Interest Rates

Germany is dealing with its bank-branch addiction

23 May 2017

Measly interest margins and rising capital requirements are forcing the country’s savings institutions to cut costs and shut branches. Germany still has more banks than petrol stations, but the shift is helpful, and may benefit big lenders like Deutsche Bank and Commerzbank.

Euro zone bonds are taboo worth breaking

17 May 2017

Spain wants the bloc’s 19 governments to pool their debt. That idea is likely to be shunned by Germany. Yet mutualisation is happening anyway through bailouts and central bank largesse, and countries are less profligate than they were. Common bonds needn’t mean wayward spending.

Commerzbank limbo underscores its need for a deal

9 May 2017

The German bank’s first-quarter return on equity was a pitiful 3 pct, and its targets are uninspiring. In most sectors, a company destroying value for shareholders would be taken over. In banking, regulatory and practical uncertainties still stand in the way of logical tie-ups.

China’s money squeeze is making market suspicious

13 Apr 2017

The central bank is lifting short-term rates and draining liquidity to target speculators. Anxious banks and institutional investors are doing less business with each other as a result. This could cause rate spikes to intensify - and trouble could spill over into the stock market.

Libor did hit bank bosses, just not the right ones

11 Apr 2017

A leaked recording has reopened the question of how much senior bankers knew about interbank rate fiddling in 2012. Junior traders who were jailed say they didn't act in a vacuum. Their partial consolation is that today’s bank bosses are now much more under the gun.

Australia stares down its troublesome twins

8 Mar 2017

The central bank is on hold. But present inaction brushes off future uncertainty. Stubbornly low inflation argues for even lower interest rates, while a bubbly housing market cries out for tighter policy. At least rising U.S. rates should put helpful downward pressure on the currency.

Review: Libor revealed dark underbelly of trading

3 Mar 2017

Two new books show how the benchmark interest rate underpinning many of the world's financial products was rigged. Jailed trader Tom Hayes leads a cast of deceitful or inept bankers, brokers and regulators. Yet both tomes might have said more about how to stop future malfeasance.

Rate tweak whiplashes UK insurers

27 Feb 2017

Insurance companies will have to pay more for injury claims after the government said payouts must be discounted at a negative rate. The metric was too high before, and arguably still is. The real mystery, though, is why financial risk ends up with claimants, not insurers.

Banking whales have had their day

29 Dec 2016

A year ago, Bank of England boss Mark Carney suggested regulators had cracked the "too big to fail" bank problem. Yet new rules keep coming, and international cohesion is fading. The biggest cross-border lenders like HSBC will find it ever harder to make their cost of capital.

India’s central bank faces race against time

7 Dec 2016

One month after a dramatic banknote recall the economy remains chronically short of cash. Leaving official interest rates unchanged will make little difference. But any prolonged delay in circulating new notes could see social unrest derail India’s anti-corruption campaign.

Mongolia’s hangover needs more than IMF medicine

19 Aug 2016

The nomad state hiked interest rates to 15 pct to defend a plunging currency. An IMF rescue seems likely, and the new government has shown it is willing to take the pain needed. Longer-term, the real cure for its economic ills will be to woo nervous foreign investors back.

Review: India’s new central banker must walk alone

10 Aug 2016

Former governor Duvvuri Subbarao's timely memoir shows how New Delhi pushed for easier policy, blocked hires and meddled with real-world rates. With a major overhaul of monetary policymaking in train, this underlines just how tough-minded the new RBI boss will need to be.

Mark Carney’s sledgehammer isn’t up to the job

4 Aug 2016

The Bank of England boss deserves credit for trying. He has halved the policy rate, will resume asset purchases, and done his absolute best to limit the perverse effects of ultra-low rates. But the economic shock of Brexit is probably bigger than anything his toolbox can handle.

Mark Carney picks good time to confound markets

14 Jul 2016

Sterling rose and UK stocks fell after the BoE left rates unchanged. Its governor's recent remarks had fanned expectations of an easing sooner rather than later. But Carney can afford to reprise his "unreliable boyfriend" persona: such market moves are the least of his worries.

Carney will be bit player in averting UK recession

12 Jul 2016

Bank of England boss Mark Carney can easily justify easing policy this week. Yet driving policy rates and gilt yields to new record lows is of limited use when investment and spending are held back by fear and uncertainty. Fiscal policy can do more to shore up the economy.