China
HSBC Global Asset Management said on July 25 it has been granted renminbi qualified foreign institutional investors (RQFII) status by the China Securities Regulatory Commission (CSRC). With the license, the bank will be able to invest in onshore China equity and bond markets.
On July 10, People’s Bank of China (PBoC) has reassured users of the renminbi that it will continue to promote capital account convertibility via the simplification of cross-border settlement rules. The notification broadly covers five major areas including renminbi cross-border settlement under the current account, onshore non-financial institution outbound renminbi lending and issuance of offshore renminbi-denominated bonds.
The PBoC announced on July 19 that it will fully liberalise lending rates, allowing financial institutions to determine borrowing costs on their own, effective from July 20. Previously, banks were not allowed to lend at less than 70% of the benchmark rate.
China’s State Council announced a package of 10 financial policy measures on July 5 to support the structural adjustment of the Chinese economy. One of the more notable policies is the call for financial institutions to provide more credit to the small-to-medium-sized enterprises (SME) space. This can be done via two methods: via the issuance of special financial bonds or the securitisation of assets.
The CSRC announced July 5 that China will resume the issuance of Treasury bond futures after an 18 year suspension. The trading is expected to start in about two months. The instruments mark the second product in China's financial futures portfolio, following index futures
Hong Kong
The Stock Exchange of Hong Kong published July 23 rule changes to complement the Securities and Futures Commission's (SFC) new regulation on sponsors which will come into effect on October 1.
The Hong Kong Monetary Authority (HKMA) announced on July 26 two enhancements in the provision of renminbi liquidity. In addition to providing one-week funds on a T+1 basis, the existing facility will provide one-day funds which will also be available the next day. Also, overnight funds available on the same day (T+0) will be provided to help banks meet their liquidity needs.
The Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) Ordinance 2013 was gazetted and came into operation on July 19. It amends the Inland Revenue Ordinance and Stamp Duty Ordinance to provide a taxation framework for Islamic bonds, or sukuk promoting the development of a market for these bonds in Hong Kong.
India
The Reserve Bank of India (RBI) has imposed strict new rules on its lending rates to domestic banks in hopes of tightening onshore liquidity and stabilising the rupee in a late night announcement on July 15. The central bank imposed limits on banks’ access to financing through the Liquidity Adjustment Facility (LAF) at the 7.25% overnight repo rate. Instead of allowing banks unlimited funding through the LAF to meet their net demand time liabilities (NDTL) – basic costs such as paying interest on deposits – banks will only be able to borrow up to 0.5% off the financial system’s total NDTLs. Any borrowing that exceeds the 0.5% limit will have to turn to the much more expensive Marginal Standing Facility (MSF).
The RBI on July 16 eased foreign direct investment (FDI) limits in 12 sectors. This second round of FDI reforms – an easing of limits in multibrand retail, civil aviation and power exchanges undertaken last September – sees higher investment caps across key sectors including defense (100% with caveats), telecom (100%), petroleum (49%), asset reconstruction companies (49%) and courier services (100%).
Lenders are petitioning the RBI to allow them to transfer bonds categorised as available-for-sale (AFS) to the held-to-maturity (HTM) category, in order to reduce mark-to-market losses which are likely to continue as chances of a rate hike increase. Banks are required to hold at least 23% of their total assets in government bonds, but many have as much as 28% on their books, due to the relatively safe nature of the investment combined with high returns.
Myanmar
Myanmar and the UK have created a taskforce to support the development of the Southeast Asian nation’s financial services sector. The taskforce will comprise officials from government ministries and agencies, and executives from financial and professional services firms, said a July 16 statement from government agency UK Trade and Investment.
Singapore
The Monetary Authority of Singapore (MAS) and the Bank of Japan (BoJ) on July 26 announced that financial institutions – including non-banks – in Singapore will be able to use Japanese government bonds as collateral to obtain Singapore dollar liquidity from the MAS through the repo market.
The MAS has announced a new regulatory framework under which banks here will be able to obtain renminbi (RMB) directly from China's domestic renminbi market. By going through Singapore's renminbi clearing bank – the Industrial and Commercial Bank of China (ICBC) – financial institutions here can now settle their clients' cross-border trade transactions in the Chinese currency using onshore rates.
South Korea
The Financial Services Commission (FSC) on July 23 rolled out the final plan to break up the Financial Supervisory Service (FSS) and set up an independent consumer protection agency by the second quarter of 2014. The smaller FSS will oversee firms' financial health and the new agency will monitor consumer protection. The consumer protection agency will be authorised to undertake its own supervisions and impose restrictions on financial companies, including banks, insurers and brokerages, separately from the FSS.
Taiwan
Taiwan will allow local bills finance companies to trade bonds denominated in foreign currencies, including offshore renminbi in Hong Kong, according to sources cited by Reuters.
Thailand
The Bank of Thailand (BoT) and the HKMA jointly announced on July 15 the establishment of a cross-border payment-versus-payment (PvP) link between the Thai baht and the US dollar RTGS system in Hong Kong. This will be launched in the second half of 2015. The PvP linkage will eliminate the principal risk of an FX transaction whereby a bank has delivered the currency it has sold but does not receive the currency it has bought – known as settlement risk.
Vietnam
The State Bank of Vietnam (SBV) decided to ban commercial banks that have not yet been permitted to provide gold custody service from doing so on July 6. The intention of this move is to tighten its management of the local gold market and prevent the damage of liquidity in the banking system. Ineligible banks, which are still keeping the gold individuals put in prior to July 5, will be allowed to continue providing the service till the due date of the custody as agreed with the customers.