World financial sphere is concerned with the way China is using trade, currency Rules to boost its exports. Seeking to maintain its export dominance, China is engaged in a two-pronged effort: (a) fighting protectionism among its trade partners and (b) holding down the value of its currency. This has already drawn world’s ire on China. Washington wants Beijing to abandon a currency peg against the dollar that U.S. lawmakers believe gives Chinese exports an unfair advantage in world trade and so steals American jobs. But the Chinese are vigorously defending their economic policies. Premier Wen Jiabao criticized international pressure on China to let the currency appreciate, calling it “finger pointing.” He said that the renminbi, China’s currency, would be kept “basically stable”. Additionally, China has already begun the process of diversifying its foreign exchange reserve assets, pushing settlement in yuan with its trading partners, and pressuring the US government to be responsible in its fiscal policy.
March 26th, 2010
Chinese banking regulators received a top award from Global Association of Risk Professionals (GARP) at New York in February this year. Both, the China Banking Regulatory Commission (CBRC) and its chairman Liu Mingkang were jointly bestowed the Risk Manager of the year 2009 by the Global Association of Risk Professionals (GARP) at the association’s 11th annual conference. The award is presented in recognition of outstanding contributions to the financial risk management profession. Richard Apostolik, the current president and CEO of GARP lauded the duo: “We are pleased to recognize CBRC and Mr. Liu Mingkang for their key role in orchestrating the recapitalization of China’s largest state-owned banks”. He praised CBRC and Liu for their efforts to implement numerous disciplined risk management practices, regulatory oversight policies and corporate governance initiatives, and for their strong commitment to the importance of prudential banking regulation. He added that this award, “takes on special meaning at a time when the recent financial crisis left many of the world’s largest banks on the brink of failure”.
March 22nd, 2010
What is Financial Modelling? Financial modeling is the task of building an abstract representation of a financial decision making situation. This is a mathematical model, such as a computer simulation, designed to represent the performance of a financial asset or a portfolio, of a business, a project, or any other form of financial investment. Theoretically speaking, a financial model is a set of assumptions about future business conditions that drive projections of a company’s revenue, earnings, cash flows and balance sheet accounts. However, financial modeling is a general term that means different things to different users. In the US and particularly in business schools it means the development of a mathematical model, often using complex algorithms, and the associated computer implementation to simulate scenarios of financial events, such as asset prices, market movements, portfolio returns and the like. Or it might mean the development of optimization models for managing and controlling the risk of a financial investment. In Europe and in the accounting profession financial modelling is defined as cash flow forecasting, involving the preparation of large, detailed spreadsheets for management decision making purposes.
March 18th, 2010
There has been much furore in financial sphere over the recent revelation of misleading accounting techniques used by Lehman Bros. An accounting trick, known as the Repo 105 aided financial relief to Lehman Brothers just before its supernova collapse. It now seems that the shenanigans spells used by them may cast a legal jeopardy for executives of Lehman and its auditors Ernst & Young. The implosion of Lehman Brothers Holdings Inc. into the biggest bankruptcy in U.S. history in September 2008 led the financial meltdown that plunged the economy into the most severe recession since the 1930s, which now thankfully shows some signs of recovery.
March 14th, 2010
By now, you must have heard about the much-discussed swaps that Greece used in order to conceal it’s debt load. To cut a long story short, the key problem here is “credibility”. Greece now has lost it and this explains why its bond yields have soared astonishingly high. The European Union is now investigating Goldman Sachs Group’s hand in using legal loopholes that helped Greece use swaps to postpone the day of economic reckoning past its inclusion to euro membership. Goldman says, though, that there was “nothing inappropriate” in the transactions it facilitated. At the same time, a new dispute is unfolding about how long European Union officials have known that Greece used derivatives to conceal its growing budget deficit. Federal Reserve Chairman Ben Bernanke believes the use of credit default swaps to destabilize a country is “counterproductive”. “We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Bernanke said Thursday in testimony before the Senate Banking Committee in Washington.
March 9th, 2010
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