ASIFMA - 22 - 29 Oct 2013 | Issue 177

22 - 29 Oct 2013 | Issue 177 Spotlight ASIFMA says India must overhaul bond markets India needs to revamp bond markets to maintain interest from foreign investors and make sure local firms have access to funding, ASIFMA says. (FT) ASIFMA Paper: India Bond Market Roadmap This report proposes a comprehensive approach for the implementation of a consistent and coordinated policy that will serve to develop and strengthen the Indian bond market. This more structured approach would enable a safer and more appealing market for issuers and investors - and ultimately result in a stronger overall economy for India. 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 China PBOC Unveils Prime Interest Rate for Commercial Bank Loans China's central bank Friday said it has introduced a new prime lending rate, which it said would help push forward interest rate liberalization. The new bank lending rate, officially known as the "loan prime rate," would be the rate on loans extended to the best customers of Chinese commercial banks. The rate is based on a weighted average of lending rates from nine commercial banks, the People's Bank of China said in a statement on its website. (WSJ) Deposit insurance plan moving forward The People's Bank of China, the nation's central bank, has signed a memorandum of understanding with the US Federal Deposit Insurance Corp, a move that market players have taken as a new step toward launching deposit insurance in China. The MOU includes matters of technical assistance, exchange of information and the coordination of policy, and covered areas of financial services, depositor protection and global financial stability policies, the PBOC said on its website. (China Daily) PBC Publishes Statistical Report on Financial Institutions Loan Investment in the 3rd Quarter of 2013 | (Chinese only) By the end of September, 2013, outstanding RMB in financial institutions sector totaled 70.28 trillion yuan, increased by 14.3% year on year, accelerating by 0.1 percent in growth rate compared with last quarter. From January to September, 2013, Outstanding RMB increased by 7.28 trillion yuan, up 557 billion yuan year on year. Convertibility of FTZ's capital account under the spotlight Industry insiders are calling for specific details on a move to enable enhanced convertibility of the capital account in the China (Shanghai) Pilot Free Trade Zone, but they also said that effective regulation must be implemented to prevent instability. "The pilot programs in the Shanghai free trade zone will not only facilitate trade and investment but will also set the direction for China's financial reform," said Qiao Yide, secretary-general of Shanghai Development Research Fund. (ECNS) Regulator 'cautious' on T+0 settlement The China Securities Regulatory Commission will be prudent in introducing same-day settlement (also known as T+0 settlement), to the A-share market, to protect small investors interests, an agency spokesman said on Friday. T+0 settlement means that securities can be traded the same day. With the approval of the CSRC, the Shanghai Stock Exchange has already amended some of its regulations. The new rules, released last week, state that same-day settlement is permitted for bond exchange-traded funds and gold ETFs. (China Daily) China Think Tank Offers Reform Wish List A top Chinese policy-advisory group is about to unveil wide-ranging proposals for overhauling the nation's economy—including less coddling of state-owned enterprises and giving farmers the right to sell their land for the first time—as China's leaders prepare for a meeting to map out their priorities for the next decade. (WSJ) Spike in China money rates raises cash-crunch fears China’s money rates shot up on Thursday after the central bank withdrew cash from the financial system, fuelling worries that the world’s second-biggest economy might see a replay of a liquidity squeeze that rattled global markets earlier this year. (FT) HONG KONG HKMA issues circular on notification requirements under Basel Core Principles for Effective Banking Supervision The Hong Kong Monetary Authority (HKMA) has issued a circular to all authorised institutions informing them to comply with two types of notification requirements in regard to the following two principles from the revised Basel Core Principles for Effective Banking Supervision published by the Basel Committee in September 2012 HKMA reminds authorised institutions of Investor Education Centre booklet on product key facts statements The HKMA has issued a circular to remind authorised institutions of the booklet entitled 'How to Read Product Key Facts Statements', recently published by the Investor Education Centre. The booklet is intended to help the investing public understand the features and risks of an investment product (namely funds, investment-linked assurance schemes and unlisted structured investment products) through reading its key facts statement. U.K., Hong Kong Widen Forex Market Probe An investigation by global regulators into potential manipulation of currency markets appears to be widening, with confirmation that more regulators are taking part. The U.K.'s financial-services watchdog said Wednesday for the first time that it is working with other domestic agencies on the inquiry. The Financial Conduct Authority, or FCA, also confirmed that it is cooperating with several agencies overseas. (WSJ) Companies Ordinance (Commencement) Notice 2013 gazetted The Financial Services and the Treasury Bureau (FSTB) has announced the gazettal of the Companies Ordinance (Commencement) Notice 2013, setting 3 March 2014 as the commencement date of the new Companies Ordinance. The new Companies Ordinance, which was passed by the Legislative Council on 12 July 2012, provides a modernised legal framework for the incorporation and operation of companies in Hong Kong. SINGAPORE New Initiatives to Strengthen China-Singapore Financial Cooperation Singapore and China today agreed on new initiatives to strengthen cooperation on financial sector development and regulation. The agreement was reached at the 10th Joint Council for Bilateral Cooperation (JCBC), co-chaired by Singapore Deputy Prime Minister, Coordinating Minister for National Security, and Minister for Home Affairs, Mr Teo Chee Hean, and People’s Republic of China Vice Premier of the State Council, Mr Zhang Gaoli. MAS revises requirements relating to conduct of renminbi business The Monetary Authority of Singapore (MAS) has revised the following regulatory provisions relating to conduct of renminbi (RMB) business in Singapore: - Notice 1116 on foreign exchange conversion in China via the RMB clearing bank for the settlement of eligible cross-border trade; - Notice 646 on foreign exchange conversion in China via the renminbi clearing bank for the settlement of eligible cross-border trade; and - Circular on the conduct of RMB business which was issued on 23 May 2013. Singapore Joins Global Currency-Market Probe Asia's biggest foreign-exchange center, Singapore, has joined the global currency-market probe, widening the investigation being conducted by regulators around the world. The Monetary Authority of Singapore "has been in touch with foreign regulators on the issue of alleged manipulation in the WM/Reuters foreign-exchange benchmark rates," a spokesman for the authority told The Wall Street Journal. "We stand ready to assist in their investigations." (WSJ) Singapore Exchange Seeks High-Frequency Traders Computerized trading firms, which execute transactions in fractions of a second, account for a negligible share of volume on Singapore Exchange’s cash equities market, according to bourse spokeswoman Loh Wei Ling, while they contribute 30 percent of revenue from derivatives. Singapore Exchange will seek to change that once it introduces safeguards, Chief Executive Officer Magnus Bocker said at a briefing this month. (Bloomberg) INDIA India raises interest rates again, warns on stubborn inflation India's central bank raised interest rates for the second time in as many months on Tuesday, warning that inflation is likely to remain elevated despite sluggish growth, and rolled back an emergency measure put in place in July to support the rupee. (Reuters) India to Issue New Rules for Foreign Banks Indian regulators are expected to issue new rules governing the operation of foreign banks in coming days, in a step aimed at pressing them to set up local subsidiaries and lend more in poor, rural areas. (WSJ) SEBI, government may change mutual fund policy to route PF money into markets SEBI and the government are working on sweeping changes to the policy on mutual funds that could see them gain access to a substantial amount of money from the state-administered provident fund and other retirement programmes, a move that could lift the fortunes of the asset management industry. (Economic Times) 'Convertibles' could replace IPO safety net SEBI is considering convertible as an option to protect investors from downside risks in initial public offerings (IPOs), after negative feedback from market players on implementation of the safety net. (Business Standard) JAPAN BOJ policy working, still has room to boost stimulus: IMF The Bank of Japan's massive stimulus is working, the International Monetary Fund's mission chief to Japan said, and there is still room to increase purchases of government bonds and exchange-traded funds if a further boost was needed. Jerry Schiff, who is also deputy director of the IMF's Asia-Pacific Department, stressed he saw no need for the central bank to offer additional stimulus for now with the world's third-largest economy in good shape. (Reuters) BOJ's Outlook Is Cautious Despite Solid Growth Despite signs of solid growth and plans for fresh government spending, the Bank of Japan remains cautious about offering a more upbeat economic outlook, seeing increasing risks from overseas, people familiar with the BOJ's thinking say. (WSJ) AUSTRALIA Australia Central Bank Wary of Rising Currency Australia's central bank attempted to talk down the nation's currency, showing that it regards a rebounding Aussie dollar as among the biggest threats to an economic recovery as a mining slowdown deepens. (WSJ) Australia to raise debt limit by two-thirds to A$500bn Treasurer Joe Hockey said that he wanted to avoid a crisis similar to the recent US fiscal emergency. "The debt limit needs to be set so as to provide sufficient headroom to ensure there is stability and certainty for the financial markets about the government's capacity to finance its operations for the foreseeable future," "We need not look any further than the recent events in the United States to realise how imperative for stability and certainty is for confidence." (BBC) MALAYSIA Balancing act by Najib Prime Minister Najib Tun Razak deftly launched his road map for fiscal consolidation last Friday, introducing the unpopular consumption tax and subsidy cuts to raise revenue and check fiscal deficit. (FMT) Malaysia to build Asia’s Canary Wharf Malaysia is pushing ahead with a bid to join the ranks of the world’s financial centres, inviting bids from developers and investors to build a vast business district in the capital that it hopes will become Asia’s version of Canary Wharf in London. (FT) INTERNATIONAL Big banks muscle in on peer-to-peer lending Such “P2P” lenders have said they aim to revolutionise credit by cutting out, or disintermediating, banks from the traditional lending process. Using new technology, they have been able to extend loans at lower rates for borrowers than traditional bank loans while simultaneously offering higher returns for investors. (FT) FSB publishes responses to consultation on implementation guidance for: • Information sharing for resolution purposes • Key Attributes of Effective Resolution Regimes to non-bank financial institutions Basel Committee publishes working paper on liquidity stress testing The Basel Committee on Banking Supervision (BCBS) has published a working paper on liquidity stress testing, which presents a survey of theory, empirics and current industry and supervisory practices and seeks to identify gaps and – where possible – suggest ways forward. The paper explores the potential usefulness and construction of more generalised measures of liquidity adequacy produced using stress-testing techniques. UNITED STATES The Federal Reserve Board (FRB) requests comment on proposed rule to strengthen liquidity positions of large financial institutions The FRB has announced that it is proposing a standardized minimum liquidity requirement for large and internationally active banking organizations and systemically important non-bank financial companies designated by the Financial Stability Oversight Council. U.S. regulators say new bank liquidity plan is tougher than Basel III U.S. regulators unveiled a plan on Thursday for banks to hold enough assets they can easily sell to survive a credit crunch, calling on U.S. banks to meet new liquidity standards two years before most foreign banks must comply. (Financial Post) Barack Obama mounts big push to bolster FDI in US President Barack Obama and his senior cabinet officials are mounting a big push to bolster foreign investment in the US – amid evidence that America is falling behind other countries in the race for global capital. (FT) US Congress moves to tighten money laundering laws Efforts to fight money laundering and empty shell companies would be strengthened by two bills introduced in the US Congress on Wednesday, by giving federal regulators enhanced powers to hold bank executives personally responsible for misdeeds. (FT) EUROPE Bank-Structure Plan Dealt Blow as EU Lawmaker Says No Time (1) The European Parliament’s top financial lawmaker said time has run out for the assembly to deal with proposals to regulate the structure of banks in a bid to prevent lenders from becoming too big to fail. Michel Barnier, the European Union’s internal market commissioner, has left it too late ahead of parliamentary elections to submit promised proposals to prevent banks being too internally complex, Sharon Bowles, chairwoman of the Parliament’s economic and monetary affairs committee, told reporters in London today. (Business Week) Troubled loans at Europe’s banks double in value European banks’ non-performing loans have doubled in just four years to reach close to €1.2tn and are expected to keep rising, according to analysis that provides a disquieting backdrop to the region’s forthcoming assessment of lenders’ balance sheets. (FT) ECB announces details of comprehensive assessment in preparation of supervisory role The European Central Bank (ECB) has announced details of the comprehensive assessment to be conducted in preparation of assuming full responsibility for supervision as part of the single supervisory mechanism (SSM). The ECB has published a note which provides an initial overview of the key features of the assessment, together with the list of banks subject to the assessment. EBA consults on draft implementing technical standards on disclosure for leverage ratio The European Banking Authority (EBA) has launched a consultation on draft implementing technical standards (ITS) on disclosure for the leverage ratio under Article 451(2) of the Capital Requirements Directive (CRR). These standards will be part of the EU Single Rulebook in the banking sector and aim at harmonising disclosure of the leverage ratio across the EU by providing institutions with uniform templates and instructions. The European Central Bank publishes second Single Euro Payments Area migration report The ECB has published its second report on migration to the Single Euro Payments Area (SEPA), which analyses the state of play in euro area countries in creating a single market for credit transfers and direct debits in euro across Europe. The report also provides guidance on managing the transition process. The deadline for euro area countries to migrate to the SEPA credit transfer (SCT) and SEPA direct debit (SDD) schemes is 1 February 2014. EU Leaders Pledge to Reach Euro Bank-Failure Agreement This Year Nations must decide how to safeguard struggling banks so that ECB reviews of the euro zone’s most important lenders, which begin next month, don’t spook investors. ECB President Mario Draghi, who addressed the summit over dinner, warned this week that “banks do need to fail” to prove the assessments’ credibility. (Bloomberg) EU agrees preliminary deal to rein in speed traders The European Union has reached a tentative deal to rein in the type of ultra-fast trading that accelerated a plunge in Wall Street stocks in 2010 and set regulatory alarm bells ringing across the world. (Reuters) Bank shares fall after ECB outlines health checks for lenders Bank shares across Europe have fallen after details of planned health checks on the top lenders were unveiled. The European Central Bank, which takes over supervision of leading eurozone banks next year, said the stress tests would unearth potential risks. Banks with capital shortfalls may be required to bolster their balance sheets, the ECB said. (BBC) Bank of England announces changes to approach on providing liquidity insurance to banking system Mark Carney, Governor of the Bank of England (BoE), has given a speech announcing changes to the Bank's approach on providing liquidity insurance to the banking system. The principles and tools the Bank uses are set out in the Sterling Monetary Framework (SMF), which has been substantially reformed in recent years. France central bank chief says Robin Hood tax is ‘enormous risk’ Europe’s planned financial transaction taxposes “an enormous risk” to the countries involved and could threaten financial stability, the governor of France’s central bank has said. (FT) Osborne to launch Islamic bond plan George Osborne, the chancellor, will on Tuesday announce plans for Britain to issue the first Islamic bond outside the Muslim world, as he seeks to turn the City of London into the “unrivalled western centre for Islamic finance”. Mr Osborne hopes that £200m bond or sukuk will act as a catalyst for the City to become a leading player in the sharia-compliant finance market, which is worth $1tn globally. (FT)