Singapore - measuring risks on retail side

To issue credit card or small loan allows the economy to grow, as it gives more and more money for people to spend before they earn it. If the average spening of the month is 1000 units, than with a credit card with a limit of 3000 can the consumer purchase additional 3000 units of service, goods or have additional savings.

Empowering the consumer with this ability is adding various components together:
a) how much is the seller able to pay for his potential customer being able to pay for service or goods (2%, 3% or 10% UPF)
b) how much is the consumer able to pay for this ability to spend banks money (27% p.a.? INT)
c) what is the risk the customer will not be able to pay for his obligation (NPL)
d) what is the financial institution paying to distribution of the financial product (SERVICE)
e) what is the cost of money financial institution pays for its resources (COF)
f) what is the expectation of the shareholder fir the return on investment (ROI)

Than it counts as:

UPF% + INT% = NPL% + SERVICE% + COF% + ROI%

If we wish to set INT as low as possible we need to work with other variables.

UPF% could be increased as long as the seller understands the significance of the whole statement. It could come to the point, where the seller is giving the whole advantage to consumer and therefore no need to pay any interest at all. I am afraid that 10% would need to be communicated properly + it shall not be limited by any regulation, as recently in EU it is

NPL% to influence is important to issue credit cards with sense. Seeking the lowest risk customers is not a solution, as this people usually doesnt need credit cards or if so they are not willing to contribute to income. Usually a consumer structure with higher risk, but not too risky is the best to aim. They will be able to spend the money and see the advantage in additional spending. And also they will have ability to pay the interest and later instalment back. Also low NPL allows customers to pay lower rates.

SERVICE% is currently a challenge, as bank employees earning low salaries are no willing to work. Also the effectively of the bank is hit, as the process is slow and takes too long. This is why FinTech ia jumping in, to allow people to get closer to financial institutions

COF% is now very low and in many banks close to 0%

ROI% as long as COF% is close to 0% is also minimal.

Therefore

INT% = NPL% + SERVICE% - UPF%

Once we decrease SERVICE% and NPL% we get very low UPF% and therefore absolute WIN / WIN situation

INDIA - respect & being clever

It is amazing how many super clever people live in India. The challenge they face everyday it enormous and therefore they can appreciate a good partner that know what he wants & is clever to use the unlimited resources of this beautiful country.

All of us are being challenged in that country for many times. Is the guy you talk to somebody to trust? Is the guy u ask for service reasonably accessing demand? How deep we shall discuss and how shallow we each other understand.

China (Shanghai) - playing rough on foreigners

After a time we will observe two different/three different answers from your chinese advisors:

1. You are Chinese you can
2. You are foreigner you are crazy and can not, as this is not usual
3. You are dark color, please leave my office.

Therefore a local partner is a must. Problem is that Chinese people like to get in touch, discuss & become friends. Therefore a great Taiwaneese may be a solution, as he/she will be opposite to the mentality, but seems like local.

China - challenge & opportunity

Challenging is to find somebody u trust, somebody who is local as it matters, somebody who will share the values of your partners with you. Prepare as many references as u can for the case, so the look on your Chinese partner is not telling you: You stupid foreigner, this is not possible in China :)

China - moving of the cash

Beijing a proper business in China is connected with various challenges. Lets focus on finance, how to move the money inside and outside of the country and what expectation might the government impose:

1. Equity .... after the registration of the company it is essential to register total amount of investment. Most of the SMEs and MMEs rules will apply to 70/30 ratio, where 70% shall be incoming as an equity. Once registered money could be send to China from outside. Please be informed, that sending CNH to China is connected with issues, as government controlled banks are keen to collect foreign currency. Therefore u would need your USDs or EUROs to be transferred and than pau the price of changing them to local currency. Expect to loose up to 5%, if you dont negotiate the rate upfront.

2. Loan .... Intracompany loan, set by registration making 30% of total investment is additional way how to pump in the money. By the loan it is expected to transfer to equity once the company did spend all the equity and still is in loss or in other case to be transferred back to origin aftet the equity prooves to be sufficient and there is no additional cash need on investments or working capital. It is possible to charge interest on such a loan and this interest shall be lower than commercial rate due to intracompany status and still higher than deposit rate in China, currently around 4%. It may be imposed withdrawal tax on such a downpayment in amount of 10%

3. Cash sweep .... a product introduced in various parts of China to help international companies to move money more free in and outside of China. Few rules need to be applied and still it will more freely move the cash.

4. SBLC .... long term financing inside China trough bank financing. This way the daughter company doesnt suffer by sending money back to origin, as they were never send to China at first.

5. Trading .... having a reasonable product or service to be purchased outside of China. This could be limited, as the price needs to be transparent and it might always be unpredictable how the local bank reacts

6. Agency scheme .... very hard to use, as it is unpredictable and usually expensive. Also acxoutingwise very challenging.

Shanghai - reality

Finance in Shanghai became less untouchable for foreigners theese days. Even the market is strictly regulated and the regulation is good to observe the proper partner on a bank side could make a difference.

Another way how to see the same issue is to follow the main issue foteigners have : How to tak with China, so China can answer the way for foreigner to understand. And who to meet, that will be in China long enough to be sure he can support you and the question u give him is not something new, but something he found the answer already. It is not good to stick outside the main flow. But it also doesnt mean, that there are not other flows to follow. Just do not lead the flow in the beginning.

Czech republic - question

After Czech republic left the protection zone of central bank we expected the CZK to got stronger and in time to cross 26,00 or at least 26,50 and therefore to prove to market, that the value was too low and there was reason for central bank to keep it so low on 27,00.

It is almost 15 days since the the crown was left free. Expectations risen. Speculations growing.

And we are now back on 27,00. Is it due to the phenomenon describing the expectation of the economy following the weak times?

India - Hundi

Hundi is an old system invented in India to change money for promissory note or any type of guarantee. It is used for many years and allows the money to flow between countries without actually crossing the countries. Therefore it is in many places regulated & not seen as advantage.

China - Islamic banking

There are three principles islamic banking stands on:
1. Do not charge interest, but share profit or loss
2. Do not finance anything that is not in accordance with the islamic belief. F.e. pork, speculation....
3. Do not finance anything that is later financed non-sharia way

This points are important to understand also in accordance with collection of the financing, sharing of the dissolving company value, mortgage financing or sale of the banks ownership or even responsibility of the bank for a good results and own capital amount.

Lets take it one by one:
*interest*
You are not allowed to charge interest, but u may charge drawdown fee & once in time loan management fee

*profit/loss sharing*
You can decide the percentage to share the loss or the profit. It shall be the same for both cases

*dissolving value*
once company is dissolved and there is any loss outgoing from the dissolution you share the loss in accordance with the profit/loss sharing percentage

*mortgage financing*
Bank owns the property and than sells it partially to purchasing party. Therefore property with building value of 100 is sold to new owner f.e. for 150 with f.e. 20/80 ration in begging. Therefore new owner needs to pay 30 (20% of 150) as a downpayment to start the deal. And than for every new payment, f.e. 15 the bank transfers 10% of property to new owner.

*sale of banks ownership*
As the bank is the owner of the property, not the owner of the collateral, it sells the % it owns in the property. Therefore direct relationship is established.

*Own capital*
The sharia loan is accounted as an own capital of the company

China - payment problems

What could be the probable way of seeing problems in financial system in China?

People are using more and more 3rd party, out of bank, payment systems. Banks are running out of liquidity and therefore increase the pressure on the government to stop 3rd party payment systems. As the only real number on the banks balance sheet is the amount of the cash any bank in any given time has on its accounts.

System would prepare for financial meltdown from inside.

Singapore - hard to fail

Singapore financial setup is inspiring & challenging. Therefore to fail in the environment will give you, in time, more and more questions if there were no other way to keep it little longer.

Usually the answer lies very close, over the corner u can not yet see. If you are seeking ti raise the equity, manage your cash flow, get your deposits, protect your FX position or even educate yourself, you might be on right place.

Singapore - Financial news

Finding an investor in Singapore is possible trough one big socializing application. It is really long process, as you need to prepare whole pitch, company information, pictures of your colleagues, idea of the company, introduction and also to be clear of the usage of the resources.

INDONESIA - fintech on loans

FinTech in Indonesia can benefit from growing market with limit amounts of financial products due to risk approach of current banks. Using the big data analysis, scoring models and data from the merchant can a FinTech company prepare reasonable solution as 100% competition to credit card with 25% interest per year. Whole solution is much more cost effective, as there is no need for branches, bank employees, bank licence.... It will be interesting to observe this ideas, as it is building bank with banks pricing without being rigid, 100% OJK regulated and with lower costs

Retail unpaid loans - basic segregation

Retail loans once unpaid are segregated to different tears by time:
I. TIER....loan overdue 1-30 days, usually in Asia collected in-house (within bank)

II. TIER...loans overdue 30-90 days, are being watched as after 90 days they become a burden for the bank as NPL. Usually are are connected with additional fees and penalty interests. Still collected in-house (within banks)

III. TIER... loans overdue 90-180 days, already part of NPL. This is already an issue for the bank, as even a partial downpayment for the loan being overdue brings trouble to the bank, as whole loan falls down and consumer equity. Banks are under pressure and are allowed to use external agencies to activate the loan. This period is highly monitored by central bank & needs to be observed

IV. TIER....180 - 360 days. Loans are getting seriously problematic. If not solved they will be written off. Pressure increases.

V. TIER....360 days - 720 days. Loans are written off.

VI. TIER .... 720 days - 5 years. Loans are written off, but could be reactivated

VII. TIER.... 5 years and more. Bank doesnt care of this loans anymore and keeps proceeding with usual business

CZECHOSLOVAK SUCCESS IN CHINA

"Little mole" is a cartoon invented & produced in Czechoslovakia many years ago. The main author, Mr. Zdenek Miller did already pass away and his daughter is now taking care of his product. It is really nice to see the same character, little mole, to be presented to Chinese children these years. Mole is accompanied by panda to match Czechoslovak and European culture with Chinese one.

The picture is from Beijing airport where u can buy any plush toy representing a character in China national TV.

Singapore - advisory servise to shares issue

Issuing of the shares in Singapore is comes with:
a) no face value parity
b) preferencial shares to be treatet differently than common shares
c) different types of shares couls be treated differently
d) convertible shares to be redeemable
e) convertinble notes without option to be redeemable
f) shares dilution
g) dividend challenge on tax side
h) interest challenge

The most important is to answer yourself:
1. Do we or do we not want the investor to be our shareholder?
2. Do we want our investor to have voting rights?
3. Do we want the investor to be easy replaceable by different cash?
4. Do we want to give to investor interest or divident?
......

Singapore - one headquarter

It is nice to see how much did Singapore become important for Indian & Chinese community. It is impossible to meet a lawyer, advisor or financial company that is not based on both.

In essence they are very clever and focus people. Everyday challenge and motivation doesnt allow to speak in business Hindi or Mandarin. Clients come and go. And all of them speak English.

Therefore struring a financial transaction is much easier. People are open even to your limited knowledge. The most important is "stupidy test" in the beggining. Be prepared to pass it, otherwise u will have a wierd lok and good bye.

Sometimes it is people in SG, that are too much focused on their own piece of pie and therefore can not see other usage of the same tool.

Jakarta - NPL

Following recent updates from the market it is obvious, that Indonesian banks are within growing stage in the position of focusing on non-performing loans. As it can be seen from various sources, one of it to be Forbes magazine, are two new CEOs of Indonesian banks Bank Mandiri
and Standard chartered focosing on growth and NPL. It is for sure a main concern to growth to deal with NPL. The possible ways to deal with NPL are:
a) setup a new team in the bank to focus on NPL in house and out of house management
b) colaboration with out ot house NPL management companies due to effectivity and variable costs
c) finding the source of NPL within the bank
d) dealing with NPL by sale of risky assets
e) studying previos solutions and price for sale of NPL to government
f) preparing new products focused on targeting of NPLs (credit cards to personal loans)
g) restructuring
h) talks to shareholders directly or through media

A proper prediction, management, approach and communication of risk is essential. Many times it is much better for the bank to issue loans with NPL than not to issue loans at all. For example on credit card NPL the bank can get first downpayment of the credit card simply by the collection of the fees by seller. Second way of collecting the NPL would be a cash flow that shall be connected with credit card. Third way the bank focuses on insurance.