ASIFMA: 19 - 26 Nov 2013 | Issue 181

19 - 26 Nov 2013 | Issue 181 Spotlight ASIFMA Launches White Paper “Asia's Capital Markets: Strategies for Sustained Growth” Collective Industry Voice Reveals Critical Need to Develop Broader and Deeper Capital Markets in the Region. The core thesis of the white paper is that deep, liquid and efficient capital markets are critical to the continued development of Asia’s economies. While the economic growth rate in Asia continues to exceed that of other regions, the structural development of its capital markets has not kept pace. ASIFMA: Asia's capital markets need harmonise regulations Asia needs common accounting standards and improved corporate governance to sustain the region’s economic development, according to a white paper from ASIFMA (Finance Asia) New U.S. derivative rules leave Asia markets vulnerable Several Asian and U.S. banks are working around new U.S. regulations on derivatives trading aimed at preventing a repeat of the 2008 financial crisis - moves that are legal but leave markets in the region exposed to a risky liquidity shortage, traders and bankers say. (Reuters) Banking industry calls on Asia regulators to speak up The international banking industry has urged Asian regulators to speak out against aggressive US and European rules which threaten to disrupt the region's financial markets. Banking industry calls on Asia regulators to speak up. (efinancial News) ASIFMA: Asian electronic trading requires encouragement Adoption of electronic trading in Asia needs further encouragement, according to ASIFMA. The industry body has made specific recommendations for improving Asia’s trading environment within its white paper, “Asia’s capital markets, strategies for sustained growth”. As well as promoting electronic trading, regional consistency of controls are also needed to support further growth. (The Trade) Update CHINA China Specifies 60 Targets to Push Forward Comprehensive Reform China’s central government released the “Decision on Major Issues Concerning the Comprehensive Reform (hereinafter referred to as the ‘Decision’)” on November 17, which puts forward 60 detailed targets in the following 15 areas to promote the nationwide reform. (China Briefing) China eases rule on QFII open-ended fund China has scrapped a floor on investments by overseas institutional investors in their open-ended China fund as the leadership pledges more freedom in the country’s financial markets. Previously, investors under the QFII programme were required to raise their open-ended China fund publicly offshore and invest more than 70% of the fund assets into domestic Chinese securities market. SAFE has now removed the 70% requirement, according to China Construction Bank. (IPA) China gets set to launch crude oil futures market China is expected to launch crude oil futures in the Shanghai free-trade zone soon and invite foreign investors to trade. The move is intended to give the nation, the world's biggest energy consumer, pricing power in the global oil market. (SCMP) CBRC decentralizes and “relax” bank network layout | (Chinese only) CBRC recently released the revised version of “Measures for Implementation of Administrative Licensing Matters Concerning Chinese Commercial Banks” (“Measures”), which further abolishes a number of administrative licensing items, including the abolition of restrictive provisions that Chinese commercial banks can only apply to establish one sub-branch in one city, as well as the abolition of administrative licensing for change of business premises of Chinese commercial banks. The Measures supports banks with strong risk management capability to optimize the layout of their regional financial services, so as to address the imbalance in the development of regional institutions. Plans for the Future Development of the Shanghai Free Trade Zone Authorities from different departments of China have recently rolled out their respective plans for the highly-anticipated Shanghai Free Trade Zone (Shanghai FTZ). Included in this is the summary of the development plans and policies for the Shanghai FTZ. (China Briefing) PBC and Central Bank of Malaysia sign Memorandum of Understanding on cross-border collateral arrangements | (Chinese only) Zhou Xiaochuan, Governor of People’s Bank of China (PBC), and Zeti Akhtar Aziz, Governor of Central Bank of Malaysia, signed a Memorandum of Understanding (MOU) at the opening ceremony of Central Bank of Malaysia Beijing Office to make cross-border collateral arrangements aimed at providing liquidity for financial institutions of both sides. The arrangements are conducive to deepening financial cooperation between two countries, enhancing market confidence and maintaining regional financial stability. HONG KONG Chinese VP says central gov't supports Hong Kong development Chinese Vice President Li Yuanchao said on Thursday the central government will "unswervingly" support the Hong Kong Special Administrative Region (HKSAR) government and its development of democracy in accordance with the law. (Xinhau) RMB 3,000,000,000 Fixed Rate Bonds Due 2015 issued by the Ministry of Finance of the People’s Republic of China The RMB3,000,000,000 Fixed Rate Bonds Due 2015 (the “Bonds”) to be issued by the Ministry of Finance of the People’s Republic of China (the “Ministry of Finance”) will be admitted into CCASS as Eligible Securities for clearing and settlement on 12 December 2013 which is the tentative listing and dealing date of the Bonds on The Stock Exchange of Hong Kong Limited (“Exchange”). The trading board lot size of the Bonds is 100 units, which is equivalent to RMB10,000 in principal amount of the Bonds. SFC surveys participants in Hong Kong OTC derivatives market The Securities and Futures Commission (SFC) has launched a survey of corporate participants in the Hong Kong over-the-counter (OTC) derivatives market. The survey is intended to assist the SFC in the implementation of the new regulatory regime for the OTC derivatives market in Hong Kong. Financial Services Development Council publishes initial research reports on development of local financial services industry The Financial Services Development Council (FSDC) has published the first batch of six research reports which aim to strengthen Hong Kong’s position as the international financial centre and enhance the development of the local financial services industry. The reports set out both the macro and micro level recommendations for the consideration of the government and relevant regulators, with proposals ranging from those on the strategic direction for developing Hong Kong as an international financial centre, to policy suggestions on removing impediments and fostering new business. OTC Clear Has Smooth Soft Launch OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx) established to provide clearing services for over-the-counter (OTC) derivatives, announces that its soft launch of business was completed smoothly today. INDIA 2013 Changes in Indian FDI Policy Navigating foreign investment in India can be daunting. The World Bank’s Doing Business 2014 report ranks India among the most difficult countries in which to start a business – 179th out of 189 countries analyzed. As such, foreign firms are highly recommended to hire a professional services firm to assist with setup and investment in the country. For foreign institutional investors (FII) and firms considering foreign direct investment (FDI), a familiarity with India’s recent changes in FDI policy is critical. (Indian Briefing) FIIs allowed to invest up to $5 bn in credit enhanced bonds In a bid to attract capital inflows, the Reserve Bank opf India (RBI) has allowed Securities and Exchange Board of India (Sebi)-registered foreign institutional investors (FIIs) and qualified foreign investors (QFIs) to invest in the credit enhanced bonds up to a limit of $5 billion. These investments would be within the overall limit of $51 billion earmarked for corporate debt, RBI said. (Business Today) India pushes to develop money markets The era of easy money for Indian banks may be coming to an end. Unlimited access to cheap overnight funding from the Reserve Bank of India (RBI) was tightened mid-year as part of measures to support a plunging rupee, and now the central bank is keen to use the restrictions to help it deepen money markets. The ability of banks to continuously tap funds through the central bank's Liquidity Adjustment Facility (LAF) lowers their need to raise cash in the markets, which has thwarted the development of a proper money-market yield curve. (Reuters) Subsidiaries may not guarantee near-national treatment for foreign banks Creating subsidiaries in India may not necessarily ensure near-national treatment in branch expansion for all foreign banks. The reciprocity clause in the Reserve Bank of India's (RBI) guidelines on subsidiarisation of foreign banks in the country means overseas lenders will be granted near-national treatment here only if their home countries allow Indian lenders to open branches without much restriction, people familiar with the development said. (Business Standard) Minister P Chidambaram pitches for India as safe investment hub Making a strong pitch to overseas Indians, finance minister P Chidambaram has said the country is a safe destination with a potential of 8% growth and ample investment opportunities. "The macroeconomic fundamentals and the microeconomic fundamentals make India an attractive and safe investment destination," he said while addressing the second South Asian Diaspora convention in Singapore on Thursday. The government, Chidambaram said, has taken a number of measures to stabilise the economy and outlined multiple investment vehicles that the country offered. (Economic Times) Finance Minister may introduce DTC Bill in winter session The Finance Ministry today said that it is finalising the official amendments to the Direct Taxes Code (DTC) Bill so that it could be taken up in the Winter Session of Parliament beginning December 5. “We are working on the DTC Bill and want to bring it as soon as possible,” Revenue Secretary Sumit Bose told reporters on the sidelines of a CII summit here. (Hindu Businessline) Banks wrote off a whopping Rs 1 trillion, mostly for large borrowers, RBI eyes abolition of system Reserve Bank of India (RBI) deputy governor KC Chakrabarty has said banks have written off a whopping Rs 1 trillion in the past 13 years and criticised the lenders because as much as 95 per cent of these write-offs were for large borrowers. Notably, allegations of un-deserving borrowers getting benefit have been levelled in case of the scheme and was looked into by RBI. (Financial Express) JAPAN BOJ Kuroda Upbeat on Global Economy Bank of Japan Gov. Haruhiko Kuroda is offering a bullish view on the global economy, brushing aside concerns over potential risks and maintaining confidence that the central bank is on track to meet its ambitious goal of winning the country's battle with deflation. (WSJ) BOJ Chief Rejects Idea of Yen, Stock Bubble Bank of Japan Gov. Haruhiko Kuroda on Friday rejected the view that the central bank's aggressive pumping of money into the economy is creating a stock market bubble and excessive yen weakness, instead stressing that he will press ahead with monetary easing to vanquish deflation. (WSJ) AUSTRALIA Stevens Says RBA ‘Open Minded’ on FX Intervention Reserve Bank of Australia Governor Glenn Stevens said that while the central bank has been unconvinced about the effectiveness of trying to drive down the Aussie, he remains “open-minded” on currency intervention. (Bloomberg) INTERNATIONAL FSB consults on guidance on supervisory interaction with financial institutions on risk culture The Financial Stability Board (FSB) has published the following two papers to assist supervisors in strengthening risk management practices in financial institutions: - Principles for an effective risk appetite framework; and - A consultation paper on guidance on supervisory interaction with financial institutions on risk culture. IOSCO writes to FSB regarding various Workstreams The International Organization of Securities Commissions (IOSCO) has published a letter, dated 28 October 2013, from its Board Chair to the Chair of the Financial Stability Board (FSB) outlining the work IOSCO is undertaking in relation to the following areas: - Cybercrime in securities markets; - Long term investment; - Crowd funding; and - Cross-border regulation. IASB announces reform to accounting requirements for financial instruments The International Accounting Standards Board (IASB) has announced the completion of a package of amendments to the accounting requirements for financial instruments. The amendments were developed in response to concerns raised by preparers and users of financial statements on the difficulties of reflecting their risk management activities and understanding hedge accounting in the financial statements. The changes are intended to enable entities better reflect risk management activities in their financial statements. OECD publishes paper on complexity and interconnectedness of bank business models and the Basel system OECD) has published a paper on the complexity and interconnectedness of bank business models and the Basel system. The paper examines whether the Basel III agreement effectively addresses the issues of excess leverage and default pressure resulting from contagion and counterparty risk from 'too-big-to-fail' institutions. Asian Banks Are Lending Record Amounts of Dollars, Yen and Euros Asia's market for foreign-currency loans is booming. Banks across the region are lending record sums in the "G3 currencies"—the U.S. dollar, the yen and the euro—even as economic growth slows and bad debts continue to rise in places like China and Korea. (WSJ) UNITED STATES Fed’s Tarullo Says Volcker Rule Will Prevent More London Whales Federal Reserve Governor Daniel Tarullo said regulators are writing a final version of the Volcker rule to block any repeats of JPMorgan Chase & Co. (JPM)’s $6.2 billion in losses last year from derivative bets by a trader dubbed the London Whale. (Bloomberg) CFTC goes its own way over Volcker rule The chairman of the US Commodity Futures Trading Commission has come under fire for pitching a version of the Volcker rule that is different to the draft being studied by the country’s four other regulators before the proposal can be finalised.  (FT) EUROPE EU Parliament Constitutional Affairs Committee publishes draft opinion on proposed regulation on single resolution mechanism The EU Parliament's Committee on Constitutional Affairs (AFCO) has published a draft opinion, dated 10 October 2013, for the Committee on Economic and Monetary Affairs (ECON) on the proposal for a regulation establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund. EU watchdog pushes for clearing house resolution plans Europe's top securities watchdog has urged swift action on plans to wind down central derivatives clearing houses (CCPs) that run into trouble to help limit potential damage to the global financial system. (Reuters) EU Says Gensler Swaps Rule Clashes With Trans-Atlantic Pact European Union regulators accused the U.S. Commodity Futures Trading Commission of reneging on a trans-Atlantic pact on swaps regulation, saying new curbs on EU-based units of U.S. banks clash with efforts to align rules. The European Commission is urging the CFTC to reconsider the measure that Chairman Gary Gensler argued is vital to prevent U.S. companies from evading regulations by booking transactions through affiliates based in other countries. (Bloomberg) EU reaches outline deal to cap "dark pool" share trading The European Union reached an outline deal on Thursday to try to shine a light on shadowy areas of the financial markets by capping off-exchange share trading, known as "dark pools", a senior EU lawmaker said on Thursday. The outline agreement is likely to hit the City of London financial centre, which is home to several "dark pools" or anonymous trading platforms. But stock exchanges and big banks will likely benefit. (Reuters)