GFMA - News on the global financial markets

Industry News

Deutsche Boerse wants OTC derivatives included in NYSE bid review
Deutsche Boerse urged EU regulators to assess its proposed merger with NYSE Euronext by including the over-the-counter derivatives market as well as the exchange-listed market. The European Commission reportedly has been considering only the smaller exchange-listed market in its review of the $9 billion deal. Representatives from interested parties including AFME, London Stock Exchange Group, Nasdaq OMX Group, ICAP and Bank of New York Mellon joined a hearing in Brussels between Deutsche Boerse and NYSE Euronext executives and regulators. Reuters(27 Oct.)

Think tank predicts 38% drop in City bonuses this year
The Centre for Economics and Business Research reversed a prediction that 2011 City bonuses will increase 6%, forecasting a 38% decline. The think tank estimated a bonus pool of about £4.2 billion for London's financial firms. In 2007, the pot reached a record £11.6 billion. Reuters(28 Oct.)

EBA's risk weightings hit Nordic banks harder than peers
The European Banking Authority decided to assign significantly higher risk weightings on mortgage assets compared with national regulators. The situation penalises Nordic banks, which rely on mortgage credit for a large part of their operations. "The choice to use transitional rules is of course unfortunate for these banks and punishes them in a way," said Martin Noreus of the Swedish Financial Supervisory Authority. "It’s clearly not favourable for Swedish banks." Bloomberg(27 Oct.)

Regulatory Roundup

UK officials remain opposed to EU tax on financial transactions
UK Chancellor George Osborne told lawmakers in Parliament that Britain will oppose any tax on financial transactions that is not implemented globally. "The euro zone is determined to pursue a financial-transaction tax," Osborne said. "Britain will not accept a financial-transaction tax at an EU-27 level while other places in the world don't have one." Meanwhile, London Mayor Boris Johnson urged the EU to drop the idea, which he said would drove business from London and result in job losses. Bloomberg(27 Oct.), Financial Times (tiered subscription model)(27 Oct.)

Global regulator takes aim at shadow-banking sector
The Financial Stability Board is tackling the $60 trillion shadow-banking sector to rein in risk. The global regulator wants to make it more difficult and expensive for banks to conduct business with the nonbanking financial sector. The FSB proposed tougher regulation of the sector. "The shadow banking system can also be a source of systemic risk both directly and through its interconnectedness with the regular banking system," according to the FSB. Reuters(27 Oct.)

BIS official questions EU's treatment of sovereign-debt risk
Herve Hannoun, deputy general manager of the Bank for International Settlements, said sovereign debt should not be given a zero risk weight, as it is under the EU's Capital Requirements Directive. "The global sovereign-debt crisis has exposed fault lines in the regulatory treatment of sovereign risk," Hannoun said. "However, the deficiency is not in the Basel standards but in the way the global standards have been applied in some countries and especially in the European Union." Global Financial Strategy(27 Oct.)

Bank of Japan boosts government-bond purchases
The Bank of Japan aims to bolster the economy by increasing purchases of government bonds. The central bank warned about threats from Europe's debt crisis and a strong yen. "Current yen rises are having a big negative impact on Japanese corporate sentiment and exports," said Governor Masaaki Shirakawa. "Global economic uncertainty, including Europe's debt problem, remains very high, prompting global investors to seek safe-haven assets." Reuters(27 Oct.)