https://www.esm.europa.eu/blog/wanted-updated-understanding-bank-runs The 2023 banking turmoil revived questions about whether bank regulation and supervision can properly mitigate new risks emerging in a highly volatile environment. While many have focused on the role of digital technology in bringing about this situation in the US, policymakers and practitioners...

https://www.esm.europa.eu/blog/higher-interest-rates-attract-investors-euro-area-sovereign-debt-pose-challenges-public The recent increase in interest rates has changed the landscape of euro area government debt. While governments must pay higher borrowing rates to finance their deficits, higher bond yields attract investors. Looking at the origin of the new demand for government debt, we ask if this will endure and...

https://www.esm.europa.eu/blog/are-banks-profits-here-stay Banks benefit from unprecedented rate hikesIn July 2022, the European Central Bank (ECB) hiked official monetary policy rates for the first time since 2011. The current hiking cycle, in addition to atypically starting with an interest rate in the negative area, is unprecedented in terms of speed and...

https://www.esm.europa.eu/blog/mind-gap-how-european-risk-sharing-scheme-could-bolster-private-insurance-coverage-natural Recent flooding events in Europe, as well as reports that insurers globally are becoming reluctant to offer homeowners protection against natural catastrophe losses in certain regions, have fuelled discussions about the role of insurance coverage in limiting the economic and societal consequences of...

https://www.esm.europa.eu/blog/esms-holistic-approach-esg-and-sustainable-prosperity The environmental, social, and governance (ESG) market has rapidly evolved over the last few years, with a myriad of bond products emerging from the market due to an ever-growing demand for sustainable assets. By March, ESG-themed bond issuance topped €3 trillion worldwide, making it a powerful...

https://www.esm.europa.eu/blog/greece-investment-grade-again-why-it-matters-keep-it Greece has achieved an important milestone in its recovery from a painful debt crisis more than a decade ago. After 13 years, Greece regained investment grade in its credit rating from Standard & Poor’s Global Ratings (S&P). In this blog post, we show why this achievement matters to Greece and...

https://www.esm.europa.eu/blog/outside-box-world-economy-heads-soft-landing-amid-uncertainty-international-monetary-fundworld The world economy is on course for a soft landing next year after a bumpy journey. Markets are eyeing some risks and must navigate more uncertainty. That was the view at the International Monetary Fund (IMF)/World Bank annual meetings held last week in Morocco. Attracting dignitaries from around the...

https://www.esm.europa.eu/blog/more-resilient-euro-area-navigates-financial-imbalances-and-macroeconomic-instability The euro area economy enters the current cycle of higher interest rates with relatively moderate levels of financial imbalances. Policy-makers have applied the lessons learned during the global financial crisis and the ensuing policy measures. In this blog, we use a quantitative approach to examine...

https://www.esm.europa.eu/blog/euronomics-financial-buffers-and-risks-during-current-credit-tightening The euro area economy and the financial system have proven resilient amidst the energy price crisis and inflation. But economic growth is slowing, and the short-term costs of monetary policy tightening are becoming apparent with the increased constraint on both borrowing and lending. With future...

https://www.esm.europa.eu/blog/financial-reporting-tool-underpin-financial-stability-times-inflation The cost of borrowing was anchored at record lows for a decade. Families and many business sectors, such as the housing market, benefitted from cheap credit. Things rapidly changed last year. The effects are already felt and the financial reporting from companies across Europe started to cast a...

https://www.esm.europa.eu/blog/building-resilience-times-inflation-induced-inequality Energy prices in the euro area have receded from their peaks of last year, yet prices of other goods and services continue to rise. Headline inflation is declining, but core inflation remains stubbornly high. Fiscal policy has an important role to play in aligning with monetary policy to bring...

https://www.esm.europa.eu/blog/commercial-real-estate-and-financial-stability-time-its-different Commercial real estate markets are under pressure in Europe and beyond as prices fall and activity has stalled in many countries. The commercial real estate sector poses risks to euro area banks and financial stability. More than a decade ago, the European Stability Mechanism was called in to rescue...

https://www.esm.europa.eu/blog/fast-and-furious-tameable-lessons-recent-banking-turmoil-eu Healthy banks are critical to safeguarding financial stability. The recent collapse of three US banks and one in Switzerland has sent shockwaves through global financial markets, with tremors continuing to this day. The speed with which these entities folded, and the strength of the market reaction...

https://www.esm.europa.eu/blog/firms-profits-cure-or-curse Despite record surge in expenses, firms saw increased profitsSince the outbreak of the pandemic, disruptions in global supply chains and the extraordinary surge in energy prices led to a sharp increase in firms’ input costs. Corporates can react to higher input costs in two ways. First, they can...

https://www.esm.europa.eu/blog/how-wholesale-digital-euro-can-strengthen-europes-capital-markets This exciting prospect also prompted the ESM to issue a discussion paper Wholesale central bank digital currency – the safe way to debt capital markets and to co-host a seminar with the International Capital Market Association in April,[1] where speakers highlighted, among numerous topics, the fact...

https://www.esm.europa.eu/blog/financial-stability-and-risks-growth-euro-area-where-do-we-stand Financial conditions in the euro area, favourable before the war in Ukraine…Favourable financial conditions, including sufficient access to loans for businesses and households, are crucial for the growth and maintenance of a healthy economy. However, cheap credit may lead to higher debt levels and...

https://www.esm.europa.eu/blog/last-year-unexpected-revenue-boon-explained-inflation Why it mattersInflation boosts public revenue. How to spend it may become a delicate issue, especially when it is unexpected and driven by an energy crisis and a geopolitical conflict, as is currently the case by Russia’s war against Ukraine. There is more money in the public purse (almost)...

https://www.esm.europa.eu/blog/how-euro-area-overcame-fragmentation-during-pandemic How the ECB helped to contain fragmentation, a key challenge for the euro area, during the pandemic and what lessons can be drawn upon for the future are explored in a recent ESM working paper.Sometimes a shock is so sudden and severe that financial markets need immediate large-scale intervention...

https://www.esm.europa.eu/blog/croatia-makes-euro-20-nations-strong Prudent build-up to membershipThe currency union has nearly doubled since its launch in 1999 with 11 countries. Croatia’s inclusion as the 20th member demonstrates the union’s continued growth despite the pandemic, conflict in nearby Ukraine, energy crisis, and the strict criteria for inclusion, the...

https://www.esm.europa.eu/blog/placing-new-value-efsf-bond-prices Since the inception of the ESM as a permanent successor, the EFSF no longer lends to euro area countries. But it continues to issue as part of its roll-over of existing loans made to some euro area countries during the financial crisis a decade ago, some of which will continue to be repaid until...