IFR Magazine - October 27, 2018

Fitch launches China rating agency

&ITCHûHASûLAUNCHEDûAûDOMESTICûRATINGûAGENCYû
INû#HINAûFOLLOWINGûTHEûOPENINGûUPûOFûTHEû
SECTORûTOûFOREIGNûlRMS
FITCH (CHINA) BOHUA CREDIT RATINGS will initially
COVERûlNANCIALûINSTITUTIONSûINCLUDINGûBANKSû
NON
BANKûlNANCIALûINSTITUTIONSûANDûINSURERSû
ASûWELLûASûSTRUCTUREDûlNANCEû&ITCHûSAID
4HEû53
HEADQUARTEREDûCREDITûRATINGû
agency has appointed Danny Chen as chief
EXECUTIVEûOFlCERûFORûTHEûNEWûENTITY
A spokesperson said the new entity will
HAVEûAROUNDûûSTAFFûBYûTHEûENDûOFûTHEûYEARû
ANDûWILLûINITIALLYûBEûBASEDûINû"EIJINGûWITHûTHEû
POSSIBILITYûOFûEXPANDINGûTOûOTHERûCITIESûLATER
&ITCHûPREVIOUSLYûHELDûAûûSTAKEûINû#HINAû
Lianhe before selling its shares to
3INGAPOREANûSOVEREIGNûWEALTHûFUNDû')#û
earlier this year, a move widely interpreted
as a sign that it was preparing to launch its
OWNûSTANDALONEûBUSINESSûONSHORE
)Nû*ULYûûTHEû0EOPLESû"ANKûOFû#HINAû
issued formal guidelines to allow foreign
rating agencies to rate onshore bonds as part
of a wider agreement struck with the United

3TATESûTOûIMPROVEûTRADEûTIES

Despite recent tensions between the two

COUNTRIESû#HINAûHASûLARGELYûSTUCKûTOûTHEû

SPIRITûOFûTHEûINITIALûPACTû)Nû-ARCHûTHEû

.ATIONALû!SSOCIATIONûOFû&INANCIALû-ARKETû

)NSTITUTIONALû)NVESTORSûPUBLISHEDûRULESû

requiring both domestic and foreign credit

rating agencies to register with it to rate

CREDITSûINûTHEûINTERBANKûBONDûMARKET

.!&-))ûSAIDûITûWOULDûGRANTûTWOûTYPESûOFû

LICENCESû#ATEGORYû!ûWHICHûGIVESûFULLûABILITYû

to rate all securities in the interbank bond

MARKETûORû#ATEGORYû"ûWHICHûGRANTSûLIMITEDû

ACCESSûBASEDûONûTHEûREGULATORSûASSESSMENT

#ATEGORYû!ûLICENCESûCOVERûlNANCIALûBONDSû

NON

lNANCIALûDEBTûINSTRUMENTSûASSET

backed securities and bonds issued by

OFFSHOREûENTITIES

&ITCHûHASûAPPLIEDûFORûAû#ATEGORYû"ûLICENCE

)Nû!UGUSTû-OODYSûANDû30ûPUBLISHEDû

detailed applications for rating licences in

the interbank bond market, although the

TWOûSTRATEGIESûDIFFERED

Thomas Blott

StanChart mulls more job cuts

STANDARD CHARTERED is preparing for a
POTENTIALûFRESHûROUNDûOFûJOBûCUTSûASûITSû
lNANCEûCHIEFûCONCEDEDûTHEûBANKSûCOST
CUTTINGûDRIVEûHADûSTALLED
“We have made virtually no progress
SINCEû-AYûWHENûWEûADJUSTEDûOURûBUDGETSûINû
REDUCINGûOURûCOSTûBASEvû3TAN#HARTû#&/û
Andy Halford said in an email to senior
MANAGERSûWHICHûWASûSUBSEQUENTLYûLEAKED
Halford asked managers to outline plans
TOûLOWERûEXPENSESûINCLUDINGûJOBûCUTSûANDû
REDUCEDûINVESTMENTûSPENDINGû(EûSAIDûTHEû
BANKSûPOSITIONûWASûEXACERBATEDûBYûAûRECENTû
slowdown in income that was likely to
CONTINUEûINTOûTHEûFOURTHûQUARTER
“We have previously stated that our
SECOND
HALFûEXPENSESûWILLûBEûSIMILARûTOûOURû
lRST
HALFûEXPENSESû4HATûREMAINSûOURûVIEWûnû
ASûWEûWILLûCONlRMûINûOURûTHIRD
QUARTERû
results update,” a spokesperson for
3TAN#HARTûSAIDû4HEûBANKûISûDUEûTOûREPORTû1û
RESULTSûONû/CTOBERû
#HIEFûEXECUTIVEû"ILLû7INTERSûHASûSPENTûTHEû
best part of a year seeking to reassure
investors he would be able to keep a lid on
costs even as the bank returned to growth
MODEû)TSûHALF
YEARûRESULTSûWEREûOVERSHADOWEDû
BYûAûûJUMPûINûOPERATINGûCOSTS
h4HEûQUESTIONûFORûINVESTORSûAROUNDûCOSTû
control – which is a key contributor to the

planned operating leverage designed to

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is actually investing enough to compete,”

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h3TAN#HARTûISûPRODUCINGûAû2/4%ûUNDERû

HALFûTHATûOFûTHEûMAINûlRMSûWITHûWHICHûISû

competes, which reduces its ability to

invest or use balance sheet growth to drive

THEûTOPûLINEvûHEûSAID

4HEûPROSPECTûOFûJOBûCUTSûISûFAMILIARû

TERRITORYûFORû3TAN#HARTûWHICHûHASû

undergone a massive reorganisation under

7INTERSû3HORTLYûAFTERûTAKINGûTHEûREINSûINû

*UNEûûHEûANNOUNCEDûTURNAROUNDû

PLANSûTHATûINCLUDEDûûJOBûCUTS

4HEûBANKûHASûRECENTLYûSTARTEDûTRIMMINGû

its coverage focus in some sectors that are

DOMINATEDûBYû53ûANDû%UROPEANûRIVALSû

4OBYû'ROSERûCO

HEADûOFûTHEûGENERALû

industries group in Asia, and Dominic

Richards, head of Asia media and telecoms

COVERAGEûAREûAMONGûTHOSEûTOûHAVEûLEFT

h4HEYVEûOBVIOUSLYûBEENûTHROUGHûAû

MAJORûRESTRUCTURINGûPROGRAMMEûFORûGOODû

reason, but there comes a point where you

have to ask ‘how much more fat is there

LEFTûTOûTRIMvûSAIDûONEûFORMERû3TAN#HARTû

BANKER

Thomas Blott

People

Markets

NO CHARGE

A judge has denied the UK fraud office’s attempt

to reinstate charges against BARCLAYS over its

2008 capital raising, potentially ending the

biggest remaining legal headache facing the bank

over its conduct during the financial crisis. In May

a UK court dismissed the charges against the

bank, but the Serious Fraud Office said it would

seek to reverse by applying to the High Court to

reinstate them.

Barclays denies the SFO’s allegation that a

US$3bn loan it made to Qatar in November 2008

was connected with a Qatari investment in the

British bank which ultimately helped Barclays

avoid a British government rescue during the

financial crisis.

The SFO had been pursuing charges that

Barclays unlawfully received financial assistance

and that it had conspired with former senior

executives to commit fraud over two so-called

“advisory services agreements” between Qatar

and the bank.

CHINA FUNDRAISING

China will help private companies raise funds in

capital markets as part of a series of measures

to address slowing growth, the government said.

Commercial banks historically have preferred

to lend to state-owned enterprises rather than

private companies, which are viewed as being

less creditworthy. Their access to credit further

shrank after Beijing opened a campaign against

a buildup of corporate debt and off-balance-

sheet loans, the chief source of the private

sector’s financing.

The central bank has taken a number of steps

this year to spur commercial banks to lend.

The People’s Bank of China will provide initial

funding to institutions that can help enhance

the credit profile of private companies that are

operating normally but face temporary liquidity

difficulties, said the State Council, or cabinet.

BREXIT BILL

ROYAL BANK OF SCOTLAND has set aside an extra

£100m to account for possible bad loans as a

result of Brexit uncertainty, in the first concrete

sign this is clouding the outlook of a big British

bank. The provision means RBS is concerned its

customers might become less able to pay their

debts when Britain leaves the European Union in

five months’ time.

CEO Ross McEwan said RBS was taking

into account the possibility of more negative

outcomes from the Brexit negotiations, under

new accounting standards that require banks

to be better prepared for possible future

losses. “There’s a lot more uncertainty in the

marketplace until we get agreement, and that’s

what this is reflecting,” McEwan said.

„ IN BRIEF