to make those first registration decisions not before 7 November 2013. Consequently, counterparties’ reporting to trade repositories is not expected to start before February 2014. ESMA has indicated that the change in the timetable is related to a combination of factors, including issues faced by applicants in ensuring the completeness of their applications. European Union and OECD agreed to foster the progress in developing global standard of automatic exchange of tax information The Ministers and Governors exchanged views on the necessary measures to ensure the stability of the banking sector and wider financial sector in the future. Besides touching the broader picture of crisis prevention and resolution, the discussion also focused on further possible reforms and policy measures to reduce financial market fragmentation and foster wider financial intermediation channels for the benefit of European economy. Bundesbank Says ECB Bank Oversight May Need Primary-Law Change European Union lawmakers will probably have to amend the rules governing the European Central Bank as it embarks on the complex task of regulating banks, according to the Bundesbank. (Bloomberg) Work on financial transaction tax to go on, EU executive says The European Commission rebuffed on Saturday an EU legal opinion that questioned the legality of a planned financial transaction tax and said work on the levy in 11 European Union countries would go on. (Reuters) Berlin mulls way to bank union without Treaty change - officials Germany is working on a plan that would allow the completion of a euro zone banking union without changing existing EU law, potentially removing a major hurdle to finish the most ambitious EU project since the start of the euro, EU officials said. (Reuters) U.K. Taxpayer Sees $95 Million Profit on Lloyds Sale The U.K. government made about 60 million pounds ($95 million) in profit on a first sale of its stake in Lloyds Banking Group Plc (LLOY), in a move toward full private ownership of Britain’s largest mortgage lender. (Bloomberg)