International Monetary Fund: responsibilities and intervention in Europe

  • Euro area integration :

    The IMF pays considerable attention to progress in fostering integration within the euro area to ensure the effective operation of the monetary union. The first-ever EU wide Financial Sector Assessment Program (FSAP), in March 2013, argued for a Single Supervisory Mechanism (SSM). In addition, the IMF published papers making the case for a  Banking Union to strengthen the EU financial oversight and sever bank-sovereign linkages; a Fiscal Union to address gaps in the euro area’s architecture; and a more effective Economic Governance framework to better incentivize structural reforms.

  • Providing financing : 

Since the start of the global financial crisis, a number of emerging and advanced European countries have requested financial support from the IMF to help them overcome their fiscal and external imbalances. Access to IMF resources for Europe was provided through Stand-By Arrangements(SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and the Extended Fund Facility (EFF)

Most of the first wave of IMF-supported programs in 2008-09 was for countries in emerging Europe. The IMF also provided financing to Iceland when its banking system collapsed in late 2008. Starting in 2010, credit was also provided to euro area members – Greece, Ireland, Portugal and Cyprus. Credit outstanding to these members peaked in July 2014 at SDR 66.3 billion, but has declined to about SDR 29.7 billion as of September 16, 2016, due in part to early repayments by Portugal and Ireland

 As of September 16, 2016, the IMF had active arrangements with 6 emerging market countries in Europe (see table) with commitments totaling about EUR 33.9 billion or $38 billion. Total credit outstanding to European members was around EUR 49.4 billion or around US$ 55.4 billion.

  • EXAMPLE OF IMF’S INTERVENTION IN EUROPE: EURO CRISIS :

[youtubehttps://www.youtube.com/watch?v=mNhLotX8ss8[/youtube]

  • Assessing individual countries and the euro area :

The IMF provides economic analysis and policy advice as part of its standard surveillance process for individual advanced and emerging European economies that culminates in regular (usually annual) consultations with individual member countries and, if relevant, EU institutions such as the ECB and EC. The bilateral surveillance staff reports for these consultations include assessments of the economic outlook, and economic and financial stability.

In addition to its policy discussions with the 19 individual members of the euro area, IMF staff also holds consultations annually for the euro area as a whole, similar to those held for other currency unions. Here, IMF staff exchange views with counterparts from the ECB, the EC and other European institutions in a number of areas, including monetary and exchange rate policies and regional fiscal policies, financial sector supervision and stability, trade and cross-border capital flows, as well as structural policies. The final staff report includes an overall assessment of the economic outlook, external and fiscal position, and financial stability of the euro area as a whole. As part of the euro area  consultation, the IMF’s views on the economic outlook and policies of the euro area are presented to the Eurogroup, comprising the 19 finance ministers of the euro area.

 

http://www.imf.org/en/About/Factsheets/Europe-and-the-IMF

Group 15 – HSBC and Prudential, The day after Brexit announcement

  • HSBC ‘plans to move 1,000 jobs to Paris’ due to Brexit :

    HSBC ‘plans to move 1,000 jobs to Paris’ due to Brexit :  After the Brexit, HSBC is planning to move up 1000 workers from the UK to Paris. There are already 10000 currently staff in Paris. Besides, around 48 000 workers are based in the UK and 260 000 across the world. HSBC forecast this week that inflation could increase to 4 per cent within 18 months after the pound sterling’s Brexit-induced collapse.

    « We’re not moving this year and maybe not even next year, » Gulliver said in an interview on the sidelines of the annual meeting of the World Economic Forum in Davos.

    « We will move in about two years time when Brexit becomes effective, » Gulliver added.

  • Prudential could relocate M&G funds :

    After the Brexit, Prudential, the UK’s largest insurer by value, has said it is considering shifting funds from M&G, its assets management business, to Dublin or Luxembourg. Richards, who joined in June from Aberdeen Asset Management, said a tenth of M&G’s £255.4bn assets under management were from EU clients. “It’s a very important client base for us.”

  • Impact Of Lower Interest Rates (Prudential) :

Prudential is expected to generate about 20% of its revenues from investments in the global markets in 2016, totaling about $11 billion. 
The risk of persistent lower interest rates will definitely impact this metric, considering fixed maturity securities contributed almost 67% of Prudential’s net investment income in the last two years. Prudential has considerable exposure o fixed maturity securities in the U.S., U.K as well as the rest of Europe. Post-Brexit, the yield on the 10-year U.S. treasury note fell below 1.5% for the first time since 2012, yields on U.K. benchmark government bonds fell below 1% for the first time on record and 10-year government bond yields in Germany ended below 0%. Other developed economies such as France, Sweden, Switzerland and Japan all touched all-time lows.
pru-15 

  • UK Insurer Prudential could move funds to Luxembourg :

    UK Insurance Broker Prudential stated on Wednesday that the group may move some of its funds business from London to Luxembourg following the UK’s Brexit vote to leave the European Union.

    A move would mean that the insurer’s investment management arm M&G could contribute in distributing its funds throughout the EU.

    M&G’s chief executive Anne Richard told reporters on Wednesday that the company could increase the number of its funds domiciled in Luxembourg and also Dublin, depending on the outcome of Brexit negotiations.

    “What we are trying to do is give ourselves options so we are in a position to react and adapt,” Richard told Reuters new agency.

    “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”

    In the first half of 2016, Prudential performed better than forecast, reporting a 2.4 billion euro profit, due mostly to growth in Asia triggering rising share results.

References

http://www.independent.co.uk/news/uk/home-news/brexit-hsbc-economy-banks-eu-referendum-latest-jobs-single-market-effects-a7104351.html

http://www.cnbc.com/2017/01/18/reuters-america-update-1-hsbc-to-shift-staff-from-britain-to-paris-after-brexit.html

http://www.nasdaq.com/article/how-can-brexit-impact-prudential-cm643996

http://www.independent.co.uk/news/business/news/brexit-latest-news-eu-referendum-prudential-mg-insurance-fund-management-assets-a7183021.html

http://www.wort.lu/en/business/following-brexit-uk-insurer-prudential-could-move-funds-to-luxembourg-57ac8e3aac730ff4e7f64dba