EU Banks Placate Investors vs. Protecting Capital
As pressure mounts on bank capital requirements (see Client Report REFORM213), the IMF has released a study finding that European banks could not have reduced capital distributions during the first year of the pandemic but for supervisory restrictions. This study is models-based and thus dependent on its assumptions. It also does not cover U.S. banks and conditions in each region may differ, but the study concludes that EU banks did not discount future expectations of economic conditions or profitability.
FRB Dallas Paper Finds CBDCs Enhance Financial Inclusion
The Federal Reserve Bank of Dallas today published a working paper finding that both a low fixed-cost/rate and a high fixed-cost/rate CBDC facilitate inclusion without harming intermediation, although the lower fixed-cost/rate option results in greater inclusion by encouraging households now relying on cash to participate in the financial system. It also found that a CBDC that increases inclusion does not necessarily decrease intermediation if the banking sector is not perfectly competitive, as its definition suggests is now the case.