MADRID | Everyone seems to skip the nagging fact that stress tests undertaken by Oliver Wyman and Roland Berger only focused on credit risk. Thus, the extra capital requirements only reflect shortcomings in the banking book due to potential bad loans. But any serious test has to embody securities risk in general and sovereign bonds in particular. The European Banking Association has performed it every time it has put European…
MADRID | ACS reported that Société Général has agreed to refinance part of the debt of its 8.25 percent acquisition of Iberdrola. The transaction, signed by ACS’ subsidiary Residencial Montecarmelo, allows to substitute the loan currently held with a syndicate of banks, in which BBVA acted as agent. The operation accounts for €1.6 billion and will leave ACS with a 6.6 percent stake in Iberdrola, that is, ACS will still…
LONDON/MADRID | Finance-wise, Italy is unnerving some of its neighbours in the periphery of the euro zone. Particularly in Spain, government officials wonder aloud about the unfairness of the whole situation: while yields of the Spanish 10-year sovereign bonds time and again cross the 7 percent frightening barrier, Italy managed last week to sell €5.25 billion in debt of various maturities at much lower interest rates in most of the…
By valenciaplaza.com | IG Markets' Daniel Pingarrón said in a conversation with VP for The Corner that the European authorities and the Spanish government should improve their timing if they want investors to believe that they can set up a coordinated, effective plan. The Spanish market index Ibex spiked after president Mariano Rajoy announced its austerity policy, but it was a short-lived reaction. Why was that? The recovery of the…
WASHINGTON | “Show me the factories, then!” Before the audience at the School for International Relations of the John Hopkins University, Adair Turner, or Lord Turner, put in these terms his rebuttal to those who defend that financial innovation betters the real economy, a selected group where we would find the former chief economist at JP Morgan and once FMI’s deputy managing director John Lipsky, who happens to strongly dissent…
Luis Martí, in Madrid | It stands for Trans-European Automated Real-time Gross Settlement Express Transfer. TARGET2 is a key payment mechanism to European monetary union because it allows all transactions denominated in the common currency to be implemented as easily between member countries as within one country. Otherwise, it would be difficult to talk about common currency. Since the effects and implications of this mechanism are the subject of heated controversy,…
NEW YORK | Have Libor scandal shock waves reached this side of the Atlantic yet? There is no doubt they will. It may impact American consumers and the U.S. financial system: Barclays is the only bank confessing malpractices so far, although Wall Street has almost surely been involved in the same dynamics. So far we've only seen the tip of the iceberg but it sends a warning signal to the…
LONDON | The euro area's debt-burdened economy is unlikely to improve soon, but it has built in up resilience against steep declines. The downturn this time should be softer than it was four years ago, Legal & General Investment Management LGIM said in an investor note. The report explained that growth in the euro area will remain weak but that a severe recession in the region as a whole is…
From valenciaplaza.com | Francisco Jorro, director in Valencia at Renta 4 Banco, said in a conversation with valenciaplaza.com that the ECB's rate cut had already been anticipated by the markets, but the move could still help growth plans in the euro area. What did you think of the ECB's decision? The truth is that a quarter down of a point was already discounted by the markes. Hence, not only the Ibex…
LONDON | Whether it is electoral incentives or sincere concern what compelled the UK government to call for supervision from outside the banking sector, free market advocates must have felt an acute sense of betrayal. On Tuesday, the Chancellor of the Exchequer George Osborne no only reminded the City that the British Bankers Association members will not see a penny of the £290-million fine that has been imposed to Barclays…