The global banking regulators have made a breakthrough in negotiations to tighten capital requirements for banks and the imposition of new standards liquidity and leverage, but relaxed some of the proposals, others delayed until early 2018, writes Financial Times. Basel Committee on Banking Supervision (Basel Committee on Banking Supervision) announced on Monday that all but one of the 27 member states of the organization sign the new document to limit the capital that banks may adopt a capital first-order ( tire-1) – the only assets that are disregarded in absorbing losses. Abstaining party as familiar with the negotiations is Germany, announced that it will decide whether to join the agreement later this year. The new rules aim to prevent the recurrence of financial crisis, but also may restrict lending. The real effect of the new regulations will depend largely on the subsequent decision of the Committee scheduled for autumn in which will determine the ratio between capital and tier one risk-weighted assets. The greater the ratio, the greater will be the effect. The Committee postponed a few of the more radical proposals, such as reporting “net ratio for stability of funding – first of its kind rule of liquidity, which will require banks to more closely link the timing estimates of assets and liabilities.
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In the event that stress testing of banks in Europe were made based on examination of the entire portfolio of government bonds to banks, 24 financial institutions it would not be able to withstand successfully. Such is the opinion of analysts of U.S. bank Citigroup. Such a scenario would have shown that the financial institutions need to raise capital amounting to 15 billion euros to be stable at any shock to the system, reported Financial Times. The problem with stress testing, which was attended by 91 banks, is that called were tested. commercial paper, rather than purchased in order to hold to maturity government bonds. The difference between them is that first used for commerce in the short and medium term, while others show real risk that government securities carry. Analysts say the U.S. Spanish bank financial institutions had the greatest benefit from such testing in this way. The reason is that they have significant positions in the Portuguese and Spanish government bonds, many of which fall under the heading hold to maturity, the newspaper added.
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Increasingly central role as Asia takes a global hub for financial services may gain even more weight to the imposition of U.S. and European governments for new taxes on the profits of banks, “said Josef Ackermann, CEO of Deutsche Bank, quoted by the Wall Street Journal. “The relative weight of Asia will increase as a result of regulatory action against the banks in the West, says Ackerman. “Asian countries know very well that you should not copy the new taxes, so popular in other parts of the world.” Taxes could be a serious blow to credit institutions with operations in many countries such as Deutsche Bank, which generates about three quarters of its revenue abroad, “says Ackerman. Emerging markets may even benefit from the negative reaction of the financial sector to the banking regulation in the West and to gain market share in the financial sector “Many governments, including China, are committed to building financial centers in times when many other countries demonstrate skepticism financial sector, “said Ackerman, noting that it is trying to make Turkey and Russia. Like other banks, evaluating prospects global economy, Asia is a priority for Deutsche Bank.
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Swaps provide protection against non-payment of Russian bonds rose 52 basis points to 194 points over last quarter – the biggest growth since the end of 2008. Thus, five-year contracts worth more than providing protection on the bonds of Turkey (190 points), Indonesia (178 points) and Philippines (168 points), although all three countries have lower rates of Russia as Standard & Poor’s. Turkey and Indonesia are rated BB and BB-Philippines have. For the last Russian swap were cheap on May 18. 100 basis points in these instruments are equal to 1%. This is the annual premium on the nominal value of bonds, against which the swap will provide appropriate compensation in case of failure to pay the debt. Contracts are used for speculation credit-ability with the issuer. According to Russian Finance Minister Alexei Kudrin Russia’s largest energy exporter in the world deserves a higher rating of this BBB, awarded by Standard & Poor’s. The big jump in insurance costs of government bonds in Russia shows that investors do not agree with that. Kudrin claims of a higher rating based on the fact that the country has the lowest level of debt among the G-20. The IMF estimates that in 2010 Russian debt will be a level of 7.7 percent of GDP on average 80% for the group. Turkey’s debt is expected to reach 50% of GDP this year.
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The Leaders of the G-20 agreed that should be taken to reduce budget deficits. They extend to the statement that the action will begin to reduce the negative balances, but it will happen only if there is sufficient evidence that economic recovery is sustainable. Goal set developed countries up to 2013 budget deficits to be reduced halfway and 2016 to be stabilized level of indebtedness. It is clear from the general opinion released by the leaders of the G-20 after meeting over the weekend in Toronto. Other commitments that countries undertake the group is to tighten the rules governing banks. Expected in many countries to introduce more stringent capital adequacy and liquidity, analysts say. “Frankly, this is more than expected, because the questions are quite specific,” he said after meeting Chancellor Angela Merkel. “The fact that developed countries have adopted this goal is success,” said Merkel on the common goal of fiscal policy. The general opinion says that the countries of G-20 will maintain plans for promoting economic and will take joint actions to ensure sustainable recovery. This issue moderate tone of the common position and shows that attempts to approximate the views of the United States and Germany did not have success. Discrepancies between the two countries are linked to Barack Obama calls Germany to increase government spending and to try to stimulate domestic consumption. Chancellor of Germany’s intentions however are fundamentally opposed by Merkel insisted on limiting spending and deficit control.
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The price of gold reached a new historic high, passing more than 1265 dollars an ounce. The main reason for this article suggests that the central banks of developing countries have purchased more gold than was expected beforehand. The new price is a record 265.30 dollars an ounce, and was placed on the London stock exchange today. ‘Precious metals won because the status of “island life” and strong demand likely will continue as long as doubts remain in the ability to successfully resolve the debt crisis in Europe, “said Carsten Frich of Commerzbank. The main news, which determines market sentiment today is related to the decision of China to increase flexibility in their exchange rate. Many believe this will lead to appreciation of Chinese currency against the dollar – something that U.S. demand for quite some time. Rubies economist Nouri does not share this vision and warns that the result of China’s decision may be further depreciation of the yuan against the dollar.
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The Debt Crisis changes rules of the game, Europe is facing a risk of “W-shaped recession,” said Arnab Das, executive director of market research and strategies Roubini Global Economics. “There are many logic behind the decline in the stock exchanges after indexes powerful climbing in recent months,” says Das. “The arguments in support of” V-shaped “scenario are weak and in Europe there is a real risk of” W-shaped “recession in the U.S. slowdown.” “We see a strong recovery by the beginning of the Debt Crisis in the euro area,” adds Das. “Governments in the euro area are trying to solve the problem, but it seems no success. Now it is unrealistic to say that we get out of this crisis without reaction on the market. China tightens monetary policy, while U.S. consumption is quite low. ” “Those who monitor the market and ask why the stock depreciates, since so many companies are presented so well, can not understand the most important thing,” said Das. “Greece is the tip of the iceberg. The risk of spreading the debt crisis in countries like Spain and even Britain, which has very high levels of debt is already very large. Measures to limit the spending will reduce growth, and this will affect corporate profitability. ” “We need a period of debt reduction,” he added. “Markets should be free of all these debts. We have not yet done so and we will be more bankruptcies.
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Singapore’s economy grew by 15.5 percent in the first quarter over the same period of 2009 due to growing activity in the factory, financial and tourism sector in the country. The increase in gross domestic product (GDP) was greater than expected and surpassed the estimates of the Ministry of Commerce and Industry of Singapore, cited by AP. Exports contribute most to impressive GDP growth of 38.6 percent in the first quarter of this year, according to an annual equivalent basis data. This appears to be the strongest pace of GDP growth since statistics began to be kept in 1975. Factory sector, which generates a quarter of Singapore’s economy, reported growth of 32.9 percent on an annual basis, the services sector grew by 10.9 per cent and construction sector – by 13.7 per cent. The government expects the Singapore economy of the country surged by 9 percent this year, a exports to increase by between 15% and 17% yoy. Central Bank of Singapore announced in April that will allow the currency to appreciate, and thus join Malaysia in the withdrawal of its cash incentives for the economy.
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Project to supply Europe with solar energy from the Sahara no longer seems so distant future after a recent World Bank announced it would invest 5.5 billion dollars to build the first solar plant in North Africa, reported the British Guardian. In 2009 was launched Desertec Industrial Initiative, designed to build plants for concentrated solar power (CSP). The project worth 240 billion euros, which was supported by the business names such as Siemens, E. On and Deutsche Bank, will provide 15 percent of electricity consumption in Europe by 2050. Morocco, the only country in the region without oil reserves, declares its readiness to five years to build the first CSP plants on its territory. Produced by CSP energy will be imported into Europe through the custom-built electricity transmission network in Spain. Morocco plans to build five solar power plants with total capacity of 2000 megawatts by 2020. In the words of Geoffrey Wolff, coordinator of Desertec UK, what keeps the project is currently relatively high cost of solar energy – 10-20 cents per kilowatt hour compared to 5 cents per kilowatt hour for natural gas. The construction of large-scale solar power plants and rising fuel prices on world markets is about to change.
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The Britain’s Prime Minister Gordon Brown attacked the U.S. bank Goldman Sachs, stating that it was “morally bankrupt”. The reason for criticism of the financial institution provide the prosecution that she manipulations financial markets. Brown, who is fighting for a new mandate at the head of the British government, asked Britain’s financial regulators to conduct their own investigation of the banking sector. “Banks are still a problem. They are a risk to the economy, citing Prime Minister, quoted by FT. German authorities also announced they will begin their own investigation of the case and eventually will take legal action against Goldman. This gives rise to failure of the German IKB Bank in 2007 as a financial institution became one of the first victims of the crisis. Goldman Sachs will certainly be in focus throughout the week because after the failure of the bank’s shares by almost 13 per cent on Friday will be interesting how they will continue to trade with them.
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