Connect with us

Uncategorized

Ping An reports RMB148,365 million of operating profit attributable to shareholders of the parent company in 2022, annual cash dividend per share grows by 1.7% year on year

Ping An reports RMB148,365 million of operating profit attributable to shareholders of the parent company in 2022, annual cash dividend per share grows by 1.7% year on year
PR Newswire
HONG KONG and SHANGHAI, March 15, 2023

Maintained stable busine…

Published

on

Ping An reports RMB148,365 million of operating profit attributable to shareholders of the parent company in 2022, annual cash dividend per share grows by 1.7% year on year

PR Newswire

Maintained stable business growth and promoted high-quality development

HONG KONG and SHANGHAI, March 15, 2023 /PRNewswire/ -- Ping An Insurance (Group) Company of China, Ltd. (hereafter "Ping An of China," "Ping An," or the "Group," HKEX: 2318; SSE: 601318) today announced its financial results for the year ended December 31, 2022.

The year 2022 marked an extraordinary year for Ping An. As a result of the complex and volatile external environment, changes in customer demand, and fluctuating capital market, several of the Group's business segments were affected to varying degrees, and their operations faced multiple challenges. Under the correct leadership of the Board of Directors, Ping An studied the new development philosophy and fostered a new development dynamic in accordance with the spirit of the 20th National Congress of the Communist Party of China ("CPC"). First, Ping An provided high-quality financial and healthcare services to support the national anti-pandemic efforts. Second, based on customer demands, Ping An fully integrated its services into financial and healthcare scenarios, and continuously improved its capability and level of financial services for the real economy and the protection of people's livelihoods. Third, Ping An accelerated the reform and transformation of life insurance, improved healthcare and elderlycare services, and strengthened technology and digital empowerment. Fourth, Ping An comprehensively strengthened risk prevention, further optimized portfolios, and increased cost-effectiveness to ensure the steady business operations. Thanks to the support of our shareholders and the loyalty of our customers, as well as the dedication of everyone at Ping An, we achieved the hard-earned results. Ping An achieved a 17.9% operating ROE, with operating profit attributable to shareholders of the parent company rising 0.3% year on year to RMB148,365 million in 2022. Net profit and net profit attributable to shareholders of the parent company amounted to RMB107,432 million and RMB83,774 million respectively. Ping An attaches importance to shareholder returns, and the annual cash dividend per share continued to grow 1.7% year on year RMB2.42.

Looking ahead to 2023, Jessica Tan, Co-CEO of Ping An Group, said, along with the external environment recovery and gradual positive effect from life reform, life NBV growth turned positive year on year in February and the encouraging momentum continued into March. We expect the NBV growth to be positive in the first quarter and the full year of 2023.

Ten business highlights in 2022:

  1. Cash dividends continued to rise amid stable profit. Ping An achieved a 17.9% operating ROE in 2022, with operating profit attributable to shareholders of the parent company rising 0.3% year on year to RMB148,365 million. Ping An attaches importance to shareholder returns, and the annual cash dividend per share continued to grow 1.7% year on year to RMB2.42.

  2. The integrated financial services model progressed steadily, providing "worry-free, time-saving, and money-saving" services. Ping An's retail customers approached 227 million and contracts per retail customer grew steadily by 2.1% from the beginning of 2022 to 2.97 as of December 31, 2022. Written premium of the corporate channel achieved through corporate business cross-selling rose 15.2% year on year in 2022.

  3. Ping An Life pursued high-quality growth and effectively advanced reform. Ping An Life optimized agent force structure, raising the proportion of "Talent +" agents by 14.1 pps year on year in 2022. Team productivity climbed as NBV per agent grew 22.1% year on year. Ping An Life's 13-month persistency ratio improved by 4.0 pps year on year, indicating improved business quality. The life and health insurance business ("Life & Health") operating profit rose 16.4% year on year.

  4. Ping An P&C maintained stable business growth, and significantly improved auto insurance business quality. Premium income increased 10.4% year on year to RMB298,038 million in 2022. Auto insurance combined ratio improved by 3.1 pps year on year to 95.8%.

  5. Ping An Bank maintained steady, healthy business growth and stable asset quality. Revenue grew 6.2% year on year to RMB179,895 million and net profit increased 25.3% year on year to RMB45,516 million in 2022.  Non-performing loan ratio rose slightly by 3 bps from the beginning of 2022 to 1.05%, and provision coverage ratio was 290.28% as of December 31, 2022, indicating adequate risk provisions.

  6. Ping An continued to implement its healthcare ecosystem strategy. Ping An's healthcare ecosystem empowers its core financial businesses, with nearly 64% of the nearly 227 million retail customers using services from the healthcare ecosystem. Ping An had nearly 4,000 in-house doctors and over 45,000 contracted external doctors as of December 31, 2022. Over 55,000 corporate clients were served by Ping An's healthcare ecosystem in 2022.

  7. Ping An continued to strengthen core technological capabilities. Ping An's technology patent applications led most international financial institutions, totaling 46,077 as of December 31, 2022, up by 7,657 from the beginning of 2022. In 2022, sales realized by AI service representatives grew 25% year on year to approximately RMB344.4 billion; customer services provided by AI service representatives accounted for 82% of Ping An's total customer service volume.

  8. Ping An studied and implemented the spirit of the 20th National Congress of the CPC and promoted the new value-oriented management culture. In 2022, Ping An's Party Committees at all levels studied and implemented the spirit of the 20th National Congress of the CPC, pursued high-quality development, and comprehensively promoted the new value-oriented management culture to empower business.

  9. Ping An further advanced green finance initiatives to support the real economy. Ping An cumulatively invested over RMB7.89 trillion to support the real economy as of December 31, 2022, safeguarding national strategic initiatives, including the Belt and Road Initiative and the development of the Guangdong-Hong Kong-Macao Greater Bay Area. Green investment and financing, and green banking business totaled RMB282,363 million and RMB182,089 million respectively. Green insurance premium income amounted to RMB25,105 million in 2022.

  10. Ping An further increased its brand value with the return of the logo slogan to "Expertise Creates Value". Ping An is committed to providing the highest-level of professional financial advisory, family doctor and elderlycare concierge services, with the aim of building a century-old trusted, first-choice service brand. In 2022, Ping An ranked 25th in the Fortune Global 500 list (4th among global financial services companies), 4th in the Fortune China 500 list, and 17th in the Forbes Global 2000 list.

Customer development: With deepened integrated financial services strategy, retail business and corporate business continued to grow

Ping An's integrated finance strategy is focused on the development of both retail customers and corporate customers under a customer-centric philosophy. Ping An leverages its ecosystems to build a brand of "heartwarming" financial services by meeting customer demands and providing "worry-free, time-saving, and money-saving" experience via one-stop, multiple-channel integrated finance solutions.

With the development of the "one customer, multiple products, and one-stop services" business model and the "integrated finance + healthcare" strategy, Ping An's retail customer development capability continued to improve. The Group's retail operating profit increased 2.0% year on year to RMB132,636 million in 2022, accounting for 89.4% of its operating profit attributable to shareholders of the parent company. The Group's retail customers increased 2.1% from the beginning of 2022 to nearly 227 million as of December 31, 2022, including 29.70 million new customers acquired in 2022.

As Ping An advanced its integrated finance strategy, retail cross-selling continued to deepen. Over 24.96 million customer migrations occurred between the Group's core financial companies in 2022. Nearly 90.20 million retail customers, or 39.8% of total retail customers, held multiple contracts with different subsidiaries as of December 31, 2022. Contracts per retail customer grew 2.1% from the beginning of 2022 to 2.97 as of December 31, 2022.

Corporate business grew steadily. Under a "1 + N" services model (one customer + N products), Ping An focuses on tiered customer development of large and medium-sized enterprises, small and micro enterprises, and financial institutions. Corporate premiums achieved through cross-selling grew 2.7% year on year, in which written premium of the corporate channel increased 15.2% year on year in 2022.

Integrated finance: The operating profit of Life & Health grew steadily. Property & Casualty maintained good business quality. The banking and asset management businesses grew steadily.

Life & Health advanced reform and transformation to pursue high-quality development. In 2022, Life & Health achieved a 32.7% operating ROE with operating profit rising 16.4% year on year to RMB112,980 million in 2022. Ping An Life improved channel business quality and effectively enhanced its comprehensive strength in channels. NBV per agent rose 22.1% year on year in 2022. The proportion of "Talent +" new agents increased by 14.1 pps year on year in 2022. Ping An Life advanced the digital business outlet reform and completed rolling out smart operations to outlets nationwide. NBV from the first and second batches of pilot outlets turned positive in the second half of 2022. Innovative channels gradually took shape. NBV from the bancassurance channel increased 15.9% year on year. The Community Grid model has been successfully rolled out in 25 cities.

In respect of products, Ping An Life upgraded its insurance product portfolio, and created differentiation advantages under the "insurance + service" framework by leveraging the Group's healthcare ecosystem. Customers entitled to "insurance +" service benefits accounted for 55% of Ping An Life's NBV in 2022, up 24 pps year on year. In respect of "insurance + health management," Ping An Life served approximately 18.59 million customers in 2022. Over 76% of newly enrolled customers used health management services. In respect of "insurance + home-based elderlycare," Ping An's home-based elderlycare services covered 32 cities across China as of December 31, 2022, providing over 500 service items. Over 20,000 customers have qualified for the home-based elderlycare services. In respect of "insurance + high-end elderlycare," Ping An started the construction of "Yi Nian Cheng" communities in Shekou, Shenzhen and Guangzhou. The first project of "Yi Xiang Cheng" product line was unveiled in Foshan, Guangdong, as an initial presence in the Guangdong-Hong Kong-Macao Greater Bay Area. Impacted by changes in the market environment and demands, L&H NBV dropped 24.0% year on year to RMB28,820 million in 2022.

Ping An P&C maintained steady business growth and significantly improved its auto insurance business quality. Ping An P&C's premium income increased 10.4% year on year to RMB298,038 million in 2022. Combined ratio rose by 2.3 pps year on year to 100.3% in 2022. Specifically, auto insurance combined ratio improved significantly by 3.1 pps year on year. However, overall combined ratio fluctuated mainly because the claim expenses of guarantee insurance business rose due to changes in the market environment. "Ping An Auto Owner," the largest automotive service app in China, had over 174 million registered users as of December 31, 2022, with over 100 million vehicles linked to it. Monthly active users of the app exceeded 37 million in December 2022.

Ping An Bank deepened the full range of digital operations and maintained stable, healthy business growth. Revenue and net profit for 2022 grew 6.2% and 25.3% year on year to RMB179,895 million and RMB45,516 million, respectively. Ping An Bank's asset quality remained stable, and its risk provisions remained adequate. Non-performing loan ratio was 1.05% as of December 31, 2022. Provision coverage ratio increased by 1.86 pps from the beginning of 2022 to 290.28% as of December 31, 2022. The Bank's core tier 1 capital adequacy ratio was 8.64% as of December 31, 2022. By leveraging integrated finance and technological empowerment, Ping An Bank built "Smart Bank 3.0", with revenue and net profit from retail business reaching RMB103,007 million and RMB19,828 million, respectively. Ping An Bank's retail AUM rose 12.7% from the beginning of 2022 to RMB3,587,274 million as of December 31, 2022.

Ping An's insurance funds investment portfolio grew 11.5% from the beginning of 2022 to nearly RMB4.37 trillion as of December 31, 2022. The portfolio achieved a 5.3% average net investment yield and a 5.5% average comprehensive investment yield over the past decade. Ping An continued to optimize the duration gap between assets and liabilities despite a market-wide shortage of long-duration assets. The Group effectively managed investment risks by strengthening risk review, refining risk limits, and tightening concentration risk management and post-investment management.

Healthcare: Ping An's healthcare ecosystem empowers its core financial businesses as a new driver of value growth

Ping An launched an innovative Chinese "managed care model", and continuously advanced the healthcare ecosystem strategy for long-term value growth. 

Ping An effectively integrates insurance with healthcare services. The Group achieved nearly RMB140 billion in health insurance premium income. Customers entitled to service benefits in the healthcare ecosystem accounted for an increasing percentage of Ping An Life's NBV in 2022. Nearly 64% of Ping An's nearly 227 million retail customers used services from the healthcare ecosystem. They held approximately 3.41 contracts and RMB54,500 in AUM per capita, respectively, 1.6 times and 3.0 times those held by non-users of these services respectively.

Ping An continuously integrates domestic and overseas premium healthcare service resources. Ping An had 14 health management centers, nearly 4,000 in-house doctors and over 45,000 contracted external doctors as well as six proprietary 3A/tier-3 hospitals in China as of December 31, 2022. Moreover, Ping An partnered with over 10,000 hospitals (including all top 100 hospitals and 3A hospitals in China), over 100,000 healthcare management institutions, and approximately 224,000 pharmacies as of December 31, 2022.

Ping An Health, as an online flagship of Ping An's healthcare ecosystem, is committed to building a one-stop ecosystem platform and a professional bridge between doctors and patients. Ping An Health achieved RMB6,160 million in revenue for 2022. The number of cumulative paying users approached 43 million for the twelve months ended December 31, 2022. Ping An Health provides membership-based healthcare services via dedicated family doctors, guiding members through an end-to-end "online, in-store and home-delivered" service network covering consultation, diagnosis, treatment and services, enabling 24/7 seconds-level management. Ping An Health has built four proprietary medical management systems, namely AI-based consultation and treatment, disease staging monitoring, rational medication management, and medical safety and quality control. Ping An Health cumulatively served nearly 1,000 enterprises and accumulated data of nearly 1,350 million consultations as of December 31, 2022.

Digitization: Ping An remains focused on the application of core technologies and promotes comprehensive digital operations

Ping An continuously invests in R&D to build leading technological capabilities, which have been widely utilized to empower its core financial businesses, and accelerates the development of its ecosystems. Ping An had a first-class technology team of nearly 30,000 technology developers and nearly 3,900 scientists as of December 31, 2022. Ping An's technology patent applications led most international financial institutions, totaling 46,077 as of December 31, 2022. Ping An ranked first globally by the number of AI, fintech and digital healthcare patent applications. AI service representatives accounted for 82% of Ping An's total customer service volume and 48.5% of the total sales volume of all service representatives in 2022.

Lufax Holding actively serves small business owners, and continuously furthers its strategic transformation. Revenue and net profit reached RMB58,116 million and RMB8,699 million respectively in 2022. Balance of retail credit facilitated reached RMB576,539 million as of December 31, 2022. Lufax Holding has provided loan facilitation services to 19.02 million small business owners and retail customers.

OneConnect actively facilitates the digital transformation of the financial services ecosystem and continuously improves its operating performance. Revenue grew 8.0% year on year to RMB4,464 million, and net loss decreased 31.9% year on year in 2022. The number of premium plus customers increased 4.2% year on year to 221.

Autohome upgrades its "ecosystem strategy" and strengthened its leading role among China's auto service apps. Autohome's revenue and net profit reached RMB6,941 million and RMB2,168 million respectively in 2022. Through its used car deal matching and auction services, Autohome contributed about 21.5% of China's used passenger car transaction volume in 2022.

Ping An actively fulfilled its social responsibilities and furthered green finance initiatives. Ping An cumulatively invested over RMB7.89 trillion to support the real economy as of December 31, 2022, safeguarding national strategic initiatives including the Belt and Road and the development of the Guangdong-Hong Kong-Macao Greater Bay Area. Green investment and financing, and green banking business totaled RMB282,363 million and RMB182,089 million respectively. Green insurance premium income amounted to RMB25,105 million in 2022. Ping An has provided RMB77,153 million for poverty alleviation and industrial revitalization since the launch of "Ping An Rural Communities Support".

2023 is a crucial year for China's 14th Five-Year Plan. Meanwhile, Ping An will celebrate its 35th anniversary. In 2023, Ping An will pursue high-quality development with Chinese characteristics and foster a new development dynamic, embarking on a new journey in a new era. Ping An will provide high-quality financial services and improve the quality and efficiency of services for the real economy by promoting and practicing our new value-oriented culture. Ping An will adhere to the business policy of "focusing on core businesses, increasing cost-effectiveness, optimizing portfolios, and improving policies and procedures." Under the technology-driven "integrated finance + healthcare" strategy, Ping An will share the benefits of financial business growth and innovations with millions upon millions of customers, and serve the real economy. Ping An will remain committed to long-term, steady, and sustainable value maximization for customers, employees, shareholders, and society.

View original content to download multimedia:https://www.prnewswire.com/news-releases/ping-an-reports-rmb148-365-million-of-operating-profit-attributable-to-shareholders-of-the-parent-company-in-2022--annual-cash-dividend-per-share-grows-by-1-7-year-on-year-301772812.html

SOURCE Ping An Insurance (Group) Company of China, Ltd.

Read More

Continue Reading

Uncategorized

Gold Prices Reflect A Shift In Paradigm, Part 2

Gold Prices Reflect A Shift In Paradigm, Part 2

Authored by Alasdair Macleod via GoldMoney.com,

In the first part of this report, we highlighted…

Published

on

Gold Prices Reflect A Shift In Paradigm, Part 2

Authored by Alasdair Macleod via GoldMoney.com,

In the first part of this report, we highlighted that observed gold prices have significantly detached from our model-predicted prices. While this has happened in the past, prices always converged eventually. However, the delta between the observed and the model predicted price has now reached a record high of around $400/ozt. We thus ask ourselves whether it is reasonable to expect that model-predicted and observed prices will converge again in the future, or, whether we witness a shift in paradigm and the model no longer works. 

In our view, the only reason for gold prices to sustainably detach from the underlying variables in our gold price model is if central banks (particularly the Fed) lose control over the monetary environment. Thus, it seems that the gold market is now pricing in a significant risk that the Fed can’t get inflation back under control. As we highlighted in Part I of this report (Gold prices reflect a shift in paradigm – Part I, 15 March, 2023), this is happening in the most unlikely of all environments. The Fed has aggressively hiked rates at the fastest pace in over 50 years and it is signaling to the market that it will do whatever it takes to get inflation under control. So why is the gold market still concerned about inflation?

The issue is that so far, it has been easy for the Fed to raise rates sharply to combat inflation. Despite the sharp move in the Fed Funds rate, one may get the impression that nothing has happened yet that would jeopardize the Fed’s ability to raise rates even higher. For starters, the unemployment rate remains stubbornly low (see Exhibit 8). 

Exhibit 8: The US unemployment rate remains stubbornly low despite the sharp rate hikes

Source: FRED, Goldmoney Research

Equity and bond prices have sharply corrected in the early phases of the Fed’s rate hike cycle, but since then equity markets have partially recovered their losses. While equity prices are not the real economy, large downward corrections can impact the real economy nevertheless due to the wealth effect. When people become less wealthy, they spend less, which in turn has an effect on the economy. The impact of this reduction in wealth might also not be meaningful so far as the correction came from extremely inflated levels. The S&P 500, for example, has corrected almost 20% from its peak, but it is still 14% higher than the pre-pandemic highs in 2019 (see Exhibit 9).

Exhibit 9: Even though US equity prices have corrected sharply, they are still well above the pre-pandemic highs….

Source: S&P, Goldmoney Research

The real estate market has slowed down significantly, but so far prices haven’t crashed (see Exhibit 10), and even though there are a lot of early warning signs, the Fed historically had only become concerned when a crumbling housing market started to affect the banks. While we certainly saw turmoil in the banking sector over the last few days, it was not related to the mortgage business so far. 

Exhibit 10: …and home prices – despite the clear rollover – have not crashed yet

Source: S&P, Goldmoney Research

Hence, at first sight, it appears there is little reason for the gold market to price in a scenario where the Fed loses control over inflation. However, there are plenty of warning signs that things are about to change. In our view, the correction in the equity market is far from over. When the last two bubbles deflated, equities corrected a lot lower for longer (see Exhibit 11).

Exhibit 11: the last two bubbles saw much larger corrections in equity prices

Source: S&P, Goldmoney Research

This alone will start to put a strain on the disposable income of not just American consumers, but globally. We are seeing signs of this in all kinds of markets. For example, used car prices had skyrocketed until about a year ago on the back of supply chain issues combined with excess disposable income. But since the Fed started raising rates, used car prices have retreated somewhat (see Exhibit 12). Arguably this is good for people wanting to buy a car with cash, and it will also have a dampening effect on inflation numbers, but the reason for it is not that all the sudden a lot more cars are being produced, but that higher rates make it more expensive to finance cars, and thus demand is weakening. 

Exhibit 12: Manheim used car index

Source: Bloomberg, Goldmoney Research

Certain aspects of the housing market also show more signs of stress than the correction in real estate prices alone suggests. For example, lumber prices have completely crashed from their spectacular all-time highs and are now back to pre-pandemic levels (see Exhibit 13). 

Exhibit 13: Lumber prices have come back to earth

Source: Goldmoney Research

Similar to the development in the used car market, while this may be good for people trying to build a new home, it is indicative of the material slowdown in construction activity. This can be directly observed in housing data. New housing starts are 28% lower than in spring 2022 (See Exhibit 14). 

Exhibit 14: New Housing Start data shows a material slowdown in construction activity

Source: FRED, Goldmoney Research

Moreover, mortgage costs have exploded. A 10-year fixed mortgage went from 2.5% a year ago to 6.3% now (see Exhibit 15). This will undoubtedly dampen the appetite for home purchases and strain disposable income as previously fixed mortgages must be rolled over. Given current mortgage rates, it is surprising that the housing market has not yet corrected a lot more.

Exhibit 15: Mortgage rates have exploded over the past 12 months

Source: Bankrate.com, Goldmoney Research

There is a myriad of other indicators, from crashing freight rates (see Exhibit 16) to layoffs in the trucking and technology sector as well as languishing oil prices despite record outages and inventories, that indicate that the Feds (and increasingly other central banks) ultra-hawkish policy is impacting the real economy, both domestic and globally. 

Exhibit 16: Freight rates had skyrocketed in the aftermath of the Covid19 Pandemic but are now back to normal

Source: Goldmoney Research

The result will be a period of global economic contraction. The Fed may view this decline in inflation as confirmation that their policies are working to fight inflation, even though it will only reflect a crashing economy. Importantly, once the recession kicks in, we will soon see rising unemployment. Once unemployment starts rising, the Fed will have to slow down its rate hikes and eventually stop. However, the underlying cause of inflation – over 8 trillion in asset buying by the Fed – will only have reversed a tiny bit by that point. This means that once the fed will have to make a decision, to either fight unemployment or inflation. 

We believe that the most likely explanation for the recent rally in gold prices against the underlying drivers of our model is that the market is increasingly pricing in that the Fed, once it is forced to stop hiking, will lose control over inflation. Faced with the choices of years of high unemployment and a crumbling economy or persistent high inflation, the gold market thinks the Fed will opt for the latter. This would mark a true paradigm shift, and from that point on, gold prices may start to price in prolonged high inflation (and our model may not be able to capture this properly).

The crash of Silicon Valley Bank (SVB) a few days ago has created significant turmoil in financial markets. While the Fed jumped in and announced a new lending program that effectively bailed out the bank, it also led to a sharp change in market expectations for the Fed. Before the bailout, Fed fund futures implied that the market expected several more Fed hikes this year, and only a gradual easing thereafter. One week later and the market is now pricing in that the Fed will only hike until May, and then pivot and start cutting rates (see Exhibit 17). 

Exhibit 17: The crash and subsequent bailout of SBV led to a sharp reassessment of the Fed’s ability to raise rates

Source: Goldmoney Research

The gold market is still pricing in a much more dire outlook with higher and persistent long-term inflation Only time will tell whether this view is correct. In our opinion, it is quite forward-looking, and gold seems to be the only market that is that forward-looking at the moment. 10-year implied inflation in TIPS, for example, is at a laughably low 2.2%. For the model-predicted prices to match observed gold prices, 10-year implied inflation would have to be around 1.5% higher, at 3.75%. This doesn’t seem to be completely unfeasible. However, even if the gold market turns out to be ultimately correct, it will take a while until the rest of the market agrees with that view, and most likely there will be a period of sharply declining realized inflation in the meantime. That said, as equities look even more fragile in this scenario, and bonds and cash are unpopular asset classes during periods of high inflation, gold may simply be the only game in town until its time as the ultimate inflation hedge is coming. 

Tyler Durden Mon, 03/20/2023 - 05:00

Read More

Continue Reading

Uncategorized

Australian Banking Association’s cost of living inquiry reveals bank pressure

An analysis of the rising inflation and concurrent collapse of Silicon Valley Bank proved that more than 186 banks in the U.S. are at risk of a similar…

Published

on

An analysis of the rising inflation and concurrent collapse of Silicon Valley Bank proved that more than 186 banks in the U.S. are at risk of a similar shutdown if depositors decide to withdraw all funds.

The trade association for the Australian banking industry — the Australian Banking Association (ABA) — launched a cost of living inquiry to closely study the impact of the COVID-19 pandemic, global supply chain constraints, geopolitical tensions and more on Australians.

An analysis of the rising inflation and concurrent collapse of three major traditional banks — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — recently proved that more than 186 banks in the U.S. are at risk of a similar shutdown if depositors decide to withdraw all funds. The ABA’s inquiry aims to identify ways to ease the cost of living in Australia and the Government’s fiscal policy response.

Consumer price index, percentage change from corresponding quarter in previous year, December 2012 – December 2022. Source: ausbanking.org.au

ABA acknowledged that many Australians would struggle to adjust to a higher cost of living, while it may be easier for some, adding that:

“The ABA notes most customers will manage the higher cost of living and their mortgage commitments by changing their spending patterns, applying their accumulated savings to their higher repayments in anticipation of higher borrowing rates, or refinancing their mortgage.”

One of the most significant pressures for banks was when citizens rolled over from a fixed-rate mortgage to a variable rate. However, ABA urged customers to be proactive and ensure they are getting the best deal for their banking services.

Household savings ratio, December 2014 to December 2022. Source: ausbanking.org.au

Property rent across Australia has also witnessed a steady increase as markets normalized following the end of COVID-19 restrictions. Citizens experiencing financial difficulty can contact their banks and get help, including fees and charges waivers, emergency credit limit increases and deferral of scheduled loan repayments, to name a few.

Related: National Australia Bank makes first-ever cross-border stablecoin transaction

Alongside this attempt to cushion Australians against rising fiat inflation, the Reserve Bank of Australia and the Department of the Treasury have been holding private meetings with executives from Coinbase, with discussions revolving around the future of crypto regulation in Australia.

Cointelegraph confirmed from an RBA spokesperson that Coinbase met with the RBA’s payments policy and financial stability departments in mid-March “as part of the Bank’s ongoing liaison with industry.”

Read More

Continue Reading

Uncategorized

Fed, central banks enhance ‘swap lines’ to combat banking crisis

Currency swap lines have been used during times of crisis in the past, such as the 2008 global financial crisis and the 2020 coronavirus pandemic.

Published

on

Currency swap lines have been used during times of crisis in the past, such as the 2008 global financial crisis and the 2020 coronavirus pandemic.

The United States Federal Reserve has announced a coordinated effort with five other central banks aimed at keeping the U.S. dollar flowing amid a series of banking blowups in the U.S. and in Europe.

The March 19 announcement from the U.S. Fed comes only a few hours after Swiss-based bank Credit Suisse was bought out by UBS for nearly $2 billion as part of an emergency plan led by Swiss authorities to preserve the country's financial stability.

According to the Federal Reserve Board, a plan to shore up liquidity conditions will be carried out through “swap lines” — an agreement between two central banks to exchange currencies.

Swap lines previously served as an emergency-like action for the Federal Reserve in the 2007-2008 global financial crisis and the 2020 response to the COVID-19 pandemic. Federal Reserve-initiated swap lines are designed to improve liquidity in dollar funding markets during tough economic conditions.

"To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of seven-day maturity operations from weekly to daily," the Fed said in a statement.

The swap line network will include the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and the Swiss National Bank. It will start on March 20 and continue at least until April 30.

The move also comes amid a negative outlook for the U.S. banking system, with Silvergate Bank and Silicon Valley Bank (SVB) collapsing and the New York District of Financial Services (NYDFS) takeover of Signature Bank.

The Federal Reserve however made no direct reference to the recent banking crisis in its statement. Instead, it explained that they implemented the swap line agreement to strengthen the supply of credit to households and businesses:

“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.”

The latest announcement from the Fed has sparked a debate about whether the arrangement constitutes quantitative easing.

U.S. economist Danielle DiMartino Booth argued however that the arrangements are unrelated to quantitative easing or inflation and that it does not "loosen" financial conditions:

The Federal Reserve has been working to prevent an escalation of the banking crisis.

Related: Banking crisis: What does it mean for crypto?

Last week, the Federal Reserve set up a $25 billion funding program to ensure banks have sufficient liquidity to cover customer needs amid tough market conditions.

A recent analysis by several economists on the SVB collapse found that up to 186 U.S. banks are at risk of insolvency:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Cointelegraph reached out to the Federal Reserve for comment but did not receive an immediate response.

Read More

Continue Reading

Trending