ENERGY AS FEE
By the start of the financial crisis almost all banks where short on liquidities. At that time all the Central Banks of the world have an allotment based liquidities window. They decides each month the amount of liquidities they want to deliver to the market and divided that in allotments. Banks could tender an interest percentage for a specific allotment and the highest interest tender on a specific allotment got that allotment. After collapse of the inter banking loan system (after the Lehman collapse) all the Central Banks of the world switch from allotment based Quantitative Easing to the so called 'open window' based Quantitative Easing. Every bank could demand any liquidity amount against a fixed and openly published Central Bank interest rate one just one condition: they have to hand over collaterals (even Greece treasury bonds are accepted for one 100% of their nominal value), by this the banks can even get full nominal cash for toxic smelling assets. So liquidities are not the problem for banks any more. The current problems of the banks are more in turnover, costs (too high overhead costs due lower turnovers), loan qualities (a strong increase of loan arrears and defaults), less off-balance placing possibilities and by this all in the by regulators (based on Basel II) required Tier-One (equity) ratios. In short: liquidities are not the problem, but Tier-One is. The Energy as Fee concept addresses this Tier-One equity demand issue. If banks get a contract fee at the percentage of the requested Tier-One on each energy transition investment finance, the will go really wild on energy transition finance. So wild that the concept of 'Energy as Fee' needs to be regulated within the concept, otherwise it will be abused more than any finance model is abused ever. What type of regulation? First the signing fee must be not in currency, but in kWh. Fee models based on cash will be abused by quick buck parasites, with a no wider horizon than the next bonus payment. Therefore the signing fee should be activated only as profit as the kWh came free, than the banks are forced to search for maximal kWh return also in all the energy finance requests. The Energy as Fee model is very open. Every manufacturer of renewable energy technology and every project developer in renewable energy technology can offer an Energy as Fee deal to any bank. And any bank certainly will be interested. By this openness it's very important that the BIS (Bank of International Settlements) make an Energy as Fee amendment on Basel II (also known as: the International Convergence of Capital Measurement and Capital Standards as described on http://www.bis.org/bcbs) for the accounting method of Energy as Fee deals for both the results, as for the balance sheets. The best way to regulate signing fees is to allow them on the balance sheets, but not allow them directly in full in the results. And of course banks than will sell their Energy as Fee deals as soon as possible to get these profits fully at once into their exploitation results and as cash in on their balance sheets. This is way auditing and regulation is so important. Without that the financial world becomes one big casino where lies put on full colour print become temperately semi truths. The financial world must not fight auditing and regulation, but endorse it, to save their future and to clean themselves from bad people and prevent bad directions. Sustainable Prosperity is something the financials should endorse. The coming massive energy transition investments (partial guaranteed by State Guarantees and also partial funded by Quantitative Easing) will give them a huge windfall that prevent them from collapse and give them time to adjust to era where economic growth due to high energy and resources prices will be scarce. The smart bankers will see this, the stupid ones will go into can-artisted conglomerates, that will be forced into receivership by good auditing and regulation. Destroying other peoples financial by financial dishonesty will become illegal again. Serving other peoples money in exchange for a reasonable fee will become main practice again. As it should been always. The deregulation of the last 30 years has no future: it leads to financial/economic/governmental collapse. If you not have the right fundamentals to build on, any thing will just grow till it collapse under its own weight. This is because to make apples you must work (limitation for too much apple production), but for money creation (due to our current 'money creation by loans' system) there's no work involved: it's just typing a new figure into the system: there is no effort limitation that controls over production. Regulation is therefore needed. And yes the cowboy/parasitic section within the banking sector of course will not like regulation. Smart bankers will emerge that have the right mix between smartness and wisdom. Wise bankers: that we have missed 30 years in a row very much. Nevertheless the signing fees will give the banks income to cover loses on their current portfolio. It pushes energy finance severe. A wise banker wants to make money. For his/her bank. For his/her Sustainable Prosperity. Hit and run will be outdated, out-phased and declared illegal. The signing fee is good to cover the loses caused by the casino cowboys. Banks there perspectives will no longer be narrowed to the next quarter, but to several years. The signing fee contributes to that. Everybody will go for the best energy investments if auditing and regulation is back in function. Signing fees will drive banks towards new energy investments. With quality. Sustainable in value. Economic Sustainable. The concept of signing fees will not re-do the housing bubble and rare things like stated income covered loans. Energy finance will be different. As it is designed to serve us all and not a few at expense of the rest of us. Signing fees as needed: they empower demand and create a demand delivering industry. Energy as Fee is a concept capable of generating a massive energy transition investment wave.
Author: Gijs Graafland
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