MUMBAI EDUCATIONAL TRUST

FIXED INCOME
BOND MARKET – INDIA VS. SINGAPORE VS
ARGENTINA

SUBMITTED TO:
PROF. AKHIL SHETTY
PGDM 2020-2022
GROUP NO. 05

NAME ROLL NO
PRATIK SHETTY 03
CHARMI VAKHARIA 39
LAUKIK NAIK 62
MOHIT JADHAV 65
SHUBHAM CHAURASIYA 99
NISHANT GARG 108
HEENA JAIN 116
AASHIKA KESARWANI 117
 India
1) History and overview of debt market  
History and overview of debt market 
The total size of the Indian debt market is currently estimated to be in the range of US $92 billion to US
$100 billion. India’s debt market accounts for approximately 30 percent of its GDP. The Indian bond
market measured by the estimated value of bonds outstanding is next only to the Japanese and Korean
bond markets in Asia. The Indian debt market, in terms of volume, is larger than the equity market. In
terms of daily settled deal, the debt and the forex markets market currently (2001-02) command a
volume of Rs 25,000 crore against a meager Rs 1,200 crore in the equity markets (including equity
derivatives). 
In the post reforms era, a fairly well segmented debt market has emerged comprising: 
1. Private corporate debt market 
2. Public sector undertaking bond market and 
3. Government securities market 
The government securities market accounts for more than 90 percent of the turnover in the debt
market. It constitutes the principal segment of the debt market. 
The Indian debt market has traditionally been a wholesale market with participation restricted to few
institutional players – mainly banks. The banks were the major participants in the government securities
market due to statutory requirements. The turnover in the debt market 
too was quite low a few hundred crores till the early 1990s. The debt market was fairly underdeveloped
due to the administrated interest rate regime and the availability of investment avenues which gave a
higher rate of return to investors. 
In the early 1990s, the government needed a large amount of money for investment in development
and infrastructure projects. The government realized the need of a vibrant, efficient and healthy debt
market and undertook reform measures. The Reserve Bank put in substantial efforts to develop the
government securities market but its two segments, the private corporate debt market and public sector
undertaking bond market, have not yet fully developed in terms of volume and liquidity. 
It is debt market which can provide returns commensurate to the risk, a variety of instruments to match
the risk and liquidity preferences of investors, greater safety and lower volatility. Hence the debt market
has a lot of potential for growth in the future. The debt market is critical to the development of a
developing country like India which requires a large amount of capital for achieving industrial and
infrastructure growth. 
Regulation of Debt Market: The Reserve Bank of India regulates the government securities market and
money market while the corporate debt market comes under the purview of the Securities Exchange
and Board of India (SEBI). 
In order to promote an orderly development of the market, the government issued a notification on
March 2, 2000 delineating the areas of responsibility between the Reserve Bank and SEBI. The contracts
for sale and purchase of government securities, gold related securities, Money market securities and
securities derived from these securities and ready forward contracts in debt securities shall be regulated
by the Reserve Bank. Such contracts, if executed on the stock exchanges shall, however, be regulated by
SEBI in manner that is consistent with the guidelines issued by the Reserve Bank. 
 
2) Role of Government and Central on developing debt market 
Indian bond market has made rapid strides in the last few years due to several initiatives undertaken by
the state, central bank and other stake holders. Although activities in corporate bonds market have
picked up, the Indian bonds market continues to be dominated by Government bonds market. One of
the landmark initiatives in this regard was phasing out of automatic monetization of fiscal deficit
through issue of ad hoc Treasury Bills with effect from April 1, 1997 through a supplemental agreement
signed between Government of India (GoI) and RBI on March 26, 1997. This agreement paved the way
for funding the fiscal deficit of GoI through market loans and thereby, need to develop the Government
bonds market. Another landmark initiative was Fiscal Responsibility and Budget Management (FRBM)
Act, 2003 prohibiting RBI’s subscription to the Government bonds in the primary auction with effect
from April 1, 2006. This initiative resulted in issuance of all Page 3 of 21 Government bonds in the
market and improved the depth of both primary and secondary segments of the Government bonds
market. 6. Some of the other important initiatives taken with respect to the Government bonds market
were (i) State governments’ fund raising shifting to market through an auction system; (ii) introduction
of primary dealers (PDs) network; (iii) introduction of When Issued market; (iv) issuance of half-yearly
auction calendars covering quantum, timing & tenor of securities for providing transparency and
certainty to the market participants; (v) setting up electronic platforms for primary auctions, namely, the
Negotiated Dealing System Auction (NDS-Auction); and (vi) setting up electronic Order Matching (OM)
platform for secondary market trade, namely, the NDS-OM. Consequently, the volume in Government
bonds market increased significantly 
 
3) Major investors in debt market 
 State governments and Central government. The largest segment of the Indian Debt
market consists of the Government of India securities where the daily trading volume is in
excess of Rs.2000 crore, with instrument tenors ranging from short dated Treasury Bills to
long dated securities extending upto 30 years. 
 Non-government entities like Banks, Financial Institutions, Insurance Companies,
Mutual Funds, Primary Dealers, Corporate entities. 
 Wholesale Debt Market - Where the investors are mostly Banks, Financial
Institutions, the RBI, Primary Dealers, Insurance companies, MFs, Corporates and
FIIs. 
 
4) Different securities in money market and capital market 
Following are the types of Money Market Instruments: 
Promissory Note: 
A promissory note is one of the earliest type of bills. It is a financial instrument with a written promise by
one party, to pay to another party, a definite sum of money by demand or at a specified future date,
although it falls in due for payment after 90 days within three days of grace. However, Promissory notes
are usually not used in the business, but USA is an exception. 
Bills of exchange or commercial bills 
The bills of exchange can be compared to the promissory note; besides it is drawn by the creditor and is
accepted by the bank of the debater. The bill of exchange can be discounted by the creditor with a bank
or a broker. Additionally, there is a foreign bill of exchange which becomes due for payment from the
date of acceptance. However, the remaining procedure is the same for the internal bills of exchange. 
Treasury Bills (T-Bills) 
 The Treasury bills are issued by the Central Government and known to be one of the
safest money market instruments available. Besides, they carry zero risk, so the returns are
not attractive. Also, they come with different maturity periods like 1 year, 6 months or 3
months and are also circulated by primary and secondary markets. The central government
issues them at a lesser price than their face-value. 
  The difference of maturity value of the instrument and the buying price of the bill, which
is decided with the help of bidding done via auctions, is basically the interest earned by the
buyer. 
 There are three types of treasury bills issued by the Government of India currently that
is through auctions which are 91-day, 182-day and 364-day treasury bills. 
Call and Notice Money 
Call and Notice Money exist in the market. With respect to Call Money, the funds are borrowed and lent
for one day, whereas in the Notice Market, they are borrowed and lent up to 14 days, without any
collateral security. The commercial banks and cooperative banks borrow and lend funds in this market.
However, the all-India financial institutions and mutual funds only participate as lenders of funds. 
Inter-bank Term Market 
The inter-bank term market is for the cooperative and commercial banks in India who borrow and lend
funds for a period of over 14 days and up to 90 days. This is done without any collateral security at the
rates determined by markets. 
Commercial Papers (CPs) 
 Commercial papers can be compared to an unsecured short-term promissory note
which is issued by top rated companies with a purpose of raising capital to meet
requirements directly from the market. 
 They usually have a fixed maturity period which can range anywhere from 1 day up to
270 days. 
 They offer higher returns as compared to treasury bills. They are automatically not as
secure in comparison. Also, Commercial papers are traded actively in secondary market. 
Certificate of Deposits ( CD’s ) 
 This functions as a deposit receipt for money which is deposited with a financial
organization or bank. The Certificate of Deposit is different from a Fixed Deposit receipt in
two ways. i. Certificate of deposits are issued only of the sum of money is huge. ii. Certificate
of deposit is freely negotiable. 
 The RBI first announced in 1989 that the Certificate of Investments have become the
most preferred choice of organization in terms of investments as they carry low risk whilst
providing high interest rates than the Treasury bills and term deposits. 
 CD’s are also issued at discounted price like the Treasury bills and they range between a
span of 7 days up to 1 year. 
 The Certificate of Deposit issued by banks range from 3 months, 6 months and 12
months. 
 Note: CD’s can be issued to individuals (except minors), companies, corporations, funds,
non–resident Indians, etc. 
Banker’s Acceptance (BA) 
 A Banker’s Acceptance is a document that promises future payment which is
guaranteed by a commercial bank. Also, it is used in money market funds and will specify
the details of repayment like the date of repayment, amount to be paid, and details of the
individual to which the repayment is due. 
 BA’s features maturity periods that range between 30 days up to 180 days. 
Repurchase Agreements (Repo) 
 Repo’s are also known as Reverse Repo or as Repo. They are loans of short duration
which are agreed by buyers and sellers for the purpose of selling and repurchasing. 
 However, these transactions can be carried out between RBI approved parties. 
  Note: Transactions can only be permitted between securities approved by RBI like the
central or state government securities, treasury bills, central or state government securities,
and PSU bonds. 
Following are the types of Capital Market Instruments: 
There are four main types of security: debt securities, equity securities, derivative securities, and
hybrid securities, which are a combination of debt and equity. 
Debt Securities 
Debt securities, or fixed-income securities, represent money that is borrowed and must be repaid with
terms outlining the amount of the borrowed funds, interest rate, and maturity date. In other words,
debt securities are debt instruments, such as bonds (e.g., a government or municipal bond) or
a certificate of deposit (CD) that can be traded between parties. 
Debt securities, such as bonds and certificates of deposit, as a rule, require the holder to make the
regular interest payments, as well as repayment of the principal amount alongside any other stipulated
contractual rights. Such securities are usually issued for a fixed term, and, in the end, the issuer redeems
them. 
A debt security’s interest rate on a debt security is determined based on a borrower’s credit history,
track record, and solvency – the ability to repay the loan in the future. The higher the risk of the
borrower’s default on the loan, the higher the interest rate a lender would require to compensate for
the amount of risk taken. 
It is important to mention that the dollar value of the daily trading volume of debt securities is
significantly larger than stocks. The reason is that debt securities are largely held by institutional
investors, alongside governments and not-for-profit organizations. 
  
Equity Securities 
Equity securities represent ownership interest held by shareholders in a company. In other words, it is
an investment in an organization’s equity stock to become a shareholder of the organization. 
The difference between holders of equity securities and holders of debt securities is that the former is
not entitled to a regular payment, but they can profit from capital gains by selling the stocks. Another
difference is that equity securities provide ownership rights to the holder so that he becomes one
of the owners of the company, owning a stake proportionate to the number of acquired shares. 
In the event a business faces bankruptcy, the equity holders can only share the residual interest that
remains after all obligations have been paid out to debt security holders. Companies regularly distribute
dividends to shareholders sharing the earned profits coming from the core business operations, whereas
it is not the case for the debtholders. 
  
Derivative Securities 
Derivative securities are financial instruments whose value depends on basic variables. The variables can
be assets, such as stocks, bonds, currencies, interest rates, market indices, and goods. The main purpose
of using derivatives is to consider and minimize risk. It is achieved by insuring against price movements,
creating favorable conditions for speculations and getting access to hard-to-reach assets or markets. 
Formerly, derivatives were used to ensure balanced exchange rates for goods traded internationally.
International traders needed an accounting system to lock their different national currencies at a
specific exchange rate. 
There are four main types of derivative securities: 
  
1. Futures 
Futures, also called futures contracts, are an agreement between two parties for the purchase and
delivery of an asset at an agreed-upon price at a future date. Futures are traded on an exchange, with
the contracts already standardized. In a futures transaction, the parties involved must buy or sell the
underlying asset. 
  
2. Forwards 
Forwards, or forward contracts, are similar to futures, but do not trade on an exchange, only retailing.
When creating a forward contract, the buyer and seller must determine the terms, size, and settlement
process for the derivative. 
Another difference from futures is the risk for both sellers and buyers. The risks arise when one party
becomes bankrupt, and the other party may not able to protect its rights and, as a result, loses the value
of its position. 
  
3. Options 
Options, or options contracts, are similar to a futures contract, as it involves the purchase or sale of an
asset between two parties at a predetermined date in the future for a specific price. The key difference
between the two types of contracts is that, with an option, the buyer is not required to complete the
action of buying or selling. 
  
4. Swaps 
Swaps involve the exchange of one kind of cash flow with another. For example, an interest rate
swap enables a trader to switch to a variable interest rate loan from a fixed interest rate loan, or
vice versa. 
  
Hybrid Securities 
Hybrid security, as the name suggests, is a type of security that combines characteristics of both debt
and equity securities. Many banks and organizations turn to hybrid securities to borrow money from
investors. 
Similar to bonds, they typically promise to pay a higher interest at a fixed or floating rate until a certain
time in the future. Unlike a bond, the number and timing of interest payments are not guaranteed. They
can even be converted into shares, or an investment can be terminated at any time. 
Examples of hybrid securities are preferred stocks that enable the holder to receive dividends prior to
the holders of common stock, convertible bonds that can be converted into a known amount of equity
stocks during the life of the bond or at maturity date, depending on the terms of the contract, etc. 
Hybrid securities are complex products. Even experienced investors may struggle to understand and
evaluate the risks involved in trading them. Institutional investors sometimes fail at understanding the
terms of the deal they enter into while buying hybrid security. 

6) Who was responsible for the Crisis and how central bank and government tried to come
out of situation  
India does have considerable international currency reserves to call on, but it also has high fiscal
deficits which leave little room for increased expenditure. Consequently, India put the emphasis
on monetary measures, in particular facilitating credit access options for producers. For many
developing countries, however, these money policy measures are strictly limited because
easement in interest policy impacts the exchange rate of their currency and the rate of inflation. 
Conversely, the effect of devaluation of currencies as a specific export incentive measure would
probably be limited as long as global demand did not rise more strongly. Some countries, in
contrast, have introduced selective trade restrictions on non-essential luxury goods. 
The crisis originated in the major financial centres in the developed countries. The force of
impact on the developing and transition countries became apparent only gradually. The situation
is new; previous crises spread from the developing countries. This time developing countries are
the victims of the crisis, but they did not cause it. “The causes of the global financial crisis are to
be found in the financial and economic policies of the developed countries, primarily the United
States (US). Developing countries are not responsible for it, but they are now seriously affected,”
wrote Martin Khor, the new Director of the South Centre in Geneva. 
The Third World Network (2008) reported that the UN Economic Commission for Asia and the
Pacific had in fact registered a “phase of heightened instability”, but at that time they reduced
their growth predictions only minimally. In the IMF July 2008 update of the Global Financial
Stability Report (IMF GFSR)2 the IMF, for its part, registered a weakening of growth in the
threshold countries and a heightened risk of inflation. Borrowing abroad became more
expensive; investors had become more risk-conscious. But the IMF still characterised the
threshold countries as fairly crisis-resistant. The full force of the global financial and economic
crisis impacted the developing and threshold countries in the course of 2008. Subsequently the
IMF, the World Bank and other institutions continually downgraded their growth predictions for
Asia, Latin America and above all Africa. 
 High growth rates disappeared and many countries even had to put up with shrinking economic
production. 
According to the IMF April 2009 World Economic Outlook (IMF WEO), the growth setbacks in
the threshold and developing countries were higher than in the industrialised countries.
Compared with their growth potential, the developing and threshold countries are therefore
harder hit by the global financial and economic crisis than the industrialised countries that caused
it. 
The regression in economic growth entailed a sinking per capita income, at least in countries
with high population growth rates. Macro-economically the crisis manifested itself in mounting
deficits in trade and payment balances, dwindling currency reserves, currency devaluations,
increasing rates of inflation, higher indebtedness and soaring public budget deficits. 
The international agencies reported on social unrest in Bulgaria, China and Latvia. 
8This had a direct impact on the living conditions of the population. The United Nations
Educational, Scientific and Cultural Organization (UNESCO) (2009) estimated that the fall in
growth cost the 390 million poorest people in Africa, i.e., those who must survive on the
equivalent of USD 1 per day, a total of some USD 18 billion or USD 46 per person. This is
equivalent to a drop in average per capita income of one-fifth. The International Labour
Organization (ILO) (2008) feared the number of unemployed could rise to some 50 million by
the end of 2009. The imbalance is mounting. Shortly before the G-20 meeting in Washington in
November 2008 the World Bank estimated that a fall in growth of 1% would force 20 million
people into absolute poverty (World Bank 2008). Six months later the World Bank predicted that
the number of poor would rise further in half the developing countries. Among the low-income
countries as many as one-third and in the countries south of the Sahara as many as three-quarters
would be affected (World Bank GMR 2009). This means that the Millennium Development
Goals faded into the distance for many countries. As a consequence, there has already been
social unrest in some countries.4 In its latest yearbook the international network Social Watch
(2009) reports, in numerous contributions by local civil society organisations, on how the crisis
has subjectively affected individual countries. 
 
 
7) Innovation in debt market due to structured Products  
Structured products are pre-packaged investments that normally include assets linked to interest
plus one or more derivatives. They are generally tied to an index or basket of securities, and are
designed to facilitate highly customized risk-return objectives. This is accomplished by taking a
traditional security such as a conventional investment-grade bond and replacing the usual
payment features—periodic coupons and final principal—with non-traditional payoffs derived
from the performance of one or more underlying assets rather than the issuer's own cash flow. 
1 Origins 
One of the main drivers behind the creation of structured products was the need for companies to
issue cheap debt. They originally became popular in Europe and have gained currency in the
United States, where they are frequently offered as SEC-registered products, which means they
are accessible to retail investors in the same way as stocks, bonds, exchange traded funds (ETFs),
and mutual funds. Their ability to offer customized exposure to otherwise hard-to-reach asset
classes and subclasses make structured products useful as a complement to traditional
components of diversified portfolios. 
2 Returns 
Issuers normally pay returns on structured products once it reaches maturity.1 Payoffs or returns
from these performance outcomes are contingent in the sense that, if the underlying assets return
"x," then the structured product pays out "y." This means that structured products are closely
related to traditional models of options pricing, although they may also contain other derivative
categories such as swaps, forwards, and futures, as well as embedded features that include
leveraged upside participation or downside buffers. 
A significant innovation to improve liquidity in certain types of structured products comes in the
form of exchange-traded notes (ETNs), a product originally introduced by Barclays Bank in
2006.3 These are structured to resemble ETFs, which are fungible instruments traded like a
common stock on a securities exchange. However, ETNs are different from ETFs because they
consist of a debt instrument with cash flows derived from the performance of an underlying
asset. ETNs also provide an alternative to harder-to-access exposures such as commodity futures
or the Indian stock market. 
Other Risks and Considerations 
One of the most important things to understand about these types of investments is their complex
nature—something that the lay investor may not necessarily understand. In addition to liquidity,
another risk associated with structured products is the issuer's credit quality. Although cash flows
are derived from other sources, the products themselves are considered to be the issuing financial
institution's liabilities. For example, they are typically not issued through bankruptcy-remote
third-party vehicles in the way that asset-backed securities are. 
The vast majority of structured products are offered by high investment-grade issuers—mostly
large global financial institutions that include Barclays, Deutsche Bank or JP Morgan Chase. But
during a financial crisis, structured products have the potential of losing principal, similar to the
risks involved with options. Products not necessarily be insured by the Federal Deposit Insurance
Corporation (FDIC), but by the issuer itself. If the company goes has problems with liquidity or
goes bankrupt, investors may lose their initial investments.4 The Financial Industry Regulatory
Authority (FINRA) suggests that firms consider whether purchasers of some or all structured
products be required to go through a vetting process similar to options traders.5 
Another consideration is pricing transparency. There is no uniform pricing standard, making it
harder to compare the net-of-pricing attractiveness of alternative structured product offerings
than it is, for example, to compare the net expense ratios of different mutual funds or
commissions among broker-dealers. Many structured product issuers work the pricing into their
option models to avoid an explicit fee or other expense to the investor. On the flip side, this
means the investor can't know for sure the true value of implicit costs. 
The Bottom Line 
The complexity of derivative securities has long kept them out of meaningful representation in
traditional retail and many institutional investment portfolios. Structured products can bring
many derivative benefits to investors who otherwise would not have access to them. As a
complement to traditional investment vehicles, structured products have a useful role to play in
modern portfolio management. 
8) Role of Regulatory bodies and Credit rating agencies  
 
The SEBI (Credit Rating Agencies) Regulations, 1999 provide for a disclosure-based regulatory
regime, where the agencies are required to disclose their rating criteria, methodology, default
recognition policy, and guidelines on dealing with conflict of interest. The Committee noted that
SEBI is among the few regulators globally to mandate public disclosure of rating criteria and
methodology by the agencies. 
  
• Change in regulations: The Committee noted that rating of an instrument or entity is
being increasingly relied upon by capital markets, bankers and investors and constitutes a key
input for financial decision-making.  In the Indian context, the credibility of credit rating has
come into question in the crisis involving the Infrastructure Leasing and Financial Services
Limited (IL&FS), a major infrastructure development and finance company of systemic
importance, with a debt obligation of Rs 91,000 crore.  The credit rating agencies ignored the
rising debt levels at IL&FS, and continued rating it AAA, indicating the highest level of
creditworthiness.  In this regard, the Committee recommended that the regulators (such as SEBI
and RBI) should review their regulations and suitably modify them to ensure greater objectivity,
transparency and credibility in the whole credit rating framework. 
  
• The Committee also recommended that the Ministry of Finance should seek a factual
report from the concerned regulators regarding the enforcement of the regulations. In particular,
the Ministry should assess the action taken by the regulators against the credit rating agencies
who had been giving stable ratings to IL&FS prior to the default crisis.  Further, it suggested that
the disclosures being made by credit rating agencies should also include important determinants
such as: (i) extent of promoter support, (ii) linkages with subsidiaries, and (iii) liquidity position
for meeting near-term payment obligations. 
  
• Issuer pays model: Currently, the credit rating agencies follow the 'issuer pays model',
under which the entity issuing the financial instrument pays the agency upfront to rate the
underlying securities.  However, the Committee observed that such a payment arrangement may
lead to a 'conflict of interest' and could result in compromising the quality of analysis or the
objectivity of the ratings assigned by the agencies.  Therefore, it suggested that the Ministry of
Finance or the regulators may consider other options as well, such as ‘investor pays model’ or
‘regulator pays model’ after weighing the relevant pros and cons.  Alternately, within the
existing framework, the appropriate rating fee structure, payable by the issuer may be decided by
SEBI, in consultation with RBI and the credit rating agencies. 
  
• Rotation of credit rating agencies: Under the current framework, there is no provision for
the rotation of credit rating agencies.  The Committee recommended that mandatory rotation of
rating agencies should be explored.  This would aid in avoiding negative consequences of long-
term associations between the issuer and the credit rating agency.  This is particularly significant
considering the recent instances of failure of credit rating agencies identifying trouble in their
client-entities. Further, the Ministry may also provide for ratings to be compulsorily carried out
by more than one agency, particularly in respect of debt instruments or bank credit above Rs 100
crore.  
  
• Currently, there are only seven credit rating agencies in the country. To increase
competition, the Committee recommended that the existing threshold for registration of such
agencies may also be suitably lowered with a view to encouraging more entities, particularly
start-ups with the requisite capability and expertise. 
  
• IL&FS: The Committee noted that the central government has intervened in the IL&FS
crisis and reconstituted the Board (the matter being under National Company Law Tribunal). 
However, the Committee recommended a comprehensive commission of enquiry into the crisis,
which will assess: (i) the role of credit rating agencies that had overrated the entities, and (ii) the
role of the Life Insurance Corporation of India, the largest institutional stakeholder in IL&FS. 
 
9) Positive and negative aspects of debt market.  
 
There is certainly an argument to be made that no debt is good debt. But borrowing money and
taking on debt is the only way many people can afford to purchase important big-ticket items like
a home. While those kinds of loans are usually justifiable and provide value to the person taking
on the debt, there is another end of the spectrum that involves debt that’s taken on carelessly.
While it’s easy to differentiate between these two extremes, some other debts are harder to
judge. 
• Good debt has the potential to increase your net worth or enhance your life in an
important way. 
• Bad debt involves borrowing money to purchase rapidly depreciating assets or only for
the purpose of consumption. 
• Determining whether a debt is good or bad sometimes depends on an individual’s
financial situation, including how much they can afford to lose. 
What Is Good Debt? 
Good debt is often exemplified in the old adage “it takes money to make money.” If the debt you
take on helps you generate income and build your net worth, then that can be considered
positive. So can debt that improves your and your family’s life in other significant ways. Among
the things that are often worth going into debt for: 
• Education. In general, the more education an individual has, the greater their earning
potential. Education also has a positive correlation with the ability to find employment. Better
educated workers are more likely to be employed in good-paying jobs and tend to have an easier
time finding new ones should the need arise. An investment in a college or technical degree can
often pay for itself within a few years of entering the workforce. However, not all degrees are of
equal value, so it’s worth considering both the short- and long-term prospects for any field of
study that appeals to you. 
• Your own business. Money that you borrow to start your own business can also come
under the heading of good debt. Being your own boss is often both financially and
psychologically rewarding. It can also be very hard work. Like paying for education, starting
your own business comes with risks. Many ventures fail, but your chances for success are greater
if you choose a field that you are passionate and knowledgeable about. 
• Your home or other real estate. There are a variety of ways to make money in real estate.
On the residential front, the simplest often involves taking out a mortgage to buy a home, living
in the home for a few decades, and then selling the home at a profit. In the meantime, you also
enjoy the freedom of having your own home, plus an assortment of potential tax breaks not
available to renters. Residential real estate also can be used to generate income by renting it out,
and commercial real estate can be a source of cash flow and eventual capital gain—if you know
what you’re doing. 
What Is Bad Debt? 
It’s generally considered to be bad debt if you are borrowing to purchase a depreciating asset. In
other words, if it won’t go up in value or generate income, then you shouldn’t go into debt to buy
it. For example: 
• Cars. While you may find it impossible to live without a car, borrowing money to buy
one isn’t a great idea from a financial perspective. By the time you leave the car lot, the vehicle
already is worth less than when you bought it. If you need to borrow to buy a car, then look for a
loan with low or no interest. You’ll still be investing a large amount of money in a depreciating
asset, but at least you won’t be paying interest on it. 
• Clothes and consumables. It’s often said that clothes are worth less than half of what
consumers pay for them. If you look around a used-clothing store, you’ll see that “half” is being
generous. Of course, you need clothes—and food, and furniture, and all kinds of other things—
but borrowing to buy them by using a high-interest credit card isn’t a good use of debt. Use a
credit card for convenience, but make sure you’ll be able to pay off your full balance at the end
of the month to avoid interest charges. Otherwise, try to pay cash. 
  
Credit card reward programs give cardholders an extra incentive to spend. But bear in mind that
unless you pay your balance in full every month, the interest charges may more than offset the
value of your rewards. 
Special Considerations 
Not all debt can be so easily classified as good or bad. It often depends on your own financial
situation or other factors. Certain types of debt may be good for some people but bad for others: 
• Borrowing to pay off debt. For consumers who are already in debt, taking out a debt
consolidation loan from a bank or other reputable lender can be beneficial. Debt consolidation
loans typically have a lower interest rate than most credit cards, so they allow you to pay off
existing debts and save money on future interest payments. The key, however, is making sure
that you use the cash to pay off debts and not for other spending. Investopedia publishes
regularly updated ratings of the best debt consolidation loans. 
• Borrowing to invest. If you have an account with a brokerage firm, then you may have
access to a margin account, which allows you to borrow money from the brokerage to purchase
securities. Buying on margin, as it’s called, can make you money (if the security goes up in value
before you have to pay back the loan) or cost you money (if the security loses value). Obviously,
this kind of borrowing isn’t for inexperienced investors or those who can’t afford to lose some
money. 
• Regulatory framework: The Committee noted that credit rating agencies in India have
progressed from rating simple debt products to complex debt structures, covering a wide range of
products and services like securities, bank loans, commercial papers, and fixed deposits.  In
India, the Securities and Exchange Board of India (SEBI) primarily regulates credit rating
agencies and their functioning.  However, certain other regulatory agencies, such as the Reserve
Bank of India (RBI), Insurance Regulatory and Development Authority, and Pension Fund
Regulatory and Development Authority also regulate certain aspects of credit rating agencies
under their respective sectoral jurisdiction. 
 
10) Suggestion and recommendations for Indian debt market 
The supply of corporate bonds is expected to more than double to Rs 55-60 lakh crore in
FY2023, from Rs 27.4 lakh crore at end-FY2018. As against this, the demand foreseen is Rs 52-
56 lakh crore, leaving a material funding gap of Rs 3-4 lakh crore. This gap would be
significantly wider if ‘A’-category borrowers — comprising about 2,400 companies with
aggregate long-term bank facilities of about Rs 10 lakh crore — tap the market. 
 
The corporate bond market also faces challenges such as five flanks: 
1. Innovation: In capital-starved economies, prudent innovation is a good way to generate
growth capital. Credit-enhancement is one such tool. But this needs fast-tracking of the Credit
Enhancement Guarantee Fund proposed by GoI, and revisiting risk weights to promote partial
credit enhancement products. 
 
Expected Loss (EL) rating scale is another tool, especially in the infrastructure sector, since the
conventional Probability of Default scale doesn’t factor in post- default recovery prospects.
Uniform and transparent benchmarks are also essential. 
 
The dormant credit default swaps (CDS) segment also needs a kick-start. This would need
legislative changes, because of the restriction on the netting of mark-to-market positions against
the same counterparty for capital and exposure norms. Also, with domestic players not keen,
permitting foreign writers of CDS contracts can be explored. The introduction of bond exchange-
traded funds (ETFs) can also help by adding secondary market liquidity. 
 
2. Liquidity: The process of structurally improving liquidity can begin with tripartite repos.
Bourses have platforms ready. But some infrastructure and operational issues need ironing out. It
would help if banks, primary dealers and brokers are incentivised to be market-makers.
Acceptance of corporate bonds by RBI would persuade banks and primary dealers to invest. 
 
3. Fine-tuning regulations: The electronic bidding platform should be made more flexible to
accommodate simultaneous issuances from one issuer, and the issuance time of about four days
must be shortened. The current limitation of 12 International Securities Identification Numbers
(ISINs) a year is restrictive. 24 ISINs a year could be phased in for starters, which can be
reduced over time as the market stabilises. Also, allowing new ISINs when issuances under a
specific one crosses, say, Rs 1,000 crore, to ensure sufficient stock for secondary market activity
would be salutary. 
 
While the Insolvency and Bankruptcy Code (IBC) has started off well, more steps are needed.
These include a standard operating procedure for the National Company Law Tribunal process
that provides clarity to investors, enhancing infrastructure and capacity of the resolution
ecosystem as the volume of cases rises, and the passage of the Financial Resolution and Deposit
Insurance Bill. The Bill is critical as over 70 per cent of the issuances are from the financial
sector not covered under IBC. 
 
4. Regulatory cohesion: Continuous availability of all financial and nonfinancial information to
all market participants will empower investment and credit decisions. Aligning the frequency of
disclosures on the financial performance of issuers of listed debt with their equity-listed peers,
and giving debt market participants and credit-rating agencies access to data repositories, will be
big steps forward 
Regulations must also promote fair valuation practices. For example, floating-rate instruments
play an important role in hedging interest-rate risk. They need liquid benchmarks as reference
points to price credit, which can also be traded. 
 
Synchronicity among regulators is crucial to ease the compliance burden of issuers. Both Sebi
and RBI have pushed large corporate borrowers to tap the corporate bond market. The insurance
and pension sectors also need to expedite investor-side regulations in line with the finance
ministry’s intent of allowing investments in ‘A’ rating category bonds. 
 
5. Investor awareness: Over the last two years, financialization of savings has increased, with
householders looking beyond gold and real estate. In the first half of 2018, debt issues raised
over Rs 27,000 crore, compared with less than Rs 4,000 crore in same period of 2017. Direct
participation may be seeing increasing mind space, against only indirect routes (through mutual
funds and insurance) earlier. Awareness programmes on fixed-income products such as
government securities, corporate bonds, debt funds and hybrids will be salutary. 
 
Depth, liquidity and vibrancy are the robust pillars of financial growth. The Indian economy
would be served well over the long term if its corporate bond market, too, has those
underpinnings. 
 Singapore
 History and overview of debt market
a. History

The Singapore Government operates a balanced budget policy and often enjoys budget
surpluses. Most of the Government’s borrowings are not used to fund its expenditure.

SGS were initially issued to meet banks' needs for a risk-free asset in their liquid asset
portfolios.

In 1998, MAS spearheaded efforts to enhance the efficiency and liquidity of the SGS market
as part of its strategy to develop Singapore as an international debt hub. This was further
refined in May 2000 with the introduction of a focused SGS issuance programme aimed at
building large and liquid benchmark bonds. This is done through larger issuance of new SGS
bonds and re-openings of existing issues to enlarge the free float.

Since April 2011 the MAS has issued MAS bills, which are central bank bills for money
market operations aimed primarily at financial institutions to help increase the availability of
high-quality liquid assets and manage banking system liquidity. While similar to the T-bills in
many ways, these central bank bills are essentially money market instruments with shorter
tenors ranging from four weeks to three months.

In 2015, the SSB (Singapore Savings Bonds) programme was introduced to provide
individuals with a long-term savings option that offers safe returns.

The Government issues SGS bonds and T-bills primarily to:

Build a liquid SGS market to provide a robust government yield curve, which serves as a
benchmark for the corporate debt market.

Grow an active secondary market, both for cash transactions and derivatives, to enable
efficient risk management.

Encourage issuers and investors, both domestic and international, to participate in the
Singapore bond market.

The Government issues SGS bonds and T-bills primarily to:

Build a liquid SGS market to provide a robust government yield curve, which serves as a
benchmark for the corporate debt market.
Grow an active secondary market, both for cash transactions and derivatives, to enable
efficient risk management.

Encourage issuers and investors, both domestic and international, to participate in the
Singapore bond market.

Government Securities Fund

The Government Securities Fund holds all proceeds from the issuance of all SGS bonds and
T-bills, except for SGS (Infrastructure) and Green SGS (Infrastructure). This ensures that the
Government’s borrowings (except for those under SGS (Infrastructure) and Green SGS
(Infrastructure)) are not used to fund its expenditure.

The Government Securities Fund can only be used to pay the interest and principal sums of
SGS (excluding SGS (Infrastructure) and Green SGS (Infrastructure)).

b. Overview of Singapore debt market:

About Singapore Government Securities

Singapore Government Securities (SGS) are debt securities issued by the Singapore
Government.

SGS are considered safe investments fully backed by the Singapore Government. They are
issued and managed by the Monetary Authority of Singapore (MAS) on behalf of the
Government.

There are four types of SGS:

1. Treasury Bills (T-bills)

Treasury Bills (T-bills) are short-term bills that mature in one year or less from their issue
date.

The Government currently offers 6-month and 1-year T-bills. They are issued at a discount to
their face value. When the T-bills mature, the Government pays the holder an amount of
money equivalent to its face value.

2. SGS Bonds

SGS bonds are longer-term bonds which mature in 2, 5, 10, 15, 20 or 30 years.

SGS bond holders receive a fixed coupon every six months before the bond matures and the
face value of the bond upon maturity.

There are three categories of SGS Bonds, and they rank pari passu:

 SGS (Market Development), issued under the Government Securities Act, to

develop the domestic debt market.
 SGS (Infrastructure), issued under the Significant Infrastructure Government
Loan Act (SINGA), to finance major, long-term infrastructure.
  Green SGS (Infrastructure), issued under the SINGA, to finance major, long-term
green infrastructure projects.
3. Singapore Savings Bonds (SSBs):

Singapore Savings Bonds are non-marketable SGS only available to retail investors. They
have a 10-year tenor but can be redeemed (in part or fully) by investors before maturity.
The interest rate for SSBs increases the longer they are held. When the bond matures,
investors will receive the outstanding amount of SSBs that they hold.

4. Cash Management Treasury Bills (CMTBs)

Cash Management Treasury Bills (CMTBs) are short-term bills that mature in less
than 6 months.

Unlike T-bills, CMTBs are only available to institutional investors. CMTBs serve as an
instrument within the Government’s cash management toolkit, enhancing the
Government’s ability to manage any short-term cashflow mismatches. CMTBs are issued
on an ad-hoc basis, and can be tailored to any tenor under 6 months. They are issued at
a discount to their face value.

When the CMTBs mature, the Government pays the holder an amount of money
equivalent to its face value.

Market Depth and Breadth

Over the years, the amount of outstanding SGS has grown steadily from S$43.2 billion in
2000 to S$196.3 billion in 2020.

SGS bonds are also included within major bond indices including:

 Citi Global Government Bond Index

 JP Morgan Government Bond Index
 Markit iBoxx Asian Local Bond Index

SGS Annual Issuance Calendar

SGS bonds and T-bills are issued according to an issuance calendar, published around
October/November each year for the following year. The issuance calendar provides the
issuance date and SGS to be issued at each auction. The amount offered will be
published closer to the issuance date.

In designing the calendar, MAS takes into account:

 Market conditions.
 The need to concentrate liquidity in benchmark bonds.
 Feedback from primary dealers.

SSBs are issued monthly. The maximum issuance size of each SSB is announced on the
first business day of each month. Issuance takes place on the first business day of the
following month.
 About Singapore Government Securities
Singapore Government Securities (SGS) are debt securities issued by the Singapore
Government.
SGS are considered safe investments fully backed by the Singapore Government. They are
issued and managed by the Monetary Authority of Singapore (MAS) on behalf of the
Government.

As the fiscal agent of the Singapore Government, MAS is empowered by the Government
Securities Act and the Significant Government Infrastructure Loan Act to undertake the issue
and management of securities on behalf of the Government.
The amount of SGS (Infrastructure) and Green SGS (Infrastructure) issued is capped at S$90
billion under the SINGA, while the amount of SGS (Market Development) and SSBs issued is
authorised by a resolution of Parliament and with the President's concurrence. Each year,
MAS seeks approval from the Minister for Finance for the total SGS issuance amount for the
new financial year. MAS decides, in consultation with the SGS primary dealers, the timing and
amount of individual bond issues.
 Major investors in the Debt market
A wide range of investors, with different investment profiles, participated in Singapore’s debt
market.

Financial institutions continued to be significant participants in money markets here, taking

up more than 60% of all short-term debt issuances.

• Fund managers (including insurers), financial institutions and private banks were all active
participants in long-term issuances, supporting the strong and diverse investor base in this
segment.

• Private banks and fund managers (including insurers) accounted for more than 60% of the
investment demand in SGD debt, with demand from private banks overtaking fund managers
(including insurers).

• Financial institutions and fund managers (including insurers) remain the dominant investors
in non-SGD debt, holding preferences in USD, GBP and EUR
 Innovation in debt market:
In 2021, the Government announced plans to issue CMTBs (Commonwealth Motor Trade
Bonds). CMTBs are issued on an ad-hoc basis and serve as one of the instruments within the
Government’s cash management toolkit. CMTBs provide the Government with more operational
flexibility to raise cash quickly, should any short-term cash flow mismatches occur.

In 2021, Parliament passed the Significant Infrastructure Government Loan Act (SINGA)
authorising the Government to borrow up to S$90 billion to finance major, long-term
infrastructure. This is a fair and efficient approach – fair, because payments are borne by the
generations who will benefit from the infrastructure; and efficient, because the Government can
tap the debt market at favourable interest rates given Singapore’s triple A credit rating. SGS
(Infrastructure) and Green SGS (Infrastructure) would be issued under the SINGA.

 The Singapore Government has been accorded the strongest credit rating by
international credit rating agencies

Rating agency Local currency Foreign currency

Moody's Aaa Aaa
S&P AAA AAA
Fitch AAA AAA
R&I AAA AAA

Most financial institutions recognise that good regulation is a valuable asset which raises the
value of their services in the eyes of their customers. It is no accident that the most
successful financial centres, New York, London, Hong Kong and Singapore, all have rigorous
supervision. Even so, detailed mechanical rules and ratios enforced by frequent checking are
undoubtedly burdensome. When these rules constrain otherwise desirable transactions, they
can contribute to driving business away.
Economic Regulation: The motivation behind economic rules and restrictions often varies,
but the end effect is that they undermine the free operation of market forces by prohibiting
certain business activities or making them difficult. Good examples are market entry
restrictions, capital controls, price controls and certain taxes. Often, economic regulations are
used to support macroeconomic policy objectives, like financial market or foreign exchange
stability. The aim of any developing economy should be to gradually reduce economic
regulations and open up its markets. The only caveat is that such liberalisation should not run
ahead of other economic, policy and market reforms, including the establishment of strong
prudential regulation. Thus, when comparing the different degrees of financial liberalisation
in the region, one needs to be mindful of the circumstances and the feasible extent of
deregulation against the background of economic, policy and market conditions. Singapore is
not a realistic near-term goal for countries like China or Indonesia.

Most financial institutions recognise that good regulation is a valuable asset which raises the
value of their services in the eyes of their customers. It is no accident that the most
successful financial centres, New York, London, Hong Kong and Singapore, all have rigorous
supervision. Even so, detailed mechanical rules and ratios enforced by frequent checking are
undoubtedly burdensome. When these rules constrain otherwise desirable transactions, they
can contribute to driving business away.

Economic regulation and local bond markets There are many types of economic regulations
in the region that have some restrictive impact on the development of local bond markets.
This study focuses only on those that are the most common and have the most disruptive
impact. In no order, these economic regulations are:
• Rules that limit foreign participation in the local bond market;
• Bond issuance restrictions;
• Price and interest rate controls;
• Rules that limit the use of hedging instruments;
• Taxation;
• Custody, settlement and clearing restrictions.

Foreign access
There are still substantial restrictions in several countries on access by foreign investors,
issuers and intermediaries who want to participate in the local bond markets (Table 1). At
one extreme, China is currently the most closed market. Investors can only enter the local
bond market if they apply for a Qualified Foreign Institutional Investor (QFII) licence, which is
a laborious process. On the issuance side, the government now seems willing to open the
local market to multilateral agencies, but no bonds have been issued so far. And for
intermediaries, access is currently only available through joint ventures. Even so, the
schedule of China’s WTO agreements and the current reform drive promise more opening of
China’s capital markets to foreign participation in the next few years. Only the move to full
capital account convertibility probably remains many years (if not decades) away, given the
poor health of many domestic financial institutions, especially the state-owned commercial
banks. At the other extreme, Hong Kong and Singapore are the most open financial centres in
the region. The main difference between the two is the non-internationalisation policy of the
Singapore dollar, which in practice only means that foreign bond issuers must swap the bond
proceeds that are not used for domestic investment purposes into another foreign currency.
Getting an intermediary licence is also a bit more difficult in Singapore compared to Hong
Kong. In between these extremes, Korea, and to a slightly lesser extent Thailand, are more
accessible, especially for investors. Indonesia, Malaysia and the Philippines are more on the
closed side, in particular in terms of issuer access, which, as with China, is limited to
multilateral agencies on a case-by-case approval basis.

Issuance restrictions
Bond issuance restrictions not only affect foreign issuers, but domestic issuers as well.
Protection of investor interests is often the motivation behind these rules, but this may come
at the expense of unnecessarily constraining an issuer’s ability to go to the market. There are
two types of issuance models: disclosure-based and merit-based.
In the disclosure-based model, which is increasingly becoming the global standard, the issuer
is required to disclose all relevant information, but investors have to decide themselves
whether the bond is fairly valued. Hong Kong, Malaysia and Singapore have adopted the
disclosure-based model.

Hedging instruments
Lack of hedging instruments is repeatedly listed as one of the top obstacles to the
development of local bond markets. At the moment, only Hong Kong permits the full range
of hedging instruments. To be sure, derivatives are complex financial instruments and need
to be used with care, but the reluctance to approve their use often has more to do with the
fear that they may be used to destabilise markets than real prudential concerns. It must also
be recognised that hedging instruments can be unavailable despite a neutral stance by the
authorities, owing to a lack of liquidity in the market. After Hong Kong, Korea, Singapore and
Thailand have taken the most steps to liberalise the use of derivatives in the local fixed
income markets.

Taxation
The issue as regards taxation is not so much one of principle (whether capital income and
gains should be taxed), but one of distortion. There are legitimate reasons why governments
want to tax capital income and capital gains. The problem is that it is difficult, if not
impossible, to tax the different forms of capital income and capital gains equally. Moreover,
there is a growing global trend not to tax foreign investors. So, investors are likely to avoid
those countries that still do so. Finally, even if there are tax treaties in place, the paperwork is
often so laborious and refunding takes so long that many foreign investors stay out of the
market. In Asia, taxation is still a key factor that keeps many foreign investors away from
local bond markets. Only Hong Kong and Singapore effectively do not tax foreign investors.

Custody, settlement and clearing

Custody, settlement and clearing are the last areas one should highlight where restrictions
are undermining local bond market activity and development. Settlement and clearing
systems and conventions have substantially improved throughout the region (delivery versus
payment and real-time gross settlement systems are standard in most countries), but they
remain much localised. Foreign investors that are active in local bonds have to use a local
 custodian and settle and clear their trades locally. Besides entailing extra effort and cost, the
often-short settlement periods in the local markets leave little time for foreign investors to
process their trades (in Hong Kong, Korea, Malaysia, the Philippines and Singapore, local
currency bonds settle either on the same day or the day after).

 Positive Aspects of the Debt Market

Security of Investment
Security is the key concern when you invest your hard-earned money. Liquidity is a
characteristic of the stock markets. Investors’ money swept away within a flash while trading in
Bitcoin. You may read a great number of horror stories regarding Forex Trade Market. On the
contrary, bondholders do not confront such horrible phenomenon.

Capital Appreciation Potential

Bonds’ issuing company increases high yield bond’s price when it experiences positive events.
The condition includes product development, acquisitions, mergers, improved earnings reports,
and mergers. Ultimately, it is beneficial for investors.

Less Interest Rate

The interest rate repeatedly fluctuates that also affects the fixed-rate bonds. The bond prices
move down if the interest rate moves up and vice versa. You may cultivate the benefits of the
high-yield bonds after four to five years. However, these bonds are issued with the maturities of
10 years or less duration. The whole phenomenon could not damage investment in the long run.

Attractive Total Returns

The investors may earn attractive total returns when the interest rate is stable, and the
economy is growing up. That’s why traders love investing in the bond market instead of other
trade markets. The investors take into deliberations two aspects, including the yields on the U.S
and high-yield bonds.

Bond Market Greases the Wheel of Economy

It is not futile to say that bond market runs the wheel of the economy. The banks make it
possible to give loans to consumers. The federal government also needs a loan by issuing
treasuries for different infrastructures. Local cities, municipalities, and states issue bonds for
diverse initiatives. Corporations prefer the bonds for tax deductions on the payments of
interest.

Different Investment Options with Bonds

Fixed income payments are the quality of bonds that allow bondholders to invest in other
securities. You do not have to pay tax on the municipal bonds. That is why; investors prefer to
utilize these bonds at the local and state level. The bond market enables investors to buy and
sell the bond.

 Negative Aspects of the Debt Market

Bond Market is not completely risk-free. It is imperative to know the disadvantages to avoid
undesired consequences.
  Yield Curve Risk - The risk of experiencing an adverse shift in market interest rates
associated with investing in a fixed income instrument
 Inflation Risk - refers to how the prices of goods and services increase more than expected
or inversely
 Sovereign Risk - the risk that a government could default on its debt (sovereign debt) or
other obligations.
 Volatility Risk - the risk of a change of price of a portfolio because of changes in the volatility
of a risk factor.
 Event Risk - Event risk refers to any unforeseen or unexpected occurrence that can cause
losses for investors or other stakeholders in a company
 Reinvestment Risk - the possibility that an investor will be unable to reinvest cash flows
received from an investment
 Credit & Repayment Risk - the possibility of a loss resulting from a borrower's failure to
repay a loan or meet contractual obligations

Manual funds of the bonds are affected when price changes. Value of portfolio falls when bonds
of tradition portfolio flip. The phenomenon damages big investors, such as asset managers,
insurance companies, and banks. Often, investors get bonds from a certain company. He/she
cannot avoid the damage if the company/bank goes bankrupt. No state has framed any law
regarding the volume of the repaid amount to bondholders.

 Types of Capital Markets Entities in Singapore

Capital markets entities include broker-dealers, fund managers, REIT managers, corporate
finance advisers, securities-based crowdfunding operators, credit rating agencies, approved CIS
trustees, licensed trust companies and financial advisers. Find descriptions for each entity,
including regulated activities and licensing requirements.
1. Approved CIS Trustees (AT): are approved and governed under the Securities and Futures
(SFA) and its subsidiary legislations.
2. Broker-dealers are licensed and governed under the Securities and Futures Act (SFA) and its
subsidiary legislation.

The scope of a broker-dealer's activities may include:

i) Acquiring, disposing, subscribing, or underwriting capital markets products on

behalf of any person.
ii) Inducing any person to acquire, dispose, subscribe or underwrite capital
markets products.
iii) Providing financing to another person to buy or subscribe for capital markets
products. and/or providing custodial services for securities.
3. Corporate finance advisers are licensed and governed under the Securities and Futures Act
(SFA) and its subsidiary legislation.

The scope of a corporate finance adviser’s activities may include:

iv) Giving advice on the laws or regulatory requirements on fund-raising by an

entity, trust or collective investment scheme;
 v) Giving advice on an offer to acquire or to dispose of capital markets products;
and/or Giving advice relating to an arrangement, reconstruction or take-over of
a company or a business trust, or any of its assets or liabilities.
4. Credit Rating Agencies (CRAs) are licensed and governed under the Securities and Futures
Act (SFA) and its subsidiary legislation.
 The activities involved in the preparation of a credit rating include:
 analysing information or data;
 formulating or drafting an opinion on the creditworthiness of a rating target;
 evaluating or approving a credit rating;
 monitoring or reviewing a credit rating which has been issued;
 formulating or drafting credit rating methodologies or models; and evaluating or
approving credit rating methodologies or models.
5. Real estate investment trust (REIT) managers are licensed and governed under the
Securities and Futures Act (SFA) and its subsidiary legislation.
 A company that manages a REIT, which is a collective investment scheme (CIS)
constituted as a trust that invests primarily in real estate and real estate-related
assets specified in the MAS Code on Collective Investment Schemes, and is listed
on an approved exchange (e.g. Singapore Exchange), is conducting REIT
management. The company, which is the REIT manager, would be required to
obtain a capital markets services (CMS) licence for the regulated activity of REIT
management.
6. Securities-based crowdfunding (SCF) operators:
 A SCF operator that facilitates offers of securities (e.g. shares or debentures)
issued by a company to investors, and carries out this activity with system,
repetition and continuity, is likely to require licensing.
 Depending on their business model, SCF operators may be carrying out the
regulated activity of dealing in capital markets products which are securities, or
fund management, unless an exemption applies. For example, a SCF operator
which carries on a business in facilitating offers of securities would require a
CMS licence for dealing in capital markets products. Where the SCF operator
manages a portfolio of investments on behalf of its investors, the SCF operator
is required to be licensed for fund management.
7. Licensed trust companies:
 A company which provides the following trust services may need to be licensed
under the TCA:
 Creation of an express trust;
 Acting as trustee of an express trust;
 Arranging for any person to act as trustee of an express trust; and Providing
trust administration services to an express trust.
8. Fund managers: If a company raises and manages third party investors’ funds in a collective
investment scheme, or invest them in segregated accounts into capital markets products,
such as equities, fixed income and financial derivatives, it is conducting fund management
and would need to be licensed or registered to do so.
9. Markets and exchanges:
  An entity operating a market in Singapore for securities, derivatives contracts or
units in a CIS, may be considered to be operating an organised market under
Part II of the SFA. A person who operates an organised market must be
regulated by MAS. As a general principle, markets that are systemically-
important will be regulated by MAS as AEs. Other markets may be regulated as
RMOs. AEs are required to comply with a higher level of statutory obligations
than that required of RMOs.
 Foreign entities operating markets offering services to participants in Singapore
are subject to the recognition regime as RMOs where MAS places reliance on
the home regulator for the supervision of the foreign entity. A key consideration
for recognition as a foreign RMO is that the regulatory regime of home
jurisdiction of the foreign entity should be comparable to the SFA, of which an
important component is the application of the IOSCO Objectives and Principles
of Securities Regulation by the home jurisdiction.
10. Clearing houses: An entity that seeks to offer clearing or settlement services in Singapore
must be authorised by MAS as a clearing facility before it can commence operations. As a
general rule, a Singapore corporation that operates a clearing facility will be deemed
systemically important and regulated by MAS as an ACH.
11. Trade repositories:
 A locally-incorporated entity that seeks to offer trading reporting services to
allow participants to fulfil their obligations under MAS’ reporting mandate must
be authorised by MAS as an LTR.
 Foreign entities offering trade reporting services to allow participants to fulfil
their obligations under MAS’ reporting mandate are subject to licensing as an
LFTR. A key consideration for licensing a foreign entity as an LFTR is that the
regulatory regime of home jurisdiction of the foreign entity should be
comparable to the SFA, of which an important criterion is the application of the
Principles of Financial Markets Infrastructure standards by the home
jurisdiction.
12. Benchmark Administrators and Submitters of designated benchmarks:
 An entity administering a designated benchmark must require authorisation by
MAS before it can commence operations unless exempted. An entity that
provides information to the benchmark administrator in connection with a
designated benchmark must also be subject to MAS’s regulations as a
benchmark submitter unless exempted.
 MAS may also designate a benchmark submitter as a designated benchmark
submitter if the benchmark submitter’s participation and information
submission is important to the functioning of a designated benchmark.
 ARGENTINA

History and overview of debt market

Argentina is a country in South America, bordered by Chile to the west, Bolivia and Paraguay to
the north, and Brazil and Uruguay to the northeast. Argentina is the second largest country in
terms of area in South America. The country’s capital is Buenos Aires. The currency unit is the
Argentine peso (ARS). The main sectors of the country's economy are agriculture,
manufacturing industry, and service sector.

Argentina government securities are represented by Treasury Bills (securities with the maturity
less than one year) and Bonds (securities with the maturity equal or more than one year). Short-
term instruments, in its turn, are further divided into three subtypes: discount securities, inflation-
indexed securities, and securities with monthly compounded coupons. Public sector also includes
securities issued by municipal and regional governments.

The private sector is represented by short-term debt instruments (securities with the maturity less
than one year); bonds (securities with the maturity equal or more than one year); and
fideicommissa financier (debt securities collateralized by a pool of assets transferred under
fiduciary management).

Debt securities are traded on the Buenos Aires Stock Exchange, Bolsa’s y Mercados Argentines
and OTC market Mercado Abierto Electronica. Government securities are placed through public
and private auctions organized by the Ministry of Finance of Argentina or direct subscription.
The instruments of corporate and municipal sectors are placed by investment banks.

Argentina is the third-largest economy in Latin America, with a population of approximately 45

million spread among 23 provinces and the city of Buenos Aires. Approximately 92 percent of
the Argentine population is concentrated in urban areas, with 38 percent living in Buenos Aires
(Capital and Province), and another 15 percent distributed in the cities of Córdoba, Rosario, and
Mendoza. The country has a talented and educated workforce, but its population has suffered
from frequent political and economic turbulence over the last 75 years.

The COVID-19 pandemic, on top of Argentina’s two-year economic recession, has compounded
the country’s economic woes. Current International Monetary Fund (IMF) predictions have
Argentina’s GDP declining close to 12 percent in 2020. The poverty rate and inflation are both
over 40 percent. Since 2017, the official exchange rate has fallen from ~ US$1:AR$20 to ~
US$1:AR$80, and the unofficial “blue” rate is double that. The Argentine government’s 2020
agreement with private bondholders to renegotiate billions of dollars of debt offers some hope as
negotiations get underway to renegotiate another US$45 billion owed to the IMF.

In this recessionary context, U.S. merchandise exports to Argentina declined from US$9.91
billion (2018) to US$8.15 billion (2019). Buoyed by a favorable exchange rate, Argentina’s
merchandise exports to the United States rose slightly from US$4.83 billion (2018) to US$4.92
billion (2019). Nevertheless, the U.S. retained a sizable bilateral goods trade surplus of more
than US$3 billion. Around 90 percent of U.S. merchandise exports to Argentina are used in local
industry and agriculture including refined oil, airplanes and aircrafts, computers, industrial and
agricultural chemicals, agricultural and transportation equipment, machine tools, and parts for oil
field rigs. Primary Argentine exports to the United States are crude oil, aluminum, wine, fruit
juices, and intermediate goods, such as seamless pipes, tubes, and other iron-based products.

There are more than 300 U.S. companies present in Argentina, some whose presence dates back
more than 100 years. Despite current macroeconomic challenges, there are significant
opportunities for U.S. companies in sectors such as infrastructure, energy, health, agriculture,
information technology, and mining. The United States is the single-largest source of foreign
investment in Argentina with approximately US$15.26 billion (stock) worth of investment
(2018). U.S. companies are widely respected in Argentina for their good business practices,
transparency, corporate social responsibility activities, high quality, and good customer service.

Reasons why U.S. companies should consider exporting to Argentina:

● Argentina is a resource-rich country with enormous potential for further development.

The country has the second-largest shale gas and fourth-largest shale oil reserves in the
world as well as abundant solar and wind energy resources.
● Argentina is the third-largest lithium producer globally with plans to increase mining
exports over the next decade. More than 70 percent of Argentina’s proven lithium
resources have not been exploited.
● U.S. expertise, technology, and equipment are needed to develop sectors such as
agriculture, energy, and mining.
● The country is digitally capable, with high internet penetration and smartphone
dissemination.
 Role of Government and Central Bank on developing debt market

The World Bank is a long-term strategic partner of Argentina. The Country Partnership
Framework (CPF) for 2019-2022 seeks to contribute to reducing poverty through promoting
sustainable and inclusive growth.

The main areas of work are:

1. Supporting the country in the creation of long-term private financing sources

The WBG supports fiscal consolidation and the strengthening of market institutions (such as
competition, trade and investment frameworks), promoting productivity-led growth and an
increase in exports. The development of a nascent local capital market and the mobilization of
financing for key investments are also strategic priorities, together with the strengthening of the
social safety net.

2. Contributing to improving public sector management and service provision

Enhancing the efficiency of public administration is another key area of the strategy. It will do so
by seeking to strengthen inter-jurisdictional coordination with the goal of improving basic public
service delivery such as water and sanitation. Moreover, it prioritizes the education sector, with
the aim of improving learning outcomes in secondary education and skills building capacity to
enter the labor market. It continues also to support the implementation of a universal healthcare
coverage system in the provinces.

3. Promoting actions to reduce the country’s vulnerability to climate change

In terms of climate change, the CPF supports the transition to a low carbon economy, increasing
electricity generation from renewable sources and promoting the adoption of climate smart
agricultural practices. At the urban level, it seeks to increase urban resiliency by promoting the
use of electric buses.

4. Main restrictions on offering and selling debt securities

In Argentina the main law regulating the activities performed in connection with the marketing
and sale of securities through a public offering in Argentina. The regulatory body responsible for
regulating these activities is the National Securities Commission (Commission Nacional de
Valore’s) (CNV), a national entity that is separate from the central government with jurisdiction
covering the entire territory of the Republic of Argentina. The CNV supervises companies
authorized to issue and offer securities to the public in Argentina.

1. The trading of securities (whether those securities are issued in Argentina) in the
Argentinean secondary market.
 2. All individuals and legal entities involved by any means in the public offering of
securities (including initial public offerings of securities), and secondary market
transactions involving securities.
3. In its capacity, the CNV issues regulations (CNV Regulations), which together with Law
No 26,831, as amended, and other legal sources constitute the regulatory framework for
public offerings of securities and the secondary market trading of securities in Argentina.
4. Public offer of securities as the invitation to the public generally in Argentina, or to
specific groups of persons (either individuals or legal entities) in Argentina, to participate
in any type of transaction with securities, whether made by the issuer of the securities or
by individuals or entities that are dedicated exclusively or non-exclusively to trading in
securities, by means of:

Personal offerings

Publications in writing (for example, newspapers, magazines, and so on), Radio or television
transmissions, Posting or signs, Pamphlets, Electronic means, Communications, or any other
means of diffusion. The Argentine securities laws do not provide for exemptions or the exclusion
of certain types of transactions from the public offering regulation. Whenever a transaction is
performed within the frame of the public offering definition, that transaction will be subject to
the Argentinean securities laws. The Argentinean securities laws do not include exemptions or
safe harbors such as those that are set out, for example, under US securities laws. Although there
is no specific regulation governing the nature and type of communication with the public, in
some cases, such as in the case of telephone calls, whether the activity constitutes a public offer
is subject to evaluation. In most cases, specific calls or one-to-one visits to Argentine residents
does not constitute a violation of the law, while the establishment of automatic call systems to a
variety of prospective or existing clients or toll-free lines may constitute restricted activity.

A security transaction will not be deemed a public offer and will not be subject to Argentine
securities laws and regulations if the offer is not made to the public or to specific groups of
persons, but to individuals or legal entities on a one-to-one limited basis, regardless of the nature
of such persons (that is, a private offer). In 2013 the CNV modified the legal framework
applicable to the placing of securities through public offers (CNV Regulations).

The main changes are the following:

● The CNV Regulations also apply to placements of shares, commercial papers (short-term
bonds), mutual funds and closed mutual funds (condos communes de inversion carraos).
Previously, the CNV Regulations only imposed certain requisites for placement of certain
securities, that is, trusts and negotiable obligations.
● A bidding or auction is required. Previously, placements could be made through a book
building process or similar.
● The placement must be made exclusively through an electronic platform carried out by a
market duly authorized by the CNV. Previously, registered agents authorized by the CNV
 to act as placement agents would use forms and lists to register subscription orders.
Investors must make their offers exclusively through an authorized agent in the country.
Previously, investors could make their offers directly to the placement agent.
● Discrimination between investors is not allowed. The acceptance of subscription offers
must only depend on the price and rate competition between the investors.
● The offering must be made exclusively through a bid or auction within an electronic
platform that can only be accessed by authorized agents throughout the country. Some
examples of this are a Dutch auction, a modified Dutch auction, or an English auction.
Such a platform must be carried out by a market and must have the prior approval of the
CNV. This new placement system is effective from 1 March 2012.
● However, the CNV Regulations provide that the issuer, acting by itself or through its
placement agents, must perform marketing efforts, so that the offer effectively reaches
the market in general. The marketing efforts may include the following actions:
● The marketing requirements set out above do not apply in the case of public offerings of
securities issued by the federal government, the provinces, the City of Buenos Aires, the
municipalities, self-governing entities, and governmental corporations.
● Therefore, a transaction with securities will not be deemed a public offer subject to
Argentine securities laws when it is not made to the public or to specific groups of
persons but is made to individuals or legal entities on a discrete and one-to-one limited
basis.
● Discrete means that the offer should not be made through mass media (for example,
television, radio, newspaper). The essence of "discrete" is that the offer is targeted to a
single, specific person or entity rather than being more generally extended.
● The reference to a one-to-one limited basis means an individual, exclusive, and
confidential offer directed specifically to one person or receiver at a time. There are no
regulations applicable to the maximum number of offerees that can receive offers of this
kind. The concept of "limited" also does not restrict the number of times that the bank
could deal with Argentine residents. Therefore, any offer of securities that does not fall
under the concept of a "public offer" discussed above will constitute a private offer of
securities and will not be subject to registration with the CNV or self-regulated markets
or other local securities laws requirements.
● The Argentine securities laws do not have extraterritorial effect, and, therefore,
registration requirements will only apply to offers addressed to the public or groups of
persons located in Argentina. However, there are a few CNV precedents alleging
violation of the Argentinean securities laws in connection with a potential offer of
securities conducted by a foreign company through the internet, when certain additional
activity is conducted directly or through an affiliate in Argentina, regardless of the
existence of adequate disclaimers to restrict the offer to those jurisdictions were
conducting such an offer would not be prohibited by applicable law, including Argentina.
However, based on an adequate construction of the Argentinean securities laws, an offer
of securities through the internet where adequate disclaimers are included, and when no
 additional specific and open marketing activity is carried out in Argentina, should not be
deemed a public offering carried out in Argentina.
● The CNV Regulation applies to securities transactions and to the agents involved in such
transactions. Each authorized securities market in Argentina, including the Buenos Aires
Securities Market (Mercado de Valore’s de Buenos Aires) (MERVAL) (). through the
Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) (BCBA) () and the
Electronic Open Market (Mercado Abierto Electronica) (MAE) (www.mae.com.ar), has
its own regulations and requirements (the regulation of each which is consistent with the
CNV Regulations), including, among other things: Reporting systems, administrative
procedures, Registry and customer information, Transactions records, nature of the assets
allowed to be traded, scope of the operations. The requirements to be fulfilled by each of
the agents involved in transactions conducted on such a market.
● Under the CNV Regulations, no person or legal entity is allowed to carry on transactions
on an authorized securities market, or to use the denomination of or to act as a securities
broker in Argentina on an authorized securities market, without its prior registration with
both the relevant authorized securities market and with the CNV. Over-the-counter agents
are also required to register with the CNV. Over-the-counter agents are those agents’
conducting transactions with securities on an over-the-counter market. Agents conducting
transactions on an authorized securities market must be authorized and registered with
both that market and with the CNV. The most significant authorized securities markets in
Argentina are the MERVAL and MAE. The MAE is an electronic trading facility
organized and sponsored by its participants and subject to control and supervision by the
CNV.
● The MERVAL is the most significant Argentinian market where debt or equity securities
issued by corporations are traded, while the MAE is commonly known for the listing and
trading of sovereign and corporate debt securities. Debt securities issued by non-
governmental entities can be traded on either the MERVAL or the MAE. As a general
principle, an agent can act and operate within different authorized securities markets in
Argentina, if agent is duly registered and authorized with each such authorized securities
market. The broker must also be registered with and authorized by the CNV.

Authorized and registered agent are generally entitled to:

Deal in any kind of securities and other financial products in Argentina, provided the relevant
financial product is considered a security under Argentinean law (including futures contracts,
forwards, options related to any kind of goods (assets), services, indexes, currencies, livestock,
crops (or any other commodity)).

Act as arrangers, underwriters, trustees, agents, and so on, in relation to any kind of securities
transactions (either in the primary or secondary markets). Authorized and registered brokers can
generally engage in any activity purporting, directly or indirectly, to involve the intermediation
of securities in Argentina. However, such brokers are generally not allowed to perform lending
or deposit-taking transactions in Argentina. These activities, which involve the intermediation
between the offer of, and demand for, financial resources, are strictly limited to the financial
entities admitted by and authorized by the Argentine Central Bank.

Major Investors in Debt Market

● Global X MSCI Argentina ETF (NYSEARCA: ARGT) gains 2.3% after Argentina's
government reaches an agreement with its major foreign private investors to restructure
$65B in debt, a step which would resolve the country's third sovereign default in 20
years.
● The agreement, with bondholders led by BlackRock (BLK -1.6%) and other major
investment firms, allows the government to avert a prolonged, public fight Argentina
suffered with its 2001 default.
● "It prevents a really disastrous impasse that could have locked Argentina out of credit
markets potentially for years," said Benjamin Edan, an Argentina expert at Washington
policy group the Wilson Center.
● The country will change the payment dates for some new bonds, which won't boost the
overall amount of interest payable but will improve the value of the proposal for
creditors, Argentina's economy ministry said.
● Argentina, though, could face more difficult talks with the International Monetary Fund
over restructuring its bailout from the fund. The country owes $44B to the IMF.
● Other major Argentine bondholders include Fidelity Management & Research, Monarch
Alternative Capital LP, VR Capital Group, Greylock Capital Management, and Pharos
Management.

Different securities in money market and capital market

Money Market:
AR: Money Market Rate data was reported at 22.526 % pa in 2020. This records a decrease from
the previous number of 60.037 % pay for 2019. AR: Money Market Rate data is updated yearly,
averaging 22.014 % pa from Dec 2010 to 2020, with 11 observations. The data reached an all-
time high of 60.037 % pa in 2019 and a record low of 9.094 % pa in 2010. AR: Money Market
Rate data remains in active status in CEIC and is reported by the International Monetary Fund.
The data is categorized under Global Database’s Argentina – Table AR.IMF.IFS: Money Market
and Policy Rates: Annual.

Capital Market:
Argentina has a long and complicated history of capital controls aimed at influencing the FX
market. Capital controls were implemented and amended on numerous occasions between 1985
and 2021. Fitch Ratings noted that the controls have had a drastic impact on rated corporates
since 2019, with the most recent announcement in late February 2021 confirming the new
normal: capital controls are here to stay.

Argentina's authorities have turned to capital controls to manage the exchange rate, stockpile FX
reserves for the sovereign and confer greater policy autonomy, but success has been limited. The
authorities have expressed a desire to phase out capital controls, acknowledging their
counterproductive nature for economic growth. However, they have yet to detail concrete and
proactive policy plans to make this transition safely -- without destabilizing outflows affecting
the peso and inflation -- by improving confidence and lifting international reserves to stronger
levels, and prospects remain elusive. Capital controls are likely to remain in place for the
foreseeable future, as their perceived importance for macroeconomic stability trumps concerns
over their adverse macroeconomic implications.
The capital controls had two profound effects on corporations since 2019 -- they weakened
financial flexibility and heightened refinancing risk. Most corporates had liquidity abroad prior
to the 2019 capital controls but have since either spent or transferred their hard-currency
deposits, exposing themselves to the local FX market. This weakened their financial flexibility
and heightened refinancing risk, as the majority has hard-currency debt. Fitch Ratings estimates
roughly 70% of rated corporates' cash deposits in aggregate were in U.S. dollars and/or abroad in
2018, which decreased to 40% of cash deposits in U.S. dollars in 2020 due to the capital
controls. Cash balances for corporations decreased by 16% over the same period. The recent
extension of the 60/40 rule limits corporate’s ability to repay hard-currency principals maturing
in 2021. Fitch expects local debt maturities will be easily refinanced. International bond
maturities will vary on a case-by-case basis.

Role of Financial institutions in Developing debt market

Securities and Exchange Commission (Argentina)

The CNV is the primary regulator of the Argentine securities markets. The mission of the CNV
is to protect investors and promote, oversee, and regulate the securities markets. The CNV
oversees the key participants in the securities industry and the capital markets in Argentina,
including issuers of securities (i.e., public companies), securities brokers and dealers,
clearinghouses, securities exchanges, mutual funds, and other key capital market participants. In
Argentina, only capital market participants registered with the CNV may engage in the public
offering of securities. To publicly issue securities, such securities offerings need the prior
approval of the CNV. The term securities are defined in a broad manner and even includes
certain types of instruments that may not qualify as securities in other jurisdictions, such as
options and derivative contracts.

The CNV is also concerned with the flow of information, preventing the misappropriation of
non-public information, and guaranteeing fair trading in the securities market. The use of
privileged information for the benefit of the persons who have access to such information or for
the benefit of third parties is forbidden.

The securities markets in Argentina are primarily governed by Capital Markets (as amended).
The Capital Markets Law, which entered into force in early 2013, introduced a comprehensive
modification of the then-existing public offering regime governed by Public Offering. The
Capital Markets Law mainly modified the regulatory framework governing securities exchanges,
securities brokers and dealers and other capital market participants by eliminating self-regulation
and empowering the CNV with authorizations, registration, and supervision powers over such
capital market participants. The Capital Markets Law was further amended in 2018 by
Productive Financing, which introduced significant reforms to the Capital Markets Law aimed at
modernizing the regulatory framework.

Other relevant laws in connection with the securities markets include:

● Securities Collective Deposit Law No. 20,643.

● Securities and Exchange Commission Law No. 22,169.
● Negotiable Securities Law No. 23,576.
● Mutual Funds Law No. 24,083.
● Trust Law No. 24,441, as amended by the Civil and Commercial Code; and
● General Companies Law No. 19,550, as amended.

The Capital Markets Law grants broad powers to the CNV with respect to the Argentine
securities markets and their participants. Although the 2018 amendment reduced the scope of the
powers of the CNV, the CNV’s powers with respect to the securities markets and their
participants continue to be broad.

Given that the CNV is the government authority that implements and enforces the Capital
Markets Law, the CNV has been granted rulemaking powers to implement the Capital Markets
Law in specific circumstances, and enforcement powers that include the power to bring
administrative proceedings and impose sanctions on breaching market participants (discussed
further below). As part of its rulemaking process, the CNV issues regulations in the form of
mandatory resolutions, the main one being CNV General Resolution.

Overall, the powers of the CNV include,

● issuing mandatory regulations in furtherance of the Capital Markets Law.

● authorizing the public offering of securities,
● granting to, and suspending and revoking licenses of, securities brokers and dealers,
clearinghouses, securities exchanges, and other key securities market participants.
● overseeing compliance with the Capital Market Law and CNV mandatory resolutions,
especially by securities brokers and dealers, clearinghouses, securities exchanges, and
other key securities market participants.
● supervising corporate affairs related to public companies, securities brokers and dealers,
clearinghouses, securities exchanges, and other key securities market participants; and
● conducting inspections, bringing administrative proceedings, and imposing sanctions as
provided in the Capital Markets Law.

Reporting and disclosure obligations

In Argentina, issuers (i.e., public companies) need to be authorized to make public offerings of
securities, and securities offerings need the prior approval of the CNV. Requests for such
authorizations must be filed, along with documents and information, with the CNV so that they
can be reviewed and approved prior to the CNV granting such authorizations. Such information
and documentation include certain basic and general identification information about the issuer,
information on shareholders, corporate governance information, and current and historical
financial information. Moreover, a prospectus following the guidelines included in CNV
regulations needs to be filed in connection with any new public offering of securities.

In addition, public companies must observe certain ongoing reporting requirements. The CNV is
the government authority in charge of supervising compliance with such reporting obligations
and reviewing documents filed by public companies in furtherance of such obligations. Such
requirements include the following:

● Financial reporting. Periodic financial reporting includes the filing of unaudited quarterly
financial statements and audited annual financial statements. In each case, financial
statements need to be accompanied by a summary by the board of directors regarding the
company’s activities and perspectives (like a brief management discussion and analysis),
a board of directors’ resolution approving such financial statements, a statutory auditors’
report and an external auditor’s report.
● Appointment of officers. Public companies must provide the CNV, within 10 business
days from the appointment of members of the board of directors and supervisory
committee, and of managers, certain information on the appointed persons and the
composition of said bodies after the relevant appointment.
● Material event reporting. Public companies must inform the CNV of any fact or situation
that, due to its importance, may substantially affect the placement of securities, the course
of their negotiation or the development of the activities of the issuer. CNV regulations
include a non-exhaustive list of important facts and situations that include, among other
things: changes in the corporate purpose of the issuer, significant changes in its activities
or the initiation of new ones, the resignation or removal of members of the board of
directors and supervisory committee, losses exceeding 15% of the company’s net worth,
the disposal of fixed assets that represent more than 15% of its assets, facts of any nature
that may seriously hinder the development of the issuer’s activities, lawsuits of any
nature that may be of significant economic importance for the development of the
issuer’s activities; and the authorizations, suspension or cancellation of the negotiation of
its securities in Argentina or abroad.
● Shareholding reporting: the members of the board of directors and supervisory
committee, managers and controlling shareholders of a public company must inform the
CNV about their direct and indirect shareholdings in the company (including holdings of
any convertible securities and options to buy or sell either shares or convertible
securities) as well as any changes in their reported holdings.
● Information required by foreign markets: public companies that list their securities in
local and foreign markets must immediately send to the CNV a copy of all the financial
documentation and relevant information that they send to these foreign markets.
Securities brokers and dealers, clearinghouses, securities exchanges, and other securities market
participants must also observe certain reporting requirements. Reporting requirements vary from
one case to another, but in most cases include similar financial reporting and material event
reporting as those outlined above for public companies. In addition, they must comply with
certain more specific requirements related to the type of activity conducted by each participant.
For example, securities brokers and dealers are also required to inform the CNV of the execution
or termination of agreements with other local or foreign participants, the valuation of the
aggregate portfolio that is being managed by the broker or dealer, the number of clients and the
channels that are being used for taking orders from the clients.

Information and reports that issuers and other securities market participants need to file in
compliance with the above ongoing reporting requirements are filed through the Utopist de la
Information Financier (AIF), or information highway, hosted on the CNV website, and are
available for access to all securities market participants, investors, and the public in general.

Sanctions and recent behavior

The CNV has broad and comprehensive inspection, investigation, and enforcement powers,
including the power to investigate, bring administrative actions, and impose monetary and non-
monetary sanctions on any person involved in offering him or herself or services in the public
offering of securities without the proper authorizations of the CNV. In other words, the CNV has
enforcement powers under the Capital Markets Law and CNV regulations and may apply
administrative sanctions as thereby provided in cases of violations of the securities laws and
regulations (notwithstanding any criminal penalties that may apply).

Prior to applying any administrative sanctions, the CNV must bring administrative proceedings
(ie, enforcement actions) against the person or entity that has allegedly violated the Capital
Markets Law or CNV regulations, or both. The CNV may decide to bring administrative
proceedings based on investigations conducted at the CNV’s sole initiative or based on
information or events reported by third parties (such as investors themselves).

Monetary sanctions include fines of up to 100 million pesos, which can be increased to up to five
times the benefit obtained, or the damage caused, if higher.

Non-monetary sanctions include:

● written warnings.
● disqualification for up to five years to act as a director, administrator, member of an audit
or supervisory committee, accountant or external auditor, or manager of any entity
subject to the supervision of the CNV (i.e., any entities participating in the public
offering of securities).
● suspension for up to two years of the authorization to make a public offering; and
● a ban on making or participating in the public offering of securities.
Typical infractions include insider trading, non-authorized public offerings of securities and
failing to disclose important events of the issuer.

The CNV may also refer cases for further prosecution before the relevant criminal courts if the
infringements would also qualify as criminal offences. For example, the Argentine Criminal
Code provides for possible criminal sanctions for a person who ‘collects savings from the public
in the capital markets or provides services of intermediation for the acquisition of securities’
without having the proper license. However, in practice, criminal sanctions, and convictions for
these types of charges are extremely rare, and even in the case of conviction, sanctions have
generally been mild, while imprisonment has rarely been applied.

Recent and upcoming developments

Argentine presidential elections were held in October 2019 and were won by the opposing
political party. The current administration, in office since December 2019, is of the same
political party that used to be in office for more than 10 years (2003–2015) prior to the
administration of Mauricio Macri (2015–2019).

Unlike in previous years, the CNV has been easy to approach recently to get guidance and
counselling from CNV officials on issuers and participants (or prospective issuers and
participants), interpretation of the laws and regulations, and compliance with reporting and
disclosure requirements. As part of its rulemaking process, the CNV has introduced an initial
stage where a regulation proposal is issued for the public’s input prior to its adoption. Given the
recent political party change in Argentina’s administration, it is uncertain whether the CNV will
continue with this open position in the coming years.

Moreover, during the past term of the previous administration of the party currently in office,
inspections, and supervising actions by the CNV had been intensified. For example, when the
original text of the Capital Markets Law was enacted in 2013, the Capital Markets Law included
(as per the specific request of the administration in office at the time) certain inspection and
supervising powers in favor of the CNV: the power to appoint supervisors who could veto
resolutions adopted by a board of directors, and the power to separate the board of directors for a
period of 180 days when, at the CNV’s discretion, the interests of minority shareholders or
security holders, or both, were infringed. Although those specific powers were eliminated by the
2018 amendment, it is uncertain whether the current administration (the same political party that
had requested the introduction of such powers in the Capital Markets Law) would seek to
reinstate those powers or go back to prior practices for inspections and supervising actions.

Challenges

The Congress recently enacted, which approves the reorganization of Argentina’s public debt.
The process of this renegotiation will certainly impact the securities markets as well as the
foreign exchange market. Depending on the approach to the renegotiation, Argentina may be at
risk of falling into a new default on its public debt. Thus, during this period it will be difficult for
new companies to be able to launch an initial public offering, and very few companies will be
able to issue bonds to raise money in the international markets.

Interacting with the regulator

Interaction with the regulator is not very formal in Argentina. Many officers may be willing to
receive parties with a reasonable interest in a matter following a telephone call to their
secretaries or an email. Some officers may request a formal letter asking for an appointment and
explaining the purpose of the meeting, but this is not the general practice. In the case of any
actions by the CNV that may require that the rights of any person be defended (e.g.,
investigations, decisions relating to the commencement or resolution of administrative
proceedings or the enactment of administrative regulations), legal counsel should always be
contacted in advance since there are strict expiration terms to file any relevant defenses or
adequate claims against such actions

Foreign investors investing in Argentina public companies

There are no restrictions under the current securities market laws and regulations limiting the
ability of foreign investors from investing in local securities. However, there are certain general
limitations and restrictions that apply in the case of acquisitions of shares by a foreign investor in
an Argentine company.

From a corporate perspective, any foreign company that becomes a shareholder in an Argentine
company must register as a foreign shareholder with the Public Registry of Commerce of the
relevant jurisdiction.

Moreover, there are certain industry-specific restrictions that prevent foreign investors from
becoming shareholders in an Argentine company. Such industries include telecommunications,
media, aviation, shipping, and certain matters related to national security and defense.

Public offerings in Argentina by foreign issuers

If a foreign entity intends to publicly offer securities in Argentina, such entity will need to be
registered with the CNV, the public offering of such securities will need to be authorized by the
CNV, and the offering and sale of such securities will need to be conducted by a registered
broker. There are mainly two ways in which a foreign entity may publicly offer its securities in
Argentina: by registering the foreign entity with the CNV as a foreign issuer, or offering the
securities issued by the foreign entity through a certificate de depositor Argentina (CEDEAR),
which is the Argentine equivalent to American depositary receipt (ADR). The regulations of the
CNV have additional specific rules applicable to the registration of foreign entities that are
funds.

Although the CNV has regulations that would allow a foreign issuer to publicly offer securities
in Argentina as explained above, the current regulations are so stringent that there has seldom
been any security publicly offered by a foreign issuer in Argentina in the past few years.
Offshore public offerings
The Securities Law does not have extraterritorial effects; therefore, public offers that purely take
place offshore are not regulated. However, offshore activities directed to Argentine residents
could be subject to the supervision of the CNV if those activities qualify as a public offering of
securities. Moreover, some recent regulations from 2018 allow certain market participants (such
as global investment advisers, securities brokers and dealers, and asset managers) to provide
advice regarding securities and receive instructions from their clients to carry out purchases and
sales of financial products abroad.

Crisis and how central bank and government tried to come out of situation

In 2018, the Argentine government faced numerous economic challenges: the unsustainable
buildup of debt, rapid depreciation of its currency (the peso), economic contraction, and
inflation. The government, headed at the time by center-right President Mario Macri, reluctantly
turned to the International Monetary Fund (IMF)for financial assistance to avoid defaulting on its
debt. After securing the largest IMF loan (in dollar terms) in the institution’s history, economic
conditions failed to improve. In the October 2019elections, Mario Macri lost to the center-left
Peronist ticket of Alberto Fernández for president and former President Cristina Fernández de
Kirchner for vice president. The Peronist ticket campaigned on a reorientation of Argentine
economic policies. After taking office, the Fernández government implemented several
economic reforms and entered debt restructuring negotiations with its bondholders, which remain
ongoing. The COVID-19 pandemic and resulting economic turmoil further stressed Argentina’s
economy, and the government defaulted on its debt in May 2020

Economic Crisis in Argentina has a long history of economic crises. It has defaulted on its
external debt (debt held by foreigners) nine times since independence in 1816. It took 15 years to
resolve Argentina’s default in 2001. Argentina has also entered 21 IMF programs since joining
in 1956. The current economic crisis facing Argentina stems from both long-standing issues and
recent developments.

When President Marci was elected in 2015, he ushered in a series of economic reforms aimed to
address the unsuccessful economic policies of the previous Kirchner governments, which had
governed Argentina since 2003. He cut export taxes, lifted currency controls, and resolved a 15-
year long dispute with holders of defaulted Argentine bonds, allowing Argentina to resume
access to international capital markets. The central bank also raised interest rates to 25% to curb
inflation. The economy contracted by 1.8% in 2016 but resumed growth of 2.9% in 2017. To
maintain political support for the reforms and support the country’s most vulnerable (one in three
Argentines was living below the official poverty line in 2015), the government held off on
substantial fiscal reforms to address the budget deficit, 4.3% of GDP in 2014.

However, the Marci government saw borrowing costs rise, as it switched to traditional borrowing
from international capital markets relative to the Kirchner’s’ unorthodox financing tools,
including money creation and coercing domestic banks into buying government bonds. The
Marci government issued $56 billion in external debt between January 2016 and June 2018.
Interest payments facing the government caused the budget deficit to increase to 6.4% of GDP in
2017. Meanwhile, capital inflows into the country to finance the deficit contributed to an
overvaluation of the peso, by 10%- 25%. This overvaluation also exacerbated Argentina’s
current account deficit (a broad measure of the trade balance), which increased from 2.7% of
GDP in 2016 to 4.8% of GDP in 2017.

Crisis and Initial Policy Response

Argentina’s increasing reliance on external financing to fund its budget and current account
deficits left it vulnerable to changes in the cost or availability of financing. Starting in late 2017,
several factors created problems for Argentina’s economy: the U.S. Federal Reserve (Fed) began
raising interest rates, reducing investor interest in Argentine bonds; the Argentine central bank
reset its inflation targets, raising questions about its independence and commitment to lower
inflation; and the worst drought in Argentina in 50 years hurt commodity yields, significantly
eroding agricultural export revenue. Investors began selling Argentine assets, putting downward
pressure on the peso. With most of its debt denominated in dollars, a depreciated peso increased
the value of the debt in terms of pesos. To improve investor confidence, the central bank and
government announced in April and May 2018 higher interest rates (to 40%) and fiscal reforms
to cut the budget deficit. Market volatility continued, however, and in June 2018, the Marci
government reached an agreement with the IMF for a three-year, $50 billion program.

At the program’s outset, skeptics raised questions about the fiscal cuts and growth projections
underpinning the program. Through the program, the government committed to ambitious and
politically unpopular austerity. The IMF was aware of the potential risks when the program was
approved in June 2018: IMF staff noted in program documents they could not certify under the
baseline forecast scenario with a high probability that Argentina’s debt would be sustainable,
with Argentina’s external debt reaching about $285billion in 2019, an increase of more than
$100 billion since 2015.

Despite an IMF program and fiscal reforms, the peso continued to depreciate over subsequent
months. To stabilize the currency, the central bank raised interest rates to 60% in late August
2018, the highest in the world, and the government committed to hastening the pace of fiscal
reforms. President Marci requested the IMF accelerate disbursements of its financing. In
September 2018, the IMF increased the program to $57 billion and agreed to frontload
disbursements of financing.

Developments in 2019 and 2020

The Marci government pursued fiscal reforms, reducing the budget deficit from 5.3% in 2018 to
an estimated 2.5% in 2019, and the IMF disbursed funds to Argentina in March and July 2019.
However, Argentina’s economy contracted by 2.2% in 2019, whereas the IMF program initially
envisioned a return to growth in 2019. The peso’s devaluation made it hard to tame inflation
(with consumer prices growing by 54% by end- 2019) and increased the real value of
Argentina’s debt (mostly denominated in dollars), accounting for about 76% of GDP in 2019.
The austerity measures and lingering recession in Argentina eroded Marci’s political popularity.
In the August 2019 primary election (which combined candidates from all parties), Marci lost
decisively to Fernández, who had pledged to “rework” the IMF program if elected. Following the
primary, capital flight from Argentina accelerated, the peso reached a record low, and
Argentina’s stock markets dropped.

President Marci subsequently shifted his economic policy approach, but still lost the election.
After Taking office in December 2019, President Fernández pursued several measures that aim
to revive the economy, including freezing utility tariff prices, reducing medicine prices,
increasing worker wages, giving tax rebates to the most vulnerable members of society, and
increasing severance pay. To offset the fiscal cost of these reforms, the government enacted
several tax increases. The government also focused on addressing public debt, opening talks with
bondholders and other creditors, including the IMF. The government initially set it. as a deadline
for renegotiating its debt, before large debt payments fell dew between April and July. The
deadline was subsequently extended several times. The COVID-19 pandemic further increased
economic pressure on the government, even as the government’s early lockdown successfully
slowed transmission. Argentina’s economy is forecast to contract by 5.7% in 2020, and the
government is on track to run a budget deficit.

The central bank is printing money to finance the government, which risks further inflation. On
May 22, 2020, the government missed a $503 million interest payment on dollar bonds issued
under New York law, putting the government into its ninth default. Although bondholders could
demand immediate repayment on all outstanding debt or pursue payment through New York
courts, negotiations are ongoing to swap the original bonds with new bonds that would provide
some debt relief through principal and interest rates cuts and maturity extensions. In June, the
IMF assessed that the government’s revised restructuring offer to bondholders would likely
restore debt sustainability for the government. More bondholders would need to accept the bond
swap before it can proceed, however, and negotiations continue.

Economic Implications for the U.S.

U.S. economic exposure to Argentina through direct trade, investment, and financial channels is
relatively limited. U.S. investors, however, are affected by the Argentine default and efforts to
restructure the debt. The role of the IMF also has implications for the United States, the IMF’s
largest shareholder. Argentina has historically been a frequent IMF borrower, and previous
programs have encountered difficulties. Argentina’s default in 2001, while on a sizeable IMF
program, led the IMF to substantially revise its lending policies. In 2018, the U.S. government
strongly supported the IMF program for Argentina, given President Marci’s demonstrated
commitment to improving U.S.-Argentine relations and reforming its economy. U.S. government
views, however, could change under President Fernandez if his government takes an aggressive
position against the IMF or U.S. creditors.