State Bank of India (SBI) Chairman Pratip Chaudhuri today said Non Performing Assets (NPA) remained an area of concern for the Indian banks.

He attributed the build up of NPAs in the banking sector to the general slowdown in the domestic economy over the last couple of years, which had seriously impaired the repayment capacity of borrowers.

Giving the example of the textiles hub of Kanpur, Chadhuri said there was general sickness in industry. “While disbursing loans, the bank had anticipated timely repayment by industry. But, the borrowers are not able to repay,” he said adding even the occupancy rate of hotels had come down drastically, signifying a slowdown. >> Read More

Fitch Ratings-London-24 April 2013: Fitch Ratings has downgraded the Bank of England’s (BoE) Long-term Issuer Default Rating (IDR) to ‘AA+’ from ‘AAA’ following the downgrade of the UK sovereign rating on 19 April 2012. The senior unsecured Short-term rating has been affirmed at ‘F1+’. The Outlook is Stable.

KEY RATING DRIVERS 
BoE’s Long-Term IDR is directly aligned with that of the UK government. The BoE is the monetary arm of the UK sovereign and as such its credit profile is aligned with that of the sovereign government.

While central banks have unlimited capacity to create base money, in practice the net present value of seigniorage, the profit from money creation, is limited and typically channelled to the government. This reinforces the close link between the central bank and the sovereign ratings. The monetary financing flexibility and the international reserve currency status of the sterling are already reflected in the UK’s sovereign ratings. >> Read More

Update, and sure enough:  

• PANICOS DEMETRIADES SAYS CYPRUS CENTRAL BANK INDEPENDENCE UNDER ATTACK,
• DEMETRIADES SAYS GOVT WANTS TO SELL GOLD WITHOUT CONSULTATION.

As a reminder, Panicos hold the now obsolete position of head of the Cyprus Central Bank.

* * *

As was noted two days ago (so certainly not the news catalyst for today’s gold sell off as some are trying to make it appear) as part of its bailout expansion by 35%, Cyprus announced, then refuted, then re-admitted, it would need to fund a portion of the incremental €7 billion in cash demands by selling €400 million, or nearly all 13.9 tons, of its central bank gold. Today, we learn that this demand came from none other than the head of the ECB Mario Draghi. Bloomberg reports: “European Central Bank President Mario Draghi said the profits of any gold sales by the Cypriot central bank must be used to cover losses it may sustain from emergency loans to Cypriot commercial banks.” >> Read More

 International Monetary Fund chief Christine Lagarde on Wednesday called on European authorities to step up banking system reform, including closing some banks if necessary.

The debt-wracked eurozone has achieved major accomplishments, including setting up the European Stability Mechanism, the rescue fund for members of the 17-nation bloc, but more needs to be done, Lagarde said in a speech to the Economic Club of New York.

Insufficient work to rebuild the strength of commercial banks has prevented accommodative monetary policy of having the desired effect of pushing affordable credit out to borrowers, she said. >> Read More

Subsidized loans are given to farmers through KCCs by state-owned banks. Until March 2012, the outstanding amount on such loans was Rs.1.6 trillion through 20.3 million cards, as per the latest Reserve Bank of India (RBI) data. This may have risen to around Rs.2 trillion, bankers said. >> Read More

• The Cypriot parliament has rejected a proposed financial stability levy, a key financing item upon which EU-International Monetary Fund economic assistance was predicated.
• We believe that in the absence of a credible alternative source of capital and fiscal financing, the risk of a disorderly credit event is rising.
• We are lowering our long-term sovereign credit rating on Cyprus to ‘CCC’ from ‘CCC+’.
• The outlook is negative. >> Read More

Russia and Kazakhstan expanded gold reserves for a fourth straight month in January, while Azerbaijan acquired bullion for the first time in more than a decade as central banks sought to diversify their assets.

Russian holdings climbed 12.2 metric tons to 970 tons last month after gaining 8.5 percent over 2012, according to International Monetary Fund data. Kazakhstan’s hoard grew 1.5 tons to 116.8 tons, following last year’s 41 percent expansion, data on the IMF website showed. Azerbaijan bought 1 ton after reporting no holdings since 1999 and Mexico sold 0.1 ton.

Gold fell for a fourth month in January, with analysts from Goldman Sachs Group Inc. to Credit Suisse Group AG calling an end to the metal’s 12-year bull run as data showed the global economy improving. Gold slumped to a seven-month low last week as investors cut holdings inexchange-traded products. Central banks will again be strong buyers this year after they boosted purchases 17 percent to 534.6 tons last year, the most since 1964, according to the London-based World Gold Council >> Read More

There were stray incidents of violence at the start of a two-day strike called by trade unions to protest against high prices and policy changes, including foreign investment in supermarkets, that they said could hurt employment.

One Bank of Japan board member said at the policy board meeting in December that eliminating the interest rate floor on deposits held at the BOJ by commercial banks would be effective in weakening the yen and wouldn’t damage money-market functioning.

“It is desirable to scrap the interest rate from the viewpoint of decreasing the attractiveness of the yen as a safe-haven currency,” said the member, according to the minutes of the Dec. 19-20 meeting released by the central bank Friday.

Policy board member Koji Ishida proposed scrapping the interest rate on the excess reserves that commercial banks deposit with the central bank, from the current 0.1%. But the proposal was voted down eight to one.

According to the minutes, Mr. Ishida also proposed cutting interest rates on the BOJ’s other fund provision measures to an annual 0.03%, although the proposal was also rejected eight to one. >> Read More

More than $114 billion exited the biggest U.S. banks this month, and nobody’s quite sure why.

The Federal Reserve releases data on the assets and liabilities of commercial banks every Friday. The most current figures, covering the first full week of 2013, show the largest one-week withdrawals since the Sept. 11, 2001, attacks. Even when seasonally adjusted, the level drops to $52.8 billion—still the third-highest amount on record, and one for which bank experts and analysts were reluctant to give a definitive explanation.

The most obvious culprit is the expiration of the Transaction Account Guarantee program, the extraordinary federal effort to shore up the country’s non-gigantic banks during the 2008 financial crisis. Big banks were considered “too big to fail,” while smaller ones were vulnerable to runs. The TAG program backstopped their deposit bases by temporarily offering unlimited insurance on money kept in non-interest-bearing accounts. That guarantee ended on Dec. 31, so a decrease in deposits would be expected first thing in January. >> Read More