In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 13 Apr 2018
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Asia: coming together

China’s newly merged China Banking and Insurance Regulatory Commission (CBIRC) is now in business. Vice premier Liu He stressed the focus is on financial supervision reform. The CBIRC has plans to regulate financing guarantee companies to manage financial risk in the banking and insurance industries. The State Council has also announced that China will create a five-year plan for a national financial database to focus on cross-sector products and important institutions to curb financial risk. The plan signals the government’s goal to improve monitoring of financial institutions, financial holding companies and asset management companies.

Speaking at the Boao Forum for Asia in Hainan, People’s Bank of China governor Yi Gang said measures to open up China’s financial sector to foreign banks will be in place this year. Plans to life foreign ownership restrictions in the insurance sector can also be expected.

The Reserve Bank of India has announced a ban on financial institutions having any links with entities that trade in cryptocurrencies. Banks have been given three months to end their exposure to these entities. There are an estimated five million digital currency users in India. The crypto market in India didn’t take the news well. Since the announcement, an online petition to reverse the ban has started. Pakistan has followed suit by banning cryptocurrencies altogether. The stance is different from EU and US jurisdictions, which are slowly embracing digital currencies.

EMEA: firming up

The continued presence of reverse break fees underlines the seller-friendly conditions in the market currently. With competition expected to intensify for this year, reverse break fees could become more popular. Break fees were banned in the UK in 2011 and as a result it was expected that reverse break fees would fall away too. But according to Koregate Capital managing partner Edward Belsey, reverse break fees have not fallen away and he expects the trend to continue till the end of this year. With private equity showing no signs of slowing down, they could become even more established in corporate deals.

With the wave of sovereign issuances expected to come to an end this year, the sukuk market may begin to flourish. White & Case partner in Dubai Debashis Dey said if the sovereign issuances come to an end then sukuk could grow as investors look for other investment opportunities other than conventional bonds. The sukuk market increased last year, totalling $98.9 billion but this is a relatively small figure compared to the $6.8 trillion conventional bond market. Developments this year could make a difference, including the rising oil price which will demotivate sovereigns from entering debt markets. 

Americas: will they, won’t they?

It is just a handful of days after the President’s personal lawyer, Michael Cohen, was raided by the FBI, and it feels remarkable that normal news hasn’t been overtaken by something more serious.

The Securities and Exchange Commission confirmed its position in the driving seat re the Department of Labor’s fiduciary rule. With chairman Jay Clayton confirming at an event in Chicago midweek that first blood will be drawn on April 18, exactly what form a best standard interest will take is uncertain – but it will hopefully answer some of the questions that are pending for the broker dealer industry.

Both the Federal Reserve and the Office of the Comptroller of the Currency released proposals suggesting tailoring an enhanced supplementary ratio, while the latter has asked for comment on stress capital buffer amendments.

The mega-merger of pharmaceutical and agriculture companies Bayer and Monsanto was given a major boost this week after reportedly gaining approval from the US antitrust authorities. An immediate sell-off by Bayer of its seed, pesticide and technology assets to rival BASF ensued, as required for antitrust purposes.

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