FFr­raag­gm­meen­nt­taat­ti­ioonn iinn eeu­ur­roo aarreeaa bbr­rooaad­dl­lyy uun­nc­ch­haan­nggeedd iinn QQ33

Financial Mirror (Cyprus) - - FRONT PAGE -

Frag­men­ta­tion in euro area fi­nan­cial mar­kets has sig­nif­i­cantly di­min­ished over the past two years, ac­cord­ing to the lat­est re­port pub­lished by Moody’s In­vestors Ser­vices.

Moody’s Euro Fi­nan­cial Frag­men­ta­tion In­dex shows that frag­men­ta­tion de­creased fur­ther in Q3 2014, to the low­est level since Q3 2010, as the di­ver­gent trends in bank­ing de­posit flows nar­rowed.

“Frag­men­ta­tion is un­likely to de­cline all the way to pre­cri­sis lev­els, as some de­gree of dif­fer­en­ti­a­tion in fi­nan­cial con­di­tions across coun­tries is war­ranted by dif­fer­ences in eco­nomic en­vi­ron­ments and cred­it­wor­thi­ness,” said Marie Diron, co-au­thor of the re­port.

In Q3 2014, bank de­posits were higher than one year ear­lier in all pe­riph­eral coun­tries, with the ex­cep­tion of Cyprus. Even in Cyprus, the pace of de­posit out­flows sig­nif­i­cantly slowed to 4.2% year-on-year, com­pared with 24% one year ear­lier. “Re­duced dis­per­sion in de­posit flows across euro area coun­tries is a sign of nor­mal­i­sa­tion in bank­ing sec­tor con­di­tions and adds to re­duced fi­nan­cial frag­men­ta­tion”, ex­plained Diron.

Fur­ther­more in Q3, the cross-coun­try stan­dard de­vi­a­tion of in­ter­est rates on loans to non-fi­nan­cial cor­po­ra­tion’s (NFCs) and house­holds was at its nar­row­est since 2009, owing to lower in­ter­est rates charged in the pe­riph­eral coun­tries. For in­stance, in Septem­ber, the av­er­age in­ter­est rates on new loans to NFCs up to EUR 1 mln were around 4.2% and 3.6% in Spain and Italy re­spec­tively, 30-40 ba­sis points lower than in June 2014. Lower dis­per­sion in in­ter­est rates, in par­tic­u­lar via lower rates in the pe­riph­eral coun­tries, is a sign of re­duced frag­men­ta­tion.

The MEFF In­dex aims to cap­ture the de­gree of frag­men­ta­tion of euro area fi­nan­cial mar­kets based on mea­sures of cross-coun­try dis­per­sion in price-based and quan­tity-based fi­nan­cial in­di­ca­tors. Th­ese in­di­ca­tors com­prise yields on gov­ern­ment bonds, bank in­ter­est rates charged to house­holds and non-fi­nan­cial cor­po­ra­tions (NFCs), cross-bor­der banks’ ex­po­sure, TAR­GET2 bal­ances and bank de­posits.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.