Asia Regulatory Review | 15 July 2014

15 JuLY 2014 | Issue 209 Spotlight Sixth Meeting of the U.S.-China Strategic and Economic Dialogue U.S. Fact Sheet - Economic Track Secretary Jacob J. Lew led a U.S. delegation of senior economic officials to Beijing on July 9-10, for the sixth round of the U.S.-China Strategic and Economic Dialogue (S&ED), which included meetings with President Xi Jinping, Premier Li Keqiang, Vice Premier Wang Yang, and other senior economic officials from key Chinese economic ministries. Key Features of the India Budget 2014-2015 The current economic situation and the challenges in India are outlined which includes the deficit and inflation, economic initiatives, the financial sector, banking and insurance sector, budget estimates, and tax proposals. Updates CHINA China vows to speed up renminbi liberalisation "The direction of our foreign-exchange reforms is clear," said Zhou Xiaochuan, People's Bank of China governor. "We hope that the exchange rate could be kept basically stable on a reasonable and balanced level through reforms. At the same time, we will allow market supply and demand to play a bigger role in determining the exchange rate." However, Mr Zhou cautioned that the central bank would only scale back its interventions in the forex market "when conditions are ready". The summit communique remained vaguely worded, as China left itself plenty of wiggle room by avoiding any specific commitments. (FT) Financial Times Guest post: China's shadow banking is risky, but how risky? By Liao Min, China Banking Regulatory Commission. Shadow banking is a risky business, for sure. That's the reason why the Financial Times ran a recent series on shadow banking, with the first article investigating China. In China, shadow banking is a broad concern, given liquidity mismatches in the system, opaque asset quality and the fact that the end-users of such finance are often in the riskier sectors of the economy such as real estate and those struggling with over-capacity. (FT) CBRC orders banks to create firewall around wealth management services Mainland banks must create a firewall around increasingly popular wealth management services, the banking regulator said, in order to avoid any contagion from higher-risk products spreading to normal bank loans. Banks must establish a separate department to carry out wealth management business by the end of September, the China Banking Regulatory Commission (CBRC) said on Friday. (SCMP) CBRC urged to relax lending rules in Shanghai free-trade zone Banks in the Shanghai free-trade zone have jointly lobbied for a relaxation of capital requirements on borrowers for fixed-asset investments in an attempt to boost lending in the zone, sources said. Some key mainland and foreign banks have formed an association in the zone, which recently wrote to the China Banking Regulatory Commission requesting looser controls on loans for fixed-asset investments. (SCMP) With New Rules for PE Investing, CSRC Focuses on Transparency The securities regulator has set out its first requirements for private equity investment funds, which until June last year were largely overseen by the country's top economic planner. On July 11, the China Securities Regulatory Commission (CSRC) published a draft regulation for privately offered funds, including PE funds, so the public could give its views. (Caixin) HONG KONG Hong Kong and Korea sign tax treaty The Secretary for Financial Services and the Treasury, Professor K C Chan, signed in Hong Kong an agreement with Korea for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income on behalf of the Hong Kong Special Administrative Region Government. The Consul-General of the Republic of Korea in Hong Kong, Mr Cho Yong-chun, signed on behalf of his government. Financial Services Development Council Annual Report 2013/14 The Financial Services Development Council released its first annual report, which covers the period from January 2013 to March 2014. The Chairman of the FSDC, Mrs Laura M Cha, said, "In the first 15 months of its establishment, the FSDC set the course and built a sound foundation for its work through formulating a macro overview of Hong Kong's position as an international financial centre as well as making specific proposals on further market development." SINGAPORE Consultation Paper on Draft Regulations for Reporting of Foreign Exchange Derivatives Contracts MAS is now consulting on draft amendment regulations to phase in reporting for foreign exchange derivatives contracts. MAS invites interested parties to provide their comments and feedback on the draft regulations. Cross-border Renminbi Flows between Singapore and Sino-Singapore Tianjin Eco-city MAS welcomed the directive issued today by the People's Bank of China (PBC) Tianjin branch that will allow eligible corporates and individuals in the Sino-Singapore Tianjin Eco-city (SSTEC) to conduct cross-border Renminbi (RMB) transactions with financial institutions and corporates in Singapore. This initiative will facilitate greater use of RMB in the region and contribute to the growth of the offshore RMB market in Singapore. Ong Chong Tee: Combating financial crime - international and national efforts Keynote address by Mr Ong Chong Tee, Deputy Managing Director (Financial Supervision) of the Monetary Authority of Singapore, at the ABS Financial Crime Seminar, Singapore, 2 July 2014. INDIA Joint Press Statement by the Chancellor of the Exchequer UK Mr George Osborne and the Finance Minister of India Shri Arun Jaitley The Finance Ministers of the UK and India, met in New Delhi on the 8 July 2014 for the seventh round of the annual Economic and Financial Dialogue. The meeting discussed ways to strengthen mutual cooperation and further boost trade and investment between the two countries. Modi government committed to lower taxes, finance minister Arun Jaitley says The Modi government is committed to lower taxes, finance minister Arun Jaitley told TOI in his first interview to a newspaper after the Budget. It was an article of faith with him as well as the Prime Minister that lower taxes gave people money to spend which, in turn, fuelled economic growth, he said. (Economic Times) JAPAN Bank of Japan statement on Monetary Policy At the Monetary Policy Meeting, the Policy Board of the Bank of Japan decided, by a unanimous vote, to set guidelines for money market operations for the intermeeting period. Bank of Japan Trims Growth Forecast The Bank of Japan slightly cut its growth outlook in a new projection released Tuesday, but kept its policy on hold and maintained a bullish consumer-price forecast, suggesting officials feel little urgency to add to their aggressive stimulus measures. (WSJ) AUSTRALIA Australia Treasury Proposals paper: Central clearing of OTC AUD interest rate derivatives The paper seeks stakeholder views on a proposed central clearing mandate with respect to interest rate derivatives denominated in Australian dollars, as part of ongoing implementation of Australia's commitments in relation to global over-the-counter derivatives markets reforms. Australia's tax treaty negotiation program Submissions are invited from individuals, businesses and community groups on Australia's future tax treaty negotiation program. Tax treaties promote closer economic cooperation between countries by reducing taxation barriers caused by the double taxation of income derived by residents of the treaty partner countries. The removal of these barriers helps to facilitate the cross-border movement of people, capital and technology. Tax treaties also contain rules to prevent tax discrimination and provide a mechanism to assist in the resolution of tax disputes. SOUTH KOREA FSC announced its plan for financial regulatory reform The FSC announced its plan for financial regulatory reform to create new opportunities and growth drivers for Korea's financial industry and economy. CYBERSECURITY SIFMA Statement on 'Cybersecurity Information Sharing Act' SIFMA today issued the following statement from Kenneth E. Bentsen, Jr., SIFMA president and CEO, on the "Cybersecurity Information Sharing Act of 2014" (S. 2588), which was passed by the Senate Intelligence Committee earlier this week: Banks Dreading Computer Hacks Call for Cyber War Council Wall Street's biggest trade group has proposed a government-industry cyber war council to stave off terrorist attacks that could trigger financial panic by temporarily wiping out account balances, according to an internal document. (Bloomberg) INTERNATIONAL FSB Foreign Exchange Benchmarks - consultation paper The FXBG has progressed its work in recent months in part by engagement with a wide range of FX market participants across the globe, as well as through independent analysis. To assist in the preparation of the final recommendations and conclusions by the FSB, the FXBG has today published an interim report for consultation so that all market participants have the opportunity to submit their views and comment on the proposed course of action. The capital adequacy of banks - today's issues and what we have learned from the past Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at Bloomberg, London, 10 July 2014. Business Leaders From Emerging Economies Meet in Brazil Business leaders from the world's five largest emerging economies gathered Monday in Brazil and expressed hope they could create multilateral institutions to facilitate trade and investment. Several chief executives from companies based in Brazil, Russia, India, China and South Africa met at the opening of the so-called Brics countries sixth annual summit. The event will advance the creation of a development bank and a financial-aid fund financed by their governments, officials say. (WSJ) UNITED STATES CFTC Staff Issues Time-Limited No-Action Relief for Futures Commission Merchants from Requirement to Obtain an Acknowledgement Letter from Certain Depositories The U.S. Commodity Futures Trading Commission's (Commission) Division of Swap Dealer and Intermediary Oversight (DSIO) recently announced in a no-action letter that DSIO will provide additional time for futures commission merchants (FCMs) to comply with Commission regulations requiring FCMs to obtain acknowledgement letters from certain depositories. DSIO will provide no-action relief until October 17, 2014. Financial markets regulatory dialogue joint statement On July 8, 2014, participants from the United States and the European Union held a meeting of their Financial Markets Regulatory Dialogue. They met to exchange information on regulatory developments as part of their ongoing dialogue, and discuss their shared interests in continuing to implement and enforce robust standards, including those on the G-20 financial regulatory agenda. EUROPE IMF: More Reforms Needed to Strengthen Recovery The euro area is recovering, but policymakers must address deep-seated obstacles to growth to ensure a strong and durable recovery, according to the IMF's latest report on the currency area. EBA consults on resolution planning and on measures to address impediments to resolvability The EBA launched today two consultations on draft Regulatory Technical Standards on resolution planning and on draft Guidelines on measures to reduce or remove impediments to resolvability. These RTS and Guidelines are part of the EBA's work to promote a consistent and coherent approach to bank resolution across the European Union. Both consultations run until 9 October 2014. EBA publishes new XBRL taxonomy for remittance of supervisory reporting as of 30 September 2014 The European Banking Authority (EBA) published today an XBRL taxonomy to be used by competent authorities for remittance of data under the EBA Implementing Technical Standards on supervisory reporting. It presents the data items, business concepts, relations, visualisations and validation rules described by the EBA Data Point Model contained in the ITS on supervisory reporting, including the amendments relating to asset encumbrance, forbearance and non-performing exposures. EBA advises the European Commission on the macroprudential rules laid down in the CRR/CRD The EBA publishes today an Opinion on the macroprudential tools laid down in the Capital Requirement Regulation (CRR) and Directive (CRDIV). The Opinion assesses whether the current rules are effective, efficient and transparent as well as the possible degrees of overlap across different macroprudential tools and the consistency of the EU framework with global standards. The Opinion also includes policy recommendations that the EU Commission should consider in its review of the macroprudential toolkit. ESMA defines central clearing of interest rate and credit default swaps The European Securities and Markets Authority (ESMA) launched a first round of consultations to prepare for central clearing of OTC derivatives within the European Union. The two consultation papers seek stakeholders' views on draft regulatory technical standards for the clearing of Interest Rate Swaps and Credit Default Swaps that ESMA has to develop under the European Markets Infrastructure Regulation (EMIR). ESMA publishes 10th updated EMIR Q&A The European Markets and Securities Authority published an update of its Questions & Answers document regarding the implementation of the European Markets Infrastructure Regulation (EMIR). Fair and Effective Markets Review by the UK Treasury, the Bank of England and the Financial Conduct Authority into the way wholesale financial markets operate The Review expects to make recommendations on: Principles to govern the operation of fair and effective markets, focusing on fixed income, currency and commodities; Reforms to ensure standards of behaviour are in accordance with those principles; Tools to strengthen the oversight of market conduct; Whether the regulatory perimeter for wholesale financial markets should be extended, and to what extent international action is required; Additional reforms in relation to benchmarks, in order to strengthen market infrastructure. Bank of England Consultation Paper: The Financial Policy Committee's review of the leverage ratio The Financial Policy Committee is today launching a consultation on the design of a leverage ratio framework for the UK. This forms part of the FPC's review of the role of the leverage ratio within the capital framework for banks, as requested by the Chancellor of the Exchequer in November 2013. This consultation paper sets out the FPC's analysis of the policy choices that would determine the role of the leverage ratio within this framework. The responses to this paper will inform the final review, intended to be published in November 2014. 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