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ECB-Euro area monthly balance of payments: July 2020
September 18, 2020--In July 2020 the current account of the euro area recorded a surplus of €17 billion, compared with a surplus of €21 billion in June 2020.[1]
In the 12-month period to July 2020, the current account recorded a surplus of €259 billion (2.2% of euro area GDP), compared with a surplus of €304 billion (2.6% of euro area GDP) in the 12 months to July 2019.
In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €487 billion in the 12-month period to July 2020 (up from €160 billion in the 12 months to July 2019). Over the same period, non-residents made net acquisitions of euro area portfolio investment securities amounting to €406 billion (up from €188 billion).
European Green Deal: New financing mechanism to boost renewable energy
September 17, 2020--The European Commission has published today the rules for a new EU Renewable Energy Financing Mechanism, to apply from the start of 2021. This Mechanism will make it easier for Member States to work together to finance and deploy renewable energy projects-either as a host or as a contributing country.
The energy generated will count towards the renewable energy targets of all participating countries and feed into the European Green Deal ambition of reaching carbon neutrality by 2050.
s foreseen under the Energy Union Governance Regulation, this Mechanism will be managed by the Commission, bringing together investors and project developers through regular public tenders. It enables "contributing Member States” to pay voluntary financial contributions into the scheme, which will be used for renewable energy projects in interested Member States ("host Member States").
ECB relaxes bank leverage regulation in attempt to boost economy
September 17, 2020--The European Central Bank has relaxed regulations on eurozone banks, freeing up as much as €73bn of capital in an attempt to boost lending and prevent the economic crisis triggered by the coronavirus pandemic from turning into a credit crunch.
The move announced by the ECB on Thursday grants lenders extra capital relief, enabling them to increase their lending to governments, businesses and households. It follows a similar, albeit more generous, move by the US Federal Reserve in April.
The leverage ratio rule- which regulates the amount of capital banks hold in relation to their assets -was introduced after the 2008 financial crisis in an attempt to prevent banks from operating with excessively indebted balance sheets. It requires eurozone lenders to have capital equal to at least 3 per cent of their total assets by next June.
Emerging Europe and the capital markets union
September 17, 2020--The European Union's capital markets union (CMU) plan is in urgent need of a revamp. Because of Brexit, EU capital markets and supervision need to become more integrated. The ongoing deep recession increases the need for equity finance mobilised by capital markets.
The eleven EU countries in central and south-eastern Europe which joined the EU in 2004 and after (EU11) are particularly affected by the ongoing consolidation of exchanges, which has diminished liquidity in smaller markets and in the traded securities of mid-sized companies.
Corporate funding remains even more bank-dependent in the EU11 than in the rest of the EU. Equity capital, whether in the form of listed shares or directly supplied by investment funds, is particularly underdeveloped.
Amundi closes 11 France-domiciled ETFs
September 15, 2020--Amundi has closed 11 France-domiciled exchange traded funds, further concentrating its business in Luxembourg and away from its home market.
The ETFs, which had €110m in assets under management at the end of June, were closed by Europe’s largest listed fund manager in August.
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Financing the European Union: New Context, New Responses
September 11, 2020-With the European Union for the first time taking on debt to help finance the economic recovery from the coronavirus, new resources are needed to fund the EU budget. Various ideas have been floated-including a digital tax and a financial transactions tax-but the most appropriate new resource would be revenues from the EU emissions trading system, which could provide enough funding to repay the EU's coronavirus borrowing.
Roughly two thirds of the European Union's budget is financed out of member states' national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added.
ECB-Euro area securities issues statistics: July 2020
September 10, 2020--The annual growth rate of the outstanding amount of debt securities issued by euro area residents was 7.3% in July 2020, compared with 7.2% in June.
For the outstanding amount of listed shares issued by euro area residents, the annual growth rate was 0.1% in July 2020, compared with 0.0% in June.
Debt securities
New issuance of debt securities by euro area residents totalled EUR 773.2 billion in July 2020. Redemptions amounted to EUR 698.8 billion and net issues to EUR 74.5 billion. The annual growth rate of outstanding debt securities issued by euro area residents was 7.3% in July 2020, compared with 7.2% in June.
Investors see lower net returns from potential closet index funds
September 9, 2020--The European Securities and Markets Authority (ESMA), the EU securities markets regulator, today publishes a Working Paper on Closet Indexing Indicators and Investor Outcomes.
The study finds that investors can expect lower net returns from closet indexers than from a genuinely actively managed fund portfolio. A summary of this study was also included in the Trends, Risks and Vulnerabilities report published on 2 September.
New Tabula ETF on Xetra: US and European investment grade credit default swaps
September 9, 2020--Since Wednesday, a new Exchange Traded Fund issued by Tabula is tradable on Xetra and Börse Frankfurt.
The Tabula Global IG Credit Curve Steepener UCITS ETF (EUR) Acc gives investors the opportunity to invest in credit default swaps with investment grade rating from Europe (iTraxx Index) and the USA (CDX IG Index).
Both the iTraxx Europe and the CDX IG Index each contain 125 credit default swaps (CDS). In order to benefit from a steeper credit curve, a long position is opened in the most recently issued five-year CDS and a short position in the most recently issued ten-year CDS. In order to maintain the current CDSs at all times, the indices are reviewed on a monthly basis.
Credit default swaps are instruments through which banks in particular pass on the default risk of their borrowers to third parties, so-called guarantors. The guarantors receive a premium for this. In return, they commit to make a compensation payment to the bank if the borrower is in arrears with his payments or defaults.
Climate finance: an agenda for EU coordination with emerging markets
September 9, 2020-Addressing the challenge of financing the low-carbon transition will require substantial investment in the European Union and in emerging and developing economies. Sustainable finance frameworks have proliferated in advanced and emerging markets but fragmentation of financial flows due to different classification systems and standards for green financial instruments is a real risk.
Ensuring consistency should be a core agenda for the new International Platform on Sustainable Finance.
Estimates suggest that about 70% of the infrastructure investment needed for the low-carbon transition will have to be deployed in the emerging markets and developing economies (EMDEs). Countries’ updated nationally determined commitments, which are due ahead of the COP-26 UN climate summit in 2021, will underline the scale of this challenge. They are bound to highlight considerable financing shortfalls as resources from national budgets and development funds will be scarce in the aftermath of the current recession.
