Regulations
Clearing Corp launches trade repository for OTC forex derivatives

The trade repositories will be launched in phases, starting with inter-bank forex forwards and swaps in the US dollar-rupee pair, and then go on to other areas

Mumbai: The Clearing Corp of India (CCIL) on Monday launched a trade repository for over the counter (OTC) foreign exchange derivatives, which will help bring in greater transparency, reports PTI.

Trade repositories (TR) maintain a centralised electronic database of OTC derivatives transaction data, providing a ringside view of market concentration, which helps in risk reduction.

The repository was launched in presence of RBI deputy governor Subir Gokarn at the CCIL, which facilitates clearing and settlement of transactions in g-secs, money market instruments and foreign exchange products.

CCIL said, the TR will help the RBI in effective monitoring of systemic risk as it gives clarity on trade positions, prices and transaction volumes.

It added that the establishment of the TR is in line with a commitment of the G-20 countries following the financial crisis of 2008, wherein every member country reports all OTC derivative contracts to TRs.

CCIL said the TRs will be launched in phases, starting with inter-bank forex forwards and swaps in the US dollar-rupee pair, and then go on to other areas.

"The services are being launched in phases to enable banks to ready their systems to report the data to CCIL," it said.

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Swiss banks' foreign client assets dip to 4-year low

The share of foreign client assets in Swiss banks dropped to 51% of their total asset under management at the end of 2011

New Delhi: Amid growing global scrutiny of overseas funds deposited in Swiss banks, the quantum of total foreign assets managed by them has dipped by nearly 300 billion Swiss francs (about Rs20 lakh crore) since 2008, reports PTI.

Also, the share of foreign client assets in Swiss banks dropped to 51% of their total asset under management at the end of 2011 -- the lowest in four years.

The foreign clients have traditionally been the mainstay of Swiss banks' wealth management business. But growing pressure from foreign governments for action against possible hoarding of illicit wealth in Switzerland has been acting as a dampener in the recent years.

As per the latest data compiled by Swiss Bankers Association (SBA), the apex body of banks in the country, the total asset under management in Switzerland stood at 5,300 Swiss francs at the end of 2011.

This included 2,700 billion Swiss francs (51%) of foreign clients and the remainder 2,600 billion Swiss francs (49%) of domestic clients.

The foreign clients' share has declined for three straight years in a row -- from 52% in 2010, 55% in 2009 and 56% at the end of 2008.

The total assets of foreign clients stood at about 3,000 billion Swiss francs at the end of 2008.

These assets include value of securities held in client portfolios, fiduciary deposits, amounts due to clients in savings and investment accounts, as also from time deposits.

The decline in foreign client assets has come at a time when Swiss banks are recording an increased number of complaints from their overseas customers.

Switzerland's banking ombudsman said last week that the number of complaints from foreign customers rose in 2011, even as their overall customer grievances fell. It did not give any specific figures of complaints from Indian clients.

While Indians are alleged to have stashed large amount of worth black money in Swiss banks, the official data of Switzerland's central bank, Swiss National Bank (SNB) puts the funds of Indian clients in Switzerland's banks at a modest 2.18 billion Swiss francs (Rs12,700 crore) -- which is just 0.14% of total foreign wealth there.

Indians' money in Swiss banks rose for the first time in five years in 2011.

These official figures, described by SNB as 'liabilities' of Swiss banks towards their clients from various countries, do not indicate the quantum of the much-debated alleged black money held by Indians or other nationals in the safe havens of Switzerland.

Also, SNB's figures do not include the money that Indians or other nationals might have in Swiss banks in others' names.

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Power Ministry's Rs2 lakh crore CDR plan for discoms has banks worried

The Cabinet is likely to take up a proposal to recast about Rs2 lakh crore debt of the power distribution companies, whose precarious financials have raised concerns of default in the banking system

Mumbai: Corporate debt restructuring (CDR), which has already seen a five-fold jump in the first quarter of current fiscal, is set to break new records as the Centre is planning to recommend Rs2 lakh crore debt of state power utilities to the CDR cell, reports PTI.

In the just concluded quarter, the banking sector has seen the quantum of restructured loans rising over five-fold to Rs20,040 crore, up from Rs4,950 crore in the year ago period, sources at the CDR cell said.

According to the Union Power Ministry, the Cabinet is likely to take up a proposal to recast about Rs2 lakh crore debt of the power distribution companies, whose precarious financials have raised concerns of default in the banking system.

This comes over and above the Rs30,000 crore CDR that five state-run discoms of Tamil Nadu, Madhya Pradesh, Rajasthan, Punjab and Haryana had availed last fiscal.

A senior official of a city-based state-run bank expressed surprise at the move saying, "Any more CDRs will have serious repercussions on the banking system as it comes on the back of an already historic rise in CDR cases due to deepening slowdown in the economy."

Though he admitted that all CDR cases do not end up in losses for banks, as the historical average of CDRs turning up as losses is only 4-5% and 18-20% of them become non-performing assets (NPAs), he said the sheer rise in the CDR proposals is itself disconcerting.

"The rising number of NPAs and CDRs can impact our ratings, which are already under strain," an official of another state-run lender pointed out.

However, the country's largest lender State Bank of India Chairman Pratip Chaudhuri had last week defended the CDR mechanism as "a welcome platform" where the bankers can take a collective call to recover their money at a later date.

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