Americas: the usual suspects
As we go to press President Trump
signed into law the National Defense Authorization Act,
which contains the long-awaited Foreign Investment Risk Review
Modernization Act (Firrma). Firrma strengthens and broadens the
existing scope of Committee on Foreign Investment in the United
States (CFIUS) by expanding its authority over critical
infrastructure, technologies and real estate investments.
Firrma gained bipartisan approval, and is very much seen as
necessary additional safeguard to US national security.
The benchmark secured overnight financing rate (SOFR),
touted as the most likely replacement for the London interbank
offered rate (Libor), got another boost this week as the World
Bank issued $1 billion two-year floating-rate notes that are
attached to the rate. The news follows the inaugural issuance
by Fannie Mae last month, an important follow up in the
development of the rate.
The presiding judge of the District Court of Massachusetts
has made the move to push back
the case against Scottrade for its violation of the Department
of Labor’s fiduciary standard rule, so that it
is under the administration of the state, as per the request of
state regulator William Galvin. This is rather than have the
case contested in a federal proceeding.
President Trump announced economic moves against Turkey, a
country whose US relations are not good at this time –
he claimed, on Twitter. Another announcement on Twitter
– mentioned last week – by Elon Musk has put
Tesla in hot water, as the Securities and Exchange Commission
followed through on its threat and issued the company a
subpoena for actions against shareholders.
Asia Pacific: falling into place
China’s Ministry of Finance on Tuesday ordered
local governments to speed up the issuance and use of special
bonds for infrastructure projects in a move to boost investment
and domestic demand amidst a worsening trade war with the US.
Provincial governments have been tasked with meeting at least
80% of their special bonds quota issued by end of September and
the rest should be sold in October.
India is mulling a new data privacy law that will regulate
how organisations can collect, process and store
citizens’ data. Spurred by a Supreme Court of
India decision in August 2017 which held that privacy is a
fundamental right, the Indian government is creating a data
protection regime that hasn’t existed before.
Drawing from a number of aspects of Europe’s GDPR,
the proposed law will give data subjects the right to confirm
whether and how their data is used, the ability to correct
misleading or false data, the right to be forgotten, and it
aims to fine companies four percent of turnover if they are in
breach of the law. Data localisation requirements being
proposed will also cause headaches to businesses, especially
EMEA: instability the standard
Turkey has dominated news headlines this week after the
Turkish Lira weakened 35% against the dollar. Economic
sanctions enforced by the US has led to a currency crisis in
Turkey, forcing national regulators to cut the limit for
banks’ forex swaps to 25% which makes it harder
for Turkish banks to short the currency. Since the rule change,
the lira has stabilised somewhat, yet concerns remain about the
short-term future of the Turkish economy. President Trump seems
unwilling to back down unless US Pastor Brunson and other US
citizens are released. Qatar has come to Turkey’s
aid with a $15 billion investment, but more help may be needed
soon if short-term improvements fail to arise.
Signs are that the collateralised loan market is about to
enter into a downturn after last year’s high
performance. Arbitrage is expected to be made more difficult as
the margins go up on the debt notes, even if the underlying
assets are paying more. Concerns are also emanating about the
Securitisation Regulation, which creates the concept of a third
party verification (TPV) agent to check whether a
securitisation fulfils the simple, transparent and standardised
But only two firms so far have applied and insurance firms,
credit institutions, investment firms and credit rating
agencies cannot become one. Fears are that the responsibilities
outlines are unclear and the notification template is going to
be time-consuming to complete. The Securitisation
Regulation and an amendment to the Capital Requirements
Regulation came into effect on 18 January, but most
provisions will come into effect on January 1 2019.
Consultations are being held currently on the role of TPVs.
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