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.
Talking point
European banks in 2016: A year to forget
The European banking industry suffered a significant setback in 2016. Revenues declined across the board, cost reductions were unable to keep pace and loan loss provisions rose. As a result, net income fell by almost half. Banks resorted to aggressive de-risking, but a shrinking equity base meant that capital and leverage ratios stagnated for the first time since the financial crisis. By contrast, US banks continued to grow and set a new record in terms of nominal profits, widening the gap to their European peers. [more]
Global financial markets
Synthetic securitisation: Making a silent comeback
Securitisation markets have returned to policymakers’ attention recently, only this time as a hoped-for panacea to anaemic lending in Europe rather than a culprit for the financial crisis. To date, the focus is largely on true-sale securitisation. Yet synthetic securitisation has notable potential as well, especially for SME lending. Synthetic securitisation saw mixed trends in recent years. 1) Complex arbitrage deals have almost disappeared. 2) Balance sheet synthetic deals have surged to an issuance volume of EUR 94 bn in 2016. Transactions have become mostly private, yet are now much less complex and of robust asset quality. A firm inclusion of balance sheet deals in the evolving framework for simple, transparent and standardised (STS) securitisations would be sensible and could well contribute to a recovery in lending in Europe. [more]
Corporate funding in Germany
Monitor Corporate funding in Germany
Lending to German corporates and self-employed showed markedly diverging trends in Q4: while business with the manufacturing sector slumped, the upswing in lending to the services sector accelerated further. Bottom line, outstanding volumes were up 0.3% qoq / 2% yoy. In Q4, foreign-owned banks and Landesbanks surprisingly benefited strongly. Corporate bond issuance and leasing reached new records in the full year; stock issuance collapsed to a new historic low though. The German economy grew solidly in Q4 (GDP +0.4% qoq). Particularly construction and public consumption performed well, whereas net exports and investment again contributed negatively. GDP expanded 1.9% in the full year, but growth may slow in 2017 (+1.1%), driven in part by higher energy prices and elevated global political uncertainty (available only in German). [more]
Cash, freedom and crime: Use and impact of cash in a world going digital
Despite a growing role of electronic payments, demand for cash is on the rise in Europe. Euro cash in circulation has increased to EUR 1.1 trillion, three times as much as in 2003. Cash limits the power of monetary authorities, provides data protection and can therefore act as a guarantor of civil liberties. On the other hand, it is often associated with a stronger shadow economy, even though the shift towards a cashless society seems to trigger higher levels of card fraud. [more]
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