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Moody's has rated India’s banking sector as stable to positive. Moody's said that while Indian banks have traditionally focused on industrial credits, the recent shift to loans has yet to complete a full credit cycle test. The report further cautioned that the shift towards retail loans and their performance under unfavourable conditions would be a decisive ratings driver for the Indian banking sector. Moody's also said that Indian banks suffer from an undiversified earnings profile, geared largely towards interest income.

Steve Kuppenheimer, director in global structured credit products and co-head of collateralized debt obligations at Merrill Lynch in New York, has left the firm. He reported to Harin de Silva and Ken Margolis, managing directors and co-heads of CDOs at Merrill, who were out of the office and did not immediately respond to emails. Reached on his cell, Kuppenheimer declined comment.

Merrill Lynch has hired Lorenzo Centi-Colella from Goldman Sachs as a director and inflation swaps trader in London. He replaces Christian Alibert, who returned last week to The Royal Bank of Scotland after two years at Merrill. Centi-Colella works with Jacob Oppon, inflation swaps trader who joined with Alibert from RBS. Oppon declined all comment.

Derivative houses in India are awaiting accounting rules which should open the door for further market development. "While volumes continue to expand, product development has been on hold," said Srinivasan Varadarajan, treasurer at JPMorgan in Mumbai, explaining end-users are mostly piling into plain-vanilla interest-rate products and rupee fx options.

Boston-based loan manager CypressTree Investment Management is looking to add credit-default swaps on loans to its existing leveraged loan funds, but will hold off until the workings of the LCDS contracts are fleshed out. Richard Omohundro, senior managing director and chairman of the investment committee, said the group wants to see loan contracts follow those of pay-as-you-go synthetic asset-backed securities, in which there is a partial pay option upon a credit event. "We are dabbling our toes in it at the moment, but will be swimming when the market gets going," he said.

Chilean private pension funds assets were $78 billion at the end of May, up 11.3% on last year. Of the total, $24.8 billion, just under a third, were invested overseas. Another $22.8 billion are invested in local markets, and $11.6 billion in the state, mostly in the central bank. Investments in Chile’s corporate sector account for 23.8% of pension fund assets, at $18.5 billion. Power, natural resources and service sector firms are the biggest recipients.

The Bank of Thailand is expected to remove constraints to trading onshore digital options for fx and interest-rate products, which have been hindering the market's growth. Following lobbying efforts by international firms that are in regular dialogue with the BOT, derivative officials are hopeful the regulators will remove the constraints in the next few months. "Plain vanilla derivatives continue to attract interest, but rectifying this issue will be a plus," said a derivatives head at an international house in Bangkok. Officials at the BOT in Bangkok declined all comment.

JPMorgan and North Asset Management, a London-based alternative asset manager, are pricing a combination note which references emerging-market and corporate credit risk. The note's AA-rated principal is linked to a senior tranche, while coupon payments are linked to an equity tranche of a credit-default swap portfolio. The majority of the portfolio references global emerging-market credits, both corporate and sovereign, while the remaining is corporate credits.

Gyurcsany looks to spending cuts amid forint collapse, ratings downgrade

Last Friday the People's Bank of China announced an increase in banks’ reserve ratios, excluding rural banks and co-operatives, by half a percentage point. The increase will be effective from July 5. The people’s Bank’s announcement follows a continued rise in investments, which are up 13.3% on last year. Money supply also increased and faster than the expected rate of 19% during the first five months of the year. The 27 basis point increase in the interest rate two months ago has so far not been able to control growth in money supply and investment.

Merrill Lynch is in the market with a senior secured loan of up to $200m for Berau Coal, Indonesia's fifth largest coal mine, according to bankers familiar with the deal.