A Moody’s sign on the 7 World Trade Center tower is photographed in New York in this file photo. Photo afP

WASHINGTON: The health of 15 of the world’s largest financial institutions has been called into serious question after Moody’s downgraded their credit ratings, citing risk exposure and the eurozone crisis.

Some of the biggest names in banking—including Goldman Sachs, Barclays, Citigroup, HSBC and Deutsche Bank—saw their ratings slashed Thursday, spelling increased investor scrutiny and potentially higher borrowing costs.

Moody’s said, in essence, that the banks risked massive losses and that they were exposed to the roiling financial crisis and to each other.

“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” said Greg Bauer, Moody’s global banking managing.

In total four firms were downgraded by one notch, 10 firms by two notches and one by three notches.

Holding companies of a number of the same banks were also downgraded.

Credit Suisse faced the largest downgrade, with its rating slashed three levels from Aa1 to A1.

Under-pressure US banking giant Morgan Stanley was seen as winning a partial victory by only receiving a two-notch downgrade.

Morgan Stanley welcomed the partial reprieve, but nevertheless questioned the Moody’s decision.

“While Moody’s revised ratings are better than its initial guidance of up to three notches, we believe the ratings still do not fully reflect the key strategic actions we have taken in recent years,” it said in a statement.

Royal Bank of Scotland, which was also downgraded, called the ratings change “backward-looking,” saying it did not recognize the “substantial improvements the group has made to its balance sheet, funding and risk profile.”

Citigroup was similarly unimpressed with the Moody’s verdict.

“Citi strongly disagrees with Moody’s analysis of the banking industry and firmly believes its downgrade of Citi is arbitrary and completely unwarranted.”

In a jab Citi added that “sophisticated” investors no longer depend heavily on ratings agencies to assess credit risk.

Ratings agencies like Moody’s were pilloried for failing to predict the cataclysm that engulfed Wall Street and the world beginning in 2008, and Thursday’s move was part of a sector-wide effort to tighten up ratings.

But even so, the swathe of downgrades amounts to a fresh indictment of the health of the global financial system, which has seen wave after wave of crisis over the last four years.

Since the sub-prime crisis banks have seen the value of their assets slump and their access to capital shrink, which has repeatedly forced taxpayers and central banks to step in to provide liquidity.

Many governments have been forced to provide bailouts, straining already precarious public finances.

On Thursday Spain became the latest to signal a bank bailout.

Madrid announced that its crisis-torn banks need up to 62 billion euros ($78 billion) to survive. It is expected to formally ask its eurozone partners for the cash on Friday.

The 15 banks downgraded were: Bank of America, Barclays, Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland, BNP Paribas, Credit Agricole, Deutsche Bank, Royal Bank of Canada, Societe Generale and UBS.

Moody’s began its review of the banks in February, and the move was widely anticipated, helping to send the Dow Jones Industrial Average sharply lower on Thursday. In a separate announcement, Moody’s also downgraded the long-term debt rating of Lloyds TSB by one notch.

The British bank said the change would have “limited impact on our funding costs and market capacity,” pointing out that its short-term funding rating remained unchanged.

The Daily Sun/Bangladesh/ 23th June 2012

The Executive Committee of the National Economic Council (ECNEC) Monday approved eight development projects involving Tk 30.39 billion.

Prime Minister and ECNEC chair Sheikh Hasina presided over the meeting.

The projects included rural water supply, railway development, water management development, dredging of Pashur channel harbour at Mongla Port, construction or rehabilitation of ferry and pontoons and expansion and development of Chittagong College – Kapasgola road.

Acting Planning Secretary Bhuiyan Shafiqul Islam briefed the journalists about the Ecnec meeting.

He said, of the total cost, Tk 20.96 billion will come as assistance, Tk 8.30 billion from national exchequer and the remaining Tk 1.13 billion will be collected from community sponsor.

For supplying drinking water to arsenic and salinity-hit areas, Tk 6.82 billion will be spent.

The project will be implemented in 33 districts across the country.

Besides, non-piped water supply system will also be established in the areas facing acute problems of salinity, iron and arsenic.

Over 300,000 sanitary latrines will be constructed for the ultra poor people of some selected unions.

For the project, World Bank will provide Tk 5.55 billion as credit and Tk 1.13 billion will come from community sponsorship. Department of Public Health Engineering (DPHE) is scheduled to implement the project by June 2016.

Railway Sector Development Project’ will be implemented to improve regional and sub-regional railway communication system, making it safer and faster mode of travelling.

The implementation cost is set at Tk 3.96 billion, of which, ADB will give Tk 3.22 billion.

The second project for railway sector is ‘Rehabilitation of Bangladesh Railway’s Main Sections (West zone, 1st Revised), spending Tk 1.50 billion.

‘Procurement of 11 MG Locomotives for Bangladesh Railway’ is another project approved yesterday, which will cost Tk 4.81 billion.

It is intended to meet the increasing demand of service in Dhaka-Chittagong route.

Japan Bank of International Co-operation will finance TK 3.35 billion for the project.

ECNEC also approved ‘Water Management Development Project (2nd revised)’ to rehabilitate the dilapidated and weak water infrastructures.

The Daily Sun/Bangladesh/ 20th June 2012

SME Foundation Director Monwara Hakim Ali chairs a discussion at SME Foundation auditorium in Dhaka Tuesday.

Local and foreign participants at a discussion Tuesday identified high bank interest rate as a big challenge for the growth of the Small and Medium Enterprises (SMEs) in Bangladesh.

They also found low skills of both entrepreneurs and employees, and absence of proper technological support as other challenges for the sector.

The SME Foundation organised the roundtable styled: ‘Challenges and Opportunities of SMEs in Bangladesh’ at its auditorium in Dhaka in support with Brac Business School and the University of Oklahoma, USA. Participants say bank loan rates for SMEs are higher compared to big companies.

“Private commercial banks often charge 17 percent and more as interest for SMEs, which is at least two percent lower for big corporate houses,” said Syed Shoaib Hasan, a local entrepreneur.

Speaking at the discussion, Jeff Moore, Executive Director of Oklahoma-based Center for Creation of Economic Wealth, said access to finance at a justified rate of interest is indispensable for the growth of SMEs as the sector entails employment and production of a country.

“The high rate of interest, as I came to know here, is really a big issue and it must be addressed with policy initiatives,” Jeff told the discussion.

Commenting on the issue, SME Foundation Managing Director Syed Rezwanul Islam said though high interest is a big challenge for the SME sector, it’s up to a bank’s own policy to facilitate SMEs.

“Yes, it (high rate of interest) has become a big challenge for SMEs. But, we are constantly pursuing the central bank and management of the banks for a logical rate that could help grow this sector,” he said.

He said the role of the SME Foundation is to address the ‘missing-middles’ so that entrepreneurs could enhance their capacity broadly to contribute to the economy.

Director of BRAC Business School, Mamun Rashid, said Bangladesh has immense potential to expand the SME sector by just providing training facility and creating space for entrepreneurs to get adequate finance.

He said entrepreneurs have no capability to prepare a bankable proposal to get loans. “Entrepreneurs must improve themselves by getting trained to learn how to write a good proposal and operate business efficiently,” he said.

The Daily Sun/Bangladesh/ 20th June 2012

The local currency appreciated by more than Tk 0.20 against the dollar this week after a slight depreciation in the past week, central bank and treasury officials said.

Inter-bank exchange rate set by the dealer banks was quoted at Tk 81.70 yesterday, down from Tk 81.93 on Tuesday last.

However, the average exchange rate of the greenback declined by only Tk 0.04 to Tk 82.36 at customer levels (for import payments) from Tk 82.40 on T

The Daily Star/Bangladesh/ 19th June 2012

LOS CABOS: After searching for months for cash, the IMF looks able to firm up a huge emergency "firewall" fund for crisis prevention after China said Sunday that big emerging economies would chip in.

A day before the Group of 20 powers open crucial talks on the eurozone crisis, Chinese Vice Finance Minister Zhu Guangyao said that the International Monetary Fund would get the balance it needs to reach the $430 billion it tentatively announced in April.

Major European and Asian governments have already pledged around $340 billion to the bailout fund, and Zhu said: "China is confident that the IMF will realize its $430 billion, and China will pitch in."

"During this Los Cabos summit a specific amount will be announced," he told reporters ahead of the G20 summit in the Mexican resort of Los Cabos.

Zhu gave no figure, but said that Mexico's President Felipe Calderon, the current G20 leader who met with Chinese President Hu Jintao earlier Sunday, was confident of raising "over $430 billion".

The issue has been a point of nervousness in recent months as the eurozone situation has deteriorated, increasing the possibility that more IMF funds will be needed to help countries vulnerable to financial contagion.

The IMF said late last year that it needed more "firepower" for emergency aid. But when G20 finance ministers and central bankers met in Washington in April, the IMF pulled in just $340 billion in firm commitments.

The Daily Sun/Bangladesh/ 19th June 2012