More Action Needed on European Bank Profitability

By John Caparusso, Rohit Goel and Will Kerry

August 30, 2017

Versions in Español (Spanish), Deutsche (German), Français (French)

A woman withdraws money from an automated teller machine in Italy: Some European banks have too many branches relative to assets (photo: Martin Moxter imageBROKER/Newscom)

European banking has made considerable progress in the past few years: Banks have built up capital, regulation is stronger and supervision has been enhanced. But profitability remains weak, posing risks for financial stability.

In a sample of more than 170 large European lenders with combined assets of $35 trillion, roughly half generated a weak return on equity in 2016, and banks representing only 15 percent of assets generated a healthy return on equity, defined as more than 10 percent. Weak profitability is also shown in a low return on assets for domestic banks in many European countries. The drivers of these weak returns reflect varying combinations of low income, high costs, or provisions needed to build buffers against non-performing assets.

Continue reading “More Action Needed on European Bank Profitability” »

Central, Eastern, and Southeastern Europe: Harnessing the Power of Good Governance

By Poul Thomsen

July 27, 2017

Dubrovnik, Croatia. Countries in the region should continue working on good governance for higher growth (photo: Album/Prisma/Newscom)

In many ways, Central, Eastern, and Southeastern Europe is an incredible success story. In less than a generation, countries moved from centrally-planned economies to market-based ones—transforming their legal systems, public administrations, and economic policies, to name a few key elements. Yet, for the sake of higher growth in the future, countries need to continue enhancing institutions and good governance.

Enhancing institutions and good governance—the efficient governing of a country—remains at the core of the reform agenda to raise prosperity to advanced European living standards. Many countries have joined the European Union, a vital anchor toward these goals, and others are aspiring to join. Continue reading “Central, Eastern, and Southeastern Europe: Harnessing the Power of Good Governance” »

Chart of the Week: Brexit and The City

By IMFBlog

May 29, 2017

It seems likely that Brexit will alter the relationship that UK-based financial firms have with the European Union—even though negotiations are just beginning.

For an idea of how much is at stake for the United Kingdom’s financial services industry, take a look at our Chart of the Week, drawn from the IMF’s latest Global Financial Stability Report. The chart illustrates the linkages that might be affected by the country’s withdrawal from the EU. One example: of the over-the-counter trading in foreign exchange derivatives in the United Kingdom, Germany and France, the UK share comes to 89 percent. Continue reading “Chart of the Week: Brexit and The City” »

The Top Ten Blogs of 2016

by iMFdirect

What a year it has been.  12 months with big implications for the global economy.

In 2016 our readers’ curiosity focused on a wide range of hot topics in the world of economic and financial policy: the economic impact of migration, China’s economic transition, the prospects for negative interest rates, the way forward for Greece, the future of commodity prices, and the outlook for Latin America, to name a few.  We compiled this top ten list for the past year based on readership.  Continue reading “The Top Ten Blogs of 2016” »

A Field Guide to Exchange Rate Regimes in Central, Eastern and Southeastern Europe

By Philip Gerson and Johannes Wiegand

For an economist interested in examining the evolution of monetary and exchange rate regimes, Central, Eastern and Southeastern Europe (CESEE) provides a habitat of unparalleled diversity. Almost every type of regime can be found in the region: from floating and inflation targeting over various pegs to the unilateral use of the euro and full euro area membership.

Continue reading “A Field Guide to Exchange Rate Regimes in Central, Eastern and Southeastern Europe” »

A Tale of Two Tellers

Jeff Hayden

by Jeff Hayden

My mother eases her car into the drive-through lane at our local bank, signs the back of her check, and places it in a metal canister. WHOOSH—the cylinder flies through a pneumatic tube to the teller inside the building.

In a few minutes, the teller squawks her thanks from the intercom speaker nearby. Another WHOOSH, and the canister returns. Inside we find a deposit receipt and a lollipop. Welcome to high-efficiency consumer banking, circa 1973.

Summer 2016. In our kitchen, I watch my oldest son rip open his paycheck and whip out his iPhone. TAP. SWIPE. CLICK. The deposit is made in an instant, thanks to an app that plugs him into an electronic banking network.

Continue reading “A Tale of Two Tellers” »

The Euro Area Workforce is Aging, Costing Growth

By Shekhar Aiyar, Christian Ebeke, and Xiaobo Shao

Versions in Français (French), and Español (Spanish)

In parallel to the aging of the general population, the workforce in the euro area is also growing older. This could cause productivity growth to decline in the years ahead, raising another policy challenge for governments already dealing with legacies from the crisis such as high unemployment and debt.  Continue reading “The Euro Area Workforce is Aging, Costing Growth” »

Currency & Power

by iMFdirect

We have a global economy, but we don't have a global currency. Or do we?

In this podcast interview with Benjamin Cohen, professor of International Political Economy at the University of California, Cohen explains why currencies become internationalized, and examines the relationship between world currencies and State power. Continue reading “Currency & Power” »

The ECB’s Negative Rate Policy Has Been Effective but Faces Limits

By Andy Jobst and Huidan Lin

Versions in Français (French), and Español (Spanish)

More than two years ago, seeking to revive a moribund economy, the European Central Bank (ECB) embarked on a new monetary policy measure: charging interest on excess liquidity that banks held at the central bank. The move complemented a series of other easing measures aimed at bringing inflation back to the ECB’s price stability objective of below, but close to, two percent over the medium term. Continue reading “The ECB’s Negative Rate Policy Has Been Effective but Faces Limits” »

Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt

By John C. Bluedorn and Christian Ebeke

Small businesses could be the lifeblood of Europe’s economy, but their size and high debt are two of the factors holding back the investment recovery in the euro area. The solution partly lies in policies to help firms grow and reduce debt.

Our new study, part of the IMF’s annual economic health check of the euro area, takes a novel bottom-up look at the problem. We analyze the drivers of investment using a large dataset of over six million observations in eight euro area countries, from 2003 to 2013: Austria, Belgium, Germany, France, Finland, Italy, Portugal, and Spain. Continue reading “Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt” »

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