Sias to host corporate governance week

SINGAPORE

in the region are recognising the

need for better corporate governance

— something that can be

achieved by increasing the level

of communication between companies’

boards and investors, according

to the Securities Investors

Association Singapore (Sias).

“Investors want to know how

companies are ensuring independence

on the board. If they are truly

run by independent directors, it

will be good for investors,” said Sias

president and chief executive David

Gerald yesterday.

His comment came as Sias announced

its first week-long corporate

governance event slated for Oct 4

to 8. Highlights include the Asian

Investors’ Corporate Governance

Conference, the Investors Choice

Awards, executive workshops and

a seminar for Catalist-listed firms.

It is targeting 400 participants,

two thirds of which are expected

to come from South-east Asia. The

event also calls on companies to

publish a statement of support for

corporate governance in the media.— More organisations

China to launch credit default swaps

But derivatives restricted to avoid pitfalls

NEW YORK

China will limit the amount of leverage used in CDS and will not permit the contracts to be written on high-risk assets such as sub-prime mortgages, Mr Shi Wenchao, the secretary general of the National Association of Financial Market Institutional Investors (Nafmii), told reporters at a briefing in New York. Crucially, investors in the derivatives will also be required to own the underlying security, Mr Shi said.

“It’s too bad that we in America and in Europe did not have those kinds of limitations two or three years ago,” said Mr Donald Straszheim, International Strategy and Investment Group’s head of China research.

“All of us around the world might be in a lot better shape than we are now. What’s most important is that their plans are to not allow this whole process to get out of control,” he added.

CDS are derivatives that pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

Private swaps complicated efforts to solve the 2008 global credit crisis in the US when regulators and market users could not easily determine how interconnected banks had become through trading contracts.

American International Group needed a federal bailout that swelled to US$182 billion ($243 billion) after losses fuelled by a unit that sold CDS on mortgage-linked debt to banks including Goldman Sachs.

— China will introduce credit-default swaps (CDS) by the end of the year, allowing banks to hedge risk while restricting the contracts to avoid pitfalls the American credit markets experienced over the last several years, according to an official with a state-backed Chinese financial association.Neither Evil Nor Good

“We believe CDS is a neutral risk-management tool. It is neither evil nor good,” said Mr Shi, whose group monitors the country’s interbank market and promotes innovation in financial products.

“CDS in China is a management tool. There will be no repackaging or restructuring of risk,” he added.

China is planning to introduce credit derivatives to help manage risk in the nation’s growing domestic bond market, he had said earlier at a June briefing in Beijing.

Sales of yuan-denominated corporate bonds in China jumped to 496 billion yuan ($98 billion) last year from just 7.9 billion yuan in 2000, according to data compiled by

The People’s Bank of China formed Nafmii in 2007 to help develop the country’s over-the-counter financial markets, which span bonds, loans, foreign exchange, commercial paper and gold.

Last month, McDonald’s became the first foreign company to sell yuan-denominated bonds in Hong Kong with a 200 million yuan issue.

Nafmii officials are in New York meeting with firms including Citigroup and JPMorgan Chase about the asset-backed securities market, Mr Shi said.

The group also met with financial firms in Germany and Poland to discuss securitisation, he added.

Chinese officials began discussions with bankers several years ago to learn about securitisation, he said.

In 2007, AAA-rated securities backed by home loans tumbled in value with the onset of the sub-prime mortgage crisis, leading to US$1.8 trillion of losses worldwide.

“We learned from the UK, Europe and the US. But we did find that there were problems with some of the teachers,” Mr Shi said.

It’s too bad that we in America and in Europe did not have those kind of limitations ...

Mr Donald Straszheim, International Strategy and Investment Group’s head of China ResearchBloomberg. The global CDS market is now US$25 trillion after reaching US$62 trillion in 2007 before the financial crisis.BLOOMBERG

Getting tough on banks

S’pore lenders not affected ? Analysts

BASEL

Banks in Singapore are largely unaffected by the new rules as they are way ahead of the requirements, analysts said.

The Monetary Authority of Singapore (MAS) yesterday said: “Singapore-incorporated banks, which have been subject to MAS’ conservative capital requirements, are well-capitalised and are adequately placed to meet these new global standards.”

“MAS will review our capital standards in consultation with industry and if necessary, revise our current requirements.”

Brokerage research house DMG said: “We see minimal impact on the three Singapore banks as their current capital adequacy ratios are way in excess of the Basel requirements.”

DBS Group, the largest bank in Singapore, said: “We welcome the harmonisation of global capital standards for banks.”

OCBC chief financial officer Soon Tit Koon also welcomed the rules, saying: “We are glad to see the greater clarity provided by the new Basel release.

We will continue to generate common equity through earnings accumulation over the next few years. Our scrip dividend scheme has also helped to preserve our common equity.”

UOB said the rules “provided more clarity and the timeline for implementation is also more generous than the original Dec 2009 proposal.”

As of June this year, DBS Group had Tier 1 capital ratio of 13.1 per cent, according to DMG.

That compares with 15.1 per cent for UOB and 15.3 per cent for OCBC.

The new rules, called Basel III, will require lenders to have common equity equal to at least 7 per cent of assets, weighted according to their risk, including a 2.5-per-cent buffer to withstand future stress, the Bank for International Settlements (BIS) said on Sunday.

Banks that fail to meet the buffer would be unable to pay dividends, though not forced to raise cash, said the BIS. The definitions of what counts as capital and how risk is assessed have also been tightened.

Banks will have less than five years to comply with the minimum ratios — 4.5 per cent common equity and 6 per cent

Tier 1 — and until Jan 1, 2019, to meet the buffer requirements, the BIS said. Tier 1 capital, whose definition has been narrowed, includes common equity and perpetual preferred stock.

Banks are currently required to have common equity equal to 2 per cent of total assets and 4 per cent Tier 1 capital. — Regulators looking to rein in the sort of risk-taking that caused the last financial crisis have reached a compromise in Switzerland that more than doubles capital requirements for the world’s banks while giving them as long as eight years to comply.Agencies

AUD  fOr  gOOd  deposit  Interests ?

gamIng  eqUItIes  fOr  beTTer  retUrns ?

sell  all  properties  and keep one for residence ?

GOLD  is  safe  haven ?

SME lender is Japan’s first bank failure in 7 years

TOKYO

The Financial Services Agency (FSA) has told the bank it cannot do any business for at least three days and must make efforts to protect existing depositors, the agency said in a statement.

Japanese media said the FSA is likely to let the bank go under and will only refund depositors a maximum of Ą10 million ($160,000). This would be the first time that a cap on deposit insurance had been used in Japan, since it was acted in 2002 after a slew of banks went bankrupt with the bursting of the economic bubble in the 1990s.

The bank specialises in providing banking services for small and medium sized businesses. It may report a negative net worth of Ą150 billion, the

Banking shares were mixed in Tokyo trade on Friday; the benchmark Nikkei Index was up 1.90 per cent.

Also on Friday, Japan approved a US$11 billion ($15 billion) stimulus package aimed at helping the export driven economy tackle deflation and the impact of a surging yen.

The previously announced plan, approved by the Cabinet of Prime Minister Naoto Kan, includes initiatives aimed at boosting consumption and creating employment for graduates. It is also intended to provide investment in green industries and offer support for small business.

The fresh stimulus package of Ą915 billion will be financed by reserve funds and is expected to lift the country’s gross domestic product by about 0.3 per cent, creating around 200,000 jobs.

The plan also specifies a strong yen as “a problem that cannot be unaddressed”, stating that the government “will take determined action, including intervention, when needed”.

Revised data on Friday showed that Japan’s gross domestic product grew by an annualised 1.5 per cent in the April-June quarter, well above an initial estimate of 0.4 per cent. — The private Incubator Bank of Japan (IBJ) was reported on Friday to have been ordered to halt operations and will file for bankruptcy yesterday, in what would be Japan’s first bank failure in seven years, officials said.Nikkei Business Daily reported.AFP

property@mediacorp.com.sg  The writer is head of research and consultancy at Chesterton Suntec International.

fOreIgn  MAYBANK  thIrd-lEg  dEEp  pEnEtratIOn  IntO  sIngapOre  BankIng  sEctOrs

vEry  serIOUs  thrEat  fOr  lOcal  sIngapOre  banks  ? ? ? ?

frOm thIs pOInt  Onward,

sIngapOre  banks  wIll  start  tO  shrInk  ? ? ? ?

Islamic banking in the heart of Geylang Serai

Julie Quek

juliequek@mediacorp.com.sg

SINGAPORE

The bank did not disclose the details of the new Islamic financial products at Friday’s launch but confirmed they were in the pipeline and formed part of its strategy to grow its Islamic banking business beyond its domestic market in Malaysia.

The new Islamic banking branch in Singapore is located in the heart of Geylang Serai, home to a large base of Muslims.

It is part of Maybank’s bigger plans for its Islamic banking unit as it aims to be the leading Islamic bank in Asean.

Malaysia’s biggest lender also said it hoped that earnings from outside its home country would contribute a higher percentage to its overall profits over the next five years.

Maybank chief executive Abdul Wahid Omar said: “The idea here will be to grow our profit to make up about 40 per cent from our international operations by 2015.”

Apart from the Asean region, the bank also expects demand coming from the Middle East, China and India.

Analysts say that oil-enriched Middle Eastern investors are attracted to Asia as the outlook for the United States and Europe remain sombre.

Mr Raj Mohamad, managing director of consultancy firm Five Pillars, said: “Asia is very well-positioned now to offer what is commonly known as Syariah-compliant products, to attract these monies from the Middle East.”

With about two-thirds of the world’s Muslim population in Asia, there is a huge potential for retail Islamic banking products to grow, analysts said.— Maybank Singapore has launched the first dedicated Islamic banking branch here and plans to roll out home loans and motor insurance products that are based on Syariah principles.

BRA  banks  flOOd

SIN  banks  ebb

GIC ‘eyeing $3.2b stake in Brazilian bank’

SAO PAULO

GIC declined comment when contacted by

Banco BTG Pactual, controlled by billionaire Brazilian Andre Esteves, was created in 2009 after BTG took over UBS Pactual from the Swiss bank.

It is the largest independent investment bank in Latin America and has regional offices in key global financial capitals such as London and Hong Kong to leverage on its expertise in emerging markets.

The bank operates in the areas of investments, asset management and wealth management.

GIC already is the largest shareholder in Switzerland’s UBS and one of the biggest in United States’ Citigroup, with its stakes in the two banking giants estimated at some $12 billion at current market prices.

If it takes the stake in BTG, it will be spreading its multi-billion bets beyond Europe and North America into the South American market.— The Government of Singapore Investment Corp (GIC) is in talks to buy a 16-per-cent stake in Brazilian investment bank Banco BTG Pactual for US$2.4 billion ($3.2 billion), the Brazil-based Exame magazine reported on Friday, citing people familiar with the negotiations it did not name.Bloomberg, while spokespeople for BTG Pactual in Sao Paulo were not immediately available for comment.

SHORT  BANKS ??

SHORT PROPERTIES  ??

LONG  GENTING  TWINS  ??

Property cooling measures timely: Wing Tai — The measures announced by the government on Monday to cool the property market were timely as prices had gone up to unsustainable levels, according to real estate developer Wing Tai Holdings.

Wong Siew Yin

SINGAPORE

Mr Edmund Cheng, Wing Tai’s deputy chairman who said this on Friday at the launch of its luxury project Belle Vue Residences (picture), added that prices for future land tenders would need to be adjusted downwards as sentiment had cooled.

However, he said Wing Tai would not be affected too much by the new curbs.

“The measures, I think, address the upgraders’ market more. Most of our properties are all high-end, upper-middle and super high-end, so the impact is not much,” he said.

Wing Tai said 109 of its 167 units at Belle Vue had been sold. It said it was confident that the project would be fully taken up, with foreigners expected to make up half the buyers. The remaining units are priced between $2,300 and $2,800 per square foot.

But while developers such as Wing Tai may stay positive, some observers expect the banking sector to feel the impact from the recent anti-speculative measures.

Banks could see a significant drop in profit contributions from housing loans, some analysts said.

“UOB has the largest percentage based on their total income. For them, we are looking at 20 to 30 per cent of their total top line coming from housing loans.

Therefore they would be, in our view, most affected by the clamp down in the property sector, followed by DBS,” said Mr Moh Tze Yang, lead analyst at SIAS Research.

Notes UOB’s 2Q2010 loan growth slower than other 2 Singapore banks due to management’s cautious view.

sOmehOw  sOmebOdy  DON'T  WANT

Testing and Certification tO ensures a high level of integrity and fairness in the bankIng industry

The presence of gaming testing laboratories in Singapore will also attract other gaming machine manufacturers to set up operations here, said Mr Kinsman.