Plummeting stocks mounting merrymaking

The talk of the town for the past 2 days has been about China unveiling the $586 billion stimulus plan. Although shares in China and Hong Kong have gained, most other Asian stocks have plummeted due to concern over worsening company earnings. China’s benchmark CSI 300 Index is still down 66 percent this year, twice the drop of the Dow Jones Industrial Average.

What amuses me the most is when several economies around the world are facing recession, there are parties and dinner receptions being thrown by the various troubled banks. Just three days after the Government threw a £20 billion lifeline to Britain's beleaguered banks, RBS came under fire for spending £150,000 on a party for staff at a five-star hotel. Talk about opulence eh?

And just the other day again The Royal Bank of Scotland blew £300,000 on a secret champagne junket for its executives. The bankers and their partners enjoyed the lavish party to mark their 'success' after a year in which the collapse of the banking industry led to global financial meltdown. The supposedly stricken bank laid on the celebration amid extraordinary secrecy to try to prevent details reaching the public, even cancelling the original venue, a top hotel in Hampshire, and transferring the party 350 miles north to Edinburgh. What the hell is going on?!? If I was one of those tax payers I would be an extremely disgruntled one. I mean using lay mans money to scoop them out of problem they themselves caused!!! Have them jobless without the fancy bonus and overflowing champagne parties, out in the real world and probably they mite realize, just mite… And whats with the secrecy? Too scared of the public? Why is the government not intervening in any of this??

According to the UK press an RBS spokesman said: 'This was an entirely appropriate staff event to recognise outstanding performance by a small number of our staff.' The spokesman would not be drawn on the cost of the cancelled booking at Chewton Glen. One of the previous nights 300 executives-from another bank, HBOS - bailed out with £11.5billion of public cash - enjoyed a £330,000 party at an Edinburgh hotel. A spokesman for HBOS insisted: 'It was a modest affair, an event we hold every year to reward our star performers. It was well deserved. I mean “HELLO”?? “Too bad the entire world is facing the grunts of a meltdown- Cést la vie, but our lives must go on.”

Isn’t it just annoying to read such things? I mean who gives these morons the right to blow up stupendous amounts of money on frivolous merry making? What on earth are the regulators waiting to act on? This has to stop.. but how, by whom ? So many questions and still waiting for answers.

Such is life.. Cést la vie indeed..

The Closing Bell

I had received this cartoon image as a part of one of those ‘start of the week’ forwards. I don’t usually read all my forwards to be quite honest as they quite often fail to amuse me. However considering the global financial crisis resulting in the paramount economic gloom and the plummeting state of affairs for countries across the globe, its only natural that I went through a forward with the title – The Closing Bell.

A great deal of people would have lost a huge chunk of their hard earned savings and the fortunate ones would have lost slightly less in comparison. We here in the Middle East have been continually reassured that we are mostly insulated from the rest of the world. But are we really?
One of Kuwait’s largest lenders, Gulf Bank is said to have incurred losses of up to 200 million dinars after some clients defaulted on derivatives contracts linked to the euro. The loss occurred as result of the significant decline in the exchange rate of the euro against dollar. However, the headline news in Kuwait Times today stated, “No need to panic-Central Bank”. The Central Bank has stated that the losses will not affect the Banks financial position and has guaranteed to back the Bank and its deposits. And the government is reportedly pumping KD 1.5 billion to shore up the banking sector.

These efforts ought to help the depositors bring back their confidence. Here in Oman, the CBO’s conservative banking regulations (which was often criticized earlier) is now actually working in favor of the depositors in this global tumult. “As a pre-emptive measure, before RO liquidity becomes a concern for the local banking system, CBO has decided to effectively reduce the reserve requirement (by allowing CBO CDs and cash portfolio of banks under the 8 per cent reserve requirement up to 3 per cent), which would inject about RO 270 million back into the banking system, and that would be available to them for meeting their short-term liquidity needs. The lending ratio norm, which had to be tightened from 85 per cent to 82.5 per cent effective from November 2008 to contain fast growth in credit in the banking system, has also been deferred till restoration of normal conditions in the international markets, so that banks could continue to lend and meet genuine credit demand in the country.”(Source: Zawya)

Depositors should be able to distinguish between banks that are directly affected by the crisis and those that are indirectly affected due to the weakening confidence and panic in the market. They should be able to draw confidence from the concrete capital and profit figures of the banks and also from the willingness of our government authorities to intervene at any stage to ensure the smooth running of Oman’s banking system.

It’s a rough time for everyone. But Cést la vie. Based on facts and figures, let’s work towards steering clear of the increasing panic.