Cabinet clears Bill to deal with crisis in banks, insurers
NEW DELHI: A proposal to introduce a Bill in Parliament for setting up a Resolution Corporation to deal with bankruptcy in banks, insurance companies and financial entities received Cabinet go-ahead on Wednesday.
The Financial Resolution and Deposit Insurance Bill, 2017, which aims to instil discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities, was approved by the Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday, an official statement said.
The proposed Bill will provide for a comprehensive resolution framework to handle any bankruptcy situation in banks, insurers and financial sector entities. According to the statement, the Bill when enacted will pave the way for setting up of the Resolution Corporation.
It would also lead to repeal or amendment of resolutionrelated provisions in sectoral Acts as listed in Schedules of the Bill. "It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, to transfer the deposit insurance powers and responsibilities to the Resolution Corporation," it said.
The Resolution Corporation would ensure the stability and resilience of the financial system, protecting the consumers of covered obligations up to a reasonable limit and public funds to the extent possible.
The government has recently enacted the Insolvency and Bankruptcy Code, 2016, for the insolvency resolution of non- financial entities. The proposed Bill complements the Code by providing a resolution framework for the financial sector. Once implemented, this Bill together with the Code will provide a comprehensive resolution framework for the economy.
It seeks to give comfort to consumers of financial service providers during any financial distress. It would help in maintaining financial stability in the economy by ensuring adequate preventive measures while at the same time providing necessary instruments for dealing with a post-crisis situation. NEW DELHI: Four large banks that met an inter-ministerial group (IMG) on Wednesday expressed concern over "stress" in the telecom sector and flagged the possibility of loan default by operators.
The IMG met officials from four leading banks – State Bank of India, Punjab National Bank, Axis Bank and HDFC Bank on financial difficulties being faced by the telecom industry, whose debt burden stand at a whopping Rs 4.6 lakh crore.
"They (banks) say that the telecom sector may be in stress and there can be defaults," sources familiar with the development said.
The banks in the two-hour meeting talked about measures that can be taken to enhance liquidity.
Sources further said that SBI'S exposure to the telecom sector is to the extent of Rs 80,000 crore.
They added that the IMG may meet the banks once more but the date has not been finalised yet.
The IMG, comprising officials from ministries of communications and finance, is meeting operators and lenders to discuss financial difficulties being faced by the industry, and measures that can be taken to ease the situation.
Last month, SBI chairman Arundhati Bhattacharya in a letter to the telecom secretary had expressed concern over the stress in the telecom sector reaching "unsustainable levels".
"The stress in the sector has reached highly unsustainable levels after the entry of new players and launch of free services which led to erosion of topline and EBITDA of the telecom service providers," the letter said. BEIJING: The Chinese insurer that owns New York City's Waldorf Astoria Hotel said on Wednesday its chairman was unable to perform his duties following a report he was detained by regulators amid accusations of possible financial misconduct.
Anbang Insurance Group Ltd. Chairman Wu Xiaohui was "temporarily unable to perform his duties due to personal reasons," said a one-sentence statement on the company website. It said Wu authorised other executives to do his work and gave no other details.
On Monday, the magazine Caijing reported that Wu, who founded Anbang in 2004 and built it into one of China's biggest insurers, was detained last week by insurance regulators.
Citing unidentified sources, it said authorities told the company about the detention but gave no reason. Spokespeople for Anbang did not respond to phone calls or emails. The China Insurance Regulatory Commission did not respond to questions sent by fax. Anbang has been under scrutiny since a multibillion- dollar global string of asset purchases, including buying the Waldorf for $2 billion, raised questions about how it was paying for its buying spree.
The privately held company said the money was raised from shareholders. It denied accusations by another magazine, Caixin, in April that Anbang improperly used payments from policyholders to increase its capital base. More recently, the company has suffered a series of setback including failing to complete several foreign takeovers, including the proposed purchase of Us-based Fidelity & Guaranty Life for $1.6 billion. In May, Anbang was ordered to stop selling two financial products that regulators said violated industry rules. Other Chinese insurers also have been investigated following complaints of reckless speculation in stocks and real estate. The chairman of the Chinese insurance regulator is under investigation by the national anti-corruption agency.
Regulators have declared reduction of financial risks in the Chinese economy a priority this year. Rising Chinese debt levels have prompted concern about the stability of the country's financial system. Anbang has a reputation for unusually aggressive expansion in a Chinese insurance industry dominated by state- owned companies.