ASIFMA - 15 - 22 Oct 2013 | Issue 176

15 - 22 Oct 2013 | Issue 176 Spotlight Singapore Announces Direct Currency Trading Plan With China Singapore and China will introduce direct trading between their currencies, helping the city-state cement its status as Southeast Asia’s yuan hub. The two nations also agreed on a 50 billion yuan ($8.2 billion) quota for financial institutions in Singapore to invest in China’s domestic securities under the Renminbi Qualified Foreign Institutional Investor, the Monetary Authority of Singapore said in a statement today. (Bloomberg) ASIFMA India Currency & Rate Risk Management Seminar This conference will be aimed at systemically important Indian financial institutions (including government-owned, state-owned and private banks) and will feature leading practitioners and market participants who will share their thoughts on the implementation of rigorous risk management frameworks. ASIFMA Job Openings: Asset Management MD and Global Regulatory Policy Director ASIFMA has two exciting job opportunities available: 1) Managing/Executive Director – Head of Asset Management. 2) Manager/Director - Global Regulatory Policy. Update CHINA Economy to see 'good ending' in 4th quarter Premier Li Keqiang assured on Monday that the nation's economy will have "a good ending" in 2013, which will enable it to have "a promising beginning" for 2014. He also vowed to carry out reforms and ensure employment as economic growth stabilizes. Macroeconomic policies should continue to balance growth and structural reforms, he said. "We are confident of achieving the main targets of economic and social development this year," Li said. (China Daily) China urges implementation of reform, restructuring measures The Chinese government has vowed to further promote reforms and restructuring, while urging the implementation of such measures issued by the State Council in recent months. The moves are expected to lay a solid foundation for the economy to stabilize and grow, according to a statement released after a State Council executive meeting presided over by Premier Li Keqiang. (Xinhau) PBC to stick to prudent monetary policy The PBC will apply a mix of various monetary policy tools to respond to changing situations, while maintaining banking system liquidity and keeping credit and overall social financing growth at reasonable levels, said the statement. (Global Times) PBOC: Banks' liquidity set to remain ample The central bank reiterated on Wednesday that banking liquidity is ample and will remain so in the near future, indicating it will not easily pour money into the banking system despite a cash squeeze earlier this year that caused market turmoil. (China Daily) CBRC's Luo Ping fires Basel broadside A director-general of the CBRC informs that the new Basel rules being introduced in the wake of the financial crisis is too complex. (Finance Asia) CBRC solicits public comments on “Administrative Measures for Liquidity Risk Management for Commercial Banks (Trial)” | (Chinese only) CBRC has drafted the “Administrative Measures for Liquidity Risk Management for Commercial Banks (Trial)” (Draft for Comments) (“Liquidity Measures”), which is now soliciting comments from the public. “Liquidity Measures” adopts most of the adjustments on liquidity coverage based on Basel III liquidity standard, mainly including: reducing non-business-related deposits and outflow rate of secured financing with the central bank; raising defining standards for business-related deposits; improving liquidity risk identification and coverage of derivatives products; and explicitly allowing the liquidity coverage ratio of commercial banks to fall below 100% under stressful conditions. Meanwhile, the “Liquidity Measures” specifies more stringent requirements on qualified and high-quality liquid assets. (NAFMII Newsletter) Lenders offer new investment route The mainland's banking regulator will allow select banks to launch Asset Management Plans in a pilot scheme, introducing a new channel for lenders to tap into the funds of savers. (SCMP) Overseas investment outpacing FDI inflow China's outbound investment grew much faster than foreign direct investment (FDI) flowing into the country in the first nine months of this year, partly because domestic firms are eager to expand overseas, the Ministry of Commerce said Thursday. (Global Times) NAFMII publishes “China OTC Financial Derivatives Market Development Report 2012” | (Chinese only) “China OTC Financial Derivatives Market Development Report (2012)” systematically combs developments and characteristics of domestic and international OTC financial derivatives markets in 2012, and comes up with specific policy recommendations on OTC financial derivatives market development in 2013 by drawing development and regulatory reform experiences from foreign markets, and by analyzing objective environments and constraints faced by our OTC market. The report was published by China Financial Publishing House in September 2013. (NAFMII Newsletter) UK & China announce plans to make London global currency centre for investment in China The UK and Chinese governments have agreed a series of steps intended to make London the global currency centre for investment in China. The agreement concludes two days of talks between the Chancellor George Osborne and his Chinese counterpart Vice-Premier Ma Kai as part of the Economic and Financial Dialogue between UK and China. HONG KONG HKMA May Tighten Bank Funding Rules to Safeguard Credit Supply The Hong Kong Monetary Authority may introduce measures to discourage banks from using short-term funding for long-term loans as the regulator seeks to ensure faster lending growth doesn’t destabilize the economy. (Bloomberg) Currency market probe reaches Asia as Hong Kong questions banks Hong Kong is looking into suspected price manipulation in the $5.3 trillion-a-day global foreign exchange market, becoming the first authority in Asia to join Europe and the United States in the investigation. (Reuters) China's central bank likely to lift yuan conversion limit for Hongkongers Central bank likely to scrap conversion limit of 20,000 yuan-a-day for Hongkongers, in boost for denomination's investment products in city. (SCMP) SINGAPORE Singapore Conducts Assessment of Money Laundering and Terrorist Financing Risks Singapore has launched a comprehensive assessment of money laundering (ML) and terrorist financing (TF) risks in the country. MAS consults on proposals to facilitate better understanding of prospectuses The Monetary Authority of Singapore has launched a consultation on proposed enhancements to the current rules relating to prospectus disclosures for offers of securities. The proposals are intended to improve the readability of prospectuses and facilitate better understanding by investors of key information presented in prospectuses, and make prospectuses more accessible to retail investors. INDIA Raghuram Rajan's RBI gears up to launch interest rate futures India plans to launch trading of government bond futures within the next two months as part of efforts to deepen its financial markets, according to several sources involved in the discussions with the central bank. (Financial Express) Rajan: Policy soon to facilitate entry of foreign banks The Reserve Bank of India would soon come out with major reforms in the banking sector that would allow foreign banks to enter India in a big way and even take over domestic lenders, Governor Raghuram Rajan said. (Business Standard) G Padmanabhan: Banking on quality data Inaugural address by Mr G Padmanabhan, Executive Director of the Reserve Bank of India, at the Conference on Data Quality Management, organised by the Indian Institute of Banking and Finance, Mumbai, 18 October 2013. IOSCO: Easy money regime could pose risks for securities markets The spillover effects of expansionary monetary policies to stimulate economic growth might create "potential risks" for securities markets, says the global grouping of capital market regulators. (Economic Times) SEBI proposes new norms for settlement of default proceedings Sebi today proposed new norms for settlement of administrative and civil proceedings against suspected market defaulters, except in cases of serious violations like illicit pooling of funds from investors, insider trading and fraudulent and unfair trades. (Economic Times) JAPAN BOJ Upgrades View of All Regions The Bank of Japan raised its assessment of all of the country's nine regions, in a sign that the economic recovery being driven by the policies of Prime Minister Shinzo Abe is spreading throughout the nation. Japan Avoids Drastic Moves on Labor Rules in New Zones The Japanese government on Friday proposed relaxing regulations in planned "special economic zones" to encourage investment, measures that sidestep, for now, sweeping labor market changes that businesses are demanding. The steps to spur investment in the special zones—a part of Prime Minister Shinzo Abe's economic growth strategy—were generally welcomed as a good start. Kikuo Iwata: Purpose and mechanism of quantitative and qualitative monetary easing Special lecture by Mr Kikuo Iwata, Deputy Governor of the Bank of Japan, commemorating the 50th Anniversary of the Institute of Economic Research, Chuo University, Chuo, 18 October 2013. IMF - Outlook for Interest Rates and Japanese Banks’ Risk Exposures under Abenomics This paper examines how Japan's long-term interest rates and Japanese banks' interest rate risk exposures may evolve under Abenomics. Results from a panel regression analysis for major advanced economies shows that long-term government bond yields in Japan are determined to a large extent by growth and inflation outlook, fiscal conditions, demography, and the investor base of government securities. AUSTRALIA Australia Central Bank sees 'daunting' task ahead in global financial reform Efforts to bolster the global financial system have progressed well but the time has come to focus on implementing already agreed reforms, Australia's central bank chief said. (Reuters) Australia Central Bank Says Lower Dollar Needed for Economy A lower Australian dollar is needed to help rebalance growth in the country's economy, the governor of Australia's central bank said Friday. "I personally continue to think that a lower currency than this would be helpful in rebalancing the growth sources of the economy. I prefer it to be lower than this, rather than higher," Reserve Bank of Australia Governor Glenn Stevens told a business audience. (WSJ) NEW ZEALAND New Zealand must stick to Government plan to head off global risks A number of ongoing global risks reinforce the need for New Zealand to continue improving its own economic resilience and competitiveness, Finance Minister Bill English says. It can do that by returning to budget surplus and addressing potential threats to financial stability such as housing affordability, he told the Institute of Finance Professionals New Zealand (INFINZ) annual conference in Auckland today. (Scoop) MALAYSIA Mustapa: Government to ensure stability in Budget 2014 The Government must adopt a less popular stance in Budget 2014 to ensure long-term economic stability, says International Trade and Industry Minister Datuk Seri Mustapa Mohamed. He said several measures would be announced in the impending budget to be unveiled by Prime Minister Datuk Seri Najib Tun Razak next Friday to strengthen the economy in the long-term and they may not go down well with the masses. (The Star) INDONESIA Deputy Minister: New economic package on horizon Deputy Finance Minister Bambang Brodjonegoro said the package would include a revised regulation, such as tax holidays and tax allowances, to draw investment. The government issued four economic packages aimed at improving the current account deficit and to stabilize the rupiah against the US dollar. (Jakarta Post) PHILIPPINES SEC tightens rules on outsourcing The Securities and Exchange Commission (SEC) is tightening the rules that govern the outsourcing of certain functions of brokerage firms. The new rules focus on transparency and ensuring the capability of local and foreign service providers to help the operations of brokerage firms, the SEC said. (Phil Star) SOUTH KOREA KRX signs MOU with S&P Dow Jones The Korea Exchange (KRX) and S&P Dow Jones Indicies have signed a memorandum of understanding (MOU) for collaboration in global marketing and sales of KRX indicies including the KOSPI200. The KRX believes that its information business will become a future growth engine for the exchange and S&P Dow Jones' experience in global commercialisation will help elevate its index business to a higher level. INTERNATIONAL Regulators warn on rise of boom-era debt Global securities regulators have warned that the types of debt security that played a central role in the global financial crisis are again growing in popularity among investors. The International Organisation of Securities Commissions (IOSCO) said on Tuesday that investors chasing higher yields were placing more money into leveraged investment products that could be vulnerable to a sharp change in financial market conditions. (FT) ESMA Chair discusses international coordination of OTC derivatives regulation and supervision The Chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, has given a speech on the international coordination of the regulation and supervision of OTC derivatives markets. Amongst other things, Mr. Maijoor emphasised the need for regulators to rely more on foreign regulation when it achieves the same regulatory outcomes, and the importance of close cooperation between supervisors across jurisdictions. He also highlighted the importance of consistent global regulations and supervision. Bank for International Settlement Andrew Bailey: Regulating international banks Andreas Dombret: The yin and yang of resolving the European sovereign debt crisis Klaas Knot: Central bank independence and unconventional monetary policy – challenges for the European Central Bank UNITED STATES Treasury Secretary: U.S economy bruised by fiscal fight The U.S. economy has been hurt by a recent budget standoff in Washington and it is important that the nation does not go through another around of brinkmanship, Treasury Secretary Jack Lew said. (Reuters) US regulators set to round on markets data providers The data centres that house modern day securities trading resemble unremarkable high security barns, but they have been labelled by one of the US’s chief legal officers as high-tech insider trading hubs. (FT) Fed could taper as early as December The US government shutdown sabotaged a crucial month of data and dealt a blow to the world’s largest economy, but the Federal Reserve could still begin reducing its asset purchases as early as December. (FT) U.S. Treasury Seeks Chief Risk Officer as Part of Strategic Plan The Treasury intends to create the job of chief risk officer to oversee a small team and “provide permanent financial risk-management expertise,” according to the memo from Undersecretary for Domestic Finance Mary Miller to staff in her division in Washington. (Bloomberg) Redefining ‘US person’ creates fund manager turmoil Fund managers in Europe and Asia could scale down their US operations after being caught up in new, costly derivatives rules aimed at improving market transparency. For the first time, non-US fund managers could be considered “US persons”, which would make them subject to Commodity Futures Trading Commission rules on over-the-counter derivative trading. EUROPE Russian depository assigns pre-LEIs Russia's central securities depository, the National Settlement Depository (NSD), has begun to act as a pre-Local Operating Unit (pre-LOU), and has started to assign pre-Legal Entity Identifiers (pre-LEIs) to Russian legal entities. Draghi asked EU to keep state aid rules for banks flexible Banks that are still viable but need state aid to boost their capital base should be allowed to receive help without inflicting losses on their junior bondholders, European Central Bank President Mario Draghi told the European Commission. (Reuters) EU Commission publishes responses to consultation on reforming structure of EU banking sector The EU Commission has published the contributions received to its May 2013 consultation on the structural reform of the banking sector, which set out the main building blocks of the Commission’s follow-up to the report of the high-level expert group on reforming the structure of the EU banking sector (Liikanen report). EU’s Barnier Says Open to Compromise on Bank Resolution Law Michel Barnier said he’s open to compromise on plans for winding down stricken euro-area banks, in a bid to overcome German-led attacks on the proposal. “What matters is that the system chosen functions effectively and will be workable,” (Bloomberg) EU Races for Bank-Failure Deal Deadline to Avert Quagmire The EU, which took three decades to clear such milestones as defining chocolate and setting up a patent court, has just months to create a system to handle failing lenders. It’s the biggest step toward building a banking union that its leaders say is essential to preventing a rerun of the euro debt crisis. (Bloomberg) ECB to publish details for bank reviews The European Central Bank will reveal first details next week of how it will go about health-checking the banks it will start supervising from late 2014. (Reuters) ESMA consults on technical advice on procedural rules to impose fines on trade repositories ESMA has launched a consultation on the technical advice it must provide to the EU Commission on the procedural rules for imposing fines and periodic penalty payments on trade repositories. The consultation document sets out ESMA’s preferred options for the procedural rules. BoE’s Tucker warns on shadow banking risk Regulators need to “up their game” in overseeing hedge funds and shadow banks as risky pools of capital build up beyond the heavily scrutinised world of traditional banking, one of the world’s top central bankers has warned. Paul Tucker, the Bank of England’s outgoing deputy governor, said in an interview with the Financial Times that it would be “absolutely disastrous” if the economic fragility of banks was recreated outside the mainstream banking sector. (FT) Bundesbank VP: Leverage Ratio Encourages Banks to Take on More Risk While the leverage ratio is often cited as a simple fallback measure for dealing with a complex banking system, it is anything but, Deutsche Bundesbank Vice President Sabine Lautenschlaeger said in a speech in Frankfurt. "The leverage ratio has its own deficiencies. It punishes low-risk business models and it favors high-risk businesses, encouraging banks to engage in more risk-taking," she said. (WSJ) European dark pool equity trading jumps 45% Share trading on controversial off-exchange venues in Europe has risen 45 per cent in the past six months, underlining the growing popularity of so-called dark pools with the region’s institutional investors. The growing popularity of these venues, operated by companies such as UBS, Liquidnet, Turquoise and Bats Chi-X Europe, comes as European policy makers look to clamp down on dark pools. (FT) Bats to Expand European Trade Reporting Services Bats Chi-X Europe, the largest pan-European stock exchange, will offer reporting of off-exchange transactions through its new BXTR service, Mark Hemsley, chief executive officer of Bats Europe, said in an interview. BXTR will provide trade monitoring, a service for alternative platforms to report data, and allow negotiated transactions to be brought onto the exchange. The system also helps systematic internalizers, or banks who match customer orders internally, meet transparency requirements. (Bloomberg)