Personal Finance

Do You Have the Right Personality for a Loan?

Lending money is a risky business. Since 2010, Bank of England figures reveal that lenders have written off an average of £13.2 billion a year in bad loans. You can never be 100% sure that you will ever get your money back.  One way of mitigating that risk is to know as much as possible about the person to which you are lending. Indeed, some financial managers reportedly are now considering the use of personality tests to assess the suitability of borrowers seeking loans or credit agreements.

Banking System Access Eludes Women Globally

Around the world, women in developing economies enjoy less access than men do to the banking system.

Bank account opening procedures, especially requirements to produce identity documents, are a major barrier for undocumented women in developing countries. These requirements aim at meeting anti-money laundering and counter terrorist financing (AML/CTF) obligations. But the barriers may be set unnecessarily high for women given their crime risk profile.

Trading Short-Term Financing Gain for Long-Term Pain

George Osborne is in the process of finding £20 billion of savings with his government spending review. As the government searches to balance the budget and reduce public spending, it is worth re-examining an old favourite when it comes to keeping spending off the balance sheet – private finance initiatives (PFI).

This is a dangerously addictive way of financing public spending that rarely has an economical result. In fact, spending cuts put pressure on government departments who have to make fixed PFI payments to the private sector from their reducing budgets.

Increased Mortgage Lending Not Necessarily a Precursor to a Bubble

Domestic banking crises often originate in the real estate sector. Therefore, one might conclude that mortgage lending is negative for financial stability. However, in normal (non-crisis) periods, mortgage lending may actually contribute to financial stability. This is because mortgage loans have different risk properties from other bank assets such as commercial loans, so having some share of mortgage loans in a bank’s portfolio tends to diversify the risk of that portfolio.

Can Australia Grow Their Economy via Tax Cuts?

In his recent speech on personal income tax cuts, Treasurer Joe Hockey made clear that the “common cause of reform [of the tax system is] to improve the growth trajectory of the Australian economy”. The key to this for Hockey is to ensure the income tax system is not constraining workforce participation and effort, through things such as bracket creep.

Hence the need for a downward revision of personal income tax rates.

It sounds quite straightforward and reasonable, not the least because it addresses the average income earner.

The Three Rules of the Dodd-Frank Law

Dodd-Frank turned five last month and once again, the debate around some of its rules sparked many discussions by politicians and economists, but less by the public. According to a poll conducted in 2015, only 4 percent were ‘very familiar’ and 30 percent were ‘somewhat familiar’ of the Dodd-Frank law.

The Franc(ness) of SNB's Problems

Earlier today, the Swiss National Bank reported a record CHF50.1 bln loss. It has the chins wagging, but the real implications are minor.  The losses are not realized and are unlikely to be repeated.  In fact, if the SNB's report had covered the month of July, the loss would likely have been smaller. 

Are Globally Systemically Important Banks (G-SIBs) Still at Risk?

Ever since the 2008 financial crisis, the Federal Reserve Board has been trying to regulate big banks that pose huge systemic risk to the economy. The financial crisis highlighted the fact that big banks were taking more risks for which they were not prepared.  Some banks were so big that if allowed to fail, they could have taken down the entire financial system with them.

Hope for a New Tax Structure to Help Developing Countries Receives a Blow

When an international development conference in Addis Ababa almost collapsed last week, the confrontation emerged from an obscure and unlikely source. Who knew that the status of the UN Tax Committee could so stir the emotions?

After taking negotiations to the brink, the G77 group of developing countries climbed down on demands for a global tax body and the rich countries got their way. Campaigners called it a tragic day for developing countries.

If you thought that, you would have needed a very optimistic view of the UN’s abilities in this area.