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
Europe might gain from Brexit, but still lose to Asia
Regulatory reforms have already reshaped derivatives trading in Europe. The upcoming potential shift towards central clearing for some derivatives classes and the availability of CCPs globally will likely result in some fragmentation in derivatives trading. FX derivatives markets are providing first insights into this: Asia already makes up 26% of global FX derivative trading volumes in 2016. As the Asian exposures of European firms and Asian financial sector grow, hedging currency risks in local Asian markets seem to be becoming common practice. This may fuel the ongoing decentralisation of global derivatives trading and give rise to higher costs for market participants. [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
The upward trend in lending to German corporates and self-employed continued in Q3 (+0.5% qoq / +2.1% yoy). Loans to several important manufacturing industries declined, but grew strongly with real estate-linked industries. Savings banks and cooperative banks expanded further, whereas business weakened at Landesbanks and credit banks. Bond and equity issuance was solid. Spectacular: the average rate for corporate deposits fell into negative territory for the first time in history. The German economy faced muted growth dynamics in Q3 (GDP +0.2% qoq), yet may pick up speed again in the current quarter. Growth was driven by private and public consumption, while net exports shrank. Likewise, investment contracted. The expected slowdown in growth next year (to 1.1%) is to a large extent due to the lower number of working days. (available only in German) [more]
EU-Monitor
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]
Global financial markets
European bank performance: The deposit conundrum
European banking sector results improved in the third quarter after a weak first half of the year. Still, all revenue components registered year-over-year declines, only partly offset by falling costs and lower loan losses. While credit growth remains nearly non-existent, deposit growth has picked up further momentum and is now at its strongest since 2009. This comes despite record-low borrowing costs for customers and deposit rates virtually at zero. Going forward, following the US election, one of the biggest unknowns is the future direction of prudential regulation at the global level, where changes could have a material impact on European banks. [more]
 
 
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