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Section 1: Global financial environment

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Chart 1.12 Financial market uncertainty(a)(b) Sources: Bloomberg, Chicago Mercantile Exchange, JPMorgan Chase & Co., NYSE Euronext and Bank calculations. – PowerPoint PPT presentation

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Title: Section 1: Global financial environment


1
Section 1 Global financial environment
2
Chart 1.1 Market-implied default probabilities
over the next five years for selected sovereign
debt(a)
  • Sources Markit Group Limited and Bank
    calculations.
  •  
  • Probability of default, derived from CDS premia,
    from the perspective of a so-called
    risk-neutral investor that is indifferent
    between a pay-off with certainty and an uncertain
    pay-off with the same expected value. If market
    participants are risk-averse, these measures may
    overstate actual probabilities of default. A
    loss given default of 60 is assumed.
  • December 2011 Report.

3
Chart 1.2 Spreads of government bonds over
German bunds in selected euro-area countries(a)
  • Sources Thomson Reuters Datastream and Bank
    calculations.
  • Ten-year government bond spreads over German
    bunds.

4
Chart 1.3 Trade-weighted indices of selected
currencies(a)
  • Sources Bank of England and Bank calculations.
  • Change since December 2011 Report.

5
Chart 1.4 Credit ratings of selected
sovereigns(a)
  • Source Moodys.
  • All data points are at year-end, except for 2012
    which is at 21 June 2012.

6
Chart 1.5 Foreign deposits with monetary
financial institutions in selected euro-area
countries(a)
  • Sources Banca dItalia, Banco de España, Banco
    de Portugal, Bank of Greece, Central Bank of
    Ireland, Deutsche Bundesbank and Bank
    calculations.
  • Data to April 2012.

7
Chart 1.6 Domestic deposits with monetary
financial institutions in selected euro-area
countries(a)(b)
  • Sources Banca dItalia, Banco de España, Banco
    de Portugal, Bank of Greece, Central Bank of
    Ireland and Bank calculations.
  • Cumulative percentage changes in amounts
    outstanding since June 2010.
  • Excludes government and monetary financial
    institution deposits.

8
Chart 1.7 Net investment flows into selected
equity and bond funds(a)
  • Sources Emerging Portfolio Research and Bank
    calculations.
  • Data capture within-country flows (eg investments
    by US-domiciled mutual funds in US equities) as
    well as cross-border flows.
  • Regional funds dedicated to Western European
    equities.

9
Chart 1.8 International ten-year spot government
bond yields(a)
  • Source Thomson Reuters Datastream.
  • Yields to maturity.

10
Chart 1.9 Cost of default protection for
non-financial corporates(a)
  • Sources Thomson Reuters Datastream and Bank
    calculations.
  • Calculated using the geometric mean of five-year
    CDS premia of non-financial corporates.
  • Consists of Austria, Belgium, Finland, France,
    Germany and the Netherlands.

11
Chart 1.10 International equity indices(a)
  • Sources Bloomberg, Thomson Reuters Datastream
    and Bank calculations.
  • Denominated in units of local currency except for
    MSCI Emerging Markets index, which is denominated
    in US dollars.
  • December 2011 Report.

12
Chart 1.11 Estimates of the premia required by
investors to hold equities(a)
  • Sources Bloomberg, Thomson Reuters Datastream
    and Bank calculations.
  • As implied by a multi-stage dividend discount
    model.

13
Chart 1.12 Financial market uncertainty(a)(b)
  • Sources Bloomberg, Chicago Mercantile Exchange,
    JPMorgan Chase Co., NYSE Euronext and Bank
    calculations.
  • Three-month option-implied volatilities.
  • Average of FTSE 100, SP 500 and Euro Stoxx 50
    for equities. West Texas Intermediate for crude
    oil. Average of three-month short sterling,
    eurodollar and Euribor for interest rates.
    Average of five-year on-the-run iTraxx Europe
    main and CDX North America investment-grade for
    CDS premia.
  • December 2011 Report.

14
Chart 1.13 Primary corporate debt market
conditions(a)
  • Sources Dealogic and Bank calculations.
  • Shading is based on a score that reflects gross
    issuance (relative to nominal GDP) and spreads in
    primary markets, expressed as a number of
    standard deviations from its historical average,
    using available data from January 1998. Where
    spreads are not available, indicators are based
    solely on issuance. Latest data point is end-May
    2012 (using most recent GDP data).
  • Gross issuance of bonds, excluding issuance by
    corporates where parent is a financial entity.
  • Gross issuance of syndicated loans, excluding
    cancelled or withdrawn facilities.

15
Table 1.A Selected payment systems(a)
  • Sources  Bank of England, CLS Bank
    International, Euroclear UK Ireland, UK
    Payments Administration and Bank calculations. 
  • CLS data show the value of obligations as
    submitted to CLS for settlement (effectively
    double the value of the underlying
    transactions).  CREST values are for sterling
    only and exclude flows generated by the
    self-collateralising repo or auto-collateralising
    mechanisms.
  • CLS average daily values to 18 May 2012.
  • FPS operational availability to 30 April 2012.

16
Chart 1.14 Cost of default protection for
selected banking systems(a)
  • Sources Capital IQ, Markit Group Limited,
    Thomson Reuters Datastream and Bank calculations.
  • Aggregated five-year CDS premia from selected
    banks and LCFIs, weighted by assets as at 2011
    Q4.

17
Chart 1.15 Difference in the cost of default
protection between group and subsidiary for
selected European banks(a)
  • Sources Bloomberg and Bank calculations.
  • Difference between five-year senior unsecured
    euro-denominated CDS premia for group and
    subsidiary entities of selected cross-border
    European banking entities.

18
Chart 1.16 Bank equity prices(a)
  • Sources Thomson Reuters Datastream and Bank
    calculations.
  • Indices used are FTSE French banks, FTSE German
    banks, FTSE Italian banks, FTSE Spanish banks,
    FTSE UK banks and FTSE US banks. All indices
    denominated in US dollars.

19
Chart 1.17 Tier 1 capital ratios for selected
international banking systems(a)(b)(c)(d)
  • Sources SNL Financial, published accounts and
    Bank calculations.
  • Includes banks with total assets of more than
    US100 billion at end-2010.
  • Aggregated Tier 1 capital divided by aggregated
    (risk-weighted) assets. All figures are under
    local accounting conventions.
  • Data exclude 100 government-owned banks.
  • Tier 1 ratios are used because of difficulties
    comparing core Tier 1 ratios across countries.

20
Table 1.B Stress-test assumptions
  • Sources European Banking Authority, Federal
    Reserve and Bank calculations.
  • Date of publication.
  • Rate of output growth in first year of stress
    period.
  • Maximum fall in domestic stock market indices
    relative to scenario baseline during the period
    covered by the stress test.
  • Maximum fall in domestic housing indices relative
    to scenario baseline during the period covered by
    the stress test.
  • Maximum change in domestic sovereign debt yields
    relative to scenario baseline during the period
    covered by the stress test.

21
Chart 1.18 Issuance of term bank senior secured
and unsecured debt in public markets(a)(b)
  • Sources Dealogic and Bank calculations.
  • Unguaranteed securities with an original
    contractual maturity or earliest call date of at
    least 18 months. 2012 H1 data are up to and
    including 21 June 2012.
  • US banks include Bank of America, Citigroup,
    JPMorgan and Wells Fargo. UK banks refer to the
    major UK banks peer group. Euro-area banks
    include BBVA, BNP Paribas, BPCE, Commerzbank,
    Crédit Agricole, Deutsche Bank, ING, Intesa,
    Société Générale and UniCredit.

22
Chart 1.19 Major UK banks and LCFIs leverage
ratios(a)
  • Sources Bank of England, published accounts and
    Bank calculations.
  • Leverage ratio is defined as assets divided by
    capital. Assets are adjusted for cash items, tax
    assets, goodwill and intangibles. Capital
    includes total shareholders equity adjusted for
    minority interests, preferred shares, goodwill
    and intangibles. Assets are also adjusted on a
    best-efforts basis to achieve comparability
    between US GAAP and IFRS with respect to
    derivatives and off balance sheet vehicles.
  • Pro-forma data are used for RBS from 2007 to
    2009.
  • End-2011 for major UK banks except for National
    Australia Bank (31 March 2012) and Nationwide (4
    April 2012).

23
Chart 1.20 Cross-border claims by banks in the
euro area on advanced and emerging-economy
regions(a)(b)(c)
  • Source Bank for International Settlements
    (BIS).
  • Change in BIS-resident banks aggregate
    cross-border claims vis-à-vis all sectors by
    region.  Calculated as the exchange rate and
    break-adjusted flow during a quarter as a
    percentage of the stock of outstanding loans at
    the end of the previous quarter. 
  • Reporting countries include all euro-area
    countries except Estonia, Malta, Slovakia and
    Slovenia.
  • Includes cross-border claims by euro-area
    resident banks on residents in other euro-area
    countries.

24
Chart 1.21 Selected trade finance flows(a)(b)(c)
  • Sources Dealogic and Bank calculations.
  • Flows include loans to shipping and aircraft.
  • Split by nationality of deal originator.
  • 2012 data are up to and including 21 June 2012.

25
Chart 1.22 ECB Bank Lending Survey credit
demand and supply(a)
  • Sources ECB and Bank calculations.
  • Weighted diffusion index of responses for
    mortgage lending, consumer credit and lending to
    enterprises. Weighted by stock of lending to
    each sector for the respective regions.
  • Balance of respondents reporting an increase
    (positive number) or decrease (negative number)
    in loan demand.
  • Balance of respondents reporting a tightening
    (negative number) or loosening (positive number)
    of credit standards.

26
Chart 1.23 Sterling lending to UK private
non-financial corporations and individuals(a)(b)
  • Source Bank of England.
  • Twelve-month growth rate.
  • Sterling lending by UK-resident monetary
    financial institutions.
  • Includes lending to private non-financial
    corporations (PNFCs) and the household sector
    (non-profit institutions serving households,
    individuals and unincorporated businesses).

27
Chart 1.24 Spreads on lending to UK households
  • Sources Bank of England and Bank calculations.
  • December 2011 Report.
  • Spread between average quoted rates on 10,000
    personal loans and Bank Rate.
  • Spread between average quoted rates on two-year
    fixed-rate mortgages with a 9095 loan to value
    (LTV) ratio and two-year UK government bond
    yields. Gap in 2009 data due to small sample of
    reporting institutions.
  • Spread between average quoted rates on two-year
    fixed-rate mortgages with a 75 LTV ratio and
    two-year UK government bond yields.

28
Box 1 New sources of non-bank finance
29
Table 1 Largest UK peer to peer lending companies
  • Sources Company websites, Funding Circle,
    Ratesetter, Thincats and Zopa.

30
Chart A Number of crowdfunding platforms
  • Source Massolution.
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