the culture at the bank. they had certainly been trying very hard to reach out to customers, to their own employees, to focus on the hill, and answer questions and be more accessible, and right the wrongs, so to speak. this continues. lawmakers on both sides of the aisle have continued to call for investigations. there's a number of government agencies including the sec, looking into various aspects of this. will continue. wells fargo will continue to be in the hot seat. regulators across the board are under pressure, more so than even before to demonstrate they happened atf what wells fargo, and more broadly at other big thanks. -- big banks. wells fargo has a lot of work, and continues to do a lot of work to renovate this. >> you mentioned reaching out to customers and employees. what exactly have they been doing to help customers, and employees who might have gotten fired? >> that's part of their strategy as well, several different aspects of how they are helping -- particularly one issue, i will give an ex

settles with the regulators? deutsche bank has put $9 billion 2008.ince 200 defrauding fannie and freddie and mortgage-backed securities has drawn and $46 billion in fines, but this is a state of play. as a proposition to the market, do you see a resurgence? the yield curves are rising. is monte paschi and deutsche bank on your buy list? not least the trumped week as well. have a look. manic --fairly flat at the moment. discretionary down by 1.1%. the data was mixed. household purchases great, but the jobless claims rising to the highest level in six months. al golden here up a third of 1%. here upave got gold in 0.3%. the have contracted for the 30th day in a row. a long drawng removal from gold and oil off by zero point 4%. oil trims its weaker gains. stockpiles rising in the united states of america. as eight span by 2.26 million barrels last week so inventories are the highest in three decades and the dollar, a little bit of a pod. down by 1/8. afflicting on the jobless numbers from yesterday. those are your market. things

when you look at the u.s. banks, particularly with goldman sachs, jpmorgan, on the heels of this trump rally, europe banks still underperforming relatively speaking. >> yes, we've seen some rally recently, but you highlight a key point, there's a major trend we've seen in equity markets, starting in early july as interest rates bottomed and accelerating sharply after the u.s. presidential elections as people have moved away from some of the parts of the market seen as safe, high quality, low beater, towards the more cyclical exposures including banks. that probably has further to run in 2017. >> we had a guest yesterday saying he's calling the top of the markets. enough is enough. we've had this run. valuations don't make sense. do you think we're at the top of the market? >> i think it's always hard to call those markets. >> super hard. >> i would say for european equities starting valuations are not demanding, not particularly cheap by historical standards but not expensive either. interest rates remain low. as an

the bank says the u.s.overnment's claims are not consistent with the facts and it will defend itself against the unreasonable allegations and demands. barclays won't say why settlement talks with the doj broke down but reports say the bank believes continuing negotiations under a new u.s. administration may be more beneficial. certainly a theme for corporations, talking about this idea that they could look to get favorable or more favorable environments in a possible trump administration. >> a justice department under jeff session also have to take up this 200-page lawsuit from the u.s. suing barclays. i wonder, though, yes, it is considered a much more favorable environment for banks, the trump administration. but this is still a european bank having to settle with the u.s. trump has talked about u.s. first. >> and these were americans adversely affected to a large degree by some of the alleged misdeeds from some of these mortgage situations. >> that's a to be continued on barclays. more news on italian ba

we had the bank of japan meeting, the last of the central banks to meet this year. th figure that it expects to hit next year. 6.5%. it is always 6.5! the chinese economy grows rapidly and slows down, there are interesting things, but the official numbers never seem to change. last year, when we kicked off, there was a panic about china having a hard landing and the currency was weak and oil prices we re currency was weak and oil prices were collapsing, but now if anything theissueis were collapsing, but now if anything the issue is the other way around, the issue is the other way around, the economy is strengthening, housing market is booming. we have seen a housing market is booming. we have seen a shift, which is what beijing has wanted to do. it has not been the factory floor, it is the services. the housing market. a lot of stimulus was thrown at china over the last couple of years, including currency weakness, and they have turned inflationary for the world, and that is why will see interest rates going up and bark —— bond market selling off. if the interest ra

let's go back to the banks. u believe it is almost impossible at this moment in time, 60% of italians voting no on the referendum, for monte dei andhi to reassure investors find an anchor investor or other investors to raise that capital? marcello: listen, impossibility is a difficult word to use. i would use "very low probability" to find a market solution. up an we have to build alternative. in my opinion, the only possible alternative is a public intervention. but obviously, a public intervention requires an arrangement, a compromise between the italian government and european institutions. you know very well that the european gnomes avoid the public intervention except in very extreme cases. hence, we have to judge of currently in italy the banking sector is in an extreme situation or not. francine: professor, we will get back to the rules in just a second. that from a point -- i covered many crises in my years in bloomberg. a lot of the anglo-saxon world, a lot of the people in brussels, have always said, we

the swiss national bank has left -0.75%.sit rate on hold later today, we get the decision from the bank's speak to bloomberg's nejra cehic. boe.ch 20 two for the no change expected today? nejra: that's right. no change expected today. orn to the benchmark rate asset purchase target. what investors will focus on is any comments mark carney -- any comments that come out in a minute of this balancing act between supporting growth on one hand and controlling inflation on the other. that dilemma has been in the economic data we had this week. employment dropped for the first time in more than a year. on the other hand, inflation accelerating to its highest in more than two years. those expectations have been fueled by a weaker sterling. sterling, we have seen on a trade basis rise 6.5% from the last meeting, which was key. there was a shift from easing buyers to a neutral stance. intelligence is expecting the bank of england to confirm that neutral stance today. francine: at the same time, we know mark carney is in frankfurt today. we are not sure whether he is -- the ecb or not. nejra: this

the thet's get to banking stories of the day. deutsche bank agreed to settlements with the justice department. barclays is being sued for fraud. italy is rescuing. columnist whoour writes about the banking center. also is the visiting professor of the london school of economics. he used to be the director general at the italian treasury. thishave put away liquidity injection and capital injection. is it enough? is 20 billion euros enough to cure the balance sheet elements of the italian taking industry? >> i think it's certainly a very large amount area i think it could be enough. thedon't have to clean up banking sector in italy. you need to fix the process and facilitate a speed up in reduction. this is what is the aim of this package. mark: how long does this process start. at bringing down these nonperforming loans. take?ng is it going to when will we say the italian banking industry is truly on the road to fixing itself, which this economy really needs. issue was the package approved last night. it's a good chance to see this

already says, the central bank faces the problem that pretty much all of the central banks are facingrld. how do you expect the riksbank to navigate the volatility happening right now? robert iger: your man in stockholm highlights two issues here. the first -- robert parker robert parker: that has resulted tt race in aant neat and government bond market trading and that has become an issue in a number of eurozone government bond markets. issue number one is qe has an unintended consequence on capital market liquidity. i think in the case of sweden, the other point is that you know, not just are, but of course other swedish cities, the real estate market has arguably become too strong and actually swedish inflation has started to pick up over the last six months or so. so yes, i think in the thet-term we will see riksbank maintaining a very easy monetary stance but as the ecb progressively and slowly tapers throughout 2017, i think you are probably going to see the same from the riksbank so short term the monetary stance will remain very easy but i think we will be having a very differ

from a value perspective -- >> you mentioned the banks a moment ago the european banks. what about the italian banks. >> the italian banks are a significant risk. while we've seen investors coming off they are increasing in italy. so we do caution investors to stay clear of italian banks at this point in time. >> european banks? >> we've seen them already surge so since -- we've seen a 37% increase in european banks. the run up has been quite strong, but they have been underperforming for a significant amount of time. just given the negative news of the brexit event that has actually weighed on sentiment. i think if the ecb continues with the monetary stimulus we're seeing signs of credit reaching the economy barring italy and that should help the banking sector. >> what are you willing to hold because gold has been off seven straight weeks. you see a run up on bond commodities. what do you want to hold? >> we still are positive on gold despite its sell off. we've seen quite strong outflows from gold ever since trump has taken power. but we believe investors essentially o

an independent audit of the bank. ay this amount is thatly within the limits were planned in 2016's budget. so this is within the budget for this year. that, there will be some additional expenses for next year which is the payment of interest on the bonds that we put into the bank. which is also where we will put the budget for next year. so everything will be balanced within the government targets and also within the imf program mark: targets. , once itthat the ebrd has stabilized, when the u.s. expect that to happen? when will the lender be stable and ready to sell. difficult to make projections now. the ebrd is not just a buyer as any other buyer. ebrd is more just a regular buyer. a partner that could help us to improve the bank, to help develop its services farther. happen, is going to this is what we will see. at the moment, we need to make sure that organization is fully completed. that the bank is fully under control. then, shortly afterwards, a sign of support not only in the supervisory board but also in cap

the banks are on the move.up to 1.07 -- like the trump victory, completely opposite the doom and gloom people would have expected. euro-swissie, and a weaker swiss franc. weakermentioned a turkish lira this morning. we want to talk with ian bremmer about china. .u.d., maybe dr. carson talks about it. you lived with it. america? hud do for ian: this determines that people -cost quality housing when people cannot afford it. carson does not have the experience to -- i thought to myself, that is the right kind of guy. he recognizes -- he was selling his book, getting his facebook numbers up, but he knows he cannot be a cabinet secretary. to the have to move on weekend's festivities with trump in china. are we pivoting? we are pivoting to twitter. will we pivot in china? ian: it is hard to imagine. if you wanted to pick a fight with china through the tweets we , you also want to shore up your relations with american allies. for example, the trans-pacific partnership, the thing that all of they want and that they can

for example, recapitalisation of the bank that is pre—emptive based on the fact that the bank, monte schl the fact that the bank, monte dei paschi, failed some stress tests. so this could be done with a mix of private money and public money. bailing in, not all the creditors basically. so also the depositors above 100,000 euros threshold, but only the most junior creditors above 100,000 euros threshold, but only the mostjunior creditors and the equity holders and so on. that's something that is more palatable for the government. just briefly, you've worked for this bank. where has it gone wrong? well, there have been several things going wrong. for example, initially the acquisition ofa example, initially the acquisition of a bank. it was part of abm am roe. it was done at the wrong price and there were scandals with trading, but they were not really big in terms of size. what is really bad now is that they have a huge amount of non performing loans because they have a big portfolio of loa ns because they have a big portfolio of loans in italy and the italian economy hasn't grown very

it is not just the banks. as they come at you, but this is not a good outcome. tom: one of our themes of the hour with michael spence, and we are thrilled that richard haass is with us as well. later, on the interesting politics of his utah, the jr. mikeor from utah, with lee. we will do that on bloomberg radio. washington, d.c., this morning. this is bloomberg. ♪ francine: it is certainly not as funny as it was in the last couple of days, but a beautiful london skyline nonetheless. we have two pieces of important news. first of all, theresa may is doing a tour of the gulf states. she came under fire from within her own party that she was too secretive, and it seems she wants to take a too tight grip on the brexit negotiation. the second one, we had manufacturing data, unexpectedly dropping the most in eight months. this partly has to do with grexit -- with brexit. parlay with pharmaceuticals. let's get to the "bloomberg business flash." taylor: iran is about to sign its first u.n. oil deals and sanctions were

banks. this has nothing to do with the community banks. . this is about deregulating the big banks. it is also not about tailoring regulations for regional banks. wall street reform already required that and the federal reserve is already taking steps to do so. no. this bill is about a wholesale regulatory exemption for just 27, 27 of the biggest banks in america. banks with $100 billion, $200 billion and even $400 billion in as the -- assets. many of the types of banks that would benefit from this bill failed spectacularly during the financial crisis. in fact, large bank holding companies with more than $50 billion in assets received twice as much bailout money per dollar than banks with less than $50 billion in assets. contrary to the talking points from the other side of the aisle , these megaregional banks are not just big community banks. no. these regional banks are some of the worst players in predatory, subprime lending, leading up to the financial crisis. they have preyed on minority communities and rural communities and they have passed the buck on to taxpayers when their

all about the banks. we focused big-time on the banks' view the last 25 minutes. ish banks may have to give back billions of euros to mortgage customers after a ruling by the eu's top corporate a look at currencies today. the euro against the dollar yesterday was lower since the beginning of 2003. and have a look at the bond markets today, as we approach the european equity close. this is bloomberg. ♪ bloomberg world headquarters in new york and london, i am mark barton. julie, let's get over to you. you are watching crude inventories, any second now. julie: in advance of that we have seen oil fluctuate. it was higher but now flirting with the unchanged level at the moment. libyand pull between getting its oil fields back online and these weekly inventories here in the united states. just getting the numbers now and it looks like there is an unexpected build in the weekly inventories. i could be bad news -- that could be bad news for oil prices. you see that in the trades following here. 2.2 -- 2.20 6 million barrels was the weekly increase in inventories. a drop w

to the small banks. they'll argue about the fact that $50 billion an arbitrary figure. something we need to keep. that's a big bank. sorry. madam speaker, i was a regulator in my former life. i was a banker in a former life. can i tell you that's a big bank but not somebody that will bring down the economy. unless they are interconnected, which the metrics in mudville say if they are interconnected they have all sorts of other risky actions that they are engaged in. $50 billion is not going to do t things you have to look at are size and these other cry tearas. they are not pulled out of the air. these are criteria that the federal stability board uses, the office of financial research use when is they look at g-sibs, global sifis. these are analysis tools that are there, have been for a long ty. why not give the examiners, the regulators, these tools? i can tell you as a regulator they already do this. a point was made it takes 12 months on the bill to come up with these designations. the regulators alre

the banks, the government will stay on track to pursue the bank reform. e ecb is there to stand by to help banks with liquidity if necessary. we are now seeing a knee-jerk reaction. gold is more or less stable, equity markets in asia are not that touchdown, so i think we are now seeing a knee-jerk reaction. we will is down, but have to see what happens on thursday when mario draghi speaks. i think the euro-dollar should stabilize. as head of investment strategy for abu dhabi commercial bank, would you get in on italian banks? >> you know, i think that if there is going to be pressure, i really see some buying opportunity. and ah comes to shove caretaker government forces some conversion of fixed income paper into equity, they have already set up measures to safeguard those retail investors to whom those bonds were sold and properly. union credit is pursuing the sale of pioneer, less profitable, but were not talking, the dollar pressure is not about profitability. it is about the risk of default. i see possibilities there to get into the banking story. agai

the six biggest u.s. bankslion in assets, almost twice as much as the next 30 combined. a lot of money in not too many hands. it might even mean banks are still too big to let they'll. colette seo. here is the situation -- global regulators have worked ever since the financial crisis to make it possible for the biggest institution to close their doors without triggering an economic meltdown. a years of work to avoid lots were thrown into doubt by the election of donald trump, an outspoken critic of institutione their doors without dodd-frank, the u.s. financial regulation reform law. they have been vague about what would replace the law, but republicans have talked about freeing banks from the rule if they raise billions of dollars voluntarily. meanwhile, wall street thinks are told by the fed they need to raise $70 billion more in long-term debt. background, bank failures of the great depression led to the creation of deposit insurance and regulators like the fdic, also in the glass-steagall rules were put in

it seems the foreign banks are getting hit harder than the u.s. banks got at the beginning. you have to look at the nitty-gritty of the deal. i don't know how bad the quality was of the assets deutsche put into their own. it was particularly grievous in terms of the way they behaved, but you are right. but you know something? i haven't heard any talk of all these telephone -- terrible things, aren't they awful? i think that story has gone away because people want to put this massive issue behind them. we still have volatility in this market, and that is one big settlement to come. guy: we will keep an eye on what is happening there. i am looking at trading this morning. , 2.3% tok of scotland the upside. rbs doing well and trading on the back of this. if i'm a client of deutsche bank and thinking about my banking relationships in 2017, how big an impact will this have on my thinking? christopher: that is a difficult one. deutsche has some very loyal customers. they have been there for those customers a long time. they are a major european investment bank. they are seen as im

to the small banks. they'll argue about the fact that $50 billion an arbitrary figure. something we need to keep. that's a big bank. sorry. madam speaker, i was a regulator in my former life. i was a banker in a former life. can i tell you that's a big bank but not somebody that will bring down the economy. unless they are interconnected, which the metrics in mudville say if they are interconnected they have all sorts of other risky actions that they are engaged in. $50 billion is not going to do t things you have to look at are size and these other cry tearas. they are not pulled out of the air. these are criteria that the federal stability board uses, the office of financial research use when is they look at g-sibs, global sifis. these are analysis tools that are there, have been for a long ty. why not give the examiners, the regulators, these tools? i can tell you as a regulator they already do this. a point was made it takes 12 months on the bill to come up with these designations. the regulators alre

the bank of japan issuing a policy decision as expected the central bank held rates steady and maintained its pledge to guide short-term rates at 0.1%. and the government ten-year bond yield at 10%. offered a more upbeat view of japan's economy and novembrecov moderately. and then in terms of the press conference from the governor koroda was pretty dubbish and that had allowed the yen to, the dollar to rise quite significantly against the yen. 0.8%. that's why as we look at the markets right now. the nikkei is stronger than the rest of asia and the curaeps moves for you. 0.8% move for the yen. that came more from the c commentary. >> better growth outlook. when was the last time we heard that from the growth of japan. 1.5% growth expected through fiscal year ending april. that was better than a little more than 1% than they previously expected. >> the fact that he cited the weaker yen being a good thing. they're not going to step away from this yet. >>> actually, but the interesting there it might have more to do with donald trump and the higher yields we've seen since then. the japanese

the task of the banks is heavier in europe. ey can less concentrate on what is highly profitable as they do in the u.s., helped by freddie mac and fannie mae. we are in a different universe, which is demanding, and we have to work actively to reinforce the possibility of our banks, that's true. vonnie: that was the former ecb president and chairman of the group of 30. mark: we are nine minutes away from the end of the wednesday session. we will hear from the swedish finance minister on what she thinks a trump residency will mean for monetary institutions around the globe. this is the european close and this is bloomberg. ♪ vonnie: live from london and new york, i'm funny quinn. mark: i mark berger. this is the european close on "bloomberg markets." six minutes away from the end of the wednesday european session. vonnie: time for our latest boom bloomberg business flash. american factory production fell in november for the first time in three months straight production was down 1/10 of 1%. production wasl down 4/10 of 1%. utility

and the bank of england. ns that you have got some of the central bankers want to bring the interest rate down and the u.s. economy and interest-rate going up. this is a recipe for a lot more volatility to come into the financial markets next year. the principal source of volatility will be the exchange yields. the the volatility we have seen in the last 12 months will fall into [inaudible] we will see much bigger moves coming through. moreolicy will have a lot [indiscernible] on the energy and commodity spectrum as well and those currencies will again be very volatile. anna: thank you for your thoughts so far this morning. on the program. it is 7:17 a.m. in london and 3:17 p.m. in hong kong. that is where we find juliette saly. onzo group has .greed to find -- by capsugel the move comes as the swiss oner seeks to focus more health care. yahoo! fell in extended trading after announcing another security breach. an unidentified third party stole data from one billion users including 150,000 u.s. government and m

the italian banking sector. this tell us about the rest of the italian banking sector? stephen: i am not an expert on the italian banking sector, but we have seen this story play out multiple times last couple of years. in some ways, reaching some sort thissolution around probably brings stability to markets. i am less focused on italy and italian banks but on opportunities in europe more broadly. jonathan: to me, there is a here -- clear line that needs to be reconciled. the politics that emerges in places like italy and the rules. the rules say if you cannot raise capital in need state aid, that means you need to they'll in bondholders and stockholders. a lot of those are from retail money, which creates problems when it leaves set to go to the polls. so the politics in italy, what does that mean for your world? stephen: the challenges in the italian banking sector and it is the retail client base that is a holder so much debt has cost this to drag on so long and the reason they have not been willing to take on

what does it mean for the banks? ncine: again, the problem -- if you don't have political stability, manus, you really point out that if you have one of the largest banks, monte dei paschi, looking for a capital increase, and we were expecting sales to start. you are an investor, you say you can't buy into the capital increase and you shy away from it. that may feed through some of the smaller banks. it's not listed, it's a medium-sized bank, but the ecb has asked it to strengthened its capital position. again, they need to find some capital raising or go to shareholders, institutional or otherwise. if there is political instability, it may mean a lot of these investors are shying away. at the moment everything is up in the air, but we will know in the next two to three days exactly what we will face in terms of the government plays and whether we have a caretaker government or not. throughout the day we will bring you great exclusive interviews, talking to the second-largest bank, biggest in terms of market cap, and

i think some of the other central banks, particularly the european central bank have some scale problems. there's only so many bonds they can buy. we'll find out later this week what any type of tapering or timeline might look like. but i think the reason for these rebounds is this idea that central banks will be there to support it. and that continues. i'm just not shoe if it continues into 2017. >> dave, is it feasible that the ecb would look at tapering, if one of the oldest banks in europe, even if it's not the most systemic one or the biggest one, is on the cusp of collapse? >> i think the expression that we always had in the u.s. was extend and pretend. i think you'll see more of that from the ecb. it's not clear there's a clean political solution or where the capital for some type of private sector bailout would be there. so i think it's difficult to see. what the european central bank will do will just continue along the same path. the idea of extend and pretend, don't rock the markets if a significant bank is under pressure. >> if we see he this extend and pretend from the ecb i

the central bank intervened with 20 billion u.s. ars to put into the system to keep a lid on borrowing costs and to offset capital flow, which is leaving at an accelerated pace. >> you're not seeing a hard landing, right? >> i think we had a hard landing already and we had a hard landing in commodities. we might have a hard landing in the economy. >> can the chinese government soft land its economy without a big disaster? the answer is yes. >> china's stocks regulator is said to have called an unscheduled meeting as the worst start for chinese markets in two decades shows no sign of letting up. the reference rate by the most since august and a forced global exchanges to shutter early. >> china has second thoughts as it suspends the circuit breaking rules that have not kept investors from panic selling chinese stocks. >> do the chinese authorities have control of their capital markets right now? >> in the short-term, i don't think they do. by the short time, i mean in the next few days. the chinese market is not a real stock market. i

the banks weigh in. jamie dimon speaks out on the wave of populism and the need for fundamental tax reform. brian moynihan sees new animal spirits in the board room of his clients. and the need for recalibration in bank regulation. we hear from the leadership of the nation's two biggest banks. italy's oldest bank admits it is not likely to meet the deadline for raising 5 billion euros in new capital. likee next step looks italian government intervention. shares down even further on the .ewsprint t tenants -- names carl icahn to head of his deregulation campaign. and peter navarro to head a new trade counsel in the trump white house. that is what you need to know at this hour. bankthe future of italy's with lisato milan martin. have we got any color on what the plan is from here? >> the next 40 hours will be critical. paschi, the indication at the moment there isn't much there. the bank will seek some kind of government intervention. the bank as a firm deadline by the end of the year to offload a significa

the bank and ibq are both private and nonlisted. at the same time, in terms of size, they are the largest. would most likely be an acquisition type, not a merger. and losing their extensive a stock price to add the currency for that. you mentioned there were some other banks second come into the crosshairs of mergers and acquisitions. talk us through what you are seeing on the radar, in terms of the saudi market and the uae market, which you say are in focus. , there are some banks that got hurt because of the lack of growth from the government. and low oil prices. we have been hearing a lot of news of merging the smaller, weak banks. by smaller banks were hurt, the weakening economy in the uae . we're expecting a couple merger announcements sometime in 2017, probably the first quarter of 2017. at the same time, in saudi arabia, because of the and lack of ability to grow, most banks have reached their limits. i believe the creating synergies entities ining saudi arabia might work well for shareholders, and make sense for the manager

banks. so i believe the small banks would go through major m&a activity. they need to get synergies, get down costs, which is like more than 80%. that's the situation that i see in that part. regarding large banks, i believe they have gone through this cost slashing activity. they cut 3,000 branches in the last three years. therefore i believe we should focus much more on the revenue optimization practices, pricing according to value they deliver to the customer and also i believe there could be a major shift should the business model of banks. with the lower for longer policy, making money out of this simple exchange between savings and interest, it will not provided relevant level of roe in the future. i believe they should put more effort into the fees aspect and try to get back the trust of customers. >> we seen plenty of consolidation within italy, but what about cross-european consolidation. there's is also talk of a tie p tie-up. is this something that could materialize? >> unicredit has been selling off a bunch of chunks in the last recent months. t

i must say the german banks are particularly hard hit. with significant effect on profitability. >> i think there was one ceo, i think it was the ceo of credit suisse who was saying that the european banks are not investable. would you say that as well? >> i would tend to disagree. because we see valuation levels that might be interesting. some banks trade at 0.3 of book value, or 0.4. but what was crystal clear is that the tough environment will remain. our recent report shows for german banks a profitability which is really low. so 2% after tax. given not enough cost base and the remaining environment, that will also continue to be on the low level. >> what do you think, will we see more cost cuts coming up for the banking industry in germany? will we see more job cuts as well? the industry is still too big? >> we definitely think so. we foresee a necessary cost reduction of up to 30% for the german banking sector, not from today to tomorrow, but over the next ten years. that will obviously also mean job reductions. >> do you think cost

the confidence? makes italian banks different from the rest of europe's banks? e not the first european bank to face problems with capital. italian banks have a much harder time getting through the first step of a rescue. >> no european country has the same banking problem across europe. we know that spain had a realist -- real estate bubble. it really is a combination of weak economic growth, little action on reform and spending to the real economy is what they did. there was fraud, there was mismanagement, ultimately no one has tried to draw a line on this problem over the years. i think that it is important that we try to fix this soon because that could maybe help the rest of the system. in risks spiraling out of control. >> who did they make most of? two businesses question mark to consumers that cannot pay it back? >> yes, there are some sme loans that have been kicking around for some time. is about taking those losses. let's be real of the balance sheet. it hasn't happened yet in italy and europe. joe: one of the things you mentioned that people know abou

the italian banking sector has been the focus of concerns about the banking sector although there arether parts of europe to worry about also. ecb has a role to play here away from their -- monetary policy. jeremy: we have to remember that the ecb under the single supervisory mechanism is the guardianship of the banking system. and the weakness of the banks has been one of the concerns as they think about the euro and the perception of their performance of the euro. it was notable that when you looked to those ecb decision's week about the adoption or the desire to get -- about the the banking system across europe is exceptionally weak. provide some impetus to the banking system and a boost to the balance sheet. manus: looking at what is on track for the balance sheet. the ecb is going to use -- is in termsusurp the fed of the size of the balance sheet by the middle of next week. the ecb is very much in participation mode despite the debate last week about paper. what does that do to the euro? does that make euro the funding currency of 2070? --2017? scaleking at the size and of the b

the regulator part of them wants to be tough on italian banks. it has been the worry of the banks. often on the central bank side it may need to soften on the regulator side too. joe: thank you. scarlet: political risk building across europe. we will discuss the elections on sunday and what it means for the rest of the continent. this is bloomberg. ♪ bloomberg first word news. more meetings today a trump tower as donald trump fills up his cabinet and senior staff did among those on the agenda - -staff. among those on the agenda the former u.s. ambassador john bolton and democratic senator heidi heitkamp. this weekend, the goldman sachs president will return for a second meeting with president elect trump, he has been mentioned as a possibility for several jobs, including budget chief. michigan's election board is deadlocked on the request for a recount. it could start next week. meanwhile, the attorney general of michigan want the state supreme court to stop the recount. and it was got to, one is already underway and chum supporters have filed a lawsuit to stop it. in pennsylvania,

can the smaller banks in the u.s.do quite well and improve their lending if some of those constraints, those capital constraints are used? -- are eased? the goal is to allow more people to access credit in the u.s.. have bad consequences if left unchecked for too long. given that credit has been improving but is still though, that could be a good thing for u.s. growth. guy: thank you for sharing so much of your time with us. fowler,ristmas, gerry asset strategist. we will talk about the 10 year treasury and that 3% mine in the sand. this is bloomberg. -- line in the sand. this is bloomberg. ♪ >> we have a bond market bubble which is in the process of deflating. it has got a way to go and it is going to affect the outlook quite significantly. so this is different, and we have had so few stagflations that we don't have enough models to go on to see what they are doing. guy: welcome back. you are watching the european market open. speakingalan greenspan to bloomberg. we will continue the bond conversation, next. intoou k

the much. focus thisy banks in morning. david: we go to italy want again facing the biggest bank nationalization since the 1930's. the government may need to step in now after the bank raised -- failed to raise the amount of money they needed. we are joined now from milan, we knowthrough what about this and what we don't know. how much would italy own of the bank? what happens to the bondholders ? >> the question is how much will it all worth because this is early days. we've known for a long time the bank was struggling and it was certainly going in that direction. what we've learned so far is that there is a large part up to 20 billion euros that italy is going to provide. of helping them with liquidity and with capital injections. we don't have that split, and don't know how much capital monte pasche will have to raise because it will go through a restructuring plan probably with the ecb. it may be that the signing number is larger or smaller in the end. the type of investment the government will make will be important as

alix: is there too much hope in the banks? re with monetary policy, there is more reason for optimism entering this year than since the financial crisis. part of that is we have had the regulatory pendulum swinging one way for a very long time. stops, that can be a key positive for the banks. since 2010, bank investors have hoped for a rise in interest rates. the caveat there is every single year except for the year of the taper tantrum, expectations are below that. even with the huge move we had year, we arer this below where people thought we would end up a year ago. i think we do have to keep an eye on the geopolitical surprises. that is where people were surprised this year. the u.s. economy shows continuous signs of improvement. ory have shown a tendency they have hesitated because of things going on around the world. we have several things that could possibly provide disruptions. david: is there a sense of the possible swing? he said it would free up $160 billion to loan to customers or to return to shareholders and -- sh

>> it depends on the regulatory side of things. banksbly have been reluctant to raise dividends with a 30% paired ratio as a line in the sand. banks are in better shape and you are seeing that in earnings, revenues, fixed income, commodities. i think there is definitely potential for payouts to increase. anna: one way to play the reflation trade is around the banking sector in the united states. if reflation and trading is a big theme for 2017, where else do you go? >> in terms of the sector perspective, financials is the one for me. there are a lot of interesting sectors right now. health care is quite interesting. sector -- an unloved last year, in terms of talk about drug pricing -- anna: wasn't beaten up not too much around whether hillary would win? >> i think so. i think if you look at what the ceos of the big health care companies have been saying, pricing is going to remain under pressure, i don't think anyone is arguing with that. i think valuations have come up significantly. looking into next year, there are some companies wit

in europe a decision coming from the norwegian central bank. the expectations going into the decision were for the rates to remain unchanged. that's the decision from the norges bank today. rates unchanged at 0.5%. the dollar just a quarter percent weaker. interesting that we continue to see the dollar index moving higher overnight after the fed expectations for next year were more hawkish. the norwegian central bank says activity in the economy is picking up at a somewhat slower pace than projected, and that prospects of inflation will be lower than projected as well. this will come as interest to many who have been watching the moves in oil prices, wondering if a sustained momentum to the expectati expectation. a slightly higher probability of a decrease than an increase in key policy rates in the year ahead. also worth noting, some analysts wondered whether or not the bank was at its lower bound when it comes to reducing rates. they suggest the key policy rate will most likely remain at the same level in the period ahead, but a slightly highe

the banking sector and the european economy are heavily intertwined. tep or that we have resolution when it comes to deutsche bank, that it can focus on other things. we are getting an idea of what is going on and how to recap the italian banking sector? >> a decade of financial crisis almost, and the banking sector remains the key component about our discussion of the health of the global economy. the weakness of the banking system is predicated on the fact that many of the assets were generated when growth projections were in the 2% to 3% inge rather than 2.5% to 1% the case of italy, nowhere. the problem with over regulating and government was asian is chronic. particularly strong case. it has been five years of bank restructuring, capitalization, ideas about how to bring this bank to health. we are getting to a point where containment is the best we can hope for. near a this anywhere solution for the italian banking sector? >> it is a step in the right direction. guy: is it a containment of the problem as lena suggests, or a step step -- another tow

italy wants to save the banks and the e.u. ruled you may not be able to do that. >> jpmorgan said the italian banking issues are political and not financial. >> they would have removed most of the bad debt -- investors are not certain that will be sufficient to maintain a viable business model. francine: the struggles of italian banks were one aspect of a difficult year for the european financial industry. there were some bright spots, but overall, much more pain than gain. let's look back at some of the most challenging moments for some of europe's biggest banks. >> shares slumped yesterday after it became the biggest lender in four years to reassure investors that it has enough cash to pay debts. francine: it was triggered by a note that questioned deutschebank's ability to pay cocoa bonds. it is a type of debt that if things go badly that they convert into shares. >> it is more about cash than financial difficulty. it was a matter of did they have the cash flow to pay them and that is why they got the note to calm investors

i think the central bank will tolerate that. e had language adopted by the petrol reserve, which is quite unfamiliar. they will never say that we are going to let the economy overheat, but they talked about high-pressure economy, sounds a bit like that. i think there will be -- they will be more tolerant of that than usual. in other words, they will not push up interest rates. i think it will be reflected in the dollar, which will stay pretty strong. anna: king dollar is something we will talk about in 2017, as it was in 2016. thank you, chris wyllie. coming up, japan's balancing act . forecasters expect the economy to expand in the new year. analysis, live from tokyo. this is bloomberg. ♪ i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi f

there's no question the bank of japan is very powerful. how much of what we are seeing in terms of improved economic conditions is really because of genuine growth in the japanese economy as opposed to a weakening yen? support japanese economy to grow faster. at the same time, there is a long way to go to 2%. boj's new commitment [indiscernible] it puts boj in the position that they are intentionally behind the curve before they see inflation will be 2%. i think this will be a very strong commitment by boj to see tangible signs that inflation is picking up to 2%. jonathan: we began the segment by talking what a year it's been for the bank of japan, venturing into negative interest rate territory in establishing what they call yield rate control. kurodar what governor has learned from 2016 that he can apply to 2017? it was a: this year very energizing year. at the beginning of this year, there was a risk off move. chinese and other emerging andet economies decelerated a sharp decline in the dollar against other currencies put japan and other

so you are seeing a repair of the bank balance sheets. f course is that you probably because of brexit, , you won't see development from capital markets for a while. >> what worries you now about brexit? >> just the. period of uncertainty. i mean i think you can model almost every option that you think might happen. the sooner there is some clarity and direction of travel and what the ambition is means you can sort of discard some of the options and get on with prosecuting other ones to make sure that your appliance -- clients and staff that are impacted, they can begin to plan their affairs, and it can be business as usual. the sooner we can get sort of element of clarity. francine what kind of clarity? : or example, a buffer. we know mark carney was working on some transitional agreement. would that be the most helpful thing for banks? >> we will see if that is in the planning. we think it needs to be. in the sense that when you think of regulatory reforms, it is when the reforms are, finalizing it through the two-year years -- two-year

as you know, the european banks have been under more pressure than the u.s. banks. red earlier, had a healthier economy. it has been a little tougher on the european side. with a slew of regulations set thisme in for those banks, may help to alleviate some of that pressure. if you look at the global investment banks, some of my credit suisse, who is holding their investor day today, deutsche bank, ubs, they all have very big u.s. businesses. has the wealthar of american business very exposed to u.s. rates. credit suisse and deutsche bank, .ig trading businesses equity trading, not doing as well. businesses seem to outperform european businesses. jonathan: you borrow short, you lend along, you lock in the spread. about that, but when you invest in banks, you do not take that simplest approach. the central banks are saying their activities have not harmed the net interest margin, so the perception of what will happen on the back of a steeper yield curve and the reality, what calculation do you make when you look bank to bank? first, i believe the central bank actions h

could get is a lot of italian people having a run on the banks, going to the banks and withdrawing their money. the already fragile italian banking sector. could have another big problem in trying to buy out an italian bank. >> eyes are turning to matteo renzi who resigned following the referendum. >> the euro group discussed a further bailout for greece. finance ministers approved short-term mergers that failed -- most notably on debt relief. fullpushes the question of imf participation in the program to 2017. major differences remain between governments as a key point, such as how long greece should have to maintain 3.5% surplus target after its program ends in 2018, making a broader deal impossible today. let's hear what the eu commissioner had to say. medium-term fiscal trajectory will need to be in line with the fiscal framework. but the targets will need to be defined at a later stage. so we will continue discussions over the coming weeks with a view toward taking for this program to a successful conclusion and building on the efforts made by the great -- made by the greek people s