ASIFMA - 07 JANUARY 2014 | Issue 185

07 JANUARY 2014 | Issue 185 Spotlight China to set up fully private banks in 2014: CBRC China will set up three to five fully private banks on a trial basis this year in a bid to further open up the banking sector to domestic and foreign capital, China's banking regulator said Monday. Private capital will be introduced to restructure current banking institutions or set up new ones bearing their own risks, the China Banking Regulatory Commission (CBRC) said in a work meeting. (Xinhau) China makes fresh bid to curb shadow banking, contain debt risk China's cabinet has published guidelines strengthening regulation of risky off-balance-sheet lending in a new effort to address growing financial risks from an explosion in debt. The State Council's guidelines call for tighter regulation of banks' off-balance-sheet lending and say that trust companies - the biggest non-bank players in what's called "shadow banking" - should return to their original purpose as asset managers and not engage in "credit-type" business. (Reuters) ASIFMA Job Opening: Equities Analyst ASIFMA has an exciting job opportunity available: Analyst - Equities Division to do research and analytical support related to ASIFMAs Equity Division activities and priorities, reporting to the Managing Director, Equities. The successful candidate will join a growing team in Hong Kong. BA degree or above is required, preferably in finance, economics, a related field. Knowledge of (and preferably 1-2 years experience) the capital markets or relevant product areas. Update CHINA Diverse ownership to boost State Owned Enterprise reforms The Chinese government's vow to boost diverse ownership means state-owned enterprise (SOE) reform, experts have told Xinhua. Ding Yifan, deputy director of the Institute of World Development under the State Council's Development Research Center, said a communique, issued after a key meeting of the Communist Party of China (CPC) Central Committee, set diverse ownership as the future development direction. (Xinhua) PBC and CBRC joint clarify the credit risk retention ratio of securitizer (Chinese Only) PBC and CBRC joint release the Document for Requirement of Credit Risk Retention Ratio of Securitization, requiring credit risk retention ratio should not be less than 5 percent of the issuance scale of every single securitization product. And the retention ratio of the most junior tranche should also not be less than 5%. This regulation comes into effectiveness since it is promulgated. (NAFMII Newsletter) People's Bank of China and CBRC issue announcement to further regulate risk retention system of originators of credit asset securitisation The People's Bank of China (PBOC) and the China Banking Regulatory Commission (CBRC) have jointly issued 'Announcement [2013] No. 21 - Enhancing the Sustainable Healthy Development of Asset Securitisation in China' to further regulate the risk retention system of the originators of credit assets securitisation. The Announcement requires originators to retain a minimum 5% credit risk of the underlying assets. The following requirements shall be observed for the purpose of risk retention: An originator shall hold at least 5% of each securitisation product issued by it; The proportion of asset-backed securities (ABS) in the lowest tranche held by an originator shall be no less than 5% of the issued ABS in such tranche; Where an originator holds ABS of tranches other than the lowest tranche, the originator shall - hold ABS in all such tranches at the same proportion; The term of the above holdings shall be no less than the validity term of the ABS in the relevant tranche; and Other requirements prescribed by the PBOC and CBRC. Debt Conversion is allowed for Local Government Platform Company (Chinese Only) NDRC states the local government platform companies will be allowed to issue new debt to refund the short-term and high interest debt, intensifying debt restructuring. For the platform companies which face capital gap and cannot complete the construction, can be allowed to issue moderate scale of new debt for refunding and unfinished project. (NAFMII Newsletter) CSRC amends administrative measures on supervising non-listed public companies The China Securities Regulatory Commission (CSRC) has issued a Decision to amend the 'Administrative Measures on Supervising Non-listed Public Companies'. Amongst other things, the changes include the following: The definition of non-listed public companies has been further clarified to include non-listed companies whose shares are transferred publicly or the number of whose shareholders exceeds 200 through issuance/transfer to targeted offerees; Non-listed public companies whose shares are publicly transferred are required to transfer the shares at the National Equities Exchange and Quotations (NEEQ) and register such shares with the China Securities Depository and Clearing Corporation Limited; Non-listed public companies may raise capital through equity financing and debt financing, including the issuance of preferred stocks in accordance with the applicable laws; The public transfer of shares of any non-listed public companies whose shareholders are no more than 200 is exempted from CSRC approval but subject to the administration of the NEEQ; and The NEEQ shall be responsible for the self-regulation of non-listed public companies whose shares are publicly transferred at the NEEQ and shall report any relevant violations to the CSRC. SAFE issues notice on adjusting administration of RMB/FX derivative product business (Chinese Only) The State Administration of Foreign Exchange (SAFE) has issued the 'Notice on Adjusting the Administration of RMB/FX Derivative Product Business', setting out amendments to the existing rules regulating RMB/FX derivatives. The Notice will take effect as of 1 January 2014. Amongst other things, the existing filing requirement for conducting currency swap and foreign exchange swap business will be removed. Banks and their branches that have already been qualified to conduct RMB/FX forward before 2014 can start currency swap and foreign exchange swap business automatically. MOFCOM issues 2013 Countries (Regions) Guidelines for Outbound Investment and Cooperation The Ministry of Commerce (MOFCOM) has issued the 2013 Countries (Regions) Guidelines for Outbound Investment and Cooperation. The guidelines are intended to help Chinese enterprises' outbound investment by providing guidance on the overall investment environment of relevant foreign countries or regions (host countries), especially the local laws, regulations and policies related to industrial development. The guidelines have been updated annually since 2009. China to strengthen delisting rules China's top securities regulator has said that it will look into improving delisiting rules for listed companies that are involved in major violations. More issues need to be made clearer concerning the legal basis for delisting in such cases, the definition of a major violation, and the approach for delisting, Monday's Shanghai Securities News quoted Xiao Gang, chairman of the China Securities Regulatory Commission, as saying. (Xinhau) China adjusts measures in Shanghai FTZ Changes to a raft of measures on foreign investment approval and admission control within the pilot free trade zone (FTZ) in Shanghai were announced by the Chinese government on Monday. The State Council, or Cabinet, said in a statement that it decided to temporarily adjust measures in an effort to reform the country's foreign investment management and open the service sector wider to overseas investors. (Xinhau) China's foreign exchange regulator urges consideration of Tobin Tax A leading financial regulator in the mainland has suggested the country could introduce a tax on foreign exchange transactions among other steps to guard against speculative capital flows amid further economic liberalisation. Yi Gang, head of the State Administration of Foreign Exchange (SAFE), wrote in an article for the Communist Party theoretical journal Qiushi that China should study in depth the so called Tobin Tax on financial transactions. (SCMP) China bond issues vanish as debt crackdown takes hold Concern about China's debt load is mounting, but there are signs that higher interest rates may finally be helping the country get to grips with the wasteful investment and excessive borrowing that has fuelled the economy since the global financial crisis. (Reuters) Shanghai Stock Exchange brings in new delisting rules New delisting procedures took effect on Friday on the Shanghai Stock Exchange as part of the bourses efforts to promote delisting reform and better protect investors interests. (China Daily) Central Bank, CSRC Promote Cross-market Issuance, Trading of CDB Financial Bonds China Development Bank (CDB) issues the first batch of financial bonds with the amount of RMB12 billion on the Shanghai Stock Exchange (SSE) on December 27, which is a beneficial pilot of the Central Bank and the China Securities Regulatory Commission (CSRC) in deepening the reform and promoting the development and the interflow between on-floor and over-the-counter bond markets and has received full attention and positive response from market players. HONG KONG Hong Kong-Based Bank of East Asia Joins OTC Clear as 4th Clearing Member Hong Kong Exchanges recently established clearing solution for over-the-counter (OTC) instruments has bagged its fourth clearing member. Local banking giant, Bank of East Asia (BEA), has joined the clearing service for interest rate swaps and non-deliverable forwards (NDFs), OTC Clear. The move comes on the back of increased developments in the clearing of OTC transactions post G20 initiatives to migrate OTC instruments to execute on recognized exchanges. (Forex Magnates) After belated securities reform, Hong Kong should look at insurance regulation After many rounds of consultation, the government will seek in the second quarter lawmakers approval to change the law to allow investors to hold their shareholdings in the form of electronic records instead of paper certificates. (SCMP) SINGAPORE MAS issues Notice 832 on risk based capital adequacy requirements for finance companies incorporated in Singapore The Monetary Authority of Singapore (MAS) has issued Notice 832 on risk based capital adequacy requirements for finance companies incorporated in Singapore. Notice 832 establishes the minimum capital adequacy ratios for a finance company and the methodology a finance company will use for calculating these ratios. MAS responds to feedback on draft Notice relating to issuance of covered bonds The Monetary Authority of Singapore (MAS) has published its responses to the feedback it received on its March 2012 consultation paper on the draft MAS Notice relating to the issuance of covered bonds. Reappointments in the MAS Board of Directors The Monetary Authority of Singapore (MAS) announced that Mr Lim Chee Onn, Senior International Advisor to Singbridge Private Limited, and Mr Peter Ong, Permanent Secretary of the Ministry of Finance, have been reappointed to its Board of Directors from 1 January 2014 to 31 May 2016. US CFTC authorises SGX as Asias first Derivatives Clearing Organization Singapore Exchange (SGX Derivatives Clearing) has become the first Asian clearing house authorised as a Derivatives Clearing Organization (DCO) by US derivatives regulator, the Commodity Futures Trading Commission (CFTC). New and existing US customers will be able to clear their derivatives contracts efficiently through SGXs derivatives clearing house in compliance with the latest US laws and regulations, including the US Dodd-Frank Act, the Commodity Exchange Act and CFTCs regulations. Demand for derivative products expected to rise The tapering of quantitative easing in the US could result in increased market volatility in Asia. And as businesses seek to reduce the risk of wild price swings in currencies or commodities, for example, the Singapore Exchange (SGX) said that is likely to further drive demand for hedging or derivative instruments this year. (Channel News Asia) INDIA CCIL to issue Unique Identity Codes to Entities in Financial Transactions The Reserve Bank of India has selected the Clearing Corporation of India Ltd. (CCIL) to act as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India. The LEI is a 20-character unique identity code assigned to entities which are parties to a financial transaction. As an LOU, CCIL will issue unique identifier codes to all eligible and desirous legal entities participating in financial markets across the globe on a non-profit cost recovery basis. FinMin to re-examine capital controls, foreign portfolio investment norms The Finance Ministry opened the New Year with a major initiative to review the framework governing capital controls and foreign portfolio investments. For this, the Ministry has extended the term of the Sahoo Committee, which recently submitted its recommendations on depository receipts. (Hindu Business Line) RBI seeks to alter pricing method for money market rates The Reserve Bank of India (RBI) on Friday recommended moving away from determining money market benchmarks through the current poll of traders towards one based on the trades done during a set period to remove any possible scope of manipulation. (Reuters) RBI to relax norms for takeover of infrastructure loans The Reserve Bank of India will soon relax norms for the takeover of infrastructure loans, allowing them to be treated as standard assets even if they are rescheduled during the process. Under the current rules, any rescheduled loan is treated as a non-performing loan (NPL) for which banks have to make provisions. (Economic Times) Centre to review RBI powers as part of financial sector reforms Under the proposed regulatory structure, the RBI will perform the functions of monetary policy, regulation and supervision of banking and payment systems. The Financial Stability Development Council will function in the systemic risk and development category. (Hindu Business Line) SEBI now holding individuals accountable for irregularities: Sinha To bring greater accountability in stock market, SEBI is now holding individuals also accountable along with their companies for any misdeeds, chairman U K Sinha said today. 'We will be presenting guidelines for better corporate governance in listed companies in coming days,' Sinha said, addressing a conference here on ?New Initiatives: Investor Protection and Investor Education. (Hindu Business Line) JAPAN Kuroda Sees Golden Opportunity to Escape Deflation Bank of Japan Gov. Haruhiko Kuroda said that recent broad improvements in the economy have created a 'golden opportunity' for the country to escape years of deflation, calling on business leaders to transform their deflationary mindsets. (WSJ) TSE faces international challenge Japan Exchange Group Inc. (JPX), which was formed through integration of the Tokyo Stock Exchange and the Osaka Securities Exchange on Jan. 1, 2013, marks the first anniversary of its establishment Wednesday. Stock markets in Japan saw positive activity in 2013, and bright news is likely to continue in the New Year, with a foreign company to be listed in Japan in February for the first time in about six years. (The Japan News) AUSTRALIA Australian banks achieve positive substituted compliance outcomes from the CFTC ASIC Chairman Greg Medcraft said, 'The decision recognises the strength of the Australian regime, and reflects the ongoing constructive engagement between the Australian regulators and foreign counterparts, at all levels of our organisations. 'We have been working closely with IOSCO and the OTC Derivatives Regulators Group to put in place principles to facilitate substituted compliance. The CFTC's decision is a major step towards that goal. INDONESIA Bank Indonesia Transferring Regulation and Supervision of Banks to Financial Service Authority Bank Indonesia and Financial Service Authority (OJK) signed a record of transfer (BAST-Berita Acara Serah Terima) on the function of Banks supervision and regulation from Bank Indonesia to OJK which will be signed directly by the Governor of Bank Indonesia, Agus D.W. Martowardojo and the Chairman of Board of Commissioners of Financial Service Authority, Muliaman D. To Increase Transparency and Accountability, BI Applies Financial Accounting Policy (FAP) as the Accounting Standard starting from 1 January 2014, Bank Indonesia will apply Financial Accounting Policy (FAP) as a reference for preparation of financial statements. FAP is a financial accounting standard prepared specifically based on the uniqueness of the purpose and characteristics of transactions in BI as the central bank, which is different from other commercial entities or public institutions. MALAYSIA Joint Public Consultation Paper - Trade Repository Reporting Requirement for Over-the-Counter Derivatives The Suruhanjaya Sekuriti Malaysia, Bank Negara Malaysia and Perbadanan Insurans Deposit Malaysia are issuing a joint consultation paper on the trade repository reporting requirements for OTC derivatives which sets out the details of the mandatory reporting requirements and the transitional arrangements. This public consultation ends on 20 January 2014. MYANMAR Local banks want partners in order to build capacity Despite continued efforts on the part of local banks to upgrade services ahead of the anticipated inclusion of foreign competition, bankers claim that they will require outside help in order to increase capacity building and training that would keep them competitive. (MM Times) INTERNATIONAL A Stock Exchange Expands Its Global Reach While the New York Stock Exchange has recently been swallowed up by the InterContinental Exchange, a company that gets most of its revenue from trading derivatives, BATS, which was founded in 2005, has been doubling down on plain-vanilla stock trading and global expansion. That steady business has quietly moved it closer to the top of the list of the largest stock exchange operators in the world in terms of the value of shares traded. (CNBC) Asian Banking: Moving Beyond Basel III Asian banks are well capitalized and many Asian jurisdictions have moved beyond Basel III - with higher capital requirements and ahead of the January 2015 deadline. Indeed, nearly half of all jurisdictions currently implementing Basel III are Asian. (Fung Global Institute) Ben S Bernanke: The Federal Reserve - looking back, looking forward Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal Reserve System, at the Annual Meeting of the American Economic Association, Philadelphia, Pennsylvania, 3 January 2014 UNITED STATES Yellen gets final stamp of approval to head U.S. Fed Janet Yellen, a key force behind the Federal Reserve's unprecedented and controversial efforts to boost the U.S. economy, was confirmed by the Senate on Monday to lead the central bank just as it begins to unwind that stimulus. (Reuters) Lew Will Push EU to Avoid Race to Bottom on Finance Rules Treasury Secretary Jacob J. Lew will press European officials to follow the U.S. lead in adopting tougher banking regulations to ensure that American financial firms are not put at a competitive disadvantage. (Bloomberg) U.S. regulators temper overseas swaps guidance as lawsuit looms U.S. regulators said Friday they will provide temporary relief to swap dealers affected by a November staff memo that expanded the scope of their power to regulate derivatives overseas. The Commodity Futures Trading Commission also said it will now give the public 60 days to comment on the November 14 memo, which is at the heart of a lawsuit filed by three Wall Street trade groups last month and set to be argued before a federal judge next week. (Reuters) EUROPE ESMA clarifies reporting of on-exchange derivatives under EMIR From 12 February 2014, EMIR requires all EU counterparties to a derivative contract to report their trades to a TR, irrespective of whether these are traded on or off exchange. Reporting derivative contracts enables regulators to identify and analyse potential risks associated with derivative markets. ESMAs Q&As aim to provide guidance to market participants, clarify which firms have to report their ETD contracts to TRs and what information needs to be included in order to ensure consistent data across the EU. Europe set to ease reform on bank splits Brussels is set to ease financial reforms so that big European banks are not forced automatically to split lending operations from risky trading. In a draft European Commission proposal, seen by the Financial Times, the separation is no longer mandatory, would be less costly and restrictive than first envisaged and national supervisors are given wide discretion in applying the reforms. In a further twist, the commission adds its own 'narrowly defined' version of the US Volcker rule, which outlaws proprietary trading. Era of Renminbi Dawns As Chinas Influence Grows 'The Chinese currency, the renminbi, is not terribly well known at the moment, but over my lifetime its going to become almost as familiar as the US dollar.' So said George Osborne during a recent visit to Shanghai. At first glance, this might seem unrealistic. The renminbi is hardly a global investment currency and barely registers on central bank balance sheets. So any change would require a profound shift in the financial landscape. (FT)