📰 EBF Weekly Brief - Thursday 9 April

Eurozone finance ministers set for more talks on Corona package

The Eurogroup at 14 CET will resume its discussions on a comprehensive financial package to mitigate the economic impact of the Covid-19 outbreak after their 16-hour video call ended on Wednesday morning without an agreement. Eurogroup President Mario Centeno (picture), Portugal's finance minister, said he hopes to achieve a strong EU safety net to shield workers, firms and countries while committing to a comprehensive recovery plan. Divisions between the Netherlands and Italy over Coronabonds are at the heart of the standoff. If finance ministers reach an agreement, EU Heads of Government are due to meet shortly after Easter. If the EU fails to agree on a common approach, then countries such as Italy and Spain will have to borrow more from capital markets in order to stave off mass unemployment, possibly triggering a sovereign debt crisis.

FROM THE MEDIA today

FD: Economic costs of Corona pandemic seen above 5000 bln dollars

The Corona pandemic may cost the global economy more than 5000 billion dollars, according to analysts at Citigroup and Morgan Stanley, reports the Dutch Financieele Dagblad. That is more than the size of the Japanese economy. The bank analysts believe that the economic downturn will be mitigated inpart by monetary and fiscal support measures but also project that the the impact of the crisis will continue to resonate at least until 2022. Analysts at JPMorgan Chase estimate the damage even at 5500 billion dollars. Read more (NL)

Economist: How sick might banks get?

The corona-crisis does indeed give banks a chance to improve their image. But it also presents them with some painful dilemmas and, worse, may ravage their bottom lines, according to the Economist. Michael Corbat, boss of Citigroup, has warned that banks like his have to tread a “fine line” between supporting clients and undermining financial stability.The growing worry in the West is that the short-lockdown, quick-snapback scenario proves too rosy. Read more

FT: Eurozone banks reported weak profits before Corona outbreak

Eurozone banks entered the coronavirus crisis in a weakened state with the sector’s profitability declining in 2019 for the first time in three years, the FT reports, according to new data from the European Central Bank. Hit by slowing economic growth and falling interest rates, return on equity at the 113 banks supervised by the ECB fell last year from 6.2 per cent to 5.2 per cent. Read more. Seeking Alpha

Bloomberg: Biggest Swiss banks bow on dividends

Swiss lenders UBS and Credit Suisse will both split their payouts for 2019 into two installments withholding part of the money until the second half when the impact of the pandemic will be clearer. The firms had been reluctant to follow peers that previously cut or delayed their dividends, says Bloomberg. According to Reuters, Swiss financial watchdog Finma it welcomed a decision by the two lenders to pay out half of their dividends for 2019 in the fourth quarter of 2020 despite their strong capital decisions. Read more Reuters

FT: French central banker floats printing money to hand to companies

The head of the French central bank has floated the idea of printing money and giving it directly to companies, saying such measures could be conceivable if needed to combat severe deflation as eurozone policymakers seek to tackle the economic impact of coronavirus, says the FT. Read more (€)

Reuters: UK government expands overdraft with Bank of England

Britain’s government said it had expanded its overdraft with the Bank of England, known as the Ways and Means facility, to ensure it had access to funds in case COVID-19 disruption renders it unable to raise money from markets easily. The finance ministry and the Bank said the facility would support market function by minimising the immediate impact of raising additional funding in gilt and sterling money markets, reports Reuters. Read more Bloomberg

EBF MEMBERS IN THE NEWS this week

Finland: Virtual and central bank digital currencies

​Finance Finland’s latest mini-seminar was arranged as an online-only event due to the coronavirus situation. FFI invited Aleksi Grym from the Bank of Finland to discuss central bank digital currencies, and Hanna Heiskanen from the Finnish Financial Supervisory Authority to discuss virtual currencies. Read more

Switzerland: In the face of the coronavirus: pragmatism

The fight against coronavirus also puts a strain on the economy. The Federal Council has taken unprecedented support measures to help struggling companies survive. And the banks, logically, play a crucial role in overcoming liquidity shortages. Read more (FR)

Germany: Who, what and how much? An overview of the Corona aids

In order to provide companies, self-employed or freelancers who have got into financial difficulties as a result of the Corona crisis with the urgently needed liquidity, the Federal Government and the Länder have decided on extensive measures. Read more (DE)

The Netherlands: Banks take necessary safety measures

In addition to the measures taken earlier to combat crashes at ATMs, the banks are immediately restricting the availability of so-called 'sealbag machines'. This temporary measure is necessary from a safety point of view. Entrepreneurs will continue to be able to make deposits. Read more (NL)

UK: Global Human Rights sanctions programme

Last month UK Finance looked at the future of UK/EU sanctions alignment and what may happen once the transition period completes. This month Gloria Perez Torres from BDO looks at Magnitsky sanctions and what the proposed UK Global Human Rights sanctions programme may look like. Opinions expressed in this article are solely those of the author. Read more

FROM THE INSTITUTIONS this week

BIS releases Basel III Monitoring Report

The Basel Committee on Wednesday published the results of its latest Basel III monitoring exercise, based on data as of 30 June 2019. The report sets out the impact of the Basel III framework that was initially agreed in 2010 as well as the effects of the Committee's December 2017 finalisation of the Basel III reforms and the finalisation of the market risk framework published in January 2019. Given the June 2019 reporting date, the results do not reflect the economic impact of the coronavirus disease. Read more

ECB announces package of temporary collateral easing measures

The ECB has announced a package of temporary collateral easing measures to mitigate the tightening of financial conditions across the euro area. The ECB introduced a temporary increase in the Eurosystem’s risk tolerance in order to support credit to the economy. Read more

EBA updates impact of the Basel III reforms on EU banks’ capital

EBA has published two reports, measuring the impact of implementing the final Basel III reforms and monitoring the current implementation of liquidity measures in the EU. The Basel III monitoring report assesses the impact on EU banks of the final revisions of credit risk, split into four sub-categories, operational risk, and leverage ratio frameworks. Read more

Commission: Sustainable Finance consultation deadline 15 July

The Commission has launched a consultation on its Renewed Sustainable Finance Strategy, which is open until 15 July 2020. The renewed strategy will build on previous initiatives and reports, such as the Commission's 2018 Action Plan on Financing Sustainable Growth and the reports of the Technical Expert Group on Sustainable Finance (TEG). Read more

Eurojust action against criminal groups abusing corona crisis

Eurojust has taken action in various cases of online fraud and computer hacking by criminal organisations abusing the current COVID 19-crisis. At the request of, for instance, Germany, France and the Czech Republic, cross-border investigations are actively supported, regarding fake sales of protective face masks and hand gels. Read more

ECB Banking Supervisory publishes Q4 2019 statistics

The ECB Banking Supervisory Authority has published its statistics for the fourth quarter of 2019. According to the statistics: 1) Capital ratios for significant institutions remain stable in the first quarter of 2019, with total capital ratio at 17.99% and CET1 at 14.34%; 2) NPL ratio decreases further to 3.67%, lowest level since time series first published in 2015; 3) Liquidity coverage ratio increases to 149.71%. Read more

IMF speech: Georgieva’s participation in the WHO press briefing

"Never in the history of the IMF have we witnessed the world economy come to a standstill,” Kristalina Georgieva, managing director of the IMF, said at the WHO press briefing last Friday. Speaking at the World Health Organization’s headquarters in Geneva, Georgieva said that this was “humanity’s darkest hour, a big threat to the whole world and it requires from us to stand tall, be united and protect the most vulnerable of our citizens.” Read more

Commission and EIF unlocked €8bn in finance for 100,000 SMEs

The Commission and European Investment Fund has unlocked €8 bn in finance for 100,000 SMEs. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic. Read more

EBF IN THE NEWS this week

Life sometimes is a storm - Prof. Annamaria Lusardi

Professor Annamaria Lusardi, Director of the Global Financial Literacy Excellence Centre in Washington DC speaks at the seminar 'Building Financial Resilience at Turbulent Times', hosted on 24 March by the European Banking Federation. Professor Lusardi has conducted research on the causes and correlations of financial fragility and wellbeing. Video Full seminar

Digital Operational Resilience Framework: EBF key messages

The EBF submitted this week its key message following the initiative of the European Commission to bring forward legislative proposals for fostering the digital operational resilience framework for financial services with a view to harmonise rules across the EU. EBF actively monitors the increasing interconnectedness of all actors within the financial ecosystem, incl. third party providers, and the evolution of ICT risks highlight the need for a common level of minimum security for the financial sector as a whole, based on international coordination. Read more

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ABOUT THE EUROPEAN BANKING FEDERATION

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.