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Getting Credit right

Independent Financial Advisors at Enable in Bishops Stortford see it as part of their role to help people find the right credit arrangements for the right parts of their financial journey through life. So it is with interest we note that for the first time in three years it is cheaper for European banks to access the credit markets than it is for the region’s investment-grade corporates – “a dynamic that bodes well for the provision of credit to the wider economy”, say US bank Morgan Stanley in a report published recently.

How can this help us you might ask? The US bank said: “Not only can this help reduce systemic risk and if sustained over time ease the pace of deleveraging – it clearly can help wholesale banks’ business models.” “This is fundamentally a good direction of travel and speaks to the dramatic reduction in perceived tail risks by ECB activity (first Long Term Refinancing Operation and then Outright Monetary Transactions), even if the central case for the economy looks poor.”

In particular, it pointed to increased issuance from ‘national champion’ banks in Italy, France and Spain, but also some Yankee issuance from organisations like BNP Paribas, BVA and Crédit Agricole.

“This is not to say we are becoming blasé. The tenor of some of the deals we know is short. Second, banks are still and will continue to deleverage: senior bank funding issuance is down 25% this year.” Said Morgan Stanley.

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