Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Banks, Capital Markets, Financial

US money market funds warm to eurozone

Posted on February 28, 2013

The amount of money being allocated by US money markets funds to eurozone banks hit the highest level for more than a year, in a sign of how much investor sentiment towards Europe has thawed in the wake of central bank action.

New figures from Fitch Ratings show that as of the end of January, the exposure to eurozone banks by the 10 largest US prime money market funds hit 14.5 per cent of assets under management, the highest level since October 2011 and a 90 per cent jump on a dollar basis since the low-point last June.

    For the seventh consecutive month the funds increased their allocations to banks in France, making it the largest single-country exposure in the eurozone for the second month in a row.

    US money market funds have traditionally been a key source of short-term dollar funding for banks across Europe but in 2011 they were one of the first investor groups to withdraw as the crisis in the eurozone escalated.

    Their return to the eurozone banking sector is a good indicator of the renewed confidence in the region in the wake of intervention by the European Central Bank last year.

    A promise by Mario Draghi, president of the ECB, to do “whatever it takes” to save the euro and the launch of a government bond-buying programme by the ECB aimed at ailing eurozone countries last September encouraged international investors back to the region and triggered a months-long market rally.

    Robert Grossman, head of macro credit research at Fitch, said there were indications that US money market funds were becoming less risk averse. Funds are more willing to hold unsecured debt and, in the case of French banks, more likely to hold longer-duration certificates of deposit than time deposits, which typically mature overnight or within a few days.

    Despite the steady upward trend, Mr Grossman said it was unlikely that the amount allocated by US money market funds to eurozone banks would fully regain their May 2011 levels, when nearly a third of their assets under management were invested in the region’s financial institutions.

    Banks were shocked by the speed and scale of the withdrawal of US money market funds in 2011. Since then, faced with regulatory pressures and weak growth, a number of lenders have offloaded or shrunk parts of their business and become less reliant on US money market funding.

    Recent data from the Bank for International Settlements show that French banks cut their international lending across all currencies by more than 25 per cent between June 2011 and the end of September 2012.

    BIS figures also show that Japanese banks over the same period increased their overseas lending. That shift is also reflected in the US money market funds’ allocations – two out of the three largest single bank exposures by the funds were to two Japanese banks, Mitsubishi UFJ Financial Group and Sumitomo Mitsui.