MADRID | By J.P. Marín Arrese | Spanish banks are frantically pressing government to transform their deferred tax assets (DTA) into rock-solid unconditional commitments. Failure to do so before the end of the year would deprive them of 40 billion in Tier 1 capital, an amount equivalent to last year’s rescue package. Unless they secure full immunity for current DTA, they are bound to devote ample resources in redressing their own resources.
What really makes China anxious about reforms is not a fall on exports, but it’s incapability to continue absorbing the expensive investments that for years triggered miraculous growth. Could be China making the same mistakes than in 2008? Could the country be falling into the investment trap again? Among many other issues, the Central Committee of the Communist Party agreed on markets playing a greater role in allocating resources. This and other decisions suggested a less interventionist model where the private sector should have a greater role. The new leadership doesn’t have many options left.
NEW YORK | By Ana Fuentes | Micro-blogging star Twitter made its debut at NYSE on Thursday, opening at $45.10 a share, well above the $26 set by the firm and its bankers. Indeed, it was a big day for the New York stock, more than for the company itself, since what we saw on the floor was a mere game of offer and demand, nothing to do with the company’s real value. Outside of Wall Street and Silicon Valley, many find it hard to get excited about this IPO.
MADRID | By Ilan Brat and Christopher Bjork at The Wall Street Journal via Presseurop | It has puzzled Spanish bank analysts for years: Why did the country’s mortgage delinquency rate rise so slowly even as unemployment soared above 26%? A big part of the answer—revealed by a spate of bank earnings reports in recent days—is that Spanish lenders had been making their loan books look healthier than they really were by refinancing big numbers of loans to struggling homeowners and businesses.
MADRID | By Raimundo Poveda | With the typical delays of the first willful calendars, the European Community Resolution that regulates a common supervisor for the euro zone and guests (SSM, single supervisory mechanism) was finally published. Press and politicians are announcing the Banking Union, a new name for an invention of limited scope. We already had a common banking market since 1989, and a European Banking Authority since 2011. The Banking Union will turn back the financial Balkanization process triggered by the crisis. So entities will get abundant credit at unified interest rates, just as during the bubble; SMEs in the South will pay for credit the same as German SMEs; and there will be credit! We will go back to the Arcadia Felix of the first five years of the century. True? Well, maybe not.
MADRID | By Francisco López | In the current context of scarce credit activity and low interest rates, a substantial part of banks’ financial income originates in the fixed income portfolio. The banking sector’s balances of fixed-income come to €540 billion, which represent 17% of the total balance (around half of them being public debt).
MADRID | The Corner Team | The major European banks Asset Quality Review (AQR) will be released on Wednesday. And the criteria for classification of bank assets to be presented by the ECB are key to start estimating more accurately the outcome of the stress tests in 2014, Santander analysts point out. Capital requirements of major entities would be of €55billion, concentrated mostly in Italian banks.
BEIJING | By Yu Hairong at Caixin | The Shanghai FTZ was supposed to be a step towards China’s financial openness. However, the negative list is too long and hardly reflects any improvement on existing foreign investment restrictions.
LONDON | Barclays analysts | US equities rallied strongly and high-beta/high-yielding currencies benefited most in response to initial news of the deal. This positive sentiment has supported most Asian equities today. However, the reaction in currency markets has been more muted, perhaps reflecting the high degree of market optimism on a resolution since the US government shutdown began on 1 October.
Markets have started the week in a relatively directionless fashion amid slow-moving progress in Washington, Barclays analysts point out. That lack of decision could make the Fed delay the tapering until 2014, keeping downward pressure on the USD.