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Posts tagged ‘Commercial Bank’

Rodriguez Valladares: Don’t Break Up Big Banks out of Revenge.

Mega-banks are frequently called a threat to financial stability, and breaking them up is pushed as a solution to our economic worries.

But breaking up the mega-banks to score a post-crisis pound of flesh could result in higher unemployment, increased credit costs and a transfer of risk from banks to lightly regulated shadow financial institutions, cautions one financial expert.

“The desire for revenge may be strong, but we should not lose sight of what should be our key goal: to make the global financial sector safer,” Mayra Rodriguez Valladares, managing principal at New York-based MRV Associates, which trains bank examiners and executives at financial firms, writes in an article for the American Banker.

Forbes Columnist: 
‘Who the Hell Cleared This?’

The “too big to fail” banks have become a scapegoat for the financial crisis, yet all types of financial sector players, including securities firms, hedge funds, private equity firms, insurance companies and mutual and pension funds, can cause systemic risk, points out Valladares, a faculty member of The New York Institute of Finance.

Splitting up banks would prompt a large number of layoffs, she says, noting that most people working at banks are not bankers or traders and don’t get big bonuses. Instead, they’re analysts, back-office personnel, janitors and other small fry.

“Adding these people to the unemployment line neither helps the global economy nor punishes the true perpetrators of the crisis.”

Lower borrowing costs for mega-banks means lower borrowing costs for individuals and corporations, Valladares adds. If banks were to shrink, consumers and businesses would pay higher interest rates.

New banking regulations have not been finalized due to lobbyists and legislators blocking regulators. If those rules are completed, implemented and properly enforced, she explains, they could shrink financial risks or at least stop them from getting larger.

But bank critics should think through the impact of breaking up banks, she warns. For instance, after banks are split up, who would regulate the new entities?

“If securities firms were to end up out of the jurisdiction of bank supervisors,” she notes, “we would add more risk to the global financial sector by pushing the non-bank components to a practically unregulated shadow market.”

Mega-bank critics say that once investment houses are walled off from commercial banks and they do not receive government support, market discipline would encourage them to reduce risks.

“Where was market discipline in the mid-2000s?” she asks.

With an implicit government guarantee, mega-banks do not fear failure and can take excessive risks, argued Dallas Federal Reserve Bank President Richard W. Fisher and Harvey Rosenblum, the bank’s executive vice president and director of research, in an editorial in The Wall Street Journal.

It emboldens their sense of immunity from the law and lets them raise capital more cheaply than smaller banks can.

“This is patently unfair,” they argue.

Forbes Columnist: ‘Who the Hell Cleared This?’

© 2013 Moneynews. All rights reserved.
By Michael Kling

U.S. gives banking green light to Myanmar tycoons.

  • An employee stands behind a MasterCard logo during the launch of the international credit card issuer's first ATM transaction in Myanmar, in Yangon, in this November 15, 2012 file photo. Two banks owned by tycoons associated with Myanmar's former military regime will start to do business with U.S. companies and investors in the latest reward for the Southeast Asian country's rapid political transformation. The U.S. Treasury Department said on February 22, 2013, it would issue a general licence for four of Myanmar's biggest banks - Myanma Economic Bank, Myanma Investment and Commercial Bank, Asia Green Development Bank and Ayeyarwady Bank - allowing U.S companies and citizens to deal with them. REUTERS/Soe Zeya Tun/Files

    View PhotoReuters/Reuters – An employee stands behind a MasterCard logo during the launch of the international credit card issuer’s first ATM transaction in Myanmar, in Yangon, in this November 15, 2012 file photo. Two …more 

YANGON (Reuters) – Two banks owned by tycoons associated with Myanmar’s former military regime will start to do business with U.S. companies and investors in the latest reward for the Southeast Asian country’s rapid political transformation.

The U.S. Treasury Department said on Friday it would issue a general licence for four of Myanmar’s biggest banks — Myanma Economic Bank, Myanma Investment and Commercial Bank, Asia Green Development Bank and Ayeyarwady Bank — allowing U.S. companies and citizens to deal with them.

The easing of sanctions on Asia Green Development Bank and Ayeyarwady Bank underlines how politically connected capitalists of the old regime — whom the United States once castigated — are re-inventing themselves and retaining a strong foothold as foreign investors race to enter Myanmar.

It helps remove uncertainty among U.S. companies over lingering restrictions on their dealings in Myanmar and is expected to increase the domestic reach of U.S. credit card firms Visa Inc andMasterCard Inc.

The decision was announced ahead of a visit to Myanmar by 50 U.S. executives on Monday to explore opportunities in the resource-rich nation, the latest sign of burgeoning foreign corporate interest in the country of 60 million.

“This announcement will undoubtedly help the further development of the market,” Antonio Corro, MasterCard’s chief representative for IndoChina, said in a statement. “We expect that Myanmar’s tourism sector will continue to grow rapidly and so building card acceptance is key.”

Washington eased sanctions last July to allow U.S. companies to invest in and provide financial services to Myanmar, dropping restrictions on dealing with most Myanmar banks.

Sean Turnell, an expert on Myanmar’s economy at Australia’s Macquarie University, said the latest move was significant because it would normalize the flow of international funds in and out of Myanmar. But he said the inclusion of formerly blacklisted Ayeyarwady Bank and Asia Green Development Bank was a surprise given previous U.S. assurances that they “still had their eye on the worst offenders of the past regime”.

“One of the great anxieties is over the cronyisation of the economy — the fear it will be a fleeting summer and become like Russia,” Turnell said.


Ayeyarwady Bank is owned by Zaw Zaw, who was previously described by the U.S. Treasury as “a regime crony” and blacklisted under targeted U.S. sanctions four years ago.

The tycoon, whose holdings range from timber and gems to luxury resorts and who benefited handsomely from state privatizations three years ago, told Reuters last year his dream was to buildAyeyarwady into an international brand.

Asia Green Development Bank is controlled by Tay Za, Myanmar’s best-known tycoon. He was previously sanctioned by the U.S. Treasury as a “notorious henchman and arms dealer”.

U.S. firms will still be barred from forming joint ventures with the banks. The other two banks granted a general licence on Friday are controlled by the government.

“It is now time for Myanmar and the U.S. to take the relationship to the next level,” Tami Overby, vice president for Asia at the U.S. Chamber of Commerce, told a meeting of U.S. and Myanmar business officials in Yangon.

Western countries have suspended most sanctions in recognition of Myanmar’s dramatic political and economic opening since the new government took power in March 2011.

Critics say they risk moving too fast, pointing to evidence of human rights abuses in recent months against Myanmar’s Rohingya Muslim minority group and ethnic Kachin rebels engaged in a conflict with the military.

MetLife, Cargill, Fedex, Chevron, General Motors, General Electric, Target, Honeywell and eBay are among the roughly two dozen U.S. companies visiting Myanmar this week.

Visa and MasterCard have already entered the country, partnering with several banks and gaining access to a nascent ATM network, but only a handful of merchants currently accept payment by card. A central bank official who asked not to be identified told Reuters that only six out of 19 private Myanmar banks can handle MasterCard and Visa cards at the moment.

“I am sure the recent easing of sanctions will enable the remaining banks to use these cards in the very near future,” the official said.

Visa, which marked its first point-of-sale transaction in Myanmar last month at a Yangon restaurant, said in a statement to Reuters that decisions to apply for a Visa licence were “up to individual banks.”

(Additional reporting by Stuart Grudgings in KUALA LUMPUR, Eveline Danubrata in SINGAPORE and David Henry in NEW YORK; Writing by Stuart Grudgings; Editing by Richard Borsuk and Paul Tait)


By Aung Hla Tun | Reuters

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