Banking, Financial Markets and Regulation
Like the regulatory framework, the structure of the international financial markets influences the development of financial service providers and economies. Scenarios for the future development of the global financial market, and the related opportunities and risks, are a major part of the work of Deutsche Bank Research.
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European banking markets
Research Briefing
Liquidity is key for the central clearing of derivatives
With more and more OTC derivative contracts shifting towards central clearing, the existing risk management and collateralisation practices are changing tremendously. Consequently, market participants’ attention has turned towards the determinants of central clearing. Our empirical analysis reveals that liquidity is the most important precondition for the central clearing of CDSs. By contrast, higher volatility reduces the likelihood of derivatives being centrally cleared. CCPs also seem to prefer reference entities with relatively robust financial characteristics. [more]
SME financing in the euro area: New solutions to an old problem
SMEs’ access to finance remains a pressing problem in many parts of the euro area as SMEs largely rely on bank loans for funding. Our findings show that it is mainly the banks’ own refinancing costs in capital markets and their risk perceptions regarding SMEs which give rise to constraints. Of the steps taken to spur bank lending, the ECB’s LTROs seem to have had limited success. Securitisation of SME loans on the other hand has the potential to bridge the gap between SMEs’ funding needs and the availability of bank loans. Public-sector and market-based initiatives to improve SME financing are of great importance as well: for the former, private-sector involvement is crucial; as for the latter, overall success has been mixed so far. [more]
Corporate funding in Germany
Monitor Corporate funding in Germany
In Q4 2014, lending to German corporates and self-employed remained weak (-0.1% qoq). The decline in outstanding volumes with the manufacturing industry accelerated, whereas the services sector saw a solid increase. Public-sector banks suffered a setback, while commercial banks and cooperative banks performed well. As regards financing alternatives, bond issuance and the leasing business posted convincing results. The German economy grew surprisingly strongly in Q4 (GDP +0.7% qoq), driven mainly by a significant expansion in private consumption and construction investment. On the other hand, foreign trade and investment in machinery and equipment contributed only moderately to growth. The GDP forecast for 2015 has been raised substantially to 2.0% (available only in German). [more]
Global financial markets
Money market funds – an economic perspective: Matching short-term investment and funding needs
Money market funds are important financial players in Europe and the US, offering investors capital preservation and daily liquidity on the one hand, while providing short-term funding in money markets on the other. However, the European and US markets differ in their structures and economic functions: In Europe, where the market is split into two distinct segments, MMFs’ balance sheets reflect to a large degree intermediation within the financial sector and a strong investment focus on bank debt. In the US, by contrast, a homogeneous set of industry standards exists and MMFs’ business is geared more towards direct intermediation between non-financial sectors. [more]
Global financial markets
Deposit guarantee reform in Europe: A systemic perspective
The financial crisis has led to substantial reforms of the system of financial regulation and supervision in Europe – not limited to but including deposit guarantee schemes (DGSs), which play a key role in consumer protection and financial stability. The most recent DGS reform follows a gradual approach, i.e. focuses on adapting existing national systems rather than replacing them. Nevertheless, new rules for bank resolution and the emerging Banking Union are considerably changing the environment DGSs operate in. Given the complexity of the new setup, cooperation between the different players in the financial safety net – including DGSs – is indispensable. [more]
Spotlight on Germany
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