India lays down the law on financial management

Updated: Monday March 17, 2014 MYT 8:31:18 AM

India lays down the law on financial management

BY YAP LENG KUEN

THE spate of resignations at India’s financial institutions indicates the government’s seriousness in ensuring that top management either perform or perish.

In the past 10 months, chairpersons of a financial institution and a bank, a pension sector regulator and at least one independent director on the board of a bank have quit their posts.

Terming the spate of exits as unprecedented, some senior bankers told the Economic Times that more resignations are likely to follow as investigations proceed against executives accused of mismanagement or misappropriation.

All this is happening against the backdrop of rising bad loans at public sector banks.

Gross NPAs of public sector banks rose to Rs 2.03 lakh crore in the quarter to September 2013 from Rs 1.55 lakh crore in the previous quarter, said Economic Times.

India is responding to the global wake-up call for banks to pull up their socks.

It is taking a proactive stance in relation to potential mismanagement and misappropriation.

If carried out consistently and in a transparent manner, these steps can help save the situation before it gets out of hand.

Meanwhile, the Bank of England (BoE), in its concern to get to the root of the problem, has appointed a leading QC to investigate if any its staff was involved in foreign exchange rigging.

The bank’s oversight committee, led by Sir David Lees, has asked Lord Grabiner to assess whether any of its officials was involved in the manipulation of the forex market between 2005 and 2013, said the Telegraph.

The BoE last week suspended an official amid an internal review into whether bank staff had failed to flag up signs that forex traders exchanged client orders to manipulate daily benchmark exchange rates, dating as far back as 2006, said theTelegraph.

It looks like the BoE is leaving no stone unturned in its investigations which date as far back as 2005/2006.

But as the saying goes, it is better late than never!

The findings should be revealed in a transparent manner as a message that everyone involved in the chain has a role to play in ensuring a healthy forex market.

Focus on the bonus season is not just confined to European banks.

Wall Street’s average cash bonus swelled last year to its highest since the financial crisis and the third largest on record, said Reuters, quoting New York State’s budget watchdog.

The cash bonus pool jumped 15% to US$26.7bil in 2013, according to the New York state comptroller’s annual estimate based on personal income tax trends.

The increased bonuses came as Wall Street posted a fifth consecutive year of profits after record losses during the 2008 financial crisis.

Profits for broker-dealer operations of New York Stock Exchange member firms, however, fell 30% to US$16.7bil in 2013, said Reuters, quoting the state comptroller’s report. It looks like it is the same case of rising bonuses and falling revenues.

Across Europe and the United States, there appears to be plenty of organisations, post crisis, that have yet to show long term positive results. Hopefully, the revenues will catch up before they overspend on items like bonuses.

Columnist Yap Leng Kuen cautions against overspending in an environment that is still fragile.