Banking system – Nioga http://nioga.net/ Fri, 23 Sep 2022 12:52:55 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://nioga.net/wp-content/uploads/2021/10/icon-120x120.jpg Banking system – Nioga http://nioga.net/ 32 32 bank in india: the liquidity of the banking system becomes deficient, for the first time in more than three years https://nioga.net/bank-in-india-the-liquidity-of-the-banking-system-becomes-deficient-for-the-first-time-in-more-than-three-years/ Wed, 21 Sep 2022 04:47:00 +0000 https://nioga.net/bank-in-india-the-liquidity-of-the-banking-system-becomes-deficient-for-the-first-time-in-more-than-three-years/ The liquidity of the banking system fell into deficit for the first time in more than three years, due to the effect of advance tax payments and soaring government cash balances. Net cash injection stood at Rs 21,873.43 crore on Tuesday, bucking the trend of a surplus for the first time since May 2019, according […]]]>
The liquidity of the banking system fell into deficit for the first time in more than three years, due to the effect of advance tax payments and soaring government cash balances. Net cash injection stood at Rs 21,873.43 crore on Tuesday, bucking the trend of a surplus for the first time since May 2019, according to Reserve Bank of India (RBI) data compiled by India Ratings. . Net excess liquidity in the banking system was Rs 8.03 lakh crore about a year ago.

This sparked speculation that the central bank may have to detail its liquidity management policy in the next monetary policy, brushing aside commentary on interest rate hikes, suggesting a possible shift in stance.

“The loss-making banking system, although frictional, validates the shift in policy strategy from accommodative to strict,” said Soumyajit Niyogi, head of India Ratings. “This will allow the MPC (monetary policy committee) to change the policy stance from neutral to accommodative.”

After a review of liquidity conditions, the RBI on Wednesday decided to conduct an overnight variable rate repo (VRR) auction on Thursday to inject liquidity into the banking system. ET had reported on September 19 that the RBI was likely to hold a pension auction. The central bank will announce its monetary policy on September 30.

“The RBI is likely to focus on longer term floating rate repos to ease systemic liquidity with less likelihood of reversing the recent rise in the CRR (cash reserve ratio),” Aditi Nayar said. Chief Economist at ICRA Ratings. “Some indications on liquidity should accompany the monetary policy outcome next week. While frictional stress from fiscal outflows would ease going forward, we are awaiting data on sustainable liquidity to assess whether this- it has also decreased.

The overnight interbank rate, at which banks borrow and lend to each other, climbed to 5.85%, 45 basis points higher than the repo rate, now at 5.40 %, according to data from the Clearing Corporation of India. One basis point is 0.01 percentage point.

The weighted average rate (WAR) in the interbank call market was 5.72% compared to 5.17% last Thursday and 5.20% on Friday, reflecting a rise of more than half a percentage point.

“RBI will ultimately succeed in keeping interbank rates close to the operational repo rate,” said Ashhish Vaidya, Managing Director of DBS Bank. “Removing housing means tighter financial conditions, which also points to higher rates and less liquidity.”

The weighted average rate (overnight) in the tri-party repo market (TREP) increased by 5.74%. The weighted average rate closed at 5.65% against 5.30% on Thursday against 5.27% on Friday last week. Banks, bond houses, corporations, insurance companies and mutual funds can participate on this platform.

“Given the pressure on the rupiah which is expected to continue alongside inflationary forces, short-term rates must also remain elevated as a first line of defense,” Niyogi said. The rupee ended Wednesday at 79.98 against the dollar, down 0.28%, after weakening to 80.01 intraday.

Treasuries and shorter duration sovereign securities yielded 16 to 24 basis points more in the primary market compared to last week.

“Once the repo rate hits 6%, the MPC might change the stance to neutral, in sync with the upper inflation tolerance level,” Niyogi said.

Retail price inflation as measured by the consumer price index accelerated to 7% in August from 6.71% a month earlier, reigniting fears of an acceleration in rate hikes to tame price.

RBI Governor Shaktikanta Das had mentioned being vigilant on the liquidity front in the August policy.

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A more specialized banking system would transform the country https://nioga.net/a-more-specialized-banking-system-would-transform-the-country/ Tue, 20 Sep 2022 17:40:33 +0000 https://nioga.net/a-more-specialized-banking-system-would-transform-the-country/ Ghana needs more specialized banks to drive the nation’s development agenda, said Reverend Dr Samuel Worlanyo Mensah, an economist. Reverend Dr Mensah, Executive Director of the Center for Greater Impact Africa, said most local entrepreneurs and businesses depend on banks for start-up capital and other financial assistance, hence the need for specialist banks to support […]]]>

Ghana needs more specialized banks to drive the nation’s development agenda, said Reverend Dr Samuel Worlanyo Mensah, an economist.

Reverend Dr Mensah, Executive Director of the Center for Greater Impact Africa, said most local entrepreneurs and businesses depend on banks for start-up capital and other financial assistance, hence the need for specialist banks to support each sector.

He also urged the government to step up measures to support industrialization and productivity by creating an enabling environment for local people to be well-established and able to compete in the global market.

Rev. Dr. Mensah told the Ghana News Agency Tema Regional Office Conference Hall Dialogue Platform.

The GNA Tema Industrial News Hub Boardroom Dialogue is a media think tank platform for state and non-state and commercial and commercial operators to communicate with the world and address global issues with Ghanaian expertise.

Rev. Dr. Mensah lamented that most banks in the country are doing normal universal banking business and most are not ready to help local entrepreneurs stand up.

He said again that most small businesses were stuck because the financial institutions supporting them had dissolved.

He said the absence of a strong national development plan module to develop the country has contributed to the economic crisis the country is going through recently despite COVID-19 and the announced Russian-Ukrainian war.

He said that the government must plan so that in the next ten to 15 years it develops strong entrepreneurs who can support the economy, reiterated that the cleaning up exercise in the banking and financial sector was commendable to the time it was undertaken but unfortunately the COVID -19 pandemic had revealed that the decision was not economically motivated.

Mr. Francis Ameyibor, Tema Regional Director of the Ghana News Agency, reiterated that the media landscape is undergoing rapid transformation and the old system of institutions holding face-to-face events in a large conference hall is disappearing.

He said, “From now on, don’t expect more invitations to headquartered events, newsroom managers need to embrace new ways of collecting and disseminating news.”

Mr. Ameyibor said: “Due to the global transformation of communication and information, state and non-state institutions that organize conferences, meetings, seminars and invite journalists to cover are rapidly resorting to the use Zoom, Skype and other web platforms for meetings.

“Now that web-based meetings have become enduring and the old system of organizing a large conference is dead and gone, media professionals should no longer seek to focus on events.”

Mr. Ameyibor said GNA-Tema has moved forward to put in place parameters to engage strategic stakeholders consistently to set the stage to be more active and profitable for the company.

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Banking system sound, well capitalized and provisioned: RBI Gov https://nioga.net/banking-system-sound-well-capitalized-and-provisioned-rbi-gov/ Mon, 05 Sep 2022 16:07:30 +0000 https://nioga.net/banking-system-sound-well-capitalized-and-provisioned-rbi-gov/ India has a six-sided buffer, including a favorable growth differential, lower inflation than many of its trading partners, a cushion of foreign exchange reserves and a strong banking system built around its economy. , which every participant in the financial markets should bear in mind, according to the Governor of the Reserve Bank of India, […]]]>

India has a six-sided buffer, including a favorable growth differential, lower inflation than many of its trading partners, a cushion of foreign exchange reserves and a strong banking system built around its economy. , which every participant in the financial markets should bear in mind, according to the Governor of the Reserve Bank of India, Shaktikanta Das.

Das pointed out that India is widely seen as one of the fastest growing major economies in the world in 2022, while other major economies could experience a recession or a considerable moderation in their growth momentum.

“India’s favorable growth differential gives investors confidence. This is amply reflected in the surge in portfolio inflows into India since July 2022. Inflows in August alone, at $7.5 billion, are more than 16 times net inflows in July,” he said. declared at the annual FIMMDA event.

“The terms of trade shock has eased”

The Governor observed that the recent decline in commodity prices and supply chain pressures have eased the terms of the trade shock that India has faced in the aftermath of the pandemic and war.

With the resulting easing of imported inflationary pressures, India’s CPI inflation peaked in April 2022, he said.

Additionally, India’s average August crude basket price of $97.4 per barrel came in lower than we had assumed for the full year at $105 per barrel in the August 5 monetary policy resolution. . In fact, India’s inflation is lower than many of its trading partners.

Das noted that the changing outlook for commodity prices also changes the assessment of India’s current account deficit in 2022-23, which is now expected to remain well below sustainable levels.

“At a time when food security is threatened worldwide by shortages and soaring prices, India’s large buffer stocks of food grains supplement domestic supply and ensure national food security,” he said. -he declares.

Das pointed out that India’s foreign exchange reserves of $561 billion (as of August 26) provide a cushion against external shocks, as demonstrated day by day. In addition, the reserves are also reinforced by term assets.

Banking system

“The health of our banking system is healthy. It is well capitalized and well provisioned, with better asset quality. This is an essential pillar of financial stability and should have a positive impact on financial markets,” he said.

According to Das, reflecting these fundamental factors, the rupee has moved in an orderly fashion over the current fiscal year so far.

“He held his ground in a world of sharp depreciation in other currencies of emerging market economies and advanced economies.”

“While the US Dollar has appreciated by 11.8% in the current financial year so far, the INR has depreciated by 5.1%, which is among the lowest in the world “said the governor.

The RBI is regularly present in the market, providing liquidity and confidence to facilitate its smooth and normal functioning.

Monetary Policy

Going forward, monetary policy will remain vigilant, agile and calibrated to ensure price stability while supporting growth, Das said.

The Governor said there are certain areas, such as service delivery to small customers and retailers, where the performance of market players can still improve.

“While there has been a steady increase in the number of secondary market transactions under the RBI Retail Direct Scheme, there remains considerable room for improvement to ensure liquidity for retail investors throughout trading hours. market on the NDS-OM platform.”

“We continue to receive representations from customers, particularly those who trade forex with small notes, about fair pricing of forex products,” he said.

A research study conducted by some RBI officers found empirical evidence of the presence of considerable price discrimination in the OTC FX derivatives market. The services provided by banks on the FXRetail platform require special attention. Response time and customer onboarding on the platform can be faster.

Published on

September 05, 2022

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FCM Bank Malta selects DXC Technology and Temenos for the modernization of its central banking system https://nioga.net/fcm-bank-malta-selects-dxc-technology-and-temenos-for-the-modernization-of-its-central-banking-system/ Tue, 30 Aug 2022 07:07:30 +0000 https://nioga.net/fcm-bank-malta-selects-dxc-technology-and-temenos-for-the-modernization-of-its-central-banking-system/ By Leandra Monteiro Today Digital transformation DXC Technology FCM Bank Malta DXC Technology, a global Fortune 500 technology services partner, has partnered with solutions provider Temenos to lead the digital transformation of the critical IT architecture of FCM Bank, one of Malta’s leading providers of savings products and to determined time. Marcel Homolka, CEO of […]]]>

By Leandra Monteiro

Today

  • Digital transformation
  • DXC Technology
  • FCM Bank Malta

DXC Technology, a global Fortune 500 technology services partner, has partnered with solutions provider Temenos to lead the digital transformation of the critical IT architecture of FCM Bank, one of Malta’s leading providers of savings products and to determined time.

Marcel Homolka, CEO of FCM Bank Limited said: “A successful bank must be quick and flexible to meet the needs of its customers. FCM Bank worked with DXC Technology to deliver and implement the Temenos banking platform, which the bank considers to be the best in the industry. We are also launching a new online banking system that is up-to-date, intuitive and easy to use. »

Leveraging DXC’s expertise in banking and capital markets, and software from Temenos, FCM Bank replaced its legacy core banking system with a modern digital platform to support its growth strategy. The new system went live in June 2022, with DXC supporting the migration of FCM Bank’s applications, offerings and customers from legacy systems to the new Temenos platform.

By moving to the new open and agile platform, FCM Bank will benefit from better protection against cyber threats, faster time to market for new products and services, and an overall improvement in efficiency. The Temenos platform also provides functionality for transaction processing, payments, financial crime mitigation, and data analytics.

FCM Bank’s new core banking solution has been designed to anticipate the current and future expansion plans of the bank and its parent company SAB Financial Group. It leverages the open Temenos platform with functionality for retail and business accounts, deposits, loans, and payments. DXC and Temenos’ corporate banking experts worked together to deliver the transformation, utilizing expertise from Luxoft, a DXC company and one of Temenos’ leading systems integration practices globally.

Andrew Haigh, Head of Banking and Capital Markets EMEA, DXC Technology said, “DXC has over 45 years of banking and capital markets experience, managing over 250 million customer deposit accounts and 275 million cards for the world’s leading banks. Building on this experience, DXC is proud to partner with FCM Bank in this exciting new chapter of growth.

Philip Barnett, President of Strategic Growth, Temenos added, “We are delighted to see FCM Bank complete the modernization of its core banking services, moving from legacy systems to a modern, agile and open platform for composable banking. Our close collaboration with DXC and our joint go-to-market helps banks of all sizes eliminate the burden of legacy IT systems and speed time to market. This successful go-live is a major step in the digital transformation of the bank. Through the Temenos platform, FCM Bank will benefit from rapid time-to-market for new banking products and services to provide innovative solutions to its customers now and in the future.

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Acting CBE Governor starts term with reassuring message: Egypt’s banking system is used to overcoming challenges https://nioga.net/acting-cbe-governor-starts-term-with-reassuring-message-egypts-banking-system-is-used-to-overcoming-challenges/ Sat, 27 Aug 2022 07:00:00 +0000 https://nioga.net/acting-cbe-governor-starts-term-with-reassuring-message-egypts-banking-system-is-used-to-overcoming-challenges/ Hassan Abdalla, acting governor of the Central Bank of Egypt (CBE), took office last week with a message of comfort to Egyptians, saying Egypt’s banking sector is strong and capable of supporting the economy. During his first meeting with the leaders of banks operating in the Egyptian market last Wednesday, Abdalla said that although this […]]]>

Hassan Abdalla, acting governor of the Central Bank of Egypt (CBE), took office last week with a message of comfort to Egyptians, saying Egypt’s banking sector is strong and capable of supporting the economy.

During his first meeting with the leaders of banks operating in the Egyptian market last Wednesday, Abdalla said that although this step is critical, the Egyptian banking system is used to overcoming challenges.

Abdalla was also keen to point out that all employees in the Egyptian banking sector are one family, saying, “We are all one family. There will be disagreements, and that’s normal, but in the end, we stick together.

Abdalla also made a surprising announcement appointing Hisham Ezz Al-Arab, former chairman of the Commercial International Bank (CIB); and Mohamed Naguib, former chairman of Saib Bank, as his advisers.

After the announcement, Ezz Al-Arab took to his official Facebook account to say, “May the lord be with us in the discharge of our duties. I am convinced that we will succeed despite the challenges.

Ezz Al-Arab served as Chairman and CEO of CIB from 2001 to October 22, 2020.

He has approximately 45 years of extensive banking experience. Before joining CIB, he held several positions at Deutsche Bank, JP Morgan and Merrill Lynch in several countries, including Egypt, the United States and Bahrain.

Ezz Al-Arab also served as Chairman of the Federation of Egyptian Banks (FEB) between 2013 and 2016/2017 and 2020.

In addition, he has held several other positions including Co-Chair of the Emerging Markets Advisory Board of the Institute of International Finance (IIF), Member of the MasterCard Middle East Regional Advisory Board, Non-Executive Member of the Fairfax Africa Board of Directors, in addition to being a non-executive member of Ripplewood Advisers MENA Holdings ltd.

As for Naguib, he was Chairman and CEO of the Arab International Bank (SAIB) from 2011 to 2018 and has 40 years of experience in banking, leasing and credit.

Naguib has served as Chairman of the Board of Directors of Banque Misr in Germany, Vice Chairman of the Board of Directors of Banque Misr and Member of the Board of Directors of the International Leasing Company (incolease ), the National Bank of Egypt (NBE), the Financial Holding Company for Civil Aviation (CIAF), the General Authority for Investment and Free Zones (GAFI) and the Micro, Small and Medium Enterprises Development Agency (MSMEDA).

CBE imposes new banking regulations

In his first decision as acting governor of the CBE, Abdalla removed the maximum deposit limit for individuals and businesses at bank branches and ATMs.

It also decided to increase the maximum daily cash withdrawal limit for individuals and businesses at bank branches from EGP 50,000 to EGP 150,000 and to maintain the daily limit of EGP 20,000 for ATM withdrawals.

The CBE said the decision is an amendment to a decision issued on April 22, 2020 regarding the reduction of maximum cash withdrawal and deposit limits for individuals and businesses as part of the precautionary measures taken to deal with the repercussions. of the coronavirus pandemic.

Commenting on these new decisions taken by the CBE, the former Vice President of Blom Bank Egypt, Tarek Metwally, said that appointing Ezz Al-Arab and Naguib as advisors to the governor was the right choice, especially since they are known for their efficiency and diverse expertise.

Metwally explained that this difficult step requires concerted efforts to develop the banking sector and overcome these challenges.

Regarding the decision on deposit and withdrawal limits, Metwally said: “I think it is a natural procedure, and I expect more decisions to be made by the ECB over the period. to chart the course and pave the way for more policies. ”

He explained that the origin of the cap decisions was the exceptional circumstances of the pandemic – they were meant to be temporary. When other developments emerge, these decisions will naturally have to be reconsidered.

Metwally also predicts that the CBE would also reconsider initiatives that have previously been put forward to support a number of economic sectors, including the SME support initiative, the cost of which would be well in excess of revenues for the sector.

In addition, he expects the provision of foreign currency for import operations to be reconsidered, as well as recent decisions taken in this regard due to their impact on business and employment in the light upcoming CBE policies and the importance of meeting obligations.

Finally, he called on everyone to give the new CBE leadership a chance to do its job, saying “the mission is difficult, but not impossible.”



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Banking system credit growth is on track, but how long will the good times last? https://nioga.net/banking-system-credit-growth-is-on-track-but-how-long-will-the-good-times-last/ Sat, 27 Aug 2022 05:58:48 +0000 https://nioga.net/banking-system-credit-growth-is-on-track-but-how-long-will-the-good-times-last/ By Jaspreet Singh Arora Amid all the din of rising costs of living and a possible global economic downturn, news of a pick-up in non-food credit growth is often ignored. After lackluster mid-single-digit growth over a two-year period, growth in non-food credit accelerated. Data collected by the RBI from 33 regular commercial banks (representing about […]]]>

By Jaspreet Singh Arora

Amid all the din of rising costs of living and a possible global economic downturn, news of a pick-up in non-food credit growth is often ignored. After lackluster mid-single-digit growth over a two-year period, growth in non-food credit accelerated. Data collected by the RBI from 33 regular commercial banks (representing about 90% of total non-food credit employed) shows that in the first half of June 22, outstanding credit increased by 13.7% year-on-year to reach 121 trillion rupees. .

The percentage should not be scoffed at, as it marks a two and a half year high clearly indicating that growth has rebounded to pre-Covid levels. Before determining whether or not this trend is sustainable, let’s first analyze in a little more detail which segments are driving this growth.

Distribution sector

As the charts below show, the brightest segment remains the retail lending segment. Constituting about 29% of total non-food loans, this segment experienced rapid growth of 18% year-on-year. In fact, retail lending never really slowed down, even during the pandemic, after growing in double digits the previous two years. In the personal lending segment, while home loans were up 15% year-on-year, auto loans, credit cards and consumer durables were the main drivers. This would indicate continued traction in middle/upper class urban consumption, as this is the segment that has been relatively less impacted by the pandemic. However, it should also be remembered that rising vehicle and durable goods prices following rising commodity prices are also factors at play here.

Also read: Sensex, Nifty could drop 10-15% in months, says Sandip Sabharwal; add ICICI Bank for the long term | INTERVIEW

Industrial sector

Turning now to the industrial sector (16% of total non-food loans), growth seems relatively moderate at 9.5% year-on-year. However, if we only scratch the surface, we will see that credit to medium, small and micro businesses has jumped 34% year-on-year over the past year. As a reminder, these segments have been the most impacted by the pandemic. The revival of economic growth coupled with the MSME package of Rs 3 trn (lakh crs) announced by the government during the pandemic period has helped this sector to come out of stress.

  • At a somewhat more granular level, some of the industries that have driven credit growth have large numbers of MSMEs in their value chain. These include food, drug and pharmaceutical processing, rubber and plastic products, and electronics. In this context, we believe that regional banks with a niche clientele within the MSME segment should do well in the future.
  • Within the industrial sector, credit growth for the infrastructure segment (38% of industrial sector loans) was driven by sectors such as telecommunications and roads. While the telecom sector has been in debt for a long time, the future will not be much different given the huge investments required to establish a 5G ecosystem. Investment in road construction is one of the few bright spots when it comes to building infrastructure. With the pace of execution accelerating, credit growth has been solid at 18% year-on-year over the past year despite a high base of 30%.

Service sector

In the services sector (25% of total non-food loans), growth was stable at 12.8% year-on-year. Unsurprisingly, this was driven by 15-18% year-on-year growth in the retail and wholesale segment. Just like the MSME sector, business activities have also slowed down during the pandemic.

Also read: Jefferies’ Chris Wood keeps India portfolio unchanged despite risk of Wall Street-led correction

The debatable question now is whether this growth is sustainable or may simply prove short-lived given the outlook for higher interest rates in the future and a likely decline in commodity prices. .

Our point of view

The medium-term outlook for credit growth looks promising for the following reasons:

  1. With the resumption of urban consumption growth, it can be expected that the retail lending segment will continue to do well. One of the factors driving this development is the national IT sector, which has seen an increase in recruitment and an increase in average salary levels. Traditionally, the fortunes of the computer industry have been a major driver for real estate, personal vehicles and consumer durables in certain regions. With crude oil prices remaining firm, many Middle Eastern economies have seen better growth over the past 12 to 18 months. This should ideally result in increased remittances to India, which is also a key driver of personal consumption in some states.
  2. The recent recovery of real estate activities after a long period of crisis is also expected to continue for some time, leading to growth in housing loans, at least in urban areas.
  3. On the capital expenditure front, the next few years will see large investments in sectors such as chemicals and pharmaceuticals (China plus 1 factor), defense equipment and electronics (government push to become “Atmanirbhar “), roads, railways (new orders for wagons, locomotives and passenger cars), sugar (ethanol plants), paper, renewable energies (solar and wind farms), transnational gas pipelines (and related infrastructure such as CNG stations) and oil refining and petrochemicals (IOC, HPCL).
  4. The multitude of PLI schemes announced by the government for 14 sectors so far will be another driver for further investment in sectors such as automotive and automotive accessories, textiles/clothing, white goods, electronics and computer equipment, pharmaceuticals, etc. Investments from large industries will incentivize MSMEs serving these sectors to follow suit.

Conclusion

Given the fairly comfortable or improving portfolio of stressed assets (NPA) for many private and public sector banks, they may be a bit more aggressive in growth. Without this buffer, bank credit growth could have slowed in a scenario of higher interest rates. In addition, with NBFC spreads likely to shrink due to rising interest rates, banks, with their low-cost liabilities, are better positioned to drive credit growth going forward. In summary, we believe that barring an unforeseen event like Covid, the domestic banking sector is able and willing to take advantage of the many opportunities for credit growth.

(Jaspreet Singh Arora is the Chief Investment Officer (CIO), Research & Ranking. Opinions expressed are those of the author.)

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The Determinants of Excess Reserves in the PNG Banking System https://nioga.net/the-determinants-of-excess-reserves-in-the-png-banking-system/ Thu, 25 Aug 2022 07:00:00 +0000 https://nioga.net/the-determinants-of-excess-reserves-in-the-png-banking-system/ This presentation examines why profit-maximizing commercial banks in PNG require excess unremunerated reserves. An autoregressive distributed lag model is used to estimate the determinants of excess reserves using time series data for the period January 2002 to December 2017. The model includes precautionary and inadvertent factors that affect banks’ excess reserves commercial. The results suggest […]]]>

This presentation examines why profit-maximizing commercial banks in PNG require excess unremunerated reserves. An autoregressive distributed lag model is used to estimate the determinants of excess reserves using time series data for the period January 2002 to December 2017. The model includes precautionary and inadvertent factors that affect banks’ excess reserves commercial. The results suggest that the discount rate, demand deposit volatility, and private sector deposits contribute to the accumulation of excess reserves, while foreign exchange reserves, credit to the private sector, and treasury bill rates effectively reduce pressure on excess reserves. The reserve requirement ratio, however, is not effective in influencing the demand for excess reserves. This empirical analysis concludes that involuntary variables are the main determinants of excess reserves in PNG – and suggests that to deal with persistent excess reserves in the banking system, the central bank could consider potential policy interventions such as paying interest on reserves that commercial banks hold above the required limit and stimulate demand for domestic credit.

Speaker
Thomas WangiPhD Scholar, Arndt-Corden Department of Economics, ANU

This seminar is free and open to the public. Registration is required to attend the seminar. You can attend at the Brindabella Theater (Crawford School of Public Policy, ANU), the MBA Suite (SBPP building, UPNG) or online via Zoom.

The ANU-UPNG Seminar Series is part of the partnership between the ANU Crawford School of Public Policy and the UPNG School of Business and Public Policy, supported by the PNG-Aus Partnership.

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Slammed doors and legacy flaws https://nioga.net/slammed-doors-and-legacy-flaws/ Wed, 24 Aug 2022 12:01:00 +0000 https://nioga.net/slammed-doors-and-legacy-flaws/ Despite Bitcoin (BTC)’s promise of a peer-to-peer world, building a first Bitcoin business in 2022 still requires third-party intermediaries. Whether it’s seed capital, using fiat currency, or simply operating fiat payment rails, bitcoin activity means interaction with the legacy financial system. For the vast majority of bitcoin-based businesses, that means they probably need a bank. […]]]>

Despite Bitcoin (BTC)’s promise of a peer-to-peer world, building a first Bitcoin business in 2022 still requires third-party intermediaries. Whether it’s seed capital, using fiat currency, or simply operating fiat payment rails, bitcoin activity means interaction with the legacy financial system.

For the vast majority of bitcoin-based businesses, that means they probably need a bank.

Cointelegraph spoke to Bitcoin-only businesses about their experiences working with banks, given that Bitcoin ultimately gets a lot of bad press in the mainstream media. Additionally, some of the banking industry’s biggest proponents love minting Bitcoin. Ben Price, founder of the Bitcoin Company, recently shared that the company has lost “dozens upon dozens of banking partnership opportunities just because we are a Bitcoin company.”

Price was a product manager at Visa for years before founding the Bitcoin Company. He told Cointelegraph that “the goal of the Bitcoin Society is to bring Bitcoin to the world” as it is “a real catalyst for the betterment of our civilization.”

Price became frustrated while working at Visa – not because he was a “hardcore Bitcoin maxi”, but because of the slow progress. According to him, projects related to payments, central bank digital currencies (CBDC), non-custodial wallets and others have been regularly shut down or mothballed. Additionally, the inner workings of the legacy financial system have been called into question. Carman told Cointelegraph:

“And, at the end of the day, Visa kind of serves the banks. They do not serve consumers.

The Bitcoin Company is part of a new line of Bitcoin “neobanks” – banks that treat Bitcoin as a native currency alongside fiat. From The Bitcoin Company in the US to Xapo in Gibraltar to CoinCorner in the UK, Bitcoin neobanks are flexing their financial muscles. In short, they allow people to live on a bitcoin standard and easily interact with the legacy financial system.

Carman explains that Bitcoin neobanks derive from a desire to “hyperbitcoinize” – that is, to drive the mass adoption of Bitcoin – while admitting that only a smaller group of people will adopt Bitcoin like the cypherpunks the had originally planned. He divides Bitcoin users into two groups: cypherpunks who prioritize privacy, bury their seed phrases in the yard, mix their coins, and run Bitcoin nodes; and the remaining 95% of people — like his mother and sister, he explains — who will likely need access to a Bitcoin neobank. According to Carma

“Bringing Bitcoin to most people around the world will likely require a gradual transition from legacy fiat systems to a Bitcoin standard. And to do that, you need to provide both pools.

However, why can’t banks integrate Bitcoin and capitalize on the new technology and profit from Bitcoin’s success? Christian Ander, founder of Swedish bitcoin exchange BTCX, told Cointelegraph, “Many banks have a policy of not engaging with or integrating bitcoin and crypto companies. It doesn’t matter whether or not the company complies with the regulations.

Ander visiting the bank that integrated his company. Source: Twitter

Danny Brewster, CEO of bitcoin trading platform FastBitcoins, told Cointelegraph that bitcoin-only banking firms, such as FastBitcoins, have persisted since 2013. However, banks were initially unwilling to do business with bitcoin due to a ” lack of understanding,” Brewster told Cointelegraph.

Fast forward to 2022, and “Despite regulatory clarification and extensive scrutiny, the broader crypto market is a mess with companies like LUNA, 3AC, and more.” Brewster explained that due to the Terra implosion and subsequent crypto contagion, banks are even more risk averse. He said:

“Banks see this, combined with payment fraud issues, as a huge red flag and headache that they want to avoid. […] I used to naively think it was because they were afraid of being replaced by bitcoin, and time has proven that thesis wrong.

Brewster said crypto scams, wash trade and the darker side of crypto are tarnishing Bitcoin’s reputation: “In one case at a bank, over 90% of all payment fraud cases hit the “crypto” at some point in the flow, it is obvious why as the resulting transaction gives the criminal irreversible funds at the end of the transaction. The constant recurrence is likely to color one’s opinion of Bitcoin , he explains, because Bitcoin and crypto are considered one and the same:

“As you spend your days dealing with this, it will impact your perspective on all things space, and these people also have a say in who the bank chooses to do business with.”

Anders explained that there are many reasons behind banks’ reluctance to integrate bitcoin businesses, from “incompetent anti-money laundering staff and routines regarding bitcoin and crypto assets” to “old money versus new.” [money]debate. However, he suggested that it is wrong to think that Bitcoin is a threat to the bank’s core business model. “In fact, it is not, but the central bank’s digital currency ballast.”

Brewster argued that “CBDCs will follow the path of every announced shitcoin partnership,” suggesting their eventual demise. But if CBDCs are successful, commercial banks could face some competition from an unlikely source.

Related: Bank uses 56 times more energy than Bitcoin: Value Chain Report

Finally, Hal Finney, the first person to mine Bitcoin after Satoshi Nakamoto, predicted the existence of Bitcoin-backed banks in 2010. Finney pointed to scalability issues as the reason for these banks, although the Lightning Network evolved to allow Bitcoin to process infinitely more. transactions. In the meantime, although workarounds exist, companies that favor Bitcoin may be forced to continue to “partner” with banks.

Additionally, Carman conceded that while partnering with banks is a headache, “many merchant partners refuse to work with us (i.e., let us sell their gift cards) because we allow users to buy with bitcoin. […] So it’s not all on the banking side. Indeed, while there are encouraging signs of payment adoption by Bitcoin merchants, fiat is king while FUD reigns almighty.