Archive for December 6th, 2018

Why the J&K Governor is being made to rethink decision to convert J&K Bank a public sector entity?

December 6, 2018

I had blogged about J&K Governor deciding to covert J&K Bank into a public sector entity.

It seems that the Governor is forced to reconsider the decision:

On November 22, the State Administrative Council of Jammu and Kashmir, which is currently under governor’s rule, approved a proposal to make Jammu and Kashmir Bank Limited a public sector undertaking that is accountable to the state legislature. On Tuesday, after days of sustained protests from various quarters in the state, Governor Satya Pal Malik appeared to have reconsidered the decision.

“No changes are being made here or contemplated,” Malik said a statement titled “Governor’s Assurance”. The statement went on to say that “in view of the concerns expressed, and to give comfort to employees, the government will re-examine the issue of accountability to legislature”.

Hmm..

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How will UK’s banking system differ and look like in 2019?

December 6, 2018

Interesting speech by James Proudman, Executive Director, UK Deposit Takers Supervision.

He points how UK’s banks are being ring fenced to prevent them in the next crisis:

In 2010 the Government established the Independent Commission on Banking (ICB) to make recommendations to improve financial stability and competition in the banking sector. The ICB recommended that the core retail banking operations of UK banking groups should be ring-fenced from any international or
investment banking activity in their groups. The ICB argued that if retail banking operations had been ring-fenced prior to the crisis, this would have reduced the likelihood that the banks would have needed Government support.

The ICB’s recommendations formed the basis of the banking reform legislation passed by Parliament in 2013. This set out the core banking activities which must sit in a ring-fenced bank, as well as the ‘prohibited’ activities that must be separated from the ring-fenced bank or stopped altogether. The legislation also
specified the degree of separation required. Ring-fenced banks must have the capability to make decisions independently of their groups and should not be operationally dependent on group entities which undertake prohibited activities. Ring-fenced banks must also have sufficient financial independence and have their own capital and liquid resources. Any exposures to the rest of the group must be limited and on commercial terms.

All large UK banking groups – defined as those with ‘core’ retail deposits greater than £25 billion – are required to implement ring-fencing by 2019. Currently, seven banking groups cross this threshold. Between them, these groups have around £5 trillion of assets, both in the UK and overseas.

The ring-fencing regime is designed to be consistent with the other parts of the post-crisis regulatory framework. The most systemically-important ring-fenced banks will be held to higher capital requirements. The Systemic Risk Buffer will be applied to ring-fenced banks to ensure they are adequately capitalised and
resilient to shocks. We expect ring-fenced banks to have, on average, around 1.5 percentage points more high-quality ‘Tier 1’ capital than non-systematically important banks.2 And a ring-fenced bank will not be able to be capitalised by debt raised externally by its group, which would give rise to so-called ‘double leverage’. 

 Overall, the Bank estimates that ring-fenced banks’ total loss absorbency will be, on average, around 27% of their risk-weighted assets, higher than the 17% recommended by the ICB.

Hmm..


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