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Progress and Issues in AMBIF Discussion Prof. Shigehito Inukai with Matthias Schmidt ADB Consultants 13 th ABMF Meeting, Tokyo, 25 July 2013 1 V.2_as at.

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Presentation on theme: "Progress and Issues in AMBIF Discussion Prof. Shigehito Inukai with Matthias Schmidt ADB Consultants 13 th ABMF Meeting, Tokyo, 25 July 2013 1 V.2_as at."— Presentation transcript:

1 Progress and Issues in AMBIF Discussion Prof. Shigehito Inukai with Matthias Schmidt ADB Consultants 13 th ABMF Meeting, Tokyo, 25 July 2013 1 V.2_as at 12 July 2013 Not Final (For ABMF-J)

2 Proposed Agenda ① Support for Interim Report from AFMCGM ② Additional Information since Interim Report ③ Addressing Regulatory Concerns ④ Detailing AMBIF Components ⑤ Documentation - Creation of Voluntary ADRB ⑥ Update on Information Platform ⑦ Proposed Phase 3 Activities ⑧ Introduction of ADRB (Voluntary working group for making recommendations on AMBIF Documentation) ⑨ Questions & Answers (in Session 2) 2

3 ① Support for Interim Report from AFMCGM 3

4 AMBIF Focus is shifting Basic AMBIF Components agreed in principle Necessary detailing in progress Additional information as discussed Focus on AMBIF Documentation as key component for implementation based on possible demand expectations Focus on possible approaches to AMBIF implementation with regulatory authorities 4

5 Phase 2 Interim Report – SF1 Submitted to ABMI on 25 April 2013 Acknowledged by AFMCGM on 2 May 2013, support mentioned for ABMF’s present and future activities 5

6 ② Additional Information relevant for AMBIF since Interim Report 6

7 Proposed AMBIF Market(s) or Segment(s) for Consideration EconomyType of MarketCandidate Market Professional Market as a result of Participation of Market governed by SRO Accessible to Foreign Institutional Investors PR China Issuing & Secondary Inter-Bank Bond Market (IBBM) Access/Participation Institutional Investors PBOCNAFMIIvia QFII (Issuing & Secondary) (Qualified Foreign Institutional Investor) (Regulation)(QFIIs, B/Ds)(CSRC)(SSE)(YES) Hong Kong IssuingHKExMarket Practice Professional Investors SFC, HKExHKExYES Issuing & Secondary OTCMarket Practice Professional Investors SFC, HKMA-YES IndonesiaMTN Issuing(Private Placement)Market Practice Market Participants --YES JapanIssuingTokyo PRO-BONDLaw (FIEA) Specified Investors FSA, TSETSE, JSDAYES Korea SME + SME Foreign Issuers Issuances QIB MarketDecree to FSCMA Qualified Institiutional Buyers KOFIA (FSS)KOFIANot at the moment Issuing Private Placement FSCMA defines this market Market Practice Professional Investors (KOFIA) YES Malaysia Issuing & Secondary Excluded OffersLaw (CMSA) Sophisticated Investors SC Malaysia-YES Issuing Exempt Regime (Listings only) Membership Institutional Investors Bursa Malaysia-YES Philippines Issuing & Secondary Qualified Investor / Qualified Buyer Market Participation Qualified Investors / Qualified Buyers SECPDExYES Singapore Issuing & Secondary OTCMarket Practice Institutional Investors SGX-YES Thailand Issuing & Secondary Private Placement under AI Regime / OTC Thai SEC Regulation Accredited Investors (AI, includes II & HNW)) SECThaiBMAYES Viet Nam Issuing & Secondary (Private Placement)Law Professional Investors SSC(VBMA)YES 7

8 Table: AMBIF Investor Types as currently evident in ASEAN+3 Economies and their Legislation; now including Cambodia 8 EconomyInvestor Term As stated by Investor Term in each Economy represents the following Types of Investors (expressed as Categories mentioned in Laws, Regulations or Market Practice) Banks Broker/Dealers Insurance Companies Mutual Funds Provident Funds Government Funds Central Banks Closed-ended Funds Corporates Deposit Protection Agency Derivatives Businesses Development Funds Exchanges Foreign Institutional Investors Finance Companies Fund Managers High Net Worth Individuals Individuals as Fund Managers Supra Fin. Institutions Institutional Investors Other (to be specified) Private Funds Statutory Companies/Boards Subsidiaries of Inv. Types Trust Companies Trustee Cambodia Institutional InvestorsAnukret    PR China 'IBBM Investors'PBOC     Qualified Foreign Institutional InvestorCSRC    Hong Kong Professional InvestorLaw      'Offer to Prof. Investors'HKEx        Indonesia {Professional Investor}IFSA  Japan Specified InvestorsLaw       Korea Professional InvestorsLaw        Qualified Institiutional BuyersLaw       Malaysia Sophisticated InvestorsLaw       Philippines Qualified Investor, Qualified BuyerLaw, SEC      Singapore Institutional InvestorsLaw        Thailand Accredited InvestorsSEC    Viet Nam Professional InvestorsLaw    

9 Issuance Cost: Update Context: Members’ request to quantify potential AMBIF benefits  Many thanks go to Deutsche Bank, HSBC!  Obtained significant amount of information  For both international and regional markets  Some initial observations on next page 9

10 Issuance Cost: Initial Observations Typically: international > domestic markets Since domestic market issuance not required to tap typical international services Further normalisation needed because: Markets’ practices, cost components differ Cost assumptions are solid but may not be directly comparable to AMBIF features  May need to differentiate between current and AMBIF issuance to determine suitable cost components 10

11 Accounting/Reporting Standards Considered a challenge in context of AMBIF, based on market visit feedback Thought to be addressed via IFRS (International Financial Reporting Standards) However, research to date indicates that acceptance is slowing and direct applicability of IFRS may be limited Instead, markets and listing places appear willing to accept multiple standards Phase 2 Report to reflect this 11

12 Information on Withholding Tax 12 PWC has kindly offered to compile the data for ABMF! EconomyType of Bonds Withholding Tax on Interest from Fixed Income Securities WHT Rate Concession(s), if anyRemarks in % PR China Government Corporate Hong Kong Government Corporate Indonesia Government Corporate Japan Government Corporate Korea Government Corporate Malaysia Government Corporate Philippines Government Corporate Singapore Government Corporate Thailand Government Corporate Viet Nam Government Corporate

13 Information on Withholding Tax Envisaged withholding tax (WHT) information for members’ information and consideration: Headline (official) tax rates Concessionary rates, as may exist Details on concessions 13

14 14 ③ Addressing Regulatory Concerns and Feedback

15 Regulatory Concerns/Feedback Regulatory mandate to be confirmed Suitable regulatory process, taking into consideration market-specific regulatory processes (many/none), multiple regulators Understanding of investor types for AMBIF Practical issues on regulatory process Approach to AMBIF Implementation One possible Adoption of AMBIF 15

16 16 Possible AMBIF Regulatory Processes Using Typical Modalities of Standardizing Regulations Degree of standardizationStrong Feasibility Difficult Harmonization Mutual Agreement Acceptance of Equivalence Mutual Recognition Substituted Compliance Target Area 16

17 Understanding AMBIF Investors  Will be addressed in next Chapter 17

18 Practical Considerations  Please refer to Information Platform 18

19 One possible Adoption of AMBIF AMBIF Component Local Currency Issuance Instruments Investors Issuers Documentation = AMBIF Market 19 Available in given Market L ocal Currency Issuance Straight Bonds, Sukuk Licensed Investors, FII Acceptable Issuers e.g. Market Practice Prerequisites in place? Potential Approach Regulatory Guideline ~ AMBIF Market?! ✔ ✔ ✔ ✔ ✔

20 One possible Adoption of AMBIF From previous page Key: no (major) changes to existing legislation and/or regulations Where no specific regulations exist, licensing and market practice could be referenced Potential to bring all AMBIF Components together in a (single) guideline (to be) issued by the relevant authority (or domestic equivalent procedure) Related guideline may be issued by authority Related guideline may be issued by authority 20

21 21 ④ Detailing AMBIF Components

22 AMBIF Instruments in Local Currency No strong opinions recorded on proposed instruments or local currency issuance, but would like to confirm with members:  Straight bonds and Sukuk?  Intention not to prevent issuance in foreign currencies Being other ASEAN+3 local currencies Being e.g. USD or EUR 22

23 AMBIF Investors: Clarification Proposed AMBIF Investor type:  Investment Advisory Businesses Investor type meant to represent member economies varying definitions of professional Asset managers Fund managers Investment advisors Investment managers Mutual Funds / Unit Trusts  Not intended to unify, but to be inclusive 23

24 AMBIF Investors - FII Interim Report: no intended limitations or restrictions for Foreign Institutional Investors (FII), other than those in place FII may be seen as representing potentially significant demand for each domestic AMBIF bond issuance FII = investors from other ASEAN+3 markets as well 24

25 AMBIF Issuers No objection or feedback on AMBIF Issuers so far, but further detailing desired Who may be interested to issue? What may be their considerations? Other relevant information  Intention to provide more detailed info by 14 th ABMF 25

26 26 ⑤ Documentation – Creation of Voluntary ADRB

27 Update on AMBIF Documents Creation of Voluntary “Asian Common Professional Bond Market Practices and Documentation Recommendation Board” (ADRB or AMBIF-PDRB) by market practitioners Types of docs at present Basic objectives 27

28 Expression of General Interest between Markets - Sample / To be checked with Market Sources 28 Issuers’ Home Market PR ChinaHong Kong IndonesiaJapanKoreaMalaysiaPhilippin es Singapor e ThailandViet Nam Issuing Market PR China ○○○ Hong Kong ○○○ Indonesia ○○ Japan ○○ Korea ○○○ Malaysia ○○ Philippin es ○ Singapor e ○○ Thailand ○○ Viet Nam ○ Above matrix is just an image.

29 29 ⑥ Update on proposed Information Platform (Based on Dr. Hyun’s Idea)

30 Comparison of individual IP vs. common IP Individual IP Individual IP Common IP Individual cost Total cost Information management/ sharing Investment activation Implement-ability SCA/Communication AMBIF information platform will serve as common platform to foster standardization of market practices and facilitate intra-regional cross-border bond issuance and investments. 30

31 Function of Common AMBIF Information Platform : : : Common Infrastructure for AMBIF Market: common infrastructure for ASEAN+3 members in AMBIF Market Information Sharing System for AMBIF Bond: collect and distribute information of ASEAN+3 AMBIF Bond Supportive System for Substituted Compliance Approach: facilitate communication and mutual understanding among ASEAN+3 regulators Management System for AMBIF Market: manage all relevant information of regulatory process and qualification of market participants 31

32 Next Step for Discussion The Establishment of AMBIF Information Platform Board working together with ADRB as may be required Study process flow of bond issuance in countries with existing IP (Malaysia, Indonesia, Thailand, Japan, Korea etc) Standardize process flow and issuance documents submitted to regulators to implement AMBIF 32

33 Remainder of Phase 2 13 th ABMF TOKYO Meeting 14 th ABMF JEJU Meeting Phase 2 Report Publication 25/26 July6/7 NovDec 2013 Draft Phase 2 Report; AMBIF Conclusions 16-19 Oct SIBOS Dubai 33 Participation by ADB Secretariat Editing, formatting final Phase 2 Report & Gathering of Information for Phase 1 Updates

34 34 ⑦ Proposed Phase 3 Activities

35 Phase 3 - Proposed Activities Phase 1 Market Guides Report Updates AMBIF Implementation Pilot Issue BCLMV Knowledge Support 35

36 Phase 3 – Market Guide Update Envisaged for Q1, 2014 Members are kindly requested to review and provide updates, necessary revisions by end December 2013 Use of SWIFT request form, process Publication target: April 2014, since second anniversary of original report + to be in time for next AFMCGM in May 2014 36

37 Phase 3 – AMBIF Implementation Key: decision by regulatory bodies or delegated authorities on AMBIF Markets Compilation of agreed AMBIF Components, Substituted Compliance Approach and proposed processes, for use and reference in above decisions Roll out by/in individual markets ABMF to create awareness in markets 37

38 Phase 3 – Proposed Pilot Issue Key: AMBIF in place Opportunity to work through existing and future issues or challenges with pilot participants May induce fine tuning of AMBIF 38

39 Phase 3 – BCLMV Knowledge Support Expected follow-up to Phase 2 support Dependent on markets’ specific requests Support creation/update of Cambodia and other Economies’ market guides 39

40 40 ⑧ Introduction of ADRB (Voluntary working group for making recommendations on AMBIF Documentation) By Mr. Suzuki of Barclays and Mr. Yanase of NO&T

41 Prof. Shigehito Inukai Faculty of Law - Waseda University 1-6-1 Nishiwaseda, Shinjuku-ku Tokyo 169-8050 Office +81 3 3202 2472 Mobile +81 80 3360 7551 41 Matthias Schmidt ADB Consultant Office +61 3 95571314 Mobile +61 423 708910

42 42 ⑨ Questions & Answers (Session 2)

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