Bank culture powwow blends carrot, stick, naivete 21 Oct 2014 During an off-the-record self-examination by Wall Street, Fed bigwigs outlined ideas for pay structures, risk management and personal and institutional punishment. Some of it sounds sensible, some unworkable and some nostalgic. And official failings still need addressing, too.
BoE IT payments glitch raises serious questions 20 Oct 2014 The central bank says a malfunction has led to backlogs in settling large payments, of the sort made by home-movers. The BoE is hard on retail banks for such failings. Its systems are meant to be “fault tolerant.” Even if the fallout is limited, an investigation shouldn’t be.
Rampant market fear clarifies global divide 15 Oct 2014 A slump in 10-year U.S. Treasury yields and the evaporation of this year’s stock gains augur poorly for the Fed’s bond-buying exit. Yet the domestic economy has been improving. Slowing growth elsewhere presents the bigger worry. America’s central bank can’t do much about that.
EU securitisation tweaks miss the point 10 Oct 2014 The European Commission has outlined rules for high-quality securitisation. That should revive the market for the sort of debt the ECB wants to buy. But focusing on the least risky kind of deals will still make it hard for banks to free up capital – and get lending.
Russian central bank intervention is a dead end 8 Oct 2014 The central bank of Russia is buying roubles on the market, but the exchange rate keeps sinking. The economy has deep structural flaws, worsened by Putin’s aggressive foreign policy. There are many reasons to take capital out of Russia. For the currency, the only way is down.
ECB may find that senior risk can be dangerous 7 Oct 2014 The central bank’s plan to buy asset-backed debt echoes the 2008 crisis. That has raised worries about possible losses. The ECB will buy only senior-ranking debt, but even with that safeguard there is a tension between reviving securitisation and increasing its balance sheet.
ECB keeps hands free with proxy QE 2 Oct 2014 President Mario Draghi gave little new detail on the ECB’s private debt purchase programme, and no hints that sovereign bonds will ever follow. Yet the central bank’s asset purchases could be large, and have major “spillovers.” That would indirectly help governments too.
Running Argentina’s central bank an impossible job 2 Oct 2014 Juan Carlos Fabrega’s resignation makes Alejandro Vanoli its fourth boss in as many years. He has to try to combat spiraling inflation and dwindling reserves while dealing with President Cristina Fernandez’ interventionist policies and a debt default. He’s unlikely to last long.
ECB can stomach Greek junk risks 1 Oct 2014 The central bank seems ready to break its own collateral rules to buy Greek or Cypriot asset-backed debt. That’s a side effect of policy success, not a cause for worry. The ECB needn’t be a slave of rating agencies, and the risks to its balance sheet are manageable.
Sovereign doom loop haunts EU bank stress tests 1 Oct 2014 The euro zone banking union was meant to start with a robust bank solvency test. Yet national regulators have successfully lobbied the ECB to count deferred tax credits as capital. That restores the state/bank dependency the single banking supervisor is trying to sever.
Commodity bear market looks entrenched 29 Sep 2014 A rising dollar, the prospect of U.S. rate rises, and moderating Chinese growth are casting long shadows over the asset class. The threats to the bear case are strong supply-side responses, or successful economic stimulation by the ECB. Neither looks very likely.
Wall Street police discover how hard reform can be 26 Sep 2014 The financial crisis has forced financiers to change the way they do business. Bad cultures and behaviors are hard to root out, though. Witness JPMorgan’s whale of a loss. A whistleblower has revealed similar troubles at the New York Fed. Regulators also have toughening up to do.
Full-on QE poor fix for ECB’s no-inflation problem 24 Sep 2014 Markets remain unimpressed by Mario Draghi’s efforts to make prices rise more quickly. Sinking inflation expectations will strengthen the hand of those who want the ECB to launch all-out government bond-buying. But even such desperate measures may not be the panacea.
Savings rate is sound goal for central bankers 24 Sep 2014 It certainly looks like monetary policy these days doesn’t have much effect on price changes. Its power over labour markets is also limited. Perhaps central banks should target savings, which have been too low in the United States. Higher interest rates would be a start.
Fed’s beleaguered cast of hawks loses more wings 22 Sep 2014 Philly Fed President Charles Plosser’s retirement reduces the tighter-money group on the FOMC, though Cleveland’s Loretta Mester, on the committee in 2016, is a protégé. They may speak and vote against the consensus but must await a new Fed chairman and governors to prevail.
ECB can live with a pea-shooting bazooka 18 Sep 2014 Banks took up 83 bln euros in the first round of the ECB’s four-year liquidity injection. That’s less than hoped. Markets are sanguine, hoping sovereign debt purchases are now more likely. The limp start will at least pressure the ECB to deliver on its pledge to buy private assets.
Markets seek certitudes that are beyond Fed’s gift 17 Sep 2014 Investors parse the U.S. central bank’s every utterance for policy clues. The rate-setters have tried to help with extra loquacity. But words cannot be set in stone. Even if today’s statement drops “considerable time,” the date of the first rate increase will remain uncertain.
ECB’s trillion-euro race may start slowly 17 Sep 2014 A first round of liquidity injections this week will test Mario Draghi’s attempt to fight deflation in the euro zone. A small take-up could increase pressure for more ambitious sovereign debt purchases. But the ECB has time, and several ways to boost its balance sheet as planned.
China stealth stimulus may slip down back of sofa 17 Sep 2014 A reported injection of $81 billion via big banks equates to less than a month of credit. It won’t restore rapid growth, but may help cash-strapped companies pay their bills for a while. High debt and low liquidity are forcing authorities into increasingly intricate manoeuvres.
Commodity prices mirror global growth pessimism 17 Sep 2014 Fading hopes of 3 percent-plus global GDP growth are bringing down prices of everything from oil and cotton to corn and sugar. Expectations of monetary tightening are also playing a role. Equities remain sanguine, but some sagging currencies suggest the selloff could go further.