Vietnam Commercial Banks – Financial Indicators 2018

Everything you need to know about the $1.8 billion PNB-Nirav Modi fraud

India is currently dealing with what likely is its biggest bank fraud so far.

Companies owned by diamond merchants Nirav Modi and Mehul Choksi are alleged to have swindled Punjab National Bank (PNB) of over Rs11,000 crore ($1.77 billion). Amid speculation and a flurry of reports on the nature and magnitude of the scandal, here’s a basic list of questions and answers on the alleged crime.

When did the fraud take place?

Between 2011 and at least 2017. It was detected in the third week of January 2018, according to the PNB management which approached the Central Bureau of Investigation onJan. 29.

How was it carried out?

In 2011, ​i​t began with a a much smaller amount with a single letter of undertaking (LoU)​ worth around Rs800 crore.

What is a letter of undertaking?

It is a guarantee that a bank is obliged to repay the loan if the actual borrower—Nirav Modi in this case—fails.

So, were the loans approved by PNB?

The first LoU was issued by two PNB employees on behalf of the bank via SWIFT, sanctioning loans to be disbursed abroad.

What is SWIFT?

Society of Worldwide Interbank Financial Telecommunication, or SWIFT, is a system to send instant messages. Once a foreign bank or a foreign branch of a bank gets the LoU via the SWIFT message, it disburses the loan to the borrower.

Where did it go wrong?

When the credit due was not paid in time, more LoUs were issued on behalf of PNB to offset the payment​.

What is “offsetting the payment”?

When the borrower did not repay the first Rs800 crore, the bank ought to have stepped in and booked a default by the group company. Instead, the two PNB employees, who were allegedly party to the fraud, issued more LoUs on behalf of PNB, asking other banks to give out fresh loans to the firms. This continued until two weeks before the whole operation came to light after some of Modi’s employees visited the bank on Jan. 05. The management was caught napping and the overdue loans exceeded Rs11,000 crore.

Are we sure the fraud did not exceed Rs11,000 crore?

“I don’t think so, but we will know after the investigation,” PNB managing director and CEO Sunil Mehta said on Feb. 15. If the probe reveals that the amount exceeded the current estimate, the bank’s liability may increase. “Gross exposure is significantly higher at $1.8 billion, though, at this juncture, it will be difficult to ascertain the financial impact across the banking system as investigations are on,” Edelweiss Research said in a note on Feb.15.

How did the management miss a colossal fraud like this for so many years?

PNB sources say the bank isn’t fully integrated on a ​​Core Banking System (CBS) which could have immediately detected the discrepancy.

What is a CBS?

Gartner defines CBS as a back-end system that processes daily banking transactions, posting updates to accounts and other financial records. It is a centralised software that keeps all records across branches and is capable of generating alerts over any undue activity.

So, India’s second-largest government bank didn’t buy good software?

According to sources, PNB’s integration to a CBS was initiated in 2002. The technology took a decade to become developed. It should have been upgraded by 2012, but wasn’t. It is getting updated now.

Is PNB the only bank without proper CBS?

“Public sector banks continue to grapple with weak systems, raising questions on why the processes are not centralised, unlike most private banks where bypassing CBS is not easy,” Edelweiss said. It added that “the liability on respective banks depends on the investigation’s outcome. Even Bank of India, in the third quarter of financial year 2018, reported stress of Rs9,400 crore pertaining to stand-by letter of credits discounted by its overseas branches.”

So, without good software, the two employees were able to game the system?

Yes, the two individuals apparently colluded with the borrower to wrongfully sanction fresh loans via SWIFT. ​

Shouldn’t banks have other ways of keeping track?

SWIFT transactions are supposed to be regularly reviewed. PNB sources say there is a system to check SWIFT transactions daily by the manager and a concurrent auditor within the branch,​ a norm that was not followed. “We have an internal rule wherein officials are rotated within departments, ideally every few months. But the two accused were in the same role in the same branch for seven years. ​The moot point is, we are at a loss to find out now. So many managers changed, so many auditors and inspectors came and went. How did they bypass everybody?” a PNB official said, requesting anonymity.

Is it the first time that such a fraud had occurred?

No. A bunch of Indian banks faced massive losses due to unpaid loans from Winsome Diamonds, which defaulted for the first time in 2013. The loans given to Winsome, and its associate entity Forever Diamonds, were through similar SWIFT route. However, both Winsome and Forever failed to repay, citing default by customers. The Serious Fraud Investigation Office is probing the case.

Is it possible there were more PNB employees involved?

It is too soon to say. The management has assured investors that it will undertake a forensic audit and look into loans approved under earlier managements, if needed.

Which are the other banks that lent money to Nirav Modi and Mehul Choksi’s firms?

According to sources, Allahabad Bank has the largest exposure—of ​over Rs4,000 crore. Union Bank has anywhere between Rs1,000 crore and Rs2,000 crore, and the State Bank of India about Rs1,000 crore. Axis Bank has over Rs2,000 crore, though it has already sold off those loans.

What will be the impact of the Rs11,000 crore (or bigger) fraud?

Loss of public faith in PNB and other state-owned banks will be the biggest risk. According to RBI regulations, PNB will have to repay other banks the money owed by the firms. PNB sharesholders may see their wealth eroding further as the Rs11,300 crore liability is more than a third of the bank’s market value. The pain will only increase if the probe reveals a bigger scam. This is besides the taxpayer money that will be lost in litigation and getting Modi and Choksi extradited.

Who will pay for the losses?

Reports say that RBI has instructed PNB to pay other banks for the loans disbursed to Modi and Choksi. Other banks will have to set aside money from their profits till the time PNB coughs up the money, and when it does pay up, PNB’s books will then have to show the amount as loss.

Have Modi and Choksi offered to repay?

The PNB CEO said Modi sent an email seeking time to repay, and the management, in turn, has sought a detailed repayment plan.

Where are Modi and Choksi?

We don’t know for certain but reports suggest that Modi may be in New York.

By Samantha Radocchia, Co-Founder at Chronicled (2015-present). Originally published on Quora.

With over 83 million passengers traveling through Dubai International Airport, it was the world’s third busiest airport in 2016. The city itself is booming, with an annual population growth of just over 10%.

While it’s the undisputed business hub of the Middle East, Dubai has set an ambitious goal: To be the first blockchain-powered government in the world by 2020.

It’s a bold transition for the city but one that might not be as far-fetched as you think. Blockchain-powered smart cities are more attainable than people imagine. The uses for blockchain within cities are nearly endless, but there are some major areas where blockchain will represent a dramatic improvement.

Let’s look at a few of those areas to see how blockchain can impact city life in the coming years. After all, if Dubai’s experiment with blockchain-powered government works out, there’s no telling who might follow suit.

Inefficiencies

Cities around the world are already working to become what we call “smart cities.” They’re using IoT connected devices to do everything — from detecting gunshots to monitoring traffic and air quality.

And guess what? All of those IoT devices can be registered on the blockchain.

There are plenty of opportunities to add blockchain to city systems that are already connected. These systems gather plenty of data that could be placed on the blockchain. Upgrading to blockchain would make it easier for city governments to access and manage that data.

Say, when the light in an IoT connected lamp post goes out, it could trigger an automatic message to officials in charge of replacing it.

Right now, there are silos of data. Not every security camera or electronic lock is made by the same company. Not every parking garage uses the same parking sensors to determine capacity. If we could securely organize all of that data onto an interoperable backbone, then law enforcement (or government officials or whoever is allowed access to the data) would be able to get that access without going through multiple separate parties.

Blockchain could help solve many city inefficiencies almost immediately.

Public Safety

Communication and data sharing can have a positive effect on public safety as well. Recently, I had a conversation with a company in Boston who is trying to use the blockchain space for public safety data in police departments. Their data is very loosely organized. Silos of data are inaccessible to police stations in different neighborhoods within the same city. The current system is very rudimentary, partly because there’s no better way to share sensitive data between departments.

Blockchain can provide a secure system for sharing sensitive data. Wires won’t be crossed, and opportunities won’t be missed due to a lack of communication. This still has to be weighed against a citizen’s right to privacy and the government’s limit to tracking individuals. But it’s good to see people are talking about sharing data and working on preventative measures, such as analyzing crime statistics and planning police patrols around that information.

Public Transportation

Most major cities rely heavily on public transportation. Some of them can’t operate without it. There are opportunities to put blockchain to work here.

New York City recently awarded a $573 million-dollar contract to transition from their refillable MetroCard to electronic readers. Right now, New York commuters have to manually swipe the cards and refill with money as needed. In cities like San Francisco and London, you don’t even need a card. You can scan your phone and deduct payment from connected accounts such as Apple Pay or PayPal.

The next step would be to use a blockchain-based system for pay. If commuters have a blockchain wallet on their smartphone, they could pay for any transit pass, loyalty programs, or purchase without a card.

And that may give extra incentive to take public transport.

Smart Incentives

Another interesting aspect of blockchain-powered cities is how they can incentivize citizens to make positive decisions.

Here’s a hypothetical:

Say you decide to take public transportation to work every day this coming week instead of driving. When the wallet registers you’ve used public transportation all week, you get a discount on your energy bill for that month. Or maybe you’re credited for one free bus ride.

Whatever it is, the incentive has to gently push people towards ethical, sustainable, and transparent ways of consuming and producing goods and services.

This could lead to more sustainable, habitable cities with fewer issues and inefficiencies. At the end of the day, that’s what blockchain can help us accomplish — smarter, healthier cities. And if Dubai makes good on their goal in 2020, we may have an example to follow in just a few years.

Tech companies are the new investment banks

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In a low interest rate environment, with billions of dollars in yearly earnings, tech giants like Apple are issuing their own very cheap debt and using it to buy up the higher-yielding corporate debt of other firms. Mark Lennihanby Rana Foroohar

A few years ago, while trawling for information about financial risk and where it might be held, I had a fascinating conversation with an economist at the US Treasury’s Office of Financial Research.

She told me to look at the debt offerings and corporate bond purchases being made by the largest, richest corporations, such as Apple or Google. In a low interest rate environment, with billions of dollars in yearly earnings, these high-grade firms were issuing their own very cheap debt and using it to buy up the higher-yielding corporate debt of other firms.

In the search for both higher returns and for something to do with all their money, they were, in a way, acting like banks, taking large anchor positions in new corporate debt offerings and essentially underwriting them the way that JPMorgan or Goldman Sachs might. Since such companies were not regulated like banks, it was difficult to see exactly what they were buying, how much they were buying, and what the market implications might be. Still, the idea that cash-rich tech companies might be the new systemically important institutions was compelling.

That is why I have been poring over a new Credit Suisse report that both confirms and quantifies this idea. Economist Zoltan Pozsar has forensically analysed the $US1tn in corporate offshore savings parked in liquid assets, a fortune that he likens to China’s foreign exchange reserves, not only because of its market-moving size, but the idea that both fortunes were created by a macroeconomic "crime" — mercantilism in the case of China, and tax arbitrage for the corporate hoard.

The largest and most intellectual-property-rich 10 per cent of companies — Apple, Microsoft, Cisco, Oracle, Alphabet — control 80 per cent of this hoard. Their earnings come mainly from IP that can be easily moved across borders. Their offshore savings went from around $US100bn in 2008 to $US700bn by 2016. And, according to Mr Pozsar’s calculations, most of that money is held not in cash but in bonds. Indeed, half of it is in corporate bonds.

The much-lauded overseas "cash" pile held by the richest American companies, a treasure that Republicans cited as the key reason they passed their ill-advised tax "reform" plan, is actually a giant bond portfolio.

What does this mean? Many significant things. But let us start with the obvious, which is that bonds are not cash. If companies are to bring back those overseas earnings and invest them in growth-enhancing projects in the US, as Donald Trump keeps promising us they will, they would have to sell their bond stash.

This has serious implications for interest rates. Consider that the Federal Reserve is starting to deleverage its own balance sheet. Now, add in the corporate "echo-taper", as the Credit Suisse report puts it, and you have got a heck of a lot of bonds on the market, which is bound to move the interest rate needle up, perhaps more quickly than is currently expected. We saw last week the effect that even a mild change in interest rate expectations can have.

Another point to consider: the real economic growth impact of this spending scenario would be minimal. Corporate treasurers have already said that the bulk of repatriated funds will be used for mergers and acquisitions, dividends and share buybacks, not building factories or raising wages.

"That will be good for whoever owns those stocks, but not much else," says Mr Pozsar. "The $US1tn offshore is the manifestation of a lot of what [Thomas] Piketty [author of Capital in the Twenty-First Century] says."

Financial fortunes will be made and lost as this cycle plays out over the next couple of years — most of the dealmaking would probably be done by 2020, when the next presidential election could shift rules yet again. Yet nothing in the real economic growth picture would change. We are still in the last stages of a recovery cycle, with flat productivity and demographics, and due for slower, not faster, growth in the next few years. The Wall Street-Main Street divide remains as stark as ever.

In fact, the new Republican tax plan is likely to exacerbate that divide, by making it even easier for big companies to move money around. The shift to the territorial system means that US businesses won’t have to play the game of issuing debt to buy debt any more.

They will just move money where they like. In the context of more trade protectionism and pushback against immigration, this could lead to further discontent with globalisation, if you define it as the free movement of goods, people and capital. As Mr Pozsar writes, "the US is embracing protectionism on the one hand, and tearing down liquidity silos on the other". If people continue to feel the game of globalisation is rigged against the little guy, you can bet on more political populism.

This time around, the target of voter rage will not be the big banks, but the world’s largest and richest corporations. Just as, say, the Rothschilds went from being merchants to merchant bankers when they had enough cash on hand, so rich corporations — especially tech firms — have become the financial engineers of our day. Let us hope the companies’ boards are thinking about all that comes with it.

Read more: http://www.afr.com/news/world/tech-companies-are-the-new-investment-banks-20180212-h0vzqw#ixzz573p90Js3
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Australia’s real-time payments platform goes live

Australia’s real-time payments platform goes live, with customers of three of the country’s big four banks able to transfer funds in seconds. The New Payments Platform (NPP) will enable customers of Commonwealth Bank, National Australia Bank and Westpac to send money via a service called PayID, which requires users to enter only the recipients’ mobile phone number or email address. Other financial institutions, including ANZ, will follow.

The billion dollar project is being run by NPP Australia, which was set up by the industry in late 2014 in response to cajoling from the country’s central bank, eager to catch up with the likes of the UK in the faster payments arena.

Swift was brought in in 2015 on a 12-year contract to design, build and operate the platform’s basic infrastructure.

In addition to speeding up payments, the NPP allows for up to 280 characters of information to be attached to payments, which the RBA says will provide richer data, facilitating e-invoicing and straight-through processing.

Bank of Baroda to shut down South Africa operation
Source: Economic Times

The Bank of Baroda has decided to shut down its operation in South Africa, a development that comes within months of the South African Reserve Bank imposing a fine of 11 million rand for lapses in compliance. The bank notified the South African Reserve Bank on Monday about its plan to exit the country.

"The registrar, which is part of the South African Reserve Bank (SARB), is in discussions with the Bank of Baroda to ensure its orderly withdrawal from South Africa so that no depositor is disadvantaged," said a statement issued by the South African Reserve Bank.

The exit from South Africa could also be linked to the Bank of Baroda being a banker to the Gupta family of Indian origin who reportedly took undue advantage of its connections with South Africa’s president Jacob Zuma. South African authorities have alleged that the bank transferred a large sum of money to the Zuma family, which is now under investigation.

In a statement last week the bank had said, "The Reserve Bank of South Africa is investigating the allegations against Bank of Baroda and the bank is actively cooperating and supporting these investigations."

In June last year, the banking regulator of South Africa had sought information on the financial transaction of Gupta family from banks. At that time, the Bank of Baroda continued to maintain banking relations with the Gupta family, while Standard Bank, Nedbank, First National Bank and Barclays Africa Group discontinued banking with the family. The Gupta family’s businesses in South Africa range from information technology to engineering and mining.

How are Bitcoin and Ethereum different?

Benard Marr

Bitcoin was the first true cryptocurrency and has been in circulation since 2009. Ethereum is a far more recent development, going live in 2015.

In the time between Bitcoin and Ethereum’s release, lots of other cryptocurrencies emerged. Mostly, however, they were limited to trying to improve on aspects of Bitcoin’s performance – for example, increasing speed of transactions or improving the security or anonymity of transactions.

Ethereum is certainly faster than Bitcoin – with transactions typically settling in seconds, rather than minutes. But it also takes things further. While still blockchain based, and operating as a store of value, its fans and evangelists see it as a platform for distributed computing, which comes with its own built-in currency, called Ether.

While the Bitcoin blockchain can simply be pictured as a database of accounts (or wallets) with an amount of currency stored in each, the Ethereum network blockchain is a more sophisticated construction, capable of storing computer code – applications – that can use the CPU power going into the network to execute.

The currency – Ether – represents this CPU power – so the idea is that Ether will be bought and sold by businesses, governments or individuals to allow them to tap into the vast, distributed resources of the Ethereum network to run their own apps.

The first of these applications are known as “smart contracts”. This is a way of automating contracts and agreements so they will execute when consensus says that conditions have been filled. Though simple, their uses are potentially widespread – such as enabling payment systems which will release funds on completion of work, or authorizing the transfer of ownership of good when payment has been made.

The Ethereum network also allows the creation of other cryptocurrencies, or tokens, using the same protocol as Ether but distributed on different blockchains, which can be public or private. This means they can be created by organizations to represent shares, voting rights or as means of proving identity or authorization credentials.

Should I invest in Bitcoin or Ethereum?

Well, as I am not a financial advisor I wouldn’t tell you where to put your money. What I can do is suggest some things that you should bear in mind, if you are looking to make speculative investments in cryptocurrency.

Ultimately, the long-term growth of any cryptocurrency (or indeed business) depends on useful applications being found for its assets.

If Bitcoin goes on to become a widely accepted form of currency, or the Ethereum network becomes an established standard for distributed computing, then the value of these assets is likely to continue to grow.

On the other hand, in technology, there is always something snapping at the heels of the front-runners. Newer and more efficient algorithms could replace either Bitcoin or Ethereum.

Additionally, both face the threat of government regulation. The value of many cryptocurrencies (including Bitcoin and Ethereum) have moved downwards since the start of the year, which has been attributed to threats of their trade being regulated by governments in China and Korea.

What is clear is that the huge increases in value we have seen over the last five years has largely been due to speculative investment – people buying them in the hope that they will be able to sell them for more money to someone else in the future.

This is often a recipe for inflated prices and an inevitable crash back down to earth – something that many believe could happen at any time and may have already started.

Ultimately, achieving sustainable growth will be dependent on useful applications. More businesses accepting Bitcoin as a method of payment, and more applications becoming widely used and supported on the Ethereum network.

AFC U23 Football Tournament: Spectacular win of Vietnam U23 vs. Qatar –
The win which has never been done before!