Singapore: Hong Kong and Singapore
are seeking to snare a bigger share of the US$540 trillion global derivatives
business, taking advantage of tough new UK and European banking rules and
uncertainty created by Britain's plans to leave the European Union.
Over the past five months, regulators
from the two Asian financial centers have been separately holding talks with
the Asia Securities Industry and Financial Markets Association (ASIFMA), which
represents global lenders in Asia, five people with direct knowledge of the
matter told Reuters.
At the center of the discussions is
what kind of regulatory changes would be needed in Hong Kong and Singapore to
get more banks to book their derivatives business in one of the two places.
If the Hong Kong Monetary Authority
(HKMA) and the Monetary Authority of Singapore (MAS) are successful, they could
lure billions of dollars of banking business and eventually create what could
amount to thousands of jobs in Asia.
These derivatives would include
products such as interest rate swaps or foreign exchange derivatives, which
allow companies and investors to hedge their exposure to interest rate rises
and currency swings.
Asia has traditionally accounted for
less than 10 per cent of the global over-the-counter derivatives market,
according to Bank for International Settlements data.
Global banks have typically held the
majority of Asia-related trades on their European balance sheets, with London
being a major booking center for such deals. This has allowed them to gain economies
of scale by aggregating their capital and infrastructure in one or two
locations, while London also has a deep talent pool of employees with expertise
in managing and processing the trading book.
During the past three years, though,
many banks have begun to review their Asia trade booking arrangements because
of new U.K. and European rules that have made Britain less attractive as a
global hub for Asian risk.
Brexit has made the situation more
urgent by prompting many banks to move some of their operations, including
trading books, out of London. This has sparked broader internal discussions
over whether more of the London book holding Asia trades should also be moved
to Asian financial centres, the sources said.
Banks looking to book more trades in
Asia include HSBC , Standard Chartered, UBS and Credit Suisse, one of the
sources said.
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