European Leaders Approve Landmark Banking Union

Arthi Gupta
13 Dec, 2012
New York City

Euro zone ministers approved long sought banking union in the region. The Eurogroup formally approved the second disbursement of

[R]5:30 PM Frankfurt – Euro zone ministers approved long sought banking union in the region. The Eurogroup formally approved the second disbursement of €49.1 billion for Greece. The SNB left the minimum exchange rate unchanged. Greek jobless rate rose in the third quarter.[/R]

The European indexes edged lower and finance ministers approved the European banking union.

European Union leaders approved a long sought banking union that will streamline and standardize procedures in the euro zone across banking system and prevent future national debt crisis that affects the common currency.

The union will remove one central reason for the current euro crisis and prevent future local political interference in the local banking system and avoid the building of excessive debt of local governments by banks.

At least 150 large and multinational banks will be placed under a single supervisory authority controlled by the European Central Bank and if needed the new authority will be empowered to monitor all 6,000 banks in the region. UK and Sweden will not be part of the union.

The single supervisory authority will monitor depository guarantee rules and deal with unwinding of banks and manage resolution fund to bailout banks.

European leaders are meeting for the last time this year and the agreement will now need approval from the European Parliament and German and other lawmakers. The single authority will be operational next April and will be fully functional in 2014.

The Eurogroup formally approved the second disbursement for Greece and the European Central Bank was finalized as the common banking supervisory authority across the euro zone.

The Eurogroup formally approved the second disbursement for Greece after reviewing the outcome of the debt buy back operation conducted by the government.

The Eurogroup authorized the European Financial Stability Facility to release the next installment for a total amount of €49.1 billion. The disbursement will be made in several tranches. Greece will receive €34.3 billion in the following days and the remaining amount will be disbursed in the first quarter of 2013.

In corporate deals, Renault SA, the French car maker sold its remaining 6.5% stake in AB Volvo for SEK 12.78 billion or about $1.92 billion.

Separately, Societe Generale SA, the French lender agreed to sell the majority stake in its Egyptian subsidiary National Société Générale Bank to Qatar National Bank Group for about $1.97 billion.

Additionally, QNB group will acquire Société Générale's stakes not already owned by NSGB in some of the local subsidiaries of NSGB. This will take the total deal value to about $2 billion.

Deutsche Bank AG said negative impacts from de-risking and valuation adjustments to certain assets as well as charges related to its GTB business activities in the Netherlands will have an impact on its fourth quarter earnings.

In Paris trading, the CAC-40 Index fell 8.07 or 0.2% to 3,638.59 and in Frankfurt the DAX Index edged lower 28.50 or 0.4% to 7,586.82.

The yields on Spain’s benchmark dropped five basis points to 5.31%. Italian 10-year yields fell six basis points to 4.59%.

Spanish Bond Auction

Spain raised €2 billion from the sale of three- and five-year paper and a bond due in 2040 bonds today.

The Treasury sold €803 of five-year bonds maturing in July 2017 at an average yield of 4.2%, down from 4.47% in the last auction on October 4. The bid-to-cover ratio rose to 3.13 from 2.47.

The country also sold €681 million of three-year bonds at an average yield of 3.358%, down from 3.390% when the issue was last sold on December 5. The bid-to-cover ratio was 4.8.

In addition, the Spanish Treasury raised €540 million in bonds maturing in 2040 at an average yield of 5.893% compared with 4.738% in the last auction in March 2009. The bid-to-cover ratio was 2.1.

SECO Lowers Swiss Outlook

The Swiss gross domestic product is now estimated to grow 1.3% next year compared to the 1.4% growth forecast in September, a report from the State Secretariat for Economic Affairs showed.

The GDP projection for this year was left unchanged at 1%.

Separately, the Swiss National Bank left the minimum exchange rate of Sfr1.20 per euro unchanged.

In addition, the SNB is leaving the target range for the three-month Libor between zero and 0.25%.

For 2012, the bank forecasts inflation rate to decline 0.7%.

UK Car Output Climbs

The UK car manufacturing rose increased from last year in November, data released by the Society of Motor Manufacturers and Traders said today.

Total car production increased 4.9% annually to 142,825 units in November. Output of cars meant for export rose 1.2% annually, while production for the domestic market surged 32.3%.

Spanish Leading Index Rises

The Conference Board leading economic index for Spain increased 1% from a month ago to 103.1 in October with all components contributing to the improvement. The order books survey and job creations made the largest positive contributions.

The coincident economic index, a measure of current economic activity, remained unchanged at 96.3 in October.

Greek Unemployment Rate Soars

Greece's unemployment rate increased to 24.8% in the third quarter from 23.6% in the second quarter, data released by the Hellenic Statistics Authority showed. In the third quarter of 2011, the jobless rate was 17.7%.

There were around 1.23 million unemployed persons in the country at the end of the third quarter, up 5.3% from the second quarter and by 40.2% compared with the third quarter of 2011.

The unemployment rate among youth, aged between 15 and 24, was 56.6% during the third quarter, the highest among all age groups.