Etiqueta: news

Link: https://www.cnbc.com/2019/10/21/facebooks-david-marcus-libra-could-use-currency-pegged-stablecoins.html

Date: October, 21st 2019

Media: CNBC

What happened?

Facebook has suggested its Libra project could use multiple cryptocurrencies backed by different existing currencies like the dollar, rather than having one single digital token tied to a basket of currencies. Instead of having a synthetic unit they are using a series of stablecoins, a dollar stablecoin, a euro stablecoin, a sterling pound stablecoin, etc. These currencies are focused on reducing the volatility observed in virtual currencies such as bitcoin and others. With this project they want to create a more efficient cross-border payment system.

Whom and where it affects?

 It would affect the whole world, specially most developed countries where most of people have access to internet, it will also affect the international banking and financial system. Although People still aren’t very familiar with this cryptocurrencies, they are gaining popularity and it’s a reality they will become more important with time.

What sort of public or private institutions are involved?

The Association libra, the hand that guides the nascent cryptocurrency, is composed of partner companies. The Libra Association will be an independent non-profit organization based in Geneva, Switzerland. Its aim is to coordinate and provide a framework for governance on the Libra network and to reserve and guide grants of social impact in support of financial inclusion. The association is constituted from the net of nodes validators that manage the blockchain Libra. Its members will consist of geographically distributed and diversified enterprises, non-profit and multilateral organisations and academic institutions.

Why is it important for Banking and Finance?

It is important because basically this new system will be backed up by different existing currencies so only for that reason it will affect traditional banking and change it in the way people percieve money, this change has already began with other cryptocurrencies that exist already, so every time people fear less to this new concept of money and for sure its going to be the future of our finances.

What do you think will be the consequences in the foreseeable future?

The advantages of this type of money is that is an excellent alternative for many people who have to send money. Apart from being a currency with a limitation in its issuance, they allow that before the increase in its demand its price has risen and therefore becoming an excellent investment. It is also a technology that allows you to create automatic rules to money. All these great advantages allow us to predict that its use will continue to grow.

We can see many transactions that are made, new very powerful players that are entering, new projects that are emerging, after all, it is our day to day, and all these are very strong indicators that we are on the right track.

Today may not be the best system in all situations, but it is certainly an unstoppable evolution. The spread of bitcoins in the world as a global currency is already a reality, the development of solutions that solve some gaps is already underway, the revolution that the blockchain has brought and is also bringing to other sectors, beyond the systems of payment, is constantly increasing.

All the largest companies have already realized the value of that technology and are focusing on solutions to implement them in their businesses.

Key words:

Cryptocurencye, Blokchain, Stablecoins, Bitcoin and Volatility.

Link: Long-term negative rates have ‘adverse consequences’ we don’t fully understand, says Jamie Dimon

Date: 21st October 2019

Media: CNBC

What happened?

The article talks about various topics, which, of course, are all intertwined. First and foremost we have to mention that the rate at which the economy is growing is slowing down, this is caused by various geopolitical factors, such as the Brexit deal and the U.S.-China trade war. This, in turn, is the main reason why the interest rates are at an all-time low, reaching, in some places, numbers below zero.

Whom and where does it affect?

As one might imagine, the decrease in interest rates has an effect on every participant in our global economy. For example, when interest rates are low, people tend to spend more because investing in financial products generates next to no returns, they also tend to take out more loans to invest in different business venues since loans become «cheaper». Obviously those living in countries where the rates of interest are close to or below zero will be affected the most.

What sort of public or private institutions are involved?

The following public institutions:

• National Central Banks (NCB)
• European Central Bank (ECB)
• International Monetary Fund (IMF)

The following private institutions:

• Private banks, such as J.P. Morgan Chase

Why is it important for Banking and Finance?

Negative interest rates change the normal way of how banking is done. Having negative interest rates, essentially means that deposits will incur a charge instead of receiving interest. i.e. you will have to pay to have your money in a bank instead of being paid for having said deposit.

What will the consequences be in the foreseeable future?

The consequences will depend on the future development of the interest rates and decision-making of central banks. There are two possible outcomes:

1. The continuous drop in interest rates below zero. This outcome would cause a fall in the consumption of financial products, even a cash withdrawal if banks started to charge for having a bank deposit. On the other side, people would be even more tempted to take out loans and invest in businesses.
2. The rise in interest rates, resurfacing above zero. This would, probably, end in a massive slowdown of the economy, or even, a recession.

Key words:

ECB, Bank of Japan, negative interest rates, recession, slowdown, European Union, United States, Jamie Dimon

Link: Interest rate rot hits regular-saver accounts

Author: Sam Baker

Date: 14th October 2019 / 5:30pm

Media: The Telegraph (UK)

What happened?

British banks are lowering interest rates on the top regular-saver accounts, due to financial problems arising from the country’s political and economic situation (Brexit). Consumers are affected because banks only benefit those accounts that have monthly cash income.

Whom and where it affects?

The protagonists of this news are the private banking and consumers. The news is located in the United Kingdom.

What sort of public or private institutions are involved?

The public institution involved in this news is the Bank of England. There are private banks that also appears in the news such us: M&S Bank, HSBC, First Direct, Nationwide, and Virgin Money.

Why is it important for Banking and Finance?

This news is very important for Banking and Finance, because it reflects how the concept of “savings account” is losing its meaning. If rate cuts continued: where is the consumers’ savings? If this trend continues, we would end up paying interest rates for maintaining a savings account.

What do you think will be the consequences in the foreseeable future?

The imminent Brexit as well as a possible global crisis are factors that can lead to zero (or even negative) interest rates. With this low interest rate policy, savers will lose: they will see how their deposits will barely be remunerated, in cases of companies, banks will start charging their large clients for saving their money. This is something that is already happening throughout the European Union. On the other hand, low interest rates will benefit debtors, as it allows them to pay less for their debts. In addition, the new loans will be cheaper.

Key words:

Regular-saver accounts, Brexit, consumers, banks, cash income, private banking, the Bank of England, savings account, rate cuts, trend, zero interest rates, low interest rate policy, deposits, debtors, loans.

Link: Banks expect to cut business lending at fastest rate since 2008 crash

Date: 17th October 2019

Media: The Guardian

What happened?

The bank of England made a survey which shows that banks plan to reduce the rating in response to rising defaults and a fall in demand.

Whom and where it affects?

It affects banks and individuals. Banks have seen the biggest collapse in demand from commercial property companies. On the other hand, individuals are expected to find it more difficult to get credit over the next three months as banks and building societies cut the length of interest-free period on new credit card lending.

Apart from the reasons just explained, british businesses will be affected because of Brexit, a phenomenon that is growing in the United Kingdom.

What sort of public or private institutions are involved?

The first involved is the Bank of England because they made the survey. Second, the banking sector because it is the one that is going to cut its lending to businesses. Finally, the lenders, who were asked to answer several questions in order to have this survey made.

Why is it important for Banking and Finance?

It is important for banking and finance because the finance industry, as the figures revealed, shows an increasing caution across it. With money so cheap, there is a lot of debt out there and the worry is that for some people it is starting to be reflected in their daily life.

What do you think will be the consequences in the foreseeable future?

As a consequence, we can say that default rates are going to increase slightly which may lead to bankruptcy. This will affect not only the United Kingdom but will also spread to Europe and, in a long term, the rest of the world. Not to say that the first affected will be the citizens, who are going to have financial problems with their repayments.

Key words:

Default, bankruptcy, loan, debt, lenders, mortgage, Bank of England

Link: Post-Crisis ECB Considers How It’ll Set Rates in the Future

Date: 14th January, 2019

Media: Bloomberg 

What happened?

After pumping cash into the markets for over than a decade, the European Central Bank (ECB) is considering the way it controls interest rates and transmits monetary policy. The ECB will have to determine its monetary policy framework to adapt it to a new era characterized by the contraction of the stimulus measures and the reduction of its balance sheet and excessive liquidity.

Whom and where it affects?

It mainly affects the ECB and the national central banks of all countries that have adopted the euro.

What sort of public or private institutions are involved?

Among public institutions involved, we can find the European Central Bank (ECB), the Federal Reserve (FED) and the Bank of England (BOE). 

Why is it important for Banking and Finance?

Changing the monetary policy framework of the Eurosystem could affect the entire banking and financial system. The main objective of the ECB is to maintain price stability in the euro zone; through interest rates, it can influence economic activity, alining it with inflation objectives. 

Focusing on the banking sector and taking into account that one of its main functions is to transmit monetary policy, a change in its framework would mean a turn on its business strategies.

What do you think will be the consequences in the foreseeable future?

Since the main objective of the Eurosystem is to ensure price stability and taking into account that the HCIP (Harmonised Index of Consumer Prices) is around 2.1% for the euro area, what we can expect is the implementation of monetary policies that prevent higher inflation. This will inevitably lead to the reduction of the quantitative easing programmesand the rise of interest rates on Main Refinancing Operations (MRO), Deposit facility, and Marginal Lending Facility.

The increase in interest rates will make borrowing more expensive and saving more attractive. This will have important effects throughout the entire financial system and affect growth development. Some of the plausible consequences of this decision could be: the increase of interbank lending rates (Eonia and Euribor) and the subsequent effect on assets that depend on these indexes; more expensive bank loans and credits and more attractive deposits, a situation that might improve banks’ income statements; increasing yield expectations over bonds, rising financing costs both for governments and corporations, and putting pressure on stock markets, demanding higher returns.

Summing up, a change in the monetary policy framework would inevitably lead to a scenario of costly financing, investment decline and more savings that would cause a deceleration of economic growth. Nevertheless, it is important to emphasize the complexity of this decision, that would be made after careful deliberations and in the right time.

Key words:

Monetary Policy, ECB, Deposit Facility, Eonia and Euribor.

Date: Oct 24th, 2018

Media: Forbes

Link: https://www.forbes.com/sites/francescoppola/2018/10/24/a-tale-of-two-investment-banks/#70a819b15f6a

What happened?

Barclays and Deutsche Bank are leading European banks by total assets (in billion €) and they have released their third-quarter results.

Although at first glance, these results look good, as their profits increased, poor performance in their investment banking divisions is bad news for both banks.

Whom and where it affects?

It affects both banks in Europe, and therefore, their investors, shareholders or clients.

What sort of public or private institutions are involved?

Barclays is a British multinational investment bank and financial services company headquartered in London; and Deutsche Bank is a German investment bank and financial services company headquartered in Frankfurt, Germany.

Why is it important for Banking and Finance?

As these banks are the most important banks of Europe, their bankruptcy or their financial problems, can cause a financial instability in the European economy or even systemic risk.

What do you think will be the consequences in the foreseeable future?

There is a possibility that Deutsche Bank merges with Commerzbank (also German bank). Bolting the two “ailing German giants” together might perhaps create a bank large enough to compete with the Americans, though it’s a risky strategy – mergers of this kind can have the unfortunate effect of amplifying the weaknesses of both banks. In case this happened, Barclays could suffer too much pressure and it wouldn’t resist to compete succesfully once again with the American giants.

Key words:

Investment bank, Shareholders, Investors, Europe, Deutsche Bank, Barclays, Results/performance.

Date: 18th October 2018

Media: The Guardian

Link: https://www.theguardian.com/business/2018/oct/18/eu-members-should-be-wary-of-stealing-londons-super-sized-financial-sector

What happened?

Due to the negotiations about Brexit in United Kingdom, other European countries are using the deep uncertainty about the future financial regulation of the continent’s financial markets to include business and activities.

Whom and where it affects?

This issue affects the rest of the business and countries in the European Union

What sort of public or private institutions are involved?

It involves all institutions, mainly financial and bank sector, the Brexit pretends a financial rethinking about a major financial centre is, of course, unambiguously good for Porsche dealerships, upmarket champagne bars and table dancing clubs.

Why is it important for Banking and Finance?

Is very important because the relationship between the rest of Europe banks and United Kingdom banks. This banks had lost the capitalization also the interest rates are at historic minimums, apart of the financial crisis because of the brexit, the GDP also suffers a contraction. There was a drop in housing prices, specifically 33%. In addition to all, United Kingdom has  a void on the part of the rest of countries of the European Union, costing them thus to obtain financing outside of UK.

What do you think will be the consequences in the foreseeable future?

The United Kingdom will participate in a real-world experiment that tests the economy. It will produce the substantial relocation of financial activity unless it realice a major advance in the Brexit negotiations. If it happen , the BIS economists won’t make a mistake.

Date: 9th of April 2018

Media: Banking Technology Magazine

Link: https://www.bankingtech.com/2018/09/moneemint-to-become-europes-first-ethical-digital-bank/ 

What happened?

    MoneeMint will create the first ethical digital bank in Europe. Initially, it will offer prepaid services and products. MoneeMint is the new image of Ummah Finance. It was founded by Waqar and Martin Luther Maramba. 

Whom and where it affects?

   The app is aimed at millennials in the United Kingdom and the rest of Europe.

What sort of public or private institutions are involved?

The only institution is Ummah Finance (their capital is private), founded in 2016, based in London. This company has changed its name to MoneeMint. 

Why is it important for Banking and Finance?

It is important because it will mean an innovative improvement in banking services, due to which it will become the first Islamic bank through mobile phones based in the United Kingdom. Their ambition is transform the way Muslims in the UK Bank.

What do you think will be the consequences in the foreseeable future? 

The consequences in the future is that if the app is profitable then a lot of similar institutions will begin to offer the same services. This innovative service will allow them to approach the level of traditional banking, improving aspects of ethical banking. MoneeMint is creating new strategies to adapt to changes. In this way, the ethical bank will be able to offer different products.

Key words: banking, millennials, ethical digital bank, fintech, innovation, prepaid, Islamic bank.