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Charting the Regulatory Landscape

Europe: ECB deposits are still outpacing lending

Lending in Europe remains weak despite negative rates. The ECB’s latest survey showed deposits of households and companies have grown almost 10% since the ECB cut rates below zero in mid-2014, while bank lending is up only around 2%.

We are watching: A graceful Brexit? The UK’s timing to trigger Article 50, and start the formal two-year process of leaving the EU has likely been delayed to end-March. The House of Lords voted for an amendment to grant Parliament a vote on any deal with Brussels, though this proposal is likely to be overturned.

Source: ECB, Haver, as of January 2017. Indexed to June 2014=100

China: Reserves decline has paused

Interventions to support the renminbi amid strong capital outflows have caused the central bank’s foreign reserves to decline for seven straight months through January, followed by a modest uptick in February.

China has the world’s largest foreign reserves, but they have fallen by roughly a quarter, to just above $3 trillion.

We are watching: How low will they go? People’s Bank of China (PBoC) Governor Zhou Xiaochuan has said policy support for the renminbi can be sustained, but we are alert to the potential for more volatility if capital outflows continue.

Source: Bloomberg, as of February 2017

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