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People and Markets

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  • The ease with which banks have been able to deploy retained covered bonds for repo funding with central banks has aggravated liquidity risks and undermined regulations that were designed to shore up liquidity management practices exposed as inadequate during the 2008 financial crisis.
  • The Bank of Japan has said that it will pay extra on reserves deposited by banks that become more cost efficient or that merge. A similar policy could well be introduced in Europe too, although perhaps with different aims.
  • US president-elect Joe Biden’s student debt relief plan is a dialled down version of what Democratic candidates were proposing on the campaign trail in the run up to the 2020 election. But rather than focus on the incoming president’s priorities, observers should be thinking about the lasting impact of the Covid-19 pandemic on the $1.6tr of outstanding student debt.
  • The European Central Bank cut in October the share of corporate bonds it bought that have lower ESG ratings, according to analysis from ABN Amro, leading some bankers to predict less technical support to come for parts of the corporate bond market.
  • Crédit Agricole benefitted from brisk capital markets activity in the third quarter, its results on Tuesday showed, while it has also set up a private investment banking division for wealthy individuals and families.
  • Yves Mersch, one of the ECB governing council’s staunchest hawks, has a new argument for why the central bank must abridge its purchase programmes: by keeping down the borrowing costs of the eurozone periphery, the ECB is helping countries to “circumvent EU loans”, which he thinks should not be allowed to happen.
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