4 Sunday, March 13, 2011
Doubts about security of US nuclear facilities
The Financial Daily International Vol 4, Issue 126
Publisher & Editor-in-Chief: Amir A. Ashary Editor: Shakil H. Jafri Executive Editor: Manzar Naqvi Honorary Advisory Board Haseeb Khan, FCA
S. Muneer Hussain Rizvi
Asim Abbas Ashary, CPA
Khurram Shehzad, CFA
Akhtar M. Zaidi, FCA
Prof. Zakaria Sajid (KU)
Dr. A. Hadi Shahid, FCA
Zahid Bukhari SVP HBL (retd)
Muhammad Arif
Ismat Sabir Head office
111-C, Jami Commercial Street 11, Phase VII, DHA Karachi Telephone: 92-21-35311893-6 Fax: 92-21-35388428 URL: www.thefinancialdaily.com Email Address: editor@thefinancialdaily.com
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Rising delinquency of agriculture sector The Agricultural Credit Advisory Committee (ACAC) had set an indicative agricultural credit target of Rs270 billion for current fiscal year. The target was 8.8 per cent higher than the disbursement of Rs248 billion during last fiscal year. Out of the total target, Rs181.3 billion were allocated to commercial banks, Rs81.8 billion to ZTBL and Rs6.9 billion to Punjab Provincial Cooperative Bank Limited (PPCBL). According to credit disbursement details during first half current financial year five major banks as a group disbursed Rs55 billion, ZTBL disbursed Rs21 billion, domestic private banks disbursed Rs22.7 billion and PPCBL disbursed Rs2.9 billion. Non-Performing Loans show a slight increase as three agricultural provinces of the country have witnessed flood in August last year. The flood has destroyed standing crops, of which growers were unable to payoff their already obtained loans. The State Bank of Pakistan has revealed that NPLs under head of agriculture financing has surge by 6.56 per cent to peak level of Rs34.1 billion or 18 per cent of the outstanding loans as on December 31, 2010 as compared to Rs32 billion or 17.7 per cent of the outstanding loans as on December 31, 2009. Major increase was registered in NPLs of ZBTL, which have gone up by Rs4.2 billion to Rs18.2 billion in December 2010. NPLs of five leading commercial banks have declined by Rs0.9 billion to Rs6.4 billion in December 2010 as compared to Rs7.5 billion in December 2009. NPls of domestic private banks has surged by Rs300 million to Rs4.8 million. In addition, with a decline of Rs900 million the NPLs of PPCBL stood at Rs 4.9 billion from R 5.8 billion during the same period. A closer look at the NPLs of ZTBL and five leading banks reveals interesting facts. While NPLs of ZTBL grew by Rs4.2 billion, NPLs of big five commercial banks declined by Rs0.9 billion. This contrast can be attributed to one fact, better risk management by the big five through credit insurance. Many critics had expressed their apprehensions on the unsatisfactory credit insurance arrangements made by ZTBL. Insurance experts say that Pakistan has completed the first phase of crop insurance and now they have to go a few steps forward. The first step in to offer comprehensive insurance of four major crops. The second step is formation of insurance pool, with Government of Pakistan contributing lion's share. The system is already in place in India and can be easily replicated in Pakistan. Let one point be very clear in the minds of economic managers that comprehensive crop insurance has become need of the time and its success largely depends on formation of pool by the government. Since catastrophes are taking place more frequently and the quantum of losses is also on the rise, it is advisable that comprehensive crop insurance be introduced at the earliest.
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T
he massive earthquake that forced the closure of four nuclear power plants in Japan has highlighted the grave risk of inadequate back-up generators at U.S. facilities, a leading U.S. scientist group said on Friday. While the U.S. regulators made clear that the national nuclear fleet is built to withstand the biggest earthquakes in history, scientists said they needed to do more to ensure that future quakes don't risk the kind of reactor impact that Japan is now grappling with. . "We do not believe the safety standards for U.S. nuclear reactors are enough to protect the public today," Edwin Lyman, senior scientist, global security programs, at the Union of Concerned Scientists, told Reuters. The group supports nuclear power as a means to combat global warming, but wants tougher safety measures. The magnitude 8.9 earthquake that rocked Japan on Friday knocked out power to the backup cooling systems of a reactor in Fukushima prefecture, north of Tokyo, forcing the evacuation of thousands of residents. Operator Tokyo Electric Power Co said rising pressure inside the No.1
reactor had elevated the risk of a radiation leak, Jiji News reported on Saturday, although officials said earlier there had not been a leak. Lyman said U.S. reactors also do not have enough backup power to ensure a safe shutdown during an emergency. If
of a similar quake, one of the five biggest of the past century. "There have been tremblers felt at U.S. plants over the past several years, but nothing approaching the need for emergency action," Scott Burnell, a spokesman at the Nuclear Regulatory
“We do not believe the safety standards for U.S. nuclear reactors are enough to protect the public today," Edwin Lyman, senior scientist, global security programs, at the Union of Concerned Scientists, told Reuters. The group supports nuclear power as a means to combat global warming, but wants tougher safety measures. reactors could lose both off-site power and backup generators it could lead to a core meltdown in a short period of time. Nuclear plants need power to keep water flowing over the fuel rods to prevent overheating. BUILT TO STAND But news of widespread shutdowns across the nuclear sector in Japan raised questions about how the United States' 104 reactors would respond in the event
Commission said. Before any reactor is built in the United States, owners are required to conduct geologic seismic studies to determine the biggest earthquake to have occurred in that area going back thousands of years. As in Japan, U.S. reactors are designed to safely shut in the event of an earthquake. If a bigger earthquake were to occur, Burnell said the plant safety systems
would continue to provide the level of safety needed to shut the plant but there would likely be some degradation, though not more than the plant was designed for. Two U.S. nuclear plants along the California coast made preparations for a potential Pacific Ocean tsunami on Friday, but continued to operate normally. The reactors -- built by companies including PG&E Corp and Edison International -- are designed to safely shut in the event of an earthquake that big, Burnell said. There are multiple and redundant safety systems at a nuclear plant used to shut the reactor and prevent the release of radiation during an accident. These systems include an air tight steel or reinforced concrete containment building with walls between 4 to 8 feet thick that is strong enough to withstand the impact of a fully loaded passenger airliner without rupture, and a reactor vessel containing the uranium fuel rods that is made of high tensile steel four to eight inches thick. The two biggest nuclear operators in the United States are Exelon Corp and Entergy Corp.-Reuters
Euro zone leaders agree to strengthen bailout fund E
uropean leaders agreed Saturday to strengthen the euro zone bailout fund, make its loans cheaper and lower the interest rate on loans extended to Greece, a move to get on top of the yearlong debt crisis. In a bold series of steps that may help to calm some of the pressure in financial markets, the leaders of the 17 countries that share the European single currency said they would increase the guarantees they pay into the European Financial Stability Facility, allowing its capacity to be increased to the full 440 billion euros, from a current level of around 250 billion euros. They also agreed to lower the interest rate and lengthen the maturity on loans extended to Greece, reducing the rate by 100 basis points to bring it into line with IMF lending. The term on the 110 billion euros of EU/IMF loans was lengthened to 7.5 years from three, giving Athens more time to repay. "Pricing of the EFSF should be lowered to better take into account debt sustainability of
the recipient countries," Herman Van Rompuy, the president of the European Council, told reporters after the summit of the leaders concluded. Any loans made by the EFSF to any new potential applicant country would be in line with IMF rates. The EFSF now charges a 300 basis point penalty fee for its credit and 50 basis point one-off charges. Ireland, which received an 85 billion euro bailout from the EU and IMF last November, could also benefit from the lower interest rates, but it will depend on discussions on a common corporate tax base, which Ireland strongly opposes. Newly elected Irish Prime Minister Enda Kenny said he had made it clear during more than seven hours of talks that a harmonized EU tax base would be detrimental to Ireland, which has an attractive 12.5 percent corporate tax rate. "I made it perfectly clear that the (common consolidated corporate tax base) in my view was harmonization of the tax rates by the back door and this would be very detrimental to
Ireland and indeed to Europe," Kenny said. French President Nicolas Sarkozy said a deal on Ireland could still be reached at a summit on March 24/25, when EU leaders will meet to sign off on
distressed euro zone member states in the primary market. That will also be the case with the European Stability Mechanism, a permanent facility that will replace the EFSF from mid-2013 and will have
tion, intervene in the debt primary market in the context of a program with strict conditionality." As a further part of their efforts to get on top of a crisis that has engulfed Greece and Ireland and continues to threaten Portugal, the member states agreed that plans should be in place to deal with any bank that demonstrates vulnerabilities in stress tests that will be completed in the coming months. Bad debts in the European banking system continue to undermine efforts to get on top of the broader crisis, exacerbating sovereign debt problems. Many analysts say the sovereign debt crisis cannot be resolved without a solution to the bad banking debts, which could involve debt restructuring.-Reuters
In a bold series of steps that may help to calm some of the pressure in financial markets, the leaders of the 17 countries that share the European single currency said they would increase the guarantees they pay into the European Financial Stability Facility, allowing its capacity to be increased to the full 440 billion euros, from a current level of around 250 billion euros. what they have called a "comprehensive package" to tackle the debt crisis. In further changes to try to make the EFSF more flexible and better able to stave off pressure in financial markets, the leaders agreed to let the bailout fund buy the bonds of
an effective lending capacity of 500 billion euros. "Financial assistance from the ESM and EFSF will take the form of loans," Van Rompuy said. "However, to maximize the cost efficiency of their support, the ESM and the EFSF may also, as an excep-
Rajaratnam tapes to get lots of play at trial R
egardless of whether hedge fund chief Raj Rajaratnam, the Sri-Lanka born American, ends up testifying at his criminal trial, jurors are going to hear a lot from him. Testimony resumes on Monday in the biggest Wall Street insider trading trial in decades, with New York prosecutors expected to play more of the Galleon Group founder's phone calls tapped by the FBI. Rajaratnam is accused of making about US$45 million in illegal profit between 2003 and March 2009 through stock tips supplied by wellplaced friends. Nineteen people have pleaded guilty in the probe, which shocked the hedge fund world because of the government's widespread use of wiretaps, tactics usually deployed in organised crime cases. Back on the witness stand on Monday will be former McKinsey & Co partner Anil Kumar, who has admitted leaking details about the consultancy's clients to Rajaratnam. Federal prosecutors on Thursday played a recording of the two men, one-time business school classmates, discussing corporate information. Rajaratnam's trial in Manhattan federal court began last Tuesday and is expected to last at least two months. If convicted, he faces as much as 20 years in prison on the
most serious charge of securities fraud. Lead defense lawyer John Dowd told the 12-member jury in his opening statement that the government's investigation "focused on snippets of innocent conversations taken out of
figure takes the witness stand. "Tactically, I think it's going to be necessary," said attorney Eric Fisher, of Butzel Long law firm and a former federal prosecutor. "They are going to be hearing Rajaratnam's voice over and over again and the defense
Kumar is the first cooperating witness to testify for the government. In calmly delivered testimony on Thursday, he described getting paid by Rajaratnam for information about deals involving chip maker, Advanced Micro Devices, a McKinsey client. When Rajaratnam's defense lawyers cross examines Kumar, they will seek to damage his credibility. context" and the information "you hear discussed on those telephone calls was public." A spokesman for John Dowd has declined to comment on whether Rajaratnam, 53, will testify. Some lawyers not involved in the case say that because the government may play up to 173 audio recordings for the jury, the trial could be the rare high-profile case where the central
can't rely on arguments that the government hasn't met its burden of proof." Kumar is the first cooperating witness to testify for the government. In calmly delivered testimony on Thursday, he described getting paid by Rajaratnam for information about deals involving chip maker, Advanced Micro Devices, a McKinsey client.
When Rajaratnam's defense lawyers cross examines Kumar, they will seek to damage his credibility. Indian-born Kumar, 52, has pleaded guilty to conspiracy and fraud charges in the case and will be sentenced later this year. He told the court he has been under investigation by tax authorities and owed $1 million in back taxes, which he has since paid to the Internal Revenue Service. Kumar said Rajaratnam deposited $500,000 a year in $125,000 installments every three months to a bank account in Switzerland. The money would be reinvested in a Galleon account in Bermuda under the name of Kumar's housekeeper. The Galleon probe has been embarrassing to McKinsey, which has not been accused of wrongdoing. Its former chief, Rajat Gupta, has also been ensnared in the case. The U.S. Securities and Exchange Commission accused Gupta of leaking Goldman Sachs secrets to Rajaratnam when he sat on the bank's board. Gupta denies the accusations. Prosecutors say they will present evidence of calls between Gupta and Rajaratnam. To convict, the evidence must convince the jury that Rajaratnam received information from someone who had a fiduciary duty not to disclose it.-Reuters