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.
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.
To say that a central bank is influential in determining the course of national markets and economies would be a serious understatement. But behind the central bank’s more obvious monetary policy lies its collateral policy, a hidden but key contributor to its overall, far-reaching financial impact. What exactly are collateral frameworks, and what do they really do?
Central banks saw their reputations peak when they were perceived as saviors of the world after the financial-market crisis. As a consequence, expectations for their power to manage economies became exaggerated, while at the same time, they were overburdened with new responsibilities—especially true for the ECB. But support for the independence of central banks is on a declining trend.
Anemic economic growth in advanced economies has led central banks to prescribe loose monetary policy that has not produced the cure. The problem may lie more on the supply than demand side; digital innovation in industrial operations if properly implemented could lead to the transformative revolution that will boost productivity and revive economic performance.
Forecasting economic risk is an attempt to quantify the unknowable in a complex, ever-changing system. Although they often fall short of future realities, macroeconomic forecasting models that include thoughtful and comprehensive analyses of risk factors will provide launching points for serious and useful economic-policy discussion and planning.
Europe’s vision of idyllic unity has lost its glow due to rampant immigration, regulation and debt, causing nationalist parties to ride the waves of public anger. None of these crises have benefited European banks, with some teetering on the brink. But solutions exist that if implemented will restore growth and financial stability.