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Bundesbank profits stall as eurozone risks grow

The eurozone debt crisis is not yet over, even if calm appears to have returned to the financial markets, the Bundesbank warned on Tuesday as it set aside billions of euros in new risk provisions.

Bundesbank profits stall as eurozone risks grow
Photo: DPA

“Even if reform policies are kept to, the necessary adjustments in the crisis countries are still going to take years,” the head of the German central bank, Jens Weidmann, told a news conference.

“The growth rates seen before the crisis, which were partially artificially inflated, will not be achievable for a long time,” he said.

Weidmann also complained that policymakers in some countries still lacked a clear direction.

“The reform process has stalled in France; in Italy, the elections have cast a question mark over it and the situation in Cyprus is even less clear,” he said.

“The crisis is thus not over, despite the calm that has returned to the financial markets in the interim,” the central bank chief insisted.

Turning to Germany, Europe’s biggest economy which has managed to escape the recession that many neighbours still find themselves in, Weidmann said: “the German economy was still in good shape … despite the difficulties in many European partner countries.”

Nevertheless, the long-running crisis “represents the most significant risk for the economy in Germany,” Weidmann warned.

“Only some of the confidence lost as a result of the crisis has been recovered so far,” he noted.

As the year progressed, growth could be expected to become stronger, but this would depend on the absence of further shocks to confidence, he argued, insisting that it was up to politicians, not Europe’s system of central banks to solve the crisis.

The Bundesbank’s net profit for last year rose only slightly from a year earlier, because the central bank had decided to set aside billions of euros more in risk provisions, Weidmann continued.

The bank’s 2012 net profit amounted to €664 million, compared with €643 million in 2011.

The entire amount – which is less than half the €1.5 billion that Finance Minister Wolfgang Schaeuble had been hoping for – was transferred to the federal government.

“Despite significantly higher interest income, there was scarcely any rise in the profit owing to a further steep increase in risk provisioning,” Weidmann said.

Interest income is a central bank’s most important source of income and net interest income rose to €8.3 billion last year from €4.8 billion a year earlier.

“The steep €3.5 billion rise is due mainly to strong balance sheet growth on account of the crisis,” Weidmann said.

The central bank boosted its provisions for general risks, including inflation and exchange-rate risks, by €6.7 billion to €14.4 billion, he said, pointing to “further heightened risks stemming from monetary policy operations in the wake of the financial and sovereign debt crisis.”

As part of its wide armory of anti-crisis measures, the European Central Bank embarked on a controversial programme, known as SMP, to buy up the sovereign debt of countries hit hardest by the crisis.

Out of a total €208.7 billion worth of bonds acquired, Italian sovereign debt accounted for nearly half or €99 billion.

Spain followed in second place, accounting for €43.7 billion of the bonds bought, Greece for €30.8 billion, Portugal for €21.6 billion and Ireland for €13.6 billion.

Weidmann refused to reveal exactly how much of the Bundesbank’s risk provisions covered the bonds bought up under the SMP programme, saying merely it was around “one third”.

AFP/mry

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Cashless payments in Switzerland: What is Twint and how does it work?

If you live in Switzerland, you are likely no stranger to Twint and maybe even use it regularly to make and receive payments. But if you are not familiar with this app, this is what you should know.

Twint app can be installed on a mobile phone.
“Twinting” money with a smartphone is easy and convenient. Photo by Andrea Piacquadio from Pexels

In Switzerland, the word “Twint” is used both as a noun and a verb.

As a noun, it describes the mobile application which allows you to pay for various goods and services practically everywhere in the country.

As a verb, (“to twint”), it means to send someone money, or receive it, via the same app.

So what exactly is Twint?

Simply put, it is digital cash (not to be confused with bitcoin, which is digital currency) that was first introduced in Switzerland in 2014 and has become very popular since then.

Twint logo. Image by Twint.ch

People like it because it is an easy and quick way to make instantaneous payments, especially in situations when credit cards or physical cash can’t be used.

A big part of its convenience is that it can be used at cash registers, vending machines and parking meters, as well as in online shops — pretty much everywhere in Switzerland, even in places that don’t accept credit cards.

The only similar mode of payment would be your maestro debit card issued by your bank.

This video explains exactly how the process works.

Another advantage of Twint is that you can use it to send money to someone else’s mobile phone — as long as they also have Twint. And you can receive money the same way.

And there are no fees or charges for this service.

How does Twint work?

Anyone can use Twint, but you need a Swiss bank account or a credit card and, of course, a smartphone.

According to Twint website, you need a smartphone with either an iOS (from version 12.2 and upwards) or Android (from version 7 and upwards) operating system and Bluetooth capability (from version 4.0 and upwards).

“It is generally not possible for Twint to be used on Apple devices with an operating system older than “iOS 12.2” or on Android devices with an operating system older than “Android 7”. On Android devices without access to the Google Play Store (e.g. on certain HUAWEI models), the use of Twint app is also not possible”.

But If you have a compatible phone, installing Twint is easy.

Swiss banks offer their own version of the app, and you can download it directly from your bank’s website.

Then, when you use Twint to make a payment, the amount is debited directly from your bank account or credit card.

By the same token, if you receive payment from another Twint user, the money is automatically deposited in your account.

And you are not limited to just one Twint app.

If you have accounts is several banks, or have more than one credit card, you can install and use all of them.

READ MORE: How to open a bank account in Switzerland

Can Twint be used to make payments and receive money from abroad?

For the moment, Twint can be used solely in Switzerland and payments can be made only in Swiss francs – although this may change in future. 

“We are, however, working closely with providers in other countries to develop an international and multi-currency solution”, according to Twint website.

You can find more information about Twint here.

READ MORE: Which bank is best for Americans in Switzerland?

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