Author: Helen

Pension Fund Awards 2017

Posted on by Helen

Economic uncertainty is always a challenge for businesses, and the pensions sector is certainly no exception. After several years of somewhat slow growth, the events of 2016 shook the industry to its core. Geopolitical tensions, creeping isolationism, market volatility and political upsets have forced the pensions sector to rapidly adjust to a new, unpredictable international business climate. With the industry still recovering from the 2008 global financial crisis, such market unrest is far from welcome.

In addition to this immediate economic turbulence, the pensions industry is also facing its own looming demographic crisis. Rapid advances in medicine, nutrition and sanitation are now seeing people live far longer, with average life expectancy reaching an incredible 85 years in some developed nations. Meanwhile, reduced birth rates and a decline in infant mortality have given rise to a rapidly ageing population in many of the world’s largest economies. With an ever-increasing number of retirees requiring state and private pensions, the pensions sector faces an immense challenge in the decades to come.

The World Finance Pension Fund Awards 2017 provide an insight into these shifting expectations in the pensions market and celebrate the industry’s most innovative players. While the future may present some problems for the sector, this year’s recipients continue to thrive by offering the best services and the most pertinent insights.

The pensions industry is set to embrace technological advances as we look to
2017 and beyond

Growing demand
The world’s population is ageing rapidly. In 1950, people aged 60 and over made up just eight percent of the global population. That figure is now at 12 percent, and is expected to almost double to 22 percent by 2050.

With people around the world living for longer, there are consequently fewer working age citizens for every older person. This inevitably places a significant strain on the global pensions system, with international governments increasingly coming under pressure to ensure pensions remain financially sustainable and workable.

In countries with well-developed pensions systems, the poverty rate among retirees is often the same or lower than that of the general population. For example, pensioners in the UK are now financially better off than working age citizens, with the average pensioner household income overtaking the working age household income for the first time in 2017. However, a failure to adequately deal with the rapidly shifting demographics could result in a rise in old age poverty in even the world’s most developed nations. At present, state pensions tend to come from contributions made by taxpaying citizens, but as the population ages, there will simply be fewer taxpayers to support more retirees.

By 2050, some 40 percent of the population will be looking to claim pensions in various nations, including Japan, South Korea and Macau. While these countries currently boast well-developed pension funds, reforms must be made in order to adequately deal with population ageing. A failure to prepare for this demographic shift could result in rising poverty levels among the elderly, which would in turn place further pressure on healthcare systems and other public services.

While developed nations may be heading towards a future pensions crisis, many countries are still struggling to establish a workable pension system. In some Latin American, sub-Saharan African and Asian nations, pension schemes are almost non-existent or still at a nascent stage. In these regions, many citizens work in the informal economy, meaning they are not covered by social protections and do not pay taxes. As such, many developing nations struggle to provide a state pension for their elderly citizens, and are denied the crucial capital that can be generated from pension funds. The challenges to pension reform may be great, but the rewards will prove invaluable for many of the world’s developing nations.

A challenging year
On a more pressing scale, the pensions industry must now deal with the fallout from 2016’s various economic upsets. With a shock presidential victory for Donald Trump, the UK’s unprecedented decision to leave the European Union and an economic slowdown in China, the global economy has battled through a turbulent 12 months.

As the world adjusts to these new circumstances, economists have warned that inflation is likely to rise sharply in 2017, potentially reaching three percent in the UK and other European nations. Inflation rate changes have a profound effect on pension schemes, as high inflation can erode the value of retirement income.

Pensioners who purchase annuities are on a fixed income, which may not keep pace with rises in inflation. What’s more, cash savings and pension pots are hit hard by even low-level inflation, as the low interest rates on savings accounts simply cannot compete with rising inflation. For example, the value of £100 has more than halved over the past 20 years, thus wiping significant value from cash savings. Meanwhile, interest rates on global retirement incomes have been kept at near-record lows over the past decade in order to support the economy as it recovers from the 2008 financial crash. This means that people retiring today will ultimately receive just half the income of those who became pensioners in 2000.

In order to offset rising inflation in the US, the Federal Reserve has already taken the base interest rate to one percent, and has warned there will be more rate hikes to follow in 2017. With these high levels of inflation and low levels of interest on retirement incomes, 2017 could shape up to be a challenging year for the pensions industry.

Going digital
Like many financial services, the pensions industry is increasingly looking to digitalise its operations. As retirees become more tech-savvy, pension providers are attempting to introduce a new range of digital initiatives, particularly in their advisory services. According to accountancy giant EY: “2017 is set to be the year when so-called ‘robo-advice’ will make a real breakthrough.”

For many middle-income retirees looking to make the most of their pension pots, visiting an independent financial advisor can prove extremely costly. Due to a fear of exposure to future complaints, many advisors demand large fees in exchange for their services, often leaving pensioners with no choice but to make crucial retirement decisions by themselves.

In order to make quality financial advice more readily available, some pension providers are beginning to offer robo-advice services, which combine algorithms and automated online responses to give customers real-time counsel. Offering an effective and less costly alternative to a human advisor, intelligent robotics can help steer retirees towards financial products and pension plans that best suit their needs and savings goals. While such services are still something of a novelty, the pensions industry is set to embrace technological advances as we look to 2017 and beyond.

As the pensions sector prepares for the changes and challenges of the months ahead, the World Finance Pension Fund Awards celebrate the companies setting new standards worldwide. The winners of this year’s awards truly embody the future of the pensions industry, demonstrating adaptability, innovation and excellence in their services. For an insight into the industry’s top performers, take a look at our 2017 winners.

 

World Finance Pension Fund Awards 2017

Australia
Asgard

Austria
APK

Belgium
Amonis

Bolivia
BISA Seguros y Reaseguros

Canada
Ontario Teachers’ Pension Plan

Caribbean
NCB Insurance

Chile
SURA

Colombia
Proteccion

Czech Republic
KB Pension Company

Denmark
Danica Pension

Estonia
Nordea Pensions Estonia

Finland
Elo

France
EADS

Germany
Allianz

Ghana
Pensions Alliance Trust

Greece
Alpha Trust

Iceland
Arion Banki

Ireland
Allianz

Italy
Fonchim

Japan
Government Pension Investment Fund

Kenya
Octagon Pension Services

Macedonia
KB First Pension Company

Malaysia
Gibraltar BSN

Mexico
Afore XXI-Banorte

Mozambique
Mocambique Previdente

Netherlands
Zwitserleven

Nigeria
Fidelity Pension Managers

Norway
SPK

Peru
Prima AFP

Poland
ING

Portugal
Fundos Pensoes Santander Totta

Serbia
Dunav

Spain
Pensions Caixa 30

Sweden
Alecta

Switzerland
Zurich

Thailand
EGAT Provident Fund

Turkey
AK Asset Management

UK
Pension Protection Fund

US
Arkansas Teachers Retirement System

The student loan bubble threatens to burst

Posted on by Helen

The student loan systems in the US and the UK are increasingly taking the form of two rapidly expanding bubbles. Both are inflated by a toxic combination of increased competition in a labour market that is ramping up the requirement for advanced qualifications, and the fact that uncapped class sizes with higher tuition fees are incentivising universities to increase student intakes.

But while the two systems may share a parent, they are not twins. Distinctions in the fabric of both loan procedures mean these bubbles differ in shape and size: student loan debt in the UK recently reached £100bn ($129bn) for the first time, whereas in the US, it now stands at $1.3trn.

Inflating the bubble
In the UK, individuals face few personal ramifications for failing to pay back their loans in full. UK studies suggest, however, that the ‘graduate premium’ of better job options and increased wages – often touted as motivation for getting a degree in the first place – may only exist for certain subjects and institutions. In the US, where a smaller proportion of the workforce has a university degree, graduates continue to out-earn non-graduates. However, here the personal risks of taking a student loan are far greater, since failure to pay can result in bankruptcy.

A fall in state funding for higher education in both the US and the UK has seen the cost for individuals soar in recent years

Were either bubble to burst, the fallout would look much the same: a mess of personal debt and stagnation in consumer spending. Like the role of housing in the run-up to the global financial crash, the value of a university degree may now be overinflated, but until the bubble bursts, it is hard to see why students would stop buying into it. To let the air out safely, change needs to come from employers and policymakers.

A fall in state funding for higher education in both countries has seen the cost for individuals soar in recent years. Subsidies for public colleges in the US have fallen by 26 percent since the early 1990s, while tuition fees have steadily climbed. The average annual fee for a public college in the US is now $9,700, while private Ivy League institutions command massive sums of almost $70,000. This is in a country where the median annual salary is $50,000.

Tuition fees of £1,000 ($1,290) were first introduced in the UK in 1998. By 2012, these had rocketed to the current level of £9,425 ($12,170). Nick Hillman, Director of the Higher Education Policy Institute, a UK-based think tank, said in an interview with World Finance that the rise in tuition fees was the main reason behind UK student loan debt reaching unprecedented levels: “That £100bn is going to keep growing for a very long time. It will only start coming down when you’ve got very, very many people in the labour market, in good jobs, paying their loans down quite fast. That won’t happen for 10, 15 years, if not longer.”

Across the pond, student loan debt in the US has shot up by over 170 percent in the past decade. This debt mountain is cultivated by a lending system that Business Editor of the Financial Times, Rana Foroohar, has compared to the subprime practices behind the global financial crash.

$1.3trn

Student loan debt, US 2017

$129bn

Student loan debt, UK 2017

$9,700

Average annual fee for US state colleges

$12,170

Average annual fee for UK universities

Certainly, there are parallels to be drawn between the subprime housing bubble and the current student loan system: both involve money easily lent to vulnerable borrowers to help them purchase a product that is rapidly increasing in price, but with questionable returns.

Fit to burst
The pile-up of personal student debt in both countries is starting to have tangible effects. In the US, where student loan debt is collected from graduates regardless of salary, default rates are now higher than pre-crisis levels. Worryingly, this is the only type of personal debt for which this is the case – the reigning in of lending practices for things like mortgages, credit cards and cars have kept default rates below 2008 levels.

In the UK, since loan repayment only occurs once the graduate’s salary reaches £21,000 ($27,000), students are insulated from the worst-case scenario of bankruptcy, as Hillman pointed out. He said: “No politician who has supported the big loans in the UK has ever argued every single penny of it should be paid back… If you never get a well-paid job, you never have to pay it back.”

However, the UK system still leaves young people exposed to very high levels of lifelong personal debt. The idea that if you don’t make a lot of money, you won’t pay the loan back is often repeated to 18-year-olds when they first seek a student loan. While this is technically true, it doesn’t capture the reality of repayments: unless a person earns under the income threshold for their entire working life (by no means a high income), loan repayments will leech their salary like an extra tax for up to 30 years. Student debt in aggregate is lower in the UK, but on an individual level, it outstrips the US, despite lower median earnings for graduates. Average debt per UK graduate is £32,220 ($41,600) in the UK – in the US, this figure is $34,000.

This debt has obvious personal consequences. Dampened salaries make saving for a deposit harder, so young people are stuck renting or living with parents for long periods of time. However, the ripple effects on the wider economy are perhaps more troubling: if young people aren’t buying houses, they are also not buying any of the items that fill a house, reducing consumer spending. For as long as salaries are weighed down by student loans, the spending power of an entire generation is diminished.

On top of this, it is hard to find a participant in the UK system who would act to moderate it. Student loans are provided to 18-year-olds who have no financial literacy, no credit history and no incentive to research the basics, such as interest rates or the length of repayment schedules. Usually the lender is the natural regulator, having an obvious incentive not to offer money it will not later recoup. However, in the UK, the power to bestow a student loan is very separate from the money backing it: money is lent by the government upon the offer of a place at any university. Universities then collect tuition fees, but do not have to recoup loan costs.

For as long as salaries are weighed down by student loans, the spending power of an entire generation is diminished

Easing the debt crisis
This current situation, with very large numbers of young people crippled by debt they are unlikely to repay, will prove a drain on the entire economy if unchecked. Clearly, the UK Government’s attempts to foist the cost of university back on to individuals aren’t sustainable. Since the cost of fees for the number of people who attend university today is too expensive to fund through taxes, the only clear way forward is to cut attendance rates.

However, whatever the potential risks of student loan debt, young people are unlikely to opt out of the system while the perceived personal benefits of a degree remain high. Hillman said: “Even in the depths of the recession, people with degrees were more likely to be earning more than people without a degree, so it is a pretty good insurance policy.”

Hillman suggested that a potential solution could be to improve transparency around funding: “I’m having a bit of a battle with universities at the minute, because I think they should tell their students more precisely where that £9,000 [$11,620] goes.” Certainly, better information would enable young people to make more informed choices about the value of their education, but fixing the system cannot be left to young people or universities alone.

A large part of the solution would be a shift in how degrees are treated by employers and wider society; more open-mindedness about qualifications aside from university degrees is needed. There are encouraging signs on this front from some firms traditionally viewed as graduate-only destinations, such as Penguin Books and EY, which have done away with the degree requirement. However, the ability to release some pressure from this inflated area of the economy without causing an unpleasant crash is contingent on others following their lead. If firms can tempt enough young people away from the student debt trap, the bubble will start to deflate – hopefully without bursting first.

Bankers of the Year 2017

Posted on by Helen

Africa
Segun Agbaje
Guaranty Trust Bank
Having studied accountancy at the University of San Francisco and business administration at Harvard Business School, Segun Agbaje went on to cut his teeth at Ernst & Young in California. He joined Guaranty Trust Bank in 1991 and swiftly rose through the ranks into management, becoming Executive Director in 2000 and Deputy Managing Director in 2002. Agbaje was appointed CEO in 2011, in recognition of his diverse knowledge and experience of all areas of the Nigerian banking industry, particularly commercial banking, investment banking, treasury, corporate planning and strategy, and settlements and operations. Guaranty Trust Bank has more than 10,000 employees and operates across Africa from its base in Lagos, Nigeria. Today, the bank is focused on driving financial inclusion in Nigeria through the digitalisation of its banking services.


Europe
Ralph Hamers
ING Financial Group
Though he began his career with ABN Amro in Canada, Ralph Hamers has been at ING for the vast majority of his time in the banking sector. He joined the company in 1991, first working in structured finance before working his way up to CEO of ING Netherlands, and then CEO of ING Belgium and Luxembourg. He most recently became CEO of ING Financial Group in 2013. A down-to-earth, practical leader with an MSc in Business Econometrics/Operations Research from Tilburg University, Hamers places great value in consumer trust in business. He is also a modernist, and in recent years has led ING to profitable growth in difficult markets thanks to a digital-first philosophy. ING is the Netherlands’ biggest bank by assets, with more than 42,000 employees and 40 countries of operation.


Middle East
Mohammad Nasr Abdeen
Union National Bank
As CEO of the only bank jointly owned by the governments of Dubai and Abu Dhabi, flexibility has become Mohammad Nasr Abdeen’s stock-in-trade. Under his stewardship, Union National Bank (UNB) has spread across the Middle East and as far as China, with the opening of its Shanghai branch in 2008 making it the first UAE bank to establish a presence in the Asian nation. Abdeen began his career at UNB in 1999, back when it was a standalone operation. The bank now comprises a network of more than 100 branches and employs around 1,800 people across the world. Abdeen’s conservative lending policy and careful approach to investment helped UNB to ride out both the 2008 financial crisis and last year’s oil price crash in the Middle East. Now the bank is on the rise, with Q1 2017 figures already having beaten analyst forecasts.


North America
William Downe
Bank of Montreal
After graduating with an MBA from the University of Toronto, William Downe joined the Bank of Montreal in 1983. Having quickly established himself as a key player within the group, Downe was appointed Vice Chairman in 1999 before being named CEO in 2007. Since the appointment, Downe has drawn plaudits for increasing the bank’s presence in the US, with the acquisition of Marshall & Ilsley in 2011 more than doubling the bank’s authority south of the Canadian border. Despite holding a variety of senior management positions throughout Canada and the US, Downe has still found time to engage in numerous charitable causes: he currently sits on the board of a number of charities, including acting as Chair for the St Michael’s Hospital Foundation. After more than a decade at the helm of the bank, Downe announced in April 2017 that he plans to retire in October.


Latin America
Carlos Hank González
Banorte
Born into a family synonymous with South American business, Carlos Hank González followed in his grandfather’s footsteps by becoming CEO and Chairman of Banorte in 2014. Harbouring great ambition from a young age, González specialised in finance while studying at the prestigious Universidad Iberoamericana in Mexico, before going on to hold a number of senior roles prior to joining Banorte at the age of 43. González has since helped to restore confidence in Mexico’s fourth largest bank by assets, bringing stability to Banorte’s operations after shares had tumbled 14 percent in the six months prior to his appointment. By ushering in a “new phase of collaboration between all the institution’s governing bodies and management”, González has greatly improved Banorte’s efficiency, something that was emphasised when the financial group registered a 24 percent profit increase in Q1 2017.


Asia
Pedro Cardoso
Banco Nacional Ultramarino
After obtaining an MBA from the Catholic University of Portugal, Pedro Cardoso began his journey up the management ladder at Banco Comercial Português, where he worked as Deputy General Manager of its New York branch. Having proven himself in the US banking sector, he returned to Europe, where he took his first executive role as CFO of Madrid’s Banco Caixa Geral. In 2008, he was nominated as a board member of Caixa Geral de Depósitos, the largest Portuguese banking group, before he was appointed CEO of Macau-based Banco Nacional Ultramarino (BNU) in 2011. He also became President of the Macau European Chamber of Commerce in 2015, where he used his almost 30 years of banking experience to strengthen ties between Europe and the Far East. Proficient in five languages including Mandarin, today Cardoso is working to extend BNU’s reach beyond Macau to mainland China.


Australasia
Shayne Elliott
ANZ Group
Though he spent his formative years studying in New Zealand, Shayne Elliott’s expansive knowledge of the finance industry has come from a truly international career. Beginning his livelihood on the derivatives trading desk at Citigroup, Elliott gained his experience while working in the UK, US, Australia, Hong Kong and the Middle East. Renowned for his numerical aptitude, Elliott became Citigroup’s Head of Australia aged just 38, before becoming Chief Executive of Asia-Pacific Operations in 2003. Elliott ended his 20-year association with Citigroup two years later, moving to the Middle East with EFG Hermes before joining ANZ in 2009. Now CEO of the group, Elliott has successfully consolidated ANZ’s position as a ‘super regional bank’, shifting the group’s focus towards generating returns after years of spending and growth.

Investment Management Awards 2017

Posted on by Helen

As shocking as the 2008 global financial crisis was, what was perhaps as unexpected was just how long the economic recovery would take. Almost a decade on, and post-crisis recovery still continues, restricting growth in countries around the globe and prolonging the pressure applied on numerous markets and industries.
While this state of affairs continues in 2017, we are seeing growth broadening out in more economies, prompting the global economy to draw on greater strength than it has done for years.

This is therefore a key year for investments, with the investment management market undergoing a transition of sorts. Key trends earmarked by Goldman Sachs include the rising tide of anti-globalisation sentiment, climbing inflation rates and a general shift towards fiscal spending on both sides of the Atlantic.

Navigating this transitioning landscape is no small feat for investment management groups, yet there are those that do so with apparent ease. In recognition, the World Finance Investment Management Awards name and celebrate the very best the industry has to offer. The awards look in particular to those firms that have shown fortitude over the past year when it comes to shifting economic conditions and stagnant growth. Our winners have proven themselves agile by combatting a climate that is constantly changing. In doing so, they offer their clients a sense of stability, even in spite of such rough waters.

The current transition towards fiscal spending can be attributed to a backlash after years of austerity measures

The globalisation backlash
For decades, globalisation has pushed forward, driving growth and commanding adherence from economies both large and small. Those who shrank away from economic integration did so at their own peril. Those who embraced it wholeheartedly, on the other hand, witnessed phenomenal growth and a leap forward in their economic development. Just look at China.

Globalisation has made this vast world a much smaller place; it has made trade between even the furthest corners of the Earth easier than humankind has ever known. Rapid advancements in transportation, logistics and technology during the 19th and 20th centuries helped this trend, enabling nations to hone in on the industries and services in which they excelled. Prosperity spread, while both companies and individuals were afforded a whole new world of opportunities.

But despite the benefits brought forth by a once exponential increase in the flow of goods and people across borders and seas, the heyday of globalisation seems to be coming to an end. This change in sentiment can be attributed to the slow, drawn out economic recovery that has prevailed since the global financial crisis. With mass unemployment and a resurgence of inequality, populist parties around the world are now gaining traction with their disheartened and desperate audiences. This discontent can also explain the shock election of politically inexperienced and inordinately crass reality television star Donald Trump as the 45th President of the United States.

A growing inclination towards protectionism can also be seen elsewhere, particularly in Europe (as shown by Brexit and the popularity of France’s Marine Le Pen). An unfortunate consequence has been the emergence of protectionist trade policies, something those in the investment management industry are certainly keeping a close eye on.

Great expectations
Fortunately, the gloomy forecasts that resulted from low levels of inflation and disappointing nominal growth have finally been replaced by better expectations. This long-awaited shift is expected to continue throughout 2017. As stated in the Goldman Sachs 2017 Investment Outlook: “We expect concerns around potential secular stagnation to give way to a more inflationary paradigm in the US.”

The US is now also experiencing declining unemployment which, together with a decline in job vacancies, has resulted in climbing wages. This tightening of the labour market, along with the potential for an inflationary fiscal outlook, has helped price and inflation expectations rise from former lows. According to the report: “Modestly higher inflation driven by an improving global growth outlook should be beneficial for assets, but unanchored expectations or a central bank response that is too aggressive could cause upsets.”

Broadly speaking, experts predict this inflationary environment will be positive for equities, though not all markets and organisations will experience the same benefits. While rising wages help to prop up demand, which in turn bolsters revenue, some companies may not be able to bear the brunt of rising costs, particularly if they cannot be passed on to the customer
due to market competition.

Moreover, an inflationary landscape could also be damaging for government bonds. “We think in the US there is a risk of a sudden re-pricing in rates markets. This implies that bonds could become a source of volatility in other markets, such as credit. If rates move higher, we will closely watch their correlation to risk assets”, according to Goldman Sachs.

From one extreme to another
Also apparent in 2017 is a growing divergence of monetary policy across the Atlantic and Pacific Oceans. The US, for example, already raised interest rates in March to one percent, and is expected to do so at least once more in 2017. However, both the European Central Bank and the Bank of Japan are expected to continue with easing policies, stretching them even closer to their limits. As stagnating growth continues to persevere around the globe, a shift in stimulus strategy will take place, which will see a greater inclination towards fiscal spending. This transition can be attributed to a backlash after years of austerity measures, together with a better understanding of the necessity of infrastructure development.

“This transition is important to watch, as it could provide a better policy mix to support growth and corporate earnings, or it could drive debt and inflation sharply higher and spark more volatility in developed or emerging market assets”, the report noted.

Perhaps even more significant is the potential impact of deregulation on markets and economic growth. The promises Trump made with regards to regulatory changes focus on improving access to capital, as well as improving the ease of business formation. Over in Europe, the business case for Brexit was driven by what was seen by many as excessive regulation within the EU, against which financial institutions across the region are now beginning to push back. China, on the other hand, seems to be creating a well balanced combination of stimulus and regulation, which is successfully driving structural reform, all the while maintaining growth. Consequently, investment managers will continue to look out for regulatory divergence across the globe, as well as the possibility of competitive deregulation.

As investment management firms continue to weave their way through this changing landscape, naturally there will be those that are simply unable to keep up. Industry players have long been required to keep a vigilant ear to the ground, but it would seem that in 2017 – and for the foreseeable future – expectations are higher than ever. As such, investment managers must have the foresight and forward-thinking approach needed to tackle today’s challenges and come out as winners on the other side.

The World Finance Investment Management Awards offer a keen insight into the investment management firms that have managed to maintain their success, even as the industry transforms around them. Our awards panel scoured the industry from one corner of the globe to the next, while also responding to feedback from our readership, in order to offer a truly global view of the brightest names in investment management today.

 

World Finance Investment Management Awards 2017

Argentina
Puente

Armenia
Capital Asset Management

Australia
AMP Capital

Austria
Kepler

Bahrain
SICO BSC (c)

Belgium – Equities
Degroof Petercam

Belgium – Fixed Income
Candriam Investors Group

Brazil
HSBC Global Asset Management

Bulgaria
TBI Asset Management

Canada – Equities
EdgePoint Wealth Management

Canada – Fixed Income
Optimum Asset Management

Caribbean
Santander Puerto Rico

Chile – Equities
BCI Asset Management

Chile – Fixed Income
BCI Asset Management

China
China Universal Asset Management

Colombia
BBVA Asset Management

Croatia
ZB Invest

Cyprus
Byron Capital Partners

Czech Republic
Conseq Investment Management

Denmark
Danske Capital

Egypt
CI Capital Asset Management

Finland
LocalTapiola

France
Natixis Asset Management

Germany – Equities
Allianz

Germany – Fixed Income
Helaba Invest

Greece
NBG Asset Management

Hong Kong
BMO Global Asset Management

Hungary
OTP Investment Fund Management

Iceland – Equities
Kvika Banki

Iceland – Fixed Income
Stefnir Asset Management

India
Birla Sun Life Asset Management Company

Indonesia
BNP Paribas Investment Partners

Iran
Turquoise Partners

Ireland
Irish Life Investment Managers

Italy – Equities
Mediolanum Gestione Fondi

Italy – Fixed Income
Generali Investments

Jordan
First Investment Group

Kazakhstan
RESMI Finance & Investment House

Kenya
Old Mutual Kenya

Korea
Korea Investment Management

Kuwait
KAMCO

Lebanon
Blominvest Bank

Liechtenstein
VP Fund Solutions

Luxembourg – Equities Value
Invest Asset Management

Luxembourg – Fixed Income
BCEE Asset Management

Malaysia
AmInvest

Malta
HSBC Global Asset Management

Mauritius
MCB Investment Management

Mexico – Equities
Citibanamex

Mexico – Fixed Income
SURA Asset Management

Netherlands
ING Investment Management

New Zealand
NZAM

Nigeria
FBN Capital

Norway
Skagen Funds

Oman
Bank Muscat Asset Management

Pakistan – Equities
JS Investments

Pakistan – Fixed Income
Al Meezan Investment Management

Paraguay
Puente

Peru
BBVA

Philippines
BDO Unibank

Portugal
Sociedade Gestora dos Fundos de Pensoes

Qatar
QNB Asset Management

Saudi Arabia – Equities
NCB Capital

Saudi Arabia – Fixed Income
JADWA

Singapore
Lion Global Investors

Slovakia
IAD Investments

Slovenia
KD Funds

South Africa
Argon Asset Management

Spain
Santander Asset Management

Sri Lanka
NDB Wealth Management

Sweden
AXA Investment Management

Switzerland
Swisscanto Invest by Zürcher Kantonalbank

Taiwan
Cathay Securities Corporation

Thailand
UOB Asset Management

Turkey
Garanti Asset Management

UAE
Emirates NBD Asset Management

UK
Santander Asset Management UK

Uruguay
Puente

US – Equities
BlackRock

US – Fixed Income
State Street Global Advisors

Vietnam
BIDV Securities

South Africa’s spat over central bank mandate reaches the high court

Posted on by Helen

The South African Reserve Bank has fought back against a proposed mandate change, which would see its primary focus change from that of price stability to a focus on the “socioeconomic wellbeing of the citizens”.

Public Protector Busisiwe Mkhwebane instructed parliament to make the changes during a press conference on June 19. Following this conference, the value of the South African rand dipped sharply, falling 2.05 percent against the dollar.

Mkhwebane’s proposal came against a backdrop of political uncertainty in South Africa, with President Jacob Zuma pledging “radical economic transformation” amid an upcoming leadership battle.

The South African Reserve Bank argued the move consisted of “gross overreach” in the public protector’s institutional power

In response to the proposed change in its mandate, the South African Reserve Bank has filed a complaint to the high court, arguing that the move consisted of “gross overreach” in the public protector’s institutional power. In the court filings, Governor of the South African Reserve Bank Lesetja Kganyago stated: “In the impugned remedial action, the public protector instructs parliament to amend the constitution to strip the Reserve Bank of its primary function – to protect the value of the currency. The public protector has no power to amend the constitution, let alone to instruct parliament to do so.”

He called for the proposed mandate change to be stopped in its tracks, saying that from the moment it was announced, “it has had a serious and detrimental effect on the economy and, for as long as it remains in place, it holds the risk of causing further rand depreciation, further ratings downgrades and significant capital outflows”.

If the mandate changes go ahead, the South African Government would be moving against a global consensus regarding the role of central banks in upholding economic stability. In the court filings, Kganyago fought the case for protecting the current mandate and its focus on prioritising price stability by saying that, if implemented, the proposed change would strip the Reserve Bank of the core function of other central banks.

He added that the move “threatens to undermine the critical contribution that the Reserve Bank makes to the stability of our financial system, which is central to sustainable growth and development, job creation, the reduction of inequality and poverty alleviation”.

Any change to the constitution, however, would be a slow process. According to the court papers, arguments that oppose the suggested changes must be filed before July 26. Furthermore, even in the event of the high court application being unsuccessful, a two-thirds majority in parliament would be necessary to make the proposed changes.

Italy sets aside €17bn for double bank bailout

Posted on by Helen

On June 25, the Italian Government agreed to provide up to €17bn ($19bn) in state aid in order to protect the country’s financial sector from the disorderly collapse of two failing regional banks, Veneto Banca and Banca Popolare di Vicenza (BPVI).

The move was made shortly after the European Central Bank declared on June 23 that the two banks were either failing or likely to fail. The government has laid out measures that will help shoulder the burden of the two lenders’ soured loans, while enabling large parts of the banks’ activities to be sold to Intesa Sanpaolo banking group. Intesa has paid a symbolic one euro ($1.12) for taking on the good assets of the two banks.

The Italian banking sector currently accounts for around a third of the eurozone’s bad debt

In an emergency cabinet meeting on June 25, a decree was agreed that will grant an initial cash injection of €4.79bn ($5.4bn) to cover liquidation costs. On top of this, authorities set aside an additional €12bn ($13.4bn) that can be called upon by Intesa during the liquidation process.

The European Commission found the decision to be fully in line with competition law, stating: “Both aid recipients, BPVI and Banca Veneto, will be wound up in an orderly fashion and exit the market, while the transferred activities will be restructured and significantly downsized by Intesa which, in combination, will limit distortions of competition arising from the aid.”

The bailout comes at a time when the Italian Government is facing wider criticism for its willingness to resort to state aid in order to prop up its debt-ridden banking sector. The Italian banking sector currently accounts for around a third of the eurozone’s bad debt.

Authorities have already wound down several small lenders, as well as taking on the recapitalisation of the country’s third-largest bank, Monte dei Paschi di Siena. Minister of Economy and Finance of Italy, Pier Carlo Padoan, said in a press conference: “Those who criticise us should say what a better alternative would have been. I can’t see it.”

Italian Prime Minister Paolo Gentiloni said the intervention was “important, urgent and necessary”, and would protect savers, as well as the health of the Italian banking system.

EU citizens to stay in the UK after Brexit

Posted on by Helen

British Prime Minister Theresa May has outlined plans to guarantee the future rights of three million EU citizens living in the UK, confirming they will be able to remain in the country after the Brexit process is complete.

The proposed deal would grant a new ‘settled’ status to EU migrants who have lived in the UK for more than five years, and would guarantee them the same access to healthcare, pensions and education as British nationals. The proposals are dependent on EU states guaranteeing the same rights to the 1.2 million British citizens living in 27 different EU countries.

The proposed deal would guarantee EU nationals the same access to healthcare, pensions and education as British nationals

Addressing her fellow EU leaders, Theresa May said she wants EU migrants to feel secure and safe as Brexit talks progress: “The UK’s position represents a fair and serious offer, and one aimed at giving as much certainty as possible to citizens who have settled in the UK, building careers and lives and contributing so much to our society.”

The Prime Minister unveiled the proposals at a Brussels summit, where she met with European leaders for the first time following her ill-fated snap election.

Angela Merkel, the German Chancellor, described the offer as “a good start” to the Brexit negotiations, but confirmed that the UK’s departure from the bloc would be a complex and lengthy affair. She said: “There are still many other questions linked to the exit, including on finances and the relationship with Ireland.”

The EU negotiating team will now officially review the UK’s offer, deciding whether to accept the deal and reciprocate its terms.

In addition to these proposals, May also told EU leaders that the UK would scrap the contentious 85-page form it currently requires EU migrants to complete when applying for residency, thereby streamlining the application process.

While these initial offers appear to have gone down well with EU leaders, the Prime Minister could be on something of a collision course with her European counterparts over her demands for the UK’s courts. Brussels has routinely insisted that EU citizens in the UK must be able to go to the European Court of Justice when they have a complaint regarding their rights, but May insists it should be the UK’s own courts that have the final decision in such matters.

The Brussels summit began just one day after a Brexit-heavy Queen’s Speech was delivered to the UK Parliament. With Brexit negotiations now officially underway, the UK has until 30 March 2019 to finalise its exit process.

Olympic Games find new sponsor

Posted on by Helen

Chipmaker Intel has stepped in to fill the role of McDonald’s as a global sponsor of the Olympic Games. The new deal signed between Intel and the International Olympic Committee (IOC) will cover the next four Olympic Games, and will focus on bringing the company’s technological expertise to the international event.

The deal will see Intel incorporate a range of new technologies into the Olympic Games, Bloomberg reports, such as virtual reality, artificial intelligence and drones. These will be used to enhance both the event itself and its presentation.

The change in sponsorship comes at a challenging time for the IOC as it struggles with declining viewership

Thomas Back, President of the IOC, welcomed the deal during a presentation in New York: “There are many young people that are living a digital life, so we have to go where they are in the digital world, in their virtual reality.”

The Intel deal fills a hole left by McDonald’s, which last week ended its partnership with the Olympics after 41 years. McDonald’s was due to continue its sponsorship until 2020, but the deal was ended early after an undisclosed arrangement was made.

The change in sponsorship comes at a challenging time for the IOC as it struggles with declining viewership and a lack of enthusiasm from cities willing to host the games. US broadcaster NBC called the Rio Olympics a media success, although viewership numbers were down on the previous year. The only two cities left in the race to host the 2024 Olympic Games are Paris and Los Angeles, after a number of other destinations dropped out citing cost concerns.

According to the Financial Times, an IOC working committee recommended last week that Paris and Los Angeles should each be awarded the 2024 and 2028 games in a simultaneous vote in order to lock down two strong hosts as early as possible.

Over the past two years, US-based Olympic sponsors Budweiser, Citi, Hilton and AT&T have also ended their sponsorship agreements. However, in a boost for the IOC, this year has seen Alibaba agree to a sponsorship deal that will run through to 2028.

A fossil-free future for Saudi Arabia

Posted on by Helen

The end is nigh for oil, and while countries and businesses worldwide will undoubtedly struggle to adjust to a fossil-fuel-free future, the transition is set to be particularly painful for the world’s biggest producer of black gold. Oil is the foundation of the vast wealth possessed by the Kingdom of Saudi Arabia, and as resources deplete, the economy threatens to deteriorate and bring social stability down with it.

Add to this the stark consequences of fossil-fuel-driven temperature increases and, for a country that already endures one of the world’s hottest climates, the ugly side of Saudi Arabia’s relationship with oil becomes clear.

Saudi Arabia must therefore divest from oil, and fast. Ruling King Salman’s recent decision to appoint his son Mohammed bin Salman as heir – sidestepping his nephew Crown Prince Mohammed bin Nayef in the process – underlines the urgency of this task. Mohammed bin Salman had previously been charged with negotiating Saudi Arabia’s divorce from oil; his new role as successor bequeaths him unprecedented power to accelerate this task.

Depleting supplies
It is now widely accepted that the carbon emitted when fossil fuels are burned causes global temperatures to rise. The sad irony of this is that some of the most severe effects of hotter climates will be felt in the Middle Eastern countries, many of which contribute most heavily to oil production in the first place.

Saudi Arabia has around 70 more years of oil left to export. That’s one generation-worth on an optimistic estimate

In an interview with World Finance, Dr Mohamed Raouf, a senior researcher at the Gulf Research Centre, explained how Saudi Arabia in particular faces grave challenges due to the effects of climate change, such as “desertification, biodiversity loss, water scarcity and sea level rise, and extreme heat waves throughout the country”.

Nonetheless, even if fossil fuels had zero effect on the environment, supplies are still running out. It takes the planet millions of years to compress animal remains and plant debris into energy-dense oil; this is clearly much slower than the rate at which humans consume it. To this effect, economies around the world do not have a choice over the extent to which they will rely on oil in future – it simply won’t be there to rely on.

In Saudi Arabia, official government figures reported in OPEC’s 2016 Annual Statistical Bulletin state the country has proven oil reserves of 266 billion barrels. This figure has remained generally constant since the 1980s, despite the country exporting large quantities of oil throughout this period. However, assuming the reported proven rate is accurate and the supply rate remains at its current level of 10.2 million barrels a day, Saudi Arabia has around 70 more years of oil left to export. That’s one generation-worth on an optimistic estimate.

New sources of energy
As a hugely wealthy country whose citizens are accustomed to high living standards, Saudi Arabia is very attuned to the need to diversify its economy. Crown Prince Mohammed bin Salman’s radical change in direction for the kingdom’s Public Investment Fund (PIF), one of the world’s largest sovereign wealth reserves, is central to this.

Reconfiguring the economy so that Saudi Arabia can support itself without relying on oil exports is crucial to the country’s survival. Raouf explained: “The Kingdom of Saudi Arabia will face a progressively uncertain future if it doesn’t manage to diversify its economy.”

The real danger for Saudi Arabia’s economy may not take place for several years but, as Raouf pointed out, it is palpable even in the medium term: the Paris Agreement, according to Raouf, “incentivises increasingly ambitious climate targets, and while history tells us the progress of international climate negotiations is slow, there is a pretty good chance the shift [away from oil] may happen within 15 years”.

An apparent shift in global sentiment suggests he may be right. President Donald Trump’s decision to pull the US from the Paris Agreement was, in the context of the world’s historic treatment of climate change, not particularly surprising: short-termism over the cost of not implementing climate solutions, compared with the cost of making decisions that are unpopular with voters, has seen many governments miss emissions targets and push forward deadlines for change. What was surprising, however, was the resolve of other signatories to uphold the agreement despite Trump’s decision. This may be the moment noted in history as when the tides turned on governments’ responses to climate change.

Meanwhile, the welfare state that is currently the backbone of Saudi Arabia is “not sustainable at all if the country continues to depend heavily on oil industry and exports”, according to Raouf.

Without question, Saudi Arabia has no choice but to move away from oil in order to preserve its wealth. However, Raouf stressed that the country is choosing to focus investment on creating a socially, as well as financially, rich future: “Diversification also aims for economic and social benefits like job creation, a greener economy and sustaining the same high quality of life which is key for the country’s stability.”

Reconfiguring the economy so that Saudi Arabia can support itself without relying on oil exports is crucial to the country’s survival

A changing environment
The link between fossil fuels and global warming has been publicised since the 1950s, but only very recently have governments begun to take the threat of a warming planet seriously. The historically unenthusiastic policy response to global warming is understandable: in the same way that people in their 20s find it difficult to put money aside for a very disconnected 70-year-old self’s pension, the hotter, wetter and more chaotic world that fossil fuels will create has long seemed part of a very distant, sci-fi future.

However, this is no longer the case. Extreme weather events are increasingly common, sea levels are noticeably rising, and the effects of food shortages and unliveable climates no longer loom four generations in the future, but rather one or two.

Much of the Middle East is already so hot it is barely habitable; several degrees temperature increase is a big difference in a desert. A 2015 paper written by MIT climate change scientists and published in Nature magazine found that rising levels of humidity are expected to make huge swathes of the Gulf region, including Saudi Arabia, uninhabitable by the end of the century.

One of the most troubling features of environmental change for Saudi Arabia concerns the scarcity of another precious fluid: water. Raouf pointed out that the country is not prepared for an impending shortage: “There are some things to try, such as changes to infrastructure, and potentially a mix of fines and incentives to ration consumption, but the whole solution is not clear.”

In evidence of social stability’s vulnerability to climate change, droughts, food shortages and increased competition for land have already resulted in dramatic political upheaval in the Middle East. It is clear that, if unaccounted for, the worsening natural climate will create as many social problems as the changing economic one.

An oil pipeline in Saudi Arabia
An oil pipeline in Saudi Arabia

Shifting investments
One solution that Saudi Arabia is pursuing to counteract the decreasing value of oil and to step back from the country’s continued reliance on the commodity is through the PIF. The government seeks to grow the PIF into the world’s largest sovereign wealth fund and use it as a vessel to finance the country’s future, by backing foreign construction projects and technology start-ups with potentially sizeable profits.

In November last year, the Saudi Press Agency announced a $27bn transfer from official reserves to the PIF, which boosted the fund’s wealth by about 17 percent. In a further sign of the country’s departure from oil reliance, the kingdom hopes to provide additional capital through money raised from a planned IPO listing of the state-owned Saudi Aramco. An expected $100bn earned from a five percent stake sale of the company will be funnelled straight into the PIF.

A large part of the fund’s focus will be on foreign investments, notably those in the US. This will mark a significant shift from how the PIF has previously operated – mostly as a tool to finance Saudi Arabian infrastructure projects. Currently, just five percent of the fund is dedicated to foreign business investment, in the next few years this is set to increase tenfold, with 50 percent allocated to foreign spending by 2020.

US tech companies stand to benefit from the new direction of the fund’s investment. Some of this will take place directly, such as the $3.5bn stake in Uber that the PIF secured last year. However, some of it will be through a venture capital fund called the Vision Fund.

The brainchild of SoftBank CEO Masayoshi Son, the Vision Fund was founded with the aim to raise $100bn investment capital and become the world’s largest venture capital fund. It is well on track to do so, and with a $45bn pledged investment, Saudi Arabia is the largest single investor. Using an investment team with substantial knowledge of scientific developments, the Vision Fund seeks to back companies advancing disruptive technologies to maximise investment profit. If it is successful, there will be a certain circularity in seeing Saudi Arabia’s lifeblood transform from the dying fuel of the last Industrial Revolution to the shiny new innovations powering the next one.

In May this year, Son announced that SoftBank would pledge 50 percent of its $100bn capital to fund US tech start-ups, making Saudi Arabia by proxy one of the largest investors in the US tech scene. Another boost to US industry came with the PIF’s decision to place $20bn with US asset management firm Blackstone. This makes Saudi Arabia the anchor in a $40bn infrastructure fund that will focus on upgrading US assets, in a significant boost to American manufacturing.

At the time of the Blackstone investment, Crown Prince Mohammad bin Salman said PIF backing “reflects optimistic views around the ambitious infrastructure projects being undertaken in the US”. This illuminates the new road Saudi Arabia’s diversification plans are taking, since previously money was mostly reserved for projects within the kingdom itself. Raouf highlighted that internationally focused investment is part of “the Kingdom of Saudi Arabia’s aims to be a key player in global politics and the economy, in line with economic diversification, by 2030”.

Oil is so deeply embedded in Saudi Arabia’s economy that there will be no clean split from dirty fossil fuels. However, these ambitious investments – particularly those within the technology sector – are an encouraging sign that the country is preparing for the road to a new, green world.

Trump administration reaffirms commitment to push through tax reform

Posted on by Helen

In a speech to US manufacturers released on June 20, US House Speaker Paul Ryan asserted that Congress and the Trump administration are moving “full speed ahead” to deliver fundamental tax reforms. These reforms, promised during the Republican presidential campaign, are due to be enforced by the end of 2017.

Plans to cut tax rates for individuals, small businesses and US corporations while investing heavily in infrastructure to boost jobs and spending were the cornerstones of US President Donald Trump’s 2016 presidential bid.

Some promises made on the campaign trail have proved contentious with voters, business leaders, or both

Pledging the biggest overhaul to taxes since the Reagan era, Trump’s campaign revolved around reinstating economic prosperity for ‘left behind’ Americans. Some of his promises were uncontroversial: for example, measures to simplify the US’ proliferous tax code by reducing the number of individual tax brackets from a confusing seven to a more manageable three were welcomed by many.

However, some promises made on the campaign trail – and in the months since winning – have proved contentious with voters, business leaders, or both. These include raising tax rates, cutting corporation tax from 35 percent to 15 percent, and taxing American companies on profits earned through products sold in the US, but made abroad.

Republicans are under increasing pressure to make progress towards passing tax reforms in order to maintain their majority of the House of Representatives and the Senate in upcoming 2018 midterm elections. However, the party has struggled with infighting on other key Trump promises, such as the abolishment of Obamacare, suggesting that, despite the Republican majority, passing Trump’s tax reform will prove difficult.

With the hopes of unveiling the legislation by September, Ryan has been working with Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin and Chief Economic Advisor Gary Cohn to try and come to an agreement over the proposed tax reforms.

Ryan did not set out exactly which reforms he is determined to see implemented in his speech to US manufacturers, but he did assert that this is a key priority: “We are going to get this done in 2017… We cannot let this once-in-a-generation moment slip.”

Barclays charged with fraud over crisis-era Qatari fundraising

Posted on by Helen

The UK’s Serious Fraud Office has charged Barclays, its former CEO and three other former senior executives with fraud over deals made with Qatar during the peak of the financial crisis. The charges mark the culmination of an extensive five-year investigation by the Serious Fraud Office, and will be the first time any senior British bankers have faced criminal charges over crisis-era misconduct.

Former Chief Executive John Varley will appear before Westminster Magistrates’ Court on July 3, along with Roger Jenkins, Thomas Kalaris and Richard Boath, all of whom previously held senior positions at the bank.

The charges against Barclays mark the first time any senior British bankers have faced criminal charges over crisis-era misconduct

The charges relate to a series of commercial agreements struck between Barclays and Qatari investors during 2008, when the global financial crisis was at its peak. In total, Qatari investors provided £6.1bn ($7.75bn) to Barclays during two rounds of fundraising in June and October of 2008.

This multibillion-pound investment ultimately allowed the bank to avoid resorting to a taxpayer bailout in the wake of the financial crash. While rivals Lloyds Banking Group and the Royal Bank of Scotland were forced to turn to government bailouts, Barclays was kept afloat by these vast emergency funds.

In November 2008, a month after the second round of funds was negotiated, Barclays agreed to provide a $3bn loan facility to the state of Qatar. According to UK regulators, this loan was only partially disclosed to the market at the time. As such, in August 2012 the Serious Fraud Office launched an investigation into whether the bank was properly disclosing fees it paid to the Gulf state, and whether it had loaned the nation money in order for the funds to be reinvested into the bank.

In a statement released on June 20, Barclays said it is “considering its position” in light of these developments, and that it is awaiting further details of the case. The bank has faced a number of probes by worldwide regulators in the years following the 2008 financial crisis, but the charges levied by the Serious Fraud Office are by far Barclays’ most serious indictments to date.

By charging one of the world’s biggest banks, the Serious Fraud Office is setting a new precedent and is sending a strong message that it will be aggressively pursuing convictions for large-scale financial misconduct.

Japanese exports surge in May

Posted on by Helen

Japan has continued its modest economic recovery, with surging exports of cars and steel prompting a 14.9 percent annual increase in exports for May. While this figure was below analysts’ expectations, it nonetheless shows potential for Japan to continue its gradual economic recovery.

As reported by Reuters, the 14.9 percent rise announced on June 19 was below analysts’ expectations of 16.1 percent, but was the biggest increase since January 2015.

The IMF has urged Japan to push through broader structural reforms to boost wages and increase productivity

The growth has been attributed to the increasing strength of the global economy and a competitive yen. Analysts also noted the growth in car and steel exports was specifically due to an earthquake in May last year, which temporarily shut down production.

Japan’s imports also posted an increase of 17.8 percent, well above estimates, thanks to increasing local demand for chemicals, electronic parts and raw materials.

While the figures bode well for Japan, further work is needed if the economy’s gradual recovery is to continue. The IMF has urged Japan to capitalise on these figures and push through broader structural reforms to boost wages and increase productivity, according to the Nikkei Asian Review. Part of the challenge Japan has been facing is an ageing demographic and, subsequently, a shortage of younger workers.

Upon the release of the IMF’s annual review of Japan’s economy on June 19, First Deputy Managing Director of the IMF David Lipton advocated for greater support for female, older and foreign workers, as well as more equitable wages. “Closing gaps between regular and non-regular workers, increasing mobility across firms, and ‘equal pay for equal work’ are key to boosting overall wages”, he said at a press conference following the release of the review. The organisation also encouraged Japan to continue its current stimulus policies.

Earlier in June, Japan announced that annualised GDP growth was one percent for the first quarter. Though down from an earlier estimate of 2.2 percent, this annualised growth still underlines a slow, positive increase, Reuters reported.

China scales back restrictions on foreign investment in free-trade zones

Posted on by Helen

On June 16, China announced it had removed 27 restrictions on foreign investment in a newly issued negative list for its free-trade zones. The move is an attempt to attract further outside investment to the country by creating a more appealing trading environment.

China has a total of 11 free-trade zones, which enjoy looser trade and financial regulation than the country as a whole. However, the negative list previously specified designated areas within these zones that were off-limits to foreign investment. This list existed to reduce competition from foreign rivals for local state-backed firms, as free trade zones are more attractive to foreign investors seeking access to Chinese markets than the rest of the heavily regulated country.

China is potentially an extremely lucrative market for foreign investors, but restrictive legislation dampens outside interest

The announcement that restrictions have been removed in the latest negative list signals the country’s recent resolve to participate more actively in the global trading environment and make itself a more attractive prospect for foreign investment. As the world’s second-largest economy, China is potentially an extremely lucrative market for foreign investors, but restrictive legislation and a lack of transparency dampen outside interest.

One industry in which foreign companies will benefit from the scale back is manufacturing. Makers of rail transportation equipment and civilian satellites are two particular examples, as these companies will now no longer be forced to enter a joint venture with a Chinese partner or sign over a majority stake to a Chinese firm in order to operate in a free-trade zone.

Rules on financial services that had previously prevented foreign companies from underwriting government bonds have also been relaxed.

China has a considerable incentive to open itself up to greater financing from the rest of the world. The country struggles with a growing debt overhang – an issue that caused Moody’s to downgrade its credit rating last month. Moody’s warned that China’s debt mountain would rise to unmanageable levels if maintaining ambitious growth targets continued to be prioritised over deficit reduction.

The government’s determination to maintain historic growth rates – a fixation that dates from a period when its cheap exports industry was far more dominant than it is today – is currently financed by high levels of government investment and borrowing. As a result, debt shows no signs of shrinking.

Eurozone ministers approve further debt relief for Greece

Posted on by Helen

On June 15, Greece avoided another bankruptcy blow after striking a deal with its European creditors to secure billions of euros in renewed financial aid. Eurozone finance ministers have agreed to disburse €8.5bn ($9.5bn) of bailout funds to the nation in an attempt to help bolster Athens’ economic recovery.

This fresh injection of funds will essentially remove the risk of Greece defaulting on its €7bn ($7.8bn) in debt repayments, which are due to be paid next month. The deal follows months of uncertainty over the nation’s financial future, with the EU and the IMF often clashing over how to reduce Greece’s substantial debt pile. The IMF has repeatedly called on Germany and other major eurozone economies to offer Greece increased debt relief, and has demanded greater clarity when it comes to the long-term solution for the country.

Greece has been bailed out on three separate occasions since 2010, with Germany emerging as the main contributor to the nation’s debt relief funds

Now, with both parties reaching a compromise, the IMF is set to formally join the ongoing debt relief programme. However, despite this commitment, the IMF will pledge no more than €2bn ($2.2bn) in financial support, as it requires the eurozone to cover the rest of the bailout programme costs.

“Overall, I think this is a major step forward”, said Jeroen Dijsselbloem, the Dutch Minister of Finance, who chaired the meeting between the parties. “We are now going into the last year of the financial support programme for Greece. We will prepare an exit strategy for going forward to enable Greece to stand on its own feet again over the course of next year.”

Over the course of the discussions, eurozone ministers also agreed that Greece could receive further help to make its debt pile more sustainable, with creditors raising the possibility of extending repayments by 15 years and linking them to growth rates. While Greek Prime Minister Alexis Tsipras might have been hoping for debt forgiveness, the outcome has been broadly welcomed in Athens, with Finance Minister Euclid Tsakalotos telling reporters: “There is now light at the end of the tunnel.”

Greece has been bailed out on three separate occasions since 2010, with Germany emerging as the main contributor to the nation’s debt relief funds. However, Germany had threatened to pull out of further disbursements if the IMF refused to contribute, causing profound disagreements between the EU and the fund. Agreed under mounting time pressure, the new deal comes as a great relief to the cash-strapped nation, which had previously been warned that without additional help, its debts could spiral to 250 percent of GDP by 2050.

Airbus appoints independent review panel

Posted on by Helen

French aircraft giant Airbus has appointed an independent review panel as part of an initiative to overhaul company compliance procedures. The move comes in the face of fraud and bribery allegations launched in the UK and France last year concerning flaws in Airbus’ previous applications for export credits.

Last August, the UK’s Serious Fraud Office (SFO) launched a criminal investigation regarding irregularities found in requests by the aircraft manufacturer for export credit support on its commercial jets.

Airbus faces a further suit in Austria over alleged fraudulent activity in a $2.3bn order of Eurofighter jets

This followed a decision in April by the UK Export Finance agency to freeze all applications from Airbus after the company notified it of omissions and misstatements in its past declarations on the use of third-party consultants. The agency referred its findings to the SFO, which decided to investigate the matter further.

In a statement released at the time the investigation was announced, Airbus asserted it had reported the suspicious activity to the UK Export Finance agency itself, and it was cooperating fully with the SFO’s investigation.

Germany and France joined the UK in halting export credits. France has also since announced a similar investigation, and authorities from the two countries have said they will cooperate for their inquiries. Airbus faces a further suit in Austria over alleged fraudulent activity in a €2bn ($2.3bn) order of Eurofighter jets. Vienna’s public prosecutor is also looking into Airbus’ defence and space arm.

The independent review panel, which includes former German Finance Minister Theo Waigel and former French European Affairs Minister Noelle Lenoir, will have full access to the company’s records and will be expected to take a “hard look” at procedures and culture, according to a statement by Airbus CEO Tom Enders.

Reuters reported the decision to bring in external monitors may strengthen Airbus’ chances of winning a deferred prosecution agreement with the SFO and France. This means any prosecution launched would be immediately suspended if strict compliance guidelines were met.

Airbus posted a 52 percent drop in underlying earnings in the first quarter of this year, partly due to weaker prices on older models of passenger jets, as the company changes to new models with higher production costs.