ASIFMA - 29 Oct - 05 NOVEMBER 2013 | Issue 178

29 Oct - 05 NOVEMBER 2013 | Issue 178 Spotlight ASIFMA: Asia’s 2014 regulatory Outlook The Asia Securities Industry and Financial Markets Association (Asifma) has grown rapidly over the past 12 months. CEO Mark Austen speaks with IFLR about the Association's plans for 2014, how global regulatory initiatives will affect Asia, and why regulators must start trusting one another. (IFLR) How US prudential standards could fragment global market Proposed regulations regarding the implementation of sections 165 and 166 of the Dodd-Frank Act require foreign banking organisations with a significant US presence to create a US intermediate holding company over their US subsidiaries. Those intermediate holding companies will be subject to US capital requirements, requiring foreign banks to silo capital within the US. (IFLR) ASIFMA: India needs to improve bond markets ASIFMA has produced a report this week claiming that if its suggestions were to be implemented, Indian bond markets would develop, strengthen and become more appealing to investors. The Hong Kong-based industry body construes that government and corporate bond markets in India are inferior not only to those in the developed world, but also in comparison to its neighbours within Asia. (The Trade) 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's market reforms to upgrade economy China is stepping up market reforms to upgrade its economy and reduce distortions caused by the remnants of the government-controlled economy. The move is in line with the call by the nation's new leadership for "new impetus for economic development through reform." (Xinhuanet) Xi: China confident of sustainable economic growth China is working to transform the mode of development and readjust its economic structure, Xi said, highlighting the country's push for new-type industrialization, urbanization, the application of information technology and agricultural modernization. He noted that China's economy is growing steadily, with its GDP expanding by 7.6 percent in the first six months and by 7.8 percent in the third quarter. (Xinhuanet) State Council announces reforms to PRC Company Capital Registration Regime | (Chinese only) The State Council of the People's Republic of China (PRC) has published details of a meeting hosted by the Prime Minister Li Keqiang in which he set out reforms to the registered capital registration regime of PRC-incorporated companies. The reforms are intended to reduce the costs for start-up companies and promote investment activities. New warning on overcapacity China's central ministries on Monday sent a stern message about the implementation of a key State Council document aimed at tackling excess industrial capacity. The ministries underscored the increasing urgency of containing the risks of the long standing issue. (China Daily) PBC Announces Official Run of Loan Prime Rate Centralized Quotation & Publishing Mechanism | (Chinese only) the People’s Bank of China (PBC) announced the official Run of Loan Prime Rate (LPR) Centralized Quotation & Publishing Mechanism. Under the mechanism, quoting banks quote respective loan prime rates, and then the designated publisher computes the weighted average of these quotations to arrive at an average interest rate of quoting banks and makes it public. (NAFMII Newsletter) PBC Signs the Memorandum of Understanding with the Federal Deposit Insurance Corporation PBC Governor ZHOU Xiaochuan signed the Memorandum of Understanding (MOU) with the Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg in Beijing, aiming to expand cooperation between two parties in the area of financial services, depositor protection, resolution of cross-border financial institutions, crisis management and international financial stability policy deliberations by enhancing information sharing, bilateral dialogues and policy coordination. (NAFMII Newsletter) China's Central Banker Leads Push to Overhaul Economy With mandatory retirement looming and little to lose politically, China's central banker, Zhou Xiaochuan, used a Communist Party session last November to vent about the lethargic pace of economic reform. (WSJ) China securitisation plan expanded to include foreign banks Chinese regulators have expanded a pilot plan allowing banks to package loans into tradable securities to include foreign banks, sources said. Chinese policymakers see securitisation as a tool to shift risk away from the banking system to reduce the chances of a financial crisis as economic growth slows and bad loans rise. (Reuters) Freer RMB movement 'can answer US claims' The report acknowledged measures taken by China this year to loosen capital controls and free up channels for cross-border capital and investment, along with the establishment of the Shanghai free trade zone, which is expected to liberalize interest rates, capital account opening and currency convertibility. (China Daily) CSRC head urges improved delisting system Unprofitable public companies should strictly follow delisting regulations and halt trading in their shares on the nation's exchanges, according to China Securities Regulatory Commission Chairman Xiao Gang. "The delisting system is one of the most important and fundamental regulations in China’s capital market," said Xiao. He called for policy changes that would make it easier for shares delisted from mainstream exchanges to trade in the over-the-counter market. Xiao added that such shares could regain their exchange listings when they meet the standards. (China Daily) Foreign companies can apply for OTC trades Foreign enterprises could enter the over-the-counter equity exchange system, or the so-called "third board", said China Securities Regulatory Commission on Thursday. Qualified joint stock companies, including private and foreign enterprises, can apply to trade equities on the system, the CSRC said on its micro blog. However, companies who have foreign shares should also submit documents issued by commercial authorities to confirm the status of these shares, said the CSRC. (China Daily) Nasdaq to Develop Markets With China Financial Futures Exchange Nasdaq OMX Group Inc. and the China Financial Futures Exchange said they will work together to develop the latter’s markets. The pair “will carry out extensive cooperation regarding technology, consultation, information sharing, staff training and explore opportunities for cooperation to promote collaborative business projects,” Zhang Shenfeng, chairman of CFFEX, said in the statement. (Money News) Banks urged to write off non-performing loans Bank authorities are urging that non-performing loans be written off, particularly in areas of acute over capacity, according to a statement on the banking regulator's website on Monday. Shang Fulin, president of China Banking Regulatory Commission, also stressed the importance of sustainable financing at a meeting in Fujian province. "We must make more efforts to prepare for a possible rise in non-performing assets and explore market-based options to pack and transfer bad loans," said Shang. (China Daily) HONG KONG HKMA: Statements issued by Financial Action Task Force on Money Laundering The Financial Action Task Force on Money Laundering (FATF) issued two updated statements on a number of jurisdictions identified by FATF as having unsatisfactory money laundering and terrorist financing controls. HKMA launches Treat Customers Fairly Charter The Hong Kong Monetary Authority (HKMA) has launched the Treat Customers Fairly Charter designed to promote a stronger corporate culture of treating customers fairly among banks. The charter has been drawn from good banking practices locally and overseas and from the G20 High-Level Principles on Financial Consumer Protection. SINGAPORE OTC trade reporting begins in Singapore Banks and swaps dealers in Singapore will for the first time be able to report their over-the-counter derivatives trades to a central data registry to meet part of sweeping G20 regulatory rules. The city-state on Thursday launches a trade repository, a requirement under new rules created by legislation such as the Dodd-Frank Act in the US and European Market Infrastructure Regulation (Emir) being finalised in Brussels. (FT) MAS responds to feedback on proposed regulations for reporting of derivatives contract The MAS has indicated that the OTC reporting regime will commence on 31 October 2013, starting with the reporting of interest rate and credit derivatives. While specified persons can comply with the reporting requirements upon the commencement of the reporting regime, they are not required to do so until their respective reporting commencement dates. The reporting commencement dates for banks, other financial entities, and significant derivatives holders are 1 April 2014, 1 July 2014, and 1 October 2014 respectively. SGX consults on proposal to establish remote membership for clearing of US customers' swaps The Singapore Exchange (SGX) has launched a consultation paper on its proposal to establish a new remote membership class, which will enable futures commission merchants registered with the US Commodity Futures Trading Commission (CFTC) to clear swaps for existing and new US customers through SGX’s derivatives clearing house, Singapore Exchange Derivatives Clearing Limited (SGX-DC). INDIA RBI lowers India's economic growth forecast to 5 pct for 2013-14 The Reserve Bank of India (RBI) today scaled down India's economic growth forecast for current fiscal to 5 per cent from the earlier projection of 5.5 per cent, citing downside risk stemming from domestic constraints. " ... headwinds to growth from domestic constraints continue to pose downside risks, and vulnerabilities to sudden shifts in the external environment remain," RBI Governor Raghuram Rajan said in the second quarter monetary policy review. (Financial Express) India's Central Bank Raises Key Lending Rate to Fight Inflation India's central bank Tuesday raised its key lending rate for the second time in a little over a month, continuing its battle against rising prices even as the South Asian nation grapples with a slowing economy. The Reserve Bank of India increased the rate at which it lends to banks overnight by a quarter percentage point to 7.75%. The central bank last raised that rate, called the repurchase rate, after its policy meeting in September. (WSJ) RBI ring-fencing foreign banks: Those set up after August 2010 to become wholly-owned units Reserve Bank of India governor Raghuram Rajan's plans to ring-fence foreign banks' domestic operations from the influence of their parents may turn out to be an irritant for new entrants as it plans to exempt the big boys who have been present in India before August 2010. The big four foreign banks in India — Citibank, Standard Chartered Bank, Hongkong & Shanghai Banking Corporation, and Deutsche Bank — may escape local incorporation based on the date of entry. (Economic Times) RBI prescribes Rs 500-cr initial capital for foreign bank subsidiaries Foreign banks seeking to set up subsidiaries in India would need at least Rs 500 crore as initial paid-up voting equity capital or net worth. Though foreign lenders would be incentivised to convert their branches here into wholly-owned subsidiaries, subsidiarisation wouldn’t be mandatory. The wholly-owned subsidiaries of foreign banks would be given “near-national treatment”, including for the opening of branches, the Reserve Bank of India said. (Business Standard) SEBI debating allowing raising funds via convertible bonds As IPO market still remains tepid, forcing companies to borrow costly funds from other sources, capital markets regulator Sebi today said it is looking at allowing them to issue convertible debentures to raise money. "The Primary Market Advisory Committee of SEBI is currently debating an alternative route to allow corporates to issue convertibles (debentures), which after certain time must be converted into either equity or other debt instruments," SEBI chairman UK Sinha told reporters on the investor protection in capital markets here. (Economic Times) EU wants full-scale reforms in India’s insurance sector The European Union wants India to raise foreign direct investment (FDI) limit in the insurance sector and also increase voting rights of foreign investors as part of the proposed bilateral Free Trade Agreement (FTA). A group of Parliamentarians from the European Union, who play a critical role in ratifying trade agreements signed by the European Commission, met their Indian counterparts on Tuesday and urged them to sign a number of pending Bills including the Insurance Bill and the Pension Bill. (Hindu Businessline) JAPAN BOJ Board's Inflation Target Skepticism Grows Skepticism among the Bank of Japan's policy board over whether the central bank can achieve its ambitious inflation target is growing, although the level of disagreement over its bullish economic outlook wasn't strong enough to make the nine-member board change its closely watched semi-annual report. (WSJ) Japan Seeks New Export Markets After just 10 months in office, Japanese Prime Minister Shinzo Abe has already made his 12th overseas trip as he tries to find new markets for Japanese exports in the face of increasingly strong competition from China and South Korea. This week, the prime minister wrapped up a trip to Turkey, where he extolled Japan's central role in a 10-year project to build a rail tunnel that for the first time links by rail the Asian and European sides of Istanbul. (WSJ) AUSTRALIA Statement by Glenn Stevens, Governor: Monetary Policy Decision At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. ASIC in 2014: Areas of focus and expected changes to the regulatory landscape A speech by Greg Medcraft, Chairman, Australian Securities and Investments Commission, to the Governance, Risk and Compliance (GRC) conference, 31 October 2013. INTERNATIONAL Regulatory Oversight Committee publishes letter on business registry information The Regulatory Oversight Committee of the Legal Entity Identifier System (LEIROC) has published a letter to national business registries seeking confirmation on the proposed use of the official business registry name and identification numbers for the unique identification of entities as set out under the G20 and Financial Stability Board endorsed global initiative. Global Central Banks Reach Standing Currency-Swap Deal The European Central Bank, U.S. Federal Reserve, Bank of Canada, Bank of England, Bank of Japan and Swiss National Bank announced "their existing temporary bilateral liquidity swap arrangements are being converted to standing arrangements," the ECB said in a statement. Those arrangements would remain in place until further notice. (WSJ) IOSCO Urges Implementation of Principles for Financial Benchmarks IOSCO believes these Principles provide a solid framework to ensure the quality, integrity, continuity and reliability of Benchmarks, and therefore encourages Administrators to take all the necessary measures to comply with them and provide the public disclosure set out above. Block trade agreement could cut pressure for buy-side A model agreement for block trades, created by the Association of Financial Markets in Europe (AFME), could help reduce the workload of buy-side traders. The model agreement, which covers block sales of shares by banks to buy-siders at a discount, has taken 18 months to create and AFME hopes it work will smooth the path to block trading and save vital time for buy-siders. (The Trade) Basel Committee publishes second consultation on fundamental review of trading book capital requirements The Basel Committee on Banking Supervision has published a second consultation paper on the fundamental review of trading book capital requirements. The consultation paper provides details on the approaches which were introduced in the Basel Committee's May 2012 consultation, and sets out a draft text for a revised market risk framework. UNITED STATES CFTC Issues Notice on Mutual Acceptance of Approved LEIs The CFTC issued a Notice announcing that registered entities and swap counterparties subject to CFTC swap data recordkeeping and reporting regulations concerning Legal Entity Identifiers can now comply with those regulations by using any LEI issued by an LEI provider endorsed by the Regulatory Oversight Committee of the global LEI system. - Notice - Press Release Fed Extends Stimulus as Growth Stumbles The Federal Reserve is still waiting for clear evidence that the economy can grow decently without its help. The Fed’s widely expected announcement on Wednesday that it would press ahead with its stimulus campaign of asset purchases and low interest rates reflected the reality that the nation’s central bankers gained little clarity in the six weeks since their last meeting, in part because the government shutdown delayed and distorted key economic indicators. (NY Times) Treasury Proposes FATCA Guidance for Foreign Banks The Treasury Department and the Internal Revenue Service have released a document containing proposed guidance for foreign financial institutions as the next step in implementing the Foreign Account Tax Compliance Act in an effort to combat offshore tax evasion. (Accounting Today) U.S. regulator aims for December vote on Volcker U.S. regulators hope to vote in December on a rule that would bar banks from gambling with their own money, the nation's top derivatives regulator said on Wednesday, a sign that the controversial Volcker rule may soon become law. (Reuters) Tech revolution to transform swap trading Now, in the wake of the financial crisis, big banks face a similar decision in the lucrative derivatives market. where financial reforms have opened the door to electronic trading. A string of new trading venues, dubbed “swap execution facilities” (Sefs), have started operating. Behind this transformation lies efforts by regulators have to reduce the systemic risk associated with privately-negotiated “over-the-counter” derivatives deals between banks, investors, insurers and companies. (FT) EUROPE EU lawmakers pledge speedy Libor reform, scope debated European Union lawmakers have pledged rapid approval of a draft EU law to regulate market benchmarks such as Libor, though they sparred over how comprehensive the new regime should be. (Reuters) High-speed trading ‘aids efficiency’, ECB says High-frequency traders improve price setting and help reduce “noise”, or short-term volatility in markets, the working paper by three US academics concludes. It warns regulators that introducing measures to curb their activities “could result in less efficient markets”. (FT) EU's Barnier: ready to compromise on bank resolution The European Commission is ready to compromise on how many banks will fall directly under the scope of the euro zone's banking resolution authority, potentially limiting it to the largest institutions, the EU's financial markets chief says. (Reuters) EU's Barnier warns about softening new bond trading rules European Union rules being finalised to regulate derivatives and bond trading are too light-touch and will leave markets in the dark, EU financial services chief Michel Barnier has said. Barnier has told Markus Ferber, a German member of the European Parliament who is leading negotiations on the new rules, he was concerned about how they are evolving. (Reuters) ECB Liikanen warns some European banks may be allowed to fail Europe has to allow banks with unsustainable strategies to fail after years of debt and financial turbulence which showed banks' capital was far too low, European Central Bank Governing Council member Erkki Liikanen said on Thursday. (Reuters) ECB Says Banks Set to Ease Loan Standards This Quarter Euro-area financial institutions signaled they may make it easier for companies to get loans for the first time in more than six years, which may help the region’s recovery gather momentum. (Business Week) LSE to launch Islamic Market Index and London to issue first Sukuk outside the Islamic world The UK Prime Minister, David Cameron, announced plans to stimulate Islamic investment in the UK at the World Islamic Economic Forum in London via 3 initiatives. Markit calls time on trade reporting service The group confirmed it would close down the operation, formerly known as Markit BOAT, at the end of September next year. London-based Markit has had doubts over the subsidiary’s future for several years and its announcement comes only weeks after Bats Chi-X Europe, the region’s largest share trading exchange, announced its own rival enhanced trade reporting service. (FT)