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The institution has had its share of operational challenges in the past, but somehow continues to show resilience in ensuring its Fiji operations remain prudent and sound. We noted that in 2012, CCFL made a strategic decision to have additional provisions, resulting in a higher than normal provisioning charge against its profit.

And, for young people whose paths become difficult, such as those who 2/3 BIS central bankers' speeches get caught up in the juvenile justice system, what effect do such experiences have on their futures as workers and consumers, and what are the most promising approaches to foster a course correction?

A more ambitious style of global governance would understandably take some time to take shape.

At this stage the issue really is monitoring and assessing whether the general direction of G 20 member country policies is heading in a mutually consistent and agreed fashion over the medium to long-term, and how the G 20 processes can help countries navigate their domestic legislative, regulatory and judicial processes such that commonly agreed policies are adopted.

– I am happy to record that our monetary policy stance succeeded in maintaining price stability. The headline inflation rate which stood at 6.1 per cent in July 2009 declined steadily to 1.7 per cent in June 2010, which was low by historical standards.

– I take the opportunity here to express my appreciation to our two foreign Members, Prof Stefan Gerlach and Mario Blejer, whose extensive experience have greatly benefited the debate and enhanced the decision-making process at MPC meetings during these trying moments.

In one case a bank entered into Equity Finance1 and Standard Securities Lending arrangements with a number of brokers. The securities lent to the bank by brokers were generally obtained as a result of the Equity Finance arrangements between the brokers and their clients.

As such, our investments decisions and how we use our money is very critical. The economy could do better if all the resources around us are intelligently invested so that the Private Sector, the engine of growth, should use the resources to develop our country.

In the system we have had for some years now, the inflation BIS Review 86/2006 5 target, rather than the exchange rate, is our anchor for policy.

The ECB also purchased some securities outright in distressed markets through its securities markets program (SMP), which was, however, later replaced by the pledge to intervene more decisively through Outright Monetary Transactions (OMTs). The unconventional measures undertaken have involved extraordinary central bank lending, expanding central bank balance sheets substantially (Chart 2).

Indeed, real-life success stories of microentrepreneurs and hard data on hand prove beyond reasonable doubt that microfinance truly has the power to liberate our entrepreneurial poor from poverty and to give them a better life. As of June 2008, there were 802,092 microfinance borrowers who have accessed loans worth P6.5 billion from 230 banks.

Thank you again Satish for the kind invitation to be here today. I extend my warmest congratulations to the BRED Bank Team on the establishment of this new branch. I wish your institution the very best in its future endeavours. Official opening I now have much pleasure in declaring BRED Bank (Fiji) Limited’s Nausori Branch, open. Thank You, Merci and Vinaka Vakalevu.

I am not speaking on behalf of either the Board of Governors or the Federal Open Market Committee (FOMC). Varieties of landings In figure 1, I present four plausible scenarios for future growth. Each has a quite different implication for both the outlook and policy.

In each case the economy faces an initial gap between actual output (the dashed line) and potential output (the solid line). Such a gap is typical of conditions that follow a recession. During the expansion phase, at least for a period, growth in production typically exceeds the growth in capacity, so that the gap between actual and potential output is closed gradually.

The objectives and policy guidance for macro-prudential are consistent with this but more specific.

However, Japan’s experience suggests the possibility that low inflation continuing for a long time changed people’s inflation expectations in a backward-looking manner, and thus medium- to long-term inflation expectations also lowered adaptively. In fact, as the disinflationary trend continues, short- and medium-term inflation expectations by economic entities and the markets have already started to decline somewhat in the euro area as well.

If current law is maintained, that aging of the U.S. population will lead to sustained increases in federal entitlement spending on programs that benefit older Americans, such as Social Security and Medicare. The second cause of rising entitlement spending is the expected continued increase in medical costs per beneficiary.

Projections of future medical costs are fraught with uncertainty, but history suggests that – without significant changes in policy – these costs are likely to continue to rise more quickly than incomes, at least for the foreseeable future. Together with the aging of the population, ongoing increases in medical costs will lead to a rapid expansion of Medicare and Medicaid expenditures.

The Bank, and in particular its Okayama Branch, will seek to play a part in contributing to the further development of Okayama Prefecture's economy. Thank you for your attention. 11 Japan's Economy and Monetary Policy Speech at a Meeting with Business Leaders in Okayama December 12, 2019 Masayoshi Amamiya Deputy Governor of the Bank of Japan Introduction I.

Financial and Economic Developments II. Price Developments III. The Bank's Conduct of Monetary Policy Conclusion Chart 1 I.

Robo advisors might exacerbate financial volatility and pro-cyclicality if the assets under management reach a significant level, which is not yet the case. Pro-cyclicality might result from weaker customer relationships and the interoperability of access points. This calls for the regulation of fintechs, at least to a certain extent.

A lot of corporations using technology-enabled financial innovations operate either on a global scale or carry out a large number of cross-border transactions. Identifying key regulatory issues to safeguard financial stability is therefore a goal that the German presidency is aiming at in cooperation with the Financial Stability Board and other standard setting bodies. Another pressing issue in a digitised world is cybercrime.

As regards the current monetary situation, exchange rates are close to their central rates in all the prospective EMU countries, led by market forces. Likewise, long-term interest rates have converged closely as a result of market expectations, and most of the key central bank rates - as well as short-term market rates - have moved into very close alignment.

The background for this is of course the broad economic convergence of prospective EMU countries. We would nonetheless be burying our heads in the sand if we were to overlook the fact that in some countries there is concern about a possible pickup in inflation, at the core countries’ interest rate level, unless fiscal policy is tightened in these countries.

Results in this area differ to some extent, as they depend on a number of specific assumptions. But the available studies indicate that the likelihood decreases to very low levels when the central bank aims at an inflation rate above 1%.

We are thus convinced that focusing on inflation of below but close to 2% provides a sufficient safety margin against nominal interest rates hitting the zero lower bound.

The issue gained prominence in November 2010, when the main characteristics of the European Stability Mechanism (ESM), the permanent mechanism slated to replace the European Financial Stability Facility (EFSF) in June 2013, were spelled out. Scepticism on the effectiveness of market-based fiscal discipline was already present in the early stages of the EMU project.

To quote Chairman Bernanke: ‘‘Further progress in global economic integration should not be taken for granted…as in the past, the social and political opposition to openness can be strong… much of it arises because changes in the patterns of production are likely to threaten the livelihoods of some workers and the profits of some firms…The natural reaction of those so affected is to resist change, for example, by seeking the passage of protectionist measures’’ (Jackson Hole, 2006).

The priority now is to achieve greater convergence between the countries and thus create a more resilient economic bloc. Every country must continue with its reforms: in particular France, but also Germany. Does the economic transformation of France promised by Emmanuel Macron go far enough? It will enable France to make up for lost time.

7 R Hausmann, D Rodrik & A Velasco (2005) In: N Serra & J Stiglitz (Eds) The Washington Consensus Reconsidered: Towards a New Global Governance, Chapter 15: 324–355; D Rodrik (2005) Growth strategies. In: P Aghion & SN Durlauf (Eds) Handbook of economic growth, Volume 1, Part A, Chapter 14: 967–1014.

And that is [based] on the assumption that the central bank will do whatever is necessary to prevent second-order effects. Pursuing Long-term Agricultural Reforms to Rein in Inflation If we look at this chart, note that the month-on-month [changes in inflation may] look tiny, but they are really significant.

By the way, you can see a really tall bar when inflation was over 1.0 percent in one month. If that were to happen 12 months in a row, you would have 12.0 percent [annualized] inflation. We had several really bad months, really bad shocks. We thought that this was the last one.

The pace of growth has slowed, but it has done so in line with the authorities’ intentions. Inflation in China has also moderated. Across the rest of east Asia, the recent data have been mixed.

It is certainly true that reaping the fruit of success comes with a time lag. But experience from Germany – which ten years ago was nicknamed the “sick man” of Europe – shows that the benefits will come to the fore sooner or later.

There have been low levels of credit spreads on bonds issued by emerging markets and companies with low credit ratings, which are around their lowest levels since 1997. Partly in response to these very positive borrowing conditions, an increasing number of emerging market countries have been able to issue long-term debt in their own currency and thereby reduce foreign currency exposure and rollover risk.

Acceptable progress has, however, been made in this regard during the last two years. Against this background, this Forum has been organised to proffer practical solutions on how to tackle the problem of the burgeoning domestic debt of the Federal Government.

It therefore seems the perfect place to host today’s conference on banking business models and to discuss their future. Given that the worst financial storm since the 1930s is only gradually calming down, the topic chosen for this conference is very apt.

So once the crisis is over and the stimulus measures unwind, we should be more or less back where we started. This is wishful thinking. The sharp contraction in economic activity brings with it a permanent output loss. This is reflected in significant downward revisions to estimates of potential output and potential output growth.

This means that banks should provide full and clear information on their services in a simple and understandable way to enable their clients to compare offer terms for different products as well as for the same product by different banks and be able to make informed decisions.

At the same time, the customer is educated and his sense of responsibility for his own decision and the risk that it involves is developed. All developed countries are challenged with increased transparency and improved consumer education, and their central banks, from ECB, Bank of England and the FED, keep reiterating their significance.

In spite of hazards and challenges, it has made great strides towards the goal of taking the economy to new heights. Our vibrant banking industry is an example of the unremitting efforts that the past and present employees of the SBP have been making. We still have a long way to move forward. There are many, many milestones that remain for us to conquer.

Let us make a firm resolve today that we will live up to the ideals of the Quaid-e-Azam and further our efforts to achieve the ends for which the State Bank of Pakistan was established. 2 BIS central bankers’ speeches

I am pleased to appear before you today to report on this effort as it nears completion. Open discussion of complex issues has been at the heart of the Basel II development process from the outset and no doubt will continue to characterize it as Basel II evolves further.

*** Professor Florens Luoga, Outgoing Chairperson and Governor of the Bank of Tanzania; Dr. Alfred Hannig, Executive Director of the Alliance for Financial Inclusion; Governors and Deputy Governors; Ladies and Gentleman; Good afternoon.

Thus, central banks have been led to provide what essentially amounts to catastrophic financial insurance coverage. Such a public subsidy should be reserved for only the rarest of disasters. If the owners or managers of private financial institutions were to anticipate being propped up frequently by government support, it would only encourage reckless and irresponsible practices.

The decrease in borrowing also reflects pressures facing banks, such as the need for smaller, more robust balance sheets, and concerns among investors about “bail-in” rules. Consequently, banks may face higher funding costs as investors demand more compensation for the increased risk of losing their money. In addition, higher asset encumbrance has an impact on unsecured bank creditors.

This is a sign of improving confidence and more favourable conditions. We therefore see some indication that the functioning of the money market is improving. How does the ECB’s non-standard policy compare with the approaches taken by other central banks also grappling with the turmoil in financial markets? Since mid-September 2008, the Federal Reserve has embarked on a policy of direct “credit easing”.

This policy involves, first, the provision of liquidity directly to borrowers and investors in key credit markets and, second, the purchase of debt instruments such as commercial paper or assetbacked securities. These measures are targeted at directly addressing instability or declining credit availability in critical non-bank channels of intermediation.

However, the Rule could have significant implications for important market-making activities as well as for market liquidity, depending on how related regulations are written and how they are actually implemented. According to the proposed regulations, U.S. government bonds and most other U.S. agency obligations are exempt from the Rule.

Obviously, the U.S. authorities are keen to ensure smooth transactions for these securities, and are well aware of the importance of market-making activities for that purpose. Market liquidity is no less important for the securities of non-U.S. governments. However, the proposed regulations do not exempt government obligations of other countries, including 6 BIS central bankers’ speeches Japan, Canada and European countries.

We face them, too; namely, how to explain often complicated ideas in a clear and concise manner. The Federal Open Market Committee, under the leadership of Chairman Ben Bernanke, has made communication a top goal, and as I will describe in a moment, I am on record as strongly supporting this initiative. In many respects, communication is another word for education.

The better we communicate, the more we educate about the Federal Reserve’s responsibilities and its actions. And before I begin, I should remind you that my comments here tonight reflect my views alone, and not necessarily those of others in the Federal Reserve System, including my FOMC colleagues.

6 BIS central bankers’ speeches prudential, market, and systemic risk regulators around the world to address weaknesses in OTC derivatives markets. An OTC derivative is a privately negotiated contract between a pair of counterparties to exchange future cash flows that depend on the performance of an underlying asset or benchmark index.

For example, we have issued guidance to supervisors stressing the importance of taking a balanced approach to supervision and of promptly upgrading a bank’s supervisory rating when warranted by a sustainable improvement in its condition and risk management.

All that being said, prices of oil and oil products in the United States today are quite high relative to recent experience.

Both the investor lending benchmark and the interest-only lending benchmark have been removed for banks that have provided assurances on their lending policies and practices to APRA. But the improvements in lending practices implemented by the banks over the past few years have resulted in credit conditions being tighter than they were a few years ago.

Turning to the first point, the financial crisis has shown an unexpected strong and fast transmission of the US sectoral financial shock around the globe. Despite the fact that significant progress has been achieved to measure and identify risk exposures of globally acting banks and the shadow banking system, for example, by enhanced network analysis, important challenges remain.

Beyond an intensified monitoring of these risk exposures on this more microprudential level, global monitoring of capital flows and changing financial transmission channels of external shocks have to be enhanced. Moreover, we should not only focus our monitoring on the ups and downs of exchange rates, interest rates and CDS, but even more on the underlying reasons for these movements.

It looks as though firms that had been hesitant to raise prices for many years are encouraged by the increase in consumers' appetite for spending. Third, it appears that investors have started to consider the recent price rises as positive developments.

Among budget chain restaurants listed on the Tokyo Stock Exchange, there have been some cases where the announcement of price rises was received positively and stock prices increased sharply. I feel it was often the case in the past that investors were rather concerned about the declines in the number of customers and sales as a result of price rises.

The microprudential authorities’ assessment of “solvency” under the current ELA agreement is based on a number of backward-looking 5/7 BIS central bankers' speeches indicators, such as the reported Common Equity Tier 1, Tier 1 and total capital ratios with a possible grace period in the case of a credible prospect of recapitalisation within a limited timeframe.

While some technicalities still need to be resolved, it now seems likely that this effort will be successful. 2 BIS central bankers’ speeches

Consumer spending continued to increase in the first two months of this year and has now risen at an annual rate of about 2–1/2 percent in real terms since the middle of 2009. In particular, after slowing in January and February, sales of new light motor vehicles bounced back in March as manufacturers offered a new round of incentives.

What will surely become known as the “Mandela banknote series” reflects South Africa’s pride as a nation and pays tribute to a much-loved world icon. To give a brief history of South African banknotes: About 230 years ago the Dutch Governor Joachim van Plettenberg first introduced paper money in the Cape.

Sustainability of the recovery The business cycle and growth in the United States are decisive for the prospects of the world economy. In 2003 world GDP amounted to $ billion, of which US economic output accounted for 30 per cent or just under $ billion.

Japan’s GDP was $ billion; that of the euro area was $ billion, or more than one fifth of world economic output. Italy, with annual output of $ billion at last year’s average exchange rates, accounted for 4.1 per cent of the world economy, mainland China for 3.9 per cent. The other developing countries together accounted for 13 per cent of world output.

Intellectual roots and institutional framework Paolo Baffi was one of the first professional economists to be taken on by the Bank of Italy; it was 1936. He took over the leadership of the Bank in August 1975, just a few days after Guido Carli’s resignation, and was the first Governor to have made his career within the Bank.

Many of his writings bear witness to the intellectual evolution and choices of an economist whose outlook embraced equally theoretical interests and policy concerns. In 1935, after Italy invaded Ethiopia, Baffi’s mentor, Giorgio Mortara, carried on a campaign against the international sanctions imposed against Italy from his Giornale degli Economisti.

These scars occur through: young people not getting onto the jobs ladder, or slipping off it, with permanent effects on their lives people losing training opportunities with long-term consequences for their career prospects lower levels of investment in physical capital and research the damage to the fabric of our society and to people's lives that is caused by a long spell of unemployment.

Effective market discipline can complement bank supervision and regulation. BIS Review 91/2001 1 With sufficient accurate and relevant information, market participants can better evaluate counterparty risks and adjust the availability and pricing of funds to promote better allocation of financial resources. The concept of market discipline is assuming greater importance among international banking supervisors as well.

Fortunately, there has been pragmatic recognition of the problems, and a willingness to change course. At Jackson Hole, Chairman Jerome Powell invoked the legacy of Paul Volcker, who decisively stabilised inflation after the policy errors of the 1970s.

I have nothing very new to say on this subject other than to point out that it is the result of private agents’ decisions rather than government’s demands on capital markets, and that its magnitude has not changed very much in the last 20 years. It has varied cyclically, of course, but around a basically flat trend.

We are going to be seeing other developments, including electronic mandates, and probably more and more mobile payments. Time and experience will refine and change our payment products. And DNB is looking with interest at our neighbours to the east and the shorter transfer times they are achieving on SEPA Direct Debits.

SEPA’s arrival will also change the playing field for payment service providers and banks, and innovative parties will grasp their opportunities. One of these innovations will involve parties wanting access to payment accounts so that they can offer new services. The Dutch payment sector has issued a position paper on this subject and has sent this to Europe.

Although some of the most complex structured-finance products may be gone for good, securitization will only recover fully when new business models solve the agency problems that were inadequately dealt with in recent years. Development of these business models by lenders, dealers, regulators, and the credit rating agencies will take time.

Furthermore, in my view, financial institutions, particularly banks, will probably play a crucial role in this process. They have the ability to originate loans and make sure that there are incentives for accurate credit assessment of the underlying risks.

In 2006, the Bank introduced what is called an “understanding of medium- to long-term price stability” (hereafter “understanding”), which outlines the Bank’s understanding of price stability that should be taken into account when discussing monetary policy, and released a numerical expression, a year-on-year rate of change in the CPI that “falls in the range approximately between 0 and 2 percent.” This time, in order to prevent the expression “approximately” from inviting misunderstanding, we decided to employ clearer words to express the Policy Board’s intention to not tolerate a year-on-year rate of change in the CPI equal to or below 0 percent and that the midpoints of most Policy Board members’ understanding are around 1 percent.

In our assessment the current monetary policy stance will contribute to achieving price stability. However, we will monitor very closely all developments over the period ahead. 8 BIS Review 106/2008

In the light of what I said at the outset, we should not underestimate the risk that the consensus needed in our democracies to effectively address financial crises may be distorted in favour of special interests.

The ethical question relating in particular to the operation of markets and the use that is made of information does not concern only individuals but has a broader dimension that touches on the functioning of our democracies.

These are all areas where demand growth has been soft and firms’ margins are under downward pressure. So, to summarise, the overall picture is one in which aggregate demand has grown strongly, and is expected to continue to do so.

However, a higher-than-average share of that growth in demand is being met through imports, not only because of the high exchange rate but also because of the heavy weight of resource sector investment in overall demand.

That is not only a reference to the fact that football World Cups are no longer being played in the wonderful summertime, but in the winter months. Changes can be observed in the world of payments as well. Driven by digitalisation, new payment methods are emerging and, with them, new providers of innovative payment services.

On the one hand, at the microprudential level, central banks and other financial authorities ought to undertake a continuous and careful evaluation and monitoring of the risks for individual financial institutions deriving from their exposure to assets, projects, entities and/or income streams that are directly affected by climate-related developments.

On 2 March 2012, the "Treaty on Stability, Coordination and Governance in the Economic and Monetary Union" (which includes the so-called “Fiscal Compact”), was signed by twenty-five Member States (all but the UK and Czech Republic).

According to the Treaty, the annual structural balance of the general government must be balanced or in surplus (with a lower limit of –0.5 % of GDP at market prices). These Member States will have to enshrine this rule in their national legal system through provisions of binding force and permanent character, preferably constitutional.

http://www.imf.org/external/pubs/ft/gfsr/2011/01/pdf/chap3.pdf IMF, (2011b), “Separated at Birth? The Twin Budget and Trade Balances”, World Economic Outlook, Chapter III. http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/c4.pdf IMF, (2011c), “Macroprudential policy: an organizing http://www.imf.org/external/np/pp/eng/2011/031411.pdf framework”, March. IMF, (2011d), “Macroprudential Policy: An Organizing Framework – Background Paper”, March. http://www.imf.org/external/np/pp/eng/2011/031411a.pdf IMF, (2012), “Dealing with Household Debt”, World Economic Outlook, Chapter III, April.

The legislative proposal on covered bonds made by the European Commission in March 2018 is an important step in that direction, also with a view to promoting a further deepening of the capital markets union. The ECB also sees merit in the proposed directive serving as a basis for new national legislation on covered bonds.

Inevitably, this means that regulators set minimum standards for risk modelling and in a way become “risk modellors of the last resort”.6 This brings about uniformity in risk management while, arguably, heterogeneity would be more desirable because uniform approach to risk management can accentuate market movements by increasing correlation in the financial system which may result in larger systemic risk.

In the early months of this year the euro-area index of industrial production continued to waver. In the spring the cyclical indicators signaled the persistence of a very cautious attitude among firms and households.

Although the narrowing output gap and the lagged effects of a rise in commodity prices will contribute to moderating CPI deflation, they will not be strong enough to make year-on-year CPI firmly positive for fiscal 2004.

However, I must say that while anyone can apply to establish a bank in Fiji, they must meet our fairly comprehensive licensing requirements, which play an integral role in ensuring we are dealing with reputable, tried and proven players. Historically, we have had banks withdraw from the country for various reasons. Some contend that this indicates that the country is sufficiently banked.

[Let me also mention some other important strands of work of the Basel Committee in the pursuit of strengthening the resilience of banking systems, such as the introduction of a non-risk based supplementary (to regulatory capital) measure, strengthening the quality of banks’ regulatory capital and the review of the minimum level of regulatory capital with the aim to arrive at a total level and quality that should be higher than the current Basel II framework.

[12] Woodford, M., "Forecast Targeting as a Monetary Policy Strategy: Policy Rules in Practice," paper prepared for the conference "John Taylor's Contributions to Monetary Theory and Policy," Federal Reserve Bank of Dallas, October 2007. 6 BIS Review 1/2008

When the pandemic hit, we had to respond decisively to prevent a credit crunch for struggling firms. And now, the reopening of the economy and the war in Ukraine are leading to a phase of higher, mainly energy-driven inflation. We are fully committed to ensuring that inflation stabilises at 2% over the medium term – which is what our mandate requires.

Is this a sign that the recession is worsening? Jean-Claude Trichet: I indicated, on behalf of the Governing Council, that we had observed a further decline in inflationary pressures – linked, in particular, to a slowdown of economic activity – which justified a further cut of our interest rate by 0.5%.

And as a pioneer in developing prudential regulation of microfinance, the Bangko Sentral is part of the working group responsible for drafting the guidance paper on “Microfinance activities and core principles for effective banking supervision” issued by the Basel Committee on Banking Supervision. But more than these, we take pride in the actual results that we see on the ground.

Moreover, the federal government would not be able to sanction a state if, for example, its tax code was leading to a local housing bubble. This is now not excluded in the euro area under the Macroeconomic Imbalances Procedure.

Conclusion The Australian dollar has shown some big swings in both directions since it was floated in 1983. This is the fourth time in that era that the Australian dollar has fallen by more than 10% in trade-weighted terms in a year.

On each of the earlier occasions, it seemed at the time that the fall would go on forever, and there were plenty of people who had explanations to support its continuation. However, on each occasion, it recovered and it will do so again this time.

BIS central bankers’ speeches 1 By this point our ability to provide that additional accommodation through standard measures was constrained as policy interest rates approached zero. Like other central banks 3, we had learned that the likelihood of hitting zero interest rates had been severely under-estimated in our previous analysis 4.

We therefore achieved the expansion of our stance through three new, non-standard instruments: a series of targeted long-term refinancing operations (TLTROs); a negative deposit facility rate (DFR); and an asset purchase programme (APP) including private and public securities.

One policy which we will continue to take to improve external endurance is the strengthening of the second line of defence through financial cooperation with other central banks and financial authorities in the region. We view these types of cooperation should be continuously strengthened to anticipate against uncertainty of risk of the global economic condition that can instantly weakened the external sector performance.

Distinguished Guests, Ladies and Gentlemen, [Macroprudential Policy Direction] 48. In an effort to strengthen external sector endurance, we will also adopt macroprudential policy through supervisory action. The macroprudential policy is aimed at strengthening credit composition extended to productive sectors with export orientation and which provide import substitute goods and support efforts to increase economic capacity. 49.

My thoughts today, however, are not a call to rewrite Genesis, but rather a recognition that our stress testing regime--like the banking and financial system that it evaluates--will and should evolve as we continue to learn from experience in the management of this tool.

In the best traditions of the Federal Reserve, this evolution should be grounded in rigorous analysis of the facts and a commitment to continual improvement of our methods. In my remarks today, I will begin with what has been successful about the stress tests and why those elements should remain.

Many concepts of core inflation have been proposed, such as HICP inflation excluding energy and food components, trimmed means of the HICP sub-indexes and model-based measures.

Individuals and merchants will expect to be able to obtain digital euro at their banks[12], just like they do today with cash. [13] It should be simple for people to start using the digital euro, and there should be no need to change bank in order to do so.

Likewise, our internal model-based assessments of the euro area corporate bond market do not signal overvaluations and excessive bond premia to date. In the present context, there is nevertheless, the need to remain vigilant and continuously monitor developments. Monetary policy must however remain focused on inflation and/or on growth.

Therefore, such risks need to be addressed by policy instruments dedicated to ensuring financial sector resilience while curbing financial cyclical excesses – that is, by supervision and macroprudential policy. Macroprudential policy has two main objectives: to enhance the resilience of the whole system and to smoothen the financial cycle, i.e. the fluctuation of credit, leverage and asset prices that may lead to boom-bust episodes.

Some of these take the form of price ceilings or subsidies to households, which elevate demand for certain commodities and often reduce supply. Others involve subsidies to producers, which may divert needed resources to different uses. A prime example is the support for biofuels, which reduces the amount of arable land available for food production.

The fourth and final set of suggested reforms involves a number of initiatives that governments ought to take, as opposed to the various things that they should stop doing. The former include structural reforms to make their economies more flexible and resilient to shocks and, more generally, encouraging rather than resisting necessary adjustments to changing market conditions.

These risks have not gone away, but the fact that they are not building at the rate they have been is a positive development. Monetary policy I would like to conclude with what all this has meant for monetary policy over the past year or so.

And It would be based on a European infrastructure, facilitating intermediaries to scale payments innovation throughout the euro area and thus strengthen Europe's strategic autonomy. Our work on exploring the underlying rationale, potential benefits and risks and core design principles of a digital euro has made good progress.

Indeed, it is one reason interest rates have been so low through much of the recent global expansion.

In the United States, the shortfall in business demand has been made up for largely by the household sector, as I just noted; for a variety of reasons, that has been less the case in many other countries, especially in Asia, and these countries have, in effect, relied on exports to fill the gap between demand and potential production.

Of equal importance are market-led initiatives like the work that is currently being done by the Taskforce on nature-related disclosures (TNFD) These two steps represent what we excel at: collecting and interpreting data. But we have to make sure that our quest for better data does not result in delays.

Because it is time – high time – for the third step: to actually take action and use the data at our disposal, to change the way we do things, to restore the balance between nature and economy. As the nitrogen crisis and last year’s floods in the Netherlands show, the loss of biodiversity is not merely a challenge for future generations.

BIS central bankers’ speeches 3 No simple fiscal rule would have prevented the risky over-dependence on bubble-related tax sources. Certainly, the Fiscal Compact does introduce a tighter set of rules on future (postProgramme) fiscal policy than was embodied in the original Stability and Growth Pact.

Finally, doubts over the sustainability of the Chinese economic recovery and policy interventions there persist. Monetary policy and inflation Let us now focus on monetary policy and inflation in Mexico. Since last year, annual inflation has remained moderate. For 15 consecutive months, it has been below the 3 percent target. This is unprecedented and calls for consolidation of the trend.

The breakdown of trust Having described the critical role that trust plays in the process of financial intermediation, I will now describe how trust has broken down over the course of the financial crisis. The period leading up to the financial crisis saw what might be labelled, in the context of my talk today, the development of lazy trust.

The Governing Council made clear that the modalities of TLTRO III would take into account a thorough assessment of the bank-based transmission channel of monetary policy, as well as developments in the economic outlook. The recent deterioration in the economic outlook prompted us to ease several of the terms of the new operations.

• Exploring the possibilities for private contingent credit lines that provide additional liquidity, or reduce debt service burdens, at times of stress.

that have the effect of Also, some degree of consensus seems to be emerging around the need to re-assess the capital standards established by the Basel Committee on Banking Supervision with a view to reducing the perceived bias towards short-term interbank credit lines from industrial countries to emerging market banks.

dollar 160 Yen/euro 150 140 2 60 130 50 120 1 40 110 30 100 0 20 90 10 0 CY07 Foreign Exchange 80 09 11 13 15 17 19 -1 CY07 09 11 13 15 17 19 70 CY 07 09 Notes: 1.

Shaded areas for September 15, 2008 to March 31, 2009 correspond to the Global Financial Crisis and for March 1, 2020 onward to COVID-19. 2. In the left-hand chart, figures for the United States are the VIX Index and those for Japan are the Nikkei 225 Volatility Index. 3.

5 Standard and Poor (2009), "What Stress Tests Reveal about U.S. Banks Capital Needs," May 1. 6 Purchase accounting adjustments were recognized for Capital One Financial Corporation, JPMorgan Chase & Co., PNC Financial Services Group, Inc., and Wells Fargo & Company.

BIS Review 57/2009 5 Fourth, in contrast to some outside estimates, estimated losses for the capital assessment program are for the 19 firms, not the entire banking system. Moreover, numerous adjustments were necessary to reflect particular facts and circumstances at these firms.

In this scenario, 12 life insurers with a combined market share of 14% would fail to meet the requirements of Solvency I by 2023. 2 BIS central bankers’ speeches • In the more severe stress scenario, the extremely low interest rates affect a wider range of asset classes.

The fundamental problem with climate change was described thus in the Stern Review in 2006: “Climate change is the greatest and widest-ranging market failure ever seen.” This is because climate change is an economic externality, meaning that whoever causes the emission does not pay the full costs of the damage.

Of course, moving assets off the balance sheet and into special purpose entities, with the attendant creation of servicing rights and high risk residual interests retained by firms, generates its own risks and reduces transparency unless the firm takes additional steps to enhance disclosure. Several types of securitization have grown rapidly over the past decade.

One of the fastest growing has been asset-backed commercial paper, which soared from only $ billion outstanding at the end of 1989 to about $ billion as of year-end 2003. Commercial mortgage securitizations have also proliferated noticeably since the early 1990s.

BIS Review 33/1998 ˝ -5- More broadly, the time may be appropriate to hasten the adoption of widely accepted international accounting and disclosure principles that raise the standard for accounting treatments in all countries.

We should recognize that it can also be an important option for people confronting economic challenges in their lives, such as insufficient retirement savings. A study conducted by the Kauffman Foundation suggests that both baby boomers and older generations are increasingly turning to entrepreneurial activities.

For larger lower-rated corporations that have significant default risk, the expansion of the so-called junk bond market has offered the capability to raise funds even when other sources of financing were less available.

Bean, C., (2005), Monetary Policy in an Uncertain World, Oxonia Distinguished Speakers Seminar, The Oxford Institute of Economic Policy, Oxford, 22 February. Bean, C. (2006a), Comments on Ken Rogoff: “Impact of Globalization on Monetary Policy” at the Federal Reserve Bank of Kansas City, 30th Annual Economic Symposium, Jackson Hole, Wyoming, 26 August.

First, a credit boom due to lower interest rates once the countries in question had joined the euro area. Second, insufficient or totally absent risk management in economic policy, which should have been much more countercyclical. And third, the Stability and Growth Pact was not applied as strictly as it should have been, or was weakened by questionable accounting practices and faulty statistics.

Given these similarities with the root causes of the financial crisis, the responses of economic policy are similar, too. The first challenge has been to stabilise the situation. The relevant steps towards that goal were taken by the Eurosystem and the Ecofin ten days ago.

The Bank believes that together with the cumulative effects of earlier policy measures and the effects of the government’s efforts to strengthen Japan’s growth potential, the latest decision to implement monetary easing will prevent the economy from deviating from its course of returning to a sustainable growth path with price stability.

That work recommended that 30 per cent of income be adopted for the maximum level of housing costs for households in the bottom 40 per cent of the income distribution.1 Some commentators have since begun to apply it to all households, including those with very high levels of residual income.

In addition to these EU-wide proposals at the legislative level, a separate pact (the Euro Plus Pact) has been drawn up by the euro area countries and several other EU Member States in order to redress competitiveness differences, thereby further strengthening the economic pillar of EMU. These measures, once fully operational, would certainly improve the economic governance of the euro area.

But strict implementation is key, so that the concept of “effective peer review” in the Union regains credibility among market participants and the public. The ECB regards the reforms made to the macroeconomic and budgetary surveillance framework as not ambitious enough: they appear to leave room for discretion by Member States to escape sanctions in the event of non-compliance.

A countercyclical macroeconomic policy response was only possible for those economies which had sufficient macroeconomic and fiscal space, in terms of their current account and fiscal balances, public debt ratios and foreign exchange reserves.

This might appear to be a statement of the obvious, but it is worth thinking about what this implies for boards of directors. Perhaps the most important consequence, as the Basel Committee states, is that the board must pay attention to the long-term interests of the institution and to those of all stakeholders, including depositors and creditors.

First, private and public sector balance sheets are still adjusting in many euro area countries. However, in light of the large fiscal adjustment that has already taken place, the fiscal drag is declining.

Such straying above fundamentals could create problems for our economy when the inevitable adjustment occurs.” Testimony of Alan Greenspan before the Committee on Banking and Financial Services, U.S. House of Representatives, July 22, 1999.

Both these two distinguished gentlemen, Barroso and King, have something in common: their common feature, although one was in politics and the other in central banking, is, by pure coincidence, that they both held the top position in their field for two full successive terms, a total of ten years each, Barroso from 2004 to 2014, and King from 2003 to 2013, in the same turbulent period.

History pays tribute not only to achievements, what one has done after all during one’s tenure, but also to the longevity of one’s time in office.

In both dimensions, the speedy coordination on a coherent policy response and the stability provided by a large monetary area, the euro has proved to be an anchor of stability in critical times. The paper is structured as follows. Section 2 portrays the measures taken by the European System of Central Banks.

Since the early 1980s, the personal saving rate has fallen steadily; on average, a household today saves only about 1-1/2 percent of its disposable income, compared with about 11 percent in 1984.

The growing popularity of Bitcoin, for example, ― which had seen at one point an increase in its value of 5,000 per cent – is tempting for individuals seeking rapid returns on their outlays. Whether such outlays should be termed “speculation” or “investment” is a matter of judgement.

To be sure, the Congress and the Commodity Futures Trading Commission (CFTC) have taken steps to address these concerns about the CEA. The Futures Trading Practices Act of 1992 gave the CFTC authority to exempt OTC derivatives from most provisions of the act.

For example, progress in integrating the secured money market, that is, the market in which money is exchanged for collateral and repos, or repurchase transactions, and which includes the markets for T-bills and CDs, has been hampered by differences in national rules about collateral, settlement and matters concerning the handling of insolvency.

Meanwhile, the rating agency Standard & Poor’s downgraded its outlook for Japan’s sovereign AA ratings from “stable” to “negative”.

The Real foreign exchange rates, which are adjusted for the inflation rate, could be stable even if the target inflation rates are different among countries. However, in this case, nominal foreign exchange rates will appreciate in places that adopt lower targets, and this will consequently reduce production and employment, leading to a decline in prices.

Provided that these adjustment costs are substantial, stability in nominal exchange rates is desirable. 12 Bank is focused on achieving its price stability target of 2 percent and maintaining the inflation rate at that level in a stable manner in Japan.

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We were the first to react by reducing the key policy rate, in four rounds. At the global level – already in the first three weeks of March, 49 central banks cut down their reference rates, making the first move at the onset of the crisis.

The European Parliament, which represents EU citizens, is the key to fostering people’s understanding of and trust in ECB decisions. In this sense, it contributes to the effectiveness of our monetary policy. But your contribution, as parliamentarians, does not end here.

For example, we have a substantial body of theoretical work on quantitative easing from Curdia, Woodford and others. We have also made a lot of progress in incorporating financial frictions into the models used by central banks. This began in the United States before spreading to Europe. It’s also an opportunity to revive monetary schools of thought that had disappeared.

Discussions about negative interest rates, for example, have provided an opportunity to revisit the work of Silvio Gesell and his theory of banknote demurrage, which had become a theoretical oddity but is becoming significant once more. The crisis was an opportunity to test the vitality of economic theory and its responsiveness, and I think this was a positive thing for this field of study.

* * * I would like to thank the Caribbean Financial Action Task Force (CFATF), the Ministry of National Security, the Commonwealth Secretariat and the United States Embassy of Trinidad and Tobago for jointly organizing this Conference and inviting me to speak.

The work to date has reflected a very constructive and cooperative effort between the central banks and market participants. All of us recognise the need to restore the public’s faith in the foreign exchange market and the value of the Global Code in assisting that process and also in helping improve market functioning and confidence in the market. 1 See <www.bis.org/mktc/fxwg/gc_may16.pdf>. 2 See <www.bis.org/press/p150511.htm>.

Therefore, I do not think that they form an obstacle to a stronger economic activity. Second, it has to be noted that the relevant real interest rate is an ex ante concept. It is based on expected rather than on actual inflation.

As an example: direct credit systems will define clearing time-frames, and debit systems will define charge-back rules or conditions. These types of rules are often called the ‘rule books’ in jurisdictions like Canada and the United Kingdom (UK).

Additionally, about 20 percent of the higher-priced loans that were extended in low- or moderate-income areas, or to low- or moderate-income borrowers, were loans originated by lenders not covered by the CRA. Our analysis found, in fact, that only 6 percent of all higher-priced loans were made by CRA-covered lenders to borrowers and neighborhoods targeted by the CRA.

Conclusion Let me draw to a close. In exceptional times, regaining stability sometimes requires exceptional measures. We cannot always look to the past for answers. We may need to take new steps to achieve longstanding goals. That is the situation we have been facing. For the Member States, new steps have been needed to restore competitiveness.

7 See Rostagno, M. et al., (2016), “Breaking through the zero line: the ECB’s negative interest rate policy”, Brookings Institution, Washington DC, 6 June 2016. Presentation available on the Brookings Institution website. 8 ECB (2016), “Euro area bank lending survey”, Third quarter 2016, European Central Bank, October. 6/6 BIS central bankers' speeches

Every year for the last fourteen (14) years we at the BSP have held this annual ceremony traditionally right around this time: our Anniversary month… There is significance in this chosen timing.

And in an environment of increasing interest rates, there is a risk that households with high DTIs will find it more difficult to service their debt.

This agreement has resulted in the “Principles for stable capital flows and fair debt restructuring in emerging markets”, previously known as the “Code of Conduct”, and it was endorsed at the end of last year by the G20 10 Javad K. Shirazi: The East Asian Crisis: Origins, Policy Challenges, and Prospects, June 1998.

The GDP ratio of the general government deficit has decreased by 5.6 percentage points from 8.3 percent in fiscal 2012 to 2.7 percent in fiscal 2017, and the GDP ratio of net government debt, which had been increasing sharply, is more or less unchanged at around 121 percent since fiscal 2012.8 7 See Harada Yutaka, "Nihon keizai to seisansei: Special Lecture at a Conference Commemorating Daiwa Institute of Research's 200th Release of Japan's Economic Outlook," Bank of Japan, March 2019.

The documents also stress the need to enhance cooperation and information exchange among the supervisors in each country and industry segment. Implementing these recommendations may necessitate changing the legal framework of our financial oversight frameworks, but major changes in our financial institutions and markets demand changes in the supervisory frameworks of our countries. The United States is no exception.

The latest data available from the Australian Bureau of Statistics (ABS) show that at February 2012 around 2.3 million people – almost one-fifth of the total number of employed people – were newly employed, having been in their job for less than a year.

While a little under half of these were starting work for the first time or were not previously working, 1.2 million people moved from one job to another. And this is in a year when the net growth in published employment was just 23,000. This changing in jobs occurred for a range of reasons.

Denmark, which is de facto in the euro area, has made structural reforms in the labour market, which have proved very efficient. We are fully backing this trend of reforms. It is very important to communicate as efficiently as possible and to convince public opinion that this is a successful way to fight unemployment and promote growth.

Furthermore, the decline in global crude prices and naphtha prices will reduce the size of subsidies to oil and fertilizer companies, opening up fiscal space for infrastructure spending. From the external sector perspective, it is projected that imports will shrink more than exports keeping the current account deficit modest. There are also several structural factors that have come to India's aid.

The humility of central bankers has seldom been an occasional act; it’s more of a constant attitude. But it’s cast off and dismissed lightly. The central banker is instead labelled as arrogant. It’s an optical illusion. Quite often, this perception, as amply discussed in central banking literature, leads to clashes with the elected representatives of the people.

Whereas the central banker, by the very nature of his responsibilities, takes a long term view of the economy, the elected representatives of the people take a short term view, shaped and limited by the length of their tenure of office. This is quite understandable for they don’t get elected on the basis of their beautiful political philosophies.

In related work, Hyun Song Shin together with David Greenlaw, Jan Hatzius and Anil Kashyap “Leveraged Losses: Lessons from the Mortgage Market Meltdown”, paper for the 2008 US Monetary Policy Forum, February 2008, have assessed the current episode in some detail. BIS Review 44/2008 1 that almost nobody could have foreseen.

These factors included an abundance of liquidity that underpinned a build up of leverage in the financial system, an increasingly interwoven and complex financial system the growth of which was fed by financial innovation and some financial agents’ incentives that were aligned against prudent practices.

The purpose of asset classification and provisioning is to present a true picture of bank’s balance sheet and not to stigmatize accounts / borrowers.

The second point I want to stress is that having an inflation target as an anchor is very helpful in terms of the Bank's accountability. If inflation persistently deviates from the target, we are committed to explaining the reasons why, what we will do to return it to target, and how long we expect the process to take.

Slowing labor demand and the steep increases in the price of imported oil have damped real income gains. And banks report that they have tightened the terms and standards for consumer loans. In this environment, consumer sentiment has been weak; it began eroding last summer and plummeted in February. Together, these factors are likely to restrain spending growth in the period ahead.

This restraint should be offset 2 BIS Review 26/2008 somewhat beginning in the late spring, when many households will start to receive the tax rebates that are the centerpiece of the recent fiscal stimulus package.

* * * Ladies and Gentlemen, I should like to thank you for attending this conference, jointly organised by the Ministry of Finance and the MNB, and sharing with us your valuable thoughts on the forms and possibilities of co-operation between the Government and the central bank on the road to the euro. I.

The introduction of the euro is a joint enterprise for us. It is not merely a legal obligation we undertook in the treaty of accession but much more than that – a unique opportunity that may enable the Hungarian economy to catch up more quickly and may ensure lasting economic and financial stability.

The data is the average for 17 advanced economies. Year 0 corresponds to a systemic financial crisis.

At the Bank of Israel, we did not think that their projection was too optimistic at the beginning of 2011. We only understood this in retrospect. Following the decline in the growth rate in 2012, the government spent more than what it had planned to spend, which was another factor in increasing the deficit.

But, just as importantly, we also need to be humble when explaining the past behaviour of exchange rates. In that regard, it is worth recognising that models of exchange rates provide only rough estimates of the more enduring relationships. The International Backdrop After a lengthy period of relative stability, global financial markets have been more volatile over the past few months.

The incoming data from around the end of 2018 was associated with a tightening in financial conditions: global equity prices declined; corporate credit spreads widened; issuance of corporate debt eased; and volatility picked up across most markets (Graph 1).

Moreover, in addition to coping with the weak yen environment, there is recently a growing awareness among firms of the need to restructure supply chains - by, for example, creating multiple chains -- from the perspective of economic security and business continuity. I think that firms' shift back to domestic production will thus be an important business strategy.

To this end, I will begin by reviewing the main features of Mexico’s banking system, in order to identify likely channels of improvement; then, I will examine how these possibilities are addressed by the recently approved financial reform; and finally, I will discuss Mexico’s economic outlook with an emphasis on inflation and monetary policy.

Thus, Japan’s export environment as a whole continues to be favorable, and the currency and financial instability in Southeast Asia has, so far, not affected the fundamental trend of Japan’s exports in any significant way. In addition, Southeast Asian countries have been adopting various measures, some of which are internationally coordinated.

India has recently entered the group of top 50 countries in the global innovation index (GII) list of 2020 for the first time. The India Innovation Index, released by Niti Aayog last year, has been widely accepted as a major step in the direction of decentralisation of innovation across all states of the country.

The goal is to make MMFs less vulnerable to runs without ending their usefulness as a close substitute for bank deposits and an important source of short-term funding for a number of private and public sector borrowers. What does this mean for Canada? So far, I’ve been talking about shadow banking issues mainly from an international perspective.

Now I would like to focus on how these issues apply here at home. In Canada, shadow banking is more limited in scale and scope than in other jurisdictions, especially the United States, where competitive pressures and regulatory restrictions drove some activities out of the banking system. Let’s look at some numbers.

Several of the remaining issues involve quite a number of calibrations based on the accumulation of very technical and expert considerations, such as the measurement of risk-weighted assets. The outcome of these considerations would have a significant impact on the determination of required macro capital and the risk-taking behavior of financial institutions.

For example, the price of West Texas Intermediate crude oil delivered at Cushing, Oklahoma in three months’ time could be influenced by many factors. If the U.S. economy were booming and people resumed driving huge pickup trucks, demand would skyrocket and so would the price for crude oil.