Bank losses worrisome !

It is imperative for banks to have a better prediction of their losses so that their capital position will be better reflected

IT may seem strange to analyse bank losses at a time when major banks, even the taxpayer-owned ones, are profitable.

Moreover, major economies are also said to be turning around. So why would we be so worried about bank losses?

According the analysts at Barclays, this is related to the bank's risk-weighted assets.

With so much focus on capital and the need to boost capital for the taxpayer-owned banks, it is inevitable that the question on losses would pop up.

That's when the banks accurately forecast the capital required.

However, if they do not have a fairly accurate idea of the losses they may be incurring, they may not be allocating enough capital buffer for it.

Therefore, the analysis on bank losses should be seen in a positive light as it helps to shed information early on the capital position of the bank.

The startling fact is that the banks themselves may not be able to predict their losses with a fair degree of accuracy, said the Telegraph.

UK, European and Asian banks, on average, forecast losses of nearly 30% higher than those they actually faced, the survey by analysts at Barclays found.

According to the report, Lloyds and HSBC predicted a default rate on their lending portfolios more than 50% above what they actually experienced.

Barclays was found to have been too pessimistic, particularly with assets in its investment bank where it forecast a default rate 78% higher than in reality.

“Most of the time banks' PDs (predicted defaults) are lower than forecast, suggesting a degree of conservatism,” the analysts said, as quoted by the Telegraph.

“The forecasting errors' can be massive, which raises questions over both their predictability and hence meaningfulness of the resulting risk weighted assets,'' they said.

It is therefore imperative for banks to have a better prediction of their losses so that their capital position will be better reflected.

Banks' boards of directors are fortifying themselves with new knowledge.

HSBC, the largest British bank, has appointed former director-general of British Security Service, Sir Jonathan Evans, onto its board, with expertise in counter terrorism and cyber threats.

With the accusations of money laundering, these major banks are coughing up a lot of money to engage top guns that can deal with the intricacies of it all.

Before terrorim, it was risk posed by over dabbling in derivatives. Banks engaged armies of risk and compliance oficers

Whether these counterrorism and cyber threat themes really emerge into trends remains to be seen.

A survey by pension fund The Scottish Widow indicated that in 10 years' time, Britons will have to work till 70.

They do not have enough savings to last through, as they are currently caught up in daily living expenses, it was reported in The Guardian.

That sounds chilling but fast becomig a reality soon in many other countries.

Many will start rushing for health and pharmaceutical products to strengthen themselves while others will just struggle on.

Plain Speaking by YAP LENG KUEN

>Columnist Yap Leng Kuen reckons it's easier to think positive.

Related:

UK taxpayer-owned banks take harder hit

Samsung S4 new heir to Galaxy smartphone throne

 The S4 lives up to all the buzz to take over the torch for Samsung's outstanding range
 
WITH over 10 million units sold worldwide since its launch last month, an introduction to the Samsung Galaxy S4 seems somewhat redundant.

So we are going to head straight into discussing whether the latest addition to Samsung’s arsenal of Galaxy devices lives up to all the buzz.

There are two variants of Samsung Galaxy S4, one powered by the 1.9GHz Snapdragon 600 quad-core processor, and the other by Samsung’s Exynos 5 1.6 GHz Octa-core processor (which we find on our shelves here).

Octa-core, on paper, sounds astounding but, in reality, it is somewhat disappointing.

Make no mistake, it is fast: Multi Window and multi-tasking run much better here. But for that much processing power, it is fair to expect the device to run as smooth as butter all the time.

When you fire up the five-inch full HD display, the awe factor goes up.

The Super AMOLED display is stunning and you will soon forget about the cheap-looking and prone-to-grime polycarbonate back plate that covers the removable 2,600mAh battery, microSD slot and micro SIM slot.

We found the new features the Galaxy S4 came with to be rather useful, especially Air Gesture which lets you scroll up and down a web page, change music track, or even answer a call by waving your hand.

You can even wake the device up enough to show you the time and notifications that way.

With Samsung Smart Scroll, we can easily scroll up and down web pages by tilting the device. The only catch is that you can only use both Air Gesture and Samsung Smart Scroll on web pages opened with Internet Browser.

Other features include the S Translator which provides instant translation and Optical Reader which automatically recognises text, a business card or QR code information.

There is also the WatchON which transforms the device into an infra-red remote control for your home entertainment system including your television, set-top box, DVD player and air-conditioner.

Dubbed as the Life Companion, the Galaxy S4 also has an excellent snapper.

One of the best things about the Galaxy S4’s camera is its user-friendliness.

Owing to the camera software borrowed from the Galaxy Camera, swapping in-between the 12 modes onboard is a breeze.

The camera does extraordinarily well in an environment with good lighting, producing pictures with vibrant colours and details.

Otherwise, you’ll get some noisy pictures. However, the HDR mode manages to work very well in managing the tricky lighting scenarios.

Other Ingenious modes like Animated Photo which lets you create animated GIFs without leaving the camera app, and the Dual Camera function which allows simultaneous use of both front and rear cameras, also help make immortalising memories more delightful.

The battery in the Galaxy S4 holds up pretty well especially with the brightness turned down.

A full charge lasts a full day of heavy text messaging, web-browsing, taking pictures and multi-tasking between apps. It can easily last longer with Power Saving Mode turned on.

All in, the Galaxy S4 is an outstanding device despite its shortcomings and occasional stutters. It is undeniably deserving of taking over the S III in carrying the torch for the Galaxy line-up.

By Yeevon Ong lifestyle@thesundaily.com

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Solar wars threaten climate fight

Amidst gloomy news in the deteriorating climate change situation is this bright spark – the cost of solar energy has been going down dramatically.

 THE source of clean and renewable energy is seen as one of the major saviours that could help power the world without emitting greenhouse gases.

The drawback is that solar energy has traditionally been more expensive to use than carbon-intensive coal or oil.

But in recent years solar power has become much cheaper. Energy experts predict that its cost could match that of conventional fuels in the next few years in some areas.

Solar cell prices have been falling, from US$76 (RM235.52) per watt in 1977 to about US$10 (RM30.99) in 1987 and only 74 cents (RM2.29) in 2013. Between 2006 and 2011, Chinese cell prices dropped 80% from US$4.50 (RM13.95) per watt to 90 cents (RM2.79) per watt.

Factors for this include a drop in price of the main raw material polysilicon (due to oversupply), increasing efficiency of solar cells, manufacturing technology improvements, economies of scale and intense competition.

The use of solar energy has shot up as the cost goes down. Global installed capacity jumped by 28.4 gigawatts (one gigawatt is 100,000 megawatts) in 2012 to reach 89.5GW. The 100GW milestone will be crossed some time this year.

All this is good news for the fight against climate change. Now comes the bad news.

The growing global demand has prompted the rise of solar panel manufacturers, and the competition is fierce, with a number of companies facing closure. China’s biggest solar energy company Suntech is in serious trouble.

But China has even bigger problems. The United States government, receiving complaints from US solar panel manufacturers, has slapped high anti-dumping tariffs on Chinese imports.

Now the European Commission also plans tariffs averaging 47% on Chinese solar products which it claims are selling below cost.

China is taking these threats seriously. Premier Li Keqiang in a visit to Europe last week took up the issue with European leaders.

Senior trade officials say China will retaliate. A full-scale trade war is thus imminent.

In a surprise turn of events, Germany and 16 other European countries have told the European Commission they are against its move.

But EC Trade Commissioner Karel De Gucht will apparently still slap on the tariffs provisionally, which is within his power to do.

So the solar wars between China with Europe and the US will likely proceed. This is a real pity, as the commercial interests of the countries are coming in the way of rapid progress in solar energy and the fight against climate change.

The expansion of the solar panel industry in China has played a crucial role in getting prices down, making solar energy more and more competitive, and driving its explosive growth.

Yes, China subsidises and promotes its solar industry. But the US and Europe also provide massive subsidies and supports.

The US has provided its solar companies with loan guarantees, research grants and tax deductions including investment tax credits and accelerated value depreciation.

European countries have given subsidies to consumers using solar energy, and incentives to producers including through the feed-in tariff scheme, in which solar energy providers are paid prices higher than what is charged to electricity users with the price difference being met by governments.

Without the subsidies, the solar industry would not have grown. Trade protectionist measures taken by one against the other, or by all against others, would be a recipe for disaster – for trade, the solar industry and the environment.

Well known solar energy advocate and chairman of Solarcentury Jeremy Leggett uses the following analogy to illustrate the trade war: “A planet faces an asteroid strike. Its inhabitants manufacture rockets with which to head off the threat. But, as the rock nears, they descend into international bickering over who pockets what from rocket-making.”

No one wins in this trade war, because of global solar supply chain, explains Leggett. Solar ingots, the upstream feedstock, are mostly made in Europe and America. The midstream products, cells and modules, are mostly made in China.

If China is hit on the mid-stream products it exports, it could retaliate with tariffs on the upstream products it imports.

For example, in Europe, the tariffs against China would wipe out thousands of jobs because most are not in manufacturing but in the companies that install the modules, regardless of where they are made.

The solution, he adds, is for the leaders of the few countries where most solar panels are manufactured to make a deal that coordinates the subsidies required in the various parts of the solar chain, and which is required for the few years that some countries need to bring the price of solar energy to parity with that of conventional energy.

An apt conclusion is made by Leggett: “The world will have to embrace common security on a bigger scale. Engaging in international competition while clinging to the illusion that markets always work will never solve our common problems of energy insecurity, poor air quality and resource depletion, never mind development. We will keep on maiming industries that can save us.”

Global Trends
By MARTIN KHOR