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Tag Archives: Banks

Italy’s bail-in headache

Weakness in the Italian banking sector is a major concern for the euro area. Retail investors stand to lose out if BRRD bail-in rules are strictly applied, and many in Italy are seeking an exception for political reasons. However, Silvia Merler argues that this would set a dangerous precedent. She calls for an orderly bail-in, followed by compensation for investors mis-sold unsuitable products. The current market concern about Italian banks is hardly surprising. I have discussed at length...

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Europe’s next headache: Italy’s banking crisis

Share this:Italy’s distressed banking sector is quickly becoming a source of great concern throughout Europe’s financial markets. Angelo Baglioni breaks down the crisis as an outcome of two factors: bank mismanagement and the insolvency generated by a deep recession, which have caused bad loans to soar to unprecedented levels. He concludes it is reasonable to expect that the EU institutions will allow Italy to support its banking sector with the European regulatory frameworks.  The...

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Italy’s banking problem is serious but can be fixed

Following the UK vote to exit the European Union, the fragility of the Italian banking system has come into the spotlight. The Economist described it as a “potentially more dangerous financial menace” than Brexit. This characterization is massively overblown. The policy and political challenges associated with Italian banks are complex but far from intractable, and need not become a systemic risk for the euro area. Italy’s weak banking sector is the largest remaining pocket of financial...

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The impact of the EU regulatory framework for financial services

Keynote speech by Commissioner Jonathan Hill at Bruegel event "The impact of the EU regulatory framework for financial services" on 12 July 2016. Well, here we are. Just three days left as Commissioner for Financial Services. Really I should be packing instead of coming here to talk about financial regulation – which goes to show just how much I like packing. Although I had had no direct experience of financial services before I came to Brussels, I obviously arrived with a set of...

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Total assets versus risk weighted assets: does it matter for MREL?

As a consequence of the global financial crisis, various initiatives have been taken in different jurisdictions to ensure the future resolvability of banks without massive use of public funds. In Europe, the BRRD introduced the concept of MREL, which is in the process of being defined. Please see the PDF version of the paper for footnotes, references, and appendices. Highlights The European Union’s Bank Recovery and Resolution Directive foresees a ‘minimum requirement for own funds...

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Lost passports: a guide to the Brexit fallout for the City of London

If the UK cannot secure a ‘Norway’ deal and stay within the internal market, the UK will lose passporting rights for financial services and access to euro clearing and settlement, both of which make London attractive as a financial centre. A substantial part of the UK’s wholesale banking and trading sector may move out. 1. The City of London outside the European Economic Area Part of London’s attractiveness as an international financial centre is its access to the internal market of the...

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Losing “EU passport” would damage City of London

If the UK cannot secure a “Norway” deal and stay within the internal market, the UK will lose the passporting rights which make London attractive as a financial centre. The macroeconomic fall-out from Brexit has also damaged the performance of banks and insurers. 1. Passporting Part of London’s attractiveness as international financial centre is the access to the internal market of the wider European Economic Area (EEA). By using a UK licence as European passport, foreign financial firms...

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The European Deposit Insurance Scheme

Statement prepared for the European Parliament’s ECON Committee Public Hearing of 23 May. It is welcome that the European Union and the euro area in particular discuss the topic of a European deposit insurance. In fact, to complete banking union, three pillars are indispensable: banking supervision, bank resolution and deposit insurance. In terms of institution building, I would argue that supervision is now fully in place while the European Resolution Mechanism with its funds is still only a...

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Italy’s Atlas bank bailout fund: the shareholder of last resort

Italy’s new bank fund Atlas might be what is needed in the short run, but in the longer term the fund will increase systemic risk. What ultimately matters is how this initiative will affect the quality of bank governance, a key issue for the future resilience of the system. In Greek mythology, Atlas the Titan was condemned by Zeus to eternally hold the weight of the sky on his shoulders. A mythological struggle that has recently made the news, thanks to the creation of a new Italian bank fund...

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Brexit endangers London’s status as a financial hub

The UK’s competitive edge in financial services is substantial and would be difficult to dislodge. But Brexit could damage London’s attractiveness as the centre of European banking, as an entry point to the EU and as a global financial hub. FDI is also at risk. London’s strength as a global financial centre is impressive. The British capital has a share of nearly 50% in certain segments of global financial markets. Table 1 shows that the UK hosts  48.9% of the world’s interest rate...

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