Eurozone
SSM challenges eurozone banks to improve governance
Supervisor warns most significant banks in eurozone fall short of international best practices; presents lessons from assessment of management bodies and risk appetite frameworks
Malta’s deputy governor denies corruption allegations
Deputy governor of Malta’s central bank strongly denies allegations of bribe-taking and issues defamation writs; no official announcement on next governor, due to be appointed on July 1
Helicopter money still contentious as Borio enters debate
Article by Claudio Borio and others claims helicopter money means giving up on monetary policy for ever, but economists such as Adair Turner and John Muellbauer question the result
Greek deal unlocks funds but delays debt relief
Deal allows possibility of future debt relief but drops IMF’s stronger demands; pushes most difficult decisions back
ECB looks to add eight more O&Ds to guide
European Central Bank proposes guidance on the application of another eight options and discretions in banking supervision; public consultation will run until June 21
Paper examines credit risk spillover in the eurozone
Estimations of fair-value credit default swap values may give better picture of eurozone risk contagion than market prices for credit default swaps, ECB paper argues
Panellists at ECB conference challenge complexity of macro-prudential set-up
Public and private sector representatives agree it is too early to judge macro-prudential framework; identify some positive elements but raise concerns about institutional complexity
ECB paper explores public and private employment link
Research contradicts literature that claims an increase in public employment crowds out private employment, at least in recessions
Mersch sets out broad questions around distributed ledgers
Yves Mersch considers how access to central bank money could work if market infrastructure adopts the technology; ECB publishes paper on its application in post-trade market for securities
Perceived long-term eurozone deflation risk unaffected by oil – paper
Between 2010 and 2012, perceived short-term deflation risk was “significantly” affected by oil prices, while medium-term risk was only affected between 2013 and 2015, research suggests
Europe set for new Greek clash as Lagarde hits back over leaks
IMF chief has sharp words for the Greek prime minister after staff phone conversation is posted online by Wikileaks; debt relief remains a major sticking point as July repayment looms
Tax system severely reduces Italian banks’ profits – paper
Disparities in eurozone countries’ effective tax rates for their banking sectors may threaten banks’ ability to strengthen their capital, a Bank of Italy paper argues
Weidmann says latest ECB package went ‘too far’
Bundesbank president says the council was agreed on the need to act in the wake of weaker economic projections, but the eventual measures, including an expansion of QE, were too much
Slovenia report simulates effects of structural reforms
Report by local institute, in co-operation with the central bank and OECD, argues the time is “ripe” for structural reform in Slovenia; suggests long-term benefits outweigh short-term costs
TLTRO II may reflect renewed ECB focus on transmission, analysts say
The European Central Bank’s decision to operate a second targeted long-term refinancing operation would help provide banks with ‘stability’, according to Draghi
Kaplan to ‘closely monitor’ debt and ageing demographics in line with growth
Dallas Fed president will also look to other major economies throughout 2016 for patterns that may affect growth; the Federal Reserve will need to be patient, he says
Eurozone sovereign debt crisis has increased financial fragmentation, paper argues
Eurozone corporate bonds have different risk premia according to which country a company is headquartered in, paper argues; fragmentation has ‘dampened effectiveness’ of ECB policy
Book notes: Stabilising capitalism: a greater role for central banks, by Pierluigi Ciocca
Pierluigi Ciocca offers an excellent, brief and crisp account of the main issues facing central banks today
Tighter quality standards on banknotes not needed, DNB paper suggests
The Netherlands Bank maintains the European minimum standard for sorting euro banknotes, as study sees no reason to impose stricter requirements
Debt repayment problems have ‘severe consequences’ on consumption, paper finds
Quarterly consumption 30% lower when debt repayment problems arise, research suggests, while recovery after the arrears is smaller than the initial decline
ECB ‘actively considering’ whether to scrap €500 note, Cœuré says
Executive board member says he finds arguments in favour of keeping highest denomination note ‘less and less convincing’, as evidence mounts of its role in corruption and crime
BoE’s Cunliffe wants more detailed timetable for European reforms
Bank of England deputy governor welcomes ambition and honesty of five president report, published in June; hopes to see more detail on dates in future
People: Mozambique deputy moves to airline; Mervyn King joins Aston Villa FC board
Bank of Mozambique deputy moved from central bank to national airline; former BoE governor joins premier league team board of directors; and more
Research compares borrower-based macro-pru tools
Debt service-to-income caps generate ‘less pronounced macro feedback’ in the short term than loan-to-value limits, working paper finds