05.03.2008

• Subprime exposure in ICICI Bank
• ICICI Bank is reported to have taken a hit of $263 mn because of its exposure to the subprime crisis.
• A kind of primer that the ET gave in today’s issue is very educative. I excerpt it for you below:
• Why are Indian banks hit
  Because they have exposures to derivatives like credit default swaps and credit-linked notes. There is a mark-to-market loss on these instruments when markets are in turmoil
  Why they invest in CDS and CLN
  The return was higher. It was also an opportunity to participate in the funding of big overseas acquisitions.
  How it works
  Foreign bank that lends to Indian co for an acquisition buys a CDS from ICICI. CDS is like an insurance against which ICICI earns a premium. For the foreign bank, the credit risk is transferred from the Indian firm to ICICI. In CLN, the bank not only sells protection but also buys bonds from the foreign bank
  What subprime changed
  Liquidity dried up and CDS premia surged, reflecting a rise in the cost of protection. ICICI and other banks had to make a provision on CDS and CLN, since the premium they earned was less than the market rate. This is similar to a provision on bond when interest rate goes up.
• Are some of the terms sounding foreign? Dig deeper into our Glossary and search for those terms in our blog. You will find relevant information about them form our earlier notings.
• While we are reeling under our entry into the subprime mess, Ben Bernanke, the Federal Reserve Chairman (USA’s Reserve Bank) has opined that bank write-downs may be overdone. This is because banks are marking their securities against an index that suggests the losses will be 32 times worse than the actual loss.
• Solution for clearing nuclear waste?
• Disposal of radioactive waste is a very problematic issue. Hence there is lot of opposition in developed countries against nuclear power generation.
• But chemists at Northwestern University (US) have identified metal sulphide material as a possible source for nuclear waste removal. The new material is extremely successful in removing strontium from a sodium-heavy solution, with concentrations similar to those in real liquid nuclear waste.
• Strontium-90, a major waste component, is one of the more dangerous radioactive fission materials created within a nuclear reactor. By taking advantage of ion exchange, the new method captures and concentrates strontium as a solid material, leaving clean liquid behind.
• Mobile banking variants
• It is reported that there are three variants of mobile banking.
• 1. Bank adds on a mobile channel to its existing distribution channels.
• 2. A hybrid model where a mobile operator may bring different branding, product set and / or distribution system to a bank based product.
• 3. An operator-dominated model in which the operator itself is responsible for the deposits taken.
• Mobile banking is getting serious attention because of the fact that our rural hinterland houses about 135 mn ‘unbanked’ households, while mobile companies are making inroads into our hinterland at a furious pace.
• What does the LSA agreement with US mean?
• It enjoins India to provide logistical support, supplies and services – including repair – against cash or similar reciprocity.
• Ofcourse, we are talking of military logistics here. Not others.
• Should we sign the LSA with the US? Have any ideas on this? Debate them in our shoutbox.
• Know anything about Ritu Nanda?
• She is the daughter of Raj Kapoor and the wife of Rajan Nanda, the head of Escorts group of companies.
• So what’s the big deal about it? She is also India’s top agent for LIC of India consistently for two decades!!! No small achievement; know? She also appears to be having a Guinness record of selling 17000 pension plans in a day.
• Iran nuclear issue unnecessarily getting escalated?
• Yes, speaks The Hindu in today’s editorial and an op-ed article. Looks like there is strong evidence that the UN is unnecessarily toeing the line of the US which is leading it up the garden path.
• The editorial is worth a read. Do so here. In addition to that you have a very well written piece from Siddharth Varadarajan in the op-ed. Look at it here.
• Something about China’s political establishment and power
• Its Parliament is National People’s Congress. It has 3000 delegates.
• China’s Cabinet is State Council.
• The NPC is meeting shortly and is expected to give another five year term to the President (Hu Jintao) and the Prime Minister (Wen Jiabao) respectively.
• A controversial author
• Heard of Misha Defonseca? “Misha: A Memoire of the Holocaust Years” is supposed to be her autobiographical work.
• She admitted last week that her tale of living with a pack of wolves in the woods during the Holocaust was fiction, not fact.
• The memoir, published in 1997 was a best seller in Europe and was translated into 18 languages. A French movie based on this was a big hit.
• Remember Opal Mehta err… Kavya Viswanathan?
• Nagaland goes to polls today
• Presently it is under President’s rule for the last two months.
• The assembly has 60 seats. NSCN (I-M), the Congress, Nagland People’s Front, BJP are the main parties in the fray.