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Ravi Menon: Covid-19 – we need more connectivity, not less

20 August 2020
Knowledge Base

Ravi Menon, Managing Director of the Monetary Authority of Singapore, recently gave a keynote speech via video conference from Singapore. COVID-19 has triggered the sharpest contraction in the global economy since the Great Depression of the 1930s. We can expect a gradual recovery from the third quarter onwards as countries re-open their economies. But there is considerable uncertainty about the strength and durability of this recovery. The trajectory of the economy will be largely shaped by the trajectory of the pandemic – which is itself a significant source of uncertainty. The risk of secondary waves of infection is not trivial. Those countries that have put in place strong safe management measures and a robust regime of testing, contact tracing, and swift isolation of infected persons, are more likely to minimise a second outbreak of infections and sustain their economic recovery.  Continue reading…

ECB extends recommendation not to pay dividends until January 2021 and clarifies timeline to restore buffers

12 August 2020
Knowledge Base

The European Central Bank (ECB) recently extended its recommendation to banks on dividend distributions and share buy-backs until 1 January 2021 and asked banks to be extremely moderate with regard to variable remuneration. It also clarified that it will give enough time for banks to replenish their capital and liquidity buffers in order not to act pro-cyclically. This updated recommendation on dividend distributions remains temporary and exceptional and is aimed at preserving banks’ capacity to absorb losses and support the economy in this environment of exceptional uncertainty. This uncertainty makes it difficult for banks to accurately forecast their capital positions. As demonstrated by the vulnerability analysis the level of capital in the system could decline significantly if a severe scenario were to materialise. Continue reading…

Lockdown or Knock-out? Part 4: Is the corona detector a solution?

31 July 2020
Knowledge Base

by Michel Klompmaker

Let’s start with the facts. Last week was the worst week to date, with 1.794,124 registered infections. Many politicians seem to be turning a blind eye to this reality and we should fear the fact that global figures, especially in Asia and Africa, are not correct. After all, not all cases of infections were registered in a reasonably civilised country such as the Netherlands. Meanwhile, EU Commissioner Gentiloni says “It is time to pump new confidence and new money into our economies in this critical situation.” There are now more than 17 million registered coronavirus patients worldwide and the EU has adjusted its economic expectations for the EU countries downwards. Continue reading…

Lockdown or Knock-out? Part 3: In the USA and Brazil, Covid-19 inexorably strikes

20 July 2020
Knowledge Base

by Michel Klompmaker

The WHO has reported a record number of new infections worldwide in recent days. The health organisation reported last Saturday that 224,260 new infections worldwide were registered in one day. And then we are only talking about the cases known to WHO. It can be guessed that the situation is even more serious, because even in a civilised country like the Netherlands, many infections were simply not reported. But what does this mean for the global economy? Let’s take a closer look at two major players from across the ocean, then it will soon be clear that the worst is yet to come. Most reports from the past few days come from the United States and Brazil. Together these countries account for almost half of all new infections worldwide, but many people in India have also tested positive for the virus. A few figures: The number of new worldwide registered new infections in the week of June 29 – July 5 was 1,230,000. Last June, the WHO recorded a record number of new infections of 5,303,000 compared to more than 2,300,000 last April. Continue reading…

Lockdown or Knock-out? Part 2: Texas and Trump

13 July 2020
Knowledge Base

by Michel Klompmaker

In many parts of the world, the coronavirus has been ruthless. This is also the case in the southern states of the USA. Viewed from a Western European perspective, the pandemic appears to be somewhat extinguished, but this is by no means the case from the perspective of the coronavirus itself. Very worrying is the recent increase in the worldwide number of registered infections from about 10 million on June 27 to more than 13 million on July 12. In part two of our series “Lockdown or Knockout?” we take a moment to reflect on what has recently happened in Texas and in passing we take the opinion of a German virologist from the University of Bonn. Continue reading…

Lockdown or Knock-out? COVID-19: Are we going to play Russian roulette now?

01 July 2020
Knowledge Base

by Michel Klompmaker

We have decided to publish a series of articles entitled “Lockdown or Knock-out?” on this platform. We will discuss and comment on the current measures taken by the various governments, economic forecasts from experts and expectations of politicians from the perspective of risk & compliance. We are just going to start and as long as there is no vaccine for the coronavirus, we will regularly discuss the issues that are worthwhile. Today we start with the recent news about lending to business customers in the Netherlands. On the one hand, we see a decrease in the number of infections and deaths, but what does this actually mean for the economy if we put it in a somewhat broader perspective? Is there reason for optimism? We would like to spread the optimistic sound, but we cannot ignore the facts and that they are not good. Did circumstances leave no other choice or have the banks and the responsible minister switched to a form of Russian roulette? ING announced yesterday that it expects to triple the number of bankruptcies in the Netherlands next year. And in the meantime, since the outbreak of the corona crisis, the Dutch banking sector has provided additional credit of around EUR 14 billion. As a result, the percentage of gross national product corporate debt (IMF source) has risen again to over 150 percent. For the critical down-to-earth reviews, who like to make dismissive statements about the financial policy of the so called “garlic countries”: Italian corporate debts are in percentage at over 60 percent of the gross national product. Continue reading…

Mitigating risks and increasing resilience towards infectious diseases

15 May 2020
Knowledge Base

Past events in history have shown that another pandemic may come about some time in the near future. However, there are measures that can be taken to reduce the risks as stated by a newspaper by the Institute of Economic Affairs. As the human population continues to increase, so too will viruses and diseases. Today, there are quite a few outbreaks that have remained and settled permanently among humans, though they have not quite reached the extent of the Covid-19 pandemic. However, when comparing Covid-19 to other major viruses and diseases that have spread, it is relatively moderate. Adding on to a growing population, economic integration, long supply chains, traveling and a change in how health care systems are operated and structured have all made the impact of an infectious disease significantly greater compared to 50-60 years ago. Continue reading…

Practical steps to ensure a bank’s business continuity during a pandemic

21 April 2020
Knowledge Base

by Sandra Galletti & Dr. Steven Goldman

This article identifies some strategies and recommendations that banks can utilize to minimize the impact on bank operations of the Covid-19 pandemic. A pandemic* (1) is a very particular and very terrible type of crisis. Unlike other crises such as earthquakes or cyberattacks which impact the bank’s infrastructure, pandemics directly impact its people – employees, vendors, suppliers – who might be unable to perform their jobs. Furthermore, customers cannot do business in usual ways. Unlike other crises such as technological breakdowns or security threats to which there is a reasonable expectation of resolution within a certain time frame, a pandemic’s duration can be prolonged; its severity brutal. Continue reading…

The impact of the Covid-19 virus on airlines

15 April 2020
Knowledge Base

It is clear that one of the most severely affected sectors is the global aviation sector. How will this go and how far will the government’s financial aid go to keep the strategically important airlines figuratively and literally in the air? Not to mention the measures that are likely to come our way. A valid passport and a paid flight ticket will no longer be a guarantee that you can get on board a flight. And will half of the passenger seats disappear to the cargo hold soon? Food for thought for trend watchers, doomsday prophets and economists, but for now the hard reality is that about 90 percent of the fleet of many airlines is parked neatly on the ground. We will go through the situation with you of any airline we know, KLM, but what is mentioned below may apply to any other airline. Continue reading…

Photo: https://pixabay.com/

Introductory statement by the ECB

13 September 2019
Knowledge Base

ECB’s President Mario Draghi and Vice President Luis de Guindos announced that: “Based on our regular economic and monetary analyses we have conducted a thorough assessment of the economic and inflation outlook, also taking into account the latest staff macroeconomic projections for the euro area. As a result, the Governing Council took five decisions in pursuit of its price stability objective.”

Continue reading…