Cypriot levy prompts concerns about European banking union | Cyprus should protect small savers from levy, Eurogroup says | Regulation spurs creation of bond-trading platform
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19 March 2013
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News on the global financial markets

Morning Bell
PCS touts securitisation as key to closing Europe's funding gap
Prime Collateralised Securities has released a white paper explaining how securitisation could help resolve a €4 trillion funding gap in Europe. PCS acknowledges issues with certain structured-investment vehicles, subprime residential mortgage-backed securities and other securitisations but says most have performed well. The group identifies problems with pre-crisis securitisation, including a lack of transparency and embedded leverage. "Securitisations that did not partake of any of these components performed extremely well and in line with expectations," according to the paper. Reuters/International Financing Review (18 Mar.), (subscription required) (18 Mar.)
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Industry News
Cypriot levy prompts concerns about European banking union
The decision to implement a levy on Cypriot depositors as part of a rescue by the euro zone has triggered concerns about European reforms, including creation of a banking union. Financial Times (tiered subscription model) (18 Mar.)
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Cyprus should protect small savers from levy, Eurogroup says
Euro-zone finance ministers say a levy on bank accounts is "the best way to guarantee a prosperous future for Cyprus" but that small savers should be protected. "Cyprus would have faced scenarios that would have left deposit holders significantly worse off," the ministers said. Eurogroup President Jeroen Dijsselbloem says the Cypriot government has authority to modify the levy so it falls "progressively". Deutsche Welle (Germany)/Agence France-Presse/The Associated Press/Deutsche Presse-Agentur/Reuters (19 Mar.), European Voice (Brussels) (free registration) (19 Mar.), Kathimerini (Greece) (18 Mar.)
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Regulation spurs creation of bond-trading platform
Deutsche Bank is leading an industry effort in Europe to create a bond-trading platform that would use an order book to link up buyers and sellers. The platform, partially a response to regulatory changes, has seen support from the buy and sell sides. "A lot of the momentum has been driven by conversations with UK buy-side firms, and over the next three months there'll be significant progress regarding the model and infrastructure we decide upon," said Dominic Holland of Deutsche Bank. The Trade News (U.K.) (18 Mar.)
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Dougan discusses overhaul of Credit Suisse business model
Since Brady Dougan became CEO in 2007, Credit Suisse has worked to realign the interests of bankers with those of shareholders. Dougan says the dynamic between banker compensation and shareholder returns will change once a revamp of the bank's business model is complete. "In the past few years, certainly, the shareholders have taken a bigger reduction in their returns than labour has within the business model," Dougan said. "That's not sustainable." Bloomberg (18 Mar.)
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Regulatory Roundup
BIS pushes bigger benchmark-rate role for central banks
The Bank for International Settlements has released a paper suggesting that the London Interbank Offered Rate and other benchmark rates should be replaced with rates that are based on actual bank transactions. The BIS also says central banks should have a bigger role in the process. "It is clear that central banks must play an important role in supporting the development of alternative reference rates," BIS Chairman and Bank of England Governor Mervyn King said. Reuters (18 Mar.), Bloomberg (18 Mar.)
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Integrity of benchmark rates is questioned
Investigations into possible manipulation of the London Interbank Offered Rate and other benchmark rates have prompted several banks to withdraw from panels that set the rates. That exodus has prompted questions about the benchmarks and whether firms should be required to participate in the rate-setting process. Financial News Online (U.K.) (subscription required) (19 Mar.)
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ESMA expresses concerns about credit rating agencies
The European Securities and Markets Authority says credit rating agencies are not meeting standards, noting failings in the "process of disclosure and implementation of changes" to methodologies. "Considering the continued importance of credit ratings in financial markets, it is extremely important that credit rating agencies identify and remedy those issues in their businesses which may undermine the independence, objectivity and the quality of credit ratings," Chairman Steven Maijoor said. Reuters (18 Mar.), Bloomberg (18 Mar.)
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Tech Trends
Transaction taxes spur technological solutions
Financial-transaction taxes in France and Italy mean traders will have to rely on technology to determine which instruments apply. "The financial-transaction taxes represent an operational challenge for financial institutions due to the complexities of identifying securities in scope and determining the level of tax on those instruments," said Anthony Belcher of Interactive Data, which launched a service to help traders navigate the environment. The Trade News (U.K.) (18 Mar.)
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Spotlight on China
China streamlines approval process for investment projects
China's State Council says it will simplify and speed up the procedure for getting investment projects approved. Authority to approve some projects will be delegated to lower-level departments, the council says. China Daily (Beijing) (19 Mar.), (China) (18 Mar.)
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GFMA webinar: "Global LEI Developments and Deadlines" -- 8am Eastern on THURSDAY
GFMA will host a webinar to help financial-market participants prepare for the critical implementation of a global legal-entity identifier. Recently, there have been important developments from the US Commodity Futures Trading Commission, global regulators and the LEI Regulatory Oversight Committee. Further, important deadlines under the CFTC's reporting and record-keeping rule for swaps are quickly approaching. Participate in this timely webinar to receive expert summary and analysis of the latest regulatory developments and initiatives.
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Early-bird registration is open: AFME 6th Annual European Post-Trade Conference
Registration is open for AFME's 6th Annual European Post-Trade Conference, scheduled on 23 May at the Lancaster London hotel. This event brings together eminent speakers from across the industry, including senior operations executives and key regulators, and offers insights into crucial developments in the post-trade space and their impact on the industry.

Register to secure your place.
  • Early-bird member rate (available until 11 April): £299
  • Early-bird nonmember rate: (available until 11 April): £609
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You may have to fight a battle more than once to win it."
-- Margaret Thatcher,
British prime minister
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