ASIFMA - 14 - 21 JANUARY 2014 | Issue 187

14 - 21 JANUARY 2014 | Issue 187 Spotlight HK Exchange mulls circuit breakers There have been a number of glitches at various exchanges and I think market participants have been saying look, right now the burden is all on us, we have to have a system that protects ourselves and our clients,' said Nick Ronalds, head of equities at the Asia Securities Industry & Financial Markets Association, a trade association for banks and brokers. 'And efficiency suggests that it would be a good idea for the exchange to have safeguards because they would apply universally. (FT) Asia's Capital Market Revolution to Challenge Hong Kong Hong Kong is a vibrant business centre that always ranks highly on indices of ease of commerce and financial deregulation. It is one of my favourite cities. And of course, as the mainland Chinese economic boom has developed, Hong Kong has been uniquely situated. I am convinced the coming Asian century is real, that China will drive it and Hong Kong will remain in a unique position. But Hong Kong will also face new challenges to its status as Asia's major financial centre. (Linkedin) Update CHINA China PBOC Extends Short-Term Funding Program As Rates Soar The People's Bank of China is expanding operations to provide more short-term liquidity to cash-strapped smaller banks when money market rates surge, according to a PBOC document seen by MNI. The document, signed by the bank's Guangzhou branch, said that the PBOC's Standing Lending Facility will be extended to include small and medium-sized banks, including rural banks and city commercial banks. The document said the PBOC in Beijing decided to trial the program but did not indicate if it applies to banks nationwide. (MNI News) China launches RMB central IRS clearing, corporate margins may follow China's Central Bank launched a voluntary Shanghai Clearing House for Renminbi interest rate swaps in a bid to mitigate counterparty risk. (CT) Regulators at Odds on Reining In China's Shadow Lending China's effort to rein in runaway credit is being hampered by infighting between the central bank and the nation's banking regulator, say officials at both institutions, with the two agencies sparring especially over how hard to press so-called shadow bankers. The officials say that the People's Bank of China, concerned about banks finding ways to move loans off their books, has been frustrated at what it sees as the unwillingness of the China Banking Regulatory Commission to toughen regulation of banks' dealings with shadow lenders, an array of formal and informal institutions creating credit outside the formal bank channels. (WSJ) CSRC to set up in Qianhai special zone The economic zone in Shenzhen is hoping for a financial breakthrough in 2014, including inviting regulators and various financial institutions to set up office in the site. The China Securities Regulatory Commission is to open an office in the Qianhai economic zone in Shenzhen, an important step meant to aid financial reform in the countrys special economic zones. (Finance Asia) CSRC 'determined' to pursue IPO reform The nation's financial regulators will continue to pursue market-oriented reform for new share listings and conduct random inspections, including checks of underwriters' work, the China Securities Regulatory Commission said on Friday. (China Daily) CSRC revises special provisions on information disclosure by commercial banks (Chinese Only) CSRC revised 'Compilation Rules for Information Disclosure by Companies Publicly Offering Securities to the Public (No. 26) - Special Provisions on Information Disclosure by Commercial Banks'. First, it is added with information disclosure requirements for innovative businesses such as trust and wealth management. Second, it unifies information disclosure standards. Third, it simplifies information disclosed content. It removes duplicate regulations on banks internal control system, simplifies disclosure on names and addresses of banks at all levels, as well as gives banks the option to make disclosure by regions according to their own management characteristics. And the disclosure requirement on external guarantees of banks during their daily operations is exempt. (NAFMII Newsletter) Commercial banks can issue write-down bonds on Shanghai Stock Exchange, both financial products and individuals can participate (Chinese Only) Shanghai Stock Exchange issued 'Notice on Relevant Matters Concerning Capital Replenishment of Commercial Banks by Issuing Corporate Bonds as well as Bond Trading and Transfer'. According to the Notice, the scope of commercial banks that can issue write-downs bonds on Shanghai Stock Exchange is further expanded to include not only institutional investors but also 'financial products issued by financial institutions', as well as individual investors whose assets are not less than RMB 5 million. (NAFMII Newsletter) AMAC issues pilot rules on registration of managers and filing of funds for private investment funds (Chinese Only) The Asset Management Association of China (AMAC) has issued the 'Pilot Rules on Registration of Managers and Filing of Funds for Private Investment Funds' to implement the relevant provisions under the amended PRC Securities Investment Funds Law, which require private investment fund managers to register and make filings with AMAC. The rules will take effect as of 7 February 2014. Amongst other things, under the rules: 'Private investment fund' refers to any fund that is offered to qualified investors in a non public manner and established, in the form of a company or partnership, for the purpose of making investments and managed by a fund manager or general partner; All fund managers shall register with AMAC via an online registration/filing system and apply for AMAC membership - as the rules do not impose any substantive eligibility requirements on fund managers, presumably all registration applications that are complete and comply with AMAC's requirements will be accepted; After the fund-raising for a private fund is finished, the relevant fund manager shall make a filing with AMAC through the online system within 20 working days - a private fund may open securities related accounts only after the filing; Fund managers are subject to both ad hoc and periodic reporting obligations; and Professionals engaged in private fund management shall meet certain requirements as provided in the rules. China pledges progress on currency reforms in Shanghai FTZ Shanghai's mayor on Sunday pledged to make major progress this year on key financial reforms in the city's new free-trade zone (FTZ) including full convertibility of China's currency. (Global Post) China economic growth at 14-year low China's economy, the world's second-largest, grew at its slowest pace in 14 years in 2013, latest figures show. Its gross domestic product (GDP) expanded 7.7% from a year ago, the slowest pace of growth since 1999. The growth rate was better than the government's target of 7.5%. The pace of expansion was also the same as 2012. The data highlights the challenge policymakers face in sustaining China's high growth rate as they look to rebalance the economy. (BBC) China grants gold import licences to foreign banks for 1st time China has granted licences to import gold to two foreign banks for the first time, sources said, as moves to open the world's biggest physical bullion market gather pace. Allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations. (Reuters) HONG KONG SFC issues circular on risks associated with virtual commodities The Securities and Futures Commission (SFC) has issued a circular to remind licensed corporations and associated entities to take all reasonable measures to ensure proper safeguards exist to mitigate the money laundering and terrorist financing risks associated with virtual commodities. Mutual recognition: Two factors to get right The first products must be quality and meet investor expectations, while clarity is needed on how long Hong Kongs sole partner status will be exclusive, the AFF hears. (Asian Investor) Concerns grow over powers of regulators Financial firms and some lawmakers expressed worry that a government-proposed law next year may give too much power to the regulators. The proposal unveiled in a consultation paper last week is aimed at ensuring Hong Kong complies with the new international rules brought in by the Financial Stability Board formed by the leaders of the Group of 20 developing economies. Hong Kong is a member on the board. (SCMP) TAIWAN Taiwan, HK, London should cooperate in offshore RMB: banks A ranking official of the Bankers Association on Tuesday called for Taiwan's cooperation with Hong Kong and London on developing offshore renminbi business, saying this will generate benefits for three parties. Bankers Association Chairwoman Lee Jih-chu, who doubles as chairwoman of the state-invested Bank of Taiwan, said on the sidelines of the Asian Financial Forum in Hong Kong that her missions at this year's forum are four-fold, one of which being to make a bid to partake in the annual meeting between Hong Kong and London on RMB business cooperation. (China Post) London official urges financial easing Taiwan has the potential to develop into a large offshore yuan business center like Singapore and Hong Kong if the government further loosens regulations on financial products and services, Lord Mayor of London Fiona Woolf said in Taipei yesterday. 'You will need to see more liberation in the way financial products and services are regulated in Taiwan,' Woolf told a press conference. (Taipei Times) Taiwan could benefit from delay of FATCA: official A possible delay in the United States' implementation of a tax information exchange with financial institutions across the world could help Taiwan gain leverage in the follow-up negotiations, local finance officials said Saturday. (Focus Taiwan) SINGAPORE Growth-hungry bourses beat a path to Singapore Since it was founded by Sir Stamford Raffles in 1819, Singapore has been known as a commodity trading centre in Asia, first in rubber and tin. Now exchanges are beating a path to the city-state as they tap the regions fast-growing commodity and energy markets. (FT) INDIA Interest rates may come down without Raghuram Rajan's help RBI Governor Raghuram Rajan may not oblige the government with a rate cut next week despite inflation slowing and little sign of economic revival, but a surprise surge in small savings could have a similar effect. Since it's flush with money, the government may not need to borrow as much from the market as it had budgeted, which in turn should see interest rates softening. (Economic Times) RBI sets up panel to review governance of bank boards The panel, which is expected to submit its report within three months from the date of its first meeting, will review among other things the central bank's regulatory guidelines on ownership of banks and representation in the boards. The committee will ascertain if there is conflict of interest in board representation, including among owner representatives and regulators. It will also assess and review the 'fit and proper' criteria for all categories of directors of banks, including tenure of directorship. (Economic Times) RBI standardises gold loan norms The Reserve Bank of India (RBI), on Monday, said that it had been decided to prescribe a loan-to-value (LTV) ratio of not exceeding 75 per cent for banks lending against gold jewellery, including bullet-repayment loans against pledge of gold jewellery. 'Therefore, henceforth loans sanctioned by banks should not exceed 75 per cent of the value of gold ornaments and jewellery,' the RBI said in a notification to all banks. (The Hindu) JAPAN Japan out of deflation now, no guarantee it won't return: economy minister Japan appears to have escaped deflation for now, Economics Minister Akira Amari said on Tuesday, but warned that the risk of it returning cannot be ruled out as policy makers continue their efforts to foster sustainable growth. Amari said it is important that wages rise faster than consumer prices and that he will closely watch annual wage negotiations that will take place this spring. (Reuters) Abe vows to realize 'perpetual' economic growth Japanese Prime Minister Shinzo Abe has renewed his pledge to realize industrial competitiveness. He says there is no end to his growth strategy. Members of the Industrial Competitiveness Council, including Abe, cabinet ministers and experts met on Monday. They endorsed draft policies for Japan's new growth strategies to be compiled around June. According to the draft policies, the council will consider a corporate tax cut to boost industrial competitiveness. (NHK) Japan's Abe to Decide on Retail Sales Tax Increase in 2014 Japanese Prime Minister Shinzo Abe said on Sunday he will determine by the end of the year whether to raise the nation's sales-tax rate to 10%. "I will make that decision this year, after checking economic data covering the coming July-September period," Mr. Abe said in an interview with the national broadcaster NHK. (Reuters) SOUTH KOREA South Korea plans price band limits on futures, options trading South Korea's financial regulator said on Wednesday that it plans to impose price band limits on futures and options trading after a local brokerage suffered crippling losses on erroneously placed options transactions last month. (Reuters) FSC to let bourse operator use 'shutdown switch' for erroneous derivatives trades he Korea Exchange (KRX), South Korea's sole bourse operator, will be allowed from later this year to directly cancel erroneous derivatives tradings after a local broker came on the brink of bankruptcy due to a trade blunder, the financial regulator said Wednesday. The Financial Services Commission (FSC) rolled out reform measures for the local derivatives market, which includes giving the KRX full authority to annul erroneous trades before the transactions are settled between counterparties. (Global Post) MALAYSIA Malaysia Says Pacific Trade Pact Hard to Complete This Year Talks on a 12-nation Pacific trade pact may be hard to finalize this year after a deadline for completion was missed last month, a Malaysian minister said. (bLOOMBERG) INTERNATIONAL Banks Fail to Meet Trading Data Standards, Global Regulators Say The worlds biggest banks must give a better account of what financial products they trade and who they trade them with, a group of global regulators said today. About a third of banks surveyed failed to produce weekly trading reports that met regulatory standards, according to a report from the Senior Supervisors Group. Banks in the European Union 'still struggled to meet the standards,' while Canadian lenders 'led all peers' the group said. (Bloomberg) IMF predicts higher global growth but warns of risks The International Monetary Fund expects global growth to pick up this year, though deflation is a "rising risk" as long as economic growth stays below what policy-makers believe is optimal, the head of the Fund said on Wednesday. IMF Managing Director Christine Lagarde expressed concern about price growth remaining below the target of many central banks, which could hurt the nascent recovery. (Reuters) FSB: Senior Supervisors Group Report on Counterparty Data This "Progress Report on Counterparty Data" includes background on the project, reporting expectations, and observations by supervisors and from firms' self-assessments. Basel Committee issues risk management guidelines related to anti-money laundering and terrorist financing The Basel Committee on Banking Supervision has issued a set of guidelines to describe how banks should include the management of risks related to money laundering and financing of terrorism within their overall risk management framework. Regulatory Oversight Committee publishes list of endorsed pre-LOUs The Regulatory Oversight Committee of the Legal Entity Identifier System (LEIROC) has published a table setting out the endorsed pre- local operating units (LOUs) of the Interim Global Legal Entity Identifier System (GLEIS). The LEIROC is a committee of authorities from around the world working to coordinate and oversee a global system of legal entity identification. UNITED STATES Volcker Rule Curbs on Banks Owning CDOs Eased in U.S The adjustment to Volcker answers concerns from smaller U.S. banks that they would have to rush into taking millions in losses on their holdings. Instead, the regulators let banks keep CDOs backed by trust-preferred securities established before May 19, 2010, and obtained by Dec. 10, 2013, five financial agencies said yesterday in a joint news release. (Bloomberg) SEC may seek more power to enforce Volcker rule U.S. securities regulators fear they do not have the full range of enforcement powers to police Wall Street's compliance with the controversial Volcker rule, and told Reuters they are considering new rules to fill the gap. Officials at the U.S. Securities and Exchange Commission say the rule, which generally bans banks from making speculative bets with their own money, does not currently allow the agency to police brokerages for technical violations. (Reuters) Judge Rules U.S. Banks Must Report to Foreign Countries under FATCA Deals A federal court has ruled that U.S. banks must report to foreign governments on the holdings of nonresident alien account holders under the intergovernmental agreements that the Treasury Department has signed with other countries tax authorities in an effort to implement the Foreign Account Tax Compliance Act. (Accounting Today) EUROPE ECB sets 'ambitious' data deadline for selected banks The European Central Bank has given selected euro zone banks three weeks to submit extensive details of their trading books and risk models as part of a review of the currency bloc's largest banks. (Reuters) Commissioner Michel Barnier welcomes agreement in trilogue on revised European rules The European Parliament and the Council reached an agreement on updated rules for markets in financial instruments, that will improve the way capital markets function to the benefit of the real economy. EU Parliament highlights concerns regarding intergovernmental agreement on single resolution mechanism The Chairwoman of the EU Parliament's Committee on Economic and Monetary Affairs (ECON), Sharon Bowles, and the responsible rapporteur and shadow rapporteurs have written a joint letter to the Greek EU Council Presidency to express their concerns regarding the intergovernmental conference on the intergovernmental agreement on the functioning of the single resolution mechanism (SRM), the first meeting of which took place on 9 January 2014. 'Don't hollow out financial transactions tax', says EU tax chief The European Union's top tax official has called on member countries not to dilute proposals for a financial transactions tax in the euro zone, suggesting the bloc could instead implement the plan more gradually. Algirdas Semeta, the European Commissioner for tax affairs, told Austrian paper Der Standard he thought a deal was possible in the first half of this year even though some countries wanted to exempt sovereign bonds, interbank securities repurchase deals and pension fund transactions from the levy. (Reuters) ICE Benchmark Administration to become new administrator on 1 February 2014 Intercontinental Exchange Group (NYSE: ICE) has announced that ICE Benchmark Administration (IBA) will officially take over as the new administrator of the London Interbank Offered Rate (LIBOR) from 1 February 2014. The Financial Conduct Authority (FCA) has confirmed formal authorisation to IBA to administer LIBOR effective from 1 February 2014.