Financial Markets Explained

Learn about the economy and the markets in general as we present a comprehensive explanation of the most commonly used jargon.

Why did the Euro rally on ECB’s decision in December, 2015

Why did the Euro rally on ECB’s decision in December, 2015

Financial Markets Explained
On December 3rd 2015, the European Central Bank met for its monetary policy review. The ECB decided to leave the minimum bid rate unchanged at 0.05%, but cut the deposit rate to -0.30%, from -0.10% a 20bps cut for deposits held at the Central Bank. The ECB then followed up the monetary policy decision with a press conference, where the Central Bank announced that it would extend the QE deadline from September 2016 to March 2017, while leaving the current pace of QE purchases unchanged at €60 billion per month. During the press conference and into the end of the day, the Euro rallied close to 3.06% for the day, closing at 1.0938 and posting a 21-day high. Prices reversed sharply after initially opening the day (03/12/2015) at 1.0612. So why did the Euro rally so strongly despite the E
What is the ECB’s Emergency Liquidity Assistance or ELA Program

What is the ECB’s Emergency Liquidity Assistance or ELA Program

Financial Markets Explained
Ever since the recent Greece crisis hit the news headlines, a constant abbreviation "ELA" has been mentioned in the same breathe. For most investors and traders alike, the ELA might initially come across as yet another 'complex financial jargon' (think: EFSF, ESM, etc) put together by the technocrats in the EU Commission and the ECB. The ELA has grown to become an increasingly important tool in the Greece crisis. More importantly, it (the ELA) has allowed Greek banks to remain solvent while an agreement is chalked out by Greece and its lenders. So what is the Emergency Liquidity Assistance or ELA for short? The ELA is one of the many programs run by the European Central Bank and is described as financial support offered by the ECB in 'exceptional circumstances or on a case-to-case basis'...
What is the TLTRO and how is it different to LTRO

What is the TLTRO and how is it different to LTRO

Financial Markets Explained
The ECB recently concluded its first round of TLTRO or targeted long term refinancing operations, which turned out to be anti-climatic. Against an estimated 150bn Euros up for grabs, banks managed to take only 82bn Euros in TLTRO loans from the ECB. The question that might come to one's mind is what is the TLTRO and how is it different from the regular LTRO scheme that is well in place by the ECB. The TLTRO was first announced at the ECB's June 2014 monetary policy meeting where ECB Chief, Mario Draghi unveiled a slew of measures to tackle the high exchange rate and the threat of deflation in the Eurozone. Back then, the ECB allocated a total of €400bn Euros in targeted long term refinancing operations to ease up liquidity in the Eurozone banks. How is TLTRO different to LTRO? The TLT
ECB’s Negative Deposit Rates – Busting the misinformation

ECB’s Negative Deposit Rates – Busting the misinformation

Financial Markets Explained
After yesterday's ECB decision to venture into negative deposit rate territory; which now the mainstream media terms it as 'Historic' there have been many articles cropping up about how the ECB's negative deposit rate will affect the retail consumers. Part of this hype can be related to misinformed writers who have no clue on how the money system works in today's economy (which hasn't really changed since the past few decades). This article's aim is to provide a fact based analysis of the effects of negative deposit rates and thus concludes that for the average retail customer who banks with the high street banks, there is nothing to worry about, let alone panic. Negative Deposit Rates - For What and for Who? Large commercial banks and financial institutions such as HSBC, Deutsche Bank a...
European Banking Union Explained

European Banking Union Explained

Financial Markets Explained
The much talked about European Banking Union proposals has been making news on and off. For a complex set up such as the European Union which is comprised of various sovereign countries, in this article we explain the basics of the European Banking Union, the purpose of setting up the banking union and its far reaching implications on the Eurozone member countries. If one has to summarize the EU Banking Union proposal, it can be said that the idea is to break the vicious circle between the banking systems and their respective governments in order to create buffers of financial 'safety nets' to avoid a repeat of the financial crisis. European Banking Union - Brief History & Context The idea of establishing a common banking union across the Eurozone was highlighted after the Eurozone f...