Moody’s raises Greece sovereign bond rating after bailout
London is facing renewed pressure over its dominance of the €1 trillion (£880 billion)-a-day euro clearing market after the European Central Bank set out proposals aimed at giving it more oversight of the lucrative business.
The move by the Frankfurt-based ECB — the central bank for the 19 countries using the euro — follows a report by the European Commission that called for the EU to have more powers over clearing of financial products denominated in euros after Brexit, according to The Guardian.
The city dominates the market in clearing, a process which is supposed to reduce the risks in complex financial transactions by matching buyers and sellers as well as reducing the cost of trading, through the use of clearing houses. Credit ratings agency Moody’s raised Greece’s long-term issuer rating to ‘Caa2’ from ‘Caa3’ after eurozone governments extended a credit lifeline to the country.
Moody’s also changed its outlook to ‘positive’, up from ‘stable’ previously, saying it saw signs that the heavily indebted country’s economy was stabilizing, AFP wrote.
It pointed to a mid-june agreement reached by Greece’s creditors to relaunch an aid plan to the country, which had been blocked for months due to disagreements between eurozone countries — especially Germany — and the International Monetary Fund.
The move reduces the specter of a short-term crisis, after eurozone governments agreed to give Greece a new credit lifeline of some €8.5 billion ($9.5 billion).
Moody’s said it expected Greece’s debt ratio to stabilize this year at 179 percent of GDP, adding that growth should return to the economy this year and next.
Greece returned to growth in the first quarter of 2017, with a 0.4 percent increase in GDP, according to figures revised upwards in early June.
The business has been hotly contested since the EU referendum a year ago, when Xavier Rolet, chief executive of the London Stock Exchange, warned that 100,000 jobs across the UK were at risk if the city lost the ability to process euro-denominated transactions.
In an announcement on Friday, the ECB said its governing council was setting out a recommendation to have more oversight of the business.
Using the technical term for clearing houses — central counterparties — the ECB made clear that London was in its regulatory sights, as it demanded “clear legal competence in the area of central clearing”.
The bank said: “These powers include a significantly enhanced role for central banks of issue in the supervisory system of central counterparties, in particular with regard to the recognition and supervision of
“It is too early to conclude that economic growth will be durable,” Moody’s said.
The IMF, which links financial aid to debt relief, has also signed an ‘agreement in principle’ to allow immediate assistance that avoids a payment crisis in Athens this summer.
It said Thursday that negotiations with creditors for debt reduction had ‘made progress’.
An IMF spokesman said: “If we did not think there was a good chance of reaching a debt deal, we would not have chosen that route.”
Moody’s also raised the long-term country ceilings for foreign-currency and local-currency bonds to B3 from Caa2. systemically important third-country CCPS clearing significant amounts of euro-denominated transactions.”
It builds upon the report from the European Commission earlier this month which fell short of forcing the relocation of euro clearing after Brexit but would allow tougher regulation of ‘systemically’ important amounts of trade being conducted by clearing houses outside the remaining 27 members of the EU.
In a speech this week, Mark Carney, governor of the Bank of England, outlined the scale of the clearing market.
He said the London Clearing House (LCH) clears swaps — a form of financial instrument — in 18 currencies for companies in 55 jurisdictions, handling more than 90 percent of cleared interest rate swaps globally and 98 percent of all cleared swaps in euros. to their anxiety over global economic instability and the 2016 spike in Singapore’s resident unemployment rate to the highest level since 2010. The other key concerns include the global economic instability itself and inflation.
Lim said these concerns combined to make Singapore investors less optimistic than many of their global peers in terms of the investment outlook for the coming year.
They report net optimism of just nine percent, significantly lower than the average of 18 percent in Asia excluding Japan and the global average of 20 percent.