ASIFMA: Asia Regulatory Review | 27 February 2014

11 February 2014 | Issue 189 Spotlight ASIFMA Asia Credit Report, Fourth Quarter 2013 The ASIFMA Asia Credit Report is a quarterly report on the trends and statistics of the Asian bond market. Additional statistics on the G3 and CNH fixed income markets are also included. MAS and SGX Propose Measures to Strengthen the Securities Market The Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) today released a joint consultation paper setting out proposals to strengthen the securities market in Singapore. The proposals follow an extensive review by MAS and SGX of the securities market in Singapore. The review concluded that while the securities market remains sound, there were three areas for improvement: - Promoting orderly trading and responsible investing; - Improving the transparency of market intervention measures; and - Strengthening the process for admitting new listings and enforcing against listing rule breaches. U K Sinha gets two-year extension as Sebi chief Sebi chairman U K Sinha has got a two-year extension till 2016 to continue at the top job as Finance Ministry has issued a notification to this effect. "The notification for Sebi chairman's extension has been sent to Sebi late last night," a senior Finance Ministry official said. (Economic Times) Update CHINA China to reform pension system China will reform its pension scheme by unifying the two separate systems for urban and rural residents to allow people better access to social benefits, according to an executive meeting of the State Council on Friday. The move, part of the efforts to address pension payment gaps between urban and rural areas, was announced in a statement issued after the meeting presided over by Premier Li Keqiang. (Xinhua) China's Central Bank Leads Effort to Regulate Internet Finance The People's Bank of China - working with China's banking, securities and insurance regulators - is trying to put in place measures that would protect consumer information from being stolen or misused, ensure adequate risk disclosure over the Internet-based investment products, and prohibit illegal fundraising activities, the people said. "Right now, the goal is not to crack down on the sector, but to foster its healthy development," a PBOC official said. (WSJ) PBC announced financial market performance in 2013 (Chinese Only) The PBC announced that the accumulated issuance volume of bonds in 2013 reached RMB 9 trillion, up 12.5% year-on-year, including RMB 8.2 trillion issued through the interbank bond market. As of the end of 2013, 138 foreign institutions have been approved to enter the interbank bond market of China, including foreign central banks, international financial institutions, sovereign wealth funds, clearing banks in Hong Kong and Macao, foreign banks engaged in RMB settlement in cross-border trade, foreign insurance institutions RQFII and QFII. (NAFMII Newsletter) China to allow private investors to establish rural commercial banks China will allow private investors to establish rural commercial banks to inject more funds into the countryside and boost rural development, according to the CBRC. (Xinhua) HONG KONG HKMA issues circular regarding Basel Committee guidance on sound capital planning process The Hong Kong Monetary Authority (HKMA) has issued a circular in relation to the guidance on a sound capital planning process issued by the Basel Committee on Banking Supervision (BCBS) on 23 January 2014. The HKMA notes that sound capital planning by banks is a necessary complement to a robust regulatory framework and is critical for determining the amount, type and composition of capital that should prudently be held by banks so that they will be able to continue pursuing their business objectives, while also withstanding stressful situations. SINGAPORE SGX to revise fees for securities market Singapore Exchange (SGX) is revising the fee structure for its securities market to make trading more cost-efficient and to facilitate market making and improve liquidity in the market. The revisions to clearing and depository fees will be rolled out from 2 May 2014. The change will encourage on-exchange trading, thereby enhancing liquidity, transparency and price discovery on the market. SGX enhances regulatory tools Singapore Exchange (SGX) is enhancing its regulatory tools in line with international standards, by refining its query process and adding new requirements. As one of the few exchanges which conduct real-time surveillance of trading activities and issue real-time queries to companies on unusual trading activities, SGX regularly enhances its regulatory tools. This latest series of enhancements also follows a joint review with the Monetary Authority of Singapore (MAS). The enhancements become effective 3 March 2014. Singapore May Add Trading Restrictions After Penny-Stock Crash Singapore may introduce a minimum price for mainboard shares and impose rules on collateral for some trades after a slump in the stocks of three companies erased $6.9 billion in market value over three days in October. The city-state also may set up an independent listing committee and boost enforcement, according to a joint statement from the Monetary Authority of Singapore and Singapore Exchange Ltd. (SGX). INDIA RBI releases Report of the Committee on Financial Benchmarks The Reserve Bank of India placed on its website, the Report of the Committee on Financial Benchmarks. It may be recalled that the Reserve Bank had announced the constitution of the Committee on Financial Benchmarks (Chairman: Shri P. Vijaya Bhaskar, Executive Director) on June 28, 2013 with a mandate to study various issues relating to financial benchmarks in India and to submit the Report by December 31, 2013. The Draft Report of the Committee was placed on RBI website on January 3, 2014 for public comments. The Committee has finalised its report after taking into account the feedback received from market participants and other stakeholders. RBI releases Report on Enabling PKI in Payment System Applications The Reserve Bank of India released on its website for public comments, the Report of the Technical Committee on Enabling Public Key Infrastructure (PKI) in Payment System Applications. RBI to allow leveraged buyout of stressed assets The Reserve Bank of India has decided to allow leveraged buyouts in the country through specialised entities which want to buy stressed companies supported by bank lending. The banking regulator had last month mooted a proposal to allow such leveraged buyouts which could open up a new investment opportunity for large private equity firms in India. The draft proposal has been retained in the final framework released by RBI on Thursday. (vccircle) Innovative policy tools are of no help in taming inflation: Raghuram Rajan The Reserve Bank of India governor Raghuram Rajan implicitly justified his decision to raise rates to tackle high inflation. Using unconventional tools to conduct monetary policy may not be an advisable option as it could create some new set of problems, he said. "I think problems arise when central bankers get overly innovative in the tools they use," Rajan said. (Economic Times) Sebi, anti-graft Bills priority A Bill to crack down on Ponzi schemes along with six anti-graft legislations is on top of the priority list of the government for the Parliament session starting this week. However, some key financial sector Bills such as Direct Taxes Code (DTC), Goods & Services Tax (GST), and insurance Bill will now have to wait for the next government. (Business Standard) Interim budget may see some change in taxes: P Chidambaram "We can make any proposal short of amending any law... We cannot propose amendments to the Income-tax Act, Customs Act or the Excise Act... We can also outline a vision for the future," Chidambaram said in response to a query on the vote on account at a news conference on Monday. (Economic Times) World has abandoned inflation-targeting, India must follow suit The Urjit Patel committee recommendations for a new monetary policy framework are ill-founded, anti-democratic and incapable of controlling inflation. It'd make it easier for simple-minded bond traders to guess which way the RBI's policy rates would move, though. (Economic Times) Sebi aims to ease delisting rules, check manipulation India capital market regulators plan to overhaul the delisting process to eliminate any chance of manipulating the price of stocks up for delisting from Indian bourses. The Securities and Exchange Board of India (Sebi) is set to change rules in a manner that will remove any opportunity for speculation, but also make it easier for companies to delist. (Live Mint) P Chidambaram bats for single demat account for all financial assets "Priority should be accorded to the steps like common demat account for financial assets, which will add considerable benefits to consumers," said Chidambaram, who was chairing a meeting of the Financial Stability Development Council on Tuesday. (Economic Times) JAPAN Japan's current account woes throw spotlight on economic risks Japan posted its smallest current account surplus on record last year, throwing the spotlight back on Tokyo's ability to service its huge debt and exposing a danger point in an economy starting to find its feet after years of underperformance. (Reuters) BOJ Deputy Governor Bullish on Japan Economy, Despite Markets BOJ Deputy Gov. Kikuo Iwata said downside risks to the economy are "small," although worries over the U.S. and developing economies caused the yen to rebound this week, casting a pall over Japanese exports, and sending Tokyo share prices plummeting. "I think it is fine for Japan to maintain its current stance on economic and monetary policies," he told a news conference in the southern city of Miyazaki, where he earlier met local business leaders. (WSJ) AUSTRALIA RBA Sees Weaker Currency Fueling GDP Growth, Inflation: Economy The Reserve Bank of Australia raised its economic growth and inflation forecasts, reflecting a weaker currency, and reiterated its shift to a neutral policy stance. "Over the past few months, there have been further signs that very stimulatory monetary policy is working to support economic activity,' the RBA said in its quarterly monetary policy statement in Sydney today. "The boards view is that a period of stability in the policy rate is likely." (Bloomberg) ASIC reports on regulating complex products ASIC, through a dedicated Complex Products Working Group, has recently conducted a review of the risks posed to investors by 'complex products' and a review of ASICs approach to regulating such products. NEW ZEALAND NZ PM reminds Australia of China's importance to both countries The big game in global commerce for Australia and New Zealand is China, visiting New Zealand Prime Minister John Key told business leaders and members of parliament (MPs) in Australia on Friday. (Xinhua) SOUTH KOREA KRX signs memorandum of understanding with Eurex and European Energy Exchange The Korea Exchange (KRX) has announced that on 11 December 2013 it signed a memorandum of understanding (MOU) with Eurex and its subsidiary European Energy Exchange (EEX) on building cooperative relationships of their derivatives markets at the Eurex headquarters in Eschborn, Gemany. THAILAND SET extends suspension regulations The Stock Exchange of Thailand (SET) has extended its temporary trading suspension rules to include riots, terrorism and natural disasters as part of its outage prevention measures. The new rule took effect last Thursday. Previously, the SET's board was only allowed to order a temporary trading suspension of local bourses if a computer glitch affected the SET itself or its broker members. (Bangkok Post) MALAYSIA Maybank offers ringgit trade financing in China Malayan Banking Bhd is offering trade financing in ringgit to customers in China through its branches in Beijing and Shanghai, making it the first bank to offer such a facility there. It said on Tuesday customers in China - which is its third largest trading partner -- could settle their cross-border trade transactions with their Malaysian counterparts directly in ringgit. (The Star) INDONESIA Indonesia calls for greater clarity from Fed on tapering The Indonesia finance minister has joined the India central bank governor in warning that the US Federal Reserve risks undermining fragile emerging market economies unless it clarifies plans to taper its extraordinary monetary stimulus programme. (FT) Indonesia Q4 growth helps reassure jittery investors The Indonesia economy grew faster than expected in the fourth quarter of 2013, one of several recent data releases that has provided some reassurance to jittery investors who remain concerned about the outlook for emerging markets. Gross domestic product grew by 5.7 per cent year-on-year between October and December, above economists average forecast of 5.3 per cent, as improving exports mitigated against slowing growth in domestic consumption and investment. (FT) Indonesian banks ready for new real time settlement system Local banks have said that they are ready to implement the new version of the real time gross settlement (RTGS) system, scheduled to be launched this year by Bank Indonesia (BI) in an effort to make transactions more efficient ahead of the ASEAN Economic Community (AEC). Edy Utomo, the head of Bank Rakyat Indonesia (BRI) central operations division, said the state-owned lender had prepared everything for the new settlement system last year. 'We are waiting for the central bank to give the go-ahead,' he said on Thursday. (Jakarta Post) VIETNAM Slow economy puts Vietnam's infrastructure projects on the shelf Faced with a slowing economy and deteriorating fiscal health, Vietnam is being forced to suspend more and more of its large infrastructure projects. Vietnam plans to build four nuclear reactors in the southern province of Ninh Thuan, but concerns are mounting that the project could be delayed for up to six years. (Asia Nikkei) PHILLIPINES Government outlines budget priorities for next 3 years The Aquino government has put in place a budget priorities framework for the remaining three years of its term aimed at accelerating and sustaining economic growth, eliminating poverty and enhancing transparency and accountability. The national development plan for 2014 to 2016 is designed to address economic constraints and the need for greater state efficiency while building a foundation for faster and inclusive long-term growth. (Phil Star) Hot money outflow to slow down - BSP The rapid outflow of foreign portfolio investments or hot money in the first three weeks of January may slow down soon as investors start looking again into the countrys strong macroeconomic fundamentals, the Bangko Sentral ng Pilipinas said yesterday. (Phil Star) Broker anonymity rule starts early next year The operator of the countrys stock market will implement broker anonymity in trades by early next year. The move, which is in line with global best practices, will result in improved liquidity and prevent the herding mentality among brokers, the Philippine Stock Exchange (PSE) said in a statement yesterday. Broker anonymity refers to the practice of not showing the broker identifiers for trading matched at the trading engine. (Phil Star) Goldberg welcomes Phl bid to join trade pact The US government supports the Philippines interest to join the Trans Pacific Partnership (TPP) Agreement but notes that the country membership would entail making commitments to meet the deals high standards including liberalizing the economy. (Phil Star) INTERNATIONAL G-20 eyes database to fight tax evasion The world's leading economies will try to outfox tax dodgers by pooling information on offshore bank accounts. Later this month in Australia, finance ministers and central bank chiefs from the Group of 20 are expected to agree on such an arrangement, which officials aim to have in place by the end of next year. (Asia Nikkei) FSB Consultation Paper: Feasibility study on approaches to aggregate OTC derivatives data The public consultation paper examines the three broad types of model for an aggregation mechanism: a physically centralised model; a logically centralised model; and the collection and aggregation by authorities themselves of raw data from TRs. Within these three broad types of model, a variety of detailed alternatives exist that would provide differing levels of sophistication of service. IOSCO consults on code of conduct fundamentals for credit rating agencies The International Organization of Securities Commissions (IOSCO) has published a consultation report on Code of Conduct Fundamentals for Credit Rating Agencies, which proposes revisions and updates to the current IOSCO code of conduct for credit rating agencies. IOSCO publishes report on crowd-funding The paper says that regulators should strike a balance between encouraging crowd-funding, which could help stimulate economic recovery by providing capital to small and medium-sized enterprises, and mitigating the risks associated with its growth. It concludes that the financial return crowd-funding market does no currently present a systemic risk to the global financial sector, but this may change if it is allowed to grow without proper management. BIS publishes working paper on global long-term interest rate in emerging markets The Bank for International Settlements (BIS) has published a working paper on 'The global long-term interest rate, financial risks and policy choices in EMEs'. The paper discusses the greater monetary and financial policy choices that emerging market economies now face. The BIS has emphasised that the views expressed in the paper are those of the authors and do not necessarily represent the views of the BIS. UNITED STATES US's Lew to Congress: Govt Money May Run Out Thurs Feb 27 The following is the text of a letter sent to members of Congress by Treasury Secretary Jack Lew Friday updating his warnings about the exhaustion of extraordinary measures to avoid default beginning at the day's close of Treasury business. (MNI News) As Yellen makes Fed debut, expect theater, not fireworks Janet Yellen's first test as chair of the Federal Reserve comes on Tuesday when she faces U.S. lawmakers, some hostile to the central bank, who will want to know how committed she is to winding down the Fed's support for the economy. (Reuters) Baucus as China Ambassador Sets Off Election-Year Shifts Montanas governor as soon as today will choose a U.S. Senate successor to former Finance Committee Chairman Max Baucus, whose confirmation as ambassador to China is setting off a series of political changes. (Bloomberg) U.S. signs two more FATCA agreements The Treasury Department announced Wednesday that the U.S. had inked two more agreements with other countries to implement a key measure cracking down on offshore tax evasion. The U.S. agreements with Canada and Hungary to implement the Foreign Account Tax Compliance Act, or FATCA, brings the number of signed accords to 22, with another dozen agreements in principle. (The Hill) EUROPE Draghi Starts Policy-Action Countdown as ECB Awaits Data The European Central Bank president cited next weeks snapshot of euro-area economic growth and the need to better assess the inflation outlook as critical for whether policy makers take 'decisive' steps when they reconvene to set monetary policy in March. (Bloomberg) ESA Joint Committee publishes final report on mechanistic references to credit ratings in guidelines and recommendations In accordance with the Credit Rating Agencies Regulation (CRA 3), the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance & Occupational Pensions Authority (EIOPA) have reviewed all their existing guidelines and recommendations in order to identify, and where appropriate remove, references to external credit ratings that could trigger sole or mechanistic reliance on such ratings. EBA announces key features of 2014 EU-wide stress test The European Banking Authority (EBA) has announced the key components of the forthcoming 2014 EU-wide stress test. The objective of the EU-wide stress tests is to help supervisors assess the resilience of financial institutions in the European Union to adverse market developments. The exercise aims at ensuring consistency and comparability of the outcomes across all banks based on a common methodology, scenarios and accompanied by a consistent disclosure exercise. EBA launch draft Implementing Technical Standards on the mapping of ECAIs credit assessments The Joint Committee of the three European Supervisory Authorities (EBA, ESMA and EIOPA - ESAs) has published a consultation on draft Implementing Technical Standards (ITS) on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAIs). These ITS will be part of the Single Rulebook in banking aimed at enhancing regulatory harmonisation across the EU. The EBA is expected to submit these draft ITS to the European Commission by 1 July 2014. ECB publishes first quarterly report on implementation of SSM regulation The European Central Bank (ECB) has published its first Quarterly Report to the EU Parliament, the EU Council and the EU Commission on progress in implementing the regulation on the Single Supervisory Mechanism. The report covers the three months up to 3 February 2014, as well as the preparatory work undertaken by the ECB in cooperation with national supervisors and central banks since the euro area summit of 29 June 2012. ESMA delivers second set of advice on EMIR equivalence Following its technical advice published on 9 September 2013, the European Securities and Market Authority (ESMA) has published a supplement to its advice to the European Commission on the equivalence of the regulatory regime for central counterparties (CCPs) of Japan with the European Markets Infrastructure Regulation (EMIR). EU to offer near-total tariff elimination The EU will offer to lift tariffs on nearly all goods imported from the United States during the Trans-Atlantic Investment Partnership (TTIP) negotiations, Reuters news agency says. Brussels and Washington are negotiating towards the worlds biggest free-trade pact and, according to Reuters sources, on Monday EU negotiators will make their tariff-lifting offer. (New Europe) Let weak banks die, says eurozone super-regulator The eurozone new chief banking regulator has warned that some of the regions lenders have no future and should be allowed to die, heralding a far tougher approach to the supervision across the currency bloc. (FT) Data quality to improve under MiFID II Improved trade reporting and greater transparency as a result of MiFID II will help market participants to make more informed trading decisions, according to industry experts. (The Trade) UK watchdog says forex probe to stretch into 2015 Britain's financial watchdog said it was unlikely that any conclusions will be reached this year in its probe into potential manipulation of foreign exchange markets. "I would be surprised if we got to conclusions within this year. I hope that we will next year," Financial Conduct Authority Chief Executive Martin Wheatley told UK lawmakers on Tuesday. (Reuters)