Daily Archives: March 6, 2012

Ralph Atkins

Another milestone has been reached in European Central Bank history.

Following last week’s three-year longer-term refinancing operation, the size of the ECB’s balance sheet has exceeded €3trn for the first time (ECB, in this context, actually means “eurosystem” — the network of eurozone central banks of which the ECB is part). Its latest financial statement shows a €330.6bn increase in assets compared with last week, which was more or less the same as the increase in lending to eurozone banks.

As such, the ECB has drawn further ahead of the Federal Reserve in terms of the overall size of its balance sheet (see chart below). Read more >>

Claire Jones

Are US equities about to get a boost from a surprising source?

The Bank of Israel this month joined the Swiss National Bank and the Hong Kong Monetary Authority in investing in US stocks, initially setting aside 2 per cent of its $77bn reserves stockpile into share indices.

However, even though the amount could eventually climb to 10 per cent of its reserves, this hardly the sort of news that will move a market as big as US equities, for which $7.7 billion is small change.

But if other central banks, which collectively manage $10.7trn-worth of reserves, follow suit, then the impact could be significant.  Read more >>

Ralph Atkins

What do central bankers do when they are worried? They increase their reserves.

Tuesday’s Bild Zeitung reports the Bundesbank will next Tuesday declare a sharp drop in profits after increasing provisions against risks on its balance sheet. The amount transferred to the German finance ministry would fall below €1bn, Bild said. That would be less than half the €2.2bn profit reported for 2010 – which was around half the previous year’s figures, again because of higher provisions.

The Bundesbank is not confirming Bild’s report, but it sounds plausible. Jens Weidmann, Bundesbank president, told Handelsblatt in an interview last month that the rising risks borne by Germany’s central bank would require “more rather than less provisions. That will have an equivalent impact on the level of Bundesbank profit.”  Besides significantly higher provisions this year would fit with the Bundesbank president’s increasingly-cautious rhetoric more recently. Read more >>