“As we all know, the rule of law is as important as it is fragile and the pandemic crisis has accelerated both the good and the bad things in our society.” This was stated by the president of the ECB, Christine Lagarde, in her closing speech at a conference of the World Law Congress in Madrid, in commemoration of the former US Supreme Court judge Ruth Bader Ginsburg.
In a previous panel, Lagarde had stated that “in life if you have a goal, if you have a dream, then it is better to have a strategy. There will be stages along the way that will not necessarily be victories – he explained – but that will carry you forward ».
Eria: “The exuberance of markets is worrying, especially with leverage”
“I am very concerned about the high exuberance in the financial markets, especially where there is a high level of leverage.” This was stated by the head of ECB banking supervision, Andrea Enria during a hearing in the Senate.
“This type of phenomena – he said – risks giving rise to significant losses in the event of sudden corrections” in the markets, losses that could have repercussions on the banks “even in the event of adjustments in expectations. This is a real risk “and the ECB Supervision” we are making decisions “on this front, he warned.
“Against suspension of new default thresholds for banks”
The new thresholds for defining default (insolvency), which require the onerous restructuring and, therefore, the default of an exposure for banks, are questioned by some observers given the delicate phase of recovery after the pandemic collapse. «However, the suspension of the thresholds, even in the current context, would mean encouraging the practice of ‘perpetuation’ (evergreening) of loans. In other words, we would in fact end up promoting unsustainable forms of support to debtors that conceal the effective deterioration of credit risk and aggravate the already present problem of an excess of private debt ».
«The analysis conducted by the ECB indicates that public support linked to the pandemic emergency may have increased the number of so-called ‘zombie companies’, which are a legacy of the great financial crisis and the sovereign debt crisis. These debtors curb the productivity of the economy and expose the banking system to the risk of sudden adjustments, with significant destruction of value. Giving up parts of the prudential framework – continued Enria – would lead the banks to fuel the problem, rather than helping to tackle it. As also recognized by the G30, the only way to manage the recovery phase is to ensure that resources are channeled to economically sustainable businesses and projects, while avoiding situations of adverse selection and moral hazard ».
«I am confident that all the banks under our supervision are now ready to apply the new rules on credit risk. The final EBA guidelines on this were published in 2016 and only became applicable as recently as five years later. EU banks have had a lot of time to prepare models, infrastructure and governance to comply with the new regulatory regime. In fact, many have updated their systems in full compliance with the new regulatory framework – said the head of EU banking supervision – therefore, a revision of the rules would create a serious problem of equal conditions ».
Pepp, weekly net purchases slow to 15.7 billion
The weekly net purchases of ECB securities have returned to slow to € 15.7 billion, with the Pepp pandemic crisis program. According to data from the same institution, the total amount of bonds accumulated with this program reached 1,185.6 billion euros, as of 2 July last. The previous week, closed on 25 June, with the Pepp the ECB and the Eurosystem of central banks had made net purchases for 24.3 billion euros, marking an acceleration compared to the previous week.
Source: RSS DiariodelWeb.it Economia by www.diariodelweb.it.
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