Dubai rattles the world with its loan rescheduling program
Dubai World, the government investment company with $59 billion of liabilities, sought to delay repayment on much of its debt.
The announcement sent shockwaves throughout the financial and political world.
Credit-default swaps tied to debt sold by Dubai rose as much as 131 basis points to 571.
For India, which has tens of thousands of its citizens living and working in the emirate, the concerns are more direct: thousands of its expats staring at job losses and the economy, sharply reduced trade.
India, which gets nearly a quarter of the remittances from the United Arab Emirates and has lakhs of labourers working in the region, could be worse off than most other nations if the crisis escalates into a full-blown one like the Russian or Argentinean crises of the past. India’s exports to the UAE stood at $23.92 billion in FY09.
Investors believe that there could be more troublespots in emerging markets after Vietnam devalued its currency and raised rates.
Continuation on Dubai crisis:
European banks with exposure to the Middle East were badly hit, with HSBC Holdings falling 7.6% and Standard Chartered Bank crashing 7.5% on fears they may be holding a substantial portion of the debt owed by Dubai.
British banks have the most loans outstanding to the United Arab Emirates in Europe, constituting $49.5 billion of a total of $87.3 billion extended by the continent’s lenders to the Gulf country as of June 2009, Royal Bank of Scotland Group said in a research report on Friday, citing Bank for International Settlements.
BUT policymakers and Indian companies, which have operations in the Emirate, believe the impact may not be much.
The potential loss numbers pale in comparison to the $2.8 trillion in writedowns the International Monetary Fund estimates US and European lenders will have made between 2007 and 2010 as a result of the global credit crisis.
Take a look at this graphic which gives an excellent expo on the current crisis and the possible consequences thereof.
Experts think that investors will take haircuts, European banks (which may be holding as much as $40 billion of Dubai’s $80 billion debt) will sell a slice of their investments, and a Kazakh-style clean-up and debt write-off will get the builder’s paradise up on its feet.
You can take a look at some of the world's biggest financial crises here.
Govt. to infuse funds in banks for better CAR
CAR is the summary measure of the amount of capital that is necessary to cover unexpected losses. Higher the amount better it is.
Basel II Norms prescribe a CAR of 9% for banks internationally. But in India, the CAR of our banks is at 12%. In spite of this the government is cautious and wants to shore up the Tier-I capital of our banks.
For this purpose it is getting about Rs. 16,000 crore from the World Bank as a soft loan and is reportedly adding another Rs. 5,000 crore of its own to infuse a total of about Rs. 21,000 crores in our banks.
What is trail risk?
It is a banking term for the chance that seemingly remote, nasty events might occur.
India too announces voluntary emission cuts
Faced with manoeuvres by the US and China, India on Friday upped its Copenhagen offer by promising to bring down carbon emissions by 20-25% between 2020 and 2030. India maintained that it would be voluntary and that the country would not take any internationally legally binding commitments.
The development comes in the wake of the announcement by China that it would cut carbon intensity by 40-45% by 2020 from 2005 levels. This was cited as a move forward by the developed countries.
In the past one week, there have been hectic activities on climate change in the US, China and Brazil, with all the three countries announcing their respective positions for the summit. The latest move by India is expected to buffer it against a possible charge that it’s the main hurdle before a solution.
Dry to sweet amber wine from the Jerez region of southern Spain or similar wines produced elsewhere; usually drunk as an aperitif
port wine: Noun
Sweet dark-red dessert wine originally from Portugal
Alcoholic beverage taken before a meal as an appetizer
An upright tripod for displaying something (usually an artist's canvas)