Reuters blog archive
from India Insight:
Rana Dasgupta’s first non-fiction book is an investigation into what makes Delhi a city of unequal transformation, salted with ambition, aggression and misogyny. "Capital: A Portrait of Twenty-First Century Delhi" takes its shape from an "outsider’s" anxiety about not being able to understand a city that is primarily the by-product of refugees from India’s partition in 1947.
Dasgupta, 42, was born and raised in England, and belongs to a family of migrants whose roots are in the Lahore of British India, now Pakistan. In 2000, he flew to Delhi after quitting a marketing job in New York and fell "into one of the great churns of the age".
The book, more than 400 pages long, documents personal lives of people from different socio-economic backgrounds, especially the "flourishing bourgeoisie" of Delhi, beginning about a decade after India liberalized its economy in 1991.
In a phone interview with India Insight, Dasgupta talked about writing about Delhi’s super rich, the "war against women" in India, the lack of successful women entrepreneurs, and a city that is "vastly underimagined". Here are edited excerpts from the interview:
From Turkey, which hiked its overnight lending rate by an astonishing 425 basis points in an emergency meeting on Tuesday, to India which delivered a surprise repo rate hike a day earlier, central banks are increasingly looking to "shock and awe" markets into submission with their policy decisions.
By George Hay and Neil Unmack
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
The European Central Bank has struck a balance between pragmatism and pain. The euro zone’s central bank has lifted the veil on its balance sheet review of 124 banks it will supervise from the end of next year. It has slightly pulled its punches, but in ways that might be justified.
from Bethany McLean:
In capital we trust. Capital is our savior, our holy grail, our fountain of youth, or at least health, for banks. Seriously, how many times have you read that more capital will save the banks from another Armageddon? Even the banks point to capital as a reason to have faith. "Financial institutions have also been working alongside regulators to make themselves and the financial system stronger, more transparent, more resilient and more accountable,” wrote Rob Nichols of the Financial Services Forum, which is made up of the chief executive officers of 19 big U.S. financial institutions. “Specifically, capital, which protects banks from unexpected losses, has doubled since 2009.” If you were a cynic -- who, me? -- you might say that the mere fact that the banks are pointing to capital is proof that capital is not all that.
Everyone seems to be ignoring the basic fact that capital isn’t a pile of cash. It’s an accounting construct. On his Interfluidity blog (which I found courtesy of Naked Capitalism), Steve Waldman writes, “Capital does not exist in the world. It is not accessible to the senses. When we claim a bank or any other firm has so much ‘capital,’ we are modeling its assets and liabilities and contingent positions and coming up with a number. Unfortunately, there is not one uniquely ‘true’ model of bank capital. Even hewing to GAAP and all regulatory requirements, thousands of estimates and arbitrary choices must be made to compute the capital position of a modern bank.” In other words, even if you give bankers credit for good intentions, the accounting that would truly capture “capital” may not exist. Or as Waldman writes, “Bank capital cannot be measured.” Layer in some real world realities. The next time things get tough, will regulators once again practice forbearance and allow firms to overstate their capital, which has the perverse effect of making no one trust reported capital? Let’s not forget Lehman, which according to Lehman had a very healthy Tier 1 ratio of 10.7 percent on May 31, 2008 and a total capital ratio of 16.1 percent. This didn’t matter, because no one believed Lehman’s capital was real.
from Global Investing:
It's difficult to find many investors who are enthusiastic about Russia these days. Yet it may be one of the few emerging markets that is relatively safe from the effects of "sudden stops" in foreign investment flows.
Russia's few fans always point to its cheap valuations --and these days Russian shares, on a price-book basis, are trading an astonishing 52 percent below their own 10-year history, Deutsche Bank data shows. Deutsche is sticking to its underweight recommendation on Russia but notes that Russia has:
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
Barclays is under the spotlight after Deutsche Bank's capital U-turn. Having trumpeted an organic capital strategy since being appointed co-chief executives of the German bank last year, Juergen Fitschen and Anshu Jain finally opted for a 3 billion pound equity placing to bolster capital. Barclays new boss Antony Jenkins doesn't look immune to a similar volte face.
For Bank of Israel governor Stanley Fischer, this week’s high-powered macroeconomics conference at the International Monetary Fund was a homecoming of sorts. After all, he was the IMF’s first deputy managing director from 1994 to 2001. The familiar nature of his surroundings may have helped inspire Fischer to use a household analogy to describe the vaunted but often ethereal principle of central bank independence.
Fischer, a vice chairman at Citigroup between 2002 and 2005, sought to answer a question posed by conference organizers: If central banks are in charge of monetary policy, financial supervision and macroprudential policy, should we rethink central bank independence? His take: “The answer is yes.”
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
How much capital do banks need? Ask the Basel Committee of global banking supervisors, and it will recommend 3 percent of total bank assets. Ask tougher observers like the UK’s banking commission, and you’ll hear 4 percent. But ask Anat Admati and Martin Hellwig, the economists behind The Bankers’ New Clothes, and you’re in for a shock: they’re after 30 percent.
Too-big-to-fail banks are bigger than ever before. But top regulators tell us not to worry. They say the problem has been diminished by financial reforms that give the authorities enhanced powers to wind down large financial institutions. Moreover, supervisors say, the new rules discourage firms from getting too large in the first place by forcing them to raise more equity than they had prior to the financial meltdown of 2007-2008.
New York Fed President and former Goldman Sachs partner William Dudley said in a recent speech:
from Financial Regulatory Forum:
By Ted Knutson
WASHINGTON, July 19 (Thomson Reuters Accelus) - The low interest rate environment being pushed by the Federal Reserve can pose safety and soundness issues for some banks, Michael Stevens, senior executive vice president of the Conference of State Bank Supervisors, told Thomson Reuters Accelus Wednesday.
"Low interest rates are a supervisory concern because they can have a corrosive effect on net interest margins, which impacts profitability, which impacts capital formation, which affects the ability to lend more and to grow," said Stevens.Reduced interest margins can be a safety and soundness problem for banks that don't manage them well, Stevens added.