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30 March 2005

FT: Zurich eurobond challenges London





Switzerland's challenge to London and other European financial centres in the eurobond market has scored its first success. Some $125m (£66m) of eurobonds issued by Banco Itaú, a Brazilian bank, began trading in Zurich yesterday, the first time Switzerland has taken such business from the traditional centres of London and Luxembourg.

The UK accounts for about two-thirds of the ԃ,000bn eurobond market, which supports thousands of London-based jobs. Luxembourg has most of the rest. Switzerland announced plans for new listings rules in November to try to lure issuers away from London and Luxembourg, the first serious challenge to their dominance since the international bond market emerged 40 years ago.

The Swiss move came alongside a battle by London and Luxembourg to prevent European Union regulation from undermining their own eurobond markets. On July 1, the EU will introduce a prospectus directive that will require bond issuers to provide information in accordance with the new International Financial Reporting Standards. In 2007, a second transparency directive will come into effect. The new rules could discourage non-EU companies, particularly Asian ones, from issuing eurobonds inside the EU because many bond practitioners claim that the new rules are flawed.

The Swiss exchange's rules change allowed eurobond listings by non-Swiss companies for the first time. The LSE plans to launch an alternative 'professional', or self-regulated, eurobond market this summer. It will be free from EU control - similar to the AIM market for equities. It hopes this will calm the concerns of issuers in places such as Asia.

© Financial Times


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