BIS expresses concerns about markets' stimulus reliance | Cypriot rescue includes haircut for bank depositors | ESMA offers warning and guidance on central counterparties
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18 March 2013
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Morning Bell
Europe must form banking union and bolster banks, IMF says
The International Monetary Fund is urging Europe to begin developing a banking union and shore up financial institutions. "Risks remain elevated, especially in a context of low growth and fiscal retrenchment," according to the IMF. "Regulatory and policy uncertainty, and gaps in policy frameworks also continue to pose vulnerabilities. Further ambitious steps are thus necessary to rebuild confidence and achieve long-lasting financial stability in the region." Bloomberg (15 Mar.), CNNMoney (15 Mar.), Reuters (15 Mar.), The Wall Street Journal (15 Mar.)
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Industry News
BIS expresses concerns about markets' stimulus reliance
Central banks in Europe, Japan and the US have kept interest rates low, implemented asset-purchase programmes and taken other steps to calm financial markets and buy time for governments to make changes to spur growth. However, the Bank for International Settlements is concerned about markets' reliance on central bank stimulus. "The fact that market dynamics have become ever more dependent on central bank and government stimulus is a cause for concern," said Stephen Cecchetti, head of the BIS Monetary and Economic Department. Reuters (17 Mar.)
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Cypriot rescue includes haircut for bank depositors
Cypriot President Nicos Anastasiades said in a televised address that he has no practical alternative to applying a haircut to bank deposits as part of a €10 billion rescue by the euro zone. As partial compensation for losses, depositors will receive bonds linked to natural gas revenue, he said. Kathimerini (Greece) (17 Mar.), Spiegel Online (Germany) (16 Mar.), Cyprus Mail (17 Mar.), Reuters (16 Mar.), Financial Times (tiered subscription model) (18 Mar.)
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Regulatory Roundup
ESMA offers warning and guidance on central counterparties
The European Securities and Markets Authority has cautioned regulators that they need to make sure trades among clearinghouses do not create financial instability. ESMA's warning also comes with recommendations on how to manage such risks, including monitoring collateral treatment closely. The Wall Street Journal/Dow Jones Newswires (15 Mar.)
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European Parliament pushes to expand bonus clampdown
The European Parliament's main parties back a plan to include bonus curbs in an overhaul of Undertakings for Collective Investment in Transferable Securities funds, extending a clampdown to fund managers. Financial Times (tiered subscription model) (17 Mar.)
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Concerns about HFT appear overstated, ASIC says
The Australian Securities and Investments Commission has called for tougher market regulation, while tempering concerns about high-frequency trading. "We found public concerns over HFT appear to have been overstated and can be attributed to the increasing use of trading technology by investors generally," according to ASIC. However, the regulator suggests a minimum resting time for orders. Reuters (18 Mar.)
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Analysis: ECB's bond-buying programme raises questions
Financial markets continue to face the question of whether the European Central Bank will use its bond-buying programme to stop a speculative sell-off of bonds of troubled nations. It appears that ECB policymakers are prepared to deploy the Outright Monetary Transactions plan, if needed. Reuters (15 Mar.)
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Spotlight on China
China's Li vows to fight corruption and embrace frugality
Chinese Premier Li Keqiang says the government will exercise power in a transparent fashion, fight corruption and bring frugality to spending. The government also will scale back its payroll, reduce overseas trips for business and cut spending for official hospitality and vehicles, Li says. China Daily (Beijing) (18 Mar.), Reuters (17 Mar.)
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China eases rules on financial-product distribution
Amended Chinese regulations will allow commercial banks, including foreign ones, to sell mutual funds and other financial products to citizens after 1 June, provided the banks had no "significant administrative or criminal penalties" during the past three years, the China Securities Regulatory Commission says. The changes will let foreign banks tap into China's lucrative market. The Wall Street Journal/Dow Jones Newswires (18 Mar.)
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PBOC's Yi expects increased capital-account reforms
China will accelerate capital-account reforms now that Zhou Xiaochuan has been reappointed governor of the People's Bank of China, Deputy Governor Yi Gang says. "We are making tremendous progress in the capital-account convertibility," Yi said. He also emphasised a need for countries to avoid competitive devaluation and other types of protectionism. Reuters (17 Mar.)
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GFMA News
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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AFME News
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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SmartQuote
The injury we do and the one we suffer are not weighed in the same scales."
-- Aesop,
Greek storyteller
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