Asia Regulatory Review | 08 - 15 April 2014

08 - 15 April 2014 | Issue 199 Spotlight Joint Announcement of China Securities Regulatory Commission and Securities and Futures Commission The China Securities Regulatory Commission and the Securities and Futures Commission have approved, in principle, the development of a pilot programme (Shanghai-Hong Kong Stock Connect) for establishing mutual stock market access between Mainland China and Hong Kong. When launched, the pilot programme will operate between the Shanghai Stock Exchange (SSE), the Stock Exchange of Hong Kong Limited (SEHK), China Securities Depository and Clearing Corporation Limited (ChinaClear) and Hong Kong Securities Clearing Company Limited (HKSCC). Update CHINA PBOC Chief Says Mutual Market Would Bolster Cross-Border Yuan Use China central bank Gov. Zhou Xiaochuan said Thursday a new trial program that would allow cross-border stock investment between Hong Kong and China would help bolster use of the yuan outside the mainland. Speaking at the Boao Forum for Asia, Mr. Zhou said regulators would allow investors to use the currency of their choice if they participate. Mr. Zhou said Hong Kong and mainland regulators are busy making preparations for the opening of the mutual market, but he didn't say when it would be unveiled. (WSJ) CBRC issues 2014 Guidance on the Supervision of Wealth Management Products (Chinese Only) Recently, China Banking Regulatory Commission (CBRC) issued 2014 Guidance on the Supervision of Wealth Management Products in banking industry, which includes eight supervision requirements for the year, such as strengthening off-site supervision, exploring division system in management framework, and encouraging the exploration of new wealth management products and models. (NAFMII Newsletter) NDRC amends its outbound direct investment rules The National Development and Reform Commission (NDRC) has amended its outbound direct investment (ODI) rules and promulgated the 'Administrative Measures on Filing and Approval of Outbound Direct Investment Projects'. The new rules will become effective on 8 May 2014 and apply to PRC entities with legal person status. HONG KONG IMF praises HK's robust financial oversight and sound fiscal management policies An International Monetary Fund (IMF) Staff Mission to Hong Kong has endorsed the Government's proactive policies to reinforce the resilience of the economy and the financial system, and reiterated that the Linked Exchange Rate System is the best arrangement for Hong Kong. Shanghai-Hong Kong Stock Connect List of Eligible Stocks for Southbound Trading (for reference only) The Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited, is issuing this news release in response to market enquiries regarding the shares that would be eligible for trading under the Southbound Trading Link as referred to in the joint announcement (the Joint Announcement) issued by the China Securities Regulatory Commission and the SFC on 10 April 2014 in relation to the development of a pilot programme (Shanghai-Hong Kong Stock Connect) for establishing mutual stock market access between Mainland China and Hong Kong. TAIWAN Taiwan Should Focus on U.S. Trade Matters Before TPP, Envoy Says Taiwan should use trade talks with the U.S. to prove its commitment to economic reforms needed for entry to the broader Trans-Pacific Partnership before seeking to join that pact, said the U.S.'s unofficial envoy to the island. (Bloomberg) SINGAPORE MAS Monetary Policy Statement MAS Outlook for 2014 for growth, inflation and monetary policy. Singapore keeps monetary policy tight, sees economy rebounding Singapore's central bank stuck to its tight monetary policy stance on Monday despite weaker growth in the first quarter, saying core inflation will remain elevated as a sustained recovery in advanced economies spurs a rebound in the city-state. (Reuters) SGX to effect revised securities market fee structure on 1 June Singapore Exchange (SGX) will introduce its revised securities market fees, with changes to clearing, transfer and onward settlement fees, with effect from 1 June 2014. This initiative is part of SGX's on-going efforts to strengthen and improve liquidity in Singapore's securities market. Following its initial announcement of the revised fees in February, SGX has continuously engaged market participants as they prepare for the implementation of these fee changes. The effective date of 1 June 2014 has been scheduled to provide all market participants with time to complete changes required to their systems and processes. INDIA Rajan warns global co-operation risks 'breaking down' The governor of India's central bank warned on Thursday that the extraordinarily loose monetary policies in rich countries are threatening to break down co-operation among leading economies. In an explosive speech on the fringes of the International Monetary Fund spring meetings, Raghuram Rajan said the prolonged period of ultra-loose monetary policy in developed countries would lead emerging markets to build defence reserves that would hinder global growth. (FT) Foreign banks keen on differentiated licence The Reserve bank of India (RBI)'s proposal to issue differentiated banking licences appear to have caught the imagination of foreign banks. The RBI's guidelines on subsidiarisation didn't really excite foreign lenders in the country. However, Bankers say several mid-sized foreign lenders are keen to apply for such a licence, as and when RBI decides to offer these. (Business Standard) Change in investment conditions / restrictions for FII/QFI investments in government debt securities FIIs/QFIs shall henceforth be permitted to invest only in dated government securities having residual maturity of one year or above. Indian banks may not be able to cope with unexpected losses, says International Monetary Fund The International Monetary Fund (IMF) has warned that Indian banks don't have enough of a buffer to absorb unanticipated losses, and may have to dip into capital if credit quality deteriorates. In its global Global Financial Stability Report (GFSR) released on Wednesday, the IMF said Indian banks have not set aside enough money from profits to cover bad assets compared with others. (Economic Times) JAPAN Shinzo Abe, BOJ Governor Kuroda Meet Bank of Japan Gov. Haruhiko Kuroda on Tuesday offered Prime Minister Shinzo Abe assurance that the central bank will take additional easing measures should a downturn in the economy make it difficult for the BOJ to achieve its inflation target. (WSJ) US-Japan deadlock points to no April TPP deal for Obama An impasse between the US and Japan over import tariffs means Barack Obama's visit to Tokyo this month looks unlikely to yield the prize that some had hoped for: the key to uniting a dozen Pacific Rim economies in one trade zone. (FT) AUSTRALIA RBA maintains neutral stance on interest rates THE Reserve Bank of Australia has reaffirmed its neutral bias and noted further signs that low interest rates were supporting domestic economic activity, in the minutes of its April board meeting. (The Australian) SOUTH KOREA Cabinet approves Enforcement Decree of Covered Bond Act The Financial Services Commission (FSC) has announced the approval of the Enforcement Decree of the Covered Bond Act by the Cabinet. The Covered Bond Act was passed by the National Assembly on 19 December 2013 to provide a statutory foundation for financial companies to issue covered bonds. The Enforcement Decree, which will take effect on 15 April 2014, stipulates details mandated by the Covered Bond Act such as qualifications for cover assets, evaluation basis and issuance cap. Fn Hub Korea to publish country briefs for emerging markets Fn Hub Korea, a unit under the Financial Supervisory Service (FSS), has published country briefs for emerging markets as part of an effort to help domestic financial companies expand overseas and in response to growing demand for information about financial markets in emerging economies. The briefs contain financial market trends, financial regulatory authorities and Korean financial companies with operations in each country. Countries included under the briefs are Malaysia, Myanmar, Vietnam, Indonesia, Cambodia, Thailand, Philippines, China, India and Bangladesh. FSC Plans to Overhaul NCR Rules for Securities Companies The FSC plans to overhaul net capital ratio (NCR) rules for securities companies, as part of its efforts to revitalize the country’s capital markets. FSS examines domestic banks' first capital disclosures under Basel III The Financial Supervisory Service (FSS) has published the findings of its examination of domestic banks' first capital disclosures under Basel III standards. The Basel Committee on Banking Supervision published a set of disclosure requirements on the composition of banks' capital in June 2012 with the aim of improving market discipline by enhancing both the transparency and credibility of its capital regulations, along with the adoption of Basel III. INTERNATIONAL Financial Stability Board publishes reports on implementation of OTC derivatives market reforms The Financial Stability Board (FSB) published today the seventh of the FSB's semi-annual progress reports on implementation of OTC derivatives market reforms. G20 Leaders agreed in 2009 to a comprehensive reform agenda for these markets, to improve transparency, mitigate systemic risk, and protect against market abuse. BIS: One currency, two markets: the renminbi's growing influence in Asia-Pacific This study presents evidence of the renminbi's growing influence in the Asia-Pacific region. The CNH market - the offshore renminbi foreign exchange market in Hong Kong SAR - is found to exert an effect on Asian currencies that is distinct from that of the onshore (CNY) market. Changes in the RMB/USD rates in both markets have a statistically and economically significant impact on changes in Asian currency rates against the US dollar, even after controlling for other major currency moves and the transmission of China's monetary policy to the region. Big asset managers eye new trading venue Several of the world's largest asset managers are discussing the creation of a joint equity trading venue, in an attempt to end the technological arms race sparked by high-frequency trading firms. Fidelity, the Boston-based manager with $1.9tn under management, has sounded out rivals about routing their share trades through a central venue that would rival traditional stock exchanges and so-called "dark pools" of liquidity. (FT) UNITED STATES U.S. Officials Urge Firms to Share Cyber-Threat Data Companies that share information with one another about cybersecurity threats aren't violating U.S. antitrust laws, Obama administration officials said Thursday as part of an effort to promote corporate cooperation against hackers. "We must encourage companies to rely on each other," U.S. Deputy Attorney General James Cole said during a briefing with reporters. "To secure the nation's networks of information and resources, members of the private sector must share information." (WSJ) Regulators Weigh Curbs on Trading Fees A fee system that is a major source of revenue for exchanges and some high-frequency trading firms is coming under the heightened scrutiny of regulators concerned that market prices are being distorted, according to top Securities and Exchange Commission officials. SEC officials, including some commissioners, are considering a trial program to curb fees and rebates they say can make trading overly complex and pose a conflict of interest for brokers handling trades on behalf of big investors such as mutual funds. (WSJ) EUROPE ECB, BoE say public intervention needed to revive stigmatised debt market The European Central Bank and Bank of England said public intervention to kick-start the shrinking market for packaged debt is inevitable, and it accused global regulators of taking too tough a stance on the sector. (Reuters) ECB platform, EU law to 'revolutionise' securities settlement The European Central Bank's new platform for settling trillions of euros of stock and bond trades will trigger a shake-up in the business, the head of one of Europe's biggest settlement houses said. (Reuters) European Supervisory Authorities consult on draft technical standards The European Supervisory Authorities (ESAs) have launched a consultation on draft Regulatory Technical Standards (RTS) outlining the framework of the European Market Infrastructure Regulation (EMIR). The RTS cover the risk management procedures for counterparties in non-centrally cleared OTC derivatives, the criteria concerning intragroup exemptions and the definitions of practical and legal impediments. ESMA adds Eurex Clearing AG to list of authorised CCPs under EMIR The European Securities and Markets Authority (ESMA) has updated its list of central counterparties (CCPs) that have been authorised to offer services and activities in the EU in accordance with the European Markets Infrastructure Regulation EMIR (EMIR). With the authorisation of Eurex Clearing AG, there are now four CCPs authorised under EMIR. ESMA adds KDPW_CCP to list of authorised CCPs under EMIR The European Securities and Markets Authority (ESMA) has updated its list of Central Counterparties (CCPs) that have been authorised to offer services and activities in the Union in accordance with the European Markets Infrastructure Regulation EMIR (EMIR). There are now three CCPs authorised under EMIR, the European Central Counterparty N.V. (EuroCCP - NL), authorised on 1 April 2014, NasdaqOMX Clearing AB (SE), authorised on 18 March 2014, and KDPW_CCP, authorised on 8 April 2014. Europe's top central banks push for high-risk loan return Europe's two top central banks will on Friday make a joint push to revive an asset class that was vilified for its role in the financial crash in an attempt to kick-start lending to the region's credit-starved companies. In a draft paper seen by the Financial Times, the Bank of England and the European Central Bank call for the easing of "unduly punitive" rules that make it less attractive to buy packages of loans known as asset backed securities. (FT) Features ASIFMA Homepage ASIFMA Careers ASIFMA Events Data ASEAN and Indian Banks Resilient to US Tapering Australian Prime Mortgage Arrears Basel III Implementation in ASEAN and India Chinese Steel Industry Credit Analysis on Fiji Global Speculative-Grade Default Rate APAC Briefing Attendees Say QE Exit Biggest Recovery Risk New M&A Regulation Positive for Chinese Insurance Market Global Tightening to be Manageable for Hong Kong Banks Fitch Upgrades China Telecom to 'A+'; Outlook Stable Fitch Affirms China at 'A+'; Outlook Stable Is China Set To Echo Japan's "Lost Decade"? 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