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European economy

The ECB's decision on interest rates hits the European banking sector

European economy 5th October 2020

The ECB Links The Dividend Veto To The Default Rate; Santander Urges It To Reconsider

The ECB is focusing on the proactive management of NPLs, linking the dividend policy to the impact of Covid19 on credit quality. Estimates suggest an increase in delinquency rates of up to €1.4 Tr in an adverse macro scenario, equivalent to 5.7% of the capital ratio. At a round table organized last week by the Bundesbank, Banco Santander chairman Ana Patricia Botín argued that the dividend veto is one reason why the banking sector is not sufficiently resilient “in terms of its ability to attract capital.”

ECB

European economy 1st October 2020

The ECB Could Move Towards An Inflation Model Similar To That Of The Fed

Intermoney | ECB President Christine Lagarde acknowledged yesterday that the central bank would consider formulas to allow inflation to exceed 2%, without being forced to raise rates and suffocate the recovery. Reality, as Lagarde indeed acknowledged, is in keeping with a world in which inflation targets must be transformed. They were designed to avoid upward deviations, but not to deal with prolonged situations of inflation deficit.

Siemens Energy

European economy 30th September 2020

Siemens Spins Off Energy Business; Hands Shareholders Over 55% Of New Siemens Energy

Shares in the new Siemens Energy started trading on Monday. The new company includes 100% of the former Gas & Power division plus 67% of Siemens Gamesa Renewable Energy. Siemens has handed over to shareholders 55% of Siemens Energy via a kind of share dividend, in the proportion of one Siemens Energy share for every two Siemens shares. While 9.9% goes to Siemens Pension-Trust, Siemens holds a direct 35.1% stake. That said, its aim is to continue to reduce its participation in the next 12-18 months.

sweden

European economy 29th September 2020

Sweden And Norway Are Moving Toward A Cash-Free Society

The payment market in Sweden and Norway is being digitized. To give an international comparison, the cash in circulation as a percentage of GDP variable is used as a proxy for the demand for cash. In 2018, the cash in these two economies was equivalent to 1.3% and 1.5% of their GDP, respectively. In contrast, in the United States and the Eurozone, this variable was at 8.2% and 10.9%, respectively.

RSunak

European economy 24th September 2020

UK Chancellor Sunak Announced Additional Stimulus

UK Chancellor Rishi Sunak today delivered a series of new measures and extensions to existing supports to help the UK economy through the winter months following the re-emergence of the coronavirus and re-imposition of wider restrictions on activity.

European banks

European economy 22nd September 2020

European Banks: Six Months Into The Pandemic, A Tougher Spot But No Crisis

The European banking landscape does not look much worse six months into the pandemic-triggered economic crisis than before Covid-19 struck. Loan-loss provisions are higher, there is negative pressure on top-line revenues and gloomy market predictions linger. But the prospect of a new banking crisis is remote. The principal merit goes to the regulatory architecture set up in Europe after the Great Financial Crisis.

ECB both christines

European economy 21st September 2020

ECB Temporarily Relaxes Capital Requirements To Weather Covid-19

The European Central Bank has decided to allow the lenders it directly supervises in the region, on a temporary basis until June 27, 2021, to exclude certain exposures to the central bank from their leverage ratio. In this way, the institutions will have more room to incur debt since the ECB will not require more capital for it. In fact the ECB will not take into account the liquidity (cash and deposits) banks hold at the central bank when calculating the leverage ratio (Capital/Assets).

The car sector is key in Europe: stimulates the rest of the sectors of the economy

European economy 21st September 2020

Sales Of The European Automotive Sector To Fall By At Least 20% For The Rest Of The Year

Santander Corporate & Investment | New car registrations in Europe (EU+UK+ European Free Trade Association) plummeted 17.6% annually in August to 884,394 vehicles. Thus it broke the three-month period of smooth declines, including a 3.7% drop in July. In total, 7.267,621 new cars were registered in the European Union between January and August, almost 3.6 million less than in the same period last year. The outlook for the sector for the rest of the year is not encouraging. 

Varsoviaok

European economy 18th September 2020

Polonia: Economic Contraction Lower Than Eurozone Average

Poland ́s economic contraction due to the coronavirus pandemic is expected to be 3.5%, much lower than the Eurozone recession of 8%. The economic performance is less dependent on exports compared to Poland ́s Central European peers like the Czech Republic, Hungary or Slovakia. At the same time private consumption accounts for 58% of GDP, reducing the vulnerability to external shocks (as evidenced by avoiding a recession in the 2009 credit crisis). In 2021 the economy is forecast to rebound by 5.6%.

Economy policy in difficult times: the risk of trying to drive the economy back to the peak of the cycle

European economy 17th September 2020

BoE: “We Continue To Expect A £75bn Extension Of QE In November”

The Bank of England (BoE) left policy on hold at its latest meeting. Bank Rate remained at 0.1% and the Asset Purchase Facility (APF) was left at £745bn. Both decisions were made unanimously. The BoE explained that the APF had risen to £684bn to date, buoyed by £230bn in gilt purchases and £9.3bn (of £10bn) corporate debt purchases. The current QE programme is expected to expire around the turn of the year and purchases have been lower than in Q2 given the improvement in liquidity conditions.