March 17, 2011: Catastrophe And Growth: Japan And The Economics Of Natural Disaster [NEWSLETTER]

Conversation Starters

---BCBS and CPSS Establish Joint Working Group To Revise BCBS Supervisory Guidance For Managing Settlement Risk In Foreign Exchange Transactions
The Basel Committee on Banking Supervision (BCBS) and the Committee on Payment and Settlement Systems (CPSS) are establishing a joint working group to revise the BCBS's Supervisory guidance for managing settlement risk in foreign exchange transactions (2000), with the goal of ensuring that financial institutions adequately control their foreign exchange settlement exposures. The group will be chaired by Ms Jeanmarie Davis, Senior Vice President at the Federal Reserve Bank of New York. Today's announcement indicates the re-launch of the planned work between central banks and supervisors, which had been postponed with the onset of the financial crisis.

Existing report: Settlement risk in foreign exchange transactions (BIS, 1996).


---ACF Consultants Report Warns Bank Profits Could Take A Hit
Press Release
Banks were warned their profitability would be hit by the new Basel regulations months ago – but failed to listen. Banking expert Dr Lawrence Galitz, CEO of financial training company ACF Consultants issued a warning to the City in October last year. His prediction, based on ACF’s sophisticated banking simulation software Global Banker, predicted profits could fall by a third after the introduction of Basel III in 2013.
“Several banks recently complained to regulators about the negative impact Basel III will have on their profits,” said Galitz. “We have been saying this since they were announced six months ago.”
The third set of rules from the Basel Committee on Banking Supervision has tightened the definition of a bank’s Tier 1 capital – the amount a bank must hold as a safety measure for any future crashes.
"Basel III may force banks to widen their margins and put up the cost of lending and if it’s going to cost banks, it’s going to cost us the consumers, too,” said Galitz. “But the good news is that banks will definitely be safer.”
The advanced training simulator Global Banker, designed by ACF Consultants, is being used by some of the world’s biggest banks to train staff to work within Basel III. The programme tested bankers with the new rules which also include higher capital ratios and new liquidity requirements.
“Working with simulated banks under the new system gives us a fascinating preview of what life in the banking world will be like over the next 10 years,” said Galitz. “Our training software gives the most realistic and accurate view of how bankers will operate once Basel III has commenced.”
ACF Consultants is a UK-registered private company with offices in London and New York.


FSA Chairman Spells Out Regulatory Challenges Beyond Basel III
Press Release
Lord Turner, chairman of the Financial Services Authority (FSA), will say this evening that already agreed regulatory reforms will have a major beneficial impact but further reforms are needed to make the financial system stable. He will also say that regulators need to recognise that the financial system will continually mutate, creating new risks, and requiring a continually evolving regulatory regime.
http://jlne.ws/etfKTj


Lead Stories

Catastrophe And Growth: Japan And The Economics Of Natural Disaster
The Economist
JAPAN is in tragic disarray after last week's massive earthquake and subsequent tsunami. Nature may be cruelly unpredictable, but people are just cruel. Every time there is a catastrophe abroad, American opinionators use the prospect of reconstruction as an opportunity to conduct a proxy debate over fiscal stimulus and economic fundamentals. So, like clockwork, some benighted folks started talking up the potential economic gains from Japan's disaster, causing a rubber ball to fall down a tube into a pail, which overflowed, splling water down a chute, which turned a little water-wheel, which rang a little bell, startling libertarian economics professors into lecturing us about "the broken windows fallacy".
http://jlne.ws/hAdLPj

UN Calls Emergency Meeting as Japan Nuclear Crisis Deepens
By Shigeru Sato and Tsuyoshi Inajima, Bloomberg
The United Nations' nuclear agency will call an emergency meeting to discuss the crisis in Japan as a breach at the stricken Fukushima Dai-Ichi plant increased the risk of a radioactive leak.
http://jlne.ws/fzmz2Z

Escalating nuclear crisis in Japan feeds Treasury safety demand
By Richard Leong, Reuters
Investors fearful over Japan's growing nuclear crisis scrambled for U.S. government debt for a third straight day on Wednesday, signaling the bond market could rally further.
http://jlne.ws/hI9LZc

JGB futures surge after huge Japan quake
Reuters
Japanese government bond futures surged on Friday and briefly rose more than a full point after a massive earthquake hit northern Japan, while trading in cash bonds was suspended after the quake.
http://jlne.ws/fg72sn

Effectively out of control’: 4 words that rattled markets
Michael Babad, WSJ.com
Fears over Japan's nuclear crisis drove down North American stock markets today, wiping out the year's gains for the S&P 500. Already jittery, markets began to tumble sharply after comments the crisis by the chief energy official of the European Union, who warned that the stricken Fukushima Dai-Ichi nuclear plant was "effectively out of control" and could get worse.
http://jlne.ws/h5ntiT

Geithner: Japan won't need to sell U.S. Treasuries
By Ronald D. Orol, MarketWatch
In response to a question, Treasury Secretary Tim Geithner said Tuesday that he does not believe that there is a risk Japan will have to resort to selling some of their U.S. Treasury holdings to raise cash in order to respond to the damage caused by an earthquake and tsunami. "I do not," Geithner said in response to a question by Sen. Charles Schumer at a Senate Banking Committee hearing. "Japan is a very rich country and has a high savings rate and has the capacity to deal not just with the humanitarian challenge but also the reconstruction challenge they face ahead."
http://jlne.ws/faUmzt

Hartford Falters as 'Upside' Japan Bet Sours After Earthquake
BusinessWeek
Hartford Financial Services Group Inc. is one of the worst-performing U.S. insurance stocks since the Japan earthquake as the firm's bullish bets in the nation may hurt results more than a year after it halted sales there.
http://jlne.ws/h4854e

Japan feeds more money to banks as stocks slump
By TOMOKO A. HOSAKA, Associated Press/ Yahoo! News
Japan's central bank pumped billions more into the financial system Tuesday to quell fears that the country's banks could be overwhelmed by the impact of the massive earthquake and tsunami. Stocks slumped for a second day as a nuclear crisis escalated.
http://jlne.ws/eqGDOl

OECD: Pension Reforms Insufficient
By SEBASTIAN MOFFETT, WSJ.com
Recent pension reforms in developed economies aren't sufficient to deal with increasing life expectancy, and people will have to work longer in future, the Organization for Economic Cooperation and Development said in a report.
http://jlne.ws/f6Rj50

Some Manufacturing Sectors Putting More Capacity to Use
By James Politi, FT.com
Tim Geithner, the Treasury secretary, said there was a “reasonable chance” of the US finding a consensus on corporate tax reform, as he faced questioning from lawmakers that focused on the raging battle over fiscal ­policy. Mr Geithner said it was “worth taking a run” at an overhaul of the way the US taxes business, in order to lower the current top rate of 35 per cent, which many economists and corporate leaders believe puts the US at a competitive disadvantage.
http://jlne.ws/enP9QG

Geithner backs Congress eyeing of covered bonds
Reuters
Treasury Secretary Timothy Geithner on Tuesday backed efforts from lawmakers on Capitol Hill to look into ways to expand the way homes are financed, including the creation of a covered bond market.
http://jlne.ws/fWTmr2

Swap Margin Change Will Add Costs, Executives Say at Conference
By Matthew Leising, Bloomberg
Swaps investors should be prepared to pay more for clearing services if they want their margin protected against being used to fund another investor’s default, industry executives said during a panel discussion in Florida.
http://jlne.ws/fEcrqp

National survey finds banking, brokerage and securities execs upbeat about U.S. economy in coming months
PressReleasePoint
CHICAGO, Mar. 16, 2011 – Senior management at U.S. banking, investment bank, brokerage and securities companies are optimistic, according to a Grant Thornton LLP survey. Nearly three-quarters (72%) of banking executives believe that the U.S. economy will improve in the next six months, compared with two-thirds (64%) for all business leaders.
http://jlne.ws/h2F513

More Than 99 Percent Of TARP Disbursements To Banks Now Recovered As Six Financial Institutions Deliver Nearly Half Billion Dollars In Proceeds To Taxpayers
Press Release
The U.S. Department of the Treasury announced that today six financial institutions have repurchased Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP) investments, delivering a total of $475 million in proceeds for taxpayers.
http://jlne.ws/dXc5Mz

Taxpayers in line for big reward, say bank chiefs
Independent
Taxpayers will receive a "handsome" reward for bailing out the banks, according to the heads of Lloyds Banking Group and Royal Bank of Scotland. Yet they criticised ongoing talk of the banks being too big to fail as a "red herring".
http://jlne.ws/g4H4lL

US Fed says recovery on ‘firmer footing’
By James Politi, FT.com
Federal Reserve officials said the US economic recovery was on a “firmer footing”, upgrading their outlook on the back of a gradual improvement in the labour market but pledging to press on with monetary stimulus as planned.
http://jlne.ws/gdx8pe

Fed holds rates, bond-buy plan
By Greg Robb, MarketWatch
The Federal Reserve on Tuesday said a run-up in commodity prices is unlikely to result in a sustained inflation increase as it left its key short-term interest rate unchanged at a record low and continued its plan to buy government bonds.The decision was expected by financial markets.
http://jlne.ws/ez5jRI

Fed opposes single surcharge for banks
By Tom Braithwaite in Washington and Brooke Masters in London - Financial Times
The US will not support a single capital surcharge for the world’s biggest financial groups, the Federal Reserve’s top bank supervisor said, in an apparent boost for some of the industry.
http://jlne.ws/hjNbUO

Welcome to Debtors' Prison, 2011 Edition
By JESSICA SILVER-GREENBERG, WSJ
Some lawmakers, judges and regulators are trying to rein in the U.S. debt-collection industry's use of arrest warrants to recoup money owed by borrowers who are behind on credit-card payments, auto loans and other bills.
http://jlne.ws/gYUPhE

Late Winter Lull Hits Economy Again
By Brenda Cronin,WSJ.com
It’s Groundhog Day for the U.S. economy, with conditions looking a lot like early 2010, a time when many expected that the recovery was about to gain serious traction. All that optimism was rewarded with an abrupt slowdown — and that’s what three experts see as the best-case scenario for 2011.
http://jlne.ws/eKAAQv

Big banks investigated over Libor
By Brooke Masters and Patrick Jenkins in London and Justin Baer in New York,Financial Times
Regulators in the US, Japan and UK are investigating whether some of the biggest banks conspired to “manipulate” the benchmark interest rate used to calculate the cost of billions of dollars of debt.
http://jlne.ws/fR6uRg

UBS Says It Is Being Investigated Over Possible Manipulation of the Libor
By JACK EWING, DealBook
UBS said Tuesday that United States and Japanese regulators were investigating whether the Swiss bank tried to manipulate a key benchmark used to set interest rates around the world.
http://jlne.ws/eSDQ5m

FDIC Clawbacks, Mortgage Deal, Swipe Fees, UBS-Libor Probe: Compliance
Bloomberg
The Federal Deposit Insurance Corp. is seeking comment on a measure that may subject executives and directors to clawbacks of as much as two years' pay if they are found "substantially responsible" for the failure of a systemically important financial company.
http://jlne.ws/hfbaBh

TARP: By the Numbers
By: Steve Adamske, U.S. Department of the Treasury
You may have seen a lot of news stories recently about Treasury’s efforts to wind down TARP and exit its investments in private companies. And most of those stories include a sea of numbers about the program: How much it’s expected to cost. How much money has gone out the door. How much has been repaid. And many others.
http://jlne.ws/eJq01s

EU Agrees on Economic Overhaul
BY MATTHEW DALTON, WSJ.com
European Union governments Tuesday agreed on a broad economic-policy overhaul, but European Central Bank President Jean-Claude Trichet said the changes didn't go far enough.
http://jlne.ws/eXzLWJ

IEA warns of oil price shock on global economy
By Zaida Espana, Reuters
Sustained high oil prices will damage world economic recovery, the International Energy Agency said on Tuesday, as it warned that OPEC's cushion of spare oil output to calm the market was at its lowest for four years.
http://jlne.ws/h2bQIi

Banking's Scourge on Charm Offensive
By VICTORIA MCGRANE And MAYA JACKSON RANDALL, WSJ.com
Elizabeth Warren has earned a reputation as the scourge of the financial industry. Banks used "tricks and traps" to carry out a "massive looting from middle-class families," the Harvard professor and consumer advocate has said. She slammed Wall Street chiefs after the financial crisis as the "people who drove the car over the cliff" and then "demanded a bailout."
http://jlne.ws/dTVJtm


Events

SIFMA 2nd Annual Private Client Conference
Apr. 7 and 8, 2011
SIFMA's Conference For Private Client Groups At All Levels - New York
http://jlne.ws/htYf3e

Fixed Income Summit
Apr. 28, 2011
Pensions & Investments' One-Day Conference - Chicago
http://jlne.ws/ezwy1m

2011 Morningstar Investment Conference
June 8-10, 2011
Morningstar's Conference For Leaders From Across The Investment Industry - Chicago
http://jlne.ws/gD5nJ1


Exchanges, Clearing Houses & MTFs

NYSE Euronext names first 10 clearing members
By Telis Demos and Jeremy Grant in Boca Raton, Financial Times
NYSE Euronext named a group of 10 banks, brokers and proprietary trading firms as inaugural members of New York Portfolio Clearing, a clearing house behind the launch on Monday of the New York-based exchange’s attempt to break the CME Group domination of trading in interest rate and bond futures contracts.
http://jlne.ws/dNu2UM

NYPC Announces Initial Clearing Members for March 21st Launch
Press Release
NEW YORK--(BUSINESS WIRE)--New York Portfolio Clearing, LLC (NYPC) announced today that its board has approved the first of its clearing members:
* Advantage Futures LLC
* Barclays Capital Inc.
* GETCO, LLC
* Goldman Sachs & Co.
* MF Global Inc.
* Morgan Stanley & Co., Incorporated
* Newedge USA, LLC
* Ronin Capital, LLC
* Rosenthal Collins Group, LLC
* UBS Securities, LLC
http://jlne.ws/fuOisp

**CN: Watch for a Q&A Monday on the JLN Interest Rates Blog with Tom Callahan, chief executive officer, NYSE Liffe U.S. and NYPC board member, on the first day of trade for the NYPC products.

LSE admits gap in retail bond data
By Jeremy Grant
The London Stock Exchange has admitted that real-time prices for some retail bonds traded on its market may not be available to investors as a result of its switchover to a new technology system. The development is the latest problem to arise from the exchange’s overhaul of its technology, which involves switching the LSE’s markets over to a new system developed by MillenniumIT.
http://jlne.ws/epI2NF

Eurex Clearing to take on interest rate and equity derivatives
Press Release
Eurex Clearing, Europe's leading clearinghouse, announced today that it plans to expand its Eurex OTC Clear service to include OTC-traded interest rate and equity derivatives. The new services will be introduced in the context of the upcoming regulatory reforms expected to require mandatory clearing for standardized OTC derivatives in the U.S. and Europe.
http://jlne.ws/dLxGWQ

ELX ANNOUNCES PLANS TO LIST EUROPEAN INTEREST-RATE FUTURES USING MAKER-TAKER AND TAKER-MAKER PRICING MODELS
Press Release
New York, Mar 15, 2011 – ELX Futures, L.P. (ELX), a leading electronic futures exchange, announced today that it will move forward with launch plans to trade competitive interest-rate products from NYSE Liffe and Eurex using the maker-taker and taker-maker pricing models, bringing enhanced technology, competitive pricing and market structure innovation to challenge an expanding monopoly structure.
http://jlne.ws/gLX8JO

Toronto-Dominion Bank Group joins LCH.Clearnet’s SwapClear
Press Release
Toronto-Dominion Bank Group (TD Bank) has announced its intention to join SwapClear, LCH.Clearnet Ltd’s (LCH.Clearnet) market leading over-the-counter (OTC) interest rate swap clearing business. The bank has commenced implementation and will begin clearing its IRS business as soon as this is completed.
http://jlne.ws/e7Yi3o


Firms & Banks

Citigroup Tops List of Banks Who Received Federal Aid
CNBC
Now it can be told: The bank that exposed the federal government to the greatest potential loss during the government bailout was Citigroup , which received a grand total of $476.2 billion in cash and guarantees, according to a new report of the Congressional Oversight Panel which oversees the TARP program.
http://jlne.ws/gEmwf0

Lloyds Banking Group to cut 570 more jobs
BBC News
Lloyds Banking Group is cutting 570 jobs and outsourcing more than 450 posts under further restructuring. The jobs are going from the part-nationalised group's wholesale, retail, insurance and human resources divisions across the UK.
http://jlne.ws/g65dTQ

Deutsche reveals risky eurozone debt
eFinancial News
Deutsche Bank said its exposure to the financially troubled nations in the eurozone more than doubled as a result of its acquisition of Postbank last year.
http://jlne.ws/dH5icX

Macquarie chairman Clarke to step down
By Peter Smith in Sydney - Financial Times
David Clarke has resigned as chairman of Macquarie Group due to ill health and has been replaced by Kevin McCann, the Australian investment bank’s lead independent director.
http://jlne.ws/eJqxkl

Rajaratnam Told of Goldman Talks on Wachovia, AIG Purchase
BusinessWeek
Rajat Gupta, while a member of Goldman Sachs Group Inc.'s board in 2008, told Raj Rajaratnam of talks on whether to buy American International Group Inc. or Wachovia Corp., according to a wiretap recording.
http://jlne.ws/gyMWE3

Trial tapes capture Goldman bank deal talk
By Kara Scannell in New York - Financial Times
A Goldman Sachs director told Raj Rajaratnam, founder of the Galleon Group, that the investment bank had discussed buying a commercial bank in July 2008, according to a recording of a phone call played during the hedge fund manager’s insider trading trial.
http://jlne.ws/ewMjwq

Gupta Told Rajaratnam of Goldman Talks on Wachovia, AIG Purchase
Bloomberg
Prosecutors at the insider-trading trial of Rajaratnam, the co-founder of the Galleon Group LLC hedge fund, played the recording of a July 29, 2008, discussion between the men. During the conversation, Rajaratnam asked about a "rumor that Goldman might look to buy a commercial bank."
http://jlne.ws/dHYb43

No Dodge for Raj Raj: Straight-Shooter Streeter Uncowed by Dowd
The New York Observer
Last Wednesday, inside a wood-paneled courtroom with gold taffeta curtains and wall-to-wall carpet patterned with federal seals, Raj Rajaratnam, billionaire founder of the Galleon hedge fund, stared at a far-off point in space. The man at the center of the government's biggest insider-trading case ever, flanked by five of his attorneys and free on $100 million bail, never once turned his head to ...
http://jlne.ws/fYF0kP

Krawcheck Said to Exempt Merrill Brokers From 'Garden Leave'
BusinessWeek
Sallie Krawcheck, head of Bank of America Corp.'s wealth management division, told Merrill Lynch financial advisers that a new "garden leave" policy doesn't apply to them, said two people with knowledge of the matter.
http://jlne.ws/fONX8u

Read Vikram Pandit's Letter to Citigroup Shareholders
Wall Street Journal Blogs
In his annual letter to shareholders, Citigroup CEO Vikram Pandit said his company is the "best-positioned bank in the world" to take advantage of changes in the financial services business.
http://jlne.ws/fwTxes

AIG offers $15.7bn Fed buyback
By Justin Baer in New York and Tom Braithwaite in Washington - Financial Times
American International Group has offered $15.7bn in cash to buy back a portfolio of mortgage-backed securities from the Federal Reserve in a deal that could hand the US government a profit on one of the key components of the insurer’s bail-out.
http://jlne.ws/hy1dHZ


Auctions & Statistics

Treasury to Sell $11B 10-Yr TIPs On March 24
The Treasury Department said it will sell $11 billion 9-year 10-month inflation-indexed bonds on Thursday, March 24.
http://jlne.ws/hdKW9M

Freddie Mac and Fannie Mae 2011 note calendar
Reuters
The following are scheduled sales announcement dates for potential Freddie Mac (FMCC.OB) reference, Fannie Mae (FNMA.OB) benchmark notes for 2011.
http://jlne.ws/hqkRzo


Regulators

FDIC. Approves 'Too Big to Fail' Rules
DealBook
A top banking regulator approved a plan to seize and unwind big banks — a proposal that will help address those “too big to fail” firms whose collapse could imperil the financial system.
http://jlne.ws/fagnxB

Geithner open to corporate tax reform
By Gary Siegel, The Bond Buyer
The Treasury Department said it will sell $11 billion 9-year 10-month inflation-indexed bonds on Thursday, March 24.
http://jlne.ws/hHQZSA

CFTC’s Gensler Says Swap Dealer Rules Among First To Be Adopted
By Silla Brush, Bloomberg
The U.S. Commodity Future Trading Commission plans to start finalizing derivatives regulation under the Dodd-Frank Act with definitions for swap dealers and major users of swaps, Chairman Gary Gensler said.
http://jlne.ws/ezcZte

Should the ECB raise rates?
The Economist
Last week, European Central Bank President Jean-Claude Trichet hinted that the ECB may increase interest rates within the next month, and other officials have suggested that as many as three rate increases could take place this year. The announcement came as new figures showed inflation continuing to move upward in January, due in part, but not entirely, to rising energy costs. Central bankers elsewhere, and in Britain especially, will be watching closely to see what the ECB does. Should the ECB begin tightening monetary policy now? If so, how should it go about it; how much tightening is necessary? If not, what course should the ECB navigate?
http://jlne.ws/gwrC9b

Written Testimony Of Special Advisor To The Treasury Secretary For The Consumer Financial Protection Bureau Elizabeth Warren - Before The House Subcommittee On Financial Institutions And Consumer Credit Committee On Financial Services
Press Release
http://jlne.ws/h5NfK4

Written Testimony Of U.S. Treasury Secretary Timothy F. Geithner Before The House Of Representatives Committee On Appropriations Subcommittee On Financial Services And General Government
Press Release
http://jlne.ws/gBtn7k

FSA says big banks should triple core capital
Reuters Finance News via Yahoo! UK and Ireland Finance
Banks should roughly triple the amount of capital they are being asked to set aside from 2013 to make the financial system safer, the banking watchdog said on Wednesday. Adair Turner, ...
http://jlne.ws/fkMEjn

Regulators may be moving too fast for their own good on Dodd-Frank, GOP says
By Peter Schroeder, The Hill
The breakneck pace of rulemaking to implement the Dodd-Frank financial reform law is squeezing out public comments and could result in inconsistent regulations, House Republicans warned Wednesday.
http://jlne.ws/fIlDzL

BOJ Pledges Liquidity on Japan Quake as Toyota Shuts Plants
By Christopher Anstey and Mayumi Otsuma, Bloomberg
Japan’s central bank pledged to ensure financial stability after the strongest earthquake in at least a century forced Toyota Motor Corp. (7203) to shut some plants, knocked out oil refineries and sparked a plunge in stocks.
http://jlne.ws/dN45Zo

Fed’s Dudley: Stronger Recovery Doesn’t Mean Early End to QE2
By Michael S. Derby
A top Federal Reserve official reiterated Friday that improving economic growth doesn’t mean the central bank will need to end its $600 billion bond buying program early.
http://jlne.ws/gLB75L

Minutes Of The U.S. Federal Open Market Committee, January 25-26, 2011
Press Release
http://jlne.ws/fBLQ6g


OTC

US banks plead to limit range of swap rules
By Gregory Meyer and Aline van Duyn in New York - Financial Times
US banks are urging regulators writing new rules for the derivatives markets under 2010’s Dodd-Frank Act to keep their hands off the banks’ swaps businesses in London and other overseas financial centres.
http://jlne.ws/guiyEM

Prop traders are swap dealers? / Sommers / Chilton / merger mania
By Roberta Rampton, Reuters
Steep costs of proposed new U.S. Dodd-Frank regulations could deter proprietary traders from providing the same kind of liquidity in swaps markets as they do in futures, the head of a major Chicago-based firm said. Proprietary firms, which typically use their own money to trade and do not trade on behalf of customers, would like to play a bigger role in swaps markets. But they are concerned they will be caught in a broad net of expensive regulations, said Donald Wilson of DRW Trading.

CFTC to Focus on Swaps Data to Shape Regulations, O’Malia Says
By Matthew Leising, Bloomberg
The Commodity Futures Trading Commission will focus on collecting data to inform how it completes regulation of the $583 trillion over-the-counter derivatives market, said Commissioner Scott O’Malia. The information on how many swaps trade per day and which contracts are considered standardized by the industry will make it easier to know which trades can be guaranteed by a clearinghouse, O’Malia said today in an interview at the Futures Industry Association annual conference in Boca Raton. Once clearing is established, how the trades are executed on exchanges or similar systems can be determined, he said.
http://jlne.ws/h9Zxbd

Former J.P. Morgan Executive To Launch Swaps Trading Platform ODEX
By Katy Burne, Of DOW JONES NEWSWIRES
A former J.P. Morgan Chase & Co. (JPM) swaps executive is preparing to launch a new kind of derivatives-trading platform next quarter, which he expects will benefit from the Dodd-Frank financial-overhaul law. The venture has been in test-mode since September.
http://jlne.ws/eLhh0D

One in Four Hedge Funds Are Clearing OTC Swaps Now, UBS Says
By Matthew Leising, Bloomberg
One in four hedge funds is already clearing over-the-counter derivative trades, up from none in October, before new rules require changes later this year to the $583 trillion market, according to analysts at UBS AG. Most interest-rate, credit-default and other swaps bought and sold by money managers will be required to be processed by a clearinghouse later this year under new U.S. regulations. UBS analysts led by Alex Kramm in New York surveyed money managers to gauge how they're reacting to the changes, following an initial survey in October, they said in a note to clients today.
http://jlne.ws/g7Vm70


Global News

Moody’s downgrades Portugal
By Peter Wise, Financial Times
Moody’s has cut Portugal’s credit rating by two notches citing “subdued growth prospects” and high government borrowing costs.
http://jlne.ws/gLrwFZ

India hikes rates by quarter point on oil fears
India hiked key interest rates by a quarter point Thursday -- its eighth hike in a year -- warning that rising oil prices will aggravate already high inflation in Asia's third-largest economy. The Reserve Bank of India also raised its inflation forecast for the year from 7 percent to 8 percent on high crude prices and rising manufacturing costs, saying that its current anti-inflationary stance is likely to continue despite instability in the Middle East and natural disasters in Japan.
http://jlne.ws/fAgjNP

Spain’s Borrowing Rates Ease Slightly in Latest Bond Sale
By RAPHAEL MINDER, The New York Times
Spain managed on Thursday to sell 4.1 billion euros, or $5.7 billion, of debt at slightly lower rates, in an auction that was considered a crucial test of market confidence after last weekend’s agreement to bolster the euro zone’s rescue fund.
http://jlne.ws/glk2fB

NAB British chief off as it ponders merger
Brisbane Times
THE hopes of National Australia Bank's long-serving British boss, Lynne Peacock, of pulling off a ''get big or get out'' deal to solve its difficulties have been quashed by the announcement of her impending departure from the group.
http://jlne.ws/fJd8Rb

Goldman Sachs Continues Expansion in India
Press Release
Mumbai, March 16, 2011 - Goldman Sachs Asset Management today announced it has agreed to acquire Benchmark Asset Management Company, an asset management company in India. The transaction is expected to close later in the year, subject to regulatory approvals. The terms of the transaction were not disclosed.
http://jlne.ws/ejJXPp

StanChart, HSBC close all Bahrain branches
The Malaysian Insider
Standard Chartered and HSBC Holdings said they have closed all their branches in Bahrain today, after Bahraini forces clashed with protestors. Bahrain yesterday declared martial law to quell worsening sectarian unrest that has sucked in troops from fellow Sunni-ruled neighbour Saudi Arabia. StanChart has seven branches in ...
http://jlne.ws/fHEYsp

EM havens in inflation-linked bonds
By Stefan Wagstyl, Financial Times
Inflation-linked bonds – common enough in developed markets – have been something of a niche instrument in emerging markets.
http://jlne.ws/dKUamx

OECD Cuts U.K. Growth Forecast, Urges BOE Restraint on Rates
By Gonzalo Vina, Bloomberg
The Organization for Economic Cooperation and Development cut its forecast for U.K. economic growth in 2011 and said the Bank of England should refrain from increasing interest rates until the second half of the year.
http://jlne.ws/hAQUzJ

Santander’s Sáenz faces banking ban
By Victor Mallet in Madrid, Financial Times
Alfredo Sáenz, chief executive of Santander, has been sentenced to jail and banned from banking for three months by Spain’s Supreme Court in the latest phase of an embarrassing legal battle over a customer loan default that has already lasted 17 years.
http://jlne.ws/gzCKD6

GFI Group Announces First Electronic Matching of Colombian Bonds
Press Release
New York, March 16, 2011 – GFI Group (NYSE: “GFIG”), a leading provider of wholesale brokerage, clearing services, electronic execution and trading support products for global financial markets announced today it has conducted the first electronic matching of a Colombian Peso Government Bond from its newly opened Bogota office.
http://jlne.ws/em82a0

Guy Debelle: The Australian bond market in 2011 and beyond
Speech by Mr Guy Debelle, Assistant Governor of the Reserve Bank of Australia, at the KangaNews Australian DCM Summit, Sydney, 15 March 2011
Today I will discuss the current structure of the Australian bond market and talk about some trends that might influence its evolution in the coming years. I will focus on the bank debt and Kangaroo markets, given the theme of this conference. I will also address some of the issues surrounding the implementation of the forthcoming Basel liquidity standard...
http://jlne.ws/gLeKca

Spanish Banks Seek Investors to Plug $21 Billion Shortfall
BusinessWeek
Spanish banks that together need as much as 15.2 billion euros ($21 billion) to meet minimum capital levels now must persuade investors that their battered balance sheets offer the potential return to match the risk.
http://jlne.ws/fad7p2

Barclays told to inject E500m
By Patrick Jenkins - Fianancial Times
The Bank of Spain added to Barclays’ woes in the country on Thursday, declaring that the UK group must inject more than E500m ($690m) to meet new capital requirements.
http://jlne.ws/f3JYQZ

Norway Backs Sweden in Seeking Toughest Bank Capital Rules
By Josiane Kremer, Bloomberg
Norway is signaling it may follow Sweden’s target of imposing some of the world’s toughest capital requirements on lenders as policy makers in Scandinavia embrace post-crisis measures that banks warn will undermine competition.
http://jlne.ws/e6D7ct

Malaysia Central Bank Holds Rate at 2.75%, Lifts Reserve Requirement
CentralBankNews.info
Malaysia's Central Bank, the Bank Negara Malaysia, held its overnight policy rate unchanged at 2.75% and increased the statutory reserve requirement ratio to 2% from 1% previously.
http://jlne.ws/grRlsp