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Scarcity raises the price of a good. This economic law has been drummed into us as a result of the numerous booms and slumps that have molded our societies over the centuries.
The current inflationary process is still in full swing, and the action of central banks, the ultimate guarantors of price stability, will be greatly intensified from now on.
Despite limited exposures, we are likely to see impairments in banks' loan portfolios, an increase in the operational risk resulting from sanctions and a fall in profitability of the most-exposed banks which, in some cases, could erode part of their capital.
Although the NPL ratio in the banking system declined as banks sped up the disposal of bad loans, asset risk remained high amid the repeated pandemic threats and the slow recovery. The risks associated with Evergrande’s fallout are manageable although it will take a longer time for the banking sector to absorb the shock.
No surprises came out of last Thursday's ECB meeting, with the expected announcement of a reduction in asset buybacks under its pandemic emergency purchase program (PEPP). The big decisions on monetary policy measures will have to wait until its meets on December 16.
Over the summer, the optimism in the financial markets held firm. This was despite the confirmation of the unprecedented collapse of economic activity in the second quarter of 2020 — the result of the drastic measures taken on a global scale to contain the spread of COVID-19.
It is still too early to take stock of the year but, with a little more than a month to go until it ends, everything indicates that 2018 will have been the year in which the financial markets ran head on into reality. In 2017 a very positive tone dominated the markets, due to a combination of factors that shaped a very favo…
Bank deposits have slowed since the end of 2015 and further more since the beginning of 2018. The slowdown matches historical patterns during late-stage economic expansions. The likely cause is the higher attractiveness of deposit alternatives as deposit interest rates have not increased commensurately with other short-term…