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in credit intermediation is not disrupted. i hope the analysis and observations i have shared today can assist with a process of learning, evolving, and improving that will prevent future disruptions. thank you. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | richard byles : update and outlook for the jamaican economy monetary policy press statement by mr richard byles, governor of the bank of jamaica, at the quarterly monetary policy report press conference, kingston, 21 february 2024. * * * introduction good morning and welcome to our first quarterly monetary policy report press conference for 2024. the year has started with inflation being above the bank's inflation target. statin reported last week that headline inflation at january 2024 was 7. 4 per cent, which is higher than the outturns for the previous three months, and above the bank's target of 4 to 6 per cent. core inflation, however, which excludes food and fuel prices from the consumer price index, was 5. 9 per cent, which is lower than the 7. 1 per cent recorded in january 2023. the inflation outturn at january is higher than the bank had projected in november 2023. as we communicated then, in the wake of the announcement by the minister of finance and the public service of the temporary two - phase reduction in jutc fares, we had estimated that the announced measure would have had a material impact on tempering the inflationary pressures of the ppv fare increases. inflation was consequently projected to generally remain within the target range, except for december 2023 and a few months in 2024. upon review, the bank now recognises that it had overestimated the impact of the reductions in jutc fares. the two - phase reduction is now estimated to have an offsetting impact of only 0. 2 percentage points on annual inflation, with the first reduction already evident in the cpi data for january 2024. notwithstanding the welcomed and offsetting reduction in jutc fares, the higher than targeted headline inflation at january continued to largely reflect the impact of the increase in the ppv fares as well as the effect of wage increases throughout the economy. the inflation outturn also reflected high agricultural food inflation which has been the result of the adverse weather conditions that affected the island in 2023. with this brief background, i will now speak in further detail about the bank's latest monetary policy considerations and decisions. monetary policy decision the bank's monetary policy committee ( mpc ) met on the 16th and the 19th of february and was advised that inflation is projected to remain above the bank's target range until june 2025, largely because of the impact of the temporary price shocks which i outlined earlier, including the projected impact of the second phase of | 0 |
european central bank : press conference - introductory statement introductory statement by mr jean - claude trichet, president of the european central bank, frankfurt am main, 4 may 2006. * * * ladies and gentlemen, let me welcome you to our press conference and report on the outcome of today β s meeting of the ecb β s governing council. the meeting was also attended by commissioner almunia. on the basis of our regular economic and monetary analyses, we have decided to leave the key ecb interest rates unchanged. overall, the information which has become available since our last meeting broadly confirms our earlier assessment of the outlook for price developments and economic activity in the euro area, and that monetary and credit growth remains very dynamic. against this background, the governing council will exercise strong vigilance in order to ensure that risks to price stability over the medium term do not materialise. such vigilance is particularly warranted in a context of ample liquidity and still very low levels of nominal and real interest rates across the whole maturity spectrum, implying an overall accommodative monetary policy stance. for monetary policy to make an ongoing contribution towards supporting growth and employment in the euro area, inflation expectations must be firmly anchored. let me now explain our assessment in more detail, turning first to the economic analysis. the data that have become available since the start of the year point to a re - acceleration of economic growth in the first quarter of 2006, following the moderation observed in the last quarter of 2005. in addition, the latest indicators and survey information point to continued growth in the second quarter and lend support to the scenario of a gradual broadening in economic activity as embodied in the march 2006 ecb staff projections. business confidence is particularly buoyant, which, in principle, bodes well for investment, and the recovery in consumption and employment appears to be proceeding, albeit still gradually. looking further ahead, the conditions remain in place for continued growth over the coming quarters. activity in the world economy is expected to remain strong, providing continued support for euro area exports. investment growth should benefit from an extended period of very favourable financing conditions, balance sheet restructuring, and gains in earnings and business efficiency. consumption growth should also strengthen over time, in line with developments in real disposable income, as the labour market situation continues to improve. this favourable outlook for economic growth is broadly in line with available forecasts from international organisations and the private sector. considering the information available, risks to this scenario | vitor constancio : strengthening european economic governance β surveillance of fiscal and macroeconomic imbalances speech by mr vitor constancio, vice - president of the european central bank, at the brussels economic forum, brussels, 18 may 2011. * * * thank you very much for the invitation to participate in this panel today. the session is intended to focus on β surveillance of fiscal and macroeconomic imbalances β, which arguably is the most important strand of the economic governance package. but one should consider that this package β beyond the 6 legislative acts β also contains three other strands : the euro plus pact, the creation of the european stability mechanism and the setting - up of the european system of financial supervision. a fundamental strengthening of economic governance in the euro area requires simultaneous progress in all three areas. the first strand is necessary to prevent and correct imbalances ; the second to ensure the conditions for future growth and competitiveness ; the third to provide a last resort backstop if crises still occur, the fourth to guarantee financial stability, in particular in the banking sector. that said, prevention and correction of fiscal and macroeconomic imbalances must be given priority as it is the pre - condition for sustainable economic growth and financial stability. as the ecb has stressed on a number of occasions, here a β quantum leap β forward is needed in strengthening the stability and growth pact and creating an effective new framework for surveillance of macroeconomic imbalances. important negotiations are ongoing between the commission, the council and the european parliament to reach agreement on the legislative package of economic governance reforms. for this agreement to reach the necessary β quantum leap β, the following elements are essential. first, greater automaticity is needed in all surveillance procedures, including the new macroeconomic surveillance framework. the council should have less room for halting or suspending procedures against member states. strict deadlines to avoid lengthy procedures and the deletion of escape clauses would also contribute to automaticity. this is critical to ensure the credibility of the new framework and address spillovers in a timely manner. second, enforcement tools need to be more effective. in addition to financial sanctions, political and reputational measures would help foster early compliance, as would the application of earlier and more gradual financial sanctions within the macroeconomic surveillance framework. discretion to reduce or suspend financial sanctions is undesirable as it strongly reduces effectiveness and sets the wrong incentives. third, more ambitious policy requirements would better match the current reality of the euro area. | 0.5 |
. innovation is already altering the power source of motor vehicles, and much research is directed at reducing gasoline requirements. at present, gasoline consumption in the united states alone accounts for 11 percent of world oil production. moreover, new technologies to preserve existing conventional oil reserves and to stabilize oil prices will emerge in the years ahead. we will begin the transition to the next major sources of energy perhaps before midcentury as production from conventional oil reservoirs, according to central tendency scenarios of the energy information administration, is projected to peak. in fact, the development and application of new sources of energy, especially nonconventional oil, is already in train. nonetheless, it will take time. we, and the rest of the world, doubtless will have to live with the uncertainties of the oil markets for some time to come. | oil industry to build inventories, demand from investors who have accumulated large net long positions in distant oil futures and options is expanding once again. such speculative positions are claims against future oil holdings of oil firms. currently, strained capacity has limited the ability of oil producers to quickly satisfy this markedly increased demand for inventory. adding to the difficulties is the rising consumption of oil, especially in china and india, both of which are expanding economically in ways that are relatively energy intensive. even the recent notable pickup in opec output, by exhausting most of its remaining excess capacity, has only modestly satisfied overall demand. output from producers outside opec has also increased materially, but investment in new producing wells has lagged, limiting growth of production in the near term. crude oil prices are also being distorted by shortages of capacity to upgrade the higher sulphur content and heavier grades of crude oil. over the years, increasing demand for the environmentally desirable lighter grades of oil products has pressed refiners to upgrade the heavier crude oils, which compose more than two - thirds of total world output. but refiners have been only partly successful in that effort, judging from the recent extraordinarily large increase in price spreads between the lighter and heavier crudes. for example, the spread between the price of west texas intermediate ( wti ), a light, low - sulphur crude, and dubai, a benchmark heavier grade, has risen about $ 10 per barrel since late august, to an exceptionally high $ 17 a barrel. while spot prices for wti soared in recent weeks to meet the rising demand for light products, prices of heavier crudes lagged. this temporary partial fragmentation of the crude oil market has clearly pushed gasoline prices higher than would have been the case were all crudes available to supply the demand for lighter grades of oil products. moreover, gasoline prices are no longer buffered against increasing crude oil costs as they were during the summer surge in crude oil prices. earlier refinery capacity shortages had augmented gasoline refinery - marketing margins by 20 to 30 cents per gallon. but those elevated margins were quickly eroded by competition, thus allowing gasoline prices to actually fall during the summer months even as crude oil prices remained firm. that cushion no longer exists. refinery - marketing margins are back to normal and, hence, future gasoline and home heating oil prices will likely mirror changes in costs of light crude oil. with increasing investment in upgrading capacity at refineries, the short - term refinery problem will be | 1 |
by the governors of the four non - euro area national central banks. the signing of this agreement by the latter parties implies their acceptance of the operating procedures. it does not, however, imply their participation in erm ii. for the currency of each member state participating in the mechanism, a central rate against the euro and a standard fluctuation band of Β±15 % will be defined, in principle supported by automatic unlimited intervention at the margins, with very short - term financing available. however, the ecb and the participating non - euro area national central banks could suspend automatic intervention if this were to conflict with their primary objective of maintaining price stability. in line with the resolution of the european council, exchange rate policy co - operation may be further strengthened, for example by allowing closer exchange rate links between the euro and other currencies in the exchange rate mechanism, where, and to the extent that, this is appropriate in the light of progress towards convergence. 2. general documentation on escb monetary policy : instruments and procedures last friday, 18 september 1998, the ecb published a report entitled β the single monetary policy in stage three : general documentation on escb monetary policy instruments and procedures β. this report contains a detailed description of the monetary policy instruments and procedures to be applied by the escb in stage three of emu. hence it provides credit institutions with the information they need in order to prepare for participation in escb monetary policy operations as from 1 january 1999. the report expands upon and updates the material contained in an earlier version which was published by the emi on 23 september 1997. the report first sets out the criteria to be fulfilled by credit institutions in order to be eligible as counterparties to escb monetary policy operations. it then presents the features of the different types of open market operations which might be conducted by the escb and the escb β s two standing facilities ( the marginal lending facility and the deposit facility ). the report also contains a detailed description of the procedures related to the various types of operations, and specifies the eligibility criteria and the risk control measures to be applied to assets underlying the escb β s liquidity - providing operations. moreover, the report includes the description of the features of the escb β s minimum reserve system and sets out specific provisions to be applied for the escb β s monetary policy instruments and procedures in the transition to stage three. in this context i should also mention that on 11 september 1998 the governing council of the ecb endorsed the statistical | shocks, hicp inflation has been above - and sometimes significantly above - 2 % for quite some time. but inflation always bounced back following these shocks and today the outlook for price stability is once again favourable. a second related point i would like to mention is the medium - term orientation of our policy. as a central bank, we only affect prices with long lags and we cannot steer trends in prices with high precision. our focus on the medium term helps to avoid overly ambitious attempts to fine - tune inflation developments. you might ask what β medium term β means exactly. it is certainly not a fixed time horizon, as some have argued. experience in recent years has taught us that flexibility in this respect is very important. from this point of view, the ecb β s monetary policy strategy is different from pure forms of inflation targeting. this leads me to my third issue, which is that one cannot simply rely on a single inflation forecast to conduct monetary policy successfully. experience suggests that it can be very misleading to summarise the assessment of medium - term inflationary pressures in one single figure, even when a measure of statistical error is attached to it. unfortunately, monetary policy is not so simple and the repeated significant forecast errors by all major institutions over the last few years provide evidence of this. indeed, i agree with alan greenspan who once said that central bankers should be less reluctant to admit that they sometimes do not know. instead of relying on a single forecast, our monetary policy strategy emphasises this fundamental uncertainty. our strategy builds on several forecasts and indicators and includes a cross - check of the information from the economic analysis, which is relevant from the short to medium - term perspective for inflation, with that from the monetary analysis, which is important for the medium to long - term outlook. in this respect, the fourth point that i would like to discuss today is that over the last few years we have seen that monetary analysis is not only an important, but also a complex business. i have no doubt that inflation is a monetary phenomenon over the long term and that we are right in attributing a prominent role to monitoring monetary developments in our monetary policy strategy. a fifth point i would like to make is that it was difficult to gauge the effects of global interdependencies when we began to conduct the single monetary policy. what we have learnt, in particular, is that global linkages go well beyond the international trade channel, which was traditionally considered to be the main, | 0.5 |
pursued will be of importance for how the adjustment takes place. in norway, monetary policy is geared towards keeping inflation low and stable. the operational target of monetary policy is consumer price inflation of close to 2. 5 percent over time. the inflation target provides the economy with a nominal anchor. when inflation expectations are firmly anchored, monetary policy serves as the first line of defence when the economy turns down. over time, monetary policy can only influence inflation. monetary policy cannot assume a primary responsibility for delivering the necessary structural changes in the norwegian economy. but via the exchange rate channel, monetary policy can help facilitate the necessary restructuring process. without our own national currency the situation would be more challenging. the social partners would have to go it alone. the experience of some european countries shows that this can be demanding. with a floating exchange rate, the necessary adjustment of the cost level can take place faster, and may prove less painful. the krone exchange rate can function as a stabiliser. the depreciation of the krone through autumn last year indicates that this mechanism is functioning ( see chart 8 ). the monetary policy credibility built up over the years is now of considerable benefit. continued confidence that inflation will remain low and stable over time is a necessary precondition for a pronounced weakening of the krone concurrent with a low key policy rate. the benefit associated with a currency of our own disappears if the temporary rise in inflation associated with a krone depreciation is countered by higher wage increases. the result would be a higher key policy rate and a stronger exchange rate than would otherwise be the including reserves that have been approved for development by holders of oil rights and other proven resources in fields and discoveries. source : the shelf in 2014, norwegian petroleum directorate. bis central bankers β speeches case and, not least, higher unemployment. the social partners have a particular responsibility in this regard. in december last year, norges bank lowered the key policy rate by 0. 25 percentage point to 1. 25 percent. norges bank gave weight to the weakening of the growth outlook for the norwegian economy observed through autumn. already last winter, oil companies announced a period of downscaling, with cuts in investment, headcounts and costs. this tendency is being reinforced by the sharp fall in oil prices, which is having adverse spillover effects on the mainland economy and may lead to higher unemployment. low interest rates may increase the risk that debt and asset prices reach unsustainable levels. financial imbalance | ##fg has grown in size. oil prices have fallen sharply over the past six months. even if prices edge up again, we have been reminded of the uncertainty associated with future revenues. lower oil prices imply slower growth in the gpfg than previously estimated. in the longer term, this means less money in the national coffer, with an attendant reduction in norway β s fiscal space. at an oil price of around usd 60 per barrel, transfers to the gpfg may come to a halt. rather, it seems that at today β s level of petroleum revenue spending there will soon be a need to make transfers from the gpfg to the fiscal budget. measured as a share of gdp, the gpfg may have already reached the peak. calculations in the national budget for 2015 illustrate this point ( see chart 15 ). the broken red line shows the trajectory for fiscal space assuming a real return of 4 percent. the estimation is based on the oil price level prevailing late last summer. if the return is closer to 3 percent, there will be little room for increasing petroleum revenue spending over the fiscal budget. on the contrary, in the course of a few decades, petroleum revenue spending as a share of gdp will have to be reduced, that is to say fiscal policy will have to be tightened. if, in addition, the oil price settles more permanently around the level observed so far this year, fiscal policy must be adjusted earlier. if petroleum revenue spending follows the real return, we will be heading for a period of sizeable fiscal retrenchment each year. in addition, pension obligations will show a pronounced rise further ahead. the fall in oil prices has been a reminder of the uncertainty surrounding future petroleum revenues. the same applies to the return on gpfg capital. the three paths illustrate the uncertainty we are facing, but they also illustrate another important point. spending the return will ultimately lead to a flattening of the gpfg, which will then decline as a percentage of gdp. it has always been clear that this will happen at some point in the bis central bankers β speeches future. what is new is that this may be the case here and now. at today β s oil price, the gpfg may have reached the peak. in that case, petroleum revenue spending as a percentage of gdp must be reduced to avoid using more than the return on the gpfg. even if the oil price and the rate of return follow a path that allows the gp | 1 |
back to. practically everything we need is in there. and it β s a respectful document. it gives each of us the responsibility of exercising good judgment. and more importantly, it says that we trust each other to do so. i β m really proud to be in an institution where we can operate that way. and the fact that we can is something i believe each of you should take pride in. because, let β s face it, it β s not something that happened by itself. it β s not a coincidence. it was your ideas that shaped the compass. and it β s no coincidence that the compass is even more relevant today than when we put it together. so, congratulations not only for creating it, but for living by it. | david a dodge : the bank of canada β s commitments to canadians remarks by mr david a dodge, governor of the bank of canada, at the town hall meeting, ottawa, 18 may 2004. * * * good morning everyone and welcome. welcome also to those of you joining us by videoconference. today β s gathering is very important, so i β m glad you have taken the time to attend. before i begin i want to say hello to the members of the management forum and executive management committee who are with us today. these town halls are becoming a bit of a springtime tradition. the snow melts and the time comes for us to get together. we take stock of where we are, where we β re going, and how we want to get there. as you know, many institutions, both governmental and private, are currently concerned about governance structures, accountability and rules of behaviour. of course we focused on these issues a couple of years ago when we established our compass. and it β s our compass i β d like to focus on now. it is an amazing document. i think it captures the essence of who we are. and one of the truly great things about it is how it came to be. creating the compass was a comprehensive exercise. it was top down, bottom up and side to side. staff had an opportunity to take part in the consultation, debate, and careful consideration that went into the making of it. together, we produced a remarkable set of commitments to canadians, to excellence, and to each other. we really don β t need to worry about producing something new. but it is useful as we get together, to remind ourselves of what it is that we created. our commitment to canadians placed our legislated mandate into very concrete terms. canadians need to have confidence in the value of the money they earn and the quality of the bank notes that they carry around. they need to have confidence in canada β s financial system. they want to know that the bank is managing the government β s funds with integrity. and that we are communicating and being accountable for what we do. when we say we are committed to canadians, we β re saying we β re committed to fostering their confidence in our integrity as a central bank. our second commitment is to excellence. it reflects the high standards we set for ourselves in our work on behalf of canadians. it goes hand in hand with the statement we made when we launched the compass and the medium term plan | 1 |
y v reddy : some perspectives on the indian economy address by dr y v reddy, governor of the reserve bank of india, at the peterson institute for international economics, washington dc, 17 october 2007. * * * mr. chairman and friends, i am greatly honored by the invitation extended to me by the peterson institute for international economics to share some of my thoughts on the indian economy. this meeting is reflective of the recently observed growing interest and confidence in the status and future of the indian economy. today, i intend to submit that, since independence in 1947, the indian economy has been on the whole, on a path of gradually self - accelerating development accompanied by reasonable stability. there has been a noticeable acceleration in the level of confidence and the performance of the indian economy in the 21st century. the short - term prospects, despite recent global uncertainties, continue to be, by and large, benign for india. over the medium - term, there are several challenges and opportunities. the public policy may, therefore, have to specially focus on these aspects in order to meet not only the expectations of the global community, but also, and more importantly, the aspirations of millions of people in india, particularly the poor and the underprivileged from diverse backgrounds. i. self - accelerating growth since independence and in the new millennium before independence, during the first five decades of the 20th century ( 1900 - 01 to 1946 - 47 ), the annual average growth performance of the indian economy was dismal, averaging 0. 9 per cent. since the beginning of the planned development process in the early 1950s, the gdp growth displayed a self - accelerating tendency reaching a level of around 6. 0 per cent in the 1990s. two exceptions during this phase were the dipping of the growth rate in the 1970s to 2. 9 per cent and during the crisis year of 1991 - 92 1 when the growth was as low as 1. 4 per cent. the record of inflation in india has been satisfactory. since independence, the wholesale price inflation, on an average basis, was above 15 per cent in five out of fifty years. in thirty six years, out of fifty, inflation was in single digit and on most occasions high inflation was due to external and domestic shocks such as sharp rise in fuel and food prices. in the new millennium, the gdp growth rate has accelerated further averaging 6. 9 per cent during the seven - year period 2000 - 01 to 2006 - 07, while the growth rate in the last four | his business will still flourish. let me bring up some statistics to highlight the importance of the exportoriented sector in the mauritian economy and the extent to which they are exposed. the eoe sector plays a key role in our economy and its sustainability and competitiveness are a matter of national interest. to take 2010 figures, the eoe sector represents around 6 per cent of gdp, accounts for 58 per cent of total export of goods, and provides employment to nearly 56, 000 persons, which in turn represents a little over 10 per cent of total employment. however, the eoe sector and external demand - led sectors as a whole are subject to some structural weaknesses which make them particularly vulnerable to external shocks. a full two - thirds of our total export of goods was directed to european markets in 2010. this bis central bankers β speeches pattern of dependence on europe is also evident on the services front. two - thirds of our tourists also come from europe. to complete the picture, half of total fdi inflows into mauritius came from europe in 2010. this geographical concentration on europe for exports of goods and services, and inward investment, is not replicated on the import side. europe provided only one quarter of our imports of goods. we are not only highly exposed to the european market ; we also have to cope with the imbalance in the currency in which our trade is conducted. on the one hand, it is estimated that 41 per cent of our export proceeds is denominated in euros. the share of the us dollar and pound sterling stands at 39 per cent and 14 per cent, respectively. on the other hand, our imports are invoiced mainly in us dollars, with a share of 67 per cent. the euro represents 21 per cent and the pound sterling less than 2 per cent of imports. at one point in time, the combination of a downward slide of both the euro and the pound sterling on global currency markets, coupled with a stronger us dollar, raised serious concern in view of the negative implications of such a trifecta on a wide spectrum of economic activity in the country, including the sugar, textiles, tourism and bpo sectors. today, fortunately the rupee has stabilized. we cannot, however, pretend that we are protected from all external instability, as the value of our currency in the domestic foreign exchange market is largely driven by the interplay of domestic and international factors. after almost 84 weeks of non - intervention in the foreign exchange market, the | 0 |
yves mersch : prospects of islamic finance β the view of a central bank in europe closing keynote address by mr yves mersch, governor of the central bank of luxembourg, at the islamic finance conference, frankfurt am main, 18 november 2010. * * * ladies and gentlemen, it is my pleasure to talk to an audience of such distinguished financial specialists. before i embark on what islamic finance means for central banking in europe, i will have a look at the growing importance of the phenomenon, its characteristics in the context of financial stability in general and its performance during the financial crisis in particular. finally, i will present the achievements within my own constituency to overcome the obstacles for an accelerated and safe spreading of islamic finance in europe. islamic finance : growing importance the development of modern islamic finance roughly started more than four decades ago. at the very beginning it occupied a small niche visible in islamic countries. in malaysia the pilgrim fund ( tabung haji ) was established in 1969 as an islamic savings institution. more recently islamic finance has expanded out of this niche. worldwide, the assets of islamic finance institution have grown at double - digit rates for a decade. even some conventional banks have embarked into the provision of shari β ah compliant financial assets reaching an estimated 509 billion usd at the end of 2007 according to moody β s 1. today, there are at least 70 countries that have some sort of islamic financial services. almost without exception, the major multinational banks offer some kind of these services. with the rise of the importance of sovereign wealth funds ( swf ), islamic finance was pushed further. about a decade ago, many emerging countries started to accumulate huge foreign exchange reserves, most of them benefiting from rising oil, gas and other natural resources β prices, being supported by favorable macroeconomic policies. with assets under management of an estimated 3, 000 bn usd in 2009, swf represent twice the wealth of hedged funds. muslim countries, oil exporters in particular, account for more than 50 % of all swf β s assets β not all of which are islamic finance products, though. while islamic banking remains the main form of islamic finance, islamic insurance companies ( takaful ), mutual funds and islamic bonds ( sukuk ) have witnessed strong global growth. the sukuk markets in particular have gained importance. in recent years, the issuance rose from less than 8 bn usd in 2003 to 50 bn usd by mid - 2007. 2 after a sharp decline during the financial crisis, private | ), β understanding the great recession β, american economic journal : macroeconomics, vol. 7 ( 1 ), 110 β 167. 21 see gertler, m. and p. karadi ( 2015 ), β monetary policy surprises, credit costs, and economic activity β, american economic journal : macroeconomics, pp. 44 β 76. 22 clerc, l., a. derviz, c. mendicino, s. moyen, k. nikolov, l. stracca, j. suarez and a. p. vardoulakis ( 2015 ), β capital regulation in a macroeconomic model with three layers of default β, international journal of central banking, pp. 9 - 63. 23 see : blanchard, o. ( 2016 ), β do dsge models have a future? β, peterson institute for international economics policy brief 16, 11 august ; blanchard, o. ( 2016 ), β further thoughts on dsge models β, peterson institute for international economics realtime economic issues watch, 3 october ; blanchard, o. ( 2017 ), β the need for different classes of macroeconomic models β, peterson institute for international economics realtime economic issues watch, 12 january. 6 / 6 bis central bankers'speeches | 0 |
. policy actions have typically been explained solely in terms of inflation : for example, reducing the risk that inflation will undershoot the target in the medium term or extending the horizon over which we intend to return inflation to target. although, technically accurate, such explanations don β t speak to the distress of businessmen and women worrying about the future of their companies or to the anxiety faced by families unsure as to whether they will still be in a job next week. make no mistake : inflation targeting provides the flexibility for policy to respond to such anxieties. and we have fully exploited that flexibility over recent years. but it doesn β t provide a natural framework β a ready vocabulary β in which this flexibility can be clearly communicated. this almost exclusive focus on inflation in our communications didn β t matter for much of the first 20 years of inflation targeting in the uk. indeed, arguably it was one of its attractions. prior to the introduction of inflation targeting in 1992, the uk had searched β in vain β to find a credible anchor for monetary policy and inflation expectations. the simplicity and clarity provided by a numerical target for inflation helped to establish the credibility of monetary policy and was instrumental in fostering the period of stable growth and low inflation enjoyed in the decade or so prior to the financial crisis. but in the aftermath of the crisis and faced with five years of almost no growth, it is natural for people to ask what monetary policy is doing to help get the economy going. the control of inflation is important but so too is supporting the creation of jobs as unemployment rose to its highest level for almost twenty years. there was a real risk that this would start to erode the trust and support of inflation targeting ; to damage its democratic legitimacy. this was arguably evident earlier this year in the discussions in the media and amongst some commentators as to whether the framework of monetary policy should be altered, say to adopt a nominal gdp target or for the mpc to have an explicit objective for growth. a subtext of that discussion was that the inflation target was in some way acting as a constraint on the support that monetary policy could provide to the faltering recovery. to repeat : such criticism is misplaced. the credibility provided by the inflation target is a prerequisite for monetary policy to be able to respond so aggressively to the fallout from the crisis. and with inflation being above target almost consistently over this period, it is hard to argue that monetary policymakers have somehow been fixated by inflation. but the forward guidance provided | gdp peaked sources : ons and bank calculations. notes : the chart plots real business investment. the range includes the recessions of 1973, 1979 and 1990. all speeches are available online at www. bankofengland. co. uk / speeches chart 3 : uk real business investment to gdp ratio is falling percent of gdp source : ons. chart 4 : investment consistently weaker post - crises average financial recession cumulative change ( per cent ) average normal recession - 5 0 - 10 years - 15 - 20 - 25 - 30 source : jorda, o., schularick, m. and taylor, a. ( 2013 ), β when credit bites back β, journal of money, credit and banking, vol. 45, issue s2. notes : the chart shows the cumulative change in per capita investment. the grey shaded area shows a 95 % confidence interval around the average normal recession. all speeches are available online at www. bankofengland. co. uk / speeches chart 5 : uk, us and euro - area capital overhangs being worked off uk capital to output ratio euro area capital to output ratio euro area trend capital to output ratio us capital to output ratio us trend capital to output ratio per cent per cent uk trend capital to output ratio 1995 1999 2003 2007 2011 2015 1995 1999 2003 2007 2011 2015 sources : bea, oecd, ons and bank calculations. chart 6 : zombie firms rising in aes, falling in the uk ( a ) per cent of firms 12 % per cent of firms 30 % 10 % 25 % 8 % 20 % uk measure ( rhs ) ( c ) 6 % 15 % global measure ( lhs ) ( b ) 4 % 10 % 2 % 5 % 0 % 0 % source : european commission, ameco database ; imf, world economic outlook ; datastream worldscope ; the conference board ; bis calculations ; bureau van dijk and bank calculations. ( a ) zombie firms are defined as firms with a ratio of earnings before interest and taxes to interest expenses below one. ( b ) sample includes listed firms aged 10 years or more. shown is the median share across au, be, ca, ch, de, dk, es, fr, gb, it, jp, nl, se and us. ( c ) sample includes both publicly listed and private uk firms. only firms whose turnover reached Β£1 million in one of the past ten years are included. there are around 17, 200 firms per year | 0.5 |
, exchange - traded market when the trading halt ends? what kinds of problems might domestic specialists and market makers have in restarting if the market has moved away from them during the halt? recent changes to shorten the duration of the circuit breakers likely would ameliorate these concerns somewhat, but the worry remains. - 3another important change in the financial landscape in the years since the crash has been a greater focus on risk management by both market participants and supervisors. developments of new instruments, both on and off exchanges, and of new methods for evaluating risk, have given market participants powerful new tools to allow them to absorb market shocks. similarly, risk management tools have been enhanced at clearing organizations. regulators must respond to these new tools. to fully utilize their benefits, regulators will need to approach regulation and supervision in different ways. a good example is to be found in the approach by banking supervisors to developing a capital requirement for market risk. after initial fits and starts, the basle supervisors β committee embraced the concept of using banks β internal models as a basis for a capital requirement for market risk. the federal reserve has taken this process of employing new approaches to regulation a step further with its pre - commitment proposal. pre - commitment allows banks to commit to the maximum loss they will experience over the next quarter in their trading portfolio ; this commitment becomes their capital requirement. the proposal gives banks incentives to establish the commitment in a prudent fashion through fines and disclosures if it is violated. economists in the audience will recognize this proposal as an application of an incentive - compatible approach to regulation. i suspect that there are far more areas in our regulatory structure in which incentive - compatible approaches could be implemented. self - regulatory organizations also may find such an approach beneficial, particularly in this era in which sros are being asked to assume more and more regulatory responsibilities. incentive - compatible regulation essentially tries to harness the self - interest of market participants to achieve broader public policy goals. by using such an approach, our overall goal is to make individual market participants more resilient and better able to withstand shocks. this, after all, is the most basic ( and probably the most effective ) protection for firms faced with events such as the 1987 crash. at a macroeconomic level, public policies also should ensure that markets and the economy itself can withstand shocks. while the 1987 crash did not have significant, real economic effects, this is not always the case with stock market crashes. such episodes are generally accompanied by dramatic increases | , resulting in greater reliance on remote work, reductions in nonessential travel, and changes to cre usage and valuations. - 7in downside scenarios, there could be some persistent damage to the productive capacity of the economy from the loss of valuable employment relationships, depressed investment, and the destruction of intangible business capital. a wave of insolvencies is possible. as the federal reserve board β s may financial stability report highlighted, the nonfinancial business sector started the year with historically elevated levels of debt. 10 already this year, we have seen about $ 800 billion in downgrades of investmentgrade debt and $ 55 billion in corporate defaults β a faster pace than in the initial months of the global financial crisis. several measures of default probabilities are somewhat elevated. it remains vitally important to make our emergency credit facilities as broadly accessible as we can in order to avoid the costly insolvencies of otherwise viable employers and the associated hardship from permanent layoffs. finally, in keeping with the global nature of the pandemic, foreign developments could impinge on the u. s. recovery. the international monetary fund estimates that real global gross domestic product dropped at an annual rate of about 18 percent in the second quarter after falling nearly 13 percent in the first quarter. while the potential for a fiscal response across the euro area is positive and important, there has been some renewal of tensions between the united states and china, and the outlook for many emerging markets remains fragile. the federal reserve moved rapidly and aggressively to restore the normal functioning of markets and the flow of credit to households and businesses. the forceful response was appropriate in light of the extraordinary nature of the crisis and the see board of governors of the federal reserve system ( 2020 ), financial stability report ( washington : board of governors, may ), https : / / www. federalreserve. gov / publications / files / financial - stability - report20200515. pdf. - 8importance of minimizing harm to the livelihoods of so many americans. with the restoration of smooth market functioning and credit flows, our emergency facilities are appropriately moving into the background, providing confidence that they remain available as an insurance policy if storm clouds again move in. while it is welcome news that 7. 5 million jobs were added in the past two months, it is critical to stay the course in light of the remaining 14. 7 million job losses that have not been restored since the covid | 0.5 |
a broader range of individuals and institutional investors. for islamic banks, the iap creates a differentiated product that presents a new source of income and funding profile. there is also the potential for institutions with specific mandates including government agencies to strategically collaborate with the iap and islamic banks to form public - private partnerships to facilitate the efficient channelling of grants or funding and to facilitate financing opportunities for identified strategic ventures. the role of the iap that is launched today is envisaged to transcend beyond our domestic borders to become an effective channel to further enhance financial interlinkages in the regional and global economy. it can also be enhanced to become a multi - currency investment platform to provide a marketplace for local and international investors to invest in real economic activity and projects denominated in various currencies and financed by islamic banking institutions from different jurisdictions. this will be a first of its kind shared global platform for islamic finance. in facilitating cross - border transactions, the iap will also contribute towards drawing new foreign investors while also allowing for participation in the financing of projects outside the country. the iap, together with the existing components of financial intermediation will form a more complete, and yet mutually complementary financial ecosystem. to ensure its success, there has to be greater awareness and understanding on the key features of the iap and its embedded mechanisms by all the stakeholders. of importance is for islamic banks, investors and entrepreneurs to have a clear understanding on the risk and return relationships that are embedded in the variations of shariah contracts used in such investment account products. expectations need to be aligned with the various approaches adopted to managing these relationships according to the contractual and operational requirements. it is also paramount for islamic banks to uphold the best practices in the conduct of discharging their fiduciary duties and in performing its administration. of importance is the required due diligence, performance monitoring, suitability assessment and investment management. this would ensure that the iap is always a trusted medium of investment that is transparent and competitive in providing a seamless experience for investors. this would address the concerns of investors on the risks associated with the asymmetry of information. such features would contribute towards strengthening the ability of the iap to attract a wider range of investors, therefore enabling the platform to cater for different types of risk profiles of the different ventures. this shared infrastructure for advancing the delivery of the investment account product offerings represents an important platform to take this proposition forward. i wish to congratulate the six financial | institutions that include four islamic banks and two development financial institutions on their collective effort to initiate this platform. i understand there is bis central bankers β speeches interest from other islamic banks to take part in this platform. this platform will have the potential to create a more extensive network of sponsoring banks to meet the more diversified demands of investors and ventures. this would further enhance the potential for the value proposition of the iap as a shariah compliant investment vehicle and a fund raising avenue that would bring benefits to the economy. on that note, it is my great pleasure to officially launch the iap. i wish it every success. thank you. bis central bankers β speeches | 1 |
business lines in a situation of financial stress. work has also been initiated to implement this in malaysia. financial institutions are expected to develop a menu of options for recovering from events of severe stress in order to restore business to a stable condition. these plans must be regularly updated to reflect changes in a firm β s business model and operational arrangements. at its most basic level, recovery plans are helping financial institutions to better understand their operational and financial interdependencies and how this can affect recovery options that are available to the institution. some institutions are finding through this process that their operations have become far too complex to support credible recovery strategies. these institutions are taking or considering steps to restructure parts of the business to achieve wider options for recovery. indeed, an important development emerging in the recent period has been the more explicit consideration of implications for recovery plans in key strategic decisions, such as decisions to hub operations at a particular location or service provider. as much as organisational resources are put into enhancements of business continuity management, it is important for businesses to always keep in mind the inherent limitations of bis central bankers β speeches business continuity plans and not be lulled into a false sense of confidence that these plans may provide. scenarios featured in these plans are often based on assumptions, which are a simplification of reality at best. such scenarios should always be rigorously challenged to account for changing conditions. business recovery or resumption actions should also contemplate a range of conditions to build agility within the organisation to execute required, but potentially untested, responses. firms should expect that they will rarely get to a point of precision in their scenario planning and bcm responses. this does not mean that bcm is necessarily reduced to an exercise in futility. a commitment to continuous improvements in bcm is almost certainly likely to prepare firms better for disasters and tail risk events even if those specific events were not exactly contemplated. this is because the organisation will be naturally better at coming together in a crisis, and would be able to leverage on some of the core elements of response plans that have already been developed and tested. the world today is encountering more extreme disasters such as epidemics and unpredictable weather - related calamities. in our own country, the worst flood disaster experienced in decades last year saw over 250 thousand people displaced with estimated costs of more than two billion ringgit to repair damaged infrastructure. this presents a sober reminder of the responsibility of all corporations to ensure that they are well prepared for | and remain resilient against calamities, not just for their own survival, but in the interest of employees and the community that depend on them. role and prospects of the insurance industry in advancing risk management the cost associated with negative tail - risk events will only escalate as business networks grow in complexity. the use of insurance continues to be an important way in which companies can reduce this cost by transferring risks to insurance providers. insurers are well - placed to assume such risks given their long standing history in risk analytics which enables them to effectively exploit the law of large numbers and benefit from risk pooling. among emerging economies, however, there is still a sizeable protection gap in spite of the increased frequency and severity of weather related disasters and other natural catastrophes. in 2014, insured losses in asia only covered about 10 percent of total losses incurred as a result of natural and man - made disasters. combined insurance premiums written from emerging markets accounted for only 18 percent of global premiums in 2014, against 82 percent recorded from the advanced economies. given the concentration of growth and development in emerging economies, going forward, the extent of underinsurance is a concern. in many of these economies, efforts are being aggressively pursued to increase awareness of the importance of insurance protection in helping one manage risks, and to develop an effective insurance market to meet these needs. the insurance industry in malaysia currently stands at crossroads of implementing important reforms being introduced by bank negara malaysia both in the general and life insurance sectors. the objective of the reforms is to further enhance the competitiveness of the industry, ensure its continued resilience, and encourage greater innovation in solutions offered for households and businesses to better manage risks. to this end, two aspects of the reforms are significant. the first is the progressive strengthening of prudential standards that aim to improve underwriting and risk assessment capabilities within insurance companies, while substantially strengthening incentives for insurers to differentiate themselves in the market. the second is the structural changes that are being introduced to reduce market distortions and drive efficiency improvements. beyond domestic borders, the bank also continues to pursue further liberalisation in the cross border provision of insurance in certain sectors, such as the marine, aviation and goods in international transit ( mat ) sector, both to enhance capacity and reduce costs for businesses. this is primarily being advanced under regional integration plans, focusing in particular on asean. taken together, the reforms are expected to result in wider product offerings and delivery channels, service quality | 1 |
stanley fischer : monetary policy - by rule, by committee, or by both? speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at the 2017 us monetary policy forum, sponsored by the initiative on global markets at the university of chicago booth school of business, new york city, 3 march 2017. * * * in recent years, reforms in the monetary policy decisionmaking process in central banks have been in the direction of an increasing number of monetary policy committees and fewer single decisionmakers β the lone governor model. 1 we are only a few months away from the 20th anniversary of the introduction of the bank of england β s monetary policy committee, just a few years after the 300th birthday of the venerable old lady of threadneedle street. the bank of israel moved from a single policymaker to a monetary policy committee in 2010, while i was governor there ; more recently, central banks in india and new zealand have handed over monetary policy to committees. the federal reserve is not part of this recent shift, however. the federal open market committee ( fomc ) has been responsible for monetary policy decisions in the united states since it was established by the banking act of 1935, two decades after the founding of the fed itself. 2 the movement toward committees reflects the advantages of committees in aggregating a wide range of information, perspectives, and models. despite the prevalence and importance of committees in modern central banking, the role of committees in the formulation of policy has not attracted nearly as much academic attention as has the research on monetary policy rules. 3 the literature on monetary policy rules stretches back to at least adam smith and includes important contributions from david ricardo, knut wicksell, and milton friedman. more recently, john taylor has moved the research agenda forward with his eponymous rule, and a large number of academic papers have been written examining the effectiveness and robustness of policy rules. 4 in contrast, as noted, study of the role of committees in making monetary policy has been fairly light, notwithstanding the insightful work of alan blinder and others. 5 committees and rules may appear to be in opposition as approaches to policymaking. one might even argue that if a central bank ever converged on a single monetary rule, there would be no need for a monetary policy committee. in practice, the fed operates through a committee structure and considers the recommendations of a variety of monetary rules as we make monetary policy decisions. our decision is typically whether to raise or reduce the | proximity can often mean economic and financial linkages. but even economies on the other side of the globe, with few direct linkages, can be affected for no other reason than that they are classified as β emerging markets β. such countries might well have some weaknesses such as those noted above which, given time and a measure of economic and financial stability, might be adequately addressed. but under conditions of widespread desire to shed risk, they become immediate stumbling blocks for markets. this can put intense pressure on the policy authorities and economies of these countries - pressure which few countries can withstand easily. for these reasons, the picture looks different from the perspective of the emerging market economies. what is good for us after a long period of evolution need not be good for another country at a much earlier stage of that evolution. in modern parlance, it is essential to get the sequencing right. countries have to attain a high standard of financial infrastructure and regulation before they can submit themselves to the potential instability inherent in the totally free movement of capital. in the meantime, they should integrate themselves as closely as they can into the international capital market and, as their markets evolve towards maturity, they can take additional steps progressively to liberalise their regulatory regimes. to expect them to do it in the other order is to ask them to run before they can walk. 3. what should we do about it? fortunately, there is now a widespread agreement that something has to be done to improve the international financial system. the degree of instability, if it continues unchecked, could lead many participating countries to question the whole legitimacy of the system. the severity of the contractions in asia is the most striking example, but so is the sudden recognition that a hedge fund can become so important that its failure could pose a systemic threat to the united states and international economy. the fact that the second most important exchange rate in the world the us dollar - yen rate - could move by 20 per cent in a month without there being a material change in fundamentals has also caused concern. i think there is now agreement that something has to be done, and it is heartening to see that the united states has taken a leadership role, including by convening the group of 22 and its three working parties. i also think that the australian government has played a very useful role - first by its representations to the imf urging more flexibility in its handling of the indonesian crisis, and secondly by its attempt to keep the momentum of apec heading in the | 0 |
system and in the real economy. a year ago, the uk housing market was clearly developing significant momentum. prices were growing much faster than incomes. borrowers were increasingly driven to borrow a greater amount relative to their annual income. the amount of such new mortgages at high loan to income ( lti ) ratios β borrowers borrowing over 4 times their annual income β had exceeded its pre - crisis peak. the risk the committee saw was that if the number of high lti mortgages continued to grow, there would be increasing numbers of highly indebted households very vulnerable to a change in economic circumstances. this would increase both macroeconomic volatility and systemic risk. the committee came to the view that this was a macroprudential risk that needed to be insured against. it recommended the introduction of limits on the proportion of new mortgages at high lti ratios. the momentum in the housing market cooled and the limits have not so far been reached. it is impossible to say how much this was a result of the committee β s action ; a number of other important factors were also in play. but it is an example of the fpc β s approach to adjusting policy to respond to changing risks. and it is also an example of the committee taking a broad view of financial stability that goes wider than direct risks to the banking system. a further example of how macroprudential risk can develop outside the banking system is the lending and investment that happens through financial markets rather than through banks. to take one example, the global asset management sector has grown by 60 % since 2003 and is now a similar size to the global commercial banking system. this will probably be one the july 2015 fsr identified the following major risks facing the uk financial system : the global environment notably greece and china ; market liquidity ; uk current account deficit ; uk housing market ; misconduct ; and cyber risk. bis central bankers β speeches of the new frontiers of macro ( and micro ) prudential regulation. the fpc is exploring whether there are significant risks from changes in these markets and in particular how asset managers manage liquidity to meet redemptions in times of stress. there is also work underway on this internationally. macroprudential policy is still a work in development. over the past few years much of the fpc β s work has been learning by doing. as we learn, we will have to set out clearly and publicly the development of our overall policy framework β how resilient we believe the | implementation of the new capital accord requires higher specialised skills in banks. in fact it requires a paradigm shift in risk management. the governance process should recognise this need and make sure that the supervised entity gears up to it. risk awareness has to spread bank - wide, the manner of doing business that measures risk adjusted returns needs to permeate the system. top management and the human resource development policy of banks thus need to get tuned bis central bankers β speeches to this requirement. we in the reserve bank also need to hone up our skills in regulating and supervising banks under the new system. we see this as an ongoing process and are continuously working towards skill improvement. governance 18. one can have the capital, the liquid assets and the infrastructure. but corporate governance will be the deciding factor in the ability of a bank to meet the challenges. bcbs has added a separate principle on corporate governance in its core principles for effective banking supervision which were revised in 2012. it is interesting to note that before 2012, there was no separate principle on corporate governance. i think global community is recognising the importance of corporate governance and is trying to fix the issues. thus while strong capital gives financial strength, it cannot assure good performance unless backed by good corporate governance. element of conservatism in minimum standards 19. several speakers mentioned about the super equivalence issue. let me add my bit to that discussion before i conclude. there is a general feeling that we have put in place a more stringent framework than what basel norms require. of course one would point out to the 9 percent crar, the 4. 5 leverage ratio, the slr running parallel with lcr, the higher ccf for otc derivatives and the like. we need to see this in a context. i have already dealt with the slr - lcr issue. on capital, all i can say is that in the ultimate analysis, on an aggregate basis, it does not make much difference. we must also appreciate that relatively much longer recovery process of defaulted loans, shorter history of ratings assigned by rating agencies in indian conditions putting certain constraint on benchmarking them against the international standards, relatively large population of unrated borrowers especially in mid and sme corporate sectors, market risk factors exhibiting more volatilities, etc. add challenges. besides, pillar 2 process and related add - on capital requirements is also yet to be fully stabilised. the higher prescription of 9 % minimum requirements in comparison to basel minimum of 8 | 0 |
and the development of a level playing field in international financial transactions, and it is therefore a threat to international financial stability. the caribbean is requesting that the imf, through its membership of the fsb, insist that the fsb refocus its engagement with the caribbean to concentrate on issues where the fsb can reinforce the efforts which the caribbean has been engaged in for many years, to upgrade and maintain surveillance of domestic and international financial sectors which offer international financial services of the highest quality and integrity. these activities are undertaken with the assistance of and in collaboration with the imf, the world bank and other international institutions, and the fsb should support already established processes. in this connection, the caribbean identifies the statistical data gaps as a priority for attention. | per cent. an additional important feature of the measures is that a certain amount of new lending is allowed above the specified thresholds. 17 these allowances recognise that higher loan - tovalue or loan - to - income mortgages can be appropriate in certain circumstances, as laid out in the banks β own credit policies, and can help to ease some valid concerns about market access difficulties, without permitting excessive leverage or credit risk to build up across the system as a whole. in addition, in december 2015, the bank announced the first settings of both the countercyclical capital buffer and other - systemically important institutions ( or o - sii ) capital buffer. 18 these measures are part of the capital requirements regulation toolkit which is applicable in all eu member states. the countercyclical capital buffer is a prudential tool designed to respond to fluctuations in the economic cycle and stabilise lending activity. when credit growth picks up, banks will be required to hold additional capital. when the economic cycle turns, banks will be able to release this, allowing stable lending to the real economy, through the cycle. although at present, following the central bank β s assessment, we have set this buffer at zero per cent for irish exposures. the o - sii buffer is an additional capital buffer applied to banks that are systemically important for the domestic economy. the central bank has set this buffer at 1. 5 per cent for its systemic institutions, to be phased in over the period 1 july 2019 to 1 july 2021. it is very clear to me that if these measures had been in place fifteen years ago, the scale of financial crisis experienced in ireland would have been much more limited. this time, our measures have been introduced early in the cyclical recovery in the market in order to prevent the recovery from becoming destabilised by excessive leverage being taken on by households. the mortgage rules in particular are designed to limit the risk of a house price β credit cycle emerging once again. while the parameters may in the future be amended, either tightened or loosened, in response to cyclical conditions, these measures, which seek to underpin prudent lending standards, have been introduced as permanent, structural features of the irish mortgage market. moreover, the evidence threshold to justify adjustments to these rules is significant. the loan - to - value measures include a maximum loan - to - value ratio of 80 per cent for non - first - time buyers of a primary residence, while for first - | 0 |
from the crisis that buffeted its economy and banking sector. state intervention is much more limited in italy than in almost all other european countries, helping to remove the market β s perception of a risk considered high for the entire banking system. the costs for the public purse will be reduced by burden sharing among equity holders and subordinated bond holders. it will be possible to offset them against the proceeds of future sales of shareholdings. a necessary condition for benefiting from public precautionary recapitalization is the approval by the european commission of a restructuring plan drawn up by the bank. the injection of public funds into banca monte dei paschi di siena will presumably use up about a third of the β¬20 billion set aside by the government. there is more than enough room to address the recapitalization needs of any other italian banks that meet the conditions laid down in the decree, in the first place those relating to the results of a stress test. however, for other measures to be implemented the banks must be willing to apply for public support and to deal with the ensuing commitments. following the capital strengthening carried out under the fondo atlante, the senior management of banca popolare di vicenza and of veneto banca have been drawing up an industrial plan for their further recapitalization and relaunch, which will soon be presented to the supervisory authorities. the feasibility of a merger will be examined with a view to achieving cost savings and synergies capable of ensuring a return to profitability. the challenges for the banking system aside from the difficulties of some banks in particular, the banking system as a whole is called on to face new and demanding technological and market - related challenges, on which we have often reflected. this is not only a necessity for italy : a return to higher and lasting profits is a must for all european banks. the way in which branch networks are structured, services provided, and technologies used, must all be reviewed in a bold and innovative spirit. value creation in the banking industry has changed and continues to do so ; italian banks can no longer put off much needed restructurings and strategic reviews. only in this way can they continue to successfully attract investors ; only then can they continue to compete effectively and maintain their stability. in some cases capital strengthening on the market will need to continue, as is already happening for some large banks ; experience has shown that if requests for new capital are based on clear, ambitious and, at the | reached its lowest level since 2008 ; from the end of 2015 the stock of outstanding npls also began to diminish, albeit gradually. nonetheless, they continue to weigh heavily on the balance sheets of italy β s banks and there have been repeated calls for better, firmer and more comprehensive management of these exposures. last june bad loans and other npls on the balance sheets of italian banks amounted to β¬191 billion net of write - downs, that is 10. 4 per cent of total loans. including write - downs, npls came to β¬356 billion, a figure frequently quoted in debates, which refers to the face value of the exposures and accordingly does not represent their actual weight in banks β balance sheets. out of β¬191 billion of npls, net bad loans, i. e. exposures to insolvent debtors, amounted to β¬88 billion or 4. 8 per cent of loans. the remaining β¬103 billion pertained to situations in which regular repayments may resume, especially if the recovery gains momentum. the bad loan recovery rate effectively recorded by italian banks averaged 43 per cent over the ten years 2006 - 15, a proportion largely in line with banks β balance sheet figures. our studies point to a wide dispersion of recovery rates : for many banks the margin for improvement is considerable and must be rapidly exploited. the first two rounds of new bad debt reporting received and analysed by the bank of italy last year revealed that there is still some way to go in creating detailed and easy - to - access databases. in the two years 2014 - 15, recovery rates dropped to an average of 35 per cent. this was partly due to an increase in the number of positions closed following β en bloc β market sales to specialized investors : in the ten years considered, the average recovery rate for these sales was 23 per cent, against 47 per cent for positions closed following standard procedures. the market prices of exposures should be assessed bearing in mind that they reflect the very high yields demanded by oligopolistic buyers, which also factor in the possibility of long recovery times ; in some cases the existence of a large proportion of long - standing bad debts, already amply written down, explain the particularly low selling prices. the large volume of italian npls has drawn the close attention not only of the supervisory authorities but also of international markets and observers. it requires careful management. the majority of bad loans are held by banks in a sound financial | 1 |
compensation structure is reconsidered, the psas need to be amended or renegotiated in order to facilitate more workouts. finally, psas should clarify the situations in which loan modifications and other mitigation strategies should be pursued. one tool that could aid in providing such clarity, and has received substantial attention over the last few years, is the net present value model. requiring servicers to take mitigative actions that are net - presentvalue positive to the investor could encourage the fair and consistent treatment of borrowers. investors also need tools that will allow them to better monitor servicer performance and take action accordingly. these tools should be developed and described in the contract. currently, metrics that allow investors to measure servicers β execution are not widely available. such metrics could include customer satisfaction ratings, delinquency and cure rates, the average time that a homeowner waits on the phone to talk with the servicer, and servicer error rates. indeed, one can even imagine the development of a uniform servicer scorecard. to be meaningful, the ability to transfer servicing from low - performing servicers to high - performing ones would have to be enhanced. the creation of common back - office systems across servicers would make transfer less prone to error and less costly, and any contractual or legal barriers would need to be reduced to allow investors to β fire β a lowperforming servicer. a new contractual regime designed along these lines would represent a significant change from the existing world of servicing, but it could help create a system in which servicers compete on the quality of their performance and are more accountable to both investors and consumers. representations and warranties i turn next to the problem of representations and warranties contained in the psas. underwriting standards declined dramatically in the middle part of the previous decade as the housing bubble approached its peak. for example, the median combined loan - to - value ratio on subprime mortgages originated for home purchases rose from 90 percent in 2003 to 100 percent in 2005 β meaning that more than one - half of borrowers who purchased homes with subprime mortgages put no money down. the share of mortgages in which borrowers did not document fully their income or assets also increased. in addition, the number of mortgages that defaulted in the first year after origination β commonly considered a gauge of poor underwriting β rose appreciably as the bubble approached its peak. 4 the β originate | government policies to drive structural changes. 2 / 2 bis - central bankers'speeches | 0 |
jean - claude trichet : award acceptance speech for the grand cross 1st class of the order of merit speech by mr jean - claude trichet, president of the european central bank, at the award of the grand cross 1st class of the order of merit by the president of the federal republic of germany, berlin, 3 april 2008. * * * mr president, dear eva, your excellency, dear friends, i will not attempt to conceal the fact that i am extremely touched : touched to be here with you, mr president, in this magnificent palace of yours ; very touched to have such a prestigious honour bestowed on me by the federal republic of germany ; and touched to find myself surrounded by so many friends with whom we have worked with such energy in deepening and strengthening the friendship that exists both between france and germany and across europe as a whole. mr president, thank you from the bottom of my heart for awarding me this grand cross, which i regard as an honour bestowed on the whole of the executive board and the governing council and all of the staff of the european central bank. mr president, dear horst, being here with you today, i am inevitably reminded of certain shared experiences, events that are now etched firmly in my memory as landmarks in what has been a truly historic period. β’ my first memory is of the fall of the berlin wall in 1989. you were tasked with organising the reunification of germany as state secretary at the federal ministry of finance. i remember accompanying you in 1990 on a long journey by helicopter over east germany to berlin, during which you explained to me the colossal economic and financial stakes involved in reunification. β’ my second memory is of the soviet union itself suffering serious financial problems prior to its collapse in 1991. we were in moscow together with our partners, the other g7 state secretaries, to negotiate with the kremlin β which had, by then, lost all of its power and had an β end of empire β feel to it β with a view to rescheduling the soviet union β s debt. β’ my third memory is of the decision in europe to enter into intergovernmental negotiations with a view to establishing the single currency. you were negotiating on behalf of germany. we met many times in order to prepare the text of the maastricht treaty. i will always remember a long discussion we had in 1991, when i remember having the impression that we had convinced each other that our respective countries really wanted to go through with this β but | the values for the financial sector are ultimately solidified by private sector forces. in particular, professional bodies have a crucial role to play. this role includes β but is not limited to β promoting competence within the financial sector. beyond training, these organisations are uniquely positioned to build for financiers, a sense of pride and societal purpose toward their vocation. the asian institute of chartered bankers ( aicb ) is making substantial progress in this direction for the banking profession. i am pleased to note that its flagship chartered banker curriculum dedicates a significant emphasis on professional ethics. this stands alongside various other efforts for training and standard - setting, including those by aif, iclif, sidc, fide forum, ppkm and fspb. i wish to take this opportunity to specifically commend the aif and fspb for their initiatives, including today β s event. these draw the much needed attention by the industry to this important subject. the system of values affecting behaviour does not only depend on the sector - wide legal and regulatory frameworks and the vibrancy of the professional community. also, of crucial importance, is the role of the board and senior management in each organisation. as has been often repeated, these leaders set the tone from the top. this is established through official decisions and formal statements, including the corporate values and various codes of conduct. however, their role goes much further than that. more than their words, the board and senior management determine the prevailing values of the organisational ecosystem through their attitudes, actions and decisions β especially those relating to professionalism and integrity. do they give the impression that the ends always justify the means? how vigorously do they question sudden surges in a business unit β s profitability? are they willing to overlook ethically questionable actions so long as the firm is technically within the bounds of the law? how do they react to ethical failures and misconduct? how does compromising the policies of the organisation affect bonuses and promotion? apart from the board and senior management, the system affecting each organisation is also determined by the shareholders. the capitalist system depends on owners of capital to promote sustainable value creation through market discipline. is it simply short - term profits that matter? are there other social or environmental purposes that must be safeguarded? to this end, the securities commission β s malaysian code for institutional investors articulates the stewardship 3 / 5 bis central bankers'speeches role that shareholders ought to play. ultimately, shareholders need to | 0 |
in 2016 will be the weakest in seven years. south africa, like other commodity - exporting nations, is facing a terms - of - trade shock as a result of the persistent decline in commodity prices since 2011. this has been exacerbated by periods of protracted labour unrest and electricity supply shortages. more recently, the severe drought conditions have begun to weigh on activity in the agricultural sector. at an aggregate level, corporate profit growth in the third quarter of 2015 ( known as the gross operating surplus ) was at its lowest level on record at 0, 3 per cent year - on - year. this was due to declining profitability in agriculture, mining, and manufacturing. pressure on corporate income suggests that investment, consumption, and hiring by the private sector will be muted in 2016. sarb β s leading indicator of economic activity has declined on a year - on - year basis for the past 12 months. this supports our view that the risks to the growth outlook are skewed to the downside. meanwhile, the inflation outlook has also deteriorated. after averaging 4, 6 per cent in 2015, inflation is expected to accelerate to 6, 8 per cent in 2016 and 7 per cent in 2017. the elevated inflation trajectory is largely as a result of multiple supply - side shocks which are expected to feed into consumer prices over the forecast horizon. these include a sharp depreciation of the exchange rate, a spike in domestic maize prices, and above - inflation electricity tariff increases. the domestic drought conditions have forced south africa to import maize, which means that the depreciated exchange rate is now a determinant of the local maize price. as a result of this double whammy, food inflation is expected to reach 11 per cent this year. even the sharp drop in the international oil price is unlikely to provide much reprieve to consumers as the rand β s depreciation means that petrol prices are likely to be slightly higher this year than in 2015. persistent weakness in the south african economy poses very real risks to employment and investment growth over the longer term. ultimately, this means that the collective gains in prosperity which we as a nation have achieved are at risk of being eroded. monetary policy against this difficult economic backdrop, the reserve bank must continue to execute its mandate of protecting the value of the currency in the interest of balanced and sustainable economic growth. protecting the value of the currency means that we aim to maintain its purchasing power. the purchasing power of the rand is influenced | remember that the structures of financial markets differ across countries, and hence a policy tool that appears appropriate in some jurisdiction may not necessarily be the most desirable one in a different country. furthermore, empirical evidence does not, so far, suggest that the volatility of south african financial assets has meaningfully diverged from those of markets in countries where such policy tools have been implemented. it is, however, important that investors remain assured and convinced of the firm commitment of south african authorities to price stability and sustainable public finances, irrespective of the challenges that the country faces in the pursuit of sustained economic growth and development. in that respect, the bank β s commitment to flexible inflation targeting, monetary policy transparency and predictable implementation, remain crucial to limiting any rise in financial market uncertainty and volatility. the monetary policy committee at its november meeting judged that an unchanged policy rate was consistent with its mandate at this stage. in order to maintain the integrity of the inflation targeting framework, however, it would not hesitate to take appropriate action, should the medium - term inflation outlook deteriorate significantly. at the same time, a reduction in public deficits as per the framework laid out in the october 2013 medium - term budget policy statement, together with the implementation of measures agreed upon in the national development plan, aimed at unlocking the country β s longer - term growth potential, would substantially assist the bank in carrying out its mandate of price and financial stability, in the interest of sustained economic growth and development. 6. conclusion let me then finish by answering the question of whether there is still a case for investing in emerging markets with a β yes β. while challenges remain and headwinds in the form of uncertainties around fed tapering, lower growth in key emerging market economies, and continued volatility are likely to be with us for some time, and the need to address certain structural challenges by emerging economies is beyond question, the much better fundamental backdrop of emerging markets and continued prospects of higher growth than in advanced economies, especially in regions such as sub - saharan africa, appear to suggest that it would be a mistake to write off emerging markets. by rather adopting a somewhat medium to longer - term investment horizon with appropriate diversification strategies, and looking through some of the temporary turbulence, investors that maintain their loyalty to this asset class are likely to reap the benefits. emerging markets appear to be adjusting both bis central bankers β speeches cyclically and structurally from spectacular levels of growth observed previously to more sustainable levels | 0.5 |
carolyn wilkins : opening remarks - β toward the 2021 renewal of the monetary policy framework β opening remarks ( delivered virtually ) by ms carolyn a wilkins, senior deputy governor of the bank of canada, at the bank of canada workshop β toward the 2021 renewal of the monetary policy framework β, ottawa, ontario, 26 august 2020. * * * bonjour tout le monde, et bienvenue a notre colloque virtuel. thank you all for joining our workshop on the renewal of the bank of canada β s monetary policy framework in 2021. renewal is just around the corner β hard to believe. bank researchers have made a lot of progress since we kicked off our workplan in 2018. that seems like a thousand years ago given the current health and economic context. at that time, in a speech at mcgill β s max bell school of public policy, i laid out the main challenges confronting us as we did our work. we are looking forward to the conference they will host on this topic in september. one challenge i laid out in that speech has become crystal clear today : central banks are likely to run out of conventional firepower if we see an economic downturn in a low - interest - rate world. another challenge is that long periods of low interest rates encourage investors to take on risk that may be excessive. we see that now with high levels of indebtedness, not only in canada, but around the world. global debt - to - gdp is nearly 350 percent β much higher than at the time of the global financial crisis. these challenges led us to focus our research on three questions : first : can we articulate another framework that will do a better job than the inflation - targeting framework that β s been in place for over 25 years? to answer this, we are running a horse race among alternative frameworks for monetary policy. these include average inflation targeting, price - level targeting, an employment - inflation dual mandate and nominal gdp growth and level targeting. another possibility is to raise the inflation target. we are evaluating these frameworks against a clear set of criteria. of course, we are looking to see how well they can achieve stability in the economy and in prices so that businesses and families can make decisions with more confidence. we β re considering the implications for accountability, communications and credibility. we β re also looking at more novel criteria : how each framework impacts the distribution of income and wealth, and how robust the frameworks are in good economic times and bad. you | important financial market utilities. more recently, we have also created an office of financial stability policy and research at the federal reserve board. this office coordinates our efforts to identify and analyze potential risks to the broader financial system and the economy. it also helps evaluate policies to promote financial stability and serves as the board β s liaison to the fsoc. international regulatory coordination as a complement to those efforts under dodd - frank, the federal reserve has been working for some time with other regulatory agencies and central banks around the world to design and implement a stronger set of prudential requirements for internationally active banking firms. these efforts resulted in the agreements reached in the fall of 2010 on the major elements of the new basel iii prudential framework for globally active banks. the requirements under basel iii that such banks hold more and better - quality capital and morerobust liquidity buffers should make the financial system more stable and reduce the likelihood of future financial crises. we are working with the other u. s. banking agencies to incorporate the basel iii agreements into u. s. regulations. more remains to be done at the international level to strengthen the global financial system. key tasks ahead for the basel committee and the financial stability board include determining how to further increase the loss - absorbing capacity of systemically important banking firms and strengthening resolution regimes to minimize adverse systemic effects from the failure of large, complex banks. as we work with our international counterparts, we are striving to keep international regulatory standards as consistent as possible, to ensure that multinational firms are adequately supervised, and to maintain a level international playing field. thank you. i would be pleased to take your questions. bis central bankers β speeches | 0 |
welcome address luigi federico signorini, deputy governor of the bank of italy cepr international macroeconomics and finance ( imf ) programme meeting webinar, 10 - 11 december 2020 ladies and gentlemen, it is my privilege to open this meeting of the cepr β s international finance and macro group. in these unusual times, one must forgo the benefits of informal, realworld interaction. we are now all of us well accustomed to making the most of virtual discussions. nevertheless, i do hope that we shall soon be able, and have the opportunity, to welcome you here in rome in person. globalisation is one of the key themes for this group. for over two decades, starting from the mid - eighties, the world saw cross - border movements of goods and ( especially ) capital increase apace, much faster than gdp. it was not, of course, the first instance of such a sustained process. it had happened during the β belle epoque β of globalisation, between 1870 and the outbreak of the first world war, and again after the second. often, increased exchanges went hand - in - hand with accelerating economic growth, the dissemination of productivity - enhancing technology, the spread of new cultural models, and an internationally open mind - set, especially among the elites β in a knot of reciprocal causation links that is not easy to disentangle. globalisation was even stronger last time. at the onset of the global financial crisis, world exports amounted to more than a quarter of global gdp, against 13 per cent just before the great war. even more importantly, this time globalization went beyond europe, north america and other traditionally advanced economies, unleashing powerful forces for economic development in much of continental asia, for instance, and contributing to an astonishing reduction in global poverty. after embracing globalisation, each in its own way, the two largest countries in the world started a process of convergence with advanced economies that scarcely anybody would have thought possible fifty years ago. many other economies did the same. institutions and the rules for multilateral cooperation, strengthened after the end of the cold war, accompanied and supported this process. eras of globalisation, however, seem to end abruptly. the belle epoque waltzed unconscionably into the great war. the post - ww2 era came to an end with the dissolution of bretton woods, the oil crisis and stagflation. the latest period of globalisation closed with a global financial crisis | volatility of short - term interest rates around a given level of official interest rates. i would also emphasise that the actions undertaken were not in any way motivated by an attempt to mitigate losses for those who had taken excessive credit market risks. rather, the substantial injections of liquidity by central banks were intended to contribute to stability in the interbank market at a time of significant strain. the situation in ireland in the recent financial stability report of the central bank and financial services authority of ireland, we have concluded that while the risks to financial stability have increased since last year, the stability and health of the banking system here remain robust when assessed by the usual indicators of financial health such as asset quality, profitability, solvency, liquidity and credit ratings. however, like their international peers, irish banks have been operating in an environment where liquidity is not as readily available as heretofore. in addition, notwithstanding the fact that the larger institutions have diversified their businesses outside the irish economy, the banking sector is operating in an economy where growth will be slower by comparison with recent years. investor sentiment towards the banking sector globally has been negative in recent times and irish banks have not been immune from this. however, the current situation and outlook for irish banks, based on an assessment of developments so far, is positive. firstly, the sector's shock absorption capacity has been largely unaffected by the turbulence in international financial markets. a survey of the exposures of irish banks published in the financial stability report shows that the domestic banking system has no significant direct exposures to us sub prime mortgages and essentially negligible exposures through investments and through links with other financial companies or special purpose vehicles. in addition, the exposure of domestic institutions to hedge funds and private equity is very low by international standards. secondly, given the extent of the disruption to normal market functioning internationally in recent months, it is inevitable that access to liquidity in the interbank market by irish banks, like all banks, would be affected. however, the comprehensive liquidity framework within the eurosystem and the significant volumes of collateral held means that irish banks are well positioned to access eurosystem liquidity. also, a fuller assessment of the funding patterns of irish banks indicates that there is a significant medium - term element to much of their funding, as well as a relatively wide range of funding options available to them. finally, our stress - testing of the banking system and our extensive financial stability analysis indicate that irish | 0 |
be made to the collective bargaining system so that settlements are more closely related to the specific situation of firms. it is also necessary to increase the incentives for the stable hiring of employees, reducing the segmentation and duality brought about by the still - high numbers of temporary employees as a proportion of the total labour force, despite the fact this proportion has fallen in recent years. in this respect, the reform of hiring arrangements in the past has been in the right direction, as it has reduced the differences in terms of costs between temporary and permanent employment contracts. stepping up investment in capital goods and establishing conditions conducive to the incorporation of technological progress, especially in the ict field, are vital factors for boosting productivity gains in the economy. nevertheless, as the experience of other countries ( particularly the united states ) has shown, to reap the potential benefits of the incorporation of new technologies through investment also requires setting a more flexibly working economy in place, pushing through structural and liberalising reforms, and designing an appropriate regulatory framework. structural reforms aimed at promoting flexibility, innovation, human capital formation and competitiveness should not be considered as having only medium - and long - term effects. the recent history of the spanish economy illustrates the relative speed with which their effects have become visible, when they have been applied with perseverance and consistency. this is because they alter the expectations of agents, who incorporate the new framework into their behaviour almost immediately. the foregoing takes on special importance in the face of the challenges eu enlargement entails. the similarities between the productive specialisation of our economy and that of the accession countries, combined with their low - cost and highly trained labour, pose a challenge to the spanish economy, which has to face stiff competition in those industries in which spain is more specialised. it will be necessary to bolster the competitive capacity of the spanish productive structure through productdifferentiation and quality - enhancing strategies, by improving its endowment of technological and human capital and by developing the technologically most advanced industries. but spanish companies must also set in train strategies enabling them to harness the opportunities of enlargement and to increase their presence in the new areas of the single market, channelling their foreign direct investment efforts in that direction. financial aspects of the spanish economy some of the financial features of recent developments in the spanish economy are of particular importance. as i have said, monetary and financial conditions remained generous in the spanish economy and, in step with this, financing received by households and | stood at end - 2002 at 4 %. this increase in inflation has been partly reversed, thanks to the improvement in recent months which has seen this rate cut by around one percentage point. however, the bout of rising inflation last year fed through in part to wages, highlighting the importance of reinforcing wage moderation. in fact, the inflation differential with the euro area, despite narrowing recently, has remained persistent. and that may pose a risk for future competitiveness. in the area of price formation, a cause for concern is the differences that continue to be seen in business margins, depending on whether industries exposed or not to competition are involved. in the former, mainly export - geared companies, the rate of change of prices has been virtually zero for over a year, reflecting the efforts exporting companies have to make to compete in markets experiencing a particularly delicate situation. in parallel, other industries less exposed to competition continue to increase their operating margins considerably. the spanish economy β s resilience in the face of the adverse external environment in 2002 offers bright prospects for short - and medium - term developments, having placed it in a sound starting position for more dynamic growth as the international climate improves. however, the expansionary impulses stemming from emu membership will tend increasingly to have a lesser effect, while the economy will have to address new challenges arising from the stiffer competition that eu enlargement will entail. consequently, the growth pattern may not reside so much on consumption and construction but will have to be underpinned to a greater extent by investment and exports, meaning that dynamism will depend particularly on their profitability and competitiveness. national economic policies will thus have to be geared to strengthening these elements by promoting macroeconomic stability, business profitability and the competitiveness of the productive system. as earlier indicated, budgetary policy has contributed to domestic stability by means of fiscal consolidation and the control of the budget deficit. if in the future, against a background in which european monetary conditions will remain relatively generous for the requirements of the spanish economy, demand pressures were to persist and contribute to sustaining an inflation differential unwarranted by the process of real convergence, it might be advisable to move towards a budgetary surplus position. that would additionally help tackle the problems of the long - term sustainability of the pensions system. maintaining competitiveness, which is one of the main long - term challenges, will require continuing wage moderation and higher productivity gains. to do this, certain changes must | 1 |
to improve bank transparency, as well as strengthen the effectiveness of liquidity risk management and derivative products will complement these regulations farther. under such a policy, all players in the banking industry, including shariah, is expected to have sufficient space to maintain its intermediary function, as well as continue the implementation of prudential principles and risk management as a priority. distinguished guests, as i mentioned earlier, the cornerstone of our defense against a crisis is the banking sector. the economy is crisis resistant if its banking sector is crisis resistant. the banking sector i allude to is based on two pillars, namely good governance and good supervision. regarding good governance, i would like to stress one pivotal aspect. with the circumstances found pervading our financial and banking sectors lately, i am even more assured that human integrity and character, above all else, are determining factors. we can adopt a sophisticated risk management system and put in place a good supervision system, however, in the end the result is subject to the integrity and character of the administrators. no matter how good a system is it will not work if the administrators seek loopholes to abuse and exploit. in the future, bank indonesia will strengthen its screening process based on the character and integrity of our bankers, and certainly, our supervisors. bank indonesia will also impose strict sanctions for those who abuse their authority. psp and bank management must take full responsibility, bound by prevailing laws and regulations, for incidents that occur at their respective banks. improvements to bank resilience closely correspond to the quality of bank supervision. with this in mind, i am happy to report that bank indonesia is currently undertaking steps to augment bank supervision. the repositioning and revitalization of personnel is currently underway. supervisory procedures and methods are constantly reviewed to focus on issues that determine the wellbeing of a bank. in 2009, we plan to boost the effectiveness of bank supervision through two key measures. the first is to complete the risk - based supervision framework by improving the risk assessment process, oversight, auditing and system surveillance. ameliorating the quality of risk management, particularly liquidity management and control over new products and bank activity, represents the mainstay of ongoing endeavors. this is considered sufficiently urgent to be handled during the current financial turmoil. second is to improve the function and organization of supervision both at head office and all branch offices of bank indonesia. we will continue to strengthen the correlation between findings and actions ; between audit results and management steps | . we will form a panel team to improve audit quality and managerial steps. this year, we will also increase our budget for training. these measures are expected to secure our pathway through this crisis period as well as also build more solid foundations for better bank supervision in the mid term. closing distinguished guests, this brings me to the end of my speech here this evening. the ship that represents our national economy is currently navigating a tempestuous ocean. the ship itself is relatively robust, certainly stronger than the ship we sailed eleven years ago. however, the current weather front dwarfs that of eleven years ago. notwithstanding, i am convinced we can weather the storm. the key is that the ship β s crew and passengers are unified and open to help one another based on trust. i am confident that this is our joint resolution, as the alternative is too expensive for our country, as transpired eleven years ago. i sincerely wish you all a productive year ahead and once again, happy new year for 2009. hopefully during this new year, god almighty will bless us and light our way towards a better and more prosperous future. thank you. wassalamu β alaikum wr. wb. | 1 |
swedish economy continued to grow at a good rate during the first six months of this year. 1 this is partly because the development of domestic demand has been relatively stable. there are several reasons why sweden has coped so well. sweden β s stable public finances, for example, have meant that fiscal - policy consolidation, which has otherwise dominated the economic - policy agenda in several other countries, has not been necessary in sweden. competitiveness has also developed well. this can be seen very clearly if we look again at figure 6. there are also a number of explanations for this positive development. we have had a period in which productivity grew very strongly in sweden for several consecutive years, inflation has been low and stable and pay formation has improved significantly compared with the period prior to the introduction of the inflation target. the fact that the swedish economy has been strong has also led to a resilient swedish labour market, and the number of those employed has continued to increase somewhat during the year. however, the supply of labour has also increased, so that the fall in unemployment we have seen since the start of 2010 was interrupted at the end of 2011. unemployment in sweden is now just below 8 per cent per cent ( see figure 9 ). β¦ but high household indebtedness constitutes a risk another reason why the swedish economy has coped so well is that we have not suffered a crash on the housing market or in other areas of the financial sector. nevertheless, developments in sweden have given cause for concern. housing prices have risen significantly in sweden over the last 15 years in both an international and historical perspective ( see figure 5 ). the same applies to household indebtedness ( see figure 6 ). it is not surprising that there is a link between these factors as a large proportion of the banks β lending to households has been used to buy housing. i and several of my previous colleagues on the executive board warned about the risks associated with household indebtedness and housing prices in sweden long before the financial crisis. one could say that the crisis has given these issues renewed and increased currency. a positive factor is that the rate of increase in lending to households has slowed down recently following the very high rates of increase we saw in the years before the financial crisis. housing prices have also levelled out recently. both monetary policy and the mortgage cap have probably played a role in subduing lending to households. 2 however, the debt ratio, that is debt as a percentage of disposable income | currency and banking crisis show that threats to the financial system may indeed emerge suddenly, and that authorities must react very quickly - if not within minutes, at least within hours. the growth and increasing globalisation of financial markets, the high volatility in these markets and the increasing complexity of financial institutions, are all examples of factors that increase the risk for sudden crises and increase the probability that such crises will spread from one market to another. 1. ela as part of general crisis management and resolution should a financial crisis occur, there are a number of measures that may be used by authorities to limit the consequences of the crisis. in addition to ela, examples of these measures are financial support to protect the solvency of institutions, brokering of private sector support to or acquisitions of troubled institutions, management of deposit insurance schemes and insolvency procedures for financial institutions. in general, these measures may be undertaken by different authorities. a consequence of this is that cooperation between authorities is an important element of crisis management. the authorities must have a common strategy for how the crisis should be managed in order to avoid excessive support to the financial sector. excessive support may lead to undue costs to taxpayers and to unsound incentives for the financial sector. in this context, it is important to emphasise that these effects can arise from all kinds of official support. thus, the authorities must limit the support that is offered. support may be warranted only when there is a considerable risk for a systemic crisis that may lead to a severe decline of real economic activity. typically, real economic activity is affected by a breakdown of payments systems or restrictive granting of credit, a credit crunch. traditionally, ela provided by central banks has been seen as a measure to deal with pure liquidity problems in banks that essentially are solvent. in practice, situations where pure liquidity problems arise seem to be rare. in most cases where banks face liquidity problems, there is some uncertainty about the solvency of the institutions involved. typically, it takes time to make an assessment of the solvency of an institution. in the swedish banking crisis, it took many months to fully assess the financial situation of the troubled institutions. not even the institutions themselves had a good picture of how large their problems were. recent developments in the financial system, such as consolidation, the emergence of geographically dispersed financial conglomerates with activity in many product lines and a greater complexity of financial products, make this task even harder. it is unlikely that central banks or | 0.5 |
dialogue between risk managers and the insurance industry, parima will help to enhance risk culture and risk management capacity in asia. develop the marketplace i will now move on to our efforts to develop the insurance marketplace in singapore. we have three key thrusts for marketplace development. first, expanding the broker network. singapore already has a vibrant broking cluster, which has played a central role in facilitating business flows. we play host to over 70 insurance brokers. four of the top five brokers in the world have their regional hubs in singapore. today, brokers are not just intermediaries, but also high - value service providers who drive innovation and collaboration in the industry. β’ many brokers provide a wide range of risk management services. these include dynamic financial analysis, risk management and actuarial consultancy, portfolio and financial modelling, and catastrophe modelling. β’ some brokers have also begun to tap alternative risk transfer solutions to manage more complex and larger risk exposures and liabilities. we are keen to encourage brokers to use singapore not just as a placement centre, but also as a centre of excellence for innovation. β’ a good example of this is aon, which recently established its analytics and innovation center in singapore to provide analytics solutions to the group β s business units on a global basis. second, encouraging a subscription market. to underwrite large and complex risks, insurers need to collaborate. risk sharing enables market participants to diversify their portfolios. we want to promote a true subscription market, where insurers not only share risks, but also expertise. the subscription concept leverages both the deep expertise of the lead insurer and the supporting capacity of the other insurers to cover a variety of large and complex risks. bis central bankers β speeches such deep collaboration requires contract certainty. contract certainty ensures the finalisation of terms and conditions of the policy prior to inception of risk and therefore, serves to minimise ambiguity and disputes over claim and coverage. β’ i am pleased that our industry players have come together to form a workgroup, which issued earlier this year a set of guidelines and best practices for reinsurance contract certainty. β’ the workgroup is now monitoring the industry β s progress in achieving contract certainty via monthly submissions by industry players on the level of contract certainty in their reinsurance transactions. β’ this is a sterling example of industry collaboration. mas supports this initiative and has been working with the industry to implement the new standards. third, creating more platforms to bring buyers and sellers | , there is room for private credit to provide non - dilutive financing that can complement equity and debt financing, by providing flexibility through customised deal structures. 3. ultimately, we need a variety of funding instruments β including seed funds, short - term loans, venture debt and equity financing β to build and sustain the wide range of early - and late - stage companies in the region. singapore β a hub for enterprises and financing just as how changi airport plays a key role as a hub for regional and global air connectivity, singapore plays a key role in intermediating capital flows and investment opportunities. we have a strong ecosystem here in singapore, which can help the private markets community tap on and unlock asia's potential. 5 / 7 bis - central bankers'speeches a. first, we will continue to maintain a conducive environment for businesses to set up in singapore. i. over the years, we have built up a reputation for our regulatory environment, stable and efficient infrastructure, access to financial intermediation and services, and strong rule of law. ii. we hope this will not only attract more companies in our region to set up in singapore, but also encourage private equity managers to promote singapore as a springboard into the region for their portfolio companies. 1. one such example is straive, which the partners group had a majority stake in from 2017 to 2021. 2. under the ownership of partners group, straive transformed from a provider of content services into a technology - driven content, data and edtech solutions company. 3. as part of its transformation, straive moved its headquarters to singapore, and now serves over 300 customers in 30 countries worldwide. b. second, we will continue to offer various fund structures and investment platforms to reduce costs and improve efficiency for both investors and fund managers. i. for example, in 2020, we launched the variable capital company ( vcc ) structure, a flexible corporate structure for investment funds. ii. the vcc has given fund managers greater flexibility, as it allows different investment strategies β such as real estate, private equity, and public and private credit β to be employed in different sub - funds, but overseen by a single board of directors. iii. to date, we have more than 1, 100 vccs set up by traditional and private market managers for a variety of use cases and fund strategies. iv. the availability of vccs also facilitates the co - location of fund vehicles with their singapore - based | 0.5 |
this should be weighed against the significant benefits and operational savings from the more accurate allocation of capital to risk. mas will work closely with the local banks to implement the new accord. business and strategic considerations next, banks have to decide how to grow and position their businesses over the longer term, especially the local banks. maintaining margins and cutting costs is necessary in the short term, but beyond that, banks need longer term strategies for staying viable and competitive. after a period of domestic consolidation, the local banks have made several regional acquisitions, but they still remain small by international standards. competition will intensify, within the domestic market because of liberalisation, and internationally because globalisation is continuing. the local banks may well find that in order to hold their own and be viable, they need to grow bigger. possibilities for domestic growth are limited other than through further consolidation. but the region offers considerable opportunities. asia is poised for sustained growth, having emerged from the crisis as one of the most promising regions in the world. countries have gone through a period of structural reforms and transformed their financial sectors. now they are progressively opening up their economies to greater foreign participation. this is attracting interest from major regional and global players. our local banks cannot ignore this game. they need to consider their options carefully. is the way forward to remain a niche player, sizeable in the domestic market, but small by international standards? or must they achieve greater scale by expanding into the region? if so, what strategy will minimise the risks and maximise the benefits of operating in different countries? how can they build strong management teams, to execute a sound strategy well? each bank must answer these questions for itself. their long term profitability and viability depends on their finding the right answers. challenges for the financial sector let me move on to some of the opportunities and challenges for the financial sector. i will discuss three issues - developing the wealth management industry, growing our capital markets, and increasing our human capital. wealth management the asia - pacific is the fastest growing market for private banking in the world. rapid development is producing large numbers of wealthy individuals, and huge amounts of private wealth to be managed. asian savers and investors are increasingly sophisticated and are seeking best of breed products and managers. non - asian clients are increasingly demanding geographical diversification for their assets. institutional assets in asia will also grow progressively as countries reform pensions, and deregulation frees up assets from insurance companies and other corporates for professional management. these | in the countries of the region. our strong legal system and the availability of international legal expertise and product structuring teams equip us to structure complex cross - border transactions. the growing wealth management industry will also generate a steady source of funds for regional investment products. human capital a major issue that concerns all parts of the financial sector is human capital. a distinguishing characteristic of a successful financial centre is that it attracts talented and dynamic professionals from a broad range of disciplines and experiences. they make the financial centre what it is. deepening and broadening our talent pool will be a continuing challenge for the financial sector and for mas. mas and industry players have taken steps together to address this. the institute of banking and finance had been re - organised to better meet the needs of the industry as a financial training intermediary. it will also serve as a platform for the industry to provide regular feedback on manpower needs and issues. the industry has established the financial industry competency standards committee, which will develop internationally aligned competency benchmarks for the whole financial industry. mas is also working with specific industries to address their human resource needs through a manpower conversion scheme. this scheme will help mobilize, train and channel resources to support growth areas quickly. mas will work with financial institutions to build and upgrade talent in the financial sector workforce. singapore has always welcomed talented individuals to live and work here. they have contributed much to the vibrancy of our financial sector. singapore must remain open to talent and continue to be a conducive environment to work and live in, so that we can continue to attract talent here, and also retain able singaporeans. conclusion mas is committed to the vision of singapore as a leading global financial sector, one which is competitive, fosters enterprise and innovation, and maintains high regulatory standards. we have made steady progress toward this goal and must continue to do so. we must never become complacent and satisfied with the status quo, or else we will soon be overtaken and left behind. mas will strive to create an environment where market forces, enterprise and innovation can thrive. we will stay abreast of market developments, and be sensitive to the needs of the industry, without compromising on supervisory standards. our experience has shown that the two are not incompatible ; indeed listening to industry players, without being overwhelmed by them, helps us to become better regulators and supervisors. i am grateful for the full support and cooperation which the industry has extended to mas, and | 1 |
ambiguities and possible breaches of the contract will enhance competitiveness, both at the institutional level as well as for the financial system as a whole. in malaysia, islamic finance disputes are adjudicated in civil courts and not the shariah courts where the jurisdiction is limited to matters relating to muslim individuals. if the dispute concerns a point on the ascertainment of shariah, the courts and arbitrators are required to refer to the shariah council at bank negara malaysia to facilitate the ruling. the shariah councilaβ¬β’s authority is the ultimate body responsible for shariah in banking and financial matters that is within the purview of bank negara malaysia. this referral system provides an enabling platform for preserving consistency and predictability in interpretation and application of shariah principles for financial transaction in malaysia. concluding remarks allow me to now conclude my remarks. the inherent strengths of islamic finance amid the global financial crisis has heightened interest in islamic finance across the world. the level of innovation, scale and complexity of islamic financial transactions is also increasing at a tremendous pace. going forward, it is envisaged that the legal services in islamic finance will become even more significant in the continued advancement and efficiency of islamic finance. in this regard, your thought leadership in addressing the legal issues embedded in islamic finance holds important element in the continued growth of the islamic financial services industry. here, i would like to take this opportunity to congratulate the islamic financial services board for organizing this timely seminar. i trust it will continue to be a constructive platform for the legal and industry practitioners to deliberate on effective and pragmatic solutions to the legal issues in islamic finance. on this note, i wish all of you a productive and successful seminar. | zeti akhtar aziz : legal issues in the islamic financial services industry speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 4th ifsb seminar on legal issues in the islamic financial services industry, kuala lumpur, 28 september 2009. * * * it is my great pleasure to speak at this 4th ifsb seminar on legal issues in the islamic financial services industry that has brought together so many international experts and industry practitioners to discuss legal issues in islamic finance. such dialogue is important to achieving a common understanding and solutions to issues in islamic finance, thus contributing to its overall development. islamic finance has continued to expand and demonstrate its resilience in the current more challenging international financial environment. this advancement has been in terms of the increased range of islamic financial products and services, the development of the islamic financial infrastructure and institutions, the greater maturity of the islamic financial markets and the more comprehensive supporting legal and regulatory framework. more recently, the international dimension of islamic finance has gained significance with the move to further liberalise domestic islamic financial system and the strengthening of the international islamic financial architecture. in malaysia, islamic banking assets at the end of the second quarter of this year, now constitutes close to 19 % of total banking assets. total financing now amounts to rm118 billion and accounts for 20. 1 % of the total financing portfolio of the banking industry. net nonperforming financing remains low at 2. 4 %. islamic securities has also maintained its dominance in the malaysian bond market, accounting for 58 % of total bond market. and almost two thirds of the equity market comprises shariah compliant securities. growth has also been experienced in the takaful sector in which the funds asset has registered an increase by 8. 2 %. this recent decade has also seen the increase in number of islamic financial institutions including full - fledged islamic banks, development financial institutions that engage in islamic banking, takaful, re - takaful and capital market intermediaries. several of these players have strategic partnerships with foreign players. in april this year, as part of the liberalization initiatives announced, new mega islamic banking licenses and up to two family takaful licenses will be issued this year. on the global front, islamic financial assets are projected to grow to usd1. 6 trillion by 2012 while the global sukuk outstanding valued to date at approximately usd152. 8 billion. in the third series of this seminar in 2007, the vital role of a strong | 1 |
a new format focused on issues with long - term strategic implications that need to be addressed in the current environment. it is designed to encourage deliberations from the different perspectives between industry participants and bank negara malaysia. the dialogue will also serve as a platform to reflect on recent economic and financial developments and the major policy initiatives by bank negara malaysia. allow me to take this opportunity to share some thoughts with you in these areas. the outlook for the malaysian economy continues to remain favourable, despite some signs of moderating growth in the global economy arising from the higher oil prices. malaysia has had a track record of solid and steady growth for a number of years now. the diversified economic structure and sound macroeconomic fundamentals have been important in supporting this trend. of importance is that this growth is private sector driven. while price pressures have been contained by improvements in labour productivity and capacity expansion, domestic inflation has begun to edge upwards, largely due to cost - related factors. in balancing these trends, monetary policy has continued to remain supportive of growth. growth in asia has also remained strong with mutually reinforcing effects for regional economies, including malaysia, as regional integration continues to intensify. the global environment, however, is clouded by uncertainties amid the persistence of global imbalances. the united states continues to record large deficits in its external accounts. there is significant discussion in the global community on how these imbalances may be unwound. the consensus, however, is clear that the adjustment should be orderly. there has however, been an over focus on realignment of exchange rates to facilitate this adjustment. but this may risk destabilizing adjustments. ultimately, the structural imbalances have to be addressed by some combination of adjustments in demand, prices and exchange rates. in particular, the rebalancing of global growth can be expected to be a major factor contributing to an orderly adjustment to these imbalances. indeed, it would require more than just adjustments in exchange rates. the nature and breadth of the adjustments will be important to achieve a long - term solution. with its young workforce, growing productivity, competitive and dynamic economies, there is great potential for the asian economies to contribute towards the re - balancing of global growth. with rising income levels in regional economies, particularly among the growing middle income group in china, india and the asean economies, there is potential for an expansion of demand within the region. the rebalancing of global growth across the world will eventually | evolved a vibrant sukuk market, more asian countries have turned to the sukuk market for financing large - scale projects including for infrastructure development. several countries in the region are currently reviewing their legislation and taxation to enable debut sukuk issuance. the asian sukuk market has also been progressive in the innovation frontiers. there has also been a growing trend for multi - currency sukuk issuances. this provides greater prospects for tapping a wider pool of investors, including from the middle east and europe. in malaysia and more recently, in indonesia, sukuk issuances have also aimed at retail investors. this is to take advantage of the high levels of surplus savings in asia, whilst providing wider investment options to retail investors that have traditionally invested in bond funds and unit trusts. the trend for greater regional economic and financial integration will also provide substantial opportunities for islamic financial institutions to facilitate the integration process in the region and with other parts of the world, and thus have a greater role in financing asia β s future growth. priorities for strengthening financial stability and growth let me turn to the priorities for strengthening financial stability and growth. whilst there needs to be continued efforts at the national level to develop the institutional foundations for islamic finance that will foster effective and efficient financial flows, and ensure that financial stability is preserved, the new wave of internationalization for islamic finance requires increased collaboration across jurisdictions to strengthen the international financial infrastructure of islamic finance. going forward into the future, this will be particularly important given that the international environment has become more challenging. this is to ensure that the greater internationalization of islamic finance takes place in an environment of financial stability. at the national level, the first priority relates to trend for the domestic islamic financial system to become more integrated allowing for risks to be rapidly transmittal across the financial system. this requires the development of enhanced regulatory, supervisory and legal bis central bankers β speeches frameworks that are also adaptive and effective to the innovative dynamics and unique mix of risks in islamic finance. fundamental to this is the implementation of the international regulatory and supervisory standards and best practices for islamic finance. the islamic financial services board ( ifsb ) has introduced prudential standards for the islamic financial services industry β in all key areas of capital adequacy, risk management, corporate governance and shariah governance. their implementation would in turn promote more consistent regulatory and supervisory frameworks across borders. importantly, the adoption of these international prudential standards which are aligned to the core principles and | 0.5 |
interest rates in january 2015. and, as companies cut their investment intentions further, we lowered interest rates again the following july. to be clear, our economic models correctly predicted that the collapse in oil prices would be a serious blow. specifically, our main policy model gave us invaluable insights into how the shock would affect the economy and how the subsequent adjustments would unfold. but the fact that everything we were hearing was supporting these insights increased our confidence that cutting rates was the right course of action. adjusting to lower oil prices obviously, the drop in oil prices was a significant detour for the canadian economy. we knew that the shock would trigger a complex series of adjustments and create significant hardship for many people. basically, our models projected that the economy would go through the reverse of its experience in 2010 β 14, when high oil prices led to strong increases in business investment and national income. provinces where the energy sector is relatively more important, such as newfoundland and labrador, would feel these effects most acutely. this underscores one of the fundamental challenges for policy - makers, that economic shocks can have very different effects across canada β s regions. in terms of adjustments, we anticipated that lower oil prices would mean not only a decline in the energy sector, but also a pickup in growth in the non - energy sector. we expected exports to be boosted by a lower canadian dollar. and, as exporting companies reached their capacity limits, we expected to see business investment increase. stronger exports and investment would complement household spending, and growth would become more broadly - based and selfsustaining. certainly, adjustment in the energy sector has been painful. beyond cuts to investment spending, oil companies restructured operations and laid off workers. employment in the resource sector fell by roughly 50, 000 jobs from the beginning of 2015 to the middle of last year. despite this, companies boosted production and exports of crude oil as earlier investments were completed and as they found greater efficiencies. and, since oil is priced in us dollars, the decline of the canadian dollar also helped cushion the impact of the shock. the increased output and weaker currency helped to offset almost half of the $ 60 billion decline in revenue from oil shipments, boosting exports by about $ 25 billion. 2 / 5 bis central bankers'speeches that said, canada β s other exports took longer to recover than we anticipated. exporting companies had taken a significant hit both during and after the global financial crisis. many disappeared, to be | off sharply, since banks needed to repair their balance sheets and comply with more - stringent regulatory capital requirements. so how does canada fit in? we have traditionally been a capital importer. our current account balance β the difference between how much we invest and how much we save β has typically been in deficit to the tune of 2 β 3 per cent of gdp. we have depended on external financing to fund this gap. in the early 2000s, strong foreign demand and high commodity prices raised our national incomes, and we ran current account surpluses for a number of years. during those years we exported capital to the rest of the world ( chart 4 ). since the global financial crisis, foreign demand has been on a weaker track and commodity prices are lower. our current account is again in deficit and, once more, we are relying on capital imports from the rest of the world. benefits and challenges of financial globalization as i β ve already mentioned, opening up an economy to capital flows brings both benefits and challenges. benefits the benefits of financial globalization are similar to those of free trade. open borders create opportunities for transactions that benefit both parties because of their differences in endowments or preferences. for example, a country where a large share of the population is of working age can benefit from being able to channel its savings to other countries β a net capital outflow. as the country β s population ages further and more of its citizens retire and start to draw on their savings, foreign assets are liquidated, generating a capital inflow from the rest of the world. cross - border investments, which give rise to gross capital flows, enable investors to diversify risk. canada β s pension funds have, for example, used international opportunities to effectively provide more - secure retirement income for canadians. fdi brings other benefits, since it bundles financing and know - how. this helps residents of the investing country use these capabilities where they can be most see committee on international economic policy and reform, banks and cross - border capital flows : policy challenges and regulatory responses, september 2012. - 6productive and creates opportunities in the recipient country. over the years, canada has benefited from sizable flows of fdi in both directions. chart 3 : banking flows are the most volatile capital flows per cent of group gdp, four - quarter moving average % - 10 fdi direct inflows portfolio inflows derivative inflows gross inflows other inflows source : imf world economic outlook. imf balance of payments | 0.5 |
klibor which has no direct correlation with the changes in the rental rate. actively promote the role of the market players the islamic financial services industry is expected to benefit from the recent increase in the number of players following the launching of islamic subsidiaries, the issuance of foreign islamic banking licences and the measures to issue additional takaful licences. the entrance of these players will contribute to an active participation in both the primary and secondary markets for islamic financial instruments. ladies and gentlemen, i hope this seminar will crystallize positive ideas to pave the way and contribute towards the development of a more vibrant and dynamic islamic financial system. i wish to take this opportunity to thank the speakers for accepting our invitation to share their invaluable knowledge and experiences in this seminar. the participation by researchers and practitioners in the islamic financial system is also important. on this note, i wish you all a successful seminar. | the euro crisis. in fact, there are already signs that asian exports, thailand β s included, are slowing. amid a slowing global economy, this drag on growth is unavoidable in the short - term. to grow out of the crisis and survive the shocks from outside, thailand must look within and unleash domestic engines of growth. long - term investment in productive infrastructure is one key engine of growth. another is domestic structural change spurred by two drivers of change in the region. the first driver of change is growth in china and the attendant rise of the chinese middle class and demand for a broader range of imported goods and services. chinese exports will also grow in sophistication. the second driver of change is trade liberalization in the region β such as free trade agreements with china and india as well as the asean economic community, or bis central bankers β speeches aec. aec, in particular, goes beyond free trade and also has the potential to foster not only goods and services integration but also cross - border labor and investment flows. because of the sheer size of these markets β china, india and aec β the regional pattern of production will change considerably to cater to new demands while leveraging on new comparative advantages and supply chain synergies. uncompetitive firms have to either upgrade themselves, or close down and free up labor resources to more competitive firms. this reallocation process implies that the country makes better use of labor resources and achieves higher productivity. ongoing financial sector reform will also build financial sector resiliency. thailand β s financial sector master plan, now in its second phase, continues, and focuses on liberalization through increased competition, raising efficiency, and strengthening the financial infrastructure. our research shows that the gains from structural change can be considerable although adjustment costs, in terms of the reallocation of labor and capital, will also be significant. now we arrive at the third and final question. given the euro crisis and thailand β s prospects for growth, what should monetary policy do? the dilemma here is how to bridge short - term stabilization with long - term goals of structural change. the challenge for policy is to maintain an overall framework where the trend of increasing economic integration can continue while containing crises. given our baseline scenario of a prolonged recovery without a liquidity seizure we lean towards long - term goals β for example, maintaining capital flow liberalization, financial sector liberalization and market - led exchange rates β but with a readiness for monetary stimulus should | 0 |
ravi menon : a vibrant carbon market for a low carbon future opening remarks by mr ravi menon, managing director of the monetary authority of singapore, at the climate impact x announcement event, singapore, 20 may 2021. * * * minister for national development mr desmond lee, ladies and gentleman, good afternoon. let me start with the big picture. to limit global warming to 1. 5Β°c, global annual greenhouse gas emissions need to be halved by 2030 and reduced to net - zero by 2050. yet, the trajectory of carbon emissions is still on a steady uptrend. just on energy needs alone, demand in asia is projected to double in 2030. economic development will drive demand for fossil fuels, which is still the cheapest way to generate electricity in many parts of asia. the switch to cleaner energy sources cannot be made in one leap. coal accounts for about half of asia β s total energy supply today. we need to shift the energy mix progressively, first to relatively less emissions - intensive fuels like natural gas, and then to renewables. this shift will require fundamental infrastructure changes : refurbishing power plants to generate cleaner fuels ; and upgrading the power grids to manage different energy sources and to minimise the intermittency of renewables. to make this progressive shift to a low - carbon future, asia will need a lot more transition financing than is available today. to spur more green finance for transition, we need to have two things in place : a price on carbon, and a market for trading carbon credits. carbon prices and carbon markets climate change is the result of probably the biggest market failure in history. for the longest time, the world did not put a price on the carbon emissions that have steadily degraded our environment and now pose serious climate risks. a meaningful price on carbon is critical to create the right incentives to reduce emissions. the challenge is to arrive at the right price, one that does not unduly impede economic development and yet is sufficient to drive decarbonisation efforts that will enable the world to meet its climate targets. carbon pricing is gaining momentum. globally, there are 61 carbon pricing initiatives in place, half of them carbon taxes and the other half emissions trading systems. 1 / 5 bis central bankers'speeches singapore introduced in 2019 a carbon tax of $ 5 per tonne of greenhouse gas emissions, to establish the principle of a price on emissions. the original intention was to gradually raise the tax from 2023 onwards to between | for domestic inflationary pressure, the mpc has raised bank rate twice ; it now stands at 0. 75 %. the fpc, meanwhile, judging that the domestic risk environment had returned to a standard level, has also raised the counter cyclical capital buffer twice to 1 %. looking ahead, if we get a smooth brexit with a transition deal, as assumed in the mpc β s latest inflation report forecast ( table a ), i expect growth to pick up, leading to excess demand and building domestic inflationary pressure, so that further monetary tightening is appropriate to maintain monetary stability. relative to the best collective judgement expressed in the mpc β s central forecast i am, as i have set out in my talk today, a little more pessimistic on gdp growth than my colleagues on the mpc. but as i have discussed, that is true both on the supply side, where i can see more downside risks to productivity, and on the demand side, where i am less optimistic that investment will recover as much as it does in the central forecast. those two risks broadly offset each other in terms of the balance of demand and supply, meaning that my best guess for inflation, and the outlook for policy, is in line with the central view. but as i have argued today, the outlook for policy depends on more than just our central expectation for the path for the economy β we need to consider the risks as well. my third lesson from the crisis was that policy needs to be prepared for the unexpected. that is true both for the mpc, who need to take the balance of risks to their central forecast into account when setting monetary policy, and for the fpc, who set financial policy based on their assessment of the risks to financial stability. the fpc track a very large number of risks ; i will focus on just two β first, market volatility, and, second, brexit. 6 jon cunliffe β s speech β financial stability post brexit : risks from global debt β, available online at https : / / www. bankofengland. co. uk / / media / boe / files / speech / 2019 / financial - stability - post - brexit - risks - from - global - debt - speech - by - jon - cunliffe. pdf, goes into more detail on several key risks including brexit and global risks. all speeches are available online at www. bankof | 0 |
in service to society new zealand β s revised monetary policy framework and the imperative for institutional change a speech delivered at wharewaka function centre, wellington, new zealand on 29 march 2019 by adrian orr, governor written with omar aziz, economic advisor 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz introduction tena koutou katoa. thank you for joining us today to discuss new zealand β s new monetary policy framework. the recent amendment to the reserve bank β s legislation sets up a monetary policy committee that is responsible for a new dual mandate of keeping consumer price inflation low and stable, and supporting maximum sustainable employment. the committee β s deliberation process will ensure that all decisions benefit from a diverse range of views, and offer greater transparency and accountability to monetary policy decisionmaking. before i outline the features of the new framework and its underlying principles, i would like to paint the backdrop to this institutional change. the business of central banking is evolving as circumstances change. some of the change is favourable, some is confronting. on the favourable side, we have low and stable inflation, low unemployment, and broad financial stability. this advantageous position must never be taken for granted. i thank all of the wise people β past and present β who have worked hard on creating the current environment. on the challenging side, in addition to maintaining the status quo, we have new and significant long - term economic challenges among which central banks operate. for example, in the financial system alone, we must deal with global economic inter - dependence, dominant financial institutions, significant debt burdens, technological change that challenges employment and financial inclusion norms, climate change, and much more. the list is long and the challenges have intergenerational implications. i spoke about many of these issues in a recent speech about the dangers of short - term thinking. 1 the refreshed reserve bank act and monetary policy practices, and the ongoing reviews of our legislation, position us to adapt to these changes. the aim is to ensure that the reserve bank can continue to achieve its fundamental purpose, which is β to promote the prosperity and well - being of new zealanders, and contribute to a sustainable and productive economy β. 2 institutions, legitimacy & identity let β s take a step back and talk about the backdrop to recent and pending changes to the reserve bank β s frameworks. the key role of a public institution is | / refit - - review - of - flexible - inflation - targeting / and https : / / www. regjeringen. no / en / aktuelt / report - of - the - law - commission - on - the - act - relating - to - norgesbank - and - the - monetary - system / id2558679 / page 5 of 11 β strategies, tools and communication practices β that service its dual mandate. 12 and, the bank of canada is well into a regular five - yearly review of its β inflation control agreement β. 13 14 beyond this, calls to build further resilience in the financial system β especially in its interface with the wider economy β is an emerging theme on the international agenda. 15 the first review of the reserve bank of new zealand act 1989 to be completed was that of monetary policy. now enacted in law, new zealand β s new monetary policy framework is being formally introduced on 1 april 2019. i will now elaborate on the specifics of the revised monetary policy framework with reference to its history, locating it in the wider context of other external policy reviews and consultation processes that the bank is involved in. reserve bank act 1989 : objectives & accountability the reserve bank act of 1989 was introduced at a time when there was great uncertainty about economic conditions in new zealand. in the 1970s and 80s, our country, like many others, had adopted a variety of strategies to deal with high and volatile inflation ; none were successful. the 1989 act gave the reserve bank operational independence to achieve the objective of price stability. a single decision maker model was introduced making the governor responsible and singularly accountable for the substance of monetary policy. the policy targets agreement ( pta ) between the minister of finance and the governor set explicit goals for monetary policy to pursue. 16 an agreement between a single decision maker and the government provided sufficient flexibility to make the appropriate revisions to the inflation target as we adjusted from high to low inflation. over time, there have been several revisions to the inflation target, settling in recent times on a band of 1 β 3 percent with a focus on the 2 percent midpoint. 17 12 federal reserve to review strategies, tools, and communication practices it uses to pursue its mandate of maximum employment and price stability, press release, 15 november 2018, ( https : / / www. federalreserve. gov / newsevents / pressreleases / monetary20181115a. htm ) wilkins, c., a. | 1 |
state one of the particular strengths of new york state is its diversity β and this is especially true from an economic perspective. in western and central new york there are top - tier universities, manufacturing businesses, a thriving professional services industry, as well as popular tourist destinations. since the 2008 financial crisis, the declining population trend in upstate new york of earlier decades had largely stabilized. in recent years, new businesses had sprung up and unemployment had fallen to historic lows. 1 / 3 bis central bankers'speeches all of this was against the backdrop of a strong national economy. at the start of the year, most forecasts anticipated continued moderate growth throughout 2020 and into 2021. according to the data for april, the unemployment rate now stands at a staggering 14. 7 percent β a figure i hoped that i would never see in my lifetime, and one that is sure to get worse before it gets better. if i think back to the economic picture of february, nobody could foresee this would be our reality within a few short months. it β s likely that the latest numbers do not reveal the full extent of the financial devastation faced by millions of american families. the data don β t capture those who had to leave their jobs, either for their own health or to take care of loved ones. many more people have had their hours reduced or have been forced to take a pay cut. it β s going to be some time before we have a detailed understanding of the full economic effects of the public health measures necessary to combat the coronavirus. what we do know is that the pandemic has put a large question mark over the positive trends experienced in our state, as well as the nation as a whole. as social distancing measures are relaxed, we will get a better understanding of how different industries are affected. we know that travel, hospitality, and retail have all been hard hit. what we don β t know is what the shape or timescale of the recovery will be. it β s going to be some time before we have a clearer view of the effects on other industries, including autos, higher education, manufacturing, and professional services. our response despite this extraordinary uncertainty, at the federal reserve we worked quickly to put measures in place to support the economy and set the foundation for a strong recovery. during the first half of march, the federal open market committee ( fomc ) brought the target range for the federal funds rate to near zero. 1 the fomc has indicated | christian noyer : re - examining central bank orthodoxy for un - orthodox times speech by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, at the conference of the global interdependence center / bank of france, paris, 26 march 2012. * * * the unconventional policies implemented during the crisis have transformed the face of central banking. but will these changes prove permanent and will β the unconventional become the new normal? β there is not yet definitive answer to this question. we may not, as easily as we would like, be able to revert exactly to the status quo ante. however, i strongly believe we must make sure that the gains from the pre - crisis period, in terms of monetary and price stability, are not compromised in the process. prior to the crisis, a description of central banks would have centred on four characteristics : they were focused with price stability being their primary or key objective, and no responsibility was sought or given for financial stability ; they were of limited size with very small balance sheets and interest rates as their only policy instrument ; they were independent, a condition recognised as necessary to anchor inflation expectations, and embodied in very strong institutional frameworks ; and they were successful : the β great moderation β, a period of exceptional low volatility in output and inflation, was widely seen as a product of efficient and wise monetary policies. there was a happy feeling that, at last, a perennial monetary regime had been found, well - tailored to the characteristics of a modern market economy. financial markets were efficient and the zero lower bound and liquidity trap appeared to be no more than historical curiosities. with hindsight, of course, we can see now that this β ideal β economy may never have existed. the great moderation was as much a product of β good luck β ( brought by disinflationary effects of globalisation ) than good policy. monetary stability is a necessary but not a sufficient condition of financial stability, because capital markets are not always and necessarily efficient. and downward financial spirals may quickly bring our economies to the point where interest rates can no longer be used as effective tools. therefore, as the crisis unfolded, central banks responded by taking unprecedented measures and, in the process, underwent three major changes a diversification of their interventions. in order to both : unclog financial markets ( both private and public ). this involved exceptional liquidity provision to | 0 |
philip r lane : q & a with reuters q & a with mr philip r lane, member of the executive board of the european central bank, conducted by mr daniel burns, at reuters newsmaker, new york city, 27 september 2019. * * * the following is a transcript of an on stage question and answer. let me welcome philip lane, member of the executive board of the ecb. that β s a role he went to earlier this year having served as the governor of the central bank of ireland since 2015. he has been an adviser to other international economic organisations, such as the imf, oecd, world bank and asian development bank. he has a phd in economics from harvard and earned his bafrom trinity college dublin where, until recently, he was the whately professor of political economy. i β m also told he is a liverpool fan, so he is riding high early in this premier league season and we β ll see if that confidence extends to team ecb. mr lane if you β d like to start. one reason i suppose that i wanted to talk here this morning was to further explain the context for our recent monetary policy decision. so if you look back over the last few years, if you look at the period from 2014 to 2018, essentially, the decision in 2014 by the ecb to tackle the risks of a slow - growing economy and the deflation risk in the euro area meant that during those years, from 2014 to 2018, what we saw was a fairly significant recovery. we had a big decline in unemployment in europe, a very strong record of job creation and a significant stabilisation of inflation. so compared with the period in 2014, when deflation risk was on the horizon, there was a significant recovery in the inflation process through that period. and so to more recent monetary policy history, at the end of 2018 the decision was made that enough progress had been made in bringing inflation back towards the target that we would end the net asset purchases. now in september 2019, part of the package that we announced a couple of weeks ago was : we did a small policy rate cut β the deposit facility rate went from β 40 basis points to β 50 basis points, we provided reinforced forward guidance and we restarted the net asset purchase programme ( app ), running at β¬20 billion a month. so you may ask : why was that necessary? well, when we made the decision last december to end net purchases under our app, the 2021 | most helpful in building an economy in which people are poised to get ahead. conversely, it would also be beneficial to understand whether any policies may hold people back or discourage upward mobility. there is some debate on how the level of economic mobility in the united states may have changed in recent decades and whether it is easier or more difficult for people to get ahead today than it was in previous generations. shortly, you will hear from a panel of distinguished experts with a range of views on this topic. looking at the very recent past, we should also be asking whether and how this may have changed coming out of the great recession. later, my federal reserve board colleague, governor brainard, will speak on a topic of significant interest to me and i expect to many others β how young adults are faring in the economy and what the short - and long - term implications may have been for entering the job market at a time of significantly constrained opportunities. this is another example of how exogenous factors β those over which individuals have little or no control β may play an important role in determining how easily someone is able to improve his or her circumstances. communities also affect economic mobility, and here, too, more research is needed to understand how and to what extent these effects occur. economists do not fully understand how locational differences affect economic mobility or the complex relationship between economic mobility and geographic mobility. there are community characteristics β for instance, the composition and level of local employment, schools, transportation, physical infrastructure, and community facilities β that may affect the economic mobility of the residents of that community. and there is also a community development analogue to economic mobility : further research may help us better understand why some communities succeed or fail in generating jobs, developing successful small businesses, attracting infrastructure investment, and so on. how do some places advance economically and create circumstances in which residents, in turn, are more likely to thrive? finally, there are important research questions to be answered about the relationship between economic mobility and the economy as a whole. it seems obvious that greater economic opportunity and mobility promotes a healthier economy. entrepreneurship, innovation, and hard work β surely key contributors to individual mobility β are central to a strong economy as well. but research could help us better understand how much mobility at the individual level matters for overall growth in productivity and economic output. to what extent is income mobility influenced by domestic or global economic forces, and to what extent can we promote mobility through domestic policy choices? bis central bankers β speeches these | 0 |
heartened by your show of support. as the economist adam smith once said, and i quote : β civilized society stands at all times in need of the cooperation and assistance of great multitudes. β bis central bankers β speeches it is our hope therefore that the same spirit of cooperation and collaboration will characterize our pursuit of continuing reforms in 2013 and the years ahead. and now, let us offer a toast to all of us coming together for an even stronger, more responsive, more inclusive, and more successful philippine banking system that will underpin a strong and vibrant philippine economy that will bring prosperity and a better quality of life to our country and our people. cheers! bis central bankers β speeches | ##ism. pragmatism 1 / 4 bis - central bankers'speeches in light of our limited knowledge about the economy and the influence of monetary policy, decision - makers are well advised to be pragmatic. they should choose policies that exhibit a certain degree of robustness to different circumstances. rather than seeking measures that are optimal in the context of specific situations, decision - makers are better off adopting less ambitious policies that produce reasonably good results in a sufficiently large variety of scenarios. in analysing such scenarios, we work with models that incorporate a relatively small set of key relationships. these relationships provide useful approximations of the economy's dynamics and the transmission of monetary policy. however, not everything can be captured in mathematical equations or measured with the available data. furthermore, our assumptions about the behaviour of market participants are drawn from the past, which is often only roughly comparable to a given situation in the present. policymakers must therefore also look beyond models and form broader β less formal β hypotheses about how the economy and the monetary transmission mechanism function. model simulations and forecasting must have a prominent place in our decision - making process β not least given the lag in monetary policy's impact on the economy. however, risk assessments and cost - benefit analyses should also involve judgements based on less precisely measurable evidence that cannot be directly incorporated into models. the snb takes such a pragmatic approach to decision - making. our policies do not follow a strict rule designed to be optimal with respect to a single model of the economy. our main inflation forecast is based on a suite of models, as well as judgmental adjustments drawing on a variety of outside information not captured in the models. such outside information includes monetary indicators and discussions with company managers. furthermore, our monetary policy decisions are not based exclusively on our inflation forecast. our forecast is always complemented by a careful risk assessment and comprehensive cost - benefit analysis by the governing board. the snb's pragmatic approach to decision - making allows us to respond quickly and flexibly to different kinds of shocks. however, it is important to note that pragmatism is not synonymous with unbounded discretion and a lack of discipline in policy - making. this brings me to the second principle : consistency. consistency while decision - making should be pragmatic, it should be consistent over time. policy decisions must be based on a firm commitment to the objective of price stability. they cannot be based on a period | 0 |
incoming β banks, from our point of view. they are making progress in preparing for the post - brexit world, although details and decisions are often still missing. that said, there are still some banks, mostly smaller ones, which seem to be delaying their final decision on relocating. second, there are those banks which access the uk market from the eu β the β outgoing β banks, from our perspective. most of these banks have also made plans, which is good. still, some of these plans remain a bit too high - level, in our view. so, more work needs to be done, even if the circumstances might be challenging. my message to all affected banks is this : don β t procrastinate. no one will wait for you. when brexit happens you will either be prepared, or not. i advise you to be prepared. and there are a lot of things that need to be considered. settlement finality, for instance, might be affected by brexit, because the protection of the eu settlement finality directive regarding the unwinding of transfer orders will no longer apply across the channel. another issue is the continuity of contracts, that is, the ability of market participants to continue servicing existing contracts, in particular derivatives contracts, without appropriate permissions in place. banks should therefore include this topic in their contingency plans. and finally, banks should assess what brexit means for their recovery plans. after all, it could 3 / 6 bis central bankers'speeches raise barriers and make certain recovery options less feasible. but brexit is not just something the banks have to think about. it also raises a lot of questions for us supervisors. and right from the start, we have worked hard to answer all these questions and map out our approach to brexit. we have to think about cross - border banking groups, for instance. in the wake of brexit, new banks will be set up in the euro area. and they will most certainly be part of banking groups which are headquartered outside the eu, in a third country. this raises the question of how autonomous the new euro area entities will be. will they become well - established banks? or will they end up as shell companies, which are overly reliant on other group entities from outside the eu? and to be very clear : that β s not what we want to see. we expect banks to manage some of their risks locally. they need local staff | , and they need local infrastructure. in respect of market risk, banks must be able, in the medium to long term, to trade locally on a permanent basis, and they must have local risk committees. likewise, they will need to trade and hedge risks not just with other group entities but with diversified counterparties. against that backdrop, we are currently working on a booking model assessment framework, which will set out what we expect from banks. naturally, our expectations will follow the principle of proportionality. in other words, large banks that are highly interconnected and conduct complex capital market operations will have to meet higher expectations. but it β s not just booking models that play a role here. i already mentioned the need for local staff. it seems, however, that some incoming banks have something in mind which is referred to as β dual - hatting β. it means that staff members carry out functions in more than one entity of the group. here, we have some concerns, in particular if dual - hatting includes important functions, extending to that of the ceo. wearing two hats might cause conflicts of interest and limit the time that can be spent on each. this is even more of an issue when the relevant staff members are physically located outside the euro area. in our view, certain key roles should not be part of such dual - hatting arrangements. in other words, euro area entities must be sufficiently independent from group entities that are located outside the eu. we will not accept shell companies ; that β s for sure. we do not see them as banks. and we won β t accept more inventive set - ups either. in order to avoid having to move staff and assets to the continent, some banks seem to be considering the idea of establishing a subsidiary in the euro area, which would then set up a branch in the united kingdom. this branch would use the subsidiary β s eu passport to enter the european market from the uk. we have serious misgivings about this. first, the primary reason for establishing a branch should be to serve the market of the country where the branch is based. then, there are legal issues. can a third - country branch use its parent company β s eu passport to access the european market from that third country? that cannot be in the spirit of european law. and the subsidiary might just serve as a shell company. as i said, we do view these kinds of design critically. internal models β setting capital buffers ladies and gentlemen, | 1 |
ΓΈystein olsen : the norwegian economy β macroeconomic developments and monetary policy speech by mr ΓΈystein olsen, governor of norges bank ( central bank of norway ), at the finance norway's capital markets day 2018, oslo, 6 april 2018. * * * accompanying slides first of all, i would like to thank finance norway for the opportunity to speak to you today about macroeconomic developments and monetary policy in norway. as you may be aware, a new regulation on monetary policy came into force earlier this spring. i will return to the regulation and its implications for the conduct of monetary policy and the interest rate outlook. but first, let me start abroad. chart : economic growth following the financial crisis the advanced economies have emerged from a challenging period. ten years ago the world economy was hit by a shock and thrown into the deepest recession since the 1930s. the economic downturn that followed the financial crisis stands apart from earlier recessions. it was both deeper and longer. potent measures were deployed to address the crisis, but it has still taken time to get the world economy back on its feet. monetary policy had to play a substantial role in the wake of the crisis. without powerful economic policy measures, there was a risk of a self - reinforcing recession. chart : global real interest rates central banks were led into unknown territory and implemented unconventional measures. already low long - term real interest rates were brought down even further. ten years of historically low interest rates and large - scale asset purchases give cause for reflection. an important question is what responsibilities should rest with a central bank. a related theme is what is meant by the objective of low and stable inflation. chart : inflation in norway the primary objective of monetary policy is to maintain monetary stability, as part of the central bank β s responsibility for the monetary system. inflation that is either too high or too low has undesired consequences, such as arbitrary wealth redistribution, underinvestment and resource misallocations. the result is lower activity and lower welfare. since 1990, an increasing number of countries have chosen to link monetary stability to a numerical inflation target. since the financial crisis, all of these countries have maintained their inflation targeting regimes. this reflects the overall positive experience with this framework. it did not get in the way of a powerful response to the financial crisis. in norway too, inflation targeting has functioned well. inflation has remained low and stable since it came down in the early 1990s, and the inflation target has anchored inflation | 2. 5 percent. an expected real appreciation could then occur partly in the form of wider price and cost differentials between norway and its trading partners. the period of rising oil revenue spending now appears largely to be over. thus, it is difficult to find compelling arguments for setting an inflation target in norway today that differs from that of our trading partners. the new regulation is consistent with how monetary policy has been conducted in practice in recent years. the regulation states that : β inflation targeting shall be forward - looking and flexible so that it can contribute to high and stable output and employment and to counteract the build - up of financial imbalances. β as long as there is confidence that inflation will remain low and stable, monetary policy can contribute to stabilising the economy. when the economy is exposed to shocks, the central bank can respond rapidly by adjusting the key policy rate, as we did in 2008 and when oil prices fell in 2014. a flexible inflation targeting regime can reduce the risk of unemployment becoming entrenched at a high level following economic contractions. nevertheless, monetary policy cannot assume primary responsibility for high output and employment. the level of output and employment over time depends on overall economic policy, including the tax and social security system, the wage formation process and the functioning of the labour market. monetary policy is only one component of such an overall framework. 2 / 4 bis central bankers'speeches the importance of financial markets and financial stability was underestimated before the crisis β also by central banks. the financial crisis revealed how harmful financial imbalances can be. monetary policy can in given situations take account of the risk of a build - up of financial imbalances. but monetary policy cannot take primary responsibility for heading off a gathering storm. regulation and supervision of financial institutions are the primary means of addressing shocks to the financial system. the build - up of financial imbalances has in recent years been given little weight in monetary policy among the major central banks. their focus has been on counteracting a deeper and more prolonged downturn and on preventing deflation. in countries that were less affected by the financial crisis, more attention has been devoted to financial stability considerations. in high - tech, global financial markets, capital moves rapidly between different currencies. a wide interest rate differential could have a substantial impact on the exchange rate, with repercussions on inflation, output and employment. this is why low interest rates in large economies that were severely hit by the financial crisis quickly | 1 |
indeed, the three recent rate hikes by the fomc were so well anticipated that financial markets hardly responded when those actions were announced. second, in the long run, communicating the central bank β s objectives and policy strategies can help to anchor the public β s long - term expectations - most importantly, its expectations of inflation. public confidence that inflation will remain low in the long run has numerous benefits. notably, if people feel sure that inflation will remain well controlled, they will be more restrained in their wage - setting and pricing behavior, which ( in something of a virtuous circle ) makes it easier for the federal reserve to confirm their expectations by keeping inflation low. at the same time, by reducing the risk that inflation will come loose from its moorings, well - anchored inflation expectations may afford the central bank more short - term flexibility to respond to economic disturbances that affect output and employment. the third way in which clear and open communication enhances the effectiveness of monetary policy the channel that will be the focus of my remarks today - is by helping to align financial - market participants β expectations about the future course of monetary policy more closely with the policy committee β s own plans and projections. as i will discuss, to the extent that central bank talk provides useful guidance to markets about the likely future path of short - term interest rates, policymakers will exert greater influence over the longer - term interest rates that most matter for spending decisions. at the same time, expanding the information available to financial - market participants improves the efficiency and accuracy of asset pricing. both of these factors enhance the effectiveness and precision of monetary policy. in the remainder of my remarks i will elaborate on the usefulness of central bank communication as a means of informing the policy expectations of financial - market participants and the public more generally. in doing so, i will discuss some new empirical evidence on the effects of central bank communication policies in both the united states and japan, drawn from a recent paper i prepared with two federal reserve colleagues. before proceeding, however, i should say that the views i express today are not necessarily those of my colleagues on the federal open market committee or in the federal reserve system more generally. communication and the effectiveness of monetary policy although people often speak of the federal reserve as controlling interest rates, in fact the fed directly affects only one very short - term and ( in the scheme of things ) relatively unimportant interest rate, the federal funds rate. as you may know, the federal funds rate is | term policy tightening, presumably on the expectation that the sharp pickup in growth in the third quarter of 2003 would induce the fomc to raise rates. however, this market reaction placed insufficient weight, i believe, on the fact that the expansion that began in mid - 2003 was characterized by exceptional gains in labor productivity, which implied in turn that the rapid growth in output did not materially increase the pressure on resources. with inflation low and with continuing slack in resource utilization, the rapid tightening projected by the markets did not appear justified, the surge in output growth notwithstanding. the language of the statement in august 2003 and subsequent meetings persuaded the markets that an autumn tightening was not in the cards, and market expectations adjusted accordingly. crucially, this change in expectations resulted in lower interest rates at all maturities, a development that helped support the expansion in the latter part of last year. when the policy tightening cycle finally began earlier this year, the fomc indicated that, with underlying inflation still relatively low, it would proceed β at a pace that is likely to be measured. β as i discussed in a speech in may, the gradualist approach implied by this statement is often appropriate during a period of economic and financial uncertainty ( bernanke, 2004 ). at the same time that it provided information on its outlook and its expected policy path, however, the committee properly insisted that its policies would be conditional on the arriving economic data. in particular, the committee noted that it would respond as necessary to maintain price stability. before 1994 the public did receive relatively immediate notice of monetary policy action if a change in the fomc β s target for the federal funds rate was accompanied by a change in the discount rate, which was always announced in a press release. to be absolutely clear, in pointing out the benefits of clear communication i am not asserting that central bank talk represents an independent tool of policy. indeed, if the central bank β s statements are not informative about the likely future course of the short - term interest rate, they will soon lose their ability to influence market expectations. rather, the value of more - open communication is that it clarifies the central bank β s views and intentions, thereby increasing the likelihood that financial - market participants β rate expectations will be similar to those of the policymakers themselves - or, if views differ, ensuring at least that the difference can not be attributed to the policymakers β failure to communicate their outlook, objectives, and strategy to the public and the markets | 1 |
arrangements for the recovery or potential resolution of central counterparties in a crisis situation can be put in place. we should not wait for a potential emergency to remind us of the urgency of this problem. it would be too late to address it then, as the cross - border upheaval in the banking sector in the context of the 2008 β 09 financial crises amply demonstrated. and the consequences in the case of central counterparties would be even more devastating than what we have seen in the banking sector. cross - border application inconsistencies finally, let me briefly mention another area of concern : the cross - border application of different rules. i leave entirely aside the question of whether or not we are finished with the bis central bankers β speeches standard setting. there are areas where additional work would be beneficial : think of collateral transformation and settlement cycles, and of the success of target2 - securities in fostering harmonisation around t + 2 settlement in europe. but this would require another conference and i will focus here on the application of existing rules. it is clear to all of us that due to the global nature of the otc derivatives markets, international coordination is absolutely indispensable to avoid inconsistencies, gaps or overlaps, or conflicting rules. at a more general level, the lack of a level playing field in the enforcement of the new financial standards has a potential to fragment the global financial system and to lead to a suboptimal allocation of capital of liquidity and to overconsumption of scarce resources, such as the safe assets used as collateral by financial market participants. otc derivatives are a case in point. i therefore strongly welcome the recent agreement reached between the european commission and the us commodity futures trading commission ( cftc ) on a common path forward regarding a number of measures on how to approach cross - border issues. in this context, the notion of substituted compliance is a useful tool, as it will help to reduce the risk of duplication and potential frictions of rules. clearly, convergence at a very granular level may not be achieved. it may not even be desirable, as specific differences may reflect the specific institutional and regulatory frameworks in the jurisdictions concerned. nevertheless, it needs to be ensured that the outcome in all material aspects is similar. a key objective of the g20 mandate for otc derivatives reform was to ensure effective systemic risk reduction in these markets. it is unlikely that we will achieve this objective by converging on the lowest common | there is no doubt of the scale of the challenge that the crisis has posed for all advanced economies, including the us and japan, there is also no doubt that we have taken significant measures in responding to that challenge. but much more needs to be done. i. financial and economic reform prompted by the crisis let me begin with financial regulation. the crisis calls for a comprehensive agenda of reform of virtually every aspect of the global financial system. we must control the forces that led the system to become absorbed with itself and ensure instead that it serves the real economy. and we must be assured that the financial system provides a sustainable contribution to economic growth. at this point, we have achieved a blueprint of more stringent bank regulations, which includes more loss - absorbing capital, better risk coverage and limitations on undue leverage. countercyclical capital buffers are intended to lower pro - cyclicality. the oversight of financial institutions, financial markets and market infrastructure are being strengthened, and the organisational structure of financial supervision is being overhauled. but much remains to be done. the most important aspect is implementation of these reforms. moreover, the issue of systemically important financial institutions still requires decisions, and oversight of financial markets must be strengthened. we cannot afford the consequences of limited transparency and excessive influence of dominant players and oligopolistic market structures. bis central bankers β speeches the new european system of financial supervision is an important step forward. the three new european authorities β for banking, for insurance and occupational pensions, and for securities and markets β are strengthening our focus on interlinkages and spillovers within the eu β s financial system. and the european systemic risk board is developing the tools it needs to issue warnings and make recommendations for action on potential future sources of systemic risk. inattention to financial risk was the prime cause of the crisis. inattention to macroeconomic risk β and the many ways in which such risk interacts with fragile fiscal structures β prepared the ground for the budgetary troubles that some euro area countries are facing today. this brings me to reform of economic governance. the eu is about to introduce surveillance focused on imbalances and divergences in competitiveness across the euro area. this is long overdue. since 2005 within the eurogroup and β shortly thereafter β publicly, the ecb has warned that such divergences create considerable risks and must be corrected. if fully implemented, macroeconomic surveillance will make a strong contribution to the smooth functioning of emu. it | 0.5 |
and risk - based capital is that they work. if and as they work, we may well observe what the critics note. but, that short - run effect has to be evaluated against the long run, and a judgment reached about the terms of the tradeoff. for in the long run, both market discipline and risk - based capital charges affect ex ante risk - appetites because lenders can calculate the likely impact of their actions. the resultant change in behavior should reduce the amplitude of cycles, and any resultant pro - cyclicality has to be evaluated against that backdrop. or, more generally, short runs have to be evaluated against the backdrop of long runs, regardless of mr keynes β s unfortunate observations about the latter. | overvalued exchange rate. with ltcm, there was similar excessive leverage and reliance on short - term financing arrangements. going forward, international organizations and national authorities will have to invest more resources in monitoring markets for signs of stress. while there is not a single indicator of banking or balance - of - payment crises, the tracking of financial market prices in many markets and financial flows across borders should help to identify trouble spots. where appropriate, national authorities should consider broadening the information they collect. complementary to these efforts, national authorities can take steps to facilitate transparency within markets. the key to avoiding excessive leverage is the market discipline that should be provided by market participants β creditors and counterparties. but market discipline works well only if counterparties share sufficient information to allow reliable assessments of their risk profiles. supervisors need to ensure that, before establishing credit relationships, regulated entities have a clear picture of a counterparty β s risk profile and have ensured that information relevant to that relationship will be available on a sufficiently timely and ongoing basis. public disclosure also has an important role to play, and authorities should make sure that appropriate requirements are in place. to be sure, public disclosure is unlikely to be sufficiently timely or detailed to meet the needs of creditors. still, it is essential to protect retail depositors and investors, and it provides a standardized framework from which customized bilateral disclosures can be drawn and elaborated. lastly, industrial countries have the responsibility to assist in the training of supervisors in emerging market economies, an area in which, i am pleased to say, we in the federal reserve system have been active for a while. we cannot afford not to take this responsibility, and in this regard, virtue is more than its own reward. we benefit in such technical assistance by strengthening our contacts with supervisors abroad, which is important when examining internationally active institutions based here at home, and by reducing the potential for adverse shocks from abroad. issues for further consideration as i noted, one of the contributing factors to asian financial distress was the ill - considered buildup of short - term foreign currency borrowing by banks in these nations from banks in industrial countries. some have attributed such behavior to the effects of an inappropriately low capital charge in the basel accord for short - term interbank credit extensions. they argue that the experience requires an increase in capital charges in order to effectively control the quantity of interbank loans. i do believe that we, in fact, should question the treatment of interbank credit by the accord. credit risk, in my | 1 |
. c. stein ( 2004 ), β cyclical implication of the basel ii capital standards, β economic perspectives, 1q / 2004, federal reserve bank of chicago. rajan, r. g. ( 2009 ), β cycle - proof regulation, β the economist, april 8, 2009. " contingent " regulations have the following properties. during the up - phase period, they should mitigate overconfidence to prevent the accumulation of systemic risks once systemic risk actually emerges, however, they should impose few restrictions to avoid reinforcing economic deterioration. in preparation for a severe erosion of confidence, they may be furnished with some policy incentives to restore confidence. to sum up, it is desirable that regulations be contingent on risk - taking attitudes of market participants, and thus strict during booms and loose during busts. " cost - effective " regulation is a concept which is important in the evaluation of regulations. this standard dictates that when one or more regulations could achieve the same results, the least expensive approach should be chosen. for example, if it is desirable to induce financial institutions to raise capital, it is better to do so during boom times when funding is readily available as opposed to slump times when the economy has begun to turn sour and the funding cost is higher. this standard is also important when considering how to use public funding. when making the decision between injecting capital and purchasing nonperforming credits, one must consider costs involved as well as benefits of policy effects. currently, the basel committee on banking supervision and many other fora, interest groups and ad hoc groups are floating many different proposals about how best to regulate finance. taking the " 3 cs " in mind, i would like to take up several regulatory reform proposals that have come out of the international debate and examine their significance. in doing so, it is perhaps easiest to divide regulations into two categories : " ex ante measures " to be taken to prevent the crisis and " ex post measures " to influence how the crisis plays out when it happens. these could also be termed " policies for normal times " and " policies for emergency times. " ex ante measures the basel committee on banking supervision is taking the lead in a discussion on ways to alleviate the procyclicality of capital adequacy requirements. as i explained, current capital adequacy requirements are considered to have procyclicality properties. in response, the discussions focus on the idea of introducing variable " buffer capital | drying up quickly in the interbank market. the event has come to be known as the " paribas shock. " many european banks were among those facing liquidity difficulties. confronted with this situation, the european central bank ( ecb ) promptly announced that it was prepared to supply massive amounts of liquidity into the short - term money market. 5 in point of fact, mmfs played a role in deepening the crisis during the " lehman shock " of september 2008 as well, as will be discussed below. the reserve primary fund, a major independent mmf, held large amounts of cp issued by lehman brothers. the fund incurred large losses because of the bankruptcy, plunging it into some argue that there may be an excessive maturity mismatch on financial institutions β balance sheets as a background factor that triggered the liquidity crisis. certainly, a close observation of the facts in the current financial crisis exposes not only the maturity mismatch but also the " liquidity uncertainty " that is the fundamental risk inherent in all financial instruments. it is a truism that liquidity is largely unrecognized while it exists and only understood once it disappears. for example, the design of abcps assumes that they can be sold on the market at any time if necessary, but when crisis actually occurred, these instruments could not immediately be sold. had institutional fund - raising been a little more long - term, there would have been a time cushion that might have enabled them to deal with the crisis in liquidity. although it may not be possible to take every possibility into account in the selection of assets, a constant awareness of the uncertainty of liquidity and continuous assessment of the maturity gaps between assets and liabilities are key factors in improving the soundness of financial institutions. one often - heard opinion is that credit default swaps ( cds ) and other financial derivatives amplified the instability of the financial markets in the current financial crisis. opinions will differ on the merits of cdss themselves, but no one would deny that the dysfunction of the over - the - counter ( otc ) market, where these instruments were primarily traded, undermined confidence in financial markets as a whole. on september 15, 2008, lehman brothers declared bankruptcy. right around the same time, the market began to talk about american international group, inc. ( aig ) being on the rocks as well, and its share price plummeted. aig sold large volumes of cds protection, in which it was believed that there | 1 |
##equacy framework ( caf ) review, launched under the italian g20 presidency, which has increased the ibrd's financing capacity by up to $ 150 billion over the next decade. we congratulate the bank for the newly adopted ibrd framework of restoration measures, while calling for rapid approval of remaining reforms to ensure its full functionality and alignment with major regional mdbs. 1 / 4 bis - central bankers'speeches we also applaud the work that the mdbs are jointly making to better recognize the value of existing callable capital. while continuing the dialogue with credit rating agencies, we urge management to integrate a part of callable capital into the wb's capital adequacy metrics. we also appreciate the newly established enhanced callable capital, and we call for the most inclusive approach in recognizing the financial leverage of shareholders'voluntary contributions in a way that is consistent with the credit rating agencies'practice. we should be very cautious in designing any reform of ibrd pricing which may have negative impacts on ibrd and ida financial capacity, which we have been striving to expand. moreover, we should be aware of any conflicting effects on the newly established framework for financial incentives. we also call for greater analysis of spillovers of price changes for the broader mdbs system, as well as on their implications for the bank budget anchor and the incentives for country graduation and private sector financing. we urge mdbs to develop effective partnerships with climate and environmental vertical funds so as to maximize scarce concessional resources. mdbs can greatly help improve access to these funds at scale and speed. thanks to their financial leverage, mdbs can also augment the resources available in vertical funds, by associating programmatic approaches with their parallel subscription of wbg hybrid capital and portfolio guarantees, to strengthen predictability of resources for beneficiary countries. we look forward to continuing work with the wbg to implement the conclusions of the forthcoming g20 independent high - level expert group review on the vertical climate and environmental funds. we appreciate the wbg's new approach to private capital mobilization. enhanced country diagnostics, stronger country dialogue, and closer collaboration among the wbg institutions are needed to increase the supply of effective projects. the wbg guarantees platform, the publication of gems data, the introduction of new products to mitigate foreign exchange risks, and the promotion of policy reforms specifically designed to improve the business environment will all help lower the actual and perceived risks of private investment in developing countries. | project standardization and securitization will contribute to attracting investors and accelerating the wbg's portfolio turnover, thus making capital more efficient. the poorest countries are facing the greatest hardships, and 700 million people worldwide are still trapped in extreme poverty. it is our duty to help them overcome challenges and build a more equitable future. as the largest international development fund in the world, ida has a major responsibility to help low - income countries return to the path of recovery and sustainable growth, as well as transition out of conflicts, poverty, and deprivation. this year, ida21 negotiations are creating a new architecture in order to better integrate ida into a one wbg and strengthen its alignment with the evolution agenda. ida must continue to be centered on concessional financing, meaningful policy commitments, and result - oriented targets. 2 / 4 bis - central bankers'speeches at this crucial juncture, we are committed to ensuring that ida remains the largest and most impactful partnership between borrowers β at different income levels β and donors. highly concessional resources are a vital source of financing for low - income ida countries, especially those lacking significant access to capital markets. at a time of heightened debt vulnerabilities, higher interest rates, and lower fdis, this is even more important. we should collectively deploy all efforts to mobilize adequate concessional finance for ida21. in this collective effort, the rule - based formula to increase ibrd transfers under better financial conditions and higher incomes β agreed upon in 2018 β is playing a crucial countercyclical role, and it should make shareholders proud of the ibrd's increased role among the key contributors to ida. the 2018 agreement remains a sign of solidarity and mutual responsibility for a poverty - free world. we also commend the further efforts of ida itself to stretch its own balance sheet with new caf measures. these measures allow for more efficient deployment of resources belonging to ida beneficiaries. we support their full engagements in this decision to best calibrate the appropriate balance between the degree concessionality and volumes, should a trade - off emerge. our ultimate goal is to spur long - term development through an effective ida21. the ida model is well tested in delivering complex and transformative projects in key sectors, based on country ownership. mission 300, in partnership with the african development bank, is an excellent model for using ida resources through regional multiphase approaches, building partnerships and β together with ifc and miga β mob | 1 |
in remote areas, even during the monsoon season. the project not only builds and upgrades markets, but also significantly boosts sales of agricultural produce and enhances access to inputs. additionally, ccrip enhances climate change adaptation capacity and promotes employment opportunities and gender empowerment. ccrip demonstrates the power of collective action in addressing specific national economic issues or local community development, and therefore sets a compelling precedent for malaysian dfis. instead of working in isolation, dfis can leverage pooled 1 / 3 bis - central bankers'speeches resources and expertise to jointly deliver targeted support, catalyse effective infrastructure development and drive transformative change. secondly, dfis can use blended finance to mobilise both public and private capital, specifically targeting near - bankable projects with significant economic spillover. by blending different sources of capital such as government grants, concessional funds, and private capital, the project risks can be diversified to align with the risk appetite of each capital provider. an example of a successful blended finance is the philippines water revolving fund ( pwrf ) 3. pwrf is a co - financing facility by the development bank of the philippines ( dbp ) in collaboration with japan international cooperation agency ( jica ) and usaid to incentivise commercial banks to lend to the water and sanitation sector. key features include a sovereign guarantee by the philippines'department of finance, a credit risk guarantee by a private guarantor, and technical capacity building programmes in water project appraisal for inexperienced lenders. the fund has successfully channelled over usd 234 million towards 21 water and sanitation projects, with approximately 60 % crowded in from commercial banks. as a result, roughly 6 million people now have improved access to piped water. this success story exemplifies how blended finance can unlock private sector participation and generate positive economic and social outcomes. thirdly, dfis have the capacity to influence government policy to build long term solutions. given dfis'wealth of expertise and a holistic understanding of the sectors and segments served, as well as close affiliation with government bodies, dfis are wellpositioned to surface pain - points and advise governing bodies on suitable policies to achieve climate goals. a good case of policy additionality is the melaka green city action plan ( gcap ), developed by the melaka state government with technical assistance from the asian development bank ( adb ) 4. through this policy, the melaka state government was able to reduce carbon | by more than the bank had expected, with more muted price pressures across a wide range of goods and services, consistent with the unexpected increase in excess capacity. bis central bankers β speeches β’ total cpi inflation has also been lower than anticipated, reflecting developments in core inflation and weaker - than - projected gasoline prices. β’ total cpi inflation is expected to remain around 1 per cent in the near term. it is expected to rise gradually, along with core inflation, to the 2 per cent target in the second half of 2014 as the economy returns to full capacity and inflation expectations remain well - anchored. β’ despite the reduction in global tail risks as a result of a series of actions by european and american authorities, the inflation outlook in canada is still subject to significant risks. β’ the three main upside risks to inflation in canada relate to the possibility of stronger - than - expected growth in the u. s. economy, higher canadian exports and renewed momentum in canadian residential investment. β’ the three main downside risks to inflation in canada relate to the european crisis, more protracted weakness in business investment and exports in canada, and the possibility that growth in canadian household spending could be weaker. β’ overall, the bank judges that the risks to the inflation outlook in canada are roughly balanced over the projection period. β’ reflecting all of these factors, the bank today maintained the target for the overnight rate at 1 per cent. β’ while some modest withdrawal of monetary policy stimulus will likely be required over time, consistent with achieving the 2 per cent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of imbalances in the household sector suggest that the timing of any such withdrawal is less imminent than previously anticipated. with that, tiff and i would be pleased to take your questions. bis central bankers β speeches | 0 |
on to consumers and lower prices are reflected in lower nominal salary settlements, then inflation could be structurally lower than it has been. this would give the monetary policy committee serious food for thought and in general would imply lower rates or at least a more gradual normalisation of interest rates. it could be a win - win - win scenario. if only we could dream! the south african economy is in a difficult space. we are negatively impacted by global developments, especially in europe and in china. combined with domestic concerns that i have outlined earlier, we do not anticipate robust economic growth or employment creation in the medium term. we hope we are wrong. it is possible for south africa to enter a virtuous cycle of rising confidence, rising investment and stronger growth fuelling employment gains ; bis central bankers β speeches leading to still higher levels of confidence. it will require strong leadership across the economy to create such a virtuous cycle. let me turn more directly to the challenges of collective bargaining. wage negotiations and the process of wage setting are important in the central bank β s thinking because wages are a key price in the economy. you would have often heard central bank governors decry periods when salary settlements are in excess of inflation and productivity growth. i would like to make clear what the bank β s thinking on this matter is. we are not opposed to workers receiving real salary increases. firstly, we feel that there should be an equitable sharing of productivity gains between workers and investors. an unequal sharing of such gains in either direction is unsustainable. secondly, there must, especially in the south african context, be an appropriate sharing of productivity gains between workers and senior managers. thirdly, productivity gains should be shared between existing workers and new additions to the workplace. if existing workers take all the productivity gains, then there is little scope to increase employment. the trend in recent years in south africa has been for workers to receive salary settlements in excess of inflation and productivity gains. firms respond to this situation by reducing staff numbers. this is clearly an unsustainable and undesirable development. the simple point that successive reserve bank governors are making is that in general, lower inflation enables larger real salary increases and higher productivity leads to higher incomes, higher investment and more employment. in conclusion ladies and gentlemen, i would like to leave you with a lesson from john nash, who won the nobel prize in economics for his work on game theory. his simple lesson is as follows : in | . ii. conduct of monetary policy next, let me explain the bank β s conduct of monetary policy. first, the bank has been pursuing powerful monetary easing through comprehensive monetary easing. under the comprehensive monetary easing framework, the bank encourages a decline in longer - term market interest rates and a reduction in various risk premiums through the asset purchase program. at the monetary policy meeting held last week, the bank, with a view to responding to the downside risks to the economy that i bis central bankers β speeches described earlier, decided to increase the total size of the program by about 10 trillion yen, to about 50 trillion yen. second, the bank has been making efforts to ensure financial market stability. third, in order to meet the biggest challenge for japan β s economy, which is the strengthening of the foundations for economic growth, the bank has been providing funds to private financial institutions that make lending and investment consistent with the policy goal. the funds are provided against collateral such as government securities, at a very low interest rate. with a view to making this framework more effective, in june 2011 the bank decided to establish a 500 billion yen new line of credit, through which it extends loans to financial institutions for their equity investments and the so - called asset - based lending ( abl ). the bank recognizes that japan β s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability. based on such strong recognition, the bank will continue to consistently make contributions as the central bank through the three - pronged approach that i have explained. bis central bankers β speeches | 0 |
in greater detail, starting with the economic analysis. since september 2008 the financial market turmoil has intensified and broadened. tensions have increasingly spilled over from the financial sector into the real economy. as a result, economic activity throughout the world, including in the euro area, has weakened further. in particular, foreign demand for euro area exports has declined, and euro area domestic activity has contracted in the face of weaker demand prospects and tighter financing conditions. the survey data and monthly indicators for november and december that have become available since our last meeting clearly point to a further weakening of economic activity around the turn of the year, indicating the materialisation of previously identified downside risks to activity. looking further ahead, on the basis of our current analysis and assessment, we continue to see global economic weakness and very sluggish domestic demand persisting in the coming quarters as the impact of the financial tensions on activity continues. at the same time, we expect the fall in commodity prices to support real disposable income in the period ahead. furthermore, the euro area should over time reap the full benefit from the effects of policy measures announced over recent weeks. in the view of the governing council, this outlook for the economy remains surrounded by an exceptionally high degree of uncertainty. overall, risks to economic growth remain clearly on the downside. they relate mainly to the potential for a stronger impact on the real economy of the turmoil in financial markets, as well as to concerns about the emergence and intensification of protectionist pressures and to possible adverse developments in the world economy stemming from a disorderly correction of global imbalances. it is crucial that all parties concerned make their contribution to lay sound foundations for a sustainable recovery. for this to materialise as early as possible, it is of the utmost importance to maintain discipline and a medium - term perspective in macroeconomic policymaking, pursuing a stability - oriented and sustainable approach. this is the best way to preserve and enhance confidence. the significant measures being implemented by governments to deal with the financial turmoil should help to ensure trust in the financial system and to ease constraints on credit supply to companies and households. with regard to price developments, annual hicp inflation has declined substantially since the middle of 2008, when it peaked at 4. 0 %. hicp inflation was 1. 6 % in december, after 2. 1 % in november. as we have emphasised on previous occasions, the significant decline in headline inflation in the second half of 2008 reflects mainly the sharp falls | financial tensions has contributed to a slowdown in the flow of monetary financial institution ( mfi ) loans to the non - financial private sector in recent months. more data and further analysis are necessary to form a robust judgement about the severity and scope of credit constraints and their possible implications for economic activity. to sum up, we decided to reduce the interest rate on the main refinancing operations of the eurosystem by a further 50 basis points, bringing the total reduction since 8 october 2008 to 225 basis points. today β s decision takes into account that inflationary pressures have continued to diminish, owing in particular to the further weakening in the economic outlook. the governing council recalls its operational decision, taken on 18 december 2008, to widen again the corridor formed by the rates on the eurosystem β s standing facilities as of 21 january 2009. looking forward, we continue to expect inflation rates in the euro area to be in line with price stability over the policy - relevant medium - term horizon, thereby supporting the purchasing power of incomes and savings. after today β s decision we consider risks to price stability over the medium - term to be broadly balanced. this takes into account the latest economic data releases and survey information, which add clear further evidence to the assessment that the euro area is experiencing a significant slowdown, largely related to the effects of the intensification and broadening of the financial turmoil. both global demand and euro area demand are likely to be dampened for a protracted period. a cross - check of the outcome of the economic analysis with that of the monetary analysis confirms this view. monetary expansion is moderating further, supporting the assessment that inflationary pressures and risks are diminishing. all in all, the level of uncertainty remains exceptionally high. the governing council will continue to keep inflation expectations firmly anchored in line with its medium - term objective of inflation rates below, but close to, 2 %. this supports sustainable growth and employment and contributes to financial stability. accordingly, we will continue to monitor very closely all developments over the period ahead. regarding fiscal policies, the governing council welcomes the european council β s reconfirmation of its full commitment to sustainable public finances. in this respect, the current economic situation calls for particular prudence with regard to the adoption of extensive fiscal stimulus measures, taking into account the particular fiscal situation in each country. the operation of automatic stabilisers will provide a relatively large and powerful fiscal impulse to the weakening economy, in addition to | 1 |
, dr. jha served as india β s ambassador to the united states and as governor of jammu and kashmir. he was also a member of the widely acclaimed brandt commission which made a persuasive case for north - south cooperation. that some of the issues raised in the brandt commission are relevant even today is a testimonial to the foresight and wisdom of the commission β s members such as dr. jha. 5. this lecture series in his name honours dr. jha β s outstanding service to the nation and his leadership of the reserve bank during a very critical period. so far, there have been 11 lectures. the last one was given by prof. john taylor in february 2010, two years ago, on β lessons from the financial crisis for monetary policy in emerging markets β. the lecture by prof. obstfeld this evening will be the 12th in the series. the distinguished speaker β prof. maurice obstfeld 6. it is perhaps presumptuous to introduce prof. maurise obstfeld, who is a distinguished academic and internationally renowned economist. regardless, i will indulge in the pleasure of doing so because the occasion demands it. 7. prof. obstfeld is currently the class of 1958 professor of economics and director of the center for international and development economic research ( cider ) at the university of california in berkeley. he got his doctorate from the massachusetts institute of bis central bankers β speeches technology ( mit ) in 1979 under the supervision of the legendary professor rudiger dornbusch of the textbook fame. thereafter, prof. obstfeld taught at columbia, university of pennsylvania and harvard before moving to uc, berkeley in 1989. 8. publishing papers is part of plying the trade of being an academic. a few of them also write text books. but far fewer of them write text books that become standard teaching material cutting across university and national barriers. prof. obstfeld belongs to that select category. many among the audience here must have learnt economics from his seminal textbook on international economics, co - authored with prof. paul krugman. 9. economists have been categorized in several ways β classical and neo - classical, macro and micro, keynesian and monetarist, free market and leftist. it is fashionable these days to categorize economists as salt water or fresh water to classify their academic persuasion which, curiously, seems to be correlated with whether their university is located inland or on the coast. prof | concluding, it will be remiss of me not to address the relationship between the real and the financial sectors in the context of globalisation, open economies and macro finance. economists have for long recognised the strong complementarities between the real and the financial sectors. financial development contributes to growth in either a supply - leading or a demand - following sequence ; that is, either the financial sector development creates the conditions for growth or the growth generates demand for the financial services. it is important to recognise that the financial sector in india is no longer a constraint on growth and its strength and resilience are acknowledged, though further improvements need to take place. on the other hand, without the real sector development in terms of the physical infrastructure and improvement in supply elasticities, the financial sector can even misallocate resources, potentially generate bubbles and possibly amplify the risks. hence, public policy may have a crucial role to play in ensuring balanced reforms in both the real and the financial sectors. the criticality for the policy makers is not only to ensure that there are no financial sector constraints on the real sector activity but also to assure that the financial sector reforms have complementarity with the pace and process of reforms in the real sector in india, along with, no doubt, fiscal empowerment β as consistently emphasised by the reserve bank. let me conclude by complimenting all those who have devoted their energies to bring to fruition this innovative collaborative academic activity with policy significance for the reserve bank of india. i am thankful to the organizers, specially prof. nachane for giving me this opportunity to be with you. we, in the rbi, look forward to the benefit of discussions in this conference. let me wish the conference all success, and, with success, hopefully many happy returns. thank you. | 0.5 |
ipumbu shiimi : addressing financial inclusion in namibia statement by mr ipumbu shiimi, governor of the bank of namibia, at the official launch of the nam - mic payment solution, windhoek, 24 april 2012. * * * director of ceremonies members of the board of directors of nam - mic payment solution members of the media distinguished invited guests, ladies and gentlemen i am pleased to join you in witnessing the official launch of nam - mic payment solutions, which will be a second mobile payment services provider authorised by the bank. i am equally pleased to note that nam - mic is embracing modern technology to provide value added services to its 200, 000 union members. ladies and gentlemen, the bank welcomes the nam - mic payment solution because it comes at a time when there is a greater need to find accessible, affordable and inclusive payment services to extend financial services to the excluded community. i therefore welcome the β nam - mic cellcard β authorised by the bank as an electronic wallet card that will enable payment for goods and services, person - to - person payments, airtime and electricity purchases. the bank has identified financial inclusion to be an important thrust in the bank β s developmental role in achieving the ideals of vision 2030. the bank, therefore, has made financial inclusion as one of the key strategic objectives of the bank. at the centre of the bank β s agenda to address financial inclusion, is access to financial services and payment services. as you may recall, in 2011, the bank with the banking industry launched the national payment system ( nps ) vision 2015 document. one of the strategies set out in that document, is to increase the accessibility of the payment system by providing for new types of participants, but at the same time maintaining the safety and efficiency of the payment system by adhering to sound internationally accepted payment system risk principles. in line with the nps vision 2015 the bank issued a determination on the issuing of electronic money in namibia which became effective on the 1st of march 2012. this regulation essentially applies to all persons who intend to issue e - money in namibia. both banking institutions and non - bank actors are permitted to apply for authorization to issue emoney. as such any persons operating and / or issuing electronic money without the distinct authorization from the bank of namibia is committing an offence in terms of the payment system management act, of 2003, as amended. the determination on the issuing of electronic money paves the way for the development of innovative solutions which are supported by a | tom alweendo : announcement of the commencement date of the financial intelligence act 2007 speech by mr tom alweendo, governor of bank of namibia, at launching the awareness campaign on provisions of the financial intelligence act 2007, windhoek, 29 april 2009. * * * distinguished invited guests ; members of the media ; ladies and gentlemen ; i would like to welcome all of you to the bank of namibia this morning. the occasion today is to officially launch the commencement of the financial intelligence act and to also launch our public awareness campaign. as you are all by now aware, the financial intelligence act was enacted in 2007. the act empowers the bank of namibia, amongst others to receive suspicious transaction reports from reporting entities, to analyze such reports, and to disseminate the intelligence gathered to law enforcement agencies for further investigation and possible prosecution. the bank is further required to conduct compliance audits with all reporting entities to ensure effective adherence to this act. the key in combating money laundering through the reporting entities is to know who their customers are. if they know their customers well, they will be able to detect attempts at money laundering. in fulfilling this mandate, since 2007 we have been preparing ourselves to be ready with the implementation of the act. in this respect, i am happy to say that we have managed to build the necessary capacity and that we are more than ready to implement the act. due to some legislative delays, the bank was not able to commence with the implementation of the act as early as we would have wished. however, i am happy to report that the commencement date for the act is now set to be the 1st may 2009. in order to educate the public on money laundering, we are also starting with a comprehensive awareness campaign. this is necessary because we are only likely to successfully combat money laundering when the public in general understand as to what is at stake. financial crime, of which money laundering is part, is increasingly becoming a global phenomenon. this is despite the enactment of laws designed to curb financial crime. this is not only a threat to the global financial sector, but if allowed to flourish money laundering has the potential to become a threat to society. it can lead to the accumulation of economic power to organized crime. this development has the potential of eroding our political and social systems based on elected representation as we know them today. in other words, the social consequences for allowing money launderers to operate unchecked could spell disaster for stability and the rule of | 0.5 |
weak price pressures. see kalemli - ozcan, s., laeven, l., and d. moreno ( 2015 ), β debt overhang, rollover risk and investment in europe β, mimeo. kydland, f. and e. prescott ( 1977 ), β rules rather than discretion : the inconsistency of optimal plans β, journal of political economy, 85, 473 β 490. barro, r. and d. gordon ( 1983 ), β rules, discretion and reputation in a model of monetary policy β, journal of monetary economics, 12, 101 β 120. bis central bankers β speeches indeed, eggertsson and pugsley ( 2006 ) show that, in a fragile post - crisis situation where monetary policy is sustaining the recovery, any perception that the central bank is adopting a greater tolerance towards a future regime of lower inflation can have very negative effects. looking at the great depression period, they argue that the return of the us economy to recession in 1937 resulted from a perception that the fed had abandoned its commitment to reflation, creating pessimistic expectations of future growth and inflation that fed into both expected and actual deflation. the economy then became caught in an equilibrium of β contractionary beliefs β. 10 third, once central banks let inflation expectations drift away from their previous anchor and fail to counteract this through forceful policy action, there is no guarantee that expectations will naturally settle at another desirable level. as orphanides and williams ( 2004 ) show, it is precisely by defending its inflation objective that the central bank facilitates the public in learning how to process the flow of information, and thereby influences the formation of inflation expectations. 11 without such an orientation, expectations may continue to drift in the same direction, and a re - anchoring of inflation expectations may morph into an outright de - anchoring of inflation expectations with no visible end - point. in such conditions, monetary policy would face an uphill battle to preserve inflation rates compatible with any reasonable definition of price stability. to see this, consider a simple phillips curve framework that relates inflation to measures of economic slack. accommodative monetary policy reduces the degree of economic slack and thereby puts upward pressures on inflation β a move of the economy along a given phillips curve. but when inflation expectations change, this is not the only dynamic pattern taking place. instead, a change in inflation expectations alters the inflation rate to which the economy will gravitate when it | peter praet : the european central bank β s fight against low inflation β reasons and consequences speech by mr peter praet, member of the executive board of the european central bank, at luiss school of european political economy, rome, 4 april 2016. * * * i would like to thank jonathan yiangou, john hutchinson and federic holm - hadulla for their contributions to this speech. accompanying slides can be found on the european central bank β s website. in the last half century central banks have come a long way in how they approach their macro - stabilisation functions. as recently as the late 1970s, views still diverged across advanced economy central banks as to the efficacy of monetary policy in delivering price stability. some, such as the bundesbank and the swiss national bank, were already committed to using monetary measures to control inflation. but others, such as the federal reserve and various european central banks, remained more pessimistic in their outlook, believing that monetary policy was an inefficient means to tame inflation and that other policies should be better employed. 1 illustrating this view, fed chairman william miller observed in his first fomc meeting in march 1978 that β inflation is going to be left to the federal reserve and that β s going to be bad news. an effective program to reduce the rate of inflation has to extend beyond monetary policy and needs to be complemented by programs designed to enhance competition and to correct structural problems β. 2 in this context of timidity about the effectiveness of policy, inflation expectations were allowed to de - anchor, opening the door to bouts of double - digit price rises. the outcome was a phase of so - called β stagflation β, where both inflation and unemployment rose in tandem. the policy lesson that emerged from this period was that sustainable growth could not be separated from price stability, and that price stability in turn depended on a credible and committed monetary policy. from late 1979 onwards β with volcker β s assumption of the fed chairmanship β central banks converged towards this orientation and took ownership for fulfilling their inflation mandates. as their renewed commitment to control inflation became understood, inflation rates fell steeply in a context of improved anchoring of inflation expectations. central banks abandoned the self - absolving notion that price stability depended on other, non - monetary authorities. as is well - known, the events that led to the 2008 crash confirmed that price stability is not a sufficient condition for macroeconomic stability | 1 |
committed advocate of the basel reform agenda. upon joining the basel committee as an observer in 2014, we became a proactive adopter of global regulatory standards. we are convinced that higher and better quality bank capital is the cornerstone of a sustainable global financial order. the uae has indeed benefitted from the basel committee β s outstanding efforts in many ways, supporting the evolution of our financial sector - in terms of its depth, breadth, efficiency and stability. critics who argued that such reforms would derail global economic recovery have been proven wrong. on the contrary, it has been proven that only well - capitalized banks can continuously provide credit through the economic cycle and remain profitable. we subscribe to the need for a good balance between risk sensitivity, comparability, simplicity and β let me add - proportionality - of the global framework. looking back at our own implementation of the basel framework in the uae, we remain conservative in our approach. it takes into account the idiosyncratic risks of our banking system, and the need to mitigate their impact in a way which is appropriate for our jurisdiction : first, a wider macro - prudential overlay is applied to our regulatory framework. to address negative externalities posed by domestic systemically important banks ( dsibs ), capital surcharges are imposed on dsibs. this is largely driven by their concentrated market position, similar business models and entrenched interconnectedness with major counterparties. this surcharge also covers an implicit pillar 2 component, while a detailed design of pillar 2 framework is being finalized. higher capital requirements are also motivated by uae β s institutional environment, which presented potential for improvements in areas such as resolution regime for banks and bankruptcy proceedings for corporate borrowers. i am pleased to say that concerted efforts are already underway to address them. additionally, banks have opted to maintain significant capital buffers over and above minimum requirements. as a result, the uae banking system has sustained high level of capitalization, as evidenced by the average leverage ratio of 10. 5 % for the four dsibs. second, the cbuae has issued comprehensive requirements on large exposures, which represent a conservative approach to sovereign risk and limits excessive risk concentrations. past banking crises globally have either led to, were accompanied by or trailed closely behind a sovereign crisis. learning from these lessons, we came up with an appropriate response. we are fully supportive of bcbs β s ongoing work on sovereign risk. clearly, ignoring this | opening remarks by h. e. the governor of the central bank of the uae for the 20th international conference of banking supervisors abu dhabi, 28 november 2018 as prepared for delivery esteemed colleagues, ladies and gentlemen, welcome to abu dhabi and to the 20th international conference of banking supervisors ( icbs ). it is a privilege to host all of you during a very special year for the uae. we are celebrating the year of zayed β marking 100 years since the birth of uae β s founding father. consistent with the values advocated by the late sheikh zayed, the year of zayed celebrates people of all nationalities, faiths and cultural backgrounds. this event with its global participation is a true reflection of these values. [ introduction ] on this occasion of hosting the icbs conference, let me emphasize that the basel committee β s role as an international standard setter has progressively solidified over the years, and its work has become equally important for both developed and emerging market economies. let us remind ourselves of the major shortcomings of the basel framework prior to the global financial crisis β ( 1 ) too little capital with too little going concern loss absorption capacity, ( 2 ) excessive leverage, ( 3 ) neglect of liquidity risks, weaknesses in banks β resolvability and ( v ) insufficient macro - prudential considerations. a decade later, tremendous efforts to remedy such fault lines have culminated in a balanced set of common standards β the basel iii. reaching consensus on the necessary reforms was a difficult journey. from broad consensus in 2010 to its finalization seven years later, this achievement required strong determination, leadership and coordination across the globe. i take this opportunity to applaud basel committee β s many successes - ( 1 ) strengthening the global financial system, ( 2 ) addressing β too - big - to fail problem β, ( 3 ) improving banks β risk management, and ( 4 ) providing credible tools to minimize procyclicality of prudential regulations. significant improvements have also been made in home - host cooperation, which is the bedrock of resilience of global financial system and help minimize the scope for regulatory arbitrage. in my remarks today, i will say a few words on our own implementation of basel standards in the uae, followed by a brief focus on several shared challenges for banking supervision that the central bank of the uae ( cbuae ) considers important. [ the uae approach to the basel committee on banking supervision ( bcbs ) standards ] the uae remains a | 1 |
consider a standard measure of problem loans : the ratio of noncurrent and delinquent loans to bank capital and the allowance for loan loss. in the first quarter of 2009, that ratio rose for all loans to 24 percent for the median minnesota bank, double the 25 - year median level of 12 percent. for commercial real estate loans, the problem loan ratio rose to about 9 percent, nine times higher than the 20 - year median of 1 percent. bis central bankers β speeches the problem loan story has changed completely. the ratio for total loans is at 9. 5 percent for the median minnesota bank, right around the 25 - year low. and the ratio for problem commercial real estate loans for the median minnesota bank is at 2 percent and rapidly returning to pre - crisis levels. these same general patterns hold for the nation β s banks. the low earnings and negative loan growth for the median minnesota bank have also improved, but not yet to pre - crisis levels. return on average assets, a standard measure of profitability, has been holding very steady for the past several years at just below 1 percent. this is clearly better than the trough of 0. 5 percent during the crisis. but the 20 - year median is 1. 15 percent. currently, the return on average assets of the median minnesota bank is at 0. 94 percent, which is at the 19th percentile for the past 20 years. year - over - year net loan growth for the minnesota median bank is at 4. 6 percent. again, this is much better than the β 4. 7 percent crisis trough ; indeed, negative growth persisted through the end of 2012. but the 25 - year median is nearly 6 percent for minnesota banks, while 4. 6 percent is at the 39th percentile. the nation β s banks show similar general patterns. so, yes, there has been recovery in important ways for community banks in the state. but other important measures continue to lag historical norms more than five years after crisis depths. this weaker - than - hoped - for performance is one factor raising concerns for community banks about the additional supervision and regulation burden that faces them post - crisis. i β d like to turn to those concerns now. post - financial crisis supervision and regulation of community banks low earnings levels have many potential sources. let me mention three. first, on the revenue side, weak loan growth naturally leads to more competition for available loans and drives down returns. second, if banks can β t make more loans, | amando m tetangco, jr : we are all wealth watchers speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the wealth watch book launch, manila, 3 july 2015. * * * this is the second time this week that we are launching a document related to financial empowerment. just two days ago, we launched the national strategy for financial inclusion, the document signed by 13 government agencies ( including the bsp ) which sets the strategic map for a unified national financial inclusion landscape. it is a living document that is meant to be populated by tactical plans of each of the agencies involved. and it is envisioned that following the launch, significant partnerships among government agencies as well as with the private sector would ensue. as you know, we had the queen of the netherlands, the un secretary general β s special advocate for financial inclusion for development, queen maxima, witness that occasion as our special guest. while we do not have a queen with us today, we are most privileged to have you our most significant partners in this journey of financial literacy and education and consumer protection to share this occasion with us. today, we launch a different document. a book. in fact, a β wealth book β. unlike the nsfi, this wealth watch book is not authored by 13 government agencies, but the book is authored by those β closer to home β β by our very own bspers from the financial consumer protection department ( fcpd ). the book is not for those who have no access to financial products and services but, it is for those who have a little bit more than others well, perhaps significantly more but who may need to be just as β watchful β in many respects, however, this book and the nsfi are about the same. because like the nsfi, our wealth watch book deals with information, and how you can make that information β work β for you. it is about stewardship of what you have. it is about preparing for unexpected events. it is about growth and growing what you have so you can have more. our launch today brings to mind the nba draft. at each draft, media would focus on how those towering β boys β who β ve been drafted would now move from β living within tight college budgets β to becoming and i quote from yahoo sports β money making machines β. sadly, however, we so often hear | 0 |
is home working good for you? speech given by andy haldane chief economist and member of the monetary policy committee ( mpc ) engaging business summit and autumn lecture 14 october 2020 the views expressed here are not necessarily those of the bank of england or the monetary policy committee. i would like to thank jack meaning and andrea sisko for their help in preparing the text. i would like to thank lena anayi, andrew bailey, john lewis, sophie piton, jo place and chris young for their comments and contributions, and the organisers of the engaging business summit autumn lecture for giving me the opportunity to discuss these issues. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice i am delighted to be speaking at this β engaging business β summit, at such a critical time for business, for workers and for the wider economy. the focus of today, and the excellent background report, is happiness in the workplace. this is an issue in which everyone has a stake. it is particularly pertinent with many people having had to adapt their ways of working as a result of the covid crisis. indeed, this year may well have seen the largest shift in working practices ever seen, certainly the largest in modern times. that begs a host of questions about the impact of these changes in working practices on workers, businesses, communities and the wider economy. for economists like me, it raises questions about the impact on productivity and output in the workplace. as arid as these concepts can sometimes sound, they are crucial for shaping how this crisis will affect incomes and living standards over the medium - term. equally important are issues of well - being, not least given understandable concerns about how the virus and lockdown are affecting our mental health. the background report for this event is timely in providing some early answers to these questions. 1 taken at face value, its conclusions are encouraging. workplace happiness is, in general, higher and many are feeling a greater sense of workplace empowerment. at the same time, it is too early to be reaching definitive conclusions on what the long - term effects of these seismic shifts in how we work will be. it is also crucial to recognise that these changes have affected individuals in very different ways. for many frontline workers - from health and social care, to public transport and police β home - working has simply not been an option. those jobs, and many others like them, have become both harder | speech of the governor on the occasion of the 20th anniversary of the cbk honourable... it is my great honour and pleasure to welcome you today for marking the 20th anniversary of the establishment of the central bank of the republic of kosovo. it is my great pleasure to have representatives of local and international institutions among us today, without whom it would not be possible to achieve the successes we have achieved to date. therefore, on behalf of all cbk staff and on my behalf, i would like to express my heartfelt gratitude for all that you have done for us over the years and for the honour you have done to us by joining us in marking this very important anniversary for us. to better understand the situation we are in, and the way we are heading, it is a good idea to go back a little retrospectively to remember how we got here, and to use the past as a driving force to move towards a more successful future. the central bank of the republic of kosovo was established in 1999, at a time when kosovo was beginning to build all institutions from scratch. along with the establishment of institutions, the foundation of the market economy in our country was also beginning. faqe 1 nga 7 cbk as a new institution, in spite of the great efforts to organize the institution itself, where everything was starting from scratch, began to commit itself towards building the financial infrastructure necessary to create the conditions for the financial system to start functioning in kosovo. this way, the cbk soon began the activity of building the payment system, formulating the regulatory framework for the financial sector, and developing other functions necessary to serve the country's economy. the beginning of the cbk's operation coincided with the time when most of the countries in the region were about to complete the transition process, where the omissions made at the beginning of this process, made the transition lengthy and difficult. cbk showed high diligence and learned from the difficulties that other central banks of transition countries went through, and chose the model that proved successful in developing an efficient and sustainable financial sector. in this way, cbk laid the foundations of a financial system based on private ownership and from the beginning opened the doors for the entry of foreign financial institutions. in fact, it was foreign financial institutions, especially banks, which first started operating in kosovo, bringing contemporary financial industry experiences and restoring the trust of the local people in the financial system. also, the cbk has consistently followed a sound licensing policy | 0 |
various kinds of moral hazard, both socially and economically. it is true that the zero interest rate policy, which provides the market with ample funds to guide the overnight rate to virtually zero, could create a situation where banks and firms have become less sensitive to borrowing costs and liquidity risks. indeed, it is through this effect that the policy supports economic recovery and promotes structural reform. at the same time, it cannot be denied that the policy may tend to delay structural reform by making economic agents with a large amount of debt less conscious of borrowing costs and liquidity risks. of course, i do not think it appropriate to lift the zero interest rate policy to prevent moral hazard. let me make it clear that the termination of the zero interest rate policy depends on whether we can be confident that the economic recovery is being primarily led by private demand. is the termination of the zero interest rate policy consistent with fiscal policy? the fifth point is the relation between the termination of the zero interest rate policy and the government β s fiscal policy stance. some argue that a stimulus from the monetary policy side is essential and it is premature to terminate the zero interest rate policy because no further stimulus from fiscal policy can be expected considering the significant deterioration in the government β s fiscal position. others argue that, when the government formulates a supplementary budget to stimulate the economy, fiscal policy aimed at achieving an economic recovery led by private demand and the bank β s monetary policy should be harmonized. of course, the bank of japan never ignores the government β s fiscal policy stance when conducting monetary policy. as i have reiterated many times, we will not terminate the zero interest rate policy unless we feel confident that the economic recovery is led by private demand. chart 6 shows the contribution of private demand and government expenditure to the year - on - year growth of real gdp, which indicates that the driving force behind the economy has steadily shifted from government expenditure to private demand, and the gdp growth rate has been gradually rising. the bank of japan will terminate the zero interest rate policy only when it feels confident that an economic recovery led by private demand is in prospect, and i believe this is consistent with what the government is aiming at. impairing the proper functioning of the market mechanism the sixth point relates to the functioning of the market mechanism. there is a view that the proper functioning of the financial market has been impaired by the zero interest rate policy and that it should be restored by terminating the policy. in fact, we too were worried about the impairment | 1999. for example, the year - on - year growth rate of real gdp increased from minus 0. 4 % in the first quarter of 1999 to plus 0. 7 % in the same quarter of 2000, and industrial production growth rose from minus 3. 8 % in the first quarter of 1999 to plus 7 % in the second quarter of 2000. business sentiment in terms of the tankan diffusion index for all industries and sizes of firms has substantially improved from minus 44 in march 1999 to minus 18 in june 2000. and, the consensus forecast of the private sector for real gdp growth for this fiscal year has been revised upward from 0. 8 % at the beginning of this year to 1. 5 % recently. moreover, june β s tankan survey showed that corporate profits were expected to mark a double - digit increase for two consecutive years in fiscal 1999 and 2000. while inflation in terms of wpi is slightly above the previous year β s level, that in terms of cpi is slightly below. there are a number of factors responsible for the moderate economic recovery. first and foremost is the implementation of several important policy measures to restore financial system stability. public funds were injected into major banks to strengthen their capital base and a legal framework was established to speed up the bankruptcy process. under such circumstances, financial institutions themselves are striving to reconstruct their management. the second factor is support from macroeconomic policy, which includes both fiscal policy of the government and the zero interest rate policy of the bank of japan. the third factor is the upturn of overseas economies. in addition to the expansion in the united states and europe, asian economies have been recovering rapidly after overcoming currency and financial crises. the fourth factor is the boom in the high - tech and it - related business areas. whether trends like the it revolution witnessed in the united states will spread to japan depends on how firms and individuals as users take advantage of information technology. japanese producers related to high - tech business have swiftly responded to the rapid increase in demand both at home and abroad, and an increasing number of them have been expanding investment reflecting the tightening supply and demand conditions. it is natural that economic recovery leads to the question of whether the zero interest rate policy should be terminated. as i mentioned, the bank of japan announced in april 1999 that it would continue the zero interest rate policy until deflationary concern had been dispelled. discussions at subsequent monetary policy meetings have disclosed that such deflationary concern would be dispelled if we | 1 |
in which that in formation is publicized and shared. banks must increase their level of technical knowledge, including expertise in products, production methods, markets, about the firms applying for loans, particularly in this recession, when loan applications tend to be for generic purposes and less tied to investment plans, which are easier to evaluate objectively. 14 we are moving towards a different financial system from the one we are used to. policies, laws and practices must be geared to allowing firms β especially innovative ones β to have more of their own capital, paid in by the owners or from specialized funds, but also raised on the capital market. 15 for this reason italian smes must take a decisive step towards ensuring as stiglitz and greenwald say ( 2014 ), starting from arrow β s lesson ( 1962 ), β learn to learn, learning β. phelps ( 2013 ). levine ( 2014 ). see, for example, beck ( 2013 ) and cbi ( 2012 ). bain & company and iif ( 2013 ). according to our calculations, today in italy there are 500 enterprises that meet the criteria and would benefit by being listed on the stock exchange. bis central bankers β speeches that information about their status is reliable and widely available. the level of bank debt will have to be reduced. banks in turn must accelerate a change that has already begun for some of them. they too are entering a new phase in which it is essential for them to be very well capitalized because of the risks of which we are now all well aware : they must therefore satisfy the general conditions of profitability, transparency and good governance that will allow them to obtain funding at competitive rates ( to pass on to lending rates, reducing them ) and, if necessary, to raise new capital rapidly and in sufficient quantity. besides improving their capacity to understand which companies to lend money to, they must also add financial consultancy to their traditional lending activities, thus helping firms to decide the best level and composition of their financial liabilities and supporting their entry to the markets. these new services could build income streams that would at least offset the loss of a part of traditional banking activities. conclusion we italians told ourselves from the outset that we were not to blame for the global financial crisis, and it was true : on the eve of the flare - up, we had a financial and a banking system that were largely immune to the problems famously discovered in the anglo - american systems. our fault was another : over the preceding decade we allowed the economy to | s place in assessing creditworthiness and without being a burden on the budget in the immediate, but only after bankruptcy is announced and within the limit of the ratio of insolvencies to the total guarantees granted. a good example is already provided by the central guarantee fund operating under the aegis of the ministry for economic development, which partially guarantees banks that grant loans to small firms and participates in the latter β s screening. since 2009 the fund has granted guarantees on loans amounting to more than β¬40 billion. the scale of the fund β s operations could be further increased. see, among others, panetta ( 2014 ) and the classic stiglitz and weiss ( 1981 ) cited therein. agenda possibile ( 2013 ), panetta ( 2014 ). haselmann, pistor and vig ( 2010 ). bis central bankers β speeches securitizations serve essentially to distribute the risk inherent in bank loans to smes among a large number of bank and non - bank institutional investors. in view of the small size of the loans, it is necessary to create asset - backed securities, i. e. packages of loans in the form of bonds, of which it is not too difficult to assess the quality, and place the various tranches with different investors according to their risk appetite. operations can be carried out by the originator banks themselves or by other financial entities. these instruments could also be backed in part by public guarantees. notable among the possible investors are insurance companies, which are often hard put in the present phase of the cycle to find desirable investments for their technical provisions in terms of risk / return and maturity. to develop such a market some regulatory problems must be overcome, firstly at international level. the global financial crisis has discredited instruments such as abs, which were abused by pushing their complexity and opacity to the limit. but the abuses can be forbidden without eliminating the instrument itself, which retains its rational basis. the ecb has launched a very large programme for the purchase of simple and transparent abs in order among other objectives to facilitate the financing of smes. the bank of italy and ivass are following the matter closely. with great rapidity this summer ivass drafted amendments to the regulations on insurance companies β investments consistent with the new legislative provisions introduced recently to increase the competitiveness of the italian economy. the new prudential regulations, aimed at achieving greater diversification of risk, will also allow insurance companies to grant credit directly subject | 1 |
countries like the philippines, with a long tradition of microfinance, have better institutional and financial infrastructures, which can be leveraged to provide a wider range of services, and cater to more clients at the β bottom of the pyramid β. ladies and gentlemen. this happened because we have dedicated and creative microentrepreneurs like our cma finalists and winners, responsive microfinance institutions, a consultative regular, and people who patronize the goods and services from our microentrepreneurs. moving forward, let us continue to find ways to maximize the opportunities and benefits we can derive from microfinance. i look forward to seeing our cma winners take advantage of the mentoring program organized by citi, guidance from the microfinance council and even better products from microfinance institutions. at the same time, you can count on the bangko sentral to keep working with industry players and advocates to nurture the development and maturity of the microfinance sector. we look forward to innovations that can target financially - excluded segments of our population, with affordable and accessible financial services. at the same time, we will ensure that our regulations will keep providers and products safe, sound, and responsive to diverse needs of our microfinance clients. once again, congratulations to all our winners and all those involved in this this 12th cma! mabuhay ang ating microfinance sector! mabuhay ang ating mahal na bansang piilipinas! maraming salamat, at magandang hapon sa inyong lahat! bis central bankers β speeches | generation currency coin series. prominently featured on the obverse of the 20 - piso coin is manuel l. quezon, the first president of the philippine commonwealth who advocated the adoption of the national language ; created the national economic council, the precursor of the national economic development authority ; and worked passionately to regain philippine independence. the reverse side features the bsp logo and the malacanan palace, the official residence of the president of the philippines. consistent with the theme of the ngc coin series, a native flora is featured in the 20 - piso coin β the nilad, which is believed to be the origin of the name of the country β s capital city, manila. it should also be mentioned that president quezon is the first philippine president to reside in this proud and iconic palace. these design elements put emphasis on the cultural and historical significance of coins to 1 / 2 bis central bankers'speeches philippine society. moreover, the design of this bi - color 20 - piso ngc coin makes it easily distinguishable and highly secure. the bsp is also introducing today the enhanced 5 - piso ngc coin with nine sides to make it more distinct from other denominations in the ngc coin series. this reaffirms bsp β s commitment to not only uphold the highest standard of excellence, but also listen to the public β s observations as it endeavors to bring central banking closer to the people. maraming salamat and mabuhay! 2 / 2 bis central bankers'speeches | 0.5 |
good cop / bad cop speech given by sam woods, deputy governor, prudential regulation and chief executive officer, prudential regulation authority mansion house city banquet, london 25 october 2018 i am grateful to ivar van hasselt and joanna keeble for their assistance in preparing this speech and to other colleagues for comments and contributions. all speeches are available online at www. bankofengland. co. uk / speeches lord mayor, ladies and gentlemen, andrew and i have worked together for a long time, and we β ve often found it useful to adopt a regulatory good cop / bad cop routine. in the context of mansion house, the rules are simple : whoever gives the shortest speech is good cop! now andrew i timed you just now, and with a few edits i think i can sneak in under the line β¦ but why am i talking about the police at all? police metaphors are dangerous, but as it happens β good cop / bad cop β is a good analogy for two different aspects of our role as regulator : first, bad cop : areas where we need actively to insert the public interest into privately or mutually - owned firms, because some of the costs of their failure would be externalised and they therefore have an incentive to run too much risk. here there is inherently a degree of conflict between regulator and firm β it is the way our system is set up. capital is the most obvious example of these battlegrounds, where reasonable people with different objectives quite naturally come to different answers. but there are many others. second, good cop : areas where we and firms are collectively facing a shared challenge. there is no inherent conflict between the public and private interest β we have a shared interest in mitigating the risk, and there is a role for both public and private sectors. cyber is the classic case of these shared endeavours. with the post - crisis reform job now largely complete, i will set out what firms should expect to see from the pra across these areas as we enter a new phase. bad cop let me turn first to areas where our incentives and those of firms are not perfectly aligned, and where there may therefore be a degree of tension between us as we seek to secure the benefits of the new system we have spent the last decade putting in place. i will give you five examples β in highly abridged form, as i β m determined to beat andrew β s time. first, our brand - new retail ring - fence, the | that is a fairly high bar. in practice this is likely to mean that we put more emphasis on operational resilience for larger firms doing activity whose disruption could have a financial stability impact. for smaller firms we are only strongly interested where something is going on that is big enough to threaten the firm β s safety and soundness. so for example : if you are a big bank you can expect us to take an interest in your ability to process payments ; if you are an insurer with a large annuity book, we will want to know what the operational risks are to your ability to supply people β s retirement income ; and if you are a smaller firm spending huge sums on a all speeches are available online at www. bankofengland. co. uk / speeches major it project, we will be interested in that. across all of these, we will also want to dig into systemic risks β most obviously those associated with cyber - attacks and the risks associated with a heavy concentration of activity across firms with a handful of outsourcers. but there is also a much wider set of more day - to - day operational issues and problems which arise for firms, and given the increasing importance of digital service delivery firms need to get much better at this. sometimes these issues will engage the fca β s objectives, which will be a judgement for andrew and his team. but in general, they will only be a priority for the pra if they meet the criteria i have just mentioned. with sufficient but limited resource we need to focus our efforts where they can have the biggest impact in terms of advancing our statutory objectives. brexit now lord mayor, i admit that i am very tempted to conclude this speech without a mention of the b - word, not least because this would surely guarantee a speech shorter than andrew β s. but our philosophy on brexit issues happens to illustrate the point i am making here about shared endeavours. because getting from a to b on brexit is very much a shared endeavour, although let β s be honest it doesn β t always feel like that! of course there are some debates between us and firms as they restructure, in particular where we see structures that appear overly complex or lacking in proper accountability. but in general this is not a battleground where the incentives of regulator and regulated are inherently in tension : we all want as smooth a transition as possible, and to reduce cliff - edge risks as best we can. actions speak louder than | 1 |
u. s. virgin islands β and is the area the new york fed is responsible for. i spent yesterday and today meeting with district business leaders, community organizers, and elected officials, hearing about their work, their successes, and their challenges. people β s experiences are influenced by the macro level, but their local economy plays an equal, and often more important role in shaping their economic opportunity. one aspect of the fed that we don β t talk about enough is the work our regional economists and our outreach teams do, trying to understand what β s going on at the local level. while the u. s. economy has been growing for the last 10 years, analysis by new york fed economists shows that not everyone is feeling the benefits equally. growth is concentrated in the largest cities like new york and san francisco, and those who benefit the most are those who already have high incomes. 2 a large part of this is because current economic conditions favor highly skilled workers who tend to flock to cities. these big metropolitan areas are successful, but they also suffer from some of the starkest wage inequality in the country. by contrast, upstate new york is less unequal, but the disappearance of manufacturing jobs has held back growth. more equal wage growth is only good news if people have jobs. but many have found themselves in the position of leaving the area in which they grew up to look for work. the albany area has bucked this trend. the mix of colleges and universities specializing in innovative subjects like nanotechnology, and high - tech businesses, alongside its position as a state capital, has created a real economic success story. i know there are a lot of students in the room, and choosing suny was a wise move. investing in an education that equips you for the future will pay off over the long term. the tale of many economies so what can the fed do about this complex picture β the tale of many economies i β ve talked about today? 2 / 3 bis central bankers'speeches monetary policy is an important tool, but it alone cannot address all the economic issues that we face. the policies we enact at the fomc are vitally important for sustaining growth at the national level, but they can β t determine everything that happens at the local level. this is where our community development work comes in. through our research and outreach, we put data and analysis into the hands of community leaders to give them tools to strengthen their local economies. we have programs that use | some more significant changes in light of developments and lessons learned in recent years. and most importantly, it positions us for success in achieving our maximum employment and price stability goals in the future. 1 see board of governors of the federal reserve system, statement on longer - run goals and monetary policy strategy, as amended effective august 27, 2020. 2 longer - run forecasts of interest rates can be found in blue chip financial forecasts ( wolters kluwer ). for the decline these forecasts over this period, see the june 2012 and june 2020 issues. 3 see john c. williams, three questions on r - star, frbsf economic letter, 2017 β 05 ( february 21, 2017 ), for a discussion of the decline in the natural rate of interest. estimates of the natural rate for the united states, canada, the united kingdom, and the euro area are available at federal reserve bank of new york, measuring the natural rate of interest. 4 jerome h. powell, new economic challenges and the fed β s monetary policy review, speech at β navigating the decade ahead : implications for monetary policy, β an economic policy symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming ( via webcast ) ( august 27, 2020 ). 5 richard h. clarida, the federal reserve β s new monetary policy framework : a robust evolution, speech at the peterson institute for international economics, washington, d. c. ( via webcast ) ( august 31, 2020 ). 2 / 2 bis central bankers'speeches | 0.5 |
of the exchange rate on domestic petrol price increases has been in excess of 50 cents per litre. the producer price index also shows that while the headline ppi inflation increased by 7, 8 per cent, the imported component increased by 2, 1 per cent. this favourable inflation prognosis has allowed us to reduce interest rates to their lowest levels in about 30 years. our real interest rates are also low by comparison with recent experience. throughout the 2000s, depending how one measures real interest rates, the average real policy rate was between 3 and 3, 5 per cent. in the recent past this has declined to around 1, 5 to 2 per cent. under the conditions outlined, monetary policy is expected to remain relatively accommodative for some time, but contingent on changes in the outlook for inflation and the factors that impact on inflation. where does the economy go from here? south africa β s biggest internal challenge is unemployment, currently in excess of 25 per cent on the narrow definition. there is no doubt that addressing this must be the national policy priority. south africa β s unemployment is of a structural nature, and not something that can be solved by interest rates or the exchange rate alone. as we have noted on numerous occasions, interest rates can have a cyclical effect on growth or employment, but on their own will not be able to solve an inherently structural problem. it is incorrect to look at the interest rate or the exchange rate as the silver bullet that will solve the country β s growth problems. the exchange rate is just one element in the story, and excessive focus on the exchange rate could result in the neglect of other factors that would constrain growth even with an appropriately valued exchange rate. to improve south africa β s competitiveness and growth prospects requires concerted policy coordination across government departments. there are some obvious microeconomic reforms or initiatives that should be prioritised, and i will refer to only a few. a continued focus on infrastructure is essential. because the world cup is behind us, there should not be a decline in spending on infrastructure. this is one of the best forms of expenditure that can be undertaken. it is investment in the future as opposed to current consumption. it is productive, it provides jobs, and it helps alleviate constraints to growth and to exports. while there is a clear need to address the blockages affecting the mining sector, it does not help to increase mineral extraction if the rail infrastructure is unable to get the ore to the ports, and if the | these exit strategies. this optimistic view envisaged us policy rates being increased by the middle of 2010. there were, however, more pessimistic views which believed ( and some still believe ) that the risk of a double - dip recession was high. the current emerging consensus appears to be that while the risks of a return to negative growth are not trivial, the most likely outcome is for a protracted period of low growth in the advanced economies while the emerging markets are seen as the new growth engine. in essence, we have emerged from the recession, but not from the crisis. the reasons for the poor growth outlook vary across countries and regions. in the united states, the consumer is still deleveraging in the face of a housing market that has not fully corrected, and a withdrawal of the fiscal stimulus. in the euro area, the replacement of private credit and expenditure with state credit and expenditure resulted in a ballooning of fiscal deficits and debt ratios in a number of countries where debt to gdp ratios were already under pressure, particularly in southern europe. greece and italy, for example, have debt to gdp ratios of 130 per cent and 118 per cent respectively. pressure from the markets as well as the conditionalities related to the imf - led bail - out packages resulted in the implementation of austerity measures in a number of countries, and fiscal retrenchment became the order of the day at a much faster pace than was originally thought appropriate. fiscal adjustment in greece is planned to reduce the deficit from over 13 per cent of gdp to around 3 per cent of gdp in 2014, while in spain the objective is to reduce the deficit from 9, 6 per cent of gdp to 3 per cent by 2013. in the uk, government spending cuts for the current fiscal year have averaged 25 per cent across departments. the danger with such an approach is that the adverse impact on growth could set in motion negative debt dynamics which would make the overall debt situation even worse. it has been suggested by desmond lachman of the american enterprise institute, that the greek austerity programme would result in growth contracting by between 15 β 20 per cent, leading to an increase in the debt to gdp ratio to 180 per cent. while there is general agreement around the risks of excessive debt, there is less agreement as to how much is excessive, and how quickly it should be reduced. as george soros has recently argued, the premature pursuit of fiscal rectitude could wreck the recovery. at best | 1 |
frederic s mishkin : globalization - a force for good? remarks by mr frederic s mishkin, member of the board of governors of the us federal reserve system, at the weissman center distinguished lecture series, baruch college, new york, 12 october 2006. * * * it is a great pleasure, for very personal reasons, to be here at baruch college to deliver my first speech as a federal reserve governor. my now - deceased father, sidney mishkin, whom i still miss every day, proudly graduated more than seventy years ago from baruch, then called city college. indeed, you might have noticed the sidney mishkin gallery when you came into the building. the gallery was part of a gift that my father made to this institution upon his death fifteen years ago. the education he got at baruch during the depths of the great depression - attending class at night because he had to work to support not only himself but also his parents - helped give him the opportunity to become a successful businessman. i hope that the students here will likewise take advantage of the opportunities bestowed by their education and make important contributions to our economy. now, let me turn to the topic at hand : can more globalization - in particular, financial globalization - be a force for good? the globalization of trade and information over the past half century has lifted vast numbers of the world's people out of extreme poverty. despite the doom and gloom that you often hear, world economic growth since the second world war has been at the highest pace ever recorded. what we are seeing in countries that are export oriented, and thus able to take advantage of the present age of globalization, is a reduction in poverty and a convergence of income per capita toward industrialcountry levels. in india and china, for example, globalization in recent years has lifted the incomes of more than 1 billion people above the levels of extreme poverty. although economic globalization has come a long way, in one particular dimension aβ¬ β finance - it is very far from complete. as documented in the superb book by maurice obstfeld and alan taylor, global capital markets, financial globalization has made its greatest strides in rich countries. gross international capital flows, which have risen enormously in recent years, move primarily among rich countries. the exchange of assets in these flows is undertaken to a large extent to enable individuals and businesses to diversify their portfolios, putting some of their eggs in the baskets of other rich countries. international capital is generally | globalization of trade in goods and services are not controversial among economists. polls of economists indicate that one of few things on which they agree is that the globalization of international trade, in which markets are opened to flows of foreign goods and services, is desirable. but financial globalization, the opening up to flows of foreign capital, is highly controversial, even among economists, despite benefits of the sort i just mentioned. for example, in his best - selling book globalization and its discontents, nobel laureate joseph stiglitz is very critical of globalization because he sees the opening up of financial markets in emergingmarket economies to foreign capital as leading to economic collapse. even jagdish bhagwati, one of the leading economists defending globalization of trade ( after all, his book is titled in defense of globalization ), is highly skeptical of financial globalization, stating that " the claims of enormous benefits from free capital mobility are not persuasive. " 1 george soros, the prominent financier, opens his book on globalization with a chapter entitled " the deficiencies of global capitalism. " one reason for the controversy is that opening up the financial system to foreign capital flows has led to some disastrous financial crises causing great pain, suffering, and even violence. these crises can arise when bad policies encourage excessive risk taking by financial institutions, policies that rich elites in the developing countries often advance for their own profit. there are those ( including stiglitz and bhagwati ) who put the primary blame for the failures of financial globalization in emerging - market economies on outsiders, specifically on the international monetary fund, or what they refer to as the jagdish bhagwati ( 2004 ), " the capital myth : the difference between trade in widgets and dollars, " foreign affairs 77, no. 3 p 7. wall street - treasury complex. the evidence has brought me to the conclusion that institutions like the imf or the u. s. treasury are not primarily to blame, although neither are they blameless - public and private financial institutions active in the international capital markets have often aided and abetted poorly designed financial globalization, although that was not their intention. another objection to focusing on financial development and globalization as key factors in economic growth is that it is far from clear that emerging - market economies are finance constrained : in other words, they often do not have trouble getting money for investments. but throwing money at investments does not work. indeed, as the experience of recent years | 1 |
masaaki shirakawa : semiannual report on currency and monetary control statement by mr masaaki shirakawa, governor of the bank of japan, concerning the bank β s semiannual report on currency and monetary control, before the committee on financial affairs, house of representatives, tokyo, 13 july 2011. * * * introduction the bank of japan submits to the diet its semiannual report on currency and monetary control in june and december. most recently, the bank submitted the report for the second half of fiscal 2010 on june 10, 2011. i am pleased to have this opportunity to talk about recent developments in japan β s economy and present an overall review of the bank β s conduct of monetary policy. i. economic and financial developments in japan i will first explain economic and financial developments in japan. japan β s economy faced strong downward pressure, mainly on the production side, due to the effects of the great east japan earthquake that occurred on march 11. the earthquake disaster caused damage to production facilities in a wide range of areas and consequent constraints on the supply of parts and materials led to supply - chain disruptions. moreover, serious damage to power generating facilities resulted in constraints on electric power supply. production declined sharply mainly due to these supply - side constraints and consequently exports fell. domestic private demand also suffered to a considerable degree, affected in part by a deterioration in business and household sentiment. four months after the earthquake, japan β s economic activity is picking up with a gradual easing of the supply - side constraints caused by the earthquake disaster. production has recently shown clear signs of picking up as the restoration of supply - chain disruptions has progressed steadily at a faster - than - expected pace. at least for this summer, the electric power shortages are apparently not constraining economic activity as significantly as initially concerned, due to a strengthening of supply capacity by electric power companies and firms and households β efforts to conserve electricity and level out demand. in response to the pick - up in production, exports have started to increase. domestic private demand has also begun to pick up, with some improvement in household and business sentiment. meanwhile, the june tankan ( short - term economic survey of enterprises in japan ), released by the bank at the beginning of this month, showed that business sentiment deteriorated compared with the march tankan, which appeared to have hardly reflected the effects of the disaster. as for the outlook, however, many firms, especially in the manufacturing sector, expected improvements. | among the flexible and internationally used investment currency elite. one example of such necessary reforms would be to eliminate obstacles hindering access to the capital market, such as the quota model for investment in the bond market. the final step towards becoming a globally recognised key currency is for a currency to be used as an international reserve currency. the renminbi's inclusion in the imf's special drawing rights basket has provided the framework for this. it is now expected that a wider range of market participants will invest capital in renminbi - denominated securities. these participants will likely be joined by an increasing number of central banks that will, in the future, invest parts of their reserve assets in corresponding securities, mostly government bonds. 3. what is the role of the frankfurt financial centre in the internationalisation of the renminbi? the renminbi's internationalisation strategy does not culminate with the currency's inclusion in the imf's basket of currencies, however. on the contrary, the chinese government is currently focusing on a whole raft of measures. one of these is the cross - border interbank payment system ( cips ). it was launched in october 2015 and is the sole provider of settlement services for offshore renminbi payments. the people's bank of china designed cips to provide an infrastructural buffer for the expected growth in renminbi transactions and to stem the disadvantages with regard to settlement efficiency vis - a - vis other currencies ( particularly the us dollar ). other measures include bilateral cooperation agreements that aim to further promote use of the renminbi as a trading and investment currency. the potential for efficient renminbi clearing is significant to enterprises that operate internationally. as china's largest european trading partner, germany is of crucial importance in this context. it was not for nothing that the first renminbi clearing hub located outside asia was established in frankfurt. since 2014, it has been possible to settle renminbi - denominated payments via the frankfurt branch of the people's bank of china. this service provides attractive opportunities for small and medium - sized enterprises, for instance, to establish and expand business 2 / 3 bis central bankers'speeches relationships with chinese enterprises while at the same time settling payments with china within their own local time zone and jurisdiction. the china europe international exchange, or ceinex, is another collaborative initiative. this joint venture of the deutsche borse group, the shanghai | 0 |
than in the past. this could be a concern in view of the generally limited price and wage flexibility, low labour mobility and the lack of a risk - sharing mechanism due to the still incipient financial integration. time will judge the severity of this potential effect. montary union with the completion of the single market and european monetary union the economic and the monetary side of the β triangle β have been completed. this raises the fundamental question : can monetary union work and survive without the third side of the triangle, which is without a fully - fledged political union? the answer is clear : yes, it can. it is possible that, over the very long term, strong elements of a political union may ( need to ) emerge, but for the time being economic and monetary union ( emu ) can proceed perfectly well without a political union in the form that we understand today. here are the main arguments : first, monetary union in itself has a clear political dimension. it entails the transfer of national monetary policy decision - making powers to a supranational entity, the european central bank. relinquishing national sovereignty in such an important field is a substantive contribution to political integration. a central bank is, after all, an element of statehood. the maastricht treaty has made the ecb independent of any political influence so that it is able to fulfil its clear mandate of preserving price stability. monetary policy - making is hence not only centralised but also depoliticised. this step was only possible because euro area members had achieved a high degree of convergence in monetary policy attitudes and preferences in the run - up to monetary union. moreover, the way participating countries see themselves and their role as nation states has changed profoundly. in this respect, the launch of the euro marks the most recent and far - reaching step. national sovereignty has not only been transferred in the area of monetary and exchange rate policies but also in other key policy areas, such as competition and trade. finally, a single market has been established. as a result, the euro area countries already share important elements of state formation which are also key to the functioning of monetary union. flexibility second, from a purely economic perspective, what else is needed to make the single monetary policy work? most importantly, flexible markets are needed to enhance the ability of individual countries to respond to specific circumstances and economic shocks. wages and prices in particular may need to adapt more quickly and strongly. the mobility of capital will become an | assume, for simplicity β s sake, that these goods are only produced domestically. if the prices of these products grow at a rate of 2 % per year, the overall average inflation is 2. 6 %, exceeding the 2 % objective of most central banks in advanced countries, including the ecb β s. if some of these goods and services are produced abroad, the rate of their price increase may be even higher, due in particular to the balassasamuelson effect that i mentioned previously. as the shifting of production to countries with lower wages tends to fade away, any wage increase or exchange rate appreciation in eme will lead to higher import prices in advanced economies. the central bank then has to choose between either revising the inflation rate objective upwards and taking account of imported inflation, or maintaining the inflation objective unchanged, which means lower core inflation. in both cases, headline inflation is bound to be higher than core inflation. this means that price increases for imported goods must not feed into wages and domestic prices. the implications for monetary policy are quite complex. the stance of monetary policy cannot be assessed on the basis of core inflation, given that the interest rate incorporates expectations of headline inflation. keeping the policy interest rate unchanged while headline inflation rises β even if core inflation remains unchanged β implies de facto allowing for the monetary stance to become more accommodative. over time this is likely to impact on core inflation. it is certainly a challenge to make sure that core inflation remains subdued and lower than headline inflation if imported goods prices increase by more than 2 %. this can be achieved without additional monetary policy tightening only in a friction - less world, in which domestic wage and price - setters accept the permanent change in relative prices. we obviously need more work on these issues, which are particularly relevant in light of past experience. indeed over the past decade international and national institutions have often made forecast errors in the same direction, underestimating inflation and overestimating growth in advanced economies ( chart 6 ). this has led to an overly accommodative policy. if we want to avoid repeating the same bias, we should be more alert to this issue. macroeconomic policies another way in which advanced economies are affected by globalisation is through its unbalanced nature. globalisation is very advanced in trade and economic activity. in the financial area, however, globalisation is more limited, in the sense that emes are characterised by an excessive demand for and an insufficient production of high quality | 0.5 |
jens weidmann : stable banks for a stable europe speech by dr jens weidmann, president of the deutsche bundesbank, at the 20th german banking congress, berlin, 7 april 2014. * 1. * * welcome mr fitschen, ladies and gentlemen i am honoured to have been asked to speak to you this evening at the 20th german banking congress. the film we have just seen illustrates that german banking congresses, or bankers β congresses as they used to be called, have always mirrored our country β s colourful history. i would like to take the opportunity today to talk about the importance of stable and healthy banks for a stable currency union. 2. dissecting the financial crisis do you remember the agatha christie film β murder on the orient express β? the us businessman mr ratchett is murdered on the train from istanbul to calais. detective hercule poirot, who happens to be on the same train and is asked to investigate by the director of the train company, a fellow traveller, discovers that the murder victim has twelve stab wounds and is, in reality, the criminal cassetti. after questioning the witnesses, he ascertains that a number of passengers had a motive to murder cassetti. he therefore comes to the conclusion that there is not one culprit for cassetti β s murder, but twelve. i am telling you this because the chief economist of the bis, claudio borio, recently said that the search for the culprit for the financial crisis brought to mind the search for the culprit in β murder on the orient express β. as with cassetti β s brutal murder, for which there is no one culprit, there is no monocausal explanation for the financial crisis. in fact, the contrary is true : an analysis of the root causes of the global financial crisis, as well as the european debt crisis, shows that many are to blame, or should we say responsible. i believe that no one here in this room will deny that there were serious aberrations in the banking sector, which contributed to the crisis. however, central banks and the regulatory authorities also made mistakes. although the central banks successfully combatted inflation, they provided incentives for risky investor behaviour. regulatory authorities underestimated the resulting dangers, as did the financial markets, where risk premiums were long at extraordinarily low levels. politicians trusted in the efficiency of the financial markets and pursued a policy of market liberalisation and deregulation | 2016 β an adequate timeframe, in my opinion, for mobilising these funds. it would also be right, in my view, to use the option granted by the srm regulation of also counting amounts which banks have already paid into national resolution funds towards their contributions. a european deposit guarantee scheme is not being regarded as a matter of priority at the moment, and rightly so. after all, a joint deposit guarantee scheme would necessarily mean joint liability. but joint european liability would necessitate joint european control, which would require more than the creation of a single supervisory mechanism. 6. 2 single supervisory mechanism the ecb is aiming to be ready to launch the single supervisory mechanism ( ssm ) on 4 november. this will require a mammoth effort by all the parties involved. it is a project that is comparable to the creation of monetary union, but is to be rolled out at seven times the speed. at the current juncture, the ecb together with the national supervisors is comprehensively assessing the balance sheets of 128 banks which, as things stand today, are candidates for direct ecb supervision. if the asset quality review and the subsequent stress test reveal that banks need to be recapitalised, the need for capital will have occurred on the watch of the national supervisors β so you could say it is a legacy issue. it is therefore down to the member states in question to repair these legacy issues before responsibility shifts to the ecb. private funds should be first in line to address any capital shortfalls. failing that, it should be up to the member state to recapitalise the bank in question, assuming the latter runs a viable business model. this asset quality review is a major undertaking for supervisors and the banks in question. yet at the same time, it is crucial for ensuring that the single supervisory mechanism gets off to a credible start in its mission to restore confidence in banks and revitalise lending in the euro area. hence the strict and demanding standards set by the asset quality review and the subsequent stress test. the assessment represents a huge administrative burden for the banks, so their misgivings are understandable. but if you are looking to paint a complete picture, there β s simply no getting round a thorough assessment. the procedure is even being likened to a full physical examination for banks. before a football club signs a new player, it first subjects him to a thorough medical β and that is more than just a quick once - over. of course there are some | 1 |
such as electricity and water, as well as transport links, need ongoing investment to accommodate a rising population. this challenge has clearly been recognised and, over recent years, governments at both the state and federal level have been increasing infrastructure investment. as can be seen from this graph, public investment in communications infrastructure has increased with the rollout of the nbn. transport infrastructure β road and rail β has increased even more sharply and is back close to the share of gdp it represented in the years immediately after the global financial crisis. graph 1 https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 4 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba the recent federal budget foreshadowed additional infrastructure spending. more broadly, investment by the federal government is projected to increase over coming years. most of the infrastructure spend is by state governments, however. this has already increased noticeably, particularly in the south - eastern states, and according to state budgets it is projected to increase further in the next couple of years. much of this work is in urban transport projects, both road and rail. graph 2 another area of infrastructure attracting substantial investment at the moment is renewable energy. the value of renewable generation projects slated for the next year or so is similar to the average of recent years'investment in electricity generation, distribution and transmission, a much broader total set of activities. most of the investment in renewables is by the private sector. these projects have become more attractive lately as the cost of the underlying technology has fallen. at the same time, the costs of fossil - based inputs to existing generation methods has risen, and so has the price of electricity. so renewable energy projects are becoming increasingly commercially viable. as such, it is an area where the private sector can provide the infrastructure. and that is indeed what we are seeing. a range of data sources on both capital expenditure and financing show greatly increased activity recently ( graph 3 ). a few years ago, much of the https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 5 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba investment in renewables was in small - scale rooftop solar. more recently, as the economics of these projects has changed, we are seeing more large - scale solar and wind projects being financed and built. graph | - which is the ratio of our resource - intensive export prices to our manufacturing - intensive import prices - bottomed in 1985 but have on average risen since. more importantly, few now doubt that it is manufacturing prices which are under continued downward pressure as a result of the rapid expansion of capacity in asia, particularly in china. ( d ) institutions matter more and more, development economists and economic historians are coming to the conclusion that, at the deepest level, a sound institutional framework is the crucial ingredient for sustained economic performance, and that it is far more important than distance, geography or the presence of resources. one only has to look at the extreme differences in economic performance between south and north korea, or west and ( formerly ) east germany to see how different institutions can outweigh the same geography, culture and resources. the different economic performance of australia and argentina is another clear case, as is the more general economic superiority of the former british colonies over the former spanish colonies, which has been a subject of recent studies emphasising the importance of institutions over geography. 5 what are the β deep β institutions that are conducive to sustained economic performance? β’ the first one is the enforcement of property rights. no - one will venture capital for an economic project if success leads to confiscation by the government or other powerful forces. thus, the enforcement of property rights means a strong body of commercial law ( particularly the law of contract ), impartial courts, honest police force, etc. it also means eliminating, or at least minimising, corruption. it often used to be thought that corruption β greased the wheels of commerce β and helped things get done. but modern research has unequivocally shown the higher the level of corruption, the worse the economic performance. 6 β’ the second institutional requirement is constraints on the ability of government or other elites to exercise arbitrary power. this usually means an open society, democratic political system and a free press, but i would also add institutions that encourage competition by challenging monopoly powers. an important ally in this is the openness of the economy to wright and czelusta ( ibid ). stoeckel ( 1999 ). acemoglu, johnson and robinson ( 2003 ). mauro ( 1995 ). international trade in goods and ideas, which has been shown to have a significant correlation with economic performance. 7 β’ some degree of equal opportunity so that people can invest in human capital formation. in this area, | 0.5 |
opening remarks delivered by mrs. leila matroos - lasten, acting president of the centrale bank van curacao en sint maarten during the second of the third cbcs central banking conference opening remarks delivered by mrs. leila matroos - lasten, acting president of the centrale bank van curacao en sint maarten on the occasion of the third cbcs central banking conference reinventing central banking : supporting inclusive growth and financial innovation centrale bank van curacao en sint maarten, willemstad june 7, 2019 excellencies, distinguished guests, ladies and gentlemen, good morning. welcome to the second day of the third central banking conference of the centrale bank van curacao en sint maarten ( cbcs ). on behalf of the board of directors of the cbcs, also today i would like to extend a special, heartfelt thank you to the speakers who graciously accepted our invitation. during yesterday β s program, we discussed the concept of inclusive growth. ms. henriquez of the cbcs kickedoff the program with an overview of indicators beyond the gdp for inclusive growth, while mr. ivanyna of the imf and mrs. grenade of the caribbean development bank focused on the development of inclusive policy frameworks and the impact of such policies on our communities β well - being. mr. kanz from the worldbank discussed household over - indebtedness and the policies and actions that can be undertaken in this area. additionally, the program featured a presentation on the determinants of growth in the caribbean by ms. dare and ms. hieroms of the cbcs. finally, given the continuous risk of financial instability, mr. campos cuevas of the asba shared some insights on resolution regimes, while the governor of the central bank of trinidad and tobago, mr. hillaire, shared with us the lessons learnt in the area of resolution regimes. the overarching theme of this year β s conference : β reinventing central banking : supporting inclusive growth and financial innovation β, is no coincidence. inclusive growth and financial innovation are two areas where the cbcs can play a key role in supporting the sustainable development of curacao and sint maarten. the theme underscores a very important issue that we all are facing : the digital economic sector is purported to be growing 35 % faster than the wider economy. if inclusiveness, financial technology, and innovation | lopes, mrs. chaukos, and mr. cova. we encourage you to make the most of this opportunity to engage and interact with these experts. we will cap our day with presentations and a panel discussion on central bank digital currency ( cbdc ). new global or regional trends and policies have helped push innovation and technology to the forefront. an example of this is the increasing number of central banks carefully considering entering the cbdc space. we are excited to welcome mr. kiff, of the imf and one of the co - authors of the discussion note of the imf on the development and implementation of cbdc. mr. kiff will provide a short update of this important and dynamic discussion note. we will also have mrs. welsh provide an overview of the implementation of the cbdc by the eastern caribbean central bank, and subsequently, we will have mr. pietersz of the cbcs provide an overview of the status of our own consideration of cbdc. afterwards, mrs. luis of ibis management will share the results of a whitepaper issued on the potential implementation of a cbdc in curacao and sint maarten. let me say that we as regulators feel more vibrant than ever in our ability to keep evolving with the changes in our markets. ladies and gentlemen, once again i thank you for being here at the β reinventing central banking : supporting inclusive growth and financial innovation β conference of the cbcs. i wish you a successful second day of the conference and look forward to fruitful dialogue and discussion! thank you for your attention. | 1 |
oriented policies are no substitutes for fiscal and external adjustment : they are mutually reinforcing. if designed in a way that reduces rents and fights vested interests, they will not only improve the efficiency of the adjustment process but also its equity, to the benefit of the poorest, the youngest, and of future generations. they will support medium to long - term growth and therefore employment and fiscal sustainability. they will help economies to reap the full benefits of belonging to the single market and to the economic and monetary union. they will help societies to sustain social models which would otherwise be debased by the permanent output loss caused by the crisis, and the related loss of tax revenues. 16 i should add that there is a need for reforms in all euro area countries, including the larger ones, albeit to varying degrees and in different areas. even if a euro area country doesn β t feel the pressure of financial markets and programme conditionality, its government should take seriously the responsibility to carry out necessary reforms that will ultimately support growth elsewhere in the region. and it is the responsibility of all euro area governments, jointly, to advance the reforms outlined last december by the president of the european council that will give stable foundations to the single currency. the single supervisory mechanism is an important first step, to be complemented as soon as possible by a single resolution authority and fund ; further steps towards an economic, fiscal and political union should follow, completing our economic and monetary union. if there is a lesson to be learnt for all euro area countries, it will be to make sure that in the future they make the necessary changes pro - actively and not in response to a crisis. thank you for your attention. a coordinated reduction of mark - ups would lead to a similar impact on gdp growth in the adjusting countries. international spillovers of reforms are generally found to be limited. for a review, see dieppe a. et al. ( 2012 ), competitiveness and external imbalances within the euro area, ecb occasional paper no 139. see coeure b. ( 2013 ), the three dimensions of the euro area crisis, speech at the asia - europe economic forum conference on β european troubles, asian worries β, brussels, 21 january. bis central bankers β speeches slide 1 bis central bankers β speeches slide 2 bis central bankers β speeches slide 3 slide 4 bis central bankers β speeches slide 5 slide 6 bis central bankers β speeches slide 7 slide 8 bis central bankers β speeches slide 9 bis central bankers β speeches | ##ency of the financial system. the fed expects the banks it oversees, including the largest banks, to be financially sound. two core elements of soundness are capital and liquidity. capital is the funds provided by a bank β s shareholders that serve as a buffer to enable the firm to absorb unexpected losses, including during times of economic downturn or financial stress. a bank β s liquidity is its ability to meet current and future obligations to customers and others with whom it enters into financial transactions. liquidity is the lifeblood of a financial firm, because once liquidity dries up, the firm is no longer able to operate. beyond focusing on capital and liquidity, the fed also promotes safety and soundness by seeking to ensure that banks are well managed and subject to strong governance by a board of directors responsible to shareholders. it is unfortunate that i need to underscore this, but we expect the firms we oversee to follow the law and to operate in an ethical manner. too often in recent years, bankers at large institutions have not done so, sometimes brazenly. these incidents, both individually and in their totality, raise legitimate questions of whether there may be pervasive shortcomings in the values of large financial firms that might undermine their safety and soundness. 4 while the federal reserve looks closely at the individual safety and soundness of large financial firms, as i noted earlier, it is not sufficient to view each of these firms in isolation. the safety and soundness of large firms affects, and is affected by, the stability of the broader financial system. in the decades of relative financial stability leading up to the crisis, it is fair to say that the fed focused too much on individual firms and not enough on their role in the financial system and the implications of those firms β operations for financial stability. to a current list of these firms is available on the federal reserve board β s webpage β large institution supervision coordinating committee β. this list may evolve based on changes in firms β relative systemic importance. financial stability oversight council determinations of nonbank financial institutions subject to federal reserve oversight are available on the u. s. department of treasury β s website. information is based on data from the most recent fr y - 9c report, which is filed quarterly by bank holding companies and savings and loan holding companies. to access the report, see the board β s webpage β reporting forms β. for more information, see daniel k. tarullo ( 2014 ) | 0 |
to build a digital and carbon - neutral future. finally, better access to venture capital would help young european firms turn innovative ideas into marketable products. 1 / 2 bis - central bankers'speeches for now, i look forward to implementing our newly established partnership and to the benefits it will bring to our financial system. 2 / 2 bis - central bankers'speeches | joachim nagel : remarks at the " bell ringing ceremony " remarks by dr joachim nagel, president of the deutsche bundesbank, at the " bell ringing ceremony " to celebrate the european commission joining the european repo market at deutsche borse / eurex, frankfurt am main, 7 october 2024. * * * check against delivery ladies and gentlemen, it is a great pleasure to be here today to celebrate the european commission joining the european repo market at deutsche borse / eurex. this is a significant milestone, and i am happy to share this moment with all of you. the bundesbank will act as a general clearing member for the commission. having provided similar services to several other public entities for many years, the bundesbank brings experience to the table. with this robust track record, we are happy to provide our services to the commission. i can assure you that you are in good hands. eurex already supports a wide range of repo transactions and is a major player in europe's financial landscape. since 2021, the commission has been issuing bonds under the temporary nextgenerationeu programme, and this will continue until 2028. in total, bonds worth approximately β¬800 billion will ultimately be issued. the eu is therefore set to become an important player in the euro bond market for some time to come. the repo facility introduced today will significantly enhance liquidity in the secondary market for these bonds. ladies and gentlemen, today's event not only highlights the attractiveness of frankfurt as a financial hub, it also helps strengthen it further. this is particularly important as much investment will be needed in the areas of digitalisation and decarbonisation in the future. of course, bank loans will likely continue to play a vital role in financing these investments. but there is also substantial potential for more financing through capital markets. as many of you probably already know, i have long been an advocate of greater integration of european capital markets. i firmly believe that advancing the capital markets union is essential, particularly in the areas of securitisation, insolvency laws, and venture capital. a transparent and high - quality securitisation market would enable banks to transfer parts of their loan portfolios to the capital market. this would relieve their balance sheets and create scope for additional loans. an effective and harmonised insolvency regime would facilitate cross - border investment and the reallocation of scarce resources to innovative firms striving | 1 |
β including early childhood learning, youth programs, housing, reservation schools, higher education, workforce development, children and family services, and elder programs. 38 center for indian country development a pervasive lack of data makes it difficult to evaluate how economic developments are impacting indian country. the limitations of the data available on indian country are due to data collection and reporting issues, such as small sample size or large margins of error. 39 at the federal reserve bank of minneapolis, the center for indian country development collects data and conducts economic research and analysis to help resolve the critical need for accurate and timely data. one of the steps they have taken includes publishing a labor market data tool, which presents estimates of the labor force participation rate, employment - to - population ratio, and unemployment rate for the ai / an population in the u. s. 40 the center for indian country development also focuses on applied research and engagement in indian country to support long term economic prosperity and inclusion. recent research has centered on the role tribal enterprises play in economic opportunity and how tax revenues in indian country can help improve the economic infrastructure and financial inclusion for tribal communities. through policy webinars and its upcoming inaugural research summit, see β an economic education partnership with indian country, β federal reserve bank of st. louis, november 19, 2020, https : / / www. stlouisfed. org / open - vault / 2020 / november / economic - education - partnership - indian - country. see β data disaggregation : the asterisk nation, β national congress of american indians ( ncai ) policy research center, https : / / www. ncai. org / policy - research - center / research - data / data. see center for indian country development, β native american labor market dashboard, β federal reserve bank of minneapolis, https : / / www. minneapolisfed. org / indiancountry / resources / native - american - labor - market - dashboard. the center is working alongside tribal leaders to leverage data and research to improve the economic well - being of indian country. the reserve banks play a unique and important role in increasing our understanding of local needs and regional issues, and in the federal reserve districts with large native american populations and stakeholders, our banks are very engaged with indian country activities. we welcome the diverse perspectives of native americans, from serving on our boards and advisory councils to joining us as full - time employees, to better inform our decisionmaking. tawney brunsch | we know it is a product of the great depression, and that economic disaster was the result of a combination of events unlikely to recur. in addition, the moral - hazard costs of the safety net are significant. nonetheless, the safety net, by providing ongoing access to real resources, has become capitalized into a broad spectrum of asset values. it is now an embedded part of our social and economic framework, for good or ill. viewed in its most favorable light, the safety net does guard against those once - in - a - century or so breakdowns in market forces, however induced. the long absence of a fire, or of an economic and financial conflagration, does not suggest that we should cancel the fire insurance policy or the safety net. but, i do think that as a society we ought to explore what we can do at the margin to retain the economic benefits and lower the economic costs of the safety net. we ought to be careful that we do not, through safety net expansion, increase the marginal costs more than the marginal benefits. a look back to the pre - safety - net era might be helpful as part of that exploration. i have in the past suggested that to lessen the moral hazard of the safety net and to improve supervision and regulation, public policy should attempt to simulate, in so far as possible, what markets alone might do, or at least to create market - type incentives. to do so would, of course, move us closer to the period of pre - safety - net incentives while avoiding, one hopes, the distortions of that regime. for example, solvent banks must remain assured that they will be able to liquefy their sound assets at times of liquidity distress, but ideally, we would otherwise like banks to be managed as if there were no safety net. that is, if we retain the safety net, we ought to price and otherwise manage it so that the banking system is as close as possible to the one the market alone would provide. clearly one of those steps would be better pricing of safety - net access. the federal deposit insurance corporation has proposed some useful initiatives to move in that direction. the usual suggested premiums for deposit insurance are, of course, far from those that would fully eliminate the subsidy that insurance provides to depository institutions and their borrowers and depositors, especially at times of financial crisis. indeed, to eliminate the subsidy in deposit insurance, the fdic insurance premium would have to be set high enough | 0.5 |
to reverse these policies? what are the right pace and sequence for each element? bis central bankers β speeches a key step in normalizing policy will be to start increasing the target for the federal funds rate, which is currently still in a range of 0 to 1 / 4 per cent. this can be accomplished, in part, by gradually raising the interest rate the fed pays on excess reserves. the fed will also remove excess reserves from the financial system, in order to control shortterm interest rates. they have introduced and test - driven an overnight reverse repo facility that they will use for that purpose. restoring the federal reserve β s balance sheet to its normal size is a process that is likely to be accomplished over a longer period. it is important to note, however, that the size of its balance sheet will not hinder the fed β s ability to control the policy rate and liquidity in the economy. the framework they have outlined will limit the risk that large excess reserves could lead to excessive loan creation and a sharp increase in inflation. does this sound complicated? yes β because it is complicated. but we have full confidence in our colleagues at the federal reserve to manage this process well. how will the renormalization of monetary policy play out in the financial system β both in the united states and globally? asset prices, risk spreads and volatility are at levels that reflect the abundant liquidity provided through unconventional monetary policies in the united states and some other countries, together with expectations that interest rates will be kept at very low levels for a long time. while the federal reserve will seek to guide the renormalization process so that markets readjust smoothly as monetary policy is brought back to normal, there is an important risk that there will be some bumps along the way. what will the exit mean for canada? on the whole, the federal reserve β s planned exit from unconventional monetary policies is part of a good news story for canada. it is a sign that a sustained u. s. expansion is well under way. a more sustained u. s. expansion β a stronger housing market and robust business investment β should help our non - energy exports, which remain below their prerecession level. as the u. s. economy regains vigour, it should also contribute to improved business and consumer confidence in canada. bis central bankers β speeches however, from a policy - maker β s perspective, the renormalization of u. s. monetary policy will act to tighten canadian | annual real rate of return of 1Β½ - 2 per cent. by way of comparison, the authorities have based their use of petroleum revenues over the central government budget on the assumption that the petroleum fund can generate a long - term real return of 4 per cent. it is unlikely that this rate of return will be achieved if we only invest in bonds. buying a bond means lending money to others. buying equities is the same as investing in real assets. buying equities gives us direct ownership of the means of production in global business and industry. on the one hand, these ownership rights provide high returns when companies are flourishing. on the other, shareholders are the first to sustain losses when companies fail. consequently, the return on shares fluctuates far more than the return on bonds, reflecting the higher level of risk. over the past 75 years, equity returns in the us market have been negative almost every third year. an investor will only invest in high - risk vehicles if it is reasonable to expect compensation for the risk. the compensation for high risk in the stock market is a far higher average return for equities compared with bonds. since 1926, the annual return on us equities has on average been 4. 8 percentage points higher than the return on bonds. also in most ten - year periods, investing in us equities has been profitable, with the exception of the depression in the 1930s and the last half of the 1970s. equity returns have been negative after ten years only in the years between 1928 and 1938, in other words on equity investments made the year before the 1929 stock market crash. it may also be worth noting that equities purchased during recessions - such as in the mid - 1930s and mid - 1970s - brought solid returns ten years later. the picture is the same for most other countries. since short - term fluctuations in equity prices are difficult to predict, it may be a sound strategy to keep the share of equities constant over time. this means buying a relatively large volume of equities when prices are low, and buying a smaller volume - or selling - when prices are high. this is the strategy applied by the petroleum fund. let us now revert to the norwegian economy and norwegian economic policy. the revision of economic policy in march 2001 can to some extent be said to be a consequence of our oil economy. the new guidelines have also changed the interaction between the different components of economic policy. fiscal policy will now have an | 0 |
a new series of banknotes is currently being introduced. the β¬50 banknote was issued recently and will be followed by the β¬100 and β¬200 banknotes soon. and you β re withdrawing the β¬500 banknote from circulation? exactly. we β re no longer printing the β¬500 banknote because it has become too popular for money laundering purposes and other unsavoury uses. so we β re stopping it. a great deal of our time is also occupied by payments, all the techniques used to transfer money from one account to another. just a month ago, we launched a real - time payment system which allows all euro area banks, if they want, to make person - to - person transfers within a matter of seconds. there β s a second thing i wanted to ask you. what is qe, or quantitative easing? it β s incomprehensible to the general public, but it β s a staggering programme : over the past few years, ecb traders β your traders β have purchased β¬2. 5 trillion in public and private 1 / 8 bis central bankers'speeches debt. the programme has been halted. what purpose did it serve? yes, that β s right. over four years, between 2015 and 2018 β our last net purchases were made a few days ago, just before christmas β we bought european public and private debt amounting to β¬2. 6 trillion. why? it β s very simple : to reduce the cost of financing in the euro area. the central banks β they teach this in high school β steer the overnight interest rate. but, this is not sufficient as firms borrow over a period of three, five, ten years. so the three - year, five - year and ten - year interest rates also need to be lowered. to do this, we buy government bonds, and this has considerably improved financing conditions, which, in turn, boosts consumption and investment in the euro area. β¬2. 5 trillion, mr cΕure β you say this has given a boost to consumption and investment. but ultimately if we look at growth, all this money quite frankly doesn β t seem β at least to people in france β to have gone to them, into their pockets, into a rebounding economy... of course it β s gone to them! through all the mechanisms that make the economy work : lowering interest rates for lending to companies, which we did not only in france and germany, but also in greece, | attract foreign direct investment ( fdi ). one way to do that is by completing quickly privatization projects which are at a mature stage, as well as stepping up the pace of the overall privatization and real estate development programme. fdi, besides closing the investment gap, promotes greater trade ties with countries and companies with cutting edgetechnologies. this will allow integration of greek companies into global value chains, increasing openness of the economy and improving both the quantity and quality of greek exports. 8. supporting the unemployed and enhancing employment and training programmes. with unemployment at very high levels, it is essential to provide immediate support to the unemployed and those marginally attached to the labour market by using active labour market policies and targeted social transfers to counter temporary income losses and shorten job transitions. in the medium term, emphasis should be placed on skill upgrading and retraining policies to get people back into work. 6. final remarks a major issue in the coming months is the consolidation of confidence and the improvement of the country β s creditworthiness, which will allow the return of the greek sovereign to financial markets on sustainable terms after the end of the programme in august 2018. the steps that will make an effective contribution in this direction are : β’ first, the implementation of the reform and privatization programme and the preparation for the timely conclusion of the fourth and final review, which will mark the end of the programme ; β’ second, the specification of medium - term debt re - profiling measures, which will enable greece β s access to bond markets on sustainable terms and will facilitate the inclusion of greek government bonds in the ecb β s quantitative easing programme. 5 / 7 bis central bankers'speeches β’ third, the complete lifting of capital controls, in connection with the improvement of the economic outlook and depositors β confidence in the greek banking system. new bond issuances, while still in the esm programme, coupled with the forthcoming esm disbursements ( in line with the june 2017 eurogroup commitment ) could be used to build up a cash buffer to support investors β confidence and facilitate greece β s market access. such a cash buffer would be particularly useful in the event that greece β s credit rating has not improved to investment grade by the end of the programme in august 2018 ( currently, five notches lower ). however, notwithstanding the existence of a cash buffer to consolidate confidence over the medium term, it is important to clarify the environment in which the greek economy will move after the end of the | 0 |
gov / newsevents / pressreleases / monetary20171011a. htm. 19 see janet l. yellen ( 2016 ), β the federal reserve β s monetary policy toolkit : past, present, and future, β speech delivered at β designing resilient monetary policy frameworks for the future, β a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 26 ; and david reifschneider ( 2016 ), β gauging the ability of the fomc to respond to future recessions ( pdf ), β finance and economics discussion series 2016 β 068 ( washington : board of governors of the federal reserve system, august ). 7 / 7 bis central bankers'speeches | regulatory quality affect incentives for people and businesses to invest in physical and human capital, technology and the organization of production. therefore, particular emphasis should now be placed on improving the public administration, implementing the land registry, strengthening institutions, cutting red tape, lowering the regulatory burden and ensuring the predictability and stability of legislation, reducing entry barriers into network industries, retail trade and professional services as well as on enhancing judicial efficiency. moreover, with regard to independent authorities, it is important to strengthen their administrative and financial autonomy and ensure respect for their independence, as well as accountability towards parliament. 3. adopting a growth - friendly fiscal policy mix. the over - performance relative to the fiscal policy targets over the past three years strengthened fiscal policy credibility, but it came at a cost, i. e., lower economic growth. this is due to the high reliance of the fiscal policy mix on tax policy measures and tax rate hikes. according to the global competitiveness index 2017 β 2018, greece ranks last and second to last as regards the adequacy of the tax system to provide incentives to invest ( 137th out 137 countries ) and to work ( 136th out of 137 countries ). high tax rates actions encourage the shift of activities towards the shadow economy and provide incentives for tax evasion. hence, the fiscal mix is not sustainable and must change. more emphasis has to be placed on cutting non - productive expenditures, increasing the public sector efficiency, including the management of state property and improving the tax administration. these actions will lead to a fairer distribution of the fiscal burden and will facilitate the reduction of the excessively high tax rates. 4. tackling the problem of non - performing exposures / loans ( npes / npls ) and strategic defaulters which constrains the banking system β s ability to finance economic growth. the npe reduction targets for the next two years are ambitious compared to last year, implying that banks will need to step up their efforts and make full use of the available toolkit for private debt resolution. moreover, banks will be facing new challenges in 2018, most notably the implementation of ifrs 9, stricter treatment of loan - loss provisions, as well as the eu - wide stress test to be conducted by the ecb. thus, banks need to step up their efforts to attain their operational targets for reducing their npls and, ideally, over - achieve them now that the economy has returned to positive growth. in this context, they need to broaden | 0 |
, including the build - up of leverage which can be triggered by monetary policy, by using macroprudential policy instruments which reduce the interconnectedness of financial institutions and procyclicality through regulations on financial institutions β balance sheets. furthermore, if additional macroprudential policies which can contribute to financial stability successfully play a complementary role to monetary policy, this can contribute to enhancing the monetary policy β s credibility and transparency. in order to achieve financial stability through the harmonization of operations between the two policies, it is essential for the various policy authorities to cooperate closely. and there is a global trend toward emphasizing the central bank β s role in setting up an institutional framework to ensure seamless cooperation. policy decisions should be made through this institutional framework based on adequate sharing and analysis of information to avoid overlap and conflict between policy goals. in the process, the role of the central bank is important particularly since it is in charge of monetary policy and forms the mainstay of macroprudential policy implementation. while carrying out monetary policy so far, central banks have been equipping themselves as systemic regulators to take the lead in implementing macroprudential policies by building up expertise in evaluating overall economic conditions and financial market stability based on their process and analysis of macro and financial data. the us fsoc ( financial stability oversight council ), europe β s esrb ( european systemic risk board ), the uk fpc ( financial policy committee ) set up to carry out macroprudential policies since the crisis show that the central bank plays a leading role within the financial stability policy agencies. bis central bankers β speeches conclusion almost five years have now gone by since the global financial crisis and we have faced two major assignments of overcoming the crisis successfully and subsequently preventing a recurrence of the crisis. on the one hand, major advanced countries are implementing quantitative easing to overcome the crisis, and on the other hand international financial bodies such as g20, fsb and bcbs are developing global financial regulatory reform measures and promoting their implementation. coordinating these measures designed to overcome the crisis and prevent its recurrence is one of the major challenges the international community now faces. along with this, international policy cooperation to curb regulatory arbitrage, as well as each individual country β s coordinated operation of its macroeconomic policies, is crucial for the sustainable and stable growth of the world economy. there has been of course a constant repetition of financial and economic crises, most prominently the great depression of the 1930s, and | juyeol lee : opening address β 2017 bank of korea international conference speech by mr juyeol lee, governor of the bank of korea, at the 2017 bank of korea international conference, seoul, 1 june 2017. * * * ladies and gentlemen, i am delighted to bid a warm welcome to you all, our participants in this bank of korea 2017 international conference. i wish to express my sincerest appreciation to our keynote speakers, professor thomas sargent of new york university and president john williams of the federal reserve bank of san francisco, as well as all of our moderators, presenters and discussants. special thanks to professor sargent also for his great help to us again this year in organizing the conference. it has been nearly a decade now since the global financial crisis. and looking back over these years, the global economy did not emerge from conditions of low growth and low inflation for a long time, even under the unprecedented accommodative fiscal and monetary policies carried out around the world. to make matters worse, financial imbalances increased, mainly in emes, as international capital flows into emes surged, against a backdrop of continuing low interest rates worldwide, and private debt levels in these countries soared. fortunately, the global economy seems to have regained some growth momentum, and the international financial markets are stable. however, trade protectionism and geopolitical risks are increasing in some parts of the world, and the normalization of monetary policy in the us is expected to continue. productivity growth has also not yet returned to its pre - crisis level. in view of all this, we cannot be sure that the current global economic recovery and financial stability will be sustained. and the structural problems that have built up since the pre - crisis period make it even more difficult to be confident. in this situation, i think we can take this year β s conference as a very meaningful opportunity to look into the challenges that lie ahead for us in the next decade, and to discuss ways of dealing with them. today, i would like to talk just a bit about some of the challenges that many countries face in common, and about possible policy responses to address them. first, income inequality has risen as an important global policy agenda. income gaps among the different social classes have been widening in many countries, and this could impair the virtuous circle by which economic growth leads to increases in employment and income, which then help growth to strengthen further. recently, globalization and technological innovation are being held responsible for | 0.5 |
, and the government β s new economic stimulus package are expected to underpin the economy. however, attention should be paid to growing risks of downward pressures on the economy induced by a possible further slowdown in overseas economies as well as by developments in foreign and domestic capital markets. with regard to prices, import prices are rising, mainly reflecting the depreciation of the yen. domestic wholesale prices are declining somewhat mainly due to the decrease in prices of electrical machinery. consumer prices continue to be somewhat weak owing to the decline in prices of other imported products and their substitutes, despite the increase in prices of petroleum products. corporate service prices are still falling slowly. this report was written based on data and information available at the time of the bank of japan monetary policy meeting held on february 9, 2001. the bank β s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on february 9 as the basis for monetary policy decisions. as for the conditions surrounding price developments, the recent yen depreciation is exerting upward pressures on prices. moreover, the balance between supply and demand in the domestic market is projected to be on a gradual improving trend, while an economic recovery is expected to continue at a moderate pace. recently, however, the pace of recovery seems to be slowing and crude oil prices, which had been exerting upward pressures on prices, are falling. in addition to the declining trend of machinery prices due to technological innovations, the decrease in prices of consumer goods arising from the streamlining of distribution channels, and the reduction in communications fees aided by deregulation will continue to exert downward pressures on prices. overall, prices are expected to be somewhat weak for the time being. in the financial market, the overnight call rate is generally moving around 0. 25 percent. interest rates on term instruments have been declining somewhat. the japan premium remains negligible. yields on long - term government bonds have declined to around 1. 4 - 1. 45 percent. the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds are mostly unchanged or expanding somewhat. stock prices continue to be weak and are moving around the lowest level recorded since the beginning of 2000. in the foreign exchange market, the sharp depreciation of the yen since late december has come to a pause. the yen is currently being traded in the range of 114 - 117 yen to the u. s. dollar. with regard to corporate finance, private banks | t t mboweni : the foundation has been laid1 speech by mr t t mboweni, governor of the south african reserve bank, at the bmf corporate update gala dinner, gallagher estate, 18 june 2004. * * * one of the institutional arrangements arising out of the political negotiations process at the world trade centre in kempton park was the creation of the transitional executive council ( tec ), a sort of β provisional government β. the tec as many will recall, established a number of sub - councils. i served on the sub - council on finance. effectively, the then government could not take any major economic decisions without the concurrence of the tec sub - council on finance. those were nice days when we had power without the stress of responsibility! one of the problems / constraints facing the economy at that time, was that the country only had foreign reserves to cover for plus / minus three weeks of imports. this was indeed a crisis for an economy as big as ours. at that time, south africa β s gross domestic product at market prices was around r480 billion. for the sake of perspective, today β s gdp at market prices is r1. 2 trillion. the then minister of finance, mr derick keys, approached the tec to negotiate an agreement with us for a joint approach to the international monetary fund ( imf ) for assistance. this was a difficult request since there were so many strategic and tactical questions to consider. an example in this regard was the question of whether the apartheid government was trying to lock us into an imf structural adjustment programme via the back door, thereby tying the hands of the future democratic government. the end result was that we agreed to that request by the then government to approach the imf for the required balance of payments support called the compensatory and contingency financing facility ( ccff ). there were no conditionalities attached since this was a soft loan as it were. however, we had to provide the imf with a β statement on economic policy β. the statement was fairly simple : assure the imf that the future government will pursue prudent macroeconomic policies. this was something that the anc in particular had adopted as an approach as early as 1992 in a document entitled - ready to govern. we did not sell out! however, this β statement on economic policy β has been described by some as the beginning of neo - liberal economic policies that were to be pursued | 0 |
however, overcoming the challenges posed by excessively high inflation requires the contribution of other players as well. fiscal policy has a major role to play in protecting the most vulnerable income groups from excessive inflation, but has to act in a manner that does not amplify current inflationary pressures. targeted and temporary fiscal measures cushion the energy shock, without persistent implications for aggregate demand. in addition, the deterioration of the macroeconomic situation alongside the uncertainty surrounding the outlook for inflation and interest rates pose risks to financial stability. the ecb needs to be alert to any emergence of fragmentation across euro area financial markets, which could compromise the timely return of inflation to its target. such phenomena could lead to a tightening in financial conditions over and above the extent warranted to contain inflation. at the same time, an abrupt tightening in monetary policy may lead to sharp increases in sovereign bond yields and a widening of spreads of the vulnerable sovereigns, with severe consequences for financial stability. the above illustrate the complicated situation which the governing council has to face. the importance of swift action to control inflation as soon as possible cannot be stressed enough ; still, the tightening pace should be well - adjusted, in order to avoid amplifying economic slowdown and posing a threat to financial stability. this is a very narrow path to tread that demands careful navigation. in the present environment, monetary policy needs to remain an anchor of stability and confidence that inflation will return to its target in a timely manner. in navigating this path, it is important to maintain prudence and gradualism. as former ecb president mario draghi3 has said, " in a dark room you move with tiny steps. you don't run, but you do move. " with these words, let me wish you a very productive and fruitful conference. thank you for your attention. 1 in the absence of the monetary policy measures, gdp would have been at least 2. 7 % lower by end - 2018, and annual inflation 1. 3 % weaker. see rostagno, m., altavilla, c., carboni, g., lemke, w., motto, r., saint - guilhem, a. and yiangou, j., " a tale of two decades : the ecb's monetary policy at 20 ", ecb occasional paper no 2346, december 2019. 2 see keynote speech by fabio panetta, member of the executive board of the ecb, at the | financial safety net will need to be put in place to assure that greece is able to weather adverse developments that could temporarily drive borrowing costs up to unsustainable levels. the envisaged β cash buffer β is one such safety net, that would enable greece to avoid a recourse to the markets at times of heightened volatility and high refinancing costs. this cash buffer is currently being built up with the trial bond issues before the end of the programme, as 1 / 7 bis central bankers'speeches well as with disbursements from the european stability mechanism ( esm ). at the current stage, the first trial return to the markets took place in july 2017 with a five - year bond issue, while in november 2017 a bond exchange was conducted for an amount of β¬25. 8 billion. subsequently, after the completion of the third review, a seven - year bond issue was launched, as part of the government β s plan for greece β s return to international markets before the end of the programme. this issue, which took place amid turbulence in international financial markets, was successful. however, episodes of turmoil such as the recent ones appear to have a greater impact on countries with poor credit ratings and a weaker economy. these countries saw the yields on their government bonds rise considerably. this suggests that, in the present uncertain conditions, the greek state β s return to the markets, as necessary as it may be for a return to normality, must proceed with caution. international experience has shown that trial bond issues for the purpose of creating a sound cash buffer prior to the expiry of a programme helps bolster confidence and paves the way to the exit from the programme. nevertheless, the need for a complementary precautionary assistance programme must also be considered. the possibility of a recourse to a precautionary support programme, especially if financial market conditions call for one, must not be overdramatised, as the european mechanisms are there to be used if needed. such a precautionary assistance framework can be expected to support the greek economy, by helping to reduce borrowing costs, since it will provide assurance of the greek government β s and banks β access to funding beyond the end of the current programme in august 2018. under an esm precautionary credit line, funds would become available, without necessarily having to be raised beforehand, whereas the build - up of a cash buffer necessarily entails additional borrowing, which would increase | 0.5 |
the financial and business services sector. one explanation may be that in periods of uncertainty the large well - known enterprises with good ratings continue to attract funds at favourable conditions and may then channel funds to smaller enterprises via intercompany loans or via trade credits. it would, of course, be useful to compare productivity developments in a wider range of sectors in the euro area with those of the united states. but this is not yet possible, as quarterly productivity developments are not produced at the same sectoral breakdown in the us. ( the us disaggregates only to the non - farm business sector and the manufacturing sector. ) the main comparable indicators used for fiscal policy analysis are the general government deficit, expenditure and debt. harmonised deficit figures show strong deficit deterioration in the euro area and in the us for the last two years. these were driven by sharp declines in tax revenues as well as expansionary fiscal policies. japan 6 displayed a deficit between 6 and 8 % of gdp for most of the early 2000s as a consequence of the japanese crises in the 1990s, with some improvement for the period 2006 β 2008. in 2009, the fiscal outlook deteriorated again with an estimated deficit of around 7 % of gdp. 7 again, a direct comparison is not possible without adjustments, 8 due to methodological differences in their compilation. 9 the expenditure - to - gdp ratio 10 indicates the size of the government sector. comparable figures show a convergence of expenditure levels in the us and japan, at around 37 % of gdp. the relative importance of the government sector in the euro area is much higher, with a current expenditure ratio just above 50 % of gdp. when interpreting these figures, an important caveat concerns the institutional differences between the social security of the countries. mandatory private insurance schemes for pensions, unemployment or health care reduce the headline figures for government expenditure in the us. state contributions to compensate for households β voluntary payments into social security funds increase government expenditure in the euro area. comparable figures show an increase in the debt - to - gdp ratio 11 between 2007 and 2009 in the euro area and the us, amounting to 12. 8 percentage points and 19. 2 percentage points respectively. in japan, the government debt ratio stood at 162. 2 % 12 of gdp in 2008 after rising more than 40 percentage points in the last decade. this is due to the accumulation of high deficits and low gdp growth. it is straightforward to compile government data for japan according to the european definition on the basis of | negative correlation, and that the total debt is downwardly sticky has an implication for the relation between the debt and economic growth. in countries such as japan, the united states, the united kingdom, and spain, the debt overhang in households, firms, and / or the government seems to be at a threshold point at which the debt will exert a severe restriction on the economy. therefore, in bis central bankers β speeches considering the outlook for the global economy, it must be borne in mind that the high level of total debt could remain a major impediment to global economic development. c. the japanese economy is expected to return to a moderate recovery path the japanese economy has shown some weakness since april 2012 mainly in manufacturing, because the european economy has receded and growth in the chinese economy has slowed, and because domestic demand has been insufficient to offset the weakness in overseas demand. although the trend of exports is still downward, the rate of decline has moderated compared to the situation during the july β september quarter of 2012. this movement is consistent with recent developments in the global purchasing managers β index ( pmi ), which reflect the pick - up in the u. s. and the chinese economies. reflecting signs that the fall in exports has bottomed out, production in manufacturing is thought to be bottoming out as well ( chart 19 ). looking at domestic demand components such as private consumption, the negative impact of the ending of environmentally friendly car subsidies has recently diminished, and consumption remains resilient despite several negative factors affecting income such as the decrease in winter bonuses ( charts 20 and 21 ). the employment condition in the manufacturing sector still looks bad, but the negative spiral of weakness in manufacturing is not expected to spill over into the nonmanufacturing sector. in these circumstances, business fixed investment, which has recently shown some weakness on the whole, is projected to turn to a moderate increasing trend ( chart 22 ). according to the production forecast survey by the ministry of economy, trade and industry ( meti ), it is becoming harder to identify the basic trend of production due to quirks in the seasonal adjustment unique to the january β march quarter and the chinese new year holidays in february. nevertheless, at a minimum production is unlikely to show a further substantial decline. as overseas economies are somewhat more likely to return to a moderate growth path β unlike in the period up to summer 2012, when there were high tail risks β and the domestic economy is expected to enjoy the impact | 0 |
, the german economy is a net exporter of euro banknotes both to the rest of the euro area and non - euro area countries. according to our estimates, more than 40 % of the bundesbank β s cumulative net issuance leaves the euro area altogether. what are the main drivers behind this? conventional decompositions suggest that two channels are of particular importance : first, net shipments from international banknote wholesalers, and, second, tourists using banknotes to cover their travel expenses. however, with the increase in labour mobility, a third channel may have come to the fore which relates to the link between migration flows and remittances. there is evidence to suggest that, for example, estimates of the amount of us currency held abroad are affected by remittance flows. 2 workers base their individual decision to migrate on a simple cost - benefit analysis : the income benefits from migrating should outweigh the social and economic costs of moving. in the spirit of forward together, immigrants tend to use a portion of their income earned abroad to support their families at home. the value of remittances worldwide is on the rise. unlike foreign direct investment, these flows are driven less by risk and return but more by altruism and care for one other. remittance flows 2 / 3 bis central bankers'speeches are relatively resilient β at times even moving in a countercyclical manner. there are two views as to how remittance flows may also affect economic policies. on the one hand, as a driver of economic development, they may play an important role in reducing absolute poverty and income inequalities in the recipient country. on the other hand, there is the danger of excessively relying on remittance flows. there is evidence to suggest that incentives for structural reforms may weaken as a result. 3 from a payments point of view, remittances are cross - border p2p transactions. this implies that households need to have a reliable infrastructure at their disposal. in many cases, households will turn to non - cash systems. nevertheless, individual preferences and providers β transaction costs vary. cash does play a role in this too. informal cash transfers across borders could occur, for instance, when the receiving country is in close geographical proximity. but there are also several well - established formal channels. money transfer operators, for example, tend to accept physical cash payments by the sender, even if they then pass on the payment information in electronic form | in the balance sheet and changes in interest rates. uncertainties related to this relationship help to explain the fomc β s choice to make changes in overnight rates its main tool for adjusting the stance of monetary policy in the normalization process while balance sheet normalization runs in the background. still, having both instruments in the central bank β s toolkit raises the importance of clear and cohesive communications about their respective use. lesson 7 : operational flexibility is important as i noted earlier, the fed successfully adapted its operating regime to be able to control interest rates even with a large balance sheet. the fomc has not decided what kind of operating regime it wishes to run in the long run, but one lesson from the crisis is that not all operating frameworks may be robust to a wide range of circumstances, such as implementing policy at the zero lower bound. if one wished to retain the option that the balance sheet could be deployed as an active tool for policy implementation at this threshold and then gradually revert to a passive role when conditions normalize, then one needs to consider how to transition into and out of different operational modalities. this requires operational flexibility. a byproduct of a central bank β s portfolio - expanding asset purchase programs is an increased supply of reserve balances in the banking system. 43 thus, once balance sheet tools are deployed, the central bank will find itself operating in a system with reserve abundance if it wasn β t already, and will need to adopt instruments and arrangements that can deliver interest rate control accordingly. this imperative could imply switching operating regimes β from a corridor regime to a floor regime, or from a liability - driven floor to an asset - driven floor β and staying in the 8 / 13 bis central bankers'speeches new regime for an extended period. some central banks, such as the ecb, have monetary policy implementation frameworks in which this transition happens relatively seamlessly, while others, such as the fed before the crisis, required significant changes to tools and operations. timeliness of the transition is important, and overly complex transitions β especially if there is little time to prepare β could potentially restrain a central bank β s ability to respond aggressively to rapidly changing economic and financial conditions in a crisis. perhaps more importantly, delayed transitions could interfere with market expectations about any change in the policy stance, even though appropriately - calibrated expectations, through their effect on market pricing, could be stabilizing and lower the risk of a crisis. additionally, if a central | 0 |
1. 4 % in 2005, 1. 6 % in 2006, 1. 8 % in 2007 and 2. 14 % in 2008. with 1, 470 branch offices spread over the country, the amount of financing provided by the industry has grown from a mere rp 5. 5 trillion ( usd 458 million ) in 2003 to rp 28 trillion ( usd 2. 3 billion ) in 2007 and rp 38 trillion ( usd 3. 2 billion ) in 2008. the industry has also shown its commitment to support micro and small - scale businesses with microcredit financing ( kur ). by the end of 2008, total microcredit extended by sharia banks reached rp 326 billion ( usd 27 million ). as a whole, the islamic banking sector has grown at a compounded annual growth rate ( cagr ) of over 46 % in the last five years. notwithstanding, the industry is expected to acquire a 15 % market share of the total national banking system by 2015. with reference to the capital market, the first corporate sukuk was issued in early 2002, followed by tens of corporate sukuk issued over the subsequent years. islamic capital market development was marked by its inclusion in the national master plan in 2005. as of december 2008, there were 22 corporate islamic bonds issued under mudharabah and ijarah contracts totaling rp 4. 78 trillion ( equivalent to usd 434. 5 million ), or approximately 2. 7 % of total bonds issued. furthermore, there are currently 36 issuers of islamic mutual funds, consisting of equity funds, fixed income funds and balanced funds. net asset value ( nav ) totals rp1. 8 trillion ( usd163. 64 million ), approximately 3. 5 % of total nav for mutual funds. those promising sharia financial institutions are inextricably tied to strong political will from the stakeholders. in june 2008, the islamic banking industry in indonesia gained new momentum as parliament passed a new islamic banking act. in april of the same year, parliament also enacted a new bill concerning islamic bonds. the promulgation of these two laws has provided a firm legal foundation for islamic banking in the country, thus promoting the advancement of islamic banking and finance. in august last year the government successfully issued state sukuk and then in february of this year retail state sukuk were issued. surely, this has contributed significantly to further catalyze the development of a wide - based retail secondary market for investment | sethaput suthiwartnarueput : central banking amidst shifting ground welcome remarks by dr sethaput suthiwartnarueput, governor of the bank of thailand, at the bis - bot conference on " central banking amidst shifting ground ", bangkok, 2 december 2022. * * * governors, distinguished guests, ladies and gentlemen. it is a pleasure and great honor for me to be welcoming so many distinguished members of the central bank community to thailand. thank you for making the journey here from near and afar. let me also extend a warm welcome to speakers and panelists joining us on - line today. we truly appreciate your participation in the conference. i would like to also express my sincere appreciation to the bis for helping usorganize and host this event. during a period where the world is grappling with challenges that threaten to pull us apart, the bis has continued to serve as a cornerstone of central bank and regulatory cooperation acting to pull us together. indeed we are all here together in large part due to the convening powers of the bis. this year marks the 80th anniversary of the bank of thailand. this conference is an opportune moment for us to take stock and reflect on how far we have come and chart the way forward. in light of the rapid and seismic changes we have experienced, such reflection is needed more so now than ever. today, central banks are facing a triple challenge from : i ) a rapidly changing economic backdrop that has transformed the nature of the underlying policy challenge ; ii ) shifting conceptual frameworks needed to guide policy ; and iii ) emerging institutional pressure points on policy mandates and central bank independence. in other words, what needs to be done has changed, how to do it has become unclear, and why it should be done is subject to greater scrutiny. for central banks tasked with maintainingeconomic and financial stability, it is as if the ground is literally shifting beneath our feet. hence the theme of the conference today : " central banking amidst shifting ground ". we are exceptionally fortunate to have such a distinguished list of speakers and panelists with us to share their insights and experiences on these issues. to set the stage, let me elaborate on the three key fault lines that central banks will have to navigate at this critical juncture. a rapidly changing economic backdrop the first fault line, reflecting the rapidly changing economic backdrop, is palpable. inflation has returned with a vengeance, catching everyone by surprise. the strong post - pande | 0 |
to find a policy that is sufficiently tight to prevent inflationary impulses gaining a lasting grip. this is necessary to ensure that they do not spread to inflation expectations, wages and other prices. at the same time, the policy must be sufficiently loose to avoid unnecessary negative effects on production and employment. it is a difficult balancing act. to manage this in a way that provides a good growth in the economy that is sustainable in the long term requires that the credibility of the inflation target remains intact. this is the premise for formulating monetary policy. if the expectations of inflation are pushed up and remain above the inflation target, there is a risk that they will become a self - fulfilling prophecy. and dealing with high and fluctuating inflation rates is often a very difficult and expensive process β for individual households and the economy as a whole. the oil price shocks in the 1970s are examples of how external inflationary impulses were allowed to gain a firm foothold and spread throughout the economy at the same time as economic activity was weak. the cost of dealing with this adjustment was high, not least because our competitiveness was undermined. the consequences for swedish monetary policy right now what do the rising commodity prices mean for the interest rate decision we made a couple of weeks ago? what will it entail for future monetary policy if these price rises continue? well, it is of course largely the balancing act i recently described. we executive board members must currently take into account in our deliberations the forces pulling the economy in different directions. in sweden economic activity is still fairly strong, but there are signs of a slowdown. we are also seeing weaker international developments and financial turmoil. in contrast, inflation and inflation expectations remain high. one can thus say that commodity prices are in a way in both scales of the balance. they are to some extent both behind the slowdown in economic activity and behind the high inflation and inflation expectations. the way my executive board colleagues and i weighed together the various factors at the most recent monetary policy meeting resulted in our holding the repo rate unchanged at 4. 25 per cent. we are also currently assuming that the interest rate will need to be held at this level in 2008 to manage the inflation target a couple of years ahead. of course, commodity prices were important in our assessments. so let me therefore conclude by describing how i myself reasoned in connection with the interest rate decision. rising prices all in all, inflation has largely developed in line with the forecast in the february monetary policy | , was affected by the economic slowdown in 2001. the slowdown was aggravated by the uncertainty following the terrorist attacks on 11 september. growth in sweden and in the oecd as a whole was then around 1 per cent. economic policy was made more expansionary in many countries and at the beginning of 2002 there were signs that uncertainty had declined and that economic activity was about to improve. growth improved slightly and assessments of future growth assumed that economic activity would continue to strengthen. however, these expectations were not met. during the second half of 2002 economic prospects took a downturn once again, growth forecasts began to be adjusted downwards and the time for the economic upturn was postponed further. this applied both internationally and in sweden. it was partly due to the confidence crisis suffered by the business sector as a result of corporate scandals in the united states and a number of large - scale bankruptcies. this contributed to a new stock market fall. the threat of war in iraq and the ensuing outbreak of war for a time created greater uncertainty over the global economy than usual. the lack of clearly positive economic signals once the acute stage of the war was over, contributed to an increasingly pessimistic view of the economic situation during the first half of 2003. the weaker economic activity was also reflected in the riksbank β s inflation and growth forecasts, and the repo rate was cut by a total of one percentage point during spring and summer 2003. during the second half of 2003 the views of economic activity became slightly more optimistic again. it now appears that economic growth in sweden and the united states during 2003 was largely as we had expected at the beginning of the year. in sweden, investment showed a much poorer growth than expected during 2003, but this was counteracted by good growth in consumption, in both the private and public sector, and by favourable developments in foreign trade. one could therefore say that the riksbank, in common with other analysts, became overly pessimistic in connection with the iraq war, at least with regard to the view of economic growth in the united states and sweden. with regard to developments in the euro area, the situation is slightly different. there, the growth forecast for 2003 has been revised down further during the second half of the year and it is only very recently that some positive economic signals could be distinguished. however, it is quite clear that growth in the euro countries was much poorer during 2003 than we believed it would be at the beginning of the year | 0.5 |
. regtech could address a wide array of requirements related to regulatory reporting, financial crime, operational risk ( including cyber - security and fraud detection ), consumer protection and data protection regulation. although there are many regtech companies operating in developed countries, there are no examples of regtech operating in macedonia. nevertheless, macedonian banks and non - bank players are allowed to use services offered by regtech companies operating globally in order to stay compliant with the rising regulatory requirements. 1 β open for business β choosing digital business models for banks to drive new growth β β accenture strategy 2 accenture payments, consumers β initial reactions to the new services enabled by psd2, 2016 5 / 5 bis central bankers'speeches | years after the monetary independence, we stand firm ahead of new challenges and i assure you that we will succeed by guaranteeing the stability of the denar and price stability, which are the best contributions that a central bank can make for the prosperity of our society. congratulations on the 28th anniversary of the monetary independence! 2 / 2 bis central bankers'speeches | 0.5 |
of monetary union that was previously priced - in by markets. today, the euro area is therefore a more stable and resilient place to invest in than it was a year ago. and not a single euro of government bonds has been purchased under the omt programme. strengthening banks β risk absorption capacity banks β capital position clearly lies outside the remit of central banks. in fact, it is β first and foremost β the responsibility of shareholders to ensure that their bank is solvent and able to sustain its core business. and if the private sector is unable or unwilling to provide the capital necessary to achieve solvency, it is for the fiscal and regulatory authorities to decide whether and how to act. monetary policy cannot substitute for or subsidise either of these policy domains. bis central bankers β speeches but the euro area has achieved significant progress in terms of solvency. banks have received fresh capital. problematic legacy assets have been removed from banks β balance sheets, notably in countries under financial assistance programmes more remains to be done. in particular, two policy initiatives should take precedence. first, we need to create full transparency about the risks on banks β balance sheets. such transparency is a pre - condition for the banking sector to return to lasting health. and a healthy banking sector is a pre - condition to revitalising bank lending. second, we must align investors β incentives with those of society. this means that market participants that stand to benefit from the upside of risky activities should also bear commensurate losses on the downside. europe is making some progress in these areas too. to strengthen transparency, we are establishing a single supervisory mechanism ( ssm ), which tasks the ecb with overseeing major parts of the european banking system. by placing this responsibility with an independent institution at european level, the single supervisory mechanism will ultimately allow earlier identification of financial risk. to strengthen incentives, the institutional architecture is being augmented by rules to facilitate investor participation in dealing with distressed banks. in particular, harmonised rules and procedures for bank recovery and resolution are currently being developed at european level. to ensure a fully consistent and effective application of these rules, their implementation should be placed within the remit of an independent single resolution mechanism. before the ecb takes over the ssm, it will conduct together with the national supervisory authorities and with an appropriate involvement of private sector companies, a balance sheet review of those banks that it takes into the ssm. to this end, the national budgets and where needed, the es | aging of the population occurs over a shorter period and at a faster pace than you might expect. 8 the good news about demographic change is that we can forecast prospective changes well in advance and with a certain degree of accuracy. in addition, emerging countries can learn from the precedents set in those advanced countries that are already experiencing problems related to an aging population. it is not too early to start preparing for prospective aging. although population aging has a wide range of economic implications, i would like to focus today on one of the main issues associated with aging, the pension system, by reviewing national institute of population and social security research, " population projections for japan. " japan's experience. the pension system is at the core of the social security system. as the pension system has a significant impact on people's lives, careful and detailed consideration is necessary before implementing reforms. for over 20 years in japan, we have been discussing various issues, including how to secure the financial resources necessary to support the pension system, and have made steady progress with reforms. the japanese pension system is largely based on the so - called pay - as - you - go scheme, where benefits for the elderly are paid out of premiums collected from the contemporary working age population. therefore, the aging of the population demands a regular review of the balance between premiums, benefits and government subsidies. after long and intensive discussion, a number of reforms have been adopted, including a raise in the pension age and an increase in the subsidy from the government. a mechanism called the " macroeconomic slide " has also been introduced, which automatically adjusts the amount of pension benefit by taking into account changes in the number of people insured and average life expectancy. at least once every five years, the government must carry out a comprehensive review of the financial conditions of the pension system, including its long - term prospects. the aging of the population has huge implications not only for the pension system but also for public finances in general. expenditure on health and elderly care has increased significantly in japan. the proportion of social security expenses to total annual expenditure has soared from around 14 percent in 1970 to around 35 percent at present. maintaining the credibility of public finance by ensuring medium - to long - term fiscal sustainability is essential. to this end, planning and reviewing the social security and tax system so that they can adapt to demographic changes is critically important. maintaining economic vitality amid an aging and shrinking population is also a critical issue. from a macroeconomic perspective | 0 |
. think about how you can provide them with an opportunity to invest in a broad range of assets at affordable cost. i have little doubt in my mind that as you take up this challenge, you will be able to create financial stability by being a good investment manager to this segment of investors. i have been informed by the chairman of equity capital resources ( ecr ) plc that the company intends to list ecrut on the stock exchange in the near future. when this commendable intention is achieved, ecrut will be the first collective investment scheme to be publicly traded on the stock exchange in zambia. with the calibre of men and women behind this investment vehicle, i am confident this will be achieved in the required time frame. when that time comes we want to turn back to this day and say β we were part of the birth of ecrut β. the existence of the ecrut shall provide means of resource mobilisation, bringing on board a collection of individual participation in the capital and money markets. this vehicle will facilitate the participation of investors who previously were not capable of participating in highly denominated securities in the financial sector. ladies and gentlemen, before i end my speech, let me quickly touch on an important aspect of collective investment schemes, that is, investor confidence in the managers and the industry itself. i believe by far this is the most important factor in whether a scheme can attract and maintain long - term investors. there must be a strong regulatory framework. whereas there is a strong regulatory body in the securities and exchange commission that vigorously administers the law to protect investors, fund managers must be committed to strong self - regulation and exercise professional ethics to the best interests of investors. this, chairperson, is fundamental. it now gives me great pleasure to officially launch the ecrut scheme. thank you. | marked improvement on the 1980s, when the increase remained at around 1 per cent per year, and even more so compared with the 1970s, when the productivity trend was negative. factors such as the change in fiscal and monetary policy regimes and stiffer competition have probably played a role in this development. despite the fact that the strong growth in productivity during the 1990s partly reflects both rapid growth in the private sector relative to the public sector and the large expansion in the ict sector, there is reason for relative optimism regarding the future. our economy has become more open, with greater competition and price pressure in many sectors. the problem is primarily the labour supply. here, developments seem to have turned in a negative direction. one reason for this, i believe, is that economic policy has not in practice been aimed at putting people in work. one example is that the compensation levels in several transfer payment systems were increased during the late 1990s. now other changes are being discussed which would directly and tangibly have the same effect, for instance, a reduction in working hours. another problem in this context is that the swedish labour market has not been able to make adequate use of the many people in sweden who were born abroad. the employment frequency among these people has been much lower than the employment frequency among people born in sweden. this applies in particular to those who have arrived here quite recently. they include many university - educated or otherwise highly - qualified people who are completely without work or have jobs below their level of competence. in addition, the problem is exacerbated by the fact that the population's age structure in the near future will become less advantageous from a labour force perspective, with increasing numbers of exits from the labour force. an ever declining group of workers will have to support an ever increasing number of people, unless measures are taken. it is easy to see the significance for economic growth of measures to increase the labour supply. for example, the number of hours worked could increase by an average of 0. 4 percentage points more per year if it were possible to halve the number of people on sick leave by 2008. this means that the number of hours worked could increase by an average of 0. 8 per cent annually instead of 0. 4 per cent during the period up to 2008. if it was also possible to break the negative trend for persons born abroad and bring them into the labour market to a greater extent than now, this would also increase the number of hours worked. in 2002, 75 per cent | 0 |
##ly regulatory requirements with internal risk measurement methodologies. it is important to recognize that the application of the new accord is principally intended for large international banks, which are complex institutions usually operating in developed countries. therefore, basel ii has often been questioned about its implications and appropriateness for banking in emerging market economies, and it is on this point that i would like to focus my remarks. in principle, the three - pillar structure of the new accord provides more precise directions to regulators to strengthen bank supervision and incentives to banks to become more sophisticated in risk management. implementation of basel ii eliminates β one size fits all β methodology to assess risks and offers instead a wide range of methods to evaluate risks based more on failure likelihood. but the supervisory authorities in several emerging markets and many developing economies are concerned that basel ii puts a challenge they cannot meet. probably our greatest concern relates to the need of the standardized approach to rely on external rating agencies for calculating minimum capital requirements. currently domestic rating agencies are totally absent in albania and not well developed as in many other non - oecd countries. on the other hand, in most of our economies many small enterprises cannot afford to be clients of international rating agencies. since borrowers unrated from rating agencies will be assigned a 100 % risk according to basel ii, initially most domestic credits may end up under this 100 % category. this could reduce risk sensitivity of the new system brining it close or similar to that of basel i. on the other hand, albanian banks hold a significant share of government treasury bills and notes. actually, under basel i to this exposure of the banking system denominated in local currency is assigned 0 % risk independently whether credit risk of the sovereign debt is rated or not. under basel ii, standardized approach, it is possible that sovereign debt is assigned a risk weight between 0 % to 150 %, most likely 100 % since it falls under unrated category. this means that banking system in albania may have to increase capital allocation to comply with the minimum level of the capital adequacy ratio. an important intention of basel ii is to strengthen market discipline by developing a set of information disclosure requirements. in our countries there is plenty of room for improvement in this respect to allow market participants to assess key information on risk exposure, risk assessment process, and hence capital adequacy. this is important since it increases public pressure on banks to have a better performance in assessing and monitoring risk. however, in short run information disclosure might also have some | ##k and 10000 lek. the latter is a completely new denomination in the series of the albanian banknotes. the printing and issue into circulation for the first time of the new banknote with the largest value, 10000 leke, represents in itself, the adoption of the banknotes β structure to the evolution of the structure of prices and wages, the development the electronic payments, and of the other indicators related to the management of currency. this note with the largest denomination accompanies the economic development of the country, and according to all analysis, meets the market requirements to have it in the structure of our series of banknotes, which are legal tender. the presentation and issue of this note will enable a better and more efficient circulation of cash, by helping the structure of the currency in circulation, reducing the costs of production, storage and distribution, thus enhancing the efficiency of the bank of albania in cash management and issuance. in addition, the presence of this new highest - value banknote in the structure of the albanian banknotes increases also the effectiveness of the bank of albania to manage a rather adequate strategic stock to meet the 1 / 3 bis central bankers'speeches increased market demand for cash in contingency cases. despite the development in other means of payments, as electronic ones, currency in circulation is set on an upward trend from years now. this trend reflects the ongoing demand of economy for cash as a payment means. bank of albania is attentive while planning to guarantee the fulfilment of this demand of the market, in both normal and atypical situations. the current situation caused by the covid - 19 pandemic, is a real example in this regard. economy has increased further its demand for cash throughout this period. thus, over 2020, currency in circulation lifted by all 52 billion or three times higher than the growth recorded in 2019. also, in the first five months of 2021, the growth amounted around all 10 billion. meeting the demand of market for cash is achieved through ensuring and planning the sufficient stock of cash at the bank of albania, which guarantees the security for both the present and future. allow me to detail briefly some of the features of these two denominations : the 1000 lek banknote, part of the new series, has a refreshed design, but it retains the same motives presented in the existing one, embedding changes related to the whole configuration of all added and improved elements. the theme of the 10000 lek | 0.5 |
legal issues regarding central bank digital currency ( abstract ), " institute for monetary and economic studies, bank of japan, september 2019. goods ( i. e. financial and monetary stability ). this is desirable for the national economy as a whole. the bank of japan, as the operator of the boj - net and as a catalyst promoting dialogue in the private sector, will continue our efforts toward the greater efficiency and safety of payment systems. thank you very much for your attention. | β rate of inflation. the specificities of our economy coupled with the weak predictable relationships between certain key monetary and other economic variables have not made targeting a specific inflation rate that easy at this stage. i suspect you must be aware of the saying : β to be sure of hitting the target, shoot first and call whatever you hit the target. β price stability will continue to be given central importance and will be kept clearly in sight as the anchor for monetary policy. precisely, this is what the bank of mauritius act 2004 expects us to deliver. much progress has been made in the recent past in the achievement of price stability. wide fluctuations in the rate of inflation have been drastically reduced over time. inflation rate in the 1980s reached a peak of 44 per cent and a low of less than 1 per cent. in the 1990s, it attained a high of 14 per cent and a low of 3 per cent. in the last 5 years the highest rate was 7 per cent because of the introduction of vat coupled with an increase in the vat rate and the lowest was 4 per cent. these figures are the headline inflation rate as published by the central statistical office ( cso ). it captures changes in the cost of living based on a typical household consumption basket. central banks have gone deeper into statistical analyses of inflation. for quite some years they have come up with the concept of core inflation - an indicator of the underlying movements in consumer prices. core inflation irons out the effect of temporary disturbances and shocks to prices that are not attributable to economic and monetary policy. for instance, the impact of the current increase in world price of oil on our inflation rate is a disturbance for which monetary policy is not responsible. that part of inflation due to such disturbances and shocks are statistically isolated from the headline inflation rate. the resultant rate of inflation provides a measure of and an indicator of underlying long - term inflation. we have carried out this exercise for mauritius. we have had some difficulties in arriving at a specific core inflation rate for mauritius because the prices of around one - third of the items in our consumption basket are set by government. having used two different methods, we obtained a range for our core inflation. for the 12 - month period ended september 2004, the core inflation ranged between 2. 9 per cent and 3. 3 per cent lower than the headline inflation rate of 4. 1 per cent as published by the cso. on average, our core inflation is likely to be between 1 and 1 | 0 |
only loosely connected local markets. thus, while investors can arbitrage the price of a commodity such as aluminum between portland, maine, and portland, oregon, they cannot do that with home prices because they cannot move the houses. as a consequence, unlike the behavior of commodity prices, which varies little from place to place, the behavior of home prices varies widely across the nation. speculation in homes is largely local, especially for owner - occupied residences. for homeowners to realize accumulated capital gains on a residence - a precondition of a speculative market - they must move. another formidable barrier to the emergence of speculative activity in housing markets is that home sales involve significant commissions and closing costs, which average in the neighborhood of 10 percent of the sales price. where homeowner sales predominate, speculative turnover of homes is difficult. but in recent years, the pace of turnover of existing homes has quickened. it appears that a substantial part of the acceleration in turnover reflects the purchase of second homes - either for investment or vacation purposes. transactions in second homes, of course, are not restrained by the same forces that restrict the purchases or sales of primary residences - an individual can sell without having to move. this suggests that speculative activity may have had a greater role in generating the recent price increases than it has customarily had in the past. the apparent froth in housing markets may have spilled over into mortgage markets. the dramatic increase in the prevalence of interest - only loans, as well as the introduction of other relatively exotic forms of adjustable - rate mortgages, are developments of particular concern. to be sure, these financing vehicles have their appropriate uses. but to the extent that some households may be employing these instruments to purchase a home that would otherwise be unaffordable, their use is beginning to add to the pressures in the marketplace. the u. s. economy has weathered such episodes before without experiencing significant declines in the national average level of home prices. in part, this is explained by an underlying uptrend in home prices. because of the degree of customization of homes, it is difficult to achieve significant productivity gains in residential building despite the ongoing technological advances in other areas of our economy. as a result, productivity gains in residential construction have lagged behind the average productivity increases in the united states for many decades. this shortfall has been one of the reasons that house prices have consistently outpaced the general price level for many decades. although we certainly cannot rule out | our country β s fundamentals. these episodes lasted for only a limited time, however. another advantage of a flexible swiss franc is that changes in the international monetary system have little bearing on our currency which is largely determined by switzerland β s economic realities. consequently, the launch of the euro - a major event on the monetary scene in recent years - did not lead to the disappearance or the destabilisation of the franc as feared by some. though the euro - for all intents and purposes - is accepted as a means of payment in switzerland, there are not more euros in circulation now than there were french francs or german marks prior to the monetary integration. furthermore, the calm that has characterised the foreign exchange market in europe since the disappearance of the national currencies mitigated the speculative pressures on the franc. our currency is therefore less volatile than before. last but not least, contrary to the pessimistic assumption that the swiss national bank would have to shadow the policy of the european central bank, it was able to set its interest rates according to the needs of the swiss economy. on the whole, our monetary regime passed the test imposed by the change in the european monetary system with flying colours. even though switzerland is a modest player on the international scene it carries more weight than one would imagine. the country β s edge lies in its small size, leaving it no other option than to open up to international trade. moreover, its liberal philosophy and sound financial standing have given it the necessary tools to conduct a policy of openness and to have a strong presence abroad. having chosen the option of free trade and free movement of capital, switzerland is, in many respects, better prepared than others to take advantage of the greater opening of the borders brought about by globalisation. to be sure, this is not an easy ride, as international competition always necessitates painful adjustments, and switzerland is no exception in this respect. when we take stock of the last few years, however, the bottom line looks favourable. we would certainly be in an even better position now, if we had built up a stronger presence in emerging economies. as you can see, contrary to what some people believe, globalisation is not the cause of the weak growth of the swiss economy ; indeed the opposite is true. foreign trade is the engine driving our economy. it has expanded in recent years in step with the global economy. by contrast, our domestic market has stagnated and registered only | 0 |
also, in some sense, preserved the obstacles to swift and orderly liberalisation of capital controls. if parliament had not passed the emergency legislation in october 2008, thereby ensuring that there was a functioning banking system and that domestic deposits were secure, if capital controls had not been introduced in november 2008, if we had not been so successful in repairing domestic balance sheets, if the economic recovery had been weaker and the rate of return on domestic assets had been lower, then the domestic assets of the old banks would have been worth much less, as would the offshore kronur. in this scenario, these positions might have exited iceland long since, at just a small fraction of the value they had just before the resolution of the old banks. instead, the domestic assets of the old banks amounted to 25 % of gdp and the stock of offshore kronur was estimated at around 15 % of gdp. it was clear that free exportation of these positions without mitigating action would have resulted in a new currency crisis, with potentially serious effects on financial stability. that was both economically and politically unacceptable. as a matter of fact, the population had been promised solutions to these problems entailing no negative effect on the exchange rate. the icelandic authorities have publicised three versions of their capital account liberalisation strategy : the first in 2009, the second in 2011, and the current one in june 2015. it was under the second strategy that the stock of offshore kronur was reduced through a series of auctions. that strategy, however, did not include a solution to the problem of the old banks. the split between the old and new banks was only finalised towards the end of 2010, and in any case, the old banks were largely exempted from the controls until march 2012. the current strategy is based on a guiding principle and a set of criteria that any proposed solutions would have to fulfil. if i explain these to you now, you will better understand what we have done to date and what is forthcoming. an overall guiding principle in the design of the liberalisation strategy was that it should entail comprehensive, cautious, and clearly communicated solutions, allowing the country to lift capital controls without undue risks to macroeconomic and financial stability. the strategy is comprehensive in the sense of mitigating, in a sufficient manner, the risk that excessive capital outflows would overburden iceland β s small foreign exchange market and inflict systemic negative externalities on the general public. in particular, it | our most basic questions about them : are available measures suitable indicators of true inflation expectations by households and businesses? how are expectations formed β and in particular what are the respective roles of central bank talk, central bank actions, and actual inflation outcomes? and how do expectations influence price and wage setting? in short, although i believe that inflation expectations are critical to assessing the inflation outlook, i cannot be sure ( particularly in real time ) that our expectational measures are accurate and so cannot know what precise role expectations play in wage and price dynamics. in sum, then, i found reading the paper to be useful and instructive because it reminded me not only of what we have learned but also of what we still do not know. james h. stock and mark w. watson ( 2007 ), " why has u. s. inflation become harder to forecast? " journal of money, credit, and banking, supplement to vol. 39 ( february ), pp. 3 - 33. | 0 |
or losses, at least if those accounts were also to be marked to market. so gilt price movements necessarily all wash out once the public accounts are compiled on a consistent basis, at least so long as the assets are retained within the public sector 3. we do not, however, expect to retain all the purchased assets in the asset purchase facility to maturity. at some stage, as the recovery proceeds, the monetary policy committee will need gradually to remove the large monetary stimulus that we have imparted to the economy, otherwise we will be in danger of overshooting our 2 % inflation target. that monetary tightening will take the form of some combination of a higher level of bank rate and asset sales from the asset purchase facility to the private sector. the process of selling off the gilts can then be expected to push gilt yields back up towards where they would have been in the absence of the quantitative easing programme. when the asset purchase facility is finally run down, won β t the closing accounts tell us about the benefits or costs of the programme? the answer to this is : no. the first point to make is that the aim of quantitative easing and the asset purchase facility is to help the monetary policy committee achieve its macroeconomic objective, namely hitting the government β s inflation target without generating undue volatility in output. the accounts of the asset purchase facility are not designed to address these overall macroeconomic costs or benefits, which instead requires an assessment of the impact of quantitative easing on demand and inflation. as i have already noted, this is a difficult issue which is likely to keep researchers busy for many years to come. second, even if one were interested in the rather narrower issue of the impact of quantitative easing on the public finances, whether the treasury ends up with a profit or a loss from the asset purchase facility represents only a small part of the picture. gilt yields will be lower than they would otherwise have been during the period that they are held in the asset purchase facility, so reducing the cost of financing a given budget deficit. this needs to be factored into any calculation of the implications for the public finances. rather more significantly, quantitative easing is intended to boost spending and activity. in the process, it should raise tax revenues and reduce benefit payments. and, unless quantitative easing proves to be largely ineffective, this effect is likely to dominate the other elements of the calculation. finally, it is worth noting that normal monetary policy, conducted by varying bank rate, also generally affects | by the committee on payments and market infrastructures ( cpmi ) and the international organisation of securities commissions ( iosco ). all speeches are available online at www. bankofengland. co. uk / speeches operational risk is the risk of disruption from systems and processes, from human errors and management failures and from external events and external actors. all types of financial market infrastructure firms face operational risks. indeed, for many of these firms, it is the β number one β risk they face. a serious operational incident affecting one of these global pipes is likely to have an impact on the system as a whole in several jurisdictions, rather than just upon the infrastructure firm itself. the pfmis require financial market infrastructure to identify plausible sources of operational risk, and ways to mitigate their impact. fmis are also required to have credible business continuity and recovery plans, with the aim of resuming operations within a maximum of two hours following the most disruptive events. however, as the infrastructure that supports the financial system grows in scale, complexity and inter - connectedness, the potential risks and costs of systemic operational risks increase as well. to successfully mitigate this requires a focus on both operational risk and on operational resilience ; the ability to respond and recover, as well as prevent and protect. this is well highlighted by the risk presented by cyber - attack. last year saw the β bangladesh bank β incident in which $ 81 million of fraudulent payments were effected through the swift network. this has brought to the forefront the need to manage cyber risk not only in the infrastructure firm itself, but also in its surrounding ecosystem of users and intermediaries. this was an attack on a user rather than on the swift network itself. swift has responded with a customer security programme to reinforce customers cyber defences around their connection to swift and is developing plans for enforcement of the framework. the bank of bangladesh attack had a criminal motivation. it did not bring the system to a halt and, in a narrow sense, one could argue that financial stability was unaffected. i think, however, that would be a complacent view for two reasons. first, the attack risks undermining the credibility of a key piece of global financial infrastructure. and second, and perhaps more important, the attack highlighted the growing risk from cyber attacks generally, whatever the motivation. pmi - iosco : principles for financial market infrastructure ( 2012 ). principle 17 : operational risk. all speeches are available online at www. bankofeng | 0.5 |
of the swedish economy further ahead would be even worse if high inflation were allowed to become entrenched β we know this from experiences both in sweden and in other countries. the question is not, therefore, whether inflation will return to the target, but how it will happen, and how the swedish economy will develop during this process. it can be painful, but it can also be relatively smooth. 9 for a more detailed discussion, see jansson ( 2020 ). 8 how well the swedish economy in general develops depends on the interaction between different agents. this is an insight that i think has become somewhat neglected, and that was the reason for the speech i held a year ago on the division of roles between fiscal and monetary policy. but it is not just a question of the macroeconomic policy mix. it is about a broader interaction, involving many economic agents. let me describe how inflation can be brought back to the target in a favourable scenario. in principle, it is the riksbank β s current forecast that i am describing, but without numbers and in more general terms. the increases in the policy rate that the riksbank has made, and expects to make, contribute to the fact that inflation will start to decline in 2023. also contributing to this is that factors causing restrictions on supply, and temporarily pushing up commodity prices, are fading away, and that international inflation is being curbed by central banks raising their policy rates. the economic agents trust that the high inflation rate is temporary and will return to the target fairly soon. the longer - term inflation expectations will thus remain anchored at 2 per cent. wage increases and the industrial agreement benchmark are based on the assumption that the inflation target will continue to apply in the future, despite the temporary rise in inflation. companies are refraining from excessive price increases, which risk giving rise to compensatory wage increases that increase their costs, and which force the riksbank to raise the policy rate further, which will drive their costs up even more. in turn, fiscal policy focuses on targeted support to households and companies that suffer particularly badly in the poorer times that can hardly be avoided going forward. in such a scenario, the inflation target will be able to continue to provide a basis for a long - term favourable development in the swedish economy, without very large policy rate hikes by the riksbank ( figure 6 ). in a bad scenario, the opposite happens. interest rate hikes will be insufficient and economic agents start to doubt | the riksbank, and not as something which agents in general should support, can be problematic. this was evident during the long period when the riksbank β s policy rate was close to the lower bound, and the riksbank also supplemented its policy with other measures such as asset purchases, but it was nevertheless difficult to bring inflation up to the target. this was not a specifically swedish phenomenon, but a problem that many advanced countries wrestled with. monetary policy in isolation was simply not enough. it needed support from other policy areas and agents, who, whether they like it or not, also play a role in the development of inflation. and although we now have well - designed frameworks in place for different policy areas, this in itself is not always sufficient to ensure a good economic outcome β the frameworks must also work together and result in a meaningful whole. a lot has certainly changed in a year. inflation has risen substantially around the world, and central banks have raised their policy rates quickly and quite a lot. the problems with the lower bound for the policy rates and too low inflation have therefore disappeared from the agenda at the moment. however, as i have noted, it is far from clear that the global economic playing field has changed in any profound way in the longer run. above all, there is a great deal to suggest that the global real equilibrium interest rate remains at a historically low level. it is therefore possible, perhaps even likely, that these problems will reappear in a few years β time. but perhaps my most important message today is that there is a need for interaction between different agents in the economy also when inflation is too high, as it is today. it is true that the policy rate is not restricted upwards in the way that it is downwards β it can be raised without it hitting any ceiling. but even if there is no such restriction on raising the policy rate, the problems gradually increase the higher the policy rate has to be raised to bring inflation back to the target. it is therefore not a question of whether inflation will be able to reach the target at all, but of how large the cost will be for the swedish economy in the short term to attain this. the better the interaction, the smoother the slowdown in inflation will be. 10 if we really see the inflation target as a macroeconomic target that provides favourable prerequisites for a good long - term economic development, such interaction should be both possible and desirable to achieve. references aucle | 1 |
economic stability, but it is not sufficient. governments also need to practice the right economic policies. bis central bankers β speeches an ongoing question is how much responsibility for economic policies should be elevated to the european level. for banking supervision and resolution there is a strong case for centralisation. clearly, the euro area also needs solidarity mechanisms for extreme events that are out of reach of national policies β that is the role of the european stability mechanism. and i see scope for common projects with a common funding if they enhance the resilience of the single currency area and come with appropriate democratic control. but beyond that, i do not see a strong case today for further fiscal centralisation. there are three reasons for this. first, fiscal discipline starts at home. most citizens do not want decisions on taxing and spending to be made at the european level, at least for the time being. this means that governments have to take responsibility for delivering sound budgetary policies. europe has a role to play in guiding governments in the right direction. but we know the stability and growth pact was not properly enforced. that is why i am encouraged by the approach taken in the fiscal compact. this enshrines balanced budget rules in national constitutions or equivalent, under the vigilance of independent fiscal councils. the second reason why i do not see a strong case for fiscal centralisation is that economic adjustment can and should take place via flexible markets. if countries introduce structural reforms that allow their economies to adjust more quickly to economic downturns, there is less pressure on their national budgets, and hence less need for external budgetary support. and flexibility does not mean social unfairness. too often, what delays adjustment is resistance by insiders who have managed to capture an unfair share of national wealth and oppose economic change. the third reason is that you do not buy an insurance policy when your house is already on fire. fiscal centralisation can be properly discussed only when euro area countries, large and small, have put their houses in order fiscally, financially and economically. the good news is that it seems governments have understood the message. budgets are being consolidated. structural reforms are being introduced. competitiveness is being regained. for example, the countries under full eu - imf programmes have seen their unit labour costs fall by more than 15 percentage points since 2009 relative to the euro area average. exports in portugal and spain are up by more than 20 % since the start of the crisis. but reform is not a medicine only | , namely the interest rate decisions, which are designed to deliver price stability, and the non - standard measures, which are designed to help restore a better transmission of our monetary policy, taking into account the abnormal functioning of some markets. question : how is the ecb β s room for manoeuvre influenced by the poor condition of public finances in euro zone countries, and especially in the countries with acute crisis? as i said, we are not compromising on our primary goal of maintaining price stability, and our interest rate decisions are designed to fulfil that aim. any other approach would be unthinkable. and one should never forget that price stability is a precondition for sustainable growth and job creation. question : there are some heavily indebted nations within the euro area, most prominently greece. yesterday ( tuesday, 19 april ) the news agency reuters reported that clemens fuest, who chairs the german finance ministry β s technical advisory committee, said greece β s extremely weak balance sheet meant a restructuring of the greek sovereign debt was inevitable. he said that : β one must recognise the realities β i am expecting a haircut β. do you agree with mr fuest and other prominent economists and policy - makers who have expressed similar views? there is an important adjustment plan which has been adopted by the greek government to reform its fiscal and structural policies. this plan has been approved by the imf, by the international community and by the european commission in liaison with the ecb. this plan is being applied. question : how worried should we be about credit rating agency s & p β s negative outlook for the aaa rating of us debt? is there a rising risk of higher long - term interest rates worldwide? the ecb has always thought and said that it was important for all advanced economies, without exception, in europe and the rest of the world, to be very keen on the sustainability of their long - term fiscal policies. it is extremely important that the authority of the signatures of the advanced economies is unchallengeable. i personally have full trust in the united states for preserving its creditworthiness and the authority of its signature. question : the ecb has postponed its exit from the non - standard measures on several occasions. can the non - standard measures de facto co - exist with any level of interest rates? yes, indeed, the β separation principle β that we apply permits us always to have the right level of interest rates, even when markets are still not | 0.5 |
with a significant rise in uncertainty. this scenario captured many channels likely to affect the canadian economy, including foreign demand and commodity prices. it also attempted to capture some amplification from elevated household debt. it did not, however, include the effects of any financial turbulence coming from international markets. 6 see c. a. wilkins, β the age of leverage β ( remarks to ubc vancouver school of economics and cfa society vancouver, vancouver, british columbia, march 14, 2019 ). - 5is that in times of stress, redemptions of fixed - income etf shares could amplify volatility in the value of these shares and in prices in the underlying corporate bond market. other riskier forms of lending, such as leveraged loans, which are increasingly being packaged into collateralized loan obligations ( clos ), have been growing rapidly too. 7 globally there β s about us $ 700 billion of clos outstanding and issuance is strong. the financial engineering behind the structure has been improved since the crisis, but there is still room for concern. for one, the quality of the underlying loans has declined, and many of them lack the usual protections through covenants. the dynamics in an unwind of any of these more complex instruments could look a lot like a case of deja - vu. those in montreal during the financial crisis will remember that complexity of financial engineering and liquidity mismatch were at the heart of more than one problem. the first line of defence against these risks is clearly with people like you in this room β understanding and mitigating your own risks and building contingency plans in case something goes wrong. the bank is stepping up our own monitoring too, especially as it pertains to non - bank financial intermediation, and is leading an initiative to build greater information sharing among federal and provincial regulators. 8, 9 now, how could the trade war create a perfect storm? what i mean by a perfect storm is a combination of an economic downturn and financial stress. an increase in uncertainty or bad trade news could be the trigger. this, in turn, could spark a sharp reversal in risk premiums and lead to a drop in prices for assets, including for houses. creditors would see more defaults, especially from corporations with lower credit ratings. moreover, if enough investors rushed to adjust their portfolios at the same time, liquidity would dry up, amplifying the effects. 10 all of this would find its way to the | banking system, making it harder for business owners and families to borrow and intensifying the downturn. resilient to storm pressures let me now turn to my third point : the canadian financial system is highly resilient. 7 leveraged loans are high - yield loans to non - financial corporations with lower credit ratings. banks underwrite most leveraged loans and issue them in us and european markets. they are sold to a wide range of financial system participants, and a substantial share is securitized into clos. clo structures are subject to tighter regulations than they were before the global financial crisis, including more stringent subordination requirements and restrictions on asset holdings. 8 see g. bedard - page, β non - bank financial intermediation in canada : an update, β bank of canada financial system hub ( march 26, 2019 ). 9 the bank chairs the heads of regulatory agencies ( hoa ), a federal - provincial forum for discussing financial sector issues. the hoa also includes the department of finance canada, the office of the superintendent of financial institutions, the quebec autorite des marches financiers, the ontario securities commission, the alberta securities commission and the british columbia securities commission. 10 in our may 2019 fsr, bank staff looked at what would happen to open - ended fixed - income mutual funds in canada if many people pulled their investments out simultaneously. - 6canadian banks are part of a global banking system that is more solid than it was a decade ago. globally active banks are holding over us $ 2 trillion more capital than they were at the beginning of 2011, when the phase - in of the post - crisis reforms began. this translates to a 7 - percentage point increase in their tier 1 capital ratio. 11 the leverage limits and new liquidity regulations also make these banks more resilient. 12 canada has implemented new measures to further strengthen our banking system. for example, canada β s prudential regulator, the office of the superintendent of financial institutions ( osfi ), increased the required amount of capital that canada β s big banks have to hold to protect themselves against financial - system vulnerabilities. canada introduced a bail - in regime to ensure that investors β not taxpayers β would take the brunt of the financial burden in the unlikely event that a big bank were to fail. also, osfi asked many smaller, single - business - line banks to reduce their reliance on short - term brokered funding, which can be | 1 |
the 2019 financial inclusion survey showed that 71 % or an estimated 51 million remain unreached by the formal financial system. with these realities and other significant developments transforming the country β s financial inclusion landscape, our vision and strategy must evolve to reflect new exigencies, demands, and opportunities. the nsfi 2022 β 2028 signifies our greater collective commitment and aspiration for a more financially included and empowered citizenry. it takes a deliberate stance to address the significant disparities in financial inclusion levels across demographics and segments. the nsfi 2022 β 2028 emphasizes financial inclusion to enhance consumer welfare and features financial resilience as a centerpiece of our renewed vision. it outlines a strategic governance framework, through which a broader set of stakeholders can be tapped as a driving force of the 1 / 2 bis central bankers'speeches strategy β s implementation and, thus, truly foster a whole - of - nation approach. by articulating concrete desired outcomes, priorities, performance indicators, and targets, this landmark document will not only serve as a financial inclusion blueprint for the next six years, but also as powerful tool for communicating our bold commitment to the financial inclusion agenda. at this point, i would like to thank and commend my fellow fisc members and our stakeholders for your recognition of financial inclusion as an essential component of our country β s development master plan. your contributions have truly been invaluable to the development of the nsfi 2022 β 2028. the effective implementation of the nsfi 2022 β 2028 will, of course, rely on everyone β s unwavering dedication and zeal. we must work to ensure all filipinos can thrive and prosper in an ever - evolving landscape. this is also why we chose the social media hashtag # kabilangako, to send a clear message that no one will be left behind. finally, today β s launch merely heralds the continuation of our financial inclusion journey, one that is to be pursued with even greater purpose : to open opportunities for every filipino to become both the beneficiaries and foundations of growth and prosperity. we look forward to being with you on this journey. thank you again for joining us on this momentous occasion as we unveil the nsfi 2022 β 2028. maraming salamat at mabuhay! # 2 / 2 bis central bankers'speeches | . 1 billion this year to us $ 6. 5 billion next year. remittances will swing from a 5 - percent contraction this year to 4 - percent growth next year. year - to - date, overseas filipino remittances fell by only 2. 4 percent. our external accounts will remain robust, with the gross international reserves ( gir ) hitting us $ 100 billion this year. at the moment, we are already at an inflection point. early signs of recovery include growth in remittances in june and july from declines the previous months, as well as growth in fdis in may and june following contractions the previous months. the purchasing managers index improved from 27. 5 in april to 50. 2 in september. the value and volume of production for the manufacturing sector also improved from march to july. year - on - year, contraction of imports have slowed down from 65. 3 percent in april to 24. 4 percent in july. and, the decline in exports eased to 9. 6 percent in july from a sharp 49. 9 percent fall in april. speaking of inflection point, the bsp is mindful of the need for careful disengagement of our covid response measures. we recognize that doing so either too late or too early may have serious repercussions on the economy. last month, the bsp started the issuance of our own securities, as allowed under our recently amended charter. this adds to our policy toolkit and will help us better manage liquidity moving forward. over the medium term, the philippines is poised to become one that is stronger, technology driven, and much more inclusive. the intention is for all filipinos to reap the benefits of economic development. i believe all the necessary conditions for achieving these lofty goals are satisfied. as such, i β m 5 / 6 bis central bankers'speeches optimistic about tomorrow β even as we continue to work hard amid the crisis to protect lives, livelihoods, and businesses today. thank you very much for listening, and i look forward to our discussion. 6 / 6 bis central bankers'speeches | 0.5 |
their life - cycle income. reforms that raise expectations of life - cycle income should immediately support current consumption. to give just one example of this effect, an extension of the retirement age should lift not only medium - term supply β by expanding the active population β but also short - term demand, by reducing the need for precautionary savings ahead of retirement. but credibility is crucial in determining how quickly these positive effects materialise. if there is uncertainty about the timeline over which reforms will be implemented, or about the commitment of successive governments to maintaining them, it will take longer for firms and households to adjust their expectations and the benefits of reforms will be delayed. 15 moreover, if reforms are not perceived to be sustainable under a wide variety of conditions moreover, if reforms are not perceived to be sustainable under a wide variety of conditions β for example, if a pension reform is unrealistic over the longer - term β agents will anticipate a reversal in the future and refrain from adjusting their behaviour today. β for example, if a pension reform is unrealistic over the longer - term β agents will anticipate a reversal in the future and refrain from adjusting their behaviour today. we have used our euro area and global economy ( eagle ) 16 model to analyse for a medium - sized euro area country the effect of credibility and timely implementation 17 β in this andrews, d., a. caldera sanchez, and a. johansson ( 2011 ), β housing markets and structural policies in oecd countries. β oecd working papers, no. 836, january 2011. gnocchi, s., a. lagerborg, and e. pappa ( 2014 ), β do labor market institutions matter for business cycles? β, journal of economic dynamics and control, vol. 51, february 2015. giavazzi, f., and m. mcmahon ( 2008 ), β policy uncertainty and precautionary savings. β nber working papers 13911, national bureau of economic research. gomes, s., p. jacquinot, and m. pisani ( 2010 ), β the eagle. a model for policy analysis of macroeconomic interdependence in the euro area. β ecb working paper series no. 1195, may 2010. under full credibility, firms anticipate the full amount of the implied long - run increase in output, which leads to an immediate increase in asset prices and, hence, firms β | mario draghi : building on the achievements of post - crisis reforms speech by mr mario draghi, president of the european central bank and chair of the european systemic risk board, at the second annual conference of the esrb, frankfurt am main, 21 september 2017. * * * it is my pleasure to welcome you to the second annual conference of the european systemic risk board ( esrb ). the conference coincides with the tenth anniversary of the start of the global financial crisis in the summer of 2007. the crisis shook the european union to the core, and required substantial policy actions to stabilise the economy and the financial system. with a return to stability having been achieved, it is important that we take time to reflect on what we have learnt, what we have achieved over the past ten years, and where we need to do further work. the crisis taught us that individual banks and the banking system as a whole needed to be more resilient than they were pre - crisis. as a result, many reforms have been put in place in recent years. our banking regulation and supervision have become stricter. moreover, the european regulatory framework now places greater emphasis on identifying and addressing system - wide risks. this includes the establishment of the esrb and the creation of macroprudential instruments assigned to public authorities. a more resilient post - crisis banking sector in the banking sector, significant efforts have been made in recent years to increase resilience. in the euro area, for example, the average common equity tier 1 ratio of significant institutions rose from 7 % in 2008 to 13. 5 % by end - 2016. and banks are required to set up solid governance structures and prudent risk management practices. moreover, resilience is now tested more rigorously in a forward - looking manner. the eu - wide stress tests coordinated by the european banking authority ( eba ) have become an important tool for quantifying banks β capital needs, with a view to ensuring that they would be able to continue lending to creditworthy borrowers even during a severe recession. 1, 2 post - crisis prudential rules have also provided public authorities with macroprudential tools to address systemic risks in the banking sector. 3 and the understanding of how to calibrate and implement these tools has advanced. for example, all member states now have a countercyclical capital buffer framework that is fully operational. 4 four member states have announced a non - zero buffer rate for domestic exposure | 0.5 |
agencies understand that outside parties will likely want to see the notice of proposed rulemaking for basel ii and the relevant proposals for amending current rules alongside one another for comparison's sake. conclusion broadly speaking, in developing basel ii we are striving to establish higher standards for internal risk management at banking organizations, including capital adequacy, and to improve both the supervisors'and the public's understanding of banks'risk taking and risk management. over the past two decades, major banking organizations have become ever larger and more complex, while some national financial systems have become more concentrated. against this backdrop, assessing the overall risk and capital adequacy of the largest banks has become not only increasingly difficult for supervisors, the public, and bank management, but also critical for national authorities. if you believe, as i do, that basel i was one of the most important advances in international bank supervision, then i hope you also accept that market changes and increased sophistication in risk - management techniques require that we now update that initial framework. a fundamental premise of basel ii is that, for these major banks, neither supervisory nor market discipline can be effective unless banks'own systems can be depended on to measure and manage risk taking and capital adequacy. basel ii is intended to provide both a framework and incentives for achieving these ends. it is useful to keep in mind that as supervisors we are seeking to apply a new set of rules to private, profit - seeking businesses and are trying to achieve the goals of basel ii in a manner consistent with achieving safety and soundness in a market economy. for example, we want to be relatively certain that the required capital levels for business lines ( and, of course, for the bank as a whole ) are in line with the underlying risks, and we need to have a certain degree of confidence in the capital numbers for each bank. we also want banks to target their investments where they can have the greatest positive impact on risk measurement and management. in other words, we are not looking for large expenditures in areas for which the benefits will not be material. finally, we would like to see some comparability across banks, at least in their estimation of the inputs for basel ii, but at the same time offer a certain degree of flexibility to reduce burden on the banks and allow them to retain their own styles of risk management. admittedly, navigating between consistency and flexibility is an art, but our experience tells us that it is | . supervisors and the industry need to maintain an ongoing dialogue about basel ii, since it is such a complex and multifaceted project. issues range from very technical questions about parameter values to broad concerns about how the framework will be implemented across countries. we hope it is clear that we are being attentive to the full range of these concerns and will continue to be as the industry raises additional concerns along the way. the continued emphasis on dialogue is even more important because a few important elements of the framework are still considered works in process. for example, the basel framework issued last june did not define the exact manner in which institutions should calculate their estimates of loss given default ( lgd ) based on periods of economic downturn. the basel member countries have commissioned a subgroup to study this issue, recommend a way to add clarity to the concept of downturn or " stress " lgds, and provide guidance to the industry. the basel committee has also recently issued a consultative paper on certain trading - related exposures and double - default effects, stemming from the work of a joint group formed by the basel committee on banking supervision and the international organization of securities commissions. we are acutely aware that our continuing work on these issues is complicating banks'preparations somewhat. but since these issues are so critical, we have to take the extra time to find the right solutions. and we need the help of the industry to do so. competitive effects of basel ii before i close, i would like to say a few words about the potential competitive effects of basel ii. at the federal reserve, we are particularly interested in effects that basel ii could have on banking markets, particularly ones that could distort existing markets that work well. in that vein, we have published several white papers analyzing the potential impact on specific aspects of banking, such as small - business lending, mortgage lending, and mergers and acquisitions. a paper on credit cards is forthcoming. while the conclusions of the papers published so far do not point to broad disruptions in existing banking markets as a result of basel ii, we do acknowledge that certain participants could be affected, especially in the small - business and residential - mortgage credit markets. in part to address these concerns, but also to conduct overdue routine updates to existing regulatory capital rules, the agencies also plan to propose several modifications to the current rules that most banks in the united states will continue to follow, since basel ii is expected to apply to only a handful of institutions. the | 1 |
lucas papademos : financial structures, credit growth and house prices in the new eu member states - policy challenges on the road to the euro speech by mr lucas papademos, vice president of the european central bank, at the conference held by latvijas banka, riga, 19 september 2005. * i. * * introduction it is a great pleasure for me to speak at this conference organised by latvijas banka, in a country that has played such an important role as a major trading centre in european history. initially, that role partly reflected its geographic location on one of the oldest trading routes in europe β the so - called β route from the vikings to the greeks β, which was used to trade, among other things, latvian amber β a route dating back to the times of the ancient greeks and the roman empire. and then later, the city where we have gathered today, riga, became one of the most significant members of the hanseatic league, which controlled trade on the bustling baltic sea in the 14th and 15th centuries. today, latvia has a modern and dynamic economy, again occupying an important position in european trade, having achieved a remarkable transition towards a successful market economy after gaining independence in 1991. trade and finance have always gone hand in hand. therefore, it is no surprise that just as the latvian economy has undergone an impressive transformation, so too has the latvian financial system. latvia has made substantial progress in the development of its financial structure and has created the institutional and legal frameworks necessary to support a market - oriented financial system. 1 today, its financial markets are developing rapidly in new directions and are providing valuable services to both households and the corporate sector, underpinning the functioning of a modern high - growth economy. as i am addressing a distinguished audience with expert knowledge of the latvian economy, i consider it appropriate to take a broader and more comprehensive view, and look at the development of the financial sector not only in latvia, but in the new eu member states as a whole. after an overview of certain salient features characterising the financial structures of these countries, i will concentrate on two issues that have recently received considerable attention from both policy - makers and the media : strong credit growth and rapidly rising house prices. this will bring me to the focal point of my remarks : the challenges arising from these developments and the appropriate policy responses. ii. features of the financial structures in the new member states many of you have witnessed at first hand the remarkable | jerome h powell : welcoming remarks - teacher town hall meeting welcoming remarks ( hybrid ) by mr jerome h powell, chair of the board of governors of the federal reserve system, at a conversation with the chair : a teacher town hall meeting, washington dc, 28 september 2023. * * * thank you, sarah, thank you to those in fed education who helped put together this event, and thank you to the teachers here and online who have put aside some of their planning time to listen and, i hope, also participate. if i were doing the grading, credit would always be granted for participation. we have scheduled this discussion with teachers well into the school year, partly to highlight the beginning, on october 1, of economic education month. at the fed, every month is economic education month, and we are glad to join in the celebration. it is, fortunately, a very different time for teachers than the one we faced in august 2021, the last time we held this discussion with educators. in the crisis of the pandemic, teachers were on the front lines. i know how overwhelming this challenge was for many of you, and the extent of your sacrifice, for which i thank you. and the crisis in many ways continues, as research confirms the educational deficits that students still suffer from the pandemic. in addition to the challenges they face, there are likely to be consequences for the economy and for society, in a generation of young people who may lack some of what they need to be well - informed and engaged participants in our economy and our democracy. addressing this legacy of the pandemic is a major public policy challenge, so now more than ever, teachers are crucial to america's future. a large majority of you are economic educators, a role that is of particular importance. as many of you know, the fed's ability to influence the economy depends to some extent on influencing the public's view of current and future economic conditions. when my colleagues and i publish our projections for the most likely path for the economy and interest rates, as we did a couple of weeks ago, one of our goals is to influence spending and investment decisions today and in the months ahead. that will only be the case if people understand what we are saying and what it means for their own finances. that's where you come in. by educating students about economics, not only are you providing them with valuable skills to manage their finances, and to improve their chances for future success | 0 |
are not aware of how much good they do to their children. it just comes with being a father or a mother. so again, let me congratulate you and congratulate everyone who has been involved in your success. let β s now open our discussion. thank you. 2 / 2 bis central bankers'speeches | sector. these became what is known as the 2 / 3 bis central bankers'speeches single rulebook β a single framework for financial institutions in all 28 eu countries. but writing the rules was not enough. so, the second step was to build european banking supervision. and so the single supervisory mechanism, or ssm for short, was created. it is made up of the ecb and the national supervisors of the 19 euro area countries. the ecb directly supervises the largest banks in the euro area. smaller banks are still supervised at the national level, but in close cooperation with the ecb. our job is to contribute to a healthy and resilient banking system. we make sure each bank respects the rules it is subject to and is supervised according to the same approach. this creates a level - playing field for all banks across the euro area and avoids supervisory arbitrage and national bias. the next step was to create a european system to deal with bank failures : the single resolution mechanism. this step represented a larger paradigm shift. banks should no longer be rescued using taxpayers β money. those who have reaped the benefits, that is the investors and creditors, should pay first if things go wrong. this helps to keep incentives healthy. but let β s go back to the institutional architecture. the single resolution board, or srb for short, is at the centre of the single resolution mechanism. the ssm and the srb cooperate closely when a bank is in trouble. the decision to declare that a bank is failing or likely to fail is made by us as supervisors. at that point, when a bank fails, the srb takes over. it decides whether a bank should be resolved at the european level, or wound up under national legislation. the details of this process are complex, and i β m happy to tell you more if you are interested. but the bottom line is simple. the mechanism aims to minimise both the impact of bank failures on financial stability and their cost to taxpayers. but resolution is not the final piece of the puzzle. nor is it the final pillar of the banking union. it was envisaged that the banking union would be supported by three pillars. european banking supervision and resolution are the first two. the third pillar is a european deposit insurance scheme. it is still in the making, but its importance is clear. for there to be a true banking union, depositors in all countries need to have the same level of confidence in their banks | 0.5 |
situations. indeed, we have begun to buy back short -, medium - and long - term securities to inject liquidity to the market, proving that they are in fact monetary policy instruments. besides, regulatory measures were adopted β bimonthly calculation of banks β liquidity requirements β to β decompress β stress situations in the money market. clearly, for the current transition stage of the argentine economy, there is no other viable and sustainable alternative than the current managed floating regime. a system based on free floating, still called for by many, would have involved the risk of going back to the devaluation - inflation spiral that has been so recurrent throughout our economic history. in the past few days, however, we also learnt that in spite of the necessary foreign exchange stability for the current transition stage, there is no β foreign exchange insurance. β we have seen that on wednesday 25, when the upward trend was most marked, the exchange rate increased, leading to a volatility that ruled out hopes of guaranteed profits. when devaluation expectations became noticeable, threatening to manifest itself in the rest of the economy, we made it clear that we will mitigate steep increases potentially having an inflationary impact or causing uncertainty. once the foreign exchange rate was stabilized, we adopted measures to reduce the upward pressure on interest rates, a process that will continue until normalization is achieved. but, what do we mean when we talk about a stage of transition? in post - crisis periods, the macroeconomic fundamentals usually overreact to then gradually readjust themselves and converge towards a long - lasting scenario. these transition stages take time and raise enormous challenges. our neighboring countries β experience teaches us that flexibility and gradualism in both policy design and implementation are the adequate way of riding them. during the money and banking conference organized by the central bank of argentina, vittorio corbo, president of the central bank of chile, stressed the sequential process undergone by the chilean economy following the crisis of the early 1980s. four elements have been of utmost importance in this long process : consolidating fiscal solvency as a countercyclical tool, reestablishing external sustainability, restructuring liabilities, and rebuilding the financial system. once all these aspects were addressed, progress was made in the consolidation of a regime that is nowadays highly credible. thus, in 15 years, chile managed to lead inflation from around 30 percent to the current annual 2. 9 percent, after patiently building credibility and institutions. | , if we fast forward to the year 2008, and to the current financial crisis, we note that asymmetries in information between financial institutions, this time relating to the extent of exposure to and value of complex derivative products, led to a freezing up of credit markets, the eventual collapse of some important financial institutions, and the near meltdown of the entire financial system. in these events we can see the insights of akerlof in his 1970 paper. mr. chairman, the near collapse of the financial system has in turn led to a rapid and deep global recession β the sharpest since world war ii and the first in which all regions of the world were suffering a downturn in fortunes at the same time. this downturn may well have its most devastating impact on poor countries, particularly in africa β who incidentally were not responsible for the crisis. it is worth asking the question that if the basic insights on the powerful impact that a lack of information could have on markets was known as far back as 1970 β why were these lessons not assimilated into the policy making tool kit of central banks or in the financial architecture of our economies? mr chairman, i have no doubt that perhaps a large part of the answer to this question is in the fact that the 1970s had a very different financial environment when compared to our current environment. as the financial markets developed, driven by technological and financial innovation and the deregulation of financial services, financial institutions were able to price and sell risks through ever more complex financial products. the very nature of complexity of these products created the asymmetries in information that has proved catastrophic to the world economy. however, i wish to focus on another reason why akerlof β s insight was never fully absorbed by policy makers and the public : i believe that we allowed the workings of the financial sector to become more and more divorced from key stakeholders such as the legislature, who had the responsibility of enacting regulations governing the financial sector, and the public for whom the media was an important source of information β and so our fate was sealed. mr. chairman, clearly africa was not the source of the financial crisis, but it is being impacted by the crisis and there are many who believe that africa may well bear the long term costs of the global economic downturn β if the broad gains of the past years are reversed and the productive capacities ( e. g. human and social capital ) are destroyed due to worsening health and education outcomes. from | 0 |
andreas dombret : in support of coco bonds op - ed by dr andreas dombret, member of the executive board of the deutsche bundesbank, published in frankfurter allgemeine zeitung, 21 february 2015. * * * one of the key outcomes of regulatory reform in the banking industry, launched in 2008, is that banks need more and more capital. to illustrate this point, the new basel iii regulatory framework requires credit institutions to hold significantly more higher - quality capital than before. in addition, global systemically important banks need to additionally strengthen their capital base so that they can bear potential losses unassisted. the idea is to enhance banks β resilience and avoid putting taxpayers back on the hook for banks β losses in future crises. although these reforms are good, they raise the question of how banks will be able to cover growing capital requirements. with this in mind, we should turn our attention to a different kind of capital instrument. known as β contingent convertible bonds β, or β coco bonds β for short, they are bonds which convert automatically from debt to equity upon a specific trigger event β for instance, if an institution is faced with insolvency or if its tier 1 capital ratio drops below a certain threshold. in such cases, coco bonds increase the bank β s capital buffer. this new type of bond is attractive to credit institutions for several reasons. one is that, under certain conditions, coco bonds are recognised by supervisors as capital. these conditions hinge on the category to which the capital is to be assigned and reflect, for instance, subordinated status and long - term availability of the capital. the issuing bank β s discretionary scope for deciding whether or not to make coupon payments to investors is a further condition. another selling point for coco bonds to banks is that interest payments on the bond are tax - deductible. coco bonds can be attractive to institutional investors as well ; owing to their particular risk, they promise superior returns to those on normal bonds β which accounts for much of their appeal to investors, particularly in the current low - interest - rate setting. so are coco bonds a β silver bullet β for banks? in germany at least, their importance has been marginal up to now. up until the end of last year, these bonds were issued mainly by large banks in spain, switzerland and the united kingdom. their total volume amounted to some β¬50 billion. only two german institutions issued coco bonds in 2014. uncertainties surrounding the | a certain extent. for those institutions that are the most heavily affected, fulfilling the basel iii requirements will undoubtedly present a challenge that should not be underestimated. yet for them as well β and let β s remember there is just a relatively small number of such institutions β i consider the consequences of the reforms to be acceptable. past experience teaches us that preliminary calculations tend to overestimate rather than underestimate the actual requirements. this is due, among other things, to the fact that we look at bank balance sheets as at a specific reporting date and do not take the banks β reactions, such as restructuring operations on the asset side, into account. however, this is where i do see considerable leeway for a number of institutions. the equity ratio of german banks and savings banks has risen by more than half a percentage point to currently 16. 2 % since september last year, which was due primarily to the reduction in risk - weighted assets. furthermore, the new rules will not come into play overnight. it is planned that all institutions shall be given longer implementation deadlines to give them enough preparation time for the transition. this will extend the period in which institutions can, for example, retain profits in order to strengthen their capital base. it may also make it easier to raise fresh capital if a favourable market environment can be expected. not least, the transitional periods also provide institutions with sufficient time to thoroughly check their business models. as the german representative in the basel committee, i will do everything i can to ensure that the transitional arrangements are 3 / 5 bis central bankers'speeches adequate. while some institutions will have their work cut out for them, the majority of german credit institutions will barely need to take any action. this applies, in particular, to small and mediumsized institutions. as i mentioned earlier, some of you in this room can probably even expect to see lower capital requirements in future. with a bit of luck, we will be able to create the first basel iii fan base here tonight. 4. don β t lose sight of the objective : basel iii in context with this in mind, i would now like to steer your attention away from the immediate towards the longer - term implications of the basel iii reforms. after all, this set of rules has the demanding task of laying down global standards for the banking system β possibly for many years to come. you will, of course, experience this first hand in a variety of different ways. credit institutions will, after all, either be | 0.5 |
innovations would not have been possible without the breakthroughs achieved in financial theory, it has been predominantly technological progress that has made the widespread use of these innovations possible. the second factor underlying the structural changes in the financial system and banking sector is the process of financial liberalisation which has been ongoing for some time already. it has allowed an increase in the overall level of competition in financial systems. in the eu, financial liberalisation gained momentum with the single market programme. the single most influential act for banks was the introduction of the second banking coordination directive, which provided a passport for banks to offer services across the european union. liberalisation in the eu financial services sector is already very extensive. what we see now is an ongoing adjustment of the regulatory environment implemented in the 1980s and early 1990s. in effect, it allows other driving forces to have a more profound effect on the financial system. one of these factors, which has been facilitated by liberalisation, is the trend towards globalisation. this trend is occurring in most private sectors of the economy. as companies and individuals requiring financial services are becoming more globally oriented, they demand appropriate financial services. globalisation is expected to increase competition in most areas of financial services, and it may also be able to realise economies of scale and scope. at the same time, globalisation has opened up new markets for banks, particularly in trading, asset management and investment banking activities. finally, the wealth of individuals has increased, and a larger proportion of the population is making portfolio investments. this is partly a result of the ageing of the population, which has, in itself, increased the average wealth of people. at the same time, it is also due to changes in pension systems in a number of countries from a β pay - as - you - go β to a funded basis. the prospects for the future are for more of such change, as reflected by the recent proposals for pension reforms in germany and france. the increased number of wealthy individuals has changed the demand for financial services. traditional banking services or products, while maintaining a strong position in liquidity provision, are not adequate for people interested in diversification and maximisation of returns subject to risks in the context of long - term investments. the associated rise in demand for securities has led to an increasing need for brokerage, fund management and consultancy services. while there are new providers for these services, banks could remain at the centre stage, albeit with their services oriented more towards asset management. in addition to the overall increase | point to participation. emu is one important component of the eu cooperation in which sweden is now taking part. from the debate about economic aspects of emu one sometimes gets the impression that an alternative exists which is much simpler, enabling us to avoid all the adjustments which brussels imposes. that is not the case. sweden has experienced a profound economic crisis in the 1990s that was essentially self - inflicted. development in the rest of europe has on the whole been better. we must now in any event continue to consolidate government finance and establish long - term confidence in the stability of swedish economy. this will scarcely be easier outside emu. i find it hard to envisage that sweden would ultimately want to remain outside a functional emu. bit by bit the countries of europe will grow together. this makes the question not whether but when sweden ought to join. perhaps this perspective can help to make the question less dramatic. in our efforts to prepare the financial sector for emu we can see that the work has come a long way. we also meet a strong desire from the parties concerned to get going as quickly as possible so as not to fall behind ; so as to compete on the same terms as other european enterprises and not lose business opportunities. my own experience of eu cooperation prompts the same conclusion. as a β free rider β alongside emu it is not just business opportunities that we lose but also influence on european cooperation. | 0 |
quite persistent as it takes time for prices to adjust. that is not surprising, as companies know that foreign exchange markets are volatile and so the initial response of prices to an exchange rate change is likely to be relatively small. but the longer it persists, the more likely it is that sterling prices will adjust to euro prices, creating the potential for quite long term impacts on uk inflation relative to the euro area. that is what we appear to be seeing at the moment, with the historic relationship shown in chart 6 suggesting that uk inflation could run 1 to 2 percentage points above euro area inflation for a considerable while unless there is some noticeable appreciation in the value of the pound. the counterargument to this view is that the recent substantial depreciation of the pound against the euro and other currencies is needed to support a rebalancing of the uk economy and sustain the growth of uk manufacturing and other internationally competitive sectors of the economy. but the extent of the depreciation of sterling since 2007 has been much greater than we have seen in previous rebalancing episodes, such as the mid - 1990s β which raises the question whether sterling has fallen much further than needed. 5 and it is not clear see sentance ( 2011 ) for a comparison of the recent fall in sterling with previous episodes. bis central bankers β speeches that the export - based manufacturing activities which could benefit from a large depreciation have the capability to respond quickly by scaling up output β particularly when their demand is already being boosted by a recovery in global demand. chart 7 manufacturing output in uk, euro - area and sweden rebased to 100 in 2007 uk euro - area sweden source : eurostat and thompson datastream chart 8 goods exports from uk, euro - area and sweden rebased to 100 in 2007 uk euro - area sweden source : eurostat and thompson datastream bis central bankers β speeches the performance of uk manufacturing output and exports relative to other regions and countries which have maintained stronger currencies β such as the euro area and sweden β supports this view. chart 7 shows that there is very little difference in the current level of output relative to its pre - recession level in the uk, sweden and the euro area β though the depreciation in the pound may have helped shield manufacturers from a bigger decline in output during the recession. chart 8 shows broadly the same picture for the exports of goods, which are dominated by trade in manufactured products. this picture is perhaps not that surprising when we think | over the past year. instead, as chart 5 shows, sterling has remained relatively weak, both against the full trade - weighted basket of the currencies of our trading partners, and particularly against the euro β which is the most important currency for uk trade, with the euro area accounting for around half of our total exports and close to half of total uk imports. chart 5 sterling depreciation since 2007 rebased to 100 in january 2005 euro - sterling exchange rate sterling eer * average eer *, 97 - 07 * : effective exchange rate source : thompson datastream and bank for international settlements this weakness of sterling is one of the key reasons why uk inflation has been much higher than our peer group of european economies. as chart 6 shows, the differential between inflation in the euro area and the uk is closely associated with the relative strength and weakness of the sterling / euro exchange rate. and there are good reasons for this. while the bis central bankers β speeches uk has an independent monetary policy, it is a member of the single european market which covers all european union economies. the benchmark prices of traded goods in the european market will be set in terms of euros, reflecting the fact that this is the currency in which most european producers will have their costs and revenues denominated. so when the pound falls against the euro, producers will tend to raise their prices in sterling terms to maintain euro revenues, creating a positive uk - euro area inflation differential, as we have seen recently. by the same token, the weakness of the euro against the pound in the first half of the last decade created a negative uk - euro area differential with uk inflation running below continental european countries. chart 6 euro - area / uk inflation differential and exchange rate euro / sterling % 0. 3 2. 0 1. 5 0. 2 1. 0 0. 1 0. 5 0. 0 - 0. 5 - 0. 1 - 0. 2 - 1. 0 euro - area / uk cpi differential ( rhs ) * - 1. 5 euro - sterling exchange rate ( lhs ) * * - 2. 0 - 0. 3 - 2. 5 - 0. 4 - 3. 0 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2011 * : euro - area cpi minus uk cpi. a negative differential implies higher uk inflation. * * : expressed as the deviation from its average over the same period. source : thompson datastream chart 6 suggests that this inflation differential can be | 1 |
mr. meyer gives his views on the us economic outlook and the challenges facing monetary policy remarks by mr. laurence h. meyer, a member of the board of governors of the us federal reserve system, before the economic strategy institute, washington, d. c. on 8 / 1 / 98. three forces are likely to shape the outlook to which monetary policy will have to respond in 1998. the first is the momentum in the cyclical expansion. the second is the set of factors that have recently restrained inflation, despite persistent strong growth and a decline in the unemployment rate to the lowest level in a quarter century. and the third is the spillover from the asian turmoil. the dominant story in 1997 was the near stand - off between the first two forces. the strength of the cyclical upswing kept monetary policy alert, but - - given the quiescence of inflation - mostly on hold, during the last year. the continued robustness of the expansion into the fourth quarter, including further tightening of the labor market in october and november, might, in my judgment, have tilted the balance toward the case for additional monetary restraint, notwithstanding the continued excellent inflation readings. but, at that very time, the growing dimension of the asian turmoil began to cast a shadow over the forecast for 1998. it has reinforced prospects for some spontaneous slowing of the economy, introduced a downside risk that had not previously been an important consideration in policy deliberations, and added an additional restraining force on inflation immediately ahead. the task of the federal reserve in the coming year will be importantly shaped by the magnitude of the downdraft from the asian crisis, how it interacts with the remaining cyclical strength in domestic demand, and the degree to which its effects on import and commodity prices help keep inflation in check. but before i return to the prospects for 1998 and the challenges for monetary policy, i will offer a retrospective on 1997. let me emphasize that the views i present this afternoon, both about the outlook and about monetary policy, are my own views and should not be interpreted as the views of the fomc. retrospective on 1997 in my days as a forecaster, i found it a useful discipline to begin the year by critically reviewing the experience of the previous year, identifying the key themes that shaped the outlook, trying to learn from the forecast errors, and drawing implications for the outlook. i will follow this practice this morning. the most dramatic feature of the 1997 macro experience was clearly the combination of faster - than | jerome h powell : introductory comments β roundtable on the interim report of the alternative reference rates committee introductory comments by mr jerome h powell, member of the board of governors of the federal reserve system, at the roundtable on the interim report of the alternative reference rates committee, sponsored by the federal reserve board and the federal reserve bank of new york, new york city, 21 june 2016. * * * i want to thank you all for coming today, and i also want to thank the alternative reference rates committee ( arrc ) for all its work in developing its interim report. this report marks a new stage in reference rate reform. 1 reference benchmarks are a key part of the financial infrastructure. about $ 300 trillion dollars in contracts reference libor alone. but benchmarks were not given much consideration prior to the recent scandals involving attempts to manipulate them. since then, the official sector has thought seriously about financial benchmarks, conducting a number of investigations into charges of manipulation, publishing the international organization of securities commission β s ( iosco ) principles for financial benchmarks and, through the financial stability board ( fsb ), sponsoring major reform efforts of both interest rate and foreign exchange benchmarks. 2 the institutions represented on the arrc have also had to think seriously about these issues as they have developed this interim report. now, we need end users to begin to think more seriously about how they use benchmarks and the risks they are taking on by relying so heavily on a reference rate β in this case u. s. dollar libor β that is less resilient than it needs to be. in saying this, i want to make it clear that libor has been significantly improved. ice benchmark administration is in the process of making important changes to its methodology, and submissions to libor are now regulated by the united kingdom β s financial conduct authority. however, the term money market borrowing by banks that underlies u. s. dollar libor has experienced a secular decline. as a result, the majority of u. s. dollar libor submissions must still rely on expert judgement, and even those submissions that are transaction - based may be based on relatively few actual trades. this calls into question whether libor can ultimately satisfy iosco principle 7 regarding data sufficiency, which requires that a benchmark be based on an active market. that principle is a particularly important one, as it is difficult to ask banks to submit rates at which they believe they could borrow on a daily basis if | 0.5 |
even more tangible : 1 / 6 bis - central bankers'speeches people want our work and decisions to be an island of stability in the middle of a storm that keeps raging. our observations have been confirmed by banque de france's governor francois villeroy de galhau, who said, " the credibility of central banks and their resolute course of action have a consequence : they are fueling growing public expectations. " there is a direct relationship : the more effective the policy that a central bank pursues and the higher its credibility, the more people expect from the central bank's decisions. this is what unites us with other central banks. they also deal with expectations. central banks in different countries may have differently worded their statutory mandates, but each central bank directs its efforts toward shaping and managing expectations and maintaining trust, which is a key aspect of ensuring the effectiveness of central bank policy. we have some insights that i will share, but we certainly do not have all the answers. so, today we will look for answers together, and the first question is : how to maintain a central bank's credibility amid high uncertainty while undergoing a dramatic transformation? despite the tremendous experience the nbu has gained, as the war wears on, uncertainty is constantly generating new challenges. challenges for us. challenges for the whole world. the echoes of the storm that started in ukraine can be felt now both on the european continent and across the ocean. the war has already affected global food security, migration flows, and redistribution of budgets in favor of military spending. the war is affecting logistical and production capabilities, encouraging tighter border control on land and water and in cyberspace. the war is being reflected by slowing rates of economic growth and rising global inflationary pressures. the world is highly interconnected through trade, financial, and geopolitical networks. as a result, we are seeing that big shocks can have avery different asymmetric and nonlinear effects due to complex interrelated economies and rapidly worsening expectations. and under the laws of perfect storm, the worst - case scenario can happen... hence question two : are central banks ready to face the challenges of war if it comes close to their countries'borders? the nbu's experience proves that conventional approaches and tools are no longer enough to effectively implement the central bank mandate. and in some cases, new 2 / 6 bis - central bankers'speeches challenges dictate the need to change not only the approaches, but the very | philosophy of central banking. since the war's onset, we have accumulated a unique base of knowledge and solutions that has proved effective amid high uncertainty. over this time, the financial sector and the economy have gone from survival and adjustment stages to gradual recovery. along with solutions, we have also developed several insights that i expect you and i will augment during the panels today. 1. central banks should prepare for crises. in emergencies, we do not rise to the level of our expectations, we fall to the level of our preparedness. the idea of crisis preparedness is nothing new. it lies at the core of ensuring financial stability, which became a widespread part of central banks'mandates after the asian market crisis and was cemented as such by the 2007 β 2008 global financial crisis. in essence, crisis preparedness involves creating a system of buffers and an early warning system that operate on the principle " prepare today for what may come tomorrow. " central banks should not be afraid to take into account the relevant experience from different cases. the nbu started preparing immediately after russia annexed crimea in 2014. thanks to prearranged action protocols and a package of anti - crisis measures put into effect on 24 february 2022, we were able to stabilize the situation. we managed to prevent panic, stem capital outflows, and help the country fight and defend its independence. we pegged the exchange rate to the u. s. dollar and imposed administrative restrictions on fx transactions and cross - border movement of capital. we activated the banking system's business continuity protocols. have you ever heard of any countries where people could easily use payment cards amid a full - scale war, even on its first day? i know of only one such country. ukraine. not a single payment was denied, not a single ukrainian bank stopped operating. people had uninterrupted access to their money and continued to keep their deposits in banks. we supported the country's budget by issuing uah 400 billion in monetary financing as ukraine waited for financial support from partners. we did it because the defense forces needed immediate funding. a tactical medicine phrase i often use to explain the essence and importance of crisis response is very apt. in the event of severe injury ( which is how you can describe the invasion's impact on the ukrainian economy ), compress the damaged blood vessels with a tourniquet to stop the bleeding as soon as possible. our emergency measures became such a tourniquet for the financial system | 1 |
task faced by most central banks. apart from ensuring cost effective and high quality currency notes and coins, it also requires accurate forecasts of the demand for currency notes and coins, which varies seasonally and with economic activity. the higher acceptance of electronic payment not only improves the economic efficiency of a country, but also allows substantial cost savings to be gained. studies have shown that widespread utilisation of electronic payment systems has the potential of contributing to at least 1 % of a country β s gdp annually. indeed, there are important potential benefits and scale effects that can be reaped from the realisation of the electronic payment agenda for individuals and businesses, as well as for the economy as a whole. thus, it is for all these reasons that bank negara malaysia has made the migration to electronic payments as one of its strategic results. while the acceptance of electronic payment is on the rise in malaysia, with electronic payment per capita doubling from 23 in 2005 to 41 in 2009, cash and cheques are still largely popular. hence, resource intensive and time consuming processes continue to exist in the payment value chain. as electronic payments are more economical for the society and, as part of the broader efforts to enhance malaysia β s long term national competitiveness, it is essential that costs arising from these inefficiencies are eliminated. an area that requires more attention moving forward, is the change in customers β behaviour and mindset. undoubtedly, it takes time and energy to withdraw cash, deposit cheques and reconcile cheque payments. however, there are segments of society who still prefer paper as they are so accustomed to paper and have always trusted paper instruments. thus, one of the greatest hurdles to accelerate the adoption of electronic payments is breaking longstanding habits and changing the behaviour of people. another important aspect in promoting greater adoption of electronic payments is the need to strengthen consumer confidence in the safety and security of the payment mechanism. recognising the important role of payment cards in the malaysian payment system and in the electronic payment agenda, bank negara malaysia spearheaded the migration from magnetic stripe to the chip - based card infrastructure on a national scale for both the atm and credit cards. this migration is also to counter fraud due to cloning, skimming or counterfeiting. we began with the atm card migration and by 2005, malaysia became the first country to fully migrate to the emv chip - based credit card infrastructure on a national scale. financial inclusion efforts and emphasis on accelerating the adoption of electronic payments would | local community. the importance of vision so far, my remarks have focused on the tangible aspects of planning and investment. but i do not want to leave out a critical element that is perhaps impossible to measure but underlies each of your undertakings. that element is vision. the washington post has reported that when joe horning walked through this theater eight years ago, he was surrounded by broken windows, rotted floor boards, and leaks in the roof. that β s what he saw. but what he envisioned was quite different. he envisioned a beautifully restored theater that would not only serve the community but, more important, also serve as a symbol that columbia heights could be revitalized. indeed, in the past eight years, that vision has been realized, with columbia heights today a vibrant and viable neighborhood. as in similar neighborhoods in the district of columbia and throughout the united states, there is much to celebrate in the results of community investments. the increase in street traffic and economic activity makes the neighborhood a livelier and safer place. property values are rising, and that allows homeowners here to experience the wealth - building power of homeownership that their peers in more - affluent areas have experienced for years. it also enables them to invest in the rehabilitation of their homes. this additional investment improves the look and feel of the entire neighborhood. of course, the higher home prices and rents that result from the increased desirability of this neighborhood also limit the availability of affordable housing. these pressures on the market are being felt here in the washington metropolitan area as well as in other expanding real estate markets. the question of gentrification in columbia heights was interestingly portrayed in the washington post earlier this month through the eyes of a pair of twelve - year old girls who have grown up in this neighborhood. the girls entered a citywide essay contest on gentrification, a word that they had not previously known, and observed very keenly the effects of the development going on around them. they noted their increased feeling of safety as they walked to and from school thanks to the rehabilitation of previously vacant rowhouses and the exciting new diversity of individuals living in their neighborhoods. but they also missed the friends whose families were forced to move out of the neighborhood when it became too expensive to stay. they were saddened by the loss of some of the smaller shops that will be replaced by larger retailers. in the end, the girls concluded that gentrification is a complicated issue, and its results are " not | 0 |
rates as soon as core inflation stabilises, or even better, when it starts falling. however, it's different in reality. because of the transmission lag, the central bank should correctly stop raising rates before inflation peaks. 3 the problem of this 1 / 4 bis - central bankers'speeches academically and practically correct approach is that people can see that inflation is still high and might think that the central bank is not determined to fight inflation because rates have stopped rising. the economically incorrect approach of raising rates until cost - push inflation turns around leads to an overshooting. the resulting recession will be deeper than necessary. professor oldich ddek and i described this precisely in an article called tamers of cost - push inflation. 4 it's also why we have set the monetary policy horizon at spring 2024 in the last two forecasts. 5 if the central bank is credible enough, ceasing to increase rates before inflation turns around does not have to be a problem. however, everything needs to be properly explained. so, i argue that the cnb's interest rates are already at a level that is dampening economic activity. the short - term interest rate in the czech republic is now at its highest level since 1999. we have the tightest monetary policy in more than twenty years. growth in the quantity of money in the economy is slowing considerably. m1 is falling by 6. 3 % year on year in nominal terms ( september 2022 ), while the average for 2015 β 2019 was growth of 9. 3 %. m2 is rising by 5. 5 % year on year in nominal terms ( september 2022 ), while the average for 2015 β 2019 was 7. 8 %. if we deflate the monetary aggregates by the consumer price index, the monetary developments are already significantly restrictive for the economy. the year - on - year change in net new mortgages was - 82 % in september ( - 77 % in august and - 71 % in july ). the year - on - year change in net new loans to corporations was - 64 % ( - 40 % in august and - 70 % in july ). the demand - pull inflation pressures from the domestic economy are now moderating and household consumption is even falling in real terms. a policy of stable interest rates is therefore now the right one. however, credibility is about the long term, about consistency, and about actions rather than words. we have the second - highest international reserves in europe after | speech price stability : the foundation for a strong economy july 08, 2022 john c. williams, president and chief executive officer remarks at the university of puerto rico β mayaguez, mayaguez, puerto rico as prepared for delivery it's a pleasure to be here this morning at the university of puerto rico's beautiful mayaguez campus. thank you for that kind introduction. this visit is part of the new york fed's broader commitment to serving the diverse economies in the federal reserve's second district, which β in addition to puerto rico β includes the u. s. virgin islands, new york state, northern new jersey, and parts of connecticut. here in puerto rico, we supervise four commercial banking organizations that account for a large part of the deposit and lending activities on the island. we also provide cash services to depository institutions located in puerto rico and the u. s. virgin islands. to take one example, the new york fed coordinated an extensive effort to keep cash operations on the island functional following hurricane maria, ensuring adequate supply and meeting the demand for much - needed currency. we also study issues that affect the communities here, and our economists monitor economic conditions that inform our work. 1 i'll start by saying that i am so pleased that in many respects the puerto rican economy has recovered strongly from the hurricanes and the pandemic. over the course of my visit, i've had the opportunity to hear firsthand from business, government, and community leaders about what is happening on the island. i met with government officials to discuss the commonwealth β s economic plan and pandemic recovery. i also heard from executives about how the banking sector is faring. and i met with leaders of cooperativas to hear about what they're doing to help residents improve their access to credit and financial services. i took a short flight here from san juan after a full day of engagements yesterday, and i spent the earlier part of this morning at the aeronautical and aerospace institute of puerto rico, where i learned about this growing industry. needless to say, the views from the ground and the air have been delightful. the u. s. economy has experienced a tremendous rebound since the darkest days at the onset of the pandemic. but now, inflation is sky - high, and it is the number one danger to the overall health and stability of a well - functioning economy. the war in ukraine and the recent lockdowns in china, on top of | 0 |
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