In June 2022, the US Federal Reserve kick-started a programme to reduce the size of its balance sheet (QT2). However, banking regulations could hinder its ambitions. The first quantitative tightening (QT1) programme, which was launched by the Fed in October 2017, had already been curtailed early due to the liquidity requirements imposed on banks. Balance sheet constraints could in turn bring QT2 to an early end. The tightened leverage standard is already reducing the ability of banks to act as intermediaries in the secondary markets for US Treasury securities while federal government financing needs continue to grow.
The public and private moratoria granted since the onset of the Covid-19 pandemic to the Portuguese non-financial private sector[1] have, to a very large extent, now expired. The outstanding amount of loans under moratoria stood at EUR3.1 bn in October 2021, from EUR3.6 bn in March 2020 and a peak of EUR46.3 bn in September 2020. Moratoria now cover only 1.5% of outstanding loans to households and non-financial corporations, from 1.9% in March 2020 and 23.5% in September 2020. The expiry of moratoria since September 2021 has not, so far, resulted in a significant increase in non-performing loans[2]. Their outstanding amount (EUR4.0 billion) and ratio (2.0% of loans) have returned to their July 2008 levels
No sooner had the divorce agreement with the European Union been signed than the UK started disputing its terms. On 16 March, the British government was formally notified by the European Union for breaches of the Protocol on Ireland and Northern Ireland and violation of the duty of good faith. The final outcome, which can include sanctions, is yet to be decided. The fact remains that Brexit, described as a “historic mistake” by the remaining 27 members of the EU, appears as nothing more or less than what it is: a clear break. Admittedly, it will not stop the UK economy from recovering
Looking beyond the short-term economic shock, the Covid-19 pandemic and the exceptional health protection measures introduced to contain the virus raise many questions as to the lasting consequences of the crisis. The issue of zombie firms, which is far from new, has taken on a whole new dimension, as their weight in developed economies has progressively increased since the 1980s. Massive public interventions to tackle the effects of the pandemic, whether by governments – debt moratoriums, cancellations of employer social security contributions, widespread use of short-time working schemes, etc. – or by central banks – increase and prolongation of asset purchases schemes – could result in keeping non-viable companies afloat, raising fears of a zombification of economies.
Due to the lengthening of the health crisis, the European Banking Authority decided on 2 December 2020 to reactivate its guidelines on legislative and non-legislative moratoria on loan repayments. This decision aims at easing credit instructions criteria for granting moratoria. Moratoria granted in relation to the COVID-19 pandemic before 31 March 2021 will not automatically be considered as a forbearance measure. However, such moratoria must have benefitted a sufficiently large set of borrowers and their granting must have been based on a criterion other than solvency. The beneficiaries of moratoria that aim at preventing a default will no longer automatically be considered in default
On 16 September, the Single Supervisory Mechanism (SSM) for the euro zone announced the temporary exclusion of reserves with the Eurosystem from the calculation of leverage ratios at major banks. Similar relaxations had been introduced a few months earlier in the USA, Switzerland and the UK. The exceptional measures taken by public authorities to bolster liquidity have resulted in a significant expansion of banks’ balance sheets. Fearing that leverage requirements could hamper the transmission of monetary policy and affect banks’ abilities to lend to the economy, first regulators and then supervisors have temporarily relaxed such requirements
In response to the crisis triggered by the Covid-19 pandemic, in April the US Congress set up the Paycheck Protection Program (PPP), a small business lending programme guaranteed by the Federal government with an overall budget of nearly USD 650 billion. Under certain conditions, the loans can be converted into subsidies within the limit of payroll costs, interest on mortgages, rent and utilities paid during the 24 weeks after the loan was granted. The loans will be partially or completely forgiven on condition that employment and wages are maintained by the end of the year. At 22 June, 4.6 million SME had borrowed more than USD 515 billion under the programme, virtually all of which was borrowed as early as mid-May
What do the results of the European elections tell us? Does Prime Minister May’s resignation change things?Can the Withdrawal Agreement still be saved? Is there still a risk of a no-deal Brexit? Are we heading towards early elections? How is the UK economy holding up?
For most observers, the European elections are seen above all as a kind of political health report that is conducted simultaneously in all of the EU member countries. In this article, we will describe the main tendencies highlighted in the most recent polls and we will explore some of the possible consequences of these elections on the balance of power in Brussels and on the events that will follow thereafter.
On 1 February, Senate Banking Commission Chairman Mike Crapo outlined his proposal for reforming the US mortgage market. The proposal starts from the widely held position that although public guarantees are essential in ensuring a liquid and stable mortgage market, the Federal government should not be the sole party exposed to payment default risk. The Ginnie Mae securitisation model of multiple originators and multiple issuers* would be widely replicated, but only the private sector would participate in credit enhancement. Ginnie Mae would provide its guarantee (the government guarantee) to securitisations backed by loans covered by approved private guarantors. Credit risk transfer programmes would be reinforced for “non-extreme” credit risk
