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CME Group Market Insights: Wait Continues for Centralized Supervisor of European Banking System

LONDON, Jan. 23, 2014 /PRNewswire/ -- A new research report -- Watching European Bank Reform -- from CME Group assesses the prospects for European banking reform and examines the barriers and opportunities ahead. The stagnant growth environment in the Euro-zone is still reflected in GDP numbers, with 2013 estimated year-over-year GDP growth of -0.4%, showing only a modest improvement from the -1% posted in 2012 and forecasted growth for 2014 of 1% provides a hint of optimism.

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This new report looks at the following three factors to watch in 2014:


  • There exist two cyclical effects which lace the sovereigns and their national banks together: 1. Without a supranational bank regulator and supervisor, member states have kept individual responsibility for and oversight of their national banking systems; 2. Large proportions of domestic government debt are held on the balance sheets of many European banks, so the solvency of the government falls directly onto that country's banks.

High-Yield Debt Issuance

  • Given the Euro-zone banks' dual, key roles to provide credit for both commerce and their governments, getting their banking system back to good health has been incredibly difficult, and a decrease in lending by Euro-zone banks has forced corporations of many types to seek funding elsewhere. This shift from corporate loans from banks to public market debt issuance underscores a decreased source of business and revenues for Euro-zone banks on the one hand, but on the other represents hope for future economic growth.

Banking Union

  • Currently, there exists a hybrid of the originally proposed supranational, all powerful banking union overseeing the entire Euro-zone banking system and a network of national supervisors. With another round of stress testing for banks in 2014, this round of ECB-conducted tests puts the central banks credibility at risk if they are not perceived as being tough enough.

Looking at the year ahead, deflation is still a concern, and the weaker economies of the Mediterranean countries, while having made progress—observe Italy achieving an operating balance in its budget and Spain growing exports and producing meaningful pension reform—still need to be watched closely.

You can download the full report here: http://www.cmegroup.com/education/featured-reports/watching-european-bank-reform.html

This research report has been prepared on the basis of information obtained from sources which are believed to be reliable, but no representation or warranty is offered as to its accuracy or completeness. The opinions contained in the research report represent the views of its authors as of the date of publication and may be subject to change without prior notice. Nothing in the report should be considered or relied upon as investment advice or as the basis for trading.

About CME Group

As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest ratesequity indexesforeign exchangeenergyagricultural commoditiesmetalsweather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.



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