PRESIDENT CALLING COLLECTIVE MEETING OF PARTIES THURSDAY AFTER FAILED EFFORT TO ASSEMBLE GOVT. Kathmandu, 9 Jan.: The eighth presidential deadline asking The Big Three and five Madeshbadi parties in government to assemble a national consensus government to succeed the administration of Prime Minister Baburam Bhattarai elapsed Wednesday. The effort of President DR. Ram Baan Yadav and the parties for nearly 45 days haven’t borne fruit. The president is holding a collective meeting with parties Thursday to find antheroutletto the deadlock. Leaders quoted the president, who has given responsibility for a consensus effort to the Big Three and Madeshbadi parties, is against renewing his failed effort for a consensus government. UML General Secretary Ishwor Pokhrel Wednesday called for a majority government of parties in the dissolved parliament. . nnnn PM’S INTERVENTION TO STOP JOURNALIST MURDER PROBE PROTESTED Kathmandu, 9 Jan.: Journalists and locals Wednesday staged a sit-in front of district police office in Dailekh protesting the prime ministerial intervention in investigation of journalist Dikenda Thapa murder eight years ago. Five Maoists are under investigation under judicial custody after arrest as they admitted burying Thapa alive after kidnap. nnnn WILD ELEPHANTS DESTROY 10 HOUSES AROUND KOSHI TAPPU Kathmandu, 9 Jan.: Wild elephants came out of the protected Koshi Tappu and destroyed 10 houses in the reserve’s neighbourhood overnight. Villagers of 10 houses spent the night in the open in fear in SUnsari. nnnn BACKGROUND ON CPN MAOIST GENERAL CONENTION Kathmandu, 9 Jan.: In its first General Convention (GC) since its split from the ruling UCPN (Maoist) party, the CPN-Maoist leadership faces pressure from its cadres to revive war-era structures, including the military, to accomplish ‘outstanding tasks of the revolution.’m Phanindra Dahal write in The Katmandu Post. The breakaway Maoists believe that the mother party conveniently side-stepped two major agendas—socio-economic transformation of Nepali society and dignified integration of the former Maoist combatants into the Army—’betraying the People’s War.’ While there is unanimity in the party over the two issues, there is divergence on the way forward to complete the outstanding tasks of the revolution. While party Chairman Mohan Baidya ‘Kiran’ is against an immediate reinstatement of an armed struggle, Secretary Netra Bikram Chand ‘Biplav’ is of the view that revolution will not be complete without taking up arms. “The party will now adopt a roadmap of cooperation and struggle. If parties refuse us a share in state power, we will start preparations for an armed struggle,” Party Secretary Chand told reporters at the party headquarters in Buddhanagar on Tuesday. “We are not in favour of wasting time in the name of consensus.” The convention, which kicks off at Khulamanch in Kathmandu on Wednesday, will be attended by around 1,200 representatives from the state and district committees and the party structure overseas, including India. Representatives from state committees have said there is intense pressure on the party to revive conflict-era structures such as the ‘people’s government’, ‘people’s court’ and the ‘people’s liberation army’ to help carry the revolution forward. “We cannot complete the revolution with words and paper alone. There should be a military structure and all members of the party and its sister organisations should be part of an army,” said a representative from the Tamsaling State Committee. The National People’s Volunteer, the party’s youth wing, is all set to advocate for the establishment of a military wing, comprising 21 core structures under the chairman’s leadership. Krishna Dev Danuwar, a leader from the party’s Madhes State Committee, said the party would resort to a ‘struggle’ after the general convention to secure the “people’s republic, safeguarding national sovereignty and resolving issues related to people’s livelihood.” He, however, said the party will not immediately go for a military structure and would instead take peacefully to the streets. “The party will think of forming a military wing only if the government cracks down on our agitation,” he said. Some local representatives have also argued that the party should go ‘partially underground’ and give continuity to efforts aimed at fulfilling the goals of the decade-long ‘People’s War.’ “The party was observing a ceasefire for the last few years. We expect that the general convention will energise the rank and file by adopting clear strategies on the way forward,” said one representative from the party’s Maghraat State Committee. The five-day national congress will also question the ‘genuineness’ of the UCPN (Maoist) party since its split in June. The CPN-Maoist has also claimed this as its ‘seventh’ general convention, continuing with the last one held 22 years ago. Despite widespread discontent with the mother party, there are still speculations that UCPN (Maoist) Chairman Pushpa Kamal Dahal will attempt an alliance with Baidya, given his ‘insecurity’ with Prime Minister Baburam Bhattarai, Dahal’s rival within the party. Observers claim that the feud within the former rebel party could lead to three communist parties—one led jointly by Dahal and Baidya, one by Bhattarai and another by Chand. nnnn IMPROVEMENT IN STRESS TESTS OF COMMERCIALA BANKSNN Kathamandu, 9 Jan,: The latest stress tests of commercial banks carried out by the Nepal Rastra Bank (NRB) have shown some improvement compared to previous year’s results, especially due to the improvement in liquidity and capital adequacy Indicators, Mukul Humagain and Trithvi Man SHrestha write in The Kathmandu Post.. This is what the International Monetary Fund’s (IMF) recent report based on the assessment of its article IV mission suggests. The IMF report says fewer banks are vulnerable to liquidity and credit shocks in 2012 compared to 2011. Stress testing is a risk management tool used to evaluate the potential impact on a firm of a specific event and movement components like earning, liquidity and capital. Citing the recent stress tests of commercial banks by the central bank, the IMF report said a standard credit shock would push the capital adequacy ratio of 20 among 32 commercial banks below the regulatory minimum. The number of such banks in 2011 was 22. Standard credit shock has been defined as 15 percent performing loans deteriorating to substandard, 15 percent substandard loans deteriorating to doubtful, 25 percent doubtful loans deteriorating to loss and 5 percent of performing loans deteriorating to loss. Likewise, the number of banks that may turn illiquid after five days of standard withdrawal shock is 14 in 2012 compared to 19 in 2011, according to the report. Standard withdrawal shock is the withdrawal of customer deposits by 2 percent and 5 percent in the first two days and 10 percent each in the following three consecutive days. According to the report, commercial banks are more resilient to deposit withdrawal shocks, and to withdrawals by large individual and institutional depositors. It is mainly due to the improvement in liquidity on the back of strong remittance inflows, states the report. Bankers say the report reflects the reality. NIC Bank CEO Sashin Joshi said the report shows the improvement is consistent with the measures taken by the central bank and the commercial banks to address credit and liquidity shocks. “Banks have increased their liquidity and capital adequacy ratio. I don’t think the banks will face major shock due to deterioration of asset quality and there will be a liquidity crisis like two years ago,” said Joshi. According to Joshi, the central bank directive on managing an additional one percent capital in the capital adequacy ratio as buffer capital would also help absorb credit shocks. Currently, banks are required to maintain CAR at 10 percent and the central bank has directed them to keep an additional one percent as caution measure. There is also a slight improvement in the response to credit shocks, particularly those calibrated to real estate loans, according to the report. In case of 25 percent of performing loans of real estate and housing sector is directly downgraded to loss loans, CAR of 11 commercial banks will come below the required 10 percent level. The number of such banks in 2011 test was 15. The improvement is due to the decrease in banks’ loans to the realty sector over the last three years. Commercial banks’ direct exposure to construction and real estate sectors has declined from 19.5 percent in 2009-2010 to around 16.5 percent in 2011-12. Indirect exposure through collaterals has also declined from 66 percent to 56 percent over the period. “The overall exposure is still high,” states the report. Joshi, however, said with banks increasing provisioning of real estate loans, systemic risk is unlikely to happen even if the realty loans are defaulted. The central bank also says the chances of BFIs’ exposure to realty sector affecting the system immediately are slim. “The lending to the realty sector has so far been managed well,” said NRB Deputy Governor Maha Prasad Adhikari. “A little more time is required for BFIs to be able to recover realty loans.” He said the liquidity surplus is also unlikely to remain at last fiscal year’s level due to increased lending against deposits. “However, liquidity crisis like before looks unlikely.” nnnn