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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.

156 (51-60)
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]
51
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]
52
June 17, 2016
Region:
The Juncker Plan set out to boost investment in Europe and can show some progress so far. After operating for about a year, a total of EUR 12.8 bn financing of the European Fund for Strategic Investments (EFSI) has been approved by the European Investment Bank and the European Investment Fund. This is expected to trigger EUR 100 bn of total investment according to estimates by the institutions. The European Commission has already called for extension of EFSI beyond the initial three year period ideally increasing its scale and scope. However, considerations about EFSI’s future need to be based on thorough evaluation of effectiveness and demonstrated added value. After the first year, there is -quite naturally- more information on activity than evidence on impact. To that effect, continuous monitoring and mid-term stock-taking are key to inform the debate about EFSI's future. [more]
53
June 14, 2016
Region:
Analyst:
Since the ECB’s announcement to include investment-grade corporate bonds in its QE programme (CSPP), corporate bond issuance has surged in the euro area. However, even though this is a boon for issuers, benefits for the real economy may be quite limited. The value added for SMEs is hard to see, and funds raised will most likely be used predominantly for refinancing of existing debt and for stock buybacks instead of new investments. Moreover, potential side effects of the corporate bond programme such as inefficiencies in the pricing of risks and deterioration in liquidity could increase the distortions in bond markets. [more]
55
May 24, 2016
Analyst:
The tremendous growth momentum in high-frequency trading seems to have reached its limits in recent years. The increasing cost of infrastructure and relentless competition within the industry are probably the first to blame. In addition, high-frequency trading firms are hardly participating in those dark pools where large block transactions are executed. Both trends are challenging their business model and trading strategies as high-frequency traders have seen their revenues and profits erode. Furthermore, forthcoming tighter prudential regulatory oversight may lead to an overhang of capacity in the high-frequency trading industry. [more]
56
May 2, 2016
Region:
In September 2015, the European Commission set out its action plan to establish a Capital Markets Union in order to push for stronger and more integrated capital markets in the EU to better complement bank finance. Creating deeper and more liquid stock markets is crucial in this respect, and also a precondition for European financial centres to regain their position in a global context. Indeed, the total number of stock exchanges operating independently in the EU is astonishingly high, especially in eastern and south-eastern European countries. In addition, market capitalisation is highly concentrated in only a handful of exchanges, and in smaller markets also tends to be lower relative to economic size. [more]
57
April 29, 2016
Region:
With the Single Resolution Mechanism taking full effect in 2016, winding-up large European banks in distress has become a more realistic scenario than ever before. One of the key elements of such a resolution is the bail-in tool. It is supposed to ensure that for investors, higher returns also involve higher risk, thereby establishing greater discipline and differentiation in markets for bank debt. Indeed, our analysis shows that market participants see the new bail-in regime as credible, which is a necessary precondition for a successful application. Important issues that still remain are the market depth for bail-in instruments and legal clarity about bail-in hierarchies. In any case, banks’ funding costs are likely to rise as a result, especially in the medium term. [more]
58
March 23, 2016
Region:
No? Then it may be worth taking a look at this digital technology and its potential areas of application. Alongside unsupervised learning algorithms and early cognitive systems, blockchain is an example of a digital technology that not only calls tried-and-tested business models into question, but is already turning them on their head. It may have its origins in the financial sector, but a universal spectrum of applications is beginning to open up both within and outside the fintech world. Those who have tried experimenting with digital technologies have quickly found that in many cases they make existing business models, processes and infrastructures noticeably more efficient and thus increase productivity. This has certainly been the case with blockchain, which is why it is a good idea for many decision makers (not only) in the financial sector to keep a close eye on developments and, above all, the various experiments with blockchain that are currently ongoing. Ideally they would experiment with various projects and pilot studies themselves in order to come up with their own ideas and try putting these into practice. [more]
59
March 17, 2016
Region:
Despite headwinds from slow economic growth, low interest rates and tighter regulation, European banks’ recovery continues. In 2015, banks’ core business with the private sector returned to growth, revenues rose and provisions for loan losses declined again. The sector has become more profitable and resilient. Challenges remain aplenty, but European banks are definitely heading in the right direction. [more]
60
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