Why are interest spreads so high in Uganda?

Using international comparisons and a unique bank-level dataset on the Ugandan banking system over the period 1999 to 2005, we explore the factors behind consistently high interest rate spreads and margins. International comparisons show that the small size of Ugandan banks, persistently high T-Bill rates and institutional deficiencies explain large proportions of the high Ugandan interest rate margins. The Ugandan bank panel confirms the importance of macroeconomic factors, such as high inflation, high T-Bill rates and exchange rate appreciation. There is also evidence for the small market place and high costs of doing business explaining persistently high spreads and margins; smaller banks and banks targeting the low end of the market incur higher costs and therefore higher margins. Spreads and margins also vary significantly with the sectoral loan portfolio composition of banks, while there is little evidence for foreign bank entry, privatization or changes in market structure explaining variation in spreads or margins over time.     

The trilemma of a monetary union: Another impossible trinity

A monetary union among autonomous countries cannot simultaneously maintain an independent monetary policy, national fiscal sovereignty and a no-bailout clause. These three features make up an impossible trinity, and attempts to preserve all three concurrently will ultimately end in failure. In order to save EMU, one of these three must be abandoned.     

“Excellent” systems analysis: The Singapore context

Within the broad context of Singapore's IT2000 Project, an exploratory research project was conducted as part of an on-going program to identify the perceptions of what constitutes the qualities of an excellent systems analyst. A grounded theory approach (theory building) was adopted using Kelly's RepGrid technique to conduct interviews with stakeholders in the systems analyst's performance in a large organization based in Singapore. In reviewing the constructs which emerged from the stakeholder interviews, 12 universal Themes were identified, such as Attitude, Knowledge, Communicate, including a number of sub-Themes. Each stakeholder group had its own interpretation of the relative importance of each Theme. These results have implications for the selection, training and development of systems analysts. Suggestions are made for further research to compare the cross-cultural perceptions of excellent systems analysts, as well as the testing of specific hypotheses derived from the results of this research project.Dr M. Gordon Hunter is with the Faculty of Management, The University of Lethbridge, 4401 University Drive, Lethbridge, Alberta, T1K 3M4 CANADA, tel: (403) 329-2672; fax: (403) 329-2038; e-mail: HUNTMG@CETUS.MNGT.ULETH.CA. Dr John Beck is with the Division of Human Resource and Quality Management, School of Accountancy and Business, Nanyang Technological University, Nanyang Avenue, Singapore 2263.     

The UK Financial Sector and Risk Management in PFI Projects: A Survey

In PFI transactions the private companies which take on the obligation to build and manage a facility usually provide only a small fraction of the project's capital requirements. Most of the capital is borrowed from banks and other financial institutions. This poses challenges to financial services providers which often have to retain untypical residual project risks. This article describes the types of risks faced by financial services providers and the strategies they use to cope with these risks. Given the often politically-sensitive nature of PFI projects, the authors suggest that financial institutions should investigate a broader set of parameters than they do at present, which relate directly to the political economy of PFI projects.     

Banking is essential,banks are not. The future of financial intermediation in the age of the Internet

This paper examines the question how the future of financial intermediaries and banks as special financial intermediaries may look like in the age of the Internet. The reduction of transaction costs caused by the Internet will reduce the barriers to enter the market for financial products, because there may be no longer a need to run a large system of cost-intensive branches. But as closer examination of the functions of financial intermediaries shows, not everybody can sell and distribute financial products. This is true because of asymmetric information problems in financial business which require an intermediary with a good reputation and because of the need to keep large funds of capital to transform the risk of assets. Both requirements represent an important barrier to enter the market for financial intermediation. Not every financial product will be exposed to more competition due to the rise of the Internet but only products which are standardized and have a low risk. Moreover, large firms with high amounts of capital and a good reputation can be considered as new competitors for banks.     

The impact of sovereign wealth funds on global financial markets

If sovereign wealth funds act similarly to private investors and thus allocate foreign assets according to market capitalisation rather than liquidity considerations, official portfolios reduce their “bias” towards the major reserve currencies — the US dollar and the euro. As a result, more capital flows “downhill“ from rich to less wealthy economies. In this scenario, the euro area and the United States would be subject to net capital outflows while Japan and the emerging markets would attract net capital inflows. The potential implications of a rebalancing of international capital flows for stock prices, interest rates and exchange rates remain uncertain, however. The authors wish to thank Marcel Fratzscher for excellents comments. The views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank.