Globalisation of the banking sector presents a unique set of challenges. Nepal ’s tryst with the financial sector development has been around for a little over twenty years.
The development in this sector actually started in the mid-1980s with the entry of foreign banks in joint venture with Nepali promoters breaking the monopoly of the state-owned banks. Non Banking Financial Institutions (NBFIs) started being licensed in 1984 with lower capital requirements for such institutions than for the banks and it marked the need for more players in the market to expand the access of services to the general public. However, the actual proliferation of finance companies did not commence until the mid 90s. This article attempts to track the growth in this sector, the regulatory constraints and whether such players were really needed in the financial market.
According to the findings of the Access to Financial Services Survey by the World Bank et al. (2006), only 26 percent of Nepali households have deposit accounts and 15 percent have loan accounts with banks and formal financial institutions. There has been an exponential increase in the number of finance companies: in 1984 there was only one, in 2007 there are 79. However, despite the high number of finance companies, they manage to serve only 2 per cent of the population. Therefore, the expectation of mid-90s that the hordes of licenses issued for setting up finance companies would expand the financial services and make it accessible to the masses has not been fulfilled. It has only increased the number of players who are competing with each other for a share from the same segment of the market.
Historical Background:
The Finance Companies Act-2042 introduced in 1984 was the first law that governed the operation and limitations of finance companies. It allowed finance companies to take deposits from the people and make investment on hire purchase, housing industry, commerce etc. In effect they were allowed to operate as mini banks. Some eight years later, the Merchant Banking Act 2050 allowed certain finance companies that met the regulatory requirements to acquire Merchant Banking license as well. As of 2007 data there are 8 Non-Banking Financial Institutions (NBFIs) with Merchant Banking license. This has been, from the beginning till date, the only major difference between a commercial bank and a finance company in terms of the activities allowed to them. The only areas reserved for the commercial banks are : over drafts, personal loans, foreign exchange transaction and opening letters of credit. Recently, the finance companies are allowed to transact also in Indian currencies though they are still restricted from transacting in other foreign currencies. In order to govern this sector more prudently, the Banks and Financial Institutions Act 2061 (also known as the Umbrella Act) was introduced by replacing all the other earlier Acts thus making this the single Act that governs all financial sector players from commercial banks to finance companies. The banks and financial institutions are divided into various categories fixing the extent of permitted services based on the capital. The players with the highest capital base are the commercial banks and they are given class “A” category; development banks class “B” category, Finance Companies class “C” category and Micro-Financing Institutions and Cooperatives are given class “D” category. Products and services are allowed according to the category an institution belonged to. Although this has been in line with the principle of prudential regulation and it has enabled the Nepal Rastra Bank to incorporate all the formal players in the financial sector under its regulatory jurisdiction, the purpose of making financial services endemic has not materialised. All it has done is dividing the number of players into capital structured groups. However, the Umbrella Act along with the prudential regulations of the Nepal Rastra Bank has made this sector the most transparent and highly regulated industrial group, which is positive development despite the frequent changes in directives.
Efficiency Parameters:
Growth in numbers, across the financial sector, has failed to address the main issue of accessibility. Ironically, the reach to the masses is in decline.
Between 1992 and 1995, Nepal Rastra Bank licensed almost three dozen finance companies. The need at that time was to make financial services more accessible to the general public. The handful of joint-venture commercial banks in operation during that period were more inclined to serve institutions and high net-worth customers. The newly licensed finance companies filled this void initially by catering to the general urban populace.
But the premise that wholesale banking would continue in the commercial banking sector and finance companies would enter consumer and retail financing and be a replacement for the informal sector was short-lived. In the beginning, the simple process and quick sanctioning of loans by the finance companies as opposed to the long and cumbersome process of the commercial banks appealed to the average urban population. Therefore, the finance companies can be given credit for initiating the practice of providing higher yielding depository products and expanding access to formal loans in a market where people were subject to stringent loan procedures of the government-owned and joint-venture commercial banks. As competition in the entire banking and finance sector grew, the demarcation began to be vague. Furthermore, all the players, whether a bank, development bank or a finance company was vying for a share out of the same market pie.
Time series data of finance companies (aggregate) from 1994 to 2006 show that there has been an 1156 percent average annual growth in deposits, but corporate deposits are increasing and slowly displacing individual deposits and finance companies are heavily dependent on commercial banks for borrowing. What has transpired is that finance companies have serviced an area which used to be exploited by the informal sector, but due to increasing competition and proliferation of commercial banks they are losing market share to the commercial banks.
On the loan side, there has not been significant difference in the percentage of outstanding loans between 1998 and 2004. Term loans increased by 5 percent in 2004 as compared to 1998, the year when this type of loan commanded the highest weighted exposure (i.e. 40 percent). Housing sector took second place at 30 percent in 2004 (29 percent in 1998), which was a negligible increment. The loan exposure was strictly limited to the urban areas. Data to support the increasing trend of loans for purchase of stocks listed in the stock exchange and for financing the purchase of shares in the IPO (Initial Public Offering) of the companies was not available at the time of writing this article, but finance companies have been heavily exposed recently in advancing funds for such margin trading and IPO investment. To stop this trend, Nepal Rastra Bank directed in March 2007 (NRB 2063/12/8) all finance companies and banks not to advance loans for IPO investment in the first week of the scrip’s floatation and allowed such loans only if the scrip was under-subscribed after the first week of floatation. Subsequently, more stringent regulations were directed towards equity financing which is misconstrued and popularly known in Nepal as ‘margin trading’. However, this has not forced many of the finance companies from withdrawing from this area of investment as it has been extremely profitable. The present trend, as it is heading, continues to show a ‘drifting away’ of investment from the real sector towards more lucrative and highly profitable yet extremely risky and volatile stock market.
Regulatory Development:
Finance Companies Act of 1984 allowed the inception of finance companies. After allowing Merchant Banking activities in 1992, the only significant change in operations commenced in 2004 with the Banks And Finance Companies Act (BAFCA). Finally, finance companies, in addition to their limited activities, were allowed to be members of the check clearing house, transact in Indian Currency and were authorized to do that in real estate business.
Subsequent directive in 2005 allowed finance companies to be able to provide debit and credit cards by being subsidiary members of banks. Finance Companies henceforth were expected to follow all prudential regulations that commercial banks were following. One of the biggest changes, after the Umbrella Act came into operation, was on the balance sheet of finance companies as they were now to follow cash-based accounting system as opposed to accrual-based in the past along with strict provisioning and interest suspense allocations. The stringent reporting requirements also compelled them to upgrade their technology to be in compliance with NRB reporting standards.
This was a wake up call to many of the finance companies which operated as a family-run business. Overnight, prudential regulations were in effect compelling them to transform and be transparent. The Umbrella Act was a beginning towards harnessing all the various players towards operating in a transparent and highly regulated system. The Umbrella Act of 2004 narrowed the gap between a commercial bank, a development bank and a finance company. However, none of the new directives were enablers to make the financial sector more endemic or far reaching. The new directives only increased the competition in an already over-crowded market and attempted to enforce prudential regulations on all players. Out of the three categories, it is only the finance companies group that belong to category "C", that may boast that not a single member of that group has been penalised for misconduct of operations or on any other issue by NRB. A few banks in category "A" and "B" have been taken under NRB management due to misappropriation and non-compliance to directives.
Constraints:
If the mandate of the finance companies was to be an arbiter between borrowers and lenders for the masses then the whole exercise has not quite been successful. But if the intention was to create a parallel institution with lesser capital to cater to a segment that commercial banks avoided, then the finance companies have served that purpose.
The constraints to reaching out to rural areas have been many:
1. Loans are dependent on collateral of immovable assets and there are strict provisioning requirements.
2. Project loans based on security of equipment is risky due to lack of secured transaction register
3. Lack of monitoring capability and dearth of skilled manpower who are willing to re-locate
4. Security and slow legal framework
5. Inconsistent directives from the regulator
Now let’s analyse these points in further depth. The trend of loans and advances based on collateral of immovable assets as a primary source of recourse to possible default has been the biggest impediment in reaching out to the rural poor or to an entrepreneurial group that can produce no immovable asset as security. The other reason behind this is the NRB guidelines that require heavy provisioning for loans secured by any means other than collateral of immovable assets and equipment. This has been a deterrent to the lending institutions who do not wish to take overt risks.
Sources and Uses of Fund of Finance Companies (Aggregate)
Although the Secured Transaction Act was passed in 2006, safety of collateralised equipment is still not there due to the lack of the secured transaction registry. The risk is that it is very difficult to track the equipment collaterised and the same equipment can be used as collateral in a number of lending agencies. Once the registry comes into operation, the problem is expected to be solved.
There has been a dearth of skilled manpower in this sector willing to go to remote areas to work. The cost of monitoring projects outside the urban areas is high. This, coupled with the security risks, has acted as major deterrent in recent times.
The financial sector has been the fastest growing industry quantitatively and, as a result of new innovations and technology, is the most progressive. Unfortunately, the legal system has not been able to keep pace with this development. Reform in the legal apparatus is urgently needed to facilitate quick decisions in this sector. The Debt Recovery Tribunal set up in 2001 has tried to address the legal problems on behalf of the financial sector, but the process is usually slow. Constant stay orders from the courts have been major impediments to the due process.
Regulatory directives are not consistent and can change at any pressure from parties with vested interests. Directives have been known not to be applicable to a few players and have been changed to facilitate them. This will undermine the regulator's capacity and cast doubt on the slogan of good governance being propagated.
The future:
As competition grows fierce with new players setting up business with larger capital, the existing finance companies need to strategically think ahead by increasing capital, setting up systems to cope with rising competition and explore new markets. The future for this category of financial institutions lies in the success to determine the appropriate customer mix and business mix to grow profits at high rates, with a strong focus on fee-based revenues.
Banking in terms of conventional methods needs to be revamped and the regulatory authority should allow investment banking products to be introduced into the market. In order to facilitate this, the government has to allow an independent rating agency to be set up.
The classification of the financial institutions in A, B, C, and D categories is meaningless in this market as some C category companies have a stronger balance sheet as well as compliance record and management than some "A" and many "B" category institutions. An independent credit rating agency will enable a balanced rating based on the financial strength of an institution and not on the capital base alone. In turn, this will be a stronger encouragement for the public to deal with the institutions that have higher ratings, thus compelling the weaker players to improve their operations. The market will force them to correct themselves.
The recent retail-led boom has helped the banking and financial sectors overcome the stalemate in corporate lending and has been the fuel for growth in this sector. However, this trend involves massive competition. Therefore, sustainability for the players is getting exceedingly difficult. The future will also depend on the collaboration between the financial institutions, which should inevitably lead to mergers.
Non-banking financial institutions (NBFI) should be allowed to expand their product base so that their fee based income will increase to occupy larger share in the total income. New instruments along the lines of investment banking products, should be encouraged. Mutual funds management should be allowed to NBFIs. A clear demarcation of activities should be adhered to as per the directives and the regulator should have strict guidelines enforcing these rules.
Conclusion:
The finance sector has shown maturity in recent years. The positive trend is also due to the strict regulatory guidelines for those who follow them. However, innovation in this sector is lacking. In order to be competitive in this market, finance companies need to collaborate and start thinking and planning mergers to create a larger capital base. The future for small capital base companies is limited. There has to be a paradigm shift in the regulations to facilitate development in the financial sector. Financial innovation can only take place if it is allowed from the regulatory angle; otherwise, redefining the wheel and calling it an innovative product will continue to be the trend in the banking and financial sector.
Sunday, December 30, 2007
Country market research, analysis, forecasts and company intelligence
Business Monitor Online’s Commercial Banking Service
provides unparalleled commercial banking market research for country markets and analysis on commercial banking companies worldwide – from Asia and Africa to the Americas, Europe and the Middle East. The online service features commercial banking industry trends; intra-daily news analysis; systematic country market assessments with 5-year forecasts and key assumptions; covering bank deposits; loans and assets; and key drivers of industry growth and future prospects; including the macroeconomic situation; the commercial initiatives of major players; government policy and the regulatory environment.The Commercial Banking Service enables industry professionals, company analysts, consultants, industry and regulatory organisations to evaluate and better manage the risks, and exploit business opportunities, in global commercial banking markets. Subscribers are drawn from more than 80 countries around the world, including many of the commercial banking sector’s major players.
Friday, December 21, 2007
$20bn from Fed to ease credit woe
The US Federal Reserve has made $20bn (£9.9bn) available to major banks in an attempt to ease concerns about a global credit crunch.
Monday's auction is the first step in a plan agreed among five central banks, including the Bank of England and the European Central Bank.
The central banks hope that the auction will make retail banks and investment houses happier to lend to each other.
Such lending has become more expensive recently, adding to the credit squeeze.
The central banks plan to offer more than $100bn in loans to retail banks, after it became clear that cuts in interest rates were not having an effect on inter-bank lending.
US Treasury Secretary Henry Paulson said on Monday that there was no "silver bullet" to solve the credit market problems.
Monday's auction is the first step in a plan agreed among five central banks, including the Bank of England and the European Central Bank.
The central banks hope that the auction will make retail banks and investment houses happier to lend to each other.
Such lending has become more expensive recently, adding to the credit squeeze.
The central banks plan to offer more than $100bn in loans to retail banks, after it became clear that cuts in interest rates were not having an effect on inter-bank lending.
US Treasury Secretary Henry Paulson said on Monday that there was no "silver bullet" to solve the credit market problems.
Thursday, December 20, 2007
China to provide concessional loan of Rs 13 billion
The Chinese government is going to provide a loan of Rs 13 billion at concessional interest rate.
“The Chinese government has moved forward with the process of providing the concessional loan,” Nepalese ambassador to China, Tanka Karki told Kantipur daily.
The loan totaling $200 million will be used to build Upper Trishuli hydropower project and other development programmes.
The government of Nepal will identify other projects, Karki said.Additionally, the Chinese government has provided a grant assistant of Rs 428.5 million for the implementation of mutually agreed development projects.
An agreement to this effect was signed and exchanged in Kathmandu on Thursday at the Finance Ministry.
The grant assistant is part of the continuing economic and technical cooperation mechanism between the governments of China and Nepal.
The agreement was signed by finance secretary Vidhyadhar Mallik on behalf of Nepal and Zheng Xianglin, ambassador of China to Nepal on behalf of Chinese government.
“The Chinese government has moved forward with the process of providing the concessional loan,” Nepalese ambassador to China, Tanka Karki told Kantipur daily.
The loan totaling $200 million will be used to build Upper Trishuli hydropower project and other development programmes.
The government of Nepal will identify other projects, Karki said.Additionally, the Chinese government has provided a grant assistant of Rs 428.5 million for the implementation of mutually agreed development projects.
An agreement to this effect was signed and exchanged in Kathmandu on Thursday at the Finance Ministry.
The grant assistant is part of the continuing economic and technical cooperation mechanism between the governments of China and Nepal.
The agreement was signed by finance secretary Vidhyadhar Mallik on behalf of Nepal and Zheng Xianglin, ambassador of China to Nepal on behalf of Chinese government.
Sunday, December 16, 2007
World Bank and Merck & Co., Inc., Announce US$50 Million Funding Initiative to Eliminate River Blindness in Africa
December 4, 2007 – The World Bank and Merck & Co., Inc., today announced an initiative to raise US$50 million to help eliminate river blindness, a leading cause of preventable blindness, in 28 African countries.
Merck has pledged up to $25 million—about half of the funding needed over the next eight years—to help eliminate this public health problem which puts the health and livelihood of 100 million people at risk worldwide, mostly in sub-Saharan Africa. The disease causes intense itching, disfiguring skin disease, and eye lesions that often result in permanent blindness.
The World Bank will work with Merck and other partners to raise the remaining $25 million. This $50 million in new funding will supplement the $20 million already raised by the Bank from international partners, for a total of $70 million to support the program through 2015.
Merck has pledged up to $25 million—about half of the funding needed over the next eight years—to help eliminate this public health problem which puts the health and livelihood of 100 million people at risk worldwide, mostly in sub-Saharan Africa. The disease causes intense itching, disfiguring skin disease, and eye lesions that often result in permanent blindness.
The World Bank will work with Merck and other partners to raise the remaining $25 million. This $50 million in new funding will supplement the $20 million already raised by the Bank from international partners, for a total of $70 million to support the program through 2015.
Israel arrests 25 Hamas members in West Bank, including lawmaker
West Bank - Israeli forces arrested 25 Hamas members, including a member of Parliament, in overnight raids in this West Bank city, Palestinian officials said.
Those arrested included lawmaker Ahmad al-Haj Ali, as well as a former deputy Cabinet minister and two city council representatives, all Hamas members, Palestinian security officials said.
The Israeli military said troops made overnight arrests in an operation targeting Hamas operatives in Nablus.
Hamas, a militant Islamic movement with ties to Iran, has largely been driven underground in the West Bank since it took over the Gaza Strip in June, defeating the forces of the rival Fatah movement.
Mahmoud Abbas, Fatah's leader and the Palestinian president, has ruled the West Bank since then and his moderate government has been moving ahead with peace talks with Israel and cracking down on Hamas.
The Israeli arrests came two days after Abbas' security forces carried out a similar sweep targeting Hamas supporters in Nablus. Hamas put the number of detainees at 26.
The raid also came in wake of a pro-Hamas rally in Gaza on Saturday that drew about 250,000 people and was a major show of force for the Islamic group.
Israel arrested dozens of Hamas lawmakers in the summer of 2006, after Hamas forces captured an Israeli tank crewman and killed two others in a cross-border raid near Gaza. Talks on a prisoner swap have stalled and the soldier, Cpl. Gilad Shalit, remains in captivity.
Ahmad Bahar, a senior Hamas official in Gaza, said Sunday that the lawmaker's arrest overnight brought the number of Hamas parliamentarians held by Israel to 46.
Those arrested included lawmaker Ahmad al-Haj Ali, as well as a former deputy Cabinet minister and two city council representatives, all Hamas members, Palestinian security officials said.
The Israeli military said troops made overnight arrests in an operation targeting Hamas operatives in Nablus.
Hamas, a militant Islamic movement with ties to Iran, has largely been driven underground in the West Bank since it took over the Gaza Strip in June, defeating the forces of the rival Fatah movement.
Mahmoud Abbas, Fatah's leader and the Palestinian president, has ruled the West Bank since then and his moderate government has been moving ahead with peace talks with Israel and cracking down on Hamas.
The Israeli arrests came two days after Abbas' security forces carried out a similar sweep targeting Hamas supporters in Nablus. Hamas put the number of detainees at 26.
The raid also came in wake of a pro-Hamas rally in Gaza on Saturday that drew about 250,000 people and was a major show of force for the Islamic group.
Israel arrested dozens of Hamas lawmakers in the summer of 2006, after Hamas forces captured an Israeli tank crewman and killed two others in a cross-border raid near Gaza. Talks on a prisoner swap have stalled and the soldier, Cpl. Gilad Shalit, remains in captivity.
Ahmad Bahar, a senior Hamas official in Gaza, said Sunday that the lawmaker's arrest overnight brought the number of Hamas parliamentarians held by Israel to 46.
Friday, December 14, 2007
Bank of America to Liquidate $12 Billion Cash Fund
Dec. 11 (Bloomberg) -- Bank of America Corp. will liquidate a $12 billion cash fund for wealthy clients and institutions, the largest investment of its type to close because of losses tied to the collapse of the subprime-mortgage market.
The fund, Columbia Strategic Cash Portfolio, was sold as an alternative to money-market funds, offering a higher yield by taking more risk. It was the biggest so-called enhanced cash fund, with $33 billion in assets two weeks ago before an investor pulled more than $20 billion, said Peter Crane, founder of Crane Data LLC, the Westborough, Massachusetts-based publisher of the Money Fund Intelligence.
``This could be the death of enhanced cash funds,'' Crane said. Such funds hold about $850 billion in assets.
Some investors in Charlotte, North Carolina-based Bank of America will get their money back at net asset value, which fluctuates and currently is 99.4 cents on the dollar. Others may get control of specific assets, Robert Stickler, a spokesman for the second-largest U.S. bank, said today in an interview.
Some cash funds hold commercial paper or medium-term notes issued by structured investment vehicles, or SIVs, that have fallen in value as delinquencies on home loans rose to the highest in 20 years in the third quarter, according to data compiled by the Mortgage Bankers Association in Washington. SIVs use proceeds from the short-term debt to buy longer-term securities backed by assets including subprime mortgages and credit-card receivables.
Not Money Funds
A General Electric Co. enhanced cash fund last month returned money to investors at 96 cents on the dollar after losing money on mortgage-backed securities. Federated Investors Inc., the third-largest manager of money-market accounts in the U.S., bailed out investors in its Enhanced Reserve cash fund as credit markets seized up.
Towns and school districts in Florida last month pulled almost half of $27 billion in assets from a state government investment pool that bought SIV debt and other subprime-linked assets. State managers froze the fund until hiring BlackRock Inc. to salvage the portfolio. It reopened last week.
Unlike money-market funds, which are considered the safest investments besides bank accounts and government debt, cash funds aren't required to maintain a $1 net asset value. To generate higher yields, enhanced funds buy riskier assets that money funds aren't permitted to hold.
Assets of U.S. money-market mutual funds rose to a record $3.083 trillion during the seven days ended Dec. 4 as investors sought a haven from credit-market losses, according to data compiled by the Money Fund Report in Westborough. Enhanced cash funds hold about $850 billion in assets.
Columbia Management, Bank of America's Boston-based investment unit, manages $566 billion in assets. Last month, the bank said it may provide as much as $600 million to prop up Columbia funds that bought debt from SIVs and other assets tainted by mortgages.
``The liquidity in the fund was eroding,'' Stickler said. He declined to say who would be eligible to be repaid in fund assets rather than cash.
``They can give them to us, and we will manage them in a separate account at no fee,'' Stickler said. The fund is closed to new investments. Stickler also declined to be more specific about the investments the fund held. ``It has some investments in it that have either lost value or are illiquid,'' he said.
The fund, Columbia Strategic Cash Portfolio, was sold as an alternative to money-market funds, offering a higher yield by taking more risk. It was the biggest so-called enhanced cash fund, with $33 billion in assets two weeks ago before an investor pulled more than $20 billion, said Peter Crane, founder of Crane Data LLC, the Westborough, Massachusetts-based publisher of the Money Fund Intelligence.
``This could be the death of enhanced cash funds,'' Crane said. Such funds hold about $850 billion in assets.
Some investors in Charlotte, North Carolina-based Bank of America will get their money back at net asset value, which fluctuates and currently is 99.4 cents on the dollar. Others may get control of specific assets, Robert Stickler, a spokesman for the second-largest U.S. bank, said today in an interview.
Some cash funds hold commercial paper or medium-term notes issued by structured investment vehicles, or SIVs, that have fallen in value as delinquencies on home loans rose to the highest in 20 years in the third quarter, according to data compiled by the Mortgage Bankers Association in Washington. SIVs use proceeds from the short-term debt to buy longer-term securities backed by assets including subprime mortgages and credit-card receivables.
Not Money Funds
A General Electric Co. enhanced cash fund last month returned money to investors at 96 cents on the dollar after losing money on mortgage-backed securities. Federated Investors Inc., the third-largest manager of money-market accounts in the U.S., bailed out investors in its Enhanced Reserve cash fund as credit markets seized up.
Towns and school districts in Florida last month pulled almost half of $27 billion in assets from a state government investment pool that bought SIV debt and other subprime-linked assets. State managers froze the fund until hiring BlackRock Inc. to salvage the portfolio. It reopened last week.
Unlike money-market funds, which are considered the safest investments besides bank accounts and government debt, cash funds aren't required to maintain a $1 net asset value. To generate higher yields, enhanced funds buy riskier assets that money funds aren't permitted to hold.
Assets of U.S. money-market mutual funds rose to a record $3.083 trillion during the seven days ended Dec. 4 as investors sought a haven from credit-market losses, according to data compiled by the Money Fund Report in Westborough. Enhanced cash funds hold about $850 billion in assets.
Columbia Management, Bank of America's Boston-based investment unit, manages $566 billion in assets. Last month, the bank said it may provide as much as $600 million to prop up Columbia funds that bought debt from SIVs and other assets tainted by mortgages.
``The liquidity in the fund was eroding,'' Stickler said. He declined to say who would be eligible to be repaid in fund assets rather than cash.
``They can give them to us, and we will manage them in a separate account at no fee,'' Stickler said. The fund is closed to new investments. Stickler also declined to be more specific about the investments the fund held. ``It has some investments in it that have either lost value or are illiquid,'' he said.
US central bank set to cut rates
The US central bank is expected to cut interest rates to 4.25% from 4.5% when Federal Reserve officials meet later.
Analysts predict the Fed will cut rates for the third time in 2007 to boost economic growth and ease the impact of the housing crisis and credit crunch.
But a half a percentage point cut is less likely, analysts say, given that more jobs were created in November than had been expected.
The meeting of the Fed will be its final one of the year.
The bank is expected to make its announcement on interest rates at 1915 GMT.
Third time?
The Federal Reserve has cut rates twice already this year. On 18 September, the central bank cut interest rates from 5.25% to 4.75%.
The first cut in four years, it was aimed at preventing a downturn in the housing market and limiting the impact of the credit crunch.
It lowered rates again on 1 November, reducing them to 4.5%. This loosening of monetary policy has been replicated around the world. In the past week, the Bank of England cut rates from 5.75% to 5.5%, though the European Central Bank decided to keep rates on hold at 4%.
Analysts predict the Fed will cut rates for the third time in 2007 to boost economic growth and ease the impact of the housing crisis and credit crunch.
But a half a percentage point cut is less likely, analysts say, given that more jobs were created in November than had been expected.
The meeting of the Fed will be its final one of the year.
The bank is expected to make its announcement on interest rates at 1915 GMT.
Third time?
The Federal Reserve has cut rates twice already this year. On 18 September, the central bank cut interest rates from 5.25% to 4.75%.
The first cut in four years, it was aimed at preventing a downturn in the housing market and limiting the impact of the credit crunch.
It lowered rates again on 1 November, reducing them to 4.5%. This loosening of monetary policy has been replicated around the world. In the past week, the Bank of England cut rates from 5.75% to 5.5%, though the European Central Bank decided to keep rates on hold at 4%.
Nepal Likely to Get Geothermal Plant
LNJ Bhilwara Group of India has announced an ambitious plan to set up geothermal power plants in Nepal and India .
An agreement was signed between the Group and Glitnir, a Nordic development bank recently in New Delhi for identifying locations and setting up the plants in both Nepal and India . Though the locations under consideration in Nepal are not disclosed, the Indian sites being considered are Puga ( Jammu and Kashmir ) and Tatapani (Himachal Pradesh), according to reports in the Indian press.
According to Anup Joshi of the Corporate Communication Department of Bhilwara Group, discussions are going on with a number of potential Nepali parties with whom the Group will partner in setting up the plant in Nepal . However, the corporate sources in Nepal name Triveni Group as the most likely Nepali party.
Geothermal power plants harness the earth's heat and geothermal energy from underground reservoirs containing hot rocks saturated with water or steam. Hot water and steam are piped up to a geothermal power plant where they are used to drive electric generators. The water once used and cooled can be piped back into the reservoir. For this reason, geothermal heat is considered renewable energy source entitling the plant operator carbon credit under the Kyoto Protocol.
Glitnir has successfully implemented 5MW geo-thermal a project in China where it brought expertise and funded the project to heat a district in the Xian Yang province.
An agreement was signed between the Group and Glitnir, a Nordic development bank recently in New Delhi for identifying locations and setting up the plants in both Nepal and India . Though the locations under consideration in Nepal are not disclosed, the Indian sites being considered are Puga ( Jammu and Kashmir ) and Tatapani (Himachal Pradesh), according to reports in the Indian press.
According to Anup Joshi of the Corporate Communication Department of Bhilwara Group, discussions are going on with a number of potential Nepali parties with whom the Group will partner in setting up the plant in Nepal . However, the corporate sources in Nepal name Triveni Group as the most likely Nepali party.
Geothermal power plants harness the earth's heat and geothermal energy from underground reservoirs containing hot rocks saturated with water or steam. Hot water and steam are piped up to a geothermal power plant where they are used to drive electric generators. The water once used and cooled can be piped back into the reservoir. For this reason, geothermal heat is considered renewable energy source entitling the plant operator carbon credit under the Kyoto Protocol.
Glitnir has successfully implemented 5MW geo-thermal a project in China where it brought expertise and funded the project to heat a district in the Xian Yang province.
Himtal to Sell 80% Stake to GMR
The Indian company GMR Energy Ltd. has entered into a share purchase and joint venture agreement to acquire 80 percent stake of Himtal Hydro Power Co. (P) Ltd., which is implementing a 250-MW Upper Marsyangdi-2 Hydro Power project. In a filing to Bombay Stock Exchange, GMR Infrastructure, the parent company of GMR Energy, has notified that the relevant application has been submitted to the authorities of Nepal seeking their approval for the proposed joint venture and to start the feasibility study and environmental impact assessment.
Reports quoting Brindawanman Pradhananga, Chairman of Himtal, state that the project with its construction sites in Manang and Lamjung, was originally estimated to generate 125 MW which has now been increased to 250 MW after GMR showed interest in the project. The joint-venture deal between Himtal and GMR was signed during the energy convention held at Kathmandu last year. The total cost for the project at 125 MW capacity was estimated at 200 million US dollars which will go up as the capacity is now to be expanded.
Reports quoting Brindawanman Pradhananga, Chairman of Himtal, state that the project with its construction sites in Manang and Lamjung, was originally estimated to generate 125 MW which has now been increased to 250 MW after GMR showed interest in the project. The joint-venture deal between Himtal and GMR was signed during the energy convention held at Kathmandu last year. The total cost for the project at 125 MW capacity was estimated at 200 million US dollars which will go up as the capacity is now to be expanded.
Labour Commission on the Anvil
The government has started preparations for setting up the Labour Commission, as provided for in the Interim Constitution.
After a decision was taken to this effect at a meeting of the Council of Ministers in the second week of November, a task force has been set up for this purpose with Bishnu Prasad Lamsal as the convenor. Lamsal is a Joint Secretary in the Ministry of Labour and Transport Management. The task force has five representatives from Federation of the Nepalese Chamber of Commerce and Industry (FNCCI) and other five representing various trade unions.
Meanwhile, the government has also started steps to revise the Labour Act which was introduced 15 years ago. The International Labour Organisation is providing technical assistance to draft the revised law
After a decision was taken to this effect at a meeting of the Council of Ministers in the second week of November, a task force has been set up for this purpose with Bishnu Prasad Lamsal as the convenor. Lamsal is a Joint Secretary in the Ministry of Labour and Transport Management. The task force has five representatives from Federation of the Nepalese Chamber of Commerce and Industry (FNCCI) and other five representing various trade unions.
Meanwhile, the government has also started steps to revise the Labour Act which was introduced 15 years ago. The International Labour Organisation is providing technical assistance to draft the revised law
NIC becomes Bank of the Year 2007
The Banker magazine, a co-publication of the Financial Times of London, has declared Nepal Industrial and Commercial Bank as Nepal 's Bank of the Year 2007.
Among the banks established with 100 percent Nepali equity and managed by Nepali professionals only, NIC is the first to win the honour.
Other Nepali banks that had the distinction in the previous years include Nabil, Nepal Investment Bank, Everest Bank and Standard Chartered Bank Nepal.
Among the banks established with 100 percent Nepali equity and managed by Nepali professionals only, NIC is the first to win the honour.
Other Nepali banks that had the distinction in the previous years include Nabil, Nepal Investment Bank, Everest Bank and Standard Chartered Bank Nepal.
Nine Branches in a day
NABIL bank has probably become the first bank in Nepal to open nine branches in a day.
On November 18, 2007 , Nabil made the history by electronically declaring open nine branches simultaneously from Kathmandu . The new branches are located at Birtamod, Damak, Hetauda, Narayangadh, Baglung, Tulsipur, Ghorahi, Dhangadhi and Mahendranagar.
According to bank sources, all the branches, equipped with ATM facilities, will provide any branch banking (ABB) service.
On November 18, 2007 , Nabil made the history by electronically declaring open nine branches simultaneously from Kathmandu . The new branches are located at Birtamod, Damak, Hetauda, Narayangadh, Baglung, Tulsipur, Ghorahi, Dhangadhi and Mahendranagar.
According to bank sources, all the branches, equipped with ATM facilities, will provide any branch banking (ABB) service.
Jyoti Group Enters Pharma Sector
While various industrial units are reported closing down citing security problems, Jyoti Group, one of the major business houses of the country, has started its foray into the pharmaceuticals industry.
Construction works have already started for the factory of Himal Pharma, spread over 20 ropanis of land, in Jharuwarasi VDC of Lalitpur district.
According to Suhrid Jyoti, Executive Director of the new company, the factory is being established with an estimated investment of Rs. 260 million and meeting the WHO GMP standards to produce penicillin as well as non-penicillin medicines in tablets, capsules and syrup as well as ointments. Also in the plan is a unit for injectibles to be added in the near future.
The factory will have a capacity to produce about 82.7 million units of medicines. Initially the factory will produce 80 types of medicines, informed Madhav Pradhan, Chief Executive Officer of the company.
At present, the construction of the compound wall for the factory is completed, while the work is going on with the initial environment impact assessment. The company sources say, the plan is to commission the factory within two years.
Construction works have already started for the factory of Himal Pharma, spread over 20 ropanis of land, in Jharuwarasi VDC of Lalitpur district.
According to Suhrid Jyoti, Executive Director of the new company, the factory is being established with an estimated investment of Rs. 260 million and meeting the WHO GMP standards to produce penicillin as well as non-penicillin medicines in tablets, capsules and syrup as well as ointments. Also in the plan is a unit for injectibles to be added in the near future.
The factory will have a capacity to produce about 82.7 million units of medicines. Initially the factory will produce 80 types of medicines, informed Madhav Pradhan, Chief Executive Officer of the company.
At present, the construction of the compound wall for the factory is completed, while the work is going on with the initial environment impact assessment. The company sources say, the plan is to commission the factory within two years.
Monday, December 10, 2007
I don't have low self-worth: Sonam
Sonam Kapoor is basking in glory of her Saawariya performance. The offers like Rakeysh Mehra's film Delhi 6 are pouring in everyday for the doe-eyed beauty.
Talking about her new found fame and life after that she says,"I'm second-time lucky. If I had to choose one filmmaker after Sanjay Sir (Bhansali) I'd have chosen Rakesh Mehra. I haven't seen his Aks. But I fell in love with Rang De Basanti. Loved every performance in it.I love his courage, integrity and idealism. I went beyond conventional definitions of the heroine in Saawariya. I hope to do the same in Delhi 6. It's a great follow-up.I couldn't have chosen a better second film. The minute I met Rakeysh Mehra I was completely floored. We connected very well. I sat with him for five hours."While her performance in Saawariya has been lauded some Mumbai critics have slammed the film. Some people even say she got a raw deal in the plot."Three of them. I'll remember their names forever, she says with a laughter and adds, "I don't think I got a raw deal. In the second-half all the meaty dialogues are mine.When Sanjay Sir offered me the role he said it was complex and not author-backed. But he had faith that I could carry off."What about a report that some of her crucial scenes have been cut in Saawariya?"What utter nonsense," she reorts, "No crucial scene of mine has been cut. Just the usual editing that happens in every film. I don't know where this comes from.People are just creating friction through fiction. If this kind of loose talk gives some people a high, so be it. It doesn't effect my relationship with Sanjay Sir."
Ask her if her low self-worth come from her weight problem, Sonam says," Oh, but I was over-weight only for two years, not as a child.In school I was cool. I was never a limelight moth. I did like dancing, though. But I never thought of myself as a Madhubala, Madhuri or Sridevi.It was Sanjay Sir who made me feel beautiful from inside. I'm extremely grateful to God to get me such a complex role. To be a Sanjay Leela Bhansali heroine after Manisha Koirala, Madhuri, Aishwarya Rai and Rani Mukherjee…what more could I ask for?"So is she flooded with offers after Saaariya?"Yes, They're all coming to my father. He's so proud of me. He keeps saying he never knew I could be such a capable actor and handle the media with dignity and grace. He isn't too demonstrative How can I think of anything else right now? I need to focus on my second film. I'm going into a different mood and style here," exults Sonam.
Talking about her new found fame and life after that she says,"I'm second-time lucky. If I had to choose one filmmaker after Sanjay Sir (Bhansali) I'd have chosen Rakesh Mehra. I haven't seen his Aks. But I fell in love with Rang De Basanti. Loved every performance in it.I love his courage, integrity and idealism. I went beyond conventional definitions of the heroine in Saawariya. I hope to do the same in Delhi 6. It's a great follow-up.I couldn't have chosen a better second film. The minute I met Rakeysh Mehra I was completely floored. We connected very well. I sat with him for five hours."While her performance in Saawariya has been lauded some Mumbai critics have slammed the film. Some people even say she got a raw deal in the plot."Three of them. I'll remember their names forever, she says with a laughter and adds, "I don't think I got a raw deal. In the second-half all the meaty dialogues are mine.When Sanjay Sir offered me the role he said it was complex and not author-backed. But he had faith that I could carry off."What about a report that some of her crucial scenes have been cut in Saawariya?"What utter nonsense," she reorts, "No crucial scene of mine has been cut. Just the usual editing that happens in every film. I don't know where this comes from.People are just creating friction through fiction. If this kind of loose talk gives some people a high, so be it. It doesn't effect my relationship with Sanjay Sir."
Ask her if her low self-worth come from her weight problem, Sonam says," Oh, but I was over-weight only for two years, not as a child.In school I was cool. I was never a limelight moth. I did like dancing, though. But I never thought of myself as a Madhubala, Madhuri or Sridevi.It was Sanjay Sir who made me feel beautiful from inside. I'm extremely grateful to God to get me such a complex role. To be a Sanjay Leela Bhansali heroine after Manisha Koirala, Madhuri, Aishwarya Rai and Rani Mukherjee…what more could I ask for?"So is she flooded with offers after Saaariya?"Yes, They're all coming to my father. He's so proud of me. He keeps saying he never knew I could be such a capable actor and handle the media with dignity and grace. He isn't too demonstrative How can I think of anything else right now? I need to focus on my second film. I'm going into a different mood and style here," exults Sonam.
Sunday, December 9, 2007
Fraud Investigators Brace for Arsons from Subprime Mortgage Crisis
Insurance fraud investigators are girding for an expected rash of arsons by cash-strapped homeowners trying to avoid foreclosures and ballooning monthly payments as the subprime mortgage crisis deepens.
"Home arsons for insurance money by mortgage-burdened owners are hardly new. The question is whether a new and virulent spike looms," says the Coalition Against Insurance Fraud.
Falling home values and tighter lending are making it difficult for many people to finance their way out of trouble. More than $50 billion in adjustable-rate mortgages were reset last month, thus intensifying the financial crunch on homeowners, says the coalition's Executive Director Dennis Jay.
"The subprime mortgage crisis is crushing untold thousands of homeowners under heavy mortgage payments they can't afford—especially as many monthly payments adjust upward sharply after introductory teaser periods of low-interest rates," he writes in an artcile in its publication, Fraud Focus.
Only a few suspected home torchings have surfaced so far. Samuel White allegedly burned down his Houston home for insurance money to dodge a scheduled foreclosure. An African-American, he allegedly spray-painted racial slurs around the interior to make the suspected crime appear to be a hate crime.
Suspected mortgage-related home arsons already have jumped 50 percent above the 2006 rate in California, though the numbers are still relatively small, the insurance department says.
The industry's Rocky Mountain Insurance Association also is watching its region closely. In fact, one Woodland Park owner allegedly torched his home just days before he was scheduled to evicted in a foreclosure.
"I don't believe that it's had time to ripple through the market yet to the point that many people have reached the point of desperation," EFI Global fire investigator Alex Ahart says. "But I absolutely think it's coming."
"Home arsons for insurance money by mortgage-burdened owners are hardly new. The question is whether a new and virulent spike looms," says the Coalition Against Insurance Fraud.
Falling home values and tighter lending are making it difficult for many people to finance their way out of trouble. More than $50 billion in adjustable-rate mortgages were reset last month, thus intensifying the financial crunch on homeowners, says the coalition's Executive Director Dennis Jay.
"The subprime mortgage crisis is crushing untold thousands of homeowners under heavy mortgage payments they can't afford—especially as many monthly payments adjust upward sharply after introductory teaser periods of low-interest rates," he writes in an artcile in its publication, Fraud Focus.
Only a few suspected home torchings have surfaced so far. Samuel White allegedly burned down his Houston home for insurance money to dodge a scheduled foreclosure. An African-American, he allegedly spray-painted racial slurs around the interior to make the suspected crime appear to be a hate crime.
Suspected mortgage-related home arsons already have jumped 50 percent above the 2006 rate in California, though the numbers are still relatively small, the insurance department says.
The industry's Rocky Mountain Insurance Association also is watching its region closely. In fact, one Woodland Park owner allegedly torched his home just days before he was scheduled to evicted in a foreclosure.
"I don't believe that it's had time to ripple through the market yet to the point that many people have reached the point of desperation," EFI Global fire investigator Alex Ahart says. "But I absolutely think it's coming."
Friday, December 7, 2007
Govt disburses Rs 190.5 million as relief for displaced people
The government has disbursed Rs 190.5 million to provide relief to people displaced from their homes due to the conflict in the country.
According to the Ministry of Peace and Reconstruction, the disbursed amount has already been sent to 73 of the total 75 districts of Nepal. As nobody was displaced in the remaining two districts, Manang and Mustang, the government did not send any relief money there. Few districts have already started to distribute the relief money to the people displaced by the conflict.
Nepali Congress general secretary Ram Chandra Poudel (File Photo)
Speaking at the discussion programme organized by the parliamentary finance committee Thursday, Peace and Reconstruction Minister Ram Chandra Poudel said 24 thousand displaced have been identified and the money would be provided to them as permanent relief.
“The government is unable to compensate the losses in property and other things the displaced endured during their ordeal,” Poudel said and added, “We can only provide some relief to those who have suffered during the conflict so that they can fend for themselves
According to the Ministry of Peace and Reconstruction, the disbursed amount has already been sent to 73 of the total 75 districts of Nepal. As nobody was displaced in the remaining two districts, Manang and Mustang, the government did not send any relief money there. Few districts have already started to distribute the relief money to the people displaced by the conflict.
Nepali Congress general secretary Ram Chandra Poudel (File Photo)
Speaking at the discussion programme organized by the parliamentary finance committee Thursday, Peace and Reconstruction Minister Ram Chandra Poudel said 24 thousand displaced have been identified and the money would be provided to them as permanent relief.
“The government is unable to compensate the losses in property and other things the displaced endured during their ordeal,” Poudel said and added, “We can only provide some relief to those who have suffered during the conflict so that they can fend for themselves
Wednesday, December 5, 2007
Swiss Banking News
10.10.2007 On October 8, 2007, Credit Suisse announce the launch of its latest index in the HOLTSelectTM series - global HS Market Neutral Index. HS Market Neutral Index offers provides investors with the opportunity to invest neutral strategy with low correlation to other asset classes in a rules-based market. Also, it reduces market risk as it ensures sector and region neutrality. To identify key investment opportunities, the index uses Credit Suisse's HOLT framework and provides gives access to HOLT's database of over 18 000 stocks from more than 55 countries. To construct the index, an initial universe of the top 275 North American, 300 European and 175 Japanese stocks is applied by market cap. Then, the universe is divided into 10 sectors that include financials, energy, information technology, telecoms, health care, materials, consumer discretionary, industrials, consumer staples and utilities. The top ranking 10% of each sector are taken. Then, the universe is divided into 50 sector and region categories, using 5 currency regions and the 10 above-mentioned sectors. The resulting index has an equal number of long and short stocks. It also ensures that there is no sector, regional or currency bias. Calculated by Standard & Poor's and rebalanced on a quarterly basis, the HS Market Neutral Index has a compounded annual return of 11.6% since January 1996. The index has delivered positive excess returns in 81% of quarters.
Foreign ministry to issue new passports
The foreign ministry has said that it will start to issue passports that can be read by machines from the year 2010 and has started to make necessary arrangements for it. The ministry decided to issue such passports on the direction of International Aviation Institute. A taskforce comprising officials of foreign ministry, home ministry and science and technology ministry has already started doing necessary homework for it and would submit its report to the concerned ministry in one months time, said a foreign ministry official.
Monday, December 3, 2007
U.S. Individual Life Insurance Premium
Windsor, CT, Dec 2, 2007 — LIMRA International reports U.S. individual life insurance premium increased twenty percent in third quarter 2007 resulting in an eight percent increase for the first nine months of 2007 over 2006.
"Corporate-owned life insurance (COLI) (cases of 200 lives or less) and private placement sales made a significant impact this quarter," said Ashley Durham, LIMRA analyst for product research. "In addition, companies noted that increased service to and expansion into new distribution channels (such as BGAs/MGAs/wholesalers) also affected sales tremendously.”
LIMRA also reports that total face amount in the third quarter rose by six percent over 2006, while the total number of new policies sold declined by one percent.
All products were up through the first nine months of 2007, especially universal and variable universal life, which were up 9 and 10 percent (23 and 55 percent for the quarter). Year-to-date, term life grew seven percent and whole life grew three percent.
The biggest portion of the sales increases seen through the third quarter stem from the brokerage channel. In fact, with the exception of WL, all products were up especially UL and VUL which were up 16 and 19 percent for the year and 28 and 110 percent for the quarter.
Universal life continued to hold the lion's share of annualized premium through the September of 2007 at 40 percent while term and variable universal life remained steady at 23 and 15 percent respectively. View the latest data table on U.S. life sales trends . For more statistics, visit the newly updated Data Bank .
"Corporate-owned life insurance (COLI) (cases of 200 lives or less) and private placement sales made a significant impact this quarter," said Ashley Durham, LIMRA analyst for product research. "In addition, companies noted that increased service to and expansion into new distribution channels (such as BGAs/MGAs/wholesalers) also affected sales tremendously.”
LIMRA also reports that total face amount in the third quarter rose by six percent over 2006, while the total number of new policies sold declined by one percent.
All products were up through the first nine months of 2007, especially universal and variable universal life, which were up 9 and 10 percent (23 and 55 percent for the quarter). Year-to-date, term life grew seven percent and whole life grew three percent.
The biggest portion of the sales increases seen through the third quarter stem from the brokerage channel. In fact, with the exception of WL, all products were up especially UL and VUL which were up 16 and 19 percent for the year and 28 and 110 percent for the quarter.
Universal life continued to hold the lion's share of annualized premium through the September of 2007 at 40 percent while term and variable universal life remained steady at 23 and 15 percent respectively. View the latest data table on U.S. life sales trends . For more statistics, visit the newly updated Data Bank .
Subscribe to:
Comments (Atom)