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Life settlements make their way in the UK
January 22, 2010--US life settlements, the business of buying life assurance policies from individuals and collecting a pay-out when they die, is becoming an increasingly talked-about asset class in the UK.
Evans Randall, the property-focused private equity group, is the latest in a small group of UK investment managers to offer a product for retail investors with the launch of what it calls the only US Life Settlements fund approved by the Financial Services Authority. The US life settlement market has grown rapidly in recent years and has attracted interest during the financial crisis as an asset whose performance is not correlated with changes in other markets or economic conditions.
Second estimate for the third quarter of 2009-EU27 current account deficit 27.7 bn euro
16.7 bn euro surplus on trade in services
January 22, 2010--According to the latest revisions1, the EU272 external current account3 recorded a deficit of 27.7 billion euro in the third quarter of 2009, compared with a deficit of 73.5 bn in the third quarter of 2008 and a deficit of 49.0 bn in the second quarter of 2009.
In the third quarter of 2009, compared with the third quarter of 2008, the deficit of the goods account decreased (-19.1 bn euro compared with -64.9 bn), as did the deficit of the income account (-8.6 bn compared with -14.2 bn). The surplus of the services account fell (+16.7 bn compared with +19.3 bn) and the deficit of the current transfers account increased (-16.7 bn compared with -13.7 bn).
The surplus recorded in the services account (+16.7 bn euro) is mainly the result of surpluses in "other business services", which includes miscellaneous business, professional and technical services (+8.9 bn), financial services (+5.7 bn), transportation (+5.4 bn) and computer & information services (+4.1 bn), partially offset by deficits in travel (-5.6 bn) and royalties & licence fees (-3.9 bn).
In the third quarter of 2009, the EU27 external current account recorded a surplus with the USA (+12.5 bn euro), Switzerland (+6.0 bn), Canada (+2.4 bn), Hong Kong (+2.1 bn), Brazil (+1.6 bn) and India (+1.1 bn), and a deficit with China (-29.3 bn), Russia (-8.4 bn) and Japan (-8.0 bn).
Financial Account
In the third quarter of 2009, the EU27 made direct investments abroad for 56.2 bn, compared with 75.7 bn in the same quarter of 2008, while foreign direct investors made investments in the EU27 for 26.9 bn, compared with investments for 64.5 bn in the same quarter of 2008. Portfolio investments recorded a net inflow of 100.8 bn, compared with 153.2 bn in the third quarter of 2008.
These provisional data, issued by Eurostat, the statistical office of the European Union, are based on the information available at the time of publication and subject to revision.
Risks in the Financial System Report
January 22, 2010--Finansinspektionen warns that there are several potential risks that must be carefully monitored. One of the risk areas highlighted in the new report, Risks in the Financial System, and the object of a review by FI is the mortgage market.
FI believes that mortgage credit losses do not constitute a threat to the stability of the banks. However, heavily borrowed households may suffer when interest rates rise if the banks do not carry out comprehensive credit checks.
Micro loans, often called SMS loans, are another threat for consumers. Companies that offer micro loans do not fall under FI's control and thereby are not subject to supervision. FI believes that legislation in this area must be reviewed.
The results of the new stress tests conducted by FI during the fall show that the Swedish banks can withstand sustained major credit losses in the Baltics and that their capital buffers are stronger now than they were in the spring.
In order to gain an overview of the current global financial risks, FI created a panel of internationally renowned experts. The panel emphasised that the commercial real estate sector is a source of risk and indicated that this sector can cause large credit losses in the future, both in Europe and the USA. It is the opinion of the panel that there are still significant risks in Eastern Europe.
view the Risks in the financial system November 2009
IOSCO completes global framework to fight against cross-border market abuse
January 22, 2010--IOSCO completes global framework to fight against cross-border market abuse The International Organization of Securities Commissions (IOSCO) has announced that it has achieved its goal, set in 2005, of having its eligible membership sign onto or committed to sign the Multilateral Memorandum of Understanding concerning Consultation, Cooperation and the Exchange of Information (MMoU).
The goal was achieved at the last meeting of the Chairs of the Executive, Technical and Emerging Markets Committees, at the conclusion of which the Conseil du Marché Financier of Tunisia was invited to become the latest full signatory to Appendix A of the MMoU. From IOSCO’s eligible membership of 115 securities regulators, 96% now meet the requirements needed to become signatories to the MMoU, or have made the necessary commitment to seeking national legislative changes to allow them to do so in the near future.
The 64 full MMoU signatories can now request and share confidential information in the pursuit of cross-border securities offences. IOSCO’s rigorous expert assessments found that these jurisdictions are fully compliant with the cooperation and enforcement requirements of the MMoU.
The majority of the remaining eligible IOSCO members, a further 46, have indicated their commitment to seeking the changes necessary to become signatories. A small number of members have yet to formally enter the process and are likely to receive technical assistance to help them meet the minimum requirements.
DB Index Research -- Weekly ETF reports -- Europe
January 21, 2010--Highlights
ETF Volume
Exchange based Equity ETF turnover declined by 2.8% on the previous week. Daily turnover for the previous week was E1.1bn. European fixed income ETF turnover rose by 5.8% to E207.5m.
n exchange based bond ETFs, db x-trackers II EONIA TR Index ETF has the highest daily turnover of E18.30m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E52.71m.
There were 23 new listings last week. CASAM issued thirteen new ETFs on NYSE Euronext Paris followed by Credit Suisse AM which issued seven new ETFs on Swiss Stock Exchange. UBS issued two new ETFs on Swiss Stock Exchange and ETFlab launched one new ETF on Deutsche Borse. All the new listings were primary listings.
European Regional ETFs remained at the top position as leading product area with total turnover of E342m with 31.93% of total ETF turnover followed by Country ETFs with total turnover of E248m accounting for 23.15% of total ETF turnover. The DAX ETFs remain the dominant country products with total average daily volume of E123m across the fourteen listed products and accounting for 11.4% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 15.4% of turnover trading E165m per day with liquidity split across 17 ETFs and 44 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 37.7% of total turnover. The Euronext NextTrack platform has 18.3% market share. The LSE’s combined Italian Exchange and London market share is now 28.0%.
Assets under Management (AUM)
Total European Equity related AUM declined by 1.6% to E115.7bn during last week. AUM for DJ Euro STOXX 50 ETFs was E22.9bn accounting for 20.0% of total European AUM. Fixed Income ETF AUM remained at about the same level at E36.4bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.2bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.3bn.
To request a copy of the report
FSA Chairman calls for close engagement between accounting standard setters and prudential regulators of banks
January 21, 2010--FSA chairman, Lord Turner, today called for close engagement between global accounting standard setters and those responsible for prudential regulation of the banking sector to address issues arising from the unique systemic nature of banks.
Financial Services Authority (FSA) chairman, Lord Turner, today called for close engagement between global accounting standard setters and those responsible for prudential regulation of the banking sector to address issues arising from the unique systemic nature of banks.
Speaking today at a conference hosted by the Institute of Chartered Accountants of England and Wales (ICAEW) in London, Adair Turner, said: “No other sector of the economy is remotely comparable to banking in its capacity to be a driver of economic volatility rather than a victim of it.” As a result, he argued that banks must be viewed differently from any other sector of the economy, including the rest of the financial sector, and that accounting standards relevant to banks need to reflect these differences.
He highlighted two aspects of existing bank accounting practice which contribute to the problem of procyclicality and are, therefore, intrinsically tied to macro-prudential and macroeconomic concerns:
First, the accounting treatment of loan losses within the banking book. This bases loan loss provisions on evidence of already current credit impairment and does not allow for reasonable judgements on future potential losses. And second, the ‘fair value’ valuation approach (predominantly ‘mark-to-market’) in the trading book, which recognises unrealised gains or losses and which, especially when applied to illiquid securities, can drive harmful volatility in both upswings and downswings.
GAM unit hoping to list physically-backed base metals ETFs by year end -source
The exchange traded funds will be listed on the Swiss exchange
January 21, 2010--GAM Holding (GAMH.VX) unit Swiss and Global Asset Management (S&G) plans to list some of the first physically-backed base metals exchange traded funds by the end of the year, a source close to the asset manager said.
The ETFs, to be listed on the Swiss exchange, will buy physical quantities of copper, zinc, aluminium and nickel to gain exposure to spot market prices rather than futures contracts, where prices can diverge sharply from spot prices, the source said.
As a result of this divergence, asset managers say, commodities ETF investors can find their returns vary widely from those of the underlying commodity.
Government moves to support UK Islamic finance industry
January 21, 2010--The Treasury has introduced measures in Parliament to support Islamic finance and the issuance of corporate sukuk within the UK.
The Financial Services and Markets Act 2000 Order 2010, will help to provide a level playing field for corporate sukuk within the UK. The Order provides clarity on the regulatory treatment of corporate sukuk, reducing the legal costs for these types of investments and removing unnecessary obstacles to their issuance.
Sukuk are a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles. Although there is an obvious appeal to the Muslim community, sukuk can be issued and bought by everyone.
Exchequer Secretary to the Treasury Sarah McCarthy-Fry MP said:
“The Government’s objectives on Islamic finance are to enhance the UK’s competitiveness in financial services by maintaining the UK’s position as a Western leader for international Islamic finance; and to ensure that everybody, irrespective of their religious beliefs, has access to competitively priced financial products.”
“This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country. It is good news for the UK economy and for our Islamic finance industry.”
January 2010: Flash Consumer Confidence Indicator
January 21, 2010--In January 2010, the DG ECFIN flash estimate of the consumer confidence indicator signals an improvement for the EU aggregate (up to -13.3 from -14.3 in December) and a broadly unchanged level for the euro-area aggregate (-15.8 compared with -16.1 in December).
The Economic Sentiment Indicator continues to recover
The Economic Sentiment Indicator (ESI) rose once again in December to 92.0 (+4.1 points) in the EU and to 91.3 (+2.5) in the euro area. It has improved in both areas for nine consecutive months since its trough in March 2009, though it still remains below its long-term average.
FSA outlines concerns about firms' handling of clients' money and assets
January 21, 2010--The Financial Services Authority (FSA) has sent a letter and report to the chief executive officers (CEOs) of major insurance brokers and investment firms which are able to hold money or assets on behalf of clients. The letter draws attention to the FSA’s concerns over the handling of clients’ money and assets
It follows a letter sent to firms in March 2009, which explained the obligations a firm has to protect clients’ money and assets and set out the FSA’s intention to conduct further firm visits during 2009.
Subsequently the FSA visited a range of firms and found a number of failings. As a result, the FSA took the decision to write to chief executives with an accompanying report containing details of visit findings, and highlighting some of the weaknesses discovered.
These included:
poor management oversight and control;
lack of establishment of trust status for segregated accounts;
unclear arrangements for the segregation and diversification of clients’ money; and
incomplete or inaccurate records, accounts and reconciliations.
The FSA has already taken measures against a number of the firms that it visited, including referring two firms to enforcement, freezing a firm’s assets and commissioning skilled persons reports.
Sally Dewar, managing director of risk, said:
"The client asset rules are a key protection for consumers. It is simply unacceptable that firms are not ensuring that consumers get the appropriate protection. We have pointed out our concerns to firms and will be following up these concerns with further visits this year."
The report also includes examples of how firms should meet FSA expectations in relation to compliance with its requirements. Over the course of the year, the FSA will be increasing its visits to firms to assess how well these are being met.
