№100: Potential for Cooperation: Polish and Czech Standpoints on the Banking Union

Author(s): Tomáš Profant,Patryk Toporowski / Language(s): English

Czech and Polish banking systems are similar in many aspects, such as the predominance of euro area banks in the market and a strong banking supervisory authority. These common features of banking systems translate to similar Czech and Polish positions towards the Banking Union. Their main proposals are to include the specificity of so-called host countries and to maintain the strong position of national supervisory authorities. Although Poland and the Czech Republic will have more reasons to sign up to the Banking Union if they join the euro, these countries should continue to stress the importance of maintaining financial independence between parent banks abroad and their branches and subsidiaries in Poland or the Czech Republic. These countries should promote their monitoring systems as effective methods of providing financial security.

№098: Inflation is Dead, but Not German Angst: How the Monetary Policy of the ECB Undermines the Culture of Stability

Author(s): Sebastian Płóciennik / Language(s): English

The recent expansionary course of the European Central Bank confuses Germany. Getting the southern members of the eurozone out of recession is important, but the price could be damage to domestic savings, fading enthusiasm for reforms in the eurozone and more lax approaches to inflation in the future. In addition, the anti-deflationary bias in the eurozone can mark a point from which the traditional German macroeconomic preferences stop pushing themselves forward. Berlin needs allies to defend those preferences and Poland seems to be among them.

The debt, the stock market and the state-owned enterprises. The sources of chaos on the Chinese financial markets

Author(s): Jakub Jakóbowski / Language(s): English

The government’s extensive programme for stimulating the economy has enabled China to maintain high economic growth after the global financial crisis in 2008. However, this success has come at the price of a number of negative economic phenomena and the consequences they have had are the major challenge for the government today. The vast programme of investments in infrastructure, construction and fixed assets, which has been the main source of economic growth over the past few years, has caused a rapid increase in China’s debt from 158% of GDP in 2007 to 282% in 2014. Along with the local governments in charge of implementing the programme, the Chinese sector of state-owned enterprises (SOEs) has been heavily burdened by the stimulation policy. The sector’s profitability has fallen, its indebtedness has increased and management problems have been revealed.

№298. Armaments duplication in Europe: A quantitative assessment

Author(s): Valerio Briani / Language(s): English

European countries are not only hollowing out their militaries with insufficient defence spending, but are also failing to spend their existing budgets wisely, according to Ivo Daalder, former US Ambassador to NATO. As a result, EU countries may not be able to meet impending security challenges. A key issue in this regard is the duplication of platforms (i.e. vehicles bearing weapons) and systems in the land, air and sea domains. The analysis shows duplication of a ratio of 3 to 1 in European programmes/platforms, compared with the US.

Свойства и характеристики SVAR-индикатора инфляционных ожиданий для Беларуси: последствия для монетарной политики

Author(s): Dzmitry E. Kruk / Language(s): English

This article explores empirical SVAR-based measure of inflation expectations for Belarus. Properties of this measure result in a diagnosis that inflation expectations in Belarus are highly volatile and unanchored. Level shifts in inflation expectations give a rise to a specific phenomenon of Belarusian monetary environment which is multiple regimes of functionality with severely different properties. This sensitively restricts the effectiveness of monetary policy in the country. Hence, stabilizing inflation expectations at a reasonably low level and anchoring them is argued to be an important precondition for effective monetary policy in Belarus.

The Mechanism of Adjustment to Changes in Exchange Rate in Belarus and its Implications for Monetary Policy

Author(s): Dzmitry E. Kruk / Language(s): English

This paper aims at visualizing adjustment mechanisms of the Belarusian economy to changes in exchange rate level and providing correspondent policy recommendations. The paper is organized as follows. Section 2 deals with methodological issues of equilibrium exchange rate estimation and its specifics for Belarus. Section 3 is devoted to analysis of the pass-through effect from nominal exchange rate to prices and its impact on the short-term equilibrium exchange rate. In fourth Section, main conclusions and policy recommendations are provided. Technical issues are presented in Annex A.

Структурные Сдвиги в Динимике Инфляции и Денежных Агрегатов в Беларуси

Author(s): Igor Pelipas / Language(s): Belarusian

More evidence that financial markets imposed excessive austerity in the Eurozone

Author(s): Paul De Grauwe,Yuemei Ji / Language(s): English

The decision by the ECB in 2012 to commit itself to unlimited support of the government bond markets was a game changer in the eurozone crisis. It had dramatic effects. By taking away the intense existential fears that the collapse of the eurozone was imminent, the ECB’s lender-of-last-resort commitment pacified government bond markets and led to a strong decline in the spreads of the eurozone countries.

Ratingul transparenței acționarilor băncilor din Moldova

Author(s): Natan Garștea / Language(s): Romanian

One of the main vulnerabilities of many Moldovan banks, with a strong imprint on the national economy, it depends on the transparency and low quality of the shareholders. Many times, this problem undermined the corporate governance of banking institutions, which resulted in the accumulation of toxic assets in the system and even the bankruptcy of 3 important banks in 2015 (Bank of Savings, Social Bank and Unibank). Therefore, with a view to solving the current banking crisis from the Republic of Moldova, it is absolutely necessary to increase the transparency and quality of bank shareholders. In this sense, actions are needed, both on the part of the NBM and on the part of the commercial banks. Not lastly, increasing the transparency of bank shareholders and presenting the real final beneficiaries it is also one of the recommendations and preconditions of the International Monetary Fund with a view to reform quality of the domestic banking sector and the signing of a potential memorandum. In turn, by this memorandum depends on the unlocking of external budgetary assistance from the other partners Development. We also believe that increasing the transparency of bank shareholders is, obviously, the primary prerogative of the NBM, but this will not be possible without the stronger motivation of banks for this process.

The Bank Recovery and Resolution Law. Bank Recapitalization Regime (bail-in) and State Guarantee

Author(s): Dumitru Pîntea / Language(s): English

The bail-in procedure is a relatively new one at global level. Actually, according to Directive 2014/59/UE, up until now no European financial institution was salvaged from bankruptcy through bail-in5. Considering the complexity of the Directive, the existing contraindications between European governments regarding the bail-in procedure, as well as the extremely strong lobby from international financial groups, certain reluctance in implementing the provisions is present in several European countries. However, the recent history notes the use of bail-in in the Cyprus banking crisis, and more specifically, in the recovery of the financial situation in two financial institutions with systemic impact.

What Factors Underpin Bank Disintermediation and How Can We Stimulate the Lending Activity?

Author(s): Dumitru Pîntea / Language(s): English

In order to identify the mechanisms/tools that could be used by NBM, banks and Government to overcome this lack of confidence and resume the lending activity, Expert-Grup committed to facilitate the dialogue between commercial banks, NBM, experts and other stakeholders. How we can stimulate the lending activity and bring back trust in the bank-customer relationship study was developed for this purpose1. This document focused on two subject lines. On the one hand, the study aims to identify the actual causes that fuel the bank disintermediation and the constraints that hinder the expansion of bank loans, on the other hand – to present solution how to foster this activity. In addition, in order to explore the actual situation, the Questionnaire for Assessing the Lending Activity was developed and sent to banks. This tool allowed forming a much clearer picture of the constraints affecting the demand and supply by types of loans. In the end, the results were discussed at a round table attended by representatives of commercial banks, Government, top management of NBM and other economic experts. The presence of all the stakeholders around the same table allowed to express the inside vision on this phenomenon and this note comes to synthesize and to totalise the results of the actions conducted by Expert-Grup in order to identify the factors underlying the bank disintermediation and the solutions regarding the stimulation of lending activity.

Long-term financial instruments: how to develop and why we need them?

Author(s): Eugen Ghilețchi / Language(s): English

Moldova, like other developing countries, faces a relatively short maturity of financial instruments. The average weighted maturity of state securities in circulation is only 6.5 months. The average weighted maturity of the portfolio of new loans granted throughout the banking sector in 2016 made up 29 months, while the average duration of loans granted to legal entities in developed countries is 58 months. Meanwhile, about 92% of the total new deposits attracted by local banks in 2016 have a term of up to 1 year. Thus, economy of the country is constrained by the lack of long-term credit instruments that would otherwise enable efficient long-term investments: real estate projects, infrastructure projects, etc. // The problem of maturity of financial instruments has two aspects: lack of the supply of instruments with long-term maturity and low demand from the population for such instruments. A basic precondition without which it is impossible to extend the maturity of financing is to ensure stable macroeconomic conditions.

5 mituri despre datoria externă

Author(s): Marina Soloviova / Language(s): Romanian

As part of the "Support Platform for the Republic of Moldova", at the first donors' conference held in April 2022 in Berlin, important financial support was announced in the form of loans and grants from various governments, European and international financial institutions, for mitigating the negative economic and social impact that Moldova suffered as a result of the regional security crisis. This July, the second edition of the conference took place in Bucharest, where the emphasis was placed on the consolidation of energy independence and assistance for reforms. In this context, messages of concern appeared in the public space, both sincere and manipulative, regarding the country's ability to assume new foreign debts. This article examines whether such fears are justified and disproves the main unfounded perceptions that exist on this subject. We also propose a series of recommendations for the Government and creditors aimed at ensuring judicious contracting and management of external loans.

Impact of the global financial crisis on local communities in Moldova

Author(s): Author Not Specified / Language(s): English

This study was commissioned to the Expert-Grup think-tank by the UNDP office in Moldova with the purpose to assess qualitatively, and to the extent possible, quantitatively, the impact of the global financial crisis and associated economic downturn on Moldovan local communities and identify possible responses that local communities can adopt to cope with the crisis. Expert-Grup has used a wide range of tools and techniques to conduct the research. Available statistical data have been analyzed quantitatively but qualitative research was important to get the quantitative analysis more “human development”-orientated.

Decoding the Kroll Report. Analysis on basic factors which led to the decapitalisation of Banca de Economii, Banca Sociala and Unibank

Author(s): Adrian Lupuşor,Vladislav Gribincea,Akexei Buzu / Language(s): English

This analysis has been drawn up in the context in which 3 banks of systemic importance and which constitute about 35% of the whole Moldovan banking system assets reached insolvency limit in late 20141. The Banca de Economii, Banca Sociala and Unibank (hereinafter, BEM, BS, respectively UB) have been placed under special administration of NBM at the end of November 2014, as a result of the dramatic downfall of the financial situation. Thus, the capital adequacy indicators have dropped below the minimum allowable level, and the share of nonperforming loans increased substantially (Figures 1 and 2).

POLITIČKA ANALIZA: Eurozona kao fiskalna unija – odavno potreban scenarij?

Author(s): Iain Begg / Language(s): Bosnian

"There is nothing to do with the transfer union!" - this has long been Germany's firm stance on the issue of the euro. But the fiscal union is being talked about more and more, not only as the most credible way out of the national debt crisis that is pressing the eurozone, but also as an inevitable and logical consequence of the monetary union. According to this reason, the fiscal union would make it much easier to reap the promised fruits of the common currency, and the gains would easily exceed all costs. Today, it cannot be denied that fiscal (or political) union is a scenario for the development of the Eurozone that must be taken seriously. The seemingly insurmountable obstacles in the way may be serious enough to make progress nearly impossible.1 However, given how many golden calves have been slaughtered since the fall of 2009, it may only take one or two more crises for the debate shifts from the question of whether a fiscal union will be established to the question of how it will be done. The aim of this essay is to present the arguments in favor of a tighter fiscal union as a welcome, rather than ominous, solution to the problems that have plagued the common currency in the last two years. The essay attempts to construct a plausible scenario that describes what such a fiscal union could look like, considering the arguments for and against and possible costs and benefits.

Euro v zemích visegrádské čtyřky

Author(s): Katarína Lokšová / Language(s): Czech

The countries of the Visegrad Group already committed themselves to the adoption of the common European currency by signing the Treaty of Accession to the European Union (April 16, 2003 in Athens). Unlike Great Britain or Denmark, they did not negotiate the so-called an opt-out clause that would release them from this obligation. However, the timing of the accession process is fully within the competence of individual states. Despite the seriousness of this decision, it initially seemed that the Czech Republic, Slovakia, Poland and Hungary started a race to see who would finish first. Over time, however, Central European governments, with the exception of Slovakia, postponed the introduction of the euro until they reached the current situation. Currently, apart from Slovakia, which has already introduced the euro, none of its neighbors is planning to adopt the common currency in the near future.

České národní zájmy po Fiskální smlouvě?

Author(s): Vít Dostál,Arnošt Marks / Language(s): Czech

Since the signing of the Fiscal Treaty at the beginning of March, which was widely discussed in the Czech Republic, the European Union and its member states have undergone further dynamic development. There were presidential and parliamentary elections in France and double parliamentary elections in Greece. Spain and Cyprus got into economic difficulties. Further steps were discussed at the European level in the form of pro-growth measures, the banking union, and more generally formulated theses about the necessity of Europe began to come from Germany at a faster pace.

Nestandardní měnová politika Evropské centrální banky

Author(s): Oldřich Dědek / Language(s): Czech

The professionalism and prestige of central banks is formed not only in normal times when performing routine tasks of monetary policy, but also, and perhaps above all, when handling extraordinary events with extraordinary means. Therefore, we cannot leave aside the behavior of the European Central Bank (ECB) with its unconventional, unorthodox or, according to the terminology of the ECB itself, non-standard procedures that were deployed against the crisis. The exceptional period of the crisis years caused the monetary policy of the ECB to go beyond the usual terrain in which it operated, and face head-on problems for which standard solutions were not prepared. Compared to other central banks, the years of crisis were doubly difficult for the ECB, because in addition to the financial and economic eurozone, an unprecedented debt crisis also plagued it.

Diagnosticul deprecierii leului moldovenesc

Author(s): Alexandru Fală / Language(s): Romanian,Moldavian

The Republic of Moldova "started with the left" in 2015. The upheaval of the foreign exchange market represents only a sequence with a greater intensity within a systemic trend of depreciation of the Moldovan leu (MDL). In turn, the weakening of the national currency that began in the last quarter of 2014 and continues to date indicates that the national economy has entered a phase of compression. At the same time, the weakening of the banking sector, caused by the explosion of dubious transactions in recent years, as well as the deterioration of the regional economic situation, which together with other determinants affect the exchange rate of the national currency, will influence the degradation of the socio-economic indicators of the Republic of Moldova during 2015.