Debt
The changing composition of central bank balance sheets
Quantitative easing may have been necessary, but it has created worrying distortions and has probably discouraged structural change, while deflecting attention away from ever-greater levels of debt leverage
Serbia’s Tabaković deems NPL action plan a success
Proportion of NPLs has fallen by 6% since 2015, says governor
Banks’ funding plans need ‘careful monitoring’, EBA says
Planned increase in MREL issuances in 2018–09 may cause problems, report warns
IMF designs new instrument amid rise of regional financing
The “policy co-ordination instrument” is designed to allow the fund to offer technical support to countries looking to unlock funding from regional arrangements
Jaime Caruana defends pre-crisis record as Bank of Spain governor
Former governor says ultimate responsibility was on the “deficient” management of the regional savings banks, which relaxed their lending standards
Fiscal challenges a worry for Trinidad and Tobago – report
Central bank cites rising debt and failed fiscal consolidations as reasons for ratings downgrade that could make borrowing costs higher on international markets
RBNZ considers cutting contingent instruments from capital regime
Central bank casts sceptical eye over debt instruments with in-built conversion triggers, following recent problems in Europe
EBA study quantifies impact of IFRS 9
Report finds smaller banks are likely to see a heavier capital impact from new accounting rules; Basel Committee paper says a mix of forward- and backward-looking rules may work best
Yellen warns of debt impact on productivity
Fed chair states in “strongest possible terms” that the current spending by the US government is unsustainable and could harm productivity
Zimbabwe’s bond notes are ‘exacerbating’ economic fragility, IMF says
Fund urges Zim authorities to restore credibility to currency regime as financial crisis shows no sign of abating
Vietnamese central bank cuts rates, despite IMF credit warning
Decision contradicts IMF advice to keep monetary policy on hold to contain rapid credit growth, but growth and inflation have disappointed
CEPR paper sketches ‘radical, realistic’ Greek reform plan
Stanford and Yale economists outline “unorthodox” policies that could put Greek debt on a sustainable footing – and might be acceptable to all negotiating parties
‘Multiple lending’ may cause contagion during stress – paper
Researchers say multiple lending may ease liquidity shocks in normal conditions, however
BoE ups capital buffers as consumer credit outstrips income
“Pockets of risk” including effects of Brexit negotiations and car finance warrant attention, BoE says, though it stresses overall stability threats are at “normal” levels
Book notes: Can We Avoid Another Financial Crisis?, by Steve Keen
Steve Keen challenges “mainstream” economic thinking in this concise book, hoping to shift the political debate on debt
BIS paper links debt service lag to impact on real economy
Authors find the lag between borrowing and peak debt service helps explain why debt booms reduce future output and increase the probability of a crisis
RBA minutes point to dangers from debt
Growth in household debt exceeds growth in incomes, creating risks to consumption; board members say situation warrants “careful monitoring”
Thai central bank warns on deteriorating debt serviceability
Bank of Thailand flags financial stability risks as weakening macroeconomic outlook impacts debts among SMEs and households
Aruba central bank keeping an eye on government deficit
Caribbean central bank says borrowing from the domestic market could put pressure on international reserves; says it will be monitoring the situation “closely”
Paper explores effects of capital controls on cost of international debt
Restrictions on capital inflows produce “substantial” corporate bond spreads but effects are mitigated for firms in EU or with English legal origins
RBNZ consults on DTI limits with full macro-pru review scheduled for 2018
Central bank evaluates benefits of limit and how it would interact with current macro-pru policies; consultation offers reassurance to households about welfare costs
Former PNG governor accuses institution of ‘fuelling corruption’
Morauta says central bank has become “inanimate puppet” in government game whereby it continues to fund the growing deficit
Balance sheet weakness and falling investment to blame for productivity slowdown – paper
IMF paper rejects structural hypothesis for slowdown in productivity growth following crisis; firms with balance sheet issues and those hit harder by credit tightening cut back on investment
Venezuela’s central bank devalues bolivar as crisis continues
Bolivar devalued 64% in latest currency auction in an attempt to stem effects of financial crisis; Goldman Sachs comes under fire from opposition leader