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are being taken by the government to promote insurance and pension sectors. while, to some extent banks can undertake the maturity transformation, to mitigate the risk of such transformation beyond acceptable limits, the only option is for government itself or government entities like iifcl to provide appropriate risk mitigants till natural long term institutional investors emerge in a big way. to come back to repos in corporate bonds, rbi has already set out the pre - conditions for allowing repos in corporate bonds : viz., an efficient and safe settlement system based on dvp and availability of fair prices. the permission to the clearing houses of the exchanges to open a transitory pooling account with the rbi is the first step taken to provide an environment for an efficient and safe settlement system. draft guidelines for allowing repos in corporate bonds will be placed shortly on rbi ’ s website for wider dissemination and comments. take out financing is one method of addressing the alm issue. some argue that take out financing has not worked because of the higher capital requirements that needs to be maintained, both by the financial entity offering the asset for takeout as also the bank financing the infrastructure. in case of organisations like iifcl offering take out, this should not be an issue. however we are having a relook at this constraint. issuance of long term bonds by banks with special incentives for investors is another suggestion that is made for addressing the problem of asset liability mismatch. while this is being examined, it needs to be mentioned that the recent introduction of the 10 year future on the exchanges can perhaps help in developing products to mitigate the interest rate risk for infrastructure projects. to conclude, there is need to address the non credit issues in agricultural credit, credit and credit plus issues in mse financing and a variety of innovative risk mitigants in infrastructure financing to make sure that the indian banking system can play its due role in capital formation in these three vital sectors of the economy so critical for sustainable inclusive growth. references reserve bank of india ( 2009 ) : annual report planning commission ( 2008 ) : 11th five year plan – 2007 - 12 government of india ( 2009 ) : economic survey, 2008 - 09, ministry of finance government of india ( 2009 ) : annual report, ministry of micro, small and medium enterprises | for 2008 - 09 resulted in write off of loans for farmers enabling them to re access the banking system. the policies have led to significant increase in share of agricultural credit to agriculture and allied gdp from 22. 7 per cent in 2004 - 05 to 33. 3 per cent in 2008 - 09. the compounded annual growth rate of agriculture credit was 28. 4 per cent during 2003 - 08 as compared to 24. 5 per cent for overall bank credit in this period. the fact that overall private capital formation in agriculture has declined during this period would suggest that most of the incremental credit has gone for production and not for investment. this is an issue which needs more study to understand the factors that are impeding private capital formation in agriculture. these would be obviously closely linked to the factors identified as impeding growth in agriculture. micro and small enterprises ( mses ) while non financial factors may be more important in the agricultural sector, in the mse sector, credit is a vital input for growth. as per the data on micro and small enterprises ( mses ) in the annual report of ministry of micro, small and medium enterprises, 2006 - 07, the sector accounted for around 39 per cent of total industrial production, 34 per cent of the exports in the industrial sector and around 35 per cent of total employment among units engaged in manufacturing and services. the sector registered a robust annual average growth in value of output, exports and employment at 16. 8 per cent, 20. 0 per cent and 4. 4 per cent, respectively during the expansionary phase of 2003 - 07, before showing signs of slowing down in 2007 - 08 particularly in respect of employment growth to 2. 9 per cent. according to the annual report of ministry of micro, small and medium enterprises, 200607, fixed investment in the sector constituted 37. 8 per cent of the value of production from the sector in 2005 - 06 ( decline sharply from 59. 9 per cent in 1999 - 2000 and 51. 6 per cent in 2002 - 03 ). credit to the sector as share of gdp of the sector however rose marginally from 55. 0 per cent in 1999 - 2000 to 56. 7 per cent in 2006 - 07. in terms of overall bank credit, credit to mses declined from 14. 5 per cent in 1999 - 2000 to 7. 2 per cent in 2006 - 07. although annual growth rate of credit to this sector was more than 20. 5 per cent in this period, credit to the | 1 |
##0, and maki - franti, p., a. silvo, a. gulan and j. kilponen ( forthcoming ), monetary policy and inequality : the finnish case, bank of finland research discussion papers. 2 see also riksbank ( 2020 ). distributional effects of the riksbank ’ s measures, monetary policy report, november 2020. www. riksbank. se / globalassets / media / rapporter / ppr / fordjupningar / engelska / 2020 / distributional - effectsof - the - riksbanks - measures - article - in - monetary - policy - report - november - 2020. pdf 3 john rawls, a theory of justice. 1971. 4 see www. ecb. europa. eu / home / html / index. en. html 3 / 3 bis central bankers'speeches | emerged that threaten to unsettle the global economy. during the early part of 2018, growing expectations of a faster pace of monetary tightening began to emerge, as the stronger pace of united states ( us ) growth was sustained and fiscal policy became more expansionary. growth in europe and japan has slowed, while the strengthening of the dollar has resulted in a reversal of capital flows from the emerging markets. in addition, concerns about the rise in protectionism have materialised, thus contributing to an escalation in trade tensions. concerns about a possible trade war have contributed to uncertainty about world trade, which could derail the global economic recovery that policymakers have been working hard at since the global financial crisis. we are already witnessing the adverse effects. in april, for example, we saw the largest decline in world trade since may 2015. 1 ‘ south africa ’ s future foreign policy ’, an article by nelson mandela in foreign affairs, vol. 72, no. 5, november / december 1993, african national congress page 2 of 6 trade wars are, in effect, a ‘ zero sum ’ game. small open economies suffer the most, as they rely on trade with the advanced economies and large economies - who are the price setters. addressing these risks at both country and global level requires strong institutional frameworks and a commitment to cooperation and coordination. the rising interconnectedness has widened the set of shared problems that are more effectively addressed through a global agenda. in this respect, collaboration is essential. this includes, among other things : reaffirming the open and rules - based multilateral trade system ; strengthening the global financial safety net ; addressing the excess external imbalances ; completing the financial regulatory reform agenda ; and reaching the 2030 sustainable development goals. these issues are central to the agendas of the group of twenty ( g20 ), the financial stability board, the bank for international settlements, the international monetary fund, and the world bank. south africa is an active participant in all these institutions. as you may be aware, the 10th brics2 summit, this time under south africa ’ s presidency, concluded a few days ago. its theme was ‘ brics in africa : collaboration for inclusive growth and shared prosperity in the fourth industrial revolution ’. since the beginning of 2018, the sarb has actively driven a number of initiatives among the brics central banks. this has included initiatives directed at enhancing the research capacity of the contingency reserve arrangement ( cra ), further work | 0 |
ignazio visco : welcome address - 3rd finance and productivity conference welcome address by mr ignazio visco, governor of the bank of italy, at the 3rd finance and productivity conference, " green deal - reformation, evolution, and revolution ", rome, 8 - 9 june 2023. * * * ladies and gentlemen, distinguished guests and colleagues, i welcome you all today to the third finance and productivity conference organised by the bank of italy, together with cepr, the competitiveness research network ( compnet ), the european bank for reconstruction and development ( ebrd ) and the halle institute for economic research ( iwh ). the topic chosen for this year – " green deal : reformation, evolution, and revolution " – underlines the importance of the ongoing debate about the green transition and the quest for making our economic systems more resilient to climate shocks. the discussion around these topics has centred on strategies to achieve the goal of net zero greenhouse gas emissions, which requires a combination of economic disincentives for fossil fuels and the increased availability of present and future clean energy alternatives. economists have the task of making an effective contribution to the evaluation of the effects of existing policies and collaborating in the design of measures based on the available evidence. carbon taxation and emission quotas have proven to be useful instruments in discouraging the use of fossil fuels. they must be carefully calibrated to achieve the largest possible welfare gains, mitigating potential regressive effects and avoiding abrupt and ungoverned reallocations between green and brown sectors. the aim of public policies should not be to immediately phase out the activities with a bigger carbon footprint, but rather to help energy - intensive firms to steadily and significantly reduce their emissions to the largest extent and whenever possible. the transition to greener technologies also needs to be accompanied by appropriate policies. as renewable - energy power sources become more profitable, the streamlining of regulatory procedures and the deployment of grid - scale storage facilities are needed to safely increase their role in the power mix. clean investments can also be encouraged among non - energy producers, tackling the constraints that lead firms to underinvest in the green transition or to prioritise short - term cost considerations over longer - term environmental and, ultimately, economic benefits. this conference contributes to this debate, envisaging a rich array of research papers encompassing a wide range of topics, which aim at shedding light on significant issues that seem especially important to | and the scientific committee for having put together such a rich and interesting programme. once again, i express my gratitude to the presenters, moderators and all the other participants in this event for their presence here today. i wish you all two days of very fruitful interactions and discussions. 2 / 2 bis - central bankers'speeches | 1 |
and submit their findings by december 20, 2002. these results will allow us to ascertain the need for adjustments prior to the release of an updated proposal for public comment in the second quarter of 2003, followed by finalization of the new accord in the fourth quarter of 2003, and implementation at year - end 2006. • while much work clearly remains to be done over the next three years - including evaluating banks'readiness, training supervisory staff, and working towards consistent implementation across supervisors - in my view, both the journey and the ultimate destination of a new accord will contribute substantially to a more resilient international financial system. • unfortunately, while there is a deepening consensus on key elements about how to promote resilience ex ante, there is no comparable degree of consensus on how best to handle international financial crises once they do erupt, or the proper roles of public institutions and the private sector in containing and resolving such crises. notwithstanding considerable efforts at the public and private level to search for a better way, no magic bullet or formula has been found, although at times some have been asserted. • nor is one likely to be available. experience and a reading of the historical record suggest that the seductive allure of grand solutions must be resisted. cases differ greatly with respect to what is possible and desirable in terms of their implications for the interests of the public and private sectors. moreover, history tells us that new developments in markets and practices quickly will render obsolete those measures that might seem well attuned to today ’ s circumstances. • allow me to explain how i think progress can be made by first focusing a bit on the problem that confronts us. i would like to highlight some of the important changes that have taken place over the past two decades in the patterns and instrumentation of capital flows to the emerging world, and in the nature of crises that can arise associated with these flows. g first, it is important to keep in mind that the constellation of investors and the range of instrumentation have broadened considerably over the past two decades. equity investors ( both direct and portfolio ) are now the principal source of net inflows for emerging market countries, and most medium - term debt is held in tradable form by a broad array of diversified, well - capitalized, fixed - income investors. g second, there have been equally important changes in the destination of flows. reflecting the predominance of private - to - private flows since 1990, today sovereign foreign debt often represents only a | the second half of 1999. the question that remains unanswered - and troublesome - is whether this significant improvement in productivity growth, which has made the us economy one of the most competitive in the world today, is temporary or permanent. what is less often taken into account is that the us productivity boom of the 1990s has taken place against a background of very low inflation in the united states and rapidly decelerating inflation in almost every region of the world. through much of the 1990s, weak economic performance elsewhere in the world has held down commodity price inflation and strengthened the dollar. as a result of both productivity growth and the favorable world inflation environment, core consumer price inflation ( cpi ) - excluding the more volatile food and energy sectors - has been running about 2 % recently, down from 3 % in 1995. as measured by the personal consumption expenditures deflator ( pce ), core inflation is even more subdued, rising by only 1½ % a year over the past few years. as a central banker, however, i cannot help but register concerns about some recent developments. as the expansion has progressed, signs of imbalance or strain have begun to appear in the us economy, especially in relation to the world economy. commodity prices, for example - and not just oil prices - have increased rapidly in recent months, as world growth has bounced back sharply in 1999. for example, on a year - over - year basis, prices for crude materials, excluding food and energy, were up 15 % as of february. in addition, strong consumption growth in the united states has been fueled in part by an inexorable decline in the personal saving rate. as i have noted, however, these declines in personal saving rates may to some extent be due to technical measurement issues. moreover, the us current account deficit has also widened markedly over the past several years, with corresponding large surpluses in asia and europe. the outlook is for continued worsening in the deficit that had already reached a record last year, at about 4 % of gdp. history tells us that such imbalances can persist for some time, but increase in risk as they widen. history also tells us that current account imbalances eventually require macroeconomic adjustment - adjustment that is smoother and more orderly the earlier and more coordinated the policy response. while i am not one to second - guess the markets, i also believe that we in the united states must ask ourselves whether the surge in the stock market over the past several | 0.5 |
but adjustable exchange rates. in that statement he remarked : “ let me lay to rest the bugaboo of what is called devaluation ”. a bugaboo, according to merriam - webster is “ an imaginary object of fear ” or “ something that causes fear or distress out of proportion to its importance ”. well imaginary or not, the ending of the bretton woods system did have consequences. ( though the consequences did not include the one feared by my future father - in - law who had just heard a few days earlier of the engagement of his daughter to a boy with a job offer from the imf : would it survive? ). consequences there were : the closing of the gold window ( announced by nixon as temporary ) became permanent and was followed by a decade in which prices in the us doubled. and they almost doubled again in the following decade! so here is my lesson no. 2 : surprise announcements can have long - run effects. bis central bankers ’ speeches credibility and truthfulness of course statements around devaluations and the run - up to them have had a tendency to weaken the credibility of central bankers ( and other public officials ). take this quote from the irish finance minister reported in the irish times, thursday january 28, 1993 : “ i want to assure the people in london who are putting around the rumours that we are going to devalue today or tomorrow that they are wrong ”. true enough, no devaluation occurred on the thursday or friday … but it did on the saturday. although widely cited, former federal reserve board vice chairman alan blinder famously did not say “ the last duty of the central banker is to tell the public the truth ”. what he did do, it seems, was conduct a survey of central banker attitudes, “ in which officials had ranked ‘ a duty to be open and truthful with the public ’ last among criteria on why credibility was important ”. well, that ’ s even worse, though it ’ s not blinder ’ s view ; it was the view of many central bankers he surveyed in 1999. devaluation denials may have been an obvious reason for this, and it is perhaps unsurprising that regimes such as the disastrous erm, which create such pressures for disinformation, can be among the most ineffective. lesson no. 3 : central - banking - by - surprise makes candid communication extremely difficult. yet we all agree that credible communication is essential for lasting policy success | g20 ) now has a much more important role than it did before the financial crisis. it established a working group on reinforcing international cooperation and promoting integrity in financial markets that called on the international monetary fund ( imf ) and the financial stability board ( fsb ) to explore information gaps and propose ways to strengthen data collection. the report of the imf and the fsb, entitled “ the financial crisis and information gaps ” 16, makes 20 high - level recommendations to address the measurement of risks in the financial sector, international financial linkages and the vulnerability of economies to shocks, as well as the communication of official statistics and was endorsed by the g20 in november 2009. i am pleased that this report was produced with significant input from the ecb. “ mfi balance sheet and interest rate statistics and cebs ’ guidelines on finrep and corep ”, february 2010. committee on european insurance and occupational pension supervisors ( ceiops ). directive 2009 / 138 / ec of the european parliament and of the council on the taking - up and pursuit of the business of insurance and reinsurance ( solvency ii ) ( recast ) oj l 335, 17. 12. 2009, p. 1. committee of european securities regulators ( cesr ). see http : / / www. financialstabilityboard. org / publications / r _ 091107e. pdf. as new collections of data from reporting agents will be required in most g20 economies to close information gaps, a multi - year programme, combined with an appropriate governance framework and sustained policy support, is needed to implement the recommendations. the g20 have therefore received an action plan in june 2010, detailing the recommendations and timetables for their implementation. this action plan was welcomed recently also by the international monetary and financial committee of the imf board of governors. although the need for more comprehensive and more comparable statistics extends beyond the g20 economies, the g20 have volunteered to set an example. because of the economic importance of the g20 economies, their data are sufficient to compile reliable and timely key world aggregates, such as quarterly gdp, within two months of the end of the reference quarter. experience in the euro area confirms the traditional statistical paradigm that more aggregated data, such as euro area or world aggregates, are more reliable than their component data. comparable statistics are important in a globalised world in which decision - makers and the public at large need to focus not only on their | 0 |
of our job so seriously. all speeches are available online at www. bankofengland. co. uk / speeches | to spread around the pra ’ s supervisory approach can be somewhat less intense. for example, there are various classes of property insurance, such as mobile phone, for which an argument could be made that the pra should restrict itself to a lower level of supervision. our resourcing all speeches are available online at www. bankofengland. co. uk / speeches model already works to some extent in this way, but the ieo has challenged us to think more deeply about this question. another interesting area is insurance bought by commercial or corporate customers. in these cases, the information asymmetry between buyer and seller is lower, or sometimes reversed, and contracts are typically renewable annually, meaning that there are lower concerns about customers being locked into long - term policies. in circumstances where buyers often choose their cover provider based on third - party measures of financial strength ( such as opinions from rating agencies or insurance brokers ), there is a case to be made that the need for the regulator is reduced. indeed, many in the london market have made this very point ( somewhat less subtly! ). but before anyone excitedly hears this as confirmation that the pra will no longer regulate certain types of insurer, remember that we have a statutory objective to contribute to protecting policyholders of all stripes. so the debate is about ‘ how ’, not ‘ whether ’. in fact, the pra ’ s resourcing model already works to focus our resources on those areas of most concern. we categorise each regulated firm according to its size and the potential harm customers would suffer should it fail. the majority of firms we regulate are assigned the lowest category, reflecting the low level of risk they pose to our objectives. firms in higher categories receive more supervisory and specialist resources, and decisions for those firms are approved at more senior levels within the pra ’ s decision – making framework. the ieo have challenged us to look at this system again and we will do so. our executive director for insurance supervision, david rule, will take forward discussion of all of these issues with the prudential regulation committee. we will then revise our approach to insurance supervision document to explain any changes we decide to make. in doing this we will of course need fully to factor in our third objective, to facilitate effective competition – which was also recently reviewed by the ieo. although this is a secondary objective, it is given a high priority in the pra and is also quite rightly a topic in | 1 |
anselmo teng : macao ’ s role as a platform for economic, trade and financial services speech by mr anselmo teng, chairman of the monetary authority of macao, at the 3rd ministerial conference of the forum for economic and trade cooperation between china and portuguese speaking countries, macao, 13 november 2010. * * * honourable ministers, dear guests, ladies and gentlement, the forum for economic and trade cooperation between china and portuguese speaking countries was established in 2003. the forum attaches much importance to economic and trade cooperation development. on the other hand, it embodies integration of different culture while members pay respect reciprocally to different trade practices. all through these years, encouraging results have been achieved via the principle of equality, mutual benefit and diversified cooperation displayed by members of the forum. today, we are holding the 3rd ministerial conference of the forum. we make use of the opportunity to welcome local entrepreneurs and financiers and their counterparts who have come afar. we gather together to voice out our opinions based on which we shall formulate how to better our cooperation. portuguese speaking countries are a market of more than 200 million consumers and endowed with enormous natural resources, which are complementary to the economy of china. in a short span of time of 7 years, the forum has enabled member countries to develop a brand new relationship. industry and trade have flourished, visits and communications among members have become more frequent, the ministerial conference of the forum has been regularized. the forum has promoted interaction in the financial realm and financial institutions of both sides have achieved solid results arising from financial cooperation. we see harmonious atmosphere, equality and mutual benefit in the forum, all of which have enhanced development. integration of east and west cultures and complementary economic development are also being activated rapidly via various vehicles of the forum. in view of its advantageous geographical location and historical background, macao has been playing a vital function as the liaison platform for economic and trade cooperation between china and the portuguese speaking countries. it is a unique city in china when comes to maintaining such special relationship with portuguese speaking countries. in view of its historical backdrop, its relationship with the mainland, particularly in the realm of trade and financial connections, and the benign interactions with portuguese speaking countries, particularly its partnership with financial institutions of these countries, macao has fully displayed its function as service platform in the middle. in the financial sector, as the financial regulator, the monetary authority of macao ( “ amcm ” ) has | opening remarks to finance and expenditure committee. adrian orr, rbnz governor 24 november 2022 ref # x954866 v1. 8 tena koutou katoa it is good to be with you this morning to present our november monetary policy statement. i ’ m joined by assistant governor / general manager of economics, financial markets and banking, karen silk, and our chief economist paul conway, and i acknowledge our other monetary policy committee ( mpc ) colleagues some of whom are with us today or watching online. today we are here to outline our most recent monetary policy statement and the reasoning for our ocr decision. to provide the best context possible for the committee ’ s decision i will refer briefly to the reserve bank ’ s recently published review of our monetary policy actions over the five years endedseptember 2022. 1 the review – undertaken in conjunction with the board of te putea matua and peer reviewed by two independent international experts – is a legislative requirement. it is also a timely requirement from the committee ’ s perspective. over the period reviewed, the global and new zealand economy has experienced historically significant economic shocks, in large part due to the covid - 19 pandemic and exacerbated by russia ’ s invasion of ukraine. policymakers, including the reserve bank ’ s monetary policy committee, are currently dealing with the significant and ongoing implications of these shocks. our monetary policy statement is our most recent analysis of the economic implications for the new zealand economy. on behalf of the committee, we are sorry that new zealanders are being buffeted by significant shocks and inflation is above target. as we ’ ve said before, inflation is no one ’ s friend and causes economic costs. 2 we also want to reaffirm the committee ’ s determination and confidence we will return annual inflation to within our 1 to 3 percent target range. the review highlights several lessons that we are adopting, and we are continuously learning as things evolve. _ _ _ _ _ _ _ _ _ _ _ _ https : / / www. rbnz. govt. nz / monetary - policy / about - monetary - policy / rafimp https : / / www. rbnz. govt. nz / hub / news / 2022 / 07 / monetary - policy - review as our chief economist paul conway explained when we released the review with the benefit of 100 percent hindsight : the committee would have had to lift the ocr to around 7 per cent in early 2020 to have | 0 |
is harder for policy to boost productivity and growth. the second half of the 20th century, the median level of gdp per capita was 15 % below the level predicted from the trend of the ten years prior to the crisis, which is roughly where the uk is currently. see reinhart, c. m., and v. r. reinhart “ financial crises, development, and growth : a long - term perspective ”, the world bank economic review. refers to forecasts made for the first year after the april imf weo in question ; for example the april 2010 weo forecast for 2011 relative to the final outturn data. bis central bankers ’ speeches in these secular stagnation views of the world, the water around us was getting colder before the crisis and has become colder since. but we have not noticed it. and it is this, rather than the slowness of the healing process and the aftershocks of the crisis, that explains the serial disappointments in economic growth. i have set this out as two very different stories about what is happening – “ slow healing ” and “ secular stagnation ”. of course, given enough unfortunate events and enough repeated disappointment on the pace of recovery, they could look and feel the same for a long time. there is much that is common to them. in both stories for a period of time, productivity is lower, interest rates stay low for long and pay and income growth is weak. but these effects are longer - lived in a secular stagnation world. it is quite possible that we are in some combination of both worlds. but i think it is important, especially when thinking about policy, to distinguish the different forces that drive these respective stories about the world. the uk picture which brings me to the uk. when i joined the mpc over two years ago, the data seemed to point quite firmly towards the healing story. the uk was experiencing a burst of growth, driven by the return of credit and confidence and pent - up demand from the recession and slow recovery. many commentators were arguing that the bank was in danger of getting behind the curve ; these arguments grew louder as unemployment fell at its fastest rate for 40 years. the bank ’ s forecasts two years ago suggested that growth would fall back a touch, but only a touch, to around its pre - crisis average of 0. 7 % per quarter. our forecast for growth in 2014, 15, 16 was 3. 4 %, 2. 7 % | and 2. 9 % respectively. the reality has confirmed part but only part of that story. over the course of 2014 and 2015 growth drifted down, slowly but consistently and by more than forecast. the economy grew at around 2 % annualised in the last quarter of 2015 – around 0. 7 percentage points lower than the february 2014 forecast ; growth in 2015 was 0. 2 percentage points lower. the bank ’ s most recent forecast is for growth to pick up slowly over the next few years to 2. 5 %. that is less than the average growth rate of nearly 3 % in the decade before the crisis but around the average growth rate in the last 60 years. it will, according to the oecd, be the fastest growth rate among g7 economies this year. over the period, inflation has been pushed down to around zero by the strength of sterling and by the very sharp fall in the oil price. i hesitate to describe the oil price fall as an “ unfortunate event ”. much of the fall is the result of an increase of supply, the product of the oil investment cycle that accompanied oil prices staying at over $ 100 per barrel for much of the last ten years. that will have boosted consumption and supported growth in oil - consuming countries like the uk. but the speed and size of the fall has made the shock to inflation very abrupt and exposed weaknesses in oil - producing economies. and more worryingly some of the fall over the last 18 months has been due not to an increase in supply but rather to slowing demand in emerging markets especially china. this will have had an adverse effect on world growth. there are continued signs of strength in the uk economy. consumer confidence is near record levels and business investment intentions are strong. housing market transactions and investment are picking up. credit has picked up and is growing around the rate of gdp. on pre - crisis metrics, there are signs of tightening in the labour market. unemployment is now at 5. 1 % – its lowest level since 2006. job - to - job flows have picked up sharply and are nearly at pre - crisis levels and the vacancy to unemployment ratio – a measure of labour - market tightness – is at its highest level since 2005. but, some things have still not improved as we had hoped. despite being stronger in the middle of 2015, pay growth has now fallen back to the 2 % range – roughly its average since the crisis. and forward - looking surveys do not suggest any significant recovery in pay growth is | 1 |
words have not lost much relevance. furthermore, the new - keynesian approach is a natural extension of the real business cycle framework to a world with nominal rigidities. as such, it focuses on short - term deviations of the relevant variables from trend. the empirical evidence for the correlation between money and inflation, however, is of a low - frequency nature. in other words, it is more relevant to the trend behaviour of inflation. in a nutshell, given the empirical evidence, it seems that the new - keynesian framework is missing something important in the working - mechanisms of the economy and the inflation generating processes that govern it. something that is – at least - empirically captured by the information content of monetary aggregates. moreover, the merits of analysing monetary developments in a broad framework encompassing credit dynamics allows to extract valuable information with regard to possible financial market tensions caused by the build - up of asset price bubbles. in the light of these considerations it is not so much a question of whether monetary policy in the eurosystem should pay close attention to monetary aggregates. the more relevant issue is how this should best be done, that is, how monetary aggregates should feature in the monetary policy design. here, the challenging task for monetary analysis is how to separate in real time the noise in the shortrun development of monetary aggregates from the part of monetary dynamics that signals risks to future price stability. monetary analysis, properly understood and implemented, can not be a mechanical forecasting exercise. it has to take into account the possibilities of money demand shocks injecting noise into the liquidity - inflation nexus or possible structural shifts in money demand relations. up - to - date monetary analysis should be a broadly - based approach and an ongoing intellectual endeavour. and this is precisely how monetary analysis has developed over the past few years in the eurosystem. in an environment of high financial uncertainty it has identified large liquidity shocks which led to significant portfolio shifts in liquid and secure bank deposits. and it has derived a toolbox of liquidity measures signalling possible excess liquidity. applying this toolbox has allowed to separate liquidity developments rooted predominantly in financial uncertainties from developments signalling more imminent inflation risks. for example the actual strong increase in the money stock m3 which is accompanied by very low level of interest rates and a strong rise in loans to the private sector. all in all, an elaborate analysis of monetary aggregates as well as their components and counterparts is a useful tool for monetary policymakers | such threshold effects in my view deserve further empirical investigation. let me conclude by saying that the experience of the first seven years of emu has shown : • that the monetary analysis plays an important role in our policy strategy and our policy decisions • that the monetary analysis is a challenging and evolving exercise given today ’ s financial market dynamics • but that, even in such an environment, money has an empirically justified informative role. | 1 |
. currently, adjustments are hard - handedly being enforced by the markets. in the said countries, ireland excepted, product and labour markets didn ’ t function properly and they still don ’ t. markets are overregulated and labour markets are highly inflexible. by addressing these problems, labour productivity can increase, thereby lowering unit labour costs. i am not saying this will be easy, but i ’ m convinced that such steps are absolutely necessary for emu to function properly. as the chart also shows, in the netherlands unit labour cost growth was also relatively high during the first years of emu. this, however, wasn ’ t caused by the high inflation rates and low flexibility of the labour market, but reflected the low unemployment rate in the netherlands in that period. bis central bankers ’ speeches for many years, the unemployment rate in the netherlands was the lowest in the euro area. the divergences in unit labour cost developments and price competitiveness within the euro area are reflected in the current account balances of the individual countries. as you can tell from chart 9, before the crisis, most southern european countries and, to a lesser extent, ireland experienced high and steadily increasing current account deficits, while the current account surpluses of germany and the netherlands improved further. for many years it was thought that in a monetary union, the current account balances of individual countries were no longer relevant. it was only the balance of payment of the euro area as a whole that mattered. we know better now. of course, besides competitiveness problems, the crisis also had fiscal causes. as can be told from chart 10, the stability and growth pact didn ’ t prevent some governments from taking up old habits once they had fulfilled the convergence criteria that enabled them to join emu. we shouldn ’ t forget, however, that this was facilitated by some of the core countries of emu. when it became clear that fiscal policies in these countries wouldn ’ t be able to meet the rules of the stability and growth pact, it was not the policies that were changed but the pact. this was clearly a mistake. besides, the gradual worsening of the budget balance in countries like italy and portugal was partly due to their competitiveness problems. since devaluing out of these problems was no longer an option, the declined competitiveness slowed down economic and employment growth. this dampened tax revenues while stimulating social security expenditures. looking at it this way, the lack of fiscal discipline partly reflected | fiscal compact, in which the political leaders of the euro area countries ( and most other eu countries ) further strengthened the rules governing budgetary discipline in europe. furthermore, in march the capacity of the efsf / esm will be evaluated. we have to conclude that the efsf in its current form ( based on guarantees ) and size unfortunately has failed to convince markets that all countries will get through this crisis unharmed. this is why we as central bankers call upon the european governments to increase the emergency facility as soon as possible. the ecb also took further measures to avoid the sovereign debt crisis from severely dragging down the real economy. it did so by introducing a refinancing operation with a maturity of three years. as chart 4 shows, this operation attracted a lot of interest, with a total volume of eur 490 billion ( right - hand side of the graph ). this is not all “ new ” liquidity by the way, since banks also rolled over operations with shorter maturities into this new facility. this provides them with the liquidity security they need in light of the market tensions and, thus, helps prevent a sharp reduction in credit supply to the economy. at the end of this month, a second three - year operation will be carried out. in analysing and solving the sovereign debt crisis, the focus was on fiscal and monetary factors rather than on the macroeconomic causes of the crisis. however, as i ’ ll briefly demonstrate by means of charts 5, 6 and 7, these causes are at least as important as the fiscal slippages some countries allowed themselves. at the start of emu, per capita income levels between countries differed significantly. it was assumed that catching - up countries would experience faster economic growth. this is what did happen, but not quite to the extent expected. prior to the crisis, mainly ireland, and to a lesser extent also greece and spain, showed signs of real convergence. their cumulative growth differentials compared to germany reached 20 to 45 % in 2007. note that italy and portugal hardly experienced any real convergence towards the german welfare level, even before to the crisis. even the netherlands “ converged ” more than these countries. bis central bankers ’ speeches unfortunately, the catching - up process largely took place through debt, either public or private. as chart 6 shows, in some countries credit to the private sector grew by more than 10 % a year for over a decade. as a result, their debt with the rest of the | 1 |
has two main elements. the first is the mandatory introduction of a balanced budget rule and a correction mechanism for deviations from balanced budgets at the national level. the second element envisages a strengthening of the excessive deficit procedure within the stability and growth pact. if effectively implemented, the fiscal compact will help to anchor market expectations on the sustainability of public finances in europe ( and narrow the currently abnormal spreads ). yet, governments now need to prove their commitment to these new fiscal rules by ensuring a rapid ratification of the new treaty on stability, coordination and governance in emu, which includes the fiscal compact, its transposition into national law and by living up to the rules and the spirit of the fiscal compact. the financial stability component of sound finances august 2007 saw the start of the financial turmoil with an increasing loss of confidence in the financial markets, a drying - up of liquidity and an increase in both risk premia and counterparty risks. ever larger volumes of so called aaa - rated privately issued assets became “ toxic ”. in september 2008, after lehman ’ s bankruptcy, money markets virtually seized up, financial losses rose rapidly and a process of deleveraging set in. financial stress spilled over to the real economy with a sudden and very severe impact on trade and growth. this led to the global financial crisis. how can financial markets be made sound again? this question raises many issues which i have not time to address here today but are fundamental, like : how can a better pricing of risk be insured? how can asset price bubbles be detected and corrected in time? how can procyclicality of financial markets be attenuated? and how can the financial system better align with the needs of the real economy? there have been several institutional developments. a new supervisory framework has been put in place in the eu in order to share information and best practices, foster cooperation and identify sources of systemic financial risks at an early stage. it consists of two pillars. the first covers micro - prudential supervision and comprises the european banking authority as well as other supervisory agencies. 2 supervisory colleges for pan - european banks are also starting to operate. the second pillar is dedicated to macro - prudential supervision and is centred on the european systemic risk board. the esrb can issue warnings and macroprudential recommendations whenever necessary. in addition, the new basel iii rules are being implemented to secure adequate capitalization of banks. what explains the rapid contagion that has characterised the sovereign debt crisis | luis de guindos : gabriel zucman ’ s contribution to research on wealth inequality and the redistributive effects on globalization remarks by luis de guindos, vice - president of the european central bank, on the occasion of the award of the bernacer prize to professor gabriel zucman, madrid, 11 october 2019. * * * it is a pleasure for me to celebrate with you the award of the 2019 bernacer prize to gabriel zucman, assistant professor of economics at the university of california, berkeley. gabriel ’ s creative work on measuring household wealth over time and across countries and his studies on the effects of taxation and globalisation on the accumulation of wealth have become increasingly influential among academic economists and policymakers. he is a deserved recipient of the bernacer prize, which is awarded each year to an outstanding young european economist working in the fields of macroeconomics and finance. this year ’ s prize has been awarded specifically for gabriel ’ s “ influential research on wealth inequality and the redistributive effects of globalisation ”. gabriel, together with his co - authors thomas piketty and emmanuel saez, has been one of the pioneers in this field, showing us how to use various data sources – aggregate sectoral accounts, household surveys, fiscal data, historical administrative data and unofficial records – to estimate the evolution and determinants of the wealth distribution over centuries. such a long time range is important, as many of the movements in wealth inequality are very gradual, which means that these changes can only be estimated reliably once enough data are available. at the same time, retrieving historical information on wealth poses multiple challenges. first, data on household wealth are much scarcer than, say, data on household income. second, the wealth distribution is heavily skewed toward its top tail, such that relatively few households hold a large fraction of aggregate wealth in the economy. consequently, to be able to measure wealth inequality, it is important that we include information about the very richest households. third, and especially for the richest households, one should account for all assets, including those held abroad, which tend to be more difficult to trace. a key approach used by gabriel to overcome these challenges is the “ income capitalisation method ”, which uses fiscal data on capital income to estimate the wealth distribution. although not always easily accessible, fiscal data are available for several decades and also cover the richest households. the method is therefore useful in | 0.5 |
. technological advances, deregulation and harmonisation of laws and regulations are important forces contributing to a freer flow of capital and services in the single market. there is little doubt, however, that the introduction of a single currency will make a major contribution to accelerating this process. in sum, trends influencing developments in the banking and financial industry such as deregulation, internationalisation, changes in customer behaviour and rapid technological advances – leading to intensified competition – have been there for some time and will continue. however, the establishment of monetary union will probably intensify existing trends, creating even greater challenges with regard to competition in the banking and financial industry. this brings me back to the basic proposition made in the introduction. in many respects, the euro will not give rise to fundamentally new challenges. it is highly likely, however, that the euro will accentuate challenges that are already present. and that, i think, goes for the uk as well as norway. * * * | stanley fischer : longer - term challenges for the us economy speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at " a conversation with stanley fischer ", sponsored by the council on foreign relations, new york city, 21 november 2016. * * * notwithstanding a number of shocks over the past year, the u. s. economy is performing reasonably well. job gains have been robust in recent years, and the unemployment rate has declined to 4. 9 percent, likely close to its long - run sustainable level. after running at a subdued pace during the first half of the year, gross domestic product growth has picked up in the most recent data, and inflation has been firming toward the federal open market committee ’ s 2 percent target. 1 although the economy has moved back to the vicinity of the committee ’ s employment and inflation targets — suggesting that the cyclical drag on the economy has been greatly reduced, if not largely eliminated — along some dimensions this has not been a happy recovery. unease with the economy reflects a number of longer - term challenges, challenges that will require a different set of policy tools than those used to address nearer - term cyclical shortfalls in growth. prominent among these challenges are low equilibrium interest rates and sluggish productivity growth in the united states and abroad. i will first touch on low interest rates before turning to productivity. the federal funds rate and policy rates in other advanced economies remain very low or even negative. longer - term rates are also low by historical standards, even taking into account the increase of the past two weeks. such low interest rates, together with only tepid growth, suggest that the equilibrium interest rate — that is, the rate that neither boosts nor slows the economy — has fallen. why does this matter? importantly, low interest rates make the economy more vulnerable to adverse shocks by constraining the ability of monetary policy to combat recessions using conventional interest rate policy — because the effective lower bound on the interest rate means that monetary policy has less room to reduce the interest rate when that becomes necessary. also, low equilibrium rates could threaten financial stability by encouraging a reach for yield and compressing net interest margins, although it is important to point out that so far we have not seen evidence that low rates have notably increased financial vulnerabilities in the u. s. financial system. more fundamentally, low equilibrium real rates could signal that the economy ’ s long - run growth prospects are dim. why are | 0 |
the necessary means to accomplish its missions : i would like to emphasise this imperative. i will now give the floor to bernard delas, who will present the prudential developments in the insurance sector. remi bouchez will then discuss the work of the sanctions committee. thank you for your attention. 3 / 3 bis central bankers'speeches | concept is even relevant. i am however a " r * believer ", and the ecb and the banque de france have ventured some estimates, using a series of semi - structural models. 3 / 4 bis - central bankers'speeches these estimates show that the pandemic marks a halt in the two - decade long downward drift in r * on the back of lower growth and population ageing. this might be good news for the economy in general, and monetary policy in particular : the risk of interest rates hitting the effective lower bound has slightly eased. our estimate suggests that in the euro area, the real neutral rate is now slightly positive, between 0 % and 0. 5 % ; and therefore the nominal neutral rate, adjusted for 2 % inflation, could be between 2 % and 2. 5 %. in the united states, it could be around one percentage point higher, taking into account the surplus of investment over savings, and stronger demographics and productivity gains. this 2 % to 2. 5 % range is a reasonable estimate of the average of ecb policy rates over a future full monetary cycle. however, this is not necessarily the target for the current rate - cutting phase : it simply shows that we have significant leeway to lower our rates before exiting restrictive territory. to sum it up, echoing henry james famous novel, the time for a " turn of the screw " on euro area monetary conditions is over ; now time is coming in europe to start to gradually " release the screw " and lower the pressure. thank you for your attention. 1 james, h., letter written in 1872. 2 lagarde, c., ecb press conference, 11 april 2024. 3 villeroy de galhau, f., " anatomy of a fall in inflation : from a successful first phase to the conditions for a controlled landing ", speech, 28 march 2024. 4 williams, j., " effective dialogue and well anchored inflation expectations : essential tools for navigating challenging times ", in central banking in the americas : lessons from two decades, bis, november 2023. 5 rapach, d., is the last mile more arduous?, federal reserve of atlanta, january 2024. 4 / 4 bis - central bankers'speeches | 0.5 |
system underpins that of the economy as a whole. financial markets are different from product markets and therefore, greater liberalisation goes along with deeper supervision and higher degree of regulation. any destablisation in financial markets affects even those who are not in financial markets. on the other hand, financial markets can drive the real economy. therefore, transparency, disclosures, prudential norms and capitalisation are a must. this is essential because bank depositors have no other security except that banks are well regulated. increasing deregulation and globalisation, greater competition from within the country and cross - border dealings have exposed banks to even greater risk. diversification into non - traditional products like insurance, derivatives etc., has added to the complexity of banking business. further, internet banking, e - commerce, e - money and other information technology related innovations are adding new dimensions to risks faced by the banking sector. mergers and acquisitions as well as outsourcing of some non - core activities are undertaken by the banks with some strategic objectives they also enhance the risks in banking. considering the speed with which banking is changing, it is recognised that there is a need to enlarge the focus and thrust of risk - based supervision ( rbs ) so as to be able to improve the risk sensitivity of the supervisory approach. in view of the relevance of improved risk management systems under the changing circumstances and the larger emphasis placed on risk management systems in banks under basel ii, it is essential that rbs stabilises at an early date and serves as an important feedback to not only the managements but also the supervisors. however, taking into account the diversity in the indian banking system, stabilising the rbs as an effective supervisory mechanism will be a daunting task. consolidation and move towards universal banking we are slowly but surely moving from a regime of “ large number of small banks ” to “ small number of large banks ”. the new era is going to be one of consolidation around identified core competencies. mergers and acquisitions in the banking sector are going to be the order of the day. successful merger of hdfc bank and times bank earlier and stanchart and anz grindlays has demonstrated that the trend towards consolidation is almost an accepted fact. we are also looking for such signs in respect of a number of old private sector banks, many of which are not able to cushion their npas, expand their business and induct technology due to limited capital base. coming times may usher | be unfortunate ”, he said. rajan abandoned a high - flying career as a global economist two years ago to return to india as the chief economic adviser to the indian government. it was then facing a sharp downturn in growth and looking for a growth strategy before this year ’ s elections, which the congress party - led coalition government is expected to lose. there was speculation he was a destined for an even bigger job and that came with his appointment as governor of the reserve bank of india. he has since pursued a more focused approach to monetary policy, with three rate rises. capital economics asia economist daniel martin said in a recent report : “ overall, he has made a good start. he has taken a tougher stand on inflation and is looking to push through a broader reform agenda, both of which could lay the foundation for stronger long - term growth. ” “ but there are limits to what a central bank governor can achieve, which is why so much is riding on the make - up and performance of the next government. ” bis central bankers ’ speeches prescient forecaster rajan was chief economist of the international monetary fund from 2003 to 2006. while there, he came to the attention of global financial markets when he raised questions about the health of the global financial system at a celebration honouring former us federal reserve board chairman alan greenspan just before the global financial crisis broke out. he argued financial sector managers were encouraged to “ take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time ”. this comment is now seen a prescient forecast of what happened after the collapse of lehman brothers. one of the other participants in the weekend g20 meeting says : “ to have a person of that pedigree in an emerging market central bank is quite a change. he ’ s the first star appointment to an emerging market central bank. no one has been appointed with this sort of profile. ” “ there ’ s a lot of interest in what he will have to say because no one knows just what he meant when he said what he said about tapering. he will be closely questioned ”, the g20 delegate said off the record. not surprisingly, rajan is a determined champion for the indian economy. he urges australian companies which fear perceived corruption and heavy - handed indian bureaucracy to learn from the experiences of western companies that have stayed the course. “ with risk comes return, and people have learnt how to make money in india | 0.5 |
a box of old hockey cards in the basement, right? everybody does. what if in that box you ’ ve got a chris kunitz card from his rookie days? hey, now that the regina native is an olympic gold medallist and two - time stanley cup winner, that card is suddenly worth a lot – and you have the incentive you need to go dig it out of the basement. it ’ s the same thing with a terms - of - trade shock. since 2002, we have enjoyed the benefit of an almost 25 per cent rise in canada ’ s terms of trade. with the average world price of oil over the past decade more than double that of the previous three decades, canada ’ s resources are suddenly worth a lot – and we have the incentive we need to go dig them out of the ground. that ’ s what ’ s been happening. higher oil prices have stimulated oil production in canada, magnifying the benefits from the improvement in the terms of trade. this is particularly true of canada ’ s vast oil sands, where the higher prices have made them economically viable. to step up production requires more workers and more money. where do they come from? what draws them in? the economy has natural market mechanisms that help. with the bis central bankers ’ speeches higher prices these sectors command on the world markets, profits, job markets and wages heat up, attracting more investors and more workers. as people earn more, they spend more and, as this work force grows, they need more of everything – from tim hortons to pickup trucks. this leads to more jobs and higher wages in other sectors and other regions of the economy, so everyone benefits. people move to where it ’ s hot as a share of gdp, investment in mining and oil and gas extraction has doubled since 2002. as companies step up their investments, they set off a chain of events that draws people in. over the past ten years, about a quarter of a million people, net – roughly the population of saskatoon – have moved from other provinces to alberta. last year alone, net migration to alberta from the rest of canada totalled nearly 45, 000. saskatchewan, too, has had more people move in than out over the past year. between 2006 and 2011, about one in every five saskatchewanians was either a newcomer or had moved a long distance within the province. for all of canada ’ s workers, this is a sea change. while alberta and saskatchewan may be net recipients of people, there is | are to benefit from everything this great country of ours has to offer. bis central bankers ’ speeches | 1 |
national banking sector ( through the harmonisation of supervisory practices and deposit guarantee schemes ), as well as foster sustainable lending and economic growth ( by reducing the fragmentation of the european financial markets ). i shall stop here, thanking you for your attention. i wish you a fruitful outcome of the conference, and hope you enjoy your stay in bucharest! bis central bankers ’ speeches | of external competitiveness. reestablishing a long - term balance between income growth and productivity dynamics is therefore a must. finally, i saw in some papers that romania would be downgraded because of its external liquidity position. this indicator is computed as a ratio between the country's international reserves and its overall foreign debt, both public and private, in the short - run. we have a sub - par ratio in romania, as short - term external debt is higher than reserves. i believe this is also an overstatement, as romania's international reserves are close to the upper limit of the optimal level if we take into account the other indicators, such as the ratio between reserves and imports. the short - term external debt is high indeed, but the bulk of it belongs to the private sector. and out of this, loans taken by foreign - based banks operating in romania from their parent undertakings abroad account for the largest share. we have started to address this issue by taking measures aimed at discouraging foreign currency - denominated loans. if that risk materialised and parent banks diminished their flows to romania, the effect would be rather beneficial as it would remove the base for an unsustainable expansion of foreign currency - denominated credit which has been a headache for so many years. therefore, i do not consider these arguments that solid to place romania in a group of countries with high likelihood of witnessing hard landing. do you think, therefore, that high economic growth in romania will go on? i believe that romania will see further economic growth in the coming years. a growth much closer to the potential which our experts had estimated at around 6 percent annually. it is true that, with weakening economic activity worldwide, especially in the eu which is our main trade partner, economic growth might be a bit slower than 6 percent. no doubt that economic growth will be affected by several factors next year, placing it over or below 6 percent : the oil price, the farming year, heightened efforts to develop the infrastructure and also to create conditions to boost labour productivity, the level of foreign investments, and so on. in any case, a 6 percent annual economic growth in the present context is a remarkable achievement. that would not prevent some analysts from saying that, if gdp growth slows to 6 from 9 percent, the growth rate plunged by 33 percent. an 8 - 9 percent growth means overheating? what is your opinion? i have never ventured to say that one | 0.5 |
for global capital flows, foreign exchange valuation and financial asset prices even if it is mostly anticipated when it occurs. which leads to the key question i want to address in the remainder of my remarks : what should the federal reserve do to minimize the impact? like other central banks, our monetary policy mandate has a domestic focus. our monetary policy actions, though, often have global implications that feed back into the u. s. economy and financial markets, and we need to always keep this in mind. from one perspective, the unconventional nature of monetary policy around the world adds little that is fundamentally new to the challenges that face emes. today ’ s monetary policies simply represent a way of easing that was necessitated by hitting the zero lower bound here and elsewhere. central bankers have managed differences across countries in cyclical positions and policy stances many times in the past. this time should not be fundamentally different. but, from another perspective, we have less experience operating with unconventional monetary policy, we have been in this regime for a long time and this creates more potential uncertainties. these uncertainties put a premium on clear communication among central bis central bankers ’ speeches bankers as well as between central bankers and market participants. in my view, an important fact is that the large scale asset purchase programs undertaken in the united states and elsewhere have dramatically shrunk the size of bond risk premia globally. this new set of monetary policies affects financial asset prices in a different way compared to changes in short - term interest rates, and we should be humble regarding what we claim to understand about this distinction. looking ahead, it seems likely that markets will remain focused on those vulnerabilities that they might have ignored prior to the taper tantrum in 2013. the greater premium on strong fundamentals, policy coherence and predictability will likely remain. although we will undoubtedly experience further bumps in the road. i think we can remain generally optimistic about the prospects for adjustment. but for this to occur, it will be important for market participants to appropriately discriminate across countries, rather than treating emes as a single group. the good news is that many emes generally appear to be better equipped today to handle the fed ’ s prospective exit from its exceptional policy accommodation than they were during past tightening cycles. this reflects the fundamental reforms that emes have put in place over the past 15 years, as well as the hard lessons learned from past periods of market stress. among the positives are : • the absence of peg | . however, our experience during the stress test has already suggested some possible reasons. first, not surprisingly, the supervisory perspective on stress test modeling tends to be somewhat more conservatively inclined than that of the firms. second, federal reserve modeling generally avoids the assumption that loss experience during a period of high stress can be the full 2012 report, including methodology and results, is available at www. federalreserve. gov / newsevents / press / bcreg / bcreg20120313a1. pdf. bis central bankers ’ speeches extrapolated from experience in more normal times, whereas at least some firm modeling uses roll rates and other such extrapolations that may not be as useful for measuring losses in tail events. a third, and related point, is that for some loan types the federal reserve model incorporates nonlinear effects of the macroeconomic scenario. for example, a 20 percent decline in national house prices would mean that prices would decline substantially more in some markets and less in others, and losses in areas where house prices decline more would be disproportionately greater than losses in areas where house prices decline by less. the result would be higher overall losses than if prices had declined by a uniform 20 percent everywhere. fourth, supervisors had the advantage of seeing the modeling practices of all 19 of the firms and were able in some instances to identify outliers in terms of assumptions and practices. our disclosures – both of our methodology and of the results – seem to have struck about the right balance between providing useful information to investors, counterparties, and the public, on the one hand, and protecting proprietary information whose release might result in competitive harm to firms, on the other. however, as with all aspects of the stress test and ccar, we welcome any suggestions for improvement here as well. as to procedure, we have already decided on several changes for next year. first, the timing of the ccar will change, so that the decisions on objection or non - objection will apply to capital actions beginning in the second quarter of 2013. that is a shift from the first two ccars, in which the supervisory responses covered first quarter capital plans, but those responses were not delivered until late in that quarter. second, now that the regulatory reporting mechanisms for data collection are in place, we will be able to begin the analysis earlier, thereby providing more time to both firms and supervisors to run the stress tests. incidentally, because these reports will be filed quarterly | 0 |
will move ahead gradually, ensuring close coordination between the authorities involved. financial risks stemming from climate change assessing and managing the financial risks stemming from climate change is one of the main challenges facing regulators, supervisors and financial intermediaries. all the players involved are called upon to put their best efforts into ensuring that the financial sector is able to accurately assess the magnitude of the current and future exposure to such risks, so as to seize the opportunities connected with the decarbonization of the economy. yesterday the bank of italy published its responsible investment charter, in which it has taken on three commitments : to promote environmental, social and governance ( esg ) sustainability, with initiatives to encourage the disclosure of adequate information on sustainability by issuing firms, banks and other financial system players ; to continue to integrate esg principles into the management of its investment portfolios by favouring the investments with the best profiles ; and to publish information and analyses on sustainable finance and to communicate the results achieved regarding its investments on a regular basis. correctly measuring the risks connected with climate change requires above all the availability of reliable and comparable data in order to assess the possible impact of transition and physical risks on financed sectors and activities. it is here that regulatory authorities at european and international level are currently focusing their efforts. the issue of data availability is a priority for the italian presidency of the group of twenty ( g20 ), which has asked the international monetary fund ( imf ) to include climate change in the preparation of a new data gaps initiative and the financial stability board to draw up a report on the availability of data to monitor climate - related risks for financial stability. a first version of this report will be presented this week at the g20 finance ministers and central bank governors venice meeting. 7 / 10 bis central bankers'speeches the results of the pilot project recently conducted by the eba also point to the importance of bridging the data gap as soon as possible. steps in this direction will be taken once the technical standards relating to the ‘ third pillar ’ obligations concerning banks ’ exposures to physical and transition risks, currently in the consultation phase, have been finalized. the inclusion of this information in the balance sheets is essential to enable all stakeholders ( shareholders, creditors, consumers ) to monitor and stimulate sound risk management on the part of financial intermediaries. at the same time, supervisory authorities are working hard to encourage banks to make the appropriate organizational arrangements to measure, monitor and manage climate - related financial risks. last year, a specific guide | since january 1999 this standardised deduction has been set at 10 % for both types of securities. today, following a review of new statistical evidence available, the governing council decided to increase the standardised deduction to 30 %. this decision shall have effect as from the determination of the reserve requirement to be fulfilled in the maintenance period starting on 24 january 2000. a separate press release presenting this decision and some background information on standardised deductions from the reserve base will be issued to you here today. the governing council today approved the ecb ’ s budget for 2000, which gives the ecb the green light to recruit further staff needed to support the ongoing activities of the ecb. this will bring the ecb ’ s staff to slightly over 1, 000 ; the number of staff employed to date stands at 750. at its meeting on 18 november 1999 the governing council approved the publication of an update of the book on “ european union balance of payments statistical methods ” ( the “ b. o. p. book ” ). this important book documents the statistical methodologies applied in member states in compiling balance of payments statistics and, as such, improves the transparency of the compilation of euro area statistics. this new version includes additional chapters on : ( i ) investment income ; ( ii ) estimation methods, especially for goods, investment income and portfolio investment ; ( iii ) financial derivatives ; and ( iv ) the stocks compiled for international investment position statistics. the book was published on the ecb ’ s web site at 4 p. m. yesterday and will be available from the ecb in hard copy format during the course of next week. finally, let me inform you that the general council discussed the monetary policy objectives, strategies and intentions of the non - participating eu central banks against the background set by the monetary policy of the eurosystem. this is the second time that such an exercise has been undertaken since the ecb was established. | 0 |
or are not sufficiently transparent. i have been impressed by how seriously the private sector has responded to the challenges raised by the events of this year. accounting bodies and regulatory agencies are also seeking ways to improve practices and restore confidence. they are re - examining the role and the responsibilities of external auditors to boards and shareholders – and how these can differ from other duties that auditors are sometimes asked to carry out by management. and they are asking if shareholders and boards have the tools and the power to hold management accountable. it's important that we continue to work on these issues and, moreover, that we are seen to be working on them. we live in a world where impressions matter and where capital markets are increasingly global. canadian issuers will be judged not only against our own standards, but also against the worldwide standards for accounting, disclosure, and governance. at the same time, we must be careful not to impose an overly onerous burden of processes and paper on businesses, particularly on smaller firms, given their importance to the canadian economy. let me be clear : the same principles must apply to all public companies. while all businesses must abide by the spirit of the new standards, it may well be appropriate that larger, more widely held firms should face more detailed requirements than smaller firms whose shares are not as widely held. the challenge of developing an appropriate canadian formula is made more difficult because we do not have a single lead securities regulator, as do the united states, the united kingdom, and australia. i'm not here to argue whether or not canada should have a single lead regulator. the point is we need to improve our current system, and we need to do it now. if we don't, we risk damaging our reputation in world capital markets. in sum, the best way to restore investor confidence is to put in place a system of incentives that encourages managers and boards to always act in the best interests of shareholders. disclosure is key. in every case, shareholders are best protected with full, fair, and accurate disclosure of information. to quote a recent c. d. howe report, " if reforms cannot help investors distinguish good and bad investment prospects, there is no avenue for improving confidence. " this brings me to an important issue for the bank. we have a shared responsibility to promote a sound financial system – together with the department of finance, the office of the superintendent of financial institutions, the canada deposit insurance corporation, as well as provincial and other regulatory bodies. for | inducement for banks to beat their lending benchmark and expand lending beyond their pre - announcement plans. second, banks that as of april 2016 cannot prove that they have beaten their benchmark will be asked to reimburse in advance funds that otherwise could be borrowed for a period of up to 4 years. through these combined effects, we believe that a widespread use of this facility has the potential to halt the vicious circle of constrained lending, weak macroeconomic conditions and elevated loan delinquencies, and re - ignite a positive “ credit multiplier ” process. and in fact the combination of monetary policy measures decided last month already led to a further easing of the monetary policy stance. in particular : • we have seen a marked downward shift in the whole term - structure of the money market. for example, in the overnight segment, eonia fell by 12 bps to 0. 03 % between 4 june and 1 july. over the same period, the 3 - month euribor declined by 10 bps and the 1year 4year ois forward rate declined by 23 bps. • to gauge the overall easing effect of our measures one may go back a bit more in time and look at developments since early may, when the governing council signalled its readiness to act in june. for instance over the period 7 may [ the day before the may gc ] and 1 july the 3 - month euribor declined by 13 bps and 1y4y ois forward rate declined by 36 bps. • since early may we have also seen some compression of liquidity premia [ as for example evidenced by a decline in the spread between kfw bonds and german bund yields with the same residual maturity ] and government bond spreads. the monetary operations to take place over the coming months will add to this accommodation. all measures together should support lending to the real economy, support the economic recovery and – through that avenue – steer inflation rates to levels closer to 2 %. the existence of a “ portfolio balance channel ” has been extensively discussed recently in the context of the fed ’ s large scale asset purchases. there is a vast literature assessing empirically the portfolio balance channel in that context. see, for example, gagnon, joseph, matthew raskin, julie remache and brian sack ( 2011 ), “ the financial market effects of the federal reserve ’ s large - scale asset purchases ”, international journal of central banking 7 ( 1 ), pp. 3 – | 0 |
peter pang : policies adopted by authorities in different jurisdictions with respect to international reserves welcoming remarks by mr peter pang, deputy chief executive of the hong kong monetary authority, at the international monetary fund independent evaluation office ( ieo ) / hong kong institute for monetary research ( hkimr ) workshop, hong kong, 24 march 2011. * * * it is a pleasure to welcome all of you to this event co - hosted by the hong kong institute for monetary research ( hkimr ) and the independent evaluation office of the imf. the hkimr, as some of you already know, is a subsidiary of the hong kong monetary authority. its objectives are to promote research on longer - term and wider policy issues of relevance to the monetary and financial development of hong kong and the asia region ; and to foster cooperation and cross - fertilisation of research efforts between academics, international financial institutions and the hkma research activities. for this reason we are particularly pleased to co - sponsor this workshop which deals with the important topic of policies adopted by authorities in different jurisdictions with respect to international reserves and with the advice the imf gives in this regard in its consultations with policy authorities. the accumulation of international reserves has become one of the issues at the center of debates about the functioning of the current international monetary system as well as about reforms of this system. one lesson that authorities in this part of the world drew from the financial crisis in the late 1990s was that strong policy fundamentals are not always enough to guard against the vagaries of international capital flows. a sizable cushion of international reserves is important as a buffer to guard against sudden changes in market sentiments that can lead to capital outflows and pressures on the currency. starting shortly after the asian financial crisis reserves were thus accumulated in the region to build up such buffers. but holding large amounts of reserves is of course costly as they are typically invested in highly liquid assets with relatively low yields compared with some alternative uses of the funds. it is partly for this reason that authorities in the region have taken steps to create a mechanism for pooling some of their reserves in the form of the chiang mai initiative which started in year 2000 and its multilateral extension which was agreed on in 2010. while the size of the pool of reserves under the chiang mai agreement is relatively modest compared to the potential needs for some of the larger economies in the region, the importance of the agreement goes far beyond the aggregate amount of reserves involves. it reflects a desire by authorities in | means you raise deposits online and make loans online. the first part is easy ; the second part is not so easy. in our culture, apparently, you need a human being to collect on loans, but nonetheless, we are hoping digital banks can figure this out. and a couple of them are figuring it out. 3 / 7 bis - central bankers'speeches they are six now. we are limiting the number of digital banks to six licenses, but we are looking very closely at the industry and are going to decide if we are going to open it up again. maybe we can attract different business models and make the industry more exciting. we also have a regulatory sandbox. the regulatory sandbox means you try your innovation, do a proof of concept, and do a pilot, but when you do that, you work with a regulator. the regulator is there to help you and tell you what the regulatory implications might be if you succeed. we are not there to judge whether you will succeed or not. we are just there to help you. if you grow, you know what you are getting into regarding regulations. it is about minimizing regulatory uncertainty. if you have a new idea, enter a sandbox. we will assign you a regulator. we will scold you, oh bawal'yan, but that is for your own good. then, of course, there is generative ai [ artificial intelligence ]. that is inevitable. if you have used chatgpt, you know how irresistible it is. so, we do not even have to encourage it. you guys will do it without any encouragement, but of course, we have to think of guard rails for generative ai. as you know, generative ai leads to what we call hallucinations ; it imagines things that never happened. it leads to herding ; it gives the same answer to different questions. so, we think that, for now, at least, when using generative ai, a human being should work with it and look at the answers before you decide. apparently, it is not so hard to tell whether the answers are wrong. if you teach at ateneo or smu and take a take - home exam, you are almost sure the student will use ai. a student who does not use ai is not a good student. but apparently, it is easy to tell. when the homework comes in, you look at it, and you will know whether ai is used. the point | 0 |
of full blown economic fragmentation, and what actions can be taken to sustain globalisation, even in the face of a changing global trade landscape? 1 / 3 bis - central bankers'speeches since this is a conference about the chinese economy, perhaps we can start with a quick examination of how china is adapting to the change and turning the challenge into opportunity. despite the headwinds in the trade sector, china's world export share has remained at around 15 per cent since 2018. this reflects two important trends. first, china has continued its economic diversification and regional collaboration through expanding its import and export network, particularly to broader emerging markets. it has also stepped up outward direct investments to establish stronger footholds in the global supply chain amidst friend - shoring or near - shoring. second, china's manufacturing industries have doubled down on their efforts to move up the value chain, from low - end, labour - intensive component manufacturing to highertech, full - spectrum product manufacturing, supported by china's own domestic market and growing capability in more sophisticated technology goods. indeed, this is a process that pre - dates the recent rise in global trade protectionism, if just for the classic reason of comparative advantage. what we have witnessed is that even as some production may have been diverted away from china, these have been largely concentrated in a few sectors – namely, textiles, electronics and autos – and in the assembly segment rather than upstream. while chinese exports might take up a smaller share of some markets as a result, it is exporting more intermediate goods and capturing a larger share of imports from other regional economies. china's search for new trade opportunities through diversification and supply chain upscaling has brought structural transformation to the chinese economy and helped maintain china's key position in global manufacturing. the process, together with other changes in the global supply chain, will bring fundamental changes to global trade and investment. it would be premature to predict what the new order will be. but one thing is for sure, those who embrace the change and rise to the challenge will benefit greatly, and it should not be a zero - sum game. now let me shift gear and touch on some emerging opportunities we are going to discuss at this conference. i will focus on two panel themes : digital trade transformation and innovative trade finance – two topics that are increasingly relevant as we transition towards a digitalised global economy. digitalisation of trade offers a range of benefits. for firms, digital transformation of trade and | eddie yue : china and the changing global trade landscape challenges and opportunities opening remarks by mr eddie yue, chief executive of the hong kong monetary authority, at the 14th annual international conference on the chinese economy, organised by the hong kong institute for monetary and financial research, hong kong, 14 october 2024. * * * professor wei [ shang - jin, n. t. wang professor of chinese business and economy, columbia university ], distinguished guests, ladies and gentlemen, good morning! it is my pleasure to welcome you all to the 14th annual international conference on the chinese economy, organised by the hong kong institute for monetary and financial research. the theme of this year's conference is " china and the changing global trade landscape : challenges and opportunities ". this is a timely and important topic – not just for china, but also with far - reaching and enduring implications for the global economy. there is ample evidence that globalisation has brought enormous benefits to the world, through increasing cross - border flow of trade, investments, technology, ideas, and people. for emerging market economies, integration into the global supply chain has been a crucial contributor to their economic development. as global income rose in tandem with global trade from the 1980s onwards, billions of people have been lifted out of poverty. since the 2008 global financial crisis, however, the golden era of globalisation has given way to a gradual slowdown in global trade in goods. there is a combination of factors. first, it reflects doubts or even scepticism about the distributional effects of globalisation. secondly, rising geopolitical considerations in recent years have led to a re - imposition of various trade and investment restrictions by some jurisdictions. and thirdly, recent disruptions to supply chain, caused by the pandemic and regional military conflicts, have prompted discussions about ways to mitigate such risks. these developments have not yet translated into a wholesale reconfiguration of the global trade landscape. but it appears that the slow - down in global goods trade is likely to continue. a recent joint study by the hkma and the bank for international settlements ( bis ) suggests that some supply chain realignment has already been taking place during the pandemic. any escalation of geo - economic fragmentation would almost certainly result in a costly transition, especially for asia given the region's relatively open economies. for those who believe in the value of free trade and globalization, the key question then is how best to collectively minimise the risks | 1 |
started circulating in may last year. as i ’ m sure you ’ ll agree, the note you ’ re going to see is instantly recognisable as a ten. it certainly resembles the ten euro notes you have in your pockets, with its distinctive romanesque architecture. however, perhaps it will have more of a visual impact, as the images are larger and more defined, the colours are stronger and the bridge has added depth. when you take a closer look you ’ ll see the new ten has the same new features as the new five : a portrait of europa – a figure from greek mythology – in both the hologram and the watermark, as well as the emerald number, which changes colour from green to deep blue when you tilt the note. introducing a new banknote, especially one used as much as the ten, is a major undertaking. it requires a lot of planning and preparation to gradually replace the two billion or so ten euro notes currently in circulation. i would like to thank all who were involved in this process within the eurosystem. i would also like to thank the banks, retailers and other cash - handling professionals, who will, in the end, put those new notes in your hands. i know that banknote equipment manufacturers and suppliers are already working hard to ensure that the bis central bankers ’ speeches machines are adapted in good time so that the introduction goes smoothly, and i want to thank them as well for the vital part they play. we are announcing the date of issuance and are sharing the required technical information well in advance to give all parties enough time to get ready. the new europa series ten euro banknote will start circulating on tuesday 23 september this year. and now it ’ s time to see the new ten euro banknote. bis central bankers ’ speeches | vitas vasiliauskas : balancing fintech opportunities and risks welcome speech by mr vitas vasiliauskas, chairman of the board of the bank of lithuania, at the joint bank of lithuania - international monetary fund seminar " balancing fintech opportunities and risks ", rise, vilnius, 10 june 2019. * * * good afternoon, distinguished guests, innovators and leaders in financial technology, policy makers. welcome to the seminar, jointly organised by the imf and the bank of lithuania. over the years, we have successfully cooperated with the fund on a number of issues relevant to lithuania ’ s economy and financial sector. and, when it comes to fintech, we set a good precedent almost three months ago in end - march. back then, our member of the board mr marius jurgilas conducted an internal seminar on lithuania ’ s fintech experience at the imf ’ s offices in washington. today we find ourselves to be discussing financial technologies in vilnius – indeed, an appropriate follow - up. given the importance of the issue, we are deeply honoured to have imf deputy managing director mr tao zhang participating in the event. his presence is truly a recognition of lithuania ’ s achievements in the fintech domain. to help frame today ’ s debate, let me briefly depict lithuania ’ s fintech landscape from the perspective of a regulator. but first, i should perhaps explain why the bank of lithuania has put strategic emphasis on fintech. i will be frank and open : we have some very pragmatic reasons. the most important is the market concentration. the share of the three largest banks, as measured by assets, now exceeds 80 %. we also observe similar levels of concentration in key market segments, for instance, payments. this drives us to encourage new participants. in a truly competitive market, the incumbents can never feel at ease, because there ’ s always someone ready to take your slice of the pie. indeed, the free and dynamic market may be a harsh place. but it is best at providing the consumer with the highest quality services at a fair price. needless to say, for a public authority, promoting the benefit of consumers is one of our key goals. — being an integrated regulator, the bank of lithuania has developed a wide range of instruments to attract new players and stimulate competition. in fact, i find the recent guidance provided by the imf to well reflect our methods. this is particularly the case with the bali fintech agenda | 0 |
silver standard – middle income who can afford but do not have insurance because of the high cost of meeting insurer requirements such as the engineer ’ s certificate ( 36k households ) ; bronze standard – low income who can afford some form of insurance cover but are not offered the relevant products to meet their capacity to pay and the need that they have ( 121k households ) ; microinsurance – considered uninsurable and will need support as they cannot afford to pay for insurance ( 68k households ). the target group at this time is the bronze standard and we have now reached a stage where a product proposal has been put together for a sum insured of $ 7, 000 to be offered as household insurance for majority of the households in fiji with a low level of compliance, and a premium of around $ 200. the world bank will present the final product proposal to the government with the aim of soliciting international aid to assist in reinsuring this insurance portfolio. honourable chair, i hope those remarks are helpful background for the committee ’ s review of the reserve bank of fiji 2016 insurance annual report, and we would be happy to answer your questions. thank you 4 october 2017 | choongsoo kim : bank of korea ’ s 63rd anniversary speech by dr choongsoo kim, governor of the bank of korea, at the commemorating ceremony of the bank of korea ’ s 63rd anniversary, bank of korea, seoul, 14 june 2013. * * * dear fellow members of the bank of korea, we come together to commemorate the anniversary of the bank of korea ’ s establishment each year, wherever we work – in seoul, and in our domestic branches and overseas representative offices. by honoring the history and tradition established by those who served before us, and by reflecting on what our contributions are to the development of our national economy and of the bank of korea, and on what kind of legacy we will leave to those who come after us, we use this as an opportunity to look back on the past, to analyze the present, and to seek future directions. it was on this occasion back in 2010, when we celebrated our 60th anniversary and started out on a new sixty - year cycle, that we pledged to ourselves to make the bok ‘ a leading advanced central bank ’ under the banner of a “ global bok ”. this declared our resolve to develop ourselves to fully qualify as members of a leading worldclass organization and to reform the bank of korea with strong resolve so that, reborn as a leading central bank, the bok can play a vital role in steering the course of the korean economy ’ s development. and three years have now passed already since we began our bank ’ s second sixty - year cycle with this solemn declaration before the nation and the world. although countries around the world have over the past five years struggled to emerge from the great recession, which is seen as the worst period of economic crisis since the great depression of the 1930s, their efforts have until now not borne sufficient fruit. on the one hand countries have tried various new and unprecedented macroeconomic policies, in order to overcome the crisis as quickly as possible and to achieve economic recovery. and on the other hand they have devoted utmost efforts to pursuing global financial regulatory reforms, to forestall a future crisis and prevent crisis from recurring. and the korean economy is no exception to this trend of change, and is facing a variety of challenges and tasks in line with the changes in environment at home and abroad. this situation can be comparable to the adventure of exploring an unspoiled and unknown world, and the effectiveness of our knowledge and experience are being tested. in the past, of course, the | 0 |
solutions to apply the first of the general principles for international remittances services, namely : “ the market for remittances should be transparent and have adequate consumer protection ”. in line with this principle, many countries are developing national remittance price comparison databases in order to increase market transparency, providing information to migrants who want to send money home that should enable them to acquire the information essential to informed choice. at present the market for remittances is not always fully transparent. two issues are particularly relevant : total price and speed of service. the cost of a money transfer is not actually easy to calculate due to two variable components, i. e. transfer fee and exchange rate. consequently, the consumer may not know exactly the amount of money the receiver will get. the difficulty is compounded for migrants, who due to poor financial education, language barriers and time constraints, may have difficulty in accessing certain services, in particular bank services. this may result in the impossibility of comparing alternative remittances services and finding the most economical. the ready availability of information fosters competitive markets, as demand will tend to concentrate on the most efficient remittance service providers, those offering quick service at lower cost. the national websites compliant with the world bank standards provide all the information required for informed decisions : the fees charged, the exchange rate applied and the time necessary for the money to be available. the bank of italy welcomes the creation of a national price comparison website and will support its management, facilitating data collection and providing information on the most significant corridors and on the latest updates in the retail payment market. this initiative is consistent with the overall approach taken by the bank in performing payment system oversight, whose aim is to promote efficiency. in this particular market efficiency is all the more important in view of the enormous impact that remittances may have on the economy of an emerging country. the analysis of the pricing of a payment instrument is one of the key indicators of a market ’ s performance : when the price reflects the cost of the payment instrument, the market is efficient. efficient funds transfer, with no waste of time or money, enables migrants to channel their earnings to productive ends. in italy the regulatory framework on transparency in the payment market will be enhanced by the payment services directive. the objectives of the new legal framework are to heighten competition in the retail payment market, strengthen user protection and develop more efficient payment services. a special set of provisions is dedicated to transparency | ). conference paper altinoglu ( 2023 ). conference paper farias and suarez ( 2023 ). conclusion • i conclude by again thanking the keynote speakers, session chairs, presenters, discussants, and all the other participants for being here today. i wish you all two days of very fruitful exchange and discussion. | 0.5 |
when a borrower defaults, the bank now suffers a loss only when both a borrower and its credit derivative counterparty default. the risk of simultaneous default is certainly much lower than the risk of a single default. credit derivatives, while making markets more complete, are not a panacea and must be used wisely. most credit derivatives require the counterparty to make a payment to the bank when a credit loss or default occurs. for this type of credit derivative, traditional credit risk may reappear as counterparty credit risk, that is, the risk that the bank ’ s counterparty will not fulfill its agreement to compensate the bank in case of a credit loss. the price of a credit derivative should take into consideration the credit risk posed by the seller of the protection and the appropriate default correlation, though default correlations are difficult to estimate precisely. but some credit derivatives, such as credit - linked notes, are prefunded - - the counterparty pays the principal up front and the repayment it receives at maturity is contingent on a credit event not occurring. banks selling these funded credit derivatives have no counterparty credit risk at all. recognizing that they must understand the characteristics of new risk - sharing mechanisms, several regulatory bodies have taken a close look at the credit derivatives market in recent years. the federal reserve, in its role as a bank supervisor, monitors banks ’ participation in the credit derivatives market. in addition, the u. k. financial services authority and the bank of england have issued reports on credit derivatives in recent years. thanks to these efforts, we have a much better picture of the credit derivatives market than we did a year or two ago. these groups have all reported that they find no evidence that the credit derivatives market threatens financial stability. the nonbank firms that are active in the credit derivatives market, notably some insurance companies, do appear to understand the nature of the risk they are taking on. although regulatory capital arbitrage was cited as a factor spurring the early growth of the credit derivatives market, the increasingly active portfolio management of credit risk, by both banks and insurance companies, has driven growth of the market in recent years. even at this relatively early stage in their life cycle, credit derivatives do appear to offer benefits. the creation of a market for credit risk transfer has probably enhanced efficiency and economic resiliency by enabling credit risk to be dispersed throughout the financial system. credit risk diversification using credit derivatives is thought by many to be one factor that has helped | andreas dombret : current developments in germany and europe welcome address by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the reception for the outgoing deputy head of the representative office of the deutsche bundesbank, new york, 24 august 2011. * * * introduction ladies and gentlemen for more than four years we have been facing an unprecedented crisis, which has sometimes led to high levels of uncertainty. i will start my short speech with some information on the current situation in germany and europe before returning to the individuals and their role in transmitting such information. let me stress in this context that it is a pleasure to be meeting all of you today and to have this opportunity to improve our transatlantic relationships and to exchange views later on. current situation in germany and europe as i mentioned, we have been living in the face of an extraordinary crisis for more than four years. having originated from the american housing market, this crisis quickly spread to the global financial markets. it caused a severe recession of the real economy and eventually led to an erosion of confidence in the public finances of various countries. in the wake of debt problems and amidst worries about the state of the global economy, we have seen renewed market turbulences over the past weeks. however, looking at the underlying development of the real economy, the situation in germany and the euro area is not as dire as these turbulences might suggest. let us begin by taking a look at the situation in germany. gdp as the most general indicator of a nation ’ s economic performance has broadly recovered. during the crisis the german economy shrank considerably ; in 2009 alone, gdp contracted by 5. 1 % – by far the most severe downturn for more than half a century. however, in 2010 and the first quarter of 2011, the german economy recovered strongly and the level of economic activity has almost returned to pre - crisis levels by now. these strong dynamics seem to be contrasted by the first estimate of gdp growth in the second quarter of this year which revealed an increase of just 0. 1 % compared to the first quarter. nevertheless, this pronounced drop in the growth rate does not come as a surprise and should be no cause for concern : the strong expansion we saw in the first quarter was in part due to catch - up effects, since the last quarter of 2010 had been adversely affected by an exceptionally cold winter. hence, a certain backlash in the second quarter was to be expected, and in its recent june forecast the bun | 0 |
##ilizing both inflation and economic activity. 2 those two goals are related : maintaining price stability promotes stronger economic activity in the long run. what do we mean by price stability? a widely cited definition is that the inflation rate is sufficiently low so that households and businesses do not need to take inflation into account i'd like to thank etienne gagnon, steven kamin, linda kole, andrew levin, and david lopez - salido for helpful comments and assistance with this speech. indeed, this specification of monetary policy objectives is exactly what is suggested by the dual mandate that the congress has given to the federal reserve to promote both price stability and maximum employment ( mishkin, 2007a, 2008 ). in making everyday decisions. 3 broadly speaking, i believe this definition of price stability is a reasonable one, and in practice, central banks around the world have chosen average levels of inflation between 0 and 3 percent as consistent with this criterion. however, this range can be narrowed a bit further by considering the implications of economic theory and empirical evidence about the average inflation rate that produces the best economic outcomes. in particular, the literature on the optimal inflation rate not only bolsters the case for low inflation but also highlights the risks of maintaining an excessively low inflation rate. the case for low inflation all economists agree that hyperinflations, such as the one in germany in the 1920s, are particularly damaging due to the resulting distortion of economic incentives and the waste of valuable resources. even rates of inflation far short of hyperinflation appear detrimental to economic performance, as evidenced by the double - digit inflation rates of the 1970s. and over the past decade or so, central bankers and academic economists have reached a remarkable degree of consensus about the desirability of low and stable inflation – and as you know, arriving at a consensus is quite rare for economists. the average rate of inflation distorts the efficient allocation of resources through three main channels. first, because some firms face costs in changing their prices, a rise in the general price level tends to generate undesirable movements in relative prices, thereby leading to an inefficient allocation of resources. this relative price dispersion increases with inflation, and the desirability of minimizing these relative price distortions provides a key rationale for price stability. 4 second, inflation is an implicit tax on capital. in an imperfectly indexed tax system, inflation seriously distorts saving and investment because investment income is taxed | , financial stability report ( washington : board of governors, november ), https : / / www. federalreserve. gov / publications / 2020 - november - financial - stability - reportpurpose. htm. see the committee ’ s march 23, 2020, postmeeting statement ( quoted text in paragraph 2 ), which is available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / fomccalendars. htm. see lorie logan ( 2020 ), “ treasury market liquidity and early lessons from the pandemic shock, ” speech delivered at the brookings - chicago booth task force on financial stability ( tffs ) meeting, held via videoconference, october 23, https : / / fedinprint. org / item / fednsp / 88983. - 7been suggested to strengthen the resilience of the treasury market. for instance, further improvements in data collection and availability have been recommended to enhance transparency related to market participants, such as broker - dealers and hedge funds. some have suggested that the federal reserve could provide standing facilities to backstop repos in stress conditions, possibly creating a domestic standing facility or converting the temporary foreign and international monetary authorities ( fima ) repo facility to a standing facility. 9 other possible avenues to explore include the potential for wider access to platforms that promote forms of “ all to all ” trading less dependent on dealers and, relatedly, greater use of central clearing in treasury cash markets. 10 these measures involve complex tradeoffs and merit thoughtful analysis in advancing the important goal of ensuring treasury market resilience. offshore dollar funding markets the global dash for cash also led to severe stress in offshore dollar funding markets, where foreign exchange swap basis spreads increased sharply to levels last seen in the global financial crisis. foreign banking organizations serve as key conduits of dollar funding for foreign governments, central banks, businesses, nonbank financial institutions, and households. 11 see board of governors of the federal reserve system ( 2020 ), “ federal reserve announces establishment of a temporary fima repo facility to help support the smooth functioning of financial markets, ” press release, march 31, https : / / www. federalreserve. gov / newsevents / pressreleases / monetary20200331a. htm ; and board of governors of the federal reserve system ( 2019 ), “ minutes of the federal | 0.5 |
banking regulations cap banks ’ exposure to the equity markets. 15. when we come to foreign exchange and interest rate derivative markets, the perspective changes significantly. it is to be appreciated that interest rate and exchange rates are important macro - economic variables with economy - wide implications. the reserve bank of india has responsibility in regard to both the rates and is statutorily mandated to ensure sound functioning of these markets. therefore, its approach to development the cash as well as derivative segments of these markets has been characterised by what one can call as cautious gradualism. i shall elaborate on the issues involved in these markets. foreign exchange derivatives 16. the backdrop for the foreign exchange market is provided by several factors following the balance of payment crisis we faced in 1991. full current account convertibility since 1994, increasing openness on the capital accounts, a persistent and sometimes rapidly increasing current account deficit, the instability in autonomous capital flows, the investment needs of an expanding economy and globalization aspirations of indian corporates are some of them. our stated objective is to maintain orderliness in the foreign exchange market even as the exchange rate is market determined without any target level or band. the other factor one has to reckon with is the so - called impossible trinity where an independent monetary policy, a fixed exchange rate and an open capital account are impossible to simultaneously attain. since no economy of india ’ s size and complexity can sacrifice its independence in monetary policy, the inevitable consequence is an eclectic combination of some capital account openness and some flexibility in the exchange rate. 17. how does all this influence the development of the foreign exchange derivatives market? our approach to development of the foreign exchange derivatives market has been largely biased by the use of these products as instruments of hedging for individuals and real sector firms with a pre - existing foreign exchange exposure. take for example an exporter who has a foreign exchange receivable at a future date and any adverse movement is likely to adversely affect her expected rupee revenue and therefore her balance sheet. a derivative product like a forward sale or a put option is designed to remove all or some bis central bankers ’ speeches uncertainty of the exporter ’ s expected revenue and thereby impart stability to its balance sheet. 18. but a derivative product also is an instrument for expressing a view on the future path of the price of the underlying. thus if you expect the rupee to fall in value at a future date, you can sell it in the forward or futures market or buy a put option. this has | in derivatives and underscoring the need for further regulating the market. immediate aftermath of a crisis was not a good time to take a balanced view, and now that much of the dust has, somewhat settled down, we can perhaps look at the problem dispassionately. financial sector & the derivatives 3. before we go to the theme of derivatives, it is necessary to briefly discuss the financial sector as such so as to provide a backdrop, as it were. it has been generally accepted that a financial sector is a necessary precondition for economic growth and progress. economists like john hicks, walter bagehot and joseph schumpeter have held that the development of financial sector helped mobilize the resources necessary for “ the immense work ” that constituted the industrial revolution. of course, like everything else in economics, this also has a contrary view point. economists joan robinson and robert lucas have expressed scepticism about the emphasis given to the financial sector. extensive research in recent years goes to show that a well developed financial sector may be neither a necessary nor a sufficient condition for economic growth but the absence of an efficient financial sector can surely retard growth. 4. the financial sector essentially enables inter - temporal transfer of income and smoothens the consumption over the life time of an individual. on the other side, it also pools the surplus and allocates it to various socially productive projects which require an upfront outlay with the potential of generating a surplus at the end of the production cycle. it involves parting of money from the one who has the surplus to the one who needs it. but it could be a bis central bankers ’ speeches dangerous proposition. it is for nothing that polonius counsels his son laertes in shakespeare ’ s hamlet, “ neither a borrower nor a lender be ”. the legal - financial system that has evolved over the centuries has developed an elaborate architecture to ensure that the trust of the people is maintained in the financial system and they lend and borrow their requirement freely and safely. the financial sector has basically two kinds of problems. the first relates to information asymmetry inasmuch as one party to the transaction, the borrower or the investee, always knows more than the other party, the lender or the investor. this is a large topic in itself which i do not intend to deal with here, except that it also lays the ground for the second problem in financial transactions, that is, the risk of default or | 1 |
2017, the european council repealed its 2009 decision on the existence of an excessive deficit. for 2017 it is projected that the primary balance target of 1. 75 percent of gdp will be reached with a safe margin. the current account deficit as a percentage of gdp has fallen by 15 percentage points since the beginning of the crisis, with the current account effectively being in balance over the last two years. labour cost competitiveness has been fully restored and price competitiveness is almost back at its level of 2000 and can be expected to continue to improve with the implementation of further product market reforms that raise competition in various sectors of the economy. it is worth noting that this has been achieved through the painful process of internal devaluation, that is, through outright reductions in nominal wages and salaries. at the same time, a bold programme of structural reforms has been implemented covering the pension system, the health system, labour markets, product markets, the business environment, public administration, the tax system and the budgetary framework. its implementation, alongside the privatization and real estate development programme, is on - going. finally, the banking system has been restructured and consolidated. significant recapitalization, following stringent stress tests along with in - depth asset quality reviews, now ensures that greek banks are among the best capitalized in europe. this fact, along with an npe coverage ratio of 47 percent and good collateral will play a considerable role in allowing banks to address the pressing issue of the stock of non - performing loans. in addition, significant institutional reforms have been initiated aiming at providing banks with a variety of means of reducing non - performing loans. as a result of these efforts, the economy has already started to rebalance towards tradable, export - oriented sectors. a few numbers are indicative of this trend : 2 / 9 bis central bankers'speeches first, the share of exports of goods and services in gdp increased from 19 % in 2009 to 30. 2 % in 2016 with most of this increase stemming from exports of goods. in fact, according to eurostat data, greece ’ s exports of goods have increased by 43 % since 2009 in real terms, compared to 42 % for the euro area and 47 % for germany, europe ’ s export engine. second, between 2010 and 2015, the relative price of tradables versus non - tradables rose by about 10 %. as a result, the relative size of the tradables sector, measured by gross value added, grew by approximately 12 | , the stock of non - performing exposures ( including off balance sheet items ) was 3. 2 % lower than at end - december 2016. following the pattern of previous quarters, the outflow of npes coming from collections, liquidations and sales of loans was rather limited. instead, the key driver for the reduction in the stock of npes over the past quarter has been loan write - offs, especially in the business and 3 / 9 bis central bankers'speeches consumer portfolios which reached €3. 3 billion for the first half of 2017. finally, there is progress in reforms despite the recurrent delays in programme implementation. according to a recent lisbon council report ( europlus monitor, september 2017 update ), greece is still ranked first among the 28 countries of the european union on the basis of the adjustment progress indicator. this implies that greece has put the worst of the first half of 2015 slippage behind it and has started to improve again. 3. 1 growth forecasts for 2017 – 2019 overall, in 2017 the bank of greece estimates that gdp will increase by approximately 1. 7 %. for 2018 and 2019, growth is projected to accelerate to 2. 4 % and 2. 7 % respectively. consumption is expected to rebound modestly, driven by robust employment which is recovering faster than output on account of the previously implemented labour market reforms and the active labour market programmes in place. investment is projected to increase as confidence is restored and financial conditions improve. exports are projected to continue their positive trend, benefiting not only from the benign global economic outlook but also past improvements in cost competitiveness. these projections are based on the assumption that the reform and privatization programme will be implemented smoothly and according to the set timetable. 4. risks and major challenges ahead despite the positive signs that are being recorded today and the progress achieved, there are still downside risks to the outlook of the greek economy. the most significant and immediate risk is a delay in the completion of the third review of the programme. this should be avoided as it would fuel a new cycle of uncertainty that would lead to the suspension of investment plans, it would delay the repayment of government arrears and would not facilitate a normalization of financial conditions. in such a case economic recovery and the return to international financial markets will prove to be short - lived. in addition, there are significant external risks associated with the strengthening of the euro and the likelihood of economic growth slowing in the euro area. there are also significant geopol | 1 |
manuel sanchez : the shared task of financial inclusion remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the sixth financial education summit, organised by banamex, mexico city, 19 november 2013. * * * it is an honor to participate in this meeting on financial education and economic citizenship. i am pleased that banamex has organized, once again, a forum for discussion and analysis that contributes to understanding the challenges posed by financial inclusion in our country, and to pondering viable options for promoting it. theory and international evidence show that financial intermediation and inclusion favor economic development and enhance living standards. among other benefits, access to banking services allows individuals and firms to make better savings decisions, carry out economic transactions efficiently, and finance consumption and investment. despite these advantages, mexico is under - banked relative to advanced countries, and also even relative to nations of similar or less development. the percentage of people with a bank account, the proportion of individuals and firms with credit, and the availability of distribution channels such as bank branches, automatic teller machines, and point - of - sale terminals for every 100, 000 inhabitants reveal that mexico is significantly behind, although the data also suggest a huge opportunity for improvement. 1 as is well known, many savers and seekers of credit meet their needs with ingenious methods running from investments in and trading of animals to rotating savings and credit associations ( tandas ). indeed, those with null or limited access to financial services have come up with other ways of saving, demanding loans, making financial decisions, and carrying out fairly complex operations in their own ways. in fact, the proportion of the population that uses informal financial services surpasses that using the formal system. 2 frequently, these schemes are effective. for example, contrary to commonly held prejudices, informal credit markets for people with low incomes tend to have a strong payment culture, partly because transactions occur in communities with strong binding ties. however, it is also true that informal vehicles hardly guarantee optimum scales and protect users from possible fraud, given that they lack adequate rules and supervision. low financial inclusion can obstruct or make more expensive the access to information and services indispensable to increasing people ’ s opportunities and improving social wellbeing. to the extent that this limitation may affect broad segments of the population, generally those with the lowest incomes, it can diminish the productive potential of social groups and entire regions, making marginalization more acute. obstacles to | the market can expect greater transparency in the conduct of monetary policy and this should reduce the gray areas in anchoring public expectation about inflation and enhance the functioning of the markets. strengthening the financial system in the financial sector, the main challenges emerged from the overhang of the asian financial crisis and the greater integration of the philippines into the global financial system. in response, we have addressed these challenges precisely by strengthening the financial sector. focus has been given to maintaining a sound and viable banking system and the development of the domestic capital market. efforts in this area have begun to show positive results. banks ’ balance sheets are gradually recovering from the large burden of bad loans while the local bond market has received the initial shot from the reforms that include the now operational fixed income exchange. we shall sustain the bangko sentral ’ s reform strategy on cleaning up banks ’ balance sheets, addressing remaining weaknesses in managing risks, and ensuring that our prudential regulatory standards are elevated to international benchmarks. we shall also continue to coordinate with other government agencies and the private sector in installing the remaining infrastructural requirements of a well - functioning capital market that would diversify our sources of funds and reduce our vulnerability to various shocks. but we need to enhance a few things even as we have started to launch them. we are moving into consolidated supervision and risk - based approach to bank examination that are aligned with international best practices. such innovations are necessary to allow regulators to effectively manage challenges posed by conglomerate structures and cross - border issues. we are improving corporate governance and market discipline. a crucial element for effective oversight of the banking system is for the regulator to have stronger supervisory and regulatory authority and this can only be done with the support of congress in amending the bsp charter. finally, we realize that the bsp can enhance its effectiveness by establishing teamwork with the other financial regulators. thus was born the financial sector forum ( fsf ) that has elevated the cooperation among the regulators to pioneering levels. the fsf will help harmonize supervisory and regulatory efforts, improve the exchange of information among regulators and promote better consumer protection. in the area of promoting the domestic capital market, the changes we would like to see are the fruits of the steps that have already been started in close collaboration with the private sector. we shall be pleased to see more robust trading of government and subsequently, private, debt securities at the fixed income exchange, improved market confidence from the use of independent custodians, migration by the banks from | 0 |
the balance of risks shifts between the need to support growth and the duty to safeguard financial and price stability, monetary policy stance will have to be adjusted accordingly. the bank of thailand stands ready to employ the right mix of policy tools under its purview to attain these goals. ladies and gentlemen, i believe that a balanced and judicious use of monetary policy tool has and will continue to play a critical role for ensuring long - term macroeconomic and financial stability. as always, the bank of thailand will strive to create a stable economic environment in which businesses can prosper on a sustainable basis, so that thailand will continue to be the destination of choice by long - term investors. let me close my remark by thanking the netherlands business community for the substantial contribution to the thai economy. i hope that the relationship between our two nations will continue to flourish. thank you. bis central bankers ’ speeches | first, the new investment cycle in thailand may have taken off, led by both the private sector and large public infrastructure bis central bankers ’ speeches projects. many of these projects have high imported contents, and stand to gain from an exchange rate appreciation. spells of baht appreciation thus provide an incentive for many firms to implement a long - overdue technological upgrading and import more capital goods in an environment where labor is scarce and no longer cheap. in turn, these imports can help slow down the pace of appreciation and mitigate the adverse effects on export industry. furthermore, corporations that have expanded their operations overseas or plan to do so will also benefit from stronger baht which can help, to some extent, reduce the overall impact of baht appreciation on their businesses. with cooperation from all sides, including policymakers and private sector alike, thailand could seize this opportunity to strengthen the fundamentals of the economy further, and reap long - term benefits that are likely to be greater than short - term costs of adjustment. second, it is often overlooked that under flexible exchange rate, adjustments in the currency ’ s value themselves can be an effective buffer for capital flow volatility. in a wellfunctioning market, a currency that is overvalued relative to its fundamentals would be subject to market discipline that helps slow down further appreciation. indeed, estimates from both the international monetary fund and various investment banks suggest that the current value of thai baht is consistent with the underlying fundamentals. to promote a deeper foreign exchange market and foster more balanced capital flows, the bank of thailand also launched a capital account liberalization master plan, which entailed liberalization of thai investment abroad and a streamline of foreign exchange regulations. there are also continuing efforts to enhance the private sectors ’ adaptability and foreign exchange risk management. these initiatives should provide an extra layer of cushion to shield businesses against short - term market volatility. they are not, however, a substitute for structural improvement in productivity, which in the long run holds the key to success for the export industry. given that the global environment is still subject to uncertainty, capital flows may continue to be volatile, and risks to financial stability warrant close monitoring, it is more important than ever that monetary policy strikes the right balance between providing support to sustain growth momentum while ensuring long - term financial stability. in the judgment of mpc, the current stance of monetary policy remains accommodative, with the real policy rate still in negative territory. as | 1 |
2016 world economic outlook, has projected global growth at 3. 4 per cent in 2016, marginally going up to 3. 6 per cent in 2017, helped largely by emdes, projected to grow at 4. 3 per cent and 4. 7 per cent respectively. fears of a 2008 like crisis may still be a long way off unless things get a lot worse in china. being an optimist, i would, be hesitant in using the word ‘ turmoil ’ to describe the current global economic situation. there are certain concerns though. the risk of a deflationary spiral looks more immediate and has the potential to cause damage. with some sovereign and corporate balance sheets sitting highly leveraged, a deflationary period and the increase in the real value of debt could weaken the debt repayment capacity of many economies and corporations. persistent low interest rates, which cast a shadow on the capabilities of central banks to stimulate growth and stability, make the outlook on global financial markets highly uncertain. critical issues relating to global geo - political developments and idiosyncratic socio - political challenges being faced by many advanced economies would have a spill - over impact on the economic outlook and have to be kept in view. of course, this would require separate discussions. impact on india 9. let me now briefly discuss about india ’ s positioning vis - a - vis its peers in the emde space at the current juncture. while i share with you some facts and figures which are quite impressive, i would also flag certain issues which, if not addressed properly, could be a drag on the economy. india has been variously hailed as “ beacon of stability ”, “ haven of stability ” and “ bright spot ” amidst a slowing global economy ”. this flows from the fact that india is the best performing large economy ( gdp close to us $ two trillion ) with a 7. 6 per cent estimated growth rate for fy16. both imf and the world bank in their january 2016 outlook project india to grow at the highest rate among major economies in 2016 and 2017. notwithstanding the volatility seen in some of the vital data points ( e. g., falling exports, low iip numbers, etc. ) the growth trajectory remains on track. importantly, such growth has been accompanied by macro - economic stability. inflation has been under control and the balance of payment position looks healthy. current account deficit ( cad ) has narrowed to 1. 4 per cent of gdp ( q2, fy16 ) from | central banking career, tommaso gradually developed a general paradigm of what he believed central banking involves. this paradigm is drawn from the evolution of modern central banks over the last 200 years. as the role of money – as a means of payment, a unit of account and a store of value – evolved over time, also what he called the triadic function of central banking evolved. in his view, ensuring price stability refers to money as a unit of account and a store of value ; operating and supervising the payment system refers to money as a means of payment ; and pursuing the stability of banks refers to money as a means of payment and a store of value. i would add that price stability is the primary goal, the primary mandate and that ensuring price stability is also a precondition for the other functions to be correctly exerted. tommaso ’ s paradigm still provides a single and consistent order, in which the responsibilities of a central bank have their place. to each of these activities – from monetary policy to banknote printing, to market operations, financial stability, payment systems, relations with other public institutions, dialogue with the financial community and international cooperation – tommaso has been assigned at different stages of his professional life. bis central bankers ’ speeches in all these activities the central bank pursues and represents the public interest of a sound and credible currency, one that preserves its value over time. and it is with great pride that i say today, in particular thanks to tommaso ’ s contribution, together with all members of the executive board, of the governing council and the staff of the ecb, that our primary mandate has been fulfilled : with an average inflation rate in the euro area over the past 12 years of 1. 97 %, the ecb governing council has delivered what 330 million europeans expect – “ la difesa del risparmio ”, “ die wahrung zu sichern ”, “ assurer la stabilite des prix ”. this remarkable track record has been delivered by a team of, today, 18 central banks ( the ecb, as captain of the team, and the national central banks of the 17 euro area countries ), which we call the eurosystem. from the very beginning, tommaso saw the challenge of making the full body of the eurosystem an effective, continent - wide central bank, to make all its components act together, as i call it, as a true team, with a strong and dedicated | 0 |
exchange rate, even without the national bank of serbia ’ s interventions in the foreign exchange market. together with high demand for the first issue of the republic of serbia ’ s eurobonds, the prior indicates that serbia ’ s financial resilience to bis central bankers ’ speeches external shocks of this kind is greater than in previous years. the stability of the dinar was underpinned largely by the inflow of foreign direct investments, as well as by the conclusion of a precautionary arrangement with the international monetary fund. chart 3 risk premium indicator − embi by country ( daily, in basis points ) chart 4 movements in exchange rates of national currencies against the euro * ( september 30, 2010 = 100 ) bulgaria serbia embi global composite hungary poland croatia turkey turkey poland czech republic hungary romania serbia * growth indicates appreciation. the government ’ s commitment under the arrangement to run a sustainable fiscal policy lessens the risk of a public debt crisis in serbia, which is of paramount importance in light of the forthcoming parliamentary and local elections. in an environment of a global collapse of confidence in public finance sustainability, the perception of serbia ’ s risk will depend most on the sustainability of its budgetary framework. * * * the slowing of global growth over the previous two quarters, and notably that of the euro area, has already reflected on the serbian economy. according to preliminary estimates, in the third quarter gdp rose 0. 7 % year - on - year and fell 0. 4 % quarter - on - quarter. the fall in economic activity in the third quarter is for its major part due to the reduced final consumption of households. chart 5 economic activity indicators ( seasonally - adjusted data, 2008 = 100 ) chart 6 contributions to quarterly gdp growth ( in p. p. ) 2. 4 - 2 0. 5 0. 5 0. 5 1. 4 - 0. 7 - 1. 0 - 0. 7 - 1. 4 - 1. 2 - 1. 0 1. 2 - 0. 7 - 0. 5 - 0. 4 - 0. 5 - 4 - 6 iii iv i ii gdp * nbs estimate. 4. 1 iii iv i ii iii iv i ii iii iv i non - agricultural value added ii iii 2011 * - 8 iii iv i ii iii iv i ii iii iv total final consumption net exports i ii iii iv i ii iii 2011 * investment gdp ( % ) * nbs estimate. bis central bankers ’ speeches chart 7 retail trade ( | of wheat and corn prices, a rise in processed food prices in the coming period will probably be modest. chart 17 world prices of primary commodities ( 2010 = 100 ) chart 18 one - year ahead expected and targeted inflation ( in % ) 7. 4 6. 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 10 ural oil prices corn prices wheat prices copper prices 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 financial sector ( gallup and strategic agency ) financial sector ( thomson reuters agency ) financial sector ( bloomberg ) targeted inflation tolerance band declining world prices of other primary commodities, such as oil and base metals will also work towards the disinflatory effect. furthermore, we expect administered price growth to be slower in 2012 than in this and earlier years, though we may see another departure from the planned level. the disinflation process will be further fuelled by declining inflation expectations. inflation expectations declined from some 8. 0 % to 6. 7 % in the last two months, and we expect this tendency to continue. a fall in year - on - year inflation will be particularly pronounced until march – april next year as a result of the base effect. namely, although monthly inflation rates have decreased over the last six months to levels consistent with the target, the year - on - year rate remains above the target as price hikes from late 2010 and early 2011 are still included in its calculation. as these price hikes phase out of the year - on - year calculation and new, lower monthly inflation rates are taken in, year - on - year inflation will decline and return within the target band. chart 19 short - term inflation projection ( y - o - y rates, in % ) chart 20 inflation projection ( y - o - y rates, in % ) projection 12 3 12 3 12 3 12 3 the key risks to the presented inflation projection are largely associated with movements in the international environment and fiscal policy at home. bis central bankers ’ speeches world analysts agree in the assessment that global growth will be slower than expected until recently, but there is a large difference across individual forecasts. if, contrary to the currently prevailing expectations, the world economy is swept by a new wave of recession, negative repercussions for the serbian economy, and the disinflationary effects arising from aggregate demand, would be more pronounced than | 1 |
peter nicholl : recent banking sector developments in bosnia and herzegovina speech by mr peter nicholl, governor of the central bank of bosnia and herzegovina, at the ceremony of the taking over of hrvatska postanska bank by raiffeisen bank, mostar, 5 may 2001. * * * i want to congratulate the two banks, raiffeisen and hrvatska postanska, on the step they are taking today. they are taking part in a process the central bank of bh has been promoting for some time now – the consolidation and strengthening of the commercial banking sector in bh. this process is very important. an efficient banking system is a crucial part of market economy. it encourages savings and it promotes investment and employment by lending those savings for business development, housing and other purposes. the year 2000 will be seen as the year in which the banking sector in bh finally began to change for the better. i will mention just a few of the highlights. first, the payments system underwent fundamental reform. bh now has a modern european - type payments system. second, minimum capital requirements for banks were increased and will increase further. third, it become possible for a bank registered in one entity to operate branches in the other entity. five banks are already doing so, and more will follow. fourth, a limited deposit insurance scheme has started which should help return citizens confidence to the banks that qualify. so far, only four banks have been admitted to the scheme and it is only operating in the federation. last, but not least, more foreign banks commenced operations in bh in 2000, either by applying for licenses directly or by purchasing an existing bh bank. increased foreign competition will be very good for the bh economy. it will give depositors more choice and will force the local banks to improve the range and quality of the services they provide if they want to survive. one can already see these effects occurring. there is still a long way to go before bh has a banking sector that can play the major role the banking sector plays in most other countries in europe. but 2000 will be seen as the year in which the bh banking sector finally began to move in the right direction. it is certain that the speed of change in the banking sector will accelerate even more in 2001. the overall winners from the improvement in the banking sector will be the customers of banks and the economy of bh. today ’ s event is part of the acceleration of | the transformation of the bh banking sector that i have refereed to. raiffeisen opened in sarajevo just last july, only nine months ago. they have since opened a branch in banja luka and are in the process of opening more branches in the rs, in brcko and in many other towns in the federation. today, they are taking a big step into herzegovina by buying hrvatska postanska bank. they have very quickly become a bank that is operating over the whole territory of bh as well as in most of the neighboring countries. i congratulate them on the major role they are playing in transforming and strengthening the banking sector in bh and wish them every success with their new partner. | 1 |
to below 5 % by the turn of the century. the creation of “ a super welfare state ” in this manner without the backing of a proper resource base by sri lanka has been criticised by many as an unsound and unsustainable policy compared with that pursued by superperformers in the region. in this backdrop, some aspects of the welfare state were done away with in late 1970s when sri lanka moved to an open economy policy in which growth objectives were pursued through private sector participation and emphasis on export orientation. to facilitate the new growth strategy, economy was liberalised and a flexible exchange rate regime was followed. in the initial decade following the adoption of the new policy, economy responded positively, but at the same time, incidence of poverty too increased to a significant level 3. by mid 1980s, sri lanka ’ s two great chronicles, mahavansa and culavansa, have praised the kings who in fact followed this policy to the letter. the kings were guided mainly by kautilya who in his arthashastra advised the king to “ augment his power by promoting welfare of his people ” the arthashastra, penguin classics ( 1987 ), p 181. britain ’ s entry into a fully fledged welfare state was completed after the world war ii based on the beveridge report. for details, see, yergin, daniel & stanislaw, joseph, the commanding heights, ( 1998 ), p 6. for instance, poverty level as a percent of total population which stood at 19 % in 1978 - 79 rose to 27 % in 1986 - 87. saarc, meeting the challenge, ( 1992 ), p 5. it was felt that, unless an effective strategy is adopted to alleviate poverty among those who could not get integrated to the market economy policies, the country was within sight of another socio - economic explosion similar to the one which it experienced in 1971 in the near future 4. as a counter strategy, several poverty alleviation schemes were initiated by the government with focus on the poor. along with these schemes, the central bank too entered the foray by implementing some pilot projects based on microfinance and support services so that it could develop microfinance techniques and systems for others to emulate. one such project, funded by the international fund for agricultural development ( ifad ) and canadian international development agency ( cida ) was implemented by the central bank in four districts where the incidence of poverty was the highest under the title | buying and selling rates of foreign exchange, thus allowing freer foreign exchange transactions. the change in the exchange rate regime resulted in an overshooting effect with the rupee depreciating by rs. 13 from rs. 98 per us dollar within the first three days, but a relatively quick stabilisation of the exchange rate followed. as the use of monetary policy to defend the foreign exchange rate was no longer necessary under the floating exchange rate regime, the central bank of sri lanka was able to conduct monetary policy with an increased focus on achieving the bank ’ s objective of price stability. however, maintenance of price stability came under heavy pressure under this regime whenever aggregate demand was excessive as a result of expansionary fiscal policies. therefore, at times of such excessive domestic demand through fiscal dominance, the central bank of sri lanka intervened in the foreign exchange market to defend the exchange rate from depreciation. although this was done with the good intention of maintaining macroeconomic stability in difficult times, experience repeatedly showed that managing the exchange rate extensively was always associated with a substantial loss of limited international reserves followed by a large depreciation. the most recent of such events were in 2011 / 2012 and 2015. during the 2011 / 2012 episode, the central bank supplied us dollars 4. 2 billion to the market on a net basis, while the central bank supplied us dollars 3. 2 billion to the market on a net basis during the year 2015. in spite of these considerable losses of reserves, the rupee depreciated against the us dollar by 13. 5 per cent by the end of the 2011 / 2012 episode and by 9. 0 per cent during 2015. since then, the central bank has explicitly announced that international reserves will not be used to defend an overvalued exchange rate. instead, the central bank intervention in the foreign exchange market will aim to buildup international reserves. so far during 2017, the central bank has been able to purchase over us dollars 1. 3 billion from the market on a net basis for this purpose, and improved market confidence is shown by the limited depreciation of the currency this year. gradual modifications to the monetary policy conduct returning to the previous discussion, it was clear by late 1990s and early 2000s, that a serious rethink of central banking in sri lanka was necessary. in addition to the increasingly popular view within international central banking and academic circles that price stability must be the overriding objective of a central bank, financial innovations, including the development of electronic | 0.5 |
axel a weber : the macroeconomy and financial systems in normal times and in times of stress dinner speech by professor axel a weber, president of the deutsche bundesbank, at the joint bundesbank - bank of france conference on " the macroeconomy and financial systems in normal times and in times of stress ", gouvieux - chantilly, 8 june 2009. * * * introduction ladies and gentlemen, i warmly welcome you to this dinner on the occasion of the joint bundesbank - banque de france conference here in gouvieux. the regal ambience of this castle may help us to momentarily forget our everyday events and concerns ; however, this will certainly not last. the global financial crisis has been keeping the world on edge for nearly two years now. the turbulence in the international financial markets that erupted in august 2007 developed into a full - blown global financial crisis in september 2008 with the collapse of us investment bank lehman brothers. the deterioration of the situation in the financial market caused the decline in global economic output, which was already starting to take hold, to take a dramatic turn for the worse. industrial and emerging economies underwent a nearly completely synchronised sharp economic downturn in the last two quarters. despite growing signs that the intensity of the downturn is subsiding, past experience has shown that the economy is generally very slow to recover from recessions that are associated with real estate and financial crises. although the forecast uncertainty is currently particularly high, the crisis is likely to put a strain on global financial markets and the real sector for some time to come. to quote the opening lines to the tolstoy novel anna karenina : “ happy families are all alike ; every unhappy family is unhappy in its own way. ” this pearl of wisdom is also relevant in times of financial crisis. although virtually the entire world was bowled over by the sheer force of events, it is small details that set the individual transmission channels apart. allow me to briefly cite germany as a case in point. in august 2007, right at the beginning of the financial crisis, germany was the first country to see two banks encounter difficulties, even though we had not had any local asset price bubbles. since the financial crisis is clearly a global problem, the risk - bearing capacity of many internationally active financial institutions has now been affected severely on a worldwide scale. turning to developments in the real sector, it is striking that germany saw a particularly sharp drop in overall economic activity relative to | ##s and are flexible enough to allow perspectives on risk to change as business conditions change and new data become available. governance structure to ensure sound risk management, boards of directors and senior management at financial institutions must also establish an overall governance and control structure that is credible, robust, and consistent throughout the firm. it is critical that senior management set the tone at the top, communicate it, and lead by example. this strategy should be clearly articulated and should be recognizable in the actions of the firm's employees. business lines should be held equally accountable and there should not be any special treatment for " star " employees, even if they are bringing sizable revenues into the institution in a particularly year. while certain financial institutions may choose to conduct business on a decentralized basis, they must always remember that in the end the exposures and obligations are rolled up and combined into one consolidated legal entity. in addition, the institution's commitment to and emphasis on risk management should be eminently visible – both within and outside of the organization. for example, the firm should demonstrate that its risk managers have direct access to top management and play a key role in decisionmaking. they also must be able to speak authoritatively about the risk profile and risk - management strategy of the whole organization to market participants and counterparties. durability of risk - management structures of course, risk - management structures are successful only if they are sturdy and durable. these structures and their associated strategies should be embedded in the firm's culture and not be dependent on just one or a few people. they should be part of the fabric of the organization, not just a few catchy phrases repeated from time to time. for example, understanding and living up to the firm's risk - management standards should be a prerequisite for advancement to a senior management position. effective risk management remains sturdy and durable only if supported by strong and independent risk functions that produce unbiased information. having independent risk managers with a certain amount of authority allows for clear, dispassionate thinking about the entire firm's risk profile, with no favoritism toward any business unit. senior management should encourage risk managers to dig deep to uncover latent risks and point out cases in which certain business lines are assuming too much risk. in other words, it is good to have a few people within the institution who – to paraphrase a former federal reserve chairman – know when to take away the punch bowl. being the party pooper, however | 0 |
luis maximo dos santos : financial inclusion and education for central banks of portuguese - speaking countries opening address by mr luis maximo dos santos, vice - governor of the bank of portugal, at the 3rd meeting on financial inclusion and education for central banks of portuguese - speaking countries ( bcplp ), lisbon, 6 july 2017. * * * as prepared for delivery. 1. welcome to portugal, to lisbon and to banco de portugal. welcome to the 3rd meeting on financial inclusion and education. i would like to warmly greet the central banks of sao tome and principe, timor - leste, brazil, the west african states, cabo verde, mozambique, angola, as well as all the distinguished members of each bank ’ s delegation. your presence honours us all, thank you. it is also my pleasure to greet every one present today and to welcome for the first time the alliance for financial inclusion, represented by its executive director. 2. these meetings were started not a moment too soon, in 2013, resumed in 2015 and today we gather to open the third. it is not only our privilege but also a pleasure to host this event. in fact, financial inclusion and education are increasingly seen as a priority in the international agenda on account of their impact on the promotion of financial stability and economic development. these meetings on financial inclusion and education show how important it is for central banks of portuguese - speaking countries to share their knowledge and experience of initiatives to promote financial inclusion and education. the wealth of experiences and best practices shared at the first two meetings led to the publication of reports on the initiatives undertaken to promote financial inclusion and education in portuguese - speaking countries. i am certain that the past two years have brought us many developments on this subject, in the various countries, which will be presented and analysed today and tomorrow, meriting a third report to be published with the conclusions of this meeting. every time, these meetings delve deeper into the topic under analysis : 1. at the first meeting, in 2013, we took stock of what part central banks should play and of the best international practices to promote financial inclusion and education ; 2. at the second meeting, in 2015, we debated financial education in schools, distance learning and the importance of partnerships for the success and sustainability of financial inclusion and education policies. in this third meeting, besides taking an in - depth look into financial education in schools, a strategic pillar of education for population in general and for young people in particular, new | elisa ferreira : lessons from the crisis for central banks - a policy view remarks by ms elisa ferreira, vice - governor of the bank of portugal, at the joint bank of portugal and european central bank conference on " risk management for central banks ", panel 2 " lessons from the crisis for central banks - a policy view ", lisbon, 25 september 2017. * * * introduction economists and policymakers are still struggling to build a consensus on the long - run economic impact and on the policy implications of the financial crisis, 10 years past its beginning. in my view, there are two major lessons from the crisis : ( i. ) understanding macroeconomic equilibria requires knowing the interaction / transmission mechanisms of balance sheet positions of all agents in the economy, the behaviour of financial intermediaries and the interlinkages between the financial and non - financial sectors of the economy ; this has implications on the design of economic policy, notably monetary and macroprudential policies, and on the need for interaction between monetary, macroprudential and microprudential policies ; ( ii. ) the european architecture was unprepared to face the financial crisis and, despite several major steps observed in recent years, we are still living within an incomplete setup ; a holistic approach – combining ( i ) steps in micro and macroprudential policies, ( ii ) policy action to implement the three interlinked pillars of the banking union ; and ( iii ) further coherent steps in economic integration are warranted. in these remarks i would like to briefly touch upon each one of these lessons, having in mind the policy implications that may arise for the euro area. ( i ) the return of financial issues to centre stage in economic thinking and the challenges still faced at the current juncture one of the insights from the crisis is that real and financial interactions can only be ignored at our peril. this has implications for economic modelling and for the design of monetary and macroprudential policy strategies. in particular, should financial stability considerations be incorporated in the conduct of monetary policy? what is the effectiveness of macroprudential policy when some of the risks for financial stability have already materialized and the macroprudential “ buffers ” were not build up beforehand? how do monetary policy and macroprudential policy interact in practical terms? issues such as how to optimally coordinate policies and how to avoid time - inconsistency problems in this coordination are still outstanding. this is even more evident in a | 0.5 |
item that applications made by wal - mart to cash cheques at its 44 stores has been approved by the division of banking in massachusetts mainly on grounds of providing facility to the unbanked. in some jurisdictions, non bank entities are being allowed to provide payment and account maintaining facility without bank account - through e - money - to meet the needs of the unbanked. in developing countries, the added dimension, and the main difference is that the focus of financial inclusion is on promoting sustainable development and generating employment for a vast majority of the population especially in the rural areas. in yesterday ’ s address in bancon, deputy governor dr. rakesh mohan has elaborately laid out the position for india and the data analysed by him speaks for itself. rather than repeating the figures, let ’ s just take a look at a few facts. in march 2005, commercial banks had 338 million savings and current accounts as against 290 million in 2000. rural accounts went up from 172 million to 200 million – representing an increase of 28 million, while urban accounts increased by 20 million from 118 million to 138 million. the rate of growth annually was around 3 % just a little over the population growthstate wise data would show certain areas where there is hardly any increase. the number of loan accounts increased from 54 million in 2000 to 77 million in march 2005 ( 7. 3 % cagr ). however the higher growth rate was on account of urban areas. in rural areas, the number of loan accounts went up from 40 million to 47 million ( 3. 3 % ) whereas the urban areas showed a stronger growth from 14 million to 30 million loan account or growth rate of 16. 5 %. the growth in the number of small borrower accounts in rural areas was even lower at 2. 5 % whereas the growth in the number for urban areas was 13. 8 % between 2000 and 2005. there has been hardly any increase in outreach or scale in the last five years except for some growth in branches and loan accounts in urban areas. number of bank offices in rural areas remained more or less the same - 47253 in 2000 to 47586 in 2005 - while they rose from 19808 to 22383 in urban areas. current and savings accounts per branch in rural areas rose from 3650 to 4202 and from 5965 to 6155 in urban areas. the number of loan accounts per branch rose from 844 in 2000 to 1003 in 2005 while in urban areas the number increased from 731 | to 1335. these data bring out the spurt in urban retail lending in recent time – but this has not been matched by similar growth in savings accounts in both rural and urban areas or growth in loan accounts in rural areas. on the other hand, there are 93 million mobile users today – the cagr since 1999 is 85 %. the number of mobile phones currently is more than the number of borrowers from the banking system. there is a clear need to increase the outreach and scale up operations at existing outlets. use of technology the use of it is inevitable to improve the usage of existing branch infrastructure. increasing outreach and up scaling number of accounts at each branch will require bankers to move out of their branches and source clients and then look at low cost delivery alternatives once the account relationship is established. opening a no frills account with a small overdraft or gcc is only the first step in building the relationship which would require sustained efforts to ensure that the banking relationship with the customer is fashioned to meet his needs. it can reduce cost and time in processing of applications, maintaining and reconciliation of accounts and enable banks to use their staff at branches for making that critical minimum effort in sustaining relationship especially with new accountholders. in rural areas customers cannot be expected to come to branches in view of opportunity cost and time and hence banks will have to reach out through a variety of devices such as weekly banking, mobile banking, satellite offices, rural atms and use of post offices. in urban and even in rural areas where mobile phones have penetrated, banks could use mobile technology for facilitating banking transactions. mobile phones can be used to transfer funds real time from and to bank accounts and could make remittances and payments at very low cost. once the data base and track record is established, a multitude of financial services can be offered including savings, remittance, transaction banking such as receipt of salaries, pensions and payments for utilities, loan including home loans, insurance and mf products. here the branches can render more business and variety of products to existing clientele as also source new customers within the area of operation. financial inclusion offers a huge potential for business in terms of resources and assets and banks therefore need to take aggressive steps to use technology, business processes and personnel to be able to exploit this potential in innovative and creative ways. in a branch banking model, local community based organizations or respected persons could be used to deal with the information asymmetry problem by leveraging the knowledge about customers | 1 |
to deal with ( domestic and cross - border ) systemic risks in the banking sector. to be true, in the late 80s / early 90s the concept of systemic risk hardly existed. the flaws of the original treaty are therefore less of a conceptual nature – unless one applies the intellectual framework of today with the benefit of hindsight to judge the design of the early 90s. the main flaw in my view was that the political authorities and economic agents did not internalise enough what participation in a monetary union means. they received the benefits of reduced interest rates but missed out on the obligations for the country itself ( i. e. the need for adjustment through the domestic economy ) and towards other countries ( arising from negative spillovers linked to unbalanced domestic policies ). a coherent and viable architecture of emu ought to be based on more integrated frameworks for budgetary matters, economic policy, financial sector and democratic accountability. bis central bankers ’ speeches in light of the crisis and the urgent responses it required in the short term, one may lose sight of the major institutional progress achieved since the crisis erupted. besides putting in place crisis management tools and financial firewalls that not only proved effective but also underlined a degree of solidarity unseen before to accompany ambitious reform programs which began – where implemented – to yield results, european leaders have adopted major decisions aimed at significantly reinforcing the architecture of emu. first, the fiscal framework has been strengthened since the start of the crisis to improve fiscal discipline and restore fiscal sustainability in euro area member states. in particular, fiscal surveillance has been enlarged and fiscal governance has been enhanced by procedural steps to nearly automatic sanctions. we expect that no further holes will be punctured in this strengthened sgp. there are encouraging signs. national governments are addressing their fiscal imbalances. the euro area ’ s progress in fiscal consolidation is much more advanced than that of other regions of the world. its average fiscal deficit in 2013 is projected to be 3. 1 % of gdp, compared with a 5. 8 % deficit in the us or a 9. 5 % deficit in japan. gross general government debt is expected to peak at 96 % of gdp in the euro area this year vs. 106 % in the us and 244 % in japan. second, economic governance at european level has been improved by implementing the macroeconomic imbalance procedure ( mip ). the mip has been set up to enhance surveillance, identify potential risks and correct existing imbalances. this has been complement | crunch that has further aggravated the crisis. cyclical factors have thus played an important role in increasing unemployment. the ecb has reacted to the crisis on three fronts. as for “ conventional ” monetary policy, it has cut interest rates from 1. 5 % in november 2011 to 0. 5 % today. it has reduced the interest rate paid by banks on their deposits at the ecb from 0. 75 % in november 2011 to – 0. 20 % today. it also activated at the end of 2011 credit lines for the banking system amounting to €1 trillion and with an unprecedented maturity of three years. subsequently, facing the reemergence of the sovereign debt crisis and a serious crisis of confidence about the survival of the euro, it introduced the now famous outright monetary transaction programme which has helped to rapidly reduce uncertainty in the financial markets in the euro area and to realign spreads with the credit rating. more recently, it has introduced a further three measures of unconventional monetary policy : the tltros, credit lines of up to four years that can be used by banks for loans to households and businesses ; two programmes for the purchase of covered bonds and abs with the aim being to further expand liquidity via operations directed towards the real economy. all these policy actions, accompanied by the expected maintenance of interest rates at their current level for a long period of time and an ongoing expansion of the ecb ’ s balance sheet, together with the commitment by the bis central bankers ’ speeches governing council to take further unconventional policy actions should medium - term inflation expectations worsen or if the measures already decided on prove to be insufficient, has led to an unprecedented degree of monetary accommodation. today, all the current and expected market interest rates over all horizons are lower than they have ever been, and lower than they are today in the united states. but most of the measures taken may have effects on the real economy only through banks, which in the euro area intermediate about 80 % of the credit. only if they pass on to households and businesses the extraordinarily accommodative conditions in terms of interest rate, the maturity, the quantity that the ecb offers them, will monetary policy be fully effective with its stimulus. for that to happen it is not only necessary for there to be demand for credit from customers able to repay it, but that they [ the banks ] themselves are healthy. it is to this end that the ecb, on the eve of becoming the single supervisor for the euro area | 0.5 |
effects of the decline in the us dollar, the average oil price in the second half of 2004 was about 50 per cent higher than the average over the period 2001 - 2003. assessing the implications of this change requires us first to ask why it occurred. the oil shocks of the mid and late 1970s resulted from opec actions to drive up the price by restricting supply. in such a scenario, costs of production for industrial users of energy are raised, which means some combination of higher prices and lower profits ensues. possibly some of the capital stock is rendered uneconomic. for households, the rise in oil prices reduces purchasing power, so imparting a contractionary impact on other areas of demand. 2 the situation when the disturbance emanates on the demand side is different. the initiating shock here is expansionary in nature : somewhere in the world, there is unexpected strength in energy - intensive production of goods and services. prices rise, but so does output. admittedly, output would have risen even further had the supply of oil been perfectly elastic, but a demand - driven rise in oil prices is a sign of global growth strength, not weakness. graph 2 click to view larger that is the bulk of the story in the past few years. with global gdp having grown by about 12 per cent over the past three years, oil demand is estimated to have increased by about 6½ per cent over the same period. granted, there have been periods of pressure on prices driven by uncertainty over current or future supply, but the main story is one of demand. a key assumption of this analysis is that there is only limited short - term scope to substitute towards other sources of energy or to otherwise use oil more efficiently, which is reasonable for the short term though not the long term. it also assumes that the income gain accruing to oil exporters does not lead to demand expansion in those countries sufficient to offset the contractionary impact in the oil - importing countries. 2 / 7 there is, of course, an important compositional element too. much of the additional growth in demand is coming from the asian region. this means that traditional big users of oil in the developed countries are competing for resources in a way they had not been accustomed to doing in the past. a rise in the oil price could well seem to them quite like the supply shock scenario - higher prices and lower output. hence, if oil prices were to remain quite high, economic prospects for some of the western industrial countries, | glenn stevens : economic and financial conditions december 2004 address by mr glenn stevens, deputy governor of the reserve bank of australia, to the australian business economists and the economic society of australia ( nsw branch ), annual forecasting conference dinner, sydney, 14 december 2004. * * * 2004 turned out to be a year of considerably stronger output in the global economy. according to the international panel of private forecasters recently polled by consensus economics inc, global gdp1 will have risen by 5 per cent in 2004. this does not include the recent round of data revisions in japan, and so may be adjusted down a little. even so, it is hard to see how the outcome will not be at least a full percentage point above the long - run average and as strong as any year in the past thirty. graph 1 click to view larger as always, there were short - term departures from the established trend. the us “ soft patch ” in mid year followed a brief period when price statistics in the us had people worried about inflation. the number one topic of discussion the previous year, of course, had been deflation. there were also periodic concerns that the attempts to engineer a slowdown in china might over - achieve, resulting in a slump of global significance. the various short - term concerns were overdone, as is so often the case, but were to be expected given that an innumerable army of analysts, commentators and financial market players extensively debate every twist and turn of the economic data, many of which turn out to be statistical noise. a more genuine reason for some discomfort is perhaps that, despite vigorous global growth in total, there is a feeling that it is a little lop - sided, with some areas participating less than fully. the euro area, for example, has struggled to “ gain traction ”. as measured by the imf's ppp - weighted approach. 1 / 7 in 2005, some slowing is envisaged but forecasters apparently expect growth still to be better than average. it might be revised down a bit in the near term reflecting some softer recent data. but even a noticeable downgrade would leave growth at about average, which would be quite a reasonable outcome. in the course of expansions lasting a number of years, it is quite common for there to be the odd slower year ; they can ’ t all be above average. one factor affecting people ’ s expectations will presumably be energy prices. measured against the sdr, so as to avoid valuation | 1 |
that they are not reasonably able to identify or manage. our second driver comes from our ongoing work on bank failure management, which some of you will be familiar with. while we are not expecting any banks to fail, we do want to be in a position to discharge our legal responsibilities if one does get into trouble. and one of the things we may well want to do is to continue to operate a bank in statutory management, and keep it as a full participant in the payment system. we also need to be able to act quickly in respect of transactions that are in the various pipelines at the point where a statutory management is declared. to do this, we potentially need fast access to new zealand management, technological and payment system resources. i noted earlier the complexity of the payment system overall, and i don't think that some of these questions have particularly easy answers. we are addressing some of them through our outsourcing policy, but others are likely to require alternative approaches, and some further co - operation with the industry. the goals include ensuring that key systems are designed to be " high availability " ones ; that robust back - up arrangements are in place wherever feasible ; that business continuity plans are effective and mutually consistent ; and that rapid decision - making and communication capability is readily available. for us, this is very much " work in progress " at this point. legislative powers finally, in talking about regulation, i should note that in 2003 the reserve bank was given some formal legal jurisdiction over the payment system for the first time, in a new part 5b of the reserve bank act. the powers basically give us the right to obtain and publish information, and thus to throw a spotlight on any issues of public interest. they do not give us the kind of authority to scrutinise and determine prices, for example, that the payment system board has in australia : here, that kind of role is performed by my former colleagues in the commerce commission, and we are very comfortable with that division of labour. the reserve bank is an advocate for competition and suitably - open access rules in the payment system. in practice the new legislation provides a more formal basis for the kinds of things we have been doing, and does not signal any change in direction. we decided recently to publish the principles we would follow in our payment system oversight work, and these have been put on our website today. you will be able to read them there, so i won't go into them in detail. they | this technology. more recently, the use of pc - banking and the internet to initiate transactions have been growing rapidly in popularity. cheques are progressively disappearing, but - contrary to longstanding predictions of a " cashless society " - the use of currency has continued to grow. in the wholesale markets, the kiwi interbank transfer system ( kits ) began in 1987, to handle electronically some payments between the four big banks. it was replaced in 2000 by the same - day cleared payment service ( scp ), which can handle interbank payments and payments between bank customers on a real - time basis. in 1990, the reserve bank commenced to operate the austraclear system under licence. this system, as you know, provides a depository for debt and equity securities, the facility to transfer these securities on a real - time delivery - versus - payment basis, the facility to make cash payments, and a platform for the automated provision of intra - day liquidity to the banking system. settlements amongst the banks in respect of each day's transactions used to take place on the books of the reserve bank - everything was netted down to a single number that each bank either owed to the system, or was owed by the system, and the banks'accounts at the reserve bank were debited and credited accordingly. no doubt this procedure started with a ledger, a clerk and a quill pen, and it didn't change much until 1998 when the electronic exchange settlement account system ( esas ) was introduced. this system enabled three main changes : • large interbank transactions could now be settled on the reserve bank's books at any time during the day, without having to wait until the end of the day, and without having to be included in the end - of - day netting wash - up. this is called real time gross settlement ( rtgs ) • austraclear transactions were now also settled using esas, giving the securities market delivery - versus - payment in central bank money ( austraclear had previously been dvp in commercial bank money ). new zealand was one of the earliest countries in the world to achieve this outcome. • reserve bank operations to provide intra - day liquidity to enable these real - time transactions were automated though an " autorepo " facility finally, late last year, the new zealand dollar entered the cls system, which provides a payment versus payment service for settling foreign exchange transactions. this substantially reduced the largest remaining settlement risk | 1 |
svein gjedrem : monetary policy and the economic situation speech by mr svein gjedrem, governor of the central bank of norway, at a meeting of the troms fish farming association, harstad, 13 march 2003. the address is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 5 march and on previous speeches. please note that the text below may differ slightly from the actual presentation. the charts in pdf can be found on the norges bank ’ s website. * * * the operational target of monetary policy as defined by the government is inflation of close to 2½ per cent over time. norges bank sets the interest rate so that future inflation will be equal to the inflation target of 2½ per cent. interest rates were reduced this winter in response to the change in the inflation outlook. the inflation projections were revised downwards as a result of weaker cyclical developments in the world economy, a sharp drop in interest rates internationally and a strong krone. in addition, the norwegian business sector is feeling the effects of the high norwegian cost level. moreover, growth in domestic demand has slowed. household purchasing power has been reduced as a result of higher electricity prices. the weak prospects at home and abroad are in turn having an impact on the norwegian labour market and the outlook for wage growth and inflation in the years ahead. the inflation target provides economic agents with an anchor for their decisions concerning saving, investment, budgets and wages. households, businesses, public entities, employees and employers can base decisions on the assumption that inflation in norway will be 2½ per cent over time. high demand for goods and services and labour shortages normally point to higher inflation in the future. when interest rates are increased, demand falls and inflation is kept at bay. when demand is low and unemployment rises, inflation will tend to slow. interest rates will then be reduced. the inflation target is a vehicle for, not an obstacle to, monetary policy ’ s contribution to stabilising output and employment. this intention is also expressed in the regulation on monetary policy. the inflation target of 2½ per cent is broadly in line with the inflation targets of our trading partners. it is also an anchor for developments in the krone exchange rate. the krone fluctuates. we have open trade with other countries and free capital movements. we do not have the instruments to fine - tune the krone exchange rate. the krone has | been strong. as a result, prices for imported goods have fallen. this has led to low and stable inflation in spite of sharp wage growth. the krone exchange rate fluctuates. this is not surprising because other countries ’ currencies also fluctuate. the swedish krona, sterling and the new zealand dollar have fluctuated considerably in periods. the krone exchange rate is the price of our currency measured in terms of a foreign currency. developments in other countries are just as important for the krone as developments in the norwegian economy. capital flows freely and flows can change rapidly. this can spill over to exchange rates and interest rates as well as output and employment. currency swings are driven by cross - border capital movements. capital flows were heavily influenced by investor focus on stock market returns until the downturn began. in the us, equity prices almost trebled between 1995 and 2000. stock markets in other countries followed suit. the decline was amplified after the downturn in the global economy deepened as a result of terror and fears of war. investors sought to avert the risk in the stock market. capital inflows into the stock market resulted in a strong dollar. however, expectations concerning corporate earnings were higher than later proved to be warranted. when expectations were lowered, equity prices fell. demand for bonds increased, resulting in low long - term interest rates. in response to heightened uncertainty and fears of war, traditional safe havens for capital, such as the swiss franc and gold, have become increasingly attractive. the swiss franc appreciated after the terrorist attacks on 11 september 2001 and towards the end of last year. gold prices moved up sharply after un security council resolution 1441 was adopted in november last year. oil prices fell markedly after 11 september 2001, but have since risen. fears of war in iraq have increased the uncertainty surrounding global oil supplies. strategic oil reserves have risen, while private reserves are low. this has exerted upward pressure on oil prices. the strike in venezuela has also had an impact. the oil market is unstable. the extraordinary conditions in the oil market will not prevail indefinitely. major economies such as the us, germany and france are struggling with stagnation and fears of recession. substantial tax relief and low interest rates are holding up activity in the us. the japanese economy has been in a deflationary recession for a long period. in recent years, the krone exchange rate has shadowed the difference between norwegian and foreign short - term rates | 1 |
domestic flexibility to adjust wages and prices to correct lack of competitiveness. we therefore could not maintain the parity for long. it also led to distortion in risk perception that led to excessive foreign exchange risk mismatch, over investment in the non - traded sector and damaging speculation, especially in real estate. when we had to change to the flexible exchange regime, the exchange rate depreciated to a low point of less than 50 % of its pre - crisis value before backing up to above 60. the exchange losses that occurred was, among other things, one of the major factors causing the level of non - performing loans to go up to the peak of 45 %. this was almost one out of every two dollars lent out. what stress test can really prepare us for such an event? the second is to have the right infrastructure for the domestic financial markets. this topic includes many things like ( a ) having the proper market rules, ( b ) having the legal framework that facilitates the enforcement of creditors ’ rights, ( c ) having the laws and procedures to deal with bankruptcy, ( d ) having proper accounting and auditing standards as well as a reliable system of credit information on individual borrowers. i can still recall that during the 1997 crisis, the inter bank market in thailand ceased up for fear of counter party failure. but the problem also extended to the system of commercial trade credit between ordinary companies, the sellers and buyers of goods. today, five years after the event, the system of trade credit still has not regained its full recovery. this problem can be mitigated with the function of credit bureau that reports regularly on payment behavior of commercial firms. third is to ensure that there exists proper supervision of financial institutions. the country has to ensure that the agency entrusted with this task has sufficient power to act. i can still remember that in thailand long ago, when government successions often did not come from elections but through military actions, it was very common for commercial banks to have army generals sitting on their boards. banking supervision under such an environment was a challenge. but the biggest challenge is what to do when banks suffer such losses that they are unable to continue. this happened when thailand went into the crisis in 1997. we closed down two - thirds of our finance companies. as for the commercial banks, we had 15 local banks then. six banks had to be taken over by the authority. the private shareholders were forced to take full losses, and new capital provided by the authority. management | christine m cumming : macro overview of the united states remarks by ms christine m cumming, first vice president of the federal reserve bank of new york, at the european economics and financial centre, london, 15 february 2011. * * * it is a great pleasure to be here to speak to you today about recent developments in the u. s. economy. i ’ d like to thank professor hannah scobie and the european economics and financial centre for organizing the seminar in this beautiful historic setting, and thank the member of parliament, geoffrey clifton - brown, for presiding over and sponsoring this meeting. the views i will express are my own and do not necessarily reflect the views of the federal reserve bank of new york or the federal reserve system. i have organized my talk into six observations about the u. s. economy. first, in considering the nature of the recovery from the financial crisis and recession, which many call the “ great recession, ” it is important to take note of the severity of the downturn from which we are recovering. even though the united states has experienced six consecutive quarters of positive growth of real gross domestic product ( gdp ) since the official end of the great recession, the level of output remains well below the business cycle peak. the economic history of such combined financial crisis and recession experiences is that recovery is often slow and protracted ; this one seems no different. hours worked, closely tied to overall economic activity, and personal income excluding transfers ( charts 4 – 5 ) illustrate both the depth of the economic decline and the highly unusual nature of the recovery so far compared with all others in the post - world war ii period. the unemployment rate has declined, but to a large extent this reflects the decline of the labor force participation rate ( chart 6 ). ranges of estimates of unemployment including discouraged workers run as high as the high teens. had the participation rate remained at its business cycle peak level, the unemployment rate would be about 10. 5 percent. core inflation ( excluding energy and food prices ) has declined to a very low level, well below the range of 1 percent to 2 percent that market participants have associated with the fed ’ s desired, “ mandate consistent ” range. low rates of core inflation are of concern because economic research suggests that this is an important indicator of long - term trend headline inflation ( chart 7 ). economic history also suggests that recoveries from financial crisis and recession are fragile. indeed, one disappointment in 2010 was that an initially strong recovery weakened considerably in | 0 |
also recognise a broader responsibility to the community of hong kong, and a duty to promote an understanding of our role and objectives, and to keep ourselves informed of community concerns and open to public debate. to this end, the hkma pursues a policy of transparency and accessibility. this policy has two main objectives : to keep the financial industry and the general public as fully informed of the hkma ’ s work as possible ; and to ensure that the hkma is in touch with, and responsive to, the community that it serves. we have done a great deal over the past year to advance this policy. this applies not just to technical matters, such as the greatly increased transparency of the currency board system or the daily publication, since november, of the size and composition of the monetary base and the virtually real - time publication of the aggregate balance of the banking system. it also applies to the information we issue for general public consumption, whether in print, through the press, on the internet, or in our programmes of educational briefings and seminars. of course, considerations of market sensitivity, commercial confidentiality, and statutory restrictions on disclosure of confidential information place some limits on the amount of material we can make public. given the increasing transparency and the extremely limited discretion over the currency board arrangements, which draws its credibility from a strict rule - based system, a certain constructive ambiguity is also necessary if we are to have the flexibility to deal decisively with sudden crises. within these limits, we are committed to developing our policy of transparency, and to increasing the quality and comprehensibility, and not just the quantity, of the materials we put out for public consumption. the challenges of this year we see it as one of our challenges to seek to maintain public interest in our work, even though it is possible that some of the controversies and concerns that sustained that interest in 1998 will fade away as economic recovery moves closer. this brings me to the prospects for the remainder of this year and beyond. i leave the predictions and forecasts to others in the government entrusted with this task. but i think it appropriate to say something here about the monetary environment. recent months have witnessed the return to a more stable monetary environment in hong kong. speculative pressures on our currency have moderated sharply, allowing a significant decline in interest rates from the peaks last year. as you know, under the linked exchange rate system, our interest rates are closely tied to those in the united states in normal circumstances. in last year ’ s exceptional | ’ s banking system, quite naturally, came under severe pressure, though it has handled the downward adjustment in asset prices and the volatilities brought on by the financial crisis with remarkable success. a much more disturbing feature of the larger crisis has been the succession of opportunistic attacks on the hong kong dollar and on hong kong ’ s financial markets. these attacks increased the pains of recession by pushing up interest rates and by corroding confidence in our financial system, both locally and overseas. they reached a climax in the sophisticated assault of early august, which mobilised massive resources in an attempt to play off the currency board system against the stock and futures markets. this attack was unprecedented in scale and organisation. it posed a grave threat to the stability and integrity of our whole financial system. decisive, albeit controversial, action by the hong kong sar government ensured that this threat was averted. in combination with other factors, this action helped to ensure stability in our markets for the remainder of the year and beyond. the hkma ’ s role in the august operation is well known to members. for my part, i am fully convinced that what we did was necessary and right for hong kong, and that it delivered our financial system from the brink of a profound and very dangerous crisis. the portfolio of shares acquired by the government as a result of operations has been placed under the management of efil, which will draw up plans for disposing the majority of them in a gradual and orderly manner. but so much has been said about this subject that the impression is sometimes given that that is all that the hkma did in 1998. this is a pity, because we have other solid achievements to place on record. among the achievements worth singling out are : • effective supervision of the banking system to ensure stability and soundness during a period of intense regional financial crisis and domestic slowdown. • a growth of 27. 5 % in the accumulated surplus of the exchange fund during the year, or 15 % if the gains from the equity portfolio acquired in august are excluded. • continuing currency stability, within the framework of the linked exchange rate system, against unprecedented speculative attacks, and during a year of currency instability in much of the rest of the region. • substantial improvements to the currency board system, which have made it more resilient, more transparent, and less vulnerable to manipulation than it was before. • increased involvement in regional and global initiatives to promote hong kong as an international financial centre and | 1 |
efforts to increase the participation in employment of those population sectors which are still characterized by low employment. the expected demographic trends do not support a high rate of growth in the coming years, and we will need to act to offset the effects on growth of those trends in order to continue to grow at a satisfactory rate. high growth rates are not enough ; it is very important that the fruits of growth are divided more equally by all parts of the population, so that they will support the reduction of poverty and of inequality in income distribution. we want inclusive growth, which supports the cohesion between various population groups, and within the groups themselves. social cohesion is a prerequisite for national strength, and for forming a society in which our children, as well, will want to live and raise their children. increasing labor force participation has an important role in this regard as well. in recent years, the cost of living has also been placed the top of the public agenda. this is partly related to the issues i already mentioned. improvements in productivity and the rate of growth will necessarily bring with them an improvement in the purchasing power of the israeli worker, in particular if the growth will be distributed more equally. but the cost of living is also partly related to the structure of the economy, to the level of competitiveness and the level of concentration of the economy. we must continue to strive toward an economy with a competitive environment, in which every producer can rely on its relative advantages and offer the best products and services, and in which every consumer has the access and ability to choose the cheapest and most appropriate goods and services. in recent years, we have seen important reforms in this area, and we must continue to carry out reforms which will reduce the concentration and increase competition. in the banking industry, as well, changes are occurring which increase competitiveness and the consumer ’ s ability to compare and choose the best and cheapest service. alongside these changes, it is important to continue the efficiency measures in the banking system, so that competitiveness will increase while maintaining the stability of the system – stability which is a necessary condition for a growing and thriving economy. housing prices have increased in recent years at an accelerated pace, and have also been a significant component in the rise in the cost of living. the bank of israel, in the framework of its economic advice to the government, assists with diagnosing the barriers and recommending the policy required to increase the supply of housing at a rate which can meet demand. | and we are witness to important initiatives in the area of academic education, mainly among the ultraorthodox sector. the israeli education system ’ s achievements in the international pisa tests are below average. we have recently had better achievements in tims tests, and i hope that they will also be reflected in the other tests. we must improve the achievements of the education system in order to achieve higher economic success. the world bank conducts a survey of the ease of doing business in all countries each year. in 2013, we were in 38th place, a very unsatisfactory placing. we have fallen significantly in this ranking during the past decade, not because our situation has deteriorated, but because the bureaucratic burden in other countries has lessened. the bureaucracy affects not only the ease of doing business, but also the cost of living. for instance, we see its effect on the ability to adjust the supply of housing and on housing prices. the concentration committee made two important recommendations on the matter of breaking apart pyramids and separating financial and real holdings. in this context, i note that if we require the immediate complete separation of financial and real holdings, there would be no people who would be able to be controlling owners of banks, since they would not be able to obtain the required capital through their activities in the real industries. it is possible that in another few decades, we will reach the conclusion that controlling owners are not necessary for banks. but in the meantime, i suggest not to conduct such large experiments on the financial system. i usually don ’ t make comparisons to greece, but this time i will do so : for hundreds of years, we have seen the ramifications that an unstable financial system has on the market. we have a strong banking system, which was of tremendous assistance in our ability to withstand the crisis. we must not endanger its stability, so i suggest not to limit cross - holdings of financial and real entities for now beyond what the concentration committee recommended when it set a benchmark of nis 6 billion for holdings of a real company by someone who holds controlling interest in a financial entity. i understand the logic behind the other suggestions, but i think that we must first of all examine the ramifications of lowering the number of entities that can hold controlling interest before we continue advancing in this field. labor productivity in the israeli economy is 20 percent lower than the oecd average. while we are a wealthy economy, it is a mistake to compare ourselves to the us and | 0.5 |
better able to judge the extent to which the committee's rationale is reasonable and persuasive. the projections also function as a plan for policy – albeit as a rough and highly provisional one. as i mentioned earlier, fomc participants will continue to base their projections on the assumption of " appropriate " monetary policy. consequently, the extended projections will provide a sense of the economic trajectory that committee participants see as best fulfilling the federal reserve's dual mandate, given the initial conditions and the constraints posed by the structure of the economy. to illustrate, consider the question of the length of time over which a central bank should aim to restore price stability following an unwanted increase in inflation. a central bank that places weight on both employment and price stability, like the federal reserve, would not attempt to disinflate immediately or establish a fixed time frame for the restoration of price stability. rather, the optimal expected time required for completing the disinflation would depend on a host of factors, including the size of the initial deviation from price stability, the initial state of the real economy ( for example, the level of unemployment ), whether the rise in inflation resulted from transitory or more persistent sources, the extent to which inflation expectations are well anchored, and so on. in circumstances in which disinflationary policy is necessary, the extended economic projections would make clear that the federal reserve is committed to maintaining price stability, but they would also provide some indications about what the committee views as the most appropriate pace of disinflation, given the state of the economy and the requirements of the dual mandate. in like fashion, the speed at which policy aims to return the economy to its sustainable rates of growth and employment following a period of resource slack should depend in part on the nature and extent of inflation risks, among other considerations. more generally, the extended projections will convey additional information about the committee's policy strategies and thus help augment the committee's transparency, predictability, and accountability. finally, the extended projections will embody information about fomc participants'evaluations of certain long - run features of the economy, evaluations determined both by the economy's structure and by the committee's policy objectives. because of the extension of the projection horizon to three years, participants'inflation projections will convey more information regarding their views about the measured rate of inflation that, in the long run, is the historical data we will provide on forecast errors will starkly illustrate this | and policy practice. in particular, although inflation - targeting central banks certainly pay attention to economic growth and employment, their formal accountability is often largely couched only in terms of a price - stability objective. likewise, the communication strategies of inflation - targeting central banks tend to be focused on the formal inflation objective and the horizon over which that objective will be achieved. as i have emphasized today, the federal reserve is legally accountable to the congress for two objectives, maximum employment and price stability, on an equal footing. my colleagues and i strongly support the dual mandate and the equal weighting of objectives that it implies. of course, as i have discussed, the federal reserve's influence over these objectives differs importantly in the long run : monetary policy determines the long - run inflation rate, whereas the factors that influence the sustainable rates of growth and employment in the long run are largely outside the central bank's control. still, over time, monetary policy must strive to foster rates of growth and employment close to their long - run sustainable rates. the federal reserve must thus be accountable for the effects of its policies on the real economy as well as on inflation. the enhanced projections that i have described today will provide additional information pertinent to both halves of the federal reserve's mandate. at a more technical level, the federal reserve differs from most inflation - targeting central banks in that it provides information about the independent projections of committee members rather than a single collective forecast. to some extent, that difference reflects the relatively large size of the fomc and the geographic dispersion of committee participants ; those factors would make the development of a detailed consensus forecast quite difficult as a practical matter. but, as i will discuss briefly, such a diversity of viewpoints can enhance the quality of policy decisions. the diversity of the committee an important strength of the federal open market committee is its diversity. the board members and reserve bank presidents who sit around the table at each meeting of the fomc bring a wide range of perspectives to the deliberations that reflect the participants'professional backgrounds, the regions of the country with which they are most familiar, and their differing approaches to economic and policy analysis. the task participants face at each meeting is to forge a rough consensus regarding the outlook, the risks to the committee's objectives, and the appropriate policy response. of course, it is not always possible – indeed, it would be rather unusual – to come to a set of conclusions that fully represent the views of every participant | 1 |
occurs. these are genuine practical difficulties in applying basel iii to islamic financial institutions. even so, they should not get in the way of recognizing the important principle that islamic financial institutions need to take liquidity risk just as seriously as conventional firms need to do. they need to make sure that they keep maturity mismatching to prudent limits. there needs to be a debate about what sort of limits would be prudent. but there is no doubt that limits are needed. another issue that basel iii seeks to address is to ensure that banks have sufficient capital to be able to absorb losses on an on - going basis. standard setters have focused not only on the amount of capital but also on its quality. in the simplest terms, the financial crisis revealed that too many conventional banks had capital that would only absorb losses if the bank went into liquidation. it was not capable of absorbing losses on an on - going basis. basel iii sets out to ensure that bank capital has a stronger ability to absorb losses before a bank goes into liquidation. it has often been argued that islamic financial institutions need a different capital structure to conventional ones. their account holders can expect to share in the risks to which the firm is exposed. this means that, in principle, they should expect to share in losses as well as profits. but a similar assumption was made about investors who held the subordinated debt issued by conventional banks. when those banks failed, instead of taking their share of losses, subordinated debt holders were often protected by the terms of the bail - out. so, what applies in theory does not always apply in practice. this means that the regulators of islamic financial institutions also need to pay careful attention to the ability of capital structures to absorb losses on an on - going basis. it has become clear as a result of the financial crisis that the predominant form of bank capital needs to be equity. from an islamic industry perspective, this has the great advantage that equity is without a doubt shariacompliant. finally, on the subject of international financial reporting standards, it is important to remember that transparency and consistency in the valuation of assets is every bit as important to islamic financial institutions as to conventional ones. in fact, it is even more important. because investment account holders are in principle exposed to similar kinds of risks as the holder of bank equity, it is important that islamic financial institutions can present bis central bankers ’ speeches their financial results in a clear and understandable form which is comparable between institutions. if | rasheed mohammed al maraj : relevance of international standards to the islamic financial industry speech by he rasheed mohammed al maraj, governor of the central bank of bahrain, at the 13th aaoifi – world bank annual conference on islamic banking and finance, manama, 23 october 2011. * * * your excellencies, distinguished guests, ladies and gentlemen : on behalf of the central bank of bahrain, it gives me great pleasure to welcome you to the 13th aaoifi – annual world bank conference on islamic banking and finance. i should especially like to thank the many distinguished speakers who will participate in the conference, as well as the event organisers and sponsors. particular thanks are due to the world bank for its continuing support. mr. james adams, vice president, east asia & pacific region of the world bank has again travelled to bahrain participate in this conference. it is a pleasure to have you with us. as in previous years, the conference agenda deals with a wide range of topics, all of which are important to the future development of the islamic financial services industry. however, in my remarks this morning i intend to focus on a theme that two of the sessions have in common : the relevance of international standards to the islamic financial industry. this theme is explored both in session one, which considers the risks associated with using international financial reporting standards by islamic financial institutions, and in session five which is concerned with the potential risks and difficulties in the implementation of basel iii in islamic banks. the question asked by both of these sessions is : how relevant are international standards to the islamic financial industry? in many ways the islamic financial industry faces different issues to those that the international standards have been designed to address. for example, the principle of risk sharing is at the core of the islamic financial industry. it changes the nature of the risks faced by islamic financial institutions and their customers. unlike ordinary depositors, the holders of unrestricted investment accounts in theory share some of the risks that in a conventional institution would be borne exclusively by the shareholders of the bank. however, it is possible to concentrate too much on the differences and not enough on the similarities. while the principles of islamic finance are very different to those of conventional finance, islamic financial institutions are still subject to same kinds of risks and to the same laws of economics as are conventional ones. the differences between the two types of financial structure should not blind us to the issues that are common to both. let me give some examples. basel iii requires conventional banks | 1 |
sabine lautenschlager : interview with market news interview with ms sabine lautenschlager, member of the executive board of the european central bank, and market news, conducted by mr luke heighton on 28 august 2019 and published on 30 august 2019. * * * the account of last month ’ s monetary policy meeting of the governing council showed the ecb has become more pessimistic in its assessment of the eurozone growth and inflation outlook over the longer term, to the extent that the baseline growth scenario may need to be revised. how worried are you? there is, indeed, some increasing uncertainty based in particular on political shocks such as the trade tensions and brexit. also in germany there is a downward trend in the manufacturing sector. but we also see signals of strengths in the euro area, for instance positive trends in the labour market and a resilience of the overall domestic growth. the account appears to suggest – or at least i took from it – that a majority of members in the governing council do favour the introduction of a package of measures, such as a combination of rate cuts, asset purchases and tiering, rather than a selective sequence of options. would that be your preference? in my opinion, based on the current data, it is much too early for a huge package. and i am still convinced that the asset purchase programme ( app ) is the ultima ratio, and it should only be used if you have a risk of deflation ; and the risk of deflation is nowhere to be seen now. furthermore, i am concerned about setting the wrong incentives for governments if we were to re - start the app and buy further government bonds. what is needed are structural reforms to foster sustainable growth. and you always have to ask yourself what kind of impact restarting the app would bring. we are already in negative yield territory for many government bonds. we also need to consider how big the purchase universe is when keeping the current purchase limits. and keeping the limits is for me of utmost importance to address the risk of monetary financing. there has been a lot in ecb communications of late, and elsewhere, about the perceived need for fiscal authorities to do their part to boost growth and inflation. do you think there is a trade - off between convincing certain governments to provide fiscal stimulus and the ecb embarking on deeper negative interest rates? equally, if there is to be an interest rate cut on september 12, does it follow that there has to | be tiering in order to gain support for such a measure? we are not the only game in town, and we should not be. let me repeat the need for structural reforms. this is necessary for sustainable growth, and would give a boost to the competitiveness of many countries in the euro area. using fiscal space is another possibility for some countries. rate cuts are part of standard monetary policy tools, so it ’ s something that you should certainly think about before you consider non - standard measures like app. but overall, we have to assess whether these instruments are needed to support the transmission channel and what kind of impact and side effects they would have. 1 / 3 bis central bankers'speeches but first, i would like to see the september data and whether additional measures are needed to maintain price stability in the medium term. i would also like to assess what kind of impact these measures could have. let us not forget that we already have a very accommodative monetary policy. lending to households and firms is still high, according to the july figures ; investments are still ongoing in spite of the uncertainties. do you have a view on how low into negative territory the ecb can go? we need more analysis on what kind of impact and costs and benefits rate cuts would have. we need to look at potential side effects, for instance when would bank customers start to keep cash at home? and you asked about tiering. well, for this we need more analysis too. what is the net burden on banks and are mitigating measures necessary? the banks always bring up the gross burden, but they also benefit from the negative interest rate. so we have to consider all aspects before taking a decision. would you support more closely linking the state - dependent leg of forward guidance to inflation expectations? to plot a more explicit rate path should certain inflation conditions be met at a given point in time. i ’ m sceptical to link forward guidance solely to inflation expectations. could you envisage circumstances in which existing tltros could be repriced, in order to make them more attractive to banks? that might be, yes. we can use different tools : a change in forward guidance, tltro, rate cuts, the mitigating measures for rate cuts, depending on whether the data shows a need for them, their impact, costs and benefits. but overall, i don ’ t see the need for a huge package. recent ecb communications have consistently stressed that | 1 |
and beyond. value creation at the turn of the twenty - first century will surely involve the transmission of information and ideas, generally over complex telecommunication networks. this will create considerably greater flexibility of where services are produced and where employees do their work. the transmission of ideas, or more broadly information, places it where it can be employed in maximum value creation. a century earlier, transportation of goods to their most value - creating locations served the same purpose for an economy whose value creation still rested heavily on physical, bulky output. not unexpectedly, as goods and services have moved across borders, the necessity to finance them has increased dramatically. but what is particularly startling is how large the expansion in cross - border finance has become, relative to the trade it finances. to be sure, much cross - border finance supports investment portfolios, doubtless some largely speculative. but at bottom, even they are part of the support systems for efficient international movement of goods and services. the rapid expansion in cross - border banking and finance should not be surprising given the extent to which low - cost information processing and communications technology have improved the ability of customers in one part of the world to avail themselves of borrowing, depositing, or risk - management opportunities offered anywhere in the world on a real - time basis. these developments enhance the process whereby an excess of saving over investment in one country finds an appropriate outlet in another. in short, they facilitate the drive to equate risk - adjusted rates of return on investments worldwide. they thereby improve the worldwide allocation of scarce capital and, in the process, engender a huge increase in risk dispersion and hedging opportunities. but there is still evidence of less than full arbitrage of risk - adjusted rates of return on a worldwide basis. this suggests the potential for a far larger world financial system than currently exists. if we can resist protectionist pressures in our societies in the financial arena as well as in the interchange of goods and services, we can look forward to the benefits of the international division of labor on a much larger scale in the 21st century. what we don ’ t know for sure, but strongly suspect, is that the accelerating expansion of global finance may be indispensable to the continued rapid growth in world trade in goods and services. it is becoming increasingly evident that many layers of financial intermediation will be required if we are to capture the full benefits of our advances in finance. certainly, the emergence of a highly liquid foreign exchange market has facilitated | emmanuel tumusiime - mutebile : recent initiatives designed to increase the efficiency of the ugandan banking system address by mr emmanuel tumusiime - mutebile, governor of bank of uganda, to the annual bankers ’ dinner, kampala, 4 march 2005. * * * distinguished guests, fellow bankers, ladies and gentlemen an after dinner speaker who was new to the art of public speaking stood up and having suitably saluted his audience stopped dumbfounded. presently, however, he composed himself sufficiently to begin his speech. “ a few hours ago only the lord and i knew what i was going to say ….. but now the lord only knows ”. it is always an honour for me to be a guest speaker at this annual event where the banking fraternity gets an opportunity to interact and exchange views in a relaxed environment away from each one ’ s busy place of work. at a similar event last year, i was challenged to speak about the basel ii accord or the new capital accord as it is referred to by many of you. i vaguely recall the levels of boredom which showed on the faces of most of those who were present that evening, which is something i do not wish to see repeated tonight. this time round i will make life easy for everyone by talking about mundane things let me first report on the state of the financial sector. substantive progress has been made in building a sound and profitable financial system. in the 1980s and 1990s, the banking system was under severe stress ; many banks were riddled by high levels of non - performing assets and some banks were insolvent. as a result, in 1995, two banks were seized by bank of uganda. the uganda commercial bank had to be restructured and recapitalised by the government and the non - performing assets recovery trust was created in 1995 to recover unpaid debt totaling the equivalent of us $ 34million. ucb deposits at that time represented over 20 % of the total deposits of the banking system and the feeling was abroad that it was too large to be allowed to fail. in 1998 and 1999, four more banks, accounting to about 12 % of the total deposits of the banking system, were intervened by the bank of uganda and closed. the central bank also intervened in ucb and attempted another rescue operation. during this period, the bank of uganda of uganda instituted an internal programme to strengthen banking supervision with substantial resources being put into training and moving towards a risk - based approach to banking supervision. the resolution | 0 |
commission for creditworthiness checks. banks should continue to be supervised in a technology - neutral manner – without duplicating any regulation, and without duplicating supervisory processes. but let me circle back to the current dora proposal : the oversight framework for critical ict third - party service providers does indeed complement the supervisory approaches taken within the single supervisory mechanism ( ssm ) and at the national level. while the ssm focuses on the risks that financial institutions take when they outsource activities to ict third - party providers, dora enables the european supervisory authorities ( esas ) to access critical ict third - party service providers directly and sanction them if necessary. for this task - sharing arrangement to work, there are three key requirements for dora i would like to emphasise from my point as a supervisor : 1. a well designed approach ensuring supervisory efficiency ; 2. closer cooperation among authorities and 3. and clear consistency of rules. first, it is key that we always bear in mind the objective of supervisory efficiency when designing dora. the dora proposal raises some crucial points regarding the interplay between ( traditional ) banking supervision and the new european oversight framework. we welcome the aim to streamline and harmonise any overlapping regulatory requirements or supervisory expectations. if the esas increasingly engage in supervising cloud providers, they must ensure that they do so in an efficient manner and without duplicating any work. one issue should be examined only once and by just one authority. this is important for us as supervisors, as we have a duty to deploy our staff and resources efficiently. and of course, this is important for you, the banks, as well : you don ’ t want to be supervised twice for the same issue. i am sure this is also true for cloud service providers. this implies that we must clearly define the responsibilities of both banking supervisors and the esas in order to avoid a clash of competencies. under the proposed regulation, the esas will perform operational oversight functions for critical ict third - party service providers, with the eba designated as the lead overseer and in close cooperation with eiopa and esma. this includes on - site inspections, ongoing oversight and recommendations for action. by contrast, banking supervisors are to stick to their mandate of supervising financial institutions. supervision of critical ict third - party service providers therefore falls only indirectly, if that, within the scope of banking supervisors. second, closer cooperation among authorities is needed. if the esas directly supervise critical ict third - | work together and help dora set the standards for rules and oversight to make digital freedom and digital resilience possible. thank you for your attention. 1 see newsletter on cyber security from bis : www. bis. org / publ / bcbs _ nl25. htm 5 / 5 bis central bankers'speeches | 1 |
are changing and businesses need to change to remain relevant. such change takes courage, action and investment. one thing is for sure, however, highly indebted businesses will have the least ability to invest ahead of these societal expectations – and for innovation more generally. going back a few years to the 1990s and 2000s, new zealand ’ s agriculture sector saw widespread conversions from sheep and beef farming to dairy. the number of sheep in new zealand more than halved, while the number of dairy cattle more than doubled23. this transition was driven by increased global demand for dairy products, which led to higher milk prices24. meanwhile, wool and meat prices have been less attractive than they once were. these farm conversions required significant investment. banks helped to fund this investment by lending heavily to the sector. agriculture debt in new zealand increased from $ 5 billion in 1990 to $ 63 billion today. two thirds of this debt is owed by dairy farms25. looking more closely at dairy farming in aotearoa, debt has grown much faster than output – debt per kilogram of milk solids produced has quadrupled in 15 years26. the rapid increase https : / / www. mfe. govt. nz / fresh - water / we - all - have - role - play / land 22 https : / / www. mfe. govt. nz / ets 23 stats nz data 24 global dairy trade auction data rbnz agriculture survey, standard statistical return ( ssr ) and bank balance sheet ( bbs ) rbnz agriculture survey, rbnz bank balance survey and dcanz production data. ref # 8528795 in agriculture debt has been fuelled by banks ’ aggressive and loose lending standards over recent years. 27 while bank lending allows businesses to quickly take advantage of new opportunities, high debt comes with high risk. when times get tough, or when capital is needed to grow, highly indebted businesses find it much harder to weather the storm and remain relevant. this is a symptom of short - term thinking that is not sustainable. banks ’ incentives are not the same as the farmers. banks ’ business is to lend, and they are incentivised to manage the risk of their overall portfolio for the long - term, rather than the risk of any individual farm or business. this is why banks are critical and efficient in a modern economy - but debt must be used with care. a bank has a more diversified portfolio, so it will almost certainly survive a resonable | mr. brash looks at the implications of the global financial marketplace for new zealand address by the governor of the reserve bank of new zealand, dr. donald brash, to the single financial services market conference in wellington, on 19 / 11 / 97. introduction it ’ s a great pleasure to be here today to share some thoughts with you on the global financial marketplace, and its implications for new zealand. we have recently had a dramatic example of how events in one country can spread rapidly. the recent share market collapse that began in hong kong and spread to equity markets around the world, including new zealand, illustrates just how integrated global financial markets have become. designing and implementing an effective financial policy in pursuit of national goals, in a world of highly integrated capital markets, is one of the most topical and challenging tasks in central banking today. to keep my presentation today within manageable bounds, and reflecting my professional interest, i will constrain my comments to one of the important functions of a central bank, namely, the preservation of stability in the financial system. our focus at the reserve bank is on promoting the maintenance of a sound and efficient financial system in new zealand. this focus involves establishing a policy environment to counteract the possibility of contagious spread of financial distress, and in particular is aimed at encouraging prudent bank behaviour. i will begin by sketching out some of the key trends in global finance, and will then describe the international regulatory response to these developments. along the way, i will tease out the implications for new zealand, and test our approach to banking supervision against these global developments. i will conclude with some crystal ball gazing. trends in the global financial marketplace let me begin then with some observations on the rapidly changing global financial marketplace. it is now a commonplace that barriers between countries and financial markets, at least in developed countries, have largely disappeared, and this fact, together with new technologies, new financial instruments and new funding techniques, means that financial intermediation is increasingly global. fundamental to this trend has been the way in which advances in computer and communications technology have reduced the costs of cross - border transactions by lowering the costs of collecting and analysing data, undertaking transactions, clearing and settling payments and monitoring financial flows. and the cost reductions have been very dramatic. a recent article in the economist noted that “ the cost of a three - minute telephone call between london and new york has fallen from us $ 300 ( in 1996 dollars ) in 1930 to us $ 1 | 0.5 |
peter praet : the outlook for reform - cementing growth and delivering sustainable employment speech by mr peter praet, member of the executive board of the european central bank, at the ludwig erhard lecture, organised by the lisbon council, brussels, 30 november 2017. * * * accompanying slides the solid and broad - based economic recovery in the euro area is continuing1. we have now seen 18 quarters of positive growth and the short - term economic indicators all point to a continued economic upswing with above - trend growth. the breadth of the expansion is notable. the dispersion of growth rates across both countries and sectors is at its lowest level for two decades, reflecting a convergence of growth rates around higher levels. this is reassuring for the growth outlook because recoveries tend to be firmer and more robust when they are broad - based. progress in the euro area recovery has been mostly home - grown, with a virtuous cycle increasingly taking hold between rising income and spending in both the corporate and the household sector. an important driver behind the good performance of domestic demand is the very favourable financing conditions for firms and households, which are heavily contingent on our policy measures. however, the positive developments also reflect the pay - off from years of balance sheet repair, institution - building – at both national and union level – and structural reforms. in the banking sector, enhanced regulation and supervision have steered the sector towards safer business models and stronger capital profiles. euro area banks have shored up their capital positions with average common equity tier 1 capital ( cet1 ) having increased from 7 % in 2007 to 14. 1 % at present. banks have also disposed of non - core assets, reduced their exposure to market risk and generally refocused their activities on more traditional business models. these measures imply that banks are today in a much better position to intermediate between those who save and those who want to invest, thereby supporting the recovery. banking sector repair has also been helped by structural reforms. a number of euro area countries have, for instance, enhanced the effectiveness of their insolvency regimes. in corporate debt restructuring, experience to date shows that an effective insolvency regime is critical to facilitate the early rescue of viable firms and the speedy exit of non - viable ones. internal ecb analysis has confirmed that eu countries with better insolvency frameworks deleverage faster and are able to adjust their non - performing loans more rapidly than countries with weaker regimes. in turn, this | the other hand, 2 / 3 bis central bankers'speeches that means that any new integration steps involve a political process that must be approved by 27 governments, subject to local and national political interests. that involves slowness and procrastination, but the result is robust. even after the crisis we have lived through, which has deeply scarred our economic and social fabric, the level of public support for the euro is at its highest in 20 years. that should be the basis for further progress. 3 / 3 bis central bankers'speeches | 0.5 |
. going forward going forward, much still needs to be done. the telecommunication liberalization has led to the creation of an enabling environment for the introduction of electronic payments and mobile banking products never witnessed before in papua new guinea. we have only seen the start of it but the rest is yet to come and it is here to stay and grow. however, the challenge of all the regulatory institutions are to ensure that transactions conducted are cost effective, efficient, and poses a low risk on the consumers. this requires close coordination in the area of regulation especially monitoring and licensing, provision of technological infrastructure and ensuring maximum benefit for consumers. the bank has commenced a major review of the payments system in papua new guinea in 2009. review of the payments system is necessary for promoting a sound and efficient system that will reduce costs to both businesses and consumers and also improve monetary policy transmission. as the electronic or mobile phone banking products are means of payments, the payments legislation will cover its regulatory aspects and where necessary specific guidelines will be introduced for the electronic payments products. conclusion i trust that this workshop will help us understand the various issues relating to mobile phone or mobile money systems and products, and also appreciate major developments and pilot programs already taking place in papua new guinea. this workshop is meant to create awareness on the mobile phone technology that is already in the market place which can be adopted to connect the unbanked segment of our population to financial services so they can be empowered to improve their livelihood. thank you all for accepting our invitation to attend this workshop and i look forward to your productive participation today. thank you ladies and gentlemen for listening. | s representatives through twice - a - year reports, testimony, oversight, and audited financial statements. i am strongly committed to that framework of transparency and accountability and to continuing to look for ways to enhance it. in our federated system, members of the washington - based board of governors participate in fomc deliberations with the presidents of the 12 regional federal reserve banks, which are deeply rooted in their local communities. i am a strong supporter of this institutional structure, which helps ensure a diversity of perspectives on monetary policy and helps sustain the public ’ s support for the federal reserve as an institution. if confirmed, i would strive, along with my colleagues, to support the economy ’ s continued progress toward full recovery. our aim is to sustain a strong jobs market with inflation moving gradually up toward our target. we expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink. however, while we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty. so we must retain the flexibility to adjust our policies in response to economic developments. above all, even as we draw on the lessons of the past, we must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation ’ s financial stability and economic prosperity — the original motivation for the federal reserve ’ s founding. 1 / 2 bis central bankers'speeches as a regulator and supervisor of banking institutions, in collaboration with other federal and state agencies, we must help ensure that our financial system remains both stable and efficient. our financial system is without doubt far stronger and more resilient than it was a decade ago. our banks have much higher levels of capital and liquid assets, are more aware of the risks they run, and are better able to manage those risks. even as we have worked to implement improvements, we also have sought to tailor regulation and supervision to the size and risk profile of banks, particularly community institutions. we will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms — strong levels of capital and liquidity, stress testing, and resolution planning — so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy. in doing so, we must be clear and transparent about the principles that are driving our decisions and about the expectations we have for the institutions we regulate. to conclude, inside the federal reserve, we understand that our decisions in all these areas matter for american families and communities. | 0 |
risk than the traditional banks and their cost of funds has also been higher. they have to work hard to keep their customers over the longer term as many tend to graduate to the banks as they become more successful. indeed competition across the whole banking system has noticeably stepped up in the last five years and customer bis central bankers ’ speeches allegiance is almost a thing of the past. no doubt each bank and credit institution is now being judged by its level of service. despite the intense competition, i think it is fair to say that our credit institutions have persevered in their niche areas and continue to perform well, backed by strong capital positions and satisfactory earnings performances. the combined balance sheet of the credit institutions recorded an annual growth of 33 percent over 2015, to reach $ 335million, with merchant finance limited contributing almost half. at the end of last year, combined credit institutions ’ net profit before tax stood at $ 18 million with capital and reserves growing 13 percent to $ 72 million. merchant finance limited please allow me to share a brief history of merchant finance limited. officially established in 1986 as the merchant bank of fiji, this institution initially operated as a finance company and since it did not take deposits from the public it did not come under the supervision of the reserve bank. this all changed in 1992 when we granted the company a licence to operate as a credit institution, enabling it to access public deposits. in 2002 the merchant bank of fiji changed its name to merchant finance & investment limited. further approval was granted in late 2014 to make another name change. this is the name we are actually launching tonight – merchant finance limited. so this year merchant finance limited actually enters its 24th year of serving the people of fiji as a licensed credit institution. the company has grown significantly, with an asset book of $ 21 million in 1992 to a publically reported $ 134 million in june 2015. the profitability of the institution has also increased over the years noting an ‘ all time high ’ of just over $ 8 million in its last financial year. ladies and gentlemen, as the supervisor of the banking industry, the reserve bank closely observes the relationships of our licensed financial institutions with the other sectors of the economy. as i alluded to earlier, credit institutions like merchant finance limited play the unique yet important role of servicing customers and sectors which the banks may consider as high - risk. it is pleasing to see that merchant finance limited ’ s reach as a lender has extended to many key sectors in the economy, such as transport | the main core of our tourism industry operations, as well as key manufacturing and production centers, and our main commercial areas, have been spared. there are of course exceptions in one or two areas, but overall, losses may not be very large. full restoration of electricity supply will naturally be an important element for our industries to bounce back strongly, as will be the public relations campaigns overseas to ensure our potential foreign visitors get the correct message that our tourism sector is already up and running. it has been extremely pleasing to see our fiji electricity authority playing a key role in working around the clock to give us power. in fact many areas have already been reconnected. we have also seen how our tourism industry has been very proactive, along with government, in doing whatever is necessary to keep the visitor arrivals momentum going. given these positives, i would expect that our key manufacturing and service sectors should continue to support our growth in the short to medium term. in regard to the reserve bank ’ s key objectives, it is likely that we will see some fall in foreign reserves as our domestic exports, including sugar and other agricultural products are impacted and as our importation of reconstruction hardware and other related items rise. however there will be some offsetting positives in terms of foreign aid and assistance inflows which have already begun to flow in through in - kind grants and even raised levels of remittances from our families abroad. while our reserves levels are currently very comfortable, any signs of sustained pressure on them will be addressed through appropriate measures, including accessing special funding from the international monetary fund, which has already indicated its willingness to assist. on the inflation front, we will likely see a rise in the prices of domestic produce over the next three to six months on account of reduced supply, but this should ease in the second half of the year as supply improves. the timing will depend on how fast our farmers are able to rejuvenate their farms. they will need much assistance with seed material and i very happy to see this has already been activated by our government with the support of a number of local and foreign agencies. also on the positive side, the sustained low oil prices should help cushion the cost of recovery for those affected. dear friends there has been so much activity around us in support of our people who have and are still suffering the effects of tc winston. some areas, such as housing, will take time to fully recover. but i am confident that the government is doing all | 1 |
institute will continue to make a valuable contribution in future - to ensure an even better understanding of the swiss economy. bis central bankers ’ speeches | demands that the snb hold at least 20 % of its assets in gold, that it be prohibited from selling its gold reserves and that all gold reserves be physically stored in switzerland itself. the snb does not generally comment on any political initiatives. however, the gold initiative has a very direct impact on the snb ’ s capacity to act. this is why we are taking the opportunity today to present our viewpoint for the first time on the demands of the initiative. the initiators see a high level of gold reserves as a guarantee for currency stability. they fear that the swiss franc will decline in value and that price stability will be threatened if a large proportion of the balance sheet does not consist of gold holdings. they are also concerned that the snb ’ s gold reserves held abroad are not secure and will not be accessible in critical situations. we share the objectives the initiators put forward, such as maintaining currency and price stability and ensuring both the snb ’ s capacity to act and its independence. however, the measures proposed to this effect are not suitable ; in fact, they are even counterproductive. instead, they are based on misunderstandings about the importance of gold in monetary policy and would compromise the snb ’ s capacity to act in pursuing its monetary policy, which would run counter to the objectives envisaged. in other words, these measures would, in certain situations, considerably hinder the snb in fulfilling its monetary policy mandate and be detrimental to switzerland. we therefore consider it our duty to point out the serious disadvantages of the initiative already at an early stage. having said that, however, the snb is interested in a dialogue on any questions connected with the initiative. with this in mind, allow me to make a few remarks. the snb has the statutory mandate to ensure price stability, while taking due account of economic developments. the monetary policy operations that must be carried out in fulfilment of this mandate have a direct impact on the snb ’ s balance sheet. in order for the snb to fulfil its mandate at all times, its capacity to act in monetary policy matters must not be compromised by rigid rules on the composition of its balance sheet, which would be the case with the required 20 % minimum share of gold and the ban on the sale of gold. it was precisely the latest crisis that demonstrated how important it is for the snb to have the flexibility to expand its balance sheet, if needed. in future, | 0 |
although monetary data contain information which is vital for monetary policy decisionmaking, monetary developments alone will clearly not constitute a complete summary of all the economic information necessary to enable appropriate policy decisions to be taken. the governing council recognises that it is important, in parallel with the assessment of monetary growth, to look at a wide range of financial and other economic indicators, including economic forecasts. this systematic analysis of all other relevant information about economic and financial conditions will ensure that the governing council is as well informed as possible when taking monetary policy decisions. this broadly based assessment takes into account, inter alia, the information content of wage developments, exchange rates, fiscal indicators, real activity, assets and commodity prices. internal forecasts of economic activity and prices in the euro area can also contribute to the success of an appropriately forward - looking monetary policy. monitoring monetary, financial and economic developments also helps to identify the nature of shocks hitting the economy. it thereby contributes to the assessment of overall economic developments. on the basis of this thorough analysis, the interest rate will be set in a way that best serves the maintenance of price stability. the contribution of fiscal policy to a stable euro with regard to fiscal policies, i should like to stress the following main points of interest with regard to a stable euro : • a sound conduct of fiscal policies is important for the stability of the euro. • in particular, strict implementation of the stability and growth pact by each member state is vital. • the targets envisaged in the current stability programmes to bring down government deficits and debt levels represent a minimum requirement for most member states rather than a final aim. budgetary positions in the euro area as a whole have not yet been consolidated sufficiently. government debt as a percentage of gdp remains far too high on average and has only started declining hesitantly in the recent past. deficit - to - gdp ratios in a number of countries are still closer to the 3 % value set in the treaty as a reference for excessive deficits than to the medium - term balanced or surplus position envisaged in the stability and growth pact. in case of a prolonged growth slowdown we might therefore easily see deficits reaching excessive levels. in addition, deficits fell very slowly in 1998, this reduction in fiscal imbalances being the result of strong economic growth and falling interest payments rather than of genuine fiscal consolidation measures. structural and primary balances have even deteriorated. in addition, the progress in structural fiscal consolidation envisaged for the medium term appears to be | 2 3. 2 3. 1 2. 9 3. 9 3. 2 3. 3 3. 4 3. 3 interest expense 3. 8 3. 6 3. 6 3. 7 3. 8 3. 8 3. 6 3. 7 3. 8 3. 9 gdp growth ( percentage change ) 1. 6 1. 2 0. 9 1. 1 1. 1 1. 6 1. 2 1. 5 1. 6 1. 4 debt 131. 2 130. 9 129. 2 126. 7 124. 6 131. 2 130. 9 130. 0 128. 1 126. 7 ( 1 ) rounding of decimal points may cause discrepancies. – ( 2 ) revenue and primary expenditure are calculated based on data from the update to the 2018 economic and financial document, the draft 2019 budget law and decree law 119 / 2018. – ( 3 ) includes financial support to emu countries. table 3 main public finance indicators for general government ( per cent of gdp ) revenue 45. 2 45. 9 45. 7 45. 7 47. 9 48. 1 47. 9 47. 7 46. 5 46. 4 expenditure 47. 8 51. 2 49. 9 49. 4 50. 8 51. 1 50. 9 50. 3 49. 1 48. 7 of which : interest expense 4. 9 4. 4 4. 3 4. 7 5. 2 4. 8 4. 6 4. 1 3. 9 3. 8 primary surplus 2. 3 - 0. 8 0. 1 1. 0 2. 3 1. 9 1. 5 1. 5 1. 4 1. 4 net borrowing 2. 6 5. 2 4. 2 3. 7 2. 9 2. 9 3. 0 2. 6 2. 5 2. 4 borrowing requirement 3. 1 5. 5 4. 3 3. 9 4. 1 4. 8 4. 1 3. 0 2. 6 3. 4 borrowing requirement net of privatisation receipts 3. 1 5. 6 4. 3 4. 0 4. 6 4. 9 4. 3 3. 4 2. 6 3. 4 102. 4 112. 5 115. 4 116. 5 123. 4 129. 0 131. 8 131. 6 131. 4 131. 2 debt source : based on istat data for general government consolidated account items. ( 1 ) rounding of decimal points may cause discrepancies in totals. – ( 2 ) the proceeds | 0 |
been decided that the volcker rule, which drew the most attention in the dodd - frank act, will apply from july 2015. although regulatory reform is crucial for the stable growth of the financial sector, it can also cause negative side effects in the short term by increasing the cost burdens for financial institutions and thus leading to a contraction of financial activities. the fact that an international agreement has been forged, and that the reform efforts have made some progress, has however had the positive effect of reducing the uncertainties about future changes. the bank of korea can take pride in having ensured that domestic economic activity did not become estranged from international trends, by implementing its monetary and credit policies in line with changes in international financial markets, and in having stood up for our national interests by active involvement in the global efforts for regulatory reform. i would stress that the process whereby a substantial number of bank of korea staff participate in the g20, the imf, the fsb and the basel meetings, convey the meeting results to the korean economic and financial community, and then report the domestic reactions back to these international meetings, has helped our economic agents to prepare themselves for handling the changes in the global economy and, at the same time, helped to ensure the reflection of our economic conditions in the regulatory and policy decision - making process as much as possible. of course, we should be careful that this does not have the negative side effect of lessening our reform efforts to bring korea ’ s economic system into conformity with international norms. my dear colleagues, this year there will be many changes in the bank of korea ’ s policies, as much as in the external environment. given the korean economy ’ s heavy external dependence, in this situation of a rapidly changing and uncertain external environment it is not very realistic or wise for us to conduct economic policies in an inflexible manner by following previously set principles. this is because the downside risk caused by policy failure due to factors that we cannot control may be considerable. however, when the u. s. and other advanced economies begin to show signs of pulling out of their crises, we can achieve a certain degree of growth in line with favorable external economic conditions, and can therefore adopt measures to further strengthen the basis for long - term growth of the domestic korean economy. what challenges do you think are before us? as korea ’ s central bank, we need to pay close attention to the effectiveness and efficiency of our monetary and credit policies in carrying them out. with the g | regulated entities engaged in micro finance pursue the goal of customer protection within a well - calibrated and harmonized set - up. as you all may be aware ; the reserve bank has recently come out with the consultative document ( cd ) on ‘ regulation of microfinance ’ seeking feedback from all the stakeholders. i wish to highlight some of the major aspects we are trying to address through this proposed framework. over - indebtedness and multiple lending 12. the protection of small borrowers has been enshrined in the nbfc - mfi regulations which do not permit more than two nbfc - mfis to lend to the same borrower. besides, there is a regulatory ceiling on the maximum amount that can be lent by an nbfc - mfi to a microfinance borrower. but it is observed that small borrowers are increasingly able to get multiple loans from 2 / 5 bis central bankers'speeches several lenders well beyond their repayment capacity, contributing to over - indebtedness. the borrowers then end up defaulting on their repayment obligations. then there are reports of coercive recovery practices by the entities looking to recover their dues. in this entire process what we see is a compromise with the basic tenet of responsible lending with the small and marginal borrowers ending up becoming victims of over - indebtedness. 13. in the proposed framework, it has therefore been suggested that the regulations should focus on repayment capacity of the borrowers rather than considering only indebtedness or indebtedness from only nbfc - mfis in isolation. it has been proposed to address the issue of over - indebtedness by prescribing a common definition of microfinance loans which will be uniformly applicable to all lenders and linking loan amount to household income. the proposal is that the payment of interest and repayment of principal for all outstanding loans of the household at any point of time should not be more than 50 per cent of the household income. pricing of micro finance loans 14. over the years, modifications in the regulatory instructions and clarifications governing loan pricing for mfis have evolved in sync with changing circumstances. following the recommendations of malegam committee, the guidelines issued in december 2011 prescribed a uniform margin cap ( 12 per cent for smaller nbfc - mfis with portfolio of rs. 100 crore and less and 10 per cent for others ) along with a | 0 |
low rather than too high. since the global financial crisis, the inflation rate in the euro area has on average been just 1. 2 % ( slide 2 ). in germany, it has been only slightly higher, at 1. 3 %. in the ten years before the introduction of the euro, inflation in germany had on average been more than twice as high. for most people, the dangers of too high inflation are immediately obvious. however, many do not understand why too low inflation may also pose risks to price stability. this is what i would like to briefly explain now. 3 in the past years inflation expectations in the euro area have declined markedly. this becomes clear when looking at financial markets, where such expectations are formed every day. just before the pandemic broke out, financial market participants were expecting an inflation rate of approximately just 1. 3 % in the euro area in the long term, which was significantly below our target of 2 % ( slide 6 ). lower inflation expectations largely reflected scepticism and doubts about the euro area ’ s longterm growth prospects, which had been gradually deteriorating in the years leading up to the pandemic. conditions in the labour market are testimony to this. some 13 years after the start of the global financial crisis, the unemployment rate in the euro area excluding germany is still higher than in 2008, before the financial crisis ( slide 7 ). a high level of structural unemployment dampens aggregate demand and leads to a situation where many firms are less profitable because they cannot pass through increased costs to their customers. this, in turn, pushes inflation down. wage increases are then lower, too, and people 2 / 9 bis central bankers'speeches spend less on goods and services, creating a vicious circle. demographic change threatens to further exacerbate these issues in the future. in germany, the labour force is expected to shrink by almost 12 % by 2035 ( slide 8 ). an ageing population weakens expected future demand and may discourage firms from investing in innovative and efficiency - boosting technologies. in the 1980s, annual productivity growth in the euro area was 2 %. it has more than halved since. these trends hurt economic growth and employment and they reduce monetary policy ’ s precious room for manoeuvre in a crisis. this is linked to the two key determinants of nominal interest rates : expected long - term growth and inflation expectations. if they fall, so do interest rates. this is exactly what we have | price stability in the euro area. we will vehemently counter persistent upward and downward deviations from our inflation target. we will take the prices of owner - occupied housing into account in inflation measurement. and we will act carefully and cautiously in the current environment in order to finally pave the way out of the low interest rate environment after so many years. many thanks for your attention. the slides can be found on the european central bank website. 1 schnabel, i. ( 2020 ), “ narratives about the ecb ’ s monetary policy – reality or fiction? “, speech at the juristische studiengesellschaft, karlsruhe, 11 february. 2 the ecb website provides detailed information on the new monetary policy strategy. for a description of the key elements of the new strategy, see schnabel, i. ( 2021 ), “ a new strategy for a changing world “, speech at the virtual financial statements series hosted by the peterson institute for international economics, frankfurt am main, 14 july. 3 see also schnabel, i. ( 2020 ), “ covid - 19 and monetary policy : reinforcing prevailing challenges ”, speech at the bank of finland monetary policy webinar “ new challenges to monetary policy strategies ”, frankfurt am main, 24 8 / 9 bis central bankers'speeches november. 4 see also schnabel, i. ( 2021 ), “ escaping low inflation? ”, speech at petersberger sommerdialog, frankfurt am main, 3 july. 5 dihk ( 2021 ), “ engpasse treffen die deutsche wirtschaft in ganzer breite “, 19 august. 9 / 9 bis central bankers'speeches | 1 |
##udential requirements related to the interplay between banks and hedge funds. this could create the potential for an asymmetry leading to distorted regulatory incentives. second, also on the basis of the fsb analysis, we need to look with new eyes at the eu regulatory framework and ask ourselves whether it can properly address systemic risks stemming from shadow banking. in the past, regulation was sectoral - based, without specific consideration of the interconnections existing in reality between financial sectors. in this context, i welcome the commission ’ s green paper, which contains a very helpful preliminary analysis on whether the regulatory initiatives undertaken so far in europe are addressing such new perspective. it also indicates outstanding policy issues on which further regulatory initiatives might be needed. the green paper is also referring to the need for europe to establish a permanent process for the collection and exchange of information by all relevant authorities to address shadow banking entities and activities. in this regard, i note that the esrb, as the eu macroprudential body with authority over the whole eu financial sector, is well placed to conduct a continuous monitoring of systemic risks stemming from shadow banking. iii. policy issues concerning securities financing : the ecb ’ s views i would like now to focus on the repo market, which is of particular importance for central banks. the repo market is a key source of financing for the banking sector and the shadow banking system. most recent estimates of the size of the repo market in the us are in the range of usd 12 trillions in early 2010. 3 there are no official data on the overall size of the repo market in the euro area, but according to the latest december icma survey, the total value of outstanding repos on the book of the 64 offices of 59 financial groups in the eu in december 2011 was of eur 6. 2 trillion in gross terms. secured lending via repos has been increasing significantly in the past recent years in detriment of unsecured forms of interbank lending in money markets. indeed, we estimate that since 2002 the daily turnover of the interbank secured lending more than doubled whereas the unsecured part of that marked decreased slightly. secured financing provides benefits over unsecured lending, especially during turbulent market times. at the same time, however, the reliance on secured financing provides a powerful channel of transmission of shocks in the financial system. the decline in collateral values translates in additional collateral calls possibly compounded with higher haircuts and margins requirements. a | a solution to be possible, however, it would be required the support of the european commission by taking the necessary legislative initiative for the creation of a basic reporting underlying securities include u. s. government, federal agency, government sponsored enterprise, mortgage - backed, and corporate securities. bis central bankers ’ speeches framework at the eu level for market infrastructures. this would aim at ensuring that the data gathering would provide a complete and uniform picture of the euro repo market, while also safeguarding any legal and confidentiality requirements regarding the use of the data. the market would also benefit from this solution : reporting infrastructures would have to set - up procedure to retrieve and transmit the data, but they may offer an additional service to their participants given the economic value of information. ultimately, not only authorities, but market participants and the financial markets more widely would benefit from the general increased transparency on the euro repo market. vi. conclusions this conference today by the commission is a crucial moment in setting the stage for some key policy decisions in order to avoid financial stability risks stemming from shadow banking. in my view, among the list of actions to be considered, the establishment of a set of timely data concerning the repo market would be of key importance for supervisors, central banks and market participants. in order to make a first step, i propose the preparation of a detailed feasibility study for the repo market database in cooperation with the european commission. i hope that the preliminary considerations i developed today will foster further reflections and timely actions. thank you for your attention. bis central bankers ’ speeches | 1 |
within the framework of setting monetary policy, and its responsibility for financial stability and banking system stability, the bank of israel deals with the consequences of a low interest rate environment, which is derived to a great extent from the monetary policy adopted in major economies worldwide. the regulatory steps taken by the bank of israel helped to reduce the risk to which both borrowers and the banking system are exposed. ultimately, the solution will need to come from bringing the supply of homes in line with the basic demand for housing services, and we must hope that the steps being taken by the government in this area will bear fruit. bis central bankers ’ speeches israel ’ s agenda also includes the discussion about the size and the role of the public sector in the economy, and the structure of the tax system. after several years of reducing the share of government expenditure in gdp and reducing the tax burden, voices are heard calling for expanding the scope of services that the government provides for its citizens. the optimal size of the government cannot be calculated by one economic model or another – an economy with a small government and low tax burden can grow and thrive, as can an economy in which there is a larger government and greater tax burden. the size of government expenditure, ultimately, is the result of society ’ s preferences. however, we must remember that the size of government and the tax burden go hand in hand. if we choose a large government which will provide public services with high quality and quantity, will invest in infrastructure, and will be actively involved in supporting engines of growth, we will have to bear a higher tax burden. it is not a simple choice, primarily because we will not be able to allow ourselves large deficits and a growing public debt – those will endanger the financial stability of the economy, and negatively impact growth and quality of life in the long term. the global economic crisis taught us another lesson about the importance of the stability of the financial system. we learned that we must map out and understand the connections between various financial institutions, and locate possible points of failure which may influence the financial system ’ s stability. supervision of the financial system in israel is dispersed among several entities. this situation is liable to lead to cracks in the supervisory systems, and to lead to a situation in which risks which are protected against adequately in one part of the financial system are growing in another. the various regulators cooperate with each other and work professionally and collaboratively. with that, we must institutionalize the collaboration and information sharing through a financial stability | efforts to increase the participation in employment of those population sectors which are still characterized by low employment. the expected demographic trends do not support a high rate of growth in the coming years, and we will need to act to offset the effects on growth of those trends in order to continue to grow at a satisfactory rate. high growth rates are not enough ; it is very important that the fruits of growth are divided more equally by all parts of the population, so that they will support the reduction of poverty and of inequality in income distribution. we want inclusive growth, which supports the cohesion between various population groups, and within the groups themselves. social cohesion is a prerequisite for national strength, and for forming a society in which our children, as well, will want to live and raise their children. increasing labor force participation has an important role in this regard as well. in recent years, the cost of living has also been placed the top of the public agenda. this is partly related to the issues i already mentioned. improvements in productivity and the rate of growth will necessarily bring with them an improvement in the purchasing power of the israeli worker, in particular if the growth will be distributed more equally. but the cost of living is also partly related to the structure of the economy, to the level of competitiveness and the level of concentration of the economy. we must continue to strive toward an economy with a competitive environment, in which every producer can rely on its relative advantages and offer the best products and services, and in which every consumer has the access and ability to choose the cheapest and most appropriate goods and services. in recent years, we have seen important reforms in this area, and we must continue to carry out reforms which will reduce the concentration and increase competition. in the banking industry, as well, changes are occurring which increase competitiveness and the consumer ’ s ability to compare and choose the best and cheapest service. alongside these changes, it is important to continue the efficiency measures in the banking system, so that competitiveness will increase while maintaining the stability of the system – stability which is a necessary condition for a growing and thriving economy. housing prices have increased in recent years at an accelerated pace, and have also been a significant component in the rise in the cost of living. the bank of israel, in the framework of its economic advice to the government, assists with diagnosing the barriers and recommending the policy required to increase the supply of housing at a rate which can meet demand. | 1 |
the business sector are found in bernanke, gertler, and gilchrist ( 1999 ) ; kiyotaki and moore ( 1997 ) ; christiano, motto, and rostagno ( 2010 ) ; and christensen and dib ( 2008 ). models demonstrating how the balance sheets of households affect their borrowing capacity are described in iacoviello ( 2005 ), christensen and meh ( 2010 ), and christensen et al. ( 2009 ). there is a long history of macroeconometric models that incorporate financial variables, for example, the bank of canada muse model used in the context of international analysis. first, we need better tools to understand the highly non - linear dynamics through which financial imbalances build up and affect the real economy. this involves improving our models, but also developing indicators that can help us to better track the risk of potential financial disruptions to the overall economy. second, we need to improve our understanding of how the real economy and system - wide forces can contribute to the development of financial imbalances, particularly through risk - taking behaviour. developing better tools regarding better tools, we are developing a new generation of models that, unlike those that came before, consider the financial sector, including banks, not just as a transmitter of shocks, but as a potential shock in its own right. we are developing macroeconomic frameworks that take into account the balance sheets of financial intermediaries, multiple interest rates and credit spreads so that we can understand better how developments in the financial sector affect economic performance. this work is being done by academics and central bank researchers, including those at the bank of canada. 3 research at the bank of canada has made important strides in modelling balance sheets of banks into standard macroeconomic frameworks with financial frictions. 4 bank staff have also introduced multiple financial assets into the bank of canada ’ s main policy model ( totem ), as well as credit and banking into the global economic model ( bocgem - fin ). the bank of canada has used this research to make important contributions to international reports by the financial stability board ( fsb ) and the basel committee on banking supervision ( bcbs ), assessing the impact of stronger capital and liquidity requirements on economic activity. bank staff ran simulations to provide a comprehensive assessment of the potential impact on the canadian economy of the new basel iii global capital and liquidity standards. a report was published summarizing the bank ’ s core results for canada, including a comparison | of canada estimated that for canada, the net economic benefits to be gained from improving the safety and robustness of the canadian and international financial system could amount to about $ 200 billion – or about 13 per cent of gdp. 10 while it is neither possible, nor desirable, to eliminate risk - taking, by understanding it, identifying it, tracking it, and spotting dangerous trends, we can do much to prevent the buildup of imbalances that can lead to a crisis erupting. there is no magic bullet to safeguard the financial system. we work in an exceedingly complex and dynamic environment, one that presents new – and very difficult – challenges. the task we have set for ourselves is far from easy, but when the best and the brightest in the fields of economics and finance combine their efforts and work together, we can make important progress. complacency is the enemy. conclusion as we move away from the crisis, we all have an obligation to remember that imbalances build during periods of calm. our vigilance is required at all times, not just during a crisis. better tools will help us to identify risks and better understand the human behaviour behind risk - taking. and certainly, system - wide supervision and regulation will do much to improve the global financial system. however, as i conclude tonight, i would like to reinforce the fact that all of us here are part of the “ system. ” economists, finance professionals, business school professors and students are part of this “ system. ” we have a role, and a responsibility, to improve our understanding of, and account for, the system - wide consequences of our individual actions. we have a chance to ensure that the painful lessons of the last few years lead to a better financial system, and by extension, to a more prosperous and stable world. thank you very much. bibliography adrian, t. and h. s. shin. 2009. “ money, liquidity, and monetary policy. ” federal reserve bank of new york staff report no. 360. akerlof, g. a. 1970. “ the market for “ lemons ” : quality uncertainty and the market mechanism. ” the quarterly journal of economics 84 ( 3 ) : 488 – 500. bank of canada. 2010. “ strengthening international capital and liquidity standards : a macroeconomic impact assessment for canada. ” august. basel committee on banking supervision ( bcbs ). 2010. “ an assessment of the long - term economic impact of | 1 |
the eu treaty. it implies that the implementation of the monetary policy is practically fully delegated to the national central banks. consequently, instead of to the ecb, the commercial banks in the netherlands must turn to the nederlandsche bank for liquidity, and hold the statutory cash reserves on an account with the nederlandsche bank. besides the implementation of monetary policy, the national banks are also entrusted with the management of the ecb reserves. so, we do not just manage our own gold en foreign exchange reserve assets, but also a part of the gold holdings in frankfurt. another example of the decentralised approach : should the eurosystem decide to intervene in the foreign exchange markets, the dealing rooms of the national banks will also assist in the practical execution of the measures involved. the second key task consists in promoting the smooth operation of payments. this task is assigned to us under the bank act and in our capacity as participant in the escb. for the settlement of transactions to be efficient, it is essential to have a payments system that is reliable. everybody should be able to rest assured that the banknotes and coins they receive are genuine. this, of course, applies to guilders and euro alike. the nederlandsche bank orders the banknotes from johan enschede in haarlem, manages the supplies, sees to the distribution, checks whether incoming banknotes are soiled or false etc. the responsibility for the minting and issuing of the coins rests with the minister of finance. the coins are minted by the koninklijke nederlandse munt at utrecht, but, just as the banknotes, distributed by the nederlandsche bank. the nederlandsche bank not only deals with cash payments, but also with non - cash, or funds, transfers. funds transfers must be settled smoothly and at a reasonable fee. under my chairmanship, a working committee composed of senior officers who are currently conducting a survey of the fees involved by payments and of the payments infrastructure. on the basis of the final report, which will probably appear in february 2002, the nederlandsche bank will make recommendations towards enhancing the efficiency and the competitive and innovative power of the dutch payments system. the nederlandsche bank will also contribute to the efficiency of payments by ensuring that the payments systems and securities transaction systems are secure and reliable. this task is called " oversight ". and, last but not least, we come to supervision. as the supervisory task is purely a | the number of business failures that usually follow an economic downturn. we helped to 1 / 3 bis - central bankers'speeches set the stage for the rapid economic rebound that has followed the reductions of pandemic - related restrictions in the third quarter last year and in recent months. * * * the economic recovery is strong, but new waves of the pandemic may slow it down. the priority of economic policies is to continue providing support to the economy until the recovery is set to last and uncertainty subsides. however, as the pandemic has been with us for quite some time now, it is important that policy support is targeted at the most affected and vulnerable households and businesses and that it does not hamper structural adjustment, as this could undermine productivity growth, which has slowed markedly in europe over the last 25 years. the main operational challenge is how to distinguish between viable and nonviable businesses. for those that have dismal chances of survival, it is necessary to prepare the ground for the most efficient liquidation process. it is important that capital is freed up and directed to promising activities and that workers who are likely to lose jobs are equipped with the skills for reallocation as soon as possible. the eventual unwinding of the remaining pandemic support measures should be gradual and guided by stable improvement in economic data. in the medium term, fiscal and monetary policy will need to begin rebuilding space to address future shocks. however, planning for necessary structural reforms, to the pension and healthcare system, for example, should start as soon as possible, as their implementation usually takes time. * * * the european banking system remains resilient, as shown by recent stress tests carried out by the eba and the ecb. its solid position reflects, among other things, the cleaning up of balance sheets, recapitalisations, and strengthening of regulatory and supervisory frameworks after the previous financial crisis. the path of strengthening the resilience of the banking system is not yet complete, however. it is therefore necessary to continue towards the completion of the banking union and bank resolution framework, including a common backstop, and with harmonisation of national insolvency laws. as the health and economic situation stabilises, additional attention should be paid to the long - term challenges of many european banks, namely low profitability and the issue of sustainability of bank business models. as the recovery continues, banks will continue to play an important role in financing businesses and households. | 0 |
francois villeroy de galhau : european resilience and parisian momentum speech by mr francois villeroy de galhau, governor of the bank of france, at the paris europlace, new york, 11 april 2023. * * * ladies and gentlemen, it is a great pleasure for me to be here in new york for this paris europlace gathering, and i would like to thank damien laban, deputy consul general of france in new york, for his kind welcoming words, and emmanuel goldstein from morgan stanley. the last time i was able to attend this traditional spring event was in april 2019, on the very same day and time notre - dame de paris caught fire, and before the covid crisis struck. a lot has happened since then, including the outbreak of a war in europe, which was another major shock. however, our atlantic alliance has strengthened, europe's economy has proved remarkably resilient, and we at the european central bank will rein in inflation by end 2024 / 2025 at the latest ( i ). on another note, i must mention that paris has asserted itself as a major financial centre ( ii ). i. europe has proved remarkably resilient, and we will rein in inflation let me start with our updated economic outlook, in europe and in france. you may remember that in the quarters that followed the invasion of ukraine, growth prospects were regularly revised downwards, as our european economy suffered in particular from high energy prices, fear of a shortage in energy sources, and hence general uncertainty - and even worries about how we would get through the winter. europe reacted swiftly, diversifying its sources of energy supply, and global market prices decreased sharply, especially from the fourth quarter of 2022. in the end, the euro area economy expanded by 3. 6 % in 2022, still higher than in the us, despite a slowdown in the second half. the likelihood of a recession in 2023 is now very remote, and growth prospects have even been revised upwards, to 1. 0 % in 20231 ( up by 0. 5 percentage point compared with december forecasts ), before rebounding to 1. 6 % in 2024 and 2025. faced with a historic geopolitical and economic shock, europe has shown remarkable resilience, and greater unity. euro area inflation further accelerated after the invasion of ukraine, but the outlook for 2023 and beyond has also recently improved – although with mixed news. on the | see, the ssm is well on track and i am fully confident that it will be operational at the end of this year, as expected. but this good result should not lead to forget that for the banking union to be fully successful, the ssm needs to be completed with the adoption of a single resolution mechanism. indeed, in line with my colleagues at the ecb, i consider the single resolution mechanism to be another essential pillar of the banking union, alongside the ssm. ideally, the srm should consist of three main elements : a single system, a single authority and a single fund. this is why the ecb has constantly been encouraging all the relevant parties to make further progress in adopting the srm, which should be in place by the time the ssm becomes operational. you know that a political debate is taking place currently between the european council of ministers and the european parliament. the version of the srm that has been agreed among european governments at the end of last year is not ideal, notably because it requires a long transition period which could fuel uncertainties. but what matters most is that we have clear and common set of rules concerning banks resolution. for the mechanism in itself, europe has proven in the past that, confronted to acute crisis, it was able to accelerate the processes and deepen its solidarity. ladies and gentlemen, i hope i have managed to give you a clear and up - to - date picture of the advance towards banking union. i would like to conclude by stressing just how crucial this development is in order to strengthen our economic and monetary union. i think that the ecb proved, in the darkest moments of the crisis, that it was completely committed to the euro. our actions were driven by a profound belief that the single currency is our most valuable shared asset and that it brings enormous economic benefits. today, with the construction of a banking union, we aim to demonstrate that this is a long - term commitment. thank you for your attention. bis central bankers ’ speeches | 0.5 |
and demand uncertainty ’, the quarterly journal of economics, 114, 1, pp. 185 - 227, 2019 ; d. altig, j. m. barrero, n. bloom, s. davis, b. meyer and n. parker, ‘ surveying business uncertainty ’, journal of econometrics, 231, 1, pp. 282 - 303, 2022. for instance, the interpretation of firms about the ecb ’ s inflation target, see m. bottone, a. tagliabracci and g. zevi, ‘ inflation expectations and the ecb ’ s perceived inflation objective : novel evidence from firm - level data ’, journal of monetary economics, 129, s15 - s34, 2022. m. bottone, e. mattevi, l. modugno, m. mongardini and a. neri, ‘ indebitamento e liquidita delle imprese nel 2020 : evidenze su microdati di impresa ’, ( only in italian ), banca d ’ italia, covid - 19 notes, 21 december 2021. i. balteanu, m. bottone, a. fernandez - cerezo, d. ioannou, a. kutten, m. mancini and r. morris, ‘ european firms facing geopolitical risk : evidence from recent eurosystem surveys ’, voxeu, 18 may 2024 ; l. panon, l. lebastard, m. mancini, a. borin, p. caka, g. cariola, d. essers, e. gentili, a. linarello, t. padellini, f. requena and j. timini, ‘ inputs in distress : geoeconomic fragmentation and firms ’ sourcing ’, banca d ’ italia, questioni di economia e finanza ( occasional papers ), 861, 2024. however, conducting traditional business surveys based on sound methodologies such as probability sampling is becoming increasingly challenging and costly for central banks. examples of key challenges include the rise in both the item non - response rate − which has tripled to 15 per cent for investment plans since the inception of our invind survey − and the unit non - response rate, especially among firms that perceive a high response burden. 13 moreover, the growing awareness and concerns about data privacy and time constraints14 not only | . in the uk, we adopted a target for inflation as long ago as 1992 and the whole framework for taking decisions about interest rates was overhauled after the 1997 election. i am sometimes asked how different british economic history would have been if we had adopted the present approach to monetary policy at various landmark dates – such as 1976 or 1979. this is a hard one. tolstoy famously said that all happy families are alike, but unhappy families are each unhappy in their own way. it is rather the same with monetary policy. there are very many ways of getting it wrong – the uk has some experience here - but the hallmark of all good monetary policy is what hans dietrich tietmeyer ( president of the bundesbank in the 1990s ) used to call ‘ the three cs ’ : credibility, consistency, and continuity. my own view, for what it is worth, is that there has been a virtuous circle over the past 10 - 15 years when central banks have taken advantage of relatively benign global conditions to embed the three cs, by successfully implementing better policy - making frameworks and establishing strong reputations for competence on the back of excellent track records. the bank of england would have faced a tougher challenge in doing this in the economic circumstances of the 1980s, and certainly the 1970s – even if the political consensus had existed to support such an experiment ( which it didn ’ t ). even the bundesbank built up its formidable reputation during the german post war economic miracle. that said, i do not think there is any doubt that the new approach to monetary policy did represent a major advance on what went before. in what way? inflation targeting, the uk ’ s current approach, broke with past attempts to run an independent monetary policy by offering commitment and clarity. for the first time, the government and the bank of england committed to clear objectives, clear communications and clear lines of accountability. we now have a decision - taking framework which allows monetary policymakers plenty of room for discretion, while forcing them to provide a full explanation of their thinking. by hook or by crook, the fact is that central banks do now enjoy considerable credibility. they treasure that legacy, much like any blue chip company, and for many of the same reasons. credibility, and the trust that flows from it, is worth a great deal in policy - making, as in business. if people believe that the bank will act to keep inflation low and stable they will factor that in to their decisions. ( they may | 0 |
must apply a critical lens to understand whether changes to regulations or policies would be necessary to address specific concerns. some potential technology solutions assume — or for example, see project cedar, a technical experiment by the federal reserve bank of new york ’ s innovation center, which examined whether distributed ledger technology could be used to improve the efficiency of cross - border payments and settlements involving multiple currencies, at https : / / www. newyorkfed. org / aboutthefed / nyic / project - cedar. for example, see the bank for international settlements innovation hub project nexus proof - of - concept, which explores the interlinking of domestic faster payment systems, at https : / / www. bis. org / about / bisih / topics / fmis / nexus. htm. - 11 even require — policy change, such as issues related to operating hours and account access. in these cases, a new technology alone cannot solve the issue. some point to a decentralized infrastructure to support digital assets as a solution to address current frictions in cross - border payments, like speed and cost of payments. however, these perceived payment limitations do not always stem from problems with existing technology, but rather from existing policies, laws, and even consumer and business preferences. and within the international context, some changes may require greater alignment across jurisdictions. some purported payment limitations or frictions exist for specific reasons related to managing key risks that policymakers may not want to change, and it is important to understand the tradeoffs of these policy decisions. let ’ s use the example of compliance requirements that deter financial crimes and counter the financing of terrorism. these policies exist to accomplish specific policy goals and are implemented by banks that balance the need for transparency to deter crime and the protection of consumer financial information from government overreach. in these cases, the perceived barriers in existing payment systems are established for important public policy reasons and are not limitations resulting from the existing technology itself. it is important to not only thoroughly understand what technological innovations can do, but also what these innovations should be able to do within the broader context of a robust, well - functioning banking and payments system. my vision for responsible innovation requires that we continue to distinguish which specific payment frictions can benefit from technological innovation itself and - 12 which are questions of policy and exist for good reasons, as well as the recognition that we should not compromise vital public policies in the name of innovation. the importance of continued research the federal reserve remains open to multiple | reserve — frequently referred to as reserves. these reserves are held for a number of purposes, including settling large - value interbank payments. interbank payment services, like the fedwire funds service and other private sector services, are critical to the functioning and stability of the financial system, and the economy more broadly, as they enable important financial market functions. 5 wholesale payment infrastructures operated by the central bank tend to underpin domestic and international financial activities by serving as a foundation for payments and the broader financial system. this infrastructure allows payments to flow safely between consumers and businesses within the united states and internationally. since this infrastructure is so critical to the payments system, it is necessary that we investigate and understand the potential opportunities, risks, and tradeoffs for wholesale payments innovation to support a safe and efficient u. s. payment system. these wholesale systems fabio panetta, member of the executive board of the european central bank, has argued that wholesale cbdc has existed for decades. see fabio panetta, “ demystifying wholesale central bank digital currency ” ( speech at the deutsche bundesbank symposium on payments and securities settlement in europe, frankfurt, germany, september 26, 2022 ), https : / / www. ecb. europa. eu / press / key / date / 2022 / html / ecb. sp 220926 ~ 5f9b85685a. en. html. for additional discussion on wholesale cbdc versus reserves on a wholesale payment platform, see jon durfee, jesse leigh maniff, and priyanka slattery, “ examining cbdc and wholesale payments ” ( washington : board of governors of the federal reserve system, september 8, 2023 ), https : / / www. federalreserve. gov / econres / notes / feds - notes / examining - cbdc - and - wholesale - payments20230908. html. - 9function safely and efficiently today, but we have seen new payment platforms built on innovative technologies that have generated interest in new capabilities. this includes transacting “ tokenized ” forms of money and assets and enhancing the programmability of payments through the transfer of money using so - called smart contracts. these platforms are also being explored as a way to improve the efficiency of payment, clearing, and settlement of certain financial transactions, including for cross - border purposes. policymakers should be mindful of the specific features innovative wholesale platforms could include, and the risks, trade | 1 |
##ider, what type of monetary policy implementation framework suits best for the eurosystem in the longer run. as a result of our framework review, the eurosystem will move back towards a system in which marginal liquidity is eventually supplied through short - term credit operations at a fixed rate and with full allotment procedure. hence, the new framework can be seen as a move from a supply - driven balance sheet towards a demand - driven one. in some sense, this marks a natural return towards our original thinking that led us to design a demand - driven system based on refinancing operations, and a liability driven balance sheet. we have started a journey to normalize our balance sheet, but its size will be different from what it was before the series of crises started some 15 years ago. the natural size of our balance sheet has doubled thanks to the increase in the autonomous liquidity factors. furthermore, we will continue meeting the banks'demand for reserves in full also in the future. hence, this demand will be an important driver of the overall amount of liquidity and thus also the size of the central bank balance sheet. yet, even if there 2 / 3 bis - central bankers'speeches are uncertainties in the way, our direction is clear, we will be unwinding the legacy monetary policy outright portfolios, and this process will take quite some time before we introduce new ways to provide the banks with their structural liquidity needs. as there are many uncertainties around the monetary policy implementation landscape today, we must stand ready to react and calibrate the size and composition of our balance sheet also in the future if and when monetary policy does not transmit smoothly. after all, monetary policy operational framework needs always to serve our monetary policy ultimate goals – price and financial stability needs will always dominate in our thinking about the optimal balance sheet. so, in the eurosystem, we will carefully monitor the evolution of all the relevant markets and indicators and stand ready to adjust the framework design and parameters if necessary. thank you for your attention. i am looking forward to our discussions in which we may dig deeper into the design of central bank operational frameworks. 1 one could add gold and imf receivables to the natural central bank assets, but when netted with their liability side counterparts ( revaluation accounts and imf special drawing rights ), their volume would not change the big picture. 3 / 3 bis - central bankers'speeches | regulatory tools work across the entire financial system. this strikes me as an important goal and the ultimate bis central bankers ’ speeches challenge for policymakers. the challenge arises not only from the fact that the regulatory system is fragmented, but also from the fact that, in order to work – indeed, in order to instill trust in the resiliency of the financial system – regulations need to be complied with by financial system participants and enforced by supervisors. the recent attention being paid to capital regulation, in particular, shouldn ’ t distract us from the broader context and importance of compliance with, and enforcement of, the various capital rules. from the perspective of the hammer, everything looks like a nail. similarly, from the perspective of the financial regulator, everything might look like a problem of insufficient capital. instead, capital might, in fact, be sufficient but appear insufficient because of circumvention of compliance, or because of absent or delayed enforcement. to make regulation – any financial regulation – work, there must be on - site opportunities for supervisors to look for risk factors that, if not addressed, can lead to failure. there must be strong governance that is practiced by smart management teams and overseen by informed and engaged boards of directors. loan loss provisioning must be appropriate, and regulators need to enforce such appropriate provisioning, as well as assess the prudence of the institutions ’ underwriting standards. examiners of any financial institution must be able to spot early risks and articulate to institutions ’ management and boards of directors why such risks are, in fact, risks. and the identification of risks should be true risks, and not just new business practices that examiners have never seen before. addressing risks should not be tomorrow ’ s problem ; troubled financial institutions should not be “ fixed ” by permitting larger firms to buy them without commitments to address the risks presented by the combined firms. finally, the public needs to have faith that regulation is meaningful. the public has an interest in a strong financial system, and this interest needs to be articulated when regulation is crafted, implemented, and enforced. concluding thoughts even within the regulated sector, crafting appropriate financial regulation to address asset bubbles is challenging. in reality, it is hard to know in real time when asset prices have deviated sharply from fundamentals. asset price increases often initially reflect improving fundamentals and may only subtly and gradually change into reflections of speculative excess. prior to the peak of housing prices, interest rates were low, making mortgage payments affordable ; real incomes | 0 |
system, whether from internal weaknesses or external shocks can therefore quickly lead to a financial crisis. the resulting economic hardship can take years, or even decades, from which to recover. a very good example of this phenomenon was seen during and after the global financial crisis. vulnerability to climate change 1 / 6 bis - central bankers'speeches but let me start by addressing one of the major external risks to caribbean economies, namely the climate crisis. our region is one of the most vulnerable to the impact of climate change. indeed, when we refer to climate vulnerable economies, caribbean countries are always the highest ranked by any measure. rising sea levels, more intense storms such as hurricane beryl, which caused significant damage to a number of caribbean islands in late june, prolonged droughts, and flooding have become our unfortunate reality. these climate - related risks have a direct bearing on financial stability, as these systems don't just devastate homes and infrastructure, they can also have adverse effects on the financial system. for example, the destruction of infrastructure can lead to loans becoming nonperforming, as businesses and households may default on their debt. banks and other large financial entities in turn, may face liquidity problems, which can trigger a systemic crisis. furthermore, as governments attempt to rebuild after the event, this often leads to an increase in public debt, which puts further strain on their ability to finance essential services and infrastructure. imagine the strain on our resources that would have occurred had any of our islands been hit by the back - to - back hurricanes that recently devastated florida and other states along the us south coast. climate - related risks are particularly challenging to manage because of their unpredictable nature and the difficulty in quantifying their economic impact. caribbean regulators must therefore continuously monitor these risks and implement forwardlooking policies to mitigate their effects on the financial system. the impact of global economic shocks in addition to climate change, external economic shocks pose another serious risk to financial stability in the caribbean. our economies are heavily reliant on global trade, tourism, and remittances. any disturbance in the global economy such as a recessions in our major trading partners or sudden changes in commodity prices can ripple through our financial systems. take, for instance, the fallout from the covid - 19 pandemic, which brought the world to a standstill in 2020. it was an economic shock of unprecedented proportions for the caribbean. indeed, our tourism sector, a lifeline for many economies, came to | alwyn jordan : monitoring and assessing risks to financial stability in the caribbean remarks by mr alwyn jordan, deputy governor of the central bank of barbados, at the financial stability report ( fsr ) peer - to - peer workshop, bridgetown, 16 october 2024. * * * on behalf of the central bank of barbados, it is my great pleasure to welcome you to this peer - to - peer exchange seminar. i'd like to extend a special welcome to dr. petr jakubik from cartac, whose initiative has brought us together for this important event. this is not just another training seminar – it is a dynamic platform for the exchange of ideas, the sharing of expertise and the building of frameworks for future collaboration. in today's rapidly evolving global landscape, where financial stability and economic resilience are increasingly intertwined with central bank regulation, peer exchanges like this are vital. they help us remain agile, informed and equip us with the latest knowledge and best practices to meet the challenges we face as central bankers and regulators. it is therefore a pleasure to be here today to discuss this issue with you, which is at the heart of economic development in the caribbean. we all know that at first glance, financial stability may seem like a dry, technical topic, but for us in the caribbean, it is central to safeguarding our economic well - being. as the global financial system becomes more interconnected, our economies are exposed to a variety of risks – both natural and man - made. today, i want to highlight why financial stability is crucial for our region, with particular emphasis on challenges such as climate change, external shocks, and the evolving financial landscape. i will also shed some light on the difficulties faced by caribbean central banks and other regulators in preparing comprehensive financial stability reports. we all know that financial stability is about ensuring that various entities such as banks, insurance companies, financial markets, and payment systems operate smoothly without triggering major disruptions. when financial stability is maintained, businesses can secure credit, households can borrow and save, and governments can finance development. it is therefore the backbone of economic resilience. for the caribbean, the stakes are particularly high. we are a region of small, open economies that are highly dependent on external trade, tourism, and foreign investment. our economic structure makes us extremely vulnerable to external shocks, whether they are related to global financial conditions, natural disasters, or geopolitical events. any significant disruption to the financial | 1 |
way or another. cheaper alternatives are on their way. the new solutions could also result in faster payments. national payment card schemes, such as bankaxept in norway, might provide an alternative to the international card schemes, including access to the new services. new regulations have been introduced to lower the costs related to international cards. a new eu regulation also provides for direct bank - to - bank payments, bypassing the card schemes entirely. technological innovation has given us not only new methods of payment, but also new forms of money – so - called e - money. e - money is electronic money issued by non - bank entities, but in existing currencies. paypal customers can make payments through their paypal account. facebook has recently applied for a europe - wide e - money licence. if large providers offer an attractive, user - friendly solution, this method of payment could become widespread. a key issue related to e - money is the question of consumer trust. e - money is a claim on the issuing company. e - money is not backed by a deposit insurance scheme or any authority. other companies are offering new forms of money – often in the form of a new currency – on closed platforms such as social networks and online games. examples of such platform currencies are amazon coins, the virtual currency used in the online game world of warcraft and chinese q coins. these currencies might seem insignificant, but they have already been used as means of payment outside their own platforms. a number of private digital currencies have also appeared. some have gained ground in terms of turnover and use, while others were introduced for purely fraudulent purposes and have rapidly disappeared. the largest and best - known digital currency is bitcoin, which was launched in 2009. bitcoin has been the subject of widespread debate, but still has only a minor role in the payment system. payment by bitcoin is costly, and the system ’ s capacity is limited. bitcoin prices have been highly volatile. a characteristic of private currencies such as bitcoin is the absence of any central institution backing the currency. but this is also a problem, making it difficult to establish the trust necessary for a widespread adoption of these currencies. cybercrime new technology and new forms of payment are raising fundamental questions related to the security of the payment system. cybercrime is evolving rapidly, with cyberattacks becoming increasingly advanced and well - organised. 5 / 9 bis central | it is still possible to achieve this, but we do need to be prepared for other outcomes as well, including a sharper rise in unemployment. given the world we are living in, there are many sources of uncertainties at present and we could be knocked off that narrow path. recent data as the board navigates this path, it is paying close attention to developments in the global economy, household spending and the outlook for inflation and the labour market. i would like to say a few words about each of these in light of the recent data. first the global economy, which is in a challenging position. the imf is predicting a period of weak growth, especially in advanced economies ( graph 5 ). even so, recent forecast revisions have tended to be to the upside, following stronger news on labour markets and household spending on services in several countries. a change in china ’ s covid policy has also improved the near - term outlook there. graph 5 advanced economy gdp growth * ppp - weighted % imf forecast % - 2 - 2 - 4 - 4 - 6 * - 6 imf estimate for 2022 ; imf forecast for 2023 and 2024. source : ceic data the main global issue though is still inflation. headline inflation has peaked in most economies and is now coming down due to the resolution of supply side problems, softer demand for goods and a decline in some commodity prices ( graph 6 ). even so, there is still uncertainty about how quickly inflation will come back down. in many countries, the prices of services are still increasing quickly and wages growth is above the rate that is consistent with sustainable achievement of inflation targets. reflecting this, in underlying terms, inflation is proving to be uncomfortably persistent. while most central banks are forecasting that inflation will be back to target within two to three years, there is a range of other plausible scenarios where it occurs quicker or slower. graph 6 consumer price inflation year - ended % united states euro area % % - 2 canada united kingdom % - 2 sources : rba ; refinitiv in australia, the monthly cpi indicator for january published last week provided support to the idea that headline inflation has also peaked in australia ( graph 7 ). this monthly indicator is still experimental and can be volatile from month to month, so some caution is required. but the year - ended inflation rate showed a welcome decline from 8. 4 per cent in december to 7. 4 per cent in january. graph 7 monthly cpi indicator headline inflation, year | 0 |
an unsustainable external position developed, as could be seen in a double - digit current account deficit. and macroeconomic and prudential policies were not up to the task. quite the contrary : there was a policy conflict between monetary policy and the demand levers pulled by the government, and the risks inherent in capital flows, fx balance sheets, and credit and asset price booms were left under - regulated and insufficiently supervised. the second story was the rise and fall of three cross - border banks operating on the basis of eu legislation ( the european “ passport ” ). this story was much more unique, as it was part of the first banking crisis in europe since the eu single market was formed in the early 1990s. this framework, along with the prevailing conditions in international financial markets that provided for ample and cheap credit, facilitated the cross - border expansion of the newly privatised icelandic banks. in less than five years, from the end of 2003 to mid - 2008, the combined balance sheet of these banks went from under two times gdp to almost ten times gdp, topping other small european countries with international financial centres, as can be seen on figure 1 : bis central bankers ’ speeches towards the end, around two - thirds of the combined balance sheet of the three cross - border banks was denominated in foreign currency. on the liabilities side, the share of fxdenominated debt was actually higher, as can be seen on the right side of the slide, with almost half of the financing in the form of fx deposits and other short - term fx financing. the fx part of the balance sheet therefore had a significant maturity mismatch. however, there was a very limited safety net of the type we have in a national setting, in the form of liquidity provision and lender of last resort ( lolr ) to back it up. it was an accident waiting to happen, and happen it did, with a vengeance, at the peak of the international financial crisis in autumn 2008, when there was a wholesale run on the fx financing of internationally active banks. after having done a post mortem on the failed banks, we now know, however, that they also had other ailments that would probably have done them in at a later stage, although the process might have been somewhat less disorderly. the combination of the macroeconomic imbalances, an unsustainable banking system, and the full eruption of the great financial crisis meant that iceland faced unprecedented | few commentators have argued that we have overestimated the risks associated with such lending, or that reducing risks is not a worthwhile endeavour. instead, most of those that criticise the measures appear to feel that they are disproportionate, that is, given their benefits in terms of risk reduction, they have too detrimental effects on the property market. in principle, that is a reasonable argument to which i will now turn. direct effects unfortunately, it is still too early for a careful review of the direct effect of the rules – which works through banks ’ lending practices – on the property market. that is so for three reasons. first, the measures were introduced only nine months ago, in february 2015. therefore, any data concerning new lending in h1 2015 will mostly contain mortgages that were approved prior to the introduction of the regulations, given that banks allow approvals to last up to nine months. indeed, it may well be that these measures have only started to affect lending recently. consequently, it will take some time before new lending consists entirely of loans falling under the scope of the regulations. second, banks ’ compliance with the measures will only be assessed after lending data for the period to end - december 2015 has been submitted. before that date we will have no hard evidence on how the measures have impacted on bank lending. however, if anything, my suspicion is that banks, not unexpectedly, might have needed some time to become fully acquainted with the rules and to introduce them in their lending practices. we will know more in a few months ’ time. third, it is important to note that in 2013, lti ratios at or below 3. 5 were the norm and comprised around 83 per cent of new lending. similarly, lending at ltvs greater than 90 per cent was circa 15 per cent of all new lending in 2013. thus, the measures were broadly compatible with actual lending practices and therefore unlikely to have large immediate effects on credit availability. however, as the percentage of loans with an ltv ratio between 80 – 90 per cent was increasing and rapid house price growth was emerging, the introduction of the measures was timely. overall, it is clear that any review of the measures themselves can only be carried out once sufficient time has passed for us to have the necessary data to analyse their effects. it is also worth recalling that while there is flexibility to recalibrate the measures if necessary, they are bis central bankers ’ speeches designed to be permanent features of the regulatory landscape | 0 |
yandraduth googoolye : implementation of basel ii in mauritius address by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the special banking committee on the implementation of basel ii in mauritius, port louis, 21 september 2007. * * * chairman chairman of the mauritius bankers association chief executive of the mauritius bankers association chief executives of banks representatives of banks dear colleagues it gives me great pleasure to address you on the implementation of basel ii. as we all know, basel ii is a major challenge for small economies like ours. however, we must take pride in the fact that all our banks, regardless of their size, are committed to the implementation of basel ii. right at the outset, the bank of mauritius has favoured a consultative approach to the implementation of basel ii. since the setting up of the main committee, i must say that considerable work has been achieved. we take pride in the fact that we are having recourse to our in - house expertise and as we move forward we are creating synergies for nurturing our local jurisdiction. as you are well aware, the implementation of basel ii is a daunting and challenging task for all regulators the world over. it is also the case for mauritius. much progress has been made by our in - house staff and the representatives of banks, at the level of the working groups. despite uncertainties at some stage, we are confident that the project has regained momentum and that we will reach the march 2008 target for the parallel run. the bank has set up a new basel ii unit, the members of which are present here today. may i seize the opportunity to extend our appreciation to the dedicated representatives of banks that have relentlessly put in efforts to reach where we are today. we look forward to their ongoing collaboration. basel ii framework today, i would like to briefly touch upon the evolution of the revised framework, its broad structure and the preparatory measures taken by the bank for implementing this framework, and the challenges facing the industry in its migrating to basel ii. we must bear in mind that the basel ii framework allows for flexibility and we, at the bank of mauritius, will exercise our discretion to adapt the new framework to the specificities of our jurisdiction. the need to achieve greater financial inclusion and to provide an efficient credit delivery mechanism remains our overriding consideration. the basel i accord dates back to 1988 when the basel committee on banking supervision released a framework for capital adequacy. mauritius | and conditions of living. it has enabled all nations to produce on a higher efficiency scale. it has helped increase productivity. it has allowed the instant spread of knowledge and ideas so that the range of choices available to consumers has expanded continuously. trade and globalization have without doubt brought enormous benefits to many countries and citizens of the world. we might disagree on the exact modalities and the sequencing of trade and tariff reforms, but few of us would dispute that international trade has been a major driver of global economic growth since the end of the second world war. trade expansion boosted post - war economic recovery in the leading economies of today ; germany and japan are notable examples that come to mind. it figures large in the “ growth miracles ” of the asian tigers, mauritius, but also china! but this has not happened without those countries facing their own crises. the impact of the crisis on trade finance today we are facing the worst economic crisis in generations and this crisis is threatening to undo the economic development that many countries have achieved so far. undoubtedly world trade has been one of the worst casualties in the global financial crisis. this is even threatening to “ erode people ’ s faith in an open international trading system. ” the negative impact on world trade finds its way through two main channels. first the credit crunch resulting from the financial market turbulences has led to a fall in the supply of trade finance, which has rightly been described as the oil of the wheels of international trade ; and secondly the spillover of the financial crisis into the real economy has caused the worst recession since the great depression and fuelled a contraction of trade volumes. and those of us who believe in open trade almost as an article of faith, have watched with growing disbelief as the threat of protectionism started to rear its ugly head. as economic activity collapsed and unemployment soared in many countries, protectionist sentiment has risen along with the attraction of other trade - distorting policies. many countries have implemented domestic stimulus packages aimed at protecting their businesses and industries, favouring domestic goods and services sometimes at the expense of imports. policy - makers are perfectly aware that such policy actions have international implications – in the short term they can boost domestic demand but in the long term, they undermine the international trading system and global wealth and welfare. outlook for world trade for 2009 if we look at the prospects for world trade for 2009, we see that the world bank has predicted that the volume of world trade in goods and services will decrease by around 6 percent. | 0.5 |
not be healthy. relative government indebtedness is already higher than in many other emerging markets. also, mexico ’ s sovereign credit risk perception, as measured by cds premiums, has remained above that of other countries with the same rating. furthermore, rating agencies have given mexico a clear warning this year in the form of a downward change in perspective. a second contributing factor to peso depreciation may be markets ’ disappointment on lowerthan - expected growth in mexico. a third cause may stem from uncertainty on the forthcoming u. s. presidential election and its implications. finally, given the depth and liquidity of the peso market, and the fact that derivatives are used to hedge peso positions and as a proxy for other emerging - market asset investments, price swings for the mexican currency may be exacerbated. volatility could easily increase in the future, in light of so many unknown global geopolitical and financial variables. this situation could be even more risky in the face of mexico ’ s high exposure to foreign holdings of peso - denominated government debt. these holdings represent one of the highest proportions of the total outstanding of local currency debt in the emerging - market group, decreasing somewhat during the last two years, at close to a third, with the drop concentrated mainly in short - term securities. the still high ratios of foreign holdings could be interpreted as a positive sign. the tables could rapidly turn, however, if perception of strength evaporates. therefore, it is absolutely urgent that mexico strengthen its fiscal stance in an unambiguous way, cutting public expenditures significantly in order to stabilize, and eventually reduce, total government debt to gdp. obviously, monetary policy should also continue to carry its weight in the effort to fortify macroeconomic fundamentals. recent economic developments and outlook since 2014, gdp has risen at a relatively stable rate of around 2. 3 percent year - on - year, including a dip in the 2016 second quarter. two offsetting forces have contributed : expansion in services and decelerating industrial production. recently, the pace has slowed in both sectors. the main drag on industrial output has been a contraction in mining, driven by a longstanding decline in oil extraction. manufacturing production has also been slowing to almost no growth recently. to a large extent, these developments have resulted from a falling trend in u. s. manufacturing production and a contraction in manufacturing exports to the united states since 2015, despite the significant real depreciation of the | ( ii ) having taxonomies that reflect differences on the needs and priorities of each country but also allow for international comparability, and ( iii ) promote broad adoption of esg criteria and foster transparency on the methodologies of esg rating service providers. 4. upgrading risk management practices to include climate related risks among financial 2 / 5 bis central bankers'speeches institutions. just as we carefully and continuously monitor traditional financial risks, climaterelated risks should become part of routine risk management for financial institutions and supervisors. i. traditional regulation instruments, like capital requirements, might be ill - suited to address these new risks. therefore, we must encourage and facilitate financial institutions and supervisors to undertake forward looking methodologies such as stress tests and long - term scenario analysis for climate - related risks. ii. the ngfs scenarios provide a good starting point in this respect to facilitate comparability. iii. all financial intermediaries should be subject to a minimum of disclosure and risk management practices related to climate risks to avoid loopholes that could generate severe distortions both to the climate and financial stability agendas. iv. beware that applying climate related regulation only on banks or certain financial institutions could have significant unintended consequences, including disintermediation and risk - shifting. many institutions cannot act and build capacities alone, particularly on climate risk scenario analysis. this is a complex task that requires new skills, long - term forward - looking methodologies and dialogue with climate scientists. integrating scenario analysis into risk management would allow financial institutions and markets to price financial risks better. this is uncharted territory for all, we all need to cooperate with each other at the national and international levels. question 3. can you please elaborate on how to generate capital mobilization and investment in climate mitigation and adaptation in mexico and emdes in general? in this respect, what are the challenges? the agenda for the mobilization of climate related finance is very much focused on developed countries. the emerging economies and ldcs issues and strategies that are needed to advance the agenda in these regions are not being adequately identified. one example of high concentration of green investments in advanced economies can be seen in capital markets the issuance of green and sustainability related bonds and loans from 2015 to 2020 by emerging countries, excluding china, represented only 11 % of the total volume globally ( when including china this percentage increases to 18 % ). as for green bonds, the figure is only 8 % excluding china, and 22 % with china. with the | 0.5 |
villy bergstrom : the role of the riksbank in swedish society speech by mr villy bergstrom, deputy governor of sveriges riksbank, at fristaende sparbankers forbundsstomma, held in stenungssund, on 22 may 2000. * * * in my speech today i would like to concentrate on the role of the riksbank in swedish society. i am going to begin by trying to clarify the sometimes exaggerated idea about the meaning of the riksbank having an independent position in relation to our democratically elected representatives. later in my speech, i will take up issues relating to the riksbank ’ s role in reducing the risk for financial crises and the important function of the bank system. the duties of the riksbank the riksbank is an authority subject to the riksdag. the areas of responsibility that have been delegated to us in one way or another involve ensuring that our money plays its part well in society. in order for a modern economy to function efficiently, there must be access to money that is accepted by everyone as a means of payment. it must also be possible to make payments for the enormous flows of goods and services in a developed economy in a secure and efficient way. last but not least, it is important that the country ’ s currency functions as a store of value, a demand that is met if inflation is low and predictable. stable prices reduce uncertainty when agreements about future payments are to be concluded, for instance pay agreements. another benefit that is usually emphasised is that stable prices do not create the same arbitrariness in income distribution between savers and borrowers as high inflation does. by ensuring that our money fulfils its functions, the riksbank makes its best contribution to citizens ’ welfare. this is the ultimate objective of all economic policy and monetary policy is no exception. when the value of money and financial stability are maintained, we contribute to creating good conditions for growth, which is usually considered to be an important part of welfare. however, the funds the riksbank has at its disposal cannot affect productivity growth in the long run. as there is considerable agreement that it is neither possible nor desirable to use regulations as a normal component of policy, changes of the shortest interest rate are normally the monetary policy tool available to the riksbank. our tasks have been formulated as follows ; the riksbank shall ( 1 ) maintain price stability, ( 2 | ) promote a safe and efficient payment system and ( 3 ) be responsible for the supply of banknotes and coins. the core activity that the riksbank is responsible for is stated and regulated in the riksbank act. a new act came into force on 1 january 1999 and was occasioned by the demands made on the conduct of monetary policy according to the so - called maastricht treaty. the riksbank in a democracy when sweden became a member of the european union and the government signed the so - called maastricht treaty, this entailed, among other things, acceptance of the requirement that the riksbank was to have an independent position in relation to the government and the riksdag. however, many regarded it as a controversial demand, not least in the swedish trade union movement and within social democracy. it is hardly surprising that there were strong reactions in many places as an independent central bank is a quite new and unfamiliar element in swedish public administration. it meant that the conduct of monetary policy should be delegated to an authority that was only restricted by legislation. this procedure can be most closely compared with the independent interpretation of laws by the courts. however, on closer inspection of the content of the new law and the practice established since then, it can probably be said that the reactions and concerns were exaggerated. mention is often made in general discussion of, for instance, “ the independence of the riksbank ”, which may call to mind an organisation that can carry out its policy wholly without control and parliamentary supervision. in fact, in my view, what is involved is rather more a sensible arrangement, where the objective of monetary policy, stable prices, has been established by law. in addition, the act states that the riksbank, without prejudice to the objective of price stability, shall support general economic policy with a view to achieving sustainable growth and high employment. furthermore, when the new act was passed, responsibility for general issues relating to foreign exchange policy was transferred from the riksbank to the government it is thus the government that is to decide on the krona ’ s relationship to other currencies. this means, for instance, that it is the government that shall decide whether and when sweden shall apply for participation in the european exchange rate mechanism, erm2. however, the riksbank is responsible for setting the exchange rate at which the linkage shall be made in this case and the width of the band in which the krona | 1 |
financial centre depends crucially on its soft powers, not just on hard infrastructure. hong kong is uniquely well positioned to take advantage and play a pivotal role in the new era of china ’ s growth story and in the internationalisation of rmb. hong kong enjoys both first - mover advantages as well as many irreplaceable structural advantages, given hong kong ’ s very close links with the mainland in trade, investment and finance under the “ one country, two systems ” principle. however, there is absolutely no room for complacency. as this new era of rmb internationalisation has just begun, we still have a long, long way to go as the offshore rmb markets continue to grow and mature, while the capital account controls in mainland china are being gradually relaxed or lifted. in the early stages of this new era, the primary task of hong kong is to develop the cnh market and at the same time work with other financial centres such as sydney, london or paris to grow the pie, leading to win - win outcomes. as we move into the more mature stages of the internationalisation of rmb, the available policy headroom should be quite ample for the markets to flourish. at that time, the 2nd and 3rd elements of pips, i. e. infrastructure and people / products, would matter a great deal more if hong kong wishes to retain its competitive edge over the others. it will be up to our industry, financial firms and market practitioners to out compete the other centres in terms of product innovation and distribution of various financial products and services that best serve the needs of their clients. i am sure that the tma, with the support of its members and the financial industry, will continue to play a leading role in developing the professionalism of the practitioners and in facilitating product innovation. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches | gross settlement system has registered a phenomenal growth, reaching an average of around rmb700 billion each working day. 4. i won ’ t bore you further with the numbers as i am sure you are very familiar with them. surely it is useful for us to pause, look back, take stock and try to think of ways in which we can continue to excel as we go forward from where we are. so without further ado, let me quickly turn to the main theme of my remarks this morning : “ what does it take to build a successful global hub for offshore rmb businesses? ” the key to success, if i may summarise it, lies in the acronym : “ pips ”. 5. “ pips ” stands for “ policy headroom, infrastructure and people / products ”. let me cover these three elements in the reverse order. for people and products, i have said many times that for any financial centre to thrive and out - compete other centres, the crucial building block would be its people and products. it goes without saying that a world class financial centre must have the right people designing and distributing the right products that serve the needs of the financial consumers. this is an important and core component of the soft power that i have been talking about in the last few years. it is a key attribute that differentiates a global hub from the other financial centres. people and products fall into the area in which the financial industry, including the individual firms, practitioners and industry bodies like the tma, can and should play a dominant role. i am sure that you will agree with me bis central bankers ’ speeches that policy makers and regulators, while having the responsibility to safeguard financial stability and to accord appropriate protection to financial consumers, are not really well suited to get too involved in gauging market demand and designing financial products that would best meet the requirements of the consumers. 6. having said that, policy makers and regulators do have a crucial role to play in respect of policy headroom and infrastructure, which are the first two elements of “ pips ”. let me elaborate further. 7. clearly there could not be any offshore rmb markets if the mainland did not make a move in 2009 to change its policy of not allowing the use of rmb in cross - border trade and other transactions. but of course, the mainland authorities were and still are understandably wanting to open up the capital account on an incremental basis, taking one step at a time | 1 |
is the continuous education of businesses and consumers to encourage the desired change in payment behaviour that will deliver important efficiency and productivity gains for our economy. 4 / 5 bis central bankers'speeches let me conclude by congratulating myclear and the winners of today ’ s awards ceremony. i hope that today ’ s event will inspire greater achievements in accelerating malaysia ’ s migration to epayments. 5 / 5 bis central bankers'speeches | leading role in shaping the development of the country ’ s payment systems, in line with its statutory mandate to promote safe, efficient and reliable payment systems. we have taken important steps to correct price signals associated with the use of different payment instruments, and created market mechanisms to better align incentives at the institution level. along the way there was resistance, but we had experienced that left to its own devices, the market is not capable of making strategic changes necessary to drive payment efficiency, financial inclusion and competitiveness. but, cooperation is key. 1 / 5 bis central bankers'speeches indeed, the various measures that were implemented have been instrumental in accelerating the e - payment agenda forward, only because of the cooperation of the industry, sometimes with a bit of nudging. but truth be told, we have been able to achieve so much. today, the payments industry is no longer the exclusive domain of banks. the advent of fintech driven by the increasingly inexpensive and pervasive internet and mobile technology has encouraged the entry of more agile non - bank players as potential disruptors or collaborators of the incumbent players. this has set the stage for an exciting new era in payments, an era in which the industry is expected to take on a larger role in delivering a more robust and efficient payments system for malaysia. the bank will facilitate this in three key ways : i. first, through policy initiatives to encourage collaborative competition or ‘ co - opetition ’ ; ii. second, by further strengthening industry alignment ; and iii. third, by supporting more inclusive governance arrangements for the development of the payment system. policies to promote co - opetition as a key enabler for greater efficiency, competition and innovation network effects are critical to an efficient payment system. the larger the network of a payment system, the more valuable it is to users of the payment system. instead of duplicating resources to build costly and overlapping payment infrastructures, the industry should collaborate at the infrastructure level to improve the network architecture and achieve this more quickly, thus benefitting from economies of scale and new opportunities to serve customers better. competition should continue to exist at the product level, where industry players compete to deliver a positive user experience through value - added product offerings. this would not only avoid market fragmentation, but also allow a more optimal use of scarce industry resources. such ‘ co - opetition ’ is not new in malaysia. we used to have three atm networks in the country. in 1997, the three atm networks were consolidated | 1 |
##ize the financial market, and strive to build a mutually beneficial relationship between china and its foreign partners. thank you. | that they plan to consolidate the fiscal deficit to no more than 3. 1 % of gdp for fiscal year 2003. this is a good gradual reduction from 3. 6 % last year. the overall government debt is currently still at 54 % of gdp, well under the cap of 60 % announced in 2001. the rapid recovery of the general economy also helped boost tax revenue collection by as much as 10 % in 2002, and looks set to repeat itself in 2003 as well, helping to narrow the budget deficit. ladies and gentlemen, no one can plan for 2003 with absolute certainty. we are all following the news minute by minute, and even the best laid out plan for this year must contain several scenarios to cover for contingencies. but the one certainty i can assure you is that the macro economic policies in thailand that aim for stability and sustainable growth will continue. | 0 |
. the strengthening of the supervisory review process ( pillar 2 ) envisaged in the new accord could provide a sounder basis for promoting these practices. monetary authorities, too, are beginning to recognise the complex two - way relationship between monetary and financial stability. the seeds of future financial instability are usually sown by excessive credit expansion. this facilitates the build up of leverage in the financial system and exposes institutions to losses when the credit cycle turns. monetary policy will have to be more conscious in future of the risk of accommodating excessive credit expansion and the unsustainable rise in asset prices that often accompanies it. iii. the organisation of supervisory functions as i noted at the outset, there are also procedural issues to be considered in adjusting to a more complex environment. the blurring of distinction between institutions makes it increasingly important to have consistency in the supervisory rules and enforcement methods that apply across different sectors. in its absence, there would be the twin dangers of regulatory arbitrage or competition in laxity. this is an issue for an individual economy as much as for an increasingly integrated global financial system. hence, there is a national and an international dimension to the question of how the supervisory function should best be organised. at the national level, two quite different approaches are being pursued : to bring all regulatory, supervisory, and oversight functions together in a single entity, as the scandinavians first did in the late 1980s and others ( e. g. japan, the uk ) have copied since ; or, to keep the entities separate, but create mechanisms that ensure appropriate co - ordination among the relevant authorities. each has advantages and disadvantages. at one level, the single entity solution seems attractive. it would certainly seem preferable if the preponderance of domestic institutions were themselves integrated financial conglomerates. ( but even then – as in netherlands – the authorities can come to different conclusions ). and integration might be an attractive option where a history of supervisory or regulatory failure calls for adjustments that are unlikely to obtain within an existing diversified structure. but even if these conditions are met, it is not immediately clear which are the regulatory activities that it makes sense to bring together and which to keep on a stand - alone basis. should for example the prudential supervision of banks and other financial institutions be integrated, but market regulation, including customer and investor protection, be kept separate? experience with how well integrated regulators handle potentially conflicting objectives during episodes of significant turmoil might tell. a single all embracing | , and the vulnerability to takeover, are just some of the areas where corporate governance structures can play a key role in hindering or encouraging necessary adjustments. finally, and i would stress this point, the european labour market has been relatively inflexible to date, even if important structural reforms are now underway in many countries. obstacles to the adjustment of labour are just as important as obstacles to the adjustment of financial capital. they can result in dangerous inertia in cost structures. and they may prevent the productivity gains otherwise attainable through the reorganisation of business processes and products, particularly through the adoption of new technologies. the pattern of the restructuring process under way in europe tends in many respects to confirm these propositions. available evidence indicates that the tendency for the number of institutions to decline and concentration to rise is a generalised one. at the same time, it also indicates that in terms of cutting branches and, above all, employment, continental europe is lagging well behind english - speaking and nordic countries. this broadly underscores the picture that emerges from the behaviour of indicators of profitability, costs and creditworthiness reviewed above. tellingly, the evidence also indicates that the restructuring has proceeded fastest, and in some respects has gone furthest, in those nordic countries that experienced a banking crisis in the late 1980s and early 1990s. and it suggests that, while in terms of numbers of institutions consolidation has been most substantial among savings, cooperatives and mutual banks, employment appears to have been comparatively less responsive, except where financial difficulties have emerged. against this background of limited progress at the level of the firm, what can be said about the current wave of mergers and acquisitions ( m & a )? m & as are an important means through which restructuring can take place. indeed, the available statistics indicate that the share of financial sector deals in the total has tended to increase in recent years. also, the average size of transactions has gone up substantially. mega - deals of unprecedented proportions have been making headlines. at the same time, the experience with previous merger waves has, on balance, been somewhat disappointing. in addition, it stands to reason that the performance of merged entities is likely to be as sensitive as that of individual firms to a number of environmental elements, ranging from sub - optimal corporate governance structures to inflexibility in factor markets. a look at the current wave shows some brighter spots but is not free of clouds. on the positive side, cost - cutting and down - sizing in | 0.5 |
of the governing council against it? trichet : i never comment on the statements of other members of the ecb ’ s governing council. i will only say this much : an overwhelming majority were convinced that the decision was right under the circumstances. faz : in comparison with almost every other major currency, the euro has fallen sharply this year. is this a risk for price stability? trichet : the euro is a credible currency. the fact that it is a currency whose rate of inflation has been below 2 % for over 11 years demonstrates its trustworthiness. price stability is a key feature of the euro and a major asset for domestic and international investors. faz : so there is no need for intervention? trichet : i never comment on interventions. faz : the crisis stems from excessive debts. we are now fighting the crisis with even more credit and even more money. how do we get out of this spiral? trichet : we have a number of ways of providing the banks with additional liquidity support, which will automatically be discontinued when the situation improves. owing to the serious tensions observed very recently in the markets, we have now reintroduced some of these support measures. but you can be sure that we will exit those measures in a timely fashion in line with improvements in the functioning of the markets. we will never lose sight of our primary mandate of ensuring price stability over the medium term, with the right monetary policy stance. there is a clear separation here. by the way, note that the growth of the monetary aggregate “ m3 ” is currently negative. i have been committed to price stability all my life. for me, inflation is a tax that would mainly hit the poorest and weakest in our society. faz : the purchase programme seems like a second major bailout. are we rescuing the banks again? trichet : we are constantly urging the banks to live up to their responsibilities. all our support for the banking sector is geared to stabilising the real economy in the financial crisis in order for price stability to be ensured and, by way of consequence, for jobs to be retained. we are therefore calling on the banks to strengthen their balance sheets and lend. they should not use their profits for huge bonus payments or excessive remuneration packages, which are a disgrace in the current environment, nor to massively distribute their profits. instead, the banks should do everything they can to strengthen their capital base in order to be able to better provide credit to businesses. fa | the hands of governments and regulators. against this background, monetary policy measures in a crisis can serve a critical role in guarding against disorderly self - fulfilling disruptions. they can buy time for other policy domains to undertake the necessary adjustments and reforms. but they cannot substitute for such actions. they must also be mindful of adverse longer - term consequences of short - term support provided. here is my “ to do ” and “ not to do ” list on monetary policy in crisis times, expanding a little on bagehot. • provide liquidity, not solvency support. recapitalization is the task of shareholders and governments. for early expositions of the need for a medium - term stability - oriented monetary policy to take into account the build - up of financial imbalances, see o. issing, “ why stable prices and stable markets are important and how they fit together ", first conference of the monetary stability foundation, 5 december 2002 and o. issing, “ monetary and financial stability : is there a trade - off? ”, bank for international settlements, march 2003. bis central bankers ’ speeches • prevent disorderly deleveraging and fire sales of assets, do not delay unduly necessary balance sheet adjustments. • provide temporary backstop to markets under stress, do not replace market functioning for too long. • provide short - term liquidity support, do not enter long - term credit allocation to be left to financial intermediaries. • act as lender of last resort to the banking system based on the traditional role of central bank refinancing, do not confuse this with lolr to governments or inappropriate fine - tuning of financial markets. • support functioning monetary transmission mechanism ( via banks and markets ), do not guarantee uniform financing conditions or suppress fundamentally justified risk premia. • preserve singleness of monetary policy, do not compensate need for political commitment to keep composition of currency area intact. • buy time and pre - empt self - fulfilling dynamics ( tail risks ), do not distract from need by other policy domains to undertake structural reforms and address underlying fundamentals, avoiding wrong incentives and moral hazard. • fulfil the duty of fire - fighting in crisis to preserve financial and ultimately price stability, but keep a medium - term perspective and do not neglect unintended consequences and adverse side - effects from protracted non - standard measures on financial institutions and functioning. • take responsibility and credit for averting armageddon, but do not overstate | 0.5 |
evening i want to set out what is being done. at the heart of it is the need to ensure finance supports you through the whole cycle. the need to avoid the pattern – all too familiar to you – of financing conditions going from conservative to careless and then to completely closed, all too rapidly. bis central bankers ’ speeches the need to replace financing that magnifies cycles of sentiment with financing that mutes them. and in this, the measures i ’ ll outline this evening constitute one aspect of a broader post - crisis endeavour to build, and maintain, a financial system that supports, and does not disrupt, the real economy. it goes by the name of macroprudential policy. banking system resilience the first step to nurturing a resilient environment is to reduce the prospect of a sudden crunching of credit supply from an injured banking system. in the financial crisis, as banks were holed below the waterline and new lending seized up, the flow of new lending to commercial property collapsed to a third of its earlier level. since the crisis, the bank of england has been building a safer banking system. measured on a consistent basis, major banks hold 10 times more capital than they did before the financial crisis1. and through stress testing, we ’ re making sure they ’ re able to withstand severe stresses. by withstand, i don ’ t just mean survive. i mean continue to lend, including to you. last year, we tested whether the banking system could withstand a snap back of long - term interest rates, a sharp fall in residential and commercial real estate prices, and a deep recession – all without cutting lending. this year we ’ re testing whether they can withstand a synchronised, sharp slowdown in china, emerging markets and europe, and sharp falls in asset and commodity prices – all while increasing lending to the uk real economy by 10 %. we showed last year that, where the tests say a bank needs more capital, we ’ re prepared to take action. and where the system needs strengthening as a whole, we can change capital requirements to put additional resilience in, either across the board through countercyclical requirements, or to particular sectors, through sectoral capital requirements. we are matching the strength of the banking system to the scale of risk it faces, so you can be more confident that credit will be there when you need it. resilient underwriting standards we have to nurture more than the resilience of | claudia buch : the deutsche bundesbank's 2016 financial stability review speech by prof claudia buch, deputy president of the deutsche bundesbank, at the press conference to unveil the deutsche bundesbank's financial stability review, frankfurt am main, 15 november 2016. * * * ladies and gentlemen i would like to welcome you, on my behalf and on behalf of andreas dombret, to the unveiling of the 11th edition of the deutsche bundesbank ’ s financial stability review. the stability of the financial system has been the topic of much discussion over the past year. interest rates, which have remained low for years, are currently in the focus of the debate. these low interest rates reflect weak global economic growth. at the same time, they are encouraging increased risk - taking and an expansion of borrowing. it is impossible to pinpoint exactly when interest rates will go back up again. market players are capable of getting it wrong when it comes to assessing risks and future economic growth. to illustrate the point, let ’ s compare this with election forecasts. most forecasts got the outcome of the us presidential election wrong : only 11 out of 96 forecasts predicted the election outcome correctly. 1 the election forecasts took into account average “ standard ” forecast errors from the past. however, these errors were exceeded by a considerable margin in the actual election. this is not actually anything to worry about if isolated errors ( eg in individual us states ) cancel each other out. however, if all the individual forecasts are systematically biased in the same direction, they won ’ t cancel each other out. and if all observers rely on forecasts, this can lead to false certainties. at this moment, if we look at the financial markets, we see a danger of market participants holding false certainties – and thus, expecting interest rates to stay low, and asset prices to stay high, over the long term, taking excessive risks. on the whole, risks could be systematically underestimated, and the value of collateral for lending operations could be overstated. the surprise that sets in when the opposite occurs is all the greater. in the financial markets, surprise news leads to abrupt price corrections – as was shown by the markets ’ response to the brexit vote. market interest rates can jump up, leading to a significant need for adjustment with the potential for adverse consequences for the real economy. financial stability considerations therefore warrant the build - up of risk buffers so | 0 |
recently in medium - to longer - term inflation expectations is a cause for extra vigilance. in short, the latest data on the euro area economy point to a continued but increasingly fragile recovery and the uncertainties and downside risks surrounding the recovery have intensified. all the while, we are facing continuously sluggish money and credit dynamics – even if growth rates of some key aggregates have edged up in recent months. consistent with this subdued picture, the latest ecb staff projections foresee growth and inflation to pick up only gradually. and, by the end of the projection horizon, annual hicp inflation is still expected to fall short of our target of a rate of inflation of below, but close to, 2 % over the medium - term. it was against this backdrop of a persistently weak inflation outlook, a slowing growth momentum, and subdued monetary and credit dynamics that we decided on a package of bis central bankers ’ speeches measures between june and october to provide further monetary policy accommodation and support lending to the real economy. impact of june - october policy decisions the policy announcements since june, together with the rate cuts, have already led to a further considerable easing of the effective monetary policy stance – although the liquidity injections via the tltros and purchase programmes will only gain pace in the coming months. this additional easing is evident from various metrics of the market - based cost of financing. since the beginning of june, forward money market rates have shown steep declines across the maturity spectrum. now, the forward curve consistently lies below zero over a two - year horizon. eonia is not expected to exceed 25bps before well into 2018. the 3 - month euribor rate, which is an important conduit of monetary policy impulses to lending rates, dropped to all - time lows and now stands close to zero. and the policy decisions, in particular those announced in september, triggered a compression of spreads across other asset classes, including abs, covered bonds and sovereign bonds. the recent sharp compression of abs spreads since june is particularly important. to the extent this compression of secondary market spreads is passed - through, this would support loan origination and promote credit flows at lower lending rates. as indicated, this market response has materialised although the lion ’ s share of the liquidity injection of the measures is yet to come. in september, we conducted only the first out of eight tltros. notably in december, counterparties will have another opportunity to participate in the t | follows the long - standing monetary policy tradition in the euro area, which in view of our financial structure is centred on lending to counterparties. but, inevitably, this makes the overall scale of the measures to a large extent dependent on banks ’ autonomous decision to participate and borrow, which is itself influenced by banks ’ appraisal of the strength of the recovery and the prospects for a sustained rebound in credit demand. in conditions in which these expectations may be re - appraised, the force of the overall monetary policy stimulus that can be expected to be introduced through the tltro is bound to become more uncertain. the purchase programmes do not run into this problem. but the capital market segments they target are not as deep and liquid as their equivalents in other leading economies. this is particularly the case for the abs market, which has yet to recover from a protracted period of minimal issuance activity and disappearing trading traffic. ecb intervention will, in itself, partly mitigate this problem by encouraging issuance activity as well as the unfreezing of abs and covered bonds that are currently retained on intermediaries ’ balance sheets. however, these dynamic effects are difficult to estimate precisely. taken together, these factors mean that not only the efficiency of the measures per euro of liquidity injection, but also the overall scale of the measures is difficult to anticipate. balance sheet communication these considerations interact with our recent communication as follows : the clarification that the measures will have a sizeable impact on our balance sheet is a way to manage the second dimension of uncertainty, the scale. it underpins our commitment to ensure a powerful transmission of the measures adopted in june and september. and it gives reassurance that the liquidity injections will be scaled appropriately to ensure the intended macroeconomic impact, namely to bring inflation rates closer to 2 %, materialises. this reassurance provides market participants with a broad orientation on our future policy conduct that will help them navigate the uncertainties inherent in the current policy environment. this is all the more important since the tltros and the two purchase programmes are likely to gain pace only gradually. all in all, it should thus be clear that the balance sheet communication does not establish an additional target for monetary policy. instead, in assessing the ecb ’ s monetary policy measures, the primary metric of success remains their impact on inflation rather than on the balance sheet. so how will these measures contribute to stimulating higher inflation? the purchases of simple and transparent | 1 |
. we also run surveys that provide information on exposures to hedge funds. but these provide only a partial view of portfolio leverage : either because they do not provide a link between borrowing and investment activities ; or because we only see part of the portfolio due to non - banks ’ multi - jurisdictional presence ; or because the data are simply not sufficient to assess the risk of leverage. given the global nature of non - bank business models, it is essential that transparency and data availability are enhanced through international efforts, and that authorities have the right metrics to assess the risks of leverage. [ 20 ] it is encouraging to see progress being made, for example by the sec. beyond improving transparency, regulators will need to consider how best to ensure leverage is well managed. these could, for example, include broad market - wide measures such as market regulations to ensure excessive leverage is better controlled by market pricing and margins. some international work is underway. the bcbs - cpmi - iosco margin group has published its final report on margin practices. [ 22 ] the report recommends policy work in six areas [ 23 ] – including increasing the transparency and predictability of margin calls, evaluating their responsiveness to stress, and enhancing liquidity preparedness by clearing members and non - banks. as part of the ‘ next steps ’, there is already work underway evaluating the responsiveness of cleared and uncleared margin models. finally, there are important questions about the role of central bank balance sheets. in a number of recent events, central banks have had to intervene in size, using public money, to remove the threats to financial stability. providing backstop liquidity insurance when tail risks to financial stability crystallise is a core part of central banks ’ job. and the fpc has discussed the importance of examining whether central banks should have facilities to provide liquidity to a wider set of financial market participants in stress. but central banks cannot be a substitute for the primary obligation of market participants to manage their own risk, or for internationally co - ordinated reforms that enhance the resilience of the non - bank financial sector. for that reason, such facilities must be carefully targeted on the financial stability vulnerability at hand, and designed in ways that incentivise the right private sector behaviours, incuding reducing incentives for excessive risk taking in the future. [ 24 ] my colleagues in our markets area have been considering these issues, [ 25 ] including with colleagues internationally [ 26 ] – and a number of these principles | policy maintaining economic balance is key to the making of monetary policy, as it is one of the most important pre - requisites of macroeconomic stability. in practice, this means that as the economic activity returns to normalcy, monetary policy stance must similarly be normalized. failure to do so will add undue pressure on inflation, ultimately posing risks to macroeconomic stability. thus this year, the monetary policy committee ( mpc ) will need to continue normalizing monetary policy. the amount and pacing of policy interest rate adjustments this year will be consistent with the outlook for growth and inflation as well as the surrounding risks. as always, the policy decisions will be grounded on informed and prudent deliberation by the mpc, with an aim of keeping core inflation within the target band as mandated by law. because many shocks, both of temporary and structural nature, cannot be foreseen, it is difficult to say beforehand what level of policy interest rate should be appropriate for this year. however, sustained negative real interest rates are usually not consistent with fostering economic balance. bis central bankers ’ speeches timely adjustments in policy interest rate will help keep inflation pressure in check, which in turn lead to low and sustainable borrowing costs in the long run. the bank of thailand has taken steps to enhance the transparency of monetary policy making, by announcing the mpc voting result together with the statement for the first time early this month. the first minutes of the meeting has also been released this morning. it is hoped that these information will help businesses and households understand the rationales behind the mpc policy decisions, and enable them to make better and more informed economic decisions. exchange rate policy the bank of thailand adheres to our policy framework, where exchange rate is not a policy instrument and hence is market - determined. however, recognizing the risks of high volatility in capital movements looking ahead, the bank of thailand has followed a three - part approach. the first is to develop a systematic capital flows master plan, with sequencing appropriate for the development of the thai economy and the evolving international financial market. part of this plan is to relax regulations that hinder thai residents from investing abroad, in order to foster more balanced capital flows. secondly, the bank of thailand will encourage the use of appropriate financial hedging instruments, in order to strengthen the risk management capability of the private sector, especially the small and medium - sized businesses. given the possibility of more volatility in the financial market looking ahead including the | 0 |
a point estimate, as in the european commission survey. we find that households provide values that are in line with official releases. 7 concerning firms, in our quarterly survey of inflation and growth expectations we ask companies to provide point estimates for both nationwide hicp inflation at different horizons, and own selling price changes. we see this survey as particularly valuable because quantitative price expectation surveys for businesses are scarce — a surprising fact, given that firms ultimately set the prices of goods and play a key role in wage setting, either through their associations ( collective bargaining ), or on an individual basis. 8 concerning property price developments, our housing market survey, conducted quarterly on a large sample of real estate agents, enables us to monitor current and expected house prices, as well as rents, and more generally to follow the main trends of the housing market. 9 we also devote considerable research efforts to using price expectations data. topics include how inflation expectations form, to what extent they are anchored, how inflation expectations influence agents ’ decisions ( including pricing decisions ), and how best to derive estimates of agents ’ inflation expectations from market data. 10 in 2018, the eurosystem set up the price - setting microdata analysis network ( prisma ), with a view to improving our understanding of price - setting behaviour, and gaining new insights into a key element of monetary policy transmission. prisma exploits various sets of granular data, including those underlying official price indices such as the consumer price index, as well as scanner data and online prices. microdata on prices are useful for studying the price - setting process, such as frequency, size and distribution of monthly price changes, a line of research that would not be possible using aggregate indices only. a recent, interesting example of what one can do with such data is a banca d ’ italia paper that singles out those individual prices that change only infrequently. almost by definition, such prices generally have a lot of inertia, and in fact they had barely changed for years. however, with the recent surge in inflation they are now displaying a distinct, if still moderate, upward trend. ( other prices are much more volatile, and it is more difficult to extract obvious signals from them ). 11 another paper based on the prisma dataset, on quality adjustment, will be presented in this meeting. 12 let me emphasise in closing that i am mentioning this network, not only because of the interesting topics it has been addressing, but also because it is | fabio panetta : credit and the financing of firms address by mr fabio panetta, deputy director general of the bank of italy, at the federazione delle banche di credito cooperativo lazio umbria sardegna, “ reload banking. la banca del domani per un nuovo sviluppo dell ’ italia ”, rome, 21 june 2013. * 1. * * the macroeconomic environment and the credit market euro - area gdp continued to contract in the first quarter of 2013, with the cyclical weakness spreading across countries. domestic demand is reflecting the impact of private and public sector deleveraging and the worsening of credit conditions. exports declined for the second successive quarter. the cyclical indicators have shown a small improvement in recent months, although the levels are still low. according to eurosystem forecasts, gdp will fall by 0. 6 per cent over the year as a whole. in italy the economic situation shows little sign of improving. in the first quarter of 2013 output contracted more than in the rest of the area, mainly owing to the decline in domestic demand. for the first time in four years exports decreased, in response to the reduction in demand from the other euro - area countries and a slowdown in sales outside europe. industrial production declined further in april before picking up slightly. analysts expect the decline in gdp to ease during the present quarter ; economic activity seems likely to stabilize in the second half of the year. according to oecd forecasts, gdp in italy will fall by 1. 8 per cent on average this year ; this would bring the cumulative contraction since 2007 to around 8. 5 percentage points, larger than that recorded during the depression of the 1930s. credit market conditions are one of the most critical aspects of the macroeconomic situation in italy. in the first four months of this year lending to firms diminished by just under 4 per cent on an annual basis ; lending to households also contracted, although to a lesser degree. the reduction in borrowing costs came to a halt last autumn, and lending rates are still above the euro - area average. small and medium - sized enterprises face increasing difficulties. the decrease in lending reflects the weakness of demand for loans, which in turn is associated with the reduction in investment, the deterioration in consumer confidence and the weakness of the property market. but the reduction in bank credit, and the increase in its cost, can also be ascribed to the tightening of supply conditions. evidence pointing in this direction | 0.5 |
to be an enduring pillar of the international financial architecture. to that end, the g - 20 leaders agreed at the cannes summit last november that the fsb should expand its resources, and gain legal personality bis central bankers ’ speeches and greater financial autonomy. this will extend the fsb ’ s capacity to coordinate, monitor and assess financial reform. but, ultimately, it is up to the fsb ’ s member countries to ensure that the house of reform becomes the home to the financial system. full implementation is the responsibility of every member. we should expect no less. thank you. bis central bankers ’ speeches | reasons, it is clear that there is no room for complacency and that institutions must act to achieve tighter cost control and to rationalise their procedures. against a background of rising doubtful assets it seems essential to build up both the amount and quality of capital and to establish sound risk control mechanisms. lastly, institutions should continuously carry out stress testing and develop contingency plans to anticipate what line of action to take in the face of different market situations. regarding the supervisor, i believe there has been widespread recognition of the reliability and quality of spanish banking supervision. therefore this work should continue to cultivate a close relationship and permanent contact with institutions, but without relaxing the demands made of them. the last agent to which i wish to devote attention is households. in the current circumstances it is inevitable that households should regard the future with greater uncertainty and restrict their spending, stepping up their saving and reducing their level of indebtedness. the behaviour of households will be influenced by whether or not they are indebted and, if so, the weight of this debt burden on their current income. in the case of the more heavily indebted households ( in proportion to income ), the picture is more complicated since, to the prevailing uncertainty about the economic outlook may be added the tightening of financing conditions, which is largely a result of the financial turmoil. it is difficult to predict whether this tightening will continue, although money market rates ( the main benchmark in spanish mortgage loans ) now contain a substantial risk premium over the ecb ’ s official rates, currently at 4. 25 %. in addition, the adjustment phase will lead to a decrease in the high debt of households, which is a necessary step for them to be able to drive a fresh phase of high growth. as in the case of firms, households will also have to be asked to adapt to the changes. above all, this calls for a greater effort in training, acquiring professional skills and versatility. it would also be useful if energy saving could be included in households ’ day - to - day activities, although, as in other areas, the provision of proper incentives by the authorities ( particularly through energy price and taxation policies ) is crucial. i would like to end with a message of confidence on the spanish economy ’ s capacity for growth : the country ’ s productive foundations are much more solid than in the past and there has been a process of convergence with average european income levels which is unlikely to be reversed. spain is a | 0 |
malcolm edey : opening statement to the senate economics references committee inquiry into matters relating to credit card interest rates opening statement by mr malcolm edey, assistant governor ( financial system ) of the reserve bank of australia, to the senate economics references committee inquiry into matters relating to credit card interest rates, sydney, 27 august 2015. * * * thank you for the opportunity to appear today. i know the committee is interested in a number of different aspects of credit card pricing and regulation, and we ’ ve tried to address those aspects that come within our field of expertise and responsibility in our submission. as we explain in the submission, credit cards have both a payment and a credit function. the regulatory powers and mandate of the reserve bank payments system board ( the board ) relate to the payment function. the board has a mandate to use its powers to promote efficiency and competition in payment systems, consistent with overall stability of the financial system. to that end, the board has for a number of years regulated card payment systems by setting standards in relation to such matters as interchange fees, surcharging and access. as you know, the board is currently undertaking a comprehensive review of those aspects of card payments regulation. i ’ ll be happy to answer any questions you might have today about how that review is proceeding. i know the committee is also very interested in the credit function, and particularly the interest rates on credit cards. that is not something that we regulate, but we have set out in our submission an overview of some of the key facts. if i may, i ’ ll just make a few high - level observations about that before we go to questions. credit card products vary a lot in the interest rates that they charge. some of those rates are very high. they ’ re higher than i think can be easily explained. interest rates of the order of 20 per cent on credit cards are not uncommon. the average rate for borrowers who incur interest on credit cards is currently about 17 per cent. after deducting banks ’ cost of funds and the cost of credit losses, that would equate to an interest rate margin of more than 10 percentage points. my advice if you ’ re in that situation is to shop around. despite the prevalence of high - rate cards, this is a market where there is some significant competition. there are a lot of card products that offer lower rates and special deals for balance transfers. in many cases, cardholders should be able to lower their interest rates by taking | inflation processes have become highly unclear, amidst these uncertainties ; central banks are faced with the need to recognise the importance of inflation perceptions and inflation expectations also, as distinct from inflation indicators. the distinction between inflationary expectations and current inflation perceptions in the context of inflation policy is also worth bearing in mind. furthermore, often than not, the expected change rather than the actual change in real interest rate, following a change in the policy rate, often drives the actions of the economic agents. in this context, credible communication and creative engagement with the market and economic agents has emerged as the critical channel of monetary transmission. the existence of administered prices in commodities critical to inflation expectations, perceptions or indicators complicates the relationship between prices and monetary policy transmission, though the outcome may be socially desirable. third, the presence of administered interest rates, even in segments of a financial system, could hold back appropriate adjustments in real rates as a sequel to changes in the policy rates. the administered interest rates do occur in different forms, instruments and magnitudes but these could be, to some extent, monitored. what is surprising, however, is that the financial market rates could also display somewhat inexplicable impervious behaviour and thereby, act as the source of nominal rigidities in the economy. sometimes, it is described as a conundrum, or might i say " i do not know "? fourth, the central banks are now taking baby steps – sometimes more frequent steps and at other times after a long gap, and in both directions – to respond to, what appear to be, ripples rather than huge waves in the sea of economic activity. further, while what is considered as a “ neutral rate ” of interest, in the present period, appears to be much lower compared to several years before, the issue is whether the neutral rate in respect of the emerging market economies, which has been coming down in tandem with global rates, will tend to be distinctly higher than in the developed economies. fifth, if the domestic inflation rate of an economy, however low it may be, is higher than the average inflation rate of its trading partners, it puts pressure on the exchange rate. in this context, the question of simultaneous balance of the internal and external sectors becomes a major issue if the flexibilities in the economy are less than adequate. the conduct of monetary policy inevitably involves a careful judgment on the relative weights assigned to the domestic and the global factors and constant reassessment and rebala | 0 |
work for every firm in every circumstance. that said, standardized metrics will help in assessing changes over time and across firms. the uk banking standards board ( bsb ), for example, provides one lens on assessing culture change for a broad crosssection of financial service firms operating in the u. k. 10 i believe diagnostic tools like this are an important part of the cultural assessment toolkit. moreover, firms and the official sector need to evaluate a wide range of behaviors, signals, and outcomes to draw the most robust conclusions about the depth and pace of culture reform. i think it is critical for both firms and the official sector to continue to experiment with new approaches to assessing culture change, to collect and build new forms of data and measurement, to develop qualitative assessments to complement quantitative ones, to use new techniques and technology to understand how a firm ’ s culture and conduct are changing, and to continue adapting and course correcting to a sustainable business strategy as the operating environment evolves. influence fostering productive behavioral change is at the heart of culture reform. behavior, in turn, is driven by a multifaceted set of factors including incentives, cues from peers, observations about leaders, and formal policies and procedures. most of us are not experts in human behavior, so i believe we should be open to incorporating lessons from behavioral economics and other social sciences into programs to mitigate conduct risk and promote cultural change. behavioral economics blends psychology and economics to provide insight into why individuals may behave in a certain way and make decisions that may not be in their own economic best interest. for example, individuals often make choices that provide immediate recognition or satisfaction — higher status within a peer group, for example — often at the cost of a potentially better financial outcome in the long term. this type of human behavior is at the core of the complexity of culture reform. lessons from the field have increased understanding of where decision - making can depart from economic expectations. sometimes, these lessons have been used to create circumstances and environments that positively influence individual outcomes by “ nudging ” individuals to better choices. 11 these nudges, in turn, help reinforce acceptable behavioral norms, and ultimately a firm ’ s culture. how can we nudge in order to reduce misconduct risk? more broadly, how can the financial services sector, including firms and supervisors, leverage insights from the social sciences to promote environments that foster healthy group behavioral patterns with better decision - making? technology the promise of new technology and big data for financial | institutions is everywhere we look. 3 / 5 bis central bankers'speeches from artificial intelligence to machine learning to natural language processing, there seems to be unlimited potential for more efficient operations, better analytics and more accurate predictions, and more personalized product development. but, how will advances in technology, particularly the adoption of new technologies, such as artificial intelligence, influence the behavioral risks associated with human decision - making? and how does technology introduce new risks that prompt a rethinking of responsibility and customer relationships — especially with regard to privacy and information security? moreover, the disruptive potential of innovation is likely to exacerbate an already complex environment as decision - making becomes more opaque and new roles and responsibilities are introduced. for example, what will effective governance and risk management look like? do artificial intelligence and machine learning introduce new model risk? or operational risk? or conduct risk? what does it mean to supervise or regulate conduct if decisions are made by selflearning algorithms? more broadly, what culture and conduct risk will be embedded in technology - driven financial services in the future? these are hard questions for financial firms and for the official sector, and our approach to the reform of financial industry culture will need to address them. conclusions to return to the beginning of this discussion, culture reform in finance is a complex problem. causal relationships are difficult to isolate, linkages are constantly changing, and accurate prediction is impossible. that does not mean that we are powerless, or that we should accept complexity as an excuse for not trying to foster change. rather, we need a long - term commitment that brings the appropriate tools and approaches to bear. the costs and potential consequences of market failures associated with misconduct risk and culture suggests that it is vitally important that we do so. both financial firms and the official sector should focus attention on investigating and asking questions to better understand the underlying drivers, motivations and risks behind the behaviors of individuals and groups. we should ensure that we look at behaviors and outcomes from multiple perspectives, so we can gain a more robust understanding of the operating environment as a whole. no single perspective is likely to provide all of the insights. experimentation and iteration, use of narrative and story - telling, and innovative methods for harnessing diversity of perspective are thought to be effective ways of tackling complex problems and we all need to innovate, adapt and seek new approaches. 12 i think this focus on conduct and culture is entirely consistent with a traditional supervisory focus on resilience, both | 1 |
##quisite condition for each country to achieve sustainable growth, but not a sufficient condition. in formulating macroeconomic policy, the traditional emphasis was to ensure domestic stability or to put one ’ s house in order. however, the simple sum of each country ’ s policy actions may not necessarily achieve an optimal outcome at the global level. although policy - makers in each country may be acting rationally from its own individual perspective, collectively there is the risk of a fallacy of composition. currently, many central banks in advanced economies have entered the realm of unconventional monetary policy such as the purchase of various types of assets to spur growth and to buy time as the sectors of the economy go through balance - sheet repairs. however, as the domestic monetary transmission mechanism is constrained, there may also be unintentional cross - border spillover effects, such as increases in capital inflows to other countries. the effects could also feedback to the originating country. meanwhile, central banks in emerging economies have also shifted toward monetary accommodation or relaxed recent tightening moves. these steps are necessary to support growth. but what this global monetary accommodation ultimately means for global bis central bankers ’ speeches commodity prices and inflationary pressures, and as a result to global macro - economic stability, is something that will likely require close monitoring. another dimension would be the tendency to focus on external demand to spur domestic growth. this is a natural reaction when domestic demand is fragile. when the global economy as a whole is growing rapidly this would not be an issue, but when global growth is weak, this could mean taking away possible opportunities from other economies. if rapidly growing emerging economies were to succumb to the temptation to resist the appreciation of one ’ s currency, this could be counterproductive from a global perspective. the third lesson is that although measures taken by central banks, both individually and collectively, have been successful in stabilizing the economy and the financial system during the crisis, policy - makers, including central banks, cannot be complacent. for example, the ecb ’ s omt has significantly taken away tail risks in the euro zone. this respite is probably, nonetheless, only temporary and this opportunity must be used to fundamentally resolve the root causes of the crisis within the euro area. another example would be the central bank swap lines which were introduced during the height of the crisis after the collapse of lehman brothers and still function as a backstop to maintain stability in global interbank markets. the swap lines substantially reduced stress | masaaki shirakawa : lessons from the global financial crisis – asian and global perspectives remarks by mr masaaki shirakawa, governor of the bank of japan, at the international council meeting of the bretton woods committee, tokyo, 13 october 2012. * * * it is an honor to be a part of this esteemed panel. with the hope of stimulating further debate, i would like to discuss three lessons from the global financial crisis and the resulting challenges they present. first, in this globally interconnected world, nothing is purely regional anymore. a global perspective is crucial. when the euro area crisis was initially brewing a couple of years back, there was reluctance from our european colleagues to discuss it as an issue with global implications. the euro area economy was recovering and it was argued that the current account of the euro area as a whole was balanced and that intra - area imbalances were manageable. it was presented as a regional problem with regional solutions. we all know now that this was not the case. the euro area crisis has impacted global growth through both trade and financial channels, probably in a much larger way than initially expected. resolving the euro area crisis has become a key agenda item for the g20, and the imf is playing a key role together with the euro area core countries towards its resolution. to give another example, when economic growth decelerated in the advanced economies last year, there was hope that the emerging economies, especially those in the asia would pick up the slack. asian economies provided approximately 40 % of global growth in 2011 and their share in global exports was more than 30 % in 2011. this, however, did not mean they were immune from the slowdown of the european economy. weakness in europe has impacted chinese exports, and through the regional supply chain, exports and growth have been impacted broadly throughout asia. the imf, in its regional economic outlook published yesterday, points out that two - thirds of emerging asia ’ s exports are linked to demand from europe and the united states, and fund has reduced its growth outlook for asia in 2012 from 6. 0 % to 5. 4 %, and that of 2013 from 6. 5 % to 5. 9 % respectively. they have also noted that this estimate is based on the premise that conditions in europe improve gradually and that the fiscal cliff in the united states will be avoided. considerable downside risks remain. the second lesson is that putting one ’ s house in order is an essential prere | 1 |
##demic, ensured that the economic fallout from the second and further waves was more subdued. the rapid roll - out of vaccines in developed countries led to a gradual lifting of restrictions on economic activity and to a resumption of investment and consumption with far fewer bankruptcies than expected, although at the cost – consciously incurred – of a one - off increase in public debt. many advanced countries have now reached, or are close to reaching, pre - crisis output levels. under the italian presidency, the g20 also took action to help the weakest economies that had been disproportionally hit by covid - 19. it provided support to multilateral mechanisms, ensuring wide access to tests and vaccines. in addition, to address the structural weaknesses highlighted by the pandemic, it established a new panel on prevention and preparedness that advanced proposals to improve the mobilisation of funding and enhance coordination between health and finance ministries and international organisations. work to deliver a shared solution on these issues will continue in the next few months under the indonesian presidency. the g20 also agreed to extend the suspension of debt service payments for 50 countries until 1 / 5 bis central bankers'speeches the end of the year, and to renew efforts to operationalise the common framework for the treatment of the distressed debt of some eligible countries. while the latter has encountered some difficulties, last october g20 ministers and governors reiterated their commitment to make progress. the g20 also agreed to make 650 billion dollars available in additional reserves through a general sdr allocation, with rechannelling options to allow low - income countries to receive further support. on the second issue – the fight against climate change – our presidency began at a time of swiftly rising awareness of the issues raised by climate change among savers, investors, financial market operators and the public at large. the attitude of g20 delegations was ( and is ) also changing. it is no surprise that countries differ widely in their priorities and sensitivities on this issue, but there appeared to be a worldwide surge in the feeling that a conversation on actions needed had to be held within the g20 framework in a multilateral format. the italian presidency, of course, cannot claim to be the prime mover of any of these global developments. however, i think we can fairly say that the presidency quickly sensed the new spirit, and saw the opportunity to channel it into a concrete discussion of steps to take. under our presidency, the sustainable finance study group has been | luigi federico signorini : outcomes of italy ’ s g20 presidency speech by mr luigi federico signorini, senior deputy governor of the bank of italy and president of the insurance supervisory authority ( ivass ), at the eurofi high level seminar 2022, paris, 23 february 2022. * * * good afternoon, ladies and gentlemen. i do appreciate this opportunity to discuss some key steps taken during italy ’ s g20 presidency in 2021. to keep this speech within reasonable limits, i need to be selective. i shall briefly recap the main outcomes of the work of the g20 finance track, and then focus on the results obtained in two areas of direct concern for financial markets, i. e. : ( i ) strengthening the resilience of non - bank financial intermediation ( nbfi ), and ( ii ) preparing the financial sector for a world that is starting to fight climate change seriously. italy took up the g20 presidency in the midst of the pandemic crisis, at a time when global economic activity was suffering from the resurgence of infections and remained well below its pre - covid levels. many low - income and developing countries in particular were lagging far behind in their recovery. in this context, the italian presidency defined three overarching priorities for the financial track of the g20 : to provide quick, strong and cooperative action to step up the policy response to the pandemic, and to lay the groundwork for a more resilient global health system in the future ; to resume the discussion on climate change within the g20, profiting from the new attitude of the us administration in favour of multilateralism as well as from the swift rise of interest in the topic at the global level ; to secure an agreement on international taxation. on the first issue – the response to covid and future preparedness for global health emergencies – in 2020, thanks to the extraordinary public support extended to households and firms in many jurisdictions, as well as to the prompt coordinated response of monetary and other financial policies to the crisis, the world economy had recorded a strong recovery. contrary to what happened at the time of the global financial crisis of 2008, a financial meltdown was avoided this time and the financial system continued to provide critical support to the real economy. a return of the pandemic weighed on the world economy in the winter of 2021. however, continued strong, coordinated policy action, and the experience accumulated during the first wave of the pan | 1 |
has been introduced and the fiscal backstop for the srf has increased in size. while there is political agreement about the srf backstop and its terms of reference, there is not yet agreement on the european deposit insurance scheme. second, it is imperative to accelerate progress on the capital markets union. this is ambitious. it entails streamlining core aspects of national policies, such as taxation and insolvency regimes, 3 / 4 bis central bankers'speeches which are essential for integrating the legal underpinnings of cross - border markets. capital markets can smooth country - specific shocks by providing a larger pool of financial assets that can be shared across borders. this helps to decouple wealth and income – and hence consumption – from output. conclusion let me conclude. the euro area risk outlook is again tilted to the downside. this is a conjunctural concern. the global decline in the natural rate of interest over the past quarter of a century, however, poses structural challenges. policy rates will likely remain low, by historical standards, and may hit their lower bounds more frequently than in the past. 7 we have learned from the experience in japan that it is possible to get caught in a vicious cycle of declining inflation expectations, falling inflation and a binding lower bound on nominal interest rates from which it is difficult to escape. it is thus of utmost importance that we enhance the firepower of euro area stabilisation policy by means of a policy mix that, while continuing to make full use of monetary policy, assigns a more substantive role to fiscal stabilisation policy. laying the institutional foundations for a european fiscal capacity would be an important step in this direction. 1 see coenen, g. ( 2003 ), “ zero lower bound : is it a problem in the euro area? ”, working paper series, no 269, ecb, september. 2 schmidt, s. ( 2013 ), “ optimal monetary and fiscal policy with a zero bound on nominal interest rates ”, journal of money, credit and banking, vol. 45, no 7, pp. 1335 – 1350 ; and werning, i. ( 2012 ), “ managing a liquidity trap : monetary and fiscal policy ”, nber working paper series, no 17344, national bureau of economic research. 3 eggertsson, g. ( 2011 ), “ what fiscal policy is effective at zero interest rates? ”, in acemoglu, d. and woodford, m. | policy can act to stabilise the economy. but for idiosyncratic shocks, stabilisation becomes trickier. monetary policy cannot target individual countries, and those affected can no longer adjust their exchange rate to help cushion the effects of the shock. hence the literature emphasises the need for economic cycles to converge, so that common shocks generally dominate. for asymmetric shocks, stabilisation comes ex ante from greater cross - border risk - sharing to improve resilience, and ex post from fiscal policy. but in the light of recent experience, it is worth revisiting this classic separation between using 1 / 4 bis central bankers'speeches monetary policy for common shocks and fiscal policy for asymmetric shocks. fiscal policy at a national level in the euro area was unable to fully counter asymmetric shocks during the crisis. and at an aggregate level, stabilisation may benefit from monetary and fiscal policy working in tandem given the current environment of low interest rates. nominal interest rates have been declining in advanced economies since the 1980s. in large part, this decline is attributable to the decline in average inflation over that period. investors require lower compensation for expected future inflation, and the fall in inflation volatility has also reduced the inflation risk premium. the decline is also a result of a secular fall in the natural rate of interest, which is the rate that balances desired saving and investment in the economy. while the natural rate cannot be precisely measured, a range of estimates point to its decline. there are a number of contributing factors to this decline, principal among which is lower potential growth. lower potential growth reduces the expected rate of return on capital, so reduces the rate at which firms are prepared to borrow to invest. other factors that are believed to have further weighed on the natural rate of interest include the ageing population in europe, the role of income distribution, increased saving in emerging markets and a general rise in risk aversion. this fall in the natural rate of interest has important implications for the optimal policy mix in the euro area. the interest rate at which monetary policy becomes accommodative falls directly in line with the natural rate, so the effective lower bound on nominal rates has become a much greater consideration when setting policy. before the crisis, it was estimated that interest rates in the euro area would be likely to hit zero only once every 50 years. 1 at the current natural rate, rates of zero or below are likely to be a much | 1 |
have raised in my speech tonight serve a range of objectives ; and each of them is worth pursuing with ambition. thank you very much for your attention. bis central bankers ’ speeches | ernst welteke : a european perspective on the world economy address by mr ernst welteke, president of the deutsche bundesbank, at the 13th annual hyman p minsky conference on the state of the us and world economies “ economic policy for sustainable growth ”, new york, 15 april 2003. * * * ladies and gentlemen! at times like these, where transatlantic ties are under strain, i regard it as both an exceptional honour and a welcome opportunity to be able to present my european view of the world economy here at the 13th annual hyman p minsky conference on the state of the us and world economies. our transatlantic dialogue must not be interrupted, even when our views differ in important respects. i am a member of the german - american friendship organisation “ atlantik - brucke ”. in february, our organisation ran an ad in the new york times entitled “ a message from germany ”. its essence reads : “ for the overwhelming majority of germans, the relationship with the united states remains of vital importance. current differences of opinion between governments over the question of iraq must not be allowed to sever that bond ”. i would like to confirm that view today here in midtown manhattan. in the following, i will first comment on the present state of the world economy, which is characterised by unusually high uncertainty. afterwards i would like to give you some facts about the german economy. finally, i will try to spell out the european view of how the fundamentals must be set for sustainable growth to take place. 1. the present state of the world economy 1. 1 uncertainty abounds the world economy has not been in exactly very good shape these past few months. the ongoing war in iraq is weighing on the world economy. financial markets are fickle ; confidence among businesses and consumers remains subdued. we must, however, not be fooled into regarding the war in iraq as the sole source of uncertainty or the predominant issue for the world economy. uncertainty was around before that war was on the horizon, and uncertainty will stay on for a while even after a - hopefully fast - end to the war. what is more, uncertainty stemming from geopolitical strife seems to be deflecting our focus from some fundamental imbalances. redressing these imbalances is a precondition for a return to sustainable growth. overinvestment incurred during the millennium boom is being unwound only slowly. vast spare capacity forms the backdrop for weak capital spending. | 0.5 |
##h governance framework has met its intended objectives, we are now in the midst of reviewing and strengthening the framework in response to the evolvement of the industry. the securities commission malaysia and the labuan financial services authority are also vested with similar powers, and are equally committed to building a robust and comprehensive framework for islamic finance in malaysia. our policies also strive to be forward looking and responsive to the needs of the world. for example, the sustainable and responsible investment or sri framework developed by the securities commission has enabled the issuance of sri sukuk for education in 2015, and green sukuk just a few months back, which was the world ’ s first. our islamic finance industry is also backed by robust market infrastructure, including an islamic interbank money market that provides funding and liquidity support for the malaysian islamic banking system. for islamic fund management, bursa malaysia ’ s islamic securities exchange platform provides a marketplace that is conducive for shariah investing. 1 / 2 bis central bankers'speeches second, a vibrant islamic financial system must have a wide array of players and participants. these range from islamic financial institutions, fund management companies, takaful operators and investors – both retail and institutional investors. another key player of a vibrant islamic financial system is professional services firms. in malaysia, these firms play a critical role as facilitators of growth, providing support to various stakeholders of islamic finance. we have more than 60 experienced professional services firms offering specialised services in islamic finance. collectively, this ancillary network offers a wealth of expertise – in shariah advisory, law, i. t, tax, audit, research and training, to name a few. over the years, some of these professional services firms have developed a strong reputation for their technical excellence, and have established an international presence. our professional services firms are keen to share their experiences and to assist foreign clients and countries interested to develop islamic finance. our experiences include provision of advisory services to shariah funds and asset management companies in the u. s, switzerland and south korea ; and to sovereigns and corporates on sukuk issuances. our legal firms have also played a part in the development of legal and regulatory frameworks for islamic finance in a number of countries. contributions have also been made in the area of research, education and training, with more than 50 international projects, training and customised programmes delivered to international clients since 2010. the third imperative is in the area of talent. | the success of an islamic finance system depends critically on having the right set of quality talent. this is more so as we aspire for islamic finance to reach greater heights, in this new normal of rapid advances in technology and changing demographics. accordingly, malaysia has made significant investments in developing a complete ecosystem dedicated to meeting the human capital needs of the islamic finance industry. our talent infrastructure caters to every level, for both academic and professional needs. dedicated talent entities for islamic finance have also been set up, such as inceif – a global university for islamic finance – and isra, a globally recognised institution in enriching research and knowledge on shariah. an important aspect of talent development is elevating the quality and professionalism of talents in islamic finance – not just in malaysia, but globally. in realising this vision, the chartered institute of islamic finance professionals was set up to promote the highest standards of professional practice among islamic finance practitioners. this is complemented by the establishment of the association of shariah advisors in islamic finance to enhance the qualification and professionalism of the shariah fraternity. two specialised certifications will be launched by the association early next month which aim to strengthen technical and ethical rigour of shariah advisors and practitioners. with an increasing range of options for professional qualifications for islamic finance, the finance accreditation agency ’ s islamic finance professional qualification structure – to be launched today – is a timely and much welcome milestone. as a learning reference structure, it streamlines and classifies the levels for islamic finance professional learning programmes. for islamic finance professionals and the organisations they represent, this will help them make better informed decisions when evaluating the suitability of the wide array of professional learning programmes on offer globally. i hope that today ’ s event would help bring you a step closer to realising your respective organisation ’ s goals in islamic finance. with that, i wish you a productive afternoon. 2 / 2 bis central bankers'speeches | 1 |
session by quoting from on the origin of species by british naturalist charles darwin : " it is not the most intellectual of the species that survives ; it is not the strongest that survives ; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. " 1 baku hit by widespread flooding ( msn. com ). 2 what to know about the floods that killed over 200 in spain | time. 3 finance & prosperity 2024 ( worldbank. org ). 4 finance & prosperity 2024 ( worldbank. org ) / the stated figures are from 2022. 5 adaptation gap report 2024 | unep - un environment programme. 3 / 4 bis - central bankers'speeches 6 ngfs conceptual note on adaptation, november 2024. 7 world bank, 2019 open knowledge repository ( worldbank. org ). 8 standard chartered / kpmg / undrr, 2024, guide for adaptation and resilience finance | undrr. 9 global commission on adaptation, september 2019, adapt now : a global call for leadership on climate resilience - global center on adaptation ( gca. org ). 4 / 4 bis - central bankers'speeches | notwithstanding general concerns about the responsiveness of supply, the information available suggests that foreign residential purchases have probably not had a large direct effect on the price of housing that is typically purchased by first home buyers. while incomplete, the firb data and the information received through our liaison with developers suggest that most foreign residential purchases are for new, higher - density, inner - city properties as well as properties close to universities. furthermore, the properties they purchase tend to be valued well above the average national sales price. in contrast, most purchases by first home buyers have been for established homes that are priced well below the national average. moreover, when they do purchase new housing, first home buyers appear to generally purchase detached homes close to the fringe of the main cities rather than new apartments located close to the city centres. of course, there are some foreign buyers that purchase cheaper homes outside the inner - city areas, just as there are some first home buyers that purchase inner - city properties priced above the national average. but in the main, foreign buyers appear to be purchasing properties that are typically quite different in their characteristics from those purchased by most first home buyers. finally, i would like to comment on the issue of the availability of data. firb ’ s main role is to ensure foreign purchases are consistent with the rules, rather than to provide data on the actual level of foreign investment. even so, a case could be made for more timely provision of the approvals data that are already collected by firb, perhaps publishing them on a quarterly rather than annual basis. also, more granular data could be provided, such as the number of approvals within broad price brackets rather than just the total value and number of approvals. beyond that, the benefits of any new reporting requirements in this area should be weighed carefully against the costs of its collection and administration. with those introductory comments, my colleague, dr david orsmond, and i are happy to take any questions you may have. bis central bankers ’ speeches | 0 |
the committee has explicitly translated the first goal into a 2 percent target for personal consumption expenditure, or pce, inflation. this is a measure of inflation that includes all goods and services, including those related to food and energy. the committee ’ s second goal – maximum employment – is less rigid, because long - run employment is influenced by many variables outside the control of monetary policy. however, most fomc participants project that, over the longer run, unemployment will be between 5 percent and 6 percent if monetary policy keeps inflation close to 2 percent. it is useful to examine the recent evolution of the economy in light of these two objectives. first, i will show you data on the unemployment rate over the past 30 years or so. you can see that the unemployment rate peaked at 10 percent after the great recession. it has fallen disturbingly slowly. indeed, you can see on this graph that the unemployment rate fell much more rapidly in 1983 and 1984 after peaking at over 10 percent. second, i will show you data on pce inflation. since the beginning of the great recession, pce inflation has averaged only 1. 5 percent – well under the fomc ’ s target of 2 percent. note too that pce inflation has trended downward since early 2012 and is currently running at close to 1 percent. bis central bankers ’ speeches these graphs show us the past, but what about the future? the fomc has said that, under its current monetary policy stance, it expects the unemployment rate to decline gradually to desirable levels. it has said too that it expects inflation to move back toward 2 percent over the medium term. by easing monetary policy relative to its current stance, the fomc could facilitate a more rapid fall in unemployment and more rapid return to 2 percent inflation. hence, the committee could do better with respect to both of its congressionally mandated objectives by adopting a more accommodative monetary policy stance. that concludes my formal remarks. thank you all once again for joining us here tonight, and now i look forward to fielding your questions. bis central bankers ’ speeches | have input into fomc deliberations. this basic federalist structure has a long history. in fact, this year is the centennial of the opening of the 12 reserve banks and the start of the work undertaken by the federal reserve system. it ’ s been a fascinating hundred years, with many twists and turns along the way. i ’ m sure that many of you have questions about that journey. the answers to all of your questions – and probably more – are on a website that the fed has created at federalreservehistory. org. i encourage you to visit this site to learn more about the people, places and events that have shaped federal reserve history. i won ’ t say too much more about fed history – perhaps to the relief of some of you! – but i do want to draw your attention to one of the things that i think has changed the most over the federal reserve ’ s history : our communication with the public. a hundred years ago, congress created a system that was designed specifically so that the residents of main street would have a voice in monetary policy. technology has changed a lot since 1914 – i ’ m told that they didn ’ t even have smartphones back then – and so the ways that we gather bis central bankers ’ speeches information from main street have changed. but this fact - finding is still an important part of the making of monetary policy. indeed, tomorrow, i will meet with upper peninsula business leaders to gather exactly this kind of information. communication is a two - way street, however. during the past century, the federal reserve ’ s communications to the public about its monetary policy actions have also evolved greatly. the pace of change was especially rapid in the eight years under chairman bernanke ’ s leadership. so, as the federal reserve system plans for its second century, i would say that the importance of two - way communication is a key lesson from the system ’ s first century. in order for the fed to continue to be effective, it needs to communicate its policy decisions transparently to the public. conversely, it also needs the public ’ s input on how those policies are affecting them. events like the one today, and my meeting with business leaders tomorrow, are a key part of fostering that two - way communication. with that background in mind, let me turn back to the fomc and the making of monetary policy. i mentioned that the fomc meets eight times per year. at those meetings, we decide | 0.5 |
soundness, therefore, the absolutely crucial thing is to avoid a housing boom and bust cycle. to ensure this, policy initiatives are naturally required from the micro angle targeting the supply and demand of housing and the tax regime. an even more important task, however, is to carry out macro economic policies that keep the overall economy on a stable course. what is more, given that financial innovation can amplify financial unrest, central banks and financial supervisory authorities should redouble their efforts to construct effective systems for monitoring and supervision of financial derivatives. closing remarks ladies and gentlemen, i expect this seminar will be a forum for a policy debate, involving in - depth and constructive discussions about household debt issues. in closing i should once more like to voice my deep thanks to all of you taking part. although you have a crowded and hectic schedule, i hope you will be able to spare some time to gain a taste for korean culture and the beauty of spring here. thank you. | be used in this market. germany ’ s largest promotional bank, kfw, is the country ’ s number one issuer of green bonds with an issuance volume of € 28 billion. on a side note : green promissory notes, also known as “ schuldschein ”, are quite a niche product due to their characteristics, but might be an alternative worth considering for 1 / 3 bis central bankers'speeches communities and bigger cities. this clearly underpins germany ’ s goal of becoming one of the global leaders in sustainable finance. at the eu level, market participants expect the european union to become the largest esg issuer in the world. in the context of the joint borrowing programme known as “ next generation eu ”, the eu could issue more than € 250 billion in green bonds. this will support a sustainable economic recovery from the covid - 19 impact in all eu countries. in terms of social bonds, the eu sure programme to mitigate unemployment risks in an emergency is another driver. the eu plans to raise up to € 100 billion by 2021 in social bonds. the first social bonds issued by the eu in october and november with a total volume of € 31 billion were heavily oversubscribed. asian investors were reportedly among the buyers. overall, germany and the eu have set landmarks recently for sustainable finance. 3 factors that will make sustainable finance a more mature market segment let me now briefly touch upon factors that will make sustainable finance a more mature market. here, transparency and disclosure really matter. take climate change, for example : this poses a material financial risk to companies and banks. to manage this risk and harness opportunities, the right information must be identified and disclosed. when it comes to quantifying financial risk, rating agencies have traditionally played a crucial role – and it should be no different for climate - related financial risk. sustainability ratings will help to reduce information asymmetries between issuers and potential investors. since climate risk is financial risk, it has to be part of all credit ratings. the major rating agencies have started to include sustainability aspects, including climate change risk into their credit assessments. going forward, we rather need to develop commonly recognised methodologies to assess climate change risk. this includes standardised data, definitions, and weighting of risk factors. central banks also need to tackle climate - related challenges in their own areas of responsibility. they have to consider these risks not just in the fields of supervision and financial stability, but also when implementing monetary | 0 |
excesses, which include unsustainable financial leverage, household over - indebtedness, and perhaps the over - extension of the financial industry. this will be painful but inescapable. in view of japan ’ s decade - long experience, there are no palatable alternatives. one more note of caution. because of the pain associated with the unwinding of excesses, we might be leaning toward protectionist measures in trade and finance. but we must resist a descent into protectionism by any means. like protectionism, regulatory overreaction will also undermine the economic efficiency, thereby putting downward pressure on productivity growth. without question, this is the last thing we intend to achieve. challenges ahead : crisis prevention what i have so far said concerns crisis resolution. but crisis prevention is equally important from the longer - term viewpoint. let me sketch this out. first of all, the current crisis presents a challenge for the conduct of monetary policy. it requires a change not only in policymakers ’ way of thinking but also in the theoretical underpinnings on which actual policies have been formulated. in the last two decades, macroeconomics as a professional discipline has evolved with impressive sophistication. if i may put it simply, its implications for policy practitioners might be condensed into three points. first, economic growth potential is maximized under the sustained stability in prices. second, central banks ’ monetary policy should be aimed primarily at achieving price stability. third, as a corollary of the first and the second, the onus for macroeconomic stabilization should be mainly on monetary policy. of course, there is nothing wrong with each of these propositions. but over time, they seem to have created a sense of complacency among us with regard to the potency of monetary policy. for instance, some macroeconomic theorists have claimed that a depression is no longer a real concern. however, the current crisis, including its run - up, demonstrates that a macroeconomic theory does not take proper account of the dynamics in financial systems and the irrational behavior of human being such as herding and indulgence in excessive optimism. therefore, from a preventive vantage point, we need to develop a broader approach. under benign economic conditions, imbalances could accumulate through a number of channels. as we saw in japan in the 1980s and in the us in the early 2000s, expectations of sustained low interest rates often contribute to the build - up of economic excesses through higher | daniel k tarullo : shadow banking and systemic risk regulation speech by mr daniel k tarullo, member of the board of governors of the federal reserve system, at the americans for financial reform and economic policy institute conference, washington dc, 22 november 2013. * * * as illustrated, quite literally, by a chart that new york fed staff produced a few years ago, the term " shadow banking system " encompasses a wide variety of institutions that engage in credit intermediation and maturity transformation outside the insured depository system. 1 in my remarks today, i want to concentrate on short - term wholesale funding and, especially, the pre - crisis explosion in the creation of assets that were thought to be " cash equivalents. " such assets were held by a range of highly risk - averse investors, who were in many cases not fully cognizant that the " cash equivalents " in their portfolios were liabilities of shadow banks – the institutions depicted in the memorable graphic. in some cases, the perception of claims on shadow banks as cash equivalents was based on explicit or implicit promises by regulated institutions to provide liquidity and credit support to such entities. in other cases, the perception came about because market participants viewed the instruments held on the balance sheets of shadow banking entities – notably highly rated, asset - backed securities – as liquid and safe. while reliance on private mechanisms to create seemingly riskless assets was sustainable in relatively calm years, the stress that marked the onset of the financial crisis reminded investors that claims on the shadow banking system could pose far more risk than deposits insured by the federal deposit insurance corporation ( fdic ). once reminded of their potential exposure, investors engaged in broad - based and sometimes disorderly flight from the shadow banking system. this experience of the run on the shadow banking system that occurred in 2007 and 2008 reminds us that similar disorderly flights of uninsured deposits from banks lay at the heart of the financial panics that afflicted the nation in the late nineteenth and early twentieth centuries. the most dramatic of these episodes were the bank runs of the early 1930s that culminated in the bank holiday in 1933. just as it was necessary, though not sufficient, to alter the environment that led to those successive deposit runs by introducing deposit insurance in order to create a stable financial system in the early - twentieth century, today it is necessary, though not sufficient, to alter the environment that can lead to short - term wholesale funding runs in order to create a stable | 0 |
svein gjedrem : economic perspectives address by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the meeting of the supervisory council of norges bank, oslo, 15 february 2007. please note that the text below may differ slightly from the actual presentation. * * * introduction the poet rolf jacobsen would have been 100 years old this year. he was particularly interested in geography. in an interview with telemark arbeiderblad in 1971, he stated that the bible was a work of substantial importance, but that the same could be said about the comprehensive guide to public transport in norway. 14 in one of his geography poems, he writes : “ when the sun is shining on china the stars are twinkling here. and the reverse. asia is vast. half the earth ’ s land mass [... ] 15 yes, asia is vast. the rapid expansion in china and other asian countries is of growing importance to norway. these countries are a major source of cheap consumer goods and services and demand for our raw materials. ole karlsen ( editor ) ( 1993 ) : frøkorn av ild ( seeds of fire ). om rolf jacobsens forfatterskap, landslaget for norskundervisning, cappelen fakta. source : from the poem ” nar solen skinner pa kinesere ” ( when the sun is shining on china ) in rolf jacobsen ’ s collection of poems ” nattapent ”. gyldendal norsk forlag a / s 1985. interest rates, inflation and the business cycle the norwegian economy is now booming following the pronounced upswing since summer 2003. the upturn followed a period of slower growth as from 1998 and a mild recession in 2002 and into 2003. even though there have been cyclical changes, growth has been very high over the past 15 years. norway is one of the nations that has gained most from trade liberalisation and increased cross - border flows of capital, technology and labour. norway has experienced the benefits of shifts in the division of labour across countries and regions. first, norway ’ s terms of trade have improved markedly. we can buy one and a half to two times the volume of imports for the price paid for our exports than was the case only 5 - 6 years ago. prices for oil and gas, shipping, fish, industrial commodities and engineering products have increased considerably. moreover, norwegian import | ##9370e1f173a8 / ml / 2019 – 05 – 27 - afs - anlage - faq - data. pdf. financial stability board ( 2011 ), “ policy measures to address systemically important financial institutions ”, november 2011, available at : www. fsb. org / wp - content / uploads / policymeasures - to - address - systemically - important - financial - institutions. pdf. financial stability board ( 2017 ), “ framework for post - implementation evaluation of the effects of the g20 financial regulatory reforms ”, july 2017, available at : www. fsb. org / 2017 / 07 / framework - for - post - implementation - evaluation - of - the - effects - of - theg20 - financial - regulatory - reforms /. 1 see german financial stability committee ( 2019 ) and german financial stability committee ( 2019a ). 2 consultative and final reports are available at : www. fsb. org / work - of - the - fsb / implementation - monitoring / effects - of - reforms / 3 see financial stability board ( 2011 ). for details see the terms of reference ( www. fsb. org / 2019 / 05 / evaluation - of - too - big - to - fail - reforms - summary - terms - of - reference / ). the final report is scheduled for the g20 presidency in 2020. 4 www. fsb. org / 2019 / 05 / fsb - launches - evaluation - of - too - big - to - fail - reforms - and - invites - feedback - from - stakeholders / 5 for details, see, voxeu. org / article / prudential - policies - crossing - borders 4 / 4 bis central bankers'speeches | 0 |
toshihiko fukui : incentive mechanisms for economic policy makers opening speech by mr toshihiko fukui, governor of the bank of japan, at the 12th international conference hosted by the institute for monetary and economic studies, bank of japan, 30 may 2005. * * * introduction good morning, ladies and gentlemen. i am very pleased to address the 12th international conference hosted by the institute for monetary and economic studies. on behalf of my colleagues at the bank of japan, i welcome participants from all over the world. over the last twenty - four years, we were fortunate to have the best minds from the academia and central banks come together at previous conferences to discuss current issues in central banking. i would like to thank everyone who has been involved, because the positive reviews we received are reflections of all the commitments in time and efforts of the people attending the conferences. from this year, the institute will hold the conference every year, not every other year. this should enable us to cover a wider range of monetary and economic issues in a more timely manner. the new annual conference format should offer more opportunities for candid exchanges of views between central bankers and scholars. i hope that you would extend to us your continued support for our future conferences. theme of this year's conference this year, we discuss how to design incentive mechanisms for economic policy makers. institutions and the incentive mechanisms they engender collectively influence economic performance. some institutions create incentives to induce efficient behavior, and others do not. take two of the broadest of institutions, a market economy and a centrally planned economy. in a market economy, the market price signals any excess demand or supply, and creates incentives for producers. when the market price is higher than the equilibrium price, a producer has an incentive to increase his or her production and increase sales. on the other hand, a producer also has an incentive to cut back on his or her production when the market price is lower than the equilibrium price. meanwhile, increased supply will let the market price fall and vice versa, until the market is cleared at the equilibrium price. such an incentive mechanism achieves efficient resource allocation in a market economy. in a centrally planned economy, the track record of central planning agencies is dismal. they generally failed to structure incentives for a producer to autonomously respond to excess demand and excess supply. at the same time, central planning agencies themselves lacked proper incentives to identify changes in demand, and consequently, often failed to instruct producers to produce according | to changes in demand. efficient resource allocation was not achieved. it is no wonder then that centrally planned economies collapsed around the world by the 1990's. institutions and their incentive mechanisms play a key role in determining economic performance. failure of incentive mechanisms in a market economy the market price is not the only source of incentives in a market economy. some incentive mechanisms, however, fail to induce efficient behavior. for example, incentives influenced the course taken by japanese banks in dealing with the problem of non - performing loans. until the late 1990's, the japanese regulatory and institutional environment did not motivate banks to take prompt actions that would have prevented their balance sheets from deteriorating further. for example, the latitude banks had in the disclosure of non - performing assets enabled banks to withhold information, perfectly legally, on the full extent of their problems. as a result, market discipline could only play a limited role. at the same time, measures available to regulators and supervisors were rather limited. a bigger stick would surely have helped the authorities to persuade banks to take more decisive actions. finally, in the late 1990's and early 2000's, various policy measures were introduced to better align the incentives of banks. they included the introduction of more precise standards for disclosure and prompt corrective actions by the fsa. the functions of the deposit insurance corporation were strengthened as well. the bank of japan encouraged japanese banks to make an appropriate evaluation of their loans by using discounted cash flow method. these measures finally generated proper incentives for japanese banks to put their houses in order. the recent removal of the blanket guarantee of deposits was a symbolic event in this regard. this example suggests that incentive mechanisms could affect the stability of the financial system. the central bank has a vested interest in the design of such incentive mechanisms. incentive mechanisms for a central bank central banks are not free from incentives created by their institutional settings. for example, in the past, governments in the industrialized economies tended to regard that there was a trade - off between high growth and moderate inflation. this created an environment where central banks would acquiesce inflation resulting from above - potential economic growth. the stagflation in the 1970's could be regarded as a consequence of such misguided institutional incentives. fortunately, we have learned from history. from the late 1980's onwards, there seems to be a growing recognition among governments in the industrialized economies that central banks should aim for price stability, which is a precondition for | 1 |
the exchange rate mechanism of the eu, for at least two years, and third, after the sustainable fulfilment of all the convergence criteria laid down in the treaty, the new member states will adopt the euro. throughout the process leading to the introduction of the euro, the new member states ’ economic situations and their policy strategies will have to be assessed on a case - by - case basis. the role of erm ii in this process, first, is to help participating member states orient their policies to stability and to foster economic convergence. second, participation in erm ii without severe tensions for at least two years is one of the convergence criteria. finally, entry into the euro area will be based on the sustainable fulfilment of the maastricht convergence criteria. these criteria will be applied to future euro area entrants in the same way they applied to euro area countries. it may take quite a while before new member states will be in a position to fully participate in emu. a fair share of realism is called for to avoid disappointment. in the long run, such an equitable and strict procedure will be to the advantage of all member states of the european union. in concluding, i would like to reiterate that in many respects, the euro has proved to be a driving force for europe ’ s continued political integration and economic reforms. the euro is regarded as an important token of identity for a modern, dynamic and open europe. the euro provides a stable anchor in unfortunately not so stable times. but the euro can only shield us from external shocks within limits. even though the euro has already triggered considerable fiscal and structural reforms, we must not relinquish our endeavors to make the euro area economy more efficient and productive. | . monetary policy decision - making by committee : why, when and how it can work. mimeo. small, d., m. gelfand, l. babcock, and h. gettman ( 2007 ). who goes to the bargaining table? the influence of gender and framing on the initiation of negotiation. journal of personality and social psychology 93 ( 4 ), 600 - 613. | 0.5 |
nicholas c garganas : regional financial stability around the eurozone presentation by mr nicholas c garganas, governor of the bank of greece, at the conference on regional financial stability around the eurozone, organised by the euro 50 group, istanbul, 1 june 2006. * * * i am delighted to have been asked to participate in this conference on “ regional financial stability around the eurozone ”. this topic has gained importance as the economies - and particularly the financial systems - of south - eastern european ( see ) countries have increasingly developed linkages both within their region and with the eurozone. in recent years, see countries have generally experienced high rates of economic growth, improvements in macroeconomic fundamentals, and a significant transformation and growth of their financial systems. for sustainable future growth and development in the region, the maintenance of financial stability is an essential precondition. in turn, the existence of an effective legal and regulatory framework for the financial sector and the conduct of financial supervision in accordance with international best practices plays an important role in promoting financial stability. to this end, considerable efforts have already been made to strengthen the legal and regulatory frameworks of the financial sector in see countries and to improve supervisory practice. in what follows, i will briefly discuss the various channels through which external assistance towards regulatory and supervisory reform in south - eastern europe has been provided, identify some areas where further reform and expertise appears necessary, and suggest some cooperative arrangements that could contribute to this objective. over the past fifteen years or so, technical assistance to improve the legal and regulatory framework of the financial sectors of see countries and the implementation and enforcement capabilities of the competent national authorities has been provided in various forms by international organisations such as the imf, the world bank, and the bis. although a comprehensive discussion of all these projects is not realistic in my short presentation, it may be worthwhile to at least mention a few of them. supervisory personnel from see countries have participated in training seminars offered by the financial stability institute of the bis and by the joint vienna institute. under the joint imf - world bank financial sector assessment program, international teams of experts have assessed the financial sectors of see countries and the degree of compliance with basel core principles and have identified weaknesses and proposed corrective measures, many of which have since been implemented by the countries concerned. in coordination with international institutions, the united states agency for international development ( usaid ) has supported projects in many see countries to improve the regulatory framework for the financial sector and the conduct | urjit r patel : macro and micro drivers of business potential of ifscs in india speech by dr urjit urjit r patel, governor of the reserve bank of india, at gandhinagar, gujarat, 11 january 2017. * * * a. introduction 1. we are gathered here today to commemorate the establishment and success of gift, india ’ s first international financial services centre ( ifsc ) that brings together world class infrastructure, connectivity, people and technology on a single platform for businesses across the world. an allinclusive and modern economic zone, it offers global firms competitive access to india ’ s large and burgeoning demand for financial services. 2. international financial centres around the world have historically emerged out of the confluence of economic and political developments. in modern times, while major centres adapted their financial institutions and instruments to intermediate international capital flows, they also came to be seen as vehicles for economic growth and development of the host countries. 3. to achieve their objectives, it is necessary that the regulatory frameworks governing ifsc operations are well - thought out, guided by the ease of doing business principle, tempered by prudent risk management, and geared to deliver efficient financial services. the various areas of attention from this standpoint include registration and approval process for new entrants, regulation, supervision and resolution of financial entities, and dispute settlement. 4. ifsc at gift city is probably the first such centre to be launched after the 2008 global financial crisis. in some ways, the light - touch regulatory philosophy epitomised by ifscs came to be questioned in the aftermath of the crisis. however, gift city has the advantage of drawing the right lessons in this regard to avoid pitfalls. 5. the rbi has been working closely with all ifsc stakeholders on diverse subjects in recent years to help gift develop. 6. today we see intense competition among the major ifcss trying to position themselves for various business lines, and increase their business potential, which is the theme of this seminar. in addition to the usual attributes there are two other dimensions, viz., the broader economic environment in tandem with associated policies, and the micro ecosystem specific to the ifsc sector. b. macro 7. as we celebrate gift today, it is important to recognise that its further growth will, inter alia, be predicated on the environment of domestic macro stability that we have achieved along several key areas over the last few years. we need to be ever vigilant to preserve | 0 |
good customer outcome should focus on, among others, whether customers are provided with accurate and sufficient information, and whether the products or services provided to the customers indeed suit their needs. on a day - to - day basis, imagine that a frontline staff wants to keep a customer happy by simply doing away with all the due diligence procedures, so as to complete a transaction quickly to save the customer ’ s time. surely the customer, who may be in a hurry, would feel that time is saved and therefore happy on the spot. but it would be doubtful whether the products or services acquired in this manner would really suit the customers ’ needs. and when it led to losses subsequently when market conditions turned against the customers, there could be complaints coming your way. therefore, perception mismatch among frontline staff about what really represents “ good customer outcome ” is something that banks must be careful to avoid. 8. another interesting observation from the exercise is about perception of performance gauges. an area that banks have been putting a lot of emphasis in the past few years is reducing the weight of financial performance in incentive systems. nevertheless, our review found that the perception of incentive structure differs greatly among different staff levels. more simply put, while senior management and supervisors think that the incentive systems are more balanced among business targets and non - financial factors such as compliance and customer outcomes, frontline staff generally still take financial performance and business targets as the highest assessment priority. this possibly reflects that some other forces maybe at work, such as social interaction and recognition among bank staff. 9. the hkma published the final report of this review last month. we highlighted in the report the above observations and a number of other interesting points which, i think, is definitely worth a read. in the report, we also put forward incentive system design principles and useful practices identified from the review. we are in the meantime collating the observations on individual participating banks, and will communicate the useful findings to them individually. i truly hope that banks will make good use of the review outcome to assist in their ongoing risk culture journey. mandatory reference checking scheme 10. another important piece of our bank culture efforts is the mandatory reference checking scheme ( or in short, mrc scheme ). we and the industry both realise that no matter how hard one tries to encourage desirable staff behaviour through a proper incentive system, and as much as we hope that bank staff will always behave with integrity, we cannot naively assume that this will always happen. | ##quip our talent pool with the right set of skills to face the upcoming challenges. recently, there have been media reports about talent shortage in hong kong. i ’ m sure you will appreciate that hong kong is a small open economy with a significant and vibrant financial industry. so it is really natural to see people come and go. undoubtedly, the travel restrictions given the need to contain the spread of covid would have brought a degree of inconvenience to travellers, in particular expatriates with families elsewhere. we at the hkma have maintained a close dialogue with the industry and reflected the views of the industry to the government. despite the tough balancing act of pandemic controls and facilitating travelling, i ’ m pleased to see that our travel restrictions have in fact been adjusted gradually in the past few months. 16. talking about the overall talent landscape, in fact many markets around the world are facing the very same issue of talent shortage. in recent years, the increasing prominence of fintech and green and sustainable finance have been a game changer to the global financial industry. financial institutions across the globe are actively looking for experts with relevant knowledge and skillsets to help develop innovative fintech solutions or sustainable investment products, manage the climate risks, so on and so forth. 17. many markets resort to competing for talent globally by trying to secure talent from other jurisdictions to fill the gaps. i would not deny that this is a convenient short - term solution. but since fintech and green finance are longer term trends, i firmly believe that the most effective solution is to nurture more home - grown talent. that ’ s why the hkma is currently working on two fronts. on the one hand, we are working hard to upskill existing practitioners to ensure that they keep pace with developments of the industry. on the other hand, we are actively reaching out to universities and secondary schools, seeking to attract more new blood for the industry and better prepare those interested young talent for a long - term banking career. 18. so let ’ s talk about existing practitioners. our enhanced competency framework ( in short, ecf ) comes in handy here. the ecf has been playing a key role in enhancing the competency level of our banking practitioners, through providing systematic training as well as industry - recognised qualifications. to date, more than 16, 000 practitioners have obtained certifications in various professional areas under the ecf. at the end of last year, we added a new “ fintech ” | 1 |
shri v leeladhar : indian banking – the challenges ahead text of the third natarajan memorial lecture delivered by shri v leeladhar, deputy governor, reserve bank of india, chennai, 14 november 2005. * * * i deem it an honour to have been invited to deliver this year ’ s g natarajan memorial lecture. i did not have the good fortune of meeting late shri g. natrajan but i have heard a lot about him from my friend shri v. a. george. as a father of a mentally challenged child i had an insight into the activities of smt. poonam natrajan, founder chairperson of vidya sagar, formerly known as spastic society of india, chennai. i am grateful to her for inviting me to address this august gathering. recently i had an opportunity to read late natrajan ’ s book – rupee watch, the story of the indian forex market retold ( 1993 - 99 ) which gives us an idea of the deep insight he had on the india forex markets during those turbulent days. to pay my homage to this great visionary, i thought nothing could have been more appropriate subject for todays address than – “ indian banking – the challenges ahead ”. in recent years, there has been a considerable widening and deepening of the indian financial system, of which banking is a significant component. with greater liberalisation, the financial system has come to play a much larger role in the allocation of resources than in the past and its role in future can be expected to be much larger than at present. the growing role of the financial sector in the allocation of resources has significant potential advantages for the efficiency with which our economy functions. consequently, the adverse consequences of malfunction of the financial system are likely to be more severe than they used to be in the past. hence, all our efforts today are focused at ensuring greater financial stability. given the significance of the indian banking system, one cannot afford to underplay the importance of a strong and resilient banking system. the pre - reform period witnessed the following major regulatory constraints on the banking sector which not only distorted the efficiency of the interest rate mechanism but also adversely affected the viability and profitability of banks : - large pre - emptions – both in terms of the statutory holding of government securities ( statutory liquidity ratio, or slr ) and cash reserve ratio ( crr ) ; and - complex structure of administered interest rates ; | also prepared bench mark documents covering cheque clearing – both mechanical and manual, as also retail electronic products which cover the aspects of minimum standards that have to be put in practice to ensure their efficient operations. these benchmark standards are applicable to both the processing centres run by the reserve bank as well as other commercial banks. another issue that merits attention is that of service charges. it can be argued that the competitiveness and competition or a buyer ’ s market would bring down costs in a near - tomedium timeframe and definitely in the longer run. yet, the fears of cartelisation, excessive cost - recovery in the initial years and lack of transparency in the cost - structure are concerns that need to be addressed. while the charges - framework should be remunerative to providers they should not be prohibitive to users. the challenges lie in striking a balance between cost and cost - recovery, including the issues relating to transparency in the charges framework and rationalisation of charges across banks / service providers. in uk, the office of fair trading ( oft ) has been addressing these issues. we, in india, have recently mandated the service charges that could be levied by banks for providing electronic payment products to their customers, as also for usage of shared - atm networks by banks'customers. besides other kinds of financial risks and risk mitigation measures that need to be taken, operational risk assumes significant importance in the context of retail payments and their settlement mechanisms because of the wider scope of operations of such systems which is not limited to a few players ( unlike large - value or inter - bank payment systems ). while retail payment systems need to be sized appropriately to handle substantial volumes and reduce the load on large - value payment systems, appropriate and well - tested business - continuityplans with sufficient built - in - redundancies should also be in place to ensure availability of the retail payment systems in the eventuality of any disruption / contingency. i am sure important issues such as process innovation, outsourcing, business continuity planning etc will be substantially covered during the seminar deliberations. while banks and other financial intermediaries are often the major players in any payment system arrangement, the role of non - bank operators such as technology and communication service - providers, support services for atm networks, issuance of pre - paid payment instruments, etc certainly cannot be ignored. modern payment systems, be it wholesale or retail, depend extensively on technology and communications for their effective and efficient functioning. the role of | 0.5 |
njuguna ndung ’ u : financial sector performance in kenya remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, on the occasion of the silver jubiliee celebrations for family bank limited, nairobi, 22 june 2009. * * * your excellency honourable mwai kibaki, president and commander - in - chief of the armed forces of the republic of kenya ; honourable uhuru kenyatta, deputy prime minister and minister for finance ; mr. titus muya, chairman, family bank ltd. ; mr. peter kinyanjui, chief executive, family bank ltd. ; distinguished guests ; ladies and gentlemen : i am delighted to be here this morning to join with family bank in celebrating twenty five years of providing financial services to kenyans. allow me at the onset to appreciate the presence of his excellency the president. i also wish to salute the board, management and staff of family bank for successfully serving kenyans for the last twenty five years. for most of the twenty five years of its ’ existence, family bank operated as a building society with a microfinance focus. in the last two years, the institution has operated as a commercial bank and has registered a commendable performance. in 2008, the institution recorded a profit before tax of kshs. 530. 7 million and opened 9 branches countrywide increasing its ’ branch network to 43. this is a sterling performance, but there still remains room for further expansion and improvement. your excellency the banking sector continues to exhibit resilience in the face of various local and global turbulences. the sector has also continued to grow and now consists of 43 commercial banks, 2 mortgage finance houses and 123 foreign exchange bureaus. the first deposit taking microfinance institution was also launched last week. allow me to mention some indicators of the financial sector performance that painted a rosy picture in the last 12 months to april 2009 : • the sector ’ s assets increased by 12 % from kshs. 1. 09 trillion in april 2008 to kshs. 1. 23 trillion at the end of april 2009 as banks continued to expand their lending portfolio. • deposits increased from kshs. 880bn in april 2008 to kshs. 940 bn on the back of deposit mobilization and expansion of branch networks by banks. • the capital adequacy ratio stood at 19. 8 % above the statutory minimum of 12 %. this is an indicator that the sector has | as they battle the scourge of climate change and meeting foundational development needs. early green shots can be seen in innovative financing mechanisms that have been developed in availing clean solar energy to rural households in kenya, uganda and tanzania ( m - kopa ) and government mobilizing micro - amounts to fund development in kenya ( m - akiba ). african banks are also committing to global sustainable finance initiatives. but much more is required to scale up sustainable financing in africa. since 2017, i have been the patron of the green bonds programme kenya, a public - private partnership whose key remit is to develop a transparent, accountable and verifiable green bond market. in 2019, we launched the regulatory framework for kenya ’ s bond market and in september issued the first green bond of usd 45 million. this joins other issues in africa of under usd. 2 billion out of an estimated global green bond issuance of usd. 167. 3 billion. how then do we scale up sustainable finance across africa? i am delighted to note that the un hosted an africa day on october 10, 2019 during the annual general meeting of the international network of financial centres for sustainability ( fc4s ) in geneva, switzerland. the fc4s network hosted by the un is a partnership of global financial centres that seeks to promote the expansion of sustainable finance. this is achieved through sharing of experiences, research and technical support. so far, four leading african financial centres, cairo, casablanca, lagos and nairobi have joined the network. a regional programme will be launched in geneva, through which african centres can leverage on global knowledge to scale up sustainable finance in their respective jurisdictions. though this is a welcome move, africa must customize its sustainable finance vision to fit its own local circumstances. let us leverage on the fc4s, be guided by the paris climate agreement, but we should think ‘ global while acting local. ’ the time for africa to act is now, the effects of climate change continue to be harsher as a burgeoning youth population seeks opportunities to prosper. african economies need to be inclusive and resilient. the green shots are evident but we need to water them to grow into the tree that shades the continent. drawing from a japanese fable, the best time to plant a tree that matures in 400 years is today, the next best time is tomorrow. the writer is the governor of the central bank of kenya | 0.5 |
olli rehn : remarks - bank of finland institute for emerging economies ’ ( bofit ) 30th anniversary dinner opening remarks by mr olli rehn, governor of the bank of finland, at bank of finland institute for emerging economies ’ ( bofit ) 30th anniversary dinner, helsinki, 9 november 2021. * * * ladies and gentlemen, your excellencies, dear friends and partners of bofit, may i wish you a very warm welcome to this anniversary dinner and to the bank of finland. i am delighted that you have been able to join us this evening to celebrate bofit ’ s 30th anniversary with us. we highly appreciate our partnership with you, in academia, the media and administration, a partnership that goes back many years. while bofit is a dynamic, no doubt cool and chillzoomer at 30, its home base – the bank of finland – is already a grown - up boomer at 210 years of age. in the global history of central banking, the bank of finland is certainly no novice. founded in 1811, the bank of finland is the fourth oldest central bank in the world today. only the swedish, british and french central banks are older than us. however, we could even make a claim to share sweden ’ s top position – its central bank, riksbanken, was founded in 1668 when finland was still firmly part of the kingdom of sweden! in fact, our best - known economist before the 2016 nobelist bengt holmstrom, was anders chydenius, who played a very active role in the economic policy debates of 18th century stockholm. he was so active in monetary policy that he was effectively sacked from the riksdagen, the swedish parliament, since he was calling for an end to the hard currency approach that was ruining the nation ’ s industries. no wonder he gained a reputation as a champion of free speech and freedom of expression! anyway, following its foundation the bank of finland played a catalyst role in the nation - building process in finland. autonomous institutions in economic and monetary policy - making were established in parallel with the evolution of an increasingly politically aware civil society and newspapers. these were followed by political and constitutional independence. and some decades later on friday 1 december 1939, the government of the winter war was essentially constructed on these very premises, on the second day of the war when helsinki was bombed by soviet planes. the decision was shaped in a meeting of vaino tanner, the great ” old mensh | øystein olsen : the conduct of monetary policy introductory statement by mr øystein olsen, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting ( norwegian parliament ), oslo, 4 may 2015. * * * please note that the text below may differ from the actual presentation. accompanying charts can be found at the end of the speech or on the norges bank ’ s website. i would like to thank the chair of the committee for this opportunity to report on the conduct of monetary policy. my introduction here today is based on norges bank ’ s annual report for 2014 and our monetary policy assessments up to the monetary policy meeting in march. chart : inflation and projected capacity utilisation monetary policy in norway is oriented towards keeping inflation low and stable. the operational target is consumer price inflation of close to 2. 5 percent over time. the inflation target provides the economy with a nominal anchor. inflation has edged up in recent years and hovered around 2. 5 percent through 2014. when inflation expectations are firmly anchored, monetary policy can serve as the first line of defence when the economy turns down. monetary policy seeks to be robust and takes into account the risk of particularly adverse economic outcomes. the goal is to avoid an abrupt economic downturn and higher unemployment. in the event of major shocks, for instance a sharp drop in oil prices, this may imply a more active monetary policy than normal. the consideration of robustness also implies that monetary policy seeks to mitigate the risk of a build - up of financial imbalances. hence, house price inflation and debt growth are also important for monetary policy. norges bank weighs the different types of risk against each other. six years have now passed since the global economy was hard hit by the financial crisis. the norwegian economy has fared well in the years following the financial crisis, stimulated by vigorous activity in the petroleum industry. growth has slowed in recent years and a decline in oil investment will result in low growth for a period. against the background of weaker growth prospects for the norwegian economy and reduced foreign interest rates, norges bank lowered its forecast for the key policy rate through 2014 and reduced its key policy rate in december 2014. chart : money market rates for trading partners global economic growth remains moderate, but there are wide differences across countries. the sharp fall in oil prices is positive for most of our trading partners, but is dampening activity in oil - producing | 0 |
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