Economy

Yellen Sees Bank Mergers, Earnings Pressure Following March Crisis

Published

1 year ago

June 25, 2023

During an interview in Paris this week, Treasury Secretary Janet Yellen said that an increase in interest rates and recent banking instability are likely to prompt more banks to pursue mergers this year, while adding that the rising costs of retaining depositors are contributing to this trend.According to Yellen, several smaller banks noted that they are paying more on savings accounts after the Federal Reserve began raising rates quickly last year. That trend has continued following the collapses of Silicon Valley Bank and Signature Bank SBNY in March, reported the Wall Street Journal. During the interview, Yellen said that paying higher rates for deposits is now denting those banks’ profitability.Many banks are facing challenges due to the Federal Reserve’s rate increases. Concerns over their sustainability led to significant drops in the stocks of midsize banks earlier this year.The Financial Stability Oversight Council, the panel of regulators led by Yellen, met last week to discuss the banking sector, focusing on risks banks face in lending for commercial real estate. Yellen said those risks primarily lie in the loans smaller banks have extended for office buildings.Also Read: Yellen Sounds Alarm At G7: Default Risk Puts US National Security Interests In JeopardyWhile higher interest rates have increased the cost of many commercial mortgages, Yellen said she doesn’t expect office-building loan defaults to cause broad fallout, though it could cause other banks to fail, the Wall Street Journal reported.”There may be some problems from this, but I think it’s going to be manageable,” Yellen said, according to the publication. “I don’t really think that this is systemic.” According to the Wall Street Journal, Yellen said she doesn’t expect a return to the same instability seen earlier in the year but believes that weaker second-quarter earnings could pressure stock prices and lead some banks to merge.”I don’t think it’s a huge threat to the sector, but there will probably be banks that end up wanting to merge,” Yellen said.According to her, more consolidation in the banking industry could be healthy, though Yellen has warned against the biggest banks becoming even bigger.Yellen is in Paris this week to discuss with global leaders the debt burdens faced by developing nations, especially those grappling with climate-related disasters.Now Read: Janet Yellen Sees Lower Odds Of US Recession, Says Inflation Has Declined SignificantlyPhoto: Shutterstock

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

9 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

9 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

9 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.