Following the COVID-19 pandemic, concerns over the likelihood of financial crises breaking out across emerging markets are returning once more. Fathom’s Financial Vulnerability Indicator (FVI), a comprehensive model assessing the likelihood of banking, currency, and sovereign crises occurring, is currently flashing red in both South Asia and Sub-Saharan Africa. This piece outlines a brief history of African banking crises and outlines the forces driving the current uptick in banking risk. Refresh this chart in your browser | Edit the chart in Datastream Laeven and Valencia (2020)[1] have catalogued the incidence of three types of financial crises (currency, sovereign and banking) for 165

Studying the board members of Europe’s major banks is a chastening education in the continent’s incestuous financial elite. Shareholders and regulators largely tolerate the criss-crossing careers and responsibilities of directors because it’s hard to find experienced candidates untainted by theoretical conflicts of interest. Still, Deutsche Bank’s latest appointee is in a category of his own. The 13 billion euro lender in August nominated Juerg Zeltner to join its supervisory board. The 52-year-old has lots of relevant experience. He worked at UBS for 30 years, most recently leading its giant wealth management division. In May he was named chief executive of

There have been considerable improvements in the euro area’s governance framework since 2011, but the bloc remains vulnerable to future sovereign and banking crises. The ‘doom loop’ between sovereign and banking risk has been weakened, but remains intact. In his first New Year’s address, Emmanuel Macron vowed to “reinvigorate European ambitions” while appealing to the French public not to be swayed by “nationalists” or “sceptics”. Since his election, President Macron has placed considerable focus on greater European integration.  A key part of Mr Macron’s vision focuses on the capacity of the European Stability Mechanism (ESM), or a new alternative body

According to our China Momentum Indicator 2.0 (CMI 2.0), real economic growth in China rose to 7.3% in the twelve months to August. At a five-and-a-half year high, this marks a significant rebound from the trough of 2.4% in September 2015. This pick-up in economic activity will have been actively encouraged by President Xi Jinping in the lead up to the Communist Party’s twice-a-decade National Congress, scheduled to take place on 18 October. Putting on a show of prosperity ahead of this will have been seen as mandatory amongst government officials trying to gain favour with Xi, who will begin

A recent report from Accenture asks “Fintech – Did Someone Cancel the Revolution?” The report notes that the promise of Fintech startups to change market structure, radically improve products, and disrupt incumbent financial firms has not yet come to pass. This question comes in the wake of a decline in new Fintech startup formation. Per Figure 1, the number of Fintech startups in the US and Europe has declined rapidly since 2015 after several years of steady growth. Figure 1: Where Are the Fintech Startups Going? Sources: Atlas The Accenture report misses a key point. The Fintech revolution hasn’t been

Sustained period of GDP growth above 3% — check. Continually falling unemployment — check. Considerable progress in fixing the banking sector — check. Ten-year government yield falling from 4% to less than 1.5% — check. For over two years Spain has continually been one of the fastest growing economies in the euro area. In the second quarter of 2017 Spain recorded quarterly growth of 0.9%, above the already impressive 0.6% average for the whole of the euro area. This notwithstanding, Spain’s unemployment rate still stands at 17%, the highest rate among major euro area countries apart from Greece. Additionally, the

Take the money and run is the new Uber Benchmark. The ride-hailing firm, valued at nearly $70 billion in its most recent funding round, is beset by multiple controversies, managerial turmoil and huge losses. Early investor Benchmark may be loath to give in to demands to sell its 13 percent stake. But it would help restore some stability and let the venture-capital firm rake in billions. Benchmark, which led Uber’s series A funding round in early 2011, has injected nearly $30 million into the company, according to fellow shareholders. Now, though, it has turned to the courts to try to

The Japanese consumer is perking up. Figures released on Monday showed gross domestic product grew unexpectedly fast in the second quarter. The data is volatile and often revised. But the unbroken run of expansion, now 18 months long, is good news. Rising household consumption is even better news. Annualised growth of 4 percent from April through June was far better than the 2.5 percent most economists were expecting. The number is also impressive on its own terms. Most developed countries would love that kind of economic performance, although few are used to looking to Japan, long beset by economic stagnation,

Need and yield are making cat bonds roar. Low interest rates and a hunger for uncorrelated returns are fueling investor demand for bonds insuring against hurricanes, pandemics and other catastrophes, pleasing insurers eager to lay off risk. Yields on these instruments have fallen even as issuance has soared. Disaster, if it strikes, may only increase their popularity.In a typical cat bond, an issuing insurer or government agency pays a healthy interest-rate premium to investors over about three years. If a pre-specified event happens, the buyer forfeits some or all of the principle. So if, say, an earthquake above a certain

Three years ago, one US dollar was officially worth six Venezuelan bolivars. Unofficially, on the black market, one US dollar was worth sixty Venezuelan bolivars. How times have changed. Now the Venezuelan currency is worth less than the pretend gold used in the game ‘World of Warcraft’ – the bolivar having fallen more than 130% against the dollar on the black market in the past month alone. You now need almost 18,000 bolivars to buy one dollar on the black market, making one bolivar worth less than one-hundredth of a cent. In Venezuela, turning a piece of paper into a

If Altice USA’s initial public offering was a TV program it would have been a huge ratings success. Bankers directed a flawless show for selling shares in the American division of the Dutch-based cable company. Worth some $23 billion, it now trades at a higher multiple than much larger rivals despite plenty of static. JPMorgan, Morgan Stanley, Citi and Goldman Sachs deserve a pat on the back for their efforts in the IPO episode. They managed to sell more shares than initially planned, and at $30 a pop did so near the top end of the range they had earlier

China’s ratio of private non-financial debt-to-GDP has now breached 200% – a quarter above what it was in the US ahead of the financial crisis in 2008.  If all off-balance sheet lending were to be included, the total would be substantially higher. Credit continues to flow towards unprofitable projects and unproductive assets that generate little or no return. Fathom estimates China’s non-performing loans problem at close to 30% of GDP, over ten times higher than the official estimate. We struggle to believe that President Xi will be willing to sacrifice lower growth for deleveraging: if and when growth falls below