Interpreting Middle East Economic News and Analyzing Market Trends

Category: Banks

Last-minute Cyprus deal approved without vote, offshore finance industry killed in the process

The President of Cyprus reached a last-minute deal with EU technocrats representing the European Union, the European Central Bank and the International Monetary Fund, known as the Troika.  The deal calls for stealing deposits from the wealthiest depositors in the two largest banks.  Depositors at smaller banks are saved for now.  The President’s friends are safe since he instructed them to take their money out of Cyprus last week.  In the end, the Troika gets its two wishes; 1. collect money for its clients (EU banks and investors), 2. kills Cyprus’s offshore financial center.  In the process, Cyprus snubs Russia and Turkey.  Here’s more from Reuters:

   

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Islamic banking assets grow faster than conventional banking assets

Islamic banks, which also suffered during the financial crisis, are back on track and growing faster than their conventional counterparts.  Though still small by global standards, Islamic banking assets topped $1.55 trillion for the first time in 2012.  Here’s more from Arab News:

Islamic banking assets with commercial banks in the GCC* reached $445 billion at the end of 2012, up from $390 billion in 2011, with the outlook for the industry remaining relatively positive in 2013.  This represents a 14 percent year-on-year growth, which is considerably lower than the five-year average of 19 percent.

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Money-laundering and other poor decisions put breaks on HSBC’s revenue growth, 5,000 more jobs might be cut

The bank, once known as “the world’s local bank,” has spent the past few years trying to find its way through the financial crisis.  What has emerged since then is a bank riddled with scandals, poor decision-making and a management team out of focus.

 

Pre-Financial Crisis

 

Though HSBC’s problems became clear only during the financial crisis, some of the problems were present well before 2008.  Let’s start first with 2003.  This was the year HSBC acquired Household International in the US.  A well-known predatory lender, which had its run-ins with the law for its predatory practices.  HSBC, a global bank by all standards, was merely a New York bank in the US, with a few branches in Miami and Los Angeles.  The pressure was on senior management to make a significant acquisition in the US to enhance its footprint in the market.

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EU and IMF ask Cyprus to steal from its depositors in return for bailout

Euro zone finance ministers agreed yesterday on a long-awaited bailout package for Cyprus.  The country has been asking for a bailout of its banking system for a while, but the EU, as you can imagine, has had larger problems to deal with.  Cyprus was asking for $17 billion to shore-up its banking system, equal to its annual GDP.  However, EU finance ministers had a better idea; give Cyprus less than it was asking for, steal up to 10% of depositors money and raise corporate taxes. The theft will take place on Tuesday.  Banks will be closed on Monday so that the theft can take place without a hitch first thing Tuesday morning.  There are so many things wrong with this ‘package’, but first here’s a report from Reuters:

  

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UAE banks go after riskier clients in order to grow loans and credit cards

Stockbroker, who were once classified by banks in the UAE as being risky bets, have now relaxed these rules in order to push loan growth.  Here’s more on the story:

Stockbrokers are being inundated with inquiries from banks trying to sell them credit cards and loans as the recent rally in stocks bolsters confidence in the equities market.

It follows several years of some banks giving brokers a wide berth when selling their products, perceiving them as “high risk” during the global financial crisis.

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