ASIFMA - 08 - 15 Oct 2013 | Issue 175

08 - 15 Oct 2013 | Issue 175 Spotlight Hong Kong Exchange Takes Action Against Potential U.S. Default Hong Kong's stock exchange is asking investors who post some U.S. Treasury bills as collateral to pony up more of the securities, in one of the first actions by a regulator bracing against a possible U.S. default. Mark Austen, Chief Executive of ASIFMA, said the biggest threat to the region's financial system would come if the U.S. defaulted while Asian markets were open, without giving participants time to prepare for its impact. (WSJ) ROC endorses CICI utility developed by DTCC and Swift as a globally accepted Pre-LOU This marks an important milestone in establishing full operational deployment of a Global Legal Entity Identifier System aimed at giving regulators and firms stronger systemic risk monitoring capabilities so they can analyze positions and transactions they oversee on a global basis. ASIFMA Annual Conference 2013: Developing Asia's Capital Markets -- 20 & 21 November ASIFMA is proud to present the Annual Conference 2013 on 20 & 21 November in Hong Kong, with the theme for this first-of-a-kind, two-day event as "Developing Asia's Capital Markets". ASIFMA Job Openings: Asset Management MD and Global Regulatory Policy Director ASIFMA has 2 exciting job opportunities available: 1) Manager/Director - Global Regulatory Policy, 2) Managing/Executive Director – Head of Asset Management. Update CHINA China and ECB sign $57bn currency swap deal China and the European Central Bank have signed a currency swap agreement worth 350bn yuan ($57bn; £36bn), state-owned Xinhua news agency has said. Such agreements mean the central banks can exchange currencies and firms can settle trade in local currencies rather than in US dollars. (BBC) China's commitment to reforms sets good example World Bank President Jim Yong Kim said on Thursday that China's willingness to continue reforms despite lower growth rates is a "good example" for all emerging markets and developing countries. "In terms of the Chinese approach to the current lower growth rates, we were very impressed with the fact that China is still committed to the reforms," (China Daily) China central bank says 2013 GDP growth to exceed 7.5 percent China's economic growth should exceed 7.5 percent this year, deputy central bank governor Yi Gang was quoted by Xinhua as saying, the latest expression of confidence from Beijing that the world's No. 2 economy is steadying. (Reuters) China's fiscal reform will boost growth Less tax for small businesses and more financial support for local government are on the cards as the Chinese leadership considers to start reforming the fiscal system. (Xinhau) IMF’s Zhu Says China Has Tools to Deal With Debt Levels The Chinese government has room to deal with rising debt levels, which has become a “serious concern,” according to Zhu Min, a deputy managing director at the International Monetary Fund. (Bloomberg) CBRC relaxes liquidity rules The China Banking Regulatory Commission said in an online statement on Friday that it is proposing to ease requirements on lenders' liquidity levels to reflect new changes in the Basel III guidelines. The CBRC will extend the deadline for banks to meet the required minimum liquidity coverage ratio, or LCR, which was to have taken effect this year, until 2018. (China Daily) China raises hurdles for foreign banks China is raising the hurdles for foreign banks, more than tripling the amount of capital that new entrants to the country must post and limiting the derivatives operations of those already on the ground. But at the same time, the Chinese regulator also has offered foreign lenders much-desired clarification about how they can sell bonds in the domestic market, issue credit cards and offer overseas investment products to their clients on the mainland. (FT) UK opens doors to Chinese banks with special terms for lenders George Osborne will on Tuesday roll out the red carpet for Chinese banks looking to expand in London, offering to break down regulatory barriers in a bid to reinforce the City’s position as a global renminbi hub. (FT) HONG KONG Hong Kong delegation to meet Chinese leaders on Shanghai yuan rivalry Hong Kong bankers will meet the State Council and the nation's financial regulators this week for briefings on the development of the free-trade zone in Shanghai and the internationalisation of the yuan. (SCMP) HKMA publishes guideline on minimum criteria for authorisation under Banking Ordinance The Hong Kong Monetary Authority (HKMA) has published its guideline on minimum criteria for authorisation, superseding its previous version published on 19 July 2013. FRC publishes report on independent audit oversight The Financial Reporting Council (FRC) has published a report on independent audit oversight. The report is based on the findings of an international comparative study on independent audit oversight commissioned by the FRC to assist the government in the process of developing reform proposals to enhance the independence of Hong Kong’s audit regulatory regime. FSTB responds to Legislative Council question on vetting of and approval for new listings applications The Financial Services and the Treasury Bureau (FSTB) has published its response to a question from the Legislative Council relating to the vetting of and approval for new listings applications. Free trade zone could boost HKEx listings, says Chief A pilot free trade zone (FTZ) in Shanghai could lead to greater listings and investor activity on Hong Kong Exchange and Clearing (HKEx), according to chief executive, Charles Li. (The Trade) Eddie Yue: The development and future of the offshore Renminbi market Welcome remarks by Mr Eddie Yue, Acting Chief Executive of the Hong Kong Monetary Authority, at the Third Meeting of the Hong Kong – London RMB Forum, Hong Kong, 26 September 2013. SINGAPORE Singapore taking calibrated approach on financial system: PM Lee The Singapore government is maintaining a calibrated and stable approach towards the country's financial system. Prime Minister Lee Hsien Loong said this was one of the key lessons learnt since the fall of Lehman Brothers five years ago. (Channel News Asia) MAS consults on proposed amendments to disclosure and submission requirements for assessing global systemically important banks Monetary Authority of Singapore (MAS) has launched a consultation on the proposed amendments to MAS Notice 637 on disclosure and submission requirements for assessing global systemically important banks. SIAS urges SGX to introduce circuit breakers immediately The Securities Investors Association of Singapore has called on the SGX to introduce circuit breakers immediately. The exchange had planned to introduce the mechanism by the end of this year, subject to regulatory approval and industry readiness. The proposed mechanism will kick-in once security prices move by more than 10 per cent in five minutes. During a five-minute cooling-off period, trading can continue at or within the 10 per cent price band. (Channel News Asia) Singapore Circuit Breakers Sought After Losses: Southeast Asia Singapore Exchange Ltd, Southeast Asia’s biggest bourse, faces calls from investors to add circuit breakers after a plunge in shares of three commodity companies erased $6.9 billion in value over three days. (Bloomberg) INDIA India progressing well on ASEAN partnership India has made significant progress on its proposed plan of action for expanding partnership with the 10-nation ASEAN grouping in areas of economic, political, security and socio-cultural cooperation, and the two sides are on track to meet $ 100 billion trade by 2015. (Economic Times) IMF pegs FY14 growth at 4.25% on weak demand Casting doubts over the finance ministry's optimism that India's economy would grow more than five per cent in FY14, the International Monetary Fund (IMF) pegged the country's economic growth at 4.25 per cent. (Business Standard) IFC to sell rupee-linked bonds to fund India investment The International Finance Corporation (IFC), the World Bank's investment arm, plans to raise $1bn (£630m) by selling Indian rupee-linked bonds. IFC will use the proceeds to finance "private sector investment in India". (BBC) RBI allows lenders to borrow from global multilateral bodies The Reserve Bank of India on Thursday allowed banks to raise funds from global multilateral institutions until Nov. 30 as long as the money raised is for general banking purposes and not for capital enhancement. These borrowings from multilateral bodies will also be eligible for the recently opened forex swap facility. (Economic Times) Foreign portfolio investors to get tax benefits similar to FIIs Foreign Portfolio Investors (FPIs) will get all the tax benefits available to foreign institutional investors (FIIs). They will also not have to fulfil the Know Your Customer norms separately for opening bank accounts, the Finance Ministry said. (Hindu Business Line) JAPAN Abe Raises Profile at Asian Summits President Barack Obama's absence from summits in Southeast Asia this week was expected to open up the floor for an increasingly assertive China, but the spotlight turned more on another leader eager to bolster his relations with Southeast Asia and extend his country's reach: Japanese Prime Minister Shinzo Abe. (WSJ) BOJ Warns Over U.S. Debt Stalemate One of the Bank of Japan's deputy governors Wednesday issued a fresh warning over the potential repercussions of a U.S. debt impasse, as weeks of political brinkmanship in Washington cast a pall over Tokyo's efforts to defeat more than a decade of deflation. (WSJ) Kuroda Says BOJ Prepared to Do What’s Necessary on Deflation Bank of Japan Governor Haruhiko Kuroda said the bank will do what is necessary to defeat deflation, while declining to discuss specific additional measures it might take. (Bloomberg) INDONESIA Indonesia economy stable until 2018: OECD A recent report by the Organization for Economic Co-operation and Development (OECD) says Indonesia’s economic will grow on average 6 percent annually during 2014-2018, making it the country with the highest economic growth. (Jakarta Post) Indonesian Central Bank Seals South Korea Currency Swap Indonesia and South Korea have agreed on Saturday to enter a bilateral, three-year currency swap deal worth up to $10 billion, which could help the Southeast Asia country better defend a rupiah hit by capital flight. The deal would bring Indonesia’s total bilateral currency swaps signed this year to an equivalent of $37 billion, including a $15 billion deal with China and a $12 billion deal with Japan. (Jakarta Globe) All cross-border transactions must be reported The Financial Transaction Reports & Analysis Centre (PPATK) has announced that starting on Jan. 1, 2014, all financial transactions into and out of the country would have to be reported to the center. The new rule, which will be applied following the adoption of the international funds transfer instructions (IFTI), aims to counter money-laundering practices. (Jakarta Post) Bank Indonesia issues regulation on hedging transaction Bank Indonesia (BI) issued a regulation on hedging transactions which was aimed at giving economic players an umbrella law in efforts to mitigate market risks in the midst of domestic foreign exchange market fluctuations. (Jakarta Post) PHILIPPINES The Bangko Sentral ng Pilipinas may revise banks’ minimum capital requirement The Bangko Sentral ng Pilipinas may revise the minimum capital requirements of banks as part of reforms meant to ensure financial stability in the country. “The last time that the regulator increased minimum bank capital was 14 years ago... It’s under review right now as the balance sheets of the industry has grown fivefold in the last 14 years,” BSP Assistant Governor Johnny Noe E. Ravalo said. (Philstar) THAILAND Thailand and China Move to Boost Their Comprehensive Strategic Cooperative Partnership Mr. Li Keqiang, Premier of the State Council of the People’s Republic of China, will pay an official visit to Thailand on 11-13 October 2013, as guest of the Royal Thai Government.He will meet Prime Minister Yingluck Shinawatra to discuss ways to enhance the Thailand-China Comprehensive Strategic Cooperative Partnership by strengthening close cooperation in all areas of mutual interest. Prasarn Trairatvorakul: From here to there - transition in emerging markets Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, delivered in the Thailand@Harvard Series, Harvard Kennedy School, Boston, Massachusetts, 7 October 2013. INTERNATIONAL Central Banks Gaming Out U.S. Default as Deadline Nears Central banks have begun making contingency plans on how they would keep financial markets working if the U.S. defaults on the world’s benchmark debt.Policy makers discussed possible responses when they met at the International Monetary Fund’s annual meetings in Washington over the weekend, said officials who spoke on condition of anonymity because the talks were confidential. (Bloomberg) Debt ceiling crisis has other nations angry and scared At the start of the current US budget standoff, other countries viewed the situation with a mix of sympathy, concern and bemusement. With the 17 October deadline for raising the debt ceiling approaching, however, the international view has changed to fear and anger. (BBC) Shutdown Raises Global Recession Risk as Lagarde Lambastes U.S. Arriving in Washington for the annual meetings of the International Monetary Fund and World Bank, policy makers expressed concern that failure by U.S. lawmakers to end a government shutdown and raise the nation’s debt ceiling could trigger default and recession, imperilling already historically sluggish growth around the globe. (Bloomberg) G20 continues discussion on reforming the international financial architecture These themes will be also discussed at the forthcoming meetings of the G20 Finance Ministers and Central Banks Governors, as well as their Deputies, which are to be held on 10 and 11 October. IMF tells nations to raise their game The world faces years of sluggish growth unless leading economies undertake difficult economic reforms, the International Monetary Fund warned on Tuesday in a downbeat World Economic Outlook. (FT) IAIS announces plans for development of global insurance capital standard The International Association of Insurance Supervisors (IAIS) has announced its plan to develop a risk based global insurance capital standard (ICS) by 2016. The IAIS has agreed to develop a risk based global ICS for inclusion with its comprehensive framework for the supervision of internationally active insurance groups (ComFrame). Bank for International Settlement Working Paper No 432: Liquidity regulation and the implementation of monetary policy In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. Benoît Cœuré Speech: The economic consequences of low interest rates Public lecture by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the International Center for Monetary and Banking Studies, Geneva, 9 October 2013. UNITED STATES SEC Launches Market Structure Data and Analysis Website The Securities and Exchange Commission today unveiled a dynamic new website to provide investors and others with the ability to interactively explore a range of new market metrics and access empirical research and analyses that further inform the broader public debate on market structure. U.S. senators hint at possible fiscal deal on Tuesday A month of combat in the U.S. Congress over government spending showed signs on Monday of giving way to a Senate deal to reopen shuttered federal agencies and prevent an economically damaging default on federal debt. (Reuters) Canceled EU-U.S. talks complicate trade ambitions Even before the cancelation of the latest round of EU-U.S. talks, negotiations to create the world's largest free-trade deal were getting into difficulty territory. (Reuters) EUROPE Dollar's reserve role at risk from U.S. budget uncertainty - ECB's Nowotny The dollar's role as the world's leading reserve currency is at risk because of the political impasse in the United States, which has raised fears of a debt default, European Central Bank policymaker Ewald Nowotny said. (Reuters) Draghi Says ECB Guidance Allows Rate Cuts on Volatility European Central Bank President Mario Draghi said policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes. “The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,” Draghi said at the Economic Club of New York yesterday. (Bloomberg) ECB backs search for new benchmark to replace Euribor The European Central Bank called on Thursday for the creation of a new breed of bank-to-bank lending rates to compliment and eventually take over from scandal-tainted benchmarks such as Euribor and Libor. (Reuters) IMF drops criticism of Osborne austerity The International Monetary Fund has dropped its criticism of George Osborne’s austerity drive after revising up the UK’s growth forecast by more than any other leading economy. (FT)