ECB

Markets 10th September 2014

The ECB turns into a massive backstop

MADRID | By J.P. Marín Arrese | The ECB asset purchases drive has received staunch support from the financial markets. No wonder, as it turns the central bank into a huge and largely undemanding backstop. Under the covered bond programme, it will switch banking liabilities into fresh liquidity. The ABS purchases scheme will transfer loan portfolio exposure to the ECB. Overall, both measures amount to a solid backstop for redressing banking solvency. The move comes most timely, as stress tests and asset quality reviews are due shortly to be published.

Markets 9th September 2014

G4 central banks expanded their balance sheets by $4Tr in 4 years

MADRID | The Corner | The size of the ECB’s private asset purchase plan is an enigma. According Mr Draghi, the central lender aims to bring its balance sheet to 2012 levels, that is, from the current €2Tr to €3Tr (March 2012). Some analysts believe he went too far in Jackson Hole and the expansion shall not exceed €450bn (see chart above). Meanwhile, the G4 central lenders have increased their balance sheets in $4Tr since 2010- Only the BoJ continues to expand it at a rate of $650bn/year. And even if the Fed starts unwinding its stimulus program in October, if we add about €450bn annual from the ECB would liquidity would be increased by €1Tr.

Markets 8th September 2014

How many NPLs in the Greek banking sector are also non-recoverable loans?

ATHENS | By Jens Bastian via MacroPolis | The recent presentation of half-year results by the four systemic banks in Greece – National Bank of Greece (NBG), Piraeus Bank, Alpha Bank and Eurobank – brought a mixture of good news and underlying structural challenges affecting the operational capacity of domestic lenders.

Markets 8th September 2014

Will we see a second round of QE in Europe soon?

MADRID | The Corner | “The ECB’s quantitative easing in Europe came late compared to the US Fed’s but before we expected,” Barclays’ Alberto Vigil commented on Monday, who believes that a second round of QE stimulus in the eurozone is about to take place soon. “Little bears may become a little like bulls,” he ironizes. The combination of the QE with the strength of the American data has already brought a significant correction of the euro of 7%.

In Europe 5th September 2014

Draghi does the dirty job while Germany attacks

FRANKFURT | By Lidia Conde | What a relief! France is reinventing itself as it is Angela Merkel’s hope. However much Mr Draghi warns that the ECB will do whatever it takes to save the euro, all the fresh money in the bank will be useless unless “some members of the Eurozone” change their economic policy. This is Germany’s analysis of the Eurozone state.

In Europe 5th September 2014

The ECB failing to convince needs to act

MADRID | By JP Marin Arrese | Ever since Alan Greenspan moved at will financial markets behaviour, simply by talking up or down either expectations or exchange rates, central bankers have tried to follow suit. For all his merits, Mario Draghi lacks Greenspan’s skills. Even if he commands enough fluency in English, his messages sometimes are utterly ill placed. Yesterday’s underperformance in his press conference showed it vividly.

Markets 4th September 2014

ECB will give banks money to spend and punish those who sit on their hands

MADRID | The Corner | Mario Draghi finally unveiled the European Central Bank’s betting on further stimulating the eurozone: benchmark main refinancing rate will be cut from 0.15 per cent to 0.05 per cent and marginal deposit facility risen 0.1 per cent to 0.2 per cent. Also a programme to purchase a “broad portfolio of transparent asset-backed securities” will be in place from October this year. Thus, the ECB becomes the first central bank to announce large-scale asset purchases and negative deposit rates. Reactions were quick: the euro fell below the key threshold of $1.3 to hit a low of $1.2995.

Markets 4th September 2014

QE gathers momentum

MADRID | By J.P. Marín Arrese | Mario Draghi’s anxious call to governments, urging them to put the house in order by implementing a combined economic and monetary policy, seems the right course of action. Deflationary risks run high as prices fall well behind the medium-term target. Once again, the Eurozone seems stuck as the growth prospects dwindle. Nothing new, as its appalling record during the crisis shows. Filling gaps through moral lessons, instead of money, hardly solves deeply entrenched problems.

In Europe 4th September 2014

Europe’s PMIs mixed data confirms the need of new, strong action from ECB

MADRID | The Corner | August PMI figures confirm what investors already know: Europe’s economy continues to expand at a very low rate. Indeed, the final data have been revised downwards in those cases where no changes were expected, and they are worse than July’s. Final services PMI: 53.1 vs. 53.5 preliminary and 54.2 in July (highest level of the last 3 years). Specifically, PMI services index in Spain rose to 58.1 points in August from 56.2 in July, representing the biggest increase since December 2006. The consensus of analysts expected a slightly lower number of 55.5 points.

In Europe 3rd September 2014

ECB: We need a QE shot (not 17 of them, JPMorgan)

MADRID | The Corner | It’s speculation day before the European Central Bank’s tomorrow meeting. Will a QE plan finally be announced? Experts at Santander bank think that, if announced too early, it could damage TLTROs. JP Morgan economists believe there is a 30% chance we’ll get a QE shot in 2014, 50% next year. And they’ve come with a proposal we find erratic: 17 different bond buying plans, one for each state member. That is exactly the opposite direction the EU needs to be heading to.

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