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September 2021

Commercial banks

Ten commercial banks’ OPEX reaches 932.26 billion naira in first half of 2021, boosted by double-digit inflation, AMCON Levy, others

By Darasimi Adebisi

Despite the abundant profits reported by deposit banks around the country in their second quarter reports, it appeared that the double-digit inflation rate, among other factors, resulted in a total operating expense (OPEX) of 10 banks by seven percent to 932.26 billion naira in semester 2021 (H1) compared to 871.67 billion naira in the comparable period of 2020.

Analysis of bank results submitted to the Nigerian Exchange Limited (NGX) showed that regulatory costs such as the Asset Management Corporation of Nigeria (AMCON) charge 0.5 percent on total assets and the Nigeria Deposit Insurance Corporation (NDIC), currency, were other factors that contributed to the increase in OPEX of these 10 banks during the period under review.

Recently, the National Bureau of Statistics (NBS) announced that Nigeria’s inflation rate closed in June 2021 at 17.75%, compared to 17.93% and 18.12 recorded in May and April, respectively.

The inflation rate in January was 16.47 percent but rose to 17.33 percent in February. The office reported an inflation rate of 18.17% in March 2021.

Industry analysts believe that the rise in bank operating expenses is mainly due to regulatory costs.

Further analysis of the results showed that banks operating in the country recorded OPEXs below the inflation rate during the period, due to the reduction in staff costs.

For example, Access Bank Plc reported an increase of around 9% in operating expenses to 189.8 billion naira in the first half of 2021 from 174.3 billion naira in the first half of 2020, while operating expenses of Zenith Bank Plc rose 10.3 percent to 149.85 billion naira in the first half of 2021 from 135 naira. 0.85 billion in the first half of 2020.

Access Bank hinted that the nine percent OPEX growth was due to the franchise expansion following the acquisition in Kenya, Mozambique, South Africa and Zambia.

“The OPEX at the Bank level has remained stable despite the increase in regulatory costs (17%), depreciation and amortization (16%). We continue to optimize our costs despite the inflationary environment, ”explained the bank.

Guaranty Trust Holdings Plc (Guaranty Trust Bank) declared 89.34 billion naira of OPEX in the first half of 2021, an increase of 7.2% from 83.31 billion naira, as OPEX of Fidelity Bank Plc having fell 10 percent to 42.25 billion naira in the first half of 2021 from 46.84 billion naira in the first half. 2020.

GTCO in a presentation to investors and analysts attributed the increase in OPEX to the headline inflation rate and the marginal movement of the Naira / US dollar rate in the official market which resulted in the increase in general prices of goods and services.

According to the bank, “operating costs were largely impacted by a 27.3% growth in AMCON expenses and 9.3% in depreciation expenses”.

In addition, United Bank for Africa Plc reported a 0.5% increase in OPEX to N132.8 billion in the first half of 2021, compared to N132.13 billion in the first half of 2020, while that of FBN Holdings Plc increased by 10 % to N152.57 billion in the first half of 2021 compared to N139. 17 billion in the first half of 2020.

FBN Holdings explained that the 35.4% increase in regulatory costs was responsible for the surge in OPEXs, stressing that management continued to focus on cost control as a key priority.

In the same vein, Standard IBTC Holdings with 14% to N55.37 billion in the first half of 2021 against N48.54 billion in the first half of 2020 recorded the highest OPEXes of the period, while the OPEX of the sterling bank increased. from 11% to N35.5 billion in the first half of 2021. from 32.1 billion naira in the first half of 2020.

In addition, FCMB Group Plc declared N47.95 billion from OPEX, a nine percent increase from N44.05 billion in the first half of 2020, while Union Bank of Nigeria increased its OPEX of around four percent to 36.8 billion naira in the first half of 2021 compared to 35.4 billion naira. in H1 2020.

Commenting, the Head of Financial Institutions, Agusto & Co, Mr. Ayokunle Olubunmi, noted that the increase in banks’ operating expenses was attributed to the increase in the cost of the operating environment and regulatory costs.

According to him, “the increase in operating expenses differs from bank to bank. The AMCON direct debit and the NDIC premium also contribute to the OPEX of the banks. Keep in mind that the double-digit inflation rate and the fall of the Naira this year has had an impact on bank spending. Since banks do not operate in isolation, this should of course affect their OPEXs during the period. “

For his part, the CEO of Enterprise Stockbrokers, Mr. Rotimi Fakeyejo, said TODAY that the harsh operating environment of companies has had an impact on OPEX of banks.

He noted that banks were careful in managing costs by reducing personal expenses, among other things based on the need to remain profitable.

From ThisDay Live


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Currency

The Taliban have yet to decide on the currency for trade

PESHAWAR: Afghan traders are finding it difficult to continue trading due to the lack of foreign currency, as the international community withheld the assets of the Da Afghanistan bank after the Taliban took Kabul on August 15.

On the other hand, the Taliban have yet to decide which currency should be used for trading, which has created new problems for traders. The dollar exchange rate in Afghanistan has fluctuated.

The Pakistani government has announced that it will trade with Afghanistan in Pakistani rupees, while the Taliban said in a statement on their social media that all major and minor trade transactions in Afghanistan will be done in Afghan currency.

Afghan traders rejected Pakistan’s decision to conduct business transactions in Pakistani currency.

The article continues after this announcement

The Afghan Taliban have said that the country’s identity is more important and that no decision will be made that undermines the interests of the Afghan nation.

However, no new mechanism has been formulated for trade and other business activities. In addition, Afghanistan and Pakistan have yet to announce an official policy of mutual trade and transit between the two countries.

According to sources, after the Taliban took control of the banking system in Afghanistan, it is difficult for traders to exchange dollars because the current banking system is closed.

Finance Minister Shaukat Tarin told the Standing Committee that it had been decided to conduct trade between Pakistan and Afghanistan in Pakistani rupees.

Tarin told the Standing Committee on Finance that there is a shortage of dollars in Afghanistan after the international community seized its assets. But the

Pakistan has also called on the world to unfreeze Afghanistan’s accounts as this may trigger a humanitarian crisis.


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Banking system

Banking system: managed economies against capitalist states

The banking sector is one of the most critical aspects of a country’s economy, despite their preferred economic systems. Banks play a vital role in an economy by facilitating the allocation of funds from savers to borrowers. Banks accept deposits from their customers which they then use to provide financial support to consumers and business organizations.

Therefore, the financial sector is the most crucial determinant of economic growth and development, as banks provide the necessary capital. Some researchers have even argued that the status of a banking system is a good indicator of the country’s economic situation. This argument is also applicable to the Chinese and American economies, which depend heavily on their banking sector (Ding, Fung, & Jia, 2017).

However, financial institutions like banks develop unique structures and operations based on the preferred economic system of the country. For example, the banking system in a managed economy like China is fundamentally different from the banking system in capitalist systems like the United States. This article analyzes how the banking system in a managed economy like China is fundamentally different from the banking system in capitalist countries like the United States.

One of the most fundamental differences between the banking system in a managed economy and the banking system in a capitalist system concerns the ownership of financial institutions. Managed economies like China are characterized by strong government involvement in the planning and management of the economy. The state-owned People’s Bank of China was the only financial entity mandated to operate in the Chinese economy.

However, the country underwent reforms in the 1980s, allowing five other specialized public banks to operate in the country. The banks included ABC (Agricultural Bank of China), BoCom (Bank of Communications), BoC (Bank of China), CCB (Construction Bank of China) and ICBC (Industrial and Commercial Bank of China).

Other reforms included the offering to specialized banks of initial public offerings (IPOs), although the state still retains a controlling stake in the banks. Moreover, the little private property in the banking sector is mainly reserved for Chinese nationals with limited foreign investment in the authorized banking system. The Chinese government is reluctant to allow foreign investment in the financial sector because the banking system is closely tied to the state’s micro and macroeconomic policies. This ownership structure is fundamentally different from that adopted in capitalist societies like the United States.

Capitalist systems like the United States tend to look to private property in the banking sector to promote free market ideals promised under capitalism, although the state plays a critical role in regulating the sector through of the Federal Reserve system. The privatization of the banking sector in the United States has resulted in the largest number of financial institutions with more than five thousand financial entities in the country.

In addition, privatization has also resulted in the creation of many small banks, especially those regulated by state supervisory committees. The five largest financial organizations are private because the capitalist system adopts a free market system that encourages private ownership of these institutions. In addition, the US banking system allows significant foreign direct investment in financial institutions under free market capitalist principles. As a result, managed economies like China turn to state ownership while capitalist systems like the United States encourage private ownership throughout the banking system.

The regulatory environment for the banking system in managed economies like China is also fundamentally different from that of capitalist countries like the United States. Elliot states that the United States and China have taken very different directions when it comes to financial regulation (Elliot, 2017). The Chinese government plays a vital role in regulating the financial environment, especially banking activities, as does its role in ownership.

The government is essential in regulating the banking system since it regulates it internally through its ownership positions while maintaining an external regulatory role through state bodies. Ownership positions in the country’s major banks allow the government to direct the actions and operations of the banking system as the major public financial institutions dictate the functioning of the financial sector in the country.

The government’s external regulatory role also allows the Chinese government to control and manage the banking sector through the People’s Bank of China, acting as a central bank, and three other regulators: China Securities Exchange Commission , CIRC (China Insurance Regulatory Commission), and CBRC (China Banking Regulatory Commission) (He, 2012). However, the Chinese government has implemented reforms to regulate the financial sector, especially the banking system, and established the Committee for Financial Stability and Development (FSDC) in November 2017. The committee was entrusted with the task of role of super financial regulator and was created under the aegis of the Council of State. headed by a Deputy Prime Minister with more powers than the other regulatory commissions. Therefore, as Cousin excellently states, the state is the essence of the regulator of the Chinese banking system.

In comparison, the United States adopts a two-tier system that implies that financial institutions can be licensed by state governments or by the federal government (Labonte, 2017). However, regulators are independent from government interference and are free to pursue their policies as they see fit. For example, the Federal Reserve Bank, which serves as the central bank of the United States, is independent from government policies and actions, although it coordinates with government officials to ensure a unified monetary strategy.

However, the government has no power over the bank. Some of the main types of financial regulators at the federal level include consumer protection regulators, regulators of government-sponsored companies, securities market regulators, and custodian regulators (Labonte, 2017). Therefore, the state tends to play an important role in regulating the banking system in managed economies like China, while regulators are more independent in capitalist countries like the United States.

Finally, the banking system in managed economies like China is geared towards supporting government policies while that of capitalist countries is sensitive to free markets. Cousin states that “financial flows were organized around planning exercises for the whole economy and flows were directed to specific industries and regions based on policy decisions” regarding the Chinese banking sector (Cousin, 2012).

This statement implies that the main function of the banking system is to serve the macro and microeconomic policies of the Chinese government, which can sometimes be based on political considerations. For example, the banking system directs financial resources to priority sectors of the current political regime. In contrast, the banking system in capitalist societies like the United States is established to serve the market and responds to market changes appropriately. For example, US banks grant loans at their discretion without any direct government interference.

In conclusion, this article analyzes the fundamental differences between the banking system of a managed economy like China and the banking system applied in capitalist countries like the United States. One of the most fundamental differences between the banking system in a managed economy and the banking system in a capitalist system concerns the ownership of financial institutions. The regulatory environment for the banking system in managed economies like China is also fundamentally different from that of capitalist countries like the United States. Finally, the banking system in managed economies like China is geared towards supporting government policies while that of capitalist countries is sensitive to free markets.

The references

Cousin, V. (2011). The specificities of Chinese banking regulations.
Ding, N., Fung, HG and Jia, J. (2017). Comparison of bank profitability in China and the United States. China and the global economy, 25(1), 90-108.t
Elliot, DJ (2017). Living in two worlds: Chinese and American financial regulation. Center for Strategic and International Studies |. https://www.csis.org/living-two-worlds-chinese-and-us-financial-regulation
Him, WP (2012). Banking regulation in China: what, why and how? Journal of Financial Regulation and Compliance.
Labonté, M. (2017). Who regulates whom? An overview of the US financial regulatory framework.

Follow the latest news live on CEOWORLD magazine and get updates from the US and around the world. The opinions expressed are those of the author and are not necessarily those of CEOWORLD magazine. Follow CEOWORLD magazine on Twitter and
Facebook. For media inquiries, please contact: [email protected]



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Commercial banks

Afghanistan dispatches: “commercial banks run out of US dollars” – JURIST – News

EXCLUSIVE JURIST – Law students and lawyers in Afghanistan file reports with JURIST on the situation there after the fall of Kabul to the Taliban. Here, a lawyer from Kabul with experience in the country’s financial sector presents his observations and perspective on the circumstances facing the country’s banks and banking system under the new regime. For reasons of confidentiality and security, we retain his name and institutional affiliation. The text has only been slightly retouched to respect the author’s voice.

The Acting Governor of the Central Bank of Afghanistan issued another letter urging commercial banks not to allow corporate bank accounts to 1) withdraw money for any purpose and 2) carry out electronic transactions inside and outside Afghanistan.

Afghanistan pays around US $ 7 billion electronically through correspondent banking services. The last restriction will significantly increase the price of imported products.

In addition, only the main offices of commercial banks are open. No branch is currently operating, at least as far as I can see in Kabul. In addition, commercial banks are strapped for US dollar liquidity because they do not receive it from the Central Bank. The US Treasury has decided to stop the supply of physical dollar banknotes to Afghanistan. It also raised the prices of raw materials. As an example, I bought a 16 liter bottle of oil for 1400 AFN. Today was AFN 2500.

In another incident, one of the members of the Central Bank’s Supreme Council in an interview with Reuters urged the US Treasury and the IMF to take the necessary steps to provide the Taliban-led government with limited access to the country’s reserves. . It has been in the media all day today and many have commented on it.

In Afghanistan, there are currently 11 commercial banks, but five are not in a stable situation. Some time ago, the central bank looked at some of these banks and concluded that at least two of them would become insolvent within the next year. Given the current situation, they will be insolvent sooner than expected. In addition, in Afghanistan, only about 4 million people use banking services out of almost 35 million people. This low number of customers is due to the fact that Afghans do not trust the banking system and think their money will be safer with themselves. This situation will worsen further due to recent policies implemented by the Central Bank.

Surprisingly, some of the people who support the US / IMF idea of ​​giving the Taliban limited access to the country’s foreign exchange reserves are people who have opposed the rise of the Taliban. But the impacts the frozen accounts are expected to have on the country’s poor may be the only reason they said what they said.

Meanwhile, the Taliban are at direct war with the only party rising up against them in the Afghan province of Panjshir. It is very difficult for them to finance such a war and we fear that if they have access to more money from investments now frozen, they will use it to finance their war.


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Currency

Are vaccines the new age global currency in 2021

Researchers around the world have been working at an unprecedented rate to advance more than 100 vaccine candidates after the depth and scale of the COVID-19 pandemic was finally revealed. However, most of the infrastructure and funds necessary for the research, production and distribution of effective vaccine candidates have been collected haphazardly rather than through national and international emergency preparedness frameworks. Delays in detecting and responding to the COVID-19 threat, especially in India, have resulted in deaths and a devastated economy. It is difficult to understand why a well-designed and well-implemented vaccine procurement strategy is ignored, or why a public good has been turned into a commercial commodity. Obviously, the ideals of the government’s free market philosophy seem to be more important to them than saving lives and getting India out of the dire situation it is in now. Nothing else explains why a product so vital to the health security of the country has different prices. diets.

Indian vaccines: explained

Covishield vaccinations account for 90% of all vaccines given in India so far. The Serum Institute of India (SII), which manufactures the Covishield vaccine, has fixed costs for private hospitals at Rs 600 per dose and state governments at Rs 400 per dose. In private vaccination centers, the final cost of the vaccine may be more than Rs 600 per dose, as they will have to factor in their own costs of administering the vaccine. It now produces 60 million doses each month, but with financial support from the Indian government and GAVI (https://www.gavi.org) , they want to increase that to 100 million doses from July 2021. The capacity of Bharat Biotech, which makes the Covaxin vaccine, is now 10 million and will be increased. Bilateral deals appear to have been made with other companies with the help of Rs 1,500 crore from the Indian government to boost supplies to 700 million doses by July. As a result of these public statements, India is expected to receive the necessary doses by July, excluding the entry of additional vaccines like Sputnik and Pfizer, the supply and price of which remain unknown.

Vaccines: the currency of the new world

This begs the question of what Finance Minister Nirmala Sitharaman meant when she said in her budget speech on February 1: “I have provided 35,000 crore for the covid-19 vaccine in 2021-2022. “. If additional funds are needed, I will give them. In addition, the central government has allocated 3,000 crore to the Serum Institute and 1,567 crore to Bharat Biotech, for the supply of vaccines until July. After allowing for a reasonable margin, the cost of purchasing vaccines at Rs 150 per dose by the central government as the sole purchaser for government needs amounts to over Rs 19,500 crore. divided, the price advantage obtained by buying in bulk disappears. Under the current vaccination strategy, the central government would pay Rs 7,500 crore and states would spend Rs 34,400 crore, with an average vaccine cost of Rs 430 per dose – a total of Rs 42,000 crore. Given the state of the economy, which is dependent on loans, it is puzzling and confusing why the Center is unwilling to use its market power and continue to fragment markets, which would only bleed states further. and disproportionately favor vaccine manufacturing companies. The producer makes a huge profit at Rs 200 each dose, and it would be the most expensive vaccine purchased by governments through the Universal Vaccination Program. Even so, in the 2021-22 budget, this would imply an investment of Rs 26,000 crore against an allocation of Rs 35,000 crore for the purchase of vaccines.

Black markets are getting stronger

It is clearly a market dominated by suppliers. While the Serum Institute has set the private sector price for vaccinations at Rs. 600 per dose, the final price in a private vaccination center will be higher. In addition, due to limited availability, there is a risk that a black market will emerge for these vaccinations, as has been the case for oxygen cylinders and drugs used in the treatment of Covid. Take the example of hand sanitizers to try to better understand this problem. Hand sanitizers had disappeared from the market and were being sold in black when covid began to spread early last year. The reason was that demand greatly exceeded supply. Despite this, many companies entered the market after witnessing the high price of disinfectants, and the supply problem was quickly overcome and the prices became affordable. So the free market worked, and it worked brilliantly. However, in the case of vaccinations, new entrepreneurs cannot simply enter the market and start producing the vaccine, ensuring that the price of the vaccine does not skyrocket in the months to come. This does not mean that the private sector should be excluded from the immunization process. They should be for the simple reason that the population should be vaccinated as soon as possible. In view of this, a real rival, namely the government, is needed to ensure that the costs of vaccination in the private market do not skyrocket. This could have been accomplished by ensuring that the covid-19 vaccine is always available for free at government vaccination clinics. This would have ensured that private actors set fair prices for their vaccinations and do not make excessive profits. The likelihood of the latter occurring has increased dramatically. In 2019-2020, India’s gross domestic product (GDP) was $ 203.5 trillion. That figure is expected to drop to $ 195.9 trillion next year, a reduction of $ 7.6 trillion. This estimate was made before the onset of the second wave of covid. As a result, GDP for 2020-2021 could be less than $ 7.6 trillion, implying a larger drop. The cost of the spread of covid and the failure of society as a whole to develop collective immunity, forcing governments to enforce closures and curfews, has led to a decline in economic activity. As a result, it makes sense for the government to provide free immunizations, at least in government-run immunization clinics. Since India’s economy declined in 2020-21, it is unlikely to contract in 2021-22. However, if India’s growth rate falls below the current forecast of 10-12%, we would expect a few trillions more in economic damage. In this situation, if the central government spends the 35,000 crore it has set aside on vaccinations (or even more if necessary), the whole economy will benefit greatly.

And after?

To be fair, most countries have struggled to roll out vaccines, even rich countries that have tried to trap far more than their needed percentages of global supplies. Overall, the distribution of vaccines in the United States matches that of the rest of the world: uneven, unfair and inept. This strategy will extend the existing epidemic and raise doubts about humanity’s ability to work together to address the much larger problems that lie ahead. The virus, on the other hand, has no limits and is not afraid. Even if public policy leaves sections of vulnerable demographic groups to destroy, it will rebound. It is a policy that should be revised as soon as possible.


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