Banking, Financial Markets and Regulation
Like the regulatory framework, the structure of the international financial markets influences the development of financial service providers and economies. Scenarios for the future development of the global financial market, and the related opportunities and risks, are a major part of the work of Deutsche Bank Research.
Talking point
Europe might gain from Brexit, but still lose to Asia
Regulatory reforms have already reshaped derivatives trading in Europe. The upcoming potential shift towards central clearing for some derivatives classes and the availability of CCPs globally will likely result in some fragmentation in derivatives trading. FX derivatives markets are providing first insights into this: Asia already makes up 26% of global FX derivative trading volumes in 2016. As the Asian exposures of European firms and Asian financial sector grow, hedging currency risks in local Asian markets seem to be becoming common practice. This may fuel the ongoing decentralisation of global derivatives trading and give rise to higher costs for market participants. [more]
Global financial markets
European bank performance: The deposit conundrum
European banking sector results improved in the third quarter after a weak first half of the year. Still, all revenue components registered year-over-year declines, only partly offset by falling costs and lower loan losses. While credit growth remains nearly non-existent, deposit growth has picked up further momentum and is now at its strongest since 2009. This comes despite record-low borrowing costs for customers and deposit rates virtually at zero. Going forward, following the US election, one of the biggest unknowns is the future direction of prudential regulation at the global level, where changes could have a material impact on European banks. [more]
Corporate funding in Germany
Monitor Corporate funding in Germany
The upward trend in lending to German corporates and self-employed continued in Q3 (+0.5% qoq / +2.1% yoy). Loans to several important manufacturing industries declined, but grew strongly with real estate-linked industries. Savings banks and cooperative banks expanded further, whereas business weakened at Landesbanks and credit banks. Bond and equity issuance was solid. Spectacular: the average rate for corporate deposits fell into negative territory for the first time in history. The German economy faced muted growth dynamics in Q3 (GDP +0.2% qoq), yet may pick up speed again in the current quarter. Growth was driven by private and public consumption, while net exports shrank. Likewise, investment contracted. The expected slowdown in growth next year (to 1.1%) is to a large extent due to the lower number of working days. (available only in German) [more]
EU-Monitor
Cash, freedom and crime: Use and impact of cash in a world going digital
Despite a growing role of electronic payments, demand for cash is on the rise in Europe. Euro cash in circulation has increased to EUR 1.1 trillion, three times as much as in 2003. Cash limits the power of monetary authorities, provides data protection and can therefore act as a guarantor of civil liberties. On the other hand, it is often associated with a stronger shadow economy, even though the shift towards a cashless society seems to trigger higher levels of card fraud. [more]
Global financial markets
Start-ups and their financing in Europe: Out of the woods with Capital Markets Union
Ensuring sufficient funding for European start-ups forms an integral part of the emerging European Capital Markets Union (CMU). Cost-efficient solutions are necessary to reverse the 40% decline in small IPOs in recent years. To strengthen bank lending to start-ups, reviving the securitisation market and potentially establishing an SME-covered bond market is crucial. Venture capital investments are also subdued – most recently, they were only one tenth of the level in the US. To increase them, institutional investors should be granted more flexibility in their portfolio allocations. Finally, the EU hosts more than 500 crowd funding platforms. A common legal and regulatory approach could stir consolidation and thereby reduce search costs for investors and borrowers alike. [more]
 
 
Interactive map
Copyright © 2017 Deutsche Bank AG, Frankfurt am Main