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Adb considering islamic bond, sovereign insurance product


Dec 16 The Asian Development Bank (ADB) is considering an Islamic bond as early as next year, plans which could evolve into a regular issuance programme and an insurance product to help member countries offer sukuk of their own. The Manila-based development lender is building strong links with Islamic finance, holding its first conference on the subject last month as part of efforts to boost financial inclusion and promote financial stability in member countries. A proposal will be presented to ADB management in the first quarter of next year, defining whether the AAA-rated lender aims for a single issuance or a recurring sukuk programme, Ashraf Mohammed, assistant general counsel at the ADB, told Reuters."It's early days but one would hope it's more than just a one-off. I am hopeful we can make headway in 2014."ADB is dedicated to reducing poverty in Asia and the Pacific through inclusive and environmentally sustainable economic growth and regional integration. In 2012, ADB assistance totaled $21.6 billion, including co-financing of $8.3 billion. The proposal would look at whether the sukuk is set up on a standalone basis or as part of one of its existing bond programmes, said Mohammed."It really depends on how we structure it. We may have to do a separate sukuk programme - separate from existing bond programmes."

Identifying financing projects in member countries, either from the government or private sectors, would then determine the size and tenor of a potential sukuk, he said. Some of the countries the ADB would work with in this area include Pakistan, Bangladesh, Indonesia, the Philippines, the Maldives and several central Asian countries, he added. The ADB would then consider an insurance policy designed to boost the credit rating of sukuk from sovereign issuers, mirroring a product developed by a unit of the Islamic Development Bank (IDB).

"This is something the ADB is also considering," said Mohammed, adding the ADB had already worked on a partial credit guarantee with the IDB for a project in Pakistan in 2012, which could serve as a basis for the product. TEST Sukuk, investment certificates which follow religious guidelines such as bans on interest and monetary speculation, have grown in prominence as a funding tool beyond the industry's core markets of the Middle East and Southeast Asia.

Britain, South Africa and Hong Kong are actively considering issuance of their own, but an ADB sukuk would test whether the Islamic finance industry can cater to an issuer known for prioritizing pricing of its borrowings."Being a development bank, we want to use resources effectively. By definition we are a very conservative organisation," Mohammed said. A maiden sukuk from the ADB, however, could open the door to issuance in multiple jurisdictions, tenors and currencies. Last year, the ADB completed 77 borrowing transactions, raising $13.2 billion in long- and medium-term funds, compared with $14.0 billion in 2011. The new borrowings were raised in eight currencies, with maturities ranging from 1 to 30 years. ADB pursues a strategy of issuing liquid benchmark bonds to maintain a strong presence in key bond markets; but it also seeks to develop domestic capital markets of member countries through local currency borrowings. The ADB estimates its annual borrowing needs at between $14 billion to $16 billion over the next three years.

Asia pac loans hit three year low despite chinese m&a boom


HONG KONG, Dec 30 (LPC) - Syndicated loan volumes in Asia Pacific, excluding Japan, fell for the second consecutive year slipping to a three-year low of US$463.8bn in 2016 as slower economic growth and geopolitical turbulence curtailed bank lending despite a surge in M&A activity from China that boosted North Asian loans. Lending in 2016 of US$463.8bn from 1,291 transactions, was down 1.6% from US$471.26bn in 2015, and is the lowest annual figure since 2013 when US$462bn was raised from 1,289 loans. Fourth-quarter 2016 volume of US$103.14bn was also the lowest fourth-quarter tally since 2012 and 1.85% lower year on year. China, Asia's largest syndicated loan market, (ex-Japan), led the market with a wave of event-driven financings backing China Inc's overseas acquisition spree. It pushed M&A lending in 2016 to US$80.8bn, equalling the previous record set in 2007 and almost 70% higher compared with US$47.86bn raised for the segment in 2015."The loan market in 2016 has been supported by a significant increase in M&A activity, with a broader universe of Chinese corporates in particular being very acquisitive and completing jumbo-sized, cross-border acquisitions as they look to acquire technology and grow outside of their home market," said Amit Lakhwani, head of loan syndicate & distribution, Asia, at Standard Chartered Bank. Asian lending and M&A deals in particular, received a huge fillip with a US$12.7bn bridge loan for China National Chemical Corp's (ChemChina) massive SFr43bn (US$43.45bn) bid for Swiss seeds and pesticides company Syngenta AG, which was the global M&A highlight of a volatile year. The recourse financing was the largest from Asia (ex-Japan) and was part of a bigger US$32.9bn debt package supporting ChemChina's acquisition, which still requires regulatory approvals. The debt also included a US$20.2bn non-recourse bridge loan at the Syngenta level. While Asian and European lenders participated in the recourse and non-recourse loans, opportunities for international banks to lend in event-driven loans for Chinese state-owned enterprises are shrinking as Chinese banks continue to step forward to lead the strategic segment."In 2016, we have observed the deal-corridor narrowing for foreign banks wishing to play in the corporate and LBO acquisition space, with the Chinese and Taiwanese banks playing a far more predominant role across the board," said Lyndon Hsu, head of leveraged and acquisition finance, Asia Pacific at HSBC. Some privately-owned Chinese companies used foreign lenders for their overseas forays. Chinese internet giant Tencent Holdings Ltd raised US$3.5bn in an acquisition financing in October from a group of 17 international and Chinese banks for its purchase of Finnish mobile gaming firm Supercell Oy.

The acquisition was Tencent's largest and also the world's largest buyout of a game developer. The financing was the borrower's debut M&A loan and followed the completion of two plain vanilla loans with tight pricing only a few months earlier. The financings backing ChemChina and Tencent's acquisitions, among others, boosted Hong Kong's loan volumes, which is a centre for offshore Chinese borrowings. Loan volume in the territory hit a record US$106bn, showing a 22% rise in 2016. China and Hong Kong were the only Asian loan markets to register activity of more than US$100bn, although overall China volumes fell 9.1% to US$135bn in 2016 despite the record M&A boost as the economic slowdown in the country took its toll. LIMITED GROWTH India was the star among major Asian loan markets, showing the biggest percentage increase in 2016, as the country's borrowers tapped offshore loans frequently with state-owned oil and gas companies and pharmaceutical companies raising funds for overseas acquisitions. Indian offshore borrowing of US$21.25bn in 61 deals was 37% higher than 2015's tally. Indonesian companies also relied heavily on foreign currency borrowing, which lifted the country's 2016 total to US$12.58bn, almost 50% higher than in 2015. Both markets reversed declines seen in 2015 as their corporates offered welcome diversification from lending to China, which has dominated regional lending since 2013. Japan posted an 8.5% increase in volumes to US$234.67bn, compared with US$216.33bn in 2015, as borrowers sought to lock in cheap long-term funding using hybrid loans in a negative interest rate environment.

Taiwan saw the biggest annual decline in 2016, dropping 27% to US$34bn as corporates grappled with a slowing economy, mirroring similar issues in neighbouring China. Loans from Greater China of US$285.22bn in 2016 were 2.1% lower than US$291.28bn raised in 2015. Australia saw lower activity for the second year in a row with lending dropping 8.4% to US$72.8bn in 2016, while Singapore was flat at US$38.68bn. Other Asian blue chip firms followed Tencent's example and were also able to reduce their borrowing costs tapping into a deal-starved investor base. Several high-grade credits including Chinese oil behemoth CNOOC Ltd, Indian state-owned oil & gas bellwether ONGC Videsh Ltd and financial services giant Blackstone Group, among others, visited the loan markets more than once during the year to raise funds, either for refinancing or for acquisitions."Liquidity conditions remained strong throughout the year, however subdued deal flow resulted in most loan investors struggling for assets to meet budgets. This supply-demand imbalance led to significantly competitive behaviour, which resulted in pricing tightening across most markets, with structures becoming looser and tenors being pushed out," said Lakhwani.

The year also saw rare borrowers such as the Democratic Socialist Republic of Sri Lanka, Hong Kong rail operator MTR Corp Ltd and Airport Authority Hong Kong, Malaysian banks Malayan Banking Bhd and Public Bank Bhd , Indian mortgage lender Housing Development Finance Corp, state-owned Bank Negara Indonesia, among others, giving lenders opportunities to gain exposure to quality credits. Most of these borrowers returned to the loan markets after several years to take advantage of lower pricing and abundant bank liquidity. Sri Lanka made an impressive return to the loan markets in September after an eight year absence to sign its largest syndicated facility after increasing a three-year loan to US$700m from a targeted size of up to US$500m. Earlier in March, the Islamic Republic of Pakistan and the Government of Mongolia also tapped loan markets, while the Independent State of Papua New Guinea followed in November with a debut US$200m five-year borrowing that is expected to be launched into syndication in January. ROAD AHEAD While Asian borrowers enjoyed benign loan market conditions in 2016, the year ahead poses more potential threats as the full impact of Britain's vote to exit the European Union, Donald Trump's victory in the US presidential elections and the US Federal Reserve's move to increase interest rates plays out across global financial markets. Industry participants are bracing for a different year in 2017 amid expectations of a further drop in China-related borrowing as the country continues to grapple with a slowing economy."After a lukewarm 2016 for the loan market dominated by China-linked issuance, 2017 looks set to be different with an expected rise in deal volumes from Southeast Asia and India and potentially lower China volumes, influenced by talk of greater control on capital flows and a slowdown in outbound M&A activity," said Amit Khattar, head of loan trading and syndication, Asia, at Deutsche Bank. Meanwhile, lenders' focus to generate returns amid tepid deal flow will keep pressure on pricing, as banks review their strategies and higher funding costs force them to continue culling customers or pass costs on."Banks continue to have excess liquidity to deploy and report that they are short on assets, meaning these conditions will continue into 2017, absent any major event," said Lakhwani."Loan pricing especially in US dollars could see a mild increase from 2016 reflecting increased US dollar cost of funds, while liquidity from investors will remain robust," said Khattar.

Bahrain eyes external sharia audits for islamic banks


Bahrain's Waqf Fund, a non-profit body set up by the central bank, has proposed mandatory external sharia audits for Islamic financial institutions to help strengthen compliance and improve the image of the industry. Regulators around the world are increasing their scrutiny of Islamic finance, including the boards of sharia scholars who rule on whether activities follow religious principles. Since sharia boards tend to be paid by the institutions whose activities they oversee, the scholars can be open to accusations of conflicts of interest - prompting calls for separate and independent oversight. The Waqf Fund, established in 2006, is backed by 21 institutions such as banks and mostly focuses on educational initiatives. Bahraini regulators do not have to accept its proposals but since it is chaired by the central bank's executive director of banking supervision, Khalid Hamad, its recommendation appears likely to be adopted. While the proposal is for Bahrain, it may have an impact on Islamic finance globally because of Bahrain's central role in the industry.

The proposal ties in with growing pressure for reforms to the sharia oversight system in other countries. For example, Kuwait's central bank governor Mohammad al-Hashel suggested in a December speech that an independent legal entity should oversee the way in which Islamic financial institutions certify they are following sharia principles.

FRAMEWORK The Waqf Fund will develop a framework for external sharia audits with a team of audit firms, scholars and the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)."An independent sharia audit should be made mandatory by regulators in order to achieve the desired benefits," the fund said in a statement on Sunday.

Because it suggests that sharia compliance audits be part of the existing external auditor framework, the Bahraini fund's proposal is more specific than Hashel's proposal in Kuwait. The Waqf Fund also called for a revamp of AAOIFI standards to provide more detail on sharia review and audit functions, while making AAOIFI's sharia auditor certification mandatory for people involved in the review process. Bahrain is one of the few jurisdictions where AAOIFI standards are mandatory. Many countries, including Malaysia and Pakistan, have over the past year taken steps to overhaul their Islamic finance rules; the reforms have included taking a more active role in monitoring sharia scholars. In Malaysia, scholars are now legally accountable for the financial products they approve and liable to fines and prison time for wrongdoing. Bahrain's central bank will release a new regulatory framework for Islamic insurance (takaful) this quarter, in an overhaul of standards which the regulator hopes will attract new business in a sector it helped to pioneer.

Brief cembra money bank announces successful placement of 200 million swis


Sept 24Cembra Money Bank AG :* Said on Tuesday has successfully issued two fixed rate senior unsecured bonds in the Swiss capital market* Said issued five year bond of 100 million Swiss francs with a coupon of 0.75 pct, and an eight year bond of 100 million Swiss francs with a coupon of 1.25 pct

* Said payment date of the bonds is Oct. 14, 2014

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British pm targets finance industry for failing to promote women


Prime Minister Theresa May criticized Britain's finance industry for failing to promote and retain women on Tuesday as the government revealed that some of the biggest players have committed to having at least 30 percent in senior roles by 2021. The Treasury said that for every pound earned by a man in the male-dominated financial services industry - the highest paid sector in Britain - a woman earns just over 60 pence, while women account for only 23 percent of boards and 14 percent of executive committees."The UK is a world-leader in financial services, but the sector could do even better if it made the most of many talented women who work in finance. Too few women get to the top and many don't progress as quickly as they should or they leave the sector completely," May said in a statement. At the current pace of change it would take 30 years for women to attain just 30 percent of the seats on executive committees - the level at which research suggests a minority's voice can be heard, a report by Oliver Wyman found. May became only the second female British prime minister after Margaret Thatcher in July following David Cameron's departure as Conservative party leader in the aftermath of the country's surprise vote to leave the European Union. She has since taken aim at the British establishment as she seeks to show she understands the frustrations of many voters which showed through in the June 23 referendum result. Major British banks have been widely unpopular in Britain because of the role they played in the financial crisis.

May's predecessor launched the Women in Finance Charter in March following a review of how to get more women into senior financial services roles. This was led by Virgin Money Chief Executive Jayne-Anne Gadhia, one of the most high-profile women in the sector. Her review recommended that internal targets be set for gender diversity in senior management, that pay packages be linked to a firm's gender balance, that companies appoint an executive responsible for gender, diversity and inclusion, and that companies report gender statistics publicly. By July, 72 financial firms had signed up to the initiative, but no formal targets or quotas were announced. While 60 of these have committed to a 30 percent target, including HSBC, RBS and Lloyds, only 13, including the Financial Conduct Authority, Virgin Money and Legal and General, are aiming for a 50/50 split.

Of the signatory firms, 20 named their CEO as the senior executive accountable for progress against their targets, the Treasury said in a statement on Tuesday, adding that the next group to sign up to the charter will be announced in November. While Britain has opted for voluntary targets, other countries have adopted quotas to ensure gender balance across business, not just finance. Of the 12 largest countries in Europe, five have mandatory quotas for female board representation: Belgium, France, Germany, Italy and Norway, according to a European Women on Boards study in April.

This report also said that countries where mandatory quotas on board gender diversity at listed companies were introduced between 2011 and 2015 tended to experience high levels of growth in the percentage of women on boards over this period. However, Britain dropped from sixth to eighth place in the ranking of female board representation, according to the study, while Norway ranked first with 39 percent of board seats held by women, compared to 23 percent for Britain.