Category Archives: Regulation

Banks promise City watchdog they’ll keep Libor going until 2021

wenty banking giants have agreed to support the scandal-hit benchmark the London interbank offered rate (Libor) until an alternative is found in 2021 so that the transition doesn’t rattle markets.

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Can SDGs Shape the Future of Corporate Disclosure?

Businesses are showing increasing interest in using the Sustainable Development Goals (SDGs) to inform and enhance their social and environmental programs and ultimately their business strategies.  The SDGs were adopted by the United Nations in 2015 and include 17 ambitious goals and 169 targets aimed at ending poverty, protecting the planet, and ensuring prosperity for all.

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What the Central Banks Are Saying About Cryptocurrencies

Eight years since the birth of bitcoin, central banks around the world are increasingly recognizing the potential upsides and downsides of digital currencies.

The guardians of the global economy have two sets of issues to address. First is what to do, if anything, about emergence and growth of the private cryptocurrencies that are grabbing more and more attention — with bitcoin now surging toward $10,000. The second question is whether to issue official versions.

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Bond traders see MiFID’s silver lining as rules crack open data

European bond traders are looking on the bright side of tougher transparency rules — unprecedented market data that can help them make sure they’re not getting ripped off. New regulations will require details on many transactions to be published within 15 minutes, and sometimes before the trade has gone through, previously unheard of in the traditionally opaque bond market. Some dealers and investors are starting to plan how they will capture and analyze the data to help them work out fair values for trades.“Everyone should be analyzing and using the data to better understand the market,” said Mehmet Mazi, HSBC Holdings Plc’s global head of credit trading, and a speaker at this week’s Fixed Income Leaders Summit in Amsterdam. “Firms who do this smarter will have an edge.”Traders are welcoming the influx of data even though it risks making their jobs harder by potentially exposing their intentions to other parties in the predominantly over-the-counter market.  Read more

ISDA – Asia-Pacific OTC Derivatives Study

Derivatives markets have grown markedly in Asia-Pacific in the past decade, with Hong Kong and Singapore now pre-eminent in regional trading of FX and interest rate derivatives (IRD). Total IRD daily average turnover in Asia-Pacific markets increased to $298.3 billion (US dollars unless otherwise specified) in April 2016 from $187.4 billion in April 2007, while the equivalent figure in FX increased to $1.7 trillion from $1 trillion.

This rate of growth has outstripped that of global derivatives markets. Between 2007 and 2016, IRD turnover in Asia-Pacific markets grew at 5% compound annual growth rate (CAGR), while FX turnover grew at 6%. Global IRD and FX turnover grew at 4% and 5% CAGR, respectively, over the same period.

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China: Corporate Governance risks for investors

China adopted its first corporate governance code in 2001, ahead of many APAC peers, with updates in 2011 and 2016. As China’s market becomes more accessible to global investors, corporate governance practices will likely face increased comparison to global standards.  Our report references MSCI ESG Research’s rich corporate governance data to examine the opportunities and risks to minority shareholders presented by current corporate governance practices in the MSCI China Index.

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Delhi Event Invite – Challenges in FRTB Implementation, Oct 27, 7pm

Challenges in FRTB Implementation
Register Now
Date: Friday, October 27, 2017
Time: Registration: 7:00-7:30 PM
Presentation: 7:30-9:00 PM
Networking Reception: 9:00-10:00 PM
Location: Ramada Gurgaon Central
Plot 2 Sector 44, Central Emerald Hall
Gurugram , Haryana , 122003
India
Speaker: Udit Mahajan
Co-Head of Market Risk Projects, Deloitte UK
Synopsis: The Fundamental Review of the Trading Book (FRTB) represents an evolution of Basel regulation impacting Capital Markets with a deep focus on addressing the failings identified in the financial crisis. FRTB is a material overhaul of the Market Risk framework which impacts all core functions in Capital Markets (front office, risk, finance, treasury, and technology).

This session is focused on some of the key challenges faced by front office, risk methodology, and technology teams when adopting FRTB. Out of the many challenges being faced by banks today, five will be covered in detail:

  1. Front Office-Risk-Finance Alignment
  2. External Transactions and NMRF
  3. Multiple Revaluations in IMA
  4. Capital Optimization and Business Strategy
  5. Trading Desk Structure
 This event is organized as Chapter meeting for GARP
Register Now

New market risk code won’t trigger big bank capital hikes: Basel

LONDON (Reuters) – Most banks will not have to hike capital significantly to meet stricter rules to counter trading risks, a survey showed on Tuesday, after Asian nations sought to delay introducing the code citing concerns about the need for more funds.

The code, known as the “fundamental review of the trading book” or FRTB, was drawn up by the Basel Committee on Banking Supervision and tightens “market risk” capital requirements.

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Global debt may be understated by $13 trillion: BIS

LONDON (Reuters) – Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.

Bank for International Settlements researchers said it was hard to assess the risk this “missing” debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.

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Placing liquidity at the heart of risk management

Financial regulators around the world have sought to reduce the systemic risk to liquidity caused in periods of market volatility. SEC 22e-4, the US’s most recent regulatory response to liquidity risk, will start to require compliance as early as of June 2018 and while it may feel like there’s enough time to prepare, the challenge of implementing liquidity risk systems at financial firms is actually a significant undertaking.

The Risk in CoCo Bonds You Could Be Missing

Contingent Convertible bonds – known as “CoCos” – have grown popular among European (and increasingly Asian) financial institutions since the 2008-09 financial crisis. They offer attractive yields but come with a challenge: figuring out when a CoCo bond is at risk of being converted to equity, which effectively can eradicate the bond’s value.

The answer, as MSCI’s Gergely Szalka writes in a new blog post, may lie in having a dedicated risk model that picks up on early warning signs. Gergely shows how MSCI’s CoCo pricing podel would have detected the rising risk that preceded this year’s collapse of Spain’s Banco Popular ahead of a standard risk model.

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[Webcast] Examine Risk-Based Approaches to Multi-Asset Strategies, Sept 28, 2pm ET

TRADITIONALLY, THE RETURNS FROM ONE ASSET CLASS have tended to be uncorrelated with the returns of other asset classes, leading to the widespread investment practice of diversification. As investors continue to seek positive returns with lower levels of risk, the time is right for examining Risk-Based Approaches to Multi-Asset Strategies.

Register now, Sept 28, 2pm EST

TOPICS OF DISCUSSION
Economics now—where are we in the cycle and what can we expect next?
Hedging—what can mainstream investors do to hedge against future events?
Diversification—a foundation stone of Modern Portfolio Theory—is it still one of the best solutions for asset allocation and management? 

Default reinforces wariness over Chinese corporate bonds

Bondholders in China’s Wuyang Construction Group are furious over the company’s default as they note its failure to reveal a long list of problems when the bonds were sold. The tale of woe is just one casting a pall over China’s efforts to build up its corporate bond market, where companies are more accustomed to government bailouts than the possibility of failure.

Hedging points to rising caution over corporate debt

Money continues to flow into the US investment-grade bond market but there’s also hedging as investors turn to credit default swaps. Analysts see the recent growth in that market as a sign of caution and possibly a leading indicator of bond market weakness.

ISDA Webinar : The Foundations of an Efficient Market Infrastructure, 14 Sept 8am ET

ISDA will host an introductory webinar tomorrow (Thursday, September 14) at 8:00 am NY time / 1:00 pm London time to provide an overview of an initiative to facilitate the adoption of emerging technologies, such as distributed ledger and smart contracts. The webinar will cover the importance of common data and process standards to aid interoperability, and will provide an update on ISDA’s work to identify and define core lifecycle events and actions and consolidate them within a so-called common domain model (CDM).

All participants must register in advance to listen to the webinar by clicking here.

Register now

https://services.choruscall.com/links/isda170914.html

Lessons From the Quant Liquidity Crunch

Commentary: A decade after the August 2007 “Quant Liquidity Crunch,” Peter J. Zangari, global head of research and product development, writes about the changes and lessons learned from this event and the ensuing financial crisis. Among them: Best-in-class risk management is now integrated into the investment process and investors have placed greater emphasis on alternative sources of return, from factor investing to private asset classes.

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The market risk that makes Nobel laureate Robert Shiller ‘lie awake worrying’

Yale University economics professor Robert Shiller has a warning for investors.

The Nobel laureate says low volatility paired with a questionable price-earnings ratio could wipe out a chunk of the stock market’s value.

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Public Sector Mergers in India: Does Size Bring Synergies?

In June 2017, the $23 billion Vodafone-Idea Cellular merger got the go ahead from the Competition Commission of India. A few days later, the government announced a deal between two public sector undertakings (PSUs) – the Oil & Natural Gas Corporation (ONGC) and Hindustan Petroleum Corporation Ltd (HPCL). The Rs. 28,000 crore ($4.4 billion) merger involves ONGC buying up the 51% government stake in HPCL.

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IFRS 9 Implementation Challenge For Low Default Portfolios: One Possible Approach To Compute PDs

As of January 1, 2018, IFRS 9 will replace the current IAS 39 across several jurisdictions, including many European countries.

By focusing on expected credit losses, IFRS 9 will represent a significant shift from IAS 39 (incurred losses) since the new impairment requirements determine that expected losses will have to be computed not only for non-performing assets, but also for performing assets, with a direct impact on Profit and Loss (P&L).

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Webinar Replay: Will the FOMC Continue to fuel Interest in Senior Loan?

In the tailwinds of 2016 when LIBOR finally crossed 1%, and given the prospect of further rate hikes, senior loans are poised for an uptick in demand. But is there room for more?

Join us as we explore why the fundamentals of floating-rate instruments are increasing institutional allocations to senior loans at home and abroad.

Leading industry practitioners will examine:

A risk/reward analysis of leveraged loan fundamentals
How index-based strategies and ETFs impact depth of liquidity in primary and secondary senior loan markets
The refinancing effect – how stronger demand is weighing on credit spreads and yields
Speakers:

  • Ted Basta, Senior Vice President, Market Data, Loan Syndications and Trading Association
  • Myles Gilbert, Managing Director, Cambridge Associates LLC
  • Jason Giordano, Director, Fixed Income Product Management, S&P Dow Jones Indices
  • James Meyers, CFA, Director of Fixed Income ETF Product Strategy, PowerShares by Invesco   View the Speaker Bios