Subject: ECB view - Euro banks topside play From: Martin Zeman Date: Wed, 23 Jan 2019 17:23:24 -0500 To: "Paul Barrett (S" ‹ > Cc: Stewart Oldfield Paul — research piece with some nice charts on the banks topic we talked about. https://research.db.com/Research/Article?rid=2f75ac9d-8fd7-40f4-a215- d9b93915e21b-604&kid=RP0001&documentType=R Page 16 -> How/when could the ECB adjust rates policy for the banking system? Our baseline view is that the start of the ECB policy tightening cycle will be delayed to March 2020 due to the current loss of cyclical economic momentum. However, delaying the tightening cycle for cyclical reasons opens the door wider to arguments for a non-cyclical rate adjustment in 2019. We think the ECB should take some type of policy action this year to support the structural profitability of the banking system — one could even make the inverted argument that a rate hike could ease bank-based financial conditions were it to be particularly positive for banking — the only question is how and when? If the ECB is becoming concerned about current economic conditions, March could be a 'live' Council meeting for an adjustment in the policy stance. March is the obvious time to announce details of the replacement for TLTR02. This presents an opportunity to consider the width of the standing facilities corridor. EFTA01436180