Italy’s woes expose euro-area governance failures

2016 ◽  
Keyword(s):  
Euro Area ◽  
Banking Sector ◽  
Capital Requirements ◽  
Bank Loans ◽  
The Political ◽  
Political Uncertainty ◽  
Content Type ◽  
Core Inflation

Significance The political uncertainty in Rome is hampering efforts to restore confidence in MPS and poses a challenge to the implementation of the EU’s controversial ‘bail-in’ rules. Impacts Euro-area core inflation is just 0.8%, less than half the ECB’s 2.0% target despite a gradual pick-up in growth. Despite surging nearly 50% from a July record low, the Stoxx 600, the euro-area’s banking sector index, is still 5% down year-to-date. From 2017 to 2019, 550 billion euros of EU banks' senior debt will mature -- a lifeline, if the most vulnerable can survive until then. Further euro-area capital requirements will come in in 2017, but could be introduced gradually to minimise the disruption. Nearly 18% of Italian bank loans are non-performing, three times the euro-area average.

Four disintegration risks may threaten the EU’s future

2017 ◽  
Keyword(s):  
Euro Area ◽  
Presidential Election ◽  
The Political ◽  
Economic Downturn ◽  
Political Uncertainty ◽  
National Front ◽  
Content Type ◽  
Marine Le Pen ◽  
Decisive Victory ◽  
The Eu

Subject Four European disintegration risks. Significance After the French presidential election, which saw the decisive victory of Emmanuel Macron over National Front leader Marine Le Pen, a sigh of relief could be heard in European capitals: the worse had been avoided; the EU would thrive again. This relief could be premature. At least four disintegration risks are still threatening the EU. Impacts Even though its economic prospects are positive, the euro-area remains fragile and could plunge back into chaos if left unreformed. An economic downturn would benefit Eurosceptic populist parties. The political uncertainty of a caretaker government in Germany will increase its officials' reluctance to agree to any euro-area reforms.

scholarly journals Impact of the Basel III bank regulation on US agricultural lending

2020 ◽  
Vol 80 (3) ◽  
pp. 321-337 ◽  
Author(s):  
Kevin Nooree Kim ◽  
Ani L. Katchova
Keyword(s):  
Growth Rates ◽  
Banking Sector ◽  
Agricultural Sector ◽  
Global Financial Crisis ◽  
Detailed Examination ◽  
Capital Requirements ◽  
Basel Iii ◽  
Content Type ◽  
The Usa ◽  
The Impact

Purpose Following the recent global financial crisis, US regulatory agencies issued laws to implement the Basel III accords to ensure the resiliency of the US banking sector. Theories predict that enhanced regulations may alter credit issuance of the regulated banks due to increased capital requirements, but the direction of changes might not be straightforward especially with respect to the agricultural loans. A decrease in credit availability from banks might pose a serious problem for farmers who rely on bank credit especially during economic recessions. The paper aims to discuss these issues. Design/methodology/approach In this study, the impact of Basel III regulatory framework implementation on agricultural lending in the USA is examined. Using panel data of FDIC-insured banks from 2008 to 2017, the agricultural loan volume and growth rates are examined for agricultural banks and all US banks. Findings The results show that agricultural loan growth rates have slowed down, but the amount of agricultural loan volume issuance still remained positive. More detailed examination finds that regulated agricultural banks have decreased both the agricultural loan volume and their loan exposure to the agricultural sector, showing a possible sign of credit crunch. Originality/value This study examines whether the implementation of the Basel III regulation has resulted in changes in agricultural loan issuance by US banks as predicted by the lending channel theory.

scholarly journals Capital buffers based on banks’ domestic systemic importance: selected issues

2015 ◽  
Vol 7 (3) ◽  
pp. 207-220 ◽  
Author(s):  
Michal Skorepa ◽  
Jakub Seidler
Keyword(s):  
Banking Sector ◽  
Relevant Literature ◽  
Capital Requirements ◽  
Content Type ◽  
Individual Level ◽  
Level Data ◽  
National Bank ◽  
Key Steps ◽  
Importance Assessment

Purpose – The purpose of this paper is to assist the numerous regulators around the globe who are currently considering ways to impose domestic systemic importance-based capital requirements on banks. Design/methodology/approach – The article discusses in some detail a number of issues from the viewpoint of regulatory practice, mentioning relevant literature where available. Comments partly reflect the experience that the Czech National Bank gathered over the past two years while preparing its own regime of domestic systemic importance-based capital requirements on banks. Findings – The authors stress, among other points, one weakness of the (otherwise well-designed) method suggested by the Basel Committee for Banking Supervision (BCBS) for assessment of banks’ systemic importance: the method is “relative” in that it does not reflect the absolute importance of the banking sector for the economy. The paper also explains that in some cases, use of individual-level rather than consolidated-level data may be preferable, in contrast to what the BCBS guidance suggests. Further, implications of the buffers over a longer term are pointed out. Originality/value – As far as the authors are aware, this article is the first to comprehensively discuss the main issues surrounding both key steps (systemic importance assessment and determination of buffer level) in the process of introducing buffers based on domestic systemic importance. A number of questions related to these two steps are raised which regulators may appreciate to be reminded of, even if some of the questions are such that it is not possible to give a generally applicable answer to them.

Syriza may be troika's best hope for Greek deal

2015 ◽  
Keyword(s):  
Stock Market ◽  
European Commission ◽  
Financial Market ◽  
Euro Area ◽  
The Political ◽  
Costs And Benefits ◽  
Content Type ◽  
Political Left ◽  
Unexpected Outcomes ◽  
Market Exuberance

Subject Unexpected outcomes in the Greece-troika imbroglio. Significance Negotiations between Greece and its 'troika' of official-sector creditors (the European Commission, ECB and IMF) are taking place amid two meetings of the euro-area finance ministers and one summit of EU leaders before the end of February. While it is impossible to know now what the result will be, it is possible to speculate on the costs and benefits of any given scenario. Impacts If Syriza fails to achieve meaningful debt reduction, it could discredit the political left as well as the notion of EU solidarity. Greek sovereign yields and the Greek stock market are likely to react extremely positively to any deal between the troika and Greece. Financial market exuberance towards Greece will be unwound as the implications of Greece's continuing high debt load become clearer.

Draft budget will increase Greek taxpayers' burden

2016 ◽  
Keyword(s):  
Euro Area ◽  
Financial Assistance ◽  
Economic Recovery ◽  
The Political ◽  
Tax Revenue ◽  
Unequal Distribution ◽  
Content Type ◽  
The Third ◽  
Private Households ◽  
Political Backlash

Significance Clearing state arrears to the private sector depends on the quartet of international creditors' timely disbursement of financial assistance tranches. The finance ministry is in no position to generate additional tax revenue or cut expenditure. Thus, it is vital to conclude the second review of the third programme and disburse the next 2.8-billion-euro (3.1-billion-dollar) tranche. Impacts The political backlash from angry taxpayers may just be an election away. No euro-area country has achieved economic recovery after seven years of recession on the back of excessive taxation. The 2017 budget draft only increases the unequal distribution of the rising tax burden for private households and corporates.

Ukraine's banking sector to grow leaner but stronger

2016 ◽  
Keyword(s):  
Economic Crisis ◽  
Large Scale ◽  
Banking Sector ◽  
Capital Requirements ◽  
Real Sector ◽  
Medium Term ◽  
Content Type ◽  
Quick Recovery ◽  
Positive Effects ◽  
National Bank

Subject Early signs of recovery and consolidation in Ukraine's banking sector. Significance For Ukraine's banking sector, the effects of the economic crisis since early 2014 include dramatic currency devaluation, the undermining of public trust and numerous bankruptcies. The crisis has also had positive effects as the National Bank of Ukraine (NBU) set about purging the sector of weak, poorly run institutions. Impacts Capital requirements will cause significant consolidation in the near-to-medium term, as many smaller banks will be unable to comply. By failing to resume large-scale lending to the real sector, the banks will limit the chances of a quick recovery. Russian-owned banks are not immediately threatened by official sanctions, owing to the hefty deposit base they have developed.

Strong data increase pressure on ECB to wind down QE

2017 ◽  
Keyword(s):  
Euro Area ◽  
European Central Bank ◽  
Oil Price ◽  
Consumer Confidence ◽  
Quantitative Easing ◽  
Content Type ◽  
Core Inflation ◽  
European Central ◽  
Asset Purchases ◽  
Japanese Yen

Subject Outlook for euro-area uantitative easing. Significance Data released today by the European Commission showed business and consumer confidence rose to the highest in almost six years in February, further fuelling the debate over how quickly the European Central Bank (ECB) should wind down its two-year-old quantitative easing (QE) programme. Headline inflation rose to 1.8% year-on-year in January, the fastest in four years and just below the ECB’s 2.0% target. However, core inflation remains below 1.0%, justifying the continuation of the central bank’s asset purchases despite fierce resistance from Germany. Impacts The euro has fallen against the Japanese yen and the dollar this month because of rising concern about euro-area political risk. Fears of a sudden end to the 30-year bull market in bonds have eased; ten-year US yields are down over 20 basis points since mid-December. Further upside potential for the oil price is likely to be limited due to US shale and countries exempt from the OPEC cuts raising output. In this era of unconventional policy, the ECB could maintain QE to stabilise weaker members but raise rates to satisfy stronger ones.

Prior actions passed will unlock Greek bailout cash

2015 ◽  
Keyword(s):  
Euro Area ◽  
Pension Reform ◽  
The Political ◽  
Content Type ◽  
The Government

Significance This allowed the Eurogroup of euro-area finance ministers to authorise the release of 12 billion euros (12.8 billion dollars) from the latest bailout package of 86 billion -- 2 billion euros to supplement budget needs and 10 billion for bank recapitalisation. Impacts There could be more parliamentary cliff-hangers over approving implementing legislation in such areas as pension reform. The opposition may support the government on some issues, but this could undermine Tsipras's authority. Another election is possible, but might not change the political balance.

Rise in volatility-linked trading raises market risks

2018 ◽  
Keyword(s):  
United States ◽  
Euro Area ◽  
Equity Markets ◽  
The United States ◽  
Trading Strategies ◽  
Currency Devaluation ◽  
Content Type ◽  
Core Inflation ◽  
Market Risks ◽  
Dramatic Decline

Subject Trading of volatility assets intensified this month's market sell-off. Significance The dramatic decline in global equity markets last week, led by the sharpest drop in the S&P 500 index in more than two years, highlights the dangers posed by trading strategies and products linked to the Chicago Board Options Exchange (CBOE)'s volatility (VIX) index. Highly leveraged bets against market tranquility backfired as the VIX touched its highest level since China’s shock currency devaluation in 2015. Impacts Starting from a low base will exaggerate any inflation increases -- core inflation is still below 2% in the euro-area and the United States. Despite this month’s turmoil, trading in volatility assets will remain popular -- investors will ‘buy the dip’ and continue to seek yield. The euro-area is enjoying its fastest growth in twelve years but faces political tests this year, notably the Italian elections next month.

The risks surrounding ECB stimulus withdrawal are high

2018 ◽  
Keyword(s):  
Euro Area ◽  
Emerging Market ◽  
Content Type ◽  
Core Inflation ◽  
Bear Market ◽  
The Past ◽  
Downward Pressure ◽  
Export Competitiveness ◽  
Equity Funds ◽  
Equity Index

Subject Monetary divergence Significance After reaching multi-year highs in the second half of 2017, euro-area manufacturing and services surveys are now signposting slower growth. Meanwhile, euro strength is dampening inflation pressures. Thus the ECB will be cautious in its plans to ‘normalise’ its ultra-loose monetary policy. Impacts The euro has gained 15% against the dollar over the past twelve months; growing divergence with US policy will fuel further strength. Further euro strength is likely to put more downward pressure on euro-area core inflation and could damage export competitiveness. Markets are likely to remain volatile; the S&P 500 equity index is experiencing its second-most volatile year outside a bear market. Investors’ appetite for ‘risk assets’ will remain strong; 65 billion dollars has gone into emerging market bond and equity funds in 2018.

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