Re: Banking Sector

[chutiputhaTop contributor]

Sir,as i feel this is a red light of Saving(Deposit) money @ Banks,It's a better keep money in a safe place,other than Bank.

People will go for alternative services

I presume this is for CASH only withdrawals.  
If you transfer online within account to account, asks for a bank  Draft
or say bills pay bills etc  online its should not count?


Anycase I saw banks have not been given a directive by Finance ministry yet.

This can get tricky as their previous usual hasty proposals.

How do you calculate ?

What if someone needs  Rs 1.2 million for house repair? Should he get taxed too?

What if they need to withdraw Rs 2 laks in CAsh at a time for 6 times within 1 month

Are they going to accumute it?




 

How this will effect ?

The 2016 budget proposed to charge a certain amount on withdrawals of cash from banks. This proposal stated that a charge of two per cent would be imposed on cash withdrawals of Rs. 01 million to Rs. 10 million and three per cent on cash withdrawals of over Rs. 10 million.

Accordingly, if a depositor withdraws Rs. 01 million from his/her deposits then he/she would have to pay the bank Rs. 20,000 as charges.

[කිත්සිරි ද සිල්වාTop contributor]

People will find a way to circumvent the issue and avoid paying the 2%.

[slstockVeteran]

Chuti,

Smart guy.
This is something I was intending to say on the Bank budget effects thread.
( I meant your last 2 lines

So is good .

ps : Chuti, what up with you? When you first came you used rep system a lot.
Now I see you use it very little. What made the change?

Sir,as i feel this is a red light of Saving(Deposit) money @ Banks,It's a better keep money in a safe place,other than Bank.

People will go for alternative services

I presume this is for CASH only withdrawals.  
If you transfer online within account to account, asks for a bank  Draft
or say bills pay bills etc  online its should not count?


Anycase I saw banks have not been given a directive by Finance ministry yet.

This can get tricky as their previous usual hasty proposals.

How do you calculate ?

What if someone needs  Rs 1.2 million for house repair? Should he get taxed too?

What if they need to withdraw Rs 2 laks in CAsh at a time for 6 times within 1 month

Are they going to accumute it?




 

How this will effect ?

The 2016 budget proposed to charge a certain amount on withdrawals of cash from banks. This proposal stated that a charge of two per cent would be imposed on cash withdrawals of Rs. 01 million to Rs. 10 million and three per cent on cash withdrawals of over Rs. 10 million.

Accordingly, if a depositor withdraws Rs. 01 million from his/her deposits then he/she would have to pay the bank Rs. 20,000 as charges.

[chutiputhaTop contributor]

Oh is that So...? Actually i didnt notice it...there is no any simple change of my mind.
Tend to re use as previous

Chuti,

Smart guy.
This is something I was intending to say  on the Bank budget effects thread.
( I meant your last  2 lines  

So     is good .

ps : Chuti, what up with you? When you first came you used rep system a lot.
Now I see you use it very little. What made the change?

Sir,as i feel this is a red light of Saving(Deposit) money @ Banks,It's a better keep money in a safe place,other than Bank.

People will go for alternative services        

I presume this is for CASH only withdrawals.  
If you transfer online within account to account, asks for a bank  Draft
or say bills pay bills etc  online its should not count?


Anycase I saw banks have not been given a directive by Finance ministry yet.

This can get tricky as their previous usual hasty proposals.

How do you calculate ?

What if someone needs  Rs 1.2 million for house repair? Should he get taxed too?

What if they need to withdraw Rs 2 laks in CAsh at a time for 6 times within 1 month

Are they going to accumute it?




 

How this will effect ?

The 2016 budget proposed to charge a certain amount on withdrawals of cash from banks. This proposal stated that a charge of two per cent would be imposed on cash withdrawals of Rs. 01 million to Rs. 10 million and three per cent on cash withdrawals of over Rs. 10 million.

Accordingly, if a depositor withdraws Rs. 01 million from his/her deposits then he/she would have to pay the bank Rs. 20,000 as charges.

[slstockVeteran]

Alright then.

Oh is that So...? Actually i didnt notice it...there is no any simple change of my mind.
Tend to re use as previous

Chuti,

Smart guy.
This is something I was intending to say  on the Bank budget effects thread.
( I meant your last  2 lines  

So     is good .

ps : Chuti, what up with you? When you first came you used rep system a lot.
Now I see you use it very little. What made the change?

Sir,as i feel this is a red light of Saving(Deposit) money @ Banks,It's a better keep money in a safe place,other than Bank.

People will go for alternative services        

I presume this is for CASH only withdrawals.  
If you transfer online within account to account, asks for a bank  Draft
or say bills pay bills etc  online its should not count?


Anycase I saw banks have not been given a directive by Finance ministry yet.

This can get tricky as their previous usual hasty proposals.

How do you calculate ?

What if someone needs  Rs 1.2 million for house repair? Should he get taxed too?

What if they need to withdraw Rs 2 laks in CAsh at a time for 6 times within 1 month

Are they going to accumute it?




 

How this will effect ?

The 2016 budget proposed to charge a certain amount on withdrawals of cash from banks. This proposal stated that a charge of two per cent would be imposed on cash withdrawals of Rs. 01 million to Rs. 10 million and three per cent on cash withdrawals of over Rs. 10 million.

Accordingly, if a depositor withdraws Rs. 01 million from his/her deposits then he/she would have to pay the bank Rs. 20,000 as charges.

[yellow knifeTop contributor]

Ok back to Taiwan

Taiwan kept its currency level artificially low. The new Taiwan dollar was kept pegged to the US dollar at 40:1  from 1961 all the way to 1985 , despite  low inflation , persistent trade surpluses from the mid 1970s (much earlier than Korea) and productivity level which increased by multiples.

This combination would normally make a currency appreciate. In order to maintain the exchange rate, the Bank of Taiwan accumulated foreign exchange reserves of USD 60 billion  by 1987 second in the world to Japan's USE 63 Billion , despite and economy less than one tenth the size.

Taiwan' cheap currency' approach today echoed in mainland China-supported its heaver dependence, and compared with Japan and Korea on low valued added export processing by multinational firms which accounted for around a quarter of manufacturing exports in the 1980s  and on relatively lower valued added exports by domestic private firms.

[yellow knifeTop contributor]

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I quote above from a website on Grain Exports and following extract is added to the chart as at May 2015


" In table 4 I have listed the largest holders of foreign exchange reserves in the world today. As you can see the list is dominated by Asian countries. All those investors who buy into the Asian growth story pin their argument either directly or indirectly on the size of these reserves. Growth requires investments; however, due to the high savings rates across Asia, and hence the plentiful reserves, the money is there to finance those investments without the countries becoming net debtors. What the argument does not take into consideration is that, at least in some countries, those reserves will be increasingly going towards paying for the rising cost of oil and food imports "

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[yellow knifeTop contributor]

In the late 1980s Taiwan succumbed to intense international pressure over its currency manipulation and began to deregulate its financial system. AS in Korea , the state lost a good part of its capacity to impose industrial policy via the banks.

Fifteen new private banks were licensed in 1991 compared with a total of twenty banks in existence to that point.

The new owners of private institutions were not responsive to state direction on lending and the central bank did not seek to influence them through re-discounting and over loaning, while the market share of government-linked banks declined steadily from a peak of around 95% in 1980s.

If you recall that at the beginning of this thread I said SL will have same fate.. More bank licenses will be granted next year...

[yellow knifeTop contributor]

The stock market which previously was stifled by Kuomintang control of the listing process, also took off in the 1980s providing  new avenues for financing without government strictures as did deregulated offshore borrowing. Domestic bank credit fell as a share of Taiwanese firms total liabilities from an average of over 30%  in the 1980s  to under 20% by 2000.  Meanwhile the exchange rate appreciated consumer credit became widely available for the first item and there was an asset bubble, although a less debilitating one than Japans.

However unlike for Japan and Korea, financial deregulation entered Taiwan before economy's leading firms achieved highest levels of performance.

[Market loverTop contributor]

Chuti,

Smart guy.
This is something I was intending to say  on the Bank budget effects thread.
( I meant your last  2 lines  

So     is good .

ps : Chuti, what up with you? When you first came you used rep system a lot.
Now I see you use it very little. What made the change?

Sir,as i feel this is a red light of Saving(Deposit) money @ Banks,It's a better keep money in a safe place,other than Bank.

People will go for alternative services        

I presume this is for CASH only withdrawals.  
If you transfer online within account to account, asks for a bank  Draft
or say bills pay bills etc  online its should not count?


Anycase I saw banks have not been given a directive by Finance ministry yet.

This can get tricky as their previous usual hasty proposals.

How do you calculate ?

What if someone needs  Rs 1.2 million for house repair? Should he get taxed too?

What if they need to withdraw Rs 2 laks in CAsh at a time for 6 times within 1 month

Are they going to accumute it?




 

How this will effect ?

The 2016 budget proposed to charge a certain amount on withdrawals of cash from banks. This proposal stated that a charge of two per cent would be imposed on cash withdrawals of Rs. 01 million to Rs. 10 million and three per cent on cash withdrawals of over Rs. 10 million.

Accordingly, if a depositor withdraws Rs. 01 million from his/her deposits then he/she would have to pay the bank Rs. 20,000 as charges.

Haha.
So it's gd for leasing companies

[yellow knifeTop contributor]

Fundamentally , Taiwan kept its banking system on a short leash until the late 1980s, by which it was already a USD 10,000 per capita plus economy. Capital controls were also maintained to the same point. The timing of the transition to a more open financial system was not optimal but nor was it a total disaster.

So far we evaluated three banking systems.

1. Japan
2. Korea

followed the same line. Heavy controls. Less banks. State banks. High on bureaucracy like MITI and Export discipline, EXIM banks, re-discounting and finally giving way to IMF, WB and US and that's only after footing firmly in Development.

3. Taiwan had to give way to IMF even before setting foot firmly yet only after reaching Per Capita USD 10,000 mark and still doing well.


Close proximity of these countries may influence performance of each other.

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[yellow knifeTop contributor]

Now we will look at the banking system of another country close by, Philippines.

Under Ferdinand Marcos from 1965 to 1986 , exports as a share of Philippines GDP increased from 20% to 26%, but debt service on foreign loans rose more than ten folds. Moreover the country had privatized its banks to oligarchs back in 1950s.

If Ferdinand Marcos had done what Park Chun Hee  did and marshaled the banking system to drive an industrial policy kept in check by deport discipline, there  is no reason why the Philippines could not have turned out like Korea.

[yellow knifeTop contributor]

When we talk about Phillippine banking system few nice terms are often used

1. Crony Capitalist

Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism

2.Kleptocracy

Kleptocracy, alternatively cleptocracy or kleptarchy, (from Greek: κλέπτης - kleptēs, "thief" and κράτος - kratos, "power, rule", hence "rule by thieves") is a term applied to a government seen as having a particularly severe and systemic problem with officials or a ruling class (collectively, kleptocrats) taking  advantage of corruption to extend their personal wealth and political power. Typically this system involves the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service.

Thus Phillippine is much closer to us Sri Lanka..

There is another very close relationship... That is blaming past regimes for all mistakes by currently doing nothing..

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[yellow knifeTop contributor]

It was not the scale of the Philippines international borrowing that made disaster inevitable.

The tradition of the national elite plundering the financial system began will before the Philippines independence in 1946. ( This is why in the book Why Nations Fail? it is mentioned that development cannot be engineered but a historical process)

In 1916 , Washington developed financial and most legislative power to its colony, and sponsored the creation of a rather large state-owned investment bank. The Philippine National Bank (PNB) was set up to fund Filipino development in line with US's own infant industry tradition.

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Phillipines purely depended on exporting agricultural products to US. After the US curt tarriff-free quotas in the 1970s the Philippine was left with a thoroughly inefficient agricultural sector. Yet the entrepreneurs did not care. That is the forth close relationship we SL share with Philippines.

4. Dependency on US and other big nations sympathy in the name of Quota

Phillippino business class purely depended on estates and plantation and opposed any efforts which force them to industrialization.



Thus naturally after five years the powers of PNB was transferred from US to Manila , it became bankrupt by lending to huge sums to local oligarchs who failed to repay loans.

[yellow knifeTop contributor]

Anyway by now Phillipine's export tree shows amazing difference.. Just 1.5% for coconuts and 1.7% for banana.. rest on manufacturing...

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We Sri Lankans are worrying about seven consecutive month of export dip now and worried about Forex.. Just imagine the dependency of basic agriculture by us even now...


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[Deegoda Gamage]

You can see implementation all above recommendations(Washington Consensus)

in recent Budget

I also think no other way

But people with with welfare and anti- American mentality will not tolerate

It will be a big problem in the near future

If the govt can tackle this problem during first six months OKKOMA GODAY

Otherwise UBE KATETH PAS MAGE KATEH PAS.OKKOMA IVARAY

[HUNTERTop contributor]

Nice Thread YK! ++
Good information presented brilliantly as usual.

(Missed to join early and doing some catching up reading )

[yellow knifeTop contributor]

From 1950s  the Phillipines became east Asia's IMF and WB junky. Privatization of the banking system was prescribed in late 1950s  (as its was by US government advisers in Syngmna Rhee's Korea in 1957)

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Syngman Rhee is the first President of South Korea.

But in the absence of export discipline , the banks became personally piggy banks of the entrepreneurial families.

By the time Marcos was elected in 1965 , there were 33 private banks and almost every major business family controlled at least one of them. In 1964 there was the first of an unending series of private bank failures as Republic Bank, which belonged to an distilling to lumber entrepreneur collapsed and had to be taken over by PNB.

[yellow knifeTop contributor]

You can see implementation all above recommendations(Washington Consensus)

in recent Budget

I also think no other way

But people with with welfare and anti- American mentality will not tolerate

It will be a big problem in the near future

If the govt can tackle this problem during first six months OKKOMA GODAY

Otherwise UBE KATETH PAS MAGE KATEH PAS.OKKOMA IVARAY

DG

Lets discuss about this once I complete this thread where I may include banking of many countries, South Korea, Japan, Taiwan, Phillipne, Thailand, Zimbabwe, etc...

Yes at the moment state banks are pushed down to allow more room for private sector. Gold importing will be taken away from Bank of Ceylon and will be licences for 50 entrepreneurs. SOE's accounts will be transferred from State Banks to private banks.

So lets discuss about the Yahaplana on Banking sector may be after three years from today onwards...

[yellow knifeTop contributor]

Both Marcos and General Park Chun Hee promised they will tame the oligarch capitalists of the nation.

Both men identified the symptoms of the underlying problem. Entrepreneurs who ere contributing very little to national development.

But General Park Chun Hee took the control of the private banks to State and created export discipline.

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[yellow knifeTop contributor]

Two Scholars who looked at the Central Bank of Phillippnies in the early 1980s concluded.

" Virtual all economic activities can qualify for re discounting... the central bank is the " Lender of First Resort" . They noted that loans for activities including Tobacco trading, coconut milling and stock trading ( the latter following a WB, IMF report calling for the expansion of Fillippino capital markets) were all re discounted.

In South Korea you have to export to get qualified for re-discounting.

[yellow knifeTop contributor]

The private banks enjoyed plundering of national assets . Roberto Benedicto, owner of the Hacienda Seperanza sugar estate funded and average of half its assets from 1979 to the onset of deeper crisis in 1984 with CB re-discounts.

Roberto had no export business other than commodity trading. He owned media and telecom companies.

President Marcos himself used Central Bank guaranteed foreign loans to buy Manhattan real estates.


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[yellow knifeTop contributor]

Historical Forex Data shows the relationship between USD and Phillipine Peso..

I found this from a nice article that discussed who is responsible for economic down fall of Phillipines.

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[yellow knifeTop contributor]

Above forex relationship shows within the regime of Marcos no export discipline by the state and worsening Trade deficit.

Its almost the same situation what we face here in SL and bending down State Banks to provide room for SL private banks will have an impact to be studied and write in few years time.

For the time being just remember that

1. When The Finance PLC was on the brim of Bankruptcy it was BoC that really saved it.

2. When SMLL.PLC was inching to bankruptcy it was People's Leasing ( not listed and fully state then) saved it.

3. The gold pawning of People's Bank is the provider of working capital to rural agriculture sector and once that is under attack will a private bank shoulder the risk ?

4. What are the banks that have provided biggest margins ?

Anyway these things we can discuss after 3 or more years and for the time being lets continue studying other countries while keeping an eye on our own banking sector.

[yellow knifeTop contributor]

The cause of the Philippine's downfall in the mid 1980s is often blamed by Filipinos on what is known locally as DOSRI ( loans to directors, officers, stockholder and related interest ). The financial system collapsed in an orgy of related-party lending was the Proximate, not the ultimate reason for the crisis.

In Korea the banks also dis most of their lending to their owner -the state and its favoured allies such as Chung Ju Yu of Huyndai.

Yet there was no collapse in South Korea.

The reason behind these differences is Export Discipline.