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Banking and Financial Markets

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.

154 (41-50)
November 23, 2016
Analyst:
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]
41
November 18, 2016
Region:
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]
42
November 1, 2016
Region:
While European central bankers commend themselves for the scale and originality of monetary policy since 2012, this self-praise is increasingly unwarranted. The reality is that since Mr Draghi’s infamous “whatever it takes” speech in 2012, the eurozone has delivered barely any growth, the worst labour market performance among industrial countries, unsustainable debt levels, and inflation far below the central bank’s own target. While the positive case for European Central Bank intervention is weak at best, the negative repercussions are becoming overwhelming. This paper outlines the five darker sides to current monetary policy. [more]
43
October 4, 2016
Region:
The policy of low and negative interest rates has had a limited impact on the returns on household financial assets in Germany to date. The nominal total return has averaged 3.4% over the last four years. Even nominal returns on interest-bearing investments did not slip below 2% until 2015 because a large proportion of longer-dated and mostly higher-coupon investments dampened the effect of evaporating market returns. High and stable revaluation gains have also buttressed total returns over recent years. They have probably been enhanced in no small measure by the ECB’s Quantitative Easing programme. Interest income and revaluation effects are likely to be a greater burden in 2016 and 2017. The income return on other assets is also likely to drop on account of the financial market environment. The scope for further significant revaluation gains is likely to be limited given already very high valuations. In 2017 the real total return could even become negative (again). [more]
44
September 29, 2016
Region:
Analyst:
Ensuring sufficient funding for European start-ups forms an integral part of the emerging European Capital Markets Union (CMU). Cost-efficient solutions are necessary to reverse the 40% decline in small IPOs in recent years. To strengthen bank lending to start-ups, reviving the securitisation market and potentially establishing an SME-covered bond market is crucial. Venture capital investments are also subdued – most recently, they were only one tenth of the level in the US. To increase them, institutional investors should be granted more flexibility in their portfolio allocations. Finally, the EU hosts more than 500 crowd funding platforms. A common legal and regulatory approach could stir consolidation and thereby reduce search costs for investors and borrowers alike. [more]
45
August 23, 2016
Region:
Many of the things that had us gasping in amazement when we watched science fiction films just a few decades ago have now become a mass-market reality. Today, Hollywood shows us what we can expect if we continue to develop digital technologies at the current pace. Of course, artificial intelligence and its use in all areas of our lives are undoubtedly still a long way off. However, substantial progress is being made especially when it comes to pattern recognition, modern data analysis and the use of self-learning algorithms. Without this technological progress, we would no longer be able to cope with the exponential growth in data volumes and data potential of which we can still only begin to conceive. We need the machines. [more]
46
August 22, 2016
Region:
The debate about whether a negative interest rate policy (NIRP) helps or hinders the transmission mechanism of monetary policy continues to rage. The BIS and many others – including us* – long ago issued warnings about throwing open the monetary floodgates and the side effects of negative central-bank interest rates, and now Mark Carney, the governor of the Bank of England, has also clearly rejected negative interest rates, despite using all the means at his disposal to prevent the UK economy from sliding into recession after the Brexit shock. The package of measures he launched in August significantly exceeded market expectations, but Carney has ruled out negative interest rates, referring to the adverse impact on the capital markets. [more]
47
August 18, 2016
Region:
The European banking industry has gone into reverse gear this year so far, following substantial progress in 2014 and 2015. Its revenues and profits have relapsed into contraction, and the potential for lower loan loss provisions to come to the rescue seems exhausted. Once more, cost cuts have not kept pace with the retreat on the income side. In a market environment that continues to be very challenging, banks may have to resort to even tougher measures to put themselves on a sustainable footing again. [more]
48
July 6, 2016
Region:
Breathtaking. No other word really does justice to the profound changes unleashed by digitalisation and the accelerating pace at which new technologies are appearing. Of course, many of these technologies are still in their infancy and in some cases still have a rather visionary character, but they nevertheless hold unforeseen and lucrative potential. The race for digital technologies and successful monetisation strategies has been on for some time, especially among the large, well-known internet platforms. However, start-ups are increasingly throwing their hat into the ring and causing quite a stir among the business models of established companies. As a result, many innovation-stimulating digital technologies are gradually finding their way into traditional companies where they are evolving into a comparative competitive advantage (not only) for Germany as a business location. [more]
49
June 21, 2016
Region:
After two years of recovery, European banks suffered a setback in the first quarter of 2016. Capital market revenues were hit by concerns about global economic growth and banks’ own business models. Cost cuts and a further decline in loan loss provisions helped only somewhat to smooth the fall in profitability. Still, net income was about the same as in Q1 2014, and progress continued in other areas. [more]
50
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