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(Special
Issue)
Economy
The
World Economy 2002: A Change of Tides
-- Dr.
Antony P Mueller
The
year 2002 has witnessed an enormous amount of change
in the world economy. While euro is fast consolidating
its position against its compatriot, the US dollar,
Germany is facing stagnation and a major unemployment
problem. Argentina is yet to revive from its economic
crisis, and Brazil's currency has crashed, making the
country vulnerable to economic shocks. But the situation
in the US remains completely different. Though the country
is facing a mild recession, appropriate economic policies
have been initiated to tackle them. Can US sustain its
dominant global position? © IUP. All Rights Reserved.
Regulation,
Deregulation, Public Finances and Economic Growth
-- Serdar
Küçükakin
Europe
is suffering from sluggish growth. The reason for this
does not lie with the stability pact, but the root cause
for this problem is overregulated European markets.
This overregulation not only has its effect on the economy
directly, but also has indirect effects. On the other
hand, the US has been able to achieve a sustainable
growth due to its flexible labor market and a considerable
rise in private investment. Although a number of policy
measures were instigated for improving the euro zone
economy, a more holistic approach is still required. © IUP. All Rights Reserved.
Interest
Rate Scenario in India: A Brief Historical Perspective
and Prospects in the Near-term
-- Anand
Anchan
Globalization
has integrated the Indian economy with the world economy.
This linkage has made it mandatory for the country to
follow an interest rate policy that is in alignment
with the other world economies. With the Federal Reserve
in the US and the ECB in Europe bringing down the interest
rates, India also has taken a stance towards a softer
interest rate regime. The banks are now permitted to
fix their own prime-lending rates across various tenors
for lending funds. However, softer interest rates have
not led to any major credit off-take nor provided the
much-required boost to industrial production. © IUP. All Rights Reserved.
Reduction
in Bank Rate and CRR: The Monetary and Credit Policy
Review for 2002-03_A View
-- N
Nagarajan
Close
to the heels of the Fed and the ECB, RBI has decided
to follow a softer interest rate regime for India. In
the prevailing situation where there is ample amount
of liquidity present in the banking system, the RBI
has initiated a cut in the bank rate as well as the
CRR and has made it clear that it would be fine tuning
its interest rate policy as and when the circumstances
warrant. While RBI has initiated these major changes,
some bankers are of the opinion that these changes are
not up to the mark. Are the reductions too low? Has
the RBI announced these measures too late? © IUP. All Rights Reserved.
Progress
of Monetary and Credit Policy 2002-03: An Assessment
-- Kiran
Nanda
While
India has been witnessing some positive factors like
high foreign exchange reserves, low inflation and ample
liquidity, the RBI, in its mid-term review of the monetary
and credit policy 2002-03, has announced certain policy
measures like the reduction in the bank rate, CRR and
the repo rate at one go. These measures have been instigated
to bring the Indian interest rates in line with other
world economies. The latest credit policy has also facilitated
the industrial recovery process despite the bad monsoons.
Is the monetary policy moving in the right direction?
© IUP. All Rights Reserved.
Treasury
Corporate
Governance, Law and Finance
-- Grant
Fleming
The
role and the responsibilities of corporate treasurers
have been fast evolving in the recent past. Their role
now extends in implementing good corporate governance
strategies at various organizational levels. The recent
examples of corporate governance failures, which include
the South East Asian crisis and the debacle of giants
like Enron and Tyco, have made companies to increase
their financial transparency by providing appropriate
and in time communication to their shareholders. It
is being observed that legal protections can play a
supporting role in promoting good corporate governance. © IUP. All Rights Reserved.
Government
Securities Market: Poised for Quantum Leaps
-- Arun
Kaul
Post
liberalization, the Indian government securities market
has been growing by leaps and bounds. A market that
was only confined to a captive base of investors is
now churning out enormous amounts of volumes day after
day. The reason for this enormous growth in the volumes
can be mainly attributed to the reforms introduced by
the RBI. Introduction of new instruments like capital
indexed bonds, floating rate bonds, and the development
of NDS and CCIL have provided the much-required boost
in the development of this market. From here, where
are these markets poised to move? © IUP. All Rights Reserved.
Money
Market Developments: A Review -- CH
Prabhakara Rao
The
Indian money market is on its way for a transformation.
It is being proposed to phase out all the non-banking
entities from the money market, in order to widen the
spectrum and ensure financial discipline. With the deregulation
of interest rates, the government is firm on its stance
of maintaining a softer interest rate regime. There
are no constraints on the liquidity in the system and
new products like CBLO are being introduced for developing
repos market. On one hand while these changes bring
down the volatility, on the other hand they may also
lead to a decrease in the volumes. © IUP. All Rights Reserved.
A
Critic's View on CBLO
-- SL
Chhatre
The
RBI's decision to phase out non-bank entities from call
money market has led to the development of a new product
called CBLO. This product developed by CCIL is a variant
of the repo product providing a platform for the participants
to borrow and lend. CBLO is a negotiable instrument,
which is fully collaterized with no credit risk associated
with it, since CCIL provides guarantee against default
to the counterparties. But while the product provides
a useful platform for the market participants, there
are a few issues, that require to be addressed.
© IUP. All Rights Reserved.
The
Launch of CMS
-- T
Ravi Kumar
With
the interest rate scenario moving in the southward direction,
many of the banks are now moving towards providing cash
management services to their customers. With a large
number of institutions already into this service, it
might become extremely difficult for any new player
to gain a strong foothold. So banks need to consider
a lot of issues before launching the cash management
services to reduce their implementation costs. What
are those issues? Read on for more. © IUP. All Rights Reserved.
Integrated
Treasury Operation in Banks
-- Ashok
Bhattacharya
With
the rise in globalization and the integration of markets
world over, treasury operations have undergone an enormous
change. This change has been sweeping India and making
integration of treasury operations more and more important
for Indian banks. The basic aim of this integration
is to improve the profitability of banks and insulate
against risks. Banks are changing their organizational
structures and their way of functioning to maximize
their gains from these operations. However, there exist
certain challenges that need to be addressed. © IUP. All Rights Reserved.
Treasury
Online --
Mukund
Annigeri
Treasury
management has seen a lot of developments over the last
few years. This can be best understood with the heightened
activities in the government securities and other markets.
At this juncture, there is no doubt about the enabler
behind all these developments. Technology has played
a driving role in shaping up the treasury related activities
all over the world. The ever-increasing demand for automation
in middle and back offices has been effectively addressed
by technological developments. Deals are now being carried
on with minimal manual intervention via Straight Through
Processing. Surely, its all online treasury ahead. © IUP. All Rights Reserved.
Forex
Global
Foreign Exchange Markets in 2003: Intense Caution and
Discernment --G
Ramachandran
With
the weakening of financial markets in South America
and Asia, and the world facing the threat of a US war
with Iraq, the direction of the global foreign exchange
markets have a certain amount of uncertainty attached.
Countries may have to lay a greater emphasis on improving
their monetary environment, in order to reduce the downside
risks. This will allow them to have a greater access
to the global capital thus leading to growth. How volatile
will the currency markets be? Is there a need for investor
caution? © IUP. All Rights Reserved.
The
Sun Also Sets in Japan --
Ashraf
Laidi, Korman Tam
Japan
has been trying hard to get out of the horrendous clutches
of recession and economic slowdown. With deflation on
the rise, Japan has witnessed a decline in the interest
rates with the rates falling to near zero. The banking
system is in a dire state with Japanese banks topping
the financial casualty list, holding non-performing
assets of ¥52 tn. Though the government is planning
a number of reforms in a phased manner, the recovery
of bad loans will be essential to provide the much required
boost to the economy. Is the sun really setting in Japan? © IUP. All Rights Reserved.
In
with the Old, Out with the New --Blair
Baker
The
year 2002 was not surely the year of the dollar. The
currency has been constantly sliding with respect to
the other currencies world over. The currency, which
was already unsteady after the September11 attacks,
did weakened further after the recent accounting scandals
in some of the American corporates. Adding to the woes
of the dollar is the kind of geopolitical tensions that
America has been facing. There exist prospects of a
war with Iraq, which may take a huge toll on the currency.
It's time for traders to keep their fingers crossed. © IUP. All Rights Reserved.
Has
the Euro Redeemed Itself? --
Jes
Black, Leeanne Su
the
recovery of the US dollar still lingers amidst the escalating
threat of another terrorist attack and the possible
US war with Iraq. The United States, which was anticipated
to lead the economic growth, is facing a tough time.
the situation on the other side of the Atlantic is not
much different. Euro, the single currency for the entire
euro zone, provides a gloomy picture about its recovery
due to the sluggish growth and the inability to impose
fiscal discipline the country has been witnessing. Germany
has been showing signs of persistent weakness with problems
in labor market and rising levels of unemployment. © IUP. All Rights Reserved.
Argentina
and the "Experts" --
Steve
H Hanke
The
recent crisis in Argentina has made many a expert come
out with his own judgment on the reasons that have led
to the crisis. They affirm that peso's one-to-one link
with the dollar caused the economic slump in Argentina
by making its exports uncompetitive. But data shows
a constant rise in the Argentine exports. They also
affirm that the currency board system, which was a move
to arrest the hyperinflation and restore the faith in
the country's currency, caused the economy plunge into
a recession. To what extent these assertions are true? © IUP. All Rights Reserved.
Corporate
Management of Foreign Exchange --Venkatesh
S Bijoor
Foreign
exchange risk is one of the major risks faced by most
of the corporates. There is always an element of risk
inherent in their transactions, as the exposure to the
exchange rate volatility in the market can have significant
impact on their returns. The RBI and some of the major
banks are trying their best to generate awareness among
the market participants. It has been found that most
corporates still do not make use of the various risk
management tools available to them. How can the clients
reduce their foreign exchange risks? © IUP. All Rights Reserved.
Risk
The
Rise of Operational Risk Management
--Dr.
Ganti Subrahmanyam
With
the growth in technology and globalization, many organizations
are shifting their focus on reducing the operational
risks. A realization has dawned upon the organizations
that the volatility in the earnings may not be due to
the financial risks of the firm, but the manner in which
the firm operates. Mitigating operational risk will
help the organizations in increasing their shareholder
value. Though the Basel Committee has prescribed a number
of approaches to tackle these risks, there still exist
certain deficiencies and gaps. © IUP. All Rights Reserved.
Enterprise
Risk Management: Understanding the Linkages between
Business and Financial Risks
--A
V Vedpuriswar
With
the changing times, organizations need to follow a holistic
approach towards risk management. Enterprise risk management
has been gaining prominence in recent times paving the
way for managing all the risks that a firm encounters
in an integrated way. It is being noticed that there
exists a linkage between the business and financial
risks that a firm faces. The financial strategy of a
firm has to be inline with all its other strategies
and should effectively address the needs of the firm. © IUP. All Rights Reserved.
Integrated
Risk Management
--D
Ravishankar
Risk
forms an integral part of any financial decision as
there always exists an element of uncertainty. Risk
management should focus on identifying the potential
unanticipated events and its possible impact on financial
performance of the organization. Instead of placing
each risk in a different category, the new mantra
to be followed is a holistic approach towards risk management
called the Enterprise Risk Management. First of all
the organizations should set up appropriate policies,
systems and procedures in place and identify the various
types of risks they face. © IUP. All Rights Reserved.
Interest
Rate Swaps: Coming of Age
--Jamal
Mecklai
The
Indian interest rate swap market has witnessed an enormous
growth in the recent past. Though the volumes are not
as huge as in the government securities market, the
growth rate depicts clearly that India might be heading
towards a real money market, which RBI and the market
participants have dreamt for long. But there are some
constraints that need to be addressed in order to ensure
the smooth development of this market. The onus for
the development of this market rests on the shoulders
of the Central bank, the customers, as well as the market
itself. © IUP. All Rights Reserved.
The
Ultimate Portfolio Insurance
--David
Derwin
Centuries
have passed, but the yellow metal has not lost its glitter.
Studies have revealed that portfolios that have included
gold or gold shares have outperformed those portfolios,
which included just stocks and bonds. Holding gold assets
not only help in generating good long-term returns,
but also help in reducing the risk element in periods
of economic instability. It has been found that investment
in gold and gold shares is best suited for long-term
funds like the pension and retirement funds. Surely
the glitter still remains. © IUP. All Rights Reserved.
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