In a week that saw further ramifications to high-profile banking failures, SRP investigated the impact on structured products
The European banking sector performance has been a standout driver of successful early redemptions of structured products (autocalls) for the best part of Q1 2023 in France, according to SRP data.
With banks set to end the quarter about flat following the sector turmoil, early matured products linked to banking indices represented more than a fifth of the redeemed notional in France year to date.
The demise of the start-up supporting Silicon Valley Bank (SVB) has attracted significant attention
Additionally, products linked to the performance of shares of French banks accounted for a further three percent of the approximately €2 billion released for reinvestment in what has been an improving quarter for #autocalls in terms of rollover money.
In Europe, the European Banking Authority (EBA) has launched a public consultation on its draft Regulatory Technical Standards (RTS) on the assessment methodology under which competent authorities verify institutions’ compliance with the requirements applicable to their internal risk models under the Fundamental Review of the Trading Book (FRTB) rules.
‘One of the prerequisites for an institution to use the new internal model approach (IMA) for calculating its own funds requirements for market risk is the approval from its competent authority,’ stated the regulator.
‘To obtain such an approval, the institution is subject to a thorough and comprehensive assessment of its internal model by the competent authority to ensure it complies with the relevant regulatory provisions.’
The demise of the start-up supporting Silicon Valley Bank (SVB) has attracted significant attention. SVB’s problems were exacerbated by worsening economic conditions and the rise in interest rates. Rate rises produced losses in some of the bank's investments such as long dated US Treasuries. The failures took the market by surprise, writes FVC’s Tim Mortimer.
The case of SVB was quickly followed by the renowned investment bank Credit Suisse, a bank with a proud history plagued by troubles in recent times. Trading losses and regulatory issues forced its sale to archrival UBS last week.
The name of Credit Suisse is well known in structured products. Although it has not issued any products in the UK retail market for over three years, it has remained active in the US issuing over 2,000 products in that time according to www.structrpro.com. Find out more by visiting our site.
Nomura has appointed Simon Yates as global head of equities at Nomura Securities International (NSI), based in New York. Yates has more than 30 years of experience in the financial services industry. He has been with Nomura since 2021, most recently serving as global head of equity trading and international head of equities at NSI.
Yates was appointed to his previous role in April 2022 when the Japanese bank made 83 senior managing directors across the retail, wholesale, investment management and other segments.
The UK Financial Conduct Authority (FCA) has appointed Therese Chambers and Steve Smart as joint executive directors of enforcement and market oversight.
The expansion of the FCA’s enforcement and market oversight leadership team will also support the FCA’s ongoing transformation to become ‘a more assertive, more adaptive and more innovative regulator’.
Over in China, HSBC introduced the MSCI Pacific ESG Leaders 7% Risk Control Index as the underlier asset for two tranches of structured deposits – one denominated in Chinese yuan and the other in US dollars. The two-year products are fully-principal protected and deployed with Asian up-and-out options. The CNY tranche offers a coupon of 0.5% pa. or four percent pa. while the USD tranche of two percent pa. or six percent pa. The trigger out level is 112% for both. Their respective minimum investment is CNY50,000 and US$20,000.
The launch follows the UK bank's campaign on its structured deposits tracking the MSCI World ESG Screened Risk Control 5% Index (USD), which debut in August 2021 marking the maiden use of MSCI indices for structured products at HSBC China.
Image: iStock.