9 Δεκ 2017

IB Traders’ Insight | Update - European Financial Strength | Interactive Brokers

IB Traders’ Insight | Update - European Financial Strength | Interactive Brokers



Macro Update - European Financial Strength

This morning, the EURO STOXX Banks Index (SX7E) is +3%, having its strongest up-day since July.

The catalyst was a break in a six-month deadlock regarding the global financial regulator – Basel Committee – final batch of post-crisis capital rules.



Specifically, the Basel Committee on Banking Supervision's compromise will cause “no significant increase” in overall capital requirements. Put another way, few lenders will need to raise major new capital.

Another way to think about this beyond less potential share dilution in the sector is that some big banks will likely see their capital demands now decline. As a result, some banks with excess capital can potentially begin to buy back their shares or increase their dividends.

While this will not result in the same type of regulatory overhang removal underway in the United States, the step forward today for Basel III is noteworthy because it has been plaguing European financials for years.