Monday, November 2, 2009
Investing in Life Insurance
Here is a chapter from my book entitled TKL Financial Planning. It covers the key points to look for when you want to invest in a life insurance policy. You have to check the effect of deduction, distribution cost and break-even point to look for a policy that gives you a fairly satisfactory return. Most policies in the market give a poor return to policyholders.
Too big to fail
During the global financial crisis, the regulators discovered the danger of having banks that are too big to fail. The collapse of a large bank would cause other financial institutions to fail, leading to a total collapse of the entire financial system. This is described as "systemic risk".
If this is so dangerous, why did the regulators allowed and encouraged the consolidation of banks in the first place? Even in Singapore, the local banks were forced to merge to become bigger banks.
If I remember the reasoning at that time, it was argued that large banks would be financially stronger and would be able to compete more effectively with other large banks to lower cost for consumers.
But this did not turn out to be the case. The consolidation of banks actually reduced competition and allowed banks to run a cartel to increase banking fees. The large investment banks, provided funds for mergers, acquisations and caused the asset bubble to grow. They made billions of dollars of profits in these "good years".
The lessons are now learnt, but rather late and at great cost to the world economy. The asset bubble grew to be so inflated that it had to find its correct level. This caused the near collapse of the financial institutions. Being "too big to fail", the banks had to be bailed out by the governments.
Going forward, what is a better approach? Smaller banks? More banks?
Tan Kin Lian
If this is so dangerous, why did the regulators allowed and encouraged the consolidation of banks in the first place? Even in Singapore, the local banks were forced to merge to become bigger banks.
If I remember the reasoning at that time, it was argued that large banks would be financially stronger and would be able to compete more effectively with other large banks to lower cost for consumers.
But this did not turn out to be the case. The consolidation of banks actually reduced competition and allowed banks to run a cartel to increase banking fees. The large investment banks, provided funds for mergers, acquisations and caused the asset bubble to grow. They made billions of dollars of profits in these "good years".
The lessons are now learnt, but rather late and at great cost to the world economy. The asset bubble grew to be so inflated that it had to find its correct level. This caused the near collapse of the financial institutions. Being "too big to fail", the banks had to be bailed out by the governments.
Going forward, what is a better approach? Smaller banks? More banks?
Tan Kin Lian
Sunday, November 1, 2009
Start a Financial Plan
Here is another chapter from my book - TKL Financial Planning. It gives advice on starting a financial plan.
Loyalty and National Service
There are many "loyal" Singaporeans who support the need for National Service. I do not know if they have sons that are about to enter full time NS and have to compete with new citizens for jobs later.
I am also loyal to Singapore and support National Service. But I like it to be done in a manner that is fair to our male citizens. Read my letter to the Straits Times that was not published.
I am also loyal to Singapore and support National Service. But I like it to be done in a manner that is fair to our male citizens. Read my letter to the Straits Times that was not published.
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