Cypriot rescue could become model, Eurogroup head says | Cypriot deal deepens distrust between north and south Europe | BRICS group plans development bank
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26 March 2013
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News on the global financial markets

Morning Bell
FSA finalises rules on benchmark rates
The UK Financial Services Authority aims to prevent a repeat of manipulation of benchmark interest rates by finalising rules governing the setting of such rates. On Monday, the Financial Conduct Authority will replace the FSA and also will take on oversight of the London Interbank Offered Rate. "Confidence and trust are critical to financial markets," said Martin Wheatley, CEO-designate of the FCA. "That trust has been eroded by the Libor scandal and the recent enforcement action against several banks. These new rules today should help restore that faith and bring integrity back to Libor." Bloomberg Businessweek (25 Mar.), Reuters (25 Mar.), Financial Times (tiered subscription model) (25 Mar.), The Wall Street Journal/Corruption Currents blog (25 Mar.)
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Industry News
Cypriot rescue could become model, Eurogroup head says
Eurogroup President Jeroen Dijsselbloem has suggested that Cyprus' €10 billion rescue might become a model for future aid packages. "If we want to have a healthy, sound financial sector, the only way is to say, 'Look, where you take the risks, you must deal with them, and if you can't deal with them, you shouldn't have taken them on, and the consequence might be that it is end of story'," he said. "That's an approach that I think we, now that we are out of the heat of the crisis, should consequently take." Reuters (25 Mar.), The Guardian (London) (25 Mar.), Financial Times (tiered subscription model) (25 Mar.)
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Cypriot deal deepens distrust between north and south Europe
European leaders have come up with a rescue for the Cypriot banking system, but the process by which the deal was reached has driven a wedge between rich countries in northern Europe and nations in dire financial straits in the south. Animosity between the groups could become a greater threat to the euro than the crisis in Cyprus, according to German magazine Der Spiegel. Der Spiegel (Germany) (English online version) (25 Mar.), Cyprus Mail (26 Mar.), (France) (25 Mar.)
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BRICS group plans development bank
To energise the BRICS group, Brazil, Russia, India, China and South Africa are working to create a development bank along the lines of the World Bank and the International Monetary Fund. Chinese President Xi Jinping is scheduled to participate in a BRICS meeting this week in Durban, South Africa, and is expected to propose locating the bank in Shanghai. Bloomberg (26 Mar.), Deutsche Welle (Germany) (25 Mar.), (Russia) (25 Mar.)
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Banks funnel resources into forex-options desks
Banks are ramping up technology and staff that power their desks for foreign exchange options. Driving this investment is an increase in volume -- Barclays saw a 40% bump in January -- brought on by hedge funds and companies trying to profit from or safeguard against currency volatility. Reuters (25 Mar.)
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Regulatory Roundup
Basel panel studies alternatives to current-exposure method
The Basel Committee on Banking Supervision is looking into alternatives to the current-exposure method of calculating risks of derivatives counterparties, a source says. The panel's risk-management group discussed alternatives with representatives from GFMA and the International Swaps and Derivatives Association late last year, a senior international regulator says. (subscription required) (25 Mar.)
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RBA governor warns against regulatory "overload"
Glenn Stevens, governor of the Reserve Bank of Australia, says that when his country chairs the Group of 20 nations in 2014, it should concentrate on implementing global financial rules, rather than creating more. "By 2014, we will have reached a point in the financial regulatory sphere where the G-20 should be looking for careful and sustained efforts at implementation of the regulatory reforms that have already been broadly agreed, but being wary of adding further reforms to the work programme," Stevens said. "Lest this be considered too weak a position, let us remember how much is being attempted." Reuters (26 Mar.)
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UK watchdog plans to examine fund managers' fees
The UK Financial Conduct Authority, which formally launches Monday, plans to investigate fee structures of fund managers. The agency will "highlight the behaviours and practices of asset management firms in relation to charging structures that harm consumers", according to business plans. Reuters (25 Mar.)
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Tech Trends
LCH.Clearnet faced IT failure on New Year's Eve, BoE says
The Bank of England says in its annual survey of payments systems that LCH.Clearnet Group suffered a significant technology glitch on 31 December. "The nature of the problem created obstacles to reverting to contingency arrangements and also hindered internal and external communication," according to the central bank. Bloomberg Businessweek (25 Mar.), Reuters (25 Mar.), Financial Times (tiered subscription model) (25 Mar.)
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Spotlight on China
Dim sum bond market starts to rebound
Several big-ticket offshore yuan-denominated bonds have been issued in recent weeks, reviving the dim sum bond market. This year, about $3.35 billion worth of dim sum bonds have been issued, up from less than $3 billion in the same period last year, according to Dealogic. "Investors lost confidence after the massive sell-off in the dim sum bond market in late 2011," said Clifford Lee of DBS Group Holdings. "There was a long lull last year, as bond buyers wanted much higher yield compensation than the levels issuers were willing to offer. Now, the gap between pricing expectations from both sides is narrowing." The Wall Street Journal (25 Mar.)
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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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It is often laziness and timidity that keep us within our duty while virtue gets all the credit."
-- François de la Rochefoucauld,
French writer
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