In June, The Atlantic published “The Looming Bank Collapse”, a piece by University of California, Berkeley law professor and ex-Morgan Stanley derivatives structurer Frank Partnoy, which generated significant debate over whether a banking crisis in the same mould as that witnessed during the global financial crisis (GFC) is just around the corner.
European Central Bank
During its policy meeting on Thursday, September 10, the European Central Bank (ECB) decided to keep its main refinancing benchmark rate unchanged at 0 percent, along with leaving its rates on the marginal lending facility and deposit facility the same at 0.25 percent and -0.50 percent, respectively.
The warning not to put all your eggs in one basket may apply to policymakers’ exclusive focus on boosting the demand side of economies. Monetary policies, in particular, are fixated on promoting growth in demand. But is the supply side of the equation being ignored in the process? Is this one-sided approach most likely to prosper the economies that are subjected to it, or is a change of focus needed?
Digital currencies are proliferating around the globe, with even the bigtech players such as Facebook jumping in. What about central banks issuing their own central bank digital currencies? Many central banks are weighing the advantages and disadvantages of CBDCs so as to minimize disruption. More recently, six central banks announced that they will work jointly on this issue with support from the BIS, which shows the increasing focus on cross-border implications.
Occasionally, an anomaly becomes the new normal, and this seems to be true of negative interest rates in many regions of the world. Used as a tool of expansionary monetary policy in the aftermath of the global recession, negative rates may be wearing out their welcome, especially in some countries in Europe. But can they be scrapped entirely, or are they a natural part of the global economy’s cyclical trends?
Problems have continued to mount for the German banking sector in 2019. According to Ronit Ghose, the global head of banks research at Citibank, German lenders are in a much worse position than their European counterparts—and that even includes Italy when it comes to profitability.
Data lineage is becoming more important for financial services organisations today. Increasingly, it is becoming hard-wired in regulations and in data quality frameworks like the European Central Bank’s (ECB) Targeted Review of Internal Models (TRIM) – and ultimately this is all related to the need for ‘explainability’.
Relations are growing frostier globally, as political leaders become more nationalistic. And this change in climate is impacting economies, rendering them less cooperative. Two significant changes affecting the global business cycle include the US Fed’s tighter monetary policy, the impacts of which have rippled throughout the world, as well as the geographical shift of the centre of manufacturing production to the East, to the dismay of some Western leaders.
Financial Regulation—How to Find a Balance Between Costs and Benefits? Status quo, and possible ways forward
The decade following the financial crisis unleashed a torrent of regulatory requirements. Financial institutions have spent billions on technology and operations to achieve regulatory compliance; the frequency of new requirements is high. Despite all of this, regulators have not been satisfied with the quality of the data and level of transparency. How can banks and regulators strike a balance between the costs and the benefits of regulation?
The good news is that economic growth globally is strong, with a few exceptions, as the world shakes off the effects of the Great Recession. But economists are uneasy about troubling undercurrents, such as protectionist trade policies, that could whip up into a global trade war. Most are hoping that trade relationships can be repaired, acknowledging that the time is now to rebuild rather than burn bridges.