Streamlined SRT process aims to optimize capital management while ensuring resilience The European Central Bank (ECB) is set to accelerate the approval process for Significant Risk Transfers (SRTs) , a move designed to improve capital efficiency for banks while maintaining financial stability. The ECB’s pilot program, scheduled to begin in early 2025 , will simplify procedures and reduce approval timelines, aligning with the growing demand for efficient capital allocation across European lenders. What’s Changing? The ECB, in collaboration with the European Banking Federation , is introducing a pilot program to shorten the SRT approval process. The notification period for SRT transactions will be reduced from three months to two weeks before deal finalization. The information submission requirements will be streamlined to ease regulatory burdens for banks. These changes are expected to make SRT transactions more attractive , all...
China’s credit expansion unexpectedly cooled in November, signaling mounting challenges for the nation’s economic recovery efforts despite government stimulus.
Key Numbers and Missed Expectations
- Aggregate financing rose by 2.34 trillion yuan, below the median forecast of 2.7 trillion yuan and the 2.5 trillion yuan increase seen in November 2023.
- New loans by financial institutions totaled just 580 billion yuan, sharply missing the forecast of 995 billion yuan.
- Loans to the real economy—excluding financial institutions—fell to their lowest November level since 2009, offsetting elevated government bond issuance.
Economic Headwinds
- Despite recent signs of improvement in consumption and factory activity, overall confidence remains fragile.
- Policies implemented so far have not been sufficient to lift the economy out of deflationary pressures.
- Corporate mid- and long-term loans, a measure of business investment appetite, fell to their lowest November level since 2016.
- Private investment has been flat for the past three years, reflecting weak business sentiment.
Government Response
- China’s leaders, led by President Xi Jinping, pledged stronger stimulus in 2025 with a focus on bolstering consumer spending, which has lagged behind industrial growth.
- The People’s Bank of China (PBOC) adopted a “moderately loose” monetary stance for the first time in 14 years, signaling continued interest rate cuts and reductions in banks’ reserve requirements.
Sector-Specific Trends
- Household mid- and long-term loans, a proxy for mortgages, rose year-on-year, likely driven by a recent recovery in property transactions.
- Broad money supply (M2) expanded by 7.1% year-on-year, missing expectations.
- Corporate borrowing for investment showed little improvement, while local governments focused on using bond issuance to repay existing loans.
Outlook for 2025
- Economists anticipate deeper rate cuts, potentially the most significant in a decade, to spur borrowing and investment.
- However, recent rate reductions have failed to generate substantial demand, raising concerns about the effectiveness of monetary policy alone.
- The government’s focus on addressing indebted local governments could also limit credit availability to the broader economy.
China’s policymakers face a critical challenge in balancing short-term stimulus with long-term structural reforms as the country’s economy seeks to regain momentum. Whether these measures will restore confidence and drive sustainable growth remains to be seen.
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