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It is very scary to see Kwacha depreciating at a very fast rate. It is costing almost K6 000/per $1. The Jump from Nov’08 to February is just too enormous. This is what we predicated way back here at Zambian Chronicle, the collapse of the world economy is evidently has a lot of impact on the Zambian economy .
That is what happens when you are so dependent on the outside funding. Something is really wrong. This is what happened to Zimbabwe.
In America the economy is souring twice as much, although unlike Kwacha, the $ is appreciating. People are losing homes like crazy and job losses are sky rocketing.
US bank shares hit 17-year low yesterday on rising fears the government will have to nationalize troubled institutions such as Citigroup and Bank of America wiping out investors’ confidence as they feared government controlling of large portion of the financial sector.
According to the Financial Times report, Bank of America shares slid 14% to $3.93 their lowest point since 1984. Share in Citi were down 13.8%, closing at $2.51, their lowest since 1991.
There some options for the banks being discussed. One option, at least for Citi- would be to convert some or all of the government’s $45bn holding of preferred shares, as well as the $35bn in preferred shares held by sovereign wealth funds and other investors into common stock.
There is some refreshing news though from at least one country.
Canada has shown itself to be a pretty good manager of the financial system in ways that haven’t always been in the United States. This is due to stricter regulation and their conservative culture, one that depends heavily on a vast and stable retail branch network, and clubby working relationship,.
Canada‘s banks have remained the strongest in the G7 and according to the October report by the world Economic Forum, the soundest in the world.
According to a Finance professor at the University of Toronto, “… in Canada they do it the old fashioned way, where you need money you go to the bank and they will lend you no more than 75% of the value of your house. Canada is a more conservative place and as much as it limits growth in good times, that approach pays off when others begin a race to the bottom.”
It even gets better to know that there is a country like Canada in this world with reliable banks. Instead of our consulting Nigerians, it may be beneficial if President Banda would surround himself with world leaders like the Prime Minister of Canada.
In Canada, five banks the Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal , Largely control the market through thousands of branches across the country, forcing geographic diversification and efficiencies of scale generally not found in US or other countries.
Canadian investment banks, as part of commercial banks, are more tightly regulated and kept in check by main institutions, which would pay a price for unwise investing.
The Financial Times reported that after President Obama’s first visit to Canada, he has decided on taking a path that other presidents have not taken in the past putting banks his agenda and staying open minded to new ideas.
More drama on the souring economy.
On another note, UBS has been sued on account of 52,000 Account holders. The Department of Justice sued the Swiss bank giant for records on thousands of U.S customers. The DOJ says UBS agreed to pay a $780Million fine and reveal information on 250 US customers to avoid prosecution but vowed to fight the broader disclosure. Though some think the end of secret Swiss banking is nigh.
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