ECB

Illicit money is Europe bank stability blind spot

22 March 2018

U.S. authorities arrested the head of a Maltese bank for violating Iran sanctions, prompting calls for it to lose its licence. Similar issues triggered the recent folding of a Latvian bank. Without power to fight financial misconduct, euro zone regulators can’t keep banks safe.

Mario Draghi faces tricky exit from bond buying

8 March 2018

The European Central Bank president has started laying the groundwork to end three years of asset purchases. But there’s a growing danger that his careful preparations will be thrown off course by U.S. protectionism, euro zone politics, or unwelcome market moves.

Euro zone reform faces green and red lights

5 March 2018

Germany’s new ruling coalition has cleared the way for reforms to strengthen the single currency area. Yet proposals to backstop banks and governments remain contentious. Italy’s new government adds uncertainty. With the ECB’s firepower waning, delay may prove costly.

Spain’s ECB victory is really a win for Germany

19 February 2018

The only person left in the race to become European Central Bank vice president is Spanish Finance Minister Luis de Guindos. It’s thus likely that the top job will go to a northern European in 2019. That will please Germans keen for an end to unorthodox monetary policies.

Mario Draghi is ill-equipped for currency wars

25 January 2018

The European Central Bank chief took a potshot at the United States for flouting an international agreement not to manipulate currencies. The rate-setter has limited policy room to resist a strong euro. European politicians who take up the cudgels risk escalating the fight.

Corporate loans can propel Europe’s bank recovery

15 January 2018

Lending to companies has seen minimal growth in recent years, official data shows. A raft of positive economic data should provide the catalyst for increased demand. It would be a welcome way for slimmed-down lenders to give revenue a leg-up.

Markets start doing Mario Draghi’s job for him

12 January 2018

The euro hit three-year highs and government bond yields rose after a hint the ECB boss may rethink how long ultra-loose policy will last. The moves amount to tighter monetary conditions. That buys rate-setters time to phase out negative rates even though growth is picking up.

German workers may frustrate ECB’s inflation hopes

9 January 2018

Industrial staff in Europe’s biggest economy are striking for higher pay. They may, however, trim wage demands in return for flexible working. If pay pressures fail to flare in such a tight labour market, the European Central Bank can hardly count on them surfacing elsewhere.

Bank clients will learn the value of data in 2018

28 December 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.

Portugal beats Italy in bond market pecking order

15 December 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.

ECB could use Steinhoff mess to improve QE

13 December 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.

Sorry is the hardest word for central bankers

16 November 2017

Bank of England Chief Economist Andy Haldane says rate-setters should speak simply and honestly to the public. The first is easier than the second. Admitting past mistakes or doubts about the present is tough for institutions whose clout depends on an aura of omnipotence.

Central bankers go self-referential on rhetoric

14 November 2017

Fed Chair Janet Yellen and other top rate-setters took the stage in Frankfurt to discuss how they communicate. It’s a slightly meta admission of the role speechifying has come to play in monetary policy in an era of ultra-low interest rates. But wordiness brings its own perils.

UniCredit NPL glitch muddies Italian bank cleanup

31 October 2017

The ECB is reportedly examining whether the bank inflated the price of a $21 bln bad-loan sale, a move that could hurt its capital. It’s surprising as UniCredit’s valuations were less rosy than peers. Regulatory confusion gives lenders more reason to cling on to dud loans.

Bank of Italy chief’s new term faces uphill start

27 October 2017

Ignazio Visco has been reappointed as central bank governor despite political opposition. His first challenge is to quell critics of his handling of Italy’s banking crisis. EU rules are also getting tougher and Mario Draghi’s departure from the ECB in 2019 will remove an ally.

What Carney can learn from Yellen

21 September 2017

Fed Chair Janet Yellen showed rate-setters can shock markets even when they stick to the script. That’s a lesson for the Bank of England’s Mark Carney, who has talked up a rate rise this year. Like her, he may have to hike without having solved a host of economic puzzles.

ECB weakens Italy doom loop by bending bond rules

16 August 2017

The European Central Bank is buying more Italian bonds than its rules allow. That helps lower the country’s borrowing costs and allows its banks to cut exposure to their sovereign. With elections and political risks looming, it may have to take an ever more pragmatic approach.

Euro rally will only speed its own reversal

21 July 2017

The single currency has hit a two-year high against the U.S. dollar. That will depress import prices when inflation is still too low. Any hint that a stronger exchange rate will prompt the European Central Bank to leave monetary policy loose for longer will push it down again.

Cool credit markets could be own undoing

10 July 2017

Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.

Bank of Japan can hold out as Western yields rise

7 July 2017

The central bank underlined its determination to keep 10-year yields close to zero by offering to buy unlimited bonds. The BOJ has the tools, market dominance and motivation to hold firm. Tighter policy in the West should help Japan by weakening the yen and importing inflation.