Financial Markets latest publications
With Covid-19, it is not only necessary to take care of physical health, but also financial health, mainly because we are exposed to negative variations in income. The note presents recommendations in case of being under these variations.
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.
The financial system maintains its stability, five months after the start of the pandemic, supported by the adequate levels of capitalization and liquidity of the banking system, as well as the special regulatory measures adopted by the financial authorities.
Banks remain critical for supporting the economy during the crisis. Total bank loan growth will slow and deposit growth revert to normal rates. Banks will be operating with higher levels of deposits relative to loans, credit quality will deteriorate and profitability edge down, but systemic risks remain contained.
CNBV designates commercial banking institutions of local systemic importance. BIS annual economic report. The origination of mortgage financing from banks fell 18.2% in real terms. Adverse economic effects of the COVID-19 outbreak in the US slows down the recovery of financial markets at the end of July.
On July 21, the Council of the European Union adopted the Next Generation EU (NGEU) Recovery Plan, worth EUR 750 billion, for the coming years. It is equivalent to 5.4% of the EU's GDP, and almost EUR 1700 per capita.
The European Union has reached a deal on its recovery fund, Next Generation (NGEU), that will play a significant role in the future of European economies. Difficult negotiations have shown that divisions remain but the outcome has been very positive.
Although the capacity to pay, as expressed by the debt-to-GDP ratios, does not seem unsustainable, the government should promote fiscal consolidation in order to prevent the debt from continuing to increase after 2022, ensuring sustainability in the medium term and the preservation of the Investor Grade.