Germany will follow money in EU top jobs carve-up 4 Jan 2018 Jockeying to replace the region’s most powerful people, including European Central Bank boss Mario Draghi, will begin in earnest in 2018. Proposed new posts like a euro zone finance minister complicate the contest. Berlin will prefer control of purse strings to interest rates.
What we got right – and wrong – in 2017 2 Jan 2018 Breakingviews foresaw a dip in mega-deals; bank bailouts in India; and a “Chinese” turn in U.S. governance. But columnists overestimated the pace of change in America, and some fantasy M&A stayed precisely that. With 20/20 hindsight, silence was not always golden either.
Trump tax cut is sack of coal for foreign banks 29 Dec 2017 The U.S. president says reduced corporate taxes are a Christmas present. But a levy on interest payments to overseas companies could hit lenders with U.S. subsidiaries. The provision, the base erosion and anti-abuse tax, might even cancel out the benefit of a lower headline rate.
The Exchange: Professor Anand Menon 28 Dec 2017 The “Brexit and British Politics” author explains how last year’s vote to leave the EU became the UK’s defining political issue. He says longer-term political undercurrents helped tip the balance towards Leave – and will dictate the type of Brexit the country ends up with.
Bank clients will learn the value of data in 2018 28 Dec 2017 New EU regulations will force lenders to share account information with competitors - subject to savers’ consent. Up to two-fifths of banks’ revenue could be at stake. New entrants will need to overcome privacy concerns. Even so, customers will discover what their data is worth.
Regulators will drive next wave of EU bank mergers 27 Dec 2017 Past disasters, fragmented rules and limited cost savings rightly make European lenders wary of cross-border deals. The European Central Bank, however, is eager to see fewer and bigger banks in the euro zone. Mergers will please regulators more than shareholders.
Fed calls time on monetary and regulatory activism 21 Dec 2017 After nearly a decade of zero rates, asset purchases and tighter rules, the central bank is stepping back. Janet Yellen started the trend as the crisis receded, but her chair apparent promises a real laissez-faire shift. Markets may struggle to adapt to life without a Powell put.
Chinese government debt will go global 21 Dec 2017 A major index will include Chinese government bonds in 2018, dragging foreign money into a $9 trillion market. Beijing will appreciate the foreign stamp of approval. But sovereign guarantees will give scant cover against volatility spreading outwards from corporate credit.
Five possible triggers of the next market shock 20 Dec 2017 It takes a catalyst to set off a downturn and other reagents to sustain it. Breakingviews runs through a few more and less obvious elements: central-bank shocks, wayward exchange-traded funds, doubts about “crisis alpha,” unforeseen hedge-fund trouble and, yes, crypto-currencies.
Bitcoin finds unlikely ally in Asian watchdogs 20 Dec 2017 Japan and South Korea make up half of global trading volumes in the $300 bln bitcoin market. Tokyo has officially recognised digital currency exchanges. Seoul is mulling the same. Regulations help contain risk but also increase acceptance and allure of this untouchable cash.
Bond vigilantes will grab power from central banks 18 Dec 2017 Governments’ net debt issuance in 2018 is set to outstrip central bank buying for the first time in four years. That gives investors a welcome chance to hold profligates to account. Bond markets may, however, be prone to over-reaction as they rediscover their rusty powers of discernment.
Portugal beats Italy in bond market pecking order 15 Dec 2017 The country that needed a bailout in 2011 can borrow for less than its larger peer. Investors’ preference for Portuguese debt reflects its more vibrant economy, and messy Italian politics. Lisbon can keep outshining Rome, so long as lax bond markets don’t encourage bad habits.
Yellen’s fine legacy gives way to uncertain future 13 Dec 2017 With her fifth and final rate hike, the Fed boss has put monetary policy on a path to normalization without spooking markets or hurting growth. Her successor may not be so fortunate. As the central bank gauges potential tax cuts and trade wars, its moves become less predictable.
Bank rules wrong way to fill EU green finance gap 13 Dec 2017 The European Commission wants lenders to help plug the 177 bln euro annual funding shortfall for low-carbon projects. Lower bank capital charges for "green loans" is a mistake, though. Fuzzy definitions will lead to loose lending, and capital ratios will become even more opaque.
ECB could use Steinhoff mess to improve QE 13 Dec 2017 The EU central bank risks a loss after acquiring the South African retailer’s securities in its bond-buying scheme. Even investment-grade debt can go bad, and the hit is manageable. But in this case the ECB could have avoided trouble by requiring two credit ratings, not just one.
Bank of England is too sanguine on inflation 12 Dec 2017 Prices rose 3.1 pct in the year to November, the fastest pace in six years. The central bank blames Brexit and says inflation is near peaking. That’s convenient with further interest-rate hikes a risk to sluggish economic growth. But the BoE may not get off so easily.
Bank of England transfer defies financial gravity 11 Dec 2017 Britain’s opposition Labour party says it may move parts of the central bank to Birmingham. That may appeal to voters, but both the BBC and HSBC have found relocating expensive and difficult. The idea also ignores the reasons London’s financial centre exerts such a strong pull.
Fed forecasts just enough sunshine for stress tests 7 Dec 2017 The central bank wants to provide more information about its models for loan losses and other inputs in the annual exams. That would suit lenders who complain the process is too opaque. But the Fed would retain some mystery, striking a balance that boosts the test’s credibility.
New bank rules are kind without being weak 7 Dec 2017 Big lenders will need a trifling 27.6 billion euros of fresh equity capital under new Basel regulation. Rules on the use of internal models are no worse than feared, and kick in slowly. This is hardly draconian – but that’s because banks have already done much of what was needed.
Cox: Trump bump aside, U.S. stocks lag in 2017 30 Nov 2017 The president has unprecedentedly staked his political colors to the mast of rising equity prices, calling the S&P's rally a validation of his policies. Yet most other markets around the world have done even better. There are bigger forces at work than U.S. corporate tax rates.