impact of lehman brothers bankruptcy on post-trade system in japan 4 july, 2009 dhaka, bangladesh...
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Impact of Lehman Brothers bankruptcy on post-trade system
in Japan
4 July, 2009
Dhaka, Bangladesh
Japan Securities Depository Center, Inc.
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IMPACTof Subprime Crisisand Lehman Brothers Bankruptcyon Asian Economiesand Japan
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Impact of Subprime Crisis on Asian Economies - Real GDP Growth Rate -
Country, Region 2007 2008 2009e 2010e 2005-07 08-10
China 13.0 9.0 6.5 7.5 11.7 7.7
India 9.3 7.3 4.5 5.6 9.4 5.8
Bangladesh 6.3 e5.6 5.0 5.4 6.4 5.3
Mongolia 10.2 e8.9 2.7 4.3 8.7 5.2
Vietnam 8.5 6.2 3.3 4.0 8.4 4.5
Indonesia 6.3 6.1 2.5 3.5 5.8 4.0
Pakistan 6.0 6.0 2.5 3.5 6.6 4.0
Malaysia 6.3 4.6 -3.5 1.3 5.8 0.8
Thailand 4.9 2.6 -3.0 1.0 4.9 0.2
Korea 5.1 2.2 -4.0 1.5 4.7 -0.1
Hong Kong 6.4 2.5 -4.5 0.5 6.8 -0.5
Japan 2.4 -0.6 -6.2 0.5 2.1 -2.2
Taiwan 5.7 0.1 -7.5 0.0 4.9 -2.5
Singapore 7.8 e1.1 -10.0 -0.1 7.8 -3.1
(Source) International Monetary Fund, World Economic Outlook Database, April 2009
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Before & after Lehman Brothers bankruptcy - Asian Stock Performance -
Market Index(a) (b) (c) %change
12-Sep-08 Lowest after 12-Sep-08 25-Jun-09 (b)/(a) (c)/(a)
China SSE Composite 2,079.67 1,706.70 (04-Nov-08) 2,925.05 -17.9 40.6
Indonesia Jakarta Composite 1,804.06 1,111.39 (28-Oct-08) 2,044.17 -38.4 13.3
Malaysia KLSE Composite 1,044.03 829.41 (29-Oct-08) 1,074.11 -20.6 2.9
India SENSEX 14,000.81 8,160.40 (09-Mar-09) 14,345.62 -41.7 2.5
Taiwan TSEC weighted 6,310.68 4,089.93 (20-Nov-08) 6,457.61 -35.2 2.3
Bangladesh General 2,850.17 2,408.67 (09-Apr-09) 2,891.05 -15.5 1.4
Vietnam VN 476.00 235.50 (24-Feb-09) 453.76 -50.5 -4.7
Hong Kong Hang Seng 19,352.90 11,015.84 (27-Oct-08) 18,275.03 -43.1 -5.6
Korea KOSPI Composite 1,477.92 938.75 (24-Oct-08) 1,392.73 -36.5 -5.8
Thailand SET 654.34 384.15 (29-Oct-08) 590.60 -41.3 -9.7
Singapore Straits Times 2,570.67 1,456.95 (09-Mar-09) 2,302.46 -43.3 -10.4
JapanNikkei225 12,214.76 7,054.98 (10-Mar-09) 9,796.08 -42.2 -19.8
TOPIX 1,177.20 700.93 (12-Mar-09) 919.77 -40.5 -21.9
Pakistan KSE100 9,253.92 4,815.34 (26-Jan-09) 7,128.83 -48.0 -23.0
Mongolia TOP20 8,505.14 4,583.69 (19-Feb-09) 4,853.71 -46.1 -42.9
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Impact of Subprime Crisis on Japan (1)
= Sharp decline of export & overseas production
Manufacturing Sector
Sudden higher value of the yen Falling-off of consumer demand +
Financial Sector
Sharp decline in stock prices + Bad loans
=Negative effect on financial institutions’ balance sheets
First, financial sector’s involvement in subprime products was limited.But after Lehman Brothers’ bankruptcy…
+ Low liquidity
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Impact of Subprime Crisis on Japan (2)
Valuation profits/losses for equity holdings
Exposures to subprime-related products
Book value Realized profits/losses
Major Banks, etc.
Sep 08 2,201 719 -727
Dec 08 111 496 -842
Mar 09 -597 397 -916
Regional Banks
Sep 08 1,620 46 -47
Dec 08 666 39 -48
Mar 09 474 31 -52
Cooperative Financial
Institutions
Sep 08 -132 31 -29
Dec 08 -327 30 -29
Mar 09 -268 22 -34
Total
Sep 08 3,690 797 -803
Dec 08 450 565 -919
Mar 09 -390 449 -1,001(Source) Financial Service Agency, Exposures of Japanese deposit-taking institutions to subprime-related products, 2008-2009
(Billion Yen)
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IMPACTof Lehman Brothers Bankruptcy on the Post-trade system in Japan
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Stock Exchange
JSCC(DVP Clearing)
Net-Net
【Market】
【 Clearing】
ParticipantCustomer
【 Settlement】
Bank of Japan
【Matching】TradeData
TradeData
Non-Exchange Trade
Securities Settlement Cash Settlement
JDCC(DVP Clearing)
Gross-Net
JASDEC(PSMS)
JASDEC
Exchange Trade
Trade, Clearing and Settlement flowin securities transaction
BrokerParticipant
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Action taken after Lehman Brothers Bankruptcy
* Lehman Brothers Holdings, Inc.
Day September 2008
LBHI *(US) 15 filed for Chapter 11 bankruptcy
Lehman Brothers Japan, Inc
16 apply to the court for bankruptcy rehabilitation
FSA 15issued the order of retention of assets within Japan and the business improvement order toward Lehman Brothers Japan, Inc
Stock Exchanges 16 imposed trading suspension toward Lehman Brothers Japan, Inc
JSCC
16suspended new obligation assumption for Lehman Brothers Japan Inc.
stopped payment of cash and delivery of securities to Lehman Brothers Japan Inc.
17started buying and selling securities to close out unsettled clearing positions of Lehman Brothers Japan Inc.
25 announced the completion of close-out transactions related to Lehman Brothers Japan Inc.
JDCC
16stopped payment of cash and delivery of securities to Lehman Brothers Japan Inc.
fulfilled obligations of payment with Participant Fund
17 sold securities intended for delivery to Lehman Brothers Japan Inc.
22appropriated proceeds of a sale of securities intended for delivery to Lehman Brothers Japan Inc. for Participant Fund
(Source) Bank of Japan “Reports and Research Papers” March 2009
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Action taken by JSCC right after Lehman Brothers’ Default
JSCC
Lehman BrothersJapan, Inc
SecuritiesCompany
SecuritiesCompany
SecuritiesCompany
Shortage of Cash
Shortage of Securities
Obligation Assumption GuaranteedObligation Assumption Suspended
Covered by over-draft agreementswith fund-settling banks
(16~18 September)
Purchased from the market(17 September ~)
Failure ofSecuritiesDelivery
Cleared away
CashDelivery
Completed
XX
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Average Daily Volume of Failed-Delivery in JSCC - 2008 -
Note1: Figures are average daily failed-delivery shares against expected number of shares to be settled based onnetting for JASDEC eligible domestic stocks.
02,0004,0006,0008,000
10,00012,00014,00016,000
系列1
(thousand Shares)
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Action taken by JDCC right after Lehman Brothers’ Default
JDCCSecuritiesCompany
SecuritiesCompany
Custodian Bank
Shortage of Cash
Covered by Participant Fund(16 September)
Securities DeliveryCompleted
(16 September)
XX Lehman Brothers
Japan, Inc
Sold to restoreParticipant Fund
Obligation Assumption SuspendedObligation Assumption Guaranteed
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Default Protection by JSCC & JDCCin Lehman Brothers bankruptcy
JSCC– For the shortage of securities, JSCC
> was financed by over-draft agreements with fund-settling banks, and
> purchased securities from the market– For the shortage of cash, JSCC
> was financed by over-draft agreements with fund-settling banks
>>> Amount financed was covered by selling securities intended for delivery to Lehman Brothers Japan, Inc. and its Clearing Fund later
JDCC– For the shortage of cash, JDCC
> used its Participant Fund
>>> Participant Fund was covered by selling securities intended for delivery to Lehman Brothers Japan, Inc. later
- CCPs’ Loss Compensation Scheme functioned properly- DVP limited losses of counterparties within price volatility
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For inquiries…
Please contact:
Naoko Watanabe
International Department
Japan Securities Depository Center, Inc.