Your feedback is important to us. Click here to email us your feedback.

GFMA SmartBrief

16 November 2009

Morning Bell

UK regulators could gain authority to tear up bankers' contracts
The government of UK Prime Minister Gordon Brown will outline plans for reining in bankers' compensation deemed as encouraging excessive risk-taking. The Financial Services Authority would be given "powers if necessary to tear up contracts that would result in payments being made that would cause instability", said Chancellor Alistair Darling. The legislation would not apply to 2009 bonuses, however. Bloomberg (15 Nov.) The Wall Street Journal (16 Nov.) The Times (London) (subscription required) (16 Nov.)

Darling to propose strengthening FSA's enforcement powers: As part of the UK government's broader financial-services bill, the Financial Services Authority would be granted enhanced powers to tackle wrongdoing. FSA Enforcement Director Margaret Cole welcomed the proposed changes. "We have really changed the landscape in this agency about the use of enforcement," Cole said. "Everyone is now keen to use it to send a message." Financial Times (tiered subscription model) (16 Nov.)

UK bankers say compensation laws could spur exodus of talent: The British Bankers' Association warned that the UK's prominent standing as a global financial centre will be threatened if lawmakers approve a financial-services bill in the works. The proposal gives regulators authority to tear up bankers' contracts if they are seen as encouraging excessive risk-taking. The BBA said the laws could force talented financial professionals elsewhere and hinder economic growth. The Telegraph (London) (15 Nov.)

Industry News

Spain's central bank urges consolidation of savings banks
Miguel Fernandez Ordonez, governor of Spain's central bank, said some of the country's 45 savings banks should be merged with stronger financial institutions. "I think there are at least 15 institutions that should merge with others," he said. "I hope [by] next spring we have restructured all these institutions, that's my idea. We now have many, many mergers that we are discussing." Financial Times (tiered subscription model) (16 Nov.)

Tax deal with France qualifies Singapore for OECD list
Singapore's agreement with France to share tax information marks the 12th such agreement the Asian nation has signed, qualifying it for the Organisation for Economic Co-operation and Development's list of jurisdictions that have tightened their tax rules. Countries need the information to enforce domestic tax regulations. FinanceAsia.com (Hong Kong) (16 Nov.)

Bond-market rally to help Bundesbank as it unloads MBS
Lehman Brothers pledged mortgage-backed securities as collateral for loans from Germany's central bank during the early stages of the credit crisis. The Bundesbank plans to unload those securities and is expected to benefit from a months-long rally in bond markets. Bloomberg (13 Nov.)

Other News

Singapore exchange scrutinises banks' dark pools
Financial Times (15 Nov.)

Regulatory Roundup

Asian financial officials warn about Fed's rate policies
The US Federal Reserve's policies on interest rates threaten to encourage speculative capital, which could inflate prices of assets and derail recovery of the global economy, said financial officials in China and Japan. Liu Mingkang, the top banking regulator in China, said an extended period of low rates and depreciation of the dollar present "new, real and insurmountable risks to the recovery of the global economy". Bloomberg (16 Nov.) Financial Times (tiered subscription model) (16 Nov.) The Wall Street Journal (16 Nov.)

Report says UK might need to veto EU regulatory reforms
The EU is working toward a sweeping overhaul of financial regulations, including establishing the European Systemic Risk Board and a trio of pan-EU bank supervisors. A parliamentary report from the UK says the country might need to veto the EU overhaul unless tougher national safeguards are included. EU finance ministers could vote on the measure on 2 December. "That is far too fast," said UK Treasury Select Chairman John McFall. "The proposals will set in place a framework which should last for many decades. There is still a great deal of unease about the detail." Reuters (16 Nov.) Bloomberg (15 Nov.)

Regulators, bankers to discuss crisis lessons in Frankfurt
About 500 speakers, including German Chancellor Angela Merkel, bank CEOs and central bankers, are set to address thousands of participants at Euro Finance Week in Frankfurt this week. Participants will debate the financial crisis and lessons to be learned from it. Jean-Claude Trichet, president of the European Central Bank, will discuss "Tomorrow's Monetary Order and Financial Markets". Reuters (16 Nov.)

SIFMA News

Engage China urges Obama to push for financial-sector modernisation in China
Engage China is a coalition of 11 financial-services trade associations, including SIFMA. Engage China supports high-level engagement with China, with an emphasis on continued reforms in the country's financial sector. It released a statement on US President Barack Obama's trip to China. Blank (13 Nov.)

AFME: A new trade body for Europe
As regulation of financial markets takes on an increasingly global dimension, the London Investment Banking Association and the European operations of SIFMA joined forces to form the Association for Financial Markets in Europe. Former affiliates of SIFMA -- the European Covered Bond Dealers Association, the European High Yield Association, the European Primary Dealers Association, the European Securities Services Forum and the European Securitisation Forum -- will be integrated into AFME's business-policy divisions. Learn more. Blank (19 Oct.)

Investor Trends

Investor demand for corporate bonds remains strong
A sense of urgency among companies and investors to dive into bond markets before they wind down for the holidays is particularly acute this year. Companies are launching corporate bonds, investors are binging on offerings, while central bankers are preparing to withdraw stimulus measures that spurred the corporate-debt rally. Some industry observers are concerned that policymakers will hurt credit markets if they pull support too quickly or sharply. The Wall Street Journal (16 Nov.)

Other News

Retail investors upset about terms of Lloyds' CoCo bonds
Financial Times (14 Nov.)

SmartQuote

Nothing is so contagious as enthusiasm."

--Samuel Taylor Coleridge,
English poet, critic and philosopher