Archive for September 6th, 2016

How is it that Nepal understands central banking matters better than advanced world?

September 6, 2016

We have seen two top govt executives behind the financial crisis join the Financial Street after their assignments. Mervyn King, head of BoE joined Citibank and José Manuel Barros head of EU commission joined GS. It is amazing how these things continue despite much opposition.

I was just alerted to this development in Nepal where its central bank top officials are barred from joining banks for lifetime. And lower level executives can join only after a cooling period:

Retired staff of Nepal Rastra Bank (NRB) will be barred from joining banks and financial institutions (BFIs) for up to three years after leaving their jobs.

The parliamentary Finance Committee on Tuesday inserted the restriction in the bill to amend the Nepal Rastra Bank Act in a bid to avoid conflict of interest. The governor, deputy governor and executive directors of the central bank are already subject to such a provision, and the House panel has extended the restriction to junior level staff.

However, the Finance Committee has reduced the prohibitory period for deputy governors and executive directors to three years from the proposed seven and five years respectively in the original bill. The governor, however, has been banned for life from working in BFIs after leaving the central bank. Former staff will need to get NRB’s okay to join any BFI at the end of the prohibitory period.

The Finance Committee decided to insert the provision in the bill following a request by NRB Governor Chiranjeevi Nepal to the House committee on Tuesday even though lawmakers had submitted no proposals.

During the meeting, Governor Nepal said that even officer-level employees of the central bank had become CEOs of BFIs right after retirement. “So it is necessary to fix a certain prohibitory period for them too to avoid conflict of interest,” he told lawmakers.

The prohibitory provisions were inserted in the bill due to concerns that central bank officials could work in the interest of the BFIs which they planned to join after retirement.

So the revolving door was active in Nepal too until this law which has tried to provide some brakes.

I mean Nepal sees these conflicts of interest and take out a law against these practices. Why is advanced world sleeping where these conflicts are much much larger in scale and scope? I know they might hate to learn these lessons from Nepal but they have little choice on these matters…




What does it take to build a “Hong Kong Brand” for financial services?

September 6, 2016

Norman T.L. Chan, chief of Hong Kong Monetary Authority in his latest speech looks at the HK brand of finance.

It always is around quality and credibility whatever the brand. This is more so with financial services as people’s savings are involved.

  1. Today I would like to talk about building Hong Kong as a “Brand” for financial services.  So what is a “Brand” made up of?  For merchandise goods, “quality” and “credibility” are two major components of a “Brand”.


  1. Quality means the product or services are suitably designed, structured and built to meet the needs of consumers/customers.  In the field of fashion or luxury goods, customers’ taste is evolving all the time but very often the “Brand” actually takes the lead in shaping the trend.
  2. In the context of financial services, the concept of “quality” entails the availability of a wide range of financial products that can adequately and effectively meet the needs of customers with vastly different financial needs.  For individual customers, such products range from the basic banking services for the mass market, to very sophisticated private wealth management services for high net worth customers.  For corporate customers, quality products range from the basic transactional banking for the SMEs, to the very diverse and sophisticated services in treasury, hedging, and equity and debt financing for the very large corporates. 
  3. If Hong Kong is to become a “Brand” for financial services, it must be able to offer “quality” financial products and services.  This means that we should have ample supply of financial products and services that:

(a)           can effectively meet the needs of customers, be they individuals or corporates;

(b)          are competitively priced; and

(c)           are efficiently distributed through a network of intermediaries that treat customers fairly.

  1. So where does Hong Kong stand now in terms of “quality”?  If we benchmark Hong Kong against any of our regional peers, I would say Hong Kong stands out as one of the best in this regard.  It is hard to pinpoint any key areas in which Hong Kong would have a material gap in offering a suitable and competitive product to meet the financial needs of the customers. 
  2. Credibility
    1. As I am running out of time, I just wish to have a brief word on the second component of a Brand, and that is credibility.  It is not enough just to sell good quality products to customers.  Like any world class brands in cars, watches and luxury goods, post-sale maintenance or support service is equally important.  In other words, the success of a “Brand” also rests on establishing a reputation for being credible – to deliver a product that stands up to what it is sold for.
    2. Credibility is even more important when it comes to financial services.  This is because financial products usually have a finite life, and very often customers need to renew or purchase similar or different products from time to time.  To develop into a long-lasting and successful “Brand”, Hong Kong must be able to provide a platform for offering products that can effectively meet the changing needs of customers.  While such needs are always evolving, one thing never changes, and that is “fair treatment of customers”.  In the context of pricing, consumer/investor protection, distribution, dispute handling and resolution, the interests of the financial firms or intermediaries must not take precedence over those of the consumers or investors.  This is a difficult mission to accomplish as it requires not only a robust and yet user-friendly regulatory regime, but also a corresponding change in the culture, values, mind-set and behaviour of the financial firms and their staff.   As hard as it seems, I strongly believe that we cannot afford not to accomplish this mission.  We must try harder and harder until we have got it right.                    

      I simply cannot envisage how a financial centre can thrive and sustain its competitiveness over time if it cannot build a credible reputation for treating customers and investors fairly.  

Simple stuff. Still needs to be emphasied over and over again.

Finance is less about all the glitz and glamour it is known as today. At its core, it shares the same ideas of quality and credibility as all other products and services..

Robot Macroeconomics: What can theory and several centuries of economic history teach us?

September 6, 2016

Bank of England may be clueless on what next, but its blog Bank Underground keeps giving us food for thought via its posts.

In the recent one, John Lewis looks at this question of how robotics will impact macroeconomics. Will it lead to lower jobs as said and so on. For this, he draws upon years of history where some new technology has replaced an existing one.


Indian banks, their symbol and slogans….

September 6, 2016

Superb post by Ms Vani Hegde. She has a really interesting blog covering wide variety of things. Having retired from a bank, she knows the industry really well for a post like this.

It may just be a summary of the symbols and slogans of various banks in India, but tells you a lot which detailed posts on banks will not tell you. We treat banks/firms as homogeneous entities in our research, but each one is different or atleast trying to be different. They try and showcase this difference via multiple ways like logos/slogans.

It is actually great learning to track changes in these symbols and slogans of different banks over their history. How the bank changes all these messages either responding to current changes or anticipating some changes, can be beautifully captured by seeing through this history.

Changes in shopping patterns: How glitzy shopping landmarks of the 1990s are fast fading…

September 6, 2016

Rajagopalan Venkataraman of ToI has a nice article on fast disappearing of glitzy shopping landmarks of the 1990s. This disappearing act shows how shopping patterns are changing. One cannot take brand loyality for granted and these things keep changing. The article is on Bangalore but applies to most other cities if not all:


Fed’s new Facebook page shows how badly public thinks of the the central bank…

September 6, 2016

Ryan McMaken of Mises points to this new Federal Reserve FB page. It was started on August 18 2016 amidst low fanfare.

There have been couple of posts trying to explain its objectives and functions to general public. What has followed those posts is some serious acerbic comments by one and all.

Read these couple of comments:


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