There were four big hints in Asia that Evergrande’s restructuring is a done deal

PBOC is talking with other central banks

RBA Debelle
Phones have undoubtedly been ringing at the PBOC with other global central bankers on the line. They all have contacts at the PBOC and all global central banks coordinate and share information.
In a system like China’s where the PBOC isn’t independent, they would be on top of government plans. In a situation like Evergrande, they would be in every briefing and at the heart of the decision-making.
I strongly suspect that decisions have now been made and the need-to-know parts of those decisions have been communicated to other central bankers. Here’s why:
First of all, we saw that Evergrande today made an announcement about making an interest payment on domestic debt after negotiations with bond holders. The company is obviously done but that’s a sign that some kind of plan has been decided on’ and it’s not a disorderly collapse.
The second clue was a net 110 billion yuan in 7/14-day reverse repos. That’s the biggest injection since January and it’s a sign the PBOC is adding liquidity as a buffer because there will be some pain from the restructuring.
The third clue was in comments from the RBA’s Debelle earlier.


There is a packed agenda of Federal Reserve speakers coming up this week

The Fed, though, will roll out the talking heads from Wednesday.
Wednesday 8 September:
  • Federal Reserve Bank of New York President John Williams will speak on the economic outlook and monetary policy
  • Fed Dallas President Robert Kaplan will participate in Discussion of Economic Developments and Implications for Monetary Policy
  • Fed Chicago President Charles Evans will give welcome remarks before a virtual “Exploring Career Pathways in Economic and Related Fields” event
  • Federal Reserve Bank of San Francisco President Mary Daly will present a paper in “The Economic Gains From Equity”
  • Federal Reserve Board Governor Michelle Bowman will speak on “Community Bank Access to Innovation”
  • Federal Minneapolis President Neel Kashkari, Fed Boston President Eric Rosengren, Fed Dallas President Robert Kaplan and Fed New York President John Williams will participate in virtual “Racism and the Economy: Focus on Health” event
  • Federal Reserve Bank of Cleveland President Loretta Mester will speak before virtual Bank of Finland-CEPR “New Avenues for Monetary Policy” Conference
I posted earlier on central bank events this week that are not the US Fed :-D :

Some members of US Congress want Fed Chair Powell sacked

This from three members of the US Congress, who seem confused about the remit of a central bank:

Via a Politico report:
  • Reps. Alexandria Ocasio-Cortez, Rashida Tlaib and Ayanna Pressley  … called for Federal Reserve Chair Jerome Powell to be replaced
  • “As news of the possible reappointment of Federal Reserve Chair Jerome Powell circulates, we urge President Biden to re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice”
Sounds great! I wonder should the Chair print more or less to hit these three added objectives though?
If Yellen was still Chair she’d know how to deal with these clowns.
This from three members of the US Congress, who seem confused about the remit of a central bank:

Bank of Israel keeps benchmark rate at 0.10%

Rates in Israel unchanged, as expected

Israel is an interesting spot to watch in the reopening. The vaccine has been widely available there for a month and cases are down to 164 per day from a peak near 10,000.
The central bank continues to forecast 6.3% GDP growth under its optimistic scenario.
Economic data is light there but it hasn’t shown a reopening boom. In the most-recent report, the unemployment rate rose to 5.1% from 4.6%. For 2022, the forecast has been downgraded to 5.0% from 5.8% to 6.0%).
Some inflation is building but that’s likely import-related and up to 1.1% for the year ahead from -0.2% to +0.3%).

Brazil’s central bank hiked its benchmark rate more than was expected

A 75bp hike vs. the 50 that was widely expected from the Banco Central do Brasil.

  • BCB add that they expect to hike another 75bps at the following meeting
  • says it has initiated a partial normalisation process, reducing its extraordinary degree of monetary stimulus
Despite with the FOMC and Powell tell us I think perhaps the BCB is providing a sneak preview of what is to come from the Fed prior to 2024. We’ll see.

Brazil central bank holds rates at 2.00%, says believes inflation is temporary

Comments from Brazil’s central bank

  • Reaffirms forward guidance that it doesn’t intent to reduce monetary stimulus as long as specified conditions met
  • Latest readings in inflation were above expectations
  • Despite the expected cooling in food prices, inflation is still expected to be high
  • Inflation expectations and baseline forecasts remain below target for relevant policy horizon
  • Continues to monitor inflation developments carefully, in particular, underlying inflation
  • Soon the conditions for maintaining forward guidance may not be satisfied
  • Forward guidance removal doesn’t mean rate hike
The drop in BRL this year has certainly been inflationary and that’s unwinding now. At the same time, you can see the growing concerns about inflation.

About 84,545 bank fraud cases reported during 2019-20: RBI in RTI reply

Around 84,545 fraud cases – involving about Rs 1.85 lakh crore – were reported by scheduled commercial banks and select FIs during 2019-20, an RTI activist said, citing information received from the Reserve Bank of India.

RTI (Right to Information) activist Abhay Kolarkar said that he had sought various banking related queries under the jurisdiction of the RBI in June 2020, and the replies to the same he received a few days back.

Kolarkar in his RTI query sought to know how many fraud cases have taken place during April 1, 2019 to March 31, 2020 and the amount involved in it.

The RBI stated that the total number of frauds reported by Scheduled commercial banks and select FIs during Financial Year 2019-20 is 84,545 and the amount involved therein is Rs 1,85,772.42 crore.

To the query about how many bank employees are involved in fraud cases and how much amount is involved, the RBI replied that the information on the question is not available.

“However, it may be noted that total number of frauds reported to have been committed by staff, as reported by Scheduled commercial banks and Select FIs during FY 2019-20 is 2,668 and amount involved therein is Rs 1,783.22 cr,” the central bank said.

The RTI also sought to know how many consumer complaints received by the RBI’s 15 ombudsmen offices during April 1, 2019 to March 31, 2020.

During July 1, 2019 to March 2020, about 2,14,480 complaints were received.

The highest number of complaints received by SBI- 63,259, HDFC bank- 18,764, ICICI bank- 14,582, Punjab National Bank- 12,469, Axis bank -12,214 followed by other banks.

The central bank in its reply said about 56,493 complaints received between April 1, 2019 to June 30, 2019.

The RTI query also sought information on number of branches exited by banks and those closed after merger during April 1, 2019 to March 31, 2020.

To which, the RBI provided information about the ‘number of merged branches with another branch of same bank’ during 2019-2020, which stood at 438 branches — SBI – 130, Central Bank of India – 62, Allahabad Bank – 59 and other banks.

The total number of branches closed in 2019-20 are 194, including 78 branches of SBI and 25 of Fino payments Bank limited.

Big Week Ahead

Two G7 central banks meet and at least half a dozen emerging market central banks. There is a European Summit and perhaps a political effort to reinvigorate the UK-EU trade talks, which seem to be crashing on the shoals of stubbornness. The ECB offers its most generous long-term targeted loan that is bound to see earlier loans rolled into this new one. Further evidence that the world’s largest economy has taken a baby step toward recovery.
Let’s unpack next week’s events. But first, note that the events will take place as the recovery in risk assets appears to have come to an end with a flourish last week.  That correction, which seemed overdue, appears to have more room to run. Also, the Covid virus continues to spread globally, and businesses, investors, and policymakers are sensitive to the so-called second-wave as countries and states re-open. Below are thumbnail sketches of the events and data that shape the macro picture.
  • EU Summit: The European Council (heads of state) hold a virtual meeting on June 18 to ostensibly discuss the EU’s  May 27 Recovery Fund proposal.   Some have heralded the proposal as a key turning point in the evolution of Europe, and the possibility of a so-called Hamiltonian moment, a major set toward fiscal union, has been suggested.  We have been less sanguine; recognizing the potential scaffolding for a greater union, but also that projecting emergency actions into the future is fraught with danger.  Austria and Denmark, which have pushed back against grants instead of loans, could be won over by assurances that their rebates will remain intact.  Others, including Eastern and Central European members, may be more difficult to persuade. Although expectations are running high, we suspect an agreement will remain elusive, in which case another try will be at the July summit, which, with a little luck, could be in person.  Disappointment could weigh on the euro.


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