Prepared by Randall Dodd.
A fuller discussion of the Financial Investment Services and Capital Markets Act of 2007 can be found in Republic of Korea: Selected Issues, 2006, IMF Country Report No. 06/381; and Chapter III of this Selected Issues paper.
See Box IV.1 for a selected list of recommendations from the major International Financial Policy Organizations (IFPO). These include the Bank for International Settlements (BIS), the Financial Stability Forum (FSF), the International Accounting Standards Board (IASB), the International Monetary Fund (IMF), the International Organization of Securities Commissions (IOSCO), the Institute for International Finance (IIF), and the Organization for Economic Cooperation and Development (OECD). The New York Federal Reserve Bank (NYFRB) and the President’s Working Group (PWG) on Financial Markets are U.S. organizations, but with an international focus and presence.
As of April 2007.
For further details, see Chapter IV of Republic of Korea: Selected Issues, 2007, IMF Country Report No.07/345; and Chapter II of this Selected Issues paper.
Institute of International Finance, Final Report of the IIF Committee on Market Best Practices: Principles of Conduct and Best Practice Recommendations, July 17, 2008.
The Brazilian Futures Exchange (BM&F) is one of the largest and most sophisticated derivatives exchanges in the world, and it also serves as a clearing house for bonds and a registry for OTC derivatives. CETIP is the central securities depository and a derivatives registry in Brazil.
The service is provided by the TRACE and the Municipal Securities Rulemaking Board, a self-regulatory organization for the municipal securities market.
The vast majority of bond trading in Korea is conducted OTC. The KSDA reports that 80.5 percent of bond trading volume was OTC in 2007, down from 99 percent in 2001.
See July 31, 2008 open letter to NYFRB President Geithner from 17 dealers, key buy-side asset management firms, and three related trade associations.
See Chapter III of this Selected Issues Paper for a discussion of stress testing in regard to liquidity risk.
The use of longer maturity notes mitigates the wholesale funding risks as the frequency of the roll-over decreases and roll-over events are staggered over time.
While a substantial share of this foreign currency borrowing is from parent or headquarter banks abroad, those banks may face their own liquidity risks during periods of global turmoil, and may not necessarily be capable of maintaining lines of credit to all areas of the global enterprise.
The foreign exchange swap transaction is very much like a similarly dated foreign currency loan, but has different regulatory and accounting implications. The swap is booked through the bank’s derivatives desk and is reported as an off-balance sheet item. The offsetting value of the exchange of currencies at the spot exchange rate in the start leg of the transaction means that there is no initial credit exposure on the transaction. If it were instead structured as a back-to-back loan, it would appear on the balance sheet as matching (won) asset and (dollar) liabilities.
These entities are also known as QSPEs, special investment vehicles, special purpose vehicles, and conduits.