World finance :: Money, Savings and Stock markets

Column five ways to disaster proof your finances


the ravages of climate change, there are things you can do to safeguard your financial future. True catastrophic coverage is comprehensive and protects more than your assets; it protects your well being in the future. In addition to reviewing all of your insurance policies to see what they cover and how much your out-of-pocket expenses will be, you need to do more to prepare for the future. There may not be an optimal time to review your catastrophic coverage, but the worst time is when something bad happens. You may want to huddle with your trusted advisers before the end of the year. Here's what you need to know and do:

1) Review all of your estate planning before the end of the year. This is particularly essential, because Congress may be raising estate taxes when the current rates expire at the end of the year. You will need to have a plan if that happens, which may involve a shift of assets and gifts to children and relatives. Estate plans also include a will, a living trust or a living will. All three give specific directions to survivors on what you want done in the event of your passing. A living will gives medical directives if you are permanently incapacitated and on life support.2) Are you covered for disability? Damaged homes and apartments can be repaired over time. Your body isn't always easily fixed. Today, about one in four 20-year-olds will become disabled before they retire, according to the Council for Disability Awareness, which says that accidents aren't the major cause of missing work. Disability insurance covers a loss of income for a specified period of time - and that includes missing work for cancer, heart disease, back injuries or other illness. It's expensive to buy on your own, so ask your employer if they offer a policy. It may also be possible to buy a disability insurance plan through a group like a college alumni association, which often offers group rates.

3) Is there such a thing as portfolio insurance? Not exactly, but there is an institutional investing term that means you can work to protect your nest egg from financial catastrophes like the crisis of 2008. Your main goals are to ensure that you have inflation and stock-market downside protection by adding Treasury-Inflation Protected Securities (TIPS) to your portfolio, along with a mix of commodities, real estate investment trusts and foreign bonds and stocks. While you can't ensure that your portfolio is protected from all perils, an investment policy statement will outline the various risks you face and how you plan to allocate among different assets to reduce volatility.

4) Have an emergency savings fund. Avoid tapping retirement funds in an emergency. For millions, the retirement kitty represents the entirety of their savings. But draining these resources means you will take a nasty tax hit -- a 10 percent penalty for drawing on funds before age 59 ½. You will also pay income tax on the withdrawal. It's better to have separate emergency cash savings accounts outside of individual retirement accounts and 401(k)s. One option that my family uses is a federally insured money-market account for short-term needs like taxes and emergencies. We have a second tier account that I keep in a short-term bond fund. In the first fund, I aim to set aside enough money to cover a year's worth of property taxes and insurance premiums. In the short-term bond fund, I keep a year's worth of expenses.5) Do some worst-case scenario planning. This is a really tough thing to do, but I know how my family will fare if I die, if I have a crippling illness or I can't work. You can keep most of your property insurance in one place and disability and life insurance policies in a fireproof strong box. Let loved ones know where important papers and safety-deposit box keys are. Most catastrophe planning is difficult. Fortunately, one of the upsides of getting older is that you become more aware that life and lifestyle can be fragile, so this step of the process becomes more accessible.

Mexicos banregio bets on small business loans, but risks remain


Oct 20 Mexico's Banregio Grupo Financiero is dwarfed by industry titans like Bancomer and Citibanamex but that seems to suit its small and medium-sized business clients just fine, allowing it to dominate what has been a growing market segment. Banregio, along with other banks helped by government policies aimed at increasing small businesses' borrowing options, has succeeded in focusing on the once neglected business segment, but a recent central bank rate hike may lead to a reassessment. Banregio, Mexico's largest lender to small and medium enterprises by portfolio size, reported a return-on-equity of 18.4 percent at the end of June, nearly six percentage points above the average of the country's 47 banks. Its shares, up more than 30 percent so far this year, have far outpaced rivals like Grupo Financiero Banorte and Grupo Financiero Santander Mexico."As a bank, we think there are still a lot of businesses to support," said Enrique Navarro, financial director at Banregio. He noted the bank had pushed up profits by taking advantage of opportunities within the sector, in addition to growing its mortgage portfolio and expanding its presence around the country. The regional bank, which has 140 branches, is expected to open another seven retail locations by the end of the first half of 2017 to primarily serve more small and medium-sized businesses, Navarro said. Such moves have now put mid-size Banregio at the leading edge of a broader industry push to boost credit to smaller businesses with less than 250 million pesos ($13.4 million) in annual sales, a sector long an afterthought for Mexican banks in pursuit of lucrative larger corporate clients.'LARGER RISK'

By July 2016, Mexico's commercial banking system had extended a total of 424 billion pesos ($23 billion) in loans to micro, small and medium enterprises, a 25 percent increase from the same month two years ago, according to the country's bank regulator."We have seen a change - not yet substantial, but pronounced - that small and medium-sized companies are now preferring to move to the banking segment instead of suppliers," said German Velasco Robles, an analyst at BBVA Bancomer in Mexico. He said the trend was partially due to a battered Mexican peso, which had led companies to seek financing in local markets rather than from foreign suppliers. Bank interest rates stood at an average of 11.34 percent annually for micro, small and medium-sized businesses, while suppliers charge 6 percent to 12 percent, according to data from the central bank and Canaco Mexico, an association representing businesses.

But while Banregio and a number of larger rivals are actively pursuing businesses that previously sought funding from suppliers, rising interest rates loom as an obstacle. In the latest of a series of increases, Mexico's central bank - reacting to Mexican peso depreciation partially linked to U.S. elections - raised the key interest rate by 50 basis points to 4.75 percent on Sept. 29. That put it at its highest level since the 2008-2009 global financial crisis. That could lead to slower growth in the financial sector that would likely cause banks to tighten credit, said analysts such as Margarita Chamorro Camara of local brokerage Finamex. MORE HESITANT?

"If banks are going to reduce the amount of credit they could probably start with the most risky sectors, which could be the small and medium-sized businesses that have a larger risk," she said. While the banking sector's portfolio of overdue loans shrunk by 21 percent for large companies in the year before July 2016, it grew by 13 percent for small and medium sized businesses during the same period, according to Mexico's National Bank and Securities Commission. The rate hikes come as credit has grown by more than five times the country's annual gross domestic product, according to Mexico's bank association, partly due to growing corporate loan portfolios and government efforts to strengthen smaller businesses by guaranteeing a portion of commercial credit. But, Velasco said, that could change as higher rates make smaller businesses more hesitant to seek loans. Navarro, Banregio's finance director, said the hike would have no impact."The cost of credit is still very accessible," he said, adding that the central bank's key lending rate was far below its level of 8.25 percent at the outset of 2009. Shares in Banregio, which sets roughly 70 percent of its total portfolio at a variable interest rate, fell 1.9 percent, more sharply than five other banks listed on Mexico's IPC index on the day of the rate announcement. But the stock went on to hit a record last week and is still trading just off those highs.