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- sensitive application of basel capital standards. and, last but not least, large exposures of banks vis - a - vis counterparties of the shadow banking system need to be adequately measured and controlled by looking through complex investment structures. finally, the effectiveness of regulatory requirements with regard to shadow banking must be constantly assessed and their implementation should be peer reviewed at the global level. as outlined, addressing the liquidity risk of money market funds, procyclical credit expansion via securitised financing, and interconnections between banks and shadow banks are key regulatory reforms. adequately regulated, it should be possible to effectively mitigate systemic risks posed by such non - banking financial institutions and enable them to affect financial stability more positively. bis central bankers ’ speeches | and foster emerging best practices for business continuity. challenges in addressing the risks of regional disruptions i would now like to identify three primary challenges in implementing a strategy to address regional disruptions. these challenges involve people, business, and technology. in developing strategies for regional disruption, we must recognize that the safety of people - - our colleagues, employees, and their families - - is paramount. different strategies of regional diversification, along with efforts to strengthen security and crisis response within regions, will help protect our people. one of the challenges that we face, however, is how to increase individual safety without losing the efficiencies that we have gained from concentrating staff and expertise at critical geographic locations. the effect of regional diversification on business also presents challenges. firms will both incur costs and reap benefits with diversification, but it is often difficult to justify adding costs to address contingencies. firms inevitably have a number of strategic priorities and projects that contend for resources. we also recognize that some firms are in different positions than others in addressing regional issues. some firms have a national or international “ footprint ” that makes it somewhat easier to take important measures to diversify operational centers and back - office operations. others, because of historical circumstances or regional specialization, have harder decisions to make. these issues are always difficult. firms that play significant roles in critical markets, in particular, need to think very carefully about the new situation we are facing, along with their importance to their customers, counterparties, and the markets generally. at the highest levels of major firms, there is a real need for leadership in dealing with an issue that goes beyond ordinary business decisions. our white paper asks a series of questions about how to identify critical firms that need to adopt sound practices for regional diversification and seeks guidance on cost and similar issues. the third important challenge involves technology. some key technologies for data storage and communication do not accommodate regional diversification as readily as we all would like. the challenge here will be to modify existing arrangements, solve technological problems, and find new ways to facilitate diversification. i am sure that the firms attending sibos are very aware of these issues, and i trust that the market for these technologies will see a flow of very creative solutions over the coming months. i would like to add a note about telecommunications. we have known for some time that our progress in automating the financial markets has made us highly dependent on telecommunications. in our own discussions within the federal reserve and our discussions | 0 |
financial institutions to be cautious in their valuation and lending practices communication of this kind is considered a “ soft ” macroprudential instrument, as opposed to “ hard ” macroprudential instruments like capital buffers. the decision was based on an analysis of the financial cycle. the financial cycle differs from the business cycle, and it is related to swings in financial variables, such as lending or risk premia. in germany, the financial cycle has been quite expansionary over the past years, even during the pandemic, when gdp ( gross domestic product ) declined by about 5 % in the year 2020 alone. one reason for this is the strong fiscal and monetary support that allowed banks to continue lending. during this period, vulnerabilities to adverse shocks have been building up, though, and risks have increased. hence, the policy package aims at making the banking system more resilient to adverse shocks. this calibration of these instruments takes into account that banks have capital buffers in excess of the minimum regulatory requirements. hence, it was unlikely that these measures would have negative side effects ; the banking system would be able to meet the higher capital requirement without reducing lending or raising additional capital. moreover, banks had one year to comply with the new requirements, which came into force this february 2023, allowing for a gradual adjustment. in a fourth step, the effects of macroprudential policy instruments need to be assessed in an ex post evaluation. this step provides information about the effectiveness of the measure ( s ) taken, about intended or unintended side effects, and it also serves as an input into a possible recalibration of the policy instruments. [ 9 ] analytical work done at the bundesbank found that the macroprudential policy package served its purpose of increasing the resilience of the banking system. there is no evidence of any negative side effects. this ex post evaluation needs to take into account that the macroeconomic environment has changed since the decision to activate the measures : interest rates increased significantly in 2022, and the macroeconomic outlook has worsened. yet, there are no signs right now that would indicate a contraction in lending driven by the macroprudential instruments. [ 10 ] the recent slowdown in mortgage lending is likely due to higher interest rates and banks being more cautious in the current environment, and therefore a natural market response. of course, good policy evaluation requires good data. as part of its statutory mandate, the bundesbank com | ##piles monetary, financial, and foreign trade statistics. numerous datasets are also collected within the scope of its banking supervisory tasks. this information forms the basis for the monetary policy decision - making process, macroeconomic and financial stability analyses. the bundesbank is thus one of the largest “ data producers ” in germany. recently, it broadened its focus on aggregated statistics by adding an infrastructure for the provision and use of microdata. data collected by the bundesbank include information on banks, such as the monthly balance sheet statistics, securities holdings statistics, the anacredit credit registry as well as balance sheet data for non - financial corporations. in addition, banking supervision data and data obtained from bundesbank surveys of households ’ and firms ’ expectations are available for analysis. lastly, the bundesbank holds data collected under eu ( european union ) regulations on securities transactions. some of these datasets are available for scientific research projects and can be accessed via the bundesbank ’ s research data and service centre ( rdsc ( research data and service centre ) ). [ 11 ] the rdsc ( research data and service centre ) offers anonymised datasets on banks, securities, investment funds, firms and households, ensures compliance with data confidentiality requirements, and guarantees the quality of the data provided. moreover, numerous macroeconomic time series published in the bundesbank ’ s time series databases are freely available on the bundesbank ’ s statistics page. 3 understanding frictions in markets one important friction in financial markets that can endanger financial stability is the too - big - to - fail ( tbtf ) externality. financial institutions can become too big to fail because of their size, because of their complexity, or because of their interconnectedness with other parts of the financial system. the failure of such institutions can thus put the functioning of the entire financial system at risk. in a crisis, governments thus often stepped in to prevent the system from failing. this, in turn, created expectations of future bail - outs, thus incentivising systemically important financial institutions to take on excessive risk. since the global financial crisis, a number of reforms have been implemented to mitigate the tbtf problem and the underlying moral hazard. in a nutshell, large and systemically important banks have to meet higher capital requirements than smaller ones ; they are subject to more intensive supervision ; and new resolution regimes have been implemented that ensure that even a larger bank in distress | 1 |
irene espinosa cantellano : moving beyond climate - the relevance of biodiversity loss for the financial system keynote ( virtually ) by ms irene espinosa cantellano, deputy governor of the bank of mexico, at the green banking webinar series " biodiversity finance : its intersection with the financial sector ", green banking academy, international finance corporation, world bank group, 27 january 2023. * * * it is a great pleasure for me to join this webinar to endorse the binding commitment that, as part of society, we must reiterate to keep aware of the risks that climate change and biodiversity lossimply for the financial system and the economy. underestimation of biodiversity loss risks we should recognize and internalize that biodiversity lossis a severe threat, not only to solving the profound economic and social problems that we face, particularly in emerging and developing economies but also to our very own survival as human species. in the last decades, significant efforts have been taken to include physical and transition risks in financial institutions'risk analysis frameworks, supported by extensive scientific and academic works. however, it is undeniable that we must accelerate the pace to incorporate a critical risk that has been underestimated : the risk associated with biodiversity loss in our ecosystems. there might not be enough work yet to fully understand biodiversity loss's consequences and actual costs. we must also be aware that biodiversity loss could potentially exacerbate climate change risks. importance of biodiversity for life and the economy biodiversity and renewable natural capital provide many services necessary to our subsistence and quality of life. for instance, forests provide clean air, store carbon, and are a source of fresh water - on which humans and many species depend - to avoid soil erosion and provide several other valuable ecosystem services. marine flora and fauna, like coral reefs and fish banks, have an enormous value for our societies and not only for the local communities, which have lived and looked after them for generations. coral reefs and mangroves are also necessary to protect the shores and avoid inland flooding. globally, we have already changed almost three - quarters of the earth´s surface and two - thirds of the oceans, placing countless animals and plants under threat of extinction and destroying half of the world´s coral reefs. but we are immersed in nature and dependent on it in many different ways. natural capital is vital for the economy, with more than 50 % of the global gdp being highly or moderately reliant on nature. 1 / 5 | the road through a more effective rule of law, better public security, and improvement to mexico ’ s physical infrastructure. for a discussion of the u. s. - mexico economic relationship, see villarreal, m. a. ( 2015 ). u. s. - mexico economic relations : trends, issues, and implications. washington, dc : congressional research service, pp. 1 – 9. for an online progress report on mexico ’ s structural reforms, see presidencia de la republica, reformas en accion, http : / / reformas. gob. mx. bis central bankers ’ speeches growth and financial developments let me move on to the second part of this talk, which covers shorter - term developments. on a year – on - year basis, since 2014 mexico ’ s gdp has grown at an average rate of 2. 3 percent, not far from the historical performance, with a dip occurring in the second quarter this year. behind this relatively stable backdrop in the past two and a half years, two opposing forces have been at play. momentum in services has been offset by a slowdown in industrial production. softening industrial output in mexico seems to result from two shocks. one is falling oil extraction due to the near depletion of pemex ’ s most profitable oil fields. the other is slowing u. s. industrial production. consistent with this panorama, manufacturing exports to the united states have been on the downswing, aggravating the drag exerted by low demand for mexican products from other countries. u. s. manufacturing appears to have a larger impact on mexican exports to the u. s. than does the bilateral exchange rate. econometric estimates for the long - term behavior of mexican manufacturing exports to its northern neighbor point toward an elasticity to u. s. manufacturing production almost four times as high as that for the bilateral real exchange rate. 3 however, a weaker peso may be partly responsible for the fact that mexican exports have captured greater u. s. market share. for example, in the last four and a half years, the share of mexico ’ s automotive exports in total u. s. automotive imports has increased by almost five percentage points. private consumption has been a driver of economic expansion, partly compensating for the loss of steam from external demand. consumption growth seems to have been supported by several factors, including improvement in labor market indicators. since 2012, the unemployment rate has fallen from five percent to less than | 0.5 |
mitigating policies. the potential for overlap seems ample. given the global mandates of the fsb and the imf, effective collaboration could have these two organisations focussing on the analysis of linkages and contagion channels across the main macro areas and on developing policy bis central bankers ’ speeches options to contain spillover risk. the esrb, the fsoc and analogous national and regional institutions elsewhere could focus on sources of risk arising within their jurisdictions and devise policy measures to address domestic developments. the coming years will be crucial to assess the functioning of the new framework and to minimize potential inefficiencies. references altunbas, y., l. gambacorta and d. marques - ibanez ( 2010 ), “ does monetary policy affect bank risk - taking? ”, ecb working paper, no. 1166. angelini, p., s. neri and f. panetta ( 2010 ), “ monetary and macroprudential policies ”, mimeo, banca d ’ italia. bank of england ( 2009 ), “ the role of macroprudential policy : a discussion paper ”, november. bean, c. ( 2003 ), “ asset prices, financial imbalances and monetary policy : are inflation targets enough? ”, bis working papers, no. 140. borio, c. ( 2003 ), “ towards a macroprudential framework for financial supervision and regulation? ”, bis working papers, no. 128. borio, c. ( 2010 ), “ implementing a macroprudential framework : blending boldness and realism ”, keynote address for the bis - hkma research conference on “ financial stability : towards a macroprudential approach ”, honk kong sar, 5 – 6 july 2010 ( available at http : / / www. bis. org / repofficepubl / hkimr201007. 12c. pdf ). borio, c., and h. zhu ( 2008 ), “ capital regulation, risk - taking and monetary policy : a missing link in the transmission mechanism? ”, bis working papers, no. 268. carosio, g. ( 2010 ), “ central banking after the crisis : responsibilities, strategies, instruments ” paper presented at the oenb – 38th economic conference, june 1. catte, p., p. cova, p. pagano and i. visco ( 2010 ), | the country. some of the bcs in the past have abused the trust placed in them by the banking system and defrauded their customers. as bcs generally serve a less ‘ financially literate ’ population, it is important that their activities are brought under closer scrutiny by the banks. the banks have to take ownership of bcs that they employ and also put in place appropriate grievance redressal mechanism for cases involving them. ( ii ) msmes : rbi has recently set out guidelines on ‘ framework for revival and rehabilitation of micro, small and medium enterprises ’ for early resolution of stress in the accounts of msmes, following an ordinance by government of india. under this framework, the revival and rehabilitation of msme units having loan limits up to rs. 25 crore is envisaged. further, with a view to provide timely financial support to msmes facing financial difficulties during their life cycle, rbi had advised the banks to review their existing lending policies and incorporating therein, among others, provisions for sanctioning of standby credit facility in case of term loans, additional working capital limits, mid term review of regular working capital limits, and timelines for credit decisions. b. synergizing the roles of pccos and internal banking ombudsmen ( ibos ) in the banks : as i understand the customer grievance redressal architecture in the banking sector suffers from certain structural inconsistencies. i am compelled to make this statement as i see scope for greater role clarity and synergy in how the pccos & the ibos in the banks operate. i believe the pccos which act as bcsbi ’ s nodal point of contact with the member banks and serve as extended arms of bcsbi for monitoring implementation of codes in the banks at all levels must play a more preventive role. for that to happen, the pcco needs to be suitably senior in hierarchy with reporting lines to the ceo / customer service committee of the board. i understand, however, that currently this is not uniformly so. similarly, the office of the internal banking ombudsman which has been in place in the banks for almost last two years does not seem to have become an effective forum. our objective in institutionalizing the office of ibo was to ensure resolution of a majority of the complaints at the level of bank itself. office of ibo was envisaged as the ultimate authority to which all unresolved / partially resolved complaints were to be | 0 |
jean - claude trichet : reflections on the european economic and monetary union speech by mr jean - claude trichet, president of the european central bank, at the evangelische akademie tutzing, tutzing, bavaria, 13 november 2010. * * * ladies and gentlemen, i would like to thank the organisers for inviting me to speak here today. this is a crucial time for the european economy and for the global economy. vital debates about the state of and interactions between the world ’ s major economies have been taking place at the g20 meetings of ministers and governors a few weeks ago and at the g20 summit in seoul yesterday. within europe, there is a particularly vital debate about the framework of governance for economic and monetary union. both debates touch on the importance in these challenging times for the design of appropriate policies. throughout the global crisis, we have all striven to avoid a repeat of the economic policy disasters of the 1930s – and to foster a close cooperation between policymakers around the world. working together towards a common goal must continue to guide our actions. today, i would like to put some of the key issues into a broader context. first, i will focus on the experience of economic and monetary union in europe. second, i will briefly describe the origins and impact of the financial crisis and outline how the european central bank ( ecb ) has responded to the crisis. and finally, i will touch on the current economic situation and conclude with the key challenges that lie ahead of us in achieving an effective economic governance policy in europe. price stability in the euro area let me begin with price developments. the quality of a currency is reflected in its value. as you know, this is what in german is called geldwertstabilitat. there is one single benchmark to measure such stability within an economy and that is the degree of price stability or, expressed the other way around, the rate of inflation. as the guardian of price stability for the euro area, the ecb has set itself a very clear numerical benchmark to measure the degree of price stability. it has defined price stability to be an annual rate of inflation of consumer prices in the euro area of below, but close to 2 %, over the medium term – that is, over an average of several years. we now have almost 12 years of experience with the euro – enough time to judge whether the ecb has been successful in delivering its mandate. over these 12 years, the | challenges for economic and monetary union but as its name indicates, our economic and monetary union rests on two pillars : an economic pillar and a monetary pillar. the fundamental concepts of the monetary pillar are the full independence of the ecb and its crystal clear mandate to pursue price stability in the euro area. the fundamental concepts of the economic pillar can be summarised as follows : first, the need to determine macroeconomic policies in line with the rules governing the participation in a monetary union that is based on price stability ; and second, the need to set fiscal policies in line with the requirements as laid out in the stability and growth pact. i have already described the contribution of the monetary pillar. unfortunately, the contribution of the economic pillar is at times much less flattering. much of the problems we face today see their origins in insufficient discipline of fiscal policy makers and an inappropriate setting of macroeconomic policies. for several years, fiscal policies in many countries have not been in line with the letter and the spirit of the stability and growth pact. the pact calls for balanced budgets over the cycle, maximum deficits of 3 % and a debt level of below 60 %. when a few years ago it became clear that fiscal policies would not be able to meet the rules of the stability and growth pact, it was not policies that were changed but the pact. in 2004 and 2005, several heads of states and governments were actively trying to dismantle the stability and growth pact. one of the countries in the lead of these endeavours was germany. it was supported by france as well as other countries. it was a very fierce battle at the time, and the ecb voiced publicly its grave concerns. the second area of policy slippage concerns macroeconomic policies. in a monetary union, national developments in prices and costs have to take account of the fact that the union is a union of monetary stability. therefore, national price and costs developments significantly higher than the union average entail significant losses over time in competitiveness that are painful to reverse. by the same token, fiscal and structural policies – including appropriate supervisory policies ( today we would say macroprudential policies ) – need to keep domestic demand and credit growth in line with rates of sustainable growth and price stability. otherwise, booms and busts are the inevitable consequence. both areas, fiscal and macroeconomic policies, are monitored by the peers, supported mainly by the commission. the eurogroup and ecofin meetings of finance ministers are the fora for such peer | 1 |
##ksha abhiyan, and the like. a committee on financial inclusion ( chairman : dr. c. rangarajan ) has also been constituted by the government of india in june 2006 to recommend a strategy to achieve higher financial inclusion in the country. likewise, enabling access to a greater number of the population to the structured and organised financial system has explicitly been on the agenda of the reserve bank since 2004. unlike several central banks, which focus solely on inflation, many developed and emerging economies, including ours, focus also on growth. there is currently a clear perception that there are a vast number of people, potential entrepreneurs, small enterprises and others, who are excluded from the financial sector, which leads to their marginalisation and denial of opportunity for them to grow and prosper. the reserve bank has therefore introduced various new measures to encourage the expansion of financial coverage in the country. not only is financial inclusion essential because of its implications for the welfare of citizens but it needs to be stressed that it has to be an explicit strategy for fostering faster economic growth in a more inclusive fashion. it is in this context that i thought it would be appropriate to place the strategy of financial inclusion in the wider context of economic growth and financial deepening. my ideas on this topic are organised along the following lines. to begin with, i shall dwell upon the process of growth and financial deepening in india. this will be followed by definitional aspects and some evidence from the experience of other countries, with regard to financial inclusion. thereafter, the focus would be on interlinking the relevance of financial inclusion in our economy, which has entered a high growth orbit, with the rural economy. the penultimate section focuses on the role being played by the reserve bank in this regard. my concluding thoughts would be in the nature of issues that have a bearing on financial inclusion. ii. economic growth the growth trend of the indian economy over the last few years appears to indicate the beginning of a new phase of higher growth. from an average growth rate of around 6. 0 per cent for a quarter of a century, the growth rate has accelerated to 8. 1 per cent over the last few years. along with declining population growth, this suggests high growth in per capita income in excess of 6 per cent in recent years, and perhaps approaching 7 per cent, which would lead to doubling of per capita income every ten years. most importantly, the current growth process is not a flash in the pan and is exhibiting signs of sustainability along with | - owned public sector banks declined sharply from about 90 per cent to less than 10 per cent of aggregate assets of all scheduled commercial banks during this period. diversification of ownership has led to greater market accountability and improved efficiency. third, with a view to enhance efficiency and productivity in the banking sector through competition, the private sector and the foreign - banks were allowed more liberal entry. since 1993, twelve new private sector banks have been set up. as a major step towards enhancing competition in the banking sector, foreign direct investment in the private sector banks is now allowed up to 74 per cent, subject to conformity with the guidelines issued from time to time. fourth, consolidation in the banking sector has been another feature of the reform process, which also encompassed the development financial institutions ( dfis ), which have been providers of long - term finance. the rbi enabled the reverse - merger of a large dfi with its commercial - banking subsidiary, which was a major initiative towards universal banking. subsequently, another large term - lending institution has been converted into a bank. the mergers between non - banking financial companies and banks as also between private sector banks are now permitted, subject to the rbi guidelines. the underlying principles for consolidation would also apply, as appropriate, to the public sector banks, subject to the provisions of the relevant legislation. fifth, impressive institutional and legal reforms have been undertaken in relation to the banking sector. in 1994, a board for financial supervision ( bfs ) was constituted comprising select members of the rbi board with a variety of professional expertise to exercise “ undivided attention to supervision ”. the bfs ensures an integrated approach to supervision of commercial banks, development finance institutions, non - banking finance companies, urban cooperatives banks and primary dealers. it provides direction on a continuing basis on regulatory policies including governance issues and supervisory practices. a board for regulation and supervision of payment and settlement systems ( bpss ) has also been recently constituted to prescribe policies relating to the regulation and supervision of all types of payment and settlement systems, set standards for existing and future systems, authorise the payment and settlement systems and determine criteria for membership to these systems. the credit information companies ( regulation ) act, 2005 and the government securities act, 2004 have been enacted. certain amendments are also being considered by the parliament to enhance reserve bank ’ s regulatory and supervisory powers. sixth, a number of measures for enhancing transparency in the banking sector, through disclosures standards, have been instituted. illustratively, | 0.5 |
justified economically across euroland. however, in countries outside the euro area, such as poland, the implementation of sepa should be subject to a thorough debate in a relevant community. this is why the national bank of poland appreciates the establishment of forum sepa polska by the polish banking community and is deeply convinced that all programmes and decisions worked out and made in the course of such cooperation will increase the satisfaction of poles who use services of national banks through making product offers more attractive, through increasing security and level of services and through reducing their prices. inhabitants of the euro area obtained many benefits upon the introduction of the euro in the cashless turnover in 1999 and in cash handling in 2001. transaction costs of foreign currency exchange disappeared, home bias on financial markets was reduced, risk premium decreased and the euro has become an important currency in which securities are issued on international financial markets. menzie chinn and jakob frankel, well - known american economists project that if great britain joins the euro area, the euro will replace the dollar as the international reserve currency 2 as early as in the late second decade of the 21st century, which might entail additional benefits for european consumers see also s quinn and w roberds “ an economic explanation of the early bank of amsterdam, debasement, bills of exchange, and the emergence of the first central bank ”, federal reserve bank of atlanta working paper 2006 - 13, september 2006. m chinn, j frankel, “ will the euro eventually surpass the dollar as leading international reserve currency? ”, presented at nber conference, newport, ri, 1 - 2 june 2005. since europe will be able to take advantage of what pierre - olivier gourinchas and helene rey describe as the “ exorbitant privilege ” 3. payment systems of the euroland countries do not follow these changes swiftly enough. these systems have supported national and international retail operations in various european currencies so far. the only exception were activities of the central banks under the aegis of the european central bank. these banks quickly developed and launched the target system for real - time gross settlements of large volume euro transactions. as regards the cashless turnover in pan - european relations, foreign currency exchange savings were the only measurable benefit stemming from the introduction of the euro for the consumers. apart from that, the settlement time and the costs of crossborder transactions remained on the same high level as before the implementation of the single currency. these costs were much higher than prices | this year would be between 4 % and 5 % and similar figures will apply to other candidate countries. if one compares this data with inflation rates in some of the eu countries, one cannot see much of a difference - look at holland. third, poland had managed to achieve a high level of disinflation while introducing a high level of price liberalization. it means there is only a limited scope for further corrective inflation. all but few prices are completely liberalized and driven by healthy market conditions. fourth, in respect to so - called ballassa samuelson effect, i agree with president duisenberg, that it is mostly an empirical issue. i think the extent of this effect has been overstated and overdone in many theoretical studies. empirical data in respect to poland has shown, that in the past the contribution of bs effect to the overall inflation rate has been in the range from 1 % to 1. 5 %. as a matter of fact, bs effect is also present in the eurozone, in countries like greece and portugal. this is not the reason for, as some people heralded, a weak euro. problems of greece are not responsible for weak euro that is, if one thinks euro is weak. the already mentioned disinflation, limited scope for future corrective inflation, and manageable level of bs effect make the maastricht inflation criteria achievable. fiscal criteria must be met in the interest of the countries concerned, as it would contribute to their economic growth. fifth, there is an intermediate period between the date of entry of poland and other candidate countries into the european union and membership of the monetary union. the question is, what is the optimal length of this period. i would like to point out, that it might be a rather turbulent time. economic forces behind convergence and rapid capital flows might create an economic roller caster. it may well be in the interest of the candidate countries to make this period as short as possible. sixth, it is true that any country entering the emu need to fix the exchange rate. one should not take for granted, however, that the longer the period of the intermediate regime the better, as it is not always true that longer wait produces more information about the proper rate of exchange. it may produce just more noise. seventh, both further efficient disinflation and strengthening long - term economic growth require completion of certain structural reforms in the candidate countries. there is no way around it. | 0.5 |
seek public bridge financing. overall, i welcome the agreement as a step forward toward eliminating the negativefeedback loops between banks and sovereigns. financing of the real economy let me turn to the second issue. bis central bankers ’ speeches a key characteristic of the euro area economic recovery is the decline in loans to the private sector. this situation applies at both the euro - area and, in many cases, the individual - country levels. because the euro - area economy is bank - based, bank lending is especially significant for smes, which produce the bulk of goods and services. consequently, a credit contraction raises the question : can the recovery be sustained in the presence of negative loan growth? a number of actions and initiatives are addressing this issue. i will confine my remarks to two areas. the first concerns monetary policy. throughout the crisis, the ecb has put in place both conventional and unconventional policy measures with the objective of increasing confidence and restoring the smooth operation of the monetary transmission mechanism. the volume of credit would have contracted significantly more had it not been for the ample provision of liquidity to european banks by the eurosystem. the declining path for real interest rates, suggested by the fact that inflation expectations are anchored close to 2 % in combination with the ecb ’ s commitment to keep an accommodative monetary policy stance, will lead to a substantial increase of the demand for credit along the way. there is, however, still work to be done on the supply side of financial markets. this circumstance brings me to the second area that deserves attention, i. e. the need to restore confidence in the banking sector. confidence has been undermined by the perception that some banks have been holding assets of questionable quality on their balance sheets. the resulting credit and counterparty risk has contributed to a rise in funding costs, preventing some banks from on - lending to the private sector. supervisors, at both the european and individual country levels, are using tools – including stress tests, asset quality reviews and transparency exercises – to assess the resilience of banks and to request injections of capital, so that confidence in the quality of bank balance sheets can be restored. in this context, the establishment of the ssm and the comprehensive assessment taking place will provide a catalyst for the cleaning - up of balance sheets to take place more quickly and more comprehensively than would otherwise have been the case. the repair of banks ’ balance sheets is unavoidable and will, of necessity, involve | the previous erm. the notion of asymmetry is particularly important in underlining the principle that it is the country whose currency comes under pressure that has to undertake the necessary policy adjustments. let me now return to the case of the drachma and the erm. by the time that the drachma entered the erm, in march 1998, the participating countries had demonstrated their determination to form a monetary union by attaining considerable nominal convergence, as specified in the maastricht criteria. this convergence took place under a backdrop of market - based economies that could compete effectively in an open economic and financial system. in these conditions, the system built up a considerable amount of trust. as otmar issing has pointed out in several recent papers, the trust evoked by governments, including in their ability to deliver credible, non - inflationary policies, is a prerequisite for the existence of a stable currency, both internally and externally. when the drachma entered the erm, it became a beneficiary of the credibility established in the system over the previous years. it also benefited from the market ’ s knowledge of the availability of the system ’ s mutual support facilities, such as the very short - term financing facility. yet, greece ’ s participation was not a free ticket. the other participants in the system did not wish to endanger the credibility that had taken so long to achieve. they rightly asked for an entry fee. this fee included the following elements. • the new central rate - which as i have noted, involved a 12. 3 per cent devaluation - had been agreed by all members. • the devaluation of the drachma was both backward looking and foreward looking. the magnitude of the devaluation took account of both past inflation differentials between greece and other eu countries and prospective differentials in the period leading up to greece ’ s expected entry into the euro area. thus, the new central rate was meant to be sustainable. • a package of supportive fiscal and structural measure was announced. efforts to restructure public enterprises were stepped up. the aim of the measures was to ensure the sustainability of the drachma ’ s new central rate. in other words, the erm was meant to be a testing phase for emu participation, not a free pass into the euro area. unlike many other devaluations of the mid - 1990s and late - 1990s, the drachma ’ s devaluation | 0.5 |
to 54 % in 1998. as of august 1999, the wpi - based inflation rate stood at 54 % despite an unexpected change in the price of oil and a relative loosening of the fiscal stance in the first half of the year. since turkey has a long history of inflation, inertia has played an important role in determining inflation. breaking down this “ inflation resistance ” of the economy requires a high level of commitment on the part of the political authorities. one sign of this commitment may be their performance in the area of structural reforms. there is no doubt that the more successful the realization of the reforms, the stronger will be the credibility of the program. now let me turn to these reform issues. turkey has a good record for structural issues. we have liberalized the trade and capital accounts of the balance of payments for about two decades. we have a flexible labor market. high domestic savings is one of the main characteristics of the economy. market oriented economy is another aspect of the structural component of turkey. right now, turkey has four important structural reforms on its agenda, not only as a part of the disinflation effort but also because they are essential for changing the environment. thus, these structural reforms are vital for adapting to the changing global environment. they consist of reforming the banking sector, the social security system, agricultural subsidies, and privatization. some of these reforms have already been approved by parliament, and the others are in the pipeline. the new banking act which was approved by parliament in june has the following four general objectives : • to close the legal loopholes ; • to implement the international supervisory regulations ; • to assign the supervision of banking organizations to an independent agency ; and • to make some adjustments regarding the process of founding and operating banks. in particular, the twenty - five core principles for effective banking supervision drawn up by the bank for international settlements in 1997 have been endorsed in the amendments to the banking act. as a result, the amendments are consistent with modern principles of effective banking supervision. i believe this new law will rapidly improve the soundness of turkey ’ s banking system, which is crucial for the conduct of monetary policy. just as the monetary authorities cannot achieve medium - term price stability without appropriate fiscal policies, they cannot pursue a price stability target without a sound banking system. the banking law approved by parliament was a big step forward, but further action is also needed. one important additional issue is to restructure the state banks and reduce their role in the banking | recent effort, to build a macroeconomic infrastructure suitable for membership in the global economy, where low inflation and a sustainable growth rate, combined with sound and well functioning financial and real sectors, are the minimum standards. the last but by no means the least point i would like to make is that we now have an occasion for showing, once more, the ability of the turkish economy to overcome adversity by meeting the challenge to our resilience following a major earthquake. during the last two years, we have survived the south asian, russian and latin american crises, and also an economic slowdown in the eu region that is an extremely vital trading, financial and economic partner for turkey. we also had the uncertainties preceding the early election held in april 1999, which tested the resistance of the turkish economy. i truly believe that we have already passed these exams, and also that we have gained enormous experience. i have always said that we are extremely good in bad times, although we don ’ t like them. this time the situation and prospects are different, and we will show the abilities of the turkish economy in good times as well as bad. if the program we have begun implementing is successful, that success will affect at least the next 50 years of turkey ’ s economic and social life. i believe these messages are clear and will be well understood by our international partners. | 1 |
and here the ecb will continue to take all necessary steps within our mandate of price stability – for all euro area citizens in all parts of the euro area. already our policies have dispelled tail risks in financial markets that could have led to selfreinforcing vicious circles. we are now orienting our measures to ensure that the right financial conditions are in place to support a recovery from the crisis. this was the motivation behind our recent decision to expand our pandemic emergency purchase programme to €1. 35 trillion, coupled with the up to €3 trillion we are making available to banks that lend to the real economy. but monetary policy cannot address the more profound questions about how the economy will look in the future. historical experience suggests that major economic shifts like the one we are going through today require government action to foster change and smooth the transition to the new normal. in particular, governments need to foster innovation by providing the right framework to encourage experimentation and risk - taking in new and growing sectors, and to support the transition to new jobs for people working in “ sunset ” sectors. in parallel, they need to ensure that the conditions are in place to direct investment towards the technologies and sectors of the future. 2 / 4 bis central bankers'speeches this requires sufficient financing. the european commission estimates that the investment needs for delivering the digital transformation as well as the green transition will be at least €1. 2 trillion over the next two years. 2 but in a number of countries – italy among them – mobilising investment requires above all a business - friendly economic environment, with efficient and agile public and private services, adequate physical and digital infrastructures, a well - functioning judicial system and a strong financial sector. if such actions are taken, this crisis can engender a period of positive transformation. it offers an opportunity to policymakers to take a decisive step forward towards more inclusive, greener and more digital growth. a renewed focus on the digital economy, for example, can help break the negative feedback loop we see in europe between fragmented markets, low economies of scale and weak investment in digital capacities, which has at times resulted in the knowledge economy in the euro area contributing only about half as much to productivity growth as in the united states. 3 greater digitalisation would in turn help accelerate the shift in europe towards what the economist carlota perez has termed “ smart green growth ”, which is not only about renewables and sustainable goods, but also about innovation in the productivity of resources | ipumbu shiimi : credit information management in namibia welcoming remarks by mr ipumbu shiimi, governor of the bank of namibia, at the credit information workshop, windhoek, 19 august 2013. * * * director of ceremony mr. darrel beghin, executive director, south african credit providers association ms. mojgan derakhshani and daniel kanyi from finmark trust representatives of credit bureaus, representatives of lending institutions, distinguished invited guests, members of the media, ladies and gentlemen, good morning! i am pleased to be here this morning and thank you for the invitation to open this important workshop on credit information, a topical subject of interest to namibia. allow me therefore, director of ceremony, to extend my gratitude appreciation to finmark trust for this initiative. i am informed that the overarching objective of the workshop is to share the outcome of the fact finding mission to namibia conducted by finmark trust in march this year and also to share the south african experience in credit information management. ladies and gentlemen, this workshop comes at an opportune time for namibia. why do i say that? three reasons come to mind. first, namibia in general and the bank of namibia in particular, are vigorously pursuing a financial inclusion agenda. this is underpinned by the launch of the namibia financial sector strategy in august 2012 by the honourable minister of finance. this strategy represents a long - term development strategy for the namibian financial sector. one of the goals of this strategy is to reduce financial exclusion from baseline of 51. 7 % financial exclusion determined in 2007 to 26 % percent by 2021. the good news is that we have made significant progress in this regard, financial exclusion has fallen since 2007, it now stands at 31 %. but we still have some work to do to achieve the goal of financial inclusion. a good credit information system is a necessity for financial inclusion and this is what i would like to talk about in my remarks today. first, what is the importance of a good credit information system? three reasons : a. research has shown that there is a positive correlation between the credit information system through the presence of credit registries / bureaus in an economy and access to finance. this is because credit information sharing plays a critical role in the financial sector in facilitating access to finance to people who are in need of funding. this is achieved by availing information on borrowers ’ credit worthiness to lenders. this helps lenders with credit assessment, meaning | 0 |
of real economic activity this is, of course, a most desirable development at this stage. there are a number of reasons why any deliberate actions taken by the monetary authorities to relax monetary policy should be implemented with caution. firstly, not all problems in the international markets have been resolved. the world is still holding its breath on the vulnerable situation of the japanese banking and financial systems ; brazil is still lingering on the edge of a dangerous cliff with its international financial relations ; weaknesses recently surfaced in the financial markets of a few industrial centres ; and the secondary effects of the financial market crisis are only gradually filtering through in the form of a decline in global real economic growth. secondly, the recent financial turmoil left the south african scene with a few additional scars that need time to heal. the depreciation of the rand forced inflation to a higher level and even more out of line with the rest of the world ; the weakening of the current account of the balance of payments in the third quarter provides a further warning for caution ; a monetary stimulation may easily increase demand without increasing production ; and the continuing low level of the country ’ s official foreign reserves do not provide much scope for manoeuvring unless large foreign capital inflows will again supplement the supply of foreign exchange. structural deficiencies in the south african economy that restrict the country ’ s economic growth potential to a relatively low level place an almost permanent obligation on monetary policy to remain relatively restrictive. a relaxation of monetary policy would normally stimulate demand and, unless production responds flexibly and quickly to increases in expenditure, monetary stimulation is inclined to lead either to an unsustainable overall balance of payments deficit and / or an unacceptably high rate of inflation. the monetary policy targets in the government ’ s strategy for growth, employment and redistribution ( gear ) cannot be achieved unless all the other goals for structural adjustment are also achieved at the same time. in view of the depressed real economic situation in the country at this stage, there is, however, some room for a responsible relaxation of monetary policy, provided the international and domestic financial conditions continue to improve further. the reserve bank will move cautiously with and not against any improvement in the underlying conditions, and will allow market forces to exert normal pressures on important prices such as the exchange rate and domestic interest rates. | will need to be alert to the risks that high levels of resource utilization may put upward pressure on inflation. moreover, energy prices may pose a challenge to containing inflation. energy price changes represent a one - time shift in a set of important prices, but by themselves generally cannot drive an ongoing inflation process. the key to whether such a process could get under way is inflation expectations. to date, survey evidence, as well as readings from the treasury ’ s inflation - indexed securities, suggests that households and investors do not view the current energy price surge as affecting longer - term inflation. but any deterioration in such expectations would pose a risk to the economic outlook. as the financing requirements for our ever - rising capital investment needs mounted in recent years - beyond forthcoming domestic saving - real long - term interest rates rose to address this gap. we at the federal reserve, responding to the same economic forces, have moved the overnight federal funds rate up 1¾ percentage points over the past year. to have held to the federal funds rate of june 1999 would have required a massive increase in liquidity that would presumably have underwritten an acceleration of prices and, hence, an eventual curbing of economic growth. by our meeting this june, the appraisal of all the foregoing issues led the federal open market committee to conclude that, while some signs of slower growth were evident and justified standing pat at least for the time being, they were not sufficiently compelling to alter our view that the risks remained more on the side of higher inflation. as indicated in their forecasts, fomc members and nonvoting presidents expect that the long period of continuous economic expansion will be extended over the next year and one - half, but with growth at a somewhat slower pace than over the past several years. for the current year, the central tendency of board members ’ and reserve bank presidents ’ forecasts is for real gdp to increase 4 to 4½ percent, suggesting a noticeable deceleration over the second half of 2000 from its likely pace over the first half. the unemployment rate is projected to remain close to 4 percent. this outlook is a little stronger than anticipated last february, no doubt owing primarily to the unexpectedly strong jump in output in the first quarter. mainly reflecting higher prices of energy products than had been foreseen, the central tendency for inflation this year in prices for personal consumption expenditures also has been revised up somewhat, to the vicinity of 2½ to 2¾ percent. given the firmer financial conditions that have developed over | 0 |
on private capital flows and cross - country position - taking - - provide a response to this new element of the current problems - - the role of large - scale capital flows. what relevance is it to australia, and to this audience ( australian and overseas )? we acknowledge our stake in the outcome, with two - thirds of our exports going to east asia ( including japan ). australia is taking part in the imf - co - ordinated facilities for thailand, indonesia and korea. these funds help restore confidence and help the process of adjustment. we will use our relationships - - via our regional central bankers group emeap and, in due course, the newly - formed asian surveillance group - - to provide examples of how prudential systems work elsewhere, analysis of how the specifics might be done in particular countries, technical assistance where it can be useful, and - - the most difficult and subtle task of all - - understated and understanding support for the reform elements who have the task of fashioning a stronger financial sector. a last word directed specifically at this audience. some of you come from the countries involved : i wish you well in the vital task ahead. for the rest of us, is this, too, not a problem but rather an opportunity? the countries to our near north are going to be devoting considerable resources to strengthening their financial sectors. i hope some of you will find a role for yourselves in this process, and by doing so will look back on this as an opportunity to strengthen our links with our northern neighbours. | glenn stevens : overview of economic developments affecting australia opening statement by mr glenn stevens, governor of the reserve bank of australia, to the house of representatives standing committee on economics, brisbane, 20 august 2014. * * * chair members of the committee thank you for the opportunity to meet with you today. since the hearing in march, the global economy has continued its expansion at a moderate pace, and australia ’ s trading partner group has been growing at about its long - run average rate. with the abatement of the adverse winter weather, the us economy recovered in the june quarter and the labour market has continued to strengthen. growth in china has remained close to the target of 7. 5 per cent, though chinese residential property prices have declined in recent months. chinese authorities at various levels are responding to these developments with the aim of maintaining stable macroeconomic and monetary conditions. in japan, consumption and output grew strongly in the march quarter ahead of the increase in the consumption tax in april, and then contracted sharply in the june quarter. this is a normal pattern surrounding such tax changes, but complicates reading the underlying pace of japan ’ s economy. economic growth in the rest of east asia has continued. commodity prices important to australia have declined this year, as global supply – including from australia particularly – has increased. the terms of trade have now fallen by about 18 per cent from their extraordinary peak three years ago, but they remain over 50 per cent higher than their twentieth century trend level. perhaps the most remarkable feature of the international scene at present is the exceptionally low volatility of financial prices – the lowest observed over the past 25 years for sovereign bonds, equities and foreign exchange. yields on sovereign debt of the major countries are also very low, the lowest on record in some cases. spreads on investment grade and financial corporate bonds have reached multi - year lows and in europe yields on so - called “ peripheral ” sovereign bonds have in some cases fallen below previous historic lows. it is not as though there has been a dearth of geo - political or financial events which might ordinarily trigger more caution among investors. but compensation for risk on financial instruments remains scant. the reasons for these remarkable trends, including the extent to which they reflect the effects of the exceptional monetary policies being conducted by the major jurisdictions, or other things, could be debated at length. what is clear though is that a combination of forces has resulted in financial conditions remaining remarkably accommodative. | 0.5 |
activity was in turn reflected in labour market trends. the unemployment rate rose moderately in the first half of the year from 6 % at the end of 2008 and has stabilized at around 7 % since then. on the inflation front, consumer price trends in 2009 again did not fully mirror those in the euro area, converging only during the second half of the year when energy and food prices, which had risen sharply in the early part of the year, decelerated substantially. as a result, inflation in malta was lower than in the euro area for most of the last six months, partly compensating for the higher rates registered previously. in the context of an economic recession, malta ’ s public finances performed relatively well in 2009, although the country is still subject to an excessive deficit procedure. the deficit - togdp ratio declined from 4. 5 % to 3. 8 % in spite of an outlay of some 0. 7 % of gdp by way of targeted assistance to manufacturing firms and other stimulus measures. 1 to a large extent, however, the fall in the deficit ratio is explained by the presence of one - off expenditure items in 2008. 2 the general government debt ratio rose by around five percentage points to end the year at 69. 1 % of gdp, still below the estimated 78. 7 % euro area average. these developments helped to underpin confidence in maltese government bonds, which are primarily held by domestic residents. in fact, all the government and corporate bond issues launched in 2009 were oversubscribed, in spite of the fact that the issuance volume doubled compared with 2008. credit rating agencies have confirmed malta ’ s sovereign credit standing, with moody ’ s giving an a1 rating with a stable outlook. spreads over the german benchmark ten - year bond yield have remained stable over the past year at around 123 basis points. sources of economic resilience the relative resilience of the maltese economy is mainly attributable to four factors. the first is the adoption of the euro. the single currency has provided a valuable anchor during the intensification of the financial turmoil as malta did not have to carry the risks inherent in a small and vulnerable national currency. the threat posed by the financial crisis was further mitigated by the strength and stability of malta ’ s banking system. our banks benefited from an approach based on traditional intermediation between retail depositors and borrowers. their funding model, in fact, eschews reliance on wholesale markets. | tends to be forgotten : like individuals, countries cannot afford to live beyond their means indefinitely. sooner or later, the excesses of the past have to be paid for, often at a high economic and social cost. the recent proposals by the ec to strengthen economic policy coordination and fiscal discipline are grounded in precisely such thinking. 8 they call for improvements in both the preventive and corrective arms of the stability and growth pact, more emphasis on debt european commission european economic forecast, spring 2010. european commission european economic forecast, spring 2010, page 118. ec document com ( 2101 ) 250, entitled reinforcing economic policy coordination published on 12 may 2010. sustainability and the extension of peer surveillance beyond the budgetary dimension to other macroeconomic imbalances, such as losses in competitiveness, asset price booms fuelled by excessive credit growth and rigidities in product and labour markets. while malta ’ s situation is clearly less worrisome than that of some of the peripheral euro area countries, these proposals would benefit our economy as well. the persistence of current account deficits, for example, suggests an erosion of competitiveness and, therefore, the need for higher productivity, the removal of remaining constraints on market efficiency and increased investment in high value added, export - oriented activities. indeed, the economy ’ s strong performance up to 2006 owed more to domestic consumption than to exports. export growth, upon which the sustainability of a small, open economy depends to a large extent, has been insufficient over the past decade, and the consequent loss of market share partly explains why malta ’ s income gap with the euro area has not narrowed in recent years. with regard to the internal imbalance, the events of the last two years have brought to a halt the substantial fiscal consolidation that was achieved in the run - up to euro adoption. while the deficit had been reduced from almost 10 % of gdp in 2003 to 2. 2 % in 2007, it widened in the following two years and the latest projections, those of the ec, suggest that the shortfall will increase further to 4. 3 % this year, before declining to 3. 6 % in 2011. 9 these projections imply that the debt - to - gdp ratio in 2011 will stand at roughly the same level as in 2004, around 72 %. these ratios are higher than those contained in the government ’ s stability programme since the ec follows the “ no policy change ” rule and also because of differing macroeconomic assumptions. a credible fiscal consolidation | 1 |
not been needed. that is all i wish to say about oil prices, other than to add the caveat that i am only talking about the increases to date. obviously, if we enter a new round of similar increases, the situation would have to be reassessed. world interest rates it is well known that the world has recently gone through a phase of exceptionally low interest rates, but i am not sure that people appreciate how low they were by historical standards. in fact it is not much of an exaggeration to say that interest rates in mid 2003 were at their lowest level for a century. this was the time when official overnight rates – the ones set by central banks – were 1 per cent in the united states, 2 per cent in the euro area, and zero in japan. the only qualifications i have to make to my earlier generalisation is to concede that rates may have been slightly lower during the second world war in some countries such as the united states and united kingdom when quantity rationing was the norm, but they have not been lower in peace time. we can construct an indicator of world interest rates for a century or more using a weighted average of the rates for the united states, united kingdom, germany and japan. graph 1 shows the results for official overnight interest rates or their nearest equivalent since 1860. although the graph is dominated by the high interest rates during the great inflation of the 1970s, the readings for 2002 and 2003 are lower than any other time in this long span of years. 1 part of the explanation is that inflation was low, but it was only low compared to the post - war standard – it was not low compared to most of the period covered by the graph. in fact if we construct simple measures of real interest rates ( based on realised inflation rates ), they were also low by the standards of earlier low inflation periods. 2 in table 1, real interest rates in the first five years of this decade are lower than in any previous decade apart from those containing the two world wars and the 1970s. graph 1 the observation for 1923, the year of the weimar inflation in germany, had to be deleted because it did not fit on the scale. the problem with most measures of real interest rates is that they become negative during periods of unanticipated rises in inflation such as the 1970s. for this reason, meaningful comparisons of real interest rates ( using realised inflation rates ) should only be made for periods of low and stable inflation such as the present. | cecilia skingsley : experience with macroprudential policies summary of a speech by ms cecilia skingsley, deputy governor of the sveriges riksbank, at a workshop arranged by the committee on the global financial system, bis, held at the hong kong monetary authority, hong kong, 10 august 2015. * * * since the global financial crisis, several countries have started implementing macroprudential policies. this workshop has provided us with the opportunity to deepen our knowledge regarding how different countries choose, calibrate and implement different kinds of macroprudential instrument. we have also gained a greater understanding of the efficiency of these instruments, as well as of how different countries incorporate macroprudential settings in the calibration of monetary policy. although we have come a long way the past few years as regards setting up institutional frameworks and developing tools, macroprudential policy is still a relatively new policy field in many countries and there are many important issues that need to be addressed. i would like to elaborate on three of these issues. the first is the challenge of determining the proper mix of policy instruments and the right balance between them, and deciding how fast and resolute our actions should be when imbalances are building up. for example, on the one hand, we know from international experience that credit growth can be difficult to curb once it starts accelerating. this would speak in favour of prompt and strong measures. but, on the other hand, since we only have limited experience of macroprudential instruments, a step - by - step approach may seem more attractive. furthermore, even if the first best solution would be bold steps, it may be more difficult to gain consensus for these. i think it would be better and more reasonable to take a number of small steps in order to avoid inaction bias and a standstill in reforms. taking sweden as an example : in its biannual financial stability report, the riksbank outlines several alternatives for how the growing risks associated with increasing household debt may be managed. the second issue that needs to be addressed is how macroprudential policy should interact with other policy areas when it comes to tackling systemic risk. my view is that monetary policy could take systemic risk into consideration under the precondition that this doesn ’ t conflict with the objects of monetary policy. that is, if the object of monetary policy is inflation targeting, monetary policy may very well serve as a line of defence if inflation is not | 0 |
about 18 months, the shape of the south african yield curve has been subject to fairly significant changes. from mid - april to august last year, when south africa was affected by the global emerging markets crisis, the slope of the yield curve was negative ; it changed from a slight to a fairly steep inversion. tight monetary conditions caused yields on short - dated bonds to rise more than yields on long - dated bonds. the overall level of the curve rose, reflecting heightened uncertainties about the future direction of financial policies, nervousness about investment in emerging markets and an upward adjustment of expectations about future inflation. the financial markets settled down gradually in the last three months of 1998 and yields declined when monetary conditions became easier as the exchange rate of the rand improved. from march this year, short - term yields declined to levels below those of long - term yields and the yield curve assumed a positive slope which subsequently steepened. as i have indicated above, it is difficult to read unambiguous signals from these changes in the shape of the yield curve. nevertheless, these shifts have been noted by the reserve bank, as have the frequent comments on the topic of the yield curve by the south african investment community. last year, when the slope of the yield curve was inverted, some analysts argued that the curve was signalling a sharp slowdown in economic activity. now that the yield curve is positive and steep, some economists are predicting a significant acceleration in economic activity. conclusion empirical studies have found that the yield curve is a good predictor of growth in non - agricultural gross domestic product. so, the recent shifts in the shape of the yield curve appear to confirm what we all sense - the economy has been in a downswing, but the turning point seems to have been reached with the recovery set to gain momentum. the reserve bank does not release its forecasts on the economy, but i can mention that forecasts that we have seen of economic growth of the order of magnitude of 3 % or so in the millenium year are not out of line. it would be difficult to read more into the signals coming from the financial markets at the moment. as a general rule, we also have to bear in mind that financial markets are not always right, and that rapid adjustments sometimes have to take place when expectations turn out to be wrong. be that as it may, the signals from the financial markets form part of the mix of factors to which the central bank pays regular attention. but not only does the reserve bank look | inflation expectations rise, interest rates should rise to control demand and inflation. our approach : we kept interest rates stable ; the repo rate remained at 7 %. this approach was controversial and contrary to the mainstream opinion of economists in the czech republic. this strategy was based on two main arguments : ( 1 ) we concluded that inflation expectations are adaptive, and therefore ex ante real rates would rise once inflation falls. we expected inflation would peak soon, as supply shocks were not repeated and inflation momentum was declining. ( 2 ) we observed a sharp decline in household consumption, a contraction in lending and a slowdown in money supply growth ( m2 ). expected and perceived inflation are highly correlated expected inflation is closely related to perceived inflation, with correlation coefficients ranging from 0. 4 to 0. 74 in different years. this suggests that inflation expectations were / are adaptive. in addition, they are not a reliable predictor of future inflation. consumption was falling despite elevated inflation expectations we carefully analysed consumption trends, which typically reflect demand pressures in the economy. despite high inflation expectations, consumption fell sharply. household consumption across eu countries ( index, 2019 = 100 ) czech republic source : eurostat this contradicts economic theory : higher inflation expectations ⇒ people consume more now because they expect prices to rise in the future household consumption fell sharply for the following reasons : § § a sharp decline in real disposable income high savings rates, influenced by economic uncertainty ( precautionary savings ) and restrictive monetary policy our approach to monetary policy in times of elevated inflation expectations to summarise our strategy for taming inflation : we decided to keep nominal interest rates stable at 7 % from july 2022 to december 2023. we focused on maintaining a strong exchange rate ( through verbal intervention ), which reached an all - time high against the euro in spring 2023, making imports cheaper. in addition, the strong exchange rate tightened monetary conditions for domestic exporters who had taken on loans in euros. inflation peaked in october 2022. inflation expectations also started to fall ( due to their adaptive nature ) and ex ante real interest rates started to rise, although nominal rates were stable. together, positive real interest rates and the exchange rate resulted in the tightest monetary conditions. lending activity fell sharply and money supply ( m2 ) eased. the monetary overhang disappeared over time. we also focused on communication : § we emphasised that inflation momentum was declining, although annual inflation was still high1 for example, https : | 0 |
country. domestically, it is imperative that the new financial institutions law be enacted to give us the necessary power to implement, among other things, the all - important consolidated supervision and prompt corrective action over financial institutions. finally, i would like to thank you all for participating in this workshop, especially those of you who have contributed to the self - assessment exercise that has already been in progress. your continued cooperation and support will certainly be much needed in the months and years ahead. i wish you all an interesting and useful workshop. thank you very much. | at all times. for emerging markets, this means a strong banking sector. in the current crisis, it is the strength of the banking sector that has enabled the asian economies to cope more successfully with the impact of the global crisis. these strengths are underpinned by the sector ’ s strong capital base, its limited exposure to subprime - related and other toxic assets, and its low reliance on external funding. such strength and qualities are no accident. they are the results of deliberate policies to reform the financial system, strengthen supervision of financial institutions, and revamp financial regulation, risk management, and governance after the asian financial crisis. the point i want to stress here is that these are the qualities that helped us through the current global financial crisis and they are the qualities that we need to keep. the fourth lesson is the benefits to long - term growth and stability that come from disciplined policy management and the pursuance of policy that enhances flexibility in the economic system. the 1997 – 1998 crisis has been an important lesson for asia on this point. disciplined policy reduces the risk of an internally - induced crisis due to policy error and provides the authorities with greater room and flexibility to deal with unexpected events or shocks. in the current crisis, the ability of many asian economies to respond aggressively to the impact of the crisis without undermining policy credibility is a case in point. from my own experience, policy discipline relates closely to decisions that are made with a long - term perspective. the lack of discipline more than often reflects policy that focuses overwhelmingly on short - term outcome. in economics, emphasis on short - term outcome tends to reduce volatility initially but a cost of a much larger volatility and welfare loss at a later date as the needed adjustment is postponed. a long - term perspective, on the other hand, allows the adjustment to be spread out with lesser volatility and effects on economic welfare. next, enhancing flexibility in the economy through policy that raises the role of the price mechanism in the allocation of resources is another crucial policy choice that can make important differences to the economies of emerging markets. again, we in asia learned this lesson well in the 1990 ’ s. since then, reform of the policy regime to increase flexibility, especially the exchange rate, has contributed importantly to greater resiliency and abilities of the economies in asia to adjust to changes in the external environment. so, the fact that the asian economies have done better this time is not only because of the policy response during | 0.5 |
issues. it is important for the euro area to continue on its reform path. this is difficult but indispensable. i am aware that here in poland, people view the euro area ’ s crisis management with some scepticism. they fear a division of the eu into two blocs : the euro area and the rest. the creation of a dividing line is certainly not our goal. the single market binds all 27 eu member states closely together. this level playing field has to be preserved. but the crisis has shown that the economies inside the euro area are even more intertwined than those outside. therefore, reforms have to be more ambitious and rules stricter. this does not mean that those outside the euro area are excluded. as you are well aware, poland, for instance, has signed the euro plus pact and the fiscal compact. and the euro area is not a closed club : it is open to every eu member state that fulfils the convergence criteria on a sustainable basis. thank you. bis central bankers ’ speeches | , which commits countries to enshrining important fiscal rules in binding national legislation. the fiscal compact is an important step towards a fiscal union in the euro area. its timely ratification is now key. a real innovation is the macroeconomic imbalances procedure. it will help to detect and correct economic imbalances, for instance in house price developments. this should avoid situations like in ireland, where a bursting housing bubble, together with bank guarantees provided by the state, led to an abrupt fiscal deterioration. more legislative acts are under way to further increase the surveillance of national economic policies. once the “ two - pack ” has been adopted, it will be possible for draft national budgets to be examined in brussels. and revisions will be demanded if the budgets are not in line with the euro area ’ s fiscal rules. bis central bankers ’ speeches if implemented successfully, these measures will help countries to internalise an important point : any member of a currency union has to treat its economic policies as a matter of common concern. the euro area is already much closer to a political union than many of us realise. there is one broad area, however, where a good strategy is still missing. this is the area of financial markets. let me mention just one concern which needs to be addressed : the negative feedback loops between banks and national governments. the recapitalisation of a troubled bank by its government may lead to a deterioration of the government ’ s fiscal position. the deteriorating fiscal position in turn further weakens banks ’ balance sheets, through their holdings of sovereign bonds. this feedback loop has to be stopped. we have to move closer to a financial markets ’ union. a european bank resolution authority and a european deposit insurance scheme are two elements that could be used to address the nexus between sovereigns and banks. i see further issues that need to be addressed in the area of financial markets, for example the potential conflict of interest for national supervisors whose task should be to ensure financial stability and a smooth functioning of european financial markets, but who are – at the end of the day – accountable to a national parliament and the tax payers of one single country. this, from my point of view, is an argument in favour of the single european rulebook without loop - holes and a supervisory authority at the european level for systemically relevant financial institutions with a cross - border business model. concluding remarks let me conclude. the crisis in europe is still ongoing, but we have come a long way in addressing the most important | 1 |
labour market is now strengthening and a more rapid increase in employment will probably contribute to rising cost pressures in future. during the summer inflation has been slightly higher than expected, which was mainly due to rising energy prices. the inflationary impulse this entails is to some extent counteracted by the low unit labour costs, but inflation this year will probably be slightly higher than we had assumed in our june forecast. our assessment is that the effects of the energy prices will subside at the beginning of 2007. however, as with productivity growth, there is a risk that we are underestimating the effects – this could mean that energy prices may continue to rise and that there could be contagion effects pushing up inflation further ahead. during 2007 rising unit labour costs will provide an increasing contribution to inflation and a couple of years ahead underlying inflation is expected to be in line with the target, given a gradual increase in the repo rate. prospects for economic activity and inflation thus indicate that less expansionary monetary policy is called for in future. this will ensure that inflation is close to the target and that developments in the real economy are balanced. given this, we chose, in line with the repo rate path expected by the market, to raise the repo rate by 0. 25 percentage points at the monetary policy meeting in august. the assessment of the prospects for economic activity and inflation over the coming years that we made then showed it would be reasonable to also assume that the gradual repo rate increases will need to continue. i see no reason to change this assessment today. thank you. | ##ify in the months ahead. 11. it is heartening that there is coordination among developed countries in the management of the crisis. that is welcome and necessary, but not sufficient. in as much as emerging and developing economies are likely to be increasingly impacted by the crisis, going forward two things are necessary. first, in managing the crisis, the implications of that management for emerging and developing economies should be explicitly factored in. second, emerging and developing economies should be taken into confidence and consulted whenever the policies and actions of the developed countries have implications for them. | 0 |
credit is available and affordable. at the same time, mortgages are the largest debt most people will take on in their lifetime, so governments also like to put laws in place to protect consumers and to make sure they understand the risks that go with mortgages. and bank regulators pay close attention to mortgages because they often represent a big portion of the assets in the banking sector. in canada, residential mortgages make up about half the banking system's assets, so keeping mortgages safe keeps our banks safe. and a safe banking sector is a precondition for a stable economy. 2 / 8 bis - central bankers'speeches the policy objectives of governments and regulators can shift over time in response to changing conditions. as policies shift, so do the balance and distribution of risks. to understand this, it's helpful to keep in mind some basics of how mortgages work and who the different stakeholders are. a mortgage is simply a contract with a set of conditions that prescribe the obligations of both the lender and borrower - things like the interest rate, the term, the amortization period and the payment schedule. once a mortgage is originated, the lender sometimes retains it as an asset or an investment. other times they turn it into a security and sell it to an investor. if the lender doesn't sell the mortgage, they need to fund it. to reduce interest rate risk, they will want to fund it with a deposit that is about the same size and duration as the term of the mortgage. lenders sell mortgages so that they have a variety of funding sources and don't find themselves constrained by the availability of the deposits they hold. so investors play an important role because they give lenders access to pools of capital that let them fund more mortgages. whatever your policy objective, when you make changes to the mortgage market, it's important to keep these three groups - borrowers, lenders and investors - in mind. you need all three to have a healthy, functioning mortgage market. the challenge, of course, is that how you view a change will depend on whether you're a borrower, a lender or an investor. and sometimes, an attempt to improve conditions for one can negatively impact another. borrowers want affordability and investors want an acceptable risk - adjusted rate of return. features that reduce risk or flexibility for the borrower can increase risk or flexibility for the lender or investor and vice versa. the bottom | publicly that the decision to reduce purchases did not reflect any change in the committee ’ s plans for holding the federal funds rate at its current level. the september decision not to reduce purchases clearly took some market participants by surprise. for me, the decision was a close call, and i would have been comfortable with a small reduction in purchases. however, as the minutes of the september fomc meeting reflect, there were legitimate concerns about the strength of incoming economic data, the economic effects of tighter financial conditions and of tighter fiscal policy, and the prospect for disruptive events on the fiscal front. 7 i supported the decision as a reasonable exercise in risk management. events since the september meeting suggest that the concerns regarding fiscal matters were well founded. i would like to push back against the narrative that the decision at the september meeting has damaged the committee ’ s communications strategy. in its communications, the committee seeks to influence market conditions over the medium term in a way that is consistent with its policy intentions. as i suggested earlier, as we navigate this unprecedented transition back to more normal policy, there may be volatility in the short run. and we will continually strive to improve our communications and avoid surprises. but, at the end of the day, my own judgment is that market expectations are now better aligned with committee assessments and intentions. the september decision underscored the committee ’ s intention to determine the pace of purchases in a data - dependent way based on progress toward our objectives. moreover, the modest net tightening in financial conditions since the june meeting has likely reduced the prevalence of highly leveraged, speculative positions. i believe that the market is now prepared for a reduction in purchases when the economic outlook and the broader situation support it. see board of governors of the federal reserve system ( 2013 ), “ federal reserve issues fomc statement, ” press release, september 18. decomposing federal funds futures into components representing the true expected path of the federal funds rate and term premiums is difficult. staff models suggest that a portion of the upward revision in the federal funds futures curve over this period was associated with a pulling forward in the expected date of liftoff in the federal funds rate. see board of governors of the federal reserve system ( 2013 ), “ minutes of the federal open market committee, september 17 – 18, 2013, ” press release, october 9. bis central bankers ’ speeches short term rates have fallen back since the september meeting, and are now better aligned with the committee ’ s forward | 0 |
by world renowned rating agencies standards and poor and fitch, as well as, the reclassification of zambia as a middle income country by the world bank. the rating and reclassification requires the central bank, the zambian business community and government to continue enhancing the financial system to ensure that it is robust and reaches the unbanked. ladies and gentlemen, the product that is being launched today, demonstrates the way businesses are evolving to bring forth financial solutions that benefit customers. this service provides an important avenue for harnessing resources for financing development in our bis central bankers ’ speeches communities as airtel will partner with various stakeholders in different sectors of the economy. this will further enhance the development of the telecoms sector and its contribution to our economy. therefore, i wish to commend airtel for introducing this product which is expected to contribute towards bridging the gap in financial service provision by catering for customers in remote areas who have no access to banking services. the product is expected to extend the financial inclusion agenda in that it will be far reaching thereby impacting positively on the zambian public. i am also informed that the product is expected to reduce the use of cash in the economy. as you may be aware, the bank of zambia has been working towards reducing the use of cash in the economy by encouraging the use of alternative electronic means of payment such as the product being launched today. it is initiatives and innovations like airtel money that will make it possible for the general public to have alternative methods of transacting other than cash and other transnational payment instruments. to this end, i wish to mention that the bank of zambia with other stakeholders is in the process of putting in place a national switch that will further enhance initiatives such as this one whose launch we are witnessing today. ladies and gentlemen, the bank of zambia will continue to support any efforts and innovations by the private sector that extend the provision of financial services to the majority of our citizens. i look forward to seeing the product being launched today live up to the expectations of providing a safe, efficient, secure and reliable service to the zambian people. i hope that all customers will enjoy using the airtel money service. with these few remarks, i wish to declare airtel money officially launched and wish it all the success. thank you. bis central bankers ’ speeches | quality of service delivery of financial services, increase access to financial services by developing a rural finance policy and strategy and lastly delivering effective financial education. notwithstanding the work done through the fsdp, the financial sector in zambia still faces a number of major challenges. access to financial services among the adult population is at 37. 3 %, the cost of accessing financial services is still high, the quality of financial service bis central bankers ’ speeches delivery can do with some improvement and financial literacy remains low and presents an important factor in explaining the low level of financial inclusion that we see in the country today. the fsdp, honourable ministers, therefore, remains work in progress. i would like, however, to mention some milestones which have been achieved under this programme in order to underscore its potential as a tool for transforming for the better, zambia ’ s financial sector landscape. under the fsdp, we have witnessed the establishment of the credit reference bureau which is beginning to play an increasingly important role in helping financial institutions better manage credit risk, which in turn, should feed into less expensive credit. a draft rural finance policy and strategy aimed at improving finance to rural areas has also been completed and awaits implementation. another important exercise accomplished has been the law review exercise which has reviewed all existing legislation in the financial sector with the view to modernise, harmonise them and ensure that the different legislations speak to each other rather conflict each other. consequently, we will be submitting to government amendments to various laws, including those in banking, insurance and the capital market. another significant accomplishment under the fsdp has been work done so far in formulating a national strategy for financial education. this initiative grew out of the recognition of the fact that financial institutions and certain ngos that were engaged in promoting various financial education activities and programme were operating in isolation. what was clearly missing was a coherent and well - co - ordinated strategy among these organisations for delivering an effective education to enhance financial literacy and inclusion. consequently the fsdp identified the need to develop a coordinated approach to financial education as a meaningful way of bringing progress to this process. it therefore, started its intervention by commissioning a stock taking study of financial education efforts taking place in zambia in order to establish its true status. dfid provided financial support in the form of technical assistance which enabled the fsdp to recruit finmark trust to carry out the study. subsequently, a report was produced and presented to various stakeholders in november last | 0.5 |
alan bollard : economic surveillance after the crisis – reflections from a small full service central bank speech by dr alan bollard, governor of the reserve bank of new zealand, and mr enzo cassino, acting manager, financial markets research, to the sim kee boon institute conference on financial economics, singapore, 5 may 2011. the speech was delivered by dr john mcdermott, assistant governor of the reserve bank of new zealand. * * * introduction nearly four years after it began, the global financial crisis continues to impact the changing behaviour and practices of the world ’ s central banks. in particular, it has affected the way central banks monitor and analyse economic conditions to formulate monetary and financial stability policies. we can describe this monitoring and analysis process as “ economic surveillance ”. economic surveillance refers to all the various channels we use to obtain information about the financial system and the economy to support our decision - making. this monitoring covers both the global and domestic economies. it also covers a wide spectrum of sources and methods, including statistics, financial market data, the functioning of the payments and liquidity infrastructure, external commentaries, and intelligence gathered from contacts in the financial and business sectors. collecting, analysing and interpreting this range of data requires a wide range of skills and expertise in central banks, including macroeconomics, financial modelling and market liaison. the financial crisis has led to some changes in the way we do economic surveillance and presents new challenges and opportunities for central banks. our perspective on this task at the reserve bank of new zealand comes from being a small “ full service ” central bank responsible for both monetary policy setting and supervising the financial system. our view is also impacted by new zealand being a small open economy. this makes us a price taker in the markets for many tradeable goods and also exposes us to the impact of economic and financial shocks in larger economies. it also makes it more difficult for us to set standards of regulatory compliance for our financial sector in isolation and independently of regulatory developments in larger economies. surveillance before the crisis to better understand the impact of the crisis on central banks ’ behaviour, it is useful to start by describing how monetary authorities behaved before the crisis. in the pre - crisis world, monetary policy setters were often able to inform their decisions using a number of reasonably reliable empirical correlations between real or financial variables that had been historically quite stable. while structural change and the breakdown of empirical relationships still commonly occurred at times, many empirical regularities appeared to be | studies and provide practical guidance on modalities to scale up blended finance. mas and the de nederlandsche bank ( dnb ) will lead this initiative. i will share more details in my remarks this afternoon before the ngfs discussion panels at this pavilion. 2 / 4 bis - central bankers'speeches the glasgow financial alliance for net zero asia - pacific network will launch an initiative to develop guidance for financial institutions on how they can facilitate the managed phase - out of coal power generation in the asia pacific. mas and the asian development bank will participate in this initiative. second strategy - carbon markets to channel financing towards carbon abatement and removal projects. many entities find it difficult to eliminate their emissions or to even reduce them as quickly as they would like. high quality carbon credits generated by emission reduction and removal projects allow such entities to offset the emissions they cannot get rid of while providing financing for these projects that would otherwise not get off the ground. a well - functioning carbon trading ecosystem is particularly relevant to asia's transition effort. the market for voluntary carbon credits is huge. unfortunately, differences in carbon accounting and credit recognition practices across jurisdictions have led to carbon credits being treated with a degree of skepticism. to build an efficient and trusted carbon market, we will need better and verifiable abatement data, harmonisation in carbon accounting practices, and interoperability between the voluntary and compliance carbon markets. singapore is well - positioned to be a carbon services and trading hub. we have sound infrastructure, good governance, and a premium on trust – critical ingredients for a marketplace. we are located at the heart of southeast asia which is fertile ground to harness the potential of nature - based solutions for carbon sequestration. southeast asia holds more than one - third of the world's mangroves and has about 120 million hectares of land suitable for re - forestation. we are strengthening the carbon credit value - chain by growing project development capabilities : certify and validate project design, and monitor and verify project outcomes. third strategy – good - quality data to support transition finance. credible and comparable data is foundational for the climate agenda. data on carbon stocks, emissions profiles of projects, and historical deal data can provide the market with a proper view of climate - related risks. good - quality data is key to robust sustainability reporting, combating greenwashing, and enabling investors to make effective esg - informed decisions. good - quality data enables solutions such as blended finance and forms the backbone | 0 |
were eroded by rising prices. speculation was rampant. and the economic booms that led to rising inflation ended up in recessions. one of the things we learned from this bitter experience is that high inflation injects additional uncertainty into decision making. in a market economy, prices contain valuable information. when the price of a product is rising relative to other products, it's a signal that that particular product is becoming scarcer. producers are then encouraged to increase its supply, while consumers are encouraged to economize on its use, thus alleviating the scarcity. conversely, a drop in the price of a product is a signal that it is becoming more abundant. when this happens, firms are led to reduce their supplies of the product, and consumers are encouraged to increase their demand for it. but when inflation is high and variable, buyers and sellers are never quite sure what a price increase means. is it a sign that a specific good is becoming scarcer, or is it just a sign of more widespread inflation? this uncertainty means that prices no longer convey as much useful information, and, as a result, people find it difficult to make sound decisions about production and investment. they focus on trying to protect themselves against the effects of inflation. investors won't commit their resources for lengthy periods ; labour negotiations become more acrimonious ; and the overall economy is not as productive as it could be. indeed, with the erosion of confidence in money comes an erosion of confidence in the fairness of markets. as former bank of canada governor gerald bouey aptly put it in his 1981 annual report, " inflation melts the glue that holds free societies together. " the lesson we ( and other central banks ) have learned in the past 30 years is that low and stable inflation is the best contribution that monetary policy can make to a strong economy. since 1991, the bank of canada has conducted monetary policy with an explicit numeric target for inflation, a target that is set jointly with the government of canada. since 1995, the inflation target has been the 2 per cent midpoint of a 1 to 3 per cent range. it was last renewed 5 years ago, and is coming up for renewal this year. having a clear objective has increased the bank of canada's accountability to canadians. it has made it easier for the bank to explain its actions and easier for people to judge how the bank is doing in meeting its objective. once canadians believed that the bank would take action to | as workers, entrepreneurs, investors, borrowers and taxpayers. similarly, there are several channels through which our policies affect pension systems. yes, lower rates increase the present value of future liabilities of pension schemes. however, the liability side of pension schemes is only one part of the equation. what happens on the asset side is also important. and our monetary policy has had a beneficial impact on this side of the equation as the value of the investment portfolio has increased. also, let ’ s not forget that our monetary policy supports pension systems indirectly by supporting employment growth and thus pension contributions. in any case, it is ultimately up to sound governance structures and longterm strategies to ensure the financial health of pension systems. equally, monetary policy can have an impact on bank profitability through various channels. our assessment is that so far these effects tend to largely offset each other in aggregate terms. low rates might reduce bank profits through the narrowing of net interest margins. yet, at the same time, by supporting the recovery, accommodative monetary policy reduces delinquencies and defaults, including on mortgages. improved credit quality coupled with higher lending volumes and an improved market value of assets supports bank profitability. of course, depending on the strength of their balance sheet, some banks may be more affected than others. also banks facing structurally high cost - to - income ratios or limited diversification of income sources might have to revamp their business models regardless of the low interest rate environment. finally, let me also address the risks of overheating in some parts of the financial markets. we do not currently see compelling evidence of overstretched asset valuations at the euro area level, but we do see that real estate dynamics or high household debt levels in some countries signal the risk of increasing imbalances. such risks also exist in the netherlands : they relate to the continued very high level of household indebtedness and the low level of mortgage collateralisation. for this reason, we share the concerns expressed in the warning issued by the european systemic risk board in november 2016 and recognise that there is a case for mitigating measures. that being said, monetary policy is not the appropriate tool for addressing local and sectoral financial risks. rather, targeted macroprudential policies, which can be tailored to local and sectoral conditions, are the right answer. 1 the way forward against the backdrop of a recovery that is becoming increasingly solid, the benefits of our policy clearly outweigh | 0 |
speculation. to address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the fx markets. this includes unifying fx market segments, clearing outstanding fx obligations, introducing new operational mechanisms for bdcs and imtos, enforcing the net open position limit, open market operations and adjusting the remunerable standing deposit facility cap among others. distinguished senators, these measures, aimed at ensuring a more market - oriented mechanism for exchange rate determination, will boost foreign exchange inflows, stabilize the exchange rate, and minimize its pass - through to domestic inflation. indeed, they have already started yielding early results with significant interest from foreign portfolio investors ( fpis ) that have already begun to supply the much - needed foreign exchange to the economy. for example, upwards of $ 1 billion in the last few days came in to subscribe to the nigeria treasury bill auction of 1 trillion naira which saw an oversubscription earlier this week. our measures aimed at improving usd supply into the nigerian economy, has significant potential in taming the volatility of the exchange rates. however, for these measures to be sustainable, we must as a country, moderate our demand for fx. distinguished senators, we must understand that the genuine issue impacting the exchange rate is the simultaneous decrease in the supply of, and increase in the demand for, us dollars. it is also clear that the task of stabilizing the exchange rate, while an official mandate of the cbn, would necessitate efforts beyond the bank itself. it will also include actions by corporates and individuals to reduce our frequent demand for the dollar for business and personal needs. i would like to underscore the importance of the ongoing collaboration between the fiscal and monetary authorities and particularly progress made on tackling a number of the issues challenging our economy today. conclusion in conclusion, distinguished senators, we understand the economic costs of these developments not just for the economy, but also as they affect ordinary nigerians. 3 / 4 bis - central bankers'speeches however, as i have mentioned in previous engagements, these costs are temporary, and our decisions will address a lot of fundamental issues bothering nigeria's macroeconomic landscape and ultimately put us on a surer path to prosperity. i look forward to providing more information during the q & a session. thank you. 4 / 4 bis - central bankers'speeches | olayemi cardoso : economic briefing at the joint senate committee on finance, banking, insurance and other financial institutions and national planning speech by mr olayemi cardoso, governor of the central bank of nigeria, at the economic briefing at the joint senate committee on finance, banking, insurance and other financial institutions and national planning, lagos, 9 february 2024. * * * chairman, senate committee on banking, insurance, and other financial institutions : distinguished senator mukhail adetokunbo abiru chairman, senate committee on finance : distinguished senator mohammed sani musa chairman, senate committee on national planning : distinguished senator abdullahi yahaya distinguished vice chairs and members of the joint senate committees here today honourable ministers my colleagues from the central bank of nigeria gentlemen of the press ladies and gentlemen good morning, permit me to read a prepared statement given the seriousness of this matter and then subsequently have a discussion on these topics during the q & a session. i am honoured to appear before this joint senate committee on finance, banking, insurance, and other financial institutions and national planning to address critical concerns related to exchange rates and inflationary pressures in the economy. indeed, this is the major topic of concern in our villages, our towns and our cities. the urgency of the matter is not lost on us at the central bank, and i assure you we are working tirelessly with colleagues across government, including with the leadership of this national assembly, to bring lasting solutions. 1 / 4 bis - central bankers'speeches inflation in december 2023, the economic landscape revealed significant shifts. the headline inflation stood at 28. 92 % in december 2023 as against 28. 20 % in november, food inflation was 33. 93 % as against 32. 84 % in november, while core inflation was 23. 06 % as against 22. 38 % in october 2023. headline inflation surged to 28. 92 %, propelled by food shortages, distribution challenges, and seasonal trends. the festive season's consumer demand upsurge, following subdued periods due to energy and foreign exchange reforms, contributed to this trend, persisting from november through december yearly. the upward trend of food inflation is primarily due to supply shocks caused by insecurity, climate - induced factors such as flood and rainfall shortage in some cases, inefficient, subsistent and seasonal farming practices as well as importation bottle necks that have impacted the prices of imported food items. anecdotal evidence indicates that recent | 1 |
the second reason is that the costs and benefits of participating in coordinated actions of this kind are not in fact evenly distributed across participants. some participants will benefit more than others from a given innovation, or may find it more costly than others, for reasons to do with their size or their business model. another factor is the timing of investment cycles : collective action has to be collective, but the timing of any given investment in payments technology will always be more advantageous to some than to others. a bank that is just about to undertake a regular technology upgrade may be quite receptive to aligning that with a general change in standards ; whereas a bank that has just completed a major round of investment may not be. these things can make it very hard for industry participants to agree on the timing of a systemic innovation, or on the pricing arrangements that will underpin it. the end result can be a degree of inertia, or a slower pace of innovation than would be socially efficient. i think this problem is inherent in any network that doesn ’ t operate as a kind of proprietary unit in the way that, for example, a credit card network does ( competing of course with other networks ). bis central bankers ’ speeches for the payments system as a whole, then, this points to the need for coordination mechanisms. what sorts of mechanisms might we be talking about? for a lot of issues, the appropriate coordination mechanism could be an industry body – especially where the issue is mainly technical in nature and where there are no strong proprietary interests at stake. an example would be routine updating of technical standards. but where there are significantly conflicting incentives that make coordinated decisionmaking more difficult, it may need a regulator to take a leadership role. in australia the payments system regulator is the central bank, and regulatory decisions are made by the reserve bank payments system board. we have a mandate to promote stability and efficiency, which i think we can view as including the efficient resolution of the coordination problems that i ’ ve just described. and we have significant powers that can be directed to that end. for these reasons, the rba has been increasing its focus on these coordination issues in recent times. as you may be aware, we announced a strategic review of innovation in the payments system in july 2010, and we are now in the finishing stages of that review. in the course of the review, we held two rounds of extensive consultation with service providers as well as with end - users of the payments system. broadly speaking, the | taken to identify and mitigate risks, still be used for ml / tf purposes. ’ unquote. we supervisors are fully aware that the perfect supervisory regime does not exist. it is, however, our duty to aim for optimal results by adopting methodologies that make full use of our supervisory resources and skills. ladies and gentlemen, i thank you for your attention and wish you all an enriching seminar. | 0 |
1. return to text 3 / 3 bis central bankers'speeches | and early 2009, the world suffered the worst financial crisis since the great depression, a crisis which, had it been left unchecked, would have resulted in a global financial meltdown and an economic collapse. working with policymakers around the world, the federal reserve acted creatively and forcefully to help stabilize the financial system and halt the economic slide. our economy has been growing and adding jobs for more than two years now. but for a lot of people, i know, it doesn ’ t feel like the recession ever ended. the unemployment rate remains painfully high, and more than two - fifths of the unemployed have been out of work for longer than six months, by far the highest ratio since world war ii. these problems are very serious, and we at the federal reserve have been focusing intently on supporting job creation. supporting job creation is half of our marching orders, so to speak ; the other half is controlling inflation. or, in the language of the law that sets the mandate for monetary policy, the federal reserve is required to seek both maximum employment and price stability. we pursue those two important goals by influencing the level of interest rates and other financial conditions. my colleagues and i on the federal reserve ’ s monetary policymaking committee equate price stability with inflation being at 2 percent or a little less. that rate is bis central bankers ’ speeches low enough that people and businesses can make financial decisions without having to worry too much about rising costs, but high enough to keep the economy away from deflation – falling wages and prices – which is both a cause and a symptom of an extremely weak economy. although spikes in oil and food prices, and other transitory factors, pushed inflation up earlier this year, inflation appears to be moderating, and we expect, based on the best information that we have today, that it will remain reasonably close to our objective of 2 percent or a bit less for the foreseeable future. in the longer term, monetary policy is the main determinant of inflation, and so federal reserve policymakers have considerable latitude to choose our longer - term inflation goal. in contrast, “ maximum employment ” depends on many factors outside of the federal reserve ’ s control, such as the skills of the workforce and the pace of technological innovation. right now, my colleagues on the fed ’ s policymaking committee estimate that the u. s. economy could sustain an unemployment rate of somewhere between 5 and 6 percent without generating a buildup of inflation pressures. | 0.5 |
of households ’ bis central bankers ’ speeches disposable income stood at roughly 14 percent in the euro area, 8. 6 percent in the us, and 5. 4 percent in the uk. trade within the euro area and the eu is flourishing as well as the exchange of goods and services with the rest of the world. the euro area is the most open major economy in the world. in 2011, exports of goods and services from the euro area stood at 22. 7 percent of gdp compared to 12. 6 percent of gdp in the us. the current account in the euro area is broadly in balance ( - 0. 4 percent of gdp in 2010 ). for this year the imf forecasts a current account deficit of 3 percent for the us. optimum currency areas : basic considerations the above mentioned figures are publicly available. they are well known to scholars and market participants. why then, one may ask, are markets still so suspicious against the euro area? why is there a talk of a sovereign debt crisis in the euro area rather than in the us or the uk? and why has the epicenter of financial markets turmoil moved from the us to the euro area. before i try to answer these questions in greater detail, let us recall some of the basic considerations of optimal currency areas. when countries or states participate in a currency union they abolish their nominal exchange rate. by doing so they sacrifice a hitherto important means of adjustment vis - a - vis the other countries or states participating in the currency area. 50 years ago nobel prize laureate robert mundell argued that adjustment to economic shocks has to occur via other channels. mundell and other protagonists of the optimum currency area theory highlighted three major channels for adjustment in a monetary union in the absence of internal nominal exchange rate flexibility : – first, price flexibility can help countries or states to overcome economic shocks by adjusting wages and reducing relative prices in order to rebuild competitiveness. – second, cross - border factor mobility – in particular on labour markets – can foster adjustments to shocks as employees from anemic economies move to the healthier ones until the former regain competitiveness and growth. – third, funds may flow from the more prosperous countries or states to the weaker ones via fiscal transfers. 3 while the first two adjustments channels clearly help to approach a new equilibrium in the aftermath of an asymmetric shock, the third one could only temporarily dampen the burden of adjustment and play a stabilizing role. in | ##fp growth, it can be stated that tfp in the production of goods is slightly larger in the euro area than in the us. rather, the higher overall tfp growth in the us is driven by stronger tfp growth in services, in particular in distributive trade ( 0. 2 vs. 0. 5 ). for good order, one should not forget that productivity and technical progress in general and in services in particular are subject to measurement difficulties. tfp figures – being a residual – can only represent a rough metric. thus, the tfp contribution can be plagued by measurement errors, erroneous assumptions about market structure, or the nature and existence of the aggregative production function. the residual will also be a catch - all of neglected factor utilization, factor quality improvements over time, statistical complications associated in calculating factor rewards ( appropriate tax and depreciation allowance for capital income etc ). 2 in a nut shell : the main difference between the measured growth differences in the euro area and the us are attributed to the difficulties to assess differences in the technological progress of ict services. see trichet, jean - claude ( 2011 ), speech at the jackson hole economic symposium panel : setting priorities for long - term growth jackson hole, u. s. a., 27 august. bis central bankers ’ speeches employment having identified the limited explanatory power of growth statistics to compare mature economies with rather similar per capita growth rates, one might preferably rather look at the development in labor markets to gain some information about the economic dynamism. between 1999 and 2011, the euro area has created 14 million jobs. during the same period of time, 8 million jobs have been created in the us. heterogeneity within the currency area contrary to common belief, the heterogeneity within the euro area is not significantly bigger than between us states. although it is very common to distinguish between the countries of the euro area and focus on the diversity among individual member states, this exercise is rarely done for the us. in fact, however, the dispersion of many key economic indicators is very similar. let me provide some detail on the heterogeneity within the respective currency areas. before the crisis, the dispersion of inflation in euro area countries had remained broadly stable since the late 1990s. the level was similar to the 14 us metropolitan statistical areas. during the crisis a temporary increase in inflation dispersion in the euro area was observed. | 1 |
global gender gap and 202 years to bring about parity in the workplace. ghana placed 89th among 149 participating countries in 2018 in terms of the gender gap ( wef 2018 ) ; female talent is reported to be among the least utilized economic and business resources around the world. a recent mckinsey study posits that making even small inroads in closing the global gender gap could potentially increase global gdp by $ 12 trillion by 2025 ; further studies show that the contributions of african women to economic activities on the continent are considerable, albeit mostly informal. the un fao estimates that women in africa are responsible for 70 % of crop production, 50 % of animal husbandry and 60 % of market activity. women undertake nearly 100 % of food processing activities, in addition to child care and other responsibilities in households ; an ernst & young report asserts that women in africa make up over 50 % of africa ’ s growing population, and yet are “ a powerful untapped economic force ” that should be further harnessed as an important contributor to the african growth story ; according to the latest world bank enterprise survey, in both the public and private sectors, only 1 in 26 salaried african women is employed in a senior management position, compared with 1 in every 6 men. women ’ s formal ownership of smes currently stands at around a third of all registered smes in africa, and womenowned smes are more likely to have lower sales and annual turnover, less employees, and smaller size than those enterprises owned by men. in spite of these statistics, there is hardly any controversy about the immense role played by women in building homes, communities, societies, nations, and beyond. at least in ghana, the hard work and sacrifices of women in every sphere of our national life from time immemorial, are well recognized and praised often. yet we must ask ourselves why are there so few women in the corporate board rooms or in parliament? why are so many women confined to the informal sector? why do women own only a third of all smes in africa? why are smes owned by women more likely to be smaller than those owned by men? why do women remain “ a powerful untapped economic force ” in a continent that is seeking to emerge from the tag of being the world ’ s poorest? how can we tap more into the talents, gifts, intellect, and perspectives of women to advance our nation - building efforts? what will it take for women to | the past, they have recently come under scrutiny for their role in the financial market turbulence. however, because rating agencies rely on their reputations, they have strong incentives to improve the information content of their ratings for complex financial instruments, to ensure that all material facts are disclosed in a concise and timely manner, and to address inherent conflicts of interest in the ratings process. they have shown an ability and willingness to learn from their mistakes, and they are regularly refining their rating processes. 7 this does not mean, though, that investors can rely exclusively on the judgment of others. in the end, investors must accept responsibility for understanding and managing the credit risk in their portfolios. i'll turn now to some issues regarding financial institutions and their regulation. i'll focus on a few issues related to the models of operations in these institutions, the management of risks, and the management and regulation of liquidity. we can now see that one of the key problems with securitized u. s. subprime mortgages rested with the so - called " originate and distribute " model in which mortgage originators, many of whom did not face the same regulations as banks, entered into mortgage contracts with homeowners, and then laid off these assets as they were securitized. in principle, there is nothing wrong with having a model based on " originate and distribute, " but in practice, a number of major things went wrong, as we saw in the recent u. s. example. for example, some originators did not have sufficient incentives to conduct appropriate credit checks on clients. this model is now being closely examined by regulators in the united states and around the world, to ensure that the right incentives for originators and distributors are in place and are appropriately aligned. risk management within banks themselves is also facing scrutiny. in many cases, their riskmanagement practices did not prepare banks for the recent market turbulence, and so these market practices need to be addressed. while the basel committee on banking supervision has devoted most of its time over the past several years to completing its work on capital adequacy, it is now devoting more time and resources to the analysis of risk - management processes in banks and to the principles of liquidity management for banks. 8 let me turn now to the financial stability policies of central banks. when there is a clear market failure and a major disruption to financial stability, a central bank – depending on circumstances – may wish to relieve liquidity pressures on the | 0 |
creative destruction ’. it may lead to new business models and new configurations within financial services. the potential of financial technology the potential of fintech is well described in one of the earliest reports on fintech commissioned by the uk4 treasury. this report is useful in that it outlines how countries can positively position themselves in relation to fintech. a key finding of this report is that a country could establish a well - functioning fintech ecosystem and competitively position itself provided that a holistic view is taken that focuses on the following four core ecosystem attributes : policy, talent, capital and demand. policy refers to the following : ( i ) regulatory regimes, which includes regulatory support for new entrants and innovative business models ; group of twenty united kingdom page 2 of 11 ( ii ) government programmes, including sector - growth initiatives which, in turn, include efforts to open up the sector, increase competition, attract foreign fintechs, and improve cyber - resilience ; and ( iii ) taxation policy, which refers to the introduction of appropriate incentives to drive greater investment in fintech, but, dare i add, should also include revisions to the tax code to ensure that profits generated are included in the taxation net of this nascent sector. while clear and appropriate fintech policies are important catalysts to innovation, without talent and capital, fintech is likely to grow at a slower pace. talent refers to both the availability of technical, financial sector and entrepreneurial talent as well as the strengthening of the talent pipeline through immigration policies and the promotion of fintech in schools and universities with specialist modules, apprenticeships and sponsored work placements. capital refers to access that start - ups and scale - ups should have to seed and growth capital as well as to public capital markets. the report, for example, lists investor - focused programmes such as the sponsorship of events for venture capital funds to meet early - stage fintechs and the creation of a growth capital fund to finance fintechs. last, but not least : although each of the previous factors is necessary for the emergence of fintech, actual demand relates to the end - client demand across consumers, corporates and financial institutions. governments can play a significant role in promoting the adoption rate of fintech through the modernisation of payment and supply chain solutions. although demand is not a prerequisite, without it innovation in financial services is likely to take off at a slower pace. this framework lays the foundation for developing fintech, especially at a time when | in the european union ’ s ( eu ) fintech action plan, one of the explicit goals is enabling innovative business models to scale up across the eu region through clear and consistent licensing requirements. actions include reviewing regulation on investment - based and lending - based crowdfunding service providers for business. the proposal specifically aims to ensure an appropriate and proportionate regulatory framework, which allows crowdfunding platforms that want to operate cross - border to do so with a comprehensive ‘ passporting ’ regime under unified supervision. another action that supports innovation includes a review of the current authorising and licensing approaches for innovative fintech business models. the european commission will set up an expert group to assess whether there are any unjustified regulatory obstacles to financial innovation in the eu ’ s financial services regulatory framework. page 6 of 11 authorities should therefore not merely acknowledge or observe innovation but should actively review fintech innovations ( including those with new business models ) with a view to ensuring proportionate and consistent authorising and licensing regimes. this practice is driven by an underpinning open philosophy and a flexible approach to fintech. speakers and participants who have had experience of this approach in other jurisdictions will tell us more about the impact of this practice. we will hear how initiatives in cryptocurrencies, digital identity and digital mobile wallets may benefit from a pro - innovation philosophy. we will also hear from jurisdictions with smart nation policies about the importance of such national philosophies and policies. of course, as authorities, we will need to ensure level playing fields and manage the risk of regulatory arbitrage. this is why a coordinated multiple regulator approach is so important. practice 2 : the creation of innovation facilitators such as hubs and sandboxes to keep close to emerging developments and foster shared learning the second practice is the review and creation of structural mechanisms to enable ongoing market engagements. these include efforts aimed at collecting fintech data, organising market outreach initiatives, and implementing structures such as innovation hubs, innovation accelerators and regulatory sandboxes. each of the reports strongly encourages shared learning with a diverse set of private - sector parties. in order to support the benefits of innovation through shared learning and through greater access to information on developments, authorities should continue to improve communication channels with the private sector and should continue sharing their experiences with innovation hubs, innovation accelerators and regulatory sandboxes, besides other forms of interaction. the reports suggest that the successes and challenges derived from such approaches may provide fruitful insights | 1 |
. maturing defined benefit plans and newly set up defined contribution schemes may have different propensities to invest in risky assets, and thereby affecting the relative price of the assets. looking at available data does indeed suggest many factors impacting on the asset allocation of the different types of pension schemes. at the same time, the shift between types of pension schemes transfers the longevity risk of the individual into a future income risk for the individual. in the defined contribution pension system, a longer life can only be counterbalanced by either saving more, working longer or through unrealistically high rates of return on investments. none of these remedial options are available ex post. individuals with retirement income stemming from such pensions schemes therefore run the risk of outliving their resources, leaving only a reduction their standard of living when they are old. furthermore, as retirement income becomes subject to a greater number of risks, plan beneficiaries will have to provide for these challenges, thus putting them in a less good position to bear risk in their remaining portfolio behaviour and altering their behaviour as investors on financial markets. in this context it is noteworthy that most people have substantial problems giving a reasonable estimate of how much money at retirement they will have had to accumulate in order to sustain their current standard of living. few people realize how large the capital stock will need to be and how low the rate of withdrawal has to be, irrespective of the asset allocation chosen. individuals have a poor appreciation of the financial implications of longevity. it is the responsibility of public authorities to further promote financial education programmes aimed at enhancing not only the awareness of citizens on the financial risks they face in their decisions but also the ability to judge the options at their disposal. for instance, the rate of return on the investments is crucial to the value of definedcontribution pension schemes at retirement. this raises a number of challenging questions with respect to the structuring of the payout options for these schemes. the main options include lump - sum payments, programmed withdrawals and annuities. the choice amongst them depends on the balance to strike between flexibility and protection from longevity risk, and is most certainly subject to the country context. to this regard, financial markets need to be sufficiently developed and to offer adequate financial products, which enable individuals to convert the accumulated assets into a stream of income at retirement. it requires the ability from individuals to carefully assess their situation and make important financial choices for themselves. from a public policy point of view, | countries with a strong ageing of the population. over the coming decades, as the “ first pillar ” of old - age provision will increasingly need to be complemented by a strong “ second pillar ” of occupational pension funds, a significant increase in the value of assets managed by the retirement savings industry can be expected. this will particularly need to be the case in countries where this industry is less developed and in countries with underfunded public pension systems with defined benefits. at present the share of total wealth invested by euro area households with insurance corporations and pension funds is much smaller than is the case for us households. this largely reflects the larger weight of real estate in euro area households ’ portfolios ( both in value and relative to gdp ). the strong rise in property prices experienced in recent years by some euro area countries contributed to increase the share of housing wealth in total household wealth. at the same time, with the normalisation of house price dynamics, the accumulation wealth through institutional investors should come to the fore more strongly in the future. at just under 30 %, the share of financial wealth invested with insurance corporations and pension funds is currently very close to the share observed for the us. furthermore, this share has gradually risen from 24 % in early 1999 in part, reflecting a shift in the preference of households with respect to asset holdings from direct holdings of securities to professional asset managers. looking across the euro area, the size of the private pension fund industry differs extensively with the spectrum going from the netherlands with a very large sector of 1. 3 times gdp to france and germany with much smaller ones below a tenth of gdp. several factors have contributed to this cross - country variation in the design and importance of pension funds : the past demographic structure of the population, the fiscal position of governments and socioeconomic trends. the global pension landscape is also being affect by the shift, in particular by occupational pension plans, toward defined contribution plans, while often defined benefit plans have been closed to new entrants. traditionally, private pensions have been employer - provided and been of the defined - benefit type, where the entitlement depends on some measure of individual earnings and years of service. the pension benefit in defined - contribution plan depends on the value of individual and employer contributions, the investment returns that these earn and the terms on which accumulated capital can be converted into a flow of pension benefits. potentially, this shift in the type of the private pension schemes may have repercussions on to financial markets and portfolio allocation | 1 |
and crypto - assets – as the two techniques of key encapsulation and digital signature currently used are both based on asymmetric encryption, which is vulnerable to the quantum threat. it will be of outmost importance to factor in the risks stemming from quantum computing when designing the central bank digital currencies. this risk is already on the table with the practice of'harvest now, decrypt later'used by malicious actors. information embedded in contracts currently in force needs to be kept secret for years to come. even just the possibility that some of it will be exposed – as soon as the technology becomes available – is already a potential blow to trust. 2 / 5 bis - central bankers'speeches 2. the state of the art : one problem, many potential technical approaches as we will see through the lunch session, some solutions to mitigate cyber issues are already available. the heart of cybersecurity lies in cryptography, which – from encrypting data to securing online transactions – is the guardian of our digital world. as the financial industry and governments prepare to protect against quantum threats, it is necessary that they become'crypto - agile ', adopting a multifaceted security strategy that incorporates a range of easily upgradable quantum - resistant solution. the showcase exercise that will be performed in this session will demonstrate that there are two different but complementary approaches that can be used in order to deal with quantum - safe cryptography. on the one hand, we can take advantage of quantum properties to establish secure communication channels between parties, where any attempt to eavesdrop or intercept the exchange of encryption keys is detected. on the other hand, considering that the cryptography involves the use of mathematical algorithms to transform readable data into encrypted data and vice versa, it is possible to replace the current algorithms ( unbreakable now, but solvable with quantum computing ) with others that are more difficult to solve, even for a quantum computer. each one of these technologies – or a combination of them – will allow full end - to - end security in our digital communications. at the same time, however, these technologies are all extremely demanding in terms of time and resources. at the current state of the technology, embracing the quantum physics approach is estimated to impose costs of a higher order of magnitude, though it appears to provide a definitive solution to the quantum threat. the showcase exercise will demonstrate how some solutions already available to the market work, leveraging the points | ##i for assistance in preparing these remarks. return to text 2 the labor market conditions indicators can be found on the kansas city fed ’ s website at www. kansascityfed. org / data - and - trends / labor - market - conditions - indicators. return to text 3 the fed staff ’ s index of common inflation expectations — which is now updated quarterly on the board ’ s website — is a relevant indicator that this goal is being met. see ahn and fulton ( 2020, 2021 ). return to text 4 fomc statements, including those issued since the december 2020 meeting, are available on the board ’ s website at www. federalreserve. gov / monetarypolicy / fomccalendars. htm. return to text 5 the most recent sep, released following the conclusion of the september 2021 fomc meeting, is available on the board ’ s website at www. federalreserve. gov / monetarypolicy / fomccalendars. htm. return to text 6 the revised statement on longer - run goals and monetary policy strategy, unanimously approved on august 27, 2020, is available on the board ’ s website at www. federalreserve. gov / monetarypolicy / review - of - monetarypolicy - strategy - tools - and - communications - statement - on - longer - run - goals - monetary - policy - strategy. htm. for a discussion of the elements that motivated the launch of the review and a summary of the key changes that were introduced, see clarida ( 2020, 2021 ) and powell ( 2020 ). return to text 7 for a theoretical analysis of the fiscal and monetary policy mix at the elb, see woodford and xie ( 2020 ). for studies of the government expenditure multiplier at the elb, see woodford ( 2011 ) ; christiano, eichenbaum, and rebelo ( 2011 ) ; and eggertsson ( 2011 ). return to text 3 / 3 bis central bankers'speeches | 0 |
offers speculators a one - way bet. experience has indeed shown that crawling peg regimes have often ended in crisis. the lessons of recent economic history should not be ignored. changes in the exchange rate should only be resorted to when everything else has failed. they should be a measure of last resort. besides, they only produce the desired results if they are accompanied by a comprehensive set of complementary policies implemented in a controlled environment. speculating about the exchange rate without producing conclusive proof that it is the root cause of the economy ’ s difficulties is, therefore, inappropriate and can have serious repercussions. the national interest requires all of us to concentrate rather on the more immediate, and well documented, reasons for the economy ’ s slow growth. i have elaborated on this aspect in a recent interview carried by another local newspaper. 1 / 1 | michael c bonello : the adoption of the euro by new member states challenges and vulnerabilities speech by mr michael c bonello, governor of the central bank of malta, at the suerf seminar organised by the central bank of malta, valletta, 4 may 2006. the references for the speech can be found on the central bank of malta ’ s website. * * * distinguished guests, ladies and gentlemen i would first like to welcome you all to this seminar which has been jointly organised by the european money and finance forum ( suerf ) and the central bank of malta. a special greeting goes to our foreign participants and guests, including some fifty members of suerf from twenty - three countries. the topic chosen for the seminar is particularly appropriate at a time when the ten nms have just entered their third year of eu membership and are increasingly focusing their attention on monetary union. in these introductory comments i shall, therefore, attempt to highlight some key issues which must be dealt with on the path towards the adoption of the euro. as our policy makers have become acutely aware during the past two years, this path is characterised by manifold challenges and vulnerabilities, not least those associated with real convergence, fiscal consolidation and capital account volatility. the orientation of economic policy in these areas will have to focus strongly, at the level of both national authorities and european institutions, on consistency, flexibility and credibility if we are to extract the maximum gains for all out of this next step in european integration. long run net benefits of euro adoption in order to place this topic in its proper context it is first important to recall that the adoption of the euro is expected to produce significant net benefits for the nms in the long run. a consistent body of literature points to the likelihood of substantial output growth arising out of increased external trade in countries forming currency unions. recent studies suggest trade gains of between 6 % and 15 % from the creation of the euro after five years of its existence. 1 on the basis of these estimates, euro adoption could raise gdp by at least 1 % to 2 % over 20 years in the nms. 2 these gains arise from the elimination of exchange rate volatility and risk, lower transaction costs, increased competition and price transparency, all of which lead to trade creation. lower risk premia on borrowing costs and the stronger frameworks for policy discipline prevailing within the euro area are other potential sources of economic growth. such considerations will no doubt have played a part in the recent | 0.5 |
happening. it is no longer a question of ‘ whether it will happen ’ but ‘ how much ’ and ‘ how fast ’. the trajectory of both physical and transition risks is highly uncertain. global carbon emissions have not peaked. at the same time, commitments towards achieving netzero have never been stronger, foreshadowing stronger policy actions and growing clean energy investments. it is within this wide spectrum of possible outcomes that investors will need to make portfolio allocation decisions. investment pivots for portfolio resilience against the backdrop of these four short - term to long - term uncertainties, the overall investment environment has deteriorated. return prospects are lower, and risks are higher. bright spots exist but they are more segmented and there is a need to seek them out more carefully. this environment presents an opportunity for private capital to shine. private equity ( pe ) and venture capital ( vc ) managers are more nimble than investors in public markets. they can focus on investment themes in differentiated market segments and high growth markets to add diversification and enhance portfolio resilience. let me suggest three pivots for private market investment strategies in the uncertain environment ahead. one, pivot from growth to sustained profitability ; two, pivot to south and southeast asia as key growth markets ; three, pivot to private credit as a new avenue for capital ; pe / vc managers are increasingly prioritising profitability over growth. more managers are rightly focused on selecting companies with strong balance sheets, low burn rates, and good prospects for profitability in an environment of lower growth, higher inflation and higher interest rates. as these shifts are being made to strengthen resilience, the industry can also position itself for more sustainable growth. compared to public equity investment managers, pe / vc managers typically have more control and influence over their portfolio companies, and greater access to information on their financial and sustainability performance. south and southeast asia are becoming one of the most important regions for private market investment opportunities. last year, growth in pe / vc investments in india outpaced most major economies, including china. india and asean together accounted for almost 30 % of the record us $ 296 billion of private equity investments that poured into the asia - pacific region last year. south and southeast asia are among the most dynamic economic regions in the world. growth in these two regions is driven by favourable demographics, rising affluence, young tech - savvy consumers, and rapid urbanisation. asean is likely to benefit | a “ soft landing ”. what are the signs of hope? first, output gaps in the major economies are relatively modest and bringing aggregate demand and supply into balance may not require much more policy tightening. second, the recent moderation in global food and energy prices will help to ease overall inflationary pressures and help to prevent inflation expectations from rising. in fact, long - term inflation expectations appear to be well anchored. third, as suggested by recent research by the bank for international settlements ( bis ) [ 1 ], soft landings are more likely when the number of job vacancies is high and when policy tightening is front - loaded. these conditions seem to be in place, at least in the us economy. the bad scenario is a longer and deeper recession – a “ hard landing ”. what are the risks of this happening? first, as pointed out by the bis, when private sector debt levels are high, monetary policy tightening can trigger feedback loops through financial institutions and markets that intensify the downturn. the bis estimates that private debt service ratios in the advanced economies could rise sharply to pre - global financial crisis levels if policy rates were to increase by the same extent as the us fed ’ s tightening in 20042006. second, labour supply may continue to remain weak. labour force participation and non - resident labour flows may not fully recover to pre - pandemic levels. this means continued labour market tightness and wage pressures, and therefore more aggressive policy tightening to stabilise inflation. third, fresh supply disruptions from the war in ukraine remain a key risk. a cessation of gas supplies to europe will likely have strong knock - on effects on global energy prices. where is inflation headed in the medium term? the medium - term inflation outlook is likely to be “ higher - for - longer ” compared to the past decade of low and benign inflation. global inflation averaged 3. 8 % per annum during the last two decades ( 2001 - 2020 ). what will inflation be like over the next decade, after the current bout of high inflation is tamed? a fair guess is that we are likely to see more recurrent bouts of higher price increases compared to the last two decades. there are four structural factors underpinning this prognosis : supply chain developments ; labour market dynamics ; energy transition ; climate change impacts. first, the ongoing reconfiguration of global supply chains is likely to mean higher costs and hence prices, at least over the medium term. | 1 |
create employment opportunities for unskilled workers with low productivity, the wage scale needs to be brought more into line with productivity. ii ladies and gentlemen, the current political discussion in germany demonstrates almost daily that fiscal and social policy - makers are faced with major tasks. if they are tackled resolutely, germany will be in a position to overcome its weak growth. in my opinion, there can be no question of further increasing the general government deficits in order to try to engineer a short - term cyclical stimulus. the real challenge lies in implementing wide - ranging structural reforms to create confidence in the sustainability of public finances, thereby supporting macroeconomic momentum. however, it is no easy task to implement reforms of this kind in germany. a broad consensus normally has to be reached between the individual government levels and also between the political parties. a full calendar of elections and the virtually continuous electioneering which they entail, as well as the considerable influence of various lobbies, mean that a great degree of inertia is inherent in the system. the result can be seen, for example, in the extremely complicated tax and social security system, which is characterised by innumerable piecemeal amendments and supplements. the system has become immensely complex and, as a result, is increasingly perceived as unjust. the epithet “ tax and subsidy jungle ” indicates the loss of clarity and transparency. this is another reason why the stalemate over reform which has built up over decades must now be broken. the dismantling of the dense web of regulations, which this requires, would also enable us to reduce bureaucracy. a leaner government sector could then be financed with lower taxes, which, in turn, would benefit all. in my opinion, considerable “ deconcentration ” of government activity is also desirable. this includes a stricter separation of government tasks together with increased responsibility of each tier of government for both expenditure and revenue. greater emphasis on competitive elements in the federal system and greater consideration of the different preferences in the individual regions could facilitate more efficient and more focused government activity. allow me now to explain in more detail the tasks i see in the three areas of budget consolidation, taxation and social security. the consolidation of public finances constitutes a key task for all government levels. the budget deficits of central, state and local government have risen dramatically in the past two years from €34 billion to €60 billion. the situation is expected to deteriorate considerably this year, with the deficits of general | using the riskweighted approach. and the future floor will limit the problems that have emerged with internal models. for banks, risk regulation becomes an even more complex optimisation problem. a bank ’ s management has to integrate its business model with the multiple regulatory requirements. this implies a major challenge for operational processes, for risk management and, last but not least, for profit generation. to sum up, the successful management and supervision of banks under multiple regulatory instruments is a key challenge for bankers and supervisors – and one, i might add, that needs to be combined with the challenge of rethinking a bank ’ s strategy and business model. i will come back to this point later. 6. challenge 2 : ending “ too big to fail ”. finalising the recovery and resolution framework and making it work in reality the second challenge opens up a previously untouched layer of the banking infrastructure for reconstruction. as my colleague andrew bailey from the bank of england has rightly criticised, the call for ever - higher capital provisions neglects that there are other ways to successfully protect financial stability. i refer to the rules that are designed to make banks resolvable without systemic disruption. such reconstruction is sometimes so delicate that we might think of it as open heart surgery on the patient bank. given the scale and sensitivity of this issue, the fact that the recovery and resolution regime has been globally agreed and will soon be implemented across europe is an outstanding achievement. it was created to solve the problem of “ too big to fail ” banks and to protect taxpayers from having to bear the costs of a failure. this resolution regime is a vital step forward in acting on one of the key lessons learned from the financial crisis : the much - discussed issue of moral hazard – a problem that arose because institutions that were previously “ too big to fail ” could not be held accountable for their actions. looking ahead, there won ’ t just be recovery and resolution plans for credit institutions : clearly defined liability cascades will be established, too, so as to ensure that the taxpayer really is last in line to foot the bill – that is to say, after shareholders and creditors have been bailed in, and then only in absolutely exceptional cases. but, to put this theoretical resolution model into practice, institutions will need to hold a certain amount of additional debt which, should the need arise, will be transformed into loss - absorbing capital. bis central bankers ’ speeches for global systemically important banks, this will be achieved by a standard for total | 0.5 |
’ s intention to practice fiscal prudence. ” “ third, … in theory, a central bank can implement monetary policy appropriately with a wide range of capital levels, including levels below zero. in practice, the danger is that it may lose credibility with the financial markets and public at large, and may then be unable to attain its objective if it has substantial losses and is seen as having insufficient capital. are fears with regard to possible central bank losses illusory? according to the bank for international settlements ( bis ), 43 out of 108 central banks reported losses for at least one year between 1984 and 2005. it is also argued by some that the government can always recapitalise a central bank when necessary. this is certainly true in principle but is practically difficult when the government itself suffers from fiscal pressures and maintains a relatively high debt - gdp ratio, as is the case in india. what is also important is the erosion of central bank independence both in reality and perhaps, even more importantly, in optics. … once again, better sense has prevailed and the government has not raided the rbi ’ s balance sheet. ” ( 3 ) regulatory scope : a final issue is one of regulatory scope, the most recent case in point being the recommendation to bypass the central bank ’ s powers over payment and settlement systems by appointing a separate payments regulator ( also covered by rakesh mohan in his series, ibid ). the reserve bank has published its dissent note against this recommendation on october 19, 2018. conclusion let me conclude with some notes of gratitude and dedication as well as some for further reflection. mr. malegam has been a long - time adviser, friend and well - wisher of the reserve bank of india, as well as its former board member. he is someone i personally admire for his intellect, clarity of thinking and sagacity. i thank you, mr. malegam, for inviting me to deliver the a d shroff memorial lecture for this year. the late ardashir darabshaw shroff served as india ’ s non - official delegate in 1944 at the united nations “ bretton woods conference ” on post - war financial and monetary arrangements. one of his primary concerns was to seek a permanent seat on the executive board of the international monetary fund and the world bank, which unfortunately did not materialise. to me, his most important contribution was the co - founding in 1954 of the free forum enterprise think tank which through open dialogue presented a counterpoint to the socialist tendencies | rupees, seeks it as surplus, 3 august, 2018. dalal, sucheta. ( 2000 ) a. d. shroff - titan of finance and free enterprise, penguin books india. eichengreen, barry ( 2018 ) investors have the power to tame erdogan and trump : politicians should think carefully before seeking to influence central banks, financial times, august 19, 2018. friedman, milton ( 1970 ) the counter - revolution in monetary theory, first wincott memorial lecture, transatlantic arts. fukuyama, francis ( 2011 ) the origins of political order : from pre - human times to the french revolution, farrar, straus and giroux. khatkhate, deena ( 2005 ) reserve bank of india : a study in the separation and attrition of powers, in public institutions in india : performance and design, edited by devesh kapur and pratap bhanu mehta, oxford university press. kydland, finn e. and edward c. prescott ( 1977 ) rules rather than discretion : the inconsistency of optimal plans, journal of political economy, 85 ( 3 ), 473 - 492. mohan, rakesh ( 2018 ) preserving the independence of the rbi ( october 3, 2018 ) ; responsibility fulfilled ( october 4, 2018 ) ; protect the rbi ’ s balance - sheet ( october 5, 2018 ), business standard. moser - boehm, paul. ( 2006 ) the relationship between the central bank and the government, bank for international settlements. patel, urjit r. ( 2018 ) banking regulatory powers should be ownership neutral, inaugural lecture – center for law & economics ; center for banking & financial laws, gujarat national law university. rangarajan, c. ( 1993 ) autonomy of central banks, tenth m. g. kutty memorial lecture at calcutta, september 17, 1993. reddy, y. v. ( 2001 ) autonomy of the central bank : changing contours in india, speech delivered at indian institute of management, indore. reddy, y. v. ( 2007 ) evolving role of the reserve bank of india : recent developments, speech delivered on the foundation day of the institute of development studies, jaipur, june 30, 2007. sargent, thomas j. ( 1982 ) the ends of four big inflations, in robert e. hall, ed., inflation : causes and effects, university of chicago press. silber, william ( 2012 | 1 |
for price stability were so high that we needed to act. have jens weidmann and sabine lautenschlager been all too relentless in their criticism? liikanen : no, it ’ s been professional. nobody can claim for not having been heard in the governing council. history will tell whether our timing was right. i hope the economy in the euro area will turn for the better. the germans admire the bundesbank. the blueprint in the creation of the ecb was meant to be the bundesbank – now there seems to be not much left of it. liikanen : i admire the bundesbank too. we all learned the value of monetary policy independence by studying the history of the bundesbank. that is what the ecb fights for. the spirit is there. when inflation rates were too high, i have been one of the first to support higher interest rates. but if interest rates are close to zero, and we have protracted low inflation and deflationary risks, that requires early action. you have to act while you can. bis central bankers ’ speeches the bundesbank thinks the ecb is going too far. liikanen : there is a new question for central bankers : if our inflation is too low should you react with the same vigor as when it is too high? should you? liikanen : i am a hawk in both directions, fighting inflation and preventing deflation. there are people who say zero inflation is fine. i think zero inflation makes the economy vulnerable without any buffers. the ecb objective of below but close to 2 percent in the medium term is safer. we haven ’ t had this kind of a problem before, in the postwar period. rather, inflation was the problem, and the bundesbank has a great record there. now we talk about the prospect of too low inflation for too long. we have to go far back in history to the 1930 ’ s to understand the dangers of deflation. you would not believe how often the history books are being quoted among central bankers in various discussions. but buying government bonds always has the odor of financing government deficits? don ’ t you agree? liikanen : no, not when we are doing it the way we decided to do it. we only buy bonds on the secondary market, we buy according to the capital keys of the eurosystem members, we buy maximum 25 percent of each issuance and maximum 33 percent of each issue | an increase in credit risks and non - performing loans. not least because many customers of banks haven ’ t even fully recovered from the pandemic. in times like these, we need a strong financial system to smooth the transmission of monetary policy and to prevent credit crunches. we should likewise avoid negative feedback loop effects between the real economy and the financial system. fortunately, the global and european regulatory, supervisory and institutional reforms undertaken after the financial crisis have made the financial system much more resilient than it used to be. the years of crises have highlighted the need to constantly evaluate the role and scope of monetary policy and its relation to macroprudential policy. in the ecb strategy review, we addressed the role of fiscal policy, macroprudential policy, financial stability and monetary and fiscal policy interactions. macroprudential policy has essentially become the second key pillar of central banking today, alongside monetary policy. when financial stability risks grow, macroprudential and microprudential policies are the first line of defence. most often, macroprudential policies and monetary policy are complementary. for instance, macroprudential policies that avoid a build - up of imbalances reduce the likelihood of future financial crises with negative effects on price stability. monetary policy may also affect financial stability risks. on the one hand, accommodative monetary policy can reduce credit risk by boosting economic activity and inflation dynamics. on the other hand, accommodative monetary policy may encourage the build - up of leverage or raise the volatility of asset prices. hence, monetary policy actions should always be proportional. similarly, monetary policy tightening can either decrease or increase risks concerning financial stability. since financial crises can threaten price stability, there is a clear case for the ecb to take financial stability considerations into account in its monetary policy deliberations. the ecb already takes into account the existing limitations of macroprudential policy in different phases of the financial cycle, the interactions between macroprudential policy and monetary policy, and possible side effects of monetary policy on financial stability. at the same time, it is important to avoid the misperception that monetary policy would be responsible for guaranteeing financial stability. the eurosystem follows a flexible approach in taking into account financial stability considerations. any monetary policy response to financial stability concerns will depend on the prevailing circumstances and will be guided by the implications for medium - term price stability. to this end, efforts to overhaul the ec | 0.5 |
njuguna ndung ’ u : brief overview of the kenyan banking sector remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the launch of the firstrand bank representative office in kenya, nairobi, 2 may 2012. * * * honourable njeru githae, minister for finance of the republic of kenya ; mr. sizwe nxasana, the chief executive officer, firstrand bank limited ; mr. lloyd muposhi, the chief representative officer, firstrand bank limited representative office in kenya ; distinguished guests ; ladies and gentlemen : it is my great pleasure to join you this evening for the official launch of the firstrand bank representative office in kenya. at the onset, i wish to acknowledge the presence of hon. njeru githae, the minister for finance of the republic of kenya. his presence gives this function the great significance it deserves. further, i wish to thank the chief executive officer, mr. sizwe nxasana, for inviting me to this auspicious occasion. we are glad that the firstrand bank ltd has a physical presence in kenya. ladies and gentlemen : i am delighted to note that the kenyan banking sector has continued to attract a lot of interest from international financial players. to this end, the number of licensed representative offices of top international banks has steadily grown from one ( 1 ) in 2008 to four ( 4 ) in 2011. moreover a fifth institution was granted an approval in principle on 5th march 2012 to establish a representative office in kenya. i therefore applaud this interest as it anchors well with kenya ’ s vision 2030 that will make kenya the premier regional financial services hub. for this reason, financial development and deepening will be strong outcomes. financial infrastructure in kenya can be considered complete. banks ; microfinance institutions ; currency centres ; credit reference bureaus ; agency banking ; risk - based supervision are indicators that the financial infrastructure in kenya is now in place : with banks rolling out branch networks across the region supported by initiatives like agency banking and an appropriate information sharing mechanism allows the financial sector to grow. then the other arms of pension, securities and insurance are moving in the same direction. ladies and gentlemen : it is worth noting that the kenyan banking sector has remained resilient despite the dynamic macro environment it 3 operates in. this is evidenced by the impressive profit before tax of ksh. 89. 3 billion ( usd1. 08 billion ) | for the year ended december 2011. this was a 20. 4 % increase from ksh. 74. 3 billion ( usd895 million ) returned in the same period in 2010. the number of banks is growing to create strong banks : mergers will be required, but that is a market outcome. ladies and gentlemen : i would like to assure the banking sector and other market players that the central bank will continue to support the market development by providing an enabling environment for growth in the banking sector. allow me to outline the thrust of the initiatives we shall continue to inculcate to ensure the sector operates efficiently, effectively and soundly. the initiatives will be anchored on three pillars : first, strengthening financial stability, supervisory and regulatory framework. in particular, cbk will adopt a consolidated supervision approach to take cognisance of the growing pan - african nature of the kenyan banking sector. bis central bankers ’ speeches second, enhancing financial integrity in the banking sector so as to ensure that the financial systems are safeguarded against money laundering and financing of terrorism. third, promoting financial inclusion for financial deepening and development in line with the aspirations under the kenyan vision 2030. distinguished guests, ladies and gentlemen : finally, allow me once again to applaud firstrand bank limited for establishing a physical presence in kenya through a representative office. as the central bank we are ready to support you as you develop your business not only in the kenyan market but also on the eastern african side. with these remarks, it is now my pleasure to welcome honourable njeru githae, minister for finance of the republic of kenya to make his remarks and officially launch the representative office of firstrand bank here in kenya. thank you. bis central bankers ’ speeches | 1 |
power, as large emerging markets have opened up to trade. but let ’ s remember that integrating new regions of the world into the international trade order is not a new phenomenon. since the early nineteenth century, various countries have emerged at different times as major forces on the international economic scene. after the second world war, the world trade order, which had broken down in the 1930s, had to be rebuilt. the war - torn countries of western europe were slowly reintegrated back into that order. through the 1950s and 1960s, japan re - emerged as a major economic power. then korea took off in the 1970s, followed by other so - called “ asian tigers ” during the 1980s and 1990s. now, it ’ s china ’ s turn. and india is not far behind. what makes the ascent of china and india different from that of other countries is their sheer size. together, these two countries represent close to 40 per cent of the world ’ s population. their combined economies, measured on the basis of purchasing - power parity ( which compares economies by equalizing the purchasing power of their currencies for a similar basket of goods and services ) add up to more than 85 per cent of the u. s. economy. in fact, by that measure, china ’ s economy is the second largest in the world, after that of the united states, and india ’ s is fourth, after japan ’ s. their influence is intensifying the competitive pressure facing producers in other countries, including canada. but it also means new, fast - growing sources of demand and new opportunities for us. let ’ s remember that some of the early emerging - market economies have become important markets for canadian goods and services. the integration of china and india into the world trade order is taking place as other emerging - market economies, such as mexico and brazil, continue to carve out their niches in world markets. now, i ’ d like to spend a few minutes discussing the adjustments that all open trading nations must make in this changing environment, and recall some of the lessons that past adjustments have taught us. benefits of international competition first, let me say a few more words about the competitive environment. not surprisingly, some perceive the growing competition from china and india as a threat. companies everywhere are under constant pressure to lower costs, and many of them are finding that china and india are attractive places to establish production facilities and service centres. the loss of certain jobs in the home countries of those companies | remains weak. so it is not really surprising that some are wondering if monetary policy has lost its power. low interest rates are actually doing a great deal to support the economy. to illustrate this point, if we were to raise interest rates to pre - crisis levels, say 3 to 4 per cent, there would be a significant contraction in the economy, and it is these contractionary forces that we are offsetting with low interest rates. but while monetary policy is still powerful, it is true that at the current setting, the impact of any interest rate reduction is less than it would be if rates were at historically normal levels. that is the case in a number of economies. in this environment, it is particularly important that all policies — monetary, fiscal and macroprudential — be working in a complementary way. this is why our agreement with the government is crucial. the government is making it clear that it also supports low, stable and predictable inflation, while leaving us the independence to pursue that goal as we see fit. it is a framework that has worked extraordinarily well for 25 years and, after looking at all the evidence, we could find no compelling reason to change it. with that, mr. chairman, carolyn and i would be happy to answer questions. 2 / 2 bis central bankers'speeches | 0.5 |
the convergence process : a productivity divide between countries and regions ; and household income inequality within countries. if growth and wealth are not spread equitably in european regions and their several communities of citizens, the union will be politically challenged and may even cease to be desired. the report goes one step further to show that, within countries, regional divides are widening. and world bank research found that the main reason for this is low economic potential : lagging regions have poorer institutions, a lower share of skilled workers, and limited access to markets. www. bportugal. pt interestingly, portugal had a contrasting experience in the recent past. an empirical study from universidade do minho shows that, between 2008 and 2015, inequality among the portuguese regions in terms of real gdp per capita actually decreased by 12 %. this is an encouraging performance compared to european peers, especially when compared to those that were implementing financial assistance programmes during that same period. on a less positive note, in 2016, the vast majority of portuguese regions were still below the european union average in terms of gdp per capita in purchasing power parity. this subnational regional analysis is important for two main reasons : • on the one hand, within - countries inequalities in advanced economies have been intensifying – they are the ultimate expression of global and supranational dynamics and are giving rise to growing social and political tension ; • on the other hand, policy instruments tailored to address inequality remain mostly in the hands of national authorities. this brings me to the second point i would like to cover. 2. coping effectively with inequality at the national level the world bank ’ s growing united report argues that the revival of the european convergence machine should be pursued by ensuring equal opportunities for people and firms. this is crucial advice to all policy authorities responsible for addressing inequality : the most effective and sustainable path to reducing inequality is not by redistributing income, but rather by ensuring everyone has comparable opportunities to take part in the generation of income. in other words, although redistribution remains an important complementary tool, the strongest instrument to promote social inclusion is inclusive growth. three institutions are particularly relevant for generating inclusive growth : education, the labour market and the business environment. www. bportugal. pt let me start with education. as already pointed out by many studies, universal access to highquality education ensures equal access to opportunities, and subsequently, equal access to income. but the education system needs to be adequately tailored | carlos da silva costa : the origins of the crisis and future prospects address by mr carlos da silva costa, governor of the bank of portugal, at the centro portugues de estudos, london, 16 june 2011. * * * introduction good evening ladies and gentlemen. it is a real pleasure to be here. four years after the beginning of the largest financial crisis since the great depression global financial stability has yet to be secured and many policy challenges remain to be addressed. indeed : global recovery is not proceeding at a balanced pace ; large global imbalances persist ; widespread public debt sustainability concerns have emerged ; and links between weak balance sheets of both governments and the banking sector have led to renewed tensions in financial markets, particularly affecting the euro area. against this background, my intention today is to review the origins of the crisis and discuss future prospects. 1. what has happened? the great moderation and regulatory failure the causes of the global financial crisis are now well understood. the mid - 1990s marked the start of a decade of sustained macroeconomic growth and low inflation – a period which has become known as “ the great moderation ”. globalisation has favored benign macroeconomic conditions, creating the illusion of a new paradigm in the economy. low consumer inflation eased the pressure on central banks – most notably the us fed – to tighten monetary policy and rein in credit growth. rather than translating into consumer price inflation, credit expansion, deriving from the ample liquidity and low interest rates, has led to fast rising asset prices. in particular, very low us interest rates have promoted the rapid expansion of consumer and mortgage credit, fuelling a widespread housing bubble. regulatory and supervisory failures have amplified these developments. indeed, relevant factors to explain the magnitude of the financial bubble and the subsequent disruptions include : wide - ranging financial de - regulation ; pro - cyclical elements in regulatory frameworks ; insufficient attention devoted to financial interconnectedness and macro - systemic and liquidity risks ; and, last but not least, lack of market transparency. bis central bankers ’ speeches the transition to the self - regulation paradigm and the move from the “ originate - to - hold ” to the “ originate - to - distribute ” business model have created perverse incentives : emphasis was put on expanding lending, rather than on the borrower ’ s ability to pay. accumulation of imbalances in the us economy has mirrored the build - up of large global imbalances. indeed, current account surpluses in emerging countries, most | 0.5 |
typically later and uncertain. no wonder jean - claude juncker, the former luxembourg prime minister, said at the height of the euro crisis, “ we all know what to do, we just don ’ t know how to get re - elected after we ’ ve done it! ” instead, industrial countries are engaged in ever more aggressive monetary policy moves. this imposes tremendous risks on emerging markets like ours, as we are faced with surges of capital inflows one day when investors go into “ risk - on ” mode only to see outflows the next as they switch risk off. at the same time, overcapacity in competitor countries threatens some of our key industries. what should india do? what should india do in this environment where the international investor is manic depressive in his behavior and all countries are striving for extra growth? importantly, when global growth is uncertain, we should make sure that our domestic environment promotes strong, sustainable, and stable growth. this requires a firm platform of macroeconomic stability. let me elaborate. the recent central budget emphasized fiscal prudence and adhered to past commitments, even while allocating resources towards capital spending and focusing on structural reforms, bis central bankers ’ speeches especially in agriculture. the subsequent fall in government bond yields suggests that market investors were calmed by the government ’ s overall message. fiscal consolidation, combined with lower commodity prices, has also led to a lower current account deficit. inflation is also clearly down since the days of double - digit cpi inflation not so long ago. the rbi ’ s inflation - focused monetary framework will be strengthened by the constitution of the monetary policy committee mooted in the finance bill. while the rbi governor will no longer be able to set monetary policy unilaterally, i believe shifting the decision to a committee is in the economy ’ s interest. not only will a committee aggregate multiple views better than an individual can, it will offer more continuity, and be less subject to undue pressure. i believe the monetary reforms of this government will stand out as one of its signal achievements. the last leg of the stabilization agenda is to clean up the stressed assets in the banking sector so that banks have the room to lend again. the problem in the past was that banks simply did not have enough powers to force promoters to pay, or to put stressed assets back on track. unlike more developed countries, we do not have a functioning bankruptcy system, though a bill is currently before parliament. therefore, we first | urjit r patel : agricultural debt waiver - efficacy and limitations opening remarks by dr urjit r patel, governor of the reserve bank of india, at the seminar on " agricultural debt waiver - efficacy and limitations ", mumbai, 31 august 2017. * * * ladies and gentlemen, on behalf of the reserve bank of india, i warmly welcome you and thank you for accepting our invitation to join us today in this seminar. 1. in the recent period, farm loan waivers have engaged intense attention among the farming community, policy makers, academics, analysts and researchers. on the one hand, there is a gamut of issues that have intensified the anguish of our farmers. in this context, farm loan waivers have brought forward the urgency of designing lasting solutions to the structural malaise that affects indian agriculture. on the other, there are concerns about the macroeconomic and financial implications, how long they will persist in impacting the economy, the possible distortions that they could confront public policies with, and the ultimate incidence of the financial burden. 2. let me, in a modest way, try to eclectically address both sides of the debate. india's agrarian economy is the source of around 15 percent of gdp, 11 per cent of our exports and provides livelihood to about half of india's population. the importance of the sector from a macroeconomic perspective is also reflected in a significant flow of bank credit to finance agricultural and allied activities relative to other sectors of the economy. outstanding bank advances to agriculture and allied activities have risen from about 13 per cent of gdp originating in agriculture and allied activities in 2000 - 01 to around 53 per cent in 2016 - 17 ( chart 1 ). in real terms ( adjusted for inflation measured by the gdp deflator ), the growth of bank credit to agriculture and allied activities accelerated from 2. 6 per cent in the 1990s to 15. 4 per cent during 2000 - 01 to 2016 - 17. 3. much of this credit flow has been propelled by the policy thrust on expanding credit to agriculture, especially through priority sector lending ( psl ) stipulations. public sector banks and private banks are required to lend 18 per cent of annual net bank credit ( anbc ) or credit 1 / 4 bis central bankers'speeches equivalent amounts of off - balance sheet exposures, whichever is higher, to agriculture. under this carve - out, 8 per cent is prescribed for small and marginal farmers. even foreign banks with 20 branches and above have to achieve | 0.5 |
big problem of large bills, the bank of amsterdam and the origins of central banking. ” federal reserve bank of atlanta working paper 2005 – 16 ). large - value payments between banks are settled continuously in norges bank. see also lerbak, marie n. ( 2013 ) : “ om pengemengden ” [ on the money supply ], norges bank staff memo no. 14. a characteristic of money as a means of payment is its anonymous nature. before the use of money became common among ordinary people, payments usually took place in connection with commercial transactions, whether for goods or services, via networks from which it might be difficult to extricate oneself. the farmer was usually indebted to a town merchant, which resulted in dependency and an obligation to deliver a portion of his produce. labourers might receive partial payment for their efforts in kind, or at large mills, in scrip that could only be used for purchases in the company store. the monetisation of the economy, based on secure monetary values, severed many of these ties of dependency. with money in their pockets, accepted as legal tender everywhere, the farmer or labourer was able to choose. this is also freedom. nor did the party receiving payment, e. g. the town merchants to know more about the customer than that he had money in his pocket and could pay for the goods. eitrheim, ø. and l. f. øksendal ( forthcoming ) : on secure monetary values and freedom. bis central bankers ’ speeches in norway, the aim of shielding the monetary system from the government was already embodied in the constitution of norway adopted on 17 may 1814. the drafters of the constitution formulated the following in article 75 ( c ) : “ it devolves upon the storting... to supervise the monetary affairs of the realm ”. this provision strongly censured the danish king ’ s monetary policy during wartime. in future, representatives appointed by citizens, not the crown, were to have final responsibility for the monetary system. 27 the king ’ s scope for taxation by means of inflation was curtailed. the storting, which was supposed to meet every third year, was not equipped to assume day - to - day responsibility for the monetary system. “ someone ” had to do this on behalf of the storting. that “ someone ” became norges bank, which was established in 1814. the storting realised that the objectives of monetary policy | jan f qvigstad : seminar on bayesian econometrics ( esobe ) – opening remarks opening remarks by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at the fourth annual meeting of the european seminar on bayesian econometrics ( esobe ), norges bank, oslo, 22 august 2013. * * * good morning everyone! it is a privilege for me to welcome you to this year ’ s european seminar on bayesian econometrics, which has attracted the interest of such a distinguished group of international scholars. i would like to extend a special welcome to those of you who have traveled far in order to be here today. as a practitioner of economic policy, i have experienced the use of economic models for almost half a century. back in the late 1970s, the norwegian ministry of finance used a large input - output model to calculate the effects of fiscal policy. somewhat contrary to common sense – even then – the model suggested that an increase in government spending would reduce inflation. to remedy this obvious mistake, we calibrated a new model – using our priors on critical parameters – to get results that were more consistent with our experience. the lesson i take away from this is the following : to be useful, models need to be consistent with the view of the world that we apply to policy. this consistency principle, in my view, lies at the heart of the progress made possible by bayesian modeling. advances in the last two decades have made bayesian econometrics a key tool for central banks. norges bank has benefited greatly from this, and two of our most important policy tools are results of such advances. nemo ( norwegian economy model ) is our estimated dsge model. the model is based on international research and model development over the past 20 years. we use it to produce forecasts and guide monetary policy analysis. this year, the hype is “ forward guidance ”. the fed does it, the bank of england does it, and the ecb also. we have done it since 2005. we publish forecasts of the key policy interest rate and nemo has been essential for the construction and, above all, explanation. when i describe norges bank ’ s policy decision at press conferences, i often refer to nemo equations in order to explain our decisions. our second key policy tool is our system of averaging models, sam. the short - term forecast from sam | 0.5 |
their causes and nature given their potential implications for future economic performance. a first significant finding of empirical analysis is that the dispersion of growth rates across the euro area can largely be explained by differences in trend output growth – reflecting structural factors such as the effects of reforms recently implemented – rather than different cyclical developments. to the extent that such differences in trend output growth are related to normal and positive catching - up processes in the economies of some countries or are the consequence of persistent idiosyncratic shocks, they are not a cause for concern per se and need not have longer - term detrimental effects on inflation, economic activity and job creation. on the contrary, they may be seen as a manifestation of a desirable equilibrating mechanism, contributing to sustainable convergence among euro area countries. a second salient feature of the divergence observed in economic performance across the euro area countries is its persistence. very often the same set of countries are characterised by developments in key economic variables that are systematically either above or below the euro area average. this may suggest that the underlying adjustment mechanisms in the euro area economies are not functioning as smoothly or swiftly as they should. if the persistence of higher than average inflation and stronger than average unit labour cost growth reflects structural rigidities in a country ’ s economy and the implementation of inappropriate policies, this is a matter of concern because of the likely adverse effects on competitiveness, longterm growth and employment creation. iii. iii necessary conditions and appropriate policies for the efficient functioning of monetary union to optimise the economic performance of monetary union, to fully reap its potential benefits in terms of economic dynamism and welfare, job creation and increased per capita income, it is crucial to improve the functioning of product, labour and financial markets. to this end, well - designed and effectively implemented structural reforms and sound fiscal policies are essential in all euro area countries. since monetary policy and the exchange rate are no longer available at the national level as policy instruments and a means of adjusting to specific shocks and the challenges posed by globalisation, other adjustment mechanisms become even more important. at the beginning of the 1990s the level of dispersion of inflation rates across the euro area countries was, on average, around 6 percentage points ( standard deviation measured in unweighted terms ). in 2006 inflation dispersion was only 0. 7 percentage point. this implies that dispersion in the euro area is currently broadly in line with inflation dispersion among the key 14 us metropolitan statistical | emerging economies. finally, i ’ ll explore some of the policy implications. 2. key concepts in global liquidity the landau report of the cgfs has pointed out that global liquidity has two separate, but interdependent, components. the first component can be labelled as “ official liquidity ”, and can be defined as “ the funding that is unconditionally available to settle claims through monetary authorities ” 2. official liquidity can be generated through various instruments. central banks can create it in their domestic currency through regular monetary operations or see borio and zhu, 2008, “ capital regulation, risk - taking and monetary policy : a missing link in the transmission mechanism? ”, bis wp no. 268. cgfs paper no 45 : “ global liquidity – concept, measurement and policy implications ”, basel, 2011. bis central bankers ’ speeches through emergency liquidity assistance. in addition, authorities can provide official liquidity in foreign currency by selling foreign exchange reserves and through swap lines between central banks. the other component is private ( or private sector ) liquidity. private liquidity is created to a large degree through cross - border operations of banks and other financial institutions, and increasingly within the shadow banking system. in normal times, private liquidity dominates official liquidity. but private liquidity is highly procyclical and highly endogenous to the conditions that prevail in the global financial system. the inherent endogeneity of private liquidity means that it can easily evaporate in times of financial stress. the pro - cyclicality is documented via the strong interaction of private liquidity and the global risk appetite of financial institutions. indeed, the global risk appetite is one of the main determinants of the multiplier that links levels of overall liquidity to levels of official liquidity. consequently, while only central banks can create official liquidity ( the imf can only mobilise it and reallocate it across countries ), for global liquidity cycles to emerge there is no need for new injections of official liquidity. what is needed is that private or official investors reallocate existing liquidity to other market segments. and when viewed in this light, the true driver of liquidity is the underlying set of factors that allows this portfolio reallocation to take place. let me explain. 3. relationship between liquidity and recent crises a glance at the history of global capital flows over the last 20 years suggests that the | 0.5 |
may 10, 2017 bank of japan outlook for economic activity and prices and monetary policy speech at a meeting held by the naigai josei chosa kai ( research institute of japan ) in tokyo haruhiko kuroda governor of the bank of japan ( english translation based on the japanese original ) introduction it is my great honor to have the opportunity to address you today at the naigai josei chosa kai. at the monetary policy meeting ( mpm ) held at the end of april, the bank formulated its projections for japan's economic activity and prices as well as risk factors through fiscal 2019, and released them in the outlook for economic activity and prices ( outlook report ). today, i would like to talk about the bank's outlook for japan's economic activity and prices as well as its thinking behind the conduct of monetary policy, while outlining the outlook report. i. current situation of japan's economic activity and its outlook stronger global economic growth momentum let me start by talking about global economic developments. in the first half of 2016, pessimistic views about the global economy prevailed amid turbulence in global financial markets against the background of the slowdown in emerging economies and uncertainties regarding those economies. with the benefit of hindsight, however, it appears that the global economy hit bottom in the first half of 2016. since mid - 2016, the global economy has continued to improve steadily, and its growth momentum now seems to be strengthening further. in particular, a global improvement in the manufacturing sector and trade activity has become clear. for example, an indicator of the overall business conditions in the manufacturing sector has continued on an improving trend in advanced economies as well as emerging and commodity - exporting economies ( chart 1 ). in addition, with regard to the world trade volume - - calculated by adding up imports in each country - - a pick - up in the trade volumes has been spreading globally, mainly for asia and the united states ( chart 2 ). the world trade volume had tended to grow at a slower pace than world economic growth for a long period since the global financial crisis, and such deceleration in growth of the world trade volume is called " slow trade. " as regards the background to this, structural factors such as a pause in the expansion of the global supply chain have been pointed out, in addition to a cyclical decline in demand. the recent global improvement in the manufacturing sector and trade activity draws attention as this may suggest a change is finally | lexparency. org / eu / tfeu / art _ 130. - 2in a well - functioning democracy, important public policy decisions should be made, in almost all cases, by the elected branches of government. grants of independence to agencies should be exceedingly rare, explicit, tightly circumscribed, and limited to those issues that clearly warrant protection from short - term political considerations. with independence comes the responsibility to provide the transparency that enables effective oversight by congress, which, in turn, supports the fed ’ s democratic legitimacy. at the fed, we treat this as an active, not passive, responsibility, and over the past several decades we have steadily broadened our efforts to provide meaningful transparency about the basis for, and consequences of, the decisions we make in service to the american public. we are tightly focused on achieving our statutory mandate and on providing useful and appropriate transparency. 3 sticking to our mandate it is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day. 4 taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence. we continue to strive to improve our transparency. over my five years as chair, i have pursued this aim by extending postmeeting press conferences to all fomc meetings and instituting ongoing personal dialogue with legislators. this continuous dialogue goes well beyond the regular testimony, established by statute, in which i report to the congressional committees that have oversight responsibilities regarding monetary policy. although the federal reserve has been independent since its inception in 1914, its dual mandate only became part of the law in 1977 ( see bernanke, 2010 ). the existence of the dual mandate reflects the fact that the federal reserve ’ s monetary policy independence corresponds to operational, or instrument, independence, rather than goal independence. see debelle and fischer ( 1994 ) for an analysis of the distinction between types of independence. - 3in the area of bank regulation, too, the fed has a degree of independence, as do the other federal bank regulators. independence in this area helps ensure that the public can be confident that our supervisory decisions are not influenced by political considerations. 5 today, some analysts ask whether incorporating into bank supervision the perceived risks associated with climate change is appropriate, wise, and consistent with our existing mandates. addressing climate change seems likely to require policies that would have significant distributional and other effects on companies, | 0 |
with which you may not be familiar, refers to the extent to which people expect prices to rise in the future. in japan, with deflation continuing for nearly 15 years, the expectation that prices will not rise had taken hold. breaking out of the status quo and achieving the price stability target of 2 percent in a stable manner means that firms ’ and households ’ behavior is based on the expectation of continued inflation of around 2 percent. in this regard, there have been signs of changes in corporate behavior, such as the fact that an increasing number of firms have raised base pay in the annual wage negotiations this spring, and that some firms have changed their price - setting strategy from putting priority on low prices to putting priority on quality and reflecting increases in costs in sales prices. in fact, according to surveys of households, firms, and economists, as well as market indicators, inflation expectations appear to be rising on the whole ( chart 6 ). the qqe policy introduced in april last year aims to raise trend inflation by bringing about an improvement in the output gap and encouraging a rise in inflation expectations with largescale asset purchases and a clear commitment. the policy has been having its intended effects. under the bank ’ s large - scale purchases of government bonds, long - term interest rates have been stable. at the same time, inflation expectations have been rising on the whole, so that real interest rates – that is, nominal long - term interest rates minus the expected rate of inflation – have declined, thereby stimulating private demand. as a result, the output gap has improved and inflation has accelerated. looking ahead, with this mechanism at work, the year - on - year rate of increase in the cpi and inflation expectations are expected to increase. as i mentioned before, japan ’ s economy is likely to achieve an inflation rate of about 2 percent in or around fiscal 2015, and thereafter gradually shift to a growth path that sustains such inflation in a stable manner. therefore, the conquest of deflation in japan is now in sight. we are, however, only halfway toward achieving the price stability target of 2 percent. the bank will therefore continue with qqe, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. but, as i have consistently said, if the outlook changes due to the manifestation of some risk factors, the bank will make adjustments without hesitation if it is judged necessary for achieving the price stability target. ii. | judging whether the target is maintained in a stable manner. there are no quantitative criteria or specific indicators to assess such conditions. whether the target is maintained in a stable manner should be judged comprehensively by closely monitoring developments in a wide range of price - related indicators and sufficiently examining and assessing the current situation and the outlook for economic activity and prices. iii. toward the sustainable growth of japan ’ s economy thus far, i have talked about the bank ’ s monetary policy. japan ’ s economy has been following a path toward overcoming deflation. in this situation, a trend in which the output gap is positive ( representing excess demand ) – has begun to take root, albeit with some fluctuations due to the consumption tax hike. this trend is seen in the tightening of labor supply and demand conditions. given that slack in the economy has shrunk, as widely recognized, it has become increasingly necessary to strengthen supply capacity in order for japan ’ s economy to raise its growth potential in the medium to long term. an economy ’ s growth potential, from a relatively longer - term perspective, depends on the growth in capital stock and labor input, as well as improvements in productivity through innovation and the like. this indicates that it is private economic entities that play the most important role in efforts to strengthen growth potential and pursue the growth strategy. at the same time, to strengthen growth potential, it is essential to build an environment that enables private economic entities to unleash their creativity and “ animal spirits ” by ( 1 ) increasing the labor participation of women and the elderly, ( 2 ) eliminating restrictions to market entry, and ( 3 ) carrying out regulatory and institutional reforms. in promoting such an environment from a macroeconomic perspective, the government plays a critical role. in june 2014, the cabinet decided the new japan revitalization strategy and basic policies, which aim to revitalize japan ’ s economy. i strongly expect that efforts based on these measures will proceed steadily. bis central bankers ’ speeches | 0.5 |
all these were based on the principle of reciprocal cooperation with mutual benefits, without any one of the investment contracts forced to be signed by the chinese government. strict observance of the contract has always been advocated by europe and the united states, and is gradually appreciated by the chinese enterprises and residents. but now all of a sudden, the us alleged that chinese laws and economic practices impose “ forced technology transfer ”, “ forced ipr transfer ” and even used the word “ theft ”. that was not only a challenge to the basic facts, but also a humiliation to the chinese people. it is a common practice for any rising economy to learn the knowledge and experiences of developed countries. that is why there emerged the so - called “ catching up and imitation ” concept in development economics. over more than ten centuries in history, china ’ s science and technology was second to none in the world. our intangible assets have made exceptional contributions to the development of human civilization. the well - known “ four great inventions ” of ancient china have contributed to the emergence of capitalism in europe. without gunpowder, compass, and the printing technology, there would be no modern industrial economy. great men in history such as francis bacon and karl marx have all spoke highly of that. that being said, it seems in retrospect that our ancestors have their own regrets. though they have invented so many things, they only failed to invent “ ipr ”. looking back into history, it should be noted that imitation and even plagiarism of technology among countries were very common during the industrial age of europe and the us. some companies even tried to acquire advanced technology through dishonest and unprincipled means. this is a specific historical time phase which can not be bypassed. the developed countries have all gone through the process of standardizing intellectual property protection. but it is by building upon the work of their predecessors that each of the country achieved new breakthroughs in and made new contributions to technological advancement. thus, we believe that no country, including the us, can realize modernization by theft. but rather, modernization can only be achieved through hard work and strenuous efforts of their own peoples. it was originated from the western countries to trade technology for market or to trade market for technology. based on the principle of fairness, technology trading is a fundamental market economy activity commonly accepted. over the past years, developed countries, including 3 / 9 bis central bankers'speeches european countries and the us, | . over recent years, the renminbi exchange rate against a basket of currencies has kept stable in a global context. the chinese government has made great efforts to maintain a balance between the flexibility and stability of renminbi exchange rate, which was widely recognized by the international community. since the early 1990s, the us has constantly threatened china with the allegation of “ exchange rate manipulation ”. by definition of the us treasury department, three quantitative criteria need to be fulfilled concurrently to become a currency manipulator, including : 1 ) an annual trade surplus of over $ 20 billion with the us, 2 ) a current account surplus accounting for 3 percent of gdp, and 3 ) the value of foreign exchange purchased for exchange rate interference purpose exceeding 2 percent of gdp. in 2018, china ’ s current account surplus was only 0. 37 percent of its gdp, and there was no large amount of foreign exchange purchase, neither did china gain competitive advantage of trade through currency depreciation. so the us government can hardly label china a currency manipulator. over the past decade, all dramatic renminbi depreciations were triggered by external factors. the most recent one in may this year, when offshore chinese yuan dropped over 3 percent against the dollar, was totally caused by the escalated trade friction by the us government. over the years, developed countries had always called for greater flexibility of renminbi exchange rate. 4 / 9 bis central bankers'speeches however, once the renminbi exchange rate formation mechanism became more market - oriented and more elastic, some countries soon adopt an attitude of “ lord ye ’ s love of dragons ”, the actual fear behind professed love, with unfounded suspicion and accusation towards china, which is absolutely ridiculous. as is well - known, despite the recent fx market fluctuations, so far there is no panic among chinese firms and residents. more and more people have realized that it is not realistic to make money from currency speculations. nor is it safe to transfer financial assets overseas. in sophisticated markets, nearly no companies or individuals live on investment returns of foreign currency speculation. even the so - called mrs watanabe in japan actually turned out to be an overstated investment story. it is normal to have temporary fluctuations on renminbi exchange rate. but for the long run, given china ’ s economic fundamentals, continued renminbi depreciation is unlikely. with huge market size and growth potential, china remains to be the | 1 |
masaaki shirakawa : the role of central banks in the new financial environment remarks by mr masaaki shirakawa, governor of the bank of japan, at the international monetary conference, kyoto, 9 june 2009. * * * introduction let me first thank the hosts for inviting me to the international monetary conference. the imc has a very long history of providing not only its private sector members, but also the public sector with an excellent opportunity to frankly discuss a broad range of issues regarding financial institutions, financial markets and the financial system. we are unfortunately still in the midst of an unprecedented financial crisis, although hopefully the worst is behind us. the topic the organizers have given to us central bankers, " the role of central banks in the new financial environment ", is clearly a very timely one, something which is on our minds everyday. the fundamental role of a central bank remains unchanged, but its functions have gradually changed with the passing of time. in the case of the bank of japan, on - site examinations of financial institutions were introduced in 1928 based on the experience of the financial crisis after world war i. the bank of japan act was revised in 1998 to strengthen the independence of monetary policy. this reflects, among others, the lessons learned regarding the conduct of monetary policy during the bubble period of the latter half of the 1980s. at that time, our on - site bank examination was also given a clear legal backing. how will the role of the central banks around the world change in light of the current global financial crisis? in considering this issue, i would like to first pose two questions to the top executives that are here with us today. first, in the years heading up to the crisis, especially the five year period between 2003 and 2007, did you recognize that risks were building up in your institution and / or in the financial system? second - this is a question about the now famous quote regarding dancing with the music - if we were in the future to experience a similar benign economic period of high growth, low inflation, low interest rates and low market volatility, would you choose a different business strategy? if you were to choose a different strategy, what would be your expectations on the path that senior executives of your rival institutions would choose? while you are responsible for making your bank both profitable and resilient to shocks, the role of the central banks is to assure that your endeavors lead to a sound financial system conducive to economic prosperity. what we central | banks need to understand is that the behavior of market participants will be influenced by human nature and competitive pressures in the markets. without trying to paint a complete picture, let me raise a number of issues with respect to the role of central banks which i believe are important in the new financial environment. role of central banks assessing risks on a system - wide basis first, central banks need to assess risks on a system - wide basis taking into consideration the linkages between the real economy and financial markets as well as among financial institutions. such assessment will be the basis for policy actions regarding financial system stability. of course, this is a typical example of something that is easier said than done. before the current crisis, central banks issued warnings regarding the build - up of risks through financial system reports. however, issuing warnings are not so difficult. senior bank executives and other market participants themselves, to some extent, recognize such risks. if we seriously wish to reduce such risks, remedial action is required. but in order to go beyond analysis and take remedial actions, a proper assessment, a strong will, together with a robust legal framework which enables effective action, are all necessary. in any event, without a system - wide assessment, no actions are possible. i believe central banks are in a natural position to take up such an assessment role. as the entity responsible for monetary policy, central banks focus on macro economic conditions, have close contacts with financial market participants, and our institutional culture emphasizes the importance of research. reconsidering the conduct of monetary policy second, we need to reconsider the conduct of monetary policy. when one looks at market participants and senior bank management collectively, their incentives are also influenced by macro economic and financial conditions. the most typical example would be the search for yield witnessed during the so - called great moderation. this incentive issue evolves into a difficult challenge for monetary policy when asset bubbles emerge. the problem is often debated simply as whether monetary policy should lean against the wind or excessive asset price increases. however, i believe that such a formulation of the issue confuses the discussions on monetary policy. no central banker believes that bubbles can or should be prevented just through monetary policy. a more practical formulation of the issue for central banks would be, " how should monetary policy be conducted in an environment where asset prices are rising, credit and leverage are increasing and the economy is growing, strongly signaling a need for policy tightening, while only general prices remain stable? " in such | 1 |
efficient manner. iv. concluding remarks over the past ten years, the euro has established itself as a stable and credible currency and the single european monetary policy has preserved price stability, and thus the purchasing power of the euro, in the euro area. in addition, the euro has played an important role in insulating euro countries from other adverse effects that the financial crisis could have had on their economies, via the foreign exchange markets and other channels, if the euro had not existed. and some member states that have not yet adopted the euro as their currency have indeed experienced such effects. therefore, the euro and the liquidity management of the ecb have also played an important role in safeguarding financial stability in the euro area. with these thoughts on some lessons that could be learnt from our experience with the euro, from the ongoing financial crisis and from the contribution of the ecb and central banks to the preservation of financial stability, i wish us all a fruitful and enriching conference. thank you for your attention. | both an analytic and a policy point of view – other important challenges confronting the euro area, in particular those stemming from its future enlargement and its evolution towards an optimal currency area. iii. the ongoing financial crisis : lessons and challenges for central banks over the past ten years, the ecb has performed its tasks in an often difficult economic and financial environment that was adversely affected by sizeable and persistent shocks ; and it has had to face some extraordinary challenges. the first was the unique, historically unprecedented challenge of conducting the single monetary policy successfully so as to preserve price stability in a newly established monetary union of politically independent, though economically well - integrated, member countries. the other major and exceptional challenge is the one we are still facing today : the preservation of price stability and the safeguarding of financial stability in the euro area during the worst financial crisis in decades. the ongoing financial crisis which is, in many respects, unprecedented in intensity, scope and complexity has highlighted the role of the ecb in safeguarding financial stability. the events of the past year allow us to draw a number of conclusions concerning the responsibilities and actions of central banks in general, and of the ecb in particular, in contributing to preserving price stability through both crisis management and crisis prevention. and they have also shown how the conduct of a monetary policy aimed at the preservation of price stability and the performance of tasks aimed at safeguarding financial stability require the appropriate use of available policy instruments. let me briefly elaborate on a number of pertinent lessons learnt and on the challenges to be faced. it is by now widely accepted that a main underlying cause of the current global financial crisis was the same one that had fuelled similar episodes in earlier times : the excessive growth of credit globally over a long period of time and the associated high leverage in the financial system and in the non - financial sectors of some countries. central banks, through their monitoring and analysis of monetary and credit developments, can provide early warning signals about the building - up of financial imbalances that may lead to excesses in the financial markets – through various channels involving an under - pricing of risk and an increase in market liquidity that can fuel asset price bubbles which will eventually be followed by market corrections. and such corrections will be the more severe, the higher the degree of leverage and the more prolonged the period of excessive credit growth. there is substantial empirical evidence across countries and over different periods in support of this proposition. the ecb ’ s monetary policy strategy, which | 1 |
and the international community is keenly aware of this need. * * * in my remarks today, i will focus on global governance and in particular on the lessons that can be drawn from the extraordinary events of the past two years. i will first elaborate on why we need a set of rules, institutions and international relations that we call “ global governance ”. second, i will analyse how, in hindsight, the existing global governance has see b. eichengreen and k. h. o ’ rourke ’ s three columns on voxeu ( including the one entitled “ what do the new data tell us? ” of 8 march 2010, http : / / www. voxeu. org / index. php? q = node / 3421 ). fared during the global financial crisis. finally, i will deal with the evolution of the system as a response to the crisis, and in particular i will discuss the rise of new key players in the world economy such as the g20 and the financial stability board. being in italy, i cannot resist mentioning the teachings of nicolo machiavelli. he has become known worldwide for his pessimistic and cynical attitude towards power, but in fact one of his main messages was that freedom is not possible without rules, i. e. without good institutions. for example, in his discorsi he admires the roman republic where rules and the respect for law allowed men to be free – in contrast with what he saw with his contemporaries, who were corrupt and unable to stick to rules and therefore needed a tyrant. a famous sentence of his is “ un principe che puo fare cio ch ’ ei vuole e pazzo ; un popolo che puo fare cio che vuole non e savio ”. 2 likewise, economic freedom is not possible without an adequate set of rules and this is valid both within countries as well as in the international realm. 1. why do we need global economic governance? let me begin by explaining what we mean by “ global economic governance ” and why we need it. by global economic governance we mean, at least in the economic sphere, the set of supra - national institutions and laws as well as the international relations between countries that have an effect on cross - border economic and financial transactions. indeed, no market, even the market in the back street, can survive without an institutional infrastructure, i. e. a set of rules and this is particularly | important for open trading nations like ours : sustainable fiscal policies, a monetary policy based on inflation targeting, a flexible exchange rate, and flexible markets that can respond to changing economic circumstances. by following these prescriptions, both australia and canada should be well placed to cope with whatever developments come about in the global economy. but we must also work hard to help shape that global economy. we need to do our utmost to ensure continued free trade in goods and services and to resist protectionism. and we must work together and with other countries to make the international financial system as efficient and effective as possible. an important part of that effort must be to modernize the imf. with a stronger international system and solid domestic policies, both australians and canadians can look forward to continued strong economic growth in the years ahead. | 0 |
in the near future, and some analysts already estimate significant odds for an imminent or even ongoing recession in those economies. although a global economic contraction is not the baseline scenario for most forecasters, the continuation of downward revisions to growth projections for advanced countries would definitively affect the economic prospects for the rest of the world. for an analysis of the current deviation of u. s. output from its secular trend and a comparison with that of the great depression, see robert e. lucas, jr., “ the u. s. recession of 2007 – 201? ”, milliman lecture, university of washington, may 19, 2011. bis central bankers ’ speeches possible explanations what lies behind the disappointing upturn in industrialized economies? a striking feature of the weak and deteriorating nature of the recovery in these countries is that it has occurred in spite of unprecedented expansionary fiscal and monetary policy stances. large public deficits have resulted from automatic stabilizer mechanisms as well as from special tax relief programs and higher government expenditures, including bailouts of troubled financial and non - financial institutions, aimed at stabilizing financial markets and promoting aggregate spending. in addition, monetary policy has remained extraordinarily accommodative during recent years. central banks from the main industrialized countries have combined remarkably low policy interest rates with an increase and change in the composition of their balance sheets. the leader in expansionary monetary policy has been the u. s. federal reserve, which has maintained the federal funds rate close to zero since the end of 2008, and has also implemented large purchases of government bonds and private financial assets funded through higher voluntary bank deposits during the last four years. among other objectives, through the purchase of financial assets, the fed sought to meet the extremely high liquidity demand shown by the public during the financial crisis and, more recently, to lower long - term interest rates in order to stimulate private financing and investment. other monetary authorities have implemented similar practices. the european central bank has participated actively in the markets in an attempt to stabilize the sovereign bond prices of countries experiencing fiscal difficulties. while the extraordinary actions undertaken by the fed as a lender of last resort during 2008 appear to have contributed effectively to the normalization of non - bank financial markets, the impact of accommodation by this and other central banks on aggregate demand has been less clear. questions arise in light of the ambiguous effects of monetary policy on long - term interest rates, the still weak credit channels of monetary policy transmission, and poor output performance and | balanced approach to policy rest on a number of merits. among these, it is worth noting the potential to exploit the synergies of multiple policies acting simultaneously. 3 in addition, reliance on a multi - pronged strategy reduces the likelihood of an over - burden of policy instruments when these are used in isolation, 4 while the possibly adverse effects on the overall performance of the economy arising from the implementation of some policies may be compensated by action in other fronts. see gaspar, vitor, maurice obstfeld and ratna sahay ( 2016 ) : “ macroeconomic management when policy space is constrained : a comprehensive, consistent, and coordinated approach to economic policy ”, imf staff discussion note no. 16 / 09, september. see davig, troy and refet s. gurkaynak ( 2015 ) : “ is optimal monetary policy always optimal? ”, federal reserve bank of kansas city research working paper no. 15 - 05, july. seen from the perspective of monetary policy, which are the key areas for coordination that deserve to be underlined? a first one is exchange rate policy. in theory, flexible rate regimes allow countries the implementation of a fully autonomous monetary policy. in addition, they are widely regarded as an efficient mechanism for the adjustment of the economy to external shocks. nonetheless, as volatile flows of capital across borders have led to acute swings in exchange rates, doubts have emerged as to the degree to which such frameworks isolate economies from developments abroad. in particular, sharp fluctuations of the exchange rate can have significant effects on the real economy, domestic prices and the financial sector, especially in emes. of course, this does not imply that floating rates should be discarded in favor of alternative regimes. instead, the issue is how to increase the efficiency of floating exchange rates during episodes of disruptive volatility. a frequently noted option is the temporary use of complementary intervention mechanisms to support the adequate functioning of currency markets. 5 fiscal policy is a second crucial area of coordination for monetary policy. the erosion of space following the global financial crisis, in combination with the end of the commodities boom that preceded it, has to a large extent constrained the role of fiscal policy in many emerging market economies. in light of the extant evidence, both theoretical and empirical, suggesting the pernicious effects that weak fiscal positions can have on the overall performance of the economy, for instance through an adverse impact on see blanchard, olivier, giovanni dell'ariccia and paolo mauro ( 2013 | 0.5 |
properly demonstrate commitment to lowering inflation. in spite of the above - mentioned quite ambitious target, by september 2001, twelve - month cpix inflation had decelerated to 5, 8 % per cent and many analysts thought that the 2002 target would be met fairly easily. to say the least, circumstances changed! the exchange rate depreciation of some 37 per cent in 2001 - that is another interesting story! - mostly in the closing stages of the year, was significantly responsible for pushing up cpix inflation up to a peak of 11, 3 % per cent in november 2002. on 12 september 2002, the reserve bank's monetary policy committee had announced the fourth and final 100 basis points increase for the year of the bank's repurchase rate. as you may well imagine, i was not everyone's most - favourite governor! fortunately, inflationary pressures have abated, partly related to the rand's appreciation since december 2001 and as reflected in the year - on - year change in cpix falling to 6, 6 per cent in july 2003, and the mpc has seen fit to lower the repo rate. on 14 august 2003, following the most recent meeting of the mpc, the repo rate was further reduced by 100bp to 11 per cent effective from 15 august 2003. ( should there be anyone amongst you interested in the factors weighing on this decision, i refer you to the statement of the monetary policy committee which is on the reserve bank website ). whilst a governor is certainly more popular during a declining interest - rate cycle, rest assured there were critics who felt that the bank had not been bold enough and should have, at least, reduced the repo rate by 150 basis points! technically, what the reserve bank is doing could more accurately be described as inflation - forecast targeting. given the roughly 12 to 24 - month lag between interest - rate changes and their having their full impact felt on inflation, the repurchase rate is set at a level judged to be consistent with bringing inflation to within the target range within an 12 - to 24 - month time horizon. i am referring to the intricacies of the transmission mechanism, the clear understanding of which represents the single biggest challenge for any inflation - targeting central bank. inflation targets of 3 to 6 per cent for 2004 and 2005 have been set by the government, and guide current policy formulation. given the lags, current policy changes clearly have virtually no impact on the 2003 inflation outcome ; the focus | lesetja kganyago : south africa ’ s september 2014 financial stability review introductory remarks by mr lesetja kganyago, deputy governor of the south african reserve bank, at the launch of the september 2014 financial stability review, johannesburg branch of the south african reserve bank, johannesburg, 29 october 2014. * * * members of the press, guests and colleagues, welcome to the release of the september 2014 edition of the financial stability review. the financial stability review has been published semi - annually since 2004 which makes this year its tenth anniversary. in addition to its primary objective of price stability, the bank also oversees and maintains financial stability. in pursuit of this mandate and to contain systemic risk, the bank continually assesses the stability and efficiency of the key components of the financial system and formulates and reviews policies for intervention and crisis resolution. through the publication of its financial stability review the bank endeavours to communicate its assessment of potential risks to financial system stability. the bank also strives to enhance the understanding of, and encourage informed debate on these complex and challenging matters related to financial stability. south africa is in the process of reforming its financial - sector regulatory architecture by implementing a twin peaks model of financial regulation. under this approach, supervisory roles will be streamlined between the bank and the financial services board. the financial sector regulation bill, 2013, gives primary responsibility to the bank for promoting financial stability. in terms of this bill, a newly created prudential authority within the bank will be responsible for the prudential supervision of banks, insurers, financial conglomerates and financial market infrastructures. the financial services board, in future to be known as the financial conduct authority, will be responsible for consumer protection through its marketconduct regulation and supervision. the bank transformed its financial stability unit into a fully - fledged financial stability department with effect from 1 april 2014, and elevated the status of the financial stability committee which has been in existence since 2000 to include deployment of macro prudential tools. the financial stability review is currently being revamped in line with the explicit financial stability mandate of the bank and global best practice. the revamped publication will report in more detail on financial stability policy decisions once the new architecture is in place. the financial stability department is in the process of developing a toolkit of macro - prudential policy instruments in addition to further refining its monitoring framework for financial stability, developing a top - down stress testing model and preparing policy proposals for the development of a resolution | 0.5 |
tourist numbers over the same period in 2003. the industry has set itself a target of becoming a $ 1 billion industry in 2007. but there are signs that the scarcity of hotel rooms is already imposing a glass ceiling on future growth. it is therefore encouraging to see several hotel projects under way like the momi bay marriott, the denarau sofitel and the hilton. i think that we will need a lot more than these to expand the immense potential of our tourism industry. new industries over the years, we have seen the emergence of a number of industries, which have the potential to contribute significantly to our economy. mineral water is one such emerging industry. it has climbed to be the 7th gross foreign exchange earner for fiji in a very short period of time. its exponential growth is a result of aggressive marketing, innovation and vision in a very competitive global market. it is a classical model of what our industries can achieve globally. recently, natural waters of fiji has made additional investment to triple production to meet global demand. in summary, while growth up to now has been broad based, there are capacity constraints are starting to emerge and there are serious threats to some sectors that need addressing. medium term outlook what about the medium term outlook? in my view, this is where thediscussion becomes very interesting. we are growing at the back of domestic demand supported by a policy environment of higher government deficits and increasing borrowing from financial institutions. this policy environment was no accident. it was a deliberate package put in place to help us recover quickly after 2000. during this time, the government increased its budget deficits to above 5 percent of gdp. we, in the reserve bank, kept monetary policy very relaxed and allowed interest rates to drop to historical lows. this has led to buoyant credit demand. this expansionary policy package has worked extremely well and we have seen its fruits up to now. investment is growing, incomes are rising and employment is increasing. this consumption driven growth is not a bad thing and many large countries do use this channel to expand their economies. but on its own, it does not last in the long run for an economy like fiji. fiji is a small market relying on a few commodities for exports and heavily dependent on imports. to sustain our current economic performance under such an economic set - up, we must try to pay for our local spending out of foreign earnings. that means that we must export more. unfortunately, while tourism is booming, our exports of | for short - term economic gains. as global experiences overwhelmingly show, the price that we will ultimately pay will be extremely painful. we can grow sustainably if we let growth be export - driven. i have suggested that we embark on a national export drive. like what the tourism industry has done, we can set targets for our traditional exports and even new exports. we can then mobilise the necessary resources and efforts to reach those targets. this cannot be the drive of government only. to be successful, it has to be a collective drive of the government, the private sector, industry organisations and even trade unions. we in the reserve bank are examining several ways that we could help promote exports. first, the forward exchange cover is still available for imports associated with exports, not only of goods, but also services. second, we are re - assessing the credit export facility that we offer through the commercial banks to see if it can be more attractive to small exporters. third, we are studying the provisioning of export credit guarantee with the help of the adb. lastly, we intend to convene a conference of interested groups on exports in the new year following on from our successful inaugural symposium two months ago. there are some emerging areas of exports that we need to harness. anaconda 2, shot in fiji and released recently, is, i hope, a leading wedge of what fiji can offer in the audio - visual industry. i believe that there is potential for growth in the information and technology industry. we have seen an increase in back - office services. we are fortunate to have invested in the southern cross submarine cable, which offers more than enough capacity to cater for the growth in the it related initiatives. before leaving this issue, i just want to emphasise the important role of fiscal policy in creating the enabling environment for growth and stability. fiscal policy has a greater and faster impact on the economy, and the role of government in promoting sustainable economic development is extremely vital. government has reduced the fiscal deficit to 3. 5 percent of gdp this year and further reduction is planned in the medium term. such a fiscal stance will strongly support the long - term sustainability of the economy and keep debt at a moderate level. raising the level of growth maintaining macroeconomic stability does not necessarily mean that we should be contented with lower levels of growth. we can and we must raise the long - term potential growth rate of the economy while maintaining stability. the only way to raise the potential of the | 1 |
of banks. hitherto, there were only three commercial banks operating in botswana. in 1991, two additional commercial banks were licensed, namely, anz grindlays botswana limited and zimbank botswana limited. a year later, in 1992, the bank of botswana granted unionbank botswana limited, a subsidiary of standard bank of south africa, a banking licence, making it the sixth licensed commercial bank in the country. shortly thereafter, in the same year, unionbank merged with anz grindlays, each with an initial capital of p10 million, to form the bank we know today as stanbic bank botswana limited. director of ceremonies, today, 25 years on, stanbic bank is ranked 4th among the 10 commercial banks operating in the country, in terms of staffing, branch network, capital and deposit liabilities. from a modest beginning, with only 24 employees in 1993, stanbic bank currently employs over 600 staff members across 10 branches, and serves in excess of 80 000 retail and business customers. the bank asset base has grown significantly, from p138 million in 1993 to p12 billion as at december 31, 2016. during the same period, the bank has also consistently made profits ; with its net income after tax increasing from p2. 2 million in 1993 to p192 million in 2016. at present, stanbic bank is regarded as one of the systemically important domestic banks operating in botswana, with a 15 percent market share of total banking industry assets and deposits. distinguished guests, stanbic bank offers a wide range of traditional and innovative corporate, retail and investment products and services including, more recently, like some of its peers, the introduction of on - line and mobile banking services. i have no doubt that these technology - based platforms, products and services will enable stanbic bank to continue to be a significant player in the industry and broader economy, as well as adapt to the emergence of financial technology ( fintech ) operators for the benefit of customers and the economy at large. somewhat uniquely, while embracing technology - based banking, stanbic bank continues to reinforce its position in corporate and investment banking. amongst other awards in the recent past, it was named the best investment bank in botswana in the 2016 europe, middle east and africa ( emea ) finance african banking awards. congratulations, once again. distinguished ladies and gentlemen, another highlight is the evolution of leadership and governance at stanbic bank. notably, the chief executive position was localised in 2008 with the | other financial resources provided by clearing members. these skin - in - the - game requirements are intended to create incentives for the owners of ccps for careful consideration of new products for clearing, for conservative modeling of risks, and for robust default waterfalls and other resources to meet such risks as may materialize. 8 the issue is a complex one, however, and a number of factors would need to be considered in formulating such a requirement. recovery and resolution i have focused so far on what we can do to ensure that ccps do not fail : more transparency, enhanced stress testing, more robust capital and default waterfalls, stronger liquidity, and increased incentives to appropriately manage risks. i will conclude my remarks today by discussing what happens when all of these efforts encounter a severe stress event. try as we might to prevent the buildup of excessive risk, we need to be prepared for the possibility that a ccp may fail or approach failure in the future. when and if such a crisis materializes, ccps will be called on to stand on their own. ccps and regulators need to develop clear and detailed ccp recovery and resolution strategies that are well designed to minimize transmission of the ccp ’ s distress to its clearing members and beyond. see, for example, the related discussion in committee on payment and settlement systems ( 2010 ), market structure developments in the clearing industry : implications for financial stability ( pdf ) ( basel, switzerland : bank for international settlements, november ). bis central bankers ’ speeches recovery and resolution planning is a matter of intense focus among regulators and industry participants. just last month, the committee on payments and market infrastructures and the board of the international organization of securities commissions released their final report on the recovery of financial market infrastructures. 9 the report is part of an ongoing effort to provide guidance on implementing the pfmi requirements for recovery planning. on the same day, the financial stability board released a new report on the resolution of financial market infrastructures and their participants to supplement its earlier work on the report key attributes of effective resolution regimes for financial institutions. 10 these reports stress that ccps must adopt plans and tools that will help them recover from financial shocks and continue to provide their critical services without government assistance. it has been a challenge for some market participants to confront the fact that risks and losses, however well managed, do not simply disappear within a ccp but are ultimately allocated in some way to the various stakeholders in the organization – even if the risk of loss is quite | 0 |
remarks by prof. emmanuel tumusiime - mutebile governor, bank of uganda at the high level stakeholders ’ engagement on building a 21st century ugandan economy kampala serena hotel tuesday, september 3, 2019 the bank of uganda ( bou ) has not only successfully achieved its inflation objective of low and stable inflation, but has done so while supporting economic activity. in the last two financial years ( fy ), uganda ’ s economy has grown on average by 6. 1 per cent from a growth of 3. 9 per cent in fy2016 / 17. investor surveys suggest that business conditions and sentiments are strong. credit to the private sector has improved ; helped by accommodative monetary policy stance. the economy is expected to maintain this growth momentum and is projected to grow by between 6. 0 and 6. 3 per cent in fy 2019 / 20, and between 6. 5 and 7. 0 per cent in the medium term. the growth prospects are supported by private sector credit growth ; public investment in infrastructure ; higher agricultural output due to favourable weather and positive government interventions in agriculture ; pick - up in activity in the mineral sector ; improved regional security ( with peace in south sudan and drc ), which are expected to boost uganda ’ s exports. there are downside risks to growth, including : a ) lower external demand due to a depressed global economy. b ) political and policy uncertainty, which are very elevated in several major economies with global growth continuing to be biased downwards. already, the probability for a global recession is very high. page 2 of 5 c ) climate change which will increase uncertainty of weather patterns and constrain the agricultural sector. domestic inflation remains subdued, with the annual headline and core inflation averaging 2. 7 per cent and 3. 7 per cent, respectively, in the quarter to august 2019. the inflation outlook is favourable, with inflation projected to stabilize around the 5. 0 per cent target in the medium term. given the current inflation outlook, bou has kept the policy rate on hold since october 2018. low inflation protects the purchasing power of ugandans, especially for the poor households. bou has successfully ensured financial sector stability, including through resolving commercial banks that posed systemic risks by being very highly interconnected, both by the number and size of transactions with the other commencial banks. currently, commercial banks are wellcapitalized, liquid, and profitable. improvements in asset quality have contributed to an easing of lending standards | in addition, the central bank needs to coordinate with financial institutions and service providers to make electronic payments to be more accessible, reliable and, of course, available at reasonable price. the third consideration is the implementation of principles for financial market infrastructures. from the regulatory point of view, the important payment and settlement systems need to be appropriately regulated. the recent financial crisis has shown that financial market infrastructures, such as payment and settlement systems and central counterparty, can be sources of financial shocks or major channels that shocks are transmitted across domestic and international financial markets. to enhance safety and efficiency, the principles for financial market infrastructures have been prescribed by the committee on payment and settlement systems ( cpss ) and the technical committee of the international organization of securities commissions ( iosco ) in april 2012 with objectives to limit systemic risk and foster transparency and financial stability. in response to the new international standard, the bank of thailand intends to adopt these principles to our systemically important payment and settlement system which is bahtnet system. moreover, we will coordinate with other regulators to ensure that all systemically important payment and settlement systems are adequately supervised. i would like to conclude here that, to join the aec in 2015 both central bank and financial institutions need to have proactive strategies to deal with the changing economic and social environments. the central bank will play an important role in supporting private sectors and ensuring the stability and efficiency of financial system and infrastructures. concurrently, the financial institutions need to rethink and redesign their business processes and strategies in order to stay at the forefront of highly competitive environment as well as to reap the full benefit of the integrated economic community. thank you. bis central bankers ’ speeches | 0 |
markets for the african region is immense. we have to ensure that all necessary efforts are harnessed in designing the right enabling environment and ecosystem in this pursuit. it is important for all stakeholders including policy makers, central banks, regulators and operators to collaborate in this endeavour, not only locally but also at the regional level for a sound ecosystem. we will continue to play our role and to play it well to ensure optimisation of our potential. with these notes, i would like to thank you all for your attention and i wish you fruitful deliberations. 7 / 7 bis - central bankers'speeches | with respect to the 40 recommendations of the fatf. mauritius, which serves as a reference considering its rapid exit from the fatf list, continues to upgrade its aml / cft regime through the necessary legislative amendments and adoption of a riskbased supervisory framework. ladies and gentlemen introduction of fintech and its acceptance requires prior testing. the bank of mauritius is establishing its innovation hub and digital lab, which will provide a testing environment for the development of fintech solutions and will facilitate the hosting of ideations, hackathons and exploratory programming sessions, amongst others. we are collaborating with other central banks and innovation hubs. we are confident that these initiatives will accelerate the development of technology - enabled banking and financial services. the use of innovative solutions also introduces new risks such as cybersecurity threats. the bank of mauritius has taken proactive steps and has developed a clear - cut cyber risk and resilience strategy. we are conscious that a cyber incident may, at any point, assume magnitudes of systemic proportions since each stakeholder in the chain represents a point of vulnerability. with this in mind, i have established the mauritius financial sector cyber committee ( mfscc ) to enhance the cyber resilience of the financial sector and, by ricochet, the overall stability of our financial system. i chaired the first meeting of this committee on 15 september 2023. the upcoming projects of the committee include the establishment of relevant frameworks for the sharing of information and intelligence and the conduct of cyber simulation exercise. the 6th annual cybersecurity workshop, which was held at the imf headquarters earlier this year, was attended by representatives from over 60 countries. mauritius emerged as a notable case study. the workshop highlighted the evolving role of central banks in supervising cyber - related activities among their licensees. mauritius stood out as an example, showcasing a collaborative approach between its supervision team and its information security team as they jointly conducted onsite supervision. many countries have expressed their intent to follow mauritius'approach in strengthening their own cybersecurity frameworks. several central banks have contacted the bank of mauritius to benefit from our experience and initiatives we have been taking. i am fully confident that mauritius will develop into a regional hub of cyber excellence as it implements the cyber risk and resilience strategy. ladies and gentlemen 6 / 7 bis - central bankers'speeches to wrap up, the effective development of financial markets and its digitalisation are important to ensure sustained growth. the potential of financial | 1 |
this current environment, the issue of financial literacy from these perspectives has become more urgent, particularly in the emerging market economies of asia, where household consumption is becoming an important driver of growth. the expanding cumulative domestic market in asia is becoming massive, a factor that has been important in facilitating intra - asian trade and thus driving the economic integration of the asian region. this trend has the potential to contribute to the rebalancing of global growth and thus to address the structural imbalances currently prevailing in the global economy. households therefore need to be financially strong if this trend is to be sustainable. financial literacy will allow households to have the increased confidence to make sound decisions regarding their consumption expenditure. of importance to central banks is that consumer credit remains within prudential limits and do not impose undue risk to the consumers that can often result in financial stress. consumers not only need to be able to assess their capacity for expenditure, savings and debts but also have to be able to select from the array of financial products and delivery systems that will best meet their requirements. households need also to be aware of and understand the financial risks associated with their transactions. greater financial literacy can contribute to mitigating these financial risks. the growth in household debt is an increasingly evident phenomenon in asia. over the period of 2000 to 2004, the volume of consumer loans across seven major asia pacific economies grew at an average annual rate of 9 percent, relative to total loan growth of 5. 2 percent and corporate credit growth of 2. 6 percent. the risk emerges when debt reaches a level where it cannot be sustained, and ultimately leads to increased financial stress. it is therefore important that borrowers are financially savvy to manage financial risks in a proactive and constructive manner. the environment we are operating in is becoming increasingly challenging. individuals may not know where to seek information or do comparative shopping. the aggressive marketing by financial institutions may lure [UNK] borrowers into financial transactions that cannot be sustained in the longer term. a number of regional economies have seen aggressive marketing of credit cards, that have led to situations where financial institutions were eventually compelled to write - off many bad loans. the observation from surveys is that many consumers do not fully understand relatively simple financial calculations, and hence do not realise the risks involved. for some countries, the cost of borrowing may increase substantially depending on the prevailing conditions. this may result in difficulties in servicing the debt. also this would depend on the extent of the household gearing. for asia pacific economies, this | complicated operation. they are typically greater when associated with innovation and they grow as product structures become more complex. we all need to recognize this. regarding models, aside from the technical parts, it ’ s important to consider the less quantitative. for instance, are the inputs sound? are the model parameters based on sufficiently robust and accurate data? are the assumptions reasonable? one needs to understand the business and risk management principles, but that does not require a “ quant. ” in modeling, “ gigo ” - garbage in, garbage out - always rules. data integrity is growing in importance in effective risk management. in today ’ s world of credit risk models, especially for centralized underwriting in areas such as consumer, mortgage, and small business credit, the responsibilities of data input may reside with the lending officer. to ensure effective underwriting, the culture and incentives for loan officers should support accountability for valid information going into a model. in the “ old days ” when individual loan officers made credit decisions, any weaknesses in underwriting were confined to that lender ’ s portfolio. it was the responsibility of loan reviewers to identify those weaknesses before losses became extensive. today, the responsibility for effectively predicting defaults and loss given default resides with the senior credit officer responsible for the credit scoring model. when the underwriting results are then tested for reliability, it is critical to identify the root cause of errors due to model specifications and changes in customer behavior. the risk of centralized, model - based underwriting is that errors are no longer limited to the portfolio of a single loan officer. rather, model errors can create significant systemic risks across that loan product portfolio. we are still trying to learn how to estimate these types of risks. in our current regulatory efforts to develop internal rating - based capital standards for credit risk, we find that simply identifying and describing “ minimum ” data requirements can be a challenge. what is adequate and robust for a given purpose and what is not? each company ’ s practices are unique - as they should be. we do not wish to create the moral hazard and greater systemic risk associated with a highly specific, government - dictated procedure to measure risk. rather, we want the discipline that can be gained from requiring that the input data and the parameters used for regulatory purposes are as much as possible - the same as those used for business purposes, so that they can be markettested. differences among model results will occur, but both management and regulators must decide what is good enough for their respective purposes | 0 |
to the momentum of that flow. it was a pure case of risk versus return. 27. in addition, growing competition at the low - wage end of industries came from other asian and non - asian economies. in europe, cheaper production came from the restructuring economies of eastern europe. competition came from the revival of latin american economies with improved access to the us market through nafta. in asia, india and china are emerging as major exporters. as a result, exports in asia suffered a downturn, while imports continued to rise, leading to growing levels of current account deficits. 28. then came problems on the exchange rate front. the volatility of key exchange rates, particularly that of the yen against the us dollar, has placed the balance of payments of some asian economies under considerable stress. for instance, since most asian currencies are explicitly or implicitly linked to the us dollar, the appreciation of the us dollar severely squeezed the exporters, who have to compete with their rivals in japan and the emerging economies in other parts of the world. the weakness of the yen revived japanese exports, placing japan in direct competition with its major trading partners in asia, as the cheaper yen stimulated exports of japanese durable goods and capital goods to asia, while reducing imports from the region. it did not make sense to export out of the subsidiaries in asean when it was cheaper to buy directly from the plant in japan. the weaker yen also has a tendency to slow foreign direct investment from japan, as it is no longer so expensive to produce in japan. 29. as we are all aware, this combination of asian monetary problems has recently put tremendous pressure on the financial markets, in particular the foreign exchange markets, in the region. this was compounded by speculators who took advantage of these market developments to set up their attacks, resulting in the currency turmoil in asian currencies that we have seen. 30. here i cannot possibly resist the temptation to offer a few comments. there is a common perception that the adoption of more flexible exchange rate regimes by a number of asian economies implied a failure of fixed exchange rate systems. this is in my view a mistaken perception. as all central bankers are aware, there is no one perfect exchange rate regime. one of the dilemmas of any exchange rate regime is how the exchange rate can reflect the underlying economic conditions, which are constantly changing, so that external balance can be achieved. a fixed exchange rate regime can function well if there is strict financial | , but because people expect that the market will continue to rise making it better to buy now to reap short - term profit or hold on for bigger gains in the long run. currently in hong kong, the rapid surge in luxury - property prices may not necessarily be caused by insufficient supply of high - end residential flats, since rentals have not moved up in proportion with the prices. actually, the increases were caused by the fact that many investors, including those from mainland china, were optimistic about the outlook for future prices. 9. apart from regulating the supply of land, another method that has long been used in hong kong to reduce the risk of bubbles in the property market is for banks to act as gatekeepers in preventing sharp increases in mortgage lending. the regulatory measures implemented by hkma on 23 october that tightened the loan - to - value ratio for luxury properties priced at hk $ 20 million or more to 60 % serve this purpose. some may argue that since many buyers of luxury properties are wealthy, they may not need to apply for mortgages and therefore the hkma ’ s measures may not have the expected effect. i agree that this would be the case if all property buyers used their savings and did not need to borrow from banks. however, i do not believe that none of the purchasers of luxury properties borrow from banks. some buyers do not approach banks for mortgages because they still have time before completing the transactions, or because they do not intend to hold the flats for a long time. i also do not believe that the markets for small and medium - sized residential flats could have become so active without abundant credit from banks. i therefore believe that the prudential measures that we have taken and good risk management by banks will help stop asset - price bubbles from forming. 10. while banks will help to control the risks, members of the public and corporations in hong kong also need to be more alert. they should consider what they can afford and not borrow too much at a time when interest rates are so low to avoid getting into financial difficulties when interest rates rise again. but i can see that this is not easy. as hot money continues to flow into hong kong, it pushes the market higher. if this continues, people may get into a mistaken mindset that the market can only go up and overlook the risk that capital and hot would might one day reverse course without warning. 11. finally, i would like to share with you an article i read last week. the article | 0.5 |
in the usa economic developments in the united states continued to deteriorate during the first half of the year. this was largely connected to problems in the financial markets. in the most recent monetary policy report published at the beginning of july we were expecting gdp growth in the united states to slow down to around 1. 5 per cent a year in 2008 and 2009. i agreed on the whole with the picture of international developments presented in the monetary policy report, but my assessment was that developments in the united states could be even weaker than we were assuming. there is a risk that we will have to lower the forecasts even more in coming reports, particularly the forecasts for 2009. gdp growth in the second quarter of 2008 was actually slightly stronger than we had expected. gdp increased by 0. 5 per cent compared with the first quarter. growth in the united states is now largely being upheld by exports alone, which are increasing at a good rate as a result of world growth and the dollar depreciation ( compared with the level 2 - 3 years ago ). domestic demand will on the whole not show any increase in 2008 and 2009. i do not believe that the recovery in domestic demand will get started before the financial system has stabilised and before the fall in us house prices has come to a halt. house prices have continued to fall during the summer. growth in europe will also slow down europe fared better than the united states at the beginning of the year. this is partly because the financial crisis originated in the united states and the financial market turbulence has not been as severe as there. another explanation is that the financial balance is better in europe ; public sector finances have improved in recent years and the current account is close to zero. we assumed in the monetary policy report that gdp growth in the euro area would slow down to 1. 7 per cent in 2008 and 1. 2 per cent in 2009, to reach almost 2 per cent in 2010. at the beginning of july we had seen little sign of the slower growth in the statistics on production and in the national accounts. on the contrary, there had been several positive surprises. however, there were tangible signs of a future slowdown in other types of data, such as corporate and household confidence indicators. the quick figures for the second quarter now indicate that gdp in the euro area declined by 0. 2 per cent compared with the first quarter, which was weaker than we had expected. global growth still strong gdp growth in the world as a whole has been | union candidates put their public finances in order prior to participation. the stability and growth pact has clarified what will apply once monetary union has begun. the pact can be said to consist of two parts : a surveillance mechanism for detecting at an early stage that a country is starting to have budgetary problems and is in danger of incurring an excessive deficit, and a mechanism for sanctions on errant countries. the first mechanism covers all the eu countries and requires them to present a fiscal policy programme. the sanctions mechanism, on the other hand, applies only to countries in the euro area. the purpose of the pact is to strengthen political mechanisms at union level so that budget discipline is permanently maintained. there has been underlying concern that otherwise a country might be strongly tempted to shift a part of the adjustment costs for consolidating government finances onto the other countries. the pact requires every member state to aim for a medium - term budgetary position close to balance or in surplus. if the 3 per cent limit is exceeded, the commission and the ecofin council are to follow a specified plan of action : examination, opinion, recommendation, publication and, as a last resort, sanctions. the pact has been constructed with a view to generating so much pressure on member states to put government finances in order that sanctions will never be necessary. a knotty problem when constructing the pact was how to make the requirements sufficiently strict without placing undue restrictions on national fiscal policies. this is all the more important when monetary policy is no longer available at national level, so that the task of adjustment falls more heavily in practice on fiscal policy. oecd estimates indicate that in a “ normal ” economic downturn, the cyclical budget balance in eu countries weakens by 1 - 1. 5 per cent of gdp. some budgetary discretion is therefore needed so that there is a margin for automatic stabilisers to act when activity is falling. the conclusion is that the trade - off seems reasonable but the pact does make it necessary to achieve a balanced budget or a surplus relatively soon. under these circumstances, the swedish government ’ s ambition to establish an annual budget surplus of 2 per cent over the business cycle is commendable. fiscal policy accordingly faces new challenges and it is not all that easy to tell just what may happen. when monetary policy ceases to be a national instrument, fiscal policy will have to play a greater part in stabilisation policy. at the same time, the scope for budget policy will be curtailed in | 0.5 |
##ity requirements – ( mag report ) http : / / www. bis. org / publ / othp10. htm. bis central bankers ’ speeches | unemployment, particularly long - term unemployment, is exacerbating inequality. in the united states and the euro area combined, more than 11 million workers have been out of work for more than a year. the other side of the coin is that an efficient and resilient financial system is essential to growth, and financial development has proven an important ingredient to reducing inequality. a well - functioning financial system is a key enabler to growth, channelling savings to productive investments, and helping households and businesses manage risks. increasingly, cross - country evidence also suggests that financial development eases inequality by reducing transactions costs. this provides the opportunity to accumulate assets and smooth consumption, make financing accessible to local entrepreneurs, and promote inclusion in the formal economy. recent research finds that financial development, measured as the ratio of private credit to gdp, both raises growth and reduces inequality. for the poorest quintile, 60 per cent of the benefit of financial development comes from overall economic growth and 40 per cent from greater income equality. 7 in short, there is a virtuous circle of financial development, growth and reduced inequality. this points to the imperative of a dynamic and robust financial system. the excesses and abuses in the financial system that led to the crisis have been a lightning rod for public discontent. understandably so. but the answer is not to dismantle the financial system. it must be rebuilt. that process is well under way. 8 the g - 20 financial reform agenda, launched in the depth of the recession, is suitably sweeping. its key elements include : r. rajan, fault lines : how hidden fractures still threaten the world economy ( princeton, n. j. : princeton university press, 2010 ). s. jahan and b. mcdonald, “ a bigger slice of a growing pie, ” finance & development ( september 2011 ) : 16 – 19 ; r. levine, “ finance and growth : theory and evidence, ” in handbook of economic growth, edited by p. aghion and s. durlauf, vol. 1 ( elsevier, 2005 ) : 865 – 934 ; and t. beck, a. demirguc - kunt, and r. levine, “ finance, inequality, and poverty : cross - country evidence, ” national bureau of economic research working paper no. 10979, cambridge, 2004. t. macklem, “ raising the house of reform, ” speech to the rotman institute for international business | 1 |
##standing personal relationships with customers and borrowers. given the important role that community banks play in their local economies, we at the federal reserve are keenly interested in their health and their collective future. local communities, ranging from small towns to urban neighborhoods, are the foundation of the u. s. economy and communities need community banks to help them grow and prosper. as i ’ m sure you are all too aware, the financial crisis and its aftermath have hit some community banks especially hard, and those institutions will continue to need time to repair their balance sheets. although we are not yet where we would like to be, the good news is that many community banks are recovering and reporting stronger performance. indeed, despite some of the worst economic conditions since the great depression and their own strained balance sheets, community banks have already been doing their part to meet the credit needs of their customers, notably including small business customers. we have been spending a lot of time at the federal reserve trying to understand and promote lending to small businesses, and one of the interesting things we have found is that while small business lending contracted overall from mid - 2008 through 2010, this contraction was not bis central bankers ’ speeches uniform. in fact, a majority of the smallest banks ( in this case, those with assets of $ 250 million or less ) actually increased their small business lending during this period. and while banks with assets between $ 250 million and $ 1 billion showed a slight decline in small business lending over this period, the contraction was not nearly as sharp as it was for the largest banks. this hard evidence underscores the important benefits of relationship banking, particularly in periods of unusual economic and financial stress. community banks and the federal reserve you may recall that in my remarks to this group last year, i noted that the decentralized structure of the federal reserve system, with 12 reserve banks and 24 branches located in cities across the country, was designed to ensure that local insights and information would be incorporated in the deliberations of both the board and the federal open market committee. during the debates leading up to the passage of the dodd - frank wall street reform and consumer protection act, we emphasized that our supervisory responsibility for state - chartered banks that are members of the federal reserve system and bank holding companies of all sizes not only provides valuable economic information at the grass - roots level that would be very difficult to replace, it also gives us a fuller picture of the nation ’ s financial system. at the same time, the range | and credit markets. the primary objective of the common monetary policy is price stability. the mandate, clear and unequivocal, given to the european system of central banks is based on two tenets held by the drafters of the treaty : that the stability of the value of money is a public good which does not hinder, but rather fosters, sustainable growth of the real economy ; and that maintaining stability depends crucially on the operation of monetary policy. the european system of central banks will enjoy complete autonomy ; it will regularly provide information on its activities and report on them to the other community institutions. in particular, the european central bank will be required, pursuant to article 109b of the treaty and article 15 of the statute of the european system of central banks, to publish periodic reports on the activities of the escb, with a description of the current and future stance of monetary policy. the european parliament will be able to debate these matters and invite the president and the other members of the executive board of the european central bank to be heard by its competent committees. in particular, the need for a “ single ” monetary policy will have to be reconciled with the principle of “ subsidiarity ”, which has also been embodied in the statute of the escb and is intended to permit the highest possible degree of decentralization in operational terms. more specifically, provision is made for a division of tasks along the following lines : - - the decision - making powers in monetary policy matters, especially with regard to interest rates and compulsory reserves, will be centralized in the european central bank. the ecb will exercise these powers through the governing council, comprising the governors of the national central banks and the executive board, composed of the president, the vice - president and four other members. the executive board will be responsible for implementing the decisions of the governing council on a continuous basis ; the operational implementation of monetary policy will be entrusted to the national central banks. each national central bank will thus have two tasks : it will contribute, through its governor, to the decisions of the governing council ; and it will implement these decisions in its own country. operations in the money and foreign exchange markets will normally be carried out by the national central banks. within this framework, the bank of italy will continue to carry out all the operational functions that it currently performs. the procedures for conducting monetary control operations will be different in part from those used today ; the draft legislative decree currently under discussion in parliament is designed to permit | 0 |
training you. what can we do? nothing much! we can only do one thing and that is to continue to train new staff. leadership training is very essential. i commend the rotaract club for its immense contribution to training. making a difference making a difference is one of your rallying calls. it is a powerful one. but making a difference in what and to whom? i believe that you can make a difference on many levels. although we may not know it, we do make a difference to people ’ s lives irrespective of our position in society. we as parents make a difference to our children. we as managers and leaders in our organisation make a difference to the people that we work with. as national leaders we make a difference to the whole country. at these multiple levels of effectiveness the key to making a difference however must be at the personal level. we get that personal level right then we can influence people the right way. we get that wrong we are bound to fail. i always believe that personal victories must also precede interpersonal victories. link to communities the other theme that strikes me as very interesting is the link between corporate fiji and the communities. this is an important theme. several of your sessions today will cover this corporate responsibility. profitability is no longer the only driving force of corporates although it is still important. this larger responsibility to society has grown in global attention in recent years. why? in my view it has to do with sustainability. corporates now realise that we live in an interrelated world. no one is an island anymore. globalisation is here to stay. what one country or corporate does affects many other things in the country and the whole world. global warming is a classical example. one day if we are not careful we will all disappear under the waves. so whatever we do we now must ensure that we do them in a sustainable manner. polluting your backyard is not sustainable. dealing unfairly with your workers is not sustainable. ignoring the community is not good corporate sense. corporates are now linking more closely with the community than ever before. i commend rotaract ’ s for its community work. i am told that some proceeds of your attendance today will go towards buying computers for vishnu deo memorial primary school. this is certainly a win - win combination – where the youth are trained and the community benefits from the fees that you collect. actions not words i like your vision “ take the lead | damage on the human, social and economic fronts. there are currently over 43 million active cases worldwide and around 1. 2 million deaths across the globe. despite hitting our economy hard, i am pleased to highlight that fiji has had no covid community transmissions for almost 200 days now. furthermore, while some countries are reimposing lockdown measures in response to the second wave of the virus, here in fiji we are blessed and privileged to be able to gather for functions like this, attend soccer and rugby matches in person with other fans as well as meet for religious functions. let us not take this for granted and we appreciate the good work done by our agencies. 1 / 3 bis central bankers'speeches economic updates the imf estimates the economic impact of the coronavirus to reach us $ 28 trillion by 2025. unemployment has spiked in all countries and the global economy is projected to contract by 4. 4 percent in 2020, with 90 million people falling back into extreme poverty. this is a crisis like no other and the outturn is expected to be worse than the global depression of the 1930s. unfortunately, the fijian economy has not been spared from the wrath of the pandemic. with international borders closed, tourism, the mainstay of our economy, has come to a standstill. given that tourism cuts across many sectors and accounts for 30 – 40 percent of fiji ’ s gross domestic product, the fijian economy is forecast to contract by 21. 7 percent this year – our largest contraction since the 6. 3 percent decline in 1987. we are currently reviewing our economic forecasts and it is encouraging to note some improvements in domestic economic activity since the onset of covid - related restrictions in the first quarter. mobility and consumption indicators have picked up in line with the easing of the restrictions domestically while cane, timber and some manufacturing outputs have recovered somewhat from their lows recorded in the first half of the year. in this regard, i am pleased to highlight that positive developments in the partial indicators that we monitor point towards a softening of the contraction that was projected earlier. our official forecast will be released later next month. monetary policy objectives despite losing close to a billion dollars in tourism related foreign exchange income over the past 6 months, our foreign reserves remain at comfortable levels of just above $ 2. 2 billion and sufficient to cover 8. 2 months of retained imports. rumours of a devaluation were rife on social media sometime back, and there are some who continue to speculate | 0.5 |
niklaus blattner : it in the financial sector - aspects of regulation and supervision summary of a speech by mr niklaus blattner, vice - chairman of the governing board of the swiss national bank, at 8. berner tagung fur informationssicherheit ( 8th conference on information security ), berne, 29 november 2005. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the completeness, integrity, traceability and constant availability of data that has been securely processed are essential in order for the financial system to function smoothly. the swiss federal banking commission ( sfbc ) supervises banks and securities dealers domiciled in switzerland. its microprudential supervision focuses on the individual financial institution, in particular with regard to the protection of creditors and investors. by contrast, it is the task of the swiss national bank ( snb ) to contribute to the stability of the financial system, i. e. it is engaged in macroprudential oversight. banking legislation provisions governing the it organisation requirements of a financial intermediary do not explicitly address the topic of information security, but rather focus on the notion of “ proper and rightful conduct of business ”. for the sfbc, information security is merely one concern among others. in one of its circulars it has, however, addressed several critical areas in greater detail, e. g. on the topic of external data management and outsourcing. the snb ’ s mandate is limited to the payment and securities settlement systems. in its oversight function, the snb focuses on systems which might constitute a potential threat to the stability of the swiss financial system. the snb ’ s objectives with regard to information security include the following : security policy and organisation, physical and staff security, system operation, system development and maintenance, communication and information exchange and – last but not least – business continuity management. similar to the sfbc, the snb basically pursues a dualistic approach, i. e. it relies primarily on the results of internal and external audits. any supplemental, cross - system measures must be jointly coordinated and synchronised by all the major players. the steering group “ business continuity planning ” ( bcp ), headed by the snb, assumes this function and examined the business continuity plans developed in the individual companies. the report reveals that a great deal of progress has been made with regard to the bc | alan bollard : new zealand ’ s potential growth rate address by dr alan bollard, governor of the reserve bank of new zealand, to the new zealand canterbury employers ’ chamber of commerce, christchurch, 28 january 2005. * 1. * * new zealand ’ s growth performance has improved what a difference a decade makes. if we look at new zealand ’ s economic growth over the last decade, and compare it with the previous decade, we see that there has been a large lift in the country ’ s growth rate. average growth over the earlier decade, 1984 - 1994, was 1. 5 % per annum, while over the last decade it has averaged 3. 4 %. clearly, there were difficulties in the 1980s as firms struggled to come to grips with the new economic environment : exports subsidies were gone, government trading entities were corporatised and some privatised, there was a move towards user pays for government services, and various markets were deregulated. then there were the other factors. these included the sharemarket crash of 1987, which was to have large flow on effects, especially for some local property sector firms. another factor was the international recession of the early 1990s. neither has the last decade been all plain sailing. we had the asian crisis of 1997 - 98, but fortunately this did not last long. the economy was also affected around this time by droughts. then in late 2000 and early 2001 we saw the onset of a major slowdown in the us following a sharp fall in the value of high tech shares. nevertheless, the new zealand economy did more than simply survive these difficulties ; over the decade it had a much improved growth performance. two broad factors appear to have been influencing growth over the last ten years : • the economic reforms of the 1980s and early 1990s have resulted in a more competitive environment for the private sector. also, since the early 1990s we have had a more decentralised approach to wage setting in the private sector, which has given firms more flexibility in how they operate. • reforms in the government sector have resulted in more stable macroeconomic policies. the reserve bank act was passed in 1989 ; price stability was achieved by 1992, and has been maintained since then. we have also seen fiscal stability since the early 1990s, reinforced by the passing of the fiscal responsibility act. we have seen a more medium term approach to planning and undertaking government expenditure, without the volatility associated with attempts to “ pump prime ” the economy. our growth | 0 |
adequacy of capital and provisions. in view of the depth of the current problem, and the fact that it may be quite sometime before the global standards on these issues can be settled, regulators, in my view, must be ready to take the needed action to ensure that we address these risks in our financial systems systematically. this is why pillar ii is all the more important, because the essence of pillar ii is to ensure that financial institutions have adequate risk management process and capital, commensurate with their risk profiles. and this is why we are seeing increased vigilance by regulators and the financial institutions themselves, in terms of the rigour in the use of stresstests, which is essential in the environment of heightened volatility that superseded historical norm. the implementation of pillar ii is, however, a challenge, not only in terms of the technical and quantitative expertise for reviewing internal capital adequacy assessment process, or icaap, but also on qualitative aspects such as how to foster an on - going two - way dialogue with the supervised institutions that would enhance the icaap process. to meet this challenge, regulators need to establish a strong credibility so as to strengthen the impact of their recommendations and requirement on icaap, and in some cases, increase capital requirement to ensure capital appropriate to the material risks, not yet covered in pillar i. also, there are challenges on the legal and institutional capacity aspects on how to handle the more principle - based, and therefore, more institution - specific regulatory requirement. as for the bank of thailand, our progress on pillar ii implementation is continuing. by working closely with all stakeholders especially thai bankers, association, we have issued three prudential guidelines for basel ii since 2006. pillar ii formally took effect the end of last year, while pillar iii will be implemented in june this year. as far as pillar ii is concerned, we expect thai banks to put in place the icaap within this year and establish the comprehensive process by the end of next year. overall, we are on track with the implementation of basel ii, thereby reaffirming our commitment to international best practice. with this brief initial remark, it is my hope that this seminar would provide the needed knowledge and skills to supervisors from seanza countries for the challenges posed by pillar ii. | disposal for questions. | 0 |
euro area - wide factors and news. the advantages of sectoral diversification seem to have surpassed those of geographical diversification. as a consequence of the introduction of the single currency, euro area investors have increasingly diversified their equity portfolio holdings within the euro area. according to a recent research 6, between 1997 and 2004, the share of intra - euro area allocation increased markedly, by almost 15 percentage points, for equity portfolios and by 39 percentage points for bonds. in 2004, respectively, 28 % and 51 % of euro area total equity and bond portfolios were invested cross - border among euro area countries. integration in retail banking, by contrast, has been slow so far, although it has picked up in the last two years. with some notable exceptions, much of the consolidation in the banking sector has been the in june 2005, the ecb held a workshop on “ what effects is emu having on the euro area and its member countries? ” the workshop was organised in five areas : 1 ) trade integration ; 2 ) business cycle synchronisation, economic specialisation and risk sharing ; 3 ) financial integration ; 4 ) structural reforms in product and labour markets ; and 5 ) inflation persistence. all proceedings are now available in the ecb working paper series : see nos 594 to 599. see baldwin ( 2006 ) and anderton et al. ( 2004 ). see baele et al. ( 2004 ). de santis and gerard, ecb working paper 626 result of domestic mergers ; only in the last couple of years have cross - border banking mergers started to take place. in this respect, a number of euro area banks have considerably expanded their interests outside the euro area. however, in general, cross - border activity within the euro area has remained relatively limited, even though it is gaining in importance. this trend is expected to continue, thereby increasing the level of competition and efficiency in the euro area financial system. but further work is needed in order to achieve the goal of a single market in financial services. to this end, the ecb and the eurosystem are actively involved in several initiatives that will help foster financial integration, five of which i would like to highlight. first, the launch of target2 – the new payment platform for the financial system – is planned for the end of 2007. second, we are participating in the short - term european paper ( step ) initiative to promote the convergence of better market standards and practices in the european short - term securities | has also increased as a percentage of gdp in recent years. intra - euro area exports and imports of services increased from about 5 % of gdp in 1998 to around 6. 5 % in 2005, which represents a substantial increase even vis - a - vis extra - euro area exports and imports of services, which rose from about 7. 5 % to around 9. 5 % of gdp in the same period. and this trend could increase still further with the emergence of a single market for services. intra - euro area foreign direct investment ( fdi ) has also grown considerably, and is catching up with extra - euro area fdi. between 1994 and 2004 ( unfortunately, in the field of fdi, statistics collected by institutions like unctad, the imf or eurostat are always released with a two - year delay ), intra - euro area fdi stocks grew robustly from almost 14 % of euro area gdp to around 24 %. extra - euro area outward fdi stocks have grown somewhat less rapidly since the introduction of the euro : i. e., from 22 % to 30 % of euro area gdp. the euro is having some remarkable effects as a catalyst for a single market in financial services, particularly in the market segments which are more directly affected by the single monetary policy, such as fixed income markets. let me give you just a few examples, based on a set of indicators published by the ecb. 5 since the introduction of the euro in 1999, the cross - country standard deviation of interest rates in the interbank money market have fallen sharply. back in january 1998, one year before the start of monetary union, this deviation stood at more than 130 basis points for overnight rates, at over 100 basis points for one - month maturities, and at around 50 basis points for 12 - month rates. yet since january 1999, these differences have rarely exceeded 1 basis point. there is significant evidence that euro area corporations are taking advantage of the possibility to raise funds from the full range of euro area investors. the euro corporate bond market has grown significantly since 1999, and could grow even further, to judge by a comparison with the us. the outstanding volume of bonds issued by non - financial corporations of around €2. 3 trillion in the us is still two and a half times larger than in the euro area ( while the respective gdps are comparable ). a rapid integration is also taking place in the euro area equity markets. stock prices in euro area countries are increasingly affected by | 1 |
gent sejko : statement at the joint press conference with the imf mission chief for albania and the albanian minister of finance, 20 november 2018 statement by mr gent sejko, governor of the bank of albania, at the joint press conference with the imf mission chief for albania and the albanian minister of finance, tirana, 20 november 2018. * * * dear media representatives, in the last two weeks we have been engaged in discussions with the imf mission, which visited albania in the framework of periodic article iv consultations. such discussions focus on the current performance of the economy and financial markets in albania, their outlook, as well as the adequate economic policies and necessary structural reforms that should be implemented and monitored with a view to guaranteeing sustainable development for the country. i must say, with pleasure, that we share similar views on development trends, challenges that lie ahead, and the respective measures for tackling them. let me now present in brief the opinion of the bank of albania on these issues. the positive trend of albania ’ s economic development continued throughout the current year. from the perspective of aggregate demand, economic growth was supported mainly by the expansion of consumption, investments and albanian exports. from the perspective of production sectors, economic growth reflected mainly the expansion of the industry and services sectors, driven to a large extent also by the rise in electricity generation. from the perspective of underpinning policies, economic activity expanded, favoured by the following : the accommodative monetary policy and the favourable financing conditions, in both domestic and foreign markets ; the fiscal consolidation, which has reduced the impact of the public sector on the domestic financial markets ; and the structural reforms programme, which, irrespective of the short - term costs, have started to yield initial results. economic growth has contributed to the overall improvement of albania ’ s economic and financial balances. in line with our previous statements, the following is notable : inflation edged up slightly, despite the containing effect of the sharp appreciation of the exchange rate, suggesting that the improvement of the cyclical position of the economy is beginning to be reflected in higher wages and other production costs ; albania ’ s external position has improved, reflected in the narrowing of the current account deficit ; budget deficit remains low and public debt has trended down ; lastly, albania ’ s financial system is stable. the albanian banking sector shows stable or improving capital, liquidity and profitability indicators. our analyses and stress tests suggest that the sector is res | . production growth was mainly driven by the industry and services sectors, whereas the construction sector continued to suffer from low demand for residential properties. performance of private consumption and investments was sluggish. in line with the performance of the economy, available income of albanian households were assessed as growing at lower rates in this period. the sluggish consumption has reflected mostly higher inclination of albanian households towards savings. private consumption was more supported by consumer credit in 2011. nevertheless, banks report feeble demand for consumer credits, while consumers continued their hesitation for large purchases in 2011. moreover, investments in the economy are restricted by the ultimate demand, existence of spare capacities in production and added prudence by banks in lending. bis central bankers ’ speeches in this context, monetary policy easing of the second half of 2011 is expected to be reflected in better lending terms to albanian businesses and households to support their consumption and investment. i have often reiterated that their performance will condition economic growth in the short and medium run. fiscal policy has been stimulating in 2011, though this stimulus has fluctuated over the quarters. as indicated by the expenditures and budget deficit performance, the fiscal stimulus was stronger in the first quarter and moderate in the second and third quarters. data for the fourth quarter point to its acceleration. budget deficit in the first 11 months was all 38 billion, reflecting mainly public spending. their annualised increase rate for the first 11 months was 5. 6 %, with added contribution by capital expenditures during october – november. on the other hand, fiscal revenues continue to have slow annual increase, at 0. 7 % for this period. foreign demand continued to contribute to aggregate demand growth in the economy, albeit less than in earlier periods. its performance was affected by the unfavourable economic situation of our main trade partners. in october, exports were up 16. 3 %, recording slower annual growth rates. on the other hand, under the effect of high prices in international markets, annualised imports rates remained high and were materialised in albania ’ s trade deficit expansion, which in october was 11. 6 % higher than a year earlier. monetary sector ’ s analysis indicates contained inflationary pressures of monetary nature in albania ’ s economy. broad money expansion was 10. 6 % in october, lower than the average rates of 2011. in real terms, monetary supply growth rates were stable and are deemed to be in accordance with economic agents ’ demand for real money. during the last months, public sector demand decelerated, whereas private | 0.5 |
gabriel makhlouf : monetary and fiscal policy in times of inflation remarks by mr gabriel makhlouf, governor of the central bank of ireland, at the dubrovnik economic conference, dubrovnik, 27 may 2023. * * * the current macroeconomic environment is a complex one for policy makers. the outlook for inflation continues to be too high for too long : this means there is more ground to cover for central banks. monetary policy must be brought to levels sufficiently restrictive to bring inflation back to target in a timely manner. meanwhile fiscal policy must adjust its priorities to tackle the challenges of the major economic transitions involved in climate change, ageing populations and geo - economic fragmentation. but the increased cost of living generates political pressures that could slow this necessary adjustment. monetary policy fights inflation mostly through two channels : first, by reducing aggregate demand, and second, by anchoring the expectation of future inflation to its target. at times like this – when inflation is already far too high – expansive fiscal policy risks undermining both of these mechanisms. primarily by increasing aggregate demand, but also by signalling that the government is counteracting the effects of policies aimed at reducing inflation, potentially increasing inflation expectations. this is why i and others have previously called for cost of living supports to be targeted – i. e. at those most vulnerable to energy price shocks, temporary – so as not to add to persistent price pressures, and tailored - thus enabling further resilience to maintain sustainable growth in living standards. fiscal policy can be a major force for good, when it provides the stable foundation for a thriving economy, but it can also cause great harm by adding to inflationary pressures, which would inevitably call for an even stronger monetary policy response. monetary and fiscal policies need to work together to shore up macroeconomic stability. the coherence of monetary and fiscal policy is essential for macroeconomic stability. during the pandemic, we have seen how powerfully combined monetary and fiscal efforts helped our economies quickly get out of recession. but it is not only during downturns that monetary and fiscal policy need to coordinate their actions to effectively complement each other. an adequate policy mix is just as essential at times like this, when we must fight inflation. at a minimum, fiscal policy should avoid directly contributing to the building up of inflationary pressures. but preferably, fiscal authorities should support the disinflation effort by gradually bringing down high public debt, while also calibrating their policies to make | . and after those remarks, my team and i will be happy to answer questions. it is important to note at the outset that the review does not aim to provide an economic 1 / 6 bis central bankers'speeches forecast, but instead focuses on the potential for negative outcomes to materialise. * * * risks to financial stability the irish economy is one of the most open economies in the world for trade and finance. being open creates significant benefits in terms of jobs, economic growth and exchequer revenues. but it also creates risks, particularly to developments outside of ireland. and, at the moment, many of the risks we are concerned with stem from abroad. the most obvious risk facing the irish economy and domestic financial system is the continued possibility of a disorderly brexit. although that risk has receded, it hasn ’ t gone away. and a disorderly brexit could lead to a lot of uncertainty, volatility and disruption if it were to materialise. much has been said already on this subject, so i won ’ t dwell further on it. other key risks we see on the horizon are abrupt shifts in international trading and tax arrangements. the small and highly globalised nature of the irish economy means ireland is highly integrated in global supply chains and relies significantly on investment by foreign multinational enterprises. a further escalation in global trade wars, combined with shifts in the international tax environment, could have material effects on ireland. therefore, the announcement by the minister for finance yesterday is a welcome development. it is important that ireland builds buffers to ensure the public finances are resilient to shocks, and the government has sufficient room to manoeuvre should any materialise. building buffers in the good times limits the costs of future downturns. another key source of risk i want to flag today is from developments in global markets. global financial conditions remain very accommodative. this has resulted in the continued buildup of debt levels around the world alongside a prolonged period of easing credit standards in parts of the global corporate debt market and increased risk - taking by the non - bank financial sector. what we are mainly concerned with here is the impact of a sudden reversal in risk appetite which could lead to sharp falls in asset prices, for example. but not all risks are from abroad. closer to home, new lending has continued to grow. new household credit is growing at the highest level in a decade, and we see the domestic banks increasing their lending to large businesses | 0.5 |
sabine mauderer : getting the full picture - the road ahead for climate stress testing speech ( virtual event ) by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the 2023 european banking authority workshop on climate risk stress testing, 8 february 2023. * * * 1. introduction ladies and gentlemen, how does climate change affect the economy? what impact does climate change have on growth and inflation? how does climate change affect the financial system? policymakers need answers to these questions. understanding climate - related risks and their transmission channels is essential for designing targeted policies. central banks and supervisors have outstanding analytical capabilities. dealing with financial risks is our bread and butter business. this ample expertise can help to strengthen the understanding of climate - related financial risks. these risks are not a new risk category per se. climate risk drivers can exacerbate " traditional " financial risks and existing vulnerabilities, such as credit risks and market risks. stress tests have been an integral part of the toolbox of central banks and supervisors for a long time. stress tests provide valuable insights into the risk exposure and resilience of individual banks and the financial system. climate stress tests can complement common stress tests to give a fuller picture. 2. climate scenarios – a glimpse of possible futures stress tests are forward - looking analytical exercises that build on baseline and adverse scenarios. the same goes for climate stress tests. this is where climate scenarios come into play. climate scenarios give us a glimpse of different possible future outcomes. they can help us to understand how climate - related risks could evolve and what the implications might be for the economy and the financial system. the network for greening the financial system ( ngfs ) has developed and repeatedly refined a set of six climate scenarios. the scenarios fall into three categories and explore the impact of climate change ( physical risk ) and climate policy ( transition risk ). in the orderly scenarios, the early and gradual introduction of climate policies leads to subdued physical and transition risks. 1 / 4 bis - central bankers'speeches the disorderly scenarios assume that climate policies are delayed or divergent across countries and sectors. these scenarios are associated with higher transition risk as, for instance, carbon prices might need to rise sharply and abruptly. in the hot house world scenarios, global warming cannot be limited due to insufficient global efforts. as a result, extreme weather events become more severe and more frequent. physical risks increase drastically. all these ngfs scenarios help quantify | the cea should not fall within the ambit of the act because they are cleared. if market participants conclude that clearing would reduce counterparty risks in otc transactions, concerns about legal risks associated with the potential application of the cea should not stand in their way. traditional exchanges the working group ’ s report does not make specific recommendations about the regulation of traditional exchange - traded futures markets that use open outcry trading or that allow trading by retail investors. nevertheless, it calls for a review of the existing regulatory structures, particularly those applicable to financial futures, to ensure that they are appropriate in light of the objectives of the act. consistent with the principles of regulation that i identified earlier, the report notes that exchange - traded futures should not be subject to regulations that are unnecessary to achieve the cea ’ s objectives. the report also concludes that the current prohibition on single - stock futures can be repealed if issues about the integrity of the underlying securities market and regulatory arbitrage are resolved. i want to underscore how important it is for us to address these issues promptly. i cannot claim to speak with certainty as to how our complex and rapidly moving markets will evolve. but i see a real risk that, if we fail to rationalize our regulation of centralized trading mechanisms for financial instruments, these markets and the related profits and employment opportunities will be lost to foreign jurisdictions that maintain the confidence of global investors without imposing so many regulatory constraints. my concerns on this score stem from the dramatic advances in information technology that we see all around us. in markets with significant economies of scale and scope, like those for standardized financial instruments, there is a tendency toward consolidation or even natural monopoly. throughout much of our history this tendency has been restrained by an inability to communicate information sufficiently quickly, cheaply, and accurately. in recent years, however, this constraint is being essentially eliminated by advances in telecommunications. we have not yet seen clear evidence of a trend toward natural monopoly. but the diffusion of technology often traces an s - shaped curve, first diffusing slowly, but then rapidly picking up speed. once we reach the steep segment of that s - curve, it may be too late to rationalize our regulatory structure. already the largest futures exchange in the world is no longer in the american heartland ; instead, it is now in the heart of europe. to be sure, no us exchange has yet to lose a major contract to a foreign competitor. but it would be a serious mistake for us to wait for | 0 |
the economy itself evolves slowly, which in turn leads policy to change slowly as well. to illustrate, suppose that the fomc did not adjust policy gradually but set the federal funds rate at each meeting precisely as needed to offset the effects of shocks to the economy. suppose also that shocks to the economy tend to die away slowly or that the economy ’ s adjustment mechanisms lead it to respond only gradually to disturbances. in this scenario, observed interest rates would appear to be adjusting slowly, but in reality the apparent gradualism would reflect only the slow adjustment of the underlying economy that the fed is trying to influence. to support his view, rudebusch has presented evidence that longer - term rates respond to changes in the funds rate less than they would if the fomc were intent on pursuing a gradualist approach. distinguishing “ true ” gradualist policies from policies that respond to gradual changes in the economic environment is difficult, as the two hypotheses imply similar behavior by policymakers. however, recent studies that have taken up rudebusch ’ s challenge have generally found that both an intrinsically gradualist approach to policy and gradual changes in the underlying economic environment are needed to explain the historical patterns of u. s. monetary policy ( english, nelson, and sack, 2003 ; gerlach - kristen, 2004 ). if correct, these more - recent studies confirm that gradualism is an accurate description of actual fed behavior as well as a normative prescription of economic theory. clearly, though, the extent to which the fed has pursued gradualism over its history remains an interesting question for further research. conclusion in my talk i discussed three sets of reasons for gradualist policies : policymaker uncertainty, improved control of long - term interest rates, and the reduction of financial stress. the debate about the sources of gradualism is ongoing and i cannot hope to render a definitive verdict today on the relative merits of these rationales. my sense, though, is that policymakers ’ caution in the face of many forms of uncertainty and their desire to make policy as predictable as possible both contribute to the gradualist behavior we seem to observe in practice. i will close by briefly discussing some implications of the gradualist approach for current monetary policy. before doing so, i remind you once again that the views i express are my responsibility alone. as you know, in reaction to gathering economic momentum and an apparent stabilization in inflation, the fomc at its may 4 meeting characterized the risks to both sustainable growth and | trade in or movement of goods across the national boundaries, two types of barriers generally are described viz., natural barriers and artificial barriers. of late, while the multilateral trade agreements are encouraging reduction in such artificial barriers, the developments in technology are also making it difficult for national authorities to enforce artificial barriers. the pace and nature of globalization will naturally depend on the combined effect of technology and the public policy, both at the national and the international level. the third dimension relates to capital movements for which also, the interplay between technology and the public policy becomes relevant. there have been, however, some special characteristics of capital flows in recent years mainly led by revolutionary changes in telecom and computing capabilities. these have highlighted the phenomenon of what is described as “ contagion ”, which implies the risk of a country being affected by the developments totally outside of its policy ambit, though domestic policy may, to some extent, influence the degree of its vulnerability to the contagion. in any case, cross - border flows of capital have wider macroeconomic implications, particularly in terms of the exchange rate that directly affects the costs of movement of people as well as goods and services and, also in terms of the conduct of monetary policy and the efficiency as well as stability of the financial system. capital flows, by definition, generate further liabilities or assets and could involve inter - generational equity issues. in this regard, it is useful to distinguish the extent of globalisation in respect of three different types of economic entities viz., individuals or households, corporate entities and financial intermediaries. it has been noticed that financial intermediaries impinge on the contagion effects impacting financial stability in the developing countries. experience in asia and latin america has shown that the external liabilities of the private sector tend to devolve on national governments in the event of crises and hence, there is a role for the public policy in trying to prevent crises and creating capacities to meet crises, if and when they arise. in managing the process of economic integration that is driven by several forces, developing countries face challenges from a world order that is particularly burdensome on them. yet, it is necessary for the public policy to manage the process with a view to maximizing the benefits to its citizens while minimizing the risks ; but the path of optimal integration is highly country - specific and contextual. on balance, there appears to be a greater advantage in achieving a well - managed and appropriate integration into the global | 0 |
to our problems but rather important initial steps towards a more balanced development. for one thing, the positive trend in the swedish economy does not yet apply at all substantially to the labour market. a downward adjustment in the rate of wage increases towards more reasonable long - term figures has begun but we do not know how permanent it will be. what will happen in the next round of wage negotiations if capacity utilisation at that time is high? is the functioning of the - 6labour market in other respects sufficiently smooth for the adequate creation and filling of new job vacancies? this is a key question. if we do not succeed in finding good solutions in sweden when it comes to wage formation and the workings of the labour market, in the longer run it will not be possible to permit such strong economic expansion as we have experienced in recent years. another aspect of economic policy that, like the functioning of the labour market, is closely connected with the riksbank ’ s domain is fiscal policy. in recent years monetary policy has been assisted in the first place in that the consolidation of government finances has restored a stable foundation for economic policy ; in addition, there has been the more direct restraint — in a cyclical perspective — on demand and price impulses. in recent decades that was by no means invariably the case. on the contrary, there were periods when fiscal policy accentuated the cyclical movements. i find it important to issue a warning about repeating mistakes of this type. in the middle of an economic upswing we are now hearing calls for expansionary fiscal policies in the form of increased public spending as well as unfinanced tax cuts. there are strong long - term grounds for using the upswing in activity to build up government surpluses as a buffer for harder times. that will increase our future freedom of action in economic policy. it will be easier to cope both with future economic downturns and with structural challenges such as an ageing population. a tighter fiscal policy also eases the burden on monetary policy and increases the probability in the years ahead of being able to continue to have low interest rates and a stable economic development, with good growth of production and employment. | it is likely to persist and what policy should seek to do about it. but before turning to those topics, let me say a few words about the headwinds that still confront us on the demand side of the economy. to begin with, this was not a typical downturn and we should not anticipate a typical recovery. after normal cyclical downturns, economies typically return to the previous trend growth path within a few years. but after financial crises, economies often take much longer to recover. indeed, the evidence suggests that output typically stays well below a continuation of the previous growth path for many years thereafter. for instance, a study by the imf 2 found that across 88 past crises, output per head was, on average about 10 % below such a path fully seven years after the onset of the crisis, though there is considerable heterogeneity in the experience of individual countries ( chart 1 ). unless crises are also associated with an equivalent impairment of supply capacity, that implies an increase in the margin of unused resources. http : / / www. bankofengland. co. uk / publications / speeches / 2008 / speech342. pdf imf world economic outlook, october 2009. bis central bankers ’ speeches the primary reason for such a slow recovery is that the unwinding of earlier financial excesses takes time. moreover, banking crises are also frequently associated with a subsequent deterioration of the public finances, as governments provide support to vulnerable financial institutions and tax revenues drop back. both these features are, of course, present today in many of the advanced economies, including in the united kingdom. uk banks have made considerable progress over the past year in improving their balance sheet positions, but funding costs remain elevated and over the next two years they face the challenge of replacing around £400 billion of maturing wholesale funding. credit availability to larger corporates has improved significantly, but small and medium - sized enterprises still face difficulties in securing affordable credit. as a result, conditions in the banking sector are likely to continue to act as a brake on the recovery. as far as the public finances go, the public deficit widened sharply in the wake of the recession, reaching more than 11 % of gdp in 2009 / 10, in large part reflecting the endogenous response of spending and revenues to the downturn in activity. action would be needed to address such an unsustainable deficit, unless an early resumption of the pre - crisis growth path is expected. as | 0 |
a referendum on the introduction of a sovereign money system called vollgeld, which requires that every credit granted by a commercial bank is entirely covered by deposits. the proposal was eventually rejected. this does not mean that central banks are entirely indifferent to sovereign money systems, as will become clear in a little while when i talk about central bank digital currencies. alternatives to money in the form of euro banknotes and deposit liabilities at central banks and commercial banks so far, i have been talking about central bank money which is being provided in the form of banknotes and deposit liabilities in euro. but any type of money can potentially be created and issued by for example private entities, as long as it allows in one way or another to fulfil the main functions of money. let us call these types of money alternative money ( in the sense that they are an alternative for both central bank money and for deposits in euro at commercial banks ’ accounts ). central banks also take an interest in alternative types of money, even though they would at first sight fall outside the ambit of the central bank ’ s usual competences. central banks may have more than one reason for this. for starters, a considerable increase in the quantity and use of alternative money may undermine the efficacy of the central bank ’ s monetary policy. if the market players were to massively move away from the use of banknotes and deposits in euro, a central bank could find it more difficult to attain its objective of price stability. indeed, by substitution for regular money such as banknotes and deposits in euro, widely adopted types of alternative money could significantly reduce a central bank ’ s control over monetary conditions, such as its ability to steer interest rates 12. furthermore, many central banks, among which the eurosystem central banks, are entrusted with the task of contributing to the stability of the financial system 13. financial stability may be impacted by sudden or considerable changes in the quantity and use of alternative types of money 14. 3. 1 local currencies a local or complementary currency is a currency that can be spent in a particular and usually limited geographical locality, which differs from an official currency ( like the euro ) and about which a group of private persons, companies or government instances have agreed to accept it as a means of exchange. a local currency therefore acts as a complementary currency to an official currency, rather than replacing it, and aims to encourage spending within a local community or to support the local or social economy. european law | in international transactions. indeed, the evolution of invoicing practices will be slow and will depend among others on the usual practices in the field of price setting on the international markets and in particular on the commodities and on the oil markets. the almost exclusive use of the us dollar stems from both custom and ease as these products are quoted in dollars, a fact which will not be easy to change. the international transactions denominated in dollars are therefore four times higher than us exports. while the relative share of the euro as a payment currency is bound to increase, this evolution will in all probability be slow and progressive. as an investment and financing currency, the euro already plays an important part on international capital markets. during the first two quarters of this year, the share of euro denominated issues in the total of international issues has by far exceeded the aggregate part of its preceding currencies. in the first six months of this year, new euro denominated bond issues have surpassed by almost 50 % the amount issued in the first six months of 1998 in the currencies that now participate in the euro. the international issues in euro now stand for more than 40 % of the total amount issued on the international markets, which is a proportion that comes close to the one of us dollar denominated bond issues. several factors which i have already referred to can explain this evolution : the financing of operations with regard to mergers and acquisitions, the bigger size and greater liquidity of euro markets and the euro issues undertaken by several major countries wishing to diversify the distribution of their foreign currency debt. given the international importance of the new currency, it is not surprising that the development of the euro exchange rate has attracted considerable attention despite the fact that the level of the exchange rate is less important for the euro area as a whole than it was for each of the participating countries before the start of emu, in particular for a small country like belgium. for this reason the level of the euro exchange rate is not in itself a precise policy objective of the eurosystem. nevertheless it is an important indicator in its monetary policy strategy. in the first part of the year the relative weakness of economic activity in the euro area compared with the high growth in the us has affected the euro exchange rate. but now, with the good prospects for an economic upturn in the euro area, the firm commitment of the eurosystem to internal price stability, which constitutes the best basis for the strength of the euro in the | 0.5 |
in redressing public finances and in reducing private - sector debt, and casting doubt on the resilience of the financial system. that has triggered tensions on the debt markets and activated perverse feedback loops. lastly, the spanish economy risks seeing its capacity to obtain external funding severely blocked. while in the short run this does not actually constrain ordinary funding flows ( given the banking system ’ s possibility of resorting to ecb funding ), the prolongation of such a situation will be extremely harmful in the medium term. spain is in this situation despite the fact that its authorities have implemented far - reaching reforms in recent years to resolve the inefficiencies in its economic functioning, to correct the serious deterioration in public finances and to redress and restructure the financial system, in order to restore financing flows. resolving these problems is taking longer than expected, but that should not lead to reform fatigue. it is important to persevere with the economic policy actions undertaken. in this way the levels of competitiveness needed to ensure the smooth functioning of the euro area may be regained, the ordinary funding channels restored and the imbalances built up in recent years, in particular in relation to public finances, finally corrected. these requirements must be met if the economy is to begin to generate employment and to grow. the adjustment continues to fall on domestic demand, weighed down by the correction of imbalances, the fiscal consolidation drive and tighter financing conditions. the external sector continues to soften the impact of domestic spending on activity, due both to the buoyancy of exports and to the slackness of imports from the rest of the world, but its contribution is insufficient to halt the decline in output. in this setting, job destruction continued apace in 2011 and in 2012 to date. and, owing to the uncertain prospects for the spanish economy, a turnaround is not expected in the very short term. however, as this episode is progressively overcome, the approved labour market reforms will foreseeably have a favourable impact on employment generation, contribute to adjusting working conditions to firms ’ specific circumstances and provide for a more efficient reallocation of productive resources, which should ultimately prompt an increase in productivity levels. the cyclical weakness and the adverse behaviour of the labour market have not fed through sufficiently to the cost and price - formation mechanism, which still shows considerable inertia. the adjustment of unit labour costs is being achieved primarily thanks to the high productivity bis central bankers ’ speeches gains brought | percentage points ( ppts ) above the high end of the inflation target range of 2. 0 percent to 4. 0 percent for the year. nonetheless, as projected, inflation has gone down significantly, falling toward the midpoint ( at 3. 0 percent in april 2019 ) of the target band in the latest inflation print. this is not surprising given that the price pressures in 2018 were driven by cost - push factors. with the abatement of supplyside pressures, inflation has also started falling within target. the contribution of food inflation ( represented by the yellow bar ) to overall inflation has dropped markedly especially with rice prices easing in recent months brought about by the continued arrival of imports and the onset of the summer harvest season. looking ahead, we expect inflation to remain on a target - consistent path for 2019 and 2020. the latest baseline forecasts ( as of 9 may 2019 mb policy meeting ) indicate that inflation is projected to average at 2. 9 percent for 2019 while inflation forecast for 2020 is slightly higher at 3. 1 percent 1 / 4 bis central bankers'speeches due largely to the rebound in crude oil prices. meanwhile, risks to the inflation outlook remain broadly balanced for 2019 amid risks of a prolonged el nino episode and higher - than - expected increases in global oil prices. for 2020, the risks continue to lean toward the downside as weaker global economic activity could temper commodity price pressures. similarly, forecasts of other institutions generally convey the same expectations. results of the bsp ’ s april 2019 survey of private sector economists showed lower mean inflation forecast for 2019 at 3. 1 percent from 3. 3 percent in the previous survey round. the mean inflation forecasts for 2020 and 2021 both declined to 3. 3 percent from 3. 4 percent. meanwhile, projections from other institutions also show inflation within target for this year and the next. analysts expect inflation to continue easing and settle within the government ’ s target range. however, possible upward pressures are seen to keep inflation from further decelerating. ( upside risks to inflation ) : potential rebound in global crude oil prices, adverse weather conditions such as el nino, higher electricity rates, reduction in the bsp ’ s policy interest rate, and higher domestic demand due to the upcoming midterm elections and school enrollment ( downside risks to inflation ) : the lower inflation prints, implementation of non - monetary policy actions to increase domestic food supply and stabilize prices such as the rice tariffication law and the mitigating measures put in place by the | 0 |
masaaki shirakawa : recent economic and financial developments in japan statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank's semiannual report on currency and monetary control before the committee on financial affairs, house of councillors, tokyo, 16 december 2008. * * * introduction the bank of japan submitted to the diet its semiannual report on currency and monetary control for the second half of fiscal 2007 on june 10, 2008 and that for the first half of fiscal 2008 on december 12, 2008. i am pleased to have this opportunity to present an overall review of the bank's conduct of monetary policy. i. developments in japan's economy japan's exports have decreased due to the slowdown in overseas economies. with the deterioration in corporate profits and households'employment and income situation, domestic private demand, particularly business fixed investment and private consumption, has weakened. in sum, japan's economic activity has been increasingly sluggish. indicators of production, employment, and private consumption have all been weak. the results of the bank's december tankan ( short - term economic survey of enterprises in japan ), which were released yesterday, also clearly indicated the severity of economic conditions in terms of business sentiment and fixed investment plans. on the price front, the three - month rate of decrease in domestic corporate goods prices has been large, mainly due to the drop in international commodity prices. the year - on - year rate of increase in the cpi ( excluding fresh food ) is around 2 percent against the background of the increase in prices of energy and food. cpi inflation is expected to moderate reflecting the declines in the prices of petroleum products and the stabilization of food prices. regarding the financial side, investors have become increasingly risk averse reflecting disruptions in global financial markets. as a result, funding conditions in the cp and corporate bond markets have tightened, as indicated by the wider credit spreads on cp and corporate bonds and the difficulty faced by firms in issuing either. moreover, an increasing number of firms, not only small but also large ones, have reported that their financial positions are tight and lending attitudes of financial institutions are severe. thus, financial conditions in japan are rapidly becoming less accommodative on the whole. there are risks to the outlook for economic activity and prices. global financial markets remain under intense strain, although there has been some improvement in money markets in response to the various measures taken so far by governments and central banks. | of companies in the 21st century and urging the general public to boycott them shows not only a lack of responsibility, but also a lack of taste and common sense. i feel certain that our citizens know better and will continue to buy those products and services that suit them best, guided exclusively by their economic interest. the key principle of the late 18th century economy of comparative advantage explains that international trade is beneficial to all parties involved, and i guess that serbia of the 21st century wishes to benefit from international trade and finance, as well. i would also like to remind you on this occasion that today ’ s standard of living in serbia is largely based on foreign direct investments and access to foreign borrowing. hence, pensions are paid out regularly and on time, new jobs are created ( in the banking sector alone, the number of jobs is 50 % higher than at the onset of transition ), our citizens can take out mortgage loans, etc. in order to finance the current account deficit measuring 16 % of gdp in 2007, serbia needs foreign direct investments and fresh money. if we were to finance growth and development exclusively from our domestic accumulation, the volume of lending in 2007 would have been 4 to 5 times lower. it is true that the national bank of serbia can sustain macroeconomic stability in the short run by relying on monetary policy measures and interventions in the foreign exchange market. however, in the medium and long run, you do not make something out of nothing. i feel it is my duty to warn you that the ultimate costs of a significant decline in the level of fdis and restrictions on foreign borrowing will in the long - run be borne by our enterprises and citizens. however, i am sure it will not come to this, because it is not in serbia ’ s interest. | 0 |
indicators measures the level of venture capital financing. venture capital is indeed an attractive additional source of corporate financing, as it provides financing to young and small, research - based firms, which typically face constraints in the more traditional markets. our indicator shows a rise in venture capital financing in europe in the recent years ; however, the starting level is very low. more precisely, the euro area average for the last five years amounts to 0. 02 % of gdp, compared with 0. 1 % in the united states. therefore, i see more room for investigating ways to promote the development of this type of markets as well. the final market i want to include in my overview of the state of financial integration is the banking market. again, banking markets offer a nice illustration of how important the underlying infrastructure is. the wholesale and capital market - related segments are supported by target2 and, not surprisingly, are well integrated. for example, cross - border interbank loans account for a quarter of total interbank loans, and banks ’ intra euro area cross - border holdings of bank securities have almost tripled over the past decade. by contrast, the corporate and retail banking markets have remained more fragmented so far, also reflecting the multiplicity of existing payment systems. for instance, the euro area crossborder loans to non - banks have remained at low levels, currently at below 6 % of the total. similarly, the cross - country dispersion of banks ’ interest rates on loans to firms and households has remained relatively high, especially with regard to consumer loans. now, the ecb and the eurosystem are working hard to address the remaining gaps in financial integration, in particular when it comes to market infrastructures. the year 2008 has marked the launches of two important projects in this regard : target2 - securities and sepa. the eurosystem ’ s target2 - securities, or t2s, initiative establishes a pan - european securities settlement platform, in which cross - border transactions will be settled at the same price and as efficiently as domestic transactions. moreover, the t2s settlement cost will be significantly lower than the cost of domestic transactions today. in addition to the pure settlement cost, banks and other users would also achieve back - office and collateral savings. the t2s user requirements are a result of intensive cooperation by hundreds of experts from market participants, service providers and central bankers. by july 2008, we had received support of all euro area central securities depositories to the continuation of the | stretching the monetary policy mandate. our crisis measures must be temporary and targeted. they are justified only in the light of the exceptional circumstances seen during the pandemic. extraordinary times require extraordinary action. as the crisis evolves and subsides, the ecb will reconsider its tools and supervisory practices. 1 recital 3 of decision ( eu ) 2020 / 440 of the european central bank of 24 march 2020 on a temporary pandemic emergency purchase programme ( ecb / 2020 / 17 ) ( oj l 91, 25. 3. 2020, p. 1 ). 2 recital 3 of decision ( eu ) 2020 / 440 of the european central bank of 24 march 2020 on a temporary pandemic emergency purchase programme ( ecb / 2020 / 17 ) ( oj l 91, 25. 3. 2020, p. 1 ). 3 ibid., article 4. 4 account of the monetary policy meeting of the governing council of the european central bank held in frankfurt am main on wednesday and thursday, 3 - 4 june 2020, available on the ecb ’ s website. 5 / 5 bis central bankers'speeches | 0.5 |
, which brings down the credit score of the entrepreneur and hinders the ability of the formal financial system to lend to them. banks, on their part will need to leverage on modern technology algorithms and big data so that they can differentiate between a good borrower and a not so good one even in the absence of conventional documentation. 17. having analysed various impediments in finance to the sector let me dwell on some of the steps taken by rbi, government of india and other apex institutions in bridging these gaps. ( i ) access / availability rbi has initiated several measures to improve the availability of banking services, especially in the rural and far - flung areas where access to formal finance is arduous. 18. new institutions : as you are aware, two new universal banks have started operations while in - principle approval has been granted to 10 entities to set up small finance banks that would primarily focus on lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities. these small finance banks have been mandated to extend 75 per cent of its adjusted net bank credit ( anbc ) to the sectors eligible for classification as priority sector lending ( psl ) by the reserve bank. at least 50 per cent of its loan portfolio should constitute loans and advances of up to rs. 25 lakh. many of the sfbs have prior experience of working with small bis central bankers ’ speeches businesses as mfis / nbfcs and we believe that they will be able to bring in technology backed innovative last mile practices to serve their customers. 19. increased branch penetration / specialized branches : rbi has advised banks to set up ‘ brick and mortar ’ branches in villages with population of more than 5000 in a phased manner. coupled with a more mature banking correspondent mechanism, this would give considerable fillip in meeting the banking needs of the msmes particularly in rural areas. besides, creating presence of physical branch, there is also a need to have large number of bank officials with appropriate skill sets and knowledge to handle the life cycle needs of the small businesses. already, public sector banks have established specialized msme branches in every district to cater to the needs of the small businesses. we are already working towards improving the skill sets and entrepreneurial sensitivity of the field level functionaries. 20. p2p lending : new players have entered the msme lending landscape in form of p2p companies. these entities use an | sets of issues : 1. the landscape for otc derivatives in india 2. regulatory concerns and steps taken 3. the roadmap for otc derivatives 4. the development of markets in india. bis central bankers ’ speeches the landscape for otc derivatives in india the primary otc derivatives in india : interest rate derivatives – interest rate swaps ( irs ) and forward rate agreements ( fra ) ; fx derivatives - fx forward, options and swaps. the irs and fra were introduced in july 1999 to help banks and pds to better manage their interest rate risk in the wake of deregulated interest rate regime. swaps having explicit / implicit option features such as caps / floors / collars are not permitted. currently, there are four benchmarks used in rupee irs, viz. mibor, mifor, inbmk, miois. the trading is mainly confined to mibor benchmark. the average daily traded volume in the mibor swap over the last three years is placed at rs. 8, 873 crore, quite comparable with that of the g - secs at rs. 10, 937 crore. often the daily traded volume in mibor swaps remained above that of the g - secs. of the mibor swaps, the swaps on overnight mibor, i. e. ois, is the most actively traded instrument. the ois trades are mainly confined to 1 - year tenor, followed by 2 - year and 5 - year tenors. the relatively high volumes suggest that the product is providing a useful way of hedging against interest rate risk. however, it needs to be pointed out that the market is mainly driven by inter - bank transactions. customer - related transactions comprise only about around 1 per cent of the volume. also, the participation profile remained skewed. the share of foreign banks is at above 80 %, whereas the share of public sector banks is at around 1 %. the ois curve has been below the g - sec curve for most of the time. in the otc fx derivatives, forwards have been the most widely used instrument followed by swaps and options. usd - inr futures had picked up substantial volume since their introduction in august 2008, but the forwards still possess the dominant market share. it is evident that hedgers generally still prefer otc forwards to futures, as these provide the benefit of customization, does not involve cash flows related to daily mtm margining and are linked to | 0.5 |
bank failures and the events and circumstances surrounding them warrant review, self - reflection, and where necessary, appropriately targeted changes to identified gaps in regulation and supervision. we should carefully examine what is working and what can be improved in bank supervision. in doing so, we must appropriately and effectively manage our supervisory programs, teams, and expectations to ensure that efficient, effective, and consistent supervision is implemented across our regulated entities according to a bank's complexity, size, risk profile, and scope of activities. conducting supervision in a manner that respects due process and provides transparency around supervisory expectations goes a long way in accomplishing these goals. 2 / 3 bis - central bankers'speeches we should acknowledge that changes to supervisory expectations and processes, coupled with the sheer volume of recent regulatory and supervisory reforms and proposed reforms, will undoubtedly present additional challenges and risks for banks. while some changes to the supervisory process and priorities may be appropriate to promote a safe and sound financial system and enhance financial stability, having an appropriate focus on the most salient risks is important for effective risk management and effective supervision. we should be cautious that these changes do not distract banks or supervisors from focusing on core and emerging risks or impair the long - term viability of the banking system - especially for mid - sized and smaller banks. in closing, i hope that today's conference provides an opportunity for open and frank conversations about prudent risk management and how we can work together to maintain a safe and sound financial system. thank you for taking the time to be with us today. i hope you enjoy the conference, and i look forward to spending more time discussing these issues with you in the future. 1 board of governors of the federal reserve system, federal deposit insurance corporation, national credit union administration, and office of the comptroller of the currency, " agencies update guidance on liquidity risks and contingency planning, " news release, july 28, 2023. 3 / 3 bis - central bankers'speeches | ben s bernanke : regulatory reform implementation testimony by mr ben s bernanke, chairman of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 30 september 2010. * * * chairman dodd, ranking member shelby, and other members of the committee, thank you for the opportunity to testify about the federal reserve ’ s implementation of the dodd - frank wall street reform and consumer protection act of 2010 ( dodd - frank act ). in the years leading up to the recent financial crisis, the global regulatory framework did not effectively keep pace with the profound changes in the financial system. the dodd - frank act addresses critical gaps and weaknesses of the u. s. regulatory framework, many of which were revealed by the crisis. the federal reserve is committed to working with the other financial regulatory agencies to effectively implement and execute the act, while also developing complementary improvements to the financial regulatory framework. the act gives the federal reserve several crucial new responsibilities. these responsibilities include being part of the new financial stability oversight council, supervision of nonbank financial firms that are designated as systemically important by the council, supervision of thrift holding companies, and the development of enhanced prudential standards for large bank holding companies and systemically important nonbank financial firms designated by the council ( including capital, liquidity, stress test, and living will requirements ). in addition, the federal reserve has or shares important rulemaking authority for implementing the so - called volcker rule restrictions on proprietary trading and private fund activities of banking firms, credit risk retention requirements for securitizations, and restrictions on interchange fees for debit cards, among other provisions. all told, the act requires the federal reserve to complete more than 50 rulemakings and sets of formal guidelines, as well as a number of studies and reports, many within a relatively short period. we have also been assigned formal responsibilities to consult and collaborate with other agencies on a substantial number of additional rules, provisions, and studies. overall, we have identified approximately 250 projects associated with implementing the act. to ensure that we meet our obligations in a timely manner, we are drawing on expertise and resources from across the federal reserve system in areas such as banking supervision, economic research, financial markets, consumer protection, payments, and legal analysis. we have created a senior staff position to coordinate our efforts and have developed projectreporting and tracking tools to facilitate management and oversight of all of our | 0.5 |
in the quarters to come. although some recently released indicators point to a slight stabilization, we project the swiss economy to grow only weakly over the next few quarters. moreover, as mentioned before, there is a very high degree of uncertainty regarding the global outlook. this is also true for the swiss economy, which depends particularly on economic conditions in the euro area. if the risk scenario of a further escalation of the debt crisis were to materialize, economic activity in switzerland would suffer a much more pronounced slowdown than just described. such a development would lead to a severe risk of deflation. current swiss monetary policy given this highly uncertain outlook, the snb is – more than ever – committed to enforcing the minimum exchange rate with the utmost determination at any time. we cannot allow the swiss franc to appreciate further. hence, we must continue with our current policy, in particular as interest rates are already around zero. to enforce this policy, we are prepared to buy foreign currency in unlimited quantities, if necessary. moreover, we stand ready to take further measures if the economic outlook and the risk of deflation so require. by setting a minimum exchange rate, we have opted for a simple and clear policy, to which we are fully committed. for precisely these reasons, this policy has been absolutely credible to the markets. before concluding, let me elaborate on two potential side effects which are often discussed in the context of our current monetary policy. on the one hand, it is argued that the significant increase in liquidity since august 2011 may trigger inflation risks in the longer term. given the current economic situation, however, expanding the supply of liquidity was a necessary monetary policy response. there is currently absolutely no risk of inflation in switzerland. first, headline inflation turned negative in october 2011 and continued to decline through the end of the year. it is assumed to fall even further in early 2012. second, neither our inflation forecasts nor the medium - term inflation expectations from our surveys of households and companies show any signs of bis central bankers ’ speeches inflation risks. consequently, there is no necessity whatsoever for the snb to reduce the level of liquidity for the time being. on the other hand, a long period of very low interest rates may lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability. we are well aware of these risks and are analyzing them very carefully. however, due to the exceptional monetary policy situation, interest rates cannot readily be | increased to address such threats. in other words, at the current juncture, monetary policy cannot react to these imbalances with conventional monetary policy instruments. therefore, the swiss government is due to decide soon upon the introduction of so - called macroprudential instruments that can be used – if necessary – to mitigate potential credit and housing market distortions. conclusion the outlook for the global economy remains subdued. this, together with the persistently strong swiss franc, is weighing on economic activity in switzerland. although some indicators have pointed to a slight stabilization recently, we project that the swiss economy will grow only weakly over the next few quarters. the degree of uncertainty regarding the growth outlook remains unusually high, also by historical standards. downside risks – in particular stemming from a further escalation of the european debt crisis – are substantial. if these were to materialize, economic activity in switzerland would suffer a much more pronounced slowdown than just described. despite this rather gloomy overall picture, we should not overlook the potential for a more optimistic development. for instance, if the european authorities were to credibly commit to a sustainable solution soon, existing uncertainties would be reduced substantially. in such a scenario, demand for perceived safe financial assets would fall in general, and for the swiss franc in particular. however, as downside risks are currently far more likely to materialize, the snb will enforce the minimum exchange rate with the utmost determination. under these exceptional circumstances, it is a necessary measure to fulfill our mandate. bis central bankers ’ speeches | 1 |
quarter, uk gdp will still be around 12 % below its level at the end of 2019, a huge shortfall. the impact has been synchronised across economies – the similarities of this shock far exceed the differences in terms of economic impact. that said, within economies – the uk included – the impact of covid has been highly uneven across sectors. those that conduct activity involving large amounts of close human contact have obviously been most seriously affected. i would add that this has led to other notably uneven and unequal effects, because these sectors tend to have higher proportions of low paid workers, female workers, and there is a concentration by ethnicity as well. this is an issue the resolution foundation has done some commendable work on ( cominetti et al, 2021 ). a common question that we ask about economic shocks is whether it is a demand or supply shock. as monetary policymakers we ask this question with good reason – the identification of shock type matters for all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice the impact on spare capacity and inflation. so, what is the answer for covid? the answer appears to us to be both : demand and supply. this is not surprising – shutting large parts of the economy down to protect against infection affects both demand and supply. but this is highly relevant to the task of getting over covid, and for monetary policy. let me try to illustrate the nature of the covid shock through the lens of aggregate demand and supply. the first point to make is that illustrating the shock through a calculation of the output gap alone isn ’ t very helpful, precisely because it is the net of two shocks. in chart 1 i have therefore shown the historical path of aggregate demand ( gdp ) and supply ( potential output ) over the last twenty years, consistent with past mpc forecasts. i would caution against over - interpreting the detail of this chart, as there are several ways to represent aggregate supply and demand, and thus the output gap. but, detail notwithstanding, it is clear that while a gap has opened up between demand and supply during the covid pandemic, the overwhelming feature is the coincident hit to both demand and supply. that stands in marked contrast to the more pronounced impact on demand following the global financial crisis, and persistent period of spare capacity thereafter. as well as the covid shock, the behaviour of supply and demand also reflects | that i see reasons to believe that the longer - term negative economic effects of the covid shock will be smaller than we have seen in the past, particularly in the 1980s and early 1990s. as i described earlier, it seems likely that task and job reallocation and capital redeployment has increased since then, for instance because workers will need less significant retraining to move between sectors. in our assessment, the supply capacity of the economy is expected to be around 1¾ % lower than it otherwise would have been in the absence of covid by the end of our forecast period. but, of course, there are risks on both sides of this assessment. the third point is that, although those sectors which are growing may require new capital, elevated uncertainty is expected to continue to reduce investment other things equal, weighing on the capital stock and productivity growth. i have just used the phrase “ other things equal ” to describe the likely path of investment. however other things ought not to be equal going forward in my view. i mentioned earlier that we have had a decade or more of slower growth and weaker productivity growth. and, as chart 5 shows, although business investment did recover from a low base following the global financial crisis, it too was weak in the period prior to the covid pandemic. this was only partially offset by growth in government investment, which has also generally been weak over the same period ( chart 6 ). the effect of this weakness in investment can also be seen by looking at capital services – a measure of the value of the flow of services which are derived from the capital stock, including machinery, equipment, software, structures, and land improvements. this may better capture the drivers of supply growth than looking at growth in investment alone. it shows a sharp decline following the collapse in investment during the global financial crisis, and a subsequent recovery, which flattened off as a result of the weak investment in the period prior to covid ( chart 7 ). the covid shock has been profound, and has required an increase in public and business debt to smooth the impact. this is a necessary and sensible response. it means that the economic impact of covid will be spread over time – how long we don ’ t know because it is too early to predict. but that cost has to be managed, and it will be easier to do that with a higher trend rate of growth, boosted by stronger investment. let me add that this investment is also needed to support the | 1 |
overwhelm them. while all monetary policy tools have distributional effects, asset purchases have generated far greater attention than have changes in interest rates. for example, there is a perception that asset purchases increase inequality. in the extreme, this risks undermining trust in monetary policy makers and the constituency for operational independence. again, it bears remembering that distributional considerations are rightly the responsibility of governments not of independent technocratic monetary policy committees that are narrowly mandated to achieve price stability. in the event, bank of england research shows that income and wealth inequality has been stable in the uk since the early 1990s, and fell in the years after the crisis when the mpc used unconventional policies. those who gained least from the higher asset prices that resulted from the mpc ’ s asset purchases gained more from its broader effects supporting jobs and activity. 38 simulations using the bank ’ s main forecasting model suggest that the bank ’ s monetary policy easing in response to the crisis measures raised the level of gdp by around 8 % relative to trend and lowered unemployment by 4 percentage points at their peak. without this action, real wages would have been 8 % lower, or around £2, 000 per worker per year, and 1. 5 million more people would have been out of work. 39 see ‘ renewal of the inflation - control target : background information – october 2016 ’, bank of canada. see bunn, p, pugh, a and yeates, c ( 2018 ) ‘ the distributional impact of monetary policy easing in the uk between 2008 and 2014 ’, bank of england staff working paper no. 720. see ‘ the spectre of monetarism ’, roscoe lecture given by mark carney at liverpool john moores university, 5 december 2016. all speeches are available online at www. bankofengland. co. uk / news / speeches that said, greater use of unconventional monetary policy could increase the risk that the bank ’ s core mission is co - opted in the pursuit of other public policies goals. perhaps reflecting the success of inflation targeting in achieving price stability, in recent years a host of issues have been laid at the door of the bank of england from increasing housing affordability to improving poor productivity. there have also been calls for asset purchases to address policy goals not directly related to monetary policy, such as people ’ s qe or mmt – which essentially equate to fiscal policy – and green qe to support the transition to a net zero carbon world by supporting | risk - based supervisory framework becomes fully operational, banks posing higher risks to the system will be subject to more intensive supervision. we have also introduced a framework for domestic – systemically important banks since july 2014. all banks which have been identified as being systemically important are required to hold a capital surcharge in the range of 1 % to 2. 5 %. mauritius, as a highly open economy, has a few large corporates that dominate economic activity. these corporates require a close monitoring. a large exposure limit is in place to curtail the exposure of any borrower or group of borrowers. the basis for computing the large exposure limit was recently enhanced from capital base to tier 1 capital. further, in our framework for domestic – systemically important banks, exposure to large groups is a supplementary indicator. these large groups have been defined as having an exposure of at least rs2 billion to the banking sector. another topic that warrants attention is climate change and the reduction of global carbon emissions. the financial services industry has an important role to play in that area. i know that some central banks are already at an advanced stage in their work and that much work has already been done on that subject at the level of the fsb. in sub - saharan africa, central banks have not focused extensively on climate change. we are eager to know more about the work that has been carried out by the fsb. climate change related measures could also, perhaps, be on the agenda for future meetings. an area on which we must also focus is that of the application of technology in finance. the emergence of fintech represents an opportunity for africa. advances in areas of finance - related technology, such as blockchain, mobile payments and artificial intelligence are opening up new possibilities for financial service firms. this is an area where regional cooperation will be of paramount importance. the setting up of the fintech association will give the impetus to position mauritius as a regional hub for that industry. ladies and gentlemen, our common ambition is to transform africa into an innovative and technologically - enabled continent. however, as regulators, we have an important role to play in fostering innovation. it is our responsibility to ensure that banks operate safely and comply with applicable laws. this is why we must ensure that our regulatory and supervisory structures remain effective by constantly adapting them to changing technologies and business models. since 2017, banks are allowed to have recourse to cloud - based services subject to the fulfilment of certain | 0 |
timothy f geithner : the fed challenge remarks by mr timothy f geithner, president and chief executive officer of the federal reserve bank of new york, at the national academy foundation ’ s 2004 dinner, new york, 8 december 2004. * * * thank you, gene, for that generous introduction. it is a pleasure to be here tonight to celebrate the national academy foundation and all of your contributions to this important mission. i am very pleased to accept this award on behalf of the federal reserve bank of new york. i want to compliment sandy weill on his commitment to education and the achievements of the naf. and i want to recognize three important people from the new york fed who are responsible for the fed challenge : steve malin, lloyd bromberg and bob diamant. among these and other contributions to public service, sandy serves as a member of the board of directors of the new york fed. i want to tell you his reaction to a presentation early this year on our work in financial education. sandy listened carefully to the description of the full array of new york fed programs. then, in his typically tentative and understated way, with the same soft approach he brought to building one of the most formidable financial institutions in the world, asked why the bank didn ’ t limit its role in education to simply supporting the national academy foundation. his belief, with justifiable pride in the foundation, was that there was no more important contribution the fed could make and no more competent institution engaged in this effort than the foundation. fortunately for the new york fed, we have a long and productive collaboration with the foundation. we provide support on curriculum design and professional development. we are working together to help create a new high school in the city with a finance theme. the naf has adopted the fed challenge for its academies throughout the country. and we benefit in turn by using the academy ’ s work as a model for the economic and financial programs we support and initiate. if you care about the economic future of america, you have to care about educational reform and the mission of the naf. this mission has always been important, but it is particularly important today. confidence in america depends importantly on success in the education mission. improving educational achievement will play a critical role in generating the innovations necessary to drive future productivity growth. and yet, us students remain math challenged, and we are awarding a diminishing share of the world ’ s phds in science and engineering. improving the quality | morning i visited the fort bliss army community service training center, which offers classes on such financial topics as budgeting, debt management, understanding credit, car buying, and protecting against identity theft. more broadly, according to a recent study, 80 percent of veterans said their military experience helped them get ahead in life. 1 they said the experience helped them mature, taught them to work with others, and built their self - confidence. the value of military experience is reflected in the fact that the unemployment rate for veterans tends to be lower than the rate for non - veterans. 2 second, when you leave the military, take advantage of education benefits for veterans. the post - 9 / 11 gi bill pays for tuition and fees, a monthly housing allowance, and books and supplies. keep in mind that, on average, compared with high school graduates, people with college degrees earn about twice as much and suffer about half the rate of unemployment. 3 finally, educate yourself about your own personal finances. research by the federal reserve right here at fort bliss shows that financial education can pay off. 4 beginning in 2003, the federal reserve collaborated with army emergency relief, the u. s. army ’ s own financial assistance organization, to provide a two - day financial education course, taught by see pew research center ( 2011 ), “ war and sacrifice in the post - 9 / 11 era : the military - civilian gap ” ( washington : prc, october 5 ) available at www. pewsocialtrends. org / 2011 / 10 / 05 / war - and - sacrifice - inthe - post - 911 - era / 1. in october 2011, the unemployment rate was 7. 7 percent for veterans and 8. 8 percent for non - veterans ( not seasonally adjusted, age 18 and older ). in october 2011, the unemployment rate for college graduates was 4. 4 percent compared with 9. 6 percent for those with only a high school education. see catherine bell, daniel gorin, and jeanne m. hogarth ( 2009 ), “ does financial education affect soldiers'financial behavior? ” networks financial institute working paper 2009 - wp - 08 ( terre haute, ind. : nfi at indiana state university, august ), www. networksfinancialinstitute. org / lists / publication % 20library / attachments / 140 / 2009 - wp08 _ bell _ gorin _ hogarth. pdf. bis central bankers ’ speeches the staff of san diego city | 0 |
mark carney : uncertainty and the global recovery remarks by mr mark carney, governor of the bank of canada and chairman of the financial stability board, to the vancouver island economic alliance, nanaimo, british columbia, 15 october 2012. * * * introduction it is a pleasure to be in nanaimo at the vancouver island economic summit. with british columbia serving as canada ’ s gateway to asia, you are well aware of the interconnectedness of the global economy. to the benefit of billions of people, goods, capital and ideas flow across borders as never before. unfortunately, so too does angst. this is my topic today. while the “ great recession ” is over, what has followed is an unfamiliar process of repairing public and private balance sheets across advanced economies. the depth and duration of this deleveraging are unclear. deleveraging is holding back the global recovery and laying bare distinct challenges in different parts of the world. the euro area is stagnating as it struggles with an underlying balance - of - payments crisis. the united states is at the edge of a fiscal cliff. china and other emerging markets are trying to sustain rapid growth amid weak demand in their traditional export markets. there is a synchronous slowdown under way in the global economy. this past weekend in tokyo, when the international monetary fund ( imf ) marked down its growth forecast, no region or major economy was spared. further, the imf warned that downside risks have risen. 1 against this background, it is not surprising that uncertainty over the global economic outlook is high. it is being reinforced by concerns over how policy - makers will address these challenges. this combined uncertainty is further complicating the recovery, prompting firms and consumers to retrench. there is some evidence of this dynamic here in canada as businesses feel the weight of darkening global prospects. while i will not be able to dispel all of these concerns today, my objective is to explain how policy - makers are addressing some uncertainties and to put some others in their proper context. uncertainty and its impact it is only human to respond to uncertainty with caution. faced with a highly volatile environment, households shy away from spending on big - ticket items such as houses or cars, and firms put off making large capital investments and hiring new workers. the effect on business investment can be particularly significant. this is because uncertainty increases the value of waiting for new information when firms decide whether to undertake big projects, leading them to reduce | a 7 per cent share of global economic activity as recently as 2000 ( measured at market prices ) to an estimated share of close to 18 per cent as of 2013. measured in terms of purchasing power parity, the latest number would be even more impressive. the process has had some occasional set - backs, of course, and is not without precedent – i am thinking here of the late 19th and early 20th centuries and the emergence of the united kingdom and the united states. but such growth is nevertheless extraordinary. emerging asia has accounted for more than 40 per cent of the world ’ s growth over the past 10 years, and hundreds of millions of people have been lifted out of extreme poverty. like most episodes of successful development in the post - war period, the asian miracle has been driven by export - led growth. in many cases this was supported by a fixed exchange rate regime, and an extensive system of currency and capital controls designed to achieve and preserve international competitiveness. of course, there has been considerable variation across countries with regard to their economic circumstances, institutional arrangements and development strategies. the simple picture painted above does not apply to all. nor are asian countries the only ones in the global economy to enjoy sustained external surpluses. more importantly, for every trade surplus, there must be an equal and offsetting deficit, with many advanced countries eager in the past to play this role. bis central bankers ’ speeches such imbalances are not unusual, but the extent to which capital was “ flowing uphill ” during the pre - crisis period was. this was clearly unsustainable. it is one thing for relatively small countries to play this game, but when they grow too large, they soon run out of space. foreign reserve accumulation among the emes since 2000 has totalled more than us $ 6 trillion ( chart 3 ). chart 3 the asian miracle has generated large surpluses and large reserve accumulations the crisis as a catalyst for change when the crisis hit, export markets for the emerging asian economies suddenly imploded. fortunately, many of them had the fiscal and monetary policy space to cushion the blow. however, the crisis merely brought forward a process of global rebalancing that was inevitable. advanced economies had exhausted their credit lines, and emes were running out of foreign customers. advanced economies were going to have to boost domestic savings to get out of hock, and emes were going to have to rely on their own consumers for future growth. the coordinated and ambitious economic recovery | 0.5 |
it looked as if interest rates and inflation in jamaica were moving closer to convergence with that of the rest of the caribbean as well, but this changed sharply in early 2003 and the convergence for which we hoped was abruptly dislodged. we need to get back to that situation where economic convergence is a likelihood. capital markets need it. conclusion not only do authorities need to deliberately target economic convergence we also need to build incentives into our operational frameworks and to reward desired outcomes. this calls for more specific recommendations and for even closer interaction between market participants and the authorities. it also underscores the need for cooperative mechanisms in building our markets. thank you ladies and gentlemen. | . programming would make us creators of the technology rather than simply users. unfortunately, programming is attracting few graduates, despite the potential it offers for job creation, business development and economic wealth. the example of india is one we might wish to draw on. our students have the intelligence ; what is needed is the training, the exposure and the will. in closing, let me express my appreciation to all those who have played a part in transforming the bank ’ s environs, namely the frank collymore hall and the grande salle, into an it learning setting and especially to janice marshall who approached me with the idea, and to her staff who were intimately involved in the hosting of this fair. to the students who will be the focus of this fair over the next three days, i encourage you to be as open and as inquisitive as you wish to be as you move from booth to booth. i hope, too, that you see this event as a veritable investment in our future - yours, the bank ’ s and the country ’ s. i would especially like to thank novaline brewster for looking after the logistics of this event. i thank you all for being here today. | 0.5 |
, the european banking authority ( eba ( european banking authority ) ) and the single resolution board ( srb ( single resolution board ) ) confirmed that common equity instruments would be the first in line to absorb losses. on 18 april, the european commission published a proposal to adjust the eu ( european union ) crisis management and deposit insurance ( cmdi ( crisis management and deposit insurance ) ) framework, including broadening the scope of the resolution framework to smaller and medium - sized banks. the proposal aims to address the shortcomings of the framework that were identified in past crisis situations. this has the potential to enhance the credibility of the framework and strengthen market discipline. at the same time, as the reforms consider changes to well - established deposit insurance schemes, it is important to avoid unwanted side effects. let me recap : recent events have highlighted weaknesses in the banking sector during periods of monetary policy tightening. they have underscored the importance of adequate asset and liability management. banking supervision needs to remain vigilant in a very dynamic environment. consistent implementation of the new basel iii framework at the global level is equally important in this regard. 3 towards a single european capital market ladies and gentlemen, let me now turn from the banking sector to capital markets. the free flow of capital is essential for the functioning of a monetary union. moreover, integrated capital markets can contribute to safeguarding financial stability. this is because improved cross - border financing, especially through equity, can help to share risks and cushion economic shocks. and capital markets can help us deal with the challenges that lie ahead. think about digitalisation or the need to green our economies. these far - reaching transformations will require massive investment that will primarily have to come from the private sector. for example, delivering on the european green deal alone will require additional annual investment of €520 billion across the eu ( european union ) until 2030. to mobilise these sums, europe needs a stable and resilient banking system and deeper and more liquid capital markets. the eu ( european union ) capital markets union would promote capital market financing to complement bank lending. unlike in the united states, bank - based financing still makes up the lion ’ s share of funding in europe. there is a lot of untapped potential in european capital markets. consider insolvency regimes, for instance : the significant differences in national insolvency frameworks across the eu ( european union ) pose a major obstacle to capital market integration in europe. yet there | global financial centres until digital intermediation 7 / 9 bis central bankers'speeches on the continent matches supply and demand in a more effective way than traditional trade practices. we need to create digital hubs and platforms that are more effective than in the analogue world. this requires not only future - proof digital infrastructures but also a pooling of all parties ’ digital power of innovation, be it financial institutions, infrastructure providers, it service providers or fintech. this takes place already, as we could see in the recent past. third, a competitive legal framework : the principle of specialisation and cooperation as well as a high - performance digital infrastructure are only two components of a whole range of elements that a “ digital finance hub of europe ” requires. in spite of all efforts aimed at harmonisation in the eu, in many areas continental europe still does not have a joint, internationally applicable legal framework that can compete with english common law. there are debates at the eu level as to whether the 28th regime could be used as an alternative to the traditional harmonisation of legal provisions. this refers to a private law which does not replace national legislation but provides an alternative at the european level, such as the legal form “ european company ” ( societas europaea, se ) instead of a public limited company. the contractual parties can decide independently whether they want to apply such a law. this is of particular interest in areas in which complete harmonisation does not appear possible or is not easy to achieve. a 28th regime for business on a continental platform could be an option. the aim of further harmonising the legal framework must be to ensure that there are no additional costs for cross - border transactions within the eu – either in a direct form, by means of taxes or fees, or in an indirect form, for instance by requiring legal advice. fourth, compatible it structures : the merging of existing it architectures with the least possible friction represents another challenge. this requires a high level of standardisation. ideally, technical or administrative issues within the eu should not play any role in investment decisions. fifth, market forces have to take effect : specialisation and cooperation, digital networking, a competitive legal framework, and compatible it can help a digital city of europe to grow. however, a project like this can only succeed if it is market driven. the market has to set the agenda. policymakers could assume the role of a catalyst, sitting the main players down at one table. in addition to market participants and representatives of | 0.5 |
global players like large card networks or bigtech firms from china and the us. moreover, citizens and businesses should be able to send and receive cross - border payments to and from countries beyond the euro area under the same conditions and with the same ease as within as was highlighted this morning by bundesbank president jens weidmann. clearly, we need comprehensive european answers to the challenge posed by digitalisation while harnessing the benefits it offers. and these answers need to be inspired by a different mindset than before – just as einstein suggested. at the end of the day, it ’ s payees and payers who should ultimately benefit from being the focus of this mindset. as soon as possible, users should be able to send and receive payments throughout europe in a convenient and cost - efficient, safe and secure way. the underlying payment solution should be 1 / 3 bis central bankers'speeches recognisable as a common brand, enjoy european governance and seek global acceptance. the eurosystem took a first step towards making this vision a reality with its retail payments strategy. 1 today we learned more about the eurosystems ’ reasoning, ambitions and plans to foster payment system development in europe. the european commission recently picked up on this concept in its own retail payments strategy. 2 it is part of a comprehensive range of measures laid out in the so - called digital finance package. this morning it was further outlined by mairead mcguinness how this package will facilitate the digital transformation in financial markets. the bundesbank is fully supportive of these efforts, including during the german presidency. although some details merit further discussion, it became clear today that this package strikes just the right balance between reaping the benefits and mitigating the threats presented by the digitalisation of payments. olaf scholz, rightfully, emphasized the strong political will set on these topic. there ’ s just one point i would like to highlight : sepa instant payments are about to become the “ new normal ” in payments. a number of issues still need to be resolved, though. these include, first, pan - european reach – this is crucial for “ making it ” in the instant world. second, providers have to develop compelling solutions for end - users in all different payment situations : be they mobile, offline or online. ideally, these are seamlessly connected to a comprehensive range of relevant uses cases. introducing biometric authentication could further enhance attractiveness. third, matters of real - time | , with temperatures of up to 40 degrees celsius. the heat adds to a long - running drought, further exacerbating water shortages in parts of the country. 1 climate change is hitting home. it is not only destroying livelihoods, it can also hurt output and influence inflation. think of the horrendous flooding in pakistan, which pushed food prices sky - high. to give you some numbers : global losses from natural disasters totalled 270 billion us dollar last year, according to munich re's natcat service. roughly 55 % was not insured. 2 in a nutshell, climate change affects the real economy and thus central banks'mandate. central bankers and supervisors globally must continue to improve their economic models to better capture climate risks. 3 nature - related risks and biodiversity loss 3. 1 widening the focus i would even go a step further and argue that central banks and supervisors also need to consider nature - related risks and biodiversity loss. it is time to widen the focus for a simple yet important reason : because there will be no stable climate without a healthy natural world – and vice versa. in other words, climate change and biodiversity loss are interconnected and mutually reinforcing. still, nature and biodiversity are disappearing rapidly. and human activity is driving it. deforestation for example and the degradation of fertile land is not only putting wildlife at risk, it also destroys communities, output and hence welfare. according to the world economic forum more than 50 % of global economic output depends on nature. 3 if selected ecosystem services were to collapse, it would cause a decline in global gross domestic product of more than 2 % annually by 2030, according to world bank estimates. 4 3. 2 ngfs work global central banks and supervisors have been taking note. the network for greening the financial system ( ngfs ) – of which i am the vice chair – has set up a task force on biodiversity loss and nature - related risks. while the task force's final recommendations are still outstanding, evidence is already pointing in one direction : if financial institutions continue to ignore nature - related risks – as the majority are doing right now – then this could hurt banks'risk profile and hence their profitability. 2 / 4 bis - central bankers'speeches ignoring nature risks could, for example, lead to losses on corporate loan books and asset holdings. there is an urgent need for further research on the transmission channels from nature loss to the economy and the financial system. unfortunately, the data | 0 |
jurgen stark : the global financial crisis and the role of central banking speech by mr jurgen stark, member of the executive board of the european central bank, at a meeting hosted by the institute of regulation & risk, north asia, hong kong, 12 april 2011. * * * it is a pleasure for me to address this distinguished audience. in my remarks today, i would like to share some thoughts with you on how the global financial crisis could shape central banking in the future. crises are often associated with deep - seated changes in both the mandates and functions of central banks – this is a well - established regularity in contemporary economic history. for example, central bank inaction was widely held responsible for worsening the economic downturn during the great depression of the 1930s. the result was that monetary policy was placed under the control of fiscal authorities for nearly two decades afterwards. the great inflation of the 1970s had the opposite effect. the failure of weak monetary regimes to reign in high inflation led to the establishment, in the early 1980s, of monetary policy frameworks solidly anchored by price stability mandates, and safeguarded by independent and autonomous central bankers. will this crisis – which is still ongoing – have any implications for the tasks of central banks in the future? to shed light on this question, i will, first of all, look back on the salient features of the monetary policy paradigm prevailing before the crisis. then i will review how central banks responded in practice to the crisis, focusing on the ecb ’ s policy actions in this regard. and finally, i will discuss whether certain aspects of the pre - crisis monetary policy paradigm need to be reassessed on the basis of the recent experience, and outline the likely challenges for central banks that lie ahead. * * * 1. the monetary policy paradigm before the crisis we do not know yet to what extent the pre - crisis consensus macroeconomic framework has been de - constructed by the crisis. but we do know that the “ hubris ” of the intellectual paradigm on which that framework was erected has completely vanished. some aspects of the framework, in my view, will undoubtedly survive the crisis. one is the great and increasingly shared emphasis on central bank independence. another is the centrality of price stability for monetary policy. these were the twin foundations of the dominant monetary policy paradigm before the crisis, and the crisis has not challenged or discredited either of them. i will return to the issue of price stability towards the end of my remarks. beyond these | the interbank market emerged in the euro area and elsewhere in august 2007, the ecb reacted swiftly by providing de facto unlimited overnight liquidity to limit euro area banks ’ liquidity risk. as the tensions morphed into a large - scale crisis of confidence in october 2008, the ecb responded with a mix of standard and non - standard monetary policy actions to foster financing conditions and enhance its credit support to the euro area economy, all with a view to maintaining price stability. the standard measures essentially entailed a steep reduction of the main refinancing rate to a historical low of 1 % over a seven - month period ( october 2008 – may 2009 ). this was done in reaction to the weak economic environment and the associated change in the inflation outlook. the non - standard measures included granting banks unlimited access to central bank liquidity against an extended range of collateral with the possibility for banks to borrow liquidity at a broader spectrum of maturities, of up to 12 months. the ecb also intervened directly in some market segments that were dysfunctional, namely the covered bonds market. this was deemed important for the long - term financing of banks. in may 2010 the financial crisis took a different direction ; markets started to question the sustainability of public finances in parts of the euro area. in response, the ecb intervened in some debt securities markets, in order to prevent large and important segments of the securitised credit market seizing up and obstructing monetary policy transmission. these interventions have been limited in size, and their impact on liquidity creation has been fully sterilised. overall, the non - standard measures have been adopted with a view to ensuring the transmission of low policy rates to the euro area economy. they have been tailored to the specific financial structure of the euro area economy, whose financing to a large extent relies on banks. these measures are fully in line with the ecb ’ s price stability objective. in this regard, the approach chosen by the ecb and the eurosystem differs from that of other major central banks which embarked on large - scale unconventional measures to replace, rather than complement, standard actions, after those standard actions – changes in the policy interest rate – had reached their lower limit. in this respect, the ecb ’ s non - standard response does not qualify as a form of quantitative easing or credit easing. non - standard monetary policy measures are an extraordinary response to exceptional circumstances. they are, by construction, temporary in nature. looking | 1 |
strong, but there is still much to accomplish. so we have recently spent some time identifying our key strategic priorities, to make sure we have a good means of deciding what we really must do. as you may have seen, these priorities were endorsed by the group of governors and heads of supervision ( ghos ) at the same time they endorsed and announced the revisions to the lcr. the committee ’ s primary focus in the short and medium term is completing and embedding the full suite of responses to issues that emerged from the financial crisis. with that in mind, foremost consideration will be given to five priority areas : 1. completing the crisis - initiated reforms of the policy framework ; 2. monitoring and reinforcing the implementation of basel regulatory standards ; 3. assessing the impact of, and industry response to, implementation of the regulatory reforms ; 4. examining the comparability of model - based internal risk weightings and considering the appropriate balance between the simplicity, comparability and risk sensitivity of the regulatory framework ; and 5. enhancing the effectiveness of both micro - and macroprudential supervision. completion of the crisis - initiated reforms of the policy framework as i have already highlighted, the policy reforms initiated in response to the financial crisis are not yet complete. while the basic frameworks for risk - based capital and, more recently, liquidity are now largely settled, many of the other reforms i noted earlier remain very much a work in progress. to ensure that the weaknesses in the regulatory framework brought to light by the financial crisis do not persist for any longer than necessary, the committee is aiming to have much of this work completed by the end of 2014. this is an ambitious target, but given the importance of these reforms, there is no basis for unnecessary delay. our plan is for the leverage ratio work – which is largely devoted to the detailed specification of the exposure measure ( ie the denominator ) of the ratio – to be largely completed this year, while the nsfr, trading book, securitisation and large exposures policy work will be finalised in 2014. the committee also has two other major policy initiatives that it plans to launch soon. while not obviously thought of as immediate and essential responses to the financial bis central bankers ’ speeches crisis, they are nevertheless quite important for ensuring that the overall prudential framework remains robust, and existing reforms are effective. these projects are : • a review of the standardised ( credit and operational risk ) approaches to capital ade | collection and analysis of data to help us assess the quantitative impact of a particular policy. quantitative impact studies ( qis ) have become a central element of the committee ’ s work, and we have a full slate of qis exercises planned for this year. alongside the semiannual basel iii monitoring reports, almost all of the policy initiatives i have just mentioned have one or more data collections or impact studies planned. while this can be a burden for banks and supervisors, this hopefully makes for well informed policymaking – so is well worth the effort. in addition to all of the policy and analytical work, the committee intends to : • continue to monitor members ’ commitments to the timely implementation of agreed reforms. to date, this has focused on capital, but will be expanded over the next year to encapsulate local implementation of the lcr, as well as the frameworks for global and domestic systemically important banks ( g - sibs and d - sibs ), since these come into effect over the next couple of years ; • undertake a full set of implementation assessments for 2013. we will conduct reviews of singapore, switzerland, china, australia, brazil and canada. follow - up bis central bankers ’ speeches reviews of the european union and the united states are also planned once their basel iii regulations are finalised ; and • publish a report on the initial, detailed review of risk - weighted asset calculations for the banking book ; we hope to publish the full results by the summer. together with the recently published results on the trading book, this analysis identifies the specific drivers that lead to variations in risk weights for similar exposures. the committee ’ s next step will then be to consider policy responses to reduce any unwarranted variability and to therefore improve the comparability of banks ’ ratios. a theme i will be returning to is the importance of this implementation monitoring work for the committee. while it is a relatively new component of the committee ’ s mandate, it should not be seen as an adjunct to the committee ’ s standard - setting role. rather, it is absolutely critical to successfully delivering desired policy outcomes. where to next? as you can see, the committee is engaged in a variety of projects that require us to combine the efforts and input of regulators and supervisors across a large number of countries. this is a challenging task. an even greater challenge, however, is prioritising among competing projects to achieve our most pressing objectives. the committee ’ s response to the financial crisis has been | 1 |
major central banks and supervisors are on the verge of applying. stephen hawking once famously said about the internet : “ we are all now connected [ … ] like neurons in a giant brain ”. this could also apply to the finance of tomorrow in an interconnected world. each of us – whether regulators or professionals – is at least a neuron ; we need to be connected to other neurons to produce innovative ideas. similarly, no country or financial institution can adequately respond to the challenges of this changing world on its own : we must definitely join our efforts to build our future. thank you for your attention. 1 acpr study on the digital revolution in the french banking and insurance sector, march 2018. 3 / 3 bis central bankers'speeches | what is more, tightening in the credit supply conditions for corporate lending receded in this period ( chart 11 ). chart 10. chart 11. tl loan rates commercial loan standards * ( 4 - week average, percent ) ( net change ) source : brsa, cbrt. * banks are requested to state the change in the demand for credit. net percentage change of indexed responses indicates the direction of the change in credit demand. the index is calculated as [ the sum of percentages for ( increased somewhat + increased considerably ) ] – [ the sum of the percentages for ( decreased somewhat + decreased considerably ) ] + 100. index values greater than 100 signify increase in credit demand. source : cbrt. as a result of these developments, credit growth gained pace in the last quarter of the year ( chart 12 ). accordingly, annual rate of growth in total credit stock materialized around 16 percent at the end of the year, slightly higher than the 15 percent benchmark level for the medium term ( chart 13 ). total credit growth proved robust in early 2013, and the uptrend of 13 weeks in credit volume stood close to the past years ’ average. chart 12. chart 13. loan growth rates annual growth rate of loans ( adjusted for exchange rate, 13 - week average, annualized, percent ) ( percent ) source : cbrt. source : cbrt. bis central bankers ’ speeches there is a risk of further acceleration in credit in the forthcoming period. financial conditions index continued to ease with rapid capital inflows, improving credit supply conditions, and accommodative liquidity policy ( chart 14 ). this outlook necessitates a cautious stance against macro financial risks. given these evaluations, i would like to remind that in its first monthly meeting of 2013, the committee highlighted the faster - than - expected credit growth and signaled that macroprudential measures might be continued should this trend persist. chart 14. financial conditions index * for further details on financial conditions index, see cbrt economic notes no. 12 / 31 and report 2012 - iv, box 5. 2. source : cbrt. 2. macroeconomic developments and assumptions now, i will talk about the macroeconomic outlook and our assumptions which constitute the basis for our forecasts. first, i will summarize the recent inflation developments, and then compare the short term forecasts in the october inflation report with the actual year - end inflation data in 2012. then, i will continue | 0 |
risks is provided to the public, it is often in a form that is hard to assess. thinking carefully about communication is important to the level of public debate. the quantity of information is less relevant than its quality - sometimes less is more. and managing risk means making choices - collective choices - on the basis of a rational shared assessment of the risks involved. we cannot avoid uncertainty. so let us face up to it. the question of who should bear collective longevity risk has been discussed by blake and burrows ( 2001 ), blake ( 2003 ), dowd ( 2003 ), cox and lin ( 2004a, 2004b ), willets ( 2004 ), auerbach and hassett ( 2002 ) among others. | saying that, “ statistical thinking will one day be as necessary for efficient citizenship as the ability to read and write ”. and that is even more true today when we are inundated with statistics from every quarter. second, in order that public discussion can be framed in terms of risks, the public needs to receive accurate and objective information about the risks. transparency and honesty about risks should be an essential part of both the decision - making process and the explanation of decisions. i want to illustrate those two propositions by considering as an example public policy about pensions an issue, you might think, of particular interest to many of us in the academy. when the pensions commission reported in october, it highlighted the financing gap in our present system. but we must not lose sight of the equally important question of what are the risks incurred in pension provision and how should they be shared among us? it is not my intention to make any recommendations. that is for the pensions commission next year, and the government in its turn. but i do want to show that risk is at the heart of the issue. 2. the nature of risk “ in this world nothing can be said to be certain, except death and taxes ” wrote benjamin franklin in 1789. great man though franklin was, it is clear that there is indeed substantial uncertainty both about death, or at least its timing, and the contributions or taxes required to pay for our pensions. when thinking of how much to save for retirement, there are three main risks to consider. first, how much will we be earning in the future? second, what will be the rate of return on our savings? third, how long are we likely to live? tonight i shall focus exclusively on longevity risk - the uncertainty about how long we shall live - in order to focus on my two propositions about probabilistic thinking and public policy. 4 none of us know how long we shall live. but we can assess our chances by looking at the experience of others. a key distinction is between individual and collective risk. chart 1 plots the observed mortality rates at different ages for women in england and wales in 2002, the most recent year for which detailed data are available. ( a similar story can be told for men ). the most common age of death for women was 87, but many died at very different ages. mortality among individuals varies greatly - individual risk. but there is also significant uncertainty about the average length of life of a generation as a whole collective risk. longevity | 1 |
% average earnings per head * wage price index * * - 2 * * * - 2 non - farm. excluding bonuses and commissions. source : abs in terms of price - setting, the experience differs across firms and industries. however, at the aggregate level, the share of profits in national income – excluding the resources sector, where prices are set in global markets – has not changed very much over recent times ( graph 8 ). a reasonable interpretation of this is that, while firms on average have been able to pass on higher costs and maintain profit margins, inflation has not been driven by ever - widening profit margins. graph 8 profit share of income * % % all industries excluding mining * * * * * gross operating surplus of private non - financial corporations as a share of total factor income. excluding mining sector profits and mining sector labour income. sources : abs ; rba looking forward, it is important that wage increases remain broadly consistent with the inflation target and that a widening of profit margins does not become a source of ongoing upward pressure on prices. the board is watching developments carefully in each of these areas that i have discussed. our central view remains that economic growth will be below trend for a while, that unemployment will increase later this year and that inflation will decline gradually over time. it is a narrow path, though, and there are other plausible scenarios. before we take our next interest rate decision in perth in early may, we will conduct a full review of the forecasts and scenarios for the economy and inflation. the importance of returning to low inflation the board ’ s priority remains to return inflation to the 2 to 3 per cent target range in a reasonable time. it is important that we do this, because persistently high inflation is corrosive and damages our economy. it erodes the value of savings, puts pressure on household budgets and hurts people on low incomes the most. high inflation makes it harder for businesses to plan and it distorts investment. and if inflation becomes ingrained in expectations, it requires even higher interest rates and a larger increase in unemployment to get it back down again. it is for these reasons that the board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that. a primary task of any central bank is to preserve the value of money. and the tool we have to do this is interest rates. in principle, different institutional arrangements could be designed and non - monetary tools could be developed to help contain inflation. | 3. 0 may smp 4. 0 2. 5 3. 8 * 2. 0 scenario assumes exchange rate and policy path are fixed to august smp assumptions. sources : abs ; rba. policy implications and conclusions let me conclude. as humans, we are all prone to overconfidence, particularly when forecasting the future. in many cases, the answer we ought to give is that we simply do not know. but it can be hard to say that, particularly if your job is to give a view, and particularly where even small changes in judgement can have first - order effects on people ’ s lives. central bankers, and those who comment on us, are no exception to this universal human trait. in my remarks today, i have set out some of the ways in which we can try to lean against overconfidence without falling into the opposite trap of saying nothing at all. by avoiding over - reliance on point estimates and instead framing our assessments in terms of contingent hypotheses. by continually adjusting the weights we place on those hypotheses through a process of learning – from our own forecast errors, from a wide range of analytical models, from qualitative data and intelligence, from other countries, and through what - ifs and scenarios. and by communicating openly and honestly about where we are relatively confident about the outlook ( and where we are not ), where we are seeking to learn, and the balance of risks. many of these tools are already in use at the reserve bank – and we will move further in that direction as we complete the implementation of the rba review recommendations. of course the billion dollar question is how to map essentially uncertain judgements into policy decisions. that is really the subject for another speech – but the short answer is one should seek to choose strategies that are responsive to, and also robust to, your evaluation of the risks to the outlook as much as to the central projection. in some cases, uncertainty may induce you to be less activist – as you wait for more data, or try to avoid triggering tail risks through your own actions. in others, it can induce you to be more activist : for example, the asymmetry of potential outcomes underpinned the policy response in many countries during the covid - 19 pandemic. but beware anyone who claims it is obvious what to do – for they are false prophets! r e s e r v e b a n k o f au s t r | 0.5 |
øystein olsen : managing wealth – some thoughts on economic policy and the allocation of national savings speech by mr øystein olsen, governor of norges bank ( central bank of norway ), at a meeting hosted by the norwegian embassy, rome, 29 november 2012. * * * introduction european economies are currently going through hard times, with repercussions of the crisis still being felt throughout the world economy. for all of us, it is a humbling experience to observe how closely interconnected markets and economies have become across national borders. my intention here this evening is not to point at solutions to the challenges currently facing the euro area. what i can offer, however, is the perspective of a friendly neighbour and a substantial investor. in this modest capacity, i hope to sound a note of optimism from a region of europe that in its recent past went through a grave crisis, which was followed by a series of reforms and, eventually, the return of prosperity. the nordic experience with the cycle of crisis, reform and recovery might provide some perspective for those european countries now facing similar challenges. i will also make some remarks on the current situation in financial markets in general, and government bond markets in particular, from the viewpoint of a global investor. easy money is bad for you slide 1 : landes quote in his book the wealth and poverty of nations the historian david landes describes how the spanish empire went into a long period of decline when the flow of latin - american gold dried up in the mid - 17th century. according to landes, the moral of this story is that “ easy money is bad for you. it represents short - run gain that will be paid for in immediate distortions and later regrets. ” 1 as a country rich in natural resources, norway has shared and tried to learn from this experience. perhaps the quotation from landes also rings true for all those who borrowed cheaply during the boom before 2008, and who now have to face the consequences. windfall gains, like large and unsustainable capital flows from abroad, are double - edged. they provide short - term relief from hard choices, but may carry with them hardship in the longer term. slide 2 : output gap : a boom - bust economy after the discovery of oil in the north sea in 1969, government spending and social programs expanded rapidly in anticipation of future petroleum revenues. we sought to build a bridge across the post oil - shock recession in europe. but it was a bridge to nowhere. | , and will not entail a large sell - off on our part. instead, the effect will be merely a temporary drop in our purchases of european assets. under the new principle, the fund will still be overweight in european assets, compared to a market neutral position. lessons from the crisis the high equity share, the capacity to increase the risk level in certain periods and the need for diversification are derived from the fund ’ s characteristics. let me now review some of the lessons from the financial crisis that have also shaped the development of the fund ’ s strategy. these changes are closer to the centre of the european debt crisis. the risk tolerance of the fund is to a large degree defined by the strategic equity share, which, as i mentioned, is 60 per cent. since the fund is heavily exposed to risk by virtue of its relatively high equity share, the function of government bonds is in essence to reduce the overall volatility of the portfolio. from this perspective, the most important role for government bonds is to hedge the equity portfolio. the hedge is best achieved by holding liquid government bonds with high credit quality. typically, this entails an overweight of the safest, low - yield government bonds. conversely, high - yield government bonds are more volatile, and thus they do not serve the overall purpose as a hedge in a global portfolio. bis central bankers ’ speeches slide 14 : fixed income : new benchmark the fund ’ s benchmark index for bonds is divided into 70 percent public and 30 percent corporate debt. previously, the allocation in the bond portfolio was based on market weights, and thus the portfolio was allocated in proportion to volume of the sovereign debt issued by each country. this resulted in rising allocation to the bonds of countries with increasing debt. the risk linked to this strategy became clear in the wake of the financial crisis. a reallocation of government debt on the basis of gdp weights will reduce this risk. moreover, we have started investing in government debt issued by emerging countries. the consequence of this is a reduction in the fund ’ s european holdings. increased demand for the safest government bonds may be regarded as an adjustment to the climate of high spreads and volatility that we have witnessed in recent years. in a market environment characterised by general uncertainty, market expectations might cause a slight increase in risk premiums to mount rapidly, unless the underlying cause of the increased risk premiums is dealt with by the relevant authorities. to sum up : a downweighting of | 1 |
banks – get on board. if drivers are key players in ending texting - while - driving, then the banks themselves are essential actors in our economic comeback, and community banks play a central role. community banks were not major culprits in the subprime mortgage crisis, but they definitely suffered from it and took some hard hits because of it. the best community banks exemplify the high - road virtues that we seek to revive as standard operating practices throughout the banking system generally. i am referring to close customer service, long - term vision and sustained relationships, investment that benefits both the bank and the community, commitment to sound underwriting, and consistently legal and ethical practices and transparent governance. here at the graduate school, i imagine these high - road virtues to be one of the core values of the program, not peripheral after - thoughts to the course work that you are engaged in. this is good because, while i have been discussing the low road and the high road as though they are distinct and different physical destinations and directions, in fact it can often be difficult to tell the difference between the two. and just as a detailed map, gps system, and sound experience and judgment can help a driver know which road to take, it can require deep bis central bankers ’ speeches study, careful analysis, and commitment to be prepared to see the positive and negative dynamics intrinsic to any situation and then to make the right choice. i believe your institutions have the capacity to do a lot of good, and that in fact your banks are doing good work every day. and that is why it is a privilege to be here to address you as future leaders of our country ’ s community banks. the role of banks large - scale economic and financial events provide an opportunity to re - think basic assumptions – that is, once we get through the period of crisis management. but it takes a while to get there, and reactions to financial crises consist, first, of strategic containment, and then, of developing techniques of prevention. in terms of our recent financial crisis, the federal reserve attempted to provide the containment through the use of both traditional and innovative macroeconomic tools. congress, in turn, attempted to supply the subsequent preventative tools. in that regard, the dodd - frank wall street reform and consumer protection act ( dodd - frank act ), which embodied congress ’ strategy for preventing another crisis, was passed in july 2010. but in addition to containment and prevention, there is a third component to a meaningful | university of new hampshire ’ s carsey school of public policy and brought together representatives from banks, cdfis, mission - driven lenders, and small business online alternative lenders to talk about opportunities for collaboration, the challenges of scaling up small business lending, and potential consumer and safety and soundness regulatory issues facing partnerships between regulated financial institutions and alternative online lenders. as the sector grows and evolves, we will continue to monitor the development of online alternative lenders and the risks and opportunities that they may have for a range of stakeholders. if a bank is considering a referral partnership, the following questions could help identify potential risks : do existing customers have a need for the product or are there less expensive products that would better serve borrower ’ s needs? are the features, risks, and terms of the products offered through the referral program explained clearly and conspicuously, or are they buried in a lengthy document full of “ legalese ” that makes it difficult for borrowers to make a truly informed choice? finally, are the products offered through the referral partnership consistent with what would be recommended to a family member? ( see curran, 2013. ) there are several regulatory compliance - related questions that banks should consider. for example, have the loans offered or the lending platform to be partnered with been reviewed for compliance with applicable federal and state laws? have the loans originated by the partnering lending platform been reviewed from a consumer fairness standpoint? when assessing referral partnerships, have any issues been identified that would lead to disparate treatment of customers if banks selectively refer customers to online alternative lending partners? ( see federal reserve system community banking connections advisory board, 2014 ). bis central bankers ’ speeches alternative lending products. others have raised concerns about the risk that some small business borrowers may have difficulty fully understanding the terms of the various loan products or the risk of becoming trapped in layered debt that poses risks to the survival of their businesses. some industry participants have recently proposed that online lenders follow a voluntary set of guidelines designed to standardize best practices and mitigate these risks. 23 it is too soon to determine whether such efforts of industry participants to self - police will be sufficient. even with these efforts, some have suggested a need for regulators to take a more active role in defining and enforcing standards that apply more broadly in this sector. no doubt, ongoing technological advances and the evolving competitive lending landscape will continue to present both challenges and opportunities for community bankers who are deeply committed to the provision | 0.5 |
the stability of the financial system, it also encourages sustainable developments in the real economy. on the whole, i believe we have been neither overregulating nor underregulating. it is now crucial to apply the rules that have already been adopted consistently and to complete the outstanding reforms promptly and comprehensively. the rest of the reforms are in the pipeline. they will be rigorous, but not excessively so. that ’ s all there is to say. credit institutions will have to get used to a new market environment and develop business models that are sustainable in the long term. but we in the basel committee will make sure that, on average, the minimum capital requirements do not continue to rise above the level already reached. to do this, the committee will insist that the overall burden of the reforms is analysed in advance and limited if necessary. once the basel iii reforms have been finalised, it is also important to allow time for them to be implemented rather than immediately embarking on new reforms. and i believe that we should check whether the rules could be simplified for smaller institutions. i therefore wholeheartedly back the proposals to review the eu framework by the german finance minister, wolfgang schauble, and the british finance minister. credit institutions must be regulated. but regulation cannot succeed without credit institutions. without the tireless efforts of the banks and savings banks, the banking and financial system will not improve. they have already gone to extraordinary lengths over the last eight years, and that must be rewarded. however, we have not yet reached the end of this long and winding road. let ’ s continue to travel together in the future. i now look forward to discussing with you what the path ahead might look like. thank you very much for your attention. bis central bankers ’ speeches | , when viewed from that perspective. in my view, the existing, soon - to - be - completed set of rules will be with us for some time yet. supervisors concede that the one - off costs of adjusting to the new rules are steep, but i am in no doubt that the non - recurring transitional outlay is appropriate, given that financial stability is such a valuable public asset. and as for the ongoing costs of compliance, this is another area where we will reach a viable long - term situation once the dust has settled over the reforms. i firmly believe that germany ’ s credit institutions will be able to live comfortably with this situation following a period of transition. we will, of course, review the rules and their impact after some time, listening very attentively to take constructive criticism on board wherever possible. ladies and gentlemen, let ’ s sum up the issue of complexity. the rules have become much more detailed and multifaceted ; the alternative to this would have been much tighter capital requirements, say, which would have been imposed regardless of the underlying risk. a multi - layered regulatory approach, then, is a “ next - best solution ” ; and i am in no doubt that the banking community will be able to live comfortably with this situation after a period of transition. the often - cited negative implications of regulation – that it tightens the credit supply and drives up administrative costs at credit institutions – should be analysed objectively. viewed from a distance, it ’ s possible to identify the myths and drill down to a kernel of constructive criticism. this kernel is what we need to give serious thought to – but blanket criticism would be unwarranted here. one point of departure for simplifying matters might be a move towards greater proportionality in banking regulation, and by that, i mean the debate over whether it would make sense to introduce a more graduated set of rules for smaller, less risky institutions. but why should we graduate regulation? some claim that proportionality isn ’ t necessary. after all, isn ’ t complying with complex rules a costly and time - consuming exercise for institutions, whatever their size? but i would say that the costs of compliance weigh more heavily on smaller institutions, with their smaller workforces. they essentially face two challenges simultaneously. first, the complex rules place strict demands on their operating business ; second, smaller institutions have limited organisational capacities to cope with the legal, technical and operational requirements. intricate sets of rules can cause particular du | 1 |
##2 and in mexico ’ s oilproducing capacity, 3 led to a reduction of fiscal revenues from this source from 8. 8 percent of gdp in 2012 to 3. 8 percent in 2017. 4 uncertainty associated to the possible trajectory of interest rates in the united states, to a significant extent driven by the risks deriving from fiscal expansion in an economy operating around full employment, has been sharper in mexico than in other emes, given tight links with the us economy and a high degree of openness to foreign capital flows. the 2016 presidential election in the united states and its aftermath have resulted in unease regarding the prospects for the economic relationship between the two countries in coming years. the renegotiation of nafta has become a focal point of attention for both domestic and foreign investors, in view of the importance of this agreement for the region, both from an economic and an institutional point of view. the potential economic and political implications of the recently concluded electoral process in mexico, where a new president, congress and several state governors were elected, has also been a source of uncertainty. partly as a result of several of the above factors, the availability of external financing declined significantly, from an annual average above 4 percent of gdp in 2013 - 14, to some 1. 5 percent in 2015 - 17. although the price of the mexican crude oil basket has recovered from the lows registered in early - 2016, this came atop a sharp fall over the previous year and a half, thus resulting in current prices that are still about 30 percent below the peaks of mid - 2014. oil production nearly halved in the last 15 years, from 3. 45 million barrels per day in december 2003 to 1. 87 million barrels per day at present, a drop of 46 percent. although the energy sector reform of 2013 is expected to foster oil output, results are likely to flourish only gradually over coming years. as per the most recent projections ( march 2018 ), public oil revenues are expected to amount to 4. 0 percent of gdp this year. the mexican economy has adjusted to these shocks through a number of channels. chief among them is the significant depreciation of our currency since september 2014 which, in terms of its value vis - a - vis de us dollar, accumulates to date around 46 percent, a metric that at some stages has recorded figures nearing 70 percent. of course, notwithstanding the abovenoted reduction in the pass - through coefficient, this has had important implications for inflation. although | themselves and their families and future generations. and as a nation, we are deprived of the benefits of their potential contributions to the economy. consumer protection in the context of my earlier discussion of financial inclusion, federal consumer protection laws are critical to ensuring consumers are treated fairly when offered financial products and services. discrimination and deception have no place in a fair and transparent marketplace. these practices can close off opportunities and limit consumers ’ ability to improve their economic circumstances, including through access to homeownership and education. the federal reserve ’ s consumer compliance supervisory program reflects our commitment to promoting financial inclusion and ensuring that the financial institutions under our jurisdiction fully comply with applicable federal consumer protection laws and regulations. let me give two examples involving the federal trade commission act ’ s prohibition against unfair or deceptive practices in products and services that will undoubtedly be familiar to the audience — student financial aid and mortgage lending. in the last few years, the federal reserve has addressed deceptive practices in these areas through public enforcement actions that have collectively benefited hundreds of thousands of consumers and provided millions of dollars in restitution. in the financial aid context, our actions required restitution for students who were not given full information about the potential fees and limitations associated with opening deposit accounts for their financial aid refunds. 10 and in mortgage lending, our action required restitution by a bank that had given borrowers the option to pay an additional amount to purchase discount points to lower their mortgage interest rate, but that did not actually provide the reduced rate to many of those borrowers. 11 as we mark the 50th anniversary of the fair housing act, the fair lending laws remain critical in fostering vibrant communities and a fair and transparent consumer financial services marketplace. for all state member banks, we enforce the fair housing act, and for banks of $ 10 billion dollars or less in assets, we also enforce the equal credit opportunity act. our examiners evaluate fair lending risk at every consumer compliance exam. while we find that the vast majority of our institutions comply with the fair lending laws, we are committed to identifying and remedying violations when they occur. pursuant to the equal credit opportunity act, if we determine that a bank has engaged in a pattern or practice of discrimination, we refer the matter to the u. s. department of justice ( doj ). federal reserve referrals have resulted in doj public 2 / 7 bis central bankers'speeches actions in critical areas, such as redlining and mortgage - pricing discrimination. for example, in | 0 |
the parallel market to the formal market. we have streamlined fx requirements for the banking system to reduce market fragmentation and increase fx liquidity. we expect responsible behavior among market players. we have a collective responsibility to consistently build our markets to rise above the desire for short - term gains. on the regulatory front, we are pursuing continuous improvement aligned with global standards and best practices. the bsp is rolling - out the enhanced liquidity risk management framework. we are prescribing guidelines on the adoption of accounting standards to promote transparency and fairness in both financial and prudential reporting. the bsp is also continuously working to ensure that financial industry participants are sensitive to, and proactive in, addressing emerging cyber threats. we are enhancing as well our aml - cft compliance posture. the bsp continues to create a supportive policy environment for financial inclusion. banks are now allowed to use third party cash agents for increased on - boarding of the unbanked. we allow reduced know - your - customer ( kyc ) rules for certain low - risk accounts and use technology for face - to - face contact requirements to promote bank account ownership. we have created the framework for opening basic bank accounts. the bsp is also working closely with the national government for the implementation of a biometric - based national identity system to facilitate maximum access to financial services. we are also making big leaps in developing the country ’ s payment system even as we continuously improve the existing arrangements. today, we are capable of producing 43 million pieces of high quality currency notes per month, up from just 6. 5 million pieces 25 years ago. we also produce 200 million pieces of coins per month. our real time gross settlement system, philpass, processes 6, 000 transaction valued at php 1. 4 trillion per day. but we are upgrading it further to do more as we roll out the national retail payment system that will pave the way for the digitalization of our financial system. already, we have together launched pesonet and instapay. more inter - operable and cooperative payment schemes will follow soon. closing remarks as i close, i remind that as market stakeholders, to better navigate a more interconnected and sophisticated financial market system, we must be mindful of changes that are reshaping it. we must embrace the work that needs to be done, to stay... not only abreast, but ahead of developments. this task of navigation is, and has, never been an easy | ##y of banks ’ business functions, especially in the bank / non - bank spectrum. the difference is not arbitrary but reflects real structural differences between regions. in particular, it would be unrealistic to always assume that “ one size fits all ” : we should not put carnivorous lions and herbivorous elephants in the same cage. we should also follow a well - balanced approach that properly recognizes the synergetic cross - effects of item - by - item regulations. an appropriate criterion should be the combined effects of all item - by - item regulations. simply focusing on the “ marginal effects ” of individual measures may be misleading, even though they have good individual rationale. at the same time, we should be aware of a possible trade - off between the long - term benefits and short - term costs of stronger regulations. such regulations may indeed enhance financial stability and economic prosperity in the long run, but the hasty implementation of stringent regulations may hamper a fragile recovery, such as we find ourselves in now. let me stop here for further discussion. thank you for your kind attention. | 0 |
have also seen in the united states, where in the past there was a general absence of confidence, which was rectified by the publication of such stress tests. q : is greater fiscal integration necessary to avoid a repeat crisis of this nature? a : we must, in particular, be able to go as far as possible, without necessarily changing immediately the treaty, notably with regard to very early surveillance, almost automatic sanctions, and the strengthening and extension of sanctions so that the euro area has the equivalent of what we would have if we were in a fiscal federation. q : but wouldn ’ t a federal budget be the ideal solution? a : a federal solution would require a huge leap forward at the institutional level. it seems to me that a fully fledged political federation is not, at present, wanted by the countries themselves, speaking as a citizen, it is a matter of regret to me that the chance to take further steps was not seized in the 1990s. in the meantime, responsibility for the economic union itself – as part of the economic and monetary union, the emu – rests with the member states themselves. they, of course, fulfil this responsibility within the framework of their own national institutions. that being said, the “ peers ”, namely the other governments, duly guided by the european commission in liaison with the ecb, should not hesitate to meet all their own responsibilities : they should ensure that none of them adopts policies that could undermine the stability of the euro area as a whole. they have just seen for themselves the extent to which they share a common destiny. q : why not jointly manage some of the debt of european states? a : we have always been opposed to merging treasury operations, because this would strip states of their responsibilities and they would lose the financial incentive for sound governance. q : do the austerity plans announced amid monumental disarray by the member states pose the risk of killing off the first green shoots of growth? a : it is an error to think that fiscal austerity is a threat to growth and job creation. at present, a major problem is the lack of confidence on the part of households, firms, savers and investors who feel that fiscal policies are not sound and sustainable. in a number of economies, it is this lack of confidence that poses a threat to the consolidation of the recovery. economies embarking on austerity policies that lend credibility to their fiscal policy strengthen confidence, growth and job creation. q : should a | european rating agency be created, since the anglo - saxon agencies have added fuel to the flames during this crisis? a : rating agencies in general have had a pro - cyclical impact. they tend to amplify upward and downward swings in the financial markets. this is still obvious today. this runs counter to financial stability. it is probably advisable to put an end to a global oligopoly of three agencies. but the fundamental problem is to reduce, or eliminate, this amplifying effect that the rating agencies contribute to. | 1 |
however, there is another area relating to the banking sector that we cannot overlook when we compare indian banking practices with the rest of world and that relates to ‘ financial inclusion ’. stepping beyond the banking sector and looking at other core areas of functioning of the central bank, such as foreign exchange reserves management and payments systems also suggest several homegrown practices which are now being regarded as the international best practises. 6. let me begin with prudential regulations. statutory liquidity ratio1 and liquidity coverage ratio2 7. in the wake of the global financial crisis 2007 – 08, the basel committee on banking supervision ( bcbs ) initiated the liquidity coverage ratio ( lcr ) in an effort to strengthen the liquidity framework of the financial systems of the world. bank portfolios generally consist of illiquid assets ( longer - term loans ) that are funded by liabilities ( shorter - term borrowings ) that must be renewed continuously until the longer - term customer loans are fully repaid. episodes of uncertainty, however, can cause increases in short - term rates relative to long - term rates, which can translate into a run on and insolvency for financial institutions. to prevent such run on a daily 1 / 7 bis central bankers'speeches basis, banks need to hold unencumbered, marketable assets that would find buyers at a short notice. a reserve requirement alone may not help enough as a prudential measure for managing liquidity risk ; banks world - wide, for lack of incentives to hold up funds in unremunerated reserves, have often resorted to circumventing the statute by veering away from one form of funding to other in an effort to modify the base for calculating the ratio. the extensive use of short term wholesale funding to fund long term assets in the recent crisis being a case in point. 8. before the global crisis, usa in particular did not have any concept of liquidity asset ratio requirement from either prudential or monetary control point of view. more recently, liquidity risk management has been manifested in various stress - testing methods as per supervisory guidance. other developed countries that never had or abolished liquidity asset ratios or traditional reserve requirements so far were canada, france, sweden, and new zealand. 9. indian banks, however, have always had in place a liquidity risk management system in the form of the statutory liquidity ratio ( slr ). according to section 24 ( 2 - a ) of the banking | in order to achieve a set of objectives such as support and maintain confidence in the monetary and exchange rate policies, limit external vulnerabilities by maintaining foreign currency liquidity to absorb shocks during times of crisis, to provide a level of confidence to markets, demonstrate the backing of domestic currency by external assets and meeting its foreign exchange needs and external debt obligations. 27. however, the design of investment portfolios varies widely across countries, reflecting essentially the exposure to liquidity, currency, interest rate and counterparty credit risks and the scope of active management thereof. portfolio design takes into account a host of factors such as exchange rate regime adopted by the country, the extent of openness of the economy, the size of the external sector in a country ’ s gdp and integration of financial markets. 5 / 7 bis central bankers'speeches 28. india has been frontrunner in terms of international best practices in the management of foreign exchange reserves. according to latest international monetary fund ( imf ) guidelines, reserve management should seek to ensure that ( 1 ) adequate foreign exchange reserves are available for meeting a defined range of objectives ; ( 2 ) liquidity, market, credit, legal, settlement, custodial, and operational risks are controlled in a prudent manner ; and ( 3 ) subject to liquidity and other risk constraints, reasonable risk - adjusted returns are generated over the medium to long term on the funds invested. the broad objectives of reserve management in india runs on similar lines. while liquidity and safety constitute the twin objectives of reserve management in india, return optimisation is kept in view within this framework. it can be found even in the preamble of the reserve bank of india ( rbi ) act 1934, ‘ to use the currency system to the country ’ s advantage and with a view to securing monetary stability ’. here monetary stability may be interpreted as internal as well as external stability, implying stable exchange rate as one of the overall objectives of the reserve management policy. while internal stability implies that reserve management cannot be isolated from domestic macroeconomic stability and economic growth, the phrase ‘ to use the currency system to the country ’ s advantage ’ implies that maximum gains for the country as a whole or the economy in general, could be derived in the process of reserve management7. 29. the reserve bank of india act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets ( fca ) and gold within the broad parameters of currencies, instruments | 1 |
publication process, some of the submitting banks reportedly became concerned about reporting a rate that would suggest that they were being treated by the market as a greater counterparty credit risk than their peers. accordingly, some banks were alleged to have lowered their libor submission below their actual likely borrowing rate to avoid the stigma associated with posting a higher borrowing rate and the possibility that their funding costs could increase as a result. conflicts also reportedly abounded at the level of the individual submitters. again, these highlighted profound compliance problems at some of the submitting banks. as i noted earlier, the intent was that the expertise of the submitter would be insulated from any internal pressures by the informational barriers within the submitting banks. the hope was that these informational barriers separating the submitters from the traders were thick and impenetrable. the investigations into libor manipulation found that the reality was that they were often paper thin and porous. see darrell duffie and jeremy stein. “ reforming libor and other financial - market benchmarks. ” september 19, 2014. bis central bankers ’ speeches we have learned that false reporting and manipulative behavior was pervasive across firms and over time, took many forms and was often conducted in a nonchalant manner. this has been well - documented by the commodity futures trading commission in their published findings. for example, interest rate swap traders routinely asked colleagues to submit rates with an explicit goal to have the adjusted submission benefit the value of specific derivatives positions they held. as an illustration, investigations discovered that one “ senior yen trader ” directly or indirectly made at least 800 requests in writing on ubs ’ s email and chat systems to their submitter. 5 requests often had a casual matter of fact nature to them. to illustrate, an exchange in september 2007 from a trader at ubs to the submitter went as follows. 6 “ hi … could really do with a low 1m [ one month ] over the next few days as have 17. 5m [ million ] fixings if ok with you? ” submitting banks often facilitated this type of behavior – in some cases derivatives traders and submitters sat on the same desk, while in others the submitters were themselves traders, both circumstances obviously representing conflicts of interest. other investigations documented that traders at one bank would often shout across the trading desk to fellow traders to confirm that there were no conflicting requests before they sent their requests to their submitter. 7 the investigations also found that not only were | for a specific example of this phenomenon, see richard roll ( 1984 ), “ orange juice and weather ” american economic review, vol. 74 ( december ), pp. 861 – 880. bis central bankers ’ speeches in normal times, the tension between efficient markets and actual developments is relieved by a series of these tweaked explanations without any substantial changes to underlying views. but as markets came under increasing stress it made the arbitrage and liquidity assumptions underlying efficient market explanations less tenable. 9 further, the signals generated in different markets started to disagree markedly. one of the basic quandaries at the start of the crisis was the differing perspectives from price developments in equity and fixed income markets. the fixed income and equity markets were giving very different signals about the outlook for the economy. fixed income markets were indicating an abrupt slowdown in economic activity and through derivatives such as the abx indices substantial credit losses on some of the newly issued structured products related to residential mortgages. the equity market in contrast reached a peak in october 2007 indicating little evidence of such a slowdown. of course, fixed income and equity markets have different characteristics but perhaps a more important distinction is the role of heterogeneous beliefs and how this might be reflected in asset prices. the economics profession has made great strides in its use of expectations in models but one of the short cuts required to produce these great strides was the simplification to homogenous beliefs. for much of the period leading up to the crisis this simplification was of no consequence. however, as we now understand from sophisticated analysis of models with heterogeneous beliefs, it can produce high valuations for certain set of assets and large abrupt moves in certain market prices when leveraged positions are unwound. 10 how does this unwind express itself in real time in the views and actions of market participants? first, the views tend to become even more dispersed, as do the views regarding what the central bank should do about it. second, market participants become more suspicious of each other and rumors can spread like wildfires. many participants take defensive actions which if one is tracking market prices at a daily frequency add tremendously to the inherent noise in high frequency market moves. 11 more importantly, when the probability of a failure of a counterparty starts to increase the signal in market prices becomes a mixture of fundamentals and assessments of the likelihood of government intervention. elements of all this can be found in classic books such as kindleberger | 0.5 |
restoring price stability, which is the foundation for a vibrant and healthy economy. over the past year, inflation has increased rapidly and dramatically to levels last seen in the early 1980s. a year ago, overall inflation, as measured by the percent change in the personal consumption expenditures ( pce ) price index, was 2. 5 percent. in march, it was 6. 6 percent. a portion of this sharp rise reflects global increases in food and energy prices. but, even excluding energy and food costs, the " core " inflation rate has increased from 2 percent a year ago to 5. 2 percent today. 1 / 4 bis - central bankers'speeches three major imbalances are contributing to an overheating economy and high inflation. first, the effects of the pandemic have significantly increased demand for certain categories of spending, especially for durable goods and housing. this increase in demand is occurring while supply in these sectors is being adversely affected by the pandemic. the case study for this dynamic is the automobile sector. the combination of high demand and supply shortages has led to historically low inventories. customers are lining up to buy cars but are finding the dealer lots empty. it's a seller's market, and prices have soared. new car prices are up nearly 15 percent since the start of the pandemic, and used car prices have skyrocketed, rising more than 50 percent. another prominent example is housing. with remote work policies in place, many people have relocated - buying larger homes in the south, in the suburbs, and in more affordable cities. this shift has caused demand for housing in some regions to far outstrip supply, while new housing construction has been held back by shortages in labor and materials. the imbalance between demand and supply has led to bidding wars. homes have sailed off the market at record prices, with many purchased sight unseen. this combination of high demand and crimped supply has also resulted in rapid increases in rents, especially for apartments coming onto the market. the second major imbalance is in the labor market, where overall demand far exceeds existing supply. the ratio of job vacancies to the unemployed is near its all - time high, workers are quitting jobs at a record rate, and employers are bidding up wages. this sizzling hot labor market is also related to the imbalance between demand and supply for goods and housing, as businesses seek to hire more workers to help meet the high demand. and labor supply shortages | john c williams : the right tools for our time remarks by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the international economic symposium co - hosted by the deutsche bundesbank and nabe, eltville, 10 may 2022. * * * as prepared for delivery good afternoon. i'm so pleased to be here with you today. we've waited a long time to gather in person. and i think we can all agree that meeting in this charming location was worth the wait. for most visitors, eltville is renowned for its wine and roses. but for economists, it's a place to convene for weighty discussions on monetary policy. given the events happening around the world today, there is much to discuss. we are meeting at a time of significant economic challenges and uncertainties. inflation has reached levels not seen in decades, both in the united states and in many other countries. and recent events - including the war in ukraine, lockdowns in china, and other supply disruptions related to the ongoing covid - 19 pandemic - are exacerbating near - term inflationary pressures and uncertainty about the global economic outlook. the challenge for monetary policy today is clear : to bring inflation down while maintaining a strong economy. this, of course, is at the heart of the federal reserve's dual mandate of price stability and maximum employment. although the task is difficult, it is not insurmountable. we have the tools to return balance to the economy and restore price stability, and we are committed to using them. before i go any further, i will give the standard fed disclaimer that the views i express here are my own and do not necessarily reflect those of the federal open market committee ( fomc ) or anyone else in the federal reserve system. overheating whenever i talk about monetary policy, i start with the federal reserve's dual mandate : price stability and maximum employment. with the unemployment rate back to very low pre - pandemic levels, and a variety of indicators showing the labor market is very strong, maximum employment has been achieved. but, with inflation rising to unacceptably high levels, we are far from our longer - run goal of 2 percent inflation. high inflation harms those who are most in need. too many families are now struggling to meet the increasing cost of necessities. i am resolutely focused on | 1 |
began to be collected in 1948. even more dispiriting than this snapshot of the employment picture is that there is so little momentum toward improvements in labor market conditions. the level of payroll employment fell by nearly 9 million during and just after the recession. to date, only about one - fourth that number of jobs has been restored. the pace of job growth in recent quarters has been barely enough to absorb the increase in the labor force and wholly insufficient to produce meaningful declines in unemployment. the number of new claims for unemployment insurance suggests only modest gains in employment in coming months, while measures of job vacancies seem to have turned down. longer - term concerns for the u. s. labor market persistent employment weakness during an economic recovery, even such a tepid one, raises the important question of whether it is symptomatic of longer - run changes in the labor market. indeed, in some respects the recent weakness resembles the “ jobless ” recoveries that followed the 1990 and 2001 recessions. in both of those episodes, job growth remained weak well after the downturn in real gross domestic product ( gdp ) ended, and the unemployment rate continued to rise, though from lower levels than we have today. one might reasonably ask if these similarities suggest that structural changes have placed the labor market on a permanently lower growth path. a first response is that there are important differences between this recovery and the recoveries that followed those earlier recessions. in particular, some explanations offered for the weak labor market recovery following the past two recessions are clearly not relevant today. both the 1990 and 2001 recessions were relatively shallow downturns. this factor may have allowed more of the employment adjustment to occur through attrition, which can be spread over a longer period than layoffs. and both of those recessions followed long expansions, which may have permitted a buildup of productive inefficiencies that gave businesses scope to increase output in the subsequent recovery without expanding employment. 2 that said, there are some discouraging longer - term trends. even before the recession, the labor market seemed to be on a slower trajectory than in previous decades. between the business cycle peak in early 2001 and the peak in late 2007, the number of payroll jobs rose an average of only about 0. 6 percent per year, compared with job growth of 1. 8 percent per see michael w. l. elsby, bart hobijn, and aysegul sahin ( 2010 ), | ##less ” recoveries is a slow rebound in aggregate economic activity. over the first eight quarters of all three recoveries, real gdp grew at an average annual rate of 3 percent or less, compared, for example, with more than 5 percent in the two years following the 1975 and 1982 recessions. even taking into account differences in trends across time, the slower pace of overall economic growth following recent recessions is striking. various arguments have been advanced in an effort to rebut the presumption that an aggregate demand shortfall accounts for much or most of the increased unemployment. the see christopher l. smith ( 2011 ), “ polarization, immigration, education : what ’ s behind the dramatic decline in youth employment? ” finance and economics discussion series 2011 - 41 ( washington : board of governors of the federal reserve system, october ). see, for example, christopher ruhm ( 1997 ), “ is high school employment consumption or investment? ” journal of labor economics, vol. 15 ( october ), pp. 735 – 76 ; and thomas a. mroz and timothy h. savage ( 2006 ), “ the long - term effects of youth unemployment, ” journal of human resources, vol. 41 ( spring ), pp. 259 – 93. for a dissenting view regarding the effect of high - school employment, see joseph v. hotz, lixin colin xu, marta tienda, and avner ahituv ( 2002 ), “ are there returns to the wages of young men from working while in school? ” review of economics and statistics, vol. 84 ( may ), pp. 221 – 36. bis central bankers ’ speeches most common argument is that the deep recession created serious difficulties in matching available workers to available jobs, resulting in a big increase in structural unemployment. the mismatches in question could develop for a number of reasons. first, some have suggested that the traditional willingness of american workers to move from weaker labor markets to stronger ones has been impeded by the sharp decline in residential property prices and especially by the large number of mortgages that are now greater than the values of the properties securing them. but research to date suggests that such “ house lock ” has probably not had more than a small effect on structural unemployment thus far. 7 as noted earlier, migration rates have been falling for some time. but the declines during the recession have not been larger for homeowners than for renters. nor has migration declined more in areas where | 1 |
approach that uses all available tools and considers all relevant factors. we should also carefully consider whether our approach is appropriate in the moment : are the federal banking agencies acting in a consistent manner in their bank supervisory activities? are federal banking agencies coordinating appropriately with state banking agencies when reviewing state - chartered banks? and fundamentally, are supervisory decisions being driven by a comparison or horizontal review of differences among institutions that may have very different business activities and risk profiles? are supervisors acting pro - cyclically, or overreacting to the events of march 2023? when agencies adopt a more adversarial approach to supervision, or apply standards that are disproportionate to risk, does that negatively impact a bank's ability and willingness to engage in open communication with their examiners? asking these questions can help us appropriately calibrate our revised approach to banking supervision and help us avoid reacting in a way that is disproportionate to an institution's risk to the banking system. before concluding my prepared remarks, i'd like to discuss the federal reserve's and the other federal banking agencies'rulemaking agenda. a number of rules have been proposed for comment or are currently in the pipeline. some have already been published for comment including the proposal to implement basel iii " endgame " by significantly expanding capital requirements and bringing the threshold for compliance down to include all banks over $ 100 billion in assets from only the largest gsib banks, and the expansion of the long - term debt requirement from only the largest banks again to all banks over $ 100 billion in assets. still other proposals have not yet been published or moved to the next stage of the rulemaking process, including the community reinvestment act rulemaking, the further consideration of climate guidance, and others. the board has also publicly indicated it may propose additional revisions in the future to regulation ii. the scope of some of these reforms will be extensive and could reshape the contours of the bank regulatory framework in important ways, including for community banks. it is critical that stakeholders engage in the comment process and communicate with policymakers to share their views on the rulemaking agenda, including the specific impacts - intended and unintended - of any changes. public comments, data, and analysis help to inform decisions made throughout the rulemaking and proposal process. the bankers in this room and across the country are vitally important to the banking system, and to the broader economy, and it is important that as reforms take | of change in the core cpi is expected to remain at around 0 percent for the time being, but thereafter is expected to record a clear year - on - year increase in fiscal 2013. this outlook, however, is subject to various uncertainties, among which future developments with regard to the european debt problem continue to represent the most significant risk to the economy. its effects are already spreading to japan ’ s exports and production, both directly and indirectly through international trade. attention should therefore continue to be paid to the possibility that the european debt problem could lead to weaker growth in overseas economies – and consequently in japan ’ s economy – mainly through its effects on global financial markets. in the united states, strains from balance - sheet repair, as mentioned earlier, continue to weigh on the economy despite some firmness observed in household sentiment on the back of improvements in the employment and income situation. with regard to emerging and commodity - exporting economies, which are expected to drive global economic growth, there remains a high degree of uncertainty about whether these economies – including china, where the inflation rate has been declining recently – can achieve price stability and economic growth at the same time. regarding the outlook for prices, there is a possibility that the inflation rate will rise more than expected if international commodity prices increase due to geopolitical risks such as those associated with the situation surrounding iran, while there is also a risk that the rate of inflation will deviate downward from the bank ’ s baseline scenario due, for example, to a decline in medium - to long - term inflation expectations resulting from a slowdown in economic activity. ii. measures taken by the bank a. recent conduct of monetary policy toward a sustainable growth path with price stability with a view to overcoming deflation and returning japan ’ s economy to a sustainable growth path with price stability, the bank continues to consistently make contributions as the central bank, through the three - pronged approach of pursuing powerful monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth. 1. pursuing powerful monetary easing the bank decided the following three new measures at the monetary policy meeting held on february 13 and 14, 2012. bis central bankers ’ speeches a. introduction of “ the price stability goal in the medium to long term ” first, the bank introduced “ the price stability goal in the medium to long term, ” which is the inflation rate that the bank judges to be consistent with price stability sustainable over the medium to long term. prior | 0 |
lars heikensten : introduction to monetary policy speech by mr lars heikensten, governor of the sveriges riksbank, at the riksdag committee on finance, stockholm, 16 october 2003. * * * let me begin by thanking you for the opportunity to come here and talk to the members of the riksdag committee on finance about monetary policy. i believe that the committee's public hearing of the riksbank governor provides a good basis for a constructive discussion of monetary policy in sweden and comprises an important part of the openness the riksbank wishes to safeguard. these open hearings began originally at the initiative of the riksbank. they were an expression of our endeavour to bring about an open discussion on monetary policy, an endeavour that has since taken on many other aspects ; lengthy inflation reports, published minutes from monetary policy meetings, press conferences where we account for our interest rate decisions and explain our deliberations, and so on. now these hearings are a part of our legislation. the fact that the committee closely follows our activities has become even more important since the riksbank was given an independent status. these hearings illustrate the clear link between us and the democratically - elected body in sweden. today i shall take up three themes. i shall begin with a few words about the riksbank's situation following the referendum. then i shall comment as usual on the assessment of inflation and the interest rate decision we have published. finally, i shall discuss the swedish economy's long - term growth prospects. the riksbank after the referendum the result of the referendum was, as we all know, a " no " vote. what this means for the riksbank is that we will continue to focus our operations on our statutory objectives ; to maintain price stability and to promote a safe and efficient payment system. quite simply, it will be " business as usual " for monetary policy. this means that under normal circumstances we will continue to follow our simple monetary policy rule : if future inflation is forecast to be higher than the inflation target of 2 per cent, we will raise the interest rate, and vice versa if inflation is forecast to be lower than 2 per cent. this clear intellectual framework makes it easier to influence expectations of monetary policy in society and to evaluate the policy afterwards. both we ourselves and external analysts can take a stand on whether the policy appears sensible in relation to the target, whether the forecasts we make are reasonable, and whether | letting the conduct of monetary policy be excessively influenced by an undue concern for the stability of asset values. it saw that the aversion to significant interest rate movements expressed at the time by the bank of canada put at risk its ability to achieve its macroeconomic objectives. in one of its more colourful phrases, the report warned that “ the authorities must not be restrained by excessive tenderness. ” 21 however, the present confidence in markets is not just a question of philosophy. since the 1960s, a variety of legislative and structural changes have made the financial sector still more resilient and flexible. this has made the transmission of monetary policy more efficient and has eliminated residual concerns about the inability of the markets to cope with the effects of central bank actions. d. concluding remarks even though the porter commission had some remarkable insights, there is no doubt that there has been a major change in views since the 1960s with respect to the objective of monetary policy and the mechanisms through which policy works. two factors stand out in trying to understand the change. the first is the simple accumulation of experience that has exposed some of the shortcomings in earlier thinking about macroeconomic policy. the second is the advances in the analytic framework available to policy - makers to help them analyze the workings of the economy and of monetary policy. these are not independent factors, of course, since economic analysis does change in response to experience. in this case, it was the inability of the previous framework to provide a satisfactory explanation of the developments in the second half of the 1960s and the 1970s that led to changes in the framework for analyzing the macroeconomy. porter commission report, pp. 477 - 478. experience of good and bad outcomes has thus played a major role in the development of views about monetary policy. the theory dominating the views of tony hampson and his colleagues was developed in response to the great depression of the 1930s. however, the views of my generation of central bankers have been coloured by the great inflation that marked our professional years. this brought back to the fore the fundamental truth about inflation being a monetary phenomenon that had become temporarily obscured in the 1950s and 1960s. i want to make sure, however, that i do not leave you with the impression that views on monetary policy are mere creatures of circumstance. our belief in the objective of price stability has a more solid foundation than that. a vast range of historical evidence as well as a large body of economic theory have long supported this objective as a necessary factor for good performance | 0 |
demand side secular stagnation, " american economic review, vol. 105 ( may ), pp. 60 – 65. — — — — ( 2016 ). “ the age of secular stagnation : what it is and what to do about it, " foreign affairs, vol. 95 ( march - april ), pp. 2 - 9. wicksell, knut ( 1936 ). interest and prices ( geldzins und guterpreise ) : a study of the causes regulating the value of money, trans. r. f. kahn. london : macmillan. 1 wicksell ’ s interest and prices, published in german in 1898 as geldzins und guterpreise by gustav fischer ( jena ), was first published in english in 1936 — see wicksell ( 1936 ). 2 see laubach and williams ( 2003 ). see also gagnon, johannsen, and lopez - salido ( 2016 ) and johannsen and mertens ( 2016 ). it is important to point out that r * is not an observable variable and that estimates generally reflect assumptions about how the economy works and should be modeled. as such, different methodologies or underlying economic models can come up with a wide range of estimates of r *. lewis and vazquez - grande ( 2017 ) examine parameter uncertainty and alternative specifications in the estimation of the natural rate of interest. under some specifications, they find an estimated r * at the end of 2016 of close to 2 percent, far higher than the about 0. 5 percent reported by the methodology of holston, laubach, and williams ( forthcoming ). 3 see holston, laubach, and williams ( forthcoming ). 4 in chapter 23, p. 353, keynes includes an interesting discussion of the “ strange, unduly neglected prophet silvio gesell ( 1862 – 1930 ), whose work contains flashes of deep insight and who only just failed to reach down to the essence of the matter. ” he adds that gesell was a successful german merchant in buenos aires. see keynes ( 1936 ). 5 see summers ( 2014, 2015, 2016 ). 6 see fischer ( 2016a ) for a fuller discussion of the risks associated with a low equilibrium interest rate. 7 see irwin ( 2017 ) for an examination of an alternative pattern of causality, where slow growth — and, in particular, weak wage growth — has led to low productivity growth rather than vice versa. i should also remind the | in remote areas need to have access to quality services essential to improving their welfare, such as education and banking services. it is therefore crucial that basic infrastructures are put in place starting, for instance, with national - wide internet broadband access points and the promptpay electronic fund transfer system. moreover, these infrastructures must be interoperable and open to all, which would definitely require collaboration of the whole industry, not just an effort of any one firm. our promptpay infrastructure was the result of close collaboration between the bank of thailand and the thai bankers ’ association. it has spurred healthy competition amongst banks, catalyzing enhancement in the e - payment landscape such that it provides increased opportunities for many small merchants and consumers. another important factor for inclusivity is digital literacy. it is imperative to equip people with necessary skills to survive and thrive in this digital era. this is an enduring task and one that requires active participation at every level. this effort can begin with individual staff in one ’ s own organization — working from tech - savvy juniors to technologically - challenged peers. ladies and gentlemen, i believe the three key imperatives of productivity, immunity, and inclusivity will help thailand navigate through this digital disruption and continue on the path for sustainable economic growth. before i end my remark this morning, i would like to emphasize once again that while this new digital ecosystem is still evolving and the future remains uncertain, we cannot afford to hold back. we must strategically adapt and adopt technologies now to remain relevant and competitive and provide support for sustainable improvement in the standard of living of the thai people. in closing, i would like to congratulate the iod once again for fittingly organizing this call for action conference. actions taken at the firm level can determine the direction of our country and whether we can efficiently catch up with rapid technological changes. these changes will also inevitably affect the whole ecosystem of thailand. therefore, i urge you all to think on a bigger picture on how your firms can help make thailand ’ s digital transformation successful and fruitful. so, think big, stay informed, and act wisely. only then we can be certain that together we could truly rise above disruptions. thank you for your attention. * * * * * * * * * | 0 |
consistently said that the dynamism of the kenyan economy is largely driven by micro, small and medium enterprises, or msmes, and thus this survey contained some related questions. it also contained questions about agricultural finance modules that provide data for better understanding the usage of financial products and services within these specific aspects. so what jumped out at me in this survey? first, some interesting numbers. kenya ’ s financial access has risen to 82. 9 percent in 2018, up from 75. 3 percent in 2016, and as low as 26. 7 percent in 2006. this is a remarkable jump in just over a decade, and this number is despite the age, education, gender, residence, and income gaps. what is equally interesting – and bear with me for drilling down into the statistics – is that only 11 percent of kenya's adult population is completely excluded from any form of financial services, products or institutions. this number was as high as 41. 3 percent as recently as 2006. the most traditionally marginalised regions of the country also recorded the highest declines of excluded adults. the north eastern region recorded a decline of 47. 2 percentage points, the upper eastern region a decline of 24. 6 percentage points, and the coast region a decline of 18. 6 percentage points. this is something to celebrate. here is another statistic. the number of kenyans using more than one type of financial service and product, and this is both formal and informal, increased to 73. 7 percent in 2019, compared to 18. 8 percent in 2006. digital finance is also showing strong growth. in just the years between the 2016 survey and this one, the uptake of loans through digital apps grew from 0. 6 percent to 8. 3 percent. what will come as no surprise to any kenyan in this room is the place of friends and family. kenyans still rely a great deal on these groups to tide them over day to day, and a third of kenyan households say that this is the primary way they get by. the number jumps when they are asked about how they deal with a financial shock, with just about half, or 50. 1 percent, saying that friends and family are the key. social capital remains crucial. what are the flies in the ointment? it's not all good news, and some concerns remain. some questions we are asking ourselves out of the survey findings include the following : why are kenyans increasingly tapping the digital apps loans? do they care about pricing of | education statistics website at https : / / nces. ed. gov / programs / digest / 2014menu _ tables. asp. see table 11 in board of governors of the federal reserve system ( 2014 ), report on the economic wellbeing of u. s. households in 2013 ( pdf ) ( washington : board of governors, july ). see stephanie riegg cellini and latika chaudhary ( 2012 ), “ the labor market returns to a for - profit college education, ” nber working paper series 18343 ( cambridge, mass. : national bureau of economic research, august ) ; david j. deming, claudia goldin, and lawrence f. katz ( 2012 ), “ the for - profit postsecondary school sector : nimble critters or agile predators? ” journal of economic perspectives, vol. 26 ( winter ), pp. 139 – 64 ; and kevin lang and russell weinstein ( 2012 ), “ evaluating student outcomes at for - profit colleges, ” nber working paper series 18201 ( cambridge, mass. : national bureau of economic research, june ). see riegg cellini and chaudhary, “ the labor market returns ” ; deming, goldin, and katz, “ the for - profit postsecondary school sector ” ; and lang and weinstein, “ evaluating student outcomes, ” all in note16. see lang and weinstein, “ evaluating student outcomes, ” in note 16. 11 u. s. code § 523 ( a ) ( 8 ) prevents education debt from being discharged in bankruptcy unless the debtor proves that paying the debt would “ impose an undue hardship on the debtor and the debtor ’ s dependents. ” for the complete 11 u. s. code § 523 ( a ) ( 8 ), see the u. s. government publishing office website at www. gpo. gov / fdsys / granule / uscode - 2011 - title11 / uscode - 2011 - title11 - chap5 - subchapii - sec523. the great recession also affected the way students borrowed to pay for college as private lenders tightened underwriting standards. private lenders originated more than $ 20 billion in student loans during the 2007 – 08 academic year. however, that figure fell to about $ 9. 4 billion in the following year and reached just $ 5. 6 billion bis central bankers ’ | 0 |
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