Endeavor Careers Choicest Blogs: Weekly Current Affairs: February 2022, Week 02

Welcome to the Endeavor Editors’ Weekly Current Affairs Choicest Blog series. Get a weekly roundup – on news from business, economy, markets, policy, and more. A quick capsule format news summary and update to keep you abreast with all the latest current affairs.

1) International News and Global Economy

Ukraine tensions: Russia invasion could begin any day, US warns

Russia could invade Ukraine “at any time” and American citizens should leave immediately, the US has warned. An invasion could start with aerial bombing that would make departures difficult and endanger civilians, the White House said on Friday. Moscow has repeatedly denied any plans to invade Ukraine despite massing more than 100,000 troops near the border. The US statement prompted countries around the world to issue fresh warnings to nationals in Ukraine. US National Security Adviser Jake Sullivan said Russian forces were now “in a position to be able to mount a major military action” in remarks seen as a clear escalation in the urgency of warnings from US officials.

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U.S. warns Russia could invade Ukraine before end of Olympics

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Quad pushes back on Chinese coercion, no compromise on Indo-Pacific security

At the Quad summit, the four countries, India, US, Japan and Australia, acknowledged the centrality of Asean countries to the larger Indo-Pacific strategy and presented the democratic grouping as an alternative to authoritarian China for close economic and security partnerships. With EAM Jaishankar in the Philippines today, it is quite evident that the Quad is engaging the Asean countries with Djakarta and Manila, the keys to Indo-Pacific security. Just as the Biden administration has approved the sale of F-15 EX fighters to Indonesia, India is ready to equip Djakarta with supersonic BrahMos anti-ship cruise missiles. Indonesia, the Philippines, and Japan virtually control all the ingress routes to the South China Sea and present a deterrent to the increasingly aggressive and rapidly growing Chinese PLA Navy. Indonesia is also buying 42 Rafale F-4 fighters from France and is on its way to becoming the most powerful Air Force in south-east Asia.

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Quad meet: Key differences crop up between India and others

The Foreign Ministers of India, Japan and United States met in Australia recently for the Quad ministerial. They agreed to act together on Indo-Pacific cooperation, but India appeared to have deep divergences from the other three members.

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Pakistan has to return $3 billion to Saudi Arabia within one year: Finance Minister

Cash-strapped Pakistan has to return $3 billion to Saudi Arabia within a year which it had borrowed from Riyadh in 2021 to improve its dwindling foreign exchange reserves, it emerged on Friday. Finance Minister Shaukat Tarin told the Senate, the upper house, that the Saudi Fund for Development (SFD) in October 2021 placed the amount in the account of the country’s central bank, the State Bank of Pakistan.Under an agreement, Saudi Arabia revived its financial support to Pakistan, including about $3 billion in deposits and $1.2 billion to $1.5 billion worth of oil supplies on deferred payments. Pakistan also pledged to return the $3 billion within a year.Tarin said that the interest rate on the loan was four per cent which would have to be paid every three months.He said there was no clause in the agreement to extend the loan.”The Saudi government has told us that they can ask for their money back if Pakistan defaults at any point,” Tarin said and added that there was no question of default.

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Prominent Sri Lankan legislators call for ‘orderly renegotiation’ of foreign debt to combat crisis

A group of senior parliamentarians in Sri Lanka, including some aligned to the government, have called for an “orderly negotiated postponement” of outstanding foreign debt, and corrective policy measures including a “strong social welfare scheme”, to combat the island nation’s economic crisis. In a collective statement dated February 11, the legislators said: “The best way forward for Sri Lanka is to immediately initiate a multistep process towards an orderly negotiated postponement and restructure the repayment of its sovereign debts. Sri Lanka can then correct its policies towards a path of sustainable economic growth and debt management, while also ensuring access to essential needs and goods for the Sri Lankan people and its economy.”According to local media reports, Sri Lanka’s gross foreign reserves dropped to $ 2.3 billion in January 2022, down by 24 % since December. Sri Lanka must service debt totalling nearly $ 7 billion this year.Sri Lanka has sought Indian assistance of over $ 2 billion – New Delhi has cleared $ 1.4 billion – while tapping other sources including China, for further assistance and a debt restructure.

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Sri Lanka’s economy forces Rajapaksas into an ‘organic’ retreat, strategic shift to India

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Deuba government faces challenge over American deadline on compact

Nepal Prime Minister Sher Bahadur Deuba’s government is facing a major challenge this month as the Biden administration has set a deadline for the ratification of the US Millennium Challenge Corporation (MCC) development compact by February 28, which members of the ruling coalition are divided on. The U.S. deadline was set in a letter sent to Mr. Deuba and Mr. Prachanda on February 3 by the MCC Acting CEO in Washington, made available to the media, and followed up with a stern telephone call by Assistant Secretary of State for South and Central Asia Donald Lu on February 10 to PM Deuba, Mr. Prachanda and Opposition leader of the Communist Party (UML) K.P. Sharma Oli. In the call, sources said, Mr. Lu warned that the relations would be “affected” if the compact — originally signed in 2017 — is not ratified in the Nepal Parliament by month end.

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2) India

Former Chairman of Bajaj Auto Rahul Bajaj passes away at 83

Veteran industrialist and the former chairman of Bajaj Auto, Rahul Bajaj passed away at 83. The industrialist had pneumonia and also a heart problem.In April 2021, Bajaj stepped down as non-executive chairman of Bajaj Auto, ceding the position to his cousin, Niraj Bajaj. Rahul Bajaj was awarded with the third-highest civilian award Padma Bhushan in 2001.Bajaj was a former member of the Rajya Sabha. Besides, he had been the chairman of the International Business Council, World Economic Forum.

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Explained: Karnataka hijab row, timeline of events, violence in campus, and HC’s observation

The Muslim community is enraged after a Karnataka college barred entry of students into a campus for sporting the hijab (headscarf). Muslim community members believe that a girl once reaching puberty must cover her head and hair. And only her parents and husband in the future are allowed to see it. The college management said that it has set rules and the parents also had given a declaration that their children will follow rules at the time of admission. However due to the pandemic, the institutions were closed and once reopened, the rules were back in place and followed. However, six girls in Udupi Government PU College revolted against the college and also posted images on social media saying their constitutional rights are being denied. A few days later, the issue became viral and also took a political turn.

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Navigating the knotty binary of fighting both denial of education to girls in hijab & religious patriarchy

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FADA asks Hyundai, Kia to clear their stand on social media post on Kashmir

Auto retailers body Federation of Automobile Dealers’ Association (FADA) said it has written to Hyundai India and Kia India to clear their stand on the Korean auto major Hyundai Motor Company’s Pakistan arm posts on its official Twitter and Facebook handles, announcing “solidarity with Kashmir”.FADA added it is also urging the Ministry of Heavy Industries & SIAM India to seek clarifications on the issue. “We strictly condemn the act of Hyundai Pakistan and Kia Pakistan for the tweets on Kashmir. We remain committed to our motherland and have written to both the companies on India to clear their stand on the same”, FADA said in a statement, adding, “We also urge the Ministry of Heavy Industries & SIAM India to seek clarifications.”Hyundai Motor India, the country’s second-largest car maker, has come under massive crossfire on social media after the car maker’s Pakistan arm released posts on its official Twitter and Facebook handles, announcing “solidarity with Kashmir”. Social media users in India on Sunday called for mass boycotts or cancelling bookings of the car maker.

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ISRO’s first launch mission of 2022: Countdown starts

The 25-hour countdown for the first launch mission of 2022 of the Indian Space Research Organisation (ISRO) to orbit earth observation satellite EOS-04 onboard PSLV-C52, began early on February 13, the space agency said. The launch of the Polar Satellite Launch Vehicle, which will also carry two small co-passenger satellites, is scheduled on February 14 at 05:59 hours, from the First Launch Pad of Satish Dhawan Space Centre at Sriharikota in Andhra Pradesh. The launch vehicle is designed to orbit an earth observation satellite EOS-04, weighing 1,710 kg into a sun synchronous polar orbit of 529 km. EOS-04 is a Radar Imaging Satellite designed to provide high quality images under all weather conditions for applications such as Agriculture, Forestry and Plantations, Soil Moisture and Hydrology and Flood mapping.

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3) Economy

RBI projects India GDP growth rate at 7.8% for FY23

Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday projected India’s economic growth for the financial year 2023 (FY23) at 7.8%.The growth rate for the current financial year is retained at 9.2%.The governor said there was some loss of economic momentum due to third pandemic wave and the demand for contact intensive sector is muted.Central bank has left the benchmark interest rate or repo rate — the rate at which banks borrow from the Central bank — unchanged at 4% for the tenth consecutive time and decided to continue with accommodative stance.The RBI has adopted an ultra-loose monetary policy in the wake of coronavirus pandemic and in order to shore up the economy with adequate liquidity, it has last slashed key rate to record low of 4% and it has been held at that level since May 2020.

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4) Markets, Banking and Finance

RBI warns of spill over effects on banks and NBFCs in its policy review

Banks and non-banking financial companies have to be watchful and improve their risk management measures as the unwinding of easy policies could have spill over effects, the Reserve Bank of India Governor Shaktikanta Das said. Das stressed that banks need to fortify governance standards and build capital buffers as the financial system navigates its way through the pandemic.Das added that the regulator has been strengthening the regulatory and supervisory framework for both banking and non-bank financial sectors to proactively identify, assess and deal with vulnerabilities.As per the latest December quarter earnings, all banks are relatively stronger with higher capital adequacy, reduced bad loans, higher provisioning cover and improved profitability than in the previous years.

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Stage set for historic LIC IPO! Govt files DRHP to sell 5% for ?63,000 crore

Setting the stage for the country’s biggest-ever public offering, Life Insurance Corporation on Sunday filed draft papers with capital market regulator Sebi for the sale of a 5 per cent stake by the government for an estimated ?63,000 crore. According to the draft red herring prospectus, LIC’s embedded value, which is a measure of the consolidated shareholders value in an insurance company, has been pegged at about ?5.4 lakh crore as of September 30, 2021, by international actuarial firm Milliman Advisors. Although the DRHP does not disclose the market valuation of LIC, as per industry standards it would about 3 times the embedded value or around ?16 lakh crore.

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5) Business

Tata Motors expects CNG, EV sales contribution to go up in next 3-5 years

Tata Motors is expecting CNG cars contribution to grow up to 20 per cent gradually in its total sales over the next 3 to 5 years as it anticipates more entry-level petrol and diesel customers to opt for such models, a top company official has said. The Mumbai-based auto major is also bullish on the electric vehicle segment with sales expected to account for about 20 per cent of its overall dispatches over the next few years.Tata Motors President Passenger Vehicle and Electric Vehicles Shailesh Chandranoted that currently diesel car sales across its portfolio stand at around 15 per cent, while petrol and CNG sales account for roughly about 66 per cent and 12 per cent, respectively.EVs account for the rest of the dispatches.”In the next three to five years, petrol will possibly come down to about 50 per cent level, CNG will go up to 20 per cent. Diesel would come down further to about 10 per cent and I would say (for) EV…, we have already declared our target of going more towards 20 per cent,” Chandra stated.

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N Chandrasekaran reappointed chairman of Tata Sons for a second term of five years

Tata Sons Pvt Ltd board on Friday considered and approved the re-appointment of its executive chairman N Chandrasekaran for another five years. The continuity in leadership comes as the 154-year-old conglomerate that makes salt to luxury sedans, is working on an all-in-one ecommerce superapp — one of Chandrasekaran’s key projects — to market its swathe of consumer products and services as part of a digital makeover. The group is also reinventing its aviation businesses after successfully acquiring Air India Ltd. from the federal government last year. Chandrasekaran joined the board of Tata Sons in 2016 and took over as Chairman in 2017 at a time when the group was mired in crisis after the ouster of his predecessor Cyrus Mistry in a shock boardroom coup led by Ratan Tata, who heads Tata Trusts – a bunch of philanthropic organizations that hold 66% stake in Tata Sons. The ouster triggered a years-long legal battle between the two sides and was finally put to bed after India’s top court ruled in March 2021 that Mistry’s dismissal was legal.

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N Chandrasekaran re-appointed as Tata Sons Chairman: A look at the Key Milestones in his First Term

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ABG Shipyard, its directors booked over Rs 22,842-crore scam; biggest fraud registered by CBI

ABG Shipyard, the flagship entity of ABG Group, has been reportedly booked by the Central Bureau of Investigation (CBI) over an alleged Rs 22,842-crore financial fraud.This is the biggest bank fraud case ever registered by the CBI, official quoted by wires agencies said. The case pertained to funds gotten and misused during the 2012-17 period.Between 2012-17, the accused in the case colluded together and engaged in diversion of funds, misappropriation and criminal breach of trust, the forensic investigation showed.As many as 28 banks and financial institutions were victims of the alleged scam, as per the report. Funds given by these bodies were used for purposes other than for which they were given, CBI’s FIR said.

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ABG Shipyard, Directors allegedly cheated 28 Banks of Rs 22,842 Crore: CBI

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Coal supply crunch has led non-power sector to ‘catastrophic conditions’: Industry associations

Industry associations have written to Prime Minister Narendra Modi on deteriorating coal supply to the non-power sector, stating that curtailment in fuel supply by rail as well as road and road cum rail (RcR) modes over the last few weeks has pushed the sector towards a “catastrophic” situation. Moreover, fertiliser being part of the regulated sector is also suffering immensely due to supply crunch from the indigenous sources, they said in a joint representation.The associations include the Aluminium Association of India, Coal Consumers’ Association of India, Confederation of Indian Textile Industry, Indian Captive Power Producers Association, Sponge Iron Manufacturers Association, and Fertiliser Association of India.The industries like aluminium, cement, steel, sponge-iron, paper, fertiliser, chemical, rayon and their captive power plants (CPPs) are mostly dependent on domestic coal as fuel as well as a direct feed in the process of manufacturing.This adverse supply situation that started around August/September last year became further arduous as coal stock at many plants plunged below critical level. The demand-supply ratio had shown signs of improvement during November. However, the supply to the NRS consumers, including CPPs, has plummeted once again despite October-March being the highest production months for Coal India Ltd.

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6) Technology

FM Sitharaman says taxing cryptos doesn’t mean it has been legalised

Breaking her silence on the issue of legalising cryptocurrencies, finance minister Nirmala Sitharaman said that the government has only taxed the profits emanating from cryptocurrency transactions and not done anything to legalise or ban or regulate it. The finance minister has spoken out at a time when the cryptocurrency tax is getting a mixed reaction with some pointing towards the fact that bringing the transactions under the tax net is a step towards legalising it.”I am not going to legalise it or ban it at this stage. Banning or not banning will come subsequently, when consultations give me input,” Sitharaman said.The issue of legalising private cryptocurrencies is facing stiff resistance from the RBI which has vociferously opposed their roll out warning against their deleterious impact on country’s financial stability.The RBI stood its ground and maintained that private cryptocurrencies are a threat to financial stability.

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Govt scraps requirement of drone pilot license, after banning import of drones

The civil aviation ministry on Friday scrapped the requirement of drone pilot licence for operating drones in the country. The move comes a day after India announced its decision to ban the import of drones, a move that effectively blocks an emerging market for China’s SZ DJI Technology Co., the world’s top drone maker, and encourages a nascent local industry to ramp up production. According to an official, the Remote Pilot Certificate (RPC) issued by a DGCA-approved drone school through the single window DigitalSky Platform shall be sufficient for operating a drone in India. The official also said that no remote pilot certificate shall be required for operating a drone up to 2 kg for non-commercial purposes.

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Intel launches blockchain chip to tap crypto boom

Intel Corp on Friday launched a new chip for blockchain applications such as Bitcoin mining and minting NFTs to cash in on the rising usage of cryptocurrencies. The chip will ship later this year and the first customers include Block Inc, the Jack Dorsey-led firm that recently changed its name from Square Inc to highlight its growing focus on the blockchain.Intel said its chip is an energy-efficient “accelerator” designed to speed up blockchain tasks that require huge amounts of computing power and thereby consume a lot of energy.As a part of furthering its footprint in the space, Intel has also formed a new segment called Custom Compute Group within its Accelerated Computing Systems and Graphics business unit.

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Intel launches Crypto Mining initiative with energy-efficient GPUs

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Marketplace suspends most NFT sales, citing ‘rampant’ fakes and plagiarism

The platform which sold an NFT of Jack Dorsey’s first tweet for $2.9 million has halted most transactions because people were selling tokens of content that did not belong to them, its founder said, calling this a “fundamental problem” in the fast-growing digital assets market. Sales of NFTs, or non-fungible tokens, soared to around $25 billion in 2021, leaving many baffled as to why so much money is being spent on items that do not physically exist and which anyone can view online for free. The biggest NFT marketplace, OpenSea, valued at $13.3 billion after its latest round of venture funding, said last month more than 80% of the NFTs minted for free on its platform were “plagiarized works, fake collections and spam.”OpenSea tried limiting the number of NFTs a user could mint for free, but then reversed this decision following a backlash from users, the company said in a Twitter thread, adding that it was “working through a number of solutions” to deter “bad actors” while supporting creators.

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How will the digital rupee work-Decoding CBDC?

Would India’s digital currency be a rival to Bitcoin? How will the Central Bank Digital Currency work? What are the risks associated with it? What will this mean for the future of private cryptos? Can it boost the digital economy? Catch an ace panel decode all this and more on Moneycontrol Masterclass this Friday. Tune in Live to ask your questions to former Finance Secretary Subhash Chandra Garg, Sharad Sharma of iSPIRT, Nischal Shetty of WazirX and Rashmi Deshpande of Khaitan & Co.

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7) Politics

Goa elections 2022: Goa votes tomorrow for 40 Assembly seats

In view of campaigning for the 40 Assembly seats Goa coming to a conclusion on Saturday, the state will go to polls in a single phase starting tomorrow. The incumbent Bharatiya Janata Party (BJP) is being challenged by Congress, Trinamool Congress and Aam Admi Party (AAP) in a multi-cornered electoral contest in Goa.As of now, the Goa Assembly has a strength of 40 members out of which the BJP currently has 17 legislators and enjoys the support of legislators from Maharashtrawadi Gomantak Party (MGP), Vijay Sardesai of the Goa Forward Party (GFP), and three independents. The GFP and MGP each have three MLAs, and Congress, on the other hand, has 15 MLAs in the house.

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Uttarakhand Election: Tough fight for CM Dhami, Harish Rawat; 632 Candidates in fray for 70 seats

The political fate of several BJP heavyweights, including Chief Minister Pushkar Singh Dhami and state unit president Madan Kaushik as 70 assembly seats of Uttarakhand spread over 13 districts will go to the polls on Monday. Important candidates whose fate is to be decided in these polls include ministers in the Dhami cabinet: Satpal Maharaj, Subodh Uniyal, Arvind Pandey, Dhan Singh Rawat and Rekha Arya. Chief Minister Dhami is contesting from his current assembly constituency of Khatima while four-time MLA and state BJP president Kaushik is contesting from Haridwar. Minister Dhan Singh Rawat is contesting from Srinagar and pitted against state Congress president Ganesh Godiyal. Amid ongoing row over the right to wear hijab by Muslim students, the high-pitched campaign witnessed political parties ending with Chief Minister Dhami promising implementation of Uniform Civil Code (UCC) in Uttarakhand after winning Assembly polls.

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Uttarakhand CM’s pitch for Uniform Civil Code says ‘It Will Boost Equality’

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8) Sports

IPL Auction 2022: Complete list of players sold, unsold

England batter Liam Livingstone fetched a staggering 11.50 crore deal from Punjab Kings, who also roped in West Indies fast bowler Odean Smith for Rs 6 crore on the second day of the IPL auctions on Sunday so far. Among Indians, all-rounder Shivam Dube fetched Rs 4 crore from Chennai Super Kings for his six-hitting abilities while Gujarat Titans bagged another out of favour multi-skilled player Vijay Shankar for Rs 1.4 crore. Cheteshwar Pujara predictably went unsold at the auction while Ajinkya Rahane got a base price of Rs 1 crore from Kolkata Knight Riders. India wicket-keeper batter Ishan Kishan became the most expensive player in the IPL 2022 auction after Mumbai Indians secured his service for Rs 15.25 crore. Earlier, it was Shreyas Iyer, who also predictably, became one of the highest-paid players among the marquee set with Kolkata Knight Riders making a whopping bid of Rs 12.25 crore after an intense price war at the auctions.

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9) Opinion

Russia, Nato and the battle for credibility in the Ukraine crisis

Last week, financial industry regulators in Europe and the United States alerted banks to tighten their cyber security in anticipation of possible attacks by Russia-linked hackers. Going by Russia’s actions against Estonia, Georgia and Ukraine over the past 15 years, there are grounds to expect cyber-attacks during an escalating political crisis or ahead of a Russian military operation.While it is prudent for Western governments to warn financial institutions to raise their guard, it is unclear if Russia will launch offensive cyber operations against the US, Britain and the European Union. It is hard to see how a narrower cyber-attack on North Atlantic Treaty Organization (Nato) troops and military installations will serve Russia’s interests, unless Vladimir Putin is prepared for an all-out war with the West. A Russian cyber-attack on a Nato military network, or vice-versa, is bound to be interpreted as a ‘blinding attack’ ahead of a missile strike. Six decades of experience has taught everyone that such a move can trigger a chain of events which can quickly escalate to the nuclear level.

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China selling armed drones to stealthy strategic effect

Algeria and Egypt are the latest nations slated to receive China’s CH-5 and Wing Loong drones, sales that underline Beijing’s increasingly successful global marketing strategy after the US restricted its armed drone exports to even close allies beginning in 2020.Algeria recently publicly confirmed its order of six CH-5 drones to be delivered in March this year, while US ally Egypt is in talks with China to receive more Wing Loong drones for its air force.China’s comparatively cheap drones and often flexible payment options are especially appealing to nations with limited defence budgets, giving Beijing a cost-competitive foothold in global drone markets.From a wider perspective, however, China’s drone, as well as other advanced weaponry, sales are driven as much by strategic and foreign policy considerations as economic gain. These sales can also be construed as signs of its growing political, technological, and military might to its partners and rivals.

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Crypto tax a block for blockchain? Industry divided

Beyond the vocal — and visible — retail-facing crypto trading exchanges in India, there is a thriving local blockchain ecosystem valued in excess of $15 billion. But it must hurdle potential barriers to growth in the shape of a newly introduced tax that, some others believe, is more help than hindrance to this perception-challenged sector. The 30% tax (and TDS) on crypto income announced in the Budget is seen by some as “recognition” of the blockchain industry. But many others also believe a high tax regime and stringent taxation terms could stunt growth in a sector populated largely by bootstrapped start-ups.”Trading volumes will come down across exchanges because of high tax incidence. This will indirectly bring down tax revenues of the government,” said Darshan Bathija, CEO of Vauld, a crypto-lending & trading platform.”The TDS is going to hurt the industry the most; every time a player pays TDS, it goes from his immediate working capital. The decision to tax crypto incomes is a positive step, but it should not be so high; such high levels of taxation may not help the ecosystem to grow,” Bathija said.

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Multidimensional approach key for India to achieve $1 trn exports by 2030: CII

India needs to adopt a multidimensional approach to take the country’s merchandise exports to USD 1 trillion by 2030, a report by industry body CII has suggested. The report recommends finalising free trade agreements with large markets, extending RoDTEP to all exports, attracting global firms and addressing domestic manufacturing issues to achieve the target. In its report ‘Achieving $1 trillion in merchandise exports: A Roadmap’, released on Sunday, the CII has outlined products and destination markets that India should focus on and highlights a range of policy actions towards meeting the target. The need of the hour is for India to integrate closely with global value chains and to attract FDI inflows in its key sectors, according to the CII.

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10) Weekly special

UpScalio on a roll with multiple acquisitions and growth

Roll-up firm UpScalio has been on the news lately with a number of acquisitions. On this episode, Nitin Agarwal, Co-founder and Chief Growth Officer, UpScalio talks about the company’s journey and the road ahead.

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11) Did you know?

What is SOFR?

The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. The SOFR includes all trades in the Broad General Collateral Rate plus bilateral Treasury repurchase agreement (repo) transactions cleared through the Delivery-versus-Payment (DVP) service offered by the Fixed Income Clearing Corporation (FICC), which is filtered to remove a portion of transactions considered “specials”. Note that specials are repos for specific-issue collateral, which take place at cash-lending rates below those for general collateral repos because cash providers are willing to accept a lesser return on their cash in order to obtain a particular security. The SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from the Bank of New York Mellon as well as GCF Repo transaction data and data on bilateral Treasury repo transactions cleared through FICC’s DVP service, which are obtained from the U.S. Department of the Treasury’s Office of Financial Research (OFR). Each business day, the New York Fed publishes the SOFR on the New York Fed website at approximately 8:00 a.m. ET.

LIBOR vs. SOFR: The Key differences you need to know

LIBOR is calculated from estimates of the rate that major London banks charge each other for loans. For historical reasons, the rate has become widely adopted throughout the financial industry and is used to price derivatives, cash products and other financial instruments.In 2012, however, it was revealed that banks were rigging the rate. The panel banks that gave LIBOR estimates were collaborating together and submitting false data in order to profit more from trades.In consideration of all of these factors, the Financial Conduct Authority (FCA) announced in 2017 that it would phase out the benchmark by the end of 2021.This announcement spurred financial authorities across the world to get started on crafting alternative benchmark rates to replace LIBOR. For dollar-denominated contracts, the Alternative Reference Rates Committee (ARRC) crafted SOFR.Unlike LIBOR, SOFR is based on actual transactions — namely, overnight transactions in the Treasury repo market. Thus, SOFR is a more accurate means of measuring the cost of borrowing money. Because these transactions can be observed by anybody, it’s also less easily manipulated.

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With that, we come to an end for our Weekly Current Affairs February 2022 -Week2. Hope you have liked it. Write your feedback in the comments below and let  us know if there is anything else you would like us to cover.

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