By Engen Tham and Selena Li

SHANGHAI/HONG KONG (Reuters) -UBS has identified at least four countries, including South Korea and India, as being "slow" to grant the regulatory approvals needed to complete its takeover of Credit Suisse, an internal document reviewed by Reuters shows.

The Swiss banking giant has also highlighted Ireland and Saudi Arabia as "slow jurisdictions" in granting licences, according to the previously unreported document which was dated Sept. 6 and was circulated to UBS staff globally.

Prepared by UBS after a global review to assess the timeline of regulatory approvals necessary for the integration of Credit Suisse to complete, the document said uncooperative regulators could put transactions such as the Swiss bank deal at risk.

The document says that "a single non-cooperative regulator can jeopardise the timeline of the parent bank merger and other transactions", impacting other related integration deals.

The uncertainties could lead to winding down businesses and asset sales, when UBS faces "difficult jurisdictions or regulators", the Swiss bank said in the document.

Credit Suisse, which was Switzerland's second-biggest bank, suffered years of scandals and losses before it had to be rescued in March in a state-engineered takeover by UBS.

Although UBS completed the takeover in June, it still needs approvals from regulators in markets where both the banks operate for the legal completion of the first rescue of a global bank since the 2008 financial crisis.

A UBS spokesperson said in a statement that it was "working closely with authorities on the ongoing integration of Credit Suisse and appreciates the strong support it has received to date."

Credit Suisse declined to comment. Spokespeople for central banks in South Korea, India, Ireland, and Saudi Arabia also did not immediately respond to Reuters requests for comment.

It is normal for large merger and acquisition deals to be delayed by the myriad regulatory approvals needed to close a deal, and in very few cases transactions do get derailed due to objections raised by some regulators.

The first-ever merger of two global systemically important banks has created both opportunities and risks for UBS, which has been working on integrating Credit Suisse's businesses.

Last month UBS said it expected the takeover to be completed in 2024. The bank's internal document showed the process could be finished as soon as May next year.

'CHANGE IN CONTROL'

In South Korea, it may take up to 18 to 22 months to obtain new licences, while in Ireland the process could take up to two years, and in Saudi Arabia up to 12 months, the document said.

The regulator in India could take a minimum of six months to approve the setting up of a new branch, it added.

UBS also said in the document that for Russia, a "change in control" approval may never be obtained as this could be a politically driven decision.

In a May disclosure filed with the U.S. securities regulator, UBS said that its exposure to Russia contributed $98 million to its total emerging market exposure of $18.6 billion as of Dec. 31, 2022.

Last month, a Moscow court banned UBS and Credit Suisse from disposing of shares in their Russian subsidiaries, Reuters reported, citing court documents.

Laws introduced after Russia despatched troops to Ukraine in February last year have made presidential approval necessary for banks to cut ties with their local business, while a government commission reviews all asset transfers involving Western firms.

Russia's central bank and finance ministry did not immediately respond to requests for comment.

The majority of markets UBS and Credit Suisse operate in grant automatic transfer of all assets and liabilities, which they term universal succession, while seven of 51 jurisdictions do not recognise the practice, the document showed.

Those seven markets are Bahrain, Dubai, Abu Dhabi, Japan, Saudi Arabia, Thailand, Turkey, said the document, adding that "individual transfers are very burdensome, time-intensive and entail the risk of missing consents" in those jurisdictions.

By Kevin Buckland

TOKYO (Reuters) -The yield on two-year U.S. Treasury notes rose to a 17-year high of 5.1970% on Thursday, a day after the Federal Reserve held interest rates steady but stiffened its hawkish stance for future policy.

The 10-year yield rose to 4.4310%, a new 16-year peak.

The U.S. central bank projected a further rate increase by the end of the year and expected monetary policy to be significantly tighter through 2024 than previously thought.

Fed Chair Jerome Powell's "cautious view that a 'soft landing' is not even the base case may reflect the uncertainties of policy lag, especially alongside the possible need for more tightening," Mizuho analysts wrote in a client note.

"Against this backdrop the case for higher front-end yields, with distinct upside bias to yield volatility may persist into Q3 and early Q4," ahead of the next policy meeting in November, they wrote.

Money market traders now see better than 50% odds of a quarter-point hike by year-end, from around 40% probability before the Fed decision.

By Ann Saphir

WASHINGTON (Reuters) -Federal Reserve Chair Jerome Powell declined on Wednesday to say he expects a "soft landing" for the U.S. economy, but that sure was the picture painted by policymakers in their newest economic forecasts.

Fed officials, indeed, appear to be growing more confident than ever in being able to cool inflation without a recession or a sharp rise in unemployment.

They expect economic growth to slow next year to about 1.5%, from 2.1% this year, and for the unemployment rate to go no higher than 4.1%, the latest quarterly summary of their projections shows. That's just a smidge higher than the 4% level they see as sustainable in the long-run, and only a few tenths more than its current 3.8% level.

Just three months ago they anticipated U.S. GDP to grow only 1.1% next year, after just 1% this year, and for the unemployment rate to peak at 4.5% next year and still be there at the end of 2025.

But asked during a press conference if he would now call the soft landing a baseline expectation, Powell demurred.

"No, I would not do that," he said. "I've always thought that the soft landing was a plausible outcome...ultimately, this may be decided by factors that are outside our control at the end of the day, but I do think it's possible."

The autoworker strike, a possible government shutdown, the resumption of student loan repayments, higher energy prices, and higher long-term borrowing costs are among risks that Powell noted could affect the trajectory of the economy, inflation and, ultimately, where Fed policymakers decide they need to take rates.

ONE MORE TIME

The summary of forecasts shows most policymakers continue to expect one more interest-rate hike this year, bringing the policy rate to 5.6%, after the Fed held rates steady in a range of 5.25-5.50% on Wednesday, as widely expected.

The rosier economic picture also came with projections for fewer rate cuts next year than envisioned three months ago.

Policymakers now expect to end next year with short-term borrowing costs at 5.1%, a half percentage point higher than they anticipated in June.

The dialed-back pace of anticipated policy easing next year goes hand in hand with what policymakers expect to be uneven progress toward the Fed's 2% inflation goal, with inflation seen ending this year a little higher than projected in June.

Fed officials now see the personal consumption expenditures price index at 3.3% at year end, versus June's forecast of 3.2%, and at 2.5% by the end of next year. For 2025, they upped expected inflation slightly to 2.2% from the 2.1% projected in June, and their first look at 2026 showed them reaching their 2.0% inflation goal that year.

Fed officials expect further reductions in the policy rate as well, to 3.9% by the end of 2025 - above the 3.4% they projected in June - and to 2.9% by the end of 2026.

That would still be above the 2.5% they continue to see as the long-run neutral policy rate - the level of borrowing costs that neither slows nor stimulates a healthy economy.

The path of rates laid out in the projections is neither a plan nor a guarantee, Powell said - it's merely a best guess of what it will take to bring inflation back down to 2%.

"A soft landing is a primary objective and I did not say otherwise," Powell said. "I mean, that's what we've been trying to achieve for all this time. The real point though, is the worst thing we can do is to fail to restore price stability."

By Dharamraj Dhutia

MUMBAI (Reuters) -India's banking system liquidity deficit is at its widest in over four years ago, amid tax outflows and the lack of any major inflows, traders said on Wednesday.

Banking system liquidity deficit jumped to 1.47 trillion rupees ($17.67 billion) as on September 18, the highest single day shortfall since April 23, 2019, while banks have borrowed a record 1.97 trillion rupees from the central bank's Marginal Standing Facility window.

Advance tax payments took place last week, while outflows towards Goods and Services tax will be completed by Wednesday, with bankers estimating aggregate outflows of up to 2.50 trillion rupees.

The impact has magnified as the twin outflows have occurred in the same reporting fortnight, at a time when a chunk of the money is not available for use as it is blocked in the incremental cash reserve ratio (I-CRR).

Moreover, "another drain on rupee liquidity could be from RBI's (Reserve Bank of India) FX intervention if depreciation pressures on the rupee persist," said Gaura Sen Gupta, an economist with IDFC First Bank (NASDAQ:FRBA).

While the RBI is winding down the I-CRR, which was imposed on banks in August, this is being done in phases and is adding to the liquidity tightness, traders said.

The central bank will release 25% of the funds under I-CRR on Sept. 23 and the remaining 50% on Oct. 7, while the government's month-end inflows will start only in the last week of September.

The shortage has kept upward pressure on overnight rates, with interbank call money and TREPS rate staying in the 6.75%-6.90% band.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, expects the RBI to keep liquidity tight in the near term in order to keep short-term rates elevated, given the pressure on the rupee and underlying inflationary risks, which may also prevent the central bank from announcing variable repo rate auctions.

The liquidity deficit will, however, narrow towards the end of this month and the beginning of October as government spending picks up and the I-CRR is completely wound down.

($1 = 83.2125 Indian rupees)

Investing.com-- Most Asian stocks fell on Wednesday with markets remaining broadly risk-off before a closely-watched interest rate decision from the Federal Reserve later in the day, while weak economic readings from Japan also weighed.

Japan’s Nikkei 225 fell 0.3% as data showed the country’s exports and imports shrank less than expected in August. But Japan’s trade deficit widened substantially more than expected, hitting a three-month low on weakness in China, which is one of the country’s biggest export destinations.

Focus this week is also on a Bank of Japan meeting on Friday, amid some speculation that a pivot away from negative interest rates is imminent. 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.3% each, while Hong Kong’s Hang Seng lost 0.3% as the People’s Bank of China kept its loan prime rates unchanged, as widely expected.

The central bank has limited room to cut interest rates further and boost an economic recovery, given that rates are already at record lows. But the PBOC has also largely maintained its pace of liquidity injections to boost a slowing economic recovery. 

Weakness in China spilled over into Australia, with the ASX 200 down 0.6%. The Westpac/Melbourne Institute Leading Index- an indicator of future Australian economic growth- read 0% for August, heralding continued weakness in the Australian economy as it grapples with high interest rates and slowing Chinese demand. 

Futures for India’s Nifty 50 index pointed to a weak open, as investors continued to lock-in some profits after local stocks touched record highs this week. 

Fed angst keeps markets risk-off 

Broader markets remained largely subdued, as investors hunkered down before the conclusion of a two-day Federal Reserve meeting later in the day. 

The Fed is expected to keep rates on hold. But a recent resurgence in U.S. inflation is expected to elicit a hawkish outlook from the central bank, which could open up the possibility of at least one more rate hike in 2023.

The Fed is also expected to reiterate its stance that interest rates will remain higher for longer- a scenario that presents more headwinds for Asian markets. Rising U.S. rates  tightened monetary conditions across the globe and dried up foreign capital flows into regional markets over the past year. 

Asian chipmakers extend losses on demand fears 

Regional chipmaking stocks saw sustained losses this week, after a Reuters report showed that TSMC (TW:2330) (NYSE:TSM)- the world’s largest contract chipmaker- had asked its suppliers to delay some deliveries on concerns over slowing demand.

TSMC’s Taiwan shares fell 0.3% on Wednesday, extending losses into a third straight session.

Memory chip makers SK Hynix Inc (KS:000660) and Samsung Electronics Co Ltd (KS:005930) sank 1.2% and 0.3%, respectively, also dragging the KOSPI 0.2% lower.

Semiconductor Manufacturing International Corp (HK:0981), China’s biggest chipmaker, fell 1%, while peer Hua Hong Semiconductor Ltd (HK:1347) fell 0.6% in Hong Kong trade.

By Tom Westbrook

SINGAPORE (Reuters) - Asian stocks struggled for headway on Wednesday while 10-year U.S. Treasury yields stood at 16-year highs as surging oil prices drive inflation and set the scene for the Federal Reserve to project interest rates staying higher for longer.

Brent crude futures eased from 10-month highs overnight but at $94.26 a barrel are up 30% in three months thanks to Saudi Arabia and Russia vowing to extend output cuts.

Higher energy costs led to a bigger-than-expected spike in Canadian inflation, overnight data showed, lifting the loonie and triggering selling in the Treasury market. [US/]

Benchmark 10-year Treasury yields hit their highest since 2007 at 4.371% overnight and were last at 4.36%.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%, as did Japan's Nikkei. Overnight on Wall Street the S&P 500 also slipped 0.2%.

Futures pricing implies almost no chance of a Fed hike at 1800 GMT, but traders, who have begun winding back bets on cuts in 2024 and will be closely focused on the U.S. central bank's economic projections and chair Jerome Powell's news conference.

"The previous dot plot saw many participants expecting a cut in 2024. There is no reason for those dots to significantly move," said Sam Rines, managing director at research firm CORBŪ in Texas.

"The 'risk management' aspect of the Powell presser is likely to be: positive in regard to downward adjustments to the policy rate as or if inflation wanes, (but) negative with respect to threats of future tightening."

The Fed meeting leads a week jammed with central bank meetings and data over the next few days. British inflation figures are due on Wednesday, followed by central bank meetings in Sweden, Switzerland, Norway, Britain and Japan on Thursday.

STERLING STEADY AHEAD OF CPI

Foreign exchange markets have largely been in a holding pattern ahead of the Fed meeting, though the yen has continued to face pressure which early on Wednesday prompted a riposte from Japan's top financial diplomat. [FRX/]

Masato Kanda told reporters that Japanese authorities were always in close communication with U.S. counterparts and that he wouldn't rule out any options if "excessive moves persist."

The yen is down 11% on the dollar this year as expectations firm for U.S. rates to stay high and Japanese rates to stay low. The yen hit a 10-month trough of 147.95 to the dollar late last week and it traded at 147.80 early on Wednesday.

Benchmark 10-year Japanese government bonds remain hemmed around 0% but at 0.72% have been creeping towards the Bank of Japan's adjusted tolerance for yields 1% either side of zero.

The euro held steady at $1.0684. Commodity-exporters' currencies were firm, with the New Zealand dollar holding modest recent gains at $0.5940 after strong dairy price gains at an overnight auction. [NZD/]

China left benchmark lending rates unchanged on Wednesday, as expected, keeping the yuan steady at 7.2946 per dollar. [CNY/]

The Aussie held at $0.6415, while sterling has paused its slide and held at $1.2390 ahead of British inflation data due at 0600 GMT where headline CPI is seen ticking up to 7% year-on-year. [GBP/]

"The risk lies towards stronger outcomes given very strong labour earnings growth," said Commonwealth Bank of Australia (OTC:CMWAY) strategist Kristina Clifton.

"A stronger CPI result can cause financial markets to fully price in a 25 basis point hike for the Bank of England on Thursday and support sterling."

Rising yields have kept a lid on gold prices, with spot gold last trading at $1,929 an ounce. [GOL/]

Wheat prices, which had been driven down by huge shipments from Russia, steadied on expectations of dry weather cutting output in Australia and Argentina. [GRA/]

Investing.com-- The People’s Bank of China held its benchmark loan prime rates at record lows on Wednesday, as it moved to strike a balance between supporting an economic recovery and stemming further weakness in the yuan. 

The PBOC kept its one-year LPR at 3.45%, while the five-year LPR, which is used to determine mortgage rates, was left unchanged at 4.20%. Both rates were at historic lows, after three cuts over the past year.

Markets had broadly expected the PBOC to keep rates on hold, given that it left its medium-term lending rates unchanged last week. 

The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending interest rates in the country.

The PBOC had disappointed markets with a smaller-than-expected cut to the one-year LPR in August, while the five-year LPR was left unchanged. The move came amid growing discomfort in Beijing over weakness in the yuan, which is among the worst-performing Asian currencies this year. 

Weakness in the yuan was driven chiefly by concerns over a slowing Chinese economic recovery this year, as manufacturing activity stalled and as domestic consumption struggled to reach pre-COVID levels.

While this trend has attracted a slew of monetary stimulus measures from the PBOC, it has maintained a largely conservative stance towards cutting interest rates. 

China’s economy showed some signs of improvement through August, particularly in industrial production and consumer spending. Inflationary conditions also improved after the country slipped into deflation earlier this year.

But the overall outlook for the Chinese economy remains dour, especially as it grapples with slowing overseas demand for exports. The country’s real estate sector, which accounts for nearly a quarter of overall economic growth, is also struggling with a brewing debt crisis, which threatens to spill over into the broader economy. 

The yuan also faces an uphill battle from a widening gulf between local and U.S. yields, following a string of interest rate hikes by the Federal Reserve over the past year. The U.S. central bank is expected to keep rates at over 20-year highs for longer, pressuring most Asian currencies. 

By Rodrigo Campos and Harry Robertson

NEW YORK/LONDON (Reuters) -Global debt hit a record $307 trillion in the second quarter of the year despite rising interest rates curbing bank credit, with markets such as the United States and Japan driving the rise, the Institute of International Finance (IIF) said on Tuesday.

The financial services trade group said in a report that global debt in dollar terms had risen by $10 trillion in the first half of 2023 and by $100 trillion over the past decade.

The latest increase has lifted the global debt-to-GDP ratio for a second straight quarter to 336%. A slowdown in growth, alongside a deceleration in price increases, have caused nominal GDP to expand less slowly than debt levels and were behind the debt ratio rise, the report said.

"The debt-to-GDP ratio actually has resumed its upward trajectory," said Emre Tiftik, director of sustainability research at the IIF at a news conference.

"Notably this rise comes after seven consecutive quarters of declining debt ratios and it mostly reflects the impact of easing inflationary pressures."

The IIF said that with wage and price pressures moderating, even if not to their targets, they expect the debt to output ratio to surpass 337% by year-end.

Experts and policy makers have warned in recent months of rising levels of debt, which can force countries, corporations and households to tighten their belts and rein in spending and investments, in turn crimping growth and hit living standards.

More than 80% of the latest build up had come from the developed world with the U.S., Japan, Britain and France registering the largest increases. Among emerging markets, the biggest rises came from the largest economies, namely China, India, and Brazil.

"For the first time in a long time there's a better trend among emerging markets than there has been among developed markets," said Todd Martinez, co-head of the Americas sovereign team at Fitch Ratings, which sponsored the IIF report.

"Developed markets after the pandemic, they're taking longer to get back to their pre-crisis fiscal positions than EM did, and then a lot of them got hit by this energy shock (from the war in Ukraine)."

The report found that household debt-to-GDP in emerging markets was still above pre-COVID-19 levels, largely due to China, Korea and Thailand. However, the same ratio in mature markets has dropped to its lowest level in two decades in the first six months of the year.

"The good news is that consumer debt burdens appear to have remained largely manageable," Tiftik said. "If inflationary pressures persist, the health of the household balance sheet, especially in the U.S., will provide a cushion against further Fed rate hikes."

Markets are not pricing in a U.S. Federal Reserve rate hike in the near future, but the target rate of between 5.25% and 5.5% is currently expected to remain in place until at least May of next year, according to the CME FedWatch tool.

U.S. rates are expected to remain high for a long period, which could pressure emerging markets as needed investment is funnelled to the less-risky developed world.

The Fed is expected to leave rates unchanged on Wednesday, but could signal that it is open to further rate hikes.

JAKARTA (Reuters) - Indonesia's parliamentary budget committee on Tuesday approved President Joko Widodo's budget for 2024, his final year in office with a total spending of 3,325.1 trillion rupiah ($216.27 billion, the committee chair said.

The agreed spending is representing a fiscal deficit equal to 2.29% of gross domestic product or slightly lower than 2023's outlook of 2.30%.

The president had in August proposed spending of 3,304.1 trillion rupiah. The 2024 budget assumes economic growth of 5.2%, unchanged from the government's proposal.

The revenue target was approved at 2,802.3 trillion rupiah ($182.24 billion) or larger than the proposed 2,781.3 trillion rupiah, as the government expects higher income from the oil and gas sector. committee chair Said Abdullah said in a livestreamed meeting with the government on its budget proposal.

The budget committee's decision is expected to be approved by a wider parliamentary vote at a later date.

Other economic assumptions were unchanged from previous approval from the committee earlier this month.

($1 = 15,375.0000 rupiah)

By Huw Jones

LONDON (Reuters) - Most leading euro zone banks have met a January 2024 target for issuing special debt to replenish capital in a crisis, but some need to do more to ensure they can, if necessary, be wound up quickly, a European Union regulator said on Wednesday.

Recent banking crises in the United States, where Silicon Valley Bank collapsed, and in Switzerland where UBS was forced to acquire Credit Suisse, show that banks and regulators need to increase preparedness for rapidly unfolding crises, the Single Resolution Board (SRB) said.

Forcing banks in the EU's banking union to have minimum requirement for own funds and eligible liabilities (MREL) was a lesson from the 2008 global financial crisis where taxpayers had to bail out banks.

MREL debt is written down in a crisis to "bail in" the bank and help stop it from being "too big to fail".

The SRB, which sets MREL targets, said that by the end of 2022, two-thirds of banks met their final target.

The shortfall is 0.3% of total risk exposures or 20.5 billion euros ($21.87 billion). Some 2.7 trillion euros has been issued so far, and 24 banks have an MREL shortfall, though 14 of them have been given an extension until the end of 2024 or 2025 to meet their targets.

"While holding sufficient loss-absorbing resources at all times is key, it is equally important for banks to be able to use these funds in a crisis," the SRB said in a report.

Its focus is shifting to ensuring banks can credibly demonstrate by the end of this year that they can be smoothly "resolved" or wound down, restructured, or sold without disruption to customers.

"The SRB will review whether material shortcomings remain and take remedial action where needed," it said, though there is no sign so far that it will need to intervene.

Evaporating liquidity was a hallmark of recent banking turmoil and is being scrutinised in resolution plans of banks.

"In order to foster consistency across banks’ scenarios to be considered while integrating lessons learnt from recent crisis cases, the SRB will develop further guidance on the assumptions to be used," the watchdog said.

($1 = 0.9373 euros)