In the news this week

Author: Amélie Labbé | Published: 27 Jul 2018
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Americas: about turn

For many observers, one of the most satisfying news stories of the week will probably by the turning fortunes of social media megalith Facebook, who reported dwindling sign-up rates for the first time in its 14-year history. Following the news, share prices fell dramatically by somewhere between 18 and 20%, causing founder and chief executive Mark Zuckerberg to slip from third to sixth in the world rich list.

Never one to shy away from the headlines, President Donald Trump welcomed the president of the European Commission, Jean-Claude Juncker, to the White House to discuss the ongoing, and escalating, tariff war seen around the world. A well-timed tweet announced Trump favoured dropping all tariffs between the two jurisdictions, an eventuality that appears to have taken shape during proceedings. 

Earlier on Thursday, Fannie Mae announced that it had priced the first floating rate senior unsecured debt of the benchmark secured overnight financing rate (SOFR), touted as the most likely replacement for the London interbank offered rate (Libor). The $6 billion trade will give SOFR a significant confidence boost in the race to be the go-to replacement benchmark rate.

Finally, the Commodity Futures Trading Commission looks set to finally have a full commission, after democratic nominee Dan Berkovitz surfaced from a Senate hearing relatively unscathed on Tuesday.

Asia-Pacific: action, reaction

Faced with trade tensions and recent domestic financing clampdowns, China’s State Council has announced a number of policy measures to ease liquidity, fiscal and regulatory conditions, including additional corporate tax deductions of RMB65 billion ($9.55 billion approximately) on research and development, an injection of RMB502 billion into the financial system and an easing of restrictions on wealth management products. 

The Hong Kong Monetary Authority (HKMA) has created an open application programming interface (API) framework for the banking sector. The move will ease information sharing between banks and third-party vendors. The framework lays out expectations on how banks should onboard and maintain relationships with third-party service providers to ensure customer protection. The framework is one of the seven initiatives announced by the HKMA in September 2017 to prepare Hong Kong for an era for smart banking.

Asifma has launched a report on the regulation of outsourcing. Targeting the regulatory fragmentation challenges financial institutions are facing, it proposes nine principles for regulation of outsourcing for regulated securities, futures and banking intermediaries in the Asia-Pacific region.

EMEA: looking for solutions

Eighteen months after the failure of Banca Popolare di Vicenza and Veneto Banca, Italian bank Banca Carige has been asked by the European Central Bank (ECB) to present a new capital plan by November. In conversation with IFLR, an EU official said that a bank merger could be a solution and also help consolidate a sector said to be overgrown. Banca Carige provided the ECB with a proposal and gave several outlines previously, but repeated attempts to issue hybrid capital failed, forcing the ECB to demand the bank present a new plan before the end of the year.

The ongoing European bad loan problem will only be solved if there is convergence between European Central Bank and European Commission rules, amid fears that low hanging fruit has been picked. Non-performing loans (NPLs) in Europe have steadily declined in recent years, but there are fears that this progress could come to a standstill now that the easiest NPLs have been securitised and regulatory uncertainty remains.

Private equity firms are doing away with shorter terms on their investments and adopting a more long-term approach, a sign that the sector is modernising. As a result of this, it is expected that funds will behave more like corporates and increase their focus on buy and build strategies and there will be an increase in club deals. "It is more a diversification of what the market is offering," said Katja Butler, partner at Skadden.

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