Archive for August 7th, 2019

When Central European countries gave loans in Swiss Francs and it backfired..

August 7, 2019

Before the 2008 crisis, certain Central Europeans took loans in Swiss Francs given the stability etc. As Swiss entered the crisis and did their own thing, the CHF appreciated given its safe haven status. This led to problems for these countries as the borrowers had to pay more due to CHF appreciation. Some respite was there when Swiss National Bank decided to target their currency to prevent this appreciation. But once they removed the target, the problems again continues. This led to some of these economies to restructure their loans in either Euro or local currency.

For instance, the Slovenian government has decided to restructure in Euro and asked their central bank to face losses if any. They sent a letter to ECB for its view as per the law. ECB replied raising concerns over this move saying it is the role of the government and not Slovenia central bank.

Andreas Fischer and Pınar Yeşin in this SNB working paper look at evidence from other countries:

This paper examines the effect of currency conversion programs from Swiss franc-denominated loans to other currency loans on currency risk for banks in
Central and Eastern Europe (CEE). Swiss franc mortgage loans proliferated in CEE countries prior to the financial crisis and contributed to the volume of non-performing loans as the Swiss franc strongly appreciated during the post-crisis period.

Empirical findings suggest that Swiss franc loan conversion programs reduced currency mismatches in Swiss francs but increased currency mismatches in other foreign currencies in individual countries. This asymmetric effect of conversion programs arises from the loan restructuring from Swiss francs to a non-local currency and the high level of euro mismatches in the CEE banking system.


Amidst digitisation, Bandhan Bank opens its 1000th branch

August 7, 2019

Quite a few banks are either shutting down branches or going slow on new branches.

Bandhan Bank which got a banking licence in 2014 is thinking otherwise. It started with 500 branches and has doubled the number of branches in just 4 years.

Private sector lender Bandhan Bank on Saturday opened a new branch at Haltu in Kolkata. With this,  the bank has now a total of 1,000 branches.

The announcement of the 1,000th branch coincided with the inauguration of the bank’s new head office in Salt Lake City, Kolkata.

With a network of 3,014 Doorstep Service Centres that the bank already has, the total number of banking outlets now stands at 4,014 across 34 of the 36 states and union territories in India.

Chandra Shekhar Ghosh, MD and CEO, said, “This is a big milestone for Bandhan Bank. We started the bank with 501 bank branches in August of 2015. In just about four years, we have doubled that count to 1,000. We have always aimed at making banking accessible to all, and this landmark of 1,000 branches is another step in that direction.”

Some banks continue to believe that branches still matter…

RBI cuts policy rate by 35 bps!

August 7, 2019

RBI Governor Shaktikanta Das had earlier argued why should be change policy rates in multiples of 25 bps. RBI’s Monetary Policy Committee has gone ahead and changed the status quo and lowered the policy repo rate by 35 bps to 5.4%.

Four members agreed to cut the rate by 35 bps and 2 for 25 bps:

All members of the MPC unanimously voted to reduce the policy repo rate and to maintain the accommodative stance of monetary policy.

Four members (Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Shri Bibhu Prasad Kanungo and Shri Shaktikanta Das) voted to reduce the policy repo rate by 35 basis points, while two members (Dr. Chetan Ghate and Dr. Pami Dua) voted to reduce the policy repo rate by 25 basis points.



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