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clearly, during the lockdown, from march 17 to may 31, 2020, we saw a sharp consumer shift to digital payments. our national retail payment system ( nrps ) grew by 74 percent in volume and 42 percent in value from the beginning of 2020 to march 16, 2020. prior to the lockdown, nrps transactions stood at 18. 43 million in volume and php428. 23 billion in value. by contrast, during the lockdown, transactions rose to 32. 05 million in volume and 1 / 3 bis central bankers'speeches php607. 92 billion in value. we expect this dramatic shift to digital payments to continue even after the pandemic. increased digitalization however came with its own set of problems, such as a significant increase in the number and variety of cyberthreats and cyberattacks. while these heightened cyberthreats declined towards the end of the lockdown because of the countermeasures that were timely and carefully deployed by the bsp and our supervised financial institutions, heavy - reliance on automated systems and third - party technological firms can nevertheless raise the risk of cyber incidents with possible systemic impact to the financial system. in the coming years, we expect more supply of new and more sophisticated financial products and services that can attract customers without them realizing the risks involved and raising serious consumer protection issues. with new risks and challenges continually emerging from technological innovations, we know that central bankers can never be passive. part of our strategy to remain agile and well positioned to respond to risks and challenges before and as they materialize is embracing and harnessing the potential of technology, in the form of supervisory technology or “ suptech ”, in fulfilling our mandate. broadly speaking, the bsp ’ s suptech initiatives are classified into three categories : first – data acquisition, where bsp receives data and information from the bsp - supervised financial institutions ( bsfis ). second – data analytics wherein the acquired information gets analyzed and third – data dissemination wherein processed and analyzed information are sent out to other government agencies, internal users, and the public. data is at the heart of any effective supervision. hence, the acquisition of relevant data and its analysis and dissemination to the right parties is crucial. while we are still in our early stages of our own digital transformation as a supervisor, our initial experience with suptech has been positive. we have seen that suptech applications support faster and more flexible data capture compared with traditional template - based approach | amando m tetangco, jr : a comprehensive financial education program for filipinos speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the launching of the economic and financial learning center, manila, 3 october 2008. * * * members of the monetary board, our partners in the financial and business communities, special guests, fellow central bankers, good afternoon. we thank you for being here with us at the launching of the bangko sentral ’ s economic and financial learning center which includes the bsp library as well as the statistical and learning center. this center, which we call eflc, symbolizes bangko sentral ’ s commitment to institutionalize and sustain a comprehensive financial education program for filipinos – our primary stakeholders. we believe that persons literate in basic economic and financial concepts … stand to benefit more from opportunities that development brings. they also become better partners in ensuring that we have a sound banking system and a more efficient transmission mechanism for our monetary policy actions. in the process, they help sustain balanced economic growth. this is the philosophy that underpins our economic and financial education program. it is in this context that today, we are implementing a comprehensive economic and financial education program that covers children, teenagers, and adults. i will discuss its components briefly. for filipino children, we have bangko sentral ’ s joint program with the department of education and the banking community, where lessons on saving and money management are now being taught as part of the curriculum for 12 million public elementary pupils. for overseas filipinos and their dependents here and abroad we conduct lectures and dialogues, to help them make sound financial decisions and investments to grow their money. for our entrepreneurial poor, we continue to preach the gospel of microfinance that has helped improve the quality of life of millions of filipinos. for small and medium - scale entrepreneurs, we guide them on how and where to access credit. for banks, we teach them how to align with and benefit from our technological innovations such as the award - winning electronic rediscounting. for those engaged in the remittance business, we let them know how they can benefit from using our real - time gross settlement system or philpass. for bank customers, we empower them by educating them on their rights and responsibilities in dealing with banks. for maintaining the quality of our policies, we have professorial chairs in top | 0.5 |
has durably depressed demand and therefore prices, through the phillips curve ; while the slope of the phillips curve seems to have decreased in recent decades, it is still positive. the phillips curve remains well alive : in the bad news of “ missing inflation ”, this is the good news for monetary policy. the second factor is the strong decrease of the price of oil after 2014 that lowered the inflation rate both directly, through the energy component of consumption prices, and indirectly. it is estimated that these two factors have led to a 1 pp decrease in the annual inflation rate. unconventional monetary policy was successful in mitigating these disinflationary effects. absent this page 6 sur 9 policy, in - house and ecb computations show that annual inflation would have been around 0. 3pp lower between 2014 and 2019 ( on average per year ). after the onset of the pandemic, our monetary policy measures have also stabilized and then reversed the fall in inflation expectations. according to estimates from the ecb, all the measures taken since the beginning of the pandemic should contribute cumulatively around 1pp to the annual inflation rate over 2020 - 2022iv. inflation expectations have picked up and long - term market based inflation expectations are currently above their pre - covid levels ( marketbased inflation expectations 5y / 5y are close to 1. 6 % today ). b. beyond covid, the ecb has a powerful “ quartet of tools ” to keep its monetary policy as accommodative for as long as necessary. euro area hicp inflation increased to 1. 6 % in april 2021, from - 0. 3 % in december 2020, while core inflation remained subdued at 0. 7 % in april and 0. 2 % at the end of last year. however, this rebound is primarily due to transitory factors and base effects, which are expected to fade out of annual inflation rates early next year. underlying price pressures are expected to increase somewhat page 7 sur 9 this year, owing to short - term supply constraints and the recovery in domestic demand, although they remain subdued overall, in part reflecting low wage pressures. this assessment is broadly reflected in the baseline scenario of last march ecb staff projections for the euro area. it foresees annual inflation at 1. 4 % in 2023. there is today in the euro area no risk of lasting return of inflation. we will continue pepp net asset purchases “ until at least the end of march 202 | in the future ; the importance of internal anchors and the study and research of external ones, and ; the need for establishing capacities ; are included in the research work ’ s agenda of the bank of albania. it is a great pleasure that we already have the possibility to cooperate with a remarkable partner as oxford university, a distinguished institution for the high - level research in political and economic sciences. for this collaboration, i hope and i believe that many issues i discussed above would have an answer, partial or a complete one. the one thing i strongly desire is the involvement of as many domestic and regional researchers. i would like to guarantee all the interested persons that we are open in this direction. on the other hand, i am confident that the collaboration we made official today, shall provide a sensitive contribution towards the education and establishment of professional capacities at national level. please allow me to close my speech returning once more to the argument of professional technicians. i still think that we need to educate our technicians ; furthermore, we should make them independent financially and politically ; and afterwards, we should educate them again. on the other hand, the building of capacities is not an “ individual ” issue ; it is an institutions ’ issue ; in fact it is a process independent from human resources. this because capacities should be based on “ processes ” and not on people, for long - living. the good anchors are not used only from institutions which relate policies with them. they are instruments in the hand of public, as strong arguments to encourage government ’ s agencies towards the compilation and implementation of long term sustainable polices. i believe that the european values may play decisive role in this direction, by strengthening and supporting the establishment of respected institutions, where the criticism occurs independently from the political processes and targets. that is the reason we have chosen the collaboration with the oxford university. | 0 |
free and open to support its status as an international financial centre, providing financial services that mobilise us savings to the rest of the world and attracting foreign investments, and servicing domestic financial intermediation at the same time. london, of course, has much of the european economy in addition to the united kingdom economy. hong kong has the mainland of china, the third largest trading partner, the fourth largest economy, the largest foreign reserve holder and home to participants in the key financial markets that collectively form the largest player in the world. the second point i wish to make is that, under " one country, two systems ", there are two financial systems in china, both in a position to serve the interests of the country in the allimportant function of financial intermediation. this is unique and there are no relevant precedents in the financial history of the world. because of the uniqueness of this arrangement, there is understandably considerable scepticism both internationally and within china on how it might work. let me tell you. the two financial systems are different in a variety of ways, with the financial system on the mainland operating in the developing environment of a socialist market economy and the one in hong kong operating in the familiar environment of a capitalist free market economy. we all know that where there are differences, there are opportunities for exploiting relative strengths, addressing relative weaknesses and maximising synergies between the two systems, remembering always the national interest of making financial intermediation more efficient for the country as a whole. in other words, there is a need to develop a complementary, mutually - assisting and interactive relationship between the two financial systems. this incidentally is national policy, articulated by premier wen on the occasion of the national finance working meeting held early last year. given, however, that there are considerable controls in the financial system on the mainland, including capital controls, and that the financial system in hong kong is among the freest in the world, to develop the complementary, mutually - assisting and interactive relationship between the two financial systems there is a need first to establish channels to promote the mobility in an orderly manner between the two financial systems of ( 1 ) money, ( 2 ) investors and fund raisers, ( 3 ) financial instruments and ( 4 ) financial intermediaries. given also the increasing use and the clear prospects of the renminbi as a medium for international financial transactions there is also a need secondly to develop the ability of the financial system in hong | take any appropriate action. opportunities for hong kong having acknowledged the immediate challenges, i think it ’ s time now to turn towards the opportunities, above all in this region. for while the challenges from the west are deep, they should not blind us to the opportunities within asia. i would say that the coming opportunities for the banking industry here are bright – even if at times they may appear to be obscured by clouds abroad. in fact, i believe that they put us on the threshold of a new era for the banking industry in hong kong. i would like to highlight two of the most promising opportunities. the first is the offshore rmb market, which has developed rapidly over the past two years. the second is the increasing demand for asset and wealth management services, both institutional and individual. opportunity 1 : offshore rmb market on the offshore rmb market, hong kong bankers have been the first ones to exploit the new business opportunities. the development of this market in hong kong is a story very familiar to you, so let me focus my remarks on three specific questions which i am often asked. first, is the rmb liquidity pool in hong kong big enough? over the past year or so, the growth of rmb customer deposits has turned modest. on occasions there have even been month - on - month declines. some commentators have seen this as a sign that the rmb liquidity pool in hong kong is beginning to plateau and might not be able to support future rmb bond issuances and other financial activities. frankly, i think this should not be a cause for concern. one needs to recognise that the level of rmb customer deposits is a useful but incomplete measure of rmb liquidity. for instance, banks have been increasingly issuing rmb certificates of deposits as a means to tap rmb funds. taking rmb customer deposits and certificates of deposits together, these added up bis central bankers ’ speeches to 700 billion yuan at the end of july 2012, with a modest 5 % increase from the end of 2011. in other words, the rmb deposit pool has remained largely stable, at a time when we are seeing very vibrant rmb dim - sum bond issuances and expansion in other rmb financing and investment activities. this is a healthy sign that market forces are balancing supply and demand, and that the offshore rmb market in hong kong is maturing. looking ahead, the level of rmb deposits may rise or fall from time to time. this is only natural as | 0.5 |
debt to household income have been increasing again. lower interest rates both in real and nominal terms – this time, largely reflecting global developments – have again played some role. but there have also been other important factors at work over recent times. one of these is the slow growth in household income. during the 2000s, aggregate household income increased at an average rate of over 7 per cent ( graph 3 ). in contrast, over the past four years growth has averaged less than half of this, at about 3 per cent. slower growth in incomes will push up the debt - to - income ratio unless growth in debt also slows. this partly explains what has happened over recent years. a second factor is that some of our cities have become major global cities. reflecting this, in some markets there has been strong demand by overseas investors. a third factor has been stronger population growth. population growth picked up during the mining investment boom and, although it subsequently slowed, it is still around ½ percentage point faster than it was before the boom ( graph 4 ). for some time the rate of home - building did 4 / 14 bis central bankers'speeches not respond to the faster population growth ; indeed, the response took the better part of a decade. the rate of home - building has now responded and we are currently adding to the housing stock at a rate not seen for more than two decades. over time, this will make a difference. it is melbourne and sydney where population growth has been the fastest over recent times. not surprisingly, it is these two cities where the price gains have been largest, and these price gains have helped induce more supply. indeed, victoria and new south wales account for all of the recent upward movement in the national housing price - to - income ratio ( graph 5 ). in the other states, the ratio of housing prices to income is below previous peaks. so there is not a single story across the country. this is despite us having a common monetary policy for the country as a whole. factors other than the level of interest rates are clearly at work. 5 / 14 bis central bankers'speeches in summary then, the supply - demand dynamics have been pushing aggregate housing prices in our largest cities higher relative to our incomes. with interest rates as low as they have been, and prices rising, many people have found it attractive to borrow money to invest in an asset whose price is increasing. the result has been strong growth in borrowing by investors, with investors accounting for 30 to 40 per cent | target for the debt - to - income ratio or the ratio of nationwide housing prices to income. as i spoke about earlier, there are good reasons why these ratios move over time. my judgement, though, is that, in the current environment, the resilience of our economy would be enhanced by an extended period in which housing prices and debt outstanding increased no faster than our incomes. again, this is not a target or a policy objective of the reserve bank, but rather a general observation about how we build resilience. many of you will be aware that these issues have figured in the deliberations of the reserve bank board for some time. this is entirely consistent with our flexible medium - term inflation targeting framework. with a medium - term target, it is appropriate that we pay attention to the resilience of our economy to future shocks. in the current environment of low income growth, faster growth in household debt is unlikely to help that resilience. we have also been watching the labour market closely. the unemployment rate has moved up a little over recent months and wage growth remains subdued. encouragingly, employment growth has been a bit stronger of late and the forward - looking indicators suggest ongoing growth in employment. we will want to see a continuation of these trends if the overall growth in the economy is to pick up as we expect. stronger growth in incomes would of course also help people deal with the high levels of debt and housing prices. overall, our latest forecast is for economic growth to pick up gradually and average around 3 per cent or so over the next few years. to conclude, i hope these remarks help provide some insight into the reserve bank ’ s thinking about housing prices and household debt. as household balance sheets have changed, so too has the way that the economy works. both from an individual and an economy - wide perspective, 13 / 14 bis central bankers'speeches we need to pay attention to how the higher level of debt affects our resilience to future shocks. thank you. i look forward to your questions. 1 when balances in offset accounts are taken into account, the recent rise in household debt is less pronounced, although the household debt - to - income ratio has still risen to a record high. 2 for rba analysis of this issue see kohler m and m van der merwe ( 2015 ), ‘ long - run trends in housing price growth ’, rba bulletin, september, pp 21 – 30 and rba ( 2003 ) ‘ household | 1 |
been made, and we are still advancing in this direction. we are following the procedure for joining the oecd, and expect to become members this year. 4. finally, reform of the bank supervision in israel. there is a worldwide consensus that supervision reforms are necessary, and this applies to israel too, and it is important that we proceed rapidly in this area. in conclusion, i would summarize by saying that before i came to the bank of israel i set myself several objectives, not all of which have been achieved yet. the list included a new bank of israel law, a new wage agreement in the bank, and the structural reorganization of the bank. the reorganization that has taken place in the bank certainly helped it deal correctly with the crisis. other targets remain, albeit of somewhat less importance, but still worth mentioning : ( i ) to improve relations between the ministry of finance and the bank – we share responsibility for the health of the economy, and with two doctors caring for the same patient, it is important that they agree on the correct course of treatment ; ( ii ) to improve the level of public debate in israel, and there is plenty of room for improvement in that area. | in the oecd, for all levels of schooling, declined consistently up to recent years, reaching 70 percent in 2009. since then, there has been some increase and the share was about 75 percent in 2013. we do not have comparative data with oecd countries for the past 3 years, and in israel there was an increase in expenditure per student in most levels of education during those years. however, even if we make the extreme assumption that in the comparison countries the level of expenditure per student did not change at all in these years, expenditure per student would have reached 82 percent of the oecd average in 2016. against this background, the poor results of the israeli population on the piaac tests of basic skills — numeracy, literacy and writing, and problem solving in a digital environment — are not surprising ( nor are the results of the pisa tests, which i have shown on other occasions ). likewise, the gaps in achievements, as measured by the gini index of results, are almost the highest in the entire oecd. the connection between level of workers ’ wages in various countries, and the level of basic skills as measured by the piaac tests, are documented in the report, and present israel in an unflattering position, with a low average score, and accordingly a low wage level. wage inequality is also high for us, similar to the inequality in human capital level — both in the quantity of human capital as measured by years of schooling and even more so the inequality in the quality of human capital, as measured by gaps on basic skills tests. these findings with regard to the scope of civilian expenditure in israel, particularly related to the insufficient scope of investment in physical capital and human capital, are reflected in a low level 3 / 4 bis central bankers'speeches of infrastructures and of skills relevant to the 21st century labor market. significant and efficient investment in these areas is required in order to increase the productivity of all israeli citizens and is the key to increasing the potential growth of the economy and the standard of living of all of israel ’ s citizens, and the key to sustainable and inclusive growth. the robust macroeconomic situation presents precisely the opportunity to adopt such a policy. 4 / 4 bis central bankers'speeches | 0.5 |
the banks and improves the stability of the financial system. finally, it is my view that, over and above the formal standards and protocols, the really important thing is cooperation and communication in good faith between supervisory colleagues. cooperation is, therefore, a two - way street, and i believe that we all understand that we need to accept a minimum level of flexibility, based on mutual trust and reciprocity, if we want cooperation between supervisors to be effective. basel ii implementation : other aspects turning now to the other topics currently being discussed, i would like to mention pillar 2 of the revised framework as an aspect which is receiving increasing attention. concretely : the group is currently exchanging views on how this pillar can and should be applied consistently within an international banking group. as we can see, the question of cooperation among supervisors is not limited to the use of advanced models under pillar 1, and it is thus necessary to be able to exercise this degree of flexibility as regards the nature and scope of such cooperation. there are also certain topics on which it would be desirable that both banks and supervisors move forward more decisively. for example, as regards operational risk and the so - called hybrid approach which sets out how the capital requirement for operational risk calculated as an aggregate using advanced models ( ama ) can be distributed or assigned within a banking group - we as supervisors find ourselves in a situation where it would be advisable for us to take steps to clarify some aspects of this approach, but where we need the industry to make clearer progress in developing concrete assignment models. there are other eminently practical topics that are being discussed by the aig. without wishing to provide an exhaustive list, i would just like to mention that it is examining the material effect, in terms of capital, of the differences that continue to exist in some jurisdictions on subjects such as the definition of default. the group is also engaged in an exchange of views on how to interpret “ user testing ” and so - called “ lgds in stress situations ”. the aig is attempting to establish the circumstances in which all these differences may be acceptable, when they affect different entities within the same banking group, and under what circumstances it would be appropriate to standardise the treatment of some of them. another practical aspect of implementation relates to the growing use by a number of institutions of external models and databases, known as “ vendor products ”. the committee has recently published a newsletter clarifying supervisors ’ expectations in terms of the requirements to be met in | 24. 05. 2017 welcome address i conference on financial stability / banco de espana - cemfi luis m. linde governor good morning ladies and gentlemen, it is my pleasure to welcome you to this first conference on financial stability, jointly organised by the banco de espana and the centro de estudios monetarios y financieros ( cemfi ). thank you very much for your interest in and attendance at the conference. we have a very interesting agenda for today and tomorrow, structured around six sessions and a panel discussion covering a wide range of topics related to the theory and policy practice of financial stability. this event is bringing together distinguished speakers and discussants from central banks, international financial institutions and academia - a combination which will offer a diversity of perspectives and also ensure a lively and, for sure, interesting debate over the next two days. this conference has been possible thanks to the joint effort of banco de espana and cemfi. i am very grateful to the organisers, in particular to rafael repullo, director of cemfi, as well as to all the members of the scientific committee responsible for promoting this meeting and selecting the papers to be presented in the programme. this event has aroused particular interest among researchers, with - i am told - nearly one hundred papers having been submitted for just twelve slots. with this auspicious start, i trust this conference may become a regular forum of dialogue between researchers and policy - makers : central banks and financial supervisory authorities have many things to learn from the research carried out in academia, away from the frequent policy - making urgencies that drive the daily workload in our institutions. financial stability and macroprudential policy the last crisis generated a good deal of issues to be dealt with by authorities with a role in financial stability. the experience gained over recent years has shown the importance of safeguarding the stability of the financial system as a whole. we now understand that this ambitious task requires the use of sophisticated analytical tools to identify vulnerabilities at an early stage and anticipate how potential shocks can propagate across the financial system. to this end, both micro and macroeconomic methodologies can offer valid insights, and this is why the conference programme intends to offer a mix of both approaches. one of the most relevant and obvious legacies from the crisis is the introduction of a fullyfledged macroprudential policy framework. as we all know, macroprudential policy has, essentially, a | 0.5 |
zeti akhtar aziz : growth and development of the world economy welcoming remarks by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the official opening of the world bank group knowledge and research hub in malaysia, sasana kijang, kuala lumpur, 28 march 2016. * * * it is my great honour to welcome the distinguished senior leadership of the world bank group, dr axel van trotsenburg, vice president of development finance ; and dr kaushik basu, chief economist and senior vice president, to the master lecture on'shared prosperity'by dr kaushik basu. the lecture is held in conjunction with the official opening of the world bank group knowledge and research hub in sasana kijang later this afternoon. as we meet today, the global economy is confronted with an immensely challenging environment. a slower than anticipated growth in several major economies, the sharp decline in commodity and energy prices, the significant shifts in global liquidity, and the heightened geopolitical tensions are having far reaching and widespread implications. going forward, the challenge for both the advanced and emerging economies is to lift growth trajectories and search for sustainable growth factors that can rebuild economic fundamentals, address structural vulnerabilities and forge new sources of growth. key is the " sustainability " and strengthening of the growth and development of the world economy. an important aspect in this process is that economic growth and development, no matter how stellar, will begin to fade when inequality sets in and when income disparities widen. experience has also shown that financial crisis and economic recession entrenches the cycle of poverty. during a financial crisis, the poor lose their income by several times more compared with the average household. we saw this happen during the recent global financial crisis, and we also saw how many that were displaced suffered " hysteresis " thus deeply affecting their income prospects. we also risk facing a severe setback in our fight against poverty. in the more recent years, the international community has accorded greater attention to addressing this agenda and to achieving more balanced and inclusive growth. malaysia, while achieving growth and progress since the 1960s has always given attention for it to be a shared prosperity. given the role of the financial system in facilitating this, bank negara malaysia has always given priority to the financial inclusion agenda to not only bring the underserved segments of society into the financial mainstream but to promote a more effective participation | klaas knot : monetary policy and the great financial crisis speech by mr klaas knot, president of the netherlands bank, at the third annual nyenrode finance day, breukelen, 28 october 2011. * * * the past four years have been tumultuous for the global financial system and the global economy in an unprecedented way for all of us. the eruption of a systemic financial crisis of quite unusual intensity and international reach has been compared to the widespread shutdown of international capital markets on the eve of the first world war. the violent unraveling of events has shaken many beliefs in the economics profession. and the threat of a collapse of the world economy similar to the great depression has prompted unprecedented policy responses. monetary policy makers reacted to the crisis by deploying both conventional and unconventional tools. in this speech, i want to discuss how the conduct of monetary policy in the euro area has evolved during the different stages of the crisis and the challenges it is currently facing. to put this discussion in perspective, let me start by recalling the ecb ’ s mandate to deliver price stability, as is anchored in the maastricht treaty. pursuing this mandate requires that a number of elements are in place. first, there has to be a credible commitment to price stability as a primary goal of monetary policy. a credible commitment implies that the public ’ s long - run expectations about inflation are anchored by the ecb ’ s definition of price stability – hicp inflation below but close to 2 %. second, monetary policy has to be transparent and monetary authorities must be accountable for their decisions. this implies a need for clear and effective communication. third, monetary policy decisions have to be taken in full independence from political influence. this principle is laid down in the maastricht treaty. it implies the strict prohibition of monetary financing. fourth, monetary policy has a medium - term orientation, given the long and variable lags of the monetary transmission mechanism. fifth, monetary policy is underpinned by a comprehensive analytical framework, which rests on two pillars : the economic analysis and the monetary analysis. i should note that the crisis has shown how the monetary analysis can play an important role in signalling financial imbalances and vulnerabilities. it is an important input in a strategy of “ leaning against the wind ”. finally, monetary policy follows a so - called “ separation principle ”, which distinguishes decisions about the monetary stance aimed at achieving price stability from tools directed at implementing monetary | 0 |
against a backdrop of four successive years of surpluses recorded in the current account of our balance of payments and less than buoyant aggregate demand in the economy, the bank faces a policy dilemma. the market is flushed with liquidity for quite sometime. excess supply of foreign exchange has given rise to a situation of excess rupee liquidity. in the last two years the bank of mauritius purchased foreign currencies on the domestic market for an amount equivalent to over us $ 500 million. the rupee counterpart of the purchases amounted to around rs14 billion that has ultimately landed in the balance sheet of the bank of mauritius as well as in the balance sheet of government. the interest burden on this rupee counterpart of the foreign currencies purchased by the bank is indeed heavy. to what extent the bank can keep buying foreign currencies on the market remains a complex policy question should the considered view that the current exchange rate level have to be maintained. given the volatility of exchange rates on the international foreign exchange markets should we take the exchange rate of the rupee as a given price to us ignoring all considerations regarding domestic economic fundamentals? economics textbooks teach us that in a market economy, the invisible hands of the market promote economic efficiency. do we systematically take what the international financial markets decide as given to us despite the common belief that the invisible hands of the market often suffer from arthritis? sometime back a council member of the european central bank likened the behaviour of currency markets to herds that all ran in the same direction. he had this to say, “ i have met a lot of sheep who know they are running in the wrong direction. but they only want to run in the opposite direction if they are certain the rest of the herd will follow. ” the problem is how best the determination of the exchange rate of the rupee in our foreign exchange market reconciles domestic economic fundamentals with what the international financial markets dictate to us. the bank ’ s policy concern is about the need for stemming excessive foreign exchange inflows while sustaining the current exchange rate levels. this is a policy dilemma not only specific to mauritius but also to giant economies like china and others. the bank of mauritius has but only one instrument to strike an appropriate balance and that is interest rate. in the last 30 months the bank of mauritius reduced interest rate on 9 occasions. the lombard rate was reduced step by step from 12. 5 per cent to 9. 75 per cent. the prime lending rates of banks fell | list of systemically important banks and the assignment of those banks to the various surcharge buckets. in both arenas it is important to move as quickly as feasible to complete all this work, so as to provide more clarity to banks, markets, and the public on the details of capital requirements, while still ensuring that the final regulations and requirements are well - crafted. but if details are still lacking, the direction of these reforms is now clear. when fully implemented, these reform strands together will increase significantly the safety and soundness of the financial system and make much less likely the need for some future tarp. at a time when there is considerable disagreement over the best direction for many aspects of financial regulation, that result is one i suspect commands broad support among policymakers, policy analysts, and the public. bis central bankers ’ speeches | 0 |
of my remarks today. strengthening growth the economic situation in greece has started to pick up this year, with the economy stabilising and seasonally - adjusted real gdp increasing by 0. 2 % quarter - on - quarter in q2 2013. overall, gdp growth is expected to turn positive next year at 0. 6 %. but while these are welcome developments, they still represent a relatively weak recovery, especially given the depth of the recession that preceded it. in my view, to add momentum to this recovery and lay the foundations for medium - term growth, the authorities need to address three challenges. first, increasing the economy ’ s external competitiveness ; second, bis central bankers ’ speeches ensuring the banking sector can fund the recovery ; and third, attracting productive foreign investment. increasing external competitiveness as greece is undergoing a simultaneous deleveraging in its public and private sectors, sectoral accounting tells us that its external sector must go into surplus. the key for growth is to ensure that this happens as much as possible through higher exports rather than import compression. the best way greece can achieve this is by improving its price competitiveness. price competitiveness is particularly important for greek firms as their exports are largely concentrated in low - tech products. at the end of the last decade, high - tech or intermediatetech products represented only 28 % of total exports, compared to nearly 50 % for the eu average. yet since euro entry price competitiveness in greece has actually been on a worsening trend. according to the commission, the real effective exchange rate ( on an hicp basis ) in greece was still rising until 2011. to facilitate an export - led recovery, this trend has to be corrected and there is no way this can be achieved in the short run other than by adjusting prices and costs. i know the difficulties that such adjustment creates and the criticisms that are levelled against it. but we are in a monetary union and this is how adjustment works. sharing a currency brings considerable microeconomic benefits but it requires that relative prices can adjust to offset shocks. this process has already begun in greece today. thorough labour market reforms have reduced labour costs significantly. costs have now fallen by around by 18 % since 2009, with wage adjustment being the main driver of that fall. indeed, compensation per employee has fallen by about 20 % in this period. but the translation of cost competitiveness gains into prices has been too slow – notwithstanding the encouraging recent trend of disinflation. this is largely because reforms in product | . they would not help to promote fiscal discipline and could create higher costs in the long run. and they would do nothing to address the fundamental weaknesses in the greek economy. in short, the path of easy answers leads to stagnation, decline and an over - burdening of the young and future generations. from what i see today, i trust that the greek people know which path they need to take. a recent poll shows that 69 % of the public supports the euro – and being part of the euro means taking tough but necessary decisions. responsible choices and reliability are the preconditions for solidarity. greece has already received support from other euro area countries equivalent to 17, 000 euro per greek citizen. and, provided that it complies with the programme, those countries are committed to supporting greece until it regains market access. in short, all the conditions are present for greece to return to prosperity – and for the sake of both current and future generations, i trust that greece will make the most of them. bis central bankers ’ speeches | 1 |
to this question. first, the bank requires market participants to bid actively against its offers, which is one of the bank ’ s requirements for participation in market operations. second, selling a large amount of long - term jgbs through the bank ’ s outright purchase has a smaller effect on market prices than selling them in the market. and third, unlike short - term interest rates, interest rates on long - term jgbs have not yet reached zero. all these explanations appear plausible, but cannot be conclusive. the first explanation also applies to the bank ’ s market operations for providing short - term funds, and these operations have actually experienced undersubscription. the second one may hold true to some extent. the third explanation that interest rates on long - term jgbs have not yet reached zero seems the most convincing. whatever the explanations, from the viewpoint of providing ample funds and analyzing the effect on market prices of jgbs, we should pay more attention to the motivation of market participants for bidding on the bank ’ s offers. the second observation is that the provision of funds dependent largely on the outright purchase of long - term jgbs has created concern in the bank ’ s market operations. the bank is currently conducting the outright purchase of long - term jgbs at a high rate of 1. 2 trillion yen per month. its balance sheets at the end of march 2003 revealed that the total of banknotes and current account deposits increased by about 6. 5 trillion yen from a year earlier on the liability side. on the asset side, the outright purchase of long - term jgbs increased substantially, while money market operations decreased. in fact, the amount outstanding of long - term jgbs held by the bank at the end of march 2003 increased by roughly 9 trillion yen from a year earlier, while the amount of funds provided by money market operations decreased by about 7 trillion yen. the difference of about 3 trillion yen between the increase in the total of banknotes and current account deposits and the amount of funds provided by the bank is explained by the decrease in government excess funds, which were paid to the private sector. if the decrease in the volume of transactions in the money market were to cause difficulties to financial institutions in smoothly raising short - term funds, the bank ’ s money market operations may provide an alternative means of securing smooth funding. in this context, a decrease in the bank ’ s money market operations could be a destabilizing factor for financial markets | as a result of swift and aggressive responses taken by the government and central bank in each country and region, tension in financial markets has abated somewhat. however, the markets have remained nervous due to a decline in liquidity. in addition, although japan's financial system has maintained stability on the whole, financial conditions have become less accommodative in terms of corporate financing, as seen in deterioration in firms'financial positions. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. the bank considers that the important thing in terms of monetary policy under the recent economic and financial situation is to support financing mainly of firms and maintain stability in financial markets. with this in mind, in march and april, it enhanced monetary easing. moreover, at the unscheduled monetary policy meeting held on may 22, the bank decided to introduce a new fund - provisioning measure to further support financing mainly of small and medium - sized firms. the bank has introduced and enhanced the following three measures since march : purchases of cp and corporate bonds, ( 2 ) the special funds - supplying operations to facilitate financing in response to the novel coronavirus ( covid - 19 ), and ( 3 ) the new fund - provisioning measure. through these three measures, which are referred to as the special program to support financing in response to the novel coronavirus ( covid - 19 ) with the total size of about 75 trillion yen, it will actively support financing mainly of firms while cooperating with the government. in addition, with a view to maintaining stability in financial markets, the bank has been providing ample yen and foreign currency funds without setting upper limits mainly through purchases of japanese government bonds ( jgbs ) and the conduct of the u. s. dollar funds - supplying operations, and has been actively purchasing assets such as exchange - traded funds ( etfs ). by conducting these measures, it will continue to contribute to supporting financing mainly of firms and maintaining stability in financial markets. the bank recognizes that powerful monetary easing measures will contribute to supporting economic and financial activities, coupled with various measures by the japanese government as well as those by the government and central bank of each country in response to the spread of covid - 19. on this basis, the bank will closely monitor the impact of covid - 19 for the time being and will not hesitate to take additional easing measures if necessary. thank you. | 0.5 |
bis central bankers'speeches natcatdax ), also led by icrm, that is already utilising these new methodologies to bridge the data gap in asia. the asean platform, will build on natcatdax ’ s efforts in thailand, indonesia and philippines, and extend the coverage to other countries to further enhance data availability in asean. 18. second, risk advisory. on the demand side, asean member states have varied needs, due to differences in economic assets, population size, types of hazards and exposures faced, and the stage of development of their respective disaster risk financing strategies and markets. on the supply side, there is a wide range of disaster financing solutions such as insurance, reinsurance, index - based products, parametric covers, insurance - linked securities ( ils ) and regional pools ; and many solution providers, ranging from private insurance and insurance - linked securities markets, multilateral development banks, and international organisations. adrfi can connect both sides together, and play the role of analysing countries ’ needs, harnessing risk advisory expertise of stakeholders, and structuring optimal and cost effective disaster risk financing strategies under this risk advisory pillar ; and 1 9. third, capacity building. this pillar will focus on enhancing knowledge of disaster risk financing strategies and solutions, and equip policy makers with a good understanding of regulatory, legal, administrative and technology pre - conditions to deploy effective disaster risk financing solutions. asean secretariat will work with knowledge partners such as the world bank, asian development bank, insurance development forum 4 and the insurance industry to develop and implement a 3 - year training road map to address asean ’ s knowledge gaps. 20. by forging public - private partnerships amongst various stakeholders including policymakers, international organisations and the private sector, adrfi will play a key role in forging a robust and comprehensive disaster risk financing strategy in the region. this will help to strengthen asean ’ s disaster risk resilience, and move our economies onto a sustainable and inclusive growth path. conclusion 21. in conclusion, climate change and natural catastrophes are clear and present dangers in asean. we must act quickly to fortify our economies by adopting a comprehensive disaster risk financing strategy. this is a complex undertaking, but we can solve this together through regional collaboration and knowledge sharing. adrfi phase 2, providing a focal point for regional cooperation in disaster risk financing, marks a significant milestone in our journey towards enhancing asean ’ s disaster risk resilience. 22 | persuade the customer why their product is good for him. 2 / 10 bis central bankers'speeches many banks do not have a complete picture of their customers. they are weighed down by legacy it systems and bureaucratic processes. but several banks are stepping up to the challenge. athos is learning from porthos. banks are investing heavily in technology to optimise their operations and enhance their systems. they are collaborating with technology firms to accelerate the pace of innovation. they are becoming more customer - centric. these banks are using technology to provide customised solutions, complete solutions, and seamless solutions. first, customised solutions to suit the individual needs and characteristics of the customer. some banks are experimenting with personalised products and services, not just based on what the customer asks for but by anticipating what the customer might need. commonwealth bank of australia ’ s mobile app is using behavioural science to provide customers with financial management advice based on their spending patterns and financial goals. some banks are offering personalised interactions at every customer touchpoint. royal bank of canada has enabled its customers to pay their bills on the mobile app via speech and voice recognition. second, complete solutions that are based on the total picture of the customer. today ’ s customers are more sophisticated and want holistic solutions. in a survey of 10, 000 tech - savvy customers, accenture found that 80 % of them want integrated solutions that address both their financial and non - financial needs. financial needs are really driven by non - financial desires. people do not desire a housing loan or a fire insurance policy. people desire a house. to provide complete, holistic solutions, you need comprehensive customer data and you need a deep understanding of the customer journey. t h e customer data that most banks have are simply not sufficient to develop a good understanding of the financial situation or needs of their customers. customers have multiple relationships, with deposits and loans, investments, insurance policies, and retirement plans, spread across many financial institutions. how many financial institutions advising a customer have a complete picture of the customer ’ s balance sheet – all his assets and liabilities? some banks have started to offer aggregator services which consolidate financial information such as bank accounts, credit cards, loans, and investments from all the financial institutions serving their customers. this allows financial institutions to provide holistic financial planning. bbva provides its corporate customers with a consolidated view of all their financial information from about 90 financial institutions. 3 / 10 bis central bankers'speeches next, | 0.5 |
its relations with frankfurt during its first ten years the ecb has developed excellent relations with its environment here in frankfurt, be it with the institutions of the city or with the population. at the beginning there were still some taxi drivers who did not understand immediately where to bring a passenger who just said : “ european central bank, please ”. today, the situation is quite different. and the ecb has endeavoured to spread the knowledge of what is happening in there. we do that via our publications or our website but also by inviting the public to come inside the ecb. therefore, we participated in the skyscraper festivals of 2001 and 2007, following the example of our forerunner, the european monetary institute which did so in 1996 and 1998. in the framework of our 10th anniversary we held an open day on 1 june, and about 1, 000 visitors could get first hand information of the role and functions of the ecb. in addition, we regularly explain our work to groups of visitors from around the world, and among them of course citizens from frankfurt and the rhein - main area. in 2007 their number reached 13, 500 altogether and each visitor did not only see the ecb but also the city of frankfurt. for completeness, i wish to also mention our taking part in the osthafenfest and in the luminale, during which the großmarkthalle was fantastically illuminated. also, ecb staff participated in dragon boat races and got the enthusiastic support from the public and their colleagues on the banks of the main. the ecb is a european body, and its staff is now composed of nationals from the 27 member states of the european union. every day, i enjoy the multi - cultural atmosphere at the ecb which is stimulating as it brings fresh ideas into our professional life because of the different experiences, work styles and cultural backgrounds only to name a few of the inspiring factors. our daily encounter with the richness of european heritage brought us to the thought to let the public participate in this understanding. we did so by launching the cultural days of the european central bank which we have organised every year since 2003. the basic concept is to feature each time aspects of the variety and affluence of the culture of one of the member states of the european union, and bring it to frankfurt to present it to the citizens of the rhine - main region and beyond, with events covering music, literature, film, and modern dance. furthermore, we offer lectures about different | jean - claude trichet : ehrenplaquette of the city of frankfurt am main – awarding ceremony speech by mr jean - claude trichet, president of the ecb, at the awarding ceremony of the ehrenplaquette of the city of frankfurt, frankfurt am main, 15 september 2008. * * * sehr geehrte frau oberburgermeisterin, sehr geehrter herr stadtverordnetenvorsteher, hochgeschatzte vertreter des konsularischen corps, meine damen und herren, hier im frankfurter romer habe ich seit meinem amtsantritt als prasident der europaischen zentralbank vor bald funf jahren schon ofter gestanden und zu geladenen gasten gesprochen. heute freue ich mich ganz besonders, das wort zu ergreifen. ich mochte mich aus ganzem herzen dafur zu bedanken, dass die stadt frankfurt mich mit ihrer ehrenplakette auszeichnet. zentralbanken eine heimat in seinen mauern. so zunachst der bank deutscher lander, dann der deutschen bundesbank und seit 1998 außerdem der europaischen zentralbank. fur die auszeichnung, die mir heute hier zuteil wird, gilt mein dank zunachst meinen kollegen im direktorium der europaischen zentralbank und den mitarbeitern. sie alle haben ihren nachhaltigen einsatz geleistet, um die zusammenarbeit mit der stadt frankfurt in so konstruktiver und professioneller weise zu gestalten und haben durch ihr personliches engagement den beitrag zum kulturleben dieser stadt erst ermoglicht. diese gemeinsame leistung ist die grundlage fur diese ehrung, die verleihung der „ ehrenplakette der stadt frankfurt “. ich bin glucklich, mich in die reihe der zentralbankprasidenten einreihen zu durfen, die vor mir die ehren | 1 |
economic consequences of the crisis, but it cannot solve the crisis. to say it once again in wim duisenberg ’ s words : “ don ’ t ask for monetary policy to perform tricks it cannot deliver. ” therefore, the best contribution the eurosystem can make to a lasting resolution of the crisis is to fulfil its mandate : that of maintaining price stability. to avoid potential conflicts of interest between the ecb ’ s mandate to safeguard price stability and its role in banking supervision, changes to the european treaty will be needed in the medium term in order to strictly segregate these two functions. klaas knot said recently in an interview with the german daily “ handelsblatt ” that it was sensible to make use of the ecb ’ s credibility to establish the ssm, but that it should be bis central bankers ’ speeches considered to eventually outsource the ssm from the ecb and to establish a separate institution. and i can only agree with his view. 6. conclusion ladies and gentlemen, let me conclude. the crisis has laid bare shortcomings at the national level as well as weaknesses in the monetary union ’ s institutional architecture. repairs at the national level have seen considerable progress, though there is still a long way to go. like in a marathon, the second half of the course always feels tougher than the first – and one major challenge is to not give in to the growing reform fatigue. but at this point, the weaknesses in emu ’ s architecture probably pose a more fundamental challenge. the balance between liability and control has got out of kilter. we need to regain that balance if we are to put emu on a more solid footing. since a genuine fiscal union is not on the cards – and to me it does not seem to be for the foreseeable future – we need to make the principle of individual responsibility work. therefore, we need to break the sovereign - bank nexus in both directions. the banking union is an important first step. but we also need to put an end to the preferential treatment afforded to sovereign debt in order to immunise the financial system against sovereign default. to me, these are the piles we still need to push into the ground to provide for a lasting foundation of our monetary union. i now look forward to governor knot ’ s take on emu ’ s most pressing challenges. klaas, the floor is yours! bis central bankers ’ speeches | habit. ” strict and consistent application of the stiffened rules is therefore important. here, the commission has a special responsibility. in this context i am worried that the fiscal policy rules have become ever more complex and, in turn, so has monitoring compliance with them. it has now become almost impossible for experts, let alone the general public, to determine whether or not countries are complying with these budget rules. this naturally reduces the binding force of the rules. the binding force of the rules can also be diminished if there is the impression that they are not being strictly interpreted by the bis central bankers ’ speeches commission. and the assessment procedure gives the commission greater and more discretionary leeway. metaphorically speaking, we need to make sure that the commission does not go beyond its role as a referee and move the goalposts mid - game. based on past experiences it is clear to me that stiffening the rules alone won ’ t suffice to enforce the principle of individual responsibility. at its core, this principle requires that sovereigns, banks, and investors bear the consequences of their decisions. this implies that it is primarily up to the respective government and its citizens to come up with the revenue required for repaying public debt. this holds, in particular, since high levels of public debt often go hand in hand with substantial private assets. but it also implies that the risk of non - repayment ultimately lies with the investors, since they are the ones who reap the return when things go well. and if the fiscal limit has been reached for real, public debt needs to be restructured without posing a systemic threat to financial stability. the introduction of collective action clauses into sovereign bonds was a first step in that direction. but more steps are needed. the bundesbank has put forward a proposal for sovereign bonds to include an automatic maturity extension of three years in case a sovereign accesses the european rescue mechanisms. this automatic maturity extension would allow the sovereign in question to tackle its fiscal challenges while preventing investors from bolting. liability and control would be brought better into balance. the amount of official financial support would be reduced, and time is bought to figure out if the problem is one of temporary illiquidity or insolvency. but ultimately, all these questions boil down to the quip of american economist allan meltzer : “ capitalism without failure is like religion without sin. it doesn ’ t work. ” for the above proposals to work, we need to make sure that the ins | 1 |
policy stimuli, as well as worries about us public debt. since the swiss franc also recorded historical exchange rates against other currencies, its value, on a real and trade - weighted basis, is now well above its long - term level. investor appetite for bonds considered to be secure helped to push down capital market yields on us, german and swiss ten - year government bonds to the level last recorded in december 2010 of around 3 % ( us and germany ) and 1. 7 % ( switzerland ). by contrast, the risk premia for bonds of particularly burdened euro economies – namely those of greece, ireland and portugal – continued to rise. overall, the risk premia of certain european sovereign borrowers remain very high, and latent threats of contagion continue to exist. in the global equity and commodity markets, the mood during recent quarters was cautiously positive. in the equity markets, the gratifying corporate results had a strongly supportive effect. in the us, for example, around two - thirds of the most important corporations reported better results than were expected by the market. in the commodity markets, healthy economic conditions – especially in the emerging countries – assisted a continuation of the bis central bankers ’ speeches upward movement, although here, too, price volatility remained high. however, there were also factors weighing on the markets, like the political unrest in north africa and the middle east, the catastrophe in japan and, finally, the indications of a global economic slowdown in the markets. to summarise, the situation in the international financial markets presents a mixed picture, despite the fact that economic developments are relatively favourable. this reflects the fact that the burden inherited from the economic and financial crisis continues to be very significant. implementation of monetary policy the financial crisis was characterised not least by turbulence on the money market. while uncertainties in the international financial markets persist, the situation in the swiss franc money market eased last year, and has been very relaxed since the beginning of 2011. the swiss franc money market is still in a position of structural liquidity surplus vis - a - vis the swiss national bank ( snb ). consequently, our focus is on liquidity - absorbing open market operations. currently, a large proportion of the surplus swiss franc liquidity is being absorbed through snb bills amounting to around chf 110 billion and daily repo auctions ( reverse repos ) of around chf 25 billion. the volume being absorbed has not been increased over | competitive, more efficient and more stable ; it is in a better position to meet the needs of the economy. “ better ” does not mean “ the best ”, which, assuming it is definable, would require the contribution of supervision to be achievable. these are issues which go beyond the scope of my remarks and which i have addressed elsewhere. 4 p. ciocca, la nuova finanza in italia. una difficile metamorfosi ( 1980 - 2000 ), bollati boringhieri, turin, 2000. | 0 |
will bear the full brunt of past lending mistakes by banks. rather, there is sharing of losses between shareholders and the government – or coinsurance – with the government providing, at a price, insurance against only extreme outcomes for the banks. that can be to the advantage of all of us if banks help to underwrite the economy through the agreed lending targets and government underwrites the balance sheet of the banks. the insurance policy will be most cost - effective for taxpayers if all the major lenders sign up to lending targets. nevertheless, the problems in the financial sector mean that 2009 will be a difficult year for all of us. a pronounced contraction in spending and output is underway. as expected, output in the uk economy fell in the third quarter of 2008, but the downward momentum intensified in the fourth quarter. manufacturing output is falling, and the key service sector surveys have reached record low levels in recent months. total output in the fourth quarter is expected to have fallen sharply. in the first half of this year, the rate of contraction is likely to continue to be marked, and our trading partners are experiencing similar problems. but the very significant policy actions taken in recent months will eventually stimulate a recovery in demand, output and employment. bank rate has fallen from 5 % to 1½ %. and, as i have explained, the monetary policy committee has a range of options to stimulate the economy further if required. fiscal policy has been eased. the banking system is receiving massive support to cope with the need to restructure its balance sheet. that will take time, but time is a great healer, even of banks. since the summer, the exchange rate has fallen by almost 20 % ; and oil prices have fallen by around two - thirds, both of which will boost demand. no one can know at what point the impact of all this stimulus will have a visible effect on activity ; the lags in economic policy are notoriously long and unpredictable. but welldesigned policies implemented within a consistent policy framework will eventually work. 1. ten largest monthly falls in uk equity prices percentage change on a year earlier south sea aug - sep 1720 black monday oct - nov 1987 south sea sep - oct 1720 10 se p - 10 o ct 2008 10 sep - 10 oct 2008 oil shock & secondary bank crisis nov - dec 1973 oil shock & secondary bank crisis jul - aug 1974 france fall to germany jun - jul 1940 oil shock & secondary bank crisis feb - mar 1974 unexpected rate hike aug - sep 1981 | dividing line between helping to oil the wheels in markets which are temporarily impaired, and artificially supporting markets in which there is no underlying demand. that is why, as federal reserve chairman bernanke said in london last week, central banks will look to intervene only in markets that “ normally play major roles ” in the functioning of the financial system. therefore, the bank will need to be satisfied that there is a genuine private demand for an asset in normal conditions before it would be eligible for the asset purchase facility. we are aiming to complement and stimulate private demand, not substitute for it. the bank is actively considering in which markets targeted purchases might stimulate new issuance. one example is the corporate bond market. spreads on high quality corporate bonds have more than doubled since early september to an average of over 5 percentage points. despite innovation in financial markets this is the highest spread since the mid - 1970s. the bank estimates that a significant element of this spread represents an illiquidity premium which could be reduced somewhat by increasing activity and liquidity in the market. commercial paper is another case where purchases might help, although that market is considerably smaller in the united kingdom than in the united states. in each case the bank will keep the market fully informed, and more details will be published at the end of the month. it will be a matter of weeks not days before a programme of purchases can begin, but it will be weeks not months. there is another reason to tread carefully. such asset purchases involve taking more credit risk onto the public sector balance sheet. that is why the bank will consider purchasing only high quality assets. despite the existence of a range of unconventional instruments, monetary policy is likely to be more effective when the banking system is working normally. so the first priority for policy is to fix the banking system so that it can resume its normal lending function. the contraction of lending to ordinary viable businesses – your businesses – is threatening to drive the economy further into recession. the package of measures announced yesterday by the chancellor are not designed to protect the banks as such. they are designed to protect the economy from the banks. in particular, the asset protection scheme aims to remove a degree of uncertainty about the future losses banks will make. it also has the effect of reducing the amount of capital banks need to hold against their risky assets. both effects will serve to strengthen and underpin banks'balance sheets and so support their lending to the real economy. to be clear, the scheme does not mean that the taxpayer | 1 |
issuing messages to the relevant stakeholders. let me focus on the first two instruments, the credit transfer and the direct debit. with the introduction of the sepa credit transfer ( sct ) on 28 january 2008, the first pan - european retail payment instrument has become available. almost all banks active in the payment business in europe ( i. e. about 4, 500 banks ) adhere to the sct scheme, i. e. they are able to offer and process the sct. likewise, most retail payment infrastructures that were processing credit transfers in euro have become sct scheme - compliant, i. e. they offer clearing and settlement of the sct. preparations for the second european payment instrument, the sepa direct debit ( sdd ), are ongoing. while the design of both the core service and the business - to - business service are finalised, solutions are required for practical implementation issues such as the ongoing legal validity of existing direct debit mandates, reachability of direct debit payees and in particular the multilateral interchange fee ( mif ), i. e. a transaction fee payable from the payer bank to the payee bank. the need for such transaction fee is challenged by dg - comp of the european commission. the banking sector, the european commission and the european central bank have been working towards a solution for some time, and the issue needs be resolved urgently so as not to endanger the launch of the sdd on 1 november 2009. despite the fact that the sepa project has been ongoing for about seven years and that a lot of product design and standardisation work has been undertaken and completed successfully, the practical implementation and adoption of the sepa, which is the ultimate litmus test of the success of the integration of retail payments in the euro area, is slow. for instance, after being in existence for over a year, only about 1. 9 % of total credit transfer volume in the euro area are sct transactions. 2 banks see the responsibility on the side of corporations and public administrations to bring the critical mass of payments to the sepa environment. in this context, i am very pleased to report that the ecb has migrated all its payments for salaries, bills etc. to sepa payments right from the start of the sepa in january 2008. corporations and public administrations claim that they can see the benefits of the sepa, but still take a cautious approach towards the actual implementation. one of the major difficulties | have hit the financial world over the past two years. they have played a role of safe haven, as market participants could rely on their smooth functioning and operation. the financial turmoil should reinforce our conviction that a well functioning, stable and integrated payment and securities settlement infrastructure represents a cornerstone of the whole european financial integration process. the current crisis should not be taken as an excuse to slow down the ongoing work on the market infrastructure, on sepa, target2 securities, ccbm2. in order to exploit its full potential, banks and central banks need to implement harmonised systems, schemes and procedures. such an integrated and harmonised system would lead to larger economies of scale, greater innovation and better services. therefore, it is precisely because of the financial turmoil that we need to strengthen our efforts towards providing more integrated, efficient, safe and reliable market infrastructures as backbones of our financial system. the fascination of the holy grail may be due to its very elusiveness. in contrast to that, and despite the recent setback, bringing the european financial integration process to completion remains an attainable goal. like the knights of the round table, we – market participants and policy - makers – need to stand up in front of these difficulties and respond to the financial crisis by supporting trust in the financial infrastructures and use their potential for further integrating the financial market. | 1 |
in and year out. 2. supervision of individual firms one of the things that should not be neglected is that the severity of this crisis was as great as it was partly because a large handful of individual massive firms failed due to poor management and weak balance sheets. part of the solution lies, therefore, in much better microprudential supervision and regulation of individual firms. the basel committee has had core principles for effective banking supervision for some considerable time now. but, going beyond that, the fsb has encouraged and is sponsoring an exercise on effective supervision of sifis, significantly important financial institutions. a remarkable fact is that although the style of banking supervision varies enormously across the world, almost nothing seems to have been done to get to the bottom of the question of which approaches are the more effective – having an army of on - site examiners, such as for example in the united states ; or relying on offsite analysis, which tends to be the pattern in much of europe. an exercise led by julie dickson for the financial stability board is producing an evaluation of what is needed to supervise the largest firms in the world effectively. the idea is that that will either get encapsulated in an fsb code or in a re - draft of the basel core principles for effective supervision. 3. capital and liquidity the third element is capital and liquidity. virtually all crises have at their root over leverage in the financial sector and excessive maturity mismatch. we need to overhaul the corresponding policy instruments – capital and liquidity requirements. on liquidity, basel is introducing an accord for minimum liquidity requirements for the first time ; this is about a quarter of a century after it was first contemplated and so rather overdue, but therefore very welcome. there is an awful lot of debate around this still. many in the industry – in the banking industry – have been resisting it. but this will happen. it will lay down minimum standards for banks to hold some resiliently liquid assets and about the funding of illiquid assets. to date, much more prominent has been the work on capital. although there has been some dilution of the proposals from a few months ago, real substantive progress is being made in reforming the minimum standards and in introducing various buffers, taking into account credit cycle conditions and the circumstances of sifis. the key element of the overall package is that “ capital ” will mean capital. the world of hybrid instruments – pretending to be so - called capital instruments | but which in fact cannot truly absorb losses in a going concern – should become more or less a thing of the past. the bank of england would like it to be completely consigned to the past. only equity can absorb losses. for that reason, in calculating regulatory capital, deductions from capital should really be from equity. as part of the emerging compromise, there will be some derogations from that, but the derogations should be transparent. markets should learn to evaluate bank ’ s capital adequacy on the basis of what is made transparent about the makeup of that capital. the other really key change will come in stages – partly in the package this autumn and partly during next year and beyond – which is reducing the pernicious regulatory arbitrage that has existed between “ banking book ” capital requirements and “ trading book ” capital requirements. far too many instruments that were held in the trading book were subject to low capital requirements but actually could not be traded, leaving values exposed to big swings in liquidity premia. this was a fatal design flaw in the existing regime, and it is one which i hope should be fixed over the next year or so though the basel committee ’ s “ fundamental review of the trading book ”. 4. too big to fail at the centre of the reform effort in the fsb work is “ too big to fail. ” if one of the largest firms in the world got into trouble right now, in almost every country in the world we would not be able to cope with its demise other than through fiscal support. this is completely unacceptable. if there is one thing that i think unites the members of the g20 – at the political level and at the official level – it is that this will be consigned to the past. we will re - introduce market discipline back into the financial system, which really means re - introducing capitalism back into the heart of capitalism. the acid test has to be whether, for every financial institution in the world, it could be resolved if it faces distress in a way that does not disrupt the flow of essential financial services to the economy and without state solvency support. that is the single goal in this area. when achieved, it can transform the global financial system more than anything else. it ’ s not for me to set out the ideas today ( svein will do so later ), but there are ideas developing that i believe will, in at least some key centres, become concrete policies | 1 |
olli rehn : which economic and financial priorities for fostering growth and innovation in the eu? opening remarks by mr olli rehn, governor of the bank of finland, at the eurofi financial forum 2019, helsinki, 11 september 2019. * * * ladies and gentlemen, dear colleagues and friends, it is my great pleasure to welcome you to helsinki and to the eurofi financial forum 2019. helsinki is a major nordic financial centre and finland is an active founding member of the emu and the banking union. moreover, central banking has a long history in finland. compared to the “ youngsters ”, like the fed and the ecb, the bank of finland is a “ veteran ”, having been founded in 1811, which makes us the 4th oldest cental bank in the world. that means, if you don ’ t count finland being an organic part of sweden, which has the oldest central bank in the world, sveriges riksbank, founded in 1668. the eurofi on its part has been providing a valuable platform for the exchange of ideas and information between the public authorities and the financial industry for two decades. i am confident that over the next few days the eurofi helsinki forum will give us plenty of food for thought on topical issues in european economic and financial policy. the theme of the morning sessions – the economic and financial priorities for fostering growth and innovation in the eu – could not be more pertinent. apart from managing immigration better and reinforcing external and internal security, our key policy challenge in the coming years will be no less than boosting an economic and industrial revival of europe. let me share some thoughts with you on the priorities to this effect. first, on macroeconomic policies. as we are on the ecb ’ s silent period, i will not comment on – or even touch – monetary policy. i just note that the euro area economy has been on a path of recovery and growth since 2013. but prolonged pervasive uncertainty stemming from the escalating trade war and related to vulnerabilities in the emerging market economies, as well as ongoing geopolitical tensions, have left their mark on the economic sentiment. europe ’ s labour markets have been resilient, so far, and that is supporting domestic demand. however, the falling external demand is taking its toll, and having its effect also on the labour market. the bank of finland and other central banks in the eurosystem are ready to do what | . 3 % in the previous month, while the annual growth rate of loans to households remained broadly stable at 2. 3 % in february. at the same time, the euro area bank lending survey for the first quarter of 2017 indicates that net loan demand has increased and bank lending conditions have further eased across all loan categories. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for a continued very substantial degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2 % without undue delay. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively to strengthening economic growth. the implementation of structural reforms needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost productivity and potential output growth. regarding fiscal policies, all countries should intensify efforts towards achieving a more growth - friendly composition of public finances. a full and consistent implementation of the stability and growth pact and of the macroeconomic imbalances procedure over time and across countries remains crucial to enhance the resilience of the euro area economy. we are now at your disposal for questions. 2 / 2 bis central bankers'speeches | 0 |
that the most recent triennial survey of the bis showed that the credit derivatives market has witnessed substantial growth, from usd118 billion in 1998 to usd52 trillion in 2007. the main participants in credit derivatives, comprising about 80 per cent of the total market, are banks and hedge funds. the announcement of losses by hedge funds exposed to us sub - prime mortgages in midjuly 2007 triggered the reappraisal of asset prices, and excessive market volatility with a general flight to quality or less riskier assets. credit risk evolved into liquidity risk and banks struggled to obtain funding as interbank liquidity dried up, causing sharp increases in moneymarket rates in the major financial centres of the world. 3. how deep and widespread? what began as a fairly contained deterioration in portions of the us sub - prime market has evolved into severe dislocations in broader credit and funding markets that now pose risks to the global macroeconomic outlook. in april 2008, the international monetary fund ( imf ) estimated that declining us house prices and rising delinquencies on mortgage payments could lead to aggregate losses related to the residential mortgage market and related securities of about usd565 billion, including the expected deterioration of prime loans. adding other categories of loans originated and securities issued in the us related to commercial real estate, consumer credit market and corporations, total losses are estimated at almost usd1, 0 trillion. tighter credit conditions imposed by banks, the erosion of consumers ’ spending power due to rising inflation and continuous increases in energy costs have impacted severely on the us economy. according to the imf, the continuing correction in the us housing market and the unresolved problems in the financial sector have led the us economy to the verge of recession. the imf has downgraded its forecast for gdp growth in the us in 2008 to 0, 5 per cent, while the fed, in its latest fomc minutes released on 22 may 2008, expects the us economy to expand by between 0, 3 and 1, 2 per cent. this has serious implications for global growth, particularly for countries whose economic performance depends heavily on exports to the us. one of the interesting developments i would like to mention is that, whereas previous crises originated from emerging - market economies, developed markets were essentially the epicentre of the crisis. so far emerging markets have also proved relatively resilient to the financial turmoil. improved fundamentals, abundant reserves and strong growth rates have all helped to sustain flows into emerging | little incentive to reduce debt and measures that could have strengthened government budgets can be postponed. firms that are not making money can continue to operate. monetary policy in europe has been stretched to its limits. what monetary policy can do is to build a bridge – from the old economy in crisis to a new economy. but someone else – and something else – must create solid ground on the other side. otherwise, the bridge will be left hanging in mid - air. keynes would probably have supported the ecb ’ s policy. without countermeasures, a crisis can become a catastrophe. a slower process of economic restructuring may be a reasonable price to pay. europe is again seeing a modest pick - up in economic growth. unemployment has reached the peak and is falling in countries such as germany, ireland and spain. it is a slow process and the ordeal can seem unnecessarily protracted, but at least things are moving in the right direction. can the crisis in europe be curbed? the answer is probably yes, provided authorities succeed in establishing a form of coordination that has so far been absent. at a deeper level, there is a need for structural and institutional reforms. such reforms will take time. immune system the situation in europe illustrates how difficult it can be to curb a crisis once it has arisen. it might therefore be wise to give priority to crisis prevention. a healthy economic system is less vulnerable. crises can be curbed – or even avoided – by boosting the resilience of the economy. rather than treating the disease after it has taken hold, much can be accomplished by strengthening the economy ’ s immune system. the financial crisis revealed deficiencies and system failures worldwide. many governments and households had taken on too much debt. us investment banks such as lehman brothers operated a high - risk business model with low levels of equity. european banks were too dependent on short - term funding in international markets. in a period of growth, it is easy for banks to obtain funding. but the system is fundamentally unstable. without adequate capital requirements in the banking system, credit growth can spiral out of control. hayek gave lectures on this topic at the london school of economics in the early 1930s. 4 the lse is still home to many economists who argue against the risks of debt - financed growth. 5 solid banks are built in good times. solid banks bolster the resilience of the economy and make crises easier to manage. since the financial crisis, the g20 countries have | 0 |
particular attention, notwithstanding the current regime applied. the presentations on this issue by ms. m. peeters yesterday and by the experiences of various countries during today ’ s panel of the conference were very useful. fiscal domination remains a constant risk to price stability, as it came out of the experience presented here by mr. baschi ( turkey ). we hope that the commitment of the government for developing a better coordination of monetary and fiscal policies will continue in the future, as the minister of finance, mr. malaj stated in his speech. this idea was further elaborated on in the presentation authored by mr. hida and mr. haderi. dollarisation or fx may constitute another obstacle that places financial stability and monetary policy independence at risk, as argued by mr. driessen. therefore, it is a problem that needs attention. what inflation rate should be targeted remains a subject of debate. this concern was presented by mr. olters. the bank of albania is closely addressing this issue in a very prudential manner, so that it does not become an obstacle for economic growth. in light of the above difficulties for passing to a new regime, as stressed by mr. mayes, it is important to implement a robust strategy so as to avoid large mistakes. price stability, as stressed some times during the conference, helps economic growth. on the other hand, the second pillar of the bank of albania, the financial stability, is likely to play a more important role for economic extension. but, as mr. blejer stressed in his speech, stability should not be turned into an end in itself. a good regulated but undeveloped financial sector may be as ineffective as a deregulated sector. in order to make the basic policies in economy more harmonized and effective, i would emphasize that the banking system and the other financial institutions of the country should be more effective, open and supervised. in the final analysis, it is very important to create a real financial market, where all actors know the rules of game and obey them fairly, as it came out in the presentations of mr. niedermayer, mr. danielson, mr. pencapligil and mr. bunda. in conclusion, i would underline that the challenges ahead of us, on our way to development and integration, become easier when a spirit of cooperation exists not only within the country but also in the regional framework and broader. thanking you for your participation in this conference, i declare it closed. | the bank of thailand remains alert, and retains sufficient policy space to act if and when necessary. the third key challenge is that of a recent surge of capital inflows, whose causes are both domestic and global in their origin. on the one hand, the relatively robust growth momentum in thailand has been a “ pull ” factor, attracting portfolio inflows from those seeking to benefit from better economic prospects. at the same time, the low interest rate environment and subdued growth in major economies have helped “ push ” investors to search for higher risk - adjusted returns elsewhere, particularly in emerging economies including thailand. the exchange rates of these recipient economies have appreciated as a result, leading to concerns in some quarters about the prospect of growth momentum. in thailand, some have called on the mpc to lower the policy interest rate to ease the pressure on the baht. a few have gone further to question the suitability of inflation targeting regime for thailand. ladies and gentlemen, there is little disagreement about the pertinence of capital flows for macroeconomic outlook and stability. where my view may depart from that of some critics, is in regards to appropriate policy response, and what objectives the bank of thailand can and should pursue. the mpc ’ s core objective, as instituted by law and in agreement with the government, is to achieve maximum sustainable growth, in the context of stable prices and sound financial system. under this mandate, capital flows and exchange rate fluctuations are not the targets in and of themselves, but enter the policy calculations through their effects on the overall macroeconomic outlook. the mpc ’ s recent decisions to keep the policy interest rate unchanged can be rationalized in this light. while all members of the mpc may recognize the risks posed by volatile capital flows, the majority believed that the overall macroeconomic conditions are consistent with the mandate, and no change in policy was warranted. thus, the current policy framework is sufficiently flexible to allow the bank of thailand to address the issue of capital flows. by contrast, if policy interest rate were employed to target capital flows and exchange rate per se, the outcome would likely prove counter - productive in my view. uncertainty about the effectiveness of such policy use aside, the central bank ’ s commitment to safeguard the overall macroeconomic stability may also be called into question by the public, with potentially serious consequences. i would like to also point out that a couple of mitigating factors are currently at play, which can help alleviate the adverse impact of capital flow surge. | 0 |
sessions. but it is not enough that we discuss and become wise for ourselves. i urge everyone to turn these discussions into actions that would lead to public policy for sustainable development goals of our country, just as our conference theme reflects. let us use our wisdom to help not just ourselves but others as well. after this conference, i look forward to being with everyone at the alumni homecoming this evening. but i will not keep you any longer. i hope for everyone to have fruitful discussions and meaningful exchanges at this conference. once again, thank you very much and i wish you all a productive day ahead. 1 / 1 bis central bankers'speeches | benjamin e diokno : welcome remarks to the grips academic conference welcome remarks by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), to the grips academic conference, manila, 21 june 2019. * * * mr. takehiko nakao, president and chair of the board of directors of the asian development bank ( adb ), dr. akihiko tanaka, president of the national graduate institute for policy studies ( grips ), distinguished session presenters and discussants, grips alumni, faculty members and staff, ladies and gentlemen, good morning. welcome to the first ever bsp - grips academic conference. with the theme “ public policy for sustainable development goals, ” this conference is a special one as it is, in fact, a triple event. not only is this conference being held as part of the 70 years ’ celebration of central banking in the philippines, it also commemorates the 20th year anniversary of grips and the 40th year anniversary of its predecessor, the graduate school of policy science ( gsps ). for this, let us give ourselves a round of applause ( gov. leads everyone to applause ). as the samurai, yamamoto tsunetomo, said over 300 years ago in the book hagakure : the book of the samurai, “ wisdom comes from paying attention to wise people. ” and this, i believe, is what grips — and its predecessor gsps — has been doing over the last 40 years. that is helping us achieve wisdom by creating a venue where we can listen to wise people and hone the skills of policymakers worldwide, acquire valuable and innovative ideas to strengthen their knowledge, and formulate research - based studies to support worthwhile policymaking. all this using a comparative perspective and practical approach, with due consideration to japan ’ s wide - ranging experience and utmost consideration of country - specific issues and circumstances. needless to say, there are many wise people in this conference. browsing through the line - up of the paper presentations, i could also see many timely, relevant, and innovative policy ideas that may emanate from such discussions. from the impact of innovation in achieving inclusiveness ; the bsp ’ s role in the process of state building in the philippines ; to the relationship of financial literacy to achieving financial inclusion — these are rich subject matters worthy of much discussion. i leave this up to all of you to discuss policy and its practical implications in the ensuing | 1 |
may in some cases result in questionable or inappropriate practices, such as including projected income from cross - marketing activities in the valuation of financial instruments. additional guidance to address these issues is warranted. also, consideration must be given to revenue - recognition issues in a fair value regime. we must ensure that unearned revenue is not recognized up front, as it inappropriately was by certain high - tech companies not so long ago. disclosures fair values reflect point estimates and by themselves do not result in transparent financial statements. additional disclosures are necessary to bring meaning to these fair value estimates. fasb ’ s proposal takes a first step toward enhancing fair value disclosures related to the reliability of fair value estimates. i believe that additional types of disclosures should be considered to give users of financial statements a better understanding of the relative reliability of fair value estimates. these disclosures might include key drivers affecting valuations, fair - value - range estimates, and confidence levels. another important disclosure consideration relates to changes in fair value amounts. for example, changes in fair values on securities can arise from movements in interest rates, foreign - currency rates, and credit quality, as well as purchases and sales from the portfolio. for users to understand fair value estimates, i believe that they must be given adequate disclosures about what factors caused the changes in fair value. considerations for credit portfolio management fair value estimates affect the information you use as credit portfolio managers. today ’ s financial statements are based on a mixed - attribute accounting model. this means that an entity ’ s balance sheet may include certain values reported at historical cost and certain values reported at fair value. you probably learned more about this in yesterday ’ s break - out session about managing profit and loss volatility. fair values may be used as an analytic tool in the lending process and are compared with historical cost values. this historical cost information, along with associated disclosures, contains reliable information that provides insights into a firm ’ s expected cash flows. as the industry moves toward expanded use of fair value, i believe disclosure of certain historical cost information will remain essential. as i mentioned earlier, the reliability of the valuations and the transparency of the methods and inputs used to calculate the values are critically important. clearly, fair valuations will have an impact on leverage ratios, capital ratios, and other ratios used in the lending and credit - management process. credit portfolio managers will need to identify and understand the impact of changes in fair value estimates that result from changes in specific factors | the swap arrangement to the federal reserve ) at the exact same exchange rate that applied to the original transaction, they are conducted with major central banks with track records of prudent decisionmaking, and they are secured by the foreign currency provided by those central banks. 1f the success of these swap lines in alleviating funding pressures and reducing interbank borrowing rates is a testament to the benefits of central bank cooperation. moreover, in addition to easing funding shortages, these swaps also helped to allay market fears – they had a preventive as well as a curative role. for example, four of the central banks that participated in these arrangements – brazil, canada, new zealand, and singapore – did not end up drawing on the facilities, but it is generally believed that the existence of the lines helped prevent stresses that could have otherwise developed. as the financial crisis receded, the swap lines were closed in february 2010. however, swap lines with several foreign central banks were reopened in response to financial strains that developed in europe. 3 2f in many countries, policy rates fell to nearly zero. with substantial economic slack remaining, these central banks faced the challenge of finding ways to further ease monetary policy. the federal reserve expanded its balance sheet through the purchase of longer - term treasury securities, agency debt, and agency mortgage - backed securities. the idea was to put downward pressure on longer - term yields to spur demand and also to encourage some portfolio rebalancing toward riskier assets and loans to the private sector. more recently, the federal open market committee decided to extend the average maturity of its holdings of securities by selling shorter - maturity treasury securities and buying longer - maturity treasury securities. this maturity extension program created additional downward pressure on long - term rates without expanding the size of the federal reserve ’ s balance sheet. in addition to using conventional monetary policy and balance sheet tools to provide monetary accommodation, communication is an important tool used by central banks to the 14 central banks were those in australia, brazil, canada, denmark, the euro area, south korea, japan, new zealand, mexico, norway, singapore, sweden, switzerland, and the united kingdom. these swap lines have been renewed several times since then, with the current authorization running through february 2013. bis central bankers ’ speeches enhance the effectiveness of policy. at the conclusion of each meeting, the federal open market committee issues a statement of policy actions taken and the rationale for those actions. detailed minutes are published three weeks later, and lightly | 0.5 |
marzunisham omar : financial advisers, trusted advisers keynote address by mr marzunisham omar, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the 6th annual conference of the association of financial advisers 2017 " financial advisers, trusted advisers ", kuala lumpur, 9 october 2017. * * * it is indeed a great pleasure to be here this morning. i would like to thank the association of financial advisers for inviting me to speak, and allow me first to congratulate the team on the successful organisation of this year ’ s conference. the future is as promising as it is unpredictable. as i reflect on the theme of the conference, i am reminded of a quote from confucius, the ancient chinese philosopher – “ i used to take on trust a man ’ s deeds, after having listened to his words. now, having listened to a man ’ s words, i go on to observe his deeds. ” this morning i would like to talk about trust – financial advisers as trusted advisers. indeed, trust is at the heart of the financial advisory industry. while customer service and technology are increasingly the key differentiators, the most essential element has been, and will always be, trust. in an industry where the very foundations are dependent on the strength of personal relationships, trust is not only a necessary feature – it is its strongest advantage, its defining value proposition. therefore, in my view, trust is where the future is – the financial adviser of the future will be a trusted adviser – one that customers can depend on for reliable, thoughtful and bespoke advice without hesitation. confidence and trust in the industry has unfortunately been bruised in recent years. instances of mis - selling and fraudulent practices have adversely affected the industry ’ s reputation. the rising occurrence of illegal financial schemes in recent times has further worsened the public ’ s perception towards individuals who call themselves “ financial experts ”. most financial advisers have done the right thing, only a small minority has not. yet, it is this minority that has been enough to trigger a tipping point of bad publicity for the profession. under these circumstances, trust becomes the ultimate currency of trade. trust entails adherence to high ethical standards, putting the interests of customers first and treating them fairly. it comes down to the profession having a genuine concern for customers ’ long - term financial needs. as trusted advisers, your responsibilities extend beyond just advising customers on how to invest their money. rather, it is about helping them achieving | by the financial services professional board. going forward, the association may consider refining this code of 2 / 5 bis central bankers'speeches ethics to better reflect the specificities of the financial advisory industry. for improved efficacy, the code should also be complemented, if i may suggest, by rigorous monitoring and strong enforcement. to this end, i would like to suggest the association spearhead the development of an oversight programme aimed at identifying and responding to misconduct risks in a timely manner. perspectives from members could contribute towards crafting more creative, practical and effective monitoring mechanisms, such as members ’ compliance report cards. to further elevate the professionalism of financial advisers, bank negara malaysia is currently reviewing the fit and proper requirements. these requirements will specify, among others, the factors to be observed in the assessment and appointment of key responsible persons, such as members of the board and ceos of the financial advisers, and financial advisers ’ representatives. adoption of these standards we hope will help to strengthen the credibility of the profession. another aspect that is closely linked to professionalism is transparency. it is for this reason that the bank has introduced additional disclosure requirements through the life framework. these disclosures are intended to ensure that appropriate and fair advice is given to consumers who purchase insurance. mandatory sales illustrations have also been enhanced. additionally, all intermediaries now have to provide a service guide to help insurance buyers better understand the advice and services to which they are entitled. instead of viewing these as requirements to be complied with, i would like to encourage financial advisers to take advantage of these disclosure tools to help customers fully understand what they are paying for. this will go a long way in establishing yourselves as trusted advisers. upholding independence the second feature of a trusted adviser is independence. when consumers seek financial advice, they expect to get an objective point of view that places their best interest above all else. and rightly so – the individual ’ s hard - earned savings are at stake. yet, the reality today is that the practice of commission - based compensation for financial advisers may not be fully aligned with the principle of rewarding quality advice to customers. certainly, commission - based compensation has its advantages. it is effective in ensuring that products are actually bought. it is also appealing to consumers who may not be able to afford to pay for advice. but there is a world of difference between sales and advisory. while sales seeks to maximise transaction volume, advisory seeks to maximise the consumer ’ s welfare. with the | 1 |
. still, most forecasters predict nova scotia ’ s economy will continue to grow at the canadian average rate this year. a third factor on our watch list is the evolution of conditions in financial markets. last autumn, we witnessed sharp increases in risk premiums because of uncertainty in financial markets. in recent months, these risk premiums have declined, and conditions in both debt and equity markets continue to improve. this reflects reduced uncertainty and bodes well for business spending going forward. before moving on to the fourth factor, i ’ d like to mention several developments since april that have implications for the economic outlook. together, these developments point to near - term growth in canada that will be lower than we expected at the time of our april monetary policy report. sars is having a significant impact on the hospitality industry, not just in toronto, but across the country - including here in atlantic canada. more recently, the closure of export markets because of the discovery in alberta of an isolated case of bovine spongiform encephalopathy ( bse ) is having an impact on the beef and beef - processing industry. and, of course, problems in several important east coast fisheries are affecting employment and production in this region. as you well know, since mid - april there has also been a further sharp adjustment in the value of the u. s. dollar against major currencies, including ours. the magnitude and speed of the canadian dollar ’ s rise has been greater than anyone had anticipated and will have a dampening influence on aggregate demand later this year and next. we are working to understand all the factors behind these exchange rate movements. in setting monetary policy, we have to take into account the effects on aggregate demand of these factors, as well as the effect of the exchange rate movements themselves. exchange rate movements also have a direct effect on the prices of traded goods and services and, therefore, on inflation. however, our research has shown that, in economies such as canada ’ s, the effect of exchange rate movements on consumer prices has been less pronounced in recent years, when inflation was relatively low, than was the case in earlier years when inflation was high. the inflation picture this leads me to the fourth factor that we watch closely in setting monetary policy — the evolution of inflation and inflation expectations. let me start with inflation. in the 3 june press release that announced our latest interest rate decision, we pointed out that inflation has declined more than expected. some of this decline is due to | arab # fintex symposium – h. e. governor opening remarks honored guests, ladies and gentlemen, good morning, and welcome to this symposium on blockchain and financial inclusion. i think we can all agree that fintech is radically changing the financial sector. rapid advances in digital technology, from artificial intelligence, cryptography to distributed legder technology are already revolutionizing the way financial services are provided. this ranges from the ( 1 ) collection and processing of financial information, ( 2 ) the way saving and borrowing is executed, ( 3 ) the channels for payment of goods, and ( 4 ) money transfers between wallets and accounts, both domestically and across borders. fintech companies are increasingly offering technology - enabled solutions that can better address customer needs and preferences by offering enhanced accessibility, convenience and tailored products. by responding to consumer needs for security, trust, privacy and lower cost services, the fintech industry is poised to affect an array of financial services in a big way. more widely, i believe that fintech has the potential to enhance financial inclusion and unlocking smes and microenterprise ’ access to financing. this is a critical aspect in driving private sector growth and further economic diversification across many countries, including the uae. however, as exciting as these developments are, as a central bank we must always be mindful of our primary goal of maintaining both the safety and soundness of the banking system, and adequate levels of consumer protection. and to that end fintech presents both challenges and opportunities for consumers, financial service providers and regulators alike. the central bank ( cbuae ) is currently in the process of developing a fintech roadmap that aims to build upon the many successes of the uae fintech ecosystem, and to cohesively deploy more balanced regulatory and development initiatives to ensure a healthy and sustainable fintech ecosystem in the long term. this roadmap will be underpinned by a balanced regulatory framework that protects consumers and maintains institutional safety and soundness on the one hand, but does not stifle innovation on the other. at the same time, we must find 1 | page ways to ensure that supporting public and financial infrastructures are put in place within the ecosystem for sustainable innovation to flourish. as a strong advocate towards the uae ’ s innovation and fintech agenda, the cbuae has developed and launched multiple initiatives to help advance applications of technological innovation that will collectively benefit every stakeholder in the uae economy. allow me to name a few : | 0 |
the cpi. for that and other reasons outlined in the boskin commission report and other studies, we know with near certainty that the current cpi is off. we do not know precisely by how much, however. there is, nonetheless, a very high probability that the upward bias ranges between ½ percentage point per year and 1½ percentage points per year. although this range happens to coincide with the one i gave two years ago, it does reflect both the improvements in the index that the bls has implemented since then and the emergence of evidence suggesting that the initial problem was of a slightly greater dimension than had previously been estimated. this estimate is consistent with a number of microstatistical studies as well as an independently derived macroevaluation by staff at the federal reserve board, which i will discuss shortly. in judging these evaluations, it is incumbent upon us to resist the evident strong inclination to believe that precision is the equivalent of accuracy in price bias estimation. if we cannot find a precise estimate for a certain bias, we should not implicitly choose zero as though that was a more scientifically supportable estimate. there is no sharp dividing line between a pristine estimate of a price and one that is not. all of the estimates in the cpi are approximations, in some cases very rough approximations. further, even very rough approximations can give us a far better judgment of the cost of living, than holding to a false precision of accuracy. we would be far better served following the wise admonition of john maynard keynes that “ it is better to be roughly right than precisely wrong. ” estimates of the magnitude of the bias in our price measures are available from a number of sources. most have been developed from detailed examinations of the microstatistical evidence. however, recent work by staff economists at the federal reserve board has added strong corroborating evidence of price mismeasurement using a macroeconomic approach that is essentially independent of the exercises performed by other researchers, including those on the boskin commission. in particular, employing the statistical system from which the commerce department estimates the national income and product accounts, the research finds that measured real output and productivity in the service sector are implausibly weak, given that the return to owners of businesses in that sector apparently has been well - maintained. taken at face value, the published data indicate that the level of output per hour in a number of service - producing industries has been falling for more than two decades. in other words, | a true cost - of - living index would reflect this value and its implication for the true rate of growth of the cost of living. the cpi does not reflect it, and accordingly fails to capture a significant offset to price rises in other products. deriving an estimate of this value and building it into the cpi will not be an easy undertaking. but conceptually, it is unquestionably the right direction to be heading, and some recent research suggests that it could measurably affect the index. over time, we will need to investigate alternative sources of data. already, there is interesting work being done to develop techniques for processing data collected from bar - code scanners at the check - out counter. scanner data will allow the bls to track not just a small sample of products, but virtually the entire universe of products in selected lines of business and, perhaps most importantly, virtually the universe of transactions, regardless of whether those transactions happen on a weekday, at night, or on a holiday. we should also move to improve our understanding of the value that consumers place on their own time. absent such knowledge, it will be impossible for the bls to estimate the value of many goods and services that mainly serve to enhance convenience and save time. finally, we will have to attempt to build an understanding of why consumers shop at the places they do : what characteristics of an outlet are important, and how much so? location, hours of operation, inventory, and quality of service all are likely influences on the value that consumers place on their shopping experience, and all will be important in helping the bls to develop a more sophisticated statistical method for dealing with the appearance of new consumer outlets, including those that operate over the internet. even if the bls moves aggressively, some upward bias will almost surely remain in the cpi, at least for the next several years. two years ago, in testimony before this committee, i suggested that a workable structure for dealing with this situation might involve a two - track approach. that suggestion still seems to me to make sense. the first track would involve action by the bls to address those aspects of the bias that can be dealt with in relatively short order, say within the next year. the second track would involve the establishment of an independent national commission to set annual cost - of - living adjustment factors for federal receipt and outlay programs. the commission would examine available evidence on a periodic basis, and estimate the bias in the cpi taking into account both | 1 |
. * * * in the 1970s and 80s, finland saw substantial investment in it in the financial sector. but it was only after the financial crises in the early 1990's that the sector was forced to revise their operations, and ict was widely used in both re - engineering the internal processes and in creating new distribution channels. in the ten years that followed, banks cut their operating expenses by 50 %. this process was initiated when public authorities set stark quantitative cost savings requirements as a condition to receiving capital support. on top of which, enhanced competition, due to deregulation, has increased the need for continuous re - engineering. certainly, commonly created standards for customer - to - bank and interbank communication also played a significant role in this development. from which we can see that we need it - investment, we need competitive pressure and we need investment in innovating in the organisation to bring about productivity growth. now – and even more so in the future – tough competition in integrating markets force financial market institutions to further improve their performance and increase their efficiency. that is also what share holders want. and to bring these improvements about, streamlined inter - bank payment systems and automated securities settlement systems are required in particular. the european financial sector demonstrates, however, significant differences in efficiency, both between institutions and between national banking sectors. this question will be further elaborated in today's presentation by de nederlandsche bank's jacob bikker, the author of a well - known book in this area. implementation of ict has caused profound changes in many business lines, and yet there is the potential in further renewing and streamlining the processes – it should not be about carrying out the computerisation of old processes but rather about reinventing the processes and using the full capacity of new technology. efficiency comes from savings in personnel and time, streamlined and automated process flows, from less errors, from economies of scale and from lower processing costs per unit. banks have created new sources of income by offering more sophisticated products which would not have been possible without the use of ict. the whole banking landscape is changing. it is going to be of the utmost interest to hear bob deyoung's presentation on what the implications of these changes to the industry are, and how far this evolution can go. a modern, networked economy also requires financial institutions to review their way of carrying out their business with their customers in order to produce added value. this often requires being part of their customers'business processes and doing | more than was required of them earlier. an example of this is electronic account statements, with their structured references and other information for automated booking and reconciliation in the company's financial management. the demand for straight - through - processing from customer to the bank, between banks and to customer is intense. aspect of these issues will be discussed during both bo harald's and david blair's presentations in this seminar. * * * from bricks and mortar to clicks and mortar is the most visible phenomenon of ict in financial institutions a new distribution channel, the internet, and mobile terminals, along with sufficient atmand payment card networks have made it possible to bring down the number of bank branches, giving savings in operating costs. take, for example, one finnish bank which has managed to cut its distribution costs by 25 % and unit production costs for payments by 68 % over a 3 year period. this was achieved by implementing multi - channel applications. customers have adopted the new way of banking, paying bills, checking credit card balances or trading in securities, independent of time or place, surprisingly fast. coming generations will probably have difficulty in understanding how anyone ever queued at a bank branch to pay his bills – to say nothing of writing a cheque. today, it is difficult to see how a bank could enter the finnish or nordic markets without a well - functioning and comprehensive internet service. new customer generations are also more willing and capable of extensively managing their finances using e - banking services. housing loans, for example, are still largely negotiated in branches, but already we have seen how people request offers from various banks via the internet before entering into final discussions with one bank. this reinforces the customer's negotiating power. and this increases competition. development also requires sufficient security elements to create and maintain public confidence. and here the challenges are growing. we need european level cooperation in network security. here i hope that enisa, the european network security agency, will make its contribution. we need efficient cooperation among the law enforcement authorities to fight cyber crime. and we need the secure electronic identification and protection of data privacy. identity theft, the worst case of e - crime, must be fought on all these fronts. ict implementation and exploitation often require huge investments. in many banks ict has replaced personnel as the largest single item of expenditure. old legacy systems are aging, and according to a recent survey, over 80 % of ict expenditure goes into maintenance of these systems. new investment is required, and these are challenging projects | 1 |
the outstanding balance of rmb loans reached 17. 36 trillion yuan, accounting for 90 percent of total outstanding loans of financial institutions, with monthly inquiry averaging at 1. 44 million times. 340 million individuals are registered in the individual credit registration system ; among whom, 35 million individuals have credit records, with 2. 2 trillion yuan of outstanding balance of loans, accounting for 97. 5 percent of the outstanding balance of total consumer loans and daily inquiry averaging at 110 thousand times. these two systems have played a crucial role in preventing credit risks. in sum, the credit registration system will help promote the establishment of a good social credit environment. of course, many tasks remain to be done in this regard, including improving the database, developing both hardware and software, improving relevant laws and deep processing of the information. for example, some problems are caused by the absence of defined laws or regulations on credit registration, such as, what kind of information can be used by the third party? what information cannot be provided due to privacy concern? whether different information including bank account, payment history, tax payment, mortgage, fake goods production records and black points in the customs can be gathered in a package? in addition, information processing is very complicate due to different demands. if both the central bank and commercial banks cannot meet the needs of information, processing by the third party will require legal approval to be conducted. currently, credit registration system has been functioning well ; both the industrial and financial sectors have paid high attention to it and acknowledged its important role in china ’ s economic and industrial development. third is an inter - bank bankcard information exchange system. bankcards are mainly used by individual consumers, but many enterprises and government agencies also use them in their daily activities. the bankcard market is a competitive one with different brands issued by different companies. without cross - bank acceptance, a pos machine placed in a shop could only process a particular bankcard, so the payment efficiency will be seriously reduced, and bankcard users will also feel inconveniency in using the cards. accordingly, an inter - bank bankcard information exchange system must be established to realize cross - bank acceptance. under the pbc ’ s coordination, the china unionpay was established by commercial banks to be responsible for the bankcard information exchange among commercial banks. successful cross - bank transactions done through the china unionpay in 2005 totaled 2. 209 billion, involving a value of 108 million yuan. at present, the unionpa | % to gross domestic product ( gdp ). digitisation, for example, has reshaped financial services in countries such as china, estonia and singapore. less than a decade ago, the chinese e - commerce retail transaction value accounted for less than 1 % of the global value. this figure has risen to nearly 40 % today and, in 2016, mobile payments for goods and services in china totalled us $ 790 billion – 11 times more than in the united states. research by the imf shows that a 1 percentage point growth in the digitisation of china ’ s economy is associated with a 0. 3 percentage point growth in its gdp. estonia is a small country, with minimal natural resources, but it is leading the charge in embracing digital enablers across various sectors. an astounding 99 % of estonian companies are established online, reducing the time it takes to establish a business from 5 days to 18 minutes. in estonia, 97 % of healthcare patients have country - wide accessible digital records, with 99 % of all prescriptions issued digitally. at least 2 % of estonia ’ s gdp is saved due to the collective use of digital signatures. in singapore, citizens have the ability to store their basic identification such as their unique identification number, name, gender, age etc. electronically on a one - stop data repository known as myinfo. this enables faster completion of online information requirements such as e - government or banking services. the examples from china, estonia and singapore demonstrate the potential of technological innovation and fintech. if south africa had to adopt a similar technology, it could be used to administer social grants and could potentially result in significant page 7 of 9 cost savings. a further application could see the simplification and streamlining of compliance with the fic act. as the sarb, we have kept a close eye on fintech developments as we appreciate the developmental potential they hold. there is, for example, sufficient evidence to suggest that the pursuance of common infrastructure such as digital identity platforms, or basic citizen demographics being housed digitally ( such as myinfo in singapore ), can promote progress towards electronic transactions and financial inclusion. in india, their unified payments interface allows one to make payments simply by knowing a person ’ s unique yet simple proxy address. 5 all these capabilities have demonstrated that digital authentication platforms form the foundation for other financial services. in moving towards a digital economy, identifying new threats, including cyberspace threats, becomes increasingly important. this is why two - | 0 |
overcome, for the winding down of the various measures that central banks and governments have adopted in the face of the risk that this crisis might bring the world economy to the verge of a depressive spiral with grave consequences. the raft of measures adopted has been wide - ranging, and many are based on common principles jointly agreed upon in different international fora. multilateral cooperation is crucial for successfully tackling a global crisis. further headway must thus be made along these lines, harnessing opportunities such as that provided by the g20 meeting in london last april. not in vain, one of the lessons to be drawn from past experience is that economic redeployment behind national borders and protectionism are sure - fire recipes for exacerbating and prolonging global crises such as the present one. among the measures adopted, central banks in the advanced economies reacted decisively by providing abundant liquidity to financial systems and substantially cutting their key interest rates. these standard monetary policy measures were later complemented by other, nonconventional measures. the european central bank began very early to increase liquidity assistance and, from october, banks ’ applications for liquidity began to be met in full, while the range of financial assets accepted as collateral for these operations was widened. the main refinancing rate has been cut by 325 basis points to an all - time low of 1 % following the may meeting. and, as regards extraordinary measures, the term over which liquidity is injected has been extended to 12 months, and funds are provided in currencies other than the euro, thanks to cooperation agreements with other central banks ; the european investment bank has been granted the status of eligible counterparty, in order to smooth the course of the loans this institution makes to european smes ; and the decision has been taken to purchase covered bonds and other similar types of asset - backed bonds. at the same time, an expansionary monetary impulse of unprecedented proportions was set in train in europe, commensurate with the seriousness of the contractionary trends experienced in the real and financial domain. at government level, measures were aimed, first, at supporting financial systems and, further, at stimulating demand. among the former, selective bail - outs of banks of systemic importance in the opening months of 2008 were followed, after the heightening of tensions in markets as from the summer, by the raising of deposit guarantee scheme limits, governmentbacked bank issues, public injections of capital and the purchase or the safeguard | . the origin of this behaviour lies in the overlapping of a series of differing shocks. firstly, the correction of the real estate sector and of the high level of private - sector debt, which had started prior to the crisis, already entailed significant elements of spending containment. further, however, the forceful effects of the international financial crisis and of the global recessionary trends compounded this situation, amplifying the contraction of domestic demand, eliminating any possible external support and exacerbating the loss of confidence. this latter factor was, moreover, particularly affected by the impact of the far - reaching deterioration of the labour market on income expectations, an important matter which i shall return to later. as a result of these factors, there was a marked decline in spanish household spending, both on consumption and on residential investment. in 2008, both items accounted jointly for 80 % of the decline in the contribution of national demand to output, which stood at slightly more than 4 pp for the year on average. naturally, the heightening of the financial crisis in the final stretch of the year, and the subsequent deterioration in macroeconomic expectations, saw the contractionary impulses spread to the other components of domestic spending, meaning that business investment ultimately collapsed in the second half of the year. indeed, the sole prop of spending in 2008 was net external demand, which showed a marked increase with a contribution of 1 pp to gdp growth for the year as a whole and of 2. 3 pp in the final quarter. set against the progressive weakening of the world economy, this improvement in the external contribution was due to the notable slowdown in imports, whereby the fall in gdp is proving more moderate than in other countries. the decline in residential investment, along with the sharp pick - up in the household saving rate to 13 % of disposable income, entailed an abrupt reduction in household net borrowing, insofar as households generated a net lending capacity for an amount equivalent to 0. 6 % of gdp over the year as a whole. the slowdown in household debt intensified to the extent that the debt / gdp ratio began to fall in the closing months of the year. in the case of businesses, the decline in productive investment also led to a sharp reduction in net borrowing, which was ultimately manifest in a slowdown in the rate of increase of the debt ratio, although the interest burden still continued to increase. as a result of the change in the sign and intensity of foreign trade, there has been | 1 |
the corporate sector, exports and production have been sluggish recently, due mainly to the effects of the slowdown in emerging economies. exports, mainly automobile - related exports, to advanced economies have remained on a steady increasing trend, whereas those to emerging economies have been sluggish, especially of capital goods. exports as a whole have therefore been flat. against this background, production also has been almost flat. in terms of corporate profits, profits of manufacturing firms have been negatively affected by the slowdown in emerging economies and the yen's appreciation ( chart 3 ). nevertheless, those of all industries, including nonmanufacturing firms, have been at a level close to record highs, reflecting an improvement in the terms of trade resulting from the low crude oil prices. the diffusion index ( di ) for business conditions in the september 2016 tankan ( short - term economic survey of enterprises in japan ) has generally stayed at a favorable level. against this backdrop, firms, including large manufacturers, have maintained their positive fixed investment stance. with regard to the outlook, although overseas economies are projected to remain slightly subdued for some time, they are expected to gradually increase their growth rates as advanced economies continue growing steadily and the effects of such steady growth spread to emerging economies. against this background, exports and production are expected to start increasing moderately. business fixed investment may be affected temporarily partly by the slowdown in overseas economies and the past yen appreciation. however, it is likely to continue increasing moderately as the highly accommodative financial conditions continue and growth expectations rise moderately. developments in the household sector next, i would like to turn to developments in the household sector. positive developments in the corporate sector have steadily exerted positive effects on the employment and income situation ( chart 4 ). the tightening trend of labor market conditions has become more evident and the latest active job openings - to - applicants ratio was 1. 38 times, marking the highest level seen since 1991. the unemployment rate has been about 3 percent, which is virtually " full employment. " a perception of labor shortage suggested by the employment conditions di in the september tankan has heightened further. against this background, wages have increased moderately. despite such improvements in the employment and income situation, private consumption has lacked momentum somewhat. looking back, private consumption was relatively weak in the first half of 2016, due mainly to the negative wealth effects brought about by the decline in stock prices. however, various sales statistics show that it has started to pick up recently | ##eap determined that abf1 had achieved its original purpose, its proceeds were reinvested in abf2. in july 2018, some selected bonds held within abf2 were made available for lending to support the development of local currency securities lending markets and to enhance the functioning of regional money markets. from a market perspective. activities by those market participants and relevant authorities have been indispensable for the development of asia's capital markets. i would like to recognize and praise all of those who have committed to these efforts. looking to the future, asia needs to further accelerate and deepen the development of its financial markets more than ever before. this is because the existence of more developed capital markets both domestically and regionally will play a much more crucial role for the long - term stable economic growth of the region. today, i would like to discuss the economic implications of the conference theme, " developing asia's capital markets, " from several perspectives. then, i will briefly touch on interest rate benchmark reform, as a specific example of the challenges we are facing as we endeavor to further develop market infrastructures. economic significance of further developments in asia's capital markets financing economic growth through the growing middle - income class let me begin with the importance of relying on the growing middle - income class to finance economic growth. the middle - income class in asia has been growing to a remarkable extent. the organisation for economic co - operation and development ( oecd ) forecasts4 that the middle - income population in asia will constitute 66 percent of the world's share in 2030, more than doubling that in 2009 ( chart 2 ). the rise of asia's middle - income class will be accompanied by growth and diversification of the financial needs of that class. both domestic and regional markets in asia must satisfy those evolving demands by providing various financial services, including investment trusts, pension funds, and insurance. by doing so, asia will receive benefits such as inflows of money from the middle - income class into infrastructure projects, which require a significant amount of funding. in other kharas, h. ( 2010 ), " the emerging middle class in developing countries, " oecd development centre working paper, no. 285. words, meeting the financial demands of the growing middle - income class will contribute to utilization of asian savings for asian investments. strengthening financial stability with more liquid domestic capital markets now, i would like to proceed to a perspective of financial stability. | 0.5 |
ryuzo miyao : a macroprudential perspective in the conduct of monetary policy speech by mr ryuzo miyao, member of the policy board of the bank of japan, at the 2011 asia economic policy conference, san francisco, 30 november 2011. * * * introduction first of all, i would like to thank the organizer of this conference for inviting the bank of japan and allowing me to exchange views among such distinguished panelists and scholars. today i would like to highlight one of the key issues regarding the conduct of monetary policy, namely a macroprudential perspective in monetary policy making. more specifically, i will discuss how to take into account the risk of accumulation of financial imbalances in the conduct of monetary policy, which could help prevent financial bubbles and subsequent crises. i would also like to introduce our experience and summarize what the bank of japan has done so far in this regard. you may find it somewhat premature to talk about how to prevent future crises given that the world is still struggling in the aftermath of the global financial crisis. however, in order for asia to keep playing a leading role in the global economy, the issue must be of great importance, although i should immediately add that we have not observed excessive financial imbalances in the region. looking back at the period after the asian crisis, we have witnessed a series of incidents that can be deemed crises. it appears that the frequency of such incidents is rising and that efforts to deal with one crisis might have provided the seeds for a subsequent crisis. in the coming years, asia will not be allowed the luxury of simply being pleased with the situation. i. the essence of the global financial crisis as background, let me briefly review the essence of the global financial crisis. although a variety of economic and financial factors are involved, the essence of the global financial crisis is the formation and bursting of the credit bubble. in forming the bubble, the household sector in the united states expanded borrowing and consumption along with the boom in housing prices. on the financial front, new types of transactions such as securitized products and derivatives prevailed, and leverage also increased significantly. such excess in real economic activity, asset prices, and financial markets had a shared influence among each of these components, and this led to further excess that spread beyond national borders, resulting in the global credit bubble. balance - sheet adjustment has continued to constrain recovery in many countries, which is typical after the bursting of a large - scale credit bubble. | condition is attached to the commitment, that is to say, the bank will continue the virtually zero interest rate policy “ on condition that no problem is identified in examining risk factors, including the accumulation of financial imbalances ”. in practice, however, detecting the accumulation of financial imbalances is not an easy task. in searching for early warning indicators for financial crises, vigorous research has been done globally at various institutions such as the imf and bis as well as central banks, including us. the results of those efforts have shown that, for the purpose of detecting financial crises, it is useful to assess the degree of financial excesses by monitoring indicators such as asset prices, credit aggregate, total investment, and residential bis central bankers ’ speeches investment, most typically their deviation from a trend. the bank has established a framework to regularly check such indicators in the conduct of monetary policy. while developing analytical tools devoted to the conduct of monetary policy, the bank has also been making efforts to better analyze and assess risks across the entire financial system. specifically, it has produced diversified stress scenarios as part of macro stress testing and developed the new financial macroeconometric model to analyze the feedback process in which stress exerted on economic conditions and asset prices spreads to the real economy through the behavioral changes of financial institutions. the bank has also been developing indicators useful in analyzing excessive credit expansion and the financial sector ’ s risk - taking, as well as in detecting signs of instability in the financial system. these new tools and assessments were incorporated in our financial system report published in october, which is available at our web site. the bank also attempts to further promote concerted efforts between these assessments of financial system stability and monetary policy making. the recent economic outlook released in october and subsequent policy judgments reflect these new developments from macroprudential perspectives. closing remarks let me conclude. i have described the importance of a macroprudential perspective in the conduct of monetary policy and the bank of japan has been making certain efforts in this regard. however, i should admit that these are only partially completed and we should keep up our endeavor. in the aftermath of the global crisis, each country has implemented various policy reforms based on similar grounds. i would like to finish by expressing my sincere hope that a policy framework to prevent future crises will be further established worldwide in the coming period, through sharing experiences at various gatherings such as this conference. thank you very much. bis central bankers ’ speeches | 1 |
alwyn jordan : continuing the legacy of success remarks by mr alwyn jordan, deputy governor of the central bank of barbados, at the 25th frank collymore literary endowment awards ceremony, bridgetown, 30 january 2023. * * * good evening ladies and gentlemen. on behalf of the bank, i welcome you to the 25th frank collymore literary endowment competition awards ceremony. twenty - five years is a remarkable achievement! i recall that early in my first tenure at the bank, this competition was very much in its infancy, so i was quite impressed when i returned, after being away for over a decade, to discover how much it has grown and developed over its teenage and now young adult years. on that note, i want to congratulate, in advance, the winners of tonight's competition and to offer encouragement to those of you who, on this occasion, are not among the awardees. i promise that if you keep writing, keep honing and developing your craft, you will reap the rewards. when i delivered remarks at last year's ceremony, the central bank of barbados was beginning a year of celebrations to mark its golden anniversary, which was held under the theme " living the legacy : continuing the journey ". i said then that the frank collymore literary endowment has contributed greatly to that legacy. it forms part of the bank's commitment to contribute in a meaningful way to barbados'overall national development, which includes fostering a strong cultural identity. that's because it has always been, and continues to be, our belief that we must be a part of, and not apart from the society we serve. indeed, it is fair and accurate to point out, that over the past quarter century, the frank collymore literary endowment has developed a legacy all of its own. it was born out of the bank's silver jubilee celebrations, and conceived as a way that we could help to nurture our island's literary tradition. we are therefore very proud to see that as it marks its own milestone anniversary, it has become a symbol of excellence in this area, and that this awards ceremony is seen, to quote two - time winner linda deane, as barbados'" literary grammys or oscars. " similar to those awards, the frank collymore literary endowment recognises and rewards the best of our local literary voices and elevates their status on the local, regional, and dare i say international stage. over the years | , awardees have included emerging talent, and it has also provided a platform for other established artists to showcase their work, including winston farrell, the late honourable edward kamau brathwaite, and esther phillips, barbados'first poet laureate. the value of this competition is also apparent through the number of repeat entrants it has received over the years, as well as by the fact that it continues to attract numerous first - time participants as evidenced by the submissions to last year's competition. 1 / 2 bis - central bankers'speeches for this we must thank the many frank collymore literary endowment committees over the past two and a half decades. to the current committee, ably led by mr. andy taitt, and to those who have sat on it in the past, on behalf of the central bank of barbados, let me say how much we appreciate your hard work and dedication, and we offer you our deepest gratitude. this competition is well placed for future growth and development. indeed, the recent change that allows for submission of applications electronically means that we can now receive entries from across the diaspora. we've already seen that taking place, and it is worth noting that last year's top entrant is based overseas. this year, we again received several foreign - based entries. this broadened talent pool underscores the quality of the competition and suggests that everyone entering it must " up their game " if they want to be successful. each of you finalists, regardless of what happens here tonight, has helped to foster the frank collymore literary endowment's legacy and in the end, it is barbadian literature which is the ultimate winner. in closing, i'd like to again thank all of the artists who submitted their pieces to the awards committee, and i congratulate all of the finalists and awardees on their achievement. and finally, to you, our audience, both here in person and online, i thank you for supporting these artists, this competition and the arts in barbados in general. cheers to 25 years! i look forward confidently to another quarter century of outstanding literary work. i thank you. 2 / 2 bis - central bankers'speeches | 1 |
militate against growth. government borrowing is not bad per se, but excessive borrowing is. there is therefore a need to cap total public debt as a proportion of gdp. what is equally important in respect of fiscal management is the quality of public expenditure. if the government borrows and squanders that money away on unproductive current expenditure, both fiscal sustainability and growth would be jeopardized. governments need to spend on merit goods and public goods, in particular on improving human and social capital and on physical infrastructure. so, after all this discussion, what is the answer to the question : does the pursuit of the new trilemma militate against growth? no. it does not. but there could be some trade - offs and governments will have to tailor their policies to ensure that the benefit – cost calculus is always maximised. question 4 : what are the limits to unconventional policy measures? as the crisis exploded with brutal intensity and depth, central banks around the world acted with an unusual show of policy force, ferociously cutting policy rates to near zero or even zero. realizing soon that this was not sufficient to restore calm and confidence to the markets, they had to follow up the conventional measures with a slew of unconventional measures variously described as quantitative and credit easing. the first wave of unconventional measures was aimed at providing liquidity to the system either by way of collateralized loans through the repo window or outright purchase of bonds. liquidity management is of course standard monetary policy procedure. what made this unconventional were mainly two things. the first was the quantum of operations. the volumes were large, and were aimed at flooding the market with liquidity, much beyond what is expected in normal times. the second characteristic that made liquidity infusion unconventional was the relaxation of standards regarding the type of bonds bought under the omos. in this regard, different central banks relaxed regulations to different extents. while the bank of england stuck to treasuries, the fed bought federally backed mortgage bonds in addition to treasuries. the bank of japan went further buying also corporate bonds, commercial paper, exchange traded funds and real estate investment trusts. the second wave of unconventional measures went beyond repo operations and omos. the bank of japan extended targeted loans to banks to spur long term investment. the fed supplemented two rounds of qe with “ operation twist ” – of purchasing longer term treasuries against sale of short - term treasuries in an effort to depress | bernanke stood out was that he used qe far more aggressively than the boj ever did, introducing innovations as he went along. qe became “ credit easing ” when private assets were bought to stabilize financial markets, followed by another unconventional move – “ operation twist ” – to intervene directly at the long end of the yield curve with offsetting interventions at the short - end. the latest version of qe, as we all know, is an open ended commitment to purchase mortgage backed securities at the rate of $ 40 billion per month for as long as the “ labour market does not improve substantially ”. qe, in all its variations, was able to halt the downward deflationary spiral by making up for the declining velocity of money caused by deleveraging. it kept sovereign borrowing rates bis central bankers ’ speeches low in the face of a market revolt. it helped clean up the balance sheets of stressed financial institutions through cheap funding. the recovery from the great recession was relatively quick ; at least that was how it seemed through the “ green shoots ” of 2010. now, of course, we are no longer so sure. the limitations of macroeconomic techniques honed through deconstructing the great depression, the inflationary seventies and the great moderation are there for all to see. quite understandably, therefore, qe has its critics. it may be relevant to recall some of the criticism. criticism of qe the main criticism has been that qe is being continued beyond its usefulness. what the us economy requires now is a fiscal stimulus, and further qe is no substitute for a fiscal stimulus. it would only stoke inflationary pressures down the line. a second criticism, in fact a corollary to the first one, has been the argument that stretching monetary policy to unconventional levels has obliterated the firewall between fiscal and monetary policies, with monetary policy increasingly becoming an extension of fiscal policy, thereby renewing concerns about the fiscal dominance of monetary policy. third, whereas fiscal stimulus leads to higher taxes down the line, the combination of zerobound interest rates and qe is an immediate tax on savers, who in effect finance the stimulus. this tax on savings should induce people to consume and invest more, and save less. but with impaired balance sheets, they are possibly saving even more. given this outcome, some have questioned the circumstances under which and the extent to which qe can trigger a virtuous cycle of demand for and supply of credit to | 0.5 |
our economy. sixth, sri lanka must continuously improve its global rankings. as is well known, our country had been lagging behind in the world scene on many fronts, mainly as a result of our focus for nearly 30 years, being on just keeping body and soul together in the face of the deadly terrorist threats. as a result, up until a few years ago, our global rankings were quite dismal and low. of course, our rankings were somewhat high on health and education and very high on cricket! but unfortunately on many business related indices, we were lagging far behind many countries, and our scores in doing business, economic freedom, global competiveness, etc. were certainly not flattering. however, about 2 years ago, we started an initiative to carefully examine the criteria that is used to rank countries in relation to various indices, and taking the necessary steps to improve in each of these areas, and prove to the world that we really mean business! i believe if our efforts continue to prove successful over the next few years, and sri lanka materially improves its global rankings on many business indices, we would stand out as an economy with great promise and potential. that would also help us to be well positioned to truly gain recognition as a global hub. in this connection, let me relate a little story that may indicate sri lanka ’ s growing promise and potential. a few days ago, a high ranking official of one of a major multinationals met with me, and he told me that they are becoming increasingly frustrated by the very high costs that they have to bear in the top asian capitals of tokyo, beijing, singapore, hong kong, jakarta, manila and kuala lampur, which is making it increasingly expensive for them to do business in those cities. according to this official, their head office is therefore actively searching for alternate cities in asia with good quality infrastructure, high standards of law and order, efficient communication, convenient sea and air connectivity and excellent living conditions, in order to consider re - location of some of their regional offices. in that regard, he said to me that within the next few years, if sri lanka is able to display a high degree of improvement in each of these areas of interest to multinationals like them, sri lanka could very well be a strong candidate for consideration by such global giants, to locate their regional offices. in this conversation, what struck me first was that such a conversation would bis central bankers ’ speeches never have been even remotely possible, | countries, the efforts to mop up the post - crisis carnage have centred around the question of debt. high levels of household and corporate debt in some euro - area countries are continuing to stifle overall economic activity, particularly investment. but private indebtedness is not the only topic on the agenda – public debt also needs to be addressed. a string of euroarea countries have made huge progress in scaling back their fiscal deficits since the onset of the sovereign debt crisis – indeed, greece, ireland and others deserve plaudits for paring back their annual deficits by ten percentage points or more. but more often than not, countries are still crashing through the 3 % deficit ceiling. and if we factor cyclical gains and temporary measures out of the deficit numbers, then the structural deficits, as they are known, have been static at best or even going back up. essentially, the opportunity opened up by the low interest rates to bring down structural deficits particularly quickly was squandered. in the key area of labour market reforms, countries like italy, spain and france have made tangible progress in the right direction since the crisis struck. but employment could be boosted further still if france and spain, say, act even more decisively to address the divide splitting their labour markets into temporary and permanent employment contracts. the goods markets are another area where key decisions unleashing the forces of growth can be made. for instance, some european countries have rules which inhibit the growth of small enterprises. but when highly innovative small businesses are prevented from scaling new heights, this stunts economic growth. another case in point is the red tape involved in setting up a business, which is a major hurdle across much of europe and, i might add, especially so in germany. the world bank ’ s doing business report ranks our country 107th for red tape, alongside antigua and barbuda and behind nepal and ghana. so we ’ re not “ best practitioners ” in this respect, not by any stretch of the imagination. and there are other areas where germany would be unwise to rest on its laurels. potential growth is just a meagre 1. 3 %, and globalisation and the “ energy u - turn ” are exposing the economy to mounting competitive and cost pressures. more importantly, german society is feeling the effects of radical demographic change, which will take its toll on the country ’ s growth prospects. over time, the working - age population will diminish and the number | 0.5 |
claudia buch : introductory statement - public hearing at the european parliament concerning the position of chair of the supervisory board of the european central bank introductory statement by prof claudia buch, vice - president of the deutsche bundesbank, at the public hearing at the european parliament concerning the position of chair of the supervisory board of the european central bank, brussels, 20 september 2023. * * * check against delivery. dear madam chair, honourable members of the european parliament, it is a great honour and privilege to appear before you today. i would like to share my vision for the ssm, following my nomination by the ecb as chair of the supervisory board. the european parliament is a crucial ally for supervisors. the ssm ensures the safety and level treatment of all banks in the banking union – in the interest of european citizens. you provide the framework for the banking union and its single rulebook. and you hold ecb banking supervision to account – for me, this is key to ensuring the democratic legitimacy of supervision. as chair, i would be strongly committed to continuing the close cooperation with the parliament. i would be devoted to serving the european public good by taking direct responsibility for europe, and being a strong voice for completing the banking union. i would bring with me to the role a broad range of international experience in micro - and macroprudential oversight. as vice - president of the bundesbank, i am responsible for banking supervision and financial stability. i am a member of the ecb's supervisory board and serve as the bundesbank's g7 and g20 deputy. i can therefore contribute a comprehensive micro - and macro - level perspective. and i will continue to work with all my strength on the european project. the ssm has been very successful during its first decade, and it is well equipped to deal with upcoming challenges. it has made european banks safer and stronger. this is essential for sustainable growth. the ssm has built a culture of joint supervision across europe, and i can testify to the excellence of its staff. this is a strong foundation. 1 / 3 bis - central bankers'speeches i see three priorities for the future work of the ssm : adapting supervision to the new, more unpredictable environment ; strengthening supervision by making it even more proactive ; and continuing the good cooperation with all stakeholders. let me explain. * * * my first priority as chair would be to adapt the ssm to the changing environment. as supervisors, we need a | on resolution and deposit insurance are needed. while these will require political decisions, we will contribute with our perspective and expertise. effective resolution and supervision in fact reinforce each other. i would thus continue to cooperate closely with the single resolution board ( srb ). finally, effective international cooperation is essential, as our banks operate in markets that are not under the supervision of the ssm. * * * to summarise : it would be a great honour to lead the ssm into its next decade. i would build on its strong foundation, ensuring that our banking sector remains strong, resilient and at the service of european citizens. i look forward to your questions. 3 / 3 bis - central bankers'speeches | 1 |
subject to a number of risks. considering that in june domestic demand – and output – already was showing faster than foreseen velocity, we cannot rule out gaps closing faster than assumed in the baseline scenario. nor can we rule out that some part of that strength responded to merely temporary factors, such as the earthquake, and output will slow down before we think. in the global context, several risks are still latent. u. s. growth may weaken more than foreseen, with effects on financial markets – in particular stock index reversals – and new postponements of the monetary stimulus withdrawal. the fiscal accounts in developed economies – especially in some countries in europe – is still cause for concern, mainly because of their effects on perceived risks and in the final recovery of the world economy. furthermore, measures adopted in china to limit credit growth and prevent an overheating may result in a weaker world economy and lower commodity prices. as usual, the persistence of global imbalances entails risks both on capital flows across economic areas and on the behavior of parities between different currencies. in the recent past, the trajectory of international food prices has reopened the concern on its future performance and its impact on inflation, given the high degree of pass - through we observed in chile from world price hikes in 2007 and the first half of 2008. overall, it is not that clear that, if wheat prices continue to rise internationally, the local economy will replicate them, because domestic margins have remained fairly large. if any of these scenarios materializes, there will be direct consequences for the growth and inflation scenario foreseen by the board. after considering all the elements described, the board believes that the balance of risks for inflation and output is unbiased, and we reiterate that we will continue to use our policies with flexibility so that projected inflation stands at 3 % in the policy horizon. concluding remarks let me finish with some short reflections. after several years of heavy turbulences and natural disasters, the chilean economy is on a very good standing to continue on a path of sustained growth. price stability has been preserved, preventing inflation from affecting the purchasing power of citizens, especially those with less income and thus less capability to protect themselves against this menace. growth has consolidated, pushing the rate of job creation to levels we had not seen in years. the contribution of monetary policy to this good performance is unquestionable. it has been flexible enough to be able to be applied when facing sharp | in recent years. this combines with significant financial and trade integration, making it easier to search for new markets and opportunities for our businesses. in addition, chile´s official and private bis central bankers ’ speeches sectors have a fairly good liquidity position when its liquid foreign assets and the structure of its liabilities are properly assessed. in the past five years, the availability of net external financial liquidity has been around 70 % of gdp, compared to its near 45 % levels that the country had between 1998 and 2008. this includes the central bank ’ s international reserves, sovereign wealth funds and liquid assets of the private sector. it has also been shown that in periods of financial stress the resources of the domestic pension funds operate countercyclically, as they return to the country during periods of increased volatility in world markets. the credibility of this institutional framework has been reflected in the performance of macrofinancial indicators. this framework successfully dodged a very challenging test during 2008 – 2009, struggling with the effects of the global financial crisis on our economy, and later with the consequences of the high terms of trade and over - abundance of international liquidity. chile ’ s economic outlook for 2014 nevertheless, the changes we have seen in the world macroeconomic scenario have had an impact that exceeded our forecasts of some months ago. our new projections for 2014 will be released in our upcoming march monetary policy report, but it should come as no surprise that our growth outlook for this year has been corrected downward from december. private forecasts have already internalized this change. what are the factors behind this? first and foremost, there has been a slowdown in domestic investment, caused by both the abatement of global mining investment cycle and other specific developments. the slowdown in consumption has been more gradual, in line with fundamentals that, although they ceased to improve, are still good. as i said, investment is the one component of expenditure that has endured the biggest adjustments in the past few quarters. one explanation is the deceleration of emerging economies, china mostly, and the impact it has had on commodity prices, particularly metals. the price of our main export – copper – is around us $ 3 dollars per pound, compared with a little over us $ 3. 50 a year ago and nearly us $ 4. 0 in early 2012. in addition, the outlook for future prices has also been revised downward, triggering a postponement of mining investments whose effects spread to other economic sectors. at any rate | 0.5 |
george a provopoulos : from financial crisis to financial stability – a european odyssey speech by mr george a provopoulos, governor of the bank of greece, at the bank of poland biannual eu presidency lecture “ from financial crisis to financial stability : a european odyssey ”, warsaw, 12 february 2014. * * * i would like to thank president belka for inviting me to be here. the occasion of these lectures provides an opportunity to take stock of the progress made toward european monetary and economic integration and the work that lies ahead. my discussion of these issues will be structured as follows. i will begin by describing some important shortcomings in the original euro area institutional set - up. this will lead me to a discussion of the origins of the euro area crisis. next, i will describe the ecb ’ s reaction to the crisis, as well as the measures that have been, or are being taken, to address the euroarea ’ s shortcomings, focusing on economic governance and banking union. i will then take stock of where we stand today – both in the euro area as a whole and in peripheral countries. finally, i will comment on what remains to be done to make europe more dynamic and globally competitive. the euro area at its formation and the origins of the crisis when deciding on what architecture to give to the monetary union, policymakers settled on a “ bare - bones ” approach. the approach rested on an independent, price - stability - oriented central bank – the ecb – and fiscal discipline by the individual countries, fostered by the rules of the stability and growth pact and enforced by the markets. the maastricht treaty called on countries to pursue sound economic policies that would support the ecb in maintaining its price - stability goal. the dominant view at the founding of the emu was that current - account imbalances among countries in the monetary union would become as irrelevant as they are among regions of individual countries. persistent current - account deficits were interpreted as capital flows from countries offering relatively - low returns on investments to countries offering relatively - high returns. in other words, they were welcomed as part of an equilibrating process under which the fast - growing periphery caught up to the core. this architecture proved inadequate for several reasons, setting the stage for the euro - area crisis. first, the fiscal rules were poorly designed and under - enforced. as a consequence, in the years leading up to the crisis, the ratio of sovereign debt to | real gdp growth in the last quarter. the state, for its part, updated the law on over indebted households, amended the code of civil procedure, enhanced the efficiency of the judicial system and developed a framework for a secondary market for bad loans and non - bank credit servicing firms. turning to the most recent developments, following the eurogroup of 20th march, the greek authorities and the institutions have intensified talks on outstanding issues to reach a staff level agreement as quickly as possible. in the fiscal front, the state budget recorded a surplus of 0. 2 % of gdp in the first two months of 2017, while available data for 2016 indicate that the surplus will reach 2. 0 % of gdp, outperforming the programme ’ s target by a large margin. it should also be noted that the european stability mechanism adopted a set of short - term debt relief measures for greece on 23. 1. 2017. these measures, which were endorsed by the eurogroup in december, are designed to reduce interest rate risk for greece and to ease the country ’ s repayment profile. looking forward, the bank of greece expects gdp to grow by around 2. 5 % in 2017, although a downward revision of the december 2016 forecasts is likely due to the negative carry - over effect of the sharp decline in output in q4 2016 ( attributed mainly to the decline in gross fixed capital formation and government consumption ). downside risks to the economic outlook exist related to delays in the conclusion of the second review of the programme, the impact of increased taxation on economic activity and reform implementation. downside risks connected with the international environment include increased uncertainty associated with forthcoming elections in several eu countries, the rise in protectionism worldwide and a slowdown in global trade and a possible resurgence of the refugee crisis. upside risks are related to the inclusion of greek sovereign debt in the ecb ’ s quantitative easing programme ( qe ) and an increase in tourist arrivals and travel receipts, as indicated in the bookings trend. regarding the banking sector outlook, the out - of - court mechanism will focus on standardizing procedures for small business professionals and small and medium enterprises to ensure a rapid, effective and transparent resolution of arrears. on the remaining steps, it is important that bank managers and employees acting in good faith in managing non - performing loans should be protected from criminal prosecution, while the platforms for electronic auctions and the out - ofcourt mechanism are expected to become operational soon. addressing the problem of non - performing | 0.5 |
of issues whether it is around financial resilience, better management of conflicts of interest, or greater transparency and security for customers. conclusion to finish where i started, smil posits that a realistic grasp of our past, present and uncertain future is the " best foundation " for approaching the unknowable expanse of time ahead of us. we cannot be specific but know it will include both progress and setbacks. " the future, as ever, is not predetermined, " he writes. " its outcome depends on our actions. " 7 / 8 bis - central bankers'speeches as a regulator, when thinking about the complexity of new terrain and its many challenges, that call to action chimes greatly with me. in concluding, let me emphasise that, in the central bank of ireland, as we cover new ground, we do not move in isolation or with our peer regulators only. we are an open and engaged regulator, knowing the importance of listening to our stakeholders, building dialogue and being open to feedback. we don't just welcome your continued engagement – we see it as essential to our mission of serving the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers, investors and the wider economy. thank you for your attention and i wish you an enjoyable and productive conference. 1 with thanks to jonathan dent, caroline mehigan, kevin mullen, cian murphy, james o'sullivan and darragh rossi for their support in preparing this speech. 2 smil, " how the world really works " ( 2022 ) penguin. 3 makhlouf, " the central bank's regulatory philosophy : regulating for stability and positive outcomes " ( 2022 ). 8 / 8 bis - central bankers'speeches | to alleviate the tensions in money markets. we did not hesitate to charter unknown territory and to move forcefully to counter the adverse consequences of the financial crisis. at the same time, we always kept our medium - term perspective fade in mind, and inflation expectations remained fully anchored. the governing council made always clear that we would not compromise – in any respect – the longer - term achievement of the price stability objective or encourage or tolerate imprudent behaviour by market participants. the specific and targeted changes to our operational framework – some of which can be called “ non - standard ” – have played a critical role : they have been instrumental in organising the defence against the systemic liquidity risk that occurred in september last year and in preserving the availability of credit for households and companies at accessible rates, thereby creating the conditions for the best possible transmission of our subsequent easing of monetary conditions. we cut our key interest rate in a series of seven unprecedented steps by a cumulative 325 basis points within about half a year. the eurosystem is currently providing unlimited refinancing at 1. 0 % in its main refinancing operations. from a historical perspective, these measures are unprecedented in terms of their breadth and depth. at the same time, these measures have been taken in full consistency with our monetary policy framework and our primary objective of maintaining price stability. the crisis has not changed this objective. in contrast, the fundamental principle on which our actions were based on is that any course of policy – conventional or unconventional – should be firmly grounded on and directed to the achievement of the eurosystem ’ s primary objective of preserving price stability over the medium term. this objective will always provide the context and limits within which our course of action is framed and enacted. the evidence on our bold yet solidly anchored response to the crises is encouraging. while long - term inflation expectations continue to remain broadly anchored at levels consistent with price stability, our measures show some signs of revival in the functioning of money markets in europe. banks are at the heart of the financial system in the euro area. this is the main reason why our policy response so far has been tailored to the specific nature of europe ’ s financial structure. it is also the reason why the governing council decided in its meeting in may to proceed with its enhanced credit support approach. our enhanced liquidity provision supports banks in continuing their lending operations to firms and households. in full continuity and consistency with the operations we have undertaken since october 2008, we have delivered an array of policy decisions | 0 |
in times of economic slack. 10 conclusion to sum up, the current low unemployment rate and the recent wage increases do not necessarily imply that higher inflation is around the corner. first, measuring economic slack is fraught with well - known difficulties. second, both theory and empirical studies suggest that the wage - inflation pass - through varies over time and depends on many factors. arguably, the structural changes under way in advanced economies imply that the pass - through may be on the decline. the bottom line is that monetary policy decisions need to be based on a wide array of economic indicators, not just the unemployment rate and wages. i have touched upon some of the economic effects of the it revolution. while there might be dangers ahead, i have no doubt that, with appropriate regulation, this revolution will contribute to growth and prosperity in europe and the world. it will also change the way we work in central banks. we are actively trying to foster this change. 1 for alternative estimates of the euro area output gap, see research from the european commission and the imf, or jarocinski, m. and lenza, m. ( 2018 ), “ an inflation - predicting measure of the output gap in the euro area ”, journal of money, credit and banking, vol. 50, no 6, pp. 1189 – 1224. 2 see, for example : trainer, d. ( 2016 ). “ how the internet economy killed inflation, ” forbes, 28 september ; and cohen, p. and tankersley, j. ( 2018 ), “ e - commerce might help solve the mystery of low inflation ”, the new york times, 11 june. 3 cavallo, a. ( 2018 ), “ more amazon effects : online price competition and pricing behaviors ”, paper presented at the 2018 jackson hole economic policy symposium. 4 aghion, p., beragaud, a., boppart, t., klenow, p and li, h. ( 2019 ), “ a theory of falling growth and rising rents ”, working paper series, federal reserve bank of san francisco. 5 haskel, j. and westlake, s. ( 2017 ), capitalism without capital : the rise of the intangible economy, princeton university press ; corrado, c., haskel, j., jona - lasinio, c. and iommi, m. ( 2012 ), “ intangible capital and growth in advanced economies | at the same time not be a transparent means to communicate this complexity. overall, projection exercises provide a main element within the second pillar, but they do not offer an all - encompassing summary device. four and a half years have elapsed since the announcement of the eurosystem's monetary policy strategy. these years provide a wealth of information, in terms of direct experience and of views by external observers. in december 2002 the president of the ecb announced that the eurosystem would conduct an extensive analysis of its strategy. the evaluation encompassed a thorough assessment of comments from academics, analysts and journalists. in plain analogy with the majority of the comments received, the evaluation process focused on three aspects, namely a ) the definition of price stability, b ) the role of money and c ) the two - pillar architecture. 1. the definition of price stability the treaty ( art. 105. 1 ) assigns to the eurosystem the primary objective of maintaining price stability. on 13 october 1998 the ecb governing council defined price stability as " a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 % ". price stability according to this definition " is to be maintained over the medium term ". critics mainly addressed three aspects of this definition, namely the choice of the price index, the choice of the quantitative value for the objective and the format of the definition. 1. 1 the choice of the price index the hicp for the purpose of setting a quantitative objective for monetary policy, a price index should embody a number of essential properties, such as credibility, reliability, timeliness and frequency. the hicp was initially created for the assessment of price convergence in stage two of emu and is largely harmonised across euro area countries. it scores particularly high in the above criteria. there is no controversy in that eurostat provides a high quality price index at international standards. headline inflation versus core inflation the choice of the headline measure has the advantage of transparency : it provides the measure that most closely approximates the price of a representative basket of consumption goods and services purchased by euro area households. in theory, core inflation represents an appealing concept in that it filters out the more volatile components and / or temporary factors, which should be disregarded for monetary policy purposes. in practice though, measures of underlying inflation may lack credibility with the public. furthermore, there is no unique method to derive such measures and different measures often provide very different figures | 0 |
at http : / / www. nber. org / papers / w18315. see phelps e ( 2013 ), mass flourishing : how grassroots innovation created jobs, challenge, and change, princeton university press, princeton. see mokyr j ( 2013 ), “ is technological progress a thing of the past? ”, eu - vox essay, 8 september. available at http : / / www. voxeu. org / article / technological - progress - thing - past. bis central bankers ’ speeches i don ’ t profess to know which of these views is correct – only time will tell. what underlies these debates though is that the ability of a society to innovate, to take and manage risks and to respond quickly to the changing world helps determine the rate of productivity growth. improvements in productivity require existing resources to be used more efficiently or advances in technology – they do not occur from doing the same thing over and over again without change. so if we are to improve efficiency and advance technology then innovation is required and innovation requires someone to take a risk – the risk of trying a different process, the risk of changing workplace organisation and management practices, or the risk of spending scarce resources to explore a new idea. sometimes the effort will not pay off, but just occasionally it will, and when it does, we find a better process, a more efficient organisational design or an idea that transforms how we do things. the point i want to emphasise here is that regardless of whether the techno - pessimists or the techno - optimists turn out to be correct, our attitudes to risk - taking, to innovation and to entrepreneurship have a significant influence on our future living standards. at this point, i would like to return to one of the questions i asked you to think about at the beginning : how has our society ’ s attitude to risk and innovation evolved over time and what are the implications for productivity growth? my own tentative answer is that there has been a subtle, but important, shift in the way we think about risk and innovation. in particular, our preferences appear to have shifted in such a way that we increasingly focus on risk mitigation and risk control. there are examples of this in a whole range of activities in our society – from the nature of the legislation that parliaments pass, to the increase in compliance activities in the nation ’ s boardrooms, to the amount of money we are prepared to spend to limit the probability of blackouts | , spoke last week about some of the issues we are working through regarding the possibility of a cbdc for retail purposes. [ 4 ] we have an open mind as to whether a public policy case will emerge to go in this direction. however, as things stand today, that case has not yet been established. we are, though, exploring the possibilities in case this assessment changes. as part of this effort, we have embarked on a project with the digital finance cooperative research centre involving the issuance of a pilot cbdc that has real value, circulating in a ring - fenced environment. we have invited industry participants to propose use cases to test in this environment, the idea being that this could help us understand new business models and payment solutions that a cbdc could support. we are also looking at potential use cases for a wholesale central bank digital currency, which could supplement the existing exchange settlement accounts we offer. interest in participating in the project has been very strong, with over 140 submissions of use cases. testing will commence soon and we look forward to publishing the results next year. we are also looking at the pros and cons of an alternative form of a digital australian dollar – a payments stablecoin that is issued by the private sector, just as banks issue deposits. if we were to go in this direction, the payment stablecoins would need to be backed by a strong regulatory regime, just as applies to deposits. modernising the regulatory regime the rba is also working with the government to make sure that the regulatory regime is fit for purpose. the bank welcomes the release of the consultation paper on the strategic plan for the payments system. this plan helps to provide guidance for industry and regulators on the government ’ s key priorities for the payments system and we look forward to working with interested parties. from our perspective, one reform priority is the establishment of a new licencing regime for payment service providers ( psps ). this could help overcome some of the challenges faced by psps seeking to enter the australian market. the bank is also working on a set of common requirements for psps seeking to access payment systems, as part of the new licensing regime. the aim is to create a more level playing field for non - adi payment service providers in a way that balances the needs of the payment system operators and psps. the bank is also developing a new regulatory regime for industry bodies that set technical standards for the payments industry. a second priority is the development of regulatory arrangements | 0.5 |
entities. resultantly, immediately after the lehman failure, we saw international financial authorities placing financial sector reforms as their top priority agenda. over the last few years, we have seen increased realization among financial authorities that diversification may be beneficial for a large bank against idiosyncratic risk, but similar patterns of diversification by many global banks across the world had actually contributed towards building up of systemic risk. further, it has also been recognized that the prevailing regulatory framework and polices are not sufficient to address the “ negative externalities ” that large financial firms create. supervisory authorities have arrived at a consensus that sifi definition : an institution, market or instrument is considered systemically important if its failure or malfunction causes widespread distress, either as a direct impact or as a trigger for broader contagion. the interpretation, however, is nuanced in that some authorities focus on the impact on the financial system, while others consider the ultimate impact on the real economy as key ( financial stability board ( 2009 ) ). negative externalities are associated with institutions as they are perceived not being allowed to fail due to their size, interconnectedness, complexity key criterion to identify sifis. bis central bankers ’ speeches sifis require enhanced supervisory focus on account of their relative size, interconnectedness with market ( s ) and complexity. to reduce the probability of failure of such institution and minimize the risk to financial stability and the real economy, it is imperative to strengthen the regulatory framework and enhance supervisory capacity for dealing with sifis. before expressing my views on the regulatory framework for sifis, i would like to appreciate the commendable work done and progress made by the fsb, bcbs and other multilateral agencies on the financial reforms agenda over the last few years. enhanced international accord on capital and liquidity standards ; i. e. basel iii, has set forth the most critical reforms agenda for improving the solvency and resilience of financial institutions. a number of other policy measures supplement basel iii, which among others, included framework for dealing with global sifis ( g - sifis ). starting from initial “ guidance to assess the systemic importance of financial institutions, markets and instruments : initial considerations ” issued in november, 2009 jointly by the imf, fsb and bis, substantial progress has been made in tackling the sifis challenge. a key development took place in november, 2011, when g - 20 leaders at the cannes summit endorsed the policy | - backed market, particularly in the market for rmbs. the volume of issuance of rmbs in 2013 was the highest since 2007 ( graph 6 ). the majority of issuance continues to be in australian dollars, as has been the case in recent years, and in fact, the total australian dollar issuance in 2013 was only exceeded by the level of australian dollar issuance in the two and a half years immediately preceding the onset of the financial crisis. graph 6 despite the low level of foreign currency issuance in 2013, foreign investor demand for australian rmbs has been quite high, reflecting the lack of supply of rmbs in foreign markets, the global search for yield, and confidence in the high quality of the underlying collateral of australian rmbs. publicly available data indicate that, on average, around 40 per cent of each deal in 2013 was placed with foreign investors, and foreign investor participation at issuance has increased significantly. the gradual improvement in rmbs market conditions since mid 2012, particularly the increase in private investor demand, led to the aofm ceasing its rmbs purchases in 2012 and the government announcing the formal end of the aofm ’ s rmbs investment program in april 2013. since the start of 2013, the aofm has sold around $ 1 billion of its rmbs holdings in five transactions, including in february this year the sale of a large part of its holdings of mezzanine tranches following strong investor demand for such exposures. one area where there has been stronger growth has been in the area of subordinated debt, with the banks issuing new basel iii compliant securities to refinance legacy tier 1 and tier 2 securities and to meet strong investor demand. the stock of outstanding government - guaranteed bonds has declined to around $ 23 billion, reflecting maturities and buybacks. the remaining government - guaranteed bonds mature over the next 12 months. bis central bankers ’ speeches the improvement in the rmbs market conditions has also been reflected in a number of other dimensions : • deal sizes have increased, especially for rmbs issued by the major banks, where the average size has increased to $ 2. 5 billion. • issuance has picked up not only for the major banks but also for regional banks and non - banks ( i. e. credit unions and mortgage originators ), with a number of smaller issuers returning to the market after an absence of several years. • rmbs issuance spreads, over the last year or so, have remained at their lowest level | 0 |
ahmet ismaili : opening speech – " sustainable finance forum " opening speech by mr ahmet ismaili, governor of the central bank of the republic of kosovo, at the sustainable finance forum, pristina, 5 october 2023. * * * dear, ms. zhang and mr. marquier, ifc representatives dear, mr. fuchs from swiss embassy dear, mr. balija from kba dear, eu ambassador szunyog board members of the central bank of the republic of kosovo government representatives representatives of the central banks, and saving associations donor, partners, and financial institutions dear, colleagues ladies and gentlemen it is my pleasure to open this forum and welcome you all to the first sustainable finance forum, co - organized by the central bank of the republic of kosovo, the kosovo banking association, international finance corporation and sustainable banking and finance network, in partnership with seco. sustainable finance is the new concept which has emerged from the environmental and climate changes, with associated risks and opportunities to the economies. following the adoption of the paris agreement on climate change and the un 2030 agenda for sustainable development in 2015, governments all over the world are making strides to transition to low - carbon and more circular economies on a global scale. republic of kosovo's environmental commitments are aligned with the eu strategy, and is was one of the six western balkan countries that signed the sofia declaration ( november 2020 ), where the countries acknowledged the european green deal, as a cornerstone for the green agenda for the western balkans ( gawb ). the energy strategy of the republic of kosovo 2022 - 2031, adopted by the parliament of the republic of kosovo, is led by a vision of : a sustainable energy sector integrated into the pan - european market, ensuring energy security and affordability for citizens. also, the strategy foresees by 2025 to complete all preparations for implementing a carbon pricing system and committed to achieve net - zero emissions by 2050. 1 / 3 bis - central bankers'speeches the republic of kosovo has adopted the program with imf " resilience and sustainability facility " ( rsf ) of sdr61. 95 million, to support climate change mitigation and adaptation actions, exploit synergies with other official support and help catalyze private investment in green energy. moving to a low - carbon or green economy would need extraordinary levels of fresh capital investment, notably in the form of green financing, to support activities that cut ghg emissions and | the third anniversary of the establishment of the kosovo credit guarantee fund honourable, mr rinor gjonbalaj, chairman of the board of directors at the kcgf mr christian heldt, german ambassador to the republic of kosovo, mr bedri hamza, minister of finance, mrs lisa magno, usaid kosovo mission director, mr riccardo serri, head of the eu office, mr alessandro tappi, chief investment officer at eif, i am honoured to celebrate today with you the third anniversary of the establishment of the kosovo credit guarantee fund. it has been a privilege for the central bank to contribute, within its legal mandate, to the process of the fund establishment, in particular in the area of proper legal framework. this fund has achieved tremendous success during these past three years, assisting the economic development and creation of new jobs in kosovo. within such a short time, the fund has managed to guarantee more than 2, 560 loans amounting to eur 100 million, with a guaranteed amount totalling to eur 47. 5 million. studies to date show that, among others, access to finance is one of the obstacles to private sector development. challenges faced by small and medium - sized enterprises for access to finance in one hand, and challenges faced by financial institutions during risk assessment of the financing of these enterprises on the other hand, are already known. so, by providing credit guarantees, the fund has assisted in overcoming these challenges by facilitating access to finance for small and medium - sized enterprises. therefore, financial institutions have channelled their liquidity into the type and value of proper funding for the needs of small and medium - sized enterprises. this additional funding mechanism has helped them to develop, create new jobs, and export, thus positioning kosovo at a competitive level in the regional and european markets. an essential prerequisite for the proper functioning of the fund is the interaction with a stable and efficient banking system. the continuous growth of competition in the banking system and the advancement of this sector have led to a decline in cost in bank financing conditions, and improvement thereof. the average effective interest rate on loans in march 2019 was 6. 7 %. this level of interest rates has now approximated the cost of bank financing in kosovo to other countries in the region. also, lending of the banking sector has increased significantly, raising its lending rate to ever eur 2. 8 billion, with an annual growth rate of 11. 4 % in march 2019. considering the high level of banking sector | 0.5 |
most of us who live and work here believe it is higher than justified because external perceptions of bih are still more negative than the reality of bih. we all have to work on changing these perceptions and on improving the reality of bih even further. what can we do : • show more political cohesion and decisiveness. i see many signs that the three governments in bih are working together in bih much more than before. this has to be continued by the bih politicians, encouraged by the international community and explained to the rest of the world by both ; • one of the main reasons we got a formal sovereign credit rating earlier this year was to improve the external perception of bih. the initial rating of b3 with a positive outlook was quite good and has helped improve bih ’ s international image. once the laws on the internal debt issue are passed in both entities, i intend to go back to moodys rating agency and request that they consider an upgrade for bih ; • information : road - shows, article etc. the government, banks and business can all play a role. we all need to be ‘ salesmen ’ for bih. capital markets : bih has a strong central bank and a banking system that is now playing a major economic role. we need to focus now on accelerating the development of the capital markets in bih as they are still extremely small. this will have two major impacts on the cost of capital in bih : • it will provide the banks with instruments in which they can invest their substantial liquid funds and earn a better return than they do at present. banks at present have quite a large proportion of their asset portfolio on which they earn very little : 1 - 2 %. they therefore have to earn more on their loan portfolio in order to improve their overall rate of return on assets ; • it will give enterprises a larger range of sources of capital. this should allow the types of capital available to better meet their needs and could also reduce the cost of capital by increasing competition. what are we doing to develop the capital markets : • stock exchanges : two stock exchanges have been established in bih but both are still very small. but there are two very positive trends already underway : a ) turnover on both exchanges is steadily increasing ; b ) most of the stock exchanges in the region have agreed to develop a common database. they have announced that this is the first step towards common trading. this is very good news for the capital markets in the | peter nicholl : is the capital in bosnia and herzegovina expensive? speech by mr peter nicholl, governor of the central bank of bosnia and herzegovina, at the conference “ is the capital in bosnia and herzegovina expensive? ”, sarajevo, 13 october 2004. * * * is the price of capital in bih high? based on a simple comparison with western europe and a number of the countries in eastern europe that are further down the reform path than bih, the answer is clearly yes. given the risks and uncertainties that still exist in the political, economic and legal systems in bih the answer is no. what we need to focus on today is what are these risks and uncertainties and how can we work together to reduce them. this meeting today is focusing on the banking sector. there are a lot of improvements that still need to be made in the bih banking sector. but we also need to remember that reform in the banking sector has gone further and faster than reform in any other sector of the economy. as a consequence of that, both the availability and the cost of capital has come down substantially in bih over the last few years. the first area to focus on therefore is the reform of the rest of the economy. the banking sector is extremely liquid at present - even though their lending is growing at a rate that worries the imf. they are holding km 790 million more on their reserve deposits at the cbbh than required by our 10 % reserve ratio. they are also holding substantial short - term funds abroad. one of the reasons for this is that there is still a shortage of credit - worthy borrowers. it is easy for a bank to lend money. the challenge for a successful bank is to make sure the borrowers will be able to pay it back. while this simple rule seems blindingly obvious, the bih banking system in the past was burdened by bad debts because this simple banking rule was ignored. what needs to be done to increase the number of credit - worthy borrowers in bih? a ) company registration process ( and the process for closing a company ) : a simplified system is under preparation but i am very surprised by how slow the process has been. the banks and the central bank together reformed the internal payments system in bih over nine months. the issue of simplifying the company registration process has been talked about for about four years. it is time some of these reforms were completed rather than just talked about. b ) | 1 |
implementing policies that will ensure a stable macroeconomic environment and guarantee improved livelihoods for all nigerians. thank you for your attention. 5 / 5 bis - central bankers'speeches | integrated response by irb banks. focusing irb efforts in a compliance unit that seeks to meet the letter but not the spirit of the irb standards will not be welcome. the details of what we will expect are, of course, still being developed. based on our discussions with banks thus far, areas of special attention may include the breadth and depth of internal audit and loan review and the consistency and timeliness of internal ratings. the overall supervisory review process is likely to be familiar : verification of internal processes and procedures, coupled with some degree of transaction testing. the overarching goal will be to assess the effectiveness of a bank ’ s processes and systems in achieving sound risk management and adherence to irb standards rather than to dictate the particular form that internal checks and balances must take. supervisors will also carefully review the manner in which loss characteristics are estimated and the estimates themselves – such as the probabilities of default, the losses given default, and the exposures at default – that are provided by irb banks. this is an area where supervisors have not tread very often and with many open issues. the issues include the suitability of internal and external data sources, the appropriate historical period to use in producing estimates, and the manner in which historical data and loss estimates should be linked to the bank ’ s current exposures. these and other issues will be challenging and will rightly occupy much of our attention over the coming months and years. in this context, the industry and supervisors must work together to develop and use reasonable standards for irb quantification. neither we nor banks can afford a “ race to the bottom ” in this critical area. the expertise of the rma will be particularly sought and appreciated. supervisors obviously have a lot of work to do. we are at the very beginning of efforts to train our staff to understand all of the issues raised by basel ii and to make sound judgments about banks ’ adherence to the standards. i hope you will be patient with our examiners as they come up to speed, just as we intend to be patient with you. and you should not interpret my earlier remarks as a signal that we intend to be very inflexible. we recognize that many systems, methods, and organizational forms can satisfy the spirit of the irb standard, and that what is appropriate for one bank may not be appropriate for another. we expect and welcome variety, in part because that is necessary to support further innovation. and innovation is absolutely necessary. | 0 |
practices and better supervisory oversight, not only for derivatives, but also for bank risk management more generally. together, the industry and agency response helped stave off potentially restrictive legislation. another example of how supervisors are trying to build on bank management practices is their use of internal value - at - risk models in the calculation of capital requirements for market risk. by relying on internal models already used by the institutions for their trading and risk management activities, regulators can reduce burden while vastly improving the accuracy of the capital calculation. in addition, by embracing internal models for regulatory purposes, supervisors are encouraging organizations to incorporate sophisticated risk models more fully and formally into their risk management systems and to continue to upgrade and improve the models. as these two examples illustrate, supervisors recognize that they do not have all the answers and that rigid regulatory solutions may often do more harm than good. a supervisory approach that promotes continued improvements in private sector practices provides the right incentives to industry and, in the case of banking, also reduces risks to the federal safety net. in these ways, supervisors are placing greater reliance on a bank ’ s own risk management system as the first line of defense for ensuring safety and soundness. we also want to rely more on market discipline as another line of defense. this requires increased, improved disclosure of a bank ’ s activities, risk exposures, and philosophy for managing and controlling risk. we have made significant gains for derivatives and market risks. hopefully we will see further gains in other areas in the years ahead. while it is important for supervisors to identify risk at individual banks, as the central bank the federal reserve must also be watchful for conditions and trends external to the banking system that could place the financial system and the economy at risk. this broader perspective has become especially important with the globalization of banking and integration of markets. that is why the federal reserve has worked closely with financial regulators around the world to reduce systemic risk and promote sound banking practices and improved disclosures among both developed and emerging countries. these efforts have led to the advancement by the bis of core principles of bank supervision for authorities world - wide and, significantly, promotion of consolidated supervision of banking organizations by home country authorities. the issue of consolidated supervision is particularly relevant in revisiting the question of the modernization of the banking system. i will come to that in a moment. financial modernization and umbrella supervision first i would like to point out that whether legislative agreement is reached or not, market forces will continue the modernization of the financial services industry and will further | francois villeroy de galhau : present challenges for france ’ s central bank hearing of mr francois villeroy de galhau, governor of the bank of france, by the senate finance committee, paris, 30 march 2016. * * * madam president, general rapporteur, senators, thank you for receiving me this morning, just a few months after your vote of confidence. i attach great importance to these regular exchanges in order to inform you of matters essential to the banque de france. in 2016, the world in general, and europe in particular, are experiencing a period of uncertainty : uncertainties relating to our security, with the threat of terrorist attacks still real ; political uncertainties, with the risk of “ brexit ” and the refugee crisis ; as well as economic uncertainties, with lower economic growth in emerging economies, including china, and excess market volatility in january and february. faced with this turmoil, the eurosystem, of which the banque de france is a member, is acting decisively. its monetary policy is supporting the economy and creating a favourable environment for taking all the other actions necessary to return to strong, sustainable and job - creating growth : france, and europe, must seize this opportunity to regain confidence. 1. monetary policy, first of all, is doing its fair share of the work. the eurosystem is determined to fight the low inflation that we are facing today and thus underpin economic activity. this is our mandate and we are striving vigorously to achieve it. the new comprehensive package of measures that we adopted on 10 march 2016 reflects two main objectives : first, to return to inflation rates below, but close to, 2 % over the medium term. this is not the case at present since inflation stood at – 0. 2 % in the euro area in february, taking account of the sharp decline in oil prices, but it should return to positive territory in the second half of 2016. the other objective is to bolster the financing of the real economy and to protect it from the pressures related to market volatility. the new series of targeted refinancing operations extension of the asset purchase programme, for its part, will be of particular benefit to large french corporations. we are convinced that these additional measures will deliver concrete results, as did the successive measures we have implemented since june 2014. the latter have indeed boosted lending to businesses, while lowering the cost of credit, and made a 0. 3 % contribution | 0 |
negotiated pay increases were very high this year. • in public sector wage settlements, little emphasis appears to have been placed on the assumptions concerning wage growth on which government allocations are based. this has a negative impact on service production in many areas of the public sector. the experience of this year ’ s wage settlement also indicates that profitability in the internationally exposed sector has been given less emphasis in wage negotiations than earlier. a shortage of labour in more sheltered industries may thus have a greater influence than previously on overall wage growth. inflation would then be determined by domestic factors to a greater extent than in the past. the norwegian economic system has undergone substantial changes over the past ten to twenty years. the model based on detailed control of capital, credit and interest rates and centralised coordination has been abandoned. less emphasis is placed on having discretionary scope for manoeuvre and on using surprise decisions to influence economic developments. it is recognised that the structure of the labour market and of wage formation has a decisive impact on developments in employment. monetary policy is delegated in norway and in comparable countries. the monetary policy guidelines provide a foundation for building credibility and creating confidence in economic policy, thereby making it more effective. | . inflation has declined and contributed to a fall in nominal interest rates. a more stable inflation environment also results in lower real interest rates when investors become more certain about returns. furthermore, it would appear that high saving in some parts of the world is pushing down long - term interest rates. saving is high both in oil - producing countries, china and other asian countries. long - term interest rates in norway largely shadow external interest rates because like other countries norway is keeping inflation in check. norwegian households primarily finance house purchases by means of floating - rate loans. long - term interest rates are still of considerable importance because they provide information about the future path of short - term interest rates that borrowers can expect over time. unusually low short - term interest rates have probably also boosted the rate of increase in house prices in recent years, but this effect will be reversed when the interest rate is raised to a more normal level. short - term interest rates have influenced the path for house prices over the past 15 years, but periods of low interest rates are followed by periods of higher interest rates. norges bank ’ s key policy rate is therefore of limited importance for house price inflation over a period of 15 to 20 years. the housing stock in norway, which numbers a good 2. 2 million dwellings, shows little change from one year to the next. as a result, higher demand for housing will primarily translate into higher prices in the short term. in the 1990s, housing starts in norway were fairly low in relation to growth in the number of households. moreover, population growth has been higher in recent years, largely reflecting a high level of immigration. in 2006, the population increased by more than 40 000 and the number of households by roughly 30 000. furthermore, migration patterns in norway follow the business cycle. migration to densely populated areas is now rising. demands for high standards and new building regulations have also pushed up housing construction costs and thereby house prices. the main determinants of house price inflation have long been income, unemployment, interest rates and residential construction. over the past few years, inward migration and domestic migration patterns may also have contributed. in the past year, however, house price inflation has been higher than implied by these factors. a large share of the increase in 2006 cannot be explained by previous patterns. developments since the beginning of the 1990s may have engendered expectations that house prices will only continue to rise. this may have increased house purchases for pure investment purposes and induced younger buyers to enter the housing | 0.5 |
joachim wuermeling : brexit means brexit - but what does it mean for europe as a financial centre? speech by prof joachim wuermeling, member of the executive board of the deutsche bundesbank, at the annual reception of the association of foreign banks in germany, frankfurt am main, 20 june 2018. * * * 1 introduction ladies and gentlemen it gives me great pleasure to be able to speak to you today about the future of europe as a financial centre after brexit. there are three aspects which i would particularly like to address. the first of these is that banks looking to relocate their business to the eu or expand their presence here after brexit will be asked to satisfy the same minimum prudential standards that foreign banks already operating within the union and domestic institutions are expected to comply with. at the same time, we will need to find solutions that prevent any unnecessary additional expense. my second point is that in future, institutions that conduct cross - border business will be heavily dependent on how the respective supervisors oversee third - country institutions – as they will then be – and how the authorities involved will cooperate internationally. and third, when considering brexit, we tend to dwell on the negative side of things and think about how best to cushion the impact. as important and justified as these considerations are, we nonetheless need to continue to press ahead with our vision of a harmonised financial market in the eu – a digital financial centre of europe which offers as yet untapped potential. 2 leaving the single market means separate supervisory regimes two years on from the brexit vote, we can only assume that cross - border economic relationships look set to face noticeable headwinds going forward. for the financial markets, this means one thing : the financial services passport is dead. this immediately raises the question : could it be feasible to have something like a diet version of the financial services passport, or to perhaps create a range of exceptions? the clear answer to this is that there cannot be, nor will there be, any permanent exceptions. institutions that relocate operations to the eu or expand their presence here following brexit will have to comply with the same high supervisory standards that apply to the institutions that already operate here. this answer is underpinned by the fundamental belief that supervisors must be capable of intervening in the business activities of institutions operating within their own jurisdiction at all times. this is a sine qua non, and it should not be up for grabs. | ’ s why i would strongly urge all institutions to make the necessary preparations to keep their business operations running even if there is a hard brexit on 29 march 2019. institutions that submit an application after the end of the current quarter will find that the likelihood of their licensing procedure being concluded in time will diminish considerably. we also expect these applications to satisfy our supervisory policy stances. let us take a brief look at the key aspects. first, there are the principles for authorisation and for governance, risk management and outsourcing. in essence, the several hundred pages of requirements boil down to this : “ empty shells ” will not be permitted. banks in the euro area must be able to manage all their material risks independently and locally. to achieve this, they need to have control over their books and all their positions, and have locally independent governance and control functions that report to the local board of management – particularly in the areas of risk management, compliance and internal audit. that brings us to the question of booking models. will back - to - back hedging still be accepted? here, the ssm expects banks in the euro area to have sufficient local capacity to manage at least an evident portion of their euro - denominated business themselves and not to fully outsource it to other entities within the group. the local entities have to be established in the local market, to ensure that, in the event that other group entities fail, they can participate in the market autonomously. however, we at the bundesbank naturally see the economic advantages of back - to - back hedging. to some extent, transactions such as these serve as a pipeline to international capital resources at other locations. some parties are hoping for an overarching supervisory or legal solution to the issue of the continuity of financial contracts. in response, i warn against relying on us for this, as it is not so much a supervisory issue as a civil law problem. one very important issue – and not just for foreign banks – is the supervision of future thirdcountry ccps from the uk. in the bundesbank ’ s view, there have to be clear rules and 2 / 5 bis central bankers'speeches safeguards here ensuring that continental european authorities have both sufficient rights to obtain information and robust powers of intervention in respect of uk ccps – otherwise, it seems a relocation to the eu would be all but unavoidable. the more we look at the whole issue, the | 1 |
operating process, as well as in governance, finance and accounting practices. the financial industry should also address any negative perceptions by having an effective communication strategy and ensuring swift response time to sme customers, as these are vital in maintaining the integrity and public image of financial institutions. moving forward, it is imperative and almost inevitable for financial industry to undertake measures to advance financial literacy and capabilities of sme customers. the commitment to better serve the sme segment would reinforce the critical role of the financial industry in supporting the government ’ s development agenda in a well - functioning financial system. cgc has demonstrated that efforts to assist underserved smes can be achieved in a financially sustainable manner through its suite of innovative financial products and services. financial institutions should also explore strategic partnerships with adjacent industries such as telcos and fintechs to reduce market gaps and reliance on government subsidies for the smes. importantly, the financing ecosystem needs to be complemented with a comprehensive sme development ecosystem to nurture and elevate our smes towards greater size and competition. i hope today ’ s recognition and appreciation of fis and cgc customers would spur both parties to become more innovative, resilient and progressive. my heartfelt congratulations to all the winners and may you continue to inspire and set benchmarks on sme financing landscape. 3 / 3 bis central bankers'speeches | outstripping financing growth to households and large corporates. the approval rate for financing applications by smes of 75 %, has also been consistently higher than that for all customers. the share of sme financing over total business financing has steadily trended upwards to more than 50 % from 38 % in 2010. this reflects an increased focus on smes as a strategic growth driver for financial institutions. according to the latest bi - annual survey by sme corporation malaysia ( sme corp ), 97 % of smes which applied for financing from fis affirmed that they were able to obtain financing. of this, 27 % were first time borrowers and 23 % were without collateral and credit guarantee. nevertheless, our work is far from done. there are pockets of smes, particularly the start - ups and those operating in new and high risk segments that continue to face challenges in obtaining financing. when businesses have insufficient access to financial products and services, they may be deprived of a chance to pursue new business opportunities, and as a nation, we are deprived of the benefits of their potential contributions to the economy. 1 / 3 bis central bankers'speeches over the past 45 years, cgc has played a crucial role in bridging the gap between financial institutions and underserved smes via its innovative products and services. i commend cgc ’ s efforts for its latest venture in developing a dedicated online referral platform that connects the banks and the smes, known as imsme. the imsme has the potential to transform the sme financing landscape in the country, by matching smes ’ financing needs with suitable products, thus reducing search costs and improving financing prospects for smes. the implementation of imsme exemplifies the importance of technology in increasing smes ’ financing access. smes are now able to submit financing applications 24 hours a day, without the need to visit individual financial institutions to search for suitable product offerings. the platform also facilitates the partnership between key collaborators to deliver end - to - end solution for smes that face higher hurdles to obtain financing. with the financial advisory team in imsme, unmatched or unsuccessful applicants will be further motivated to enhance their capacity and capability with relevant trainings aimed at improving their chances to secure financings or loans in the future. the imsme complements existing initiatives in the sme financing ecosystem, such as bnm ’ s fund for smes, alternative financing channels such as equity crowdfunding and | 1 |
##son, mar ( 2007 ). “ financial globalisation and challenges for prudential policies and macroeconomic management. ” speech by deputy head of the monetary and economic department of the bis, at a meeting of the institut international d ’ etudes bancaires, reykjavik, iceland, 18 may 2007 ( http : / / www. bis. org / speeches / sp070525. htm ). a report written by william buiter and anne siebert in the spring of 2008 for one of the banks that failed later in the year gives sound analysis of the problems facing the icelandic banking system at the time. see buiter, william h., and anne sibert, ( 2008 ). “ the icelandic banking crisis and what to do about it : the lender of last resort theory of optimal currency areas ”, cepr policy insight, no. 26, october 2008. ( http : / / www. cepr. org / pubs / policyinsights / policyinsight26. pdf ). the build - up so how were these mammoths created? following a process of consolidation and privatisation, which was largely completed in 2003, the icelandic banks grew very rapidly. with headquarters in reykjavik, they expanded their activities abroad, for the most part by acquiring financial institutions in other countries, opening up bank branches, and stepping up their foreign operations. this phenomenal growth was made easier by iceland ’ s membership in the european economic area ( eea ). the eea agreement provided a legal and regulatory framework based on eu directives. this meant that the operating licences held by icelandic financial institutions were not limited to iceland but included all the countries in the eea. the european “ passport ” gave the banks the scope to operate throughout the eea, including permission to operate branches in other eea countries. statistics give a picture of rapid - fire growth over a very short period ( see graph ). from 2003 to 2007, the banks ’ total assets grew from less than two times iceland ’ s gdp to almost nine times. right before their collapse, total assets amounted to eleven times gdp. over 40 % of total assets were in foreign subsidiaries, 60 % of total lending was to non - residents, and 60 % of income was from foreign sources. over two - thirds of lending and over three - quarters of deposits were denominated in foreign currency, notably in pounds sterling. around 85 % of the banks ’ foreign lending was in europe, with | throughout the world responded to the twin threats of a failing banking system and falling confidence. at home, the monetary policy committee cut interest rates from 5 % to 0. 5 % in just six months. and with interest rates close to their lower bound, the committee in march of this year voted to start a programme of asset purchases financed by the issuance of central bank reserves, otherwise known as “ quantitative easing ”. these extraordinary actions were intended to reduce the risk of inflation falling below the 2 % inflation target that the bank of england is mandated to meet. they do so in a number of ways. the reduction in bank rate by lowering interest payments on loans has improved many companies ’ cash flows at a time when turnover is weak and working capital is scarce. a similar effect has operated for households : borrowers with floating rate mortgages in particular have seen their monthly repayments fall sharply. more generally, by reducing the returns on saving, the fall in interest rates has encouraged households and businesses to spend. the mpc ’ s programme of asset purchases has further stimulated demand by injecting additional money directly into the economy. the bank ’ s purchases of government bonds encourage investors to diversify into alternative assets, such as corporate bonds and equities. the bank is also operating directly in commercial paper and corporate bond markets to improve the functioning of those markets. both actions have helped to boost the prices of corporate assets, reducing yields and lowering the cost to companies of raising funds in capital markets. this in turn should help to stimulate increased spending. the dramatic easing in monetary policy occurred alongside a range of government policies. most importantly, the government ’ s actions to provide both capital and liquidity were see eichengreen and o ’ rourke ( 2009 ). romer ( 2009 ) makes a similar point. instrumental in stabilising the banking system. the temporary reduction in vat and the car scrappage scheme have boosted household spending and provided short - term support to retailers and the car industry. and the government ’ s business payment support service has reportedly enabled almost a quarter of a million small and medium - sized firms to delay tax payments. there are encouraging signs that these policy actions have been successful and the risk of a severe adverse feedback loop – as households, companies and banks simultaneously try to retrench – has been avoided. the banking system has stabilised. measures of business and household confidence have recovered significantly. and the most recent ons estimates for the third quarter suggest that the contraction in consumer | 0 |
since the bank introduced the quantitative easing framework, in which current account balances are used as the main operating target. the bank has made a commitment, unprecedented in the history of central banks, to continue with the quantitative easing policy until the year - on - year rate of change in the cpi ( excluding fresh food, on a nationwide basis ) registers zero percent or higher on a sustainable basis. with this commitment, the bank has continued to provide ample liquidity. in the current situation where consumer prices have been less responsive to the economic recovery, the commitment has contributed to stabilizing expectations about future interest rates and thereby market interest rates, and this situation has allowed firms to continue to enjoy low funding costs. furthermore, as returns on investment increase with the recovery, returns net of funding costs are expected to rise gradually. thus, the positive effect of the commitment on the economy, acting via interest rates, will strengthen as corporate profits increase along with the economic recovery. with the upsurge of business initiatives in the private sector and the recovery on a more solid track, the economy will eventually achieve sustainable growth and overcome deflation. in the outlook report published in october, the median forecast of policy board members is for consumer prices to post a small year - on - year rise in fiscal 2005. however, the economy could deviate from the scenario set out in the outlook, either above it or below it, and future developments in prices may be influenced by movements in various factors, including crude oil prices, productivity, and labor costs. as things stand, it is uncertain whether or not an occasion will arise during fiscal 2005 requiring the present monetary policy framework to be changed. the conduct of monetary policy, more specifically the timing of the termination of the current monetary policy framework and the pace at which the bank will raise short - term interest rates to keep them consistent with actual economic conditions, depends on future developments in economic activity and prices. if higher productivity and other factors continue to a large extent to contain upward pressure on prices as the economy moves to a sustainable and balanced growth path, this will likely give the bank more latitude in conducting monetary policy. central banks should respond appropriately and flexibly to changes in economic and financial developments. as the effects of monetary policy are transmitted first of all via the financial markets, it is extremely important that the appropriate monetary policy be communicated to market participants in a lucid manner. on occasion, speculation of various kinds arises about the future conduct of monetary policy in financial markets. market expectations | on lending minus the interest rate on deposits ), which is one component of interest income, for the past 20 years, the margin has been five to six percent on average for u. s. banks, while it has remained at slightly below two percent for japanese financial institutions. the main reason behind such low interest rate margins of japanese financial institutions is attributable to the fact that many financial institutions have basically been consistently in the interest rate competition as they compete with each other in the relatively homogenous commercial banking business with an aim to obtain a long - term stable transaction relationship. in short, the difference in business model by financial institutions is hardly observed. according to the analysis of the lending market in japan, many financial institutions tend to enter the regions that have a large lending market, thereby intensifying competition. by contrast, in the u. s. market, there is no significant correlation between market size and market concentration, which suggests that certain segregation among financial institutions might be in place. while it is not clear why such a segregation was possible, it is clear that the segregation enabled financial institutions to avoid the needless interest rate competition. of course it is not the case that japanese financial institutions themselves have not been doing anything to cope with such low profitability. signs of expansion in the investment banking business, including m & a business, have also been continuing in japan. small business loans were once actively promoted. however, since credit costs increased significantly, many banks have recently been forced to downsize or withdraw from the small business loan operations. as for household asset management, the expansion of over - thecounter sales of mutual funds and insurance has been pursued. moreover, at the major banks, the efforts to bring consumer credit companies, credit card companies, and consumer finance companies under the banks ’ umbrella were temporarily intensified. however, the profits from those affiliated companies have been sluggish, partly due to the changes in the environment they are in. after all, the fruits of pursuing new businesses have not been sufficient so far, and, at present, the new businesses have not contributed in a significant way to improving the profitability of financial institutions. second, japanese financial institutions ’ profits are subject to the fluctuations in credit costs and stock prices. in particular, as operating profits from the core business have been remaining low, a significant increase in credit costs and losses on stocks might immediately bring periodical income into the red. in fact, eight times in the past 20 years, the sum | 0.5 |
taxes and expenditure cuts to confront the unsustainable path of projected public debt, and the implementation of new regulations to prevent financial crises. to some extent, this environment of uncertainty may have partly induced the recent reduction of producer and consumer confidence. additionally, the european monetary union ( emu ) is severely affected by the fiscal fragility of some of its member countries, which since the financial crisis have exhibited sharp rises in their public debt - to - gdp ratios, with projected paths that are judged to be unsustainable. some states have already received substantial financial support from the european community and the international monetary fund, and are implementing strict fiscal and structural adjustment programs. however, the perception of credit risk of the corresponding governments, as summarized in the spreads paid for credit default swaps, has continued to portray the deteriorating trend observed since 2010 and has reached worrisome levels. several concerns apparently lie behind market skepticism surrounding remedial actions in the emu. one is the difficulty of resolving the troubled governments ’ debt burden through austerity programs and ever - increasing support funds. another factor is the negative impact that the worsened public finances of any country can have on others within the union, given the fact that their financial systems are interlinked and their institutions, notably banks, are significant holders of government bonds. contagion fears have spread to other regions outside the emu, where financial intermediaries may also have substantial exposures to european sovereign bonds, either directly or indirectly. in the past weeks the urgency of finding a solution to these problems has become even clearer. uncertainty on future developments in the monetary union hinders growth prospects in this area and fuels sharp volatility and an investor rush to safety, factors that have recently deepened in international financial markets. policy challenges the existence of fundamental factors that, to a large extent, explain the meager growth of the world economy poses important challenges to policy makers. first, short - term economic policies are facing significant limits in advanced countries. the high and rising public - debt ratios in many economies call for substantial fiscal consolidation efforts in order to make public finances sustainable and, hence, supportive of financial stability and long - term growth. monetary policy is already extraordinarily accommodative, and authorities will need to continue monitor the anchoring of low inflation while at the same time remain ready to function as lenders of last resort to guarantee the integrity of their payment systems. as noted earlier, slow growth after the crisis seems | manuel sanchez : policy challenges in a decelerating world economy remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the eighth china international finance forum, pudong, shanghai, 25 september 2011. * * * it is a privilege to be back in this beautiful country to participate in the eighth china international finance forum, put together this year with the suggestive theme of green finance development. i would like to thank the organizers of this conference for their invitation to share the podium with distinguished speakers who will address important issues related to the financial opportunities that will continue to support china ’ s outstanding economic development. on this occasion, i would like to discuss some of the policy challenges posed by the global economic situation and outlook. in particular, i am interested in assessing the recent poor performance of the world economy in order to identify possible underlying problems, which may help to design appropriate economic policy measures. i would also like to examine the implications of the weak world economic evolution for developing countries. obviously, my comments are entirely my own responsibility and do not necessarily reflect the views of the bank of mexico. the unusual recovery as you know, since the middle of 2009 the global economy has been in a process of recovery from the deep contraction stemming from the great financial crisis. the improvement has been different from other modern business cycles, because among other factors, this time it has been notably slow and has not followed the typical “ v ” shape that tends to be sharper the deeper output falls. the relatively weak world economic recovery has reflected an anemic turnaround of the advanced economies that were most affected by the financial debacle. specifically, in the united states, the epicenter of the turbulence in 2007 and 2008, real gdp barely attained its pre - crisis level by the second quarter of 2011. moreover, this indicator has remained well below the real value that would have prevailed if growth had kept up consistently with its secular trend of approximately three percent per year. 1 the unsatisfactory behavior of industrialized economies was accentuated during 2011. gdp growth showed a declining path in the first half and several activity indicators suggest that this trend has worsened in the third quarter. furthermore, consensus gdp forecasts for this and the following year have been successively revised downward, at least since last march. although the world economy is still predicted to continue expanding, this is basically due to the higher expected growth momentum in emerging markets. in particular, the united states and most advanced countries are expected to grow only modestly | 1 |
timothy lane : curbing contagion – options and challenges for building more robust financial market infrastructure remarks by mr timothy lane, deputy governor of the bank of canada, to the society for worldwide interbank financial telecommunication annual sibos conference, toronto, ontario, 19 september 2011. * * * introduction good afternoon and, to our guests from abroad, welcome to canada. this conference is taking place at a troubled time. concerns over sovereign debt have intensified, particularly in europe ’ s periphery. economic growth in the united states and other advanced economies now appears to be significantly weaker than expected. in the face of these developments, there has been mounting skepticism in a number of countries over whether policy - makers will be able to do what it takes to address these problems. the current bout of turbulence, like the financial crisis of three years ago, serves as a reminder of why it is fundamentally important to have a resilient financial system. periods of market turbulence are a fact of life. in a resilient system, financial shocks are absorbed, creating losses for individual investors, but leaving the system intact. if the system is not sufficiently resilient, however, shocks can be amplified. we saw this in 2008, when losses in a relatively small segment of the u. s. housing market cascaded into a near - meltdown of the global financial system. that process reflected a mixture of frailties – excessive leverage, reliance on forms of liquidity that proved illusory in stressful times, the use of securitized products with risks that were not fully understood, the complex web of counterparty relationships that spread risk and bred fear in core funding markets, and the absence of resolution mechanisms to deal with insolvency in systemically important institutions without endangering the entire system. in the wake of that crisis, leaders of the g - 20 countries launched a broad agenda of reforms. these reforms aim to ensure that financial institutions have adequate levels of lossabsorbing capital and liquidity to cope with periods of market stress ; to establish robust financial market infrastructure ; and to develop stronger resolution mechanisms for financial institutions, particularly across borders. when implemented, the g - 20 reforms will create a more resilient global financial system. canada will benefit significantly from these reforms. even though our financial system performed much better through the crisis than those of many other advanced countries, we are certainly not immune to events beyond our borders. in my talk this afternoon i want to focus on one element of the g | for commodities. the latter shift has also been encouraged by regulation : many european countries allow such insurance to count as regulatory capital under the basel iii rules. bis central bankers ’ speeches implications so far, i have given you a thumbnail sketch of the changing trends in the financing of commodities markets. but why do these developments matter for the world economy, and particularly for canada? here, i would like briefly to highlight three sets of issues. first, there may be implications for the pricing of commodities. as i have stressed, the broad trends in commodity prices is determined by the fundamentals of supply and demand – notably the long - term growth in demand from asian emerging - market economies. but the functioning of the markets in which commodities are traded has the potential to influence pricing in several ways. the flows of financing for commodity trading activities can affect the liquidity and efficiency of these markets and thus the extent to which prices reflect those fundamentals. as well, the financialization of commodities has the potential to affect the degree of short - term volatility of the markets. although it is too early to assess the implications of the recent changes in financing patterns i have been describing, these developments bear watching. a second set of issues pertains to systemic risk. in particular, the large trading houses, together with the physical trading operations of some large investment banks, are playing an increasingly prominent role in a number of commodity markets. this raises the possibility that some of these institutions are becoming systemically important. just as the 2008 financial crisis revealed the need to assess the systemic importance of institutions that play a central role in particular financial markets, we should be asking the same questions about institutions that are interconnected with various commodity markets. here, i have two general questions in mind : could the failure of one of the large trading houses cause serious disruption in the commodities markets in which it played a market - making role? and, could the losses that a trading house incurs through the positions it has taken in commodities have significant knock - on effects on the financial system? we are far from having answers to those questions, but they need to be addressed. third, commodities trading can potentially be an important link between the financial system and the real economy. with the financialization of commodities, financial system stress has the potential to affect commodities markets. commodities markets, in turn, have an important influence on the economic outlook of a commodity - rich country such as canada. moreover, movements in commodity prices may pose risks to the financial | 0.5 |
to turn to the board ’ s monetary policy decisions over recent months. the board is committed to doing what is necessary to ensure that inflation returns to target over time. high inflation is a scourge. it damages our standard of living, creates additional uncertainty for households and businesses, erodes the value of people ’ s savings and adds to inequality. and without price stability, it is not possible to achieve a sustained period of low unemployment. it is important, therefore, that this current surge in inflation is only temporary and that we once again return to the 2 to 3 per cent range. the board is committed to the return of inflation to target. it is seeking to do this in a way that keeps the economy on an even keel ; it is possible to achieve this, but the path here is a narrow one and it is clouded in uncertainty. i would like to highlight three sources of this uncertainty. the first is the global economic environment. in the united states, the federal reserve has indicated that a period of tight monetary policy and below - trend growth will be required to get inflation under control. in europe, real incomes are suffering very big declines because of sharply higher energy costs, and this will weigh on spending and growth. and in china, the economy is being affected by the authorities ’ approach to covid, major stresses in its property industry and drought in parts of the country. some slowing in the global economy will help bring inflation down, but a sharp slowing would make the job of delivering a soft landing here in australia much harder. the second source of uncertainty is domestic in nature – and that is how inflation expectations and the inflation psychology in australia adjust to the period of high inflation. if workers and businesses come to expect higher inflation, and wages growth and price - setting behaviour adjusts accordingly, the task of navigating that narrow path will be very difficult, if not impossible. a shift higher in inflation expectations will require higher interest rates. in time that would mean a sharper slowing of the economy. it is in our national interest that we avoid this. the third source of uncertainty is how households respond to higher interest rates. interest rates are increasing for the first time in 12 years and they are rising quickly. the full effects of this are still to be felt. household budgets are also under pressure from higher inflation, and housing prices are declining after large gains r e s e r v e b a n k o f au s t r a l i a ( graph 8 ) | - 20 - 20 - 40 - 40 sources : abs ; rba while this lift in energy prices explains some of the surge in inflation, it is by no means the full story. we can make some further progress in understanding this surge by using the standard workhorse models of inflation, which explain inflation by inflation expectations and the aggregate output gap. strong demand at a time of impaired supply – and thus a closure of the output gap – certainly helps explain part of the recent higher inflation. but these models fall well short of explaining the magnitude of the lift in inflation and, in my view, face some real challenges. one of these challenges is that the focus on the aggregate output gap is insufficient in a world in which shocks are highly uneven across sectors. we need to pay more attention to developments in individual sectors. one of the distinguishing features of the past two years is that the shocks have been highly asymmetrical. in 2020 and 2021 there was a huge increase in demand for goods and a decline in demand for services. this was particularly evident in the united states, where the demand for goods surged by close to 20 per cent in less than a year and the demand for many services was weak ( graph 5 ). a similar, although less pronounced, pattern was evident in australia. r e s e r v e b a n k o f au s t r a l i a graph 5 consumption december 2019 = 100 index united states index australia goods services sources : abs ; rba ; refinitiv this surge in demand for goods occurred at the same time as the supply side was constrained. this was partly because covid interrupted production. but it goes beyond this. even in good times, the supply side would have had trouble coping with a 20 per cent surge in demand in a short period of time. just - in - time inventory management and long supply chains had made the system less resilient and less able to respond to rapid and unexpected shifts in demand. the result was that many industries quickly found themselves on the sharply upward sloping part of the supply curve, and prices increased. and there was no offsetting deflation in those parts of the economy where demand was weak. one lesson here is that what is happening at the sectoral level is important in influencing the overall inflation dynamics in our economy – it ’ s not just the aggregates that matter. [ 3 ] resources don ’ t move freely between sectors, which means that the composition of demand and supply is important, not just | 1 |
10, 2020. return to text 4 / 4 bis central bankers'speeches | the physical limitation on visiting a bank branch or atm are learning to bank using online banking or through an app on their smartphone may not be as willing to stand in line or wait for in - person service at their bank branch in the future. recent surveys show that consumers with access to digital and mobile banking are more likely to continue using those convenience products and services in a post - pandemic world. 3 the adoption of digital banking services can also be essential for historically underserved and disadvantaged communities, assuming they have bank accounts and access to internet - based tools like smartphones. in some cases, fintech can lower costs and improve services, particularly for small businesses or lower - income consumers who are less likely to have access to credit. while electronic banking certainly didn ’ t start with the pandemic, acceleration of its adoption has undoubtedly led banks of all sizes to rethink how they will meet their customers ’ needs in the long term. i have noted on many occasions how vital community banks are to those they serve and to a strong and stable financial system. successful innovation is not just about adopting the latest 1 / 4 bis central bankers'speeches technologies. it involves aligning a bank ’ s strategy with its innovation plans to clearly map a purpose and desired outcome for the adoption of new technology. the continued success of many community banks depends on their willingness to engage in strategy - based innovation - led growth. we have seen and are encouraged by many examples of entrepreneurial community banks embracing technological innovation. developments such as digital deposit and lending products, regulatory technology solutions, and application program interfaces ( apis ) have increasingly become more popular in the banking industry. when implemented effectively, they can result in greater efficiencies and effectiveness. a number of community banks have already taken advantage of these opportunities. still, perspectives on the need for change vary across the industry. i recognize that while it seems clear that the industry is changing, there remains a wide distance between fintech ’ s promise of a future driven by technology and what many community bankers experience today. from my perspective, it is unlikely that fintech will ever completely eliminate what is the hallmark of community banking — personal interaction and building relationships with customers and communities. one trend is clear, however : more and more community banks are expressing interest in fintech partners to help them open new lines of business, help with customer acquisition, enhance customer service, and improve operational functions. through the fed ’ s engagement with fintech companies and small banks during | 1 |
vicky saporta. our two organizations have worked together closely on addressing systemic risk related to insurance. in particular, i appreciate the work of the iais to develop a holistic framework for the assessment and mitigation of systemic risk in the insurance sector. as i indicated a moment ago, i know that the iais is celebrating its twenty - fifth anniversary. as we think back to 1994, and the step forward the iais represented for cooperation and coordination on insurance oversight, i think we can all marvel at how modest, relative to today, were the demands and the aspirations at that time for international standard - setting. on the one hand, insurance had been a global business for well over a century. on the other, the idea that an insurance company could be at the center of a global financial meltdown would have seem farfetched. likewise, even after the financial crises in developing countries in the late 1990s, few people believed that the world ’ s largest and wealthiest economies could all be threatened with ruin by a truly global crisis. it is for this reason that we are not this year also celebrating the twentieth anniversary of the financial stability forum, which was created in that more innocent era. it was replaced by the fsb a decade ago because of the urgent need for a larger and more ambitious organization to deal with the global crisis that few had seen coming. 1 that global financial crisis demanded a global response and the group of 20 ( g20 ) leaders called 1 / 2 bis central bankers'speeches on national authorities to cast a wider net for membership than the financial stability forum could offer. the first ten years of the fsb have seen important achievements in promoting global financial standards that have addressed weaknesses revealed by the financial crisis. today, banks are more resilient due to higher capital and liquidity standards. we are addressing the “ too - big - to - fail ” problem, including through new statutory resolution frameworks and resolution planning. over - the - counter derivatives markets are simpler and more transparent. and the risks emanating from non - bank financial intermediation that contributed to the crisis have diminished significantly. but the fsb ’ s policy work needs to advance in a few important areas. while resolution plans are in place for the global, systemically important banks, more work is needed to build effective resolution regimes for insurers. we have to keep up the momentum to ensure that markets have confidence that bailouts using taxpayer funds are a thing of the past. the future | randal k quarles : brief remarks - 26th annual conference of the international association of insurance supervisors brief remarks ( via pre - recorded video ) by mr randal k quarles, vice chair for supervision of the board of governors of the federal reserve system, at " supervision in a digital era ", the 26th annual conference of the international association of insurance supervisors, abu dhabi, 14 november 2019. * * * i greatly regret i couldn ’ t be with you today in abu dhabi. you are in a region of the world that ’ s a fitting place to discuss the future of insurance supervision because of its ties to the very origins of insurance. the first written system of laws, the hammurabic code, in fact, included the first rules on loss liability. the ancient arab tribal practice of takaful, a system of guarantees, gave rise to one of the earliest forms of mutual insurance, which was used to protect ship owners and cargo. the middle east is the cradle of civilization, and civilization itself has always depended on the rules and guarantees that are the basis of insurance. and while i couldn ’ t be part of the your discussions, i am grateful for this opportunity to reach you with a message about how the international association of insurance supervisors ( iais ) is supporting the financial stability board ’ s ( fsb ) goal of promoting a strong and stable global financial system. the fsb was created to gather national and regional authorities together in a forum that considers and addresses financial stability risks. the iais ’ s mission, to promote effective supervision of the insurance industry, is in full alignment with the goals of the fsb. the new global financial architecture built in the aftermath of the crisis requires continued cooperation among authorities, standard - setting bodies, and all stakeholders. such cooperation is the basis of the fsb, and the basis for what the iais has achieved in the past quarter century, and what you are striving to achieve in the future. since becoming chair of the fsb last december, i have had some time to observe the important work of the iais as one of the standard - setting bodies that are essential to the fsb. the iais has been an active contributor to the fsb ’ s work through the plenary and steering committees. it ’ s also a valuable part of the work of the fsb standing committees on supervision and regulatory cooperation and standards implementation. fsb members tell me they appreciate the regular updates by iais executive committee chair | 1 |
loi m bakani : corporate governance speech by mr loi m bakani, governor of the bank of papua new guinea, at the png institute of directors workshop, port moresby, 16 – 17 july 2012. * * * introduction welcoming remarks • directors and official of png institute of directors ( pngid ), • facilitator of the workshop, mendhurst associates, mr. john mendzela • participants of licenced financial institutions • ladies and gentlemen before i begin, i would like to thank png institute of directors ( pngid ) for hosting this workshop and for the opportunity to address the participants on a common interest which is to enhance corporate governance in our institutions. corporate governance i know you all have now appreciated that good governance is important in every organizations and that the lack of it results in poor management and performance of institutions. we all should know ( because its public information ) the bad experiences in the recent past as a result of bad governance. for example, the demise of our former government bank, png banking corporation ( pngbc ) and three of our superannuation funds namely, defence force retirement benefit fund and former public officers superannuation fund ( posf ) and national provident fund ( npf ) were involved in bad management or questionable investments that resulted in three separate commission of inquiries. the financial sector reforms that took place in 2000 resulted in amendments to the central banking act and the bank and financial institutions act. this was followed by the enactment of the superannuation and life insurance act. these reforms established the independence of the central bank and enabled effective and stringent regulations. with greater independence comes greater accountability and transparency on the part of the central bank and the governor. in addition to the monetary policy responsibilities, regulatory and supervisory powers of the bank were also enhanced. the central bank now has powers to issue rules, regulations, directives and prudential standards and to take timely interventions to ensure that bad governance and unacceptable management practices are deterred. the new standard on corporate governance was drafted as a result of various onsite prudential reviews conducted by the bank since the financial sector reform in 2000. in all its findings, the lack of good corporate governance was the key central theme. the bank emphasizes that the board is ultimately responsible for governance of financial institutions, for employing the right persons in management positions and ensuring that the business functions and their risks are managed in line with board expectations and in such a | way that also serves the interests of the stakeholders. the board and senior management of the supervised institutions are expected to promote and demonstrate an organizational culture that expects integrity from its employees in conducting the institution ’ s business and for ensuring a sound and prudent approach to risk identification and management. the bank also emphasizes that the responsibility of an bis central bankers ’ speeches institution ’ s board and management is to ensure that the institution meets prudential and statutory requirements and has management practices to limit risks to prudent levels. key statistics since the reform, there have been positive results over the last few years compared to the bad experiences some 13 years ago where contributors lost a lot of their savings. prudent and good management and good corporate governance framework are enabling factors to the positive results that we see today. the way ahead in anticipation of lifting the performance of the financial system as a whole, there are several challenges we face at the central bank. these are : • constantly enhancing our supervisory responsibilities as a result of global financial developments including the recent global financial crisis and other external factors. this includes allocating adequate resources to undertake prudential reviews, provision of technical training and other manpower developments ; • introduction of new prudential standards covering best practices on good governance ; • revision of existing prudential standards to align with best practices but in a png context ; • financial crime – improving ways of dealing with perpetrators of money schemes, financial fraud and theft, proceeds of crime ; • financial inclusion – how to get the un - banked portion of our population into the formal financial system ; • financial awareness and literacy – to educate the populace on financial matters and awareness against fast money scams ; • payment system – improvements to instruments and settlements to ensure a safe, cost - effective and efficient payments system. the bank is prepared to deal with these challenges to ensure that our supervision results in a sound and prudently managed financial system in png as experienced to date. with these remarks, i would like to again say thank you to pngid for hosting the workshop and for mr. john mendzela in conducting this workshop and for all of you who attended today to take a day of from your busy schedule not only to refresh your mind, but to learn about the best practises in implementing good corporate governance. i hope that what you all have learnt during this workshop has been valuable and you would take some important lessons from the workshop to be utilised in your respective institutions. thank | 1 |
– with potential that other markets can only dream of. after contracting sharply during the financial crisis, it has expanded rapidly in recent years, not least driven by a search for yield against the backdrop of a prolonged period of very low interest rates. according to a study by credit suisse, the global market for leveraged finance grew by almost 42 % between 2011 and 2014. banks in the euro area followed that trend – between 2012 and 2014, they increased their exposures to leveraged loans by 16 %. do i worry about leveraged finance in the euro area? by comparison, the share of euro area banks in the global market for leveraged finance remains limited. in 2014, banks in the euro area accounted for no more than about 15 % of all leveraged loans that were arranged at the global level. at the same time, leveraged finance accounts for just 1 % of their assets. nevertheless, akin to efforts in the united states, european banking supervision decided to look closely at these exposures – taking a forward - looking and pre - emptive approach. the growth of the market indeed seems to be driven by a search for yield. and on the face of it, leveraged finance does provide comparatively high yields. in 2014, leveraged - finance products generated more than €5 billion of net revenues for european banks. in particular, leveraged finance offers an opportunity to increase fee incomes. accordingly, the volume of underwritten transactions has increased by 35 % since 2012, whereas the volume of deals that banks hold in their own books has only increased by 16 %. it would appear that banks are doing it for the fees. still, other factors besides a search for yield are driving the market for leveraged finance : corporate refinancing schedules, for instance. in 2014, about 52 % of transactions took place in order to renew or refinance previous deals. also, greater confidence among investors might play a role. rating agencies, banks and investment funds have communicated profusely on low default rates and the general attractiveness of the market for leveraged finance. however, the border between confidence and overconfidence is hard to define. therefore, the question is : should we keep an eye on leveraged finance? my answer as a supervisor is : yes, we should. leveraged finance is certainly not a major supervisory concern at the moment, but the recent development of the relevant market exemplifies the need for good risk governance, a welldefined and closely | assessments, conservative collateral valuations, continuous monitoring of the borrower ’ s risk profile, and rapid reactions to changing circumstances. addressing risks – risk management and banking supervision the market environment i just described undoubtedly calls for effective risk management in order to curb potential excess. however, with regard to leveraged finance, risk managers find it difficult to appropriately and effectively play their role in a market environment characterised by fierce competition. more specifically, there are three areas where we are currently pushing for improvement. first, with regard to procedure, historical credit norms are beginning to weaken and more market - friendly structures have been adopted – i already mentioned the covenant - lite issue. in that regard, the thorniest aspect is the credit approval process. the speed of credit approval has become a cornerstone of competitiveness in the market for leveraged finance. in order to increase their market share, banks have significantly shortened their internal validation process. anecdotal evidence suggests that many deals are presented by the borrowers as “ take it or leave it ”. in some cases, potential borrowers requested approval within 48 hours. to me, it seems rather challenging to properly understand a deal within 48 hours – both for the front office as well as for risk management. second, with regard to limits, risk managers need to be alert regarding a shift towards structures that support an expanding business. most banks have limits in place with regard to exposures held on their own books. however, these limits have sometimes been shifted upwards to accommodate business needs and the prospect of rewarding transactions ; the underwriting limit, for instance, has on average increased by 49 % between 2012 and 2014. in such circumstances, risk managers should ensure that stress tests adequately reflect the higher limits. in any case, from a supervisor ’ s perspective, large underwriters could be expected to avoid too much fluctuation in their limits. third, with regard to stress testing, all banks should conduct dedicated stress tests for their leveraged finance portfolios – i mentioned that before. such stress tests are helpful in identifying the consequences of downturns in the markets. therefore, as part of our planned supervisory actions, stress - testing frameworks will be strengthened, particularly with regard to the underwriting pipeline. to sum up : the european market for leveraged finance has grown, and european banks have increased their exposure to it. we as supervisors are closely monitoring these developments. but we go beyond mere observation ; we are also acting, combining individual and ssm - wide | 1 |
jean - claude trichet : the growing importance of emerging economies in the globalised world and its implications for the international financial architecture speech by mr jean - claude trichet, president of the european central bank, at the tenth l k jha memorial lecture, organised by the reserve bank of india, mumbai, 26 november 2007. * i. * * introduction ladies and gentlemen, it is a great honour for me to give this lecture to pay tribute to the memory of the late shri lakshmi kant jha. l. k. jha was a man of many talents : a distinguished administrator, a diplomat and an eminent economist. he was the first chairman of the general agreement on tariffs and trade in the late 1950s and governor of the reserve bank of india in the late 1960s. he held several important positions in the government of india. in the course of his career, l. k. jha also became a respected member of the brandt commission. as some of you perhaps remember, this commission advocated a new world economic order in which the developing countries, including india, would have a more equitable share. l. k. jha sadly left us about 20 years ago. however, if he and other members of the brandt commission were to look at the world economy today, they would be probably surprised to see how much it has changed. and one of the most important of these changes is precisely the growing share of the rapidly developing economies, which we now term the emerging markets, in the global economy. india represents one striking example of this success. together with other emerging markets, india is playing a crucial role in the process of globalisation of the world we live in. some might think that this is a new phenomenon. it is not. india has been at the core of globalisation since its very outset. let us just remember how it all started. globalisation did not start 20 years ago, when capital controls around the world began to be lifted. it did not start 50 years ago, when multilateral discussions on trade were launched. nor did globalisation start 150 years ago, with the industrial revolution. nor did it start 600 years ago, with the voyage of christopher columbus to america. of course, this voyage marked the linking of two continents, europe and america. but there is one thing which we tend to forget. christopher columbus did not want to travel to america. he wanted to reach india! his ambition was not to discover a new continent. it was to open an alternative route | is changing. for instance, last year saw the launch of the first multilateral consultations, an innovative approach that aims to bring together countries with a shared responsibility for global issues. these first multilateral consultations were dedicated to one of the key risks weighing on the world economy, namely global imbalances. the consultations involved both mature and emerging economies, including the euro area, the united states, japan, china and saudi arabia, again illustrating the fact that large current imbalances are no longer an issue for mature economies only, but a truly global issue. we at the ecb welcomed these discussions as a way to foster the implementation of the agreed strategy to address global imbalances. evidently, these discussions are also of relevance to india. large current account imbalances worldwide go hand - in - hand with sizeable cross - border capital flows. india has been confronted with challenges posed by strong capital inflows. this is why addressing imbalances is in the interest of the international community as a whole. implications for the substance not only the form but also the substance of the governance of the world economy in macroeconomic and financial matters is changing. this will be my last point. the macroeconomic and financial situation in emerging economies today looks strong. but we know it was not always so. we have seen both good and bad times. this is why many initiatives have been taken to strengthen the resilience of countries ’ macroeconomic and financial performance and policies following the string of crises of the 1980s and 1990s. reforms can obviously take many forms. but there are three guiding principles which, in my view, should always be kept in mind : transparency, good practices and dialogue. allow me to take transparency first. investors, borrowers, lenders and economic agents in general cannot make proper decisions without adequate information. 17 easy access to information facilitates investment decisions, the management of risk and market discipline. this in turn gives appropriate incentives in the conduct of macroeconomic and structural see, for instance, m. skala, c. thimann and r. wolfinger'the search for columbus'egg – finding a new formula to determine quotas at the imf ', ecb occasional paper, no. 70, august 2007. for recent – more formal – treatment of the role of information and transparency see, e. g., d. kahneman, “ maps of bounded rationality : psychology for behavioral economics ”, american economic review, 2003, 93 ( 5 | 1 |
us adjust the currency in circulation, a key component of reserve money, which is the intermediate target in our monetary policy operations. we are therefore looking forward to the implementation of the agreement we are signing today to facilitate currency repatriation between our two central banks. i am therefore, very pleased that the long months of discussions between the banco de mozambique and the bank of zambia have resulted in the mutual agreement to repatriate both the meticais and kwacha. this achievement should be saluted as citizens of both countries will now be able to pay for goods originating from the other country with the currency of that country, hence eliminating the need for currency conversions by citizens. distinguished ladies and gentlemen, this agreement is also a step towards further strengthening trade and financial cooperation between the two countries. it provides the legal basis for commercial banks, bureaux de change and other financial institutions to freely accept each country ’ s currency and repatriate it through the banking system with full accountability. the agreement will not only enhance trade cooperation but will also increase cooperation between our two central banks. furthermore, the agreement provides a platform for sharing information on the bank notes in use by the two central banks. this information exchange initiative should not only end at central banks, but be extended to all economic entities that will use and benefit from this development, especially our hard working farmers who should be paid genuine currencies when they sell their produce. once again, governor, let me thank you most sincerely for initiating this agreement. indeed, the signing of this agreement is a testament of the cordial relationship that has existed between mozambique and zambia since the days of the liberation struggle. i must add here that, for us, it marks a key milestone towards enhancing regional integration and macroeconomic convergence. as you are aware, governor, this is our main goal as member countries of the southern africa development community. i thank you. | goods and, in turn, the overall import of goods by 9. 9 % y - o - y. at the same time, the inflow of capital in the financial account, largely on account of fdi of over one billion euros since the beginning of the year, covered the current account deficit and brought the fx reserves up. since most of the fdi inflow went to tradable sectors, in the medium term we expect a further rise in exports and a gradual narrowing of external imbalance. with external debt on a downward trajectory, this further strengthens the external position of the country. chart 9 trade in goods in euros chart 10 fdi structure by sector ( s - a, h1 2008 = 100 ) ( in % ) 2005 - 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 exports imports sources : sors and nbs calculation. 2009 - 2012 2013 - 2017 other finance trade construction and real estate manufacturing mining tradeable goods and services * source : nbs. note : preliminary data for 2018. * agriculture, industry, mining, transportation, catering, ict. ladies and gentlemen, dear colleagues, what has previously been said clearly indicates that serbia ’ s economic agenda continues to yield robust results, reflecting favourably on the credit rating and country risk premium. let us remind you : at the end of the last year standard & poor ’ s upgraded the outlook from stable to positive, while fitch affirmed a stable outlook in early may, citing economic policy continuity aimed at further strengthening of macroeconomic indicators and public debt reduction. lower risk premium, measured by embi, which almost reached its historical low in early may, also speaks in favour of the previously mentioned fact, and this is also backed up in practice by investments of foreign investors in securities, as witnessed by this month ’ s successful implementation of seven - year dinar securities auctions. we believe that the good results of our economic programme will also be confirmed by the findings of the current imf mission. the achieved success was facilitated by the adoption of adequate, well - coordinated and timely economic policy measures. integral to that is the monetary policy which, through provision and preservation of price and financial stability, significantly contributed to the sustainable acceleration of economic growth. the fact that the results were achieved amid uncertainties in the international environment only confirms the efficiency of the monetary policy and the measures the nbs takes in order to strengthen the resilience of our economy. in the coming period too, monetary policy will continue | 0 |
. this reflects in part the effects of lower demand resulting from tighter monetary policy here and abroad. similarly, prices for many goods have started to plateau or even decline, reflecting weaker demand, lower import costs, and an easing of global supply disruptions that developed during the pandemic. for example, prices of used cars - a big driver of inflation during the first year of the pandemic - have been retreating toward more normal levels over the past few months. the combination of the general rotation of demand from goods to services and the effects of higher interest rates on demand for goods should contribute to further downward pressure on the prices of many goods this year. 2 / 4 bis - central bankers'speeches one gear that is moving at a far slower pace is the price of non - energy services. the ongoing imbalance between supply and demand in this sector continues to contribute to inflationary pressures. but there is some good news on this front as well. one of the biggest drivers of the rise in inflation for services has been shelter costs, which soared as demand for housing increased during the pandemic. recent data for newly - signed leases indicate that the tide is turning on rents, and we should see shelter cost inflation start to slow later this year. that said, inflation for other services besides shelter has remained high, and this gear is only starting to turn. inflation expectations represent another gear that is turning at an encouraging speed. longer - run inflation expectations remain remarkably stable at levels consistent with 2 percent inflation. 2 after rising moderately last year, households'three - year - ahead inflation expectations are now back to where they were in january 2021, and one - yearahead inflation expectations have started to reverse the rise seen over the past year and a half. 3 the fomc's policy actions with inflation still high and indications of continued supply - demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2 percent goal on a sustained basis. at its meeting last month, the fomc raised the target range for the federal funds rate to 4 - 1 / 4 to 4 - 1 / 2 percent, the seventh consecutive increase. the fomc's december 2022 summary of economic projections showed that a large majority of participants saw the federal funds rate reaching a level between 5 and 5 - 1 / 2 percent by the end of this year. the fomc statement indicated that " the committee anticipates that ongoing increases | evidence that even good supervision can ’ t prevent all bank failures? improving our ability to do this diagnosis is critical. i am confident that today ’ s panels and paper discussions will help us move forward in this direction. thank you for participating in this conference. bis central bankers ’ speeches | 0.5 |
aggregate time series. an improved understanding of ( risks to ) financial stability and of the transmission of monetary policy is a clear benefit that the use of micro data brings to central banks. this enables central banks to better perform their core tasks – maintaining price stability and contributing to financial stability. in this sense, micro data benefit both, society as a whole as well as financial institutions that operate in a more stable environment. an additional advantage of an increased use of micro data is that these data can be used for multiple purposes. traditional statistics tend to serve specific purposes, such as the construction of aggregate indicators for statistics on the financial account. if new analytical questions arise, these ( aggregate ) data often do not fit the purpose. analysis then has to rely on information which is not really targeted, or additional surveys have to be conducted. in addition to being costly, these surveys often have the disadvantage that they do not allow developments to be tracked over time and that they survey only a sample of firms or banks and are thus not very representative. using micro data that have already been collected, it is comparatively simple to respond to a new request by carrying out an appropriate aggregation of the data. looking ahead, the microdata approach to compiling statistics may even replace the traditional one, leading to cost - savings on the side of the reporting agents. in the traditional system, data has to be aggregated and reported separately for each dataset. the cost of aggregation is borne by the reporting agent. according to the microdata approach, reporting agents have to send their data only once. everything else is done by the central bank. hence, the costs of aggregation are passed on to the central bank. that is a considerable advantage for the industry, but is that everything? is it not the case that the industry not only benefits from cost savings but can also make direct use of the micro data? can statistics be jointly compiled by the industry and the central bank on a voluntary basis in order to increase benefits and reduce costs? this is not a purely hypothetical question. the bundesbank ’ s corporate financial statement statistics, which contains data on german non - financial corporations, are based on several sources, a key one being a data pool with financial statements provided on a voluntary basis by credit institutions and financial service providers. the individual institutions cannot access the micro data of the other parties. however, they receive a very wide range of statistics on key ratios, broken down by sector and size category, which they can use as part of | commitments are : ( 1 ) the plan of action of the g - 7 finance ministers and central bank governors of 10 october, ( 2 ) the ecofin council conclusions of 7 october and ( 3 ) the declaration on a concerted european action plan of the euro area countries on 12 october. these documents list common principles in key areas ( ensuring appropriate liquidity, facilitating the funding of banks through various means, providing additional capital resources to financial institutions, recapitalisation of distressed banks, ensuring appropriate implementation of accounting rules, and enhancing cooperation among european countries ), while leaving national governments free to design the operational aspects of such interventions according to the specific characteristics of their domestic financial industries. in particular, these public commitments establish some core principles on how to address liquidity, funding and solvency problems that should contribute to define a common and more effective approach to overcoming the present turmoil. this common approach has started materialising through the announcements by various euro area governments of co - ordinated action plans that comply with the general principles agreed in euro area and international fora. the importance of cooperation mechanisms and information sharing was also underlined by the european council on 15 and 16 october with the creation of a “ financial stability cell ” aiming to improve crisis management in the eu and the decision to establish regular meetings of national regulators. the importance of broad international cooperation to address the challenges faced by the world economy has been renovated in the statement released after the g - 20 summit on financial markets and the world economy of 16 november. the statement indicates principles for the reform of the international financial systems and the improvement of the global financial architecture as well as policy responses to the global slowdown in economic activity. strengthening market transparency, improving disclosure and accountability are indicated among the core principles for reform of financial markets, with the statement also including a specific action plan listing both immediate and medium - term actions in these areas. in general, the principles for reform indicated by the g - 20 are in many respects consistent with those previously stated in the public commitments of other international fora. nevertheless, as has been stressed by commentators, their restatement by the g - 20, a group of countries including both the major developed economies and the largest emerging economies, is a confirmation of both the global nature of the financial crisis and the equally global determination to overcome it. indeed, all of the public commitments so far together with the plans already adopted by many countries clearly show the strong determination of the international community to preserve the stability of our financial and | 0 |
by 2. 8 percentage points, a contribution rate of 56. 7 percent. new driving forces are growing fast, with strategic emerging industries gathering strength, and the development of digital economy, photovoltaic technology, and new energy vehicles leading the world. in the first three quarters, investment in high - tech industries increased by 11. 4 percent year on year, and the output of solar cells, charging piles, and new energy vehicles rose by 63. 2 percent, 34. 2 percent, and 26. 7 percent, 1 / 4 bis - central bankers'speeches respectively. the balance of payments has seen improved soundness. china's current account has maintained a reasonable surplus, and its cross - border trade, investment, and financing have become more active. china's economy is expected to grow by around 5 percent this year, continuously maintaining a leading position among the major economies and playing as an important engine and stabilizer for global economic growth. recently, the international monetary fund ( imf ) has revised up its forecast for china's economic growth to 5. 4 percent. ii. complex and severe international situation the world is facing many uncertainties and challenges, such as intensified geopolitical conflicts, widespread trade protectionism, as well as high inflation, high interest rates, and high debt. looking forward, the global economic recovery is sluggish. the geopolitical games, the cumulative effects of tightened global liquidity, the potential financial risks as well as the extreme weather events are important factors that may affect the growth of the global economy. according to the world economic outlook released by the imf in october, the global economic growth rate is expected to slow down from 3. 5 percent last year to 3 percent this year and 2. 9 percent next year. the tight monetary policies in the major developed economies have played a restraining role in controlling inflation, leading to an overall decline in inflation but impairing investment and consumption. the diverging situation of emerging economies and tightened global liquidity have increased uncertainties in the growth of highly indebted economies. financial risks are evolving. as inflationary pressures ease and the risk of economic recession rises among countries, major central banks will end rate hikes at the right time, which may blunt the marginal impact of tight monetary policies on currency exchange rates, stock markets, and cross - border capital flows in various countries. however, the cumulative effects will loom larger, and risks in some economies and sectors still deserve close attention. global | . of course, shibor also has uncertainties, so various aspects shall be taken into consideration when issuing new products. from a global perspective, shibor represents a direction of reform. shibor ’ s failure would suggest the failure of china ’ s money market and bond market. without a proper pricing benchmark, the chinese currency renminbi would be regarded as a failure, so would the chinese economy. so the development of shibor can only succeed without any leeway. according to experiences elsewhere in the world, shibor shall be used as a benchmark for product innovation. shibor unavoidably has loopholes, so it ’ s natural that some new products are based on benchmarks other than shibor, such as the 7 - day repurchase rate. we shall be open to such products from a commercial perspective because everything that exists must have a reason. these benchmarks may compete with shibor in a meritorious manner. only when there is competition, can we stakeholders make comparisons before shibor becomes an established benchmark. no administrative measures shall be applied to suppress other benchmarks. in terms of market development, the future trend of shibor shall be taken into full account, and international experiences shall be drawn from, such as b2b, c2c, b2c and other types of online trading in developed countries. as far as innovation is concerned, we can also initiate innovation on our own, but new innovations are subject to the test of time and market. so when designing innovative products, it is advisable to learn from international experiences. in a long - term perspective, shibor is very important for financial innovation and the development of derivatives. insightful thinking is required when drawing from international experiences. fourth, the relationship between shibor and internal transfer pricing. one advantage of shibor is that it links the market on the one hand and internal transfer pricing of commercial banks on the other hand. many commercial banks, as nationwide large banks, have internal transfer prices across regions, products, deposits and loans, and assets and liabilities. as a result, commercial banks ’ head offices are under constant pressure from branches with a deposit surplus and branches with a loan surplus. for example, deposit surplus banks demand a hike in the interest rate when they deposit fund with the head office. how can head offices convince their branches of the legitimacy of internal transfer pricing? it is not until shibor is introduced to internal transfer pricing that can the rights and interests of various departments | 0.5 |
demographics, not the product of the crisis. the more important question is whether any of the problems we see today will become permanent. this question is relevant at the global level, but let me illustrate it with direct reference to our own situation here in canada. historically, a typical recession / recovery cycle has taken a couple of years to complete. during the recession – let ’ s say it originates with a drop in export demand – companies cut back production, lay off workers, and investment and consumption spending fall. monetary and fiscal policies respond, exports recover, companies rehire their workers and move production back to normal. but this cycle has not been a typical one. the downturn was deep and has proved to be long lasting. canada ’ s export sector not only cut back on production and laid off workers, many companies restructured, many simply disappeared. recent bank of canada research on exporters sifted through more than 2, 000 categories of underperforming, non - energy exports. we found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000. had the exports of these products instead risen in line with foreign demand, they would have contributed about $ 30 billion in additional exports last year. by correlating these findings with media reports, we found that many were affected by factory closures or other restructurings. obviously, not all of this can be blamed on the financial crisis and the ensuing downturn, but for companies that were already struggling with competitiveness, the crisis surely accelerated things. the point is, when companies downsize, relocate or close their doors, the effects on the economy are permanent. those specific lost exports will not recover – something else is more likely to take their place, but that requires that surviving companies expand, or new exporting companies be created. and both such processes are bound to be much slower than in the typical recession / recovery scenario. a destructive downturn also creates long - lasting effects in our labour market, since the associated jobs are lost permanently. we have recovered well from the employment losses during the downturn, but our labour market has not yet returned fully to normal. indeed, labour conditions in canada point to material slack in the economy. we have been creating jobs at a trend rate of less than 1 per cent, well below what one would expect from an economy that is recovering. furthermore, much of the recent employment growth has been part time. there are over 900, 000 people | decisions about the future, the bank must rely heavily on economic forecasting. in addition, the impacts of bank decisions are complex and uncertain. much like a business that faces many unknowns when deciding to adopt a new technology, the bank also must make choices in the face of considerable uncertainty. this is why it's important to have good information and good advice. to get the best possible understanding of the economic situation, governing council members have access to an extremely large number of datasets, analyses and points of view. when i'm asked to summarize the work of a deputy governor, i often say that i am a big aggregator of information. i am part of a team whose job is to put together all the pieces of the puzzle to inform our decision - making. today, i'd like to explain to you what that means in concrete terms. every year, the bank makes eight monetary policy decisions. that means eight times a year, the bank must decide whether it will raise, maintain or lower the policy interest rate. four of the eight decisions are accompanied by the monetary policy report ( mpr ), published most recently in july. the mpr examines the global and canadian economies in terms of production, spending, the labour market and, of course, inflation. it also includes the bank's projections for growth and inflation and the risks to the projection over a two - year period. 2 / 7 bis - central bankers'speeches the decision - making process begins about a month before the announcement date, when bank staff present an economic projection to governing council. we call this case a. it draws on the bank's macroeconomic models and surveys, its analysis of various sectors and components of the economy, and its assessment of financial stability and financial market activity. since we don't have a crystal ball, we draw on the latest data and use our projection models to look into the future. 1 for several hours, governing council members debate the assumptions and risks to the projection as well as alternative case scenarios prepared by staff. about 10 days later, bank advisors and economists present case b, a revised projection incorporating the comments of governing council members and, if any, new developments that occurred since case a. we draw on that projection to make our policy rate decision. when there is a rate announcement without an accompanying mpr - as was the case two weeks ago - many of the same steps are involved, although staff do not make new projections. they report on new | 0.5 |
bandid nijathaworn : quantitative models and tools for good risk management opening address by dr bandid nijathaworn, deputy governor of the bank of thailand, at the 2nd seacen - occ advanced seminar on quantitative techniques for macro surveillance and determining resilience of the banking sector, bangkok, 3 september 2007. * * * let me begin by extending a warm welcome to all of you to bangkok, and to the second seacen - occ advanced seminar on quantitative techniques for macro surveillance and determining resilience of the banking sector. the bank of thailand is pleased to be hosting this seminar, jointly with the us office of the comptroller of the currency and the seacen centre. today ’ s seminar reflects another important effort in forging a closer cooperation and network between us regulators and the central banks and regulators of the southeast asian region. such a close tie is most valuable for it is a platform that helps facilitate supervisory coordination that is necessary for an efficient home - host relationship, as well as for exchanging views on important market developments and supervisory issues such as on financial innovation, on the implementation of basel ii, and on accounting standards. going forward, such a close tie will be even more valuable, because an important component of a good macro - surveillance process is an open and timely dialogue, and exchange of views among regulators from different jurisdictions. with a deepening process of financial globalisation that we are now seeing, supervisors and central banks are faced with increased challenges to analyse and manage risks, especially in the context of more complex interlinks between financial institutions and financial markets, as well as between domestic and the global economies. in such an environment, the risk management ability of financial firms and supervisors is important and rests crucially on the ability to assess quantitatively and in a forward - looking manner, the possible impact of each risk scenario on the economy and its financial sector. in this light, a sound and practical approach to integrate the quantitative assessment into financial stability and into risk - based supervision is most crucial, as it will allow the potential key risk affecting the financial sector to be identified, to be assessed, and to be ranked in order of importance. through this, the approach will help focus policy dialogue and facilitate communication between all the key stakeholders, namely – the supervised financial institutions, the home and host supervisors, other related supervisory agencies especially in the case of complex financial conglomerates, and between the monetary authority and the finance ministry. in moving forward, it | is important to recognize that, while these quantitative techniques are valuable tools, they are no substitute for a thorough understanding of the overall risk dynamic of financial institutions, the related systemic implications, as well as the behaviour of institutions and markets. the emphasis here is that a good macro - surveillance framework must balance technical excellence and technical complexity with sound rationale and good qualitative judgment in order to make real contribution to policy decision. the robust framework of risk - based supervision such as basel ii places a strong technical demand on supervisors not only on pillar i but also for the supervisory review work in pillar ii, which requires dynamically assessing on - going risk and changing risk profile of financial institutions. therefore, macrosurveillance, stress - testing, as well as model validation, will fast become the norm for good risk management. macro - surveillance and its parallel policy framework – especially macro - prudential policy – are now exciting fields for central banks and supervisory agencies. but in my view, the needed pioneered framework is yet to be developed. the quantitative models and tools so far are at its early stage of development compared to those more established in monetary policy, such as the inflation targeting framework. the frontier work currently undertaken by central banks of advanced economies are, for example, developing macro - stress testing model which incorporates interlinkages between financial and real sectors. such work is quite demanding due to the complexity of the evolving linkages and behaviour linked to rapid developments in economic and financial sector, and all the more so with globalisation. in response, community of experts are emerging, and many such experts are now using virtual network such as stress - testing internet platform to share knowledge and experience. for emerging economies such as most seacen members, it is even more challenging in light of data limitations and continued structural changes that are taking place in our markets, particularly the proliferation of new financial products that consumers are less familiar with, and are less able to manage risk because of market limitations in terms of the availability of hedging instruments. this type of situation, if not properly monitored and supervised, can lead to a build - up of financial vulnerability and risks, for example in consumer finance, real estate, and the housing market. therefore, supervisors need to work closely with their counterparts in the monetary policy wing to monitor and assess possible risks. the timeliness of this seminar is all the more important in light of the on - going developments in the global financial markets. global imbalance between economies continues to be an important | 1 |
the first quarter of this year and the most recently published forecasts by public institutions, the risks to this outlook remain broadly balanced. on the downside, there are concerns that the turmoil in financial markets could have a stronger impact on the real economy, as well as that protectionist pressures could intensify and that there could be adverse developments in the world economy stemming from a disorderly correction of global imbalances. at the same time, there may be stronger than anticipated positive effects due to the decrease in commodity prices and to the policy measures taken. annual hicp inflation was, according to eurostat ’ s flash estimate, 0. 6 % in april, unchanged from march. as explained on earlier occasions, the decline in inflation since last summer primarily reflects the sharp fall in global commodity prices over this period. moreover, signs of a more broad - based reduction in inflationary pressure are increasingly emerging. looking ahead, base effects stemming from past energy price movements will play a significant role in the shorter - term dynamics of the hicp. accordingly, we expect to see headline annual inflation rates declining further and temporarily remaining at negative levels for some months around mid - year. thereafter, annual inflation rates are expected to increase again. such short - term dynamics are, however, not relevant from a monetary policy perspective. looking further ahead, hicp inflation is likely to remain positive and below 2 % in 2010, with price developments being dampened by ongoing sluggish demand in the euro area and elsewhere. available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates at levels below, but close to, 2 % over the medium term. the risks surrounding this outlook are broadly balanced. they relate in particular to the risks to the outlook for economic activity as well as to risks to commodity prices. turning to the monetary analysis, the latest data confirm the continued deceleration in the pace of underlying monetary expansion. this is signalled, for instance, by the concurrent further declines in the annual growth rates of m3 to 5. 1 % and of loans to the private sector to 3. 2 %. the deceleration supports the assessment of diminishing inflationary pressures in the medium term. month - on - month developments in m3 and its components have remained volatile, with data for march showing a contraction in most of the respective outstanding amounts. this may partly reflect market participants ’ investment responses to the past reduction in the key ec | on source data with limited history, even if in the age of big data, these data sets are broad in scope. expectations for banks recognizing that ai presents promise and pitfalls, as a banking regulator, the federal reserve is committed to supporting banks ’ efforts to develop and use ai responsibly to promote a safe, fair, and transparent financial services marketplace. as regulators, we are also exploring and understanding the use of ai and machine learning for supervisory purposes, and therefore, we too need to understand the different forms of explainability tools that are available and their implications. to ensure that society benefits from the application of ai to financial services, we must understand the potential benefits and risks, and make clear our expectations for how the risks can be managed effectively by banks. regulators must provide appropriate expectations and adjust those expectations as the use of ai in financial services and our understanding of its potential and risks evolve. 20 the federal reserve ’ s model risk management guidance ( sr 11 - 7 ) establishes an expectation that models used in banking are conceptually sound or “ fit for purpose. ” sr 11 - 7 instructs that when evaluating a model, supervised institutions should consider the “ [ t ] he design, theory, and logic underlying the model. ” the model risk management guidance discusses in detail the tools banks rely on to help establish the soundness of their models, such as back - testing and benchmarking and other outcomes - based tests. to that end, we are exploring whether additional supervisory clarity is needed to facilitate responsible adoption of ai. it is important that we hear from a wide range of stakeholders — including financial services firms, technology companies, consumer advocates, civil rights groups, merchants and other businesses, and the public. the federal reserve has been working with the other banking agencies on a possible interagency request for information on the risk management of ai applications in financial services. today ’ s symposium serves to introduce a period of seeking input and hearing feedback from a range of external stakeholders on this topic. it is appropriate to be starting with the academic community that has played a central role in developing and scrutinizing ai technologies. i look forward to hearing our distinguished speakers ’ insights on how banks and regulators should think about the opportunities and challenges posed by ai. | 0 |
. we will continue to make our decisions meeting by meeting, taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation. although inflation has been moderating in recent months, the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy. as i mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time. our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer - term inflation expectations well anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. the historical record cautions strongly against prematurely loosening policy. we will stay the course until the job is done. 2 / 3 bis - central bankers'speeches to conclude, we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we at the federal reserve will do everything we can to achieve our maximum - employment and price - stability goals. thank you. i am happy to take your questions. 1 a box in our latest monetary policy report, " why has the labor force recovery been so slow? " discusses the factors that have been holding back labor supply. 2 a box in our latest monetary policy report, " developments in the federal reserve's balance sheet and money markets, " discusses changes in the size of the federal reserve's balance sheet. 3 / 3 bis - central bankers'speeches | to the consumer without producing any reasonable benefit. these actions were part of the most comprehensive change to credit card regulations ever adopted by the board. similar issues have arisen in the mortgage arena. many of the poor underwriting practices in the subprime market were also potentially unfair and deceptive to consumers. for example, the failure to include an escrow account for homeowners'insurance and property taxes in many cases led borrowers to underestimate the costs of homeownership. in this case, allowing greater optionality – which we usually think of as a benefit – had the adverse effects of increasing complexity and reducing transparency. restricting this practice was one of the new protections in the residential mortgage market that the board established in a comprehensive set of rules released in july. banning or limiting certain underwriting practices, which the new rules do for the entire mortgage market, also helps to address the incentive problems i discussed earlier. for institutions that we supervise, these incentive issues can also be addressed by requiring that lenders set up compensation plans for originators that induce behavior consistent with safety and soundness. where does all this leave us? it seems clear that the difficulty of managing financial innovation in the period leading up to the crisis was underestimated, and not just in the case of consumer lending. for example, complexity and lack of transparency have been a problem for certain innovative products aimed at investors, such as some structured credit products. conclusion i don't think anyone wants to go back to the 1970s. financial innovation has improved access to credit, reduced costs, and increased choice. we should not attempt to impose restrictions on credit providers so onerous that they prevent the development of new products and services in the future. that said, the recent experience has shown some ways in which financial innovation can misfire. regulation should not prevent innovation, rather it should ensure that innovations are sufficiently transparent and understandable to allow consumer choice to drive good market outcomes. we should be wary of complexity whose principal effect is to make the product or service more difficult to understand by its intended audience. other questions about proposed innovations should be raised : for instance, how will the innovative product or practice perform under stressed financial conditions? what effects will the innovation have on the ability and willingness of the lender to make loans that are well underwritten and serve the needs of the borrower? these questions about innovation are relevant for safety - andsoundness supervision as well as for consumer protection. in sum, the challenge faced | 0.5 |
the financial markets. the complexity and opacity in instruments supported also to an overreliance on ratings and rating agencies. there are various policy initiatives under way to address the aforementioned shortcomings : at the eu, in accordance with the ecofin roadmap, cebs ( in coordination with the industry ) has been mandated to review public disclosure of types and amounts of securitisation exposures, significant individual transactions and special purpose vehicles exposures by banks and to consider complementary guidelines. at the international level, the basel committee on banking supervision ( bcbs ), following the financial stability forum ( fsf ) recommendations, will issue further guidance to strengthen disclosure requirements under pillar 3 of the basel ii framework. however, the onus of identifying areas of improvement and providing useful disclosures that allow investors to assess the risk / return profile of financial institutions rests primarily with the industry. in this respect, i would like to make special reference to the european securitisation forum that since the early stages of the turmoil has acknowledged the importance of enhancing transparency. as you know, its work addresses the pertinent issues of ( i ) developing guidelines of best practices concerning securitisation disclosures ; ( ii ) providing periodic aggregate data concerning the securitisation market and ( iii ) enhancing information to investors on the composition and performance of underlying assets at issuance and on an on - going basis. availability of information is critical to maintain incentives along the securitisation chain and to enable market participants to make informed decisions. the quality of the documentation underlying issuances, such as pre - sale reports by rating agencies and prospectuses, should be improved. in addition, a sufficiently detailed disclosure of borrower characteristics and the performance of the loans over time would be important to revitalise the market. this is also of critical importance to the central banks in scheduled to be completed by june 2008. scheduled to be completed in 2009. the eurosystem, not only as market watchers but also, as i mentioned earlier, in the performance of their task of providing regular refinancing to the banking system against adequate collateral. here i would like to echo the recommendations on transparency in securitisation markets made by the financial stability forum to have standardised information about the pools of assets underlying structured credit products. supervisors and central bankers are encouraging and monitoring the market - led initiatives by the european securitisation forum and other international organisations and will evaluate the adequacy of | ##ies. these two features of the operational framework in combination with the large scale temporary refinancing operations have certainly helped the eurosystem to effectively mitigate funding liquidity risk for counterparties when interbank markets stopped functioning properly. in order to understand better the specific role which abss fulfil in the implementation of our monetary policy, let me just remind you of some key elements of our collateral framework. the eurosystem has a broad definition of debt instruments and against this background a wide range of public and private securities, including asset - backed securities, can potentially become eligible if they fulfil all the other eligibility criteria. indeed, compared with the traditional concept of other central banks in the world, the eurosystem accepts a large volume of high quality abss, and has done this well before the outbreak of the financial market turmoil. in addition to the general eligibility criteria, such as the denomination in euro and compliance with our minimum rating threshold, some specific requirements apply to abss : ( i ) only the most senior tranche of an abs structure is eligible ; ( ii ) abss must be backed by assets that have been legally acquired by the special purpose vehicle ( spv ) in a manner that the eurosystem considers to be “ true sale ”, and ( iii ) the issuing spv must be located in the european economic area ( eea ). there are no special restrictions on the underlying assets backing the transaction, with one exception, namely that underlying asset pools may not consist of credit derivatives. hence, a broad class of abss may qualify as collateral, both residential - and commercial - backed securities, all sorts of consumer credit backed abss, cash - flow collateralised loan obligations ( clos ) and cdos. overall the volume of eligible abss constitutes approximately 60 % of the entire outstanding european securitisation market. as regards the developments in the use of collateral since the start of the turmoil ( see chart 4 ), they show clearly that counterparties have made active use of the leeway the collateral framework provides. quite understandably, they have economised on the use of central government bonds, which has been often almost the only collateral counterparties could still use in interbank repo markets. instead they have brought forward less liquid collateral to the eurosystem, including abss, for which primary and secondary markets have basically dried up. the annual average share of asset - backed securities pledged as collateral increased to 16 percent in 2007 | 1 |
risk based supervision. there are periodic off - site and on - site examinations of banks ’ performance based on internationally accepted benchmarks. in addition, the bank of uganda in its effort to mitigate risks in the banking sector introduced the credit reference bureau ( crb ) and we would like to request that all sfis ensure that their borrowers register as this will create a database for managing some of the banking risks. hennie van greuning : analyzing banking risk – a framework for assessing corporate governance and financial risk management. way forward given the challenges faced by the banking sector with respect to frauds, the measures envisaged to improve the risk management systems and maintain a strong vibrant financial sector could be twofold ; those that can be done within the banking industry and its players, and those that can be initiated from outside the banking sector. internally, the banking sector players should rethink the strategy of elevating the level of scrutiny on their employees or what has become known as “ know your employee ” or kye. available statistics indicate that most of the bank frauds are internally perpetrated by employees who exploit weaknesses / lapses within the organization. the electronic era has made life better for banks in the area of transaction processing and timely delivery of value but has also introduced new types of risks and exposures. information systems that have an element of cyber or internet connection may potentially be open to the whole world and computer hackers have often used this route to cause financial loss to some financial institutions around the world. additionally, banks should enhance risk profiling of their customers. they should go beyond the traditional “ know your customer ” ( kyc ) to enhanced customer due diligence ( ecdd ). banks should be prepared to invest in the training of their employees so as to accumulate adequate human capital for managing those risks associated with the changing banking environment. most importantly, banks much exhibit high standards of good corporate governance. externally, the dearth of punitive legislation has been sighted as one of the major factors promoting frauds. as long as fraudsters know that even when sentenced, their illicit assets remain intact, they will continue in this business. enactment of laws like the anti - money laundering bill that provides for the seizure of such assets may serve as a deterrent. to facilitate faster administration of justice, the government could create specialized financial investigative sections of police. the government should revive its project of establishing common infrastructure like the national identification card to facilitate identification of customers. i thank | later this year. like in other parts of the world, there is uncertainty as to the strength of the recovery we are going to see. 3. monetary policy during 2008 the mpc was more concerned about the generalised nature of the inflation dynamics that were brought about primarily by the succession of supply side shocks. it was only in the latter part of the year that global developments began to have a significant impact on the economy. the contraction in output, and hence the widening output gap, combined with an easing in inflationary pressures, allowed for a change in the monetary policy stance. the mpc also decided to meet more frequently in order to assess the rapidly changing operating environment in a timeous manner and to be able to act appropriately when deemed necessary. given the lag in the reaction of inflation to interest rate changes, and its focus on the medium to long - term expected inflation trajectory, the mpc decided to reduce the repurchase rate by 500 basis points between december 2008 and august 2009, despite the fact that inflation was still above the upper end of the inflation target range. at the most recent mpc meeting in september, the repo rate was left unchanged at 7, 0 per cent. the mpc is of the view that the risks to the inflation outlook appear to be fairly evenly balanced, and with the current monetary policy stance, the most recent forecast indicates that inflation should return to within the target range on a sustained basis by the second quarter of 2010. upside risks to this forecast are mainly high increases in administered prices, above - inflation increases in nominal unit labour costs, as well as to an extent oil price developments. on the other hand factors such as weak consumption expenditure, weakness in credit aggregates, and the relatively strong exchange rate of the rand will provide downside pressure on inflation. reuters consensus forecast, august 2009 survey. 4. balance of payments the contraction in real gross domestic product and the steep decline in the volume of merchandise imports in the first half of 2009 led to a turnaround in the deficit on the trade account in the second quarter of 2009. south africa ’ s trade balance, which had registered deficits since the third quarter of 2005, consequently changed from a deficit of r53, 4 billion in the first quarter of 2009 to a surplus of r26, 6 billion in the second quarter. the contraction in domestic economic activity since the middle of 2008 has also had a positive impact on the deficit on the country ’ s services, income and current transfer account with | 0 |
various approaches to breaking through this vicious circle. one of them is the planned european banking union. one pillar of the banking union is joint banking supervision for large banks, the single supervisory mechanism. the ecb is planning to launch the single supervisory mechanism on 4 november. as you can imagine, this is a formidable challenge. it is a project that is comparable to the creation of monetary union but scheduled to be rolled out at seven times the speed. centralising supervisory powers at the european level will foster a comprehensive and unbiased view upon banks. it will also enable policy action that is not held hostage by national interests. thus, it will contribute to more effective supervision and better crossborder cooperation and coordination. against this backdrop, non - euro area countries might also benefit from joining the single supervisory mechanism. for countries such as denmark the door is open to join and personally, i would be very happy should denmark, at some point, decide to join the single supervisory mechanism. but all of that cannot entirely rule out the possibility of bank failure. and that is a good thing. after all, the risk of corporate failure is a core element of the market economy. thus, the banking union cannot rest on one pillar alone. a second pillar is necessary to keep everything in balance. the single resolution mechanism will be that pillar. european bank supervision requires european bank resolution – otherwise there would be an imbalance between liability and control. in this regard, the eu has made crucial progress recently, with the adoption of a harmonised bank resolution regime and the decision to create a single resolution mechanism. the single resolution mechanism will allow authorities to restructure or resolve banks without putting taxpayers ’ money at risk. in the future, whenever a bank fails, resolution costs will have to be borne first by shareholders and creditors. after that, a bank - financed resolution fund will come into play, and only as a last resort are public funds to be used and the taxpayer made to pay. the bundesbank welcomes and supports this as an important complement to common european supervision. most importantly, the banking union has to start with a clean slate. thus, one of the biggest preparatory steps is the comprehensive assessment of those banks which will fall under european supervision. this comprehensive assessment consists of two elements : a backward - looking asset quality review and a forward - looking stress test, which also applies to four danish banks. the objective of the asset quality review is to uncover legacy assets in banks ’ balance sheets that were accumulated while | sabine lautenschlager : european monetary and financial union – what is needed in terms of banking supervision? speech by ms sabine lautenschlager deputy president of the deutsche bundesbank, at the symposium on “ central banking – where are we headed? ”, in honor of stefan gerlach ’ s contributions to the institute for monetary and financial stability ( imfs ), organized by the imfs and the house of finance, goethe university, frankfurt am main, 7 february 2013. * 1. * * introduction ladies and gentlemen we come together today to honour professor stefan gerlach ’ s contribution to the institute for monetary and financial stability. stefan has certainly proven time and again to be an outstanding scholar who is able to connect theoretical considerations with the requirements of reality. and reality is what is needed, especially in times of stress like these. ladies and gentlemen, the crisis we are experiencing is without doubt the most extensive and worst economic crisis of recent decades. i would not miss it at all ; but as we have to endure it, we should all look to fulfil the original meaning of the word “ crisis ”, which is “ turning point ”. and to reach this turning point in the positive sense of the term, we need to seize the opportunity and use the lessons learnt to make the financial system and the monetary union more resilient. with regard to the banks as one important part of the financial system, we have made some important progress so far. banks have to comply with higher capital and liquidity standards ; the requirements for adequate internal control systems and an appropriate governance structure have also been tightened substantially. furthermore, the requirements to be met by supervisors have changed significantly, too. the fiscal and economic state of affairs of the emu ’ s member states is improving as well. to achieve further progress at the national level, governments need to adhere to their decisions to increase investor confidence and economic competitiveness with fiscal consolidation and structural reforms. and we have seen some progress regarding the architecture of europe ’ s financial supervisory system – even if one might ask whether it is sufficient with respect to the risks and liabilities increasingly shared at the european level. national governments seem to have no great wish to give up major parts of their sovereignty, with one exception in my view. over recent months, the european governments have agreed on a european banking union or, more specifically, a banking supervisory set - up at european level. the bundesbank welcomes the proposal. it has the | 0.5 |
where the group of new eu member states stands at the moment. a key convergence criterion is a high degree of price stability. a low level of inflation is a precondition for the provision of a favorable growth environment. the group of new eu member states has shown an impressive record of disinflation with inflation in some cases dropping from more than 20 % in the mid - 1990s to levels consistent with price stability in recent months. while we certainly welcome this disinflation trend it should be born in mind that it is related to the current central policy focus on inflation reduction as well as to past appreciations of the currencies and that is hardly sustainable to the full extent for the near future. the continuing income convergence process as well as the deregulation of administered prices will put inflation back onto the list of national policy challenges. another criterion requires the sustainability of the government financial position as expressed by the deficit and debt ratios to gdp. only a stability - oriented fiscal policy allows the countries of a monetary union to fully profit from one of the major benefits of monetary integration : a low level of risk premia and therefore interest rates. fiscal discipline will be one of the major challenges for the coming years as many acceding countries recently experienced difficulties in sticking to previously announced deficit targets. let me at this stage emphasize the commitment of the eurosystem to the achievement of sound budgetary positions. recent developments in some euro area countries give reason for concern and underline the importance of using the expected upward phase of the cycle to eliminate imbalances over the coming years. all countries would benefit from the strengthening of the sustainability of their public finances. the exchange rate criterion requires formal participation in the exchange rate mechanism ( erm ) for at least two years with no devaluations and without severe tensions. erm ii is designed to provide for flexibility and adjustability as well as for enough stability to help anchor expectations. in this view, participation in erm ii should contribute to real and nominal convergence. to ensure a smooth participation in erm ii it is essential that major policy adjustments are undertaken prior to participation in the mechanism and that a credible fiscal consolidation path is being followed. exchange rate policies within erm ii have to be in line with the general policy framework : with monetary, fiscal and structural policies. overall i ’ d like to emphasize the importance of considering the time period between eu enlargement and the adoption of the euro in the new eu member states as an essential test period to | ##ries. the strong competitiveness of the financial sector is furthermore supported by high business and regulatory standards as well as effective and stringent banking secrecy rules. however, the imf critically mentioned the low domestic profitability and efficiency of austrian banks. for one thing, these factors are traceable to strong competitive pressures given the high banking and branch office density. for another, banks still retain a rather unfavorable cost - income ratio, with some banks still absorbing the costs of recent domestic consolidation, of expansion into central and eastern europe as well as of major investments into upgrading information technology platforms and risk management systems. furthermore, the imf expressed concerns regarding the high level of foreign currency loans taken out especially for house mortgages. the oesterreichische nationalbank had already raised the same concerns earlier on. in the first quarter of 2005, foreign currency loans accounted for 19. 3 % of all loans issued to domestic nonbanks and for about 30 % of all loans to households. from the european perspective, loans granted by austrian banks accounted for approximately 3 % of all euro area loans to nonbanks while foreign currency loans accounted for 18 % of all euro area foreign currency loans granted to nonbanks at end - 20043. nearly 90 % of all foreign currency loans issued to nonbanks in austria are denominated in swiss francs while the importance of the japanese yen currently stagnates at a low level, equaling the volume of loans denominated in u. s. dollars. this high amount of foreign currency loans is tightly monitored by the austrian authorities and has already entailed a number of supervisory actions, including the introduction of a set of recommendations called “ minimum standards of granting and managing foreign currency loans. ” fsaps are designed to assess the stability of a financial system as well as to identify and remedy weaknesses in a country ’ s financial sector structure. swiss francs 42 %, japanese yen 19 %, u. s. dollars 2 %. 3. economic and financial sector performance in 2004 and in the first months of 2005 turning to my third issue, i would now like to give you a brief glance on the development of the austrian economy and financial sector in 2004 and the first months of 2005. austria encounters the current challenges and reform requirements with a forward - looking economic policy. the pension reform contributes to a sustainable retirement system that is financially secure in the long term. the corporate and income tax reform add to making austria an attractive business location and supports the | 0.5 |
’ s important to come up with temporary plans to help firms, as has been done in the area of employment with the temporary layoffs [ in spanish : expedientes de regulacion temporal, or ertes ]. what is your opinion on the public loan guarantee programmes to enable the banking sector to finance firms with credit lines and loans? they are very important, of course. all countries have put in place loan guarantees for firms. this is a good thing. but we also have to avoid the fragmentation of the internal market. not all guarantees are identical. the european investment bank ( eib ), for example, is offering a very sound shared system of guarantees. we are now seeing national guarantee schemes and we should work towards making these converge to ensure that credit continues to flow, that banks ’ balance sheets remain healthy, and that we don ’ t see fragmentation along national lines. although different countries will always be given different ratings by the ratings agencies. 1 / 4 bis central bankers'speeches the ecb has been very active since the beginning of this crisis. do you think that what ’ s been done so far is enough? the ecb has intervened on three levels. first, we have provided liquidity to the banks, under very good conditions, and we have launched a package of temporary collateral easing measures. in addition, in our role as the single banking supervisor, we have given banks the flexibility to make use of the capital buffers they had built up, so that they can continue financing and providing credit to firms and households. and finally, we have expanded our monetary policy operations. in 2020, asset purchases will reach €1. 1 trillion ( mainly of public debt ) to avoid fragmentation of the euro area. spain will receive between €120 billion and €130 billion of this money. in the current crisis, this is the main financial shield for spain and the other euro area countries. but countries are staring down the barrel of increasing expenditures and decreasing revenues … countries will experience a deep recession that will have an impact on their public finances. this will entail greater funding needs, of between €1 trillion and €1. 5 trillion, an amount the likes of which we ’ ve probably never seen before. they will also issue public debt to finance themselves, which is precisely why the ecb ’ s intervention in the bond markets aims to avoid fragmentation at an extremely difficult time. the ecb balance sheet is overflowing with debt from euro area countries. where | 4 bis central bankers'speeches play, europe is better equipped to respond to this unprecedented crisis. the agreement includes a generic reference to a future recovery fund that is yet to be defined. what criteria do you think it should meet? the ecb has always stressed the need for our economic and monetary union to be completed in order for the euro area to become more resilient. on the one hand, we need a european deposit insurance scheme so that savings have the same protections in every country. we ’ ve also called for progress in capital markets so that euro area firms have access to more sources of funding. and in the fiscal sphere, we need a shared budgetary instrument that completes the monetary union. the fund that has been proposed could go in that direction, but its size and how it is funded remain open to discussion and will depend on future decisions by governments. in any case, the determination to present a shared response is very significant, because it is a strong political signal, and also a strong signal to the markets. spain started the debate when it too voiced its opposition to the use of the esm. minister calvino has now stated that spain should not resort to using it and that, in any case, she only believes it is an option if conditionality is extremely low … before this crisis, spain was growing, it was competitive, its debt - to - gdp ratio was below 100 %, its government deficit was 2. 6 % and its unemployment rate stood at 14 %. currently it has been able to obtain the funding it requires on the markets, it is not experiencing any difficulties, and the spread against the german bund is 110 basis points. let ’ s hope that spain can maintain this relatively comfortable position. italy is not in the same position ; could that be why it is adopting a more combative stance? i don ’ t want to start making those kinds of comparisons. let ’ s come back to spain then. there is talk of making a political pact, like the moncloa pacts of 1977. what ’ s your opinion? are you in favour of pacts? i think we must always be in favour of political pacts during extraordinary times such as these. although a comparison with the 1977 moncloa pacts is perhaps not possible. at that time, spain was not a member of the eu and the euro did not exist. the main goal was to reduce inflation and change the income policy. today, there is a deep recession that will | 1 |
that it is both an attempt to engineer a beggar - my - neighbour devaluation and that it will boost capital inflows and foster asset - price bubbles. these criticisms seem to me mostly off the mark. central banks undertake asset purchases financed by the issuance of central bank money in order to boost nominal spending. they do that by depressing a range of longer - term real yields and raising asset prices. the earlier phases of quantitative easing both here and in the united states indeed appear to have lowered longer - term nominal and real yields below where they would otherwise have been. 2 this time around, the transmission channel has been rather different, as after falling on the anticipation of further asset purchases, longer - term us yields rose. but the policy should only prove inflationary in the medium to long run if it results in excessive nominal spending growth, which hardly appears likely at the current juncture. only if the federal reserve fails to tighten policy promptly as the recovery takes hold is excessive inflation likely to be a problem. the criticisms from outside seem to me almost as misplaced. while quantitative easing is likely to be associated with exchange rate depreciation, it also boosts domestic spending. demand in other countries therefore rises as a result of the increased demand in the united states, as well as falling as a result of the appreciation of their currencies. these are just the normal mechanisms that operate when official interest rates are cut in one country. it is then an empirical matter which is the dominant channel. quantitative easing is consequently very different in character from sterilised exchange rate intervention, which merely redistributes global demand. there is, though, more substance to the concern that stimulatory monetary policies in the developed economies have encouraged a search for yield and capital inflows into the emerging economies. so there is some justification for the imposition of temporary restraints on those inflows. but where such asset price pressures are building, they seem more likely to be related to overly loose monetary and financial policies in those countries and their unwillingness to allow exchange rates to bear more of the strain. it is the euro area, however, that is of particular importance to the united kingdom. in aggregate, the euro area looks to be undergoing a steady recovery, not dissimilar to ours. output in the third quarter was 1. 9 % higher than a year earlier, roughly in line with the euro area ’ s historical average growth rate. but that masks markedly diver | uk / news / 2021 / april / boe - publishes - policy - for - omnibus - accounts - in - rtgs https : / / www. bankofengland. co. uk / news / 2021 / april / bank - of - england - statement - on - central - bank - digital - currency all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice that means things like the legal entity identifier ( lei ), a global standard designed to uniquely identify any legally distinct entity that engages in financial transactions, whose adoption the bank is supporting. and it means standards that enable the efficient transfer of data between multiple parties like iso20022, which we are implementing alongside our rtgs renewal programme. as gareth ramsay, our chief data officer put it in a recent speech, standards like these are “ a key part of the soft infrastructure of the digital age ”. 8 they are foundational for unlocking many of the benefits of data for both the public and private sector. such standards could help support the idea of an open data platform for sme finance that the bank has helped to champion. by bringing together a global identity standard and a safe, secure and permissioned method of sharing information, an open platform could harness novel data sources and advanced analytics to provide smes with more choice and better access to productive finance. the bank set out some ideas on the design of such an open platform for smes last year. 9 data collection is also integral to the work that the bank itself does in pursuit of its wider mission. without the data we collect, we cannot identify risks, design good policy, and take action in a timely and targeted fashion. that ’ s why delivering ‘ common data standards ’, rules and methods that consistently label and describe financial data, are a priority long term reform for us. reflecting that priority the bank are setting up a joint transformation programme with the financial conduct authority ( fca ) and industry. and sam woods, the deputy governor for prudential regulation, and nikhil rathi, ceo of the fca, recently published a letter to firms providing an update on this work, and asking firms to work with us in partnership to deliver common data standards and other crucial reforms. 10 ai and aippf yet another rapidly - developing area is the adoption of ai in finance. we know that finance is one of the sectors that has seen widespread adoption of ai in recent years | 0.5 |
, including the prospect of additional burdens and costs. i mentioned earlier that confidence in the economic outlook is based on two factors, namely, expected growth and risk premiums. it is quite difficult to boost the potential growth rate or expectation of growth through economic policy in the short term. however, it is possible to reduce uncertainty about the economy, and this is an effective and credible method of reinforcing confidence in a market economy. in this regard, making steady progress in structural reforms such as deregulation and ensuring the stability of the financial system are significant. if these efforts can reduce uncertainty about economic and financial developments, then the present monetary easing will be more effective in stimulating economic activity, strengthening the force of the virtuous circle in the economy. | prices remain unstable. in corporate finance, the fund - raising environment of firms with low credit risks is accommodative on the whole, but with regard to firms with high credit risks, the stance of investors remains severe and the lending attitudes of private banks are becoming more cautious. under these circumstances, the government released the “ comprehensive measures to accelerate reforms ” which includes policies to accelerate the disposal of non - performing loans. including the effects arising from these measures, developments in the financial and capital markets including stock prices, the behavior of financial institutions, and the situation of corporate finance require closer monitoring. | 0.5 |
have made constant efforts to attract academy and intellectuals in the discussion of our works. the bank of albania has introduced the “ series of friday seminars ”, as an infrastructure to promote this debate. twice a month this forum invites the interested persons within and outside the bank of albania to discuss their research on topics of economic nature. the activity is as much open for home and foreign researchers from the academy and business as it is open for the bank of albania employees. in this point, i should emphasize that we expect and encourage more interest by home and foreign academics for this series of seminars. i invite the academy and all the researchers to consider this invitation as a repeated one and become more and more active in discussing the strategies and development of economic policies. the bank of albania is entirely open and invites all the stakeholders to boost this cooperation. today ’ s workshop represents in itself a concrete example of interest for cooperation between the parties and of our aim to boost it further. moreover, distinguished personalities from the finance and the academia have been present in various lectures, workshops or conferences. i am personally involved in this open discussion through a cycle of lectures held in the albanian universities and in eminent and prestigious european universities. young economists who represent the future and a key basis of human capacities should be also encouraged to do economic research. we aim at establishing a culture of research and of a supportive structure with new elements that do have not only the desire but also the necessary knowledge to study the economic phenomenon. to this purpose, the bank of albania organizes annually the governor ’ s award for the best diploma, which encourages the students of economics to carry out economic research, mainly focused on the areas of a central bank ’ s activity. in conclusion, i encourage you to consider the benefits deriving from the useful critics and recommendations during this workshop. i also hope that your participation in this workshop results useful, in terms of exchanging the know - how on various issues and in particular, on the ethics and econometrical techniques. it is with pleasure that i declare this workshop open and i invite you to deepen our knowledge! thank you! | from the strategic point of view the consolidation of research requires the improvement of economic data, the enhancement of cooperation between the public administration institutions and the academia, as well as between various countries, and the absorption and increase of human capacities in this area. following my speech i would like to briefly explore these three issues. economic research uses the economic data as its core input. consequently, the availability and quality of economic data represent a key factor to the development of timely and accurate economic research, to the maximisation of benefiting from them, as well as to the minimization of wrong decision - making and the costs it carries over. unfortunately, the availability and quality of these data cannot be labelled as satisfactory. in addition to problems of collecting and calculating the statistical basis, the data base is related to and influenced by the speed and various stages of the development of the albanian economy and by the changes of policies promoted by the taking place of these stages. the bank of albania has continuously and will constantly call on the improvement of economic data. in this context, today ’ s workshop places special emphasis on the discussion of the estimations and approximation of some economic time series for some important economic indicators, as well as on their role in the development, ethics and the quality of research of empirical nature. economic research is essential for a wide range of areas. hence, no institution can and less can a small central bank cope by itself with all the needs for economic research. quite contrary, the institutions need to identify the areas and issues of economic research where they possess certain comparative advantages and then, closely cooperate with each other. in this context, the cooperation between the institutions of public administration and the academia, the cooperation between different countries and the establishment of research nets on various areas are of prime importance. they would not only enhance the efficiency in carrying out the research, but also stimulate the professional critique and opposition and reach higher standards. the research mission described above, clear and well - defined within the framework of a central bank should not be understood as an isolate mission. the studies can not take place in a closed environment. they need debate and exchange of ideas with the academy, business and other interested stakeholders. in this regard, it is my pleasure to state that the bank of albania has made its research subject to reviews in activities organized particularly for this purpose ( inflation targeting, round tables, friday workshops, etc ). i invite you to do the same thing even during this activity. in view of debate and discussion, we | 1 |
design instead of assembly or production. and the conditions we have created for foreign investors are rather good. lithuania ’ s business environment has earned good scores in global rankings : we rank 11th in the world bank ’ s doing business ranking and are the first among central and eastern european countries. however, this is not enough. of course, the increasing transparency of regulation and the lightening burden of bureaucracy are significant achievements, but are not a panacea. one of the essential challenges in competition for foreign investment is the relatively low labour productivity, which has been growing at a twice slower pace compared to wages. real wages in lithuania have increased by 54 % over the past decade, as opposed to an increase of just 25 % in productivity. i am convinced that the solution to this problem requires a consistent and firm public policy intervention. i am therefore very happy that professor marcel fratzscher, president of the german institute for economic research, will deliver the keynote speech soon. the professor is among the loudest voices in germany highlighting the importance of public investment in enhancing potential economic growth. it is the targeted and strategically planned long - term public investment that can help transform lithuania ’ s economy and provide a strong positive impetus to the growth of labour productivity and, consequently, the economic potential. and precisely now is the right time to harness public investment for the implementation of real change. firstly, the pandemic has triggered a structural shock to the global economy and it is therefore likely that it will anchor interest rates at current lows for some time. economic logic dictates that cheap money should be used wisely. 2 / 4 bis central bankers'speeches secondly, public investment has gained importance as we live in a state of uncertainty. the pandemic forces businesses to shelve investment decisions : for instance, we estimate that private sector investment will decrease by more than 13 % in lithuania this year. i am also concerned about that as a euro area monetary policymaker, given that sluggish business investment dampens the efficiency of accommodative monetary policy measures. hence, the general government should take much stronger action once we step into an unknown territory. according to the latest analysis by the international monetary fund, public investment is much more effective in periods of uncertainty compared to ordinary times, both as a driver of gross domestic product growth and as a catalyst for private investment. and, nonetheless, i would like to emphasise quality instead of quantity in this regard. public investment should be targeted and measured | terms of investment in this area. dear colleagues, the new reality has also led to tectonic shifts in the eu economic policy. 3 / 4 bis central bankers'speeches the creation of the eu recovery fund is a historic step towards european economic integration and financial solidarity. the fund earmarks nearly €2. 5 billion in grants for lithuania. the resources of the fund will be distributed in the light of the objectives elevated in europe to the top political level : digitalisation and the green deal. the creation of the fund also implies a historic opportunity for us. targeted use of the fund ’ s resources will not only let us contribute to the european cause. the objectives set by europe provide a good compass if we want to lay a new foundation for a more rapid long - term growth of lithuania ’ s economy. that is why i mentioned in the beginning of my speech that the issue of investment and innovation is, indeed, timely. we are witnessing structural changes and new plans for investment that can alter the reality of our economic life for decades ahead. today ’ s discussion has brought together a large number of competent professionals from lithuania and abroad. i believe that our conversation can provide an impetus to make better use of the emerging opportunities. lithuania, meanwhile, begins a new political cycle and, perhaps, some of the ideas that will be put forward will resonate with decision makers. thank you for your attention and i wish you a meaningful discussion. 4 / 4 bis central bankers'speeches | 1 |
bit optimistic. but this being said it is difficult to judge what it means without all the analysis. for instance, when i look at the negative growth of the last quarter – minus 1. 2 per cent in france – one comforting aspect was that three - quarters of the decline was due to a reduction in inventories. so that was of course much better for the future because it means that once the inventories are back to the required level, to the level that corporates want to have, production starts up. so it is difficult to comment without seeing all the explanations. for the time being i have the feeling that our situation will be relatively, slightly better than that of some of our neighbour countries. what was one of our weaknesses in the past – that is a strong reliance on domestic demand and domestic consumption for growth, and certain weakness in net exports – has become a strength in the downturn. exports have fallen, like in germany, but their weight in gdp is much lower, so that it has hit the economy less. the consumer spending trend has remained positive. compared to countries like spain or the uk the average indebtedness of households was lower, so that the effect of the turmoil on consumer spending has been also relatively lower than in other countries. for all these reasons we felt that we had some slightly better resilience, but we must remain prudent. ft : should germany do more in terms of fiscal stimulus? cn : i think that they have decided on a second package that is sizable. i recognise the importance of the efforts that germany has made. ft : your plans for a central clearing house for derivatives have provoked controversy in london, where this is seen as a continental grab for business to pass though lch. clearnet and people are unconvinced that you need to have this lender - of - lastresort, central bank function. cn : for me, the argument is very simple. if you really want to have a safe system you really need these clearing houses to have the possibility of extensive access to central bank liquidity. i think that is the only way to ensure that in times of stress, when you have eventually defaults of counterparties, you can manage the liquidity in a smooth fashion. having said that, no central bank would accept large - scale access to central bank liquidity without having the oversight. ft : but market participants say that even after the lehman collapse, they still managed to unlock a lot of these trades | . but what the spanish have done is to take the whole cycle, so that you are obliged to build up certain provisions in the upturn and you can use them in the downturn and that reduces and eventually eliminates the pro - cyclical effects of the credit cycle. the second concept is that for the trading book. one could oblige banks to build up buffers using part or all of the increase in the value of securities held so that until you have finally sold the security, have booked the profit, you ’ ve got a potential profit that you can turn into a cushion. so when you enter a downturn and market values drop, the cushion would be the first defence against that. how it would work exactly still needs to be developed. these are two different types of activities, two different types of cushion. you could have both. ft : could you imagine the ecb embarking on a large - scale programme of quantitative easing, or would you rule it out? cn : i would not rule out anything and we have not ruled out anything. what i believe we must do – and we keep studying various options – is to look at a few things and see whether we need to go beyond what we have done already. by the way, i consider that we are already implementing a non - standard monetary policy. the fact that we have, first, enlarged the pool of collateral and, second, decided to make the provision of liquidity at all maturities up to 6 months at fixed rates and for unlimited quantities, means we are not in a normal framework. ft would you call that quantitative easing? cn : it is a way of doing quantitative easing, certainly, because, it means that we can provide liquidity to each institution beyond what they actually need. having given at our last policy meeting the assurance that we would continue this as long as is needed and at least until the beginning of next year, means that we have given the assurance to the banks that the easing policy will continue for quite a long period of time. having said that, what we need to look at now is not the theory. we have to be pragmatic, and look at what works and what does not work. the objective of so - called additional measures would be to act where parts of the credit market are not working, the transmission mechanism is not working. a central bank may consider that at a certain point it is appropriate to intervene directly in these markets. at the moment, we have | 1 |
constitutes one large market. of course, that market is still evolving and has not yet reached its ultimate state of development. for example, the euro as such currently exists only in the financial markets and, to some extent, in the business sector. consumers still calculate and pay in their own national currency unit, which is a handicap for increasing awareness of the euro. this will end with the cash changeover in 2002, which tends to be perceived by the general public as the true start of monetary union. in itself, the cash changeover is a gigantic logistic operation. moreover, there will be a period in which both the old national currency units and the euro will circulate simultaneously. the cash changeover will also achieve one of the main advantages of the single currency : transparency of prices in all markets. this will further facilitate the emergence of a truly single market, because it will be increasingly difficult to maintain price differentials for the same or similar products between countries. even though market segmentation may occur for various reasons, such as the particular tax situation or different technical specifications, pressure will increase on both entrepreneurs and regulators, as consumer and large retail organisations will become increasingly aware of the price differences. but there are more things to do to further integrate the euro area markets. there still exist structural rigidities in many countries, which affect the proper functioning of product and labour markets. a continuation both of moderate wage settlements and of structural reforms will be essential contributions to a further improvement of the functioning of european markets. the introduction of new technology requires flexibility of other factors, including labour, if production processes are to be reorganised most efficiently. if there are limits and restrictions to the adjustment to the most profitable combination of productive factors, the levels of investment in the new technologies will accordingly be affected negatively. it must be noted that the introduction of the euro has contributed to the awareness of policymakers throughout europe that structural reforms are needed. and although many reforms have yet to be implemented, substantial progress has nonetheless been made. governments have acted in the field of product markets in order to make them more competitive to the benefit of consumers. the favourable impact that opening up sectors to competition has on prices, growth and employment has become clear in the telecommunications and energy sectors. the challenge now is to further reduce the level of regulation so as to stimulate activities in other sectors of the economy. with regard to the fiscal position, there is a relatively high tax burden and there are still a number of countries with a very | the previous year. the full impact of the reductions in the crr effected last year will be seen in the current year. the crr on inter - bank liabilities has been withdrawn as part of the policy. apart from the impact this will have on the creation of an appropriate term deposit market, this will release about rs. 9500 million of lendable resources to banks. we have also introduced a general refinance facility which will be available to banks and this facility will be equivalent to one per cent of the demand and time liabilities of banks. all of these measures will have the impact of expanding the lendable resources of banks. the bank rate has been reduced from 12 per cent to 11 per cent to signal a reduction in the interest rate. we want the bank rate to emerge as an effective signal rate as well as a reference rate. to coincide with the reduction in bank rate, the term deposit rate for maturity of 30 days and upto one year has been reduced by one percentage point. the same rate has been made applicable to rates on term deposits of non - resident ( external ) rupee deposit accounts of maturity of over six months and upto one year. on foreign currency non resident accounts ( banks ) deposits, banks are free to determine interest rates subject to a ceiling prescribed by the rbi from time to time. thus the various measures announced will have the effect of expanding the lendable resources of banks on the one hand and bringing about on the other a reduction in the deposit rates and consequently lending rates. 12. responding to the policy announcement, a number of banks in the public sector banks have already reduced their plr by 50 - 100 basis points to take it to 14 per cent. needless to say the only enduring way to bring about a reduction in the interest rate is by keeping the inflation rate low and breaking inflationary expectations. 13. the third objective relates to the revamping of the credit delivery system which has become necessary for accelerating the credit flow from the banking system. a number of measures announced fall in this category. i would like to list the most important among them. the mandatory consortium requirements for credit limits of rs. 500 million and more has been dispensed with. banks and their customers can now enter into a variety of arrangements including syndication subject of course to the exposure limits. banks have been given full freedom to evolve their own methods of assessing the working capital requirements of borrowers. this should result in quicker decision making and speedier | 0 |
of housing and the overall cost of living in california and new york are significantly higher than they are here. and due to differences in policies governing education, the scores measuring middle - school students ’ proficiency in math are lower in both california and new york than they are in texas, and in reading, are lower in california and only slightly higher in new york. 5 taken together, these factors, alongside whatever natural advantages we may enjoy ( though it is hard to compete with the physical beauty of california and the great lakes region or the cultural splendor of new york ), affect where firms choose to locate and hire and where people choose to raise their families and seek jobs. see the nation ’ s report card, http : / / nationsreportcard. gov. bis central bankers ’ speeches i would argue that an additional factor favors texas : we have a legislature that under both democratic and republican governors has over time deliberately crafted laws and regulations, and tax and spending regimes, encouraging business formation and job creation. just last month, fairfield, calif. - based vehicle reseller copart inc. announced that it will move its headquarters to texas, citing “ greater operational efficiencies. ” 6 the ceo for the owner of hardee ’ s and carl ’ s jr. restaurants, andy puzder, claims it takes six months to two years to secure permits in california to build a new carl ’ s jr., whereas in texas, it takes six weeks. these two anecdotes from california alone clearly illustrate that firms and jobs will go to where it is easiest to do business – not where it is less convenient and more costly. both state and federal authorities need to bear this in mind as they plot changes in the fiscal and regulatory policy needed to restore the job - creating engine of america. as an official of the federal reserve charged with making monetary policy for the country as a whole, i am constantly mindful that investment and job - creating capital is free to roam not only within the united states, but to any place on earth where it will earn the best risk - adjusted return. if other countries with stable governments offer more attractive tax and regulatory environments, capital that would otherwise go to creating jobs in the u. s. a. will migrate abroad, just as intra - u. s. investment is migrating to texas. thus, even if one were to somehow have 100 percent certainty about the future course of federal reserve policy and be completely comfortable with it, without greater clarity | jean - claude trichet : 18th frankfurt european banking congress statement by mr jean - claude trichet, president of the ecb, at the 18th frankfurt european banking congress, frankfurt am main, 21 november 2008. * * * ladies and gentlemen, this year ’ s european banking congress takes place at a very challenging point in time. today ’ s event is therefore a particularly important one. it is a pleasure to be here amid so many distinguished participants and to be joined on this panel by my central bank colleagues from brazil and the united arab emirates. we are at a critical juncture as far as the set - up and functioning of the international financial system is concerned. the current financial crisis was triggered by a widespread and substantial undervaluation of risk. when the crisis erupted in august 2007, it was at first a systemic threat to the liquidity of the financial system, which mainly affected advanced economies. in mid - september of this year the crisis deteriorated very significantly and turned into a systemic threat to the solvency of important parts of the global financial system. it is no longer limited to advanced economies and is instead also affecting emerging economies. in addition, it has spilled over from the financial sphere to the real economy. global challenges call for global responses. policy - makers across the globe have responded and are taking appropriate action to contain and alleviate the crisis. central banks are playing a pivotal role in this regard, providing the necessary liquidity – sometimes in ways that were scarcely imaginable up until a few months ago – in order to ensure that financial markets and institutions can continue to function. as far as the ecb is concerned, i would like to point out once again that we have acted decisively from the very beginning of the turmoil in august of last year. at that time, when the threat to the liquidity of the financial system first emerged, we provided the system with no less than eur 95 billion of liquidity within a few hours. later that year, the ecb also began to supply liquidity to european counterparties in us dollars through swap arrangements which we established with the federal reserve. since october of this year, we have been granting full allotments in our monetary operations. these are only some of the key measures taken by the ecb in order to support financial markets, and you see from the design of these measures that some of them are literally without precedent. * * * at the same time as we are dealing with the current crisis, we also need to look | 0 |
we viewed that action as insurance against the possibility that the still widespread weakness would become entrenched. with inflation expectations well contained, this additional monetary stimulus seemed to offer worthwhile insurance against the threat of persistent economic weakness and unwelcome substantial declines in inflation from already low levels. in the weeks that followed, financial market conditions continued to improve, but only haltingly. the additional monetary stimulus and the absence of further revelations of major corporate wrongdoing seemed to provide some reassurance to investors. equity prices rose, volatility declined, risk spreads narrowed, and market liquidity increased, albeit not to levels that might be associated with robust economic conditions. at the same time, mounting concerns about geopolitical risks and energy supplies, amplified by the turmoil in venezuela, were mirrored by the worrisome surge in oil prices, continued skittishness in financial markets, and substantial uncertainty among businesses about the outlook. partly as a result, growth of economic activity slowed markedly late in the summer and in the fourth quarter, continuing the choppy pattern that prevailed over the past year. according to the advance estimate, real gdp expanded at an annual rate of only ¾ last quarter after surging 4percent in the third quarter. much of that deceleration reflected a falloff in the production of motor vehicles from the near - record level that had been reached in the third quarter when low financing rates and other incentive programs sparked a jump in sales. the slowing in aggregate output also reflected aggressive attempts by businesses more generally to ensure that inventories remained under control. thus far, those efforts have proven successful in that business inventories, with only a few exceptions, have stayed lean - a circumstance that should help support production this year. indeed, after dropping back a bit in the fall, manufacturing activity turned up in december, and reports from purchasing managers suggest that improvement has continued into this year. excluding both the swings in auto and truck production and the fluctuations in non - motor - vehicle inventories, economic activity has been moving up in a considerably smoother fashion than has overall real gdp : final sales excluding motor vehicles are estimated to have risen at a 2¼ % annual rate in the fourth quarter after a similar 1¾ % advance in the previous quarter and an average of 2 % in the first half. thus, apart from these quarterly fluctuations, the economy has largely extended the broad patterns of performance that were evident at the time of my july testimony. most notably, output has continued to expand, | productive investments benefitting the society in large. lack of hr policies and professionalism 17. the quality of human resources is an important determinant of the success of any organization. this aspect, however, has not received due importance in the cooperative institutions. the cooperative banks are headed by a committee of elected members who are not professionals and do not possess sound knowledge in banking functions. the committee takes crucial business decisions involving sanction of loans, investments, interest rates on deposits and loans, etc. which require a minimum degree of skill and expertise. often, the role of chief executive officers in these areas is minimal. 18. cooperatives do not have well defined capacity building and hr policies in crucial areas like recruitment, placement, training, career progression, succession planning, etc. recruitments are done without any objective and systematic manpower assessment. all these have led to inefficiency and lower productivity. though there is a system of training in place in many cooperative banks, there is no need - assessment to align training with the current and future staff requirements. training programs should be designed to achieve skill upgradation in areas related to audit and expenditure, management and aptitude development. it is also necessary to keep the staff sufficiently motivated through periodic job rotation, job enrichment and recognition of performance. poor recovery performance 19. frequent loan waiver announcements by governments aimed to garner electoral support have vitiated the credit discipline among the borrowers and affected the recovery atmosphere. the resultant weak finances, growing npas and poor resource base have contributed to the declining performance of the cooperatives, particularly at the grass root level. since these grass root institutions depend on liquidity support from higher financing bis central bankers ’ speeches agencies like state and central cooperative banks, non - payment of dues impairs the financial health of the entire chain. inadequate internal control and audit 20. cooperatives do not pay attention to implementation of adequate and foolproof internal checks and control. balancing of books and reconciliation of entries are in arrears for unduly long periods. as a result, there is frequent incidence of frauds involving the staff who game the system. very often, these cases are held up due to protracted litigation in courts of law and the guilty are not brought to book. there is absence of effective audit mechanism. there are delays in the conduct of audits and submission of reports. quality of audit leaves much to be desired in as much as it fails to address the gaps in the systems and processes and | 0 |
international accounting standards should incorporate disclosures of payments to governments by companies in the extraction of natural resources, especially those in the oil, gas and timber sectors. this needs to be done in both the public and private sectors to ensure that maximum revenue and other benefits accrue to the societies in which these companies operate. more generally, the accounting profession has cross - cutting socio - economic responsibility in a variety of ways including governance, business ethics, banking regulations and supervision, as well as financial stability. in this respect, climate change and its effects have opened up new horizons in which accountants can be involved in a wide range of socio - economic issues. it is my hope that accountants from developing countries will take the lead in putting in place the necessary accounting and reporting standards on costing and financing of the mitigation of adverse socio - economic effects of climate change. these were agreed on at last year ’ s united nations climate change conference in copenhagen. you will agree that this is a multidisciplinary area which, i believe, will involve close consultations between your profession as accountants and other disciplines. here at home, the financial reporting bill that was passed by parliament recently, and awaiting presidential approval, will contribute considerably in widening the scope for the responsibilities of the accounting profession. similarly, when the botswana accounting oversight authority is put in place, it should strengthen the professional accountability and ethical conduct of accountants. as a related matter, ladies and gentlemen, you will know that, in a bid to circumvent a possible repeat of the recent financial crisis, the basel committee on banking supervision reached a landmark decision on september 12, 2010. this is known as basel iii, and it translates into a more than doubling of the common equity component of capital for global banks, from the current 2 percent to 4. 5 percent, plus a new buffer of a further 2. 5 percent, to reach a floor of 7 percent. the effective implementation of this new capital adequacy requirement is the period 2013 – 2019, and it is meant to make banks resilient to financial shocks and ensure a more healthy banking sector worldwide. any bank capital falling within the buffer zone will face restrictions on paying dividends and discretionary bonuses. we await more of these proclamations and transformations going forward as the basel committee on banking supervision continues to be hard at work. as a matter of fact, the basel committee is catching up with botswana ’ s regulatory framework on this matter. it should be of interest that the bank | does liquidity mean, and why does it matter? imagine that you are doing your weekly grocery shop, but when you get to the cashier you realize you don ’ t have your wallet. even though you have lots of assets — maybe a house or a car or even a boat in the driveway — you can ’ t quickly or easily trade those for milk and bread. you are in a liquidity crunch because you don ’ t have cash on hand to buy the goods and services you need. 1 / 6 bis central bankers'speeches similarly, the financial system can only function smoothly if people, companies and governments can borrow the cash they need to operate. and this borrowing is only possible if financial institutions — the source of this cash — have access to borrowing themselves in wholesale debt markets. this is the essence of funding liquidity — being able to quickly and predictably borrow money in markets or from banks. separately, we also refer to market liquidity — the notion of being able to sell assets quickly without offering a large price discount. participants in financial markets depend on market liquidity to be able to manage their asset and cash holdings by trading large amounts of assets at predictable prices. as you can see, market and funding liquidity work hand - in - hand in normal times. institutions that need cash can get it by borrowing from or selling assets to other institutions that may have surplus cash. but in a crisis, everyone is looking to get more cash. those who have cash may hoard it. and liquidity dries up. when there ’ s not enough liquidity, it breeds uncertainty and turmoil across the whole the financial system. this makes it more difficult and more expensive for households and businesses to get credit at a time when they need it most. and all of this can worsen the overall impact of any large - scale economic shock and lengthen the recovery timeline. so let ’ s talk about the liquidity crunch that happened as the coronavirus hit. toward the end of february, as it became clear that covid - 19 was becoming a global pandemic, turbulence in financial markets increased. more and more economies worldwide shut down, and prices in financial markets began to reflect a downturn in the economy. it ’ s important to remember that we ’ ve never experienced a shock of this nature before, so markets were gripped with uncertainty about how long the downturn might last and how deeply canadians would feel its impacts. as you might guess, markets hate uncertainty. when uncertainty | 0 |
this integrated world, we perish – simple as that. how do we raise the productivity in our export sector? clearly, business as usual is not the answer. we must change how we do things. productivity in the cane fields and the sugar mills are critical to the sugar reform. we must change how we work our agricultural sector. the existing model is clearly not working. our land is fertile. we have the best pawpaw in the world, the tastiest bananas and the sweetest pineapples. but alas we are not even supplying enough of these to our hotels and supermarkets. our oceans are large yet the price of local fish keeps rising. our mahogany forests are mature, yet we are not exporting high valued timber products. obviously, something is seriously wrong and we need to correct that urgently. we talk a lot about the potential of small businesses to raise growth and provide incomes and employment. again, while we continue to talk, we see very little progress in this important area. are we following the right model? where is the bottle neck? lessons are there if you look in the right places and be prepared to accept them. benchmarking is a powerful tool to use. there are lessons abound from our asian neighbours. i am pleased that we have several international speakers with us today and we look forward to the lessons that they will leave with us. ladies and gentlemen, the point that i want to make is this : we should acknowledge and accept the significant role that productivity and competitiveness can play in overcoming many of our economic challenges that we face particularly that of lifting economic growth, attracting investment and supporting exports. more importantly, we need to do something about this now at all levels, micro as well as macro. measurement we know what we want to achieve and that is to raise productivity. we must now measure it. when i pose the question of productivity data, the usual answer i get is that we are working at it. i know that productivity is a complex indicator to measure but we should be taking some indicative measurement now. keep it simple. the crude measure that we use at the bank is calculating the total output per worker. this is obviously a very high level indicator of productivity and has many shortcomings. but for this morning ’ s purpose the broad message is what we want. using this measure, we calculate productivity growth in fiji to average 1 percent over the ten year period from 1996 to 2006. when compared to other countries, we are somewhere | savenaca narube : the economic challenges and lessons to raise fiji ’ s competitiveness presentation by mr savenaca narube, governor of the reserve bank of fiji, to the tpaf ’ s productivity symposium, suva, 5 june 2008. * * * the director general of tpaf, mr. jone usamate ; fellow speakers ; ladies and gentlemen introduction it is that time of the year again where we elevate productivity to the national level for one week. we have held this annual event for some years now. i have been speaking at almost each one of them. but it seems to be the only time of the year that i hear people talking about productivity. and that to me is simply not often enough. this symposium is a wonderful idea. we should continue to engage each other at this level to talk about productivity, share views and reignite our passion for progress. it is essential but unfortunately not sufficient. i have said this many times in the past and i will say it again today that we must make productivity a national vision. the national leaders must get excited about productivity. everyone at whatever level can make a difference on how we do business irrespective of whether you are in the public or the private sector or in between. i have also noted that in past conferences such as this, there is a lot of waiting for government to do something – introduce more incentives, set up committees, appoint think tanks, make laws – you name it – before we can do our own thing. but if i may boldly tell you this morning – this waiting around is a waste of time and money! productivity is one of the few things that we can do something about without any help from anyone. the ball is clearly in our court. economic growth i have been asked to talk on “ the economic challenges and lessons to raise fiji ’ s competitiveness ”. let me start with the economic challenges. there are many. but in my view, our major economic challenge is that the growth rate of our economy is extremely low. i spoke recently at the national micro, small and medium enterprise forum. my message today is no different – we need to raise economic growth. our average growth rate from 2001 to 2007 was 1. 7 percent. the next three years will be no different with a projected average growth rate of below 2 percent. i have said this in the past that with a growth rate this low, we will double the size of our economy in | 1 |
on - year rate of change in the cpi for all items excluding energy, for which prices fluctuate significantly, as well as fresh food has been in the range of 0. 5 - 1. 0 percent. regarding the outlook, it is expected to moderately increase in positive territory on the back of improvement in the output gap and rises in medium - to longterm inflation expectations and wage inflation. concerning risks to the outlook, the course of covid - 19, including variants, and its impact on domestic and overseas economies continue to warrant attention. in addition, there are extremely high uncertainties over the situation surrounding ukraine and the associated developments in commodity prices, global financial and capital markets, and overseas economies. meanwhile, japan's financial system has maintained stability on the whole. regarding financial risks from a longer - term perspective, while there is a possibility that prolonged downward pressure on financial institutions'profits may lead to a gradual pullback in financial intermediation, the vulnerability of the financial system could increase, mainly due to the search for yield behavior. although these risks are judged as not significant at this point, it is necessary to pay close attention to future developments. ii. conduct of monetary policy next, i will explain the bank's conduct of monetary policy. japan's economy is on its way to recovery from a downturn caused by covid - 19, as seen in its gdp remaining below the pre - pandemic level. in addition, the economy has recently been under downward pressure from an outflow of income due to rising commodity prices. on the price front, although the year - on - year rate of change in the cpi has risen to around 2 percent, this is mainly due to an increase in energy prices. given such developments in economic activity and prices, the bank will persistently continue with the current powerful monetary easing centered on yield curve control, aiming to firmly support japan's economy and thereby achieve the price stability target of 2 percent in a sustainable and stable manner. thank you. | and dynamic knowledgebased economy in the world ”. in 2005, after the mid - term review, european policymakers renewed their commitment to the ambitious goals. even though a number of member states have achieved significant progress in several areas ( such as the liberalization of the electricity market and the progress in pension and labor market reforms ), much remains to be done. more effective and efficient investment in knowledge and innovation is necessary, and labor and product markets need to be made more flexible. indeed, research by the ecb 4 suggests that euro area countries typically have undertaken more comprehensive and far - reaching reforms than other oecd countries over the past decade. however, a comparison of reform progress across policy areas shows that euro area countries have generally not made more progress than other oecd countries in reforming the “ difficult ” areas, where political resistance is strong. these “ difficult ” areas have included – for instance – the modification of employment protection legislation ( epl ), i. e. relaxing the rules governing temporary contracts, as well as extending the working age while reducing incentives for early retirement or scaling back the automatic indexation of wages. 5 the reform process therefore appears to have slowed down in many euro area countries. for emu to continue to be a success, structural reforms remain essential to raise factor productivity and potential output, create new jobs and achieve lower prices and higher real incomes! it goes without saying that further improvements in the euro area international competitiveness would evidently ensure that the euro area will – sustainably – play a role in the international monetary system equal to its economic weight. moreover, such improvements are vital to master the challenges facing emu in the years to come. to date, the 8 new member states from central and eastern europe which joined the european union in 2004, and the two which became members in 2007, have succeeded in duval, elmeskov, 2006, “ the effects of emu on structural reforms in labour and product markets ”, ecb wp no 596. see e. g., rajan, g. r, 2005, “ revitalising reforms in europe ”, the ludwig erhard lecture, brussels, 8 december. transforming their economies from centrally planned systems to market economies. substantial progress has been achieved in the areas of property rights and privatization as well as capital and trade liberalization. as the 12 new eu member states – including cyprus and malta – have anchored their institutional structures to the eu, they are being viewed as increasingly secure places | 0 |
are not able to cope with these challenges, but we do. each and every time, we prevail. and why is that? because when we work as a union, we can address problems that would overwhelm us if each country tried to address them alone. and sometimes, what seems like a difficulty of working together is simply a reflection of the difficulty of overcoming the challenges thrown in our way. one should not mistake the one for the other. many argue that our societies are not homogenous enough to operate as a union. but others would argue that further integration is necessary to extract all the economies of scale and scope that our union brings. i am firmly in this second camp. and i am firmly among those who believe that we can better protect the interest of citizens in every country by making our union, to use a phrase from your constitutional tradition, “ more perfect ”. bis central bankers ’ speeches the progress achieved over the past three years to stabilise and strengthen the euro area is real. growth is returning. the way forward is well identified. and we will not rest until our monetary union is complete. it is in our interest. it is also in your interest and that of everybody, everywhere. thank you very much. bis central bankers ’ speeches | $ 10 pa every year $ 16 pa in years 1 – 5 cumulative cf $ 140 $ 100 $ 80 npv ( rational ) $ 73 $ 66 $ 63 $ 49 $ 52 $ 55 ranking ( rational ) npv ( myopia ) ranking ( myopia ) in the absence of short - termism, project a is selected. its payouts are back - loaded but significant ; it generates a net excess return of 22 %. 17 short - termism hits such long duration projects hardest. the impatient investor chooses project c. this project delivers lower cashflows but these are front - loaded. in npv terms, the project selected is the worst on offer, whereas the rationally optimal project ranks last. capital allocation is not just sub - optimally low ; it is also skewed towards sub - optimally short - duration projects. ( b ) asset pricing consider now a formal model of multi - period equity price determination. finance theory typically assumes that investors care about both the level and uncertainty of their wealth and are risk averse. in this world, agents require a premium to invest in a company. more formally, the expected return can be written as the sum of the risk free rate and a companyspecific risk premium for company j : 18 the actual return on an investment is the sum of the capital gain and the dividend yield : assuming an efficient market, actual returns differ only from expected returns due to a forecast error which is uncorrelated with expected returns. 19 using this assumption, we can substitute ( 4 ) into ( 3 ) to give an equation for the equity price. the return is $ 73 – $ 60 = $ 13, divided by the cost of investment. this is the case with the capital asset pricing model ( capm ) ( lintner ( 1965 ), sharpe ( 1964 ) ) and arbitrage pricing theory ( ross ( 1976 ) ). under the capm, for example, the company specific risk premium is equal to the company specific beta multiplied by the market risk premium. this means. that is, we assume that bis central bankers ’ speeches. so the price of the security is simply the expected price and dividend in the next period, discounted by the sum of the risk - free rate and the company - specific risk premium. by repeated substitution, this asset pricing equation can be written as a generalised form of ( 1 ) : the current share price is a function of future discounted dividend streams and | 0 |
an option, for brief periods of time, to counter adverse exchange - rate movements. intervention cannot stand alone, however. organisationally, this also implies that we must be able to adjust our interest rates when required, without being tied down by the meeting schedule of a monetary - policy committee. this is a well - known fact in the market and thus highly transparent. alternatively, one could say that our monetary - policy committee convenes every day and as required. central bank independence is a prerequisite in this respect. without it, the implementation of necessary measures can be endangered. we have a clear division of work regarding intra - marginal interventions. the board of governors, in collaboration with market operations, establishes a strategy based on current market conditions. the board of governors has access to real - time information on any interventions, but is not consulted in advance. interventions within one day are never capped, but subject to ongoing assessment in order to establish whether strategy adjustments are called for. the ecb is kept informed on an ongoing basis. in principle, one might ask whether the design of our stabilisation policy is appropriate? theoretically, there are two arguments for acting as we do. firstly, the institutions are designed to be in compliance with emu participation and thus also with the provisions of the treaty. at some future point in time we expect denmark to enter emu, and when it does, we will not have to alter our fiscal policy, since it is already based on government finances in surplus or close to balance. there is strong political support for this rule - bound division of labour in economic policy. the awarding of this year ’ s nobel prize in economic science demonstrates that the design of institutions is also considered to be of great theoretical importance. secondly, we know from the “ impossible trinity ” that in a world of free capital movements, it is not possible to set interest and exchange rates independently of one other. the central bank has one instrument, and one instrument only, at its disposal : the short - term rate. any attempts to stabilise the exchange rate while at the same time meeting other targets, are thus futile in theory. in practice, they spawn a number of problems which are aggravated the closer one seeks to stabilise the exchange rate. a number of central banks, including several from new eu member states, currently base their monetary policy on inflation targeting. in principle, the central bank seeks to approximately meet not only one, but two targets, an inflation target and an | bond market. we have seen a favourable response to the abf hong kong fund, and i hope that the paif, with its broader investor base, will also be well received by markets. i wish you every success in promoting the paif. thank you. | 0 |
speech, ‘ seven moments in spring ’ gives a vivid and excellent account from the central banking ‘ front line ’ of this extraordinary period. all speeches are available online at www. bankofengland. co. uk / news / speeches however, the first phase – the initial shock and adjustment to a far more challenging economic outlook in the near term – has passed. while it is fresh in the memory, it is important to ask : how has the financial sector weathered the initial storm? how have the reforms made a great cost and effort since the global financial crisis performed under stress? and, on the basis of what we have seen so far, which, if any, issues are likely to need further attention by the regulatory and supervisory community? we need, of course, to bear in mind throughout the scale of the current shock. we have to go back over 300 years to find a similar sudden decline in economic activity. there is no precedent in modern economic history for the economic impact of ‘ lockdown ’ and ‘ social distancing ’. nor should we forget that, unlike the global financial crisis, this shock originates in a natural disaster rather than in the failings of the financial sector itself. but the objective of the reforms of the past 10 years has not just been to make the financial system resilient to the normal run of events or to prevent the financial system itself from generating another crisis. given what we learned, 10 years ago, about the cost of a breakdown in the financial system, the objective of the reforms has been precisely to make the financial system resilient to a ‘ tail event ’ regardless of how and where that event originates. our aim has been first to ensure that whatever the shock, it is not amplified and made worse by weaknesses in the financial system and second, that well into the range of very severe adverse events – the so called ‘ tail events ’ – the financial system is able to support the real economy and dampen the shock. assessment so, measured against that yardstick, how well has the system performed so far? all speeches are available online at www. bankofengland. co. uk / news / speeches the centrepiece of the post gfc reforms has been to require banks to hold ‘ buffers ’ of loss absorbing capital so that they can absorb losses from a very severe shock without the massive deleveraging and the bank failures which caused so much economic damage 10 years ago. and within the banking system, to strengthen even further the core | the downside. they are mainly related to slow implementation of structural reforms in the euro area, geopolitical issues and imbalances in major industrialised countries. these factors have the potential to dampen sentiment for longer than currently assumed and delay further the recovery of private investment, employment and consumption. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 2. 2 % in december 2012, unchanged from november and down from 2. 5 % in october and 2. 6 % in august and september. on the basis of current futures prices for oil, inflation rates are expected to decline further to below 2 % this year. over the policy - relevant horizon, in an environment of weak economic activity in the euro area and well - anchored long - term inflation expectations, underlying price pressures should remain contained. risks to the outlook for price developments are seen as broadly balanced over the medium term, with downside risks stemming from weaker economic activity and upside risks relating to higher administered prices and indirect taxes, as well as higher oil prices. turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued. the annual growth rate of m3 remained broadly unchanged at 3. 8 % in bis central bankers ’ speeches november 2012, after 3. 9 % in october. m3 growth continued to be driven by a preference for liquid assets, as m1 growth increased further to 6. 7 % in november, from 6. 5 % in october, reflecting inflows into overnight deposits from households and non - financial corporations. following our non - standard monetary policy measures and action by other policy - makers, a broadly based strengthening in the deposit base of mfis in a number of stressed countries was observed. this allowed several mfis to reduce further their reliance on eurosystem funding and helped to reduce segmentation in financial markets. m3 growth was also supported by an inflow of capital into the euro area, as reflected in the strong increase in the net external asset position of mfis. there has been little change in credit growth, which remained weak in november. the annual rate of decline in loans to the private sector ( adjusted for loan sales and securitisation ) remained at – 0. 5 % in november. this development reflects further net redemptions in loans to non - financial corporations. net redemptions, however, were less pronounced than in previous months, amounting to €4 billion in november, after €7 billion in october and €21 billion in september | 0 |
reasons for these impediments to inclusion. when we examine barriers that individual consumers face in becoming financially included, we uncover trustworthiness and reputation. a federal reserve analysis of the most recent survey of consumer finances suggests that the primary reason individuals do not have a transaction account is a simple dislike of dealing with financial institutions. 10 if that dislike emanates from the reputation of the particular bank, or the reputation of the banking industry as a whole, policymakers and financial institutions will not be able to enhance financial inclusion without addressing the reputational context. reputation and innovation i ’ d like to imagine how the public ’ s sense of well - being might be enhanced by their interactions with financial institutions. if we paid attention to the experiences of consumers as they interact with various segments of the financial marketplace, what could we learn? if we see rigidities or imperfections in that interactive experience, what innovation might we imagine that would not only reduce reputational risk but create something new and potentially advantageous? technological innovation was the subject of a recent award ceremony in san francisco. the winners were companies with names like soundcloud, github, makerbot, techmeme, and snapchat, all of which presumably do amazing things, although i don ’ t understand exactly what. 11 but, evidently, the real buzz at the ceremony was over something much more mundane that i for one have no problem understanding. that buzz was around a pedestrian item – a new and improved coffee cup lid. 12 this lid, called foamaroma, reportedly provides exactly the right set of openings to maximize aroma and recyclability, while minimizing the effects of coffee spurting out too fast. the point here is that the innovator noticed something simple that others had not : many coffee shop employees don ’ t drink their coffee from cups with plastic lids like their customers do, so there was a market need that had not been recognized and then addressed. here i am not just talking about the mixed miracle of mobile banking and mobile payments or being able to take a picture of a check with a smart phone and it appearing in my checking account. that ’ s a topic that is amazing in its own right and worthy of a separate speech. i am talking about encouraging banks to pay attention to the banking experiences of their customers and finding process improvements or service elements that may lead to something seemingly mundane but valuable nonetheless. see federal deposit insurance corporation ( 2012 ), 2011 fdic national survey of unbank | non - financial sectors, both inside and outside the euro area. in addition, low capacity utilisation rates are likely to dampen investment, and unemployment in the euro area is expected to increase somewhat further, thereby lowering consumption growth. for these reasons, the euro area economy is expected to grow only at a moderate pace in 2010 and the recovery process could be uneven. the governing council continues to view the risks to this outlook as broadly balanced. on the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. confidence may also improve further, and the global economy as well as foreign trade may recover more strongly than projected. on the downside, concerns remain relating to a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector, renewed increases in oil and other commodity prices, the intensification of protectionist pressures and the possibility of disruptive market movements related to the correction of global imbalances. with regard to price developments, as expected, euro area annual hicp inflation increased further in december 2009 to stand at 0. 9 %, after 0. 5 % in november. the rise mainly reflects upward base effects stemming mostly from the drop in global energy prices a year ago. inflation is expected to remain around 1 % in the near term. looking further ahead, inflation is expected to remain moderate over the policy - relevant horizon, with overall price, cost and wage developments staying subdued in line with a slow recovery in demand in the euro area and elsewhere. in this context, it is important to emphasise, once again, that inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. risks to this outlook remain broadly balanced. they relate, in particular, to the outlook for economic activity and the evolution of commodity prices. furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years. turning to the monetary analysis, both the annual growth rates of m3 and loans to the private sector were negative in november, standing at – 0. 2 % and – 0. 7 % respectively. the concurrent declines to historically low growth rates recorded in these two series over the past months support the assessment of a decelerating underlying pace of monetary expansion and low inflationary pressures over the medium term. looking ahead | 0 |
principle of full cost recovery. it is anticipated that the price per transaction would not exceed 1 euro cent, with the aim of ultimately reaching a level of around 0. 5 euro cent. fourth, market participants would be able to connect to the service via a network service provider of their choice, as long as this network vendor meets the criteria that the eurosystem will establish. the eurosystem is committed to taking a decision in june 2017 on whether to develop the service. tips could commence operations in 2018. conclusion to conclude, we can look forward to 2017 being a year of decisive action for innovation in retail payments. the main deliverables at the consumer end of the payments chain are pan - european instant payment solutions and a service for ( person - to - person ) mobile payments using the mobile phone number as a proxy for the iban. in the payment service provider domain, a common set of technical, operational and business requirements for the development of an integrated market for payment initiation services is to be developed. in the market infrastructure domain, the eurosystem is committed to taking a timely decision on whether to build a settlement service for instant payments in euro in central bank money, leveraging the paneuropean nature of target2. 3 / 3 bis central bankers'speeches | philip lowe : opening statement to the house of representatives standing committee on economics opening statement by mr philip lowe, governor of the reserve bank of australia, to the house of representatives standing committee on economics, online, 6 august 2021. * * * good morning. thank you for arranging this hearing via videoconference. these hearings are an important part of the accountability process for the rba and my colleagues and i welcome this opportunity to explain our thinking and answer your questions. later this morning, the rba will be releasing our quarterly statement on monetary policy. i would like to highlight 5 key themes from this report. the first is that the australian economy has bounced back quicker and stronger than was earlier expected. the pre - pandemic level of gdp was regained in the march quarter, more than a year earlier than we had expected in august last year. but it is in the labour market where the recovery has been most remarkable. in june, the unemployment rate fell to 4. 9 per cent, which is lower than it was before the pandemic. there has been strong growth in jobs across most parts of the economy and job vacancies have been at record highs. and in stark contrast to the experience of most other advanced economies, labour force participation and the number of hours worked had both recovered to above pre - pandemic levels. these outcomes are testament to the effectiveness of the public policy response, including the early success on the health front and the ability of australians to adapt to changed circumstances. the economic policy response involved the public sector using its balance sheet to support the economy and keep people in jobs. fiscal and monetary policy worked together well and the response of australia ’ s financial institutions also helped. households and businesses also showed remarkable resilience and an ability to change how they do things. so, it is a positive story here. now to the second theme, which is that the recovery has been interrupted by outbreaks of the highly infectious delta strain of the coronavirus, especially in new south wales. the outbreaks mean that gdp is likely to decline in the september quarter. how large the decline will be depends on the duration of the lockdowns and whether there are further material outbreaks elsewhere in australia in the weeks ahead. as a rough rule of thumb, household consumption in areas that are locked down is typically around 15 per cent lower than it would be otherwise. in addition, the lockdowns have directly affected construction activity in nsw and delayed some investment plans. some increase | 0 |
. monetary policy ladies and gentlemen, let me turn to my last subject, that of monetary policy. 8. the mpc ’ s ultimate mandate is to safeguard the macroeconomic and financial stability of the country. in the last few years, the bank of thailand has maintained an accommodative monetary policy stance. mindful of imminent downside risks to growth, the policy rate was cut three times in the mpc meetings of may and november 2013, and again in march 2014. in these three meetings, the mpc were of the view that the reductions of policy interest rate were necessary to ensure sufficient support to the domestic economy. the current real policy interest rate, which is now in a negative territory, aims to help alleviate the financial burden on households and corporations, allowing them to withstand short - term shocks. 9. however, as the current policy interest rate is already low, further easing would not be without concerns. in the last meeting in april 2014, the mpc decided to maintain the policy at 2. 00 percent. the rationales behind this decision were that the current monetary policy stance was accommodative enough to support the economy as the prolonged political uncertainties were the main cause for risk to growth, not the financial conditions. meanwhile, room for further policy accommodation was diminishing, and any possible side effects of keeping the interest rate low for a protracted period, needed to be taken into account. 10. i would like to end my remarks by thanking you all again for your contributions to the thai economy and let me assure you that the bank of thailand will continue our works to ensure a stable and resilient financial and economic environment, conducive to economic growth of the country. thank you very much. bis central bankers ’ speeches | pongpen ruengvirayudh : the current economic situation and recent monetary policy developments opening remarks by ms pongpen ruengvirayudh, deputy governor for monetary stability of the bank of thailand, at the joint foreign chamber of commerce in thailand ( jfcct ), bangkok, 21 may 2014. * * * distinguished guests, ladies and gentlemen, 1. it is my pleasure to be back here at the joint foreign chambers of commerce ( jfcct ). first of all, i would like to thank jfcct for inviting me and would also like to thank all the members of jfcct for your continuing contribution to the economic development here in thailand. economic outlook 2. a great deal has changed both domestically and externally since i was here last year. with respect to domestic economy, the prolonged political stalemate has weighed considerably on confidence, exacerbating the already fragile economy. externally, the announcement of the us fed to scale down its quantitative easing program since may 2013 has led to turmoil in financial markets across emerging economies. today, i therefore would like to take this opportunity to share briefly with you my thoughts on the country ’ s economic outlook, the medium - term challenges we face and monetary policy of the bank of thailand. 3. when it comes to current economic assessment, the slowdown of the thai economy over the last year, in combination with uncertainty over the ongoing political conflict, is a growing concern for many. the nesdb two days ago announced that gdp growth in 1q14 contracted by 0. 6 % ( yoy ), compared to same period last year. signs of moderation were witnessed in various economic activities, such as consumption and investment, as well as in government spending, despite signs of a rise in some exports. as the political deadlock lingers, tourism has begun to feel the impact. in the last mpc meeting of april 23rd, the committee projected that the thai economy in will grow less in 2014 than the previously assessed at 2. 7 percent. this will be mainly due to the weaker - than - expected economic momentum in the first quarter of the year and the political impasse posing downside risks to domestic demand and tourism. however, the economy is expected to resume its normal growth in 2015. 4. notwithstanding the short - term headwinds, there are also causes for optimism. global economic activity has been firming up. growth has gathered momentum in the us, the euro area and japan. recent government ’ s | 1 |
no long - run effect on the growth rate. the exception is the fact that they may increase private sector ’ s yields and, in that case, public investment could have positive effects on growth. this ultimately can be seen as an improvement in productivity, and might help to understand why the fiscal policy effect on growth seems to be underestimated, as daniel cohen pointed out on his exposition. but, as we are aware, models are set for very limited environments and the real world is extremely complicated. santiso made this point clearly. i am not saying that we must forget about theory. instead, i am suggesting that, in very dynamic economies, we, policy makers, should relay as much on models as we do on good judgment. the world is not linear, we have many discontinuities in the form of shocks from many different sources. it would be too much to ask a model to be able to account for these regular irregularities and, further, to be able to extract sound policy advice from it. another relevant issue on fiscal policy relates to the appropriate moment for implementation, especially with regard to its implications for stability. in this respect, we need to identify better ways to put together long - run objectives with short - run ones. in the later case, we are more prone to recognize its role as a stabilizing force. however, the ability of fiscal policy on reducing the volatility of the economic cycle is under deep scrutiny, especially in the developed world. probably this has to do with the usual handing over of the stabilizing role to monetary policy. also, the budgetary process seems to be too rigid to be able to respond in a timely way. in developing economies, usually more exposed to external shocks that hinder long - run fiscal sustainability, the implementation of countercyclical policies seems to be more difficult. notwithstanding, there is mounting evidence on the relevance of fiscal policy as a stabilizing economic force. as we are witnessing today, when there are dual mandates and divergent paths, we, central bankers, are confronted with an extremely challenging task that calls for coordination with other economic policy instruments, that gives more room for fiscal action. as an answer to the budgetary rigidities, there is a growing case for fiscal rules. many countries are putting in place this kind of framework as an institutional device to preserve the countercyclical role of fiscal policy. we heard relevant experiences such the uk and chile, showing the applicability to both | don ’ t share my view, will i be able to get my money back? with a lender - of - last - resort added to the picture, i no longer need to know what others think. as long as the lender - of - last - resort is available, if i am correct in my assessment that the firm is solvent, then i can be assured that i will be paid back. this issue was particularly relevant during the financial crisis when counterparties even pulled back from firms that were widely viewed as solvent. the federal reserve stepped in and created funding backstops for a wide array of assets, such as commercial paper and asset - backed securities. this bolstered the confidence of counterparties in one another and restored market and funding liquidity. of course, this type of lending is only feasible to an institution that is deemed to be solvent with sufficient collateral available to pledge to the lender - of - last - resort so that it can safely secure its loan. in practice, all of these methods are in place to address funding liquidity risk. capital requirements have been increased ; there is much better reporting about how firms will do under significant stress tests ; liquidity requirements – such as the liquidity coverage ratio – provide a buffer that allows management more time to respond to problems ; and, if necessary, the central bank can act as the lender - of - last - resort to support market confidence and funding liquidity. so, should more be done to support funding liquidity? in my view, an important issue is to identify and address gaps in the lender - of - last - resort function. in the u. s., some significant gaps remain. for example, the federal reserve has a very limited ability to provide funding to a securities firm, even on a fully collateralized basis. the discount window is only available to depository institutions, and section 23a of the federal reserve act severely constrains the ability of a depository institution to pass discount window funding along to its securities affiliate. although the federal reserve may be able lend to a securities affiliate under its emergency lending authority under section 13 ( 3 ) of the federal reserve act, this is not a standing facility – it can only be established if “ unusual and exigent ” circumstances exist and the program or facility must have broad - based eligibility, among other requirements. 8 a program or facility has broad - based eligibility only if it is designed to provide liquidity to an identifiable market or sector of | 0 |
mervyn king : address by mervyn king to trades union congress address by mr mervyn king, governor of the bank of england, to the 2010 trades union congress, manchester, 15 september 2010. * * * president and congress i want first to thank you for inviting me to address congress. members of your general council have made a huge contribution to the bank of england by serving on our board – the bank ’ s court. carrying on that tradition today is brendan barber. by bringing a distinct and important perspective to our discussions, brendan has helped us through some extremely turbulent times. i am grateful to him. recent times have indeed been turbulent. after a decade and a half of stability, with rising employment and living standards, came the crisis and recession – the biggest economic upheaval since the great depression. before the crisis, steady growth with low inflation and high employment was in our grasp. we let it slip – we, that is, in the financial sector and as policy - makers – not your members nor the many businesses and organisations around the country which employ them. and although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come. thankfully, the costs of the crisis have been smaller than those of the great depression. but only because we learnt from that experience. an unprecedented degree of policy stimulus, here and abroad, prevented another world slump. even so, around a million more people in britain are out of work than before the crisis. many, especially the young unemployed, have had their futures blighted. so we cannot just carry on as we are. unless we reform our economy – rebalance demand, restructure banking, and restore the sustainability of our public finances – we shall not only jeopardise recovery, but also fail the next generation. to my mind, a market economy and its disciplines offer the best way of raising living standards. but a market economy cannot survive on incentives alone. it must align those incentives to the common good. it must command support among the vast majority who do not receive the large rewards that accrue to the successful and the lucky. and it must show a sense of fairness if its efficiency is to yield fruit. there was nothing fair about the financial crisis. it was caused not by problems in the real economy ; it came out of the financial sector. but it was the real economy that suffered and the banks that were bailed out | . your members, and indeed the businesses which employ them, are entitled to be angry. but however legitimate, anger will not produce change unless its energy is harnessed to a cool analysis of what happened and why. so i want to discuss the fundamental causes of the crisis before turning to current policy. the fall of the berlin wall in 1989 changed both politics and economics. within a few years, the former soviet empire, china and other asian economies, with their combined workforce of over a billion people, entered the world trading system as market economies. their focus on export - led growth allowed consumers in the west to enjoy rising living standards as the prices of traded goods fell. but the trade surpluses in emerging economies implied an outflow of capital. relatively poor countries were lending money to richer western ones – the reverse of the traditional model of development. in the process, countries like china built up huge holdings of foreign assets – running into trillions of dollars – matched by equally huge debts in the deficit countries. such massive imbalances were never likely to be sustainable, and so it proved. if the first fundamental cause of the crisis was the scale of imbalances in the world economy, the second was the inability of our banking system to absorb such large inflows of capital without taking excessive risk. in the five years leading up to the crisis, the balance sheets of the west ’ s largest banks doubled – mainly because banks lent more to other firms within the financial sector than to the wider economy. and the proportion of capital held by banks shrank so that their leverage – the ratio of total liabilities to equity capital – rose to unprecedented levels. immediately prior to the crisis, the leverage ratios of some uk banks approached 50. to say that was risky is an understatement : at such levels, a 2 % fall in the value of a bank ’ s assets is sufficient to wipe out its capital and render it insolvent. remuneration, especially the structure of financial sector bonuses, encouraged excessive risk - taking, and distorted the aspirations and career choices of too many talented young people. investors, banks and regulators had been swept up by the apparent success of modern finance. when investors realised that many of the assets that banks held on their balance sheets were opaque and hard to value, there was immediate and justifiable concern about the solvency of many of those banks. at the end of 2008, these two fundamental factors culminated in the worst financial crisis in history. in the | 1 |
some financial institutions, we should be willing to cut the funds rate to zero, should that prove necessary to provide the required support to the economy. should the funds rate approach zero, the question will arise again about so - called nontraditional monetary policy measures. i first discussed some of these measures in a speech last november ( bernanke, 2002 ). thanks in part to a great deal of fine work by the staff, my understanding of these measures and my confidence in their success have been greatly enhanced since i gave that speech. without going into great detail, i see the first stages of a “ nontraditional ” campaign as focused on lowering longer - term interest rates. the two principal components of that campaign would be a commitment by the fomc to keep short - term yields at a very low level for an extended period ( i ’ ll say more about this in a moment ) together with a set of concrete measures to give weight to that commitment. such measures might include, among others, increased purchases of longer - term government bonds by the fed, an announced program of oversupplying bank reserves, term lending through the discount window at very low rates, and the issuance of options to borrow from the fed at low rates. i am sure that the fomc will release more specific information if and when the need for such approaches appears to be closer on the horizon. i motivated today ’ s talk by reference to the may 6 statement. let me end the talk by discussing the role of such statements in both traditional and nontraditional monetary policy. a crucial element of the statement was an implicit commitment about future monetary policy ; namely, a strong indication that, so long as a substantial fall in inflation remains a risk, monetary policy will maintain an easy stance. particularly at very low inflation rates, a central bank ’ s ability to make clear and credible commitments about future policy actions - - broadly, how it plans to adjust the short - term interest rate as economic conditions change - - is crucial for influencing longer - term interest rates and other asset prices, which are themselves key transmission channels of monetary policy ( eggertsson and woodford, 2003 ). the question is, then, how can the fed sharpen the communication of its policy commitments? for example, how could the fed be more precise about how long it will maintain monetary ease or about the conditions under which it would change its policy? in my view - - and here i am quite obviously speaking for myself - - | improvement. but in recent years, there has been growing concern about the erosion at the margins of food self - sufficiency. a big challenge for sustaining food self - sufficiency is raising production which, given that available land is fixed if not diminishing, has to come from improved productivity. a host of cash and non - cash inputs is necessary to improve productivity, and an important one is agricultural credit. development experience shows that credit is an important determinant of value added in agriculture. a quick assessment by the reserve bank of the relationship between institutional credit to agriculture ( from commercial banks, cooperatives and rrbs ) evidences positive and statistically significant elasticity – every 1 per cent increase in real agricultural credit bis central bankers ’ speeches results in an increase in real agricultural gdp by 0. 22 per cent with a one - year lag. 1 further, the granger causality test ( based on lag length of 1 ) also indicates that the causality was unidirectional from agricultural credit to agricultural gdp. iii. looking back – major policies for promoting agricultural credit in order to look ahead, it will be instructive to look back on the policies that shaped the flow of agricultural credit over the last 60 years. in the first two decades after independence, the conduit for institutional credit to agriculture was the cooperative sector. although sound in concept, the cooperative sector failed to live up to expectations. with the nationalisation of commercial banks, the decade of 1970s marked the entry of commercial banks into agricultural credit. this period saw the introduction of the lead bank scheme and regulatory prescription of priority sector lending – two landmark development policies that survive even today. the 1970s also witnessed pilot experiments in specialised agency approach for directing credit to small and marginal farmers. the small farmers development agency ( sfda ) and marginal farmers and agricultural labourers development agency ( mfalda ) that were started in select districts of the country on a pilot basis had later been extended to the whole country as district rural development agencies, which now play a central role in coordinating and managing the several poverty alleviation initiatives at the district level. the economic reforms of the 1990s, starting with the first narasimham committee of 1991, emphasised financial soundness and operational efficiency of the financial sector – including rural financial institutions. the reserve bank gradually deregulated the interest rate regime to aid improvement in the operational efficiency of banks. the next two decades witnessed several important innovations in agricultural credit. both direct and | 0 |
will do what is necessary to guarantee price stability. this contributes to anchoring inflation expectations at levels consistent with price stability. 2. 2. 4 communication and the introductory statement the introductory statement of the eurosystem published shortly after the policy decision is announced provides the policy relevant information in a structured manner to the public in real time. it is the governing council ’ s main instrument of context - specific communication. the wording of the statement is agreed upon in the foregoing meeting, and thus it presents the consensual assessment of the governing council. it portrays the council ’ s deliberations through the lenses of the two pillar strategy. and it puts into perspective the linkages between data, decisions and stated medium - term policy objectives. the time lags in the transmission of monetary policy and the medium - term orientation of the eurosystem require describing how present and future information that comes in is processed. in this respect, we offer guidance about what academics would call the reaction function of the governing council. the introductory statement specifies the way we react to economic and monetary developments, analyse and judge shocks hitting the euro area, and view the outlook for economic growth and inflation as well as the associated risks over different time horizons. in doing so we constantly emphasise the forward - looking nature of our policy framework and the medium - term orientation with regard to our price stability objective. the first part of the statement entails our combined broad assessment of the information from both pillars. in the subsequent parts economic and monetary analysis is presented in greater detail and cross - checked with one another. i will only make some remarks on the latter sections. our assessment keeps economic and monetary analysis distinct because from an empirical perspective the information content of both pillars relates to different time horizons regarding the risks to price stability. having both, monetary and economic analysis instead of just cyclical information, one avoids the mistake of taking a too narrow view of the data. our broad - based and robust strategy thus prevents us from ignoring potentially relevant information. let me put these general remarks into a more specific context by referring to the statement we published today. as the president of the ecb announced today we decided to increase the key ecb interest rate by 25bp to 4 %. this decision was based on our assessment of the risks to price stability which we have identified from our economic and monetary analysis. our economic analysis suggests the following : regarding growth, incoming information clearly confirms that the euro area economy continues to expand at a pace significantly | bank in troubles. it also includes formulating credible resolution plans for credit institutions. this is all about getting the incentives right. no credit institution should be “ too big to fail ”. these are well - known areas of progress since the crisis, but we still have some way to go before the new and harmonised regulatory framework is fully in place. there are indeed still bumps on the road. at the current juncture, where the memory of the last financial crisis seems to be fading, page 8 of 9 it is important that we stay committed to the implementation of the new regulation. this will reduce the likelihood of a new financial crisis with all its detrimental effects on our economy. if we – through ongoing reforms and implementation of the new rules being adopted in basel and brussels – end up delivering on all three pillars of regulation, then i think we have learned our lesson from the crisis well. and once all these measures are in place, we will be ready to take the next step : removing unnecessary red tape by simplifying the remaining part of the regulation and easing some of the administrative burden on banks. the three - pillar system would leave it to market forces to keep the financial sector in check. as long as banks perform on all three parameters, the credibility and soundness of their balance sheets and business models will ensure their access to necessary capital and funding. and with the resolution regime in place, we no longer need governments to save banks with taxpayers ’ money. conclusion to conclude, this period of low interest rates and unconventional monetary policy has been fundamental for the economic recovery. while global economic developments are indeed strengthening, we should be prepared for lower growth rates going forward. structural reforms to lift potential growth and rebuilding of fiscal buffers are important. low interest rates have also left a legacy, affecting banks'earnings, central bank balance sheets, as well as asset - price valuations. as normalisation of monetary policy proceeds, we must be ready to carefully manage risks and spillovers. implementation of regulatory reforms and an effective macroprudential framework will be essential to contain financial stability risks. thank you very much for your attention. page 9 of 9 danmarks nationalbank national asset - liability management europe conference 1 march, 2018 global economy is strengthening positive output gaps in the us and euro area upward revisions to economic forecasts per cent of potential gdp real gdp growth, per cent year - on - year projection output gap closed us - 1 - 2 - 5 world imf projections jan 2018 us euro area | 0 |
achieved annual cpi inflation within our 1 - 3 percent target range now. such a policy shift would have been inconsistent with the committee ’ s remit and led to many other severe and persistent economic challenges. the committee could have commenced its tightening cycle earlier in 2021 than it did, in order to better contain core ( domestic demand - led ) inflation pressure. however, the subsequent rise in international food and energy prices would still have led to headline cpi inflation exceeding 6 per cent now. chart 1 : cpi inflation split between ‘ core ’ and ‘ headline ’ source : stats nz. the blue bars represent ex - food and energy inflation, an internationally comparable measure of core inflation. these examples are not excuses for inflation not being at 2 percent. they highlight the extent of the economic shocks that buffeted the economy, and the importance of being forward - looking when setting policy, with flexibility in achieving our targets. the lags between our monetary policy actions and inflation outcomes remain long and highly variable. other central banks are in the same boat, and we are learning the lessons together. in an absolute sense, actual and expected inflation is too high and needs to be reduced. however new zealand is in a strong macroeconomic position relative to most oecd nations. chart 2 – international inflation and unemployment rates note : the data are sourced from the oecd database. the latest available data points have been used ; inflation data for 2022q3 for all countries, and unemployment data for 2022q3 for all countries except switzerland for which 2022q2 data is used. turkey has been omitted since it is an outlier with an exceptionally high inflation rate of 81 %. we are in the lowest quartile for both inflation and unemployment in the oecd. we have a stable and well - functioning financial system that is resilient to a wide range of interest rate and employment shocks. 3 and, as outlined in our statement released yesterday, we have resilient household, public, and business sector balance sheets in aggregate. now turning to the monetary policy statement. the monetary policy committee yesterday increased the official cash rate ( ocr ) from 3. 5 percent to 4. 25 percent. the committee agreed that the ocr needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium - term. core consumer price inflation is too high, employment is beyond its maximum sustainable level, and near - term inflation expectations have risen. _ | trade in the asia / pacific region, so indirect effects are likely. international markets are an important source of funding for our domestic banks. although new zealand banks are currently well funded, bank funding costs are likely to increase to some degree over the coming year. this is likely to put some upward pressure on retail interest rates relative to the official cash rate ( ocr ). monetary policy will need to take account of such pressures. the reserve bank ’ s new prudential liquidity policy, introduced in 2010, has helped to reduce this vulnerability of the banks to liquidity shocks, by requiring banks to hold more “ core funding ” ( i. e. retail deposits and long - term wholesale funding ). however, the underlying vulnerability will remain until new zealand achieves a sustained improvement in national savings. part 2 : the domestic earthquake crisis while the whole world is focused on the european crisis, new zealand has been suffering from its own domestic dramatic events – the canterbury earthquakes. the earthquake to date the earthquakes have been a debilitating, chronic event, with a profound human and economic impact that will continue to be felt for many years. it has been 16 months since the first of the major earthquakes. the location and timing of the quakes has been quite acute. there has been an unusual propensity to liquefaction. significant aftershocks are still occurring – there have been more than 400 greater than richter magnitude 4, including more than 40 greater than richter magnitude 5 since september 2010 – and this has been a shock to everyone ’ s hopes for recovery and rebuilding. the scale of impacts and ongoing activity means the rebuild is unprecedented. the reserve bank is interested in the ongoing economic effects of this shock and how we expect rebuild to happen. bis central bankers ’ speeches i will focus on the economic effects and what we expect to happen, and the limitations surrounding what we are doing. to date, demolition has progressed and basic repairs have begun, and this will continue for some time. however, widespread reconstruction is on hold while aftershocks continue. when it does begin, major reconstruction is assumed to take more than five years, with housing and essential infrastructure first. reconstruction of commercial structures could be even more protracted. the availability of insurance has been an important factor in the timing of the rebuild. there are some unique or unusual aspects ( e. g., cbd closure, building code changes, land remediation, damage on damage ) which mean that assessing the value of claims is | 0.5 |
crucial importance of our capital markets. first, in a world of less leveraged banks, a business model of originate and warehouse – because that is what it became by the middle of the past decade – is unlikely to be viable. maybe a genuine model of originate and distribute will emerge, with something like agencytype market making and trading. second, holders of bank paper – especially bonds – will be living in a different world. they will have a big incentive to monitor the riskiness of banks. this is prospectively very positive. a couple of years ago i asked around london who were the best analysts of banks. pretty well all those named were current or past equity analysts. a measure of success of our reforms will be that some leading analysts will concentrate on debt rather than equity, on the downside risks : credit analysts. they will be needed. maybe there are some already. the upshot is that withdrawing the safety net from banks will require the other parts of the financial system to be sound, because they will have to stand on their own feet. it is sometimes pointed out that the insurance industry – other than aig – did not benefit from state support. but, of course, insurance companies holding bank debt were the direct bis central bankers ’ speeches beneficiaries of state support for the banking system. regulators of insurers – including, in this country, prospectively the bank of england through the prudential regulation authority – will need to take the changed regime for banks into account. we no more want insurance to be part of a “ socialised ” financial sector than banking. finally on the “ whats ”, a world in which bank debt is perceived to carry risk is a world in which, as i have said before, it may be helpful for banks ’ management to be remunerated partly through subordinated debt rather than just equity. management would then have a clear personal incentive to focus on and contain tail risks. i understand that the eu code on remuneration would already be consistent with this. what i am describing is not a scary prospect. it should, in fact, be liberating to establish a financial system based more firmly on the principles of the market. but it is a prospective world in which our capital markets will be at least as important as they were over recent decades. that underlines the necessity of the work on, for example, standards for central counterparties, on shadow banking, and on transparent and resiliently liquid markets. this | . generalised inflationary pressures in the economy are also subdued. core inflation measures are running at 1. 3 %. that is a legacy of a long period following the crisis in which unemployment has been high and wage growth muted. 14 with additional falls in petrol prices in the pipeline, inflation is likely to fall further over the coming months and turn slightly negative for a period. it should pick up again in twelve months or so as the direct effects of a lower energy price drop out of the inflation rate. the bank has the means, will and responsibility to return inflation to the 2 % target within the next two years. that is consistent with the average horizon over which the mpc has sought to return inflation to target following overshoots in the past and with the nature of shocks the uk currently faces. the uk economy is expanding solidly. over half a million jobs have been created in the past year and there are signs that wage growth is picking up. interest rates can be expected to begin to return towards more normal levels over the next few years. relative to what we and the markets expected a year ago, that path of interest rate increases can be expected to be more gradual and more limited. 4. what is needed in the euro area? the challenges for monetary policy are much greater in the euro area than in the uk. since the crisis, euro area nominal gdp has increased by a mere 5 % in almost seven years. consumer price inflation is already below zero. core inflation has been running at or below 1 % for over a year. this is potentially dangerous. low nominal growth is intensifying the euro area ’ s debt burden ( chart 4 ). 15 the fear of stagnation is holding back spending and investment. the ecb ’ s actions last week were timely and welcome. they were also important not least because they removed any residual concerns about whether it has the will or means to meet its price stability mandate. by doing so, the ecb has reduced tail risks associated with the debt overhang to the extent monetary policy can or should. unit labour costs rose by 0. 5 % in the year to 2014q3, and unit wage costs rose by 0. 9 % over the same period, based on the mpc ’ s backcast for uk gdp. aggregate euro - area household debt was 61 % of gdp in 2007 and stood at 64 % in 2013. the corresponding figures for non - financial corporates were 94 % in 2007 and 100 % in 2013 and | 0.5 |
is the federal funds rate, p is the percent change in the headline pce price index from four quarters earlier, and y is the output gap. the output gap in turn is approximated using okun's law ; specifically, yt = 2. 3 ( 5. 6 - ut ), where 2. 3 is the estimated value of the okun's law coefficient and 5. 6 is the assumed value of the non - accelerating inflation rate of unemployment, or nairu. see john b. taylor ( 1999 ), " introduction ", in john b. taylor, ed., monetary policy rules ( chicago : university of chicago press ), pp. 1 – 14. see david reifschneider and john c. willams ( 2000 ), " three lessons for monetary policy in a low - inflation era, " journal of money, credit, and banking, vol. 32 ( november ), pp. 936 – 66. bis central bankers ’ speeches economic recovery were to proceed much faster than expected or if inflation were to come in higher. in contrast, if the recovery faltered or inflation drifted down, the committee could provide additional stimulus using its unconventional tools, but doing so involves costs and risks. given the unprecedented nature of the current economic situation and the limits placed on conventional policy by the zero lower bound on interest rates, these issues of risk management take on special importance. more broadly, these considerations help illustrate why it would be imprudent to adhere mechanistically to the prescriptions of any single policy rule. such rules can serve as useful benchmarks for facilitating monetary policy deliberations and communications, but a dose of good judgment will always be essential as well. uncertainty and policy conditionality the policy prescriptions i ’ ve discussed thus far are conditioned on an illustrative baseline forecast for unemployment and inflation. because any economic forecast is inherently uncertain, the fomc ’ s forward policy guidance states explicitly that the committee “ currently anticipates ” that economic conditions are likely to warrant such a stance of policy. the guidance does not state that the committee will keep the funds rate exceptionally low until at least late 2014. i ’ d consider it completely appropriate to modify the specification of the forward guidance in response to significant changes in the economic outlook. potential modifications of the forward guidance can be illustrated by showing how the taylor ( 1999 ) rule responds to two different shifts in the outlook. figure 9 shows one scenario in which the recovery turns out to be | spread between the u. s. and the german sovereign yields is slightly narrower than it was at the end of third quarter 2014, but it remains historically large and attractive for investors. 2 hold that thought. now, if you read page c3 of today ’ s wall street journal, specifically the article titled “ watchdog warns of risks in markets ” about the risks of a repeat of the bond market turmoil of october and concerns about market stability as seen through the eyes of the office of the fomc ’ s “ policy normalization principles and plans ” released on sept. 17 is available at www. federalreserve. gov / newsevents / press / monetary / 20140917c. htm. over the past 15 years, the u. s. long rate has averaged about 40 basis points higher than the german long rate. since january 2013, the yield spread has widened by 110 basis points to about 1. 50 percent. over the same period, german 10 - year inflation expectations have dropped from 1. 9 percent to 1. 0 percent, or 90 basis points. u. s. 10 - year cpi inflation expectations have dropped from 2. 3 percent to 2. 2 percent – just 10 basis points. so it is worth noting that the drop in german inflation expectations relative to u. s. expectations can account for most of the widening of the yield spread between these two sovereigns. for investors who measure performance in terms of nominal returns or returns against nominal indexes, however, the currently widened spread is relatively attractive. bis central bankers ’ speeches financial research ( a bureaucracy of some 225 people and growing, created by the doddfrank law ), you would have noted the following sentences : “ a reduction in securities that are available to lend against in financial markets – such as treasury bonds and asset - backed securities – also is fueling... volatility. the securitization markets have shrunk since the financial crisis and the federal reserve has further reduced the amount of available securities by snapping up trillions of dollars in bonds in recent years. ” let me repeat that last clause : the federal reserve has further reduced the amount of available securities by snapping up trillions of dollars in bonds in recent years. to be precise, $ 1. 7 trillion of treasuries and asset - backed securities were purchased under qe3, on top of the $ 2 trillion purchased under the previous rounds of quantitative easing. to be sure, we have | 0 |
##ksbank has raised the interest rate in a number of stages since january 2006 and that these increases have not yet had a full impact on the economy. what has happened since the monetary policy meeting? so far my assessment is that outcome data and indicators in the euro area are largely in line with the assessment in the main scenario of the monetary policy report. my opinion is also that the indications of weak us growth at the beginning of this year and the continued problems on the housing and property markets are in line with the assessment in the main scenario. in the short - term perspective the assessment does not differ from my own. i am however more concerned that it will take longer before the recovery gathers pace. swedish gdp growth during the fourth quarter last year was somewhat stronger than expected in the monetary policy report. employment, measured as the number of hours worked, increased at an unexpectedly high rate and productivity growth last year was weaker than expected in the report. the national institute of economic research ’ s business tendency survey for february shows a clear slowdown in economic activity in the business sector as a whole. the business tendency survey suggests that employment has continued to increase, but at a slower rate. companies have adjusted their recruitment plans downwards ahead of the coming months. in contrast, the purchasing managers index displays a more positive view in february. the total index rose somewhat and during several months fluctuated around the level of 55, which is close to the average since 2001. however, at the same time, the survey shows that growth in employment has slackened and that companies have become less optimistic about output growth in the future. in january inflation in sweden was somewhat lower compared with the forecast in the monetary policy report. however, this was largely connected with the fact that the weights in the cpi basket, as at the end of each year, had changed. the effects of this change were unusually large this time. this could be interpreted as though consumers, to a greater extent than normal, have replaced goods and services that increased rapidly in price in their consumption. the so - called substitution effect was then greater than the riksbank and most other analysts had assumed. all in all, activity in the swedish economy during the final quarter last year appears to have been slightly higher than we expected in february. productivity on the other hand showed weaker development than in the assessment in the report. survey data clearly suggests however that a slowdown is occurring in most parts of the business sector and that the increase in the demand for labour is on the | a larger percentage of this trade with eu countries, than many eu countries have themselves. the eu's trade with the 10 candidate countries is increasing more rapidly than that with any other geographical area in the world. during the period 1995 - 2000, i. e. in just five years, this trade has doubled. the percentage of intermediate goods ( components ) for western companies is growing, as is the percentage of goods with a high technology content. there are numerous examples of how eastern european companies are specialising to adapt to sophisticated co - operation with western european companies. hungary is now competing with ireland to attract the assembly of computers and cars, estonia is a large sub - contractor to both swedish clothing firms and to ericsson, nokia and their suppliers. st eastern europe may be europe's major opportunity at the beginning of the 21 century, after having trailed behind the usa in terms of growth at the end of the 1990s. the usa's increase in growth in the 1990s was partly due to the us economy being internationalised more rapidly than before, with a larger percentage of gdp exposed to international competition than the eu. if eastern europe is now integrated more closely with western europe, this could create a more efficient division of labour and raise productivity in western europe. the challenge of eu enlargement eastwards could rouse decision - makers in western europe to a more intensive reform effort so they can fully take advantage of what will, in total, be the world's single largest market. there are parallels here to japan's success story in the 1970s and 1980s, when japanese industry, which had not yet subsided into its own structural problems, benefited from the interplay with the dynamic asian economies that complemented the japanese companies. just as the dynamic asian economies additionally formed a bridge to china, the candidate countries comprise a bridge to russia ( particularly the st petersburg region where sweden is concerned ), the ukraine and the other cis countries – areas that should also become a growing part of the eu's trading sphere. moreover, unlike many dynamic asian economies, the candidate countries'populations have always had a very high level of education ; in science and technology it is fully comparable with the level in the current eu member countries. the east european trade is particularly important to the swedish economy, which is already one of the most open and trade - dependent economies in europe, at the same time as we have strong historical ties to several eastern european countries, particularly the three baltic states and poland. already, central and eastern europe | 0.5 |
speeches | amando m tetangco, jr : protecting the consumers of financial services in the philippines keynote address by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( the central bank of the philippines ), at the launch of the banking code for consumer protection, bank marketing association of the philippines general membership meeting, manila, 24 october 2012. * * * mr. allan tumbaga, president of the bank marketing association of the philippines ( bmap ) ; mr. patrick cheng, president of chamber of thrift banks ; mr. edward garcia, president of the rural bankers association of the philippines ; mr. cesar virtusio, executive director of the bankers association of the philippines ; officers and members of bmap ; mbm peter favila ; former bap president gigi montinola ; friends in the banking sector ; colleagues from the bsp ; ladies and gentlemen, good afternoon. it is my pleasure to join you in launching the new banking code for consumer protection. the bangko sentral commends bmap, as well as the rest of the industry associations for working together in updating the code. this is tangible proof of your responsiveness and commitment to provide the best service possible to your clients. it is also evidence of your recognition that the lifeblood of the banking system comes from client deposits and investments, and that their trust is something that banks must strive to preserve. this is why bankers, from top management down to the frontline staff, must exercise prudence and vigilance in ensuring that banking operations are optimally carried out. the preservation of public trust is likewise the underlying imperative for the bangko sentral ’ s policy and regulatory actions. this drives us to constantly emphasize that the business of banking requires serious effort to keep operations within the bounds of safety, soundness and professional management. this practice, in itself, is already equivalent to protecting the consumers of financial services. however, responsible banking is more than just business savvy and prudent risk management. responsible banking means a conscientious focus on clients by putting their best interest at heart. it means recognizing that they deserve the highest standards of service. client - centered banking entails embedding consumer protection in business operations. products and services must be designed, priced and delivered in ways that match client needs. adequate measures must be in place to ensure that the consumers are not unduly disadvantaged by business processes. | 0.5 |
. the risk identified in the fsr is that market forces could compel banks to maintain higher capital ratios than necessary to guard against the possibility of worse economic outcome. this could lead banks to slow balance sheet growth, which would tighten lending conditions for both households and businesses and weaken the economy. ultimately, the financial institutions themselves would suffer from this self - fulfilling prophecy. given these concerns, the superintendent of financial institutions last month took the welcome step of giving canadian banks more flexibility by allowing them to raise the proportion of preferred shares that comprise their tier 1 capital from 30 per cent to 40 per cent. the lower absolute leverage of canadian institutions and the higher quality of their tier 1 capital should mean that they can expand lending faster than their international peers. the value of this virtually unique advantage of our economy should not be underestimated. the bank is working with its international counterparts to examine how the current regulatory capital framework may amplify fluctuations in economic and financial conditions. 7 under current rules, capital requirements are linked to the credit risk in an institution's portfolio. in an upturn, risk goes down, banks are required to hold less capital, and the growth of credit increases. the problem is that this can amplify swings in financial conditions and lead to the emergence of financial imbalances. recall the link between credit growth and future financial stress that i just mentioned. then, during the downturn when credit risk increases, banks are required to increase capital holdings, thus exacerbating the economic weakness and financial stress. this is the motivation for proposals to have capital requirements move procyclically. banks could be required to build up capital buffers during times of rapid credit expansion. this would strengthen their balance sheets and reduce the risk that financial imbalances will develop from overly easy financial conditions. during a downturn, banks could then draw down these buffers, which would reduce the need to liquidate assets or restrict loan growth at a time when credit conditions and asset prices are already under stress. in this way, capital requirements would moderate the ups and downs of the credit cycle – the reverse of what currently happens – reducing the risk of a future crisis. this macroprudential approach to capital requirements is tremendously important, but it is also complex, with a number of practical and logistical concerns. such a system could be accomplished by linking capital requirements to movements in credit - cycle indicators, such as loan growth and asset prices. for example, our research on the determinants | affects external competitiveness through appreciation of the real exchange rate. finally, as inflation rises beyond a threshold, it has an adverse impact on overall growth. the reserve bank ’ s technical assessment suggests that the threshold level of inflation for india is in the range of 4 to 6 per cent. if inflation persists beyond this level, it could lower economic growth over the medium - term. bis central bankers ’ speeches causes of recent inflation spike let me first identify the high inflation period. the wpi inflation rate accelerated from 7. 1 per cent in december 2009 to a peak of 10. 9 per cent by april 2010, thereafter it remained stubbornly close to double digits till november 2011. thus, we experienced two years of high inflation between january 2010 to december 2011. during this two - year period, wpi inflation averaged 9. 5 per cent per annum. all the major components of inflation contributed to this surge. the trigger for inflation first emanated from the failure of south - west monsoon of 2009, following which food prices rose sharply. concurrently, the global economy made a sharp recovery from the recession of 2009. as a result, global commodity prices including oil rose substantially. india being a net commodity importer, particularly oil, the intermediate prices rose. this quickly spilled over to non - food manufactured products inflation, making the inflation process fairly generalised. in the subsequent one year between january 2012 to december 2012 the average wpi inflation moderated to 7. 5 per cent led by all its major components except fuel and power ( chart 1 ). the high inflation during 2010 and 2011 was a combination of both adverse global and domestic factors as well as supply and demand factors. first, crude oil and other global commodity price trends as well as exchange rate movements are increasingly playing an important role in defining domestic prices. with the gradual external liberalization, the indian economy is much more open and globalised now than ever before. currently, over 85 per cent of demand for crude oil in india is met by imports. the imported indian basket of crude oil price rose from us $ 49 per barrel in april 2009 to an average of us $ 79 per barrel in 2010 and further to us $ 108 per barrel in 2011 and remained high at us $ 110 per barrel in 2012. global metal prices, reflected in the imf index, rose by 48 per cent in 2010 and again by 14 per cent in 2011 before moderating by 17 per cent in 2012. moreover, the rupee depreciated from an | 0 |
faster than norges bank presented as the most likely path at that time. in the interest of enhancing the transparency surrounding our conduct of monetary policy, we have published our own interest rate forecast over the past year and a half. according to the latest assessments of the executive board, the overall outlook suggests that it would be appropriate to raise the interest rate gradually to about 5 per cent in the course of this year and to a somewhat higher level in the period to summer 2008. at its meeting on 25 april, norges bank ’ s executive board decided to leave the key rate unchanged at 4. 00 per cent. the executive board considered the alternative of increasing the interest rate at that meeting. there is obviously considerable uncertainty surrounding the projections. the projections are based on our assessment of today ’ s economic situation, the outlook for developments in other countries, the functioning of the economy and the conditions necessary for reaching the inflation target. the chart shows that we must be prepared for developments in inflation and output that may differ from the central path. this may also imply that the interest rate may be lower or higher than our current projections. allow me to summarise : the fall in prices for imported goods and services and the increase in export prices have provided the norwegian economy with an appreciable income boost. the mainland economy has expanded rapidly in recent years. at the same time, inflation has remained low. increased efficiency and an ample supply of labour have made a contribution to these developments. there are now limited idle resources. monetary policy increasingly reflects that many norwegian enterprises are facing capacity constraints and that inflation will pick up. interest rates will continue to be raised gradually ahead so that we can assess the effects of interest rate changes and other new information about economic developments. thank you for the opportunity to present these assessments before answering questions. | household saving. the low level of saving also reflects a higher risk - willingness among households. household debt in norway is now almost twice as high as disposable income, and the debt to income ratio is higher than ever. the increase in household debt has occurred in tandem with a surge in house prices. non - residential property prices have also increased over the past years. there is now strong growth in credit to enterprises. at the same time, enterprises are rapidly building up their liquid assets. in the assessment of monetary policy, potential effects of asset prices, such as property prices and equity prices, but also of movements in the krone exchange rate, on the prospects for output, employment and inflation are taken into account. the krone exchange rate depreciated in the latter half of 2006, but has appreciated somewhat in 2007. under an inflation targeting regime, it is important to be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. interest rate developments in other countries are therefore of importance for interest rates in norway. early in this decade, inflation and economic growth were low in many countries. interest rates were cut. the rate cuts, in conjunction with strong growth in emerging economies, particularly in asia, led to cyclical turnaround. growth in the world economy is now the strongest witnessed in several decades. external interest rates have increased and are approaching a normal level. further interest rate hikes are expected in the euro area, sweden and the uk, while interest rates in the us may fall over the next year. in norway, the interest rate was reduced to a very low level in 2003 and 2004 when inflation fell and approached zero. there is a dynamic inherent in interest - rate setting. low interest rates stimulated demand and production and eventually led to prospects for higher inflation, to which we are reacting by raising interest rates. interest rate developments must be seen in the light of actual price developments and inflation, output and employment prospects. it normally takes some time for interest rates to have an impact on prices via changes in expectations, exchange rates or capacity utilisation. consequently, interest rate setting must be based on our expectations of developments ahead. the interest rate was raised in response to the strong increase in capacity utilisation and the associated inflation prospects. the interest rate has thus been increased well ahead of an actual rise in inflation. growth in capacity utilisation has been stronger than projected one year ago. the interest rate has thus been increased somewhat | 1 |
we took the view that unbalanced growth was better than no growth. the question now, of course, is where do we go from here. there have recently been encouraging, but still tentative, signs that the worst of the global slowdown may now be behind us, and that the us and eurozone economies are now beginning to bottom out and will pick up, perhaps to around trend, as we go through this year. some asian countries actively involved in the ict sector are showing a strong recovery, and even in japan financial markets have recently strengthened. as for the exchange rate, the euro, which has, as i say, been puzzlingly weak since soon after its introduction 3 years ago, still seems likely to strengthen eventually. as it becomes clearer that the international environment really is improving, and that external demand really is picking up, then we can look forward to better balanced and generally stronger growth in our own economy. that will in due course mean that domestic demand growth - and consumer demand growth in particular - will need to moderate if we are to avoid a build up of inflationary pressure. but let me be quite clear - that's not a warning, still less is it a threat. it is essentially just a matter of arithmetic! it's quite possible, even quite likely, that the necessary moderation of consumer demand - and i emphasise the word moderation - will come about of its own accord, given the gradual increase in unemployment we are currently seeing, and the build up of household debt. and provided it does not happen too abruptly, that would be the best possible outcome. but if consumer spending were not to moderate of its own accord, we would, in the context of strengthening external demand, clearly need at some point to consider raising interest rates to bring that moderation about. i don't suggest that the timing of any such move is imminent - that will obviously depend upon the timing and the strength of the recovery abroad and on the strength of domestic demand as we move forward. and that, subhash, is of course my answer to your second question - " what precisely will happen to interest rates? " in case any of you are confused, i think that what i said was that interest rates will rise - unless they fall or stay the same! mr president, there is no doubt that the past year or so has been a difficult time for the world economy which made life increasingly difficult for the internationally - exposed sectors of our own economy. we | user costs. digital currencies, including central bank digital currencies ( cbdcs ), present opportunities but also risks associated with privacy, illicit activity, and financial stability. the introduction of bitcoin and the subsequent emergence of stablecoins with potentially global reach, such as facebook ’ s libra, have raised fundamental questions about legal and regulatory safeguards, financial stability, and the role of currency in society. this prospect has intensified calls for cbdcs to maintain the sovereign currency as the anchor of the nation ’ s payment systems. moreover, china has moved ahead rapidly on its version of a cbdc. with these important issues in mind, the federal reserve is active in conducting research and experimentation related to distributed ledger technologies and the potential use cases for digital currencies. given the dollar ’ s important role, it is essential that the federal reserve remain on the frontier of research and policy development regarding cbdcs. as part of this research, central banks are exploring the potential of innovative technologies to offer a digital equivalent of cash. like other central banks, we are continuing to assess the opportunities and challenges of, as well as the use cases for, a cbdc, as a complement to cash and other payments options. there continues to be strong demand for u. s. currency, and we remain committed to ensuring the public has access to a range of payments options. we have been conducting in - house experiments for the last few years, through means that 1 / 3 bis central bankers'speeches include the board ’ s technology lab, which has been building and testing a range of distributed ledger platforms to understand their potential opportunity and risk. this multidisciplinary team, with application developers from the federal reserve banks of cleveland, dallas, and new york, supports a policy team at the board that is studying the implications of digital currencies on the payments ecosystem, monetary policy, financial stability, banking and finance, and consumer protection. to enhance the federal reserve ’ s understanding of digital currencies, the federal reserve bank of boston is collaborating with researchers at the massachusetts institute of technology in a multiyear effort to build and test a hypothetical digital currency oriented to central bank uses. the research project will explore the use of existing and new technologies as needed. lessons from this collaboration will be published, and any codebase that is developed through this effort will be offered as open - source software for anyone to use for experimentation. the objectives of our research and experimentation across the federal | 0 |
state one of the particular strengths of new york state is its diversity — 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 — 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 ’ 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 ’ 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 ’ 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 ’ t know is what the shape or timescale of the recovery will be. it ’ 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 | ##mic and foster conditions for a strong and sustained recovery. 1 see board of governors of the federal reserve system, federal reserve issues fomc statement, march 3, 2020 ; and board of governors of the federal reserve system, federal reserve issues fomc statement, march 15, 2020. 2 see board of governors of the federal reserve system, federal reserve issues fomc statement, april 29, 2020. 3 see board of governors of the federal reserve system, federal reserve announces extensive new measures to support the economy, march 23, 2020. 4 for announcements of the various programs, see board of governors of the federal reserve system, federal reserve board announces establishment of a commercial paper funding facility ( cpff ) to support the flow of credit to households and businesses, march 17, 2020 ; board of governors of the federal reserve system, federal reserve board announces establishment of a primary dealer credit facility ( pdcf ) to support the credit needs of households and businesses, march 17, 2020 ; board of governors of the federal reserve system, federal reserve board broadens program of support for the flow of credit to households and businesses by establishing a money market mutual fund liquidity facility ( mmlf ), march 18, 2020 ; board of governors of the federal reserve system, federal reserve announces extensive new measures to support the economy, march 23, 2020 ; board of governors of the federal reserve system, federal reserve will establish a facility to facilitate lending to small businesses via the small business administration ’ s paycheck protection program ( ppp ) by providing term financing backed by ppp loans, april 6, 2020 ; and board of governors of the federal reserve system, federal reserve takes additional actions to provide up to $ 2. 3 trillion in loans to support the economy, april 9, 2020. 3 / 3 bis central bankers'speeches | 1 |
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