Banking

ERBD to the rescue! An outlook of the five year plan

Remembered for a statement that was actually never made, the prime minister of the United Kingdom for six years Harold Macmillan. He was said to have responded wittily to a reporter when asked what might possibly knock governments off course with “events, dear boy, events.” And unfortunately that is the actual state of the economy now. When the Covid hit the world in 2020, the economy was considered to be all right. But as the times passed threats started flowing from politics. The trade war between the United States and China, a surge of anti-globalisation or the rise of populism, to name just a few other than from the fundamental economic malfunction. When the European Bank for Reconstruction and Development (EBRD) published its half-yearly forecast in November 2019, it stated that the Average growth in the EBRD regions is expected to (…) pick up to 2.9 per cent in 2020. This represents a downwards revision compared with the previous forecast published in May 2019 (of 0.1 percentage point in 2020).” In October, the EBRD revised its growth forecast for the 38 economies in Europe, Asia and Africa in which it invests downwards to -3.9 percent for this year. Then came the Corona and sent the entire global economy to take a dive with no parallel in its peacetime. According to the latest IMF (International Monetary Fund) forecast, global growth is projected at -4.9 percent in 2020, and the recovery is expected to be more gradual than previously hoped. In October, the EBRD revised its growth forecast for the 38 economies in Europe, Asia and Africa in which it invests downwards to -3.9 percent for this year.

EBRD will help economies implement contributions to achieve alignment with the Paris Agreement. The Bank has adopted the concept of “just transition” to make sure that the benefits of the green-economy transition are shared while protecting vulnerable countries, regions and people. A first-of-its-kind project in Northern Greece, where coal-fired power plants will gradually be phased out and replaced by the largest renewable-energy project in the country to date with EBRD support, was signed in October.

Introduction of gender and economic inclusion strategies, promoting the advancement of women, youth, people living in remote areas and other disadvantaged groups in the economies to which the Bank invests. The EBRD’s ‘ Women in Business program’, which has channelled more than €500 million in loans to women-led enterprises in 18 countries and offered complementary advisory services, is but one of the many examples of the Bank’s successful activities in this area. Technology has always played its crucial role in promoting inclusion and this pandemic radically changed the work for millions and the concept of remote working is here to stay. This is boosting the expansion of e-commerce and e-finance, already creating new business opportunities.

One way through this can be digitalizing the processes which will improve governance and transparency, for instance, in procurement, a better resource management will reduce energy and carbon intensities and monitor the efficient use of land and energy. This step has already been taken by the EBRD such as supporting administrations s in the Western Balkans, North Africa, the Middle East and Central Asia, and is helping SMEs to go digital. A greener economy, inclusion and digitalization had seem to be at the top of the EBRD’s agenda without the COVID-19. And now these themes have urgent orders to be addressed more so than ever. This crisis has accelerated the developments which were already in progress and also the ones which were long overdue. A vaccine might come against this corona virus but there can never be a vaccine against greenhouse gases and climate change, inequality or the digital divide. And here the ERDB stands at the fore front as the only remedy is to take joint action.

Banking

Goldman banker hired by the Citi bank

Citigroup has hired Luisa Leyenaar-Huntingford from Goldman Sachs. This new hire is to co-head its global infrastructure franchise. Because, it seeks to win more business from cash-rich investment firms focusing on infrastructure deals. Leyenaar-Huntingford will be based in London. Responsibility will be shared with Todd Guenther in New York.

The pair will work closely with industry teams covering healthcare, industrials, natural resources and clean energy transition (NRCET), technology and communications. Leyenaar-Huntingford helped in the establishment of the Goldman’s infrastructure franchise in her time at the Wall Street bank. They will team up with Citi’s Iberia co-head of banking, capital markets and advisory (BCMA) Jorge Ramos will continue to be a senior member of the global infrastructure franchise.

The infrastructure sector is poised for further growth, according to the memo. The memo was released by Citi’s global co-heads of the alternative assets group Anthony Diamandakis and John Eydenberg, and its EMEA head of BCMA Nacho Gutierrez-Orrantia. There was significant private investment demand across the globe to deal with environmental, energy, transportation, waste, communication, digital and other social needs.

Banking

Banks make slow progress on UK gender pay

Major banks in Britain made a slight dent in their gender pay gaps. Several insurers went backwards. Companies in Britain with more than 250 employees have been required to publish the difference between the pay and bonuses of their male and female employees. They got a reprieve due to the pandemic, last year. The financial services sector has shown one of the largest genders pay gaps in Britain. The lack of women in senior jobs is the main reason.

Pay gap data from 21 major financial institutions showed a narrowing in their average mean gender pay gap. This is just 0.4 percentage points. Banks alone had a pay gap which narrowed by one percentage point. Ann Francke, chief executive of the Chartered Management Institute said that the UK’s financial services industry has often been singled out. It really does have to get its house in order. Goldman Sachs had the widest gender pay gap in the year to April 2020. Goldman posted a gender pay gap of 51.8%. The bank told the staffs that narrowing the gap further was a critical priority. A spokesperson for banking lobby group UK Finance said, that there is clearly more still to be done.

FTSE 100 insurers Prudential, Legal & General and M&G reported a widening in their pay gaps. Prudential’s UK gender pay gap widened to 45.2%. M&G also reported a widening in its pay gap in the most recent year to 30.5%. The M&G spokesperson said that they are determined to narrow their gender pay gap and will do this by achieving better representation of women in all roles at all levels of our organization. Legal & General’s mean gender pay gap widened to 30.8%.

The insurer said that the legal & general is tackling the underlying causes of its pay gap. This is by creating a more diverse workforce and a more inclusive culture through sustained, long-term action. Admiral had a gender pay gap last year of 12.8%. The 21 firms surveyed were Barclays, HSBC, Lloyds, NatWest, Standard Chartered, Bank of America Merrill Lynch, Goldman Sachs International, JPMorgan, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, PGMS (a Phoenix unit), abrdn, Schroder Investment Management, St James’s Place, Legal & General, Prudential, Admiral Group, Aviva and M&G.

Banking

BOJ to lower inflation target-Japan’s finance minister

Japan’s outgoing finance minister, Taro Aso, said that he had proposed lowering the central bank’s 2% inflation target. This is when the prices took a hit from plunging oil prices. He was the finance minister for nearly nine years. The slump in oil price was among the main reasons the government could not officially declare an end to deflation. In his final news conference as finance minister, Aso said that he proposed to Governor Kuroda that, with oil prices falling this much, it would be hard to achieve 2% inflation. Hence, the target must be lowered at some point. He stated this by referring to Bank of Japan (BOJ) chief Haruhiko Kuroda.

Aso also said that the governor said he would do his best to achieve the target. This is stated by adding that policymakers must scrutinise at some point, why the BOJ’s inflation target of 2% has not been met. The remarks highlight how the government and lawmakers distanced themselves from the BOJ’s target years ago, despite central bank reassurances that achieving the target was possible by maintaining or increasing stimulus.

Aso was deeply involved in negotiations with the BOJ. After Kuroda took over as governor, he deployed a massive asset-buying program. This is for pulling Japan out of deflation. Aso supported the BOJ’s stimulus efforts. He is a member of the cabinet. And also, had raised many doubts that monetary policy alone can reflate the economy out of the doldrums. New Prime Minister Fumio Kishida is set to form a cabinet.