Channel 0401 Finance | Bank

Moody's: Asian Structured Finance 2009 Review & 2010 Outlook

2010-02-07T02:32:00.001-08:00

Despite challenges, cross-border issuance likely to revive as market improves in 2010

Moody's Investors Service says in a new report that issuance in the Asian structured finance market will rise moderately in 2010, as investor interest makes a comeback, and the price gap between investors and sponsors narrows.
"The performance outlook for Korean RMBS and auto loan ABS is stable.

Korean residential mortgage loans have a recovery rate of over 99%, while the performance of Korean auto loans has been stable, with no marked deterioration during the credit crisis," says Jerome Cheng, a Moody's Vice President and author of the report.

"The performance outlook for Korean credit card ABS and Singaporean CMBS is negative. The negative outlook on Korean credit card receivables is based on potential deterioration in cardholders' payment ability. Korean household debt is at an all-time high, and a rise in interest rates would
hurt cardholders' ability to pay down unsecured credit card receivables.

For commercial properties in Singapore, the oversupply of office and industrial space and a weak economy are adding pressure to both vacancy and rental rates," says Mr. Cheng.

However, Moody's sees no rating implications on the rated transactions due to asset performance. "Given the level of subordination and the structural mechanisms present, we do not expect any rating actions, even for the two asset classes on which we have a negative outlook," says Mr. Cheng.

In its outlook for activities in 2010, the rating agency says that Korea, the largest securitization market in this region, will issue some cross-border ABS, RMBS, and covered bond transactions. Investor interest is evident, given that Korean receivables did not deteriorate much during the crisis. Rather, they have all improved, as Korea's economy started to improve.

In its review of 2009, Moody's notes that the fallout from the credit crunch significantly impacted the issuance from the Asian structured finance market -- with the exceptions of the domestic markets in Korea and India.

Korea's domestic and cross-border issuance in 2009 was USD33.0 billion, 87.6% of the region's total USD37.7 billion issuance. Korea's domestic market was dominated by project finance securitizations and RMBS, while its cross-border market generated all the foreign currency-denominated issuance in the region, including Asia's first covered bond transaction.

Moody's rating actions in 2009 were mainly downgrades related to changes in counterparty ratings and the change in Korea's local currency bond ceiling. "The downgrades were not driven by pformance deterioration in the underlying receivables. If anything, the performance of these receivables is well within our expectations," explains Mr. Cheng.

Moody's also changed its assumptions for three transactions, as perceived levels of risk increased. Two of them are deferred payment transactions in Singapore where the underlying residential property buyers' default risk had increased and the property values had declined. The third one is a Real Estate Investment Trust (REIT) in Taiwan where the REIT had acquired a new property through increased leverage. The ratings of these three transactions were subsequently downgraded.

The report discusses Moody's expectations for the Asian structured inance market in 2010, examines the outlook for cross-border Korean RMBS and ABS and Singaporean CMBS, summarizes issuance activities in 2009, and discusses collateral performance and the rating downgrades in
2009.

The report, "Asian Structured Finance: 2009 Review and 2010 Outlook" can be accessed at www.moodys.com.

“THAI CONSUMER CONFIDENCE IN FOURTH QUARTER OF 2009 REACHED THE HIGHEST LEVEL SINCE 2008” SAYS NIELSEN

2010-02-07T02:11:00.001-08:00

THAI Consumer MORE OPTIMISTIC ABOUT PERSONAL FINANCES AND JOB SECURITY IN 2010 But Spending Still Restrained

Consumer confidence in Thailand during the fourth quarter 2009 reached its highest level since mid 2008, driven by improved job prospects and better personal finances, according to the Global Consumer Confidence Survey released today by The Nielsen Company.

An increase in consumer confidence in Asian markets, as well as Brazil, continues to reflect signs that the economy is emerging from a global recession and, in some markets, the recovery is accelerating, according to the latest survey. Results of the Nielsen survey highlighted that consumer confidence gains in markets recovering fastest from recession – including Hong Kong, China, Singapore, India and Brazil – have fueled renewed willingness to spend by many consumers as they head into 2010.

While eight of the top 10 most confident markets in the fourth quarter of 2009 came from Asia Pacific, including emerging markets Indonesia (ranked 1st) and India (ranked 2nd), consumers in two of Asia’s most developed markets, South Korea and Japan, were the least confident. Brazil (ranked 3rd) and Canada (ranked 10th) were the only countries outside of Asia to make the top 10.

In Asia Pacific, Hong Kong recorded the highest consumer confidence increase for the second consecutive quarter in quarter four (Q4) – up seven index points from 93 in Q3 2009 to 100 (on a scale of 0 to 200 Index points) in Q4. Confidence in Hong Kong rose a total of 21 points since June 2009.

Globally, between June and December last year, the Nielsen Global Consumer Confidence Index rose five points from 82 to 87 while consumer confidence in Thailand increased nine points from 86 to 95.

The Nielsen survey shows that consumers in the past six months have become more optimistic about their country emerging from recession with better job prospects and personal finances. This is another sign that global recovery is heading in the right direction.

In Thailand, Nielsen found consumers became more optimistic about the economy in the fourth quarter of 2009. The percentage of Thais who said they believe the country is currently in a recession dropped for the fourth consecutive quarter– down from 91 percent in Q1 to 70 percent in Q4 of 2009.

Aaron Cross, Managing Director of The Nielsen Company, Thailand said “A year ago the world was in free-fall and consumer confidence hit an all time low in Nielsen’s global index. Thai consumer confidence also plummeted to it lowest record in Q1 2009. Since the Thai government reacted quickly to implement a significant stimulus program we have seen the consumer confidence index continue to rise throughout the year of 2009 showing an increase from 81 in Q1 to 86 in Q2 and 94 in Q3”.
Thai Consumers More Optimistic About Personal Finances

More than half (55%) of Thai consumers surveyed said their personal financial outlook for 2010 will be excellent or good compared to 45 percent last June.

Asia is also leading the way in increased discretionary spending. Chinese consumers topped global rankings (in discretionary spending) for investing in stocks and mutual funds and new technology products, and are ranked second globally for spending on new clothes and holidays. Thai consumers, however are not ready to start spending yet with 64 percent saying now is not a good time to spend - up from 60 percent in Q3.
Job Prospects Looking Up

The economy remains the top concern of Thai consumers however the concern for job security continued to decline in Q4 2009. In December 2009, 40 percent of Thai consumers described job prospects for 2010 as excellent or good compared with only 15 percent in Q1 2009, 27 percent in Q2 2009 and 38 percent in Q3 2009.
How do Thais utilize spare cash?

Thai consumers are cautious about discretionary spending. After covering necessary living expenses, Thais continue to put their spare cash into savings (59%). This has been the favorite mode of spare cash utilization for Thais since the year of 2006. After savings, holidays/vacations (47%) investing in retirement funds (30%), and home improvement and decoration (28%) were the three most popular spending options.
Discretionary spending

According to Nielsen’s survey on consumer behavior, Thai consumers will cut back on the following expenses

Spend less on new clothes (64%)Cut down on out of home entertainment (58%)Try to save on gas and electricity (55%)Delay upgrading technology, e.g. PC, mobile phone (44%)Cut down on holidays/ short breaks (42%)
About the Nielsen Global Consumer Confidence Survey

The Nielsen Global Consumer Confidence Survey was conducted between December 4 -18, 2009 and polled over 17,500 consumers in Asia Pacific, Europe, Latin America, the Middle East and North America about their confidence levels and economic outlook. The Nielsen Consumer Confidence Index is developed based on consumers’ confidence in the job market, status of their personal finances and readiness to spend. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of ±0.6%.
About The Nielsen Company

The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications. The privately held company is active in more than 100 countries, with headquarters in New York, USA.

OCBC Bank launches a dedicated private bank - Bank of Singapore

2010-02-05T23:01:00.001-08:00

(“OCBC Bank”) today announced that it has completed the acquisition of Singapore-based ING Asia Private Bank Limited and its subsidiaries (together, “IAPB”) for an investment amount of approximately US$1,446 million or S$2,024 million. IAPB is now a wholly-owned private banking subsidiary of OCBC Bank and has been re-named Bank of Singapore Limited (“Bank of Singapore“). Bank of Singapore will be led by Mr Renato (“Bing”) de Guzman, the CEO of the former IAPB. The private banking businesses of IAPB and OCBC Bank will be combined and operate as Bank of Singapore. This will result in the creation of a leading Asian private bank with over 7,000 clients and total private client assets under management of approximately US$23 billion. It will also occupy a unique position as the only dedicated private bank that is headquartered in Singapore. “The successful completion of this acquisition marks a significant milestone in our private banking business. Our much larger private bank will significantly benefit customers from both IAPB and OCBC. OCBC Private Bank customers will benefit from IAPB’s fully open architecture product platform and proprietary research, while IAPB customers will benefit from the access to OCBC’s extensive branch network and products and services that were previously not available to them, such as property financing, brokerage services, insurance, retail and SME banking products and services. We are committed to investing more in this franchise and to better serve the needs of our high networth customers across our key markets.” said Mr David Conner, CEO of OCBC Bank. Mr Renato (“Bing”) de Guzman, CEO of Bank of Singapore, said, “As part of the OCBC family and with the strong backing of OCBC, we remain totally committed and dedicated to helping our clients to seek the best outcome for their financial goals, and to grow and protect their wealth. I am confident that Bank of Singapore will continue to grow and capture greater market share in existing and new markets. We will continue to focus on attracting some of the best talents in key markets and on talent development for long term growth and professional development as part of the OCBC Group.” “I warmly welcome OCBC Private Bank clients to experience the enhanced products and services that Bank of Singapore can offer and we also thank our IAPB clients for their continuing support. Over the next few months, as we align our services, our focus will be on ensuring continuity and minimal disruption to our service levels.” added Mr de Guzman. Brand Identity The Bank of Singapore brand is a reflection of its strategic home base in Singapore, which is a sound financial hub that is internationally known for its efficiency, transparency and best-in-class services. The brand also leverages on Singapore’s unique position as a rapidly growing private banking hub, attracting money flows not just from Asia but increasingly from the Middle East and Europe. Bank of Singapore offers its clients the best of both worlds – combining global know how with a distinct level of service that is among the best in the industry. It is Asia’s global private bank. The design treatment of the logo is intended to capture a strong sense of modernity. The words BANK and SINGAPORE have been rendered in bold to reflect the unique location and distinct perspective that comes from being the only dedicated Singapore-headquartered private bank. This Asian centre is complemented with the modifier “International Private Banking” which clearly positions Bank of Singapore as one that is global in its scope and scale. The red circle and stripes have been taken from the original OCBC Bank logo to reinforce the link between Bank of Singapore and OCBC Bank. The stripes have been duplicated to create two different parts, signifying the coming together of OCBC Bank’s private bank business and IAPB to become one dedicated entity to serve the needs of high networth individuals in Asia and globally. The circular nature of the icon has significance in Asia because it represents the enduring relationship Bank of Singapore has with its customers. To build brand awareness and reach out to its customers, Bank of Singapore will be launching a pan-Asia brand advertising campaign. The new integrated media campaign debuts today in global broadcast media, international as well as local print and online media reaching out to its customers around the world.

KBank and CMBC open borders toward financial service excellence

2010-01-30T01:45:00.000-08:00

KASIKORNBANK, in collaboration with China Minsheng Banking Corporation (CMBC), has opened a new chapter in the Sino-Thai banking business, opening the financial frontier between the two countries by merging the service networks of the two banks to allow cross-border services. Both parties target joint lending to Chinese SMEs at 6 billion Baht this year.

Mr. Dong Wenbiao, Deputy Director of the Economic Committee of the Chinese People’s Political Consultative Conference (CPPCC), and Chairman of the Board of Directors of CMBC, chaired the January 28 signing ceremony at Chomphu Phukha Reception Room, KBank’s head office to open the financial frontier between the two nations. The move is aimed to enhance collaboration in financial services for customers of KBank and CMBC. KASIKORNBANK Chief Executive Officer Banthoon Lamsam and Mr. Hong Qi, President and Chief Executive Officer of CMBC, also signed the agreement at the ceremony.

Mr. Dong Wenbiao, Chairman of the Board of Directors of CMBC, said KBank and CMBC have been business partners since 2004. The two banks have together studied and developed a financial service platform and provided loans for SMEs in China with a risk management technique that has provided sound financial management for Chinese mainland SMEs. This joint project has seen significant progress, and has proven successful.

Over the past 5 years, trade between China and ASEAN has risen from USD 59 billion to USD 250 billion. On January 1, 2010, the ASEAN-China Free Trade Area (FTA) officially started, with trading volume between the two to be increased to 13 percent of total world trade volume, becoming a major economic community covering 11 countries with a total population of 1.9 billion and combined GDP of USD 6 trillion. The ASEAN-China FTA is the most populous free trade area and the world’s most powerful economic driver among developing countries. Thus, the collaboration between KBank and CMBC in diverse aspects will serve as a strong base to support and provide convenience in business operations between the two countries, which are expected to grow continually.

Mr. Banthoon Lamsam, CEO of KBank, said the Bank has expanded business in China in collaboration with CMBC, China’s leading private bank, by providing credits for SMEs in the Chinese mainland, which is one of the key business strategies of KBank in the country. The joint credit provided for China’s SMEs measured CNY 178 million, or around 900 million Baht. As the SME market in China is quite large, with a huge demand for funding, the Bank has targeted provision of CNY 1.2 billion, or approximately 6 billion Baht, of joint lending in 2010.

Aside from SME lending in China, KBank and CMBC are planning to open the Sino-Thai financial frontier via collaboration among the networks of 400 CMBC branches in China, KBank branch and representative offices in China, and 800 KBank branches in Thailand, in order to directly facilitate trade and investment between customers in the two countries, under the “boundless business” concept.

Thus, the cooperation in business expansion for customers in China and Thailand includes cross-border RMB funds transfer, wealth management such as mutual fund investments, securities trading, and deposits, credits such as syndicated loans and factoring, financial advisory services, derivative services, bancassurance, and exchange of economic and business information between the two banks.

“From now on, KBank customers will be able to use financial services offered by CMBC in China,” Banthoon said. “ For example, KBank and CMBC jointly provide RMB-denominated credits to Thai companies investing in China, and RMB-denominated credits to Chinese companies investing in Thailand. The services also include the Bank’s other financial products in four main groups including deposits, investments, risk management, RMB foreign exchange services, and international trade. Such cooperation is to innovate towards financial service excellence of the two countries in a way that will largely benefit businessmen of both nations.”

In addition, the two banks will exchange knowledge and banking management innovations. KBank is the number-one player among SME businesses in Thailand, and widely recognized as an Asian leader in providing financial services to SMEs under the concept of “Customer Centricity”. The exchange of knowledge in brand building, marketing, product development, and a complete credit management system, in combination with business administration techniques in China from CMBC, will benefit business operations to efficiently serve theneeds of SME customers in China.

VocaLink buys out joint venture partner in OneVu

2010-01-30T01:04:00.001-08:00

VocaLink, the international payment transaction specialist, today announced that it has bought out its joint venture partner, Fiserv, to become the sole owner of OneVu, the consolidated electronic bill and data presentment service. Miles Quitmann, OneVu’s Managing Director has taken the decision to leave the company at the end of January to pursue new opportunities. Fred Bar, Managing Director Euro Services will take functional responsibility for OneVu and complete the integration into VocaLink’s service portfolio.

OneVu is a critical online banking service for many of the UK’s leading corporates and banks including Lloyds Banking Group and The Royal Bank of Scotland. OneVu already has 280 million bills under management and is supporting its corporate customers in their move away from costly paper bills, reducing their impact on the environment. By consolidating a number of online bills, UK consumers can benefit from reduced prices and the convenience of having a number of household bills in one secure place.

Marion King, Chief Executive Officer at VocaLink, commented “By integrating OneVu into VocaLink we can deliver greater efficiency to our banking customers and expand our retail service. VocaLink is well placed to help OneVu grow and launch new services that benefit both corporates and consumers. I would like to take this opportunity to thank Miles for his considerable contribution in leading OneVu and successfully building the customer base and service portfolio.“

Hong Kong and Indonesia launch a new cross-border payment-versus-payment link

2010-01-30T00:33:00.001-08:00

The Hong Kong Monetary Authority (HKMA) and Bank Indonesia jointly announced today (Monday) that the new cross-border payment-versus-payment (PvP) link between Hong Kong’s US Dollar real time gross settlement (RTGS) system and Indonesia’s Rupiah RTGS system has been launched on 25 January 2010. The link, which starts operation today, will eliminate settlement risk in foreign exchange transactions between the US Dollars and Indonesian Rupiah by ensuring the simultaneous delivery of US Dollars in Hong Kong and Rupiah in Indonesia. Banks in Indonesia can better manage their counterparty risks arising from the foreign exchange transactions and enhance their operational efficiency in settling those transactions during Asian hours.

On 24 October 2008, the HKMA and Bank Indonesia signed a Memorandum of Understanding on the establishment of the PvP link. Following the completion of system development and testing, the link went live on schedule today.

The link is operated in Indonesia by Bank Indonesia and in Hong Kong by Hong Kong Interbank Clearing Limited, which operates the interbank clearing systems in Hong Kong, and is jointly and equally owned by the HKMA and the Hong Kong Association of Banks.

Mr Eddie Yue, Deputy Chief Executive of the HKMA, said, "The PvP link between the US Dollar RTGS system in Hong Kong and the Rupiah RTGS system in Indonesia makes settlement safer and more efficient by eliminating the settlement risk arising from the delivery of two currencies in different time zones. I am glad that Bank Indonesia and the HKMA share the same view in improving the infrastructure coordination among the two economies for promoting the monetary and financial stability."

Mr S. Budi Rochadi, Deputy Governor of Bank Indonesia, said, "The implementation of the USD/IDR PvP link between the Indonesian Rupiah RTGS system and the US Dollar RTGS system in Hong Kong can help mitigate settlement risk in USD/IDR inter-bank FX trades in Indonesia. The implementation also gives benefits to Indonesian banks by allowing immediate utilization of IDR and USD since both currencies are settled real-time, simultaneously and in Asian time zone and potentially making wider choice of counterparties in inter-bank USD/IDR market as the market players are not constrained by counterparty trading limit representing FX settlement risk exposure. In turn, this could promote safe, sound and efficient FX market in the country."

TMB Selects SAS Solution for End to End Business Intelligence Platform Project

2010-01-29T21:11:00.001-08:00

Thai Military Bank Public Co., Ltd. (TMB) selected the Credit Scoring Solution for Banking of SAS for its End to End Business Intelligence Project with a project value of almost 20 million Baht.

This Project is developed to offer effective and transparent risk management through powerful analytical tools which can support all stakeholders involved in Credit activities in the assessment and monitoring of the portfolio’s risk performance.

“Previously, the credit assessment process was complex manual and slow due to redundant verification of data reliability before executing reports along with operational and security problems,” said Mrs. Fabienne Libert, Senior Vice President, Retail Credit Group, TMB Bank Public Co., Ltd. . “This Project will enhance our operational efficiency and allow us to directly manage credit risks with data models while establishing governance standards data processing effectively at greater speed. Moreover, it creates transparency risk management information for all and one version of the Truth.”

“TMB decided to select SAS for the End to End Business Intelligence Project since October 2009 as SAS solutions can comprehensively cover our requirements, especially end-to-end straight through process of data starting from data extraction until delivery of information to end-users with advanced analytical tools.”
About SAS

SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions delivered within an integrated framework, SAS helps customers at more than 45,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world The Power to Know

KBank and J.P. Morgan team to guarantee one-day U.S. dollar transfers to China

2010-01-24T05:29:00.001-08:00

KASIKORNBANK has announced that it is the first Thai bank to provide U.S. dollar-denominated funds transfers service through the use of J.P. Morgan’s U.S.Dollar Clearing – Asia Direct, an intelligent routing technology that allows the funds transfer to directly reach the destination branch in key economic zones throughout China within the same day. If the banks in China cannot receive the funds within one day, KBank will refund the transfer fee. The excellent servicing standards of the two Banks will facilitate exporters to manage their time, expenses and liquidity without any difficulties.

Mr. Songpol Chevapanyaroj, Executive Vice President, KASIKORNBANK, said China is currently one of the key trading partners of Thailand. The trading volume of the two countries measured 1.19 trillion Baht in 2009, and has grown an average of 27 percent per annum since 2003. However, funds transfers have constrained trade between Thailand and China due to complications in funds receipt times caused by geography, organization, and time zone differences. China has more than 50 cities in 34 provinces with an earlier time zone than Thailand. This has made it difficult to know exactly when funds would reach recipients.

KBank has been aware of this problem and developed operations that allow U.S. dollar-denominated funds transfers from Thailand to bank branches in China within one day, with the cooperation from J.P. Morgan, one of the world’s leading banks in international funds transfer.

Thus, KBank can now provide a time guarantee for customers who transfer U.S. dollar-denominated funds to around 700 bank branches in China. If a customer completes the transaction before noon, the bank branch in China will receive the funds within one day. If the funds are not received within one day, the Bank will refund the transfer fee to the customer.

Mr. Percy Batliwalla, Managing Director and Asia Pacific head of financial institutions - banks at J.P.Morgan Treasury Services said that “As a result of the increasing intra-Asia trade flows, enhancing the efficiencies of U.S.Dollar payments, particularly within the Greater China region and Japan has become essential for all banks within Asia.

Mr. Batliwalla added that Thailand remains an important market for J.P.Morgan, and we are confident that our unique U.S.Dollar Clearing - Asia Direct solution will enable KASIKORNBANK to provide greater efficiencies to its existing and potential clients, thereby enhancing the bank's competitiveness.

In addition, this service, developed in cooperation between KBank and J.P. Morgan, will increase potential of businesses that need to make funds transfers to China, as they will more efficiently manage liquidity without the need to wait several days for transfers to be completed. Such businesses will be able to more easily control their spending without the need to submit funds transfer orders through several branch layers.

Mr. Songpol added that KBank’s network in China includes leading banks covering key economic zones throughout the country, with a total of 700 outlets. The Bank hopes the new service will match customer needs and further build confidence in the Bank as a trusted business partner. Businesses that wish to use the service can contact any KBank branch nationwide, or ask for more information at the K-BIZ Contact Center, tel. 0 2888 8822.
About KASIKORNBANK

KASIKORNBANK (KBank) has for over 60 years of operation been regarded as Thailand's premier banking institution, and a renowned forward thinking bank which always continues to deliver innovative financial services to customers. The founding of KASIKORNBANKGROUP in 2005, raised the Bank to a comprehensive financial service provider with one singular brand of quality service - K Excellence. For more information, visit www.kasikornbank.com.
About J.P. Morgan

J.P. Morgan is the world's largest U.S.Dollar clearing and commercial bank. J.P.Morgan Treasury Services leverages the services and products of its Worldwide Securities Services division, as well as its Investment Bank, Asset Management and Private Bank lines of business to provide its clients with integrated banking solutions.

Bangkok Bank named ‘Thailand Bond House of the Year 2009’ by IFR Asia

2010-01-24T02:45:00.000-08:00

Bangkok Bank has won the ‘Thailand Bond House of the Year 2009’ award from IFR Asia, a leading regional financial magazine. This reinforces the bank’s outstanding performance in setting a new standard and bringing innovation to the debt capital market in Thailand despite last year’s market fluctuations.

Bangkok Bank Senior Vice President and Corporate Finance Department Manager Mr. Surabhan Purnagupta said being the first Thai bank that won IFR Asia’s ‘Thailand Bond House of the Year 2009’ award is another success and proud milestone of Bangkok Bank.

“This is the first year IFR Asia magazine presents the ‘Thailand Bond House of the Year’ award. The award is given to a financial institution that develops and adapts itself well in line with fluctuating markets as well as setting new standards and introducing innovation. The value of the debentures issued is not the only criteria for determining the winner, but also debenture structures that suit the diverse needs of issuers and investors”, Mr. Surabhan said.

IFR Asia magazine (Volume 630, December 2009) by Denise Wee said ‘Thanks to the low interest rate environment, retail inverters were the key driver for the baht bond market in 2009, which saw insurance skyrocket to bt304.4bn (US$ 9.19bn) up to mid-November compared to Bt198.3bn in 2008. Bangkok Bank made great strides in the review period leveraging off its large depositor base that allowed it to play a key role in major transactions. The bank notched up bookrunner volumes of Bt48.6bn from 21 issues.

‘Bangkok Bank’s success came on the back of its strong performance in the previous three years during which it increased its market share from 10.2% in 2007 to 15.8% in 2009. It was the largest band for an unlisted issuer in Thailand and impressive because it was fully placed out and upsized from Bt10bn to Bt12bn just nine months after BTSC has exited from its rehabilitation programme. Apart from BTSC’s deal, Bangkok Bank also played major underwriting roles in all the other marquee deals of 2009. The bank has also seen repeat business from a cache of core clients. Bangkok Bank cemented a strong relationship with PTT, having introduced it to the retail market in 2003. The bank also saw strong repeat business from issuers like Toyota Leasing Thailand and Siam Cement included PTT Exploration and Production.’

“Bangkok Bank is proud to have taken part in contributing to the development of Thailand’s bond market by creating and offering quality debt instruments to investors while taking into account benefits and fairness for all stakeholders – both issuers and investors. It is our honor to be trusted by Thailand’s leading companies who has always selected us to serve them continuously on bond transactions”, Mr. Surabhan added.

Article Looks At The Long-Term Effects Of The Recent Credit Crisis

2010-01-17T04:57:00.001-08:00

In the wake of the 2007-2008 financial crisis, there has been much discussion about the prospects for an economic recovery over the next few quarters. But an article published yesterday by Standard & Poor's says that the more important issue is: What will happen over the next few decades? The article, which is titled "The New Normal (The Future Isn't What It Used To Be)," says that Standard & Poor's believes it will be a decade or more before the world and U.S. economies can hope to grow as rapidly as they did during the half-century or so preceding the recent crisis because they will have to bear increasing burdens. These will likely include:

--High personal debt and lower wealth in the U.S., which--combined with a rebounding though still-low saving rate--will slow the consumer spending that has powered much of U.S. and world growth.

--International trade and financial imbalances that are leading to a weaker dollar and a move away from dollar reserves.
--Stricter but inconsistent financial and other government regulation.

--A global financial system that has lost much of its capital and will need to operate with lower leverage, restricting loan availability.

--More risk-averse investors (some suddenly conservative because of recent losses, others approaching retirement and husbanding their wealth).

--Fiscal deficits in many countries, especially the U.S., the deficit of which could grow larger as the retirement wave hits.

--Rising health care costs that threaten the competitiveness of U.S. companies versus their overseas counterparts.

"We expect that the world economy will recover," said Standard & Poor's Chief Economist David Wyss. "But we think it's likely that it will look different once it does." For example, the events of the past two years likely have accelerated the relative decline in U.S. economic influence, as Asian economies have continued to grow while America's has contracted. In past decades, however, the U.S. and world economies have proved resilient. So while the future isn't as bright it seemed during the bygone boom, neither is it as bleak as it seemed only a year ago.

This article is part of a special report titled "The New Normal," which also will be published in the Jan. 27, 2010, edition of Standard & Poor's CreditWeek. The special report examines how certain industry sectors and financial markets could fundamentally change as a result of the recent credit crisis.

The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

Fitch Affirms United Overseas Bank's Thai Subsidiary

2010-01-02T01:35:00.001-08:00

Fitch Ratings has today affirmed United Overseas Bank (Thai) Public Company Limited's (UOBT; formerly Bank of Asia) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+', Short-term foreign currency IDR at 'F2', National Long-term rating at 'AA+(tha)', National Short-term rating at 'F1+(tha)', Individual rating at 'C' and Support rating at '2'. The Outlook is Stable.

The ratings are based on UOBT's strong financial position and support from controlling shareholder, United Overseas Bank of Singapore (UOB, 'AA-'/Stable). Any change in the shareholding of UOB in UOBT, or UOB's commitment and support to UOBT could affect its International and National ratings. Meanwhile, any changes in Thailand's Country Ceiling could also affect UOBT as this currently constrains UOBT's foreign currency ratings. The bank's performance remains constrained by its small size and weaker franchise, compared to Thailand's major banks.

UOBT's 2008 performance improved with a reported net profit of THB 1.4bn, compared to a net loss of THB92m in 2007, due to significantly lower loan loss provisions (LLP), improved loan yield and lower funding cost. However, profitability measures remain weaker than major banks due to its weaker loan and deposit franchise. H109 performance has been relatively weak with a net profit of THB394m (a decline of 57% yoy) due to continuing loan contraction and higher provisioning cost.

UOBT's asset quality improved following the sale of THB11bn worth of NPL in Q207, with NPLs falling sharply to THB7.9bn at end-2008 (about 5% of total from 12% at end-2006). However, impaired loans rose to THB8.7bn (6% of total) at end-June 2009 and provisioning risk remains, due to Thailand's continual weak economic environment. Loan loss reserves (LLR) amounted to about THB6bn at end-June 2009, or 69% of impaired loans.

Funding and liquidity position has remained stable. Deposits account for about 90% of funding at end-June 2009, and about 70% of deposits have maturities of less than six months. Loan-to-deposit ratio remains above 90%, while liquid assets to deposits and short-term funding ratios were about 31% at end-June 2009, a rise from 23% at end-2008.

UOBT's capital is the strongest among Thai commercial banks. The bank has recently completed a THB2.2bn capital increase which resulted in Tier 1 capital ratio rising to 20.37% to support future business expansion, and minimise potential ownership dilution in the longer term due to foreign ownership restrictions.

UOBT was established in 1939 as Bank of Asia and was later acquired by Singapore's UOB in 2004. UOBT is Thailand's ninth-largest commercial bank, with 147 branches and 2% of Thailand's total system loans and deposits. The bank's core strength is in SME and retail lending. UOB currently holds 99.66% stake in UOBT.

Fitch Affirms Export-Import Bank of Thailand's Ratings

2010-01-02T01:33:00.001-08:00

Fitch Ratings has today affirmed Export-Import Bank of Thailand's (EXIM) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook, Short-term foreign currency IDR at 'F3', National Long-term rating at 'AAA(tha)' with a Stable Outlook, National Short-term rating at 'F1+(tha), Support rating at '2', Support Rating Floor at 'BBB' and outstanding senior unsecured bonds at 'AAA(tha)'.

EXIM's ratings are correlated with the Sovereign's ratings given the full ownership and control of the bank by the Ministry of Finance (MOF). Also, EXIM's policy role as Thailand's export credit agency, which entitles the bank to partial debt guarantee provisions and loss compensation for business undertaken in accordance with its mandated policy role, links its ratings to that of Thailand's ('BBB'/Stable). Fitch believes that there is a high probability that state support would be forthcoming, if necessary. The International rating and Outlook of EXIM was revised to 'BBB'/Stable from 'BBB+'/Negative in April 2009 following a similar action on Thailand, due to the prolonged political crisis.

Following a strong improvement in financial performance in 2007, EXIM reported a weaker net profit of THB201m in 2008, 60% lower yoy due to increased loan loss provisions (LLP) as a result of higher NPLs amid the weak global economy. Revenue also declined due mainly to loan contraction. EXIM's 9M09 performance has shown improvement with net profit of THB160m, although provisioning risks remains.

The severe global economic downturn in Q408 and Q109 caused a sharp jump in impaired loans. At end-2008, NPLs stood at THB4.7bn (or 9.24% of total loans), a 62% increase from THB2.9bn (5.46%) at end-2007. At end-March 2009, NPLs rose to THB5.3bn (10.84%) but improved to THB4.3bn (9.06%) at end-September 2009 due to restructuring of NPLs. Fitch expects the weak global economic recovery to pose further risks to EXIM's asset quality in 2010.

EXIM's capital position is stronger, with total capital ratio of 23.82% at end-September 2009 compared with 16.63% at end-2008 and 13.05% at end-2007. This is due to the capital injections made by the MOF at end-2008 (THB1.3bn) and in September 2009 (THB5bn). Equity to assets improved to 23.6% at end-September 2009, significantly higher than regional peers.

EXIM began operations in 1994. The bank is under the supervision of the MOF and is subject to examination by the Bank of Thailand (BOT). The bank's main objective is to promote exports, Thai investments abroad and investments for national development. EXIM is not allowed to accept public deposits.

Money &Banking to celebrate the 10th Money Expo with the theme “The Road to Wealth”

2009-12-16T20:05:00.001-08:00

Money and Banking magazine organizes Money Expo 2010 with special theme “The Road to Wealth” to celebrate its 10th year anniversary and support Thailand economic recovery to distribute wealth to all Thais. The first event, bringing great wealth to Eastern Seaboard, is Money Expo PATTAYA 2010.

Mr.Santi Viriyarangsarit, Money and Banking magazine editor and president of Money Expo 2010 announces that “after its 9 successful years in 2009 with total 5,185,500 visitors and transactions value of 646,000 million baht, Money Expo 2010 will celebrate its 10th anniversary in 2010 in 4 regions in the country with the theme “The Road to Wealth”.

Money Expo brings together best investments and finance offers from nation’s leading commercial banks, financial institutions, along with varied life insurance options available in the market so that retail customers and SMEs can access directly to “funding source” and “Investment Choices”. At the same time, opportunities are opened for Bank and financial institute to expand both retail and SMEs base.

The first Money Expo 2010 The Road to Wealth, the roadmap to achieve wealth for all Thais, will be held in Pattaya of Chonburi province with title “Money Expo Pattaya 2010” during 5-7 February 2010 at PEACH, Royal Cliff Beach Resort Hotel where 22 organizations, including commercial banks, financial institutions together with leading organization from private sector and government agencies will participate.

These organizations will roll out golden promotions for their quality products and services, ranging from low-interest lending rate, special mortgage rate, auto loan, education loan, SMEs loan, credit card, cash card to attractive deposit rates. The best conditions will be offered for investment in stock market, bonds, derivatives, life insurance. Meanwhile, investment guidance and consultancy services will also be provided to those interested. Moreover, liveStage performances from leading superstars are scheduled to entertain visitors.

Commercial banks participate in Money Expo PATTAYA 2010 are Krung Thai Bank Pcl. , Bangkok Bank Pcl. , Kasikorn Bank Pcl. , Siam Commercial Bank Pcl. , Bank of Ayudhya Pcl. , TMB Bank Pcl. , The Siam City Bank Pcl. , CIMB Thai Bank Pcl. , The Thai Credit Retail Bank Pcl. , Commercial banks participate Government Housing Bank , Islamic Bank of Thailand , Muang Thai Life Assurance Co. Ltd. , Ayudhya Capital Auto Lease Plc. , AEON Thana Sinsap (Thailand) Pcl. , Asia Forestry Management Co., Ltd. , Profitable Group , Bank of Thailand , The Revenue Department , The Stock Exchange of Thailand , Securities and Exchange Commission , Office of Insurance Commission and The Agriculture Futures Exchange of Thailand

Chonburi province is the economic, commercial and tourism center of the East given purchasing power of 1.2 million population. At the end of 2008, Gross Provincial Product (GPP) stood at 492,051 million baht, rose by 38,165 million baht from end 2007, while GDP per Capita was 416,003 baht, increase by 27,829 million baht from the end of 2007.

As of September 30, 2009, Chonburi shelters 280 of Banks’ branches. All of which provided 153,324 million baht net credits and raised 191,457 million baht net deposits. From January to October 2009, there are 35 projects applied for investment privileges from BOI.

In addition, there are positive signs of economic recovery given the revised 2010 GDP growth forecast to 3.3 to 5.3% from previous 3.0 to 3.5% by the The Bank of Thailand.

“All indicators show that there are strong demand for loans in Chonburi and the whole Eastern region and consumers still look for better yields in deposits and investment. I’m confident that Money Expo PATTAYA 2010 will again succeed as highly as the first Money Expo PATTAYA held during 6-8 February 2009 that has attracted 45,000 visitors and generated 19,213.68 million baht worth of transactions” Mr.Santi said.
Three other Money Expo 2010

Central - Money Expo 2010 at Queen Sirikit National Convention Center, 6-9 May 2010

North Eastern - Money Expo KORAT 2010 at MCC Hall, The Mall Korat, 8-10 October 2010

North - Money Expo Chiangmai 2010 at Chiangmai University Convention Center, 12-14 November 2010

New Generation Trading System for China Foreign Exchange Trade System (CFETS) goes live nationwide

2009-12-16T19:11:00.001-08:00

Tata Consultancy Services, the leading IT services, business solutions and outsourcing firm today announced that the Reminbi currency trading platform for the Chinese inter-bank market, an initiative of China Foreign Exchange Trade System (CFETS), a subsidiary of People’s Bank of China (PBoC) has successfully gone live nationwide. The New Generation CNY Trading System (NGCNYTS) is a forward-looking trading system, which aims to incorporate the future vision of the Chinese Interbank market and relevant international best practices. It is designed to meet the fast growing requirements of the Chinese financial market with efficient risk management and real time monitoring systems. It supports multiple trading methods, including special features for market makers.

NGCNYTS is a next generation system providing unified platform across Debt, Money and Derivative Markets. NGCNYTS gained national importance, as it is the primary trading platform for all financial institutions such as Commercial Banks, Pension, Trust & Mutual Fund, Securities firms and Insurance companies in China.

Speaking on the successful implementation of this landmark project, Girija Pande, Executive Vice President and Head, TCS Asia Pacific, said, “We are extremely pleased to successfully deliver the CFETS project built based on our experience in other global markets and in close cooperation with CFETS who have experience in Chinese domestic market. It also provides flexibility to connect with third party front ends and other external interfaces. Deploying in ten markets at a time is a unique challenge which TCS could complete successfully.”

“The project is among the most prestigious venture of TCS in the APAC region, involving a highly dedicated multi-cultural team of over 130 associates spanning a period of more than 2 years. The team will be maintaining the system going forward and enhancing the system for additional markets,” he further added.

TCS’ trading solution at CFETS is scalable and can handle rapid growth in volumes with ease. Due to its scalable and configurable architecture, it also simplifies the addition of multiple financial products thus reducing the overall time to market.

Besides CFETS, TCS has successfully delivered the mission critical trading systems for the National Stock Exchange of India Limited, India, National Commodity and Derivatives Exchange, India and Clearing Corporation of India Limited (CCIL). TCS is also the chosen strategic partner involved in maintaining the trading applications at Deutsche Boerse AG, Germany.

TCS pioneered the entry of Indian IT industry in China in 2002 and remains at the forefront of that thrust with 1100 consultants in China and four Global delivery Centres (Beijing, Shanghai, Tianjin& Hangzhou). In 2005, TCS was invited by Chinese Government to form a Joint Venture to create a large scale global sourcing base in China. TCS China is serving over 30 Global and domestic clients like Eaton, Motorola, Cummins, China Foreign Exchange Trade System (CFETS), Guangdong Provincial Rural Credit Cooperative Union (GDRCC), China Trust Bank, Hua Xia Bank.

Euroclear Bank to automate syndicated loan settlement

2009-12-16T19:08:00.000-08:00

Euroclear Bank announces the industry’s first and only multi-currency, delivery-versus-payment (DvP) settlement service for secondary market trades in syndicated loans. Launch of the new LoanReach feature will take place in the first quarter of 2010. The new, automated DvP settlement service fills a major efficiency gap in the syndicated loan business, reducing costs and risks for secondary market loan trading. DvP settlement means that the cash and loan components of the trade will be exchanged simultaneously, unlike today where movements of loan positions and cash occur manually and asynchronously. DvP settlement is the industry standard for trades in most other asset classes, such as equities and bonds.

Euroclear Bank’s extended LoanReach service will eliminate most of the credit and settlement risks, and substantially reduce the counterparty risks, associated with the settlement of syndicated loans.

Furthermore, Euroclear Bank’s initiative aims to significantly shorten the length of the settlement cycle. Today, syndicated loan transactions settle on a T+20-25 basis. Euroclear Bank’s service targets the benchmarks set by the Loan Market Association (LMA) and the Loan Syndications and Trading Association (LSTA) of T+10 and T+7, respectively, for conventional trades. Shorter settlement cycles will reduce counterparty default risk and increase liquidity.

Jurgen De Weghe, Director, LoanReach Product Management, said: “We are proud to deliver the benefits of automation and standardisation to syndicated loan investors. In close collaboration with agent banks, the introduction of multi-currency trade matching and DvP settlement is critical in this cost- and risk-conscious environment. Euroclear Bank’s LoanReach service is the most comprehensive in the market, with more features, such as E-messaging and collateral management, to come in the near future.”

"We strongly support the development of market platforms for syndicated loans,” said Martin Lelong, Project Director at Société Générale Corporate & Investment Banking (SGCIB). “We are particularly interested by Euroclear’s announcement, as their service offer fits very well with the specificities of the European market, which is of key importance to us: a tool working seamlessly and with all major currencies from trade matching to final settlement. We are convinced that these types of solutions will bring operational risk reductions, increased liquidity and productivity gains to the whole sector."

LoanReach was launched in June 2008, offering a service to allocate unique identification codes for syndicated loans, a centralised loan database, as well as agent and lender portfolio reporting systems.

With the launch of its second phase in September 2008, LoanReach introduced a portfolio reconciliation service enabling lenders to reduce their operational workload by reconciling their portfolios against balances uploaded by their agents in the centralised loan database maintained by Euroclear Bank. This service feature significantly reduces the number of reconciliation failures between agents and lenders, resulting in more efficient and accurate processing of cash-related operations, such as interest payments.

Citi mandated to raise first syndicated SME financing for a microfinance institution

2009-12-15T18:43:00.001-08:00

Citibank, N.A., Dhaka Branch today announced that it has been mandated for the country’s maiden syndicated facility of up to BDT 2 billion (US$29 million) to provide financing for small and medium enterprises (SMEs). This local currency facility will be for BURO Bangladesh, a leading microfinance institution and SME-financing NGO (non-government organization) in Bangladesh. The facility will be utilized by BURO to make credit available to SMEs, especially in rural and semi urban areas. SME financing is a priority area for Citi in Bangladesh and Citi is committed to further participating in the development of the sector.

“This Citi-led initiative is aligned with the Bangladesh Bank’s [the Central Bank of Bangladesh] objective to promote the development of the SME market. We are honoured to have this opportunity to support BURO. Once closed, this deal will provide long-term, local-currency solutions to BURO for the expansion of its SME portfolio,” said Mamun Rashid, Citi Country Officer Bangladesh. The transaction is expected to close in the first quarter of 2010.

This transaction is a follow-on to a recent transaction where Citi Bangladesh successfully closed the country’s first ever syndicated agricultural term facility of BDT1.5 billion (or US$21.7 million) to BURO Bangladesh, to support its expansion of micro-lending to the agriculture sector.

“We'll expedite our SME financing programs across the country using such funds," said Zakir Hossain, Executive Director of BURO, adding that the agency is now running their SME programs in four divisions including Dhaka.

Established in 1990, BURO Bangladesh serves more than 700,000 customers, of which more than 99% are women. BURO has a presence in 51 districts of Bangladesh through over 400 branches. As part of its 2009-2013 expansion program, BURO has plans to open 215 new branches covering 1.65 million total customers.

Thai SMBs Take the ‘Hero’ Approach to Running Their Business

2009-12-15T03:55:00.001-08:00

PayPal survey reveals that Thai SMBs rank creativity and imagination as top start-up skills

Thailand, 14 December 2009 – According to a regional PayPal study released today, when it comes to the way Thai SMBs conduct business, more than a fifth (21 percent) liken themselves to ‘heroes’ – committed to meeting any challenge before them and leading their business through all types of conditions.
Keys to success

Over a third (32 percent) of Thai SMBs consider creativity and imagination as the most important skill when starting your own company, followed by self-confidence (30 percent) and industry expertise (30 (percent).

The Internet is also playing an increasingly important role in the success of Thai SMBs, with over a third (37 percent) of annual turnover derived from online sales, equating to US $182,000. Global reach, additional sales revenues and staying ahead of the times were cited as the top three drivers for going online. Currently, 66 percent of Indian SMBs have a company website and 52 percent are engaging in e-commerce activities such as offering online orders (89 percent), online payment (56 percent) and online delivery (9 percent).
Potential roadblocks

Almost three quarters (73 percent) of the SMBs surveyed in Thailand intend to grow their business steadily in the next two to three years. However, they are encountering some challenges in meeting their goal. Forty-seven percent are concerned about surviving the current global downturn, 43 percent are facing increasing competition in their industry and 37 percent are having trouble building an online business.

Thai SMBs see e-commerce as one way to overcome those roadblocks and believe it will provide an additional avenue for more sales (71 percent), help them to increase global reach (53 percent) and keep up with the times (51 percent).
The future looks bright

The average annual sales turnover for SMBs in Thailand is currently US$492,200 and the majority of Thai SMBs (80 percent) are either very or quite optimistic about business growth in the next 12 months, with more than 2 in 5 looking at up to 20 percent growth. With over 1.6 billion Internet users worldwide, it is clear that e-commerce will play a very important role in Indian SMBs achieving that growth.

“Our research shows that Thai SMBs clearly recognise the value of ecommerce with the highest proportion (over 50 percent) across the four countries surveyed already engaged in ecommerce activities,” said Mario Shiliashki, General Manager of PayPal Southeast Asia and India. “Convenience, security and minimal set-up costs will help Thai SMBs to overcome their current roadblocks and satisfy their desire to grow internationally and drive additional sales revenues. With over eleven years of experience connecting buyers and sellers across the globe, we offer merchants a cost-effective, convenient and secure way to get started online and grow their business. Plus, research has shown that SMBs can receive an average sales increase of 14 percent when they add PayPal to their site. ”
About PayPal

PayPal is the faster, safer way to pay and get paid online. The service allows members to send and receive payments without disclosing financial information, with the flexibility to pay or get paid using a variety of secure payment options, including account balances, bank accounts (in approved countries), credit cards or promotional financing. With more than 78 million active accounts in 190 markets and 24 currencies around the world, PayPal enables global ecommerce.

In the U.S., PayPal is the most preferred payment service on the Web after Visa. In the UK and Australia, PayPal is the most preferred payment service on the Web .

PayPal’s Total Payment Volume, the total value of transactions in 2008 represented nearly 9 percent of global e-commerce .

PayPal is headquartered in San Jose, California. Its international headquarters (PayPal Pte. Ltd.) is located in Singapore.

PayPal is an eBay company. More information about the company can be found at www.paypal.com

Consumer advisory - PayPal Pte. Ltd., the holder of PayPal's stored value facility, does not require the approval of the Monetary Authority of Singapore. Users are advised to read the terms and conditions available at www.paypal.com carefully before use.
About the survey

The PayPal survey was conducted by BlackBox in August and September 2009 in India, Singapore, Malaysia, and Thailand. In each country, 300 small-medium businesses (SMB) with 5 to 50 staff and either an existing ecommerce site or plans to implement one in the next 12 months were surveyed. Respondents were either SMB owners, decision-makers or managers with financial authority or influence.

The Financial Sector Master Plan Phase II

2009-11-21T00:15:00.001-08:00

The Economic Cabinet approved the Financial Sector Master Plan Phase II (FSMP Phase II), jointly proposed by the Ministry of Finance (MOF) and the Bank of Thailand (BOT), reflecting the importance placed on the setting of goals and strategic direction for continuous development of financial institutions system. The FSMP Phase II is to be implemented during 2010 – 2014, following the implementation of the FSMP Phase I during 2004 – 2008.

The FSMP Phase II aims to enhance the efficiency of the financial institutions system, thereby enabling financial institutions to perform their financial intermediation role more efficiently, become more competitive, be able to serve a broader group of households and businesses, and maintain resiliency in face of the fast-changing environment. With greater efficiency, the financing cost of individuals and businesses would decline while the economy would be more competitive. Key measures of the FSMP Phase II can be summarized under 3 pillars: 1) reduce system-wide operating cost; 2) promote competition and financial access; and 3) strengthen financial infrastructure, with details as follows:

1. Reduce system-wide operating cost to enhance management efficiency of financial institutions, which would translate to lower costs of providing services to consumers and improved ability to compete with foreign competitors. Important measures include the followings:

1.1 Reduce regulatory costs that affect operating costs and opportunity costs for financial institutions. Improvement in financial institutions regulations is still based on the key principle that such rationalisation of regulation would promote efficiency and lower costs, without compromising stability and soundness of financial institutions and the economy as well as consumer rights.

1.2 Reduce costs from remaining NPL and NPA. Important measures include tax measures and enhancement in demand for NPA by allowing banks to partner with private firms to work on increasing the attractiveness of foreclosed immovable properties. The efficiency in trading of NPA would also be promoted by establishing an NPA information centre, and fostering an effective mechanism for foreclosure and subrogation by buyers.

2. Promote competition and financial access through various measures such as introducing new service providers into the system, expanding the scope of business of existing service providers to induce greater competition in price and service quality, and fostering greater opportunity for all sectors of the economy to access financial services from the financial institutions system. Such measures would enhance the efficiency of the overall economy. Salient features include the followings:

2.1 Promote competition within the financial institutions system by setting policies based on the following 5 principles:

1) Build a financial institutions system that provides strong and resilient support for the economy under all scenarios.

2) Encourage financial institutions to become larger through voluntary mergers while having in place measures to prevent anti-competitive behaviour to safeguard fair consumer treatment. As a result, there would be gain from economy of scale and scope, thereby lifting competitiveness of the Thai financial institutions system.

3) Promote competition by enabling financial institutions to be more flexible in managing their branch network and business scope, thus enhancing the role of existing service providers. Moreover, new service providers would be introduced in order to further increase competition, thereby raising the efficiency of the financial institutions system.

4) Allow new service providers into the financial institutions system regardless of nationality while still preserving the One Presence rule. Emphasis would be placed on new service providers with the ability to fill gaps within the system in order to enhance the efficiency and stability of the financial institutions system, in line with the trend of Thailand’s international trade and investment. Approval would be on a case-by-case basis and consideration by the MOF and the BOT would be based on appropriateness for the Thai financial institutions system.

5) Support the role of Specialized Financial Institutions (SFIs) in focusing on providing financial services to low-income population and micro businesses that do not have access to services provided by commercial banks. Government ownership in the commercial banking system after the crisis in 1997 would also be reduced.

2.2 Promote financial access to various groups of the population so as to better suit their needs at a more reasonable price, especially for micro businesses and low-income individuals. There would be measures to encourage private financial institutions to adopt business models suitable to serve the population groups that currently lack the opportunity to access financial services. For example, new entry would be permitted for service providers with expertise and proven success in microfinance. In this connection, the MOF and the BOT would consider new licenses on a case-by-case basis, subjected to rules and conditions stipulated. Meanwhile, there would be measures to support the role of the government and SFIs in filling the gaps left open by commercial service providers.

3. Strengthen financial infrastructure. Efficient and more complete financial infrastructure is an important prerequisite for enhancing efficiency of the financial institutions system. Among the key infrastructures for financial institutions are those relating to the lending mechanism, which is the main business of financial institutions. Under the FSMP Phase II, there are 5 areas of financial infrastructure improvement.

3.1 Enhance the capability and tools for risk management of financial institutions, including for credit, market, liquidity, and settlement risks, in response to financial system and economic development.

3.2 Improve the information system to support risk management of financial institutions, as well as facilitate their strategic planning and service expansion. Such improvements would include capacity enhancement of the National Credit Bureau and exploring development of a data pooling system, with due consideration for appropriate protection of client confidentiality.

3.3 Review financial laws that support risk management of financial institutions with regard to lending and managing NPA, including: 1) the secured transaction law; 2) the foreclosure law; and 3) the bankruptcy law. The review aims to establish the necessary legal infrastructure that is conducive to risk management of financial institutions while providing individuals and small businesses with potential better opportunities for improved access to the business restructuring process.

3.4 Promote greater efficiency in the use of information technology (IT) and reduce cost of providing financial services. This measure aims to support more efficient use of IT and review of related supervisory standards to ensure security of such services to enhance confidence of users.

3.5 Enhance the capacity of human resource in the financial institutions system by improving the skills and expertise of staff, enhancing the role of the Thai Institute of Banking and Finance Association and encouraging financial institutions to set clear policies on staff training and development.

The MOF and the BOT anticipate that implementation of the FSMP II would benefit individuals, businesses, the financial institutions system and the country as a whole, in the following ways.

1) An efficient financial institutions system, with good risk management and corporate governance, that is strong, not burdensome for the country, and supportive of economic development in both normal and crisis scenarios.

2) Reduction in costs of services provided by financial institutions, that would help raise income of Thai people and lower operating costs of the private sector, thus increasing the country’s competitiveness.

3) Improving access for users to a broad range of financial services that is appropriate for their needs, especially through the promotion of microfinance to help reduce burden from resorting to informal market.

4) Strengthening of grass-root communities through knowledge sharing between successful microfinance experts and local grass-root micro institutions, which would lead to greater financial strength and financial immunity for all groups of the Thai society.

5) Creation of opportunities for improved access to the business restructuring process for individual debtors and small business debtors with potential, thereby enabling the continuation of their businesses and safeguarding value-added for the overall economy.

6) Infrastructure for the financial system that is conducive to risk management of financial institutions, enabling them to deal with remaining non-performing loans and assets more effectively, and thus leading to lower operating costs and greater readiness to serve customers.

After the principles stipulated in the FSMP Phase II have been approved, the FSMP Phase II Implementation Committee, chaired by the Minister of Finance, would be formed to oversee the implementation of the Plan.

In this regard, the BOT would arrange for a hearing with all financial institutions in November, this year.

POPULAR LONG-TERM CORPORATE BONDS ARE LICENSED TO SELL

2009-11-13T00:28:00.000-08:00

       One result of the past year's financial turmoil has been much greater corporate bond issuance in Thailand.
       Circumstances have been favourable. Banks are more risk averse due to the economic slowdown and have not been actively extending loans. Meanwhile, lower yields and reasonable credit spreads mean that rates are appealing for borrowers. At the same time, very low bank interest rates make bond yields attractive to savers.
       Already this year, corporations have sold more than Bt250 billion in longer-term bonds, not including short-term commercial paper, for an increase of 120 per cent from the same period last year.
       The two main distribution methods for bonds are selling directly to retail investors, or selling to institutional investors such as mutual funds or insurance companies, which in turn distribute them to the general public.
       The current craze for corporate bonds is to sell directly to retail investors.
       On the surface, this appears to be more efficient. However, direct retail sales have major limitations with two key concerns - credit risk and liquidity risk.
       Years ago, retail sales of bonds started out with issuance by the government, or by the very best corporate names. However, it has since evolved into virtually any company selling bonds to the general public, significantly raising the potential credit risk.
       This has several implications:
       Retail bond investors usually have exposure to only a few names and underestimate downside risks, while lack of diversification raises the possible loss should any transaction go bad.
       Retail investors often do not have the resources to monitor and analyse changes in corporate credit risk on an ongoing basis.
       Retail investors may not be knowledgeable enough to demand appropriate pricing to match the risk involved.
       The other key concern is that retail-oriented bond issues usually lack liquidity in the secondary market. Even if savers plan to buy and hold bonds until maturity, unforeseen circumstances could make them change their minds.
       If sales are possible at all, bid-offer spreads are likely to be very large to the small investor. In case of a forced sale, there could also be mark-to-market losses that are difficult for retail investors to hedge, unlike institutional investors that may be implementing yield curve strategies.
       For all these reasons, institutional investors theoretically have many advantages over individuals in buying and managing bonds.
       At the moment, local financial institutions still have room for development. Bond mutual funds tend to be focused on short-term money market debt, rather than on longer-term corporate bonds. There is a lack of activity in the secondary market, while hedging is still not widely used.
       Over time, however, the market should continue to develop. Greater issuance will lend depth to the market. Institutional investors will gain in scale and sophistication. And hedging tools such as interest rate futures and repurchase agreements will become available, or more widely used.
       In the medium term, this would be healthy for the local financial system, and would be better for consumers as well.

Kbank refocuses on corporate lending

2009-11-13T00:27:00.000-08:00

       Kasikornbank is refocusing on coporate lending to boost fee-based income, with a plan to increase corporate loans by 3-4 per cent next year.
       Vasin Vanichvoranun, first senior vice president, Corporate Busniess Division, said that this year the bank expected to expand corporate lending to Bt290 billion from Bt280 billion at present, and that next year's level would be in line with the country's economic-growth forecast of 2.5-3.5 per cent.
       With growth of 3-4 per cent, the porfolio will rise to Bt301.6 billion.
       "Income from corporate-banking business this year will be Bt11 billion, and this will rise 12 per cent next year. While the fee and interest income ratio is 45:55 this year, it will be balanced next year," he said.
       A bank survey of 10,000 corporations found that 20 per cent were Kasikornbank clients. The companies' annual sales range from Bt400 million to more than Bt5 billion.
       Vasin said the percentage was more satisfactory than the bank's market share in the corporate-loan market, as it reflects corporate customers' satisfaction with its services. In the previous survey, the Kasikornbank percentage was 16-17 per cent.
       He added that the bank's strategy next year was to continue being in partnership with customers, but it would try to be an adviser rather than simply a lender in order to develop long-term relationships that could establish the bank's position in their minds.
       Corporate clients are now offered a veriety of services, including transaction financing such as cash management, trade solutions and supply-chain assistance.
       Meanwhile, as interest rates may start to rise next year, along with inflation and oil prices, some customers may take the opportunity to adjust their financial structure. The bank is ready to serve this development through syndicated loans and advice on bond issuance, said Vasin.
       Besides, it will provide a merger-and-acquisition service in order to satisfy customers who would like to expand their business in line with economic expansion.
       Among the major constituents in Kasikornbank's corporate business are companies in the electrical, construction, construction materials and export-oriented industries, including those making electrical appliances and electronics, agricultural products and machinery.

NEW ZEALAND'S HOME BUILDING APPROVALS INCREASE 3.3 PER CENT

2009-11-08T06:45:00.000-08:00

       Home-building approvals in New Zealand rose for the fifth time in six months in September, signalling lower mortgage rates are helping to kick-start demand for property.
       Permits increased 3.3 per cent from August, Statistics New Zealand said, citing seasonally adjusted fugures. Excluding apartments, approvals rose 2.8 per cent to a 13-month high.
       Reserve Bank Governor Alan Bollard said he was unlikely to raise borrowing costs from a record low until the second half of next year, to help the economy emerge from its worst recession in three decades. There are signs the economy is growing again.
       "The pace of increases is not substantial but is in line with what would be expected given the increase in house sales, low interest rates and improvement in net migration," said ANZ National Bank economist Philip Borkin.
       Economists monitor approvals excluding apartments because apartment consents are volatile. There were 155 apartment approvals in September, up from 30 in August and down from 366 in September 2008.
       Excluding apartments, approvals in the third quarter increased 31 per cent quarter on quarter. Economists expect building approvals to keep pacing gains in house sales, property prices and immigration.
       Home sales rose 44 per cent year on year in September, the Real Estate Institute reported. House prices increased 1.9 per cent from August. The number of permanent migrant arrivals exceeded departures by 17,043 in the year ending September 30, the most since 2004, the government said last week.
       "With house sales still rising, further consent increases are likely over the next six months, and this should see residential construction make some reasonable contributions to growth over 2010," Borkin said.
       Property construction has slump year on year because of the recession, which began in last year's first quarter, and as a credit crisis curbed development projects. In the 12 months ending September 30, approvals fell 35 per cent.
       The value of approvals for home building and renovations declined 14 per cent in September from a year earlier to 480 million New Zealand dollars (Bt11.56 billion), the agency said.

HK TIGHTENS REGULATIONS ON SALES OF DERIVATIVES

2009-11-08T06:44:00.000-08:00

       Officials in Hong Kong said yesterday regulations on the sale of complicated investment products have been tightened after thousands of local retail investors were burned by Lehman Brothers-backed derivatives last year.
       But lawmakers said the new measures fall short and urged the government to prosecute banks that misled investors and to ban some risky products outright.
       Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, KC Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing yesterday. The government is also considering setting up an investor education body and a financial services ombudsman, he said.
       The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (Bt60.2 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. They weren't fully aware of the risk their investments carried, many of the complex derivatives were innocuously labelled "mini-bonds", angry investors took to the streets.
       Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to $6.3 billion Hong Kong dollars (B27.2 billion).
       Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. "I think it's strange that there is not a single case of prosecution after investigating for more than a year," Tong said.
       Another lawmaker, Albert Ho, asked Chan why the government didn't consider banning certain risky products altogether, as do a number of other developed markets when it comes to selling to retail investors.
       "Your approach is still disclosure-based. As long as you disclose the risks, if the disclosure is fair and comprehensive, you can cell anything. But shouldn't the government exercise discretion and ban certain products that are very complicated, very risky or whose terms are unfair to investors?" Ho said.
       Chan argued disclosure-based regulation is the international norm, adding that the new measures require bank staff to explan their products in layman's terms and assess their clients' appetite for risk.

DEUTSCHE BANK EXECUTIVE WANTS TO OPEN A POLITICAL ACCOUNT

2009-11-08T06:43:00.000-08:00

       As the managing director and head of the Global Markets division of Deutsche Bank in Thailand, responsible for more than 133 billion baht in assets and liabilities, and a mother of three young children, Ornkanya Pibuldham could be regarded as a "Thai Superwoman".
       She is also one of the best paid and increasingly influential women in Thailand and is looking beyond business, aiming to enter politics and maybe become a senator or even a minister one day.
       Ms Ornkanya, also known as Mook and who turned 40 in September, was born in Bangkok."My father used to run an engineering consulting firm and my mum was a professor of engineering at Chulalongkorn University. As both my parents were engineers,I also became one. After graduating with a bachelor's degree in engineering from Chulalongkorn University, I helped my dad, working for his company."
       But engineering didn't suit her, and pursuing an early interest in golf, she opened the first golf school in Thailand while still in her early twenties. She also became the publisher of Golf Digest Magazine . However, the business wasn't successful and seeing so many of her friends doing well in banking,she went to the University of Exeter in the UK in 1995, and emerged two years later with an MA in finance and investment.
       "After that I took a job at Standard Chartered Bank in London as a foreign exchange trader and management trainee. I was with them [in London] for one year and another four in Thailand.
       "I was approached by Deutsche Bank in 2000, and have worked here since. We are the largest bank in Germany and one of the biggest foreign banks in Thailand. My first position was in corporate foreign exchange sales, and my career took off," Ms Ornkanya said.
       "I was appointed to my current position in February 2007. I look after the bank's balance sheet, trading, sales activities, clients,markets, managing the cash-flow for the bank and so on. I have 15 people in my team, and they are all smart. I like them to be smarter than me, so that I can work less," she joked.
       "Since I'm in trading and sales, the work is quite intensive. It involves a lot of stress because we are trading. I'm so lucky that I do well. The Deutsche Bank group market department is the major contributor of the bank's revenue," Ms Ornkanya said.
       Commenting on the current economic situation in Thailand, she added:"Last year was a good year for us because the market was volatile - the stock market moved and the currency moved, because of all the news about the global economy. We were lucky that we could catch the trends so we could make money.
       "However, if you ask me about the economy, I think that Thailand is lucky because of the Bank of Thailand (BoT). It has stringent rules and regulations, but doesn't control the banks, and it has very good, well qualified people working for it. The BoT is very strict,both for local and foreign banks. That's why most of them here weren't affected [by the crisis].
       "Thai banks survived the crisis and are generally doing well in comparison to many banks abroad that collapsed because of the 'sub-prime' crisis. They [Thai banks] have plenty of cash and because of it they can lend to their clients, and for that reason the companies here have a lot of money as well.The fact that Thai companies went out buying assets in other regions is because they have access to cheap liquidity and use it as an opportunity to buy cheap assets.
       "Thailand is a country with liquidity because the banks were not affected by the crisis. We are an exporting country, so when other countries are not doing well, it is difficult for us to do well, but in general, because we have liquidity, the country has the money to muddle through the crisis.
       "The worst of the financial crisis in Thailand is most probably over. However, political uncertainties and rumours in the market are factors that discourage investors who can choose to invest somewhere else," she warned.
       And she had some advice for foreign investors:"If you ask me for advice for corporate investors, I'd need some parameters before I could advise what company or sector they should look at.
       "But for those coming here as individuals,I strongly recommend they invest in property in Bangkok, especially in the business districts.This is a very attractive investment and you can make money. To me, Bangkok is Thailand.Twenty per cent of the Thai population live here and the numbers are increasing every day. If you can't afford to invest in these areas, then buy a piece of property on the outskirts of Bangkok. As long as it's within Bangkok, you will be fine. All the infrastructure will come to you. With our current pace of development, I can't really see Chiang Mai or Khon Kaen becoming Boston or Manchester in the near future - you're not going to make money there.
       "Thailand is a good place for foreigners to invest - great infrastructure, rigid laws and regulations, a strong financial system. We may have instability on our politics, but we all know by now that it is just 'our way of life'.
       "We might not have been able to come this far without this instability," she stressed,adding:"I haven't found a foreigner who has a negative view of Thailand. They all love Thailand. Sometimes I ask myself whether Thai people love Thailand as much, whether we are proud to be Thai and say enough good things about our country.
       "Of all the foreign banks in Thailand, I'm the only female who does this kind of work.The others are all men. This job is very demanding, especially for a woman with three children to look after, plus I do a lot of travelling abroad."
       On her priorities, both personal and in business, Ms Ornkanya said:"I work for the bank, so I want the bank to be successful,because then I will be as well. As for my personal life, my priority is to make sure that my kids are doing well in a secure environment.
       "As to the future, I'm at the top at Deutsche Bank, so what next? Whatever happens, I want to live and work in Thailand. When I was young, I used to think about working abroad, but not now. If you talk about job security, or your value to an international firm, it is here."
       Commenting on her biggest achievements and failures, she said:"To have my three beautiful kids and to be a good mum to them. My family and my job are equally important to me, but of course, family is the most important. I can walk away from being a Deutsche Bank executive, but not from being a mother. No major failures as yet,definitely not in my business."
       As for her biggest challenges, Ms Ornkanya said:"Maybe I'll sit here for another few years. I need to move on at some time so my people can grow. One day, I'd like to be in politics to be able to do something for my country. My day-to-day work gives me the opportunity to get to know people and to understand their organisations and their needs. I'm making my way up there. I was approached to join a political party, but I haven't made any decision at this time. Don't you think Thai politics has many more colours than other countries? It can get you into a big fight with your best friend, and make your parents stop talking to each other."
       Ms Ornkanya attributes her success to her parents, who are also her role models:"My mum gave me self confidence and my dad gave me a great sense of humour. When people have self confidence, they tend to be surrounded by smart people.
       "And a sense of humour stops you from becoming arrogant. By the way, I'm not that successful, I have another 20 years to go before retirement. Let's talk about my 'success'then."
       Finally, Ms Ornkanya had some advice for young Thai women:"You should be committed and persistent in whatever you do.We have to make choices every day, so make sure that you make the right choices. Women always make decisions based on emotion.That's why we make wrong choices all the time. I have made wrong choices, and I have to live with them," she said without elaborating.

Advisers named for SCIB sale

2009-10-31T05:30:00.001-07:00

       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.

CIMB THAI BANK SELLS ITS SATHORN OFFICE

2009-10-31T05:29:00.001-07:00

       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.

Dollar hits 14-month low vs basket, euro nears $1.50

2009-10-20T22:50:00.000-07:00

       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.

GREENSPAN URGES BREAK-UP OF BIG BANKS

2009-10-17T20:32:00.000-07:00

       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."

Strong baht could hurt export targets

2009-10-13T22:59:00.001-07:00

       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.

TEN YEARS HAVE SHOWN REMARKABLE PROGRESS IN EUROPEAN SECURITY

2009-10-12T00:21:00.001-07:00

       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.

STARWOOD, TPG SCRAMBLE TO BUY DISTRESSED ASSETS

2009-10-11T03:19:00.000-07:00

       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.

BOT STEPS INTO FOREX MARKET TO CALM BAHT

2009-10-08T22:03:00.001-07:00

       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.

Baht eases back from high

2009-10-03T14:12:00.000-07:00

       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.

Time for decisiveness on logistics

2009-10-03T14:06:00.000-07:00

       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.

Dollar index flat ahead of US jobs, G7; euro up

2009-10-03T14:05:00.001-07:00

       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.

BofA considers short-term CEO

2009-10-03T14:03:00.000-07:00

       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.

UNDER-FIRE FED DEFENDS ITS ROLE AS KEY PROTECTOR

2009-10-03T14:02:00.001-07:00

       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.

CIT launches debt-swap plan

2009-10-03T14:00:00.000-07:00

       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.

Bath falls on US job worries

2009-10-03T13:59:00.001-07:00

       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.

SME BANK LENDING BT2.5 BN TO CREATE 50,000 FRANCHISES

2009-10-03T13:58:00.001-07:00

       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.

SCB GEARS UP FOR AGGRESSIVE GROWTH OF WEB-BASED SERVICES

2009-10-03T13:56:00.001-07:00

       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.

EMBATTLED BANK OF AMERICA CEO LEWIS TO RETIRE

2009-10-03T13:54:00.000-07:00

       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.

LGT faces lawsuit from German tax evader

2009-09-25T16:20:00.000-07:00

       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.

YUAN CURRENCY STABILITY TOP PRIORITY, SAYS ZHOU

2009-09-25T16:19:00.000-07:00

       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."

US PEER-TO-PEER LOAN WEBSITES PROVING A POPULAR ALTERNATIVE

2009-09-25T16:17:00.000-07:00

       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.

BUBBLE FEARS DISMISSED

2009-09-25T16:16:00.000-07:00

       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.

BIG QUESTIONS THAT NEED QUICK ANSWERS

2009-09-25T16:15:00.001-07:00

       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.

Leaders face economic trouble

2009-09-25T16:12:00.001-07:00

       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.

IMF SAYS CRISIS NOT OVER URGES SUSTAINED STIMULUS

2009-09-25T16:10:00.000-07:00

       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.

Half of Madoff accounts show no loss

2009-09-25T16:09:00.001-07:00

       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.

False Notes

2009-09-25T16:07:00.000-07:00

       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.

Dollar hovers near year low before Fed

2009-09-25T16:06:00.001-07:00

       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.

House seeks AOT, King Power probe

2009-09-25T16:04:00.000-07:00

       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.

Chairman of Wells Fargo to step down

2009-09-25T16:03:00.000-07:00

       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.

Banks lighten overdraft rules

2009-09-25T16:01:00.000-07:00

       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.

Top banker resigns after suspension

2009-09-25T16:00:00.000-07:00

       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.

EU watchdog aims to rely more on "moral authority"

2009-09-25T15:58:00.000-07:00

       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.

World Bank approves $4.3 billion in loans to India

2009-09-25T15:57:00.001-07:00

       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.

IMF trims Cambodia projection

2009-09-25T15:55:00.000-07:00

       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.

FINANCE MINISTRY TO HIKE 2009 ECONOMIC FORECAST

2009-09-25T15:54:00.001-07:00

       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.

CRISIS NOT BEHIND US, SAYS IMF

2009-09-25T15:52:00.000-07:00

       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.

Baht makes further gains on optimism about emerging markets

2009-09-25T15:50:00.000-07:00

       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.

KBank sure of meeting loan target

2009-09-25T15:49:00.000-07:00

       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.

CHINA MAY BUY GOLD OFFERED BY IMF

2009-09-22T21:14:00.001-07:00

       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.

GOLD READY TO HIT HISTORIC HIGHS

2009-09-22T21:13:00.001-07:00

       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.

NEW TMBAM CHIEF OUTLINES APPROACH

2009-09-22T21:12:00.000-07:00

       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.

LOANS LIKELY TO GROW IN SECOND HALF

2009-09-22T21:10:00.000-07:00

       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.

Dollar rises on short covering, sterling suffers

2009-09-22T21:09:00.002-07:00

       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.

Britain's RBS mulls rights issue

2009-09-22T21:09:00.001-07:00

       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.

ZOELLICK URGES BALANCED GROWTH

2009-09-22T21:07:00.001-07:00

       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.

Fed likely to keep aid in place

2009-09-22T21:05:00.000-07:00

       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.

Lending to recover in Q4, says BoT

2009-09-22T21:03:00.000-07:00

       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.

EX-FINANCE MINISTER SOUNDS PUBLIC-DEBT WARNING

2009-09-22T21:02:00.001-07:00

       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.

India's central bank walks an inflation tightrope

2009-09-22T21:01:00.000-07:00

       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.

UK women way behind men in the pay and bonus stakes

2009-09-22T21:00:00.000-07:00

       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.

RISK MANAGEMENT TAKING A BACKSEAT

2009-09-22T20:59:00.001-07:00

       The global financial crisis has prompted a wholesale re-evaluation of risk management. But while companies admit that major change is needed, a significant proportion is unwilling, or unable, to make the necessary enhancements.
       A report published today: "Beyond Box-ticking: A new era for risk governance," written by the Economist Intelligence Unit and sponsored by ACE and KPMG, finds that a lack of financial resources will be the biggest barrier to effective risk management in the year ahead.
       Companies everywhere are conserving cash, cutting headcount and reining in expenditure. The report finds that risk functions are no exception, with the result that important improvements to risk management are pushed to the sideline.
       Asked about the biggest barriers to effective risk management in their organisations, the 364 risk professionals from around the world questioned for this study point to poor data quality, inadequate technology and a lack of expertise. But rather than tackling these issues, risk professionals say they are more likely to concentrate on process improvements and training.
       This suggests that, rather than addressing the key risk management issues, which also carry the biggest price tag, companies are instead opting for some quick wins, and trying to do more with less. While this will have some limited impact the underlying problems with risk management are likely to remain.
       "Companies are facing a difficult dilemma in the current environment," says Rob Mitchell, editor of the report. "On the one hand, they recognise the need to allocate greater time and resources to risk management so that serious short-comings with their current approach can be addressed. But, on the other hand, they are facing huge pressures to keep costs under control.
       Satisfying these competing objectives poses something of a conundrum, and this could prevent necessary fixes to risk management from being made."
       Oliver Engels, head of enterprise risk management Europe for KPMG, said that linking risk management to decision-making in the boardroom will be vital for further success.
       "This will require more knowledge of the risk appetite, the risk profile and the control environment compared with the past," he says.
       Andrew Kendrick, chairman and CEO of ACE European Group, adds that the survey reveals the potential disconnect between business strategy and risk management.
       "Senior management from board level down must place a greater emphasis on establishing a pervasive and robust risk culture or face the impact and consequences at every level of the organisation," he says.
       Other key findings from the research include the following:
       A lack of risk expertise at the top of companies is making it difficult to build a strong risk culture. More than half of respondents say they have no plans to recruit a chief risk officer, and slightly fewer than half say they do not intend to recruit a borad-level executive with overall responsibility for risk management.
       With a high proportion of respondents saying that a "risk culture" depends on strong direction from the top of the organisation, an absence of expertise at board level suggests that many companies will find it difficult to embed a greater awareness and understanding of risk in their business.
       Compliance, controls and monitoring are consuming a disproportionate amount of time and resources.
       Respondents point to the identification of new risks as the most important role and responsibility of risk management. But, asked how they allocate their time, it is compliance, controls and monitoring that consume the lion's share of their resources.
       With a disproportionate amount of time being spent on the more mechanical aspects of the role, risk managers may be neglecting the responsibilities they have identified as being most important.
       More needs to be done to ensure that risk information is finding its audience.
       Only around one-third of respondents think their organisation is effective at ensuring information about risk is reaching the right people.
       There is also limited confidence in the quality of risk reporting: only 30 per cent think it provides information that is tailored to its audience.
       Better risk reporting will depend on improved communication and understanding between risk functions and their intended audience. Only then can information be provided that is relevant, timely and pitched at an appropriate technical level.
       There is a window of opportunity for chief risk officers to take on a more strategic role.
       In the majority of companies questioined for the research, chief risk officers play on role in major strategic initiatives: just 44 per cent are actively involved in merger and acquisition (M&A) activity, for example, and just 36 per cent in product development.
       Yet, at a time when risk is dominating boardroom agendas, there is a rare and valuable opportunity for senior risk professionals to take a seat at the top table, and to make themselves an indispensable part of any discussion about the future of the business.

FED MAY LEAVE RATE UNCHANGED

2009-09-22T20:58:00.001-07:00

       Federal Reserve policy-makers may formally acknowledge an economic recovery is underway but will make few changes to their vast stimulus effort until they see a sustainable expansion, analysts say.
       A two-day meeting of the Federal Open Market Committee opening tomorrow is widely expected to leave unchanged the central bank's near-zero interest rate policy while making only minor changes to the array of liquidity programmes to keep credit flowing.
       Fed chairman Ben Bernanke said last Tuesday the US recession "is very likely over" but that the economy remains weak due to the economy remains weak due to difficult credit conditions and high unemployment.
       John Ryding, chief economist at RDQ Economics, said the Fed cannot even think about hiking rates with the current degree of economic slack and joblessness.
       "With so much slack in the economy, the Fed is not going to be inclined to raise rates anytime soon," Ryding said. "At the same time [year-over-year] inflation rates are still in negative territory rates are still in negative territory. They can be relieved the recovery is more clearly here and acknowledge it but there is no reason for the Fed to do anything different."
       With the federal funds are seemingly frozen at zero to 0.25 per ent, the central bank's only policy option revolves around its various liquidity programs implemented since last year's credit freeze.
       The Fed last month indicated it would conclude its US$300-billion (Bt10 trillion) programme to purchase Treasury bonds, part of a programme to bring down interest rates which some call "Quantitative Easing".
       It must decide, however, on whether to extend into 2010 a trilion-dollar programme to purchase mortgage securities, which is aimed at keeping credit flowing to the still-weak housing market.
       Scott Brown, chief economist at Raymond James and Associates, said the Fed may make some modest changes in these special programmes at it positions itself for a strengthening economy.
       "They are in no hurry to start raising short-term interest rates but they do have to keep an eye on the end game," he said.
       The Fed has already indicated it has scaled back its commercial paper guarantee programme and currency swaps with other central banks because credit markets are operating more normally.
       US gross domestic product (GDP), the broadest measure of the economy's activity, fell at an annualised rate of 1.0 per cent in the second quarter, after a 6.4-per-cent plunge in the January - March period.
       But unemployment rose in August to a 26-year high of 9.7 per cent and there is a growing fear joblessness may hit 10 per cent before a full recovery takes root.
       Dean Maki, economist at Barclays Capital, said the job of the Fed and other central banks will become more complicated as the recovery progresses. "Central banks around the world slashed interest rates and together with fiscal policy stimulus in many countries, these actions helped the global economy escape recession," he said.
       "With this part of the mission accomplished, we think the focus of central banks will be shifting, but at different speeds."
       Maki argues that the US recovery is gaining more steam than most analysts expect and now calls for a robust 5.0 per cent growth pace by the first quarter of 2010.
       Based on historical date, Maki said that "the strength of a recovery has been proportional to the depth of the recession" and added: "By that standard, our peak quarter of 5.0 per cent growth can actually be thought of as conservative."
       Maki said the Fed in the coming week will likely trim its debt purchases to acknowledge the normalisation of credit markets, but will maintain ultra-low rates to keep the recovery on track for another year.

       "The Fed in the coming week "will likely trim its debt purchases to acknowledge the normalisation of credit markets, but will maintain ultra-low rates to keep the recovery on track for another year".

GSB sets up unit for bad assets

2009-09-22T20:57:00.001-07:00

       The Government Savings Bank has set up a new unit to manage non-performing assets to help the state bank clear its asset portfolio and increase profits.
       Lersuk Chuladesa, the GSB president and chief executive, said that even though the bank's non-performing assets (NPAs)were relatively small, the new unit would help more efficiently manage the disposal process to maximise returns.
       The NPA portfolio currently includes 240 properties with a value of 85 million baht. So far this year, the bank has sold of 253 plots worth 144 million baht.
       Asset quality at the GSB has actually improved over the past year despite the economic downturn,with non-performing loans of 20 billion baht, or just 3.07% of total outstanding loans.Around half of the loans represent property loans, of which 70% are currently in the foreclosure process with the bank seeking to seize pledged collateral.
       Non-performing loans at the end of last year stood at 3.31%.
       Before 2008, the bank typically focused on debt restructuring in dealing with delinquent clients, and as a result, took claim over relatively few assets pledged as collateral.
       "This really is the first year that the GSB has begun managing nonperforming assets. This new strategy has been one factor in helping the bank reduce its non-performing loans," he said.
       Mr Lersuk said the GSB was also prepared to accept the government's new policy to help refinance underground loans for people with heavy debt problems.
       The Finance Ministry wants the GSB and the Bank for Agriculture and Agricultural Co-operatives to take a more proactive role in assisting the poor by refinancing debt owed to loan sharks and other informal sources.
       "We will have to screen the borrowers of course, and set certain rules. If it is debt incurred from, say, gambling or illegal drug use, then we don't want any part of it," Mr Lersuk said.
       "But for small entrepreneurs faced with difficulty, we are prepared to help,"he added.

HK INSIDER TRADER JAILED FOR SEVEN YEARS

2009-09-20T22:00:00.001-07:00

       A Hong Kong court on Friday sentenced a former senior banker at Morgan Stanley to seven years in jail-the heaviest punishment it can impose - in the city's largest insider dealing case.
       Du Jun was convicted on 10 charges for buying 87 million Hong Kong dollars (Bt379 million)worth of shares in Citic Resources when he was advising the firm on oil-field acquisitions in Kazakhstan and northeastern China.
       He made a profit of more than $30 million from selling some of the shares in 2007, after the announcement of the acquisitions sent the share value up.
       In sentencing, District Court Judge Andrew Chan said: "The scale was unprecedented. This case is the biggest I have come across so far."
       The judge said Du was motivated by "sheer greed" and had "seriously undermined the integrity of the financial markets."
       He noted that the 41-year-old had been warned twice by his superior against trading the shares, but he refused to listen to the advice.
       Judge Chan sentenced Du to seven years and three months and imposed a fine of $23.32 million.
       But the prison term had to be reduced to seven years as it was the maximum penalty the District Court can impose.
       The judge also ordered that Du be prevented from dealing in secutiries and taking up directorship positions in listed companies for a period of five years.
       The Securities and Futures Commission (SFC), the city's financial regulator, hailed the outcome of the case as the biggest deterrent against market misconduct crimes.
       "The sentence is the strongest possible message to anyone tempted to commit insider dealing offences in the future," Mark Steward, the regulator's head of enforcement, said outside court.
       David Webb, a shareholders activist and a former non-executive director of the Hong Kong Stock Exchange, said he expected the SFC to bring forward more insider dealing prosecutions in the near future.
       "To build an effective deterrent against insider dealing, you need a track record of successful prosecutions," he said.
       The conviction was thenth secured by the SFC on insider dealing since July last year and the fourth that resulted in jail terms.

       The judge said Du was motivated by sheer greed and had seriously undermined the integrity of the financial markets.

FILMS,TV, PLAYS ABOUT MELTDOWN ON WALL STREET

2009-09-20T21:59:00.000-07:00

       Greed, hubris, vast fortunes erased at a stroke-tge financial crisis is dramatic gold dust for writers.
       One of Britain's leading play-wrights, David Hare, is tackling the world of toxic securities and subprime mortgages in his new play at the National Theatre in London.
       Author Sebastian Faulks has a new best-seller about a swashbuckling hedge fund trader.
       The BBC has made a TV drama about the collapse of Lehman Brothers.
       You may think stocks, derivatives and collateralised debt obligations are not the naturla stuff of drama.
       Think again, says National Theatre artistic director Nicholas Hytner, who commissioned Hare's play, "The Power of Yes". "The people who suffer this recession will not be the people who caused it," Hytner said. "And there you have the beginnings of a play."
       A year after Lehman Brothers' bankruptcy, artists on both sides of the Atlantic are grappling with the causes and effects of the worst financial crisis since the Great Depression.
       Michael Moore stormed sthe Venice and Toronto film festivals with "Capitalism: A Love Story", a documentary screed against financial fat cats and corporate profiteers.
       A central character of Faulks' novel "A Week in December" - riding high in British best-seller lists - is a hedge fund manager politting an audacious deal that will make him a fortune, and bring down a bank.
       The BBC has hust aired "The Last Days of Lehman Brothers", a docu-drama that starred James Cromwell ("Babe") as then-US treasury secrevene as the venerable investment house imploded unde rthe weight of its huge debts.
       In a touch of irony, the fictional account was filmed in Lehman Brothers' real - and now empty - high-rise offices in London's Canary Wharf.
       It's fascinating, if unfamiliar, terrain for writers, who are seeking to use the arts where economists failed and answer the pressing question: How did we end up in this mess?
       "You can bring a freshness to it if it's not your area of expertise," said Craig Warner, the US-born, UK-based writer of "The Last Days of Lehman Brothers."
       "Before writing this I knew there was a subprime mortgage crisis, I knew they were giving mortgages to people with a bad credit history, but I didn't know why or what the connection was to Wall Street.
       "As soo as I learned how those things were connected, I wanted that knowledge to be imparted to the world."
       Evidence suggests the world is eager to know." Enron", a play at the Royal Court Theatre about the 2001 demise of the American energy giant, was sold out weeks before opening, and will move to a bigger West End playhouse this winter and to Broadway next April.
       More broadly, the recession does not seem to have dulled the public's appetite for the arts.
       London theatres had a record year, cinema takings were up in 2008 and book sales are booming.
       Hytner said evidence from past downturns suggest arts and entertainment are "one of the very last things people stop payting for."
       "When times are tough, it is a reassuring touchstone of people's common humanity to sit with 1,000 other people and have a common experience," he said.
       In the story of how capitalism became unbalanced - "too much greed, not enough fear", in Hare's words - writers are finding humour, tragedy and irony.
       Surprisingly, perhaps, there's more sorrow than anger in their accounts.
       "The Power of Yes", which runs from September 29, looks at the way government subsidies were used to bail out the rich while ordinary people lost their jobs - a sort of socialism turned upside down.
       But Hytner says "those looking merely for a caricatured banker-bash" will be disappointed.
       The writers acknowledge the allure of corporate "masters of the universe" like Lehman Brothers' hubristic CEO Richard Fuld and Enron's Jeffrey Skilling.
       "Enron" writer Lucy Prebble - whose play charts the energy company's 2001 collapse as a result of widespread accounting fraud, a foreshadowing of the current crisis - told The Guardian newspaper she thought it was important "to try and create a tragic hero within whom you may not agree, but who is dramatically magnetic".
       Warner said Fuld, a domineering figure whose nickname was "Gorilla", has "all the hallmarks of a tragic hero."
       The events being depicted in these works are still headline news. That adds to their immediacy - but does it lessen their impact as art?
       Some reviewers found Warner's Lehman Brothers movie less dramatic than a BBC documentary on the same subject aired the next night, in which the real bankers proved more mesmerising than their fictional avatars.
       Hytner is warning people in advance that "The Power of Yes" is "not so much a play as a narrtaie in response" to the crisis.
       "Those looking for 'Death of a Salesman' will not find it," he said.
       "Probably the great play about this crash and its consequences will not come for a few years. A play written in the whiete heat of the moment might not have the reflectiveness of great works of art.
       "But", he added, "it might."

Former Fortis executives face shareholders

2009-09-20T21:58:00.002-07:00

       Shareholders of dismantled bank Fortis won the right at the weekend to call senior bank and government officials to court to explain the actions they claim caused them huge financial losses last year.
       The district court in Amsterdam "orders a preliminary evidentiary heaing," said a statement, granting an application by FortisEffect, a group that claims to represent some 1,250 investors.
       Dutch Prime Minister Jan Peter Balkenende and his former Belgian counterpart Yves Leterme, Dutch Finance Minister Wouter Bos and Dutch Central bank president Nout Wellink as well as several former Fortis bosses would "almost definitely" be among those called to give evidence, FortisEffect lawyer Adriaan de Gier said.
       No date has been set for the hearing, which he said was likely to be held in December or January.
       The former Belgian-Dutch bank and insurance group was dismantled and partly nationalised in October last year as the impact of the global economic crisis started being felt.
       Fortis' Dutch-based assets, including ABN Amro bank, were nationalised by the government for 16.8 billion euros (Bt832 billion).
       With an eye on claiming damages in future, FortisEffect now ants to question decision-makers about the negotiations leading up to Fortis' dismantling.
       FortisEffect accuses officials having distributed false information to influence the financial markets and claims its members should have been consulted on its break-up.

G-20 LEADERS EXPECTED TO DISCUSS BONUSES FOR BANKERS

2009-09-20T21:58:00.001-07:00

       Global leaders meeting at the Group of 20 summit it Pittsburgh next week are moving toward a compromise on compensation rules that fall short of the political rhetoric branding bnkaer pay a workdwide disgrace.
       Pay caps, once pushed by Franch President Nicolas Sarkozy, were excluded from recommendations made by finance officials this month. European leaders now may be willing to endorse linking bonuses to a bank's capital level, moving closer to a US position that avoids specific limits.
       "It's a way of getting both sides to the same place," said Morris Goldstein, a senior fellow at the Peterson Institute International Economics in Washington and former International Monetary Fund economist.
       The Germans and French are taking a firm stance that we need concrete steps. The US wants higher capital levels, and if this is necessary to get higher capital, they can sign onto it."
       Europe's leaders have been assailing bankers and their pay while President Barack Obama says setting a specific limits is impractical.
       Sarkozy, who vowed last month to block banks from state business unless pay is capped, may be open to compromise, a French official said.
       European Union leaders September 17 agreed to tie bonuses to bank performance and said guaranteed pay should be avoided.
       French Finance Minister Christine Lagrde in July called such bonuses an "absolute disgrace".
       Obakma, Sarkozy, UK Prime Minister Gordon Brown and Chinese President Hu Jintao, meeting in Pittsburgh September 24-25, will discuss proposals for banks to retain more assets in economic expansions and satisfy a leverage ratio, which measures equity as a proportion of total assets.

CHINA CENTRAL BANK WARNS OF MOUNTING RISKS

2009-09-20T21:57:00.001-07:00

       China's bank regulator has called on the nation's banking sector step up risk management and strengthen compliance as explosive credit growth is leading to greater risks.
       "With bank loans growing rapidly, all kinds of risks are rising in the banking industry," Liu Mingkang, chairman of China Banking Regulatory Commission, said in the statement posted on the commission's wensite yesterday.
       "Financial institutes in the banking industry must do their utmost to uphold the standard management limits and strike a solid basis for risk management."
       In an effort to counter the global financial crisis, Chinese banks issued 8.15 trillion yuan (Bt40 trillion) in new loans in the first eight months of the year, exceeding a 5-trillion-yuan target set for 2009.
       The aggressive lending has sparked concerns that some of the money has not been used to help the real economy, but has instead been put into asset markets for quick profit.
       The country's stock market surgeud 90 per cent in the first seven months of this year before tumbling nearly 20 per cent in the past month as policy-makers urged a slowdown in credit. Home purchases in major cities also hit record highs in recent months.
       Besides ordering the banking industry to set up compliance with regulatory rules, Liu also wanre dof upcoming changes in international finance regulation standards, the statement said.
       Policymakers have acknowledged concerns that asset bubbled may be building up.
       But Su Ning, the central bank's vice governor, recently said that China would continue to implement and "appropriately loose" monetary policy into next year as the economy is still in a critical stage of recovery.

WARREN BUFFETT'S PLUG FOR DALIAN SENDS STOCK SOARING

2009-09-20T21:56:00.000-07:00

       Billionaire Warren Buffett turned Dalian Dayang Trands into China's best-performing clothing stock after saying he wears the company's suits and praising it as "wonderful".
       Dayang, based in the northeastern city of Dalian, surged by the 10 per cent daily limit for a fourth day in Shanghai after Dayang posted a video on its website of Buffett congratulating the company and chairman Li Guilian on its 30th anniversary.
       The stock closed at 14.67 yuan (Bt72), its highest since January 2008.
       "I have to tell you that I now have nine suits all made in China. I threw away the rest of my suits," Bershire Hathway's chairman and CEo Buffett, 79, says in the video, adding that his business partner Charlie Munger and Microsoft Corp chairman Bill Gates also wear Dayang's outfits.
       Dayang is up 261 per cent this year, the most of 25 appael comapnies traded in Shanghai and SHenzhen.
       The company, with 2008 sales of 894.6 million yuan, and a market value of less than $350 million (Bt12 billion), does not have any "disclosable business relationship" with Buffett, it said.
       "Buffett has a lot of influence on the stock market and so when Dalian Dayang shows him wearing their suits, that has an impact," said Kong Jun, a Shanghai-based analyst at China Jianyin Investment Securities.
       Kong recommends investors buy Dalian Dayang's shares.
       Buffett assistant Carries Kizer confirmed Buffett recorded the video at Li's request.
       "It was something they asked him to do and he agreed," Kizer said in an e-mail.
       Dayang's spokesman could not be reached for comment.
       "It's been a long time since I got compliments on how I look but since I'm wearing Madam Li's suits, I get compliments all the time," he says.
       Buffett, the world's second-richest lman with an estimated fortune of $37 billion according to Forbes magazine, jokes inthe video that "maybe Bill and I could start a clothing store-and sell the compaby's suits, adding that "some day we might even be rich, who knows?"
       Gates is the world's richest man with wealth of $40 billion, according to Forbes.
       Li founded Dayang in September 1979 with 85 employees, according to its website.
       She now has around 6,800 workers and about 40 per cent of sales are derived from the US and Europe.
       "Imagine starting 30 years ago with a sewing machine and now turning out maybe 5 milliuon suits or something like that a year," Buffett says in the video.
       "It's a story that should inspire people in China and inspire people around the world."
       The company has 20 stores in 11 cities in China, according to its website.
       Ait is 250-square metre store in Beijing's Finance Street Shopping Centre, tailored suits range from 6,800 yuan at the cheapest to 21,000 yuan when made with Loro Piana cloth, said a saleswoman in the shop. Off-the-peg outfits cost about 8,000 yuan.
       Visitors the shop, which features plush armchairs, can order an entire wardrobe from suits to shirts, belts, leather accessories, shoes, ties and cufflinks. Customers buying suits at the top end of the price range may be looked after by Ivano Cattarin, who left Giorgio Armani to become Dayang's chief designer, the sales-woman said, declining to give her name.
       Chinese President Hu Jintao wore a Dayang suit when he met former US president George W Bush at the Asia-Pacific Economic Forum in 2007, according to a bound volume in the store's waiting area.

Madoff beach house sells for more than $8.75m

2009-09-20T21:55:00.000-07:00

       It boasts ocean views, an infamous former owner - and now a buyer willing to pay more than $8.75 million.
       An unidentified would-be buyer or buyers snapped up Bernard Madoff's Long Island beach house within days after the US Marshals Service put the seized property up for sale, a spokeswoman for the broker the Corcoran Group said on Thursday.
       Spokeswoman Anne Lacombe said the fallen money manager's Montauk retreat was under contract for more than its $8.75 million asking price. She didn't have the exact figure, any information on the intended buyer or the closing date.
       US Marshal Joseph R. Guccione said in a statement the potential buyer's identity and price were being kept private to protect a deal that has yet to close.
       The Marshals Service put the 3,000-square-foot (280 square metre) house on the market Sept 1 in order to help repay victims of Madoff's massive investment fraud.
       The listing attracted an onslaught of responses and numerous bids, Lacombe said. She said the highest bid was taken.
       Madoff's notoriety "made it come to a lot of people's attention, but it's really all about the location of the views and the home," she said.
       The four-bedroom house is set on a 1.2-acre (0.5-hectare) lot amid the dunes in Montauk, a windswept beach community east of the Hamptons. The house is modest by Hamptons standards, but it boasts stunning views of the Atlantic Ocean and sits closer to the surf than zoning laws now allow.
       "These kind of properties are very rare," Lacombe said.
       Madoff,71, was sentenced in June to 150 years in prison for orchestrating a Ponzi scheme that encompassed thousands of investors and billions of dollars.
       His punishment included a forfeiture order that stripped him and his wife,Ruth, of nearly all their wealth. The order gave the marshals authority to seize and sell the Madoffs' homes.
       Their five-bedroom waterfront mansion in Palm Beach, Florida,"remains on the market for $8.5 million," Lacombe said.
       Their Manhattan penthouse, listed at $9.9 million, has drawn several seriously interested potential buyers, said Anne Corey, the Sotheby's International Realty broker representing that property.
       Meanwhile, security has been tightened at the Montauk home after the theft of a $300 sculpture off the front porch late last week,Newsday reported.The East Hampton Town police didn't immediately return a telephone call about the theft on Thursday.

SWISS LENDERS RECORE "WORST LOSS" LAST YEAR

2009-09-20T21:54:00.000-07:00

       Profits of Swiss banks plunged a record 30 per cent in 2008, hurt by major losses in the trading business, the Swiss Bankers Association said yesterday.
       "The profits of the banks in Switzerland as whole decreased last year by 30.8 per cent," to 49 billion francs (Bt1.6 trillion), it said in an annual report on the banking sector.
       It was the biggest fall since the Swiss National Bank started keeping profit statistics more than 20 years ago, it added. Some improvement is expected for the trading business in the second half of 2009, but the outlook for the credit business was "not very pleasant", it added in its "Banking Barometre" report.
       "Developments during the first half and the outlook for the second half point to a negative performance in the credit busines for 2009 as a whole," it said. "The trading business is expected to produce a positive result and the commission and services business to be flat."
       The association, which has almost 360 members from the financial industry, said that more upbeat investor sentiment in the second half could lift earnings from the trading and asset management business.
       But the risk appetite evident during the boom years has not returned to most investors, so the recovery is expected to be slight, said the association. The credit business, meanwhile, is expected to show a more gloomyout-look.
       "Credit defaults caused by the economic crisis could inerease, and margins will not recover quickly," it said.
       "for these resons and because the economic downturn and the rise in unemployment have still not been overcome, the credit business will face falling results," it added.
       Switzerland's two biggest banks both posted record losses in 2008 with UBS losing around 21 billion francs and Credit Suisse losing more than 8 billion francs.

ECONOMIC RECOVERY NOT YET CERTAIN, SEMINAR TOLD

2009-09-18T05:32:00.000-07:00

       The economy is not completely out of the woods yet, because the US is still fighting a financial crisis, with more than 400 banks in trouble, central-bank chairman MR Chatu Mongol Sonakul warned yesterday.
       The US banks' customers have not repaird their debts, which would possibly force the US Federal Deposit Insurance Corp (FDIC) to spend US$400 billion (Bt13.5 trillion) to bail them out, said ChatuMongkol, who has also servehd as governor of the central bank.
       If the US financial system worsens, and the contagion spreads to the global economy, the Thai economy would inevitably suffer, he told a seminar hosted by the Bank of Thailand.
       The global economy and financial market conditions, although improved, still face several risk factors. Large financial institutions or financial conglomerates could go bankrupt anytime.
       "Confidence has improved while the Thai economic figures have picked up. The problem is that risk remains," he said.
       After the start of the Great Depression in October 1929, US commercial banks collapsed again in 1932, dragging European banks into bankruptcy.
       At least 84 US banks have fallen so far this year. Home prices have sagged and unemployment has jumped, so loan defaults have increased. That was considered the largest number of bank failures per year since the early 1990s, compared with 25 last year and three in 2007.
       The bank crashes have sapped billions from the FDIC, which guarantees account holders' money when banks go under. The FDIC stood at $10.4 billion in the second quarter, its lowest point since 1992.
       Veerathai Santiprabhob, executive vice president of the Stock Exchange of Thailand, said the US financial problems remained because about 400 banks have been having a hard time, whicl small and medium-sized banks could also be hurting.
       The US financial system could not completely function, but only overshoots, which could bring about a sharp turning point.
       "I think it is not a perfect V-shaped economic recovert. For me, it's an imperfect V-shape or a checkmark," he said.
       Titanun Mallikamas, director of the central bank's Economic Research Department, said he personally believed the Kingdom should prepare for unknown shocks, such as a China crisis, because it could impose rapid and immense risks to the domestic economy.
       The economists recommended authorities to make banking reform and social improvement national priorities in order to bring about lasting economic sustainability.
       Veerathai said the banking system' efficiency needed enhancing to help fortify macroeconomic systanability. It could be done through a platform change instead of being developed on top of the existing business.
       "We need an agenda to bring about changes in order to address upcoming challenges," he said.
       The BOT should promote more competition in the banking system while other countries around the world have tightened their regulations.
       The central bank should encourage a more open atmosphere in the industry and find a way to attract new players to jump into the market, otherwise foreign investors were unlikely to participate due to the strict regulations and the global financial crisis.
       "We have to find our how to encourage financial institutions to develop themselves all the time and introduce new products to be beneficial to the long-term economy," he said.
       The banking system's profitability has remained high during the current global crisis, which begged the question of whether the competition was intense enough, he said.
       Somchai Jitsuchon, research director for macroeconomic development and income distribution at the Thailand Development Research Institute, agreed the competition in the banking system was not enough in terms of players, functions and channels.
       Veerathai questioned whether the Kingdom should continue to be a bank-based economy when only a few banks played a key role in the industry.
       Banks have emphasised the wholesale business even though large corporations should depend on the capital market, he said.
       The BOT should expand the financial infrastructure, such as by setting up a bond market for retail investors, and initiate new innovative products, which could help the economy develop.
       The financial market lacked a long-term savings channel, which was essential for an ageging society, which desires security and a steady return, he said.
       Titanun said banks should find the proper way to use savings to finance long-term private and public investment efficiently.

TOUGHER FINANCIAL RULES MAY NEVER BE A PANACEA

2009-09-18T05:31:00.000-07:00

       US PRESIDENT Barack Obama's recent threat of tougher regulations against Wall Street bankers blamed for the current global economic meltdown may not be the panacea that many of his advisers hope for.
       Globalisation and the ubiquitous, turbo-charged, high-speed Internet-driven information era has created a virtual new-world disorder never before experienced by our current leaders, says Joshua Ramo Cooper in his new bestselling book, "The Age Of The Unthinkable: Why The New World Disorder Constantly Surprises Us And What We Can Do About It".
       In today's globalised world, tougher regulations that control the expected will not protect us from inevitable, unintended external attacks that seem to continuously come out of nowhere.
       We have to wonder how a few bad sub-prime loans to people in the inner cities of the United States could suddenly mutate into toxic instruments that caused the financial world to implode.
       Ecologist C S Holling provides an interesting analogy on why tougher regulations imposed by national governments in countries such as the UK and the USA may not do much to prevent future crises.
       "If we are dealing with a system profoundly affected by changes external to it, and are continually confronted by the unexpected, the constancy of its behaviour becomes less important than the persistence of relationships," Hollis said.
       According to Hollis, "In parts of the world where there isn't a lot of change, its perfectly fine to keep track of the things you can measure; the books in a library, say, or the amount of food you need to get through the day. But in places where there is daily, often explosive, readjustment, such measurements are worse than useless.
       "What you can easily measure in these systems matters much less than what you cannot."
       In today's economies, regulations that ensure bankers in one country follow the rules and regulations are, in themselves, ineffective in preventing global meltdowns. Bankers in Europe who were in careful compliance with their own country's regulations did not understand that they were buying toxic assets generated by US banks and sold as blue-chip, triple A-rated investments.
       By the time Lehman Brothers imploded almost a year ago, it was too late for foreign bankers to adjust. Almost every major financial institution in Europe needed a government bailout to survive the banking crisis induced by the US sub-prime fiasco.
       Earlier, the 1997 Asian financial crisis and political problems in Russia that disrupted these relatively small capital markets, quickly mutated and spread globally, and almost erupted into financial meltdowns elsewhere. These mini-crises portended a much more virulent 2008 global financial crisis and meltdown that, for most of the world, was externally induced.
       Proposed tougher regulations are not a practical solution because few countries today are willing to give up sovereign control over their domestic financial institutions. Even after the current crisis is over, few observers expect that an all-encompassing and effectively global regulatory system will be put place.
       Even with a popular US president such as Obama, and Democrat majorities in both the Senate and Congress, the US government is having great difficulty passing a much-needed universal national healthcare programme for all of its citizens. What are the odds of the US accepting global regulatory control of its financial infrastructure?
       How should countries protect themselves from inevitable future crises, especially if tougher regulations may not be a workable solution.
       Here in Thailand, His Majesty the King's "Sufficiency Economy" initiatives promulgated after the 1997 economic crisis are a good start. The initiatives promote good corporate governance and risk-management techniques that allow us to immunise and protect ourselves from any inevitable internally- or externally-induced crisis.
       Today, most Thai corporations have strong capital bases that will allow them to withstand a prolonged global crisis, and more importantly they have greatly enhanced their corporate governance practices.
       At the same time, our government must also be encouraged to invest only in resilience strategies, such as national healthcare, education and better transportation.
       His Majesty the King's sufficiency initiatives have taught us to construct a resilient society to withstand the vagaries of globalisation. With these initiatives in practice, our companies will be strong enough to withstand any inevitable surprises and absorb any damage that may be inflicted.
       In addition, Joshua Ramo says that the most resilient systems manage to become stronger under stress. "They capture the good from avalanches of change without letting the bad wipe them out," he contends.
       We must all assume that in a globalised world, future crisis-inducing events will be unexpected - and we must be prepared.

BANK TO HIKE PROPORTION OF SECURED LOANS TO 70%

2009-09-15T20:21:00.000-07:00

       Amid the tough global financial crisis, Standard Chartered Bank (Thai) is taking a conservative approach as it aims to increase the proportion of secured loans and wealth management to 70 per cent of total portfolio from the current 50 per cent.
       Vikram Issar, senior execuฌtive vice president, consumer banking country head, said that according to a Standard Chartered Bank worldwide study, the proper ratio of secured to unsecured loans should be 80 per cent to 20 per cent.
       As the unsecured loan proportion was at 50 per cent currently, the bank would use every strategy such as pricing, marketing expansion and product innovation to increase the proportion of its secured loan and wealth management business to 70 per cent by 2012.
       "The bank currently mainฌtains a flat growth rate in unseฌcured loans, while it aggressively expands secured loans such as mortgage, which grows by 50 per cent per year. Small and medium enterprise (SME) loans grow by more than 100 per cent a year. Thus, secured loans, including the wealth management business, would grow by 70 per cent per year on average," said Issar.
       The bank must maintain this growth rate to achieve its goal in 2012, when the outstanding retail loan is expected to hit US$1 billion (Bt34 billion).
       The wealth-management busiฌness is expected to dominate 20-25 per cent of the retail business portfolio.
       The securedloan proportion from SME is expectฌed at 10 per cent of the portfoฌlio, while the rest 35-40 per cent will be from mortgage and other secured loans.
       Issar believes the bank will not lose income from the portfolio adjustment, although unsecured loans offer six times higher net interest marฌgin (NIM) than secured loans.
       The bank gains NIM of 2 per cent from secured loans, while it gains NIM of 12-13 per cent from unsecured loans. Therefore, despite the lower proportion of unsecured loans, when the retail portfolio expands it still can maintain the income from retail business with lower risk.
       Currently 60 per cent of income will be from unsecured loans, while the rest will be from secured loans and the wealthmanฌagement business.
       During the rest of the year the bank is offering a lot of promoฌtions for its retail customers - all types of credit cardholders will receive 7 per cent cash back when spending at nine department stores: Tesco Lotus, Big C, Carrefour, Central, The Mall, Emporium , Siam Paragon, Robinson, and Zen until January 31, 2010.
       New personalloan borrowฌers, who choose to pay installฌments for at least 60 months, will be exempted from interest payment during the first six months from September 21 to December 31 this year.
       Customers buying life insurฌance products with a minimum premium of Bt25,000 will receive interest rate of 8.5 per cent per annum in the first month when they deposit at least Bt100,000.
       There is no frontend fee, registration fee, asset assessment fee, and revenue stamp until the end of this year for mortgage borrowers when they buy life insurance.
       Currently, the bank offers two choices of mortgage rates for new homebuyers and for refiฌnancing loan. The first is a Minimum Housing Rate (MHR) minus 4.25 per cent in the first year, MHR minus 1.19 per cent from the second year onwards, while the other choice is at MHR minus 2.75 per cent during the first two years, and then MHR minus 1.19 per cent.
       Two-year-fixed deposit in Marathon Savings account will receive steppedup interest rates beginning at 1 per cent and a maximum of 2 per cent. Besides depositors can withฌdraw money twice a month without fee, but they are required to deposit at least Bt200,000.

       "The bank currently maintains a flat growth rate in unsecured loans, while it aggressively expands secured loans such as mortgage, which grows by 50 per cent per year."

WEAK GREENBACK BRINGS CHEERS - AND FEARS

2009-09-14T06:05:00.000-07:00

       When quality manager Jackie Phang learnt that her husband was travelling to the United States for a business conference, she was in two minds whether to fly over and join him there for a holiday.
       What tipped the scale in the end? The weak US dollar, which has fallen about 8 per cent against the Singapore dollar since February. This made US vacations cheaper for travellers from the city-state.
       "I had my mind on the shopping and with the US dollar so weak, we can buy a lot more things with our cash," said Phang.
       The US dollar hit a low of $1.42 last week. It has dropped from a high of $1.55 in February, as investors, betting on a global economic recovery move their money from the "safe haven" greenback into higher-yielding assets.
       The favourable exchange rate is drawing more Singaporean tourists to the US and other places that peg their currency to the US dollar, such as Hong Kong.
       But while a stronger Singapore dollar makes holidaymakers a happy bunch, it has a mixed effect on businesses that deal in US dollars.
       Food supplier Indoguna, which imports products from more than 20 countries, said the declining US dollar had resulted in cost savings of between 1 per cent and 5 per cent. About 70 per cent of the items it brings in are transacted in US dollars.
       "The fall in the US dollar makes it slightly cheaper for us, but we won't benefit fro the full difference in the exchange rate as there are other escalating costs such as rental and operating expense,' said chief operating officer Wayne Goh.
       Still, the savings Indoguna achieves from the weaker US dollar help it price products more competitively, he added.
       But other companies said the exchange rate has hurt them.
       Chow Yoke Keng, chief financial officer at UST Technology, which sells and distributed equipment to micro-electronics firms, said her company's profitability has been reduced by about 20 per cent.
       "I buy and sell in US dollars, so my gross margin is affected," she said.
       The dip in the greenback has also caused the Hong Kong dollar to slide against the Singapore dollar, encouraging more tourists to visit the territory.
       "Because of the exchange rate now, Hong Kong is even more attractive," said Ruth Lim, marketing and communications manager at SA Tours. The company sent 6 per cent more tours to Hong Kong last month compared with the same period a year ago.

AS Greenback slides, US official talks up the dollar at world economic forum

2009-09-13T05:30:00.000-07:00

       The US government is concerned about overall demand for Treasuries, not appetite from individual countries, said david Dollar, the US Treasury Department's economic and financial emissary to China.
       "The interest rate on long-term treasury bonds is at a very low level by historical standards," Dollar said yesterday at the World Economic Forum meeting in Dalian, China.
       "That says that the market has confidence the US will get the fiscal problem under control."
       Chinese Premier Wen Jiabao said in March that the Asian nation was "worried" about the safety of its investment in US debt, as a weakening dollar erodes the value of its record US$2.1 trillion (Bt68 trillion) of foreign-exchange reserves.
       President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a %787-billion stimulus spending package.
       Treasuries of all maturities have lost 2.88 per cent so far this year, after returning 14 per cent in 2008, indexes from Merrill Lynch show.
       The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, fell yesterday to the lowest level since September, 2008.
       Chinese investors have doubled their holdings of US government bonds in the past three years to $776 billion as of June, acording to Treasury data.
       Diversification of currency reserves by China "makes some sense" due to their huge scale, said Dollar, who was formerly the World Bank's country director for China and Mongolia and ws named emissary to China in June.
       "It is healthy to have a veriety of different reserve-type of currencies," he said.
       In an interview with Bloomberg Television, Dollar said that countries still favoured holding reserves in dollars because of the breadth of the US market.
       "The US dollar happens to be the best choice," he said. "It is one of the few very good places where you can put large amounts of assets and have confidence of their future value."
       People's Bank of China governor Zhou Xiaochuan urged the International Monetary Fund in March to create a "super-sovereign reserve currency" to replace the dollar.
       The goal is to have a currency "disconnected" from individual nations and one that remains stable in the long run, Zhou said.
       Ten-year Tresuries yielded 3.34 per cent yesterday compared with the year's high of 4 per cent reached in June. The 30-year bond offered 4.28 per cent, dropping from its June peak of 4.84 per cent.
       Dollar said the US welcomes foreign investment, but it is not especially dependent onthat to fund its fiscal deficit. He said the shortfall is about 10 per cent of the nation's economy.

       The People's Bank of China governor urged the International Monetary Fund to create a super-sovereign reserve currency to replace the dollar.

US paints mixed picture on housing

2009-09-11T19:10:00.000-07:00

       The lowest mortgage rates in three months had US consumers clamouring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
       The Treasury Department followed up with a report saying only 12% of US homeowners eligible for loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
       But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labour markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
       The housing market has been showing signs of stabilisation in recent months,with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
       Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
       The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
       "The recent crisis in the housing sector has devastated families and communities across the country and is at the centre of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
       But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
       And US mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months,data from the Mortgage Bankers Association showed.
       The MBA said rates on 30-year fixed-rate mortgages tumbled to a threemonth low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
       Low mortgage rates, high affordability and the government's $8,000 tax credit - part of the economic stimulus bill for first-time home buyers have helped pave the way for stabilisation.
       The Fed report said half of Federal Reserve districts saw evidence the US economy had improved by the end of August, although labour markets remained weak and retail sales were flat overall.
       "Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
       But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers"' incentive programme lapses.
       Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
       "The economy is now growing again.We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
       "We are going to keep at this until we fix it - until we get it back on track,"he added.

REVISITING THE GLOBAL TURMOIL AND INEPT US RESCUE EFFORTS

2009-09-08T23:05:00.000-07:00

       Marking the first anniversary of the Hamburger crisis, Jean Jacques Bouflet, ministercounsellor of the European Commission's delegation in Bangkok, said yesterday that it was too early to call the economic meltdown over. Some countries in the European Union, such as France and Germany, have jumped on the up escalator.
       However, not all countries are celebrating a return to growth. After the first year of the crisis has passed into history, the economy should be on the sustainable expansion path next year, he said.
       Pornsilp Patcharintanakul, deputy secretarygeneral of the Board of Trade of Thailand, believes that the global economic downturn is levelling out after one year of suffering worldwide.
       "Economic growth is expected to recover like a 'correction mark' []. Exports will gradually grow from dramatically shrinking, while foreign direct investment is expected to enter the Kingdom soon on positive factors, including political stability, and the government's measures to booster economic growth," he said.
       The world economy should expand slightly from now, if there are no more serious negative factors to hammer down the green sprouts.
       The oil price should not be a concern, as it is gradually increasing due to higher demand in the market, not to speculation, she added.

       BLINDED
       Looking back, the warning was ominous: "Massive global wealth destruction".
       That's what Lehman Brothers Holding executives predicted before they filed the biggest bankruptcy in US history.
       "Impacts all financial institutions" read one bullet point ina confidential memo prepared for government officials obtained by Bloomberg News.
       "Retail investors/retirees assets are devastated."
       The message didn't get through. Two dozen of the world's most powerful bankers, brought together by US Treasury Secretary Henry Paulson and Federal Reserve Bank of New York president Timothy Geithner on the weekend of September 13, 2008 to devise a rescue plan for Lehman, were to busy saving themselves to see the larger therat.
       "The discussion among the CEOs was 'How do we prevent the next firm from going under?'" former Merrill Lynch CEO John Thain, who cut a deal to sell his company that weekend, said in an interview. "There should have been much more discussion about the impact directly on the markets if Lehman went bankrupt."
       While everyone assembled at the New York Fed was aware that unbridled sub-primemortgage lending and the packaging of such inferior loans into investment vehicles such as collateralised-debt obligations has pushed the financial system to the breaking point, what the bankers missed almost destroyed them - and the rest of the global eocnomy.

       BLANKFEIN, DIMON
       Lehman's downfall on Monday, September 15, sparked a run on the US$3.6 trillion (Bt124 trillion) money market industry, which provides short-term loans called commercial paper used by businesses worldwide to cover everyday expenses, including payroll and utilities.
       The panic left companies such as Goodyear Tire & Bubber stranded with insufficient cash and ravaged the accounts of millions of people.
       For Goldman Sachs Group CEO Lloyd Blankfein, JPMorgan Chase's Jamie Dimon and the rest of the financial chieftains who spent a weekend trying to unwind derivatives trades and keep bank-to-bank loans flowng, ignoring the comercialpaper market, the lifeblood of the economy, proved a catastrophic oversight.
       Within a week, the US stepped in to halt withdrawals from money market funds, leading to a $13.2 trillion it has committed to beating back the worst financial crisis since the Great Depression.

       'SYSTEM AT RISK'
       Of all the quakes of 2008 - the fall of Bear Stearns in March, the takeover of mortgage buyers Fannie Mae and Freddie Mac and the salvaging of American International Group in September - the failure to account for the effects of Lehman's demise was the most critical because its aftershocks came closest to wrecking the world economy.
       "They put the entire financial system at risk, and they didn't have to," said Harvey Miller, a partner at Weil Gotshal & Manges in New York who represented Lehman in the bankruptcy, referring to government officials. "They were warned.
       "I told them, 'Armageddon is coming. You don't know what the consequences will be'. Their response was, 'We have it covered'."
       Paulson and Geithner, who succeeded him as Treasury secretary, both declined to comment.

       INVITING 'CATASTROPHE'
       One year later, policymakers haven't learned the lesson of the bankruptcy, said Richard Bernstein, CEO of Richard Bernstein Capital Management in New York and former chief investment strategist for Merrill Lynch.
       Rather that break up institutions such as Bank of America and Citigroup, or limit their expansion, the US has given them billions of dollars in tax incentives and loan guarantees that enabled them to grow even bigger.
       To protect against a bank collapse touching off another free fall, President Barack Obama has proposed regulatory changes that rely on the wisdom of bankers and government overseers - the same people who created the conditions that led to Lehman's bankruptcy and were unable to foresee its consequences.
       "Dsignating certain institutions as too big to fail, and not having a thorough regulatory process to match, practically invites another catastrophe," Bernstein said.
       Rescue efforts exposed a financial system with so many moving parts that US regulators and the world's top bankers couldn't keep track of them all.
       A reconstruction of the meeting sat the New York Fed that preceded Lehman's bankruptcy, drawn from more than a dozen interviews with participants, reveals a failure to understand the importance of commerical paper and how that market would be affected by the collapse of the New York investment bank.
       Rather than break up institutions such as Bank of America and Citigroup, or limit their expansion, the US has given them billions of dollars in tax incentives and loan guarantees that enabled them to grow even bigger.

TOP CENTRAL BANKS AGREE TO TOUGHER REGULATIONS

2009-09-07T22:35:00.000-07:00

       International central bankrs and regulators establish "new standards" for the global financial insutry in a step to prevent a repeat of the worst economic crisis since the Great Depression.
       The measures should "substantilly reduce the probability and severity of economic and financial streess", a statement released by the Baselbased Bank for International Settlements (BIS) said.
       The drive to revamp regulation comes after excessive risk-taking by the world's banks led to US$1.61 trillion (Bt54.5 trillion) in losses and write-downs, taxpayer-funded bailouts and a global recession. Meeting less than three weeks before a Pittsburgh summit of their nations' leaders, G-20 finance chiefs on Sunday united on a plan to have banks rein in compensation and hold more capital.
       The approval set in motion and enhances revised "basel II" measures finalsed in July, that remedy flaws exposed by the collapse in credit and financial markets last year.
       "The agreements reached today [Sunday] among 27 major countries of the world are essential as they set the new standards for banking regulation and supervision at the global level," said European Central Bank chief Jean - Claude Trichet, who president over the meeting.
       National financial supervisors wre also urged to ensure that pay or compensation for commercial bankers was "properly aligned with long-term performance and prudent risk-taking", added Nout Wellink, the chairman of the Basel Committee and Dutch central bank chief.
       However, the meeting did not set a firm deate for implementation of the package, which will be fleshed out over the coming months.
       The central bank governors and supervisors who met in Basel form the oversight body of the Basel Committee on Banking Supervision.
       A draft of the measures was first unviled in January.
       The principles agreed notably to bolster standards for key "Tier 1" capital requirements for commercial banks to raise their "quality, consistency and trnsparency", the statement said.
       "Banks will be required to move expeditiously to raise the level and quality of capital to the new standards, but in a manner that promotes stability of national banking systems and the broader economy," it added.
       The central bankers endorsed the principle f a minimum global standard to fund liquidity, as well as a framework to oblige banks to build permanent "counter-cyclical" capital buffers that can be used during periods of financial turmoil.
       "These measures will result over time in higher capital and liquidity requirements and less leverage in the banking system, less cyclicality and greater banking sector resilience to stress," said Willink.
       The measures will be detailed by the end of the year and tested and refined through to the end of 2010, according to the statement.
       They will be phased in a manner "that does not impede the recovery of the real economy".
       The central bankers' meeting came swiftly on the heels of a meeting of G-20 finance ministers in London on Saturday that painfully hatched a compromise on bankers' pay and left several financial issues outstanding.
       US Treasury Secretary Tim Geithner notably went to London seeking an agreement ensuring that banks were better prepared for tougher times.
       Amid disagreement in their ranks, the G-20 ministers fell short of capping bankers' pay but pledged to reward long-term, not short-term success. Most of the issues were left for a crucial meeting of G-20 leaders in Pittsburgh on September 24-25.

G-20 to maintain stimulus measures

2009-09-06T22:46:00.000-07:00

       Top finance officials from rich and developing countries have agreed to curb hefty bankers' bonuses,but the proposed crackdown on excessive payouts so far falls short of European demands after the US and Britain shied away from imposing a cap.
       The Group of 20 finance ministers also pledged on Saturday to maintain stimulus measures such as extra government spending and low interest rates to boost the global economy, warning that the fledgling recovery that provided the backdrop to their meeting here is by no means assured."The financial system is showing signs of repair," said US Treasury Secretary Timothy Geithner."Growth is now under way. However,we still face significant challenges ahead."
       The G-20 joint statement issued at the end of their London meeting said that fiscal and monetary policy will stay "expansionary" for as long as needed to reduce the chances of a double-dip recession.
       The International Monetary Fund has said the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5%, from an April projection of 1.9%.
       But the IMF also downgraded its forecast for this year, saying it would shrink by 1.4%, instead of 1.3%.
       The group also pushed ahead with plans to reform the financial system,including tougher action against tax havens and giving developing countries a greater say in global governance.
       French Finance Minister Christine Lagarde said this ensured "things will not go back to business as usual ... that there are no dark areas anymore to hide."
       But while the gathering - a preparatory session for the G-20 leaders' summit in Pittsburgh later this month - reached agreement on the need for ongoing growth-boosting measures and some regulatory reform, it compromised on the hot topic of bankers' bonuses.
       Curtailing bankers' pay and bonuses has been seen as key by some countries after the risk-promoting payment culture was blamed for fueling the current financial crisis.
       British Treasury chief and meeting host Alistair Darling said that there must be no more cases in which "people are being rewarded for reckless behaviour."
       Heading into the talks in the British capital, European countries had pushed for the G-20, which represents 80% of the world's economic output, to enforce an official cap on both individual payouts and collective bonus pots at financial institutions.
       Britain supported the general effort to reign in bonuses, but not the cap,while the US was more intent on pushing its proposal for a global accord to force banks to hold more capital reserves.
       In the event, the G-20 agreed to give the Financial Stability Board, a body set up at the London Summit of G-20 leaders in April, the task of drawing up practical proposals the Sept 24-25 leaders meeting in Pittsburgh could agree on.
       The G-20 communique failed to directly address a proposal from Mr Geithner for a new international accord to increase bank's capital reserves, but he said he was encouraged by "support around the room."
       Mr Geithner wanted to reach agree-ment on an accord by 2010, with implementation by the end of 2012.
       The communique did not directly address that plan, but called for rapid progress in developing stronger regulation, including a requirement that banks hold more and better capital once recovery is assured.
       Mr Geithner also stressed the need for discussions on a so-called exit strategy to withdraw government support for the economy and pay off trillions of dollars in debt, saying a recovery strategy would not be effective "unless we can make fully credible our commitment to reverse those actions as soon as conditions permit."
       British Prime Minister Gordon Brown won support for his push to take tougher action against tax havens,with the G-20 agreeing to a March 2010 deadline to start sanctions against tax havens which refuse to comply with new transparency rules agreed at the April G-20 leaders' summit in London.

IMF CHIEF URGES NATIONS TO MOP UP SEA OF CASH

2009-09-06T06:23:00.000-07:00

       The global economy "appears to be emerging" from a steep slump and countries should plan to wind down stimulus efforts, International Monetary Fund chief Dominique Strauss-Kahn said yesterday. "The global economy appears to be emerging at last from the worst economic downturn in our lifetimes," Strauss-Kahn said in a speech in Berlin.
       The risks of the fragile recovery stalling appeared to be dominishing, as several advanced economies-including France and Germany-had already returned to growth and emerging economies were "recovering even more strongly",he said.
       But the warned that problems in the financial sector could persist or even intensify,particularly if efforts to restore banks to health are not completed.
       In light of the fragility of recovery, Strauss-Kahn cautioned there was "a real danger" countries may end their extraordinary monetary and fiscal crisis measures prematurely.
       "Having said this, the time is right for policy-makers to formulate their exit strategies," he added.
       The former French finance minister said international coordimation of exit strategies would perhaps be even "more important" than the well-coordinated crisis response.
       "Greater clarity in communicating policy intentions to the public is also essential to shore up confidence," he said.
       Strauss-Kahn was due to trave to London for a two-day meeting of finance chiefs from the Group of 20 developed and developing countries in advance of a September 24-25 summit in Pittsburgh, Pennsylvania.
       The global recovery Strauss-Kahn said, would likely be "relatively sluggish", with unemployment continuing to rise through next year.
       "A jobless recovery remains a risk.Having so many people out of work has significant economic costs, ranging from lower private demand to a decline in potential growth if structural unemployment rises," he said. "The social consequences are potentially even more worrisome."
       Regulatory reform momentum was lacklustre, he noted, urging countries to avoid "complacency" as financial markets improve.
       "The reform effort is not proceeding as quickly as is necessary to address the problems raised by the crisis," he said.
       The IMF managing director addressed concerns about the international monetary system and the dollar's role as the world's reserve currency in the wake of the financial crisis.
       Critics have noted the role of the dollar may have been "undermined" by US economic and financial troubles, he acknowledged.

Central bank says rates appropriate

2009-09-03T23:55:00.000-07:00

       The Bank of Thailand will not raise interest rates until it is sure the economic recovery is sustainable, according to deputy governor Atchana Waiquamdee, who played down the chance of further rate cuts following improved data.
       Interest rates in Thailand were already low and further cuts might not benefit the country much, she said.
       "The rate at 1.25% is appropriate....If we cut it by another 25 or 50 basis points, will it help spending? I think not,at a time when the economy is bad,"she said in an interview.
       Dr Atchana said there was still room for rate cuts, but only if the economy deteriorated, and she said she saw little chance of the global economy slipping again.
       "We have to reserve some bullets for the unforeseen," Dr Atchana said.
       The central bank's Monetary Policy Committee (MPC) kept its policy rate unchanged at a record 1.25% for the third meeting last week, after four cuts of a total 2.50 percentage points from December to April to help pull the economy out of its worst recession in 11 years.
       Dr Atchana said a rate rise was not likely until the economic recovery was sustainable.
       "Recovery should mean a clear momentum of sustained quarterly growth for at least two consecutive, or two or three, quarters. There should also be annual GDP growth at the same time,"she said.
       "When we want to change our stance,we need to be sure that the Thai economy has recovered and demand-pull inflationary pressure poses a risk.
       "For policymakers, they should first ascertain that the recovery is strong and sustainable at least for a period of time.Slight improvements in data should not be hastily interpreted as showing the economy is out of the woods."
       The economy grew 2.3% in the second quarter from the first, so the recession is over, but the state planning agency said political risks and weak global demand could impede the recovery.
       Dr Atchana said the annual economic contraction was likely to moderate in the third quarter and GDP should grow slightly in the final quarter of 2009 compared with a year before.
       The central bank has forecast the economy would shrink 3.0-4.5% this year,which would be the weakest performance since the 1998 Asian financial crisis, before growing 3.0-5.0% in 2010.
       Economists polled by Reuters expect the central bank to leave rates unchanged until the middle of next year, when it is likely to start raising them to tackle an increase in inflation.
       Like central banks elsewhere in Asia,the central bank has paused in its aggressive rate-cutting to assess the impact of earlier cuts amid signs that the worst of the economic downturn may be over.
       Core consumer prices, which exclude fresh food and energy were 0.2% lower in August than a year before.
       The central bank targets core inflation and has just agreed a new, slightly narrower target of 0.5 to 3.0% with the government.

Business sentiment hit by the rising cost of production

2009-08-31T21:45:00.000-07:00

       Business sentiment worsened in July as a result of an escalating cost of production, according to a Bank of Thailand survey. The Business Sentiment Index (BSI) in July was only at 45, compared to 46.3 in the previous month. The confidence index in easing production costs declined from 41 to 38.4 in July.
       "The increasing cost of production is an important issue, especially when we are looking for private investment. It is the risk that erodes business confidence," said Amara Sriphayak, a senior BOT director.
       Amara believed that producers would not pass on rising costs to customers while the economy is still only picking up slowly. Although they have thin margins they cannot mark up prices as they would like.
       Economic uncertainty remained in the first rank of all business obstacles. Political instability is of further concern for the real sector, rising to third place from fourth.
       Although business confidence is below the confidence level of 50 in July, sentiment has gradually improved. This is indicated by forecasts for the index over the next three months, which has increased from 50.4 to 51.3, from all commercial elements except production costs.
       Amara is optimistic that the improving economic conditions, the government's stimulus package as well as the global economic recovery would help bolster confidence here.
       According to the BOT, the Manufacturing Production Index (MPI) continued to improve in July, regarding domestic and export markets.
       Capacity utilisation picked up in accordance with higher production to 61.6 per cent in July. It rose slightly from 60.2 per cent in June, but remained lower than the normal level of 6870 per cent.
       The Private Consumption Index showed an impressive outlook in July in terms of both level and growth.
       It expanded 3.4 per cent from previous month, compared with 2.6 per cent in June. It contracted 1.8 per cent from the same period of last year compared to a 2.7percent drop in June.
       The government's budget disbursement was 75.2 per cent in contrast to 76.4 per cent last year. However, the amount of money was bigger.