Indonesia watchdog imposes extra capital surcharge on biggest banks

JAN 5, 201612:54 PM

[JAKARTA] Indonesia's banking watchdog has instructed the biggest banks to set aside more capital this year in an effort to reduce risks to the financial sector.

The Financial Services Authority (OJK) said on its website it will rank systemically important banks (SIBs) based on their size, interconnectedness with the financial system, and the complexity of their business.

Under new regulations SIBs are required from January 1 to set aside "capital surcharges" of between 0.25 per cent and 0.625 per cent of risk-weighted assets, depending on how systemically important the institutions are.

The surcharge will gradually increase each year until 2019 when it reaches 1 percent to 2.5 per cent of the institution's risk-weighted assets.

The "capital surcharges" are in addition to capital adequacy regulations on the banks, which start at a minimum of 8 percent of risk-weighted assets.

The OJK may impose an additional 1 percent surcharge if a bank is found to be even more systemically important than OJK's current classification.

The regulation is part of Indonesia's move to fully adopt Basel III, a global regulatory framework for banks' capital adequacy norms, the OJK said.

Last week, the central bank introduced a new requirement for banks' to hold a countercyclical capital buffer.

The regulator has already identified banks that are systemically important, OJK banking regulator Mulya Siregar was quoted as saying by the Investor Daily on Tuesday, although he declined to identify them.

Indonesia's biggest banks by assets are Bank Mandiri, Bank Central Asia, Bank Rakyat Indonesia and Bank Negara Indonesia.

REUTERS

      

Is there such thing as reliable economic growth data?

      

JAN 5, 20168:32 AM

[LONDON] Statistics surrounding economic growth are flawed at best, yet investors and officials rely on them.

To show how uncertain the numbers can be, London-based research firm World Economics set out to rank 154 countries according to the reliability of their gross domestic product statistics.

"Without accurate and reliable data, poor decisions can be made and the consequences can be serious," Chief Executive Ed Jones wrote in an e-mail. "Many observers see reported figures and believe that they are accurate without question" because they're released by the government.

The idea behind the Data Quality Index, which was launched last month, is to make people aware that GDP means different things in different countries, even if they get compared all the time.  The index is calculated using five criteria: the base year used; the international method followed for compiling GDP (the more recent, the better); the size of the informal economy, which is never fully accounted for; GDP per capita, as a proxy for how much states can spend on collecting data and measuring economic activity; corruption, as measured by Transparency International.

Countries receive different grades for each input, with 100 the best possible total score. Two further criteria - the sizes of government and the financial sector - will be included in the index calculations in 2016.  It's no surprise that the poorest economies gravitate toward the bottom.  Take the base-year effect. This is a calculation used to strip out price changes when measuring the total value of economic output. However, if the base year isn't updated regularly,  then variations in the prices of goods may be missed and new industries such as the Internet or mobile phones may be underrepresented in GDP data.

Many developing economies use fixed, outdated benchmark years and end up with data that doesn't reflect how economies transform over time. Altering the base year can have a drastic effect: When Nigeria updated its in 2014, the economy's estimated size in 2013 surged 89 per cent, according to Bloomberg Intelligence.

In contrast, most rich nations regularly update the base year used. That requires a lot more work, and hefty resources.  In differentiating developed economies, GDP per capita is key factor, propelling Switzerland to the top, followed by the US Varying scores on corruption also come into play, putting Finland, for instance, ahead of France.  In Asia, Hong Kong and Singapore make it to the top 10 globally, while Myanmar's statistics are the least trustworthy, coming at 142nd place.  On India and China, whose GDP figures are distrusted to the extent that some economists look at other data for the economic pulse, World Economics ranks them 53rd and 63rd respectively.

Based on the research firm's own sales managers indexes, India's growth is in line with official numbers, Jones said. "In contrast, our China Index is showing much more muted levels of growth in the region of about half the official data suggests."

BLOOMBERG

      

SIA's takeover bid for Tiger: 77.48% shareholding in the bag now

By

Andrea Sohsandrea@sph.com.sg@AndreaSohBT

Singapore Airlines (SIA), which on Monday raised its offer price for Tiger Airways, garnered acceptances amounting to 21.74 per cent of the budget carrier as at 5pm the same day. 

PHOTO: SPH

JAN 5, 20168:05 AM

SINGAPORE Airlines (SIA), which on Monday raised its offer price for Tiger Airways, garnered acceptances amounting to 21.72 per cent of the budget carrier as at 5pm the same day.

Including the 55.76 per cent the group and its concert parties had controlled at the start, this brings the total number of Tiger shares that SIA has garnered to 77.48 per cent.

The deal is conditional on SIA holding more than 90 per cent of Tiger at the close of the offer.

On Monday, SIA upped its offer price from S$0.41 to S$0.45 a share, and stressed that this will be the final offer to shareholders. The closing date for the offer has also been extended to Jan 22, 2016, at 5.30pm.

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Heatwaves, drought may curb global power output: study

Thousands of power plants worldwide face sharp reductions in electricity output by mid-century due to more frequent heatwaves and drought driven by global warming, according to a study published on Monday. 

PHOTO: BLOOMBERG

JAN 5, 20166:59 AM

[PARIS] Thousands of power plants worldwide face sharp reductions in electricity output by mid-century due to more frequent heatwaves and drought driven by global warming, according to a study published on Monday.

"We need to be concerned as electricity will become more expensive and less reliable in the future due to climate change," co-author Keywan Riahi of the International Institute for Applied Systems Analysis in Austria told AFP.

If warming continues unchecked, higher temperatures and water shortages could, by 2050, cut capacity in hydro-electric plants by nearly four per cent, and in thermoelectric plants - powered by fossil fuels, nuclear power or biomass - by 12 per cent.

Even if the target embraced at the Paris climate summit in December is met - limiting global temperature rise to less than two degrees Celsius compared to pre-industrial levels - power capacity would still drop significantly, according to the research.

Hydro- and thermoelectric plants, which together provide 98 percent of the global electricity supply, both depend on water to cool machinery or generate power.

Improvements in efficiency and switching types of fuel, however, would be one way to avoid future shortages of water and power, the study said.

Especially vulnerable regions include the United States, southern South America, southern Africa, central and southern Europe, and southeast Asia.

The study analysed data from nearly four-fifths of the world's hydro-electric plants, and more than a quarter of thermoelectric ones.

"Many of the plants that we couldn't include in our analysis will be vulnerable to climate change as well, but we simply didn't have the information," Mr Riahi said by email.

Water consumption for power generation is expected to double within 40 years, according to the study, published in Nature Climate Change.

In many regions, this vastly expanded consumption will clash head on - particularly in rapidly expanding economies - with increased demands from agriculture and domestic use, neither of which are taken into account in this study.

"Climate change will amplify this competition, reduce reliability of the systems, and increase the risk of water and electric shortages," Riahi commented.

"However, there is the possibility to adapt" in both types of power plants, he added.

AFP