It's traditional for bankers and their customers to think about banking as centered on the bank account. Even policy makers talk about "banking the unbanked" as if opening a bank account immediately changes a person from financially excluded to included. The bank account is the top line indicator examined by the Global Findex, the new survey of financial access by 150,000 adults from over 148 countries. The finding that 43 percent of adults in the developing world have bank accounts has quickly become the reference point for financial inclusion.
For decades, balancing one's checkbook has been the cornerstone of personal finance for conscientious adults in the developed world. When I first opened an account of my own, I received a little checkbook-sized booklet in which to write down every deposit and withdrawal. I learned that keeping track of the bank balance was like the personal hygiene of finance, like brushing your financial teeth.
The implicit message, not just for me, but I think for society at large, was that the bank account was the locus of money management. All one's main financial transactions would pass through the account, and the account would serve as a kind of running financial statement, showing not only income and expenses but also personal solvency. (I'm setting aside for now the very important function of accounts as savings vehicles. That's a story for another day.)
I believe this 1950s image of the bank account is an unacknowledged presence in the minds of bankers and policy makers like the G-20 financial inclusion group when they advocate banking the unbanked. There is an assumption that opening an account equates with using an account to manage personal finances.
But what if the low income people who don't have bank accounts -- and many who do -- don't see things that way?
Consider three observations that suggest that the image of the bank account as the central money management tool is simply not relevant for many low income people:
• The Global Findex shows that many bank accounts in the developing world are relatively inactive. While in high income countries, 72 percent of accounts have more than two withdrawals per month, in low and middle income countries that figure plummets to 16-17 percent. Many people appear to be using their accounts simply as a way to get paid.
• Yet Portfolios of the Poor reveals that low income people have complex financial lives in which they manage many financial arrangements at the same time. Individuals often have multiple, complicated transactions going on at once - cash stashed away somewhere, a loan from a friend, sales on credit, etc.
• In many countries that have introduced them, "no frills" bank accounts designed as starter accounts for the poor have experienced very low usage.
This raises the very important question: for low income people who are "unbanked" where does "money management" reside? And what is money management, anyway?
Money management is an essential component of financial capability. I propose the following definition: money management is the ongoing process of keeping track of one's financial status so that as new financial decisions arise one can make them appropriately and maintain personal solvency. The focus is on maintaining a consolidated view of where one's financial assets and liabilities are at any given time.
If I have a bank account that keeps track of deposits and pay outs, I can consult my bank statement whenever I have to make an important financial decision, and therefore I do not need to keep the money management function in my head. I can outsource a big part of my money management process to the bank account.
But what if I am a first time user of an account? I might prefer to keep track in the way I am used to, which in all likelihood means keeping a running tab in my head. Unless I already keep a written record of my financial transactions (probably rare except for sophisticated microenterprises) it might not occur to me to use an account as a money management tool. Moreover, if most of my transactions remain informal, a bank account would not be a very good representation of my financial life.
The implications of this observation for providers and policy makers are profound. Providers and policy makers should not expect people to shift their locus of money management in a twinkling. It is likely to be a gradual process, involving financial education (how to use an account as a money management tool) and, perhaps even more important, the formalization of transactions so more of them flow through the account.
This observation also shows the fallacy of no frills accounts: perhaps the low demand for the money management support provided by an account shows that many people are satisfied with the money management function that resides between their ears. It also poses a challenge to payments innovations like mobile money or remittances sent through money transfer organizations. If provided outside the context of a bank account, such transactions do not result in consolidation of the money management function, but instead require a person to continue to keep track in the head (or somewhere else).
I am finally left with a question I do not know how to answer, but it is a question that should occupy anyone working on financial inclusion. If we want to assist people in their efforts to be competent money managers, what is the best mix of services? I would welcome your thoughts.
Exclusive: Syria prints new money as deficit grows: bankers - Reuters
AMMAN |
AMMAN (Reuters) - Syria has released new cash into circulation to finance its fiscal deficit, flirting with inflation after violence and sanctions wiped out revenues and led to a severe economic contraction, bankers in Damascus say.
Four Damascus-based bankers told Reuters that new banknotes printed in Russia were circulating in trial amounts in the capital and Aleppo, the first such step since a popular revolt against President Bashar al-Assad began in 2011.
The four bankers said the new notes were being used not just to replace worn out currency but to ensure that salaries and other government expenses were paid, a step economists say could increase inflation and worsen the economic crisis.
The United Nations says Assad's forces have killed at least 10,000 people in a crackdown, and the government says more than 2,600 members of its security forces have died.
The four bankers, along with one business leader in touch with officials, said the new money had been printed in Russia, although they were not able to give the name of the firm that printed it. Two of the bankers said they had spoken to officials recently returned from Moscow where the issue was discussed.
"(The Russians) sent sample new banknotes that were approved and the first order has been delivered. I understand some new banknotes have been injected into the market," said one of the bankers. All requested anonymity.
Two other senior bankers in Damascus said they had heard from officials that a first order of an undisclosed amount of new currency had arrived in Syria from Russia, although they were unable to confirm whether it had entered circulation.
Outgoing Finance Minister Mohammad al-Jleilati said last week that Syria had discussed printing banknotes with Russian officials during economic talks at the end of May in Moscow. He said such a deal was "almost done", without going into details.
However, the central bank later denied through state media that any new currency had been circulated.
Goznak, the state firm that operates Russia's mint and has exclusive rights to secure printing technology, regularly prints money for other countries. It declined to comment.
"LAST RESORT"
Russia is one of Syria's major political backers and a close trading and economic partner. There are no sanctions in place that would bar a Russian firm from printing money for Syria.
Syrian money was previously printed in Austria by Oesterreichische Banknoten- und Sicherheitsdruck GmbH, a subsidiary of the Austrian central bank. That order was suspended last year because of European Union sanctions, an Austrian central bank spokesman said.
One of the four bankers described the decision to use newly printed money from Russia to pay the deficit as a "last resort" after several months of consideration.
Syria's deficit has swollen because of declining government revenues and loss of oil exports hit by sanctions. The government is loathe to impose unpopular measures to fight the deficit, like cutting subsidies or raising taxes.
"The deficit is there and it is already increasing and increasing quickly. And to finance it they have decided to print currency," said the senior businessman, who is familiar with the subject and in touch with monetary officials.
Bankers say a priority has been to continue salary payments for over 2 million state employees among a workforce of 4.5 million in a country of more than 21 million people.
"You cannot allow the public sector to collapse," said one of the bankers."
"People are getting their wages and there are no complaints if they are paid at the end of every month. If we reach a stage where they are not paid there will be a crisis."
Syria's $27 billion 2012 budget was the biggest in its history, taking many by surprise. Bankers say the spending surge was motivated by a desire to create more state jobs and maintain subsidies to help ward off wider discontent.
The private sector has suffered large scale layoffs, but workers in the public sector have kept their jobs and had steady wages despite a salary freeze.
Financing the spending has proven difficult. The central bank has exceeded borrowing limits from public banks, and private banks are reluctant to buy government bonds, one of the bankers said.
Inflation is already running at 30 percent, although the central bank considers it manageable.
Authorities have spent state funds on subsidies to keep the prices for household utilities and petrol unchanged, and have announced planned price controls on basic commodities. However, electricity prices for big industries have risen by 60 percent and the price of subsidised diesel fuel has also risen.
The authorities plan to inject only a small amount of new currency to prevent runaway inflation, said one of the bankers.
"But there is a limit to how much fresh money could be injected into the economy in such highly uncertain times. Reckless printing of money as a way of buying short term reprieve could be economic suicide," the banker added.
(Additional reporting by Fredrik Dahl in Vienna; Editing by Oliver Holmes and Peter Graff)
FOREX-Euro advances for 2nd day, but gains seen limited - Reuters
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Homeless man's wash in city river changes his life after he finds haul of money worth $77,000 - Daily Mail
By Anthony Bond
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Lucky break: Timothy Yost has been told he can keep the $70,000 he found
When people are homeless, they are lucky if a passer-by throws them a bit of spare change in the street.
But when one homeless man in the U.S. decided to visit a Texas park, he could not have expected how lucky he would be.
Timothy Yost found a bag full of money, but it was confiscated off him and a police investigation started into its origins.
But following a vote at Bastrop city council last night, the 46-year-old was told he could have the stash - worth an astonishing $77,000 - back.
According to the American-Statesman, Mr Yost's attorney Aleta Peacock said: 'It is a great day for Bastrop; it is a great day for Mr. Yost.'
The homeless man went to wash his feet in the Colorado River in January when he came across the bag.
He decided to investigate further and kicked the bag, upon which it jingled.
Inside, the homeless man found a mound of South African coins and wet cash.
Mr Yost then took the bag of money to a bank, where he tried to swap the damp bills for fresh money.
However, the bank clerk became suspicious and called the police.
X marks the spot: Bastrop Fisherman's Park, where Mr Yost made his find
Krugerands: One of the South African gold coins Mr Yost discovered
The city of Bastrop then kept hold of the money while detectives tried to find the owner of the haul and see if a crime had occurred.
Speaking to Your News Now, Bastrop Police Chief Michael Blake said: 'Under common law in Texas, typically if it is buried and we are not able to find the rightful owner for the funds within the prescribed time period, then the finder of the funds can petition to be awarded those funds.'
However, Mr Yost was left having to celebrate his new found wealth in prison.
He has since been jailed for public intoxication and criminal trespass.
First Derivatives and FOREX CLUB Announce Strategic Partnership - PR Newswire
MOSCOW, June 13, 2012 /PRNewswire/ --
First Derivatives plc ("FD"), a leading provider of software and consulting services to global investment banks, brokers and hedge funds has today announced that it has entered a strategic partnership with FOREX CLUB, a leading[1] online broker. The partnership will enable FOREX CLUB clients to benefit from global access to the largest liquidity pools in the market provided by 12 leading global banks and institutional levels of pricing, execution and spreads in foreign exchange trading.
(Logo: http://photos.prnewswire.com/prnh/20120517/533090 )
(Logo: http://photos.prnewswire.com/prnh/20120613/537868 )
The agreement is FD's first partnership with a privately owned retail FX broker based in Russia and the Commonwealth of Independent States ('CIS'). By introducing FD's Delta Flow™ trading technology, which uses a Direct Bank Access (DBA) model, FOREX CLUB's global client base are plugged directly into the heart of the foreign exchange market ensuring best quality execution, spreads and pricing.
Using the latest standardised connectivity from centralised data centres in the world, FOREX CLUB is now able to provide its clients with ultra-low latency and unlimited connectivity, thereby delivering an institutional level of service across all its platforms including StartFX2, MT4, ActTrader™ and Rumus.
John Beckert, MD e-Trading & Risk Management Solutions at First Derivatives, said: "Our business development model is predicated on the need to focus on those clients who can demonstrate a market vision underpinned by a solid business plan. This is vital to our growth as well as our clients. Collaborating with a firm such as FOREX CLUB enhances our ability to deliver market leading enterprise wide solutions to the broker sector of the market. We pride ourselves on partnering with clients for mutual business success and long-term profitability. On this basis, we welcome FOREX CLUB as our newest partner. By leveraging our best-in-class technologies and consultancy, we believe that FOREX CLUB is well-placed to strengthen its competitive position in the retail forex market. At the same time, their decision to adopt our Delta Flow™ trading technology underlines our commitment to providing innovative and cutting edge solutions to the forex trading markets."
Demetrios Zamboglou, Head of Hedge & Quant at FOREX CLUB, said: "We are delighted to have reached an agreement with First Derivatives to be our primary trading technology partner. This demonstrates our commitment to becoming a global leader in online retail FX trading. By ensuring direct client access to multiple pools of liquidity from the top global banks, we strengthen our competitive edge by giving clients tighter spreads and best execution practices."
About Delta
Launched in 2008 by First Derivatives plc, Delta is a comprehensive suite of high performance real-time trading, CEP, market data and risk management applications. Flagship trading products include Delta Flow, Delta Algo, Delta Margin and Delta Stream which are used in high volume, low latency environments.
About First Derivatives, PLC
First Derivatives is a global provider of software and consulting services to the financial services industry. With almost 16 years' experience working with leading financial institutions, it continues to deliver technologically advanced products and services that anticipate and respond to the evolving needs of global capital markets.
First Derivatives currently employs over 670 people worldwide and counts many of the world's top investment banks, brokers and hedge funds as its customers. It has operations in London, New York, Stockholm, Shanghai, Singapore, Toronto, Sydney, Dublin, Newry and Hong Kong.
For further information please visit http://www.firstderivatives.com
Established in 1997, FOREX CLUB is the brand name for a group of companies that provides clients from over 120 countries with platforms and services for trading forex, CFDs and other online trading and educational products. It offers clients high-quality tools in training, analytics and education, as well as personal support. FOREX CLUB has over 600 employees worldwide servicing 45,000 traders. The company was one of the industry's first to offer zero spread trading and commission refunds on all unprofitable trades exclusively on StartFX 2, the company's proprietary platform.
The company remains committed to the developed standards set forth by government regulators around the world. The company's Russian broker is a founding member of CRFIN, the Russian self-regulatory organization.
The structure of FOREX CLUB Group of Companies includes a range of brokers and training centers, including Forex Club International Limited, Akmos Trade, FOREX CLUB (FSFM license #004857) and the International Trading Academy.
http://www.firstderivatives.com;
[Notes for Editors]
[1] FOREX CLUB was rated in Forex Magnates' Q4 2011 and Q1 2012 Industry Reports as one of the top ten global brokers by retail forex volume.
Free money fattens the Swiss bankroll - Sydney Morning Herald
Who said there was no such thing as free money?
The flight of capital in global markets has become so extreme that you actually have to pay to park your money in Switzerland, in Swiss sovereign bonds that is.
While bonds around the world offer a yield, a return on investment, the picturesque tax haven in the middle of Europe now boasts a ''negative yield'' on its sovereign debt.
Putting this in perspective, the yield on a Greek bond is 30 per cent - compared with below zero. And it still looks pricey.
The countdown is on for the Greek elections this Sunday. And as the world contemplates a possible Hellenic exit from the eurozone, or a ''Grexit'', as market parlance would have it, the region's bond markets have hit their tipping point once again.
Sharemarkets, having briefly and perversely rallied on news of the €100 billion ($125.6 billion) bailout of Spain's banks early this week - something that should have been bad news as Spain had been consistently denying its banks needed help - fell on Tuesday but recovered last night.
When the sharemarket and the bond market start telling you different things, though, it is usually the bond market which has it right. Equities are plodding along yet bonds are warning of danger ahead.
It may be that the strength in equities is precisely due to the fact that bond yields in what are deemed the safer countries are so low (about 1.65 per cent in both the US and Britain and 1.2 per cent in Germany).
And it may also be that investors are simply fed up with super-low yields. At least quality industrial shares carry a decent dividend yield, albeit with less security and greater exposure to economic downturns than bonds.
The third point in favour of shares is, as many see it, the inevitability of further radical central bank stimulus: money printing, QE3, LTRO, assorted programs to appease equity markets and ''kick the can down the road''.
This latest pricing in credit markets indicates a law of diminishing returns, though, when it comes to stimulus, and kicking that old can down that old road.
Switzerland, which has retained its currency though the 20-year euro experiment, this week for the first time ever, boasts a negative yield curve on its six-month to five-year paper.
No yield at all in other words - just the ''sleep at night'' factor; that if things turned really pear shaped in the impending contagion from a Greek exit and further wobbles in Spain, your money could be parked in Swiss francs until it was safe to bring it out.
However, the amusing paradox is that the Swiss franc protects an investor against a fall in the euro, or a default in a southern European bond, but it also allows the Swiss to pay their own sovereign debt by … you guessed it … issuing more sovereign debt.
There is a catch. Last September, as Europeans were fleeing the euro in the last holus-bolus flight to safety, the Swiss National Bank was forced to peg its currency.
The franc was running so hot that it was threatening to demolish the country's high-quality export sector and its tourism. After all, why go skiing in Switzerland when to do so next door in Italy, Austria and France was half the price?
The currency fix didn't entirely quell the tide of capital, though. Hence the negative yield. This week, two-year rates are costing investors 36 basis points.
Meanwhile, below the Pyrenees, Spain's 10-year debt sank to its lowest price, which means its highest yield, in 15 years at 6.83 per cent.
At that rate, it is too expensive for the embattled government in Madrid to issue bonds and refinance. The cost of Italy's debt, likewise, became prohibitive, hitting six-month highs above 6 per cent.
The spectre of contagion once again haunts Europe and there is still another $1 trillion to borrow and refinance this year. Italy, the second-largest debtor in the eurozone, has more than €9 billion to raise in the next couple of days.
And as the calls go out from banks and markets for QE3, for another round of free money to prop up stockmarkets, it is ever apparent the benign effects of central bank stimulus diminishes with each program.
More and more people are questioning the Keynesian logic of splashing the cash around. The more compelling logic would be that splashing the cash about has failed. The result has been to pile debt upon debt.
Perhaps when they let Greece go - and it might take Spain and the rest of the periphery to be cleaned out, too - nature and markets can take their course.
In the meantime, if there is another enormous stimulus, it will provide at least short-term relief for the sharemarkets. And for Australia it might turn out to be fleetingly positive, putting a floor under commodity prices as markets opt, however briefly, to park their money in hard assets.
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[ SMH | Text-only index]
FOREX-Euro buoyed by short-covering, Italy bond sale eyed - Reuters UK
* Euro holds firm despite Spanish ratings downgrade
* NZD retreats from highs, RBNZ softens rate-hike tone
* Italy bond sale in focus
By Ian Chua
SYDNEY, June 14 (Reuters) - The euro clung on to most of its overnight gains early in Asia on Thursday, while commodity currencies like the Australian dollar came under renewed pressure following a negative close on Wall Street.
The euro last stood at $1.2574, having risen as high as $1.2611 on Wednesday as investors trimmed very bearish positions on the single currency. But a three-notch downgrade of Spain's credit ratings by Moody's saw the short-covering come to an abrupt end.
"This is now the lowest rating among the three main agencies for Spain. This may augment the recent stress in the European bond markets today and likely put the Italian bond auctions today under greater scrutiny," analysts at BNP Paribas wrote in a note.
Italy is due to sell up to 4.5 billion euros of bonds later on Thursday. The bond sale comes a day after the country's one-year borrowing costs hit a six-month high of 3.97 percent at a debt auction.
However, traders said there is little conviction in the market as the overarching focus is on Greece's election this weekend.
Canada's finance minister said the results have the potential to create a "disruptive moment" on the eve of the G20 summit in Mexico, but that policymakers will deal with that problem if it arrives.
The election outcome is too close to call for now. Syriza, the leftist party opposed to austerity measures, and the New Democracy group, which backs Greece's international bailout, are locked in a tight race.
Against the yen, the euro stood at 99.90, not far off an overnight peak around 100.11. The dollar fetched 79.45 yen, having traded in a slim range of 79.30 and 79.75 on Wednesday. Reflecting a firmer euro, the dollar index drifted down to 82.143 from a session high of 82.581.
Commodity currencies had a tougher time with the Australian dollar once again retreating from parity against the greenback. It last stood at $0.9951.
The New Zealand currency slipped to $0.7763 from a one-month high of $0.7808. The kiwi lost a few pips after the Reserve Bank of New Zealand said a weak economy and an uncertain global outlook meant rates need to stay at record lows.
As expected, the RBNZ kept rates unchanged at 2.5 percent for a 10th straight meeting.
"We didn't think the Reserve Bank would cut rates, but that they would be ready to react strongly if we did get quite a serious development in the European debt crisis," said Nick Tuffley, chief economist at ASB Bank.
"They are waiting to see what that outcome will be. If Europe continues to muddle through, we don't believe rates will go up until March next year at the earliest." (Editing by Wayne Cole)
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