The same product carries the same price—except for a loan. Due to risk premiums, some borrowers pay more than others for the same loans to protect lenders from the possible consequences of high-risk lending. The current approach ignores that paid instalments reduce the risk over time. After full payment of the principal the risk is reduced to zero. Is it time to rethink this process to ensure that human rights are not violated and resources are rerouted to meet pressing needs?
With COVID-19 still dominating the narrative across the global banking industry, arguably the biggest challenge lenders will face in 2021 is how best to maximise the customer experience amidst such a challenging environment. Indeed, given the low interest rates that have continued to weigh heavily on banks’ net interest income (NII)
The last decade or so has seen concerns grow significantly over the long-term health of the dollar. Those concerns have only grown in urgency since the coronavirus arrived on the shores of the United States in February, triggering a nationwide shutdown of the world’s biggest economy.
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.
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?
Interest rates have been depressed for so long in Europe, it’s hard to remember when they actually soared into the teens. In fact, today, the natural interest rate is flirting with negative values. Due to a number of factors, such as an ageing population and sluggish trend growth, the natural interest rate is not likely to rise anytime soon. The remedy may not lie with central banks but with governments.
Interbank offered rates, the interest rates at which banks lend and borrow in the interbank market, are being replaced by risk-free rates, partly due to past rate-rigging scandals. In Europe, what is in itself a tricky conversion has been made even more complicated by the implementation of the wider EU Benchmark Regulation. Market participants must not delay in preparing to meet the transitional challenges as the deadline draws nearer.
Little is more valuable to financial-market participants than accurate predictions of future growth. With interest rates on the rise in the US, investors are anxiously looking for indications of an impending recession. But what are yield curves really telling us about future growth prospects—in the United States and also in Australia? Is dreaded recession in the cards, or is modest slowdown more likely?
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.
While the pace of bank M&A transactions in 2018 has been on par with the same period in 2017, deal valuations are on the rise. During the first quarter, the aggregate value of all announced bank deals was $4.08 billion, down sharply from $9.08 billion a year earlier