Archive for May 11th, 2021

Collapse of Greensill Capital has strong historical parallels with fall of the medieval Medici bank

May 11, 2021

Superb article by Prof Harold James in Proj Syndicate:

The collapse of Greensill Capital has a strong historical parallel in the decline and fall of the medieval Medici bank after it went too far with the financial innovations of its own day. The lessons from both failures are clear, but most likely will be forgotten until the next financial meltdown.

FinTech, BigTech and Cryptos – will new technology render banks obsolete?

May 11, 2021

Norges Bank Deputy Governor Ida Wolden Bache in this speech:

Not many years ago, it was inconceivable that Facebook would launch its own means of payment or that large international banks would offer cryptocurrency investments. The landscape is evolving quickly.

The extent to which new solutions are adopted does not only depend on their features, but also on the alternatives. In Norway, banks have made great headway in terms of digitalisation. We have an efficient and secure payment system, and the value of the Norwegian krone commands trust and confidence. As such, I do not believe we are facing a fundamental transformation of the financial system in the near future. As long as the means of payment we use is based on Norwegian kroner, we will have money created by banks and payments that must ultimately be settled by banks. Monetary policy will still have a channel into the wider economy, and even though banks may look different in the future than they do today, they will not become obsolete.

But we cannot sit still. Going forward, it will be even more important for banks to develop their services in pace with technological advances and the public’s wishes. And I can promise, on behalf of Norges Bank, that we will do our part to ensure that paying in Norwegian kroner will continue to be an attractive and safe alternative in the future. This is a task we do not take lightly.

LIC IPO: An Empirical Study

May 11, 2021

Students of IIT Delhi -Asim Rajvanshi, Yash Garg, Suhani Jain, Nehal Chanchan and Himanshu Rajput analyse LIC”s IPO case.

The motivation of the leadership behind the IPO and its lack of credibility should also be considered in the valuation process. When the motivation is just disinvestment and not a single mention of scaling up the business, it will have to be seen if it is able to attract the bigger investors. Critical thing is this time LIC would not be around to bail LIC out if it struggles to raise interest as was the case with GIC or New India. One of the most important things that the government should do is to take action on the role of LIC as its lender of last resort. One of the most basic things that it can do is to release a buyback scheme, wherein if LIC is used to bail out a company by the will of the government, and moving forward, the shares only lose value, then the government should buy back the shares at their original price. This will help boost the investor confidence.

The Hindu In Focus Podcast: Understanding banking reforms in India after the Narasimham era

May 11, 2021

I discuss M. Narasimham’s stellar contributions to Indian banking with G Sampath in this Hindu Podcast.


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