FSB, G-20 put shadow banking at US$80,000b in 2014

Mark Carney, governor of the Bank of England and chairman of the Financial Stability Board (FSB), speaks during a news conference after the board's plenary meeting at the Bank of England in London, U.K., on Monday, on March 31, 2014. 

PHOTO: BLOOMBERG

NOV 13, 20157:06 AM

[ZURICH] The value of unregulated "shadow banking" rose to some US$80,000 billion (S$113,485 billion) last year, according to a report by the Financial Stability Board (FSB), which advises G-20 states on banking reform.

The report, issued ahead of the upcoming G-20s summit in Antalya, said shadow banking transactions not subject to regulatory oversight grew by US$2,000 billion across 2014.

The FSB, which advises G-20 countries on banking reform and was set up six years ago after the implosion of Lehman Brothers, publishes annual reports into the parallel banking system under its remit to promote international financial stability.

The Switzerland-based body, chaired by chairman Mark Carney, governor of the Bank of England, is also tasked with identifying potential weakpoints in the global financial system.

AFP

US inflation to rebound next year, says Fed's Fischer

Fed Vice Chairman Stanley Fischer, reinforcing previously stated confidence that more inflation was around the corner, said he expects the central bank's preferred measure to rebound to 1.5 per cent next year and to hit a 2 per cent goal in the"medium term." 

PHOTO: BLOOMBERG

NOV 13, 20157:26 AM

[WASHINGTON] US inflation should rebound next year as pressures related to the strong dollar and low energy prices fade, the Federal Reserve's second-in-command said on Thursday, adding the economy has done well reasonably well thanks in part to a delay in interest rate hikes.

Fed Vice Chairman Stanley Fischer, reinforcing previously stated confidence that more inflation was around the corner, said he expects the central bank's preferred measure to rebound to 1.5 per cent next year and to hit a 2 per cent goal in the"medium term."

"Some of the forces holding down inflation in 2015, particularly those due to a stronger dollar and lower energy prices, will begin to fade next year," he told a conference of researchers and market participants at the Fed Board.

"While the dollar's appreciation and foreign weakness have been a sizable shock, the US economy appears to be weathering them reasonably well, notwithstanding their large effects on certain sectors of the economy heavily exposed to international trade."

REUTER
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Modi visit to UK brings US$13b of deals, protests

British and Indian companies agreed on £9 billion (S$19.4 billion) of deals as Narendra Modi became the first Indian prime minister to visit the UK in almost a decade. 

PHOTO: AFP

NOV 13, 201511:47 AM

[LONDON] British and Indian companies agreed on £9 billion (S$19.4 billion) of deals as Narendra Modi became the first Indian prime minister to visit the UK in almost a decade.

Speaking at a joint press conference in London on Thursday, UK Prime Minister David Cameron said the two countries had not realised "the full potential" of their relationship.

Agreements include a five-year partnership to develop three Indian cities, a memorandum of understanding to develop nuclear-power plants and a deal to allow rupee-denominated Indian Railway bonds to be traded in London.

"India invests more into the UK than it does in the rest of the European Union combined," Mr Cameron said. "I think there's scope to go much further."

Mr Modi arrived in London to protests over what critics say is growing intolerance in India since his Bharatiya Janata Party swept to power last year.

Sikhs carrying banners, Kashmiris and Nepalis with flags and Muslims holding placards chanted and shouted as Mr Modi was driven to address Parliament following his meeting with Cameron.

Protesters drew attention to sexual violence and caste conflict in India and more than 200 authors, including Salman Rushdie, signed an open letter urging Cameron to address "the rising climate of fear" in India during his talks with Mr Modi.

BUDDHA AND GANDHI

In India, leading authors and poets recently returned awards from the National Academy of Letters, accusing the organisation of staying silent over the killing of an academic who had criticised idol worship in Hinduism.

Mr Modi insisted that intolerance was unacceptable in the "land of Buddha and Gandhi." "India is a vibrant democracy that protects every citizen and his views in accordance with our constitution and we are committed to that," he told reporters.

A year and half after becoming prime minister, there is concern over the slow pace of economic reform in a country projected by the United Nations to be the world's most populous by 2022.

Mr Modi has suffered recent political setbacks, with the BJP losing both Bihar and Delhi in regional elections this year.

The benchmark Sensex index fell to the lowest since Sept 28 this week.

'HUGE MOMENT'

Full details of the deals agreed during the visit were due to be released later on Thursday, but Mr Modi said the two countries would work together on renewable energy, defence and developing their respective service sectors.

Mr Cameron's office also highlighted a deal for London's Kings College Hospital to build a facility in Chandigarh and India's TVS Group to create more than 100 jobs in Barnsley, northern England.

The UK Treasury did give details of various bond issues Indian companies are planning for the London market, including that of Indian Railways.

While the size of that issue wasn't specified, the Treasury said HDFC, India's largest mortgage lender, is proposing rupee bonds of up to US$750 million, while communications company Bharti Airtel would issue a sterling bond of as much as £500 million.

Vodafone Group Plc, the largest foreign direct investor in India, pledged to invest about £1.3 billion more. This includes £800 million to upgrade its network in India, which is the highest contributor to the group's service revenue, Chief Executive Office Vittorio Colao said in a statement shared with Modi on Thursday.

"This is a huge moment for our two great nations, we must seize the opportunities, remove the obstacles to cooperation, instill full confidence in our relations and remain sensitive to each other's interests," Mr Modi said in his address to lawmakers from both houses of Parliament.

"Strong as our partnership is, for a relationship such as ours, we must set higher ambitions." He spoke of progress in India being "the destiny of one- sixth of humanity."

Mr Modi, who is visiting Britain for three days, is due to lunch with Queen Elizabeth II tomorrow and hold a rally for thousands of supporters at Wembley Stadium in the hope of drumming up funds for pet projects, as he has done at similar events from New York to Sydney.

GUJARAT RIOTS

The UK is home to one of the largest populations of overseas Indians and shares a long history with India, which it ruled until 1947. Relations between the two countries, once "imprisoned by the past," are now a "modern, dynamic partnership," Mr Cameron said.

British relations with Mr Modi were not always so cordial. Human-rights groups accused Mr Modi of failing to stop deadly riots in 2002 when he was chief minister of the western state of Gujarat.

More than 1,000 people, mostly Muslims, died in the violence.

The US denied him a travel visa in 2005 and Britain cut off contact with his government for a decade.

Mr Modi has repeatedly denied the accusations and a Supreme Court-appointed panel found no evidence he gave orders that prevented assistance from reaching those being attacked.

'ENTRY POINT'

Mr Modi implicitly backed Mr Cameron's push to keep Britain in the European Union in a referendum promised by end 2017.

"If there is an entry point for us into the EU it is the UK," Mr Modi said during the press conference. "We will continue to consider the UK as our entry point into the EU as much as possible."

In his speech, Mr Modi referred to the role the UK had played in educating and radicalising the leaders of the movement that led to India's independence.

"There are others who have spoken forcefully on the debts and dues of history," he said. "I will only say that many freedom fighters of India found their calling in the institutions of Britain. Many makers of modern India, including several of my distinguished predecessors, from Jawaharlal Nehru to Dr Manmohan Singh, passed through their doors."

BLOOMBERG

    
 

Aung San Suu Kyi's opposition party 2 seats off majority in Myanmar parliament

The party of democracy champion Aung San Suu Kyi was two seats away from winning a majority in Myanmar's parliament, according to results announced by the election commission on Friday morning. 

PHOTO: REUTERS

NOV 13, 201510:58 AM

[YANGON] The party of democracy champion Aung San Suu Kyi was two seats away from winning a majority in Myanmar's parliament, according to results announced by the election commission on Friday morning.

Suu Kyi's National League for Democracy (NLD) needs 329 seats in both chambers of Myanmar's parliament to hold the absolute majority that would give it enough firepower to elect the new president. With results still trickling in, the NLD has so far secured 327 seats.

The country's first free election in 25 years took place on Sunday, but the election commission is yet to announce full results for the whole country.

REUTERS

   
 

South Korean president open to summit with North ... maybe

South Korean President Park Geun Hye (above) is willing to hold a summit with North Korean leader Kim Jong Un if there is a breakthrough on nuclear issues. 

PHOTO: BLOOMBERG

NOV 13, 201510:24 AM

[SEOUL] South Korean President Park Geun-Hye said Friday she would be willing to hold a summit with North Korean leader Kim Jong Un, but only if there was a "breakthrough" on Pyongyang's nuclear programme.

In written answers to questions submitted by foreign news agencies, Ms Park also warned Japanese Prime Minister Shinzo Abe against dragging his feet over a settlement for Korean women forced to work in Japanese military brothels during World War II.

On the question of a face-to-face meeting with Kim Jong Un, Ms Park reiterated that the door to a summit remained open, albeit guarded by numerous conditions.

"There is no reason not to hold an inter-Korean summit if a breakthrough comes in solving the North Korean nuclear issue and progress is made in improving the South-North relationship," Ms Park said.

"But it will be possible only when the North comes forward for a proactive and sincere dialogue," she added.

Both Seoul and Washington have said any meaningful dialogue with Pyongyang would require North Korea to make some tangible step towards denuclearisation - a pre-condition the North has repeatedly rejected.

Following an escalation in cross-border military tensions, the two Koreas reached an agreement in August that included a commitment to resume high-level talks.

However, no dialogue has been held so far, and most experts believe the chances of a summit are close to non-existent.

The two Koreas have held two summits in the past, one in 2000 and the second in 2007.

"North Korea is still honing its nuclear and missile capabilities," Ms Park said, calling on the international community to send a "clear and consistent message" to Pyongyang to abandon its nuclear weapons programme.

On the question of the "comfort women" forced into Japanese wartime brothels, Ms Park said Tokyo needed to address the issue "urgently."

"I expect the Japanese government to quickly present a solution that is acceptable to the victims and deemed reasonable by the Korean people," she added.

South Korea is demanding a formal apology and compensation for the 47 surviving Korean comfort women.

Japan maintains the dispute was settled in a 1965 normalisation agreement, which saw Tokyo make a total payment of US$800 million in grants or loans to its former colony.

In what was their first one-on-one meeting last week, Ms Park and Mr Abe vowed to speed up consultations aimed at finally putting the long-running issue to bed.

Allowing it to keep "dragging on" was unacceptable, Ms Park said Friday, adding it was "high time to make a decision."

AFP

    
 

UN chief congratulates Suu Kyi, warns of hard work ahead

UN Secretary-General Ban Ki-moon speaks to the media during a press conference at the European headquarters of the United Nations in Geneva, Switzerland, on Oct 31, 2015. 

PHOTO: EPA

NOV 13, 20158:39 AM

[NEW YORK] UN Secretary-General Ban Ki-moon congratulated Myanmar's Aung San Suu Kyi Thursday on her party's election performance, but warned that "much hard work" lay ahead to build democracy.

Mr Ban described Sunday's poll as a "significant achievement" in Myanmar's transition away from military rule, although he noted that minority voters such as the Muslim Rohingya were denied the right to vote.

However, "there is much hard work that remains ahead on Myanmar's democratic journey and towards making future elections truly inclusive," Ban said in a statement.

Myanmar has been dominated by the military for half a century through direct junta rule and - since 2011 - by a quasi-civilian government run by its allies.

But the balance of power is almost certain to shift to Suu Kyi's National League for Democracy (NLD) following the most competitive election in generations.

"The people and leaders of Myanmar have it within their power to come together to build a better future for their country, a future ... where no one is marginalized, vulnerable and discriminated against," he said.

The UN chief commended the military for accepting the outcome, describing this as "uniquely important." He offered UN support to Myanmar to consolidate democracy and advance human rights.

AFP

    
 

Federal Reserve officials lay case for December interest rate hike

William Dudley, President and CEO of the Federal Reserve Bank of New York, addresses the Economic Club of New York in the Manhattan borough of New York City, on Nov 12, 2015. 

PHOTO: REUTERS

NOV 13, 20158:27 AM

[WASHINGTON] US Federal Reserve officials lined up behind a likely December interest rate hike with one key central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalize rates after seven years near zero.

Other Fed policymakers argued that inflation should rebound, allowing the Fed to soon lift rates from near zero though probably proceed gradually after that.

In New York, William Dudley said: "I see the risks right now of moving too quickly versus moving too slowly as nearly balanced."

Mr Dudley, who as president of the New York Fed has a permanent vote on the Fed's policy-setting committee, said the decision still required the central bank to "think carefully" because of the risk that the United States is facing chronically slower growth and low inflation that would justify continued low rates.

But his assessment of "nearly balanced" risks represents a subtle shift in the thinking of a Fed member who has been hesitant to commit to a rate hike, but now sees evidence accumulating in favour of one.

For much of Janet Yellen's tenure as Fed chair, policymakers at the core of the committee, and Ms Yellen herself, have said they would rather delay a rate hike and battle inflation than hike too soon and brake the recovery.

But Mr Dudley said the current 5 per cent unemployment rate"could fall to an unsustainably low level" that threatens inflation, while seven years of near-zero rates "may be distorting financial markets."

"I don't favour waiting until I sort of see the whites in inflation's eyes," he said about monetary policy timing. Going sooner and more slowly, he said at the Economic Club of New York, may now be best for the Fed's "risk management."

In Washington, Fed Vice-Chair Stanley Fischer said inflation should rebound next year to about 1.5 per cent, from 1.3 per cent now, as pressures related to the strong dollar and low energy prices fade.

The second-in-command also noted that the Fed could move next month to raise rates, which could be taken as yet another signal the central bank is less willing to let low inflation further delay policy tightening.

"While the dollar's appreciation and foreign weakness have been a sizable shock, the US economy appears to be weathering them reasonably well," Mr Fischer told a conference of researchers and market participants at the Fed Board.

The US dollar has risen about 15 per cent since mid-2015 as the Fed started its long march to a rate hike, as other major central banks added stimulus, and as investors crowded into US-denominated assets in the face of slowdowns elsewhere.

The stronger dollar has helped depress the Fed's preferred inflation measure, which at 1.3 per cent is below a 2-per cent target.

Elsewhere in the capital, two regional Fed bank presidents who had already backed a rate hike repeated their calls for the Fed to move. St Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker also said they agreed with broad consensus at the Fed that rates would move slowly after the initial "liftoff."

"The committee has been very clear that the normalization path here is going to be shallower," than the steady quarter-point-per-meeting hikes used by the Fed early this century or the faster hikes enacted in the early 1990s, said Mr Bullard, who is not a voter on the Fed's policy-making committee this year but will rotate into a slot in 2016.

A cautionary note came from Chicago Fed President Charles Evans, who worries any rate increase could damage the recovery and put the United States in the same difficult position Europe and others found themselves in when they tried to raise rates at a time when the rest of the world was holding them down.

"We have had different points in time since the downturn where certain regions of the world thought they could delink against the rest of the world. There's often a trail of tears that follows that hope that their own area is stronger. That makes me nervous," Mr Evans said in Chicago.

REUTERS

    
 

IMF urges Fed to delay rate hike until inflation evident

The International Monetary Fund said Thursday that the US Federal Reserve should delay raising interest rates until there are clear signs of a pickup in inflation. 

PHOTO: BLOOMBERG

NOV 13, 20157:13 AM

[WASHINGTON] The International Monetary Fund said Thursday that the US Federal Reserve should delay raising interest rates until there are clear signs of a pickup in inflation.

In a report on global economic issues prepared for the November 15-16 Group of 20 summit in Antalya, Turkey, the IMF singled out the prospect of higher US rates as a particular challenge to the slow-growing world economy.

In many advanced economies, it said, monetary policy "must remain accommodative, including through unconventional measures, to reduce risks to activity from low inflation and prolonged weak demand."

For the Fed, which could begin raising rates in December after holding the benchmark federal funds rate near zero since the end of 2008, the IMF urged waiting until it is clear that the downward pressure on inflation is past.

The Fed's decision "should remain data-dependent, with the first increase in the federal funds rate waiting until continued strength in the labour market is accompanied by firm signs of inflation rising steadily toward the Federal Reserve's two per cent medium-term inflation objective," it said.

It also said the Bank of Japan, fighting weaker growth, "should stand ready for further easing," while the European Central Bank, itself mulling further growth stimulus efforts in the coming months, should make clear a strong commitment to its asset purchase programme.

"Accommodative monetary policies remain essential in many advanced economies," the IMF said.

AF
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IMF may decide inclusion of China's yuan in SDR this month

The IMF's consideration of China's yuan for inclusion in its SDR basket of elite currencies is on track with a decision possibly this month, Fund spokesman Gerry Rice said Thursday. 

PHOTO: BLOOMBERG

NOV 13, 20157:01 AM

[WASHINGTON] The IMF's consideration of China's yuan for inclusion in its SDR basket of elite currencies is on track with a decision possibly this month, Fund spokesman Gerry Rice said Thursday.

With inclusion of the yuan in the SDR makeup a key policy goal of Beijing, Rice declined to speculate on the decision.

But he noted that a crucial qualification, international use of the currency, also called the renminbi, is progressing.

"The renminbi internationalisation continues," Mr Rice told reporters at a news briefing.

The board of the International Monetary Fund is expected to discuss China's application to join the SDR this month.

The Fund has been generally receptive to the idea that the yuan could join the US dollar, British pound, the euro and Japanese yen in the makeup of the SDR (special drawing right).

While not a freely traded currency, the SDR is important as an international reserve asset, and because the IMF issues its crisis loans, crucial to struggling economies like Greece, valued in SDRs.

China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping.

But until recently the yuan's exchangeability on international markets has been too tightly controlled by Beijing for it to fully qualify.

On August 4 the IMF said the currency fell short of meeting all the standards for inclusion, particularly on being "freely usable" in international finance.

But China's economic slowdown has complicated Beijing's efforts to widen its use and movements in its valuation, especially because the IMF reviews the SDR basket only every five years, and the deadline for the current review is the end of the year.

In a move seen as trying to accommodate China's push for inclusion, on August 19 the Fund announced that it had extended by nine months the implementation of the revision, giving more time for adjustment to the potential inclusion of the yuan.

So that if a decision to include the yuan is made this month, that actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.

"The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket," the IMF said at the time.

AFP

    
 

US urges Myanmar to change constitution barring Suu Kyi rule

The White House on Thursday said constitutional changes were still necessary in Myanmar to further democracy, after elections seen as a leap toward full civilian rule. 

PHOTO: REUTERS

NOV 13, 20156:45 AM

[WASHINGTON] The White House on Thursday said constitutional changes were still necessary in Myanmar to further democracy, after elections seen as a leap toward full civilian rule.

After President Barack Obama congratulated Myanmar's longtime pro-democracy leader Aung San Suu Kyi on the success of a "historic" vote that looks set to put her party in power, the White House spelled out more steps it believes are necessary.

"We have consistently said over the course of the last several years that a full transition to democratic, civilian rule in Burma would require a process of constitutional reform," said senior Obama foreign policy aide Ben Rhodes.

"Even with this election, 25 per cent of the seats in the parliament are reserved for the military," said Mr Rhodes. "And then, of course, there are the amendment procedures that prohibit Aung San Suu Kyi from assuming the presidency.

"Going forward, this is a question for the leaders and people of Burma to determine."

Ms Suu Kyi's path to power is blocked by the 2008 constitution that bars anyone with foreign children or a foreign husband from the presidency. Her sons are British, as was her late husband.

The measure is widely thought to have been brought in by Myanmar's military strongmen to prevent Suu Kyi becoming president.

After a process of parliament being seated and a president being appointed, Mr Rhodes said "at some point, it will be up to that new parliament and to those leaders to make determinations about the reform and the constitution.

"I think Aung San Suu Kyi is in a very strong position as the leader of the NLD (National League for Democracy) to be a leading voice about the future direction of the country."

AFP