Download publication

External Publication

Analysis of development in EU capital flows in the global context

The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. This report, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, aims to analyse capital movements in the European Union in a global context.

By: , , , , and Date: January 15, 2018 Topic: Finance & Financial Regulation

This material was originally published in a study commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union. The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Commission. The study is available on the European Commission’s webpage. ©European Union, 2017

The aim of this report is to analyse capital movements in the European Union in a global context. The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. Free movement of capital can enhance welfare if it channels savings towards productive use, but in crisis times, reliance on capital flows can also be a source of vulnerability if those flows transmit shocks across borders and disrupt local financial systems, with far-reaching spillovers into the real economy.

The first two sections are devoted to the monitoring of developments in international capital flows, cross-border financial positions and exchange rates and an analysis of global capital flows.

Section 2 presents trends from a global perspective, focusing on the large economies and groups of countries that are decisive for the overall picture. The authors combine up-to-date evidence from balance-of-payments statistics concerning transactions and stocks of financial assets with an analysis of policy developments and current events. Special attention is paid to potential repercussions from major recent political events, such as the UK’s Brexit referendum and the US presidential election, to the effects of monetary policy in various jurisdictions.

Patterns in the banking sector are analysed, with a comparison of countries in terms of their openness to capital flows, using established indicators of financial restrictions and focus on the evolution of Chinese FDI in the EU in recent years.

Section 3 focuses on Europe. Continuing to focus on the euro area because of its unique characteristics, the authors also pay more attention to non-euro area EU countries. However, instead of reporting data for all 28 EU Member States, they combine countries into five groups (euro-area creditors, the Benelux countries, euro-area debtors, northern Europe, and central and eastern Europe) to facilitate the recognition of key tendencies across the EU. This research also show data separately for France and Italy, which have specific characteristics that make them difficult to group with other countries. The authors analyse the different capital flow patterns and developments in international investment positions, including their compositions.

Finally, section 4 presents the results of our in-depth analysis, which this year focuses on the resolution of non-performing loans (NPLs), in particular on the development of secondary markets for distressed assets in the EU. The main motive behind this study is the fact that the EU banking sector currently needs to address a €1 trillion stock of NPLs. This type of secondary market for loans is currently under-developed compared to the size of the NPL problem in Europe, and also compared to other jurisdictions. Developing a market for asset transfers is therefore essential to respond to this immediate priority of working out distressed loans. Such an initiative would also contribute to a broader re-balancing between banks and capital markets that is necessary in Europe.

View comments
Read article Download PDF More on this topic More by this author

External Publication

Taking stock of the Single Resolution Board: Banking union scrutiny

The Single Resolution Board (SRB) has had a somewhat difficult start but has been able to learn and adapt, and has gained stature following its first bank resolution decisions in 2017-18. It must continue to build up its capabilities, even as the European Union’s banking union and its policy regime for unviable banks continue to develop.

By: Nicolas Véron Topic: European Macroeconomics & Governance Date: April 18, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Frans Timmermans

The sixth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Mehreen Khan, André Sapir and Frans Timmermans Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 11, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Manfred Weber

The fifth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Anne-Sylvaine Chassany, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 9, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Jan Zahradil

The fourth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Jim Brunsden, Maria Demertzis and Jan Zahradil Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 4, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Luis Garicano

The third event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Luis Garicano, Mehreen Khan and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 3, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Bas Eickhout

The second event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Bas Eickhout, Guntram B. Wolff and Rochelle Toplensky Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 2, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Yanis Varoufakis

The first event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Maria Demertzis, Martin Sandbu and Yanis Varoufakis Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 26, 2019
Read article More on this topic

Blog Post

The European Union must change its supervisory architecture to fight money laundering

Money laundering scandals at EU banks have become pervasive. The authors here detail the weaknesses the current AML architecture's fundamental weaknesses and propose a new framework.

By: Joshua Kirschenbaum and Nicolas Véron Topic: European Macroeconomics & Governance Date: February 26, 2019
Read article More on this topic More by this author

Opinion

The EU needs a Brexit endgame

Britain and the EU must try to preserve the longstanding economic, political, and security links and, despite the last 31 months spent arguing over Brexit, they should try to follow a new path toward convergence.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: January 31, 2019
Read article More on this topic More by this author

Blog Post

After the ESM programme: Options for Greek bank restructuring

With the end of the Greece support programme, authorities now have scope to focus on the legacy of NPLs and excess private-sector debt. Two wide-ranging schemes are under discussion. They should be assessed in terms of required state support, likely investor appetite for problematic bank assets, and institutional capacity to manage a complex new organisation tasked with debt restructuring.

By: Alexander Lehmann Topic: European Macroeconomics & Governance Date: January 29, 2019
Read article Download PDF More on this topic

Policy Contribution

Equity finance and capital market integration in Europe

Facilitating the financing of European companies through external equity is a central ambition of European Union financial regulation, including in the European Commission’s capital markets union agenda. Against this background, the authors examine the present use of external equity by EU companies, the roles of listings on public markets, and the regulatory impediments in national laws. They assess to what extent EU market integration has overcome the crucial obstacle of shallow local capital markets.

By: Inês Goncalves Raposo and Alexander Lehmann Topic: Finance & Financial Regulation Date: January 17, 2019
Read article Download PDF More on this topic

External Publication

Analysis of developments in EU capital flows in the global context

The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. This report, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, aims to analyse capital movements in the European Union in a global context.

By: Grégory Claeys, Maria Demertzis, Konstantinos Efstathiou, Inês Goncalves Raposo, Alexander Lehmann and David Pichler Topic: European Macroeconomics & Governance Date: January 17, 2019
Load more posts