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Vietnam’s Insurance Regulator Growing alongside Market
Vietnam's Insurance Supervisory Authority (ISA), which is housed within the Ministry of Finance, expects double-digit growth for the country's insurance market to continue in 2015, a state-owned news outlet recently reported. ISA data show that gross premiums reached more US$2.63 billion in 2014, up 14.2 percent from 2013. In addition, the turnover of the insurance market posted an average annual growth rate of 14.5 percent during the 2011-14 period, nearly tripling Vietnam’s average GDP growth rate during that span. Observers have credited this strong growth to several factors, including product innovation, general economic strengthening and an improved regulatory environment. In a meeting with Financial Services Committee members in New York on July 2, Chairman Phung Ngoc Khanh of the ISA focused on the following elements of the ISA’s recent and future performance: diversification of product distribution, rapid product approvals, administrative reform, technological innovation within the ISA for more secure and efficient service, enhanced leadership, and improved incentives for firms. Vietnam’s non-life insurance segment is expected to comprise the largest sector of expansion in the medium-term, in line with anticipated increases in consumer spending on property and automobiles. The country’s life insurance sector is forecast to experience slightly slower growth over the same period, partly due to comparatively lower levels of popular financial literacy. Another issue of concern for industry players is the relative unaffordability of conventional life insurance products for many Vietnamese households. Continued efforts by the Vietnamese government to improve to improve the country’s macroeconomic fundamentals are ultimately anticipated to address many of these concerns. Lastly, in with meeting with committee members, Commissioner Khanh proposed an open invitation to U.S. firms to provide the ISA technical assistance in devising future regulation.
MAS Outlines Workforce Development and Regulatory Initiatives to Maintain Financial Services Leadership
In a recent speech at the Association of Banks in Singapore’s annual dinner, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam announced a series of initiatives designed to educate and train the next generation of finance leaders in the country. He described new scholarship funds for early- and mid-career Singaporeans to acquire the skills needed in high-demand areas and introduced the Financial Sector Earn and Learn Program, a 12-18 month program which will allow prospective polytechnic graduates the opportunity to gain experience working in a financial institution and have it count towards a Specialist or Advanced diploma. Domestic and international banks such as Council members Citibank and JPMorgan have already agreed to participate in the program. Furthermore, Minister Shanmugaratnam announced the creation of the Asian Financial Leaders Program, which will bring together C-suite aspirants, policymakers and financial sector leaders together for networking and learning opportunities. In addition to these educational programs designed to maintain and build upon Singapore’s capabilities in global financial services, Minister Shanmugaratnam revealed that the current regulation requiring banks to separate their domestic and offshore operations into distinct accounting units will be gradually phased out. He cited the strengthening and proliferation of global banking regulations that more closely align with Singapore’s requirements and changes to the country’s own regulatory standards among the reasons why the current dichotomous regulation is no longer needed. A Monetary Authority of Singapore (MAS) consultation paper will be released in August with further details. Minister Shanmugaratnam also declared the formation of a Financial Center Advisory Panel consisting of senior banking, insurance and asset management leaders to advise the MAS on financial sector activities and promote cross-industry collaboration. The deputy prime minister's speech can be read in full here.
Fitch Demonstrates Optimism on Malaysia
On June 30, Fitch Ratings maintained Malaysia’s long-term foreign and local currency issuer default ratings (IDRs) at A- and A respectively and revised its outlook from negative to stable. In a statement, Fitch said that said a recently-implemented goods and services tax coupled with fuel subsidy reforms "are supportive of Malaysia's finances,” despite a substantial increase in government liabilities. The agency attached a "negative" outlook to Malaysia in July 2013, and suggested in March of this year that there was a substantial chance of a downgrade to the country’s IDR. The Ministry of Finance (MoF) applauded Fitch’s revised assessment as a recognition of the government’s commitment to sound macroeconomic policies and continued fiscal reforms. The MoF reportedly met with Fitch representatives earlier this month to assuage concerns about the country’s economic resilience. Malaysian stocks jumped the most in more than two years on Fitch’s decision, with the benchmark index climbing as much as 1.8 percent. The ringgit, which was the worst performer in Asia during the first six months of 2015, is currently trading at around 3.82 to the U.S. dollar, up more than 2.5 percent since June 30. Some industry experts have cautioned that the rally in Malaysia’s currency and stocks may be short-lived, absent concerted action to address fiscal shortfalls and threats to the country’s current-account surplus. Fitch’s press release affirming the stability of Malaysia’s IDR can be found here.
Bank Indonesia to Enforce Mandatory Use of Rupiah Rule despite Opposition
Bank Indonesia Regulation No. 17/3/PBI/2015, which mandates the use of rupiah for all onshore transactions, was implemented on July 1, despite opposition from both local businesses and certain ministries within the government. The regulation was first announced in March and seeks to reign in demand for foreign currencies onshore and to stabilize the Rupiah, one of the region’s weakest currencies. Major investors and state-owned firms have expressed concern over the multiple potential impacts of the rule, citing rising costs and currency risks as potential long-term effects of the regulation. Coordinating Minister for Economic Affairs Sofyan Djalil also raised concerns to key Bank Indonesia officials that the rule could cause distortions in the economy. However, Bank Indonesia is independent from the government and will proceed with implementing the new ruling. Peter Jacobs, a spokesman for Bank Indonesia, has argued that critical industries are exempt from these regulations, and thus the economy will not be negatively affected by the rule. Exempt industries and transactions include state budget transactions, infrastructure, international trade, and international financing. Despite exemptions within the regulations, investors worry that despite boosting the value of the Rupiah in the short run, companies may have to shift borrowing from the U.S. dollar, with its lower interest rates, to the Rupiah, and thus may push up borrowing costs across the economy. Due to the weakness of the rupiah, currency risks may lead to rising costs. Local companies in the past have used U.S. dollars as a natural hedging mechanism to safeguard against the volatility of the rupiah, which will no longer be possible. Following the introduction of the new regulations in Indonesia on July 1, currency trade dropped 10 points overnight. While companies are moving to switch transactions over to the Rupiah, state-owned companies such as Pelindo III, as well as multiple foreign firms, have expressed the need for a transition period in order to successfully adjust to new regulations.
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| Market Development
Bank Indonesia Cuts Credit Growth Forecast for the Year Jakarta Globe 3rd Jul 2015
Bank Indonesia has cut its loan growth forecast for the year following slow loan demand in the first six months, the central bank’s governor said on Friday. “It [the credit growth] may not reach 15 to 17 percent, but 11 to 13 percent for the whole year,” Agus Martowardojo told reporters. “We are going to discuss this matter at the next board of governors meeting and will officially announce the change immediately,” he added. The central bank’s board of governors is set to meet on July 14. Lenders in Indonesia have disbursed Rp 3,792.8 trillion ($284.64 billion) in loans for the year up to May, an increase of 10.3 percent from the same period a year before.
Philippines ranks 68th worldwide in financial literacy index The Philippine Star 2nd Jul 2015
The Philippines was ranked 68th globally in terms of financial literacy index, according to a study made by the Asian Development Bank (ADB). The study on financial education in Asia indicates majority of Asian nations do not have a national strategy for financial education and literacy, or that the existing programs lag behind the rest of the world. Citing a survey undertaken by MasterCard, the Philippines ranked 68th behind Malaysia, Thailand, Hongkong, Taiwan and Singapore. In the Asia and Pacific region, New Zealand topped the list.
New initiatives to boost financial sector to be introduced Channel NewsAsia 1st Jul 2015
The Monetary Authority of Singapore (MAS) will introduce new initiatives to strengthen the Republic’s financial sector for future progress, as the country marks 50 years of independence. "Taking into account market developments over the years and global regulatory changes over the last decade, we will rationalise the distinction between the domestic and international within the banking system,” explained Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam on Tuesday (Jun 30) at the Association of Banks in Singapore’s (ABS) annual dinner. “Second, we will introduce several manpower and talent development initiatives to ensure a strong Singaporean core across the range of activities in the financial sector," he added.
Thai banks offer joint loan to provider of microfinance in Cambodia The Nation 1st Jul 2015
Three Thai banks - Siam Commercial Bank (SCB), TMB Bank (TMB) and Kiatnakin Bank (KKB) - together with Netherlands-based ING Bank have offered a syndicated loan of US$65 million (Bt2.2 billion) to PRASAC Microfinance Institution, the biggest microfinance provider in Cambodia. This is the first time a group of Thai banks have made a syndicated loan of this size to Cambodian borrowers. The syndicated loan comprises $20 million each from KKP, SCB and TMB, and $5 million from ING Bank. The loan has two tranches, the first a three-year loan and the second a five-year loan. International Finance Corporation (IFC), a member of the World Bank Group, arranged the syndicated loan. It sought the collaboration of Thai banks as it saw they had the ability to support financial institutions in neighbouring countries, said Adel Meer, IFC's financial institutions group manager for East Asia and Pacific.
$225m boost for financial technology The Straits Times 30th Jun 2015
A $225 million initiative to help financial firms set up innovation labs and to fund infrastructure to deliver financial technology (fintech) services was announced yesterday. The Financial Sector Technology & Innovation (FSTI) scheme is one of several programmes aimed at establishing Singapore as a smart financial centre, which in turn is part of the Government's "smart nation" initiative, said Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) yesterday. Mr Menon told the Global Technology Law conference that the MAS will develop a regulatory approach that strengthens the industry's cyber security as well as devising initiatives to support the adoption of new technologies. These include developing efficient digital payments systems and regulatory reporting and smart surveillance systems.
OJK, IDX Mull Plan for Separate Stock Index for SMEs The Jakarta Globe 30th Jun 2015
Indonesia’s financial services regulator and local stock exchange will be teaming up to establish a niche stock market for small and medium enterprises in the country, according to Financial Services Authority (OJK) chief Muliaman Hadad. “We want small and medium enterprises to utilize the capital market with looser requirements,” Muliaman told reporters in Jakarta on Monday. “SMEs has proven to be resilient throughout the financial crises and create jobs. [This plan] could stimulate the local economy… We want to push financing firms, banks, the capital market and insurers to focus on SMEs,” he added.
Asset Management
Trading in securities up in June but down for full-year, derivatives market continues strong growth: SGX The Straits Times 6th Jul 2015
Trading in securities, derivatives and commodities on the local bourse jumped last month, Singapore Exchange (SGX) said on Monday. The total trading value for securities rose to $25 billion in June, up 20 per cent year-on-year and up 8 per cent month-on-month. The daily average trading value was $1.2 billion, also up 20 per cent from last year and 8 per cent from the previous month. There were 37 bond listings, raising $12 billion, down from 45 issues raising $21 billion a year ago, and one share listing raising $11 million versus $10 million raised in two listings a year earlier, SGX said.
Malaysia currency hits 16-year low amid political crisis Financial Times 6th Jul 2015
Malaysia’s currency hit a 16-year low as a crisis over alleged misappropriation of vast sums from a state development fund weighed ever harder on the country’s standing. The ringgit fell on Monday to levels last seen in the aftermath of the 1990s southeast Asian financial crisis, as markets turned sour the day after Najib Razak, the premier, insisted: "I am not a thief”. Mr Najib is battling claims published last week that almost $700m linked to debt-laden 1Malaysia Development Berhad ended up in his personal bank accounts.
Temasek Surfs Worldwide Equity Rally as Assets to Reach New High Bloomberg 5th Jul 2015
Temasek Holdings Pte rode a rally in global equities with a focus on developed markets that probably helped the Singapore state-owned investor’s assets reach a record. Assets at the firm, which releases results this week, may have increased 16 percent to 18 percent to as much as S$263 billion ($195 billion) in the year to March 31, according to estimates by Institutional Investor’s Sovereign Wealth Center and CMC Markets. That would be the biggest jump in assets in five years and surpass last year’s all-time high of S$223 billion. “They had a great year for their equity investments,” said Nicholas Teo, a Singapore-based strategist at CMC Markets who has been following Temasek’s annual results over the last 10 years. “It shows how aggressive their investment style is compared to other state investors.”
10 more ETFs on SGX gain excluded investment product status The Straits Times 3rd Jul 2015
Ten more exchange traded funds (ETFs) have been converted to the excluded investment product (EIP) status, boosting the number of EIP ETFs listed on the Singapore Exchange to 19, SGX said on Friday. The 10 ETFs, which are issued by Deutsche Asset & Wealth Management and are largely cash-based, cover a wide geographical spread of both developed and emerging economies, including Brazil, China, South Korea and Thailand. In this way, investors are able to ride on the growth in these countries. Retail investors do not have to be pre-qualified for ETFs classified as EIPs, which give them greater access to such securities.
Malaysia urged to peg ringgit again The Rakyat Post 2nd Jul 2015
The government has been urged to revert to the system of pegging the ringgit to counter its current depreciation and enable it to stabilise. Md Shukri Shuib, a senior lecturer in political and international studies at Universiti Utara Malaysia, said it was crucial to peg the ringgit because its sliding value could push up import costs, thus impacting the prices of essential goods. “The fluctuating ringgit will not only have a bearing on international trade but if left uncontrolled, it can lead to higher cost of living, and could become one of the factors behind the disruption of the three universal functions of politics, economy and social. “The decline in the ringgit’s value is not something for Malaysia to be proud of.
Malaysia escapes Fitch downgrade Bangkok Post 2nd Jul 2015
Malaysian stocks rallied by the most since December and the ringgit rose along with bonds after Fitch Ratings held off from cutting the nation's credit rating. Fitch raised the outlook on its fourth-lowest investment grade of A- to "stable" from "negative''. The agency said a new consumption tax introduced in April and fuel subsidy reforms "are supportive of Malaysia's finances, even as government debt guarantees increase. It warned in March that the chance of a downgrade was more than 50%, helping send the ringgit to a decade low.
Bursa likely to rebound in coming months The Rakyat Post 1st Jul 2015
Investment management company Pacific Mutual Fund Bhd expects a rebound in the Malaysian equity market in the second half of this year after a significant pull-back in the second quarter of 2015. In a statement today, chief investment officer Koh Huat Soon said the local bourse has suffered a sharp sell-off as it priced in the many negative issues that had troubled the market. “As these appear in no small measure, to have already been reflected, we now expect a rebound in second half of 2015. “Resolutions of these major concerns would raise the chances for the market to recover, heading towards our 1,830 target at year end.”
1.5 trillion VND raised from Government bonds VietnamPlus 30th Jun 2015
The Hanoi Stock Exchange (HNX) has recently held an auction to sell 1.5 trillion VND (69.4 million USD) worth of Government bonds in five-year term. The money mobilised to the State Treasury has an annual interest rate of 6.4 percent, 0.03 percent higher than that of the previous tender. The bonds on offer were worth 2.5 trillion VND (116.3 million USD) in total, including those of five-year and 15-year terms. Earlier on June 26, the HNX in conjunction with the State Treasury to launch an online government bond transaction system (E-BTS).
HOSE launches total return index VietnamPlus 30th Jun 2015
The Ho Chi Minh Stock Exchange (HOSE) launched the total return index (TRI) on June 30 to evaluate investment efficiency. Experts said the TRI is in accordance with international standards and practices, especially given that the investment trend according to the Vietnam stock market index is shaping more vividly. Deputy Director of the bourse’s research and development office Ho Ngoc Doan Trang said the HOSE aims to diversify indicators serving investors, particularly investment funds. She said the TRI provides investors with an effective evaluation tool, as well as more reference for exchange-traded funds (ETF) as the TRI reflects returns more accurately than a price index.
Banking
Chart of the Day: Delinquent loans are a sore spot for local banks Singapore Business Review 6th Jul 2015
Discover who's most at risk. Non-performing loans (NPLs) are a spot of bother for Singapore's three largest banks, according to this chart from CIMB. Compared to fears over the Greek crisis, CIMB believes that banks should worry more about delinquent loans at home and within the region. "We are more concerned about operational NPLs or possible NPLs that stem from the customer lending business, closer to home. There are three possible pots of NPLs that we are concerned about. These include the banks’ portfolios in: 1) Singapore mortgages, 2) oil & gas, and 3) commodities, ASEAN and developing Asia," said CIMB.
BoT chief race enters final stretch Bangkok Post 3rd Jul 2015
The name of the new central bank governor who will succeed outgoing boss Prasarn Trairatvorakul will be submitted for cabinet approval between July 7 and July 14, says Finance Minister Sommai Phasee. However, he still has not hinted as to whether a selection has already been made. The selection committee chaired by Sompol Kiatphaibool, a former chairman of the Stock Exchange of Thailand, submitted a shortlist of two finalists to Mr Sommai last month. A senior cabinet minister said the cabinet "is certain" to appoint Veerathai Santiprabhob, a member of the Monetary Policy Committee, to take the helm as the 23rd central bank governor, beating Supavud Saicheua, managing director of Phatra Securities.
UOB signs two new loans at branch launch Myanmar Times 3rd Jul 2015
Singapore-based UOB signed two loan agreements with clients in the auto and tourism industry yesterday, as they officially launched their Yangon branch at Parkroyal Hotel. The loan with Cycle & Carriage Automobile Myanmar Company will help fund the construction of two more automobile showrooms and a service workshop in Yangon. The other loan, to Summit Parkview Hotel, will help the hotel to build a 200-room extension. It also has previously announced a loan to refurbish the Excelsior Rangoon hotel. UOB was one of nine foreign banks – two from Singapore – that won licences to open Myanmar branches last year.
Korea’s Shinhan buys Indonesian banks Jakarta Post 2nd Jul 2015
The move by South Korean lender Shinhan Bank into the Indonesian banking market is well under way following its acquisition of two small-sized lenders. Seoul-based Shinhan has reportedly completed the acquisition of a 75 percent shareholding in Centratama Nasional Bank, according to various reports. The acquisition of Centratama, which is based in Surabaya, East Java, comes two months after Shinhan was granted approval by the Financial Services Authority (OJK) in April to take over a 40 percent stake in Bank Metro Express. The acquisition of Metro Express — a Bandung-based bank — was valued at Rp 700 billion (US$52.51 million). No detailed information was immediately available regarding the acquisition of Centratama and The Jakarta Post was not able to contact Shinhan for comment.
Vietnam bank BIDV plans foreign stake sale in 2016 The Star 2nd Jul 2015
Vietnamese lender BIDV, the country's biggest partly private bank by assets, said it could sell stakes to foreign strategic partners next year, as the South-East Asian nation further opens up its economy to outsiders. Hanoi-based BIDV may sell a 15-20% stake to a long-term foreign investor in the banking sector, and 10% to another overseas investor, while state ownership would be kept at 65%, chairman Tran Bac Ha told a news conference yesterday. Vietnam's limits on foreign ownership in the banking sector remains unchanged even after the government announced last week that it will lift the foreign ownership cap in many listed firms from Sept 1.
One more foreign bank competitor allowed entry Business Mirror 2nd Jul 2015
About a month after the Bangko Sentral ng Pilipinas (BSP) approved the entry of the Industrial Bank of Korea, the central bank welcomed another foreign bank participant. The newest competitor, described by Deputy BSP Governor for Supervision and Examination Sector Nestor A. Espenilla Jr. as an Asian bank, marks the fifth foreign bank to enter the Philippines, after the government lifted all restrictions to the entry of more foreign banks in the country. “There is one more that came in after the Industrial Bank of Korea. Yes Asian. The Monetary Board approved it last Thursday [June 25] but they [the foreign bank] have not announced it yet,” Espenilla said.
Vietnam bank BIDV plans foreign stake sales in 2016 Reuters 1st Jul 2015
Vietnamese lender BIDV, the country's biggest partly private bank by assets, said it could sell stakes to foreign strategic partners next year, as the Southeast Asian nation further opens up its economy to outsiders. Hanoi-based BIDV may sell a 15-20 percent stake to a long-term foreign investor in the banking sector, and 10 percent to another overseas investor, while state ownership would be kept at 65 percent, chairman Tran Bac Ha told a news conference on July 1.
Bank lending grows slower in May CNN Philippines 1st Jul 2015
Figures from the Bangko Sentral ng Pilipinas (BSP) revealed that outstanding loans of commercial banks, excluding reverse repurchase placements (RRPs) with the BSP, grew at a slightly lower pace in May compared to the previous month. Such loans rose by 14.5%, compared to April's 15.4% expansion. "On a month-on-month seasonally-adjusted basis, commercial bank lending increased by 0.8 percent for loans net of RRPs and by 0.7 percent for loans inclusive of RRPs," the BSP said in a statement. More than 80% of the aggregate loan portfolio went to funds for production activities. Loans in that sector saw an overall growth of 14.1%, slower than April's 15.1%.
Bank of Thailand looks to SME banking sector to make up for declining corporate financing The Asian Banker 1st Jul 2015
In his recent speech at the The Asian Banker Thailand Conference, Jaturong Jantarangs, senior director, financial institutions strategy department and policy group, Bank of Thailand, said large corporate financing is falling away for future income. Indeed, shrinking margins and a highly saturated market forced banks to open new sources of income into higher yielding business such as personal loans and SME banking. Corporate financing is often retained for other services and for supply chain expansion to cover counterparties, customers, and personnel. The SME loan business grown to $67 billion by 2014; an annual CAGR of 12% since 2010. The industry expects that from 2016 onwards it will grow at an annual pace of 10%. The SME book compared to total loans disbursed of Thai banks has actually been declining since 2008 and only started to recover again from 2011 onwards.
Asean banks can comply with Basel III rules The Sun Daily 30th Jun 2015
Malaysian banks are among those in the Asean region that are well placed to comply with Basel III capital and liquidity ratios, according to a Moody's Investors Service report. In a statement yesterday, Moody's said the report rated banks in the Asean region – including Malaysia, Indonesia, Singapore, Thailand, Vietnam and the Philippines – as well placed to comply with stricter capital and liquidity requirements under Basel III. "Moody's-rated banks in the Asean region are well capitalised and can meet the higher minimum capital requirements under Basel III," said Moody's vice president and senior analyst Alka Anbarasu. "As for the 60% minimum liquidity coverage ratio under Basel III, in many cases, the banks are already 100% compliant, though national differences make it difficult to compare the reported ratios across different banking systems.
ANZ Bank Thai banking licence 'important milestone' for super regional strategy The Sydney Morning Herald 30th Jun 2015
ANZ Bank has been given the green light to offer a wider range of financial services in Thailand after it was granted a banking licence by the country's regulators. As part of its ambitions of becoming a "super regional" bank in Asia, ANZ has been seeking a full banking licence in the fast-growing economy for several years. On June 29 the bank said Thailand's Ministry of Finance had granted the licence, and ANZ Thai would target trade and investment flows to and from the Southeast Asian economy.
HSBC appoints new CEO for Thailand The Nation 30th Jun 2015
HSBC has appointed Kelvin Tan as chief executive officer for Thailand with effect from July 1. He succeeds Tan Siew Meng, who will be taking up the newly created role of Regional Head Global Trade and Receivables Finance, Asia Pacific, HSBC. Kelvin joined HSBC in Singapore in 2009 and brings with him a wealth of strong banking experience, gained from roles in both Global Banking and Markets and Commercial Banking. In his most recent role, as Head of Commercial Banking, Singapore, he was responsible for growing the Bank's trade business and managing its relationships across all sectors of corporate clients. Kelvin has over two decades of experience in supporting corporates and MNCs across multiple industries in Singapore and Asia Pacific.
E-Payments
Credit card operators face rising NPL rate Pattaya Mail 2nd Jul 2015
According to Mr.Yuttachai Teyarachakul, Executive Director of Personal Financial Services, United Overseas Bank (Thai) Pcl., lower income credit card holders are at greater risk of contributing to Non-Performing Loans (NPLs). In order to address the problem, he said UOB is to beef up its regulations in issuing new credit cards, as the local economy slows down. New card holders must have a minimum monthly income of 15,000 baht. In normal economic circumstances, the minimum income required to obtain a new credit card is 10,000 baht.
MAP forum discusses how e-commerce helps companies be more innovative Business Mirror 1st Jul 2015
E-commerce, according to the leaders in the retail industry, is a platform where industry players can create innovations for their companies, seeking to meet the constantly moving consumer preference. In a Management Association of the Philippines (MAP) panel discussion entitled “Transforming the Way We Sell: Innovations in Retailing,” Vice President and Head of Operation and Support Services of Ayala Land Inc. Rowena Tomeldan said there is a challenge to constantly innovate and see the trends in the industry, and one trend is e-commerce. “The shopping malls have gone beyond shopping. Shopping centers now provide experience,” Tomeldan said. She said that shopping malls have evolved with the rise of e-commerce, using digital media in promotion.
Insurance
Financial advisers' association pushes for guidelines on insurance commission rebates The Business Times 2nd Jul 2015
The Association of Financial Advisers (Singapore), or AFA(S), has urged the Monetary Authority of Singapore to take a closer look at the way in which commission rebates for life insurance policies are carried out in the industry. AFA(S) president Vincent Ee stressed the importance of having guidelines on how such rebates should be carried out so that they are ethical and proper. He noted that while commission rebates lower policy premiums and benefit consumers, such incentives if carried out improperly could induce overbuying of insurance policies.
Thailand: Drought drives farmers to insurers Asia Insurance Review 30th Jun 2015
The current drought in Thailand has encouraged more rice farmers to buy main-crop insurance, with the acreage insured expected to more than double this year. Last year, farmers purchased insurance for around 700,000 rai (112,000 hectares) of main-rice crop. The Thai General Insurance Association (TGIA) projects that 1.5 million rai will be insured this year, as it believes that rice farmers now are more aware of the importance of insurance as a risk mitigation tool, reported The Nation newspaper. There are about 60 million rai of main crop in total in the country. TGIA President, Mr Anon Vangvasu, said that the association will seek a discussion with the executive committee of the National Catastrophe Insurance Fund, to request that the Fund reinsure some main rice-crop cover in order to increase crop insurance among farmers. Local insurers are currently unable to shoulder all the risk and need to transfer some of it to foreign reinsurers, he explained.
Vietnam: Insurance mart to see premium growth of more than 10% this year Asia Insurance Review 30th Jun 2015
Vietnam's insurance market is forecast to see double-digit premium growth this year, with increases of 10-12% for the non-life sector and 15-17% for life insurance, according to the Insurance Supervisory Authority which is under the Finance Ministry. In addition, the insurance industry's total revenue is expected to account for 3% of GDP this year, compare to 2.44% last year, in line with the national strategy, reported the Vietnam News Agency. Minister of Finance, Mr Dinh Tien Dung, said in a report that the turnover of the insurance market posted an average growth of 14.5% per year during the 2011-14 period, nearly tripling the average GDP growth rate.
Market Regulation
SET to lift new issue market cap Bangkok Post 4th Jul 2015
The Stock Exchange of Thailand is likely to increase its 250-billion-baht target for market capitalisation of newly issued securities this year after more than half the goal was reached in the first half. The number of listings is expected to be 40-45 this year, close to last year's 46, executive vice-president Santi Kiranand said. Of the 46 new listings last year, 17 were companies that listed on the SET, 20 listed on the Market for Alternative Investment (MAI), while the rest are infrastructure and property funds. They added 244 billion baht in market value to the stock exchange.
BI relaxes funding rules as banks wait and see Jakarta Post 6th Jul 2015
Bank Indonesia (BI) has introduced an awaited new regulation on the loan-to-funding ratio (LFR) to ease liquidity pressures in the banking system by expanding banks’ choices of funding sources. The regulation, No. 17/11/PBI/2015 issued on June 25, states that banks can push their lending disbursement higher to reach 94 percent of their total funding, an increase from the current benchmark of 92 percent under the loan-to-deposit ratio (LDR) formula. The funding options — which traditionally only include customers’ savings, demand deposits and time deposits within the LDR — have also been expanded to include medium term notes, floating rate notes and bonds that are issued by banks. Subordinated debt and any securities that have been purchased by fellow banks, however, are excluded from the list of funding options. The higher LFR of 94 percent will be implemented starting Aug. 1.
Foreign Banks Protest Bill Requiring Locally Incorporated Branches Jakarta Globe 5th Jul 2015
Critics have balked at a provision in a bill brought before the House of Representatives which would require foreign banks to incorporate their Indonesian branches locally. Indonesia currently permits foreign banks to operate in the country without having to establish a local corporation, allowing their offices here to run as overseas branches of their headquarters. Local banks have long opposed this arrangement, saying it allows foreign banks to pull capital out of the country quickly, particularly during financial market volatility. Under the banking bill set for deliberation, banks like Citibank, Standard Chartered and Deutsche Bank would have to set up locally incorporated offices – a move that the banks say will severely undermine their competitiveness and operations.
Singapore Bail-in Proposals Make Senior Bond Holders Breathe Easy Jakarta Globe 3rd Jul 2015
Holders of senior debt from Singapore’s banks will have reason to breathe easy if the Monetary Authority of Singapore implements proposals to limit its statutory bail-in framework to subordinated debt. The proposal, part of a set of proposed enhancements to the bank resolution regime, will turn Singapore into one of the most investor-friendly nations for senior bank debt, as opposed to the approach favoured in Europe and elsewhere. Many countries have introduced legislation that forces senior bondholders to share losses if a bank becomes no longer viable, adding another buffer to protect taxpayers and depositors. Instead, Singapore is limiting the use of bail-in powers to subordinated debt, which is already loss-absorbing under Basel III, effectively pledging to support senior bondholders if a bank fails.
MAS to go ahead with most proposed changes for Reits market The Straits Times 2nd Jul 2015
The Monetary Authority of Singapore (MAS) on Thursday announced it will go ahead with most of the new rules it had proposed for the booming property trust sector. The new measures are aimed at giving Reit unitholders "better protection and greater accountability", while providing managers with more flexibility operationally, MAS said in a statement. It had sought industry feedback last October via a consultation paper that pencilled proposals to "strengthen" the real estate investment trust (Reit) market.
Mandatory Rupiah Policy Needs More Time, Expert Says Tempo 2nd Jul 2015
Economy expert Lana Soelistianingsih appreciated Bank Indonesia’s move in establishing mandatory rupiah policy in every financial transaction in the country. Lana said that the policy can help to strengthen the Rupiah's position against US Dollar. However, the policy, which is regulated in Bank Indonesia Regulation No. 17/3/PBI/2015 and Law No. 7/2011 on Currency, requires transitional period, according to Lana. "The regulation is good, but it needs more time," Lana said on Wednesday, July 1, 2015. "In tourism sector, [using Rupiah in financial transaction] could potentially cause price disparity."
Division between banks' domestic and offshore operations to go: DPM Tharman The Straits Times 30th Jun 2015
Banks will no longer be required to segregate their domestic and offshore operations for accounting purposes, Deputy Prime Minister Tharman Shanmugaratnam told a gathering of bankers. Mr Tharman was speaking at the 42nd annual dinner of the Association of Banks in Singapore, held on Tuesday at Raffles City Convention Centre. Banks have been required to register their domestic banking units (DBU) and Asian Currency Units (ACU) as separate accounting entities. The DBU of a bank holds its domestically focused operations denominated in Singapore dollars, while the ACU holds its offshore operations entirely denominated in foreign currency.
Indonesia Bans Foreign Currencies in Domestic Transactions The Wall Street Journal 30th Jun 2015
Indonesia’s central bank is pushing through a regulation prohibiting foreign currencies, including U.S. dollars, from being used in domestic transactions as it tries to get a grip on the falling rupiah, despite concerns from some industries. The regulation, which takes effect Wednesday, has raised uncertainties and concerns of increased operating costs and other risks among businesses involved in mining, oil and gas, manufacturing and property firms that transact in U.S. dollars as a hedge against the rupiah, a historically volatile currency that has been on a downward slide over the last four years. Trust in the rupiah has been fragile ever since the Asian financial crisis in the late 1990s, when its value went into free fall and Indonesia went under an International Monetary Fund rehabilitation program. The rupiah has become one of Asia’s worst-performing currencies this year, depreciating around 7% against the dollar.
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