Topic Covered :
1. RBI's stance on AT1 bonds may deter investors
2. Consensus remains elusive among G20 countries on fresh SDR allocation
3. BlackRock Android malware
RBI'S STANCE ON AT1 BONDS MAY DETER INVESTORS
Why in news?
At least four banks--Bank of Baroda, HDFC Bank, Canara Bank and State Bank of India--have announced that a part of their fresh fund raising would be through AT1 bonds
1. The Reserve Bank of India's stance that Yes Bank’s Additional Tier 1 bonds and subsequent write-offs are investments gone bad may act as a deterrent for fund managers and investors from investing in new issuances, especially those of mid-sized lenders with weak capital buffers.
2. They fear that if a bank’s capital falls below regulatory levels, these bonds could be written-off putting their investment at risk.
3. In the Yes bank episode, investors saw more than ₹8,000 crore of their investments written off even though the bank had the option of converting the amount in full or part into fresh equity.
4. Deepak Shenoy, CEO at Capitalmind Wealth said that ideally no one should touch these AT1 bond issuances.
5. According to Renuka Sane, associate professor at the National Institute of Public Finance and Policy (NIPFP), poor regulation is now leading to a situation where the bondholders are being made to pay, while the shareholders are not.
CONSENSUS REMAINS ELUSIVE AMONG G20 COUNTRIES ON FRESH SDR ALLOCATION
Why in news?
The G20 countries at the latest virtual meeting of finance ministers under the chairmanship of Saudi Arabia on Saturday failed to reach an agreement on the possibility of fresh Special Drawing Right (SDR) allocation to member countries or reallocating excess SDRs from rich members to those facing liquidity crisis due to the unfolding coronavirus pandemic.
1. SDR is an international reserve asset created by International Monetary Fund (IMF) comprising the dollar, euro, yen, sterling and yuan, allocated to its members in proportion of their quota.
2. India has 13,114 million SDRs on account of its 2.76% quota while the US has 82,994 million SDRs due to its 17.45% quota.
3. China with 6.41% quota has 30,483 million SDRs at the IMF.
4. One SDR is currently valued at $1.38.
5. A fresh SDR issue by IMF would help the least developed and developing countries facing foreign exchange crisis at a time the world economy is projected to contract by 4.9% in 2020.
6. The US and India have opposed the move. Finance minister Nirmala Sitharaman in April told the G20 finance ministers that national forex reserves should be the first line of defence during a crisis like this.
BLACKROCK ANDROID MALWARE
Why in news?
Security firm ThreatFabric has alerted about a new malware, called BlackRoc