Tag Archives: Central

India central bank chief endorses advisors on policy rate cut

MUMBAI: India’s central bank governor Duvvuri Subbarao endorsed the unanimous recommendation of all external members of the bank to cut its policy interest rate last month the first cut in 9 months minutes of the quarterly meeting released on Saturday showed.

Four of the six members suggested that the Reserve Bank of India (RBI) should reduce the policy rate by 25 basis points in the third quarter policy review as global conditions were favourable and marginal decline in WPI inflation provided room for some monetary easing.

On January 29 India’s central bank lowered its key policy repo rate by 25 basis points (bps) to 7.75 percent to help support an economy set to post its slowest annual growth rate in a decade.

It also unexpectedly reduced the cash reserve ration (CRR), the share of deposits banks must keep with the central bank, by 25 bps to 4.00 percent, to infuse an additional 180 billion rupees into the banking system.

The committee consists of seven external members, apart from the governor and the deputy governors.

The panel’s role is purely advisory, with the governor having the final say in deciding rates.

Two of the members felt that a 25 basis points reduction in the repo rate alone might not induce banks to reduce their lending rates and advised a cut in the banks’ cash reserve ratio (CRR) of 25 basis points to nudge the lending rates down was in order.

This would also enable loan rates to reduce more than deposit rates.

One of the other two members felt that the Reserve Bank should make use of open market operations (OMOs) to manage liquidity and keep the CRR unchanged.

These two members recommended a sharper reduction in the repo rate by 50 basis points and use of OMOs to manage liquidity.

Copyright Reuters, 2013

Thai central bank: interest rates not only factor for fund flows

thailand 400BANGKOK: Thailand’s central bank chief said on Thursday that interest rates were not the only factor affecting capital flows and stressed that the central bank’s duty was to maintain economic stability.

Referring to a government call for lower interest rates to help stem capital inflows that have pushed the Thai currency to an 18-month high, Bank of Thailand Governor Prasarn Trairatvorakul said a “difference in views between the government and central bank is not unusual”.

The central bank will try to find a creative solution to this difference in views, he told reporters.

The baht has risen around 2.8 percent against the dollar this year, helped by foreign inflows into Thai stocks and bonds.

Exporters have complained about its strength and Finance Minister Kittirat Na Ranong said on Feb. 5 he had sent the central bank a letter setting out his view that the monetary policy committee (MPC) should cut interest rates to discourage capital inflows..

The MPC reviews policy on Feb. 20. The consensus among economists is still for no change although speculation about a rate cut has grown since Kittirat’s move.

The seven-member MPC — three central bank officials and four outsiders — unanimously voted to leave the policy rate unchanged at 2.75 percent for a second consecutive meeting on Jan. 9, taking the view that economic conditions had improved.

Last October it surprisingly cut the rate by a quarter of a point in a split decision, due mainly to global economic risks.

Copyright Reuters, 2013

Pause in rate cuts in March not certain Polish central bank head

poland2 400WARSAW: Poland’s central bank governor said it would not necessarily pause its monetary easing in March as flagged earlier, although it would be a good time to consider a strategy for the coming months after four consecutive rate cuts.

“Most of all, I didn’t say that a pause is a foregone conclusion. In March, in addition to the regular serving of data there will also be a new inflation and economic projection,” Marek Belka told the central bank’s news website obserwatorfinansowy.pl.

“So, it’s a good moment to not only think what to do at the March sitting, but also what to do going forward,” he said in an interview published on Thursday.

Copyright Reuters, 2013

Chile central bank seen holding key rate in coming months

 SANTIAGO: Chile’s central bank is seen holding its benchmark interest rate at the current 5.0 percent at its monetary policy meeting on Thursday, the bank’s latest poll of analysts showed on Tuesday.


The analysts held to their forecast that the bank’s benchmark rate would be 5.25 percent within 11 months, matching the view expressed in the previous analysts’ poll published a month ago.


On inflation, expectations were that consumer prices would rise 0.2 percent in February, according to the median forecast of 49 analysts.

The country’s economy is seen expanding a brisk 5.0 percent in the first quarter of the year, compared with a year earlier, the poll showed, unchanged from last month’s forecast for the period.

Copyright Reuters, 2013

Gilts edge lower as investors focus on central bank inflation report

LONDON: Gilts fell modestly on Tuesday in line with German Bunds after lower-than-expected inflation data left the market unmoved and investors awaited new Bank of England economic forecasts due out on Wednesday.


Britain’s inflation rate held steady at 2.7 percent for the fourth consecutive month, the Office for National Statistics said, the highest level since May but slightly below the 2.8 percent forecast in a Reuters poll.


The March gilt future settled 11 ticks lower at 116.15, while the equivalent German Bund future settled 30 ticks lower at 142.55.


“Essentially we’ve been tracking Bunds lower. We’ve been outperforming a little bit but not hugely. The market has been trading broadly speaking more softly since the US came in, but there is very little happening at the moment,” said Barclay strategist Moyeen Islam.


In its Inflation Report on Wednesday, when the Bank of England will update its forecasts for the UK economy for the next three years and Governor Mervyn King will hold a news conference.


Economists are keen to see how King reconciles a sluggish economic outlook – that might potentially benefit from more bond purchases – with a sticky picture for inflation that is likely to stay above the bank’s 2 percent target for longer than hoped.


“Tomorrow I think will be quite a subdued inflation report for the Bank of England,” said Islam. “They will acknowledge that inflation remains high, but they remain firmly fixed on the growth side of things.”


Last week the Bank of England said inflation might exceed 2 percent for the next two years, prompting some analysts to expect an upward revision to its inflation forecast, which in November was for below-target inflation from the third quarter of 2014.


As well as reducing the prospective real return on gilts, a higher inflation forecast would also raise the barrier to the bank restarting its bond purchase programme something most economists already see as unlikely.


Ten-year gilt yields were broadly steady at 2.11 percent, while their spread versus Bunds was 1.5 basis points tighter at 47 basis points.

Copyright Reuters, 2013

Lithuania central bank shuts Hearts owner Romanov’s Ukio

 VILNIUS: Lithuania’s central bank froze the operations of the country’s No. 4 bank Ukio Bankas on Tuesday, deepening the woes of main shareholder Vladimir Romanov, owner of cash-strapped Scottish soccer club Hearts.


The central bank has said it aims to make sure the banking system, victim of several post-Soviet crises, is as sound as possible and in late 2011 closed down another bank, Snoras.


This time, it said in a statement, it had found too much risk taking and not enough effort to provide financial certainty at Ukio, which is controlled by Romanov.


The prosecutor’s office also said in a statement on Tuesday that it had opened an investigation into the possible embezzlement of assets at the bank.


“Deficiencies in the bank’s operation and violations of legal acts have been established more than once,” the central bank said in its statement, appointing a temporary administrator to run the bank while it decided on the bank’s future.


It said it would negotiate with other banks to try to restructure Ukio. Siauliu Bank, almost 20 percent owned by the European Bank for Reconstruction and Development, said it would take part in the talks.


Romanov was quoted by local media as denying he was not prepared to put funds into the bank. “That is nonsense. I took all responsibility on myself I did everything they asked for,” news portal Delfi quoted him as saying.


Lithuania has been quick in the past to honour deposit guarantees, and on the streets of capital city Vilnius there were no crowds or protests at Ukio branches, which were all shut.


Ukio, whose shares have slid 75 percent since the start of 2011, has been under the eye of the central bank and was the object of a central bank inspection in December and January.


Romanov last week also sought help from the council of his home town, Kaunas, for a well-known local basketball club.


Ukio in January rejected media allegations it was under investigation for helping launder the proceeds of a Russian corruption case.


Edinburgh-based Hearts, one of Scotland’s top soccer clubs, has debt of about 24 million pounds ($38 million) and in December agreed to pay 1.5 million pounds to settle a tax dispute. Hearts also cleared a separate tax bill of 450,000 pounds which lifted the immediate threat of liquidation.


Fans have set up a foundation to try and save the club and have asked Romanov to let them take it over.


The central bank said Ukio had deposits of 3.4 billion litas, making it the fourth biggest deposit taker after the local subdiaries of Scandinavian groups SEB, Swedbank and DNB. By assets, Ukio is sixth largest.

Copyright Reuters, 2013

Russian central bank holds all rates, warns on inflation

MOSCOW: Russia’s central bank left all its policy rates on hold at its monthly meeting on Tuesday, resisting political pressure to ease policy and warning that inflation would stay above target for an extended period.


Analysts had expected the central bank to hold rates after inflation rose above 7 percent in January, feeding doubts about its chances of achieving its 5-6 percent target range for 2013, and the rouble continued to strengthen slightly to 34.74 against a euro-dollar basket after the announcement.


In recent weeks some senior officials and businessmen have criticised the bank for not cutting rates to help a slowing economy.


The bank, stepping up its anti-inflation rhetoric, is refusing to budge.


“There is a slight lurch in the direction of emphasising inflation over growth risks, which flies in the face of mounting political pressure to ease monetary policy,” said Ivan Tchakarov, chief Russia economist at Renaissance Capital.


The central bank kept the one-day auction repo rate unchanged at 5.5 percent, while the fixed one-day repo rate, a de facto ceiling for the money market, remains at 6.5 percent.


The overnight deposit rate, a floor for interbank rates, was left at 4.5 percent.


The refinancing rate, the cost of overnight loans from the central bank, was held at 8.25 percent.

Copyright Reuters, 2013

Central Qld flood repair bill tops $500m so far

Posted January 23, 2013 12:47:10

The Department of Main Roads says more than $500 million in flood works has been completed so far in central Queensland.

Regional director Terry Hill says crews are back at work and hope to have the Yeppen bridge completed by August this year.

He says the total flood reconstruction bill for central Queensland will reach $900 million by Christmas.

“There’s 42 reconstruction sites across central Queensland that are operational at this stage,” he said.

“On the Bruce Highway there’s 22 work sites and there’s about 700 people working between Miriam Vale and up to St Lawrence, just in this section in central Queensland, to reconstruct the damage that was caused in those flood events.”

Topics: regional-development, floods, public-sector, road-transport, miriam-vale-4677, rockhampton-4700

Egypt central bank sells $73.1mn at forex auction

Egypt-centra-bankCAIRO: Egypt’s central bank said on Monday it accepted bids worth $73.1 million with a cut-off price of 6.6920 Egyptian pounds to the dollar at its 17th foreign currency auction.

The cut-off price at the previous auction, held on Thursday, was 6.6820.

The auctions are a bid to curb a decline in Egypt’s foreign reserves, which the central bank said in December had fallen to a critical level.

The reserves are hovering around $15 billion, covering roughly three months’ worth of imports.

Copyright Reuters, 2013

Israel central bank chief resigns

Stanley Fischer Prof Fischer was appointed Bank of Israel governor in 2005 Stanley Fischer, governor of the Bank of Israel is to step down on 30 June, two years before his term ends.


No reason has yet been given for his resignation.


Mr Fischer had previously served as chief economist of the World Bank and deputy managing director of the International Monetary Fund.


He is due to hold a news conference on Wednesday, but said in a statement that he had already informed prime minister Benjamin Netanyahu.


Prof Fischer is known to generations of economics students as the author along with David Begg and Rudiger Dornbusch of one of the standard text books in the subject.


He also advised Federal Reserve chairman Ben Bernanke on his thesis and taught European Central Bank governor Mario Draghi.


He was appointed Bank of Israel governor in 2005 and was appointed to a second and final five-year term in 2010.


The 69-year-old economist was credited with helping the Israeli economy through the financial crisis in better shape than many other countries.

Downpour disrupts central Qld coal mines


Heavy rain and flooding has halted production at a number of central Queensland coal mines.


The Queensland Resources Council (QRC) says falls of up to 250 millimetres have been recorded at some sites, with about 20 mines now releasing water.


In 2011, flooding cost the industry $7 billion in lost production.


QRC chief executive Michael Roche says this year’s flooding is not as bad.


“There’s no doubt that there’s many mines that received rainfall in the order of 200 to 250mm of water,” Mr Roche said.


“Unfortunately for some mines that probably added to their unwanted excess water problem.


“The good news is that Abbot Point and the Hay Point ports and the Goonyella system are open.”


Mr Roche says the mines will be keen to resume delivery of coal as quickly as possible.


The torrential rain has disrupted haulage operations in the Moura and Blackwater systems.


The QRC says it is too early to say how much damage has been done to the coal freight network.


Haulage along the Goonyella line to Hay Point and Abbot Point are unaffected.

Topics: coal, weather, mining-industry, rainfall, floods, moura-4718, blackwater-4717, rockhampton-4700, mackay-4740

First posted January 29, 2013 12:54:33

India central bank cuts rates by 25bps as expected

MUMBAI: India’s central bank reduced its policy interest rate by a widely expected 25 basis points on Tuesday, taking comfort from cooling inflation as it made the first cut in nine months to support an economy headed for its slowest growth in a decade.


The Reserve Bank of India (RBI) cut its key repo rate to 7.75 percent, as forecast by a Reuters poll.


The RBI unexpectedly also reduced the cash reserve ratio (CRR), the share of deposits banks must keep with the central bank by 25 bps to 4.00 percent, which will infuse an additional 180 billion rupees into the banking system.

Copyright Reuters, 2013

UK central bank ready to set up yuan swap line

bank-of-englandLONDON: The Bank of England is prepared in principle to become the first G7 central bank to enter into a foreign exchange swap agreement with China, opening the door to another substantial step in moves to liberalise the yuan currency.

The bank’s Executive Director for Banking Services, Chris Salmon, told a meeting of senior bankers in London that the move was aimed at underpinning a developing offshore market in yuan trade out of London that Britain is keen to encourage.

It would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment.

British officials have previously shied away from such a deal because the renminbi (yuan) is not freely exchangeable. But there have been signs that China is moving to open up trading of its currency and Salmon said the bank was more interested in helping yuan business to flourish.

“The Bank would welcome the development of the offshore RMB market just as it would any other legitimate market innovation, and we would not want to inhibit that outcome inadvertently through gaps in our operational framework,” he told the London Money Market Association’s Executive Committee in the text of his speech provided by the bank.

“To remove any residual uncertainty about our attitude: the Bank is ready in principle to agree a swap line with the PBOC (People’s Bank of China), assuming a mutually agreeable format can be identified.”

European and US officials have been pressing China for years to do more to open up the yuan to market forces, saying its artificial weakness was one of the key imbalances of the global economy.

Beijing is slowly delivering, although it still keeps a tight rein on gains for the currency for fear it will weaken an economy that has been the biggest engine of global growth for a decade.

“This is part of the internationalisation of the RMB, this is China moving forward to internationalise its currency,” said David Bloom, head of FX strategy at HSBC.

“They are setting up these lines around the world, it is the beginning of the opening up of the flower of the RMB.”

BARRIERS

Britain, always anxious to bolster London’s status as Europe’s biggest financial centre, launched an offshore yuan currency and bond market to great fanfare last year and a swap deal would cement its role as the leading centre in the Group of Seven industrialised nations for offshore yuan trade.

But bankers have been arguing for some time that the bond side would struggle to develop unless British and Chinese authorities took steps to make trading easier.

The need for such measures has become even greater in recent months as potential investors have been discouraged from buying yuan bonds by China’s slowing economic growth and a slump in one-year yuan non-deliverable forwards to price in a depreciation.

“Ultimately, the growth of the market will depend on the success of market participants in matching incipient demand and supply for RMB denominated products – just as the original eurodollar market grew by satisfying a latent private sector demand for dollar assets in this time zone,” Salmon said.

“That said, there is a perception that market confidence would be boosted if the Bank and the PBOC agreed a swap line.”

Issuance of London-listed yuan bonds has been limited to a handful from the likes of oil major BP and banks HSBC and ANZ.

By comparison, the Hong Kong yuan bond market grew to around 350 billion yuan ($55.7 billion) in a little over two years from 2010, according to Thomson Reuters data.

But industry players say foreign exchange trading out of London itself looks far better, with daily turnover levels having risen to up to $900 million, compared with $1.5 billion in Hong Kong.

Figures from global transaction services organisation SWIFT also show the UK is the leading centre for offshore yuan trade outside Asia and has made far more progress in getting companies to invoice in yuan than the United States, for example.

Copyright Reuters, 2013

South Africa central bank holds rates despite slow growth

south-africa-flagJOHANNESBURG: South Africa’s Reserve Bank decided on Thursday to keep interest rates on hold, despite revising down growth forecasts for the year.


After a three-day policy meeting the bank decided to leave its key rate at 5.0 percent, while growth for 2013 was forecast to come in at a sluggish 2.6 percent.


Announcing the decision Bank governor Gill Marcus painted a bleak picture for the economy, the biggest in Africa. Detailing a “challenging domestic outlook” Marcus noted job creation continued at a “subdued pace” while the outlook for the crucial but downsizing mining sector was “bleak.”


She also predicted inflation would breach the upper range of the bank’s own target in the third quarter and the weakening rand could make that scenario worse.


That is likely to have tipped the banks hand in deciding whether to cut interest rates, which would stimulate the economy, but which could fuel inflation.

Copyright AFP (Agence France-Presse), 2013

Central Qld flood repair bill tops $500m so far


The Department of Main Roads says more than $500 million in flood works has been completed so far in central Queensland.


Regional director Terry Hill says crews are back at work and hope to have the Yeppen bridge completed by August this year.


He says the total flood reconstruction bill for central Queensland will reach $900 million by Christmas.


“There’s 42 reconstruction sites across central Queensland that are operational at this stage,” he said.


“On the Bruce Highway there’s 22 work sites and there’s about 700 people working between Miriam Vale and up to St Lawrence, just in this section in central Queensland, to reconstruct the damage that was caused in those flood events.”

Topics: regional-development, floods, public-sector, road-transport, miriam-vale-4677, rockhampton-4700

Japan central bank set to vow boldest action yet to lift economy

BoJTOKYO: The Bank of Japan is set on Tuesday to unveil its most determined effort yet to beat years of economic stagnation, but the big challenge will be how to impress markets already pricing in a doubling of its inflation target and further asset buying.


Under pressure from new Prime Minister Shinzo Abe for bolder action to overcome deflation and lift the economy out of recession, the central bank will issue a joint statement with the government pledging to pursue aggressive monetary easing to achieve a target for inflation of 2 percent, a level achieved in only a handful of months since the late 1990s.


Such a pledge will keep the BOJ under political pressure to deliver economic stimulus steps beyond its regular policy prescription of the past few years of topping up an asset-buying and lending programme, analysts say.


“This will be a historical meeting for the BOJ that marks a big change in its policy framework, so the bank will be under pressure to deliver something new,” said Masaaki Kanno, chief Japan economist at JPMorgan Securities.


“Doing the same thing it did in December won’t be enough. The BOJ needs to show it has changed. Otherwise, we may see a reversal in the current yen-weakening trend,” he said.


The yen has dropped 13 percent against the dollar in the past two months to hit a two-and-a-half-year low on expectations Abe will force the central bank into bolder action. Tokyo stocks have jumped by a fifth on the view the weaker yen will boost the export earnings of the likes of Nissan Motor Co and Canon Inc.


That leaves room for market disappointment, analysts say, if the central bank does no more than announce its new inflation target and raise the ceiling of its asset-buying programme by 10 trillion yen, the most regular increment in policy easings of the past year.


Instead, policymakers will have to consider other measures to impress investors and keep pressure on the yen, considered key to Japan’s economic fortunes as the country struggles with its fourth recession since 2001.


One option would be to make an open-ended pledge to buying assets. The ceiling on the current programme is 101 trillion yen and it runs until the end of the year.


Another option would be to scrap a 0.1 percent floor paid on short-term deposits at the central bank to encourage lending, sources have told Reuters.


A joint BOJ and government statement will likely set 2 percent inflation as a medium-term target without a binding deadline. The hope is that modestly rising prices will lift the economy by encouraging consumers to buy before prices get any higher.


Sources said the BOJ governor will be asked to report regularly to the government’s top economic council on progress towards achieving the inflation target.


For the government’s part, Abe has promised a boost to spending to help get the economy back on its feet. Abe’s stimulus may give the economy only a temporary boost at best unless he follows through with politically more difficult economic reforms, such as deregulating protected sectors such as agriculture, analysts say.


Still, Abe is likely to keep pressure on the BOJ for more stimulus even after Tuesday’s meeting at least until an upper house election expected in July.


Abe is also expected to try to install a central bank governor more sympathetic to aggressive monetary policy easing when incumbent Masaaki Shirakawa’s term ends in April. Shirakawa has maintained that monetary policy alone can not pull the economy out of deflation.

Copyright Reuters, 2013

UAE central bank won’t impose mortgage caps-governor quoted

uae central bank 400DUBAI: The United Arab Emirates central bank will not impose limits on mortgage lending without consulting commercial banks, and any new rules are not imminent, central bank governor Sultan Nasser al-Suweidi was quoted as saying.

The central bank is working on new rules for the property mortgage industry but they will take at least six to nine months to emerge, Monday’s Al Ittihad newspaper quoted Suweidi as saying in an interview.

A circular sent to commercial banks by the central bank last month, and seen by Reuters, said mortgage loans for foreign individuals should not exceed 50 percent of the property value for a first purchase of a home, and 40 percent for second and subsequent homes. Caps for UAE citizens were set at 70 percent for a first home and 60 percent for subsequent ones.

But Suweidi was quoted as saying by Al Ittihad on Monday that there was a “misunderstanding” in the media and that no central bank ruling had been issued, only a warning to banks to be prepared for rule changes in the future.

Suweidi’s office told Reuters that he was not immediately available to comment.

Copyright Reuters, 2013

Russia’s central bank keeps markets guessing on next rate move

MOSCOW: Russia’s central bank may change interest rates as early as next month, a senior central banker said on Wednesday, while keeping markets guessing over the direction of future rate moves.


Alexei Ulyukayev, the central bank’s First Deputy Chairman, explained why a central bank statement on Tuesday had dropped earlier language about current rates being “acceptable for the near future”.


“It’s a signal for market participants that we are leaving ourselves the possibility of taking any decision as early as the next meeting… to raise or lower rates depending on the situation,” Ulyukayev told reporters on the sidelines of the Gaidar Forum, an annual economic conference.


The Bank of Russia left monetary policy unchanged on Tuesday and sounded a relatively hawkish note on inflation, muddying the waters over the direction of its next interest rate move.


Speaking earlier at the conference, Ulyukayev said that an immediate easing in monetary policy was not appropriate. But he also said that inflation was firmly under control and set to fall to within the central bank’s target in the second quarter.


“Economic growth in Russia, which is at 3.5 percent, roughly corresponds to its potential,” Ulyukayev said.


“Therefore, monetary policy easing in the form of a cut in interest rates or introduction of additional instruments of quantitative easing would be counter-productive and would lead to the accumulation of new imbalances.”


Many economists have nevertheless argued that the central bank should cut interest rates in the coming months, as inflation has stabilised while economic growth is slowing.


Although Ulyukayev’s comments suggest that the central bank is in no rush to cut interest rates, they leave room to do so if economic growth were to slow further – thereby falling below its long-run potential – as many forecasters expect.


Analysts polled by Reuters at the end of last year forecast on average that growth in gross domestic product (GDP) would slow to 3.2 percent in 2013 from 3.6 percent in 2012, even if the central bank cuts interest rates as forecast.


Ulyukayev was also upbeat about the prospects for bringing down inflation – seen by most analysts as the key prerequisite for future cuts in interest rates.


He predicted that annual inflation – which reached 6.8 percent in early January – would fall to 5-6 percent from the second quarter, bringing it within the central bank’s target range.


“Inflation at 6.8 percent shouldn’t worry the central bank,” he said. “It is the result of a shock in food prices… (Price rises) don’t have a serious macroeconomic or monetary instance.”


Pressure to ease monetary policy this year may come from Russian President Vladimir Putin, who expressed concerns on Wednesday that economic growth is losing steam.


“The results for November (the most recent official data) cause a certain worry,” Putin said at a government meeting, adding that annual growth in gross domestic product is slowing according to government estimates.


Annual GDP growth declined from 4.4 percent in the first half of 2012 to just 1.9 percent in November, although the Economy Ministry expects December figures to show an improvement to 2.8 percent. 


ACCEPTABLE OUTFLOW


As well as playing down concerns over inflation, Ulyukayev also sounded relaxed about so-called capital flight, saying that net private capital outflows below $10 billion per quarter represented an “acceptable” level for Russia.


“This figure is acceptable given the state of institutions in Russia and the size of the positive current account balance,” Ulyukayev said, observing that net outflows have been below $10 billion for each of the last three quarters.


Large-scale capital outflows from Russia have been a source of concern over recent years, suggesting that a poor business climate is deterring badly-needed investment.


The net outflow of private sector capital reached $56.8 billion in 2012, according to a central bank estimate published last week, a decline on an $80.5 billion outflow seen in 2011 and below earlier forecasts.

Copyright Reuters, 2013
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Egypt central bank offers $75mn at 9th currency auction

egypt-central-bankCAIRO: Egypt’s central bank said on Sunday it was offering to sell $75 million to banks at its ninth foreign currency auction, with a maximum of $11 million per bank.


The auctions are part of a shift in currency policy announced in late December and designed to save the country’s foreign reserves, which had fallen to a critical level.


The bank accepted bids worth $74.8 million with a cut-off price for dollars of 6.5299 Egyptian pounds. The Egyptian pound has weakened by about 5 percent on the interbank market to 6.57 to the dollar over the last two weeks.

Copyright Reuters, 2013
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China faces no big pressure to ease aggressively: central bank

china-central-bank 400SANYA: China faces no big risk of an inflation rebound in 2013, nor any major pressure to ease monetary policy aggressively next year, the head of research at the central bank said on Monday.


Meanwhile, central bank chief Zhou Xiaochuan and one of his former deputies sounded a cautious note on the country’s long-term liberalisation of its currency and interest rates.


“I feel that there is no evident pressure for the central bank to take aggressive easing policy,” Jin Zhongxia, head of the financial research institute of the People’s Bank of China, told Reuters on the sidelines of a forum in Sanya on the southern island of Hainan.


“I think we will not see a big inflation rebound in 2013,” he said.


On Sunday, Chinese leaders promised to maintain a “prudent” monetary policy and pro-active fiscal policy in 2013, leaving room for manoeuvre in the face of global economic risks while deepening reforms to support long-term growth.


The central bank cut interest rates in June and July and has lowered bank reserve requirement ratios (RRR) three times since late 2011 to free an estimated 1.2 trillion yuan ($190 billion) for lending as part of a year-long programme of policy fine-tuning.


It has since held off on more aggressive easing, opting instead to pump short-term cash into money markets to ease credit strains, a move analysts say reflects Beijing’s concerns about a flare-up in property prices and consumer inflation.


Annual economic growth dipped to 7.4 percent in the third quarter, the weakest pace since the depths of the global financial crisis in early 2009, but growth has been picking up steadily since October thanks to a raft of pro-growth policies.


Annual inflation quickened to 2.1 percent in November from a 33-month low of 1.7 percent in October, which analysts said dimmed the chance for more monetary policy easing as the economy recovers steadily.


SOME CONTROLS STILL NEEDED


Central bank chief Zhou Xiaochuan told the Sanya forum on Monday that China is on course to gradually make the yuan fully convertible over time, but he warned that the authorities may have to resume capital controls if a financial crisis erupts.


“We are not saying we will have 100 percent convertibility or no supervision from the regulator but instead we will reserve the right to monitor and restrict capital flows in some sensitive areas,” Zhou said.


That included the fight against money laundering, tax evasion and short-term speculative money flows, he said.


“That is to say, we reserve the right to implement special measures to tackle problems under some special situations, such as in a financial crisis,” Zhou added.


The central bank wants to achieve “basic” yuan convertibility by 2015. It says China has already made the yuan virtually or partially convertible on capital account transactions, but analysts say it still controls key areas, such as portfolio investment and borrowings.


Meanwhile, Wu Xiaoling – a former vice central bank chief and now senior lawmaker – told the same forum on Monday that there was scope to further liberalise bank lending rates in 2013 by lowering the floor for borrowing costs.


Such a move, following on from an initial liberalisation in the summer, could stimulate borrowing and bolster the economy.


But Wu cautioned about moving too quickly on a further liberalisation of deposit rates.


“As for deposit rate, we should keep the ceiling control in place for a while. Of course we should allow a wider upfloating range for deposit rates, but we cannot do that very quickly, because we have to avoid excessive competition among financial institutions.”


The PBOC liberalised the interest rate environment with its June and July cuts to give commercial banks more room to set both lending and deposit rates competitively.


The new rules allow deposit rates to be set as high as 110 percent of the benchmark rate, while the rate on new loans can be as low as 70 percent of the official borrowing cost.


A rush to allow fully competitive, differentiated rates to attract depositors could lead to a price war for capital among China’s banks.


The rise of wealth management products in recent years, that pay higher rates of interest than regular deposits and allow banks to use the funds for lending, has created fierce competition in the sector and raised concerns among some analysts and ratings agencies about the risks they might create.


Many economists say the reduction in the officially guaranteed spread between lending and deposit rates hurts bank profitability.

Copyright Reuters, 2012
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Swedish central bank cuts rates as economy slows

swedish central STOCKHOLM: Sweden’s central bank cut interest rates by a quarter point on Tuesday to the lowest for more than two years to offset the impact of the euro zone’s troubles on a previously robust economy.


With one eye on rising household debts, however, the bank stopped short of signalling further rate cuts, contrary to some economists’ expectations of another easing early next year.


“The weak developments in the euro area are having a clear effect on the Swedish economy,” the bank said in a statement after cutting the repo rate to its lowest since October 2010.


It kept a forecast for growth this year of 0.9 percent but cut the 2013 outlook to 1.2 percent from 1.8 percent.


“The risks entailed in households’ high level of indebtedness remain, but given the weaker economic activity and lower inflation, the Executive Board of the Riksbank assesses that it is appropriate to cut the repo rate,” it added.


The cut to 1.0 percent was in line with forecasts in a Reuters poll of analysts, where opinion was divided as to whether a new rate cut to 0.75 percent would come early next year..


The bank said its repo rate was expected to remain at 1 percent for the coming year and its forecasts implied higher rates from late 2013.


The economy held up well in the first half of the year but falling demand from the euro zone, i ts m ain e xport market, rapidly reduced growth in the second half of 2012. Economists expect gross domestic product to fall in the fourth quarter.


Despite the slower economy, Sweden is still performing well compared to the euro zone, w hich t he Nordic r egion’s largest ec onomy o pted out of joining almost a decade ago.


Ratings agency Moody’s on Friday kept its AAA rating on Sweden’s debt, r eflecting a more successful balance of a strong welfare state with support for the private sector and growth.


The ESV official budget watchdog on Monday forecast that the country’s public sector deficit would be 0.6 percent of gross domestic product this year, falling to 0.3 percent in 2013.


In contrast, the European Commission has forecast an overall budget deficit for the euro zone of 3.3 percent of GDP this year and 2.6 percent of GDP in 2013.

Copyright Reuters, 2012
**

European Central Bank leaves rates on hold

Updated December 07, 2012 09:35:55

The European Central Bank has opted to leave its main interest rate on hold at 0.75 per cent for a fifth consecutive month.

Bank president Mario Draghi says the bank now predicts the euro economy will shrink by about 0.5 per cent this year, and again by 0.3 per cent next year but return to growth of between 0.2 and 2.2 per cent in 2014.

The bank has also downgraded inflation forecasts.

Mr Draghi says persistent uncertainty is hampering economic activity.

Topics: banking, industry, business-economics-and-finance, germany

First posted December 07, 2012 09:24:10

UAE central bank delays exposure, liquidity rules

anktABU DHABI: The central bank of the United Arab Emirates has postponed introducing restrictions on commercial banks’ exposure to state-linked debt and requirements for them to hold liquid assets, after complaints from the banks.


“The Central Bank board of directors reviewed banks’ feedback on the amendments to the large exposures regulation and decided to postpone implementation of the regulation until all items of the regulation are reviewed with banks,” the central bank said in a statement on Sunday.


As part of efforts to reduce risk for banks and prevent any repeat of Dubai’s 2009-2010 corporate debt crisis, the central bank announced in April this year that from Sept. 30, banks would have to restrict their lending to state-linked entities.


Any bank’s lending to the governments of the seven-member UAE federation and related entities would be capped at 100 percent of its capital base, with lending to a single borrower limited to 25 percent.


But banks complained they were not given enough time to meet the deadline and when it passed, many of the largest UAE lenders were believed to remain well over the limit. Some, such as National Bank of Abu Dhabi and Emirates NBD, held private discussions on the issue with the central bank.


Any rush to cut exposure to state debt in the UAE, where many development projects are spearheaded by state-linked firms, could have hurt economic growth in addition to damaging profitability in the banking system.


Meanwhile, the central bank also said on Sunday that after receiving feedback from banks, it had decided to postpone implementation of a new liquidity rule “until details of the requirements of the regulation are agreed”.


In July, the central bank announced banks in the UAE would have to hold high-quality liquid assets equal to 10 percent of their liabilities from Jan. 1, 2013. This aimed to prepare the sector to comply with Basel III banking standards that will be phased in around the world in the next few years.


The central bank said physical cash, reserve requirements, central bank instruments and UAE federal government bonds would qualify as such assets. But because the country’s financial markets are not highly developed, it was hard for some banks to meet the 10 percent requirement; the UAE has not even begun issuing federal government bonds.


The central bank’s statement on Sunday did not elaborate on when its regulations were now expected to be implemented, or how they might be revised.


Commercial bankers, who declined to be named because of the sensitivity of the issue, welcomed the decision and said they hoped the central bank would coordinate closely with them before introducing any new rules.


“The time limit given was too short and it was unrealistic to expect banks to reduce their exposures so fast,” an executive of an Abu Dhabi-based bank said of the loan exposure limit.


Some banks had begun to implement the liquidity rule but they had run into difficulties and the process threatened to hurt their operations, said another Abu Dhabi-based banker.


“The liquid assets that qualified are very restrictive only cash, bonds and CDs with central bank.


There should be a more interactive approach with banks before any such rules are implemented.”


Center>Copyright Reuters, 2012

Slovak central bank slashes 2012, 2013 growth outlook

jawed22BRATISLAVA: Eurozone member Slovakia’s central bank on Friday slashed its 2012 economic growth forecast to 2.4 percent from the previous 2.7 percent, and said the country was also set to do worse than expected next year.


“The forecast was influenced by lower foreign and a continuous weak domestic demand, worsening economic sentiment and a negative developement in the labour market,” central bank chief Jozef Makuch told journalists.


“We now expect the economy to grow by 2.4 percent this year,” added Makuch, who is also a member of the European Central Bank’s governing council.


“We now expect the economy to grow by 1.6 percent in 2013 and by 3.5 percent in 2014,” he added, cutting the previous 2013 estimate of 2.0 percent growth but maintaining the 2014 prediction.


“The 2014 growth will be fuelled by a stronger foreign and domestic demand and improving jobless rate,” he underlined.


The European Commission as well as the OECD expects Slovakia’s output to expand by 2.6 percent this year, making it the fastest-growing economy in the 17-member eurozone.


Slovakia’s export-driven economy is driven by electronics and car factories.


Slovakia has modern auto plants run by Germany’s Volkswagen, South Korea’s Kia and France’s PSA Peugeot Citroen and its economy is heavily dependent on demand in the rest of Europe, notably Germany.


The left-of-centre government led by Prime Minister Robert Fico — in power since April is struggling to cut Slovakia’s public finance deficit from this year’s estimated 4.6 percent of gross domestic product to below the eurozone’s three-percent ceiling by 2013.


It has pursued the spending cuts of its centre-right predecessor and opted to raise taxes.


An ex-communist country of 5.4 million people that joined the European Union in 2004 and the eurozone in 2009, Slovakia posted economic growth of 3.3 percent last year after 4.2 percent in 2010.

Copyright AFP (Agence France-Presse), 2010

Australia’s central bank cuts interest rates

Sydney: Australia’s central bank cut interest rates a quarter point to a record-matching low on Tuesday, stepping up efforts to safeguard the rich world’s most resilient economy from the risk of recession as a mining boom peaks.

The Reserve Bank of Australia (RBA) cut its main cash rate to 3.0 per cent following its monthly policy meeting, bringing the easing since May to 125 basis points and matching the trough hit during the darkest days of the global financial crisis.

“While the full effects of earlier measures are yet to be observed, the Board judged at today’s meeting that a further easing in the stance of monetary policy was appropriate now,” said the central bank’s governor, Glenn Stevens.

“Looking ahead, recent data confirm that the peak in resource investment is approaching. As it does, there will be more scope for some other areas of demand to strengthen.”

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Financial markets were almost fully priced for an easing given signs the seven-year old bonanza in mining investment is finally likely to crest next year, leaving a hole in growth that needs to be plugged by other sectors of the economy.

The move was so well discounted the local dollar actually firmed a quarter of a cent to $1.0445 on the news.

Yet, investors are still wagering official rates will have to go lower yet to truly stimulate demand among cautious consumers and a lacklustre housing market.

Interbank futures suggest the central bank rate could approach 2.5 per cent by the middle of next year, while some economists think a floor of 2 percent is not impossible.

“I think the RBA realises it needs to do more to boost the non-mining parts of the economy,” said Shane Oliver, chief economist at AMP Capital Investors in Sydney.

“What it doesn’t do is to offer much guidance as to the future, but my feeling is they still have to cut further. They will probably do 25 (bps cut) in February and then 25 in April.”

One reason for that is the stubborn strength of the Australian dollar.

In the global financial crisis, the currency tumbled by 30 US cents, giving a big boost to exports. This time foreign demand for Australia’s triple-A rated debt has helped it stay solidly above parity.

China has also played a part by accepting more moderate growth at home and thus restraining demand for Australia’s commodity exports, leading top miners such as Rio Tinto and BHP Billiton to announce a slowdown in future expansion plans and job cuts.

The Asian giant is Australia’s biggest trade market and the single largest buyer of iron ore.

It helped Australia avoid recession during the global crisis by unveiling a 4 trillion yuan ($635 billion) stimulus package that led to a wave of infrastructure development and demand for resources.

Australia’s mining investment in the year to June 2013 is expected to total A$109 billion, or nearly 8 per cent of GDP, way above the long-run average of 2 percent.

Even after Tuesday’s cut, Australian rates are still among the highest in the developed world.

With rates near zero in the United States, Japan and Britain, those countries have taken ever more exotic stimulus steps including buying massive amounts of government debt.

And, as yet, lower rates have had only a limited impact on consumers, with retail sales disappointingly flat in October and demand growth for credit the lowest in decades.

The housing market has also been less than stellar. The Statistics Bureau on Tuesday reported approvals to build new homes slid 7.6 per cent in October, so reversing much of September’s hefty 9.5 per cent increase.

The impact of lower export prices was clear in Australia’s trade deficit, which more than doubled in the third quarter. As a result, the current account deficit widened by a fifth to A$14.9 billion ($15.5 billion), according to figures from the Australian Bureau of Statistics.

Fortunately, export volumes managed to outpace imports and so add 0.1 percentage point to economic growth in the quarter.

However, that was more than offset by government penny-pinching as the ruling Labor Party struggles to return the budget to surplus in 2013, years before most other rich nations.

Data out Tuesday showed government spending fell by 2.0 per cent in the third quarter, largely due to a big drop in defence investment. That was a steeper fall than many analysts had expected and could take around half a percentage point from economic growth in the quarter.

It was no surprise then that Treasurer Wayne Swan warmly welcomed the RBA’s largesse.

“Today’s rate cut is the early Christmas present that hard-working Aussies deserve,” he told reporters. “It comes at a time where unemployment is low, and economic growth is in much better shape than many other developed economies.”

Figures for gross domestic product (GDP) are due on Wednesday and were expected to show moderate growth of around 0.6 percent in Australia’s A$1.4 trillion economy.

Such a result would see growth for the year slow to a still-respectable 3.2 per cent, from 3.7 per cent. But the balance of risks seems biased to the downside going into 2013.

Analysts estimate that fiscal tightening alone could shave between 0.75 and 1.5 percentage points off GDP growth in the year to end June 2013.

Dubai World Central expects freight increase in 2013

Dubai: Dubai World Central, the emirate’s new airport under-construction, expects the volume of freight it handles to accelerate further next year as the number of flights to the Jebel Ali hub increases, a top company official said on Tuesday.

“In 2011 we saw about 90,000 tonnes of cargo in total, and until September this year, the number was about 165,000 tonnes. By this year’s end we do expect the number to be in excess of 200,000 tonnes,” Khalifa Al Zafein, the executive chairman of Dubai World Central, told reporters on Tuesday. He expects growth to accelerate further in 2013 on the back of increased flights and more cargo companies operating from the DWC base.

The airport opened for cargo operations in 2010. There are currently five cargo flight operators at DWC, with plans to introduce a sixth once flights reach 20,000 a year, said Rashed Bu Qara’a, Dubai World Central’s chief operating officer.

Passenger operations at DWC, which is at the heart of Dubai’s ambitions to become a global aviation hub, are set to commence in 2013 but no launch date has been specified.

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“We are ready to go at any time. We have tested the terminals and it is now up to the government to decide when to start it,” said Al Zafein.

Uganda central bank cuts key lending rate 50 bps to 12pc

Tuesday, 04 December 2012 17:36 Posted by Shoaib-ur-Rehman Siddiqui

Central-Bank-of-UgandaKAMPALA: Uganda’s central bank cut its key lending rate by 50 basis points to 12 percent On Tuesday, saying economic growth was expected to remain sluggish this fiscal year.

The Bank of Uganda has now made seven consecutive monthly rate cuts in East Africa’s third-largest economy as it tries to spur a recovery in consumer spending and a return of the country to its growth potential.

“With real GDP growth forecast to remain below potential, the negative output gap is expected to persist through 2012/13,” central bank Governor Emmanuel Tumusiime-Mutebile told a news conference.

“Inflation pressures are currently subdued and are likely to remain so in the near term because of the negative output gap.”

The Ugandan shilling weakened slightly after the rate cut, trading at 2680/90 from 2675/85 just before the cut.

Tumusiime-Mutebile said the rate cut would boost real economic growth without jeopardising the medium-term inflation target of 5 percent.

Headline inflation in Uganda rose year-on-year for the first time in eight months in November, to 4.9 percent from 4.5 percent.

However, the governor warned that the economy could suffer if donors, who fund up to a quarter of the annual national budget, withdraw their aid in light of a corruption scandal involving officials from the Office of the Prime Minister.

“If all donors being reported to have cut their aid do cut their aid, we think that this will reduce the potential growth rate by about 0.7 percent,” he said.

Copyright Reuters, 2012

Turkish central bank sees year end inflation near 6pc

turkey-flag ISTANBUL: Turkey’s central bank expects year-end inflation to come in slightly above 6 percent, much lower than its official forecast of 7.4 percent, a central bank official said on Tuesday.


 


The bank has said it expects lower year-end inflation on the back of favourable unprocessed food prices and lower-than-expected November inflation data announced on Monday.


 

India central bank signs currency swap agreement with Bank of Japan

Tuesday, 04 December 2012 13:16 Posted by Asad Naeem

Indian-flag 400MUMBAI: The Reserve Bank of India signed a currency swap agreement with Bank of Japan to swap their local currencies against the US dollar for up to $15 billion, a statement said on Tuesday.

“The arrangement aims at addressing short-term liquidity difficulties and supplementing the existing international financial arrangements,” the RBI said.

The bilateral swap arrangement is for a period of three years. The two countries had earlier signed a similar pact for up to $3 billion from June 2008 to June 2011.

Copyright Reuters, 2012

Hungary central bank chief calls for caution at Dec rate meeting

BUDAPEST: Hungarian central bank policy makers should take a “deeper breath” at the December rate meeting after lowering official rates by a combined 100 basis points over the past four months, Governor Andras Simor said on Thursday.


“The December meeting is going to be even more important as we will be reviewing the new inflation report that is being prepared by the staff,” Simor told a briefing with foreign journalists.


“So we need to probably take a deeper breath before making decisions because there will be a lot of information on our table.”

Copyright Reuters, 2012

Brazil central bank calls currency swap auction, currency gains

SAO PAULO: Brazil’s central bank offered to sell $2 billion in currency swaps on Monday, strengthening the country’s currency, the real, from around the weakest levels in over 3-1/2 years.


The auction will take place between 9:40 a.m. (1140 GMT) and 9:50 a.m. and its results will be announced at 10:00 a.m., the central bank said in a statement. All swap contracts offered expire on Jan. 2.


Brazil’s currency, the real, gained shortly after the announcement and was trading 0.72 percent stronger at 2.1147 reais per US dollar. It slumped on Friday after weaker-than-expected economic growth data suggested the government would let the currency depreciate to prop up the economy.

Copyright Reuters, 2012

Eurozone central banks mull rolling over Greek bonds

Brussels: Eurozone central banks may decide to roll over their holdings of Greek debt to reduce by €5.6 billion (Dh26.6 billion) the amount governments will need to provide Athens by 2016, according to an document obtained by Reuters.

Such a move would cut the amount to €2 billion from €7.6 billion, the document, which emerged from this week’s Eurozone finance minister’s meeting, showed.

International lenders — Eurozone countries, the European Central Bank and the International Monetary Fund — agreed early on Tuesday on a debt reduction plan for Athens that would bring Greek debt to 110 percent of GDP in 2022.

This would be down from almost 190 per cent expected for next year.

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According to the document, Greece would need to get €1.8 billion in extra financing in 2012-2014 and another €5.8 billion between 2015 and 2016 — a total of €7.6 billion.

But it floated the idea that if the Eurozone’s 17 national central banks, which together form the Eurosystem, decide to replace the Greek bonds they hold with new Greek paper as the debt matures, it would save Greece the need to redeem €3.7 billion in 2012-2014 and €1.9 billion in 2015-2016.

It lists the item of “roll-over of ANFA holdings” — a term to describe central banks’ investment portfolios — in parenthesis, suggesting it has yet to be agreed or in any way formalised.

Furthermore, it notes that the amounts mentioned are tentative and subject to approval by national central banks.

There is no public data on the amounts of Greek debt held by individual Eurozone central banks.

The roll-over idea is separate from the issue of the European Central Bank returning profits to Athens from the Greek bond portfolio it has acquired under its Securities Market Programme (SMP).

That will reduce the financing needs of Greece by €4.1 billion euros in 2012-2014 and another €3 billion in 2015-2016.

This return of profits — along with cutting interest on Eurozone loans to Greece, a deferral of interest payments, maturities extension, and several other measures — allowed the Eurozone to cut the amount of new money it would have to lend to Greece to €7.6 billion from €32 billion.

A roll-over of the Greek bonds in investment portfolios of central banks would increase the overall Greek public debt by 0.1 per cent of GDP in 2020 and 2022.

But this would be offset by new debt relief measures pencilled in by international lenders for the coming years that would cut Greek debt by 2.7 per cent of GDP by 2020 and 5.1 per cent of GDP by 2022, the document said.

This new debt relief could happen once Greece reaches a primary surplus — a positive budget balance before servicing debt — and if Greek reforms are on track, Eurozone finance ministers decided on Tuesday.

Swedish central bank more likely to cut rates next than raise

Wednesday, 28 November 2012 14:01 Posted by Asad Naeem

swedish central STOCKHOLM: Sweden’s central bank is more likely to cut interest rates in the coming months than to raise them, central bank Deputy Governor Barbro Wickman-Parak said on Wednesday.

“There is a bigger possibility of a cut than a hike this winter,” Wickman-Parak said in a speech at a bank conference.

The Riksbank has cut its key repo rate twice this year, the last time in September, but left it at 1.25 percent in October. It is widely expected to cut again at its next meeting in December due to a slowdown in the economy.

Wickman-Parak also told the bankers she was worried about Swedish household debt levels but it was difficult to say what level was dangerous.

Copyright Reuters, 2012

Hungary central bank cuts rates by 25 bps to 6pc

Tuesday, 27 November 2012 20:10 Posted by Shoaib-ur-Rehman Siddiqui

hungary--BUDAPEST: Hungary’s central bank cut interest rates by another 25 basis points to 6 percent on Tuesday, its fourth rate reduction in a row, in line with market expectations.

Hungary’s base rate is now a full percentage point lower than in August, when the divided Monetary Council began an easing cycle to unshackle the shrinking economy, saddled with domestic austerity and a slowdown in exports.

Governor Andras Simor will hold a news conference about the decision at 1400 GMT.

Copyright Reuters, 2012

D-8 central banks chiefs to tackle challenges together

Agree to establ­ish trade, econom­ic links, frame joint fiscal, moneta­ry policy.  The next meeting of the governors of central banks of the D-8 countries is expected to take place in 2014 in Turkey.


ISLAMABAD: The governors of central banks of Developing-8 (D-8) countries on Wednesday showed their resolve to collaborate in the formulation of fiscal and monetary policies in the backdrop of an uncertain outlook for the global economy.


In a joint communiqué issued after the second meeting of the governors of the central banks, they agreed to make joint strategies to cope with persistent challenges of low growth and high unemployment. The D-8 countries also agreed to establish banking links, reduce dependency on traditional trade partners by shifting focus to member countries and enter into currency swap arrangements for promoting trade and smoothing capital flows.


The D-8 governors forum was established to increase understanding of each other’s economic and financial issues and enhancing cooperation among the member countries. The eight D-8 Summit is taking place in Islamabad. The summit meeting will take place at the Presidency and after that a joint declaration will be issued.


“The global economy continues to face a number of challenges. External, fiscal and financial imbalances persist, creating challenges on economic growth and employment”, according to the communiqué.


It added global growth is projected to drop in 2012 because of weak economic activity in the US and deteriorating sovereign and banking sector developments in Europe. As a result, the real gross domestic growth (GDP) growth in the emerging and developing economies is going to slow down further.


In their efforts to cope with challenges, the D-8 governors agreed to formulate monetary and financial policies to support sustainable growth strategy in D-8 countries in the backdrop of an uncertain outlook for the global economy.


The D-8 countries will also work to promote innovative financial inclusion policies, explore opportunities in Islamic finance, establish information exchange and promote peer learning amongst the D-8 central banks.


The communiqué said that since some of the member countries were facing structural challenges while others were subject to cyclical problems, the D-8 will develop policy tools to buffer the economy against the global slowdown.


The next meeting of the governors of central banks of the D-8 countries is expected to take place in 2014 in Turkey.

Banks will have to live with the new Central Bank on cheques

Dubai: Abdul Aziz Al Ghurair, who is also the Chairman of Emirates Bankers’ Association, said, the banks will have to follow the new Central Bank directives on bounced cheques offenses by the UAE nationals.

Cheques are used as a collateral for certain types of loans in the UAE. Cheque bouncing is a criminal offence and has become one of the main reasons for imprisonment of people following the financial crisis of 2008.

“Decriminalisation of bounced cheques came in a short notice and we have to live with that. You have to accept that,” Al Ghurair told reporters on the sidelines of the DIFC Forum.

Bounced cheques that used to be a strong enough criminal offence to put people behind bars, have recently been relaxed for the UAE nationals. Al Ghurair said, banks could still pursue them, but as a civil case only.

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The global financial crisis of 2008 forced many companies to close shutters due to cash flow problems and many of them ran into debts resulting in job losses and forcing many to leave the country.

The UAE Central Bank last year rolled out a set of rules aimed at limiting loans to individuals and capping banking fees in the country. The central bank has limited personal loans to 20 times the salary or the monthly income of a borrower with a repayment period set at 48 months.

Accordiing to the UAE Central Bank data, more than 1.5m cheques issued for payments totaling Dh55.3 billion ($15.05 billion) bounced last year.

Asian central banks to stop illegal remittances by overseas workers

Manila: Asian central banks have called for lower bank rates, better incentives to recipients of overseas remittances, and better regulatory system from regional central banks to encourage overseas workers to stop sending their money to relatives back home through illegal remittance agencies, a local paper said.

About 30 to 40 per cent of overseas Filipino workers (OFWs), for example, are using illegal remittance agencies other than banks and legitimate remittance centres to send money to their relatives in the Philippines.

“The illegal channels are much bigger than the legal channels for money transmission,” Dilshan Rodrigo, chair of the Asian Bankers Association (ABA) advocacy committee, told the Inquirer at the end of a two-day ABA meet in Manila.

Since illegal remittance centres are not registered, they escape regulation, and could expand black market for money transfers.

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In response, Asian central banks must slap tougher penalties on illegal centres or strengthen mechanism to make it difficult for them to operate, said Rodrigo, adding that Asian Central Banks must do more to encourage the growth of legitimate remittance channels.

At the same time, Asian banks across the region must provide incentives to sending-clients by reducing remittance facilitation, in order to get more clients and to corner the remittance market, said Rodrigo.

Moreover, Asian banks must also offer investment opportunities and more financial products to clients who receive remittances from abroad, said Rodrigo.

“If [overseas] funds come through banks, there should be more opportunities for (that) money to be used for productive purposes. Recipients of remittances should be encouraged to avail themselves of savings and investment products of banks or to engage in entrepreneurship,” argued Rodrigo.

The Philippine government has been developing programmes to help private families channel their overseas money for business activities.

Remittance of OFWs is expected to rise to more than $21 billion by end of 2012, five percent higher than the $20 billion sent to their relatives in the Philippines in 2011, the Philippine Central Bank said.

The amount of remittance could be higher since 30 to 40 per cent of OFWs still use illegal remittance centres, ABA said.

The Philippines is the fourth biggest recipient of remittances in the world after China, India, and Mexico. The money sent from abroad has kept Philippine economy afloat.

More than 10 million OFWs are based worldwide.

China Central bank guides yuan weaker as Chinese firms return for dollars

Shanghai: The yuan closed slightly weaker on Friday, with traders citing a re-emergence of Chinese corporate demand for dollars, as the central bank set a weaker official trading range for a second day running after the yuan’s record high earlier in the week.

The yuan closed at 6.2356 to the dollar, weaker than Thursday’s close of 6.2334, 0.17 per cent off the record high of 6.2252 struck on Wednesday.

The central bank set its midpoint at 6.2945 per dollar versus Thursday’s 6.2905. Under China’s managed float regime, the exchange rate can diverge 1 per cent either side of the midpoint fix, set by the central bank each day.

The yuan never hit its strong-side limit on Friday, the first time it has failed to do so in the last 14 trading days.

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“The central bank’s consecutive stronger fixes have buoyed demand for dollars, and even clients who before were steering well clear have warmed back up to buying the currency,” said a trader at a large state-owned bank in Shanghai.

“Given [the weaker midpoints] in the last two days, I can’t see the recent steep appreciation of the yuan continuing.”

Earlier in the week, trading had begun to dry up, as quotes concentrated on the strong side of the yuan’s daily trading band, without finding dollar buyers.

Traders were unsure what lay behind the revival in corporate dollar buying on Friday. Some said their re-emergence may be a sign that the yuan’s rally since late July may finally be waning. At its peak on Wednesday, the yuan had gained 2.7 per cent from late July.

Others noted the central bank was capable of quietly moving behind the scenes to encourage state-owned players, who dominate trade, to buy dollars, but the most overt signal to the market comes from the daily midpoint fixes.

“We’re looking to the central bank for where the rate will go next but in the short term things aren’t very clear,” said a trader at a joint-stock bank in Shanghai. “People trading on their own account don’t really want to get involved, we’re just waiting to see what happens next.”

Better-than-expected trade data in October suggested exporters would have dollars to sell, giving the yuan more fuel to firm, but while some traders see pressure on the yuan to appreciate remaining through December, almost all were agreed that the rally is likely to end by early 2013 as the market gradually absorbs excess dollars.

The Chinese currency is currently 0.9 per cent stronger than where it started the year against the dollar.

Data from the Bank for International Settlements show the yuan also strengthened in nominal trade-weighted terms in October, the first time it has done so since July.

Central bank split on QE impact

 The Bank said a case could be made for further easing One member of the Bank of England’s Monetary Policy Committee voted for more quantitative easing (QE) earlier this month, meeting notes have shown.


The minutes of the November meeting also showed that “views differed over the exact impact” of QE.


David Miles voted to inject a further £25bn into the UK economy, over and above the £375bn already committed under the asset purchase programme.


The eight other members voted not to inject more money.


However, all nine members of the committee voted in favour of keeping interest rates at a record low of 0.5%.


Quantitative easing is the scheme in which the central bank buys government bonds, hoping to stimulate the economy.


“A case could be made for a further easing in monetary conditions,” the minutes said, noting that output could be expanded without creating additional inflationary pressure.


“Different members placed different weights on those arguments.”


The Bank has previously hinted that more QE was “more likely than not to be needed in due course”.

Central bank chiefs of D8 countries deliberate key issues

 ”The D8 bloc has the potential to become a major economic force,” says Kazi Abdul Muktadir.


ISLAMABAD: Developing Eight (D8) countries have identified four key areas of cooperation in order to promote inclusive economic growth among member countries for the overall welfare and prosperity of their peoples.


“There are four key aspects of promoting inclusive growth, which include a sustainable growth strategy, innovative financial inclusion, Islamic financing and information exchange among the members,” State Bank of Pakistan’s Deputy Governor Kazi Abdul Muktadir said, while inaugurating an experts’ workshop here on Tuesday.


The workshop is part of the second meeting of the heads of central banks of D8 nations on ‘Financial and Monetary Cooperation for Promoting Inclusive Economic Growth’. The first meeting was held in Abuja, Nigeria last year. The meeting is being held on the sidelines of the D8 Summit 2012, aimed at improving member states’ position in the global economy, diversifying and create new opportunities in trade relations, enhance participation in decision-making at the international level and improve standards of living.


The SBP deputy governor said that the workshop is being attended by highly-qualified experts, so he expects they will provide recommendations and proposals on the basis of which an institutional mechanism could be developed for future cooperation. He said that the D8 bloc has the potential to become a major economic force, saying that close cooperation was needed between the central banks of the member countries to tap this potential.


Kazi


“Cooperation and coordination among D8 central banks is necessary to invigorate economies,” he said. He was of the view that the Islamic finance system was a way forward towards inclusive growth, as member countries have the advantage of having a majority Muslim population demanding Islamic finance. He also stressed the need for information exchanges among members to help strengthen future cooperation.


The experts, during the daylong workshop, discussed economic challenges and issues faced by D8 countries collectively and by each member country, exploring domestic impediments and constraints. They also deliberated upon external vulnerabilities, including the balance of payments and dependency on capital inflows, and exposure of D8 economies to the global economy. On innovative financial inclusion, they highlighted the importance of developing policies and regulations governing specific underserved sectors, including microfinance, small and medium enterprises, housing, infrastructure, rural and agricultural finance to enhance financial inclusion.


Specific recommendation for promoting Islamic finance were also formulated with a special focus on increasing the use of Shariah-compliant products, instruments for public sector development and infrastructure projects.


Published in The Express Tribune, November 21st, 2012.


View the original article here

India central bank will infuse more liquidity if needed: deputy

NEW DELHI: The Reserve Bank of India (RBI) will step in to provide more liquidity into the market if the need arises, deputy governor with the central bank Keshab Chandra Chakrabarty said on Wednesday.


He declined to say whether the RBI will resort to buying bonds through open market operations to inject liquidity.


Borrowings in the daily repo auction have risen above 1 trillion rupees for six consecutive sessions, nearly double the deficit level seen as acceptable by the RBI.

Copyright Reuters, 2012

Spain’s bad loan ratio hits record 10.7%: central bank

Madrid: Spanish banks’ bad loans surged to a new record level in September with more than one in ten classed as high risk, the central bank said on Monday.

The level of loans considered at high risk of not being repaid — mostly real estate credits — reached 10.7 per cent of total loans, the highest level since the records began in 1962, the bank said in a report.

The total value of these loans was €182.2 billion ($233 billion) in September, the bank said.

Spanish banks have been weighed down with rising bad loans and repossessed real estate since the collapse of a property bubble in 2008, which has caused defaults by builders and mortgage holders to soar.

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The level of Spanish banks’ bad loans, a major concern for financial markets as an indicator of the country’s financial health, has risen steadily over recent months.

In August the ratio had reached 10.52 per cent, according to revised figures in Monday’s report.

A surge in unemployment in Spain, where one in four workers is now jobless, has driven a wave of evictions of defaulting mortgage-holders.

The conservative government last week announced a two-year halt to evictions of the most desperate homeowners following an outcry over suicides linked to evictions.

Eurozone authorities agreed in June to extend a rescue loan of up to 100 billion euros to aid ailing Spanish banks.

An audit by US consultancy Oliver Wyman concluded that Spanish banks overall needed to raise up to €59.3 billion of extra capital, or €53.7 billion after adjusting for the effect of certain mergers and fiscal procedures.

But the government has said it believes it will need to ask for a lower amount, about €40 billion, from the bailout fund, since some of the banks could raise capital themselves.

In August, Spain approved the creation of a so-called “bad bank” to buy troubled property assets and bad loans from lenders in a bid to clean up the financial sector and restore investor confidence in the economy.

Central Qld mines to trial water release

By Melissa Maddison and Paul RobinsonPosted November 09, 2012 09:29:25

The State Government says a planned ‘pilot release’ of water from four central Queensland mines will help better manage waterways into the future.

Four BMA mines have applied to release water from their sites, and approval for that is expected later today.

The Opposition has criticised the pending approval, saying there was no consultation on the plan and it will mean dirty water can be released at any time.

However Environment Minister Andrew Powell says that is not the case.

“The releases can only occur when certain conditions are met and the key condition is the flow rate past the discharge point of the mine,” he said.

“If doesn’t rain, they cannot discharge.”

Deputy Premier Jeff Seeney says the four mines have applied to release water into the Fitzroy River catchment

Mr Seeney says if approved, it will be the first such release under new guidelines.

“It’s important to understand that the releases we are approving is the first step in developing a system that will properly manage the river in the long-term,” he said.

“It’s about having those releases in a very controlled environment, very closely monitored so that we can get a better [idea of the] effects of the system and manage … the water quality in the river in the longer term.”

Topics: mining-industry, environmental-impact, water-pollution, water-management, environmental-health, mining-rural, public-sector, moranbah-4744, mackay-4740, rockhampton-4700

China’s central bank breaks yuan’s record run

Shanghai: China’s central bank forced the yuan to weaken from record highs against the dollar on Thursday, by setting a lower official daily trading range when the market had been signalling the yuan could have risen further.

There was also a suspicion of intervention to take the yuan down a notch as state institutions bought dollars towards the close, traders said.

The spot yuan ended the day at 6.2334 to the dollar, easing from Wednesday’s record close of 6.2252.

The People’s Bank of China (PBOC) set the daily midpoint at 6.2905 versus Wednesday’s 6.2881, the first time it has weakened the midpoint in eight days.

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This midpoint setting put Wednesday’s record out of reach.

Under China’s managed float regime, the exchange rate can diverge 1 per cent either side of the midpoint fix, set by the central bank each day.

The spot yuan has changed hands at the strongest rate allowed by the midpoint fixing every day in the previous seven trading days, as the market strained at the central bank’s leash.

The exchange rate closed the maximum 1 per cent away from the midpoint on Wednesday, so by lowering the midpoint fix the central bank put the yuan’s record close out of reach.

And if it had not been for the late dollar selling the yuan had appeared set to once again finish at the top side of its daily range.

Traders said the yuan’s strength has been driven primarily by corporates unwinding long-dollar positions accumulated in the first half of the year, aggravated further by unexpectedly strong October exports which pumped more dollars into the system.

But economists expect the rally to end by early 2013 as the PBOC moves to mop up excess dollars and a seasonally driven surge in exports subsides.

Many dealers have complained that trading volumes have been badly hit by the lack of two-way movement in the exchange rate, combined with uncertainty over how the central bank would act once the Communist Party Congress winds down following the unveiling of a new leadership on Thursday.

A trader at a joint-stock bank in Shanghai said that dollar buying was creeping back from a few customers, but he was unsure if it was genuine demand or the central bank had prodded them into buying.

“It could be that they need dollars, or it could be a decree from above,” he said.

Traders also pointed out that rate surges late in the day had become a repeat feature in recent weeks. Some suspected the central bank may be intervening to rein in yuan appreciation.

Despite the yuan’s swift rise in recent months, forward yuan is still trading at a discount both on and offshore.

While some analysts interpret this as a sign that the market expects the yuan to give back recent gains, others say forward prices are increasingly determined by the interest rate differential between yuan and dollars as China gradually loosens controls on cross-border capital flows.

China’s central bank drags yuan off record high

Thursday, 15 November 2012 12:58 Posted by Asad Naeem

SHANGHAI: China’s central bank forced the yuan to weaken on Thursday, pulling it off a record high struck the previous day by setting a weaker official midpoint for the daily trading range, defying market signals for an even stronger yuan.


The spot yuan opened at 6.2276, its strongest permitted intra-day level, and stayed there through to early afternoon, unable to recapture Wednesday’s record-strong close of 6.2252.


The People’s Bank of China (PBOC) set the daily midpoint at 6.2905 versus Wednesday’s 6.2881, the first time it has weakened the midpoint in eight days.


Under China’s managed float regime, the exchange rate can diverge 1 percent either side of the midpoint fix, set by the central bank each day.


The spot yuan has set new records every day in the previous three trading days by changing hands at the strongest rate allowed by the midpoint fixing, as the market strained at the central bank’s leash.


Traders said the yuan’s strength has been driven primarily by corporates unwinding long-dollar positions accumulated in the first half of the year, aggravated further by unexpectedly strong October exports which pumped more dollars into the system.


But economists expect the rally to end by early 2013 as PBOC moves to mop up excess dollars and a seasonally driven surge in exports subsides.


Many dealers have complained that trading volumes have been badly hit by the lack of two-way movement in the exchange rate, combined with uncertainty over how the PBOC would act once the Communist Party Congress winds down following the unveiling of a new leadeship on Thursday.


A trader at a joint-stock bank in Shanghai said that dollar buying was creeping back from a few customers, but he was unsure if it was genuine demand or the central bank had prodded them into buying.


“It could be that they need dollars, or it could be a decree from above,” he said.


Despite the yuan’s swift rise in recent months, forward yuan is still trading at a discount both on and offshore .


While some analysts interpret this as a sign that the market expects the yuan to give back recent gains, others say forward prices are increasingly determined by the interest rate differential between yuan and dollars as China gradually loosens controls on cross-border capital flows.

Copyright Reuters, 2012

UAE Central Bank organises seminar

Abu Dhabi: The- Central Bank of the UAE held a seminar on Thursday regarding ‘Basis for Developing the Debt Market in the UAE’. .

Inaugurating the seminar, Sultan Bin Nasser Al Suwaidi, Governor of the Central Bank, spoke on the importance of having an active bond market to encounter financial crises and alleviate the pressures on banks’ liquidity. Tthe creation of a high degree of liquidity in the economy would assist in addressing the negative impact in a crisis situation.

The Governor mentioned that the application of Basel 2 and Basel 3 will require a high liquidity ratio at banks, which will inevitably lead to banks avoiding large corporate loans in the coming years> Bbanks will switch to bonds with high and medium quality. But in the absence of an active local bond and sukuk market, banks will be forced to buy bonds in the international markets, and “this situation, if developed, will put us in a high risk during crises.”

Elias Kazarian, from the Monetary and Capital Markets Department of the International Monetary Fund (IMF), gave a presentation on the ‘Sound and Efficient Infrastructure for Debt Market Development’. These prerequisites are sound fiscal and monetary policies, effective legal and regulatory structure, sound and effective clearing, settlement and custody arrangements, smooth and secure link to the payment system and close cooperation between the Ministry of Finance, Central Bank and Emirates Securities and Commodities Authority.

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The seminar discussed some recommendations for the development of the bond market in the UAE and enhancing financial stability. The important recommendations were that there is need to expedite the issuance of public debt law that will pave way for the issuances of government bonds and building yield curve, to be used as a reference for nominal risk-free interest rates. The need for an alternative to bank financing was recommended, and the existence of long-term investment funds necessary for completing the infrastructure for the market, as well as the formation of a joint committee between the Central Bank and the Securities and Commodities Authority for approving the issuance, and thereafter, rate bonds and determining the size of the issuance, to promote financial stability in the UAE and reduce dependence on rating companies, as recommended by the Financial Stability Board in Paris.

Japan to spend $700 million in Central Asia


TOKYO: Japan pledged on Saturday to launch projects worth $700 million in Central Asia to help the resource-rich region promote trade, energy-saving and regional cooperation in stabilising nearby Afghanistan.


The commitment followed a meeting in Tokyo between foreign ministers from Japan and five Central Asian nations, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

UAE Central Bank issues commemorative coins for World Energy Forum

Dubai: The Cena commemorative gold and silver coins on the occasion of the 2012 World Energy forum in Dubai.

The face of the two coins depict the name of the state in Arabic and English along with the portraits of His Highness Shaikh Khalifa Bin Zayed Al Nahyan, the President, “may Allah protect him” and His Highnesshaikh Mohammad Bin Rashid Al Maktoom, Vice president, Prime Minister and Ruler of Dubai, “ may Allah protect him”, and the denominational value of the silver coin.

While the back of both coins depict the logo of the occasion circumscribed by the title “World Energy Forum 2012-Dubai” in Arabic and English scripts.

Following are the general features of the commemorative coins:

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Australia central bank to require more data on RMBS for repos

Posted by Shoaib-ur-Rehman Siddiqui

SYDNEY: Australia’s central bank will require issuers of residential mortgage backed securities (RMBS) to provide more details on the debt and to make it public, if they want to use the debt as collateral when borrowing from the bank.


The Reserve Bank of Australia (RBA) on Monday said the proposed changes would first cover RMBS, including those securitised within banks, and later cover other asset backed securities such as debt backed by auto loans or credit card payments.


“Broadly speaking, the new information requirements cover both transaction-related data as well as information on the underlying assets, such as anonymised loan-level data,” said RBA Assistant Governor Guy Debelle in a speech announcing the changes.


“They will help the Bank to more precisely value the securities held on its balance sheet in terms of both price and risk,” said Debelle, who heads the central bank’s financial markets division.


Details of the information that will be required at least every quarter on both existing and new RMBS issuance will be set out in reporting templates on the RBA website early next year after industry consultation.


The RBA will then collect the relevant data from the banks. Debelle did not provide a deadline for the information to be provided.


The data would help reduce the RBA’s reliance on credit rating agencies in assessing the securities, said Debelle.


“These data will also be of benefit to the broader market by providing more transparency to Australian RMBS,” he added.


The information would have to be made available to the public, free of charge, and the issuer would be required to ensure that the data were accurate.


Currently there are no regulatory standards for RMBS reporting and the data can be hard to get.


 If the information was not made available the security would not be eligible as collateral for repurchase agreements in the RBA’s daily money market operations, said Debelle.


As at June this year the RBA held only A$800 million ($824 million) of RMBS under repurchase agreements, out of a total collateral pool of A$24.4 billion.


However, that is likely to grow from 2015 when a new liquidity regime for banks is due to start globally under the Basel III rules.


Australian banks also used RMBS much more extensively during the global financial crisis as collateral to borrow from the RBA. In mid-2009, total RMBS held by the central bank under repurchase agreements amounted to A$26.1 billion.


Debelle said the Australian market for RMBS was showing signs of a pick-up, having been tarnished by association during the global financial crisis.


Around A$10 billion of the debt had been issued so far in 2012, with recent deals drawing strong demand and spreads narrowing steadily.


The collateral underlying the debt was also of high quality, with arrears rates on Australian mortgages remaining low, he said.

Copyright Reuters, 2012

Turkish central bank injects 3.5bn lira in repo


Related news: Irish central bank berates lenders on arrears strategy – 16.10.12 Kenya central bank seeks to mop up $153mn in repos – 16.10.12 China central bank to drain 58bn yuan via 28-day repos – 16.10.12 China central bank focused on inflation before growth – 14.10.12 Peru posts trade deficit of $52mn in August: central bank – 13.10.12More from this category: Credit Agricole takes 2bn euro hit from Emporiki sale – 17.10.12 RBS to withdraw from UK asset protection scheme – 17.10.12 ECB official backs German minister on budget controls – 17.10.12 StanChart head of leveraged finance syndicate Kay resigns – 17.10.12 Jefferies to open Singapore operations – 17.10.12More from author: Turkish bond yields fall, Turk Telekom Q3 results eyed – 17.10.12 Euro hits 1-month high, uncertainty may check gains – 17.10.12 Kenyan shilling steady, cushioned by aid agency dollar sales – 17.10.12 UK gilts slide ahead of BoE minutes – 17.10.12 Hong Kong shares end 0.99pc higher – 17.10.12 


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India central bank to intervene in FX market if there is ‘extreme’ volatility

Tuesday, 16 October 2012 12:53 Posted by Imaduddin

MUMBAI: India’s central bank will intervene in the foreign exchange market if there is “extreme” volatility in the exchange rate, Deputy Governor H. R. Khan said.


Khan was responding to an audience question at a banking conference on Tuesday.


The Indian rupee was trading stronger at 52.83 to the dollar, snapping a two-day fall.

Copyright Reuters, 2012

Kenya central bank seeks to mop up $153mn in repos

NAIROBI: Kenya’s central bank sought to mop up 13 billion shillings ($152.67 million)from the market on Tuesday, using repurchase agreements (repos), it said.


 


The bank has frequently deployed repo this year in order to prop up the shilling currency, which fell to a record low against the dollar last year.


Copyright Reuters, 2012

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Related news: China central bank to drain 58bn yuan via 28-day repos – 16.10.12 China central bank focused on inflation before growth – 14.10.12 Peru posts trade deficit of $52mn in August: central bank – 13.10.12 Indonesia central bank says to maintain rupiah at 9,500-9,600 per USD – 12.10.12 Turkish central bank says minimum one week funding to be 6bn lira – 12.10.12More from this category: India central bank to intervene in FX market if there is ‘extreme’ volatility – 16.10.12 RBS set to depart toxic asset scheme – 16.10.12 HSBC downgrades India’s Reliance Industries to ‘underweight’ – 16.10.12 China central bank to drain 58bn yuan via 28-day repos – 16.10.12 Bank of Canada-Will take “whatever action is appropriate” – 16.10.12More from author: High food prices top UN agenda on World Food Day – 16.10.12 Administrative measures: MCCs tasked to raise Rs2.421bn in Q2 – 16.10.12 Nato supplies caused Rs100bn damage to roads, NA informed – 16.10.12 Rabi season 2012-13: Urea’s demand is around 3mn tons, NA told – 16.10.12 Bunds dip, Spain and Greece focus of market talk – 16.10.12 


 

Central Qld coal mine closes after 33 years

Posted October 10, 2012 09:42:38

After more than three decades in operation, workers will today down tools at the latest Bowen Basin mine to close in central Queensland.

Production ends today at BHP Billiton-Mitsubishi Alliance’s (BMA) Gregory open-cut coal mine near Emerald, west of Rockhampton.

It is the third Bowen Basin mine to close within the year.

BMA closed its Norwich Park mine in May.

After 33 years in operation, BMA says the Gregory mine is no longer profitable.

It employed 55 workers and the company says it has redeployed all staff seeking retention but there is no such guarantees for about 240 contractors.

Central Highland Mayor Peter Maguire says it is of historic significance.

“It was one of the first coal mines in this region,” he said.

“It’s been part of our region since the 1970s.”

Construction, Forestry, Mining and Energy Union spokesman Steve Smyth says it is a sad day for workers.

“A lot of people would have spent most of their working life there,” he said.

However, he says he welcomes the redeployment offers.

“Especially at a time like this when things appear to be slowing down,” he said.

Emerald Chamber of Commerce spokesman Victor Cominos says it will hurt local business.

“People in Emerald having to go to other mines – that doesn’t do us any good,” he said.

He says spending will leave the region.

“Naturally we want the dollars spent in Emerald,” he said.

Topics: company-news, mining-industry, mining-rural, community-development, regional, regional-development, emerald-4720, rockhampton-4700, mackay-4740

China’s central bank says inflation is priority

Tokyo: China’s deputy chief central banker said Sunday his top priority is to control inflation, despite calls by developed economies to ramp up consumer demand and domestic pressure to chase growth.

“The first thing… is [to] control inflation is our number-one job. As a central banker, we have to control inflation,” Yi Gang, deputy governor of the People’s Bank of China told delegates to the annual meetings of the International Monetary Fund and the World Bank in Tokyo.

Yi stepped in to deliver the speech when his boss, bank governor Zhou Xiaochuan pulled out. He and Finance Minister Xie Xuren stayed away as part of what observers said was a protest over a territorial row with Japan.

“Leaders of local governments are eager to develop the economy in their regions. So everybody is enthusiastic about development and they want investment, they want to have FDI (foreign direct investment).

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“Desire for higher growth is all over the country,” he said.

“As a central banker, you have to constantly remind the whole country, the central government as well as local governments… [of] the danger of inflation.”

Yi argued that the value of the yuan was “close to the equilibrium rate” set by the market, with Beijing authorities refraining from direct intervention in recent quarters.

Critics argue China keeps its currency artificially low to give its exports a competitive edge.

Yi said China has to reform its ways “gradually” as it opens its economy to market-oriented principals.

When asked the scope of the next round of stimulus, Yi only said: “large enough to stabilise growth, but not too large to cause further negative impact, problems.”

Yi added that China was not promoting internationalisation of the yuan, also known as renminbi, but has liberalised its use for the market.

“I think the central bank’s, or my attitude, is that internationalisation of renminbi is entirely market-driven phenomenon,” he said.

“In the past, China restricted using renminbi. That’s not fair. What the central bank did was to remove barriers for using renminbi.”

“If our trade partners and investment partners like using renminbi, why not?”

China central bank focused on inflation before growth

Posted by Shoaib-ur-Rehman Siddiqui

china-flagTOKYO: China’s deputy chief central banker said Sunday his top priority is to control inflation, despite calls by developed economies to ramp up consumer demand and domestic pressure to chase growth.

“The first thing… is (to) control inflation is our number-one job. As a central banker, we have to control inflation,” Yi Gang, deputy governor of the People’s Bank of China told delegates to the annual meetings of the International Monetary Fund and the World Bank in Tokyo.

Yi stepped in to deliver the speech when his boss, bank governor Zhou Xiaochuan pulled out.

He and Finance Minister Xie Xuren stayed away as part of what observers said was a protest over a territorial row with Japan.

“Leaders of local governments are eager to develop the economy in their regions. So everybody is enthusiastic about development and they want investment, they want to have FDI (foreign direct investment).

“Desire for higher growth is all over the country,” he said.

“As a central banker, you have to constantly remind the whole country, the central government as well as local governments… (of) the danger of inflation.”

Yi argued that the value of the yuan was “close to the equilibrium rate” set by the market, with Beijing authorities refraining from direct intervention in recent quarters.

Critics argue China keeps its currency artificially low to give its exports a competitive edge.

Yi said China has to reform its ways “gradually” as it opens its economy to market-oriented principals.

When asked the scope of the next round of stimulus, Yi only said: “large enough to stabilise growth, but not too large to cause further negative impact, problems.”

Yi added that China was not promoting internationalisation of the yuan, also known as renminbi, but has liberalised its use for the market.

“I think the central bank’s, or my attitude, is that internationalisation of renminbi is entirely market-driven phenomenon,” he said.

“In the past, China restricted using renminbi. That’s not fair. What the central bank did was to remove barriers for using renminbi.”

“If our trade partners and investment partners like using renminbi, why not?”

Copyright AFP (Agence France-Presse), 2012

Turkish central bank says minimum one week funding to be 6bn lira

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turkey-central-bankISTANBUL: Turkey’s Central Bank said that from Friday until Oct. 25 it would provide at least 6 billion lira ($3.3 billion) one-week funding per day, unchanged from the previous period.


 


The central bank regularly announces the total funding it plans to provide in order to ease banks’ liquidity management and help them anticipate their funding costs.


 


Copyright Reuters, 2012

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Indonesia central bank says to maintain rupiah at 9,500-9,600 per USD

Posted by Shoaib-ur-Rehman Siddiqui

indonesia-central-bankJAKARTA: Indonesia’s central bank will maintain the rupiah at 9,500-9,600 per US dollar until the end of the year due to an economic slowdown in Southeast Asia’s biggest economy, Governor Darmin Nasution told reporters on Friday.

Bank Indonesia “sees (the weakening of the rupiah) and is trying to maintain and promote it so that it is at its fundamental … It would be around that level (9,500-9,600 per dollar),” Nasution said.

“Not only exports and imports but the economy itself is weakening, so we will guard it at the range,” he said.

On Thursday, Bank Indonesia kept its benchmark rate steady at 5.75 percent for an eighth consecutive month.

The rupiah has weakened more than 5 percent against the dollar so far this year and is the worst performer in the region.

Copyright Reuters, 2012

Brazilian central bank cuts rate to new historic low


BRASILIA: Brazil’s central bank on Wednesday slashed its interest rate for the 10th time since August last year, to a record low of 7.25 percent, in a bid to stimulate the sluggish economy.


The bank’s monetary policy committee Copom, which announced the quarter-point reduction after the market closed, said the decision was made given inflationary risks, the domestic economy and global economic uncertainty.


Late last month, the central bank lowered its forecast for Brazil’s economic growth in 2012 from 2.5 percent to a measly 1.6 percent, but is counting on that number to pick up next year.


The government, which has launched a series of stimulus measures this year, is banking on two percent GDP growth this year — down from an earlier forecast of three percent — while market analysts are forecasting a 1.5 percent rise.

Kenya’s central bank seeks to mop up $18mn via repos

Thursday, 11 October 2012 14:21 Posted by Imaduddin

kenya-central-bankNAIROBI: Kenya’s central bank sought on Thursday to mop up 1.5 billion shillings ($17.6 million) in excess liquidity via repurchase agreements (repos).

The bank has persistently mopped up liquidity throughout much this year to support the shilling, which is 0.1 percent stronger than the dollar in the year-to-date.

On Wednesday, the central bank offered to mop up 6.5 billion shillings and received bids worth 13.6 billion, all of which were accepted.

Copyright Reuters, 2012

Indonesia central bank holds rate at 5.75pc

Thursday, 11 October 2012 11:58 Posted by Parvez Jabri

Indonesian-rupiah 400 copyJAKARTA: Indonesia’s central bank held its benchmark rate on Thursday at a record low 5.75 percent for an eighth consecutive month, as forecast, as the country maintained strong growth despite a global economic slowdown.

All 19 economists polled by Reuters forecast the rate would be kept at 5.75 percent, and 13 of them said Bank Indonesia (BI) the bank would hold rates for the rest of the year.

Some economists expect the bank to tighten monetary policy by year-end by lifting its deposit facility rate by 25 to 50 basis points from the current 4 percent level. This could aid the rupiah, which has weakened about 5.5 percent this year against the dollar.

A higher deposit facility rate, as well as other possible measures in BI’s toolkit, would be aimed at trying to stabilise the currency and narrow the current account deficit.

Governor Darmin Nasution said last month the central bank sees 6.4 percent economic growth for this year, compared with 6.5 percent in 2011.

Copyright Reuters, 2012

Australia’s top central banker Glenn Stevens has not been approached by British Treasury officials

Sydeny/London: Australia’s top central banker Glenn Stevens has not been approached by British Treasury officials about applying for the Bank of England’s (BOE) governor role, a source with direct knowledge of the situation said on Monday.

London’s Sunday Times newspaper reported Stevens was among the contenders to become the next head of the Bank of England, citing unidentified sources.

“Nobody had approached” Stevens about the role, said the source, who declined to be identified because the matter was private.

Britain is seeking “a person of undisputed integrity and standing” to take over after governor Mervyn King steps down next year, according to the BoE’s job advertisement.

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Stevens, 54, has been governor of the Reserve Bank of Australia since September 2006 and is the country’s highest paid public servant, with an annual salary of over A$1 million ($1 million), more than double King’s earnings.

The Reserve Bank of Australia (RBA) and Britain’s Treasury declined to comment.

An economist who styles himself the “most boring man in Sydney”, Stevens is regarded as a pragmatist, shifting last year from warning of higher interest rates to cutting them twice in succession within months.

Under his leadership, the RBA was one of the first central banks to start slashing rates during the global financial crisis in 2008, even though domestic inflation was running above 4 percent. His term ends in September 2013.

The UK Treasury has declined to confirm the names of applicants for the post, which currently carries an annual salary of £308,000 pounds ($499,000).

Favourites with bookmakers include BoE Deputy Governor Paul Tucker and Financial Services Authority Chairman Adair Turner.

Contender Gus O’Donnell, the former top British civil servant, has decided not to apply, according to the Financial Times.

Senior figures from the commercial banking industry include Jim O’Neill, the chairman of Goldman Sachs’s asset management division.

A decision is due by the end of the year.

NBAD gets extension to meet central bank norms

National Bank of Abu Dhabi secured a six-month extension to comply with the central bank’s loan limit rules.

The central bank extended the deadline for the Abu Dhabi- based lender until March 2013, chief executive officer Michael Tomalin told Dow Jones yesterday in Kuala Lumpur, according to a bank spokesman, who declined to be identified because of company policy. The new loan rules won’t affect the bank’s growth in the future, Tomalin said.

Banks in the UAE can lend no more than 100 percent of their capital to local governments and government-related entities as of September 30, 2012, the central bank said April on 4. There was no limit under previous rules. The central bank’s assistant governor Saif Al Shamsi said on October 1 it won’t extend its deadline for banks to comply with the new rules.

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Saudi Arabia’s Qassim Cement Company, or QCC, on Tuesday said its net profit fell 3.9 per cent to 110.5 million Saudi riyals (Dh107.1 million, $29.47 million) in the third quarter of 2012 from nearly 115 million riyals a year earlier due to higher cost of sales. Net profit for the first nine months, however, rose 2.7 per cent to 417.9 million riyals from 406.8 million riyals in the same period of 2011 thanks to higher sales value, the cement maker said in a statement posted on the Saudi bourse website. Nine-month earnings per share grew to 4.64 riyals from 4.52 riyals a year earlier. Operating profit totalled 428.8 million riyals during the first nine months, up 3.1 per cent from 415.7 million riyals in the same period of last year, according to the statement.

Beltone Financial has maintained its overweight allocation to Saudi Arabia in a fourth-quarter strategy update note, diversifying its exposure to all sectors. The consultancy firm said it’s shifting the allocation of funds from consumer goods, building materials, and banks only to add more sectors including telecommunications and energy, based on fundamental upside. it noted that the Saudi Arabian market provides the best exposure to most of the key themes in the region, including hydrocarbon concentration, infrastructure spending, and attractive demographics. “We maintain our overweight recommendation on Saudi and an allocation of 39.9 per cent within our top picks portfolio.” Beltone reckons, at current market valuations, banks and building material companies offer the best exposure to the market’s key investment themes. Reduces its exposure to consumer goods manufacturers because of current market values.

Saudi Arabia’s Alujain Corp on Tuesday said its unit National Petrochemical Industrial Co., or NatPet, has signed an agreement to secure a $20 million (Dh73.5 million) revolving credit facility from the Saudi Fund for Development. The three-year facility is part of the Saudi Export Programme and aims to support Natpet’s exports, Alujain said in a statement posted on the Saudi bourse website. Natpet has provided a corporate guarantee against the facility, according to the statement. Alujain, which invests in petrochemicals and industrial projects, holds a 57.4 per cent stake in NatPet that manufactures propylene and polypropylene, according to Zawya.com data.

Etihad Atheeb Telecommunication

Saudi Arabia’s Etihad Atheeb Telecommunication Co. said on Tuesday that its board has appointed Emad Ma’ali as new chief executive. Ma’ali will take charge of his new job Saturday from acting CEO Abdul Rahman Bin Abdul Aziz Mitrib who is also a board member, the fixed-line operator said in a statement posted on the Saudi bourse website. The company announced in August the resignation of its former CEO Zaid bin Abdullah Shabanat.

Kuwait Co. for Process Plant Construction and Contracting or KCPC, said on Monday it has been awarded a 34.4 million Kuwaiti dinars (Dh430 million, $122.4 million) deal for a local infrastructure project. The 913-day project involves the construction and maintenance of roads, bridges, rainwater and sewage drains in addition to providing other services, KCPC said in a statement posted on the Kuwait bourse website. The project was awarded by the Kuwaiti ministry of public works, according to the website of the country’s Central Tenders Committee. KCPC’s shares closed 1.7 per cent higher at 0.3 dinars in an overall lower market.

Australia’s top central banker Glenn Stevens has not been approached by British Treasury officials

Sydeny/London: Australia’s top central banker Glenn Stevens has not been approached by British Treasury officials about applying for the Bank of England’s (BOE) governor role, a source with direct knowledge of the situation said on Monday.


London’s Sunday Times newspaper reported Stevens was among the contenders to become the next head of the Bank of England, citing unidentified sources.


“Nobody had approached” Stevens about the role, said the source, who declined to be identified because the matter was private.


Britain is seeking “a person of undisputed integrity and standing” to take over after governor Mervyn King steps down next year, according to the BoE’s job advertisement.


Article continues below


Stevens, 54, has been governor of the Reserve Bank of Australia since September 2006 and is the country’s highest paid public servant, with an annual salary of over A$1 million ($1 million), more than double King’s earnings.


The Reserve Bank of Australia (RBA) and Britain’s Treasury declined to comment.


An economist who styles himself the “most boring man in Sydney”, Stevens is regarded as a pragmatist, shifting last year from warning of higher interest rates to cutting them twice in succession within months.


Under his leadership, the RBA was one of the first central banks to start slashing rates during the global financial crisis in 2008, even though domestic inflation was running above 4 percent. His term ends in September 2013.


The UK Treasury has declined to confirm the names of applicants for the post, which currently carries an annual salary of £308,000 pounds ($499,000).


Favourites with bookmakers include BoE Deputy Governor Paul Tucker and Financial Services Authority Chairman Adair Turner.


Contender Gus O’Donnell, the former top British civil servant, has decided not to apply, according to the Financial Times.


Senior figures from the commercial banking industry include Jim O’Neill, the chairman of Goldman Sachs’s asset management division.


A decision is due by the end of the year.


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Brazil rate decision in doubt as central bank meets

Wednesday, 10 October 2012 10:23 Posted by Shoaib-ur-Rehman Siddiqui

brazil-flag BRASILIA: Traders and analysts are split on whether Brazil’s central bank will opt for another rate cut on Wednesday to bolster a languid recovery or end a year-long easing cycle that has taken rates to record lows.

Twenty-eight of the 45 analysts polled by Reuters expect the central bank to leave its Selic rate unchanged at 7.50 percent to combat forecasts of stubbornly high inflation in coming years.

The other analysts expect a cut of 25 basis points.

Most traders, on the other hand, are betting the bank will slash the rate for the tenth straight time, likely by a quarter of a percentage point, as a slow recovery and a global headwind outweigh inflation fears.

The conflicting views reflect mixed signs from the central bank itself.

It hinted it may have already ended the easing cycle at its last rate-setting meeting in August, but left the door open for an additional cut.

The bank will announce its decision after 6 p.m. local time (2100 GMT).

Recent economic data shows that the Brazilian economy is starting to pick up after a year of stagnation.

The strength of that recovery remains unclear. Meanwhile, annual inflation has picked up and is hovering above the center of the official target of 4.5 percent, plus or minus two percentage points.

“We have more signs of a recovery in activity and short-term inflation showing a negative dynamic all of which goes against a continuation of the easing cycle,” said Jankiel Santos, chief economist with BES Investimento in Sao Paulo. “However, I would not be surprised if the bank opts for another cut given growing pessimism over the global economy.”

Since the start of the easing cycle in August 2011, analysts and interest rate futures traders have had similar records in the accuracy of their predictions, according to a Thomson Reuters review of previous forecasts.

Copyright Reuters, 2012

Turkish central bank governor says 2012 loan growth seen at 14 pct

Posted by Shoaib-ur-Rehman Siddiqui

turkey-central-bankISTANBUL: Turkish central bank Governor Erdem Basci said on Monday that banks’ annual loan growth at the end of 2012 is seen at 14 percent.

Turkish loan growth slowed from 34 percent in 2010 to 29.5 percent last year after a year of unorthodox monetary policy by the central bank aimed at preventing overheating.

Basci said last month that loan growth reached a sustainable rate this year.

Thai central bank chairman calls for scrapping of rice policy as stocks mount

Wednesday, 03 October 2012 15:23 Posted by Shoaib-ur-Rehman Siddiqui

thailand-central-bank BANGKOK: The chairman of the Thai central bank urged the government to scrap a politically sensitive and hugely expensive scheme to subsidise rice farmers, saying it was a threat to stability in a country which has faced repeated unrest in recent years.

Traders said the intervention scheme, which helped Prime Minister Yingluck Shinawatra win power in 2011, jeopardised Thailand’s position as the world’s top rice exporter, warning that the government would eventually be forced to sell its mounting stockpiles of rice at a steep loss.

“The country will be doomed if the government proceeds with the rice-pledging scheme,” Bank of Thailand Chairman Virabongsa Ramangkura was quoted on Wednesday as telling the Nation daily, a day after the cabinet endorsed the scheme, with restrictions.

The scheme is estimated to cost as much as 3.5 percent of annual economic output.

It is also likely to continue hurting exports well into 2013, with the government forced to stockpile record amounts of rice in already overflowing warehouses.

Thailand is now stuck with 12 million tonnes, or around one third of the global rice trade, priced so far above what other countries sell the grain for that its exporters have been shut out of the global market.

Virabongsa, an economist parachuted into his job in June by Yingluck despite opposition from central bank officials, has in the past sided with the government.

“This government demonstrates stability. But if there’s anything to rock the stability, it’s this scheme,” he told the newspaper, adding that it would require huge deficit-financed budgets and would open the door to corruption.

South Korean central bank switches tack to encourage growth

SEOUL: South Korea’s central bank said on Tuesday it was now directing policy at lifting economic growth, as a survey showed the manufacturing sector shrank by the most in nearly four years, adding to the case for an interest rate cut next week.

The Bank of Korea’s comment, contained in its compulsory policy report to parliament, marked a shift in emphasis toward encouraging growth, unlike the statement last month that had stressed achieving price stability as an objective.

“The Bank of Korea plans to manage monetary policy for economic growth to recover to the potential rate while ensuring inflation remains stable at the middle of the target range,” it said in the report to parliament.

The HSBC/Markit survey showed the purchasing managers’ index (PMI) of South Korea’s export-reliant manufacturing sector fell to a seasonally adjusted 45.71 in September from 47.50 in August, touching its lowest since February 2009.

The HSBC/Markit survey marked the fourth consecutive month that the index was below the 50-level separating expansion from contraction in manufacturing activity, underscoring the extent of the current economic slump.

Although data released on Tuesday showed annual consumer price inflation rose to 2.0 percent in September from a 12-year low of 1.2 percent in August, the acceleration was largely due to a surge in food prices after heavy rainfall, and inflation was still running below the central bank’s 3 percent target.

Economists said the latest data releases, along with figures out on Monday showing exports fell for a third consecutive month on an annual basis, reinforced the case for a rate cut most likely by 25 basis points.

Market rates show investors expect the Bank of Korea to lower the policy rate again at its next meeting on Oct. 11, when it is also widely expected to downgrade its 2012 economic growth forecast for the third time this year.

“We expect the Bank of Korea to cut rates by 25 bp to support private consumption,” said Ronald Man, economist at HSBC in Hong Kong.

“Given external demand remains weak, growth must be sustained from within,” he said. “The chances of a 50 bp rate cut appears unlikely, as this may be considered too aggressive and can signal panic to the markets.”

The Bank of Korea has said changes in its policy would be made in a baby-step manner.

In July, the bank trimmed its policy rate by 25 basis points to 3.0 percent in a surprise move, and has since kept it unchanged, in anticipation that stimulus measures in Korea and other major economies.

Indicators have increasingly shown that since the July policy meeting, Asia’s fourth-largest economy has lost momentum more rapidly than expected as global demand slumped in the shadow of Europe’s protracted debt crisis.

South Korea’s quarterly economic growth dipped to a seasonally adjusted 0.3 percent in the April-June period from 0.9 percent in the first quarter, and growth in the third quarter is seen to mark a similar pace to the second quarter.

The country’s top mortgage lender also released data on Tuesday highlighting depressed consumer sentiment, with housing prices falling for a third consecutive month in September to mark the worst sequence since early 2009. The market reaction was muted with the latest data matching expectations and many investors were still following the Chuseok thanksgiving holidays that officially ended on Monday.

UAE lending limit deadline passes, still no central bank guidance

Sunday, 30 September 2012 21:10 Posted by Muhammad Iqbal


du23DUBAI: A deadline for banks in the United Arab Emirates to cut their exposure to the government passed on Sunday with no clear indication of whether authorities would enforce the new rules or give ba
nks more time to comply, bankers said.

Under the rules, announced in early April with a Sept. 30 deadline, any bank’s lending to the governments of the seven-member UAE federation and related entities is capped at 100 percent of its capital base.

Lending to a single borrower is limited to 25 percent. There was previously no limit.

The rules aim to prevent any repeat of Dubai’s corporate debt crisis, which erupted in 2009 as the real estate market crashed. The crisis was worsened by local banks’ excessive exposure to government-related entities (GREs).

Because many of the largest UAE banks are over the new limits, and it could be damaging to them and the economy if they tried to sell off loans to GREs quickly, bankers generally expect the central bank to extend the deadline.

But the central bank has not confirmed this and commercial banks have not been able to obtain information on the central bank’s intentions. A meeting between commercial banks’ chief executives and central bank officials last Tuesday failed to clarify the situation.

“Although there were deliberations, we have not received anything from the central bank as of today,” one commercial banker said on Sunday, adding that there had been no news of an extension of the deadline or anything to the contrary. He declined to be named because of the sensitivity of the issue.

Many bankers think a six-month extension is likely. “We expect the start of implementation to be extended by another six months to end-Q113 and include exceptions that would not derail the overall Dubai GRE refinancing process,” said Bank of America Merrill Lynch in a note last week.

Bankers also expect that no formal sanctions will be levied against lenders which missed the Sept. 30 deadline, given the lack of clarity in the situation.

“We have not heard anything on this,” the banker said.

IMPACT

Since the largest UAE banks have been supporting GREs during debt restructurings, clarity on the issue is important for the economy.

According to an April 9 research note by Deutsche Bank, the exposures of Emirates NBD and National Bank of Abu Dhabi were at 192 and 199 percent of capital respectively. Abu Dhabi Commercial Bank, another state-owned lender, stood at 108 percent.

A large amount of loan assets did not appear on the secondary market in the run-up to the deadline, a sign that local banks weren’t worried about the approach of the date, said a Dubai-based banking source.

A massive sell-off of GRE-linked loans would have been both uneconomic and impractical; for example, NBAD would have had to offload 26.5 billion dirhams ($7.2 billion), equivalent to 16 percent of its loan book, to comply with the new rules, according to a May 23 Arqaam Capital report.

However, some local banks have become less energetic in pitching for new business, bankers said.

“We’re full up so it (lending to GREs) doesn’t turn us on in the same way,” said a banker at a local lender, adding that his institution would have to think carefully about joining deals underway such as the $4 billion fund-raising for Emirates Aluminium.

Local banks have been key to funding loans to local names in the last 18 months, especially as many European banks have withdrawn from the Gulf because of problems in their home markets.

Therefore, any move by local banks to scale back their commitments could have significant repercussions for the UAE economy. Many large-scale infrastructure projects are in the pipeline, such as construction of the UAE’s first nuclear power plant.

However, bankers aren’t panicking just yet.

“They are certainly more cautious, but they are still pitching for business,” the Dubai-based source said of local lenders.

Asian markets fall as central bank hopes deflated

HONG KONG: Asian markets suffered a sell-off on Wednesday after a US Federal Reserve head said the central bank’s huge stimulus plan unveiled this month might not boost the economy as much as hoped.

Eurozone debt fears were also fuelled after a European Central Bank (ECB) official said it could not restructure Greece’s debt with the regional lender, while tensions between China and Japan continued to weigh on markets.

Tokyo tumbled 2.03 percent, or 184.84 points, to 8,906.70, Sydney shed 0.26 percent, or 11.3 points, to 4,361.6 and Seoul slipped 0.55 percent, or 10.97 points, to 1,980.44.

Hong Kong was down 0.79 percent and Shanghai lost 1.20 percent in the afternoon.

The global excitement stoked over the past month following stimulus announcements in the US, Japan and Europe was given a jolt after the head of the Fed’s Philadelphia branch questioned the impact of the US bank’s move.

Charles Plosser said he was doubtful the unlimited bond-buying programme unleashed by the Fed would charge up the US economy, and warned that the Fed could lose credibility because of it.

IG Markets said in a report: “Many traders feel central bank stimulus is merely a sticking plaster for a broken leg, and that much more needs to be done to send the global economy safely on the road to recovery.”

His comments reversed an early Wall Street rally that had been fuelled by upbeat data on consumer confidence and house prices.

By the end of trade the Dow fell 0.75 percent, the S&P 500 lost 1.05 percent and the Nasdaq shed 1.36 percent.

In Europe, worries over Greece were back in focus as ECB executive board member Joerg Asmussen dismissed an idea raised by Athens that Greek bonds at the bank could be rolled over to bridge a fresh financing gap in the country.

He told Germany’s Die Welt daily such a move would be “forbidden monetary financing”.

His comments came after Greek deputy finance minister Christos Staikouras last week told parliament the maturity of Athens’ bonds owned by the ECB and worth around 28 billion euros could be extended by mutual agreement.

Greece is struggling to apply a fiscal overhaul mandated by the ECB, European Union and International Monetary Fund in return for a new tranche of bailout cash.

Dealers are on edge as they await a decision from Spain on asking for a bailout.

Madrid is expected Thursday to adopt a 2013 austerity budget that could be a precursor to a full-blown bailout, but Prime Minister Mariano Rajoy has refused to ask until he knows what the conditions will be.

A request for cash would allow the ECB to then step in and begin buying sovereign bonds, which would ease the country’s crippling debt woes.

On currency markets the euro bought $1.2870 and 100.00 yen in Asian trade Wednesday against $1.2902 and 100.36 yen in New York late Tuesday.

The dollar was at 77.71 yen against 77.79 yen.

In Tokyo and Shanghai, shares were also under pressure because of the ongoing diplomatic spat between the two countries over a group of islands in the East China Sea.

The row, which has seen violent protests across China, has hit China-linked Japanese firms. And on Wednesday car giants Toyota and Nissan said they would cut production in the country because demand for their cars had tumbled.

Toyota Motor ended 2.66 percent lower and Nissan Motor lost 2.63 percent.

“In the foreground there seems to be geopolitical risk between Tokyo and Beijing,” Matthew Sherwood, head of investment market research at Perpetual Investments in Sydney, told Dow Jones Newswires.

“People are still quite worried about Japan’s export-based economy.”

Oil prices weakened, with New York’s main contract, light sweet crude for delivery in November sinking 46 cents to $90.91 a barrel in the afternoon and Brent North sea crude for November delivery shedding 59 cents to $109.86.

Gold was at $1,762.63 at 0615 GMT compared with $1,764.30 on Tuesday.

In other markets: Taipei fell 0.83 percent, or 64.50 points, to 7,669.63. TSMC rose 0.58 percent to Tw$86.4 while Hon Hai Precision lost 3.53 percent to Tw$90.2.

Wellington lost 0.42 percent, or 15.99 points, to 3,809.32.

Fletcher Building fell 3.0 percent to NZ$6.85, Sky City slid 3.6 percent to NZ$3.78 and Telecom was up 0.2 percent at NZ$2.40.

Asian markets slip as central bank rally fizzles

HONG KONG: Asian markets mostly fell on Monday as the recent rally fuelled by central banks’ stimulus plans petered out, while there were fears over Greece’s ability to meet requirements to get more bailout cash.

Earlier losses in China and Hong Kong were pared despite a People’s Bank of China adviser warning the mainland economy was still weak.Tokyo was 0.45 percent down, closing 40.71 points lower at 9,069.29, while Sydney shed 0.52 percent, or 22.8 points, to close at 4,385.5 and Seoul closed flat, edging up 1.07 points to 2,003.44.

Hong Kong ended 0.19 percent lower, giving up 40.24 points to 20,694.70 while Shanghai rose 0.32 percent higher, adding 6.50 points to 2,033.19.

Global markets have been boosted in September by central bank announcements in the United States, Europe and Japan that they would buy up huge amounts of government debt to pump liquidity into their respective economies.

However, with little else to drive buying, traders on Monday cashed in the recent gains.Investors are becoming concerned about progress between Greece and the “troika” — the European Commission, the European Central Bank (ECB) and the International Monetary Fund — over budget cuts that need to be presented by Friday, Mizuho Securities forex strategist Kengo Suzuki said.

“The risk sentiment-driven rally has begun to lose steam as profit-taking kicks in and uncertainty over Greece and Spain come back into the spotlight,” Suzuki told Dow Jones Newswires.If Greece is unable to satisfy requirements it could be refused the next batch of cash to help it pay its bills, a move that would likely see it default.

Masafumi Yamamoto, chief currency strategist at Barclays Capital, said in a note to clients: “The prospect of the Eurozone’s economic recovery is still uncertain given the global economic slowdown.”

Wall Street was unable to provide any inspiration. The Dow closed down 0.13 percent, the Nasdaq added 0.13 percent and the S&P 500 was flat.Hong Kong and Shanghai recovered from earlier deep losses caused by a central bank adviser saying at the weekend that he saw no signs of a rebound in China, following a string of soft data on trade, investment and growth.

But the ongoing diplomatic dispute between Beijing and Tokyo over a group of islands in the East China Sea was still capping gains. “There are still more hurdles that need to be crossed before we can say that we are out of the woods,” said Medha Samant, investment director at Fidelity in Hong Kong, adding that the market is looking to the next set of Chinese data due at the weekend.

On currency markets the euro, which had strengthened in recent weeks after the banks’ monetary easing, bought $1.2954 and 101.13 yen in late afternoon Asian trade, from $1.2985 and 101.42 yen in New York late Friday.

The dollar was at 78.05 yen against 78.12 yen.Oil prices eased. New York’s benchmark contract, West Texas Intermediate crude for November delivery, was down 81 cents to $92.08 in the afternoon, while Brent North Sea crude for November dipped $1.00 to $110.42.

Gold was at $1,760.86 at 0810 GMT compared with $1,774.34 on Friday.In other markets: Taipei rose 0.18 percent, or 13.71 points, to 7,768.3.Hon Hai Precision lost 1.03 percent to Tw$95.8 while Taiwan Semiconductor Manufacturing Co. was 0.47 percent higher at Tw$86.1.

Mexico central bank’s tough stance on inflation is minority view

Saturday, 22 September 2012 03:12 Posted by Abdul Ahad

mexico-bank copyMEXICO CITY: The Bank of Mexico’s shift toward suggesting a possible hike in interest rates was driven by a minority on the central bank board, with the majority leaning toward steady rates as they eye deepening risks to growth.

Policymakers were unanimous in their Sept. 7 decision to keep rates on hold at 4.5 percent, but there is a growing divide among board members on the risks from a spike in inflation and the need to raise interest rates, minutes of the September rate meeting showed on Friday.

After its last decision, the bank signaled it could tighten monetary policy in the future after inflation jumped to its highest in almost 2-1/2 years in August, driven by rising food costs.

But the minutes suggested only two members of the five-member board see growing reasons for a possible interest rate hike, while the rest think inflationary pressures are a temporary bubble that does not justify higher borrowing costs.

“The majority of members agreed that the downside risks to inflation in the medium term persist,” the minutes said.

“The majority of members agreed that the board would only act if the observed inflation pressures could be contained by monetary policy.”

This contrasted with the minutes’ description of “some” members who were leaning towards a hike.

Analysts said the majority’s view suggested they would not hike unless demand-side pressures, such as wage increases, became a problem or in the case that mid-term inflation expectations deteriorate.

Despite the tougher language on inflation in the last statement, investors and economists are unconvinced that the bank is seriously considering a rate increase.

Yields on Mexican short-term interest rate swaps were little changed after the minutes as investors stuck to bets that rates will remain on hold into 2014.

“The minutes for the September 7 meeting are more neutral than the slightly hawkish communique,” analysts at Nomura noted. “We are now more convinced than ever that Banxico will not move (either hike or cut) the policy rate in a long time.”

Mexico’s steady stance contrasts with Brazil, where rates have been cut to record lows to counter an economic slowdown, and the United States, where the Federal Reserve last week said it would offer more stimulus.

Analysts noted that easier money in major economies was effectively tightening monetary conditions in Mexico and feeding gains in the peso that should help cool inflation by making imports cheaper.

The peso has recovered more than 13 percent from a three-year low hit in June, and the recent stimulus from the Fed, as well as the European Central Bank, is expected to support riskier assets, such as the peso, going forward.

Still, the majority of policymakers at Mexico’s central bank said that they could not rule out that renewed global market volatility could hit the peso again.

Mexico’s annual inflation rate is seen rising to a 2-1/2-year high of 4.82 percent in early September, according to a Reuters poll.

Inflation has already overshot the central bank’s 4 percent limit for three straight months after bad weather and an avian flu outbreak drove up egg, corn tortilla, meat and bean prices.

But most policymakers thought such pressures would be transitory and most also thought risks to growth had worsened since the previous policy meeting due to global economic woes.

So far, the spike in inflation has not hit mid-term expectations. Analysts’ estimates for annual inflation at the end of 2013 held steady at 3.70 percent in the latest bi-weekly poll from Banamex released this week.

A separate report on Friday showed Mexico’s jobless rate rose in August, breaking a five-month streak of declines and adding to expectations of a deceleration in Latin America’s second-largest economy in the second half of 2012.

But economists said this was good news in the sense that labor market slack would not put any extra pressure on inflation.

“The board perceives that the Mexican economy deceleration is milder than expected … but no inflationary pressures are perceived,” said Barclays analyst Marco Oviedo in a note.

Australia central bank sold net A$351bn in Aug

Thursday, 20 September 2012 09:17 Posted by Shoaib-ur-Rehman Siddiqui

reserve copySYDNEY: The Reserve Bank of Australia (RBA) sold A$351 million ($367 million) of Australian dollars on a net basis on the spot foreign exchange market during August, central bank data showed.

The RBA manages the forex needs of the government, which may need foreign currency, say, to buy military hardware or pay for embassy wages, and that makes up the vast bulk of its spot transactions in any month.

The RBA sold A$367 million for foreign currency on behalf of the government in August.

The central bank refers to its currency selling and buying as “reserve management” rather than intervention. It rarely intervenes and typically only when the market has become disorderly, as it did in October 2008 following the failure of Lehman’s.

Kenya central bank seeks to absorb $12mn via repos

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kenya-central-bankNAIROBI: Kenya’s central bank sought to soak up 1 billion shillings ($11.8 million) in excess liquidity via repurchase agreements (repos), it said on Thursday.

 Traders had earlier said the bank, which has been mopping up liquidity using repos for most of this year to support the shilling, could slow down it interventions as yields on the debt market rise and the government accepts more bids at the auctions.

 The central bank has been aggressively mopping up liquidity, and absorbed 5 billion shillings on Wednesday.

Slovak central bank slashes 2013, 2014 growth forecasts

Tuesday, 18 September 2012 20:07 Posted by Asad Naeem

bank-slovakiaBRATISLAVA: Slovakia’s central bank (NBS) on Tuesday raised its 2012 economic growth forecast for the eurozone state to 2.7 percent from a previous 2.5 percent but slashed its outlook for next two years.

“We now expect the economy to grow by 2.0 percent in 2013 and by 3.5 percent in 2014,” the central bank said in a press release, cutting its previous estimates of 3.1 percent growth for 2013 and 4.3 percent for 2014.

Growth this year will be fueled by soaring car production at plants run by Germany’s Volkswagen, South Korea’s Kia and France’s PSA Peugeot Citroen, the central bank said.

But “next year’s slower growth will be shaped by low domestic demand and the impact of the consolidation of public finance,” it added.

The European Commission expects economic growth in Slovakia to reach 1.8 percent this year, making it the fastest-growing economy in the 17-member eurozone.

The Slovak finance ministry is banking on a 2.5-percent expansion this year and 2.1-percent growth in 2013.

An ex-communist country of 5.4 million people that joined the European Union in 2004 and the eurozone in 2009, Slovakia grew 3.3 percent last year after expanding 4.2 percent in 2010.

Copyright AFP (Agence France-Presse), 2012

Czech central bank signals looser policy using range of tools

Tuesday, 18 September 2012 11:49 Posted by Shoaib-ur-Rehman Siddiqui

central-bank-czechPRAGUE: Czech monetary policy will likely be looser than the central bank has forecast and the board has a range of policy tools at its disposal, bank Governor Miroslav Singer was quoted as saying on Tuesday.

The central bank cut its main interest rate to a record low 0.5 percent in June and forecast that interest rates could go lower.

Singer said in an interview with newspaper Mlada Fronta Dnes that, with rates so low, it is not possible to “avoid debate about what could potentially be next.”

“We are almost at the end with one tool, but we have a whole range of (tools),” he said.

Greek central bank chief takes extra salary cut-source

Tuesday, 18 September 2012 20:47 Posted by Asad Naeem

greek bank 400ATHENS: Greece’s central bank chief George Provopoulos has decided to cut his salary by almost a third as part of cost savings at the Bank of Greece and efforts to make the economy more competitive, a banking source told Reuters on Tuesday.

The banking source said Provopoulos informed European Central Bank (ECB) President Mario Draghi of his decision in a letter outlining measures already taken to reduce operating costs and wages at the Greek central bank in the last years.

“I am determined to continue this process of cost rationalisation at the Bank of Greece. In this connection, I have decided to reduce my salary by an additional 30 percent following a cut of 20 percent in December 2009, bringing the cumulative decline since 2009 to 50 percent,” Provopoulos was quoted as saying in the letter to Draghi.

The central bank’s two deputy governors also agreed to cut their salaries by the same percentage.

Greece is striving to persuade its foreign lenders to accept a savings package of nearly 12 billion euros over the next two years, keen to unlock the aid payments it needs to avoid bankruptcy.

A Bank of Greece official confirmed the letter was sent to the ECB’s head.

Cuts in overtime pay and travel expenses and downsizing of the central bank’s branch network by 40 percent has helped to reduce its operating costs by 21 percent in the last two years despite an increased workload because of the debt crisis.