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On Kuwait, IMF Reviews Shadow Banking Without Looking into Shadows

By Matthew Russell Lee

UNITED NATIONS, December 9 -- The Kuwait reports by the International Monetary Fund, which came out from under embargo at 9 am today, have a lengthy section on "shadow banking."

  But it begins by admitting that "no single definition of shadow banking exists... Shadow banking is often identified within
entities that are less regulated than a traditional bank and lack a formal safety net."

   Even without a formal definition, the IMF says that "advanced countries show the largest shadow banking systems including in the US, euro area, and UK, amounting, in 2012, to around 200 percent of GDP in the US and euro area, and close to 400 percent in UK."

  The IMF continues: "for Kuwait, factors behind shadow banking growth seem to include ample liquidity and search for yields, regulatory arbitrage, and complementarities with the banking system."

  But in the main report, there's this rah-rah statement: "The authorities continue to strengthen the Anti Money Laundering/Combating of Financing of Terrorism (AML / CFT) framework, and looks forward to their continuing work
with the Financial Action Task Force.... Going forward, Kuwait is
expected to continue improving the effectiveness of the AML / CFT regime, and strengthening the role of the FIU."

  The IMF reports on Kuwait do not mention the word "Syria" once, much less the specifics of financial outflows to support groups there.

  Back on December 5 when the IMF issued its Article IV report on Turkey it said "the economic spillovers to Turkey from conflicts in Syria and Iraq have negatively impacted exports. The effects of tensions between Ukraine and Russia have thus far been limited, but if they were to lead to generalized risk aversion in financial markets, the impact could become significant."

   Notably, Turkey earlier this week re-announced its position that it will not recognize any break-away or break-off of Crimea from Ukraine. Turkey's policies on Syria are known.

  The IMF in its accompanying staff report offers Turkey examples from South Korea, Peru, Austria and New Zealand. But are these really analoguous? And what of the banks in the Turkish Republic of Northern Cyprus - if it's not recognized, who's regulating them?

Back on November 13, six days after sanctions were imposed on Yemen's former president Saleh and two Houthi leaders, Inner City Press asked the International Monetary Fund, "does the IMF have any comment or response to the new government, the imposition of sanctions by the UN Security Council? What is the status of the IMF's program in Yemen?"

  Later on November 13, IMF Deputy Spokesperson William Murray told Inner City Press, "Staff is in close dialogue with the authorities, who have reaffirmed their commitment to implement their IMF-backed economic reform program. These reforms are essential to boost inclusive growth, reduce unemployment and poverty, tackle corruption, and enhance fiscal and external sustainability. The three-year economic program, which was approved on September 2, 2014, is reviewed every six months. The first review is therefore planned for the Spring of 2015."

  The authorities, of course, have to some degree kept changing. We'll stay on this.

  Reuters, on the other hand, this week ran a long "exclusive" about Yemen finance and budgets, without once mentioning the IMF.

The UN Security Council's sanctions committee on November 7 designated for asset freeze and travel bans former President Saleh and two Houthi leaders, Abd al-Khaliq al-Huthi and Abdullah Yahya al Hakim. Click here for UNSC press release.

  After that, UN Secretary General Ban Ki-moon put out a statement welcoming the new government but not mentioning the sanctions:

The Secretary-General welcomes today’s announcement of the formation of the new Peace and National Partnership Government in Yemen. He congratulates President Abd Rabbu Mansour Hadi and Prime Minister-Designate Khaled Bahah for their leadership during this process. The Secretary-General commends the parties for their pledge to accept the slate decided on by the President and Prime Minister, and to extend their unwavering support to the new government. At this uncertain and fragile time for Yemen, today’s announcement is a positive step towards political stability and peace in the country.

The Secretary-General reminds the parties of the political commitments they made in signing the Peace and National Partnership Agreement. Yemen is facing enormous challenges at present, which can only be overcome if all sides work together in the greater national interest to implement the Agreement without delay.

The United Nations looks forward to continuing its engagement with the President, the Prime Minister, the Government and all Yemenis leaders as they seek to build a new democratic Yemen that responds to the legitimate aspirations of its people.

  Back on October 31 the US State Department put out this answer to a question taken earlier that day:

Question: Do you have any reaction to reports that the Houthis have given President Hadi 10 days to form a government?

Answer: We have seen the reports that speakers at a Houthi-convened conference today announced a deadline for President Hadi to form a government in 10 days.  U.S. officials continue to support the efforts of Yemen’s political constituencies, especially President Hadi and Prime Minister Bahah, in implementing the provisions of the September 21 Peace and National Partnership Agreement, including the formation of a government.  All Yemenis, including the Houthis, have an important role to play in working peacefully to form a government that can meet the needs of the Yemeni people and continue to pursue the key steps of its political transition.

  Back on October 13 after Yemeni Prime Minster designate Ahmed Awadh Bin Mubarak was vetoed by the Houthis, on October 13 President Hadi appointed Yemen’s current UN Ambassador Khaled Mahfoodh Abdulla Bahah to the position.

 Later on October 13 after a three-hour UN Security Council meeting, brief "press elements" were read out at the stakeout once again vaguely threatening sanctions -- Inner City Press' questions including about secession of the South were not answered -- and welcoming Bahah as prime minister.

He was Minister of Oil and Minerals of Yemen from 2006 until 2008, under Ali Saleh, including being “the Chairman of the Board of Directors for the Yemen Liquefied Natural Gas Project with investments of over $4 Billion, Chairman of the Safer Exploration and Production Petroleum Company and, Chairman of the Yemen General Corporation for Oil and Gas, which includes the Aden Refinery Company, the Yemen Refinery Company, the Yemen Oil Company, the Yemen Investment Oil Company, and the Petroleum Training Center.”

  That's a whole lot of hydrocarbons. Watch this site.


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