wazua Sun, Nov 10, 2024
Welcome Guest Search | Active Topics | Log In | Register

2 Pages12>
CBK moves to boost Economy
Liv
#1 Posted : Wednesday, December 03, 2008 11:49:00 AM
Rank: Veteran


Joined: 11/14/2006
Posts: 1,311
CBK's lowering of the cash ratio by 1% is a good strategy to boost growth. The effect of this is that at least Kes 10 bln will be brought to the banking system for lending,etc. This is what countries in the west have been doing to ensure the countries do not sink into recession. In 2003 govt lowered cash ratio by 4% sending treasury bills interest rates to circa 2%.

In my opinion,though this might have some adverse effect (inflation),it should bring some life to the NSE. I expect to see a small rally.

If they lower the ratio again next month to 4% this may even result in a sustained rally to Feb- Mar 2009. But again there could be other factors that may affect NSE but at the minimum I see the NSE index bottoming out sooner than later.

What do you think?

http://www.bdafrica.com/...d=11575&Itemid=5812
wkisoi
#2 Posted : Wednesday, December 03, 2008 3:37:00 PM
Rank: Member


Joined: 6/26/2008
Posts: 6
@Liv,
I could not agree with you more on the issue of the CBK move being a good one.Only thing is that it cannot stop the global recession and hanging cloud of Waki and the possible referundum. The noise level of the Waki report will continue to plague us for the medium term while I think that at every opportunity that the market will go up say 10% the supply will flow in and push the prices back down. Inflation right now is also an issue. That is what happened to the short lived rally about a month ago. Earliest we can see any significant rise in my view will be March/April but definately not to the 4000 levels until say 12-18 months from now. We might have to contend with 6% dividend yields for now at best.

All that matters is character
The General
#3 Posted : Tuesday, August 11, 2009 10:30:00 AM
Rank: Member


Joined: 6/3/2006
Posts: 553
This is quite encouraging from the CBK


CBK takes banks to task over lending rates


The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
Gordon Gekko
#4 Posted : Tuesday, August 11, 2009 10:35:00 AM
Rank: Elder


Joined: 5/27/2008
Posts: 3,760
It is not for the CBK to demand explanations from banks. Don't bark,bite. Otherwise they join the Energy Regulatory Commissions of this world.
The General
#5 Posted : Tuesday, August 11, 2009 10:46:00 AM
Rank: Member


Joined: 6/3/2006
Posts: 553
Section 4 of the Central Bank of Kenya Act states the core mandate of the Bank as follows: (1) the principal object of the Bank shall be to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices; (2) the Bank shall foster the liquidity,solvency and proper functioning of a stable market- based financial system; and (3) subject to (1) and (2),the Bank shall support the economic policy of the Government,including its objectives for growth and employment.

The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
kizee
#6 Posted : Tuesday, August 11, 2009 11:28:00 AM
Rank: Member


Joined: 1/9/2008
Posts: 537
hmmm...lets see....

cbk cuts rates releases 10bn...same time MOF says government will borrow 109bn!...so cutting crr is a very clever way of doing a silly thing...depress short term rates so that banks are forced to lend to the government at higher rates...its then assumed that the government will use this money to boost the economy(keynesian thinking)..only problem is:

1.cbk/GOK crowds out private sector as banks shift their lending from private sector to public sector(purchase of t-bills/bonds)

2. kenyensian thinkin fails to work as our beloved government usualy spends bulk of its receipts on recurrent than developmental expenditure...

What CBK/GOK should do inorder to spur growth is cut spending,totally do away with CRR and cut personal and corporate income tax....
Mainat
#7 Posted : Tuesday, August 11, 2009 12:07:00 PM
Rank: Veteran


Joined: 11/21/2006
Posts: 1,590
Liv- I like ur optimism but do note that:


Banks in the west are not lending despite QE and rates being at zero. They are instead using the opportunity to repair their capital by charging exhorbitant interest margins. Ring a bell? Kenyan banks also need to do something similar though not the same scale due to loan loss provisions
Banks are being extra-cautious given the negative forecast on the economy especially with no water,no electricity,budget deficit et al. They are only lending to very high quality customers
Gilts are an attractive alternative for banks and I think CBK is actually trying to reduce GoK's cost of borrowing



www.mjengakenya.blogspot.com
Sehemu ndio nyumba
Bashka
#8 Posted : Tuesday, August 11, 2009 12:25:00 PM
Rank: Member


Joined: 7/31/2008
Posts: 116
@Kizee brilliant comments. CBK is releasing liquidity to the market to reduce the cost of funds for the Government while it is directly urging banks to extend this to the private sector thro reduction in lending rates. But the banks have increased appetite for govt securities which provide stable returns with less risk. Currently,there is a shift by commercial banks from private sector lending to public lending....this itself is against V2030 roadmap,which sees private sector as the main source of growth. On the same note,the banks are sitting on idle money,lending to private has slowed down. Cost of funds for the private sector are up,inflation is high (although caused by supply side effects); Is CBK attaining its core mandates?


The General
#9 Posted : Tuesday, August 11, 2009 1:28:00 PM
Rank: Member


Joined: 6/3/2006
Posts: 553
@ Mainat,

Kindly shed some light on whether banks sustain lending rates through costs or risks?

The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
Waria
#10 Posted : Tuesday, August 11, 2009 2:11:00 PM
Rank: Member


Joined: 10/11/2007
Posts: 213
Allow me to offer my pedestrian views

The 10bn so released may not translate to increased retail lending levels witnessed previously since most SMes and salaried workers are already servicing loans and futher to that the bad loan provisioning has gone up for most banks

Biggest beneficiary will be corporate bonds and 364 day tbill


Me first,U next
Mainat
#11 Posted : Tuesday, August 11, 2009 3:59:00 PM
Rank: Veteran


Joined: 11/21/2006
Posts: 1,590
Gen- dude,when I read your query,it reminded me that English is not my 1st language and neither is it yours judging by the query. What do u mean by banks sustaining lending rates? Did u mean maintain lending rates? And by lending rates,do you mean the interest rates they charge customers or the interest margin they earn net of funding cost? Or were u talking about the percentage of loan growth? By costs,do u mean funding costs or operational costs?
In anycase,I'll attempt to frame the query and answer it and if its not the right one,lemme know and I'll respond l8r.
Assuming u wanted to know how banks maintain their interest margins,most banks always lend with reference to two things in the main:
1. Funding cost: i.e. how much they have to pay for deposit;in the interbank lending and from CBK as lender of last resort. Clearly banks will charge an interest rate that gives them a sufficient margin above this funding cost. There is also stuff about mismatch,but its too completed to go into here.
2. Operational costs: Most banks will always lend such that amount of loans multiplied by interest rate charged on those loans less the banks funding costs less operational costs (staff,office,it) are more than covered.
Banks also lend with reference to the credit quality of the customer as this dictates the amount of regulatory capital they need to hold. But they also consider the quality of loans they already hold.
Hope that long-winded answer helped and answered your question.

www.mjengakenya.blogspot.com
Sehemu ndio nyumba
kizee
#12 Posted : Tuesday, August 11, 2009 5:28:00 PM
Rank: Member


Joined: 1/9/2008
Posts: 537
@ mainat

im just baffled at why ndungu is blamin banks for cutting lendin to private sector....your lending rate or required rate of rate as a bank is a function of the risk free rate(read comparative rate of the GOK yield curve) plus risk premium...risk premium in kenya and world over is ata record high..cbk is not to blame..however...the cbk is slowly and surely causin and upward shift of the kenyan yield curve...this week alone GOK has borrowed 19 bn...8.5 bn in a one year tbill and 11 bn as a reopenin of a yr bond...at the same time the only maturities of GOK paper amount to 3 bn....so this week GOK has created a net outflow of KES 16bn!....theyr helpin private(read banks) sector bridge funding shortfalls by issuin one week repos @ 3.5%...so waht those geniuses are doing is lendin banks @ 3.5 and taking back this monies @ 8-8.5 in bills...how is this good for the economy..which bank will lend to private sector when they can get a 500 basis point arbitrage from good old CBK???? and you know who pays for this kind of brilliance? you and i...the taxpayer!
Mainat
#13 Posted : Tuesday, August 11, 2009 8:54:00 PM
Rank: Veteran


Joined: 11/21/2006
Posts: 1,590
Kizee- when Ndungu was appointed I thought he looked and sounded like a certificate economist. Many academic papers but no idea how a real economy functions. Kenya is not in 2003 when merely increasing money supply jazzed up the economy. We've issues that require fixes away from CBK. The problems as I see them. GoK overspend; agriculture supply-side; world-wide economy and an overhang of bad debts in the banking sector. Only one of those is outside of our control.
Unfortunately,they also require balls to resolve. If i was in the job for 12 months I'd slash cabinet to 20 posts and make cabinet and assistant minister positions taxable. Saving and generating around Ksh200m per yr. I'd slash defence spending by ksh10bn to Ksh34bn and put Ksh6bn of it towards agriculture subsidies 4 fertiliser,seedlings,employ agriculture officers. Ksh4bn would go towards tre planting via CDF. I'd install tolls on main roads into Nairobi and use the raised funds to subside KDN-type company based solar projects. I'd institute a polluter's fine 4 the companies carelessly letting stuff flow into Nbi river and others.I'd close down all councils that are not self-financing. I'd rationalise the whole district thing. Close some down and ofcourse get rid of division officers.

www.mjengakenya.blogspot.com
Sehemu ndio nyumba
The General
#14 Posted : Wednesday, August 12, 2009 6:16:00 AM
Rank: Member


Joined: 6/3/2006
Posts: 553
@ Mainat,

Calm down...i picked the question from the Prof at the CBK.

If you look at the bottom you will see a link titled: CBK takes banks to task.....




The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
Bashka
#15 Posted : Wednesday, August 12, 2009 6:38:00 AM
Rank: Member


Joined: 7/31/2008
Posts: 116
The main souce of banks profit is interest income. Banks get funds from CBK at the CBR rate,currently at 7.75% or attract deposits at 5%. Then lend to get their margin. The spread is higher if they lend to the private sector,but banks prefer public sector lending (govt securities). What is driving this appetite for govt securities? .......many say risk factor. Are there other factors?
Mainat
#16 Posted : Wednesday, August 12, 2009 11:43:00 AM
Rank: Veteran


Joined: 11/21/2006
Posts: 1,590
General-hadn't seen your link so lacked the context of your query. My answer suffices still. Banks can't make money by growing loan volumes bcos quality borrowers are fewer now. Hence they are keeping rates higher. Deposits pai sio mingi. So both apply.


www.mjengakenya.blogspot.com
Sehemu ndio nyumba
The General
#17 Posted : Monday, August 31, 2009 2:26:00 PM
Rank: Member


Joined: 6/3/2006
Posts: 553
Kenya says no political meddling in financial sector

The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
VituVingiSana
#18 Posted : Thursday, September 03, 2009 2:36:00 AM
Rank: Chief


Joined: 1/3/2007
Posts: 18,095
Location: Nairobi
LOL... UK is lying and you know it...

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
The General
#19 Posted : Tuesday, September 22, 2009 2:00:00 PM
Rank: Member


Joined: 6/3/2006
Posts: 553

CBK ignoring warning signs in the banking sector

The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
The General
#20 Posted : Monday, September 28, 2009 9:40:00 AM
Rank: Member


Joined: 6/3/2006
Posts: 553
The Governor is hot on their heels

CBK to dialogue banks on rates

The thicker the thigh the sweeter the pie.
The thicker the thigh the sweeter the pie.
Users browsing this topic
Guest
2 Pages12>
Forum Jump  
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.

Copyright © 2024 Wazua.co.ke. All Rights Reserved.