Indian Bank
05 марта, 09:35

Gold, Diamonds Used To Bribe Banker In Sprawling $2 Billion Indian Fraud Scandal

It has been more than two weeks since Punjab National Bank - one of India's largest state-owned financial institutions - informed the public about a nearly $2 billion lending fraud allegedly masterminded by Nirav Modi, a famous celebrity jeweler and one of India's richest men.  And still, investigators are just beginning to piece together the exact mechanics that allowed a celebrity jeweler, working with a handful of rogue bank employees at PNB's Mumbai branch (the bank is based in New Delhi) to pull off the largest financial fraud in modern Indian history. In their latest update, federal investigators told Reuters and a host of other media organizations that Modi and his uncle Mehul Choksi - who played an integral role in the fraud - successfully bribed bank employee with gold coins and diamonds to help coax them to look the other way when signing off on fraudulent letters vouching for the shell companies receiving the loans. Authorities have apprehended a retired PNB manager named Gokulnath Shetty, pictured below, who was essentially Modi and Choksi's inside man at the bank. Last week, we pointed out a disturbing trend whereby large multinational financial institutions were backing away from Indian banks, setting the stage for a painful credit crunch that could potentially destabilize the Indian economy. The Central Bureau of Investigation (CBI), which has arrested 14 people in the case, on Saturday for the first time said bribes were paid to at least one Punjab National Bank (PNB)official by Modi. The agency told the court that Yashwant Joshi, who worked as a manager in the forex department of the Mumbai branch that is at the center of the fraud, admitted to having received two gold coins weighing 60 grams and a pair of gold and diamond earrings from Modi. The articles have been recovered from Joshi’s house in the presence of independent witnesses, the CBI said. Police have also arrested two low level employees from the Brady House branch of PNB for helping ferry the fraudulent guarantee letters past the bank's internal controls. The two men allegedly helped produce some of the letters of understanding, then recorded them in the bank's internal system, effectively leaving its stewards in the dark. As any expert on India's state-run banks would tell you, the fact that most Indian banks haven't integrated their internal controls with the Society for Woldwide Interbank Telecommunication (SWIFT) leaves them incredibly vulnerable to fraud, particularly when bank employees who have nearly unfettered access decide to take advantage of their position. In its latest story, Reuters provided a detailed graphic explaining exactly how Modi and his crew managed to secure the fraudulent loans. The fake letters of undertaking that were so vital to the scheme allowed shell companies controlled by the fraudsters to receive loans mostly from foreign branches of Indian banks. Over the weekend, an Indian federal judge issued a warrant for Choksi's arrest. Both Choksi and his nephew Modi have fled the country, and are believed to be in Hong Kong. Prosecutors are also zeroing in on Modi, who is believed to be the ringleader of the whole scheme. “Modi appears to be the prima donna in the whole saga of the fraud perpetrated on the PNB,” the directorate said in a filing to the court seen by Reuters. But perhaps even more embarrassing - and ultimately more problematic - than the authorities' inability to apprehend the ringleaders of the fraud (though they have arrested a total of 14 people over their suspected involvement in aiding or abetting it) is the fact that nothing is being done to strengthen oversight of Indian banks. Without that, the damage to the credibility to the state-run banking system may never be repaired - and if that happens, it's the small business owners of India who will suffer as credit conditions are rapidly tightened.

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28 февраля, 05:54

Fraud at Indian bank spurs calls for privatisation

Critics say scam highlights rot in state lenders and need for change

28 февраля, 05:50

Indian Banks Face Crippling Credit Crunch As PNB Scandal Worsens

The biggest financial fraud in India's history just got bigger. On Monday, Punjab National Bank disclosed that a fraud previously believed to be $1.7 billion had swollen to $2 billion as the true extent of the fraud is still coming into focus. But the impact that this now-$2 billion fraud has had on the shares of PNB and other state-run Indian banks is having a wide-ranging impact across the country's financial system, according to Bloomberg. Foreign banks, worried about the systemic lapses that the scandal has exposed, have become unwilling to lend money to smaller Indian firms - causing massive disruptions in trade finance. All of this pressure has hammered the Indian rupee, which is on track for its first monthly drop since September. This is largely because India's economy, like the US, runs a trade deficit, and depends on capital inflows to function. Foreign capital comes through foreign funds’ purchases of Indian stocks and bonds, local exporters’ sale of foreign-currency earnings and dollar loans from foreign banks. India is one of the world’s biggest users of trade funding worldwide, according to the ICC Global Survey 2017. The fraud was purportedly masterminded by Nirav Modi and his uncle Mehul Choksi, both of whom are on the run. The two men worked with a PNB employee named Gokulnath Shetty, who recently retired. Shetty would issue fraudulent letters of undertaking to help companies create by Choksi and Modi apply for loans through the foreign branches of other Indian banks. The fraud continued as, when it came time to repay the loans, Shetty would issue still more LoU's to cover the balance. Citigroup Inc., Deutsche Bank AG, Standard Chartered Plc and HSBC Holdings Plc are among banks reducing exposure to these transactions, used by smaller companies to access short-term dollar funding, said people with knowledge of the matter. As questions are raised about the creditworthiness of guarantees from Indian state-run banks, rates have risen by as much as 0.5 percentage point for some types of financing, the people said, asking not to be identified as the details are private. Spokesmen in Mumbai for Deutsche Bank, HSBC and Citigroup declined to comment. “We continue to support our clients on transactions that meet our internal controls and standards,” a spokesman for Standard Chartered said by email. If doubts about the safety of Indian firms continue to grow, some firms may soon be forced to pay a full percentage point above Libor, compared with 0.5 percentage point before the PNB fraud was disclosed. As Bloomberg points out, the interlinked nature of global trade means trust is a crucial component of these transactions. The one silver lining is that at least larger Indian companies, which have direct access to funding from foreign lenders and don’t rely on interim guarantees, haven't been affected by the credit crunch. Possibly making matters worse, PNB has blamed other banks for negligence by failing to detect the fraud, though the fact that the bank's internal controls weren't connected to SWIFT - the international banking telecommunications system - making it much more difficult to detect the fraud. So the real question is: Will India's banking regulators finally act to install meaningful controls? Or will the fallout from this short-term finance crunch continue to worsen until it blossoms into an acute capital-flight crisis.

21 февраля, 15:01

Futures, European Stocks Slide After Poor PMIs; Dollar Gains Ahead Of Fed Minutes

The dollar rose to its highest level in a week against its G10 peers on Wednesday, rising for the 4th day against the yen and most pairs as investor focus shifted to the minutes of the Federal Reserve’s last policy meeting. The dollar hasn’t had it this good this year, bouncing 1% so far this week after slumping 1.5% last week to the lowest level in 3 years, as traders unwound short positions ahead of today's January FOMC minutes (where the most likely surprise would be the Fed's endorsement of 4 rate hikes in 2018), with investors looking for clues on just what policy makers had in mind when they added “further” twice to their guidance on interest rates. After yesterday's bond supply deluge, Treasury yields in the belly were steady ahead of the continued glut of supply this week, and the 10Y traded virtually unchanged and just shy of 2.89%. The Treasury’s $258 billion of auctions slated for this week comes amid a rapid jump in rates that gave impetus to one of the steepest equity sell-offs in years two weeks ago. And while investors seem to have adjusted to 10-year yields at a four-year high for now, the deluge of supply could push them even higher, above 3%, weakening the case for owning stocks at elevated valuations. Meanwhile, US futures and world stocks looked set to fall for a third straight day: MSCI’s world stock index down 0.1%, declining for the 3rd day, as a down day in Europe offset earlier gains in Asia. Investor attention will be on the minutes of the Fed’s last policy meeting in late January. The last readings of U.S. wages and inflation came in higher than expected, with some blaming the numbers for prompting a violent selloff in stocks earlier this month. “Markets are particularly sensitive to inflation, and we think the odds that the minutes reinforce the narrative of firming inflation are high,” said Elsa Lignos, RBC’s global head of FX strategy. "We think there is a high probability that the Fed moves the dots to four hikes in 2018 (from three) near-term and that the minutes could be another step in that direction." * * * In Europe, almost every sector of the Stoxx 600 Index fell, with the gauge tracking losses in the U.S. on Tuesday rather than a more positive mood in Asia after Markit data showed a fading outlook for manufacturing and services in the region, prompting some to ask if the recovery momentum has now peaked. The risk-off tone permeating European trading came as PMI data missed estimates across the board, first in France, then Germany and finally for the whole EU: Euroarea PMI Manufacturing 58.5 vs. Exp. 59.2 (Prev. 59.6) Euro-area PMI Services 56.7 vs. Exp. 57.6 (Prev. 58.0) Euro-area PMI Composite 57.5 vs. Exp. 58.5 (Prev. 58.8) European equities led lower by technology, while FTSE 100 outperforms slightly after earnings from Lloyds and Glencore.  In terms of sector specifics, telecoms outperform their peers amid strong earnings from Orange (+2%), to the downside, energy names lag their peers amid price action seen across the commodities complex. Other individual movers include Glencore (+4.1%), Lloyds (+1.6%) and who sit near the top of the FTSE 100 following their respective earnings. Elsewhere, other notable movers include Accor (+2.4%), Atos (-3.7%) and Iberdrola (-3.4%) post-earnings, whilst AA (-22.1%) lag the Stoxx 600 after a disappointing strategy update. Lower than expected readings of purchasing manager surveys in France, Germany and the euro zone all came in lower than expected, stabilizing euro zone bond markets. Bunds rallied from the open across the curve; UST/bund 10-year spread widens toward key 220bps level, which was last seen in January 2017.  * * * Earlier during the Asian session, MSCI’s index of Asia-Pacific shares outside Japan rose 0.7 percent after slipping earlier in the session following the U.S. market losses, which snapped a six-session winning streak. Stocks climbed in Hong Kong ahead of China's return from the week-long Lunar new year holiday on Thursday, cementing a rebound from one of the worst sell-offs in years at the start of the month.  As the Asian session progressed a combination of the fall in US equity futures and 1% declines in crude prices, the Nikkei had briefly dipped into negative territory. Elsewhere, the ASX 200 (+0.1%) had opened lower in response to the falls on Wall Street but has recovered into positive territory. Mining names the largest drag on the index with BHP and Fortescue both losing ground following soft earnings. Hang Seng (+1.8%) traded higher amid HSBC shares recovering from yesterday’s declines. In FX, after soft U.K. domestic employment report, GBP/USD extends losses through yesterday’s low while gilt futures hit two-week high. The euro traded in a narrow range that was yawn-inducing for traders even though euro-area PMI missed estimates, while the pound was buffeted by weak jobs data out of the U.K. EUR/USD edges lower to approach 1.2300 as USD continues strength seen from last three sessions. However, not even the weaker Euro could push European stocks higher. Asia’s emerging currencies were mostly lower amid a rising dollar and elevated Treasury yields. The Taiwan dollar the main exception as it reopened after the Lunar New Year holidays. Sovereign bonds advanced and Taiwan led regional stock gains. A deluge of new supply is pushing down Treasuries and spurring speculation the U.S. 10-year yield could breach the watershed 3 percent level as early as this week, which would reduce the attractiveness of developing-nation assets. The Federal Reserve will release minutes of its latest meeting later on Wednesday. "The ongoing USD rebound alongside higher UST yields is likely to pressure Asian currencies,” said Mizuho's FX strategist, Ken Cheung. "With a light calendar, the USD movement will remain the main driver for the Asian FX. The CNY fixing after the long holiday will be the focus," with recent developments suggesting no big changes, he said. In the neverending drama surrounding Brexit, a UK Official said they are in a broad alignment with the EU on the transition period. Meanwhile, PM May is facing pressure after 62 Tory hardliners demand clean Brexit, with lawmakers challenging May to take a harder approach on how far UK rules should move away from the EU after Brexit and the nature of the transition period. The stronger dollar weighed on commodities, with Brent crude futures losing 1 percent to $64.61 per barrel and U.S. crude oil futures also slipping 1 percent to $61.16. U.S. crude hit a near two-week high the previous day on news of inventory declines at a key storage hub and from expectations that top OPEC producers could extend cooperation beyond 2018. Spot gold touched a one-week low of $1,329.42 an ounce due to the resurgent dollar, having declined 1.4 percent so far this week. On today's economic data calendar, we have Markit PMI data and home sales. Scheduled earnings include Dish and The Southern Company. Bulletin headline Summary from RanSquawk European equities (Eurostoxx 50 -0.7%) trade lower across the board amid lacklustre Eurozone PMIs and a dip in US equity futures USDJPY has built on gains above the 2017 low (107.32), but stalled just before 108.00 amidst another bout of global stock market weakness Looking ahead, highlights include Eurozone and US PMIs, US existing home sales, FOMC minutes and a slew of speakers Market Snapshot S&P 500 futures down 0.07% to 2,712.00 STOXX Europe 600 down 0.5% to 378.62 MSCI Asia Pacific up 0.3% to 177.20 MSCI Asia Pacific ex Japan up 0.9% to 581.18 Nikkei up 0.2% to 21,970.81 Topix down 0.05% to 1,761.61 Hang Seng Index up 1.8% to 31,431.89 Shanghai Composite up 0.5% to 3,199.16 Sensex up 0.4% to 33,821.09 Australia S&P/ASX 200 up 0.05% to 5,943.72 Kospi up 0.6% to 2,429.65 German 10Y yield fell 3.0 bps to 0.705% Euro down 0.1% to $1.2321 Brent Futures down 0.9% to $64.67/bbl Gold spot unchanged at $1,329.24 U.S. Dollar Index up 0.2% to 89.86 Italian 10Y yield rose 2.6 bps to 1.8% Spanish 10Y yield fell 0.6 bps to 1.525% Top Overnight News from Bloomberg Lloyds to Invest $4.2 Billion in Technology, Plans Share Buyback Glencore M&A Firepower Undiminished After $2.9 Billion Dividend Prime Minister Theresa May is facing a potentially dangerous outcry from 62 members of her own party who are demanding a quick, clean break from the European Union, just as she tries to finalize her Brexit plans Japanese Lifers: Meiji Yasuda Life (AUM $353b): increasing holdings of unhedged U.S. debt; investing mostly in Ginnie Mae, some in credit and Treasuries ECB’s Vasiliauskas: we have not seen an unwarranted tightening in conditions; appropriate to rephrase guidance to focus on all instruments, not just QE: Reuters U.K. Dec. Unemployment Rate: 4.4% vs 4.3% est; Avg. Weekly Earnings 2.5% vs 2.5% est. Apple Is Said to Negotiate Buying Cobalt Direct From Miners Democrats Counter GOP Tax-Cut Pitch by Warning of Long-Term Pain Unibail Says Malls Will Evolve to Counter the Threat of Amazon Gibson Creditors Are Said to Want New CEO Before Rescue Deal Brexit Secretary David Davis will set out U.K.’s official response to EU’s transition proposals before the U.K. parliament in a written statement on Wednesday, Politico reports; Davis to demand mechanism to protect U.K. from any “harm” caused by new EU rules and regulations introduced during transition period Merck to Purchase Viralytics in Deal Valued at A$502m Takeover Target Fidessa Gains as Activist Elliott Reveals Stake AA Shares Plunge Most Since Debut After Predicting Profit Drop Output of Faulty Airbus Engine to Double, Suggesting Likely Fix A preliminary composite purchasing managers’ index for the euro-zone retreated in February to 57.5, from 58.8, and missing the median estimate of 58.4 Asian equities are trading with modest gains this morning, in what has been a relatively quiet session. Nikkei 225 (+0.2%) had been up as much as 1.2% with the JPY continuing to weaken across the board in which USD/JPY hovering around 1.08. Although, as the session progressed a combination of the fall in US equity futures and 1% declines in crude prices, the Nikkei had briefly dipped into negative territory. Elsewhere, the ASX 200 (+0.1%) had opened lower in response to the falls on Wall Street but has recovered into positive territory. Mining names the largest drag on the index with BHP and Fortescue both losing ground following soft earnings. Hang Seng (+1.8%) traded higher amid HSBC shares recovering from yesterday’s declines. In credit markets, the US Treasury curve is modestly flatter in the Asia-Pacific session, with the 10-Year yield last 0.4bp higher at 2.89%. JGBs trading in a tight range, with the 10yr up by 3 ticks. Top Asian News Yen Surge Ends $353 Billion Insurer’s Wait to Buy U.S. Bonds Hong Kong Shares Soar Ahead of China’s Return From Holiday At Last, a Woman Takes Center Stage for India’s Tech Industry How a $1.8 Billion Indian Bank Fraud Lasted Seven Years Hong Kong Traders Return to Recent Listings as Razer Surges 24% European equities (Eurostoxx 50 -0.7%) trade lower across the board amid lacklustre Eurozone PMIs and a dip in US equity futures overnight. In terms of sector specifics, telecoms outperform their peers amid strong earnings from Orange (+2%), to the downside, energy names lag their peers amid price action seen across the commodities complex. Other individual movers include Glencore (+4.1%), Lloyds (+1.6%) and who sit near the top of the FTSE 100 following their respective earnings. Elsewhere, other notable movers include Accor (+2.4%), Atos (-3.7%) and Iberdrola (-3.4%) post-earnings, whilst AA (-22.1%) lag the Stoxx 600 after a disappointing strategy update. Top European News U.K. Wages Pick Up as Fewer Foreign Workers Take Jobs Berlusconi Poaching Among Five Star Ranks: Italy Campaign Trail Euro Area Hits Speed Bump on Road to Faster Economic Growth German Economy on Track for Fastest Quarterly Growth Since 2011 Black Sea Gas to Flood Nation That Can’t Decide on a Use for It In currencies, Asian contacts are said to have attributed the latest Dollar leg-up to a further ‘technical correction’, and for the DXY 90.000 will be next on the radar given its psychological significance, but chart-wise nearest resistance resides between 90.500-600 as the index trades within a 89.935-700 range. Looking at basket components, Usd/Jpy has built on gains above the 2017 low (107.32), but stalled just before 108.00 amidst another bout of global stock market weakness. However, Jpy puts at the big figure have reportedly been in demand as the headline pair hovers around 107.50, with bids seen at 107.20. Eur/Usd is testing key Fib support at 1.2319 and buying interest into 1.2300 in wake of French, German and pan-EZ flash PMIs that missed consensus across the board. A downside break of 1.2300 exposes recent lows circa 1.2275 and stops below, but on the upside 1 bn option expiries run-off today between 1.2300-20. GBP initially faced selling pressure in the wake of the latest UK jobs figures despite the firmer than expected earnings ex-bonus release (prev. revised lower), with the report met by an unexpected uptick in the UK unemployment rate, slowdown in employment growth and the earnings release perhaps not enough to change the narrative at the BoE and nail on a May hike. However losses were then pared as it appears that the UK are now in a broad agreement with the EU on a transition period. Aud/Usd another notable mover, and retreating some distance from 0.7900 towards 0.7842 interim support despite former than forecast Aussie wages overnight as the breakdown was not as encouraging as the headline numbers appeared. In the commodities complex, WTI and Brent crude futures are seen lower alongside the firmer USD after taking a tumble during Asia-Pac trade. In terms of energy specific newsflow, things remain light ahead of tonight’s rescheduled API release with traders wary over any further climbs in US production. In metals markets, spot gold has recovered from modest overnight losses to trade relatively unchanged as markets await today’s FOMC minutes release. Elsewhere, price action across the rest of the complex remains light as Chinese participants away are still away from market. Looking at the day ahead, the flash February PMIs on manufacturing, services and composite are due in the US. Other data due includes January existing home sales data in the US. Away from this, the FOMC minutes from the January meeting are due late in the evening, while the Fed's Harker is scheduled to speak on the economic outlook in the afternoon. US Event Calendar: 7am: MBA Mortgage Applications, prior -4.1% 9:45am: Markit US Manufacturing PMI, est. 55.5, prior 55.5; Services PMI, est. 53.7, prior 53.3; Composite PMI, prior 53.8 10am: Existing Home Sales, est. 5.6m, prior 5.57m; MoM, est. 0.54%, prior -3.6% 2pm: FOMC Meeting Minutes Central Bank Speakers 9am: Fed’s Harker Speaks on the Economic Outlook 10am: Kashkari speaks in Minneapolis on Bloomberg Television 2pm: FOMC Meeting Minutes 8:20pm: Kashkari speaks at Bloomberg event in Minneapolis DB's Jim Reid concludes the overnight wrap Today is the biggest day in a quiet week for data. The highlight will be the flash February PMIs with manufacturing, services and composite readings due in Europe and the US. As a reminder, the January manufacturing reading for the Euro area came in at an impressive 59.6, albeit slightly down from the highs above 60 in December and November last year. The consensus is for another small pullback to 59.2, while the composite is expected to edge down to a still solid 58.4 from 58.8. Outside of this, we also see the monthly UK employment release with eyes on wages as the BoE gets closer to their next hike. UK data and/or BoE hawkishness has caused global yields to sell off sharply a couple of times in recent months so the release will be important. Finally FOMC minutes from the January meeting (Yellen’s last) will be out tonight but it will be outdated news given it occurred before the higher AHE’s and CPI/ PPI prints and before the market sell-off. Staying with yields, the big focus over the last 24 hours has been this week’s large Treasury supply. Overnight the US treasury has sold US$179bn of debt securities with yields at its auctions of three / six month bills and two year notes ($28bn at 2.255%) reaching the highest in c10 years. Notably, demand for the securities were reasonably sound with bid-to-cover ratio of 2.74x, 3.11x and 2.72x (vs. 3.22x previous) respectively. Looking ahead, auctions for 5 and 7 year notes will occur in the next two days. Elsewhere, core 10y bonds yields were little changed, with the UST 10y up 1.5bp to 2.89% while Bunds were flat and Gilts fell 1.7bp. The UST 2y was up 2.9bp to 2.221% and is higher again this morning. In US equities, the S&P fell for the first time in seven days (-0.58%) with all sectors but tech stocks modestly up. The index was weighted down by the consumer staples sector, in particular Walmart as it fell the most in c30 years (-10.2% vs. -10.3% in Jan. 1988) after guiding to a lower than expected earnings outlook and a slower push into online sales. The Dow (-1.01%) and Nasdaq (-0.07%) also retreated. Conversely, European bourses were broadly higher as the Euro weakened and largely reversed Monday’s decline. Across the region, the Stoxx (+0.60%) and DAX (+0.83%) both rebounded while the FTSE was marginally lower. Elsewhere, the VIX is up for the second straight day and now back up above 20 (+5.9% to 20.60). This morning in Asia, markets are modestly higher, with the Nikkei (+0.05%), Hang Seng (+0.98%) and Kospi (+0.47%) all up as we type. Elsewhere, the February Nikkei manufacturing PMI eased mom to 54 (vs. 54.8 previous). Recapping other markets performance from yesterday, in FX, the US dollar index jumped 0.69% while the Euro and Sterling fell 0.56% and 0.03% respectively. In commodities, WTI oil rose for the fourth consecutive day (+0.39%). Precious metals weakened c1.3% (Gold -1.28%; Silver -1.34%) and other LME base metals also retreated modestly (Copper -0.39%; Zinc -0.14%; Aluminium -1.31%). Away from markets, the Handelsblatt reported that given Germany’s strong support for Spain’s Economy Minister Luis de Guindos to be the next Vice President of the ECB, unnamed German officials now hope this would set the stage for Bundesbank’s Weidmann to be first ECB President from Germany after Mr Draghi’s terms ends in October 2019. According to these officials, the swing factor may depend on the relative support of French President Macron. Staying in Europe, the EC spokesman Ms Schinas said the EU is “deeply concerned” by any US trade sanctions impacting EU businesses. She added “we would be taking appropriate measures to defend EU industry, and we stand ready to react swiftly….in case our exports are affected by restrictive trade measures from the US”. Now onto some of the Brexit headlines. When asked if the UK will withhold the divorce Brexit payment to achieve the trade deal that it wants with the EU, the Brexit Secretary Davis said the “withdrawal agreement and the future relationship (between the UK and EU) are intertwined….and not separate issues”. He also noted trade must be as open and “frictionless” as possible between the two sides and that the UK and the EU will continue to work together as partners on regulations, where the UK is determined “to lead a race to the top in global standards”. Elsewhere, Foreign Secretary Johnson has said “there is no reason” why the UK and EU can’t have frictionless trade if Britain leaves both the customer union and single market. Conversely, the opposition leader Mr Corbyn has confirmed the Labour Party will support Britain remaining inside a customs union. He noted “we have to have a customs union that makes sure we can continue to trade, particularly between Northern Ireland and the Republic of Ireland…” Looking ahead, we should have more clarity next week when PM May is expected to set out her vision for the post Brexit trade deal after extensive cabinet discussions this week. Her task has been made more difficult by an open letter from 62 Eurosceptic Tory MPs insisting on elements of a hard Brexit just as hope was emerging that she could find a united cabinet position. Finally onto some central bankers commentaries. The Riksbank Deputy Governor Floden said “we have to be cautious moving forward not to surprise markets too much (on rates) and generate negative market reactions….for example…too rapid appreciation of the Krona”. He added, “most likely” we will raise repo rates in 2HCY18 and then “roughly 50bp per year under the forecast horizon”. Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In Germany, the January PPI was above market at 0.5% mom (vs. 0.3%) and 2.1% yoy (vs 1.8% expected). The February ZEW survey on the current situation was lower than expected at 92.3 (vs. 93.9) with the expectations index beating at 17.8 (vs. 16 expected). For the Euro area, the February ZEW survey on expectations eased to 29.3 (vs. 31.8 previous) while consumer confidence was also below expectations at 0.1 (vs. 1.0) following a fresh 17 year high back in January. Finally, in the UK, the February CBI trend total orders were a tad softer at 10 (vs. 11 expected). Looking at the day ahead, the flash February PMIs on manufacturing, services and composite are due in Germany, France and the Euro area. Later on we'll then get the same data in the US. Other data due includes December and  January employment indicators in the UK, and January existing home sales data in the US. Away from this, the FOMC minutes from the January meeting are due late in the evening, while the Fed's Harker is scheduled to speak on the economic outlook in the afternoon. The BoE's Carney, Broadbent, Haldane and Tenreyro are also due to testify to Parliament's Treasury Committee on the Inflation Report.

20 февраля, 23:55

Will Latest Bank Fraud Impact India ETFs?

The future of India's banking sector is in the red, as another fraud hurts the markets.

20 февраля, 00:30

"We Don't Have The Culture To Manage Risks" - Largest-Ever Indian Bank Fraud Exposes Systemic Flaws

Stocks of Indian jewelers and state-run banks have been sinking since Friday, when the full extent of what's now understood to be the largest bank fraud case in Indian history was unveiled in a complaint to Indian federal banking regulators filed by the the Punjab National Bank, a state-owned bank based in New Delhi. The bank discovered the first bread-crumbs in January, but the full extent of the fraud - which was carried out over seven years and involved the theft of nearly $1.8 billion - wasn't known until very recently. And before today, when Reuters published a report fleshing out some newly uncovered details, little was known about the mechanics behind it. The pressure has dragged the S&P BSE SENSEX - an index of some of India's most established companies - lower. Last week, we learned that the fraud involved Nirav Modi, one of India's 100 richest men and a well-known jeweler who has dressed both Hollywood and Bollywood stars, was at the center of the conspiracy. He was aided by Mehul Choksi, whose Gitanjali Group of companies was intimately involved in the fraud. Finally, the third key conspirator was PNB branch deputy manager Gokulnath Shetty, who oversaw the circulation of fake "letters of undertaking" - essentially one bank vouching that a certain client is credit-worthy and should qualify for a loan from another bank. From the broadest possible perspective, the fraud unfolded as follows: Modi and Choksi controlled a group of fraudulent jewelry companies. Shetty would circulate "letters of undertaking" vouching for collateral that didn't really exist. Based on these letters, the shell companies secured loans from foreign branches of India-based banks. This money then disappeared. A fourth individual - a junior employee who worked for Shetty - is also being held but his or her involvement is still unclear. But in the first major review of the case by an English-language media organization, Reuters said the details available overwhelmingly point to a shocking failure of oversight by both India's banking regulators and the state-owned bank's internal controls. As a result, criminals were able to steal early $2 billion from PNB largely because nobody was watching. A review of bank and government documents related to the case - and interviews with current and former PNB executives, bank auditors and experts - points to a lack of accountability and standards in the country’s public banking system. As of last September, those banks held about 87 percent of the Indian banking system’s 9.46 trillion rupees (about $147 billion) of soured loans that are non-performing, restructured or rolled over. A preliminary investigation by the nation’s tax authority said of the PNB fraud that “the hit Indian banks would take in the end may well exceed” $3 billion, according to an internal note seen by Reuters. “Yes, there is a problem. We have recognized it,” bank Chief Executive Officer Sunil Mehta said during an investor call on Friday. “We are in the process of fixing it up. We’ll see wherever the loopholes are there. The people-related risk, we are going to mitigate.” But despite that promise of action, one current senior executive at the bank’s headquarters in New Delhi said further problems could not be ruled out. “In Indian banks, we don’t work under ideal situation,” the executive, who declined to be identified, said during an interview at his office. “We are in the business of risk, you can’t say there won’t be road accidents.” Reuters also provided the most detailed account yet of how Shetty was able to circulate the fraudulent letters to other Indian banks... According to court documents filed on Saturday by the CBI, branch deputy manager Gokulnath Shetty issued a series of fraudulent Letters of Undertaking – essentially guarantees sent to other banks so that they would provide loans to a customer, in this case a group of Indian jewelry companies. These letters were sent to overseas branches of banks, thought to be almost all Indian, that would then lend money to the jewelry firms. Shetty did so using the bank’s SWIFT system to log in with passwords that allowed him, and in at least some instances a more junior official, to serve as both the person who sent messages and as the person who reviewed them for approval, according to court documents and interviews with bank executives. “The involvement and connivance of more staff members and outsiders at this stage cannot be ruled out,” said a CBI document submitted to the court in Mumbai. ... After entering the transactions on SWIFT, the CBI documents said, Shetty – who worked at the same branch from 2010 to 2017 despite normal bank practices of regular rotations - did not record them on the bank’s internal system. Because PNB’s internal software system was not linked with SWIFT, employees were expected to manually log SWIFT activity. If that was not done, the transactions did not show up on the bank’s books. A SWIFT spokeswoman said in a statement last week that the company does not comment on individual customers. All together, there were at least 150 such fraudulent Letters of Undertaking during a seven-year period, according to a CBI official who spoke on the condition of anonymity. As one of the bank's auditors' said, the fraudulent transactions was "off books". The mechanics of how the fraud happened, and what it says about the underlying industry culture, are worrying, said Abizer Diwanji, national leader for financial services in India at accounting firm Ernst & Young. “Checks and balances are there in public banks as well but they are not followed earnestly,” said Diwanji, who has tracked India’s financial services industry for more than two decades. “This is where the discipline, the culture is not there. I always believe that we don’t have the culture to manage risks, even operational risks. PNB is not an outlier in this.” To control such risks, most private sector banks require branches to route SWIFT messages through their central offices, Diwanji said. They also usually integrate their own software systems and SWIFT, meaning that activity such as a Letter of Undertaking being sent would get automatically recorded. Neither is the case at PNB or most state-run banks in India, Diwanji said. Representatives of two of the external audit firms listed on PNB’s annual report for the 2016-17 fiscal year said they could not have known what happened. “It was off-books, so auditors will not be in a position to detect it,” said Sudesh Punhani, a partner at Chhajed & Doshi. The question now is: Will Indian banking regulators make the hard but necessary decision to force banks to integrate their systems with SWIFT while strengthening other oversight tools? Even if it risks uncovering other embarrassing fraud cases? Remember, it was just October, when we discussed Indian Prime Minister, Narendra Modi’s, decision to hand over $32bn to recapitalize India’s state banks. The motivation was India’s slowing growth rate and the need to add one million Indians to the workforce every month. India has the second highest bad debt ratio of the world’s largest economies – possibly third since China’s official figure is patently incorrect. Crippled by massive bad debts, the state-owned banks were struggling to extend more credit to the economy. The announcement caused a surge in India’s Sensex equity index, led by the banks. So much for that? Time for another bailout!!

16 февраля, 16:14

Indian Banks Tumble After $2 Billion Fraud By One Of India's Richest Men Emerges

Indian authorities have uncovered a $2 billion banking fraud involving one of the country's 100 richest men, a jeweler who made his name dressing Hollywood and Bollywood actors including Kate Winslet and Priyanka Chopra. His name is Nirav Modi, and on Friday shares of the Punjab National Bank - or PNB - plunged after federal investigators first unveiled their findings in a fraud investigation. In its complaint to India's the Central Bureau of Investigation, PNB alleged that the fraud was led by Nirav Modi, a jeweler who’s dressed Hollywood and Bollywood actors including Kate Winslet and Priyanka Chopra. Modi’s No. 85 on Forbes’s 2017 list of India’s richest people and, at 47, is one of the youngest names on that list, according to Bloomberg. The scheme also involved Mehul Choksi, whose Gitanjali Group of companies was intimately involved in the fraud. PNB on Friday said it had filed complaints against Mehul Choksi’s Gitanjali Group of companies. These include Gitanjali Gems Ltd. and PNB alleges a 49 billion rupee (nearly $800 million) loss from Choksi’s companies, CBI spokesman Abhishek Dayal said in a text message. Nirav Modi PNB also claimed that Modi and Choksi worked with a former PNB employee, Gokulnath Shetty, who was posted at a PNB branch in Mumbai from where the fraud originated. Shetty was a deputy general manager in the bank's FX department. Shelly was instrumental in helping Modi and Choksi pull off the heist. The details of the scheme will sound familiar to anybody who has read our coverage of China's "ghost collateral" scandal: Modi and his collaborators secured fake guarantee letters from PNB bank, used over a period of roughly six years to secure some $2 billion in loans from overseas branches of Indian banks. During the scheme, several fake guarantee letters were issued by PNB - all without evidence of collateral - that were then used to secure the loans. The schemers allegedly then bypassed the lender’s internal messaging system in order to avoid detection, and placed instructions via the Swift global payment system asking overseas branches of Indian banks to pay out cash in the form of "secured" loans. The exact details of how this played out haven't yet been made clear. And the scheme probably would've continued, if it hadn't been for those pesky federal regulators. Indeed, the scam was uncovered when Modi approached the bank about securing a new loan for its company. But Shetty - his man on the inside - had retired, and his successor declined to honor Modi's request. In an incredibly brazen move, Modi - who had apparently become too comfortable with the success of his scheme - contested the bank's decision to deny him another guarantee. "At this, the firms contested that they have been availing this facility in the past also but the branch records did not reveal details of any such facility," PNB said in the complaint. It was only then that the bank and investigators discovered fake letters of undertaking and filed an initial complaint alleging a $44 million fraud. Two weeks later, it filed another complaint covering transactions worth about $1.8 billion, according to people familiar with the matter. The exposure of the scheme - and the realization that the loans would never be repaid - sent PNB scrambling to try and pin some of the exposure on its counterparties, the overseas branches of Axis Bank and Allahabad Bank. PNB has alleged that the money was used either to retire import bills or replenish maturing lines of credit with some other banks, according to the document seen by Bloomberg. In its public complaint, PNB names the Hong Kong branches of Axis Bank Ltd. and Allahabad Bank as the overseas counterparties. Allahabad Bank has exposure of about 40 billion rupees while Axis Bank has a roughly 30 billion rupee exposure, a person familiar with the matter told reporters in New Delhi. Union Bank has about 20 billion rupee exposure with rest accounted to State Bank of India, the person said, asking not to be named as the information isn’t public. "Allahabad Bank has raised claims of two tranches of $26 million each from Punjab National Bank for underwriting the letter of credit," the Mint newspaper reported citing Usha Ananthasubramanian, managing director at Allahabad Bank. "We want the bank to pay up as the exposure is on PNB." Axis Bank told the exchanges on Thursday that the transactions were undertaken in the normal course of business and credited to PNB’s nostro accounts. It added it has "sold down all of the referred transactions.” The Reserve Bank of India has been left to disentangle the mess, and has asked for all parties involved to submit all relevant information about the loans by the end of the week. India’s government has asked all banks to send reports involving this case or other such incidents latest by the end of this week, the Press Trust of India reported. The banking bureaucrat Kumar told BloombergQuint that the case is an isolated one. About 10 PNB employees have been suspended pending the CBI investigation, he said. He didn’t name any of the accused. PNB’s CEO said Modi has reached out to PNB to present a repayment plan but the bank has sought more details. Nirav Modi had left India even before the CBI complaint was filed, according to media reports that didn’t cite any people. India’s foreign ministry on Friday said it has suspended Modi and Choksi’s passports, and the documents may be revoked if they fail to respond. "We will seek government intervention to extradite Modi and Choksi and will not allow any settlement that leaves burden on tax payers," C.H. Venkatachalam, general secretary of the All India Bank Employees Association, said in a phone interview. "From the data we are collecting the sense is that the amount is set to become bigger." Meanwhile, the authorities are seeking to extradite Modi and Choksi and promising that any settlement to help shore up PNB's damaged balance sheet will not saddle taxpayers with the cost of the bailout. But we imagine that promise is about as genuine as the collateral Modi and Choksi used to "secure" their loans.

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15 февраля, 09:29

Indian bank hit by $1.8bn fraud case

Punjab National Bank uncovered the scam, which is linked to a single Mumbai branch.

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04 декабря 2017, 20:28

Vijay Mallya never ‘intended to repay’ Indian bank loans

India in UK court fight to secure extradition of tycoon over collapse of Kingfisher Airlines

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05 октября 2017, 03:45

India's 100 Richest 2017: New Bankruptcy Code Has Billionaires Sweating

In June India’s central bank released a list of a dozen companies that account for a quarter of all bad loans at Indian banks and face being liquidated under India’s new Insolvency & Bankruptcy Code.

14 сентября 2017, 16:28

Zacks Market Edge Highlights: ICICI Bank, HDFC Bank, iShares India ETF, WisdomTree India Earnings ETF and VanEck India Small-Cap ETF

Zacks Market Edge Highlights: ICICI Bank, HDFC Bank, iShares India ETF, WisdomTree India Earnings ETF and VanEck India Small-Cap ETF

13 сентября 2017, 01:26

Indian Stocks: A Bubble or a Buying Opportunity?

The Indian stock indexes have been hitting record highs but are they too hot to handle?

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15 июня 2017, 19:20

Indian banks: power to the consumer

Private-sector lenders exposed to the consumer sector should outperform

07 июня 2017, 15:16

Free flow

No one told Indian banks about the capital market conspiracy. While advisers in the United States, Japan and China are being accused of “tacit collusion” for charging high underwriting fees,

12 мая 2017, 00:24

Saudi Arabia To Help Build West Africa’s Largest Oil Storage Terminal

Equatorial Guinea has signed a strategic agreement with Saudi Arabia under which OPEC’s biggest producer and exporter will cooperate with the African country in the construction and financing of the Bioko Oil Terminal tank farm project that will be West Africa’s largest oil and oil products storage facility. According to Equatorial Guinea’s Minister of Mines and Hydrocarbons, Gabriel Mbaga Obiang Lima, the facility will also be the third-biggest storage facility in Africa that would firmly put his country on the global energy…

12 мая 2017, 00:24

India’s Oil Demand Ticks Up In April, Reverses 3-Month Drop

India’s oil demand returned to growth in April, following three months of declines amid a cash crunch caused by the government’s demonetization move to tackle corruption, Bloomberg reported on Friday, citing figures by the Oil Ministry’s Petroleum Planning and Analysis Cell. India’s fuel consumption increased by 3.3 percent to 16.79 million tons last month. Diesel consumption—which makes up some 40 percent of India’s fuel demand—went up 2.8 percent to 6.96 million tons, while gasoline consumption…

12 мая 2017, 00:24

Q1 Profit Helps Petrobras Slim Down Debt Ahead of Schedule

The first quarter of the year turned out good for Brazil’s embattled state energy major Petrobras. The company reported a net profit of US$1.417 billion, up from a net loss of US$318 million for the year-earlier period. Adjusted EBITDA came in at US$8.03 billion, up 48 percent on the year, and free cash flow jumped to US$4.25 billion at end-March 2017, seven times higher than the figure for end-March 2017. Operating profit surged by 118 percent to US$4.538 billion. The company attributed the positive performance to 72-percent higher exports,…

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12 мая 2017, 00:24

Rosneft-Trafigura $13B Deal To Buy Essar Oil Delayed Over Debts

Six Indian creditors of Essar Oil have not yet approved the US$12.9-billion acquisition of the Indian company by Rosneft and Trafigura, potentially further delaying a targeted closing date in June, Reuters reported on Thursday, quoting industry and banking sources close to the talks. Essar Oil owed around US$5.5 billion to nearly 30 Indian banks, and all but six have approved the acquisition, according to Reuters’ banking sources. The six lenders that are still holding up the deal have some US$500 million of Essar’s debt. Back…

12 мая 2017, 00:24

Local Constituency Threatens To Block Kenyan Oil Shipments

The Turkana South constituency in Kenya will block the transport of crude shipments to Mombasa in June if capital and employment grievances go unaddressed, according to new reports emerging from the region. The shipment is scheduled to be the nation’s first ever. Residents of the area have said they would physically block trucks headed to the capital if the federal agreement does not include a deal regarding revenue sharing, jobs, and infrastructure development. "The community is saying that they will protest and will barricade all roads…