DHAKA TRIBUNE
Business
Sunday, May 18, 2014
B3
Plans to de-risk ‘too-big-to-fail’ banks face hurdles in Europe, Asia
UCB holds conference on strategic development
n Reuters, London
n Tribune Report, Chittagong
Global plans to prevent taxpayers from having to pay for big bank failures are at risk because banking supervisors in Europe and Asia do not fully support some of the proposals aimed at drawing a line under the 2007-2008 financial crisis. Governments have paid out billions of taxpayer dollars to bail out large banks in trouble because of fears that the fallout from a big collapse would be too damaging. But leaders of the world’s major economies - the G20 - want to put an end to the “too big to fail” phenomenon. They want the world’s biggest 29 banks to hold enough capital and bonds that in a crisis they would not have to be rescued by governments. The G20’s regulatory arm, the Financial Stability Board (FSB), wants them all to hold a common “cushion” of bonds that can be converted to equity to help rescue or “bail in” the bank if all other capital has been burnt through. But there is resistance among supervisors in Europe and Asia to banks having to hold what would be another layer of capital. FSB Chairman Mark Carney wants a draft rule on the “bail in” bonds by November, when G20 leaders meet in Australia so they can move on from crisis clean-up to growth promotion. Supporters of a global standard say it is needed because big banks operate across borders. “It’s very much in the interest of the industry to find a solution to this because we want to get a consensus on the view that too big to fail has been eliminated,” David Schraa, regulatory counsel at the Institute of International Finance, a global banking lobby in Washington, said. But bankers, bank industry associations and regulators familiar with work on the new “bail in” rule say Asian bank supervisors argue that big banks in the region have enough capital already and
Oil prices rebound in Asia n AFP, Singapore Oil prices rebounded in Asian trade Friday but gains were capped by weak economic data from Europe and oversupply in the United States. New York’s main contract, West Texas Intermediate for June delivery, was up 39 cents at $101.89 a barrel in afternoon trade, while Brent North Sea crude for July gained 20 cents to $109.29. Gross domestic product across the 18-nation eurozone grew just 0.2% in the three months to March, the Eurostat data agency said, much lower than expectations for 0.4%. “Eurozone GDP was weaker than expected, Germany is fine but the rest of Europe is struggling,” Shailaja Nair, senior managing editor at energy market information provider Platts, told AFP. l
Lead_Bank of England governor and Financial Stability Board Chairman Mark Carney delivers a Financial Stability Board media briefing at the Bank of England in London REUTERS do not need the additional cushion or “debt shield.” They did not want to specify which Asian countries. Banks around the world are already having to hold far more capital from 2016 as a result of new rules to strengthen them since the financial crisis. In the European Union, central bankers argue EU banks will already have to contribute to central funds for winding down failed banks and hold bail-in debt under new European laws. Industry regulators in the EU also want the bail-in debt required in Europe to be accepted as a substitute for what the FSB is planning. Some banking supervisors in Europe also argue that capital banks already hold above
minimum requirements should count towards bail-in debt. In addition, this year’s EU bank stress test is already pushing banks to raise capital so supervisors are wary of making additional demands on them to issue bail-in bonds.
Global debt shield
Regional bickering over the plans highlights the difficulty of getting agreement on a one-size-fits-all rule that applies across the world. But failure to get a global consensus will give free rein to regulators to do their own thing, creating a patchwork of rules that would make it tough to wind down an international bank.
For example, the U.S. Federal Reserve may propose its own “debt shield”, requiring foreign banks to hold capital and liquid assets in the country to protect its taxpayers. Regulatory “hawks” like the United States and Britain want quite detailed rules, while some Asian countries prefer less defined principles, banking officials said. There are a range of views to be taken into account and refined and many tough issues remaining, a person with knowledge of the new rule said. “There will also be issues with banks that are deposit rich and don’t feel the need to issue more debt instruments,” the person said.
The FSB declined to comment. It will publish the draft rule for public consultation after summit in November. The world’s biggest banks are already expected to hold a capital buffer equal to about 10% or more of riskweighted assets. The extra cushion or debt shield would come on top of this. “People are talking about total (debt shield) and capital in the range of 17-20 percent,” a U.S. banking official said. A source at a European bank that will need a debt shield expects it to be around 10-13%, bringing total debt and capital buffers to 20-25%. “On the quantity ... we are not seeking an amount ... capable of resurrecting any failing bank including the global giants,” Bank of England Deputy Governor Jon Cunliffe said this week in the first comments of substance on the subject from a senior policymaker. We want there to be sufficient capital to recapitalize the banks that are carrying out critical economic functions to a level where they can regain and maintain market access, he said. Even if a global standard is eventually agreed, there are doubts it will prevent individual regulators from making their own rules or push them to get rid of existing ones, such as the Fed’s capital requirement for foreign banks. “I don’t see the Fed doing that anytime soon,” Kenneth Bentsen, chief executive of banking lobby the Global Financial Markets Association, said. While the regulators argue, markets are already anticipating the demise of too big to fail, an event which is expected to increase banks’ funding costs. “You have to embrace bail-in as there is no other alternative,” Philippe Bodereau, global head of financial research at bond fund PIMCO, told a conference on Thursday. “If a large US bank defaults tomorrow, one thing I am pretty sure of is that Congress is not going to give any money to recapitalize, so the era of too big to fail is probably over,” Bodereau said. l
Dollar weaker in Asia as US, eurozone data disappoint n AFP, Tokyo The dollar was under pressure in Asia Friday following a disappointing batch of data out of the United States and eurozone that led investors out of high risk assets. In afternoon Tokyo trading, the greenback fetched 101.46 yen, down from 101.57 yen in New York and 101.83 yen in Tokyo earlier Thursday. The euro bought $1.3715 and 139.19 yen compared with $1.3711 and 139.26 yen. In other trading, the Indian rupee gained more than one percent as the nation’s stock market jumped to a record high. The dollar bought 58.69 Indian rupees Friday afternoon, down from 59.50 rupees on Thursday, as election
Diamond World has gifted a diamond nosepin to its first ten customers each on its first anniversary of Bashundhara City showroom on May 16. The shop is also providing 27% discount on its products on this occasion, said its managing director Dilip Kumar Agarwal
MoneyGram Money Transfer, official money transfer partner of the “ICC T20 World Cup 2014 Bangladesh” recently conducted a promotional campaign for customers who received transferred money through MoneyGram between January 15 and February 28. The managing director and CEO of Uttara Bank, Shaikh Abdul distributed gifts to the lucky winners through a prize giving ceremony held at the bank’s head office
results indicated Hindu nationalist party leader Narendra Modi, riding a wave of public support for his pledge to revive the economy, was set to become the country’s next prime minister. In the eurozone, gross domestic product (GDP) across the 18-nation group expanded just 0.2 percent in January-March, data agency Eurostat said, half the 0.4 percent that had been forecast. Italy, the third-biggest economy in the bloc, shrank 0.1 percent in that period, while Portugal, which is about to emerge from a bailout, contracted 0.7 percent. Separately Eurostat confirmed eurozone inflation rose to 0.7 percent in April, up from the 0.5 percent reported in March but still well off the European
Central Bank’s 2% target. While there was a bright spot with Germany seeing growth double to 0.8 percent, the data add to expectations the European Central Bank (ECB) will ease monetary policy conditions to kick-start growth in the region and soothe fears of deflation. “The euro has been capped of late, mainly on the back of lower-than-expected growth data and as most ECB members supported the view of more aggressive monetary policy action being considered as soon as next month,” Credit Agricole said. “However, it appears that the jury is still out when it comes to aggressive measures,” it added. Adding to the unease, US industrial production fell 0.6 percent in April after two months of gains, although new
The Dhaka Mercantile Co-operative Bank Ltd recently donated four families of Rana Plaza victims with one tailoring machine each at the company’s Narail branch. Abdul Gaffar Khan, DC of Narail distributed the machines as chief guest at the presence of the company’s vice chair Captain (retd) Abu Zafar Chowdhury
EXIM Bank launched its branch at new premises in Bashundhara recently. The bank’s board audit committee chair, Omor Farque Bhuiyan inaugurated the branch as chief guest
jobless claims hit a seven-year low last week. “Markets prefer to focus on the negative at the moment... and this dominated over some relatively good news,” National Australia Bank said. “That tone is likely to stay for now.” The dollar was mixed against other Asia-Pacific currencies. It weakened to 11,401.80 Indonesian rupiah from 11,446.80 rupiah, to Tw$30.15 from Tw$30.16, and to 1,025.16 South Korean won from 1,026.44 won. The US unit rose to Sg$1.2520 from Sg$1.2509, to 43.75 Philippine pesos from 43.70 pesos and to 32.48 Thai baht from 32.45 baht. The Australian dollar weakened to 93.53 US cents from 93.72 cents while the Chinese yuan slipped to 16.26 yen from 16.30 yen. l
United Commercial Bank Limited (UCB) yesterday held a business conference for its managers of Chittagong branches at a local club in Chittagong. Strategic development and financial excellence of the bank came to focus at the conference. The bank’s management also addressed issues regarding financial inclusion through client-friendly products and services. The bank’s managing director Muhammed Ali presided over the conference. UCB has been selected as the best bank in Bangladesh for the category of Best Emerging Markets Banks in Asia-Pacific 2014 by a finance magazine named Global Finance, said Muhammed Ali at a press briefing after the conference. He added: “The award is undoubtedly an achievement for us and the country.” The bank’s additional managing director M Shahidul Islam, deputymanaging directors Mohammad Abu Abdullah, Md Tariqul Azam and Mohammad Shawkat Jamil were present at the conference among others. l
Apple, Google settle smartphone patent litigation n Reuters, San Francisco Apple Inc and Google Inc’s Motorola Mobility unit have agreed to settle all patent litigation between them over smartphones, ending one of the highest-profile lawsuits in technology. In a joint statement on Friday, the companies said the settlement does not include a cross license to their respective patents. “Apple and Google have also agreed to work together in some areas of patent reform,” the statement said. Apple and companies that make phones using Google’s Android software have filed dozens of such lawsuits against one another around the world to protect their technology. Apple cofounder Steve Jobs called Android a “stolen product.” Google and Apple informed a federal appeals court in Washington that their cases against each other should be dismissed, according to filings on Friday. However, the deal does not apply to Apple’s litigation against Samsung Electronics Co Ltd. Apple has battled Google and what once were the largest adopters of its Android mobile software, partly to try to curb the rapid expansion of the free, rival operating system. But it has been unable to slow Android’s ascendancy, which is now installed on an estimated 80% of new phones sold every year. Motorola, the US company that pioneered the mobile phone, no longer ranks among the biggest smartphone makers. l
World Academy for Research & Development Ltd (WARD) has organised WARD HR Summit 2014 on Friday at the conference hall of the Wings Centre in Dhanmondi, Dhaka. Khaleda Akter, ex ioint chief and director WARD was the chair of the session
SRSG Broadcast (India) Pvt Ltd, a system integrator company has recently launched its products and services in Bangladesh that include turnkey solutions on setting up of TV and FM channels. The photo shows Sanjib Mekup, CEO of the company along with officials from Ministry of Information in a launching ceremony held at a city hotel