On 20 October banking regulators finalised the transposition into American law of the Basel Net Stable Funding Ratio (NSFR)* liquidity requirement. This requires banks to maintain a stable funding profile with regard to the theoretical liquidity of their exposure over a one-year period (in order to protect their capacity to maintain exposure in the event of a liquidity crisis). The final rule differs from the Basel standard, by allocating a nil stable funding requirement to high-quality liquid assets (such as Treasuries) and short-term loans guaranteed by such assets (reverse repos)**
CaixaBank and Bankia, respectively the third and fourth largest Spanish banking groups in terms of CET1, formalized on September 3, 2020, the opening of negotiations for a potential merger. If it materialized, this operation would consolidate the Spanish banking system. The level of concentration of the latter is comparable to that observed on average in the euro area, following two successive waves of consolidation between 2008-2009 and 2012-2013 from which CaixaBank and Bankia themselves emerged. The question is whether or not this could be the prelude to a broader movement of concentration that the ECB has been in favour of since several years. Indeed, the banking supervisor sees consolidation as a way to improve the financial profitability and resilience of banks1
The analysis of banks' business model responds to strategic as well as regulatory needs. It can also contribute to studying the effects of monetary policy, amongst other things. However, no harmonized definition exists in the literature. The authors therefore regularly use hierarchical cluster analysis to objectively classify banks according to their business model. These empirical, algorithm-based approaches rely heavily on balance sheet variables. Still, the distribution of bank sources of income and assets under management are also relevant variables. We therefore perform our own classification of European banks according to their business model using all these variables
The BoE and UK government have responded to the Covid-19 crisis with a broad range of measures. These were announced swiftly, but some have taken quite a while to implement, particularly when it comes to financial support for private sector companies. These measures share the feature of relying heavily on the country’s banking sector, which is in solid shape despite facing the same challenges as banks in other European countries. All this is taking place against the background of Brexit and the government’s refusal to extend the transition period on the basis that this would increase uncertainty for businesses and could reduce the flexibility they will need to react to the health crisis.
The exceptional measures taken by the US authorities to bolster the liquidity of companies and markets in response to the Covid-19 crisis have resulted in a significant expansion of bank balance sheets. Since the financial crisis of 2007-2008, regulators have tightened balance sheet constraints significantly. Fearing that leverage requirements could damage banks’ ability to finance the economy and support the smooth functioning of financial markets, these have temporarily been relaxed. However, the Federal Reserve is unlikely to undergo a slimming regime that will scale back bank balance sheets for a number of years (and almost certainly not before the end of the period of relaxation of requirements)
Lending momentum in the euro zone recovered strongly in March 2020, with an increase of 1.6% from a 0.4% fall in February. Against a background of negative GDP growth in the first quarter (-3.3% Q/Q-4 from +1.0% Q/Q-4 the fourth quarter of 2019), conditions in March were severely affected by the lockdown measures introduced by national governments over the month [...]
