By Rob Burnett, head of European Equities at Neptune
The ECB delivered a strong package in its latest policy announcement that managed to find the right balance between supporting the economy and not endangering the banking system.
The EU banking system is very sensitive to negative rates and, if the ECB were to have cut rates by too much, it could have created systemic stress. The market was expecting cuts of around 12-14bps and so the 10bp cut in the deposit rate was slightly easier on the banks than anticipated. More importantly, all the other measures announced were supportive of banking profitability.
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