ECB

ECB confirms remuneration ceiling for euro area government deposits and adjusts remuneration of other non-monetary policy deposits

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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

Key Points: 
  • Stock market development and familiarity (language and distance) are considered key determinants for home bias.
  • The literature neglects however that investors often invest in foreign funds domiciled in financial centers.

Isabel Schnabel: The future of inflation (forecast) targeting

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Thursday, April 18, 2024
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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

Key Points: 
  • Stock market development and familiarity (language and distance) are considered key determinants for home bias.
  • The literature neglects however that investors often invest in foreign funds domiciled in financial centers.

Luis de Guindos: Presentation of the ECB Annual Report 2023 to the Committee on Economic and Monetary Affairs of the European Parliament

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Thursday, April 18, 2024
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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

Key Points: 
  • Stock market development and familiarity (language and distance) are considered key determinants for home bias.
  • The literature neglects however that investors often invest in foreign funds domiciled in financial centers.

Isabel Schnabel: From laggard to leader? Closing the euro area's technology gap

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Thursday, April 18, 2024
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Key Points: 

Forecast processes and methodologies: results of the 2023 special survey - Survey conducted on the occasion of the 25th anniversary of the ECB SPF

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Thursday, April 18, 2024
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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

Key Points: 
  • Stock market development and familiarity (language and distance) are considered key determinants for home bias.
  • The literature neglects however that investors often invest in foreign funds domiciled in financial centers.

The ECB Survey of Professional Forecasters - Second quarter of 2024

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Thursday, April 18, 2024
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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

Key Points: 
  • Stock market development and familiarity (language and distance) are considered key determinants for home bias.
  • Second, the explanatory power of plausible home bias determinants is lower than previously documented.

Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD) - March 2024

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Thursday, April 18, 2024
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Survey on credit terms and

Key Points: 
    • Survey on credit terms and
      conditions in euro-denominated
      securities financing and OTC
      derivatives markets (SESFOD)
      March 2024
      The Eurosystem conducts a three-monthly qualitative survey on credit terms and
      conditions in euro-denominated securities financing and over-the-counter (OTC)
      derivatives markets.
    • The survey questions are grouped into three sections:
      1.

      counterparty types ? credit terms and conditions for various counterparty
      types in both securities financing and OTC derivatives markets;

      2.

      securities financing ? financing conditions for various collateral types;

      3.

      non-centrally cleared OTC derivatives ? credit terms and conditions for
      various derivative types.

    • The survey focuses on euro-denominated instruments in securities financing and
      OTC derivatives markets.
    • For securities financing, the survey refers to the
      euro-denominated securities against which financing is provided, rather than the
      currency of the loan.
    • Reporting institutions should report on their global credit terms, so the survey is
      aimed at senior credit officers responsible for maintaining an overview of the
      management of credit risks.
    • SESFOD March 2024

      2

      March 2024 SESFOD results
      (Review period from December 2023 to February 2024)
      The March 2024 Survey on credit terms and conditions in euro-denominated
      securities financing and OTC derivatives markets (SESFOD) reports qualitative
      changes in credit terms between December 2023 and February 2024.

    • Looking at credit terms and conditions for the various types of non-centrally cleared
      OTC derivative, initial margin requirements increased slightly for all derivative types.
    • Survey respondents reported mostly unchanged conditions as regards the maximum
      amount of exposure and the maximum maturity of trades.
    • Moreover, they reported that the volume of valuation disputes had
      declined for all derivative types except credit derivatives.
    • The survey asked respondents to compare credit terms
      and conditions on the cut-off date for the March 2024 survey round (i.e.
    • Compared with the
      previous year, overall terms and conditions for securities financing and OTC
      derivatives transactions had eased somewhat across all counterparties, while credit
      standards for funding secured against various types of collateral and non-price terms
      in OTC derivatives markets were generally tighter.
    • Credit terms and conditions for various counterparty types in both
      securities financing and OTC derivatives markets
      Overall credit terms and conditions eased between December 2023 and
      February 2024 (Chart A).
    • The overall easing of conditions masked some
      heterogeneity between price and non-price terms, and across different types of
      counterparty, though reported changes were relatively small.
    • Credit terms and conditions for various types of non-centrally
      cleared OTC derivative
      Initial margin requirements increased slightly for all derivative types.
    • Meanwhile, they reported
      unchanged conditions for credit derivatives referencing sovereigns and commodities,
      as well as a slight deterioration for credit derivatives referencing corporates and
      structured credit products.
    • The survey asked respondents to compare the credit terms and conditions observed
      on the cut-off date for the March 2024 survey (i.e.
    • Compared with the previous year, overall terms and conditions for securities
      financing and OTC derivatives transactions had eased somewhat across all
      counterparties.
    • Survey respondents reported that non-price credit terms in OTC derivatives
      markets had tightened somewhat for almost all types of derivative relative to
      the previous year.

Is home bias biased? New evidence from the investment fund sector

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Key Points: 

    A new measure of firm-level competition: an application to euro area banks

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    Thursday, April 18, 2024
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    Abstract

    Key Points: 
      • Abstract
        This paper extends Boone (2008) by introducing a competition measure at the individual
        firm level rather than for an entire market segment.
      • We apply this extended Boone indicator to individual bank-level competition
        in the loan market in the four largest euro area countries and Austria.
      • Our new measure of firm-level competition enriches and complements
        other competition measures and provides a promising starting point for future market
        power analyses.
      • The only measure among non-structural measures that is based on the
        concept of competition as a process of rivalry is the Boone (2008) indicator.
      • We introduce
        a new performance measure of competition by extending the Boone indicator to the
        individual firm level.
      • Introduction
        The ability to reliably measure competition is valuable to researchers, analysts, and
        policymakers, especially antitrust authorities, financial supervisors, and central banks.
      • One broad
        category of indicators often used to measure competition are structural competition
        measures, such as static concentration measures, and dynamic measures, e.g., entry and
        exit rates.
      • Out of these measures, the only measure based on the
        concept of competition as a process of rivalry is the Boone indicator.
      • This study introduces a new performance measure of competition by extending the
        Boone indicator to the individual firm level.
      • It thus measures the
        increase in profits in percent of one percentage point increase in efficiency, with marginal
        costs as measure of efficiency.
      • We extend the theoretical
        underpinning of the measurement of competition for the entire market of Boone (2008) by
        a new measure of individual firm-level competition.
      • A concern of the literature is the gap
        between the practical application and the theoretical framework of Boone (2008).
      • We introduce within the same theoretical
        framework a new measure of competition on firm level, the MRP.
      • Our new
        measure significantly augments the antitrust evaluative framework by shedding light on
        whether a merger results in a less competitive market.
      • Our novel indicator focuses on
        firms? incentives to enhance their relative efficiency, as manifested in the elasticity
        between relative profits and efficiency.
      • However, an inefficient firm that is foreclosed could be more
        competitive than the larger efficient firm that relies on its scale economies.
      • Our new metric of competition unveils
        banks? ability to influence their profitability in the short term by cutting costs relative to
        their peers.
      • The new MRP indicator provides the ability to assess the impact
        of individual banks? competitiveness on their interest rate-setting behaviour in loan
        markets.
      • Incorporating this information promises a more refined understanding of the impact and
        timing of monetary policy rates changes on the real economy.
      • Section 3 introduces within the Boone
        (2008) theoretical framework our new measure of individual firm-level competition,
        including the interpretation of the MRP.
      • Section 4 provides an application of our new
        ECB Working Paper Series No 2925

        6

        individual firm-level competition measure to the loan market.

      • The StructureConduct-Performance paradigm (SCP) provides a traditional framework in the field of
        industrial organization for analysing competition behaviour in markets.
      • Concentrated
        markets ease the possibilities to collude implicitly or explicitly and therefore concentrated
        markets result in higher prices and profits.
      • For example, a tougher competition
        setup may lead to a reallocation of market shares, potentially forcing some firms to exit
        the market.
      • This approach gives firms? strategic behaviour
        central stage and focuses on the strategic interaction on prices and quantities, known as
        conjectural variation.
      • Another measure from
        this strand of literature is the H-statistic developed by Panzar and Rosse (1987).
      • The only competition measure from this performance literature where competition is the
        outcome from a process of rivalry is the Boone indicator.
      • A continuous and monotonically increasing relationship exists between
        RPD and the level of competition if firms are ranked by decreasing efficiency.
      • (2013) compare the Boone indicator with the price-cost margin
        and conclude that the profit elasticity is a more reliable measure of competition.
      • The high
        elasticity of profits to efficiency unequivocally indicates that the high market shares and
        therefore high profits are due to high efficiency.
      • A firm that quickly passes changes to the input prices is seen as a price
        taker with little market power.
      • Indicators of competition tend to measure different phenomenon and may provide
        conflicting messages, as reported for European banking by Carbo et al.
      • Application 2: Test the ?quiet life? and related market structure hypotheses using the
        MRP as competition or market structure measure.
      • Data
        Our application to individual bank-level competition in the euro area loan market uses
        balance sheet and income statement data from the Moody?s Analytics BankFocus for the
        calendar years 2013-2020.
      • As such, most publications
        on competition in the euro area includes the largest four member states.
      • Due to these restrictions the database was reduced to an unbalanced panel of up to 1862
        banks (depending on the year) from five euro area countries.
      • Application 1: Measure bank competition using MRP
        Looking at the distribution of the MRP for individual banks (Fig.
      • A similar finding for the four largest euro area countries as a group is
        reported in Carbo et al.
      • Application 2: Test of market structure hypotheses using MRP
        Our new measure of individual-bank competition can be used to test market structure
        theories.
      • Euro area banks? market power,
        lending channel and stability: the effects of negative policy rates, European Central Bank
        Working Paper, 2790 (February).
      • A
        new approach to measuring competition in the loan markets of the euro area, Applied
        Economics, 43 (23), 3155?3167.
      • Impact of bank competition on the interest rate pass-through in the euro area, Applied
        Economics, 45 (11), 1359?1380.

    Central bank digital currency and monetary policy implementation

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    Thursday, April 18, 2024
    E41, Central bank digital currency, Atlantic Council, Research Papers in Economics, Remuneration, Norges Bank, People's Bank of China, Policy, Central Bank of Myanmar, Bank for International Settlements, Blog, Financial innovation, Sveriges Riksbank, Bank of Canada, Mechanics, Journal of Monetary Economics, Insurance, Bank of England, E42, Corridor, Quarterly Journal of Economics, Report card, Frankfurt, Appetite, American Economic Association, Digital rupee, Rosolin, RBI, PDF, Private, ECB, Committee, Inden, North Rhine-Westphalia, Bank, Canadian International Council, Social science, JEL, JMD, ECCB, Digital, Journal, Research, POC, European Central Bank, ENaira, M.A, Monetary economics, Section 5, Government, ISSN, The, Central bank, Finance, Buffer, Parliament, CBN, EONIA, Asset, ATM, Risk, International Monetary Fund, Interbank, Section 4, Ministry, Press release, Section 3, Human, Waterfall, Cryptocurrency, Economy, Swiss National Bank, PIB, Section 2, Conference, Reserve Bank, Reserve Bank of India, GBP, Progress, Road, American Economic Review, CBB, Digital currency, Agur, European Commission, International Settlement, Constraint, Money, Community business development corporation, City, Equivalence, Eligibility, Ministry of Finance, Report, Control, Civil service commission, EUR, Uncertainty, Eastern Caribbean Central Bank, Abadi, Rest, Reproduction, Fintech, IMF, Federal Reserve, LCR, Data
    Key Points: