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45 Results for Banking Economics

Eurozone : Euro zone credit trends: lending to non-financial companies (NFCs) weaker than consumer lending in November and December 2019

Credit impulse in the euro zone stabilised in December 2019 (up 0.3%, as in November) against a background of a slight slowing of real GDP growth in the fourth quarter (1.0% from 1.2% in the third quarter). Outstanding bank lending to the private sector maintained its pace of growth in December (up 3.7% year-on-year). For the second month in a row, growth in lending to NFCs was less than that in lending to consumers. The slowdown in growth in lending to NFCs (where the year-on-year figure fell from 3.8% in October to 3.2% in December) was due mainly to lower investment spending (in France, Germany and most particularly Spain). This was in part offset by strong growth in consumer loans (from 3.5% to 3.7%). For the first time since 2013, more banks are expecting demand for credit from NFCs to slow (first quarter 2020). In contrast, expected demand for consumer mortgages remains strong, driven by low interest rates, particularly in France.

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Germany : Does the support of an IPS constitute state aid?

The European commission's decision on the support plan for NordLB is expected in the next few days. This offers, for the first time, an opportunity to question the coherence of European state aid rules and the existence of IPS with state-owned members.

Eurozone : Sharp decline in credit impulse for non-financial corporations

The credit impulse has declined in September, moderately for households and much more noticeably for non-financial corporations (NFC). For the latter, the credit impulse has hit its lowest level since the beginning of the asset purchases programme by the ECB at the start of 2015. These movements contrast with the stability of GDP growth in the third quarter in the Eurozone (with a year-on-year rate of 1.2%, like in the second quarter). They almost exclusively involve loans with a maturity of less than one year, which is mainly related to destocking behaviour. For the fourth quarter of 2019, banks interrogated by the ECB anticipate a continued moderation of demand by NFCs and an intensification of demand for housing loans by households.

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United Kingdom : United Kingdom: credit bank supports bank's activities at the price of a slight increase in risk

The outstanding amount of mortgages granted to households continues to grow at a relatively dynamic pace in a context of rather low interest rates, which is accompanied by a slight increase in risk. The latter seems however for the moment mastered.

Global : The new crypto-currency "Libra" project

The new cryptocurrency project – Libra – which Facebook plans to launch in 2020 raises several questions and requires an appropriate response from the regulator.

Eurozone : Accelerate the cleaning up of European banks' balance sheet

By setting a deadline for certain banks to align the coverage ratio of their stock of non-performing exposures with that of their flow, the ECB is pushing such banks to accelerate the cleaning up of their balance sheets.

Italy : DTAs: non-performing loans, regulation and tax rules

Deferred tax assets or DTAs have built up in the banking systems of Southern European countries, including Italy. The process started in 2007 and has accelerated in 2010. The main reasons behind such increase are higher levels of non-performing loans as economic conditions have deteriorated, and tax rules. Previously, loan losses and write-downs were only partly deductible from the taxable income of Italian banks in the year they were recognised. The surplus of corporate income tax paid by banks gave rise to DTAs, part of which was not deducted from regulatory capital and so inflated bank solvency ratios. As a result, Italian banks were not incentivised to accelerate the cleaning up of their balance sheets. To encourage them to do so, the Italian government has changed the tax rules. Banks can now immediately deduct all losses and write-downs from their taxable income. This is reducing the build-up of DTAs and is having a less positive effect on bank solvency ratios than the previous tax rules.

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Global : The economic impact of Basel III: applying the BIS analysis to the eurozone

In November 2016 the Bank for International Settlements (BIS) published an updated economic impact study of Basel III and the ongoing reforms, suggesting the existence of some room for manoeuvre in the creation of additional capital buffers. We demonstrate in this analysis that this room no longer exists in the eurozone, where the dominant role played by banks in financing increases the economic cost of new regulatory requirements and reduces the optimal bank solvency ratio, above which the economic cost exceeds the estimated benefit of tighter regulation.

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Eurozone : Institutional protection systems: are they banking groups?

In the eurozone, a large proportion of savings banks and co-operative banks belong to institutional protection systems, within which they undertake to support each other mutually. From a strictly accounting point of view, these networks do not constitute banking groups. However, regulators recognise that they are highly integrated and allow their members to apply a prudential treatment similar to that used by companies belonging to consolidated groups. These mutual support arrangements are to some extent part of the trend towards consolidation in the banking industry.

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Ireland : Irish banks: on the road to recovery?

Against a background of strong economic recovery, the Irish banking sector is still licking its wounds even though, overall, its financial position has improved, thanks in particular to the restructuring and recapitalisation programmes that followed the crisis and the marked improvement in the economy. The country returned to growth in 2013, with GDP rising 1.1%, and this trend accelerated strongly in 2014 and 2015. However, Irish banks are still vulnerable to a downturn in the domestic economy due to their high level of exposure to the domestic market and, more particularly, to the concentration of their portfolios on the residential and commercial real estate sectors. Given the latest stress tests by the EBA, uncertainties remain over the banks’ ability to absorb negative shocks which, if they materialised, could damage the quality of loan books and give rise to losses.

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