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we shall always see truth in fragments and from different points of vision. ” let me conclude. iitans like you will lead india ’ s race for ideas. the india that you will graduate into is much more capable of using your technological prowess than the india we graduated into. i wish you unlimited ambition, and forecast great success for those of you who continue thinking and challenging. but as you go out in the world, remember our tradition of debate in an environment of respect and tolerance. by upholding it, by fighting for it, you will be repaying your teachers in this great institution, and your parents who worked so hard to send you here. and you will be doing our country a great patriotic service. thank you and good luck. bis central bankers ’ speeches | for example, we have done in parts of the software industry. and, of course, once you are at the frontier and using the best methods in the world, the only way to grow is to innovate and be even better than others in the world. this is what our software firms are now trying to do. our alums, whom you students will shortly join, are leading india ’ s charge to the frontier and beyond. take the fantastic developments in e - commerce, ranging from the creation of electronic market places to new logistics networks and payments systems. today, a consumer in a small town can have the same choice of clothing fashions that anyone from the large metros enjoy, simply because the internet has brought all the shops in india to her doorstep. and while her local shop no longer can sell shoddy apparel, it now focuses on the perishable items she needs in a hurry, even while sub - contracting to provide the last leg of the logistic network that reaches her. economic growth through new ideas and production methods is what our professors and alums contribute to the nation. so what does an educational institution or a nation need to do to keep the idea factory open? the first essential is to foster competition in the market place for ideas. this means encouraging challenge to all authority and tradition, even while acknowledging that the only way of dismissing any view is through empirical tests. what this rules out is anyone imposing a particular view or ideology because of their power. instead, all ideas should be scrutinized critically, no matter whether they originate domestically or abroad, whether they have matured over thousands of years or a few minutes, whether they come from an untutored student or a world - famous professor. i am sure many of you have come across richard feynman ’ s lectures on physics, a mustread when we were at iit. the nobel prize - winning physicist was one of the giants of the twentieth century. in his autobiography, though, he writes how he found the atmosphere at the institute of advanced studies at princeton stultifying. now, as you know, the institute of advanced studies brings together some of the finest scholars in the world to ponder problems in a multi - disciplinary environment. but he found the atmosphere sterile because there were no students to ask him questions, questions that would force him to rethink his beliefs and perhaps discover new theories. ideas start with questioning and alternative viewpoints, sometimes seemingly silly ones. after all | 1 |
, as well as by his friend david hume, his mentor francis hutcheson, and other participants in the enlightenment. early political economists had made impressive contributions, many of them anticipating parts of smith's global view. but smith reached beyond his predecessors and subjected market processes to a far more formidable intellectual analysis. one hears a good deal of franz joseph haydn in the string quartets and symphonies of wolfgang amadeus mozart ; yet to my ear, at least, mozart rose to a plateau beyond anything haydn and his contemporaries were able to reach. so, too, in his sphere, did smith. he concluded that, to enhance the wealth of a nation, every man, consistent with the law, should be " free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of... other... men. " 2 " it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. " 3 the individual is driven by private gain but is " led by an invisible hand " to promote the public good, " which was no part of his intention. " 4 this last insight is all the more extraordinary in that, for much of human history, acting in one's self - interest - indeed, seeking to accumulate wealth - had been perceived as unseemly and was, in some instances, illegal. in the opening paragraphs of the wealth of nations, smith recognized the crucial role played by the expansion of labor productivity in improving welfare when he cited " the skill, dexterity, and judgment with which labor is generally applied " as one of the essential determinants of a nation's standard of living. " whatever be the soil, climate, or extent of territory of any particular nation, the abundance or scantiness of its annual supply must in that particular situation, depend upon... the productive powers of labor. " 5 more than two centuries of economic thought have added little to those insights. smith, on remarkably little formal empirical evidence, drew broad inferences about the nature of commercial organization and institutions that led to a set of principles that would profoundly influence and alter a significant segment of the civilized world of that time. economies based on those principles first created levels of sustenance adequate to enable the population to grow and later - far later - to create material conditions of living that fostered an increase in | ewart s williams : from single market to single economy ( benefits and challenges ) address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the second biennial international conference on business, banking & finance, port of spain, 2 may 2006. * * * in january this year when six countries signed an agreement to initiate the caribbean single market, it marked a milestone in a process that formally started in 1973 with the treaty of chaguaramas. the formal establishment of the caricom single market heralded, inter alia, the removal of restrictions on the free movement of goods, skills, services, and capital and the rights of establishment of enterprises anywhere in the region. the single economy, which as of now is tentatively scheduled to be in place by 2008, involves the adoption by member states of harmonized macro - economic policies, coordinated development of productive sectors, the building of a regional capital market and arrangements for a common currency. in essence, the treaty envisages the reconfiguration of the separate national economies into a truly single economy. over the last two decades or so, the world has witnessed increased economic and monetary integration efforts among developed nations. this fact has highlighted the case for greater economic cooperation among developing countries. moreover, the success of the euro, which has become the world ’ s second leading currency, has heightened interest in monetary union among developing countries. i should note that it is not only in the caribbean that the establishment of a common currency is under consideration. indeed, the economic community of west african states ( ecowas ), a grouping that includes nigeria and ghana, along with four smaller states, has put the establishment of a monetary union at the top of its agenda. in asia, interest in the possibility of an asian monetary union has resurfaced as part of the continuing dialogue on regional economic cooperation. in 2001, asian governments appointed a currency and exchange rate mechanism task force to examine the desirability and feasibility of regional exchange rate co - ordination. what i would like to do is to address three related questions : what additional benefits would monetary union bring to our ongoing integration efforts? what are the main challenges involved in the establishment of a single regional currency? can the european union serve as a template for monetary union in the caribbean? since the signing of the declaration giving force to the caribbean single market, there has been much comment throughout the region on the limited discussion that has taken place on the implications of the single market | 0 |
the surge of austerity, condemning europe to slow growth for a long time? a. on the contrary, fiscal soundness is essential for confidence, and confidence is the most important ingredient for sustainable growth. financial soundness and structural reforms are also of essence. but speaking for the past, let me give you two or three figures. in the past 12 years, gdp per capita has grown in europe at the same pace as in the us, around 1 %. in the labour market, despite the years of crisis, the euro area has created around 14 million jobs since the birth of the euro : about 6 million more than in the us. this is again no time for complacency. and nobody can say that we are satisfied when unemployment is still so high. q. is spain the red line in the eu? a. spain in the past has shown a remarkable capacity for innovation, for creativity, growth and job creation. it is a very dynamic country. that makes me optimistic, provided spain continues to implement very actively and convincingly its programme in three areas already mentioned : fiscal soundness, banks ’ reshaping, and structural reforms. q. and the savings banks are the red line in spain? a. in this sense, spain has three main challenges. as regards the savings banks challenge, a lot of hard work has already been done and should continue to be very actively performed. q. especially after the leaks in germany, do you think all the european partners, especially the political leaders, are aware of the danger of the current fiscal situation? a. i appeal to all governments to show a high sense of responsibility, both individually and collectively, and to keep a strong sense of direction. q. at first you didn ’ t seem very happy about the imf involvement in the bailouts. some were even calling for a european monetary fund. why did you change your point of view? a. the worst thing would have been benign neglect by the europeans, which was a big danger at the beginning. having overcome this temptation, the rescue brought together the conditionality and the financial support from the imf and the european partners, which was necessary. q. on the subject of eurobonds, europe has no treasury, unlike the united states. do you think that a step could be taken in that direction? a. at the present stage of european integration, with the current institutional framework, we consider that a major improvement in governance, particularly in fiscal policy, | , roughly in line with developments on the liabilities side. one might try to examine the link between the role of the euro in international financial markets and recent trends in the euro area ’ s balance of payments. of course, there is no one - to - one correspondence between the two concepts. nevertheless, one can observe a correlation, or co - movement, between the international role of the euro in financial markets and the euro area financial account. in particular, the euro area capital outflows in 1999 are consistent with indications that the euro was used more as a financing than as an investment currency. likewise, smaller net capital outflows in the first half of 2000 would also appear consistent with a more balanced use of the euro as a financing and an investment currency. these findings are still preliminary, but they confirm the relevance of developments reflecting the international use of the euro. let me now touch upon some other international private uses of the euro. examples are the role of the euro as a payment currency in the exchange of goods and services, as an invoicing currency in international trade, as a vehicle currency in foreign exchange markets and as a quotation currency in international commodities markets. despite the scarcity of reliable statistical evidence, a few observations can be made. first, the us dollar continues to play a leading role in these areas. second, rapid changes cannot be expected, as these functions of an international currency are driven by scale and network effects and therefore tend to develop only slowly over time. third, the euro has a prominent role in those transactions that directly involve euro area residents. for example, the euro tends to be used for invoicing or payments linked to trade flows to or from the euro area. rounding off this overview of the international use of the euro by the private sector, i should also mention foreign currency cash holdings in a number of central and eastern european countries, in which the deutsche mark takes the lion ’ s share. these cash holdings will be converted into euro as the banknotes and coins are introduced in a year ’ s time. the stability of the euro indeed makes it an attractive medium of exchange and store of value for the general public in countries that have a history of unstable prices. nevertheless, as confidence grows in the domestic monetary policies conducted in these countries, this specific international role of the euro should not develop further. evidence on the international use of the euro by the public sector not only the private sector, but also the public sector may use the euro as an | 0.5 |
convenes at a time of heightened uncertainty for the global economy. real growth is now projected at 3. 2 per cent for 2024 and 2025. the global economy is growing at a slower pace than pre - pandemic times but has shown resilience, and the risk of recession has receded. inflation continues to fall and is converging to the targets, albeit not fast enough. in the case of the usa whose target is 2 per cent, inflation is now 2. 6 per cent down from 7 per cent a year ago. the last mile is proving slow and difficult but the downtrend is expected to continue. risks to the global economy include geopolitical events, climatic events and natural disasters, cyber threats and attacks, as well as the high indebtedness of both the public and private sectors – all of which could undermine growth and financial stability. implications for the eccu what does this all mean for the eastern caribbean currency union? our projection for growth this year ( pre - hurricane beryl ) was 5 per cent, and another 5 per cent next year, powered by tourism and improved air connectivity. these projections will be revised after the macro - socioeconomic assessments for grenada and saint vincent and the grenadines are completed. we anticipate growth this year will be lower, while next year will be higher as the reconstruction gains momentum. inflation in the eccu ( 12 - month percentage change ) declined sharply from 9. 5 per cent in 2022 to 2. 2 per cent in 2023 and continues to moderate in 2024. for march 2024, the rate of inflation slowed to 1. 9 per cent and is projected to largely follow the trend in us inflation. credit to businesses grew by 5. 8 per cent last year, while credit to households grew by 2. 4 per cent over the same period. credit is projected to grow by 3. 8 per cent this year. asset quality – specifically non - performing loans ( npls ) – has slightly improved from 11. 2 per cent in 2023 to 10. 2 per cent as at march 2024. however, npls remain uncomfortably high and will be adversely impacted by hurricane beryl. the promise of artificial intelligence ladies and gentlemen, we are meeting in anguilla which is shortly titled ai. 3 / 5 bis - central bankers'speeches i therefore cannot resist making a passing comment on the phenomenon that is artificial intelligence ( ai ). the current revenue windfall | another practical demonstration of the central bank's commitment to support our youth and our region's transformation. immediate priorities before i conclude, i wish to mention some of the central bank's immediate priorities. these include : ease of opening bank accounts ; regional standards setting body ; 4 / 5 bis - central bankers'speeches office of financial conduct and inclusion ; financial literacy and inclusion strategy ; launch of eccu credit bureau ; and expansion of eastern caribbean partial credit guarantee programme. conclusion - a call for collective action ) our challenges are formidable but so are opportunities. i conclude with my oft - repeated declaration : " as a region, we cannot change our history and we cannot change our geography but we can elevate our development trajectory through innovation and collective action. " may god crown our collective efforts with tremendous success. i thank you. references 1. imf world economic outlook, april 2024 2. bis annual economic report, june 2024 3. eccb strategic plan 2022 - 2026 5 / 5 bis - central bankers'speeches | 1 |
meltdowns, firms have greatly strengthened their balance sheets. many firms have refinanced high - cost debt, which has reduced the average interest rate on the debt of nonfinancial corporations more than 1 percentage point since the end of 2000. the average cost of servicing debt would have fallen even further if not for a second major trend - the extension of debt maturities. businesses replaced a substantial portion of their short - maturity debt with long - maturity debt, both to lock in low rates and to improve their ability to withstand a liquidity shock ( since long - term debt does not need to be continually rolled over ). in addition, many firms - especially in the most troubled industries - have retired debt through equity offerings and asset sales, which limited the growth of nonfinancial corporate debt in 2002 and 2003 to the slowest pace since the early 1990s. third, firms have significantly tightened their belts. over the past two years, the drive to cut costs has generated rapid productivity gains. this greater efficiency boosted corporate profitability in 2002 and 2003 despite rather tepid revenue growth. moreover, a pickup in revenue growth in the second half of last year helped companies leverage those productivity gains, producing a dramatic recovery in overall corporate profitability. over the course of 2003, operating earnings at s & p 500 corporations surged almost 25 percent, bringing profit margins to their highest levels in several years. fourth, risk premiums fell substantially last year as corporate governance scandals receded and investor sentiment turned markedly more positive. the recovery in stock prices reflects this brighter view. in addition, spreads on corporate bonds have narrowed appreciably - especially for the riskiest firms - and they now stand at the lowest levels in several years. this decline in spreads has been helped along by the beneficial effect of the balance sheet improvements that i mentioned a moment ago. indicators of corporate financial stress such as bond rating downgrades and default rates have returned to levels normally associated with economic expansion. delinquency rates on business loans at commercial banks have also declined, and our surveys indicate that, on balance, banks have recently eased the terms and standards on such loans. in another sign of improved sentiment, money has been flowing into riskier securities. for example, equity mutual funds have registered strong net inflows for nearly a year, as have high - yield bond funds. the more favorable tone in the bond market has been associated with a notable pickup in junkbond deals amid a surge of corporate bond issues | against fmis including payment and settlement systems, and playing a “ catalyst ” role to facilitate communication among wide - ranging players involved in fmis. under globalization of the economy and technological innovations, more and more transactions and payments are being made across borders and time zones, and more diverse players are now providing payment - related services. one of the challenges for private - sector entities to provide payment services related to global cash management and e - commerce is how to deal with unsettled exposures that arise from time - zone differences and payment operations at night hours and on weekends. central bank money is the solution that would ultimately erase these unsettled exposures through settlement with finality, but providing central bank infrastructure also involves costs. in taking both possible benefits and costs in account, the bank will continue to consider the most appropriate way to provide its central bank accounts and boj - net from both “ time ” ( i. e. operation hours of the boj - net ) and “ space ” ( i. e. eligibility criteria of the bank ’ s accounts ), so as to contribute to the overall economy. besides, banknotes are payment instruments that all the people can use 24 / 7, and under the innovation in information technology, there emerges an issue about whether central banks themselves should provide, in the future, digitalized payment tools that would substitute paper - based banknotes. indeed, some central banks have recently mentioned the possibility of central banks ’ issuing digital currencies, and there are arguments that central banks ’ digital currencies would be similar to the provision of central bank accounts not only to financial institutions but also to the general public. 2 the bank does not have a specific plan to issue digital currencies at this stage, but will deepen its research and analytical activities so as to understand the impact of technological innovations, fintech and distributed ledger on financial architectures and fmis while keeping all options open, including the possibility of the bank ’ s utilizing such advanced technologies in its own operations in future. moreover, taking into account the importance of the people ’ s “ trust ” towards financial services and fmis, the fact that the japanese financial system has maintained its stability during the recent global financial crisis could be a great advantage in developing innovative financial services in japan. on the other hand, as access to financial services expands through internet and mobile devices, new types of threats to financial systems and infrastructures, such as hacking and cyber - attacks, are gaining prominence. in order | 0 |
century. each country is thus striving to make their own markets attractive to participants. japan, too, has engaged in the review of regulations and systems to promote financial deregulation. however, reform has been gradual and financial institutions have tended to deal with it cautiously due to the severe challenge they have had to face after the bursting of the economic “ bubble. ” as a result, the tokyo market has fallen far behind the new york and london markets in terms of its ability to develop financial instruments that incorporate new techniques. in recognition of this, prime minister hashimoto proposed the “ big bang ” deregulation package for japan. i understand that the purpose of this financial reform package is to revitalize the tokyo market as a free and active global market. the bank believes that the aims of this reform package are most appropriate and as a central bank, intends to contribute to the achievement of its goals. in carrying out the reform, it is especially important that the three basic principles of freedom, fairness, and globalization are strictly followed, and that the pace of the reform is not relaxed. the “ big bang ” package aims to realize and complete all reforms by the year 2001, immediately implementing any measures on which study has been concluded. however, this should not mean that the process of market reform become unduly gradual or slow, as this may jeopardize the consistency of the reform, or result in only an easier part of the reform being implemented. for example, one deregulation measure included in the “ big bang ” package and highly valued by the bank is the fundamental revision of the foreign exchange control law. if deregulation in other areas proceeds too slowly, the effects of the new foreign exchange control law might encourage financial transactions to shift to overseas markets and might then lead to the hollowing - out of the tokyo market. in order to avoid such a turn of events, it is most important to bring about concrete measures within the shortest possible time to maintain the coherence of the deregulation as a whole. b. revision of the bank of japan law lastly, i would like to discuss the revision of the bank of japan law. the revision of the bank of japan law is now in the final stage of deliberation by the financial system research council, an advisory committee to the minister of finance, following discussions last year by the central bank study group, an advisory panel to the prime minister. the bank has made public its views on the bank of | of their risk measurement and management of the complex financial instruments that are typically used in this model. basel ii also establishes benchmarks for recognising risk transfer and mitigation in securitisation and credit derivatives structures. it sets a boundary between the point at which a firm transfers risk and actually retains the risk. these enable supervisors to assess the degree of risk transfer and mitigation under both normal and stressed market conditions. and finally, basel ii requires that firms strengthen their frameworks for assessing appropriate capital for the trading book. this has taken on increasing importance given the rapid growth of trading book assets relative to the banking book. for example – the basel committee – in consultation with the industry – continues to work on developing a framework for better capturing the default risk associated with credit exposures in the trading book. in addition, basel ii permits firms to use their own models to measure counterparty credit risk exposures. this risk arises, for example, in otc derivatives, which are becoming increasingly complex and more difficult to measure. this approach is closely aligned with industry best practice as well as the underlying economic risks of these activities. basel ii has also paved the way for improvements in other, less visible ways. one example is basel ii ’ s greater focus on firms ’ risk management infrastructure. for instance, the framework requires fundamental improvement in the data supporting pd, lgd, and ead estimates that underpin economic and regulatory capital assessments over an economic cycle. this has spurred improvements in areas such as data collection and management information systems. these advances, along with the incentives to improve risk management practices, will support further innovation and improvement in risk management and economic capital modelling. pillar 2 let me now turn to the second pillar – the supervisory review process. pillar 2 really starts with you, the banks. first and foremost, responsibility lies with bank management for developing an internal capital assessment process and setting capital targets that are commensurate with the bank ’ s risk profile and control environment. a sound risk management process is the basis for an effective assessment of the adequacy of a bank ’ s capital. and bank management bears the primary responsibility for ensuring that the bank maintains adequate capital to support the risks beyond the minimum requirements. excessive participation by supervisors in a bank's capital adequacy assessment process or firms'over - reliance on supervisory review of their assessments are both counter to basel ii ’ s objectives and raise the risk of moral hazard. the better banks measure and manage | 0 |
population. this is further complemented by rbi quarterly statistics on deposits and credit of scbs : december 2022 union budget 2023 - 24 https : / / www. pmjdy. gov. in as of march 2023 a network of 2. 17 lakh atms 14, out of which 47 per cent are in rural and semi - urban areas. additionally, there are close to 32 lakh banking correspondents ( bcs ) engaged by banks 15 providing last mile access. as of 2021, 78 per cent of indian adults ( population with 15 years or more of age ) had a bank account as compared to 53 per cent in 2014 16. banking services have been made accessible to every village within a 5 km radius in 25 states and 7 union territories covering 99. 94 per cent of villages 17. this has been supplemented by a few important developments which got a fillip during covid. the first noteworthy development is the increasing use of technology in finance. technology in finance has been an important enabler that has empowered us to create a more inclusive and efficient financial ecosystem. banks have been innovating and enhancing the quality and reach of their services using technological solutions for some time now. however, this got accelerated during the covid period when mobility became a challenge and technology came to the rescue for fulfilling all our banking needs. the demands placed by the circumstances compelled banks and financial institutions to rethink their business processes and review their strategies. the reserve bank also facilitated banks and financial institutions in this journey by issuing appropriate guidelines such as use of video kyc. however, all this was made possible through the giant strides taken by our country in building a public digital infrastructure with india stack coupled with jandhan – aadhar – mobile, the so - called jam trinity, account aggregator framework and other digital initiatives, it enabled a decisive entry of the country into a digital finance era. what makes india stack unique is the scale, public accessibility and the comprehensiveness that has helped in making a building a more inclusive digital economy. the second important development to my mind during this period was the emergence of new partnerships between fintech companies and banks. banks are seen leveraging technological partnerships with fintechs in various ways to provide better products and better serve their customers. in this partnership, fintechs can contribute their technology expertise, while banks bring their domain expertise. by leveraging technologies such as chatbots, mobile apps, and personalized digital rbi data available at https : / / www. | assets over 1 per cent, non - performing loans around 2 per cent as of march 2009. all commercial banks meet the minimum capital adequacy norm of 9 per cent and throughout the crisis period, inter - bank markets for money, forex and debt have been functioning smoothly. the impact of the crisis in india, as in many emerging market economies ( emes ), spilled over from the real sector to the financial sector. industry and businesses especially the small and medium enterprises ( sme ) sector had to grapple with a host of problems such as delay in payments of bills from overseas buyers as also domestic buyers affected by the global slowdown ; increase in stocks of finished goods ; fall in value of inventories, especially raw material, which in many cases were acquired at higher prices such as metal and crude oil based products ; slowing down of capacity expansion due to fall in investment demand ; demand compression for employment intensive industries, such as, gems and jewellery, construction and allied activities, textiles, auto and auto components and other export oriented industries. hotels and airlines apart from it also saw fall in demand due to global downturn. recognising that the unexpected and swift turn of events could lead to problems of a spiralling downturn, the rbi took a series of regulatory measures in addition to providing liquidity and special refinance. during the years from 2005 - 6 onwards, in the context of high growth in bank credit to certain sectors, the rbi had raised in stages the risk weights for these sectors and had also increased the provisioning requirements for standard assets. in november 2008, as a countercyclical measure, the additional risk weights and provisions were withdrawn and restored to previous levels. the prudential regulations for restructured accounts were modified, as a one - time measure and for a limited period of time in view of the extraordinary external factors, for preserving the economic and productive value of assets which were otherwise viable. the modified regulations were in operation for applications for re - structuring received up to march 31, 2009 and restructured packages implemented within 120 days of receipt of application or by june 30, 2009, whichever was earlier. banks were, therefore, required to take swift action for detecting weaknesses and putting in place the re - structured packages in order to avail of the benefits in assets classification under the modified prudential regulations. the modifications permitted the restructured accounts to be treated as standard assets provided they were standard on the eve of the crisis, viz., | 0.5 |
we remain resolute in pushing ahead with our initiatives against climate change risks. however, the effects of climate change are rapidly intensifying and are also become increasingly intertwined with environmental degradation. hence, it is the need of the hour for all key stakeholders of our society, including scientific resources and private businesses, to combine their efforts for the national climate action of mauritius to become really meaningful and inspire positive change internationally. as we look ahead, if we aim to achieve sustainable and inclusive recovery, we should not be oblivious to our green credentials. indeed, building a greener, more sustainable and more climate - resilient economies is now an important part of the growth equation. we, at the bank of mauritius, have 3 / 4 bis central bankers'speeches already begun this journey by taking the right step in launching the climate change centre. four task forces have been set up, and i invite all stakeholders to actively interact with them, and with the climate change centre, to further the climate change agenda and contribute to the elaboration of strategies. the involvement of stakeholders is key especially as regards capacity building, exchange of information and data sharing. there is a dedicated webpage which the bank has created. you can see it on the screen right now. the webpage contains all the relevant information and contact details. ladies and gentlemen, the launch of the bank of mauritius climate change centre is indeed a major step for the country. it is a legacy for future generations. it is even more timely, as it comes to us as a prelude to cop - 26, which is due next month. with these words, i thank you all for your attention and look forward to having a meaningful discussion with you during the break - out session. 4 / 4 bis central bankers'speeches | harvesh seegolam : launch of the bank of mauritius climate change centre speech by mr harvesh seegolam, governor of the bank of mauritius, at the launch of the climate change centre, port louis, 14 october 2021. * * * mr frank elderson, chairman of the network of central banks and supervisors for greening the financial system ms danae kyriakopoulou, senior policy fellow at the grantham research institute on climate change and the environment at the london school of economics and political science distinguished guests online viewers ladies and gentlemen good afternoon it is my pleasure to welcome you, both physically and virtually, at the bank of mauritius for the launching of the bank of mauritius climate change centre. the last decade has witnessed growing interest among policy practitioners, including central banks, for onboarding climate change considerations into policy design and implementation. this can be substantiated by the manifold risks that climate change directly or indirectly poses to the mandates of central banks, namely price stability and financial stability considerations, with potentially disrupting effects on the financial system and economy at large. looking back, i can say that the landmark 2015 speech “ breaking the tragedy of the horizon – climate change and financial stability ” by mr. mark carney, former governor of the bank of england, then chairman of the financial stability board, and currently un special envoy on climate change, might have triggered the interest of central banks in the climate change topic and put the pressure on them for initiating climate actions. further, with the un intergovernmental panel on climate change ( ipcc ) recently highlighting potential global warming of above 1. 5 degrees celsius, unless actions are taken for deep reductions in carbon dioxide and other greenhouse emissions in coming decade, the onus is definitely now on central banks to take forward the climate change topic as part of their sustainability agenda. ladies and gentlemen, climate change is increasingly being regarded as the next main global threat to economic activity after the covid - 19 pandemic. indeed, recent polls show increasing awareness of climate change particularly at the level of youngsters. more than half of the people in middle - income and least developed countries, and nearly three - quarters among people in small island states and high - income countries deem it a global emergency. the covid - 19 pandemic has brought 43 percent of the world ’ s population to worry about climate change. however, unlike the pandemic which is largely recognized as a ‘ black swan | 1 |
the result has been a rise in net savings in the oil exporting countries. the two surplus regions have one thing in common. in both cases, foreign assets are accumulated almost entirely by the official sector. in the oil exporting countries, oil revenues primarily accrue to governments. higher oil revenues therefore translate into higher government budget surpluses. in south east asia, where the currencies shadow the dollar, foreign assets are accumulated primarily by the central banks in the form of official foreign exchange reserve accumulation. slide 5 shows that the global macroeconomic imbalances have led to a rapid accumulation of global official foreign exchange reserves. 3 let me now leave you with five stylized facts about swfs. first, as i already pointed out, swfs are not a new phenomenon. with its caisse des depots et consignations, france set up a swf in 1816. 4 slide 6 shows the year of establishment of each of the 14 largest swfs currently in operation. the kuwait investment authority was established in 1953. since then, swfs have been set up essentially in two waves. the first one occurred in the second half of the 1970s. the second wave began in 1996 with the setting up of norway ’ s government pension fund – global. the steep increase in oil prices since 2000, the widening of global imbalances and the resulting accumulation of foreign exchange reserves suggest that other countries will follow suit. by applying a simple rule to identify which countries potentially hold excess reserves, we can readily identify the countries that are obvious candidates for future swfs. slide 7 shows a list of countries that meet the following two conditions. 5 they have no swf at present and, judging by the greenspanguidotti rule, they hold excess reserves of at least usd ten billion. 6 note that according to snb staff calculations, the us current account deficit currently absorbs about 60 percent of the world's aggregate current account surpluses. the remaining deficits are located largely in a handful of eu countries ( spain, italy, greece, france and the uk, 30 percent ), in central and eastern europe ( 8 percent ). the final 2 percent originate in developing countries. the exception is china, which has attracted even more investments since the asian crisis, while savings have also increased faster. see, for example, genberg et. al. ( 2005 ). in some countries, the reserve accumulation has been further magnified by private capital inflows. i am grateful to | central bank transparency then allows markets to better anticipate the future path of short - term rates, the effect of this path on other financial market prices and ultimately the impact on the real economy. the monetary policy transmission process is thus rendered more efficient. transparency has a second advantage : it reduces uncertainty and may therefore lead to lower volatility in various financial markets. if markets can better anticipate the behaviour of a central bank and the effects of monetary policy, there should be less scope for monetary policy surprises, better anchored inflation expectations, less monetary policy - induced volatility in asset prices and ultimately less macroeconomic volatility. less volatility should translate into a lower risk premium and may thus promote investment and positively affect economic growth. lower risk premiums also lead to higher asset prices. indeed, throughout the world and for most asset classes, there seems to be a trend in recent years to higher valuations. these higher valuations can probably partly be attributed to the reduction of the risk premium due to lower expected volatility. to the extent that market participants correctly gauge a reduction in the risk premium, higher asset valuations can be expected to endure and represent lasting wealth creation. there is a third reason why central bank transparency has become pertinent. with the world's capital stock growing faster than the world's economies, real effects attributable to asset prices are becoming more important. 4 on the one hand, this is good news, as it creates wealth and strengthens the transmission process of monetary policy. on the other hand, a sudden increase in asset price volatility could have more adverse consequences for the real economy than what we might infer from past experience. if that is so, central banks clearly have an incentive to avoid becoming the source of unnecessary asset price volatility. the growing importance of balance sheet considerations in monetary policy only reinforces the importance of transparency in central bank communication. 5 finally, let me make an obvious but nonetheless crucial point, even if it goes beyond today ’ s topic. transparency is a valuable good in its own right. for good reasons, central banks are powerful and for the most part politically independent institutions. moreover, the officials who run central banks are typically appointed for lengthy terms and are difficult to remove from their positions. transparency is a crucial element in creating democratic legitimacy for politically independent institutions whose actions can have wide - ranging consequences for a country ’ s citizens and its elected government. as former fed chairman alan greens | 0.5 |
##humpeterian hypotheses and some new themes, oecd economics department working papers, no 161. 3 acs, z. j. and d. b. audretsch ( 1998 ), innovation in large and small firms : an empirical analysis, the american economic review, vol. 78 ( 4 ), pp. 678 - 690. 4 die großten angste der deutschen : hohe lebenshaltungskosten und folgen der migration ( ruv. de ) 5 deutsche bundesbank, domestic investment barriers faced by german enterprises, monthly report, may 2024. 6 see robert koch institute ( 2015 ), health in germany, federal health reporting. joint service by rki and destatis, november 2015. 7 nagel, j., keynote speech at the 10th anniversary of european datawarehouse, speech delivered on 14 november 2022. 8 the economist, wunderreform, 16 march 2013. 7 / 7 bis - central bankers'speeches | carlos da silva costa : farewell speech in honor of president mario draghi address by mr carlos da silva costa, governor of the bank of portugal, at the ecb governing council dinner in honor of president mario draghi, frankfurt am main, 23 october 2019. * * * as prepared for delivery dear mario, dear friends, as the longest serving governor of a national central bank in the governing council, i have been awarded the privilege and honour to say a few words at mario ’ s farewell dinner. when mario took office as president of the ecb eight years ago, europe was diving deep into the sovereign debt crisis. financial markets questioned the ability of highly indebted euro area countries to pay back their debts. a break up of the euro was a real possibility and redenomination risk premia appeared. eight years have passed, the euro is here to stay, and rests on much stronger foundations. mario´s contribution to this outcome cannot be overemphasised. his leadership as president of the ecb has shown a remarkable ability : to evaluate the context ; to separate what is essential from what is secondary ; to build consensus within the ecb ’ s governing council to pursue the required unconventional policies ; and last, but not least, to convince european leaders of the need to strengthen the foundations of the emu. mario provided impetus to the creation of the banking union, and took upon the ecb the task of setting up the single supervisory mechanism. mario has had the courage to search for solutions that tested the limits of our common mandate, while being open and flexible on how to achieve it. in doing so, he had to cope with a lack of understanding by important sectors of public opinion. with its balanced and determined decisions to define the outright monetary transactions mechanism and to provide conditional financing to the greek banking system, the ecb effectively saved the euro. with its bold unconventional policies, the ecb effectively prevented the euro area from sliding into deflation. it also allowed the time for political agents to adjust their fiscal policies, to adopt structural measures and to agree on institutional improvements needed for a sustainable economic and monetary union. mario has proven to be intellectually curious and open, looking at facts and questioning theories. he has instilled mental discipline among all of us working with him, and throughout the ecb. without annulling differences in opinion, mario was able to make us converge to a common course of action. mario, dear president, you understood the problems we were confronted | 0 |
framework, which was released in june last year. as you may be aware, basel ii has probably attracted more public attention than any other banking supervision reform. while i will not go into the details of the new framework, it is important to spend a few minutes talking about what the basel committee hopes to achieve with basel ii. any discussion of basel ii should probably start with the 1988 basel accord, which established the first internationally accepted definition and measure of bank regulatory capital. in many ways, the 1988 accord was a tremendous success story. it was adopted in over 100 countries, and contributed to the strengthening of bank capital at a time when a number of countries had experienced problems in their banking systems. it has become one of the benchmark measures of a bank ’ s financial health. while the simplicity of the 1988 accord helped to foster its widespread acceptance, that simplicity has become a liability for some banks and supervisors. almost 20 years later, industry developments in risk measurement and management have widened the gap between the regulatory capital measure under the 1988 accord and the internal capital measures used at many internationally active banks. more sophisticated technology and telecommunications, as well as market innovations, have enabled banks to better measure and manage their risks. as a result, the basel committee determined that a new capital framework was needed that would address these developments for the most complex and sophisticated banks, but that would also be appropriate for less complex banks. the committee also determined that the new capital framework should provide incentives for banks to improve their risk management practices without reducing the overall level of capital held in the banking system. basel ii, in my view, is fundamentally about better risk management and corporate governance on the part of banks, as well as improved banking supervision and greater transparency. it is also about increasing the stability of the global financial system, to the benefit not only of banks, but also consumers and businesses. the new capital framework attempts to achieve these objectives with three mutually reinforcing pillars. the first pillar aligns minimum capital requirements more closely with banks ’ actual underlying risks. qualifying banks may also rely partly on their own measures of those risks, which will help to create economic incentives to improve those measures. in concept the first pillar is similar to the existing capital framework in that it provides a measure of capital relative to risk. what is new are the second and third pillars. the second pillar – supervisory review – allows supervisors to evaluate a bank ’ s assessment of its own risks and determine whether that assessment seems reasonable. it is not enough for a | has been a formidable challenge, but formidable challenges make us stronger. it is not time to sit back in admiration ; it is time to use sepa. so, let ’ s rise to the challenge ; let ’ s use sepa, our key ; and let ’ s discover the great many opportunities that lie on the other side of that door. | 0 |
the treaty because only 5 member states were ready to implement them at the time. second example is the social charter, that was negotiated together with the maastricht treaty, but that was not acceptable at the time for the british government. a third example of flexibility brings me back to my own business. as you surely know only 12 out of the 15 current member states have until now adopted the single currency. according to the treaty, member states that have not yet adopted the euro are called " member states with a derogation ". two categories can be distinguished. the uk and denmark make up one category : these member states got respectively an opt - in and an opt - out. the second category consists of the member states that can't adopt the euro because they do not yet comply with the well - known convergence criteria. only sweden is currently in this position, but very soon a number of new member states will join sweden, having the vocation - and even the legal obligation - to adopt the euro at the right moment. it is very obvious that the member states of the euro area are more advanced in economic integration than the others are. so, this is clearly a case of " closer co - operation ", which has taken shape in the creation of a forum where the ecofin - ministers of the euro area can discuss the economic situation in the world, in the european community and in the euro area, and its consequences for economic policy making. this forum is, as you know, called the " eurogroup " and i'm sure that minister reynders will tell you everything about it after lunch. so to us, central bankers, closer co - operation or models of flexible integration is not some kind of theoretical exercise, we live with it constantly. ladies and gentlemen, my feeling is that the royal institute and the national bank have chosen for the colloquium of today a topic that is very much alive in the ongoing debate about the future institutional framework of european integration. the fact that we could find a series of utmost distinguished speakers ready to discuss this topic today with you, is a further demonstration of its importance. | amounts to sek 500 billion in total, which is more than the sum of all the loans currently taken out by small and medium - sized enterprises put together. added to this are new asset purchases of up to sek 300 billion, almost doubling the riksbank ’ s bond holdings. the riksbank also has the possibility to, via an agreement with the us federal reserve, lend us dollars corresponding to sek 600 billion. this is more than the total value of the riksbank ’ s gold and currency reserves. with these measures, therefore, the riksbank has the possibility of supplying at least sek 1, 400 billion to the banking system to ensure corporate money does not run out and to mitigate the effects on output and employment. added to this, there is also the possibility to borrow unlimited amounts of money on a weekly basis if necessary. at the same time, it is worth remembering that our measures come on top of the generous and enormous efforts currently being made by the central banks in the world ’ s major economies. going forward, it will be extremely important to monitor developments in the economy, both to evaluate the measures we have implemented and to see whether more needs to be done. the riksbank will follow developments via many information sources. we follow indicators of how the real economy is developing in the very short term and we are working to identify more indicators that can provide additional information about different parts of the economy. naturally, we will also closely follow the extent to which our programme of corporate lending is being used. as always, we are closely monitoring developments on financial markets and we are talking to market participants, banks and companies. we also have a close dialogue with other authorities and with central banks in other countries. if i may conclude with a personal reflection. as i mentioned earlier, this is the third major crisis in the swedish economy that i have been involved in dealing with. the first was the crisis in the early 1990s as head of the swedish bank support authority, colloquially known as the “ banking er ”, which was responsible for the state ’ s support measures to banks. then, it was a question of guaranteeing the solvency of banks. the second was the financial crisis in 2008 ‒ 2009 when the riksbank took action and basically guaranteed to supply the banking system with all the liquidity required to ensure it continued to work. i now have reason to say this for the second time as governor of the riksbank. but the crisis this time | 0 |
anita angelovska bezhoska : national fintech strategy to be developed opening remarks by ms anita angelovska bezhoska, governor of the national bank of the republic of north macedonia, at the nbrm workshop on fintech, skopje, 6 december 2019. * * * dear mr. jay tikam, representatives of the financial sector regulators, ministries dear colleagues, ladies and gentlemen, it is my great pleasure to open this fintech event organized as part of our ongoing efforts to encourage fintech debate among regulators, supervisors, relevant ministries and other stakeholders. as many times before, the european fund for southeast europe, has again proved its long - standing support for delivering workshops in a number of central bank areas, for which we are sincerely thankful. the main idea of this workshop is to raise awareness among decision makers and other stakeholders on the importance of the new fintech solutions and at the same time to lay ground for its development in our country, starting by identifying relevant goals and activities to be envisaged in our forthcoming national fintech strategy. over the last couple of years, the development of financial technology and its penetration in a wide spectrum of financial services has gained momentum. a variety of fintech solutions are being offered, which can be broadly clustered in three groups : a ) financial services, as business that offer internet based applications for instance for managing personal finance, trading securities, automating financial services ( robotization ) ; b ) financing, via platforms that directly match investors and lenders, such as crowdfunding, or peer to peer lending ; c ) payments, via more innovative and customer tailored payment solutions. no doubts we have that fintech offers wide - ranging opportunities. it holds the promise of reducing costs and frictions, narrowing information asymmetry, enhancing efficiency and competition, and increasingly important, broadening access to wider set of financial services – especially in low - income countries and for underserved part of the population – although it may take time for the benefits of technological change to fully materialize. against this background, ongoing innovations and technological advances can support stronger growth dynamics and higher inclusiveness of the growth, thus speeding up the real convergence process through a number of channels. for small economies, such as ours, fintech innovations can play important role in facilitating trade integration. more convenient and cheaper instruments for digital payments can set basis for easier cross - border trade, including e - commerce that currently plays a marginal role in the region. and there | philip r lane : the monetary policy toolbox and the effective lower bound welcome address by mr philip r lane, member of the executive board of the european central bank, at the ecb conference on monetary policy “ bridging science and practice ”, frankfurt am main, 11 october 2021. * * * it is a pleasure to welcome you to the 2021 edition of the annual ecb conference on monetary policy. as captured in the title of this year ’ s event, this conference series serves a vital role in bridging the science and practice of monetary policy. in particular, it is essential for the ecb to incorporate in our analytical framework the theoretical and empirical insights generated by the global academic community, and the conference format ( albeit in webinar mode again this year ) is very effective in providing us with a platform to discuss the latest developments. the breadth of academic research ( in terms of both topics and research techniques ) that is relevant for monetary policy is quite wide and this is reflected in the composition of the conference programme. the agenda includes research that exploits financial market data to examine the transmission of monetary policy, studies the impact of the pandemic on firms and banks using entity - level datasets, analyses the interactions between monetary policy and financial stability in a full - scale macroeconomic model, and explores the impact of monetary and fiscal policies on the formation of household expectations. in addition, the conference features two keynote speeches that address some of the most important issues facing central banks : monetary - fiscal interactions and the macroeconomics of climate change. under normal conditions, the informal discussions at these annual conferences provide a useful opportunity to increase external awareness of the monetary policy research conducted at the ecb and across the eurosystem. since such informal interactions cannot be reproduced in webinar format, i will take this opportunity to highlight the extraordinary research efforts of the ecb and eurosystem staff in supporting our recent monetary policy strategy review. in particular, eighteen ecb occasional papers were released on 21 september. these papers provide not only a superb series of surveys of the state of research on a given topic but also report many substantive new research findings : i believe that these occasional papers lay important foundations for many research programmes in academia and in central banks for years to come. the research reported in these papers shaped our new monetary policy strategy. in particular, a central theme of the review was to work out the implications of the trend decline in the equilibrium real interest rate and the associated implications of the | 0 |
the underlying demand and supply conditions to determine the exchange rate movements over a period, in an orderly way. to this end, the rbi monitors closely the developments in the financial markets at home and abroad, and takes such monetary, regulatory and other measures as considered necessary from time to time. the conduct of exchange rate policy is guided by three major purposes : first, to reduce excessive volatility in exchange rates, while ensuring that the movements are orderly ; second, to help maintain an adequate level of foreign exchange reserves and third, to help eliminate market constraints with a view to developing a deep and liquid foreign exchange market. the policy is aimed at preventing destabilising speculation in the market while facilitating foreign exchange transactions at market rates for all permissible purposes. there is a wide consensus that india ’ s exchange rate policy has stood the test of time, despite several domestic and external developments, including the severe currency crises which characterised the 1990s. recent international research on viable exchange rate strategies in emerging markets has lent considerable support to the exchange rate policy followed by india. global economy and india the debate in india has customarily been on the contours of the public policy in the context of increasing global economic integration. more recently, however, a debate in the rest of the world has been in evidence on the challenges likely to be faced by the global economy on account of progressively increasing global integration of the indian economy. hence, there is merit in looking at, perhaps illustratively, some of the global challenges of our integration while we move forward in this regard. over the next half - century, the population of the world will age faster than during the past half - century as fertility rates decline and life expectancy rises. in europe, the demographic profile is already tilted towards the higher age group and by 2050, this is projected to accelerate. projections suggest a turning point between 2010 and 2030 when the european union, north america and japan will experience a substantial decline in savings rate relative to investment which may be reflected in large current account deficits. most of the high performers of east asia and china are in the second stage of the demographic cycle. elderly dependency is expected to double in these countries by 2025. their working age populations will increase modestly first and then shrink. these projections suggest that east asia could increasingly become an important supplier of global savings up to 2025 ; however, rapid population ageing thereafter would reinforce rather than mitigate the inexorable decline of global savings. | of statistical information. it says when discussing fatalities on highways on page 78 : “ four times more fatalities occur on the highways at 7 p. m. than at 7 a. m. ” this of course does not imply, as some newspaper had suggested, that it is more dangerous to drive in the evening than in the morning. recast in the language of conditional probabilities, that p ( accident | 7 p. m. ) should not be confused with p ( 7 p. m. | accident ). unfortunately, it was. one more example, a study of the deaths arising out of road accidents revealed that 98 percent deaths occurs while driving on the left side of the road, whereas, only 2 percent death occurs in case of bis central bankers ’ speeches people travelling in the middle of the road. hence, it was wrongly inferred that it was safer to travel in the middle than on the side of the road. 17. another area of concern has been the misuse of statistics coming from spurious correlation and attributing such relation to type of cause and effect phenomenon. in most cases a common variable, most importantly “ time ” works as a link. let us take another example. number of people watching tv serials and number of buffaloes will register a high correlation. if one tries to link them and finds a causal relationship is simply absurd. it is easy to get carried way. one of the prime misuses of statistics is finding a strong relationship between two variables when actually such correlation is spurious. however, exploration of such behaviour has also led to path breaking developments in econometrics. for example, most of the macroeconomic series have strong time trend and thus have strong correlation. prima facie one may suspect the existence of spurious correlation. however, further exploration in such relationships led the foundation of the concept of cointegration. if two variables have a common trend, then there could be a possibility of a long - run equilibrium relationship between them. this statistical finding opened up a new dimension of modern economics and cwj granger was awarded nobel prize in economics for this in 2003. 18. let me now give you an example from the banking world. the concept of inflation is often misunderstood by people. you would often hear this refrain from many persons that despite rbi claiming that inflation has come down in the recent past, the prices have not come down. so, what is the truth? well, the truth is simply that inflation is indicated as | 0.5 |
abroad. before turning to the new law, i will mention two basic changes in central bank thinking over the last twenty years : ( 1 ) the emphasis on the independence of the central bank as a major component of its success in fulfilling its functions and achieving its targets ; and ( 2 ) the need for central bank transparency and accountability in its interest rate policy, including the analysis of the information it had available that provided the basis for its decision, and the results of its interest policy. i. central bank independence studies were carried out in the 1990s, among others by prof. cukierman, to examine and make international comparisons regarding the link between central bank independence, inflation, and economic growth. the significance of the concept of independence in the context of a central bank is that it has the authority to make its decisions without needing to obtain any external confirmation or approval. the research findings were clear : the relation between central bank independence and inflation is a negative one, and this, without paying a price in terms of growth. in other words, countries that reinforce their central banks ’ independence attain low inflation with no impairment to growth. this lesson and experience gained in countries with independent central banks, particularly in germany, also influenced decision makers. with the establishment of the european monetary union, the founding of the new republics following the collapse of the soviet union, and the process of democratization in latin america, new laws were enacted relating to many central banks, and in all cases, the emphasis was on their independence. the best known and most impressive instance is that of the bank of england : the first economic decision taken by the new labour government after the election in 1997 was to grant independence to the bank of england. till then the central bank had not been independent, and decisions on the interest rate were taken by the treasury. it is clear from the marked improvement in the performance of the uk economy over the last ten years, with regard to both inflation and steady growth, that the decision was wise and justified. the independence of a central bank is very important for its success in performing its functions and achieving its objectives. this is because democratic governments have an “ inflation bias, ” for two main reasons : a. since an expansionary interest rate policy, i. e., lowering the interest rate, tends to have a positive effect on gdp and only later does it contribute to higher inflation, and since democratic governments generally have a short horizon, they prefer to reduce interest rates, particularly when there are elections looming. an | to earn a return on their capital. in this context, i would like to refer to the banks'profits. it is quite natural to regard the banks'profits in nominal terms of billions of shekels, but one should also examine the banks'profits in relation to their capital, in other words, one should look at their return on capital. in these terms, the return on capital for the israeli banking system is not particularly high, and even low in international comparison. the return on capital for the banking system in 2005, for example, was 14. 5 percent, compared to an average 15. 4 percent globally. finally i would like to ask the knesset to push forward with government - sponsored legislation on the supervision of banking fees by the supervisor of banks as soon as the bill is presented, which i hope will be soon. this is an important bill, and every effort should be made to have this legislation passed. | 0.5 |
finance was to be servant of the economy, not master. this, truly, was a regulatory revolution. see https : / / www. bis. org / bcbs / basel3. htm. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice not all proposals for international regulatory reform found universal favour. in a paper prepared for the jackson hole central banking shindig in 2012, i questioned whether the very complexity of financial regulation might have contributed to the increasing fragility of the financial system. as you did not fight fire with fire, you did not fight financial complexity with regulatory complexity. that risked making a bad situation worse, a complexity problem squared rather than halved. to be honest, had i not called the paper “ the dog and the frisbee ” i doubt anyone would have read it. but i did, they did and the result was a sharp intake of collective breath among my colleagues around the basel committee table - and beyond. on the other side of the atlantic, one of those drawing breath was the then - governor of the bank of canada, mark carney. i am not sure what mark went on to do next. but it was not just internationally where the regulatory reform bandwagon was rolling. in the uk, the vickers commission reforms created a fire - break between banks ’ services to the domestic economy and their other activities. complexity scientists would have approved. and sweeping institutional reforms were also underway in the uk, with the fsa ’ s prudential responsibilities merged into the bank and a new consumer protection agency, the financial conduct authority ( fca ), created. the return of prudential regulation to the bank was not, fortunately, a reversion to the pre - 1997 orthodoxy. the global financial crisis had laid bare the costs of separating finance and the economy, the micro and macro – a separation that had also been a feature of the bank in the past. crisis needed to be the catalyst for change, forging a link between the bank ’ s analytical brain and its regulatory hands. and so it was, with the creation of a new policy body, the financial policy committee ( fpc ). the fpc was charged with safeguarding systemic risk in the uk using new macro - prudential tools. an interim fpc was set up in 2011 ahead of a new statutory framework being put in place. and the interim fpc gave way | can be confident that they know the answers. what we do know so far is that there has been a sharp downwards inventory correction and a contraction of investment notably in ict which was so buoyant before, with associated declines in equity prices and in us imports. consumption growth, supported by a strong housing market has so far held up rather better than might have been expected. looking forward, on the positive side, one could point to the strong monetary policy response to the slowdown, and to the recent tax rebate, which have yet to have their full effect. there were some suggestions in recent capital goods orders figures that the rate of decline in investment spending may now slow. and the rate of inventory liquidation had stabilised pointing to a turn at some point so long as consumption continued to be reasonably well sustained. consensus opinion, or so it seemed to me, had become modestly optimistic. at least that was the prospect until tuesday and the appalling terrorist attacks in new york and washington. the immediate impact of those events was a sharp fall in already weak equity prices worldwide, and fears that the trauma would undermine confidence - including consumer confidence in the us, already vulnerable to rising unemployment. even before the terrorist attacks, the pessimist could point to the imbalances within the us economy, including the weakness of private sector savings, the overhang of past investment excesses, and the us external deficit, which would, at some point, need to be corrected. on that view one could envisage a gradual adjustment over time in which case the us might face a protracted period of nearstagnation ; or - if you were really pessimistic - the adjustments might be more abrupt, implying a period of negative growth and possible further financial instability. the tragic events on tuesday will have encouraged such pessimism. for what it is worth, while i recognise the downside risks, i remain - perhaps stubbornly - cautiously optimistic. on the immediate situation, i was immensely impressed that the federal reserve and other us agencies have been able to keep essential payments and settlements services functioning as they have, which has allowed markets internationally to continue to function. and i was encouraged that equity markets in europe yesterday recovered some of their immediate losses. of course it is much too soon to assess the lasting impact of the events of the past two days. but the fundamental forces affecting the us economy have not changed. and in terms of confidence effects, it would be a mistake to underestimate | 0.5 |
monetary policy. 2. macro financial risks and outlook in this context marked by the rise in external shocks, strong uncertainty about the extent of their impact and their duration, and a change in the interest rate environment with the prospect of very low or even negative rates over a long period coming to an end, we can collectively rejoice in the fact that for more than two years the banking sector has been resilient ; it has contributed to mitigating shocks and not to amplifying them. this shock absorption capacity is an asset that must be maintained and even strengthened. this can be done through two channels : supervision and regulation. the macroeconomic risks and outlook in particular confirm the need to keep the monitoring of banks'credit and market risks high on the supervisory agenda of the acpr and the single supervisory mechanism ( ssm ). the immediate impact of the war in ukraine on financial stability has so far been adequately absorbed as the direct exposures of the financial sector to russia were low. however, risks to banks and financial stability may materialise through second - round effects and indirect channels from pre - existing vulnerabilities, notably those associated with ( i ) sectors most dependent on energy commodities, ( ii ) the development of leveraged finance and ( iii ) exposure to cyber - attacks. in this respect, particular attention should be paid to potentially sharp revaluations of high risk asset prices. the same holds true for rising prices and volatility in commodity markets and the considerable increase in margin calls on derivatives, in particular for energy and agricultural products. these have already put pressure on the liquidity of commodity market participants. very careful monitoring of credit and liquidity risks in the energy commodities sector is therefore required, in particular to ensure that any potential default ( e. g. by a trader ) remains contained and does not lead to systemic contagion. our second instrument for maintaining and strengthening banks'shock absorption capacity, after supervision, is regulation. i would like once again to stress the importance of an effective, fair and final implementation of the basel iii accord, in its final 2017 version. as i said it last year, quoting the governor, and it is even more the case today in the light of the crises we are facing : the basel iii rules represent the best possible agreement to promote financial stability at the international level. the european commission's proposal ( crr3 / crd6 ) to finalise the implementation of these rules is a decisive and very balanced step | christian noyer : is speculation the enemy of investment? speech by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, aix - en - provence economic forum, aix - en - provence, 5 july 2014. * * * between paradox and illusion : a narrow path for finance seven years after the start of the crisis, the french public – and they are not alone in this – remain largely hostile to the world of finance. despite huge efforts at reform, there are still doubts hanging over the sector. is finance useful for the economy? or, in its current form, is it merely a tool for ever - increasing speculation, at the expense of investment and the longterm needs of the economy? the fact that we still need to ask this question shows that we are living in difficult and paradoxical times, where the inner workings of the economy are often a mystery. in this context, it is tempting to fall back on simple solutions ; but that would be dangerous, and i will try to sketch out, in just a few minutes, what i believe would be a good middle ground between an unconditional love for and an exaggerated hatred of financial activity. i / – when we look at the economic and financial environment today, we can see that it is characterised by five paradoxes 1 / – first paradox : we have carried out a lot of reforms, but the flow of credit, at least of bank credit, to the economy is still insufficient. after three years of intense efforts, the main international regulatory bodies – the basel committee, fsb, and g20 – have achieved impressive results. we have significantly reinforced financial regulation, tightened capital and liquidity requirements, built more robust and efficient banks with healthier and more solid balance sheets. but despite this, bank lending remains sluggish. at the same time, bond issues have shot up, including those by less creditworthy borrowers, while issuance conditions have become less and less rigorous. the main losers in this two - pronged scenario are smes. 2 / – second paradox : the economy is struggling but stock markets are soaring. as you know, although many countries are now seeing a marked recovery, the overall pace of growth remains disappointing. recent figures for the us are below expectations. there ’ s still some uncertainty over chinese growth. and the euro area is struggling to get off the ground. despite this, the main stock market indices have risen by around | 0.5 |
david carse : banking in hong kong after the asian crisis speech by mr david carse, deputy chief executive of the hong kong monetary authority, at a luncheon meeting of the ginyukai, held on 21 august 2000. * * * ladies and gentlemen, i am very pleased to be here to address this luncheon meeting of the ginyukai. although i meet japanese banks on an individual basis quite frequently, i see them as a group less often than i used to before the asian crisis. in my earlier days in hong kong, we used to meet regularly at the numerous opening ceremonies and receptions of japanese banks who were setting up new offices in hong kong. over the last two years however i have been dealing with the voluntary revocation of the licenses of many of these same banks as they depart the territory. this is a much sadder task than cutting the ribbon at an opening ceremony. the figures tell their own story. in march 1997, there were 91 japanese authorised institutions in hong kong. this includes some banks with multiple authorisations, for example as licensed banks and as deposit - taking companies. by june of this year, the number of authorised institutions had dropped to 35, a decline of 60 %. the reasons behind this decline are varied. some of the japanese banks were forced to cut their overseas operations, including those in hong kong, because of critical balance sheet problems and heavy losses. equally, it has to be said that a number of the regional banks who came to hong kong in the 1990s lacked a clear business rationale for doing so and found it difficult to make money. given the difficult economic climate back in japan, it was probably right for these banks to cut their losses and go home. even the japanese banks that stayed have cut back on their lending here. between march 1997 and june 2000, the total lending of the japanese banks in hong kong fell from just over hk $ 2, 000 billion to hk $ 643 billion, a decline of almost 70 %. this has reduced the japanese banks ’ market share of total loans in hong kong from 51 % in 1997 to around 25 %. of course, i am aware that these figures are a bit misleading, as mr kato of bank of tokyo - mitsubishi recently pointed out to the press. most of the decline in total loans was accounted for by euro - yen loans. these are yen loans to japanese borrowers that were formerly booked offshore in hong kong for a variety of reasons, including funding costs and domestic regulations. | mr yam presents the 1998 hong kong monetary authority ’ s annual report speech by the chief executive of the hong kong monetary authority, mr joseph yam, on the occasion of the presentation of the 1998 hkma annual report before the legislative council financial affairs panel in hong kong on 3 may 1999. introduction mr chairman, honourable members, i am most grateful to you for giving me this opportunity to speak to you on the occasion of the publication of the hkma ’ s annual report for 1998. the report is tabled at this meeting of the financial affairs panel ; it is also being distributed to all members of the legislative council this morning. this report covers the full range of the hkma ’ s work for the calendar year 1998, in addition to giving an assessment of the economic and banking environment for the year. i have no need to remind members that 1998 was, to put it mildly, an eventful year. the report sets out the many problems and challenges that the hkma has had to grapple with during the course of the year, and explains what actions and initiatives the hkma has been taking to address them. you are all familiar with these issues, and you have the details before you. so i do not wish to take up too much time with a long description. my main focus in this presentation will be on the challenges for the hkma in the coming year, particularly in the light of current economic trends. before i do that, however, i should like just to highlight the challenges and achievements of the past year, and to touch on an issue that i know is of concern to members : the question of accountability and transparency. the year in review nineteen - ninety - eight was an extremely tough year for hong kong. the asian financial crisis, and eruptions in other parts of the world, brought continuing instability. the effects on hong kong ’ s open and outward - looking economy were severe. gdp declined by 5. 1 %, the sharpest decline shown in gdp statistics dating back to 1961. the unemployment rate more than doubled, to 5. 7 % at the end of the year : it has, since then, increased still further. property and share prices plummeted, though they have since regained some of their lost value. the strains and uncertainties of recession have penetrated into every home and every business. the distress has been all the more acutely felt because the recession appeared with dramatic suddenness after many years of vigorous and uninterrupted growth. hong kong | 0.5 |
none of which is prudentially desirable. in brief, the restrictions in our guidelines on upfront recognition of profit on sale of assets by the banks seek to create the right incentive framework for the banks so that the basic objective underlying the concept of securitisation does not get negated. in the aftermath of the recent sub - prime episode in some of the developed countries, caused also by wide dispersal of credit risk throughout the system through complex structured transactions, i am sure, you would appreciate the merit of adopting an appropriate incentivecompatible prudential approach towards securitisation. we need to squarely recognise that securitisation, after all, is also a credit - risk - transfer instrument and has the potential of dispersing the risks from the originating banks to those parts of the system which might not necessarily be best equipped to manage that risk. hence, rbi ’ s stand in creating the right incentive framework through prudential restrictions would seem to be an approach which has much to commend itself. migration to principles - based regulation ( pbr ) a view has been expressed in certain quarters that the indian regulatory framework should migrate to principles - based regulation from the current rules - based approach. the merits of a principles - based approach are that in a dynamic market context, where the product innovation is the order of the day, the principles - based approach to regulation provides a more enduring regulatory option since the underlying principles would not need to change with every new product whereas the detailed rules may have to be constantly modified to address the unique features of market and product developments. however, despite the stated superiority of the principles - based approach, so far very few countries have adopted this model in a big - bang or comprehensive manner. the fsa of the uk which is one of the forerunners in adoption of principles - based regulation has a rule book which has over 8000 pages. so, the pbr is not as simple to operationalise as it is to advocate. thus, in any regulatory regime, complete reliance on a principles - based approach would rarely be a feasible option since the high - level principles would need to be underpinned by the detailed rules at the operational level, to achieve the regulatory objectives. to illustrate, it might be easy to enunciate the principle that " treat your customer fairly " but ensuring it at the ground level would invariably require specific rules and prescriptions to achieve the objective underlying the principle. besides, a pbr approach also | broader portfolio level was not exhibiting any major signs of stress, the consistent high credit growth reported in the above segments warranted regulatory intervention. accordingly, certain quantitative and qualitative measures were undertaken from a macro - prudential perspective. as regulators, we would want to ensure continuous vigil to mitigate risks emerging from both within and the periphery of the financial eco - system. for example, the digital lending guidelines issued by the reserve bank envisage that regulated entity undertakes the due diligence required for lending decisions even when the loan is being sourced through a lending service provider ( lsp ). the increased reliance of banks / nbfcs to identify and onboard borrowers through fintech partners should not mean lowering of underwriting standards and improper pricing of risks. as a regulator and supervisor, we are examining the prevailing models and practices to see how best they could be leveraged for effective credit delivery, without compromising on risk management and prudential credit underwriting standards. concluding thoughts i would like to stress here that what has been shared so far is an illustration of some of the key areas of regulatory focus. at the same time, there are several other aspects which continue to be on the regulatory radar. i am sure, through a collective, consultative and collaborative approach, it would be possible to frame appropriate set of policy measures to address the current and emerging challenges. through this process, we should be able to build a stable and resilient financial system which shall meet the emerging needs of our country in an effective manner. to conclude, let me emphasize once again that even as the financial landscape evolves and transforms, the underlying principles of good governance, robust risk management, effective compliance, customer protection and responsible business conduct will be increasingly relevant. a robust culture within the organisation which delivers financial services while embracing these principles will stand the system and the institutions in good stead in the long run. 6 / 7 bis - central bankers'speeches namaskaar!! the inputs provided by pradeep kumar, peshimam khabeer ahmed and pramanshu rajput are gratefully acknowledged. 1 rbi speech : no more a shadow ( of a ) bank - available at https : / / rbi. org. in / scripts / bs _ speechesview. aspx? id = 1416 2 changing paradigms in the financial landscape - available at https : / / rbi. org. in / scripts / bs _ speechesview. aspx? id = 139 | 0.5 |
strong anti - euro movement in portugal, there is a growing current of opinion which says, : “ ok, we made all these political and economic efforts but are still paying high interest rates. it is very difficult to see where all this will end so perhaps it would be easier to leave the euro ”. a – sure, i understand. but i ’ m not sure it would be easier. the omt was an instrument created to address what we call “ the break - up fear. ” q – do you think the break - up fear has disappeared? a – yes, absolutely. i think the break - up fear has disappeared, which is a very positive result. what is now important is the credibility of reforms. i think portugal is on the right track. of course the risk premium remains high, because the risk is still high. but i think that this domestic adjustment must – to the extent possible – continue in a balanced way. bis central bankers ’ speeches q – when we look at europe – and we will have european elections in may – we can easily see that some political parties in greece, italy or even the uk or germany and the netherlands – not in portugal, but... – there are anti - euro politicians who are doing well in the polls. a – what we learned from the crisis is that we have an unfinished monetary union. a monetary union that seemed to work well in good times, but in harsh times we saw that the institutional mechanisms didn ’ t work well. there was no crisis preparation, no good crisis management, no joint supervision – many things were not in place before the crisis. that ’ s what we ’ re doing now. so the solution, if i may say so, is not less europe – this would have drastic consequences on the domestic market – but the opposite : what we need is more europe. the crisis showed that what failed were the unfinished institutions within the monetary union. that ’ s what we ’ re building. the banking union is an example. for portugal in particular, i think that it is very good news that we are talking about the end of the current adjustment programme, with or without a precautionary programme. the key is to convey this message of credibility that portuguese politicians – not just the government – continue to support reform. i know it ’ s not easy and i know that the european elections may have to deal with anti - european movements. nevertheless, i think that the vast majority of european parties have come to | peter praet : interview in expresso interview with mr peter praet, member of the executive board of the european central bank, in expresso, conducted by mr joao silvestre and mr ricardo costa and published on 18 february 2014. * * * q – the main discussion today is whether portugal should seek a “ clean ” exit or opt for a precautionary programme. what do you think would be better? a – the eleventh review of the assistance programme began this week and will carry out its regular evaluation. as far as we know, the results have been impressive. while a contraction in gdp was underestimated at the beginning of the programme, we are currently surprised on the upside. but we need to wait for the outcome of the technical discussions at the eleventh review. i cannot anticipate any decision. q – but we are in february and the troika will leave portugal in may. a – we have a few months. there are pros and cons to the different options. what is important is that the government can convince markets and other euro area countries and the european union that the programme will continue without hesitation. growth in portugal has started to become sustainable, which is new. the main question is whether there will be any doubts about the continuity of the reform programme. the precautionary programme would certainly help to dissipate doubts. in a clean exit scenario, the government should make a credible commitment to continuing the reform process. ultimately, what matters is credibility. but it is the government ’ s decision. q – you mean that the ecb does not need to have a defined position? a – my point is that for portugal, independently of the options available, what is essential is being able to convince the markets and euro area partners that reforms will continue to be implemented. i think the government is right to wait a little longer before deciding on the post - programme options. everything depends on the credibility of the reform process. imbalances created over many years cannot be resolved in three years. q – is there a risk that, without the precautionary programme, portugal would not proceed with reforms? a – there is obviously conditionality associated with the precautionary programme. q – and there is not with a clean exit. that ’ s the problem. a – a clean exit has no formal conditionality attached to it. for the government, the eccl has a political price, due to conditionality, but | 1 |
observed in practicing the activity, the requirements and standards necessary for the protection of consumer rights in finance bis central bankers ’ speeches services, including determining the method of calculating the annual percentage rate of financing, and clarity of procedures and criteria for early repayment. activation of the finance laws is expected to have a positive impact on developing and promoting the finance activity in the kingdom, improving the level of provided services by taking advantage of available assets and capital, in addition to finding new sources of funding to finance the activities of finance companies through the secondary market, which will be reflected positively on economic activity and create more jobs. sama has established the department of consumer protection to ensure the clients ’ rights in the sectors supervised by sama and to look into their complaints and improve the level of services of these sectors. sama will be happy to receive all complaints as it attaches great importance to protecting the rights of customers and raising the level of services provided to them. in conclusion, i welcome this distinctive elite of media journalists, and i am pleased to answer your questions. asslam alaikum wa rhmat allah wa barakatuh. bis central bankers ’ speeches | diversification and sustain investment by the private sector generally. the experience of the reserve bank and reserves management the depreciation of south africa ’ s currency has been in line with that of commodity exporters and other emerging markets, and substantial. so far this year, the rand has depreciated by 16 per cent against the us dollar. while the pass - through of such depreciation has been more muted than in previous cycles due to weak economic growth and moderate food price inflation, the reserve bank has nonetheless been closely monitoring any second - round effects from that depreciation. aware of the risk that already - high inflation expectations are moving higher and of the overall loose stance of monetary policy, the bank has raised interest rates by a cumulative 100 basis points since january 2014. the stance supports the economy while mitigating the risk of higher inflation. this represents a welcome contrast to the pre - inflation - targeting era when policy was tightened ( by 690 basis points ) and large us - dollar liabilities built up in an effort to more directly target a sharply weaker exchange rate. our approach to the currency has been qualitatively different. in agreement with national treasury, we unwound us - dollar liabilities and built a positive reserve position over time, with the objective of bolstering the national balance sheet and ex ante reducing the risk of the international monetary fund ( imf ) has recently projected that the region ’ s terms of trade will drop by about 14 per cent in 2015. bis central bankers ’ speeches financial and / or liquidity crises. our official reserves remain rather low by most metrics and by overall emerging - market standards. for african countries now facing lower commodity prices and a more challenging global financial environment, the quality of a nation ’ s external balance sheet seems of paramount importance. african central banks have slowly rebuilt reserve buffers over the last few years, but they remain relatively low by overall emerging - market standards. and as the global environment continues to worsen, policymakers need to focus more on the prudent management of external liabilities in order to maintain investor confidence. the growing role of financial stability let me now say a few words about the role of financial stability and about the growing importance of stable, healthy and well - capitalised banking systems – as my colleague, rene van wyk, will no doubt discuss in greater detail in the next session. it was partly thanks to the prudent management of banks ’ external exposure, on both the asset | 0 |
regards this role in view of your positioning as important mediators between cash operations and operations carried out through the banking system. in this aspect, i could not help mentioning also the obligation you have in terms of more rigorous implementation of money laundering prevention law. as you may already know, presently albania applies the flexible exchange rate regime, which means that market forces are the ones that determine its level. your behaviour has constantly helped reflecting in this price the demand and supply for this commodity, preventing the risk of price mismatch to overall market conditions and to the macroeconomic climate of the country. in this framework, i would also like to highlight your positive behaviour, related to positioning future flows of the supply and demand for foreign currency, particularly during critical periods of the market, which relate to the seasonal exchange rate behaviour, as a rational behaviour that helps reducing exchange rate volatility. given the above, the bank of albania is highly interested in getting informed with your opinions about market operation, positive or negative changes having occurred recently, relationships between foreign exchange bureaus and commercial banks within the framework of competition and mutual benefit. the bank of albania expresses its willingness to provide trainings on various products that may be traded by the domestic foreign exchange market. as the first step in this regard, we plan to deal with forward operations, which will better serve the smoothing of seasonal effects of exchange rate behaviour and the hedging against undesirable foreign exchange movements. highlighting the general but very important nature of the above issues, we would also like to share opinions on current economic situation with you. psychological effects on foreign exchange rate performance are another extremely important factor. taking into consideration the current world crisis, the bank of albania, appreciating your position in generating information from both, businesses and the broad public, would be interested in your opinions ; moreover, it would welcome your suggestions about any possible forms of generating these opinions periodically. in conclusion, intending to leave more room for discussing and exchanging ideas, we welcome your opinions even about other issues, related to reporting to the bank of albania or implementation of money laundering prevention law. | once again for being a key partner and player in the financial inclusion game. i would like to encourage the fides bank to keep up this good work. your dream saver and other services are testimony to the fact that low - income people are not only bankable, but they also insurable. 10. through the dream saver, you have made a difference in the lives of many people now and for generations to come. with this product you have empowered our people. congratulations! i thank you for your kind attention. bis central bankers ’ speeches | 0 |
board of governors of the page 4 of 10 federal reserve system, the president of the federal reserve bank of new york, and 4 of the remaining 11 reserve bank presidents who serve one - year terms on a rotating basis. the presidents of all the other reserve banks attend the meetings but they do not have a vote. the voting record of the fomc is made public. revealing the individual members'votes does not necessarily mean that there is a democratic outcome. alan blinder, the former vice chair of the board of governors of the federal reserve system, refers the possibility of'autocratic collegial'processes where the chair ’ s preference is likely to be the consensus outcome. it is well documented that under alan greenspan ’ s chairmanship of the fed, for example, there was a tradition that no more than two members would vote against the chair ’ s wishes. in such instances, while there is an appearance of democratic processes, the reality may be quite different. what is the practice in south africa? the primary goal of the sarb is the maintenance of price stability. this is confirmed in the constitution of the country, and we have applied policy within an inflation - targeting framework since february 2000. the target in effect quantifies our constitutional mandate. the constitution is, however, silent on how monetary policy should be conducted, and this allows for monetary policy practices to evolve over time. the'how'is discretionary, and the constitution gives the sarb autonomy or independence in making these policy decisions. an mpc was first constituted in october 1999. prior to this, decisions were made by the governor at times that were not pre - set. generally, announcements were a surprise, made on late friday afternoons after the local financial markets had closed. with the introduction of inflation targeting, practices have evolved. it is not my intention to outline all these changes here tonight, but i would rather like to focus on the current practice. monetary policy decisions are made by the mpc, which currently comprises six members : the governor, the three deputy governors, and two other senior officials of the sarb. the composition and workings of the mpc are governed by internal terms page 5 of 10 of reference, which make provision for up to four senior officials apart from the four governors. the choice of these officials is the prerogative of the governor, after consultation with the deputy governors. these appointments are not ex - officio and are therefore not automatically related to a specific position within the | members constitute the press conference panel, and questions are taken from the press and other analysts who can dial in. accountability and transparency are further enhanced through the biannual publication of the monetary policy review ( mpr ), in which an in - depth analysis of the monetary policy stance is presented. the mpr is launched at a national monetary policy forum ( mpf ), with all mpc members on the panel ; the launch is open to all interested stakeholders. the mpf is usually attended by more than 300 people. thereafter, a series of regional mpfs is conducted, with at least one mpc member as chair, at about nine different venues around the country. as part of our communication strategy, we also arrange stakeholder engagements. we regularly meet with foreign and domestic asset managers and investors. our outreach programme includes different groups from the broader society. these include trade unions, business associations and political parties. we also have an economic round - table discussion with economic analysts every alternate month, and we engage regularly with the academic community. ultimately, we are accountable to parliament. the sarb's annual report is presented to the parliamentary standing page 9 of 10 committee on finance, and we report to the committee whenever requested by parliament to do so. last but not least, the press and general news media are an integral part of our communication strategy. not only do the media report what we say, but they also interpret ( and in some cases misinterpret ) what we say. in order to improve the understanding of our thinking, and to encourage accurate coverage, the mpc meets with editors from the main publications at least twice a year, and once a year with senior journalists. and in order to enhance the quality of financial journalism, the sarb sponsors a chair in financial journalism at rhodes university. the steps towards communication and transparency undertaken by central banks and the sarb in particular have been significant. while we have our own communication strategies, we cannot do this without close interaction with the press and broader media. we depend on each other. the press in south africa has a proud tradition of being open, vibrant and questioning. i am sure that you, present here this evening, will carry on this tradition. my heartiest congratulations go to the winner of the award. thank you. page 10 of 10 | 1 |
a separate monetary easing policy tool and are supplementing the interest rate policy and forward guidance. in contrast, the bank applies forward guidance to qqe as a package. once the pace of the annual increase in the monetary base is set, the approximate pace of increase in jgb purchases is determined accordingly. in this sense, the pace of increase in the monetary base and that in asset purchases are treated as “ non - separable, ” as shown in chart 3. then the bank uses forward guidance to inform the public of its intention to maintain an increase in the monetary base and thus in asset purchases in the future. in other words, the bank attempts to exert downward pressure on the entire yield curve by influencing the expectations of the markets and the public about the low level of the yield curve in the future. second, the bank purchases treasury discount bills ( t - bills ) and other assets, in addition to jgbs, to meet the monetary base target. 6 moreover, it regularly conducts fixed - rate fundssupplying operations ( with a duration of mainly three months, but available up to one year ). therefore, these short - term operations exert downward pressure directly on short - term interest rates. in contrast, the federal reserve purchases longer - term treasury securities ( with a remaining maturity from four to 30 years ) and agency mortgage - backed securities ( mbss ). the downward pressure on short - term interest rates is exerted through the forward guidance. third, the bank and the federal reserve have different views on long - term inflation expectations. forward guidance issued by the federal reserve assumes that longer - term inflation expectations have been anchored at around 2 percent. however, there may be some limited concerns on the dis - anchoring of inflation expectations. therefore, one of the main tasks for the federal reserve is to continue with monetary easing measures to seek economic improvement, while ensuring that the anchored inflation expectations are maintained. in contrast, the bank has not yet successfully anchored long - term inflation expectations at around 2 percent. thus, the bank must help transform the deflation - oriented mindset of all economic entities and then increase inflation expectations to a higher level of 2 percent. therefore, the threshold used for forward guidance concentrates solely on “ 2 percent ” or “ maintaining 2 percent in a stable manner. ” fourth, federal reserve forward guidance includes employment - related thresholds. it has a dual mandate of promoting price stability and maximum employment, so the reason for this is clear. | acceleration of transactions in japanese financial markets. iv. toward more stable and accessible market infrastructure a. strengthening market infrastructure the experience of the recent crisis has reconfirmed that it is important to secure a stable source of liquidity in financial markets at all times. in strengthening market infrastructure, we should work toward reinforcing the financial market stability against stress, while at the same time considering measures to enhance accessibility with the aim of promoting active transactions. in japan, in order to address issues based on the experiences after the failure of lehman brothers, trading systems and market practices have been steadily established, in consideration of both market stability and accessibility. i hope that such initiatives and discussions will proceed further and japanese financial markets will become stable markets that are credible to market participants and accessible markets that meet the needs of various investors and in funding. b. role of the central bank in closing my remarks, i would like to talk about the role of the bank of japan in strengthening market infrastructure. the effects of the central bank ’ s monetary policy spread to the overall financial market and the real economy through various transactions by market participants and arbitrage trading between markets. the money market is where a central bank conducts daily money market operations that are essential to implement its monetary policy. the bank plays a role in providing market infrastructure by operating the bank of japan financial network system ( boj - net ), which is a settlement system for funds and japanese government securities ( jgss ), and by providing payment and settlement services. thus, the bank recognizes that it is also crucial to strengthen market infrastructure equipped with a high degree of accessibility while maintaining market stability. the bank will continue to support market initiatives to strengthen infrastructure as much as possible through communication with the market, and will actively contribute to such initiatives by improving settlement infrastructure through, for example, the construction of the new boj - net. thank you very much for your kind attention. chart 1 tension in the interbank market : libor - ois spreads ( 3 - month ) notes : 1. ( 1 ) and ( 2 ) indicate the bnp paribas shock ( on august 9, 2007 ) and the failure of lehman brothers ( on september 15, 2008 ), respectively. 2. data up to september 10, 2010. source : bloomberg. chart 2 tension in the corporate financing market : corporate bond spreads ( aa - rated ) notes : 1. corporate bond yields in japan are obtained from “ reference price ( yields ) table for otc bond transactions ” | 0.5 |
the misplaced perception that there was no urgency. bis central bankers ’ speeches the sharp slowdown in the economy towards the end of the decade and the clico crisis collapse laid bare the serious gaps in our legislative infrastructure and in our regulatory processes. we took a major step towards upgrading our financial sector legislation with the passage of a new financial institutions act ( fia ) in december 2008. while this relates specifically to the banking system, it is basically framework legislation that establishes the principles for the other pieces of financial sector legislation. work to upgrade financial legislation has picked up pace in recent months and it is now expected that the insurance bill would be presented to parliament before the end of this year ; and new credit union legislation by early next year ; and a separate law for contributory pension schemes, later in the year. a new securities and investments act is also in the offing and i am sure that chairman of the securities and exchange commission ( sec ) will have more to say about this …. i want to make the point that while we are making reasonable progress in upgrading our legislation and while, in recent years, the bank has made important strides in improving regulation, like other developing countries there are some critical challenges that we need to overcome to significantly improve the effectiveness of our financial regulation. the challenges have to do with encouraging a culture of good corporate governance : getting institutions to buy into higher standards of transparency and disclosure : establishing steps to promote market discipline : taking measures to promote market discipline : and establishing new mechanisms for regulatory co - operation. corporate governance a recent oecd report noted that poor corporate governance is invariably at the root of most failures in risk management. in my view, that was the crux of the problem with clico and is a potential problem with many financial institutions in trinidad and tobago. boards of directors need to insist that they be given information on the risks their institutions face and on the measures being put in place to mitigate these risks. however, to serve as an effective layer of checks and balances, board members need to have the requisite industry skills and expertise. in the small caribbean space this is a real concern, given the limited availability of qualified professionals willing or able to sit on corporate boards. good governance is a mindset and pivots on boards setting the right tone and working to ensure that this tone is translated throughout the entire organisation. boards need to operate in a manner in which there is healthy tension between themselves and management. while the board ’ s job is not | ewart s williams : upgrading financial regulation and supervision – a multi - dimensional challenge regulators round table presentation by mr ewart s williams, governor of the central bank of trinidad and tobago, at the unit trust corporation investor conference 2011, port - of - spain, 8 – 9 september 2011. * * * the last few years have been a difficult period for regulators all over the world. in particular, the global financial crisis of 2008 / 9 exposed gaps and weaknesses in the international financial architecture as well as in national regulatory systems. this situation has spawned a series of reform initiatives, directed in the main at the major financial centres, but with strong pressures for consequential upgrading of the regulatory systems in emerging market and developing countries. in the advanced and emerging market countries regulatory reform has focused on : tightening prudential criteria ( through larger and better quality capital and liquidity buffers ) ; strengthening macro - prudential supervision to reduce pro - cyclicality and guard against a build - up of systemic risk ; improving international financial standards ; strengthening crisis resolution mechanisms ; and broadening the regulatory perimeter to include all systemically - important financial institutions. the g20, which has responsibility for the international reform agenda, has identified the priorities for developing countries to include : strict application of the basel i framework and adherence to the basel core principles together with the adoption of a clear time - table for moving to basel ii and basel iii ; adherence to international standards and codes, for example, ifrs, fatf standards for anti - money laundering as well as other standards applicable to the insurance and securities sectors ; and the promotion of regulatory cross - border co - operation on information exchange. while our financial system as a whole was not directly affected, the global crisis was one factor that contributed to collapse of the region ’ s major conglomerate, cl financial ( clf ) and the difficulties faced by its two main financial entities, colonial life insurance company ( clico ) and the clico investment bank. in turn, the collapse of clf had contagion effects on financial and non - financial firms that had exposures to the conglomerate as well as to other regional economies. what has turned out to be our domestic financial crisis certainly underscored ( if ever there was doubt ) the urgent need for modernising financial sector legislation and upgrading financial regulation and supervision. to be fair, government had adopted a program of regulatory reform as early as 2004. however, the implementation of the program was somewhat slow perhaps in part, because of | 1 |
new ideas and identify opportunities to deepen collaboration at the regional level. these are important matters as it enables policy makers to formulate new development policies and better strategies. it has been a very productive symposium. the dedication and commitment expressed by those who have participated so actively in the various sessions should energise and inspire us all to strive even harder and achieve more to improve the well - being of our communities. on behalf of bank negara malaysia, let me take this opportunity to express our thanks to the oecd and infe, and the moderators, speakers and discussants in making this event a success. i would also like to thank all delegates for your active participation throughout this symposium. i hope you have gained valuable insights for charting your own national strategies for financial education. enjoy the rest of your stay in malaysia, and we look to the opportunity to welcome you back in the future. bis central bankers ’ speeches | complacency. looking ahead, legislative proposals should fully reflect the ongoing work at international and eu level aiming at enhancing the resilience of the financial system and protect consumers and investors against the impact of excessive risk taking and irresponsible market practices. main priorities include : strengthening the prudential framework ; addressing the risks posed by systemically important institutions ; and setting a framework for macro - prudential supervision. • first, future regulatory reform will aim at improving the level and quality of capital for credit institutions as well as developing a framework for liquidity risk. the quality of capital, especially the so called tier - 1 capital which is of utmost importance for lossabsorption on going concern and crisis situations, will significantly improve. capital buffers will be introduced to mitigate the inherent procyclical nature of financial activities. a leverage ratio will be introduced as a supplementary measure to the basel ii risk control framework curb excessive balance sheet growth. finally, a harmonised treatment for liquidity risk is also upcoming, requiring banks to hold sufficient high - quality liquid assets to withstand financial stress. these measures, when implemented, will address many of the shortcoming highlighted by the financial crisis, and will increase the ability of financial institutions to withstand shocks and thus the resilience of the financial system. • second, legislative reform also needs to address the moral hazard stemming from systemically important financial institutions. in a resilient financial system it cannot and should not be taken for granted that authorities will always come to the rescue. financial institutions, whatever their size and interconnectedness should not cause undue distress to the functioning of the financial system and to the economy as a whole, if and when mismanagement drive them to bankruptcy. • we also need to review resolution regimes and bankruptcy laws in light of recent experience to ensure an orderly winding - down of systemic cross - border financial institutions. in this respect the legislative work planned by the commission is very important. the eu commission will soon launch a public consultation on a new communication in which policy options to set - up an eu banking resolution framework will be highlighted. in addition, it will be relevant to enhance the framework for coordination among the relevant authorities for financial stability in case of crisis. • the third area relates to macro - prudential supervision. one of the key lessons stemming from the financial crisis relates to the importance of understanding and assessing the degree of “ interconnectedness ” between market participants. in particular, the crisis demonstrated that the | 0 |
upside risks relate to higher commodity prices and stronger than expected increases in administered prices and indirect taxes, while downside risks stem from weaker than expected economic activity. concerning the staff macroeconomic projections, let me inform you that the governing council has decided to publish more details as of december 2013. you will receive this material today after the press conference. turning to the monetary analysis, data for october confirm the assessment of subdued underlying growth in broad money ( m3 ) and credit. annual growth in m3 moderated to 1. 4 % in october, from 2. 0 % in september. this moderation was partly related to a base effect. annual growth in m1 remained strong at 6. 6 %, reflecting a preference for liquidity, although it was below the peak of 8. 7 % observed in april. net capital inflows into the euro area continued to be the main factor supporting annual m3 growth, while the annual rate of change of loans to the private sector remained weak. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) stood at 0. 3 % in october, broadly unchanged since the beginning of the year. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) was – 2. 9 % in october, following – 2. 8 % in september and – 2. 9 % in august. overall, weak loan dynamics for non - financial corporations continue to reflect their lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. since the summer of 2012 substantial progress has been made in improving the funding situation of banks. in order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed. the ecb ’ s comprehensive assessment before it adopts its supervisory role under the single supervisory mechanism will further support this confidence - building process. it will enhance the quality of information available on the condition of banks and result in the identification and implementation of necessary corrective actions. further decisive steps to establish a banking union will help to restore confidence in the financial system. to sum up, the economic analysis indicates that we may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below, but close to, 2 % later on. a cross - check with | mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, frankfurt am main, 5 december 2013. * * * ladies and gentlemen, i am very pleased to welcome you to our press conference. i will now report on the outcome of today ’ s meeting of the governing council, which was also attended by the commission vice - president, mr rehn. based on our regular economic and monetary analyses, we decided to keep the key ecb interest rates unchanged. incoming information and analysis have confirmed our assessment and monetary policy decisions of last month. underlying price pressures in the euro area are expected to remain subdued over the medium term. in keeping with this picture, monetary and credit dynamics remain subdued. at the same time, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 %. such a constellation suggests that we may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below, but close to, 2 % later on. our monetary policy stance will remain accommodative for as long as necessary, and will thereby continue to assist the gradual economic recovery in the euro area. in this context, the governing council confirmed its forward guidance that it continues to expect the key ecb interest rates to remain at present or lower levels for an extended period of time. this expectation continues to be based on an overall subdued outlook for inflation extending into the medium term, given the broad - based weakness of the economy and subdued monetary dynamics. with regard to money market conditions and their potential impact on our monetary policy stance, we are monitoring developments closely and are ready to consider all available instruments. let me now explain our assessment in greater detail, starting with the economic analysis. following a rise of 0. 3 % in the second quarter of 2013, real gdp in the euro area increased by 0. 1 %, quarter on quarter, in the third quarter. developments in survey - based confidence indicators up to november are consistent with a positive growth rate also in the fourth quarter of the year. looking ahead to 2014 and 2015, output is expected to recover at a slow pace, in particular owing to some improvement in domestic demand supported by the accommodative monetary policy stance. euro area economic activity should, in addition, benefit from a gradual strengthening of demand for exports. furthermore, the overall | 1 |
mojmir hampl : theory lagging behind practice speaking points by mr mojmir hampl, vice governor of the czech national bank, for the central bank of malaysia ( bank negara malaysia ) conference “ the future direction on monetary policy frameworks and strategies in emerging market economies ”, kuala lumpur, 21 may 2014. * * * ladies and gentlemen, thank you for your kind invitation to this conference. it is an utmost pleasure to be here today and to speak in front of such a distinguished audience. the issues being discussed here are important and i will echo many of the points already raised. it seems to me that we all to some extent share a feeling that there are many good questions, but sometimes we don ’ t have that many good answers to them. and because i don ’ t either, i will use the standard escape tactic of those who find themselves intellectually in dire straits – if you don ’ t have a smart answer yourself, use a quote by someone really smart and you might look smarter. so i will begin with one of the famous quotes by albert einstein : “ in theory, theory and practice are the same. in practice, they are not ”. yes, exactly. and it is true not only in physics, but also in the areas of monetary policy and financial stability. in theory we central bankers believe we can control inflation, or the sustained growth of the general price level. but in practice we tend to say that there are prices that are beyond the control of monetary policy, that are somehow disconnected from the conduct of monetary policy, or that are “ completely different ”. real estate prices, asset prices etc. interesting, isn ’ t it? and conversely, in practice we know what financial instability looks like and what it is. but in theory we haven ’ t created a rigorous operationalised theoretical system for achieving financial stability, or even for defining financial stability. there is no single, universally accepted definition of financial stability, as quantifiable as the definition of price stability. and what is worse, many believe there will never be one. again, quite interesting. so this, in my eyes, is the first constraint we face. at least in the area of financial stability, theory lags behind practice. inflation targeting is a formalised, practical and handy system, while “ financial stability targeting ” is not, despite huge steps forward recently. and i can ’ t resist dreaming of a day when we have a system in the financial stability area that | is as operationalised as inflation targeting. after all, back in 1978, the u. s. economic historian charles kindleberger, in his now classic book “ manias, panics, and crashes : a history of financial crises ”, pointed out that financial upheavals had virtually always been preceded by credit booms, property price and asset price booms and increased leverage in the financial system. all these are, in a sense, monetary phenomena. so why couldn ’ t we go further here as well? the second constraint is that smaller economies, both emerging and developed ones, are quite often in the position not only of monetary - policy takers, but also of regulatory - takers. so, they have to face the consequences of regulatory debates and decisions made by “ big guys ” somewhere else – debates and decisions they can influence only to some extent, if at all. and the emphasis in the world debate is now being put more on regulation on the micro level and less on these big questions i am discussing, despite the hard work of michael woodford and others here. i understand that micro - regulation is easier to create and to explain to the public, and sometimes also easier to implement. but it can also have faster adverse impacts. an example from europe – the harmonisation of deposit guarantee schemes ( dgs ) within the bis central bankers ’ speeches eu. it is generally a brilliant idea to have single dgs rules in the single market, but in the czech republic it has led to the abolition of the previous well - established practice of copayment when a depositor received an insured deposit from a failed financial institution. our practice was 10 % co - payment, so that depositors never got back 100 % of their insured deposits. the harmonised dgs rules established a different unified practice – deposits are insured up to 100 % of the equivalent of 100, 000 euros. this, of course, means a bigger incentive for moral hazard behaviour on the part of depositors. in the czech republic, depositors very soon started searching for higher interest rates, or higher yields, in smaller “ saving unions ” with inherently riskier business models, as these institutions are also covered by the dgs and suddenly became to a given limit riskless for savers due to the disappearance of co - payment. some of these institutions had to leave the market recently, eating up large sums from the pre - paid funds of the domestic dgs. i ’ m fairly sure | 1 |
bruno gehrig : review of the swiss economy introductory remarks by prof bruno gehrig, vice - chairman of the governing board of the swiss national bank, at the end - of - year media news conference, zurich, 13 december 2002. * * * the past year was an eventful one for the international financial markets. the global deterioration in economic prospects and eroded investor confidence deepened the stock market slump as from the middle of the year. parallel to this development, the interest rate level continued to fall. the central banks contributed to the interest rate reduction. however, with risk premiums increasing at the same time, financing conditions failed to improve for many companies but actually often deteriorated. foreign exchange following the steep slide of the us dollar, exchange rates stabilised again from mid - year onward once it had become clear that the growth slump was affecting all major economic regions equally. the swiss franc fluctuated within a relatively narrow margin to the euro this year. the geopolitical uncertainty premium applied to the swiss franc after the shock of 11 september 2001 is still being paid ( see graph ). in the current year, we again recorded phases of heightened upward pressure on the swiss currency. we tried to counteract the negative consequences of the strong swiss franc and the risk of further upward movements by lowering the interest rate several times. since the beginning of september 2001, the key interest rate differential between the euro and the swiss franc has widened from one to two percentage points. the yield on long - term bonds in swiss francs is also around two percentage points below that on corresponding euro paper. this has lowered the attractiveness of the swiss franc somewhat compared with the euro. the stabilisation of the euro / swiss franc relationship – albeit at a relatively high rate for the swiss franc – is a positive development. experience has shown that the exchange rate development has a significant influence on business activity in switzerland. we are still determined to counteract any additional upward trend of the swiss franc that might jeopardise the economic recovery. bonds in the capital markets around the world, nominal yields dropped considerably ( see graph ). however, borrowers with medium and low credit ratings did not benefit much from this development as credit risk premiums rose during the year. this also limits the macroeconomic stimulus effect of the yield decline. in addition, real interest rates did not decrease to the same extent because simultaneously inflation expectations again subsided markedly. particularly in the euro's core countries – first and | reliable conclusions to be drawn as to the risk distribution after the credit risk transfers. it can be concluded, though, that credit risks are borne by a larger number of market players than previously and that diversification possibilities are probably better utilised nowadays. in interbank business, too, more attention is being paid worldwide to default risks. a growing share of interbank business is hedged ; this is also the case in switzerland, where repo business has developed steadily. unhedged transactions still clearly account for the bulk of interbank business, but with an average volume of approximately sfr 20 billion, interbank repos, which were neglected for a long time, have grown to a respectable size. with respect to system stability, this development is favourable and should be further promoted. continuous linked settlement ( cls ) as regards credit risks in foreign exchange business, the launch of the cls system this autumn is a milestone achievement. cls bank, which has its headquarters in new york, serves as a platform to eliminate the so - called herstatt risk, i. e. the settlement risk inherent in foreign exchange deals. previously, the two legs of a foreign exchange transaction were settled at different times. if us dollars were bought against swiss francs, the franc amount was to be paid during european trading time. the corresponding amount in us dollars, however, was credited only a few hours later – during us trading time. in the few intervening hours, a credit risk existed. if a bank had been closed down during this time period, its counterparties might possibly have lost huge amounts of us dollar receivables. cls bank now makes it possible to settle foreign exchange transactions in the major currencies based on the « payment versus payment » principle, thereby eliminating the settlement risk for these transactions. currently, 42 financial institutions are directly linked to the system ( settlement members ) and settle their foreign exchange payments via cls in seven different currencies. one of these settlement currencies is the swiss franc. three swiss banks – ubs, cs and zurcher kantonalbank – participate in cls. apart from these three swiss banks, two other financial institutions – hsbc and bank of america – effect foreign exchange transactions in swiss francs via cls. every day, these five institutions together enter around 1, 400 payments in the amount of almost sfr 20 billion into cls. settlement takes place via a direct link between the swiss interbank clearing system ( sic ) | 1 |
carolyn wilkins : release of the monetary policy report opening statement by ms carolyn wilkins, senior deputy governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 13 july 2016. * * * good morning. governor poloz and i are pleased to be here to talk about today ’ s interest rate announcement and our monetary policy report ( mpr ). before turning to your questions, let me spend a few minutes highlighting the main points of discussion that took place within governing council. our bottom line is that the underlying forces that underpin stronger growth in canada are intact, and the adjustment of the economy to lower oil prices is well under way. that said, both international and domestic factors have led us to revise down our forecast for gdp growth. most importantly for canada, there is good underlying momentum in the us economy, even if the composition of us growth is somewhat less favourable for canada than it was in april. we are seeing relatively strong labour market conditions in the united states, consumers are confident, and the rate of new firm creation is back near pre - recession levels. all of this suggests that the weak start to 2016 was largely temporary. the us economy remains a key driver for global growth, which we forecast will strengthen gradually to 3 1 / 2 per cent by 2018. however, the results of the referendum in the united kingdom have clouded the global outlook. governing council carefully considered how best to incorporate the effects of the brexit vote into the outlook. it is early days, and there will be a prolonged period of uncertainty as authorities work out how the united kingdom will exit from the european union. governing council decided to incorporate in the base case projection a 0. 2 per cent reduction in the level of global gdp by the end of 2018. this reflects direct trade effects and some confidence effects on business investment. we are assuming that the brexit process will proceed in an orderly fashion. financial markets were resilient despite sharp adjustments in a wide range of global asset prices in the wake of the vote, and financial conditions are generally more accommodative. now let me turn to the canadian economy. our discussions focused on how we should look through the choppiness in recent data to see the underlying trends, and what these trends mean for the inflation outlook. among other factors, the fires in northern alberta, which have been costly for many, represent a sharp, but temporary, hit to the economy. we expect to | see gdp fall by 1 per cent at annual rates in the second quarter, and then grow by 3. 5 per cent in the third quarter as oil production resumes, rebuilding around fort mcmurray begins and the new canada child benefit lifts consumption. in fact, fiscal measures, including infrastructure spending, provide an important support to growth over the forecast horizon. we have always said that the adjustment to the oil price shock would be a complex process. and we see evidence that these adjustments are happening, thanks to the resiliency and flexibility of the canadian economy. on the energy side, firms have been quick to cut back investment plans and reduce costs. by the end of the year, we expect these reductions to be largely over. on the non - commodity side of the economy, we have also seen evidence of adjustment, but it has been more uneven. export data have been particularly volatile, and it is very important for us as policy makers to assess underlying trends. what we see is that non - commodity exports over the past couple of years have been responding largely as expected to growth in foreign activity and the canadian dollar. businesses are telling us that they are benefiting from stronger demand and a lower dollar. we have a great chart in the mpr that shows that bis central bankers ’ speeches non - commodity exports have recovered almost to their pre - recession peak, which puts the recent volatility into proper perspective. exports are projected to grow in line with the us economy over the projection period. we are being conservative by assuming that exports only make up part of the ground lost over the past four months. the past depreciation of the exchange rate will continue to support the level of exports, but its effect on export growth is projected to taper off over the course of this year. growing demand for canadian exports should lead to increased investment and new businesses being created. the question for monetary policy is when and by how much. governing council still believes that investment will be needed to expand productive capacity as both foreign and domestic demand increase. you can see that this rebuilding process is well under way in the united states, and we are seeing early signs that new firms are also being created in canada. that said, our profile for investment, while still positive, is lower than in april. that is because investment data have continued to disappoint and some businesses are telling us that they remain cautious. let me make a point about the lower investment profile. it does not just mean slower growth in gdp | 1 |
##2. rev0. pdf. ; and jesse keenan and jacob bradt, “ underwaterwriting : from theory to empiricism in regional mortgage markets in the u. s., ” climatic change, june 4, 2020, 2034 – 2067, https : / / link. springer. com / article / 10. 1007 / s10584 - 02002734 - 1. “ flood insurance, ” fema, https : / / www. fema. gov / flood - insurance. see mark carney, “ the road to glasglow ” ( speech at guildhall, london, england, february 27, 2020 ), https : / / www. bankofengland. co. uk / - / media / boe / files / speech / 2020 / the - road - to - glasgow - speech - by - markcarney. pdf? la = en & hash = dca8689207770dcbbb179cbadbe3296f7982fd0 ) ; and climate - related market risk subcommittee, managing climate risk in the u. s. financial system ( washington : commodity futures trading commission ), https : / / www. cftc. gov / sites / default / files / 2020 - 09 / 9 - 920 % 20report % 20of % 20the % 20subcommittee % 20on % 20climate - related % 20market % 20risk % 20 % 20managing % 20climate % 20risk % 20in % 20the % 20u. s. % 20financial % 20system % 20for % 20posting. pdf. see patrick bolton, morgan despres, luiz awazu pererira da silva, frederic samama and romain svartzman, the green swan : central banking and financial stability in the age of climate change ( basel : bank for international settlements, january 2020 ), https : / / www. bis. org / publ / othp31. pdf. - 4of assets. 14 similarly, changes in investor expectations about future climate policies could lead to rapid and unexpected price changes that ripple through the financial system. 15 assessing climate risk effects is complex because the predicted path of climate change is nonlinear and has likely tipping points, beyond which changes in climate conditions could occur rapidly, and climate forecasts based on historical data are no longer relevant. 16 this | a definite union - wide stability objective, would be faced with greater pressure for monetary restrictions than before. along with insufficiently flexible merchandise and labour markets, that might pose risks to the economy. that, in turn, would increase the political pressure on the ecb to relax its present stability objective. a glance at the movement of the relative prices of the principal candidates for admission to the european union bears out the supposition that, besides monetary factors, real economic catching - up processes contributed to the fact that those countries'inflation rates were all running above the eu average. in the czech republic and hungary, for instance, the prices of non - tradables rose between 1995 and 2000 about 2 percentage points faster each year than the overall cost of living. a similar picture is presented by poland and other transition economies. it must be admitted, though, that the scale of the real appreciation varies considerably, both between the individual countries and over time. at the same time, it is conspicuous, however, that the price indices for non - tradables and for the overall cost of living in germany and in france moved virtually in parallel during that period. besides the long - term movement of relative prices, the scale and correlation of short - and medium - term fluctuations provide evidence of the progress made in convergence between the present and the potential members of emu. according to the classical theories of optimum monetary areas, cf. bhf - bank, eu - osterweiterung : jenseits von nizza ( eu enlargement : beyond nice ) in wirtschaftsdienst dated 20. 1. 2001. countries should combine into a monetary union only if they are subject to largely parallel disruptions. the flexibility of the labour markets is crucial to this criterion, too. the faster and more smoothly wages adjust to new conditions, the easier it is to prevent unwelcome repercussions on the real economy. in the assessment of cyclical convergence, as in the appraisal of the longer - term catching - up process, one may have recourse to the movement of sectoral price indices. for instance, the relative prices of non - tradables in poland, the czech republic and hungary between 1995 and 2000 exhibit much greater volatility than the corresponding indices in germany or france. moreover, the disruptions in poland and hungary mostly seem to have run in the opposite direction to the business cycles in germany. empirical studies of price adjustments during economic catching | 0 |
bottom of the pyramid ” may not be possible or viable, but as various studies reveal, even the relatively low margins on high volumes can be a profitable proposition. in semi - urban and rural areas, there are a number of unbanked and under banked districts inhabited by people like artisans, migrant labour, small businessmen, retailers etc., who find it difficult to join the formal financial sector and make use of various opportunities. it is highly desirable on social as well as economic grounds that members of this class are brought into the banking fold and the ucbs can certainly take a lead in this. ucbs should design their business model to be self - supporting initially, and profitable in the long run. they should integrate their financial inclusion plan into their annual business plans. ucbs should give wide publicity to their services to connect with large population segments. it is also important to keep in mind that the service provided should be at an affordable cost and in this regard, technology will play a big part. with the wide reach of mobiles, mobile banking as an avenue for furthering financial inclusion has to be explored. adoption of appropriate and effective technology, therefore, could be the key for financial inclusion efforts to succeed. bis central bankers ’ speeches conclusion the current policy of inclusive growth with financial stability cannot be achieved without ensuring universal financial inclusion. though the efforts for universalisation of financial inclusion are already underway, there are a number of challenges in this endeavour going forward with about 480000 villages yet to be provided with banking services. the financial inclusion for the underprivileged will lead to host of downstream opportunities such as jobs for the participants to work as bcs at remote villages, technology providers etc., not to speak of the huge economic growth the financial inclusion measures trigger. banks need to perceive financial inclusion as a profitable business model and not as an obligation. this would be possible only if banks strive towards offering more and more credit products to customers captured as part of the financial inclusion plan and lower transaction cost by leveraging technology. the key is to establish an appropriate business delivery model through the involvement of all stakeholders to make financial inclusion a reality. with regard to financial education, it is crucial to harness the power of women. just as it is said that a woman getting educated would educate the family, a woman being financially literate and included, would pave way for inclusion of all members in the family. given that levels of general and financial literacy are fairly low among women, the effort should | current landscape, it is possible to expedite financial inclusion process by leveraging the flexibility provided by the multiple tech - led models for delivering a wide range of financial services. i am confident that the conference will throw up ideas which will enable the vibrant growth of the industry, while managing the challenges and addressing some of the key concerns which i have tried to highlight. from the regulatory side, we would look to foster the growth of the sector guided by the ultimate objective of financial inclusion and customer protection while providing a level playing field. 25. let me conclude by wishing you all a very productive set of discussions over the course of the conference. thank you. 5 / 5 bis central bankers'speeches | 0.5 |
in the value of currency than those to which the standard itself is subject, and, at the same time, to carry on the circulation with a medium the least expensive … ”. he also noted that : “ experience, however, shews, that neither a state nor a bank ever had the unrestricted power of issuing paper money, without abusing that power : in all states, therefore, the issue of paper money ought to be under some check and controul ; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion. ” the same concepts are to be found some hundred years later in irving fisher. the success of the gold standard was due, among other things, to the broad consensus on metallism and the classical model ; one of the latter ’ s key features is the self - adjusting ability of the economy. the restoration rule, which required the gold parity to be re - established after a period of suspension due to exceptional circumstances, was an essential part of the gold standard. short suspensions of convertibility made it possible to overcome temporary difficulties. the system allowed discretion to be exercised only within very rigid limits. gold acted as an anchor both for the monetary system and for the economic system by making maintenance of the parity a constraint on economic policy. a commodity standard, however, is not without its weaknesses, owing to the impossibility of controlling the money stock in the face of exogenous fluctuations in the quantity of metal. given the short - run non - neutrality of money, countries suffered substantial welfare costs in deflationary periods, as in the closing decades of the 19th century. during the heyday of the gold standard several proposals were put forward to overcome this difficulty : jevons ’ s revival of the tabular standard, marshall ’ s symmetallism and fisher ’ s compensated dollar. wicksell even suggested cutting the link with precious metals altogether, thus anticipating by a quarter of a century keynes ’ s radical approach in the tract on monetary reform ( 1923 ). england ’ s ephemeral return to gold in the first half of the 1920s and, just a few years later, the terrible impact of the great depression greatly affected economic and political thinking. the discussion on monetary reform ceased to be confined to the purely academic domain. the advocates of reform ( including, albeit with different approaches, economists such as keynes, fisher, | this context price stability is ensured in the leading countries ; to some extent their behaviour then influences that of the world economy. economic theory has taught us, rigorously ( consider, for example, the analysis put forward by patinkin ), that even with fiat money the price level can be determinate when the central bank exercises control over the nominal quantity of money. the creation of important monetary areas - that of the euro alongside those of the dollar and the yen contributes to the stability of the world economy, even though many countries remain outside these areas. the expansion of credit at the international level is closely connected with the operation and stability of banking systems and capital markets. important steps are being taken to subject countries outside the main monetary areas to standards of banking supervision that help to ensure the orderly expansion of credit and money. 4. in the absence of rigorous control over the quantity of money at world level, the last two decades have seen crises that, despite their occurring in just a part of the globe, have triggered a combination of inflation and deflation, with the destruction of some of the savings accumulated in banking systems and slowdowns in the growth of economies. the crises have become more frequent in the last five years and their effects more far - reaching as a consequence of contagion. the enormous advances made in data processing and telecommunications have fostered a growth in international monetary flows and total financial assets that has far exceeded the expansion of the world economy. this has undoubtedly contributed to the growth in productive investment at the global level in a period marked by low inflation, attributable in part to the increased competition in trade in goods and services and especially raw materials. the last five years have been marked by very rapid growth in the stock of financial assets made up of public and private - sector securities and bank deposits. the expansion began in 1995 at the time of the decision to carry out massive interventions in the foreign exchange markets in order to correct the pricing distortions between the dollar and other weak currencies on the one hand and the yen and other strong currencies on the other. on that occasion sales of yen against dollars amounting to several tens of billions of dollars were made ; at the same time, a policy was adopted aimed at reducing yen interest rates until they were close to zero. the expansion of yen - denominated liquidity enabled the dollar and other weak currencies, including the lira, the peseta and sterling, to strengthen. the global market saw | 1 |
businesses and workers come to expect that prices and wages will continue rising quickly this adds to inflationary pressures, requiring even higher interest rates to bring inflation down. ultimately, we would need to slow the economy down by more, which would result in a larger rise in unemploy ment and higher risk of recession. the costs of job loss are very high to individual workers and lead to persistent earnings losses. this experience is consistent across groups of workers. but job losses tend to be disproportionately borne by some members of the community – the young, those who are less educated, and people on lower incomes and with less wealth ( including renters ). [ 5 ] a weak labour market also hurts those who keep their jobs, whether through a reduction in hours worked or lower wages growth. so the future costs to not taming inflation would be borne by all australians, but disproportionately by lower income households. how resilient have household finances been to high inflation and tighter monetary policy? i have noted on a number of occasions that monetary policy needs to be set for aggregate economic conditions. we only have one instrument – the interest rate – to impact demand and it is blunt. but just as inflation is felt differently by various groups in the community, so too are interest rate moves. we therefore need to pay close attention to conditions facing different parts of the community, including the most vulnerable. that is true when thinking about monetary policy and also in thinking about financial stability. the rba ’ s forthcoming september financial stability review ( fsr ) will provide an overall assessment of the health of household and business finances. while i don ’ t want to steal the fsr ’ s thunder, i do want to conclude today by previewing a few key messages on how household finances are faring. the first thing to say is that i understand that the board ’ s message on interest rates is not what many borrowers want to hear. those with mortgages are feeling the squeeze on their cash flows not just from high inflation, but also from the increase in interest rates that has occurred in response to it. and as labour market conditions ease, more households will experience a strain on their finances from unemployment or reduced working hours. information received through the rba ’ s liaison program indicates that more people than usual are seeking support from community organisations, and often for the first time. in the fsr we tend to focus on households with mortgages, because debt has the potential | 1990s. the importance of capital and supervision had been reinforced. but by the mid 1990s, developments in technology and the anticipated growth of capital markets loomed large and shaped the environment for that inquiry. the importance of payments systems was much more on the radar screen. as you know, the wallis recommendations transformed the regulatory architecture. apra ( australian prudential regulation authority ) was created and took charge of bank supervision, a function previously performed by the reserve bank, and a new payments system board was created in the bank with a mandate for efficiency and competition in the payments system as well as controlling risk and contributing to financial stability. asic ( australian securities and investments commission ) was given a stronger consumer protection mandate. bis central bankers ’ speeches that regulatory architecture continues today. there is no serious discussion about major change to it. indeed, as has been noted before, the regulatory set - up and the australian financial system more generally came through the most severe international financial crisis since the great depression very well. not unscathed, not without some missteps or liquidity pressures and not without some credit losses. and not without some important supportive policy actions. but overall, we can certainly hold our heads up when the crisis narrative is told. at the same time, there are critical learnings for australia from the experiences of those who had a worse time of it than us through the past seven years. we survived the crisis pretty well, but how do we avoid that leading to complacency? what do we have to do to protect against a future crisis? how should we respond to the wave of changes to global regulatory standards? meanwhile, the technological frontier continues to move ahead quickly, even if in ways that wallis could not foresee. and australia ’ s privately funded retirement income system – growing at the time of wallis but by now amounting to about 100 per cent of gdp – could not be omitted from any comprehensive review of the system. this, then, was the backdrop when the murray committee set to work. the inquiry has eschewed wholesale changes in favour of more incremental ones. i do not intend to offer a point by point response to all the recommendations. let me touch on just a few themes. the first is enhancing the banking system ’ s resilience. there are a few issues here, the most contentious of which is whether banks ’ capital ratios, which have already risen since the crisis, should be a little higher still. the inquiry concluded that they should. there | 0.5 |
mispricing of risk relates to deficiencies in risk management techniques, but also, and perhaps more importantly, to existing incentives in the banking system oriented towards the short term profitability of banks. diversification in the sources of funding turning now to the second factor, the change in banks ’ funding sources : at the same time as the change in the sources of banks ’ revenue, there has been a wider change relating to banks ’ liability side of the balance sheet. 6 in particular, this refers to the shift in banks ’ business models away from the traditional model of financing. in the traditional model, there was a heavy reliance on retail deposits, but this has been replaced by an increasing reliance on market - based sources of funding. the significant recourse to specific funding instruments, such as mortgage bonds and securitisation, has made banks increasingly dependent on capital markets, but at the same time, of course, less dependent on deposits, to expand their loan base. this is evident from both an upward trending total assets to deposits ratio of the largest euro area banks ( see chart 2. a ) and an increase in the loans to deposit ratio of large eu banks ( see chart 2. b ). to the extent that more stable retail deposit financing has been replaced by wholesale funding, banks may have become more exposed to market dynamics and perceptions, constituting a potential source of instability in the banking sector. 7 see banking supervision committee ( 2009 ), “ eu banking structures report ”, forthcoming in october. a. shleifer and r. w. vishny ( 2009 ), “ unstable banking ”, national bureau of economic research, working paper series no 14943. chart 2. a : total assets to total deposits of the largest euro area bank ( outstanding amounts, eonia banks ) source : bankscope. chart 2. b : loans to deposit ratio of large eu banks ( corrected for extreme outliers ) source : bankscope. securitisation markets and the current crisis the element of this change in banks ’ sources of funding that i would like to focus on in particular is securitisation. securitisation activity did indeed increase substantially in the years prior to the financial crisis ( see chart 3 ). as you know, securitisation and financial innovation in credit markets have generated significant changes, particularly in the financial structure of banks, and, more generally, in financial market activity in the euro area. it has become clear that the change in | stability. 14 a. demirguc - kunt and h. huizinga ( 2009 ), “ bank activity and funding strategies : the impact on risk and return ”, cepr discussion papers 7170, february. a. beltratti and r. m. stulz ( 2009 ), “ why did some banks perform better during the credit crisis? a crosscountry study of the impact of governance and regulation ”, charles a. dice center working paper no 200912, july. on this, see for example r. gropp and f. heider ( 2009 ), “ the determinants of bank capital structure ”, review of finance, forthcoming. for further information on macroprudential issues, see a. crockett, “ marrying the micro - and macro - prudential dimensions of financial stability ”, remarks before the eleventh international conference of banking supervisors, held in basel on 20 - 21 september 2000. see also the report of the high - level group on financial supervision in the eu chaired by jacques de larosiere, in brussels, on 25 february 2009. in the european union, following the publication of the report of the de larosiere group, the european commission proposed in may 2009 a set of ambitious reforms, including the creation of a new european systemic risk board responsible for macro - prudential oversight. the european council in june 2009 supported the european commission ’ s proposal. i am pleased to note that the relevant authorities have already started to take action in response to all these lessons that have been learnt from the financial crisis. with a view to strengthening the resilience of the banking sector, the regulatory reform agenda that has been launched and agreed internationally will : • introduce a leverage ratio, as a measure to curb banks ’ excessive balance sheet growth. this measure will be introduced initially as a supplement to the basel ii riskbased framework and, subject to proper calibration and review, as a minimum regulatory requirement ; • raise the quality, consistency, transparency and level of capital, namely the amount of common equity and other instruments of equally high loss - absorption capacity ; • introduce a framework for counter - cyclical capital buffers above the minimum capital requirement, which will be raised during economic upturns and be used in downturns, as well as promote more forward - looking provisions ; and • establish a minimum global standard for funding liquidity which includes a stressed liquidity coverage ratio requirement and a longer - term structural liquid | 1 |
years will be largely as the leading forecasters believe. 2 see, for instance, rachel and smith ( 2017 ). 3 one example from the central bank world is that wilkins ( 2018 ) indicates that this will be an issue the next time the bank of canada ’ s monetary policy framework is evaluated, in 2021. 2 the repo rate will be somewhat higher given this, we can expect the repo rate to have been raised at least somewhat before the less favourable times arrive. most swedish forecasters, including the riksbank, are expecting the repo rate to be 0. 5 – 0. 75 per cent at the end of 2020. until then, almost all analysts believe that growth will slow down, but not to the extent that the swedish economy will enter a regular economic downturn before 2021. there are of course no guarantees, but this is how things look at the moment. neither is it possible for anyone to say how soon after 2021 a downturn may occur. it could come soon after, or some years later. 4 now 0. 5 – 0. 75 per cent is not a particularly high level for the repo rate, if one looks at it from an historical point of view. but on the other hand, history may not be as informative in this case as there has been a downward trend in global real interest rates in recent decades, as i just pointed out. it is therefore difficult to know what is currently a neutral, “ normal ” level for the repo rate. what one can say with some certainty is that it is much lower than it was 10 – 15 years ago. but even taking this into account, a repo rate of 0. 5 – 0. 75 per cent does not appear particularly high if an economic downturn were to occur in early 2021. how much is the interest rate usually cut in economic downturns? in sweden, it is not so easy to have a clear idea of this as we have had a floating exchange rate and an inflation target for just over 25 years, and that is not long enough to have experienced so many economic cycles. it is only when the exchange rate floats that one can use the policy rate to counteract economic downturns – when the exchange rate is fixed the policy rate is in principle locked on defending the chosen exchange rate. a couple of the rate - cutting phases we have had during this period have also been a little unusual. what happened in 1996 in particular, when the repo rate | to stimulate the economy even in times when the policy rate is at the lower bound. one advantage of the makeup strategy is that it can be applied within the framework of the current inflation - targeting policy. however, a condition for it to work is that it is a predictable element of the central bank ’ s policy. if one wishes to apply such a strategy, it would therefore be a good idea to formalise it in advance by means of a strategy document describing how the central bank will act in a situation where the interest rate is at its lower bound. 11 in a moment i will discuss a specific application of the makeup strategy. moderately strict odyssean forward guidance? when the central bank tries to give economic agents an idea of how the policy rate will develop, this is known as “ forward guidance ”. in sweden the riksbank publishes quantitative forecasts for the repo rate. this is called in academic literature delphic forward guidance, with reference to the oracle of delphi, who was 8 yellen ( 2018 ). the expression “ lower - for - longer ” is usually ascribed to reifschneider and williams ( 2000 ). for more detailed reasoning, see for instance soderstrom and westermark ( 2009 ). 10 this follows on from the so - called expectations hypothesis, which briefly says that longer interest rates are de - termined by expectations of the future policy rate. 11 yellen ( 2018 ) has proposed, for instance, that this could be done in the united states by means of a revision to the federal open market committee ’ s “ statement on longer run goals and monetary policy strategy ” or by publishing a separate supplement, “ committee guidelines for implementing policy at the zero lower bound ”. 6 thought to be able to see into the future. how well this strategy will function depends on how successful the central bank is at predicting its future interest - rate policy. if the forecasts for the policy rate are often correct, then it will be common for economic agents to believe in the central bank's forward guidance. but if the forecasts for the policy rate are not so accurate, then the forward guidance will be taken less seriously. and unfortunately it seems to be quite difficult to forecast policy rates. if the economy is hit by shocks, which is often the case, then the forecasts will not be very accurate. our experiences in sweden illustrate this problem clearly. both the riksbank and the market have often made substantial overestimates of | 1 |
see for example dynan 2012, mian et al. 2013, and andersen et al. 2014 ). studies that compare developments in different countries also indicate that high or growing indebtedness in the household sector entails higher risks to the real economy, even if the households also have substantial assets ( see for example imf 2012, jorda et al. 2013, and floden 2014 ). see riksbank ( 2014b ). bis central bankers ’ speeches inflation? this question is particularly relevant given that the repo rate is at zero and cannot be cut much more. i think that the question, at least in principle, should nevertheless be answered in the affirmative. it must be possible to meet financial risks with targeted measures even if this makes it more difficult for monetary policy to attain the inflation target. at the same time, it is of course desirable that the measures targeted at household indebtedness and the housing market do not in themselves lead to an economic downturn or unnecessarily obstruct monetary policy. the primary aims of policy in this area must be to ensure that the build - up of household debt slows down, that the households gradually become more resilient to shocks of various kinds and that the housing and mortgage markets become more effective. this is thus a question of a long - term adjustment process that must take place in suitablylarge steps. the amortisation proposal – a step in the right direction i see last week ’ s amortisation proposal as one such suitably - large step in the right direction. as only new mortgages will be covered, increased amortisation will be phased in over a long period of time. in combination with many new mortgage borrowers already amortising, and because the proposal entails only a moderate increase in amortisation rates, this means that the macroeconomic consequences will probably be small during the first few years. according to the riksbank ’ s estimate, the amortisation proposal will have reduced the household debt ratio by 0. 6 percentage points after five years compared with a base scenario. this means that the proposal will increase amortisation payments by less than 0. 1 per cent of gdp per year during the period. 5 the amortisation proposal thus appears to be well balanced at the moment, but work on the long - term adjustment process must continue. there are many factors to take into account when considering further measures. one such factor is how | consequences for monetary policy. we can expect more central banks abroad to conduct an expansionary monetary policy in order to counteract the dampening effect of fiscal tightening on demand. however, as policy rates in many countries are already close to zero there is limited scope for further policy - rate cuts. many central banks are instead expected to leave their policy rates unchanged for some time to come. low policy rates can also be combined with unconventional measures designed to push down long - term interest rates. 9 if the market expects the policy rate in sweden to be significantly higher than policy rates abroad, this can lead to an increase in the demand for assets in kronor as a higher swedish rate, all else being equal, increases the return on investments in swedish currency. this normally contributes to a strengthening of the krona exchange rate in the short term. a stronger krona slows down any increase in import prices. for the riksbank, which conducts an inflation targeting policy, this could be positive if inflation was high in the initial position. however, as underlying inflation is currently low, i have argued that a strengthening of the krona would, if anything, have a negative effect. moreover, a stronger krona has a negative effect on net exports as it means that goods and services produced in sweden become relatively more expensive. this in turn has a negative effect on gdp growth and resource utilisation. as i see it there are two reasons why recent developments abroad contributed to the decision to leave the repo rate unchanged and to revise the repo rate path downwards at the latest monetary policy meeting. the first is that weaker growth abroad has a negative impact on growth in sweden too and this needs to be countered by providing a stronger monetary policy stimulus. the second is that expectations that monetary policy will remain expansionary in large economies like the unites states and the euro area, for a longer period than was previously assumed, also have an effect on swedish monetary policy. swedish interest rates cannot deviate too much from foreign interest rates without this having an effect on the exchange rate. the exchange rate is of great importance to both inflation and resource utilisation and thus influences what constitutes a well - balanced monetary policy. what then will be the overall effect for sweden? we were able to note in september that the demand for swedish exports was growing more slowly than previously expected due to the weaker development of the export markets of importance to sweden. this weaker development is partly due to the fact that market turbulence resulting from the | 0.5 |
twin objectives of examining whether the supervised entity follows the regulatory prescriptions and whether its internal risk management practices are in line with regulatory expectations. pre - requisites for the success of risk based supervision effective risk management system at the core of supervisory monitoring under rbs is an assessment of the quality of a bank's procedures for evaluating, monitoring and managing risk, and of the bank ’ s internal models for determining economic capital. these models link capital to risk - taking and help banking organizations compare risks and returns across diverse business lines and locations. since under the rbs supervisors, essentially, rely on the inputs provided by banks ’ risk management systems, the rbs can only be as effective as banks ’ risk management systems. it is, indeed, true that the risk management challenge for banks has been steadily growing over the last two to three decades. this can be attributed to several developments in the financial sector like deregulation of financial markets, banks ’ diversifying into newer business lines such as providing custodial services, securities underwriting and corporate advisory services, growing inter - connectedness of the financial system, emergence and growth of complex financial products, etc. for the success of rbs, it is imperative that, as part of their risk management framework, banks are oriented towards identifying the path and passage of bis central bankers ’ speeches risks and towards pricing such risks appropriately. i would like to add that as non - executive directors you must focus on identifying the specific areas in the bank which pose greater risks and devote more time and energy to those areas. need for an effective management information system that, however, tempts me to pose some more very basic, but interesting questions. we are talking about identification of risk, their management and mitigation. but how many banks today can tell me the number of products and services they offer at their branches? also, do they have an idea of the number of customers they have? i am not talking about number of accounts here. the difference between the two is that an account is a ledger page while the customer is a live individual. can the banks tell me how many products or services each customer of theirs uses? if you don ’ t have such basic information, what kind of a risk management system can you develop? unless you have a fair idea of the number of products, number of customers, number of products and services per customer, cost of providing each product / service, returns from providing each product / service and risk involved in each product | basic function of the supervisor is to enforce the rules and norms laid down by the regulator. there is a marked difference between merely monitoring whether the entities are adhering to the regulations and actually making sure that the regulated entities adhere to them in practice. the job of the supervisor is to ensure that the entities necessarily comply with whatever mitigation plan is given to them. the supervisor should ask questions of the supervised entities even when the going seems good, let alone during bad times. not only ask questions, but to also effectively intervene. no doubt, this is an arduous task as the supervisors would be seen and treated like party poopers, but that is precisely the role that they ought to play. i believe many of the supervisors, in the lead up to the crisis, simply failed to enforce the regulations and instead, relied too heavily on the merits of the efficient market hypothesis or the bank managements ’ inner conscience. all of you, as non - executive directors, have important roles to play. you need to ask questions when the going seems good. you must focus on specific issues and seek precise clarification. you would also need to ensure that there is an appropriate internal mechanism which makes certain that the directions given by the board are properly implemented down the line. that brings me to the third question – what are the attributes of a good supervisor? when could supervision be considered effective? an imf staff position1 has very lucidly explained five attributes of a good supervisor. the note mentions that good supervision has to be intrusive. this does not mean being involved with the day to day affairs of the bank or micromanaging things. it, essentially, means knowing the bank, its institutional structure and its risk profile very intrinsically. listing the other attributes of a good supervisor, the note mentions that supervision has to be sceptical but proactive, implying that the supervisor should not take things for granted. the note also mentions that good supervision should be comprehensive - meaning that the supervisors need to look holistically at the entire banking group on a consolidated basis. in fact, many of the supervisory failings have been on imf staff position note spn / 10 / 08 dated may 18, 2010 on the making of good supervision : learning to say “ no ”. bis central bankers ’ speeches account of a lack of understanding of the risks at the periphery – in perceptibly low risk subsidiaries or low risk business verticals. the paper further mentions being “ adaptive | 1 |
3 interest rates in the primary market of government securities ( p. a., in % ) beonia key policy rate interest rate belibor 1w interest rate on deposit facility interest rate on lending facility 1 5 1 5 1 5 sources : thomson reuters and nbs. 2y * 7y 10y 3y 6m 1 5 12m 5y 3m 1 5 1 5 1 5 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 source : ministry of finance. * excluding coupon securities with the rate linked to the nbs key policy rate. lowering of the key policy rate expectedly reflected on a further drop in interest rates in the interbank money market and lower government costs in respect of issued dinar securities. to be specific, the achieved interest rates at the last three auctions of dinar securities with seven -, twoand three - year maturity were lower by 0. 5 to 0. 6 percentage points relative to the previous auctions with the same maturity, which corresponds to the lowering of the key policy rate. hence, the full coordination of fiscal and monetary policy continues. acceleration of credit activity as support to economic activity and a decrease in the npl ratio to its lowest level in the past nine years past monetary policy easing, a fall in the country risk premium, increased interbank competition, economic growth and labour market recovery, as well as low interest rates in the euro area, contributed to credit activity acceleration to 5 % year - on - year in september. excluding the effect of npl write - offs, the recovery of credit activity is even more evident and equalled 9. 8 % year - on - year. chart 4 effect of npl write - offs on lending growth chart 5 npl share in total loans, gross principle ( y - o - y growth rates at the programme exchange rate, in % ) ( in % ) - 5 - 10 - 15 total domestic loans corporates * households * total domestic loans * households corporates 1 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9 source : nbs. * excluding the effect of npl write - offs over the last year. total corporate sector household sector i iii i iii i iii i iii i iii i iii i iii i iii source : n | system raised its funds rate. additionally, bearing in mind the achievements made in the past nine months, we revised upwards our projection of the foreign direct investment net inflow for this year again, from 1. 7 billion euros to 2. 1 billion euros. that means that the expectation is that this year foreign direct investment will be at the level of around 5. 5 % of gdp, exceeding the current account deficit for the third year in a row. at the same time, this contributes to the rebalancing of our economy, leading to more dynamic exports, which record two - digit growth rates, owing to new projects and expansion of the exports base. manufacturing, which is the most propulsive part of our economy, has been recording diversified exports growth of 13. 6 % year - on - year in the first nine months of this year. even though exports increased in almost all areas, the most significant contribution to this growth stemmed from the production of base metals, rubber and plastic products, machinery and equipment and chemical products. in the coming period, the emphasis should be placed on maintaining the achieved results, further improvement of the business ambience and further enhancement of the competitiveness of the domestic economy through structural reforms. further monetary policy easing in the conditions of low inflationary pressures, with the reduction in the cost of government borrowing in the period following the last inflation report, we have lowered the key policy rate two times, in september and october, by 50 basis points in total. hence, the key policy rate was lowered to 3. 5 %, which is its lowest level in the inflation targeting regime. the decision to proceed with monetary policy easing was driven by additionally subdued inflationary pressures, and the fact that resilience of the domestic economy to external shocks increased, owing to favourable macroeconomic performance. low inflationary pressures are indicated by low and stable core inflation, moving around 1. 5 % year - on - year, the same as at the end of the previous year. the impact of the drought on food prices was also less pronounced and the second - round effects on other prices were absent, which is also confirmed by inflation expectations within the target tolerance band. according to our latest projection which takes into account past monetary easing and the public sector wage and pension increase, inflation will continue to trend within the target tolerance band of 3±1. 5 % until the end of the projection horizon. chart 2 interest rate movements ( daily data, p. a., in % ) chart | 1 |
to help establish a deposit - insurance scheme for south africa. one of the most important functions of the regulator of banks is to authorise the establishment of new banks. the power to grant licences provides the mechanism for preventing the entry of banks whose presence might be prejudicial to the interests of depositors and the soundness of the banking system. in south africa our approach is to grant licences to all applicants that comply with a stringent set of entry criteria. these criteria are that the establishment of a bank should be in the public interest ; no single shareholder should be able to dictate the bank ’ s direction without due regard to the interests of its depositors ; the bank should be governed and managed by directors and managers with proven ability and integrity to pursue the interests of the owners without harming the interests of depositors ; the bank should establish operational and control systems commensurate with the complexity of the risks and exposures it takes ; and the bank should be established with sufficient financial strength to ensure adequate capital and sustainable profitability. banks are monitored continuously to ensure that they remain fundamentally healthy. this has mainly been done through quantitative and qualitative off - site assessments. in 1999 the bank began the preparatory work for on - site reviews of credit - risk management systems and evaluations of asset quality. the process is expected to become fully operational in the second half of 2000. substantial progress has also been made with the development of consolidated supervision, ie in reviewing both banking and non - banking activities conducted by a banking group domestically and internationally. despite all these procedures, it is not possible to guarantee that banks will not experience some difficulties from time to time. in such cases, the policy of the reserve bank is to assist only banks which have a temporary liquidity problem, whereas insolvent banks are allowed to exit from the system in an orderly manner which does the least harm to the banking system and depositors. in all cases of bank failure, the bank ’ s management is replaced and the individuals involved would normally not be permitted to hold influential positions in banks again. when a bank experiences funding difficulties on a short - term basis, lender - of - last - resort assistance is provided to it. lender - of - last - resort assistance is a recognised responsibility and practice of central banks. the objective of such assistance is to enable the bank concerned to implement corrective measures and to prevent the contagion effect of a run on the bank. the liquidity under | know the security features and make the checking of money second nature. the security features on south african rands are only useful if people use them. it is every user ’ s responsibility to get to know the upgraded banknotes and check the security features. may we also take the opportunity to thank the team and their collaborators for their energy and effort in ensuring the success of the project as a whole and ensuring that the banknotes are distributed on time and for the efforts in ensuring public confidence in our banknotes. thank you for coming here today and for your participation in this process and we wish to encourage all of you to spread the message about these very important changes to our banknotes. thank you. | 0.5 |
##ducive to cross - border banking integration. before the crisis, supervisory coordination mainly took place through the lamfalussy process and committees, which were a major step forward and the best that could be achieved at the time. however, they were unable to fully iron out supervisory differences between eu jurisdictions. 15 this presented cross - border banks with substantial compliance costs and reduced the economic synergies of integration. for example, a commission survey in 2005 found that opaque supervisory approval procedures were a major deterrent to cross - border banking m & as in europe. the need to comply with different sets of rules and interact with several different authorities was also reported to be a barrier to cross - border activity. 16 the lesson from this period was that, while financial integration is ultimately a market - driven process, policy plays a key role in creating the conditions for it to progress. to quote the lamfalussy report, “ the eu has no ‘ divine right ’ to the benefits of an integrated market – it has to build one ”. 17 this ssm should help us in this building process. a single supervisor automatically removes some of the dividing lines between jurisdictions that create compliance costs. for example, there will no longer be a distinction between home and host supervisors for cross - border banks. instead, there will be a single supervisory model and eventually a single supervisory culture, rather than one per country. and crossborder groups will be able to report at the consolidated level. another benefit of the ssm – and perhaps a more important one – will be the lack of “ hidden barriers ” to cross - border activity linked to national preferences. with a european supervisor, borders will not matter. issues such as protecting national champions or supervisory ringfencing of liquidity will not be relevant. this means that banks will be in a better position to achieve the economies of scale that were promised by the single financial market – and that they also need to be competitive at the global level. it is of course for banks to decide whether such integration makes business sense. and some obstacles to cross - border integration that lie outside the remit of supervision – like company law and tax – still remain. however, the low profitability and excess capacity of the european banking sector suggests that efficiency gains could be achieved, and without exacerbating the “ too big to fail ” problem. improving risk - sharing even with a higher quality of financial integration, we know that shocks may still occur that cannot be contained within the private sector | john c williams : rising to the challenge - central banking, financial markets, and the pandemic remarks ( via videoconference ) by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at the 16th meeting of the financial research advisory committee for the treasury ’ s office of financial research, 16 july 2020. * * * as prepared for delivery good morning. over the past four months we have experienced a series of unprecedented events. the pandemic, social distancing, and the economic fallout have transformed all of our lives. this summer, many americans will be grieving the loss of loved ones, and many more will be faced with financial hardship and concern about the uncertainty of the future. the pandemic has caused a deep recession and levels of unemployment we ’ ve not experienced in our lifetimes. at the federal reserve, we are working tirelessly to address the economic damage caused by the coronavirus and to put the economy back on a path toward achieving our dual mandate goals of maximum employment and price stability. in the first half of march, as the pandemic began to unfold in the u. s., the federal open market committee ( fomc ) lowered the federal funds rate effectively to zero. bringing the policy rate down to this low level reduced interest rates across the economy, making it easier for households and businesses to meet their borrowing needs and fostering favorable financial conditions. beyond these monetary policy actions, we have taken many additional measures to promote the stability of the financial system and to support the flow of credit. today, i ’ m going to focus my remarks on these measures and detail their significance for supporting the economy. but before i continue, let me give the usual disclaimer that the views i express are mine alone and do not necessarily reflect those of the federal open market committee or anyone else in the federal reserve system. a lesson from history ensuring liquid and smoothly functioning financial markets are essential roles of central banks, like the federal reserve. yet, it ’ s often poorly understood why these roles are so important for the health of the broader economy. it was the financial crisis that erupted in 1907 that led to the creation of the federal reserve system, and as we ’ ve planned and executed our response to the current crisis, it ’ s this history lesson i keep returning to. a number of shocks, beginning with the 1906 san francisco earthquake, led to a run on the banks in 1907. the run on | 0 |
- 2012. alongside the most notable clean - up and provisioning drive, a recapitalisation and restructuring strategy was applied based on the analysis of balance sheets and on the tests based on stressed macroeconomic scenarios which concluded a year ago. this was all done in collaboration with the european commission, the ecb, the imf and the european banking authority, in the presence of independent consultants and auditors, and with the participation of the banco de espana supervisory and regulatory teams, which was technically very important for the performance of the exercise. the recapitalisation of our banks has been carried out through private access to markets ; the injection of capital financed via the financial assistance programme agreed with the european authorities ; the conversion of hybrid instruments into capital instruments ; and the provision of funds by the frob ( fund for the orderly restructuring of the banking sector ) and the deposit guarantee fund. from may 2009 to last september, the public assistance afforded to financial institutions to reconstitute their capital amounted to a somewhat over €61 billion ( 6 % of our 2012 gdp ), close to €39 billion of which were under the financial assistance programme approved with the european authorities in july 2012. the essential aim of these recapitalisation operations using public funds has been none other than to preserve the deposits in the institutions in question ( as is widely known, these are the only bank liabilities not to have undergone any loss throughout the process ), providing for business continuity by these institutions ’ own means or by their absorption by others. this is a crucial point i wish to highlight, as it is not always well - understood. regarding transparency, i would signal the initiatives taken by the banco de espana, which have been favourably viewed by the european and international authorities and by the markets, on relevant exposures and refinanced loans. and mention should be made of the guidelines on accounting practices in respect of refinanced loans. finally, i wish to underscore the approval of law 9 / 2012 of 14 / 2012 on the restructuring and resolution of credit institutions. to a most significant extent, this legislation stole a march on the future directive that will regulate these processes in europe. spanish banks ’ solvency position has improved clearly in 2013. the average core capital in our banking system will stand at around 10. 5 % as at december 2013, more than 1 pp above the related figure a year earlier. and, at the same time, exposure to the real estate sector has diminished drastically | income in 2000 to close to 130 % in 2007 and 2008. non - financial corporations moved on a bis central bankers ’ speeches similar path, which lasted longer over time, with their debt ratio climbing from over 60 % of gdp in 2000 to a peak of over 140 % in 2010. here, too, there are signs of correction. since 2010, households ’ and firms ’ debt has fallen by almost 10 pp and 20 pp, respectively. admittedly, though, such restructuring is slow as a result of weak nominal growth in household and corporate income. but the soundness of the recovery will unquestionably also depend on the progress made in normalising financing flows. since 2009, outstanding credit extended by our banking system to spanish non - financial corporations and households has been contracting uninterruptedly. as at september 2013 it was 5. 4 % lower than a year earlier, but the decline was more marked for firms than for households : a decline of somewhat more than 9 % for the former, and of 4. 5 % for the latter. as to firms, the reduction was more marked in the case of small and medium - sized enterprises ( smes ), whose access to other financing sources is generally more limited. this fall - off in credit should be viewed set against the correction of the excess debt built up by spanish households and firms during the expansionary phase that ended in 2008. deleveraging has been necessary both on the part of lenders and of borrowers. but this credit contraction should also be viewed in relation to the end of the – what was unsustainable – expansion of the real estate development and construction sectors. and of no little importance, moreover, has been the re - drawing of the map of spanish credit institutions – i refer here to the disappearance or transformation of many savings banks – which has, in a good number of cases, necessitated the re - configuration of relations between lenders and borrowers and has no doubt had a bearing on the funding difficulties experienced by viable firms with sound expansion projects. for credit to flow normally again, two essential conditions must be met : economic growth must increase and the restructuring and recapitalisation of our banking system must – as is indeed under way – be completed. a strong, healthy banking system that acts transparently and offers full guarantees to depositors, borrowers and investors is an absolutely crucial condition for sustained economic growth and, therefore, for the correction of our very serious unemployment problem. i must not fail | 1 |
come true, we also need to understand the forces behind the populist dissatisfaction with the union, and not dismiss them. the referendum debate in the united kingdom has been acrimonious. in striving to deliver a united europe, we need to be united in ourselves and build a shared eu - wide identity that delivers the necessary democratic legitimacy to the institutions. strive mightily, but eat and drink as friends. bis central bankers ’ speeches | yves mersch : opening remarks at the academy of european law opening remarks by mr yves mersch, member of the executive board of the european central bank, at the academy of european law, luxembourg, 29 june 2016. * * * ladies and gentlemen, for over 20 years the academy of european law ( era ) has provided a forum for law practitioners to debate european legal issues. and the need for such a forum remains strong today – maybe stronger than ever. shakespeare ’ s character tranio in taming of the shrew exhorts us to “ do as adversaries do in law – strive mightily, but eat and drink as friends ”. this is an appropriate sentiment for tonight ’ s event : the era is providing food and drink and has invited me to give you all something to argue about. this is a critical juncture for the european union ( eu ). a number of states have re - imposed border controls to stop the inflow of refugees, anti - eu parties are gaining popularity in many member states and one of the largest members has just voted in a referendum to leave the union. these factors provide a challenge to our institutions and legal frameworks at eu and at national level – a challenge that also legal professionals across europe need to engage with. i believe there are many reasons why the vision of a united europe is worth fighting for. let me mention just four : 1. to preserve peace ; 2. to improve economic prospects ; 3. to defend our values ; and 4. to increase personal options continent - wide. the founding fathers of the eu were willing to make political sacrifices to end bloodshed in europe, following two devastating wars just decades apart. let us not forget that we are here in a former prison in which every respected luxembourg family had relatives who stood up for these values. after 70 years of peace in western europe it is easy to be complacent that war will not happen again. yet the current situation in syria, iraq, ukraine and that of the balkans in the 1990s shows that peace is vulnerable, even on our doorstep. but defence and security have to be understood as a common endeavour. the economic benefits of the union are well documented : free trade, the removal of non - tariff barriers, the elimination of transactions costs of foreign exchange payments and the introduction of a single yield curve across the euro area to name but a few. these measures have reduced costs for businesses and households, and in turn generated higher income and created jobs. looking ahead | 1 |
and requirements. this will represent an important database for the development of a comprehensive framework for the development of smes initiated by bank negara. the survey findings will also be useful for the banking industry in formulating its own strategic plans with respect to this segment. with the advances in technology, banking institutions should be in a position to enhance access and quality of service for the smes. ladies and gentlemen, the performance of the banking institutions is also being gauged from the perspective of the shareholders. there are several significant issues affecting shareholders in the current environment. the global trend is being driven partly by an increased focus by banks on the financial performance and on the creation of shareholder value. in essence, the potential for growth lies in the value of their investments. this would be the right thing to do in the interest of long - term survival. there are enough examples of companies around the world that had lost track of the true reason for venturing into a particular business and as a result, they find themselves no longer in the business. despite narrowing of interest margins and high costs, the banking industry has been able to increase their returns with the average return to shareholders in 2001 being 14. 5 %. banks, like other companies in a free market economy, have a responsibility to generate returns for their shareholders. it is in the interests of the community as a whole that they do so, otherwise we could end up with a weak banking sector. but any company maximises shareholder value subject to constraints. these may be imposed by laws and regulations, or by the expectations of society. this means that if banks wish to preserve their reputation and the confidence of their customers, on which ultimately the strength of their franchise depends, they should act in a way that is seen to be fair and reasonable. to do otherwise, may in the long - term, be inconsistent with the objective of creating shareholder value. ladies and gentlemen, let me take a moment to say a few words on islamic banking. today, islamic banking in malaysia has firmed its position as a viable and vibrant component of the banking system. bank negara malaysia has been in the forefront in providing the necessary and required infrastructure for the sector to grow further. from a market share of virtually nil a decade ago, islamic banking has captured more than 8 % of the assets of the banking system and is poised to reach 20 % by 2010. we capitalized on the dual banking system which we believed is the right approach, and we will continue to embark in | deposit and loan initiation systems is significantly lower than that of the foreign banks. in terms of the time taken to approve new credit card applications it averaged 8 days for the domestic banks compared with 6 days for the foreign banks. as can be seen from the scorecard, the consolidation programme for the domestic banking sector was a necessary pre - requisite to enhance the sector ’ s capacity to compete. size alone however, is not a sufficient condition that will result in producing efficient and competitive banks and it does not offer guarantee of success. being a large bank is however, an important enabler to achieving enough scale to be able to invest in cutting - edge technology and management systems and to attracting the talent required to compete with the best players in the market. domestic institutions need to be able to meet the range of products offered by foreign competitors. but the larger scale and wider range of activities will demand stronger management teams. with the completion of the merger programme in december 2000, the banking groups are at various stages in building up their management team and enhancing corporate governance. a number of measures have been implemented to ensure that banking institutions ’ boards and key committees have sufficient representation of independent directors and that the boards are encouraged to appoint qualified professionals to run the banks. towards this end, bank negara has liberalised the remuneration package of the chief executive officers of banking institutions and left it to the boards to formulate appropriate packages to attract the necessary talent and determine their remuneration package. in the final analysis, a more competitive banking system should produce benefits to their customers and the business in terms of easy access, quality choices and competitive prices. an indicator of the improved level of competitiveness has been the narrowing of margins. during the year 2001, gross interest margins of banking institutions have narrowed to 3. 86 % for the commercial banks from 4. 3 %. this reflected the larger reduction in the average lending rate vis a vis the average cost of funds. competitive interest rates were particularly evident for mortgage and hire purchase loans reflecting strong demand for credit for these sectors. the competitiveness of the domestic banks in terms of the gross interest margin has also improved. the gap between the domestic banks and foreign banks has narrowed from 0. 92 percentage points as at the beginning of year 2000 to 0. 69 percentage points as at the end of 2001. ladies and gentlemen, banks which do not make investments to take advantage of the new technology may find themselves losing customers to the better - quality or lower - cost products of banks that | 1 |
linah k mohohlo : 2003 monetary policy statement statement by mrs linah k mohohlo, governor of the bank of botswana, gaborone, 25 february 2003. * * * introduction i am privileged and honoured to welcome you to this important event in the calendar of the bank - the presentation of the monetary policy statement for 2003. let me begin by refreshing memories on the objective and content of the monetary policy statement, which the bank of botswana issues every year. the statement serves several purposes. first, it provides an opportunity for the bank to report on inflation and monetary policy developments in the previous year, and to present its assessment of the outlook for inflation in the current year. second, it enables the bank to outline policy issues and the approach that will be taken in formulating its policy stance in response to inflation - related developments throughout the year. third, the monetary policy statement contains, certainly since last year, the bank ’ s annual objectives for inflation and credit growth, and an explanation of how these are derived. the statement, therefore, plays an important role in conveying to stakeholders and the public at large a range of information relating to one of the bank ’ s core functions - the formulation and implementation of monetary policy. while the transparency entailed in the presentation of the monetary policy statement is important in its own right, it is also important in influencing economic and financial expectations, as well as the behaviour of economic agents. the bank ’ s aim is to engender a public expectation of sustainable low inflation consistent with the broad objective of macroeconomic balance as a basis for sustainable growth. in addition, the statement serves as a vehicle for enhancing the accountability of the bank to its stakeholders. in my remarks this evening, i will present only the main highlights of the full text of the 2003 monetary policy statement. it is important, therefore, that you take the time to read the full text of the statement, so you can obtain a more detailed analysis of monetary policy developments. i will briefly review the behaviour of inflation in 2002 and its underlying causes, before assessing the extent to which monetary policy succeeded in achieving its objectives in 2002. i will then outline the bank ’ s view of prospective economic and financial developments in 2003 and, on the basis of that assessment, the policy outlook for the current year. the bank ’ s monetary policy framework and objectives i believe you are aware that the principal objective of monetary policy in botswana, as it is for most central banks around the world | , collectively looking ahead and, in this regard, there are several aspects of mandates and operations of the bank that require modernisation and upgrading in order to remain relevant and contribute to national development aspirations and objectives. indeed, monetary policy and the various instruments, including communication, can only be effective if undertaken alongside improvements in other operations of the bank and policy transmission channels. aliow me to highlight four relevant areas in this regard. modernisation and adaptation of the bank ’ s functions first, there is a need to adapt to changing domestic and global conditions and, also, to ensure that the bank of botswana is appropriately positioned to adequately address new developments and related challenges. some of these include fintechs, digital currencies and similar innovations as well as adopt best practice, to sustain national development. in this regard, there is ongoing review of the bank of botswana act, the banking act and proposals to promulgate a national payments law. the intention is to enhance operational capability, predictability and integrity of policy and regulatory frameworks, as well as to clarify institutional relationships and promote accountability and transparency. furthermore, one of the key lessons from the 2008 / 9 global financial crisis is the need for joint, speedy and coordinated response, by all relevant stakeholders, to any substantial systemic risks emanating from any parts of the financial sector. as part of the broader financial development architecture, there is a need to re - configure institutional arrangements for the financial sector oversight to achieve greater focus on macro - prudential dimensions of financial stability policy and financial safety nets. the recent establishment of the financial stability council is a significant step towards protecting the viability, integrity and sustainability of relationships and cross - holding of exposures within the financial sector and with other economic sectors. as i mentioned, this enables coordinated and decisive response when needed ; ultimately safety of savings and investments and prospects for attracting more. also, one of the key tenets, in this respect, include the need for legislation for the establishment of a deposit protection scheme, to further encourage patronage of the domestic financial system, in particular broader financial inclusion. monetary policy framework distinguished guests, the second area of continuing improvement that i want to highlight relates to the role of the monetary policy framework in facilitating a conducive environment for private businesses to thrive. broadly, an appropriate policy framework should encompass definition and clarity of objectives and instruments, understanding and calibration of transmission channels and, therefore, predictability and, in turn, accountability. it is | 0.5 |
to the lack of profit distribution from the ecb. the negative impact of the net result of pooling of monetary income ( column 4 ) increased by €1. 0 billion to - €2. 2 billion, mainly owing to the low remuneration on the monetary policy holdings of supranational securities, which the bundesbank itself does not hold. other income ( column 5 ) decreased by €1. 4 billion owing to a one - off effect in the previous year when other income increased by €1. 3 billion owing to the partial derecognition of deutsche mark banknotes of the bbk iii / iiia series. administrative expenditure, which is summarised in the next column, i. e. the bundesbank's staff costs and administrative expenses as well as the remaining expense items ( column 6 ), is virtually unchanged on the year. to offset the accumulated losses, the provisions for general risks ( column 7 ) were reduced by €972 million ( 2021 : increased by €1, 346 million ) to €19. 2 billion. the yearon - year change of €2. 3 billion shown on this slide is a net figure combining the increase in the previous year and the release in 2022. as in the previous year, the profit and loss account for financial year 2022 closed with a balanced result – in other words, there was zero distributable profit ( column 8 ), as in 2021. 3 / 4 bis - central bankers'speeches 4 / 4 bis - central bankers'speeches | reforms. there is one thing we can learn from germany ’ s experience, though : reforms do pay off eventually. this is an important point to remember and it is confirmed by the current state of the euro area. let us take a closer look. the euro area : approaching the end of the crisis in the euro area, the end of the crisis is getting closer – slowly but steadily. most importantly, the euro area as a whole has finally emerged from recession. so far, we have seen four consecutive quarters of positive growth, and looking ahead, we expect growth to continue. latest projections by the ecb suggest that euro - area gdp will grow by 1. 0 % in 2014 and by 1. 7 % in 2015. and this recovery is not only driven by the “ core euro - area ” countries such as germany. some of the crisis - hit countries have also finally embarked on the path to recovery. it seems, then, that the efforts to implement structural reforms are indeed bearing fruit. competitiveness has improved in most peripheral countries. improving competitiveness in turn drives exports higher. all peripheral countries, except cyprus, are projected to see some export growth this year. these achievements are reflected in current accounts increasingly reverting to positive balances. and germany is part of this rebalancing equation. since 2007, germany ’ s current account surplus vis - a - vis the euro area has shrunk continuously from 4½ % of gdp to 2 % of gdp. as business investment in germany is projected to pick up in 2014 and 2015, this rebalancing should continue. the progress that these abstract figures reflect is also visible in more concrete events. for example, ireland, spain and portugal have exited their financial support programmes without any friction. all three countries recently returned to the sovereign bond markets at relatively low yields. at the same time, stock markets in these economies have been rising for some time now. these developments underscore the progress that some peripheral euro - area countries have made in adjusting their economies. however, despite these favourable developments, there is again no time for complacency. in many countries structural reforms are far from finalised, as a report by the eu parliament suggests. at the same time, public debt is still very high in many countries and has to come down. against this backdrop, the recent debate about loosening the rules of the stability and growth pact worries me. it seems that the experience from the crisis is already fading from collective memory | 0.5 |
decade of its existence, see lorenzo bini smaghi, “ the euro area ’ s exchange rate policy and the experience with international monetary coordination during the crisis ”. speech delivered on 6 april 2009 in brussels. dependence on imported goods to satisfy domestic consumer demand, the peg was also seen as a prerequisite to safeguard domestic purchasing power. 3 throughout its existence, therefore, the bank ’ s monetary policy orientation was always focused on a fixed exchange rate as the nominal policy anchor. when the bank was founded in 1968, malta formed part of the sterling area, reflecting its past as a british colony and its strong ties with the united kingdom. when the bretton woods system collapsed in 1972, the maltese monetary authorities decided to break the exclusive link with the pound sterling and to peg the lira to a trade - weighted basket of currencies. during the 1980s the composition of the basket was revised on several occasions until, in 1989, the number of component currencies was reduced to three, the ecu - which had replaced several european currencies - the pound sterling and the us dollar. in 2002, the weight of the euro was raised to 70 %, while those of the dollar and the pound were set at 20 % and 10 %, respectively. following malta ’ s accession to the european union, in may 2004, the authorities resolved to move swiftly to adopt the euro. a year later, the maltese lira entered exchange rate mechanism mark ii ( erm ii ) with a unilateral commitment by the maltese authorities to maintain its value unchanged at the central parity rate. this central parity rate then became the conversion rate between the maltese lira and the euro when malta adopted the single currency at the beginning of 2008. in effect, malta has moved from a currency union with the pound sterling to membership of the euro area, with a period characterised by a basically fixed exchange rate in between. maintaining an exchange rate peg over such a long time span is hard, though changes to the composition of the currency basket allowed some flexibility. throughout this period, the lira was only devalued once, in 1992, in the wake of the turbulence seen in europe, which saw the pound sterling ejected from the exchange rate mechanism ( erm ) and the devaluation of the italian lira among others. otherwise, the bank ’ s determination to maintain the peg never wavered. we never blinked. the ability to maintain the peg may have been partly due to restrictions | iemed forum the mediterranean economies in a changing world lessons learned in economic and financial instability : what scenarios can we envisage? the role of central banks at present. monetary policies and exchange rates in the mediterranean countries address by dr mario vella governor of the central bank of malta barcelona, 24 february 2017 dear governor linde, dear fellow governors, ladies and gentlemen, thank you for the invitation to participate in this forum on monetary and exchange rate policy in mediterranean countries. the central bank of malta is both a mediterranean central bank, which once pursued a monetary policy regime similar to that followed by many mediterranean central banks today, as well as a member of the eurosystem. since january 2008, when malta adopted the euro, the central bank of malta is an integral part of the eurosystem. this comprises the european central bank and the national central banks of those eu member states that have adopted the euro as their currency. for us, therefore, our monetary and exchange rate policy is that of the euro area as a whole. the primary objective of monetary policy in the euro area is price stability. 1 the governing council has defined price stability as an average annual rate of inflation of below, but close to, 2 % over the medium term. this focus on price stability is based on the knowledge that money is neutral in the long run, meaning that it can affect nominal variables, such as the price level or the exchange rate, but not real variables, such as income and employment. it also reflects the historical experience of many countries, which clearly shows that inflation is ultimately a monetary phenomenon. the existence of a single currency, the euro, entails a single exchange rate. this has both internal and external implications. from an internal perspective, the single exchange rate means that the euro shields its member countries from exchange rate volatility between them. indeed, the desire to eliminate such volatility was one of the main driving forces behind the creation of the euro itself. prior to the existence of the see european central bank ( 2011 ) the monetary policy of the ecb. euro, exchange rate arrangements in europe were subject to the risk of destabilising currency crises. this instability was seen as incompatible with the existence of a single market and an integrated european economy. 2 from an external perspective, like most major currencies, the euro is a freely floating currency. the external value of the euro is determined by the interaction of demand and supply in the foreign exchange market. of course, the | 1 |
and about 30 per cent of mexico ’ s. we can talk about how many times a single auto part might cross a national border during the assembly process. and we can talk about the intricate supply chains that have been developed over more than 50 years. or, we can show how building a single, integrated north american auto industry has led to jobs in all three countries. the automotive parts manufacturers ’ association has done a good job putting the numbers together. in canada, 81, 000 people are employed in the automotive supply sector, by both canadian and foreign - owned firms. those canadian companies operate 150 plants in the united states, employing almost 43, 000 american workers, and 120 plants in mexico, providing jobs for roughly the same number of workers there. it is hard to imagine how interfering with open trade or implementing other protectionist policies would benefit these people and their families. it would be helpful to hear many more examples from other industries. policy - makers, business leaders and labour leaders all have a role to play in showing how open trade has meant jobs for workers across north america and around the world. nobody can explain the importance of trade to an employee better than their employer. regardless of what evolves, though, there is no shortage of potential sources of growth for both of our economies. the first order of business should be to keep working on opening trade elsewhere in the world. in this respect, canada has been playing catch - up to mexico, which has successfully negotiated access to many more markets than canada. the numbers tell a clear story. as of today, canada has free trade agreements in force with 15 countries that represent about 22 per cent of global gdp. mexico has agreements in force with 47 countries that represent 44 per cent of global gdp. but if you take the united states out of the picture, canada is left with free access to just 6 per cent of the world economy, compared with 28 per cent for mexico. the good news for canada is that this gap will close significantly once the agreement between canada and the european union comes into effect. it is unfortunate that the trans - pacific partnership, with its ground - breaking coverage of intellectual property and services, has been shelved for now. still, the work that was put into those areas could prove useful for both canada and mexico in future trade agreements. the bottom line is there is still scope for both countries to improve access to markets outside of north america. 4 / 5 bis central bankers'speeches within canada, we had the positive news | though the first quarter of 2016. this meant a significant hit to our national income, about $ 70 billion in that period, or roughly 3. 5 per cent of canada ’ s annual gross domestic product ( gdp ). meanwhile, mexico ’ s national income declined by about 500 billion pesos, or about 2. 5 per cent of annual gdp. in response to the shock, our currencies depreciated — the peso dropped by 28 per cent against the us dollar during the same period, while the canadian dollar declined about 20 per cent. of course, some amount of depreciation was not surprising. it was a natural consequence of the shock, and it helped economic adjustments happen by sending signals that prompted shifts in investment and employment. although both currencies rebounded early in 2016, the peso then began to fall again, while the canadian dollar more or less stabilized. global capital flows were likely one important factor. 1 / 5 bis central bankers'speeches historically, flows in and out of mexican capital markets have been closely tied to investor sentiment about emerging markets. capital flows into mexico fell sharply in 2015 and remained low in 2016, as the us federal reserve prepared to raise interest rates and eventually began tightening monetary policy. this put additional downward pressure on the peso, on top of the pressure coming from lower oil prices that both canada and mexico faced. in terms of output, though, the oil price shock hit canada harder than mexico. the canadian economy contracted outright early in 2015, while growth in mexico remained fairly stable. this reflected, in part, the fact that canada is a bigger oil producer than mexico is — at the end of last year, canadian output was about twice as large as mexico ’ s. for canada, the oil price shock meant a significant shifting of capital and workers out of the oil and gas industry. it established a two - track economy : while the non - resource sector continued to expand, it was not enough to offset the sharp decline in the resource sector. from the start of 2015, the negative impact of the resource track dominated. while the adjustment process in canada has been complex, and very difficult on a personal level for many, we are seeing encouraging signs that the worst may be over. activity and investment in the oil and gas industry have stopped declining and are coming back to a level that is commensurate with current prices. and because that large negative force is now essentially past, it is no longer masking the sources of strength | 1 |
quantitative and / or credit easing. in many countries, the authorities have also had to provide substantial direct support to financial institutions facing difficulties. although we have been spared that in canada, this support has been an important bolster for the global recovery. while these policy actions have been timely and effective, they imply that the incipient recovery depends to a considerable degree on official action. at what stage will private demand be robust enough to make the recovery self - sustaining? clearly, we haven't reached that point yet. a second important risk is the possibility of persistent strength in the canadian dollar, which would work against the positive factors that i mentioned earlier. the recent rise in the dollar is, in part, a reflection of the same factors that are leading to a recovery in canada, notably the rebound in commodity prices. it is also a result of a more generalized weakening of the u. s. dollar, as global financial conditions normalize. other things being equal, a persistently strong canadian dollar would reduce real growth and delay the return of inflation to target. if a stronger dollar were to alter the path of projected inflation relative to that presented in our july monetary policy report, we would need to take that into account. as we have said before, even though we are at the effective lower bound for our policy rate, we retain considerable flexibility through the use of unconventional monetary policy instruments, including quantitative easing. the output gap and the evolution of potential output i'll now turn to the output gap and potential output. the output gap is the difference between actual and potential output – with the latter defined as the level of output that can be achieved with existing labour, capital, and technology without putting sustained upward pressure on inflation. the concept has been much maligned, partly because it is not an observed variable, and it is subject to considerable measurement problems. however, it remains a convenient " shorthand " for characterizing underlying inflation pressures, and for bridging between the current conjuncture and the factors that will condition economic growth over the medium term, as the output gap is closed. our current situation of excess supply ( a negative output gap ) implies, all else being equal, that core cpi inflation can be expected to decline and then recover as actual output growth exceeds potential, while the level of output returns to potential. the output gap is best used to complement more detailed and micro - founded analysis, particularly that captured in more formal models. for example, our main projection model for the canadian | and what they want to do when they leave school. in order to be motivated to learn math, language, or science, students need to understand that this knowledge is relevant to the careers they want - that these courses are the foundation on which they will build their skills and interests. no one who learns a musical instrument practices scales so that they can be really good at playing scales. they practice scales so that they can play the songs they like. and students need to see first - hand the opportunities that will open up for them by studying hard and staying in school. colleges, and the industries that support them, play a key role in providing that motivation, through programs that give high school students a first - hand look at the career options ahead. the flip side of the aging population that i discussed a minute ago is relatively smaller cohorts of young people. but that doesn ’ t mean that we can stop focusing on the problems we face in preparing these young people for the workforce. indeed, the fact that we have smaller cohorts means that we must do better - we can ’ t afford to squander the potential of these young people. once they have finished high school, they need to learn the skills that will help them to become productive workers in the expanding sectors of the economy. i ’ m in the right place to be talking about this, because humber college has an exemplary record of training in areas such as design, merchandising, high - end services, and product innovation. of course, it will always be critical that canada stay on the leading edge of advanced research and theory. but pure research always needs to be complemented by the ability to commercialize, customize, and market the products that result. service industries will also require increasing numbers of skilled workers. older people buy relatively more services as a percentage of their overall consumption. the health care sector, for example, will require more medical technicians, therapists, nurse practitioners, and home care workers to meet growing demand. and as our population ages, the demand for leisure and travel services is increasing. the hospitality and tourism sectors can differentiate canada from other destinations by delivering the exemplary service that only well - trained workers can provide. in order to learn relevant skills, students should be trained to use the latest tools and production methods employed by the sector for which they ’ re training. this means innovative partnerships between educational institutions and industry, to give students access to equipment and methods that are actually being used by leading | 0.5 |
tightening of monetary policy. however, the comparison of inflation trends in croatia and those in the peer countries that have not adopted the euro ( e. g. hungary, the czech republic and poland ) shows that inflation in croatia was in fact lower. this fact, coupled with the already mentioned relatively lower borrowing costs, is a strong argument confirming that the decision to introduce the euro was good and timely and that the euro has contributed to the resilience of the croatian economy in such turbulent circumstances. it is not only our observation that the euro has had a positive effect on the croatian economy. last week i participated in a conference in riga, which marked the 10th anniversary of latvia's euro area membership. a great deal of discussion was devoted to resilience and the shield provided by the euro to a country in uncertain and insecure circumstances. this is certainly a common experience. i was glad to be able to share croatia's success story about euro adoption and confirm the same benefits of euro area membership as well as to show that the common currency, marking the 25th anniversary this year, was still very attractive. to conclude, the introduction of the euro has not been accompanied by any negative surprises. as i have elaborated in detail, the expected benefits have materialised and will continue to materialise given their permanent character. i would like to thank everyone involved in the euro introduction process, many of whom are present today. with this successful project croatia made a historical step in joining the group of the most advanced european countries and establishing ( financial ) conditions that will facilitate addressing numerous challenges waiting ahead, both those from the economic area and from the wider context. 3 / 3 bis - central bankers'speeches | central banks would and have the obligation, to give priority to price stability and financial stability as their primary mandates. with today ’ s conference we, at the croatian national bank, are appealing to banks and other financial institutions to reflect on how to incorporate climate risks into their business strategies and make their business - making more robust and resilient to hazards connected with climate change. we would also like to encourage banks to seize the opportunities brought about by transition towards low - carbon and nature - neutral economy. finally, and equally important, we want to note that we do not save nature only by switching to low - energy lightbulbs or choosing a hybrid or electric car but also by investing consciously. banks could have a noticeable positive influence if they were to finance environmentally friendly projects and make green investments. i am aware that taking the climate and environment into consideration is quite new for the banks, but it is equally so for us. however, adapting to climate change has no alternative. as bob brown once said – “ the future will either be green or not at all ". 2 / 2 bis central bankers'speeches | 0.5 |
more resilient to shocks, release resources for other important needs, and enable the government to operate a counter - cyclical policy when necessary. • the monetary strategy should be continued, acting to ensure price stability, as an intrinsic part of economic and financial stability and as a firm base for sustained growth. • economic reforms should continue. the structural reforms in the areas of privatization, education, competition and the infrastructure should be completed ; this would help increase productivity and growth. moreover, further development of the financial infrastructure and greater competition in the capital market, particularly between the institutions that operate vis - a - vis households, is the right path to follow, and would contribute to growth. i would now like to address three specific issues : 1 ) monetary policy ; 2 ) the economic situation in light of the political situation ; and 3 ) israel's membership of the oecd. 1 ) monetary policy we are currently at a stage where the economy is growing quickly, and inflation is very low, even lower than the target, and this is expressed among other things in price rises in the financial markets. in operating monetary policy we keep our eye on our primary target – the inflation target – and also on the secondary targets, i. e., to contribute to economic activity and financial stability. as every change in the interest rate also affects, to some extent, the rate of growth and the prices of financial assets, in making our interest rate decisions we have to take into consideration the trade - off between these three factors – inflation, growth and financial stability. this is an essential consideration in the whole issue of monetary policy, and it will feature in our future decisions too, as it has till now. 2 ) the economic situation in light of the political situation whenever i speak to investors or analysts from abroad, they always ask the same question, " how can israel's economic situation be so good despite all the political problems facing the country? " i answer : ( a ) the global economy is growing at an impressive rate ; ( b ) the government has maintained fiscal discipline, one of the points on which there is a consensus in israel ; ( c ) in the last fifteen years we have erected a far stronger and more robust economic framework in israel than existed previously, especially in the areas of the foreign currency market and the financial markets in general ; and ( d ) the business sector, during the war last summer, showed its ability to carry on functioning well and more or less meet its delivery dates for | stanley fischer : challenges facing the israeli economy in the globalisation era address by professor stanley fischer, governor of the bank of israel, at the 2008 herzliya conference, herzliya, 21 january 2008. * * * the topic of this session relates to the challenges that our economy faces in the globalization era. indeed, since the early 1990s the israeli economy has undergone a successful process of integrating into the global economy, and today we are already a part – albeit a small part – of it. as part of this integration, the bank of israel headed a campaign of liberalization of capital flows and disinflation until price stability was obtained. the various governments adopted, and have been practicing to this day, an approach of budget discipline and pushed through a series of structural reforms. israel ’ s successful integration into the global economy is manifested, among other things, in rapid growth ; in exports, which reached about 45 percent of gdp ; foreign investment ; a flow of foreign investments into israel ; a high credit rating ; favorable evaluations by international financial institutions ; and an invitation from the oecd to begin the process of joining. these important achievements are contributing to the strong growth and stability of our economy. in one important field in the process of globalizing our economy, however, little has been done thus far : passing a new and modern bank of israel law. the law in effect today was passed in 1954 ; it is antiquated and does not meet the accepted norms in the advanced economies. various governments in israel and the bank of israel have done a great deal of work on the new bank of israel law. in this context, two important milestones are noteworthy : 1. in late 1998, a committee under the late justice dov levin presented the government with recommendations for a new bank of israel law. this was the aftermath of professional work based on other countries ’ efforts in this field, among other things. the members of the commission included prof. haim ben - shahar and prof. alex cukierman, and several noteworthy personalities appeared before it, including the former president of the bundesbank, hans tietmeyer ; the deputy governor of the bank of england, mervyn king ( today the governor ) ; and even myself. 2. on october 2, 2005, shortly after i took up office as governor, the government resolved to adopt the principles of the new bank of israel law in the spirit of the levin committee ’ s recommendations and developments in this field | 0.5 |
border mergers and acquisitions, with a duty on competition authorities to facilitate welfare - enhancing consolidation while protecting and enhancing competition in each local market. finally, as a member of the eurosystem and the european system of financial supervision, the central bank of ireland shares with the european commission and european movement ireland a common commitment to working together on a pan - european basis in order to safeguard stability and protect consumers. only through a strong european union can we successfully manage the twin challenges posed by globalisation and technological change, with shared sovereignty the foundation for effective and sustainable international policymaking ( lane 2018 ). in closing, commissioner vestager : as a memento of your visit to the central bank, i would like to present to you our recent commemorative coin that marks the centenary of the women ’ s right to vote in 1918. 1 / 2 bis central bankers'speeches i look forward to listening to your speech at the close of this dinner. i thank valerie herzberg and micheal o ’ keeffe for their assistance in preparing these remarks. references dottling, robin, german gutierrez and thomas philippon ( 2017 ), “ is there an investment gap in advanced economies? if so, why?, ” in investment and growth in advanced economies, proceedings of ecb forum on central banking, 129 – 193. gutierrez, german and thomas philippon ( 2017 ), “ declining competition and investment in the us, ” cepr discussion paper no. 12536. gutierrez, german and thomas philippon ( 2018 ), “ how eu markets became more competitive than us markets : a study of institutional drift, ” cepr discussion paper no. 12983. lane, philip r. ( 2018 ), “ globalisation and the irish economy : a macro - financial perspective, ” geary lecture, economic and social research institute. vestager, margrethe ( 2019 ), “ the champions europe needs, ” - welt economic summit, berlin, 9 january. 2 / 2 bis central bankers'speeches | philip r lane : competition policy and central banking remarks by mr philip r lane, governor of the central bank of ireland, at the european movement ireland and central bank of ireland joint dinner in honour of commissioner margrethe vestager, dublin, 24 january 2019. * * * dear commissioner vestager, distinguished guests, i am delighted to host this dinner together with european movement ireland in honour of commissioner vestager. welcome to dublin and welcome to the central bank of ireland. the central banking community takes a strong interest in the competition portfolio held by commissioner vestager. in particular, there is increasing evidence that the level of competition and the vigour of competition policies are key factors in determining macroeconomic performance and long - run living standards. for instance, the recent empirical research of guttierrez and philippon ( 2017 ) and dottling et al ( 2017 ) finds that investment rates are negatively correlated with indicators of market concentration. moreover, the incentives for the leading firms in an industry to innovate are weaker in the absence of competitive pressures. taken together, less investment and less innovation imply lower productivity growth and lower living standards. one factor behind the different patterns by which market concentration is rising in the united states but not in europe is the vigorous approach to competition policy in the eu ( gutierrez and philippon 2018 ). importantly, this also maps into better outcomes for consumers, with prices higher in less competitive sectors. more competition also improves the prospects for workers by limiting the monopsony power of dominant employers to constrain wages. in addition to macroeconomic performance, competition policy ( and related state aid decisions ) is also influential in shaping the european financial system. the process of restructuring the european financial sector in the aftermath of the crisis has been disciplined by the imperative to maintain a level playing field. in terms of adjudicating the design of state aid interventions, the implementation of this principle is not always straightforward and this remains an ongoing challenge under the revised european bank recovery and resolution regime. a fundamental development in recent years in the euro area has been the initiation of banking union. as commissioner vestager herself remarked earlier this month : “ the fundamental strength of our internal market is its size ” ( vestager 2019 ). in the aggregate, the european banking system is quite fragmented : the development of banking union has the potential to deliver a more efficient, more competitive and more stable pan - european banking system. in the transition to banking union, we may expect to see an increase in cross - | 1 |
andreas dombret : the first six months of european banking supervision – an nca ’ s perspective speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the ilf ( institute for law and finance ) conference on the banking union, frankfurt am main, 4 may 2015. * 1. * * introduction ladies and gentlemen thank you for inviting me to speak at today ’ s ilf conference on the banking union. it is a great pleasure to be here. and again, the ilf has shown impeccable timing : it is six months to the day since we erected the first pillar of the european banking union. for on 4 november 2014, the ecb became the direct supervisor for the 123 largest banks in the euro area. together, these institutions account for more than 85 % of the aggregate total assets of the euro area ’ s banking sector. that makes the ecb one of the world ’ s biggest banking supervisors. yet the ecb is not walking alone ; it is being accompanied by the national supervisors. ultimately, european banking supervision rests on the shoulders of both the ecb and the national supervisors. let me therefore share with you my view, as a national supervisor, of the first six months of european banking supervision. 2. the benefits of european banking supervision shifting banking supervision from the national to the european level harnesses three specific benefits. first, european banking supervision makes it possible for banks throughout the euro area to be supervised according to the same high standards. these standards will emerge from sharing insights and empirical findings internationally, and from adopting best practices from each national approach to banking supervision. the option of conducting cross - border peer reviews is another way in which the goal of establishing a common set of high standards can be achieved. second, european banking supervision makes it possible to effectively identify and manage cross - border problems. this is essential, because large banks usually operate in more than one country. the failure of the franco - belgian bank dexia in 2011 is a classic case in which banking supervision with a cross - border focus could have improved crisis management. another example is germany ’ s hypo real estate, which folded in 2009. third, shifting banking supervision from the national to the european level adds a layer of separation between supervisors and the banks they supervise. this will prevent domestic supervisors from handling their banks with kid gloves out of national interest. at a more general level, the ultimate forte of european banking supervision is that it blends | some of the more lurid scenarios that are being drawn up for the first of january 2000. our topic this morning, however, is not the year 2000 problem, but the perennial question of how to devise sustainable and realistic monetary and exchange rate policies in an uncertain global financial environment. the first part of my presentation will deal with the theoretical and practical approaches to this issue, particularly in the light of the asian financial crisis. in the second part, i shall focus on hong kong ’ s experience, since 1983, of a linked exchange rate system. finally, i shall return to the regional perspective and examine the prospects for greater exchange rate stability through monetary co - operation and other routes. choice of exchange rate regime few of us, i think, would disagree with the proposition that there is no single exchange rate regime that is suitable to all economies all of the time. indeed, given the experience of the last couple of years, one may be tempted to conclude that there is no regime that is satisfactory any of the time. the difficult choices and trade - offs involved in devising a workable regime call to mind a cartoon i once saw that theorised that the dinosaurs became extinct when they tried, unsuccessfully, to devise an exchange rate mechanism. but modern governments cannot escape the choice, and it is opportune to reconsider what options are available in light of the recent experience in asia and elsewhere. it is now well understood that exchange rate and monetary regimes are inextricably linked. the days when significant barriers to capital movements allowed governments to pursue independent monetary and exchange rate policies are long gone. so any decision on an exchange rate framework is not narrowly confined to external considerations, but must reflect broader policy choices, as well as the structure of the economy in question. the practical and theoretical considerations involved in deciding on an appropriate exchange rate system can be reduced to four broad factors : the external versus domestic orientation of the economy ; the flexibility of its cost - price structure ; the exposure to financial shocks ; and the reputation and credibility of policy makers. these factors, naturally, differ from one economy to another. in theory, the choice is straightforward enough : the best system is the system that best accommodates a country ’ s “ natural endowment ” of these factors. success in practice, however, is not simply — or even primarily — a question of choosing the preferred exchange rate framework from a textbook perspective. policymakers on the ground need to address the much more demanding challenge of ensuring consistency between | 0 |
has left its mark. no one foresaw that malaysia would introduce foreign exchange controls. nor did any banker believe that russia would go so far as to suspend payments on debt denominated in roubles. people seem to be thinking that if such things could happen in malaysia and russia, perhaps they can happen elsewhere. the problems with the hedge fund long - term capital is another matter that has made international bankers more wary. although their loans to this fund were secured, the total stock of loans from all banks and the total amount of collateral were too large for direct disposal in the market ; that would have caused prices to fall, leading to losses for the banks. under such circumstances it is hardly surprising that international banks also review their lending commitments to other funds. the key question is whether the international banks ’ review of lending commitments will be extended to include other groups of customers. perhaps their lending policies will become generally more restrictive. one sign of this is that the flow of loans to many countries which are regarded as emerging markets has virtually dried up. the interest rate differential between treasury securities issued by such countries and by the us, for instance, has widened dramatically this autumn. in turbulent times, moreover, banks have difficulty in fulfilling their function, which is highly important in a market system, of distinguishing sound borrowers from others. the result may be that their provision of credit is completely suspended. it is already evident that in their assessments, various players are tending to disregard more fundamental factors. an example of this is the weakening of the krona. despite good economic fundamentals in sweden, since the summer the krona has weakened sharply and last week this tendency accelerated. in a matter of days the exchange rate with the german mark declined by up to 5 per cent. in that situation the riksbank decided to intervene in the foreign exchange market, which nowadays is unusual. we did so to demonstrate that we considered the krona ’ s fall was excessive in relation to the fundamental state of the economy and that the time had to come to pause and reconsider the situation. instances of “ follow - the - leader ” behaviour occur not just in bullish stockmarkets but also in the currency market when many countries with different conditions are lumped together in a general assessment. market players must assess each country separately. central bank interventions under certain circumstances are uncommon with a flexible exchange rate regime but they do occur. i cannot exclude the possibility of the riksbank intervening again if this were to be | element here ; another is a stable exchange rate. sweden must fulfil the convergence criteria in both these respects. in practice this means that there may be grounds for continuing to produce inflation forecasts and to publish inflation reports in much the same way as at present. we should also do what we can with the interest rate to direct inflation onto our target. but the closer we come to adopting the euro, the smaller will be our repo rate's effect on longer term interest rates. that is because as the entry date approaches, the swedish yield curve will be increasingly determined by european interest rates. the fact remains that exchange rate stability is one of the convergence criteria for sweden's full participation in the monetary union. this may affect the formation of monetary policy. the risk of conflicts between the inflation target and the need for exchange rate stability is sometimes emphasised in discussions. for several reasons i do not believe we need to be particularly concerned about that. for one thing, erm2 participation is not an ordinary system of fixed exchange rates but the preliminary stage of acceding to a monetary union in which exchange rates are irrevocably locked. so currency unrest during this period should really only occur in the event of uncertainty about sweden's emu participation on account of problems either in sweden or in emu. note that these risks are not really economic but political. presumably they would also be extremely small in a situation where accession to erm2 has been preceded by political agreement both in sweden and in the rest of the european union. moreover, currency risks arise as a rule when economic policy is out of step with the fixed exchange rate. if swedish monetary policy before and during the erm2 period is focused on price stability and economic policy in other respects is also in line with the direction in the monetary union, the risks of a currency crisis would no doubt be even smaller. furthermore, the erm2 period will presumably be comparatively short and directly connected with sweden's subsequent full participation in the monetary union. if the swedish economy is in step with the euro area on accession to emr2, the probability of any serious imbalances having time to arise is therefore small. a question that is raised from time to time is whether a decision to join the monetary union should lead to the riksbank's inflation target being replaced by the ecb's. as i see it, the grounds for doing so are weak in the time perspective of one to two years that | 0.5 |
roger w ferguson, jr : reflections on financial literacy remarks by mr roger w ferguson, jr, vice chairman of the board of governors of the us federal reserve system, before the national council on economic education, washington, dc, 13 may 2002. * * * i am delighted to welcome the national council on economic education and the minneapolis federal reserve bank to washington. i want to commend your partnership and the important discussion you have organized for tomorrow. i also want to commend both institutions for their excellent leadership. in gary stern, president of the minneapolis fed and chair of the ncee, you have one of the most thoughtful, committed, and capable public servants i know. gary is also one of the world's best economic educators and is deeply committed to making economic and financial education a priority in this country. i decided to take advantage of your presence tonight to speak about the benefits of economic and financial education and about why such education matters to the federal reserve. i also want to spend a few moments examining the importance of focus and clarity in our goals and expectations. the benefits of education i know that i could speak for much longer than you care to listen about why the understanding of economics and finance is crucial for individuals in a market economy. knowledgeable and astute consumers promote competition among providers, which benefits us all. personal financial security enhances individual well - being. increasing national savings allows us to invest more productively for tomorrow. and, at a more fundamental level, our social fabric and national image are intimately connected to our material aspirations. the united states cannot be the land of opportunity unless all of our citizens have both the tools and the ability to use them to improve their lives and livelihoods. as you may know, i have been trained both as a lawyer and an economist. i think the point can fairly be made that the most critical underpinnings of our society are the constitution and our market structures. from my perspective, however, the education that we provide our citizens about the rule of law differs dramatically from what we provide about the functioning of markets. by the time i graduated from junior high school i had read the constitution ; not until much later did i study how prices are set in a market economy. this imbalance can and will be addressed by your work and that of many others. fortunately, as my federal reserve board colleague ned gramlich pointed out recently, changes in our financial system - - including the increasing complexity and diversity of product offerings - - have | held against investor mortgage lending, and the bank of england has proposed rules that effectively tighten lending criteria for investor mortgages. despite high rates of debt repayment, housing credit increased by 8 percent in the year to march 2016, its highest growth rate since 2008. new mortgage commitments are also elevated, running at an annual rate of 35 percent of outstanding housing debt. with high rates of churn in mortgage books, recent increases in interest - only lending and high debt - toincome lending could rapidly affect the quality of banks ’ overall mortgage portfolios, tending to dilute the improvement generated by the lvr restrictions. interest - only and high debt - toincome ( dti ) lending to housing investors has increased considerably more than for owner occupiers. persistent housing credit growth in excess of income growth has caused the household debtto - income ratio to grow steadily since 2012. at 163 percent this ratio now exceeds the previous peak reached during the gfc. there is a clear risk that on - going high house price inflation could lead to a further deterioration in the household debt - to - income ratio. while low interest rates have helped to contain debt - servicing ratios ( dsrs ) for new zealand as a whole, high and rising debt levels leave households very vulnerable to any future increases in interest rates or deterioration in economic conditions. while a large increase in mortgage rates is unlikely in the current global environment, at today ’ s high debt - to - income ratios, a relatively small increase in interest rates could put significant pressure on some borrowers. this is particularly the case in auckland, where dsrs for new buyers are close to 50 percent ( figure 3. 4 ). a 1 percentage point rise in interest rates for these new buyers would boost the proportion of income devoted to mortgage servicing by around 5 percentage points. bis central bankers ’ speeches figure 3. 4 representative buyer dsrs ( annual, % of average gross household income ) on the other side of the housing market is the inability of new supply to meet the growing demand, particularly in auckland. although auckland annual housing consents recently reached an 11 year high and are some 20 percent above last year in value, the number of residential building consents per capita in auckland is currently around 40 percent of the peak level achieved in the mid - 2000s. we estimate the shortage of houses in auckland has increased over the past year and may now be in the order of 20, 000 – 30, 000 houses. furthermore, the overall housing short | 0 |
benjamin e diokno : message for the 2021 pds award message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the 2021 pds award, manila, 25 march 2021. * * * to the women and men behind the philippine dealing system holdings corporation, my heartfelt greetings and congratulations for organizing this 2021 pds awards. your theme for this year ’ s awards, “ strength in adversity, ” is very timely and relevant. the ongoing global health and economic crisis has spared no one. we are now being tested to the core. yet the struggles we face have allowed us to discover a strength that would enable us to rise above everything, to think of better ways and more effective solutions, and to help those who need our help the most. today ’ s awardees have achieved all these and more. the bangko sentral ng pilipinas salutes their outstanding performance, leadership, and innovation, especially during this very trying time. mabuhay kayong lahat! the bsp is likewise extending its gratitude to the pds group for the services you have rendered despite the pandemic. your collective selflessness has formed part of the foundation that continues to uphold the economy while it runs on a limited capacity. we are not out of the woods yet. the future remains clouded with uncertainty. but we are not discouraged. we remain focused and committed nurture the economy back to its growth trajectory in the face of the current crisis. let me share some insights on the philippine economic outlook for 2021 and the bsp ’ s policy actions to support the national government ’ s whole - of - nation approach in addressing the current crisis. multilateral agencies such as the international monetary fund, the world bank, and the asian development bank expect the philippine economy to expand by 5. 9 to 6. 6 percent this year. these are broadly in line with the national government ’ s forecasts of 6. 5 to 7. 5 percent for 2021. meanwhile, some foreign analysts have rosier estimates for the year, with growth projections ranging from 6. 1 percent to as high as 9. 6 percent. this shared optimism is based on the philippines ’ macroeconomic fundamentals, which have remained broadly intact, despite the pandemic. these fundamentals include improving quarterly gdp outturn, better business and consumer outlook, ample liquidity in the system, a sound and stable banking | system, robust external payments position, and a manageable fiscal deficit. the philippine economy has the essential elements to post a strong recovery this year. moving forward, the bsp ’ s actions and policy thrust will continue to be anchored on its core mandates of promoting price and financial stability. 1 / 2 bis central bankers'speeches the bsp will remain vigilant over the current inflation dynamics and operating environment with a forward - looking perspective to ensure that the monetary policy stance supports economic recovery and addresses any risks to our price stability mandate. it addition, bsp will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain responsive to emerging risks and to promote the continued soundness, stability, resilience, and inclusivity of the banking system. lastly, the bsp will continue to adopt policies that will strengthen the economy ’ s resilience to external shocks. these will include maintaining a market - determined exchange rate, sustaining a comfortable level of reserves, and keeping the country ’ s external debt manageable. i said this before, and i ’ ll say it again : we should not let this unprecedented crisis go to waste. let us learn from it. let us all continue to discover and tap into our inner strengths. our shared fortitude as a nation will enable us to withstand all adversities and come out of this pandemic as economic champions. may our award - winning members never tire of leading the capital market in conceptualizing and implementing new and bold strategies for the industry and for our country. continue to reform, innovate, and transform. again, congratulations to our awardees and to the pds group. 2 / 2 bis central bankers'speeches | 1 |
next, i will discuss the need for public intervention to ensure an alignment of interests ( ii ). i / the financial sector and civil society are already mobilised. cf. moody ’ s, “ impact of carbon reduction policies is rising globally ”, march 2015. mark carney, “ breaking the tragedy of the horizon – climate change and financial stability ”, speech given at lloyd ’ s of london, 29 september 2015. bis central bankers ’ speeches this mobilisation, which has yielded progress, appears to have occurred in three main phases. first, the major public financial institutions were at the forefront of this movement. this is the case for the european bank for reconstruction and development or the caisse des depots, with its subsidiary cdc - climat. the european investment bank estimates that it currently grants 25 % of its loans – over eur 20 billion per year – to “ green ” projects. second, under the aegis of the united nations, projects were launched such as the unep finance initiative, a partnership between the united nations environment programme and 200 financial sector institutions, which make environmental sustainability a collective responsibility, share best practices and establish principles for green financing. thanks to the montreal climate change protocol, or to the portfolio decarbonization coalition, signatory investors commit to measuring and disclosing the carbon footprint of their portfolios. the objective is ambitious : reduce investment in carbon - intensive projects by several hundred billion dollars. lastly, financial institutions are now making more direct commitments. french banks and insurance companies have recently announced that they have withdrawn their support for the coal industry and increased their financing of renewable energies. paris europlace called for the creation of an energy transition fund, which would be invested in by french banks, insurers and asset management companies, and which could in turn invest eur 10 billion by 2020, with a view to financing projects to improve energy efficiency or promote renewable energies. this is a commendable initiative. ii / to best align these private initiatives with the fight against global warming, which is a public good, public intervention is nevertheless necessary. for central banks or prudential authorities, three questions arise : that of financing – and interaction with monetary policy –, that of information – and of disclosure –, and lastly that of time horizons – and stress tests –. 1. the question of financing : what interaction with monetary policy? climate change is likely to affect the price of goods and services. it has a direct impact on food prices | of costs in terms of higher real macroeconomic volatility. quite on the contrary, the volatility of real variables has declined relative to the averages observed during the 1980s and 1990s. does one size fit all? it is often argued that a single monetary policy combined with inflation differentials leads to different real interest rates across countries, which in turn may destabilisize the currency union by creating divergence in output growth that exacerbate inflation differentials. this is by no way what we have observed : first, inflation dispersion among the euro area countries ( measured as the unweighted standard deviation of annual hicp inflation rates ) amounted to slightly less than 1 percentage point in 2005 compared to around 6 percentage points in the 1990 ’ s. since the inception of the euro, the average inflation dispersion across the euro area countries has been around 1 percentage point. this figure is very close to the dispersion observed across the 14 us metropolitan statistical areas. concerning growth differentials, euro area averages naturally mask a variety of growth performances of individual countries within the single currency area, especially in a context where structural convergence has not been completed yet. growth dispersion is a natural phenomenon in any large economic area. looking at the main trend, the degree of dispersion in real gdp growth rates across the 12 euro area countries declined somewhat in 2004 ( in annual average terms ) to a historically low level ( 1. 4 % as measured by the unweighted standard deviation ), while it had been fluctuating around 2 % since the 1970s. by comparison, the dispersion of real growth rates across the eight us statistical regions fluctuated around an average of 1. 5 % between 1990 and 2002. this is not surprising since some stabilisation channels are at work in a currency area : in particular, a credible monetary policy should bring about a convergence of expected inflation towards the definition of price stability, leading progressively to the convergence of ex ante real rates across the area ; moreover, lower inflation relative to other trading partners increases price competitiveness, which in turn counteracts the initial effect of higher real interest rates. 3. appropriateness of the monetary policy stance has the monetary policy stance been appropriate? to try answering that delicate question, the literature of central bank watchers or observers has mainly focused on taylor - type rules as a usual benchmark. despite numerous caveats, such an approach can be very informative as it addresses several relevant issues such as | 0.5 |
epicentre of the crisis. but then, what can explain the vast array of opinions on how to resolve the crisis? as i said at the beginning of my speech, the debate runs along the front lines of one of the most well known trade - offs in economics : the trade - off between efficiency and distribution, or, put differently, between sound incentives and burden sharing. such a trade - off informs the debate at the national level. for example, labour market reforms in the countries at the bis central bankers ’ speeches periphery would lower barriers to entry and hence promote employment, but incumbent employees are taking issue with such reforms because they fear downward pressures on wages or a greater risk of losing their jobs. and the trade - off informs the debate at the european level. on the one hand, there is the desire to strengthen incentives and controls in order to contain risks. on the other hand, there is the desire to share the economic, social and political burdens through mutualising risks. such a tug - of - war between sound incentives and greater burden - sharing occurred in the debate on the construction of the rescue mechanisms, in the debate on introducing eurobonds, in the debate on a true fiscal union, and now it takes place in the debate on a possible banking union. the bundesbank position in these debates has been clear and consistent. sound incentives are indispensable for countering the biases inherent in the euro area ’ s architecture. some burden sharing is necessary, and it is implemented via the rescue mechanisms that grant financial assistance. but if burdens are shared in a manner that distorts incentives even further, no lasting resolution of the crisis will be possible. studies by the bundesbank have shown that, in the euro area, which may be interpreted as a particularly credible variant of fixed exchange rate regimes, usual adjustment mechanisms are less immediate and less harsh than in other exchange rate regimes. through the convergence of short - term interest rates and the nearly unlimited provision of liquidity, the common monetary policy smoothes an otherwise more abrupt adjustment process, which would entail significant costs to the financial system and the real economy. but insofar as normal adjustment forces are suspended, sound incentives need to be put in place to bring about lasting gains in competitiveness and productivity. and given the dimension of existing inefficiencies, the current crisis of confidence and past experience of implementation lag and drag, there is no compelling argument for delaying the necessary adjustments while putting | ##connection, retailers will no longer have to deploy multiple card - accepting devices, thereby simplifying operations and minimizing costs. ultimately, millions of filipinos will enjoy the convenience, efficiency and lower costs of transactions from your pos interconnection. we at the bangko sentral also welcome this initiative because it presents enormous potential for creating a truly inclusive financial system where strong and vibrant institutions provide efficient financial services to more people including the underbanked and those who remain unbanked or unserved by our financial system. crucial in developing this system is the creation of a network of access points where customers can conduct their transactions through a multi - channel approach for customer interface. this is where an interconnected pos system can play an important role. since pos terminals entail relatively minimal investment, are easier to deploy and are less costly to maintain, it is likely that more and more financial institutions will be inclined to adopt this technology as a channel for their services. the growth in electronic or e - money business is another area that may fortify the role of pos systems further. bangko sentral ’ s circular 649 which set the regulatory framework for e - money and e - money issuers promotes innovations in fund transfer mechanisms and paves the way for a competitive growth in the industry. under this framework, authorized e - money issuers can build a network of cash in / cash out agents that can serve as gateway for the previously unbanked to access financial services. financial institutions can create linkages and leverage this vast network of agents to deliver financial services to a broader market using the e - money platform facilitated by either a mobile phone or a pos terminal. we have seen promising results so far. i understand that the next phase of development for the system is to allow fund transfers, another welcome innovation. as of march 2010, for instance, we have monitored 7. 4 million e - money transactions valued at roughly 11. 3 billion pesos using atm and pos channels. once this pos network interconnection is fully developed, therefore, it will provide even more efficient and costeffective ways to serve the many bankable yet unbanked filipinos. nevertheless, it is prudent to remember that while technology presents us with many opportunities, we must also remain vigilant of its attendant challenges and risks. system downtimes, breach of consumer information confidentiality, unclear charges and fees are among the issues that can | 0 |
regulation in which it is complemented by the newly developed mechanisms for surveillance including across borders, strengthened supervisory oversight and institutional arrangements for resolution. central banks and financial markets a more recently much discussed mandate is the role of the central bank in ensuring the orderly functioning of financial markets. orderly functioning financial markets are vital not only for the efficient allocation of financial resources in the economy but it is also essential for the transmission of the monetary policy and for preserving financial stability. while competitive forces are expected to result in efficient and optimal outcomes, central banks in emerging economies have had the important role of balancing between the market forces and intervention with the objective of ensuring the orderly functioning of the financial markets. it needs to be recognised that several important preconditions need to be in place to generate equilibrium prices that reflect the underlying fundamentals. this includes the institutional and market infrastructure, the incentive structure, the rules of the game and the level of financial literacy that recognise and understand the market signals. when these elements are still yet to be fully developed in many emerging economies, it increases the risk to instability. thus, as a result of the stage of development of such markets, or its size or prevailing market imperfections, emerging economies have tended to be more vulnerable to greater volatility and circumstances in which markets do not self - equilibrate. the recent global financial crisis has shown that such dislocations have occurred even in developed financial systems. institutional structures and rules that become deficient and less relevant heighten the risk for such unstable market conditions. experience has also shown that such market dislocations have severe and far reaching adverse implications on the overall economy. for the effectiveness of such interventions, however, there needs to be clarity in the objectives to be achieved by such central bank presence and the results that are expected to be delivered. of importance, there needs to be the recognition of the temporary nature of such interventions and the challenge of efficiently unwinding such presence when the objectives are achieved. there is also the need to manage the risks of unintended consequences of such direct central bank interventions. such risks could include the potential for circumvention, or the gravitation to other markets not protected by such intervention. there could also be potential costs associated with such interventions, not only the current costs, but also the cost to future generations. while the pace of deregulation and liberalisation may differ across emerging economies, there is a discernable distinct shift to greater market orientation in this | recent decade. these reform efforts have been reinforced by efforts to develop the financial markets and financial infrastructure. within this framework, the nature of intervention has been in the form of direct presence in the financial markets, the setting of rules and regulation, and in the resolution of problem financial institutions. such interventions were evident during the asian financial crisis in the late 1990s to restore stability in the financial markets. this in turn created conditions for the resumption of the financial intermediation process. while the efficient functioning of the financial system was vital for the economic recovery in asia, more important was the comprehensive set of policies that produced the recovery. within a year of the introduction of the pro - growth measures, most of the crisis affected economies experienced a strong recovery. more recently, the global financial crisis has seen several rounds of wide ranging direct market interventions to restore the smooth functioning of these markets. described as actions taken in the most extraordinary and exceptional circumstances, it demonstrates that this phenomenon of severe market dislocations has the potential to occur even in the most developed of the financial systems. as these massive interventions continue, primarily in the public and private securities markets, the concern is on its potential consequences on other parts of the world, in particular, to the emerging world. in the now more interconnected and interdependent world, these actions are already creating significant shifts in capital flows. important for the emerging world is the ability to intermediate such surges in capital flows and to manage the risks associated with such liquidity inflows and its potential to undermine the current recovery. a further element that has frequently been underestimated is the role of behaviour which has had a major influence on the dynamics of the financial markets. extreme forms of such behaviour are evident in asset and foreign exchange markets. while the former is prone to boom and bust, the latter is prone to overshooting. while several emerging economies have successfully relied on macro prudential measures to contain the formation of such asset bubbles, the foreign exchange market is not like any other market. with a daily transaction amounting to usd4 trillion, it is the most liquid and dynamic market in the world. the role of sentiment and expectations has resulted in a market that is frequently prone to excessive movements and overshooting. as highly open economies, disruptions and disequilibrium in the foreign exchange market have far reaching consequences in the real economy. intervention operations to maintain orderly market conditions reinforced by sterilisation operations have aimed at ensuring liquid | 1 |
depending on the particular impediment to the transmission of changes in the standard policy rate to the economy. two months ago i argued that financial contagion – both between debt markets of different sovereigns and between sovereigns and banks – is one major force at work that impairs the functioning of the monetary policy transmission mechanism. 10 this is still the case today ; if anything contagion dynamics have worsened rather than eased. contagion already played an important role at the beginning of the financial crisis, then in terms of the propagation of illiquidity in interbank markets. the measures implemented starting in september 2008 had the specific objective of addressing the evaporation of liquidity in the money market, which seriously impaired a key source of funding for banks and thus their ability to continue lending to households and businesses. the money market “ freeze ” and liquidity contagion was, at least in large part, due to asymmetric information on other banks ’ creditworthiness – in turn related to their exposure to toxic asset backed securities. as such, it could not have been cured by a reduction in key ecb rates. the latter could have dealt with a possible increase in interbank rates due to larger counterparty risk premia, but not to a situation of liquidity hoarding and market breakdown. 11 moreover, a sharp reduction in key ecb rates aimed at reducing banks ’ cost of funding would also have had unwarranted repercussions on the overall monetary policy stance. see friedman, m., and a. j. schwartz ( 1963 ), a monetary history of the united states, 1867 – 1960, princeton university press or, more recently, christiano, l., r. motto and m. rostagno ( 2003 ), “ the great depression and the friedman - schwartz hypothesis ”, journal of money, credit and banking 35, pp. 1119 – 1197. keynote lecture on “ contagion and the european debt crisis ” at the bocconi university / intesa sanpaolo conference on “ bank competitiveness in the post - crisis world ”, milan, 10 october 2011. for a formal analysis of the possible breakdown of the interbank market in the presence of counterparty risk, see heider, hoerova and holthausen, “ liquidity hoarding and interbank market spreads : the role of counterparty risk ”, ecb working paper no. 1126. see also allen, f., | ; population growth within texas has compounded over the past two decades by 2 percent per annum, versus 1. 1 percent for the rest of the nation. we now have the second - largest congressional delegation in the country behind california. but the growth dynamic here is vibrant, whereas that of california is stagnant. this is why we are picking up population and congressional seats, while the recent u. s. census apportioned no additional seats to california. in sum, we are a vibrant and strong economy. the economic tenor in california and the rest of america is weary, if not downright weak : somos fuerte ; los otros son flojos. since the recent economic recession ended, texas has been responsible for 48 percent of all the jobs created in america. and yet, the hispanic population is not participating in our economic prosperity in proportion to its weight in the texas census. bis central bankers ’ speeches the unemployment rate among latinos here is substantially higher than it is for non - hispanic texans. hispanics earn 36 percent less in hourly wages than non - hispanic whites ; median household income of latino - headed households in texas is about 60 percent of median household income of non - hispanic households. for the u. s. as a whole, latino - headed households earn about 73 percent of non - hispanic white household income. pia orrenius and our other economists are hard at work in deciphering what accounts for the differences between the economic status of texas hispanics and latinos elsewhere in the u. s. already, one factor is clear : hispanic educational achievement in texas is abysmal. in texas, as anywhere else in the united states and in all capitalist societies, “ you earn what you learn. ” every study known to man, and plain common sense, tell you that income is directly correlated to educational attainment. high school graduates earn significantly more than high school dropouts ; a college degree results in greater lifetime earnings than a high school degree ; the highest income groups are those with graduate degrees. nearly 50 percent of texas public schoolchildren are hispanic, but only 38 percent of high school graduates are hispanic. some 54 percent of non - hispanic whites and 48 percent of non - hispanic blacks age 18 to 24 with a high school degree were in college in 2008. the percentage of hispanics was only 43 percent. within the age cohort between 25 and 64, only 14 percent of native - born texas latinos have college degrees ; 23 percent of | 0 |
of liquidity, especially in us dollars. in the final quarter of 2008 we faced a situation in which our financial institutions were facing liquidity pressures, owing to the market reaction to the lehman brothers failure. to offset the liquidity outflow that had taken place after the bankruptcy of lehman brothers, the central bank instituted a new swap facility that permitted banks to exchange us dollars for bahrain dinar at no penalty. this helped greatly to ease liquidity conditions in bahrain ’ s money markets and allowed the 2008 year - end to pass without any significant market disruptions. as 2009 unfolded, liquidity pressures gave way to rising credit losses. within bahrain itself, losses reported by banks have been in line with those we would expect in a normal business cycle. the domestic impact of the crisis has been limited in large part due to the fact that our real estate market had not experienced high levels of speculative activity. however, since bahraini banks are major providers of credit throughout the mena region, they have been affected by credit defaults elsewhere, and by problems in the real estate sector elsewhere in the region. nonetheless, the high levels of capital adequacy of our banks has allowed them to absorb these losses and the banking system remains on a very solid footing. a further source of strength for bahrain ’ s financial sector has been our position as a hub for islamic finance. owing to the sharia prohibition on speculative activity and the requirement that financial transactions be backed by real assets, the islamic financial industry has been less affected by the global financial crisis than the conventional sector. while this sector has no room for complacency, as its customers are just as likely to suffer from the economic downturn as those of conventional banks, we nonetheless believe that there are enormous opportunities for sharia - compliant finance to take up some of the slack created by problems in the conventional financial industry. the sukuk market, in particular, is one that we believe provides a flexible financing mechanism which contains enormous potential. with bahrain ’ s long track - record and supportive regulatory regime for islamic finance, we believe that this is an aspect of the financial sector that is ripe for further development. let me again welcome you to bahrain and thank you for your participation in this important event. | rasheed mohammed al - maraj : luxembourg – a global financial services centre keynote address by he rasheed mohammed al - maraj, governor of the central bank of bahrain, at a seminar “ luxembourg – a global financial services centre ”, manama, 11 january 2010. * * * your excellencies, ladies and gentlemen : on behalf of the central bank of bahrain, it gives me great pleasure to welcome you to bahrain and to have this opportunity to discuss matters of common interest between luxembourg and bahrain. as i am sure you know, the economies of bahrain and luxembourg have many similarities. in both cases we act as a financial services hub for a wider economic region. in bahrain ’ s case, this region is the middle east and north africa, including the six member states of the gulf cooperation council. in consequence, like luxembourg, the combined assets of our financial industry represents several multiples of the size of our economy. traditionally, bahrain has concentrated on developing our banking industry, including the wholesale banks that provide project finance throughout the wider mena region. however, in recent years, in line with the vision 2030 plan, bahrain has sought to diversify its financial sector. we have seen a growing presence of insurance companies and fund managers. as of november 2009, there were 2, 610 authorised funds established in bahrain managing assets of over nine billion us dollars. while i realize that this is small in comparison with the size of luxembourg ’ s fund management industry, this is part of the financial sector that we are seeking to develop further and we expect it to grow rapidly in the coming years. the financial crisis has caused many financial centres to review their development strategies. bahrain is no exception to this trend, even though the crisis has had only a modest impact on our financial system. throughout the difficult period of 2008 and 2009, our financial markets continued to function normally and the government of bahrain did not consider it necessary to take some of the extraordinary measures, such as recapitalization of banks and providing blanket guarantees, that had been adopted in other parts of the world. although we needed to place two wholesale banks into administration in the course of 2009, these events did not have a spill - over effect to the wider financial system. in fact, the financial markets seem to have taken comfort from the prompt and effective action taken by the cbb in dealing with these two problem banks. in bahrain, as in the rest of the world, the impact of the financial crisis was felt first through a withdrawal | 1 |
given macroprudential tools should allow us to deal better with lending expansions and contractions in order to protect the economy from financial excesses. in the wake of the financial crisis, the arsenal of macroprudential tools has expanded significantly. apart from the countercyclical capital buffer we have the systemic risk buffer, the buffers for globally and domestically systemic banks, the possibility to limit large exposures, increase capital or revise risk - weighted assets to residential and commercial real estate exposures. this is a significant improvement that will allow us to develop macroprudential policies that interact with microprudential ones as well as with monetary policy. but it is not enough to create macroprudential tools. they must be properly allocated institutionally in order to avoid inaction bias by policy - makers and counteract misalignment of incentives with the financial sector, in particular at certain points in the lending / financial cycle where taming is needed. in a sense, the dilemmas and incentives that policy - makers will face regarding macroprudential policy decisions will not be far different from those encountered in the past when setting monetary policy ( i. e. interest rates ). for the latter, the optimal institutional design is to enshrine monetary policy in an independent central bank. for the former, a very similar solution, intuitively, should prevail, although the theoretical framework and the empirical research to support it is much less advanced than in the monetary field. needless to say, macroprudential policy is particularly relevant for a country like spain, part of a monetary and banking union where, as seen in the past, the financial and business cycles of the member countries may be in different positions. with a common monetary policy and ( micro ) supervisory policies, and a fiscal policy with almost no room for manoeuvre, the macroprudential policy becomes a much - needed ‘ degree of freedom ’ to deal with the lending cycle, a task that traditionally has been allocated to central banks too. as the recent article iv visit of the imf made clear, spain is one of the few countries in europe still not to have a macroprudential authority. given the role that macroprudential policy will play in the future, it is probably high time that we all reflect on the optimal design of this authority in order to enhance financial stability. see j. saurina and c. trucharte : “ the countercyclical | , the economy ’ s natural rate of interest, cannot be observed in reality, but only, in the best of cases, estimated indirectly. accordingly, the central bank needs to analyse a broad range of indicators in order to infer the state of the economy, so as to be able to determine the appropriate monetary policy stance. this conceptual framework worked satisfactorily during the 1990s and the early years of the current century, a period known as the “ great moderation ”, characterised by stable growth in the advanced economies and relatively low levels of inflation. however, the economic and financial crisis that began in 2007 - 2008 forced central banks to adopt innovative policies and, on occasion, to navigate “ uncharted waters ”. this is the subject i wish to talk about in the final part of my speech. the monetary policy challenges arising from the crisis the magnitude of the crisis that began in 2007 - 2008 led the central banks of the main developed economies to design and implement expansionary monetary policies of unprecedented magnitude and scope. the crisis had a significant effect on banks and other financial intermediaries, leading to a contraction in credit and, therefore, in economic activity. this led the main central banks to introduce various measures to provide liquidity to their banking systems at times of market malfunctioning. in addition, asset purchase and medium and long - term financing programmes were launched that avoided a systemic crisis which would have led to the failure of a large number of banks and, undoubtedly, to an enormous crisis in the real economy, as during the “ great depression ” in the 1930s. even so, the severity of the recession led to a very sharp contraction in demand, and ultimately to inflation rates that were too low and incompatible with the mandate of the central banks of the main advanced economies. this situation forced them to reduce the interest rates determined by monetary authorities to historic lows. some central banks, such as the ecb and those of japan, sweden, denmark and switzerland, reduced rates to negative levels. 5 / 7 in fact, one of the factors that has influenced the actions of central banks most in recent years has been the difficulty of reducing interest rates when they are already at very low levels. interest rates that are too low may mean that there is no incentive for financial intermediation, since, for example, it is more profitable to store money in cash than to deposit it in the banking system. what should we do then when rates are very low and the economy still requires | 0.5 |
that does nothing but sanctioning. i don ’ t know, and i do not have to know, national initiatives in a national context in this respect. on the central bank side we have sanctions at national but also at european level. you ’ re referring to the case of the latvian bank ablv... the latvian subsidiary. i read in the media that the supervisory side of the ecb informed the 2 / 5 bis central bankers'speeches national authorities of what happened and suggested to them to use the tools they have at their disposal. since the way the national tools were used is now the subject of a court case, i cannot comment further on it. let the court decide. the national central bank for its part took its own measures. and they suspended the bank. the ecb did not suspend the whole group [ from monetary policy operations ] until later. the banque centrale du luxembourg ( bcl ) suspended the group before the ecb because they have the possibility to do so at national level. would you have another example? there are some investment funds which ought to provide information and statistics to the national central bank, which then reports to us. but some funds don ’ t do it. we have asked the bcl several times to initiate sanctions because we consider that the local authority has clear knowledge of the matter. i think they are now ready to do it. i would not say centralisation is better per se. sometimes proximity leads to higher efficiency. another topic which is concerning the ecb and national lawmakers is virtual currencies. luxembourg and other countries in the eu are granting more and more importance to virtual currencies, but you seem to be really cautious. what do you see as the biggest potential threats emanating from cryptocurrencies? one should consider various aspects. one is financial stability, the second is consumer protection, the third is investor protection, the fourth is market integrity and the fifth is anti - money laundering. concerns regarding these aspects are especially high in relation to what you call cryptocurrencies. i call them virtual tokens, by the way. they are like the tokens you buy when you go to a casino. studies have shown that 50 % of transactions made using these virtual tokens and 25 % of users are linked to illicit activities. there are four main risks. the first risk is market liquidity. the market is excessively concentrated, with about 96 % of transactions being carried out by | , but not all regions have benefitted equally here in the second district. some portions of upstate new york have benefitted from an influx of technology companies and other industries, while other regions remain challenged due to a lack of population growth. later today we will hear from two of our economists who will share national and regional economic trends. also in the spirit of looking forward, i can share some views on what community bankers can expect from the supervisory process. examiners are keenly focused on emerging trends around funding costs and liquidity risks. bankers consistently share with us the challenge of raising core deposits to fund loan growth. community banks compete not only with other community banks for deposits, but also with credit unions and larger institutions. and, these larger counterparts are actively courting customers through direct mailers and offering competitive rates. data in the second district show cost across most deposit categories have increased with a slight uptick in the higher cost funding sources such as borrowings. data for the largest banks exhibit a comparable trend, but they control a larger market share. i expect another area of focus during the examination process will be interest rate risk and related challenges. bankers have shared with us that customers are demanding higher rates on deposits, yet those same customers are reluctant to pay higher rates on their loans. what is a banker to do in trying to maintain a productive, long - term relationship? we are seeing signs of lower net interest margins ( nim ), where the average nim in the second district is 3. 47 percent compared to the national peer average of 3. 71 percent. examiners will be reviewing initiatives by community bankers to partner with “ fintech ” firms. we know there is competition from non - bank providers who have the capacity to provide automated loan pre - approvals in minutes and loan closings within days after approval. today, you will hear from a panel of your peers on how fintech is changing the way their firms do business, and how they mitigate the risks associated with outsourcing. in my view, new innovations from the fintech space have the potential to fundamentally transform the provision of financial services. as i ’ ve said elsewhere, this disruption brings both opportunity and risks and that need to be managed. 2 a third forward - looking topic is the coming implementation of accounting changes for reserves, known as the “ current expected credit loss ” approach or cecl. one of our colleagues from the board of governors will join us later to address a common question raised by our bankers | 0 |
. so as things stand right now, there is no reason to worry about the euro area recovering in 2015 and 2016. mind you, all these factors are short - term. one possible concern is the ability to boost the potential growth of the euro area, which has been hit hard by the crisis. that ’ s more a long - term issue, though. aren ’ t you afraid that one of the effects of qe will be to create price bubbles for certain assets? does the ecb have the means to combat these side effects? our actions do have an impact on asset prices ; you just have to look at the way markets have risen since the public asset purchases started. we monitor risks to financial stability very closely : tommaso padoa - schioppa used to say this was in central banks ’ dna. but let ’ s not forget that the objective of monetary policy is price stability. financial stability involves different tools. as far as we are concerned, it ’ s a question of bank regulation and “ macroprudential ” tools. there is one effect you didn ’ t mention : this policy cuts governments ’ interest rate costs and potentially gives them room for fiscal manoeuvre again. that is not our objective. monetary policy serves to guarantee price stability and support the productive economy. where countries have room for fiscal manoeuvre, lowering rates bis central bankers ’ speeches increases the scope that can be used to support growth, particularly by increasing investment. where countries do not have this room for manoeuvre, such as france, my advice would be to use the lower rates to lend credibility to debt reduction, rather than to increase spending or cut taxes. however, that ’ s not a matter for the ecb to decide. it ’ s the european commission that is the guardian of the fiscal policy framework in the euro area. would you say that qe is helping immunise the euro area against the risk of an exit by a member state, even if this is not its objective? i wouldn ’ t put it like that. it is certainly reducing the risk of contagion in the euro area, but the context right now is very different from 2012. the problem for countries such as portugal, spain and ireland is no longer an exit from the euro area, far from it. their main concern now is how to capitalise on the return of growth in order to step up the reduction in unemployment and return to normal as quickly as possible. i am | supply from the agricultural sector, will reduce the saving rate and the resulting domestic funding of investment. it will probably also bring about wage increases that impinge upon the cost competitiveness of chinese exports. finally, historical experience with industrialised economies also tells us that the marginal return on capital diminishes as countries grow richer and accumulate more capital per worker. this means that in china a transition is needed from an economy driven by growth in factor inputs to one driven by efficiency and productivity improvements. the declines in these long - term structural factors are a fundamental reason why economic reforms are also very important in china, even if in the short run these developments may not result in immediate challenges to the long - standing economic model. the chinese authorities have, however, identified other, partly related developments – the emergence of domestic and external imbalances – as key factors calling for more urgent reforms. first, the share of private consumption in gdp has declined further. in the first nine months of 2010 the contribution made by consumption to gdp growth fell to 34 %, down from the pre crisis average of 39 %, while the contribution of investment picked up to stand at 59 % ( against a pre - crisis average of 49 % ). second, overcapacity in some segments of the economy and the limited efficiency of capital – especially in the public sector – have been additional sources of concern. more than half of the rmb 4 trillion stimulus enacted during the financial crisis has resulted in investment in public infrastructure, which has further increased the already sizeable role played by the public sector in the economy. third, the share of the service sector in gdp has remained small. given that the service sector is considered to be the most labour - intensive of the three major sectors, its underdevelopment has had negative implications for overall employment. fourth, income inequality has been on the rise. average urban income is now three times higher than average rural income. and the income gap between urban households with high incomes and those with low incomes has also been increasing. of course, given the complexity of the structural reforms involved, china cannot become a consumption economy overnight. this will take time. and for this very reason it is important to start now in order to ensure that the transition process is as smooth as possible. however, the benefits of these structural reforms could be substantial. to give you an idea of just how substantial, i would like to quote a recent study by the asian development bank 1. it estimates that without policy reforms china | 0.5 |
l wilson kamit : new commemorative banknotes and coins in papua new guinea speech by mr l wilson kamit, cbe, governor of the bank of papua new guinea, at the launch of the banknotes and coins to commemorate the 35th anniversary of the bank of papua new guinea, port moresby, 7 november 2008. * * * thank you for accepting the invitation to join us at the bank of papua new guinea to celebrate this important occasion. there are two important dates on our calendar we acknowledge each year. on 1st november 1973, soon after self - government and almost 2 years before independence, the bank of papua new guinea was established as the central bank of the emerging nation and a young mr henry torobert ( now sir henry torobert ) was appointed the first governor. the new secretary for finance then was mr mekere morauta ( sir mekere morauta ). the tasks before the two former governors and particularly the bank was to develop and pursue appropriate fiscal and monetary policies, adopt best practices in supervision of an infant financial system and introduce our own national currency. such were the challenges. the bank continues to face challenges and at times is compelled to undertake tasks outside of its core functions and these have been most satisfying. for instance, we were equity partners in starting up 2 commercial banks in the 1980s. in the 1990s, we were involved in the establishment of the port moresby stock exchange and the governor was a director from its inception till june 2008. our role was to nurture the financial institutions from their establishment and once they were operational the bank would exit. we have also been averse to readily accepting new responsibilities not because we cannot or do not want to but because we should limit ourselves to achieving the best in our core functions rather than the “ next best ” in undertaking too many roles and tasks. the bank ’ s independence is as far as making monetary policy and supervision decisions but any independent central bank must necessarily work with its stakeholders. the bank could not have progressed thus far on its own and we must acknowledge the contributions from the board of directors of the bank, different government officials we work with – minister patrick pruaitch mp, secretary tosali and executives and officers of the financial system we interact with on a daily basis. we have auditors, accountants, and lawyers who have assisted us reach many of our goals. out dedicated staff and their supportive families are also commended. the other important date on our calendar is 19 april of each year. this day in 1997 | felipe m medalla : re - anchoring and securing inflationary expectations in a challenging environment speech by mr felipe m medalla, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the philippine economic briefing, london, 25 january 2023. * * * friends of the philippines ; ladies and gentlemen ; and our partners in the international banking community, good day. let me begin by saying that the central bank of the philippines is an independent central bank. this [ independence ] is enshrined in the philippine constitution and implemented by the passage of a law, creating the bangko sentral ng pilipinas ( bsp ) in 1992. [ the bsp ], later on, became an inflation - targeting central bank, after new zealand and australia. it is independent because once [ bsp officials are ] appointed, it is hard to remove us. and it is independent because there is only one member of the cabinet, usually the secretary of finance, who is represented in the [ monetary ] board. by and large, i have been on the monetary board for nearly 12 years, and there has not been a single case where the government intervened when we close a bank [ to maintain financial stability ] and, of course, in the area of monetary policy. there are no messages from the president on what he wants the interest rate to be. three pillars of philippine central banking let me now say that we have three very important pillars - price stability, financial stability, and an efficient and safe payments and settlements system. i will go quickly to the two [ pillars ] because it is very hard to do justice [ in the short time i have ], but it is easy to describe. financial stability is [ when ] the banks are well - capitalized. our regulation forces the banks to put up more capital when they [ their operations ] apparently are riskier. our supervisors determine which banks are risky and taking on more risk than others. we have a very, very stable banking system because of our regulations. on the other hand, the payment system, as already described in the video, is fast becoming very digital. for instance, our goals of 70 percent of adults having their own transaction accounts and 50 percent of transactions being digital are very, very achievable. of course, the pandemic helped that happen. we have a fast payment system, called instapay, and it [ instapay transaction | 0 |
##economic scenarios. based on this information, analyses are now under way to assess the sustainability of business models and identify vulnerability factors, including cost dynamics, in good time. the results of these studies will be an important basis for our discussions with intermediaries. in the same period, also in view of targeted longer - term refinancing operations reaching maturity, we asked almost all less significant banks to update their funding plans, which the ecb already systematically gathers for significant banks. on 28 june, around €150 billion of the €300 billion outstanding tltro funding was repaid. in keeping with the plans, banks almost exclusively used excess liquidity, which has recently increased thanks to bond issuance and repo funding. recourse to new central bank refinancing operations has been limited so far. 4 / 11 bis - central bankers'speeches banks should draw more heavily on these refinancing operations to cover future repayments. moreover, significant banks anticipate further issues of bonds – including retail bonds – and, to a lesser extent, an increase in customer deposits. smaller banks claim that they will rely more on the latter. the idea of increasing deposit funding clashes with expectations of a further reduction ( at the aggregate level ) in this form of funding, which is already suffering from competition with alternative forms of investment. at present, the extensive availability of assets eligible as collateral for refinancing operations ensures that funding needs can be met, albeit probably at higher costs than anticipated. non - bank intermediaries under our supervision are subject to rules that are in many cases stricter than those in force in other european countries. in addition to refining the supervisory review and evaluation process for these intermediaries as well, we regularly check the systemic importance of alternative investment funds, whose assets under management, although still limited, have doubled over the last ten years. we pay special attention to credit and real estate funds. specific supervisory measures were taken for servicers to preserve the efficiency of the secondary credit market, which has played a key role in reducing non - performing loans on banks'balance sheets through securitization operations. initial results reveal shortcomings in governance and control, as well as delays in updating recovery plans. the ongoing discussion aims to assess the adequacy of the remedial measures, also with a view to improving the quality of the information provided to the market on the performance of managed operations. some of these operations are lagging | both an opportunity and a major test for the g20 which represents 85 per cent of world gdp and 75 per cent of global trade. following the east asian financial crisis of 1997, the g20 was founded in 1999 as a forum for the finance ministers and central bank governors to discuss global issues and policy options. after the global financial crisis of 2008, g20 was upgraded to the level of heads of states / governments in 2009. in an interconnected world, national policies alone may not be fully effective when the nature of the shocks is global and persistent. 1 / 6 bis - central bankers'speeches 6. post covid, the world economy was recovering gradually on the back of large policy stimulus and rising pace of vaccination when the war in ukraine led to sharp increases in global food, energy and commodity prices. it also triggered renewed supply chain disruptions. geopolitics has now been taken over by geoeconomics. according to the imf1, the global economy is now experiencing a process of geo - economic fragmentation, operating through five key channels – trade, technology, capital flows, labour mobility and global governance. there are rising restrictions on trade and diffusion of technology, barriers to labour migration, reduced capital flows and increased uncertainty about global public goods. the interlinkage between geopolitics and economic prospects of nations has become stronger, with each influencing the other. there is now growing trend of friend - shoring and onshoring. the focus is now on ensuring food and energy security and on securing strategic minerals – lithium, rare earths, copper, zinc, chromium, graphite, etc. which are required for producing batteries, solar panels and wind turbines. 7. actually, the backlash against globalisation had started even before the pandemic struck, as globalisation created both winners and losers. the international order could not provide cooperative solutions to make the process win - win for all. this indeed is the biggest challenge for g20 as a multilateral group. globalisation must produce better and more equitable outcomes for all, including the global south. 8. of the multiple risks facing the world community, the surge in inflation has posed a complex monetary policy dilemma in every economy between raising interest rates enough to tame inflation, and at the same time minimising the growth sacrifice to avoid a hard landing. the aggressive monetary policy tightening by systemic central banks since early 2022 and the consequent appreciation of the us dollar have led to several economies, | 0 |
for release on delivery 10 : 05 a. m. edt ( 8 : 05 a. m. mdt ) august 25, 2023 inflation : progress and the path ahead remarks by jerome h. powell chair board of governors of the federal reserve system at “ structural shifts in the global economy, ” an economic policy symposium sponsored by the federal reserve bank of kansas city jackson hole, wyoming august 25, 2023 good morning. at last year ’ s jackson hole symposium, i delivered a brief, direct message. my remarks this year will be a bit longer, but the message is the same : it is the fed ’ s job to bring inflation down to our 2 percent goal, and we will do so. we have tightened policy significantly over the past year. although inflation has moved down from its peak — a welcome development — it remains too high. we are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective. today i will review our progress so far and discuss the outlook and the uncertainties we face as we pursue our dual mandate goals. i will conclude with a summary of what this means for policy. given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks. the decline in inflation so far the ongoing episode of high inflation initially emerged from a collision between very strong demand and pandemic - constrained supply. by the time the federal open market committee raised the policy rate in march 2022, it was clear that bringing down inflation would depend on both the unwinding of the unprecedented pandemic - related demand and supply distortions and on our tightening of monetary policy, which would slow the growth of aggregate demand, allowing supply time to catch up. while these two forces are now working together to bring down inflation, the process still has a long way to go, even with the more favorable recent readings. on a 12 - month basis, u. s. total, or “ headline, ” pce ( personal consumption expenditures ) inflation peaked at 7 percent in june 2022 and declined to 3. 3 percent as of - 2july, following a trajectory roughly in line with global trends ( figure 1, panel a ). 1 the effects of russia ’ s war against ukraine have been a primary driver of the changes in headline inflation around the world since early 2022. headline inflation | of services, such as health care, food services, transportation, and accommodations. twelve - month inflation in this sector has moved sideways since liftoff. inflation measured over the past three and six months has declined, however, which is encouraging. part of the reason for the modest decline of nonhousing services inflation so far is that many of these services were less affected by the normalization of dislocations due to the pandemic is likely playing a role here as well. for example, the shifts in housing preferences related to working from home likely contributed to the increase in housing demand reflected in the sizable earlier increases in rents. as the price effects of that demand shift played out, the growth rate of rents would naturally decline toward its earlier trend. finally, multifamily construction is quite high by historical standards, and that supply coming on line has likely also taken some pressure off market rents. pce prices for housing services include both the rents paid by tenants and an imputed rental value for owner - occupied dwellings ( measured as the income the homeowner could have received if the house had been rented to a tenant ). for additional details, see bureau of economic analysis ( 2022 ), “ rental income of persons, ” in nipa handbook : concepts and methods of the u. s. national income and product accounts ( washington : bea, december ), pp. 12 - 1 – 12 - 15, https : / / www. bea. gov / resources / methodologies / nipa - handbook / pdf / chapter - 12. pdf. - 5global supply chain bottlenecks and are generally thought to be less interest sensitive than other sectors such as housing or durable goods. production of these services is also relatively labor intensive, and the labor market remains tight. given the size of this sector, some further progress here will be essential to restoring price stability. over time, restrictive monetary policy will help bring aggregate supply and demand back into better balance, reducing inflationary pressures in this key sector. the outlook turning to the outlook, although further unwinding of pandemic - related distortions should continue to put some downward pressure on inflation, restrictive monetary policy will likely play an increasingly important role. getting inflation sustainably back down to 2 percent is expected to require a period of below - trend economic growth as well as some softening in labor market conditions. economic growth restrictive monetary policy has tightened financial conditions, supporting the expectation of below - trend growth. 5 since | 1 |
avenue. combined with a carefully designed framework of targeted and temporary financial support, they should contribute to fostering structural reforms and thereby strengthening competitiveness. ideally, the reform contracts should focus on countries with the largest competitiveness challenges. they should identify the structural bottlenecks to improving competitiveness and target the reforms in a way that will remove those bottlenecks. this would establish a clear link between reforms and restoring competitiveness, which is essential for growth and job creation. smooth functioning of product and labour markets is a prerequisite for growth and job creation in emu. i therefore welcome the announcement that next year the european commission will undertake a systematic review of product and labour markets. for euro area countries the review should allow to assess whether these markets are fully compatible with participation in emu. here, product and labour markets must provide for enhanced adjustment capacity to adapt to a changing global economic environment and ensure sustained high levels of employment. the second priority for 2013 from the ecb ’ s perspective is the completion of financial union with the establishment of a single resolution mechanism. the aim of resolution is to deal with non - viable banks through measures that include their orderly winding down and closure while preserving financial stability. such a mechanism will make it possible for banks to fail in an orderly manner. improving economic union by restoring competitiveness and the functioning of product and labour markets on the one hand, and setting up a single resolution framework on the other hand are key priorities for 2013. this committee has always pushed for ambitious european solutions in the field of financial and economic governance. i am confident that you will again play an instrumental role in moving the agenda forward and adopting the relevant legislative proposals. thank you for your attention. i am now at your disposal for questions. bis central bankers ’ speeches | jean - claude trichet : interview with hospodarske noviny interview with mr jean - claude trichet, president of the european central bank, conducted on 21 september 2008 in bratislava by ms lubomira rakova ( hospodarske noviny ), and published on 23 september 2008. * * * how will slovakia ’ s entry to the euro area change your decisions about interest rates? we are working our monetary policy for the full body of the euro area. we are, as you know, presently 15, and we will be 16 as soon as slovakia enters on the 1st january next year. we are presently 320 million and we will be 325. 5 million. so it is for the sake of 325. 5 million that we are taking our decisions. and on the bases of the integrated analysis that we have on the full body of the euro area, exactly like the federal reserve itself is looking at absolutely all the usa with alaska, as well as florida, california and massachusetts. so, as soon as you are in, you are integrated in this overall assessment of what is appropriate for again 325, 5 million fellow citizens, for whose, this fellow citizens, we have exactly the same definition of price stability, as we had since the very beginning. we started with eleven, then twelve, then 13, then 15, and so we clearly have the same definition of price stability in the medium term, which is less than 2 %, close to 2 % at the level of euro area as a whole. my colleagues and myself, governor sramko with all the other members of the governing council – we will be 22 to take the decision, not 21 as we are now – we will again make a judgement of what is good for 325, 5 million citizens. people in slovakia are afraid of rising prices after january 2009. even ecb describes some doubts about sustainability of inflation in slovakia in the convergence report. what should our government do against the inflation? the ecb is responsible for price stability at the level of the euro area. price stability means in the medium term less than 2 percent, close to two percent as an average for the euro area. we have encouraged slovakia, and all economies and countries before entering into the euro area, to care for price stability to be sustainable in the medium and long run. this is our strong message. and we have always given that message not particularly to slovakia, but to all countries. we always insist on the sustainability of price | 0.5 |
right time when our countries, which just a few years ago were clearly outsiders in the international capital markets, are also now taking financing decisions to fully participate in the international capital markets. i must admit that international financial markets can be a maze for new entrants, and so updating our skills by consulting others becomes a priority and adds a lot of value. i have little doubt that as you remain deliberating here, the sessions will be very interactive and will provide a lot of food for thought. i am certain that everyone here will find this event beneficial. ladies and gentlemen, with these few remarks i hereby declare this workshop officially open. i thank you for your attention. | efficiency in the allocation of resource in the economy. allow me to briefly highlight some of the key policy initiatives that the bank of zambia has recently introduced : 1 ) reduction of statutory reserve ratios : in the fourth quarter of 2011, the bank of zambia reduced both the statutory and core liquid asset ratios by 3 percentage points to 5. 0 % and 6. 0 % respectively. the policy measure was intended to loosen liquidity for commercial banks to enable them increase their lending to productive bis central bankers ’ speeches sectors of the economy. the measure was also aimed at influencing the pricing of the loans especially in light of high lending rates prevailing in the economy ; 2 ) increase in capital : a robust banking industry is indispensable for supporting investments in the economy. a lower capital base entails limited participation in the financing of investments in addition to increased vulnerability of the banking industry. from the last quarter of 2011, the banking sector saw significant regulatory reform as the capital thresholds for banks were increased. local owned banks are now required to have a capital base of k104 billion whilst foreign owned banks are required to have a minimum capital base of k520 billion. the revised thresholds are aimed at ensuring that we have the best possible environment in which banks can carry out these key functions. as i stated earlier, banks are specialised institutions and they are fundamental to the working of the economy and linked to all parts of the financial system. but the consequence is that if banks fail, the external effects can have an adverse impact on the financial system and the economy. that is why banks are required to maintain a certain level of minimum capital. in this regard, the central bank provides oversight through prudential supervision. therefore, the measures to revise the capital adequacy framework for zambia enhances the resilience of the sector to both internal and external shocks by improving the quality and quantity of the capital available for commercial banks ; 3 ) introduction of the policy rate : the policy rate was introduced in order to provide a benchmark rate for the banking industry on which pricing for lending products can be based. it also promotes transparency in the price discovery mechanisms in the banking sector while minimizing information asymmetry particularly that associated with the credit markets ; 4 ) statutory instrument no. 33 on bank of zambia currency regulations : this measure was introduced with a view to reinforcing the use of the zambian kwacha as the legal tender in the republic of zambia. the increased use of foreign currency cash | 0.5 |
##vatized companies that labor - shedding took place. we should be aware that workers will not automatically embrace privatization and restructuring of their companies in spite of the fact that they are very often carried out in their interest or are the only option for the company to stay alive. the same can be said for the case of banking crisis resolution in croatia. based on my own experience, any resolution is bound to be faced with strong resistance and delays. first, the budget ( i. e. the ministry of finance ) will not willingly accept that it has to pay for the costs of banking crisis resolution. second, the management of the banks will try to change the banking problem resolution and not shoulder the costs of their actions. they have clear vested interests in the bank as it is ( their high salaries, their influence through credit allocation, the wish to hide previous decisions, etc ). third, depositors ( households and companies ) will make every effort to minimize their losses and get someone else to bear the costs of the problem. fourth, the owners of banks will try to put political pressure on the government to bail them out. fifth, there is the personnel of the bank, because they know that either all or part of them will lose their jobs. sixth, politicians will try to minimize the problem in the hope that it will not hurt their “ image ”. every decision on the bank resolution problem is a redistribution problem. there are always welfare losses for some interest groups, so we should be aware that such decisions will create very strong lobbying, corruption, ruthless behaviour, a fight to preserve vested interests, etc. needless to say, all such behavioral patterns mean using scarce resources to influence the outcome in a redistributive way, and not use them to produce new wealth. to overcome this problem policymakers must make sure that they have the “ incentives right ” and have a clear set of rules to diminish the scope of discretionary decision - making which always gives room for rent - seeking. b ) support for policies ultimately sound economics is sound politics as well. but the problem is that economic measures may take time to bear fruit. in other words reforms usually have immediate costs and the benefits are ( sometimes ) distant. let me stress again that policymakers must educate the public at large to get their support. if this is not the case, it may be a serious obstacle to rapid transition. with the benefit of hindsight and from the perspective of a central banker i would say that in | rent - seeking behavior, and b ) lack of broad political support for reforms ( which i partly discussed before ). a ) rent - seeking if private returns on predation are larger than private returns on production, this will send “ wrong ” incentives to people and society will not develop in the desired direction. therefore we have to make every effort to “ get the incentives right ”. this is not an easy exercise. socialism and, sometimes even more, early transition, have created vested interests and it is understandable that every socio - economic in no way am i trying to imply that the main cause of the banking crisis is inadequate supervision and regulation. but, they can certainly deepen banking problems. group will fight either to preserve their status quo or try to “ grab ” even more. the problem is especially exacerbated if the prevailing mentality in a society as a whole is the “ take it ” and not “ make it ” philosophy. every change is a redistribution, redistribution of power and relative wealth. transition by definition is a change. people on average resist change. i have called this the newtonian law of transition, namely : “ every action creates a reaction. ” ( skreb, 1998 ). this resistance to reform ( changes ) is probably “ time - dependent ” and positively correlated with the time spent in transition. in the early stages reforms are more general ( macroeconomic stabilization ) and there is much more support for them. in the later stages “ transition fatigue ” starts to develop, and disappointment with slowness ( or even a decline or stagnation ) in the rise of living standards is more and more present. on top of this, structural reforms imply microeconomic changes ( usually labor - shedding ). this is a challenge to the status quo. these are some of the reasons why structural reforms are so much more difficult to implement and slower than glamorous macroeconomic stabilization programs or measures like the announcement of a new currency, a new exchange - rate regime or a new central bank governor. based on croatia ’ s experience i would like to say that some important large - scale privatizations and foreign direct investments were either postponed or abandoned because of resistance from workers and local communities. they both preferred the imaginary safety of the status quo. the conventional wisdom is that government ownership ( the status quo ) should ensure at least minimal wages and job security. by contrast, private ownership of a company means job uncertainty for employees, as they have observed in many cases of pri | 1 |
central banks are mostly government institutions or publicly owned companies, their capital is mostly limited by domestic laws. in cases of substantial balance sheet growth, existing rules might not fit anymore. at such times the financial reporting framework might have to provide possibilities for new appropriate solutions. one such solution might be for recapitalisation by domestic governments after losses, or for potential future losses, to be made mandatory, however such requirements are often difficult to get approved by parliament and by public opinion. designing the adequate level and composition of the capital of a central bank is a sensitive challenge. one has, among a number of other internal and external factors, to take account of the central bank ‘ s legal environment, the relationship to the government, and its special tasks, like lender - of - last - resort function, or a fiscal agent - function vis - a - vis the state. in any event, a central bank ’ s capital must be sufficient to maintain its independence from the political sphere, and to provide a buffer for the inevitable price volatility resulting from the current investment environment. the individually adequate balance for each central bank between a suitable accounting framework, profit distribution rules and the ability to hold or reserve adequate amounts for loss coverage is the key for financial independence. when you apply the accounting rules to arrive at the annual financial result, you are then confronted with the question of applying rules for the distribution of profits. these rules can be classified in six general legal profit and loss schemes according to a recent ecb study on profit distribution and loss coverage of central banks ( by werner studener and his colleagues ). the study, based on the experience of 57 central banks that provided data for the ecb analysis, confirms what the bis found in 2013, namely that there is no one - size - fits - all solution for central banks, neither for the level of capital and financial buffers nor for profit distribution and loss coverage ; nor, indeed, for recapitalisation rules. however, there is evidence that these topics are interconnected and a set of guiding principles have been identified, which help to find an individual balance. 2. commercial banks and corporates as i said earlier, financial reporting is a key issue, not only for central banks, but for all kinds of businesses and, of course, commercial banks as well. modern historians agree that the invention of double entry bookkeeping in the fifteenth century was a major driver for modern economic pursuit and capitalism, as it first introduced the maxim “ increase your equity | consultative process also helps in managing expectations. growth - inflation performance as i mentioned, monetary policy framework in india shifted from a monetary targeting regime to a multiple indicator regime. such a transition was conditioned by the developments of financial markets, increasing integration of the indian economy with the global economy and changing transmission of monetary policy. a pertinent question is how did this transition impact economic outcomes, in particular the growth - inflation performance? bis central bankers ’ speeches from table 1, two broad trends can be gleaned. first, real gdp growth, on an average, improved over the period and became less volatile. second, inflation performance had improved significantly in the last decade coinciding with the adoption of multiple indicator approach. however, inflation performance deteriorated in the years 2010 - 11 and 2011 - 12 so far. in this context, it is important to recognise that the recent inflation surge has followed the global financial crisis. managing inflation in an economy which is recovering from a downturn is much more complex because of associated uncertainties than managing inflation under normal conditions. in the initial phase of the crisis in 2007, it appeared that emerging market economies ( emes ) were better positioned to weather the storm created by the global financial meltdown on the back of their substantial foreign exchange reserve cushion, improved policy frameworks and generally robust banking sector and corporate balance sheets. however, any hope about emes escaping unscathed could not be sustained after the failure of lehman brothers in september 2008 which triggered global deleveraging and heightened risk aversion. eventually, emes were also adversely affected by the spillover effects : first through contraction in world trade and then from reversal in capital flows. india, though initially somewhat insulated from the global developments, was eventually impacted significantly by the global shocks through all the channels – trade, finance and expectations channels. in response, the reserve bank swiftly introduced a comprehensive range of measures to limit the impact of the adverse global developments on the domestic financial system and the economy. the reserve bank, like most central banks, took a number of conventional and unconventional measures to augment domestic and foreign currency liquidity, and sharply reduced the policy rates. in a span of seven months between october 2008 and april 2009, there was unprecedented policy activism. for example : ( i ) the repo rate was reduced by 425 basis points to 4. 75 per cent, ( ii ) the reverse repo rate was reduced by 275 basis points to 3. 25 per cent, ( iii ) the cash | 0 |
bis innovation summit – 22 march 2022 central banks in a dlt world speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ) page 1 sur 3 ladies and gentlemen, it is a great pleasure and honour to give this opening speech of the second bis innovation summit, which illustrates central banks ’ commitment in new technologies, notably through the bis innovation hub. since their creation almost fifteen years ago, distributed - ledger technologies ( dlts ) have evolved and opened up new possibilities, building alternative circuits and removing intermediaries, supporting new solutions and use cases. are these disruptions as powerful as those brought by the invention of internet three decades ago? it may be too early to tell, but dlts are expanding at a fast pace, and have the potential to bring about far - reaching changes. the invention of bitcoin, the first crypto - asset, stemmed from the desire to build a new “ currency ” – i emphasise the quotation marks here –, outside the remit of states and central banks. that was back in 2008, and what we have observed since then is that the use of bitcoin as a means of payment remains very marginal, because it does not feature any of the fundamental characteristics of currency. nor is it a store of value, but rather a speculative asset, somewhat similar to the dutch tulip bulbs from the 17th century. the most disruptive feature of bitcoin was its underlying technology, which has since then been offered in different versions of dlt underlying various types of assets and uses. second - generation crypto - assets now embed smart contracts that have led to the development of new services and products, the last being nfts ( non - fungible tokens ). among second generation crypto - assets, so - called stablecoins or backed - assets try to reduce their volatility by anchoring themselves to fiat currencies and sovereign assets. still, they create fragmentation, and are fraught with regulatory and operational uncertainties. here too there are historical precedents : free banking in the 18th and 19th centuries, when each private bank issued its own banknotes. it had major drawbacks, such as credit risk embedded in settlement assets. the introduction of central bank money as a common and safe settlement asset was a major breakthrough and since then has become the rule – in the best interest of all | that high inflation imposes significant hardship as it erodes purchasing power, especially for those on fixed incomes and those least able to meet the higher costs of essentials, including housing, transportation, and food. that is why my colleagues at the fed and i are so committed to returning inflation to our target. monetary policy so, what does the current state of the economy mean for the policy rate we set at the fed? at the most recent meeting, three weeks ago, my colleagues and i on the fomc decided to maintain the target range for the federal funds rate at 5 - 1 / 4 to 5 - 1 / 2 - 4percent. i believe that our policy rate is in restrictive territory as we continue to see the labor market come into better balance, and inflation decline although nowhere near as quickly as i would have liked. the fomc noted that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. in making judgements about the appropriate stance of policy rate over time, i will be carefully assessing the incoming data, the evolving outlook, and the balance of risks. at its last meeting, the fomc also decided to continue the process of reducing our balance sheet, but at a slower pace. the cap on treasury redemptions will be lowered from the current $ 60 billion per month to $ 25 billion per month as of june 1. consistent with the committee ’ s intention to hold primarily treasury securities in the longer run, we ’ re leaving the cap on agency securities redemptions unchanged at $ 35 billion per month. we will reinvest any proceeds in excess of this cap in treasury securities, as detailed in the may 1, 2024 operating policy statement published by the federal reserve bank of new york. 2 the housing market the fed sets policy to promote its dual - mandate objectives of maximum employment and price stability, and employment and inflation depend on conditions in the entire economy. still, given our gathering today, i thought it would be appropriate to dive a bit deeper into the housing and home finance markets. see federal reserve bank of new york ( 2024 ), statement regarding reinvestment of principal payments from treasury securities, agency debt, and agency mortgage - backed securities, may 1, https : / / www. newyorkfed. org / markets / opolicy / operating _ policy _ 240501. - 5as i said earlier, the housing sector is | 0 |
in their own right. second : stiffer competition between markets the development of information technology and telecommunications has allowed economic agents to move their capital at will. as a result, their investment and borrowing decisions are based on the opportunities available on all markets. • domestic exchanges have become mere compartments of the global market and find themselves competing with each other. • exchanges must also compete with the extraordinary expansion of over - the - counter markets. the largest financial institutions are big players on these markets, which operate according to private and decentralised mechanisms. total notional liabilities on otc derivative markets rose from usd 72, 000 billion in june 1998 to usd 88, 000 billion at end 1999. the average daily turnover on these markets increased by 50 % between april 1995 and april 1998. • users ’ desire to improve efficiency has also driven the evolution in market structures. planned links between stock markets, particularly in europe, and the consolidation of delivery - vs - payment systems testify to these concerns. domestic trading floors with regular working hours are gradually giving way to electronic international markets open around the clock. and the official trading systems of the various financial centres are in turn being challenged by private trading systems such as electronic communication networks. third : new demands for transparency and profitability in the financial industry spurred on by this competitive pressure, the principles of corporate governance and value - adding have taken root, in particular under the impetus of fund managers. these principles force players to meet new requirements in terms of transparency and profitability. such requirements encourage participants in the global market to adopt new investment behaviour, in particular with the spread of index - linked management or massive recourse to leveraging. these objectives also result in the use of fairly homogeneous risk management techniques, such as the definition and use of limits, risk management with value - at - risk models and the development of stress testing. in addition, these objectives have established the importance of rating agencies for financial institutions, both in determining the conditions of their funding and in defining the structure of their portfolios. fourth : restructuring to cope with this increased competitive pressure if they are to survive, traditional financial intermediaries must expand and / or innovate. • the current consolidation of the financial industry is driven by the search for market power and / or economies of scale. mega - institutions emerge, more and more internationalised and diversified. these developments give rise to financial conglomerates aiming at economies of scale. • product or process innovation is an alternative - or complement - to the search | whereby prudential standards are adapted to the individual situations of financial institutions. this is the purpose of the revision of the solvency ratio currently underway in basel, in particular via the second and third pillars. • in addition, the mechanisms for safeguarding the soundness of financial systems should be adapted to the changing features of these systems. some of the aspects we feel should be given priority are : • – how to deal with financial institutions that are not yet regulated, such as financial conglomerates and highly - leveraged institutions, or certain types of financial holding ; – how to deal with remote financial services. finally, regulators must ensure that the new regulatory mechanisms they have devised fit in with the other objectives of economic policy. the impact of these regulations on the real economy must be carefully assessed in order to avoid privileging stability to the detriment of efficiency by creating new competitive distortions. in general, prudential concerns about financial stability, monetary concerns about price stability and social concerns, that is, protecting consumers, must be reconciled. in conclusion, allow me to mention the key role played by central banks in reinforcing financial stability first of all, i would like to stress what i feel is the highly complementary nature of the price stability and financial stability objectives. i believe that price stability is the bedrock on which financial stability is built. it is of course a prerequisite. secondly, i consider central banks to bear a special responsibility arising on their central position at the heart of financial systems : • they contribute directly to supplying liquidity to the economy. • their close and constant contacts with credit institutions give them a thorough understanding of banking systems. • they are responsible for ensuring that payment systems operate smoothly. central banks thus find themselves at the intersection of the various aspects of financial systems, and accordingly appear particularly well - suited to maintaining financial stability. thirdly, in my opinion, the correct answer to the changes underway in financial systems is not to set up vast centralized supervisory bodies at a global or a european level. in this domaine to be close to the credit and financial institutions concerned is decisive for efficiency. i am convinced that establishing a new generation of prudential standards and reinforcing active and close cooperation between decentralised supervisors will be for us the best means to reconcile efficiency with financial stability. to deal with these challenges, given their specific features, central banks are obviously at the heart of the process. | 1 |
that of the late 19th century and much lower than that in the 1850s. second, the terms of trade have risen much more than they did in earlier mining booms. the current level of the terms of trade rivals the sharp peaks that were associated with rises in wool prices following the first world war and during the korean war. the current mining boom has seen both the volume and the price of resource exports rise strongly. third, this is the first boom during which the exchange rate has been floating, and in which a significant rise in the nominal exchange rate has been an important part of the economic adjustment. this has added an important degree of flexibility to the economy, by allowing the real exchange rate to rise through a means other than inflation. how long the current surge in mining activity will continue is uncertain. past booms do not seem to have lasted more than about 15 years before resource depletion, or international or domestic developments, acted to slow economic activity and bring the boom to an end. on this occasion, the growth potential of countries such as china and india suggests that the expansion in resource demand could continue for an extended period, though this will depend at least to some extent on the economic management skills of the authorities in these countries, not to mention our own. assessment the booms that i have described took place over a period of about 160 years, and against very different backgrounds. yet, some similarities come through. the first point that stands out is the important role played by global events in causing mining booms in australia. in some cases this was due to the effect on prospecting activity ( e. g. the impact of the california gold rush in the 1850s boom and the availability of international capital to fund the 1890s boom ) ; in some cases it was due to a change in the relative prices of commodities on global markets ( e. g. the late 1970s boom ) ; and in others due to the emergence of powerful new trading partners ( e. g. the development of japan in the 1960s and the development of china and india recently ). the second point is that the overall impact of each boom was to strengthen the economy. increased investment in mining, higher income from mining activities, and the need for increased infrastructure to service the mines all worked in this direction. also, each boom had high, or increasing, population growth in its early years which added to the economic momentum. not everybody benefited from that economic pick - up and some industries went into decline due to the difficulty in competing | proposals, namely the mandatory certification of smart contracts prior to use. european regulatory developments are underway in other areas and will also be needed to facilitate innovation while preserving financial stability. they include measures in support of digital entities, access to financial data and artificial intelligence. why explore a wholesale cbdc? slide 5 3 / 7 bis - central bankers'speeches our second conviction is that, in order to have a framework that inspires trust in the development of the tokenisation of finance, cebm needs to be maintained as the primary settlement asset for financial intermediaries, which are the most sensitive in terms of systemic consequences in the event of problems. to achieve this goal, central banks need to adapt the form and provision of cebm to reflect the characteristics of transactions in tokenised assets, that is, tokenised securities such as shares, bonds or fund units, to ensure that cebm can be issued, recorded and used for settlement on dlt. this conviction spurred the banque de france to become the first central bank to launch an ambitious experimental programme on wholesale central bank digital currency ( cbdc ) for large - value payments in 2020. exploratory work by the eurosystem on a wholesale cbdc slide 6 this conviction is shared by the eurosystem, which launched its own exploratory work in april 2023 to trial three solutions for the settlement of tokenised assets in cebm. the banque de france's wholesale cbdc solution, based on our own dlt ( dl3s ), is one of the solutions that will be tried out in 2024. the eurosystem recently published the list of participants in the first wave of exploratory work, and we are delighted to test our dlt solution with them. this work supplements the european pilot regime, which is covered by special regulatory exemptions and which is being used to test the issuance, trading and settlement of tokenised assets under real - life conditions. it came into effect in march 2023 and will help us to assess the existence of use cases and determine whether there is genuine demand for tokenisation. it will also enable us to identify the regulatory adjustments needed for market infrastructures to operate on dlt over the long run, using a broad panel of tokenised settlement assets, including cebm. the banque de france is also taking part in several international initiatives, particularly those being spearheaded by the bank for international settlements'innovation hub, which is coordinating projects to explore the future of | 0 |
export - led growth model, hence the need to look for new markets just as emerging markets have done to move away from traditional market enclaves. bis central bankers ’ speeches the policy issue is then the determination of the appropriate role of exchange rate policy, with a view to facilitating an appropriate structural adjustment process that promotes long - run and sustainable growth. the theme of today ’ s seminar is timely as kenya ’ s economy readies for take - off. policymakers need to find a flight path through the lingering risks. ladies and gentlemen, several papers that link monetary policy actions and the exchange rate policy have been lined up for presentation today. these include research that looks into factors that explain exchange rate movements, the extent of real exchange rate misalignment and the relationship between the real exchange rate and exports. we will also get presentations on papers that develop indices that can serve as an early warning system for currency and macro - economic crises. 4 as kenya aspires to be the regional financial hub ; and is indeed currently regarded as so, one of the pillars for maintaining this regional leadership is also being on the frontier of research information for the financial sector. a well known fact is that a financial boom can trigger an overvaluation of a currency if adjustments do not take place over time. the kenya school of monetary studies is well placed to provide this leadership and it is challenged to do so. therefore, these types of seminars should be the norm on an annual basis. but filtering policy conclusions that can be used for policy direction remain the most important objective. as i conclude, i thank the participants present, including those that have travelled from far for this seminar. i hope the handful of issues addressed in the contributions today will provide the basis for a rewarding discussion. once gain – you are all very welcome! it is my pleasure to declare this workshop officially opened. thank you. bis central bankers ’ speeches | . therefore, it is essential to establish an effective framework for macroprudential supervision that will ensure both the systematic analysis of risks and the formulation of policies to address such risks. the state of the greek economy the economic slowdown has been less severe in greece than in many other european countries. however, this outcome reflects factors that, if left untreated, will reduce growth potential in the medium term. specifically, the performance of the greek economy during the crisis reflects the relatively - low level of openness and the deterioration of public - sector balance sheets from a position that was already worrisome prior to the onset of the crisis. a factor that has, however, supported the greek economy has been the soundness of its banking system. greek banks have been free of toxic assets and their exposure to the emerging economies of south - eastern europe has remained within manageable limits. a recent stress test conducted in close cooperation with the imf has reaffirmed the soundness of the greek banking system. the relatively - high growth rates experienced by the greek economy since its entry into the euro area reflect a catching - up process. to sustain a robust growth rate in the future, greece will need to address several key challenges, reflected in persistently very large currentaccount imbalances, high fiscal deficits, and worrisome debt levels. these imbalances are the result of structural rigidities, which have undermined competitiveness over time. to restore competitiveness and remove the imbalances, a dual agenda needs to be concurrently implemented : first, a multi - year program of fiscal consolidation, which can reduce risk premia and crowd - in private investment, raising the growth potential of the economy ; second, bold and wide - ranging institutional reforms in the public sector and structural reforms in product and labor markets, which can enhance productivity and raise the employment rate. only by undertaking these reforms will the greek economy be able to become more competitive and increase its growth potential and the prosperity of its citizens. the broad support received by the newly - elected government will greatly facilitate the implementation of the reform agenda. | 0 |
euroclear “ cmu and innovation ” conference 3 october 2024 opening address by denis beau, first deputy governor what will tomorrow ’ s post - trading industry look like and what forms of cooperation will it deploy? ladies and gentlemen, in a tougher and more fragmented world, an increasing body of analyses and reports are identifying europe's vulnerabilities – especially in the economic and financial sphere – and proposing ways of remedying these by leveraging and consolidating our key competitive advantages. these levers include europe's financial firepower, which is not currently commensurate with its economic heft, even though it has to contend with major investment requirements for two necessary transformations in the digital and climate spheres that hold immense promise for the future. from this perspective, the post - trading industry has a key role to play in harnessing these new digital technologies and processes which are developing before our eyes and transforming our financial system. from my perspective as a central banker, tasked with overseeing the efficiency and security of the post - trading infrastructures that are so crucial to the stability of our financial system, these innovations constitute both opportunities and risks. their deployment therefore raises strategic and operational questions that we need to answer collectively if we are to ensure that tomorrow's post - trading infrastructures safeguard the competitiveness and sovereignty of our financial system, while maintaining the stability that the legislator has tasked us with preserving. this raises the following two questions in particular : what will the post - trading services industry look like in the wake of these transformations? page 1 of 5 what path should we follow to transition to the post - trading environment of tomorrow, without jeopardizing security and efficiency? to help move the debate over the potential solutions forward, i would like to talk to you this evening about how we at the banque de france see both the development of our service offering in terms of assets used to settle transactions and infrastructure that can help to shape the posttrading environment of tomorrow, and the cooperation arrangements and priorities that need to be established to ensure a smooth transition to this new environment. i. the eurosystem's changing service offering to perform its financial stability mandate with regard to post - trading infrastructures, the eurosystem uses three instruments : the provision of services, supervision and boosting market initiatives. within this toolbox, the provision of services has long played a key role. this has meant that infrastructure services t2 and t2s and central bank money take centre | thomas jordan : innovation and entrepreneurship - key success factors in a changing business environment summary of a speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the award ceremony 2018, de vigier foundation, solothurn, 30 may 2018. * * * the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). for many decades, switzerland has been among the world ’ s most successful economies. if it is to maintain this position in future, openness to new technology will be essential. in addition to taking over technologies created elsewhere, switzerland will need to ensure that domestic companies are able to develop their own market - ready innovations. various factors can facilitate success on this front, whether in established companies or startups. above - average operating conditions – including low bureaucratic hurdles for the set - up and day - to - day running of companies, reliable patent law and ready access to financing, for example – are crucial. another important parameter is open market access, not least for foreign competitors ; barriers to entry for new firms are extremely harmful to economic wellbeing. the education system is also a significant determinant of a country ’ s innovative potential. switzerland invests heavily in high - quality education, both at university level and in the form of specialist vocational training schemes, which helps explain its status as a global leader in research and development. and finally, it is vital to promote a culture of entrepreneurship. the will to pursue a given business activity and succeed is critical if promising ideas are ultimately to evolve into marketable products or processes. switzerland cannot be truly ambitious without ambitious entrepreneurs, and surveys suggest that the country still has room for improvement here. against this backdrop, steps should be taken to cultivate innovative drive and entrepreneurial thinking early on, for instance by encouraging high school students to do projects in which they found their own small companies. various universities already run programmes designed to assist young researchers in bringing innovative products and services to market. private initiatives also play a significant role in nurturing entrepreneurship in switzerland, helping young people learn how to transform an idea into an innovation and operate a business. 1 / 1 bis central bankers'speeches | 0 |
##l put to the test in a situation where inflation significantly overshoots the target for the first time since its introduction in 1995. too high inflation and great uncertainty about developments we have a year behind us in which inflation rose sharply around the world and central banks raised policy rates at a rapid pace. at the beginning of 2022, inflation was around 4 per cent in sweden. the riksbank and most forecasters assessed that inflation would fall during the year. as we know, it continued to rise instead. one reason was the rapid economic recovery from the coronavirus crisis, which pushed up prices on commodities, inputs and transport. household demand was high, while it was difficult for businesses to adjust and increase production quickly enough. as a result, inflation received an unexpected boost when economies opened up. another important reason was russia's invasion of ukraine, which drove up the prices of energy and grain, as well as other agricultural products. in addition, the high energy prices had indirect effects on inflation via, for instance, rising prices for transports and other input goods for companies. in the context of high demand following the pandemic, firms found it easier to pass on their increased costs to consumer prices than might have been expected from previous experience. one year later, at the beginning of 2023, we thus had both far too high inflation and the lesson from last year that it is very difficult to know how inflation will develop. there are many indications that inflation in sweden, as well as abroad, will fall back in 2023. the uncertainty instead concerns how much and how quickly it will fall and whether this will be sufficient. the swedish economy must not end up in a situation where inflation becomes entrenched above the target of 2 per cent. the danger of inflation becoming entrenched at a high level let me elaborate on why this is so important, starting with an illustrative example from when i visited companies last month. one person i spoke to noted that there had been a clear shift in negotiations with other companies about future prices and deliveries. a few years ago, inflation was not discussed in these negotiations. but now it is, and this makes it difficult to enter into long - term business relationships, which in turn has a negative impact on economic developments. this highlights the problem that high inflation becomes a factor that makes financial decisions more difficult for companies and households. and this contributes to the entrenchment of high inflation. we must return to low and stable inflation because this is a | for the riksbank's monetary policy framework. after that i would like to give my view on inflation, the economic situation and monetary policy and also go into more detail on why it is so important that inflation comes all the way down and stays close to the riksbank's target of 2 per cent. this may not be obvious to everyone – after all, it has been thirty years since we were last in a similar situation. 1 / 10 bis - central bankers'speeches same inflation figures as in the early 1990s, but a different situation when i had just left the stockholm school of economics and started working at the riksbank in 1990, inflation in sweden was around 10 per cent. now when i returned to the bank at the start of this year, the inflation figures were at the same level. the background to, and reasons for, the high inflation now and then differ, of course. but the important thing is that the conditions for rectifying the situation are much better now. looking at economic developments on average over the past thirty years or so, we have had low inflation combined with good economic growth, real wages have increased steadily – with one exception last year – and we have also had, and still have, stable public finances. one important reason for this is the reforms of wage formation and the economic policy frameworks that sweden implemented in the mid - 1990s to address pricewage spirals, cost crises and an economic policy that was unable to stabilise developments. the inflation target and the transition to an independent central bank with a strong mandate to maintain that target were part of this. since then, the inflation target and a monetary policy that independently steers towards this target have been a cornerstone of economic policy in sweden. this is also reflected in the new sveriges riksbank act, which applies from the start of this year. the inflation target is the overriding objective of monetary policy. as before, the new act states that price stability is the primary objective of the riksbank. it is now also stated more clearly that price stability means sustained low and stable inflation. in concrete terms, the inflation target is the same as before, that is, a target of 2 per cent for inflation measured as the annual change in the cpi with a fixed interest rate, the cpif. if the riksbank wishes to change the specification of the target at some point in the future, the riksdag must approve the new specification before it can | 1 |
rests crucially on setting the right policies to safeguard economic and financial stability. for this, i have an excellent team of people with the knowledge and experience to help me deal effectively with the risks and the challenges. on the financial stability side, the team is headed by dr. bandid nijathaworn, and on the monetary stability side, by dr. atchana waiquamdee, both of whom are here with me today. and with the excellent cooperation from our colleagues in the financial sector, i am confident that the banking sector and the economy will continue to make solid and sustainable progress. in closing, i would like to express my sincere appreciation to all of you who have contributed to our progress through your frank and candid dealings with us ; and the competition you have infused into the banking system that has benefited consumers and served the business community at large. indeed, orderly market competition is the most potent economic force that fosters progress. i hope that we will continue to build on this great relationship. ladies and gentlemen, tomorrow, march the first, the bank of thailand will implement a final review of the reserve requirement measure to give more flexibility to investors. fully hedged capital inflows for the purchases of bonds, mutual fund shares, and property fund shares will be exempted from the reserve requirement. in essence, all investment flows that are until today subject to the reserve requirement will be given a full - hedging option. with this announcement, let me conclude my talk this evening. thank you for your kind attention. | tarisa watanagase : the thai economy – risks, challenges, and opportunities speech by dr tarisa watanagase, governor of the bank of thailand, at the foreign bank association dinner talk, bangkok, 28 february 2007. * * * mr. chairman, distinguished members of the foreign banks'association, fellow bankers, members of the press, ladies and gentlemen, i am very pleased to be here today, and to have this opportunity to share with you some thoughts on the challenges and outlook for the economy and our banking sector this year. this forum has always been one where we can have frank discussions. and i very much look forward to hearing your views. indeed, open communication is the cornerstone of a healthy working relationship. today, i would like to focus on three key topics. first, the outlook for the economy, second, the immediate challenges for the economy and the banking sector, and third, prospects for the thai economy and the banking system in the medium and longer terms. let me begin with the economy. last year was a challenging year for all of us. the economy was buffeted by several negative factors. these included political uncertainties, high oil prices and severe flooding in many provinces. the combination of these factors led to increased upside risks to inflation, especially during the first half of 2006 ; and downside risks to growth. domestic demand softened, and robust exports on the back of strong global growth helped sustain the momentum of the economy. our policy response, namely monetary tightening, proved timely. and as a result, inflation and its second round effects have been well contained. headline inflation came down from a peak of 6 percent in the second quarter, to 3. 3 percent in the last quarter, and to 3 percent in january this year. meanwhile, external stability continues to improve, with current account turning into surplus, and a strengthening of international reserves to almost 67 billion us dollars. the economy proved to be quite resilient to external shocks. and growth momentum continued satisfactorily at 5. 1 percent for the whole of last year. but most of you are probably more concerned about prospects for this year and the next. this is understandable. this year, the economy will continue to face a number of important challenges. economic uncertainty has increased, as evidenced by declining investor sentiment and consumer confidence. outside thailand, the threat of a disorderly unwinding of global imbalances still persists. at home, the implementation of the reserve requirement and | 1 |
. the oil exporting countries have been additionally hit hard by the sharp drop in international oil prices, that not only has put significant pressure on their public finances and balance of payments, but has also derailed their long term diversification plans ; while oil prices have recovered somewhat, economic activity is expected to remain subdued for some time. the low - income countries, many already under considerable social and economic strain, are facing daunting challenges because of the crisis and are falling further behind in income convergence. their heavy debt burden, limited financing options, and little or no policy space make it almost impossible for them to meet the challenges on their own. we call on the international community to rise to the occasion in helping these countries generously through grants, concessional financing and debt relief. we support the extension of the g20 debt service suspension initiative, as well as the extension of the catastrophic containment and relief trust, and welcome the progress in securing additional resources for the poverty reduction and growth trust. we encourage all public and private creditors to participate in similar debt relief operations. the plight of fragile and conflict - affected states in the menap region, some facing refugee and humanitarian crises, calls for a timely and proportional international response. the role of international institutions — particularly the fund — has been instrumental in helping 1 / 2 bis central bankers'speeches countries to alleviate their significant financing pressures arising from the pandemic. we laud the agile response of the imf to support more than 80 members in the first few months of the crisis through its emergency and other financing facilities. the imf moved swiftly to expand and adapt its lending toolkit to the needs of the members, including through temporary increases in access limits to its emergency facilities. yet, requests by some other 20 members for emergency support are still pending for various reasons. we call upon the fund to ensure that its support is available to all members in an evenhanded manner without exceptions, and that emergency financing lives up to its name. we look forward to further refinements of the fund ’ s lending toolkit, including the introduction of a pandemic support facility. as the global economy is bracing for a challenging post - crisis recovery, the fund must stand ready to assist members through financial support and tailor - made as well as country specific policy advice and capacity development to ensure that the transition and the subsequent recovery proceed smoothly. this could only be achieved by a strong, quota - based, and adequately resourced imf, with the quotas | and 14 % in 2011 ), driven by medium and long term credit dynamics ( 27. 6 % ), was a key determinant of monetary expansion in 2013. as regards the private sector, the credit growth rate over the last thirteen years averaged 19. 4 %. the revision of the 2003 banking law through the ordinance on money and credit of august 2010 extended the missions of the central bank to include an explicit objective of financial stability in addition to the price stability mandate. the 2010 banking law emphasized the role of the bank of algeria in ensuring banking system stability, safety and soundness. in this regard, it has been endowed with larger prerogatives to carry out any investigation at the level of banks or financial institutions, thereby enabling greater capacity for early detection of vulnerabilities in the system. accordingly, the bank of algeria intensified micro - prudential controls, including with regard banks ’ anti money laundering and financing of terrorism mechanisms. improved efficiency of these controls enables an orderly development of the banking system. for a comprehensive monitoring of the banking sector stability, the bank of algeria periodically assesses its bis central bankers ’ speeches soundness, based on stress tests which have been developed since 2007 and strengthened in 2013 – 2014. in addition, existing micro - prudential regulation tools – such as loan to value ratios, minimum reserve requirement ( also a monetary policy instrument ), and the ratio of debt service to revenue – have been revisited and could be adjusted as needed to face potential systemic risks. furthermore, a strengthening of macro - prudential tools is underway since early 2013, especially through the introduction of new tools enabling horizontal analysis of risks and the introduction of resilience tests. to further develop the operational framework for financial stability, and following the implementation in 2010 of the new accounting rules, in line with international standards, as well as those related to the assessment of the risks associated with new financial products, a regulation on the identification, measurement, and management and control of the liquidity risk was enacted by the council on money and credit in may 2011. this regulation introduces a minimum short - term liquidity ratio which must be met by banks and financial institutions at all times. in the same vein, the council on money and credit has also enacted in may 2011 a second regulation establishing an internal surveillance system and a ceiling by counterpart regarding interbank outstanding lending and borrowing, especially those occurring in the money market. the assessment made by the bank of algeria for 2013 suggests that all banks meet the | 0.5 |
had kept on falling. when they first set up the noodle shop, they were very serious about every minor detail – they scouted the new territories to source the best quality flour to ensure that noodles were chewy. the husband went to the fish market at dawn to buy the fresh shrimps for the wonton and the wife woke up at four in the morning to make sure the soup base ( [UNK] [UNK] ) was properly prepared. but they both had ceased doing that when the noodle shop business was doing well and such daily routines were no longer practised. so the noodles were no longer as chewy as before and the wontons were no longer tasty. as for the cafe and hot pot meals, they had very little idea on how to do them well and eventually their customers, one by one, turned away from the shop. 9. the takeaway of this story is that very often that market conditions or customer needs have changed and so we have to adapt. if a company does not or cannot adapt, then bad outcomes would ensue. however, it is more often the case that the formula and values leading to success in the past have been inadvertently eroded, if not forgotten totally. the couple in wanchai should not have forgotten what drew customers to their noodles in the first place. they had failed not because their customers had decided to eat sandwiches rather than noodles but because they forgot that it was quality that made the noodle shop bis central bankers ’ speeches successful in the first place. very often we become complacent and take things for granted after we have been successful, just like the wanchai couple did. shifting to a new product line in which we have no real expertise or niche was a recipe for disaster. the same holds true if we look at what made hong kong tick twenty or thirty years ago. many good qualities such as can - do spirit, never - say - die, openness and versatility that were cherished by hong kong people in the past seem to have faded away. keeping these good qualities, hong kong can hope to maintain its competitive edge even when the goings get rough. 10. ladies and gentlemen, the message i have for you is : while an entrepreneur should always strive to expand and grow his business, it is equally important that he should resist complacency and continue to excel in what he is doing or what he is good at. to venture into an unfamiliar universe in which one has no expertise or advantage is risky | it was at the end of october 1997 and again in january of this year, the hkma buys hong kong dollars from the banks in exchange for us dollars and the monetary base shrinks. this tightening of liquidity will in turn cause interest rates to rise, perhaps sharply so. this will choke off the inflows and restore stability to the exchange rate. 19. it is important to realize that this is an automatic process and that the hkma has no room to maneuver to prevent the rise in interest rates from taking place. to do so would run counter to the basic principle of the currency board and would risk prolonging any attack on the hong kong dollar. 20. i think that there is now a better understanding of how the currency board system works. in addition, our determination to adhere to the system and to defend the linked exchange rate has been clearly demonstrated. this should help to deter future speculative attacks on the hong kong dollar. however, we have to acknowledge that the possibility of short term interest rates shocks does exist under the currency board mechanism and the banks therefore need to take this into account in the way in which they run their business and manage their balance sheets. 21. bearing this in mind, i draw three main supervisory lessons from the regional crisis and its impact on hong kong : • first, it is important for banks to maintain a strong balance sheet that can withstand the interest rate fluctuations to which i have referred and maintain the confidence of the public. banks in hong kong score well in this respect but it is not something that can be taken for granted. i think that it is true to say that some banks did expand their loan books too rapidly during the mortgage boom in 1997. as a result, loan to deposit ratios came under some strain. the banks were also exposed to growing interest rate risk because a substantial proportion of their assets are linked to best lending rate while their liabilities are linked to hibor. this has been a reminder of the need to maintain sound fundamentals : high capital adequacy and liquidity ratios ; prudent loan classification and provisioning ; and sound risk management. • a second and related lesson from the region is that banks need to beware of excessive lending to finance overheated asset markets. this increases the leverage of their customers, exposing the banks to increased credit risk if prices fall. this of course is what has happened in the property market in hong kong, although the banks have so far been protected by their prudent lending | 0.5 |
take place. unquestionably, the steps already taken by the euro area to exit the crisis have been numerous and important. but recent market developments have reminded us that there is still a tremendous need for further demonstration of the determination of all the players in the european crisis to rise to the challenges facing us. i will mention three of these challenges. bis central bankers ’ speeches 2. but challenges remain to be addressed. 2. 1. the challenge for each individual euro country : achieving strong fiscal consolidation while ensuring long - term growth the first challenge is the seeming dilemma between fiscal consolidation and long - term growth. one thing is very clear : this crisis is fundamentally a sovereign debt crisis ; hence the priority in order to exit it once and for all must be a return to a sustainable fiscal path. in fact, an impressive effort has already been made. the portuguese deficit shrank from around 10 % in 2009 to around 6 % last year. the italian deficit has been reined in from 5. 4 % in 2009 to 3. 9 % in 2011, and italy actually ran a primary surplus of 1 % last year, which is very rare among developed economies. the french deficit has been cut from 7. 5 % in 2009 to 5. 3 % in 2011. if we look at the aggregate picture for the euro area, we see that it is the economic zone that has tackled fiscal consolidation with the greatest intensity and the best results. according to the imf ( january 2012 fiscal monitor ), after peaking at 6. 5 % of gdp in 2009, the public deficit in the euro area started to decline in 2010 and stood at around 4 % by the end of 2011 ( down by 40 % ). over the same period, the us deficit was reduced from 13 % to 9. 5 % ( down by 27 % ) and the uk deficit from 10. 4 % to 8. 6 % ( down by 17 % ). these figures show not only that the absolute level of the euro area ’ s deficit is half what it is elsewhere, but also that the pace of fiscal consolidation is actually faster. while these efforts are absolutely crucial, there are concerns that too abrupt an adjustment in public finances will be detrimental to growth and, ultimately, to fiscal consolidation itself. in the current circumstances facing europe, i believe these concerns are misplaced. we have to look at the counterfactuals : delaying consolidation would expose our economies to even greater risks. at current debt levels, economic agents are very | “ ricardian ” and would react to fiscal permissiveness by delaying their own private expenditure. financial markets would continue to impose very punitive interest rates on our countries to compensate for the uncertainty in the fiscal outlook. overall, the confidence and financial benefits of fiscal consolidation far outweigh its negative effects on effective demand in the short run. in addition, everyone knows that there are ways to boost growth strongly and durably even in times of fiscal consolidation : through structural reforms. here as well, the progress already made in many countries is impressive. in recent history, european economies have never reformed so extensively in such a brief period of time. i could cite many examples : the labour market reform in spain and now in italy, the pension reforms in italy and france, privatisations, public wage decreases in ireland, etc. some positive effects from these measures are immediate, but naturally, most of the impact on competitiveness and growth will take time to materialize. in any case, such reforms are a necessary foundation for dynamic and sustainable growth in the future and they must be vigorously pursued. there is no doubt that the euro area as a whole will benefit from these national reforms that represent a significant asset for us in the global economy. 2. 2. the challenge for the banking system : continuing to ensure that the economy is properly financed while strengthening the financial sector the dilemma here is easy to understand : on the one hand, it is absolutely necessary to strengthen banks ’ balance sheets to enable them to better absorb shocks, protect public finances and re - establish normal market functioning. on the other, a disorderly deleveraging would create enormous problems and add credit constraints to the many headwinds currently facing our economies. the euro area is currently making sure that these two objectives – although sometimes difficult to reconcile – are achieved. banks are meeting their new capital requirements. the capital plans submitted to the european banking authority ( eba ) indicate an intention to exceed the benchmarks set by bis central bankers ’ speeches more than 20 %. french banks already comply with the basel 2. 5 regulations. at the same time, bank lending seems to be stabilizing, although at a relatively low level. banks are starting to assess their financial situation more positively and in many cases their willingness to grant loans is increasing. this would not have been possible without the strong support of the eurosystem. as you know, two exceptional three - year liquidity - providing operations have been decided on and successfully implemented | 1 |
the authorities have struggled to contain the ebullience. some of china's growth has been courtesy of a rise in exports but, even if that contribution to growth diminished, china would still be growing very strongly as domestic spending has been rising rapidly. with very high saving rates at present, there would appear to be plenty of scope for further rises in consumption spending over time, as the chinese people become accustomed to higher incomes. a slower pace of growth in the g7 will presumably trim this growth to some extent. but my guess is that china can cope with that. the chinese authorities may even welcome some moderation in growth. if china does suffer a serious interruption to growth at some point – and all economies do from time to time – it is more likely, in my judgement, to be caused by some domestic problem than by the sort of events we are witnessing in the developed world at present. for australians, it will be just as important over the years ahead to keep an eye out for imbalances in the chinese economy as to watch the problems of the us economy. all told, it seems likely that, after several strong years, global growth will be noticeably slower in 2008. much of this slowing will be driven by weaker outcomes in the developed world, particularly in countries facing tighter credit conditions. some of the g7 economies are likely to experience a period of growth well below trend. it seems likely that this will affect emerging market and other economies mainly via trade linkages. at this stage, it is not clear how significant this effect will be, but it seems prudent to assume that we will be moving from a position where growth in the global economy has been well above trend to one where it will be no more than trend. some moderation in the pace of global expansion is welcome, given the pressure on prices for energy and raw materials we have seen in recent years. but the full picture for this phase of the international cycle will become clearer only over time. australia what then of the outlook for australia? the continuing rise of chinese and other incomes through those levels at which resource usage intensifies significantly has meant strong and persistent demand over recent years for the mineral resources with which australia is abundantly blessed. at this point, there appears to be a widespread expectation that contract prices for some key resources will rise in 2008. if they do, australia ’ s terms of trade, which have already risen by about 40 per cent over the past five years, would move higher still | measure markups and a broad range of indicators ( such as the evolution of firm concentration and firm dynamics ). in the united states, the observation of rising firm markups and concentration rates, combined with a decline in business dynamics – in particular the entry of firms – has led to the consensus that firms ’ market power is on the rise in the economy as a whole. 2 at the same time, there is a lively debate about the drivers of this development. some authors suggest that firms ’ market power and concentration are driven by weakening antitrust enforcement, and link rising market power to a number of welfare - reducing secular trends, such as the decline in productivity and the rise in inequality. others argue that market concentration and rising markups are a natural side effect of the rise of global technology giants, and see such developments as beneficial for growth, to the extent that they spur investment and innovation. today, let me review the euro area evidence. the evolution of market power in the euro area recent work by ecb staff3 shows that the euro area economy wide mark - up has remained fairly stable over the past three decades, hovering around 10 %. it has even declined marginally since the late 1990s / early 2000s, in particular in the manufacturing sector. this clearly contrasts with 1 / 5 bis central bankers'speeches the evidence for the united states ( see charts 1a and 1b ). other indicators confirm the absence of any marked change in firms ’ market power in the euro area. concentration ratios have remained broadly flat over the last ten years or so4, and economic dynamism – the creation of new firms and jobs – has remained stable, albeit at a low level. finally, there is no evidence of emerging euro area - based “ superstar firms ” – firms that have a substantially greater share of sales than their peers, but a low labour share, and are pulling away from those peers over time. the largest euro area firms have, as in the case of the united states, a low labour share – the share of these firms in total sales is notably above their share of total employment in a sector. however, these firms ’ market shares have not grown in recent years. moreover, the markups of these largest euro area - based firms have remained broadly stable over the past decade, implying they have also not become more profitable ( see chart 2 ). 2 / 5 bis central bankers'speeches at the same time, there are signs that some large and growing global firms are entering euro area markets and | 0 |
##balanced. the developments can be explained fairly well by factors such as disposable income, living costs, construction costs and the fact that there is relatively little new building, despite strong demand. supply is expected to increase at a slightly slower rate than demand over the coming years. my assessment is that at present no imbalances have been built up that could risk leading to a sharp fall in prices further ahead. however, the rapid increase in house prices and indebtedness occurring now is something we shall monitor closely. i would at the same time like to emphasise that monetary policy often involves difficult considerations. if i and my colleagues were to come to the conclusion that serious imbalances were building up in the economy in a way that threatened the stability of the payment system, or in a way that we felt would have serious consequences for the real economy in the future, we may want to take this into account when conducting monetary policy. however, so far, considerations concerning the effects of house prices and household indebtedness on other elements than inflation have only played a marginal role in monetary policy. | that households have increased their indebtedness can to some extent also be due to the changeover in economic policy that took place in sweden at the beginning of the 1990s, with a focus on price stability. public finances were consolidated and an inflation target was introduced. confidence in the low - inflation policy was established gradually and has brought greater stability to the economy, with lower inflation and interest rates. a more stable economy makes it easier to predict future developments in interest rates and inflation. this can in turn mean that the risks connected with slightly higher indebtedness are perceived as smaller. in recent years, household loans have largely been used to buy housing. the fact that the increase in lending to households has gone hand in hand with rising property prices is therefore no surprise. the rapid increase in house prices during the second half of the 1990s is partly due to the decline in interest rates. however, there are also other explanatory factors. naturally, income growth has also played an important role. other driving forces behind house price trends include demography and relocation flows that have contributed to a large demand for housing in certain areas of the country, particularly the metropolitan regions. there are also other factors that have had an impact, such as reduced housing subsidies and rising construction costs. there has also been relatively little new building since the crisis years, despite substantial demand for housing. nevertheless, it now appears that the trend regarding construction has turned. the increase in house prices has in turn contributed to a rise in the value of household wealth, as well as in the collateral for most of their loans. household debts as a percentage of total assets, which among other things include housing, equity and saving in insurance policies, have therefore shown relatively little increase, despite the fact that the loans have risen in relation to disposable incomes. the fall in interest rates has also meant that the percentage of households ’ disposable income used to pay interest expenditure after tax is currently low, despite the increase in indebtedness. is there reason to be concerned that households have acquired such large debts and house prices have risen so much that it could cause problems in future? to determine this, it is necessary to have some perception of the long - term sustainable levels. one point worth noting to begin with, is that the swedish nation as a whole has not increased its indebtedness in recent years. on the contrary, the large surplus on the current account indicates that external debt has declined. this should have | 1 |
drivers, pre - school teachers, supervisors, engineers, carpenters, architects, auditors, accountants, it personnel and health workers. it has probably not been since the 1970s that we find such widespread reports of purely physical production constraints, for example now in the form of shortages of rigs and other equipment in the petroleum industry or shortages of plank, concrete and insulation in the construction industry. when we reduced the interest rate in 2003, demand and output rapidly picked up. however, it took a long time for employment to rise and the next phase from a pick - up in employment to a fall in unemployment was also long. but now the upturn has entered into a mature phase. as illustrated in the chart, capacity utilisation was higher than its normal level in 2006. nevertheless, wage growth has thus far been moderate and inflation is clearly lower than the target of 2½ per cent. the decline in import prices, increased labour flows and higher productivity came into clear evidence when wage and price inflation fell markedly 3 - 4 years ago. a period of low real interest rates would nevertheless have been appropriate in order to realise the added growth potential. however, after several years of strong growth, resources are now in short supply. with the substantial number of businesses now facing capacity constraints, we can expect inflation to pick up. it is uncertain whether inflation will then rise quickly or only gradually near target. strong export growth, high oil investment and after a period higher growth in general government demand have contributed to the upswing in production and employment. but the low level of interest rates has also been a prominent driving force. this reflects the dynamics inherent in interest - rate setting. low interest rates have stimulated demand and production and should lead to higher inflation, to which we are now reacting by raising interest rates. under inflation targeting, it is important to be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. interest rate developments in other countries are thus of importance to interest rates in norway. unemployment has declined sharply in recent quarters. the pace of decline and the level of unemployment are reminiscent of two earlier cyclical peaks, one in the mid - 1980s and the one that began at the end of the 1990s and continued into the present decade. both booms culminated in sharply accelerating cost and wage inflation. some of the driving forces that have boosted the growth potential of the norwegian economy and restrained inflation may diminish. prices for imported goods are no longer decelerating at | svein gjedrem : economic perspectives address by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the meeting of the supervisory council of norges bank, oslo, 15 february 2007. please note that the text below may differ slightly from the actual presentation. * * * introduction the poet rolf jacobsen would have been 100 years old this year. he was particularly interested in geography. in an interview with telemark arbeiderblad in 1971, he stated that the bible was a work of substantial importance, but that the same could be said about the comprehensive guide to public transport in norway. 14 in one of his geography poems, he writes : “ when the sun is shining on china the stars are twinkling here. and the reverse. asia is vast. half the earth ’ s land mass [... ] 15 yes, asia is vast. the rapid expansion in china and other asian countries is of growing importance to norway. these countries are a major source of cheap consumer goods and services and demand for our raw materials. ole karlsen ( editor ) ( 1993 ) : frøkorn av ild ( seeds of fire ). om rolf jacobsens forfatterskap, landslaget for norskundervisning, cappelen fakta. source : from the poem ” nar solen skinner pa kinesere ” ( when the sun is shining on china ) in rolf jacobsen ’ s collection of poems ” nattapent ”. gyldendal norsk forlag a / s 1985. interest rates, inflation and the business cycle the norwegian economy is now booming following the pronounced upswing since summer 2003. the upturn followed a period of slower growth as from 1998 and a mild recession in 2002 and into 2003. even though there have been cyclical changes, growth has been very high over the past 15 years. norway is one of the nations that has gained most from trade liberalisation and increased cross - border flows of capital, technology and labour. norway has experienced the benefits of shifts in the division of labour across countries and regions. first, norway ’ s terms of trade have improved markedly. we can buy one and a half to two times the volume of imports for the price paid for our exports than was the case only 5 - 6 years ago. prices for oil and gas, shipping, fish, industrial commodities and engineering products have increased considerably. moreover, norwegian import | 1 |
muhammad bin ibrahim : shariah issues and malaysia ’ s islamic financial sector speech by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the “ muzakarah cendekiawan syariah nusantara ke - 9 ”, jakarta, 10 june 2015. * * * i would like to express my gratitude to allah almighty for his grace that the 9th regional shari ’ ah scholar dialogue could be held here in the city of jakarta. this is the second time the dialogue is held in jakarta since 2009. i would like to congratulate the organizers ; universitas islam negeri syarif hidayatullah ( uin ) jakarta and the international shariah research academy for islamic finance or isra for their initiatives in organising this dialogue. this dialogue was initiated in 2006 by bank negara malaysia and subsequently led by isra. our sole intention has always been to promote mutual understanding and close collaboration among islamic scholars in this region on issues relating to fiqh muamalat and islamic finance. through this platform, the vision is to generate new ideas and views among scholars in an atmosphere of tolerance and mutual respect, irrespective of our different cultures, economic and political structures. today, i would like to share my views on the following three areas : i. strengthening the role of shariah scholars ; ii. fostering the dynamism of ijtihad in a contemporary setting ; and iii. cultivating the spirit of mutual respect within the diversity of shariah interpretations. strengthening the role of shariah scholars the islamic financial landscape today has undergone various transformations and progress over the last 10 years. this transformation can be testified in the increase of global banking assets that had reached nearly usd1. 5 trillion, total outstanding sukuk amounting to usd295 billion, islamic fund assets amounting to usd76 billion as well as the takaful contributions of usd21 billion ( source : ifsb : 1h 2014 ). in addition, there has been a marked increase in the participation from non - muslim jurisdictions in islamic finance, particularly in sukuk issuances, reflecting the increasingly positive reception of islamic finance among the global community. the sukuk instrument, in particular, is among the most innovative instruments and favoured by governments and multinational corporations. in response to these developments, the role of and the expectation on shariah scholars will be more challenging in | finding solutions to emerging new shariah issues that require immediate responses from the shariah fraternity. to me, changes in the islamic financial landscape should be viewed as a golden opportunity for the shariah experts to demonstrate the dynamism of the islamic religion as perpetually modern and evolving through time. therefore, it is my hope that the role of the shariah scholars could be further enhanced and not confined solely to only ensuring and monitoring the shariah compliance aspects. in relation to this, i am also of the opinion that researches and thorough deliberations on shariah need to consider other fields of disciplines in order for the ijtihad ( reasoning ) or shariah decisions to be comprehensive, inclusive and practical. this will become increasingly important when it involves strategies and positioning of the “ ummah ” in the economic sector. shariah assessments that include input and findings of multiple disciplines as well as variations of insights will provide more added values to a particular shariah research. this effort can be implemented through active involvement of professionals in the bis central bankers ’ speeches process of researching shariah issues. i am confident that through this approach, we will be able to formulate a collective ijtihad that is comprehensive, in comparison to ijtihad that is peripheral and exclusive. in the malaysian context, we have decided to encourage the combined expertise and experience between shariah members and professionals through the shariah committees of islamic financial institutions. in fact, we also encourage qualified shariah scholars to be appointed as members of board of directors at islamic financial institutions, specifically to form a “ bridge ” or point of connection between the board and the shariah committee members, and to allow them to gain greater exposure to the operational situation in the management of islamic financial institutions. the process of knowledge sharing and discussions on shariah as well as on other realms of islamic knowledge among the board members of a particular financial institution will enrich the justifications of a particular deliberation before a decision is made. another key aspect is the importance of shariah scholars to thoroughly understand the impact of ijtihad on the growth of the islamic finance industry and society at large. every ijtihad should always be geared towards fostering harmony and not widening the differential gaps. if a gap exists even in the matter of perception, it may raise doubt and reduce the effectiveness of a shariah decision. in this context, the majority of the | 1 |
large - scale industry which has met domestic requirements and has generated an exportable surplus which facilitated almost doubling of the exports to $ 16. 5 billion in fy06 relative to $ 7 - 8 billion in the preceding decade. normally real sector development precedes the development of the financial sector, but strong credit growth in the wake of a low interest rate environment in the last few years helped pakistan stimulate economic activity. consistent and stable economic policies enhanced business confidence. in the absence of alternative sources of funding, businesses relied heavily on banks to finance their needs. growth in advances coupled with gradually rising interest rates has provided a unique opportunity for banks to generate unprecedented profits and redeployment of these funds in the banking and economic system has helped strengthen banks ’ balance sheets and continue to meet the growing economic requirements, respectively. after having achieved high economic growth, the key question posed to the pakistani economic - policy makers is how sustainable is this high economic growth path? some even contest that the economy is showing signs of overheating. this debate is triggered by few emerging trends which are typically observed when economies are set to achieve new heights of growth. economic sustainability is being questioned on the grounds that : ( i ) pakistan ’ s growth has been primarily driven by growth in real consumption expenditure – this is partly true but is also a manifestation of rising per capita income that in fy06 is around $ 850, and higher remittances inflows that have now reached close to $ 4. 1 billion. ( ii ) after a consistent reduction in macroeconomic imbalances over fy00 - 04, the fiscal and external current account deficits have been above the targeted levels for fy06 and are likely to remain in that range in fy07. most notable is the concern regarding trade deficit which is around $ 8. 2 billion in fy06. 1 around 45 % of the increase in trade deficit for july - may fy06 over the comparable period in the preceding year is on account of the rise in import bill for crude oil and petroleum products, 39 % due to higher imports of machinery, 11 % because of iron and steel and 14. 3 % for food and fertilizers. ( iii ) government is offering a renewed and aggressive fiscal stimulus in fy07, but as is well known, pakistan has no choice but to accelerate social and infrastructure development and offer relief to certain segments of population and businesses to sustain its economic achievements | on the different developments in labour productivity growth in the euro area and the us. in particular, it helps identify those sectors in the euro area where the short - run link between strong employment and low productivity growth was particularly marked. recent economic studies have highlighted the role of the information and communication technology ( ict ) revolution in explaining the acceleration of productivity growth in the us in the mid - 1990s. 7 economic history has shown that great inventions have been the catalyst for long periods of rapid growth. think of the steam engine in the late 18th century, of electricity in the late 19th century or of the internal combustion engine developed by gottlieb daimler in the 1880s. similarly we are currently experiencing the ict revolution. the cost of computing and of communicating information has dramatically fallen down. we are by way of consequence the witnesses of an extremely profound change of the economy in the domain of the production of goods as well as services. the full body of the civil society is itself dramatically transformed by pcs and by the internet which is rapidly meshing cultures, spreading news and information to all corners of the world. this suggests that, for our economic analysis, we should distinguish between sectors according to their intensity of use of ict. a typical breakdown is between ict - producing, ict - using, and other industries which are labelled as ‘ non - ict ’. 8 once more, it will be interesting to compare developments in the euro area with those in the us. there may be good reasons to believe that the ict revolution started to materialize in the us, but as for the euro area, and despite all the computers around us, growth statistics does not show evidence of it to the same extent. in europe the solow ’ s paradox is still present when it has vanished in the usa. following this ict taxonomy, the main features of sectoral productivity contributions can be summarised as follows. first, a significant deceleration in hourly labour productivity in non - ict sectors from the early 1990s explains most of the decline in euro area aggregate labour productivity growth. the deceleration in labour productivity in the non - ict sectors seems primarily related to strong employment growth, which reduced the pace of capital deepening. second, productivity developments in the ict - producing sectors were relatively strong in the euro area in recent years, and even slightly outperformed the us in the segment of ict - producing services ( software, computer and communication services ). the contribution to labour productivity growth of the ict - producing sectors was 0. | 0 |
. if the baseline of the staff projections materialises, the economy should continue to rebound thanks to the declining impact of the pandemic and the prospect of solid domestic demand and strong labour markets. fiscal measures, including at the european union level, would also help to shield the economy. based on our updated assessment of the inflation outlook and taking into account the uncertain environment, we revised our schedule for net asset purchases over the coming months and confirmed all our other policy measures. we are very attentive to the prevailing uncertainties. the calibration of our policies will remain data - dependent and reflect our evolving assessment of the outlook. we stand ready to adjust all of our instruments to ensure that inflation stabilises at our two per cent target over the medium term. we are now ready to take your questions. 3 / 3 bis central bankers'speeches | from our counterparts, but we also have the chance to ask questions about their policies and prospects. and between these meetings, senior officials from finance ministries and central banks talk frequently to each other. this kind of information sharing can also be useful in areas other than macroeconomic policy. i mentioned before that the oecd policy consensus includes the idea that countries should strive for economic flexibility through their structural policies. in particular, that means the creation and maintenance of effective and efficient labour and capital markets. again, the sharing of information about experiences and best practices can be invaluable in helping authorities design policies and programs that are appropriate to their own economies. information sharing can also help to reduce uncertainty and to promote economic security by demonstrating the most effective ways to strengthen the rule of law and reduce the risk of abuses. and information sharing is an important part of the effort to combat money laundering and terrorist financing - an effort led by the financial action task force here in paris. where coordination can be helpful so is there any scope for outright policy coordination in a global economy? as i said at the beginning, i would argue that, when it comes to international trade and finance, actual coordination is not only desirable, it is probably necessary to facilitate the expansion of commerce and to promote well - functioning global financial markets. let me explain, starting with international trade. a moment ago, i said that trade liberalization is a crucial part of an appropriate economic policy framework. but in order to have freer trade worldwide, countries need to come together to draw up and enforce a set of rules governing the exchange of goods and services. in this regard, canada has been a consistent supporter of the world trade organization ( wto ) and its earlier incarnations. unfortunately, in recent years, there has been insufficient international support for strengthening the global trade order, and talks on difficult sectors, such as agriculture, have floundered. collectively, developed countries still have a considerable way to go in terms of reducing subsidies and liberalizing trade for a number of goods, including agricultural products. in my view, we have a responsibility to do this in order to promote growth in the most impoverished nations. that is why canada has been pushing for an early resumption of the doha round. and there are other sectors, such as financial services, where major effort is required. this effort must be made so that the global economy can benefit. it won ’ t be easy ; but, in the long run, it will be worth it | 0 |
who will be deliberating current and critical issues in supervision and banking in this post crisis era. 21. i believe there is no right or wrong when discussing frameworks for effective supervision and banking regulation. the effectiveness of the agreed standards depends on many aspects and that there is no 5 of 6 one - size - fits - all approach. as many have said : “ economics is the only field in which two people can get a nobel prize for saying the opposite thing ” is true. 22. before i close my welcome address, allow me to offer my warmest welcome to you all and express my deepest gratitude to your visit. i hope you will make the most of your stay in bali and take home with you warm memories of your visit. 23. i would also like to remind you that indonesia will be hosting imf – world bank annual meeting on october 2018 in this beautiful island of bali. i would like to invite you to visit bali, not only to attend the workshops, but also to participate in a series of activities in connection to the annual meeting. please save the date, and mark your agenda. thank you. 6 of 6 | building resilient financial institutions. the first element of reforms centered on the basel iii package. the quality and level of capital has been increased and new standards for liquidity has been introduced. in addition, leverage has been constrained and explicit macroprudential dimension has been introduced. 7. although we started a year late, basel iii implementation in indonesia has been in accordance with bcbs phase - in arrangements since 2014. i am pleased to inform you that indonesian banks are not facing significant challenges, especially with regards to the capital reform, due to the high levels of capital ratio dominated by common equity tier 1. indonesia has also 2 of 6 implemented the countercyclical capital buffer and capital conservation buffer in addition to the minimum capital requirement. 8. in terms of liquidity coverage ratio, banks that are required to adopt the standard have no major difficulties complying. nonetheless, we continued to monitor the long run impact of the requirement. 9. ending too - big - to - fail. the next core element is ending too - bigto - fail. a set of measures, known as the systemically important financial institutions ( sifi ) framework, has been introduced. 10. although indonesia is not home jurisdiction of the global systemically important banks, a number of domestic banks are required to meet capital surcharge that varies between 1 % to 2. 5 % to reflect their systemic importance in the domestic financial system. 11. indonesia has also passed the law on prevention and resolution of financial system crisis in april 2016. the law enables related financial stability authorities to implement a more rigorous banking regulation and supervision, particulary for domestic systemically important banks, including the provision of recovery plans. it also provides legal foundation of bail - in mechanism. ladies and gentlemen, 12. making derivatives markets safer. the third fundamental area of reform is in the otc derivatives market. the crisis highlighted how the opaque inter - connections across financial institutions engaged in trading complex derivative contracts over - the - counter and poor risk management led to rapid contagion and systemic crisis. 3 of 6 13. the reform has focused on 5 ( five ) areas : standardization of derivative contracts ; platform trading ; central clearing ; higher margin and capital requirements for non - centrally cleared trades ; and mandatory reporting of all trades. indonesia has implemented reporting requirement for banks engaging in otc derivatives transactions. in addition, platform trading are required for both equities and commodities derivatives. national authorities are also in the proceses of establishing a ccp | 1 |
we have with the banks. i would therefore also like to thank the representatives of the supervised institutions for the mutual trust we have built up together. i am thinking in particular of the risk directorates. in the vast majority of cases, we work in a calm and constructive manner, in the common interest of a more resilient european banking sector. this is an important asset. given the difficult challenges that lie ahead in the very near future, in europe and around the world, we will need more than ever to rely on these relationships of trust. it's now time for me to conclude. i would like to thank you for your attention, both on site and remotely, and to thank the various speakers for the quality of the debates and presentations. let us continue to work together to ensure that the ssm remains the world - class supervisor that we have built : an asset for a resilient and competitive 2 / 3 bis - central bankers'speeches european banking sector, a token of confidence for european citizens and, last but not least, a support for our common currency and european integration as a whole. thank you all very much. 3 / 3 bis - central bankers'speeches | denis beau : ten years of single supervisory mechanism ( ssm ) banking supervision - key achievements and main challenges ahead closing speech by mr denis beau, first deputy governor of the bank of france, at the conference held at the prudential supervision and resolution authority ( acpr ), paris, 26 june 2024. * * * ladies and gentlemen, i would like to say a few words in conclusion, without, however, coming back on all that has already been very well developed throughout this conference. the discussions we have just heard inspire me with this image that the ssm is like a tree. i. the ssm " tree " can rely on its solid roots first of all, it seems to me that this unprecedented and ambitious mechanism is now very firmly established thanks to solid roots. these roots stem from the founding texts that we have built, discussed and enforced together, such as the ssm regulation and the ssm regulation framework. in addition, the robustness of ssm regulatory roots also result from ( i ) their concrete operational implementation and ( ii ) the way in which sb chairs and teams have taken over and shaped a solid and demanding system. i would therefore like to pay particular tribute to their work, which has helped to bring a unique mechanism out of the ground. i will come back to this later. like the roots of a vigorous tree, the project has been able to grow and strengthen, nourished by values based on cooperation and pragmatism. ssm teams were able to create a framework of confidence to ensure effective supervision : trust among supervisors and between supervisors and supervised institutions. this environment of trust has provided the basis for building an ambitious and demanding mechanism. the teams involved in the implementation managed to exchange and adopt best practices in a co - construction spirit. in that view, we can be particularly proud of the way in which the joint supervisory teams – jsts – operate. these multinational teams are a concrete demonstration of the success of european integration and cooperation. they have truly succeeded in transcending the national visions that might have seemed an obstacle at the outset of the project. i would add that, in the same spirit of cooperation, the ssm has succeeded in implementing, in a very practical way, a level - playing field across institutions. i can tell you, as a supervisory board member that this fair treatment and the sense of proportionality are always at the heart of our discussions and decisions. i believe that this has contributed to establish a high level of | 1 |
##em because when it was drafted it was assumed that all the eu member states would adopt the euro. the escb is made up of the ecb and the ncbs of all the eu member states, whether or not they have adopted the euro. the eurosystem and the escb will continue to coexist as long as there are eu members states that do not belong to the euro area. their nature and functioning is governed by the tfeu, the statute of the escb and the internal regulations ( of the ecb, executive board, general council and supervisory board ). decision - making body, of which the governors, presidents or chairmen of all the eu central banks are members with advisory and coordination competences in relation to the escb. finally, the supervisory board is an internal ecb body responsible for planning and carrying out the ecb ’ s tasks in relation to the prudential supervision of credit institutions ( see part 2 of this annex ). 1. 2 the executive board of the ecb the executive board of the ecb is the decision - making body responsible for managing the day - to - day business of the ecb and implementing the policies of the eurosystem. the executive board usually meets once a week and more frequently if necessary. formally, decisions are adopted by simple majority, although in practice, as in the case of the governing council, the executive board acts as a collegiate body and seeks consensus. among other tasks it is responsible for : i ) preparing the meetings of the governing council, presenting the proposed decisions, and ii ) implementing the monetary policy in accordance with the guidelines specified and decisions taken by the governing council, giving the necessary instructions to the euro area ncbs. it is composed of the president of the ecb, the vice - president and four other members selected from among persons of recognised standing and professional experience in monetary or banking matters. the members of the executive board are appointed, by qualified majority, by the heads of state or government of the euro area countries, on a recommendation from the council of the european union, after it has consulted the european parliament and the governing council of the ecb. the term of office of the members of the executive board is eight years and cannot be renewed. as a member of the executive board, the ecb president occupies a prominent position and exercises exclusively certain reserved functions and, if absent, these functions are performed by the vice - president : chairing meetings of the governing council, the | the crisis first, let us look at the indicator reflecting credit developments. for the first time since the global financial crisis, the volume of bank lending to the resident private sector in spain increased in 2020 ( by 3. 5 % ). total new lending to the resident private sector in 2020 was up 5. 6 % on 2019, although there were contrasting performances for non - financial corporations and sole proprietors ( rising 6. 6 % ) and households ( down 5. 6 % ). 1 these developments were heavily influenced by the credit support programmes, particularly the ico guarantee programme. indeed, the volume of credit drawn in transactions linked to the ico guarantee facilities represented 18 % of total new lending granted by deposit institutions in spain in 2020 and 34 % of new lending extended to nonfinancial corporations and sole proprietors. also notable is the role played by the macro - and microprudential measures. on the evidence available, the authorities ’ recommendation to limit dividend distribution appears to have had a positive impact on credit ( see martinez - miera and vegas ( 2021 ) for an analysis of spain and hardy ( 2021 ) for an international comparison ). similarly, there is also preliminary evidence that those banks which started out with stronger solvency positions have been able to increase credit to a greater degree during the crisis. and, of course, the european central bank ’ s forceful monetary policy response has been essential in guaranteeing favourable financial conditions for all economic agents during the pandemic. in terms of the stock of lending, bank loans to non - financial corporations grew 9 % year - on - year in december 2020, whereas lending to households declined by - 0. 5 %. second, the adverse effects of the pandemic on economic activity have not, to date, translated into a higher volume of non - performing loans ( npls ). npls to the resident private sector continued to decrease, albeit to a lesser extent than in previous years. in 2020, the stock of npls fell by 3. 8 % year - on - year ( down 4 % in march 2021 ), compared with steep declines in 2019 ( - 19. 1 % ) and 2018 ( - 29. 1 % ). the npl ratio also continued to decrease, again more moderately than in recent years, to stand at 4. 4 % in december 2020 ( the same rate as in march 2021 ), down 0. 4 percentage points ( pp ) on the previous year. the public support measures for firms | 0.5 |
##banki, with kaupþing bank ltd. the new bank will be the largest commercial bank in iceland and one of the 10 largest in the nordic countries. the privatisation of the credit institutions has thus already created ample opportunities for rationalisation and will continue to do so in the period ahead. the reform of the financial legislation and its framework in line with that in other european states has facilitated the export of financial services by icelandic financial institutions and the establishment of operations abroad. you will hear more about this process from the next speaker, director sigurdur einarsson. foreign direct investment regulations are now liberal with the most important exception that such investment is not permitted in the fishing sector. foreign direct investment is most noticeable in power intensive industries, such as the production of aluminium, which is based on iceland ’ s abundance of renewable energy resources. recent changes in corporate taxation in iceland, lowering them to among the lowest to be found, serve to attract foreign business to iceland and encourage icelandic companies with international operations to favour iceland as the base of their operations. director garðar ingvarsson will probably give you more detail on this later this afternoon. direct investment by icelandic companies abroad has risen rapidly in recent years and in a variety of areas, such as fisheries and fish processing, pharmaceuticals, retail commerce and as mentioned earlier, financial services. these developments also benefit the icelandic economy in the long run as they integrate iceland further into the global economy, allow iceland to draw more easily on the experience of others and bring in dividends. during the 20th century, iceland tried almost every type of exchange rate policy, from a monetary union with denmark to a managed float. there were long periods when the icelandic krona was pegged against or managed with respect to the currency of some trading partner countries or a basket of currencies, with varying degree of adjustability and commitment. during the 1980´s the exchange rate regime had been relatively flexible. but in the first half of the 1990´s it became much more stable, after the krona was fixed in december 1989. exchange rate stability during this period was one of the cornerstones of the successful disinflation policy that took inflation in iceland down from double digits in the late 1980s to below 2 per cent around the middle of the 1990s. once the liberalisation of financial markets was more or less completed in the mid 1990´s, exchange rate flexibility was gradually increased. the margins around the exchange rate target were widened from 2¼ per cent in either | per cent in 2022. it is certainly possible that the economy will do better than our central scenario. this scenario does not envisage a vaccine being widely available to most australians until late next year at the earliest. it also assumes that significant restrictions on international travel are still in place at the end of 2021. recent medical breakthroughs give us some hope that things will work out better than this. if so, confidence would lift and there would be a further easing of restrictions. the result would be an upside surprise to growth and jobs, especially given the significant policy stimulus that is already in place, the generally strong balance sheets and the substantial government incentives for businesses to employ people and invest. but it is also possible that things could go the other way. europe provides a salutary reminder of this. it was just 3 months ago that many commentators were remarking on the robust bounceback in europe. now, the european economy is expected to contract again in the december 1 / 4 bis central bankers'speeches quarter as countries struggle to contain the virus. similarly, in the united states the outlook is clouded by the sharp increase in case numbers there. fortunately, here in australia, we look to be on a different path, but there is no guarantee that we will remain so. this inevitably means that there is still a high degree of uncertainty about the outlook. what has become clearer, though, as time has passed is that australia is likely to experience a run of years with unemployment too high and wage increases and inflation too low, leaving us short of our goals. in the current environment, addressing the high rate of unemployment is a priority for the reserve bank board. we are intent on doing what we can, with the tools that we have, to help here. this brings me to our recent monetary policy decisions. recent monetary policy measures since the previous hearing in august, significant policy announcements were made following the board ’ s meetings in september, october and november. we made no further changes at our meeting yesterday. in september, the board increased the size of the term funding facility and allowed authorised deposit - taking institutions ( adis ) more time to draw on this facility. institutions can now access funds up to the equivalent of 5 per cent of their total loans, with additional funds available if an adi increases its lending to businesses, especially small and medium - sized businesses. in october, we changed the nature of our forward guidance about the cash rate. the focus is now on actual outcomes for inflation and unemployment | 0 |
event. all the more important, then, to draw lessons from what happened to credit suisse. that is why the fsb has begun evaluating how the us and swiss authorities responded to these recent events – to identify lessons learned and shed light on potential obstacles and areas for improvement. the fsb is currently assessing cross - border coordination mechanisms, which we view as a key factor in relation to crisis management. it is essential that these mechanisms are in place so that banks are resolvable not only on paper but also in practice. another lesson we can learn from both svb and credit suisse is that poor internal controls, risk culture and governance are at the root of other deficiencies in banks. weak decision - making procedures and the absence of a healthy challenge culture hamper effective governance and strategic steering, which can ultimately lead to a bank failure. events are opportunities to learn – to improve is to change. this means that we need to remain alert. this obviously goes for supervisors, but also for the banking sector itself. we not only have to keep learning from past events, but we must also think about what might happen in the future – about risks and vulnerabilities that are lurking just around the corner. consider the rising interest rates, for example. while higher interest rates generally benefit financial institutions, the pace of the recent 3 / 5 bis - central bankers'speeches increases and the adjustments financial markets and institutions need to make as a result are cause for concern. after a period of abundant liquidity, these adjustments can amplify shocks to the system. the elevated debt positions that governments, companies and households have accumulated also constitute a major potential vulnerability. corporate and government debt ratios in the euro area are currently 75 and 92 percent respectively. government debt in particular saw rapid growth during the pandemic. in a low - interest environment, this additional debt would be easy to deal with. but with rising interest expenses, it could cause problems. this is particularly true for large debts that need to be rolled over and reinvested in the short term. these problems would affect our societies, our business communities and our economies, but they would also affect you – our banks and other financial institutions. after all, much of the debt that governments and corporations have accrued is owed to yourenewed volatility in the financial markets could also spell trouble. investors have so far been very optimistic about inflation. the general expectation is that we will have returned to the target level of 2 percent by | klaas knot : to improve is to change speech by mr klaas knot, president of the netherlands bank, at the international banking summit, brussels, 1 june 2023. * * * " many forms of financial systems have been tried, and will be tried in this world of sin and woe. no one pretends that the current financial system is perfect or all - wise. indeed, it has been said that this system is the worst, except for all those other systems that have been tried from time to time - " yes, this sounds familiar : it sounds like that famous winston churchill quote about democracy. but i am sure this is what he could have said – and would have said – had he been a banker - he would have been a formidable one. i can almost see him sitting there in the front row, puffing on a fat cigar. grumbling about novelties like bitcoin and timecoin. reminding us again and again never to waste a crisis and never to give inif he had said this about our financial system, he would have been right. because i am convinced that our financial system, warts and all, is better than many alternatives. it has been tried and tested. by inflation and recession, by bank runs and financial crises, by innovation and incompetence. and we never gave in. because we learned, we know, that as money makes the world go round, the system that regulates and oversees that movement cannot stand still, but has to stay in constant motion. it has to change with the times, adapting to new demands from the public and changing political tides. as churchill really did say : " to improve is to change, to perfect is to change often. " our financial system has to be able to absorb change, to withstand shocks and address vulnerabilities. in other words : the global financial system has to be resilient. and to be resilient, financial institutions have to be well capitalised – because they too must be able to handle shocks. to achieve that resilience, financial regulators focus on vulnerabilities rather than on risks. we identify those vulnerabilities through rigorous monitoring, but they can also be exposed by certain events. events of all shapes and sizes. each event, each change, each shock gives us new insights – we learn lessons that help strengthen the stability of the financial system. to improve is to changethe changes we implemented during and after the | 1 |
, private sector and citizens - accept their specific responsibilities in this regard. the governments have the responsibility for providing the environment in which economic and social development can take place, and the rights of individuals are protected. the private sector, particularly in this new era, to produce goods and services, which are internationally competitive. the citizens, to participate in political, social and economic activities, which lead to the development of the society. there are two particular examples i would want to bring to your attention. first, in the demands made by citizens on governments, we must be aware of the fact that these are financed by taxation on the public. second, in the case of loans made by banks, we must realise that these are made out of the deposits of other citizens. we need to have a knowledgeable and responsible community which, in the face of the challenging domestic and external environment, makes judicious and objective choices, to achieve our ultimate goal which is the welfare of our people. | accruing to the coffers of anguilla's treasury as a result of. ai web domain registration fees ( from companies that have set up web addresses ending with. ai ) is welcomed. long may it continue! ai holds much promise to accelerate the transformation of our region and could help propel our big push in fundamental and far - reaching ways. in the financial sector, these include enhancing : customer verification and fraud detection, forecasting accuracy, payments, financial regulation and cyber resilience. notably, it could help halt the trend of de - risking, from which our region has suffered, as correspondent banks have withdrawn services, claiming that the risks of money laundering, terrorist financing and possible fines and penalties outweigh the returns. but ai – which could help manage certain risks – also creates risks such as worker displacement and cybersecurity threats. as a region, it is imperative that we answer the question : what do we want from ai? for example, do we want a pro - worker or an antiworker ai? we must make a conscious choice. in answering this question, we ought to think about some of our most pressing problems such as climate change, crime, chronic diseases, as well as the pressing need to promote cyber and financial literacy ( along with financial resilience ) across the eccu. before i move on, i issue a word of caution. ai is only possible because of large reservoirs of data ( structured and unstructured ) and phenomenal computing power. in short, ai needs data. this is an issue of perennial struggle for our region, and we will need to address issues of data collection, storage and data governance, with some urgency, if we are to truly benefit from this technology. in this regard, i commend the uwi five islands campus in antigua and barbuda for its inaugural ai research conference held last week and prime minister browne for his vision for the campus and for digital transformation. i say to our youth, there are tremendous employment and income opportunities from this emerging area but you have to be skilled to seize them. indeed, our central bank is actively seeking to recruit data analysts and data scientists as we transform the way we work and deliver our mandates. i am pleased to note that the eccb has committed to train 500 students in generative ai and python each summer for the next 5 years starting this year. our summer camp commenced on 08 july and will run for one month. this is yet | 0.5 |
and mining investment. the decline in wage growth has contributed, at the margins, to a turnaround in the real exchange rate and helped cushion the effect of slower growth of domestic demand on employment growth. it has also helped to contain domestic cost pressures thereby offsetting the effect of the lower exchange rate on consumer prices. the demand for labour has improved over recent months, although some of that may reflect a “ catch - up ” after a period of weak employment growth last year. some forward - looking indicators are higher than they have been, though they are still at levels consistent with only moderate employment growth in the next few months. the bank ’ s latest forecasts are for employment growth to pick up gradually over the next two years. the unemployment rate is expected to remain elevated over that period, declining from later in 2015 when we anticipate gdp growth to be picking up to an above - trend pace. looking well beyond that horizon, demographic changes loom large and will play an increasing role in the discussion of labour market developments. as we ’ ve suggested on a number of occasions, in time it is likely that the availability of workers, not jobs, will be the main concern. 8 [ 8 ] and in that world, one imagines that real wages might grow a little more rapidly than otherwise, in order to encourage participation. see stevens g ( 2014 ), “ economic conditions and prospects ”, speech to the american chamber of commerce ( qld ) amcham iinet business luncheon, brisbane, 3 april ; and kulish m, c kent and k smith ( 2010 ), “ aging, retirement, and savings : a general equilibrium analysis ”, the b. e. journal of macroeconomics, 10 ( 1 ), pp 1 – 32. bis central bankers ’ speeches | more tranquil times. while financial markets have been turbulent, the recent data on economic activity suggest that the global economy is continuing to recover from the sharp downturn in late 2008 and early 2009. in its latest update, the imf is forecasting that the world economy will expand by 4¼ per cent in 2010 ( graph 1 ). this is a much better outcome than was expected 12 months ago, when the imf was forecasting growth of just 2 per cent. at the time, the outcomes that we have seen recently were viewed as a possible “ upside risk ”, although most observers thought the likelihood of this risk materialising was quite low. the main focus at the time, as it has been over the past week, was on the possible downside risks which were seen to be both very real and very serious. graph 1 we now know that the various policy measures that were taken did help arrest the collapse of confidence following the failure of lehman brothers. these measures on the fiscal, monetary and financial fronts provided reassurance that policymakers would not stand on the sidelines. in doing so, they helped reduce the extreme risk aversion that was evident at the time. they also had the more traditional effect of directly supporting spending in the economy when many people were reluctant to spend. while the global economy is recovering, the recovery has been quite uneven to date. in asia, it has been v - shaped, but in the countries of the north atlantic, particularly those in europe, it has been subdued ( graph 2 ). output remains below the level it reached in 2008 and, in many countries, it will still be some time before that earlier peak is reached again. graph 2 china continues to be at the forefront of the recovery. growth over the first few months of 2010 was strong, and recent indicators suggest that this momentum has continued. investment in the manufacturing sector and in infrastructure has, if anything, surprised on the upside ( graph 3 ). the main issue continues to be the potential for the chinese economy to run too hot, putting upward pressures on the prices of goods and services and on housing prices. recently, the chinese authorities have been responding to this risk, especially through steps to rein in the property market. graph 3 the picture is broadly similar elsewhere in asia, where there has been a sharp recovery in industrial production and exports ( graph 4 ). policy settings in the region remain stimulatory, particularly when viewed against the v - shaped recovery. over the past | 0.5 |
trends. looking at flows to all developing economies, the share of outward direct investment going to these destinations has been about flat over the past decade. foreign direct investment, as a whole, has been rising relative to domestic investment, but gradually over several decades - - a trend that was not picked up in recent years. clearly, none of these explanations is the sole cause of the relatively restrained level of investment. most likely, some combination of these factors along with others we have not identified accounted for the sharp decline in investment in 2001 and 2002 and has contributed to keeping investment spending rising along a lower track subsequently, both domestically and abroad. however, as i noted, several of those factors are of questionable quantitative import, and others no longer seem to provide a rationale for the failure of investment spending to rebound more vigorously. yet, most indicators in hand do not point to a surge in business fixed investment that will restore the trend derived from earlier relationships. instead, the latest reads on business spending and intentions point to continued solid growth in capital spending, supported by favorable fundamentals of steady increases in final demand and a relatively damped cost of capital. over the past three quarters, both orders and shipments of capital equipment ( excluding the volatile aircraft category ) have continued to move up at roughly the steady pace seen since 2003. moreover, orders remained above shipments in the first quarter of this year, leading to another increase in the backlog of orders. in addition, surveys indicate that businesses'capital spending plans and their outlook for sales remain, on balance, in the elevated range that they have occupied for several quarters. a slowing in the growth of consumption and residential investment associated with a cooling in the housing market will exert some restraint on capital investment, but business sales should receive some support from improved markets for our exports. moreover, business spending on structures finally seems to be picking up momentum. the construction data that we have in hand for the first two months of the year suggest a bounceback from the anemic growth in spending on nonresidential buildings that has prevailed over the past few years. this pickup should persist, responding to the recent declines in office and industrial vacancy rates. and expenditures on drilling and mining structures are likely to remain strong, given the current market expectations for elevated energy prices. spending on structures should also get a boost this year from rebuilding in the areas hard hit by last year's hurricanes. the outlook for solid increases in investment spending has both upside and downside risks associated with it | level of investment at the end of last year, $ 1. 3 trillion, was nearly 6 percent higher than the peak reached five years earlier. however, real gross domestic product ( gdp ) expanded nearly 14 percent over the same period. to be sure, the investment peak in 2000 was unusually high ; still, the nominal share of business fixed investment in gdp, at 10 - 3 / 4 percent at the end of 2005, was well below its forty - year average. of course, comparisons of these simple ratios and growth rates do not account for other influences on investment in the macroeconomic environment, such as interest rates, the prices of capital goods, or the rate of increase in final spending. however, a more rigorous exercise using a standard model favored by many forecasters yields a similar conclusion. using lagged net investment, changes in business output, and changes in the user cost of capital to predict the level of current net investment, we find that the model did not forecast the plunge in investment in 2001. and, despite its ability to predict recent growth rates reasonably well, a dynamic simulation of such a model starting in 2000 indicates that the current level of investment is still considerably lower than expected. to be sure, we would not have expected investment to snap back right away, judging from experience. still, investment over the past few years is showing no signs of returning to the path that we would have expected from historical relationships through 1999. business financial statements also reflect evidence of restrained business spending behavior. normally, businesses are heavy net users of savings generated by the rest of the economy. the financing gap - - the level of capital spending over the level of internal funds - - is a measure of that reliance. but it was close to zero in 2002 and 2003 and remained unusually low last year ( after adjustment for tax - induced flows of repatriated foreign earnings ), which suggests that businesses stacey tevlin and charles s. struckmeyer, of the board's staff, contributed to these remarks. didn't see enough profitable investment projects to warrant tapping the markets for external financing, even at low long - term interest rates. to be sure, profit margins and cash flow have been high, but that would also seem to be an environment that should encourage expansion. in fact, businesses appear to be using some of their very large holdings of cash for other purposes. corporations have increased their share repurchases, which hit a record level last year. they have also increased share retirements through cash | 1 |
likely to be the most effective governance mechanism at public sector institutions. these observations have substantive relevance for understanding how one might tighten governance in practice, for instance, in lending outcomes ( underwriting or screening, monitoring and recovering post default ) at public sector banks, a setting that is beset with many of the features highlighted above. that is for another day. for now, let us turn to how vigilance is organised at the reserve bank of india, the central role that preventive vigilance takes at the bank, and the measures that we have adopted to date in this regard. page 7 of 11 vigilance functions at the reserve bank of india ( rbi ) the overall responsibility for vigilance work at the reserve bank vests with the central vigilance cell ( c. v. cell or just cell ), which exercises its jurisdiction over all employees of the bank and co - ordinates the activities of the 49 branch vigilance units. the cell maintains liaison with the central vigilance commission ( cvc ) and the central bureau of investigation ( cbi ). the focus of the cell is to have a comprehensive preventive vigilance setup supported by an audit framework so that vigilance issues are minimised and to sensitise our employees to various aspects of vigilance administration. the guidelines on vigilance, issued by the cvc, are aimed at greater transparency, promoting a culture of honesty and probity in public life, and improving the overall vigilance administration in the organisations within its purview. the central vigilance cell at the reserve bank, led by the cvo, follows the guidelines issued by the cvc ( the commission ) from time to time. the chief vigilance officers ( cvos ), who are the extended arms of the commission in their respective organisations, decide upon the possibility of a vigilance angle in individual cases in an organisation. not only the financial propriety of transactions, but certain non - financial aspects arising inter alia from conflicts of interest, nepotism and considerations of postretirement employment as a quid pro quo, are also required to be examined from a vigilance angle. as mentioned earlier, the bank ’ s vigilance administration focuses on preventive vigilance functions by inculcating a sense of honesty and integrity among its employees and ensuring that sound internal systems and controls are laid down, which act as a defense against intended mala fide | mark carney : the virtue of productivity in a wicked world remarks by mr mark carney, governor of the bank of canada, to the ottawa economics association, ottawa, ontario, 24 march 2010. * * * it is either brave or foolhardy of the ottawa economics association to organize another conference around canada ’ s perennial challenges of demographics, productivity, and potential growth. the cognoscenti wearily deride these shortcomings even while they acknowledge their importance. 1 after all, who really wants to talk about getting old? similarly, the subject of productivity is described as too dull, or worse, too threatening for canadians. it is said to imply working harder, not smarter, or to promote job losses rather than income gains. these debates are thus thought best confined to the policy wonks, in order that our diagnoses and prescriptions can occur in a parallel, forgotten universe. however, one wonders, who would not want to be productive in their work? is there a child whom we do not want to reach his or her full potential? could what canadians expect of their economy be so very different from what they expect of themselves? our ambitions for the canadian economy should be bold. we are a country of immense strengths and, as demonstrated during the recent crisis, considerable resilience. yet canada does underperform. we are not as productive as we could be. our potential growth is slowing. moreover, this is occurring as the very nature of the global economy, in which we previously thrived, is under threat. this debate can no longer be avoided. what, then, must be done? there are two imperatives – one domestic, one international – to secure strong, sustainable, and balanced economic growth for canada. both recall aesop ’ s fable of the ant and the grasshopper, the moral of which can be best summed up as “ idleness brings want. ” in short, in a wicked world, canada needs productive virtue. canada ’ s slowing potential this conference has already benefited from comprehensive reviews of productivity and potential growth, so i would like to briefly summarize the bank ’ s views ( which are largely in accord with the emerging consensus ). we have a problem : demographic drag will increase in coming years. as the boomer generation ages, labour force participation rates will decline and hours worked will fall. the question is merely one of degree. for some age groups, there is a possibility that participation rates will be higher than currently | 0 |
gent sejko : increasing the formalization of the albanian economy address by mr gent sejko, governor of the bank of albania, at the joint press conference with the minister of finance and economy, tirana, 7 december 2017. * * * dear minister ahmetaj, dear media representatives, it is with great pleasure that i present this concrete initiative of the bank of albania ( boa ) in the framework of our efforts to promote the formalization of the economy. it is encouraging to see that a series of initiatives by other albanian authorities are taken for the same purpose, to enhance the law enforcement and the use of financial channels. experience has shown that complementary efforts of regulatory institutions lower the policies ’ implementation costs and increase their likelihood for success. informal activity imposes open and hidden costs for the albanian economy and the society. it damages the country ’ s public finances, increases the tax burden and distorts its effect on the economic agents, hampers competition and increases the costs of fair business activity, reduces business financing resources and curbs their normal development, and creates social problems that arise from lack or insufficient coverage of social and health insurance. from the boa ’ s point of view, as the monetary authority and as the supervisor and regulator of the banking sector, informal activity reduces the effectiveness of our stabilization policies and creates the premises for instability of one or more segments of the financial system. focusing on the latter issue, i would like to remind you that safeguarding and strengthening financial stability has been and remains a major objective of boa ’ s work. as we have stated in our previous communications, the deterioration of the loan portfolios ’ quality has been one of the biggest challenges we have been facing in recent years. this deterioration reflected the effect of many factors, but the high level of informality in the economy, undoubtedly, provided its contribution to this performance. more concretely, the lack of financial transparency, lack or problems with property titles and those encountered during the execution of collateral contributed to the increase of non - performing loans and were a barrier to our legal and regulatory measures, for their reduction. in addition to the negative impact of informality on the loan performance and quality, it has also negatively affected the borrowers. taking risks beyond the repayment capacities, not identified as a result of the lack of clarity regarding the financial statements, has also caused credit default, thus making / driving borrowers face with unpredictable situations. for these reasons, the bank of albania has commended | . getting a promotion in the process of changing jobs allows employees to avoid the “ dues paying ” that can keep workers in a painfully slow rise up the corporate ladder. job hopping can also lead to greater job fulfillment. a 2012 survey by net impact 2 found that 88 percent of all workers considered “ positive culture ” important or essential to their dream job, and 86 percent said the same for work they found “ interesting. ” the same survey found that millennials are the least satisfied in their careers. i also recognize that firms are no longer just competing with others in the financial sector for talent. with skills that can be adapted across multiple industries, the talent pool that was once specialized for financial firms is now spread thin. this puts pressure on the firms and gives talented workers the advantage of being selective in their roles. they demand more from hiring managers and sense other opportunities out there if they ’ re not satisfied. as i said to a group of foreign firms a few weeks ago, all firms, regardless of size, need to keep this information in mind and get better at planning in advance, ensuring their recruiting efforts are providing a steady stream of qualified candidates, and looking for opportunities to move people around within the organization, particularly between the front office and control functions, to develop more well - rounded professionals. this is likely to mean more aggressive, creative and targeted searches and a commitment to ongoing training. as the competitive landscape and regulatory requirements change, firms will need to find the right balance between hiring new talent with specific expertise and training current staff to keep them up to speed and capitalize on institutional knowledge. 3. continuing to build resilience – stress testing and risk management : no, i am not suggesting that all firms, regardless of size, are going to be required to participate in ccar. however, i believe that incorporating the motivating principles behind stress testing into your planning – namely thinking about the many ways that tomorrow could be different from today and what that could mean for your business – is at the heart of managing your risk and your business with foresight and prudence. sound risk management demands a thorough understanding of the organization ’ s full risk profile today and how it could evolve tomorrow. employee tenure in 2014. talent report : what workers want in 2012. bis central bankers ’ speeches we expect banking organizations of all types and sizes to have the capacity to analyze the potential impact of adverse outcomes on their financial condition. stress testing can be a means to carry out such analysis. certain portions | 0 |
multiple cards in the same nfc handset. further, use of nfc would require changes in payment processing, upgrading the pos terminals at the merchant ends. liberalised business correspondent ( bc ) guidelines : bc guidelines have been significantly liberalised with corporates including mnos having been allowed to come in as bcs. the banks are also now permitted to pay a reasonable commission / fee to the bc. it is hoped that these liberalised guidelines would result in expansion of the banking coverage and along with technology provide a sustainable ecosystem for the unbanked and financially excluded segments of the population to be part of formal banking network. aadhaar enabled payment system : npci and uidai in partnership are ushering in the aadhaar enabled payment system ( aeps ). aeps is a bank led model which allows online financial inclusion transaction at pos ( microatm using handheld device ) through the business correspondent of a bank using the aadhaar authentication. at present aeps service can be availed by customers at their respective bank business correspondent outlets. aeps will support four types of banking services viz. balance enquiry, cash withdrawal, cash information note to the press ( press release no. 45 / 2011 ), telecom regulatory authority of india. bis central bankers ’ speeches deposit and aadhaar to aadhaar funds transfers. uidai along with npci has piloted aadhaar enabled payment system in jharkhand. basic transactions permissible over these accounts include cash deposit, cash withdrawal, balance enquiry, and inter - bank money transfer. this system also envisages the creation of an aadhaar enabled payment bridge which would facilitate direct disbursement of government benefits to the beneficiary by credit to their bank accounts using aadhaar. section 6 : industry level challenges convergence of products and channels – competition, technology, increased customer demand for comfort and convenience and regulatory initiatives have resulted in introduction of several payment products and channels over the time. however, banks have built these products and channels into separate silos and vertical. the cii - pwc survey “ payment business in indian banks ” brought out this issue of separate silos and lack of interoperability among these silos. for instance, in some banks the core banking system is usually different from the card processing system. the survey also highlights the issues that arise from disparate payment infrastructure for banks such as duplicity in work, lack of scalability, lack of stp, increase | of various markets, the changes in the retail payments are aimed at providing efficient and timely payment mechanisms to the citizens of this country. the payment system also assumes importance in the context of domestic financial sector reforms and global financial integration that the country is undergoing currently. foreign investments ( direct and portfolio ) are encouraged by the availability of an efficient payments system, as also the need for a low cost remittance facility for migrants to send money to their kith and kin within the country. improved, faster and cheaper domestic money transfers through the payments system is also a part of the emerging scenario. given this scenario, let me through the remainder of this address devote myself to providing a bird ’ s eye - view of the current payment system landscape in the country ; the other significant initiatives that have been undertaken ; the game changers that would provide further fillip to this endeavour ; identifying the potential goldmine as it were for deepening this process ; the enablers to take this process forward ; the challenges faced at the industry level ; the role of the regulatory framework which could serve as a catalyst ; and conclude with what i would call the 5 a ’ s of payment systems for providing an efficient, robust, safe, costeffective payment services to our fellow citizens. bis central bankers ’ speeches section 1 : payment system landscape in india the stage of payment system development in a country to a large extent depends upon the adoption of technology, introduction of new payment instruments and the confidence of the public in using these payment instruments. in india cash still continues to be the predominant payment mode. this can be gauged from the fact that value of bank notes and coins in circulation as a percentage of narrow money is very high at 60. 07 % for the year 2009 – 20101, when compared to other emerging economies like south africa ( 18. 51 % ), china ( 18. 83 % ), mexico ( 39. 14 % ). brazil comes close to india with 52. 70 % of the value of banknotes and coins in circulation as a percentage of narrow money. this is perhaps a pointer that we have been relatively slow in embracing cashless payment modes and using them as cash substitute. the pre - dominant use of cash could also be attributed to the fact that the process for adoption of non - cash mode of payments started relatively late in the country. notwithstanding this, the reserve bank has been in the forefront both as operator and facilitator for promoting the use of cashless payment instruments in the country | 1 |
discourse. in my view, it is therefore not so much a question of taking a " giant leap ", but more of specifying and implementing existing 2 / 3 bis - central bankers'speeches considerations. and the clear aim here should be to make european capital markets more attractive. this is something for which harmonised, reliable and uncomplicated legal frameworks are crucial. the action plan presented in 2020 already provides very concrete recommendations for a total of 16 areas. one of these areas is the securitisation market. here, it could be possible to stimulate the market by reducing any unnecessary regulatory barriers faced by market participants. this would bridge a gap between bank financing and the capital market, as securitisations could help to distribute risk more efficiently in the capital market. another area is the currently highly divergent national regimes for corporate insolvency resolution. the lack of harmonised insolvency rules is currently considered one of the main obstacles to the free movement of capital within the european union. the eurosystem, too, plays a role in strengthening the capital markets union : through its objective of price stability, which is a major factor that makes eurodenominated assets attractive ; through banking and financial supervision, which inspires confidence amongst investors ; and by strengthening market infrastructure, for example through t2 in payments and securities settlement, in which the bundesbank plays a major part in development and operation. 5 conclusion ladies and gentlemen, anniversaries are an occasion for joy, and, at the same time, a good time for reflection. what is clear is that europe's success story has not yet reached its conclusion, and more progress is needed on the capital markets union, in particular. there is no shortage of big, new ideas here, as meaningful proposals are on the table. but, as former german federal president joachim gauck once said : " more europe requires more courage from everyone. " policymakers and the financial sector now need the courage to flesh out and implement these proposals in order to remove any obstacles on the road to deepening the capital markets union. it's a lot like running hurdles in athletics : speed is important, but so are good timing and fitness. you only reach your goal once you've successfully cleared all of the obstacles in your path. now is a good time to clear some more of these hurdles, which will surely bring us closer to the finishing line. thank you. 3 / 3 bis - central bankers ' | 2016 – an adequate timeframe, in my opinion, for mobilising these funds. it would also be right, in my view, to use the option granted by the srm regulation of also counting amounts which banks have already paid into national resolution funds towards their contributions. a european deposit guarantee scheme is not being regarded as a matter of priority at the moment, and rightly so. after all, a joint deposit guarantee scheme would necessarily mean joint liability. but joint european liability would necessitate joint european control, which would require more than the creation of a single supervisory mechanism. 6. 2 single supervisory mechanism the ecb is aiming to be ready to launch the single supervisory mechanism ( ssm ) on 4 november. this will require a mammoth effort by all the parties involved. it is a project that is comparable to the creation of monetary union, but is to be rolled out at seven times the speed. at the current juncture, the ecb together with the national supervisors is comprehensively assessing the balance sheets of 128 banks which, as things stand today, are candidates for direct ecb supervision. if the asset quality review and the subsequent stress test reveal that banks need to be recapitalised, the need for capital will have occurred on the watch of the national supervisors – so you could say it is a legacy issue. it is therefore down to the member states in question to repair these legacy issues before responsibility shifts to the ecb. private funds should be first in line to address any capital shortfalls. failing that, it should be up to the member state to recapitalise the bank in question, assuming the latter runs a viable business model. this asset quality review is a major undertaking for supervisors and the banks in question. yet at the same time, it is crucial for ensuring that the single supervisory mechanism gets off to a credible start in its mission to restore confidence in banks and revitalise lending in the euro area. hence the strict and demanding standards set by the asset quality review and the subsequent stress test. the assessment represents a huge administrative burden for the banks, so their misgivings are understandable. but if you are looking to paint a complete picture, there ’ s simply no getting round a thorough assessment. the procedure is even being likened to a full physical examination for banks. before a football club signs a new player, it first subjects him to a thorough medical – and that is more than just a quick once - over. of course there are some | 0.5 |
decisions are not driven in a mechanical fashion by the forecasts. both the bank staff and the board are very conscious of the limitations of numerical forecasts. predicting exactly which quarter inflation is likely to increase, and at what pace, is inherently difficult. what is often more useful is the analysis and storyline that support the numerical forecasts. it is this analysis, rather than exact numbers, that is rightly the main focus of our internal discussions and our communication with the public. forecasting at the reserve bank i would now like to turn to the actual forecasting process at the rba. as many of you know, we publish a table that sets out our forecasts of inflation and growth each quarter in the statement on monetary policy. we also discuss the broad analysis underlying these forecasts and the main risks. consistent with our general approach, we do this in words, rather than using fan charts showing statistical bands of uncertainty as has become popular in some other countries. the forecasts that are published in the statement on monetary policy are discussed at the board meeting three days earlier and are developed through a series of internal meetings over the preceding month. outside of this quarterly cycle, the forecasts are kept under review by the staff. the actual forecasting process has three key elements. the first is the day - to - day assessment of trends in the economy. the second is the use of formal econometric models. and the third is the information that we obtain from our business liaison program. i would like to touch on each of these. the obvious starting point is to understand what is currently happening in the economy and the financial system and what that means for the future. in our economic analysis department there are around 50 economists continually monitoring the pulse of the domestic and global economies. elsewhere in the bank, staff are analysing developments in the financial system and financial markets. inevitably the data that we look at are subject to measurement error and they are often conflicting. this means that much of our time is spent discussing the data and what they tell us about recent trends, as well as the future. judgement is obviously critical here, with the strong collective memory of the bank staff playing an important role. the judgments that are reached are also anchored by some underlying economic relationships and concepts. as we prepare our forecasts, we are constantly asking ourselves questions such as : how much spare capacity does the economy have ; what constitutes full employment ; what is the neutral real interest rate ; what is the potential growth rate of | the rest of the world. we should not have been surprised that the australian dollar rose over the past three years given its extraordinarily low starting point, the rising terms of trade, the fact that the us dollar was finally weakening and the associated fact that us interest rates were so low. i think this was well understood by the public, including by exporters and manufacturers, even though they saw their margins shrinking and competition increasing. apprehension started to increase, however, when in the relatively short period between early november and mid february, the rate against the us dollar rose from us70 cents to us80 cents ( 14 per cent ) and against the twi from 61 to 66 ( 9 per cent ). this was an uncomfortably fast rate of increase and the prospect of it continuing was clearly a consideration to be taken into account in formulating monetary policy. if there had been a domestic need to tighten earlier this year, as there well could have been, there would have been an extremely difficult decision to make. this is the type of conflict that can arise when the world has such an exceptionally low level of interest rates, but some countries do not need, or would be positively harmed by sharing, the same low interest rate structure. the other risk we faced was that the excessive growth of credit to the household sector would continue, so fuelling further asset price rises, particularly in housing. this risk is diminishing. it now seems likely that the peak in credit demand was reached around october 2003 when monthly loan approvals for housing ( owner - occupation plus investment ) reached over $ 15 billion per month, an increase of 40 per cent over the year earlier. since then, we have had four monthly declines in loan approvals and they are now running at about $ 12 billion per month. some may be inclined to think that a decline of this magnitude - 20 per cent - represents a sharp fall in the provision of housing finance. but $ 12 billion per month is still a rapid rate of lending and, if continued, would be consistent with the stock of housing credit growing at a twelve - month - ended rate of about 18 per cent by end 2004. admittedly, this would be well down on its peak of 23. 6 per cent, but would still be unsustainably high. what we are talking about here is the difference between a flow ( loan approvals ) and a stock ( household credit ). the flow would have to fall quite a lot in order to bring the growth of | 0.5 |
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