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ECB holds rates, says no move for extended period

The European Central Bank left interest rates at a record low 0.5 per cent on Thursday and affirmed that they will remain there for some while to come and could yet fall further. Source: www.financialexpress.com Impact: The ECBs expectation was justified by a subdued inflation outlook and a weak economic environment. But low rates are not without side effects. They can lead to reforms and necessary structural changes being deferred. Financial stability risks can grow. These side effects increase with time in the low interest rate phase. The commitment to keep rates low may be intended to amplify the effect of the current low rate by reassuring investors that they can count on easy money for the foreseeable future.

RBA expected to cut interest rate


The Reserve Bank of Australia is expected to cut its official cash rate by 25 points on Tuesday, which would put it on a par with the Reserve Bank of New Zealand's official cash rate of 2.5%. Fuelling expectations of an Australian cut are lacklustre economic growth reports, sluggish jobs growth and subdued inflation. Source: www.radionz.co.nz Impact: This move might help recover from rising unemployment rates in Australia and economic slowdown of China's economy which is the biggest buyer of Australia's coal and iron ore. The news has sparked fears that the Australian economy is set to remain sluggish, pushing unemployment rates higher. The mining investment boom also continues to fade. However this may also lead to recession. At the end of the day, it will be the unemployment rate, inflation and growth in major trading partners that determine what the RBA does, and that looks to be cutting the cash rate to 2.5 per cent. A cut will provide a further cash flow boost for small business and mortgage holders as well as providing a further incentive to ramp up spending and investment. This will ensure the economy moves towards the end of 2013 with some upside momentum and will be poised for a decent acceleration into 2014.

Foreign banks in UK facing capital blow


Foreign investment banks in Britain face a shortfall of up to 29 billion to meet new EU capital rules aimed at shielding taxpayers from having to rescue banks again. The rules implement new global standards known as Basel III in the 28-country bloc. Source: www.gulf-daily-news.com Impact: It results in forcing banks to roughly triple the amount of capital they must hold compared with before the 2007/09 financial crisis when several banks were bailed out. It is estimated that big deposit-taking banks face an annual cost of 9.5bn ($14.4bn) at most to comply with the rules.

HSBC asks foreign diplomats to close accounts


HSBC has asked foreign diplomats in London to close their accounts as part of efforts to reduce business risks. Among those who have been asked to stop using the UK's biggest bank are the Vatican, Papua New Guinea and the West African nation of Benin. Source: www.independent.co.uk Impact: HSBC gave them 60 days to move their money. The bank feared being exposed to embassies after being caught up in a costly money laundering scandal. The situation has been worsened by other banks refusing to take their business and the Foreign Office has had to get involved. Embassies and consulates desperately need a bank, not just to take in money for visas and passports, but to pay staff wages, rent bills, even the (London road) congestion charge. P.S: The United States agreed fines with HSBC of $1.9 billion (1.4 billion euros) last year over allegations of money laundering that were said to have helped Mexican drug cartels, terrorists and Iran.

Bank of the Philippine Islands (BPI) Partners with IBM to Transform Banking IT Operations and Strengthen Client Services
Bank of the Philippine Islands (BPI) and IBM announced today the signing of a strategic partnership agreement to outsource BPI's existing IT infrastructure services to IBM. Under the agreement, IBM will take over BPI's IT network and data center activities. Source: www.4-traders.com Impact: This will allow BPI's Information Systems team to better concentrate on the bank's strategic initiatives. This engagement will help BPI focus on more strategic business areas while IBM manages its day-to-day IT operations. IBM will provide smarter, scalable IT services and capabilities that will enhance and accelerate BPI's transformation for growth. P.S: BPI is the recognized leader in electronic banking, having introduced most of the firsts in the industry. BPI enjoys the highest credit ratings from international rating agencies. It is the only investment grade local bank in the country as rated by the Fitch Ratings agency.

UAE banks enjoy ample liquidity and funding alternatives


Top UAE banks paying off the emergency loans they previously took from the Ministry of Finance is a sign they now have ample liquidity and funding alternatives, according to banking industry experts. Source: www.gulfnews.com Impact: The inter-bank rates have been falling for the last eight months, which indicates the liquidity in the UAEs banking system is improving. The banks can hence pay off their MoF loans which are expensive. Every year, the interest rates would have gone up 20-50 bps under the step-up clause, so it made sense for the banks to make an early repayment. P.S: The Central Bank of the UAE and the Ministry of Finance in total made available Dh120 billion to the local banks to provide the much-needed liquidity boost. In October 2008, the finance ministry

poured Dh25 billion into bank deposits to boost liquidity at banks, the first tranche of the Dh70 billion rescue facility. It deposited another Dh25 billion into banks in November the same year.