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Russian state-owned banks face Ukraine risks

LONDON – Ratings agency Fitch warned that Russian state-owned banks have significant exposure to Ukraine, as tension between the two countries deepens over the future of Crimea. Fitch senior director Alexander Danilov believes that about half the exposure is in the form of local lending by Ukrainian subsidiaries, which are mostly parent-funded. A further 25% comes from acquisition finance for Ukrainian and Russian businessmen to buy assets in Ukraine.

Newsletter February 2014: China walks a tightrope on shadow banking

Banking regulator and State Council have circulated draft proposals to tighten controls on non-bank credit By Philip Alexander

Newsletter February 2014: Liquidity rules reopen central bank debate

Revisions to Basel ratios highlight disagreements over the role of monetary authorities in insuring bank liquidity By Philip Alexander

Newsletter January 2014: Regulators step up scrutiny of Bitcoin

European Banking Authority warns on the risks of using virtual currencies while China bans bank involvement By Philip Alexander

Newsletter January 2014: China government debt audit published

BEIJING – The Chinese National Audit Office (NAO) published a comprehensive audit of national and local government debt, and the debts of state-owned companies associated with public infrastructure projects. Other state-owned company debt was excluded from the audit.

Newsletter January 2014: New capital rules set for Islamic banks

KUALA LUMPUR – The Islamic Financial Services Board (IFSB), one of the main international regulators for the industry, has published revised capital adequacy standards for Islamic financial institutions excluding takaful (insurance) and investment funds. This is the first full revision of capital standards for sharia-compliant banks and windows (subsidiaries of conventional banks) since 2005, although a number of rules concerning specific asset classes have been tweaked in the meantime.

Newsletter January 2014: Liquidity squeeze triggered by Russian clamp-down

MOSCOW – The Central Bank of Russia (CBR) revoked the licences of five banks in December, including Investbank, the largest bank headquartered in the exclave of Kaliningrad. Investbank ranked 79 in Russia by tier 1 capital at end-2012 according to thebankerdatabase.com. This brings to 26 the total number of bank licences revoked during 2013. The largest was Masterbank, 46 by tier 1 capital, which lost its licence in November 2013 over alleged money-laundering and accounting irregularities. Several of the banks that lost licences in December, including Smolensky Bank and Project Finance Bank, had suffered deposit outflows and requested liquidity assistance from the CBR in the weeks leading up to their closure. In addition, two other regional banks – Solidarnost in Samara and Ellipse in Nizhny Novgorod – are receiving financial assistance from the Deposit Insurance Agency (DIA) to prevent collapse. Their existing shareholders may lose control over these banks.

Newsletter December 2013: Chinese bank joins systemic list

BASEL – The Financial Stability Board (FSB) has published an amended list of Global Systemically Important Banks (G-SIBs) that face a supplementary capital buffer to protect against their failure. For the first time, a Chinese bank – Industrial and Commercial Bank of China (ICBC) – joins the list in the lowest bucket, with a 1.0% capital ratio surcharge on top of the 7% target level for tier 1 capital ratios. The bank already meets this requirement comfortably, with a Basel tier 1 capital ratio of 10.6% at end-2012. ICBC became the largest bank in the world by tier 1 capital in the 2013 Top 1000 World Banks ranking compiled by The Banker magazine.

Newsletter December 2013: China prepares ground for subordinated capital

BEIJING – The China Banking Regulatory Commission (CBRC) and China Securities Regulatory Commission (CSRC) published a joint draft of “Guidelines on the Practice of Replenishing Capital through Corporate Bonds”, which took effect in November 2013. These guidelines are intended to provide “an institutional norm for commercial banks to broaden their capital replenishment channels,” as well as encouraging the development of the local bond market.

Newsletter November 2013: India opens to foreign bank subsidiaries

MUMBAI – The Reserve Bank of India (RBI) released a framework for the setting up of wholly-owned subsidiaries (WOS) by foreign banks in India on 6 November. According to the RBI, subsidiaries will be “given near national treatment which will enable them to open branches anywhere in the country at par with Indian banks (except in certain sensitive areas where the Reserve Bank’s prior approval would be required). They would also be able to participate fully in the development of the Indian financial sector.”