ECB announces Finance Week Initiatives

Wednesday, Nov 18 2015

European Central Bank (ECB) executive board member Yves Mersch has outlined two major initiatives that will discussed at Euro Finance Week in Frankfurt. In a keynote speech, Mersch said that the capital markets union (CMU) will boost private risk-sharing across borders, making public risk-sharing less necessary and giving greater protection to taxpayers. The ECB and the Eurosystem has fully welcomed the action plan on the CMU published in September.

Mersch opined that for the capital markets to be homogenised, strong market infrastructure is necessary for capital to travel freely. The Eurosystem has been proactive he said, with the development of TARGET2 and, most recently TARGET2-Securities, or T2S. TARGET2 is a long established which processes a inter bank payment system, which also is a cross border arrangement.

CMU will be facilitated more easily due to TS2, as this will allow the banks to hold a centralised pool of capital, that can be moved around where it is needed most. TS2 has also ensured that barriers to cross border clearing and settlement have been removed Mersh enthused, as a harmonisation agenda was part of the development of TS2.

Mersch also believed SMEs, so starved of financing after 2008 crash, will benefit from the CMU. The ECB and the Commission are fully in favour of measures, that will alleviate this problem and facilitate a better funding system for them. Polices that reform integration, innovation, and retail payment systems, have all been put forward to accompany CMU proposals.

Euro is currently being traded around 1.0660 area. Pair is likely to find support around 1.06 handle and resistance above 1.07 level. Later today, in the US session, Building Permits and Housing Starts figures are scheduled for a release as well as FOMC Meeting Minutes.

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