Canada’s shock rate cut hurts global risk appetite 21 Jan 2015 First Zurich, now Ottawa. Days after the Swiss central bank abruptly reversed a cornerstone policy, the Bank of Canada upended market expectations with a 25 bps easing. The Canadian dollar plunged. Unpredictable policy generates volatility and fear, hurting economic prospects.
Euro zone QE-by-country not as bad as it sounds 20 Jan 2015 The ECB’s bond-buying programme may leave national central banks on the hook for potential defaults. The goal is to soothe German fears on subsidising weaker countries. Sceptics see a fissure in the monetary union. The fears are exaggerated, but perceptions matter.
ECB’s mission possible: surprise markets 20 Jan 2015 Investors are so geared up for 600 billion euros of quantitative easing that its arrival could underwhelm. Yet Mario Draghi has a reputation for bending markets to his wishes. High uncertainty about how bond-buying will work means the ECB boss still has scope to over-deliver.
Swiss franc shock will shake up Polish banking 16 Jan 2015 Austria’s Raiffeisen has 2.9 bln euros of Swiss franc loans in central Europe’s biggest market. It’s also under pressure in Russia and Ukraine, and relatively undercapitalised. If Raiffeisen retreated, other foreign operators like BNP Paribas and UniCredit could benefit.
Greek banks’ SOS looks like message to voters 16 Jan 2015 Two Hellenic lenders have already applied for emergency liquidity assistance from their central bank. While precautionary, such calls for help used to be more discreet. Flagging the banks’ difficulties could be a way to warn the electorate ahead of the Jan. 25 elections.
Asia’s big demons: debt, deflation, demographics 16 Jan 2015 The unholy trinity threatens to sap the region’s growth potential. Central banks need to fight the fiends by cutting borrowing costs so that output and prices revive. But fears of higher interest rates in the United States are prompting them to sit tight. That may be an error.
Swiss give scary lesson on central banks’ limits 15 Jan 2015 The monetary authorities are expected to control inflation, deflation, growth and the financial system. But the Swiss National Bank, an above-average institution, has managed to mess up badly by breaking its word. Others may not do much better.
Strong franc extends UBS lead over Credit Suisse 15 Jan 2015 The end of Switzerland’s currency peg shaved more than 10 pct off the value, in local terms, of its two big banks. No surprise there: both UBS and Credit Suisse have big dollar revenues and Swiss franc costs. Yet as with their respective turnarounds, UBS looks better off.
Swiss recalibrate currency world by dropping peg 15 Jan 2015 The Swiss National Bank could print enough francs to keep the currency stable against the euro but not against the dollar. So it dropped the euro peg in favour of more negative rates and a vague commitment to intervene. The franc rocketed. But it is a less predictable safe haven.
Rouble defence is losing battle for central bank 15 Jan 2015 The December rouble crisis now has a January victim: the Central Bank of Russia’s deputy head is being relieved of her monetary policy portfolio. Markets may get better guidance. But the problem is not the person. The CBR cannot beat a sinking oil price and Western sanctions.
ECB bank tsar chooses credibility over caution 15 Jan 2015 The single banking supervisor wants laggard lenders such as Italy’s Monte dei Paschi to hold extra capital buffers. That’s welcome. It may contradict the ECB’s other task – boosting lending in the euro zone. But that’s the price to pay for the new institution’s credibility.
India’s rate cut is first of several this year 15 Jan 2015 With inflation tame and output growing below potential, Governor Raghuram Rajan’s policy of high interest rates was beginning to look ill-advised. A quarter-point decrease alone won’t perk up a sluggish economy. Investors will expect a further loosening of the monetary noose.
European court opinion gives QE a helping hand 14 Jan 2015 The European Court of Justice advocate general has blessed the principle of ECB government bond-buying, with few conditions attached. That provides cover for the central bank’s quantitative easing plans – and will do little to soothe German opposition to ECB policies.
Dear chancellor: Low UK inflation can be ignored 13 Jan 2015 Mark Carney has to write George Osborne a letter. The Bank of England governor will explain to the chancellor why the inflation rate is at a 14-year low, and what the central bank plans to do about it. Breakingviews knows what to say. For now the best policy is inaction.
Falling prices show ECB failed at its only mandate 7 Jan 2015 Euro zone inflation is now negative. Sinking oil prices played a part, but market expectations were falling well before. The European Central Bank has long been seen as doing too little, too late. No wonder investors have lost faith in the bank’s ability to fulfill its mission.
Overseeing the Bank of England will never be easy 7 Jan 2015 Newly released minutes show the UK central bank’s supervisory Court did little in the 2007-9 crisis. No surprise there. Subsequent reforms have brought private board standards to this public institution. The changes may help, but no board can take politics out of monetary policy.
Asia’s central banks are behind rate-cutting curve 7 Jan 2015 Bond investors are pushing down long-term yields because they think cheaper commodities will lead to pernicious disinflation. Asian monetary authorities have room to cut short-term rates. By not doing so, they may be imperilling both growth and financial stability.
Fed pick gives Bank of Hawaii even bigger splash 6 Jan 2015 Allan Landon, Obama’s nominee for the U.S. central bank board, ran the local lender from 2004 to 2010. His BOH predecessor, Mike O’Neill, hasn’t been shy about rocking the boat at Citigroup, ousting former CEO Vikram Pandit. Maybe Landon will make some helpful waves at the Fed.
Guest view: Banks need to lead on cultural change 6 Jan 2015 While lenders have boosted capital, reduced leverage and added liquidity, they have not shown the same commitment to adjusting their core behaviors, including their risk cultures, argues former Citigroup executive and author William Rhodes.
Review: Fixing the CIA – a novel approach 26 Dec 2014 Could an outsider best reform the CIA in the wake of torture revelations? In David Ignatius’ novel “The Director,” a pro-privacy tech CEO tries to drag an agency that has lost its way into a new world of tighter rules, leaky secrets and cyberthreats. Good idea, uneven results.