Some puzzles are fun, while others are not. The sovereign-bank diabolic loop puzzle is definitely not fun for the European governments and banks victimized by it. Trapped in the loop, banks hurt sovereigns, while sovereigns return the favor by hurting banks. Is there a way to break free of this deadly embrace? New research shines a light on a possible channel to freedom that strangely enough originates in the US.
Mergers and acquisitions are often a good solution for ailing banks and have been tossed around more frequently lately as the answer for Europe’s financial institutions, many of which are struggling with internal issues along with external factors such as anemic growth and low interest rates. While consolidation brings many benefits, it may not be the best remedy for European banks right now, especially when it involves substantial cross-border deals.
Global growth is strong, but policymakers need to navigate uncharted waters and enact complex policy changes to keep the world economy on an even keel. The main risk lies not in economic conditions, but in economic policy debates too often distorted by partisanship. We have a chance to leverage new technologies to lift living standards on a sustainable basis—but we need a more level-headed discussion to chart the path forward.
Italy’s banking sector, mired in bad debt and low profitability, has been labelled Europe’s weakest, but fortunately it is making progress in addressing long-standing issues—with a little help from the government. Recent bank bailouts have given renewed hope to struggling lenders, while raising concerns that the arrangements conflict with Europe-wide rules prohibiting the use of taxpayer funds to bail out failing banks.
Quantitative easing and low interest rates were to work together to ignite roaring economic growth following the last financial crisis; in some parts of the world, monetary policy has set interest rates at zero (even below), but growth remains elusive and rock-bottom inflation rates coincide with interest rates. What went wrong?
The European debt crisis demonstrated not only the fragility of the bloc to external shocks, but it also showcased the glaring inequality within the European nations. It was a reminder that the impact falling across the Eurozone is not only severe but also unequal.
The European Union is exactly that, a union. This interconnectedness works well when all members are doing well, but what happens when one is not? Many investors are concerned about the health of banking in one member country in particular, Italy, and how its struggles may infect the Eurozone as a whole.
On June 8, the European Central Bank (ECB) began its Corporate Sector Purchase Programme (CSPP), which was initially announced by the bank’s president, Mario Draghi, on March 10 as an addendum to the ECB’s quantitative easing (QE) program.
Earlier this year, the European Central Bank (ECB) decided to cut its deposit rate to -0.4 percent and its benchmark refinancing rate to zero.
Owing to the historic referendum result that has paved the way for the UK to leave the European Union (EU), the City of London—the world’s largest financial sector—is set to be fundamentally transformed, along with the banking sectors in the UK and Europe predominantly.