Thursday 31st July 2014
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THURSDAY TICKER: 31ST JULY 2014 - Standard & Poor's says Argentina is in selective default on foreign-currency-denominated debt, after the government failed to make a $539m payment on $13bn in restructured bonds. Argentina had transferred the money to the paying agent, but a US judge would not allow its release unless hedge funds holding bonds not included in a restructuring also were paid. The latest default is expected to exacerbate problems in Argentina's recession-hit economy, analysts say. This is the second time Argentina has defaulted on its debt in the last thirteen years, after last-minute talks in New York with a group of bond-holders ended in failure. Vulture fund" investors were demanding a full pay-out of $1.3bn (£766m) on bonds they hold. Argentina has said it cannot afford to do so, and has accused them of using its debt problems to make profits - In a regulatory filing made public earlier this week, and US press reports, BlackRock has begun the process of establishing a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai. The firm is reportedly creating an investment advisory WFOE which will give it significantly greater flexibility and speed in executing its Greater China strategies – Shares in Chinese footwear manufacturer Feike AG have been listed on the General Standard of the Frankfurt Stock Exchange. Ten million shares have been listed at an initial price of €7.50. ACON Aktienbank AG is supporting the issue. Scheich & Partner Börsenmakler GmbH is the specialist. This is the third Chinese company to list on the exchange according to managing director Michael Krogmann. “With the IPO we have achieved an important strategic milestone. This helps us to expand our competitive position and our brand awareness in the booming Chinese market for children’s footwear as well as to realise future growth plans”, says Andy Hock Sim Liew, CFO of Feike AG - Funding pressures stemming from reduced central government capital grants and the persistence of tightened long-term bank lending are likely to fuel the English housing association sector's continued use of capital markets over the next two years, says Moody's Investors Service in a new report published today. The new report English Housing Associations: Financial Disintermediation- A One Way Trip, is the third in a series on European sub-sovereigns' financing needs and access to market funding.

Volcker Rule likely delayed until after US presidential elections

Monday, 16 April 2012
Volcker Rule likely delayed until after US presidential elections As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports. http://www.ftseglobalmarkets.com/

As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports.

Regulators had hoped to have the Volcker Rule finalised by mid-July. However, ironing out the increasingly complex proposal—which includes newly added exemptions needed to placate the bill’s many opponents—will likely take much longer.

Retiring Massachusetts congressman Barney Frank, head of the House Financial Services Committee and co-author of the 2010 Dodd-Frank Act, has suggested something of a compromise; that regulators work towards completing a simplified version of the law by early September. "The agencies [have] tried to accommodate a variety of views on the implementation,” says Frank, “but the results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly.”

Financial institutions may be struggling to regain public trust in the wake of the 2008 credit meltdown; however that has not stopped officials from taking aim at the proposed Volcker legislation during the SEC’s comment period which closed on February 13th. Speaking on behalf of the Securities Industry and Financial Markets Association (SIFMA), Tim Ryan, SIFMA’s president and chief executive officer called the proposed regulations “unworkable” and “not faithful to Congressional intent”. Moreover, Ryan says they will have negative consequences for US financial markets and the economy.

Echoing a common theme among Volcker critics, Ryan contends that the new law could result in drastically reduced market liquidity for investors, and make it more difficult for companies to raise capital. SIFMA’s five-part comment letter includes proposed modifications to proprietary trading restrictions and hedge fund/private-equity fund investment activity under Volcker, and expresses concern over Volcker’s impact on municipal securities and global securitisation.

Like almost everything else drafted by the Obama White House, the Volcker Rule has virtually no support in the GOP, and includes among its detractors Daniel Gallagher and Troy Paredes, the two Republican members of the Securities and Exchange Commission (SEC). Speaking at an Institute of International Bankers conference held in Washington last month, Gallagher suggested that regulators re-examine their initial efforts and, if necessary, “go back to the drawing board to make sure we regulate wisely, rather than just quickly.”

Not that all of the criticisms have had political overtones. An exception to the rule allowing US banks to continue trading treasuries and municipal bonds has drawn fire from state and local government agencies, which have demanded that they receive the same exemption. The Municipal Securities Rulemaking Board (MSRB), the US-based firm charged with protecting investor interest in the municipal-securities space, has urged regulators to expand the rule’s proprietary trading exemptions to include municipal-bond brokers. It’s an effort to avoid “bifurcation” within the municipal securities market, says MSRB, warning current exemptions “are not useful in the municipal securities market,” and unless modified will “prevent a free and open market from prevailing.”

Nor has Volcker venting been limited to the US. In a comment letter issued in February, the European Fund and Asset Management Association (EFAMA), the representative association for Europe’s investment-management community, argued that exemptions favouring US institutions pose a serious threat to European funds due to the potential shift in the balance of power. Accordingly, regulators should take the necessary steps to prevent any negative impact on liquidity and operational efficiency abroad, said the group.

Meanwhile, Oregon’s Democratic Senator Jeff Merkley, who along with Senator Carl Levin of Michigan helped draft some of the Volcker provisions, bristled at suggestions that substantial modifications would be required. If anything, said Merkley, the rule needs to be tougher, though not “as vague or complex as regulators are making it.” Also in favour of a stronger Volcker is former Citigroup chief executive officer John S Reed, who has argued that in its present form the rule “does not offer bright enough lines or provide strong enough penalties for violation."

Having made regulatory reform one of its chief priorities, the Obama administration is unlikely to cede any ground in the months leading up to the US presidential elections in November. Hence, even the most vocal of Volcker opponents admit that change is unlikely to happen until after the new Congress convenes in January of next year.

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