For daily news stories
visit http://www.ifre.comInternational Financing Review Asia April 4 2020 17Please contact us if you have information about job moves: [email protected] The ASIAN
INFRASTRUCTURE
INVESTMENT BANK
has promoted
Najeeb Haider to
director general
for investment
operations.
In his new role
Haider covers
region two, which
comprises Pakistan,
Afghanistan, Central
Asia, East Asia, WestAsia, Europe, Africa
and Latin America.
He reports to
Konstantin
Limitovskiy,
vice president
for investment
operations in region
two. He continues to
be based in Beijing.
Haider joined the
AIIB in 2016. He
was previously with
Citigroup. NZX has announced
plans to separate
its commercial and
regulatory functions.
The bourse operator
said that a new
regulatory subsidiary
will be governed by
a separate board
with an independent
chair and the
majority of members
independent of the
exchange.Joost van Amelsfort,
who has served as
NZX’s head of market
supervision since
2014, will lead the
new entity.
Separating regulatory
and commercial
functions has become
increasingly popular
among exchanges
with Singapore
Exchange announcing
similar plans in 2017. HSBC has boosted
its securities services
team with Steven
McCullough joining
from Citigroup.
McCullough started
on March 27 as head
of asset owners and
managers business
development and
client management
for Asia Pacific.
Based in Hong Kong,
he reports to BrianGodins, head of
securities services
in APAC, and to
Sebastien Danloy,
global head of asset
owners and managers
within securities
services.
McCullough was
most recently
managing director for
client executive and
account management
at Citigroup.BIS sees dollar funding squeeze
Recent actions by the US Federal Reserve
have made it easier and cheaper to obtain
dollars via derivatives markets but other
problems must be resolved to ensure
such markets remain open, the Bank for
International Settlements said.
The umbrella group for the world’s
central banks said a distinguishing feature
of the current crisis is the need to ensure
DOLLARûFUNDSûREMAINûAVAILABLEûTOûlRMSûTHATû
are enmeshed as never before in global
supply chains and in constant need of
working capital.
h0RESERVINGûTHEûmOWûOFûPAYMENTSûALONGû
these chains is essential if we are to avoid
further economic meltdown,” economists
at the Swiss-based BIS said in a report
published last Wednesday.
Dollar borrowing costs spiked last month
to levels last seen during the 2007-
lNANCIALûCRISISûASûCOMPANIESûANDûMONEYû
managers concerned about the impact of
the coronavirus and measures to contain it
rushed to secure US currency funding.
One widely watched measure is the FX
basis swap – the gap between the dollar
interest rate in money markets and the
implied dollar interest rate from the FX
swap market. A negative basis means that
borrowing via FX swaps is more costly than
using dollar money markets.
Swap rates on three-month euro-dollar
FX swaps widened to more than minus
120bp last month, levels last seen during
THEûGLOBALûlNANCIALûCRISISû)TûWASûTRADINGû
ATûBPûONû7EDNESDAY ûREmECTINGûCENTRALû
bank actions to inject dollar liquidity.
#OSTSûEASEDûAFTERûTHEû&EDûSTEPPEDûIN ûlRSTû
renewing swap lines with major central
BANKS ûTHENûEXTENDINGûSIMILARûFACILITIESûTOû
OTHERûCENTRALûBANKS ûANDûlNALLYûESTABLISHINGûa new temporary ‘repo’ facility.
But many economies still do not have
swap lines with the Fed, the BIS report said.
A long-term mismatch in the demand
for dollars and their supply by global banks
led to a build-up of pressure in the FX
SWAPûMARKETûTHATûHASûINTENSIlEDûWITHûTHEû
coronavirus crisis.
Institutional investors including insurers
ANDûPENSIONûFUNDSûHOLDûGLOBALLYûDIVERSIlEDû
portfolios, large chunks of which are likely
to be invested in dollar assets like bonds or
equities.
4HEYûlNANCEûSUCHûPURCHASESûBYû
swapping domestic currency into dollars
ANDûHEDGINGûTHEIRûFOREIGNûEXCHANGEûRISKûVIAû
derivatives markets.
But as their portfolios have ballooned
so have their hedging needs, with the
estimated cost of hedging such portfolios
now running into billions in FX swap
transactions every month.
Aggregate data from the BIS showed
the total amount of derivatives trades
outstanding at end-June 2019 was US$72trn,
with FX swaps estimated to account for
about three-quarters of this total.
Meanwhile, the very slow growth of
banking sector assets since the global
lNANCIALûCRISISûOFûAûDECADEûAGOûHASû
constricted the supply of dollars.
&ORûAûGLOBALûBANKûTHATûHOLDSûAûDIVERSIlEDû
portfolio of loans to borrowers, some of
whom have currency mismatches, broad
dollar gains tend to increase the credit risk
of the portfolio of loans and hamper their
risk-taking capacity.
That is manifested in the negative
correlation between dollar strength and FX
basis swaps, the BIS said.
SAIKAT CHATTERJEEcurrent price, is yet to be approved by
shareholders and court-stamped.
Bankers and lawyers say they have seen a
jump in inquiries about MACs in the region
in recent weeks.
“I’m sure there will be deals where the
sellers or the buyers feel like they have an
ability to not do it at that price and they’ll
have to cut,” said a Hong Kong-based M&A
banker who declined to be named.
)Nû!SIAû0ACIlCûALONE ûTHEREûAREûSOMEû
88 deals worth US$1bn or more, totalling
US$252.8bn altogether, that have been
agreed to since 2019 but not yet completed,
ACCORDINGûTOû2ElNITIVûDATAûASûOFû-ARCHû
“If the MAC clause is drafted broadly
enough, an epidemic like the current
Covid-19 situation could constitute a MAC
and therefore entitle the buyer to refuse
to complete the transaction,” Ponniya of
Baker McKenzie said.
PAULINA DURAN, KANE WUand given the uncertain timeline of the
crisis, for an untold period of time.
Australian Prime Minister Scott Morrison
has pledged A$320bn (US$195.6bn) in
lSCALûSUPPORT ûMOREûTHANûûOFûANNUALû
economic output, in a bid to keep the
economy running.
King said in a statement that Westpac
would focus on responding to the
coronavirus crisis.
“We have a critical role to play alongside
government and regulators in supporting
Australians and New Zealanders and our
COUNTRIESûlNANCIALûSYSTEMS vûHEûSAID
McFarlane said the company’s CEO and
EXECUTIVEûSHORT
TERMûBONUSESûFORûû
would be cancelled due to the alleged
breach of anti-money laundering laws.
NIKHILKURIAN NAINAN, BYRON KAYEB 3 HRSOHDQG 0 DUNHWVLQGG