Links: Yemeni money, IT migration screw-up, ECB response to Covid-19 and more

Some interesting articles I came across recently:

Yemen has two governments (civil war), one currency, and two monetary systems.

IT project management horror story at German Apobank (in German).

Overview of the Eurosystem response to the pandemic.

What central banks have done to help the economy survive Covid-19

Central bank responses to the pandemic. Source: Banque de France

Historical lessons from large increases in government debt

Euro area economic expansions are like Tolkien’s Elves: they don’t die of old age. The most recent one was murdered by corona.

(On a sidenote: I’ve been critical about the lack of blogging at the ECB. But it turns out that the Banque de France’s Eco Notepad is an excellent blog, as the four articles above show!)

All of the World’s Money and Markets in One Visualization

How may clicks to open a bank account? (Built for Mars on the user experience of retail banking)

The Economic Foundations of Industrial Policy: an amazing longread (very long!) on productivity, explaining why rich nations are rich

Ancient history: “In 2003, refinancing via LTROs amounts to 45 bln Euro which is about 20% of overall liquidity provided by the ECB.” (On June 18, 2020, banks borrowed 1.31 trillion euro from the ECB via TLTRO!)

The case for a corona consolidation of European banks and insurers

Many European banks and insurance companies are trading well below their book value.

Large firms can unlock a lot of value by taking over smaller competitors, thanks to the negative goodwill. Consolidation would support the profitability of the financial industry.


Italian banks in particular would benefit from a consolidation of their fragmented domestic market1. In February, Intesa Sanpaolo launched a bid for UBI Banca. UniCredit should consider a similar deal with Banco BPM, Banca Monte dei Paschi di Siena or BPER Banca. Also, French BNP Paribas could merge its subsidiary BNL with one of those banks.


Spanish banking is already quite concentrated. Santander took over Banco Popular in 2017. The integration was completed in 2019. Santander and BBVA could acquire Bankinter, Bankia, or Banco de Sabadell. Of course, further domestic growth of the majors depends on regulatory approval. The two global Spanish banks definitely have the expertise to execute such an operation.

Figure 1 shows the number of bank branches relative to population for Spain, Italy and the Netherlands. It’s clear that Italy and Spain have a lot of potential for cost cutting.

Figure 1: Commercial bank branches per 100,000 adults in Spain, Italy and the Netherlands. Source: World Bank.

Portugal, Poland and the Netherlands

In neighbouring Portugal, Banco Comercial Português seems a good match for Santander. Especially since both Iberian banks are active in Poland. Speaking of Poland, Santander and ING might be interested in mBank. mBank is owned by Commerzbank, a bank that desperately needs to focus its strategy.

A foreign group could shake up the uncompetitive Dutch market by buying ABN AMRO. However, as most of ABN AMRO is still state owned, this will be complicated.


Many listed insurers like Aegon, NN Group (NL), Ageas (BE), Baloise, Swiss Life (CH) or UnipolSai (IT) trade at a significant discount to their book value. This could be an opportunity for big insurance companies AXA, Allianz and Zurich Insurance Group.

Consortiums of buyers could also divide the operations of their targets (although there is a bad precedent for this scenario).

Exciting times!

Update 9 June 2020: Banco Sabadell plans to close 235 branches

Update 23 July 2020: Marc Rubinstein at Net Interest came to the same conclusion: “Coming out of Covid, when banks realise they don’t need such a large physical presence, further consolidation is likely. What’s more, if equity valuations don’t recover, banks may be able to use negative goodwill to cover restructuring charges.”

The corona reproduction number R is a function of …?

The number of corona infections can roughly be modeled as N ~ R^t, where t is time1 and R is the reproduction number. The reproduction number R is the average number of new infections caused by one person infected with Covid-19.

If R > 1, the number of patients grows exponentially. If R < 1, the epidemic fizzles out.

How do people get infected? Obviously, they have to come into contact with the virus.

R is high when people are close together, indoors, and talking/singing/shouting. That explains why most infections occur at care facilities, slaughterhouses, prisons and at home2. There also seems to be a climatological effect. Sunlight, heat and humidity are correlated with a lower R. Genetic and (tuberculosis) vaccination differences between populations have been suggested to play a role.

Johannes Borgen (@jeuasommenulle) has estimated R for different countries3. You can find his methodology here.

As expected, lockdowns reduce R to below 1.

According to this map, the pandemic is still growing in Latin America, Africa and South Asia.

Inflation is #VALUE!

What is the inflation rate during and after lockdowns?

Inflation is already hard to measure in normal times, as I discussed in Bankers are people, too (page 126-129).

But the corona crisis adds further complications. Some services are unavailable due to the corona lockdown, for example restaurant visits and air travel. To discourage hoarding, supermarkets stopped offering discounts.

The abrupt shock causes headaches for statisticians.

For more, you should read Claire Jones’ Alphaville post on the fuzzy inflation figures.

Will our lifes be fundamentally different after corona?


I don’t believe that the corona pandemic will fundamentally change the course of geopolitics or the global economy. As I predicted on March 25, 2020:

All the doomers, America-haters, EU-haters, permabears, moralizing nutters, communists, and libertarians are crawling out of the woodwork due to the coronavirus. However, I expect they will be proven wrong again. #timestamp#prediction

  • The coronavirus will not cause the collapse of society
  • The coronavirus will not end the dollar hegemony
  • The coronavirus will not be the end of the American empire
  • The coronavirus will not cause the end of the euro
  • The coronavirus will not cause the end of the EU
  • The coronavirus will not start a 20+ year bear market
  • The coronavirus will not reverse global supply chains
  • The coronavirus will not stop the desire for money, travel or luxury
  • The coronavirus will not stop climate change
  • The coronavirus will not cause the end of capitalism
  • The coronavirus will not lead to central planning
  • The coronavirus will not stop the government from intervening in the economy
  • The coronavirus will not stop central banks from “printing money”

Is the Corona Crisis the beginning of the Dumb Depression?

Will millions of businesses fail due to the corona crisis? Are we doomed to years of high unemployment?


But let’s be very clear. A depression is a political choice.

Governments can solve the crisis in the blink of an eye. Transfer money to households and businesses that suddenly lost their income.

Problem solved.

2020 KBC shareholder meeting

I live-tweeted the 2020 shareholder meeting of KBC. You can read it on Twitter, in the Threadreader app or below:

Net interest margin in 2019: 1,95%

CEO Johan Thijs: 9% increase non-life insurance fees (KBC is bank-insurance company)

FYI: you can follow meeting here:…

KBC had €216 billion assets under management in 2019 (I wonder how much will remain in 2020…)

KBC pays €491 million euro in bank taxes!

Continue reading “2020 KBC shareholder meeting”

German judges versus the ECB

The German Federal Constitutional Court (Bundesverfassungsgericht) made a decision concerning the ECB’s QE program1.

This article explains how the ECB can defend itself.

But I want to play devil’s advocate, and defend the German judges.

Despite buying thousands of billions of euros worth of bonds, the ECB has undershot its inflation target for years. The Court has a point that buying vast amounts of sovereign debt doesn’t seem proportional to this disappointing outcome.

In fact, the ECB could achieve its primary objective of price stability with a much smaller balance sheet. For example by dual interest rates. Or by helicopter money.

Second, the Court could prohibit the Bundesbank from participating in QE. But buying German bonds was not needed for monetary policy anyway! It was a political decision to buy bonds proportional to the national capital key in the ECB.

Finally, the decision of the Court should force European politicians to fix this mess. Maybe the ECB should have a dual mandate like the Fed has, so inflation and employment carry the same weight in monetary policy decisions. Or they could change the structure of the Eurosystem. Do we still need 19 national central banks when we have the ECB? Sounds like a make-work scheme to me…

Tax-paying companies have earned the right to corona support

The corona crisis is a once-in-a-lifetime emergency. You cannot expect firms to anticipate zero revenu for months on end.

Therefore, it’s reasonable to help firms with loans and grants. But not all firms. Let’s reward corporate citizens who follow the law and pay taxes.

Shorting is hard

Great Twitter thread (unrolled version here):