ECB

ECB sop to banks will only help at the margin

10 April 2019

President Mario Draghi is considering ways to ease the pain that negative policy rates inflict on banks, such as tiered deposits in Japan and Sweden. Savings-rich German lenders would benefit most. But any earnings boost would be modest and does nothing to remedy high costs.

Twitchy sterling sends traders running for cover

3 April 2019

Speculative bets on the pound are at their lowest level since 2012. Little wonder given that Britain could crash out of the EU, postpone its departure, or cancel Brexit in the next few weeks. The first signs of clearer direction will trigger a huge move on the foreign exchanges.

French banks’ pain may worsen

8 March 2019

The Bank of France may raise capital buffers to dampen loan expansion. That is justified given credit is growing much faster than the economy is expanding. But combined with pitiful lending margins, the move would add to the profitability problem which is plaguing Gallic banks.

With friends like Draghi, banks don’t need enemies

7 March 2019

European Central Bank President Mario Draghi is going to offer lenders new long-term loans. But his plan to keep policy rates at record lows for longer makes their lives harder. And if growth turns out to be as weak as the ECB now expects, more of the loans they make may go bad.

ECB stimulus flows show why Draghi works so hard

6 March 2019

President Mario Draghi bought 2 trln euros of government bonds to boost the economy. But some proceeds were used to buy debt issued by non-euro zone companies, or left in bank deposits, the BIS says, diluting the impact. Though mainstream, money-printing remains an imprecise tool.

Central banks’ gold fever is anything but reckless

5 February 2019

Their 2018 purchases of the yellow metal were the second-highest on record and up nearly three-quarters from a year ago. But this isn’t a speculative punt on prices rising. Instead, it’s a logical precaution against rival currencies and U.S. self-harm eroding dollar dominance.

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.

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.

European banks stuck in bond market prison

13 December 2018

Lenders may need to raise over 500 bln euros of loss-absorbing capital when investors are fretting over weak growth, rising rates, and geopolitical tensions. Borrowing costs are rising, and even strong banks are scrapping deals. To avert a crunch, the ECB may have to step in.

Europe’s next bank cop faces fight on many fronts

3 September 2018

Daniele Nouy steps down as chair of the European Central Bank’s banking watchdog this year. Her successor will have to keep cleaning up bad debts and improving money-laundering controls. The bigger challenge, though, is addressing lenders’ chronic lack of profitability.

Italy’s bond fix idea resembles covert bailout

21 August 2018

The economic spokesman of the ruling League Party says the euro will collapse unless the European Central Bank limits the gap between euro zone countries’ bond yields to 150 basis points. That bar is too low and would give big spenders free rein to dodge hard budget decisions.

ECB asset check puts investment banks on the spot

12 July 2018

The European Central Bank is probing how lenders including Deutsche Bank, BNP Paribas and Société Générale value illiquid holdings. Like bad debts, regulators want to improve comparability. For the three banks, the result could be higher capital charges on 44 bln euros of assets.

Mario Draghi may help more in Rome than Frankfurt

31 May 2018

Turmoil in his native Italy threatens the European Central Bank chief’s biggest triumph: saving the single currency. A eurosceptic government would weaken his promise to do “whatever it takes”. He might have more success challenging opponents of the euro as a domestic politician.

Italian radical agenda is a recipe for chaos

16 May 2018

A leaked plan by likely coalition allies 5-Star Movement and League says states should be able to exit the euro zone and cancel debt. That, along with a soaring budget and proposals for a shadow government, promise conflict with the EU. Bond markets are too complacent on Italy.

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.