RED TAPE ROUNDUP: China forces banks to offload corp bonds; India expands CDS participation; India and Taiwan set out Basel III timetable

In this round up of recent regulatory news, China forces banks to sell corporate bond holdings, India relaxes rules on credit default swaps and sets up new rules for hedge funds, the Islamic Financial Services Board publishes guidelines on liquidity and stress testing and India and Taiwan set out a deadline for its banks to meet Basel III requirements.

  • 04 May 2012
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The China Banking Regulatory Commission (CBRC) is set to introduce new rules in which banks will only be able to invest in up to 20% of any single corporate bond which they have underwritten, according to reports.

Banks will have to sell down any excess over this limit within six months of the bond’s issue date.

In addition, the CBRC will require underwriter banks to shift their 20% commitment in these corporate bonds onto their loan books. Bonds are currently classified as independent investments on banks’ balance sheets, as well as in their off balance sheet reporting.

The Ministry of Finance (MOF) announced on April 19 that starting July 1 financial lenders, including policy, commercial and local banks, credit cooperatives, leasing companies and asset management firms, will have to hold a greater ratio of capital reserves to accommodate a growing number of non-performing loans in the future.

The MOF specifically ruled that financial groups’ reserves must be at least 1.5% of their risky assets. This is a boost from the current level of 1%.

Additionally, the percentage of reserves against sub-prime loans will increase to 30% from 25%, for suspicious loans the figure is 60% and 100% for loss-making loans.

These requirements will only extend to financial groups’ general risk reserves on their balance sheets, and will not apply to their off-balance sheet exposures.


The Reserve Bank of India (RBI) published details on Basel III implementation with banks scheduled to meet the new capital ratios by March 31, 2018.

The rules are set capital ratios higher than those proposed under the Basel II guidelines.

Indian banks will have to achieve a minimum common equity of 4.5% of total risk-weighted assets of by January 1, 2013 and increase this to 5.5% by the 2018 deadline. Banks will also have to increase Tier I capital ratios from 6% to 7% over the same period.

Between now and 2018, banks will need to maintain a total capital adequacy ratio (CAR) of 9%.

Comparatively, the Basel committee recommendations propose a minimum Tier I capital ratio of 6% and a total capital ratio of 8%.

The RBI has relaxed its rules on credit default swaps (CDS) to allow all financial institutions to use the hedging tools.

In a notice on its website published on April 23, the central bank said Export Import Bank of India (EXIM), National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI) will be able to participate in the CDS market.

The RBI introduced CDS for corporate bonds in December 2011 allowing market participants to hedge their fixed income portfolios for the first time. Prior to the changes, commercial banks, non-banking financial institutions (NBFCs), mutual funds, insurance companies, housing finance companies (HFCs), provident funds, listed corporates and foreign institutional investors only were allowed to by CDS on Indian corporate bonds.

The Securities and Exchange Board of India (Sebi) has published new draft regulations for alternative investment funds such as hedge funds.

The regulator says these funds can be either open-ended or closed-ended vehicles but it wants to cap the amount of leverage they are allowed to use.

Sebi recently allowed the launch of hedge funds in India though there are as yet no domestic vehicles. All funds must register before they are allowed to invest in the country and under the new regime, all hedge funds will need to apply for a licence from Sebi.


The Islamic Financial Services Board (IFSB) has published guidelines on liquidity and stress testing to reduce risk to financial institutions offering Islamic financial services (IIFS).

The guidelines include sections on identifying and measuring liquidity risk, diversification of funding, managing Shariah compliant collateral and stress testing framework.

The Malaysia-based body, which sets standards for Islamic finance, has no statutory powers, much like the Basel committee, but can publish recommendations and guidelines. It suggests regulators start implementing the procedures from 2013.


The Monetary Authority of Singapore has launched a consultation on changing the regulations for professionals which hold capital markets service (CMS) licenses such as fund managers.

Under the proposals, CMS licensees will have to hold higher levels of capital for their market exposures.

The main changes include new regulations on capital which will apply to all CMS licences holders except for fund managers Reit managers, corporate finance advisers and custodians whose market exposures fall below a certain level.

The consultation also set out proposals on what sort of capital can be used to meet the new risk requirements.


Taiwan’s financial regulator has said that the nation’s banks will full adopt Basel III rules on capital provisions by 2019.

The Financial Supervisory Commission said that Taiwanese banks would need to hold common equity equivalent to at least 7% of risk-weighted assets while tier 1 capital must be no less than 8.5% of risk-weighted assets. In addition, the minimum capital adequacy ratio (CAR) must be at last 10.5%.

In line with the new guidelines from the Basel committee, banks will be forced to write down Tier 1 instruments or convert them to equity if their common equity falls below 5.125% of risk-weighted assets.

  • 04 May 2012

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 Citi 38,857.97 184 9.39%
2 HSBC 38,447.58 227 9.29%
3 JPMorgan 34,744.34 142 8.40%
4 Bank of America Merrill Lynch 28,556.15 119 6.90%
5 Deutsche Bank 18,270.77 72 4.42%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 13,268.07 33 6.30%
2 Bank of America Merrill Lynch 11,627.56 29 5.52%
3 Citi 11,610.06 30 5.52%
4 HSBC 10,091.34 29 4.79%
5 Santander 9,533.17 25 4.53%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Citi 13,617.40 57 11.05%
2 JPMorgan 12,607.77 55 10.23%
3 HSBC 9,327.72 50 7.57%
4 Barclays 8,643.78 30 7.02%
5 Bank of America Merrill Lynch 6,561.15 18 5.32%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UniCredit 3,966.12 27 13.01%
2 SG Corporate & Investment Banking 2,805.90 16 9.20%
3 ING 2,549.27 20 8.36%
4 Citi 2,526.98 15 8.29%
5 HSBC 1,663.71 16 5.46%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 19 Oct 2016
1 AXIS Bank 5,944.45 123 18.53%
2 HDFC Bank 3,792.05 100 11.82%
3 Trust Investment Advisors 3,390.86 145 10.57%
4 Standard Chartered Bank 2,299.63 31 7.17%
5 ICICI Bank 1,894.86 51 5.91%