Euro

The reform of the reference rates in the euro area to adapt to new regulations, promoted by the European Central Bank (ECB) along with other authorities, is taking shape. On October 2, the ECB began publishing a new overnight rate: the €STR.

The expiration of ECB Vice-President Vítor Constancio's term in June and the subsequent appointment of Luis de Guindos as his successor marked the beginning of the European Central Bank’s senior management renewal. But, how are ECB executive board members appointed?

The European Central Bank unveiled today the new €100 and €200 notes, which will be introduced in May 28, 2019. These notes complete the Europe series, the second since the introduction of the euro. The new notes, featuring security components that make them harder to counterfeit, are the highest-value denominations after the phase out of the €500 note.

The European Union is already readying itself for the possible exit of the United Kingdom from the European club without an agreement between the two sides. Although no scenario has been ruled out, Miguel Jiménez, the chief economist for Europe at BBVA Research, argued in a recent article published in El País that “a no-deal exit in March, with no transitional period, is no longer inconceivable”. In his opinion, this would be the worst possible outcome of Brexit.

The European Council meeting held on June 28 and 29 took some steps toward euro reform; conclusion of agreements will likely occur at the next meeting in December. Although it was hoped that the summit would address key questions like the budget proposed by Germany and France, ultimately the European partners chose to adopt a minimum agreement. The agreement includes measures such as support for a banking resolution fund, but the reform of the euro was deferred.

The Council of Europe will hold its June summit at a complex time with significant challenges on economic, political, and social issues. As BBVA Research points out, it also represents an opportunity to further strengthen the EU's Economic and Monetary Union. As such, the reform of the euro will be one of the decisive elements, although also one of the most controversial.

The European Commission has presented its proposal on developing a new class of low-risk assets in the form of sovereign bond-backed securities (SBBS). The new security, whose goal is to enhance diversification and reduce sovereign bond risk in the euro zone, was included in the European Commission’s roadmap. The plan unveiled in December 2017 aims to deepen European Economic and Monetary Union.

On Tuesday, BBVA entered the markets with a €1.5 billion issue of Senior Non-Preferred Debt (SNP) with a five-year term and a Floating Rate Note format. Thanks to strong investor demand, the issue closed with a coupon of three-month Euribor plus 52 basis points. The operation was the lowest-priced issue of senior non-preferred debt by a Spanish issuer.

BBVA Research maintains its forecasts for Spain’s GDP growth in 2017 and 2018 at 3.1% and 2.5%, respectively. In addition, it expects that the economic recovery will continue in 2019  (with a 2.3% increase in GDP) and that the improvement in the economy will translate into wage growth. BBVA Research’s latest Spain Economic Outlook was presented today by Jorge Sicilia, Chief Economist of the BBVA Group and Director of BBVA Research; Rafael Doménech, Head of Macroeconomic Analysis at BBVA Research; and Miguel Cardoso, Chief Economist for Spain and Portugal.  If these forecasts prove to be correct, Spain´s unemployment rate could drop to 13.4% by end of 2019, which would imply the creation of 860,000 jobs over the next two years.

In late 2017, the European Commission established a roadmap for deepening the European Economic and Monetary Union (EMU). The plan represented yet another step towards the economic integration of the EU, during a political year marked by the elections in the Netherlands, France and Germany and the Brexit negotiations with the United Kingdom. One of the most far-reaching proposals is transformation of the current European Stability Mechanism (ESM) into a European Monetary Fund (EMF). The year 2018 opens with the challenge of implementing this proposal.

The use of cash as method of payment has been declining in recent years, in favor of digital methods and credit cards. Last month we saw another example in the Hawkers sunglass brand, which will not be accepting cash payments in its new Madrid store.

According to BBVA Research’s latest Spain Outlook report, 2017 will cap off Spain’s three-year run of GDP growth at rates above three percent. Recovery will continue in 2018, but at a slower pace, in an environment marked by rising uncertainties. The report was presented today by Jorge Sicilia, Chief Economist of BBVA Group and Head of BBVA Research, Rafael Doménech, Head of Macroeconomic Analysis of BBVA Research and Miguel Cardoso, Chief Economist Spain and Portugal. Considering this scenario, BBVA Research has downgraded its GDP growth forecasts for 2017 and 2018 to 3.1 and 2.5%, from 3.3% and 2.8% in July.

Stock market indices can be described as baskets of shares. They are calculated based upon the average prices of a number of shares selected from a market or a particular sector. Their performance allows the investor to know the evolution and trends in the market. At the same time, indices serve as a reference for investors who specialize in funds or portfolios of shares. Following is a list of the principal stock indices on the world market.

The recent elections in Germany have ended this year’s electoral cycle in Europe. With euroscepticism weighing in at the ballot box, it’s now up to the European Union to bring its institutions closer to the continent’s citizens, according to José Manuel González-Paramo, Executive Director of BBVA, speaking at a conference on “The New Europe: Challenges and Opportunities” organized by ADEIT.

The EBA recently completed its latest monitoring exercise to assess EU Banks’ capital, leverage, and liquidity ratios assuming full implementation of the CRD IV-CRR/Basel III framework.  Overall, the results show that, between June and December of 2016, there was an improvement in both CET1 capital and liquidity ratios.

For months, European authorities have been mulling over a crucial issue for the health of the financial sector: reducing the stock of non-performing assets that have been piling up in banks’ balance sheets during the years of financial crisis.  The creation of a bad European bank is one of the alternatives that are being considered to solve the problem.

On March 25, 1957, representatives from the six founding countries of the European Community put their signatures to the Treaties of Rome, consisting of blank pages due to a problem with the printing. Sixty years on, Europe "is an enormous success", but today it also has "blank pages still to be filled in" for the project to continue with its process of completion. This was the metaphor used by Jose Manuel González-Páramo, the CEO of BBVA, to describe the current situation of the EU.

BBVA has participated in a public hearing in the European Parliament, organized by the Committee on Legal Affairs (JURI). The aim of the hearing was to allow stakeholders to share their insights into the directive’s insolvency proposal with the MEPs. BBVA was the only representative of the financial sector, a fact that attests to the bank’s relevance for EU institutions on these matters.

Once more this year, the symposium of the most important central bankers in the world was held in Jackson Hole from August 24 to 26. Under scrutiny were Janet Yellen, the Chair of the U.S. Federal Reserve and Mario Draghi, President of the European Central Bank. Their words gave no indications of any changes with respect to the future of monetary policy.

For every 100 euros European citizens earn, they pay an average of 50 euros in taxes and contributions.  Of the amount they pay in taxes, only 1 euro is devoted to financing the budget of the European Union.  Thus, in total, Europe manages a budget equivalent to 1% of the gross national income of its Member States.  However, the way this money is invested has a direct impact on the lives of Europeans.

The current climate of change inside and outside Europe has led the European Commission to reflect on the future of its public accounts.  In the document entitled  'The Future of EU finances', the Commission analyzes the current configuration of the budget and its future options. This document is part of a series of reflections brought about by the White Paper on the future of Europe, which set forth the different challenges and scenarios the EU will be facing through 2025.

Mario Draghi did not surprise anyone yesterday. As expected, the European Central Bank (ECB) unanimously decided to leave interest rates unchanged. He also did not announce any immediate changes to the asset purchase program. However, he did offer some clues as to the direction the ECB will follow after the summer.  As BBVA Research notes in its ECB Watch report, the discussion on gradually tapering QE (Quantitative Easing, the ECB´s asset purchase program) will take place in the fall – most likely in September.

Where will the future seat of the EBA, the European Banking Authority be located? As of today, the only thing clear is that, as a result of the brexit, the institution will have to pass the torch to another EU city. The city chosen to host this European institution, responsible for ensuring the effective and consistent oversight and regulation of the European banking sector, will be announced soon.

As the markets expected, at its June meeting the European Central Bank (ECB) closed the door on further interest-rate cuts and adopted a more neutral stance on risks, although maintaining caution. Despite the fact that the institution has not yet given signs of taking a step to exit the current monetary policy, the ECB Watch report published by BBVA Research suggests that in September it may announce a slowdown in asset purchases starting in 2018.

BBVA Executive Director José Manuel González-Páramo predicts that the European Central Bank’s (ECB) monetary policy will normalize next year. He estimates that the ECB will announce a slower pace for asset purchases in the fall. “I wouldn’t be at all surprised if we saw the first interest rate hike at the end of 2018,” he said, during the Círculo de Economía meeting in Sitges.

BBVA’s has issued perpetual debt eventually convertible into shares at the cheapest price of all operations launched by Spanish issuers for this type of product. The issuing of €500 million of contingent convertible bonds, or 'CoCos' (also known as AT1) took place at a very attractive price, with a coupon of 5.875%.

On April 4 the new €50 note will enter into circulation. This new note, presented on July 5, 2016 by the European Central Bank will be phased in gradually and will coexist with the preceding model, which will remain legal tender. Thus, the ECB completes another step in the rollout of the Europa series, and follows the €5, €10 and €20 notes, which have already been issued. Reinhold Gerstetter, independent banknote designer was selected to refresh the design of the notes.

The European Central Bank (ECB) yesterday has announced the outcome of the final auction of TLTRO-2 (targeted long-term refinancing operations).  These long-term financing operations aim to stimulate lending in the euro zone. The demand for additional liquidity has reached 233.47 billion euros, far above the amount from previous auctions and market expectations.

Mario Draghi did not announce any new changes in monetary policy at Thursday’s press conference, but the latest European Central Bank (ECB) meeting did lead to some updates. On the one hand, the ECB is more optimistic about economic growth. On the other, it is raising its 2017 inflation forecast to 1.7% (from 1.3% in December) due to growing energy prices, but it barely changed its core inflation projection. And last, but not least, it added some nuances to its wording, which could be the prelude to changes in its monetary policy,  BBVA Research notes in its ECB Watch report.

The U.K. is convinced that London will continue to be Europe's fintech capital and a global financial center after Brexit. But other European capitals are hoping to take its place. It will all depend on the long negotiation about to begin between the EU and the U.K.

Last Thursday, BBVA launched its first public debt issue of 2017: A 1 billion euro 5-year senior unsecured bond. The bank completed the transaction with the lowest coupon in history (0.625%) for this type of product, with this maturity, for a Spanish issuer.