In Europe

Banks Should Keep Every Euro Of Capital To Absorb Losses And Continue To Provide Credit To The Economy, Says ECB’s Enria

Andrea Enria, the President of the European Central Bank (ECB) Supervisory Board, said in an interview that he expects banks to keep back over $27 billion of the $35 billion they planned to distribute in dividends as capital on their balance sheets. In addition to this, Enria said the institutions have also cancelled their current and planned share buy-back programmes

The ECB Warns That A Digital Currency Would Have Serious Effects For The Financial System

If the European Central Bank (ECB) were to introduce a digital currency for citizens, with the possibility of them being able to open deposit accounts directly with the institution, it would undermine the role of the banking sector as an intermediary. This disintermediation would lead to legal problems and economic inefficiencies, stated Yves Mersch, Luxembourg’s representative on the ECB’s board.

The ECB Increases Its Emergency Purchases By 54% In The Week Of Germany’s Constitutional Court Ruling

Just a few weeks before the ECB’s key meeting (4th June), Lagarde has responded to Germany with the biggest weekly purchase since the start of the pandemic: 44 billion euros, 54% higher than the weekly average since April. Furthermore, Olli Rehn affirmed that the German Constitutional Court’s ruling could have an impact on the central banks’s ability to exercise its price stability mandate.

The ratio of NPLs could be close to 3%in Europe in 2020

ESM Credits, No Conditionality Now But What About In The Future?

Intermoney | On Friday, the first support measures within the EU worth €540 Bn were given the final go-ahead, but there are still some clouds around. There is a general requirement for accessing these loans for all countries, linked only to their use for direct or indirect Covid-19 health costs. There is no particular conditionality. In Italy, however, there are concerns about the conditionality of ESM resources in the future. If the recovery allows it, the conditions would already be a reality in 2022 at the latest.

Stocks markets remain vulnerable to short term correction

US Stocks To Be Relative Winners In A Post-Covid-19 World

Patrik Lang, Head Equities (Julius Baer) | We have downgraded eurozone equities to Underweight given slower earnings recovery expectations, increasing political risk and unfavourable sector exposure. In our view, relative valuations do not fully reflect these negatives. On the other hand, we have upgraded US equities, which should benefit from a relatively fast post-Covid-19 recovery.

The ECB Responds Without Hesitation To German Constitutional Court Ruling But Must Build Bridges

Intermoney | In the name of the ECB independence, Christine Lagarde, made it clear that the only guide for the institution is the fulfilment of its mandate and no resources or efforts will be spared in this task. Once the central bank has made it clear that it does not accept the authority of the German courts, it must move on towards a more political phase in which it can build bridges and provide a solution to the problem. If it does not do so within three months, the Bundesbank could find itself in a difficult legal mess.

UK can reverse Brexit unilaterally

BoE Chooses To Wait In Face Of Uncertainty

David Page (Head of Macro Research at AXA Investment Managers) | The Bank of England (BoE) today announced its monetary policy decision for May. It left the Bank Rate unchanged at 0.10% as widely expected, by unanimous vote. It also left QE unchanged, leaving the Asset Purchase Facility target unchanged at £645bn. This was in line with the median consensus forecast, but we had expected a £100bn increase in QE today as the current programme is set to expire in early July. This was by split decision, with two members voting for an immediate £100bn increase. The majority of the Committee decided to wait for “more information… that was likely to become available over the coming weeks”, but these members “all” acknowledged prospective weakness in the economy and downside risks to the medium term outlook “might necessitate further monetary policy action to support the economy in the future”. We fully expect the MPC to increase QE, probably by £100bn at its next meeting on 18 June.

Why Is The German Constitutional Court Now Challenging The ECB’s Purchase Programme And European Justice?

The German Constitutional Court surprised everyone yesterday with a ruling that some of the European Central Bank (ECB)’s actions, carried out as part of its 2015 bond purchase programme (PSPP), are unconstitutional. This decision clashes directly with the judgement of the European Court of Justice (ECJ). The decision does not call into question the entire debt purchase programme, but rather the part relating to the Bundesbank’s intervention.