The 2006 Asian Banker Summit:
Newspapers as a starting point for business research
See “Drafting a blueprint for the future” (business, front page)By Jon Fernquest
 Chartsiri Sophonpanich |
Your daily newspaper reading can be an important starting point for extending your knowledge of business and economics. Today’s business section has an article reporting on the 2006 Asian Banker Summit being held in Bangkok this week. Not only can you learn a lot about economics by doing some online research with the ideas discussed in the article, the conference is also a good example of Thailand’s comparative advantage in action. Thailand’s reputation as a haven of peace in a world of political turmoil has attracted a lot of MICE (Meeting, Incentive, Conference and Exhibition) business to the country.
The article starts by discussing the conference speech of former U.S. congressman Thomas J. Bliley Jr., co-author of a law that restructured the U.S. banking industry in 1999 (see Gramm-Leach-Bliley Act). The role of the Glass-Steagall Act in the Great Depression is also mentioned. These topics are worth studying in greater detail since they were part of the financial collapse of 1929 that was much larger than the 1997 Asia Financial Crisis.
There are many important and easy to remember facts in the article. For example, the United States has a low savings rate. As you read, underline facts that you find. (See answer key at end for my list).
While you are reading articles, get in the habit of spotting places where language is being used metaphorically to make an analogy like in the following paragraph: “There's no risk of a financial crisis in the immediate future, but what regulators should do is to fix the room while the sun is still shining and not wait for the storm to move in'.' Sentences like this require two steps: 1. Understanding the literal meaning, and 2. mapping the literal meaning to the topic you’re discussing, banking.
The awards section at the end of the article gives you an opportunity to learn about important people in banking. Chartsiri Sophonpanich, the president of Bangkok Bank, is an important business figure in Thailand who you will often find in the news (see picture above). Yesterday, he won the Asian Banker Leadership award for 2005. Naris Chaiyasoot, David Eldon, Guo Shuqing, and John McFarlane are other names worth researching.
Vocabulary (in article)
blueprint – a plan or set of proposals that show how something is expected to worka summit – a meeting between the leaders of countries to discuss important matters
repeal – when the government officially ends a law, making it no longer valid
scope – the limited area that a piece of work deals with
The Glass-Steagall Act – U.S. laws that changed the American banking system after the stock market crash of 1929 that led to the Great Depression (See Wikipedia).
The Great Depression – a period in the 1930’s when business activities decreased to very low levels and many people were unemployed, began in the United States, but spread all over the world (see Wikipedia)
to diversify – to increase the variety of things that you do or make
to converge – moving towards being parts of the same kind of business
holding vehicles – holding companies
a holding company – a company that owns other companies, holding shares in them
cross-sharing – sharing information between businesses with the same owner
preoccupied – thinking a lot about something so that you don’t notice other things
Fitch Ratings – a credit rating agency for companies (See Wikipedia)
consolidation – bringing together and unifying what you already have, to make it stronger
deposit insurance – insurance by the government to protect the money of savers keeping money in banks (see Wikipedia: Deposit Insurance and Federal Deposit Insurance Corporation)
x complements y – x adds different but useful features to y, making x and y a good combination
Vocabulary (in discussion above)
comparative advantage – "The notion that because of different cultural, geographic and historical circumstances, some nations are more efficient in the production of certain goods. This concept underlies the justification for free trade." (From:www.web.net/rain/glossary.htm and Google search: "comparative advantage definition" Also see the Economist's glossary and Wikipedia.MICE (Meeting, Incentive, Conference and Exhibition) - the part of tourism management that deals with large meetings
metaphorically - words are not being used with their ordinary meaning, but to describe something with an image or symbol (See Wikipedia)
analogy - explaining one thing by showing its similarity with something else (See Wikipedia)
literal meaning - the most basic and ordinary meaning of a word
Answer key:
Here are some facts that I found while reading the article. (Note: your list could be different.)
1. The Glass-Steagall Act began the Great Depression. (This seems like a very sweeping statement that some economist might disagree with. Try to find a discussion of this idea with some online research.)
2. The Glass-Steagall Act separated investment banking and banking.
3. Most lending mistakes are made during economic boom periods.
4. Taiwanese banks have benefited from financial holding companies.
5. There are two plans for the Thai financial system: 1. Thai Finance Ministry, 2. Bank of Thailand.
Article
Drafting a blueprint for the future
PARISTA YUTHAMANOP and UMESH PANDEYAsian banks are increasingly looking to restructure operations to improve efficiency and competitiveness, according to speakers at the 2006 Asian Banker Summit.
Thomas J. Bliley Jr, a former US congressman, said the repeal of the Glass-Steagal Act and passage of the Gramm-Leach-Bliley Act in 1999 helped US banks to expand business scope and competitiveness.
"The Glass-Steagal Act was a mistake that began with the Great Depression. With the separation between the investment bank and banking, it has become clear that the law protected against competition, rather than protecting the customers,'' he said at the opening of the three-day conference.
US banks can now diversify businesses from lending into securities and insurance activities, leading to greater integration of the financial sector. The new law also offers support for new financial innovations such as online banking.
``The law has integrated wealth management into the banking business. It is an important step because of the low saving rates in the USA. Now the US financial market can better meet customer demands,'' Mr Bliley said.
The banking and telecom sectors could also converge under the new legal framework, he added.
Wei Yen, managing director for Asia-Pacific Financial Institutions at Moody's Investors Service, said many Asian banks were considering restructuring their business groups through holding vehicles.
The concept of financial holding companies would help increase the flexibility of financial institutions in managing risk, as well as lead to benefits from the cross-sharing of information and sales, said Dr Yen.
He said Taiwanese banks had benefited significantly from the concept, with better shareholder returns when compared with Japan and Korea.
Japanese banks remained preoccupied with asset quality problems, while Korean banks had not shown a significant increase in their income generation, he said.
David Marshall, managing director for financial institutions at Fitch Ratings, said the 1997 Asian crisis offered a strong lesson to regulators in the region.
``There's no risk of a financial crisis in the immediate future, but what regulators should do is to fix the room while the sun is still shining and not wait for the storm to move in,'' he said, noting that most lending mistakes are made during economic boom periods.
Banks and regulators alike needed to address their flaws to prepare for future growth and competition, said Mr Marshall.
He said banks in India, Indonesia, Thailand, Japan, the Philippines and Taiwan lagged behind banks in Singapore and Hong Kong.
``Even banks in Malaysia and South Korea are stronger than those in the other countries,'' he said.
Naris Chaiyasoot, director of the Fiscal Policy Office, said in a keynote speech that the Thai Finance Ministry was drafting new framework aimed at strengthening the country's financial system.
The plan, to be finalised within the next six months, would support market consolidation, improve the operations of specialised financial institutions, and establish a new deposit insurance agency.
``We are drafting a new blueprint for the financial system which will apply for years to come. It will complement the one by the Bank of Thailand, the so-called `financial master plan','' Dr Naris said.
Meanwhile, Chartsiri Sophonpanich, the president of Bangkok Bank, was yesterday awarded the Asian Banker Leadership Award for 2005.
Some 25 awards were presented yesterday to recognise individual achievements in the advancement of the Asian financial services industry.
Awarded lifetime achievement awards were David Eldon, the former chairman for the Hong Kong and Shanghai Banking Corp, and Ishrat Hussain, former governor of the State Bank of Pakistan.
Winning the leadership achievement awards for the Asia-Pacific region were Guo Shuqing, chairman of the China Construction Bank, and John McFarlane, chief executive of Australia's ANZ.
