But after the huge moves we have seen related to some of the vaccine news of late, this is a relatively quiet session. If you look at the headlines as well, the mnuchin and powell spat doesnt seem to have caused much aggravation during the market session thus far. Seeing weakness in the turkish lira today, but after that big move we saw yesterday by the work of central bank and the shift higher in the lira, people may be fading that move a little bit on some expectation that maybe erdogan will not stick with his recent decision to maybe go to more mainstream economics. Alix lets get to our top story, governments rushing to issue vaccine approval. The modernas that and Pfizer Biontech vaccines could be approved by december. If all proceeds with no problems, the conditional marketing authorization for biontech and mentor in a could happen as early as the second half of december 2020. Alix joining us now is sam fazeli. I love how she kind of couched it and said if. What are the options in that if . Of obviously theres a lot information that needs to be digested by the regulatory authorities. Let has already been digested. This is not a normal regulatory process. The two regulators have already been speaking, apparently constantly. They have also got this issue that a lot of the many factoring work and background work that takes ages to do and assess has already been done. What they need to do basically is to look at the data and get the rubber stamp on that. We will have to see what comes out in the details of that data. That is the critical question here. Guy is it going to be harder to vaccinesessenger rna since they dont have the same traditional history as traditional vaccines . Sam not necessarily. Vaccines have traditionally been one of the safest things people have taken, probably safer than the food and drink people take on a regular basis. Youve got a situation here in which any vaccine that comes along, it is going to need to go to so many people, it is going to have to have the same scrutiny, mrna or not. It really is an adjuvant you have to think about, too, so theyve got one less issue to worry about. Alix in the meantime, if you wind up getting emergency use authorization, everything goes well, how long until those individuals get immune . How long until things are ok for certain people . Sam the answer to that is tough to tell. We need to see some of the Data Collected after the first dose and the second dose. Pfizer started counting cases five weeks after the first dose, weeksen sorry, four after the first dose. With moderna, you had a fourweek time period between the two doses, and then two weeks, so a six week time difference. I doubt there is that much difference between them. We just need to see the data. So at worst, six weeks. Guy have a great weekend. Thanks for your coverage this week. Sam fazeli, thank you very much. Mui,ng us now is janet investment director at brewin dolphin. What are you looking at right now, the cases or the vaccine news . Janet we are focusing on the more positive aspects of 2021. We feel there are a number of positive tailwinds for the next year which we should be pretty excited about. Clearly, the vaccine news. Though it may take a while to be distributed, we think this is a very positive boost to markets, which we have already seen that markets have reached record highs. We are very excited that in 2021, we are going to see more sustained recovery. Setbacks, there have been countries that have to go back to lockdown. We are very unlikely to see that next year if we do have a vaccine available, so that is good news. And we are still going to see very accommodative policy from Central Banks and governments, so these should set apart that recovery story in 2021. We are focusing on that better expectation of next year rather than the current virus. We tend to focus more on next year, otis where markets are looking at for the future. Alix where is the recovery trade not yet played out . Is it in the equity market, fx . In the rates market, regional . Is it sector rotation . Equities have started to rally on the next year. Theres still cautiousness and sensitivity over the recent spike in the virus cases, the closed down schools in new york and more restrictive measures in the u. S. And u. K. , for example, so there is still just nervousness. Lothink that next year, a more will happen, and then we are going to see synchronized global growth. We thinkof rates, that, for example, looking at the 10year treasury yield, they are kind of back to where it was before the vaccine announcement from pfizer. Still nervous and cautious, and potentially high inflation in the future is just not being priced into markets. Guy when you think we will get back to precovid growth levels . When do you think we will close the gap in terms of the growth we had in the growth we have now . If it takes quite some time, why should equity markets that have already rallied beyond where they were covid continue to rally . On the level of gdp, lets take a look at the u. K. If you look at the latest forecast from the bank of england inflation report, in isms of the level of gdp, it sometime in early 2022. But in terms of trends, you wont get back until 2024. Theres an element of permanent as aing in the economy percent of gdp. That is the reason why some of the sectors that are heavily hit by the pandemic recover, but they may not get back to that precovid trend, and we have to be cognizant of that. I think the positive story for the market next year is the synchronized global growth. We are not seeing that yet in the data. It is mostly the positive news coming from asia, coming from china, but we have yet to see int played out more clearly the u. S. And europe. If we do get that, i think markets will be pretty positive. Alix you mentioned coordination with fiscal and monetary policy. I wonder when that thesis gets played out. We are still waiting for the european Recovery Fund. There is still brexit looming in the background. Fiscal stimulus feels like a nonstarter here in the u. S. I wonder if that still holds true. Janet janet i think it still holds true. Ultimately, what we saw from governments is that, in the u. K. , for example, whenever there is some concern on the economic situation, with renewed lockdown, the chancellor is throwing more in the pot for the economy. The Furlough Program is being extended, and there are loads of furlough schemes for companies who are struggling. We continue to see that trend. So in case there is some pickup and that recovery, we expect governments will continue to. Upport measures u. S. , theres a lot of gridlock and hiccups at the moment, but we think ultimately, a stimulus deal will pass. It is likely to be anywhere above 500 billion, and that is going to be a support. Globally are committing to very low Interest Rates, and we will see more qe announced in the future. Alix thanks, janet. We really appreciate that. I remember when it was like 3 trillion stimulus. Coming up next, we have an exclusive interview with Jose Manuel Campa on the health of european banks, talking about the dividend ban and the moratorium on outlooks. This is bloomberg. This is bloomberg. Policy actions are needed. Those policies lie beyond the remit of monetary policy, but will certainly affect the environment in which Central Banks operate. Guy ecb president Christine Lagarde speaking during her opening keynote at the european banking congress, which took place today. When it comes to the heavy lifting on provisioning for bad 2021, the situation in they cite evidence that repayment harlow days repayment holidays have started to end around europe, businesses have been repaying debt, and there has been no cliff edge when it comes to the payments. However, those with a cynical nature might argue that bank ceos would say that, given they are very keen to resume paying dividends to their investors. Joining us from paris is dr. Chairman ofcampa, the european banking authority, which is published a report on this very subject. Thank you for your time. European banking ceos, and there were some speaking at the forum Christine Lagarde was at today, indicating that consumers that have enjoyed a repayment holiday that have come back to repayments have been paying back their loans. That there is no crisis, and as a result of which, provisioning should go down next year. Is it too early to make the assessment that we can signal the all clear here . Dr. Campa first of all, thank you. Good afternoon. It is a pleasure to be with you today. I think it is too early, particularly as we are going through a second wave of confinement. News that, given the exceptional measures over the spring and summer, in the report that we will publish, there have been it hundred 50 billion euros in loans under moratoria at the end of june last summer, and it thatod to hear from banks repayments are resuming. That is certainly good news. Nevertheless, i think uncertainty remains high. I thick there will continue to be improvement, and we specked that even the size of the economic downturn in the forecasts we are seeing has risen to expect an increase that may continue to pick up in this quarter or the coming court is of next year. Alix can you give me some perspective as to what the criteria will be for banks to resume their dividends . What percentage of loans have to be repaid, or is it a vaccine or a total opening up of economies . Dr. Campa i think this discussion has been ongoing. Earlier this year, we signaled that there should be very prudent distribution of dividends on any kind of capital to be prepared for any potential situations. We want any uncertainty to be removed from the economic environment. The key component is the pandemic, for sure, and the vaccines will have a countries into that. As we see uncertainty removed, there has been more foresight and assessment of where the economics will go. That is a normalized situation starting from the economic theution, and after that, evolution of the banking sector, the finance sector will go into more formalities. That should be the process for the institutions. Guy but the moment, as you have indicated, there is lots of uncertainty. We dont know what is happening with the virus. We dont know what is going to happen with the economic effects. We are expecting q4 and q1 to be very difficult. Signaltill too early to that we will be able to lift the moratorium on delivering dividends to investors until well into 2021 . You sort of answered your own question, i would say. If uncertainty remains high, i thick we should be cautious. Clawson will be the key going forward. I think banks have so far shown over the last caution will be the key going forward. I think banks have so far shown that theyast months have been. [indiscernible] context, that overall i think we will have to see how the economic evolution will continue to go. We expect the forecast from the European Central bank in december will be a key component to the discussion. Alix do using that loan provisions have peaked for banks do you think that loan provisions have peaked for banks . Dr. Campa we saw an increase in provisions in the second quarter. The evidence so far from the Third Quarter is that provisions have declined from the second quarter. I will suspect that as we get the second wave, the provisions will continue to rise. That is our expectation, that they will continue to rise over this coming quarter, and the beginning of next year. Guy we obviouslyguy need some way, the Industry Needs some way of quantifying all of this. Stress teststhe next year would be a useful way of determining whether or not banks are in a position to be able to pay dividends . Dr. Campa i think for sure, there are stress tests, and the working assumption is it will be a very important contribution to establishing the way forward from that point on. Planning to publish those stress tests in july of next year. That may seem very far away, so we will have to see what the level of certainty also that we have on the Economic Outlook in the middle of next year, but i certainly hope that will be a very important component. That may be useful for the discussions we are having right implementn how to exit strategies from the structures we have but in place. That will be the context in which those stress tests should be understood. Alix obviously in the pandemic, the focus has been on banks. What about shadow banks . What do you think the evolution of Regulatory Oversight should be on that portion . Dr. Campa i think that is an interesting question. I think the overall Financial System has proven that it has been robust to deal with the peak moment of difficulty in the spring and throughout the rest of the year, but i think there are some lessons that can be learned, for instance in the area of shadow banking. Money market funds regulations in the spring have been pointed to as an area within the banking buffers to bel used as another part of the discussion, so i think we are drawing lessons. But the most important lesson is that the core of the Financial Sector so far has been part of the solution to managing the pandemic, and fortunately not part of the calls. We should part of the cause. We should continue that way and then figure out ways to improve the system. Guy can i change the subject a little bit and ask you a question about brexit . We are getting close towards the end of the year, the point at theh we are going to see reality of brexit biting. In terms of the preparations you have seen thus far, are you satisfied that the banks have moved sufficient resources, both in terms of people and capital come out of london . Do you think covid is a reasonable excuse for people to drag their feet . Overall, we just published communication on this two weeks ago, on how the industry is prepared for brexit. I would say that banks have made a lot of progress. We identified this summer that they may be moving assets, some moved their stuff to the continent, and to the European Union. I think that has been accelerating. I dont think that covid is an excuse structurally do not move the resources away from the u. K. Into the European Union. There could be some small adjustments and operational needs in the short term, but i dont think there is any excuse on need, and those overall factors. We have been more concerned in the payment issue. There are still a number of issuers operating out of the u. K. , serving eu customers. I know that official have been signaling a direction, and we except no more by year end. Guy there is a certain amount of frustration in london that there hasnt been that much information flowing from brussels and elsewhere within the European Union to allow progress to be made in terms of harmonizing the regulatory structures that are required. Do you feel that frustration when you talk to those at the bank of england . Do you feel that frustration when you go down to the treasury and number 11 downing street . Why has the european side not been more forthcoming in terms of the conversation that needs to be had in harmonizing these regulations . Dr. Campa well, i actually had a very good communication with our u. K. Counterparts, and from my impression, you colleagues are engaging with them my impression, eu colleagues are engaging with them. The Financial Sector is not the most important aspect of those negotiations. I think the real sniffing and challenges are in other areas the real significant challenges are in other areas. I think these negotiations have been more in the background, and we expect that will continue to go forward. I think it is important to be aware that the u. K. Is already a noneu member, and starting in that we we run the risk are considered just a thirdparty. That over thee medium and longterm, they expect to diverge from the Regulatory Environment in which we still operate in the eu, and that we nee and that will need to be managed going forward. Alix what we see in the European Union is back consolidation is bank consolidation. What banks emerge the strongest out of covid . Is it a regional play . Is it the type and quality of bank that is going to be strongest . Dr. Campa it is hard for me to say which banks would be stronger. I think we need to make sure that the banks that come out of the crisis are actually the best managed banks, and the banks that have the best is in the structures going forward. That has been true throughout consolidation processes. Line, thisof the proposition really is a better one. I think that consolidation is one of the tools for restructuring, to get the banks more effective, more efficient, and more advanced going forward. We have it and if i challenges in the sector. I think those are well understood. The macro environment, the profitability is a challenge in the industry. Transformation is also a need over the longterm. To continue to pursue that one forward. We also have instability that the banks need to be ready for. I dont think that there is a single Business Model that should be considered the optimal one. It would depend on the business proposition of the individual entities. Guy we are going to leave it there. Thank you very much for your time this afternoon, Jose Manuel Campa, chairman of the european banking authority. Another week of outperformance for european equities. A third week higher as we continue to see the rotation trade working, maybe not quite as much this friday afternoon, but nevertheless pushing higher for european equities. The details to follow. This is bloomberg. Guy european equities wrapping up the session and the week. Higher for european equities. Today going out with more for whimper than a bank, up around. 5 , tracking sideways in a reasonably tight range. The market has not made up its mind which one it wants to focus or the vaccine. The two canceling each other out. Let me show you a longerterm chart to give you an idea of where european equities have come from. Where they are relative to the united states. Over the last 30 days, the stoxx 600 is up 5 versus last two to three weeks, the outperformance significant. We are, over the last week, not really going anywhere in a hurry. That is interesting in terms of the competing narrative, virus versus vaccine, which would you focus on . In terms of the intraday performance, not much to speak about. Not much to divide the equity markets throughout europe. You are not se