Eurozone
ECB and Romanian central bank set up repo swap line
Romanian currency has fallen in recent months as central bank lowers rates in response to pandemic
Central banking enters a new era
Central banks face a delicate balancing act to preserve their reputations as they evolve into ‘buyers of last resort’ and some of their actions appear functionally equivalent to ‘monetary financing’
DNB paper says eurozone investment-saving curve flatter in recent years
Persistently low interest rates in eurozone appear to have weakened monetary policy – researchers
The complex art of reserve management
The coronavirus lockdown represents another inflection point for central banks seeking to optimise the management of their $12 trillion in FX reserves
French governor says ECB could directly fund loans
Villeroy de Galhau also calls for flexible emergency purchases but rules out yield curve control
Lagarde welcomes Franco-German fund plan
Covid-19 response fund would be drawn from common EU budget
The ECB, the lockdown and the monetary financing lock
The eurozone’s central bank may need to break its prohibition on monetary financing to fight the pandemic
German court rules ECB must provide more evidence on PSPP
Judges strongly criticise ECJ’s ruling on QE programme, but stop short of declaring it unlawful
Debts, deficits, central banks and inflation
Forrest Capie and Geoffrey Wood ask what insights history can provide for central banks and governments managing abrupt, large increases in debt
ECB publishes framework for assessing prudential spillovers
Detailed paper aims to help regulators assess cross-border effects of macro-prudential policies
Joining banking union likely positive for Sweden – Riksbank
Banks’ large cross border activities mean common supervisory and resolution mechanisms are better than national equivalents
Most eurozone states experience fiscal spillovers – ECB paper
Eurozone fiscal policy may be especially effective when rate changes have little impact, paper says
Book notes: Crisis spaces, by Costis Hadjimichalis
“Don’t buy this book, unless you are a dedicated Marxist”
People: Sarb and BoE renew senior appointments
Senior Sarb and BoE officials receive new terms; MAS picks new assistant managing director; ECB appoints director; William Dudley takes consulting job
Dutch former governor attacks PM for blocking eurobond
Nout Wellink says Netherlands must prevent further debt crisis in Southern European countries
ECB paper looks at euro exchange rate shocks
Exogenous exchange rate shocks having more impact on eurozone inflation, researchers find
Fed expands network of swaps to emerging markets
Emerging markets will now have direct access to a dollar backstop, but it is still limited
Central banks and banks: a changed relationship
The development of large, complex international capital markets has reshaped the relationship between central banks and their commercial counterparts
ECB mulls wider clearing house access to account facilities
Including CCPs in the Eurosystem may remove the need for them to seek a banking licence
Inflation targets back in the spotlight
Monetary policy can do little to offset the impact of Covid-19
Trust is crucial to eurozone interbank markets – ECB paper
More bank failures or longer-lasting crises lead to smaller interbank markets, researchers find
Why Bulgaria needs to deepen its currency board
The BNB’s currency board rules should be extended to transaction deposits at commercial banks, which could in turn issue digital currencies, even in the event of euro adoption
Weak eurozone banks hindered monetary policy – Bundesbank paper
“High-risk” banks failed to increase loan spreads despite ECB liquidity injection, researchers say
BoE paper highlights non-linearities in bank funding and solvency
Results could be important consideration in stress-test design, authors say