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Kaperoni - Good News ! Apparent Confirmation Of A CBI Free Float !

DinarThug

By DinarThug,
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DinarThug Newbie

DinarThug

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CNN. Broadcasting The Good, The Bad And The Thugly .......

KAPERONI: Ok, I have studied these articles and some checking. There are two main highlighted areas One good and one bad. Let me explain what I believe is going on...

#1 Alsumaria news/Baghdad

The Central Bank announced, Tuesday, to allow banks to open documentary, alaatmadt also decided to increase the share auction downloads and given to bureaux de change and remittance, and adopted a resolution authorizing the Governor to reduce the selling price of the dollar as the market requirements. LINK

#2 Central Bank decides to allow Iraqi banks to open letters of credit

12/11/2012 - 2:26 pm

Central Bank of Iraq, Tuesday, allowing Iraqi banks to open documentary Alaatmadt, while also decided to increase the share of the weekly auction and given to the exchange companies and money transfer, also adopted a resolution authorizing the Governor of the Bank to reduce the sale price of the dollar as the market demands. LINK

...

#3 Central bank: authorize the Governor of the Bank to reduce the exchange rate to enhance the value of the Iraqi dinar

11/12/2012 03:18

Revealed CBI authorize the Governor of the Bank to reduce the exchange rate to enhance the value of the Iraqi dinar.A source at the central bank said in a statement singled out Iraqiya that authorization comes in the framework of the decisions taken by the bank on monetary policy and the stability of the market and to encourage Iraqi banks to open letters of credit and increase the share of banking companies and financial transfer applicable to the instructions in the auction currency. LINK

#4 All banks licensed to open letters of credit and funded by the Central Bank of Iraq according to a mechanism designed for this purpose,

The statement noted that "the Board of Directors authorized the Iraqi Central Bank Governor the power to reduce the sale price of the dollar and of 1179 dinars to the dollar to enhance the value of the Iraqi dinar based on market demands." LINK

KAPERONI: Ok, I have studied these articles and some checking. There are two main highlighted areas above. One good and one bad. Let me explain what I believe is going on...

1. "all banks licensed to open letters of credit and funded by the Central Bank of Iraq according to a mechanism designed for this purpose"

This is potentially very bad. This appears to be Maliki's way to get the CBI's reserves. What he has come up with is for the local banks to "open letters of credit" guaranteed by the CBI.

In other words, the CBI is now in the business of guaranteeing loans and it's reserves are the guarantee. This IMO, effects the reserves of the CBI as they now become the collateral for these "open letters of credit."

If I am correct, Maliki could initiate some loan through a local bank (through some fictitious company) and default, thus making the CBI spend it's funds to reimburse the local bank. He clearly is very clever finding ways to get access to the reserves of the CBI.

The question will be, will the IMF and WB allow this? Steve (Enorrste) does not seem to think so. I not so sure. The problem with this is it would clearly effect the value of the dinar.

2. "the Board of Directors authorized the Iraqi Central Bank Governor the power to reduce the sale price of the dollar and of 1179 dinars to the dollar to enhance the value of the Iraqi dinar based on market demands."

This appears to be confirmation that the CBI is going to move forward with a free float. They are going to let "market demands" (float) dictate the rate of the dinar as we stated. It appears it will start at the current CBI rate and rise. This authorization is very good news and hopefully we will see something soon.

CARRELLO: Other than final divorce papers, Iraq is the only thing that has made me giggle and cry at the same time. One question: If Dr.Shabibi was going to go ahead and free float in an effort to go around Maliki, why would the current Governor need to gain authority? Because he is not in a permanent position? Thanks for all the information and thoughts.

TERRY: away with that. It is just too transparent what would happen. When has a Central Bank ever let their credit (reserves) be put at risk?

re no. 2-" market demands " sounds pretty darn good. I hope the float can happen even though the letters of credits doesn't happen. We shall see.

ELLIE: Thank you Kap for explaining this article! :) It does sound like the float could be "rolling round the bend" (lol epophroditus). I tend to agree with Steve though about the WB and IMF not allowing the "bad news." Miss Sherry - please move to Colorado - I am here :) lol

KAPERONI: I did get this from Kirk, pertaining to this article...

No, it translated well enough, the problem is the Arabic version. Did a quick search and it looks like they didn't take their time with it - longer articles phrased it differently.

It isn't the Dinar they plan to weaken, rather the Gov has been given the authority to lower the price of the dollar - that's why it would strengthen the Dinar.

I presume this would go with the increased supply of dollars - it would make it easier for merchants to buy dollars since it is devalued against the dinar.

But note that in other articles I've seen, this is just one item mentioned near the bottom, it is not emphasized. The increased dollar sales is the true news here. Kirk

WN: Kap, you hit the nail with your head, oh wait, too much time in Colorado. There is no way the IMF, WB etc. would back the obvious Malimonkey business with the LOC. I wonder how we will know about he float when it happens? My eyes ara crossed in anticipation.

CAPTAINSTRIKEDOWN: Kap, I apologize for having a hard time understanding Kirk's points in relation to your two points made earlier. Could you please reconcile the two. For example, is the increased dollar sales a problem with respect to our investment? Is it still likely that the article suggests an imminent float? Thanks

KAPERONI: Captain, Kirks view is good because it confirms they are going to pump more dollars into the market. Which for all practical purposes should remove more dinar.

OLDWAZHISNA: Not all letters of credit act as "guarantees of loans". In international trade, they serve a critical role in making international trade work by allowing goods to be shipped across borders.

There are two types of letters of credit: a "stand-by letter of credit" and a "trade letter of credit". The first acts as a third party guarantee for an agreement between two parties (hence a "stand-by" where the bank will provide monies if the primary obligor fails).

This is the one that Kap should rightly fear that the Central Bank ought not to engage in.

A country's central bank is absolutely the wrong financial institution to be issuing these.

However, the trade letters of credit may be something of a logical financial instituion for the CBI to help the the opening of trade in an Iraq trying to emerge from being a third world country. They are the only banking company operating in Iraq with enough resources and credibility to operate on behalf of Iraq interests what is probably an otherwise vaccum to facilitate trade.

Trade letters of credit, if done right, have much less risk than the stand-by type. Banks that accept letters of credit are taking mostly currency risk if they only accept the transportation documents that drive the transaction and have been truly verified as to their validity.

It is true that in other countries, these types of transactions are typically handled by large international commercial banks but just as importantly they have to have a presence in the country to work smoothly. Maybe the CBI is a temporary stand-in until a better commercial banking operation is functioning in Iraq. I don't neccessarily see this as a Maliki-driven money grab.

GAINSMORE: there will not be a CBI if they start directly lending to the regional banks- this will not stand. It appears Maliki will go to great lenths to see the west not profit from this rv- which,imho- is one of the main reasons why he keeps tackling the idea. Would have been a great defensive linebacker....

BLUEYESINLEVIS: Very logical and informative post.. OLdWAZ.

Gainsmore.. I seriously doubt Maliki cares one whit about the West and the investment. he is all about power and control and holding onto that power and control.

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sandyf Newbie

sandyf

Posted
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CNN. Broadcasting The Good, The Bad And The Thugly .......

[

KAPERONI: Ok, I have studied these articles and some checking. There are two main highlighted areas above. One good and one bad. Let me explain what I believe is going on...

1. "all banks licensed to open letters of credit and funded by the Central Bank of Iraq according to a mechanism designed for this purpose"

This is potentially very bad. This appears to be Maliki's way to get the CBI's reserves. What he has come up with is for the local banks to "open letters of credit" guaranteed by the CBI.

In other words, the CBI is now in the business of guaranteeing loans and it's reserves are the guarantee. This IMO, effects the reserves of the CBI as they now become the collateral for these "open letters of credit."

If I am correct, Maliki could initiate some loan through a local bank (through some fictitious company) and default, thus making the CBI spend it's funds to reimburse the local bank. He clearly is very clever finding ways to get access to the reserves of the CBI. (What about Warka)

There was no mention of Letters of Credit in the article, LC's are an old fashioned way of international trade.

"The Bank said in a statement received (News Agency news) on Wednesday that Bank Management Council adopted several resolutions encouraging Iraqi banks and credit and Mansour as the first stage and later include all licensed banks to open credit and financing by the Central Bank of Iraq in accordance with the mechanism set up for this purpose in addition to the continuation of these banks in the entry window sale of foreign currency."

This sentence could be read as follows

"and later include all licensed banks to open credit and financing(facilities) in accordance with the mechanism set up by the Central Bank of Iraq for this purpose"

For example mortgages etc.

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TrinityeXchange Newbie

TrinityeXchange

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There was no mention of Letters of Credit in the article, LC's are an old fashioned way of international trade.

"The Bank said in a statement received (News Agency news) on Wednesday that Bank Management Council adopted several resolutions encouraging Iraqi banks and credit and Mansour as the first stage and later include all licensed banks to open credit and financing by the Central Bank of Iraq in accordance with the mechanism set up for this purpose in addition to the continuation of these banks in the entry window sale of foreign currency."

This sentence could be read as follows

"and later include all licensed banks to open credit and financing(facilities) in accordance with the mechanism set up by the Central Bank of Iraq for this purpose"

For example mortgages etc.

Sandyf that is exactly my interpretation of this article. I thought it a very good thing since the banking laws before this announcement did not facilitate these types of loan programs (I believe it is due to religious observances). If these new adopted resolutions are now in place then it makes sense that the CBI must be involved as it is the source of the "reserve deposit" infused into the local banks:

Deposits that commercial banks keep with the Federal Reserve System. Federal Reserve deposits play three key roles in the banking system. One, they are used by the Federal Reserve system to process or clear checks. Two, they are loaned between commercial banks through the Federal funds market. Three, they are used by the Federal Reserve System to control the money supply. Federal Reserve deposits are one of two types of bank assets that are considered bank reserves and used to satisfy reserve requirements. The other is vault cash.

Federal Reserve deposits are accounts that commercial banks keep with the Federal Reserve System (the Fed). The Fed is the economy's central banking authority that undertakes a great deal of bank regulation as well as setting the course of monetary policy.

Yes even though my illustration highlights the operating relationship between commercial banks and the Federal Reserve, it is standardized all over the world between commercial banks and central banks. It looks that the CBI is preparing to participate in the same system standardized all around the world. In a nutshell, it is time for the loans machines to begin and eventually kick into high gear. Time to invest in banks folks.

This is just my 2c and I am no where in the same league of the gurus.

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fnbplanet Apprentice

fnbplanet

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I thought FDIC insurance was backed by the Federal Reserve (our Central Bank). That insurance encourages people to put money in banks, which is a good thing here. If it encourages business lending, under controlled conditions, it may be a good thing for Iraq. (I don't trust Maliki anyway, so he may have something up his.....sleeve).

Maybe I was wrong.

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sandyf Newbie

sandyf

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Sandyf that is exactly my interpretation of this article. I thought it a very good thing since the banking laws before this announcement did not facilitate these types of loan programs (I believe it is due to religious observances). If these new adopted resolutions are now in place then it makes sense that the CBI must be involved as it is the source of the "reserve deposit" infused into the local banks:

Bank launches Islamic platform

13 December 2012 12:03 PM Updated : 13 Dec 2012 12:03 PM

Standard Chartered Bank has announced the launch of an Islamic version of its award-winning online banking platform, Straight2Bank.

The enhanced platform expands client access to the bank's Islamic products by providing its growing Islamic customer base with a secure online portal that is Sharia-compliant.

The existing Straight2Bank platform was enhanced to meet the needs of the bank's Islamic clients, presenting a convenient, branchless access channel to cash management, trade, securities services and reporting.

The introduction of a Sharia-compliant Straight2Bank will improve operating efficiency for Islamic clients by enabling them to manage their cash and trade portfolios with the bank electronically and instantaneously.

"We have observed growing client demand for Sharia-compliant banking services across our key markets," said Standard Chartered Saadiq chief executive Afaq Khan.

Straight2Bank will be available to customers across all segments, including small and medium enterprises, in Bahrain, the UAE, Bangladesh, Pakistan and Malaysia.

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BJinMontreal Newbie

BJinMontreal

Posted
Posted

CNN. Broadcasting The Good, The Bad And The Thugly .......

KAPERONI: Ok, I have studied these articles and some checking. There are two main highlighted areas One good and one bad. Let me explain what I believe is going on...

#1 Alsumaria news/Baghdad

...

Ummm - Never Mind ... I thought that said Asylum News ... then again ... :blink::unsure::wacko: ...

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zantac Newbie

zantac

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If I am correct, Maliki could initiate some loan through a local bank (through some fictitious company) and default, thus making the CBI spend it's funds to reimburse the local bank. He clearly is very clever finding ways to get access to the reserves of the CBI.

Why would Maliki want to do this & for what purpose.

This is just ridiculous.

Just for instants the CBI are not stupid you just cant make up a company overnight to get letters of credit or loans back by the central bank. Companies income, Credit checks, business plans, banking history & so on would be scrutinised before any LCs or loans would be granted.

Sorry just doesn’t make any sense to me at all what Kaps is talking about

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