Finance Minister AMA Muhith yesterday signalled a further hike in fuel and power prices in the next budget to reduce the subsidy burden on the government.

Muhith sat at a pre-budget meeting with the editors and other senior journalists of the print and electronic media at his ministry.

“A price adjustment is a political decision of the government but the timing will be fixed after considering political environment, summer and irrigation season,” said Muhith, when asked about the timing.

The government had to borrow from the banking system to subsidise fuel oils, which eventually increased inflation, Muhith said.

“Subsidy cuts will now tackle that,” he said.

The minister replied to the editors' queries on amnesty for black money, reducing tax on newsprint, and the World Bank's corruption report about the Padma bridge project.

In the current fiscal year, the government hiked fuel and power prices several times, resulting in inflation, especially non-food inflation reaching double digits.

But the finance minister told the editors that subsidy cuts would tame inflation and it may come down to 7.5 percent next year.

Inflation comes down to the single digit level not only because of cuts in subsidy but also due to an improved supply situation and an increase in income, Muhith said.

About amnesty for black money in the next budget, Muhith said the government has not decided on the matter yet.

On foreign aid, Muhith said the government failed to utilise foreign aid due to its inefficiency.

“Though commitment increased, we have not been able to spend the fund. It is a failure,” Muhith said.

In the next budget, steps will be taken to increase efficiency, he said.

Responding to the editors' queries about good governance and decentralisation of administration, the minister admitted there is politicisation in the administration.

“Personally I feel that finding a solution to this problem [politicisation] is difficult,” he said.

“Change is not possible without changing the political atmosphere,” Muhith said.

On public private partnership, the minister said it is not true that nothing has been done for implementing PPP projects.

He said the power projects have been implemented in line with the PPP model. Various flyover projects are being implemented through PPP initiatives, according to the minister.

The editors strongly recommended lowering tax and duty on newsprint import.

Abdul Qayyum, joint editor of the Prothom Alo, said the cost of production of a copy of a daily newspaper is Tk 20 but it is sold at Tk 8. The cost cannot be recovered from advertisements alone, he said.

Newspapers pay 23.5 percent duty, VAT and advance income tax on newsprint imports. Qayyum proposed a waiver of 3 percent duty and 15 percent VAT on newsprint imports.

He urged the government to consider the recommendation, keeping in mind the media's social contribution.

To a question about US Secretary of State Hillary Clinton's comments regarding Grameen Bank, Muhith said he read about them in newspapers.

He said his position regarding the issue was clear. He dispelled the rumours about the government taking over the bank, and said: "It's a government enterprise, and it is clear who owns how much of the bank."

"Legally, the government of Bangladesh owns 25 percent of Grameen Bank," Muhith added.

Grameen Bank is not the only microcredit providing institution of the country, he said.

Muhith said there are around 3,000 microcredit institutions, many with good recovery rates.

“Microcredit is wonderful, but there is no point in fussing about it,” he said.

Reazuddin Ahmed, editor of the News Today, asked whether a sack full of money recovered by border guards will be included in the revenue earnings. A smiling finance minister said there is no scope to include it in the revenue.

Shah Husain Imam, associate editor of The Daily Star, suggested strengthening the Implementation Monitoring and Evaluation Department for the implementation of the annual development programme.

Moazzem Hossain, editor of The Finance Express; Syed Fahim Munaim, the chief executive officer and chief editor of Maasranga Television; Manzurul Ahsan Bulbul, chief editor of Baishakhi TV; Shykh Seraj, director of Channel i; and Khondaker Muniruzzaman, acting editor of the Dainik Sangbad, were also present.

The Daily Star/ Bangladesh/ 14th May 2012

Dinesh Weerakkody, chairman of Commercial Bank of Ceylon, and Ravi Dias, managing director, arrived in Dhaka today for a four-day visit, according to a statement of the Bank.

This is their first visit to Bangladesh after taking over their respective offices on the retirement of MJC Amarasuriya as chairman and Amitha Gooneratne as managing director.

Weerakkody and Dias will meet the Bank's high officials and corporate customers in Dhaka and Chittagong and attend the annual customer's get together organised by the Bank's Bangladesh office.

The Daily Star/ Bangladesh/ 14th May 2012

Britain expects its flagship banking reforms to remain on track after European Union talks next week, a government source said on Friday, despite opposition to its demand for more freedom from Brussels to choose the level of banks’ capital defences. Chancellor George Osborne has said he will see through recommendations from the Independent Commission on Banking (ICB) for banks to be split into retail and investment arms and to hold more loss-absorbing bonds as a defence against crises.

Those rules, where UK institutions would have to hold enough capital to cover a fifth of their assets as a safety net, go beyond international standards and are opposed by some EU nations - and many in the City of London - who fear they could affect the marketplace for savers, investment and lending.

Finance ministers from across the 27-nation bloc will meet in Brussels on Tuesday to vote on a deal for new bank rules - the second attempt to reach agreement.

“We are confident that we will be able to implement the ICB’s recommendations,” a government source told Reuters.

Osborne warned his EU counterparts earlier this month that any watering down of bank capital rules would make him “look like an idiot”.

The row over who has the power over how banks are regulated could further isolate Britain from the European Union mainstream after Prime Minister David Cameron opted out of an EU economic pact aimed at shoring up the crisis-hit euro zone last year.

EU lawmakers are expected to give nations some flexibility on what bank buffers they impose but Britain wants Brussels to have even less of a say - a demand that may not find a sympathetic audience on the continent.

Britain’s Conservative-Liberal Democrat coalition government is expected to push through its own reforms one way or another.

Osborne is under pressure from an unruly faction of his Conservative party who want Britain to pull out of the EU or at least reduce the hold Brussels has over British laws and regulations, especially those that affect the City of London. London’s bankers have been unhappy with the stricter capital rules Osborne wants to impose, warning that the financial services sector - crucial to Britain’s recovery prospects - will suffer as a result unless they are adopted globally.

Some Europeans worry, however, that higher capital ratios will make British banks appear safer and more attractive to depositors than their European competitors.

The Independent/ Bangladesh/ 13th May 2012

China said on Saturday it would cut reserves for banks, as the country seeks to engineer a soft landing for the world’s second largest economy following disappointing data released Friday. The People’s Bank of China, the central bank, said it would cut banks’ reserve requirements by 0.50 per centage points effective from May 18, according to a statement posted on its website.

The move was widely expected after China reported growth in industrial production slumped to a three-year low of 9.3 per cent in April, adding pressure on Beijing to ease monetary policy.

China’s economy grew an annual 8.1 per cent in the first quarter of 2012, its slowest pace in nearly three years.

The government is targeting economic growth of just 7.5 per cent for the whole year, down from actual growth of 9.2 per cent last year and 10.4 per cent in 2010.

Beijing has already cut bank reserve requirements twice since December as it seeks to boost lending to spur growth, but economists have called for more policy support as economic figures continue to disappoint.

After the latest move takes effect, China’s reserve requirement for most large banks will fall to 20 per cent.
Some analysts were predicting a move as early as this month, especially after easing inflation gave the government room to loosen monetary policy by cutting reserve requirements.

China also said Friday that the consumer price index, the main gauge of inflation, rose 3.4 per cent year on year in April, compared with 3.6 per cent in March.

The Independent/ Bangladesh/ 13th May 2012

One of the pillars of Wall Street—bank JPMorgan Chase—faced new scrutiny Saturday after it reported a shocking $2 billion derivatives loss that even its pugnacious chief executive called “egregious.” “It ought to be a concern to the SEC. They are the ones who ought to have a concern about that,” said Senator Carl Levin, referring to the Securities and Exchange Commission, the government’s top financial regulator. “The SEC should surely take a look at it.” added the Democratic lawmaker, who heads the Senate’s Permanent Subcommittee on Investigations.

According to The New York Times, the SEC was already on the case.
The inquiry, which is being run out of New York, will probably examine the bank’s past regulatory filings about the internal unit that placed the trades, as well as recent statements from the firm’s top executives, the paper said, citing unnamed people “briefed on the matter.”

The huge New York-based bank sent shivers through the markets with the loss, after having convinced many that a well-managed bank could manage the risks of complex derivatives that lay behind the 2008 financial crisis.

Politicians called for tightening bank regulation and tough controls on hedging activities, and a Republican senator requested a hearing into the case.

“Are we confident that taxpayers are fully protected from losses at major financial institutions?” asked Senator Bob Corker in a letter to the Senate Banking Committee head.

JPMorgan CEO Jamie Dimon revealed the losses late Thursday in an unscheduled call to analysts, saying they were incurred in the last six weeks by the New York bank’s risk management unit, the Chief Investment Office.

They involved trading in credit default swaps usually meant to offset other risks in the bank’s investments, but Dimon said the strategy “morphed” into trading that was overly complex, poorly executed and badly overseen.

“These were egregious mistakes,” Dimon said. “They were self-inflicted and... this is not how we want to run a business.”

Although he said the bank was still very profitable, Dimon also acknowledged the positions could possibly lead to another $1 billion in trading losses by the end of this quarter.

“Hopefully by the end of the year... this won’t be a significant item for us,” he said.
Investors made their displeasure brazenly apparent, savaging the bank’s shares from the start of Friday’s trading.

The firm’s stock closed down 9.3 per cent at $36.96,
wiping around $14 billion off the market value of the country’s largest bank.

There was little new information about what happened at the bank. Attention focused on the role of a London-based JPMorgan trader, French-born Bruno Michel Iksil, nicknamed “The London Whale” and “Voldemort,” after the villain in the Harry Potter books.

A source close to the matter told AFP that the loss was “related, but not exclusively” attributable to Iksil’s activities, which had been reported out of London in April by The Wall Street Journal.

“Everyone is talking about this, because once again it shows the power that a handful of people can have on the market,” a London trader said.

But others said such a large loss could not have occurred without the knowledge of Iksil’s superiors.
The Wall Street Journal, citing people familiar with the situation, reported Saturday that JPMorgan told traders several months ago to make bets aimed at shielding the bank from the market fallout of Europe’s deepening crisis.

But instead of shrinking the risk, their complicated bets backfired into losses of as much as $200 million a day in late April and early May, the paper pointed out.

Erik Oja, a banking analyst at Standard & Poor’s, condemned the “major embarrassment for the bank” after it survived the 2008 financial crisis relatively unscathed.

JPMorgan was also hit with a downgrade by the rating agency Fitch, and S&P cut its outlook to “negative.”
Dimon has led US banks in fighting the application of the new Volcker Rule, which would ban such proprietary trade. Banks also do not want to see curbs on their hedging activities.

Rick Gorka, spokesman for likely Republican presidential candidate Mitt Romney, said the loss “demonstrates the importance of oversight and transparency in the derivatives market.

If elected, he said, Romney “will push for common-sense regulation that gives regulators tools to do their jobs, and that gives investors more clarity.”

The Independent/ Bangladesh/ 13th May 2012