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IMF Working paper-Strengthening Russia's Fiscal Framework
March 14, 2012--Summary: Though many aspects of Russia's fiscal policy framework are close to best practice on paper, actual practice in recent years has been moving away from best practice.
In particular, the continued focus on the overall rather than the nonoil balance, and the regular use of supplemental budgets to spend windfall oil revenues contribute to procylicality of fiscal policy, risking costly boom-bust cycles. Against this background, this paper suggests several improvements to the framework for fiscal policy.
view IMF Working paper-Strengthening Russia's Fiscal Framework
Source: IMF
Regulators starting to tighten leash on ETFs
March 14, 2012--Exchange traded funds are all the rage these days, and regulators have quickly realized that oversight hasn't kept up with the explosion.
Not only do regulators want to ensure that investors aren’t getting screwed, they’re also worried about the effects ETFs have on marketplace stability. The Bank of England recently pointed out that the complexity, opacity and interconnectedness of ETFs can “amplify propagate stress across markets.” In layman’s terms: they can really mess things up.
For that reason, the Financial Stability Board has already made some comments on the future of ETFs, and the International Organization of Securities Commissions -- the big global regulatory body -- has just put out a proposal for regulation of ETFs in hope of getting feedback.
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Source: The Globe and Mail
Financial transaction tax: first technical reading completed
March 14, 2012--On 13 March 2012 the Economic and Financial Affairs Council took stock of the work done on the proposal for a directive on the EU-wide financial transaction tax. The ministers identified the outstanding issues and discussed the next steps.
The Danish Presidency concluded that the first technical reading of the proposal had been completed.
In its report to the ministers the Presidency noted that a whole range of sensitive issues remains to be addressed. Among those issues are specific questions regarding:
the tax base (coverage of currency derivatives and government bonds and its impact on the costs of hedging and government borrowing; coverage of pension schemes and its impact on business models used in various member states, etc.);
structure of the rates and persons liable to tax;
more general questions regarding the impact on the economy, the risks of relocation outside of the EU, enforcement of the directive vis-à-vis non-EU financial institutions and delegated acts.
"It was a very fruitful and very constructive discussion. I guess that the different views on the proposal itself are well known, but there was an atmosphere of compromise and trying to find ways," said Danish Minister for Economic Affairs and the Interior Margrethe Vestager, who chaired the meeting.
The Council will continue its technical analysis in order to look at all the aspects of the proposal and their implications in practice.
view report-Presidency Note Reflecting The State of Play As Regards The Commission Proposal For A Financial Transaction Tax (FTT)
Source: Council of the European Union
Budget 2012: will 100-year bonds work?
March 14, 2012--The chancellor is considering issue long-term government bonds-packages of government debt-that may never have to be paid off in what his aides have described as a move to cash in on the current historically low interest rates on British government debt.
This is from the top of my colleague Nick Watt's story about the announcement:
George Osborne is to exploit Britain's historically low borrowing rates by making plans to issue "perpetual" government bonds which will never have to be repaid. In an unprecedented move in the modern era, the chancellor will unveil plans in the budget to relieve the debt burden on future generations by extending the length of bonds to 100 years or into perpetuity.
Lengthening the period of bonds will make it cheaper to pay down debt in the long term because the government would lock in today's low borrowing rates. Average 10-year gilt yields stand at 2%, the lowest borrowing level since the 19th century.
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Source: The Guardian
Eurozone official inflation at 2.7% in February
March 14, 2012--Euro area1 annual inflation was 2.7% in February 20122, unchanged compared with January3. A year earlier the rate was 2.4%. Monthly inflation was 0.5% in February 2012.
EU4 annual inflation was 3.0% in February 2012, up from 2.9% in January. A year earlier the rate was 2.9%. Monthly inflation was 0.5% in February 2012.
These figures come from Eurostat, the statistical office of the European Union.
Inflation in the EU Member States
In February 2012, the lowest annual rates were observed in Sweden (1.0%), Greece (1.7%) and Spain (1.9%), and the highest in Hungary (5.8%), Estonia and Poland (both 4.4%). Compared with January 2012, annual inflation fell in nine Member States, remained stable in five and rose in eleven.
The lowest 12 month averages5 up to February 2012 were registered in Sweden (1.3%), Slovenia (2.1%) and Malta (2.3%), and the highest in Romania (5.1%) and Estonia (5.0%).
Euro area
The main components with the highest annual rates in February 2012 were transport (4.6%), housing (4.4%) and alcohol & tobacco (4.1%), while the lowest annual rates were observed for communications (-3.0%), recreation & culture (0.9%) and education (1.0%). Concerning the detailed sub-indices, fuels for transport (+0.38 percentage points), gas and heating oil (+0.14 each) had the largest upward impacts on the headline rate, while telecommunications (-0.19), cars (-0.09) and rents (-0.08) had the biggest downward impacts.
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Source: Eurostat
Russian Federation: Detailed Assessment of Observance of IOSCO Objectives and Principles of Securities Regulation
March 13, 2012--I. SUMMARY, KEY FINDINGS, AND RECOMMENDATIONS
1. This assessment reviews the regulatory framework in place for the oversight of
the capital markets of the Russian Federation as of June 2011. The assessment concludes that, since the previous assessment, the regulatory authority for the capital markets, which is the Federal Service for Financial Markets (FSFM), has led the adoption of significant reforms in applicable legislation and undertaken ambitious normative (regulatory) initiatives directed to meeting the IOSCO benchmarks for which the process of implementation is ongoing.
The assessment also finds that FSFM’s ability to come into full compliance would be materially advanced by the adoption of pending legislation related to exchanges, prudential supervision, bank secrecy, and consolidated supervision. The FSFM absorbed the
Federal Service on Insurance Supervision (FSIS) as of March 4, 2011. Subsequent changes added certain other non-banking financial institutions to FSFM’s remit and will transfer
certain of its normative powers with respect to capital requirements for market professionals
and the diversification of mutual fund assets to the Ministry of Finance (MoF).
Navesis-ETF platform moves into Emerging Markets
After successful launch, Navesis-ETF, the ETF trading platform by Tradition and Nomura, expands into Emerging Markets Products
March 13, 2012- Following the successful launch of Navesis-ETF, the MTF for trading ETFs referencing NAV, Tradition and Nomura today announced the listing of 35 new Emerging Markets ETFs on to the platform.
These additions significantly enhance the depth and range of markets that can be accessed through the platform. The additions address requests received from the Navesis customer base, epitomising the continued philosophy of a platform developed to fulfil the desires of market participants. Further product and issuer additions are planned.
Since Navesis-ETF's successful launch in February this year, the platform now lists almost 200 ETFs, covering Equities, Commodities, Fixed Income and Emerging Markets. Most of the core customer base have signed up and work is in progress to add several more market makers to the platform. New functionality enhancements are constantly being made, incorporating client feedback.
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Source: Navese
Top Russian CEO says doubt affecting fund industry's growth
March 13, 2012--One of Russia's leading fund managers Alexander Pugach, CEO of UralSib Asset Management, reveals what are the main factors likely to impact the Russian fund industry over the next few years.
In this exclusive Citywire interview at his offices in Moscow, he outlines his vision of the future, discussing how asset managers will need to adapt their business models to be confident of growth in the next few years and who will be the winners and the losers.
Following the Russian asset management sector's near collapse after the 2008 crisis, with the Moscow stock market suffering a severe drop and many Russian investors withdrawing their cash from asset managers, Pugach reveals whether he expects to see more such systemic crises and what is the best way to tackle them.
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Source: CityWire
Publication of responses to the consultation on Delegated Acts concerning short selling and CDS
March 13, 2012--The Publication of responses to the consultation on Delegated Acts concerning short selling and CDS is now available.
view responses
Source: EDHEC
New EDHEC-Risk Research Sees No Evidence of Causal Link between Credit Default Swap (CDS) and Sovereign Debt Prices
In newly-released research by Dominic O'Kane, Affiliated Professor of Finance at EDHEC Business School, EDHEC-Risk Institute has performed a theoretical and empirical analysis of the relationship between the price of eurozone sovereign-linked credit default swaps (CDS) and the same sovereign bond markets during the eurozone debt crisis of 2009-2011.
March 13, 2012--The working paper, entitled "The Link between Eurozone Sovereign Debt and CDS Prices," tests the claim that speculative use of CDS by market participants had caused or accelerated the rapid decline in 2010-11 of bond prices in eurozone periphery countries,
a claim that led to the decision by the European Parliament and member states on October 18, 2011, to make the ban on so-called "naked" CDS permanent.
The EDHEC-Risk research shows that CDS spreads do not drive the sovereign bond spread in all circumstances, and that in various countries and at various times, the opposite effect is present. The results are in line with those of a recent report from the French regulatory authority, the AMF, entitled “Price Formation on the CDS Market: Lessons of the Sovereign Debt Crisis (2010- ),” even though the latter study is less comprehensive than EDHEC-Risk’s working paper. EDHEC-Risk is keen to stress that certain conclusions in the AMF report should be analysed with care. A causal link between rising CDS spreads and their decision-making character has not been established or proven in the report, which moreover does not include a formal test on the subject.
view EDHEC-Risk Working Paper Link between Eurozone Sovereign Debt and CDS Prices report
Source: EDHEC
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