investmentGATEWAY

Precise and personalised approach
INVESTMENT FAQs  | AVOID SCAMS
In some cases, fraudulent emails might claim to represent Investment Gateway and offer certain benefits. Investment-Gateway.eu does not send any such emails to request information. This website's service is purely informative, and to help direct interested parties to professional corporate services via third party consultants in Cyprus and the European Union.

Be aware. Ignore such emails and do not reply.


Thank you

Investment-Gateway.eu

Euro Area Outlook 2019

Euro area financial stability environment has become more challenging.

Published on: 03 December 2018

The euro area financial stability environment has become more challenging since May, the latest Financial Stability Review (FSR) of the European Central Bank (ECB) says.

  • Possibility of broader stress in emerging markets, rising debt sustainability concerns and trade tensions pose challenges
  • Bank resilience improved, but structural vulnerabilities continue to restrain profitability
  • Liquidity concerns are growing amid increased risk-taking by investment funds

On the positive side, a growing economy and improved banking sector resilience have continued to support the financial stability environment in the euro area. Furthermore, a series of volatility events have not spread to the broader global financial system.

At the same time, downside risks to the global growth outlook have become more pronounced since May relating to a resurgence in protectionism and stress in emerging markets. Vulnerabilities in financial markets continue to build up amid pockets of high valuations and compressed global risk premia. In the euro area, political and policy uncertainty, related to market concerns about public spending plans have increased over the review period. In addition, the possibility of a cliff-edge Brexit could pose a risk to financial stability.

With a maturing global business and financial cycle, a number of market indicators appear to signal downside risks to global asset prices. A snapback of term premia on global benchmark bonds, in particular, could materialise and possibly spill over to the euro area. Meanwhile, the prospect of renewed stress in emerging market economies tested the resilience of the global financial system. Over the summer months Argentina and Turkey witnessed significant increases in bond spreads, falling stock prices and large currency depreciations. Higher US interest rates or rising trade tensions could spark further stress in emerging market economies, the FSR warns.

Within the euro area, market concerns about budgetary plans in Italy have risen since May. Losses observed in Italian financial markets over the past six months have however not meaningfully spilled over to other euro area countries.

The profitability of euro area significant banks remained broadly stable in the first half of 2018. However, the average return on equity (at around 7%) still falls short of banks’ cost of capital. Structural vulnerabilities including overcapacity in certain domestic banking markets and high operating costs continue to dampen bank profitability. At the same time, reductions in non-performing loans (NPLs) continued apace. As a result, banks’ NPL ratios have nearly halved since 2014.

Banks’ solvency positions remain solid. The recent European Banking Authority (EBA) stress test confirmed that the capitalisation of euro area banks is sufficient to weather a severe adverse scenario. Additional sensitivity analyses to account for recent developments not specifically catered for in the test lead to an additional capital depletion of around 30 to 70 basis points on top of the overall Common Equity Tier 1 ratio depletion of 380 basis points in the adverse scenario of the EBA stress test.

The FSR also highlights risks building up outside the banking sector – notably in the investment fund sector. Over the past ten years the total assets of euro area investment funds have more than doubled to €13.8 trillion in June 2018, with the size of the non-bank financial sector approaching half that of the euro area banking sector. Growing exposures to illiquid and risky assets make the funds vulnerable to potential shocks in global financial markets.

The Review also contains three special features. The first special feature examines how banks can reach sustainable levels of profitability. The second examines the implications for financial stability of a resurgence of trade tariffs. The third discusses the rapid growth in exchange-traded funds and their potential for transmitting and amplifying risks within the financial system.

Source: European Central Bank (ECB)

 

Return to Press Page

 

About Investment-Gateway.eu

One contact, multiple options

Established in 2011, Investment Gateway is an independent and impartial hub and initial point-of-contact to leading supplier-firms in Cyprus that provide professional services for investment purposes, including company formations, subsequent company administration and maintenance services, accounting and auditing, global tax planning, wealth management, as well as international banking. Investment Gateway introduces you to the right partner from a pool of pre-qualified supplier-firms, made-up of leading accounting, legal and consulting agencies in Cyprus.

The Investment-Gateway.eu platform is a completely free service, together with offering added-value content in general information, news updates, documents and analytics on the local Cypriot, European and global economy to help with investment strategies to the EU, Europe, Russia & CIS, Middle East & Africa, as well as around the world.

Investment Gateway Contact information:
Investment Gateway Media Investment Gateway Agents
www.investment-gateway.eu www.investment-gateway.eu
communications 'at' investment-gateway.eu contact 'at' investment-gateway.eu

Investment-Gateway is an eco-friendly professional services platform, taking action on global climate change by offsetting carbon emissions on behalf of all clients. Learn More

European & Global Affairs  

No-deal Brexit Contingency Action Plan
21 December 2018
EU-Japan Trade Agreement
21 December 2018
Results Achieved from Investment
20 December 2018
FDI Stocks at End of 2017
20 December 2018
EU Enhances Monitoring of Money Laundering
19 December 2018
Preventing Accumulation of Non-performing Loans
19 December 2018
EU Agrees New Rules on Business Insolvency
19 December 2018
Euro Area Outlook 2019
03 December 2018
Increased EU-Lebanon Cooperation
29 November 2018
Macroeconomic Imbalance Procedure Scoreboard
23 November 2018
Agreement on Foreign Investment Screening Framework
22 November 2018
EU Shapes its Ambitious Strategy on India
20 November 2018
EU & China Step up Cooperation on Sustainable Development
16 November 2018
EU Trade Agreements Positive Impact
31 October 2018
EU & Singapore Forge Closer Economic & Political Ties
19 October 2018
Prev |     Page 1 of 20

 

Economy, Finance & Tax News


Cyprus Economy & Tax

 

Interviews & Speeches

 

Review & Perspective on Cyprus
CEX.IO Bitcoin Exchange