BIZweek n°233 22 mar 2019
BIZweek n°233 22 mar 2019
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  • Parution : n°233 de 22 mar 2019

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

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  • Nombre de pages : 7

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VENDREDI 22 MARS 2019 BIZWEEK ÉDITION 233 LA TOUR BASEL COMMITTEE STATEMENT Banks, beware of crypto-assets In a recently published statement, the Basel Committee on Banking Supervision (BCBS) has raised concerns relating to the risks that crypto-assets pose to the global financial system. While it acknowledges that banks do not currently have significant exposure to crypto-assets, it warns that these assets are increasingly becoming a threat to financial stability The Basel committee warned the global banking system, in a statement issued on the 13th of March, that the magnifying digital currencies industry is putting the economic and monetary balance under jeopardy. The Basel Committee on Banking Supervision that manages the world banking system was founded by The Governors of the Group of Ten Central Banks in the year 1974. The statement goes as follows  : About the Basel Committee and Mauritius The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. Its 45 members comprise central banks and bank supervisors from 28 jurisdictions. Mauritius also follows supervisory matters set out by the BCBS. For instance, Basel I Accord was adopted in our jurisdiction way back in 1993. The Capital Adequacy Ratio initially set at 8 per cent was raised to 10 per cent in 1998. Basel II became operational in Mauritius as from March 2008 on a one-year parallel run with Basel I and was fully implemented as from March 2009. To keep pace with international norms, Mauritius adopted Basel III in relation to its capital framework as from 2014. The Guideline became effective on October 2017. « The past few years have seen a growth in crypto-assets. While the crypto-asset market remains small relative to that of the global financial system, and banks currently have very limited direct exposures, the Committee is of the view that the continued growth of crypto-asset trading platforms and new financial products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks. While crypto-assets are at times referred to as ‘crypto-currencies’, the Committee is of the view that such assets do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value. Crypto-assets are not legal tender, and are not backed by any government or public authority. Through this newsletter, the Basel Committee is setting out its prudential expectations related to banks’exposures to crypto-assets and related services, for those jurisdictions that do not prohibit such exposures and services. Crypto-assets have exhibited a high degree of volatility and are considered an immature asset class given the lack of standardisation and constant evolution. They present a number of risks for banks, including liquidity risk ; credit risk ; market risk ; operational risk (including fraud and cyber risks) ; money laundering and terrorist financing risk ; and legal and reputation risks. Accordingly, the Committee expects that if a bank is authorised and decides to acquire crypto-asset exposures or provide related services, the following should be adopted at a minimum  : Due diligence  : Before acquiring exposures to crypto-assets or providing related services, a bank should conduct comprehensive analyses of the risks noted above. The bank should ensure that it has the relevant and requisite technical expertise to adequately assess the risks stemming from crypto-assets. Governance and risk management  : The bank should have a clear and robust risk management framework that is appropriate for the risks of its crypto-asset exposures and related services. Given the anonymity and limited regulatory oversight of many crypto-assets, a bank’s risk management framework for crypto-assets should be fully integrated into the overall risk management processes, including those related to anti-money laundering and combating the financing of terrorism and the evasion of sanctions, and heightened fraud monitoring. Given the risk associated with such exposures and services, banks are expected to implement risk management processes that are consistent with the high degree of risk of crypto-assets. Its relevant senior management functions are expected to be involved in overseeing the risk assessment framework. Board and senior management should be provided with timely and relevant information related to the bank’s crypto-asset risk profile. An assessment of the risks described above related to direct and indirect crypto-asset exposures and other services should be incorporated into the bank’s internal capital and liquidity adequacy assessment processes. Disclosure  : A bank should publicly disclose any material crypto-asset exposures or related services as part of its regular financial disclosures and specify the accounting treatment for such exposures, consistent with domestic laws and regulations. Supervisory dialogue  : The bank should informits supervisory authority of actual and planned crypto-asset exposure or activity in a timely manner and provide assurance that it has fully assessed the permissibility of the activity and the risks associated with the intended exposures and services, and how it has mitigated these risks. The Committee continues to monitor developments in crypto-assets, including banks’direct and indirect exposures to such assets. The Committee will in due course clarify the prudential treatment of such exposures to appropriately reflect the high degree of risk of crypto-assets. It is coordinating its work with other global standard setting bodies and the Financial Stability Board. » 4
VENDREDI 22 MARS 2019 BIZWEEK ÉDITION 233 POST SCRIPTUM FIRST TWO MONTHS OF 2019 The Rebound in Global Equity Markets Major global stock markets suffered from significant losses last year. The end of 2018 was marked by falling prices and indices. Investors were losing confidence as analysts feared an economic slowdown. However, the equity market surprisingly pickedup at the start of 2019. The first two months have witnessed soaring prices and global indices, triggered by increased optimism among investors. Global growth concerns were weighing heavily on equity markets, particularly trade tensions between the U.S. and China. Towards the end of 2018, China recorded its slowest growth in retail sales in 15 years. Trade tensions between the U.S. and China and fears over Federal Reserve System tightening were negatively affecting investor sentiment. However, trade tensions are now easing with US and China negotiating on a trade truce. The US-China trade truce could resolve major political uncertainties and thus, is positively impacting the major world equity markets. US equity markets have also been rebounding on the back of better-than-expected economic data. S&P Global Infrastructure The S&P 500 Index is having a strong recovery after the deep pullback last year. In December 2018, S&P 500 recorded a fall of 6.2% in value. US equity prices rocketed on the announcement of improved economic conditions. S&P 500 rose by 11% in the first two months of 2019. Nasdaq Composite Reflecting the marketuptrend, Nasdaq Compositive climbed 14% since the beginning of this year, with leading stocks continuing to outperform. Good performance by large-capitalisation technology stocks largely contributed to this massive improvement in the tech-heavy Nasdaq Composite. FTSE 100 Consistent with global market trends, FTSE 100 also rose by 5% in the last two months. The latest announcement, by Theresa May, of delaying Brexit and blocking prospects of a no-deal might be seen as good news, especially for the pound ; but not necessarily for the FTSE 100. Domestic businesses and the UK economy as a whole would benefit. However, about 70% of the indexes’components derive most of their earnings from overseas and earnin foreign currencies. Thus, a stronger pound may financially problematic. Euro Stoxx 50 Euro Stoxx 50 surged to make gains of 10% in the past two months. This may be attributed to a boost in the broader market sentiment following USChina trade accord. Eurozone Growth Concerns In February, however, the European Commission (EC) lowered its 2019 growth projection for the 19-member Eurozone by 0.4%. It cited weaker demand for its exports from China and geopolitical issues related to Brexit as the primary reasons behind its decision. Consistent with the EC, the Bank of England also reduced the UK growth rate to 1.2% from 1.7%. Moreover, two largest economies of the Eurozone, Germany and Italy are facing severe output declines and contractions. Nikkei 225 Nikkei 225 wentup 7% since the beginning of this year. Despite news of falling Japan’s exports, Nikkei rose to mirror increasing global optimism around the US-China trade deal. Overview of local indices, local currencies and others The SEMDEX and SEMTRI both lost ground during the month, falling 0.3% each. The SEM-10 gained 0.4% in February. The Pound continued to rise against our local currency. The observed increase of 1.2% may be attributed to the delay in parliamentary vote, announced by Theresa May. The Euro depreciated by 1.2% in February. This fall may be driven by contractions in the manufacturing industry in Germany. The US Dollar remained flat In its Dahsboard for the month of February, Aon Hewitt (Mauritius) Ltd analyzes the rebound of foreign equity markets in the first two months of 2019. The analysis provides anupdate on the performance of the major foreign equity indices like S&P 500, Nasdaq, FTSE 100, Euro Stoxx 50, Nikkei… against MUR as the Federal Reserve maintained a neutral outlook on its monetary policy and confirmedno potential increases in near future. Gold price faced a slight drop of 0.7% in February. Concerns over an economic slowdown and the strenghtening of the US dollar have been restricting gains in the gold market. Brent crude oil price further rose by 6.7%. The start of this year has been characterised by surging oil prices due to cuts in OPEC production. The rise was further supported by US sanctions on both Iran’s and Venezuela’s oil supply. World’s Largest Pension Fund down by $136 Billion Japan’s Government Pension Investment Fund, the world’s biggest pension fund recorded important losses in the last quarter ended December 2018 after the significant As at 28.02.19 In MUR% Change in Current Value Past Month fall in equity prices in December. It is to be noted that 50% of the Fund is invested in equities. Assets Last Month Last 3 Months Last 12 Months Last 3 Years GBP 45.17 44.64 1.2% 3.1% -1.6% -3.2% USD 34.14 34.18 -0.1% -0.9% 3.0% -1.8% EUR 38.62 39.10 -1.2% -1.1% -4.3% -0.5% fell to 150.7 trillion yen at the end of December from a record 165.6 trillion yen in September. 5

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