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November 20th, 2019 | 11:47 CET

Allianz, Deutsche Bank, Triumph Gold - ECB warns against own interest rate policy

  • Monetary policy
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Luis de Guindos, Vice-President of the European Central Bank (ECB), presented the semi-annual stability report this morning. In view of the continuing economic weakness and extremely low interest rates in the eurozone, the ECB warns of the dangers to the stability of the financial system. High debt levels and budget deficits in some eurozone countries could once again come to the fore in the market. Low interest rates also increased the willingness of investment and pension funds and insurers to take risks in order to generate returns on risky transactions. Unexpected price corrections in investments can thus have consequences for the entire financial system.

time to read: 1 minutes | Author: Mario Hose
ISIN: DE0005140008 , DE0008404005 , CA8968121043

Table of contents:

    Can monetary policy be environmentally friendly?

    Currency watchdogs in Europe do not have an easy job. Actually, they are independent, but surrounded by politicians and market participants who express their interests publicly or behind closed doors. At the heart of their activities is the stability of the euro and the financial system. Since the financial crisis in 2008, central banks in Europe and the US have pursued a strategy of low interest rates to boost the economy.

    The cheaper the money, the greater the willingness to spend a loan on consumption. The more people consume, the more jobs are created and the more taxes are levied. Interestingly, there has been no public debate on the role of central banks in climate change and environmental protection.

    Anti-cyclical capital buffer for banks

    Joy and sorrow are close together, because cheap money changes the market. For example, creditworthy market participants have ensured that the residential real estate market is increasingly struggling with overvaluations. Significant differences between regions and countries reflect the valuation discrepancy.

    If market weakness persists, property valuation adjustments can become a collective problem for borrowers and banks. In Germany, the so-called countercyclical capital buffer of 0.25% for banks was introduced as early as July 2019 to strengthen the financial system.

    Gold as a safe haven

    If the worst comes to the worst, it will be particularly exciting for systemically important banks and insurers. Deutsche Bank, Commerzbank, but also Allianz as an insurer will again be particularly challenged. The flight to gold or at least a diversification of the portfolio with precious metals will then become an issue again at the latest.

    Foreign gold companies such as Barrick Gold or Triumph Gold will then once again be the targeted focus of investors. At the latest when the price per ounce of gold climbs above the USD 1,600 mark, investors should think about the imperishable precious metal.

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    Der Autor

    Mario Hose

    Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.

    About the author

    Related comments:

    Commented by Mario Hose on August 28th, 2020 | 06:30 CEST

    Commerzbank, Desert Gold, Deutsche Bank - Money supply increases significantly

    • Monetary policy

    There are various financial indicators in an economy that allow assessments of the current state. An important indication is, for example, the amount of money supply and its change. However, the amount of money is still divided into three classes according to its availability. The narrow money M1 is cash and account balances with immediate access. M2 are money deposits with a maximum term of two years and three months' notice. The broad money M3 comprises the total available money as well as debts and securities. The European Central Bank published the latest data on the accelerated increase on Thursday.