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of key food items, and petitions for jeepney fare hikes due to higher oil prices. overall, the philippines remains in a sound position as its macroeconomic fundamentals underpin the economy β s recovery in 2022. the development budget coordination committee expects the economy to grow by 7. 0 to 9. 0 percent in 2022. risks and challenges remain as the emergence of highly transmissible covid - 19 variants delays the normalization of economic activities. nonetheless, the timely imposition of appropriate pandemic - related measures is necessary to control covid - 19 surges and arrest the spread of the omicron covid - 19 variant. the continued vaccination efforts and improving healthcare interventions in managing severe cases should usher the eventual transition of covid - 19 from pandemic to endemic. 2 / 3 bis central bankers'speeches on the external front, we are cognizant that ongoing policy normalization by major central banks could heighten volatility in financial markets. some central banks of major advanced economies, including the bank of korea, reserve bank of new zealand, and bank of england, have already raised key interest rates. while the shift to policy normalization of advanced economies could affect capital flows and lead to financial market volatility, this also reflects opportunities for economies like the philippines in terms of increased trade activities. nevertheless, the bsp remains steadfast in dealing with such spillover effects through our expanded policy toolkit. although the normalization of the currently ultra - accommodative monetary policy in advanced economies could lead to a rebalancing of global capital flows and depreciation of emerging markets β currencies vis - a - vis the dollar, the philippines is in a favorable position to navigate tightening global financial conditions given the manageable inflation environment and sufficient external buffers. the current level of gross international reserves β at usd108. 45 billion β is more than sufficient to withstand adverse external shocks. at the same time, structural flows from remittances, it - bpm revenues, and foreign direct investments are expected to further bolster the country β s external payments position. meanwhile, the bsp β s adherence to a market - determined exchange rate system and our macroprudential measures will continue to allow us to curb excessive fx volatility and respond to instability in financial markets. should external developments bring about risks to the domestic outlook for inflation and growth, the bsp stands ready to calibrate policy | applied by january 2, 2012 ; 2 / 3 by january 1, 2013 ; and the full risk weight by january 1, 2014. another major change is the increase in risk weight for real and other properties acquired exposures from 100 % to 150 %, which shall also be applied gradually for three years : 115 % risk weight shall be applied by january 1, 2012 ; 130 % by january 1, 2013 ; and 150 % by january 1, 2014. this revision is consistent with the bsp β s thrust of reducing the level of non - performing assets of banks to strengthen the overall asset quality of the banking system. another new feature in the revised framework is the capital requirement for operational risk which is based on 12 % of the average positive gross income of the bank for the past three years. the new guidelines also require important items to be disclosed in the annual reports and the quarterly published balanced sheet to enhance market discipline and transparency. the bangko sentral has considered delaying the effectivity of this new circular to 1 january 2012 to give concerned banks ample time to adjust to this new capital adequacy framework. and to make the transition more manageable, the implementation is on a staggered basis. ladies and gentlemen of the rural banking sector. it is important that you see these circulars not as mere issues of compliance undertaken to satisfy the regulator ; rather, it is our hope that there is a clear understanding and appreciation on your part that these measures are crucial to your growth and viability as a business. ultimately this will benefit your customers in terms of stronger social protection and your shareholders in terms of better returns. as it is, the rural banking sector as a whole is already on the right track, as far as operational bottom line is concerned. i base this on 2009 consolidated figures. in fact, even with the global financial crisis and isolated closures of some banks, consolidated return on equity of the rural banking sector in 2009 reached 12. 12 centavos for every one peso equity investment, even better than the commercial banking sector which posted an aggregate roe of 11. 38 centavos per peso of equity. total assets of the rural banking sector also continued to expand, rising from p146 billion in 2008 to p157. 4 billion in 2009. yearend 2009 figures also showed that rural banks β gross total loan portfolio was more than p98 billion, while deposits stood at over p105 billion. by any measure, these are respectable figures posted at a time | 0.5 |
round that buoy all too often before. and so we tightened policy, trying as best as we could through our tactics to minimise the unwanted upward pressure on the exchange rate. i know, chairman, only too well that this will be cold comfort to many of you in the exposed sectors - but there β s no point in pretending things are other than they are. the present imbalance means that we are trying to maintain stability in extraordinarily difficult circumstances. but i will make one final point. the inflation target we have been set is symmetrical. a significant, sustained, fall below 2Β½ % is to be regarded just as seriously as a significant, sustained, rise above it. and i give you my assurance that we will be just as rigorous in cutting interest rates if the overall evidence begins to point to our undershooting the target as we have been in raising them when the balance of risks was on the upside. there is now evidence that domestic demand growth is moderating, as it must do, and that the labour market is tightening more slowly than before. on top of that, as we said in our press notice last thursday - announcing that we had not changed interest rates - we recognise β that deterioration in the international economy could increase the risks of inflation falling below the target β. that is still not the most likely outcome in the eyes of most of us and given the real world uncertainties we can anyway never sensibly tie our hands. but there is no doubt in my mind that recent international developments have at least reduced the likelihood that we will need to tighten policy further. | would need neither to obstruct an improvement in the underlying performance of the economy, nor let the party get out of control. but that is what taking away the punchbowl is about. the same difficult judgments would face a combined monetary - and - macroprudential decision maker. and a separate monetary policymaker would have a shared interest in the downside risks to inflation not being exacerbated by the prospect of a credit bust following an unchecked boom. in those kind of circumstances, we should be helped by the tempo of the two endeavours differing. the fpc is less likely to make frequent course changes. that is reflected in its meeting routinely on a quarterly basis, contrasting with the mpc β s monthly meetings. so, as in the relationship between monetary policy and fiscal policy, the mpc will be able to take into account perturbations to aggregate demand from the fpcs interventions. both committees are part of the bank of england, so the executive of the bank will ensure that there is a common information base. fpc members are invited to the monthly briefing for mpc members. and vice versa, consistent with mpc members already being free to attend the internal financial stability briefings established over the past year or so. and finally, there will be a common chair, the governor, and overlapping membership. the members common to the two committees β four of us β will be in a minority on both to ensure that our perspective does not dominate either. how will the fpc operate and be accountable? although separate, the fpc will in many respects operate in much the same way as our monetary policy committee. there will be a schedule of regular policy meetings : four per year. a record of each will be published. and twice a year, the analysis underpinning our committee β s deliberations and decisions will be set out in the financial stability report. the role of the fsr will, therefore, become more like that of the bank β s inflation report in monetary policy. put crudely, warnings will carry greater weight under a regime where the bis central bankers β speeches fpc can actually take action. consistent with that, the fsr will in future be launched via a press conference. we expect, and hope, to be called regularly to give evidence to the treasury committee of the house of commons, and perhaps committees of the house of lords too. public hearings will help to keep financial stability issues in the public eye, | 0.5 |
the fed can use to implement monetary policy. thus, alternative implementation tools are required. this brings me to the next rate i want to talk to you about, the interest rate on reserve balances. depository institutions have access to three types of discount credit from their regional federal reserve bank : primary credit, secondary credit, and seasonal credit, each with its own interest rate. we use the term β discount rate β as a shorthand for primary credit rate. most credit at the discount window is done at the primary credit rate. for more information, please refer to board of governors ( 2022 ). the list of banks that borrow money from the discount window is published with a two - year delay. discount window borrowing increased recently following the failure of silicon valley bank and signature bank. on march 12, 2023, the fed announced a bank term funding facility to complement the funding available at the discount window ; see board of governors ( 2023 ). for a detailed discussion about the stigma associated with discount window borrowing, please see carlson and rose ( 2017 ). - 5implementation tool 2 : interest on reserve balances close to the bottom of the demand curve is the interest on reserve balances rate denoted by iorb rate in figure 2. this is the interest rate the fed pays on reserves eligible institutions keep at federal reserve banks. 8 this interest rate is the primary tool the fed uses currently to implement monetary policy. 9 in the graph, observe that the federal funds rate is close to this rate. the economic force that keeps these two rates close to each other is called arbitrage, the simultaneous purchase and sale of funds ( or goods ) to profit from a difference in price. arbitrage keeps prices of financial instruments with similar payoffs close to each other. 10 i will illustrate how arbitrage works with an example that makes it clear why the federal funds rate cannot be much lower nor much higher than the interest on reserve balances rate. arbitrage keeps rates close to each other let β s assume that the federal funds rate is 4 percent and the interest on reserves is 4. 5 percent. banks will quickly realize that they can borrow funds in the federal funds market at 4 percent and deposit those funds at the fed and earn the interest on reserve section 19 ( b ) ( 2 ) of the federal reserve act requires each depository institution to maintain reserves against certain liabilities of the bank. the board β s regulation d ( reserve requirements of depository institutions in | mr bergstrom reports on why sweden has changed its stabilisation policy regime speech by mr villy bergstrom, a deputy governor of the sveriges riksbank, the central bank of sweden, at the 140th anniversary of the establishment of norrbarke sparbank in smedjebacken, darlana on 21 may 1999. it is obvious to everyone that we live in a different economic world than we did ten years ago. ten years ago, registered unemployment was 1. 3 per cent and inflation 7 per cent. now inflation is nonexistent while total registered unemployment is over nine per cent. why has such a drastic change in the economy taken place? what is characteristic for the new economic conditions? are there alternatives to the policies now being carried out? background since the second war, sweden, in principle, had a fixed exchange rate. however, in practice, it was not particularly fixed after the mid - 1970s. from autumn 1976 to autumn 1982, sweden devalued five times. i will come back to the sorry history of 1982 - 92. in autumn 1992, the fixed exchange rate was abandoned and the krona immediately fell by 11. 5 per cent. thereafter the krona declined further so that the total fall in the exchange rate to the lowest position of 13 december 1993, was 31. 5 per cent. note that the starting point for the fall in the value of the krona in november 1992 was a cost level that was 25 per cent lower, measured in common currency, than it had been in 1976. this was a failure for stabilisation policy. a good illustration of this is the industrial worker β s wage in 1975 and 1994. in 1975, an industrial worker earned 27 kronor per hour on average while in 1994 the hourly wage was sek 95. however, if 1975 β s hourly wage is recalculated at the 1994 price level, the 1975 wage was worth sek 107 in 1994. thus, twenty years of trade union struggle when nominal wages rose by an average of 6. 9 per cent per year, resulted in a decline in real wages of 12 kronor per hour in 1994 β s prices. however, it was not just trade union policy that failed. it was just as much a failure for the government β s stabilisation policy. how could it have been so bad? stabilisation policy activism the large devaluation of 16 per cent that the newly - appointed palme government carried | 0 |
- ground stocks fell from about 30 per cent in 1996 to 23 per cent in 2000. the central banks across the world were holding about 33, 000 tonnes as at the end of 2000 as compared to about 36, 000 tonnes at the beginning of 1991, which reflects substantial sale by many european central banks. the reserve bank of india ( rbi ) holds 357. 75 tonnes of gold forming about 6 per cent of the current value of its total forex exchange reserves. our reserves management as regards gold can be termed as passive and conservative as rbi does not sell gold or trade in gold. recent developments in india wgc has estimated that the annual indian demand for the precious metal in recent years has been in excess of 800 tonnes. most of it appears to be meant for jewellery fabrication, and the rest, estimated at 10 to 15 percent, is possibly meant to meet demand on account of investment and industrial processes. a major step in the development of gold markets in india was the authorization in july 1997 by the rbi to commercial banks to import gold for sale or loan to jewellers and exporters. initially, 7 banks were selected for this purpose on the basis of certain specified criteria like minimum capital adequacy, profitability, risk management expertise, previous experience in this area, etc. the number of banks later went upto 18. on a review, since five banks had not evinced adequate interest in this business in terms of activity, the rbi did not find it appropriate to renew their licences for this purpose. at present, 13 banks are active in the import of gold. the quantum of gold imported through these banks has been in the range of 500 tonnes per year. import of gold by banks authorised by the rbi has succeeded to a large extent in curbing illegal operations in gold and in foreign exchange markets. it has also resulted in reducing the disparity between international and domestic prices of gold from 57 per cent during 1986 to 1991 to 8. 5 per cent in 2001. the import duty on gold, which was rs. 220 per ten grams upto january 1999, was increased to rs. 400 per ten grams, and with effect from april 2001 has been reduced to rs. 250 per ten grams. the estimates of duty realised from gold imports indicate an annual amount varying from about rs. 1, 000 to rs. 2, 000 crore per annum since 1997. even though the country consumes more than 800 tonnes of the metal every year, the system of assaying and | a wide range of asset prices, to be forward - looking in its aim of maintaining low and stable inflation, and to be ready to respond to changes in the signposts. the remarkable degree of stability that the uk economy has enjoyed over the past decade has been less evident over the past twelve months. growth slowed and inflation rose above target. but after a period driving along a smooth new highway, a change to a more challenging road surface does not, as i said recently to the house of lords economic affairs committee, mean that the wheels are coming off the economy ; rather, it tells us that there are somewhat more and somewhat larger bumps on the road. monetary policy can try to avoid some of the worst bumps, but it cannot ensure a flat road surface. nevertheless, growth has picked up and inflation has fallen back close to its 2 % target. our central view remains one of steady growth and low inflation. but there are risks to that central view emanating from the rest of the world and we shall watch developments in world capital markets carefully. by keeping inflation close to the target, and so doing what it can to maintain economic stability, the monetary policy committee aims to allow you and other businesses to follow the signposts which guide a market economy. i cannot finish without reminding you that tomorrow is the 300th anniversary of the birth of benjamin franklin, arguably the greatest of the american founding fathers. during his lengthy stays in england, benjamin franklin visited kent many times. to celebrate his tercentenary the american brewing association has produced a new recipe for franklin β s favourite beer. the hops recommended for the recipe are kent goldings. despite the fears of the demonstrators on hop saturday in 1908, the kent hop industry has not disappeared altogether. the area under planting is certainly much smaller, but research in centres such as wye college has produced the new hedgerow hops which are recognised worldwide. employment in kent, though, has moved into new and more productive sectors. adapting to changes in the external environment is not easy for any of us - whether running a business or setting monetary policy - but if we do adjust the benefits will accrue, if not to everyone immediately then to the great majority over the years to come. | 0 |
data, is now estimated to have been about 3. 7 million barrels per day higher than the iea projected in july 2003. 6 ( for reference, total global oil consumption this year has averaged about 81 million barrels per day ). a significant part of this unexpected increase in oil consumption, about 2. 2 million barrels per day, reflected quickly growing oil demands in east asia, notably china. however, an ongoing economic expansion across both the industrialized and the emerging - market economies has also contributed to the world β s growing appetite for oil. on the supply side, the production of oil has been constrained by the available capacity and by geopolitical developments. with oil consumption and prices rising briskly, saudi arabia and other members of the organization of petroleum exporting countries ( opec ) have promised to pump more oil. however, the relatively limited increases in production delivered so far by opec members, together with non - opec production that has fallen a bit below projections, have raised concerns that the spare production capacity available in the near term may be severely limited, perhaps below 1 million barrels per day. interacting with the limits on capacity, and contributing to the exceptional volatility in oil prices of recent months, are uncertainties about the reliability and security of oil supplies. of course, the oil - rich middle east remains especially volatile. but political risks to the oil supply have emerged in nations outside oil futures and other oil - related derivatives are traded on the new york mercantile exchange ( nymex ) and the international petroleum exchange ( ipe ) as well as over the counter. i should acknowledge that oil futures prices have a less - than - stellar record in forecasting oil price developments, but they are probably the best guide that we have. chinn, leblanc, and coibion ( 2001 ) find that futures quotes are unbiased predictors of future spot prices, though not very accurate ones. saudi arabia and other opec members, like the iea and most participants in the oil markets, did not anticipate the surge in consumption we have seen this year either. opec actually reduced its production targets in 2003 and again in early 2004 out of concern that weak oil demand would cause price declines. the middle east as well, including russia, venezuela, and nigeria. weather also has taken a toll, as recent hurricanes affected the production and distribution of oil on the u. s. gulf coast. because neither the demand for nor the supply of oil responds very | all types of shocks and can at times be misleading about what is happening to the underlying rate of overall inflation. and if increases in headline inflation prove more persistent than initially expected, central bankers must be vigilant to ensure that they do not become embedded into expectations and thereby generate substantial second - round effects on inflation. finally, because price stability ultimately involves control of overall, headline inflation, which after all is the inflation measure that households really care about, central bankers should and do pay attention to headline inflation as well as to core inflation measures. a core inflation measure should not be seen as a substitute for thorough and careful analysis of the forces that are driving our economy and the inflation process. more details on inflation forecasting at the board are in bernanke ( 2007 ). references aoki, kosuke ( 2001 ). " optimal monetary policy responses to relative price changes ", journal of monetary economics, vol. 48 ( august ), pp. 55 - 80. armour, jamie ( 2006 ). " an evaluation of core inflation measures ", bank of canada working paper 2006 - 10 ( ottawa : bank of canada, march ). bagliano, fabio c., and claudio morana ( 2003 ). " measuring u. s. core inflation : a common trends approach ", journal of macroeconomics, vol. 25 ( june ), pp. 197 - 212. bean, charles ( 2006 ). " commentary : impact of globalization on monetary policy ( 40 kb pdf ) ", speech delivered at the federal reserve bank of kansas city 30th annual economic symposium, jackson hole, wyo., august 26, www. kansascityfed. org / publicat / sympos / 2006 / sym06prg. htm. bernanke, ben s. ( 2007 ). " inflation expectations and inflation forecasting ", speech delivered at the monetary economics workshop of the national bureau of economic research summer institute, cambridge, mass., july 10, www. federalreserve. gov / newsevents. blinder, alan s. ( 2006 ). " monetary policy today : sixteen questions and about twelve answers ", in s. fernandez de lis and f. restoy, eds., central banks in the 21st century. madrid : banco de espana, pp. 31 - 72. bodenstein, martin, christopher erceg, and luca guerrieri ( 2007 ). " optimal monetary policy in a model with distinct core | 0.5 |
because the euro area is a union of nation - states with strong national traditions and preferences. while there was sufficient consensus to share a currency, economic and financial policies remained organised largely at the national level. the global crisis has revealed the vulnerabilities in this arrangement. loose coordination of policies neither ensures stability nor does it facilitate effective crisis management. the institutional design of the euro area therefore has to be reviewed to put our economic and monetary union ( emu ) on a more secure footing. bis central bankers β speeches but how should this be done? there are two possible paths. the first is to go β back to the past β, to make the original design work better. the second is to develop a new architecture that properly reflects lessons of the crisis. in my view, the first path is not viable. we have seen that the euro area is too interconnected for economic and financial policies to be a purely national responsibility. we must find ways to guarantee that national decisions do not harm other members of the monetary union. in the event of a crisis, there should be effective mechanisms for crisis management. and where necessary, this means going beyond coordination, because this is a matter of europaische innenpolitik. we have also seen that maintaining stability requires common institutions that can react to events. the euro is the world β s second most important currency. it makes up 25 % of the world β s foreign exchange reserves. 1. 5 trillion euros are traded daily on the world β s foreign exchange markets. and it is used daily by the 330 million citizens of the euro area. a currency that plays a central role in the lives of so many people has to be managed with effective decision - making. the second path, designing a new architecture, is therefore the only way forward. the key challenge today is to present a vision to europe β s citizens of what this would entail β which is precisely the theme of this conference. together with the presidents of the european council, the european commission and the eurogroup, i have been given the task of working on such a vision for the next decade. we have aimed to be as pragmatic as possible : to establish what are the minimum requirements to make the euro function to its full potential. and our conclusions are both realistic and attainable. member states will have to pool more sovereignty in selected policy areas. this is a clear lesson of the crisis. but we will not need to cede all powers to brussels. sovereignty will only | extreme swing in the economic cycle. the real fed funds rate was kept negative for a span of nearly three years, from november 1974 to september 1977. the low interest rate environment led initially to a drop in the unemployment rate. but rising inflation and asset bubbles eventually dictated a restrictive monetary policy implemented by fed chairman paul volcker and his fomc colleagues. in the end, the nation paid a high price for the low rates of the 1970s, when unemployment reached 10. 8 percent in the recession of the early 1980s. in the drive to achieve price stability and stable growth, monetary policy is a powerful tool. certainly lowering interest rates is the appropriate monetary policy response to the onset of an economic recession and rising unemployment. but it is also a blunt instrument that has a wide set of intended but also unintended consequences that can and have worsened economic outcomes including misallocation of precious resources, inflation and long - term unemployment. that is why we want to return to a sustainable long - term equilibrium policy rate, starting soon. the economy is improving and policy should reflect that fact, carefully but confidently. although we find ourselves in a unique environment, history offers us some important lessons. if we do not learn from past mistakes, we will find ourselves repeating them yet again. | 0 |
jose manuel gonzalez - paramo : on the occasion of the inauguration of the euro exhibition in barcelona speech by mr jose manuel gonzalez - paramo, member of the executive board of the european central bank, on the occasion of the inauguration of the euro exhibition, barcelona, 2 february 2009. * * * dear jose, ladies and gentlemen, it is a pleasure for me to be here in these wonderful premises of banco de espana in barcelona to celebrate with you the occasion of the 10th anniversary of stage three of the economic and monetary union ( emu ) and of the adoption of the euro. we are also here to inaugurate β the euro exhibition β, presenting the euro banknotes and coins through a range of innovative features, which we hope will be appreciated by the public in barcelona. 1. first 10 years of the euro on 1 january 1999 the third stage of emu began with the irrevocable fixing of the exchange rates of the currencies of the 11 member states initially forming the euro area. monetary authority for the new currency was transferred to the governing council of the european central bank. the euro became the currency of over 300 million citizens of europe. the number of countries participating in the emu grew over the years. today, euro banknotes and coins are legal tender in 16 of the 27 member states of the european union, and used daily by almost 330 million citizens in the euro area. slovakia has recently become the 16th member of the euro area. following a two - week dual circulation period during which payments could be made using either euro or slovak koruna, the euro became the sole legal tender in slovakia on 17 january 2009 and the changeover was very smooth. today, the single currency is used in an area that stretches from cyprus to ireland and from portugal to finland. as you know, the euro cash did not enter into circulation until 1 january 2002, when it replaced the banknotes and coins of the national currencies like, in the case of spain, the peseta. to support the cash changeover, which was one of the largest logistical operations undertaken in europe, extensive information campaigns were successfully run to acquaint citizens with the visual appearance of the euro banknotes and coins. the euro is widely recognised as an international currency of major significance. some 12 billion banknotes circulate in europe and beyond, representing a face value of more than eur 700 billion. the number of euro banknotes in circulation continued to grow since the initial cash | changeover in 2002 and their value has almost tripled since the end of the changeover period. with this success story in mind, we are confidently looking forward to the anniversaries to come, which will be marked by the full consolidation of the euro and its further adoption by new member states. 2. the euro exhibition today we inaugurate the euro exhibition here in barcelona. the exhibition was previously on display to the public in bratislava to mark the cash changeover in slovakia. other locations on its journey throughout europe will follow. the primary objective of the euro exhibition is to give the public at large the opportunity to gain a thorough overview of the euro banknotes and coins and to raise its awareness of their security features. it features, inter alia, modules on the history of money, the design elements of euro banknotes and coins and the functioning of banknote security features. it also includes a range of interactive elements to raise the visitors β attention via touch screen applications such as games, films or security feature showcases displaying counterfeit banknotes. you are cordially invited to make use of all the elements which will contribute to make your visit a learning, interesting and amusing experience at the same time. you will certainly notice that the euro exhibition features a common design : the β ages and styles of europe β. as you know, there are windows and doorways depicted on the front of each euro banknote and bridges on the back. these architectural elements symbolise communication and connection between the people of europe and between europe and the rest of the world. furthermore, bridges are regarded as a means to connect the past with the future, symbolising thus the way to a common european future. a children β s corner has been established to meet children β s special expectations. it refers to our children β s booklet, specially drafted for primary students. to ensure that the children understand and enjoy the story in their mother tongue, the spanish translation of the story was tested in colegio san jose de getafe, madrid, which we appreciate very much. it is a pleasure for us to present this booklet to the public in the newly translated versions for the first time in spanish and in all co - official languages. the booklet tells an exciting short story, set against the realistic background of a counterfeit case and explains, in an appropriate way for children, how to verify the authenticity of a euro banknote. as an additional educational benefit, its multilingual format can arouse the children | 1 |
consolidation will continue. the government has shown its commitment to this process by continuing to adjust expenditure where the revenues fall below budget. additionally, the government has demonstrated its commitment to fiscal transformation with the commencement of the phased implementation of the central treasury management system, which will result in more efficient management of public sector finances. the process to divest the government of public bodies that are a drag on the budget has achieved major milestones and is continuing. with these developments, there is going to be a continuing decline in the fiscal deficit and the debt ratios. lower demand for financing from the domestic market by the government will continue to result in more and more resources being available for private sector credit. repeated success in meeting the quantitative targets under the imf - sba has led to increasing confidence about the prospects for the economy. we saw this in the strong preference for jamaica dollar assets during the fiscal year and the steady appreciation in the exchange rate. the bank ended 2010 with strong net international reserves ( β nir β ) of bis central bankers β speeches us $ 2. 17 billion, an increase of us $ 442. 1 million for the year. gross international reserves, at us $ 2. 98 billion, represented 23. 7 weeks of projected goods and services imports. in the context of the relatively stable market conditions during the year, the bank lowered the interest rate on its 30 - day certificate of deposit by 375 basis points to 6. 75 per cent by endfebruary 2011. in addition, the bank increased the pool of loanable funds in the system by reducing the cash reserve requirement for both jamaica dollar and foreign currency deposits. market - determined interest rates also trended down during the year at a faster pace than the central bank β s policy rate. despite emerging challenges from rising international commodity prices, headline inflation continued its progress towards the achievement of the target for the fiscal year of 7. 5 to 9. 5 per cent. statin released its inflation report for february ten days ago although this may come as a surprise to you as the news media appear to have concluded that the results in the report are not sufficiently newsworthy to be reported in a timely manner. interestingly, i read a statement in one of today β s newspapers that food prices rose by 25 per cent last year in an environment where the minimum wage is j $ 4, 500 per week. well, not exactly. in the same inflation report for february that was released by statin ten days ago, prices in the food category | further out. the mortgage interest rate is projected to decline to just above 4 percent. even though there is substantial uncertainty about the future level of the neutral rate of interest, we must be prepared for a higher interest rate level than we had been accustomed to over the past decade. 2 / 3 bis - central bankers'speeches chart : inflation will slow and unemployment will increase somewhat given the current policy rate path, we expect inflation to slow further and approach 2 percent towards the end of 2027. growth in the norwegian economy is expected to pick up slightly in the years ahead, but we expect some increase in unemployment. the decline in some business sectors, especially the construction industry, may continue for a while longer before conditions turn around. many consumers have less money to spend, which has made it difficult for some people to make ends meet. interest expenses are set to remain high, but wages are expected to rise faster than prices. most households will then see their spending power increase and a debt burden that will be easier to bear. the economy may move on a different path than we now envisage, and the policy rate path may then also change. the policy rate is now likely sufficiently high to bring inflation back to target within a reasonable time horizon. but we cannot say this with certainty. if capacity utilisation increases or the krone depreciates, wage and price inflation could remain elevated for longer. in that case, there may be a need to raise the policy rate. on the other hand, if unemployment rises more than expected or price inflation declines more rapidly, the policy rate may be lowered earlier than we now envisage. inflation has come down. this is good news. but we must keep in mind that the last mile of disinflation may take time. to maintain confidence in the inflation target, we must do our job and bring inflation back to the 2 percent target. we will then be able to reap the benefits of our efforts. 3 / 3 bis - central bankers'speeches | 0 |
, petroleum - related exports, which account for about a quarter of mainland exports, will likely decrease due to a decline in global offshore investment. it will likely take time for the effects of lower oil prices on the mainland economy to become fully visible. so far, unemployment has only shown a slight increase. a flexible labour market appears to be curbing the rise in unemployment. employment growth has also remained firm, although an increasing mismatch between the number of unemployed and job vacancies points towards more slack in the labour market. in regions and sectors closely linked to the petroleum sector, unemployment has increased. bis central bankers β speeches weaker growth prospects may reduce the willingness of mainland firms to invest. on the other hand, improved competitiveness will provide a basis for expanding capacity in some sectors. in addition, housing investment is likely to support overall investment activity. house price inflation remains high. growth in household consumption has been moderate in recent years and household saving has reached a high level, in spite of low interest rates. the pension reform and uncertainty surrounding economic developments have probably induced households to increase saving. overall, we expect growth in private consumption to remain moderate ahead and the saving ratio to remain at a high level. debt - to - income ratios for norwegian households are high, reflecting a long period of rapidly rising house prices. low interest rates on loans to households are expected to fuel house price inflation, while prospects for weaker income growth and somewhat higher unemployment may have a dampening impact further ahead. for some time, based on experience from the recent financial crisis, financial stability considerations have to some extent influenced monetary policy. put in other words : we have been β leaning against the wind β. as a small open economy, norway is highly influenced by economic developments abroad. many advanced economies have experienced a difficult time since the global economy was severely hit by the financial crisis. global growth is expected to pick up. the fall in oil prices is a positive factor for the world economy. but the picture is mixed. in the us, the recovery seems to be on a firm footing. developments in the uk and sweden, two of norway β s major export markets, have also been positive, although inflation remains a challenge. the situation in the euro area appears to be more problematic. a large portion of the workforce is unemployed and production equipment stands idle. inflation is worryingly low. through winter, a number of central banks have undertaken unconventional monetary policy easing, and market expectations with regard to key rates in trading partner countries | bought by the oil companies. consequently, these operations should not have any impact on the real exchange rate. in 2015, government spending of petroleum revenues over the budget is estimated to be higher than the revenues received in kroner. government petroleum revenue spending over the budget has increased over time, in pace with the increasing size of the fund. and recently, the government β s net cash flow from the petroleum sector started to decline. as a consequence, norges bank will move from a position of selling surplus kroner to selling foreign currency in order to finance petroleum revenue spending. however, the effect on the real exchange rate will still be determined by the amount of petroleum revenues spent over the fiscal budget. it is not norges bank β s intention to influence the krone exchange rate through these foreign exchange transactions. accordingly, purchases are distributed evenly through the year. at the end of each month, norges bank announces the size of the daily purchases or sales of kroner for the coming month, based on estimates of oil revenues and fiscal spending. the amount can be interpreted as our best estimate for the remaining months of the year. the economic outlook let me now turn to the outlook for the norwegian economy. we are about to leave behind us 15 golden years. the norwegian economy has made use of favourable tailwinds and seized the opportunities offered. the other side of the coin is an economy that has become increasingly dependent on oil, and thereby more vulnerable to changes in oil prices and petroleum revenues. and as we know, oil prices have fallen by nearly 50 percent since last summer. the vulnerability manifests itself in several ways. a large share of the business sector and the labour market is linked to the petroleum sector in norway and in other countries. revenues received from the state β s direct financial interest in the petroleum sector ( sdfi ). bis central bankers β speeches petroleum investment, which has long been an important driver of growth in the norwegian economy, is now expected to fall in the years ahead. the fall in oil prices in recent months has accelerated and amplified an announced decline in the activity level on the norwegian continental shelf. lower oil prices reduce oil company cash flows and reduce the profitability of new investments. field development projects that are now underway will be affected, although to a limited extent. in addition, some new projects may be postponed or cancelled. lower demand for goods and services from the petroleum sector has spillover effects on the mainland economy, with a dampening effect on labour demand | 1 |
the impact of crises, and to quickly and efficiently resolve them once they have materialized. bis central bankers β speeches public intervention in financial markets commonly implies a series of functions that can be classified into the categories of prevention and resolution. among the category of prevention one can mention the activities of monitoring and assessing risks ( two crucial functions of financial supervision ), and the application of a regulatory policy. a regulatory policy implies the use of rules ( i. e. regulations ) but also of preventive action ( e. g. to enforce rules ), and corrective action ( e. g. to lean against imbalances ). the resolution policy involves the use of rules, which are important to guarantee prompt and efficient resolution processes, the resolution and cleaning of institutions in trouble, and the correction of imbalances. many tools are used to fulfil the objectives of public intervention in financial markets : prudential regulation, control and supervision ( i. e. preventive tools ), and resolution mechanisms and emergency liquidity assistance ( i. e. resolution tools ). the set of all these functions and tools provides a financial safety net to the financial system. in general, the functions and tools of the financial safety net are allocated to different agencies. for example, it is generally the central bank which is responsible for the provision of emergency liquidity assistance. other responsibilities like prudential regulation, supervision, and deposit insurance are allocated inside the central bank in some jurisdictions and outside in others. in order to determine the most efficient governance structure for the financial safety net policymakers should consider the agencies explicit conflict of objectives, the potential conflict of opinions about key issues ( e. g. the intervention or the liquidation of a financial institution, the provision of short term emergency assistance, the authorization of mergers and acquisitions ), and the need for coordination. in addition to this, policymakers should consider the pros and cons of the unification versus the separation of financial safety net agencies on the grounds of their relative expertise, capabilities, reputation, credibility and institutional strength. moreover, the financial safety net affects and is affected by other functions like the conduction of monetary policy and fiscal policy. these effects should also be considered when designing financial stability institutions. we come back to this point in section 5. 3. micro - and macro - prudential perspectives sound risk management are needed not only at individual institutions but also at the financial system as a whole. the severity of the recent global financial crisis can only be explained | covid - 19 pandemic, there was a sharp fall in fixed capital investment and labour supply, which still remain below pre - pandemic levels. the weakening of human and physical capital will likely weigh on medium to long - term growth prospects of the region in an environment of reconfiguration of supply chains, elevated debt levels, tighter financing 3 unctad, ( 2022 ) world investment report. conditions and uncertainty related to trade and technology transfer. over the period 2022 - 30, the region β s potential output growth is projected by the world bank to slow to 4. 6 per cent a year from 6. 2 per cent a year in 2011 - 21. falling tfp growth is estimated to account for about three - fifths of the slowdown, with the remaining two - fifths attributable equally to slowing labour supply growth and capital accumulation. economic activity in south asia rebounded strongly from the recession caused by the pandemic, when its large informal sector was hard hit by job and income losses. output in the region is on track to grow by about 6. 0 per cent a year between 2022 and 2030, faster than the 2010s β annual average of 5. 5 per cent and only moderately slower than growth in the 2000s. this will make it the fastest growing emde region in the remainder of this decade as demographic trends expand the working age population, the investment rate remains elevated, and productivity growth continues to benefit from the shift of resources away from agriculture and informal activity. although population growth is expected to moderate, labour force growth will be supported by stabilisation of the participation rate after two decades of decline. south asia β s potential growth is projected to slow only marginally to 6. 1 per cent a year on average in the 2020s from 6. 2 per cent a year in the 2010s. the forecast of potential output growth through 2030 is underpinned mainly by a projected recovery in tfp growth. in central asia 4, the pandemic and the war in ukraine have taken a grievous toll, reversing recent progress in raising living standards and leaving deep economic wounds among vulnerable populations. the region β s output is estimated to have shrunk by 0. 3 per cent in 2022 and is expected to flatten in 2023, weakened by erosion of labour productivity, muted investment and scarred human capital. potential output growth is 4 which overlaps with emerging europe in the world bank β | 0 |
the lower part of the cycle. for some workers, especially those in the early years of their working life, its effects can be very persistent. | . the oecd put it well, when saying governments " stand at a critical juncture, steering environmental and digital transitions while facing increased polarisation within their countries, heightened geopolitical tensions as well as the social consequences of economic developments ". 8 you could swap " public bodies " for governments and the sentence would remain fully accurate. add the fact that we are in an era of misinformation β which ai will turbocharge β and it's clear how challenging the course will be. but in the central bank, we know what it is to lose trust β we're acutely conscious of the regulatory failings that contributed to the financial crisis β and how hard it is to regain it. we also know that trust in central banks can decline even when they are implementing policy ostensibly in 3 / 4 bis - central bankers'speeches line with their mandates. which makes it all the more necessary that we fight for trust. in a world that is growing ever - more complex, the policy solutions will increasingly involve trade - offs. as agustin carstens, general manager of the bank for international settlements, has noted : " - trust fuels the legitimacy of policies. with trust, the public will be more willing to accept actions that involve short - term costs in exchange for long - term benefits. in sum, trust is vital for policy effectiveness. " 9 our next steps are to continue to implement our open & engaged approach to stakeholders, and to continue our empirical work with others on the subject of trust in central banks and regulatory bodies. we held a seminar in may with the academics who led peritia, an eu - funded research project on trust in public expertise, and we anticipate doing further work with those academics, as well as determining how best we can apply oecd drivers. thank you. 1 link to strategy is here 2 for more information on the production of euro banknotes, see : https : / / www. ecb. europa. eu / euro / banknotes / production / html / index. en. html 3 see : https : / / www. centralbank. ie / publication / corporate - reports / strategic - plan 4 https : / / www. centralbank. ie / publication / behaviour - and - culture - report 5 see : https : / / paschaldonohoe. ie / central - banktcd - conference - culture - diversity - the - way - forward - for - corporate - governance - in - ireland / 6 | 0 |
central bankers β speeches bank of canada research suggests that the main reason behind these improvements has been the increased sensitivity of provincial population growth to labour market opportunities β canadians are going where the jobs are. 6 finally, wages are flexible in canada. results from the bank of canada β s wage setting survey indicate that, while firms are typically reluctant to reduce base wages, incentive pay offers a possible source of downward flexibility in total compensation. 7 about 90 per cent of canadian private sector firms currently use short - term incentive pay plans. 8 such risk sharing is an effective way to maintain employment and profitability during uncertain and volatile times. a resilient financial system an important lesson from europe β s experience is the critical role that a sound financial system plays in the monetary policy transmission mechanism. it helps to ensure that changes in central bank policy are transmitted effectively to all regions to support growth and employment. when a sizeable share of a country β s banking sector has ( or is perceived to have ) deficient capital and liquidity positions, credit doesn β t flow to where it is needed. recent experience in europe has shown the particular problems a monetary union faces when banks become less willing to lend across borders within the union. this fragmentation has reinforced the links between sovereign and bank solvency. as european leaders now recognise, without major reforms to create a banking union, emu is fundamentally weakened. in canada, the existence of largely centralized prudential regulation and deposit insurance pools risk across the country. when combined with a large number of national banking institutions, this greatly reduces the risk that localized economic and financial disruptions impair provincial solvency. since the strength of the canadian banking system has been well documented, i will concentrate on canada β s sound regulatory framework. its key elements are : first, supervision is focused and proactive. consolidated prudential supervision is not burdened by other objectives such as the promotion of home ownership or community reinvestment. the staged intervention approach of the office of the superintendent of financial institutions ( osfi ) means it works with institutions to correct problems at an early stage, while they are still manageable. second, efforts to promote financial stability are coordinated. federal authorities consistently share information, coordinate actions, and pool advice to the federal government on financial sector policy. most notable in this regard has been a series of actions to slow the rate of increase in household debt. the bank of canada also works with provincial authorities to implement a number of global initiatives. third, canada has clear and | were the end of the story for the world economy, but it would be too simple. there clearly are some important imbalances we still have to contend with, particularly in the united states. the most often mentioned of these are high share prices, the high us dollar and an overhang of capital expenditure, particularly in technology. it is worth looking a little more closely at them. when share prices were on the way up, and setting new highs for the price - earning - ratio, many people were expecting that this would eventually be followed by a crash like 1987, if not one of 1929 proportions. that scenario seems less likely now that we have about 15 months of correction behind us. while the fall in the nasdaq was large enough ( 70 per cent ) to warrant the term " crash ", and its preceding rise the term " bubble ", the share market as a whole has retreated in a more orderly fashion. the fall in the broad indices such as the s & p 500 or the wilshire has been about 20 per cent over the past 15 months, and the price - earning - ratio has come down from a peak of 36 to 26. now, i do not want to get into the business of forecasting future share prices β the only point i wish to make is that the risk of a fall severe enough to frighten people into stopping spending must be smaller now that we have some of the correction behind us, than when we had none. the high level of the us dollar, and the fact that it is still tending to rise, cannot be helpful to the us economy. it must be harming us exporters and those who compete with imports, and no doubt is one of the reasons why us manufacturing output has fallen for each of the past eight months. but these effects on trade flows, while unhelpful to the united states, must be helpful to its trading partners including ourselves. so it is hard to see the trade effects of the strong us dollar being harmful to the world economy as a whole. where the rising dollar is harmful is in reinforcing the widely held view that you cannot go wrong in buying us assets β if their value goes down, at least you will gain on the exchange rate. this sort of thinking does distort capital flows and can lead to misalignments in asset markets. the area where i think a us imbalance is having unfortunate consequences both inside and outside the united states is in physical investment. in the year | 0 |
time ; and ( ii ) that they could be very costly β they always lead to a loss of output and private savings, they carry heavy fiscal costs associated with public bailouts, and they could lead to a systemic loss of confidence in the financial system which is difficult to rebuild. examples covering both advanced and developing countries suggest that while financial crises differ as to their details, they always reflect the confluence of some underlying economic vulnerabilities and a specific crisis trigger. the underlying vulnerabilities could be any of a number of things : poor risk management by financial institutions ; mis - matches between assets and liabilities ; excessive leveraging of financial institutions, poor liquidity management or inadequate capital. the trigger could be anything, depending on the country β terms of trade shocks, the collapse of an asset ( housing ) bubble, or macro - economic setbacks resulting from exogenous shocks. sometimes the specific event that can trigger a crisis is unpredictable and crises themselves are also unpredictable. in fact, many triggers are exogenous and we can do very little about them. in these circumstances, our focus therefore should be on identifying and addressing underlying vulnerabilities early so as to reduce their incidence. recognition of this reality β the need to detect emerging problems has led to the development of early warning signals and more recently to the preparation of financial stability reports by central banks. some international financial institutions, have compiled a set of macro - prudential indicators to serve as barometers of the health and stability of the financial system and to provide early warning of potential problems. our monitoring system in the caribbean has been rudimentary at best, on non - existent and fragmented, in many of our regional jurisdictions. this is unfortunate since any robust analysis would have shown up a whole range of vulnerabilities in all of the financial institutions of the clf conglomerate. some of the more glaring vulnerabilities were : ( i ) a mis - match between assets and liabilities, with mostly short term liabilities paying above market interest rates, matched by long term assets ; ( ii ) excessive leveraging of balance sheet assets, reducing their net value ; ( iii ) a preponderance of inter - group transactions ; ( iv ) the total absence of a risk management framework ; and ( v ) inadequate capital. of course, these vulnerabilities were compounded by : ( i ) a weak legislative and regulatory infrastructure, in which clf, the parent holding company was not subject to | inflation target. this indicates that the market previously assumed that in the long term price inflation in norway would be on a par with that in the euro area, i. e. around the ecb β s objective of less than 2 per cent rate of increase in prices. the members of norges bank β s executive board are collectively responsible for the bank β s decisions. the executive board meets every three weeks. at every second meeting, the executive board discusses monetary policy in depth. decisions regarding changes in the interest rate will normally be made at these monetary policy meetings. the executive board discusses the economic outlook at a separate meeting three weeks before the inflation report is presented. on the basis of preliminary projections for the report, the executive board assesses the outlook for inflation two years ahead and the uncertainty surrounding these projections. the following day, the executive board summarises its discussions and assesses the consequences for monetary policy for the next four months. this assessment constitutes an important internal reference when the executive board later makes a decision regarding the interest rate. it will also provide the basis for our external communication through speeches and the media. growth forecasts have been revised downwards as a result of the interest rate increase in july. gdp growth will pick up, but will remain below the growth potential next year. the internationally exposed sectors of the economy are moving on a different path from some sheltered industries. whereas private consumption is buoying demand growth, scaling back is expected in the manufacturing industry. frictional unemployment is expected to rise. high real wage growth is resulting in divergent developments between private and public consumption. a large share of the growth in public spending will go to covering higher labour costs in the central and local government sector. as a result there will be little scope for increased activity in the public sector, and instead high growth in private consumption. a time horizon of two years for interest rate setting allows monetary policy to contribute to stabilising production. this horizon prevents monetary policy in itself from causing unnecessary fluctuations in the economy. as an alternative, we could have sought to achieve the inflation target of 2Β½ per cent using a time horizon of six months to one year. we would then have had to reduce the interest rate sharply this summer. this would have amplified the pressures in the norwegian economy that are so clearly reflected in wage developments and household demand for loans. in all likelihood, this would have required marked interest rate increases one to one and a half years ahead. strict inflation targeting of this type would thus have | 0 |
growth β including demand for services β continued to accelerate through 1997, and that was the background to the tightening of monetary policy in 1997. we could not avoid that tightening, despite the uncomfortable sectoral imbalance within the economy. to have done so would, as i have said elsewhere, have put the whole of the economy β including the internationally exposed sectors we would have been trying to shelter β at risk of accelerating inflation, so it would not have helped even those sectors in anything other than the short term. meanwhile, in the euro - zone things were very different. demand and output growth in the major continental economies remained generally fairly sluggish for much of the period, only really starting to pick up towards the end β helped by relatively weak exchange rates. unemployment, which is much the most urgent and important issue confronting europe, actually increased ; and, despite some improvement over the past year or so, it remains at or close to double digit rates in all the largest euro - zone countries. inflation against this background remained low, tending lower β as did interest rates. the position is complicated in the euro - zone by a reviving political debate about just how much of the unemployment reflects supply - side weaknesses requiring structural reforms, and how much it reflects inadequate overall demand. the outcome of that debate will be crucial to the future evolution of the euro - zone. but in the immediate situation there was no reason to suppose that continued growth of demand and output was inconsistent with effective price stability in the zone as a whole. so much for our different starting points. but over the past year, the world β and i mean the world β has changed quite dramatically for both of us in that we have both been affected by the international economic slowdown. this started, in fact, with the financial disturbances in asia in the latter half of 1997, but even as late as the beginning of last summer it seemed as if it might have only limited impact on the overall world economy. the imf, for example, was still then projecting 3 β 3ΒΎ % world growth in 1998 and 1999 respectively β which was certainly a setback compared with their forecast of over 4 % just six months before β but it was hardly catastrophic. since last summer it has become increasingly clear that things are likely to be significantly worse than that. the financial collapse in russia, deepening recession in japan, the long battle β then sudden defeat last week β in brazil β s attempt to hold its exchange rate, and fluctuating fears of possible | derived from the european framework of harmonized legislation, from 2005 onwards listed companies, and banks and financial corporations will have to draw up their financial statements in compliance with the international accounting standards. in italy the process of adapting our legislation, including civil and tax law, is under way. the new capital accord for banks known as basel 2 will entail changes in the way financial statements are presented. it will come into force between the end of 2006 and beginning of 2007 and will introduce more efficient methods of defining the capital employed to hedge different types of risk that reflect the best business practices at international level. i affirm once again that, on the basis of existing studies, we do not expect there to be adverse effects on corporate financing, particularly of small and medium - sized firms. in fact the adoption of the new system will certainly encourage banks to become more efficient, improve their ability to assess creditworthiness, and better satisfy the needs of the business sector. at the same time firms must provide banks with exhaustive information about their assets and revenues, and the structure and scope of their activities at home and abroad. all this indicates that accountants will be expected to perform an increasingly important role, and highlights the advisory nature of their work and its contribution to dynamism. they must always be guided by ethics and professionalism. * * * a joint effort is needed, based on a climate of complete trust and cooperation between firms, banks and institutions, to help lay the foundations for economic recovery, foster a reversal of the current trend, and encourage new models of growth to emerge in southern italy as well. the people, the intelligence, the savings and the business ability to do so are all present. i wish to thank you once again and wish you pleasure and success in the performance of your work. | 0 |
average of 11 - 12 per cent over the past few years to 8 per cent in 2009. it is widely felt that what we are witnessing now is not so much a crisis in the financial system but a crisis of confidence on the part of household and businesses, and it is global in nature. the data coming out for the developed countries are shocking indeed. the u. s., for example reported job losses of over half a million in december, pushing the unemployment rate to 7. 2 per cent, the highest in 16 years. it is projected that unemployment in the us could soon reach double - digits. in germany, the unemployment rate now stands at close to 9 per cent : in the u. k., unemployment has reached ( 6. 0 per cent ) and in the e. u. it is 8. 4 per cent. to address the deepening recession and mounting job losses, most of the advanced economies are adopting enormous stimulus programs. β’ president - elect barack obama β s economic recovery and investment plan includes a fiscal stimulus of around us $ 775 billion, in addition to bank support programmes of another us $ 1. 5 - 2 billion. β’ germany has unveiled a major fiscal stimulus package which includes cuts in taxes and a programme of public investment infrastructure. β’ japan also unveiled a massive economic recovery package. β’ even china recently announced a new fiscal stimulus plan, of around us $ 586 billion aimed at boosting the rapidly slowing economy. our caribbean neighbours have also been seriously impacted by the financial crisis and the global recession. in jamaica emigrants β remittances ( the second largest foreign exchange earner ) fell by an estimated 17 per cent last year. an even larger fall is expected in 2009, along with a sharp reduction in tourist arrivals. there have been hotel closures and the postponement of hotel investment projects in the bahamas, the oecs, barbados and elsewhere in the region. late last year, the barbadian government unveiled an economic stimulus package aimed at protecting jobs and supporting the tourism industry. jamaica has also announced a stimulus package involving tax cuts, loan facilities for vulnerable sectors and infrastructural spending. here in trinidad and tobago, we have seen an interesting change in our circumstances over the past few months. our once thriving energy sector is facing sharply reduced external demand and anemic prices. oil prices have plummeted from over us $ 140 per barrel in june 2008 to around us $ 40 per barrel currently, while gas | narrow list of complaints to which banks and insurance companies have agreed. in thinking about the statutory backing for the ombudsman β s office, it may be necessary to have a flexible legal framework where the foundations are enshrined in law, but scope and operational arrangements are set in regulations. independent governance is a second, critical design issue. ideally, the office of the financial services ombudsman should be independent of consumers and of the financial services industry, whose disputes are being handled. in deciding cases, the ombudsman also needs to be independent of the central bank, because the ombudsman is acting as an alternative to the courts. so it is helpful for the ombudsman office to have an independent board, with a balanced membership reflecting persons with an understanding of regulation, the financial industry and consumer protection. a third design issue revolves around the coverage of financial businesses. a significant number of complaints received by the ombudsman are outside its terms of reference. the office received 409 banking complaints which were outside its terms of reference in 2003 β 2012, 179 more than the qualified banking complaints it received for review. in 2011 β 2012, the office received 1, 173 enquiries regarding complaints outside the banking and insurance sectors. many complaints which fall outside the ombudsman β s terms of reference relate to bank fees and pricing of bank products and services, lapsed insurance policies, insurance premium charged, personal injury for motor vehicle accidents, credit union shares and loans, and general pain and suffering. expanding the ombudsman β s mandate to include credit unions, the unit trust corporation, pension schemes and mutual funds would go a long way in strengthening the credibility of the scheme. finally, in order to deliver on this expanded mandate the ofso would need to be better resourced with the skill sets and talent as its jurisdiction and workload grows. the staff complement in the ombudsman β s office are currently seconded from, or approved by, the central bank. once a statutory financial services ombudsman is established the ombudsman would appoint the staff who would work for the scheme and not be seconded from the central bank. the central bank and the ofso will be reviewing the draft report. once finalized and accepted, the final report will form the basis for a proposed policy document ( ppd ) on upgrading the regime of financial consumer protection. the ppd will serve as the starting point for initial discussions and | 0.5 |
a slowdown in overseas economies and intensification of supply - side constraints, while upward revisions were made for fy2023 and fy2024. d. price developments in japan next, i would like to talk about price developments in japan. the year - on - year rate of increase in the consumer price index ( cpi ) for all items less fresh food has accelerated to 2. 4 percent ( chart 9 ). this acceleration reflects the fact that ( 1 ) the effects of the reduction in mobile phone charges, which had held down inflation, have essentially run their course, ( 2 ) energy prices have continued to register a relatively high increase, and ( 3 ) firms have been increasingly passing on higher raw material costs to selling prices, especially for food products. other indicators that capture the underlying trend in consumer prices have exhibited the following developments. the trimmed mean of the year - on - year rate of change in the cpi - calculated by excluding items belonging to the upper and lower 10 percent of the price change distribution - - has increased to the range of 1. 5 - 2. 0 percent due to price rises in a wide range of food products. however, in terms of the mode, which is the inflation rate with the highest density in the price change distribution, the rate of increase has been relatively marginal, in the range of 0. 5 - 1. 0 percent. while these indicators show price rises driven by goods and services that reflect the higher costs of some raw materials, my view is that, on the whole, selling prices have not risen as much as raw material prices. in terms of the baseline scenario of the outlook for prices, the medians of the policy board members'forecasts presented in the july outlook report for the year - on - year rate of change in the cpi less fresh food are 2. 3 percent for fy2022, 1. 4 percent for fy2023, and 1. 3 percent for fy2024 ( chart 1 ). considering the elevated crude oil prices and the time it has taken thus far for cost increases such as of raw materials to be actually passed on to selling prices, it is highly likely that price rises driven by cost - push factors will continue for the time being, mainly for energy and food products. upward pressure on costs stemming from inefficiency in logistics due to the prolonged situation surrounding ukraine is also likely to induce such rises. inflation rates are projected to subsequently fall to a level below 2 percent as the | china < 21. 6 > nies, asean, etc. < 36. 3 > other economies < 15. 0 > notes : 1. based on staff calculations. figures in angular brackets show the share of each country or region in japan's total exports in 2021. figures for 2022 / q3 are those for july. 2. figures for the eu exclude those for the united kingdom for the entire period. sources : ministry of finance ; bank of japan. source : ministry of economy, trade and industry. chart 5 corporate sector in japan business conditions manufacturing " favorable " di ( " favorable " - " unfavorable " ), % point nonmanufacturing di ( " favorable " - " unfavorable " ), % point " unfavorable " - 10 - 10 - 20 - 20 - 30 - 30 - 40 - 40 - 50 - 50 - 60 - 60 - 70 cy 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 - 70 cy 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 notes : 1. based on the tankan. all enterprises. 2. shaded areas denote recession periods. source : bank of japan. chart 6 corporate sector in japan corporate profits business fixed investment s. a., tril. yen s. a., tril. yen y / y % chg. 25 20 private nonresidential investment ( sna, nominal ) tankan ( actual ) tankan ( planned investment in current fiscal year as of the june survey of each year ) sales ( left scale ) current profits ( right scale ) cy 07 - 10 - 15 - 5 notes : 1. based on the financial statements statistics of corporations by industry, quarterly. excluding " finance and insurance. " 2. figures from 2009 / q2 onward exclude pure holding companies. 3. shaded areas denote recession periods. source : ministry of finance. - 20 fy 07 note : the tankan figures include software and r & d investments and exclude land purchasing expenses. r & d investment is not included before the march 2017 survey. the figures are for all industries including financial institutions. sources : cabinet office ; bank of japan. chart 7 household sector in japan sales trends by business type department stores supermarkets convenience stores dining - out travel ratio to the same month in cy 2018, % fast food restaurants outbound family restaurants inbound pubs and izakaya ( japanese - style | 1 |
whole. our work in response to the fpc β s recommendation typifies this ; but we will continue to work with firms, government and cyber experts to learn and evolve our approach. http : / / www. bankofengland. co. uk / financialstability / fsc / documents / wakingshark2report. pdf. bis central bankers β speeches | high average residual maturity of the public debt, low household debt, reduced business debt, and the fact that banks are sounder and have only limited exposure to the effects of any interest rate rises, will make it possible to contain the risks connected with the structural fragilities of italy β s economy. the achievement of a satisfactory and stable growth rate is, however, hampered by continued weak productivity growth, the inefficiencies and rigidities of the business environment and the high debt - to - gdp ratio. addressing these vulnerabilities means continuing to implement systematic reforms and balanced fiscal policies, which are also necessary to maintain the confidence of households, firms and investors. recent tensions in the italian financial market demonstrate the importance of a prudent and balanced economic policy stance. between mid - may and early june, with very low market liquidity, yields on government securities increased across all maturities. yields on ten - year bonds surpassed 3 per cent for a few days and the spread with respect to the equivalent german bond rose above 300 basis points, while the spreads vis - a - vis the government bonds of the other euro - area countries also widened. the performance of premiums on credit default swaps on government securities shows there were moments when fears of a redenomination of italy β s debt grew among financial operators. contrary to what happened at the height of the sovereign debt crisis in 2011 - 12, the markets did not perceive this to be associated with an increase in the risk of a euro break - up. pressures eased in the following weeks, when the sharp rise in volatility partially subsided and short - term yields declined, restoring the more usual, positive slope of the term structure. the spread between yields on ten - year italian and german government bonds has fallen to around 240 basis points ; however, it is still more than 100 points higher than the levels prevailing in the first half of may. maintaining orderly conditions on the government bond market is essential to defend the stability of the financial system and effectively protect the savings of italians. during the tensions at the end of may, share prices in the banking sector declined sharply. the financial situation of the public sector can influence that of the banking sector through multiple channels. the reduction in the value of government securities held by banks directly affects their assets ; it also diminishes the amount of collateral that banks can use in eurosystem refinancing operations. the challenges for the public finances can lead to an overall deterioration in the | 0 |
bank of uganda remarks by prof. emmanuel tumusiime - mutebile, governor, bank of uganda launch of standard chartered bank ( u ) limited β s client digital initiative kampala serena hotel 29 january 2019 honourable minister of information, communication technology and national guidance, hon. frank tumwebaze the board of directors, standard chartered bank uganda limited the chief executive officer, standard chartered bank uganda limited management & staff of standard chartered bank uganda limited distinguished guests in your respective capacities ladies and gentlemen, it is my distinct pleasure to be part of this great evening as standard chartered bank yet again unveils an innovative and revolutionary digital banking initiative. i take this opportunity to congratulate the board, management and staff of standard chartered bank uganda for pioneering many innovative digital banking solutions in the financial services sector in uganda, especially in the recent past. ladies and gentlemen, standard chartered bank is the oldest bank in uganda and its adoption of digitalization can be traced back to the mid - 1990s, when the bank was the first to introduce automated teller machines. the digitalization journey has since seen the roll out of various technology driven business solutions, as the bank pursued its strategic objectives. if you have been following closely, standard chartered bank over the past half a decade or more has been aggressively changing its business model fundamentally to be β digital by design β. as i recall, standard chartered committed to invest us $ 1. 5bn in technology globally. it is therefore are not surprising that today we convening to witness yet another key milestone in the standard chartered uganda digitalization agenda. the theme today, β digital transformation in banking, future trend and how to remain buoyant β is not only very relevant to the banking sector, but represents the future of banking and evolution of business models in this sector. it is cognizant of the increasing convergence between banking and technology, and the disruption of existing business models therein. but how will the digitalization which is taking center stage in the banking today, transform banking tomorrow? banking service delivery is increasingly reliant on technology. the type and application of technology determines how financial institutions appropriately respond to consumer expectations and needs. technology is also an essential in the toolkit supervised financial institutions ( sfis ) use to manage the competitive pressures that are increasingly defining the banking sector. by focusing efforts and resources on the digitization of core business processes, financial institutions enhance their ability to respond to the inherent dynamism associated with technology, and to the competitive | of all, no department attempted to report to the cso bottlenecks they were experiencing in carrying out some tasks. as such, some tasks were cancelled or deferred without drawing the attention of the spc or management. clearly, this is contrary to what was agreed. it was agreed that departments experiencing difficulties in implementing some tasks should report such incidences promptly without the need to follow the established reporting calendars. this was to enable management to make fast track decisions to keep planned programmes on course. second, some departments appeared to be unwilling to give these exercises the due attention they deserve regarding them as needless bother by deliberately not responding to reminders. this has resulted into late submission of pars and, therefore, a delay in the production of quarterly and annual reports. but, i should add that the problem of late submission of reports goes beyond work planning and budgeting activities. as a matter of fact, it is endemic and pervasive in the bank, and involves all other bank - wide initiatives, namely : β’ business continuity and contingency planning ; β’ staff performance appraisal exercises ; β’ responses to audit queries. the fact that the bank recognises the importance of these initiatives in management and that we signed up to their basic principles, means that we should devote much of our time to the processes involved to realise the benefits. this involves changing our attitudes and mindset and to recognise that we must always work as a team and deliver services promptly to derive the maximum benefits of our collective efforts. and so this coming year, i would like senior management to take much of their time and attend very seriously to bank - wide programmes. obviously, this will mean senior management devolving much of routine functions to the rank and file and concentrating on strategic functions. i also think we should introduce a system of rewards and sanctions for performing and under performing departments and functions. naming and shaming under performing departments and functions could be a useful sanctioning tool. such a system could be important because as more and more strategic functions are introduced into the bank so will the role of senior management increase to attend to those functions. very soon, the bank will be adding to the menu of bank - wide programmes, risk and performance standards management frameworks. therefore, if we do not have the right mindset to absorb these additional responsibilities, we will, definitely, not succeed. on the issue of staff performance appraisal, i am deeply concerned that senior management are persistently not app | 0.5 |
( 2008 ), zombie lending and depressed restructuring in japan, american economic review, 98 ( 5 ), pp. 1943 β 1977. eggertsson, gauti b. and paul krugman ( 2012 ), debt, deleveraging, and the liquidity trap : a fisher - minsky - koo approach, quarterly journal of economics, 127 ( 3 ), pp. 1469 β 1513. fisher, irving ( 1933 ), the debt - deο¬ation theory of great depressions, econometrica, 1, pp. 337 β 357. goodfriend, marvin ( 2011 ), central banking in the credit turmoil : an assessment of federal reserve practice, journal of monetary economics, 58 ( 1 ), pp. 1 β 12. bis central bankers β speeches ingves, stefan and goran lind ( 1996 ), the management of the bank crisis in retrospect, swedish riksbank quarterly review no 1, pp. 5 β 18. takats, elod and christian upper ( 2013 ), credit and growth after financial crises, bis working papers no 416, bank for international settlements. bis central bankers β speeches | phase, it refers to the rebuilding of transmission channels of traditional policy tools to adequately use them when the economy nears its steady state. then, our country is still going through a transition phase typical of post - crisis periods. and these transition stages β where key macroeconomic variables converge to their long - term values β take time and raise enormous challenges. unlike the cases of brazil, mexico or southeast asia, the abandonment of the convertibility regime included simultaneously an institutional breakdown, a huge devaluation, the destruction of the financial system and the default on the public debt. there are several examples of the normalization phase that is still taking place : monetary transmission channels are just being rebuilt, since credit to the private sector accounts for only 12 percent of the economy ; far below the latin american average. the experience of other emerging economies shows that consistency and gradualism in both policy design and implementation are the adequate approach during this phase. therefore, patiently rebuilding the power of monetary policy is a key step towards stability. under these circumstances, a sustainable and long - lasting reduction of inflation depends on the comprehensive, joint and coordinated action of the monetary policy, the fiscal policy, the wage policy, and the competition policy during the transition phase. the path is a sequential one while we build the traditional monetary tools as effective policy instruments. within this framework, our β s monetary and financial framework is based on three main pillars : first, a robust and consistent monetary policy that ensures the equilibrium between supply and demand in the monetary market. this system is the most appropriate for an economy that still makes intensive use of relatively liquid means of payment and has a relatively low bank penetration. second, a managed floating exchange rate regime that enables us to weather situations of financial stress β that is, a regime that provides predictability. we do not want to prevent variables from converging to their long - term values, but we would rather avoid excessive volatility as a source of unnecessary disturbances in economic decisions. on the other hand, we do not want to provide any sort of insurance that favors speculative flows. third, countercyclical financial policies to provide buffers against volatility. these include the accumulation of foreign reserves and a sound financial system that buffers turmoil, instead of spreading it. i cannot find a more telling proof of the reasons why we have pursued antyciclical policies β such as foreign reserve accumulation β during these years : the recent external shock we faced can be compared to the effect of the mexican | 0 |
##inablabla ), tweeted on 10 january 2015 at 3 : 49 a. m. 2 report by the standing conference of the ministers of education and cultural affairs dated 19 october 2001 in the version dated 27 june 2008. 3 see ing - diba online opinion poll, run by ipsos in august 2017, persons surveyed : financial decision makers aged 18 and over. international n = 12, 708, germany n = 1, 010. cited inter alia in the borsen - zeitung on 26 october 2017 : β deutsche sehnen sich nach finanzbildung β. 4 see wobker, i., p. kenning, m. lehmann - waffenschmidt & g. gigerenzer ( 2014 ). what do consumers know about the economy? journal fur verbraucherschutz und lebensmittelsicherheit, 9 ( 3 ), pp. 231 242. 5 see ing - diba online opinion poll, run by ipsos in august 2017, persons surveyed : financial decision makers aged 18 and over. international n = 12, 708, germany n = 1, 010. cited inter alia in the borsen - zeitung on 26 october 2017 : β deutsche sehnen sich nach finanzbildung β. 6 see die welt dated 16 january 2001, interview with oliver kahn, β joschka fischer sollte ein beispiel sein β. 7 see new york times of 9 october 2017, interview with richard thaler, β nobel in economics is awarded to richard thaler β, available online ( 31 october 2017 ) at : www. nytimes. com / 2017 / 10 / 09 / business / nobeleconomics - richard - thaler. html. 8 see deutsche bundesbank, β sharing central bank knowledge " β the deutsche bundesbank β s economic education activities, annual report 2016, pp. 33 β 42. digital version available online ( 31 october 2017 ) a t : www. bundesbank. de / redaktion / en / downloads / publications / annual _ report / 2016 _ annual _ report. pdf? _ _ blob = publicationfile # page = 33. 9 the result is a unique venue that makes learning an experience and where young and old can discover a great deal about money and monetary policy in a relaxed and entertaining manner. digital version available online ( 31 | , we can see a strong dispersion of npl ratios across countries. the highest npl ratios are present in those member states that were hit hardest by the economic crisis that followed the financial crisis after 2007. the high stock of npls ties up operational capacity of the affected banks, it involves legal as well as administrative costs, and it weighs on the capacity of those banks to extend new loans to realise profits and to support economic recovery. 4. how to cope ladies and gentleman, the financial world is clearly confronted with significant change and uncertainty. and many in the financial world perceive this to be a change for the worse. there are no easy solutions. the brexit negotiations will take time and uncertainty will be with us just as long. turning back regulatory achievements to provide relief from a perceived burden is not an option. as for the challenges posed by digitalisation, sticking to business as usual will not suffice. the same is true for the low - interest - rate environment : hoping for relief from a change in monetary policy won β t be enough. clearly, banks need to adapt, and indeed they have already begun. any long - term strategy for profitable banking needs to be built on its value added for customers, business partners and society. in times like these, supervisors need to be especially vigilant in monitoring financial institutions and ensuring that they do not take on excessive risks. what supervisors will not do is attempt to be management consultants for banks. difficult though the times may be, and however numerous and complex the problems may seem, it β s important to keep a clear mind and a steady hand. having a holistic and encompassing understanding of the current challenges does not mean that there are broad encompassing solutions available. we will succeed only if we refrain from falling for sweeping answers that promise to solve all the issues at once. that β s why it β s so important to have institutes like the iepe that enable us to get together and thoroughly discuss both the 4 / 5 bis central bankers'speeches challenges and the strategies needed to overcome them. and i am looking forward to having this conversation with you now. if we approach and tackle our current problems one by one, we will see that any change is manageable β both in the financial and in the real world. thank you for your attention. 5 / 5 bis central bankers'speeches | 0.5 |
because if either occurs, the impact on the global economy will be large. in the euro area, the european central bank has been raising its policy interest rate amid appreciation of the euro, and the sustainability of economic recovery should be watched carefully. in germany, fullscale fiscal consolidation has started ; for example, the value - added tax rate will be raised from january 1, 2007, and such measures may place downward pressure on the economy in the short term. in china, the economy continues to expand strongly, and there is a possibility that this growth will accelerate during the projection period, influenced by developments in fixed asset investments and exports. even though administrative measures will probably help to contain the rise in the growth rate of investment for some time, the risk of a further acceleration of the economy and subsequent repercussions cannot be ruled out, since the financial environment continues to be accommodative. global economic developments may also be influenced by international commodity prices, such as crude oil prices, depending on their future movements. the second risk is a further acceleration of business fixed investment. although firms, especially manufacturers, have been stepping up their business fixed investment, an excessive build - up of capital stock has not so far been observed in the economy overall. since firms are very careful in choosing their investment projects, business fixed investment as a whole has, despite recent acceleration, generally been kept within cash flow and the pace of increase in capital stock is moderate. in evaluating whether the growth in capital stock is excessive or not, developments not only in the moderately growing domestic market but also in strongly growing overseas markets need to be taken into account. with the economy continuing to expand moderately, financial conditions remain extremely accommodative. short - term interest rates have been very low relative to the state of economic activity and prices. the yen has been depreciating against other major currencies. the real effective exchange rate is currently as low as that recorded in the period immediately after the conclusion of the plaza accord in 1985. given such extremely accommodative financial conditions, firms may further accelerate investment based on optimistic assumptions of future profitability, such as favorable expectations regarding the growth rate, financing costs, and foreign exchange rates. such acceleration may push up overall growth in the short run, but may lead in turn to an excessive build - up of capital stock that could precipitate an economic slowdown. the upturn in land prices, particularly in major cities, is becoming more broad | for release on delivery 12. 30 pm edt march 21, 2022 restoring price stability remarks by jerome h. powell chair pro tempore board of governors of the federal reserve system at β policy options for sustainable and inclusive growth β 38th annual economic policy conference national association for business economics washington, d. c. march 21, 2022 thank you for the opportunity to speak with you today. let me first pause to recognize the millions who are suffering the tragic consequences of russia β s invasion of ukraine. at the federal reserve, our monetary policy is guided by the dual mandate to promote maximum employment and stable prices. from that standpoint, the current picture is plain to see : the labor market is very strong, and inflation is much too high. my colleagues and i are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. there is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability. we are committed to restoring price stability while preserving a strong labor market. at our meeting that concluded last week, we took several steps in pursuit of these goals : we raised our policy interest rate for the first time since the start of the pandemic and said that we anticipate that ongoing rate increases will be appropriate to reach our objectives. we also said that we expect to begin reducing the size of our balance sheet at a coming meeting. in my press conference, i noted that action could come as soon as our next meeting in may, though that is not a decision that we have made. these actions, along with the adjustments we have made since last fall, represent a substantial firming in the stance of policy with the intention of restoring price stability. in my comments today, i will first discuss the economic conditions that warrant these actions and then address the path ahead for monetary policy. - 2the labor market is very strong and extremely tight to begin with employment, in the last few years of the historically long expansion that ended with the arrival of the pandemic, we saw the remarkable benefits of an extended period of strong labor market conditions. we seek to foster another long expansion in order to realize those benefits again. the labor market has substantial momentum. employment growth powered through the difficult omicron wave, adding 1. 75 million jobs over the | 0 |
of living and housing availability are still predominant concerns, among others. the entertainment, arts, businesses, culture, and landmarks that we have here in new york cannot be replicated elsewhere. but those experiences can only be had if there are jobs and a healthy economy to support it all. it's important that we invest in the study of the challenges and opportunities for employment in this city, so that we can build the future. our conference today will do just that. in our sessions this morning, we'll talk about how employment was and continues to be impacted by shifts in the city. and we'll discuss similarities and distinctions across industries and occupations, initiatives that will attract and retain a robust workforce, and more. thanks again to our speakers and panelists for the knowledge and insight they bring to this event, and to all of you for attending and demonstrating your commitment to shaping the future of this great city. 2 / 3 bis - central bankers'speeches 1 jaison r. abel, jason bram, and richard deitz, " new york fed surveys : business activity in the region sees historic plunge in april, " federal reserve bank of new york liberty street economics, april 16, 2020. 2 jaison r. abel, jason bram, richard deitz, and jonathan hastings, " the region is struggling to recover from the pandemic recession, " federal reserve bank of new york liberty street economics, december 17, 2021. 3 / 3 bis - central bankers'speeches | harvesh seegolam : current economic conditions and outlook statement by mr harvesh seegolam, governor of the bank of mauritius, at the post monetary policy committee ( mpc ) press briefing, port louis, 3 april 2024. * * * ladies and gentlemen, members of the media, good morning. i welcome you all to this press briefing for the 70th sitting of the monetary policy committee, the first for 2024. this year shall be remembered for many reasons. the efforts spearheaded by the authorities in the previous years to overcome the crisis, to further consolidate our underlying economic structure and to top it up with the right policy mix, have borne fruits. our economic agility and recent performance have been largely praised by international organisations. let me share some of the upshots of the latest reports of the mauritian economy undertaken by major international institutions : the imf, following the 2024 article iv consultations, stated in its press release that the prompt deployment of pre - pandemic buffers has helped the mauritian economy rebound strongly from the pandemic and that growth prospects remain favourable. inflationary impulses have subsided in 2023 and are projected to ease further this year. moody's, in its january 2024 credit opinion, has maintained the country's baa3 credit rating with a stable outlook. this stable rating outlook reflected mainly the agency's favourable assessment of the country's fiscal and debt metrics as well as sizeable foreign reserves which provide a cushion against external vulnerability risks. the march 2024 country report of the economist intelligence unit also paints a very optimist outlook for mauritius, with growth expected to remain buoyant in the near term and inflation maintaining a downtrend. d. fitch ratings, in its 2024q1 banking and financial services report, assessed that mauritius ranks high relative to its regional peers for being politically stable, coupled with an improving internal balance amidst recovery in the tourism sector and subsiding price pressures. these plaudits have one common thread. they all point towards favourable growth and inflation outlooks for 2024. they also enunciate on the key role played by the bank of mauritius in macroeconomic stabilisation and safeguarding our financial system. before i zero - in on our diagnosis for 2024, let me first walk you through the latest global and domestic economic and financial developments. after that, i shall conclude with the decision taken by the mpc today | 0 |
ida wolden bache : higher policy rate to bring down inflation to the target speech by ms ida wolden bache, governor of norges bank ( central bank of norway ), at an event to present the policy rate decision, arendal, 17 august 2023. * * * accompanying charts to the speech good morning, everyone, and let me thank sparebanken sΓΈr for allowing us to use their grand premises to explain the background for our monetary policy decision today. chart : policy rate raised by 0. 25 percentage point norges bank's monetary policy and financial stability committee decided to raise the policy rate by 0. 25 percentage point to 4 percent. norges bank's task is to keep inflation low and stable. the operational target is inflation of close to 2 percent over time. we are also mandated to help keep employment as high as possible and to promote economic stability. chart : inflation is high we are raising the policy rate to dampen inflation. in july, consumer prices were 5. 4 percent higher than one year earlier. excluding energy prices, inflation is now running at around 6Β½ percent, which is markedly above our target. high and variable inflation has substantial costs β to people, businesses and society. it becomes more difficult to plan ahead and to judge whether the price of a good or a service is reasonable. pay increases that appear generous when they are agreed early in the year can after a few months be wiped out by a surge in inflation. a rapid and unexpected jump in prices hits low - income households in particular and those who can least afford it. chart : inflation is broad - based prices for many goods and services are rising rapidly, both for imported goods and domestically produced goods and services. initially, the rise in energy prices was the key driver of inflation. subsequently, prices for food and other products also contributed to pushing up inflation, while the contribution from energy prices gradually diminished. recently, inflation has been increasingly driven up by higher prices for services, such as airfares and cultural services. chart : international inflation is receding inflation has also risen rapidly internationally. in order to contain inflation, many central banks have responded by raising their policy rates to the highest levels observed since the 2008 financial crisis. 1 / 4 bis - central bankers'speeches we are now seeing that inflation is subsiding in many jurisdictions. trade flows across countries have become more normal after the pandemic, and freight rates have fallen. lower imported goods inflation will also dampen | serious challenges liquidity support through the government guarantee scheme remains necessary it is a well - known fact that greek banks did not cause the crisis, contrary to what happened in other countries, but suffered the consequences of the fiscal derailment. the downgrading of banks β credit ratings, consequent on the downgrading of the country, meant that banks were shut out from the markets, while they also lost a significant proportion of deposits. against this background and in order to meet their liquidity needs, banks had recourse to the liquidity support measures adopted by the greek government including a state guarantee scheme. such measures had been adopted by all eu countries in 2008 at the height of the global financial crisis. it should be recalled that under this scheme the state, for a fee, guarantees debt securities issued by banks ; it does not provide banks with cash. these guarantees enable banks to bis central bankers β speeches obtain liquidity from the eurosystem by providing them with eligible collateral. it should also be noted that, because of the haircuts applied, the liquidity that credit institutions can obtain using government - guaranteed securities as collateral falls significantly short of the nominal value of such collateral. the ability of banks to raise liquidity from the eurosystem by making use of government guarantees has averted a credit crunch. although nominal gdp fell by 2. 1 % in 2010, the outstanding amount of bank credit to the private sector in december 2010 remained unchanged year - on - year. given the financial environment, without the extraordinary provision of liquidity by the eurosystem the banks would have been forced to expedite the collection of their claims, cut back on loan rescheduling and reject applications for new loans even from creditworthy customers. however, the extraordinary liquidity support measures taken by the ecb and the government are temporary in nature. they aim to give banks time to adjust their business model to the new circumstances. this adjustment must be performed in an orderly manner, so as not to further aggravate the current economic downturn nor dampen the recovery, once it begins. in other words, banks must, as soon as possible, be in a position to intermediate between savers and investors relying on their own resources, rather than on the extraordinary support provided by the ecb or the state. the new conditions make it imperative for the banking sector to change its business model the banking sector, just like the economy as a whole, has found itself up against unprecedented challenges | 0 |
no one will gift growth to us. some things we know work ; others we suspect might. but in other areas, we simply have no idea whether we are hurting or helping ( or neither ) the cause of growth. often it seems that the pre - conditions for growth are laid down across decades, perhaps centuries. if so, they are hard to lose, but also hard to gain. in many respects, government policies and private sector practices are very different in, say, the united states and germany β and yet both are wealthy, growing, economies. and no matter what the policy regime, the countries of west africa, for example, are likely to be desperately poor for decades to come. probably a few things matter a lot, and a lot of things matter a little. unfortunately, it is often easiest to do something about things that won β t do very much to boost long - term prospects. some things we simply can β t change. geography matters, and drawing a circle centred on christchurch with a radius of 2100 kilometres will always encompass only a few million new zealanders and a lot of seagulls. similar circles centred on dublin, helsinki, or singapore encompass hundreds of millions of people. that harsh fact makes it all the more important that we get right what we can influence. what else matters? first, and to go back to the history i started with, we can say confidently that knowledge matters. that has rarely been more obvious than over the past few years in the united states. as we speak, the us economy is on the verge of breaking all previous records for uninterrupted growth β by next month, a record 107 months. during the 1990s, many think that the sustainable medium - term growth rate of the us economy has risen from around 2. 5 per cent in the early 1990s, to around 3 or even 3. 5 per cent today. in large part, that increase reflects the extraordinary developments in information technology in recent decades that are now coming to fruition. record - high share prices year after year do raise questions about how much is sustainable, but the change in the underlying technology is real and will not be lost β it is transforming the us, and indeed the entire developed world. so knowledge matters, and it will matter increasingly. we need people with ideas and innovations, and entrepreneurs to help convert those innovations into successful businesses. but we also need social attitudes that encourage both ideas and enterprise, and financial markets that support and sustain that enterprise. | stability role ( sections 1a and 68 of the act ) are focussed on β promoting the maintenance of a sound and efficient financial system β. the bank is also required to have regard to any statement of government policy on the bank β s functions issued by the minister ( section 68b ). the objectives and policy guidance for macro - prudential are consistent with this but more specific. the current mou objective is : β to increase the resilience of the domestic financial system and counter instability in the domestic financial system arising from credit, asset price or liquidity shocks. β guiding principles for macro - prudential in the mou include the principle of supporting monetary policy where possible and being fully consistent with micro prudential policy. the objective and guidance from the mou should be lifted into the act and potentially enhanced, for example with the principle that macro - prudential policies should be applied uniformly across all banks. further elements of the governance regime might include : a list of areas that macro - prudential policies could be applied to8, e. g. capital, loan to value ratios, debt servicing capacity ; and potentially a pta - like document that would express operational objectives agreed from time to time with the government of the day. i expect the technical details of the macro - prudential instruments would continue to be set out in the banking supervision handbook. the specific characteristics of macro - prudential that i have mentioned the common ground with micro - prudential policy and its stabilisation role point to the macro - prudential mandate remaining with the reserve bank. there are significant synergies across the micro and macroprudential functions, and the stabilisation aspect requires a macro - analysis capability and degree of coordination with monetary policy. the imf in its 2017 fsap report underlines this point and supports the reserve bank having responsibility for macro - prudential β but with full accountability. they point out that shared responsibility models, where macro - prudential decisions are made jointly by councils ( e. g. made up of the ministry of finance, central bank and regulatory agencies ), often suffer from inaction bias. 5 / 7 bis central bankers'speeches an important further aspect of governance is decision - making. given the planned introduction of a new decision making committee ( mpc ) for monetary policy, the review should consider establishing a financial policy committee ( fpc ) for decisions relating to both micro and macro prudential policy. | 0.5 |
to boost the power of the engine : reforms, including those underway, are therefore necessary. and, beyond bureaucratic barriers or corporate interests, the greatest priority is to reform vocational training and apprenticeships : we cannot remain in a situation where we have almost 3 million unemployed, of whom 600, 000 are young people, and companies cannot recruit the skills they need. i hear this everywhere from the entrepreneurs who participate in the advisory boards of the banque de france, from besancon to chateauroux last week. according to insee, hiring difficulties have been the main obstacle to corporate activity. my third wish is for financing. often, the governor of the banque de france encourages banks to lend more ; this is not the case at present! bank lending in france is very buoyant. bank lending to households and firms is growing at almost 6 % per year. this is good news, but we must avoid excesses. there are thus several efforts to be made in 2018 to ensure the smooth financing of our economy : remain vigilant to ensure financial stability, first and foremost. at last december's meeting of the haut conseil de stabilite financiere ( hcsf β high council for financial stability ), we decided to take a macroprudential measure to limit the sharp rise in the debt of certain large companies, including bond debt. it will apply as of 1 july after approval by the european authorities. if credit cycle risks persist β i. e. growth that is significantly higher than that justified by economic fundamentals β we stand ready to act further at any time in 2018, including if necessary by implementing a countercyclical capital buffer. promoting the attractiveness of the paris financial centre in the context of brexit, second : irrespective of the possible transition, the city will most likely lose its eu passporting rights. the paris financial centre must continue to develop, notably in the area of the clearing of financial instruments, and promote its numerous qualities, enhanced by the arrival of the eba, in order to become the main euro area centre for market activities. this is our collective challenge, over and above announcements of welcoming registered head offices. lastly, better channelling our savings. overall, the french economy has no lack of financing, thanks also to the soundness of its financial institutions. our challenge concerns more the nature of this financing : developing equity financing more than debt financing. flat tax is a welcome step towards a | eyes of europe and the world, which is extremely positive. lastly, in 2017 basel iii was finalised. bankers β largely represented this evening β had expressed, alongside others, serious concerns. the agreement of 7 december 2017 is the best possible agreement for our country and for europe, thanks to the particularly active commitment of french negotiators. we maintain, against all temptation of nilateralism or deregulation, our commitment to the multilateral rules of the game in place since 2009. and we are stabilising these rules once and for all : there will not be a basel iv. in sum, 2017 positively marked a turning point for both the united states and france. the beginning of 2018 has thus been characterised by a welcome optimism, but one which must not act as a disincentive : confidence yes, complacency no. we must not lie back and enjoy the return of blue skies ; we must take steps to ensure that this improvement is transformed into stronger and sustainable growth. to this end, i wish to make four collective wishes for the coming year. 2. four wishes for 2018 my first wish concerns europe. this does not so much concern our monetary policy, which has 1 / 3 bis central bankers'speeches entered a gradual normalisation phase, and which is a success ; i will not discuss it further this evening during the " silent period ". 2018 must above all be the year of economic union, which still largely remains to be built. we must now or never take advantage of the recovery to tackle the shortcomings of the euro area. because france and germany β s electoral calendars are aligned for the first time in 15 years, and since last friday, there is a prospect of a pro - european coalition in germany. and because now is the time to strengthen our economic instruments in order to deal with a future european recession, the day it comes. otherwise monetary policy may be overburdened. my second wish concerns our country. the french economy is in much better shape, but there are still major drags on growth. at around 1. 9 %, we are above our potential growth rate, which means that we are coming up against more structural limiters. there are at least two indications of this : a persistent negative growth differential vis - a - vis the euro area of around half a percentage point, and a current account deficit and hence a lack of competitiveness. in order to increase the speed of the french economy, we need | 1 |
also need more data to monitor unregulated financial institutions and markets. in recent years, significant steps have been taken to identify the data gaps and to fill them by gathering more and more detailed quantitative information. but we are just at the beginning of this process, and i know that statisticians are all too well aware of the fact that the data perimeter may change again in the future. it is vital that the work done at the european union level is consistent with the worldwide dimension. in 2009, the g20 endorsed a report on β the financial crisis and information gaps β. that report contains 20 high - level recommendations on the measurement of risks in the financial sector, international financial linkages and the communication of official statistics. bis central bankers β speeches quite some progress has been made in the implementation of these recommendations. for example, accounts for economic sectors, statistics on securities, and the principal global indicators website supported by seven international organisations, including the ecb. but it is still necessary to continue with these efforts, in particular on quarterly government finance statistics and on the fsb common template for systemically important global financial institutions. and the transposition of the new rules into all national legal systems needs to proceed swiftly. the role of statisticians going beyond the pure data challenges, the statistical community is still coming to grips with the fact that their work is now more than ever in the spotlight of public debate. β statistical errors β were once something in which only specialists were really interested. now, they can receive headline coverage, sometimes even more so than everything else coming out of both official and non - official statistical sources. public scrutiny is good for statistics but it also brings new challenges for statisticians. alongside their more traditional role of collecting data and assisting in the correct interpretation of data, statisticians also need now to be more involved in the communication of results β to the markets, to the media and to the wider public. the role of dashboards and the narrative use of data are examples of tools where the input of statisticians is clearly essential. selected ecb statistical initiatives to fill data gaps together with the rest of the eurosystem, the ecb is undertaking a number of important statistical initiatives to support fulfilment of the ecb β s mandate to deliver price stability and the esrb β s mandate to mitigate systemic risk. the initiatives will also help other policy - makers and decision - makers. let me briefly mention three of these initiatives : first, the | to adopt more unconventional measures. more structural elements β related to the persuasive views on secular stagnation and the effects of globalisation on inflation β helped to consolidate the notion that the advanced economies are facing a protracted period of low growth and low inflation that central banks are failing to normalise but have to continue to address. consequently, search for yield and trust in a sort of β central banks β put β was the prevalent narrative until last year. markets are becoming increasingly aware that central banks will not ensure such a put and are thus starting to recalibrate policy, not least as a result of the strong recovery now ongoing. the u. s. elections of last november had already temporarily interrupted the market β s belief of the previous narrative. at the turn of the year, the perception was formed that tax cuts and deregulation would spur u. s. growth, which would increase earnings β yields, subsequently leading to higher inflation and higher bond yields. consequently, we saw the beginning of a rotation from bonds to stocks with a consequent increase in stock prices and a drop in bond prices ( figure 3 ). 4 / 20 bis central bankers'speeches asset price developments this narrative about a new reflation phase in the world economy petered out last spring, particularly in what regards bonds whose prices have slightly increased since. however, stock prices continued to increase, generating fears and warnings about a possible correction ( figure 3 ) especially in the u. s. where, contrary to the euro area, the cyclical adjusted price earnings is well above historical averages ( figure 4, lhs ). there are already signs that markets are reflecting concerns with possible downward movements : the probability of a 10 % correction in stock prices extracted from option pricing has recently increased albeit remaining quite low ( see figure 4, rhs ) and the price of shortening the vix has recently sharply increased. 5 / 20 bis central bankers'speeches nevertheless, we should ponder that equity market corrections are often not very consequential as the examples of 1987 or 2000 seem to indicate. in general, it is interest rates and fixed rate debt instruments that exert a wider financial and economic impact. as i mentioned before, there are no signs of significant changes in yields despite wide expectations of monetary policy recalibration around the globe. this presumably bodes well for future central banks β decisions. figure 5 shows the slow and smooth market expectations extracted from the ois curve, for future eonia for the | 0.5 |
ben s bernanke : gse portfolios, systemic risk, and affordable housing remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the independent community bankers of america's annual convention and techworld, honolulu, hawaii ( via satellite ), 6 march 2007. * * * the subject of my remarks today is the regulation and supervision of two large financial companies : the federal national mortgage association ( known familiarly as fannie mae ) and the federal home loan mortgage corporation ( or freddie mac ). fannie mae and freddie mac were created by acts of the congress and are thus known as government - sponsored enterprises, or gses. the congress chartered these two companies with the goal of expanding the amount of capital available to the residential mortgage market, thereby promoting homeownership, particularly among low - and middleincome households. although they retain their government charters, fannie and freddie were converted ( in 1968 and 1989, respectively ) to private, publicly traded, for - profit companies. 1 fannie and freddie are regulated by the office of federal housing enterprise oversight ( ofheo ), with additional oversight by the department of housing and urban development ( hud ). the regulatory framework under which the gses operate has two principal objectives : first, to support the gses β mission of promoting homeownership, especially access to affordable housing ; and second, to ensure that these two companies operate in a financially prudent manner. for various reasons, including recent problems with accounting and internal controls at the gses, a consensus appears to exist that the regulatory and supervisory framework needs to be strengthened, and the leaders of the banking committees in the congress have expressed optimism that agreement on legislation can be reached this year. the federal reserve board concurs that a stronger regulatory framework for the gses is needed, and we hope to see a bill passed this year that addresses the important public policy issues raised by the operations of these entities. because of its responsibility to help ensure financial and economic stability, the federal reserve board must be concerned with any potential financial difficulties at the gses that might have broader systemic implications. in addition, the federal reserve board recognizes the great value that the congress attaches to the gses β affordable - housing mission. in my remarks today, i will offer some thoughts on how gse regulatory reform could reduce the systemic risks posed by these organizations while increasing their institutional focus on promoting access to affordable housing | supply side of the economy. in the case of a negative demand shock, both economic activity and inflation will tend to fall. typically, a financial crisis is one example of a negative demand shock : credit conditions are restricted, aggregate demand is restrained and firms are encouraged to undercut their competitors, thereby exerting downward pressure on inflation. to the extent warranted by the magnitude of the shock, the central bank thus faces an unambiguous policy prescription, namely to provide additional monetary accommodation. in the case of a negative supply shock, the central bank has a policy dilemma as economic activity and inflation move in opposite directions. a drop in productivity is a case in point : an increase in companies β cost per unit of output makes production less rewarding, and thus lowers the amount of goods and services supplied relative to demand. here, the central bank either temporarily accepts higher inflation, or β in an attempt to keep inflation right on target β it reinforces the disturbance driving down output. but this trade - off is weakened when the central bank can credibly commit to its price stability objective. knowing that the steady state remains the ultimate goal of policy, private agents will not factor in the temporary increase in inflation into their price - and wage - setting behaviour. as a consequence, the central bank can afford a more measured conduct of policy in the face of a negative supply side shock. of course, this is not to say that central banks have carte blanche to adopt any tool or tactic that may appear suitable for dealing with any short - run challenge. the way policy is conducted can, in itself, impinge on the central bank β s credibility to meet its objective. one example is the monetary financing of fiscal deficits, which may severely undermine the capacity of a central bank to freely decide on an appropriate course of action. the flexibility of policy conduct is clearly limited to those measures that preserve the central bank β s room for manoeuvre to independently determine its monetary policy stance β now and in the future. to summarise, for a central bank to be able to confront short - run challenges while anchoring long - run expectations, it must stick to three principles. first, it has to consistently and unambiguously align any policy action with a clearly specified objective. second, it has to adjust its policy conduct flexibly to the specific nature of the macroeconomic shocks hitting the economy. and third, in doing so it has to design its policy conduct in a way that does | 0 |
brian p sack : reflections on the talf and the federal reserve β s role as liquidity provider remarks by mr brian p sack, executive vice president of markets group of the federal reserve bank of new york, at the new york association for business economics, new york, 9 june 2010. * * * in my remarks today, i had intended to focus on the federal reserve β s experience with the term asset - backed securities loan facility, or the talf. this facility, which is scheduled to end later this month, was the last of the federal reserve β s special liquidity programs, and those programs were then expected to enter a period of inactivity. it had therefore seemed to be a good time to reflect on our experiences with the talf, and more broadly on the role of the central bank as a liquidity provider. however, the context for this talk has shifted importantly with recent developments in financial markets. in particular, investors β concerns about sovereign risk in some european countries, with the attendant pressures on financial firms with exposures in those areas, have put renewed emphasis on liquidity provision and led the federal reserve and five foreign central banks to reestablish dollar liquidity swap lines. accordingly, i will begin today with some remarks on recent financial market developments and the role of the liquidity swap lines. i will then turn to the talf program, providing a review of its performance and assessing the benefits that it provided. both of these programs provide important insights into the role of the central bank as a provider of liquidity, leading to a few observations and to a few questions that i believe warrant further exploration in considering future policy actions. 1 liquidity swaps with foreign central banks the second half of 2009 and the early part of 2010 were marked by substantial improvements in financial markets, ranging from short - term funding to longer term risk assets. there was good reason for those improvements : efforts by the government to stabilize markets and support financial institutions were successful, and a virtuous circle appeared to be under way in which increasing optimism about the economic outlook and improving conditions in financial markets fed upon one another. the gains in asset prices were dramatic, with broad equity indexes reversing most of the declines experienced in late2008 and early 2009 and with some measures of short - term funding spreads returning to pre - crisis levels. however, more recent developments have demonstrated that conditions in financial markets can change abruptly. these developments have been widely discussed at this point, and i | earnings has continued to show high growth, due to a reflection of the results of the annual spring labor - management wage negotiations - - in which the rate of increase in base pay significantly exceeded last year's high rate - - and also due to last year's increase in the minimum wage. meanwhile, potential additional labor supply - - i. e., the difference between the workingage population and the number of employed persons - - is likely to shrink ( chart 8 ). this is because of demographic changes and because labor force participation of women and seniors has already advanced to a high degree. therefore, with labor market conditions becoming increasingly tight, wages will likely become more susceptible to upward pressure. to understand how much capacity firms have for raising wages, i would like to point to labor share, which shows the ratio of labor costs to value - added. labor share is higher at small and medium - sized firms than at large firms, suggesting that their capacity for raising wages is limited. however, looking at wage growth at firms with a high labor share, even small and medium - sized firms tend to have a positive stance toward raising wages if they expect to raise selling prices. with a view to realizing a virtuous cycle between income and spending, i believe it is important to continue to pay careful attention as to whether improving profits, resulting from the passthrough of cost increases to prices, and sustained increases in wages, will spread to micro, small, and medium - sized firms. c. current price developments in japan next, i would like to talk about prices in japan ( chart 9 ). the year - on - year rate of increase in the consumer price index ( cpi ) for all items excluding fresh food is above 2. 5 percent. the year - on - year rate of change in the producer price index ( ppi ), adjusted for the effects of seasonal changes in electricity rates, has risen. this reflects firms'moves to pass on increases in raw material costs, personnel expenses, and other costs to prices, as well as a scaling back of the government's measures to reduce the household burden of higher electricity and gas charges. the year - on - year rate of increase in the services producer price index ( sppi ) has remained relatively high recently at around 2. 5 - 3. 0 percent, mainly on the back of the rise in personnel expenses. the rate of increase in the cpi ( all items less fresh food and energy, 3 / 7 bis - central | 0 |
these are a vital part of this monetary policy review, so i want to thank you, again, for your time and your contribution. once the policy review is complete, we will share our findings with the public, probably during the first half of next year. and now i look forward to our discussion. 2 / 2 bis central bankers'speeches | trends i have just described, taken together, were the justification for the issuance of draft guidance on nontraditional mortgage products by the federal reserve and the other banking agencies. the proposed guidance emphasizes that an institution's risk - management processes should allow it to adequately identify, measure, monitor, and control the risk associated with these products. it reminds lenders of the importance of assessing a borrower's ability to repay the loan, both now and when amortization begins and interest rates rise. nontraditional mortgage products warrant a bank having strong risk - management standards as well as appropriate capital and loan - loss reserves. further, bankers should consider the impact of prepayment penalties for arms. lenders should provide enough information so that borrowers clearly understand, before choosing a product or payment option, the terms of and risks associated with these loans, particularly the extent to which monthly payments may rise and negative amortization may increase the amount owed above the amount originally borrowed. lenders should recognize that certain nontraditional mortgage loans are untested in a stressed environment ; for instance, nontraditional mortgage loans to investors that rely on collateral values could be particularly affected by a housing - price decline. as noted, investors have represented an unusually large share of recent home purchases. past loan performance has indicated that investors are more likely than owner - occupants to default on a loan when housing prices decline. when credit standards are eased and risks are layered, institutions should compensate for the increased risk with mitigating factors that support the underwriting decision. among other credit enhancements, these factors generally include requiring borrowers to have higher credit scores, lower loan - to - value and debt - to - income ratios, and significant liquidity and net worth. finally, lenders should establish appropriate allowances for estimated credit losses in their nontraditional mortgage portfolios and hold capital commensurate with the risk characteristics inherent in these products. one final subject that is not addressed explicitly in our draft guidance, but that i believe is still important to supervisors and bankers, is mortgage fraud. there appears to have been a substantial upswing in suspected fraud related to residential mortgages in the past decade. types of fraud include falsification of loan applications, identity theft, misuse of loan proceeds, and inflated appraisals. according to the financial crimes enforcement network, there were more than 18, 000 reports of suspected mortgage fraud in 2004 ( the latest year for which we have complete data ) | 0.5 |
koen de backer, k., menon, c. desnoyers - james, i. and moussiegt, l. ( 2016 ), β reshoring : myth or reality? β, oecd science, technology and industry policy papers, no 27, oecd publishing ; and baldwin, r. ( 2016 ), the great convergence : information technology and the new globalization, harvard university press. 8 / 10 bis central bankers'speeches [ 6 ] oecd ( 2018 ), oecd economic outlook, volume 2018, issue 1, chapter 2. [ 7 ] in β t veld, j. ( 2019 ), β quantifying the economic effects of the single market in a structural macromodel β, european economy discussion paper, no 094, european commission, february. [ 8 ] this scenario assumes a counterfactual in which trade reverts to wto - rules, and applies most favoured nation ( mfn ) rates as tariffs on goods. for non - tariff barriers, it relies on estimates calculated for trade between the eu and the us. see in β t veld, j. ( 2019 ), op. cit. [ 9 ] as measured by ppp - adjusted gdp. [ 10 ] excluding intra - eu trade. [ 11 ] for further details, see ecb ( 2015 ), the international role of the euro, frankfurt am main, july. [ 12 ] see gopinath, g., itskhoki, o. and rigobon, r. ( 2010 ), β currency choice and exchange rate pass - through β, american economic review, vol. 100, no 1, pp. 304 β 336. [ 13 ] see falagiarda, m., mcquade, p. and tirpak, m. ( 2015 ), β spillovers from the ecb β s nonstandard monetary policies on non - euro area eu countries : evidence from an event - study analysis β, ecb working paper series, no 1869 ; potjagailo, g. ( 2017 ), β spillover effects from euro area monetary policy across europe : a factor - augmented var approach β, journal of international money and finance, 72 ( april ) : 127 β 147 ; baurle, g., gubler, m. and kanzig, d. ( 2017 ), β international inflation spillovers β the role of different shocks | multinational firms can influence national regulations through the threat of relocation, as well as arbitrage tax systems by shifting income flows and intangible assets across jurisdictions. there can also be incentives for countries to use labour standards as a tool of international competition β the so - called β race to the bottom β. this makes it more difficult for countries to enforce their core values and protect their people. it also leads to corporate tax bases being eroded, which makes it harder to finance welfare 3 / 10 bis central bankers'speeches states. [ 16 ] oecd analysis, for example, estimates global revenue losses from tax avoidance to be in the range of 4 % to 10 % of corporate income tax revenues. these effects occur when countries are not large enough to exercise regulatory power against mobile capital or cross - border firms. but it is harder for this to happen at the level of the eu, since it represents a market that companies can ill afford to leave. having regulatory power at the eu level enables eu countries to exercise sovereignty in the areas of taxation, consumer protection and labour standards. first, the eu gives its members the capacity to prevent multinationals from avoiding corporation tax by exploiting loopholes or extracting subsidies. this is a complex area, but some recent progress has been made on this front. new european rules have entered into force this year to eliminate the most common corporate tax avoidance practices. [ 18 ] and while the ecj recently ruled against the commission in a tax exemption case, it also recalled that special tax deals between multinationals and individual countries can constitute illegal state aid, which the commission has the right to examine. second, the eu offers much greater possibilities to defend consumers β values and ensure that they are treated fairly within the european market. this has been visible in the eu β s ability to enforce its values concerning privacy through the general data protection regulation. [ 20 ] it has been visible too in eu regulations to bring down mobile phone roaming charges for consumers within europe, [ 21 ] or to ensure that they cannot be charged more for cross - border payments in euro within the eu than they would be for national transactions. the third advantage is that countries have the possibility to coordinate within the eu to defend social protections without imposing trade restrictions. through the charter of fundamental rights, eu law has reduced the possibility of unfair competition from jurisdictions with laxer labour laws. and it has also helped raise labour standards within the eu. a case in point is the european directive on part - time work in 1997 | 1 |
yakiv smolii : national bank of ukraine press briefing - monetary policy statement speech by mr yakiv smolii, governor of the national bank of ukraine, at a press briefing on monetary policy, kyiv, 23 april 2020. * * * dear colleagues, please be informed that the board of the national bank of ukraine has decided to cut the key policy rate to 8 % per annum. the continued monetary easing aims to support the economy during the period of pandemic and quarantine. what inflation developments followed the last monetary policy meeting? in march β april, inflation remained even lower than the nbu had expected, despite the temporary price growth in the first weeks of the quarantine. last month, inflation declined to 2. 3 %. price growth was restrained by three major factors. first, lower global energy prices. second, residual effects of last year β s appreciation of the hryvnia. third, a larger supply of raw foods. these factors outweighed the effect from the weakening of the domestic currency in march and the panic buying of some goods in the first weeks of the quarantine. according to preliminary data from nbu online monitoring, inflation remains low in april, at less than 3 %. high demand for essential goods waned quickly. as a result, prices for most food products and medicines, which had grown in the first weeks of the quarantine, have declined in recent weeks. the foreign exchange market also calmed. in march, with foreign currency supply on the interbank market remaining almost unchanged, a spike in demand put a depreciation pressure on the hryvnia. however, in april not only did demand drop below the level of supply, but also the net supply of foreign currency is now even higher than it was in february, before the epidemic and quarantine began in ukraine. therefore, the hryvnia strengthened somewhat this month, and the nbu can cautiously resume purchases of excess foreign currency from the market in order to replenish the international reserves. how will inflation behave in the future? in 2020, inflation will remain within the target range of 5 % + / - 1 pp. price growth will accelerate moderately in the coming months, to reach 6 % at the end of 2020. fiscal and monetary policy measures that are aimed to support businesses and households will partially offset the decline in consumer demand. however, consumer demand will remain subdued for long after the quarantine ends. this will keep | ukrainians spending less on foreign travel. the current account deficit will widen again once economic activity rebounds globally and in ukraine. there are also several reasons for this. next year, ukraine is expected to see a drop in gas transit revenues, as well as pent - up demand for consumer goods from households and for investment imports from businesses. despite that, the current account deficit will remain acceptable, at 3 % to 4 % of gdp, as envisaged in the nbu β s january forecast. what does the realization of this forecast depend on? continued cooperation with the imf remains the key assumption of this macroeconomic forecast. ukraine is close to having a new aid program approved by the imf executive board. the nbu β s revised forecast envisages that ukraine will receive the first tranche of about usd 2 billion in q2. first, this will cover the state budget deficit, which has increased to 7. 5 % of gdp. this will enable ukraine to confidently pass through the period of peaking debt repayments, and finance measures to support businesses and households at a time when business activity is slowing down, employment and tax revenues are falling, and foreign investors are leaving 2 / 4 bis central bankers'speeches emerging markets. second, financing from the imf and other official international partners will help maintain ukraine β s international reserves at usd 27 to 29 billion this year and in the coming years. in this light, signing a new aid program with the imf is the main prerequisite for maintaining macro - financial stability in ukraine during the global crisis. therefore, the absence of a program with the imf remains the main risk to this forecast. another important risk to the outlined macroeconomic forecast could arise from a longerlasting novel coronavirus pandemic and, consequently, longer - lasting quarantine measures being required to overcome the outbreak. this will have a direct influence on how quickly the global and ukrainian economies recover. other risks also remain significant. they include : an escalation of the military conflict in eastern ukraine a drop in the harvest of grain, fruit and vegetable crops in ukraine in the wake of unfavorable weather the higher volatility of global food prices, driven by global climate change and the risk of stronger protectionist measures. why did the nbu decide to cut the key policy rate by 2 pp? like most countries, ukraine has found itself in a situation in which the economy needs significant support because of weaker business activity and falling consumption and employment | 1 |
in what concerns the extension of the policy toolkit. on that note, i warmly congratulate you, stijn, on winning the 2016 german bernacer prize for promoting economic research in europe. i am confident that you will make further important contributions in the years to come. 1 reinhart, c. m. and k. s. rogoff, ( 2009 ), β this time is different, eight centuries of financial folly β, princeton, new jersey : princeton university press. 2 work at the ecb finds evidence that financial cycles, defined as the joint movement of house prices and credit, are the single best predictors of banking crises ( see schuler, y., p. hiebert and t. peltonen, ( 2016 ), β coherent financial cycles : why extending credit can be an asset β, ssrn working paper. this analysis builds on work carried out at the bis ; see drehmann, m., c. borio, and k. tsatsaronis, ( 2012 ), β characterising the financial cycle : don β t lose sight of the medium term! β, bis working paper no 380. 3 piazzesi, m. and m. schneider, ( 2016 ), β housing and macroeconomics β. mimeo. 4 lustig, h. and s. van nieuwerburgh, ( 2005 ), β housing collateral, consumption insurance, and risk premia : an empirical perspective β, journal of finance, 60, 1167 β 1219. 5 favilukis, j., s. c. ludvigson and s. van nieuwerburgh, ( forthcoming ), β the macroeconomic effects of housing wealth, housing finance, and limited risk - sharing in general equilibrium β, journal of political economy. 6 favilukis, j., d. kohn, s. c. ludvigson and s. van nieuwerburgh, ( 2013 ), β international capital flows and house prices : theory and evidence, in housing and the financial crisis β, edited by e. l. glaeser and t. sinai, 235 β 299, chicago : university of chicago press. 7 kelly, b., h. lustig and s. van nieuwerburgh, ( 2016 ), β too - systemic - to - fail : what option markets imply about sector - wide government guarantees β, american economic | awareness and to prepare them for the cash changeover at the beginning of 2002, the governing council agreed to organise a series of conferences on euro changeover issues in the course of 2001. these conferences will bring together the key parties involved in the euro cash changeover process, both at the national and at the european level, with a view to focusing on the cash changeover preparations. this action should also be seen against the background of the conclusions of the european council meeting in nice on 7 to 9 december 2000. third, the governing council decided that tests on the euro banknotes will be carried out in all euro area countries in 2001. these tests will offer companies an opportunity to check and fine - tune their cash and / or vending machines and sensors with regard to their being able to recognise and accept euro banknotes. they will be organised by the euro area national central banks ; the bank of england will also be invited to participate. the ecb will monitor the test scenario in order to ensure a consistent approach and will act as the contact point for companies registered in a country without a test centre. fourth, further to the ecb β s press release of 3 august 2000, when the decisions of the governing council regarding the euro area financial modalities for the 2002 cash changeover were announced, the governing council agreed on general principles for the so - called frontloading and sub - frontloading of euro banknotes outside the euro area as from 1 december 2001. today β s decision, which complements the principles agreed with regard to the frontloading and subfrontloading of euro banknotes inside the euro area, has to be seen as a contribution to ensuring a smooth cash changeover in 2002. you will find further information relating to this decision in a separate press release to be issued this afternoon. with regard to target, the governing council decided to establish a long - term calendar of target operating days to be applied from 2002 onwards. the establishment of such a common long - term calendar was deemed necessary in order to reduce uncertainties for financial markets. in addition to saturdays and sundays, target as a whole, including both domestic and cross - border transactions, will be closed for a total of six days in the calendar year. you will find further information relating to this decision in a separate press release to be issued this afternoon. the governing council also adopted several legal acts related to the field of accounting, which will be published shortly in the official journal of the european communities. these acts relate to the legal | 0.5 |
thomas jordan : 2012 β swiss monetary policy in uncertain times introductory remarks by mr thomas jordan, acting chairman of the governing board of the swiss national bank, at the swiss - american chamber of commerce, geneva, 7 february 2012. * * * the speaker would like to thank claudia strub and till ebner for their valuable support in preparing this speech. he would also like to thank enzo rossi and peter kuster for their helpful comments. introduction since last summer, switzerland has been suffering the effects of the negative developments in the global economy, and particularly the escalating debt crisis in the euro area. the uncertainty over the debt crisis led to a massive appreciation of the swiss franc during the summer months. in their search for safe financial assets, investors drove the swiss franc to an all - time high against the euro in early august, which posed an acute threat to the swiss economy and carried the risk of deflationary developments. in response, the swiss national bank ( snb ) set a minimum exchange rate of chf 1. 20 per euro in early september of last year, which corrected the overvaluation of the swiss franc to some extent. thanks to this decision, investment planning for export - oriented companies has been facilitated, and the risk of both deflation and severe structural damage to the swiss economy has been reduced. without this policy measure, the extreme overvaluation of the swiss franc and its volatility would probably have persisted. however, the situation remains challenging for large sections of the economy β even at the current exchange rate, the swiss franc is still very strong. we expect it to weaken over time, and fall back to a level more in line with its economic fundamentals. as the data show, economic activity in switzerland slowed significantly in q3 2011. exports, in particular, fell noticeably. in addition to the strong swiss franc, the general global economic outlook has deteriorated and downside risks prevail. given this difficult environment, we remain firmly committed to defending the minimum exchange rate of chf 1. 20 per euro. this commitment applies at any time, from the moment the market opens in sydney on monday to when it closes in new york on friday. we will not tolerate any trading below the minimum rate in the relevant interbank market. to enforce this policy, we are prepared to buy foreign currency in unlimited quantities if necessary. moreover, we stand ready to take further measures if the economic outlook and the risk of deflation so | in the global economy has also surprised on the upside. so, we do not yet see the well - balanced base that would give us assurance that growth is on a solid footing. this brings me to the second issue. given the performance of exports and investment, the uncertainty regarding the tax and trade policies of the us administration again factored prominently in our discussions. the bank of canada is quite used to dealing with uncertainty, and we were very deliberate in choosing how to incorporate it into our projections and policy decision. in terms of potential us tax measures, we judged in january that there was enough information available to make some initial assumptions. there are now signs that suggest implementation will be delayed, and so we have updated these assumptions. we took a different approach to uncertainty about potential us trade policies. we now have a 1 / 2 bis central bankers'speeches better sense than in january of the extremely wide range of possibilities : they include a borderadjustment tax, targeted tariffs on some products and countries, non - tariff barriers and even broader multilateral trade measures. we do not know which of these will be enacted ; their timing is uncertain ; and each would affect the global economy and canada through a different, complex set of channels. take a look at box 1 of the report for a discussion of this. although it is fair to say that the possible outcomes are almost certainly negative for canada, we cannot reliably model them at this stage. instead, we have incorporated an extra degree of caution in our forecast for exports relative to our january forecast, including the potential implications of the softwood lumber dispute. we have also been cautious with our forecast of business investment. while businesses are becoming more confident, they remain wary. when we talk with companies, many tell us that planned increases in investment are modest, or related to maintenance, rather than to expansion. overall, we project economic growth in canada to slow from an annual pace of 3. 8 per cent in the first quarter to just over 2 per cent for the remainder of the year. we project growth of just under 2 per cent in 2018 and 2019. given the stronger profile of economic activity relative to january, governing council was very focused on the third issue : how much excess capacity remains in the economy. we use a couple of different methods to gauge the amount of excess capacity, which gives us a range of estimates of excess supply. evidence from inflation data is also consistent with material excess capacity remaining. although a number of temporary factors are keeping headline | 0 |
barry whiteside : regulation and supervision of non - bank microfinance institutions opening speech by mr barry whiteside, acting governor of the reserve bank of fiji, at the regional off - site & on - site technical workshop on non bank microfinance institutions, suva, 12 β 14 april 2011. * * * my fellow governors, mr. denton rarawa ( cbsi ) and mr. loi bakani ( bpng ) central bank representatives from the region mr. tillman bruett, regional financial inclusion advisor and project manager, pacific financial inclusion programme mr deva de silva, senior operations officer, international finance corporation workshop facilitators mr. mark flaming and dr. mohamed nasir fellow colleagues from the reserve bank of fiji ladies and gentlemen introductory remarks bula vinaka to you all. it is with great pleasure that i welcome you all to suva for the first regional technical workshop on regulation and supervision of non bank microfinance institutions. it is an honor to help host this very important workshop that brings together regulators from around the region who are interested in the microfinance and financial inclusion agenda. microfinance and financial inclusion have become very topical issues on the global agenda, and a priority in many developing countries. it has been acknowledged that inclusive financial systems, where people regardless of income level, have easy access to various financial services, are critical for a country β s sustainable long term economic growth. in the region and in our individual countries we can attest that there are still significant numbers of our people excluded from basic financial services. in this regard, our active role in financial systems regulation, reform and policy development is important to set the scene and successfully implant the microfinance and financial inclusion agenda in our countries. an important element of inclusive finance is the institutions directly involved in extending financial services to the financially excluded. most of these institutions may operate outside the boundaries of central banks β regulatory and supervisory scope. in this workshop you will get to learn and devise practical approaches and methods that can be designed and adopted to effectively regulate such institutions. i wish to acknowledge the support and funding of the alliance for financial inclusion ( afi ), the pacific financial inclusion programme ( pfip ) and the international finance corporation ( ifc ), whose kind assistance have made this regional workshop possible. regulation and supervision of fiji β s financial system in fiji, the reserve bank is responsible for regulating and supervising the local financial system. this consists of the banking, insurance, | : info @ rbf. gov. fj website : www. rbf. gov. fj reserve bank of fiji develop and promote sustainable business models that support communities β response to climate change under the maya declaration and issuing sovereign green bonds β a world first for an emerging market. i also encourage you to use the financial pages in the diary to record your daily expenses as it will help you develop the habit of tracking and assessing your financial decisions to better plan for a sustainable future. i wish to take this opportunity to acknowledge the continued commitment of all the teachers to your personal development. to the students, my advice to you is to continue asking questions. be inquisitive and further your learning whenever possible. your teachers play a key role in giving you the necessary guidance to help you develop your financial literacy but it is up to you to make the most of your opportunities. conclusion i hope you will find this year β s student diary both useful and engaging. i encourage you to use it well and develop yourselves to become not just financially responsible but environmentally - conscious. remember that a concerted effort is required to ensure a sustainable future for us and our planet, therefore every bit that you do counts. finally, i would like to wish the teachers and students all the very best for the new academic year. may you flourish always, thank you! end private mail bag, suva, fiji tel : ( 679 ) 331 3611 fax : ( 679 ) 330 2094 email : info @ rbf. gov. fj website : www. rbf. gov. fj | 0.5 |
my estimation involves continuous monitoring and evaluation of the risk profiles of banks in relation to their business strategies and exposures. this assessment will be facilitated by the construction of a risk matrix for each institution, and thus creates the room for focused supervision in relation to available resources. ladies and gentlemen, this will in no small way help to optimize the synergies from the different activities, including the regulatory and supervisory functions, and ultimately enhance substantially, the overall efficiency and effectiveness of the supervisory process. mr. chairman, the current shift in focus is in line with the introduction of the new basel capital accord ( basel ii ) to include operational risk. this puts further emphasis on supervisory review process and market discipline, which borders on transparency and full disclosure of financial information. these are intended to provide clear bases for effective management of risks and allocation of capital to cover them with the view to making safe and sound institutions. at the appropriate time, and that is possibly by end 2009, we would adopt basel ii. in addition to these intended changes, mr chairman, another development worth mentioning is the adoption and implementation of international financial reporting standards ( ifrs ), which presents a uniform basis for recognition, classification and measurement of financial assets and liabilities and the related income, and expenditure of financial institutions. in ghana, consultations have started between the bank of ghana, the institute of chartered accountants and the banks to determined those aspects that affect banks and how to implement them to suit our local conditions. ladies and gentlemen, it is not hard to see that this shift in focus of regulation and supervision will demand a change in management strategies in both the supervisory authorities and the banks. in particular, the effectiveness of the risk based supervision would invariably depend on banks'preparedness in certain critical areas, such as quality and reliability of data, soundness of systems and technology, appropriateness of risk control mechanism, supporting human resources and organisational back - up. mr. chairman, in my estimation, the above will obviously require the banks to re - orient their organisational set up to put in place efficient risk management architecture, risk focused internal audit, strengthening of the management information system, and set up compliance units. a successful transition to risk based supervision cannot do without the above and obviously make them imperative. mr. chairman, for this change to be effective in containing and managing risk, it has to be implemented throughout the whole sub - region in order to avoid contagion due to the current trend of financial integration within our sub | lionel van lare dosoo : risk - based supervision keynote address by mr lionel van lare dosoo, deputy governor of bank of ghana, at the β regional seminar on risk - based supervision β, accra, 24 april 2006. * * * mr. chairman, distinguished resource persons, workshop participants, ladies and gentlemen, i am delighted to be asked to deliver the welcome address and open this very important workshop that is jointly organised by the bank of ghana and the office of the superintendent of financial institution ( osfi ), ottawa, canada. let me take this opportunity to extend to you and especially our foreign guests a warm welcome to ghana and to this important workshop. i am informed that apart from the resource persons who come from canada, we have assembled for this workshop participants from nigeria, the gambia, sierra leone and ghana. i therefore perceive this gathering as constituting a small international community with an opportunity for cultural exchanges in addition to the specialised knowledge and skills to be acquired. even though i recognise that this week - long workshop is quite loaded and tight, i will encourage you to find time outside this busy schedule to explore and sample all the wonderful delights accra has on offer. ladies and gentlemen, there could not have been a better time for this workshop than now given the strategic importance of financial stability to the overall performance of our economies. most of our economies ( in particular ghana ) at the moment are at the threshold where sustainable macroeconomic stability, of which financial stability is key, has become the imperative condition for the growth and development process. the international banking scene in general has in recent years witnessed strong trends towards globalization and consolidation of the financial system. stability of the financial system has become the central challenge to bank regulators and supervisors throughout the world. the multi - lateral initiatives leading to evolution of international standards and codes and evaluation of adherence thereto represent resolute attempts to address these challenges. these are major challenges to both developed and developing economies alike and developments over the recent past suggest that one cannot begin to imagine the cost of inaction. ladies and gentlemen, the growing diversities and complexities of banking business, the spate of product innovation with complex risk phenomena, the contagion effects that a crisis can spread given the linkages and interdependence of banks and the growing trend of businesses without borders, calls for a new approach to ensuring the financial health of our economies and that is what risk - based supervision is all about. the risk based supervision process in | 1 |
##ogenous to the firms that increased their probability of failure β essentially the risk it took on its books. these instruments were found insufficient in doing so. further, in the new systemically oriented regulatory philosophy, it was believed that apart from being a risk to themselves, many large institutions posed risk to the system at large through significant negative externalities. it therefore became a sort of public good cause to contain the riskiness of these large institutions. the exact mechanism for doing this would be contingent on multiple factors, including size, interconnectedness, complexity, business model and industry structure etc. 31. alternate resolution mechanism : in spite of the above regime, if an institution fails on account of systemic stresses, the objective must be to minimise the cost for the taxpayers. different models have been proposed with the objective to allow the orderly resolution of a systemically important nonbank financial firm, including a mechanism to cover the costs of the resolution. various approaches that have gained traction in policy deliberations for improving resolution capacity include limits to complexity of internal structures β preference for standalone subsidiaries, recovery and resolution planning, use of contingent capital and other instrument to absorb losses as a going concern, a special resolution regime for sifis which makes the shareholders and creditors share losses ; and a bailout fund, contributed by the same entities expected to be bailed out. in the us, the dodd - frank wall street reform and consumer protection act envisages a resolution regime which allows the government to impose losses on shareholders and creditors, unlike the normal bankruptcy provisions for other firms where the aim is to reorganise or liquidate a failing firm β for the benefit of its creditors β. 32. strengthening markets and market infrastructure : the singular area of attention in this regard has been to move much of the otc derivatives market to a central clearing model. there is broad agreement in this regard though few important concomitant issues arising out of risk concentration in ccps will need be addressed carefully, including cross margining across ccps or across different products. 33. there is also the issue of implicit or explicit liquidity support by the banking system to the ccps in the form of lines of credit or to intermediaries such as brokers and market participants in the form of margins for trades, payment commitments or other forms of guarantees. it is likely that the risk of transactions undertaken through ccp sit in banks / regulated financial entities books either directly or indirectly and if so it needs to be ensured that they | cent of the net worth, whichever is higher. for recurring expenses, remittance upto 10 per cent of the average annual sales / income or turnover during last two financial years is allowed. within these limits, ads can allow remittance by a company even to acquire immovable property outside india for its business and for residential purpose of its staff. β’ partnership firms registered under the indian partnership act, 1932 and having a good track record are permitted to make direct investments outside india in any bonafide activity 200 per cent of their net worth under the automatic route. i must mention that that the liberalization in the policy on overseas investments has been very much informed by the detailed framework set out by the government in 1995 when the work was transferred to reserve bank of india. for the first time the framework articulated a cohesive policy in regard to overseas investment policy, flexible enough to respond to likely future trends. to quote from the guidelines, they reflected the'need for transparency, recognition of global developments, capturing of indian realities and learning of lessons from the past '. the basic objectives of the policy, as laid out in the notification, were as follows : β’ recognising the link between trade and investment flows, to provide a framework for indian industry and business to access global networks. β’ to ensure that such flows, though determined by commercial interests, are consistent with the macroeconomic and balance of payment compulsions of the country, particularly in terms of the magnitude of the capital flows ; and β’ to give liberal access to indian business for technology - sourcing or resource - seeking or market - seeking as strategic responses to the emerging global opportunities for trade in goods or services. β’ to give a signal that there is a qualitative change in the approach of the government, from one of regulator or controller to one of facilitator. β’ to encourage the indian industry to adopt a spirit of self - regulation and collective effort for improving the image of indian industry abroad. experience and trends the overseas acquisitions, which started of on a small scale, have reached to globally visible levels with big ticket acquisitions being announced by large corporates regularly. a report of the boston consulting group ( bcg ) on the emerging multinationals in the world puts 21 indian companies among the top 100 such multinationals. only china with 44 companies is ahead of india. tata group, bharat forge, infosys, wipro, ongc, ranbaxy and such indian companies are venturing overseas and expanding | 0.5 |
much in this building's spirit, the fsb will continue to unify countries, sectors and market activities around strong regulation. it will continue to shed light on shared vulnerabilities. and it will continue to foster a resilient financial system for all seasons. thank you. 1 see, for example, the findings of the u. s. financial crisis inquiry commission : http : / / fcic - static. law. stanford. edu / cdn _ media / fcic - reports / fcic _ final _ report _ full. pdf 2 see the fsb's holistic review into the march 2020 turmoil. 4 / 4 bis - central bankers'speeches | ##nk the role and set - up of monetary policy after the crisis. where are we headed? and how do we get there? i see three main elements of monetary policy after the crisis. for the monetary policy framework, the crisis has shown that the monetary analysis can play an important role in signaling financial imbalances and vulnerabilities. it is an important input in a strategy of β leaning against the wind β. for the operational framework for monetary policy, it is crucial that after the crisis we will return to the principles that guided the framework before the crisis. in particular, we need to return to a clear and transparent separation principle between monetary policy stance, on the one hand, and liquidity management, on the other hand. finally, there is a clear need for a sustainable institutional framework for the euro area. this framework will need to center on budgetary discipline and sound economic governance. in the long - run, as a closing piece, i see joint financing through euro bonds as the only sustainable solution to self - fulfilling liquidity / solvency problems in individual member states and domino - effects / contagion between euro area member states. how do we get there? in a transition to a post - crisis monetary policy, it is important to exit gradually from unconventional and conventional instruments that are being used during the crisis. in this phase, communication will play a very important role. and fiscal and prudential policies need to play a primary role in addressing problems that originate in the fiscal and financial spheres. let me conclude. as stan fischer said in a recent tinbergen lecture in utrecht, the big question monetary authorities face in these times is β what do you do if policymakers that should tackle problems do not act sufficiently? my answer is that monetary policy cannot solve the crisis, since it is rooted in fiscal policy and the vulnerability of the banking system. all monetary policy can do is to buy time, at the cost of stretching its mandate to the limit, if not beyond. bis central bankers β speeches | 0.5 |
are likely to worsen again. without fundamental rebalancing, a full - fledged recovery of world economy may be a remote possibility. but rebalancing within a short period of time is no trivial task. it will require more proactive and concerted policy efforts than are currently being made. the recent expansionary macroeconomic policies undertaken in response to the sluggish economic growth are, as i see it, temporary measures, and not ultimate solutions to rebalancing. they serve to mature conditions for carrying out structural reforms that are essential to remedying the imbalances. in this regard, the following can be suggested as structural solutions for rebalancing. first, the current account surplus economies need to expand their domestic sectors, and thereby establish a virtuous circle between output, employment, and income. the current account deficit countries, on the other hand, need to nurture their manufacturing industries, so as to improve their bases for exporting. in individual countries, the imbalances between their real and financial economies, and between their manufacturing and service sectors, need to be corrected, while they must also work to reduce their debts and the disparities between income classes within their populations. to secure the impetus for sustainable growth, countries will also need to work together and combine their wisdom. the brisbane action plan, a set of comprehensive growth strategies bis central bankers β speeches presented by the g20 summit last weekend, is one result of such combined wisdom, arrived at after long discussion among member countries, and will be useful in the future rebalancing in each country. during this two - day conference, we will deal with the topics of rebalancing the economy in five separate presentations, as well as in a panel discussion participated in by former and current policymakers from major countries. i look forward to participants reaping many useful ideas here, and to this conference contributing to rebalancing and to the restoration of sustainable growth. thank you. bis central bankers β speeches | 3 in such circumstances, society faces difficult questions of how best to fairly and justly promote equal opportunity. my purpose today is not to provide answers to these contentious questions, but rather to provide a factual see salvatore morelli, timothy smeeding, and jeffrey thompson ( 2014 ), β post - 1970 trends in withincountry inequality and poverty : rich and middle income countries ( pdf ), β irp discussion paper series 1419 β 14 ( madison, wis. : institute for research on poverty, march ). for income inequality in the past 100 years, see anthony b. atkinson, thomas piketty, and emmanuel saez ( 2011 ), β top incomes in the long run of history ( pdf ), β journal of economic literature, vol. 49 ( march ), pp. 3 β 71. for wealth inequality, see emmanuel saez and gabriel zucman ( 2014 ), β wealth inequality in the united states since 1913 : evidence from capitalized income tax data, β working paper and slides ( october, 14, 2014 ). for income inequality before 1913, see peter h. lindert and jeffrey g. williamson ( 2012 ), β american incomes 1774 β 1860, β nber working paper series 18396 ( cambridge, mass. : national bureau of economic research, september ). see alan b. krueger ( 2012 ), β the rise and consequences of inequality in the united states ( pdf ), β speech delivered at the center for american progress, washington, january 12. bis central bankers β speeches basis for further discussion. i am pleased that this conference will focus on equality of economic opportunity and on ways to better promote it. in my remarks, i will review trends in income and wealth inequality over the past several decades, then identify and discuss four sources of economic opportunity in america β think of them as β building blocks β for the gains in income and wealth that most americans hope are within reach of those who strive for them. the first two are widely recognized as important sources of opportunity : resources available for children and affordable higher education. the second two may come as more of a surprise : business ownership and inheritances. like most sources of wealth, family ownership of businesses and inheritances are concentrated among households at the top of the distribution. but both of these are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families | 0 |
seong - tae lee : monetary policy in an environment of low inflation opening address by mr seong - tae lee, governor and chairman of the bank of korea, at the bank of korea international conference 2006, seoul, 16 june 2006. * * * greetings ladies and gentlemen, i am delighted to be here to express my warm welcome to all of you attending " the bank of korea international conference 2006 ". i would like to extend particular gratitude to our keynote speaker, professor frederic mishkin of columbia university ; to our luncheon speaker, president un - chan jung of seoul national university ; to president william poole of the federal reserve bank of st. louis ; and to our other chairpersons, speakers and discussants, for taking time out from their busy schedules to be with us today. this year's conference, marking the 56th anniversary of the bank of korea's establishment, deals with the theme of " monetary policy in an environment of low inflation ". many central banks including the bank of korea are currently facing difficulties conducting monetary policy in the new environment characterized by low inflation. in this regard, i believe that today's conference is very meaningful and most timely. conducting monetary policy under low inflation as we are all aware, inflation throughout the world has declined since the mid - 1990s. this is mainly attributable to the emergence on the global stage of vast low - wage economies such as china and india ; to productivity gains made possible by information technology ( it ) development ; and to intensified competition in both domestic and global markets. in addition to all of these factors, the increased credibility of central banks is also believed to have contributed to low inflation. over the years, central banks around the world have been resolute in their pursuit of price stability, while working hard to enhance their capabilities in the conduct of monetary policy. together with the continuing price stability, this has helped lower the inflation expectations of economic agents. the case is much the same in korea. both consumer price and core inflation rates are running at levels some two percentage points lower than those we saw here prior to the currency crisis. particularly, the rate of core inflation nowadays is moving substantially below the lower bound of the bank of korea's target range. in the last few months, upward price movements have been observed in several countries. however, rising prices on a scale similar to those of the past are no longer expected to reappear for the time being, as firms continue their efforts to improve productivity with | to include many different vegetables. he is now looking into expanding into commercial peanut farming. i am told mr chand is always looking to expand the farm by testing different crops. mr chand β s venture was assisted greatly by the lautoka staff of the microfinance unit and the ministry of agriculture. through the microfinance unit west sanjay was identified as a candidate for the fdb small business of the year awards for 2008 and he was successful in receiving the farming small business award sponsored by the reserve bank of fiji. there are several other very good success stories but these two cases, i just illustrated, go to show how we can assist small and micro businesses to grow with the necessary support and guidance from the various agencies of government, financial institutions and ngos. let me at this stage briefly talk about the anz rural banking scheme in fiji. access to banking services in the rural areas is very critical in enhancing the growth of microfinance. in view of this, the reserve bank of fiji has been discussing with the commercial banks in fiji for a number of years on how best they can provide access to banking services to our rural people. the reserve bank was very pleased that the anz bank took great initiative in this regard by launching the anz rural banking services in 2004. both the reserve bank and the government played an important facilitating role in this initiative. i am pleased to say that the anz rural banking scheme is now an internationally recognized model for delivery of banking services to the rural sector. here, i would like to convey my special thanks to the undp for its role in making the anz rural banking a success. the undp β s financial literacy programme assisted in the success of this scheme immensely particularly in the education of villagers in the rural areas on the importance of managing their finance. to date, anz has face - to - face relationship with over 300 communities and 200 schools each month. in just under 4 years, anz rural banking initiative has grown substantially to over $ 9m deposits with over 70, 000 rural customers. in addition, total lending has reached over $ 2m and its rural banking team continues to serve with vigour in areas across fiji β in suva, nausori, sigatoka, ba, labasa, savusavu and including taveuni & kadavu. the reserve bank of fiji is very grateful to the anz rural banking scheme for the commitment shown in areas that are not normally serviced by commercial | 0 |
sub - chest run by barclays bank zambia plc. this has been exemplified by fewer deposits at the sub - chest each successive period. our investigations have revealed that this is driven by the high intensity of cash transactions within the region, largely because very few people, particularly the small - scale farmers, have bank accounts. we implore you to encourage the use of non - cash payments for your transactions. it is not only a safer means of transacting but it also enables the authorities to keep track of the level of economic activity in the area. in this regard, we also ask that the commercial banks design products and services whose cost structures are suitable for the economic environment of the region. financial institutions in general need to offer structured financing that best suits the zambian economic landscape. it is only through such activities that we will see further developments in the whole zambia rather than the few areas along the line of rail. mr. chairman, ladies and gentlemen, we have come to chipata not only to tell you what we expect of you but also to listen to what you expect of us. i therefore declare this meeting open and invite you to make your contributions. i thank you! | caleb m fundanga : how the bank of zambia β s policies are impacting eastern province developments remarks by dr caleb m fundanga, governor of the bank of zambia, at the eastern province chamber of commerce and industry open meeting, chipata, 17 january 2008. * * * β’ the chairman β eastern province chamber of commerce and industry ( epcci ) β’ members of the executive committee β epcci β’ epcci members β’ invited guests β’ ladies and gentlemen first and foremost, i must state that i am pleased to have finally made the trip to eastern province under the invitation of the epcci. the visit was planned for last year but due to other commitments i could not make it. in this regard, i made it a point to make sure that i visit the province before the end of the first quarter. i am happy that we have actualized our plans during the first month. it is our hope that we will also be able to visit other provincial towns off the line of rail during the course of the year. mr. chairman, one may question what is the purpose of the bank of zambia to visit these outlying areas? the answer is simple and is drawn from our mission statement β which is β to formulate and implement monetary and supervisory policies that will ensure price and financial system stability β. our visit is therefore, to enable us assess the extent to which our policies are impacting development in the eastern province. for a start, we can rightfully boast that as a country we have achieved single digit inflation for the second year in a row and we have had no financial institution failures in the recent past. these successes are the result of monetary and fiscal policies that have changed the economic landscape of zambia. we have been fortunate that the successes have come at a time when we are seeing renewed economic interest in zambia. investments in mining and other sectors have significantly increased, and more importantly, the eastern province has not been left out. ladies and gentlemen, we have been following the developments in eastern province with keen interest ; hence our visit to see for ourselves what is going on. i must say that we are impressed with what we have been able to find out. it is clear that income levels have risen in the region and this has been driven by the boom in agriculture. this is an encouraging development. one of our primary concerns as policy makers is to ensure that development is not restricted or concentrated along the line of rail. we therefore urge you to use your enhanced income levels to invest in capital | 1 |
economic efficiency and on price developments. it increases the strains on the monetary policy and, in a monetary union, there may be significant adverse spillover effects on other euro area countries. an institutional framework that guarantees sound government finances is an important contribution to macroeconomic stability and is conducive to sustained output growth and employment. it also helps to underpin the monetary policy. the implementation of the stability and growth pact provides sufficient scope in the medium term for a stabilising role for fiscal policy in monetary union. while, on the one hand, an unbalanced fiscal position creates difficulties for the economy concerned, if the government debt level is reduced to a reasonable level and fiscal deficits are close to zero or in surplus, this creates room for manoeuvre in economic downturns for fiscal policy to act as an automatic stabiliser. but this should then also apply if the ecomony grows rapidly or inflation is relatively high. windfalls occurring in such cases should then lead to lower deficits. of course, in making this remark i am not addressing one country in particular. fortunately, however, the dutch language gives me the opportunity to say : β if the shoe fits, wear it β. concluding remarks to summarise, national differences in growth and inflation observed in the euro area in the recent past do not appear to be unusual either in a longer - term perspective, nor compared with that which has been seen in the united states. looking into the future, it is of course difficult to predict how these differences may evolve. the experience of the united states suggests that they will not disappear completely. the further development of the single market is likely to lead to some sources of divergence becoming less significant, while others may become more important. divergences across countries will be monitored closely by the ecb but, given that monetary policy is geared towards maintaining price stability in the euro area as a whole, this means that other economic policies are required in circumstances where country or regional developments differ significantly, or over too long a period of time, from area - wide developments. in particular, this means that wage developments, backed by structural reform in labour and product markets, have a significant role to play while fiscal policy, within the framework of the stability and growth pact, must also make a significant contribution. | its key priorities and has re - convened the g20 infrastructure working group, which met in sydney earlier this month. one typical challenge is risk management. infrastructure risk takes many forms. there's the risk that the project is not built efficiently, that investors are unwilling, that demand is too high β leading to congestion β or not high enough. there are risks that revenue can't be collected as intended. there are risks that the construction isn't resilient to natural disasters or just ordinary wear and tear. another typical challenge is financing. most infrastructure assets cost a lot upfront to build, and their monetary return β if any β is only realised over a long period. this can still be an attractive payoff https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 2 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba structure for private investors, depending on how the project is structured. ensuring private sector participation in infrastructure finance has therefore been a priority of the g20. a common thread in these challenges is that the nature of the risks and funding issues are very different in the β build phase β than in the β run phase β, once the infrastructure is being used. this is true of any large construction project and, similarly, one solution can be to have different actors involved in the two stages. what policies might lessen these challenges? the good news is that, if we face common challenges, the solutions are also likely to be common. we can learn from each other. so there is value in sharing information about best practice across countries. for example, during australia's g20 presidency in 2014, a global infrastructure hub ( gi hub ) was announced, with an aim of, among other things, sharing guidance on best practices. if you think about it, the principles for designing a good road network or locating a railway line don't really change according to where you live. there will be differences relating to legal frameworks or other national specifics, but most of what constitutes best practice will be universal. to lessen the financing challenge, g20 authorities have been focusing on initiatives that can make infrastructure an attractive asset class. [ 2 ] there is plenty of private sector financing looking for the stable long - term cash flows that certain kinds of infrastructure assets can provide, once they are built. the question is how to bring that financing to the projects that need | 0 |
ignazio visco : accounting for the long - term costs of the recession remarks by mr ignazio visco, governor of the bank of italy, at the iea - isi strategic forum 2014, final roundtable β accounting for the long - term costs of the recession β, rome, 23 september 2014. * * * 1. the legacies of the great recession are many and multifaceted ; they not only affect current cyclical developments, but may also have permanent bearings on our economies. however, today β s difficulties and opportunities, as well as tomorrow β s prospects, are the result of deep underlying forces that were already reshaping the functioning of the world economy well before the great recession began. a. crisis legacies for economic growth 2. in advanced countries such as the us and the uk, gdp ( imperfect an indicator as it may be, especially in the face of the increasing role of digitisation ) has now overtaken its pre - crisis level : however, the growth rate remains lower than before 2008. in the euro area as a whole, current gdp still remains below its pre - crisis level, to which it might return late next year. it should also be underlined that the weak recovery is no longer confined exclusively to stressed countries of the area. 3. what is more worrying is that the crisis may have left lasting scars. the high correlation between the increase in estimated output gaps since 2007 and the fall in the ( estimated ) growth rates of potential output suggests that lower investment and higher unemployment ( or under - employment ) may have had an impact extending well beyond the current cycle. 4. this is particularly worrisome for countries with high public debts, whose sustainability requires a return to steady economic growth, and which may also suffer, as is presently the case in the euro area, from excessive disinflation. and this is why structural reforms and accommodative monetary policy are so much in demand these days. 5. that the legacies of the crisis go well beyond the short term is best epitomized by ongoing talks about risks of hysteresis ( the extent to which cyclical developments affect an economy β s longer - term dynamics ) and the revival ( by larry summers ) of alvin hansen β s 1930s hypothesis of secular stagnation. in essence, this hypothesis relates to factors that generate permanently higher savings and lower investment, in a context where monetary policy is unable to reduce the real interest rate to the required | meeting of shareholders : β corruption, criminal activity and tax evasion not only undermine the community but also distort the behaviour of economic agents and market prices, reduce the effectiveness of government action, increase the tax burden on those who do their duty, and restrict productive investment and job creation. well - functioning public administration improves the operation of markets and competition, reduces firms β costs, and is reflected in the quality and cost of public services and thus on the tax burden. the efficacy of the reforms depends on it. β 22. these policy actions should not be eluded. for them to be effective, they must be seen as a part of a fully - fledged strategic reasoning on the prospective functioning of our economies. more generally, while we try to better understand the challenges posed by structural and technological change, there are questions that it is fundamental to address. among them : how should the education system adapt to enable the teaching of those skills essential to keep up with new technologies? how can we enable displaced workers to acquire skills which will not become, or are less likely to become, redundant through computerisation? how can public policy smooth the social impact of technological progress and allow a wider distribution of its fruits? bis central bankers β speeches | 1 |
the euro area. absent future shocks to energy and commodity prices, the outlook for inflation over the medium term β the ecb β s 2 per cent target β will be closely linked to developments in underlying inflation. let me now discuss the prospects for these dynamics in the context of the broader macroeconomic environment. chart 1 : headline and underlying inflation factors source : eurostat and aydin yakut ( 2023 ). notes : trend inflation is based on the methodology of aydin yakut ( 2023 ). latest observation for hicp, core and trend inflation is march 2023, supercore and trimmed mean is february 2023. momentum is defined as the annualised 3 months on 3 months rates, seasonally adjusted data. economic outlook and transmission of monetary policy given the high uncertainty around the outlook for the economy, my colleagues and i will be especially focused on incoming data as part of making our monetary policy decisions. the euro area economy slowed in the fourth quarter of 2022, with economic growth stagnant in the face of falling private domestic demand. high inflation, prevailing uncertainties and tighter financing conditions dented private consumption and investment, which fell by 0. 9 per cent and 3. 6 per cent respectively. however, the ecb staff march macroeconomic projections envisage a recovery in the next few quarters as supply conditions improve further, confidence recovers, and firms work off large order backlogs. rising nominal wages and falling energy prices will partly offset the loss of purchasing power that many households are experiencing as a result of high inflation. this, in turn, will support consumer spending. looking ahead, with record low unemployment expected to hold steady at 6. 7 per cent, the ecb staff β s current projections embed a significant degree of real wage catch - up, with wages returning to 2022 levels in real terms by end2025. nominal wage growth projections of 5. 0, 4. 4 and 3. 6 per cent in 2023, 2024 and 2025 are significantly above historic averages. for wage developments, much will depend on ongoing levels of labour market tightness. while the number of job vacancies in the euro area have started to recede gradually since the turn of this year, the number of job openings relative to unemployed remains at a historic high. meanwhile, despite the weaker pmi ( purchasing managers β index ) data we saw towards the end of 2022, employment expectations remained in significant positive territory ( chart 2 | had no information at hand indicating that any of the banks were about to experience losses far in excess of their capital reserves. what i have suggested as the best course of action ( given the lack of such information scenario 2 ) β buying time for negotiation with partners, seizing control over the two failing banks, and limiting the scope of the guarantee β could hardly ( unless those negotiations had proved remarkably successful ) have reduced the direct fiscal bill by more than a few billion β a fraction of the actual damage. the alternative ( under the hindsight scenario 1 ) of bailing - in some of the bondholders and depositors of anglo and inbs would have imposed additional disruption to economic activity and capital formation which would have offset a lot of the savings to the state from not paying the creditors. i conclude that the need for β austerity measures β : the scale of tax increases and expenditure reductions that have proved necessary since, could have been reduced somewhat, but not all that much, by anything done at the end of september 2008. maintaining perspective as i have remarked recently, the boom and the bust both damaged our economy. the boom, and the decisions that were taken during it, meant that ireland had to adjust down from living standards that could never have been sustained, with sizeable and capricious shifts in the distribution of wealth. the style of banking in ireland, its regulation and broader economic policy were strongly influenced by comparable styles adopted at that time in countries often used as exemplars for irish decision makers, and in particular the us and uk. but the scale of the excesses in ireland put its banking crisis in a different league ( though not as bad as iceland ). the extent and nature of the guarantee decision frustrated subsequent efforts to minimise the costs and speed the recovery. but the bulk of these costs could not have been avoided by a different course of action on the night of the guarantee. bis central bankers β speeches | 0.5 |
sector soundness. adherence to these international best practices and codes should help to ensure that economies function properly. the third area is the strengthening of the financial sector. the assumption is that banks and other financial institutions need to improve internal practices, including risk assessment and risk management. at the same time the official sector needs to upgrade the supervision and regulation of the financial sector to keep pace with the modern global economy. to achieve these objectives, the basel committee has developed the core principles for effective banking supervision, while the committee on payments and settlement systems has drawn up the core principles for systemically important payment systems. universal principles for insurance as well as security market regulation have also been developed. the fourth area of financial sector reform concerns involving the private sector in crisis prevention. the involvement of the private sector should limit moral hazard, strengthen market discipline and improve the repayment of loans. the fifth area of reform concentrates on the prevention of systemic instability. most of the international best practices and codes have been established to minimise the effects that the insolvency of a financial institution may have on other institutions. in addition, the imf has created a contingent credit line facility as a precautionary defence for countries with strong economic policies. this facility has been designed to prevent the balance of payments problems that could arise from international financial contagion. south africa has been actively involved in discussions on the new international financial architecture. we recently also participated in a financial system stability assessment undertaken by the imf and the world bank. the report on south africa has not been published, but found that the south african financial system is robust and that the financial sector β s legal framework is impressive. the assessment was further that south africa is in broad compliance with recognised best practice in the fields of security, insurance and banking regulation and that we are making substantial efforts to ensure transparency. despite this favourable assessment, we must nevertheless continue to strive for sufficiently accountable, transparent and effective cooperation between the various agencies for the smooth running of south africa β s financial markets. this should instil public confidence in the financial system. the banks act and the regulations governing the activities of the banks have been amended to bring them into line with international developments. in addition, the reserve bank has established a financial stability unit ( fsu ) to focus on the overall stability of the financial sector and its preparedness for global competition. one of the functions of the fsu is to keep abreast of international developments as far as stability issues are concerned | ##capital. in this way, finance, often thought to be destructive, can be a very transformative force as well. 2 / 3 bis central bankers'speeches regionalisation and digitalisation are changing the rules of the game so where does this leave us? as highlighted, the future of international banking is not necessarily bleak. with further calibration and evolution, it can continue to have a prominent role in serving global interests. the good news is this evolution is already taking place. previously dominated by the elite few, in this case large global banks, international banking is now increasingly open to a larger group of market participants. on one hand, the circle of banks is expanding, from large global banks to smaller regional banks. this is an important point that is also highlighted in the global financial development report, reflecting the growing extent of banking relationships between developing countries, particularly in this region. on another front, digitalisation is ushering in a new era, expanding the borders of international banking to now include non - bank fintech players. these players have the distinct potential of transforming global banking as we know it today. around usd13 billion was invested by venture capital players in fintech startups in 2017, the third highest annual total this decade. among these, the most impressive transformation is perhaps in cross - border payments. allow me to share an anecdote highlighting the magnitude of the change that is happening. earlier this year, eight chinese tourists went on a six - day trip to finland courtesy of a chinese online payment platform company. this trip was significant for two reasons. first, payments for the entire journey was cashless and performed through a mobile app, from the payment of flight tickets to food, ground transportation and other retail purchases. secondly, finland, located as far as 6, 000 km away from china, became the first country where this chinese app can be used to make virtually all payments. this is just the beginning. as fintech companies expand to other markets and enable seamless cross - border payments for other users, one can already imagine a future where one can travel the world with just a smartphone in hand. not only that, another related consequence of such a future is that essentially all we know of β international banking β today could be performed without an actual bank. naturally, we ask ourselves what are the implications of these changing boundaries of international finance? for financial customers, it means adapting to a new banking paradigm. a more regional and digital banking ecosystem could lead to increasing localisation | 0 |
since macroprudential policy measures have been in place for a relatively short period of time compared to other macroeconomic policies, however, their effects need further verification. while hong kong, brazil and turkey have introduced macroprudential policies or strengthened related regulations in the wake of the global financial crisis, it is too early to decide on their effectiveness. bis central bankers β speeches macroprudential policies should capture potential systemic risk factors before financial instability gets out of control and turns into a crisis and be applied preemptively. what is most important is to determine the appropriate timing of their application. in addition, since the development of indicators designed to determine the choice and settings of these macroprudential policy tools is still at an early stage and the data on the basis of which they are determined is insufficient, the conduct of policy should be based on more abundant and sophisticated micro data when implementing policies. macroprudential policy instruments are normally applied in the form of regulations on financial institutions. as the pursuit of regulatory arbitrage by financial institutions including the use of shadow banking could undermine the policy effects, we need responses to deal with this. it has been assumed so far that macroprudential policy measures will be used mostly during economic expansion. we should be however mindful of asymmetry as well which rather accelerates procyclicality or weakens regulatory effects during economic downturn. harmonious operation between monetary and macroprudential policies as mentioned earlier, countries around the world do not yet have enough experience with implementation of macroprudential policies and systemetic risk indicators measuring the degree of financial uncertainty are still under development. against this backdrop, it would be difficult to expect satisfying synergy effects from the mutual complementarity of macroprudential and monetary policies. if the effects of the two policies overlap or are in conflict and they are not operated harmoniously, this may give rise to the problem of excessive or offsetting policy effects, as they both work by way of changes in financial institutions β balance sheets. if macroprudential policy works smoothly toward the targeted objectives at an opportune time, however, it can form a mutually complementary relationship with monetary policy and thus maximize social welfare through price stability and financial stability, as suggested by stijn claessens and others of the imf. this view claims that, as we can see from the experience of the financial crisis, it is possible to respond to the accumulation of financial imbalances | consequently regulatory measures have been put in place to prevent crisis recurrence, but it is still hard to say for sure that there are no more crises to come. in order to prevent the eruption of a further crisis, we should prepare for a new, unpredictable crisis rather than looking back at the previous ones, and in this respect, we should make sure that the regulatory reforms not just reflect lessons from previous crises but preemptively identify potential factors triggering a crisis and prevent their occurrence. organizations carrying out macro - prudential policies need to have the abilities of a prophet to monitor on a constant basis and identify preemptively all the economic and social factors that could possibly give rise to systemic risks. this being the case, the policy authorities must be imbued with a sense of mission to shoulder the great national responsibilities that they bear. thank you for listening so attentively and i hope that what we have discussed today will give us a clue how to cope with the challenges we have in front of us. references kim, choongsoo, β monetary policy after global financial crisis ( in korean ), β 2013 economics joint conference, feb. 2013 adrian, t. and h. s. shin, β financial intermediaries, financial stability, and monetary policy, β frb ny staff report no. 346, 2008. blanchard, o., g. dell β ariccia and p. mauro, β rethinking macroeconomic policy, β imf staff position note, 2010. c. a. e. goodhart, β the changing role of central banks, β presentation at the 9th bis annual conference, lucerne, jun. 24, 2010. erlend w. nier, jacek osiski, luis i. jcome, and pamela madrid, β towards effective macroprudential policy frameworks : an assessment of stylized institutional models, β imf working paper no. 250, 2011. h. s. shin, β imf financial stability & systemic risk forum, β mar. 2013. itai agur and sunil sharma, β rules, discretion, and macro - prudential policy, β imf working paper no. 65, 2013. reinhart, c. m. and k. rogoff, β shifting mandates : the federal reserve β s first centennial, β presentation at the aea meetings, san diego, jan. 3, 2013. stijn claessens, | 1 |
thomas jordan : the swiss national bank's role as lender of last resort in the crisis at credit suisse summary of the keynote speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the conference " the snb and its watchers ", berne, 1 november 2023. * * * the crisis at credit suisse has opened up a broad debate on the financial stability framework in switzerland. the national bank act states that the swiss national bank shall contribute to the stability of the financial system, and legislators have allocated certain tasks and instruments for this purpose. in the event of a crisis, the snb performs this mandate in particular by acting as lender of last resort and providing liquidity to systemically important domestic banks that are solvent but can no longer refinance themselves on the market. in march 2023, the crisis at credit suisse placed heavy demands on the snb in its role as lender of last resort. by making liquidity assistance available on an unprecedented scale, the snb first created the time window necessary to find a solution for credit suisse, and thereafter provided significant support in the acquisition of credit suisse by ubs. the acquisition of credit suisse by ubs on 19 march this year prevented a global financial crisis. since autumn 2022, the authorities had also examined options other than an acquisition. these included a resolution of credit suisse or a temporary public ownership ( tpo ) of the bank. after considering the risks involved, the authorities ultimately came out in favour of the acquisition of credit suisse by ubs. given the fragility of the financial markets at that time, there were fears that a resolution would destabilise the financial system. in the case of a tpo, the risks for taxpayers were considered too high. the snb's liquidity assistance was decisive in the successful handling of the crisis. never before had a central bank provided such a large amount of liquidity to a single bank. at its peak, the total was chf 168 billion in three different currencies, which the snb made available to credit suisse on the same days the liquidity was requested. it was only thanks to its well - established processes and good preparation for crisis scenarios that the snb was able to provide credit suisse with the necessary liquidity in such a short period of time, thus enabling the bank to meet its obligations in full when the markets opened. providing liquidity | a financial crisis with serious economic consequences for switzerland and the rest of the world. even in an acute crisis situation, however, the snb must always adhere to the framework established by law and comply with the allocation of roles to authorities envisaged therein. 3 / 3 bis - central bankers'speeches | 1 |
a period of significant credit expansion. it should be underlined that according to the supervisory examinations of the nbrm, the newly extended credits are granted to good clients. in december 2000, compared to the same month of 1999, the banks β foreign currency placements to the nongovernment sector decreased by denar 1, 421 million, or by 17. 2 %. the fall was primarily due to the higher attractiveness of the banks β denar credits due to the higher interest rates. at the end of march 2000, the nbrm continued with further reforms of the monetary policy instruments, where the abolishment of the credit ceilings being the most significant one. hence, the transition to indirect market - oriented instruments for monetary regulation has entirely been completed. moreover, the existing monetary instruments have been improved in order to be modern and closer to those used in developed market economies. within the framework of continuous and intensive efforts to lower the banks β interest rates, the nbrm, in april 2000, decreased the discount rate and the lombard credit interest rate by one percentage points, thus reducing them to 7. 9 % and 17. 5 % p. a. respectively. on december 30, 2000, according to the new methodology, the nbrm gross foreign exchange reserves equaled usd 478. 1 million. domestic and international payments liquidity in the republic of macedonia in 2000, the liquidity of the banking system considerably improved. in january β december 2000, compared to the same period of 1999, the average daily liquidity of the banking system was by 42. 1 % higher. this resulted in decrement of the demand for liquid funds by the banks, which was reflected upon the movement of the interest rate on the money market. in december 2000, the average weighted interest rate on the money market amounted to 7. 1 % and was by 4. 5 percentage points lower compared to the same month of 1999. the international liquidity in the payments is visible through the ability of servicing the external debt. on september 30, 2000, the external debt of the republic of macedonia, based on disbursed medium - term and long term foreign credits, amounted to usd 1, 400. 8 million. compared to the end of 1999, the external debt of the republic of macedonia was reduced by usd 37. 7 million, as a result of the repayment of the regular liabilities, as well as the exchange rate differentials. according to the payment schedule, lia | ( b ) is committed to conducting its fx market activities in a manner that is consistent with the principles of the code ; and ( c ) considers that it has taken appropriate steps, based on the size and complexity of its activities, and the nature of its engagement in the fx market, to align its activities with the principles of the code. 3 the assessment would take into account issues such as the breadth of adoption of the code, the effectiveness of adherence mechanisms, the extent to which behaviour in the market has changed and the effect of the code on market functioning. 4 bis press release, 25 may 2017, β central bank governors welcome global code of conduct for currency markets β 5 source : 2016 bis triennial fx survey. 6 / 6 bis central bankers'speeches | 0 |
. i agree with jaime caruana, the general manager of the bis, who recently said, β the asset quality review is a great opportunity to spur the necessary balance sheet adjustment. this chance must not be missed. β the banking union closes a vulnerable gap faced by emu in helping to strengthen the financial system. however, the banking union is not sufficient to strengthen the institutional architecture of emu. bis central bankers β speeches rather, we need a fundamental reform of the emu framework. and this is the third challenge that has to be met to make emu more resilient. let me elaborate on this point. the implementation of the maastricht framework was not able to save the euro area from the crisis. one of the underlying reasons for this insufficiency is that the rules were too strongly focused on fiscal policies, while their implementation was too weak. it should be kept in mind that germany and france were the driving forces behind the stability and growth pact reform about a decade ago which turned the pact into a toothless tiger. with hindsight, they scored an own goal with their efforts. another flaw in the framework was the restricted credibility of the no bail - out rule. if the markets had believed in the rule, we would not have experienced such a strong convergence of sovereign bond yields as we saw prior to the crisis. when the emu framework was established in the early 1990s, the risk of contagion among euro - area member states was clearly underestimated. financial markets were significantly less developed at that time. the credit default swaps market, for example, did not even exist back then. that may help to explain why fiscal firewalls were not deemed necessary when the emu framework was established. while the rescue measures that were established later, such as the efsf and the esm, managed to contain the fallout somewhat, they weakened the principle of individual responsibility. fiscal decision making has essentially remained national, while liabilities have been partially mutualised. in other words, the balance between liability and control has become lopsided. this balance, however, is fundamental to the stability of the monetary union. but how do we restore that fundamental balance, and put monetary union on a more solid footing? in principle, there are two options. the first way is to create a genuine fiscal union ; the second way would be to confirm the maastricht framework, which essentially means making the principle of individual responsibility work better. the first | financial system with sufficient loss absorption capacity and one which is not too closely tied to the government. the so - called sovereign - bank nexus is a huge obstacle to permanently overcoming the crisis in the euro area. during the crisis, many banks, notably in the euro - area periphery, raised their exposure to domestic government bonds ; in doing so they tied their fate even more closely to that of their national government. this development was assisted by the preferential regulatory treatment of government bonds. it includes the zero risk - weighting of government bonds issued in local currency and the lack of exposure limits. in order to strengthen the banking union and the monetary union, i believe we need to end this preferential treatment of sovereign debt over a reasonable period of time. sovereign bonds should be adequately risk - weighted, and exposure to individual sovereign debt should be limited, as is already the case for private debt. 3. conclusion ladies and gentlemen, the french writer francois fenelon said, β the more you say, the less people remember. β moreover, i promised to be brief. so let me conclude. according to econometric studies on the history of world cup football tournaments, the advantage the home team has is statistically significant β no surprises there. looking ahead to tonight β s match, this is bad news for the croatian team, since it is playing against the host country of the world cup. it is further shown that a positive relationship exists between a country β s population and its performance in world cup tournaments. so these statistics are against croatia, too. what β s more, brazil leads the world cup all - time table, while croatia is ranked 27th. brazil is the favourite to win the competition. on the other hand, football is incalculable. you never know how a match is going to end. that β s what makes it so appealing. there are plenty of surprises in the history of world cup football tournaments. i remember, for example, when germany was beaten 3 β 0 by croatia in the quarter final of the 1998 world cup in france. so there are reasons to be optimistic. pope john paul ii said, β amongst all unimportant subjects, football is by far the most important. β but even if football is basically unimportant, as john paul ii claimed, it is nevertheless enjoyable for the players and it entertains the spectators greatly. in contrast to that, the resolution of the crisis in the euro area offers an enjoyment factor of close to zero and | 1 |
of geography on the geometry of finance, a dynamic we might call geofinance. with the revolution in regulation following the financial crisis coming to its end, and with changes to the geopolitical landscape looming large, i think that geofinance is likely to be the defining challenge of the next few years. the domestication of retail banking soon after the crisis i worked with the independent commission on banking ( icb ). part of our challenge was to reconcile the uk β s position as an international financial centre with stable banking in the uk. to be clear, i am not referring to any company with a similar name. all speeches are available online at www. bankofengland. co. uk / speeches embargo : not for release before 19 : 30 on wednesday 4 october 2017 we concluded that domestic retail banking should be structurally separated from global wholesale and investment banking. the distinction was not between a safe utility bank which would never fail and a racy casino bank which would never be saved. we have had plenty of experience of retail banks getting into trouble. both sides of the ring - fence would undertake economically valuable activity, both would take risks, but each would need to be resilient to these risks without relying on the other. i will not rehearse the full arguments here, but let me highlight one which has had less attention, which is about time - consistency. it is a plain fact that prudential regulators tend to ring - fence retail banking operations in a crisis β i have done it myself. retail is predominantly domestic by nature and its troubles are best managed by those who know it best. so it makes more sense to recognise that reality and get the structures right ex ante, than to try and do so in a tearing hurry just as a crisis hits. ring - fencing retail banking is geofinance in action β in a good way. it goes with the grain of how banks are resolved, reinforcing the continuity of services which are critical to the real economy. it is predictable, with a clear framework of rules. it is proportionate, applying only above a clear size threshold. and it is efficient, allowing wholesale and investment business to prosper at a safe distance from retail and sme customers. ring - fencing is a very substantial undertaking for the pra, the fca and the affected banks β but we are on track for implementation by 1 january 2019. stability begins at home once these reforms are up and running, the core deposit - | we find a solution to the β too important to fail β problem, the size of our banking system will remain too large for the uk taxpayer credibly to support in future. london is a natural home for an international banking system, with its language, time zone and, most important of all, a large and successful critical mass of banking and supporting activity. but it cannot be allowed to benefit from an unsustainable dependence on the uk taxpayer. to allow that would be unfair to millions of people, not here tonight, who are now bearing the costs of the financial crisis. it is precisely because we do want to be an international banking centre with assets a multiple of annual uk gdp that we have to find a solution to the β too important to fail β problem. a resilient banking system is in the collective interest of the financial services industry. a robust solution will surely involve a combination of limits on the leverage of individual financial institutions ( as envisaged in the basel iii agreement ), a resolution framework for allowing individual institutions, no matter how large, to fail, and a change in the structure of banking. i await with interest the final report from the independent commission on banking. the style of regulation will also change with the pra. process β more reporting, more regulators, more committees β does not lead to a safer banking system. one of the reasons for putting the pra inside a central bank is to integrate the work of the two institutions more closely. in particular, the market intelligence team at the bank will work closely with the supervisory body. i believe that we can operate prudential supervision at lower cost than hitherto by reducing the burden of routine data collection and focussing on the major risks to the system. it is vital that we collect and process data only where the supervisors have a need to know. targeted and focussed regulation, allowing senior supervisors to exercise their judgement, does not require ever - increasing resources. for example, we will reduce the number of people subject to the intensive regulatory interview process before appointment by limiting such interviews to the most senior people. and one of the benefits will, i hope, be to make entry into uk banking easier and so promote competition. let me return to the question of which aspect of financial regulation is most deserving of the adjective β tragic β. is it light touch regulation? no β it is the mistaken belief that by compromising on unduly low capital requirements and inadequate limits on leverage, regulators can compensate | 0.5 |
markets function well. in doing so, it will aim to advance the protection of consumers, the integrity of the uk financial system and promote effective competition. it will be responsible for the conduct regulation of all financial services firms, and the microprudential regulation of those financial services firms not supervised by the pra, for example, asset managers, hedge funds, many broker - dealers and independent financial advisers. developments in the real economy whereas those institutional arrangements are new and exciting, the economic data have been disappointing for some time, notwithstanding some improvement in the most recent indicators. since the trough in output in mid - 2009, gdp has averaged just 0. 3 % per quarter. this β recovery β has been much weaker than previous cyclical upswings β and according to the recently published may inflation report projections, output is more likely than not to remain below its pre - crisis level for another year or so. there has recently been a lot of discussion about whether the uk has suffered a double - dip recession or not. but to focus on whether growth is a bit negative or a bit positive is to use the wrong reference point. trend growth should be more like 0. 6 % a quarter and we have only had five quarters of growth at that rate or higher in the 21 quarters since the start of 2008. there had been no such weak period in the uk since quarterly gdp data were first published in 1955. even compared with previous examples of financial crisis β whether at home or abroad β the uk economy has been puzzlingly weak for a long time. i want to take the opportunity today to offer a possible explanation that at least fits some of the data. much of what follows has been used as a narrative in recent inflation reports. it is as if the different groups within our society β households, businesses, banks and the government β have all decided that their future financial positions, on average, will be worse than they thought before the crisis. as economists, we would say β a reduction in estimated permanent income β. i will come back to reasons why, but, given that premise, we can explain much of what is happening. the household sector, of course, has people in many different circumstances, so one can β t tell a single story. but, subject to the vagaries of data revisions, it appears that people on average are saving much more than they were pre - crisis. some may be trying to reduce debt levels ; some saving to fill holes in expected pensions ; some for | paul fisher : the outlook for the uk economy speech by mr paul fisher, executive director for markets of the bank of england, to the cardiff breakfast club, cardiff, 24 may 2013. * * * introduction it β s nice to be back in cardiff again. as always, i will be taking the time while here to visit a number of local businesses in an effort to find out what is happening β on the ground β in the welsh economy. our network of agents across the uk provide the mpc with valuable intelligence on a continuous basis, but there β s nothing quite like hearing it at first hand for oneself. recent changes at the bank of england i β d like to start this morning by outlining some of the recent institutional changes at the bank of england, which will help shape the policy environment for a generation. first of all, supervision is back! the new prudential regulation authority, a subsidiary and therefore part of the bank of england, has moved into its new offices at 20 moorgate, just a two minute walk from the back of threadneedle street ( or faster on a cold morning! ) the move back to the bank will help us to exploit the synergies between microprudential supervision on the one hand and the markets, economics and financial stability expertise of the wider bank on the other. but most importantly this is an opportunity to change the way in which banks ( and building societies, credit unions, insurers and major investment companies ) are supervised. there will always be financial firms that fail through making bad judgements and taking risks which crystallise ; or because unforeseeable events crop up. we have to allow that to happen in an orderly manner and without the use of public money. but good supervision should make sure that financial firms are focussed on the big issues, are appropriately capitalised, sufficiently liquid and not excessively leveraged. the pra will focus on those institutions and issues which pose the greatest risk to the stability of the financial system. and their approach to supervision will be to make forward - looking judgements about the risks posed by firms, based on evidence and analysis ( and not constrained by a narrow interpretation of either domestic or eu rules ). second, the financial policy committee is now established with statutory powers. its primary objective is to identify, monitor and take action to remove or reduce systemic risks with a view to protecting and enhancing the stability of the uk financial system whilst having a secondary objective β like the mpc | 1 |
patrick honohan : banking union challenges opening statement by mr patrick honohan, governor of the central bank of ireland, to the joint oireachtas committee on eu affairs, dublin, 30 april 2013. * * * we thank the committee for the invitation to appear before it and contribute to its important work on the future of economic and monetary union. important because of the scale of the challenge to restore stability and create sustainable growth and jobs. important also because of the role of the committee in ensuring democratic participation and accountability on eu issues. the euro area has been battered by the fall - out from the great financial crisis that broke out in 2007. when the flood of financial globalisation receded, it exposed interrelated banking and fiscal and competitiveness weaknesses in many euro area countries. cross - border banking claims threatened to transmit weakness from stressed countries such as greece, portugal and ireland, to banks elsewhere in the monetary union. high indebtedness of some countries no longer seemed as easily supportable as had previously appeared. and even stronger countries experienced sizable banking losses. accelerated balance sheet repair associated with aggregate macroeconomic demand weakness has meant that recovery has been slow and tentative. this combination of pressures β primarily related to banking and wider financial sectors, as well as to macroeconomic and fiscal imbalances and divergences in competitiveness, has represented a significant challenge to the cohesion of the union. both borrowers and lenders became apprehensive and protective of their interests. at certain moments in 2011 β 12, the combination of problems seemed to market participants to threaten the very sustainability of the institutional arrangements supporting the common currency. while such fears have been allayed by the credibility of subsequent action, most notably the announcement of the outright monetary transactions ( omt ) programme of the ecb, the wider need to rebuild trust and strengthen the institutional architecture of the system is evident and confirmed in a general recognition that progress needs to be made on four dimensions, banking, fiscal, economic, and political, as adumbrated in the report of the four presidents ( of the european council, the european commission, the eurogroup and the ecb ) last june. i think it will be most appropriate for me to focus my remarks today chiefly on the banking pillar, i. e. banking union. we need banking union to transform the financial system from a source of risk and instability to a source of growth and support to the real economy. we have in fact made considerable progress in recent | is a target to reach agreement by the end of the irish presidency. linked to this is the need to get agreement on a common scheme of deposit guarantee funds throughout europe, also an objective of the presidency. however the combination of a european supervisor of banks with responsibility for the resolution of bank failures remaining at the national level may not be a stable equilibrium in political economy terms, as individual member state governments may question and resent the imposition from the ssm of bank resolution requirements potentially including recapitalisation costs. supervision and resolution should therefore be placed at the same level. the need for this has been acknowledged at successive european councils which affirmed that it is imperative to break the vicious circle between banks and sovereigns. now that there is agreement on a single supervisory mechanism it is especially important to press ahead with establishing a single resolution mechanism and authority and a single deposit guarantee scheme. bis central bankers β speeches | 1 |
six to nine months it will stay down at these levels permanently. indeed, if our economy prospers, we should expect to see a gradual appreciation of the exchange rate over the long - term. perhaps farmers need to think about the exchange rate the way canterbury farmers think about rain. sooner or later, droughts are going to happen. consider what we call β the real exchange rate β. the real exchange rate is new zealand β s nominal exchange rate, adjusted by the difference between inflation in new zealand and inflation in our trading partners. this is more relevant to exporters than simply looking at the nominal exchange rate : clearly, if inflation within new zealand is markedly higher than that in our trading partners, even a falling exchange rate is of little help to exporters, while if our inflation is markedly lower than that in our trading partners, exporters can cope with an appreciating exchange rate. when the real exchange rate rises, or in other words when the nominal exchange rate rises by more than the difference between our inflation rate and that of our trading partners, exporters are put under real pressure. and vice versa. now have a look at graph 1. graph 1 nominal and β real β trade weighted exchange rate ( 1970 - march 1998 average equals 100 ) index index nominal twi foreign / domestic price level β real β exchange rate [UNK] the solid line is the nominal trade weighted index, in other words the nominal exchange rate. the dotted line shows the difference between inflation in new zealand and inflation in our trading partners. as you can see, over long periods of time, the nominal exchange rate tends to reflect the difference between our inflation rate and that of our trading partners : when our inflation was relatively high, our exchange rate tended to depreciate ; when our inflation was relatively low, our exchange rate tended to appreciate. of course, there have been divergences between the two lines, sometimes for periods of three or four years at a time, and that is illustrated by the dashed line, or real exchange rate. but over the whole period shown, nearly 30 years, there has been no persistent tendency for the real exchange rate to rise or fall, and that is true despite the fact that through the first half of the period the exchange rate was essentially pegged to the us dollar ( with periodic devaluations ) while for the last 13 years the currency has been floating. the dashed line - the real exchange rate - has fluctuated around a pretty flat trend - line | sectors to reduce debt, as the opportunities for leveraged investment in housing and other assets will be much reduced. this increased propensity to save may blunt the impact one might otherwise expect from fiscal and monetary policy stimulus. finally, external surplus - running emerging markets, especially in asia, will have strategic consumption and investment choices to make. their broad development strategy in the early to mid - 2000s was to grow national income by exporting cheap consumer goods to developed, largely deficit - running, economies. this strategy will now be less viable given household and national financial retrenchment, and pressure on exchange rates to fall to assist in the reduction of imbalances, in the west. asian governments will need to generate large increases in consumption and domestic investment demand, to replace the gap left by exports, if they are to continue growing at the high rates needed to meet their national and social development objectives. the net financial flow from east to west that characterised the middle part of this decade will as a consequence need to fall somewhat, even if it doesn β t reverse. as the large emerging markets such as china and india continue to develop amid these large shifts in global economic and financial currents, the reduced dependence of the world on consumption and investment in the west and consequent shift of political power will accelerate. new zealand β s position new zealand, like the rest of the asia - pacific, has thus far held up better than many developed economies. the global financial crisis hit the northern hemisphere first, and hardest. the transmission of the shock to us through asia and australia β which together account for half our trade in goods β has been slower than the transmission from the us to europe. however, we haven β t escaped unscathed either financially or economically. new zealand investors have lost money. sectors of the new zealand economy exposed to external demand have weakened sharply. a few factors count in new zealand β s favour. the parts of the us and european capital markets that have been most damaged are investment banking, hedge funds, private equity, sovereign wealth funds, and stock, bond and derivatives markets. new zealand β s direct exposure to these parts of the international capital markets, and to complex derivatives or structured credit products, is very light. our banking system is well - capitalised, vanilla, and mortgage lending is generally on good credit quality. the large australian banking groups, of which the major new zealand banks are a part, are now among the largest and highestcredit - quality banks in the world | 0.5 |
the mechanisms operate that permit the central bank to determine the value of money β what is known as the transmission mechanism. for the most part, however, there is little knowledge of these very complicated mechanisms. the rapid development in the financial markets means moreover that the conditions for monetary policy are continually changing. it is therefore natural for the rules of action and strategies that govern monetary policy to be discussed and evaluated. i am going to begin by giving a short review of how the transmission mechanism is usually described and to discuss the changes that have taken place. against this background, i will then briefly describe how the riksbank conducts its monetary policy. what is the role of money? the quantity theory describes in a simple way how inflation is determined. in this theory, the price level is determined by the quantity of money in the economy. production is determined over a somewhat longer period by access to labour and by the development of productivity ; monetary policy does not affect production in the long term. it is intuitively easy to understand that at a given level of production the price level will increase if the quantity of money increases and vice versa if the quantity of money decreases. in an economy where only banknotes and coins serve as means of payment, the central bank can control inflation by determining the quantity of banknotes. this is conditional on the central bank knowing how much is required at a given price level in order for a particular quantity of goods to be produced and circulated - the speed or velocity of circulation must be known in order for a money quantity target to be used to control price movements. developments in the financial markets in general and of the payment system in particular have, however, led to a reduction in the importance of banknotes and coins as a means of payment, i. e. money. an increasing proportion of payment flows takes place by transfers between accounts and the ability of the central bank to influence the quantity of money in the economy is largely only through its ability to affect the demand for money by the general public. the quantity of money required by the general public depends on its demand for transaction funds for the purchase of goods, services and financial assets, which in turn is affected by the interest rates encountered by the general public. for instance, lower interest rates increase demand for money when businesses'demand for capital goods and households'demand for consumption increases. thus, demand for goods and services are both sensitive to interest rates and largely reflect one another. by controlling the interest rate, the central bank thus affects both the | these convexity effects are normally limited, but will grow if uncertainty about the future increases. bis central bankers β speeches expectations provide such a mixed picture, it is not surprising that different analysts reach different conclusions. figure 1 two - year forward interest rates and money market agents β repo - rate expectations two years ahead according to prospera per cent sources : reuters ecowin and tns sifo prospera. note. forward rates have been adjusted for risk premiums and describe the expected overnight rate. risk premiums include both credit risk and maturity premiums. the dates of prospera β s surveys refer to the dates the surveys were carried out. so, how should you go about assessing market expectations in such a situation? this is a difficult question and i have no complete answer. however, this should not stop us from trying to determine how to evaluate different measures of monetary policy expectations. let me begin with forward rates. forward rates have many merits. they reflect market expectations for many different time horizons and they can be observed continuously, which makes it possible to analyse how market expectations are affected by different events. often, but not always, they also provide a fairly reasonable picture of market expectations. however, the problem with forward rates, as we have already seen, is that they are also affected by a range of other factors and this sometimes means that they provide a misleading picture of market expectations. the performance of swedish two - year forward rates since the early summer illustrates this, see figure 1. we can see that two - year forward rates, adjusted for a risk premium 3, at the beginning of the summer were at approximately the same level as the money market agents β two - year reporate expectations according to prospera. subsequently, however, there was a clear downward trend and from early june to mid - september the two - year forward rate fell by approximately 80 basis points. in my opinion, a substantial downward shift in monetary policy the forward rates in figure 1 are adjusted using a constant risk premium of approximately 25 basis points, which is a rough estimate of the average size of the risk premium for this time to maturity. bis central bankers β speeches expectations in this period was hardly realistic given the fact that the swedish economy was, at the same time, surprisingly strong. later, during the autumn, two - year forward rates increased and were roughly half a percentage point below the expectations in the surveys. an interpretation that i find more likely is that the development of forward rates in | 0.5 |
their ccyb frameworks in this direction. at the ecb, we strongly support this positive neutral cyclical buffer approach. with this characterisation of the conjunctural situation, let me offer a few specific reflections on how research can support policy - making in the face of current challenges. the first concerns macroprudential capital buffer releases. deciding the appropriate timing for the release of accumulated macroprudential buffers is challenging. in our view, this decision should be linked to clear constraints in the supply of bank credit due to banks'capital positions. while research so far has focused on broader macrofinancial signals for capital releases, i see scope to complement this work with analyses of conditions and banks'behaviour that would justify releases. this would surely help making capital releases more effective in reducing the pro - cyclical effects of bank credit in periods of economic distress. the second reflection concerns positive neutral capital buffers. as i have mentioned, this approach is increasingly being used across countries, including those in the banking union. models to assess the overall benefits of the positive neutral versus a purely risk - based buffer framework could be very useful in substantiating policy makers'support for this approach. 2 / 3 bis - central bankers'speeches finally, so far, i focussed on macroprudential capital. but this year reminded us that also liquidity issues can become quickly systemic. on the one hand, we saw shocks to market liquidity in the united kingdom last autumn, when price falls in core government bond markets led to forced selling by non - bank financial intermediaries, and risked becoming self - reinforcing. on the other hand, earlier this year we saw shocks to funding liquidity, where deposit redemptions at an unparalleled speed led to the largest ever bank failures in the united states, and the abrupt merger of a global systemically important swiss bank following liquidity outflows. these episodes are a stark reminder that more efforts are needed to understand and mitigate systemic liquidity risks. increased digitalisation and use of social media may at some point require a review of the design of microprudential liquidity standards for banks, such as the liquidity coverage ratio. more importantly, the gradual and systemwide decline in liquidity implies that a macroprudential perspective on liquidity will become more relevant going forward. in principle, the existing regulation already provides some scope to introduce liquidity measures for systemic liquidity risk for banks. | for the consumer price index. some of the prices in the consumer price index vary considerably, however, due, for example, to tax changes, weather and wind. changes in these prices provide little information about inflationary pressures in the economy. therefore, some central banks focus on an underlying measure of inflation. this may be the consumer price index excluding prices that fluctuate most, or measures such as the trimmed average or the weighted median. while the purchase and sale of a dwelling is an investment, the advantage we derive from using the dwelling β shelter services β is part of consumption. therefore, the price of shelter services should be included in the consumer price index. however, this is a price that cannot be observed and is difficult to measure. consequently, some central banks completely disregard shelter services. new zealand uses an index for construction costs, while iceland includes the market value of resale homes. as a rule, the price of shelter services will increase when the interest rate rises. all central banks disregard the direct effect of interest rates on the price of shelter services. this is also the case at norges bank. in very open economies, inflation may fluctuate somewhat without prompting fluctuations in domestic output and employment or leading to changes in inflation in the medium term. in such economies, it may be appropriate therefore to accept somewhat wider fluctuations in inflation. which prices to include in the price index is a topic of discussion. in the academic literature, some have suggested that the central bank can increase economic stability or reduce the negative effects of slow price adjustment by stabilising an index with fewer prices and weights other than those in the consumer price index. 3 prices that adjust slowly should have a relatively higher weight than prices that change quickly. prices for goods and services where labour costs are a major component often adjust slowly. 4 labour costs are very important in these indices not only because they change slowly but also because they react to cyclical movements and are seldom exposed to extraordinary disturbances. see aoki, kosuke ( 2001 ), β optimal monetary policy responses to relative price changes, β journal of monetary economics, vol. 48, pp. 55 - 80, arrazola maria and jose de hevia ( 2002 ), β an alternative measure of core inflation, β economics letters, vol. 75, pp. 69 - 73, mankiw, gregory and ricardo reis ( 2003 ), β what measure of inflation should a central bank target? β journal of the european economic association, vol. 1 | 0 |
. based on expected earnings for 12 months ahead. source : thomson reuters financial. - 4 source : federal reserve board staff projection. percent, annual rate figure 7 : year - over - year growth of real total high - risk debt - 5 note : total high - risk debt is the sum of speculative - grade and unrated bonds and leveraged loans. nominal outstandings growth is translated into real terms after subtracting the growth rate of the price deflator for nonfinancial business - sector output. disclaimer for s & p data : s & p and its third - party information providers expressly disclaim the accuracy and completeness of the information provided to the board, as well as any errors or omissions arising from the use of such information. further, the information provided herein does not constitute, and should not be used as, advice regarding the suitability of securities for investment purposes or any other type of investment advice. source : mergent corporate fisd daily feed, nominal bonds outstanding, www. mergent. com / mergent - solutions / fixedincome - data ; standard & poor β s, leveraged commentary and data ( lcd ). percent figure 8 : greenwood and hanson high - yield share of corporate bond issuance source : robin greenwood and samuel g. hanson ( 2013 ), " issuer quality and corporate bond returns, " review of financial studies, vol. 26 ( june ), pp. 1483 - 1525 ; federal reserve board staff calculations. figure a. 1 : capm beta for the 10 - year nominal treasury security 0. 8 0. 6 0. 4 0. 2 0. 0 - 0. 2 - 0. 4 note : two - year rolling regressions of the weekly excess holding returns to a 10 - year treasury note versus the s & p 500 stock index. capm is capital asset pricing model. source : federal reserve board staff calculations. figure a. 2 : changes in 10 - year german and u. s. yields around ecb meetings y = 0. 7231x + 0. 5061 rΒ² = 0. 4943 change in german yield ( basis points ) - 20 - 15 - 10 - 5 - 5 - 10 - 15 - 20 note : ecb is european central bank. source : federal reserve board staff calculations. change in u. s. yield ( basis points ) percent figure a. 3 : gilchrist - zakrajsek corporate bond spread | order to meet their targets for retirement. and low rates have clearly not produced a boom in corporate investment, although standard accelerator models suggest that investment has largely been consistent with the weak pace of economic growth. nonetheless, there is good reason to think that low rates have provided significant support for demand, and my view is that they have done so. 2 as you can see in slide 1, we are now close to meeting our dual mandate - - a reasonable summary statistic for the effects of policy. while growth has been frustratingly slow, employment gains have been solid. this is a reasonably good outcome considering the scope of the crisis and the relatively poorer performance of other major advanced economies. other factors are holding down rates there are also many factors other than monetary policy that are holding down long - term interest rates. long - term nominal and real rates have been declining for over 30 years. the next slide decomposes long - term nominal yields into expected future short - term real rates, expected future inflation, and a term premium. these estimates are based on one of the board β s workhorse term structure models. 3 all three components have contributed to the downward trend in long - term nominal yields. the downward trend in nominal term premiums likely reflects both lower inflation risk and the fact that, with inflation expectations anchored, nominal bonds have become an increasingly good hedge against market risk. that has made bonds a more see engen, laubach, and reifschneider ( 2015 ). the most interest rate sensitive sectors of the economy, such as consumer durables and residential investment, have exhibited higher growth than other sectors since the second round of quantitative easing by the federal reserve. and, for example, mian, rao, and sufi ( 2013 ) conclude that the decline in house prices during the recession had a substantial effect on consumption ; by the same argument, if low rates supported house prices, then they would have supported consumer spending as well. see d β amico, kim, and wei ( forthcoming ). - 3attractive investment and reduced the term premium. 4 as shown in the next slide, a regression of the 10 - year term premium on measures of 10 - year inflation expectations and a rolling beta of treasury returns with respect to equity returns ( to proxy for the hedging value of bonds ) shows that these two factors can account for a large part of the decline in the term premium. regulations now require many financial institutions to hold more safe, highquality liquid assets, | 1 |
##ets of the core principles for effective banking supervision, developed by the basel committee on banking supervision in 2006 and revised in 2012, is that banks should have in place internal control frameworks to establish and maintain a properly controlled operating environment for the conduct of their business taking into account their risk profile, which should include, inter alia, appropriate independent internal audit and compliance functions to test adherence to these controls as well as applicable laws and regulations. in addition, the bank β s board and management have the responsibility for ensuring that the financial statements issued annually to the public bear an independent external auditor β s opinion as a result of an audit 1 / 4 bis central bankers'speeches conducted in accordance with internationally accepted auditing practices and standards. therefore, both external and internal auditors have a key role to play in strengthening corporate governance as they are the third line of defence within the combined assurance frameworks after the risk management control and compliance functions. the internal audit function is one of the fundamental β checks and balances β for sound corporate governance, designed to provide an independent assurance to the board of directors and senior management on the quality and effectiveness of a bank β s internal control, risk management and governance systems and processes, to help the board and senior management protect their organisation and its reputation. while external auditors, on the other hand, are responsible for providing reasonable assurance that the financial statements are free from material misstatements and prepared according to international financial reporting standards. the global financial crisis, however, not only revealed weaknesses in risk management, control and governance processes in banks, but also highlighted the need to improve the quality of external audits of banks. while until now, the β three lines of defence model β has been used traditionally to model the interaction between corporate governance and internal control systems, international standard setters and policy - makers are calling for a stronger interaction between banks and supervisors, particularly on the governance of risk. according to the four - lines - of - defence model, the external auditor would be required to provide an autonomous assessment of the first three lines. in march 2014, the basel committee on banking supervision issued new guidelines on external audit of banks in aiming at reinforcing the key role the audit committee plays in promoting quality bank audits through effective communication with the external auditor and robust oversight of the external audit process. though the external auditor does not have direct corporate governance responsibility, he must provide a check on the information aspects of the governance system, notably, whether the financial information given to investors | list of countries that have issued platinum coinage. three beautifully - crafted platinum coins constitute the β father of the nation β platinum series. the first coin was launched on 30 october 2009 by dr the honourable navinchandra ramgoolam, our prime minister. the second coin in the series will be launched later this year. training the financial turmoil undeniably posed new challenges for central banks and imposed new demands and new burdens on them. the leadership of central banks are under pressure to ensure that their institution is equipped to deal with the challenges which this crisis brought β and ready to face the next one. β we put a lot of emphasis on training our key staff, expose them to new thinking and raise their professional competence and skills to enable them to deal with a rapidly - changing external environment. β in the course of the year, our staff members benefited from 124 training opportunities in different areas of central banking from reserve management to talent building, an increase of 33 per cent on the previous year. β the credibility of our central bank rests on the quality of its staff, its work culture and its leadership abilities. i wish here to thank the governor of the south african reserve bank ( sarb ) who has graciously agreed to assist us in our endeavour to enhance the skills - set of our middle management with a dedicated programme on effective leadership and executive management. we were also delighted to have had the honourable tito mboweni, former governor of sarb, as a special guest to our annual dinner in honour of economic operators in december 2009. salary review and staff matters in august 2009, a report on the review of salary and terms and conditions of service was implemented, following a majority decision ( mostly external directors ) of the board of directors of the bank, with the governor, the first deputy governor, and me kader bhayat, external director, dissenting. β this report was commissioned by the board after an earlier report by the hay group, a well - known pay and remuneration consultancy selected by the bank after an open competitive tender, was rejected in toto by the board. it followed the first report from the consultant proposed by the board, which the board also found unacceptable. the second report of the consultant was prepared along lines acceptable to the board. β this last report was based on the organisation structure prevailing before the 2007 restructuring exercise. predictably, its implementation led to much litigation in court as well as to a string of cases before the labour tribunal, charging the | 0.5 |
mario draghi : plenary debate of the european parliament on the ecb β s annual report 2013 introductory statement by mr mario draghi, president of the european central bank, to the plenary debate of the european parliament on the ecb β s annual report 2013, brussels, 25 february 2015. * * * mr vice - president, mr vice - president of the commission, honourable members of parliament, ladies and gentlemen, i am very pleased to participate in this plenary debate. to lay the ground for our discussion, i would like to discuss three topics : the ecb β s monetary policy, focussing on the rationale for our latest monetary policy measures, the ecb β s commitment to accountability and transparency, and the progress towards building a deeper economic and monetary union ( emu ). i will thereby address most of the issues which the econ committee highlighted in its draft resolution. the ecb β s monetary policy for several quarters now, inflation in the euro area has been on a continuous downward trend. at the same time, in january 2015 market participants were expecting inflation to return to levels closer to our policy aim only over a horizon which stretched well beyond any meaningful definition of medium term. in an environment of weak economic recovery and subdued money and credit developments, risks were increasing that falling inflation expectations would feed back into weakening actual inflation. such a self - reinforcing process could have posed severe downside risks to our price stability objective. against this background, we judged that the degree of monetary accommodation that had been introduced in 2014 was insufficient. a more forceful monetary policy response became necessary. with key interest rates at their lower bound, the governing council of the ecb considered outright purchases of public securities to be the only remaining instrument which could be activated on a sufficient scale to broaden and strengthen the measures already in place. thus, we decided in january to launch an expanded asset purchase programme. under the programme the eurosystem will continue its purchases of simple and transparent asset - backed securities and of covered bonds. in addition, we will start purchasing on the secondary market investment - grade securities issued by euro area governments, public agencies and european institutions. the purchases will start in march. the combined purchases of public and private sector securities will amount to β¬60 billion per month. the programme is intended to last until end - september 2016. in any case, it will last until the governing council sees a sustained adjustment in the path of inflation which is consistent with its aim of achieving inflation | with less than $ 850 million in assets ). - 3and inflation. they are also not reflective of any changes in a particular bank β s activities or risk profile. as a result, many firms that are stable in their growth, business model, and risk profile end up unintentionally crossing regulatory thresholds. as they approach, and certainly once they cross over these asset - size lines, they must comply with additional regulatory and supervisory requirements that were specifically designed and implemented for larger and more complex firms. while the fixed - threshold approach benefits from simplicity, it is necessary to periodically revisit the policy effect of these bright - line thresholds. there are certainly cases in which a bank with assets less than $ 10 billion faces risks that are disproportionate to its asset size, warranting greater supervisory scrutiny. for these firms, asset size may vastly understate their risk profile. often, they do not operate like traditional community banks, relying instead on nontraditional services and engaging in complex activities. therefore, it may be appropriate for a community bank to be subject to additional oversight. this is particularly relevant when a bank has un - remediated, long - standing supervisory issues that require more supervisory monitoring and oversight. in such cases, a community bank supervisory approach is likely not sufficient or appropriate. at the same time, many banks with assets over $ 10 billion do operate like community banks, with a relationship - based straightforward business model, yet they are not regulated or supervised as such. over time, the mismatch in supervisory expectations around this and other asset thresholds becomes more pronounced as economic growth and inflation effectively lower them. this results in potentially overly complex supervisory constructs for banks with a limited traditional community bank risk profile. - 4is it appropriate to impose more restrictive requirements on firms when those heightened requirements are not a deliberate policy choice based on the level of risk? is it appropriate to treat each bank below a regulatory threshold as a traditional community bank? historically, regulators have been willing to push more complex requirements and expectations down to smaller banks β essentially bumping them into a higher risk tier β than moving larger firms into a lower risk tier when that treatment may be more appropriate. one important aspect of this definitional question involves the natural evolution of banking, specifically as it relates to innovation. the β push down β of regulatory and supervisory standards often applies when a bank pursues activities that fit under the broad umbrella of β innovation. β innovation can be defined | 0 |
economic environment is deep - seated, many firms are actively engaging with the ageing population, treating it as a new business opportunity. for example, there are many cases where firms have targeted their marketing strategies at the elderly, and have succeeded in stimulating consumers'drive to spend, particularly among those with high levels of disposable financial assets. this success is seen in consumption of various goods and services, such as expensive digital appliances, particularly flat - panel tvs ; expensive package tours both within japan and overseas ; educational services promoting lifelong education and self - improvement ; and services related to well - being and sports. given that the ageing of the population may thus be seen to provide a wide range of business opportunities for firms, there still appear to be plenty of growth opportunities for nonmanufacturers and in sectors catering to domestic demand, even with a falling population. business opportunities are not restricted to the domestic arena, and japanese firms will of course always retain the option of extending their operations overseas. recently, japanese firms, not only manufacturers but also nonmanufacturers such as retailers, distributors, trading houses, and financial institutions, have been actively engaged in business in asia. this business includes not only relocating labor - intensive production but also increasing project variety by promoting technology transfer, opening up new markets, and enhancing local sales, all of which further the expansion of japanese firms'overseas business. those of you who live in oita and other parts of kyushu can experience the impact of globalization more directly due to your geographical proximity to other asian countries. dealing with changes in the economic environment requires a head - on and proactive approach from japanese firms rather than a " wait - and - see " attitude. the most effective prescription for survival is for firms to sharpen both their ability to respond incisively to changes and the creativity with which they provide attractive new products and services. from the viewpoint of the overall japanese economy, unless japanese firms succeed in developing business aggressively in global markets and expanding domestic income, then it becomes rather hard to envisage growth in domestic demand. the need for firms to respond proactively to changes in the environment does not apply only to demographic changes such as societal ageing and the declining birthrate, but is of more fundamental relevance. during past phases of high economic growth, economic recovery spread throughout the country via increases in public investment. however, this conventional mechanism of economic recovery is changing, and firms are seeking ways to revitalize regional | some light on why there has not been more widespread positive activity in the corporate sector and what measures should be taken to encourage its spread. ii. two types of structural adjustment pressure faced by the japanese economy the first type of structural adjustment pressure faced by the japanese economy in the 1990s was the pressure to change the industrial structure exerted by the expansion of supply capacity in asian countries. other asian countries have more abundant supplies of labor than japan, while japan has a comparative advantage in terms of capital stock and technology. economic theory suggests that the japanese manufacturing sector will focus less on labor - intensive manufacturing industries whose products can be substituted with imports from other asian countries and tend to specialize in capitalor technology - intensive industries. theory also suggests that, if growth in the nonmanufacturing sector can be realized, this will enable the surplus labor emerging as the share of labor - intensive industries declines to be successfully absorbed. the expansion of production capacity in asian economies was therefore expected, through the adjustment process detailed above, to shift the japanese economy's orientation from external demand to domestic demand. in the event, the manufacturing sector witnessed both increased specialization in capital - or technology - intensive industries and a decline in the share of labor - intensive industries. however, japanese firms'efforts to reallocate their business resources, concentrating on highly profitable markets and withdrawing from other areas, ended up being only moderately successful. they could not keep up with changes in business conditions that were remarkable for their extent and the speed with which they occurred. the profitability of individual firms thus dropped significantly. in addition, the poor performance of the manufacturing sector hindered growth in the nonmanufacturing sector : household income declined, and generation of corporate demand such as advertising activities and computer software development was weak. as japanese consumers became more sensitive about prices, especially the balance between price and quality, there was an unprecedented level of import penetration from other asian economies, and this was part of the reason why the nonmanufacturing sector, particularly the wholesale and retail industry, also ended up suffering from a significant drop in profits. in addition to adjustment pressure affecting the japanese industrial structure, another type of adjustment pressure is associated with the fall in land prices after the bursting of the economic bubble. this had a powerful negative impact, on the nonmanufacturing sector in particular. it is a well - known fact that the significant fall in land prices gave rise to a huge amount of nonperforming assets in the real estate, | 1 |
##nified by the fact that the debt structures in a number of countries are still quite vulnerable to foreign currency, liquidity, and interest rate risk. the substantial share of public debt denominated in foreign currency - 70 percent on average for the lowest rated group of borrowers - and the relatively short maturity of the debt stock mean that a relatively modest shock can produce a substantial increase in debt burdens, raising the amount of fiscal effort needed to keep the debt stock on a stable or declining path, and increasing the economy β s vulnerability to a crisis. β’ in some countries, the fiscal trajectory is too weak to place the debt - to - gdp ratio on a sustainable path. in others, the fiscal position is strong enough to stabilize the debt dynamics, but provides little buffer against adverse shocks, and very little room for fiscal policy to help cushion the effects of such a shock. β’ important challenges remain in the financial area as well. in many countries, large public sector debt burdens have left banking systems highly exposed to the sovereign, constraining authorities β room for maneuver. there are also problems in banks β corporate and consumer loan books, and a number of banking systems also have a large share of foreign currency denominated liabilities, in some cases held by non - residents. β’ the durability of recent improvements in external positions, which reflect weak domestic demand in many countries, is also open to question. as domestic demand strengthens, external balances could move into deficit again, which in some cases will reintroduce a greater external risk. β’ and in many cases, the financial exposure of the imf and the multilateral development banks is already high. these balance sheet challenges took a long time to develop, and they will take a long time to reverse. they are the legacy of years of past fiscal decisions, magnified by the impact of crises on growth, the exchange rate, and the financial sector. they leave an exacting set of policy challenges. they raise the risk that future shocks to domestic confidence or adverse changes in the external environment could lead to new pressures on exchange rates, on interest rates, and on the capacity of countries to fund themselves on sustainable terms. apart from the risk of crisis, these debt levels are large enough to depress domestic investment and long - term growth prospects. in part because of these balance sheet and debt burdens, many emerging market economies face a protracted transition before they can expect to be comfortably considered stable investment grade credits, with | credit ratings regime. this led to inflated credit ratings for many mortgage securitizations that subsequently performed poorly as mortgage delinquencies increased. there were significant problems in funding and derivative markets, including flaws in tri - party repo, money market mutual funds that were vulnerable to runs, and massive and opaque bilateral otc derivative exposures. finally, all of these problems were magnified by the lack of a good resolution process for large, complex financial firms that got into trouble. as a result, policymakers were forced to develop ad hoc interventions to contain contagion and to prevent the collapse of the u. s. financial system. we should never forget how close we came to a full - blown depression, and we must resolve to never allow a return to conditions like those that existed prior to the financial crisis. that said, it is entirely appropriate to take a critical look at the changes that were made to the regulatory regime. while we do not yet have evidence of how these reforms will hold up during the next economic downturn, many have been in place long enough that we can begin to evaluate their efficacy. in such an evaluation, we should keep in mind the three goals i mentioned in my introduction. first, we must ensure that the probability of failure for a systemically important firm is exceedingly low. such a failure can lead to contagion that can damage a broad set of financial market participants, and impede the ability of the financial system to support the economy. the failure of a single systemically important firm β because of its size and interconnectedness β can significantly weaken the entire financial system. we saw this firsthand following the failure of lehman brothers. second, if a systemically important firm does fail, we must have mechanisms in place to minimize the damage to the rest of the financial system. while we can make individual firms stronger, more robust and less prone to failure, i expect that there will still inevitably be failures in the future. in principle, we could make individual institutions completely bulletproof in all possible environments. however, this would require such high levels of capital and liquidity that it would likely make them uncompetitive in their ability to provide financial services to their customers. 2 / 6 bis central bankers'speeches third, we must keep in place the structural changes that have made the global financial system less vulnerable to adverse shocks. so, what does this imply when we consider revisions to the dodd - frank act and other aspects of reform? | 0.5 |
are closely monitored by the ecb in terms of our economic analysis. within this context, while we take the euro area real estate sector into account in assessing risks to price stability, we certainly do not target house prices, or for that matter, any other asset prices. we do monitor asset prices closely because of the potentially high costs for price stability and for the economy as a whole that are associated with strong appreciations and rapid reversals in asset prices. also, our monetary analysis covers the monitoring of money and credit which often reflect the evolution of prices and house purchases. in this sense, a strategy which on top of our economic analysis regularly assesses money and credit developments has an important benefit on the monitoring side in that it can contribute to identifying and limiting the emergence of unsustainable developments in asset prices. in terms of recent developments in the euro area real estate sector, the latest available data on house prices appears to support the notion of a cooling in euro area housing market developments after a prolonged period of unusually high growth rates in many euro area countries. that said, house price growth generally remains relatively buoyant in the euro area on average when seen in historical perspective β notwithstanding considerable heterogeneity in underlying country developments. the outlook for the euro area as a whole remains that of a soft landing, as price increases moderate gradually and further developments evolve in line with fundamentals. within this context, a continued moderation of residential investment would also be likely. the above economic assessment is complemented by information from our monetary assessment, in particular that the annual growth rate of loans to households was in october at 6. 8 %, from 7. 0 % in the third quarter and 7. 5 % in the second quarter. in this sense, there is no indication that the financial market turmoil has, as yet, limited lending to households, the moderation of which started as long ago as the second quarter of 2006. i am now at your disposal for questions. | factors of the financial stress, and in order to re - establish confidence within the financial system, it is crucial to promote a widespread consistent valuation of complex structured products as well as an adequate disclosure by banks of their exposures, in particular related to the us subprime mortgage sector. second, i would welcome the efforts of the supervisory community, namely through the basel committee on banking supervision and the committee of european banking supervisors, in keeping each other abreast of developments and in considering jointly possible measures to contain the potential effects of the turmoil. third, i would underline the importance in stress situations, like the current one, of effective and smooth cooperation and exchange of information between the supervisory authorities and central banks. as to the policy lessons to be learned in order to avoid the recurrence of similar disruptions in the future, i would say that, while it is still early to draw firm conclusions, there is a common understanding on the key issues requiring further analysis. in this respect, let me recall a few topics. first, the need for the financial industry to provide more public information about securitisation, credit risk transfer and complex structured products. second, the need for rating agencies to review their methodologies for complex structured products and to address very seriously potential conflicts of interest. third, the need for investors to review their investment behaviour excessively reliant on ratings. fourth, the need for supervisors to implement the new capital framework under basel ii as rapidly and effectively as possible and to reflect on possible improvements of the framework, including the enhancements of the supervisory regime for liquidity risk. in this context, i should mention that the ecb with the assistance of the banking supervision committee is carrying out work on banks β stresstesting and contingency funding plans. on all the issues mentioned above, work is already under way at both the international and european level. the ecb is strongly supportive of the work of the financial stability forum, as well as of the european initiatives discussed in the ecofin council. in this context, i would like to once again stress the importance of effective cooperation in any policy actions to be taken at the international level. the impact of globalisation on price developments ladies and gentlemen, let me turn to the impact of globalisation on price developments. as a preface, let me say that while globalisation could influence aggregate prices in several ways, such impacts are limited to the short term given that inflation is ultimately a monetary phenomenon. the direct, and | 1 |
possibly more β other major international currencies. second, the euro can only be assured of a major role in a multipolar currency world if the architecture underlying the single european currency is sufficiently strong. the task of achieving this cannot be delegated to financial markets and requires appropriate institutional steps. the euro in a multipolar world when the idea of the single currency was first mooted in the 1980s, the global economy was dominated by three countries : the united states, germany and japan. since then, the global economy has seen major changes. with the ongoing integration of global markets, we have witnessed the rise of emerging market economies. china, in particular, has led to a progressive shift in the centre of economic gravity and is expected to overtake the united states in terms of gdp at market exchange rates sometime from 2025 onwards. the us dollar has remained the main international currency, as a result of the predominance of us financial markets and also the inability of several emerging economies to pursue independent policies ( for example by de - pegging their currencies from the us dollar ). but there is little reason to believe that these factors will not change over time. the renminbi, in particular, should be in a position to relatively quickly emancipate itself from the dollar and become a major international currency if the chinese authorities were to consistently pursue capital account liberalisation, greater exchange rate flexibility and all related policy measures in the years to come. the international role of some other emerging market currencies is also likely to increase over time. we are clearly moving towards a multipolar currency world. the question is whether the euro will be one of the poles β so to speak β of the new system. i will not dwell on the advantages for europe of being one of the poles, but rather i invite you to reflect upon what would happen if it were not. to be sure, the euro, like any other currency, would be affected by economic and political developments in the countries issuing the leading reserve currencies, and would suffer severely from external shocks. consider, as an illustration, the recent experience of the swiss franc, a currency which is renowned for its stability. after the onset of the global financial and economic crisis the franc appreciated by 17 % vis - a - vis the euro in 2010 alone, driven by the reallocation of global capital on a massive scale. this has fuelled deflationary risks and slowed economic growth. to counter | discovered america at the end of the fifteenth century, even though china β s economic development was much more advanced and had a much greater army and navy. 2 i would like to quote briefly diamond : β christopher columbus, an italian by birth, switched his allegiance to the duke of anjou in france, then to the king of portugal. when the latter refused his request for ships in which to explore westward, columbus turned to the duke of medinasedonia, who also refused, then to the count of medina - celi, who did likewise, and finally to the king and queen of spain, who denied columbus β first request niall ferguson, β civilisation : the west and the rest β, allen lane, 2011 ; ian morris, β why the west rules β for now β, farrar, 2010. jared diamond, β guns, germs and steel β, norton, 1997. bis central bankers β speeches but eventually granted his renewed appeal. had europe been united under one of the first three rules, its colonisation of the americas might have been stillborn. β the spirit of competition and the decentralised decision - making mechanism that characterised europe in past centuries explain, for example, why european navigators strove to discover new routes ; how the foundations of commercial dominance were laid ; and how scientific discoveries, which often originated abroad, were turned into innovations and new production processes. again, using diamond β s words : β once spain had launched the european colonisation of america, other european states saw the wealth flowing to spain, and six more joined in colonizing america. the story was the same with europe β s cannon, electric lighting, printing, small firearms, and innumerable other innovations : each was first neglected or opposed in some parts of europe for idiosyncratic reasons, but once adopted in one area, it eventually spread to the rest of europe. β europe rose to dominance over the centuries to the extent that the positive effects of competition prevailed over the negative effects associated with the recurrent conflicts between states that stemmed from the inability to resolve the tensions generated by competition. the european union was created precisely in order to ensure that the spirit of emulation and competition could operate within a framework of peace. there is no doubt that there are currently substantial differences within europe, with some countries demonstrating a strong capacity to adapt to the new global conditions, while others are finding it hard to implement the changes that are necessary to maintain their level of prosperity and continue to grow. these | 1 |
firms'financing options for investing in the technologies needed for the twin transition. europe's competitiveness and ability to invest also hinge on further progress being made towards banking union. a complete banking union would support more integrated 3 / 5 bis - central bankers'speeches banking services across the euro area and strengthen the global competitiveness of our banking sector. finally, the third key dimension of a unified european response is the need for deeper integration of our single market to strengthen europe's overall competitiveness and resilience. the single market remains incomplete. but it is essential for europe's long - term competitiveness. 4 a more integrated single market would help unleash europe's growth potential, boosting our shared prosperity. measures to strengthen the single market could, for example, focus on reducing red tape and excessive regulation, both at eu and national levels. this would provide incentives to invest and innovate, as 61 % of eu firms consider business regulations to be an obstacle to investment. 5 in addition, a more competitive and integrated electricity market is also crucial for completing the single market and supporting the green and digital transitions. the digital transition would also be further supported by a digital euro. progress in this direction would support cross - border trade, investment, and growth. it would also enhance innovation through increased incentives for research and development. the impact of such progress would be considerable β ecb analysis shows that the single market raised the region's gdp per capita by 12 % to 22 % between 1993 and 2008. 6 a more integrated single market would also strengthen our resilience. we now know that europe's heavy reliance on external demand and global supply chains can be a weakness. we should therefore leverage and further exploit the full scale of our internal market for goods and services. this will require comprehensive reform, but it has the potential to re - establish the single market as an engine of growth, innovation and competitiveness. conclusion let me conclude. europe has demonstrated its ability to navigate turbulent times. in the face of the current economic and geopolitical challenges, policymakers must be bold enough to take the further steps needed to advance european integration. as simone veil remarked in her inaugural speech as president of the european parliament here in a plenary session 45 years ago : " if the challenges facing europe are to be met, we need a europe capable of solidarity, of independence, and of cooperation. " her words resonate strongly today. we must seize the opportunity to bolster | following : if it is difficult to identify a risk - free rate in a currency union, this means that there is no risk - free asset either, besides the central bank β s own liabilities, the currency. whether this peculiar situation adds to the challenges facing the central bank of a monetary union, in terms of signal - extraction and analysis of expectations, i leave to you as a topic for reflection. the crisis has also proved the important role that central banks play in influencing the yield curve through both their conventional and unconventional policies ; including forward guidance, asset purchases and enhanced credit support. this raises a host of questions about the relative effectiveness of these policies, but also about conventional yield curve models and whether they adequately capture the mechanisms that explain the role of these policies, particularly given that for tractability and simplicity real - world complications like credit and liquidity premia, pricing anomalies and even the influence of the macro economy and monetary policy are often not directly considered. it is well known that during decades the fields of finance and macroeconomics dealt with interest rates, asset prices and the yield curve in a total different way and without much interaction. as diebold and rudebusch point out in their book published last year on β yield curve modelling and forecasting β : 3 β in macro models, the entire financial sector is often represented by a single interest rate with no accounting for credit or liquidity risk and no role for financial intermediation or financial frictions. similarly, finance models often focus on the consistency of asset prices across markets with little regard for underlying macroeconomic fundamentals. to understand important aspects of the recent financial crisis β¦ a joint macrofinance perspective is likely necessary β. the macro - finance approach to the analysis of the yield curve had several developments even before the crisis. in 2006, hordahl, tristani and vestin, 4 ( the last two, ecb diebold, f. x. and g. rudebusch, ( 2013 ), β yield curve modelling and forecasting : the dynamic nelson - siegel approach β, princeton university press. hordahl p., o. tristani and d. vestin, ( 2006 ), β a joint econometric model of macroeconomic and term structure dynamics β, journal of econometrics, 131. see also by the same authors ( 2008 ), β the yield curve and macroeconomic dynamics β, economic journal, royal economic society, vol. 118 ( 533 ). bis | 0.5 |
simon m potter : implementation of open market operations in a time of transition remarks by mr simon m potter, executive vice president of the markets group of the federal reserve bank of new york, before the japan center for economic research, tokyo, 25 september 2014. * * * i would like to thank deborah leonard and matthew raskin for their excellent assistance in the preparation of these remarks and colleagues in the federal reserve system for numerous insightful comments and suggestions. thank you, takeuchi - san. it is a pleasure to reconnect with you here in tokyo and an honor to have the opportunity to speak before this distinguished audience. central banks responded aggressively to the financial crisis that began in 2007 and the slow recovery that β s followed, and have taken unprecedented steps in providing monetary policy accommodation in pursuit of their macroeconomic policy objectives. in doing so, many have had to adapt in unconventional ways the frameworks and tools they use to implement their policy decisions. my remarks today will focus on the role played by the open market trading desk ( the desk ) at the federal reserve bank of new york in the implementation of monetary policy in the u. s., and on the evolution of our operational tools in recent years. i will then discuss the implications of these changes for the federal reserve β s balance sheet and for the eventual β normalization β of monetary policy when the federal open market committee ( fomc ) believes it is appropriate to remove the extraordinary levels of monetary policy accommodation that it has provided. finally, i will discuss some of the considerations that must be taken into account in normalizing monetary policy. as always, these are my views and do not necessarily reflect those of the new york fed or the federal reserve system. the desk β s role in implementing monetary policy the federal reserve ( the fed ) has a somewhat more complex organizational and governance structure than most other central banks around the world, so before discussing recent developments in the implementation of monetary policy, i β d like to take a moment to describe roles and responsibilities within the federal reserve system and where the desk fits in. the statutory basis for u. s. monetary policy is found in the federal reserve act, which was enacted just over 100 years ago. modern language around monetary policy objectives was added in 1977, when the board of governors of the federal reserve system and the federal open market committee were charged by congress with maintaining β long run growth of the monetary and credit aggregates β¦ so as to promote effectively the goals of maximum employment, stable prices | ##ity guarantee program, and here too there has been progress in a number of dimensions. most notably, perhaps, is that in the wake of the release of the results of the recent stress test, the largest u. s. bank holding companies have shown an increased ability to raise capital and issue debt without government support. the major securities firms have deleveraged and have built up significant liquidity buffers. although conditions in interbank funding markets and capital markets more broadly have shown signs of improvement, securitization markets are still significantly impaired. this is particularly true of the asset - backed securities markets, in which much of household and business credit is intermediated between borrowers and investors. what has transpired in the asset - backed securities market over the past two years has been dramatic. prior to august 2007, as much as 60 % of private credit creation in the u. s. was not held on the books of depository institutions but was instead distributed onwards through the abs markets into the so - called β shadow banking system. β through the use of abs, banks were able to package consumer loans, credit card receivables, student loans, residential and commercial mortgages, as well as other types of loans into securities that were then sold to investors. however, since august 2007, the abs market collapsed in a series of stages β first subprime mortgages, then alt - a mortgages and non - agency residential mortgage backed securities, and finally consumer abs and commercial mortgage backed securities or cmbs. the collapse spanned every area outside of the agency mortgage - backed securities market, which is supported by the government - sponsored enterprises, fannie mae and freddie mac. the final stage of collapse of the abs markets occurred following the failure of lehman brothers last fall, when the yields on outstanding abs issues soared and new originations virtually disappeared. this increase in yields did not solely reflect an increase in credit risk ; it also reflected a genuine loss of confidence and an accompanying increase in risk aversion. yield spreads on even the very safest abs obligations soared hundreds of basis points. this can be seen in the fact that aaa - rated student loan tranches, with underlying loans 97 % guaranteed by the federal government, climbed to yield levels as much as 400 basis points over libor. with the spike in yields, the economic incentives to issue evaporated β issuance was just too costly and there was no active market. after averaging around $ 50 billion per quarter of new originations | 0.5 |
. citizens are now displaying anger and resistance. they are disappointed in their expectations. we also see a deterioration in income distribution. for many people, the rise in income is lower than the growth in the economy. do you understand why voters are angry? yes, of course i do. and there is a strong temptation to opt for simplistic and national solutions, which in my view could be disastrous. protectionism leads to chain reactions. that game quickly 1 / 3 bis central bankers'speeches results in shrinking prosperity. all these voters underwent austerity measures, their taxes were raised, they saw european politicians simply muddling through the crisis. and as a reward for all this misery, they also have to face painful pension and labour market reforms. do you think it β s any wonder that voters are saying β no "? of course, quick solutions to make reality meet expectations would be great. but, unfortunately, that is not possible. easy answers are an illusion, because the gap between growth expectations and outcomes is real. the austerity measures are responses to this problem. if you set up your social security, your government expenditure on the basis of economic growth of 4 %, while only 1 % or less is realised for many years, then you enter into a vicious circle. that is why we need a comprehensive approach. even if anti - euro parties do not win a majority, they will still have strong support. confidence in the euro has remained high, also in the netherlands, as the eurobarometer survey shows. however, confidence in the ecb has declined sharply, especially during the crisis years. the situation in which the ecb was the only player that was still solving problems did it no favours, because people expected too much from us. is the monetary union not a part of the problem? it was not only monetary union that led to a fall in risk premiums and interest rates, it was a global development that started well before the euro. countries joining the euro saw their interest rates fall very quickly. that contributed to a real estate bubble in some countries. in other countries, it gave an overly favourable picture of public finances. at those low rates, the government debt suddenly appeared sustainable. the euro was born during that period, but it is difficult to determine what would have happened in twenty years without the euro. has the euro contributed to the divergence of the economies? no, but i think there was an illusion of convergence. the real convergence of economies that | was expected did not come about. maybe even the opposite. no. when the crisis arrived, it made the divergence visible, but that does not make it the only reason. what does the single currency still need? i am not yet satisfied with the banking union. we are still in transition : supervision is european, but the consequences of potential bank failures are still largely borne at national level. but before you can solve that at the european level, you have first to deal with legacy problems in the banking sector. banking union really has to be completed in five years, much faster than politicians think. are the biggest problems confined to italian and german banks, or is it a wider issue? it is fortunately limited to a few banks in a few countries. but there is another problem and that is the cost level of banks. it is still too high in many countries and it is the reason why banks β profitability remains weak. you need profitable banks to have a resilient banking sector that helps the real economy. there is hence a need for consolidation in the banking sector. you would like to see larger banks? 2 / 3 bis central bankers'speeches we need to have diversity, large and small - sized banks. but i definitely think that we must have pan - european banks. that means that, in the event of a national economic shock, banks are not overexposed to any one country. are you not afraid that banks would then emerge which are too big to fail? no, because at the scale of the euro area, they will not be too big. the basis is a european backstop. but if you had two or three deutsche banks, wouldn β t that be far too much for the euro area? you can have large banks in small countries, if supervision and resolution are completely european. we are not there yet and we still have to complete the banking union in full. the whole euro area is a fragile balance. it is a balance that we are gradually making more stable by setting up the right institutions. we are on the right path. but there has to be a not too distant deadline for completing banking union. have other crisis measures, such as purchasing hundreds of billions of sovereign bonds, had the impact you hoped for? yes. it has stabilised the euro area and has resulted in better financing conditions. i think there have been a number of episodes with major risks, even for strong countries like germany, risks, which we managed to fend off. but | 1 |
to create a true pan - european retail payment solution that has the potential to meet the vision of our strategy. the proposed solution would be based on the sepa credit transfer instant ( sct inst ) scheme, which is in our view the correct approach as it is future - oriented. and it could capitalise from day one on existing powerful and sophisticated infrastructures, such as the eurosystem β s tips. what is now needed, however, is a strong commitment from the proponents of the new initiative, and a clear roadmap to meet the envisaged objectives, so that we can see tangible actions emerge soon. proponents should also work closely with the european commission to ensure that any project will be open and comply with eu competition rules. this also means that if and when other initiatives emerge, they will of course be considered equally. public initiatives may be useful and needed from time to time to support industry - led solutions. the european commission, for example, could propose legislation obliging payment service providers to adopt instant payments within a certain period if a critical mass has not been reached by, say, the end of 2020. other regulatory changes may be needed in due course. for its part, the eurosystem stands ready to provide additional technical assistance where useful and required. for example, we will analyse how we could support the search for solutions that ensure that sct inst - compliant clearing mechanisms can be fully integrated. current private solutions for the clearing of instant payments still have not addressed interoperability issues in a satisfactory manner. this requires further analysis and action. the ecb will also continue to monitor how new technologies change payment behaviour in the euro area, for example through a reduced demand for cash. we will explore how, and to which extent, central banks would need to adapt their policies and instruments to face challenges to consumer protection and monetary policy transmission that could arise from such changes. for example, a central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used. a digital currency of this sort could take a variety of forms, the benefits and costs of which the ecb and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation. 3 / 4 bis central bankers'speeches but potential central bank initiatives should not discourage or crowd out private market - led solutions for fast and efficient retail payments in the euro area. conclusion let me conclude. global payments markets are undergoing | 2012. net export deficit narrowed 23. 9 % during this period, reflecting higher exports and lower imports than a year earlier. foreign trade data reveal that the positive impulse is carried forward in july as well. year - on - year, exports grew 11. 6 % during these months, whereas imports recorded low annual growth rates, namely 1. 1 %. these developments have led to trade deficit narrowing by 5. 2 %, year - on - year. monetary developments point to moderate monetary inflationary pressures on the economy. money supply retained its expansion rates of earlier months, registering 8. 4 % annual growth in july. its performance reflects the low demand of the domestic economy for monetary assets. the performance of financial markets has reflected the improved liquidity conditions, lower risk premiums and inflation situation in the economy. interest rates in the interbank market went down, transmitting the most recent cut of the key rate in july. additionally, yields in the primary market of government securities continued their descent. further easing of monetary conditions is expected to be transmitted also to interest rates in other segments of the financial market, conform to the time lag of monetary policy transmission mechanism. in the improved context of domestic financial markets and in the presence of a sound banking system, the bank of albania expects that its earlier decisions to ease the monetary policy will be eventually transmitted in full to the economy. projections for the economic outlook are in line with the baseline scenario assessed in previous months. economic activity at home is expected to remain low, conditioned by weak consumption and private investments as well as limited space for fiscal stimulus. consequently, inflationary pressures remain low and in check, reflected in the performance of inflation expected to range close to bank of albania β s target. * * * at the end of the discussions, the supervisory council decided to keep the key interest rate unchanged at 4. 0 %. bis central bankers β speeches | 0 |
stanley fischer : the israeli economy acceptance speech by professor stanley fischer, governor of the bank of israel, for an honorary degree, hebrew university, jerusalem, 11 june 2006. * * * it is a pleasure and an honor for me to speak today as the recipient of an honorary doctorate of philosophy from the hebrew university, and it is an even greater honor to have been asked to speak on behalf of my distinguished fellow honorees. i would like to start by congratulating the students on whom doctoral degrees are being bestowed today. you have earned the congratulations and good wishes of all for the ability and dedication you have shown in completing your doctorates, and we wish you every success and happiness in your future careers. by european and american standards, this is a young university. its founding ceremony took place in 1925, at this spot, in the presence of lord balfour, viscount allenby, high commissioner herbert samuel, haim nachman bialik, nahum sokolov, harav kook, harav meir, and 10, 000 others. that extraordinary turnout testifies to the importance the inhabitants of the yishuv and of the zionist movement attached to the founding of what they called the university of the jewish people. the university already possesses a proud history, an essential part of the history of modern israel, of the history of the jewish people and their successful but ongoing struggle to establish a modern state in the ancient land of our forefathers. each of the honorary degree recipients here has been closely associated with the hebrew university in the past, and for each of us this day brings back memories, of times, of colleagues, of friends. in my case among the personal memories are those of don patinkin, former president of the university, of yoram ben - porath, also a former president of the university, and of michael bruno, former governor of the bank of israel. and for many of us, this spot and this occasion will always be associated with the image of yitzhak rabin, receiving an honorary degree from the university immediately after the six day war. for me, the hebrew university has always been special. when i graduated from the london school of economics it was at the hebrew university that i most hoped to teach. later i did teach here, but as a visitor on sabbaticals, not as a faculty member. this is the community in which rhoda and i have formed some of our firmest and most lasting friendships. each | to look at the price of credit, and for this purpose, we will assess the tel bond spreads. if the lack of growth in credit was a result of a lack of supply, we would expect to see an increase in the price of credit. in contrast, we see a decline in the spreads, which points to a situation of a lack of demand for credit. another interesting phenomenon is the spread between the short - term interest rate and the long - term interest rate, which is relatively high over time in israel. in each period, there was apparently a different explanation for the relatively high spread in israel. in 2000, the period was the beginning of large shahar 10 - year bond issuances, and there were still concerns of inflation, which could have led to higher spreads. afterward, in 2006 β 07, there was an extraordinary boom period abroad, with much less here, so the spreads were perhaps greater in israel. even if the explanation is different for each period, it apparently reflects a higher long - term premium in israel, meaning that despite the decline in the monetary interest rate, the long - term risk in israel is apparently greater than in the rest of the world. there are price increases in the stock market, no different than what we see in other countries. in summation, when we look at the bank of israel β s three objectives, the low inflation is apparently partly due to imported inflation from abroad. the picture of real economic activity is unclear, with some negative and some positive indicators, particularly in the first quarter. in terms of leverage, there are high levels of housing credit, but we don β t see very high levels of leverage in the overall economy that could lead to a dangerous path. summing up all of these components, the monetary committee decided to leave the interest rate unchanged this month. bis central bankers β speeches | 0.5 |
in the currency market. we also have specified limits on domestic entities β ability to take on foreign credit. the banks do not lend to households or companies in foreign currency unless they have revenues in foreign currency. we have limits on fx futures and derivatives to prevent short - term speculation, as one of the main problems that we faced before the 2008 crisis was carry - trade speculation. so far, we have been able to maintain stability in the balance of payments and our currency despite a large interest rate differential vis - a - vis our neighboring currency areas. the third lesson is that the best recipe for economic stability is integrating macroprudential and monetary policy in managing credit growth and leverage ratios. the icelandic banks are well funded and have among the highest liquidity and equity ratios of banks in the advanced economies. we require high capital buffers, countercyclical buffers, and systemic buffers as well as employing other regulatory requirements. we have also introduced borrower - based measures to cap lending to households. households are required to have at least 15 % equity in order to buy a home and the maximum debt servicing capacity of 35 % to income. for the past two or three years, the central bank β s main goal has been to prevent a boom in the real estate sector from being transmitted into the financial sector while the real economy has grown at a rapid pace. in the years 2021 to 2023, the economy grew by a total of 20 % in real terms which is very strong on any scale. the bank has indeed succeeded in preventing excessive borrowing and indebtedness, or the development of a debt bubble. we have seen negative real credit growth for the past 12 months, and a rise in equity ratios for households and most businesses. nevertheless, it is very important for a small open economy to focus on credit growth. excessive growth of credit over time always leads to trouble in the balance of payments, a current account deficit, or an imbalance in capital flows. one of the main challenges which we faced after the crisis was to restore public trust. thus, the fourth lesson is transparent and proactive supervision, which is the key to public trust. it was, i think, highlighted when problems occurred with the small and regional banks in the us, like silicon valley bank. it is very important to draw both systemic and systematic conclusions from supervisory data and not get lost in the details. strict rules on conduct play an important role in the icelandic financial market regulation, caps on bonuses, restrictions on | system. this has been the work of many. the main goal has been to establish resilience to shocks. this we have achieved and the overall results can among other things be seen in the development of the net international investment position which is now positive. the icelandic economy has moved from being in debt to the rest of the world to being a creditor country - which is in a way a testament to our policies. i would like to quote helen rey on how you create resilience : β independent monetary policies are possible if and only if the capital account is managed, directly or indirectly, regardless of the exchange - rate regime β today, i will discuss six lessons that may be drawn from the icelandic experience of building a β new β financial system. first of all, one actor in charge. one of the main problems prior to the crisis was that there was no single actor responsible for financial stability. we had several actors with unclear responsibilities. but with the merger of the fsa and the central bank in 2020, the chief responsibility for financial stability was assigned to one institution, the central bank. following the change in the central bank act in 2020, three committees take all central bank policy decisions : the monetary policy committee, the financial stability committee, and the financial supervision committee. all the committees have external as well as internal members. the set - up, inter alia with official policy statements and publication of minutes, ensures transparency in the decision making, how decisions are taken and why. in my capacity as governor, i chair all three committees, but i have only one vote when decisions are taken. second lesson, managing the balance of payments. we abolished the capital controls, but we have maintained indirect control of the balance of payments through macroprudential policies and measures and also by building up and strategically using our foreign currency reserves. in 2011, there was a volcanic eruption in iceland, which you may remember because air traffic came to a halt over the north atlantic and much of europe for a couple of weeks. we have this saying ; all publicity is better than no publicity, and even very negative publicity became a fiery start of the tourism boom in our country. tourist arrivals went in just a few years from 300, 000 per year to 2. 5 million. when the tourist boom took off the central bank used the opportunity, provided by the associated currency inflows, to accumulate foreign reserves in the open market. since then, we have used the reserves to maintain stability and ensure liquidity | 1 |
markets for monetary policy by beginning with the first stages of the monetary policy transmission mechanism. in particular, as you know, the federal reserve influences financial conditions through its ability to control the federal funds rate, the interest rate at which banks lend to each other overnight. through the use of open - market operations and other techniques, the federal reserve can manage the supply of funds in the interbank market as needed to keep the federal funds rate close to its target, a capability that has not been affected by the increased international integration of financial markets. although the federal funds rate does not itself have a major influence on economic activity, other short - term rates β such as eurodollar rates β are determined largely by the current and expected future values of the funds rate, reflecting the close substitutability of alternative short - term sources of funding. the federal reserve β s ability to control the federal funds rate thus gives it a strong influence over other short - term dollar nominal interest rates and, to the extent that inflation is inertial or sticky in the short run, over short - term real interest rates as well. the fed β s ability to set the short - term interest rate independently of foreign financial conditions depends critically, of course, on the fact that the dollar is a freely floating currency whose value is continuously determined in open, competitive markets. if the dollar β s value were fixed in terms of another currency or basket of currencies, the fed would be constrained to set its policy rate at a level consistent with rates in global capital markets. because the dollar is free to adjust, u. s. interest rates can differ from rates abroad, and, consequently, the fed retains the autonomy to set its federal funds rate target as needed to respond to domestic economic conditions. short - term interest rates affect the domestic economy through a number of channels ( for example, by affecting the cost of holding inventories ), so monetary policy could influence economic activity to some degree even if its control were limited to the short end of the yield curve. moreover, the pricing of some putatively long - term financial assets may be strongly influenced by shorter - term rates. thirty - year fixed - rate mortgages provide one example. because people move or refinance their loans, leading them to prepay their mortgages, and because the pattern of real mortgage payments is more frontloaded than that of nominal payments, the effective duration of a thirty - year mortgage may be closer to five years than to thirty years | it implies that the phillips curve is steeper today than in the past ( that is, that inflation is more sensitive to slack in the economy ), a prediction that does not accord with most empirical studies. the dollar prices of imports are also affected by changes in the value of the exchange rate. however, the effects of exchange - rate changes on the domestic prices of imported goods have been quite low in recent years. cost emerging - market economies have also helped keep down the prices of imports received by the united states and other industrialized countries. indeed, the share of u. s. non - oil imports coming from the emerging asian economies has increased from 27 percent to 34 percent over the past decade or so. overall, research indicates that trade with developing economies in particular has slowed the rate of growth of import prices faced by industrialized countries, with estimates of the reduction ranging widely from 1 / 2 to 2 percentage points. one study, for example, estimated that trade with china alone has reduced annual import price inflation in the united states by about 1 percentage point over the period 1993 - 2002 ( kamin, marazzi, and schindler, 2006 ) 7. however, imported goods make up only part of what people consume, and so the effect on overall inflation is less than the deceleration in the prices of imports alone. typical estimates of the short - term effect on the overall inflation rate of less - rapid increases in the prices of imports stemming from trade with china are in the neighborhood of 0. 1 percent or less per year β a discernable but certainly not a large effect. this result requires several qualifications. first, the direct effect of lower import prices on overall consumer price inflation could understate the overall effect, if lower import prices force competing domestic firms to restrain their prices as well. research has generally found that import prices do affect the prices charged by domestic producers. 8 for example, the international monetary fund found that, in a range of industrial economies, the prices of domestic products were restrained by competition from imports, the effect being larger with greater penetration ( imf, 2006 ). to the extent that import competition slows the rate of increase of domestic prices, the tendency of lower - cost imports to reduce domestic inflation will be enhanced. on the other hand, not all aspects of globalization and trade reduce inflation. for example, globalization has been associated with strong growth in some large emerging - market economies, notably china and india, and this growth likely has contributed to recent | 1 |
and financial system, and to the png institute of banking & business management and png to which he is a codirector. i also acknowledge the great contribution by mrs desley tunstall for her tireless assistance to the under privilege in the community especially the children β s ward at the port moresby general hospital. i also welcome the new managing director mr vishnu mohan and his wife mrs bubby mohan. i wish everyone at anz bank all the very best here in their new harbour city home. it now gives me great pleasure to cut the ribbon and officially open anz harbour city. thank you. | 1992 ) : minimum standards for the supervision of international banking groups and their cross - border establishments. bank for international settlements, july. basle committee on banking supervision ( 1988 ) : international convergence of capital measurement and capital standards. bank for international settlements, july. basle committee on banking supervision ( 1975 ) : report on the supervision of banks β foreign establishments. bank for international settlements. caprio, gerard and daniela klingebiel ( 1996 ) : β bank insolvency : bad luck, bad policy, or bad banking? β paper presented to the annual world bank conference on development economics, washington, d. c., 25th - 26th april. centre for european policy studies ( 1998 ) : capital markets and emu. report of a ceps working party. committee on payment and settlement systems ( 1997a ) : real - time gross settlement systems. bank for international settlements, march. committee on payment and settlement systems ( 1997b ) : clearing arrangements for exchange - traded derivatives. bank for international settlements, march. committee on payment and settlement systems ( 1997c ) : disclosure framework for securities settlement systems. bank for international settlements, february. committee on payment and settlement systems ( 1996a ) : security of electronic money. bank for international settlements, august. committee on payment and settlement systems ( 1996b ) : settlement risk in foreign exchange transactions. bank for international settlements, march. committee on payment and settlement systems ( 1995 ) : cross - border securities settlements. bank for international settlements, march. committee on payment and settlement systems ( 1993 ) : central bank payment and settlement services with respect to cross - border and multi - currency transactions ( noel report ). bank for international settlements, september. - 20 committee on payment and settlement systems ( 1990a ) : report of the committee on interbank netting schemes of the central banks of the group of ten countries ( lamfalussy report ). bank for international settlements, november. committee on payment and settlement systems ( 1990b ) : large - value transfer systems in the group of ten countries. bank for international settlements, may. euro - currency standing committee ( 1997 ) : the measurement of aggregate market risk. bank for international settlements, november. euro - currency standing committee ( 1996 ) : proposals for improving global derivatives market statistics ( yoshikuni report ). bank for international settlements, july. euro - currency standing committee ( 1994a ) : macroeconomic and monetary policy issues raised by the growth of derivatives markets ( hannoun | 0 |
as they were significantly affected by political events, and, even though we were expecting rapid us monetary policy tightening and a strong dollar well in advance, the change in the dot plots in the september fomc meeting was more than we expected. on top of that, the fact that two major central banks in japan and china are the two exceptional cases of loose monetary policies made our currency depreciate much more than expected in september before it started to stabilize recently. 1 / 2 bis - central bankers'speeches more recently, prices and our exchange rate have somewhat stabilized and the speed of us interest rate hikes is expected to be less rapid as indicated by the recent press conference by chairman powell. ensuring price stability and reducing inflation through tight monetary policy are still our priority. at the same time, as the recent interest rate increase has been fast by any historical standard in korea, there are growing signs of stress in various sectors, and maintaining financial stability, especially in non - banking financial sectors, is becoming an important issue. in fact, we are seeing signs of money move from non - banking sectors to the banking sector after deposit rates in banks significantly increased following policy rate hikes. how to recycle those flows back to non - banking sectors is an important policy issue for the bok to manage financial market stability in this period of high inflation and tight monetary policy. now, back to long - term challenges facing the korean economy. among many challenges, the risk of economic and geopolitical fragmentation stands out to me the most. in fact, it is a short term challenge, too. the escalating us - china tensions and further deterioration of the russia - ukraine war are likey to lead to financial and trade fragmentation and consequently, the contraction of global growth and trade. it will be structural headwind limiting long run growth of the korean economy, which is heavily dependent on exports. in this respect, global cooperation at the economic and political levels is more urgently needed than ever. countries responsible for global leadership, among others, need to promote collaboration and cooperative competition, since the weakening of trade and global growth stemming from fragmentation can have negative impacts on all countries. in retrospect, china's rapid growth over the last two decades allowed the korean economy to delay painful restructuring, while reaping the benefits of trade expansion with china. we no longer have that luxury. korea cannot any more avoid restructuring reforms, even though painful, in diversifying its supply chains and concentration of key industries | to achieve more balanced and equitable economy. ladies and gentlemen! the korean economy is currently faced with many challenges and opportunities amid an accelerated global monetary tightening after the pandemic. some of them are common across many major economies and some of them are unique to korea. today i would like to learn from your insights and wisdom on " the challenges of the korean economy after covid - 19 ". my best wishes for a successful conference. thank you. 2 / 2 bis - central bankers'speeches | 1 |
the unstable equilibria on the other hand, which should not be accepted. second, the notion of resilience to shocks, taking into account the fact that whatever the level of sustainability of a particular financial situation, we can never eliminate the occurrence of unpredictable shocks. these shocks can come not only from the economic and financial sphere β the present stress test is a very powerful example β but also from the geopolitical sphere, or they can be triggered by natural catastrophes. resilience is therefore essential ; it is a necessary complement to sustainability. the third notion is holism : the present global financial system depends on the appropriate handling of a very large number of factors : prudential practices, accounting rules, audit quality, liquidity management, risk management and credit assessment, to mention but a few. this holistic approach must also comprehend a fundamental factor, namely the long - term sustainability and resilience of public macro policies β whether in particular fiscal or structural β and the associated progressive but resolute elimination of those large domestic and external imbalances that are one of the major causes of global economic and financial instability. such a paradigm change, including the three notions of medium and long - term sustainability, resilience and a holistic approach of the global financial system, is now absolutely essential to correct the fragility of the market economy which we are presently experiencing. thank you for your attention. | the european commission ). but we are also a central bank and, as of 2014, a banking supervisor. these specific tasks require a dedicated governance framework considered so crucial by the eu legislators that it was laid down in the eu treaty and, as regards banking supervision, in the regulation establishing the single supervisory mechanism ( ssm ). in my remarks i will cover each aspect of the report briefly. independence in the european union, the principle of central bank independence has a quasi - constitutional basis. article 108 of the treaty establishing the european community states that : β neither the 1 / 5 bis central bankers'speeches ecb, nor a national central bank β¦ shall seek or take instructions from community institutions or bodies, from any government of a member state or from any other body β. looking at the debate around independence, which is also taking place outside the eu, it becomes clear that safeguarding our independence requires more than a series of legal provisions. it requires an explanation of why independence is important for a central bank. as guardians of price stability in the euro area, the ecb creates the foundation for a healthy and stable european economy. independence is essential in that respect, as it protects the ecb from any temptation by governments to seek changes in monetary policy to favour short - term economic gains over price stability, or to pander to private interest groups. it is equally important to correct misperceptions, and all stakeholders do have a responsibility in this respect. the ecb communicates clear conditions for accepting credit institutions as counterparts, for quality of collateral, for emergency liquidity assistance extended by national central banks so as not to interfere with monetary policy, for accepting securities under its asset purchase programme, etc. these conditions are transparent and equal for all counterparties in the euro area. therefore, the ecb does not aim for political buy in, it merely clarifies the conditions which govern its monetary policy for all euro area countries, and this is needed to ensure that it stays within its mandate and, thus, to safeguard its independence. as for the ecb β s current role in the macroeconomic adjustment programmes, this is enshrined in a legal framework4 that is not for the ecb to alter. we believe that financial issues are where the ecb β s advice is of particular relevance. if there were political willingness to change the framework, we would be happy to engage and, based on our experience, help clarify how best to support the other institutions while safeguarding our independence | 0.5 |
andreas dombret : holistic approaches to solve the β euro crisis β speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the global economic symposium, kiel, 1 october 2013. * * * ladies and gentlemen, thank you for the invitation to this year β s global economic symposium ; it is a pleasure to be here. the β euro crisis β has certainly been, and it still is, a defining moment in the history of european monetary union β though i would add that we are dealing with a sovereign debt crisis rather than a crisis of the euro. let me kick off the discussion by offering some thoughts on how to solve the crisis. what we need is a holistic approach. since the european monetary union is a highly interdependent system, any solution must not only remedy the problem at hand but also improve the working of the system as a whole. unfortunately, many of the proposed solutions fall short of this requirement. instead, they are prone to what is known as the β cobra effect β. the cobra anecdote is set in colonial india. trying to stop a plague of cobras, the british government offered a bounty for every dead snake. the plan seemed to be working at first. high numbers of dead cobras were presented to the colonial administration. unfortunately, this did not get the plague under control. most of the dead cobras were not wild ones β they had been bred by enterprising locals in order to claim the bounty. when the governor finally caught wind of the practice, he scrapped the reward, causing the cobra breeders to set the now worthless snakes free. as a result, the plague was worse than ever. every policy not only addresses a problem, but changes the nature of the game as well. this has to be taken into account when evaluating the overall merit of any measure. and when we look beyond instant effects, many policies lose their lustre. eurobonds are a case in point. granted, eurobonds would offer temporary relief to heavily indebted member states of the euro area. but the introduction of eurobonds would distort the already lopsided balance between liability and control even further. while spending decisions would essentially remain a national prerogative, liability would become european. incentives to incur further debt would thus be strengthened, not weakened. this would strain rather than smooth the working of the system. only if common liability were matched by common control would incentives be | measures implemented to strengthen domestic frameworks. these include wide ranging measures to develop regional financial markets, to improve liquidity management across borders, to strengthen cooperation networks for the supervision of regionally - active financial institutions and to establish regional infrastructure to enhance the efficiency and lower the risks associated with cross - border payments and settlements. regional arrangements between central banks and supervisory authorities have also been significantly strengthened to actively share information on emerging risks to regional stability and where necessary to coordinate regional responses. an important part of this includes the ongoing work to enhance the frameworks for crisis management including the orderly resolution of financial institutions with significant cross - border operations. within the asean region, measures are currently being pursued to promote greater consistency in the adoption of regulatory and supervisory standards in anticipation of a larger role for asean banks in driving regional integration as part of the broader agenda to realise an asean economic community by 2015. collectively, these arrangements aim to ensure that the expansion of bis central bankers β speeches cross - border financial linkages takes place within a framework and process that adequately mitigates systemic risk across borders. fifth, central banks and regulatory authorities in most emerging economies in asia have the broader mandate that includes a focus on the development of the financial sector as a means not only to enhance the growth and development potential, but also to reinforce a strong foundation for financial stability. in malaysia, the development and reform of the financial sector in the decade that followed the asian financial crisis has not only developed the financial sector to better serve the malaysian economy, but it has also better positioned financial institutions to withstand the destabilising episodes emanating from external shocks. this has included strengthening financial intermediaries, not only in terms of scale but also in their financial positions, risk management and governance practices. this has contributed to more efficient financial intermediation while improving access to financing, particularly for small and medium scale businesses. efforts to develop a vibrant capital market have meanwhile opened up alternative channels for financing, while mitigating concentration risk in the financial system and enhancing its ability to absorb large and volatile cross - border capital flows. these factors will place asia on a firm foundation to achieve its growth and development goals. while public policy clearly has an important role, it is as important for the financial industry to align itself with the desired outcomes of sustainable growth within a longer term horizon. this will involve a number of important considerations for financial institutions, including the rethinking of business models in the light of a re - assessment of risk and return expectations | 0 |
. if community banks are prudent but opportunistic in extending credit to strong borrowers, they will help the economy recover while benefiting from that recovery themselves. | to maintain capital ratios that meet or exceed fixed minimum standards. because banks typically find raising capital to be difficult in economic downturns or periods of financial stress, their best means of boosting regulatory capital ratios during difficult periods may be to reduce new lending, perhaps more so than is justified by the credit environment. moreover, as many institutions and auditors will attest, determining the appropriate valuation of illiquid or idiosyncratic assets can be very challenging, especially in highly strained market conditions. the economic downturn also has renewed the debate concerning the appropriate levels of loan loss reserves over the cycle. institutions themselves often try to offset the potential for procyclicality in capital levels by maintaining strong capital buffers to absorb swings in regulatory capital requirements. this type of action is in line with supervisory expectations that call for banking organizations to be able to assess their overall capital needs and hold capital commensurate with their individual risk profiles β beyond complying with minimum regulatory capital requirements. most community bankers understand this point. your institutions generally hold capital in excess of minimum regulatory requirements β sometimes well in excess. nonetheless, the issues surrounding procyclicality are not easy, and their consideration will require a careful balancing of important public policy interests. policymakers should review existing capital rules and accounting standards to determine whether these rules and standards could be modified to reduce their potential to have unduly procyclical effects without weakening their ability to achieve their fundamental objectives. i'm pleased to note that the basel committee and the financial stability forum already have work under way to address excessive procyclicality in capital regulations, and that the financial accounting standards board is issuing new guidance that relates to market - to - market accounting in inactive markets and other - than - temporary impairments. conclusion i want to conclude by encouraging you as community bankers to operate prudently in the current environment, but not to let fear drive your decisions. you should all continue to exercise good risk management β including strong underwriting for individual exposures and proper management of credit concentrations in your portfolios. you should also be certain that any deterioration in asset quality and borrowers'conditions are accurately identified, measured, and managed. and you should take steps to maintain a strong financial condition with sufficient capital and liquidity levels as preparation for any future economic and financial uncertainty. by doing so, you can ensure that your institutions can continue to provide a steady and consistent source of credit to businesses and borrowers for years to come | 1 |
njuguna ndung β u : putting banking at the centre of the economy β s sustainable growth remarks by professor njuguna ndung β u, governor of the central bank of kenya, at the opening of the kba 3rd annual banking research conference, nairobi, 25 september 2014. * * * the chairman, kba governing council ; members of the kba governing council ; banks β chief executive officers ; distinguished participants ; ladies and gentlemen : it is my honour and pleasure to join you this morning at this very important conference that focuses on the role of the banking sector in the economy β s growth. it is therefore my singular pleasure to be invited to open the kba third annual banking research conference and to make some remarks at its commencement. first and foremost, i would like to commend the kba for its consistency in hosting the annual banking research conference. this is further evidence that the banking industry is keen on having its operations and strategic focus informed by analytical work. this being the third annual conference, the body of knowledge that the process has generated is without a doubt going to be beneficial to all stakeholders. research and its output is a β public good β. the broader benefits arising from knowledge cannot be restricted to those who have a direct interest in the research. research that improves the policy environment benefits all and indeed the economy at large. this year β s conference theme of β putting banking at the centre of the economy β s sustainable growth β is an example of this point. several papers focusing on finance and economic growth have confirmed the causal relationship. it is on that basis that i consider this conference β s theme on sustainability of this relationship to be inspiring, given that it provides an opportunity for deeper reflection taking us beyond the general finance β growth nexus. the kenyan economy has an ambitious real output growth target of at least 10 percent to enable the realization of the aspirations of vision 2030. the high and sustained growth targets will only be achieved through increased investment and increased productivity. the banking industry must intermediate and provide the funding required for the investment but even more important is long - term finance with attractive terms. ladies and gentlemen : the presentations lined up for this conference give me confidence that we are embarking on a conversation that will lead to the consolidation of the gains to the economy from the dynamism of the banking industry. let me make a quick reflection over the five areas around which the conference presentations focus ; β’ firstly, increasing support for agriculture is important and in the right | ##ourge of illicit financial flows. i look forward to benefiting from your thoughts and diverse experiences. thank you for your attention. bis central bankers β speeches | 0.5 |
sada reddy : fiji β s economy presentation by mr sada reddy, deputy governor of the reserve bank of fiji, to the fiji nz business council, suva, 3 october 2008. * * * outline the outline of my presentation is as follows : β’ global economic conditions β’ domestic economic conditions β’ summary global economic conditions global growth is slowing. in its july 2008 forecast, imf expected global growth to slow to 4. 1 percent in 2008 and to soften further to 3. 9 percent in 2009. however, in light of the severe global financial crisis, which unfolded in the last few weeks, there is a high likelihood that global growth may further decline. we therefore expect our major trading partners and visitor source markets to have a sluggish outlook for the next two years. emerging economies, like china and india, may experience some slowdown in growth but will continue to experience relatively high growth rates and may provide some stability to global growth. economies 2008 ( f ) 2009 ( f ) australia 4. 2 2. 6 2. 6 new zealand 3. 1 0. 5 1. 7 us 2. 0 1. 8 1. 4 euro - zone 2. 6 1. 3 0. 9 japan 2. 0 0. 9 0. 9 china 11. 9 9. 9 9. 1 india 9. 0 7. 5 7. 6 singapore 7. 7 4. 2 4. 6 south korea 5. 0 4. 4 4. 3 source : consensus forecast & asia pacific consensus forecast β sep - 08 domestic economic conditions β’ gdp growth : after contracting in 2007 ( - 6. 6 % ), our economy is showing some recovery in 2008 ( 1. 7 % ). forecasts for 2009 and 2010 are 1. 4 percent and 1. 9 percent, respectively. these forecasts were released by the macroeconomic policy committee in july 2008. these growth rates are too low and insufficient to generate adequate employment. however, fiji β s economy has been very resilient despite the global economic slowdown and massive increase in fuel and food prices. β’ major drivers of economic growth : the major positive contributors to the forecast medium - term growth are tourism ( transport and wholesale & retail trade and hotels & restaurants ), agriculture, manufacturing and mining sectors, which more - thanoffset the negative contributions from community, social & personal services sector. β’ visitor arrivals : visitor arrivals are at historical highs. a strong recovery in visitor arrivals by an annual 12 percent was seen in the first eight | points it will work on in the run up to 2020 and beyond. the first, which we are here to discuss today, is to explore synergies between target2 and t2s, with the goal of achieving a consolidated market infrastructure for large - value payments and securities settlement. the second action point is to prepare for the enhancement of target2 services with instant retail payments, at least in the settlement layer. currently, business requirements for the settlement of instant payments and credit risk management across payment systems are being gathered from market participants. we also need to assess whether interoperability arrangements between automated clearing houses can ensure full pan - european reachability for instant payment scheme participants in the eu and if and to what extent risk mitigation measures have to be harmonised across automated clearing houses to facilitate interoperability. third, there are plans to review the harmonisation of eurosystem arrangements and procedures for collateralisation. further progress is needed in this area before the business case for a common eurosystem collateral management system can be reconsidered. conclusion europe β s financial market infrastructure has been built on the basis of a collective approach, driven jointly by the public and the private sector. in all three action points for the market infrastructure beyond 2020, the eurosystem will continue to work closely with the market in order to benefit from its knowledge and experience as well as to ensure that europe β s future financial market infrastructure fully meets the needs of its users. please have your say β whether today in this information session, in the existing users β fora or by written procedure. your input is needed. let us jointly write the script for the future of the euroystem β s rtgs services. with this, i hand over to the chair of the meeting. bis central bankers β speeches | 0 |
be endorsed by the g 10 governors and heads of supervision before their publication at the end of june, i will be involved as well. last week the basel committee published a press release to announce that it had achieved consensus on the remaining issues so that i don β t expect that this endorsement could still prove problematic. the introduction of this new set of rules represents a milestone in the design of a more dynamic prudential environment, combining rules and discretion, supervisory monitoring and market discipline. this does however not mean that the work is now finished. the implementation of the new requirements will necessitate considerable efforts by the financial firms, the supervisory authorities and central banks. in order to facilitate that process the basel committee created an accord implementation group and european supervisors decided to cooperate more closely in order to achieve a greater convergence of supervisory practices. the legal work of implementing the new requirements in eu and national legislation will also be a huge task. it is therefore important that the closer interaction between the academic and regulator β s worlds which is one of the new features in the design of basel ii be maintained during the implementation phase. i hope that this conference will also contribute to this. other developments of our financial system i have mentioned before, such as the concentration process in the banking sector, the creation of financial conglomerates or bank - insurance companies and the development of cross - border activities, also call for a reassessment of our regulation mechanisms. however difficult it has proved to achieve a convergence between the national supervisory authorities in the banking sector, the next daunting challenge will most probably be, in my opinion, to enlarge that convergence to other segments of the financial system. i would like to thank all speakers and discussants taking part in this conference. i am also grateful to the belgian academic researchers and our own staff who have contributed to the research projects prior to this conference and, like all of you, i am looking forward to the presentations of their research results. finally, i would like to thank all of you for your attendance here today and i trust your participation in the discussions and question time will be very active. i hope this conference will help all of us to better understand the mechanisms underlying the recent financial developments as well as the policy responses which should accompany them. | for example, the differential between interest rates in interbank markets and bond markets has narrowed drastically, cross - border bond and mutual funds holdings have been increasing very rapidly, a market for private bond issuance has developed within europe and equity price fluctuations have been converging. these factors have induced a rapid growth of the financial markets and have facilitated the direct access of borrowers and savers to the markets. our traditional bank - oriented financial systems are gradually turning into a mixed organisation with substitution possibilities between bank and market - based financial products. the co - existence of and the competition between the two systems for allocating financial flows and risks in the economy should enhance economic efficiency, provided appropriate regulations, monitoring and supervision create the conditions for fair competition. against this background, the banking sector has experienced major changes. consolidation in the banking industry has been substantial. at the same time, banks have diversified their activities through mergers or by creating bank insurance groups. they have also been trading parts of their balance sheet assets and risks through financial markets. in addition, they have expanded their activities abroad, although further developments towards cross - border mergers and the creation of larger europe - wide banks can be expected. so the banking sector is now characterised by higher concentration, stronger competition from foreign banks and direct competition with financial markets. but what precisely will be the future role for banks in this new financial environment? theory and empirical evidence support the view that, as providers of finance, banks have the advantage of being in a position to acquire information on the borrowers and to monitor them thanks to long - lasting bank - lending relationships. this mitigates the effect of asymmetric information and moral hazard problems on the provision of funds. it is especially relevant to newly set up, small and medium - sized enterprises. this debate is not only important for banks, but for corporations themselves. indeed, it is regularly asserted β, - in various countries, not the least in belgium, that sme face increasing difficulties to get bank financing and that this problem could be compounded by the revised capital requirements imposed by the new basel ii agreement. i would like to emphasise two points. first, the new basel rules take expressly into account the specificities of sme. second, recent figures for belgium clearly indicate that, while large corporations have recently shifted to market financing, bank loans to sme keep increasing, and, moreover, are priced to rates which compare rather favourably to the ones applied in the rest of the eurozone. | 1 |
research bis central bankers β speeches showed that, within six to eight years, us government spending on highway projects delivered at least one dollar, possibly two to three dollars, in increased output for every dollar spent. it would be helpful to have more research on the fiscal multipliers of infrastructure spending in canada. but it seems likely to me that well - targeted infrastructure investments will yield more economic growth than just the first infusion of cash because they enable more growth to occur in the future. another key avenue shared by all economies is trade liberalization. we all need to encourage this, both within canada and internationally, since the world seems to be entering a phase of doubt about the benefits of international trade. beyond the rhetoric, the future of the trans - pacific partnership ( tpp ) has come into question, and the trade agreement between canada and the european union, while much more advanced, still must go through a long ratification process. we know from history that sliding into protectionism would be highly counterproductive. it is important for authorities to continually make the case for freer trade. here at home, the announcement this summer of a preliminary agreement on interprovincial free trade is certainly welcome. there are many indications that interprovincial barriers are holding back the growth of individual companies and the economy as a whole. it is also important to recognize and understand the reasons behind rising anti - globalization sentiment. for example, people who have been affected by restructuring brought about by globalization often face difficult adjustments, including retraining and moving long distances. policy - makers need to be sensitive to these difficulties and do what they can to facilitate those adjustments. at the same time, there is a role for economists to do compelling research that reminds people of the impact of trade. increasing trade is a positive - sum game. companies, too, could do more to demonstrate how globalization has made all kinds of goods and services more widely available at a lower cost, and how important trade is for their own employees. making infrastructure investments, defending existing trade arrangements and pursuing new ones are certainly good candidates for boosting canada β s economic potential. but when we move from theory to practice, how big can those effects be? well, bearing in mind that we start our analysis with a projection that canada β s economic potential is likely to grow by only around 1. 5 per cent, which is not very inspiring, we need to take every decimal point of potential growth more seriously than we have in the past. now, | david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 26 april 2007. * * * today, we released the april monetary policy report, which discusses current economic and financial trends in the context of canada's inflation - control strategy. growth of the canadian economy has been essentially in line with the bank's expectations as set out in the january monetary policy report update. but inflation has been higher than expected. after considering the full range of indicators, the bank now judges that the canadian economy was operating just above its production capacity in the first quarter of this year. over the projection horizon, domestic demand continues to be the main driver of growth in canada. with the u. s. slowdown now expected to be somewhat more prolonged than previously projected, net exports should exert a slightly greater drag on growth in 2007. the canadian economy is projected to grow by 2. 2 per cent in 2007 and 2. 7 per cent in both 2008 and 2009, returning to its production capacity in the second half of 2007 and remaining there through 2008 and 2009. core inflation should remain slightly above 2 per cent over the coming months, given pressures on capacity and the impact of higher core food prices. but with the economy projected to return to its production capacity in the second half of this year and with further easing of pressures from housing prices, upward pressure on core inflation is expected to moderate, bringing core inflation back to 2 per cent by the end of 2007. total cpi inflation is projected to rise above the 2 per cent inflation target in the second half of this year, peaking below 3 per cent near the end of 2007 before returning to the target by mid - 2008. the bank continues to judge that the risks to its inflation projection are roughly balanced, although there is now a slight tilt to the upside. on tuesday, the bank left its key policy rate unchanged at 4 1 / 4 per cent. the current level of the policy interest rate is judged, at this time, to be consistent with achieving the inflation target over the medium term. | 0.5 |
draw lessons about whether it needs refinement over time. second, given the prevalence of internationally active banks in a globalised economy, national authorities just must be able to work together β in reality ; when it matters β to control the resolution of banks whose activities cross borders. 27 and third, as by now this was re - affimed recently in a joint statement by the us federal reserve and the department of the treasury ( www. federalreserve. gov / newsevents / press / monetary / 20090323b. htm ). work is underway under the auspices of the financial stability board, which published principles endorsed by g20 heads of government in april ; and in the basel committee of banking supervisors. these issues were also discussed recently by eric rosengren, president of the federal reserve bank of boston in a speech at the institute of regulation and risk, hong kong, 5 may 2009 β challenges in resolving systemically important financial institutions β. many others have said, 28 we need to find a solution to too - big - to - fail, or too interconnected, too complex β however one wants to think about it. that might involve requiring banks to have credible resolution plans for themselves, with higher regulatory capital and liquidity charges entailed if they do not. as we have seen across many countries during the current crisis, governments can otherwise end up having to provide capital support in order to prevent the financial system unravelling, with unfathomable costs for the real economy and so for households. the long lesson of history is that we must build a resilient system ; but that we and our successors would be foolhardy to imagine that governments will never again need to provide capital to save the day. if that is right, then society needs principles and policies for what might be called β capital of last resort β, to sit alongside the lender of last resort ( lolr ) principles developed by and for central banks since the 19th century. clear and timeless principles in this area barely exist. there are just 30 or so mentions of colr on the web. one possible starting point is how we have learned to think about bespoke liquidity - support operations. after explicitly recognising that occasionally liquidity support operations can end up providing de facto risk capital if the recipient deteriorates, the late eddie george offered some thoughts on this in 1993 ; 29 β central banks are not in the business of providing public subsidy to private shareholders. | small, take responsibility for understanding and mitigating the risks in their business and be able to demonstrate to us that they are doing this. i realise that the parliamentary commission chaired by andrew tyrie was about banks and their record. but it raised an important theme that has to be considered more widely, namely that our approach to supervision of firms ensures that senior individuals are properly accountable and thus incentivised. the record of the banking crisis indicates that this senior accountability was not effective in banks that failed. often, the simplest points are the most powerful, and complexity is a poor guide. andrew tyrie and his colleagues have done a great service by making a simple but powerful bis central bankers β speeches point β as supervisors we must incentivise and hold to account those at the top, and not seek to do the job of management by influencing excessively further down. i could not end without talking about europe and solvency ii and wider global developments in insurance regulation. a month or two ago i ruffled a few feathers by criticising the cost and time taken preparing for a european directive that isn β t finalised. i have no regrets, because as public officials we have to speak honestly and transparently. i was making a point on behalf of firms because i feel strongly that you have been put to too much expense and time spent by management and boards. but, in saying this, i should be clear that the pra has not withdrawn from involvement in solvency ii, far from it. as tidjane said this morning, the insurance industry and its regulators cannot operate in a vacuum. this is why we continue to invest a large amount of our time engaging with our counterparts in europe as well as with the european supervisory authorities, the esas. we liaise closely with eiopa, the european insurance and occupational pensions authority. julian adams sits on the eiopa board of supervisors and management board and this gives us an opportunity to participate at a european level. a few weeks ago, eiopa reported on the critical issue of the long - term guarantees assessment and closed its consultation on proposals for preparatory guidelines. we now have acceptance that the classic matching adjustment is a prudent measure, which is hugely important for the uk life insurance industry. we know that many of you still have concerns around the restrictions built into the classic matching adjustment, particularly around the assets that can be used and the effect of possible downgrades in portfolios which are held for the long | 0.5 |
and federal reserve board, statistical release z. 1,'financial accounts of the united states.'figure 2 banks'cet1 risk - based capital ratio ratio q4 quarterly u. s. g - sibs large non β g - sibs other bhcs note : the data are seasonally adjusted by federal reserve board staff. the sample consists of domestic bank holding companies ( bhcs ) and intermediate holding companies ( ihcs ) with a substantial u. s. commercial banking presence. u. s. g - sibs are u. s. global systemically important banks. large non - g - sibs are bhcs and ihcs with greater than $ 100 billion in total assets that are not g - sibs. cet1 stands for common equity tier 1 capital, which is the numerator of the cet1 ratio. before 2014 : q1 ( advanced - approaches bhcs ) or before 2015 : q1 ( non - advanced - approaches bhcs ), the numerator of the cet1 ratio is approximated by tier 1 common capital. the denominator is risk - weighted assets. the shaded bars indicate periods of business recession as defined by the national bureau of economic research : march 2001 - november 2001, december 2007 - june 2009, and february 2020 - april 2020. source : federal reserve board, form fr y - 9c, consolidated financial statements for holding companies. may 07, 2024 figure 3 uninsured deposits percent of assets quarterly q4 u. s. g - sibs large non - gsibs regional note : uninsured deposits are reported by banks with total assets above $ 1 billion. for smaller banks, uninsured deposits are estimated based on the amount in large deposit accounts, excluding the first $ 250, 000 in each of those accounts. u. s. g - sibs are u. s. global systemically important banks. large non - g - sibs are bank holding companies and intermediate holding companies with greater than $ 100 billion in total assets that are not g - sibs. regional are banks with between $ 10 billion and $ 100 billion in total assets. source : federal reserve board staff calculations based on federal reserve board, form fr y - 9c, consolidated financial statements for holding companies and federal financial institutions examination council, call report form ffiec 031, consolidated reports of condition and income ( call report ). figure 4 commercial real estate loans | . i will first address the effect of productivity on costs, returning later to the link of productivity and the output gap. labor costs account for the lion β s share, about two - thirds, of the cost of producing goods and services. the labor cost of producing a unit of output depends, first, on the dollar cost per hour ( including wages and benefits ) of employing a worker and, second, on the quantity of output that each worker produces per hour. when the cost per hour of employing a worker rises more quickly than the worker β s hourly productivity - the historically normal situation - then the dollar labor cost of producing each unit of output, the so - called unit labor cost, tends to rise. recently, however, labor productivity has grown even more quickly than the costs of employing workers, with the result that unit labor costs have declined in each of the past three years. indeed, in the second and third quarters of 2003, unit labor costs in the nonfarm business sector are currently estimated to have declined by a remarkable 3. 2 and 5. 8 percent, respectively, at annual rates. again, because labor costs are such a large part of overall costs, and because capital costs have also been moderate, the business sector has enjoyed a net decline in total production costs. a decline in production costs must result in lower prices for final consumers, an increased price - cost markup for producers, or both. in practice, both have occurred in recent years : firms have passed on part of the reduction in costs on to final consumers in the form of lower ( or more slowly rising ) prices, and pricecost markups ( as best we can measure them ) have risen well above their historical averages. the high level of markups is an important and perhaps insufficiently recognized feature of the current economic situation. to the extent that firms can maintain these markups, profits will continue to be high, supporting investment and equity values. to the extent that product - market competition erodes these markups, as is likely to occur over time, downward pressure will be exerted on the inflation rate, even if, as is likely, the recent declines in unit labor cost do not persist. 2 the third unusual factor is the persistent softness of the labor market. as i already noted, fully two years after the official recession trough, we are only just beginning to see significant gains in employment. of course, the unemployment rate, at about 6 percent of the labor force, is not exceptionally high | 0.5 |
slow down prices and thereby margins for the companies. the changes are necessary to increase our welfare, even if they create problems for some people in the short term. to manage these challenges, we should jointly strengthen the opportunities for education and skills development, even out some of the gaps arising during the upheavals and safeguard the interests of the general public by strengthening competition on the new markets. in a changing world we need to have clear game rules to ensure the economy functions smoothly. reliable price stability, in terms of purchasing power, is one such game rule. it makes it easier for individuals and companies to plan for the future, it improves price setting and wage formation and thus contributes to more stable economic activity. so, attaining our inflation target of two per cent will help to accomplish the changeover following on from digitalisation. 10 references apel, mikael, frohm, eric, hokkanen, jyry, nyman, christina and palmqvist, stefan ( 2014 ), why haven't companies raised their prices? results from a survey on company pricing β, economic commentaries no. 4, 2014, sveriges riksbank. baumol, j william, panzar, c john, and willig, d robert ( 1982 ) β contestable markets and the theory of industry structure β, new york : harcourt brace jovanovich, inc. brynjolfsson, erik and mcafee, andrew ( 2011 ) β race against the machine : how the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy β, new york : w. w. norton & company. cavallo, f alberto ( 2017 ), β are online and offline prices similar? evidence from large multi - channel retailers β, american economic review 2017, 107 ( 1 ) : 283303. cavallo, f alberto ( 2018 ) β more amazon effects : online competition and pricing behaviors β, national bureau of economic research, no. w25138. cowen, tyler ( 2011 ), the great stagnation, new york, dutton de loecker, jan and eeckhout, jan ( 2017 ), β the rise of market power and the macroeconomic implications β, national bureau of economic research, no. w23687. de loecker, jan and eeckhout, jan ( 2018 ), β global market power β, national bureau of economic research, | households and companies to which they lend. the bank therefore contributes to ensuring that the mediation of capital in the economy functions efficiently ; it is sufficient that borrowers can convince the bank of their creditworthiness, they do not need to convince each individual saver. similarly, savers do not have to assess the creditworthiness of every borrower ; it is enough to be satisfied of the bank's solvency. the banks can also supply payment services for households and companies by using the existing financial infrastructure, such as accounts and various routines for transferring funds between financial institutions. as these functions are central to an efficient economy, it is evident that major problems can arise if financial stability is upset. this is aptly illustrated by, for instance, the crises in south east asia at the end of the 1990s and by the bank crisis that sweden and other countries suffered at the beginning of that same decade. while the target of maintaining price stability is relatively straightforward and intuitive, it is more difficult to specify the task of promoting financial stability. this task has also been formulated in slightly different ways in different central banks β regulations. for instance, the bank of england β s charter says that it is β responsible for the overall stability of the financial system as a whole β, while the corresponding task in the regulations for sweden β s riksbank has been expressed in a more indirect manner : β to promote the efficiency and safety of the payment system β. 4 one strategy for maintaining financial stability can briefly be described as consisting of three different parts : a clear regulatory framework, an efficient day - to - day prudential supervision and oversight and a preparedness to act strongly and quickly in a crisis. exactly what role is played by the central bank in this strategy is also something that varies from country to country. many central banks contribute in different ways to the formulation of the regulatory framework for the financial system, for instance, by giving their views on proposed bills and by participating in committees where domestic and international legislation is formulated. with regard to the day - to - day prudential supervision and oversight, one solution that is applied in sweden and other countries is that the supervision of the financial sector is delegated to a special, independent authority with the power to apply sanctions. in other countries the supervision work is done by the central bank itself. in the cases where supervision is delegated to an independent authority, the central bank usually has an oversight role that entails regularly monitoring and analysing developments in the financial sector | 0.5 |
7 2. 3 β0. 8 β0. 1 1. 1 1. 6 β0. 5 avc and telecommunications equipment β2. 8 β4. 7 housing ( d ) 3. 0 1. 9 3. 5 2. 9 2. 2 2. 8 0. 7 2. 2 administered prices 4. 4 3. 8 utilities education health other administered 4. 5 5. 1 4. 3 4. 0 4. 2 3. 2 4. 0 3. 6 market services ( e ) 2. 9 2. 0 tobacco 8. 4 13. 9 automotive fuel 3. 3 6. 7 holiday travel and accommodation 2. 2 0. 8 headline cpi ( f ) 2. 5 1. 8 trimmed mean ( f ) 2. 6 1. 8 retail consumer durables ( b ) food ( c ) fruit and vegetables alcoholic drinks non - alcoholic drinks new dwelling purchase rents dwelling maintenance and repair ( a ) adjusted for the tax changes of 1999 - 2000 ( b ) excludes audio, visual and computing equipment ( c ) excludes fruit, vegetables, meals out and takeaway food ( d ) excludes administered prices ( e ) excludes domestic travel and telecommunications equipment and services ( f ) excludes interest charges and indirect deposit and loan facilities sources : abs ; rba http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 4 / 23 22 / 08 / 2018 low inflation | speeches | rba retail one of the factors having a significant impact on inflation outcomes in recent years has been increased competition in the retail sector. prices of many retail items have been steady or falling over recent years. since 2015, retail prices have on average. the price of the typical food basket declined has not increased all that much over the past 10 years, while the prices of consumer durable items such as fridges and furniture ( adjusted for improvements in the quality of the goods ) have not changed noticeably over the past 25 years ( graph 3 ). most notably, the prices of audiovisual equipment have declined by 90 per cent over the past 25 years ( see below ). in the case of consumer durables and audiovisual equipment, technological improvement has clearly been an important factor, but competition in the retail sector has also played a significant role. graph 3 one way of illustrating the effect of competition on retail prices is by examining the changing dynamics of exchange rate pass - through. that is | , the way that changes in the exchange rate affect price changes for retail items. http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 5 / 23 22 / 08 / 2018 low inflation | speeches | rba graph 4 illustrates that changes in the exchange rate typically pass through quickly to import prices for retail goods. that is, the prices of imported goods at the docks tend to move very much in line with movements in the exchange rate ( first - stage pass - through ). when the exchange rate depreciates, these at - the - dock prices increase. this relationship hasn't changed much over the past 25 years. in the two decades up to 2010, these changes in import prices at the docks tended to be passed on to the retail prices faced by consumers. however, over the past decade or so there has been a shift in these pricing dynamics for retail goods. graph 4 while slower growth in consumer spending over this time frame compared with the earlier period has probably played a role in explaining retailers'reluctance to pass on higher import prices, it is the http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 6 / 23 22 / 08 / 2018 low inflation | speeches | rba structural changes underway in the retail sector that are putting downward pressure on prices. one aspect of this is that the internet, and technology more generally, have meant that foreign retailers can now compete with local retailers for online shopping, which is a small but rapidly growing part of the retail market. in june, online sales made up around 5 per cent of total retail trade according to the australian bureau of statistics ( abs ) ; however, the value of online sales has grown by 50 per cent over the past year. this competitive pressure is not confined to online market share, with a number of large foreign retailers also setting up β bricks and mortar β retail operations in australia. in addition to the direct competition from this source, there is also greater information about prices, which has allowed households to comparison - shop more easily and negotiate greater discounts off listed prices. competition is not directly observable, but we can look at some proxies for it to assess how it has changed. two proxies for competition are mark - ups and margins. mark - ups measure the ratio of a firm's sale price to its marginal cost | 1 |
economic and financial conditions that followed world war i, many economic historians have credited it with promoting price stability and robust international trade and capital flows during 1870 - 1913, the so - called classical gold standard era. another example of a rule - like monetary policy institution is a currency board, such as the ones currently employed by hong kong and several eastern european nations. on the other side of the debate, advocates of discretion have firmly rejected the use of strict rules for policy, arguing that central bankers must be left free to set monetary policy as they see fit, based on their best judgment and the use of all relevant information. supporters of discretion contend that policy rules of the type advocated by friedman are simply too mechanical and inflexible for use in real world policymaking ; in particular, simple rules cannot fully accommodate special circumstances or unanticipated events. during the past few decades, for example, financial innovation and new transactions technologies have led to large and difficult - to - predict changes in the empirical relationship between money growth and the rates of growth of output and prices. if central banks had slavishly followed friedman β s k - percent rule for money growth during this period, critics point out, substantial economic instability would have been the likely result ; indeed, most central banks have deemphasized money growth as a policy target or indicator in recent years. more generally, opponents of rules have argued that, as a practical matter, policymakers can never credibly commit to abandoning the bank of england β s capable β management β of the pre - war gold standard was an important element in its success ; after the war, great britain no longer had the economic and financial power needed to occupy a central position in the world monetary system. proponents of discretion do not necessarily reject the use of β rules β or formulas - such as the famous taylor rule ( taylor, 1993 ) - as rough guides to policy, so long as policymakers remain free to deviate from the rule as they see fit. john taylor himself advocates using his eponymous rule in this way. discretion in favor of supposedly β unbreakable β rules. the problem, this argument runs, is that the public will understand that the central bank always has the option of abandoning its rule, should the rule happen to dictate a policy action perceived at the time as counterproductive. hence, an announcement by the central bank that it is adopting a strict policy rule would carry little credibility. although a strict rules - based framework for | term funding markets, including some spikes in repo rates in 2019, but overall vulnerabilities stemming from liquidity and maturity mismatches in the financial sector still appeared low β especially so at large banks, which had substantially reduced their reliance on short - term wholesale funding from pre - crisis levels. in late 2019, market participants were telling us that the most salient risks to the u. s. economy were from trade frictions, the challenges facing monetary policy given the proximity of interest rates to their effective lower bound, and market liquidity. 1 then the covid event unfolded. on february 21, while we were with the italian authorities in riyadh for the g20 meetings, italy announced quarantines of the northern towns being hardest hit by the new virus. this was a trigger for what became a rapid change in market sentiment, as investors began to prepare for what was beginning to seem might be a significant slowdown in economic activity. volatility rose ; selling pressure rose. as other european governments began to adopt travel bans, lockdowns, and school closures, there was a surging demand for safe assets. with fears of a widespread economic slowdown proliferating in late february and early march, treasury prices rose and yields fell sharply, as usually happens when the economic outlook worsens. and as often happens when a shock leads to a surging demand for safe assets, some risky assets became very difficult to sell. then on march 11, roughly two weeks after the first italian quarantines, the w ho declared covid - 19 a global pandemic, and several new countries announced lockdowns and border 1 / 5 bis central bankers'speeches closings. this was the trigger that turned what up to then had been a reasonably familiar, if concerning, flight to safety into a historically unprecedented dash for cash. corporates preparing for a potentially extended disruption in revenues began seeking cash reserves en masse, while financial firms uncertain about the value of assets and counterparties began cutting their exposures. as a result of this scissoring, we saw serious strains in several financial markets. some of the most severe strains emerged in short - term funding markets and among institutions engaged in liquidity transformation. i will highlight a few. first, we saw a pullback from commercial paper, or cp, markets. in an effort to contain risk in an abruptly slowing economy, investors shortened the maturities at which they were willing to lend in the | 0 |
term upside risks to the inflation outlook, the sarb felt that it was appropriate to act against such risks, especially in light of policy normalisation in advanced economies β which would most likely imply a higher neutral real interest rate for a small and open economy like south africa β s. hence, in november 2018, the monetary policy committee ( mpc ) decided to raise the repurchase rate ( repo rate ) by 25 basis points, reversing the cut that had been implemented in march of the same year. by early 2019 though, inflation performance was more benign than anticipated and the risks to the inflation outlook had eased sufficiently enough for the sarb to maintain an unchanged policy stance. page - 4 - of 9 at the time of its latest meeting held on 18 july 2019, the mpc felt comfortable enough with the recent downward trend in inflation outcomes, as well as the ongoing decline in inflation expectations, to lower the repo rate by 25 basis points. overall, when looking back at the last few years, it is important to acknowledge the progress that has been made in reducing inflation volatility in south africa, including in response to exchange rate shifts, and how this has allowed for a better anchoring of inflation expectations and, in turn, how this has also limited the need for sharp monetary adjustments. since 2016, surveyed inflation expectations have declined by 100 basis points. a more stable and predictable path of interest rates will enhance the environment for sustained economic growth, as the experience of many advanced economies and, increasingly, also the emerging economies has shown. the persistence of such gains is, however, not certain, meaning that the mpc will continue to exercise vigilance in the years ahead. financial stability with the implementation of the financial sector regulation act 9 of 2017 ( fsr act ) in april last year, the sarb was provided with an explicit statutory mandate to protect and enhance financial stability. the fsr act further requires the sarb to monitor and keep under review the strengths and weaknesses of the financial system, as well as any risks to financial stability. to this end, the sarb has developed frameworks for identifying, monitoring and mitigating systemic risks. on the whole, the sarb currently assesses the financial sector to be strong and stable. nevertheless, potential vulnerabilities exist, as we have observed a few emerging trends over the past year, particularly in the banking sector. while south african banks remain adequately capitalised and profitable, the implementation of the new | moderate increase over the forecast period, there may be some upside risk to this. at this stage, we see the main risk to the domestic petrol price coming from the exchange rate and higher fuel levies. demand pressures are expected to remain relatively muted. they may have contributed to the more moderate trend of core inflation in 2017. this is also reflected in the persistence of a negative output gap despite potential output growth of only 1. 1 % for this year rising to only 1. 3 % by 2019. we do not see inflation pressures coming from the demand side for some time, although global growth is expected to close the global output gap in 2018 β and this will also further narrow our own gap. household consumption expenditure growth is expected to remain relatively muted, at page 7 of 9 around 1 % per annum, over the forecast period. this is against a backdrop of weak growth in credit extension to households, low levels of consumer confidence, higher tax burdens, and the absence of significant wealth effects. by contrast, some support to consumption expenditure is expected to come from lower inflation and real, albeit modest, wage growth. wage pressures remain a concern, as nominal wage settlements continue to contribute to the persistence of inflation at higher levels. overall, we remain concerned about the weak economic growth outlook. the sarb β s forecast for gdp growth for 2017 has been revised upwards, albeit marginally, from 0. 5 % to 0. 6 % in september, while the forecasts for 2018 and 2019 have remained unchanged at 1. 2 % and 1. 5 % respectively. the risks were assessed to be slightly on the downside. of major concern is the negative growth in gross fixed capital formation, particularly by the private sector. growth in private - sector fixed capital formation has been negative for six consecutive quarters. as i mentioned earlier, restoring confidence will go a long way in getting us on a recovery path. without growth, we will not be able to make any inroads into our most pressing problem of high unemployment, currently at over 27 %. so, what can monetary policy do to help in this situation? it is clear that the problems the economy faces are mostly of a structural nature β not something that can be solved by monetary policy alone. in addition, recent surveys conducted by the bureau for economic research also indicate that the uncertain political environment is the single biggest factor weighing on business confidence, and therefore on investment. research conducted at the sarb indicates that the confidence factor shaved off at least one percentage | 0.5 |
β s recommendation on a countercyclical capital buffer for banks. in addition to new zealand and norway, the central banks in sweden, the czech republic and israel currently publish interest rate forecasts. in addition, the federal reserve publishes the individual interest rate forecasts of the members of the federal open market committee ( fomc ). norway β s sovereign wealth fund ( the β government pension fund global β ) is managed by norges bank investment management ( nbim ) and is invested in international capital markets. for details on our institutional framework, see qvigstad, j. with i. fridriksson and n. langbraaten ( 2013 ) : β monetary policy committees and communication, β norges bank staff memo 2 / 2013. bis central bankers β speeches [ chart : timeline : the first years of norges bank forward guidance ] in 2004, we started to publish our first quantitative guidance in the form of a β strategy interval β for the key policy rate four months ahead. in november the following year, we published for the first time our own interest rate forecast for the next three years. prior to that, we had established and published criteria for an appropriate interest rate path. 8 up until november 2005, the analyses and forecasts in our reports had been based on either a constant interest rate path or an interest rate path as implied by the forward market. at this point however, our conclusion was that it would be easier to interpret, evaluate and communicate our view of the economy when it was based on a path for the interest rate that we considered to be appropriate. in addition, it made our communication better aligned with our analytical framework and with theory. [ chart : our interest rate forecast is conditional ] our forecast for the key policy rate 9 is presented in a panel together with forecasts for inflation and the output gap. the chart shows the forecasts in the most recent monetary policy report, published just two weeks ago. there is substantial uncertainty associated with the projections, as illustrated by empirically based fan charts. the fan chart for the policy rate also illustrates the conditionality of the forecast : although we control the key interest rate, the forecast for the interest rate is conditional on the outcomes for other variables, which are uncertain. [ chart : the system for monetary policy analysis and forecasting ] when we decided to publish our own interest rate forecast, more transparency and documentation were required regarding our models. our core policy model, nemo ( norwegian economy model ), | shock and therefore with transitory effects on inflation, tightening the policy was less than optimal. most recently, the exchange rate broke the upward trend it followed for several quarters. actually, it has dropped compared with its levels early in the year. symmetric to our previous actions, if for this reason inflation were to fall temporarily below our target, we would not apply a more expansionary monetary policy, unless after some time we saw second - round effects jeopardizing the return of inflation to 3 % over a two - year horizon. importantly, any changes in the policy stance in either direction can be warranted only if our medium - term inflation forecast suggests that it will deviate away from the 3 % target. of course this would be determined by changes in its fundamentals. what are the risks we identified in our baseline scenario? on the external front, one of the main risks is a reversal of the improved international financial conditions. as i said, the path that the fed will ultimately take to adjust the policy rate is critical. an increase in the fed funds rate is very likely within this year, and the markets β expectations point at very gradual subsequent adjustments. a more aggressive action by the fed could increase global volatility significantly, affecting asset prices, capital flows and currencies. the brexit vote materialized one of the risks outlined in june but, to this date, its effects seem 4 / 14 bis central bankers'speeches bounded. however, its true consequences are still in the making, so further repercussions on medium - term growth in the uk and europe cannot be ruled out. add to this the concerns about the soundness of part of european banks, particularly in italy and portugal. and let β s not forget several open electoral processes around the world, whose results could cause a shift towards more protectionist policies. in the emerging world, the overall risk outlook has tended to moderate in the past few months. accordingly, concerns about china have eased, while the chinese impulse policies have stabilized the pace of growth. significant risks remain, however, namely the doubts surrounding the sustainability of these measures over time, as well as about the chinese financial system and real estate sector, among other factors. moreover, a scenario in which the fed β s monetary policy becomes more aggressive may have important negative implications on china. in latin america, beyond very recent improvements, adjustments to both public and private spending are still needed. domestically, short - term inflationary risks remain tied to the evolution of | 0 |
cyber - risk management strategies. we encourage bank management teams to engage with regulatory points of contact whenever questions arise on cyber security matters just as with any other regulatory matter. closing remarks in closing, the pace of technological change continues to accelerate. we recognize that banks need to adopt new technologies to meet customer demands, to take advantage of efficiencies and cost savings, and to remain competitive in the marketplace. although third - party relationships are one avenue for community banks to bring new technologies online, they must do so with a thorough understanding of the associated risks. the federal reserve is committed to working together with the other regulators to continue providing guidance and resources, like this workshop, to ensure that banks are appropriately managing cyber risk. thank you again for the invitation be with you today. i hope this workshop demonstrates the value of open communication between bankers, regulators, industry, and law enforcement so that we may continue to work together in building resilience in the financial system to ever - evolving cyber risks. 1 the views expressed in these remarks are my own and do not necessarily reflect those of my colleagues on the board of governors of the federal reserve system. 2 see board of governors of the federal reserve system, cybersecurity and financial system resilience report ( pdf ) ( washington : board of governors, july 2022 ). 3 see " phishing, " ( pdf ) cybersecurity and infrastructure security agency. 4 see federal deposit insurance corporation, risk review ( pdf ) ( washington : federal deposit insurance corporation, june 2022 ). 5 see proposed interagency guidance on third - party relationships : risk management, 86 fed. reg. 38182 ( july 19, 2021 ). 6 see " sr 21 - 15 / ca 21 - 11 : guide for community banking organizations conducting due diligence on financial technology companies, " board of governors of the federal reserve system, last modified september 15, 2021. 5 / 6 bis - central bankers'speeches 7 see computer - security incident notification requirements for banking organizations and their bank service providers, 86 fed. reg. 66424 ( effective april 1, 2022 ). 8 see board of governors of the federal reserve system, cybersecurity and financial system. 6 / 6 bis - central bankers'speeches | the metrics used to evaluate these two questions would rely on loan counts rather than dollar value in order to avoid inadvertent biases in favor of fewer, higher - dollar value loans. 9 the in order for the retail lending metrics to provide a meaningful evaluation, a bank would also need to meet a minimum percentage of retail loans in its local community relative to its deposits. the bank β s ratio would be compared to a minimum activity threshold based on the performance of all reporting banks in that same assessment area, with the goal of screening out the lowest performers who would need to undergo a full review from an metrics would be evaluated separately for each major product line in a bank β s assessment area, which is important to tailor the use of metrics to a bank β s business model. the proposed approach measures a bank β s performance in serving the needs of both lowand moderate - income borrowers ( and small businesses and small farms ) and lmi places in the community. for mortgage loans, an lmi borrower distribution metric would calculate the percentage of a bank β s number of loans made to lmi borrowers relative to its overall mortgage originations, and assess this percentage against an assessment area threshold determined by local demographics and the aggregate lending of other in - market competitors. a separate lmi neighborhood distribution metric would evaluate the percentage of a bank β s number of loans in lmi tracts to its overall loan count and assess this against a threshold determined by local demographics and the aggregate lending of other in - market competitors. a bank that meets or exceeds both the lmi borrower and lmi neighborhood thresholds for each of its major product lines would be presumed to have a satisfactory - or - better level of retail lending performance in that assessment area. using a customized dashboard, each bank could track its own activity against the threshold on an ongoing basis reflecting recent data, eliminating the lengthy uncertainty associated with the current evaluation methodology, which many banks have highlighted as the most important area for reform ( figure 2 ). importantly, the cra database we have constructed confirms that the proposed retail lending metrics correlate well with past ratings of bank performance ( figure 3 ). the specific thresholds that would establish a presumption of satisfactory performance could be informed by examiner. the minimum activity threshold would be calibrated for geographies and different market conditions over time. current evaluation procedures but need not be set at the same level, and public input will be important. the retail lending | 0.5 |
##ldkircher, 2015 ; feldkircher and schuberth, 2020 ) by positively influencing the output of trading partners as well. some authors also find that output spillovers are relatively stronger than price spillovers when compared to the relative strength of output versus price effects in the euro area itself ( benecka et al., 2018 ; moder, 2019 ). these effects are transmitted through different channels : via demand, exchange rates and financial linkages ( feldkircher et al., 2020 ). a thorough understanding of such spillover effects is thus crucial for the design of appropriate domestic monetary, and also macroprudential, policies which should ideally allow economies to reap the benefits of strong economic and financial integration with the euro area, while mitigating the associated risks. i am looking forward to discussing these issues with my esteemed colleagues later on in panel 1. 3. the role of eu funds third, let me turn to the role of eu funds. as an immediate response, eu authorities provided emergency support financing and eased certain requirements, such as national co - financing requirements, to tap available cohesion and structural funds from this year β s eu budget. in parallel, flexibility clauses in the fiscal framework were activated and state aid rules temporarily adjusted. as a next step, the european parliament and the council agreed on the eur 100 billion sure instrument proposed by the european commission. sure stands for β support to mitigate unemployment risks in an emergency. β based on eu budget capital market borrowing, the sure instrument will provide loans to individual member states to support short - time work schemes and help member states protect jobs and thus employees and self - employed against the risk of unemployment. the first bond issuance for this program was substantially oversubscribed and can be considered a success. the council has already approved financial support under sure to several member states. romania, for example, will receive eur 4 billion, and poland will receive eur 11 billion. pursuant to the invitation by the european council and with a view to supporting a common broad - based recovery within the eu, the european commission complemented its previous budgetary proposals for the next multiannual financial framework ( mff ) for the period from 2021 to 2027 with a β recovery package β at the end of may. according to the council, the funds under this european union recovery instrument referred to as β next generation eu β ( ngeu ) are page 4 von 8 designed to be committed over the period from | the continuing impact of our past monetary policy tightening on consumer prices should help this process. while market - based indicators of inflation compensation have largely reversed the declines observed in the autumn, most measures of longer - term inflation expectations continue to stand at around 2 per cent. risk assessment the risks to economic growth remain tilted to the downside. greater friction in global trade could weigh on euro area growth by dampening exports and weakening the global economy. lower confidence could prevent consumption and investment from recovering as fast as expected. this could be amplified by geopolitical risks, such as russia's unjustified war against ukraine and the tragic conflict in the middle east, which 2 / 4 bis - central bankers'speeches could disrupt energy supplies and further weigh on global trade. growth could also be lower if the lagged effects of monetary policy tightening last longer than expected. it could be higher if easier financing conditions and falling inflation allow domestic consumption and investment to rebound faster. inflation could turn out higher if wages or profits increase by more than expected. upside risks to inflation also stem from the heightened geopolitical tensions, which could push energy prices and freight costs higher in the near term and disrupt global trade. moreover, extreme weather events, and the unfolding climate crisis more broadly, could drive up food prices by more than expected. by contrast, inflation may surprise on the downside if low confidence and concerns about geopolitical events prevent consumption and investment from recovering as fast as expected, if monetary policy dampens demand by more than expected, or if the economic environment in the rest of the world worsens unexpectedly. greater friction in global trade would make the euro area inflation outlook more uncertain. financial and monetary conditions market interest rates in the euro area have risen since our december meeting, partly mirroring higher rates in global financial markets. while financing conditions remain tight, our interest rate cuts are gradually making it less expensive for firms and households to borrow. the average interest rate on new loans to firms declined to 4. 5 per cent in november, while the cost of issuing market - based debt remained at 3. 6 per cent. the average rate on new mortgages edged down to 3. 5 per cent. growth in bank lending to firms rose to 1. 5 per cent in december, up from 1. 0 per cent in november, amid a strong monthly flow. growth in debt securities issued by firms moderated to 3. 2 per cent in annual terms. mortgage lending continued to rise gradually but remained muted overall, | 0 |
stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 18 april 2018. * * * good morning. senior deputy governor wilkins and i are happy to be with you to answer your questions about today β s interest rate announcement and our monetary policy report ( mpr ). before taking your questions, let me briefly offer a few insights into governing council β s deliberations. inflation is on target and the economy is operating close to potential. that statement alone underscores the considerable progress seen in the economy over the past 12 months. that said, interest rates remain very low relative to historical experience. this is because the economy is not yet able to remain at full capacity on its own. furthermore, the sustainability of this level of activity is not assured ; although we expected the economy to moderate in the second half of 2017, that moderation has extended into early 2018 and has been more pronounced than expected. governing council considered recent economic data very carefully and concluded that the softness early this year was due mainly to two temporary factors. the first relates to changes to mortgage rules that went into effect at the start of the year. these caused house sales to be pulled forward into the fourth quarter of 2017. although we are still expecting the housing sector to moderate in 2018 compared with last year, we can expect a partial recovery of activity in the second quarter. the second factor is the unexpected drop in exports during the first quarter, much of which was related to transportation bottlenecks. this points to a partial recovery in the second quarter and later in the year. notice that we are expecting only a partial recovery in the level of exports β an issue i will return to in a moment. accordingly, we expect a strong rebound in the second quarter after a lacklustre first quarter, with an average growth rate of about 2 per cent in the first half of the year and a return to nearpotential growth thereafter. fiscal stimulus, both provincial and federal, is playing a role in this forecast. we will be monitoring the data for the second quarter very closely in the weeks ahead. assuming our forecast remains on track, it is governing council β s view that interest rates will need to move higher over time to keep inflation on target. we acknowledge that the forces weighing on the economy mean that monetary policy is likely to remain stimulative to some | employment and improved living standards. the fsb was born of necessity in the aftermath of the financial crisis. its raison d β etre stems from one overarching fact : the global financial system is highly integrated. 2 financial institutions and markets are interconnected and interdependent within and across various the fsb grew out of the financial stability forum ( fsf ), founded in 1999 by the g - 7 in the wake of the financial crises in asia, latin america and russia. bank of canada deputy governor timothy lane, in his 2013 speech, β financial stability in one country? β argues that because of global financial integration, it is impossible to achieve financial stability in one jurisdiction by focusing exclusively on domestic considerations. bis central bankers β speeches sectors, including banking, insurance, and pension and investment funds, and, increasingly, across national jurisdictions. thus, to achieve a comprehensive and coherent approach to the financial regulation and oversight necessary to attain the global public good of financial stability, coordination is essential across countries, across all of the elements of the reforms, and across many different regulators and supervisors. failure to coordinate would lead to the fragmentation of the financial system, which would impede the global recovery. this need for effective coordination is why the g - 20 established the fsb in 2009. 3 what is the fsb? the fsb is not only the newest, it is by far the smallest β with only about 25 full - time staff β and probably the least well known of the major international organizations. 4 these include such postwar heavyweights as the international monetary fund ( imf ), the world bank and the organisation for economic co - operation and development ( oecd ). it is an international organization like no other : β’ its membership is composed of national financial authorities from 24 countries, including g - 20 members and other significant financial jurisdictions such as switzerland and singapore. 5 an important innovation is that it also includes international financial institutions such as the imf, the world bank and the bank for international settlements, as well as international bodies that set standards for banking, insurance, securities and accounting. 6 β’ the fsb punches well above its weight by levering the knowledge of its 70 member agencies, which are home to several thousand financial sector experts. it is these experts who do most of the heavy lifting, sitting on committees and working groups to develop policy and conduct peer reviews of implementation, supported by the small fsb secretariat. β’ at the fsb, decision making is based on | 0.5 |
that sound economic policy was pursued in serbia and that the resilience of the domestic economy to potential risks was strengthened. by consistent implementation of monetary policy and full coordination with fiscal policy, the national bank of serbia significantly contributed to the country β s solid economic performance, which strengthened the basis for sustainable growth. we are therefore able to talk today about the lowest risk premium, which in july, for the first time since records are available for our country, fell below 60 bp. risk premium indicator β embi ( daily data, in bp ) embi global composite embi europe serbia source : jp morgan. thank you for your attention. please allow me now to pass the floor to general manager of the financial stability department mr darko kovacevic. | management measures in response to over - investment in certain sectors of the economy with the result that the unstable and unhealthy factors in the economy have been curbed. based on updated statistics, the growth of money supply slowed in august, with all intermediate targets for monetary policy lower than expected at the beginning of the year. the consumer price index rose by 5. 3 percent, due mainly to rising food prices compared with the same period last year. inflation, which excludes food and oil prices, remains relatively low, demonstrating that china β s macroeconomic management measures have played an important role in lowering credit and investment growth, leading to brighter prospects for a soft landing. the chinese government is firmly resolved to curb over - investment in certain economic sectors and to promote economic and financial reform. we will pay close attention to macroeconomic developments and remain prepared to take the necessary steps to consolidate the gains in macroeconomic management. in 2004, we have taken important steps to reform state - owned commercial banks and capital markets. learning from international practice, we have begun to restructure two state - owned commercial banks as share holding companies, which are scheduled to be listed in 2005. furthermore, reforms are also underway at banks and non - bank financial institutions - including the two other state - owned commercial banks, joint stock commercial banks, urban commercial banks, and rural credit cooperatives. we have also introduced the qualified foreign institutional investors scheme, allowing the investment of foreign capital in china β s security markets. through these reforms, we will build a strong financial system able to support the sustained, stable, and rapid growth of china β s economy. the recovery of the hong kong sar economy continues. for the first half of 2004, real gdp registered robust growth of 9. 5 percent. growth was broadly based, supported by further implementation of the closer economic partnership arrangement between hong kong sar and the mainland and gradual expansion of travel deregulation to more mainland cities and provinces. consumer confidence continued to recover, putting an end to almost six years of deflation. driven by service exports, real gdp in macao sar grew by 36. 0 percent for the first half of 2004, and the unemployment rate dropped to 4. 9 percent. the further strengthening of economic cooperation between the mainland and macao sar contributed not only to the continued growth momentum in the tourism industry and strengthening the role of its trade platform, but also to the development of the financial sector and new industries. we believe that the global recovery combined with the stable | 0 |
echoes of melville | speeches | rba leading media around the world ( graph 7 ). the sources of this uncertainty are well known. the long list includes the trade and technology disputes between china and the united states, the brexit issue, the ongoing tensions in the middle east, the problems in hong kong and the tension between japan and south korea. not surprisingly, these events are making businesses nervous and they are responding by putting off investment decisions. many would prefer to wait until some of the uncertainties are resolved before proceeding. graph 7 as important as these current geopolitical tensions are, they are not the full story. businesses face a range of other significant uncertainties, including from the rapid pace of technology change, increased competition as a result of globalisation and ongoing changes to regulatory arrangements. it is probable that the uncertainties generated by these structural changes are interacting and being amplified by the geopolitical issues. in this context, it is worth noting that despite the marked decline in global interest rates ( and some decline in the cost of equity ), average hurdle rates of return for new investments in many countries have not changed much ( graph 8 ). it seems that there is a global norm for hurdle rates somewhere around the 13 to 14 per cent mark and it is hard to shift this norm, even at record low interest rates. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 10 - 29. html 11 / 18 10 / 30 / 2019 some echoes of melville | speeches | rba graph 8 there are a couple of possible explanations for this. the first is that the reduction in the cost of borrowing has been offset by a rise in the required risk premium due to the uncertainties that i spoke about. if this were so, the hurdle rate would be unchanged, with lower interest rates just compensating for the riskier environment. the second possibility is that some firms have been slow to adjust to the new reality of low interest rates. we hear reports that a hurdle rate of return of 13 to 14 per cent has been hardwired into the corporate culture in some companies. changing this hard - wiring is difficult and time consuming. however, from our liaison with australian companies, we do know that some companies have lowered their hurdle rates and this is opening up new opportunities for them. it would be good to hear more such reports. my view is that there is an element of truth to both explanations : risk premium | , the risks from fluctuations in interest rates, exchange rates, equity prices and commodity prices. the new guidelines become effective at the beginning of 1998. the novel feature of the market risk guidelines, which were developed by the basle committee on banking supervision and are being adopted internationally, is the reliance they allow to be placed on banks β own risk management systems. banks have the option of using their internal models to calculate required capital, or of employing a standard model specified by the basle committee. of course, internal models need to meet certain minimum standards - - both quantitative and qualitative - - before they will be accepted for supervisory purposes. a bank whose systems are not up to scratch will have to use the standard model. the rba must sign off on the adequacy of internal systems. but the onus for effective day - to - day risk management will remain squarely with the boards and senior management of banks. as an aside, during the past year we introduced arrangements under which a bank β s chief executive, with the endorsement of the board, must attest to the rba that all key risks have been identified, that systems have been designed to manage those risks, that the descriptions of those systems held by the rba are current and that the systems are working effectively. we are already seeing important general benefits from these new arrangements. they have resulted in more high - level attention to risk management systems and the system descriptions provided to us. chief executives now need to see those manuals, which were previously often regarded as an administrative inconvenience for officers handling liaison with the rba. this has added discipline and rigour to the whole risk management process. eleven banks have applied to us for internal model status under the market risk rules, and they are all presently upgrading their existing risk measurement and management practices to meet the minimum requirements. as well as to measurement methodology, they are giving attention to such features as the adequacy of separation of front - and back - office operations, procedures to ensure that traders deal only in products for which robust operational and legal arrangements are in place, the rigour of revaluation processes and procedures for stress testing and back testing. we remain hopeful that, by the end of the year, all internal models will have reached a standard with which we can be comfortable, but there is a good deal of work still to be done in some cases. another eleven banks plan to use the standard model for market risk, while the remainder | 0.5 |
and upwork surveys confirm that gig work does, indeed, lower barriers to workforce entry and increase hours and flexibility for some individuals. the increasing prevalence of gig work may also affect the unemployment rate and productivity. to the extent that gigs provide an easy entryway to employment, unemployment may decrease. however, if gig work is less stable, it may increase job loss. the net effect on unemployment is, thus, unclear. regarding productivity, gig work could lower aggregate productivity to the extent that it requires less human capital or specialized knowledge than traditional jobs, or if it primarily increases hours worked by lower - skilled individuals. that said, gig work, especially when enabled by new technologies, may allow hours to respond more flexibly to changes in demand and individuals to more easily connect with many different clients or employers. as a result, workers β downtime and the time required to acquire new clients and manage existing clients may decrease, in which case resource utilization and productivity may increase. 4 / 8 bis central bankers'speeches it is also possible that the increasing prevalence of gig work will cause the cyclical behavior of unemployment, participation, and the workweek to change, with implications for how we assess the amount of slack. we know that contingent work increases when the economy worsens. if new technologies make it easier to find gig work, then we could see unemployment rise less in recessions, to the extent that gig workers are counted as employed. however, it could be that individuals who are able to avoid unemployment through contingent work would still be underemployed if it is difficult to cobble together enough gigs to achieve full - time employment. this would likely show up as lower average workweeks and higher levels of involuntary part - time employment during downturns. as a result, cyclical changes in resource utilization could be reflected less in movements in the unemployment rate and more in variation in hours per worker. beyond the behavior of macroeconomic variables, it is unclear how the growth of different types of gig work affects the welfare of workers. welfare should increase in cases where gig work meets the needs of workers by providing a low - barrier means of accessing employment and by allowing workers to better match actual hours worked with desired hours of work, especially if the gig work is available at times and in places where traditional work opportunities are in short supply. there is some evidence that this has, indeed, been the case. for example, 24 percent of informal workers in the eiwa survey indicated that contingent work | least require time to stabilize. opponents of imf support also argue that the substantial financial backing, by cushioning the losses of imprudent investors, could exacerbate moral hazard. moral hazard arises when someone can reap the rewards from their actions when things go well but do not suffer the full consequences when things go badly. such a reward structure, obviously, could encourage excessive risk taking. to be sure, this is a problem, though with respect to asia some investors have to date suffered substantial losses. asian equity losses, excluding japan, since june 1997 worldwide are estimated to have exceeded $ 700 billion of which more than $ 30 billion has been lost by u. s. investors. substantial further losses have been recorded in bonds and real estate. moreover, the policy conditionality, associated principally with imf lending, which dictates economic and financial discipline and structural change, helps to mitigate some of the moral hazard concerns. such conditionality is also critical to the success of the overall stabilization effort. as i will be discussing in a moment, at the root of the problems is poor public policy that has resulted in misguided investments and very weak financial sectors. convincing a sovereign nation to alter destructive policies that impair its own performance and threaten contagion to its neighbors is best handled by an international financial institution, such as the imf. what we have in place today to respond to crises should be supported even as we work to improve those mechanisms and institutions. accordingly, i fully back the administration β s request to augment the financial resources of the imf - - u. s. participation in the new arrangements to borrow and an increase in the u. s. quota in the imf. hopefully, neither will turn out not to be needed, and no funds will be drawn. but it is better to have it available if that turns out not to be the case and quick response to a pending crisis is essential. i also believe it is important to have mechanisms, such as the treasury department β s exchange stabilization fund, that permit the united states in exceptional circumstances to provide temporary bilateral financial support, often on short notice, under appropriate conditions and on occasion in cooperation with other countries. in my testimony before this committee in mid - november, i endeavored to outline the roots of the current crisis. this morning i should like to carry the analysis a bit further. companies in korea and many other asian countries have become formidable world - class producers in a number of manufacturing sectors | 0.5 |
with price stability. economic actors are confident that the snb will also be able to keep inflation well under control over the long term. in view of the stable inflation expectations, it is not surprising that long - term rates have changed little since the beginning of the year. the yield on ten - year confederation bonds has fluctuated between β 0. 1 % and + 0. 2 % since the start of 2018. andrea maechler will examine exchange rate and interest rate developments in more detail later. monetary policy outlook let me summarise the key points with regard to monetary policy. we anticipate that our economy has expanded by around 2. 5 % this year. in line with a gradual slowdown in the global economy and high capacity utilisation in switzerland, domestic growth is likely to stabilise at around 1. 5 % next year. the inflation forecast for this year is unchanged ; for 2019 and 2020 it is somewhat below our forecast last quarter. the swiss franc is still highly valued. given the slightly muted inflation outlook and the continued fragility in the exchange rate situation, our expansionary monetary policy remains appropriate. with the negative interest rate and our willingness to intervene in the foreign exchange market as necessary, we support economic activity and ensure price stability. ladies and gentlemen, thank you for your attention. it is now my pleasure to give the floor to fritz zurbrugg. page 4 / 4 | economic developments abroad, as these have a considerable bearing on the inflation and economic outlook in switzerland. the global economy is somewhat less robust than it was a few months ago. although the pace of growth remains strong worldwide, it is no longer quite as pronounced as at the beginning of the year. one reason for this is that the economic recovery is already well advanced in many countries, and momentum is slowing as a result of the high utilisation of production factors. another reason is that a number of uncertainties are hampering growth. in this context, global growth lost momentum somewhat in the third quarter. this was largely attributable to special factors, such as production losses in the german automotive industry and extreme weather events in japan. economic expansion in the us and china remained robust. employment figures in the advanced economies rose again and unemployment continued to decline. the growth in international trade in goods also continued. in our baseline scenario for global economic developments, we anticipate solid growth in the coming quarters. in the short term, the world economy is set to continue to expand somewhat above potential, benefiting from the clear improvement in the labour market situation and the ongoing expansionary monetary policy in the advanced economies. however, a gradual slowdown is likely in the medium term. nevertheless, we also see significant risks to this baseline scenario, primarily in connection with political uncertainties and protectionist tendencies. these risks have considerable potential for damage. the resulting uncertainty alone can curb growth and weaken the resilience of the global economy. for instance, surveys indicate that trade tensions have prompted companies to reassess their investment plans and value chains. as far as brexit is concerned, uncertainty remains high following the postponement of the vote in the uk parliament. the tension surrounding italy β s fiscal policy also persists. all these risks could lead to turbulence in the financial markets, jeopardise global economic growth, and also influence monetary policy. page 2 / 4 berne, 13 december 2018 thomas jordan news conference swiss economic outlook i shall now turn to the economic outlook for switzerland. according to initial estimates, swiss gdp fell by an annualised rate of 0. 9 % in the third quarter. despite this decline, gdp was still 2. 4 % higher year - on - year thanks to the strong expansion in the previous quarters. how are we to assess this development? first, a slowdown in momentum was to be expected after several very strong quarters. second, the decline in gdp | 1 |
we need to think carefully, as of now, about how to make these developments fully compatible with the rights of individuals and about how to square the increasing availability of information on the private lives of each one of us in relation to our political views, state of health, or sexual orientation, with the protection of our personal freedom and with the rules that govern the functioning of a modern liberal democracy. j. m. keynes ( 1930 ) β economic possibilities for our grandchildren β, freely available online. designed and printed by the printing and publishing division of the bank of italy | guidance and recent european legislation, 13 the ecb and the national central banks will focus on three key areas : first, strengthening the cyber resilience of individual financial market infrastructures, including payment systems ; second, increasing the cyber resilience of the entire financial sector ; and third, promoting public - private cooperation on cybersecurity for the financial sector at the european level. in italy, to ensure a comprehensive strategic vision and the alignment of internal and institutional policies, a high - level task force on cybersecurity has been set up within banca d β italia. in this regard, the banca d β italia β s three - year strategic plan envisages two specific lines of action. one focuses on protecting the bank β s critical assets by reorganizing security functions within the it directorate general. the other focuses on enhancing the cyber resilience of italy β s financial sector. lloyd β s ( 2017 ), β counting the cost : cyber exposure decoded β. the cpmi - iosco guidance on cyber resilience for financial market infrastructures is a key example. see β fundamental elements of cybersecurity for the financial sector β, followed in 2017 by the β fundamental elements for effective assessment of cybersecurity for the financial sector β. directive ( eu ) 2016 / 1148 on the security of network and information services ( the so - called β nis directive β ). on the subject of public - private cooperation, the banca d β italia and the italian banking association have created the financial sector computer emergency response team ( certfin ), which coordinates the sharing of information and cyber threat intelligence among banks, financial market infrastructures, insurance companies, markets and trading venues and outsourcers. since its foundation, in january 2017, certfin has analysed and circulated information about 1, 000 cyber events ; and it has sent more than 200 warnings to individual financial firms about potential attacks, while continuously monitoring vulnerable areas. lastly, it is important to stress that actions taken by financial - sector authorities must be integrated with national cyber security strategies and frameworks. in italy, this link is ensured via constant dialogue with appropriate government institutions, including but not limited to national intelligence and law enforcement agencies. 4. 2 basic principles of regulation the regulation of fintech activity is still in its infancy, and the regulatory framework differs from country to country. a review of the choices made in each jurisdiction would require an in - depth analysis | 1 |
loans societies, ten major superannuation funds and six life insurance companies. over the last two years, two commercial banks were sold and amalgamated into the operations of the other two existing banks. in line with its new powers under the bfia 2000, the central bank initiated enforcement actions against a number of institutions, including the former government owned commercial bank and finance companies, in an attempt to rectify problems that threatened depositors β funds or the overall stability of the financial system. the central bank also instituted care - taker management for a few large savings and loan societies under the savings and loan societies act, and liquidated 76 dormant societies as part of its revitalisation programme. legal action was also taken against several fast - money schemes that continue to solicit deposits from the public. new initiatives the bank issued new standards on foreign currency exposures on 28 september 2001, setting a limit of 10 percent of bank capital for any single foreign currency exposure, and 15 percent of capital for total foreign currency exposures. the new standard also requires banks to report their exposures each day to the central bank in electronic format. the bank is reviewing the existing prudential standards ( i. e. regulations ) covering capital adequacy, large exposures, and asset quality and provisioning that applies to banks and finance companies, with the ta from the imf. these prudential standards have been reviewed and implementation will take commence in 2003. new polices are now being drafted to place limits on shareholdings and market share of the banks. 3. latest economic and outlook for 2003 economic growth preliminary estimates of economic activity indicate that real gdp declined by 0. 5 percent in 2002, following a revised decline of 3. 4 percent in 2001. the decline was due to the continued depressed levels of activity in the mineral, building and construction, retail and wholesale, and electricity, gas and water sectors. for 2003, real gdp is projected to increase by 1. 8 percent with growth in both the mineral and non - mineral sectors. the agriculture / forestry / fisheries sector is forecasted to grow by 2. 9 percent in 2003, reflecting increased production of all agricultural export commodities. balance of payments preliminary balance of payments data for 2002 showed an overall deficit mainly reflecting a widening current account deficit, due to lower merchandise exports of most agricultural commodities, gold, copper, crude oil, forestry and marine exports, combined with higher imports and net service payments. the level of gross official reserves at the end of | december 2002 was us $ 340. 0 million, sufficient for around 4. 6 months of total and 6. 6 months of non - mineral import cover. the balance of payments for 2003 is projected to show a further deterioration in the overall balance reflecting a deficit in the capital account and narrow surplus in the current account. the projected surplus in the current account is attributed to increases in production and prices for the major agricultural and mineral exports. the declining trend in the current account surplus, which commenced in 2000, is a worry and reflects the decline in non - mineral sector exports and higher imports. fiscal operations of the government the 2002 supplementary budget introduced in august 2002 aimed to achieve a deficit of 3. 4 percent of nominal gdp, but is now estimated to be higher due to payment of unbudgeted expenditures relating to the national elections and general goods and services. with no draw down in exceptional or program financing during 2002, the government relied on new issues of domestic debt to finance the budget deficit and net external loan repayments. the 2003 national budget, aims to consolidate the fiscal adjustments introduced in the 2002 supplementary budget and restore it to a sustainable fiscal position. the adjustments would assist in achieving macroeconomic stability and provide the conditions necessary for sustainable economic growth. the budget deficit is projected at 2. 0 percent of gdp with reductions to 1. 0 percent of gdp in the medium term. to achieve a sustainable budget deficit, a financing gap is required to be filled from external sources. exchange rate during 2002, the depreciation of the exchange rate was influenced by the following factors : high government expenditure ; persistent current account deficit in the non - mineral balance of payments, due to sustained import demand mainly fuelled by fiscal expansion, low export receipts from the agriculture sector and high net overseas remittances by individuals and companies ; increased forward transactions by importers ; uncertainties created by the delay in the announcement of government macroeconomic policies, and disruption to the mineral projects ; increase in reserve money as a result of net maturity of treasury bills by the non - bank public ; downgrading of png β s credit rating by an international ratings firm ; and negative real interest rates, which contributed to the high net remittances overseas. since december 2002, the exchange rate has generally stabilized and is steadily appreciating due to inflows of export receipts and supported by low import demand. inflation the upward trend in the rate of inflation that began in 2001 continued into the june and september quarters of 2002 | 1 |
green finance. moving forward, the push for disclosure through the establishment of a national framework for carbon emissions reporting is another critical enabler to increase data availability and transparency for a systematic transition to a low - carbon economy. this will contribute towards the development of more data driven climate policies and targeted carbon emissions reduction schemes. second, the role of finance. we have spoken about the critical need to bring in private capital for green investment. the bank, as a financial regulator, recognises this key role of finance and has introduced various measures towards this end. given physical, transition and liability risks and their implication to the economy and financial system, there is a bona fide recognition that climate risk is well within our mandate of safeguarding monetary and financial stability. with that, the bank has taken a phased and proactive approach in strengthening financial system resilience to climate risk and in driving sustainable finance. in this connection, guidance for financial institutions to classify economic activities that contribute to climate change objectives is provided through our work in developing a principles - based taxonomy. this would be the start to build deeper understanding in climate risk, for financial institutions to better identify, assess and manage the risk. the bank is now working to finalise the climate change and principles - based taxonomy, which is expected for issuance next year. the bank also collaborates with the financial industry to accelerate initiatives to build the required capacity and expertise relating to green and sustainability. through the value - based intermediation community of practitioners ( vbi cop ), various guidance documents have been developed to spur adoption of vbi, which considers the triple bottom line of people, planet and prosperity. in august this year, the value - based intermediation financing and investment impact assessment framework ( vbiaf ) sectoral guides on palm oil, renewable energy and energy efficiency were issued to guide financial institutions in implementing vbiaf on these sectors at a more granular and transactional level. work is also in progress to develop the next vbiaf sectoral guides on manufacturing, oil and gas, infrastructure and construction, targeted for issuance in 2021. furthermore, greater climate disclosure by financial institutions is in the pipeline ; as we are progressing plans to further encourage financial institutions to adopt the tcfd recommendations for climate - related disclosure. this is part of the priorities of the members of the joint committee on climate change over the next 12 months to pave the way for the adoption of disclosure standards by the industry in the immediate future3. this will | of consumers. studies have shown that if borrower income is held constant, loan features do matter to the successful repayment of a loan. so i hope we have learned that misaligned incentives that result in harm to consumers have implications for the economy overall. if we recognize this, then we must also recognize that consumer protections cannot be viewed as an ancillary component of a scheme to regulate for safety and soundness. rather, they are fundamental to the quality of the credit upon which the economy is built. having said that, policymakers must also consider the desirability of a dynamic economy, one in which useful innovations are encouraged and credit is made available to as many consumers as have the ability to benefit from it. the tension between protecting consumers and making credit broadly available is one that is as important in making an individual loan as it is to ensuring the stability of the economy. the key to successful policy formulation is to resist the temptation to regulate the problem of the moment. for example, if, in reaction to the abuses in consumer and mortgage lending over the past few years, we were to focus solely on consumer protection policies, the result could be overly restrictive access to credit, which could threaten future economic growth. on the other hand, if the policy focus is strictly on stabilizing the banking sector without giving due consideration to consumer protection, both consumer and investor confidence will remain weak and we will risk repeating the mistakes of the past. trust in the financial system can be regained only if sufficient consumer protections are in place to give borrowers reason to believe they will be treated fairly. the role of the federal reserve the federal reserve addresses its consumer protection responsibilities in a variety of ways, using its regulatory and supervisory authority as well as its consumer education, research, and outreach capabilities. we take a multifaceted approach to consumer protection, for a couple of reasons. first, our organization is in the unique position of being a central bank as well as a regulator and supervisor for the banking industry. moreover, our experience in this arena has taught us that there is no one solution sufficient to address the information needs and substantive protection of consumers in credit transactions. by offering a broad spectrum of products, services, and activities, we aim to provide consumers with the information necessary to make good financial decisions. for example, based on our belief that clear and well - organized disclosures can help consumers make good choices among financial products, the federal reserve has used its regulatory authority to develop extensive new disclosures for | 0 |
all, who hears about the idea that never came to fruition - - but it serves as an important check in the policymaking process. as i mentioned, economic thinking at the cea has been marked by important continuities. nevertheless, the evolution of thinking at the cea over the years has reflected the economic challenges of each era as well as continuing developments in economic research. the ideas of keynesian stabilization that were an important motivation for the employment act reached their zenith during the kennedy administration. since that time, the cea has followed the economics profession away from a belief that fiscal policy can or should fine - tune the level of aggregate demand. during the 1960s and 1970s, the economy was confronted by rising inflation pressures, a series of energy shocks, and a slowdown in the underlying pace of productivity growth. at the same time, there was considerable ferment within the economics profession, as prevailing views of the inflation process and of the government's role in economic stabilization were challenged. successive ceas agonized over these issues and over whether to use the new ideas emerging from the academy and, if so, how. since the 1980s, the cea has focused increasingly on understanding the sources of economic growth and the supply side of the economy. the focus on international issues, too, has intensified as trade and international financial flows between the united states and other countries have grown. i should also note that, despite its overtly macroeconomic origins, the cea has expanded successfully into the realm of microeconomics, particularly issues related to regulatory policy and market structure. notwithstanding these changes in focus over time, there have been important intellectual continuities. in particular, a common theme throughout the cea's history has been a belief in the importance of market forces, and this belief stands as an important legacy of the cea. 2 / 3 of course, as chairman of the council during president ford's administration, i was close to some of these debates and decisions. i was recruited to serve as chairman of the council by president nixon's economic team. as it turned out, i was before the senate banking committee for confirmation the day that president nixon resigned. president ford quickly renominated me, and i began work at the cea in september 1974. i was privileged to serve president ford, and found him to be a very effective leader. parenthetically, there are some interesting parallels between president ford and president truman. both were serving as vice president | the cea realized it at the time, they created an enduring agency that has played a significant role in economic policy making. president truman apparently had an inkling. he noted in his memoirs : occasionally, as we pore through the pages of history, we are struck by the fact that some incident, little noted at the time, profoundly affects the whole subsequent course of events. i venture the prediction that history, someday, will so record the enactment of the employment act. i concur with president truman's assessment. indeed, based on a cost - benefit test, surely the cea must be one of the most successful government agencies in history. 3 / 3 | 1 |
to - day basis. it also eliminates the need for a lot of interbank trading activity to move reserves to banks that would otherwise find themselves short of reserves on a particular day. in my view, this type of intermediation activity does not have much social value. while the fomc has discussed these issues, it has made no decision about its choice of longterm monetary policy operating framework. this seems appropriate to me because over the next few years we will gain considerable further experience about operating with a floor - type system. nevertheless, my expectation is that the fomc will ultimately favor maintaining a floortype system similar to what is in place today. as support, i would point to the minutes of the november 2016 fomc meeting, in which participants observed that the current framework had been working well. this leads us to the next question : assuming that a floor system is retained, what amount of reserves will be needed in the banking system so that day - to - day open market operations are not necessary to keep the federal funds rate within its target range? in other words, how small can the amount of excess reserves be before banks begin to compete and bid for such reserves, introducing unwanted volatility to the federal funds rate? first, there will need to be sufficient excess reserves to accommodate day - to - day fluctuations in the β autonomous factors β that influence the amount of reserves in the banking system. these include shifts in the treasury β s cash balance, the foreign repo pool, and overnight reverse repo facility usage. second, there will have to be an additional buffer to meet banks β underlying demand for reserves. we expect that the demand for reserves will be considerably higher than it was prior to the financial crisis because reserves can be used to satisfy the more stringent liquidity requirements that are in place today, and because the opportunity cost of holding reserves is much lower now since the fed pays interest on reserves. together, as a rough starting point, we have suggested that the necessary amount of excess reserves could be in a range of $ 400 billion to $ 1 trillion. 6 coupled with uncertainty about the likely growth in other factors, such as currency outstanding, this implies a normalized balance sheet size of, perhaps, $ 2. 4 trillion to $ 3. 5 trillion in the early 2020s. 5 / 6 bis central bankers'speeches after reaching that level, one should anticipate that the fed would resume purchases of treasury securities. these purchases would allow the | york fed β s portfolio projections report and accompanying data files illustrate some projected paths for the size of the fed β s securities portfolio under alternative scenarios for the long - run level of liabilities. for midyear 2017 update and report archive, see www. newyorkfed. org / markets / annual _ reports. html. 7 see, for example, eric m. engen, thomas laubach, and david reifschneider ( 2015 ), the macroeconomic effects of the federal reserve β s unconventional monetary policies, finance and economics discussion series 2015 β 005 ( washington : board of governors of the federal reserve system, february ) ; brian bonis, jane ihrig, and min wei ( 2017 ), the effect of the federal reserve β s securities holdings on longer - term interest rates, feds notes ( washington : board of governors of the federal reserve system, april 20 ) ; and troy davig and a. lee smith ( 2017 ), forecasting the stance of monetary policy under balance sheet adjustments, macro bulletin ( kansas city, mo. : federal reserve bank of kansas city, may 10 ). 8 see david harrison ( 2017 ), β economists see modest impact from a fed balance - sheet reduction, β wall street journal, may 11. for the new york fed β s markets group surveys, see the july results at www. newyorkfed. org / markets / primarydealer _ survey _ questions. html and www. newyorkfed. org / markets / survey _ market _ participants. html. 6 / 6 bis central bankers'speeches | 1 |
repo auctions, and secondary market trading at the primary dealer level. turning to today β s function, this is the 5th ceremony bou is hosting to recognize the pd of the year. i wish to acknowledge the role this year β s award winner has played especially in providing more consistent coverage in the primary auction and repo operations and particularly their pricing. ladies and gentlemen, on behalf of the bank of uganda, i wish to announce that standard chartered bank uganda is the primary dealer of the year 2009. i now invite the managing director to receive the award. congratulations. i thank you. | emmanuel tumusiime - mutebile : the primary dealer system in uganda remarks by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the annual primary dealer award ceremony, kampala, 25 february 2010. * * * distinguished guests ladies and gentlemen let me take this opportunity to welcome you all to this function which is organized to recognize the best performing primary dealer in uganda government securities for the year 2009. the bank of uganda introduced the primary dealer system in february 2003. the main objectives were to : i. promote financial markets development ii. facilitate secondary market trading and market efficiency through the reduction in the costs associated with issuing government securities by and large these objectives have been achieved. the primary dealer system has contributed to the growth of the government securities market. during the year 2009, the bid cover ratio in the primary market was 2. 346 ( compared to 1. 445 in 2008 ), an indicator that there was increased demand for government securities. furthermore the primary dealers have continued to provide liquidity in the secondary market by quoting effective two - way prices in all market conditions. the turnover in the secondary market increased from 1. 555 trillion the previous year to 1. 909 trillion in 2009. this is a big achievement. however, there are still outstanding challenges. just to mention a few, volatility in the interbank rates, wide bid / ask spreads, thin trading during tight market conditions, buy and hold trading strategies and low horizontal repo trading activity among others. in order to address these challenges bou has undertaken a comprehensive review of the pd regulatory framework in order to enhance the system and to create a more competitive market environment. effective 1st september 2009, risk based approach to capital for pds was introduced. in addition, market making valuations have been reinforced whereby pds clearly indicate what is available in categories for sale, trading and held until maturity. let me also mention that bank of uganda has now embarked on the second phase of reforms which will involve introduction of non - bank pds, through a tiering system as well as underwriting provisions. consultations are ongoing and it is our expectation that in the 1st quarter of the new financial year we shall be ready to implement. furthermore, in order to enhance the above - mentioned pd reforms, bank of uganda has embarked on a process of acquiring a state of art central securities depository system, which will provide among other functionalities, e - bidding in primary auctions, automated | 1 |
of making cross - border payments. in particular, transaction volumes in money markets rapidly reached high levels while typical bid / ask spreads decreased almost immediately to very low levels. this indicates the depth and high degree of liquidity that the euro money market has already achieved. a feature of the current stage of the development of the euro money market, which is particularly worthy of note, is that differences in overnight interest rate spreads mainly reflect differences in the credit standing of banks rather than that of the country in which the transaction takes place. these structural developments are, of course, positive. for the eurosystem ( i. e. the ecb and the national central banks of the 11 countries participating in the euro area ) the existence of a deep and liquid money market enhances the efficiency of monetary policy operations. in this respect, i should like to draw your attention to the β market friendliness β of the framework applied by the eurosystem to the conduct of monetary policy operations. by this i mean that the framework is based on tenders in which markets decide who receives the liquidity. the standing facilities are open and recourse to the marginal lending facility is not subject to scrutiny. in addition, the list of eligible collateral is extensive. prospects for the development of financial markets in the euro area looking now at the financial markets from a broader perspective, it is important to remember that the financial markets of the euro area began the process of integration before the start of stage three of economic and monetary union. an indication of the pace of integration before january 1999 is provided in particular by the evolution of spreads between yields on the bonds issued by the various central governments of the euro area. these spreads narrowed continuously from mid1995 onwards and their volatility was also noticeably reduced during this period. factors contributing to this favourable pattern included increased convergence towards low rates of inflation across the euro area during stage two, the gradual reduction and finally the disappearance of exchange rate risks, the commitment of governments towards improving the sustainability of public finances, and the increase in the depth and liquidity of government bond markets. as i have already said on a previous occasion, i believe that the interest rate markets of the euro area will increasingly provide an accurate reflection of the differences in credit quality between various issuers as well as differences in liquidity between bonds, while divergences purely related to the location of market participants within the euro area will become less and less relevant. it seems highly likely that the capital markets of the euro area | particular attention which i shall briefly elaborate. 1 / 5 bis - central bankers'speeches ( a ) firstly, technology risk : the ongoing fintech revolution in banking is bringing a disruptive paradigm shift in the banking services. banking services are now being bundled with other financial and non - financial services and giving consumers the convenience of accessing the full spectrum of financial products. indeed, the pace of technological changes is so rapid that banks will have to transform like technology companies continuously innovating and investing in technological upgradations. the risks of cyber - attacks, data breaches, and operational failures have also increased. ( b ) secondly, business risk. as the recent examples of some international bank failures have demonstrated, banks get into trouble due to fundamentally flawed business models. sometimes banks follow inherently risky strategies with the confidence that their bank has mitigating controls. however, their assumptions may not hold true either due to internal control failure or due to exogenous factors. the board plays a vital role in independently assessing the business model and its attendant risks. it is important for banks to carefully assess their own unique circumstances and capabilities, conduct thorough analysis, and tailor their strategies accordingly. while it can be valuable to learn from the experiences of other banks, adopting their strategies without considering the specific context and requirements of the organization may lead to unfavourable outcomes. therefore, boards should be cognizant of their business model and its potential downsides, both in near term and in future. ( c ) thirdly, there is operational risk due to various factors such as high attrition, lack of succession planning, skilling of staff, outsourcing, etc. ( i ) attrition and high employee turnover lead to loss of institutional knowledge, disruption in services and increased recruitment costs. similarly, lack of succession planning, particularly for critical roles, can pose significant operational risks. ( ii ) ensuring that employees have the necessary skills and knowledge is imperative to adapt to new technologies and business practices. ( iii ) risks also emanate from outsourcing, including potential loss of control over critical operations, data security breaches, and increased dependency on thirdparty providers. ( iiii ) banks also need to be careful about process risks where errors, inefficiencies or breakdowns in operational processes can lead to financial losses, compliance failures or customer dissatisfaction. operational risks stemming from ethical issues at the operating level can also have significant repercussions for banks, including reputational | 0 |
nout wellink : managing complexity speech by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the nautadutilh seminar, bussum, 10 november 2009. * * * i have been informed that the topic for discussion will be the new balance between banks and supervisors in the financial system. this is an issue i β m happy to address. however, before doing so, let me first say a thing or two about complexity in the financial system. how should we treat complexity? let me start by stating the obvious. a solid financial sector is crucial to the functioning of our economy. its existence allows the efficient allocation of capital between different activities and across time, and promotes the efficient spreading of risk within society. today, it is hard to think of any form of economic activity that is not in some way dependent on its existence. therefore, the stakes are high in the current debate on financial sector regulation. after the events of the last two years, everyone agrees that change is needed. however, opinions differ about the kind of change we need. first, there are those that see the complexity of the financial system as the root of the problem, and therefore propose to constrain finance much in the way it was until the 1980's. some suggestions along this line are narrow limits on the activities of banks, splitting supposedly β safe β banks from banks engaging in capital market activities, or constraining specifications of financial products to those pre - approved by authorities. second, there are those who think that complexity itself is not the root of the problems, but rather circumstances allowed the complexity of the financial system to contribute to the crisis. they believe that the goal of regulatory changes should not be to decrease complexity per se. rather, they think complexity should be made more manageable. in this debate, i find myself squarely backing the second view. the reason for this is that i do not believe complexity in itself to be a bad thing. complex systems are designed, in many cases, to be more useful and efficient than simple ones. radios from the 1950s β of the kind i used when i was an amateur broadcaster β are much simpler than the ones we have today. yet today, thanks to innovation and rising complexity, radios have become cheaper and more reliable. and, on top it all, they offer a much wider range of functionality and are easier to use. cars are another example where complexity and technology has been used | to make them safer, rather than more hazardous. wonderfully named features as abs and esc are only possible because of innovation driving growing complexity in car - making. this is the kind of complexity that keeps drivers safe every day. the finance industry also offers us some wonderfully names symbols of complexity, such as rmbs and cds. unfortunately, unlike their counterparts in the car industry, these are not currently associated with safety and reliability. so it is clear that innovation and complexity may have improved the system β s ability to allocate capital efficiently in many cases, but certainly not in all. this implies we should go back to the drawing board to improve the resilience of the financial system. but it does not mean we should go back to the past. innovation cannot be undone and the idea that tomorrow β s problems can be solved by yesterday β s regulation strikes me as overly simple and even dangerous, as it could constrain the possibilities for financial system to allocate capital around the world and transfer risk efficiently. while we are at the drawing board, we also need to address the issue of containing systemic risk. the new financial system as a whole, as well as its individual institutions, will need to be more resilient to shocks. the present - day financial system is a complex system, characterized by a high level of interconnectedness. therefore, monitoring the financial system as a whole, and the linkages between its elements, has become all the more important. such β macro - prudential β supervision mechanisms help to spot sources of financial instability at an early stage. a positive development in this regard is the establishment of the european systemic risk board next year. but changes are also at hand to strengthen each financial institution individually. and some of these changes will have a profound effect on the balance between banks and supervisors. managing complexity this brings me back to our topic of discussion. the balance between banks and supervisors. what changes are necessary for individual banks and supervisors, in order to strengthen the resilience of the financial system and manage its complexity? let β s start by looking at changes for individual banks. some policy proposals have received ample attention in the debate. in order to make the financial system more resilient to shocks, each individual bank will need to hold a bigger capital buffer than before. this can be achieved through higher overall buffers, increases in capital charges for specific activities, or a combination of the two. furthermore, the quality of capital buffers needs | 1 |
mario draghi : ecb press conference β introductory statement introductory statement by mr mario draghi, president of the european central bank, naples, 2 october 2014. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. i would like to thank governor visco for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today β s meeting of the governing council. we will now report on the outcome of our meeting. based on our regular economic and monetary analyses, and in line with our forward guidance, we decided to keep the key ecb interest rates unchanged. following up on the decisions of 4 september 2014, we also decided on the key operational details of both the asset - backed securities purchase programme and the new covered bond purchase programme. this will allow us to start purchasing covered bonds and asset - backed securities ( abss ) in the fourth quarter of 2014, starting with covered bonds in the second half of october. the programmes will last for at least two years. together with the series of targeted longer - term refinancing operations to be conducted until june 2016, these purchases will have a sizeable impact on our balance sheet. the new measures will support specific market segments that play a key role in the financing of the economy. they will thereby further enhance the functioning of the monetary policy transmission mechanism, facilitate credit provision to the broad economy and generate positive spillovers to other markets. taking into account the overall subdued outlook for inflation, the weakening in the euro area β s growth momentum over the recent past and the continued subdued monetary and credit dynamics, our asset purchases should ease the monetary policy stance more broadly. they should also strengthen our forward guidance on the key ecb interest rates and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. together with the monetary accommodation already in place, the determined implementation of the new measures will underpin the firm anchoring of medium to long - term inflation expectations, in line with our aim of maintaining inflation rates below, but close to, 2 %. as all our measures work their way through to the economy they will contribute to a return of inflation rates to levels closer to our aim. should it become necessary to further address risks of too prolonged a period of low inflation, the governing council is unanimous in its commitment to using additional unconventional instruments within its mandate. a separate press release will provide further information on the modalities of | , and the flow of loans in recent months has been strong. the monetary analysis has helped to support the necessary medium - term orientation of monetary policy in the face of the ongoing financial turmoil. from this perspective, the monetary analysis points to upside risks to price stability at longer horizons. moreover, a thorough assessment of the monetary counterparts suggests that, as yet, the availability of bank credit to households and non - financial corporations has not been significantly affected by the turmoil. to sum up, a cross - check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment that upside risks to price stability prevail over the medium term, in a context of very vigorous money and credit growth and the absence of significant constraints on bank loan supply up to now. in fact, we noted that risks to price stability over the medium term have increased further. the economic fundamentals of the euro area are sound, and incoming macroeconomic data continue to point to moderate but ongoing real gdp growth. against this background, the governing council is monitoring very closely all developments. it is in a state of heightened alertness. by acting in a firm and timely manner, we will prevent second - round effects and ensure that risks to price stability over the medium term do not materialise. securing a firm anchoring of medium and longterm inflation expectations in line with price stability is of the essence. regarding fiscal policy, the governing council welcomes the spring 2008 orientations for euro area fiscal policies agreed by the eurogroup ministers on 13 may 2008. many euro area governments still need to implement much more ambitious policies to ensure that their country - specific medium - term budgetary objectives are attained by 2010 at the latest, as agreed in berlin in april 2007. achieving and maintaining sound structural fiscal positions is imperative to create scope for the free working of automatic stabilisers in all euro area countries and will help to prepare for the budgetary costs of population ageing. the steady pursuit of prudent and efficient fiscal policies would also help to limit current inflationary pressures and would increase potential growth and employment. as regards structural reforms, the governing council reiterates its full support for all efforts to enhance competition, increase productivity and foster market flexibility. against the background of a marked increase in international food commodity prices, removing impediments to competition at the various stages of the food supply chain in the retail and distribution sectors would benefit european consumers through lower prices. the ongoing β health check β of the eu common | 0.5 |
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