Central Banks

Italian banks have a 38 bln euro problem

15 January 2019

The European Central Bank has told euro zone lenders to deal with dud loans by a set date. For state-owned Monte dei Paschi, the deadline is 2026. If applied broadly that demand – and a slowing economy – would hinder Italian banks’ ability to deliver decent medium-term returns.

Basel capital deal gives banks only brief respite

15 January 2019

The Bank for International Settlements has halved a proposed increase in capital requirements for trading assets. Lenders’ cheer may be short-lived. Banks still have to comply with tougher rules on credit risk and face increased scrutiny of their leverage ratios.

China can give stock buying idea a wide berth

15 January 2019

Beijing’s financiers are abuzz with debate about whether the central bank should buy equities as part of official efforts to help a slowing economy. Drawbacks would outweigh limited benefits. Luckily there is a better way to channel money to where it would do growth more good.

Trump’s Fed pressure is a paper tiger, so far

14 January 2019

The U.S. president often bashes the central bank’s rate increases on Twitter. It’s unhelpful but transparent – which makes it easier for the Fed to resist. The real danger is if Trump bullies Jerome Powell behind closed doors, or changes his tactics for the two open board seats.

Zimbabwe currency plan is doomed before delivery

14 January 2019

Robert Mugabe’s successor wants to ditch the U.S. dollar and introduce a new national money. Its value is bound to dive but any benefits will be fleeting unless Harare can also slash a bloated civil service and break its serial addiction to printing cash. That is unlikely.

Guidance is a two-way street with Fed and markets

10 January 2019

Jerome Powell says the U.S. central bank will be patient in weighing new rate moves. Previous hawkish comments unsettled investors, helping tank stocks last month. The two are learning to read each other, but a data-dependent message may get tricky if the economy starts to turn.

Germany may outdo Italy as a bank bail-in wrecker

9 January 2019

NordLB needs at least 1.2 billion euros to help provision dud loans after merger talks with rivals failed. Along with smaller Italian peer Carige, the regional German lender is a prime candidate for resolution. Politics means a mix of private equity and public funds is a likelier solution.

Italy’s radicals bow to bank bailout temptation

8 January 2019

The government has passed measures to prop up Banca Carige, despite pledges by some of its members not to rescue lenders. Carige is too small to undermine Italy’s financial sector. But even supposedly anti-establishment parties won’t stomach the political cost of a bank failure.

Italy’s Carige has tricky path to recovery

4 January 2019

The sickly lender won’t find a buyer unless it carries out a serious spring clean. That means selling at least 1.8 bln euros of dud loans, which looks hard without some government aid. The hit to public finances would be small, but a rescue could still stoke political tensions.

Next ECB boss will matter less than his sidekick

3 January 2019

Most of those vying to replace Mario Draghi at the European Central Bank lack his creativity. Others will have more scope to sway debates. Ireland’s freethinking Philip Lane is favourite to be chief economist. He would have outsized influence, especially in the next downturn.

Three key indicators to watch like a hawk in 2019

2 January 2019

Want to know whether there’s going to be a U.S. recession, a trade-war flare-up, or corporate implosions? You could obsess over news and social media – or skim a few proxy indicators like the price of soybeans, the Treasury yield curve, and the number of stocks in bear territory.

MTN’s Nigeria fix promises longer-term headaches

2 January 2019

The African phone giant has paid $53 mln to settle an $8 bln dispute with Abuja. That looks like a cheap way of maintaining good relations in its most important market. But the speed of the resolution, and modest size of the penalty may encourage further interference.

ECB starts new year with Italian bank hangover

2 January 2019

Regulators in Frankfurt have appointed temporary administrators at troubled Banca Carige. The unprecedented move looks a last-ditch attempt to push through a 400 million euro cash call opposed by the bank’s top investor. Barring a sale, the next step could be resolution.

Euro faces tough adulescence

31 December 2018

The currency enters its third decade with flaws that date back to conception. They were fully exposed after early market successes gave way to a teenage existential crisis. These weaknesses have the power to ruin adulthood as the drug of cheap central bank money slowly runs out.

EU investment banks face the regulatory microscope

28 December 2018

With the region’s bad-debt crisis on the wane, supervisors will shift their focus to probing lenders’ risk models and 132 billion euros of hard-to-value assets. For banks which had previously relied on their own guesstimates, that could mean higher capital charges.

Steve Mnuchin cries wolf on U.S. markets

24 December 2018

The U.S. Treasury secretary used financial-meltdown language to address pedestrian issues of falling stocks, a government shutdown and the president’s Fed-bashing. At worst the alarmism could create a crisis; at best it undermines his credibility when a real threat appears.

Japan is stealth threat to 2019 market stability

24 December 2018

Governor Haruhiko Kuroda’s tiny tweaks to ultra-loose policy will agitate global asset prices more than the actions of his U.S. or euro zone peers. Higher domestic yields are set to lure Japanese money back from U.S. credit or European debt markets and the yen will be buoyant.

Italy’s budget truce may yet herald 2019 hangover

19 December 2018

Rome’s anti-austerity executive has ended a damaging EU row by backing down over its deficit, cheering domestic asset prices. But its restraint looks largely cosmetic. Investors may soon fret about the risk of a recession and how to refinance public debt without much ECB support.

The 2019 stock market reversal: how it happened

18 December 2018

Few people would have disagreed at the beginning of the year that the nine-year-long bull market was reaching its end phase. That didn’t diminish the shock when stocks began to plunge in earnest. Breakingviews lays out a fictional account of how the good times came to an end.

China’s social credit poses rising risk to CEOs

14 December 2018

Beijing’s plan to blacklist executives for misbehaviour is widely misunderstood. But it's worrisome as tensions spike. By holding CEOs accountable for their company's misdeeds, the system blurs China’s already fuzzy line between corporate and personal interests.