China lending outside the banking sector under control

While loans in China outside the banking sector have increased in recent months - investors shunning banks - the chairman of the Banking Regulatory Commission (CBRC), said Liu Mingkang the risks associated with such loans remained "manageable". History of secure markets or otherwise attempt to limit such practices as implying they could be riskier than it seems?

Remember, Chinese banks have been submitted last year to restrictions on the volume of new loans. In early September, the rating agency Fitch said it could lower the sovereign rating of China in the next two years. Reasons: the heavy debts of the Chinese banking sector, the latter having provided massive loans in recent months.

But outside the banking sector, all is not rosy: credits "parallel" have indeed conduits some borrowers into bankruptcy, particularly in the area of Wenzhou (East), which has about 400,000 companies. In recent months, more than 90 patrons fled the city in debt and two suicides were to be deplored the dead who are forced to face repayments to their creditors. Analysts said at the national level, the informal credit sector would weigh 4,000 billion Yuan (454 billion), about 8% of outstanding bank loans.

In early July, the rating agency Moody's had indicated that for its public debt in China amounted to 36% of its Gross Domestic Product (GDP), taking into account the share of the debts of local governments for which Beijing assume direct responsibility. A few days earlier, the National Audit Office indicated that the debts of the provinces, municipalities and districts in China amounted to 27% end of 2010 China's GDP, representing a total of 1.163 trillion Euros. The same office was, however, insisted that 63% of this debt would be repaid through revenue budget.

But some of these claims, considered doubtful threaten the banking system so that the Credit Suisse sees the same "time bomb" the most dangerous of the Chinese economy. Much less "alarmist" shall we say politely, the Chinese government estimates for its public debt to about 20% of GDP. But it does not include in its calculation the financial elements of local governments, which are however not allowed to borrow directly.

Now where the rub is that they have borrowed huge amounts from the global financial crisis, via means of ad hoc structures called "financing platforms" or PFL. But according to the National Audit Office, the "ability to pay is low and faces potential risks in some areas and in certain industries." Indeed, in a snowball effect, some local governments have had to make new loans ... to repay debts previously contracted, also depends heavily on land sales to meet their deadlines. According to the auditors of governments of China, 108.3 billion Yuan (11.8 billion) of loans were made or used fraudulently, the money ends up in Banks real estate or stock markets.
A bit worried, Moody's said in turn that the Chinese banks lent 8,500 billion Yuan (905 billion) from a total of 10'700 billion Yuan (1.163 trillion Euros) to local governments ... a situation that causes a high risk exposure. "These debts existed before the global financial crisis, but they quickly accumulated over the past two years while investment by local governments has been used as one of the main tools" to revive the economy, adds Moody's.

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EU companies in search of the Euribor

While the debt crisis in full swing and the European Union - or at least the euro area - appears to be on the verge of bankruptcy, the European Commission tries to make the household among the speculators and "arrangements between friends." The current situation also appears to arise largely from certain financial transactions that some would not Catholic. The European Commission said Wednesday it had raided the eve of the financial companies’ active in derivatives on the benchmark inter-bank euro (Euribor). This indeed suspects that a cartel has been established.

"The Commission is concerned that the companies concerned were able to violate the antitrust rules that prohibit cartels and restrictive business practices," the Commission said in a statement ... without naming the main question. The Commission does not specify whether the inspections were carried out on its own initiative or upon the termination of the cartel by one of its participants.

Recall that the Euribor is, for a given maturity, the fixing calculated each business day at 11am French time, published by the Banking Federation of the European Union (FBE), an average rate at which a sample of 57 large banks established in Europe lend in white (that is to say that without the loan is pledged by securities) to other banks.

Following the release of the Commission, Euribor-EBF was ready to share its data with the authorities.
Cedric Quemeneur, director of Euribor-EBF, institution that compiles the interbank rate also reported apartheid 'confidence in the management of the Euribor. ""With the number of banks that are involved in determining the rate, determine the rate artificially would be impossible. I think the Commission is not familiar with how the reference rates are determined. We are ready to help, "he told Reuters.

According to sources familiar with the matter based in Frankfurt, the offices of Deutsche Bank in London would be part of institutions searched by investigators from the European Commission.

Potential for promoters and brands in co branded Credit cards Part.III

Then, the positioning of retail banking networks will play a key role in the organization of the market around these cards, to date, it remains to be determined. By partnering with offers co-branded, they risk a drop in sales of traditional credit cards, implying a de facto decrease in revenues related to contributions (the co-branded cards being offered at a price much lower). In contrast, waive offer these products may cause a loss of market share when demand for co-branded cards for the benefit of credit card companies 'captive' (subsidiaries of the distribution, automotive ...) or new entrants. The tactics seem to apply the major banking groups is to rely on their own subsidiaries consumer credit to play the complementary offers, while reducing the risk of cannibalization ...

Finally, a technical constraint - but significant - just reduce the potential of these credit cards. The choice of "cash payment" or "credit payment" in cash is not possible outside the network of retail partners, including the lack of standardization of EMV terminals.

This uncertainty is reinforced by the lack of feedback potential. Indeed, the very special place of the bank card in France compared to our European neighbors (almost all of the park to the EMV standard, high number of transactions, psychological ...) renders inconclusive any analogies with the co- branding practiced by our European neighbors. Under these conditions, the first move will engage in enhanced listening market reactions. For their part, the traditional players in the market for payment card will now have to think to optimize their organization in the event of a redeployment of their strategy for success of co-branding.

On a broader front, it is an additional axis to be included in the reconfiguration strategies means of payment that must implement the banks to adapt to new regulatory requirements (SEPA, PSD) and market developments (innovative means of payment for retail, process for STP of corporate cash management ...)

Potential for promoters and brands in co branded Credit cards Part.II

The co-branded cards allow, a technical point of view, to combine:

    * The functions of a card "private" (when used one mode "on us", that is to say in a shopping partners). It opens all the specific services: credit, loyalty ...
    * The functions of a card "banking" (when used on mode "on them", that is to say, outside partner stores). It can then pay for purchases at any merchant equipped with an electronic payment terminal (EPT) or remove hope in vending machines (ATMs).

This device should allow going further in terms of loyalty. Besides disseminating the image of the brand with every new spending set by the wearer, the method allows to increase the accumulation provisions of points and possibly create a new need among customers not yet equipped cards.

More discrete, the arrival of co-branding will also allow retailers to renegotiate rates and commission charged plates with company’s consumer credit outstanding that manage card or to change partners.

Uncertain scope

Many uncertainties remain about the success of this system:

First, the process of replacing a store card with a Visa or MasterCard co-branded (or the systematic use of it if replacement is required by the sign) does not always value added significantly to the holders. This determination should be largely influenced by the potential affinity with the brand or the provision of fringe benefits.

This trend may be in favor of high-potential brands identification of dream or ostentatious (luxury, automobile, travel ...) but less favorable to the everyday consumer brands (supermarkets, health, fast food ...) they may have to pay more benefits to customers will finally convince a "subprime" (involving an increase in the cost and risk is a decline in the commission of the sign by the company credit ...)