Friday 21 December 2012

Taiwan banks face higher systemic risk in the long run, says Fitch

Taiwan banks can be expected to face higher systemic risk in the long run due to increasing opportunities for credit exposure to Taiwanese companies operating in China, according to a new report from ratings agency Fitch Ratings. Cherry Huang, an analyst at Fitch, told Compliance Complete that an increasing number of loans made by Taiwan banks to Taiwanese companies operating in mainland China could increase systemic risk in the island's banking system.

In a recent report on the outlook for banks in Asia-Pacific, Fitch said that while Taiwanese banks' China-related credit would remain around eight percent of total assets in the coming year, the condition could become riskier in the longer term.

Banks in Taiwan are lobbying the island's financial regulator, the Financial Supervision Commission (FSC), to lift the regulatory ceiling for China-related credit exposure. However, the Fitch report pointed out that China was ranked highest in terms of systemic risk, according to a micro-prudential index (MPI), whereas Taiwan was ranked near the bottom.

To read more, please visit:

http://www.complinet.com/global/news/news/article.html?ref=160953&bulletin=spotlight&region=_10115



Tuesday 18 December 2012

Chinese corporate issuers should improve information disclosure and corporate governance, says Fitch

First-time Chinese corporate issuers have been urged by Fitch Ratings to improve their post-bond deal information disclosure and make sure they pass on adequate information to international bond investors promptly.

Matt Jamieson, the head of APAC Research at Fitch Ratings, told Compliance Complete that due to a lack of experience, Chinese corporate issuers often did not understand the requirements for information disclosure to international bond investors. He said their delayed pace of information disclosure prohibited investors from being sufficiently updated on the current affairs of the companies they have invested in.

In a recent report, Fitch said some investors had expressed frustration that the level of communication from many Chinese corporate treasury teams had been extremely poor, when compared to other multinational corporates issuing bonds.

To read more, please visit:

http://www.complinet.com/global/news/news/article.html?ref=160881&bulletin=spotlight&region=_10115

Hua Xia case highlights regulatory risks posed by mis-selling, says lawyer

A recent case involving the suspected mis-selling of a wealth management product by Hua Xia Bank in China has showcased the risks banks face from individual sales staff acting on their own, according to a Beijing lawyer. Her comments followed an announcement earlier in December that a former employee of the bank had mis-sold a high-risk wealth management product (WMP) to a customer without explaining the risks involved. The WMP later stopped making repayments.

The Hua Xia incident was an extreme example of how things could go wrong, and reflected a failure by the bank's risk management department to spot the risk, said Jane Jiang, partner at law firm Allen & Overy in Beijing. She said the case revealed that the contractual relationship between the bank and its customers was not clear. If the former Hua Xia employee sold WMPs at the bank’s counter, the bank arguably gave implied authorisation by allowing such WMPs to be sold at the bank, said Jiang.

To read more, please visit:

http://www.complinet.com/global/news/news/article.html?ref=160858&bulletin=spotlight&region=_10115

Friday 14 December 2012

Chinese life insurers face new risks and challenges from investment liberalisation

Chinese life insurers face new investment risks from issues such as complexity and non-transparency, after the country’s insurance regulator earlier this year broadened the investment scope for insurers by allowing them to hold a wider range of investments, said a report by Fitch Ratings.

Joyce Huang, director of Fitch Ratings’ Asia-Pacific insurance team and author of the report, told Compliance Complete that life insurance companies in China need to be fully prepared to face challenges posed by the range of new investment products.

"Generally, products will be more complicated, [and] it is not that transparent compared to if [life insurance] companies buy government bonds or corporate bonds," she said. "Usually they [government and corporate bonds] have ratings -- that would be the main difference. Liquidity can also be an issue due to no secondary market being available."

To read more, please visit:

http://www.complinet.com/global/news/news/article.html?ref=160845&bulletin=spotlight&region=_10115

Saturday 8 December 2012

Training and culture vital to ensuring strong compliance, conference hears

The compliance profession is a people industry, and employers need to understand why they are training people and how training will affect their company’s business, said speakers at a Hong Kong conference. In a panel debate on compliance and training at the third Pan-Asian Regulatory Summit in Hong Kong, organised by Thomson Reuters, panellists said training and a culture of compliance was key to avoiding a wide range of risks such as reputational damage and fines.

David Nutman, regional head of compliance at Prudential in Asia, said at the conference that one of the other key factors for companies to consider was recognition for compliance officers.

"Recognition is very important, [it] is not just about positioning compliance from a financial point of view, it is equally about positioning them ...in an organisation to influence and make a direction change in behaviour generally."

To read more, please visit:

http://www.complinet.com/global/news/news/article.html?ref=160508


Thursday 11 October 2012

China's insurance regulator announces measures to improve sales conduct

http://www.complinet.com/global/news/news/article.html?ref=159116&bulletin=news&region=_10115

Saturday 19 May 2012

CSRC launches innovative officials rotation (re-write)

Recently, I read an article  from China Economics & Finance (Caixin Media), named as A New Spin on Regulation. It mainly talks about how the China Securities Regulatory Commission (CSRC) has begun rotating officials to break up vested interest groups and clear way for innovation.

Last October, Guo Shuqing became CSRC's Chairman, who has ever since advocated less administrative interference in the country's securities markets .

"A key element in Guo's package of proposed reforms would replace an approval-based stock issuance system with a registration-based mechanism," staff reporter Lu Yuan writes on the China Economics & Finance. "But vested interests stand in the way of his overhaul plan."

The method is to replace officials occupying powerful positions at centre stage with those from behind the scenes. This means the nine key deparments officials would be moved to secondary departments, meanwhile, the vacancies would be filled by officials from outside the key departments.

The rotation began in early March, additionally, personal wishes would be considered during transfers.

One example saw Li Liang, a Columbia master graduate who also holds a Ph.D from the China Academy of Social Sciences, become the party Committee of China within CSRC. "Li's move is only one of the many for the CSRC recently and is intended to dislodge senior officials from posts that are vulnerable to exploitation and corruption." Lu writes.

"This time, among all regulatory bodies, the CSRC has carried out probably the most thorough job rotations," one of CSRC's officials told Lu.

According to the publication, CSRC does rotate its officials. Throughout the years, the regulatory body managed several rounds of executive job rotations, though it was deemed a procedure which has not so far affected the protected interests of key departments until the recent changes. 

CSRC employs more than 3,000 people nationwide, with 800 residing in Beijing.

Wednesday 16 May 2012

Greece future (re-write piece)

The BBC Business reveals that Greece will have a fresh election on 17 June, due to the failure to form a coalition government on 6 May.

The event raised concerns over Greece's membership within Eurozone.

Tuesday's election showed that there was no party to win a parliamentary majority. Since then, there has been deadlock over whether Greece should continue to go ahead with the austerity measures required by an international bailout agreement.

The BBC reports that recent opinion polls suggest the leftist bloc Syriza, which opposes the tough bailout conditions, would win a new election, but would still not gain enough for a parliamentary majority.

EU officials were in talks concerning Greece's future – if Greece elects an anti-bailout government in June, the country would exit Eurozone.

The rest of the markets has also been affected by the crisis, which has seen Asian stocks are pushed lower on Wednesday and oil prices are knocked down.

Additionally, the uncertainty over the Euro has also sparked concern over a run on the Greek banks.

European leaders indicate that they will cut off funding for Greece, if the country rejects the bailout agreement sealed in March, and there would be no further discussion on its bailout.

Christine Lagarde, the head of the International Monetary Fund, talked about the possibility of orchestrating an “orderly exit” for Greece from the eurozone.

“It is something that would be extremely expensive and would pose great risks, but it is part of options that we must technically consider.”

The newly elected French president Francois Hollande also expressed his opinion that he would prefer Greece to remain in the Euro.

Saturday 12 May 2012

JP Morgan trading loss story (re-write)

JP Morgan Chase's shares value has plunged by 9% after its trading loss amounting to $2 billion (£1.2 billion), which subsequently resulted in a notch loss from a leading rating agency, the BBC Business reveals. 

It is believed that the loss is related to a London-based credit trader Bruno Iksil, who amassed an outsized position which hedge funds bet against. The bank has ruled out the strategy used in the loss trades is proprietary trade, which is prohibited by the so-called Volcker rule.

The regulators are now finalising Volcker rule, and are also pressed ahead to ensure the supposed “hedging” by JP Morgan would be covered in an expansive clamp down.

The head of SEC Mary Schapiro told the BBC that “all the regulators are focused on this”.

According to the Reuters, the bank's chief executive Jamie Dimon said it was not clear whether the bank had broken any law or violated any rules. “We've had audit, legal, risk, compliance, some of our best people looking at all of that.”

The losses prompted Richard Fisher, the President of Dallas Federal Reserve Bank, to call for the break-up of the top five U.S. Banks, and to say he is worried the biggest banks do not have adequate risk management.

Added to that, the debacle also undermines confidence in other U.S. banking shares, with Citygroup closing 4.2% lower, Goldmans Sachs falling 3.9% and Morgan Stanley losing 4.2%.

According to the BBC, Fitch downgraded the bank's debt from A plus to AA minus, and forecasts another downgrade could be possible in the next six months, even though the scale of the loss was “manageable”.

JP Morgan was believed to be in a much healthy condition than many other banks after avoiding risky investments in the 2008 financial crisis.