Archive for June 10th, 2019

When a regulator takes over a bank..

June 10, 2019

China Banking and Insurance Regulatory Commission recently took over Baoshang Bank on 24-May-2019.

The regulator answered the questions raised by Financial Times.

Interesting times!


Daniel Defoe, Cooperative Banks and challenges facing German economy..

June 10, 2019

Another fascinating speech by Jens Weidmann of Bundesbank.

He points how Defoe once wrote about need to have savings/cooperative banks in England. But they took shape in Germany:

Three hundred years ago, a book was published that has since gone down in history as one of the most printed publications of all time.[1] It tells the tale of the son of a Bremen merchant who went by the name of Kreutznaer. This young man embarks on a sea voyage, is enslaved, then escapes, then procures a plantation in Brazil, and finally becomes stranded on a desert island. You will all know the protagonist by the name of Robinson Crusoe.

This story by the British writer Daniel Defoe immediately became a resounding success. Indeed, just one year after the original edition was published, as many as four German translations were already on the market, and Defoe lost no time in penning two sequels.

You might not be aware that Daniel Defoe had another bright idea that was also very well received, though it didn’t occur to him until quite some time later. Even as far back as 1697, he was recommending that “that all persons in the time of their health and youth, while they are able to work and spare it, should lay up some small part of their gettings as a deposit in safe hands … to relieve them if by age or accident they come to be disabled”. If an institution were created for this purpose in every county in England, he wrote, poverty might easily be suppressed by helping people to help themselves.

However, the kind of savings institution which Daniel Defoe had in mind was first established not in England, but in Hamburg. It was here, in the year 1778, that the “Ersparungsclasse der Allgemeinen Versorgungsanstalt” was established – the world’s very first savings bank. So you could say that holding the German Savings Banks Conference here in Hamburg is a kind of homecoming. And if we look a little closer at the philosophy behind the savings banks, we can see a key aspect of the social market economy: the idea of “prosperity for all”. Having unfettered access to markets – in this case, to banking services – promotes this idea, and it is integral to Germany’s economic model.

Nice bit. Indian cooperative movement which started in 1904 (and many other countries) took insights from German savings banks.

He then speaks about challenges facing German economy: High current account surplus, China effect and so on…


The procyclicality of banking: evidence from the euro area

June 10, 2019

Harry Huizinga and Luc Laeven research this hot issue of bank procylicality in Euro area:

A high procyclicality of banks’ loan loss provisioning is undesirable from a financial stability perspective, as it implies that bank capitalisations are more negatively affected at the trough of the business cycle, exactly when capital market conditions for banks are at their weakest. This column finds that provisioning procyclicality in the euro area is about twice as high as in other countries. This has important implications for the supervision of euro area banks going forward.

RIP Mr. Girish Karnad

June 10, 2019

Those who grew watching Malgudi days/Turning Point (and several other shows on Doordarshan), cannot forget Mr. Girish Karnad. One is not even listing his several other achievements. A person who wore multiple hats.

Rest in peace Sir.


Building a Specialised Supervisory Cadre at Central Bank

June 10, 2019

My recent article in Business Standard.


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