Australia
The Reserve Bank of Australia has set out new disclosure rules for the loans in securitisation used as repo collateral.
Under the new rules, issuers will required to report information on new and existing residential-mortgage backed deals on a more regular basis. The specific information required by the RBA is set out in reporting templates across four areas: transaction information, securities information, pool information and anonymised loan-level data.
The RBA says the new requirements are designed to promote greater standardisation of RMBS reporting and enhance information available on securitisations in the Australian market since there is currently no regulatory standard for RMBS reporting and disclosures.
A consultation on the changes is open until December 28.
China
The National Association of Financial Market Institutional Investors (Nafmii), which oversees MTNs and commercial paper in the interbank bond market, is preparing new regulations governing the credit ratings of bonds.
The new rules which will look to differentiate between three models of rating agencies including firms that charge for the issuers for ratings and those that charge investors and those that use publically available information, according to a report by Reuters.
India
The governor of the Reserve Bank of India (RBI) has said the country will issue inflation linked bonds later this year.
This would be the first time India has issued debt linked to its inflation rate having failed to get a bond sale off the ground in 2007 after a lack of protection against deflation fuelled concern that would eat into the principal.
India’s National Housing Bank (NHB) has released a working paper on facilitating a structured covered bond market.
The NHB, which is a subsidiary of the Reserve Bank of India (RBI), created a working group last year to look into how best to fund mortgage lending through the capital markets. The group, which was led by Ananta Barua, executive director at the Securities and Exchange Board of India (Sebi), released its report on October 17, but only published the report to the public on October 31.
According to the report, the most likely approach will be a self-intermediated structure in which the issuers would transfer the cover pool to a special purpose vehicle (SPV) which would guarantee the debt. The NHB has proposed that it take on the role of the SPV.
The RBI has also relaxed regulations around currency hedging for foreign institutional investors (FIIs).
FIIs can now choose any bank of their choice to hedge the currency risk of their investments. Prior to this change, FIIS could only use banks where they held accounts.
“It has now been decided to allow FIIs to approach any bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date,” said the RBI in a statement.
The changes are subject to a number of provisos including that the FII’s global outstanding hedges and derivative contracts cancelled across all banks is within the market value of its investments.
Korea
The Financial Services Commission (FSC) has published a bill that would allow for covered bond issuance by the country’ banks.
Under the outline of the Covered Bond Act (CBA), Korean financial institutions with a market capitalisation of more than KRW100 million (US$91,700) and a capital adequacy ratio of 10% will be eligible to issue covered bonds. The cover pool must have a ratio of 10% and can include mortgage loans, debt issued by governments and public institutions as well as cash certificates of deposit.
The issuance ceiling has provisionally been set at 4% of the issuer’s total assets.
The new legislation also gives covered bond holders priority over its unsecured bond holders, depositors and deposit insurers in the case that the bank goes bankrupt.
The draft bill on the CBA will be submitted for parliamentary approval by December, 2012 after a 40-day notice period from October 24 to December 3, 2012 and a review by the Ministry of Government Legislation.
The Financial Supervisory Service (FSS) is bringing in restrictions on the sale of subordinated bonds by financial institutions with the aim of protecting investors.
Under the new rules which will take effect from next year, subordinated debt will only be recognised as capital under defined circumstances such as worsening capital adequacy ratios. Financials firms will also be prevented from selling the instruments through their subsidiaries.
The regulator is also tightening rules regarding the issuance of commercial paper over concerns about loose disclosure regulations and lack of transparency.
From October, asset-backed commercial paper (ABCP) issuers will be required to disclose more information on the paper, including financial soundness of issuers, collateral assets and specification on product structuring as well as credit ratings.
It also plans to set up an information hub to provide investors information including CP’s credit ratings, collateral assets and product structuring.