Tisco Securities and UBS were engaged yesterday as financial advisers for the sale of the 47.58 per cent of Siam City Bank (SCIB) held by the Bank of Thailand's rescue fund.
The other applicants for the job were Quant Group, Trinity Advisory 2001 and Phatra Securities.
Tongurai Limpiti, the assistant governor supervising the Financial Institutions Development Fund (FIDF), said strategy, planning and also the experience of the financialadvisers in terms of human resources and organisation were most in line with the requirements of the FIDF.
All qualifications met the terms of reference and gained the highest marks, he said.
Tisco completed the paperwork on October 22 and started meeting to prepare for the share sale on the same day.
It has been given a one-month deadline to finalise the plan.
The central bank may sell its shares in Siam City Bank in the second quarter of next year if the market is favourable, Tongurai said.
The FIDF seized the lender in the aftermath of the Asian financial crisis more than a decade ago.
SCIB is the seventh-largest bank, with Bt413.8 billion worth of assets at the end of June, according to a central bank statement.
Recently, Thanachart Bank expressed strong interest in FIDF's stake in SCIB.
Thanachart has asked for shareholder approval to increase its capital by Bt40 billion to support its intention to buy SCIB.
The Industrial and Commercial Bank of China is also a strong contender to buy the SCIB shares.
Saturday, October 31, 2009
CIMB THAI BANK SELLS ITS SATHORN OFFICE
CIMB Thai Bank yesterday sold its office block on Sathorn Road for just over Bt1 billion to an undisclosed buyer. The deal will be completed in December.
"We're pleased with the sale price, which we believe reflects the fair value of the property," said president and CEO Subhak Siwaraksa. "This sale forms part of the bank's rationalisation exercise to improve efficiency and reduce costs.
"We're operating with excess space at the moment, as the bank's office operations in Bangkok are spread between its buildings on Sathorn and Soi Langsuan. By early next year, we'll all be operating from one site in the Langsuan building."
The bank's board approved the sale of the Sathorn building earlier this month after an extensive bidding process attracted 20 interested buyers. The 2,706-squaremetre property consists of a 26storey tower block and a threestorey building.
Customers with accounts at that branch can continue to do business there until further notice.
CIMB Thai Bank, formerly known as BankThai, was acquired by the CIMB Group in January. As of June 30, it had Bt134 billion in assets and Bt7.1 billion in shareholders' funds.
"We're pleased with the sale price, which we believe reflects the fair value of the property," said president and CEO Subhak Siwaraksa. "This sale forms part of the bank's rationalisation exercise to improve efficiency and reduce costs.
"We're operating with excess space at the moment, as the bank's office operations in Bangkok are spread between its buildings on Sathorn and Soi Langsuan. By early next year, we'll all be operating from one site in the Langsuan building."
The bank's board approved the sale of the Sathorn building earlier this month after an extensive bidding process attracted 20 interested buyers. The 2,706-squaremetre property consists of a 26storey tower block and a threestorey building.
Customers with accounts at that branch can continue to do business there until further notice.
CIMB Thai Bank, formerly known as BankThai, was acquired by the CIMB Group in January. As of June 30, it had Bt134 billion in assets and Bt7.1 billion in shareholders' funds.
Tuesday, October 20, 2009
Dollar hits 14-month low vs basket, euro nears $1.50
The dollar hit a 14-month low against a basket of currencies yesterday on a cocktail of policymaker comments,but options-related buying kept it from pushing through $1.50 against the euro and 90 yen.
Strength in global stocks, fired by Apple Incs forecast-beating third-quarter earnings overnight, also fed traders appetite to sell dollars for higher-yielding currencies and assets more closely correlated with economic recovery.
Comments on the euros strength from an adviser to French President Nicolas Sarkozy and a Market News International report quoting an unnamed Chinese government source calling for a reversal of the dollars slide had limited impact.
Until the market hears much stronger rhetoric from leading policymakers like European Central Bank President JeanClaude Trichet, low US interest rates coupled with rising asset and commodity prices will probably weigh on the dollar,analysts say.
The dollar has been under sustained pressure this year due to expectations for low US interest rates and questions about its status as the worlds reserve currency.
At 1000 GMT the dollar index, a measure of its strength against six major currencies, was down 0.4% at 75.21 after dipping as low as 75.103, its lowest in 14 months.
After failing to take out options barriers at $1.50, the euro was last at $1.4978, up 0.1% on the day. It earlier touched a 14-month high of $1.4994, and slipped to $1.4955 after the Market News repor t on an unnamed Chinese gover nment sources concern over the dollar.
Strength in global stocks, fired by Apple Incs forecast-beating third-quarter earnings overnight, also fed traders appetite to sell dollars for higher-yielding currencies and assets more closely correlated with economic recovery.
Comments on the euros strength from an adviser to French President Nicolas Sarkozy and a Market News International report quoting an unnamed Chinese government source calling for a reversal of the dollars slide had limited impact.
Until the market hears much stronger rhetoric from leading policymakers like European Central Bank President JeanClaude Trichet, low US interest rates coupled with rising asset and commodity prices will probably weigh on the dollar,analysts say.
The dollar has been under sustained pressure this year due to expectations for low US interest rates and questions about its status as the worlds reserve currency.
At 1000 GMT the dollar index, a measure of its strength against six major currencies, was down 0.4% at 75.21 after dipping as low as 75.103, its lowest in 14 months.
After failing to take out options barriers at $1.50, the euro was last at $1.4978, up 0.1% on the day. It earlier touched a 14-month high of $1.4994, and slipped to $1.4955 after the Market News repor t on an unnamed Chinese gover nment sources concern over the dollar.
Saturday, October 17, 2009
GREENSPAN URGES BREAK-UP OF BIG BANKS
US regulators should consider breaking up large financial institutions considered "too big to fail", former Federal Reserve chairman Alan Greenspan said yesterday.'
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on foreign Relations in New Your.
"If they're too big to fail, they're too big," Greenspan said. "In 1911 we broke up Standard Oil - so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do."
At one point, no bank was considered too big to fail, he said. That changed after the Treasury Department under then-Secrretary Hank Paulson effectively nationalised Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns and American International Group.
"It's going to be very difficult to repair their credibility on that because when push came to shove, they didn't stand up," Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms' safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that would not work.
"I don't think merely raising the fees or capital on large institutions or taxing them is enough," he siad. "I think they'll absorb that, they'll work with that, and it's totally inefficient and they'll still be using the savings."
He said while "just really arbitrarily breaking down organisations into various different sizes" goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
"Failure is an integral part, a necessary part of a market system," he said. "If you start focusing on those who should be shrinking, it under mines growing standards of living and can even bring them down."
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on foreign Relations in New Your.
"If they're too big to fail, they're too big," Greenspan said. "In 1911 we broke up Standard Oil - so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do."
At one point, no bank was considered too big to fail, he said. That changed after the Treasury Department under then-Secrretary Hank Paulson effectively nationalised Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns and American International Group.
"It's going to be very difficult to repair their credibility on that because when push came to shove, they didn't stand up," Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms' safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that would not work.
"I don't think merely raising the fees or capital on large institutions or taxing them is enough," he siad. "I think they'll absorb that, they'll work with that, and it's totally inefficient and they'll still be using the savings."
He said while "just really arbitrarily breaking down organisations into various different sizes" goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
"Failure is an integral part, a necessary part of a market system," he said. "If you start focusing on those who should be shrinking, it under mines growing standards of living and can even bring them down."
Tuesday, October 13, 2009
Strong baht could hurt export targets
Thailand's exports are unlikely to achieve 10% growth next year if the government leaves the baht's appreciation unchecked,exporters warn.
"Ongoing baht strength will harm Thai shipments and weaken our competitiveness," said Pornsil Patchrintanakul,deputy secretary-general of the Board of Trade.
Mr Pornsil was one of a group of leading executives from more than 50 trade associations who yesterday met with Veerasak Jinarat, the vice-minister for Commerce.
The baht, quoted yesterday at 33.35 to the US dollar, is currently trading at a 14-month high and is up 4.4% since January.
Exporters said the baht has appreciated significantly faster against the dollar than competing currencies such as the Chinese yuan or the Vietnamese dong,hurting Thailand's trade competitiveness.
Exporters yesterday called on the central bank to help maintain the baht at about 36 baht per dollar to keep Thai exports competitive particularly for agriculture and food.
But Bank of Thailand Governor Tarisa Watanagase said the baht was moving in line with other Asian currencies. There was no need for a repeat of the 2006 capital controls to try to prevent a rise in the currency's strength.
"We are still taking care of the baht,"she said."But there is no need to have any capital controls as we have not seen speculation in the currency yet."
The central bank does plan to diversify its foreign reserves with other currencies in coming weeks, she said.
"We will do what we can," she said.The BoT has intervened steadily to slow the baht's rise to help Thailand's export-driven economy, but the currency's value against the dollar has still increased by about 2% since September.
The government is facing calls to help control costs by cutting import tariffs on raw materials and introducing a carbon tax.
Exporters urged the the government to accelerate establishing its own carbon and wastewater standards.
"The national carrier Thai Airways International, for instance, is subject to pay 800 million baht carbon tax to the EU in 2012 as it flies over EU's territorial sky and emits carbon dioxide to the global atmosphere," said Mr Pornsil."The Thai government should also issue the same standards and requirements requiring other airlines to pay carbon tax to Thailand."
Vollop Vitanakorn, vice chairman of Thai National Shippers' Council also warned Thailand was expected to suffer from an unskilled labour shortfall of about one million people over the next five years, as unskilled workers return to the agricultural sector as agricultural product prices rise.
In addition, the government's free education programme is expected to yield a skills improvement that will add to segment's labour shortage, he said.
"Ongoing baht strength will harm Thai shipments and weaken our competitiveness," said Pornsil Patchrintanakul,deputy secretary-general of the Board of Trade.
Mr Pornsil was one of a group of leading executives from more than 50 trade associations who yesterday met with Veerasak Jinarat, the vice-minister for Commerce.
The baht, quoted yesterday at 33.35 to the US dollar, is currently trading at a 14-month high and is up 4.4% since January.
Exporters said the baht has appreciated significantly faster against the dollar than competing currencies such as the Chinese yuan or the Vietnamese dong,hurting Thailand's trade competitiveness.
Exporters yesterday called on the central bank to help maintain the baht at about 36 baht per dollar to keep Thai exports competitive particularly for agriculture and food.
But Bank of Thailand Governor Tarisa Watanagase said the baht was moving in line with other Asian currencies. There was no need for a repeat of the 2006 capital controls to try to prevent a rise in the currency's strength.
"We are still taking care of the baht,"she said."But there is no need to have any capital controls as we have not seen speculation in the currency yet."
The central bank does plan to diversify its foreign reserves with other currencies in coming weeks, she said.
"We will do what we can," she said.The BoT has intervened steadily to slow the baht's rise to help Thailand's export-driven economy, but the currency's value against the dollar has still increased by about 2% since September.
The government is facing calls to help control costs by cutting import tariffs on raw materials and introducing a carbon tax.
Exporters urged the the government to accelerate establishing its own carbon and wastewater standards.
"The national carrier Thai Airways International, for instance, is subject to pay 800 million baht carbon tax to the EU in 2012 as it flies over EU's territorial sky and emits carbon dioxide to the global atmosphere," said Mr Pornsil."The Thai government should also issue the same standards and requirements requiring other airlines to pay carbon tax to Thailand."
Vollop Vitanakorn, vice chairman of Thai National Shippers' Council also warned Thailand was expected to suffer from an unskilled labour shortfall of about one million people over the next five years, as unskilled workers return to the agricultural sector as agricultural product prices rise.
In addition, the government's free education programme is expected to yield a skills improvement that will add to segment's labour shortage, he said.
Monday, October 12, 2009
TEN YEARS HAVE SHOWN REMARKABLE PROGRESS IN EUROPEAN SECURITY
2009 IS A LANDMARK YEAR for the European Union's role in the world. It marks 10 years of the European Security and Defence Policy (ESDP), during which the EU became a global provider of security, making a real difference to people's lives all over the world. At the same time, we are on the threshold of a new era when then Lison Treaty enters into force and provides fresh impetus for our external action.
In 10 years, we have deployed 20 operations on three continents to help prevent violence, restore peace and rebuild after a conflict. From Kabul to Pristina, from Ramallah to Kinshasa, the Eu is monitoring borders, overseeing peace agreements, training police forces, building up criminal justice systems and protecting shipping from pirate attacks. Thanks to our achievements, we are receiving more and more calls to help in a crisis or after a war. We have the credibility, the values and the will to do this.
The EU was ahead of its time in 1999. The comprehensive, multifaceted nature of our approach was novel. And the EU remains the only organisation that can call on a full panoply of instruments and resources that complement the traditional foreign policy tools of its member states, both to pre-empt or prevent a crisis and to restore peace and rebuild institutions after a conflict.
This is where the EU's unique added value lies. We combine humanitarian aid and support for institution-building and good governance with crisis-management capacities, technical and financial assistance, and political dialogue and mediation. The EU's joint civilian-military approach makes us flexible and able to offer tailor-made solutions to complex problems. Today's conflicts demonstrate lmore clearly than ever that a military solution is neither the sole nor the best option, particularly during the stabilisation of a crisis - a truth US President Barack Obama has also emphasised.
The ESDP first cut its teeth in the Balkans. When the Yogoslav wars broke out in the 1990's we watched as our neighbourhood burned because we had no means of responding to the crisis. We learned our lesson and organised ourselves, acquiring a set of capabilities coupled with decision-making procedures and a security doctrine. In 2003, we prevented a fresh out-break of hostilities in the former Yugoslav Republic of Macedonia through our diplomatic efforts and then deployed Operation Concordia. In 2004, Operation Althea took over from the Nato peacekeeping force in Bosnia and Herzegovina. Today, we are still deeply engaged in the Balkans, fighting organised crime and building up the institutions of law and order. For example, Eulex Kosovo is the largest EU mission to date, with some 2,000 staff, working in the police and judicial system and in mobile customs teams.
The EU's crisis-management and peace-building activities are not restricted to its backyard. We have made a real difference in Africa, helping for example to provide a secure environment for elections in the Democratic Republic of Congo and protecting refugees and aid workers from the fall-out of the Darfur crisis. Last year, we mounted Eunavfor, our first-ever naval operation, to compact piracy in the waters off Somalia. Who would have guessed 10 years ago that the EU would one day lead a taskforce of 13 frigates in the Indian Ocean that would cut the success rate of pirate attacks by half?
This year the EU has 12 operations running concurrently - more than ever before. Since 2003, some 70,000 men and women have been deployed in 23 crisis-management operations. They come from EU member states and non EU countries that also take part in our operations, including Norway, Switzerland, Ukraine, Turkey and the United States.
Of these 23 millions, six have been military and the other 17 civilian. We deploy army or navy personnel when and where they are needed but our business is peace-building, not waging war. The EU is not a military alliance. The solution to any crisis, emergency or conflict must always be political our ESDP actions are always firmly anchored in political strategies, formed by consensus.
Our ESDP missions have taken us as far field as Aceh, Indonesia, where we monitored the peace agreement reached after the 2004 tsunami, following decades of civil war. Working closely with the Association of Southeast Asian Nations, we mediated between rebels land the government and oversaw the decommissioning of weapons.
As we gain experience and expertise we are mounting increasingly ambitious operations. Our success with Operation Artemis, in the Democratic Republic of Congo, where the EU intervened in 2003 after violent clashes and a humanitarian crisis in Bunia, helped prepare us to mount our Eufor operation in Chad and the Central African Republic and Euvafor Somalia, which South Africa has expressed an interest in joining.
Last year, we showed how rapidly we could mobilise when we dispatched a monitoring mission to the Caucasus in less than three weeks to help defuse the crisis between Russia and Georgia, following the EU-mediated peace agreement. As a member of the International Quartet, the EU is deeply engaged at a diplomatic level in the Middle East peace process and the moment and agreement is reached between the Isralis and Palestinians we will be ready to help implement it on the ground. We already have a mission in the West Bank helping to build up the Palestinian civil police and criminal justice system. In Somalia, we are considering security-sector reform measures to complement Eunavfor Somalia and the humanitarian aid and political support that we are already providing.
To respond to the growing calls to help tackle regional and global security challenges, the EU must improve the efficiency and coherence of its external action still further. We currently have a gap between our ambitions and our resources, which must be addressed. Clearer priorities and more sensible budgeting decisions are needed. And we need to strengthen our civilian and military capabilities and boost their funding in order to back up our political decisions.
The EU's unique, joint civilian-military approach must be further developed to make us yet more flexible. Our capacity to deploy rapid reaction forces also needs strengthening. In the second decade of ESDP, the Lisbon Treaty will put all this within the EU's grasp.
In 10 years, we have deployed 20 operations on three continents to help prevent violence, restore peace and rebuild after a conflict. From Kabul to Pristina, from Ramallah to Kinshasa, the Eu is monitoring borders, overseeing peace agreements, training police forces, building up criminal justice systems and protecting shipping from pirate attacks. Thanks to our achievements, we are receiving more and more calls to help in a crisis or after a war. We have the credibility, the values and the will to do this.
The EU was ahead of its time in 1999. The comprehensive, multifaceted nature of our approach was novel. And the EU remains the only organisation that can call on a full panoply of instruments and resources that complement the traditional foreign policy tools of its member states, both to pre-empt or prevent a crisis and to restore peace and rebuild institutions after a conflict.
This is where the EU's unique added value lies. We combine humanitarian aid and support for institution-building and good governance with crisis-management capacities, technical and financial assistance, and political dialogue and mediation. The EU's joint civilian-military approach makes us flexible and able to offer tailor-made solutions to complex problems. Today's conflicts demonstrate lmore clearly than ever that a military solution is neither the sole nor the best option, particularly during the stabilisation of a crisis - a truth US President Barack Obama has also emphasised.
The ESDP first cut its teeth in the Balkans. When the Yogoslav wars broke out in the 1990's we watched as our neighbourhood burned because we had no means of responding to the crisis. We learned our lesson and organised ourselves, acquiring a set of capabilities coupled with decision-making procedures and a security doctrine. In 2003, we prevented a fresh out-break of hostilities in the former Yugoslav Republic of Macedonia through our diplomatic efforts and then deployed Operation Concordia. In 2004, Operation Althea took over from the Nato peacekeeping force in Bosnia and Herzegovina. Today, we are still deeply engaged in the Balkans, fighting organised crime and building up the institutions of law and order. For example, Eulex Kosovo is the largest EU mission to date, with some 2,000 staff, working in the police and judicial system and in mobile customs teams.
The EU's crisis-management and peace-building activities are not restricted to its backyard. We have made a real difference in Africa, helping for example to provide a secure environment for elections in the Democratic Republic of Congo and protecting refugees and aid workers from the fall-out of the Darfur crisis. Last year, we mounted Eunavfor, our first-ever naval operation, to compact piracy in the waters off Somalia. Who would have guessed 10 years ago that the EU would one day lead a taskforce of 13 frigates in the Indian Ocean that would cut the success rate of pirate attacks by half?
This year the EU has 12 operations running concurrently - more than ever before. Since 2003, some 70,000 men and women have been deployed in 23 crisis-management operations. They come from EU member states and non EU countries that also take part in our operations, including Norway, Switzerland, Ukraine, Turkey and the United States.
Of these 23 millions, six have been military and the other 17 civilian. We deploy army or navy personnel when and where they are needed but our business is peace-building, not waging war. The EU is not a military alliance. The solution to any crisis, emergency or conflict must always be political our ESDP actions are always firmly anchored in political strategies, formed by consensus.
Our ESDP missions have taken us as far field as Aceh, Indonesia, where we monitored the peace agreement reached after the 2004 tsunami, following decades of civil war. Working closely with the Association of Southeast Asian Nations, we mediated between rebels land the government and oversaw the decommissioning of weapons.
As we gain experience and expertise we are mounting increasingly ambitious operations. Our success with Operation Artemis, in the Democratic Republic of Congo, where the EU intervened in 2003 after violent clashes and a humanitarian crisis in Bunia, helped prepare us to mount our Eufor operation in Chad and the Central African Republic and Euvafor Somalia, which South Africa has expressed an interest in joining.
Last year, we showed how rapidly we could mobilise when we dispatched a monitoring mission to the Caucasus in less than three weeks to help defuse the crisis between Russia and Georgia, following the EU-mediated peace agreement. As a member of the International Quartet, the EU is deeply engaged at a diplomatic level in the Middle East peace process and the moment and agreement is reached between the Isralis and Palestinians we will be ready to help implement it on the ground. We already have a mission in the West Bank helping to build up the Palestinian civil police and criminal justice system. In Somalia, we are considering security-sector reform measures to complement Eunavfor Somalia and the humanitarian aid and political support that we are already providing.
To respond to the growing calls to help tackle regional and global security challenges, the EU must improve the efficiency and coherence of its external action still further. We currently have a gap between our ambitions and our resources, which must be addressed. Clearer priorities and more sensible budgeting decisions are needed. And we need to strengthen our civilian and military capabilities and boost their funding in order to back up our political decisions.
The EU's unique, joint civilian-military approach must be further developed to make us yet more flexible. Our capacity to deploy rapid reaction forces also needs strengthening. In the second decade of ESDP, the Lisbon Treaty will put all this within the EU's grasp.
Sunday, October 11, 2009
STARWOOD, TPG SCRAMBLE TO BUY DISTRESSED ASSETS
Starwood Capital Group and TPG's agreement to buy US$4.5 billion (Bt150 billion) of Corus Bankshares' real estate assets shows investors are ready to bet on distressed property - as long as the US helps finance the deals.
The private-equity firms led a group that won the auction for loans and properties of the failed Chicago lender, offering $554 million, the Federal Deposit Insurance Corp said last week.
They will take a 40-per-cent stake and manage the portfolio, while the FDIC keeps 60 per cent and lends the buyers as much as $2.39 billion to complete the sale.
The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.
The losers, including Colony Capital and Related Co, will have more chances to acquirs distressed mortgages.
As many as 1,000 US banks may fail by 2011, according to John Duffy, chief executive officer of KBW Inc, a New York-based firm that advises financial institutions.
"There are going to be hundreds of banks that are going to be seized and we're just getting started," said James Corl, managing director of Sigular Guff, a New York-based firm that manages about $9 billion.
"Auctions of non-performing bank loans are going to comprise the next wave of opportunities for distress-oriented real estate investors."
The FDIC will provide the Starwood-TPG group with $1.39 billion of zero-coupon debt to help pay for the purchase and as much as $1 billion in working capital.
Similar financing was included by the agency in deals involving IndyMac Federal Bank and BankUnited Financial.
The government will have to continue offering such low-cost debt to persuade investors to absorb troubled bank lains and real estate, according to John Grayken, founder of Lone Star Funds, a Dallas-based firm that buys distressed assets including mortgages.
"Unless the seller is willing to finance, you have to do these deals with all equity," Grayken said.
The FDIC probably will make similar arrangements in future sales, Chairman Sheila Bair said.
"I think we will use this structure again, absolutely," Bair said October 6. "We're pleased with the results."
Corus Bank, taken over by regulators on September 11, was a 51-yeard-old Chicago lender crippled by construction loans for condominiums after the housing market slumped and the credit crisis worsened.
It was one of 98 banks seized this year as lenders fail at the fastest pace in almost two decade. Corus' $7 billion in deposits and 11 branches were sold to Chicago-based MB Financial.
Starwood, based in Greenwich, Connecticut, is run by Barry Sternlicht, who was chairman of Starwood Hotels from 1997 to 2005.
Fort Worth, Texas-based TPG's investments include casino owner Harrah's Entertainment and Neiman Marcus Group, a luxury retailer.
Their partners in the deal are Perry Capital, a New York-based hedge-fund firm with about $7 billion in assets, and WLR LeFrak, a joint venture of the real estate firm LeFrak Organisation of New York and WL Ross and, a unit of Atlanta- based Invesco that is run by billionaire Wilbur Ross.
Investment managers are raising between $118 billion and $138 billion to buy properties and real estate secutiries, according to surveys by Institutional Real Estate Inc of San Ramon, California, and Real Estate Alert, an industry newsletter in Hoboken, New Jersey.
Lone Star is seeking $20 billion for two new funds.
Distressed assets including residential and commerical mortgages and bonds backed by such loans will be sold over the next several years as banks go into receivership or seek to strengthen their balance sheets. Commercial and investment banks together hold about 80 per cent of the devalued assets that will change hands, according to the Lone Star presentation.
About $524 billion of commercial mortgages held by US banks and thrifts are scheduled to come due before 2012, half of which probably would not quality for refinancing because they exceed 90 per cent of the property's value, accoridng to Lone Star.
At least $410 billion, or two-thirds, of commercial mortgages bundled and sold as bonds coming due by 2018 will have difficulty refinancing, according to data from Frankfurt-based Deutsche Bank.
The Washington-based FDIC used partnerships with private investment firms two decades ago to sell the assets of savings and loans that failed amid plunging oil prices and real estate speculation.
The government formed the Resolution Trust in 1989 to merge or liquidate insolvent thrifts, and by 1995 the RTC had handled 747 thrifts, eventually recovering about $395 billion of assets with a book value of about $452 billion, and limiting losses to taxpayers.
The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.
The private-equity firms led a group that won the auction for loans and properties of the failed Chicago lender, offering $554 million, the Federal Deposit Insurance Corp said last week.
They will take a 40-per-cent stake and manage the portfolio, while the FDIC keeps 60 per cent and lends the buyers as much as $2.39 billion to complete the sale.
The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.
The losers, including Colony Capital and Related Co, will have more chances to acquirs distressed mortgages.
As many as 1,000 US banks may fail by 2011, according to John Duffy, chief executive officer of KBW Inc, a New York-based firm that advises financial institutions.
"There are going to be hundreds of banks that are going to be seized and we're just getting started," said James Corl, managing director of Sigular Guff, a New York-based firm that manages about $9 billion.
"Auctions of non-performing bank loans are going to comprise the next wave of opportunities for distress-oriented real estate investors."
The FDIC will provide the Starwood-TPG group with $1.39 billion of zero-coupon debt to help pay for the purchase and as much as $1 billion in working capital.
Similar financing was included by the agency in deals involving IndyMac Federal Bank and BankUnited Financial.
The government will have to continue offering such low-cost debt to persuade investors to absorb troubled bank lains and real estate, according to John Grayken, founder of Lone Star Funds, a Dallas-based firm that buys distressed assets including mortgages.
"Unless the seller is willing to finance, you have to do these deals with all equity," Grayken said.
The FDIC probably will make similar arrangements in future sales, Chairman Sheila Bair said.
"I think we will use this structure again, absolutely," Bair said October 6. "We're pleased with the results."
Corus Bank, taken over by regulators on September 11, was a 51-yeard-old Chicago lender crippled by construction loans for condominiums after the housing market slumped and the credit crisis worsened.
It was one of 98 banks seized this year as lenders fail at the fastest pace in almost two decade. Corus' $7 billion in deposits and 11 branches were sold to Chicago-based MB Financial.
Starwood, based in Greenwich, Connecticut, is run by Barry Sternlicht, who was chairman of Starwood Hotels from 1997 to 2005.
Fort Worth, Texas-based TPG's investments include casino owner Harrah's Entertainment and Neiman Marcus Group, a luxury retailer.
Their partners in the deal are Perry Capital, a New York-based hedge-fund firm with about $7 billion in assets, and WLR LeFrak, a joint venture of the real estate firm LeFrak Organisation of New York and WL Ross and, a unit of Atlanta- based Invesco that is run by billionaire Wilbur Ross.
Investment managers are raising between $118 billion and $138 billion to buy properties and real estate secutiries, according to surveys by Institutional Real Estate Inc of San Ramon, California, and Real Estate Alert, an industry newsletter in Hoboken, New Jersey.
Lone Star is seeking $20 billion for two new funds.
Distressed assets including residential and commerical mortgages and bonds backed by such loans will be sold over the next several years as banks go into receivership or seek to strengthen their balance sheets. Commercial and investment banks together hold about 80 per cent of the devalued assets that will change hands, according to the Lone Star presentation.
About $524 billion of commercial mortgages held by US banks and thrifts are scheduled to come due before 2012, half of which probably would not quality for refinancing because they exceed 90 per cent of the property's value, accoridng to Lone Star.
At least $410 billion, or two-thirds, of commercial mortgages bundled and sold as bonds coming due by 2018 will have difficulty refinancing, according to data from Frankfurt-based Deutsche Bank.
The Washington-based FDIC used partnerships with private investment firms two decades ago to sell the assets of savings and loans that failed amid plunging oil prices and real estate speculation.
The government formed the Resolution Trust in 1989 to merge or liquidate insolvent thrifts, and by 1995 the RTC had handled 747 thrifts, eventually recovering about $395 billion of assets with a book value of about $452 billion, and limiting losses to taxpayers.
The investors, who are paying about 60 cents on the dollar, beat out seven other bidders.
Thursday, October 8, 2009
BOT STEPS INTO FOREX MARKET TO CALM BAHT
The skyrocketing gold price has pushed the Bank of Thailand (BOT) into stepping into the foreign-exchange market to calm the baht, which has been floating up on increasing capital inflows.
Higher gold prices, which hit a new high of US$1,058 (Bt35,265) per ounce yesterday, have led to heavy selling of bullion by exporters, boosting the current-account surplus and driving the baht beyond its fundamentals.
The baht rose 0.5 per cent to 33.30 per dollar as of 5pm, according to data compiled by Bloomberg. It earlier touched 33.23, the strongest level since June 2008.
Suchada Kirakul, assistant central bank governor, said the continual intervention by the central bank was aimed at stabilising the baht, which has surged past its fundamental value given the sluggish economy.
One key factor that caused baht to appreciate was the weakening of the dollar after US private sector confidence fell with unemployment higher than expected.
Domestically, the serlling current-account surplus as well as net capital inflows of Bt60 billion so far this yearcompared to a meagre Bt16 billion for last year - were contributing to the baht's strengthening, she said.
Capital has also been flowing back after local asset-management firms saw their foreign investment funds invested in Australia reach their due dates, she said.
Most importantly, the huge exports of gold recently on global gold prices jumping to historic highs has caused higher demand for baht, as exporters want to exchange their sales proceeds denominated in US dollars into the local currency.
Locally, gold bar prices were quoted at Bt16,450 per 15 grams for buying and Bt16,550 for selling.
The central bank said the baht's moving up against the dollar was not out of line with its regional counterparts so far this year. It has gained about 4 per cent, which ranked it in the middle compared to regional currencies.
For example, Australia's dollar has shot up by 20 per cent from early this year as it has enjoyed a robust economy and property boom.
In September, employment there jumped by more than 40,000 jobs from the previous month, better than the projection by economists of a decline of 10,000 jobs.
The Australian central bank had to hike its policy rate by 25 basis points to 3.25 per cent.
The economies of Indonesia and the Philippines have also been much improved with capital inflows growing. Indonesia also depends less on oil than Thailand.
The US dollar is continuing to trend down after the unemployment rate there rose more than expected, which undermined confidence in the unit.
Although one of the US Federal Reserve governors mentioned a hike in the policy rate, the central bank believes that it will not be the case soon.
For Thailand's policy rate, the central bank still needs to shore up the economy, whose recovery is still fragile, she said.
On October 21, the central bank's Monetary Policy Committee will meet to consider a policy-rate adjustment. On May 20, the committee decided to keep the one-day repurchase rate unchanged at 1.25 per cent.
Local gold bar prices were Bt16,450 per 15 grams for buying and Bt16,550 for selling.
Higher gold prices, which hit a new high of US$1,058 (Bt35,265) per ounce yesterday, have led to heavy selling of bullion by exporters, boosting the current-account surplus and driving the baht beyond its fundamentals.
The baht rose 0.5 per cent to 33.30 per dollar as of 5pm, according to data compiled by Bloomberg. It earlier touched 33.23, the strongest level since June 2008.
Suchada Kirakul, assistant central bank governor, said the continual intervention by the central bank was aimed at stabilising the baht, which has surged past its fundamental value given the sluggish economy.
One key factor that caused baht to appreciate was the weakening of the dollar after US private sector confidence fell with unemployment higher than expected.
Domestically, the serlling current-account surplus as well as net capital inflows of Bt60 billion so far this yearcompared to a meagre Bt16 billion for last year - were contributing to the baht's strengthening, she said.
Capital has also been flowing back after local asset-management firms saw their foreign investment funds invested in Australia reach their due dates, she said.
Most importantly, the huge exports of gold recently on global gold prices jumping to historic highs has caused higher demand for baht, as exporters want to exchange their sales proceeds denominated in US dollars into the local currency.
Locally, gold bar prices were quoted at Bt16,450 per 15 grams for buying and Bt16,550 for selling.
The central bank said the baht's moving up against the dollar was not out of line with its regional counterparts so far this year. It has gained about 4 per cent, which ranked it in the middle compared to regional currencies.
For example, Australia's dollar has shot up by 20 per cent from early this year as it has enjoyed a robust economy and property boom.
In September, employment there jumped by more than 40,000 jobs from the previous month, better than the projection by economists of a decline of 10,000 jobs.
The Australian central bank had to hike its policy rate by 25 basis points to 3.25 per cent.
The economies of Indonesia and the Philippines have also been much improved with capital inflows growing. Indonesia also depends less on oil than Thailand.
The US dollar is continuing to trend down after the unemployment rate there rose more than expected, which undermined confidence in the unit.
Although one of the US Federal Reserve governors mentioned a hike in the policy rate, the central bank believes that it will not be the case soon.
For Thailand's policy rate, the central bank still needs to shore up the economy, whose recovery is still fragile, she said.
On October 21, the central bank's Monetary Policy Committee will meet to consider a policy-rate adjustment. On May 20, the committee decided to keep the one-day repurchase rate unchanged at 1.25 per cent.
Local gold bar prices were Bt16,450 per 15 grams for buying and Bt16,550 for selling.
Saturday, October 3, 2009
Baht eases back from high
The baht fell yesterday from a 14-month high on concern that a US government report will show the jobless rate climbed to a 26-year high, dampening the outlook for US consumer spending and Asian exports.
The currency dropped for a second day as the MSCI Asia-Pacific Index of regional shares lost 2.1% following a private industry report yesterday showing US manufacturing unexpectedly declined. The Dollar Index, which tracks the greenback against currencies of six major trading partners, rose to a threeweek high as investors sought relative safety on doubts about the pace of a global recovery.
"We've seen some unwinding of riskier assets and dollar short-covering," said Chutima Nuphan, a foreign-exchange trader at TMB Bank in Bangkok."The market is concerned about a recovery because the jobless rate may be worse than people think. The stock markets are falling as well."
The baht fell 0.1% to 33.49 per dollar late yesterday in Bangkok. The currency reached 33.38 on Thursday, the highest level since July 2008. It completed a fourth weekly gain, rising 0.2%.
The Bank of Thailand would stem volatility in the baht and aimed to keep its movements in line with other currencies in the region, governor Tarisa Watanagase said last week. Policymakers have no plans to implement measures to control capital flows, she said.
Overseas investors had bought $136 million more Thai equities than they sold this week as of yesterday, taking net purchases for the year to $1.7 billion.
The currency dropped for a second day as the MSCI Asia-Pacific Index of regional shares lost 2.1% following a private industry report yesterday showing US manufacturing unexpectedly declined. The Dollar Index, which tracks the greenback against currencies of six major trading partners, rose to a threeweek high as investors sought relative safety on doubts about the pace of a global recovery.
"We've seen some unwinding of riskier assets and dollar short-covering," said Chutima Nuphan, a foreign-exchange trader at TMB Bank in Bangkok."The market is concerned about a recovery because the jobless rate may be worse than people think. The stock markets are falling as well."
The baht fell 0.1% to 33.49 per dollar late yesterday in Bangkok. The currency reached 33.38 on Thursday, the highest level since July 2008. It completed a fourth weekly gain, rising 0.2%.
The Bank of Thailand would stem volatility in the baht and aimed to keep its movements in line with other currencies in the region, governor Tarisa Watanagase said last week. Policymakers have no plans to implement measures to control capital flows, she said.
Overseas investors had bought $136 million more Thai equities than they sold this week as of yesterday, taking net purchases for the year to $1.7 billion.
Time for decisiveness on logistics
If Thailand wants to achieve its hope of becoming the logistics centre for Southeast Asia, the government must act decisively and rapidly to develop the infrastructure for logistics, said former finance minister M.R. Pridiyathorn Devakula.
M.R. Pridiyathorn, also a former Bank of Thailand governor, wants to establish a decision-making body to develop local infrastructure and industrial sector competitiveness.
"The country's economic competitiveness relies very much on logistics costs. The government already knows what to do but the decision makers are still very slow to do anything," he said.
He made the comments at a seminar called "Logistics Asia 2009: Repositioning Thailand in the Global Value Chain",organised by the Thailand Management Association (TMA) in collaboration with the Thai Chamber of Commerce (TCC)and the Transport Institute of Chulalongkorn University to discuss the future direction of local logistics development.
M.R. Pridiyathorn said the economic crisis shifted the world's economic growth engine to Asia. That could translate into brisk trading traffic in the region.
To accommodate this change, logistics cost reduction would promote Thailand as a logistics hub to serve this upsurge in goods transport.
"Cheaper cost will support local in-dustrial competitiveness and attract more foreign investment to the country,"M.R. Pridiyathorn said.
"There are lots of projects that are in different stages - some are already planned and ready to be implemented - but what is needed is a decisionmaker who has the guts to make a decision."
The country's logistics system relies on road for over 80% of traffic, with 2%marine transport and the rest through rail. But road transport is the most expensive and fuel-thirsty, so Thailand needs to develop other modes, he said.
The first step is developing sea transport as it is the easiest and can be done by private sector investment.
"Two important port routes are those linking Laem Chabang and Bangkok to the South. For rail, more dual-track routes are needed while a rail extension to link Thailand with southern China would also improve our trade with the giant economy," he said.
Extension of airport facilities to accommodate more human traffic and cargo also needs to go ahead.
"A more open-eyed approach at how Thailand would play as a regional logistics centre also needs to be considered,"said M.R. Pridiyathorn.
"We need a tool to link the east and west, linking the Gulf of Thailand and the Andaman Sea through a landbridge.Once accomplished, crude transport from the Middle East to Korea and China will be able to go through this route.This will allow us to be a regional transport route in Asia."
He added that infrastructure such as a landbridge and the long-delayed Southern Seaboard would also be crucial in accommodating more investment in petroleum and related sectors such as petrochemicals.
"Establishing the link would also open our export routes to Africa and the Middle East, which are growing markets.China would also be interested in using this route to provide to emerging markets," he said.
He also criticised the government for paying too little attention to economic issues, adding that the Map Ta Phut court order that halted 76 projects was the result of indecisive action to tackle pollution problems by past governments.
"The government must take the case as a lesson for future infrastructure development and also to win back investment," said M.R. Pridiyathorn.
M.R. Pridiyathorn, also a former Bank of Thailand governor, wants to establish a decision-making body to develop local infrastructure and industrial sector competitiveness.
"The country's economic competitiveness relies very much on logistics costs. The government already knows what to do but the decision makers are still very slow to do anything," he said.
He made the comments at a seminar called "Logistics Asia 2009: Repositioning Thailand in the Global Value Chain",organised by the Thailand Management Association (TMA) in collaboration with the Thai Chamber of Commerce (TCC)and the Transport Institute of Chulalongkorn University to discuss the future direction of local logistics development.
M.R. Pridiyathorn said the economic crisis shifted the world's economic growth engine to Asia. That could translate into brisk trading traffic in the region.
To accommodate this change, logistics cost reduction would promote Thailand as a logistics hub to serve this upsurge in goods transport.
"Cheaper cost will support local in-dustrial competitiveness and attract more foreign investment to the country,"M.R. Pridiyathorn said.
"There are lots of projects that are in different stages - some are already planned and ready to be implemented - but what is needed is a decisionmaker who has the guts to make a decision."
The country's logistics system relies on road for over 80% of traffic, with 2%marine transport and the rest through rail. But road transport is the most expensive and fuel-thirsty, so Thailand needs to develop other modes, he said.
The first step is developing sea transport as it is the easiest and can be done by private sector investment.
"Two important port routes are those linking Laem Chabang and Bangkok to the South. For rail, more dual-track routes are needed while a rail extension to link Thailand with southern China would also improve our trade with the giant economy," he said.
Extension of airport facilities to accommodate more human traffic and cargo also needs to go ahead.
"A more open-eyed approach at how Thailand would play as a regional logistics centre also needs to be considered,"said M.R. Pridiyathorn.
"We need a tool to link the east and west, linking the Gulf of Thailand and the Andaman Sea through a landbridge.Once accomplished, crude transport from the Middle East to Korea and China will be able to go through this route.This will allow us to be a regional transport route in Asia."
He added that infrastructure such as a landbridge and the long-delayed Southern Seaboard would also be crucial in accommodating more investment in petroleum and related sectors such as petrochemicals.
"Establishing the link would also open our export routes to Africa and the Middle East, which are growing markets.China would also be interested in using this route to provide to emerging markets," he said.
He also criticised the government for paying too little attention to economic issues, adding that the Map Ta Phut court order that halted 76 projects was the result of indecisive action to tackle pollution problems by past governments.
"The government must take the case as a lesson for future infrastructure development and also to win back investment," said M.R. Pridiyathorn.
Dollar index flat ahead of US jobs, G7; euro up
The dollar was flat against a basket of major currencies yesterday as dealers squared positions ahead of US jobs data later in the day and a meeting of Group of Seven finance chiefs over the weekend.
The euro ro se broadly on a Market News report citing 'well-placed monetary sources' that the European Central Bank was discussing raising interest rates and unwinding its liquidity provision programmes, even though it would not do so for some time.
But trading ranges w ere narrow before the US employment repor t for September at 1230 GMT, the economic indicator that has probably the single biggest impact on financial markets.
At 0940 GMT the euro was up 0.2% on the day at $1.4555, rebounding from a threeweek low of $1.4502 hit earlier in the day.
Dealers reported good demand from Asian reserve managers in the low $1.45s and stronger support at $1.4450, a break of which to the upside in early September was key and so could be equally significant if it gave way on the downside.
Traders also reported options expiries at $1.4550 rolling off later yesterday.
The euro pared losses against the yen to trade flat at 130.15 yen and was up 0.5% against sterling at 91.60 pence.
"While it's prudent for central banks to discuss the possibility of raising rates at some point, (it is) less prudent for any of the big three central banks - the US, UK and euro zone - to move any time in the coming six months," said Lauren Rosborough, senior currency strategist at Westpac in London.
"These comments are being taken too literally," she said, refer ing to the Market News report.
The euro ro se broadly on a Market News report citing 'well-placed monetary sources' that the European Central Bank was discussing raising interest rates and unwinding its liquidity provision programmes, even though it would not do so for some time.
But trading ranges w ere narrow before the US employment repor t for September at 1230 GMT, the economic indicator that has probably the single biggest impact on financial markets.
At 0940 GMT the euro was up 0.2% on the day at $1.4555, rebounding from a threeweek low of $1.4502 hit earlier in the day.
Dealers reported good demand from Asian reserve managers in the low $1.45s and stronger support at $1.4450, a break of which to the upside in early September was key and so could be equally significant if it gave way on the downside.
Traders also reported options expiries at $1.4550 rolling off later yesterday.
The euro pared losses against the yen to trade flat at 130.15 yen and was up 0.5% against sterling at 91.60 pence.
"While it's prudent for central banks to discuss the possibility of raising rates at some point, (it is) less prudent for any of the big three central banks - the US, UK and euro zone - to move any time in the coming six months," said Lauren Rosborough, senior currency strategist at Westpac in London.
"These comments are being taken too literally," she said, refer ing to the Market News report.
BofA considers short-term CEO
Bank of America Corp's board of directors is considering hiring a short-term chief executive, a move that signaled CEO Kenneth Lewis' plan to depart caught the bank flat-footed.
The company said on Thursday it might hire a chief executive for two years,allowing internal candidates more time to grow into the job. But that decision sends a worrisome message to investors who are looking for stability at the embattled Charlotte, North Carolina-based bank and are weary after more than a year of crises.
"Not having an announced successor is going to hurt the bank," said Matt McCormick, a Cincinnati, Ohio-based portfolio manager with Bahl & Gaynor Investment Counsel."I believe that is going to increase volatility and increase focus on them."
The company's stock sank 4.2% to $16.21 on Thursday, reflecting concern about the bank's plan.
"The board's evident lack of prep-aration for Lewis' departure is surprising," experts said.
The board has not assembled a search committee or hired an outside firm to manage the hunt for a new CEO, a company spokesman said.
But Lewis has been under siege from prosecutors, politicians and the public for months over his handling of Bank of America's acquisition of Merrill Lynch & Co, and critics have called for Lewis'departure for months.
"The board should have had a plan in place for this contingency. You don't always have years to groom and plan a successor," said Karen Brenner, a business professor at New York University specialising in corporate governance issues.
Picking a short-term candidate quickly, and settling on the permanent CEO later could be a risky strategy, recruiters noted.
The wrong temporary leader may delay making necessary changes.
Lewis, in an letter to employees announcing his departure, said he expected the next two quarters to be difficult for Bank of America.
"This is like playing roulette," said Joel Koblentz, an Atlanta-based executive search consultant."You don't know who to bet on, but in this case, you have to get it right. This is not one you recover from if you make a mistake."
A list of internal candidates include:wealth management head Sallie Krawcheck, consumer banking chief Brian Moynihan, chief financial officer Joe Price, investment bank chief Thomas Montag, mortgage head Barbara Desoer and chief risk officer Greg Curl.
Early external candidates cited by various media reports include GMAC Financial Services CEO Alvaro de Molina,a former Bank of America executive who spent two decades at the bank, and Bob Steel, former Goldman Sachs executive and Wachovia Corp CEO when that bank was bought by Wells Fargo in 2008.
"The bank is hoping to avoid the situation that Citigroup Inc faced in late 2007, when its chief executive, Chuck Prince, stepped down, and finding a replacement took several months," the Wall Street Journal reported.
The company said on Thursday it might hire a chief executive for two years,allowing internal candidates more time to grow into the job. But that decision sends a worrisome message to investors who are looking for stability at the embattled Charlotte, North Carolina-based bank and are weary after more than a year of crises.
"Not having an announced successor is going to hurt the bank," said Matt McCormick, a Cincinnati, Ohio-based portfolio manager with Bahl & Gaynor Investment Counsel."I believe that is going to increase volatility and increase focus on them."
The company's stock sank 4.2% to $16.21 on Thursday, reflecting concern about the bank's plan.
"The board's evident lack of prep-aration for Lewis' departure is surprising," experts said.
The board has not assembled a search committee or hired an outside firm to manage the hunt for a new CEO, a company spokesman said.
But Lewis has been under siege from prosecutors, politicians and the public for months over his handling of Bank of America's acquisition of Merrill Lynch & Co, and critics have called for Lewis'departure for months.
"The board should have had a plan in place for this contingency. You don't always have years to groom and plan a successor," said Karen Brenner, a business professor at New York University specialising in corporate governance issues.
Picking a short-term candidate quickly, and settling on the permanent CEO later could be a risky strategy, recruiters noted.
The wrong temporary leader may delay making necessary changes.
Lewis, in an letter to employees announcing his departure, said he expected the next two quarters to be difficult for Bank of America.
"This is like playing roulette," said Joel Koblentz, an Atlanta-based executive search consultant."You don't know who to bet on, but in this case, you have to get it right. This is not one you recover from if you make a mistake."
A list of internal candidates include:wealth management head Sallie Krawcheck, consumer banking chief Brian Moynihan, chief financial officer Joe Price, investment bank chief Thomas Montag, mortgage head Barbara Desoer and chief risk officer Greg Curl.
Early external candidates cited by various media reports include GMAC Financial Services CEO Alvaro de Molina,a former Bank of America executive who spent two decades at the bank, and Bob Steel, former Goldman Sachs executive and Wachovia Corp CEO when that bank was bought by Wells Fargo in 2008.
"The bank is hoping to avoid the situation that Citigroup Inc faced in late 2007, when its chief executive, Chuck Prince, stepped down, and finding a replacement took several months," the Wall Street Journal reported.
UNDER-FIRE FED DEFENDS ITS ROLE AS KEY PROTECTOR
Federal Reserve chairman Ben Bernanke on Thursday told lawmakers that protecting consumers of fincancial services is "vitally important", while omitting prior criticism of an Obama administration proposal to shift such powers from the Fed to a new agency.
"It is vitally important that consumers be protected from unfair and deceptive practices in their financial dealings," Bernanke said in testimony to the House Financial Services Committee.
"Strong consumer protection" helps preserve savings and promote confidence in financial firms and markets, he said.
Bernanke did not discuss the proposal for a separate agency in the testimony, after saying in July that there would be disadvantages to creating one.
That may soften a clash with Representative Barney Frank, the panel's chairman, who said at a hearing that the Consumer Financial Protection Agency must be created because the Fed and other bank regency, Frank said.
Frank, a Massachusetts Democrat, released a "report card" on September 23 that he said demonstrated the Fed's "poor record" in "using the tools provided by Congress to protect consumers from abusive financial-industry practices".
The 55-year-old Fed chief previously testified on potential changes to financial regulation in July, when he said there would be disadvantages to creating a consumer financial-protection agency.
Rules created by the Fed in recent years "benefited form the supervisory and research capabilities" of the central bank, Bernanke said in July.
Representative Mel Watt, a North Carolina Democrat, noted the length of comments on consumer issues in the Fed chief's prepared statement, telling Bernanke that "five sentences" was not enough. "It's just not a good message to send," said Watt, who chairs a subcommittee on US monetary policy.
Bernanke did not respond to Watt's criticism. In a July-22 Senate hearing, the Fed chairman said consumer protection should be added to the Federal Rreserve Act as a formal policy goal along with low inflation and full employment.
Answering questions from lawmakers, Bernanke said he does not see an "immediate risk" to the US dollar's status as the world's main reserve currency.
Al the same time, US leaders must "take the appropriate steps to manage our fiscal position and keep in flation low", he said.
"It is vitally important that consumers be protected from unfair and deceptive practices in their financial dealings," Bernanke said in testimony to the House Financial Services Committee.
"Strong consumer protection" helps preserve savings and promote confidence in financial firms and markets, he said.
Bernanke did not discuss the proposal for a separate agency in the testimony, after saying in July that there would be disadvantages to creating one.
That may soften a clash with Representative Barney Frank, the panel's chairman, who said at a hearing that the Consumer Financial Protection Agency must be created because the Fed and other bank regency, Frank said.
Frank, a Massachusetts Democrat, released a "report card" on September 23 that he said demonstrated the Fed's "poor record" in "using the tools provided by Congress to protect consumers from abusive financial-industry practices".
The 55-year-old Fed chief previously testified on potential changes to financial regulation in July, when he said there would be disadvantages to creating a consumer financial-protection agency.
Rules created by the Fed in recent years "benefited form the supervisory and research capabilities" of the central bank, Bernanke said in July.
Representative Mel Watt, a North Carolina Democrat, noted the length of comments on consumer issues in the Fed chief's prepared statement, telling Bernanke that "five sentences" was not enough. "It's just not a good message to send," said Watt, who chairs a subcommittee on US monetary policy.
Bernanke did not respond to Watt's criticism. In a July-22 Senate hearing, the Fed chairman said consumer protection should be added to the Federal Rreserve Act as a formal policy goal along with low inflation and full employment.
Answering questions from lawmakers, Bernanke said he does not see an "immediate risk" to the US dollar's status as the world's main reserve currency.
Al the same time, US leaders must "take the appropriate steps to manage our fiscal position and keep in flation low", he said.
CIT launches debt-swap plan
CIT Group Inc launched on Thursday a debt-exchange plan that the struggling lender to small and midsized companies hopes will prevent it from filing for bankruptcy.
CIT, however, also asked bondholders to approve a prepackaged plan of reorganisation that would allow it to initiate a voluntary filing under Chapter 11 if the debt exchange failed.
The lender, founded more than a century ago, said around a third of its bondholders agreed to participate in the exchange offer or vote for the prepackaged plan of reorganisation.
Under the terms of the exchange offer,a tendering holder of an existing debt security would receive a pro-rata portion of each of five series of newly-issued secured notes, with maturities ranging from four to eight years, and/or shares of newly issued voting preferred stock,CIT said.
The exchange offers are conditional upon the company achieving a debt re-duction of at least $5.7 billion in aggregate, with specific targets for the periods from 2009 to 2012.
The exchange offer expires on October 29.
"We believe this plan ... can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process," chief executive Jeffrey Peek said in a statement.
CIT, which serves almost one million small and mid-sized companies, said the plan has been approved by its board of directors and by a committee of bondholders.
CIT's problems emerged in recent years following Peek's idea to tap into potentially profitable but risky businesses such as subprime mortgages and student loans.
The financial meltdown triggered a sharp rise in CIT's loan losses and credit costs, leaving the company on the verge of collapse. The lender to businesses from retailers to sport teams has lost close to $5 billion since the end of 2007.
For the 12 months ending August 31,2010, CIT's unsecured debt funding needs are about $7.6 billion. The financial company has about $40 billion of long-term debt.
CIT's longer-term plan is to essentially turn itself into a bank. The company is one of scores of lenders and underwriters that relied on bond markets to fund their operations, only to suffer as the credit crunch has raged for two years.
In a regulatory filing, CIT said it expected to seek permission to transfer certain business platforms into its CIT Bank unit within 12 to 18 months after the completion of its restructuring.
It plans to diversify the bank's funding base by adding commercial and retail deposits, it said.
CIT received $2.3 billion in December under the government's Troubled Asset Relief Programme (TARP), but federal regulators this year rejected requests by CIT for more help.
The Obama administration also declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.
CIT, however, also asked bondholders to approve a prepackaged plan of reorganisation that would allow it to initiate a voluntary filing under Chapter 11 if the debt exchange failed.
The lender, founded more than a century ago, said around a third of its bondholders agreed to participate in the exchange offer or vote for the prepackaged plan of reorganisation.
Under the terms of the exchange offer,a tendering holder of an existing debt security would receive a pro-rata portion of each of five series of newly-issued secured notes, with maturities ranging from four to eight years, and/or shares of newly issued voting preferred stock,CIT said.
The exchange offers are conditional upon the company achieving a debt re-duction of at least $5.7 billion in aggregate, with specific targets for the periods from 2009 to 2012.
The exchange offer expires on October 29.
"We believe this plan ... can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process," chief executive Jeffrey Peek said in a statement.
CIT, which serves almost one million small and mid-sized companies, said the plan has been approved by its board of directors and by a committee of bondholders.
CIT's problems emerged in recent years following Peek's idea to tap into potentially profitable but risky businesses such as subprime mortgages and student loans.
The financial meltdown triggered a sharp rise in CIT's loan losses and credit costs, leaving the company on the verge of collapse. The lender to businesses from retailers to sport teams has lost close to $5 billion since the end of 2007.
For the 12 months ending August 31,2010, CIT's unsecured debt funding needs are about $7.6 billion. The financial company has about $40 billion of long-term debt.
CIT's longer-term plan is to essentially turn itself into a bank. The company is one of scores of lenders and underwriters that relied on bond markets to fund their operations, only to suffer as the credit crunch has raged for two years.
In a regulatory filing, CIT said it expected to seek permission to transfer certain business platforms into its CIT Bank unit within 12 to 18 months after the completion of its restructuring.
It plans to diversify the bank's funding base by adding commercial and retail deposits, it said.
CIT received $2.3 billion in December under the government's Troubled Asset Relief Programme (TARP), but federal regulators this year rejected requests by CIT for more help.
The Obama administration also declined help, saying it had set high standards for granting aid to companies and leaving private investors as the one alternative to avoid collapse.
Bath falls on US job worries
The baht fell from the strongest level in 14 months on concern a US government report yesterday would show the jobless rate climbed to a 26-year high, dampening the outlook for consumer spending and Asian exports.
The currency dropped for a second day as the MSCI Asia-Pacific Index of regional shares lost 1.9 per cent following a private industry report showing US manufacturing had unexpectedly declined.
The Dollar Index, which the ICE uses to track the greenback against currencies of six major trading partners, rose toward a three-week high as investors sought relative safety on doubts about the pace of a global recovery.
"We've seen some unwinding of riskier assets and dollar short-covering, "said Chutima Nuphan, a foreign-exchange trader at TMB Bank, "The market is concerned about a recovery because the jobless rate may be worse than people think. The stock markets are falling as well."
The baht fell 0.1 per cent to 33.51 per dollar as of 10.23am yesterday in Bangkok. The currency reached 33.38 on Thursday, the highest level since July 2008. It headed for a fourth weekly gain, rising 0.2 per cent.
The central bank will stem volatility in the baht and aims to keep its movements in line with other currencies in the region, Bank of Thailand Governor Tarisa Watanagase said last week. Policy-makers have no plans to implement measures to control capital flows, she said.
Overseas investors bought US$136 million (Bt4.55 billion) more Thai equities than they sold this past week as of Thursday, taking net purchases this year to $1.7 billion.
The currency dropped for a second day as the MSCI Asia-Pacific Index of regional shares lost 1.9 per cent following a private industry report showing US manufacturing had unexpectedly declined.
The Dollar Index, which the ICE uses to track the greenback against currencies of six major trading partners, rose toward a three-week high as investors sought relative safety on doubts about the pace of a global recovery.
"We've seen some unwinding of riskier assets and dollar short-covering, "said Chutima Nuphan, a foreign-exchange trader at TMB Bank, "The market is concerned about a recovery because the jobless rate may be worse than people think. The stock markets are falling as well."
The baht fell 0.1 per cent to 33.51 per dollar as of 10.23am yesterday in Bangkok. The currency reached 33.38 on Thursday, the highest level since July 2008. It headed for a fourth weekly gain, rising 0.2 per cent.
The central bank will stem volatility in the baht and aims to keep its movements in line with other currencies in the region, Bank of Thailand Governor Tarisa Watanagase said last week. Policy-makers have no plans to implement measures to control capital flows, she said.
Overseas investors bought US$136 million (Bt4.55 billion) more Thai equities than they sold this past week as of Thursday, taking net purchases this year to $1.7 billion.
SME BANK LENDING BT2.5 BN TO CREATE 50,000 FRANCHISES
The Small and Medium Enterprises Development Bank of Thailand will provide loans worth a combined Bt2.5 billion to Thapisuj Foods Group's franchisees, with a view to creating 50,000 entrepreneur jobs around the country.
Thapisuj Foods Group is the franchisor of Prikkareang pork noodles and grilled-pork meatballs.
SME Bank president Soros Sakornvisava yesterday said he expected the Bt2.5 billion to be released to Thapisuj Foods Group's franchisees within six months.
The Prikkareang franchise is the first such operation for which SME Bank has approved loans. The agreement is for Bt50,000 to be lent to each frachisee.
Soros said SME Bank expected to enter into similar agreements with two other franchise businesses by the end of the year. The bank will focus on the food business as its main priority, as this type of activity is easy to access for people wanting to run their own enterprises, he added.
The loan period is for a maximum of five years, while the interest rate will fall into one of two categories: 5 per cent for franchisees who are members of the Social Security Fund, and the minimum lending rate for others.
Industry Minister Charnchai Chairungrueng said he backed SME Bank's venturing into this kind of lending, as food-business franchises were a good way to reduce the unemployment rate.
Meanwhile, Labour Minister Phaithoon Kaeothong said the unemployment rate had declined to 500,000 from about 1 million people early this year, due to a resumption of recruitment in major industries such as automobiles and electronics.
Thapisuj Foods Group is the franchisor of Prikkareang pork noodles and grilled-pork meatballs.
SME Bank president Soros Sakornvisava yesterday said he expected the Bt2.5 billion to be released to Thapisuj Foods Group's franchisees within six months.
The Prikkareang franchise is the first such operation for which SME Bank has approved loans. The agreement is for Bt50,000 to be lent to each frachisee.
Soros said SME Bank expected to enter into similar agreements with two other franchise businesses by the end of the year. The bank will focus on the food business as its main priority, as this type of activity is easy to access for people wanting to run their own enterprises, he added.
The loan period is for a maximum of five years, while the interest rate will fall into one of two categories: 5 per cent for franchisees who are members of the Social Security Fund, and the minimum lending rate for others.
Industry Minister Charnchai Chairungrueng said he backed SME Bank's venturing into this kind of lending, as food-business franchises were a good way to reduce the unemployment rate.
Meanwhile, Labour Minister Phaithoon Kaeothong said the unemployment rate had declined to 500,000 from about 1 million people early this year, due to a resumption of recruitment in major industries such as automobiles and electronics.
SCB GEARS UP FOR AGGRESSIVE GROWTH OF WEB-BASED SERVICES
Siam Commercial Bank will next year aggressively expand its Internet and mobile banking services including SMS banking, mutual funds, insurance and financial planning.
A month ago, it launched a widget as a new banking channel for making financial transactions easier.
Executive vice president, said yesterday that the key feature of the widget was convenient access, as users did not have to open a browser and key in the URL name.
But they could do the same financial transactions as with Internet banking by using the widget, which could be downloaded on their mobile phone or computer from the Internet banking channel.
At present, 10 per cent or about 800,000 customers use Internet banking, while the bank has eight to nine million accounts. But Internet banking accounts for 20 per cent of the total 50 million transactions each month.
SCB plans to expand Internet banking users next year to 20 per cent of total customers or about 1.5 million customers. The bank has gained Bt60 million in fee income from this channel so far.
Next year, the bank would introduce more complex financial products to Internet and mobile banking.
Customers will be allowed to make transactions such as checking account balances and transferring money via SMS on their mobile phone when they send the code and bank account number. This channel would be suitable for those who still use the old version of mobile phones and not the Internet.
SCB will promote its SMS-alert service to customers first, and then gradually introduce new SMS banking services to them.
It will also sell insurance products online, including life insurance, personal assurance, auto insurance both first and third class, and insurance according to the traffic victim protection law. The bank will have customers fill in their information for calculation.
The same with financial planning - customers can also do it online with no need to contact the bank's branches.
The bank can save a lot on operating costs when it can encourage customers to increasingly use Internet banking.
Internet banking was an informationrich channel, so if customers used it more, the bank could extract savings from its call centre service, which costs at least Bt20 per call.
Bank staff would have more time to introduce sophisticated products to customers.
Internet penetration in the country has reached 20 million users, so the bank expects to expand its Internet banking offerings.
However online communities were not satisfied with hard selling, so the bank had to be very careful in doing marketing among online customers.
Marketing would be in form of information and entertainment, such as in the middle of this month, when the bank would promote the widget by holding an online game, with prizes.
SCB plans to expand Internet-banking users next year to 20 per cent of customers, or about 1.5 million customers. It has gained Bt60 million in fee income from this channel so far.
A month ago, it launched a widget as a new banking channel for making financial transactions easier.
Executive vice president, said yesterday that the key feature of the widget was convenient access, as users did not have to open a browser and key in the URL name.
But they could do the same financial transactions as with Internet banking by using the widget, which could be downloaded on their mobile phone or computer from the Internet banking channel.
At present, 10 per cent or about 800,000 customers use Internet banking, while the bank has eight to nine million accounts. But Internet banking accounts for 20 per cent of the total 50 million transactions each month.
SCB plans to expand Internet banking users next year to 20 per cent of total customers or about 1.5 million customers. The bank has gained Bt60 million in fee income from this channel so far.
Next year, the bank would introduce more complex financial products to Internet and mobile banking.
Customers will be allowed to make transactions such as checking account balances and transferring money via SMS on their mobile phone when they send the code and bank account number. This channel would be suitable for those who still use the old version of mobile phones and not the Internet.
SCB will promote its SMS-alert service to customers first, and then gradually introduce new SMS banking services to them.
It will also sell insurance products online, including life insurance, personal assurance, auto insurance both first and third class, and insurance according to the traffic victim protection law. The bank will have customers fill in their information for calculation.
The same with financial planning - customers can also do it online with no need to contact the bank's branches.
The bank can save a lot on operating costs when it can encourage customers to increasingly use Internet banking.
Internet banking was an informationrich channel, so if customers used it more, the bank could extract savings from its call centre service, which costs at least Bt20 per call.
Bank staff would have more time to introduce sophisticated products to customers.
Internet penetration in the country has reached 20 million users, so the bank expects to expand its Internet banking offerings.
However online communities were not satisfied with hard selling, so the bank had to be very careful in doing marketing among online customers.
Marketing would be in form of information and entertainment, such as in the middle of this month, when the bank would promote the widget by holding an online game, with prizes.
SCB plans to expand Internet-banking users next year to 20 per cent of customers, or about 1.5 million customers. It has gained Bt60 million in fee income from this channel so far.
EMBATTLED BANK OF AMERICA CEO LEWIS TO RETIRE
Bank of America chief executive Kenneth Lewis, at the centre of a storm over a government-backed deal to buy Merrill Lynch last year, announced plans to retire on December 31.
Lewis, who had lost the post of chairman earlier this year at an angry shareholder meeting, "notified the board of directors of his decision to retire, effective December 31, 2009", the company said in a statement on Wednesday.
"The board will continue ongoing planning to ensure his successor is selected by that date. Lewis will retire as CEo and as a directir." Lewis, who heads the largest US banking group by assets, said "Bank of America is well positioned to meet the continuing challenges of the conomy and markets. "I am particularly heartedned by the results that are emerging from the decisions and initiatives of the difficult past year and a half," he added. Lewis had provoked shareholders' anger by acquiring Merill Lynch without informing them of the investment banks's massive losses.
It later emerged that Lewus had been pressured to complete the purchase of the firm for fear of a furthre blow to a fragile financial system. Lewis told a congressional hearing that he concluded the deal because if Bank of America backed away, "the government could or would remove management and the board."
But asked specifically if he were "pressured", Lewis replied: "It's hard to find the exact right word to describe what I just described."
Henry Paulson, who was Treasury chief when the deal was sealed, acknowledged he had urged Lewis not to back away from Merrill. Paulson "intended to deliver a strong message reinforcing the view... that it would be unthinkable that Bank of America take this action for which there was no reasonable legal basis and which would show a lack of judgement," a Paulson spokesman said.
Congress opened an inquiry after documents released by New York state Attorney-General Andrew Cuomo indicated that top US Treasury and Federal Reserve officials threatened to push out bank management and board members if the takeover were not completed.
The banking giant also faces litigation over bonuses paid to Merrill executives just before the takeover was finalised.
Bank of America has reached a deal with the Securities and Exchange Commission to pay a penalty of US$33 million (Bt1.1 billion) to the authorities "for misleading investors" on $3.6 billion in bonuses. But a federal judge rejected the plan, saying it penalised the shareholders who wewre victimised, and failed to shed light on what happened.
Regulators were ordered to bring the case to trial, and said last week that new charges could be filed.
Merrill Lynch's payment of cash bonuses on December 29, just ahead of the finalisation of its acquisition by Bank of America on January 1, sparked an outcry in the United States over executive compensation, particularly involving firms bailed out by the government.
Lewis, who had lost the post of chairman earlier this year at an angry shareholder meeting, "notified the board of directors of his decision to retire, effective December 31, 2009", the company said in a statement on Wednesday.
"The board will continue ongoing planning to ensure his successor is selected by that date. Lewis will retire as CEo and as a directir." Lewis, who heads the largest US banking group by assets, said "Bank of America is well positioned to meet the continuing challenges of the conomy and markets. "I am particularly heartedned by the results that are emerging from the decisions and initiatives of the difficult past year and a half," he added. Lewis had provoked shareholders' anger by acquiring Merill Lynch without informing them of the investment banks's massive losses.
It later emerged that Lewus had been pressured to complete the purchase of the firm for fear of a furthre blow to a fragile financial system. Lewis told a congressional hearing that he concluded the deal because if Bank of America backed away, "the government could or would remove management and the board."
But asked specifically if he were "pressured", Lewis replied: "It's hard to find the exact right word to describe what I just described."
Henry Paulson, who was Treasury chief when the deal was sealed, acknowledged he had urged Lewis not to back away from Merrill. Paulson "intended to deliver a strong message reinforcing the view... that it would be unthinkable that Bank of America take this action for which there was no reasonable legal basis and which would show a lack of judgement," a Paulson spokesman said.
Congress opened an inquiry after documents released by New York state Attorney-General Andrew Cuomo indicated that top US Treasury and Federal Reserve officials threatened to push out bank management and board members if the takeover were not completed.
The banking giant also faces litigation over bonuses paid to Merrill executives just before the takeover was finalised.
Bank of America has reached a deal with the Securities and Exchange Commission to pay a penalty of US$33 million (Bt1.1 billion) to the authorities "for misleading investors" on $3.6 billion in bonuses. But a federal judge rejected the plan, saying it penalised the shareholders who wewre victimised, and failed to shed light on what happened.
Regulators were ordered to bring the case to trial, and said last week that new charges could be filed.
Merrill Lynch's payment of cash bonuses on December 29, just ahead of the finalisation of its acquisition by Bank of America on January 1, sparked an outcry in the United States over executive compensation, particularly involving firms bailed out by the government.
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