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Euro Area Policies: 2011 Article IV Consultation--Lessons from the European Financial Stability Framework Exercise; and Selected Issues Paper
July 19, 2011--EXECUTIVE SUMMARY
The European Union’s (EU) financial stability framework is being markedly
strengthened, with more responsibility for financial stability moving to the EU level.
Several new institutions have been operating since 1 January 2011, and progress is being
made in harmonizing regulation, supervision, deposit insurance, crisis management and resolution, in particular.
This strengthening is taking place on the heels of a severe financial crisis which is still lingering in weaknesses in the banking system interrelated with sovereign difficulties in
the euro area periphery. Constructing a new financial stability framework in the present macro-economic circumstances in the EU complicates the process and poses challenges.
This European Financial Stability Framework Exercise (EFFE), conducted by IMF staff, is expected to be a precursor to a Financial Sector Assessment Program (FSAP) exercise for the EU area. It focuses on the internal consistency of the design of the new framework and on identifying outstanding issues. Assessing the functioning of the new institutions is premature given their recent setup, while issues related to the present macroeconomic scenario are being dealt with in the report on the euro area consultation discussions.
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Source: IMF
BNY Mellon gains on European uncertainty
July 19, 2011--Bank of New York Mellon, the world’s largest custody bank by assets, reported growth in earnings for the second quarter on rising assets under management and highlighted the opportunity created by uncertainty in Europe’s banking system.
Net income for the New York-based bank rose 8 per cent to $735m from the same period last year. Revenues of $3.06bn were up 15 per cent on the year before, but BNY Mellon reported non-interest expenses up 21 per cent as the company integrated acquisitions, such as last year’s $2.31bn deal to buy PNC Financial Services’ global-investment services business, and faced significant litigation costs.
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Source: FT.com
Three new iShares ETFs launched on Xetra
July 18, 2011--Three new ETFs issued by iShares have been tradable in Deutsche Börse’s XTF segment since Monday.
ETF name: iShares Barclays Capital Emerging Market Local Govt Bond
Asset class: bond index ETF
ISIN: DE000A1JB4Q0
Total expense ratio: 0.50 percent
Distribution policy: distributing
Benchmark: Barclays Capital Emerging Markets Local Currency Core Government Bond Index
ETF name: iShares Dow Jones Europe Sustainability Screened
Asset class: equity index ETF
ISIN: DE000A1JB4N7
Total expense ratio: 0.45 percent
Distribution policy: non-distributing
Benchmark: Dow Jones Sustainability Europe Index ex Alcohol, Tobacco, Gambling, Armaments & Firearms and Adult Entertainment Index
ETF name: iShares Dow Jones Global Sustainability Screened
Asset class: equity index ETF
ISIN: DE000A1JB4P2
Total expense ratio: 0.60 percent
Distribution policy: non-distributing
Benchmark: Dow Jones Sustainability World Enlarged Index ex Alcohol, Tobacco, Gambling, Armaments & Firearms and Adult Entertainment Index
The iShares Barclays Capital Emerging Market Local Govt Bond fund enables investors to participate in the performance of government bonds from eight emerging market countries. Only bonds denominated in the respective local currencies and with residual maturities of between two and 30 years are considered. In order to be admitted to the index, bonds must also have an outstanding volume of at least USD 750 million for Latin America, EUR 750 million for the EMEA region and JPY 87.5 billion for the Asia-Pacific region.
The iShares Dow Jones Europe Sustainability Screened and the iShares Dow Jones Global Sustainability Screened ETFs pursue the same investment objective – they select equities according to long-term economic, environmental and social criteria. They only include the top 20 percent of the 600 largest European and 2,500 largest global and sustainable companies from the Dow Jones Global Total Stock Market Index. Producers of alcohol, adult entertainment, gambling products, armaments and firearms are not represented in the index.
The product offering in Deutsche Börse’s XTF segment currently comprises a total of 838 exchange-listed index funds, making it the largest offering of all European stock exchanges.
Source: Deutsche Börse
NYSE Euronext announces new ETFs -Lyxor
July 18, 2011--NYSE Euronext is pleased to announce that Lyxor has listed 2 new ETFs on NYSE Euronext's Paris market today:
|
Name |
Trading name |
ISIN |
Symbol |
Reuters RIC |
BBG Ticker |
Underlying index |
TER |
|
LYXOR ETF Thailand |
LYXOR THA |
FR0011067529 |
THA |
THA.PA |
THA FP |
SET 50 |
0,45% |
|
Name |
Trading name |
ISIN |
Symbol |
Reuters RIC |
BBG Ticker |
Underlying index |
TER |
|
LYXOR ETF MSCI Indonesia |
LYXOR INDO |
FR0011067511 |
INDO |
INDO.PA |
INDO FP |
MSCI Indonesia |
0,55% |
NYSE Euronext has now 664 listings of 573 ETFs based on more than 360 indices. So far this year, a total of 123 new listings of 97 ETFs have taken place on the NYSE Euronext European market.
Source: NYSE Euronext
Predictive Accuracy Analysis of Fitch European Fixed-Income Investor Survey
Investor Survey Offers Insight into Direction of Spreads
July 18, 2011--Summary
Fitch Ratings has undertaken an evaluation to assess the predictive power of survey data collected in its quarterly senior fixed‐income investor survey series. Focusing on expectations for credit spread movements, tests have shown that the data exhibit good predictive value, supporting the use of the survey in providing creditmarket
professionals with meaningful insight on the direction of spreads.
Using two sets of quarterly, qualitative data, Fitch applied a popular model evaluation technique (the cumulative accuracy profile (CAP) model) to quantitatively analyse the accuracy of 12‐month spread predictions relative to actual outcomes. The evaluation centred on data collected for investment‐grade
(IG), speculative‐grade (SG) and emerging‐market (EM) corporate credit asset classes, and the results were compared with asset swap spreads for relevant global credit indices.
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Source: Fitch Ratings
Office for Budget Responsibility: Fiscal Sustainability Report
July 18, 2011--The Office for Budget Responsibility (OBR) published its first annual Fiscal Sustainability Report (FSR) on 13 July 2011. The FSR helps to inform the public on the long-term challenges facing the UK's public finances
The Treasury published an Unaudited Summary of the Whole of Government Accounts for the year 2009-10 on 13 July 2011. The Government made available the key balance sheet analysis contained in this summary to enhance the analysis of the sustainability of the public finances in the FSR.
view the Fiscal Sustainability Report 2011
Source: HM Treasury
Deutsche Boerse shares replaced by Deutsche Boerse Tendered shares in STOXX indices
July 15, 2011--STOXX Limited, the market-moving provider of innovative, tradable and globalindex concepts, today announced adjustments in several STOXX indices. As a result of the expected merger with NYSE Euronext, the Deutsche Boerse shares (DE0005810055, Financial Services, Germany) in
the EURO STOXX SO, STOXX Europe 600, STOXX Global Total Market and sub-indices will be replaced with the Deutsche Boerse Tendered shares (DE000A1KRND6, Financial Services, Germany). This change will be effective July 20, 2011.
Component changes are being announced today after the acceptance threshold of at least 75% was reached by the end of the initial tender period. The free-float factor of the new share will be adjusted from 100% to 82.43% in all STOXX indices. This reflects the acceptance rate based on the current information and leads to a decrease in weighting.
For more information on the STOXX Indices, please visit www.stoxx.com.
Source: STOXX
Tendered Deutsche Börse shares to be included in DAX
July 15, 2011--Deutsche Börse today announced an adjustment to the DAX index. As a result of the expected merger with NYSE Euronext, the Deutsche Börse AG shares (ISIN DE0005810055) in the DAX will be replaced with the tendered share class of Deutsche Börse AG (ISIN DE000A1KRND6). This change will be effective 20 July 2011 and reflects the decision of the Working Committee for Equity Indices published on 6 June 2011.
The Working Committee had decided to make this component change provided an acceptance threshold of at least 50 percent is reached by the end of the initial tender period, or at any time throughout the extended period, with two trading days notice. As this threshold has been reached, the larger share class will be included in the DAX in accordance with the index rulebook. In addition, the free-float factor of the new share will be adjusted from 95.41 percent to 77.83 percent in the DAX to account for a change in the free-float greater than 10 percentage points. This value equates to the number of tradable shares of the tendered shares class based on the current information.
After closing or failure of the transaction the tendered share will be replaced by the share of the new company or the old Deutsche Börse share respectively provided the new company fulfils the criteria for inclusion in the DAX index. This process ensures that the relevant criteria of index continuity and tradability are upheld.
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Source: Deutsche Börse
Eight banks fail European stress test
July 15, 2011--Eight banks have failed Europe's bank stress test designed to assess whether they can weather another economic crisis, bank regulators said on Friday. Sixteen banks barely passed
Eight European banks are not strong enough to withstand a prolonged recession and need to raise 2.5 billion euros in capital, an industry health check aimed at reviving investor confidence showed on Friday.
The so-called "stress test" of 90 banks in 21 countries – representing 65 percent of the assets in Europe's banking sector – showed five banks in Spain, two in Greece, one in Austria and one in Germany failed the test, although the German result is disputed by the bank in question and is therefore not counted along the eight banks that officially failed the test.
Between five and 15 smaller lenders had been expected to fail the test. All big banks passed, as expected.
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Source: Deutsche Welle
Statement by the IMF on the European Banks Stress Test
July 15, 2011--Mr. José Viñals, financial counselor and director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF), issued the following statement today:
“The Fund welcomes the EU-wide stress test exercise carried out under the auspices of the European Bank Authority (EBA) and the strengthened methodology and assumptions that have been applied across the banks in the exercise.
“The disclosure of the very detailed information accompanying the release of the stress test results will allow market participants to form a considered view of the soundness of the banks participating in the test. We hope that this elevated degree of transparency becomes a permanent feature at the level of national jurisdictions.
“The outcome of the exercise reflects efforts made by individual institutions and national supervisory authorities to strengthen bank balance sheets, but more needs to be done. The Fund considers it important that national authorities have promptly committed to address the pockets of vulnerability detected through the stress test exercise, and strongly advocates that the necessary measures are taken to effectively address weaknesses not only in institutions that have ‘failed’ the test, but also in those that have only narrowly passed it. More generally, in light of the current turmoil, the Fund would emphasize the importance of further strengthening capital buffers.”
Source: IMF
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