ECB

ECB’s tough love is good for banks, bad for Italy

28 Dec 2016

The European Central Bank says Monte dei Paschi needs 9 bln euros of extra capital - up from 5 bln euros - after seeking state aid. Raising the bar is a prudent response to prolonged uncertainty. But it adds to Rome’s debt, and may push up the bailout bill for other banks.

Draghi’s market first-aid kit ready for 2017

8 Dec 2016

The ECB boss is extending the central bank’s asset buying until the end of next year but will unexpectedly reduce purchases from April. It may sound muddled. In fact, these and other changes give Draghi more scope to support markets throughout a politically fraught year.

Trump may make Mario Draghi great again

10 Nov 2016

European bonds are tracking the rise in U.S. yields sparked by President-elect Donald Trump's spending plans. This helpfully expands the number of bonds that the ECB boss can buy. U.S. protectionism would also hurt the euro zone economy and push Draghi back into the limelight.

ECB taper whimper is the most low growth permits

5 Oct 2016

Reports that the European Central Bank may reduce asset purchases caused a blip up in bond yields. But it's a far cry from the 2013 U.S. tantrum, and rightly so. Weak growth and insufficient public investment will force monetary policy to stay loose despite diminishing returns.

Global bond rout gives Draghi a reprieve

14 Sep 2016

The rise in yields as prices fall makes more German debt eligible for ECB purchases, under its own arcane rules. President Mario Draghi is still, though, running out of bonds to buy. Canny market timing is a poor substitute for a real solution: Germany could simply borrow more.

Freak euro bonds show ECB’s power – and its limits

8 Sep 2016

The central bank’s negative rates and bond-buying have forced down borrowing costs: German bearing maker Schaeffler is paying around 3 pct on risky notes that roll up interest payments. Yet smooth credit markets have not boosted investment. Europe’s governments need to step up.

Bond scarcity is least of Mario Draghi’s problems

7 Sep 2016

A shortage of eligible bonds may force the ECB boss to tweak self-imposed limits on asset purchases. The trick is to do so without upsetting sticklers for rules. It’s a minor test compared with how hard he’s finding it to push up inflation despite spending more than 1 trln euros.

Review: Europe gets some blunt marriage counseling

12 Aug 2016

The single currency is flawed and Germany is to blame, says Joseph Stiglitz in his new book. Even a Europhile would have to admit he's right when he claims Europe has too little solidarity and too much austerity. Stiglitz fails, however, to plot a clear way out of the union.

Weaker banks are in EU’s core, not its periphery

1 Aug 2016

A dozen lenders had sub-10 percent post-stress capital ratios and a 400-plus bps loss in the EBA's stress test. Only a third are from troubled "periphery" states like Italy. Perhaps core states should become less sniffy about a Europe-wide deposit protection scheme.

ECB’s MPS kid gloves are a necessary evil

1 Aug 2016

The European Central Bank allowed Monte dei Paschi to disregard losses on a 10 billion euro bad debt sale for internal models. Giving banks a get out of jail card could incentivise bad lending. But cleaning up MPS is critical, and not many other banks will be in a rush to copy.

MPS rescuer might just rescue Italy

29 Jul 2016

The Italian lender has picked eight banks for a 5 bln euro rights issue over another rescue deal fronted by ex-banker Corrado Passera. EU stress tests show Monte dei Paschi's capital is weak. But investor support may signal the beginning of the end of Italy's bank crisis.

Portugal’s three bad B’s: banks, budget, Brexit

22 Jul 2016

Lisbon’s banks are saddled with bad loans, and need capital. The government is caught between Brussels’ fiscal rules and a weak coalition. And the UK vote to leave the EU may hurt already grim growth. The three B’s may imperil Portugal’s BBB rating, and blow up its bond yields.

ECB takes off hair shirt; puts on kid gloves

8 Jul 2016

The euro zone central bank's vice-president hinted that restrictive Brussels state aid rules get in the way of sorting out banks. Even if that reflects reality, it jars with the ECB's mission. Wavering over state aid makes the laudable goal of banking union harder to achieve.

Markets can force rethink of ECB German bond bias

16 Jun 2016

Teutonic yields are sinking. Brexit risks amplify the impact of ECB chief Mario Draghi’s bond buying. Very low borrowing rates are great for governments but heighten the danger of market volatility. Changing rules that force central bank purchases to favour German debt can help.

Brexit is reopening euro zone sovereign wounds

14 Jun 2016

France’s bond yields are rising while Germany’s are falling. It’s a warning markets may doubt the integrity of the euro zone if a UK exit triggers copycat referendums. The ECB has neither the power nor the mandate to fight the kind of extreme outcomes that could ensue.

ECB corporate bond buying is risky experiment

1 Jun 2016

The central bank's pledge to buy company bonds has caused a surge in issuance. As a result, market spreads - the premium investors demand over sovereign debt - are not falling. The unwanted side effects of the programme show why corporate credit markets are best left alone.