ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Triggering a Global Financial Crisis

Whether a black swan or a scapegoat, Covid-19 is an extraordinary event. Declared by the WHO as a pandemic, Covid-19 has given birth to the concept of the economic “sudden stop.” We need extraordinary measures to contain it.

Climate Change Is Uninsurable, So, What Should We Do?

I have had a career that has spanned investment banking, public policy, and academia, in the early phase of my working life. As you can imagine, academia was the least, and investment banking the most, posh. I can recall a time when the Prague Symphony Orche­stra put on a private concert in Prague...

Revisiting the NBFC Crisis

Even while the effort to resolve the crisis resulting from non-performing assets in the banking sector was underway, India’s financial sector was overwhelmed by failures of large non-banking financial companies. In the discussion that followed the collapse of these NBFCs, the emphasis has been on the absence of due diligence, poor financial management and downright fraud. The environment these firms found themselves in did encourage such tendencies, but there were structural reasons as to why these institutions accumulated bad assets, and these reasons are often ignored.

Reining in Bankers’ Pay

The Reserve Bank of India’s guidelines on compensation for top management of banks are more generous in respect of variable pay than those of the European Union. However, they are a step forward in that they address an important lacuna in the existing guidelines: the non-inclusion of stock options in variable pay. The guidelines should serve to set a cap on the total compensation payable to bankers. As important are the disclosures in respect of top management compensation that the guidelines mandate.

A Rate Cut That Failed to Please

The decision of the United States Federal Reserve to cut short its cycle of interest rate increases and reduce rates, while announcing a halt to its quantitative tightening programme, is likely to restore an environment of excess and cheap liquidity. While justified as a means to strengthen the US recovery, this move would in all probability deliver increased financial speculation rather than higher growth. If that triggers another financial boom–bust cycle, slow growth could be followed by another deep recession.

A New Development Model for the New Economy

The new economy needs a development model that is people-centric, not production-driven. Emphasis, therefore, must be on the development of human capital. But, public education and health are not enough to break out of the middle-economy track. The world’s most pressing problems, from climate change to the future of work are all manifestations of inequality. The role of government is to not only be a more effective provider of learning and health, but also to be an agent for greater access to opportunity and changing patterns of ownership at all levels.

Thus, Spoke the Bond Market

Would market volatility amidst global trade tensions and uncertainty cause a global recession? Although the world’s major central banks had managed to avoid risks in the first week of June, despite some small variations at some maturities, the United States yield curve remained more or less as it was at the beginning. What will happen in the not-so-distant future?

Bad Debt Resolution Hits Judicial Roadblock

With the Supreme Court having declared ultra vires the Reserve Bank of India circular directing banks to pursue bad debt resolution at any cost, the process of making banks alone pay for all-round errors has come to an end. The Court has required the government to specifically authorise each resolution exercise and not delegate blanket authority to theRBI. This would matter in cases such as in the power sector where a misplaced privatisation policy explains the non-performing assets, which the government would now have to take into account. The Court’s order also makes it difficult for theRBI to pretend that it had no role in the generation of theNPAs.

Are We Heading towards a Synchronised Global Slowdown?

The global economy is heading towards a downturn. However, is the world prepared to deal with the consequences? Whether it is a slowdown or recession, it remains to be seen as to what the future would hold for the banking systems of Eurozone and China, and the global stocks in general.

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