ASIFMA: Asia Regulatory Review | 18 - 25 February 2014

18 - 25 February 2014 | Issue 192 Spotlight Circuit breakers have divided the financial community A heated debate has been rekindled by the Hong Kong stock exchange's decision to consider introducing circuit breakers to prevent split-second computer trading from causing market disruptions or distortions. "Fat-finger" traders who input massive but wrong orders that could temporarily disrupt trading in a market are now far less of a worry than flash crashes caused by computers. (SCMP) China to streamline securities watchdog in efficiency drive China plans to overhaul its securities regulator, merging some departments and creating four units to fill existing gaps, as it looks to reduce unnecessary red tape and create more effective oversight of its fast-developing markets. The China Securities Regulatory Commission (CSRC) will merge departments overseeing areas from initial public offerings (IPOs) to futures trading, as well as boosting its oversight of illegal trading activity. (The Business Times) ASIFMA's 4th Offshore RMB Markets Conference ASIFMA is pleased to present the 4th Offshore RMB Markets Conference in Singapore on Thursday, 13 March 2014. The conference is an industry-wide event for both sell-side and buy-side, bringing together high-level regulators, policy makers, ASIFMA members and their guests, to discuss key developments, trends and issues for offshore RMB markets. Update CHINA CPC meeting underlines further reform Participants at a meeting of the Communist Party of China (CPC) on Monday decided that deepening reform would help China reach its economic and social development targets this year. Participants concluded that China will continue to implement a proactive fiscal policy and prudent monetary policy, stabilize and improve its macro-control policies, keep economic growth "within a rational zone" and elevate growth quality and efficiency in order to achieve this year's goals. (Xinhua) China PBOC's Zhou Plays Down Shadow Bank Risk At G20 People's Bank of China Governor Zhou Xiaochuan told the meeting of Group of 20 finance ministers and central bank governors that the Chinese government will push ahead with economic reform, while playing down the risks associated with "shadow banking." Zhou told the G20 that reforms to rebalance the economy will continue, noting that the current account surplus last year was just 2.1% of GDP, down from as much as 10% during the boom years of the last decade. (MNI News) PBOC official urges vigilance and tolerance for online finance sector With online trading continuing to thrive in China, Liu Shiyu, vice president of People's Bank of China (PBOC), the country's central bank, has warned of the three potential risks for online financing. These include the dubious legal status of online financial institutions, possible defects in the management system of supporting funding suppliers, and soundness in the internal control system of online institutions. (Want China Times) Credit policy stresses rural finance, new industries China's central bank has informed all branches and financial institutions of this year's credit policy, stressing better services for rural finance and emerging industries, the Shanghai Securities News reported on Friday. The People's Bank of China (PBOC) urged a start to pilot mortgage loans for rural land contractual management rights while prudently boosting pilot mortgages for farmers' housing property, the newspaper said. (Xinhua) Banks ordered to raise liquidity coverage ratios Chinese commercial banks' liquidity coverage ratios must reach 100 percent by 2018 to strengthen them against the risks of credit crunches, the China Banking Regulatory Commission said on Wednesday in a new liquidity management regulation. The target ratio is set at 60 percent this year, rising by 10 percentage points annually until 2018, the same transitional period specified in the Basel III accord. The CBRC's regulation will take effect on March 1. (Ecns) CBRC adds Interbank Business and Wealth Management Business into New Liquidity Measures (Chinese Only) CBRC issued the 'Administrative Measures for Liquidity Risk Management of Commercial Banks (Trial)', requiring commercial banks to effectively identify, measure, monitor and control liquidity risks in all lines of business including interbank business and wealth management. It also requires commercial banks' liquidity coverage ratio reach 100% by the end of 2018, and during the transition period, the ratio reaches 60%, 70%, 80% and 90% respectively by the end of 2014, 2015, 2016 and 2017. (NAFMII Newsletter) Insider trading suspected at Bank of Beijing The Bank of Beijing (BOB) is under inspection by China's securities regulators after a vice president bought shares in the bank three days before a major deal was announced. Deng Ke, spokesman for the China Securities Regulatory Commission (CSRC), told a press conference on Friday that the CSRC's Beijing branch and the Shanghai Stock Exchange (SSE) were inspecting the bank. "Regulatory measures will be taken if the inspection finds any violations," Deng said. (Xinhua) SAFE consults on provisions for foreign exchange control over cross-border security (Chinese Only) The State Administration of Foreign Exchange (SAFE) has published a consultation draft of the 'Provisions for Foreign Exchange Control over Cross-border Security', which are intended to lower the applicable threshold of certain cross-border security and streamline the administrative procedures by removing all prior approval requirements. The reformed policies would cover outbound security (Nei Bao Wai Dai), inbound security (Wai Bao Nei Dai) and other cross-border security interest. U.S. Urges China to Speed Up Economy Reform China should accelerate plans to liberalize its economy even at the risk of fomenting social and political unrest, U.S. Treasury Secretary Jacob Lew said Friday. As recently as late last year, Mr. Lew applauded Beijing's willingness to open its markets to more foreign investment, reform its financial sector, and move toward more market-determined pricing in the economy. At the time, however, he questioned the new leadership's commitment to delivering the reforms in time to be of real use to the fragile global economy. (WSJ) Britain in talks to set up yuan clearing bank in London Britains finance minister said his country is in 'active' discussions with Chinese authorities to appoint a clearing bank in London. It is the latest in the British capitals initiatives to cement its position as a top offshore yuan centre and corner a bigger share of the global business in the currency. 'The UK and Chinese government are in active discussions now about the employment of a renminbi clearing bank in London,' Chancellor of the Exchequer George Osborne said in a speech to business leaders in Hong Kong on Thursday. (SCMP) HONG KONG Beijing to replace Hong Kong as host for Apec meeting Beijing will replace Hong Kong in hosting the Apec finance ministers meeting, the central government has decided. The meeting, originally scheduled from September 10-12, has also been postponed to after late-September, though an exact date has not been announced. (SCMP) SINGAPORE Deutsche Borse seeks to open Singapore clearing house Deutsche Borse, the German exchanges operator, is in talks about opening a clearing house in Singapore, deepening its strategic push into Asia to take on its US rivals. Reto Francioni, chief executive, said on Thursday the city-state would be the hub for the growing Asian business of Deutsche Borse as it seeks to diversify from its key mature and flat European markets. It is planning to spend 30m Euros in the coming year on growth projects, with Asia a key focus. The region has emerged as the next battleground between the worlds largest exchange groups as its capital markets mature beyond equities trading into derivatives, especially in commodities. (FT) INDIA IMF Calls for Indian Emergency Rupee Plan in Taper Warning India should prepare a plan to respond to volatility in global currency markets that may come as the U.S. Federal Reserve reduces monetary stimulus, the International Monetary Fund staff said in a report. While Indias finances have improved since last year, a coordinated plan is needed in case capital account pressures re-emerge, the IMF said. (Bloomberg) Banks question RBI panel report, say some ideas may not work A top Indian bank lobby criticized the recent recommendations on financial inclusion made by a Reserve Bank of India (RBI) panel, arguing that some of its key proposals were impractical. (Livemint) JAPAN BOJ Nakaso: Board Agrees Downside Risk To Global Growth Lower Bank of Japan Deputy Governor Hiroshi Nakaso told lawmakers Tuesday that the BOJ board shares the view that downside risks to global economic growth has become smaller, rejecting the idea that he is more cautious about aggressive easing than some of his peers. He also told the House of Representatives (lower house) Financial Affairs Committee that Japan's economy is on track toward a modest recovery and stable 2% inflation, repeating the BOJ's latest assessment. (MNI) AUSTRALIA Lew Says Australia to Sign Tax Evasion Agreement The U.S. and Australia are set to sign an agreement on automatic sharing of bank information to battle tax evasion, amid plans for a global compact to prevent companies shifting income to low-tax countries. The two countries have reached an agreement on the Foreign Account Tax Compliance Act 'in substance, and plan to sign it soon,' U.S. Treasury Secretary Jacob J. Lew told a media event in Sydney today. (Bloomberg) SOUTH KOREA South Korean President Unveils Push to Cut Export Reliance Announcing a policy package that seeks to boost domestic demand, help smaller companies grow and nurture the underdeveloped service industry, Ms. Park said South Korea had "no future" without major re-engineering of the economy. At the heart of the package: deregulation aimed at cutting through the red tape that has restrained industries from education to medical services. (WSJ) FSC announces financial policy direction for 2014 The Financial Services Commission (FSC) has announced its financial policy direction for the year 2014. The FSC has set three broad policy goals, which include establishing market discipline in financial markets, securing stability in the financial system, and strengthening the financial industrys competitiveness. KRX signs business agreement with settlement banks on OTC financial product The Korea Exchange (KRX) has entered into a business agreement with four over-the-counter (OTC) financial product settlement banks, namely Busan, Shinhan, Woori and Korea Exchange Bank. The KRX received authorisation on OTC derivatives clearing business from the Financial Services Commission (FSC) in September 2013 and is looking forward to launching a KRW-dominated interest rate swaps (IRSs) clearing service on 3 March 2014. INTERNATIONAL G20 Finance Ministers and Central Bank Governors issue communiqu� on recent developments in global economy In 2014 the G20 intends to focus, amongst other things, on substantially completing by the Brisbane summit key aspects of the core reforms agreed in response to the global financial crisis: building resilient financial institutions; ending too-big-to-fail; addressing shadow banking risks; and making derivatives markets safer. G-20 Renews Vow on Shadow Banking Amid Talk of China Risk Global finance officials renewed their promise to address risks from unregulated lending and said their drive to end bailouts for large banks should be nearly finished this year. Group of 20 finance ministers and central bank governors meeting in Sydney over the weekend said they are focused on 'substantially completing' efforts to prevent lenders from becoming too big to fail and addressing the risks of shadow banking before a summit of the nations leaders in November. (Bloomberg) G20 aims to add $2tn to global economy The worlds biggest economies have agreed to target reforms aimed at adding more than $2tn to the global economy over five years, marking a shift in emphasis at G20 level from championing austerity to promoting growth as the financial crisis recedes. 'We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 per cent above the trajectory implied by current policies over the coming five years,' said ministers in a joint G20 communique. (FT) Trans-Pacific Partnership Talks End Without Deal Talks between 12 nations that are a negotiating the Trans-Pacific Partnership have ended in Singapore without reaching an agreement. "Progress has been made but the talks ended without a final agreement," an official involved in the negotiations said Tuesday. (WSJ) Basel Committee updates FAQs on Basel III monitoring The Basel Committee on Banking Supervision has published an updated version of its frequently asked questions on Basel III monitoring. The document provides answers to technical and interpretive questions raised by supervisors and banks during the Committees Basel III monitoring and is intended to facilitate the completion of the monitoring questionnaire. UNITED STATES The Federal Reserve Board on Tuesday approved a final rule strengthening supervision and regulation of large U.S. bank holding companies and foreign banking organizations The final rule establishes a number of enhanced prudential standards for large U.S. bank holding companies and foreign banking organizations to help increase the resiliency of their operations. These standards include liquidity, risk management, and capital. It also requires a foreign banking organization with a significant U.S. presence to establish an intermediate holding company over its U.S. subsidiaries, which will facilitate consistent supervision and regulation of the U.S. operations of the foreign bank. EUROPE ESMA and EBA publish results of their joint review of Euribor-EBF The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have published the results of their joint review of the Euribor-EBF. The review found that Euribor-EBF has made significant progress in implementing the ESMA-EBA recommendations of 11 January 2013 addressing weaknesses and shortcomings in its governance and technical framework. In particular, the review found that Euribor-EBF has undertaken reform measures across all affected areas, with four recommendations fully implemented and a further six recommendations partially implemented. ESMA updates AIFMD table of signed cooperation agreements The European Securities and Markets Authority (ESMA) has published an updated table showing the state of play of Memoranda of Understanding (MoUs) signed by EU national supervisors. ESMA had negotiated the template MoUs regarding the Alternative Investment Fund Managers Directive (AIFMD) with non-EU regulators. The AIFMD MoUs allow the exchange of information between EU and non-EU supervisors thus enabling non-EU fund managers to market alternative funds within the European Union. ESMA updates list of non-EEA central counterparty applicants under EMIR The European Securities and Markets Authority (ESMA) has published an updated list of central counterparties established in non-EEA countries which have applied for recognition under Article 25 of the European Markets Infrastructure Regulation (EMIR). The list is not necessarily exhaustive and remains subject to further updates. Transaction tax deal possible by May -euro commissioner in paper A deal for 11 euro zone countries to introduce levies on financial transactions could happen by May, European Commissioner Algirdas Semeta told an Austrian newspaper. (Reuters) U.K. Regulator Poised To Change Rules for Foreign Banks The U.K.s Prudential Regulation Authority, the primary overseer of banks operating here, plans to unveil a proposed new approach Wednesday to supervising the U.K. arms of foreign banks. The overall message will be that it will become easier for foreign banks to open lightly regulated arms known as branches, assuming the banks don't collect retail deposits and that their home - country regulators are deemed cooperative, according to people briefed on the PRAs plans. (WSJ) Financial transaction tax: City of London publishes paper discussing effects on European household saving The paper concludes that countries planning to introduce the FTT are likely to suffer significant losses in household savings portfolios as a result of taxing a broad range of financial instruments. In larger Member States with sizeable capital markets, this loss could amount to as much as EUR 205 billion, or 16% of the total value of equity and debt holdings.