A German tax evader is suing the Liechtenstein bank LGT, claiming the institution failed to inform him that his supposedly confidential financial data was in the hands of the authorities.
The Liechtenstein Regional Court confirmed yesterday a report in Financial Times Deutschland that the civil proceedings would be heard next in Vaduz,the capital of the Alpine principality.
The real estate developer wants 13 million in damages, claiming the bank should have told him the German government had incriminating information against him. He said that had he known of the impending proceedings against him, he would have come clean to the tax authorities and avoided penalties.
The man, aged 66 at the time, was given a suspended prison sentence and a fine of 7.5 million for tax evasion.In 2008, Germany's intelligence services purchased a computer disk from a former LGT employee, which contained confidential data on hundreds of clients of several nationalities, many of whom were evading taxes.
Liechtenstein has strict banking confidentiality rules, though these are in the process of being relaxed owing to international pressure against so-called tax havens.
Friday, September 25, 2009
YUAN CURRENCY STABILITY TOP PRIORITY, SAYS ZHOU
Zhou Xiaochuan, governor of the Chinese central bank, has said currency stability is the most important goal of monetary policy as exporters call on the government to delay appreciation of the yuan.
China must stick to a moderately loose monetary stance, use policy tools flexibly and control inflation to keep the yuan stable, Zhou said in an interview transcript posted on state radio's website yesterday.
China has stalled the yuan's gains against the dollar since July last year, protecting exporters as stimulus spending drives the recovery in the world's third-biggest economy. Exporters at a trade show in Shanghai yesterday urged the government to delay gains by the currency after overseas shipments slumped 23.4 per cent in August from a year earlier.
"The yuan's exchange rate should be kept stable," said Bruce Shao, general manager at Jiangsu-based Taicang Tianchen Tracery, a manufacturer of bamboo curtains. "I don't know when we can fully recover," he said, citing a 20-per-cent decline in sales this year.
Monetary policy needs to be contnuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments, Zhou said.
Developing natins such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for, he added.
China's consumer prices have fallen for the past seven months after inflation rose in February 2008 to an 11-year high of 8.7 per cent.
The yuan traded at 6.8259 per dollar as of 2.31pm in Shanghai, from 6.8269 the previous day. It strengthened 21 per cent in the three years after a peg against the dollar was scrapped in July 2005. The currency will end this year at 6.82, and rise 2.2 per cent to 6.68 by the end of 2010, according to the median estmate in a Bloomberg News survey of 27 analysts.
Since 2005, the flexibility of the yuan's exchange rate has increased notably, Zhou said. The currency has been kept basically stable, he added.
Commerce Minister Chen Deming said in July that exports would decline at a slower pace in the second half of the year, while reiterating that a stable exchange rate is important for an economic recovery.
Exporter Shao said he waited in his booth for more than five hours at the International Sourcing Fair yesterday without a single foreign buyer visiting.
"Monetary policy needs to be continuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments. Developing nations such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for."
China must stick to a moderately loose monetary stance, use policy tools flexibly and control inflation to keep the yuan stable, Zhou said in an interview transcript posted on state radio's website yesterday.
China has stalled the yuan's gains against the dollar since July last year, protecting exporters as stimulus spending drives the recovery in the world's third-biggest economy. Exporters at a trade show in Shanghai yesterday urged the government to delay gains by the currency after overseas shipments slumped 23.4 per cent in August from a year earlier.
"The yuan's exchange rate should be kept stable," said Bruce Shao, general manager at Jiangsu-based Taicang Tianchen Tracery, a manufacturer of bamboo curtains. "I don't know when we can fully recover," he said, citing a 20-per-cent decline in sales this year.
Monetary policy needs to be contnuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments, Zhou said.
Developing natins such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for, he added.
China's consumer prices have fallen for the past seven months after inflation rose in February 2008 to an 11-year high of 8.7 per cent.
The yuan traded at 6.8259 per dollar as of 2.31pm in Shanghai, from 6.8269 the previous day. It strengthened 21 per cent in the three years after a peg against the dollar was scrapped in July 2005. The currency will end this year at 6.82, and rise 2.2 per cent to 6.68 by the end of 2010, according to the median estmate in a Bloomberg News survey of 27 analysts.
Since 2005, the flexibility of the yuan's exchange rate has increased notably, Zhou said. The currency has been kept basically stable, he added.
Commerce Minister Chen Deming said in July that exports would decline at a slower pace in the second half of the year, while reiterating that a stable exchange rate is important for an economic recovery.
Exporter Shao said he waited in his booth for more than five hours at the International Sourcing Fair yesterday without a single foreign buyer visiting.
"Monetary policy needs to be continuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments. Developing nations such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for."
US PEER-TO-PEER LOAN WEBSITES PROVING A POPULAR ALTERNATIVE
With banks tight tening their lending standards an dcredit-card companies raising interest rates, US borrowers are increasingly turning to an unusual source of money: other people.
Despite a recent regulatory hurdle, websites that facilitate peer-to-peer lending, in which people-often strangers-lend money to each other with no involvement from a bank, are growing in popularity. Borrowers usually get loans with lower rates than they would from banks or credit cards, while investors often get higher returns than they would from traditional bank products such as certificates of deposit.
Analysts expect the industry to grow as customers who face rising credit-card rates search for new ways to refinance their debt. Many investors, meanwhile, have lost confidence in the rocky stock market and have sought other places to park their cash. Membership in peer-to-peer lending groups is climbing fast, and so is the money involved. About US$282 million (Bt9.46 billion) in peer-to-peer loans were made in 2006, according to Celent, a Boston-based research firm. By 2010, the firm expects such loans to grow to $5.8 billion.
The industry has gained so many followers that the Securities and Exchange Commission last year ruled that companies engaging in peer-to-peer lending must register with the agency because the loans are considered secutities. After temporariy suspending their operations for several months, Prosper and Lending Club completed theirregistrations. Loanio and IOU Central have filed their papers, an SEC spokesman said. Others are expected to follow.
"With this credit crunch, the timing couldn't have been better for this industry to really gain a foothold and grow," said Curtis Arnold, founder of CardRatings.com and co-author of the "Complete Idiot's Guide to Person-to-Person Lending". "It offers a viable option for folks who are getting turned down for credit elsewhere. There's a lot of people fed up with banks. From the investment side, that is intriguing. When you can get returns of 9 to 10 per cent in this market...that's pretty amazing."
Since registering with the SEC in October, Lending Club has gained 300,000 members. In January, it oversaw $1.8 million in loans. Last month, $3.4 million in loans were made.
Between the time it launched in 2006 and registered with the SEC in July, Prosper has grown to 850,000 members and facilitated $180 million in loans.
Officials at the lending sites said much of their increased traffic had come from borrowers whose interest rates on their credit cards have spiked.
Card issuers have been raising rates in anticipation of a new law, set to take effect in February, that could hinder rate increases. During the housing boom, many consumers were able to get out of their card debt through home-equity lines of credit. But home values have plummeted in many areas, leaving borrowers without a source of money they once fell back on. About 50 per cent of Prosper's loans goes to borrowers trying to consolidate credit card debt, said Chris Larsen, Prosper's chief executive Prosper's loans can come with interest rates as low as 4 per cent. "With their credit card debt, it could take 20 years to pay it off," Larsen said.
Other peer-to-peer lending sites operate differently. Prosper allows lenders to bid on the interest rates for borrowers, which results in lowrate loans. Virgin Money codifies loans between friends and families. Other companies specialise in particular types of loans. TuitionU, for example, help students get loans to pay for school.
The sites typically vet borrowers by pulling their credit reports and requiring minimum credit scores. But the loans do not come without some risk. Lending Club's borrowers have a default rate of about 3 per cent. Prosper's default rate is about 5 per cent. If a borrower misses payments, the sites report them to credit bureaus. Officials at the sites point out that credit card default rates are in the double digits.
Still, Mark Schwanhausser, a research analyst at California-based Javelin Strategy and Research who has studied peer-to-peer lending sites, said investors should be vigilant for signs that borrowers are struggling to repay their loans. "It's not a 'buy it and tuck it away' kind of thing," he said. "I think you want to pay attention."
Borrowers usually get loans with lower rates than they would from banks or credit cards, while investors often get higher returns than they would from traditional bank products such as certificates of deposit.
Despite a recent regulatory hurdle, websites that facilitate peer-to-peer lending, in which people-often strangers-lend money to each other with no involvement from a bank, are growing in popularity. Borrowers usually get loans with lower rates than they would from banks or credit cards, while investors often get higher returns than they would from traditional bank products such as certificates of deposit.
Analysts expect the industry to grow as customers who face rising credit-card rates search for new ways to refinance their debt. Many investors, meanwhile, have lost confidence in the rocky stock market and have sought other places to park their cash. Membership in peer-to-peer lending groups is climbing fast, and so is the money involved. About US$282 million (Bt9.46 billion) in peer-to-peer loans were made in 2006, according to Celent, a Boston-based research firm. By 2010, the firm expects such loans to grow to $5.8 billion.
The industry has gained so many followers that the Securities and Exchange Commission last year ruled that companies engaging in peer-to-peer lending must register with the agency because the loans are considered secutities. After temporariy suspending their operations for several months, Prosper and Lending Club completed theirregistrations. Loanio and IOU Central have filed their papers, an SEC spokesman said. Others are expected to follow.
"With this credit crunch, the timing couldn't have been better for this industry to really gain a foothold and grow," said Curtis Arnold, founder of CardRatings.com and co-author of the "Complete Idiot's Guide to Person-to-Person Lending". "It offers a viable option for folks who are getting turned down for credit elsewhere. There's a lot of people fed up with banks. From the investment side, that is intriguing. When you can get returns of 9 to 10 per cent in this market...that's pretty amazing."
Since registering with the SEC in October, Lending Club has gained 300,000 members. In January, it oversaw $1.8 million in loans. Last month, $3.4 million in loans were made.
Between the time it launched in 2006 and registered with the SEC in July, Prosper has grown to 850,000 members and facilitated $180 million in loans.
Officials at the lending sites said much of their increased traffic had come from borrowers whose interest rates on their credit cards have spiked.
Card issuers have been raising rates in anticipation of a new law, set to take effect in February, that could hinder rate increases. During the housing boom, many consumers were able to get out of their card debt through home-equity lines of credit. But home values have plummeted in many areas, leaving borrowers without a source of money they once fell back on. About 50 per cent of Prosper's loans goes to borrowers trying to consolidate credit card debt, said Chris Larsen, Prosper's chief executive Prosper's loans can come with interest rates as low as 4 per cent. "With their credit card debt, it could take 20 years to pay it off," Larsen said.
Other peer-to-peer lending sites operate differently. Prosper allows lenders to bid on the interest rates for borrowers, which results in lowrate loans. Virgin Money codifies loans between friends and families. Other companies specialise in particular types of loans. TuitionU, for example, help students get loans to pay for school.
The sites typically vet borrowers by pulling their credit reports and requiring minimum credit scores. But the loans do not come without some risk. Lending Club's borrowers have a default rate of about 3 per cent. Prosper's default rate is about 5 per cent. If a borrower misses payments, the sites report them to credit bureaus. Officials at the sites point out that credit card default rates are in the double digits.
Still, Mark Schwanhausser, a research analyst at California-based Javelin Strategy and Research who has studied peer-to-peer lending sites, said investors should be vigilant for signs that borrowers are struggling to repay their loans. "It's not a 'buy it and tuck it away' kind of thing," he said. "I think you want to pay attention."
Borrowers usually get loans with lower rates than they would from banks or credit cards, while investors often get higher returns than they would from traditional bank products such as certificates of deposit.
BUBBLE FEARS DISMISSED
The economy is not developing a bubble as asset prices have not risen beyond the fundamental level, while political uncertainty has also put pressure on economic growth, Kasikornbank president Prasarn Trairatvorakul said yesterday. His comment was in reaction to the Asian Development Bank's statement on Tuesday that it is concerned the Thai economy could develop a bubble as the low cost of funding may lead developers to borrow too much for investment in property assets.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
BIG QUESTIONS THAT NEED QUICK ANSWERS
World leaders will meet at the G-20 Summit with time running out to prevent the recession worsening
The G-20 Summit in Pittsburgh, which will begin today and end on Friday, opens up an opportunity for world leaders to find a way out of the current financial mess. Prime Minister Abhisit Vejjajiva is also participating in this summit, as chair of the Association of Southeast Asia Nations.
Five months ago, the world was reeling under unprecedented financial turmoil. Many were predicting that an economic depression was on the horizon, after decades of global imbalances and financial bubbles. A concerted action by the G-20 helped stave off the crisis, with some US$12 trillion having been poured into the global economy and financial system to prevent a systemic collapse.
High on the agenda of the G-20 - the member countries of which control about 85 per cent of the world's gross domestic product - is a joint economic programme to arrest the recession, coordination efforts on financial policy to prevent another crisis, how to curb bank executives' pay to prevent them from taking excessive risks, and an exit strategy from the government intervention into the economies.
There are dilemmas facing the G-20 leaders. The fiscal stimulus programmes may prevent economies from weakening any further, but they have created enormous burdens on public-sector debt. The loose monetary policy to assist banks and corporations in resuming their business might ignite fears of inflation. When is the appropriate time for the G-20 to exit from its heavy-handed involvement in the global economy and global financial system so that the private sector can take charge again?
There are signs that the global recession is fading. But most G-20 leaders, and the International Monetary Fund, are not rushing to bet on that. Gordon Brown, the UK prime minister, said it is premature to conclude that the recession is over, and it is still necessary for the UK to continue its fiscal stimulus programme. US President Barack Obama said unemployment in the US will continue to worsen over the next couple of months. Canada is pledging a fiscal stimulus package equivalent to about 4 per cent of its gross domestic product, just to keep the economy humming. It has called for the G-20 to continue the fiscal programmes to help lift the world out of the recession.
Most interesting will be how China plays its cards at the summit. China would like to have a greater say in the International Monetary Fund. It has said it is willing to subscribe to the tune of $50 billion in the IMF's $500 billion recapitalisation programme, to increase its lending capacity to needy countries facing balance of payments crises. The US and the European Union, however, are still cautious over China's attempt to exert its newfound influence in the international financial institutions.
Moreover, China also wants to reform the IMF away from its current make-up, which has been around since the end of World War II. Along with Brazil, India and Russia, China has called for the international monetary system to steer away from the US dollar as the predominant reserve currency. China is relying on a two-track strategy on this front. It would like the role of the Special Drawing Rights - a currency unit of the IMF - to play a greater role in global financial transactions. At the same time, it is boosting the role of its renminbi, gradually taking steps to liberalise its financial system to allow greater convertibility of the currency.
These are the big issues that the G-20 leaders will have to address to prevent this recession from deepening and the financial turmoil from getting any further out of control. If the global economy is to face a double dip, it will be difficult for them to pull it out of trouble a second time, given the massive resources they have already poured in to support it.
Moreover, if the G-20 leaders do not have the courage to rein in control over the financial services, which have gone out of control, financial turmoil will return to haunt us all again.
The G-20 Summit in Pittsburgh, which will begin today and end on Friday, opens up an opportunity for world leaders to find a way out of the current financial mess. Prime Minister Abhisit Vejjajiva is also participating in this summit, as chair of the Association of Southeast Asia Nations.
Five months ago, the world was reeling under unprecedented financial turmoil. Many were predicting that an economic depression was on the horizon, after decades of global imbalances and financial bubbles. A concerted action by the G-20 helped stave off the crisis, with some US$12 trillion having been poured into the global economy and financial system to prevent a systemic collapse.
High on the agenda of the G-20 - the member countries of which control about 85 per cent of the world's gross domestic product - is a joint economic programme to arrest the recession, coordination efforts on financial policy to prevent another crisis, how to curb bank executives' pay to prevent them from taking excessive risks, and an exit strategy from the government intervention into the economies.
There are dilemmas facing the G-20 leaders. The fiscal stimulus programmes may prevent economies from weakening any further, but they have created enormous burdens on public-sector debt. The loose monetary policy to assist banks and corporations in resuming their business might ignite fears of inflation. When is the appropriate time for the G-20 to exit from its heavy-handed involvement in the global economy and global financial system so that the private sector can take charge again?
There are signs that the global recession is fading. But most G-20 leaders, and the International Monetary Fund, are not rushing to bet on that. Gordon Brown, the UK prime minister, said it is premature to conclude that the recession is over, and it is still necessary for the UK to continue its fiscal stimulus programme. US President Barack Obama said unemployment in the US will continue to worsen over the next couple of months. Canada is pledging a fiscal stimulus package equivalent to about 4 per cent of its gross domestic product, just to keep the economy humming. It has called for the G-20 to continue the fiscal programmes to help lift the world out of the recession.
Most interesting will be how China plays its cards at the summit. China would like to have a greater say in the International Monetary Fund. It has said it is willing to subscribe to the tune of $50 billion in the IMF's $500 billion recapitalisation programme, to increase its lending capacity to needy countries facing balance of payments crises. The US and the European Union, however, are still cautious over China's attempt to exert its newfound influence in the international financial institutions.
Moreover, China also wants to reform the IMF away from its current make-up, which has been around since the end of World War II. Along with Brazil, India and Russia, China has called for the international monetary system to steer away from the US dollar as the predominant reserve currency. China is relying on a two-track strategy on this front. It would like the role of the Special Drawing Rights - a currency unit of the IMF - to play a greater role in global financial transactions. At the same time, it is boosting the role of its renminbi, gradually taking steps to liberalise its financial system to allow greater convertibility of the currency.
These are the big issues that the G-20 leaders will have to address to prevent this recession from deepening and the financial turmoil from getting any further out of control. If the global economy is to face a double dip, it will be difficult for them to pull it out of trouble a second time, given the massive resources they have already poured in to support it.
Moreover, if the G-20 leaders do not have the courage to rein in control over the financial services, which have gone out of control, financial turmoil will return to haunt us all again.
Leaders face economic trouble
Bolstering a global economy still wobbly from the worst recession in seven decades, restraining greedy bankers and plotting a future course for sustainable growth - the leaders of the world's major economies have no shortage of items on their to-do list when they meet today and tomorrow.
The problem is that with the global economy on the mend, they could encounter waning enthusiasm to launch bold intitatives, especially if those efforts would limit the leaders' political manoeuvring room back home.
OBAMA'S MAJOR GOAL MAY BE WATERED DOWN
President Barack Obama is already facing the likelihood that one of his major goals will be watered down. He wants the G-20 to agree to a new global compact to avoid the dangerous imbalances that many believe played a major contributing role in pushing the world into a severe and prolonged recession that has cost millions of lost jobs and wiped out trillions of dollars in wealth.
It is likely that the G-20 will endorse the US call for a new "framework for sustainable and balanced growth", but without any major way to enforce commitments made to rastrain imbalances such as China's massive trade surpluses and the United States' surging budget deficits.
The G-20 leaders are also vowing to adopt tougher rules of the road to keep banks from engaging in the kind of risky behaviour that brought on the current crisis, but they are pushing different approaches.
The problem is that with the global economy on the mend, they could encounter waning enthusiasm to launch bold intitatives, especially if those efforts would limit the leaders' political manoeuvring room back home.
OBAMA'S MAJOR GOAL MAY BE WATERED DOWN
President Barack Obama is already facing the likelihood that one of his major goals will be watered down. He wants the G-20 to agree to a new global compact to avoid the dangerous imbalances that many believe played a major contributing role in pushing the world into a severe and prolonged recession that has cost millions of lost jobs and wiped out trillions of dollars in wealth.
It is likely that the G-20 will endorse the US call for a new "framework for sustainable and balanced growth", but without any major way to enforce commitments made to rastrain imbalances such as China's massive trade surpluses and the United States' surging budget deficits.
The G-20 leaders are also vowing to adopt tougher rules of the road to keep banks from engaging in the kind of risky behaviour that brought on the current crisis, but they are pushing different approaches.
IMF SAYS CRISIS NOT OVER URGES SUSTAINED STIMULUS
Strauss-Kahn calls on G-20 leaders to maintain efforts to pull the world economy out of recession
International Monetary Fund managing director Dominique Strauss-Kahn called on leaders from the Group of 20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis isn't over.
"This recovery will be rather sluggish, at an average lower than growth we had before the crisis," Strauss-Kahn said in an interview in Washington before the G-20 summit begins today in Pittsburgh. "It's too early to say the crisis is behind us."
'ADDRESS TRADE IMBALANCES'
The IMF chief also urged policy makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse. Giving China a bigger role in the fund will help bolster cooperation, he said, as policy makers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
"A failure to rebalance the global economy would cause any recovery to be ultimately doomed," said Gerard Lyons, chief economist at Standard Chartered in London. "Aiming for a balanced world economy is a win-win situation."
Leaders from the G-20, which groups the largest developed and developing nations, gather tomorrow for their two-day summit in Pittburgh. Formed out of the Asian financial crisis, G-20 meetings were elevated to the heads-of-government level in November.
Suddenly, we're in a better position to have this kind of cooperation and economic coordination than we were before," Strauss-Kahn said. The G-20 talks are a chance to "fix the way we work together governing globalisation, and it may work."
FIRST SIGNS OF GROWTH: GETIHNER
US Treasury Secretary Timothy Geithner said at a press conference on Tuesday that G-20 leaders will "take stock of where we are in putting the world on a path to stronger, more sustainable, more balanced growth". The goals include a stronger financial system that's better able to absorb shocks, he said.
"We're now seeing the first signs of growth" and "the financial markets have improved considerably," Giethner said. "We want to make sure we build on the progress that we've achieved."
UK Prime Minister Gordon Brown echoed Geithner's sentiment, telling reporters in London that "what we want to do is safeguard a recovery from a recession" and that "the stimulus that we have still got to give the world economy is greater than the stimulus we have already had."
Strauss-Kahn said the US can do its part by boosting the country's savings rate and reducing its budget deficit, and China can contribute by fostering domestic demand, which would have the effect of revaluing its currency, the yuan.
BIGGER ROLE FOR CHINA
China may be more willing to cooperate when it gets a bigger role at the IMF, which leaders are expected to announce by calling for a shift in voting rights that would favour emerging markets, he said.
"The Chinese know they're becoming a big player, they want to be considered a big player, and if they're considered a big player they will behave as a big player," Strauss-Khan said.
While the global economy is susceptible to a "double-dip" recession, Strauss-Khan said that isn't the "most probable" scenario.
Banks still have "a lot to do" to clean balance sheets, said Strauss-Kahn, 60.
Meanwhile, French Finance Minister Christine Lagarde said banks may need to cut their size or increase their capital reserves in response to regulatory changes being considered by the G-20.
International Monetary Fund managing director Dominique Strauss-Kahn called on leaders from the Group of 20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis isn't over.
"This recovery will be rather sluggish, at an average lower than growth we had before the crisis," Strauss-Kahn said in an interview in Washington before the G-20 summit begins today in Pittsburgh. "It's too early to say the crisis is behind us."
'ADDRESS TRADE IMBALANCES'
The IMF chief also urged policy makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse. Giving China a bigger role in the fund will help bolster cooperation, he said, as policy makers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
"A failure to rebalance the global economy would cause any recovery to be ultimately doomed," said Gerard Lyons, chief economist at Standard Chartered in London. "Aiming for a balanced world economy is a win-win situation."
Leaders from the G-20, which groups the largest developed and developing nations, gather tomorrow for their two-day summit in Pittburgh. Formed out of the Asian financial crisis, G-20 meetings were elevated to the heads-of-government level in November.
Suddenly, we're in a better position to have this kind of cooperation and economic coordination than we were before," Strauss-Kahn said. The G-20 talks are a chance to "fix the way we work together governing globalisation, and it may work."
FIRST SIGNS OF GROWTH: GETIHNER
US Treasury Secretary Timothy Geithner said at a press conference on Tuesday that G-20 leaders will "take stock of where we are in putting the world on a path to stronger, more sustainable, more balanced growth". The goals include a stronger financial system that's better able to absorb shocks, he said.
"We're now seeing the first signs of growth" and "the financial markets have improved considerably," Giethner said. "We want to make sure we build on the progress that we've achieved."
UK Prime Minister Gordon Brown echoed Geithner's sentiment, telling reporters in London that "what we want to do is safeguard a recovery from a recession" and that "the stimulus that we have still got to give the world economy is greater than the stimulus we have already had."
Strauss-Kahn said the US can do its part by boosting the country's savings rate and reducing its budget deficit, and China can contribute by fostering domestic demand, which would have the effect of revaluing its currency, the yuan.
BIGGER ROLE FOR CHINA
China may be more willing to cooperate when it gets a bigger role at the IMF, which leaders are expected to announce by calling for a shift in voting rights that would favour emerging markets, he said.
"The Chinese know they're becoming a big player, they want to be considered a big player, and if they're considered a big player they will behave as a big player," Strauss-Khan said.
While the global economy is susceptible to a "double-dip" recession, Strauss-Khan said that isn't the "most probable" scenario.
Banks still have "a lot to do" to clean balance sheets, said Strauss-Kahn, 60.
Meanwhile, French Finance Minister Christine Lagarde said banks may need to cut their size or increase their capital reserves in response to regulatory changes being considered by the G-20.
Half of Madoff accounts show no loss
Federal prosecutors said on Tuesday that a review of most accounts held by financier Bernard Madoff's customers when he was arrested shows that about half of the customers had not lost money because they withdrew more money than they originally invested.
Prosecutors made the revelation as they told a judge in court papers that there was no need to order restitution because all of Madoff's assets will be distributed to investors through forfeiture requirements.
As part of their filing in the US district court in Manhattan, they summarised the findings of a court-calculating how much investors lost so it can be decided how to divide up assets that are recovered.
The government said a search of financial records, including microfilm records dating back to 1979, show that investors suffered net losses exceeding US$13 billion (Bt436 billion). In all, 15,870 claims have been made to the trustee by those seeking a share of any recovered money.
Prosecutors made the revelation as they told a judge in court papers that there was no need to order restitution because all of Madoff's assets will be distributed to investors through forfeiture requirements.
As part of their filing in the US district court in Manhattan, they summarised the findings of a court-calculating how much investors lost so it can be decided how to divide up assets that are recovered.
The government said a search of financial records, including microfilm records dating back to 1979, show that investors suffered net losses exceeding US$13 billion (Bt436 billion). In all, 15,870 claims have been made to the trustee by those seeking a share of any recovered money.
False Notes
Police net counterfeit dollars with a face value of almost Bt100 million; Cambodia connection being probed
US Embassy officials led Sa Kaew police yesterday in a sting operation that resulted in the arrest of a 62-year-old businesswoman and seizure of counterfeit US banknotes with a face value of more than Bt41 million.
Police sting
The embassy's four-strong counterfeit-currency team had been on the case since identifying as fake banknotes previously seized by Aranyaphrathet Police on the border with Cambodia.
The team led the way to a shop on Burapa Pirom Road, where undercover police arranged to buy a bundle of counterfeit 100-dollar bank-notes at Bt80 apiece. After the embassy men confirmed the banknotes were fake, police arrested shop owner Kimcheng Srimahakomol. A subsequent search of the premises yielded a total of 12,320 fake 100-dollar bills hidden in boxes and each printed with the serial number AL32738338D.
Clues from Cambodia
Under interrogation, Kimcheng told police she bought the banknotes from Bangkok's Yaowarat area with the intention of selling them as kong-tek - offerings to the spirit of the deceased at Chinese funerals - and that she was unaware this was illegal.
Police said sheets of Cambodian newspapers used to wrap the bundles of notes didn't fit with Kimcheng's claims and further investigation was necessary.
More incidents
This latest operation follows an incident last Wednesday in which police arrested Chatchai Wongkittikraiwal, 26, and seized counterfeit 100-dollar bills with a face value of some Bt31 million. A day later, Cambodian vendor Seng Bonlan, 36, was taken into custody after being arrested at Sa Kaew's Rong Kleu Market with Bt18 million in fake 100-dollar notes.
US Embassy officials led Sa Kaew police yesterday in a sting operation that resulted in the arrest of a 62-year-old businesswoman and seizure of counterfeit US banknotes with a face value of more than Bt41 million.
Police sting
The embassy's four-strong counterfeit-currency team had been on the case since identifying as fake banknotes previously seized by Aranyaphrathet Police on the border with Cambodia.
The team led the way to a shop on Burapa Pirom Road, where undercover police arranged to buy a bundle of counterfeit 100-dollar bank-notes at Bt80 apiece. After the embassy men confirmed the banknotes were fake, police arrested shop owner Kimcheng Srimahakomol. A subsequent search of the premises yielded a total of 12,320 fake 100-dollar bills hidden in boxes and each printed with the serial number AL32738338D.
Clues from Cambodia
Under interrogation, Kimcheng told police she bought the banknotes from Bangkok's Yaowarat area with the intention of selling them as kong-tek - offerings to the spirit of the deceased at Chinese funerals - and that she was unaware this was illegal.
Police said sheets of Cambodian newspapers used to wrap the bundles of notes didn't fit with Kimcheng's claims and further investigation was necessary.
More incidents
This latest operation follows an incident last Wednesday in which police arrested Chatchai Wongkittikraiwal, 26, and seized counterfeit 100-dollar bills with a face value of some Bt31 million. A day later, Cambodian vendor Seng Bonlan, 36, was taken into custody after being arrested at Sa Kaew's Rong Kleu Market with Bt18 million in fake 100-dollar notes.
Dollar hovers near year low before Fed
The dollar hovered near its weakest for a year against a currency basket yesterday before a US Federal Reserve policy decision later in the day expected to keep interest rates at record lows.
The euro pulled back slightly from a one-year high struck against the dollar earlier with stronger than forecast euro zone manufacturing, services activity and industrial new orders having little immediate impact as the market had largely priced in improvement in the sector.
The New Zealand dollar surged to its highest in 13 months against the US currency after the economy unexpectedly pulled out of recession in the second quarter, fuelling expectations the central bank might have to start raising rates sooner than previously thought.
The kiwi smashed through all barriers to rise more than a cent to $0.7315,its highest since early August 2008, after gross domestic product (GDP) data showed the economy unexpectedly grew in the second quarter, ending a prolonged recession.
The jump in the kiwi prompted investors to shift more money into other higher-yielding currencies such as the Australian dollar from the US currency,and helped trigger further speculative dollar selling against other currencies such as the euro and the yen.
The dollar index, which measures the dollar's value against a basket of six major currencies, was 0.1% lower at 76.022 by 0917 GMT, off an earlier low of 75.892, a level not seen since last September. Charts indicate the next support level at around 74.70.
The euro pulled back slightly from a one-year high struck against the dollar earlier with stronger than forecast euro zone manufacturing, services activity and industrial new orders having little immediate impact as the market had largely priced in improvement in the sector.
The New Zealand dollar surged to its highest in 13 months against the US currency after the economy unexpectedly pulled out of recession in the second quarter, fuelling expectations the central bank might have to start raising rates sooner than previously thought.
The kiwi smashed through all barriers to rise more than a cent to $0.7315,its highest since early August 2008, after gross domestic product (GDP) data showed the economy unexpectedly grew in the second quarter, ending a prolonged recession.
The jump in the kiwi prompted investors to shift more money into other higher-yielding currencies such as the Australian dollar from the US currency,and helped trigger further speculative dollar selling against other currencies such as the euro and the yen.
The dollar index, which measures the dollar's value against a basket of six major currencies, was 0.1% lower at 76.022 by 0917 GMT, off an earlier low of 75.892, a level not seen since last September. Charts indicate the next support level at around 74.70.
House seeks AOT, King Power probe
The House committee on finance, fiscal and banking will today file a petition to the National Anti-Corruption Commission (NACC) over Airports of Thailand's charges for extra space used at Suvarnabhumi Airport by King Power International.
Surapong Tovichakchaikul, a Puea Thai Party MP and chairman of the committee, said the petition was against the ministers of finance and transport, as well as government officials, for negligence and loss to the state.
The chairman said the action followed testimony on the charges from directors of Airports of Thailand, the finance minister, the permanent secretary of finance and NACC officials.
"The concession for the duty-free area, signed between AOT and King Power in 2005, demands King Power to pay Bt1.2 billion per annum. However, the company's duty free area was 6,820 square metres above the space specified in the concession. However, King Power was charged [an additional] Bt990 million, when the damage is as high as Bt6.49 billion," Surapong said.
Meanwhile, regarding the commercial-space concession, King Power was also found to have controlled 25,820 square metres, when the specified area was only 20,000 square metres. For the extra space, it paid Bt414 million, against an actual cost of Bt1.56 billion, Surachai said.
The AOT board will convene at its monthly meeting today.
AOT president Serirat Prasutanond said yesterday that the board would be informed of the progress on the extra charges on King Power's excess commercial area, which could be valued at Bt300 million-Bt400 million.
He said this was for the extra space used until December 2008.
Surapong Tovichakchaikul, a Puea Thai Party MP and chairman of the committee, said the petition was against the ministers of finance and transport, as well as government officials, for negligence and loss to the state.
The chairman said the action followed testimony on the charges from directors of Airports of Thailand, the finance minister, the permanent secretary of finance and NACC officials.
"The concession for the duty-free area, signed between AOT and King Power in 2005, demands King Power to pay Bt1.2 billion per annum. However, the company's duty free area was 6,820 square metres above the space specified in the concession. However, King Power was charged [an additional] Bt990 million, when the damage is as high as Bt6.49 billion," Surapong said.
Meanwhile, regarding the commercial-space concession, King Power was also found to have controlled 25,820 square metres, when the specified area was only 20,000 square metres. For the extra space, it paid Bt414 million, against an actual cost of Bt1.56 billion, Surachai said.
The AOT board will convene at its monthly meeting today.
AOT president Serirat Prasutanond said yesterday that the board would be informed of the progress on the extra charges on King Power's excess commercial area, which could be valued at Bt300 million-Bt400 million.
He said this was for the extra space used until December 2008.
Chairman of Wells Fargo to step down
Wells Fargo & Co said on Tuesday that Dick Kovacevich would step down as chairman at the end of 2009, after staying in the post an extra year to help the bank navigate the financial crisis.
His successor is no stranger.CEO John Stumpf, who is 56, takes the additional role of chairman on Jan 1. He had been seen as Kovacevich's heir apparent since being appointed chief operating officer in 2005.
During Kovacevich's tenure, the market value of the company's stock rose to more than $130 billion from $4 billion. Now 65, Kovacevich became CEO of Wells Fargo in 1998 after his former company, Norwest Corp, bought the then-struggling bank and assumed its name. He will retire from the company in early 2010.
Kovacevich's stayed as chairman a year longer than planned,and up to the maximum age allowed by internal Wells Fargo rules. The bank has a mandatory retirement age of 65.
But last November, he was asked and he agreed - to continue as chairman.His task was to focus on the crisis facing the financial services industry and to help with the integration of Wachovia after it was bought.
As CEO, Kovacevich brought to Wells Fargo a retailer's mindset, imploring employees to think of the bank's branches as "stores." He believed checking accounts, credit cards and other financial services should be sold like other retail products, with aggressive marketing
appeals to customers.
The bank's lead director, Phil Quigley,called Kovacevich's leadership "bold,determined and visionary."
Stumpf first joined a subsidiary of Norwest, the company that bought Wells Fargo, in 1982.
Stumpf held various positions at Norwest in Minnesota, Arizona, Utah and Texas before he became executive vice president of community banking in 2002.
He was named chief operating office in 2005 and to the CEO post in 2007.
Stumpf has been on the Wells board since 2006 and will retain his CEO position when he becomes chairman.
Kovacevich said Stumpf "is the best person in the country to be leading our company through the challenges and enormous opportunities ahead."
The bank has fared better than most of its peers during the past year, but also like others it faces future loan losses as unemployed customers default on loans. Still, its latest secondquarter earnings after payment of preferred dividends was $2.58 billion, or 57 cents per share, which beat the 34 cents per share forecast of analysts surveyed by Thomson Reuters. Its quarterly revenue of $22.5 billion also beat their forecast.
Last autumn, Wells joined other banks that took federal money to shore up the financial services industry when it took a $25 billion infusion. As of late July,Wells could not yet say when it could pay back the money.
His successor is no stranger.CEO John Stumpf, who is 56, takes the additional role of chairman on Jan 1. He had been seen as Kovacevich's heir apparent since being appointed chief operating officer in 2005.
During Kovacevich's tenure, the market value of the company's stock rose to more than $130 billion from $4 billion. Now 65, Kovacevich became CEO of Wells Fargo in 1998 after his former company, Norwest Corp, bought the then-struggling bank and assumed its name. He will retire from the company in early 2010.
Kovacevich's stayed as chairman a year longer than planned,and up to the maximum age allowed by internal Wells Fargo rules. The bank has a mandatory retirement age of 65.
But last November, he was asked and he agreed - to continue as chairman.His task was to focus on the crisis facing the financial services industry and to help with the integration of Wachovia after it was bought.
As CEO, Kovacevich brought to Wells Fargo a retailer's mindset, imploring employees to think of the bank's branches as "stores." He believed checking accounts, credit cards and other financial services should be sold like other retail products, with aggressive marketing
appeals to customers.
The bank's lead director, Phil Quigley,called Kovacevich's leadership "bold,determined and visionary."
Stumpf first joined a subsidiary of Norwest, the company that bought Wells Fargo, in 1982.
Stumpf held various positions at Norwest in Minnesota, Arizona, Utah and Texas before he became executive vice president of community banking in 2002.
He was named chief operating office in 2005 and to the CEO post in 2007.
Stumpf has been on the Wells board since 2006 and will retain his CEO position when he becomes chairman.
Kovacevich said Stumpf "is the best person in the country to be leading our company through the challenges and enormous opportunities ahead."
The bank has fared better than most of its peers during the past year, but also like others it faces future loan losses as unemployed customers default on loans. Still, its latest secondquarter earnings after payment of preferred dividends was $2.58 billion, or 57 cents per share, which beat the 34 cents per share forecast of analysts surveyed by Thomson Reuters. Its quarterly revenue of $22.5 billion also beat their forecast.
Last autumn, Wells joined other banks that took federal money to shore up the financial services industry when it took a $25 billion infusion. As of late July,Wells could not yet say when it could pay back the money.
Banks lighten overdraft rules
As US lawmakers prepare to implement sweeping credit card reforms, Bank of America Corp and JPMorgan Chase & Co are moving to overhaul overdraft fees and practices that have been criticised industrywide as excessive and harmful to consumers.
Bank of America Corp said on Tuesday it would cap the fees it charges customers for overdrawing their accounts, backpedaling on the hikes the company imposed just this year.
Starting on Oct 19, Bank of America will no longer charge overdraft fees when a customer's account is overdrawn by less than $10 in one day. A $35 fee will still be levied if the account isn't brought into balance within five days.
The Charlotte, North Carolina-based bank will also limit to four the number of times an overdraft fee can be charged on an account per day. Just this year,the bank had raised that cap from five to 10.
It also raised the fee this year for the first overdraft in a 12-month period to $35 from $25- a hike that still stands.
"Enrollment in the bank's overdraft programme is currently automatic for new customers, and opting out is possible only in very limited circumstances,"said Anne Pace, a Bank of America spokeswoman.
But now customers will be able opt out, meaning that transactions will be denied at the register if customers don't have enough money in their accounts to cover a purchase.
Pace said the company didn't have an estimate on how many people might opt out of the overdraft programme,noting that many consider it a useful back-up."Customers will need to visit their local branches to opt out. They will also be able to call," Pace said,"but the appropriate phone number hasn't yet been determined."
When asked about the reversal from the fee hikes earlier this year, Pace said the company "is responding to the changing needs of customers in the difficult economic environment."
"JPMorgan Chase & Co will also be overhauling its overdraft fees," a spokeswoman said late Tuesday.
Starting in the first quarter of 2010,the bank will make overdraft protection opt-in for all customers, post transactions to accounts as they occur, and eliminate fees when accounts are overdrawn by $5 or less. It will also reduce the maximum number of fees per day to three from six.
"The changes will apply to all customer accounts," the spokeswoman said.
The banks' turnaround comes as credit card reforms passed earlier this year will soon limit banks' ability to raise fees and interest rates and require greater disclosure about costs. Banks also will have to give customers the choice to opt into over-the-limit programmes for credit cards, which are similar to overdraft programs and charge consumers for spending beyond their credit limit.
The credit card law doesn't address debit cards, however, and banks can still automatically enroll cardholders into overdraft programs. Three-quarters of large banks have automated overdraft programmes, according to a 2006 study by the Federal Deposit Insurance Corp.
Consumer advocates say automatic enrollment in overdraft programmes is misleading, because most people assume they can only spend the money they have when using debit cards. But the programmes have become an industry standard in the past several years,and a hefty source of revenue for banks.
Initial overdraft fees at banks range from $16 to $36, according to a survey by the Consumer Federation of America conducted in March.
Some banks also charge sustained fees if consumers fail to bring their accounts up to balance with a couple days; CFA says 10 of the 16 largest banks make such assessments.
Bank of America Corp said on Tuesday it would cap the fees it charges customers for overdrawing their accounts, backpedaling on the hikes the company imposed just this year.
Starting on Oct 19, Bank of America will no longer charge overdraft fees when a customer's account is overdrawn by less than $10 in one day. A $35 fee will still be levied if the account isn't brought into balance within five days.
The Charlotte, North Carolina-based bank will also limit to four the number of times an overdraft fee can be charged on an account per day. Just this year,the bank had raised that cap from five to 10.
It also raised the fee this year for the first overdraft in a 12-month period to $35 from $25- a hike that still stands.
"Enrollment in the bank's overdraft programme is currently automatic for new customers, and opting out is possible only in very limited circumstances,"said Anne Pace, a Bank of America spokeswoman.
But now customers will be able opt out, meaning that transactions will be denied at the register if customers don't have enough money in their accounts to cover a purchase.
Pace said the company didn't have an estimate on how many people might opt out of the overdraft programme,noting that many consider it a useful back-up."Customers will need to visit their local branches to opt out. They will also be able to call," Pace said,"but the appropriate phone number hasn't yet been determined."
When asked about the reversal from the fee hikes earlier this year, Pace said the company "is responding to the changing needs of customers in the difficult economic environment."
"JPMorgan Chase & Co will also be overhauling its overdraft fees," a spokeswoman said late Tuesday.
Starting in the first quarter of 2010,the bank will make overdraft protection opt-in for all customers, post transactions to accounts as they occur, and eliminate fees when accounts are overdrawn by $5 or less. It will also reduce the maximum number of fees per day to three from six.
"The changes will apply to all customer accounts," the spokeswoman said.
The banks' turnaround comes as credit card reforms passed earlier this year will soon limit banks' ability to raise fees and interest rates and require greater disclosure about costs. Banks also will have to give customers the choice to opt into over-the-limit programmes for credit cards, which are similar to overdraft programs and charge consumers for spending beyond their credit limit.
The credit card law doesn't address debit cards, however, and banks can still automatically enroll cardholders into overdraft programs. Three-quarters of large banks have automated overdraft programmes, according to a 2006 study by the Federal Deposit Insurance Corp.
Consumer advocates say automatic enrollment in overdraft programmes is misleading, because most people assume they can only spend the money they have when using debit cards. But the programmes have become an industry standard in the past several years,and a hefty source of revenue for banks.
Initial overdraft fees at banks range from $16 to $36, according to a survey by the Consumer Federation of America conducted in March.
Some banks also charge sustained fees if consumers fail to bring their accounts up to balance with a couple days; CFA says 10 of the 16 largest banks make such assessments.
Top banker resigns after suspension
The head of South Korea's top banking group resigned yesterday after the financial watchdog punished him for huge investment losses at a state-run bank which he previously headed.
Hwang Young-key, chief executive of KB Financial, said in a statement he stood down to take responsibility for the losses at Woori Bank.
"I would like to say once again that I feel heavy responsibility for the losses incurred at Woori Bank which I once worked for," Hwang said.
The Financial Services Commission earlier this month suspended Hwang from duty at KB Financial for three
months. It blamed him for losses of 1.62 trillion won ($1.3 billion) which Woori Bank sustained on its investments in derivatives between 2005 and 2007.
The punishment made it impossible for Hwang to extend his term at KB, which
ends in about two years. It also barred him from holding a top post at any domestic financial firm for four years.
The watchdog said Woori Bank incurred its losses by investing in overseas credit default swaps, designed to protect investors against the risk of default, and other derivatives.
The investments went sour during the global financial crisis.
Hwang has reportedly said that last year's crisis was the equivalent of a "natural disaster" and he should not be accountable for losses caused by it.
In his statement yesterday the banker said it was "regrettable" the financial watchdog had not taken his explanations into account.
He became chief of KB Financial, the country's largest financial group in terms of assets, in September last year.
Woori posted its first loss in almost seven years in the fourth quarter of last year.
The government holds a 73% stake in Woori after rescuing it in the aftermath of the 1997-1998 East Asian financial crisis.
Hwang Young-key, chief executive of KB Financial, said in a statement he stood down to take responsibility for the losses at Woori Bank.
"I would like to say once again that I feel heavy responsibility for the losses incurred at Woori Bank which I once worked for," Hwang said.
The Financial Services Commission earlier this month suspended Hwang from duty at KB Financial for three
months. It blamed him for losses of 1.62 trillion won ($1.3 billion) which Woori Bank sustained on its investments in derivatives between 2005 and 2007.
The punishment made it impossible for Hwang to extend his term at KB, which
ends in about two years. It also barred him from holding a top post at any domestic financial firm for four years.
The watchdog said Woori Bank incurred its losses by investing in overseas credit default swaps, designed to protect investors against the risk of default, and other derivatives.
The investments went sour during the global financial crisis.
Hwang has reportedly said that last year's crisis was the equivalent of a "natural disaster" and he should not be accountable for losses caused by it.
In his statement yesterday the banker said it was "regrettable" the financial watchdog had not taken his explanations into account.
He became chief of KB Financial, the country's largest financial group in terms of assets, in September last year.
Woori posted its first loss in almost seven years in the fourth quarter of last year.
The government holds a 73% stake in Woori after rescuing it in the aftermath of the 1997-1998 East Asian financial crisis.
EU watchdog aims to rely more on "moral authority"
The European Union's new financial watchdog plans to use "moral pressure" instead of regulatory authority to crack down on countries posing major risks to Europe's economy.
The European Commission yesterday laid out a new financial oversight structure that it wants governments to back to prevent a repeat of last year's banking crisis. Still, it is shying away from creating forceful new regulators who could unilaterally overrule member states.
The commission says it wants risks in the financial system to be identified and resolved at an earlier stage; EU countries to co-operate better in emergency situations and clearer rules set out for solving disputes between financial supervisors in different countries.
Despite Europe's shared market of 500 million people, financial oversight is fragmented and divided between 27 member states who do not always apply the same EU rules in the same way.
That became very clear last year when governments scrambled to rescue banks and shore up a financial system under threat of collapse.
Ireland's move to guarantee all bank deposits alarmed British banks who feared that savers would move funds there. France and Germany, meanwhile,complained loudly about Luxembourg's lax investor protection rules that led to many losing money after investing in funds linked to the massive US financial fraud run by Bernard Madoff.
The European Commission says it wants to plug those weaknesses in the EU's supervisory framework.
The new European Systemic Risk Board is also supposed to watch out for wider risks to the economy, such as the financial situation of banks, potential asset bubbles and how well markets are functioning. It would issue recommendations and warnings to national governments and supervisors which must take action or explain why they haven't done so.
The European Commission says the new risk board will flag warnings that have been ignored to all EU governments,which will increase "the moral pressure on the recipient to act or explain."Warnings won't always be made public to avoid spooking financial markets.
The European Central Bank, which governs monetary policy in the 16 nations that use the euro, will help run the risk board and its president will likely lead the watchdog - although EU officials have said that senior jobs are open to non-euro nations.
The new financial supervisory framework will create three new authorities to watch over banking, financial markets and both insurance and pensions.
They will have more power than the supervisory committees they are replacing because they will be able to resolve disputes between national supervisors and suggest new technical standards.The European Securities and Markets Authority will also supervise credit rating agencies. That means EU agencies will have more power to counter national supervisors - something Britain has fiercely resisted.
But the EU executive insists that the new system won't veto national supervisors and will only step in where necessary - such as on EU-wide technical standards and sorting out disputes.
The new authorities will not be allowed to make decisions that would force a government to spend money - such as telling it to bail out a bank.
"Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks,"said commission president Jose Manuel Barroso.
The European Commission yesterday laid out a new financial oversight structure that it wants governments to back to prevent a repeat of last year's banking crisis. Still, it is shying away from creating forceful new regulators who could unilaterally overrule member states.
The commission says it wants risks in the financial system to be identified and resolved at an earlier stage; EU countries to co-operate better in emergency situations and clearer rules set out for solving disputes between financial supervisors in different countries.
Despite Europe's shared market of 500 million people, financial oversight is fragmented and divided between 27 member states who do not always apply the same EU rules in the same way.
That became very clear last year when governments scrambled to rescue banks and shore up a financial system under threat of collapse.
Ireland's move to guarantee all bank deposits alarmed British banks who feared that savers would move funds there. France and Germany, meanwhile,complained loudly about Luxembourg's lax investor protection rules that led to many losing money after investing in funds linked to the massive US financial fraud run by Bernard Madoff.
The European Commission says it wants to plug those weaknesses in the EU's supervisory framework.
The new European Systemic Risk Board is also supposed to watch out for wider risks to the economy, such as the financial situation of banks, potential asset bubbles and how well markets are functioning. It would issue recommendations and warnings to national governments and supervisors which must take action or explain why they haven't done so.
The European Commission says the new risk board will flag warnings that have been ignored to all EU governments,which will increase "the moral pressure on the recipient to act or explain."Warnings won't always be made public to avoid spooking financial markets.
The European Central Bank, which governs monetary policy in the 16 nations that use the euro, will help run the risk board and its president will likely lead the watchdog - although EU officials have said that senior jobs are open to non-euro nations.
The new financial supervisory framework will create three new authorities to watch over banking, financial markets and both insurance and pensions.
They will have more power than the supervisory committees they are replacing because they will be able to resolve disputes between national supervisors and suggest new technical standards.The European Securities and Markets Authority will also supervise credit rating agencies. That means EU agencies will have more power to counter national supervisors - something Britain has fiercely resisted.
But the EU executive insists that the new system won't veto national supervisors and will only step in where necessary - such as on EU-wide technical standards and sorting out disputes.
The new authorities will not be allowed to make decisions that would force a government to spend money - such as telling it to bail out a bank.
"Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks,"said commission president Jose Manuel Barroso.
World Bank approves $4.3 billion in loans to India
The World Bank on Tuesday announced $4.3 billion in loans to India, including $2.0 billion for the banking sector, to help strengthen its economy amid the global economic crisis.
The World Bank said its executive board approved loans for projects in five countries, with the loans for India by far the largest.
"The four projects worth $4.3 billion to India are designed to support the government's infrastructure agenda and bolster its economic stimulus programme," the Washington-based development lender said.
The bank noted that after a period of high economic growth -which reached 9.7% in 2006-07- the onset of the global financial crisis in 2008 saw a decline in India's growth rate to about 5.0-6.0% in the fourth quarter of 2008-2009.
The bank projected a "realistic"growth rate of between 5.5 and 6.5% for 2009-2010 for Asia's third-largest economy, after Japan and China.
"This is a crucial time to support India," Roberto Zagha, World Bank country director for India, said in a statement.
"While the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain. Today's support will help maintain credit growth and continued infrastructure investments," he said.
Zagha said supporting infrastructure development was crucial to "lay the foundations for stronger future growth."
The World Bank said it had extended a $2-billion loan to support the banking sector, in response to a request from the Indian government to support stimulus measures to counter the worst global downturn in six decades.
"This will help maintain the confidence of the public in the banking sector,prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets resulting from the global financial crisis and its impact on India's economy," it said.
The loan is for 30 years and includes a five-year grace period in which India is exempt from repayments.
A 28-year loan of $1.195 billion was aimed at increasing the availability of long-term financing for the India Infrastructure Finance Company to provide public-private financing of infrastructure projects.
The "pipeline" of projects under consideration "includes selected power,roads, and ports projects," the World Bank said.
A loan of $1 billion, maturing in nearly 30 years, would support the Fifth Power System Development Project aimed at strengthening India's electricity transmission system.
The three loans will be provided by the International Bank for Reconstruction and Development (IBRD), the bank's institution that aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development.
A $150-million, 35-year credit was granted by the bank's International Development Association, which helps the poorest country by providing interestfree loans and grants.
The IDA credit is to assist the Andhra Pradesh Rural Waters Supply and Sanitation Project, aimed at improving rural water supply and sanitation services in the southeastern state.
Other loans and credits approved were:1.0 billion to Hungary;$200 million to Latvia;$71.50 million to Nepal; and $65.2 million to Vietnam.
The World Bank said its executive board approved loans for projects in five countries, with the loans for India by far the largest.
"The four projects worth $4.3 billion to India are designed to support the government's infrastructure agenda and bolster its economic stimulus programme," the Washington-based development lender said.
The bank noted that after a period of high economic growth -which reached 9.7% in 2006-07- the onset of the global financial crisis in 2008 saw a decline in India's growth rate to about 5.0-6.0% in the fourth quarter of 2008-2009.
The bank projected a "realistic"growth rate of between 5.5 and 6.5% for 2009-2010 for Asia's third-largest economy, after Japan and China.
"This is a crucial time to support India," Roberto Zagha, World Bank country director for India, said in a statement.
"While the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain. Today's support will help maintain credit growth and continued infrastructure investments," he said.
Zagha said supporting infrastructure development was crucial to "lay the foundations for stronger future growth."
The World Bank said it had extended a $2-billion loan to support the banking sector, in response to a request from the Indian government to support stimulus measures to counter the worst global downturn in six decades.
"This will help maintain the confidence of the public in the banking sector,prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets resulting from the global financial crisis and its impact on India's economy," it said.
The loan is for 30 years and includes a five-year grace period in which India is exempt from repayments.
A 28-year loan of $1.195 billion was aimed at increasing the availability of long-term financing for the India Infrastructure Finance Company to provide public-private financing of infrastructure projects.
The "pipeline" of projects under consideration "includes selected power,roads, and ports projects," the World Bank said.
A loan of $1 billion, maturing in nearly 30 years, would support the Fifth Power System Development Project aimed at strengthening India's electricity transmission system.
The three loans will be provided by the International Bank for Reconstruction and Development (IBRD), the bank's institution that aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development.
A $150-million, 35-year credit was granted by the bank's International Development Association, which helps the poorest country by providing interestfree loans and grants.
The IDA credit is to assist the Andhra Pradesh Rural Waters Supply and Sanitation Project, aimed at improving rural water supply and sanitation services in the southeastern state.
Other loans and credits approved were:1.0 billion to Hungary;$200 million to Latvia;$71.50 million to Nepal; and $65.2 million to Vietnam.
IMF trims Cambodia projection
The International Monetary Fund revised down its forecast for Cambodia's economy yesterday, predicting that gross domestic product (GDP) would contract 2.75% in 2009.
That is sharply lower than its previous forecast of a 0.5% drop.
Speaking to reporters in Phnom Penh,IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.
Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.
The IMF noted that agricultural production was "a bright spot with a good harvest expected" this year.
"Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead," the IMF stated.
But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15%, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.
But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.
Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen "by double digits" due to the global economic crisis affecting visitor nations.
"As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries," the IMF said.
The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.
"New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property (sector) also down," the IMF noted.
Foreign direct investment is also expected to end the year sharply down,the IMF said, and is projected at $490 million this year versus an estimated $815 million last year.
That is sharply lower than its previous forecast of a 0.5% drop.
Speaking to reporters in Phnom Penh,IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.
Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.
The IMF noted that agricultural production was "a bright spot with a good harvest expected" this year.
"Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead," the IMF stated.
But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15%, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.
But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.
Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen "by double digits" due to the global economic crisis affecting visitor nations.
"As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries," the IMF said.
The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.
"New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property (sector) also down," the IMF noted.
Foreign direct investment is also expected to end the year sharply down,the IMF said, and is projected at $490 million this year versus an estimated $815 million last year.
FINANCE MINISTRY TO HIKE 2009 ECONOMIC FORECAST
The Finance Ministry will revise upward its 2009 economic forecast after several better-than-expected indicators have suggested a gradual recovery.
Ministry spokesman Ekniti Nitithanprapas yesterday said the Fiscal Policy Office would release its updated forecast next Monday.
He said several key indicators had recently suggested an improvement in economic conditions, such as exports rising month on month and the economic expansion of major trade partners China and India.
Consumption has also increased as a result of the government's stimulus package, he added.
The ministry previously predicted that the economy this year would shrink by about 3-3.5 per cent. The new projection could put the figure at between minus 2.5 per cent and minus 3 per cent, said Ekniti.
It is expected to expand by 4 per cent year on year in the fourth quarter, following a series of falls in the preceding quarters. The economy is expected to contract by about 3-4 per cent year on year in the current quarter.
The Asian Development Bank on Tuesday released its updated economic forecasts, which projected that China would grow by 8.2 per cent - up from the 7 per cent predicted in March.
The ADB now projects that the Thai economy will contract by 3.2 per cent, against its previous estimate of a 2-per-cent contraction.
The bank said that as Thai exports accounted for about 70 per cent of gross domestic product, a sharp fall in sales abroad had hit the economy particularly hard.
Indonesia, whose exports account for only 20-25 per cent of GDP, has been less impacted by the global downturn, resulting in the bank lifting its forecast for 2009 economic growth to 4.3 per cent, from the previous estimate of 3.6 per cent.
The ADB predicts the Thai economy will expand by 3 per cent next year.
Ekniti said the Thai economy would expand by an average of about 4 per cent each year from 2009-11, driven by public investment worth Bt1.43 trillion. The inflation rate is predicted to be 2 per cent.
Risks to growth, he added, were delays in the implementation of public projects and high oil prices.
Critics have said achieving growth next year would be no surprise, given the very low base this year.
Teerana Bhongmakapat, dean of Chulalongkorn University's Faculty of Economics, said the world economy would experience low growth in 2011 after expansion resumed next year. The recovery will, therefore, be W-shaped.
He said there was also a probability of further shocks in the next few years in some countries. If such shocks occurred in large economies such as China, then the global economy would experience another round of turbulence.
The risk of high inflation will also be a cause for concern after 2011 if the global economy recovers strongly.
However, for the time being, economic recession remains a threat. The Thai economy will likely move in line with the global economy, said Teerana.
Ministry spokesman Ekniti Nitithanprapas yesterday said the Fiscal Policy Office would release its updated forecast next Monday.
He said several key indicators had recently suggested an improvement in economic conditions, such as exports rising month on month and the economic expansion of major trade partners China and India.
Consumption has also increased as a result of the government's stimulus package, he added.
The ministry previously predicted that the economy this year would shrink by about 3-3.5 per cent. The new projection could put the figure at between minus 2.5 per cent and minus 3 per cent, said Ekniti.
It is expected to expand by 4 per cent year on year in the fourth quarter, following a series of falls in the preceding quarters. The economy is expected to contract by about 3-4 per cent year on year in the current quarter.
The Asian Development Bank on Tuesday released its updated economic forecasts, which projected that China would grow by 8.2 per cent - up from the 7 per cent predicted in March.
The ADB now projects that the Thai economy will contract by 3.2 per cent, against its previous estimate of a 2-per-cent contraction.
The bank said that as Thai exports accounted for about 70 per cent of gross domestic product, a sharp fall in sales abroad had hit the economy particularly hard.
Indonesia, whose exports account for only 20-25 per cent of GDP, has been less impacted by the global downturn, resulting in the bank lifting its forecast for 2009 economic growth to 4.3 per cent, from the previous estimate of 3.6 per cent.
The ADB predicts the Thai economy will expand by 3 per cent next year.
Ekniti said the Thai economy would expand by an average of about 4 per cent each year from 2009-11, driven by public investment worth Bt1.43 trillion. The inflation rate is predicted to be 2 per cent.
Risks to growth, he added, were delays in the implementation of public projects and high oil prices.
Critics have said achieving growth next year would be no surprise, given the very low base this year.
Teerana Bhongmakapat, dean of Chulalongkorn University's Faculty of Economics, said the world economy would experience low growth in 2011 after expansion resumed next year. The recovery will, therefore, be W-shaped.
He said there was also a probability of further shocks in the next few years in some countries. If such shocks occurred in large economies such as China, then the global economy would experience another round of turbulence.
The risk of high inflation will also be a cause for concern after 2011 if the global economy recovers strongly.
However, for the time being, economic recession remains a threat. The Thai economy will likely move in line with the global economy, said Teerana.
CRISIS NOT BEHIND US, SAYS IMF
The G-20 summit will kick off today in Pittsburgh with the leaders pledging to hold on to government stimulus measures to avoid interrupting the economic recovery because the cirsis is not over yet.
The agenda at the September 24-25 summit includes possible curbs on financial industry pay, joint economic policies anad whether to start winding down stimulus spending.
However, British Prime Minister Cordon Brown indicated that the global economy had yet to ffel the biggest impact of the government-led spending programmes to stimulate demand and reiterated concerns about removing them too early.
"The stimulus that we have still got to give the world economy is greater than the stimulus we have already thad," Brpwm said. "What we want to do is safefuard a recovery from a recession we feared would develop into a depression."
Politicians in Britain are calling for the government to put the brakes on spending and to fucus on curbing the budget deficit that next year will exceed 12 per cent of gross domestic product, the most in the Group of 20.
But International Monetary Fund Manageing Director Dominique Strauss-Kahn called on leaders from the G-20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis is not over yet.
"This recovery will be rather sluggish, at an average lower than growth we had befor the crisis," Strauss-Kahn said in an interview in Washington. "It's too early to say the crisis is behind us."
The IMF chief also urged policy-makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse.
Giving China a bigger role in the fund will help bolster cooperation, he said, as policy-mamers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
Brown is seeking support for a formal series of meetings among world leaders to coordinate economic policies and tackle problems ranging from trade imblances to bonus pay earned by bankers.
Brown said economic recovery was not yet guaranteed, addomg tp cp,,emts from IS President Barack Obama, who this week said the unemployment rate "could even get a little bit worse, over the next couple of months".
French Finance Minister Christine Lagarde, who will also be in the Pennsylvania city along with President Nicolas Sarkozy, echoed those sentiments.
The G-20 needs to "give a very strong signal that they will continue the stimulus plans", Largarde said on France Inter radio. "We've stopped the free-fall, but we must continue to underpin the economy."
The UK and the US are proposing similar measures to get national governments to steer economic policy so that futhure imbalances can be worked out before they damage the system.
At the same time, Beijing is pressing for a bigger voice in the IMF and says G-20 leaders should start making good on promises to give developing countries more IMF votes.
A deputy governor of China's central bank proposed the creation of a multinational sovereign wealth fund to help developing countries, in a report released ahead of the G-20 summit.
"Considerations can be [given] to setting up a "suprasovereign wealth investment fund' to help channel captital inflow into the developing would so that these countries can serve as new engines in global recovery," said the official.
The agenda at the September 24-25 summit includes possible curbs on financial industry pay, joint economic policies anad whether to start winding down stimulus spending.
However, British Prime Minister Cordon Brown indicated that the global economy had yet to ffel the biggest impact of the government-led spending programmes to stimulate demand and reiterated concerns about removing them too early.
"The stimulus that we have still got to give the world economy is greater than the stimulus we have already thad," Brpwm said. "What we want to do is safefuard a recovery from a recession we feared would develop into a depression."
Politicians in Britain are calling for the government to put the brakes on spending and to fucus on curbing the budget deficit that next year will exceed 12 per cent of gross domestic product, the most in the Group of 20.
But International Monetary Fund Manageing Director Dominique Strauss-Kahn called on leaders from the G-20 nations to maintain efforts to pull the world economy out of a recession, warning that the crisis is not over yet.
"This recovery will be rather sluggish, at an average lower than growth we had befor the crisis," Strauss-Kahn said in an interview in Washington. "It's too early to say the crisis is behind us."
The IMF chief also urged policy-makers to seize the opportunity to address imbalances in trade and investment flows blamed for contributing to the credit collapse.
Giving China a bigger role in the fund will help bolster cooperation, he said, as policy-mamers seek agreement to pare US borrowing and buttress domestic demand in nations with trade surpluses.
Brown is seeking support for a formal series of meetings among world leaders to coordinate economic policies and tackle problems ranging from trade imblances to bonus pay earned by bankers.
Brown said economic recovery was not yet guaranteed, addomg tp cp,,emts from IS President Barack Obama, who this week said the unemployment rate "could even get a little bit worse, over the next couple of months".
French Finance Minister Christine Lagarde, who will also be in the Pennsylvania city along with President Nicolas Sarkozy, echoed those sentiments.
The G-20 needs to "give a very strong signal that they will continue the stimulus plans", Largarde said on France Inter radio. "We've stopped the free-fall, but we must continue to underpin the economy."
The UK and the US are proposing similar measures to get national governments to steer economic policy so that futhure imbalances can be worked out before they damage the system.
At the same time, Beijing is pressing for a bigger voice in the IMF and says G-20 leaders should start making good on promises to give developing countries more IMF votes.
A deputy governor of China's central bank proposed the creation of a multinational sovereign wealth fund to help developing countries, in a report released ahead of the G-20 summit.
"Considerations can be [given] to setting up a "suprasovereign wealth investment fund' to help channel captital inflow into the developing would so that these countries can serve as new engines in global recovery," said the official.
Baht makes further gains on optimism about emerging markets
The baht continued to trade at 13-month highs yesterday as signs that a global economic recovery is gaining traction encouraged fund managers to invest more heavily in emerging markets.
Local policymakers do not see any signs of asset-price bubbles developing,said Paiboon Kittisrikangwan, a Bank of Thailand assistant governor.
The baht has risen 1.4% this month as overseas investors have been net buyers of $545 million in Thai equities.
"It's all about sentiment," said Usara Wilaipich, chief economist at Standard Chartered in Bangkok."There is more optimism on the global outlook. That is encouraging short-term portfolio inflows into the region, including Thailand. The dollar-baht will move lower."
The baht rose to 33.51 per dollar yesterday from 33.60 on Tuesday.
Local policymakers do not see any signs of asset-price bubbles developing,said Paiboon Kittisrikangwan, a Bank of Thailand assistant governor.
The baht has risen 1.4% this month as overseas investors have been net buyers of $545 million in Thai equities.
"It's all about sentiment," said Usara Wilaipich, chief economist at Standard Chartered in Bangkok."There is more optimism on the global outlook. That is encouraging short-term portfolio inflows into the region, including Thailand. The dollar-baht will move lower."
The baht rose to 33.51 per dollar yesterday from 33.60 on Tuesday.
KBank sure of meeting loan target
Kasikornbank believes it will meet its 2009 loan growth target, thanks to rising loan demand in the second half in line with the economic recovery, said president Prasarn Trairatvorakul.
The bank expected to book loan growth of around 4% by the end of this year, in line with its 2009 target of 4-5%.Loan demand has picked up in the second half, buoyed by the demand of power plant projects in the energy sector.But recently, loan withdrawals by the projects have slowed down pending a clearer economic climate.
Loan demand has improved in all business areas including the corporate sector, small and medium-sized enterprises and consumer finance. For commercial loans, however, the demand is mainly for working capital rather than long-term loans. The bank's shrinking loan growth in the first half of this year was due mainly to a contraction in shortterm loans.
KBank, Thailand's fourth largest bank by total assets, will likely be the first to announce loan expansion for 2009. Its loan portfolio contracted by 2% in the first half this year.
Dr Prasarn said improving loan withdrawals reflect investors are more confident in the economic recovery both globally and locally and in particular,the G3 economies. China's strong rebound also supports the recovery.
The Thai economy is moving out of recession and the country's gross domestic product is expected to expand in the fourth quarter this year compared with the same period last year. But for all of 2009, GDP would contract by around 3% compared to 2008.
Despite the positive outlook for the rest of this year, KBank is not sure whether it will meet its net interest margin goal of around 3.7% to 3.8% this year.
Commenting on the economy, Dr Prasarn forecast the Bank of Thailand would keep its policy rate unchanged at 1.25% by the end of this year and interest rates in the banking system would be held steady as a result.
He predicted the central bank's oneday repurchase rate would start to increase in the second quarter of 2010, in line with stronger economic recovery next year. But the money market rate,as well as the loan and deposit rates of the banking sector, would likely be raised in the first quarter next year before the policy rate moves up.
Shares of KBank closed yesterday on the Stock Exchange of Thailand at 79.75 baht, up 1.5 baht, in trade worth 660.4 million baht.
The bank expected to book loan growth of around 4% by the end of this year, in line with its 2009 target of 4-5%.Loan demand has picked up in the second half, buoyed by the demand of power plant projects in the energy sector.But recently, loan withdrawals by the projects have slowed down pending a clearer economic climate.
Loan demand has improved in all business areas including the corporate sector, small and medium-sized enterprises and consumer finance. For commercial loans, however, the demand is mainly for working capital rather than long-term loans. The bank's shrinking loan growth in the first half of this year was due mainly to a contraction in shortterm loans.
KBank, Thailand's fourth largest bank by total assets, will likely be the first to announce loan expansion for 2009. Its loan portfolio contracted by 2% in the first half this year.
Dr Prasarn said improving loan withdrawals reflect investors are more confident in the economic recovery both globally and locally and in particular,the G3 economies. China's strong rebound also supports the recovery.
The Thai economy is moving out of recession and the country's gross domestic product is expected to expand in the fourth quarter this year compared with the same period last year. But for all of 2009, GDP would contract by around 3% compared to 2008.
Despite the positive outlook for the rest of this year, KBank is not sure whether it will meet its net interest margin goal of around 3.7% to 3.8% this year.
Commenting on the economy, Dr Prasarn forecast the Bank of Thailand would keep its policy rate unchanged at 1.25% by the end of this year and interest rates in the banking system would be held steady as a result.
He predicted the central bank's oneday repurchase rate would start to increase in the second quarter of 2010, in line with stronger economic recovery next year. But the money market rate,as well as the loan and deposit rates of the banking sector, would likely be raised in the first quarter next year before the policy rate moves up.
Shares of KBank closed yesterday on the Stock Exchange of Thailand at 79.75 baht, up 1.5 baht, in trade worth 660.4 million baht.
Tuesday, September 22, 2009
CHINA MAY BUY GOLD OFFERED BY IMF
China may purchase some of the 403.3 metric tonnes of gold being offered by the International Monetary Fund, Market News International reported yesterday, citing two unidentified government sources.
China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources.
There is no indication China is seeking to buy all of the gold on offer, it said, citing no one.
The IMF board approved the sales, valued at about US$13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks," according to a statement issued last Friday.
An official at the People's Bank of China declined to comment.
China, the world's biggest gold producer, has increased reserves by 76 per cent to 1,054 tonnes since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
China's foreign reserves, the world's largest, rose 9.1 per cent in the second quarter, climbing a record $178 billion, and totalled $2.13 trillion on June 30, according to the central bank. The bullion sales can occur any time, the IMF said. Selling directly to central banks, which have not yet expressed interest, would be faster, according to the IMF.
Bullion for immediate delivery declined as much as 1.2 per cent in Singapore to a low of $995.97 an ounce, the first day it traded below $1,000 since September 15.
It was priced at $999.30 ounce late afternoon in Singapore.
China may double the ratio of its gold holdings to its foreign-currency reserves over five years, Sun Zhaoxue, chairman of the China Gold Association, said on May 15.
The association "hopes" China will increase gold holdings to 3 per cent of foreign currency reserves in five years from 1.4 per cent now, Sun added.
China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources.
There is no indication China is seeking to buy all of the gold on offer, it said, citing no one.
The IMF board approved the sales, valued at about US$13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks," according to a statement issued last Friday.
An official at the People's Bank of China declined to comment.
China, the world's biggest gold producer, has increased reserves by 76 per cent to 1,054 tonnes since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
China's foreign reserves, the world's largest, rose 9.1 per cent in the second quarter, climbing a record $178 billion, and totalled $2.13 trillion on June 30, according to the central bank. The bullion sales can occur any time, the IMF said. Selling directly to central banks, which have not yet expressed interest, would be faster, according to the IMF.
Bullion for immediate delivery declined as much as 1.2 per cent in Singapore to a low of $995.97 an ounce, the first day it traded below $1,000 since September 15.
It was priced at $999.30 ounce late afternoon in Singapore.
China may double the ratio of its gold holdings to its foreign-currency reserves over five years, Sun Zhaoxue, chairman of the China Gold Association, said on May 15.
The association "hopes" China will increase gold holdings to 3 per cent of foreign currency reserves in five years from 1.4 per cent now, Sun added.
GOLD READY TO HIT HISTORIC HIGHS
Despite the news that the International Monetary Fund would sell more than 400 metric tonnes of gold, local fund managers believe global gold prices could still stand above US$1,000 an ounce and would soon rise to a new historic high.
Gold prices yesterday declined to under US$1,000 an ounce for the first time since September 15.
They said several central banks have reduced exposure to the US dollar as a reserve currency, while more institutional investors have shifted more of their portfolios to gold.
Yesterday, gold declined, further cooling a rally that sent prices above $1,000 an ounce this month, after the IMF approved bullion sales and as a rebound by the dollar curbed demand for an inflation hedge, according to Bloomberg.
The IMF's executive board approved sales of 403.3 metric tonnes valued at about $13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks".
"I don't think it will affect the market too much," Jonathan Barratt, managing director at Commodity Broking Services, said on Monday. "It will either go to central banks or they might actually auction it off."
Morgan Stanley also said the IMF's approval to sell gold is not a "material threat to current prices" and kept its 2010 gold forecast at $1,000 an ounce, according to an emailed report yesterday.
Immediatedelivery bullion yesterday lost as much as $11.63, or 1.2 per cent, to $995.97 an ounce and traded at $1,000.20 by midmorning. The metal, which fell below $1,000 for the first time since September 15, added 0.2 per cent last week, a fifth gain.
The US Dollar Index, a gauge of the greenback against six major currencies, extended gains, climbing as much as 0.2 per cent. Some traders buy gold to preserve purchasing power when the US currency weakens. On Friday, gold prices in New York were at US$1,010.3 an ounce.
For the domestic market, gold bar prices early yesterday were quoted at Bt15,900 per baht weight for buying and Bt16,000 for selling, while gold ornaments were quoted at Bt15,675.44 for buying and Bt16,400 for selling.
Gold bar prices were at 2:40pm changed to Bt15,850 for buying and Bt15,950 for selling, while gold ornament prices were changed to Bt15,614.80 for buying and Bt16,350 for selling.
Gold has jumped 14 per cent so far this year on speculation that inflation will accelerate as the US economy emerges from the worst recession since the Great Depression. The precious metal rose 0.2 per cent last week, the fifth straight weekly gain and the longest streak since November 2007.
Bullion has jumped around 30 per cent since the collapse of Lehman Brothers last year.
Paisarn Krutdamrongchai, a senior executive of TMB Asset Management, pointed out that global gold prices still stand above $1,000 as several institutional investors have reduced their holdings of US treasuries, as they believe the US dollar would weaken. And they have turned to investing more via gold funds to diversify risks.
Prapas Tonpibulsak, CEO of Ayudhya Fund Management, believes global gold prices could set a new peak above the record high reached last year at $1,034 an ounce.
Most institutional investors and central banks view the US dollar as depreciating further, so several central banks have reduced their US dollar holdings.
Fund managers have also shifted their funds away from US treasuries, which are likely to provide skimpier returns than commodities and gold.
The stock market rally over the past year has made some riskaverse investors shift to bullion.
Jitti Tangsithpakdi, president of the Gold Traders Association, said the news report of the IMF selling gold, which would curb the global gold rally, is only a report with no grounds.
He said the IMF's gold sale needs approval from the US Congress and more than 100 member countries. The IMF is also under a sales quota of not more than 500 metric tonnes of gold per year.
"I can tell you that this is only a news report released by speculators. I believe that gold will reach its new high within a short period," he said.
Gold prices yesterday declined to under US$1,000 an ounce for the first time since September 15.
They said several central banks have reduced exposure to the US dollar as a reserve currency, while more institutional investors have shifted more of their portfolios to gold.
Yesterday, gold declined, further cooling a rally that sent prices above $1,000 an ounce this month, after the IMF approved bullion sales and as a rebound by the dollar curbed demand for an inflation hedge, according to Bloomberg.
The IMF's executive board approved sales of 403.3 metric tonnes valued at about $13 billion (Bt445 billion), pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks".
"I don't think it will affect the market too much," Jonathan Barratt, managing director at Commodity Broking Services, said on Monday. "It will either go to central banks or they might actually auction it off."
Morgan Stanley also said the IMF's approval to sell gold is not a "material threat to current prices" and kept its 2010 gold forecast at $1,000 an ounce, according to an emailed report yesterday.
Immediatedelivery bullion yesterday lost as much as $11.63, or 1.2 per cent, to $995.97 an ounce and traded at $1,000.20 by midmorning. The metal, which fell below $1,000 for the first time since September 15, added 0.2 per cent last week, a fifth gain.
The US Dollar Index, a gauge of the greenback against six major currencies, extended gains, climbing as much as 0.2 per cent. Some traders buy gold to preserve purchasing power when the US currency weakens. On Friday, gold prices in New York were at US$1,010.3 an ounce.
For the domestic market, gold bar prices early yesterday were quoted at Bt15,900 per baht weight for buying and Bt16,000 for selling, while gold ornaments were quoted at Bt15,675.44 for buying and Bt16,400 for selling.
Gold bar prices were at 2:40pm changed to Bt15,850 for buying and Bt15,950 for selling, while gold ornament prices were changed to Bt15,614.80 for buying and Bt16,350 for selling.
Gold has jumped 14 per cent so far this year on speculation that inflation will accelerate as the US economy emerges from the worst recession since the Great Depression. The precious metal rose 0.2 per cent last week, the fifth straight weekly gain and the longest streak since November 2007.
Bullion has jumped around 30 per cent since the collapse of Lehman Brothers last year.
Paisarn Krutdamrongchai, a senior executive of TMB Asset Management, pointed out that global gold prices still stand above $1,000 as several institutional investors have reduced their holdings of US treasuries, as they believe the US dollar would weaken. And they have turned to investing more via gold funds to diversify risks.
Prapas Tonpibulsak, CEO of Ayudhya Fund Management, believes global gold prices could set a new peak above the record high reached last year at $1,034 an ounce.
Most institutional investors and central banks view the US dollar as depreciating further, so several central banks have reduced their US dollar holdings.
Fund managers have also shifted their funds away from US treasuries, which are likely to provide skimpier returns than commodities and gold.
The stock market rally over the past year has made some riskaverse investors shift to bullion.
Jitti Tangsithpakdi, president of the Gold Traders Association, said the news report of the IMF selling gold, which would curb the global gold rally, is only a report with no grounds.
He said the IMF's gold sale needs approval from the US Congress and more than 100 member countries. The IMF is also under a sales quota of not more than 500 metric tonnes of gold per year.
"I can tell you that this is only a news report released by speculators. I believe that gold will reach its new high within a short period," he said.
NEW TMBAM CHIEF OUTLINES APPROACH
Somjin Sornpaisarn, the new CEO of TMB Asset Management, said yesterday that a new approach to boosting provident funds and greater cooperation with TMB Bank would help drive growth of his company.On September 1 Somjin replaced Jotika Savanananda, who recently resigned as CEO of TMBAM to join SCB Asset Management.
Somjin said he would retain the operating standards of the company with the strong point of a "passive investment" strategy to support him.
"TMBAM has been a prominent organisation particular in passive investment. Other services include 'extra cash card' and a call centre. The company's focus has been on unit holders. So the new funds that we'll launch will depend on market demand and will be done along with market education," he said.
Provident fund management would get most of his attention. By providing the employees of its clients a range of investment choices that fit their risk profiles, TMBAM could boost this business.
TMBAM offers up to seven choices for provident fund customers. Altogether 329 companies have entrusted TMBAM to manage their provident funds with more than 46,000 members, more than half of which can choose from a menu of investment products.
TMBAM would provide services and products via crossselling with its parent, TMB Bank, which has both corporate and retail customers.
The market has speculated that TMBAM would be folded into ING Funds (Thailand) Co, a subsidiary of ING Group, which is a major shareholder of TMB Bank.
Somjin said he would welcome any change.
"Whether it (TMBAM) would be merged or not, I don't know. But both asset management companies have different characters," he said.
329 companies with 46,000 members have entrusted TMBAM to manage their funds.
Somjin said he would retain the operating standards of the company with the strong point of a "passive investment" strategy to support him.
"TMBAM has been a prominent organisation particular in passive investment. Other services include 'extra cash card' and a call centre. The company's focus has been on unit holders. So the new funds that we'll launch will depend on market demand and will be done along with market education," he said.
Provident fund management would get most of his attention. By providing the employees of its clients a range of investment choices that fit their risk profiles, TMBAM could boost this business.
TMBAM offers up to seven choices for provident fund customers. Altogether 329 companies have entrusted TMBAM to manage their provident funds with more than 46,000 members, more than half of which can choose from a menu of investment products.
TMBAM would provide services and products via crossselling with its parent, TMB Bank, which has both corporate and retail customers.
The market has speculated that TMBAM would be folded into ING Funds (Thailand) Co, a subsidiary of ING Group, which is a major shareholder of TMB Bank.
Somjin said he would welcome any change.
"Whether it (TMBAM) would be merged or not, I don't know. But both asset management companies have different characters," he said.
329 companies with 46,000 members have entrusted TMBAM to manage their funds.
LOANS LIKELY TO GROW IN SECOND HALF
Lending by banks would likely pick up in the second half after a Bt212-billion drop in the first seven months of the year, Bank of Thailand (BOT) deputy governor Bandid Nijathaworn said.
The loan market would possibly improve in the second half of the year in keeping with economic recovery, as the export and agricultural sector would expand seaฌsonally in the fourth quarter.
Manufacturers would expand investment to accuฌmulate stock while the govฌernment's spending would help drive demand for loans of the real sector particularly in construction, he said after a quarterly meeting with the Thai Bankers' Association.
"If the economy picks up in the second half, demand for loans will also pick up, especially working capital," said the deputy governor.
He said the improved loan marฌket would be beneficial to the entire economy as well as the real sector, particularly smallandmediumsized enterprises (SMEs), which have seen a sharp decline in lending over the past seven months.
The banking system's loans fell Bt212 billion or 3.68 per cent over the past seven months compared with the end of last year. It was the result of a drop in demand for credit folฌlowing the economic slowdown and commercial banks' tightening of loan approvals.
Bandid said month-on-month lending has contracted at a slower pace, primarily marking the neutral pace in August, which indicated rising demand for loans.
The loans have contracted on a yearonyear basis. Whether they would expand in the rest of the year would depend on how the economy would pick up.
"The economic recovery and improving business confidence would be positive factors for the loan market as liquidity and regulation are not obstacles," he said.
Many banks have projected that the demand for loans would increase largely in the fourth quarter of the year. The demand would be from the export sector as it would benefit from the global economฌic recovery, and from the agricultural sector.
Meanwhile, the central bank has asked the banks to encourage SMEs to join the government's creditinsurance scheme worth Bt30 billion after the government approved to relax rules such as fee reduction.
The central bank has played the role of intermediary between crediฌtors and debtors to expand debt maturity.
It has encouraged banks to provide information, such as domestic and global economic data to SMEs to enable them make business decisions.
"SMEs give importance to the market and industry outlook. If the banks provide information, it will be beneficial to SMEs," said Bandid.
The loan market would possibly improve in the second half of the year in keeping with economic recovery, as the export and agricultural sector would expand seaฌsonally in the fourth quarter.
Manufacturers would expand investment to accuฌmulate stock while the govฌernment's spending would help drive demand for loans of the real sector particularly in construction, he said after a quarterly meeting with the Thai Bankers' Association.
"If the economy picks up in the second half, demand for loans will also pick up, especially working capital," said the deputy governor.
He said the improved loan marฌket would be beneficial to the entire economy as well as the real sector, particularly smallandmediumsized enterprises (SMEs), which have seen a sharp decline in lending over the past seven months.
The banking system's loans fell Bt212 billion or 3.68 per cent over the past seven months compared with the end of last year. It was the result of a drop in demand for credit folฌlowing the economic slowdown and commercial banks' tightening of loan approvals.
Bandid said month-on-month lending has contracted at a slower pace, primarily marking the neutral pace in August, which indicated rising demand for loans.
The loans have contracted on a yearonyear basis. Whether they would expand in the rest of the year would depend on how the economy would pick up.
"The economic recovery and improving business confidence would be positive factors for the loan market as liquidity and regulation are not obstacles," he said.
Many banks have projected that the demand for loans would increase largely in the fourth quarter of the year. The demand would be from the export sector as it would benefit from the global economฌic recovery, and from the agricultural sector.
Meanwhile, the central bank has asked the banks to encourage SMEs to join the government's creditinsurance scheme worth Bt30 billion after the government approved to relax rules such as fee reduction.
The central bank has played the role of intermediary between crediฌtors and debtors to expand debt maturity.
It has encouraged banks to provide information, such as domestic and global economic data to SMEs to enable them make business decisions.
"SMEs give importance to the market and industry outlook. If the banks provide information, it will be beneficial to SMEs," said Bandid.
Dollar rises on short covering, sterling suffers
The dollar rose broadly yesterday, extending its pullback from a one-year low against the euro as traders continued to trim short positions in the US currency following broad losses so far this month.
Agains t the yen, the dollar rose nearly a full percent on the day after speculative flows pushed the US currency higher in quiet trade in Asia, where markets in Japan and Singapore were closed for holidays.
The pound continued to come under selling pressure, hitting a five-month low against the euro after the Bank of England said the pound's long-r un sustainable exchange rate may have fallen due to an increased focus on Britain's economic imbalances following the global credit crisis.
By 0738 GMT, the euro had slipped 0.3% to $1.4662, easing from $1.4768 hit late last week, its strongest since September 2008.
The dollar was up 0.8% at 92.00 yen,near the day's high around 92.20 yen touched in early European trade.
Traders said leveraged names and momentum funds took advantage of thin Toky o trade to tr igger stop-loss orders above 91.60 yen, pushing the pair through technical resistance at 91.80 yen.
Analysts said mounting short positions in the dollar may be a signal that it will recover some of its recent losses this week.
"There's already a lot of long euro/dollar positions in the mar ket so it's difficult to push the pair higher," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
Agains t the yen, the dollar rose nearly a full percent on the day after speculative flows pushed the US currency higher in quiet trade in Asia, where markets in Japan and Singapore were closed for holidays.
The pound continued to come under selling pressure, hitting a five-month low against the euro after the Bank of England said the pound's long-r un sustainable exchange rate may have fallen due to an increased focus on Britain's economic imbalances following the global credit crisis.
By 0738 GMT, the euro had slipped 0.3% to $1.4662, easing from $1.4768 hit late last week, its strongest since September 2008.
The dollar was up 0.8% at 92.00 yen,near the day's high around 92.20 yen touched in early European trade.
Traders said leveraged names and momentum funds took advantage of thin Toky o trade to tr igger stop-loss orders above 91.60 yen, pushing the pair through technical resistance at 91.80 yen.
Analysts said mounting short positions in the dollar may be a signal that it will recover some of its recent losses this week.
"There's already a lot of long euro/dollar positions in the mar ket so it's difficult to push the pair higher," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
Britain's RBS mulls rights issue
Britain's Royal Bank of Scotland is considering approaching the market for extra money to avoid giving more control to the government - the second bank to mull such a move, reports said on Sunday.
RBS, which is 70 per cent owned by taxpayers after being bailed out in the global financial crisis, is preparing to join the government's insurance scheme for toxic assets, reports said, citing unnamed sources.
However, it is also considering a 3 billion pound to 4 billion pound (Bt164 billion to Bt219 billion) share issue to reduce the stake it would hand the government for joining its Asset protection Scheme.
RBS chief executive Stephen Hester is still "putting out feelers" about a "modest-sized" share issue, the Financial Times reported.
"RBS are looking to gauge investor appetite for a small, modest equity issue," a source was quoted saying.
RBS could put 325 billion pound worth of toxic assets into the scheme, which provides guarantees for risky assets, and would have to issue 19 billion pound of non-voting shares to the government as a fee, the newspaper said.
Raising fresh capital by issuing new shares could stop the government's share of the bank increasing from 70 per cent to a possible 84.5 per cent, the BBC said.
RBS, which is 70 per cent owned by taxpayers after being bailed out in the global financial crisis, is preparing to join the government's insurance scheme for toxic assets, reports said, citing unnamed sources.
However, it is also considering a 3 billion pound to 4 billion pound (Bt164 billion to Bt219 billion) share issue to reduce the stake it would hand the government for joining its Asset protection Scheme.
RBS chief executive Stephen Hester is still "putting out feelers" about a "modest-sized" share issue, the Financial Times reported.
"RBS are looking to gauge investor appetite for a small, modest equity issue," a source was quoted saying.
RBS could put 325 billion pound worth of toxic assets into the scheme, which provides guarantees for risky assets, and would have to issue 19 billion pound of non-voting shares to the government as a fee, the newspaper said.
Raising fresh capital by issuing new shares could stop the government's share of the bank increasing from 70 per cent to a possible 84.5 per cent, the BBC said.
ZOELLICK URGES BALANCED GROWTH
World Bank president Robert Zoellick yesterday urged the Group of 20 leaders to set an ambitious agenda of "responsible globalisation" at this week's summit.
Zoellick said the summit should include efforts to promote more balanced growth with financial stability, development and climate change, rather than the narrow focus set at the last G-20 summit in London in April.
"The challenge for the G-20 iss how do you sustain the momentum and cooperation they were able to achieve cooperation they were able to achieve when staring into the abyss at the time of the London summit as the crisis wanes?" Zoellick told the Financial Times.
US President Barack Obama hosts G-20 leaders in Pittsburgh starting Thursday for two days of talks aimed at tightening regulations to ensure that a similar global financial crisis never happens again.
"The core message of Pittsburgh needs to be more than implementing the agenda set in London, which was mostly about financial stability or reforming bankers' bonuses," Zoellick said.
"I would like the G-20 to talk about responsibly globalisation. That would capture balanced global growth, financial stability, climate change, help for the poorest including our proposal for a new facility to help countries cope with economic shocks not of their own making," he added.
Zoellick also warned of rising protectionism and called for a robust G-20 response. "We have a low-grade fever of trade tensions and the temperature is starting to rise," he told the Financial Times. he urged the United States and China to settle their dispute over imports. The United States last week imposed punitive tariffs of 35 per cent on Chinese-made tyre imports - a move that prompted Beijing to lodge a complaint at the World Trade Organisation.
The World Bank last week urged the G-20 nations to step up aid to the poorest countries, saying they lack billions of dollars for critical spending to weather the global economic crisis.
A year after the collapse of Lehman Brothers plunged global finance into chaos, G-20 leaders will try to force banks to build bigger capital safety cushions, while avoiding a clash over bonuses.
Nearly six months have passed since the last G-20 summit in London and the top world economies have since edged closer to agreeing new regulations to prevent or mitigate future bank failures, but some hard bargaining remains.
Bonuses looked likely to be the hot issue, with European capitals seeking to force London and New York to cap the massive payouts they feel encourage excessive risk-taking. But signs of consensus have emerged ahead of the summit Thursday-Friday in the American city of Pittsburgh, with leaders anxious to avoid an embarrassing row on the issue - a highly symbolic one for angry taxpayers.
The US Federal Reserve agreed to tie compensation more closely to risk and to defer payments, while French President Nicolas Sarkozy appears to have stepped back from his earlier demand for mandatory caps.
A deal therefore looks possible on bonuses and checking bankers' enormous salaries, but G-20 chiefs are keen to reach a wider accord on a package of measures to strengthen banks. On the table will be recommendations from the "Basel Committee on Banking Supervision" aimed at drawing lessons from the collapse of Lehman and the crises that hit European groups Fortis and Dexia and Iceland's Kaupthing.
The committee, representing central bankers and regulators from leading G-20 states and other nations, wants banks to simplify their structures to make it easier to wind down their international operations in the event of a crisis.
These "Basel II measures" have been welcomed by European governments, which would now like to see the G-20 as a whole adopt them as the foundations of a new, more stable international financial system.
Washington, however, would like to move past Basel and - within three years - strike a broader deal to increase the amount of capital each bank needs to hold as a back-up in case its liabilities threaten to overwhelm it. US Treasury Secretary Timothy Geithner came to a meeting of G-20 finance ministers in London this month to urge "greater urgency" in making banks increase their capital reserves as a buffer against hard times.
France and Germany, among others, believe Basel II goes for enough, and are resistant to the idea of renegotiating minimum capital levels, fearing that US banks - which thye see as having lax accountancy standards - will benefit.
Part of the US plan would be for banks to hold fewer assets in complex securities, a mixture of debt and equity, and more in liquid assets. Such a rule would hit European banks harder than American ones.
The subject "obsesses the Americans", according to one source involved in the pre-summit negotiations, and some observers predict it will become the main sticking point.
"If the way the rules are applied is such that it puts European institutions at a disadvantage, it won't be acceptable," wanred Thomas Philippon, a French professor at the Stern Business School in New York.
While differences remain on bonuses and bank liquidity, there are other areas on which the G-20 leaders are closer to agreement.
They could approve new rules on leverage, a bank's ratio of capital to liabilities, and the need for so-called "living wills", plans to allow dead banks to continue trading while their partners disentangle their business.
Basel II would also ensure banks make more detailed disclosures of their exposure to complex products such as asset-backed securities, and seek means to discourage them from becoming too big or too complex to be allowed to fail.
Zoellick said the summit should include efforts to promote more balanced growth with financial stability, development and climate change, rather than the narrow focus set at the last G-20 summit in London in April.
"The challenge for the G-20 iss how do you sustain the momentum and cooperation they were able to achieve cooperation they were able to achieve when staring into the abyss at the time of the London summit as the crisis wanes?" Zoellick told the Financial Times.
US President Barack Obama hosts G-20 leaders in Pittsburgh starting Thursday for two days of talks aimed at tightening regulations to ensure that a similar global financial crisis never happens again.
"The core message of Pittsburgh needs to be more than implementing the agenda set in London, which was mostly about financial stability or reforming bankers' bonuses," Zoellick said.
"I would like the G-20 to talk about responsibly globalisation. That would capture balanced global growth, financial stability, climate change, help for the poorest including our proposal for a new facility to help countries cope with economic shocks not of their own making," he added.
Zoellick also warned of rising protectionism and called for a robust G-20 response. "We have a low-grade fever of trade tensions and the temperature is starting to rise," he told the Financial Times. he urged the United States and China to settle their dispute over imports. The United States last week imposed punitive tariffs of 35 per cent on Chinese-made tyre imports - a move that prompted Beijing to lodge a complaint at the World Trade Organisation.
The World Bank last week urged the G-20 nations to step up aid to the poorest countries, saying they lack billions of dollars for critical spending to weather the global economic crisis.
A year after the collapse of Lehman Brothers plunged global finance into chaos, G-20 leaders will try to force banks to build bigger capital safety cushions, while avoiding a clash over bonuses.
Nearly six months have passed since the last G-20 summit in London and the top world economies have since edged closer to agreeing new regulations to prevent or mitigate future bank failures, but some hard bargaining remains.
Bonuses looked likely to be the hot issue, with European capitals seeking to force London and New York to cap the massive payouts they feel encourage excessive risk-taking. But signs of consensus have emerged ahead of the summit Thursday-Friday in the American city of Pittsburgh, with leaders anxious to avoid an embarrassing row on the issue - a highly symbolic one for angry taxpayers.
The US Federal Reserve agreed to tie compensation more closely to risk and to defer payments, while French President Nicolas Sarkozy appears to have stepped back from his earlier demand for mandatory caps.
A deal therefore looks possible on bonuses and checking bankers' enormous salaries, but G-20 chiefs are keen to reach a wider accord on a package of measures to strengthen banks. On the table will be recommendations from the "Basel Committee on Banking Supervision" aimed at drawing lessons from the collapse of Lehman and the crises that hit European groups Fortis and Dexia and Iceland's Kaupthing.
The committee, representing central bankers and regulators from leading G-20 states and other nations, wants banks to simplify their structures to make it easier to wind down their international operations in the event of a crisis.
These "Basel II measures" have been welcomed by European governments, which would now like to see the G-20 as a whole adopt them as the foundations of a new, more stable international financial system.
Washington, however, would like to move past Basel and - within three years - strike a broader deal to increase the amount of capital each bank needs to hold as a back-up in case its liabilities threaten to overwhelm it. US Treasury Secretary Timothy Geithner came to a meeting of G-20 finance ministers in London this month to urge "greater urgency" in making banks increase their capital reserves as a buffer against hard times.
France and Germany, among others, believe Basel II goes for enough, and are resistant to the idea of renegotiating minimum capital levels, fearing that US banks - which thye see as having lax accountancy standards - will benefit.
Part of the US plan would be for banks to hold fewer assets in complex securities, a mixture of debt and equity, and more in liquid assets. Such a rule would hit European banks harder than American ones.
The subject "obsesses the Americans", according to one source involved in the pre-summit negotiations, and some observers predict it will become the main sticking point.
"If the way the rules are applied is such that it puts European institutions at a disadvantage, it won't be acceptable," wanred Thomas Philippon, a French professor at the Stern Business School in New York.
While differences remain on bonuses and bank liquidity, there are other areas on which the G-20 leaders are closer to agreement.
They could approve new rules on leverage, a bank's ratio of capital to liabilities, and the need for so-called "living wills", plans to allow dead banks to continue trading while their partners disentangle their business.
Basel II would also ensure banks make more detailed disclosures of their exposure to complex products such as asset-backed securities, and seek means to discourage them from becoming too big or too complex to be allowed to fail.
Fed likely to keep aid in place
With the economy starting to rebound but still fragile, Federal Reserve policymakers this week are expected to keep emergency programmes to encourage spending and borrowing intact. But to avoid unleashing inflation later on, they are likely to consider ways to rein in programmes designed to keep mortgage rates down and get banks to lend more freely.
As the economy improves, the Fed will face more pressure to wind down some of its programmes. For now, Fed chairman Ben Bernanke and his colleagues probably will stay the course while striking a more optimistic tone at a two-day meeting that ends on Wednesday.
"I think they are feeling more confident about the recovery," said Christopher Rupkey, economist at Bank of Tokyo-Mitsubishi.
Fed policymakers are all but sure to keep interest rates at a record low near zero to nurture a tentative recovery.And they will probably stick with their goal of buying $1.45 trillion in mortgagebacked securities and debt issued by Fannie Mae and Freddie Mac by year's end. The programme is intended to lower rates on home mortgages and support the housing market.
The real estate industry, which led the country into its worst recession since the 1930s, is starting to heal. Sales are firming. And prices in some markets are edging up after a dizzying plunge.
Still, the housing market is being propped up by the Fed's programmes,and its health remains precarious. Foreclosures are expected to keep climbing.Soured loans will still weigh on banks.More homeowners are expected to go under water, meaning they owe their lender more than their home is worth.
The Fed's efforts have helped lower mortgage rates. Rates on 30-year loans dipped to 5.04%, Freddie Mac reported last week. That was down from 5.07%the previous week and 5.78% a year earlier.
"Given the delicate state of the housing market, Fed policymakers will be loath to make any major changes," economists said.
"Why upset the apple cart and spook the market?" said Mark Zandi, chief economist at Moody's Economy.com."The economy and the housing market can still use the help."
Still, some analysts think the Fed could opt to slow its purchases. It could buy less than the full $1.45 trillion by year's end. At the Fed's previous meeting in August, some Fed officials said a "tapering" of the mortgage-buying program "could be helpful," according to minutes of the private deliberations.
At that meeting, policymakers said they would gradually slow the pace of a program to buy $300 billion in Treasury securities and shut it down at the end of October, a month later than previously scheduled. That programme is designed to force rates down for mortgages and other consumer debt to get Americans to spend more.
But the programme's effectiveness has been questioned on Wall Street and Capitol Hill. Critics have complained that the Fed appears to be printing money to pay for the government's spending binge.
Most economists think the Fed will keep the target range for its bank lending rate at zero to 0.25% through the rest of the year. If it does, commercial banks'prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay at about 3.25%, the lowest in decades.
Bernanke recently declared the recession "very likely over." Factory activity is growing. Consumer spending and home sales are stabilising, and carbuying got a lift from the "cash for clunkers" rebate programme. Some residential construction is picking up.
But Bernanke warned that the pace of economic growth probably wouldn't be strong enough to generate many new jobs and prevent the unemployment rate from rising. The rate hit a 26-year high of 9.7% in August and is expected to top 10% this year.
Inflation, meanwhile, is likely to remain tame for now. The weak job market means employers won't feel generous with wages. Idle plants also will help limit inflation.
Even with a pick-up in production,factories are operating well below capacity. In light of consumer caution and expectations for a lethargic recovery,companies won't be likely to raise prices.
As the economy improves, the Fed will face more pressure to wind down some of its programmes. For now, Fed chairman Ben Bernanke and his colleagues probably will stay the course while striking a more optimistic tone at a two-day meeting that ends on Wednesday.
"I think they are feeling more confident about the recovery," said Christopher Rupkey, economist at Bank of Tokyo-Mitsubishi.
Fed policymakers are all but sure to keep interest rates at a record low near zero to nurture a tentative recovery.And they will probably stick with their goal of buying $1.45 trillion in mortgagebacked securities and debt issued by Fannie Mae and Freddie Mac by year's end. The programme is intended to lower rates on home mortgages and support the housing market.
The real estate industry, which led the country into its worst recession since the 1930s, is starting to heal. Sales are firming. And prices in some markets are edging up after a dizzying plunge.
Still, the housing market is being propped up by the Fed's programmes,and its health remains precarious. Foreclosures are expected to keep climbing.Soured loans will still weigh on banks.More homeowners are expected to go under water, meaning they owe their lender more than their home is worth.
The Fed's efforts have helped lower mortgage rates. Rates on 30-year loans dipped to 5.04%, Freddie Mac reported last week. That was down from 5.07%the previous week and 5.78% a year earlier.
"Given the delicate state of the housing market, Fed policymakers will be loath to make any major changes," economists said.
"Why upset the apple cart and spook the market?" said Mark Zandi, chief economist at Moody's Economy.com."The economy and the housing market can still use the help."
Still, some analysts think the Fed could opt to slow its purchases. It could buy less than the full $1.45 trillion by year's end. At the Fed's previous meeting in August, some Fed officials said a "tapering" of the mortgage-buying program "could be helpful," according to minutes of the private deliberations.
At that meeting, policymakers said they would gradually slow the pace of a program to buy $300 billion in Treasury securities and shut it down at the end of October, a month later than previously scheduled. That programme is designed to force rates down for mortgages and other consumer debt to get Americans to spend more.
But the programme's effectiveness has been questioned on Wall Street and Capitol Hill. Critics have complained that the Fed appears to be printing money to pay for the government's spending binge.
Most economists think the Fed will keep the target range for its bank lending rate at zero to 0.25% through the rest of the year. If it does, commercial banks'prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay at about 3.25%, the lowest in decades.
Bernanke recently declared the recession "very likely over." Factory activity is growing. Consumer spending and home sales are stabilising, and carbuying got a lift from the "cash for clunkers" rebate programme. Some residential construction is picking up.
But Bernanke warned that the pace of economic growth probably wouldn't be strong enough to generate many new jobs and prevent the unemployment rate from rising. The rate hit a 26-year high of 9.7% in August and is expected to top 10% this year.
Inflation, meanwhile, is likely to remain tame for now. The weak job market means employers won't feel generous with wages. Idle plants also will help limit inflation.
Even with a pick-up in production,factories are operating well below capacity. In light of consumer caution and expectations for a lethargic recovery,companies won't be likely to raise prices.
Lending to recover in Q4, says BoT
Bank lending trends for the fourth quarter are expected to pick up strongly, as companies boost production and rebuild inventories in light of the improving global economy, according to the Bank of Thailand.
Bandid Nijathaworn, a deputy central bank governor, said outstanding credit in the financial system fell by 212 billion baht or 3.68% year-on-year for the first seven months of the year.
But preliminary data for August show that demand for credit is picking up,particularly for working capital.
"If the recovery can be sustained,then it will help boost credit demand.For the first half, outstanding credit fell 3% year-on-year, but now we have flat growth," Dr Bandid said.
"On a month-to-month basis, we should see positive credit growth, although figures remain negative yearon-year."
Demand in the fourth quarter should continue to increase thanks to seasonal factors, industry restocking and higher spending and investment by the public sector.
Dr Bandid said market liquidity remained plentiful and would not be a constraint for loan growth. Economic uncertainties, both for Thailand and the global economy, remained the largest constraint for bankers.
The central bank met with representatives of local banks yesterday to discuss economic trends, as well as new relaxed terms by the Small Industry Credit Guarantee Corp for small business loans.
Bandid Nijathaworn, a deputy central bank governor, said outstanding credit in the financial system fell by 212 billion baht or 3.68% year-on-year for the first seven months of the year.
But preliminary data for August show that demand for credit is picking up,particularly for working capital.
"If the recovery can be sustained,then it will help boost credit demand.For the first half, outstanding credit fell 3% year-on-year, but now we have flat growth," Dr Bandid said.
"On a month-to-month basis, we should see positive credit growth, although figures remain negative yearon-year."
Demand in the fourth quarter should continue to increase thanks to seasonal factors, industry restocking and higher spending and investment by the public sector.
Dr Bandid said market liquidity remained plentiful and would not be a constraint for loan growth. Economic uncertainties, both for Thailand and the global economy, remained the largest constraint for bankers.
The central bank met with representatives of local banks yesterday to discuss economic trends, as well as new relaxed terms by the Small Industry Credit Guarantee Corp for small business loans.
EX-FINANCE MINISTER SOUNDS PUBLIC-DEBT WARNING
Former finance minister Thanong Bidaya has expressed concern about the level of public investment under the government's Thai Khemkhaeng (TKK) project, saying it might be investing too much over a very short period.
Expenditure under TKK is expected to amount to Bt1.4 trillion over the next three years.
Thanong told a seminar hosted by the National Economic and Social Development Board yesterday that he was concerned about rising public debt, which could cause high inflation and erode Thailand's sovereign credit rating.
While he was speaking, the Finance Ministry was preparing to propose today that the Cabinet approve borrowing of Bt801 billion for the new fiscal year starting October 1. The ministry plans to raise the funds to finance a budget deficit of Bt350 billion, public investment next year worth Bt270 billion and the restructuring of Financial Institutions Development Fund debt worth Bt181 billion. The ministry plans to issue long-term and savings bonds, plus borrow directly from banks.
Thanong said the government might not need to invest too much over the next three years. In any case, the government's plan could be delayed by red tape in the budgeting procedure, which has seen public investment in the past take several years to implement.
The former finance minister said the government had not yet set a clear plan of how public debts would be repaid. The level of public debt is expected to rise to about 60 per cent of gross domestic product by 2012, from 40 per cent now.
Thanong said the government was being too optimistic in predicting the economy would expand about 5 per cent in years to come. At best, economic growth will be 2-3 per cent, which will create difficulty for the next government in serving public debts, he said.
Although the government is not borrowing abroad, domestic borrowing can create trouble.
"It will be all right if the government borrows from the market or those having ample liquidity. But if it simply prints more money, it will cause high inflation," he said.
He also attacked the government's policy of boosting consumption, which he said would not be sustainable. The government should instead be providing support, such as deregulation, to help exporters. It should also find new markets for them.
While economists continue to debate the "shape" of the global economic recovery - whether its graph form will be L- or U-shaped - Thanong said a high risk remained.
He believes the recovery will be U-shaped, or a gradual recovery.
However, if the world's private sectors do not recover after many governments have injected huge amounts of liquidity into their economies, then recovery will be delayed, he said.
Thanong also said the government might need to centralise supervision of financial institutions. He said it should learn a lesson from the United States, which failed to prevent the financial crisis because there were many regulators supervising financial institutions, and their efforts were not coordinated.
In the face of such a crisis, developed countries like the US and those in Europe could take care of themselves, but small countries like Thailand would face great difficulty rescuing their economies.
Expenditure under TKK is expected to amount to Bt1.4 trillion over the next three years.
Thanong told a seminar hosted by the National Economic and Social Development Board yesterday that he was concerned about rising public debt, which could cause high inflation and erode Thailand's sovereign credit rating.
While he was speaking, the Finance Ministry was preparing to propose today that the Cabinet approve borrowing of Bt801 billion for the new fiscal year starting October 1. The ministry plans to raise the funds to finance a budget deficit of Bt350 billion, public investment next year worth Bt270 billion and the restructuring of Financial Institutions Development Fund debt worth Bt181 billion. The ministry plans to issue long-term and savings bonds, plus borrow directly from banks.
Thanong said the government might not need to invest too much over the next three years. In any case, the government's plan could be delayed by red tape in the budgeting procedure, which has seen public investment in the past take several years to implement.
The former finance minister said the government had not yet set a clear plan of how public debts would be repaid. The level of public debt is expected to rise to about 60 per cent of gross domestic product by 2012, from 40 per cent now.
Thanong said the government was being too optimistic in predicting the economy would expand about 5 per cent in years to come. At best, economic growth will be 2-3 per cent, which will create difficulty for the next government in serving public debts, he said.
Although the government is not borrowing abroad, domestic borrowing can create trouble.
"It will be all right if the government borrows from the market or those having ample liquidity. But if it simply prints more money, it will cause high inflation," he said.
He also attacked the government's policy of boosting consumption, which he said would not be sustainable. The government should instead be providing support, such as deregulation, to help exporters. It should also find new markets for them.
While economists continue to debate the "shape" of the global economic recovery - whether its graph form will be L- or U-shaped - Thanong said a high risk remained.
He believes the recovery will be U-shaped, or a gradual recovery.
However, if the world's private sectors do not recover after many governments have injected huge amounts of liquidity into their economies, then recovery will be delayed, he said.
Thanong also said the government might need to centralise supervision of financial institutions. He said it should learn a lesson from the United States, which failed to prevent the financial crisis because there were many regulators supervising financial institutions, and their efforts were not coordinated.
In the face of such a crisis, developed countries like the US and those in Europe could take care of themselves, but small countries like Thailand would face great difficulty rescuing their economies.
India's central bank walks an inflation tightrope
India's central bank faces a tricky balancing act in fighting inflation expected to surge in coming months and keeping the country's fragule economic recovery on track, economists say.
Central banks across the world are facing similar dilemmas after cutting interest rates aggressively in the face of the world financial crisis and now having to decide when to start tightening policy as recoveries take root.
Asia's third-largest economy reported a return to inflation last week as a result of soaring food costs fuelled by a bad monsoon and economists said they expected further sharp price rises in the months ahead.
Annual inflation, which had been in negative terrain for 14weeks, rose 0.12 per cent for the week to September 5, according to the latest Wholesale Price Index (WPI) figures, India's most watched cost-of-living benchmark.
"In the coming weeks, inflation is expected to rise on a sustained basis, up to 7 per cent by March 2010," said Siddhartha Sanyal, economist at Edelweiss Securities. Some analysts believe inflation could hit eight per cent by March.
The resurfacing of inflation, along with a still nascent economic recovery, has confronted the central bank with a dilemma about when to take the first steps to tighten monetary policy to keep a lid on prices. Reserve Bank of India governor Duvvuri Subbarao struck a hawkish tone last week, saying "inflationary pressure [in India] is a more urgent concern" than elsewhere, raising the prospect he might move before other central bankers.
But at the same time, he said, "We will not exit from the accommodative monetary policy unless we are assured recovery is secure."
Economists said Subbarao's words under-socored the delicate nature of the bank's task.
"A timely exit policy is critical to achieve the fine balance between avoiding risks to domestic asset prices and choking early signs of growth recovery," Sanyal said.
The economy grew by 6.7 per cent in the year ended March 31 - the slowest rate since 2003 and down from 9 per cent a year earlier.
The central bank expects growth of "around 6 per cent" for the current fiscal year - still strong by anemic world standards but not enough to make a dent in India's widespread poverty.
In coming months, the bank may raise the percentage of cash commercial banks must keep in reserve - the cash reserve ratio - instead of hiking policy lending rates directly, analysts said.
Central banks across the world are facing similar dilemmas after cutting interest rates aggressively in the face of the world financial crisis and now having to decide when to start tightening policy as recoveries take root.
Asia's third-largest economy reported a return to inflation last week as a result of soaring food costs fuelled by a bad monsoon and economists said they expected further sharp price rises in the months ahead.
Annual inflation, which had been in negative terrain for 14weeks, rose 0.12 per cent for the week to September 5, according to the latest Wholesale Price Index (WPI) figures, India's most watched cost-of-living benchmark.
"In the coming weeks, inflation is expected to rise on a sustained basis, up to 7 per cent by March 2010," said Siddhartha Sanyal, economist at Edelweiss Securities. Some analysts believe inflation could hit eight per cent by March.
The resurfacing of inflation, along with a still nascent economic recovery, has confronted the central bank with a dilemma about when to take the first steps to tighten monetary policy to keep a lid on prices. Reserve Bank of India governor Duvvuri Subbarao struck a hawkish tone last week, saying "inflationary pressure [in India] is a more urgent concern" than elsewhere, raising the prospect he might move before other central bankers.
But at the same time, he said, "We will not exit from the accommodative monetary policy unless we are assured recovery is secure."
Economists said Subbarao's words under-socored the delicate nature of the bank's task.
"A timely exit policy is critical to achieve the fine balance between avoiding risks to domestic asset prices and choking early signs of growth recovery," Sanyal said.
The economy grew by 6.7 per cent in the year ended March 31 - the slowest rate since 2003 and down from 9 per cent a year earlier.
The central bank expects growth of "around 6 per cent" for the current fiscal year - still strong by anemic world standards but not enough to make a dent in India's widespread poverty.
In coming months, the bank may raise the percentage of cash commercial banks must keep in reserve - the cash reserve ratio - instead of hiking policy lending rates directly, analysts said.
UK women way behind men in the pay and bonus stakes
Women at some of Britain's top banks and finance companies take home bonuses five times smaller than their male colleagues, according to a government-commissioned study released recently.
The average annual bonus for women was nearly 2,900 pounds (Bt159,000) compaed to about 14,500 pound for men, the report carried out by the Equality and Human Rights commission (EHRC) said.
The findings come after finance ministers from the Group of 20 largest and fastest-emerging economies called at the weekend for "global standards" on pay but stooped short of backing calls for bonuses to be capped.
The survey of 44 companies employing almost a quarter of the workforce in the sector also found that most women starting new jobs in finance companies received olower salaries than men.
The difference in pay for men and women of comparable seniority in firms surveyed was 39 per cent, rising to 47 per cent for total earnings when bonuses, overtime and performance-related payments were taken ibto account.
The study also showed that fewer than half the companies were making an effort to address the pay gap, with just one in four undertaking a pay audit to ensure women were not paid less than men.
Trevor Phillips, chairman of the EHRC, said: "The financial sector has the potential to play a central role in Britain's recovery but it has to address this shocking disparity of rewards. "By bringing down arbitarary bariers, and changing practices that, intentionally or not, inhibit women's success, financial firms have the chance to boost morale, bring on new talent and maximise the potential of their existing employees."
Harriet Harman, Britain's minister for women and equality, said: "We cannot tackle discrimination if it is hidden which is why I asked the commission to produce this report.
The average annual bonus for women was nearly 2,900 pounds (Bt159,000) compaed to about 14,500 pound for men, the report carried out by the Equality and Human Rights commission (EHRC) said.
The findings come after finance ministers from the Group of 20 largest and fastest-emerging economies called at the weekend for "global standards" on pay but stooped short of backing calls for bonuses to be capped.
The survey of 44 companies employing almost a quarter of the workforce in the sector also found that most women starting new jobs in finance companies received olower salaries than men.
The difference in pay for men and women of comparable seniority in firms surveyed was 39 per cent, rising to 47 per cent for total earnings when bonuses, overtime and performance-related payments were taken ibto account.
The study also showed that fewer than half the companies were making an effort to address the pay gap, with just one in four undertaking a pay audit to ensure women were not paid less than men.
Trevor Phillips, chairman of the EHRC, said: "The financial sector has the potential to play a central role in Britain's recovery but it has to address this shocking disparity of rewards. "By bringing down arbitarary bariers, and changing practices that, intentionally or not, inhibit women's success, financial firms have the chance to boost morale, bring on new talent and maximise the potential of their existing employees."
Harriet Harman, Britain's minister for women and equality, said: "We cannot tackle discrimination if it is hidden which is why I asked the commission to produce this report.
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