ECB needs way of financing banks during wind-down: Constancio

The European Central Bank needs a way to finance failing banks while they are being wound down, says Vitor Constancio (REUTERS)
Updated 09 April 2018

ECB needs way of financing banks during wind-down: Constancio

Frankfurt: The European Central Bank needs a way to finance failing banks while they are being wound down, ECB vice president Vitor Constancio said on Monday, citing the British and US models as possible examples.
A bank run on Spain’s Banco Popular last summer laid bare a hole in European rules, which bar the ECB from supporting a failing bank while the European Union’s Single Resolution Board organizes a rescue.
Constancio cited Britain, where the Bank of England can request an indemnity from the government on loans extended to banks in resolution, and the United States as possible models.
“The UK and US have... a solid, whole process of resolution that includes those liquidity problems during that period of time, and I hope that Europe will get to some solution to this problem,” Vitor Constancio told the European Parliament.
Banco Popular was immediately bought by larger peer Santander, which allowed it to keep functioning as normal.
But the Spanish case showed how the euro zone framework, which lets national central banks provide Emergency Liquidity Assistance to cash-strapped lenders only if these are still viable, is not fit for purpose.
Sources say the ECB is considering taking on the task via a new lending facility called Eurosystem Resolution Liquidity.
But any such move is likely to require approval from the Eurogroup of euro zone finance ministers, where richer countries fear it could be used inappropriately to prop up banks with public money.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.