09 Apr
EACC

World Bank | Joint Statement by the Heads of the International Energy Agency, International Monetary Fund, and World Bank Group

 The Heads of the International Energy Agency, International Monetary Fund, and World Bank Group have agreed to form a coordination group to maximize their institutions’ response to the energy and economic impacts of the war in the Middle East. They issued the following joint statement:
The Middle East war has caused major disruptions to lives and livelihoods in the region and triggered one of the largest supply shortages in global energy market history. The impact is substantial, global, and highly asymmetric, disproportionately affecting energy importers, in particular low-income countries. It is already transmitted through higher oil, gas and fertilizers prices, and is triggering concerns about food prices as well. Global supply chains—including of helium, phosphate, aluminum, and other commodities—are affected, as is tourism due to flight disruptions at key Gulf hubs. The resulting market volatility, weakening of currencies in emerging economies, and concerns about inflation expectations raise the prospect of tighter monetary stances and weaker growth.
At these times of high uncertainty, it is paramount that our institutions join forces to monitor developments, align analysis, and coordinate support to policymakers to navigate this crisis. This is especially the case for countries that are most exposed to the downstream impacts from the war and those confronting more limited policy space and higher levels of debt. To ensure a coordinated response, we have jointly agreed to form a group that will:
(i)  Assess the severity of impacts across countries and regions through coordinated data sharing on energy markets and prices, trade flows, fiscal and balance of payments pressures, inflation trends, export restrictions of key commodities, and supply chain disruptions.
(ii)  Coordinate a response mechanism that may include: targeted policy advice, assessment of potential financing needs and related provision of financial support (including through concessional financing), and use of risk mitigation tools as appropriate.
(iii)  Mobilize relevant stakeholders, including other multilateral, regional, and bilateral partners, to deliver a coordinated and efficient support to countries in need.
The group will work with, and draw on, other international organizations’ expertise as needed.
We are committed to working together to safeguard global economic and financial stability, strengthen energy security, and support affected countries and people on their path to sustained recovery, growth, and job creation through reforms.
—
About the International Energy Agency
The International Energy Agency, the global energy authority, was founded in 1974 to help its Member countries coordinate collective responses to major oil supply disruptions. Its mission has expanded and evolved since, and rests today on three main pillars: working to ensure global energy security; expanding energy cooperation and dialogue around the world; and supporting a secure, affordable and sustainable energy future. For more information, visit https://www.iea.org/.
About the International Monetary Fund
The IMF is a global organization that works to support economic growth and prosperity for all of its 191 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being. The IMF is governed by and accountable to its member countries. For more information, visit  https://www.imf.org
About the World Bank Group
The World Bank Group works to create a world free of poverty on a livable planet through a combination of financing, knowledge, and expertise. It consists of the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). For more information, please visit www.worldbank.org, ida.worldbank.org/en/home, www.miga.org, www.ifc.org, and www.icsid.worldbank.org.The post World Bank | Joint Statement by the Heads of the International Energy Agency, International Monetary Fund, and World Bank Group first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

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06 Apr
EACC

IMF | Global Imbalance: Old Questions, New Answers?

Blog | Widening global current account imbalances are best addressed by simultaneous domestic policy adjustments. Industrial policy and tariffs offer a costly fix with unreliable effects on imbalances.
Global current account imbalances are widening again, reversing a decade of steady decline following the global financial crisis. History suggests a clear risk: widening imbalances have often been accompanied by concentrated and lower-quality growth, triggered sectoral dislocations across trading partners, and preceded financial crises or abrupt reversals of capital flows. With the global economy already absorbing multiple shocks, such a disorderly adjustment could be exceptionally costly.
This renewed widening has revived questions about which policy tools can meaningfully impact external positions. In particular, the recent expansion of industrial policies and the proliferation of trade restrictions have diverse economic and non-economic motives, but are often justified by the objective of reducing current account imbalances. Yet there is limited analytical and empirical clarity on how these policies affect external balances.

Saving and investment
For any economy, the current account reflects the difference between what its people, businesses, and government save and invest. This concept anchors the IMF’s long-standing analytical framework for external sector assessments.
Policies affect the current account to the extent that they alter saving or investment. This depends not just how policies affect activity today, but also how they shift expectations. Personal saving rises when people expect income to decline, and it falls when they expect increased income. Companies invest based on their outlook for returns, not just today’s profitability. This insight is central to understanding why many trade and industrial policies often have limited or counterintuitive impacts on the current account.
We can see how standard macroeconomic policies have driven some of the recent increase in global imbalances: bigger budget deficits and robust consumer spending have lowered saving in the United States, while weaker demand and higher saving in China have followed its real estate slowdown.
Of course, positive or negative current account balances are not inherently undesirable, as they can reflect structural factors such as countries saving more as their population ages. It is also important to bear in mind that the relevant metric for assessing imbalances is the overall current account position of a country against the rest of the world, not bilateral or sectoral balances. Nor are imbalances simply about misaligned exchange rates and price competitiveness. A meaningful diagnosis requires a full macroeconomic assessment of influences on saving and investment, including policy drivers and structural forces.
Policy details matter 
Tariffs have been justified as a way to narrow trade deficits. However, our analysis finds that they have only small and unreliable effects on the current account because they are often perceived as permanent or are frequently retaliated against. In such cases, people do not adjust saving in anticipation of future price changes. The result is a nearly unchanged current account.
There is one important exception: temporary tariffs can raise saving by encouraging people to postpone consumption. In theory, this can increase the current account balance, though such episodes are rare, and empirical evidence suggests the effects are modest and short-lived.
Industrial policies are more diverse—and so are their effects. We distinguish two types of industrial policies: micro, which target specific companies or sectors, and macro, which are economy-wide policies that are often combined with financial or capital account restrictions.
Micro industrial policies—such as subsidies for a specific industry or targeted tax incentives—generally have ambiguous and limited effects on the current account. When they succeed in raising aggregate productivity, they tend to boost investment and consumption, often lowering the current account balance. When they fail, for example by misallocating resources and depressing productivity, they can increase the current account balance, but at the cost of lost output. Either way, large and systematic effects on external balances are uncommon.
Macro industrial policies, by contrast, can have larger effects. These strategies, often associated with export-led growth models, combine foreign asset accumulation, capital flow restrictions, financial repression, or other mechanisms that boost national saving. These policies work not by improving efficiency but by forcing saving, often at the expense of economic welfare. The current account balance increases, but mainly because domestic demand is restrained and resources are redirected toward external surpluses.
The conclusion is clear: industrial policies and tariffs are not shortcuts to external rebalancing. When they affect the current account, they often do so by suppressing consumption or investment—hardly a recipe for sustainable growth. Durable rebalancing still depends on sound domestic policies, not trade barriers.
Future imbalances and output
Applying our findings to the current economic picture, scenario analysis shows that global imbalances could widen further if trends persist. This would reflect continued large fiscal deficits and strong domestic demand in the United States, additional government support to exporters in China alongside weaker safety net provision and consumption, and subdued investment and weak productivity growth in Europe. In this setting, an escalation of tariffs does little to change current account positions, largely because these measures are reciprocated or perceived as permanent, but it does lower output across regions.
By contrast, an alternative scenario anchored in domestic rebalancing—fiscal consolidation in deficit countries, more consumption‑led growth in surplus economies, and productivity‑enhancing investment elsewhere—would narrow global imbalances and raise global output.
This synchronized adjustment would lead to the best outcome for the global economy. The economic drag from US fiscal tightening would be offset by stronger demand from China and Europe. But even if such coordination proves difficult, the best course of action for each country is clear: start addressing domestic imbalances now, regardless of what others do. Delaying adjustment poses a threat to domestic and global economic stability. Unilateral adjustment will also add pressure for other economies to adjust. Stronger domestic demand in China, by lifting global demand, would increase global interest rates and make fiscal adjustment more likely in other regions such as the United States. Fiscal consolidation in the United States could further stoke deflationary forces in China and incentivize efforts to boost consumption.
What is clear is that global imbalances will be shaped by domestic macroeconomic trajectories and policies rather than by tariffs or narrowly targeted industrial policies. It’s also evident that reducing global imbalances works best when countries move together. The IMF, though its analysis, policy advice, and convening power, can help its members move toward this better outcome.
 
 
Compliments of the International Monetary FundThe post IMF | Global Imbalance: Old Questions, New Answers? first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

02 Apr
EACC & Member News

Bird & Bird: European Blockchain Sandbox – supporting FinTech innovation and compliance

The European Blockchain Sandbox (‘Sandbox’), a European Commission initiative, concluded its work with the publication of the 3rd cohort best practices report in February 2026. The Sandbox provided a pan-European framework enabling cross-border regulatory discussions between blockchain/DLT innovators from both the private and public sectors with regulators and authorities on national and EU level.

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02 Apr
EACC

ECB |How Banks Are Adjusting to Declining Reserves

As the Eurosystem normalises its balance sheet, central bank reserves – banks’ most liquid asset – keep declining. This post examines how banks adapt to lower levels of reserves and explains why take-up in the Eurosystem’s standard refinancing operations (SROs) is expected to increase.[1]
 
Central bank reserves have almost halved from a peak of €4.9 trillion in 2022 to €2.6 trillion in early 2026 (Chart 1a). While still abundant, they are unevenly spread across banks. This implies that, as the Eurosystem continues to shrink its balance sheet, some banks may need to source reserves sooner than others. At the same time, money market rates at which banks lend and borrow have moved closer to the deposit facility rate (DFR) – the main policy rate through which the ECB steers its monetary policy stance. In fact, secured money market – repo – rates last traded this close to the DFR in 2020. This blog post examines the implications of these trends.
In an annual Eurosystem survey, bank treasurers were asked about the preferred level of reserves they wish to hold. When compared to actual reserve holdings, we find that banks representing 26% of all euro area banking assets now operate close to what was indicated as their preferred level of reserves, up from 15% a year earlier (Chart 1b).[2] The group includes large banks, such as globally systemically important banks (G-SIBs), as well as custodians and asset managers – institutions that generally manage their liquidity more actively.
Looking ahead, reserves are projected to decline by about €470 billion per year, though this projection is subject to high uncertainty (Chart 1a).[3] While at present most banks are still holding abundant reserves, the share of banks nearing their preferred reserve levels is expected to increase. By the end of 2026, banks accounting for 50% of total banking assets are projected to reach their preferred level (Chart 1b). In other words, banks will have to more actively manage their liquidity.

Chart 1
Reserve positions of euro area banks

a) Projected path of reserves

b) Share of banks close to their preferred reserve level

(EUR billions)

(percentage of banking assets)

Sources: ECB (Eurosystem market operations data and the Eurosystem Bank Treasurer Survey for the fourth quarter of 2025).
Notes: The left panel shows the projected path of euro reserves assuming take-up in standard refinancing operations is in line with the median SMA respondent. The uncertainty area around the projections is based on a range of alternative assumptions. The right panel classifies banks by the relative distance between their reserves in fourth quarter of the relevant year and their preferred reserve level indicated in Bank Treasurer Survey. Banks are classified as close to their preferred level if their reserve holdings are within a distance equivalent to 1% of total assets of the reserve target they indicated in the Eurosystem Bank Treasurer Survey. All other banks are classified as banks with abundant reserves. The projection for the fourth quarter of 2026 assumes that the aggregate decline in reserves will continue at the same pace as that observed for each bank business model group between the fourth quarter of 2024 and the fourth quarter of 2025.

As reserves decline, banks will increasingly rely on money markets and the Eurosystem refinancing operations to manage their reserve levels. Those banks that are closer to their preferred reserve levels or their internal regulatory targets will normally be the first to seek liquidity. We are analysing banks’ behaviour in money markets and central bank operations in order to learn how reserves are distributed through the market. We are also investigating how money market rates are evolving and how banks are adapting to the changes to the operational framework for implementing monetary policy announced in March 2024.
Liquidity is being redistributed smoothly
Commercial banks are actively lending and borrowing in money markets, which is redistributing their central bank reserves smoothly across banks and euro area countries. Currently this redistribution is working well – there are no signs of fragmentation. The repo market – the main money market to borrow and lend reserves – is dominated by banks with abundant reserves.[4] These are mainly dealer banks that intermediate liquidity. However, other banks are also becoming increasingly active in the repo market in order to manage their reserve levels (Chart 2). In fact, those closest to their preferred reserve levels borrow the most in the short-term repo market relative to their reserves.

Chart 2
Outstanding gross and net repo borrowing of banks

Sources: ECB (Securities Financing Transactions Data and the Eurosystem Bank Treasurer Survey) and ECB calculations.
Notes: The chart shows the average gross and net outstanding repo positions in 2025 by bank liquidity group. “Term repo” is defined as transactions by euro area banks against any collateral type with a maturity above one month. The bank liquidity groups are banks with reserves close to target (i.e. close to their preferred level); and banks with abundant reserves. For banks with abundant reserves we distinguish between those that are close to either their internal liquidity coverage ratio (LCR) or net stable funding ratio (NSFR) targets. Banks are considered to have optimised their LCR or NSFR if they are within 11 percentage points of their internal LCR target or 5.3 percentage points of their internal NSFR target. These ranges represent the 25th percentile of LCR standard deviations and the 50th percentile of NSFR standard deviations.

Banks are also active in term money markets – a market where they borrow and lend for longer than 30 calendar days. They use this market to manage their compliance with Basel III regulatory standards: the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). Survey evidence indicates that banks set internal targets above the 100% regulatory minimum for these regulatory ratios and are keen to defend them. When facing liquidity shortfalls, term money markets are typically the first point of access. This market activity has further redistributed reserves across euro area banks and countries, but it has also pushed up premia on term liquidity, as banks close to their regulatory targets increasingly borrow in these markets to fine-tune these ratios. In turn, activity and interest rates in the term segment can act as an early indicator of changing system-wide liquidity needs and as a benchmark for how attractive Eurosystem standard refinancing operations are. Figure 1 illustrates these interactions.

Figure 1
Illustration of the interaction of reserves with regulatory ratios, markets and the central bank

Source: ECB.

Short-term interest rates are close to the deposit facility rate
Overall, short-term market interest rates remain near the ECB’s DFR (Chart 3a). The benchmark rate for unsecured bank borrowing is the euro short-term rate (€STR). Its spread versus the DFR has gradually narrowed. Likewise, secured money market (repo) rates have moved closer to the DFR as collateral has become more abundant and reserves have continued to decline.

Chart 3
Short-term interest rates steered by the deposit facility rate

a) Spread between short-term rates and the DFR

b) Spread between repo rates and the DFR by borrower type

Sources: ECB data (Money Market Statistical Reporting and the Securities Financing Transactions Data) and ECB calculations.
Notes: The left panel shows the spread between the €STR and the DFR as well as the spread between the repo rate and the DFR, 5-day moving average excluding month-ends, where the repo rate is the weighted-average repo rate for one-day trades collateralised by euro area government bonds or other EU bonds. The repo rate is trimmed at the 25th and 75th percentiles. The right panel shows the transaction volume-weighted average repo rate for: borrowing banks that are close to their preferred reserve level; borrowing banks that have abundant reserves (see Chart 1b); and borrowing by hedge funds. The latest observation is for 30 March 2026.

The share of overnight repo trades above the DFR has increased to 40%, but this does not reflect funding pressures for banks. In fact, banks – including those with less abundant reserves – are still borrowing at rates just below the DFR on average (Chart 3b). Instead, repo rates above the DFR mainly reflect cash demand from hedge funds which are willing to pay the spread to fund their investment strategies in other market segments.
Lessons learned from other jurisdictions, i.e. the United States and the United Kingdom, underscore two points. First, money market rates can also be driven by other factors, such as higher collateral supply or higher non-bank demand for cash. And, second, it is not only banks’ reserve needs which can substantially influence money market rates.[5] So rising rates do not necessarily signal increasing scarcity of reserves, but may instead reflect shifts in market structure or funding conditions. In such cases, movements in certain segments of the money markets need to be interpreted with caution, as they may not provide a reliable signal about the overall liquidity environment.
Declining reserves to eventually lift take-up in ECB operations
The demand for Eurosystem SROs remains low so far, because conditions in money markets continue to be favourable. On average, money market rates are largely below the rate on the main refinancing operation (MRO), currently 2.15%, which is 15 basis points above the DFR, now at 2.0% (Chart 4a). Banks can borrow at lower rates in markets than they would have to pay to borrow from the central bank against a broad set of collateral. As a result, the take-up in the ECB’s SROs has remained limited, averaging around €20 billion last year (Chart 4b). In contrast, longer-term market funding (for instance, with tenors of 12 months) is seeing rates above the MRO rate. This reflects its regulatory value, especially for the NSFR, as SRO funding does not count towards this ratio. However, while overall SRO take-up is low, more banks are participating with test bids or for covering temporary liquidity needs. Simply put, there is little urgency to borrow from the ECB as of now, but banks have to ensure operational readiness.
Our survey results show that banks’ incentive to use Eurosystem operations is likely to increase as reserves become scarcer and SROs become more attractive relative to market funding. This means that moving to lower levels of reserves may, all other things being equal, be accompanied by a rise in money market rates.
In the ECB’s operational framework, the SROs are designed to serve as the marginal tool for meeting banks’ liquidity needs. As reserves become less abundant and more banks will approach their preferred levels of reserves, SROs – provided at fixed rates with full allotment – offer a key source of reserves. Also, when money market rates are moving higher, borrowing through SROs and lending into the money market becomes more attractive. In turn, more take-up in SROs will inject reserves into the system, keeping money market rates in check.

Chart 4
Favourable funding conditions in money markets explain low take-up in Eurosystem operations

a) Relative market pricing of borrowing in money markets versus the expected deposit facility rate

b) Use of Eurosystem SROs

Sources: ECB (Money Market Statistical Reporting, Securities Financing Transactions Data, Short-Term European Paper statistics, Survey of Monetary Analysts) and ECB calculations.
Notes: The left panel shows the average difference between each money market rate and the expected DFR implied by the overnight interest swap (OIS) rate with a matching maturity, as an average from July 2025 until 30 March 2026. Repo against high-quality liquid assets (HQLA) collateral – such as euro area government bonds (EGB) – tends not to provide any LCR or NSFR regulatory value irrespective of the trade maturity. The right panel shows the outstanding amount in SROs and the median consensus from the March 2026 Survey of Monetary Analysts. LTRO stands for 3-months longer-term refinancing operation, MRO for main refinancing operation.

Conclusion
More banks are now operating closer to their preferred reserve levels and the euro area financial system has so far adjusted well to declining reserves. Banks are borrowing and lending in the markets effectively, which is helping redistribute reserves smoothly across banks and countries. There are no signs of fragmentation. Short-term interest rates, both secured and unsecured, remain close to the ECB’s DFR. Until now, money market funding conditions have been favourable compared with the terms for borrowing through the SROs. Therefore, banks have met almost all their liquidity needs through the money markets. However, as reserves continue to decline it will be important for banks to be ready to use Eurosystem operations as routine tools to manage their liquidity and to support market-making.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

Standard refinancing operations consist of the main refinancing operations (MROs), with a duration of one week, and also the longer-term refinancing operations (LTROs), which have a duration of three months. Both operations provide liquidity upon demand against broad collateral, at the MRO rate and the average MRO rate respectively.

The Eurosystem Bank Treasurer Survey was conducted between 14 and 29 October 2025 with two main objectives: to determine the preferred minimum level of reserves banks aim to maintain under the current economic and financial conditions and to assess the demand for Eurosystem refinancing operations. The survey also investigates what drives demand for central bank reserves and how regulatory requirements interact with that demand.

The path of reserves is calculated based on a projection of the other balance sheet items of the Eurosystem. Banknote growth and non-monetary policy holdings are the main contributors to the uncertainty around the central projection.

Repo refers to repurchase transactions, a type of short-term loan where one party sells a financial asset with a simultaneous commitment to repurchase that asset at a future date. The repo market is therefore also called the secured money market, as borrowing of liquidity (reserves) is secured by collateral (typically government bonds) which the cash lender keeps as insurance should the borrower not repay the loan. Before the global financial crisis, reserves were mainly redistributed via unsecured borrowing and bank lending.

For example, in the United States the Federal Reserve announced the launch of Reserve Management Purchases to stabilise the level of reserves, while in the United Kingdom banks are increasingly borrowing from the Bank of England’s operations, even though reserves remain above the preferred minimum range of reserves. In these jurisdictions, repo rates have experienced upward pressure and mild volatility, which is partly related to demand from non-banks, including hedge funds, and partly to bond supply.

 
 
Compliments of the European Central Bank The post ECB |How Banks Are Adjusting to Declining Reserves first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

01 Apr
EACC & Member News

Bird & Bird: EU Inc. – A new European company form for founders and investors

On 18 March 2026, the European Commission presented its long-awaited proposal for EU Inc. – a completely new, harmonised European company form intended to be the cornerstone of the so-called ‘28th regime’. The proposal is ambitious: it aims to provide European founders and investors with a common, digital corporate law framework applicable across the EU, without having to navigate 27 national legal systems and more than 60 different company forms. Below, we outline the key elements from a practical start-up and VC perspective.

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01 Apr
EACC

European Commission | Questions and Answers on the EU ETS Market Stability Reserve

What is the Commission proposing to change in the EU ETS Market Stability Reserve?

The Commission is proposing to stop the automatic invalidation of ETS allowances held in the Market Stability Reserve (MSR) above 400 million. Instead of being cancelled, these allowances will be retained in the reserve.
This strengthens the MSR’s role as a buffer, improving its ability to respond to future market developments, including situations of supply tightness or excessive price volatility, while preserving the system’s rules-based design.

Why is the Commission proposing updates to the Market Stability Reserve now?

The EU Emissions Trading System(EU ETS) is delivering: it is reducing emissions, cutting Europe’s dependence on imported fossil fuels and driving investment in clean, homegrown energy. At the same time, as recently highlighted by President von der Leyen at the March European Council, it needs to be modernised to remain effective, flexible and responsive to changing market conditions.
The proposed update to the MSR reflects this need. Stopping the invalidation of allowances will strengthen the system’s capacity to act as a buffer and ensure stability in the years ahead. The comprehensive review of the EU ETS, planned for July 2026, will contain that assessment and include any relevant adjustment to keep the MSR fit for purpose in the next decade.
This measure is part of a broader effort to keep the EU ETS fit for purpose, maintaining its core design while strengthening its ability to deliver decarbonisation, competitiveness and energy security.

How will this change affect carbon prices and the functioning of the EU carbon market?

The Commission does not speculate on carbon price developments or make projections on the price impacts of legislative proposals. The EU ETS remains a market-based system where prices are determined by supply and demand.
The proposed change does not have an immediate impact on the market balance. Under the proposal, allowances in the MSR would only be released into the market at times of market tightness or excessive price increases.
A comprehensive review of the EU ETS will follow in July 2026.

How will the proposal support Europe’s competitiveness while delivering on its climate targets?

Mainly thanks to the ETS, domestic emissions in the EU dropped by 39%, while the economy grew by 71% between 1990 and 2024. The proposal strengthens the EU ETS, so it continues to drive emissions reductions while providing the stability and predictability that industry needs to invest in the transition.
At the same time, strengthening the Market Stability Reserve improves the system’s ability to respond to market imbalances and reduces the risk of excessive price volatility. A more stable and predictable carbon market provides greater certainty for businesses planning long-term investments in clean technologies.
 
 
Compliments of the European Commission The post European Commission | Questions and Answers on the EU ETS Market Stability Reserve first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

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