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need to be patient about these things. wages are not increasing very much and most of the newly created jobs offer less attractive terms of employment. some labour market developments are positive but others negative. people aged over 50 are returning to the labour market ; that came as a surprise to us. and we also see an increase in labour market potential owing to migration, especially from central and eastern european countries. because of migration from those countries, germany still has a significant labour supply despite having a high level of employment. some of those central and eastern european countries, such as poland, hungary and the czech republic, are now experiencing stronger wage inflation. that will spread. the more people who are employed, the bigger the increase in disposable income, the more that is spent. on the other hand, we see that youth unemployment is particularly high in a number of countries and that getting young people into jobs is not easy. another factor influencing wage inflation is that more people are working as self - employed. we are increasingly seeing a dual labour market. even in the civil service. on the one hand, you have insiders with an attractive job and a high degree of protection and on the other, the new employees who do not have the same terms, work under more flexible contracts and can be let go more easily. of course you might say : so what β s the problem? that is part of market reform, it β s good for the economy. don β t forget that, in this way, quite a few people can avoid long periods of unemployment. those new jobs create earnings and stop people from losing their skills. on the other hand, there are also risks if the labour market reforms lead to a dual labour market, not only from an ethical standpoint but also because economic growth is not β inclusive β. for that reason, i see a role for the government in correcting the negative redistribution effects of reforms. it β s a fixed component in president mario draghi β s speeches : governments also need to introduce structural reforms, monetary policy cannot do everything. has belgium made sufficient use of the low interest rates to introduce the necessary reforms? 2 / 5 bis central bankers'speeches i don β t like commenting on government policy, and certainly not on that of my own country. but speaking in general terms, i can say that the pension reforms were good decisions in countries such as italy and belgium. belgium has also undertaken a small measure of labour market reform. the point is that it should | peter praet : interview in de standaard interview with mr peter praet, member of the executive board of the european central bank, in de standaard, conducted by mr pascal dendooven and ms goele de cort on 3 july 2017 and published on 8 july 2017. * * * it looked like a reversal last week. ecb president mario draghi β s speech in sintra had an impact on the markets, interest rates increased and the euro strengthened, the markets took it as a signal that an end to the ecb β s stimulus is in sight. i see it more as an evolution in our communications. in essence, we said that the economy is doing better and that growth is looking good. and since the last meeting of the governing council the positive news has continued. the tone was rather optimistic regarding growth, and rightly so. but, and this has to do with our mandate, the underlying inflationary pressure remains subdued. this is why we also stress that we should be patient and persistent regarding our monetary policy. proof that your policy of quantitative easing has worked? some people said that this policy would create hyperinflation whereas others thought that, at best, it would have no effect. low interest rates would supposedly not lead to more investment and growth, but they have in fact had a very favourable impact. not only in the real estate market but also elsewhere. it was also said that people would start to save more and spend less in order to compensate for the loss of interest income and to secure their retirement. but the saving rate has remained stable. only investment was more sluggish than we had hoped, but that is picking up now. surveys among smes show that they no longer find it so difficult to obtain loans. nothing new, in your view, but a sharp market reaction nonetheless. have markets not become overly focused on messages from the ecb? is that still a healthy situation? it β s true that in the short term there was a clear reaction. people also had the impression that it was a sort of β coordinated β action by different central bankers but that wasn β t the case. our message was very nuanced. the thing is, deflationary pressures were considerable in 2015. at that time, we faced negative shocks to the economy. there was a sense of urgency. that no longer applies. now indeed inflation is picking up, but that is a process that is a long way from completion. | 1 |
the bank is pursuing monetary easing under the framework of yield curve control, in which the short - term policy interest rate is set at minus 0. 1 percent, the target level of 10 - year japanese government bond ( jgb ) yields is around zero percent, and the range of 10 - year jgb yield fluctuations is around plus and minus 0. 5 percentage points from the target level ( chart 10 ). i will focus on three points regarding this monetary policy. first, the short - term policy interest rate is decided and controlled solely by the bank. if, in the future, the bank were to terminate its negative interest rate policy and apply, for example, a zero interest rate, it would raise the short - term policy interest rate by 0. 1 percentage point. this decision will be made if the bank assesses that it would be appropriate to prevent price rises by suppressing demand in the real economy. applying this to the risk - management approach, by maintaining a negative interest rate of minus 0. 1 percent, the upside risk of the inflation rate continuing to exceed 2 percent if monetary tightening falls behind the curve becomes a greater concern than the downside risk. given current developments in economic activity and prices in japan, the bank assesses that there is still a long way to go before such decisions are made. second, in its policy statement, the bank has made a commitment to continue with the current framework of qqe with yield curve control, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. at this point in time, sustainable and stable achievement of the 2 percent target has not yet come in sight. therefore, the bank will maintain the current framework in accordance with its commitment. third, in conducting yield curve control under the current policy framework, the bank has been striking a balance between its positive effects and side effects from the viewpoint of keeping in mind the impact on the functioning of financial intermediation and the market while continuing with monetary easing in a sustained manner. every policy has its positive effects, but it also always comes with costs. there is no free lunch for any policy. given that the bank is conducting monetary easing at such a large scale, this has had positive effects, but at the same time, profits of financial institutions and the functioning of financial intermediation have been affected ( chart 11 ). in addition, controlling interest rates inevitably has had an impact on market functioning. the balance between | of countless stakeholders and financial institutions. i would like to express my respect for your efforts to ensure the region's economic and financial resilience. this year marks the 150th anniversary of the birth of chiba prefecture. let me conclude by offering my congratulations and hope that its economy will continue to flourish. thank you very much for your attention. japan's economy and monetary policy speech at a meeting with local leaders in chiba august 2, 2023 uchida shinichi deputy governor of the bank of japan introduction i. current situation of and outlook for economic activity ii. current situation of and outlook for prices iii. the bank's conduct of monetary policy iv. recent and future economic activity in chiba prefecture chart 1 i. current situation of and outlook for economic activity the boj's forecasts for real gdp ( july 2023 outlook report ) 580 s. a., ann., tril. yen fy 2025 + 1. 0 % fy 2023 + 1. 3 % fy 2024 + 1. 2 % fy 13 note : the forecasts presented are the medians of the policy board members'forecasts. the values of real gdp for fiscal 2023 onward are calculated by multiplying the actual figure for fiscal 2022 by all successive projected growth rates for each year. sources : cabinet office ; bank of japan. chart 2 i. current situation of and outlook for economic activity private consumption s. a., cy 2019 = 100 total real private consumption of which, services cy 15 note : figures for total real private consumption are the real consumption activity index ( travel balance adjusted ) based on staff calculations, which exclude inbound tourism consumption and include outbound tourism consumption. source : bank of japan. chart 3 i. current situation of and outlook for economic activity results of spring wage negotiations developments over time results by type of employment and firm size y / y % chg. cy 2022 cy 2023 rate of wage increase + 2. 1 % + 3. 6 % base pay increase + 0. 6 % + 2. 1 % total wage increase cy 2022 cy 2023 regular employees 2. 1 % 3. 6 % base pay increase 1, 000 or more 2. 1 % 3. 7 % regular wage increase 300 to 999 2. 0 % 3. 4 % 100 to 299 2. 0 % 3. 3 % 99 or less 1. 9 % 2. 9 % part - time employees 2. 3 % 5. | 1 |
1 strategic priorities of the insurance industry. 2 gross written premium year to date quarter 4 2018 β life β¬34, 869m, non - life β¬16, 068m, reinsurance β¬16, 703m ; source central bank of ireland regulatory returns. 3 sibley, ed : innovation and insurance in ireland : a supervisory perspective ( 2017 ). 4 see department of finance : the cost of insurance working group. the cost of insurance working group, chaired by minister of state michael d β arcy td, has undertaken a review of the factors which are influencing the increased cost of insurance. the working group brings together all the relevant departments and offices involved with the process. its objective is to identify immediate and longer term measures which can address increasing costs, while bearing in mind the need to maintain a stable insurance sector. the first phase involved an examination of the motor insurance sector. the second phase involved an examination of the employer liability insurance and public liability insurance sectors. 5 department of business, enterprise and innovation : second and final report of the personal injuries commission 6 clarke, frank : statement on the occasion of the opening of the new legal year ( 2018 ). 7 humphreys, heather : launch of the piab conference 2019, department of business, enterprise and innovation ( 2019 ). 8 a with - profits policy is typically one that allows the policy to participate in the profits of a life insurance company, through a ring - fenced fund with its own characteristics and specific fund rules. 9 rowland, derville : opening remarks at the central bank outsourcing conference ( 2019 ). 10 cession refers to the portions of the obligations in an insurance company β s policy portfolio that are transferred to a reinsurer. ceding a portion of risk to a reinsurer allows an insurance company to more effectively and efficiently manage its overall risk exposure. the agreement between the ceding insurance company and the reinsurance company will include comprehensive terms under which the cession is ceded. 11 the percentage of total non - linked investments allocated to sovereign debt reduced from 34 % to 28 % while the percentage of total non - linked investments allocated to corporate debt increased from 25 % to 31 % from q1 2016 to q4 2018. source : central bank of ireland regulatory returns. 12 central bank of ireland : compliance by regulated financial service providers with their obligations under the fitness and probity regime ( 2019 ). 13 central bank of ireland : demographic analysis of pcf applications ( 2019 ). 14 european insurance and | occupational pensions authority : financial stability report ( 2018 ). 15 central statistics office : population and labour force projections ( 2018 ). 7 / 7 bis central bankers'speeches | 1 |
pursuing low and stable inflation and contributing to maximum sustainable employment, without creating undue volatility in output, interest rates and the exchange rate ; maximising financial system soundness while supporting efficiency, competition, innovation, and inclusion ; promoting certainty of cash availability while promoting technology innovation in payments and settlement systems ; ensuring robust payment and settlement systems, while encouraging competition ; and being the liquidity provider in extreme financial market events while minimising moral hazard in market behaviour and operating prudently with the bank β s balance sheet. these trade - offs have always existed in economic practice, but they have varied in their definitions, importance, and presence in the reserve bank β s legislation, and societies expectations. our task is to build a consistent, coherent, and transparent approach to managing and explaining these objectives, trade - offs, and our risk appetite across all aspects of our work. figure 1 our purpose, vision and values 1 our context let me set out the hierarchy of our objectives which form the basis of many of the trade - offs we need to consider. at the top of the pyramid, the reserve bank is given authority to carry out a broad set of tasks via its legislation. the rbnz act 20212, which came into effect in the middle of 2022, replaced our previous legislation from 1989. this new legislation sets out our purpose of β promoting the prosperity and wellbeing of all new zealanders and contributing to a sustainable and productive economy β. as outlined in the relevant cabinet papers3, this purpose is an explicit recognition that central bank functions are not ends in themselves, but contribute towards much broader policy and societal goals. we pursue our purpose through our statutory objectives, i. e. price stability, financial stability and providing the functions of a central bank. underneath this legislation sit our remits from the minister of finance. while we have statutory independence from the government β meaning we have considerable operational autonomy to achieve our objectives and intended outcome β the remit documents explicitly outline what the government of the day wishes us to take into account of when pursuing our objectives. _ _ _ _ _ _ _ _ _ _ _ _ statement of intent 1 july 2022 - 30 june 2026 https : / / www. rbnz. govt. nz / hub / - / media / project / sites / rbnz / files / publications / statements - of - intent / rbnz - soi - 2022. pdf bank of new zealand act 2021 https : / / www. legislation. govt | . obtaining the right balance between these factors will largely determine the direction of the western economies with a positive outcome being sustained ultimately by the return of business and consumer confidence leading to investment and productivity growth. similar forces can be seen at play in the new zealand economy. the difference being that the imbalances and structural issues here are not nearly as deep - seated as in many of the western economies. furthermore, new zealand has been fortunate to be placed geographically in the eastern part of the pacific primarily selling soft commodities that are now experiencing increasing demand from asian trading partners who continue to experience relatively good growth. the canterbury earthquakes have proved to be an additional test of resilience for the country and although insurance will cover the majority of the cost of recovery, the process of rebuilding will take much longer than originally thought and may well cost more than currently forecast. the impact of these events on the provision and cost of insurance is now becoming apparent and is reflective of a general review of the insurance cover for natural disasters world - wide. the frequency and intensity of these types of events seems to be on a rising trend creating further management challenges for private and public enterprises. bis central bankers β speeches institutional response institutional language is now coloured by words such as austerity, crisis, collapse, disaster response, instability, volatility, vulnerability and, above all, uncertainty. the gfc exposed the weaknesses of risk management to the world and especially the inadequacy of institutions that allowed their risk management practices to be subverted by the drive for short term profitability. many of these institutions no longer exist and if they do, not in a form they would have recognised prior to the gfc. the irony is that despite its lack of strength in the decades building up to the gfc and its ultimate failure, risk management remains absolutely critical to the success of institutions. furthermore, the incidence of risk means that the enterprise needs to take a long run view of its business not a myopic, short run, approach. which is a good thing if it helps to make the business operating environment more stable. the issues outlined earlier in this paper reveal the complexities that private and public enterprises will need to navigate in the future. possession of a metaphorical radar, capable of identifying obstacles both near and far, should be second - nature to those leading and managing the enterprise. in the current climate effective risk management aligns very closely to the theme of your conference : β embracing uncertainty and delivering value in turbulent times β. | 0.5 |
nils bernstein : the european debt crisis β from a danish perspective speech by mr nils bernstein, governor of the national bank of denmark, at the seminar β europe in the times of crisis β are we looking for solutions or parachutes? β, at danske bank, copenhagen, 14 december 2011. the slides can be found on the website of the national bank of denmark. * * * thank you for inviting me to speak here today. i will touch upon the european debt crisis from a danish perspective. the world economy has lost momentum since last spring and short - term outlook has worsened. the european economies, especially in the euro area, have seen the strongest slowdown. but there are considerable differences from country to country. germany and france continued to enjoy solid growth in the 3rd quarter, whereas growth in the most indebted countries, the five giips countries i. e. greece, italy, ireland, portugal and spain, has been close to zero or even negative ( slide 2 β real gdp ). there is a clear division among the eu member states : countries, with relatively sound public finances and external balances before the crisis, are performing better than countries with internal and external imbalances ( slide 3 β general government balance ). but over the past couple of months even euro area member states with sound economies have been affected by rising interest rates. there is considerable volatility, and three groups in the euro area seem to have been formed. the first group with the narrowest spreads to germany includes finland, the netherlands, austria and france. the second group consists, among others, of belgium, spain and italy and the third group is ireland, portugal and greece. denmark stands out by having a negative yield spread of 15 β 20 basis points to germany. in the five giips countries, a substantial share of government debt is held by foreign investors, and the short - term public debt issuance requirement is high. in combination with high current account deficits, resulting from lack of competitiveness, this leaves these countries especially vulnerable to changes of sentiment in the international capital markets ( slide 4 β current account ). despite marked differences between the economies with high debt ratios in the euro area, they all saw a significant reduction in the risk premium β and thus the level of interest rates β following the introduction of the single currency in 1999 ( slide 5 β yield spreads ). this immediately eased the financing burden on their very substantial government debt. but this advantage was not used to consolidate | the widening of the fluctuation band. we also tried to obtain support from page 4 of 7 the bundesbank to get back to a narrow band between the danish krone and the d - mark. markets eventually calmed down and the krone exchange rate against the d - mark was brought back to its level from before the turmoil. the erm crisis is the last time that a crisis has caused a noticeable deviation of the exchange rate from its central parity. during the global financial crisis in 2008, new lessons were learned. first of all, we were reminded of the need for large buffers. this applies to our foreign exchange reserve. but also, in the financial sector. we also saw how excessively accommodative economic policies in the years leading up to the crisis contributed to the economic setback in denmark. heightened global uncertainty prompted investors to seek safe havens. several small currencies came under pressure β including the danish krone. to stabilise the krone, we intervened heavily. to quote my predecessor, former governor nils bernstein on the matter ; β we could literally see our reserves pouring out of our coffers. i felt like driving a car without brakes. β as a result, we increased interest rates on several occasions, thereby widening the spread between our policy rate and that of the ecb. a clear example that defending a fixed exchange rate regime is costly at times. but we never doubted that it was worth it. and as a result of our efforts, the exchange rate remained stable throughout the crisis. in the aftermath, we decided to increase our foreign exchange reserves significantly. as governor bernstein put it ; β we had to recognise the truth in the simple saying ; money is hardest to come by when you need it most. β in the first 30 years of the fixed exchange rate policy, currency crises were typically associated with downward pressure on the krone. that changed with the sovereign debt crisis in 2011 - 12. assets in danish kroner were suddenly considered a safe haven by investors who worried about the risk of a potential break - up of the euro area. as a result, we intervened heavily by purchasing currency. we also became acquainted with negative interest rates. it was the first time in our 200 - year history that we had negative rates β in fact, it was the first page 5 of 7 time for any central bank to reduce its key policy rate into negative territory. the introduction of negative rates brought us some spotlight in the central | 0.5 |
the sole source of intermediation. their breakdown induces a marked weakening in economic growth. a wider range of nonbank institutions, including viable debt and equity markets, can provide important safeguards of economic activity when the banking system fails. fifth, despite its importance for distributing savings to their most valued investment use, excessive short - term interbank funding, especially cross border, may turn out to be the achilles β heel of an international financial system that is subject to wide variations in financial confidence. this phenomenon, which is all too common in our domestic experience, may be particularly dangerous in an international setting. i shall return to this issue later. finally, an important contributor to past crises has been moral hazard, that is, a distortion of incentives that occurs when the party that determines the level of risk receives the gains from, but does not bear the full costs of, the risks taken. interest rate and currency risk - taking, excess leverage, weak financial systems, and interbank funding have all been encouraged by the existence of a safety net. the expectation that national monetary authorities or international financial institutions will come to the rescue of failing financial systems and unsound investments clearly has engendered a significant element of excessive risk - taking. the dividing line between public and private liabilities, too often, has become blurred. * * * given that the existence of safety nets generates moral hazard, and moral hazard distorts incentives, why do we continue to provide safety nets to support our financial systems? it is important to remember that, notwithstanding the possibility of excessive leverage, many of the benefits banks provide modern societies derive from their willingness to take risks and from their use of a relatively high degree of financial leverage. through leverage, in the form principally of taking deposits, banks perform a critical role in the financial intermediation process ; they provide savers with additional investment choices and borrowers with a greater range of sources of credit, thereby facilitating a more sophisticated allocation of resources that appears to contribute importantly to greater economic growth. indeed, it has been the evident value of intermediation and leverage that has shaped the development of our financial systems from the earliest times - - certainly since renaissance goldsmiths discovered that lending out deposited gold was both feasible and profitable. in addition, central bank provision of a mechanism for converting highly illiquid portfolios into liquid ones, in extraordinary circumstances, has led to a greater degree of leverage in banking than market forces alone would support. traditionally this has been accomplished by making discount | support members of an associated group of companies. experienced bank supervision cannot fully substitute for poor lending procedures, but presumably it could encourage better practice. apparently even that has been lacking in many economies. and training personnel and developing adequate supervisory systems will take time. i pointed earlier to cross - border interbank funding as potentially the achilles β heel of the international financial system. creditor banks expect claims on banks, especially banks in emerging economies, to be protected by a safety net and, consequently, consider them to be essentially sovereign claims. unless those expectations are substantially altered - - as when banks actually incur significant losses - - governments can be faced with the choice either of validating those expectations or of risking serious disruption to payments systems and to financial markets in general. arguably expectations of safety net support have increased the level of cross - border interbank lending from that which would be supported by unsubsidized markets themselves. this would suggest resource misallocation. accordingly, it might be useful to consider ways in which some added discipline could be imposed on the interbank market. such discipline, in principle, could be imposed on either debtor or creditor banks. for example, capital requirements could be raised on borrowing banks by making the required level of capital dependent not just on the nature of the banks β assets but also on the nature of their funding. an increase in required capital can be thought of as providing a larger cushion for the sovereign guarantor in the event of a bank β s failure. that is, it would shift more of the burden of the failure onto the private sector. alternatively, the issue of moral hazard in interbank markets could be addressed by charging banks for the existence of the sovereign guarantee, particularly in more vulnerable countries where that guarantee is more likely to be called upon and whose cost might deter some aberrant borrowing. for example, sovereigns could charge an explicit premium, or could impose reserve requirements, earning low or even zero interest rates, on interbank liabilities. increasing the capital charge on lending banks, instead of on borrowing banks, might also be effective. under the basle capital accord, short - term claims on banks from any country carry only a twenty percent risk weight. the higher cost to the lending banks associated with a higher risk weight would presumably be passed on to the borrowing banks. borrowing banks, at the margin, might reduce their total borrowing or shift their borrowing to nonbank sources of funds, perhaps with the shift facilitated by the lending banks, who | 1 |
between government and individual banks will focus on lending to those sectors. there is scope for a reduction in the leverage of banks without restricting lending to the β real β economy. but to bring that about much of the necessary β netting β of exposures would be cross - border, demonstrating that almost every aspect of the present crisis has an international dimension. what is the appropriate policy response in present circumstances? some say that because the massive increase in indebtedness contributed to the crisis the right response is to save and repay debt. others argue that the only way out of our present difficulties is to borrow and spend more. who is right? both are β up to a point. we cannot avoid the necessary long - term adjustment. to pretend otherwise would only store up problems for the future. but we can try to slow the pace of the adjustment to domestic demand in order to limit its impact on output and employment. so we need to take actions now that will dampen the adjustment in the short term while recognising that the adjustment will ultimately need to be made. this is the paradox of policy at present β almost any policy measure that is desirable now appears diametrically opposite to the direction in which we need to go in the long term. spending now supports the economy, but in the long run we need to save more and borrow less. public borrowing sustains spending, but in the long run needs to fall. banks are encouraged to run down their capital to enable them to absorb losses while continuing to lend, but in the long run they will need more capital. interest rates have fallen to unprecedented levels, but in the long run will need to rise to more normal levels. in each area of policy it is important that there is a clear framework which guides both the short - term response to the current downturn and the exit strategy when normal conditions return. for monetary policy, the inflation target is that framework. bank rate is set to meet our target of 2 % for the twelve - month rate of consumer price inflation. for a decade inflation and bank rate were remarkably stable. but in only four months, the mpc has cut bank rate by 3Β½ percentage points to its lowest ever level of 1Β½ %. does this mean we have changed our target? no. we have taken those actions precisely because the sudden downturn in the world and uk economies created a significant risk that inflation would fall below the 2 % target. despite those big cuts, there remains a risk that inflation will fall | paul fisher : the economic outlook β some remarks on monetary policy speech by mr paul fisher, executive director for markets of the bank of england, to the agency for scotland, london, 23 may 2011. * * * i would like to thank ronnie driver for his help in preparing this speech. for most of us, the current outlook for the uk economy is not a very attractive prospect. after experiencing a precipitous fall in demand during 2008 / 09, the latest estimates suggest that uk output in 2011 q1 remained around 4 % below its peak pre - crisis level. the monetary policy committee β s ( mpc ) central projection published in its may inflation report, is for output to grow at around its historical trend rate ( chart 1 ), such that it would be mid - 2012 before that previous peak level is regained ( chart 2 ). at the same time annual cpi inflation, far from being subdued by the recession, has picked up to 4Β½ %. in the short - term it is likely to go higher still before, we expect, falling back towards the 2 % target ( chart 3 ). all this poses a significant challenge for policy makers, not least because of the genuine hardships slow growth and high inflation cause for businesses and households up and down the country. chart 1 chart 2 gdp projection based on market interest rate expectations and Β£200 billion asset purchases projection of the level of gdp based on market interest rate expectations and Β£200 billion asset purchases bis central bankers β speeches chart 3 cpi inflation projection based on market interest rate expectations and Β£200 billion asset purchases the recent data has not been particularly encouraging. official figures for 2010 q4 and 2011 q1 suggest that there was no underlying growth ( allowing for the unusual impact of snow in december ). and the unemployment rate remains at just under 8 %. the data may not be totally reliable β they never are β but the message we get from our business contacts in all parts of the united kingdom is not inconsistent with this broad picture painted by the official statistics. meanwhile, cpi inflation is likely to go yet higher if ( as the mpc expects ) rises in the price of energy get reflected in utility bills in due course. the largely unanticipated path of cpi inflation over the past couple of years can be explained by three factors : changes in the standard rate of vat, unforeseen changes in wholesale oil and gas prices and higher - than - expected import prices following the 25 % depreciation of sterling since | 0.5 |
of properties acquired through foreclosure, and the effect of a high percentage of distressed sales on home prices. regardless of how we got here, we, as a nation, currently have a housing market that is so severely out of balance that it is hampering our economic recovery. to many, the story of the recent financial crisis and its aftereffects for the housing market is one mainly attributed to subprime lending. although problems were concentrated initially in subprime mortgages, today about two - thirds of underwater mortgages and loans in foreclosure are actually prime or federal housing administration ( fha ) mortgages. this fact suggests that solutions aimed at righting the wrongs of previous reckless lending in the subprime market are not sufficient to tackle the scale of current problems. clearly, the market is not functioning as it should. despite near - record - low interest rates, credit conditions remain tight for many consumers and investors interested in buying or refinancing residential real estate. moreover, the lack of sufficient numbers of buyers and sellers may limit price discovery, which heightens uncertainty about the β right β price for a given piece of real estate and further limits activity. in addition, the large number of foreclosures and a protracted foreclosure process have led to an unprecedented level of bank - owned homes, a level that is likely to persist for some time. so how do we move forward in these difficult circumstances? bis central bankers β speeches the economy normally has some self - correcting mechanisms. typically, a drop in prices β whether the price of an apple or the price of a house β stimulates demand and brings new buyers into the market. in the case of houses, price declines often occur in the context of a broad - based weakness in the overall economy. in response to macroeconomic weakness, the federal reserve generally can lower the target federal funds rate, which would be expected to lower mortgage rates. the combination of lower prices and lower mortgage rates makes home purchase more affordable and helps revive the housing market. indeed, most recent recoveries have been led by housing. but for a variety of reasons, these mechanisms are not working fully in today β s economy. when crafting solutions, it is helpful to first identify areas where removing some obstacles might enable these self - correcting mechanisms to operate more productively. refinancing existing mortgages at lower rates one way to reduce the flow of foreclosed homes is to | francois villeroy de galhau : parisian momentum speech by mr francois villeroy de galhau, governor of the bank of france, at the bloomberg " future of finance " paris forum, paris, 9 may 2023. * * * ladies and gentlemen, it is a great pleasure for me to give this keynote address at the first future of finance β paris forum organised by michael bloomberg and his team. after the first panel, which gave precious insights on how paris can lead the way in the reshaping of financial markets, it will cover the whole range of most topical issues. this first bloomberg forum in paris is more broadly a very timely and welcome initiative, which echoes financial players'growing interest for the french capital. paris has indeed kept asserting itself as a major financial centre over the last few years, and stands out as unique in the network of european financial centres. i can only invite you to read the excellent bloomberg article published on 18 april, which perfectly captures this multifaceted trend. 1 its title, banks betting on paris say there is life after london, should bring definitive reassurance to other banks, and encourage them to make the same winning bet. so should its content, for instance : " since early 2018, nine of the biggest international banks have increased the assets booked at their eurozone entities more than sixfold to almost β¬1. 7 trillion " ; " if any city can make claim to being the bloc's new pre - eminent hub, it's paris ", " many executives who spoke to bloomberg said they expect headcount to keep growing from local hiring [ in paris ] ". indeed, paris is the only financial center to offer such a wide range of financial activities, from global asset management to insurance and banking. beyond the large number of subsidiaries established in or relocated to paris since brexit β at least thirty banks, twenty asset managers, several market platforms for instance β, we should also consider the activities performed through branches in paris, especially trading rooms and desks, which are sometimes far more significant than the subsidiaries to which they are legally bound. contrary to other cities, which have attracted one or two kinds of financial services, paris is the only one to have benefited from relocations on all segments of the financial industry. more importantly still, these moves were not one - off events : the momentum has lastingly shifted from london to continental europe. we observe a steady shift, which shows no sign of losing steam. combine this with | 0 |
swiss economy is still not fully utilised overall. technical capacity utilisation in manufacturing remains considerably below its long - term average. although employment was up in the first quarter, the unemployment rate remained unchanged. we expect the moderate recovery to continue in the coming quarters. for 2014, we anticipate that the growth rate will remain at around 2. 0 %. as we continue to see gradual improvement in the international environment, export demand is likely to rise. over time, this should encourage corporate investment and stimulate demand for labour. the level of residential construction orders remains high. on the whole, however, we expect a considerable slowdown in the growth momentum of residential construction investment. in addition to global risks, the swiss economy also faces uncertainty at home. in the past few weeks, the snb β s delegates for regional economic relations asked companies to assess the impact of the popular initiative on curbing mass immigration on their business activity. the results suggest a tangible level of uncertainty about economic conditions. most companies have not taken any specific measures, however. monetary and financial conditions i will now turn to monetary and financial conditions. after about two years of negative inflation, consumer price inflation has been practically zero for some months now. this very restrained development is also reflected in inflation expectations. the majority of market participants expect inflation to remain unchanged in the short term. over a longer horizon of more than two years, the relevant surveys show that the expected rate of inflation is approximately 1. 0 %. these results are consistent with our assessment of the inflation outlook. bis central bankers β speeches geopolitical risks and mixed economic data in the major economies led to stronger demand for secure investments. this was reflected in falling yields on long - term government bonds. my colleague, fritz zurbrugg, will talk to you about developments in the financial markets in more detail. mortgage rates also declined again, thereby further bolstering demand for mortgage loans. however, the slowdown of momentum in mortgage lending, which has been observed for some time now, continued. this is a step in the right direction. nevertheless, imbalances remain. it is therefore still too early for an all - clear. given the high level of liquidity, money market rates remained at a low level. even prior to the introduction of negative interest rates by the european central bank ( ecb ), swiss franc libor futures slipped well into negative territory. we are closely monitoring the impact of the recent interest rate reductions in the euro area | could thus be scheduled to begin next year when the legal framework will be in place. greater uncertainty surrounds the question of the allocation of excess reserves, but this will have no impact on our sales intentions. as no precise date for the beginning of our sales activities could be set, i will limit myself to indicate to you in what spirit we plan to approach this question. in my opinion, two observations seem essential : first, as a major holder of gold, the swiss national bank has no interest in adopting a strategy which would push the price down. we know that 1300 tonnes of gold cannot be absorbed by the market in a short period of time. we therefore are considering distributing the sales over a period of several years. second, we intend to keep important gold holdings. once the sales programme has come to an end, gold will continue to play an important role in our monetary reserves. the recent revision of the constitution has led to the stipulation that we should maintain β sufficient β gold reserves. the fact that this precision was introduced at the initiative of our parliament indicates that the swiss people wish to keep ample gold reserves. consequently, we do not envisage going beyond the announced plan of selling 1300 tonnes. | 0.5 |
in water management, in roads and ports and in cold storage facilities. south african firms in the agricultural and agro - processing sector have the expertise, the know - how and the capital to invest in food production and processing on the continent. again, there are strong backward linkages between such investments abroad and jobs back home. it is often said that all economic progress is about moving up the value chain, producing ever more complex products. this can only be done through partnership and cooperation between bis central bankers β speeches the state, the private sector and our education and research communities. a major area of focus for the country is the manufacturing sector. manufacturing is important because it is a sector where productivity levels are already relatively high and the sector is able to generate well - paying jobs for millions of people. a major obstacle to faster growth in manufacturing has been a shortage of high level technical skills. that is where you come in. this university is at the cutting edge of producing the type of skills required for our manufacturing sector to move up the value chain, to enhance productivity and grow our exports. the central university of technology is the home of the centre for rapid prototyping and manufacturing. this university, supported by the national research foundation, is investing heavily in research in β additive manufacturing β, also known as 3d printing. 3d printing is likely to revolutionise aspects of manufacturing, lowering barriers to entry and allowing mid - sized economies to compete more effectively with other global players. these are exciting developments and i have no doubt that this university will play a greater role in helping our country to develop its advanced manufacturing sector. in conclusion ladies and gentlemen, despite significant challenges, south africa as a nation is in the process of determining its future ; it is a country that is growing, and with that growth comes opportunities. we must continuously raise the quality of our education system ; continuously keep up with the best developments globally so that we can produce young graduates who are at the cutting edge of the fields that they enter ; young people who will shape the future, drawing on the extraordinary strengths of all south africans. the future is contested terrain, and it will be determined by our vision of what that future could be and what we, together, do. it is largely in your hands now. again, thank you for this honorary doctorate. i humbly accept it on behalf of all south africans who are making a contribution to build a non - racial, democratic and prosperous south africa. thank you. bis central bankers β speeches | define precisely the coordinated effort needed to contain inflation in pursuit of the broader economic objectives of sustainable high economic growth and employment creation. while this agreement should define the practical implication of the reserve bank β s goal of price stability, it should also guarantee the instrumental independence of the reserve bank. secondly, the announcement of inflation targets clarifies the central bank β s intentions and reduces uncertainty about the future course of monetary policy. inflation targets make policy transparent. they make the central bank β s intentions explicit in a way that should improve the planning of the private sector. thirdly, inflation targeting helps to discipline monetary policy and strengthens the central bank β s accountability. if targets are not met, the central bank has to explain what went wrong. this leads to a better understanding on the part of the public on what basis monetary policy decisions were made. disadvantages of inflation targeting although inflation targeting has certain definite advantages when compared with other monetary policy frameworks, it could also have certain disadvantages. one of the limitations of inflation targeting is that it is a complicated approach to implement. although all monetary policy frameworks should be forward looking, inflation targeting relies heavily on forecasts. where inaccurate forecasts are made public it can obscure the central bank β s objectives and reduce its credibility. compared with other monetary policy frameworks there is also the risk that inflation targeting could lead to inefficient output stabilisation. this can occur particularly in the event of significant supply shocks, such as sharp changes in the price of oil. preconditions for inflation targeting in view of these potential disadvantages of inflation targeting, it is important that certain preconditions are met before a decision is taken to implement this framework. in this regard it is important that a central bank is free to pursue financial stability. the inflation target may be jointly set by the government and the central bank. however, once the target has been determined the central bank should be free to use any instrument to achieve the ultimate objective. in the application of inflation targeting it is further important that there is a commitment by all authorities to the objective of price stability. preferably there should be close cooperation between monetary policy and other policies, and in this coordinated effort the inflation objective should be an inherent part of overall policy. to implement inflation targeting it is important that well - developed financial markets exist in a country. the policy instruments generally used by monetary authorities require effective money, capital and foreign exchange markets. if financial markets do not react quickly to the | 0.5 |
the financial system as a whole. in addition to this it is obvious that further and new tasks arise for regulatory agencies and central banks at the national as well as the international level. addressing the issue of disaster recovery has to become part of the routine supervisory process. supervisory guidelines and examination procedures are being adjusted in this light and they are helpful tools in increasing resilience. also, when overseeing payment systems resilience and business continuity will have to be scrutinized anew. finally, central banks must always keep in mind that they carry a big responsibility for resilience and stability through their role as liquidity providers. time and time again, free and easy access to liquidity has proven to be essential in large - scale crises. since central bank liquidity is usually granted against collateral, the linkage between the payment and the securities settlement systems has to be especially robust. the market participants have to know and understand the conditions of access to lending of last resort facilities provided by central banks so that they can shape their contingency planning and collateral portfolios accordingly. simultaneously central banks have to take the necessary precautions to increase resilience at their own end. costs and benefits of resilience let me add some remarks on the costs and benefits of improving resilience. my conviction will not come as a surprise to you : investment in resilience does indeed pay out for the financial sector as a whole and for society at large, but it also pays out for financial market infrastructures and for each and every financial firm. in other words, i have no doubt that more still needs to be done at the level of single institutions, and, on top of that, at the level of the financial industry as a whole. however, voices have raised the concern that, in light of the ever - increasing cost of safety and against the background of the significant cost pressure due to deteriorating market conditions, investment in resilience might in fact be increasingly limited. but, as i said before, the higher requirements for operational reliability, for contingency planning and for crisis management stem mainly from the financial industry β s own development. clearly, increasing concentration, geographic clustering, connectivity and interdependency are highly beneficial, but they do also have a price when it comes to the reduction of risk. we cannot enjoy the benefits without paying this price. the point here is that we all have to be very careful about how we invest in resilience. and we have to make | jean - pierre roth : the financial crisis is receding β what will the future bring? summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the centro di studi bancari, vezia, 15 december 2009. the complete speech can be found in french on the swiss national bank β s website ( www. snb. ch ). * * * after the financial crisis, the global economy will enter a phase of weak economic growth. unemployment levels in the industrialised countries will be comparatively high. public finances in these countries have been heavily depleted, both by the crisis and by the needs arising from the ageing of their populations, and will need to be consolidated. in monetary terms, inflation will remain under control, at least in those countries whose central banks enjoy a strong level of independence. switzerland is comparatively well equipped to meet these challenges. its public finances are in a healthy state and it is sufficiently open to the world to participate in its most dynamic markets. with its tradition of high quality and cutting - edge technology, switzerland is well positioned to react to specific market requirements. moreover, it can draw on considerable financial resources and, thanks to the openness of its labour market, also has easy access to labour resources, without which growth would not be possible. switzerland β s only major drawback is the fact that it is a lightweight in the geopolitical arena, which makes it almost impossible for it to defend itself against protectionist tendencies and discriminatory measures taken by big countries. the swiss government must therefore take a strong stand on behalf of free trade, while also ensuring that the private sector operates within the best possible framework for its further development. ultimately, our future welfare depends on the vitality of the private sector, not on any state intervention. | 0.5 |
banknote as a relic of the past, but rather embrace it as a cornerstone of our present and future prosperity. ensuring that our banknotes and coins are relevant, remains the pre - occupation of the bank of namibia. the bank need to ensure our currency is counterfeit resilient to maintain the public's trust and the integrity of our currency. as you might be aware, the first namibian banknotes and coins series were issued in 1993, marking 30 years in circulation. in may 2012, the bank issued the second family of banknotes with state - ofthe - art security features, which notes are currently in circulation. however, the coins have not been upgraded since its initial issuance in 1993. enhancing security features on banknotes and coins is an on - going process that is undertaken to maintain the highest level of quality and security. the international best practice dictates that central banks should review their currency at intervals of between six and eight years with the aim of ensuring that demand for banknotes are well aligned with economic activities, address weaknesses and challenges associated with the management of notes and coins in circulation. given the aforesaid, the bank in 2022 undertook a comprehensive review of the current circulation currency, which study revealed the need for the bank to undertake a minor upgrade on the current banknote series and a complete upgrade of the coin series. this project will entail the revamp of both our banknotes and coins, to give them a vibrant, modern look and feel, whilst incorporating the latest security features to mitigate the advances in technology that may give rise to counterfeiting. the new series will, therefore, not only further strengthen the resilience, confidence and integrity in our currency but will improve the durability of our banknotes and coins, in so doing, allow the bank to procure currency in the most cost - effective manner. we intend to launch the upgraded namibian currency series in 2025. ladies and gentlemen, as a proud namibian nation, we find ourselves on the brink of a transformative era where new doors of opportunity are swinging widely open before us. the discoveries in oil and gas, coupled with advancements in green hydrogen within the renewable energy sector, beckon us towards unprecedented avenues of economic growth and progress. and once more, it is luderitz, standing steadfast at the heart of these endeavours, holding within its embrace the very key to our nation's future economic prosperity and boundless opportunity. 4 | the settlement grew the necessity for a more convenient and universally accepted form of payment became evident. this led to the introduction of physical banknotes and coins and the issuance of local banknotes, which later fostered economic growth and modernized the financial system at the time. ladies and gentlemen, from those heady days, money is still an integral part of our lives. indeed, " money makes the world go around, " liza minnelli famously sang in the movie cabaret. money is central to human relationships symbolising trust, sovereignty, and value exchange. for centuries, the world over, history has taught us that the loss of faith in the value of currency can lead to economic and political instability and even conflict. money, therefore, has epitomized sovereignty, embodying the authority and stability of nations. ladies and gentlemen, the bank of namibia shoulders the responsibility of issuing money with the primary objective of maintaining price stability. over the past 34 years, we have diligently discharged this mandate. yet, the global banking arena is currently experiencing rapid and significant shifts driven by digital technology. this evolution reshapes how money is managed, with digital alternatives emerging to challenge traditional banking practices. the concept and relevance of money, as we have known it for centuries, finds itself at an interesting inflection point. in the past few years, financial technology - fintech for short - has caught the world's imagination by offering innovative alternatives to traditional means of payment. in the midst of this transformation, digital currencies and the rise of'big tech'encompassing blockchain, artificial intelligence and the internet of things stand as prominent examples of a fundamental shift in the financial landscape. the " money flower, " as described by the bank for international settlements in their quarterly review from september 2017, serves as a conceptual framework illustrating the various dimensions or functions of money in an economy. like a flower with different petals, money serves different purposes or roles. at the heart of the flower lies central bank money, issued, and controlled by a country's central bank like the bank of namibia, encompassing both physical cash and digital money used for significant transactions between banks and governments. moving outward, we encounter other forms of money. mobile money enables us to manage and transfer funds via mobile phones through services like e - wallets and paypal. further out, we find commercial bank money, created by commercial banks through loans and deposits, enabling us to do our everyday transactions through swiping for | 1 |
or even a single region subject to a subdued macroeconomic performance in the recent past. third, regulation. banks are now facing new requests to raise more and better - quality capital. more importantly, significant institutions will have to hold on their balance sheets substantial volumes of liabilities that could be subject to bail - in. clearly, those retail banks with little or no tradition in issuing capital and other securities in capital markets will have particular difficulties coping with the enhanced regulatory framework. admittedly, though, the corporate structure of many retail banks - particularly those which are not yet regular corporations listed in capital markets - may face less immediate pressure to restore higher profitability levels. that may allow them to buy some time. 3 / 5 yet, low sustained profitability is often a symptom of vulnerability and, certainly, of inefficient allocation of the resources employed in the banking business. there is therefore a need to reflect on the best way to strengthen retail banks, to make them better able to cope with the new macroeconomic and regulatory conditions without damaging the social benefits associated with their activity. it would be unsound to try to establish specific strategies with the pretention to be unconditionally applied in all circumstances. however, i see some difficulties for numerous retail banks in adapting to the low - profitability and tighter regulatory environment if they are not able to increase their ability to compete with banking corporations in terms of costefficiency, business diversification and access to capital markets. some transformation of the retail and, in particular, the saving banking sector therefore seems unavoidable in order to meet the target. we, in spain, have already taken some steps in that direction. as you well know, in response to the financial crisis, measures were taken along different lines, which helped solve the main shortcomings affecting the spanish banking sector at that moment in time and positioned it in a good starting point for the implementation of the ssm. in addition to measures taken to reduce the level of exposure to real estate development and to drive greater consolidation in the sector, a major effort was made in the field of recapitalisation, which went beyond the actions taken by public authorities. since 2008, the sector has set aside new provisions for outstanding loans or foreclosures for approximately β¬300 billion. and, after absorbing this substantial balance sheet clean - up into results or reserves, banks have managed to increase their own funds by approximately β¬70 billion over the same period. | 17. 11. 2016 challenges facing the retail banking sector remarks at the dinner event organised by the european savings and retail banking group ( esbg ), madrid fernando restoy deputy governor good evening. it is a pleasure to have the opportunity to participate in this event and to address this eminent group of bankers. i am grateful to isidro faine and jose maria mendez for inviting me. i hope that you have now got your breath back and recomposed yourselves after viewing picasso β s impressive and to some extent disheartening masterpiece, guernica. you certainly need a strong mind to discuss banking issues nowadays. i imagine that probably much of the agenda of your regular meetings is devoted to exchanging experiences on how financial institutions such as those participating in the european savings and retail banking group ( esbg ) are addressing the current challenges affecting the entire financial sector in the current post - crisis period. allow me to attempt to make a modest contribution to that discussion. i would like to say from the outset that i do not believe that the financial crisis, as such, has challenged any specific business model. we have seen institutions with quite different sizes, governance structures and business orientations failing all around the world. the crisis has affected both investment and commercial banks as well as wholesale and retail businesses. indeed, i would subscribe to the idea that, by and large, the crisis does not provide clear arguments with which to question a particular business model or line of activities, such as retail intermediation, wealth management or investment services. it does however encourage us to analyse whether those banking activities are conducted in a sufficiently efficient way by specific institutions so as to make them profitable. that said, pure european retail banks admittedly face specific challenges in the current environment, which need to be effectively addressed in order to preserve the social function that those institutions provide. let me mention three of the most obvious challenges. first, the low interest rate environment, which is putting heavy pressure on financial margins, particularly for institutions β such as most of those belonging to the esbg - with little investment in securities that could be revalued as rates go down, and with much funding obtained from retail deposits, which impedes a full transmission of very low or negative market rates to funding costs. second, the accumulation of non - performing loans in several regions of the euro zone. this is particularly a challenge for banks, again mostly retail banks, with a significant concentration of exposures in a single country | 1 |
credit of sponsoring banks. lately, paper of higher quality could be placed more easily, and at better prices, than some weeks ago. thus, a more discriminating market would seem to be emerging in the abcp market. financial stability let me now provide you with an update of the recent developments regarding euro area financial stability. last month, i drew some very tentative lessons from the events as we saw them evolving at the time. by now we have learned more, but the lessons to be drawn still remain tentative and provisional. as i told you last month, the re - assessment of risk β which is still ongoing β reflects the materialisation of some of the vulnerabilities that had previously been identified by the ecb as well as by the global central banking community. since our last meeting, we have witnessed tentative signs of normalisation in some parts of the credit and financial markets. nonetheless, as regards the prospects going forward i would certainly tend to agree with those who caution against complacency. the situation in certain parts of the euro area money markets remains complex, and banks are still reluctant to lend to each other in the unsecured interbank term money markets. in a number of cases the present episode of market correction will impact banks β profits. fortunately, several years of rather favourable economic and financial developments, as well as better risk management, have significantly improved the resilience of the euro area banking system, placing the core financial institutions in a rather comfortable position to absorb the recent disturbances. our baseline scenario is that the process of adjustment in the money and credit markets will take place in an orderly manner. nevertheless, it cannot be excluded that this positive baseline scenario could yet be challenged by some low - probability but potentially high impact negative events. therefore, there is no room for complacency at the present juncture. the first priority remains the need to restore confidence among the various participants of the global credit market. today, we still have the paradox that there are large amounts of high quality assets which investors are currently treating as if they have poor credit quality. last month, i tentatively identified three potential and non - exclusive remedies to this situation ; i will again stress them today and i will even add a fourth one. first, there is a need to increase transparency and further improve risk management β including liquidity risk management β relating to complex structured products. second, an assessment of the role played by rating agencies needs to be undertaken. third, a review | largely as a consequence of capacity constraints and relatively tight labour markets, inflation is expected to remain around 2 % on average. as regards economic activity, it appears that the sustained real economic growth experienced in the euro area in the first half of 2007 has continued over the summer. the economic fundamentals support a favourable medium - term outlook for economic activity. while euro area consumer and business confidence indicators declined in september, mainly reflecting the financial market correction, they remain above their historical averages and continue to point to ongoing sustained growth during the second half of the year. available forecasts for 2008 confirm the governing council β s main scenario of real gdp growing at around trend potential. this scenario is based on the expectation that global economic activity will remain robust, with the moderation of economic growth in the united states largely offset by the continued strength of emerging market economies. given the financial market volatility and the reappraisal of risks in recent weeks, this assessment remains surrounded by heightened uncertainty. on balance, risks to this outlook for growth are judged to lie on the downside. the monetary analysis confirms the prevailing upside risks to price stability at medium to longer - term horizons. on the basis of latest available data, covering the period to the end of august, the underlying money and credit expansion remains strong. however, strong money and credit growth may have been influenced by temporary factors, such as the flattening of the yield curve and recent financial market volatility. the headline figures may therefore overstate the underlying money and credit growth. in august, the flow of loans to households and non - financial corporations remained strong. however, financing conditions have tightened somewhat in the context of financial turbulence, although financing costs are not exceptionally high by historical standards. as regards developments in the bank lending behaviour, there are some signs showing an impact of recent financial market volatility. the results reported in our october 2007 bank lending survey point to some net tightening of the credit standards in the third quarter of 2007 both on loans to large enterprises and loans to households for house purchases, following a prolonged period where credit standards were eased or remained unchanged. looking ahead, banks expect to further tighten credit standards in the fourth quarter of 2007. the ecb β s monetary policy stands ready to counter upside risks to price stability, in line with its treaty mandate to maintain price stability as the primary objective of monetary policy. under current circumstances, particular caution is required in assessing any potential impact of recent financial market developments on the real economy. before | 1 |
electricity prices in some cities have declined recently after earlier large increases, and changes in government policy are likely to result in a decline in child care prices as recorded in the cpi. there have also been changes to some state government programs that are expected to lead to lower measured prices for some services. together, these changes mean that our forecast for headline inflation for 2018 is now 1ΒΎ per cent. looking beyond these short - run dynamics, inflation is still expected to rise as the economy moves closer to full employment. the labour market is gradually tightening and it is reasonable to expect that this will lead to a lift in both wages growth and inflation. this tightening of the labour market is evident in the steady increase in job vacancies, with the number of vacancies, as a share of the labour force, at the highest level in many years ( graph 15 ). it is also evident in the increase in the number of firms reporting that it is difficult to find workers with the necessary skills. as expected, the tighter labour market is leading to higher wage outcomes in certain pockets of the labour market. over time, we expect that this will become a more general story, although this is going to take some time. graph 15 https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 16 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba in terms of the financial risks facing the economy, things have also been broadly moving in the right direction. for a number of years, risks were rising due to the nexus of high and rising levels of debt and escalating housing prices. over the past year, though, housing price declines in the largest cities have reversed a small part of the earlier gains. borrowing by investors has also slowed considerably, largely because of reduced demand by investors. there has also been a tightening of credit standards. while banks are competing strongly for customers with low credit risk, their appetite to lend to riskier borrowers has lessened a bit. some of the non - bank lenders are providing credit to these borrowers. this change in financial trends has helped reduce the build - up of risk. it is helpful that this change is taking place at a time when the world economy is growing strongly, the unemployment rate is trending lower and the economy is recording good growth. this is assisting with the adjustment and means that, notwithstanding the changes in the housing market, | - content / uploads / chief - scientist - submission - to - senate - inquiry - intoaustralias - innovation - system1. pdf ; and ceda ( 2013 ), β australia adjusting : optimising national prosperity β, november. available at http : / / www. ceda. com. au / media / 338287 / cedaaustadjusting _ web. pdf. bis central bankers β speeches responsibility for the g20 now passes to turkey. we can bask in the glow of success for a few weeks and then get on to other matters. the point simply is that this has gone well as a result of the determined efforts of a range of people who were clear about what they wanted to achieve and who mobilised the necessary resources and effort to get there. one other result of australia β s leadership of the g20 is that the whole issue of infrastructure is well and truly on the table. no one doubts the need for infrastructure provision and it has clear economic attractions. spending on infrastructure supports aggregate demand during construction but, if done well, also augments the economy β s supply capacity for the long run. it is also clear from the various discussions over the past year that there is not a shortage of capital in global markets to fund infrastructure projects. the issues to be overcome don β t include finding the money. they concern appropriate project selection criteria, long - term planning, governance, contract design, appropriate risk sharing between public and private sectors, pricing usage of the infrastructure and so on. there is an opportunity here, including for australia, to do something of value over the years ahead. of course, we will need to be serious and to put in the effort over an extended period β in all the above areas. if we don β t put in that effort, not much actual infrastructure will be delivered. but if we are serious, a lot could be achieved. i imagine that the committee for the economic development of australia would be keen to be involved. conclusion i have reached the limits of our time this evening. australia β s economy is continuing to grow, moderately. it has been responding in ways you would expect to the remarkable set of circumstances it has faced over the past decade. there is continuing adjustment ahead and doubtless no shortage of challenges. but beyond these challenges of the next couple of years, maximising our economic possibilities in the modern world requires sustained efforts at adaptation and innovation, at doing things better and, perhaps most of all, | 0.5 |
. next steps 15. the central bank of nigeria is very pleased to be partnering with the gates foundation and looks forward to the next phase of the project. it is imperative that going forward, a determination is made of additional information that may be relevant to our inclusion and regulation efforts that are not already accounted for in this round. 16. other non - conventional financial access points should be captured and included in the report such number of people and value of transactions that pass through motor parks, markets and such other hubs where financial activities are carried out to help determine the general level of activities in the informal financial sector. conclusion 7. in conclusion, i believe that we are taking a very important step here today and the partnership between the central bank of nigeria and the bill and melinda gates foundation will go a long way in ensuring that our efforts to realize the targets set are a success. i look forward to a continued collaboration. thank you. bis central bankers β speeches | sanusi lamido sanusi : using geospatial mapping to further the national financial inclusion strategy keynote address by mr sanusi lamido sanusi, governor of the central bank of nigeria, at the launch of the result of the gis mapping of financial access points in nigeria, lagos, 8 july 2013. * * * introduction 1. it is indeed my pleasure to be delivering the keynote address at this occasion of the launching of the geospatial mapping of financial institutions in nigeria in conjuction with the bill and melinda gates foundation ( bmgf ). 2. the nigerian national financial inclusion strategy ( nfis ) was launched in october, 2012 and the overall target outlined in the strategy is the reduction of the number of adults excluded from access to financial services from 46. 3 % in 2010 to 20 % in 2020. as a member of the alliance for fianancial inclusion ( afi ), this is in line with our maya declaration in 2011. 3. the broader aim of the target is that of the proposed 80 % adult nigerians to be included, at least 70 % would be in the formal sector, with specific targets for services such as ; payments, savings, credit, insurance and pensions outlined as well. 4. achieving these targets will require the collaborative efforts of all the stakeholders in the financial industry, and with this in mind the central bank of nigeria has approved a number initiatives centered around improving inclusion some of which include ; the development of agent banking guidelines, and tiered know - your - customer ( kyc ) requirements to encourage financial institutions to reach out to under served segments, the development of a consumer protection framework under a newly set up consumer protection department and a national campaign to promote financial literacy. geospatial mapping 5. as part of our efforts to implement our national financial inclusion strategy, the bmgf at the alliance for financial inclusion ( afi ) global policy forum in 2012, made a commitment to support the central bank of nigeria ( cbn ) in the actualization of set out targets in the strategy. 6. the gates bmgf identified certain areas for collaboration with the cbn based on their assessment of nigeria's needs with respect to financial inclusion as well as the capacity of their partners. these areas include ; geo - spatial mapping, capacity building initiatives for the shared services office ( which drives the shared services initiatives including the cashless nigeria policy ) and capacity building support for the financial inclusion secretariat ( which would drive the implementation of the n | 1 |
can do their job : finance the economy. that makes it imperative to sort out npls. and there has been quite some progress on this front. since 2015, significant banks in the euro area have brought down their non - performing loans by almost β¬200 billion ; from β¬989 billion to β¬795 billion. that said, npls are still too high in parts of the banking sector. that is why banks have to act. and times could not be better. we can look back at 18 consecutive quarters of economic growth ; this is a robust, broad - based economic recovery. now is the time to sort out the issue of non - performing loans. banks need ambitious yet realistic plans to deal with their stocks of npls. and they need the right governance for these plans. earlier this year, the ecb published its β guidance to banks on non - performing loans β. along these lines, and as part of our supervisory dialogue, we take a close look at the banks β ability to manage their npl stocks. we then scrutinise the plans devised by the banks to reduce those stocks. we will start providing our feedback later this month. 1 / 2 bis central bankers'speeches banks have to carefully consider how they will react should any performing loans happen to become non - performing. so, with the future in mind, we have to ensure that the problem of npls does not recur. new npls should therefore be conservatively provisioned within a reasonable period of time. this would serve to strengthen the balance sheets of banks, enabling them to focus on their core business. that β s why we have drafted an addendum to our guidance on non - performing loans. it sets out how we expect banks to provision for future npls. the main goal is to have timely provisioning, which should prevent new npls from becoming a problem with systemic implications. but let me say that while our expectations are firm, there are no automatic actions attached to them. we will discuss with each affected bank individually why it is not fully provisioning for loans which have been non - performing for several years. only if the results of this structured dialogue do not convince us will we consider pillar 2 measures. we have followed this path before, for instance with our recommendation on dividend distribution policies and the asset quality review. the addendum to our guidance on non - performing loans explains our methodology and is currently the subject of a public consultation. this consultation will increase | transparency for banks, and the public, and it will help to ensure a level playing field. so, while it is ultimately up to the banks to deal with npls, we supervisors play a role too. it β s our job to address vulnerabilities in the banking sector. npls are probably the single biggest challenge β and of course they are a drag on the entire economy. and while i am convinced that the ecb has led the way with its work on npls, we are not the only ones who can and should take action. european finance ministers agreed, in july this year, on an action plan to tackle npls. also, national governments can help to resolve the npl problem by reforming their legal and judicial systems. in some countries, it can take quite a long time to recover npls in court. this is something that can only be addressed at national level by national governments. npls are a joint problem, and we need to make a joint effort to resolve it. each party has to play a role : banks, supervisors and politicians. in line with our mandate, we supervisors have done and will continue to do what is necessary. thank you for your attention. 2 / 2 bis central bankers'speeches | 1 |
, schularick, and taylor ( 2017 : p. 8 ) shows the capital ratio, averages by year for 17 countries. the blue line plots the mean of capital ratios in the sample countries between 1870 and 2013. the red line refers to the median of the sample countries. the grey area is the min - max range for the 17 countries in our sample. details are given in the original paper. source : jorda, richter, schularick, and taylor graph 6 : bank nonperforming loans ( % of total loans ) graph 6 shows the development of non - performing loans to gross loans ( the total value of the loan portfolio including nonperforming loans before the deduction of specific loan - loss provisions ). vertical line separates the pre - crisis period ( up to 2007 ) from the crisis period ( as of 2008 ). france in % germany greece italy spain us source : world bank graph 7 : gross domestic product ( annual growth rate ) graph 7 shows the development of the growth rate of the gross domestic product in the us and the eu15. the eu15 comprises the following 15 countries : austria, belgium, denmark, finland, france, germany, greece, ireland, italy, luxembourg, netherlands, portugal, spain, sweden, united kingdom. vertical line separates the pre - crisis period ( up to 2007 ) from the crisis period ( as of 2008 ). in % us eu15 - 2 - 4 - 6 source : oecd graph 8 : gross domestic product ( annual growth rate ) graph 8 shows the development of the growth rate of the gross domestic product in the us and selected european countries. vertical line separates the pre - crisis period ( up to 2007 ) from the crisis period ( as of 2008 ). france in % germany greece - 2 italy - 4 spain us - 6 - 8 - 10 source : oecd graph 9 : gross fixed capital formation ( annual growth rate ) graph 9 shows the development of the growth rate of capital formation. gross fixed capital formation ( gfcf ) is defined as the acquisition ( including purchases of new or second - hand assets ) and creation of assets by producers for their own use, minus disposals of produced fixed assets. the relevant assets relate to products that are intended for use in the production of other goods and services for a period of more than one year. vertical line separates the pre - crisis period ( up to 2007 ) from the crisis period ( as of 2008 ). france in % germany | that this sense is more palpable in the current environment for a number of reasons that i would like to explore this morning. let me begin with the global financial crisis. while it is largely associated with a banking crisis, its implications have spread far beyond the banking sector. the insurance industry found itself in a position of having to defend its activities from being subjected to the same fate of the wide - ranging regulatory reform that has consumed the banking sector following the crisis. the loss of confidence in financial intermediaries has been particularly damaging. consumer confidence and trust in financial intermediaries have fallen to all - time lows and continuing discoveries of misconduct have done little to restore confidence. consumers are unfortunately prone to painting all intermediaries with the same broad brush and asking themselves how far they can trust their financial service providers. as a result, conduct issues are coming under significant scrutiny globally, and the expectation of professional conduct is no longer taken for granted by consumers and regulators alike. this general shake - up of the industry that followed the crisis has meant that insurance brokers, swept up in the tide, must confront the very basic ethos of their business. they must make serving the real economic interests of businesses and helping individuals secure their financial futures the heart of their business. they need to be concerned about bis central bankers β speeches the social and environmental impact of the business decisions that they make. and they must commit to providing a fair deal to their customers and building enduring long term relationships. the environment has become far more unforgiving of anything less. a second reason that insurance broking is at a critical crossroad is the accelerated pace of change that is occurring in asia and the business implications that this will have for the region. asia is the most dynamic and fastest growing region in the world today. the region recorded economic growth of over 7 percent in the past decade, higher than global growth of 4 percent. the imf β s latest forecast projects growth for asia at 6. 4 and 6. 2 percent in 2015 and 2016 respectively, in sharp contrast with anaemic growth in more advanced economies. reflecting its growing contribution to global growth, asia accounted for approximately 28 % of the world β s premiums, after europe ( 35 % ) and north america ( 30 % ). 1 coupled with a high population growth rate, there are projections that asia will overtake north america as the second largest contributor to world insurance premiums in several years. the establishment of the asean economic community at the | 0 |
might be larger is the effect of so - called β global slack β. this is the notion that globalisation has made labour supply characteristics more uniform across the globe and labour markets more contestable. conditions in foreign labour markets could therefore have a dampening effect on domestic inflation even as domestic slack is shrinking. the evidence, however, is not clear - cut. for example, new ecb analysis finds only limited 3 / 7 bis central bankers'speeches support for the thesis that global slack is weighing on euro area inflation today, over and above the impact it has on global prices. 6 alongside the question of the level of slack is the impact of slack on inflation. this is the wellknown debate on the slope of the phillips curve. there are indeed reasons to believe that wage and price setting behaviour in the euro area might have changed during the crisis in ways that slow the responsiveness of inflation. for example, structural reforms that have increased firm - level wage bargaining may have made wages more flexible downwards but not necessarily upwards. likewise, we see today that firms are absorbing input costs through lower margins due to uncertainty over future demand, which would also tend to temper price pressures. indeed, ecb estimates show that, if we take into account the unusually large and persistent shocks of the past years, the phillips curve for core inflation may well be somewhat flatter recently. however, insofar as the slope of the phillips curve depends nonlinearly on the cyclical position, it may steepen again when the economy reaches and surpasses full potential. while these various reasons might delay the transmission of our monetary policy to prices, they will not prevent it. as the business cycle matures, the higher demand resulting from positive supply developments will accelerate price pressures, while firms β pricing power will increase and the broader measures of slack will converge towards the headline measures. as shown in the united states, the gap between the headline unemployment rate and those broader measures typically opens in recessions and shrinks in expansions. currently, it is converging to the minimum levels recorded before the 2001 and 2007 recessions. so just as for oil and commodity price shocks, we can be reasonably confident that the forces we see weighing on inflation are temporary β so long as they do not feed more lastingly into inflation dynamics. low inflation feeding into price and wage setting this brings us to the third possible explanation for why growth might be diverging from inflation : the hypothesis that a persistent period of low inflation is in fact | sabine lautenschlager : cyber resilience - a banking supervisor's view statement by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism, at the high - level meeting on cyber resilience, frankfurt am main, 19 june 2017. * * * this week i learnt that the first computer virus dates back to 1971. it spread via the arpanet, which was a precursor of today β s internet. the arpanet connected about two dozen universities and government hosts in the united states. the virus had been written for experimental purposes and was not malicious. it just displayed a simple message on infected computers : β i β m the creeper : catch me if you can β. things are a bit more complex today, and the outcome of cyber incidents much worse : they can disrupt business, cost a lot of money and destroy reputations. and indeed, the potential for damage is great, as so much relies on it and so much happens online β the financial sector is a case in point. as you all know, banks have always been attractive targets for criminals. although the damage has been limited so far, we banking supervisors take cyber risk very seriously. and we insist on banks doing the same. cyber risk has been a priority for ecb banking supervision from day one. in 2015, we established a working group that had three goals. first, to get an overview of how supervisors deal with such risks both at national and international level. second, to get an overview of how prepared banks are for cyber risk. and third, to propose to the supervisory board a strategic direction and a dedicated work plan on cyber risk. we have learnt a lot over the past two years. and we have used it to address this risk from several different angles. for us, one of the first steps was to establish a cyber incident reporting framework. we conducted a successful pilot phase in 2016. and now we will implement a long - term solution for all those banks that we directly supervise. as from this summer, they will be required to report all significant cyber incidents. this will help us to assess more objectively how many incidents there are and how cyber threats evolve. it will also help us to identify vulnerabilities and common pitfalls. in addition to our ongoing supervision we also perform thematic reviews on cyber security and it outsourcing. these reviews help us to assess the risks | 0.5 |
be tiering in order to gain support for such a measure? we are not the only game in town, and we should not be. let me repeat the need for structural reforms. this is necessary for sustainable growth, and would give a boost to the competitiveness of many countries in the euro area. using fiscal space is another possibility for some countries. rate cuts are part of standard monetary policy tools, so it β s something that you should certainly think about before you consider non - standard measures like app. but overall, we have to assess whether these instruments are needed to support the transmission channel and what kind of impact and side effects they would have. 1 / 3 bis central bankers'speeches but first, i would like to see the september data and whether additional measures are needed to maintain price stability in the medium term. i would also like to assess what kind of impact these measures could have. let us not forget that we already have a very accommodative monetary policy. lending to households and firms is still high, according to the july figures ; investments are still ongoing in spite of the uncertainties. do you have a view on how low into negative territory the ecb can go? we need more analysis on what kind of impact and costs and benefits rate cuts would have. we need to look at potential side effects, for instance when would bank customers start to keep cash at home? and you asked about tiering. well, for this we need more analysis too. what is the net burden on banks and are mitigating measures necessary? the banks always bring up the gross burden, but they also benefit from the negative interest rate. so we have to consider all aspects before taking a decision. would you support more closely linking the state - dependent leg of forward guidance to inflation expectations? to plot a more explicit rate path should certain inflation conditions be met at a given point in time. i β m sceptical to link forward guidance solely to inflation expectations. could you envisage circumstances in which existing tltros could be repriced, in order to make them more attractive to banks? that might be, yes. we can use different tools : a change in forward guidance, tltro, rate cuts, the mitigating measures for rate cuts, depending on whether the data shows a need for them, their impact, costs and benefits. but overall, i don β t see the need for a huge package. recent ecb communications have consistently stressed that | . our liquidity facilities relieved pressure on markets created by mass liquidations of assets driven by the demand for cash, as did our direct purchases of treasuries. our credit facilities satisfied the cash demand of borrowers more directly. our swap lines and repo facilities with foreign central banks alleviated the shortage of dollars to satisfy dollar - denominated cash needs abroad. the result of this quite muscular intervention has been the fairly rapid return to stable market 3 / 5 bis central bankers'speeches function despite the severe pressures i have been describing. interestingly, in many cases our facilities had their effect less by actually providing liquidity or credit, than by providing a backstop. the β announcement effect β of the fed β s willingness to step in returned confidence to market participants and function to markets, without the facilities themselves seeing large amounts of use. looking back at these events since the covid event, what have we learned about the u. s. financial system? one lesson is that several short - term funding markets proved fragile and needed support β the commercial paper market and prime and tax - exempt money market funds, as key examples. the runs on prime money funds and commercial paper were particularly disappointing, since in many ways they resembled runs that we saw in these markets during the gfc. money fund reforms implemented in 2016 were followed by investors shifting away from prime money funds and towards mmfs that hold securities backed by either the u. s. government or governmentsponsored enterprises. because they hold safer assets, government funds are less fragile. at the same time, some prime funds can still β break the buck β by suffering losses, or can put up β gates β that limit redemptions. investors worried about losses at a money fund may feel some incentive to be among the first to withdraw from the fund, before it breaks the buck or puts up redemption gates in the face of large outflows. the shortening of maturities in the commercial paper market was similarly reminiscent of the gfc. it appears that these short - term funding markets remain an unstable source of funding in times of considerable financial stress. the fed and other financial agencies have accomplished a lot in requiring or encouraging market participants to rely less on unstable short - term funding, but it is worth asking whether there may be other steps needed to secure these very important sources of liquidity. a second lesson we learned last spring is that the treasury market is not immune to the problems of short - term and dollar funding markets. in | 0 |
show you what β s at stake with a robust export recovery. and i β ll close with some thoughts on how we can improve the odds of bringing this about. comparing crises the global financial crisis pummelled the world economy back in 2008 and 2009. but canada fared relatively well because of our strong financial system. our recession was shorter and shallower than in most other economies. but our exports were hit hard β indeed, harder than most. that β s because of our close ties with the united states, which was the epicentre of the crisis. while global exports fell by less than 20 percent, canadian exports fell by close to 30 percent. as is usually the case in recessions, demand for goods was particularly affected. canada swung from having a large trade surplus in goods to a small deficit. ( chart 1 ). chart 1 : canada's trade balance has been negative since the global financial crisis ( quarterly data, seasonally adjusted annual rate ) can $ billions - 20 - 40 - 60 - 80 goods source : statistics canada services total trade last observation : 2020q3 canadian exports began to recover immediately after the crisis, but the rebound stalled. weak foreign demand, particularly from the united states, was holding exports back. but that wasn β t the whole story. bank of canada researchers spent a lot of time dissecting these disappointing exports and zeroed in on two fundamental issues : geography and competitiveness. two - thirds of canada β s underperformance was blamed on geography β who we trade with. canadian export markets were concentrated in mature economies with relatively slow growth, such as the united states, rather than faster - growing emerging - market economies, largely in asia. the remainder of this poor performance was tied to a lack of competitiveness : unit labour costs in canada were higher than elsewhere because of slow productivity growth and - 3the impact of a stronger currency. canada β s regulatory regime and investment climate were also cited as impediments. 1 now let β s look at how this past experience compares with today. while the period leading up to the global financial crisis was positive for trade, the period before the pandemic was anything but. trade disputes arose between the united states and several other economies, including canada, the european union and particularly china. these disputes led to escalating tariffs and pervasive uncertainty about global policy. bank researchers estimated that these factors combined would reduce global output by more than 1 percent β that β s more than $ | : $ 53 billion - 10 - 20 - 30 upside note : assumes no policy rate reaction downside last data plotted : 2024q4 in reality, the outcome will probably fall somewhere between the two extremes. obviously, we all hope that real life turns out closer to the optimistic scenario than the pessimistic. but hope is not a strategy. we need to think strategically to increase the odds of a strong trade recovery. markets for our products business leaders and policy - makers each have important roles to play. they need to work together to leverage, broaden and deepen global markets for canadian products. thanks to the signing of the canada - us - mexico agreement, the comprehensive economic and trade agreement with the european union, and the comprehensive and progressive agreement for trans - pacific partnership, canada already has some of the best market access in the world. further, we have numerous bilateral trade deals in place. the business community and governments across canada need to work together to leverage these market opportunities. the business community can capitalize on this market access by investing in people and in productive capacity. we know canada has an incredibly diverse workforce β people have come from around the globe to live here, bringing their global connections and knowledge with them. and we β ve seen clear evidence researchers add an estimate of the impact of the reopening of the oshawa auto plant in the optimistic scenario. - 7that shifting populations can drive trade. 4 smart companies can leverage canada β s workforce advantage to build global markets for their products. companies can also look to global supply chains for growth opportunities. supply chains are trending toward more regional networks around major global trade hubs. global companies invest in the resilience of their supply chains through diversification of suppliers or production locations, and through digitalization and automation. canadian companies need to seize these opportunities to be part of the solution. as policy - makers and business leaders, we have the responsibility to explain the importance of rules - based trade. we need to push for a renewal of the spirit of internationalism that served so many countries well for decades. and we need to make sure that the benefits of open trade are shared fairly within and across economies. with covid - 19 accelerating the digital economy, rules for digital trade and competition are more critical than ever. this also highlights the urgent need for a concerted, internationally coordinated effort to improve the ability to measure the digital economy. this is a priority for statistics canada, but much more work remains, and | 1 |
impact of policy uncertainties from the global market, but also achieve and maintain our external competitiveness. here at home, greater collaboration and cooperation among ourselves β private businesses, firms and government agencies β will reinforce our competitive position. as you know, the bsp actively engages exporters through the regular conduct of the conference on gearing up for external competitiveness ( cguec ) and the annual exporters β forum. we also conduct consultative one - on - one meetings. these serve as venues for discussing prospects, as well as plans and initiatives for the sector. in fact, we held one conference here in cebu last may 2017. this was followed by a series of consultation meetings with some of cebu β s top exporters of furniture, processed fruits, and garments in june 2017. 2 we hope to continue this active partnership with you. on behalf of the monetary board and the bsp, i congratulate philexport for its 25 years of helping exporters succeed in international trade, and taking the lead in building strong alliances among export - related industries, government agencies, and non - governmental organizations. daghang salamat at mabuhay tayong lahat! 1 quoted actual exports numbers are latest available from the philippine statistics authority. 2 note : the cebu - based firms / associations consulted by the bsp in june 2017 were the cebu furniture industries foundation, inc., 7d foods international, and metro wear, inc. 4 / 4 bis central bankers'speeches | the establishment of the asean economic community or aec in 2015, we are now at that phase of formally consolidating the 10 asean markets into a single economic base. to achieve this, it is necessary that we have an integrated and well - functioning regional financial system. this is defined under the asean financial integration framework or afif. within the afif is the integration of the banking markets. this is what we refer to as abif and it is being pursued alongside the integration of the other facets of the financial market such as the payments and settlement system, the capital market, and the insurance sector. a proper response to your chosen topic of what asean integration means to asian and philippine banking must therefore take a holistic view that considers abif in the context of afif, which in turn is an essential element of the aec, which itself is only 1 of the 3 β communities β. there are many moving parts in asean integration but it is clear that the envisioned upside is premised on economies of scale and scope. latest statistics from the asean secretariat tell us 1 / 4 bis central bankers'speeches that asean represents usd2. 4 trillion in combined gdp, making it among the 10 biggest economies in the world. over the past decade and a half, asean was the 3rd fastest growing economy in the world, behind only china and india. asean has a population base of 629 million, 35 % of whom are below 20 years old. total trade volumes reached a high of usd2. 53 trillion in 2014 and fdi inflows, usd120. 8 billion in 2015. 1 clearly, these are not small numbers ; but they are relevant only if we see asean as an integrated market. taking full advantage of this aggregate size and collective economic strength is precisely the point of integration so that there is freer movement of goods and services as well as of labor and capital. in asean β s vision, this will allow for the unbundling of distribution from production, so that one can produce in the jurisdictions which have the comparative advantage for the product and have the product sold in other jurisdictions where there is greatest demand. the freer movement of capital is not only for production, it also holds true for the regional financial market. when compared with other regional blocs or other countries in the world, asean is well - documented to have a higher saving rate relative to gdp. cross - border portfolio flows data confirm, however, that asean minimally invests into asean. | 0.5 |
financial stability could increase further. as we saw in 2015, even a lower momentum on the swiss mortgage and residential real estate markets can cause imbalances on these markets to increase. this can happen, for instance, when combined with comparatively weaker developments in fundamentals such as gdp growth. moreover, in a sustained period of low interest rates, real estate prices will remain subject to upward pressure. another rise in prices or decline in yields could occur particularly in the residential investment property segment. this would increase the risk of a substantial correction in the event of an interest rate rise, which would put pressure both on leveraged investors and on the banks who finance their investments. at the same time, in an environment of persistently low interest rates, the pressure on interest rate margins would continue. such pressure creates powerful incentives for banks to take on more risks. the focus here is on maturity transformation and affordability risk in mortgage lending. in the short term, this may allow banks to increase their profitability, but the flip side is that this also makes them more vulnerable to interest rate shocks and corrections on the mortgage and residential real estate markets. domestically focused banks would be particularly exposed to a major interest rate shock. as we explain in our financial stability report, in the event of a normalisation of interest rates, banks would initially benefit from the restoration of the liability margin. however, a major interest rate shock would cause net interest income to fall significantly at many banks, potentially resulting in losses. the greater a bank β s maturity transformation is, the higher these losses will be. even if the current low interest rate period were to continue and interest rates were only to rise very gradually, the possibility of a major interest rate shock should not be ruled out. experience has shown that interest rate corrections can sometimes be sudden and sharp. it should also be borne in mind that interest rates on the money and capital markets are currently more than 300 basis points lower than at the beginning of 2008. in other words, bis central bankers β speeches even if interest rates were to return to levels previously considered normal, this would still constitute a major correction. in view of the fact that risks to financial stability could increase further over the short to medium term, the capital surpluses of domestically focused banks are of particular significance. when defining their appetite for risk and their capital plans, the banks should continue to ensure that they are also able to absorb the losses associated with highly unfavourable but possible scenarios in the future. even under scenarios of | lsap = large scale asset purchases, mep = maturity extension programme, apf = asset purchase facility, qqe = quantitative and qualitative easing 17. 11. 2016 financial markets and monetary policy implementation β an evolving relationship | andrea m. maechler | Β© snb sources : andrade et al. ( 2016 ), snb central banks further reduced long - term interest rates by purchasing government bonds sources : imf, snb the different asset classes are more strongly correlated today than before the crisis 17. 11. 2016 financial markets and monetary policy implementation β an evolving relationship | andrea m. maechler | Β© snb sources : bloomberg, snb equity prices in the us reached new highs despite falling earnings expectations 17. 11. 2016 financial markets and monetary policy implementation β an evolving relationship | andrea m. maechler | Β© snb sources : bloomberg, snb little change in us equity market β s pre and postcrisis reaction to news 17. 11. 2016 financial markets and monetary policy implementation β an evolving relationship | andrea m. maechler | Β© snb thank you for your attention Β© swiss national bank | 0.5 |
european countries and the only non - eu country to have issued a green eurobond. the issued bond was worth eur 1 bn, with a maturity of seven years, at the lowest coupon rate of 1. 0 %. such a low rate is owed to strong demand of international investors who assess that serbia has excellent growth prospects. the issuance was aligned with the green bond principles of the international capital market association, with a clear obligation to use the funds exclusively for projects in the areas of renewable energy, energy efficiency, transport, water management, pollution prevention and control, circular economy, biodiversity and environmental protection, and sustainable agriculture. 2 / 4 bis - central bankers'speeches furthermore, in respect of fx reserve management, the nbs also has green bonds of high - ranking prime international issuers in its portfolio, thereby also supporting the green transformation. in addition, as a regulator and supervisor, we have conducted a survey among banks in serbia on how climate - related risks affect their operations and what are the activities they undertake in this regard. the preliminary conclusions of the survey indicate that : 1. the banking sector began to recognise climate risks in the context of the risk management system, and half of them defined the concept of that risk in their internal acts ; 2. more than half of banks expect a significant impact of climate risks on the bank's risk profile in the coming period, with the majority expecting that impact in a period longer than five years ; 3. a majority of banks have not yet included these risks in the scope of the bank's management bodies, nor in the system of reporting on risks ; 4. half of banks did not define any limits or restrictions arising from climate risks. other banks have mostly done this by defining exposure limits in the form of a target maximum value that needs to be reached by a certain date, or activity restrictions by defining a list of activities that are not supported. moreover, as an institution responsible for the financial system stability, we have been implementing advanced macroprudential stress tests of the banking sector's solvency and liquidity for a long time. as an additional step forward, within the new regional ipa project, we will work together with central banks from the european system of central banks to include various macro scenarios of the impact of climate risks in the existing framework. also, as part of cooperation, since july 2021 we are a member of the network for greening the financial system. this year, shortly after its founding, we joined | 20 % ( the average between 2007 and 2009 ). for simplicity we also assume a full roll - over of the existing stocks. with declining inflation along the targets, this implies rising real rates of fx credit growth. the government are also key conditions for success. for instance, government policies in the past had sometimes prioritized euro over dinar, not really providing a good example to the public. subsidies extended to fx - based financial products until last year is yet another example. also, a vast majority of government debt is in foreign currency, making fiscal policy exposed to fx risks. some public companies continue to make fx deposits and take fx loans regardless of the nature of their hedging needs. fortunately, the situation is changing rapidly and the government started actively to prioritize the use of dinars. the dinarization strategy we have in mind has three interconnected pillars. although activities in each pillar can be pursued independently, the progress is mutually reinforcing. however, careful coordination is needed to minimize potential adverse effects on other economic activities. the first pillar is the most general but also the most important. it calls for strengthening the macroeconomic environment by delivering low and stable inflation through a flexible exchange rate, alongside durable economic growth and stable financial system. 5 understandably, the nbs should continue and further reinforce its flexible exchange rate it policies under this pillar. similarly, we should be strengthening our capacity to provide for stability in financial markets. structural reforms in the real economy and sustainable fiscal policies delivering long - term growth are equally important. although they rest outside of the monetary policy control, the nbs will support the government efforts in this area. we should also bear in mind that the real success in this pillar will come only over a long period, requiring prolonged efforts. we are positive that targeted measures, subsidies and campaigns will increase short - term dinar savings and loans. however, a sustained period of macroeconomic stability will be needed before the trust in dinar as a means of storing wealth is re - established. the second pillar in our dinarization strategy should consist of measures creating favorable conditions for the development of the dinar bond market. the measures should facilitate expansion of the dinar credit activity of banks through promoting dinar denominated instruments and markets. development of an actively traded dinar yield curve is an important milestone of this pillar. in this sense, much activity is already taking place. several commercial banks have started programs offering longer - term dinar credits under both flexible and | 0.5 |
mr noyer discusses implications of the introduction of the euro and some basic structural features of emu speech delivered by mr christian noyer, vice - president of the european central bank, at the european institute in new york on 29 september 1999. * * * ladies and gentlemen, it is a pleasure for me to be able to address you today and to share with you some remarks about the changes which economic and monetary union ( emu ) in europe has brought about. in so doing, i should like to focus my comments on the introduction of the euro and the immediate implications for european and international financial capital markets, for central banking and the european economy as a whole. however, the launch of a new currency, historic as it was, does not constitute a one - off event. in fact, it is the longer - term dynamics of emu which represent the great challenge for the years to come. in the second part of my address i should therefore like to touch upon some basic structural features of emu β which have perplexed observers within the eu, but especially outside europe β namely, how a single monetary policy can indeed function in the absence of a unified political entity. before that, allow me to briefly explain our terminology, with which you may, as yet, be unfamiliar. the β eurosystem β is the name given to the european central bank ( ecb ) and the β at present β 11 national central banks of those countries which have introduced the euro. the β euro area β is the term used to refer to these 11 countries. the β european system of central banks β also includes the central banks of the four eu member states which have not, as yet, adopted the euro. the launch of the euro on 1 january 1999 the european union achieved a new and unprecedented stage of economic integration. with the launch of the euro, 11 countries merged their monetary sovereignty and transferred the task of conducting a common monetary policy to a supranational institution, the eurosystem. this historic step was the culmination of a long period of preparation, the magnitude of which can hardly be overestimated. eu member states embarked upon an ambitious and sometimes painful fiscal consolidation process ; exchange rate crises and hostile public opinion in some countries had to be overcome by a clear political conviction that the project would eventually succeed. at the technical level, the banking and financial sectors, eu legislators and many others diligently prepared the changeover to the new currency in cooperation with the ecb | . the clearing and reporting obligation has been implemented in major jurisdictions. the cpss and the financial stability board ( fsb ) have issued guidance on the recovery and resolution of financial market infrastructures, including central counterparties. however, it should also be highlighted that little more than half the fsb jurisdictions have legislative frameworks in place that implement the g20 pittsburgh commitments. other important reforms are still underway or have only recently been adopted and implementation is outstanding. regulation implementing basel iii in europe entered into force two months ago. tomorrow the european parliament will discuss the regulation establishing a single supervisory mechanism, an important step towards a european banking union. under the single supervisory mechanism, one supervisor will have a complete overview of an entire large and interconnected banking group in the context of the bis central bankers β speeches single currency. furthermore, work is being undertaken to address cross - border regulatory inconsistencies. so where do we stand five years after lehman brothers and four years after pittsburgh? did we achieve the overall goal of improving transparency, mitigating systemic risk and protecting against market abuse in otc derivatives markets? are we now better placed to monitor risks building up in the financial system? i will limit myself to three of the many issues covered by this conference : lack of transparency, the challenges remaining in central clearing and inconsistencies in crossborder application. transparency first, i would like to reflect on one of the main root causes of the financial crisis : the lack of transparency relating to otc derivatives in general. when i say β in general β, i mean that there was not only a lack of transparency on otc derivatives at the level of the market, but also at the level of individual institutions and counterparties. there are two dimensions to the lack of transparency : lack of information due to a lack of reporting requirements, and data fragmentation making it difficult to connect the dots and see the full picture. let me address them in turn. the accounting treatment in many jurisdictions allowed such instruments to be reported offbalance sheet. furthermore, different valuation methods were used to estimate the risks attached to these transactions. hence, information was either completely unavailable or incomplete and, even if available, it could not be compared across the sector and jurisdictions owing to different accounting assumptions and valuation methods. it was thus of little value to regulators and supervisors. in addition, financial innovation and strategies that were intended to limit risk β especially securitisation and insurance through derivative products β dramatically increased the complexity of the financial system | 0.5 |
tourism industry is expected to lead the growth assisted by some growth in agriculture. a growth rate of around 1. 7 and 1. 9 percent is expected for 2011 and 2012, respectively. while we are encouraged by the turnaround in the economy, we still have a number of fundamental issues in the economy which if not fixed will not allow us to fully realise our growth potential. we have said on so many occasions in the past that our external position, or fiji β s balance of payments ( bop ), remains vulnerable. the poor performance of our exports sector, coupled with our ever growing need for imports, continues to produce a widening trade and current account deficit. as long as we have a current account deficit, it will continue to put pressure on fiji β s foreign reserves. the challenge remains in raising exports and minimising imports to help reduce these imbalances and ease pressure on foreign reserves. unless we bring the current account deficit to below 5 percent of gdp, our macroeconomic policies will need to remain relatively tight. in light of this, government will have to consolidate its fiscal position by aiming for a reduced fiscal budget. this is expected to be supported by relatively tight monetary conditions. now what does this mean for fijian businesses? in the short - term, business conditions in fiji may not be easy. a tight fiscal policy can mean fewer tax breaks and handouts to businesses. tight monetary policies can mean that loans will be more expensive. therefore, businesses should brace themselves to survive against challenges during these times. so, how do you manage in such an environment? i do not think i can give you any serious advice in this regard. but, i suppose i can make some general comments here. businesses should consider adjustments in their operations. you need to work smarter so that the limited resources you have gives you the maximum returns. you can consider product diversification β look for new and perhaps, niche, business opportunities. consider moving up the value chain by adding value to your current products. if you are currently providing tours for tourists, explore going into budget accommodation. if you are producing timber, consider converting them into furniture or other finished products. if the local market is saturated, consider exporting your goods and services. in addition to these, businesses should also consider staff capacity building at the various training institutions we have, tpaf for instance, to improve productivity and dynamism of your workforce. most importantly, as i mentioned before, an important rule is that businesses operate according to | claudia buch : economic challenges facing europe and the world policy priorities of the italian g7 presidency and german g20 presidency in 2017 statement by prof claudia buch, deputy president of the deutsche bundesbank, at the panel discussion with claudia buch and luigi federico signorini ( deputy governor of the bank of italy ), collegio carlo alberto, turin, 19 december 2016. * * * 1. challenges in the year 2016 we have witnessed important political events β some of them with unexpected outcomes and market reactions. financial markets recovered rather quickly from the brexit vote in june ; they first plunged and then went up after the us presidential election in november ; markets did not react much to this month β s referendum about constitutional reform in italy. post - crisis financial regulatory reforms sought to make the financial system more resilient against shocks. market responses to the brexit vote showed the importance of buffers in the system. market participants built up liquidity buffers before the referendum, and the depreciation of the british pound cushioned some of the adjustment. but the extent to which we have already seen the longer - term stock adjustment, the revaluation of assets, and the full response of markets to these events remains an open issue. recent political developments reflect global challenges that go much deeper. there is a great deal of uncertainty about how the rising tide of populism and protectionism will affect the global economy over the longer term. the benefits of globalization are being questioned. policymakers must therefore strike the right balance between sustaining integration, fostering economic prosperity, and addressing concerns about inequality. in europe, the 25th anniversary of the maastricht treaty and the upcoming 60th anniversary of the treaty of rome remind us of the many achievements of the european integration project. these include 70 years of peace and lasting democracy, freedom of movement, free trade of goods and services, and a rise in economic prosperity for many citizens. a precise measurement of the benefits of economic integration is hardly feasible, but a recent study estimates the gain in gdp per capita due to eu membership at approximately 12 % ( campos et al., 2014 ). 1 at the same time, economic integration has distributional consequences. not every individual, not every firm benefits from free trade and from increasing ( international ) competition. there is a need for appropriate policy responses such that both potential winners and losers continue to share a feeling of belonging together. many of the policy issues involved go well beyond the analytical contributions that | 0 |
2 reports the average value of each characteristic for tracts that are assigned to each of the three types. specifically, each of these factors has an eigenvalue greater than one. bis central bankers β speeches bis central bankers β speeches | loan, and as the government as a whole lacked appropriate resolution authority or the ability to inject capital, the firm's failure was, unfortunately, unavoidable. the federal reserve and the treasury were compelled to focus instead on mitigating the fallout from the failure, for example, by taking measures to stabilize the triparty repurchase ( repo ) market. in contrast, in the case of the insurance company american international group ( aig ), the federal reserve judged that the company's financial and business assets were adequate to secure an $ 85 billion line of credit, enough to avert its imminent failure. because aig was counterparty to many of the world's largest financial firms, a significant borrower in the commercial paper market and other public debt markets, and a provider of insurance products to tens of millions of customers, its abrupt collapse likely would have intensified the crisis substantially further, at a time when the u. s. authorities had not yet obtained the necessary fiscal resources to deal with a massive systemic event. the failure of lehman brothers and the near - failure of aig were dramatic but hardly isolated events. many prominent firms struggled to survive as confidence plummeted. the investment bank merrill lynch, under pressure in the wake of lehman's failure, agreed to be acquired by bank of america ; the major thrift institution washington mutual was resolved by the federal deposit insurance corporation ( fdic ) in an assisted transaction ; and the large commercial bank wachovia, after experiencing severe liquidity outflows, agreed to be sold. the two largest remaining free - standing investment banks, morgan stanley and goldman sachs, were stabilized when the federal reserve approved, on an emergency basis, their applications to become bank holding companies. nor were the extraordinary pressures on financial firms during september and early october confined to the united states : for example, on september 18, the u. k. mortgage lender hbos, with assets of more than $ 1 trillion, was forced to merge with lloyds tsb. on september 29, the governments of belgium, luxembourg, and the netherlands effectively nationalized fortis, a banking and insurance firm that had assets of around $ 1 trillion. the same day, german authorities provided assistance to hypo real estate, a large commercial real estate lender, and the british government nationalized another mortgage lender, bradford and bingley. on the next day, september 30, the governments of belgium, france, and luxembourg injected capital | 0.5 |
β investors. well - informed and empowered investors are at the core of a well functioning capital market. investors will lose confidence in a market where disclosure is misleading and where selling practices are irresponsible. safeguarding the interests of investors, particularly retail investors, is therefore a key focus of mas regulation. but this objective has to be balanced against the need for investors to take ownership of their investment decisions. a regulatory approach that requires issuers or intermediaries to bear all the risks and losses will not work. if investors expect their losses to be always made good, there will be moral hazard and it will encourage reckless investing. mas safeguards the interests of investors in five ways : first, we demand stringent disclosure of information by issuers ; second, we require transparency in the information disclosed ; third, we set standards for intermediaries who sell investment products to provide quality financial advice ; fourth, we promote investor education, so that investors are empowered to make informed decisions. fifth, we provide affordable and accessible dispute resolution mechanisms for investors who feel aggrieved by the investment process. let me take each of these aspects in turn. bis central bankers β speeches disclosure there is nothing like disclosure to instill market discipline. in the words of us supreme court justice louis brandeis, β sunlight is said to be the best of disinfectants ; electric light the most efficient policeman β. disclosure is about shining that light so that all can see and make informed decisions. investors are entitled to accurate and timely disclosure of material information so that they can assess the risks and rewards of their investment. disclosure works not because all investors understand every word that is disclosed. disclosure works because it facilitates scrutiny by experts in the market ; it is this professional scrutiny that acts as a check on issuers and helps to inform the broader investor base. take for example an ipo prospectus. it can typically run into hundreds of pages, with detailed descriptions about the company β s business operations, its competitive environment, governance practices, and risk exposures, not to mention a full set of financial statements. most retail investors cannot easily digest all this information. but the scrutiny of the prospectus by analysts and institutional investors helps to bring to light any significant weakness in the company. having said that, i must acknowledge that greater disclosure does not always improve our understanding of investment products. while all material and relevant information must be disclosed, there is a tendency for disclosure to be voluminous and legalistic β often made for | such cross - border sukuk, especially to finance the large infrastructure needs in both middle east and asia. already a large proportion of sukuk issued in each region are linked to infrastructure projects. 6 singapore β s contribution in light of these developments, i am pleased to note that islamic financial activities in singapore have continued to expand over the past year. in banking, middle east banks based in singapore have started offering islamic window facilities for their corporate clients. recently, singapore - listed shipping company atlantic navigation, which has operations in gcc and india, signed an islamic financing facility with a singapore - based bank to further its business activities. home - grown mustafa group is also considering an islamic financing facility to fund its expansion into neighbouring countries. in fund management, securus fund, the world β s first shariah compliant data centre fund, successfully completed its second round of fund raising earlier this year to double their capital to about us $ 200m. the fund is based and jointly managed in singapore by keppel data centre investment management and aep investment management, which is majorityowned by the saudi al - rajhi group. with the capital increase, the fund has since acquired quality data centres in ireland and netherland to add to its existing assets in australia, malaysia and uk. sabana reit, the world β s largest islamic reit in terms of listed assets, issued the first convertible sukuk in singapore last year. the response from investors in asia and the middle east has contributed to sabana launching its s $ 500m multicurrency sukuk programme in april 2013. this is singapore β s second corporate sukuk programme after city development β s s $ 1b programme launched in 2010. earlier this year, city development issued the 7th and 8th tranches from their programme for a total amount of s $ 100m. we are encouraged that more sukuk issuances are also in the pipeline. just recently, swiber, a major singapore - listed company engaged in offshore epic ( engineering, procurement, installation and construction ) services in asia pacific, middle east and latin america, announced its intentions to set up a sukuk programme in singapore in the coming months. these developments suggest that the growth potential for islamic finance in singapore has yet to be fully realised, and that singapore can play a role in giving growth of cross - border islamic financing an even greater push. towards this end, mas is presently working with other government agencies and the industry to | 0.5 |
loans and deposits, has not always been successful in uganda, possibly because the operating costs have been too high. several of the mdis which were licensed in the 2000s have since been converted into commercial banks. mobile banking mobile banking was first introduced in uganda in 2009. the business model involves a partnership between a mobile phone operator and a commercial bank. the services offered have so far been restricted to basic retail payments and money storage services ; money can be transferred from one customer to another and it can also be stored in a customer β s virtual account. the main regulatory concern of the bou has been to safeguard customers β virtual money which they purchase, with cash, from mobile money agents. the bou has only allowed mobile money operations when this is done in partnership with a supervised commercial bank. mobile money operators have to hold, in an escrow account in their partner commercial bank, the equivalent in value of all the mobile money that they have sold to their customers. this means that the mobile phone operators, which are not licensed financial institutions, cannot themselves intermediate the funds that they have mobilised through the sale of mobile money. customers who purchase mobile money have a similar level of protection as that which is afforded to depositors in a commercial bank. the bou has also issued mobile money guidelines in 2013. the guidelines stipulate an approval process for all agents who wish to engage in the provision of mobile money services and the roles and responsibilities of all parties involved. they also stipulate the safeguards to protect bis central bankers β speeches customers, such as the requirement that customers β pin numbers must be used to authenticate all transactions. as can be seen in table 2, the growth in mobile banking has been phenomenal. the number of registered mobile money customers exceeds half of the total population of uganda, although this number may include some people who are registered with more than one operator. in terms of extending access to financial services, mobile banking has made a much larger contribution than any other recent innovation. the regular finscope surveys reveal that the share of the population with access to formal financial services increased from 28 percent in 2009 to 54 percent in 2014 and that almost all of this increase was due to access to mobile banking. however, although the growth of mobile banking amongst the previously financially excluded has been impressive, we should also bear in mind that the range of financial services available through mobile banking is very narrow ; as i have already noted it is restricted to basic payment transactions and storage of money. agent | 12 countries that undertake textbook policies of financial sector liberalization are not immune to the inflows β indeed, stein, jeremy. 2012. monetary policy as financial - stability regulation. quarterly journal of economics 127, no. 1 : 57 β 95. see diamond and rajan ( 2012 ), farhi and tirole ( 2012 ) and acharya, pagano and volpin ( 2013 ). the problem is exacerbated if unemployment is driven by factors that move to a different cycle and pace than the financial cycle. see feroli, kashyap, schoenholtz, and shin ( 2014 ) for details. see stein ( 2013 ). see bruno and shin ( 2014 a, b ), calvo, leiderman, and reinhart ( 1996 ), obstfeld ( 2012 ), rey ( 2013 ), and schularick and taylor ( 2012 ) for example. see eichengreen and gupta ( 2013 ) and mishra, moriyama, n β diaye, and nguyen ( 2014 ). bis central bankers β speeches their deeper markets may draw more flows in, and these liquid markets may be where selling takes place when conditions in advanced economies turn. 13 macro - prudential measures have little traction against the deluge of inflows β spain had a housing boom despite its countercyclical provisioning. recipient countries should adjust, of course, but credit and flows mask the magnitude and timing of needed adjustment. for instance, higher collections from property taxes on new houses, sales taxes on new sales, capital gains taxes on financial asset sales, and income taxes on a more prosperous financial sector may suggest a country β s fiscal house is in order, even while low risk premia on sovereign debt add to the sense of calm. at the same time, an appreciating nominal exchange rate may also keep down inflation. the difficulty of distinguishing the cyclical from the structural is exacerbated in some emerging markets where policy commitment is weaker, and the willingness to succumb to the siren calls of populist policy greater. but it would be a mistake to think that pro - cyclical policy in the face of capital inflows is primarily a disease of the poor ; even rich recipient countries with strong institutions, such as ireland and spain, have not been immune to capital - flow - induced fragility. ideally, recipient countries would wish for stable capital inflows, and not flows | 0 |
local buyers, who are more familiar with rmbs, and offshore buyers, most obviously in europe, who are more familiar with covered issuance. corporate issuers in many respects, the corporate segment has been the quiet achiever of the australian debt market over the past few decades. the stock of bonds on issue from australian entities grew solidly from the mid 1990s until the financial crisis. although the significance of market - based funding as a share of total debt funding for australian corporates has fluctuated somewhat, over the long run, debt market funding has grown in line with the funding needs of the corporate sector ( graph 6 ). as i just noted, the investment - intensive composition of growth over the next few years is likely to see continued strong corporate issuance by australian names, particularly resources companies. for more details see debelle ( 2010 ), β the state of play in the securitisation market β, address to the australian securitisation conference 2010, sydney, 30 november. bis central bankers β speeches graph 6 non - resident issuers β kangaroos and australian dollar eurobonds the fastest growing segment of the australian capital market over much of the past decade, and certainly in recent months, has been australian - dollar issuance by non - residents β the market of most interest to the audience here today. initially, much of this issuance was offshore in the eurobond market, but increasingly issuance has moved to the onshore β kangaroo β market ( graph 7 ). graph 7 in addition to the shift in the location of market activity, an important compositional shift is occurring with new issuance increasingly dominated by aaa - rated names ( graph 8 ). this probably reflects the increased risk aversion of investors in the post - crisis environment. bis central bankers β speeches graph 8 growth in the aaa - segment of the market has been underpinned by rapid growth in issuance among the supranational and sovereign agencies ( ssa ) group. ssa issuance in all currencies has grown rapidly in recent years, as these borrowers have responded to the large fiscal demands stemming from the impact of the global recession on public budgets in a range of jurisdictions. in addition, ssa issuers have displayed a growing tendency to issue in australian dollars over recent years. last year, australian dollar issuance accounted for more than 8 per cent of ssa issuance in all currencies ( graph 9 ). graph 9 this greater tendency to issue | have been introduced and continue to be introduced in line with the growing global trends. these developments have not only increased competitiveness in the financial sector, but also improved financial access and inclusion across the country. you may also wish to note that the bank of zambia, as the financial sector licensing authority, continues to receive numerous applications from institutions seeking to establish themselves in zambia. ladies and gentlemen, zambia β s economic prospects for 2014 remain strong with a projected growth of over 7 percent. this growth is expected to be mainly driven by agriculture, manufacturing, construction and mining. manufacturing and mining are expected to benefit from increased capital imports which should increase capacity utilisation, particularly among most mines. high construction activities are expected to be sustained in 2014, mainly in roads, commercial structures and housing estates. with increased output in the growth sectors, zambia β s external sector is projected to improve supported by continued growth of nontraditional exports. inflation is expected to be low at 6. 5 % at the end of the year. given the foregoing, the medium to long - term economic growth prospects for zambia remain bright. the country is expected to continue attracting foreign direct investment inflows as it grows. as a result of this robust economic performance and bright future prospects, the zambian economy recently obtained a us $ 1. 0 billion eurobond, reflecting continued investor confidence in the country. i am also proud to state that recently, the imf rated bis central bankers β speeches zambia as one of the fastest growing african economies with growth projected above 7. 0 percent in 2014. ladies and gentlemen, as the economy grows and as the business environment remains attractive, the need for accurate, current information and news about the domestic economy and financial markets, the region and wider global market becomes ever more critical. it is imperative, therefore, that your reporting is understandable, relevant, reliable verifiable, and comparable. this, in our humble view, requires the conveying of economic, business and financial developments, including the interpretation and expression of complex figures and technical jargon into simpler language for the easy understanding and assimilation by large sections of the population. to help you achieve this all important task, the bank of zambia has found it necessary to continue to engage you through this forum. distinguished colleagues, the favourable performance of the economy is partly attributed to prudent monetary and fiscal policy and appropriate regulatory framework. in light of this, the seminar seeks to also re - emphasise the role of monetary policy in | 0 |
into the future. it is not as though things are standing still in other jurisdictions. in the area of real - time payments, we have seen major initiatives launched in sweden and singapore β countries we would often view as comparators in terms of their income levels and market structures. the swedish system was launched in december 2012 with a service known as swish, which enables households to send real - time payments via their mobile phones on a 24 / 7 basis, 365 days a year. singapore β s system, known as fast, was launched in march this year. these two initiatives have wide participation, including by all the larger banks in those countries and many of the smaller institutions. there are some other countries, with lower income levels, lower penetration of electronic payments and without universally β banked β populations, that have also made the leap to fast retail payments. these include mexico with its spei system, south africa with real - time clearing and india with its immediate payments service. is there a plausible reason to accept australia falling behind? delivering the npp is also, in my opinion, in the interests of the australian financial institutions, which are at the heart of payments today. it can be expected to lead to further growth in electronic payments and a reduction in costs. it will maintain the ongoing relevance of the current players. if those players do not provide australian end - users with the services they want, surely others will seek to do so. alternatively, the reserve bank would be duty bound to consider a regulatory approach. so our message to the industry is : stay the course. continue the goodwill and prodigious effort that has brought you to this point. deliver on the commitments you have collectively bis central bankers β speeches made. let us together build a payments infrastructure that is efficient, open to competition and that will support innovation into the future. i thank apca and its officers in particular for the efforts they have made, and continue to make, in the npp and across the payments landscape. and i wish the broader payments industry success in its efforts to improve australia β s payments system and look forward to ongoing cooperation between the bank and the industry. bis central bankers β speeches | three potential channels of effects from these events to australia. the first is a direct trade link. australia β s exports of goods and services to europe are actually quite modest ( table 1 ). by far the biggest trade relationships these days are with asia. hence, a bigger impact of the euro crisis on australia would come indirectly via trade with asia. it is pretty clear that growth across much of east asia moderated in 2011 and that there has been some effect of the slower euro area economy on asian exports. there have been other forces at work too β the japanese tsunami a year ago had significant effects on production chains around asia. these effects had probably not completely disappeared when the floods in thailand had another significant impact, which may still be affecting the data. so detecting the effects of weaker european growth against the backdrop of the supply disturbances to trade patterns following these natural disasters might be a little like trying to pick up one conversation in a crowded room : there β s a lot of background noise. bis central bankers β speeches but most of the high - frequency data on trade and production did not seem to show the slowing intensifying as we went into 2012. it is too early yet to say that a new strengthening is under way. but we do not seem to be seeing the signs of a rapid fall in trade that we saw in late 2008. a reference to 2008 brings me to the third channel through which we think about the effects of the european crisis. and it is perhaps the most unpredictable and potentially most damaging kind : the financial link. it would not be the direct exposures of australian institutions to the most troubled countries of europe that would be of concern, because those are quite small. it would be the more general impact on global markets of a european problem. what we saw in late 2008 was effectively a closure of funding markets for financial institutions for a period, after the failure of lehman brothers. these sorts of events affect virtually all countries, because the impacts on credit conditions, trade finance, share prices, and household and business confidence β all of which lead to precautionary behaviour β occur almost instantaneously everywhere. there was a period late in 2011 where there was a genuine fear that this could happen again. funding markets tightened up and effectively closed for many european banks. interbank activity more or less ceased in europe. the cocktail of sovereign credit concerns, large bank exposures to those sovereigns, possible bank capital shortfalls and prospective large debt rollover needs of banks, not to mention | 0.5 |
bond issuance and mortgage lending in domestic currency and at longer maturities. the new instruments are also changing the distribution of risk. when entities in the emerging markets borrowed in foreign currencies, they bore the exchange rate risk while lenders bore default risk. this arrangement made the financial crises of the 1990s very costly : sharp currency depreciations caused the domestic - currency value of foreign - currency debt to balloon. with domestic - currency financing, lenders now bear most of the exchange rate risk. and with fixedrate bonds, the interest rate risk, too, is being shifted to the lenders. we would expect that emergingmarket borrowers would have to pay higher yields to compensate lenders for this additional risk. but yields on the new instruments have generally been moving down. for example, mexico, even with its history of macroeconomic instability, can borrow in pesos at a thirty - year maturity at roughly 8 percent. these low yields are part of a more general decline in compensation for risk in emerging markets, a trend also evidenced by low risk spreads on dollar - denominated bonds and rising stock prices. in part, this trend reflects the low volatility in international financial markets in recent years. however, it also reflects improvements in the economic policies and debt positions of emerging - market economies. in the past, an environment of low risk spreads contributed to overborrowing, booms, and then busts. so far, that cycle has not developed, and it is crucial that sound and prudent policies continue to guard against it's doing so. credible macroeconomic and financial policies in the emerging - market economies provide double benefits : they help keep borrowing costs low, and, in the event of a future retreat from risk by global investors, they will help the affected economies weather any ensuing financial turbulence. conclusion in conclusion, i believe that the current net flow of capital toward the industrial world is not in the longterm interest of the developing economies. to raise incomes and reduce poverty, the developing economies must boost their productivity, and that, in turn, will require complementing their large and growing labor forces with increasing quantities of capital. i would add that the current pattern of net capital flows is more the deviation than the norm. the developing economies in the aggregate swung into current account surplus only in the past decade. moreover, at present, only a subset of developing economies account for those surpluses, and even those are enjoying substantial gross capital inflows. | today, i will make the case that recent developments in commodity prices can be explained largely by rising global demand and disruptions to global supply rather than by federal reserve policy. moreover, empirical analysis suggests that these developments, at least thus far, are unlikely to have persistent effects on consumer inflation or to derail the recovery. critically, so long as longer - run inflation expectations remain stable, the increases seen thus far in commodity prices and headline consumer inflation are not likely, in my view, to become embedded in the wage and price setting process and therefore are not likely to warrant any substantial shift in the stance of monetary policy. an accommodative monetary policy continues to be appropriate because unemployment remains elevated, and, even now, measures of underlying inflation are i am indebted to board staff members christopher erceg, steven kamin, david lebow, andrew levin, trevor reeve, david reifschneider, stacey tevlin, and william wascher for their assistance in preparing these remarks. bis central bankers β speeches somewhat below the levels that fomc participants judge to be consistent, over the longer run, with our statutory mandate to promote maximum employment and price stability. while i continue to anticipate a gradual economic recovery in the context of price stability, i do recognize that further large and persistent increases in commodity prices could pose significant risks to both inflation and real activity that could necessitate a policy response. the fomc is determined to ensure that we never again repeat the experience of the late 1960s and 1970s, when the federal reserve did not respond forcefully enough to rising inflation and allowed longer - term inflation expectations to drift upward. consequently, we are paying close attention to the evolution of inflation and inflation expectations. sources of the recent rise in commodity prices let me now turn to a discussion of the sources of the recent increase in commodity prices. in my view, the run - up in the prices of crude oil, food, and other commodities we β ve seen over the past year can best be explained by the fundamentals of global supply and demand rather than by the stance of u. s. monetary policy. in particular, a rapid pace of expansion of the emerging market economies ( emes ), which played a major role in driving up commodity prices from 2002 to 2008, appears to be the key factor driving the more recent run - up as well. although real activity in the emes slowed appreciably immediately following the financial crisis, those economies resumed expanding | 0.5 |
of the risks that caused so much damage elsewhere in asia. the diversity and depth of australian markets, by ensuring that avenues of financing are always available, also add to the resilience of the economy. i would also give some credit to the financial sector for contributing to the reduction in inflation volatility we have seen over the past 15 years. part of this can be traced to the reduced pass - through to inflation of changes in the exchange rate, which, in turn, has been partly attributable to the increased use of exchange rate hedging by firms. conclusion so let me end by saying that it is clear that the growth of financial markets and the growth of the economy are closely intertwined. financial markets need a strong economy to thrive, and the economy needs strong, vibrant and well - regulated markets if it is to continue to expand. i think that it is fair to conclude that australia to date has been well served by its financial markets, and i would encourage you to continue to work to maintain these high standards. | in the market. it is worth noting the code is principles - based rather than rules - based. this is to encourage market participants to think about their practices and how their activities comply with the principles, rather than working narrowly to a set of rules. the code β s application is also designed to be proportional to the fx business that a participant is involved in. clearly, there are some principles that aren β t directly relevant to the buy - side. most obvious are those principles that deal with handling client orders or client mark ups. ultimately, the code β s principles are there to give market participants confidence in how the market is operating. there are numerous ways the code can promote confidence. it can help to improve price competition as liquidity providers β pricing practices become more transparent to clients. market participants can also be more confident that good practices around information handling will result in a more level playing field for all. 1 / 2 bis central bankers'speeches so i encourage those of you who have yet to familiarise yourselves with the code to do so. and then consider adopting it. it is a useful tool in many ways, not just to enhance your own practices but, for those on the buy side to gauge what you should expect from your brokers in terms of their execution, the type of market colour they provide and their market practices more generally. finally, i should mention the work of the australian foreign exchange committee ( afxc ). this committee contributes to maintaining the code and promoting it within the local market. our membership comprises a diverse range of market participants, including those from both the sell - side and buy - side, and also those that provide infrastructure to the market, such as the platforms. so if you are interested to know more about the code, you could contact any one of the members and ask about their own experiences with the code. 2 / 2 bis central bankers'speeches | 0.5 |
lower and with ageing populations, significant emigration and decreasing investment rates, focus has turned to structural reforms and institutional quality. labour and product market liberalisation, or business friendly environments almost became mantras of central bankers in their communication with governments and the broader public. european institutions have started to stress the importance of the quality of the institutions. and not only their quality, of course. yesterday morning i spoke in croatia about the need to improve the efficiency of the judicial system. it is fair to say that many reforms have already been undertaken across europe and that many countries are now seeing the benefits of such policies. for the last couple of quarters, every new gdp data release by eurostat has been a positive surprise, while forecasters have been raising their gdp forecast for the ea and the eu. however, while growth has resumed in all countries, medium - term growth potential in the region is insufficient to ensure pre - crisis pace of real convergence. namely, for convergence to be sustainable, long - term potential per capita growth must be consistent with an expansion of demand. in other words, gdp growth that results from strong capital inflow, foreign demand shock, or fall in interest rates due to perhaps euro area enlargement process, could prove to be unsustainable. so, the question is, did we take convergence for granted? was one of the great features of the european integration process only a temporary and unsustainable phenomenon related to the initial'low - hanging fruit'reforms that corrected vast resource misallocation problems, followed by a huge inflow of foreign capital before the crisis? will convergence return back to a faster speed, will it continue at a slower speed, or maybe even stop or reverse? is convergence still here and, even more importantly, is it here to stay? well, as it has been shown already at this conference, convergence is still present but it has slowed down compared to the pre - crisis period. of course, having said that, we have to keep in mind that cee has come a long way since the beginning of the transition. our progress has been tremendous. if we go back to 1995, the average level of income per capita in cesee countries was below 40 % of the old europe β s income ( in pps terms ). by 2008 it increased by a half and reached 60 % of the eu15 level of income. and in some regions, like the baltics, developments were even more spectacular with relative income per capita doubling in | like this awards program, the microfinance industry in the philippines also continues to evolve, grow and break new grounds. at the bangko sentral, the challenge is for us be responsive to the changing demands of the industry, specifically in areas of policy, supervision and regulation. last year, for instance, the bangko sentral approved the micro - agri product ( map ) to address the financing needs of small farmers. under this program, banks with microfinance operations are allowed to extend credit to clients with small agricultural activities using microfinance methodologies. in effect, these micro - agri loans are given the same regulatory treatment as microfinance loans, including the no - collateral provision. nevertheless, while the bangko sentral is open to innovations, it continues to be prudent as the agriculture sector has its own unique intricacies and risk profile. accordingly, we have set in place certain parameters to ensure that risks associated with agriculture finance are properly managed. there is also growing interest in providing housing microfinance and even micro - insurance, using microfinance methodologies and technologies. for instance, one of the country β s leading microfinance institutions β the center for agriculture and rural development or card β has formed a mutual benefit association which offers micro - insurance to over 300, 000 clients. this is yet another tool that minimizes vulnerabilities from poverty. i have been informed that the insurance commission has recognized card for its significant contribution in increasing the number of insured filipinos. in addition to product development, the microfinance industry is also working on more efficient delivery channels to lower costs and increase its reach. one delivery channel that is gaining much interest is the use of mobile phones for selected microfinance transactions. through electronic cash platforms β such as smart money and globe g cash β mobile phones are able to make payments and transfers, send remittances, or make purchases. this bears much potential for a country like ours β¦ where the mobile phone sector serves practically all income groups and where the number of mobile phone users and usage are among the highest in the world. new technologies present a unique opportunity to reach a wide range of clients including the lower income segments of our population, who are traditionally marginalized and β unbanked. β for instance, the rural bankers association of the philippines - microenterprise access to business services ( rbapmabs ) has a joint project with globe telecom to provide banking services using the g | 0 |
domestic borrowing costs that take place. this foreign currency borrowing is intermediated by the domestic banking system, where the financing is more short - term than the lending. thus the banking system has a growing balance sheet in fx, with a maturity mismatch but limited lolr facilities to backstop it. in short, financial risks are accumulating, both in the financial sector and among firms and households. at the same time, the economy is increasingly in an unsustainable position, with an overvalued currency and big current account deficit. the bis central bankers β speeches whole thing then comes crashing down when foreign financing comes to a sudden stop, heralding a currency crisis and even a banking crisis as well. before i go further, let me warn you, though, that this is only part of the explanation of the financial crisis in iceland. the offshore activities of the banks and old - fashioned macroeconomic mismanagement were equally important, if not more so. on this topic, i refer you to other speeches and publications by myself and others. 2 what can and should be done about the problems i have laid out? in answering that question, we should take into account that the biggest problems occur when global factors β cross - border financial integration and associated capital flows β and domestic vulnerabilities interact negatively. in principle, solutions could be directed at any or all of these. some are obvious in their design and relatively easy to implement, especially if they can be implemented unilaterally by individual countries. others are more complex in their design or require global, regional, or big - country action that is not necessarily forthcoming. one potential solution is to enter a monetary union, thus eliminating the small country monetary policy problem. it would also reduce the financial risks emanating from currency mismatches and foreign currency maturity mismatches in the balance sheets of domestic banks. but as this is currently not on the agenda in my own country and recent developments have demonstrated that it is no panacea β with pros and cons that extend far beyond my topic her β i will not dwell on it further. there is no doubt that flaws in the international monetary and financial systems exacerbate the problems that i have mentioned. reforms that would reduce the current asymmetries in the adjustment burdens of surplus and deficit countries, or would to a greater degree internalise the global externalities of the monetary policies of central banks issuing major reserve currencies, could reduce | have other explanations. thus co - movements in asset returns could be due to common shocks and the low level of correlation between short and long rates due to monetary policy credibility. looking at the totality of the evidence and case studies, however, it seems difficult to escape the conclusion that global financial integration was a big underlying driver, although there were also other factors at play. new zealand appears to be a relevant example here. during significant parts of the 2000s β before the gfc β the policy rate in new zealand was raised to counteract demand pressures at the same time as the us maintained an easy stance. new zealand β s long rates were flat or falling for most of this period. i could tell a similar but slightly more complicated story from my own country. the tendencies that i have described can be problematic in their own right but in no way fatal, as the experience of new zealand and others attests to. it is when they interact badly with other economic and financial risks that can face small, open and financially integrated economies β such as the global credit cycle, domestic financial vulnerabilities, policy conflicts, and asymmetric shocks β that we can have a lethal cocktail. this was the case in iceland. to demonstrate this, let me take a stylised example which is, i admit, heavily influenced by the experience of my own country. a small, open, and financially integrated economy develops a positive output gap that is larger than in the rest of the world. the economy is booming and is seen as a good investment by outside investors. this occurs in a situation where the global credit cycle is in a strong upswing. the result is capital inflows and upward pressures on the exchange rate. the country has a floating exchange rate and has adopted a flexible inflation targeting regime. monetary policy therefore reacts by raising interest rates due to the risks that the booming economy poses for future inflation. this, however, widens the interest rate differential vis - a - vis the rest of the world and sucks in even more capital through carry trade and other channels. the currency therefore appreciates further. this helps to limit inflation, both directly, through lower imported inflation in terms of domestic currency, and indirectly, by directing demand abroad. but the effect of monetary tightening on domestic demand is limited through the processes i have described, where long rates react weakly to the increase in the policy rate. in addition, firms and households increasingly borrow in foreign currency in order to avoid even those limited increases in | 1 |
interest rate is a common mechanism in corporate lending, whereas it might involve risks in retail lending. in contrast to businesses, people are not always able to properly assess 3 / 7 bis central bankers'speeches their future risks and might agree to borrowings at interest rates that might rise. this is especially important for a mortgage loan which is the largest one taken out by people over their entire life and the most demanding one since people might lose housing if they fail to repay their mortgage loans. two months ago, we released a consultation paper on floating interest rates and discussed it with the market community. the findings of this discussion are as follows. it would be unreasonable to prohibit floating interest rates completely since this reduces opportunities to expand lending, especially given that banks have increasingly more current liabilities and increasingly more non - current assets. floating interest rates really help address this mismatch. nonetheless, i would like to emphasise that in the first place banks still need to expand the share of long - term funding, for instance, through bonds. however, unrestricted access to floating interest rates should only be provided to β qualified β borrowers, that is, the highest - income people who are well aware of inherent risks they accept taking out very large loans. in contrast, small loans should be issued on very clear terms, and floating interest rates in this case should be prohibited, in our opinion. floating interest rates should be available in the absolute majority of loan types ( including in mortgage lending ). however, the range of possible changes in floating interest rates or loan maturities should be limited. let β s say that this should be no more than a third of an interest rate or no more than a fourth of a loan maturity. we still need to discuss these parameters in greater detail. people would thus be able to measure their risks under various scenarios and make a wellinformed decision. we believe that the caps setting the maximum amount of a small loan should be established taking into account regional specifics. this aspect also requires additional discussions. now, i would like to proceed from current risks to the trends in the financial sector. digitalisation might be an even more significant trend for finance than for the economy in general. actually, the financial sector has been extensively applying advanced technologies for a long time already. an ecosystem, which is the most powerful business model, is exactly the result of a fusion of technologies and finance. ecosystems have become so powerful that they now impact not only the development of and competition in the financial sector | a surge in the first two weeks of this year, they have dropped in recent weeks, though holding somewhat above the path that corresponds to our inflation target. moreover, we do not rule out that the deferred effects of the vat hike may manifest themselves in the months to come. it is also of note that in february, both monthly core inflation and most other indicators adjusted for volatile components and seasonality exceeded 4 % in annual terms. there is evidence that risks that prices of certain food products may grow at an elevated pace have decreased. in february, a decline was registered in prices of a number of products which had made a considerable contribution to acceleration of food inflation. furthermore, both domestic and external prices of main crops stopped growing in recent months. current harvest expectations for this year are favourable, which also limits risks in this part. petrol and diesel prices were comparatively stable in december - february, and even drifted down slightly in february. this constrained inflation acceleration. furthermore, the ruble appreciated in the opening months of the year ; this had a favourable effect on prices and inflation expectations. inflation expectations is the second factor we closely monitor. we had concerns about their 1 / 3 bis central bankers'speeches possible response to inflation acceleration. expectations of professional analysts remain anchored. analysts understand the temporary nature of this year β s inflation acceleration associated with one - off factors, in particular, the vat. therefore, as the bank of russia, they forecast a moderate increase in inflation in 2019 and expect inflation to come in at 4 % from next year onwards. households and businesses responded to inflation acceleration more pronouncedly. expectations of households rose from a historic low of 7. 8 % seen last april to 10. 4 % in january, that is returned to their mid - 2017 readings. businesses β price expectations also jumped considerably. however, household inflation expectations dropped to 9. 1 % as early as march. price expectations of businesses also declined. however, they both remain elevated. it is of special note that inflation expectations of households and businesses demonstrated last year that they remained unanchored. they follow current changes in prices, primarily petrol and food prices, and ruble exchange rate fluctuations. the third important factor we took into account is consumer demand. lending underpins consumption but slowing wage growth constrains a rise in demand. consumption growth slowed down after a short - term acceleration in november, which was likely associated with preemptive purchases of non - food goods in the run - up to the vat | 0.5 |
##cen. gov / sites / default / files / shared / fta - check - fraud - final508. pdf. see u. s. department of the treasury, β treasury announces enhanced fraud detection processes, including machine learning ai, prevented and recovered over $ 4 billion in fiscal year 2024, β news release, october 17, 2024, https : / / home. treasury. gov / news / press - releases / jy2650. - 6some consumers, like those with poor or no credit history but with sufficient cash flow to support loan repayment. 7 ai could be used to further expand this access, as financial entities mine more data sets and refine their understanding of creditworthiness. of course, we also know that using ai in this context β in a way that has more direct impact on credit decisions affecting individual customers β also presents more substantial legal compliance challenges than other ai use cases. ai also has promise to improve public sector operations, including in regulatory agencies. as i have often noted, the data relied on to inform the federal open market committee decisionmaking process often is subject to revisions after - the - fact, requiring caution when relying on the data to inform monetary policy. 8 perhaps the broader use of ai could act as a check on data reliability, particularly for uncertain or frequently revised economic data, improving the quality of the data that monetary policymakers rely on for decision - making. additional data as a reliability check or expanded data resources informed by ai could improve the fomc β s monetary policymaking by validating and improving the data on which policymakers rely. while these use cases present only a subset of the possibilities for the financial system, they illustrate the breadth of potential benefits and risks of adopting an overly cautious approach that chills innovation in the banking system. over - regulation of ai can itself present risks by see board of governors of the federal reserve system, consumer financial protection bureau, federal deposit insurance corporation, national credit union administration, and office of the comptroller of the currency, β interagency statement on the use of alternative data in credit underwriting, β news release, december 12, 2019, https : / / www. federalreserve. gov / supervisionreg / caletters / ca % 201911 % 20letter % 20attachement % 20interagency % 20statement % 20on % 20the % 20use % 20of % 20alternative % 20data % 20in | purpose is a definition required? in the context of the financial system, the definition of ai may help to delineate how the regulatory system addresses it and establishes the parameters for how it can be used by regulated institutions. other specific contexts could also be included, like third - party service providers that support banks or other financial services providers, or use by regulators in support of their mandates. a definition helps regulators and regulated institutions understand the activities that are subject to rules and requirements by defining the scope. while this definitional question is important to establish clarity about the scope of what constitutes ai, it can also distract us from a more important point β what is the appropriate policy framework to address the introduction and ongoing use of ai in the financial system? i have no strong feelings about the ideal or optimal definition of ai, and some version of the many definitions floating around are probably adequate for our purposes. at a minimum though, a definition must establish clear parameters about what types of activities and tools are covered. but before leaving the topic, i want to offer a cautionary note. a broad definition of ai arguably captures a wider range of activity and has a longer β lifespan β before it becomes outmoded, and potentially never becomes outdated. but a broad definition also carries the risk of a broad β and undifferentiated β policy response. this vast variability in ai β s uses defies a simple, granular definition, but also suggests that we cannot adopt a one - size - fits - all approach as we consider the future role of ai in the financial system. - 4innovation and competitiveness knowing that the technology and use of ai continues to evolve leads to the question of how it should be viewed by regulators, particularly in light of the need for innovation and the effect on competition. innovation ai tools have the potential to substantially enhance the financial industry. in my view, the regulatory system should promote these improvements in a way that is consistent with applicable law and appropriate banking practices. one of the most common current use cases is in reviewing and summarizing unstructured data. this can include enlisting ai to summarize a single report or to aggregate information from different sources on the same or related topics. the ai β output β in these cases may not directly produce any real - world action, but it provides information in a more usable way to assist a human. ai use cases like this may present opportunities to improve operational efficiency, without introducing substantial new risk into business processes. in | 1 |
villy bergstrom : the labour market and wage formation speech by mr villy bergstrom, deputy governor of sveriges riksbank, at the association of swedish engineering industries'hr director conference, rimbo, 22 november 2005. * * * introduction thank you for your invitation to come and speak here. today, i will not be touching upon current economic policy in sweden or the weakening of the krona exchange rate. i will return to those issues in a couple of days in a different speech. the shift in economic policy at the start of the 1990s has entailed better conditions for wage formation in sweden. among other things, the adoption of the inflation target has reduced uncertainty over future price developments. wage - earners do not have to worry that their wage increases will be eroded by excessively fast price rises, while it is easier for employers to determine their scope for wage costs. the lower uncertainty over inflation is reflected in the fact that inflation expectations since the mid1990s have been firmly anchored around 2 per cent. it is important to remember that the current conditions for wage formation in sweden β a floating exchange rate and inflation target β are considerably different from our previous regime with a fixed exchange rate. a fixed exchange rate was the norm in sweden for some 130 years, even though the systems for maintaining it changed. background to the current system during the post - war era the exchange rate norm was supervised by international agreements through sweden β s membership of the international monetary fund ( imf ), and the bretton woods system. that meant that devaluations were only allowed in the event of fundamental structural problems or imbalances. so the bretton woods system limited the opportunities for individual countries to devalue their way out of a cost crisis. instead, the countries were offered loans from the imf on tough terms. for swedish wage formation, this was a successful period. the swedish trade union confederation and other employee organisations / trade unions, as well as the swedish parliament and government, were aware that the strict regulations did not permit devaluation, which had a disciplinary effect on swedish wage formation. the bretton woods system was based on an arrangement whereby the us dollar had a fixed value in terms of gold and the currencies of the other countries in turn were pegged to gold via a fixed exchange rate with the dollar. when the us was forced to abandon its dollar peg to gold in the early 1970s after having borrowed large amounts to finance the vietnam war, | outlook is instead somewhat weaker. for sweden, it seems likely that the economy will experience a rather normal recovery next year. consequently, it is also probable that inflation a couple of years ahead will be close to 2 per cent, roughly as forecast by the riksbank in august, even if inflation in the forthcoming year may be lower. long - term perspective before rounding off, allow me also to touch upon the longer - term perspective. over the last decade, the economic policy debate has largely centred on stabilisation policy. the fact that stabilisation policy was in focus during the first half of the 1990s is easy to understand. following a severe crisis caused largely by mistakes in stabilisation policy, we changed our exchange rate regime and altered the focus of both our monetary policy and fiscal policy. in the emu debate, it has been natural to continue the discussion of monetary policy and exchange rate systems. i, at least, believe that this discussion went a bit too far. it was easy to get the impression that welfare in sweden depended solely on the riksbank's actions. this is not the case of course. the objective of monetary policy over the past ten years has been to ensure price stability. this has proved rather successful - inflation is in line with the riksbank's target and it is important therefore that it lays a solid foundation for growth. but when we alter interest rates, it is mainly with a view to affecting demand around a long - term output trend. while this is important, it must be remembered that we do not affect the trend itself. and it is this trend that determines our welfare! so we must now shift our focus in the public debate from monetary policy and stabilisation policy to issues that determine sweden's ability to create growth and welfare. in fact, this has been important for a long time since sweden suffered a considerable decline in welfare terms relative to almost all other countries, especially during the 1970s and 1980s. but it is particularly significant now in the light of the challenges facing us in the near future, particularly as a result of our ageing population. essentially, economic growth is determined by how much we work and how productive we are. nothing can change this. the number of hours worked is affected by a large number of factors ; e. g. the number of people of working age, the number of these that are employed, absenteeism, etc. labour productivity, measured as gdp per hour worked, is partly dependent on | 0.5 |
supervisory council decided to keep the key interest rate unchanged, at 3. 5 %. the supervisory council deems that the current monetary conditions are adequate to meet our medium - term inflation target, and provide the monetary stimulus necessary to recover the domestic private demand. bis central bankers β speeches | , in turn, conditions spending and investments in the economy. on the other hand, credit supply is tight, as lending standards performance shows. financial markets during the second half of 2011 were calm and reflected relatively downward premiums on liquidity risk and inflation. successive key rate cuts were swiftly reflected in the interbank market. in the primary market, government security yields dropped, reflecting the key interest rate cut as well as the low demand of the public sector for loans. moreover, transmission of monetary policy signals is expected to be extended fully to the deposits and loans market, in accordance with the transmission mechanism time lags. the bank of albania deems that a good part of above - analysed tendencies would be present during 2012, as well. according to our core projections, the albanian economy will continue to grow during the year ahead, albeit below its potential. the country β s economic activity will be conditioned by the solution of the crisis in the euro - area countries, economic growth of partner countries, and foreign investor β s attitude to risk. bis central bankers β speeches on the other hand, economic challenges in our partner countries may be transformed into positive opportunities for the albanian economy. albanian economy attractiveness with low unit labour costs, macroeconomic stability and financial soundness of businesses, households and the banking system may be reflected in more foreign direct investments. while our projections factorize lower foreign demand contribution, in baseline scenarios, the widening of albanian exports market remains a potential scenario, as well. economic growth projections presume positive consumption and investments growth at home, in response to improvement of lending terms. the latter are expected to reflect the eased monetary policy of the bank of albania and reduced risk premiums in the financial system. moreover, reduction of room for fiscal stimulus and maintaining of stable fiscal parameters will enable the private sector to create spare funds and cut down risk premiums for the economy. factorising our expectations for below - potential economic growth and lower imported inflation, as well as in the presence of the economy β s expectations on inflation around the target, our projections suggest that, with 90 % probability, consumer price inflation will range 1 β 3 % during 2012. * * * taking into consideration the information set out above, in the supervisory council assessment, inflationary pressures remain controlled over the monetary policy relevant horizon. moreover, economic agents β expectations on inflation remain anchored to the bank of albania β s target band. at the conclusion of discussions, the supervisory council decided to cut the key interest rate by 0 | 0.5 |
of that mean for inflation? we've come a long way from the 8. 1 % inflation we saw last summer. as i mentioned, annual cpi inflation was down to 4. 3 % in march, 1 / 2 bis - central bankers'speeches led by falling goods price inflation, and we see further declines ahead. that's good news. but many canadians are still struggling to manage the rising cost of living, and prices of many things that people need to buy are still rising too quickly. food price inflation is just under 10 %. we expect food price inflation to come down in the months ahead, but services price inflation will take longer. continued strong demand and the tight labour market are putting upward pressure on many services prices, and those are expected to decline only gradually. we expect it will take until the end of 2024 to get inflation all the way back to the 2 % target. when we met last week, the bank's governing council discussed whether we've raised rates enough, and we considered the likelihood that the policy rate may need to remain restrictive for longer to return inflation to the 2 % target. governing council also discussed the risks around our projection. the biggest upside risk is one i just mentioned - that services price inflation could be stickier than projected. the key downside risk is a global recession. if global banking stress re - emerges, we could be facing a more severe global slowdown and much lower commodity prices. overall, we view the risks around our inflation forecast to be roughly balanced, but with inflation still well above our target, we continue to be more concerned about the upside risks. let me conclude. our job at the bank of canada is to get inflation all the way back to the 2 % target. we are encouraged with the progress so far. and seeing inflation get down to 3 % this summer will be welcome relief for canadians. but let me assure canadians that we know our job is not done until we restore price stability. price stability is important because it restores the competitive forces in the economy and allows canadians to plan and invest with the confidence that their money will hold its value. that's the destination - we are on our way and we will stay the course. with that summary, the senior deputy governor and i would be pleased to take your questions. 2 / 2 bis - central bankers'speeches | njuguna ndung β u : bank regulation reforms in africa : enhancing bank competition and intermediation efficiency keynote address by prof njuguna ndung β u, governor of the central bank of kenya, at the 12th seminar by african economic research consortium, mombasa, 22 march 2010. * * * prof. william lyakurwa, executive director, african economic research consortium ; senior policymakers here present ; distinguished guests ; ladies and gentlemen ; i am delighted to be with all of you here in mombasa and to speak on bank regulatory reforms in africa : enhancing bank competition and intermediation. but before i make my remarks, let me take this opportunity to thank the african economic research consortium ( aerc ) for their invitation to give the keynote address at this seminar. this is indeed a timely topic as we continue to assess the effects of the global financial crisis and find long term solutions to mitigate and prevent recurrence. i am informed that approximately 70 senior policymakers from over 20 countries in sub - saharan africa ( ssa ) are in attendance. this signals the importance of this seminar and the policy spin - offs it will generate. at the outset, ladies and gentlemen, i would like to recognize the important role that aerc has played in strengthening local capacity for managing economies within sub saharan africa. the consortium has contributed to advanced policy research and graduate training in economics. most institutions of policy in sub - saharan africa today are led by aerc alumni. i am happy to be part of this group myself. ladies and gentlemen ; this seminar is taking place at a time when countries in africa are taking stock of the second and third round effects of the global financial crisis. you will agree with me that the crisis which initially hit african countries with stronger financial linkages to international capital markets ; significant trade relations with the western world and rich natural resource countries set the stage for challenging times in policy making and implementation. africa β s prospects in the post - crisis period are contingent on the behaviour of policymakers. indeed, there is need for better regulation that can readily identify emerging vulnerabilities ; properly price risks ; and strengthen incentives for prudent behaviour. it is tempting after the crisis to call for more regulation β but we should emphasize better regulation. second, we should emphasize building strong institutions. globally, the remedial actions taken by governments to deal with the crisis have borne fruit and the green shoots of recovery are beginning to sprout. for | 0 |
##z bank on the opening of its branch in kimbe, and look forward to its future plans to expand its branch network throughout png. thank you for listening. | over 20 percent. this performance is also reflective of the investors and public β s confidence of the management of the economy. in this regard, the private sector must be recognized and commended for the continuous confidence in the economy. however, the government needs to be cautious and remain within the medium term development strategy ( mtds ) and the budgetary framework, because these achievements to date can easily be undone if there is any fiscal slippage in the lead up to the national elections next year. going forward papua new guinea should not be complacent with the current macroeconomic stability but continue to work towards building a more efficient and competitive financial system that accommodates domestic and global challenges. the reforms of the financial sector is still on - going and the following reforms are currently being undertaken by the bank : β’ a taskforce has reviewed the superannuation and life insurance industries to determine areas where parts of these new legislations could be more stakeholder / member friendly. the report has been finalized and is waiting to be formally presented to the treasurer and myself ; β’ undertaking a review of the legal framework for the savings & loan societies and microfinance institutions ; β’ the bank continuous with the review of liberalization of foreign exchange controls with the aim of fully liberalizing the remaining controls ; β’ the bank encourages licensed non - bank financial institutions as authorized foreign exchange dealers to promote competition. β’ the bank has commenced a major review of the payments system in papua new guinea. review of the payments system is necessary for a sound and efficient system that will reduce costs to businesses. the review will cover different forms of payments, clearing - house, currency banknotes and coin distribution and withdrawal methods. papua new guinea is a predominantly cash economy and i want to see our people use clean banknotes and bright coins. i want to devise more efficient methods of withdrawing dirty and torn banknotes. these financial sector reforms are intended to sustain macroeconomic stability over the medium to longer term, which is necessary for laying the foundation for economic growth. however, these reforms themselves may not be able to achieve the desired outcomes if the government reneges on delivering the budgetary expectations. this expectation also takes into account the government β s achievement of a balanced budget in the medium term and commitment to deliver priority areas identified in the medium term development strategy ( mtds ). | 0.5 |
dishonesty and fraud. our message is clear β improper or illegal conduct have no place in our financial sector. importance of market discipline 15 this brings me to the second topic. market discipline. 16 as with our enforcement actions, market discipline can play an important role in shaping behaviour. it creates a strong incentive for financial institutions to conduct their business in a fair, transparent and responsive manner. a firm or its representatives with a poor record will deter prospective clients and investors. similarly, investors will avoid companies that have poor standards of governance and disclosures. in other words, investors will penalise those that have fallen short, and reward those that have fared well. 17 to allow market discipline to work, different participants in the eco - system must play their part. let me use the equity market as an example and outline a few key roles. 18 mas is the statutory financial regulator. we implement and administer the laws and regulations that govern activities in the capital market, and as mentioned, will carry out enforcement actions against those who run afoul of them. 19 sgx regco is the frontline market regulator for listed issuers. it is responsible for ensuring that the market operates in a fair, orderly and transparent manner. sgx regco administers the listing rules that require listed issuers to, among other things, provide full, timely and accurate disclosures on material information. listed issuers are also required to have in place sound governance frameworks and practices. 20 listed issuers are central to market discipline. having tapped the public markets for capital, they have a duty to run their business honestly and competently, and to update investors on relevant information promptly. it is incumbent on them to strive for high standards of corporate 2 / 5 bis central bankers'speeches governance and to engage proactively with all stakeholders. 21 there are also market intermediaries and other professionals. these include : issue managers and sponsors who bring issuers to the market and are responsible for proper due diligence and in guiding issuers to furnish the relevant and appropriate disclosures. issue managers have a key gatekeeping role in our capital markets, as they are most familiar with the issuers. they can judge the quality and suitability of a prospective issuer for public markets. auditors have an important responsibility to perform checks on financial statements and provide assurance that these are reliable. lawyers and consultants provide advice to help issuers ensure that their business dealings and corporate actions comply with laws and rules. other | by cad, an individual behind a company rbi holding pte ltd was charged with multiple counts of forgery and cheating offences for his involvement in fraudulent investment schemes. in a separate case, an individual was charged with cheating offences for promoting schemes that promised investors a 97 % return on their investment. 37 i have mentioned the mas - cad joint investigation. the police has also set up a centralised anti - scam centre in cad to tackle all forms of scams so as to enable them to intervene quickly to disrupt scammers β operations. 38 finally, it is worth reiterating that one should not plunge into an investment just because it promises a high return. avoid buying a product on impulse or herd instinct or name - familiarity. construct a well - diversified investment portfolio that is aligned with your investment objective and risk tolerance. today β s seminar will certainly cover these investing principles in more detail. conclusion 39 let me conclude. all stakeholders in the capital marketplace have a role in good corporate governance and effective market discipline. 40 on mas β end, we will continue our financial education efforts as an integral part of our regulatory and supervisory work. these will encompass heightened surveillance, investigation and enforcement actions with other authorities. 41 it leaves me to reiterate that investors should always seek to understand the issuer and product before investing in them. remember to β ask. check. confirm β. there will be a short halfminute video on this at the end of my remarks. do also visit the pop - up exhibition booth outside the theatre to learn more about the resources available to help you. 42 thank you for your attention. 5 / 5 bis central bankers'speeches | 1 |
international investment position as a percentage of gdp has not worsened substantially in recent years. however it will be difficult for new zealand to substantially improve the investment income component of the current account deficit in the short to medium - term because the stock of foreign ownership is already so large. if the $ nz were to weaken in the medium - term in line with many economists β predictions, then we would expect to see a further pick - up in foreign investment attracted by cheaper new zealand assets. such a large debtor position, arising out of new zealand β s poor savings performance, makes the country more vulnerable to adverse shocks. we are inevitably more exposed to changes in global interest rates or sudden shifts in the investment preferences of overseas investors. at times, this can make it more challenging to maintain price stability and avoid unwanted swings in economic activity. this pattern of household investment also impacts economic performance. if new zealanders fail to identify and invest in higher yielding equity then we condemn ourselves and the country to lower returns, and economic growth will be lower. | last five years. this imposes a heavier mortgage - servicing burden, which has been justified by the big increases in house values. the typical household now commits about 13 percent of its disposable income to service debt. this makes these households much more vulnerable than they used to be to adverse events, such as increases in unemployment and rising interest rates. these debt servicing rates are significantly higher than in other oecd countries. despite this vulnerability, the increases in house values have stimulated a strong wealth effect. households feel richer ( and provided house values hold up, they are richer ), and have been spending with confidence. their confidence is such that they have been prepared to dissave at an unprecedented rate. the preoccupation with housing assets has been at the expense of other assets that one might normally expect to find in balanced household portfolios, namely financial assets, such as equities. this speech highlights the unusually small holdings of equities by new zealanders and some of its financial and economic implications. most of our housing stock is owner - occupied, and our behaviour here is not unusual by oecd standards. in this talk i focus on those households with sufficient resources to consider investments beyond their own occupied houses. many new zealand households are not sufficiently well off to consider much in the way of equity investment. for those that are, a financial advisor would look at a particular set of household circumstances and, depending on these, advise an appropriate balance of holdings split between : β’ land and buildings in both residential and commercial sectors. β’ cash and financial debt instruments that might vary by duration and risk. β’ equity holdings, both direct and portfolio ownership, in private and public firms. these holdings would differ largely depending on variations in income, wealth, household size, composition, and age. the situation is further complicated by the ability to hold assets directly or via managed funds ; by quite different tax treatments ; by decisions to invest in new zealand or overseas ; by commitments in directly held family firms, farms and forests ; and by decisions by the government to hold certain assets jointly on behalf of new zealanders. sources of equity in new zealand it appears that holdings of equity by new zealand households are particularly low by oecd standards, with direct holdings of both domestic and foreign equities making up no more than about 4 percent of total assets. a frequent reason cited is the severity of the october 1987 stock market collapse, an event that passed by 20 years ago. in the us | 1 |
similar, although interest rates have been β and still are β higher than in larger industrialised countries. this is quite at odds with what could be expected based on some of the discussion taking place in iceland. the fact is that long - term real rates in iceland are currently at their lowest for this entire period, apart from a short time in the midst of the economic crisis, when the real policy rate was held very low so as to stimulate the economy and presumably pulled longer - term rates downwards for a while. i have said that monetary policy had little to do with these developments. this does not change the fact that these developments have affected monetary policy, as they reflect in part the decline in short - term equilibrium real interest rates. monetary policy has therefore responded to this with lower nominal interest rates than would otherwise have been appropriate. nominal rates have fallen even further during this period, for three reasons. first of all, inflation and inflation expectations were brought to target levels in major industrialised countries in the last two decades of the 20th century ; therefore, it was not necessary to keep nominal and real rates as high as before. it could be said that the same development has taken place here in iceland in the recent term. second, global deflationary tendencies have been strong in recent years, following the inclusion of china and russia in the global trading system and due to technological advances and developments in international production and value chains. third, a pronounced economic slack in major industrialised countries after the financial crisis has led to much more accommodative monetary policy than would otherwise have prevailed in those countries. all of these factors combined have contributed to the current situation, where nominal central bank rates in leading industrialised economies are extremely low in historical terms. actually, many observers consider them dangerously low as regards their potential impact on financial stability and the efficacy of the financial system. what about iceland in this context? the central bank β s key rate is the interest rate that determines short - term market rates at any given time. in the recent past, this has been the rate on seven - day term deposits, which is now 5. 25 %, as chart 2 indicates. it is far below the average for the period since the adoption of the inflation target in late march 2001, in spite of the significant tension in the economy. this is a reflection of the progress made in the recent term in bringing inflation expectations to target. the bank β s key rate has been slightly lower on two occasions since the adoption of the | appreciation of the krona have yet to be transmitted in full. nonetheless, further tightening may be necessary over the next few months. comparisons with previous forecasts and various indicators suggest that since december the central bank β s policy rate hikes have by and large delivered a tighter stance. the central bank β s monetary policy is very much debated in society at large at the moment, which is natural given the great interests at stake. obviously i have closely followed discussions of monetary policy for a fairly long time and must admit that the debate in recent times has been more mature and bears witness to a deeper understanding of economic principles than before. it is normal for opinions to be divided over the central bank β s measures during tight stances such as the present. the central bank welcomes public debate and is ready to take part in it. i would like to use this opportunity to address a few points that have been raised in this debate recently. sometimes it is alleged that monetary policy is impotent in a climate of heavy capital inflows. claims are also heard that the central bank β s monetary policy measures only exert an influence through the exchange rate and have no effect on long - term interest rates, and absolutely not on indexed interest rates. certainly, a tight monetary stance does put significant upward pressure on the exchange rate, contributing to lower inflation in the short run. central bank policy rate hikes also have a very swift effect on the money markets, and interest rates on other instruments with maturities of a few months or years are soon influenced too. central bank policy rate decisions also have an impact on long - term interest rates, both indexed and nonindexed. all research in iceland and everywhere else confirms this, but because the effect is transmitted with a long lag, monetary policy must be forward - looking. interest rate decisions made today are not transmitted in full to long - term interest rates until one or two years hence. thus the debate often focuses on the short - term effects of monetary policy, but people need to be patient and bear in mind the impact which does not emerge until well into the future. the central bank does not have the slightest doubt that interest rate changes in iceland ultimately have the same effect as those in other countries, in other words that general economic principles apply just as much in iceland as anywhere else. when monetary tightening is beginning to have an effect and specific sectors of the economy bear the brunt, it is normal to ask whether there are no softer alternatives, which | 0.5 |
. 9 28. 2 71. 5 2005 - 06 40. 4 31. 1 60. 9 2006 - 07 ( p ) 40. 0 26. 4 61. 0 * at end - march. note : data exclude devolvement but include mss and non - competitive bids. one of the key issues in the development of the market for a better price discovery is liquidity of securities. it was observed that, of the universe of a large number of outstanding securities, only a few securities are actively traded in the secondary market. the reserve bank has been following a policy of passive consolidation through re - issuance of existing securities with a view to enhancing liquidity in the secondary segment of the government securities market. the share of re - issuances in the total securities issued was 97. 7 per cent during 2005 - 06. active consolidation of government securities has also been attempted under the debt buyback scheme introduced in july 2003, which is expected to be more actively pursued now. as a result of the developmental measures undertaken, the volume of transactions has increased manifold over the past decade ( chart 6 ). the significant drop in turnover in 2004 - 05 and 2005 - 06 could be due to a β buy and hold β tendency of the participants other than commercial banks, particularly insurance companies, which now hold a substantial portion of government securities, particularly those of longer maturities. the decline could also be attributed to the asymmetric response of investors to the interest rate cycle. in the absence of a facility of short selling in government securities, participants generally refrained from taking positions which resulted in volumes drying up in a falling market ( chart 7 ). to keep the markets liquid and active even during the bearish times, and more importantly, to give the participants a tool to better manage their interest rate risk, intra - day short selling in government securities was permitted among eligible participants, viz., scheduled commercial banks ( scbs ) and primary dealers ( pds ) in february 2006. subsequently, the short positions were permitted to be carried beyond intra - day for a period of five trading days, effective january 31, 2007. to further improve the liquidity in the government securities market, guidelines for trading in when issued β wi β market were issued by the reserve bank in may, 2006. trading in β wi β segment, which commenced in august 2006, was initially permitted in reissued securities. it takes place from the date of announcement of auction till one day prior to allotment of auction | of macroeconomic variables for supporting monetary policy making. the department is also providing statistical support to other functions of the bank. in the wake of the recent financial crisis, there is renewed focus on availability of information and statistical gaps globally. the department is actively engaged with other international bodies such as the imf, g20, bis and fsb in strengthening our financial statistics and adopting international best practice. notwithstanding various achievements, there are challenges. i take this opportunity to focus on three of those : β’ how to make the best use of granular data from banks? β’ how to enhance the scope and coverage of corporate finance statistics? β’ how to further develop asset price statistics? first, the requirement of disaggregated granular banking data on a more frequent basis for policy and research has increased. for example, we have been compiling account level data on deposit, credit and interest rates on an annual basis through basic statistical returns ( bsrs ). these data are an important source for understanding monetary transmission. hence, there is a need to obtain these data on a higher frequency, at least on a quarterly bis central bankers β speeches basis, electronically from the banks β source systems. moreover, data on similar items obtained through various statistical returns show significant differences. hence, there is need to harmonise data definition across various returns submitted to different departments of the bank. this will require a close coordination between statisticians and regulatory departments to identify, harmonise and mitigate data gaps. on the part of the banks, implementation of core banking solution has created the potential for banks to provide granular data electronically, both for statistical and supervisory purposes, directly from their source systems. it is important for reporting entities to adopt straight through processing without manual intervention so as to maintain data integrity. this will also help rationalisation of various returns thereby reducing the reporting burden on banks. of course, as granularity increases data size becomes large. i am happy to note that today we have two special talks on big data which will have practical relevance for our data analysis. second, the reserve bank is compiling data on corporate finance such as production, sales and profitability. these data are also used to generate corporate saving and investment at the national level. from a financial stability perspective, the corporate balance sheet data are important for assessing risk parameters such as leverage and unhedged foreign currency borrowings. corporate performance data is also important to understand the micro foundation of pricing power and hence inflation dynamics. there is, therefore, a | 0.5 |
to the banking system. we produce regular analyses and reports on such matters in our six - monthly stability reports. as far as the work with price stability is concerned, we must take into account the effect that house prices have on household saving and consumption decisions through their impact on wealth and thus the level of demand in the economy as a whole. for households with debts, the scope for consumption is also affected by interest rate adjustments if the share of income used for interest payment changes. accordingly, we take this into consideration when we make our inflation assessment. there has been a swift increase in household debt and house prices over a long period. one potential cause of concern, which we cannot disregard, is that if this trend continues at the same rapid rate, a situation could develop where, at a later date, there is a risk of a considerable slowdown in growth and employment as a result of households finding themselves compelled to increase savings owing to a heavy debt burden. the risks involved here are very difficult to quantify in forecasts or pinpoint in time, but could none the less be a threat to macroeconomic stability. inflation could then also revert to a state that might prove difficult to deal with. however, it should be underlined that the likelihood of such a scenario arising is regarded as slight, in particular when we have identified it in good time. we have taken these factors into consideration even if they have not been crucial for our monetary policy decisions. the riksbank does not have a target for the krona exchange rate. however, since the exchange rate is one of many factors affecting growth and inflation, we must naturally take the path of the krona into consideration in the inflation assessment. the exchange rate affects inflation directly and generally relatively quickly through prices of imported goods and services. the exchange rate also affects inflationary pressure indirectly and usually with a long time lag, by its impact on the level of activity. a weaker krona entails, everything else being equal, greater demand for swedish goods and services, which in turn leads to an increase in resource utilisation. the exchange rate can also affect inflation expectations indirectly. i would now like to move on to inflation prospects and monetary policy. in the december inflation report, we made the assessment that international growth would be good this year and in the next few years but would slow down somewhat. new information prior to our january meeting suggested that development would be stronger than expected. this applied primarily to the euro area and asia while the latest | irma rosenberg : the objective of monetary policy speech by ms irma rosenberg, deputy governor of the sveriges riksbank, at a meeting arranged by a β hman fondkommission, stockholm, 14 february 2006. * * * a discussion has recently taken place in the media on the objective of monetary policy. some have argued that we should have more objectives while others considered that we already work with too many objectives and that this has created a lack of clarity. in my opinion this discussion is a bit misleading. we have one objective : keeping inflation low and stable. however, in our efforts to achieve this objective, we have, like many other central banks, opted to be flexible to avoid exposing the economy to strain. our statutory objective is to maintain price stability. it has been left to the riksbank to decide on the detailed interpretation of this objective. we have defined it as meaning that inflation should be 2 per cent. however, monetary policy affects the economy with a time lag and is simply not precise enough to maintain inflation at a constant 2 per cent. the inflation target includes a tolerance interval of + / one percentage point to underline that temporary deviations are permitted, provided that these are not too large. for further clarity, we apply the principle that in the event of any deviation, inflation should normally be brought back to the target within a two - year period. when we set the interest rate, we must accordingly base our decision on an inflation forecast. in most cases, this two - year horizon provides us with the scope to return gradually to the target without having to apply monetary policy with such force as to create unnecessary fluctuations in the real economy. occasionally in the wake of a major disturbance, there may even be grounds to allow a period of more than two years to return to the target. in such cases, however, we should communicate this clearly. like most central banks with inflation targets, we apply what is usually referred to as a flexible inflation target policy. when we decided at the most recent monetary policy meeting to increase the repo rate, we once again had to take into account the continuing rapid increase in house prices and household debt. this was not because we have a target for household debt or house prices. however, it is important for us to monitor the trend in the housing market, bearing in mind both financial stability and price stability. as far as financial stability is concerned, there are no indications that house prices or household debt constitute a threat | 1 |
turnaround in inflation. the consumer price index is forecast to fall by around 4 per cent this year and to be broadly flat next year ( the hicp index, which does not include mortgage interest payments, is projected to fall by close to 1Β½ per cent this year with a further modest fall in 2010 ). while major initiatives have been taken to stabilise the financial sector, and i will comment on these shortly, we also need to restore stability in other areas and chart a path that will in time ensure a sustainable recovery in economic growth. in particular, the importance of reversing the deterioration in cost competitiveness and in fiscal imbalances cannot be overstated. with regard to competitiveness in recent years, economy - wide productivity gains have been very modest and labour cost increases have been relatively high compared with our main trading partners. this has led to a substantial erosion of the country β s competitiveness. this deterioration is now being addressed and many firms have taken action to reduce their costs, with a view to regaining competitiveness and protecting output and employment. while this has undoubtedly been painful, it nevertheless reflects encouraging evidence of the flexibility and realism that is needed if the economy is to maintain the maximum possible number of jobs in the short term while placing ireland in a favourable position to benefit from an eventual recovery in world demand. this type of flexibility must embrace all sectors of the economy. on the fiscal side, the deterioration in the public finances is a cause for serious concern. the government has agreed with the european commission to correct our excessive deficit position by 2013 and it is crucial that these targets are met. the government β s introduction of a public sector pension levy and the supplementary budget are steps that have been taken to this end. bringing the public finances back into balance is necessary to restore macroeconomic stability and to ensure international confidence in the economy on which, as a small open economy, we are so dependent. as the bulk of the fiscal problem is of a structural or underlying nature, a cyclical recovery in economic growth cannot be relied on to restore order to the public finances. experience, both here and overseas, suggests that the best way to restore fiscal balance is to place more emphasis on reducing expenditure rather than increasing taxation. therefore, while some broadening of the tax base is necessary, it is desirable that the primary focus of fiscalconsolidation measures should be on reductions in public spending. the commission on taxation and the special group on public service numbers and expenditure programmes will help identify | deal or a disorderly outcome. 1 / 6 bis central bankers'speeches just a couple of weeks ago, the central bank published our revamped financial stability review3. even if you don β t get through the whole report, i recommend the first couple of pages at least. they highlight what we see as the key risks currently facing the irish economy and financial system. it also addresses how we can build resilience to these risks. a disorderly brexit is one of the main risks on the horizon. as the possibility of a no deal scenario looms ever larger, the uncertainty around the final outcome is already weighing on business and consumer sentiment. within the central bank, we have been working on brexit since before the referendum4. the work has focused on a few main areas : first β understanding the possible effects of brexit, in terms of the risks to the irish economy, to the financial system, and to consumers. since the referendum in june 2016, the main impact thus far has been through the depreciation of sterling against the euro. however, the significant trade and investment links with the uk mean that the irish economy is more exposed to the risks from the uk β s departure than any others, apart from the uk. second ensuring that existing irish financial services firms understand and are planning for the impact that brexit will have on their businesses, so that firms can continue to serve customers after the uk departs the eu. the third important area has been wider contingency planning for the system and taking actions to mitigate the most important and immediate threats to the financial system. ensuring there is no loss of market access for the payment and settlement of equities and exchange traded funds ( etfs ) for example. finally, we have been dealing with the authorisation of firms. of which there were well over 100 applications for either new licenses or extensions to existing ones. these applications vary from large banks to small investment firms or payment institutions. overall, in terms of our wide work on brexit, we have tried to be as transparent as possible. for example, we have published our quarterly reports prepared for the commission of the central bank ( our board ), albeit in redacted format on our website5. a no - deal brexit would likely bring considerable volatility to financial markets, with heightened stress and a potentially large depreciation of sterling6. following the financial crisis, we have been building resilience in | 0.5 |
, given the increasing interdependence among jurisdictions within the region and therefore the greater need for regional co - operation. the adb has the right institutional framework for promoting such co - operation, and i am glad to see that under the leadership of the president there has been increasing involvement of the adb in regional financial cooperation recently. i welcome the intention for adb to launch a review of its long - term strategic framework and the fact that this has been preceded by the work of the eminent persons group convened by the president last year. i am also happy to see emphasis being given in the report of the eminent persons group to financial sector development and financial integration in the region, among other operational priorities. i certainly hope that this emphasis in the report will be reflected, through the review process, in the long - term strategic framework. i feel also that such a strategic review should cover the governance structure of the adb as well, in order better to reflect the new economic realities and the asian heritage of the adb. hong kong looks forward to contributing appropriately to this review process and seeing a new long term strategy developed for adb that would reflect the consensus of its members and stakeholders. thank you. | joseph yam : changes in asia β a brief look at the dynamics within the region statement by mr joseph yam, chief executive of the hong kong monetary authority, and alternate governor for hong kong, china in the asian development bank, at the 40th asian development bank annual meeting, kyoto, 6 may 2007. * * * i would like to thank the government of japan and the people of kyoto for their hospitality in hosting this year β s annual meeting of the asian development bank ( adb ). i would also like to congratulate mr kuroda on his re - election as the president of the adb. this year marks the 40th anniversary of the adb. over the past four decades, asia has achieved remarkable development, particularly in terms of economic growth and the reduction of poverty, and clearly the adb has contributed significantly to this achievement and has established itself as a regional financial institution of strategic importance. asia has undergone remarkable changes too over the past four decades and in many ways, in particular in terms of the economic dynamics within the region, and between the region and the rest of the world. changes have been particularly marked in the past decade or so, under the influence of globalisation and the revolution of information technology. there has, for example, been rapidly increasing trade integration, encouraged obviously by the high degree of freedom in international trade, and consequently increasing economic interdependence within the region. changes always present new challenges and opportunities. and for the new challenges to be met and the new opportunities to be exploited, there is often the need for new approaches and new initiatives, at both the national and international levels. there is a view, for example, that trade integration in the region has not been adequately served by financial integration, given restrictive controls on capital mobility still being practised in selected jurisdictions. as a result there is some doubt as to whether the long term development potential of the region has been maximised and whether the rapid economic growth the region is experiencing is sustainable. there is further concern from the point of view of the maintenance of monetary and financial stability. new approaches and new initiatives are indeed necessary to promote greater financial integration in the region. i am sure there are many other areas concerning development of the region in which new approaches and new initiatives may be desirable. being a regional financial institution of strategic importance, it is obvious that the adb has a significant role to play. i would argue that this should be a role of increasing significance, or even a pivotal role | 1 |
t t mboweni : how exposed is the rand to the potential outflow of hot money? remarks by mr t t mboweni, governor of the south african reserve bank, at the economist β s fourth business roundtable with the government of south africa, johannesburg, 21 november 2005. * * * it is difficult to quantify the exact potential of β hot money β outflows. undoubtely there is some of it in south africa, similar to any other high - yielding emerging - market country with a liquid currency market. some rough indications of potential β hot money β are the following : β’ the high turnover in the foreign exchange swaps market, with mainly non - resident clients as counterparties. β’ some build - up in authorised dealers β net forward commitments against rand β’ non - residents have increased their holdings of domestic bonds and equities by some r45 billion in the current year to date. south africa β s current account deficit is financed by ( predominantly ) foreign portfolio investments which can be easily reversed, while foreign direct investment is generally regarded as being more stable. however, two observations can be made in this regard : β’ the imf in march 2005 published a study entitled β the composition of capital flows : is south africa different? β this paper argued that zar stability and some changes to government policies could contribute to greater fdi. the paper noted, however, the sa attracted three times more foreign portfolio investment than any emerging - market country, as a percentage of gdp. equity flows to south africa remained well above levels in other developing and emerging markets. the composition of capital flows to south africa appears to be quite the opposite of other emerging markets. importantly, it is noted that south africa has attracted portfolio inflows more consistently than other countries. β’ there are indications that fdi might increase ( absa / barclays, vodafone ) as we sustain healthy growth rates, the exchange rate becomes more stable and exchange controls are relaxed further and eventually abolished. the rand has become more stable : zar volatility has declined over recent months β historical volatility down from as high as 30 per cent in the middle of 2003 to below 10 per cent in october 2005 behaviour of importers and exporters has become more rational β balances in cfc accounts stay fairly constant, whereas during 2001 and 2002, there tended to be build - ups in balances as exporters anticipated the zar to depreciate. the average holding period | can be expected, have deteriorated moderately, but on the whole still point to cpix remaining within target over the next three years. the bank needs to guard against inflation expectations worsening further and becoming entrenched. economic growth should remain robust, despite the fact that oil prices will most likely have a dampening effect on growth. the manufacturing sector appears to have weathered a relatively strong rand quite well, while global economic conditions are such that export growth should be maintained at a healthy pace. both consumer and business confidence should remain high, with the factors supporting consumer confidence in 2005 still effective in 2006 β healthy disposable income, structural changes in the economy, and still low nominal interest rates. money supply and credit extension should witness a mild moderation, alongside growth in the housing market. we have noted signs of cooling off already. expectations of interest rate increases are likely to dampen credit demand ( mortgage financing ) somewhat. however, certain country - specific factors are likely to support still high and positive rates of growth, namely, the participation of nonresident buyers in the local market, the emergence of a new middle class, strong consumer demand, and a general catching up in the local housing market with international developments. international developments point to a moderation but still healthy economic growth rates, and while the inflation outlook internationally has deteriorated, the overall picture remains benign. this should support both economic growth locally and limit inflationary pressures in the local economy. the balance of payments may witness a mild deterioration, however, capital inflows, both portfolio and foreign direct investment, should be sufficient to finance this. fiscal policy remains supportive of a non - inflationary expansion in economic growth. the bank will continue to build its foreign exchange reserves, and purchase foreign currency at opportune times in a manner that does not destabilise the financial markets. | 1 |
financial services agency ( jfsa ) and paying attention to overseas developments on the libor transition. thank you very much for your attention. libor transition in the final stage : there will be no deus ex machina speech at the nikkei financial online seminar held by nikkei june 8, 2021 amamiya masayoshi deputy governor of the bank of japan chart 1 initiatives for the libor transition in japan 1st stage ( 2012 - ) both yen libor and tibor ( calculated based on interbank rates in the tokyo market ) became subject to the enhancement of robustness as benchmarks the uncollateralized overnight call rate was identified as the yen risk - free rate in japan 2nd stage ( july 2017 - ) the cross - industry committee on japanese yen interest rate benchmarks ( the committee ) was established. it promoted considerations on the choice and usage of alternative interest rate benchmarks replacing yen libor final stage ( march 2021 - ) with more progress made in the considerations, tools necessary for the transition are ready - > now the focus is on the actual transition activities by individual market participants chart 2 three options for alternative interest rate benchmarks tibor based on interbank rates submitted by 15 financial institutions in japan, including major banks o / n rfr compounding ( fixing in arrears ) based on the uncollateralized overnight call rate used in actual transactions the most robust benchmark, but it may be less compatible with the existing administrations and systems because the interest amount is only finalized just before the next payment torf οΌ tokyo term risk free rate οΌ the term risk - free rate in japan based on the ois rate, a fixed interest rate exchanged in the interest rate swaps ( irs ) to a floating rate calculated using the uncollateralized overnight call rate compounded in arrears it may be more compatible with the existing operations and systems but how to establish its robustness is a critical issue chart 3 toward the acceleration of the libor transition milestone the issuance of new transactions for loans and bonds referencing yen libor needs to be ceased by the end of june 2021 tools for the success the committee indicated in the results of its first public consultation that the term riskfree rate received the most support as an alternative benchmark the publication of a production rate for torf started on april 26, 2021 ( about two months ahead of its initial schedule ) chart 4 toward the acceleration of the libor transition milestone the amount outstanding of legacy contracts for loans and bonds referencing | improvement of transparency in the calculation process, and the sufficiency of market liquidity of the underlying ois market. as i have just laid out, there are multiple options for alternative interest rate benchmarks to yen libor. under these circumstances, market participants need to consider the optimal selection of the benchmark options according to the financial products they have, the nature of transactions they face, and their own individual business needs, and then to begin new transactions or make changes to their legacy contracts with the chosen alternative benchmark. to support initiatives by each of market participants, the committee has provided the results of various discussions and deliberations and some recommendations concerning the libor transition. among those provided by the committee is " roadmap to prepare for the discontinuation of japanese yen libor " ( hereafter the " roadmap " ), which indicates milestones that market participants should take into account in the making of their own roadmap for transition. 3 cross - industry committee on japanese yen interest rate benchmarks ( 2021 ), " roadmap to prepare for the discontinuation of japanese yen libor. " in the next section, i would like to explain three points that market participants should note, mainly by addressing major milestones in the roadmap. ii. toward the acceleration of the libor transition a. cessation of the issuance of new transactions referencing yen libor first, according to the roadmap, the issuance of new transactions for loans and bonds referencing yen libor needs to be ceased by the end of this june ( chart 3 ). the roadmap is based on the consensus of major market players in a wide range of businesses, which was reached through a series of their deliberations with related international discussions taken into account. given the existence of the consensus, it is important that market participants complete their preparations for conducting new transactions referencing alternative interest rate benchmarks within the remaining time of less than one month. tools necessary for ceasing the issuance of new transactions by the end of this june are already available. in july 2019, the committee carried out its first public consultation on the choice of alternative interest rate benchmarks to yen libor, including the ones for new loans and bonds, in order to solicit comments from a wide range of market participants. the results of the first public consultation were then published in november the same year. they showed that a term risk - free rate received the most | 1 |
, these vulnerabilities appear to have combined in unforeseen ways to trigger a very severe episode of deleveraging and reintermediation. while the intensity of the problems across various markets has ebbed and flowed since august, it is clear that this process is still very much ongoing and is likely to persist, at least into the early part of 2008. recent developments in financial markets, such as the temporary closure of the covered bond market, point to a further tightening in liquidity and reinforce the view that there is still some way to go before we see a return to more normal market conditions. uncertainty is likely to remain high and confidence will only return to markets when the impact on larger institutions and, indeed, their responses, becomes clearer. until we reach that point markets may continue to remain fragile and vulnerable to bad news. money market problems and central bank responses i would like to turn now and talk about how central banks have reacted to these developments and what impact this has had. within their sphere of influence, central banks, in general, responded in an unprecedented manner to counteract disorderly conditions in money markets. in particular, the ecb, along with other major central banks moved quickly to meet the increased liquidity needs of the banking system and liquidity management policies since august have been very much focused on, first, restoring, and, then, maintaining calm in money markets. the ecb has been particularly active since the outbreak of turbulence and has used the full range of operational instruments at its disposal. it has added extra liquidity through special overnight and longer - term refinancing operations, as well as through more sizeable injections of liquidity in its main refinancing operations. there have also been changes to the pattern of liquidity provision within the eurosystem, with significant front - loading of liquidity needs to accommodate the demand of counterparties to fulfil reserve requirements early in the maintenance period, and changes to the maturity composition, with much larger weight for 3month refinancing operations relative to 1 - week refinancing operations. i would emphasise that these operations were all conducted within the existing operational framework. in participating in eurosystem liquidity operations, market participants have been able to use a very wide range of collateral to access funding. earlier changes to the collateral framework in particular, have helped in supplying the liquidity needs of the euro markets in a timely fashion. this has added significantly to the flexibility of | about how recent events in financial markets may impact on economic developments. the first point to make is that much depends on how market developments and financial conditions evolve from here and for how long the market turbulence continues. for this reason, it is difficult, at this point, to assess the extent to which activity may ultimately be affected. however, recent developments have not been favourable and increase the risk of a more significant spillover from financial markets to broader economic activity. looking first at channels of transmission, tighter financial conditions could reduce economic activity in a number of ways : for example, through increased credit spreads and higher term funding rates ; through a fall in financial wealth or net worth as a result of the turbulence and, perhaps most importantly, through problems in credit and funding markets impacting on the overall supply of credit. the recent euro area bank lending survey offers some early evidence on the response of euro area banks to the initial turbulence in credit markets. the results show a net tightening of lending standards which is greatest with respect to loans to enterprises, particularly for the financing of mergers and acquisitions and corporate restructuring. we have also seen signs in euro area retail interest rates of some rise in rates charged for personal consumer loans and also for lending to non - financial corporations. on the positive side, the resilience of the euro area economy is helped by the fact that it was growing strongly before the recent outbreak of market turbulence. underlying economic fundamentals remain favourable, with strong employment growth boosting household incomes and corporate balance sheets quite healthy. notwithstanding these supports, however, any marked slowdown in us growth would remove some impetus to activity. while us third quarter growth surprised on the upside, the indications for the quarter are not that favourable. the us housing market, which has been at the root of current problems, continues to deteriorate. this has further heightened concerns about the risk of spillovers to us consumer spending, which has been the main engine of growth in the us economy in recent years. there are some signs that this is now beginning to happen and, if this continues, it is difficult to see how overall economic activity in the us will remain unaffected. in the event of a more significant slowdown in the us, the extent to which global economic activity stays decoupled from us developments remains to be seen. the likelihood must be that it could not remain immune from such developments. more generally, as is the case for the rest of the global economy, the broad repricing of risk and tightening of | 1 |
which clearly facilitated the cross - and off - border expansion of the icelandic banks through the so - called european passport. it was and is deeply flawed. the basic problem is that the freedoms are not matched by public action and frameworks at the eu and eea level. bank size relative to country size was assumed to be a matter of no concern, and fx risk was largely ignored. based on the icelandic experience, a banking union makes perfect sense, but only fully for the eurozone, and even then it has to include all three elements β common supervision, resolution, and deposit insurance β in order to break the deadly embrace of banks and sovereigns. in the interim, i think small countries, especially those with their own currencies, will have to impose their own prudential measures in order to defend themselves against the risks they face. the third lesson relates to the structure of the financial sector in small, open economies in the absence of robust and credible international or regional safety nets. to my mind, international financial centres cannot be located in such countries without some ex ante mechanism that at least partly insulates the domestic economy from the risks involved. in some sense, this is what iceland did in the nick of time in early october 2008. furthermore, in very small, open economies with their own currency, like iceland, the international activities of domestic banks and fx risks on their balance sheets must be limited and regulated. in this context, we have been thinking about the prudential regime that must be in place in iceland when we have lifted capital controls and icelandic banks are again free to use their european passporting rights. we will have more stringent restrictions on permissible currency mismatches than in the past, also taking into account positions of unhedged households and companies, but more importantly, we will, through some combination of lcr - and nsfr - type ratios in foreign exchange, put strict limits on fx maturity mismatches. the combination of these and other measures will make it impossible for the banking system to attain the size and cross - border reach it had before the crisis. the big question is whether it will be deemed compatible with the eea agreement. bis central bankers β speeches more generally, i think the distinction between macroprudential measures and capital controls can be more complex than many make it out to be. the fourth lesson is on capital flows : deal with the inflows if you want to avoid the risk of having to introduce comprehensive capital controls | stephen s poloz : release of the financial system review opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the financial system review, ottawa, ontario, 9 june 2016. * * * good morning. senior deputy governor wilkins and i are pleased to be with you today to talk about the june issue of the bank β s financial system review ( fsr ), which we published this morning. the fsr identifies financial system vulnerabilities and monitors how they evolve. it then looks at how those vulnerabilities could become risks to the financial system as a whole. turning vulnerabilities into risks requires a trigger β an event that interacts with the vulnerability and has a magnified effect on the financial system and the economy. so, we measure financial stability risk as a combination of the scale of the underlying vulnerability, the probability that a risk will be triggered and the estimated magnitude of the fallout if it is. since our last fsr in december, the global macroeconomic environment first deteriorated but then improved. the us economic recovery gained traction, and accommodative monetary policies helped stabilize global financial conditions. here in canada, the economy continues to work its way through the implications of low oil prices, even though prices have recovered some lost ground. the export recovery remains uneven, and has yet to translate into stronger investment spending. nevertheless, we remain confident that those forces are in motion in light of continued us expansion, past monetary policy actions and announced fiscal plans. more recently, the devastating wildfires in alberta pose a significant downside risk for near - term economic growth, but estimated insurance claims, while large, do not suggest a threat to financial stability. today β s fsr focuses on the same three vulnerabilities as our december report : β’ the elevated level of canadian household indebtedness, β’ imbalances in the canadian housing market and β’ fragile fixed - income market liquidity. we assessed these vulnerabilities in the context of four risk scenarios, namely : β’ a large increase in canadian unemployment brought about by a severe recession ; β’ a sharp jump in long - term interest rates driven by higher risk premiums, globally and in canada ; β’ a sudden rise in stress from china or another major emerging economy ; and β’ a prolonged period of very low commodity prices. the first two vulnerabilities, household indebtedness and imbalances in the housing market, have | 0 |
is of course no guarantee that if we work really hard we will definitely achieve great success, but at least we will have a chance. if we don β t even give it a try, there is no hope. it does not matter which way you may wish to go as long as you are fully aware that you do have a choice. that choice, which will shape your careers and your whole life, is yours and yours alone. thank you. | for european and north american companies. these firms must therefore take up many challenges in order to safeguard their competitive edge, both on their domestic markets and their foreign outlets. at the same time, the emerging countries are large in size and exhibit strong economic growth, too. therefore, they also offer many opportunities for firms that are able to seize them. all these developments linked to the increasing globalisation of the economy obviously raise a good many questions. these include the determinants of trade flows, strategies enabling companies to gain a foothold in external markets, or the employment consequences of importing goods from low - cost countries. these issues have been extensively discussed in both the theoretical and empirical economic literature. since the mid - nineties, a growing segment of this literature has been paying particular attention to the microeconomic determinants of international trade and foreign investment. researchers have made intensive use of firm - level databases specific to different countries that have gradually become available for them. this microeconomic approach has brought an important contribution to our understanding of the causes and consequences of the globalisation, mainly because firm - level data make it possible to point up things that do not show up in aggregate statistics. if only one example had to be given, it would of course be the fact that trade is concentrated among a few firms, which are in a better position than the others to bear the high costs associated with entering foreign markets. indeed, within each industry, firms of different sizes, with different performances, and with different behaviour in terms of innovation and international involvement, operate alongside each other. it is important to take this heterogeneity into consideration to understand the dynamics of foreign trade. this heterogeneity also has very important implications for economic policy, in the sense that it helps to identify two levers that are likely to be activated as a means of boosting firms β international involvement. the first consists of encouraging their expansion β and especially that of smes β so as to give them the best preparation to go international, including policies designed to foster their research and development efforts. the second lever concerns measures aimed at cutting the costs of entering foreign markets, for instance by helping firms to find potential new customers there or by removing administrative and regulatory barriers. another undeniable advantage of the microeconomic approach is that it helps bring out the scale of reallocation of production factors from the weakest - performing firms towards those whose business is more flourishing. among other things, this enables economists to gain a | 0 |
give us all some information. this is not something that can be seen every day. memo from department head to floor manager : the ceo will today deliver a short speech to make the sun disappear for two minutes in the form of an eclipse. this is something that cannot be seen every day, so staff will meet in the car park at ten or eleven. this will be safe, if you pay a moderate cost. memo from floor manager to supervisor : ten or eleven staff are to go to the car park, where the ceo will eclipse the sun for two minutes. this doesn't happen every day. it will be safe, and as usual it will cost you. memo from supervisor to staff : some staff will go to the car park today to see the ceo disappear. it is a pity this doesn't happen everyday. | with, a holistic long term approach. such an approach should have four key components. the first, and probably most important in the early stages of agricultural development, is to provide agricultural extension services which can reach the majority of smallholders throughout the countryside and provide advice on the adoption of good agricultural practises and the optimal crops to be grown, given the characteristics of their farms, as well as postharvest handling and storage. agricultural extension services must be supported by good agricultural research. both agricultural extension and agricultural research have the characteristics of public goods, because the dissemination of agricultural knowledge from one farmer to another means that social benefits exceed private benefits. hence, they should be subsidised through the government budget. the second component of a holistic agricultural strategy should be to strengthen land rights. as in many african countries, land tenure systems in uganda are often complex and the ownership or usufruct rights of farmers are often unclear and insecure. this deters farmers bis central bankers β speeches from making long term investments in land improvements and it is also an impediment to access to formal sector credit, because land with unclear ownership is not suitable for loan collateral. the third component is better rural infrastructure, especially rural feeder roads. the commercialisation of farming is impeded by the high costs of transporting farm inputs and outputs, from farm gate to and from the market, because of poor roads. high transport costs drive down farm gate prices of farm output and drive up input prices, which undermine the commercial viability of farming. more public investment in the construction and proper maintenance of rural feeder roads is essential to support the modernisation of smallholder agriculture. the fourth component is improved access to finance. as i noted earlier, this may not be the binding constraint for many smallholders, especially subsistence farmers. access to finance will only benefit those farmers who have the knowledge and capacity to use purchased farm inputs to raise their productivity in a manner which generates profits and which does not expose them to a potentially ruinous level of risk. this probably currently applies to only a minority of smallholders in the country, although the number of smallholders who could benefit from finance should rise substantially if the other constraints to agricultural modernisation are effectively tackled. in formulating policies for the development of agricultural finance best suited to support the modernisation of smallholder farming it is necessary to address two important questions : what specific type of financial services do smallholder farmers need? and what types of financial institutions are most | 0.5 |
volatility in asset markets and providing continued support for positive economic activity. in deciding these policy measures, the bank brought forward the march monetary policy meeting ( mpm ). at an unscheduled mpm on may 22, the bank decided on such measures as the introduction of a new fund - provisioning measure to support financing mainly of small and medium - sized firms. deputy prime minister and finance minister aso and bank of japan governor kuroda then released a statement together, communicating to the public at home and abroad that the government and the bank " are committed to making every effort to facilitate corporate financing and maintain stability in financial markets... and doing whatever it takes to settle the situation, and will work together to bring the japanese economy back again on the post - pandemic solid growth track. " i believe that the clear stance of the government and the bank has helped build a sense of assurance regarding the outlook for japan's economy. b. reflections on policy effects the policy responses undertaken to date by the government and the bank have generally been effective. this is indicated by the fact that the rise in the number of unemployed and corporate bankruptcies has so far been limited, despite economic activity being rapidly and significantly depressed due to the impact of covid - 19. for example, the bank's estimate of the output gap in japan's economy for the april - june quarter this year was minus 4. 83 percent, the largest negative figure since the minus 5. 40 percent for the january - march quarter of 2009, immediately after the global financial crisis ( gfc ), and the minus 5. 53 percent for the quarter following that. this is because working hours and capital utilization rates declined sharply against the background of the spread of covid - 19 and preventive measures strongly constraining firms'and households'economic activities. even though the figures for the output gap show that the extent of deterioration in economic activity this time has generally been the same as at the time of the gfc, the degree of employment adjustments has remained relatively small so far. this seems attributable to the fact that increases in corporate bankruptcies, discontinuation of businesses, and unemployment have been constrained to some extent, due to the swift implementation of various policy responses, such as the expansion of employment adjustment subsidies and support for financing. iii. japan's economy in the covid - 19 era a. from waiting for the pandemic to end, to learning to | growth recorded a more than 10 percent decline on an annualized basis for two consecutive quarters in the october - december quarter of last year and the january - march quarter of this year. the reason why economic conditions deteriorated in japan more seriously than those in other countries was that the high - tech manufacturing industries including automobiles, electrical machinery, and general machinery, which benefited from the recent high growth of the global economy, had a high share in japan's economy. a fall in global demand especially for durable goods and capital goods owing to the rapid contraction of global economic activity directly hit those industries, resulting in a substantial decline in exports and production. since this spring, as the " acute pain " of the global economy has started to dissipate, there has been a reversal of the mechanism which i have just mentioned. that was illustrated by the april - june real gdp growth rate of 3. 7 percent, on an annualized basis, which was the highest growth in the g - 7 countries. with progress having already been made in inventory adjustments both at home and abroad, the recovery in exports and production has increasingly become obvious, centering on automobiles and electronic parts. in particular, against a backdrop of china's strong demand for electrical appliances, exports to east asia first rebounded early this spring. signs of improvement remain observed not only in the real economy, but also in corporate financing. the issuing rates of cp and corporate bonds, which surged from last autumn, have declined to the levels seen before the collapse of lehman brothers. while only a handful of firms with high ratings could issue corporate bonds up to the end of last year, the situation improved significantly such that the issuance was a record high this june. firms'financial positions have continued to improve particularly at large firms. while some yelps were once heard from firms'managers and treasurers on their financial positions, they seem to have materially regained their composure recently, albeit still not being able to dispel uncertainty about the future outlook. looking ahead, japan's exports are expected to continue to increase as the overseas economies start recovering. the resultant recovery in corporate profits and the effects of various policy measures will likely bring about a gradual recovery in business fixed investment and private consumption. therefore, the bank's baseline scenario is that " japan's economy will start recovering from the latter half of fiscal 2009. " however, i will hasten to add that the bank judges that the pace of recovery is highly likely to be only moderate | 0.5 |
to determine domestic policies. i am sure for example that we would be keen to talk to each other about how to strengthen our monetary defensive mechanisms against attacks on our currencies, and how to enhance the pain tolerance level of our financial systems so that we can absorb financial shocks more effectively. there is also considerable interest in building more robust financial infrastructures on the one hand to facilitate effective financial intermediation and on the other hand to limit the contagion effect of financial crises domestically and on a regional basis. i believe that this is a sensible way forward, at least for the time being. at the emeap forum, monetary authorities have, as i mentioned earlier, examined the whole spectrum of central banking functions quite comprehensively and have identified issues where monetary co - operation would be beneficial. 46. before going into these issues, let me just make two points about the approach that should be adopted in asian monetary co - operation. first is that asian monetary co - operation must be considered within the context of global monetary co - operation. in other words, we should not, and i believe we are not trying to, build fortress asia. i do not believe that this is in the best interest of asia. it is essential that we work within the international monetary and institutional framework as much as possible. let us not forget that the international monetary order is still largely determined by the g - 3 currencies. asian economies cannot on their own, or without the help of others, determine the fate of the g - 3 currencies, even though we may have views about the future system. - 10 - 47. second is that, given the great diversity of the economies in the region, being at very different stages of financial development, asian monetary co - operation should proceed with flexibility and at a pace comfortable to those wishing to take part in it. it would be pragmatic to build monetary co - operation and establish links, perhaps first at the bilateral level, between those who are ready and willing, and are operating compatible systems : for example, bilateral repurchase agreements of us treasury securities to enhance each other β s liquidity of foreign reserves, or bilateral linkages of real time payment systems and clearing systems for securities to facilitate effective financial intermediation across the cooperating economies. these bilateral linkages would serve to set targets and standards for others in the region who are not quite ready. and when eventually the majority of the bilateral linkages have been established, we would then | and in a flexible way, starting with less ambitious goals and proceed at a pace and with arrangements comfortable to all. i believe the approach of building an asian monetary network capable of further linkages to form a global monetary network is the correct one. it is based on voluntary participation and accommodates each participant β s unique circumstances. we do not have the visionaries of europe that saw the need for a single currency, nor do we believe that a single global institution would be adequate in providing solutions to all asian monetary problems. in the asian pragmatic and patient way, and using the wise words of the late deng xiaoping, we cross the river by groping for the stones. i am confident that in the end, we will be able to build a robust and efficient asian monetary network that would contribute to monetary and financial stability, and economic prosperity in asia, and in turn contribute to global financial stability and prosperity. 61. i cannot end this lecture without paying tribute to the tremendous support and co - operation that the hong kong monetary authority has received since its formation only four and a half years ago. i want specifically to acknowledge the unstinting support of the people β s bank of - 13 - china and the bank of england. without their guidance the hong kong monetary authority would not have become a reality. the bank of japan, the bundesbank and the federal reserve bank of new york have also been generous in their support when we went around the international financial centres to explain the unique concept and practice of β one country, two systems β. all our fellow central banks and monetary authorities in emeap, seanza, and bis showed us great kindness and support during the sensitive transitional period to the resumption of sovereignty by china in 1997. indeed, the hong kong monetary authority is itself the fruit of monetary co - operation. 62. when asked what comes after 1997, we used to give the very simple reply : what comes after 1997 must be 1998. as you can see for yourself, with goodwill and co - operation, the prosperity of hong kong has been ensured, both before and after the resumption of sovereignty to china. you have my assurance, and the assurance of china, that hong kong will continue to play its role as an international financial centre. we will work hand in hand with all central bankers around the world to build a safer and more robust international monetary system. thank you. | 1 |
will follow the creation of the prudential regulation authority. the challenge facing monetary policy is obvious β the combination of high consumer price inflation and weak economic growth. both of these might seem surprising given the large amount of spare capacity in the economy. but the rise in world energy and other commodity prices, and the need to reduce both the external and budget deficits, are squeezing real living standards, pushing up on consumer price inflation and slowing domestic consumption. the big picture is that the uk economy is going through a major rebalancing of demand and output, from private and public consumption to net exports and business investment, which will take several years to complete. a necessary precondition for that rebalancing was a fall in the real exchange rate. markets anticipated that need. the nominal effective sterling exchange rate fell by around 25 % between the start of the crisis in 2007 and the beginning of 2009, since when it has been broadly stable. the monetary policy committee ( mpc ) decided to look through the first - round effects of this depreciation on the price level. we could have made a different judgement. we could have raised bank rate significantly so that inflation today would be closer to the target. but that would not have prevented the squeeze on living standards arising from higher oil and commodity prices and the measures necessary to reduce our twin deficits. and it would have meant a weaker recovery, or even further falls in bis central bankers β speeches output, despite our having experienced the worst downturn in output and spending since the great depression. to force nominal wages below their already depressed level would have meant much higher unemployment, a greater erosion of living standards, a marked degree of β undesirable volatility in output β ( contrary to our remit ), and a risk of inflation falling well below the target in the medium term. with the freedom granted from having our own currency, the mix of tight fiscal and loose monetary policy is necessary for a rebalancing of the economy. because of the measures taken to reduce the enormous fiscal deficit here at home, uk sovereign debt funding costs have actually fallen relative to those in germany since the start of last year. of course, there can always be differences of judgement about the overall stance of policy, but to change the broad policy mix would make little sense. of course, at some point, bank rate will need to rise to more normal levels in order to ensure that inflation returns to its 2 % target. there has been, | , and thereby tends to lower demand for u. s. goods and services. that being said, i would note that the value of the dollar does not appear to play much of a role in explaining the decline in u. s. exports over the past year. the current level of the trade - weighted dollar is about where it has been, on average, over the past few years. however, looking back several years, the 25 percent appreciation of the dollar that occurred in 2014 was an important contributing factor to the previous noticeable decline in u. s. exports that took place in 2015 and 2016. global financial markets also link the united states to the global economy, and developments abroad can spill over into domestic financial conditions, with material effects on domestic activity. this is particularly evident during episodes of global financial stress, in which β risk - off β shifts in sentiment can depress u. s. equity prices and widen domestic credit spreads even as flight - to - safety flows push down u. s. treasury - 5yields. these global financial spillovers to the u. s. economy were notably pronounced during the 1998 russian crisis, the euro - area debt crisis earlier this decade, and the china devaluation episode of 2015 β 16. recently, global financial spillovers have contributed to the significant decline in u. s. treasury yields that we have seen since the spring. since the market for debt is global, low β and, in many cases, negative β yields abroad encourage capital inflows that put downward pressure on u. s. yields. equity prices have also reacted to global developments and recently appear particularly sensitive to news about the outlook for u. s. international trade. global factors have likely also contributed to the estimated decline in the neutral rate of interest, or r *, that we have observed in the united states and many other countries. slow productivity growth and population aging have lowered potential growth rates in major foreign economies, decreasing demand for investment and increasing desired saving, both of which have contributed to lower equilibrium interest rates abroad, with spillovers to the rest of the world, including in the united states. 4 global developments influence not only u. s. economic activity and financial markets, but also u. s. inflation. global factors β through their influences on u. s. aggregate demand and supply that i just described β can alter u. s. inflation dynamics. foreign factors can also directly affect the prices paid by u. s. firms and consumers, particularly, but | 0 |
, but it may not be deep enough to prevent large price swings when demand for liquidity is significantly above the norm. this consideration would be most relevant in the markets that are amenable to high - frequency trading, and automated trading more generally, where assets are fairly standardized, such as equities and u. s. treasury securities, and less relevant in markets where securities are more idiosyncratic, such as corporate bonds. it is also possible that markets that more readily lend themselves to high - speed trading may be characterized by relatively greater concentration over time. achieving the speed necessary for high - frequency trading requires large technology investments that necessarily may support a relatively more limited number of market participants. greater concentration in turn might be associated with lower resilience at times of stress. the possible effect of hfts on the resilience of market liquidity is an important topic for future research. of course, other developments may be affecting liquidity in financial markets. for example, market participants have indicated that changes in participants β risk - management practices may be contributing to reduced market liquidity. in particular, the experience of the financial bis central bankers β speeches crisis may have led many participants to reevaluate the risk of their market - making activities and either reduce their exposure to that risk, become more selective, or charge more for it, thereby reducing liquidity. 4 it is also worth noting the increased role of asset managers on the buy side of the fixed income markets. during normal market conditions, the demand for liquidity from this group of bond holders is likely relatively small, since asset managers acting on behalf of retail investors generally buy bonds to hold them for some period. moreover, managers of openend funds hold liquidity buffers that enable them to respond smoothly to normal redemption demands. however, because the large increase in bond fund holdings is relatively recent, little is known about how these funds will react to periods of market stress or to abrupt changes in financial conditions and the adequacy of their liquidity buffers for such situations. because funds potentially allow daily redemptions even against illiquid assets, it is possible that redemptions could be magnified in stressed conditions as individuals try to redeem early, which in turn could lead to liquidations of relatively less liquid assets, thereby amplifying price volatility and reducing market liquidity. if in fact liquidity resilience has declined recently, it may be a transitional development that will be corrected going forward as | loan, and as the government as a whole lacked appropriate resolution authority or the ability to inject capital, the firm's failure was, unfortunately, unavoidable. the federal reserve and the treasury were compelled to focus instead on mitigating the fallout from the failure, for example, by taking measures to stabilize the triparty repurchase ( repo ) market. in contrast, in the case of the insurance company american international group ( aig ), the federal reserve judged that the company's financial and business assets were adequate to secure an $ 85 billion line of credit, enough to avert its imminent failure. because aig was counterparty to many of the world's largest financial firms, a significant borrower in the commercial paper market and other public debt markets, and a provider of insurance products to tens of millions of customers, its abrupt collapse likely would have intensified the crisis substantially further, at a time when the u. s. authorities had not yet obtained the necessary fiscal resources to deal with a massive systemic event. the failure of lehman brothers and the near - failure of aig were dramatic but hardly isolated events. many prominent firms struggled to survive as confidence plummeted. the investment bank merrill lynch, under pressure in the wake of lehman's failure, agreed to be acquired by bank of america ; the major thrift institution washington mutual was resolved by the federal deposit insurance corporation ( fdic ) in an assisted transaction ; and the large commercial bank wachovia, after experiencing severe liquidity outflows, agreed to be sold. the two largest remaining free - standing investment banks, morgan stanley and goldman sachs, were stabilized when the federal reserve approved, on an emergency basis, their applications to become bank holding companies. nor were the extraordinary pressures on financial firms during september and early october confined to the united states : for example, on september 18, the u. k. mortgage lender hbos, with assets of more than $ 1 trillion, was forced to merge with lloyds tsb. on september 29, the governments of belgium, luxembourg, and the netherlands effectively nationalized fortis, a banking and insurance firm that had assets of around $ 1 trillion. the same day, german authorities provided assistance to hypo real estate, a large commercial real estate lender, and the british government nationalized another mortgage lender, bradford and bingley. on the next day, september 30, the governments of belgium, france, and luxembourg injected capital | 0.5 |
domestic financial markets normally also leads to a substantial use of the currency by foreign investors. at the same time country - specific risk features such as political risks can reduce the international use of the currency. let me emphasise that the euro is backed by an environment of monetary stability with a medium - term orientation and which may be seen as providing sound conditions for the further enhancement of the international role of the euro. clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. this has been reflected, for example, in relatively active and liquid euro / dollar trading in the foreign exchange market since the launch of the new currency. the euro can also be expected to become an attractive currency for the investment of official reserves. moreover, available information concerning the private use of the euro as a currency of denomination for debt securities indicates a significant increase in the share of international debt markets in the first quarter of 1999. this supports the view that in the medium term financial markets see the euro as a stable currency. moreover, it is widely recognised that in the medium to long term exchange rates follow a path determined by fundamental factors such as price and economic developments. thus, internal price stability should serve as an anchor for the development of the euro β s external value in the medium term. indeed, a stability - oriented monetary policy protecting the purchasing power of the euro is the basis of a solid and stable currency over the medium term. as yet it is too early to predict how long it will take for the euro to be considered as a truly international currency similar to the us dollar. the eurosystem neither promotes nor hinders the development of the euro as an international currency. we consider that the international role of the euro should develop through the interaction of market forces. concluding remarks to conclude, the success enjoyed by the euro in its first half year can without doubt be attributed to a number of factors. above all, the member states were successful in their efforts to achieve a smooth changeover to the euro. the independence of the ecb and the clear mandate to maintain price stability are crucial to ensuring a high degree of credibility of the eurosystem β s monetary policy. without the confidence of international financial markets and the permanent support of banks and financial institutions in the euro area and beyond, the single currency in europe could not have become a reality. i am confident that we can expect also a continued | which itself has become more risk - sensitive. and let us not forget that, in some cases, the standardised approaches have become less costly in terms of capital. at global level, the capital requirements from standardised approaches have been reduced by about 2 % on average. mortgages and corporate lending make up the majority of these reductions. so, basel iii does keep risk sensitivity on board. it acknowledges, though, that there are limits to internal models. it provides safeguards to restore trust in risk - based capital requirements. does this mean that basel iii is the perfect standard β the philosopher β s stone of banking regulation? well, basel iii is a global standard, and across the world, financial sectors differ greatly. just think of real estate financing and how differently it is treated in europe compared with the united states. thus, a global standard cannot suit everyone perfectly. the key is to find an acceptable compromise ; the alternative would be to have no global standard, and that would definitely be worse. the output floor in particular is one such compromise. what impact will the final basel iii package have on banks β and on their business models and their capital? the rules are not neutral. the bottom - up safeguards in basel iii, including the input floors, will impact on risk weights in some business areas. certain retail credit card exposures are one example. the top - down output floor affects overall capital requirements, depending on the overall portfolio composition of a bank. for example, our analysis suggests that the difference between internal ratings - based and standardised risk weights tends to be relatively large in certain segments of real - estate markets where historical loss rates are exceptionally low. the output floor tends to be more binding for banks which are heavily engaged in these markets. overall, it is hard to predict how business models will evolve. this depends not only on regulation, but also on many other factors, including the future path of profitability in different business areas, the pricing power of banks and, eventually, how banks will adapt their business models. now what about additional capital requirements? what about the banks β claim that the burden might be too heavy for them? well, there are two things to bear in mind. first, there will be a long transition period. this is at the heart of the overall compromise which 2 / 3 bis central bankers'speeches paved the way for finalising basel iii. this transition period runs right through to 2027. it gives banks and legislators time to implement all the changes introduced | 0.5 |
kishori j udeshi : in quest of new cheese speech by ms kishori j udeshi, deputy governor of the reserve bank of india, at the indian banks β association seminar, mumbai, 26 april 2005. * * * iba deserves to be complimented for having organised this seminar on the subject of β in search of new cheese β towards newer profit avenues β. the subject holds considerable contemporary relevance coming as it does at a time of intense competition, thinning margins, rising yields, and dwindling trading profits. as we look back we can see that the declining interest rate scenario during the last three to four years coupled with prudent regulation, in alignment with international standards and effective supervision has strengthened the balance sheets of banks. it β s a different matter that had the asset quality been as it should have been, the profits could have been more gainfully utilised. what is of concern however, is whether the reduced npa levels reported are sustainable through stronger credit appraisal processes built up over the years or are they only a result of massive provisioning which will be difficult to sustain in a scenario of rising bond yields. only time will tell. before i talk of cheese let me begin by chalking out two issues on the expenditure side in the future scenario. this chalk may serve to highlight the quest for cheese. first and foremost, banks would need to invest heavily in technically qualified professionally skilled staff. for this you recognise to invest in arms i. e. attract, retain and motivate staff. turnover of such staff in banks is going to be as volatile as it is for the bpo firms and compensation structures would need heavy revamping. this should necessarily be accompanied by good hrm system which can measure performances. secondly, although technology deployment in banks has increased remarkably, this has not been leveraged to the maximum extent essential to achieve and maintain high service and efficiency standards. in effect, managing technology, is still a key challenge for indian banks. we have, therefore, had to settle for just the standardised approach under basle ii. we need to move to advanced approaches under basle ii in order to achieve greater efficiency of capital and be competitive in india as also globally. for this, banks not all but certainly the large and significant banks need to invest heavily in advanced technology which is another item of expenditure that cannot be avoided in the near future. given this backdrop, can banks make profits by the same old 3 - 6 - | 3 rule? i. e. pay 3 % interest on deposits charge 6 % interest on loans and head for the golf course at 3. because there is grain of truth in this, i would say that perhaps they may manage to earn some profits but they would certainly not remain competitive. banks would need to think of partnerships and strategies that were previously unthinkable β and perhaps still so β but these would need to be tackled. for example, investment banking may have been thought of as being unreasonably volatile but it may now be the need of the corporate customer. β’ banks need to develop more efficient credit delivery mechanisms and this should form part of its repositioning strategy. β’ banking data reveals concentration of banking business in urban / metro areas, with the top ten centres accounting for roughly 70 % of banking business i. e. potential of rural / semi - urban areas remain relatively untapped. i may be naive, but what beats me is the high spreads between the formal and informal sector lending rates in the rural areas. is cheese for the money lender not cheese for a bank? β’ banking can forge and nurture appropriate public - private partnerships for development of micro finance activities. β’ smes have been a neglected segment of bank lending β year on year growth in the ssi segment has been barely 5 % as compared to 19 % growth in total lending. it may interest you to know that in its search for improving profitability, a large japanese bank introduced a product called β uncollateralised business select loan β aimed at small businesses in 2002. it has been stated that this business generated net margins of 2 % - 2. 5 % compared with the net corporate lending margins of 0. 8 % - 1. 1 %. for this, instead of relying on collateral, the bank developed a new credit scoring system and new methods of measuring default and counterparty risk as also new marketing methods. β’ securitisation will enable banks to target profit growth from asset turnover based business rather than the balance sheet. β’ it is stated that non interest income accounts for nearly half of all operating income generated by us commercial banks. in india, it is less than one - fifth. while there is scope for increasing fee based income through non - traditional services, studies in the us suggest that increased reliance on fee based activities tends to increase rather than decrease the volatility of banks β earnings stream. i am aware that the issues raised are neither new nor profound but if something | 1 |
slowing down. so it is not all obvious to me at least that the household sector will suddenly run for cover in the current environment, where the labour market remains remarkably robust, and the prospect for inflation - and hence the prospect for interest rates - remains relatively benign, remaining somewhat above target in the near term but moving down gradually as we move into next year. i don't say that things could not turn out rather worse than that - and there are other uncertainties, like development of the exchange rate, or the effect of the upcoming increase in national insurance contributions, which i have not touched upon this evening. uncertainty is a fact of economic life. but i do say that it would be unwise - as some have implied - to set monetary policy on the basis of the worst possible outcome, even if one knew what that would actually mean in policy terms. at the time of our last inflation report published in november the mpc's collective view of the most likely outcome for the uk, looking over the next two years, was for growth at around trend with inflation close to target. but we were - and we remain - acutely conscious of the uncertainties and risks around that prospect. and we review the position intensively both at our regular monthly policy meetings and in the context of our quarterly forecasting round. and in that context, i give you my assurance that, despite the fact that we have not changed interest rates now for over a year, we stand ready to do so at any time if and when we see the risks to our central expectation beginning to crystallise in either direction. mr president, let me conclude by suggesting once again this year that yes, we can keep the uk economy moving forward, but i don't pretend that it will be easy. sadly i am attending this dinner for the last time as governor this evening, so i will not be accountable to you for how we get on. but i will leave the bank of england in the good hands of my successor, mervyn king, when i step down in june, and i have every confidence that he will, by the time of your next dinner, have a positive story to tell. | . but the serious downside risks to the economic outlook we saw then have since receded. the uk economy has actually bounced back more strongly than in previous recoveries, supported by both domestic and overseas demand. according to data from the council for mortgage lenders, both house repossessions and arrears peaked in the recent recession at lower levels than in the early 1990s, and the numbers have been falling since early 2009. these upside pressures on inflation from import prices and vat have been one reason that inflation has not fallen back in the way we expected in the aftermath of recession. the other significant factor is that spare capacity has not exerted as much downside pressure on cost and price increases as expected. that is partly because the margin of spare capacity appears to be less than we have seen in previous economic cycles. in the labour market, this is the flip - side of the resilience of employment and a lower level of unemployment relative to the early stages of previous recoveries. but survey evidence also suggests that there is limited spare capacity within firms to take up the slack as demand recovers. 12 for example, the most reliable measure of capacity utilisation in manufacturing β the cbi industrial trends survey β shows capacity utilisation at around its average level, which is quite surprising at this stage of the recovery. there is more survey evidence of spare capacity in the services sector. but this does not seem to be exerting much downward pressure on inflation. the cpi measure of services price inflation has picked up from 2. 4 % at the end of last year to average around 3. 8 % in recent months. this is considerably in excess of the 2 % target and also slightly above the average rate of services price inflation we experienced during the decade prior to the financial crisis, as chart 7 shows. this does not appear consistent with the view that spare capacity in the uk services sector is serving to hold down inflation. with the economy recovering at home and abroad, inflation above target and set to rise further, i believe there are three powerful arguments for a gradual rise in interest rates which have been evident for several months. first, the main elements of demand for uk businesses β overseas markets and domestic private sector spending β have been recovering for over a year now and look set to continue to grow. the outlook for growth suggests the uk economy should be able to withstand a gradual rise in interest rates, even taking into account the impact of fiscal consolidation. indeed, it is worth noting | 0.5 |
it - for compliance " failures " related to fatf recommendations that are yet to have a proven impact on crime and of little relevance to most countries in our region. we must ensure that resources and knowledge are shared, and a common pacific voice heard as these affects the livelihoods of our people. on that, perhaps, rather sombre note, i welcome you to our country, with the all the generosity, and warmth of spirit that this country, and our pacific region is known. it is my honour to declare this in person inaugural pacific financial intelligence community plenary open. i hope this meeting leads to the deepening of friendships between participants and ties between our countries. 2 / 3 bis - central bankers'speeches may god bless you all. 3 / 3 bis - central bankers'speeches | , 2023. 3 / 4 bis - central bankers'speeches 6 in addition, the committee said it will continue to reduce its holdings of treasury securities and agency debt and agency mortgage - backed securities, according to the board of governors of the federal reserve system, plans for reducing the size of the federal reserve's balance sheet, may 4, 2022. 4 / 4 bis - central bankers'speeches | 0 |
flat and enable enterprises to purchase new equipment. everybody does well if the saving and credit scheme runs smoothly. 2. economic growth by 3. 5 % in 2009 is very challenging indeed! lower economic growth implies lower income, and in case of no decline in spending, a higher than currently planned growth of 1ΒΎ % in consolidated budget deficit will automatically follow! hence, it is of utmost importance that we design a set of measures to be implemented in case economic growth turns out to be lower than planned for the period ahead. 3. proving that serbia is different than other countries in the region. serbia was the first country in the region to seek financial arrangement with the imf as a precautionary measure. this proves that we are a responsible state and wish to implement transparent economic policy under the imf umbrella. this is certainly a point in our favour and will prove useful in serbia β s attempts to remain an attractive foreign investment destination in the near future of extremely cautious capital spending and restrictions on investments. thank you for your attention! | radovan jelasic : serbia against the economic crisis speech by mr radovan jelasic, governor of the national bank of serbia, in a meeting of top officials and leading businessmen themed β serbia against the economic crisis β, belgrade, 9 january 2009. * * * your excellencies, ministers, ladies and gentlemen, i am grateful for the invitation to attend this meeting and hope it will, if not resolve, then at least contribute to improved understanding of both current events and possible responses to the challenges our economy and the overall serbian society are now facing. allow me to begin by emphasizing the following four items of concern : 1. the level of disruption in international economic relations is unprecedented since ww2. there is no institution, no scenario or study which offers a ready made solution to the current crisis. 2. nobody, and absolutely nobody, can tell how long the crisis will last nor how deep the disruptions will cut into the tissue of the world economy. this fact should be born in mind by all decision makers when deciding on any measures, either those relating to the use of foreign reserves or measures involving changes in the exchange rate for the dinar! 3. to err is human, especially when the problem at hand and the urgency of quick response are so paramount. but it is also of ultimate importance to admit one β s mistake and to adopt corrective measures as the market is quicker than ever in dealing punishing blows for any mistake! 4. of course, we need to face up to the reality, the reality which in serbia is most commonly termed β harsh β. this time, though, this attribute is more than applicable, but should not be used as an excuse for us not to confront the reality. both the exchange rate of the dinar against the euro and the current movements in prices are the β blueprint β of economic and political reality in serbia and beyond. naturally, we may blame most of such problems on the movements abroad, but i hope we all agree on one point at least β movements in prices and the exchange rate depend heavily on the type of measures we undertake in response to internal and external challenges. and the challenges have never been so numerous! what with the recent gas crisis and its fallout on both prices and the exchange rate in serbia! out of the blue, we are hit by rising prices of coal and wood for heating and there are no electricity heaters in the market even if your life depended on it. that is what constitutes | 1 |
above the minimum reserve requirements over monthly periods of time. this will allow the banking system to absorb liquidity shocks easily. the volatility of money market rates will, as a consequence, be reduced. also, fine tuning operations will not have to be used frequently, which will mean that markets are less affected by central bank interventions than they would otherwise be. the second objective of the minimum reserve system is to enlarge the demand for central bank money, so as to enlarge the liquidity deficit of the banking system vis - a - vis the european system of central banks. this will safeguard the role of the european system of central banks as a key provider of liquidity to the banking system. in the minimum reserve system of the ecb, the reserve ratio will be rather small and reserve requirements will be fully remunerated. the reserve ratio will be set at between 1. 5 % and 2. 5 % and will be applied to the deposits, debt securities and money market paper issued by credit institutions, except for residual maturities above two years. reserve holdings will be remunerated up to the required reserve level, at the rate of the escb β s main refinancing operation ( as averaged over a month ). it may be argued that a less than full remuneration of minimum reserves would increase the interest rate elasticity of central bank money demand. this notwithstanding, the european central bank has decided in favour of a full remuneration of minimum reserves in order to avoid the potential distortions to fair and efficient markets that a less than full remuneration could have implied. as a result, the minimum reserve system is unlikely to lead to any delocation of certain parts of the reserve base, hence of savings. finally, it may also be useful to note that the european central bank has also decided not to exempt any credit institution of the euro area from the minimum reserve system. 4. conclusion i am confident that the policy of the ecb has always been, and will continue to be, guided by the principle of equal treatment, the desire to foster the development of financial markets in the euro area and the need to avoid undue shifts in economic activity. this will also contribute to providing an adequate environment for an efficient allocation of savings in the euro area. | policy, while at the same time being as neutral as possible with regard to financial structure. the neutrality and, indeed, market - friendliness, of the ecb β s framework is apparent in a variety of ways. first, neutrality is apparent in the way open market operations are conducted. almost all of the ecb β s open market operations will be executed through tenders, to which a broad spectrum of counterparties may submit bids. this will be a transparent and fair process. fine tuning open market operations may also be conducted through tenders, the so - called β quick β tenders. the ecb and the national central banks will aim at giving the opportunity to participate in fine tuning operations to all counterparties having an appropriate track record of activity in the money market, if necessary on a rotating basis. second, the consideration of neutrality has been a driving factor in the process of establishment of the list of eligible assets. eligible assets are the assets which counterparties have to post as guarantees for any credit received from the european system of central banks. the list of eligible assets comprises a wide variety of assets, which have been selected by the ecb according to area - wide uniform criteria relating to their credit standing in the whole euro area. in order to promote a certain degree of continuity at the start of the third stage of european monetary union, a sub - set ( the so - called tier two eligible assets ) includes assets of particular importance for certain national banking systems of the euro area. these assets have the same credit standing as the other assets. for monetary policy operations, counterparties will be able to use any eligible assets, irrespective of where they are located in the euro area. to this end, national central banks will act as correspondents for each other so as to make cross - border use possible also for assets for which this service is not yet provided by securities settlement systems. for the record, one may also mention the ecb β s system of risk control measures. risk control measures will ensure that the amount of assets provided is always sufficient. when designing its system of risk control measures, the ecb has paid careful attention to the best market practices in this area. finally, and perhaps most importantly, the minimum reserve system of the ecb has been developed so as to be as neutral as possible. the minimum reserve system has two main objectives. the first objective is to stabilise money market interest rates. this will be achieved by requesting that average reserve holdings be | 1 |
share and competitive pressures. in addition, a disproportionately high percentage of these businesses reported higher costs in 2009. in this regard, the automatic adjustment of wages to inflation through the cola mechanism, irrespective of the level of productivity, is one of the factors that has been contributing adversely to the cost structure of these enterprises, and consequently to their competitive position. here i must reiterate that a currency union member country like malta, whose only sustainable source of long - term growth are its exports, cannot afford to allow nominal wages to grow faster than productivity, which is what has happened during the past decade. the competitive position of these enterprises is also constrained by their ability to introduce more efficient production processes. the proportion of enterprises that did not undertake some form of restructuring last year was one of the highest in europe. this is probably one reason why malta has lagged behind its european peers in pursuing the targets set by the lisbon innovation scoreboard, in particular in the areas of entrepreneurship and human resources. 6 another frequently mentioned cost factor are administrative burdens. this is an endemic problem in malta, confirmed by a recent survey in which a reduction in such burdens featured as the priority recommendation by executives of foreign - owned companies operating in malta as a means of enhancing the attractiveness of the island to foreign investors. 7 finally, with regard to the constraint represented by the small size of the domestic market, maltese entrepreneurs have no option other than to attempt to break into foreign markets. this is not an easy task. during the past decade, malta has registered one of the slowest european innovation scoreboard 2009. link available at : < > http : / / www. proinno - europe. eu / sites / default / files / page / 10 / 03 / i981 - dg % 20entr - report % 20eis. pdf ernst & young β s 2009 malta attractiveness survey. average annual export growth rates in volume terms in the eu. survey information from micro and small enterprises reveals that the most frequently cited obstacles to exporting relate to taxation issues in foreign markets, inadequate market intelligence and insufficient capital. 8 recent initiatives and the way forward this suggests the need for a comprehensive strategy to help these small enterprises exploit the opportunities offered by the eu single market, building on the existing public and private initiatives. the budget for 2010, for example, included measures aimed specifically at easing some of the constraints i have just referred to. chief among these is a | - accession economic programme report for 2002, where it is noted that the current regime has served malta well in promoting real and nominal convergence. in view of these considerations, and given the importance which exchange rate stability has for trade and investment, the current regime remains the preferred arrangement for malta. taken together, therefore, the institutional arrangements governing erm ii and the successful experience with the current fixed exchange rate regime suggest that the way forward will consist of a gradual reduction in the weight of the us dollar and sterling in the currency basket, such that by the time malta will be ready to join erm ii the euro will be the sole reference currency. if the united kingdom were to join emu in the meantime, this would automatically raise the proportion of the euro in the currency basket, making the approach to erm ii that much easier. consistently with this objective, the weight of the euro in the basket was increased from 56. 8 % to 70 % last august. given that malta β s optimal exchange rate strategy in the run - up to erm ii has been identified, the next question concerns the choice of the central exchange rate and the fluctuation bands. the choice of the central exchange rate and fluctuation bands some might argue that the choice of the central rate is not vitally important. after all, the central rate can be re - aligned if necessary, although such a move would require the agreement of the ecb and the other national central banks participating in the euro area. in practice, however, the initial central rate chosen is important because it conveys a signal to the market about what the ecb and the national authorities consider to be the equilibrium exchange rate. the determination of the central rate is also crucial because if the selected rate turns out to be incompatible with economic fundamentals, market intervention by the ecb and the central bank of malta could become too frequent in relation to the resources available. determining the appropriate central rate, however, is not an easy task. nevertheless, though the available evidence suggests that in the current economic climate the maltese lira exchange rate is sustainable at prevailing levels, work is being undertaken in order to estimate an equilibrium rate. the second choice concerns the fluctuation band. it is a matter of choosing between the lower degree of uncertainty and volatility associated with a narrow fluctuation band and the flexibility inherent in a wider fluctuation band. on the one hand, the flexibility necessitated by the absence of capital controls would strengthen the case for a | 0.5 |
that trade in u. s. government securities with the federal reserve bank of new york. on money market mutual funds was severely constricting their purchases of commercial paper, an important source of credit to many businesses, we supported the funds, their customers, and their borrowers by making credit available that allowed funds to meet heavy redemption requests and also provided credit directly to borrowers in the commercial paper market. our objectives in these programs are consistent with central banks'classic function as lenders of last resort. we are encouraging the continued provision of private - sector funding to intermediaries by assuring their creditors that sound intermediaries have a sure source of liquidity to repay debts. when, despite this encouragement, private lenders have such a strong preference for safety and liquidity that credit is not forthcoming, we lend, often at a penalty rate relative to normally functioning markets ; that lending is intended to prevent disorderly and disruptive failures and fire sales of illiquid assets, which would drive asset prices lower, intensify the disruption of credit flows, and deepen the pullback in spending. most recently, in collaboration with the treasury, we have begun supplying liquidity to purchasers of securitized credit. under this program, private investors absorb credit risk up to a certain level, and the treasury takes on the bulk of the credit risk above that level. the federal reserve's residual credit risk is designed to be quite small. the asset - backed securities market that this program supports had become a key vehicle over the past couple of decades for financing credit extended to households and businesses, but its functioning deteriorated rapidly over the second half of last year, with issuance tailing off almost completely. the availability of credit from the federal reserve and the insurance against severe downside risks from the treasury should buoy demand for securitized debt and thus help bolster the flow of credit to households and businesses. a shortage of funding has not been the only factor impeding the extension of credit. lenders have been concerned about counterparty risk and about conserving their own capital against unforeseeable events. we can't deal with those concerns through our lending because we do not take appreciable credit risk. but confidence about access to funding has been a part of the problem, as reflected in the evaporation of trading in term maturities in a wide range of wholesale funding markets and the elevated spreads paid by even very safe borrowers. the limited availability | overall, one result of the more - rapid pace of information technology innovation has been a visible acceleration of the process of β creative destruction β, a shifting of capital from failing technologies into those technologies at the cutting edge. the process of capital reallocation across the economy has been assisted by a significant unbundling of risks in capital markets made possible by the development of innovative financial products, many of which themselves owe their viability to advances in information technology. there are few, if any, indications in the marketplace that the reallocation process, pushed forward by financial markets, is slowing. while growth in companies β projected earnings has been revised up almost continuously across many sectors of the economy in recent years, the gap in expected profit growth between technology firms and others has persistently widened. as a result, security analysts β projected five - year growth of earnings for technology companies now stands nearly double that for the remaining s & p 500 firms. to the extent that there is an element of prescience in these expectations, it would reinforce the notion that technology synergies are still expanding and that expectations of productivity growth are still rising. there are many who argue, of course, that it is not prescience but wishful thinking. history will judge. * * * before this revolution in information availability, most 20th - century business decision - making had been hampered by pervasive uncertainty. owing to the paucity of timely knowledge of customers β needs and of the location of inventories and materials flowing throughout complex production systems, businesses required substantial programmed redundancies to function effectively. doubling up on materials and people was essential as backup to the inevitable misjudgments of the real - time state of play in a company. decisions were made from information that was hours, days, or even weeks old. accordingly, production planning required costly inventory safety stocks and backup teams of people to respond to the unanticipated and the misjudged. clearly, the remarkable surge in the availability of more timely information in recent years has enabled business management to remove large swaths of inventory safety stocks and worker redundancies. that means fewer goods and worker hours are absorbed by activities that, while perceived as necessary insurance to sustain valued output, in the end produce nothing of value. these developments emphasize the essence of information technology - the expansion of knowledge and its obverse, the reduction of uncertainty. as a consequence, risk premiums that were associated with many forms of business activities have declined. | 0 |
are giving a special award for microenterprise leadership. this will be awarded to a previous winner whose success continues to bring it to another level of growth and expansion. ladies and gentlemen. seeing our microentrepreneurs graduate into the next level as a small enterprise is a milestone we look forward to. in this connection, we have developed support programs to make this happen. among others, the regulation of the bangko sentral ng pilipinas on β microfinance plus β increases the ceiling of microfinance loans from one hundred fifty thousand ( p150, 000. 00 ) to three hundred thousand pesos ( p300, 000. 00 ) to support further growth that will employ more people, create wealth, and contribute to broad - based, inclusive growth. as it is, we are already seeing positive results from providing microentrepreneurs access to finance. as of end - june 2013, 186 banks with microfinance operations were serving over one million clients with combined outstanding loans of 8 billion pesos. and these microentrepreneurs have become net savers β¦ with consolidated bank deposits of 8. 9 billion pesos, an amount that easily surpasses their total loan. it is clear, these microentrepreneurs are on the road to attaining a certain level of financial independence. bis central bankers β speeches we also continue to implement programs to provide more filipinos access to financial services that would empower people to improve their lives. for instance, there are now 391 micro - banking offices that provide a broad range of financial services in new areas. in addition, a retail electronic payments system through e - money and mobile banking is in place with 30 e - money issuers working alongside a network of more than 12, 000 cash - in and cash - out agents. indeed, we continue to post gains in our program to develop a more inclusive financial system that will promote inclusive growth. ladies and gentlemen. this year β s cma is taking place on the heels of super typhoon yolanda that devastated parts of leyte, samar and other islands in the visayas. some of our previous cma winners were not spared. our regional winners from bantayan and malaspacua islands in cebu reported that the typhoon wiped out everything they owned. also affected are our previous winners living in iloilo, negros and leyte. destructive natural calamities underscore the importance of having adequate insurance protection especially for | the most vulnerable. in particular, microinsurance can protect the hard - earned gains of our microentrepreneurs. for this reason, starting in 2011, the prizes of cma winners include microinsurance. indeed, challenging times call for stronger partnerships. and to show our support and solidarity to our microentrepreneurs, we conducted here at the bangko sentral last week a three - day event which we called microfinance partnerships during challenging times. fellow advocates of microfinance, let us continue to enhance and strengthen our partnerships in support of our microentrepreneurs who have improved the lives of their families and generated employment for millions of filipinos. it is also noteworthy that our microentrepreneurs are also known for their generosity in helping other would - be entrepreneurs. they would readily share their stories and mentor others. last month for instance, the bangko sentral β s financial education lectures for 1, 700 teachers and principals of the department of education in kabankalan, negros occidental was made more memorable and inspiring by the sharing of local microentrepreneurs from negros. indeed, our microentrepreneurs have developed a culture of sharing. in words and in deeds, they inspire others who aspire to better their lives through microfinance. across our country, our microentrepreneurs prove that humble beginnings can lead to success beyond their dreams and sometimes even beyond our borders. once again, congratulations to our cma winners this year. mabuhay ang microfinance! mabuhay ang ating mahal na bansang pilipinas! maraming salamat sa inyong lahat! bis central bankers β speeches | 1 |
in the economy is likely to increase, decrease or stay about the same, and how the likely outcomes compare with the announced objective. that judgement then informs a decision as to whether monetary policy needs to restrain demand, to support it or to be β neutral β. of course other factors that affect prices β like exchange rate changes, changes in the price of oil, and so on β have to be taken into account as well. note that the economy β s supply potential is a key element in the above framework. this is not a directly observable thing : there is no time series labelled β potential supply β. assumptions have to be made about the availability of productive factors β labour and capital β and about the productivity with which these factors can be used. this is why the current productivity discussion is so important. incidentally, the desire for more productivity is not a call for working harder. australians already work pretty long hours by international standards. productivity per hour, which is what counts, is not improved by adding more hours, but by finding ways of making the hours that are already being contributed more effective. the board β s decision each month, and the reasoning behind it, are communicated to the public. these statements are among the most closely scrutinised documents in the country. i am often awed by the layers of hidden meaning that people are able to detect in them. but the main purpose of these statements, and of all the other communication we do, is simply to try to make the bank β s assessment of the outlook and its actions as understandable as possible to the many people who need to make long - term decisions, including households and businesses. of course, events and new information often change the outlook, as we have seen recently. recent developments how has the board evaluated recent developments within the above framework? 3 throughout the past year or so, the forecasts that the bank β s staff have provided to the board have suggested that underlying inflation would probably stop falling and then gradually rise through the three - year forecast period. the backdrop to this view was that the rise in the the deputy governor recently gave a very good account of this in more detail than i can attempt here today. see : < http : / / www. rba. gov. au / speeches / 2011 / sp - dg - 230811. html >. bis central bankers β speeches terms of trade was expansionary for incomes and investment, which would likely see demand growth remain pretty strong even as | point and a measuring stick for monetary policy decisions, which recognises that, in the end, monetary policy is really about the value of money. we arrived at this framework after a long search β the β search for stability β set out in detail by ian macfarlane in his abc boyer lectures in 2006. 2 the current framework is not necessarily the end of history. but it has worked well for a period not far short of two decades now, with no obviously superior framework on offer. the first such statement was between treasurer costello and ian macfarlane in august 1996. we are now up to the fifth incarnation of this agreement. see : < http : / / www. rba. gov. au / monetary - policy / framework / stmtconduct - mp - 5 - 30092010. html >. macfarlane i ( 2006 ), the search for stability, boyer lectures 2006, abc books, sydney. bis central bankers β speeches sometimes people ask whether a higher target for inflation might not be better, particularly when inflation is looking like it will rise and the bank is running a setting of monetary policy designed to resist that. the answer ultimately hinges on how prepared we would be to accept the things that would go with higher inflation. higher average interest rates would be among them β there is no reason that savers, any more than wage earners, would be prepared simply to accept an erosion of their financial position. that is why countries with higher inflation generally have higher nominal interest rates. moreover, whatever structural challenges the economy faces would still have to be faced at higher inflation rates. higher inflation wouldn β t make those issues go away, nor make them any easier to cope with ( as we know from our own history when inflation was high and structural change still had to occur ). we would simply waste more real resources as everyone sought to protect themselves from the higher inflation. in supporting the decision process that puts this framework into practice, the bank carries out a great deal of detailed statistical work, tracking several thousand individual data series. it conducts extensive liaison with businesses and other organisations, usually speaking in detail to as many as 100 contacts each month. it produces voluminous published analysis of these data. the objective of these efforts is, at its heart, fairly simple. we are trying to form an assessment about the course of overall demand in the economy and how it is travelling in relation to the economy β s supply potential. that assessment in turn informs a judgement as to whether inflation pressure | 1 |
the financial markets and maintain financial stability. q & a session : david marsh ( managing director, omfif ) : it is sometimes said that there is a vacuum in leadership in the world. do you think it is about time for china to take a greater leadership role in the international monetary reforms? you mentioned a number of very positive developments in your speech regarding the chinese economy. it seems to provide a good platform for china to push forward some ideas about the reform of reserve currencies, the role of the sdr, institutionalizing the swap, and so on. 2 / 3 bis central bankers'speeches zhou xiaochuan : in recent years, along with rapid economic development, china has started to play a role in the international economic governance, including participating in the reform of reserve currency system and policy making in trade and financial stability. but china is still focusing very much on the domestic agenda, including further promoting economic development and regulatory reforms so as to keep pace with global development. we are pleased to see that imf has included the rmb into the currency basket of sdr. it β s encouraging and it will prompt china to adopt more reform and opening up policies, and support rmb to serve better as a freely usable currency. although china has strengthened cooperation with the international organizations, such as imf, bis and fsb, and participated in standard setting and rule making, we still have a long way to go in order to play a more significant role. as for the currency swap, it is an unexpected outcome of the global financial crisis. after the outbreak of the global financial crisis in 2008, due to the shortage of hard currencies and the difficulties in developing correspondent banking relationship on the part of commercial banks, some neighboring countries requested to enter into local currency swap agreements with china, in order to support and facilitate regional trade. we first signed an agreement with south korea, then with some asean countries and central asian countries. later on, the swap arrangements gradually expanded into other parts of the world, such as argentina, ukraine and egypt. therefore, currency swap arrangement is an unexpected outcome of the global financial crisis. china supports the further development of global safety net. in our view, the global safety net may be more efficient than bilateral arrangements. william r. rhodes ( william r. rhodes global advisors, inc. ) : last year, you expressed concern about the growing debt to gdp ratio. but you sound fairly optimistic about the issue this year. it seems that the government | do anything about the current account deficit or about the lack of savings from government policy or private choices. our manipulation of the overnight interest rate helps to keep the overall economy in balance - promoting price stability and production at the economy β s potential. but on the federal open market committee jack and i can do nothing to promote savings other than to provide a stable backdrop for private decisions. promoting savings is a job for fiscal and tax policy. if our trade and current account deficits move toward balance, foreign economies will face the questions of how to replace the demand that will no longer be coming from the united states and to reallocate production to a new mix of spending. the u. s. current account will not correct in isolation. the united states has been, in effect, exporting its demand overseas, supporting economic activity in foreign economies by importing more goods and services than we export. if our imports fall and exports rise, just the opposite will occur in the rest of the world. as our domestic demand is restrained relative to production, demand elsewhere will have to increase to foster global high employment. how that is to be achieved is an open question : structural reforms that improve the flexibility of the labor force and production and that foster growth abroad are a desirable way to contribute to better global balance, but macroeconomic policy adjustments to promote more domestic demand may also be required. it is simply not possible for all countries to enjoy stimulus from net exports ; some countries will need to be net importers, especially if the united states no longer fills that role. and so my two issues become related. the development strategies of countries such as china and other asian nations, to be successful, must be compatible with the pattern of adjustment in global demand that is required by the consumption, saving, and investment decisions made by market participants everywhere. conclusion the global economy seems to be facing major adjustments in several dimensions simultaneously. successful adaptation to changing circumstances will require flexibility on several fronts. no one can anticipate how events will unfold - the evolving geography and technology of the production of goods and services, the shifting balances between spending and producing as current accounts change. my fear is that poorly formed diagnoses and incorrect policy prescriptions will have unintended adverse consequences for our economy. any elements of rigidity - in exchange rates, in labor and product markets, in quotas and tariffs on international trade - limit the channels through which the adjustment process can work. rigidity concentrates stresses, increases the risk of | 0 |
##s have helped european banks avoid the significant liquidity pressures we feared a few months ago and have reduced the risk that they would need to sell off their u. s. dollar assets abruptly. conclusion in sum, i am hopeful that europe can effectively address its current fiscal challenges. the federal reserve is actively and carefully assessing this situation and the potential impact on the u. s. economy. at this time, although i do not anticipate further efforts by the federal reserve to address the potential spillover effects of europe on the united states, we will continue to monitor the situation closely. thank you for your invitation to testify today, and i look forward to answering your questions. bis central bankers β speeches | . exports would decrease. this would hurt domestic growth and have a negative impact on u. s. jobs. it is important to recognize that the euro area is the world β s second largest economy after the u. s. and an important trading partner for us. also, europe is a significant investor in the u. s. economy, and vice versa. thus, what happens in europe has significant implications for our economy. second, deterioration in the european economy could put pressure on the u. s. banking system. as the recent round of stress tests revealed, u. s. banks are much more robust and resilient than they were a few years ago. they have bolstered their capital significantly, built up their loan loss reserves and have significantly larger liquidity buffers. the direct net exposures of u. s. banks to the so - called β peripheral β european countries are actually quite modest. the good news in the united states means that we are better able to handle bad news from europe. with that said, the exposures of u. s. banks climb sharply when one also considers their exposures to the core european countries and to the overall european banking system. u. s. money market mutual funds, in particular, have significant european holdings. this means that if the crisis were to broaden further and intensify, it would put pressure on the capital and liquidity buffers of u. s. banks and other financial institutions. third, severe stresses in european financial markets would disrupt financial markets here, which could harm the real economy. stress in the financial markets causes banks to more carefully husband their balance sheets. when that phenomenon occurs, the availability of credit to u. s. households and businesses becomes constrained. such conditions could also cause equity prices to fall, impairing the value of americans β pension and 401 ( k ) holdings. this would damage the u. s. recovery and result in slower output growth and less job creation. at a time when u. s. unemployment is very high, this is a particularly unacceptable outcome. in the extreme, u. s. financial markets could become so impaired that the flow of credit to households and businesses would dry up. bis central bankers β speeches u. s. dollar swaps in today β s globally integrated economy, banks headquartered abroad play an important role in providing credit and other financial services in the united states. about $ 1 trillion in worldwide dollar financing comes from foreign banks, $ 700 billion in | 1 |
all sizes across the country significantly improves the federal reserve β s ability to effectively carry out its central - bank responsibilities. perhaps most important, as this crisis has once again demonstrated, the federal reserve β s ability to identify and address diverse and hard - to - predict threats to financial stability depends critically on the information, expertise, and powers that it has as both a bank supervisor and a central bank. not only in this crisis, but also in episodes such as the 1987 stock market crash and the terrorist attacks of september 11, 2001, the federal reserve β s supervisory role was essential for it to contain threats to financial stability. 3 the federal reserve β s making of monetary policy and its management of the discount window also benefit from its supervisory experience. 4 notably, the federal reserve β s role as a supervisor of state member banks of all sizes, including community banks, offers insights about conditions and prospects across the full range of financial institutions, not just the very largest, and provides useful information about the economy and financial conditions throughout the nation. such information greatly assists in the making of monetary policy. the legislation passed by the house last december would preserve the supervisory authority that the federal reserve needs to carry out its central banking functions effectively. improving the federal reserve β s supervision of banking organizations the federal reserve strongly supports ongoing efforts in the congress to reform financial regulation and close existing gaps in the regulatory framework. 5 while we await passage of for further discussion, see the bernanke letter to dodd and shelby in note 2. our ability to monitor key payment and settlement systems also depends critically on our supervisory powers, as several key institutions involved in payments and settlements have state member bank or edge charters. without bank supervisory authority, the federal reserve would have no ability to examine or regulate such institutions. lack of strong consolidated supervision of systemically critical firms not organized as bank holding companies proved to be the most serious regulatory gap. in addition, under the gramm - leach - bliley act of 1999, the federal reserve β s consolidated supervision of bank holding companies was both narrowly focused on the safety and soundness of their bank subsidiaries and heavily reliant on functional supervisors of the bank and regulated nonbank subsidiaries of these companies ; in turn, the functional supervisors themselves were statutorily focused only on the safety and soundness of the specific entities they regulated. none of the federal regulators had sufficient authority to focus on the systemic risk that large banking organizations posed. comprehensive reform legislation, we have been conducting an intensive self - examination | capitalize on it. fostering education that will enable individuals to overcome their reluctance or inability to take full advantage of technological advances and product innovation in the financial sector can increase economic opportunity. as market forces continue to expand the range of providers of financial services, consumers will have more choice and flexibility in how they manage their personal finances. they will also need to learn ways to use new technologies and to make wise financial decisions. in considering means to improve the financial status of families, education can play a critical role by equipping consumers with the knowledge required to choose from among the myriad of financial products and providers. financial education is especially critical for populations that have traditionally been underserved by our financial system. in particular, financial education may help to prevent vulnerable consumers from becoming entangled in financially devastating credit arrangements. regulators, consumer advocates, and policymakers all agree that consumer education is essential in the quest to stem the occurrence of abusive, and at times illegal, lending practices. an informed borrower is simply less vulnerable to fraud and abuse. financial education can empower consumers to be better shoppers, allowing them to obtain goods and services at lower cost. this process effectively increases consumers β real purchasing power, and provides more opportunity for them to consume, save, or invest. in addition, financial education can help provide individuals with the knowledge necessary to create household budgets, initiate savings plans, manage debt, and make strategic investment decisions for their retirement or for their children β s education. having these basic financial planning skills can help families to meet their near - term obligations and to maximize their longer - term financial well - being. the importance of basic financial skills underscores the need to begin the learning process as early as possible. indeed, improving basic financial education at the elementary and secondary school level will provide a foundation of financial literacy that can help prevent younger people from making poor decisions that can take years to overcome. in particular, it has been my experience that competency in mathematics - - both in numerical manipulation and in understanding the conceptual foundations - enhances a person β s ability to handle the more ambiguous and qualitative relationships that dominate our day - to - day financial decisionmaking. for example, through an understanding of compounding interest, one can appreciate the cumulative benefit of routine saving. similarly, learning how to conduct research in a library or on the internet helps one find information to enhance decision - making. focusing on improving fundamental mathematical and problem - solving skills can develop knowledgeable consumers who can take | 0.5 |
sub prime crisis, these funds have injected significant amounts of long term funds to the large ailing institutions to resurrect them or to prevent them from continuing with poor financial health. in that sense, the sovereign funds have acted as an immensely useful stabilizing force during the financial crisis. however, the injection of such funds has been received with mixed feelings in the geo - political context. i would think the debate on this development is just beginning and it would be useful for all of us to carefully watch the movement of this issue in time to come. another important development in reserve management is the extensive use of external fund managers. external fund managers are being increasingly engaged by central banks, as many central banks are yet to acquire the technical skills and competencies required to manage the new asset classes that are developing in these dynamic market conditions. i would think this factor too, would be one that we would have to give a lot of attention in the future, and as to how we make use of such expertise without compromising central banks β core objectives, would be a challenge for all of us. 6. my dear friends, given the importance of reserve management, it is timely to organize a seminar on this subject. when reading through your program, i realized that the organizers and the resource persons have done remarkably well in selecting the topics to be covered. in my view, the topics and presentations are just the right blend that a reserve manager would wish to focus on, in this day and age. finally, let me take this opportunity to sincerely thank the resource persons who have accepted our invitation to share their knowledge and experiences on various subjects relating to reserve management, the central banks of our member countries for showing high interest in this program, our own cbs for organizing this event, and i wish that all of us could benefit significantly from the program. i wish this seminar all success. | the world economy in particular. let me now say a few words about our own efforts in this sphere of activity. the initial phase of establishing a comprehensive framework for anti money laundering and combating financial terrorism in sri lanka was focused on the preparation of the draft legislation. with the passage of legislation, our efforts were then directed towards setting up of the infrastructure for the financial intelligence unit ( fiu ). we now have a fully operational fiu established in the central bank, the apex institution in the financial system in sri lanka, to meet both its local and international obligations. as you may be aware, sri lanka is presently engaged in a valiant effort to control many terrorist activities waged by the ltte, a group acknowledged worldwide as a terrorist movement. usa, canada, the eu and many other countries have banned this movement due to flagrant human rights violations and inhuman acts of terror. they have been designated as a terrorist group by most countries in the western hemisphere. as has been recognized worldwide, the most effective manner to undermine and defeat terrorist activities is to stop or curb its funding sources. notwithstanding the bans, the ltte has extended its tentacles in north america, the european union and australia. in response, those countries and nations are today taking meaningful steps to stop these fund raising activities and taking the perpetrators of such crimes to justice and we deeply appreciate such moves. the government of sri lanka is dedicated to winning the support of all countries in this regard through the exchange of information on a bi - lateral basis which would enhance bi - lateral co - operation through a structured exchange of information. only last week, one such initiative with switzerland was commenced where fruitful discussions were held to establish a framework and modalities for structured co - operation. it has also been recognized that efforts to combat the financing of terrorism require jurisdictions to expand the scope of the anti money laundering framework to include non profit organizations and, in particular, some dubious charities. this is to ensure that such organizations are not used, directly or indirectly, to finance and support terrorism. we are in possession of information of how certain so - called charities have been able to even hoodwink international agencies to donate funds to them for, seemingly, charitable or humanitarian causes, but which have, instead, been channeled for the upkeep of terrorist cadres and the provision of supplies to assist the terrorist effort. natural disasters such as the tsunami have also unwittingly lent a humanitarian face and ample cover to such activities. we, | 0.5 |
##holders can use their bargaining power to obstruct a resolution of the crisis in hopes of getting a better deal. after the mexican crisis had been resolved with the help of significant new official lending to mexico, the international community focused on how to improve the bargaining position of the debtor government with its bondholders if such a crisis should arise in the future. the β rey report β on sovereign liquidity crises ( named for its author, jean - jacques rey of the central bank of belgium ) was a major effort by the g - 10 countries to learn the lessons of mexico. it recommended two new steps : β’ first, the imf should expand its willingness to lend into arrears to cover the situation in which a sovereign was making a good faith effort to work out a debt restructuring with its bondholders. β’ second, it recommended that bonds issued in international markets contain clauses that would facilitate debt restructuring if it became necessary. clauses could be added to provide for debt - holder representation in negotiations with the sovereign or qualified majority voting on changes in terms. such clauses would make it harder for minority creditors to block restructuring or exact a higher price than necessary to satisfy the majority. neither of these recommendations received much official attention until the asian crisis hit. although the recommendations were not actually germane to the situation in asia, the imf reviewed the recommendations at its interim committee meeting in april 1998 and action in the near future seems more likely than a year ago. perhaps the official community will always be one crisis late. unlike the sovereign debt crises in latin america, the situation in asia involved private debts ( of banks in korea, corporations in indonesia, and some of each in thailand ) to private creditors, mostly banks. hence, it was inherently harder, as currency values plummeted and reserves all but disappeared, to design ways either to restore stability or to organize work - outs. an additional complication was the fact that, although the debts were private, some of them involved varying types of implied government guarantees. in korea, the finance minister ill - advisedly volunteered that the korean government would honor foreign debts of korean banks. when the korean banks experienced difficulty rolling over their international bank loans, the bank of korea provided the reserves they needed to repay the loans, in effect delivering on the guarantee, but rapidly depleting the central bank β s reserves in the process. guarantees of this sort clearly create moral hazard. pre - crisis, they result in more bank lending than would otherwise have taken place, and | toward pre - pandemic levels. indeed, the labor force participation rate of women in their prime working years reached an all - time high in june. demand for labor has moderated as well. job openings remain high but are trending lower. payroll job growth has slowed significantly. total hours worked has been flat over the past six months, and the average workweek has declined to the lower end of its pre - pandemic range, reflecting a gradual normalization in labor market conditions ( figure 5 ). this rebalancing has eased wage pressures. wage growth across a range of measures continues to slow, albeit gradually ( figure 6 ). while nominal wage growth - 7must ultimately slow to a rate that is consistent with 2 percent inflation, what matters for households is real wage growth. even as nominal wage growth has slowed, real wage growth has been increasing as inflation has fallen. we expect this labor market rebalancing to continue. evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response. uncertainty and risk management along the path forward two percent is and will remain our inflation target. we are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time. it is challenging, of course, to know in real time when such a stance has been achieved. there are some challenges that are common to all tightening cycles. for example, real interest rates are now positive and well above mainstream estimates of the neutral policy rate. we see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. but we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint. that assessment is further complicated by uncertainty about the duration of the lags with which monetary tightening affects economic activity and especially inflation. since the symposium a year ago, the committee has raised the policy rate by 300 basis points, including 100 basis points over the past seven months. and we have substantially reduced the size of our securities holdings. the wide range of estimates of these lags suggests that there may be significant further drag in the pipeline. beyond these traditional sources of policy uncertainty, the supply and demand dislocations unique to this cycle raise further complications through their effects on - 8inflation and labor market dynamics. for example, so far, job openings have declined substantially without increasing unemployment β a highly | 0.5 |
de larosiere report, the ecofin council has charged the commission to reinforce the so - called β infrastructure legislation β referring to the procedures for the prevention and resolution of crises of cross - border groups. the economic and financial committee has been asked to develop proposals to improve the cooperation mechanisms for managing crises at these intermediaries. ( i ) the instruments for managing crises. in the first place significantly increased harmonization of legislation on the instruments for managing crises is necessary. in fact the large disparities between member states with regard to national authorities β powers and responsibilities in early interventions and the procedures for resolving crises prevent the coordinated management of interventions involving cross - border groups. the commission has undertaken to present proposals for european legislation in this field shortly. the procedures laid down in the italian legislation on the management of banking crises, which include preventive measures, have proved effective and could be a useful model for guiding the work carried out at the european level. the possibility of introducing a common procedure for the management of the crises of cross - border banking groups should also be weighed. if this were not feasible, at least the application of the directive on the winding up of credit institutions could be extended to the subsidiaries of foreign banks, as a first step towards a greater degree of harmonization in this field. ( ii ) the removal of obstacles to the transfer of assets within the european union. progress is needed in the harmonization of company and bankruptcy law to remove the obstacles that prevent the transfer of assets and liquidity between the various components of cross - border banking groups. the possibility of ring - fencing assets held in a country leads in fact to solutions that are rational from the standpoint of individual member states but inefficient in terms of enhancing the value of the group β s assets ; in some cases ring - fencing may even accelerate insolvency and complicate the management of the crisis. ( iii ) deposit insurance schemes. the commission is also working to reduce the disparities still present in the working of deposit insurance schemes. the recent revision of the directive raised the levels of coverage and shortened reimbursement times, but it did not reduce the wide margins of discretion member states enjoy regarding the funding of the schemes, or the conditions for and the characteristics of the interventions. in promoting a greater degree of harmonization of these aspects, it should also be possible to consider a common deposit guarantee scheme at european level, which could interact with national deposit protection schemes and make an inval | β ( 3 ) excludes liabilities in connection with bilateral loans to emu member countries and italy β s capital contribution to the esm ; loans disbursed through the efsf are not included in the state sector borrowing requirement. figure 4 gross yields on bots and 10 - year btps, average cost and average residual maturity of debt ( per cent and year ) source : istat, for interest expenses. ( 1 ) ratio between interest expense in the preceding 4 quarters and the stock of the debt at the end of the year - earlier quarter. β ( 2 ) the yield at issue is the average, weighted by the issue amounts allotted, of the compound allotment rates at the auctions settled during the month. β ( 3 ) average monthly yield at maturity of the benchmark traded on the online government securities market. β ( 4 ) right - hand scale. designed by the printing and publishing division of the bank of italy | 0.5 |
this in mind. we also need to be careful not to underestimate the consequences of our actions. focusing only on direct channels, the effects that one would expect to ripple back to the united states from problems in one or two emes typically look quite small. but, when all of the indirect channels of feedback are aggregated properly β which admittedly is difficult to do β the effects may be considerably larger. my point is that we tend to underestimate these feedback effects. for most of us, the market volatility of this past spring and summer still remains fresh in our minds. eme financial markets were hit hardest, with declines in equity prices, a widening in sovereign debt spreads, and a sharp increase in foreign exchange rate volatility. in the u. s., we saw a spike in treasury yields, with 10 - year rates rising by roughly 100 basis points from early may to early july, and rising by roughly another 30 basis points before peaking in early september. most commentary has focused on the shift in expectations with respect to u. s. monetary policy β and, in particular, to uncertainty about the timing and implications of fed tapering β as the catalyst for these moves. this focus seems generally right, although other factors also played a role. market participants also had to evaluate the possibility that growth in china and other emes might be slowing even as growth in the u. s. and other advanced economies bis central bankers β speeches was picking up. the subsequent market movements as investors withdrew funds from eme investments were an abrupt shock for emes generally, especially after the long earlier period of abundant liquidity and ample inflows. from one perspective, the unconventional nature of recent u. s. monetary policy adds little that is fundamentally new to the challenges now facing emes. these policies simply represent a way of easing, driven by our coming up against the zero lower bound. central bankers have managed differences across countries in cyclical positions and policy stances many times in the past. but, from another perspective, we have less experience operating with unconventional monetary policy and this creates more potential uncertainties. this puts a premium on continued dialogue among central bankers, between central bankers and the market, and keen listening skills on our part. in my view, the fact that our large scale asset purchase programs affect the size of term risk premia globally is important. this set of monetary policies affects financial asset prices in a different way compared to changes in short - term interest | close with a final thought. the largest problems that countries create for others often emanate from getting policy wrong domestically. recession or instability at home is often quickly exported. equally important, growth and stability abroad makes all our jobs easier. this means that there are externalities in the work we do, so that more effective fulfillment of our domestic mandates helps to bring us to a better place collectively. ensuring global growth and stability is and will remain our joint and common endeavor. this is what terry checki has worked for over his distinguished career. we have been very fortunate for his service and must carry the mantle forward. bis central bankers β speeches | 1 |
β t had to worry about such problems in sweden. the financial crisis of 2007 β 2009 impacted borrowers in other countries hard a meltdown in the global financial economy was averted in 2008 and 2009 at a price we are still unable to calculate. even if the total cost has yet to be calculated, we can still note that bis central bankers β speeches the consequences of the financial crisis are clear if we take one of its fundamental causes, the us housing crisis, as an example. in the autumn of 2011, 22 per cent of all us mortgage holders still owed more than the value of their property. this is almost 11 million homeowners. 1 one of the factors behind the development of the us housing market was irresponsible lending to households with weak debt - servicing ability. we have also seen examples of this in europe. problems in the housing sector could have severe consequences for households we don β t want to have to go through a similar development in sweden. our experiences of the crisis of the 1990s are more than enough. and we didn β t emerge unscathed from the crisis of 2008 either. nobody wants a new financial crisis. at the moment, the greatest risks to financial stability in sweden are the financial unease in the euro area and the resulting unease on the financial markets. however, our assessment is that the swedish banks are also well - prepared for weaker development than in our main scenario. i would also like to touch on a domestic risk that is frequently mentioned β swedish households β high levels of indebtedness and the risk of a fall in housing prices. firstly, i would like to say that we don β t see any acute threat in this regard. we are not facing any dramatic falling housing prices. in addition, our assessment is that the swedish banks can also cope with fairly large falls in the market value of housing. nonetheless, we at the riksbank have long warned that the high level of indebtedness may make the swedish economy vulnerable. if the economy should develop adversely, households may be forced to cut back on their consumption. when a home falls greatly in price, the household becomes unable to move without realising major losses. individual households can then find themselves in particularly dire straits. a couple of days ago, finansinspektionen presented a report on housing loans in sweden. 2 encouragingly, this report showed that the mortgage ceiling introduced in 2010 may have dampened indebtedness and risk. at the same time, | is usually referred to as financial stability concerns, to put it simply, working in various ways to ensure the financial system is stable and functions efficiently. for example, individuals, companies and organisations must be able to make and receive payments in an efficient manner. when goods are transported to consumers via our physical infrastructure, such as the road network or by air, the payment for the product is sent to the end recipient by means of the β financial infrastructure β. if the financial infrastructure did not function, the economy would more or less grind to a halt. the financial system also makes it possible to manage various risks that can arise in the financial markets. this is important to both households and companies. another important function is to be able to save and borrow money via the financial system. this gives households and companies the possibility to distribute incomes and consumption over time. the funds that are saved can be borrowed by companies and households to finance various investments which can then create employment and growth. when there is distrust and disturbances in the financial system, this function may be impaired, which can lead to a credit crunch. first the financial sector is affected, but then it gradually becomes more difficult for households and companies to borrow, too. consumption and investment then decline, which can lead to a substantial economic downturn. a credit market that functions well is thus an important condition for good growth. to summarise, one can say that the financial system β s functions are very important for economic development. it is important that the system is stable for our society to function properly on the whole. but financial stability is something that most people probably often take for granted. as long as everything is functioning well, the focus of public debate is much more often on our interest rate policy and the inflation target than on our stability task. but more recently, as the functioning of the financial markets has been hampered, the situation has almost been reversed. it has also become very clear how closely related our two main tasks are. the riksbank β s most important tool in conducting monetary policy is the repo rate. one can say that we try to influence economic activity and inflation by steering the price of credit, that is, interest rates. but to be able to do this, the payment system and the credit markets must function so that the riksbank β s interest rate decisions have an impact on other interest rates in the economy. financial stability is in other words more or less a condition for being able to conduct monetary policy in an efficient manner | 0.5 |
ongoing improvements in mining firms'balance sheet positions. specifically, firms in the sector have reported a strong focus on reducing costs, realising efficiencies and paying down debt, particularly amid earlier expectations of commodity price declines ( as global supply increased and demand was seen to be moderating ). and while banks'direct exposures to the mining sector tend to be very low at around one per cent, the mining sector accounts for around 20 per cent of australia's business https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 08 - 08. html 9 / 13 08 / 08 / 2019 financial stability through the lens of business | speeches | rba investment. as such, there are important spillover channels to the rest of the economy, which mean that the improved position of mining firms reduces risks to firms in other parts of the economy. graph 7 small business the final issue i want to briefly cover is conditions for small business more generally and risks that could arise from this source. small businesses are a substantial part of the australian economy. they account for 70 per cent of employment and 40 per cent of production in the private nonfinancial sector. difficult conditions in small business could therefore have flow - on effects to the economy through decreasing employment and lower income for unincorporated enterprises, and hence to the health of households'balance sheets more broadly. and these effects are often particularly felt in regional areas where small businesses are part of the lifeblood of the community. furthermore, there could be impacts on banks'asset quality if non - performing loans rise. small businesses have been facing tighter credit conditions over the past year or so from a level that was already tight. over the past couple of years, lending to small businesses ( which includes businesses with annual turnover of less than $ 50 million ) has hardly grown at all, unlike lending to large businesses, which has grown by around five per cent per year on average ( graph 8 ). https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 08 - 08. html 10 / 13 08 / 08 / 2019 financial stability through the lens of business | speeches | rba graph 8 there are a number of reasons why small businesses are facing tighter credit conditions. [ 4 ] first, there is a more of a blurring in the line between lending to small business and personal credit. the obligations placed on financial institutions for lending to consumers ( under responsible | benjamin e diokno : the philippine economy - towards a more inclusive, a - rated economy speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at " financial paradigm shift : fintech and the future of philippine monetary policy ", a forum with the bsp governor by oxford business group and v & a law, manila, 28 january 2020. * * * ladies and gentlemen, good afternoon. i am honored to speak before all of you β organizational leaders and captains of industry. first of all, i would like to thank oxford business group ( obg ) for inviting me to this event. for many years, obg β s annual publication β the report : philippines β has provided a comprehensive and high - quality information on the philippine economy. my talk today will be divided into four parts. first, a quick review of the philippine economy β s performance in 2019. second, the outlook on the philippine economy for 2020 and beyond. third, the role of the bangko sentral ng pilipinas in achieving the economy β s goals. and fourth, as a conclusion, the philippines β potential to be recognized as an a - rated economy on the back of significant milestones achieved in recent years, robust growth prospects, and sustained commitment to critical structural reforms. the philippine economy in 2019 amidst a slowing global economy. 2019 was a good year for the philippines. the economy expanded by 6. 4 percent in the fourth quarter of 2019, bringing the full - year growth to 5. 9 percent. at this pace, the philippines remained one of the fastest growing economies and the most resilient in asia and in the world. last quarter β s growth marked the philippines β 84th consecutive quarter of uninterrupted growth, which shows it has remained resilient since the post - asian financial crisis years. from an average inflation rate of 5. 2 percent in 2018, it averaged 2. 5 percent last year β well within the target range of 2. 0 to 4. 0 percent. external payments position remained strong which served as a buffer for the economy against external shocks. as of end - 2019, the gross international reserves ( gir ) rose to its highest level ever at $ 87. 8 billion. this is equivalent to 7. 7 months β worth of imports of goods and services and payments of primary income. the received doctrine is that gir equivalent to 3 months of | 0 |
terms of macroeconomic policy, the tide has now turned. after a decade of low inflation, we moved last year very quickly to a period of high inflation. the inflation surge was driven by multiple factors : quicker than anticipated recovery from the covid19 pandemic, global supply chain bottlenecks exacerbated by renewed china lockdowns and, in the case of energy and food, russia's illegal war in ukraine. the ongoing monetary policy normalisation is a response to the dramatically changed inflation outlook. in the united states, the tightening of monetary policy began in march. so far, the fed has conducted two 75 basis - point hikes, placing the fed funds target range between 2. 25 % and 2. 5 %. it has also started to reduce its balance sheet. the ecb, in turn, announced in june its intention to raise interest rates in two instalments, first in july and again in september. in july, we raised the key ecb interest rates by 50 basis points. this was more than had previously been signalled, because the june inflation figures showed an even greater increase than we had anticipated, and so we determined that it 2 / 5 bis - central bankers'speeches was appropriate to take a bigger first step on the normalisation path. going forward, the ecb's interest rate decisions will be data driven, aiming for 2 % inflation in the medium term, in line with our strategy. let me next turn to central bank digital currencies. at the ecb, as in a number of other central banks across the world, we are looking into the possibility of introducing a cbdc, a digital euro. the investigation phase started in late 2021 and is expected to be concluded in october 2023. once the investigation phase is completed, we will decide whether to embark on actually building a digital euro. it is important to note that a digital euro would complement cash β not replace it β by allowing central bank money to be used in digital form also for retail purposes. we will continue to safeguard citizens'access to and the usability of cash across the euro area, even though its role as a medium of exchange has been diminishing rapidly, at least in some countries. a digital euro would give people an additional choice about how to pay and would make it easier to do so in an increasingly digital economy. it would expand the availability of digital central bank money beyond transactions between banks to include everyday peer - to - peer payments | been made to the united states and the question has been asked as to why europe us unable to effect as strong expansionary measures. many reasons exist that make comparisons with the united states infeasible. firstly, the expansion of the us public deficit is largely due to an increase in military expenses, which can hardly be regarded as counter - cyclical expansionary economic policy. furthermore, there was, and still is, substantially more genuine room for manoeuvre in the us economy in this respect. contrary to the euro area, us public finances were clearly in surplus when the country entered into recession. for demographic reasons alone the outlook for us public finances clearly outweighs that for the euro area. furthermore, the tax rate is markedly lower in the us in comparison to the euro area, which also gives the united states substantially latitude in taxation. finnish economy if the expected recovery of the world economy begins, the finnish economy will, without doubt, follow suit. however, forecasts suggest that the growth rate would only return to a 2 β 3 % level. one trend in which finland has taken the lead in international comparisons is population ageing. the problem of ageing is not exclusive to finland, but it has started to manifest itself here exceptionally early. in effect, the increase in labour growth in finland has virtually come to a halt and is expected to make a downwards turn in the near future. this will inevitably be reflected in all sectors of the finnish economic policy decision - making. in the next few decades, population ageing will pressure finland into increasing spending on its public sector, amounting altogether to some 6 % of the gdp. the funds accumulated in the pension scheme cover only one third of these upward pressures. can the remainder be met with increases in taxation? i doubt it. in fact, there is increased pressure to reduce taxes further in the future. another easily distinguishable future trend is tightening competition over the location of companies. finnish companies are increasingly a part of a global business world with operations in finland. in such a world the relocation of operations to places where costs can be kept to a minimum becomes the norm. a small, expensive, rapidly ageing and remote country is hardly in the best possible position when an international company is contemplating where to locate operations. labour mobility is gradually changing from a theoretical possibility into a reality that shapes economic policy. what kind of prospects does finland have for succeeding in international competition? political stability and security, a reliable legal system, a still solid infrastructure | 0.5 |
of ottoman rule and, more recently, the communist take - over of these countries, which resulted in an expulsion of all non - communist greeks. after an interlude of some 50 years, the historic forces are back at work. more than 5, 000 greek companies now operate in the neighbouring balkan countries and are among the main foreign investors in bulgaria, fyrom, romania, albania and, more recently, serbia. this development has resulted in a delocalisation of greek industry to our neighbouring countries and a steady inflow of migrant workers to greece. the greek banking sector has also undergone a radical transformation, evolving from the highly regulated sector it was 15 years ago, when the bank of greece set over 150 different levels of interest rates to become a free, competitive and dynamic sector and a key pillar in greece β s successful economic performance. despite their relatively small size by european standards, the greek banks'high profitability has enabled them to build sound foundations. just like other sectors, the greek banking sector has also expanded to south - east europe. this offers greek banks the opportunity to benefit from the growth potential of a rapidly developing region with low levels of financial intermediation, to increase their size and efficiency, and to continue to flourish in the very competitive international financial environment. the market penetration of greek banks, based on their total assets in the neighbouring countries, ranges from 11 % to over 30 %. moreover, the foreign claims of greek commercial banks on the balkan region countries have reached almost β¬11 billion, which represents 25 % of greek banks β total foreign claims and 58 % of their own funds. unfortunately, the state of the greek economy is far from rosy and many challenges still lie ahead. after euro area entry, fiscal discipline was relaxed and during the last five years the fiscal deficit has, in fact, worsened. only this year has it been budgeted to fall below 3 % of gdp, while continuous efforts will have to be maintained to reach a balanced position, as required by the eu. moreover, the euphoria after euro area entry prompted a'' money illusion'' with labour unions demanding and obtaining high nominal wage increases, regardless of the impact on real incomes and unemployment, as a result of the the loss of external competitiveness. this makes it even more urgent and imperative to raise productivity growth further and develop high value - added activities. we, therefore, need to intensify our structural adjustment efforts in the labour and product markets, promote innovation and technology, and | history of the last 50 years has taught us. in this context, i think that we can go a long way with the lamfalussy framework. and i do not think we are anywhere near the stage where we can say that we have fully exploited all the possibilities it has to offer, at least in the banking sector. in addition, the lamfalussy framework and the way it is applied will evolve over time in response to the evolution of markets. the eurosystem β s perspective i would like to conclude my speech with a specific reference to the eurosystem's perspective of the above - mentioned regulatory developments. it is worth noting that the eurosystem's primary relevant concern stems from the fact that it is responsible for monitoring financial stability in the euro area, and at the same time recognises that a smooth - functioning financial system is a vital transmission mechanism for ecb monetary policy. within this context, the forthcoming implementation of the new capital requirements framework, as well as the strengthening of supervisory cooperation within the eu, are seen as particularly encouraging developments, as they considerably enhance the existing financial stability framework. of course, as the financial market landscape changes and the degree of european financial integration increases, new concerns are likely to arise, regarding, for instance, the ability of the system as a whole to respond to a possible emergency situation in a timely and effective manner. the bank of greece, as a member of the eurosystem, keeps a close eye on developments, while participating actively in the respective discussions within the eu institutions for the establishment of common arrangements. | 1 |
, and deposits handily fund loans. so why would we do total loss absorption capacity ( tlac )? and what sort of resolution plan is possible when recapitalization from markets is most unlikely? we can β t afford to close a dsib, and we have no capital markets providers to take the failure risk. this is far from unusual in small countries β so why are we putting a lot of time into internal capital adequacy assessment processes ( icaaps ), recovery plans, resolution plans, and the like? because that is the international expectation. it would be better to develop a supersimplified but pragmatic approach that minimizes but does not eliminate the potential for public sector bailouts of dsibs. conclusion to sum up : the bahamian experience, and from what we have seen of other small country experience with the basel committee, has generally been positive. we are also deeply grateful for the work of the fsi, which is an extraordinarily helpful group. the same applies to the technical assistance on offer directly from basel committee member agencies and their associated national assistance bodies, plus the international multilateral development bodies. there are a few areas where we would like to see more consideration given to small country issues, but the bottom line is that the bcbs works for us, even though we aren β t a member and are unlikely ever to become a member. we are not yet in a position to say that about all international rule - making bodies, but that is a conversation for another day. i will conclude by thanking you personally and your agencies for your good work, and for the assistance and consideration you have shown the bahamas and other small nations over the years, and the assistance and consideration to come in the future. | the rules. a monetary policy report that might accompany such a forecast could include various views that may differ from the baseline summaries. performing this exercise would indicate the inherent uncertainty that policymakers face, yet it would also provide a better sense of the likely direction of policy and the variables most related systematically to that policy. further, this type of communication would push the fomc to conduct policy in a more systematic manner, which i believe will lead to better economic outcomes over the longer run. bis central bankers β speeches | 0 |
that the banking sector will take advantage of opportunities arising from the conducive macroeconomic environment in the country to create wealth and contribute to the development in our economy. finally, let me extend my gratitude to the board of directors and the managing director of access bank zambia limited for inviting me to officiate at this launch of the two branches and the visa debit card. i also wish to particularly thank the access bank, group deputy managing director, mr herbert wigwe for having travelled all the way from nigeria, to come and be part of this event today. it now gives me great pleasure and honour to declare the acacia and longarces branches officially launched. i thank you for your attention. | federal reserve banks have partnered with financial institutions, nonprofit organizations, local governments, and community institutions to help improve consumers'access to financial education materials and programs. currently, the board and the philadelphia reserve bank are conducting long - term research projects to better understand what makes particular consumer counseling and education programs successful. conclusion the federal reserve is committed to being proactive in addressing issues that affect consumers in their financial services transactions. we seek to promote the availability of consumer credit while ensuring that consumers receive the information they need to understand their options. consumers who do not have accurate information and an understanding of what that information means will have difficulty choosing among competing products. because information is critical to more competitive, and thus more efficient markets, more effective disclosure also has the capacity to weed out some abuses. by using consumer testing systematically, the federal reserve is taking an innovative approach to revising its regulations and improving the effectiveness of disclosures. at the same time, we will continue our cooperation with educational and community organizations around the country to help inform and support consumer education efforts. we recognize, however, that disclosures and financial education may not always be sufficient to combat abusive practices. because some bad lending practices may require additional measures, the federal reserve will seriously consider how we might use our rulemaking authority to address abusive practices without restricting consumers'access to beneficial financing options and responsible subprime credit. we will, along with the other supervisory agencies, also continue to actively use our other tools β such as supervisory guidance, the examination process, and our enforcement powers β to address specific practices that are abusive or otherwise inappropriate. | 0 |
higher than estimated in the report and that small and medium - sized firms in particular would find it difficult. the riksbank also drew attention to the risks of sweden being discriminated against in various respects. one example was the disadvantageous terms for outsider countries in target, the european payment system. moreover, an outsider position for the time being would involve additional costs in various parts of the economy. financial institutions, for instance, would have to operate twin systems in order to remain competitive. negative long - term effects of remaining outside such is the nature of the long - term effects that assessments of them are unlikely to change fundamentally in the course of a year or two. still, there is new and additional information that may cast a somewhat different light on certain aspects. one major issue concerns the link between emu and the single market. there is empirical evidence that the single market is exerting downward price pressure in the european union. some assessments suggest, moreover, that emu may lead to a further price fall ; figures as high as 10 to 15 % have been mentioned. if the effects were to be of that magnitude, the welfare gains would be substantial. in practice, however, it is not easy to distinguish the parts that emu and the single market are playing in price formation. empirical data therefore have to be treated with caution. at the same time, emu and the single market are linked at another level ; as an american colleague recently remarked, β if emu would help to secure the single market β s survival, it β s worth all the other risks. β another important long - term consideration is the structure of europe β s business sector. i believe we are now experiencing a formative phase. european manufacturing and services companies are being rapidly restructured, with effects that are likely to be considerable. many forces are contributing to this process ; the globalisation of production is one and another is the single market. but there can be hardly any doubt that emu is also playing a part, particularly for the financial sector. participation in the euro area would give sweden and swedish companies access to a larger capital market that is expanding rapidly. assessing what being outside the monetary union entails in this phase is not easy. personally i believe the effects are negative. i also think they may turn out to be considerable. a related matter is the location of companies. representatives of large swedish groups, as well as the federation of swedish industries, for example, frequently state that euro participation would result | other countries also have serious problems with their public finances other countries are also experiencing serious problems. among the euro countries, apart from greece, these are mainly portugal, italy, ireland and spain. critical conditions for assessing how these countries shall attain a sustainable development of their public finances in the future are the current size of the public sector debt in relation to gdp, the credibility of their future fiscal policy and the conditions for growth in domestic and external demand. the larger a country β s debt in relation to its gdp, the greater its interest expenditure and the closer it is to an untenable situation. among the countries i just mentioned, italy has the largest burden of debt, with a gross public debt similar to that of greece at just over 100 per cent of gdp. the other countries are not quite so vulnerable, but their debts are rising rapidly. ( slide : gross public debt in portugal, ireland, italy and spain ). the credibility of their future fiscal policy is a decisive factor, not least for the rate of interest they are forced to pay on their public debt. here, earlier patterns of balance or deficit play an important role, as does, of course, the content of their fiscal policy consolidation programme. the deficits are currently large in all of the vulnerable countries, but while ireland and spain have been able to show a balance or surplus during the years prior to the crisis, italy and portugal have shown a deficit throughout. ( slide : general government net lending in portugal, ireland, italy and spain ). a common precondition for the ability of these countries to renew their loans at a manageable cost is the credibility of their fiscal policy consolidation plans. the example of ireland points to a credible consolidation plan with concrete decisions on large cuts in public expenditure being able to reverse an upward trend in interest rates, while the greatest pressure is currently on portugal, where the ten - year rate rose last week. ( slide : government bond rates of portugal, ireland, italy and spain, compared with those of germany ). the more favourable the conditions for the development of domestic and foreign demand, the greater are the chances that good gdp growth will be able to reduce the problems in public finances. those countries that have not had large falls in asset prices, including italy, do not risk suppressed domestic demand in the same way as, for instance, spain and ireland, where property prices have fallen substantially. with regard to demand from abroad, the problems are made more severe by wages and prices having grown faster in | 0.5 |
the availability of a european safe asset could help banks reduce their excessive holdings of domestic sovereign bonds on their balance sheets. and we have a relevant experiment going on now, which should provide useful information on the pros and cons of a european safe asset. i am referring to the fact that the european commission will issue eur 800 billion worth of euro - denominated bonds in the coming years to finance the european recovery package, nextgenerationeu. the first tranche was very well received by the markets, subscribed by several multiples of the original offer. the funding experience the package could provide useful lessons and guidance for the design of a european safe asset. to conclude, we need to understand ever better both the lessons of covid - 19 and the structural trends in the economy and their impact on financial stability. i would coin the main message of my speech by paraphrasing james carville : β it β s the resilience, smarty! β β that i. e. resilience should indeed be the critical driver of financial sector polies. as far as the central banks are concerned, the biggest contribution they can make to the society is to deliver on their price stability mandate, which will also contribute to sustainable economic growth and broad - based, inclusive employment growth. i am confident that the outcome of the ecb β s monetary policy strategy review will enhance the effectiveness of our monetary policy and the attainment of price stability, and thus also enabling sustainable growth and full employment. thank you for your attention & let me wish you a productive conference! 1 esrb recommendation on intermediate objectives and instruments of macro - prudential policy ( esrb / 2013 / 1 ) 4 / 5 bis central bankers'speeches 2 imf, staff guidance note on macroprudential policy, november 2014. 3 simona malovana, martin hodula, zuzana rakovska, and josef bajzik, 2021, czech national bank survey on macroprudential and monetary policy, summary of the results, june 2021. 5 / 5 bis central bankers'speeches | to use as means of payment. even stablecoins, a more recent breed of private digital money, have turned out to be not so stable after all. 1 / 5 bis - central bankers'speeches regulators have been warning private investors about the risks involved, but strong returns tempted more and more of them to jump on the bandwagon during the upswing phase. the total market cap of crypto - assets reached a peak of close to usd 3 trillion in late 2021. it has since declined to less than usd 1 trillion during the market turmoil this year. as was to be expected, the sharp revaluations of crypto - assets have led to a number of casualties and heavy losses for many investors. some commentators have pinpointed the large - scale quantitative easing of central banks as the root cause for excesses in the crypto market. qe was a necessary response to the economic situation prevailing in the wake of the 2008 global financial crisis in most advanced economies. central banks quickly reduced interest rates to near zero to help the economy recover. but as the policy rates reached the effective lower bound, more had to be done to boost the economy and meet the inflation target. that's where central bank purchases of longer - term financial assets, or qe, came in, together with other unconventional policies including forward guidance, negative interest rates, and funding for lending programmes. while there may still be no consensus on how qe works in theory, i think we can all agree that, in practice, it has proved an effective tool for easing financial conditions and providing economic stimulus when short interest rates are at their lower bound. since both the overall easing of financial conditions and the role of qe as a portfolio rebalancing channel have served to push up the demand for risky assets, it is no surprise that asset prices have developed favourably during the qe period. this applies to crypto - assets in particular, where price formation is highly speculative and fanned by popular misunderstanding of monetary economics and even conspiracy theories. however, given the high volatility of crypto - assets, it is apparent that monetary policy can only explain a small part of the overall movement in their value, while the bulk of this has to be attributed to other factors. overall, i am sure that the economic benefits of qe outweigh the costs. as martin wolf noted in his recent ft piece on the battle over monetary policy, occasional asset bubbles are preferable to mass unemployment! in | 0.5 |
am also confident that, when the time comes, the fed will act to ensure that inflation remains firmly under control. | 5 to 10 years increased only ΒΌ percentage point. while such movements obviously bear watching, i would note that such a combination β namely, a substantial jump in near - term inflation expectations coupled with a relatively modest uptick in longer - run expectations β has often accompanied previous sharp increases in gasoline prices, and when it did, those movements were largely reversed within a few months. 4 information derived from the treasury inflation - protected securities ( tips ) market also suggests that financial market participants β longer - term inflation expectations remain well anchored even as the near - term outlook for inflation has shifted upward. in particular, while the carry - adjusted measure of inflation compensation for the next five years has increased about 1 / 4 percentage point since earlier this year, forward inflation compensation at longer horizons is roughly unchanged on net. much of the increase in five - year inflation compensation has been associated with the surge in food and energy prices, and the level of this measure appears consistent with a normal cyclical recovery after adjusting for those effects. commodity prices and inflation now i would like to explain in further detail why i anticipate that recent increases in commodity prices are likely to have only transitory effects on headline inflation. the current configuration of quotes on futures contracts β which can serve as a reasonable benchmark in gauging the outlook for commodity prices β suggests that these prices will roughly stabilize near current levels or even decline in some cases. if that outcome materializes, the prices of gasoline and heating oil are likely to flatten out fairly soon, and retail food prices are likely to continue rising briskly for only a few more months. consequently, the direct effects of the surge in commodity prices on headline consumer inflation should diminish sharply over coming months. overall inflation and core inflation regularly deviate from one another. when this has occurred over the past 25 years, the tendency has been for overall inflation to subsequently converge to core inflation, and not the other way around. an example of this pattern was seen in the months following hurricane katrina in 2005. bis central bankers β speeches over time, i anticipate that the recent surge in commodity prices will also affect the prices of a broader range of consumer goods and services that use these commodities as inputs. many firms are seeing such costs escalate and will pass along at least part of these increased raw materials costs to their customers. nevertheless, i expect the overall inflationary consequences of these pass - through effects to be modest and transitory, provided that longer - run inflation expectations remain well | 0.5 |
y v reddy : the global economy and financial markets - sustaining the recovery statement by dr y v reddy, governor of the reserve bank of india and leader of the indian delegation on behalf of bangladesh, bhutan, india and sri lanka, to the international monetary and financial committee ( imfc ), washington, dc, 24 april 2004. * * * mr. chairman the global economic environment has improved significantly since we met last september in dubai when the outlook for the global economy was weighed down by some uncertainties and risks. the recent strengthening of the global recovery process has been led by buoyant growth in emerging asia, especially china and india and, of course by a robust turnaround in the us. incipient recovery appears to have set in in the euro area while the economic activity in japan has exceeded expectations. the resurgent growth in many emerging market economies ( emes ) is now accompanied by significant resilience and emes are now positively contributing to the world growth. the determinants of global growth and the policy requirements for sustaining the present momentum, both at regional and multilateral levels, need to be evaluated in the light of this beginning of a significant rebalancing of economic strengths and activity. the improved global recovery has been accompanied by a strong acceleration in world merchandise trade, particularly from emerging asia, japan and euro area. with renewed improvement in sentiment, investment has also picked - up in most regions, which should in the normal course augur well for sustaining the recovery process. reflecting improved investment opportunities and receding systemic risks, capital flows to emerging markets have also improved. at the same time, the risk of deflation in several industrial countries has begun to subside with growing recovery and rising commodity prices. risks have been mitigated by improved liability management through readjustment of maturity structure of external debt, build up of foreign exchange reserves, and improved credit quality. the domestic bond market has also received added fillip in many countries. international financial markets have remained orderly and buoyant. while resilience against shocks in emes has strengthened, it is still an open question whether the anecdotal β herding behaviour β of investors is tempered by the β maturation process β of the investing community across the globe. this factor continues to be a critical issue for policy - makers in emes. although overall global growth prospects have improved markedly, uncertainties still remain. significant challenges and risks which still persist include possibilities of disruptive global currency adjustments, continued | banks to take additional capital. i find it to some extent peculiar that host supervisors and subsidiaries of banks headquartered in the eu, as a part of the vienna initiative, agreed regarding the carrying out of stress testing, and if necessary, recapitalization. but such an exercise is not foreseen in the home country. in addition to that, lending should be revived as well, but for this, i admit, i do not have a ready made formula how to do it. third, the vienna initiative should be extended to the entire region as i in belgrade could sleep much more calmly if the majority of the countries would have such an agreement. once we have finalized our deal, i hope in a matter of days, the deal makers should focus on all other countries as spill over effect is very large : a rumor regarding any bank in serbia or croation circulates in the region in matter of hours and could cause irreversible damages. fourth ifis β money should start rolling β as we are entering a crucial time period of the crisis in the second half of this year. time of statements, commitments, letters of intent etc. is over ; banks, investors, debtors need nothing more but money. the proof of the pudding is in eating, and this is now the time to proof what do the ifis stand for. last but not least, politicians in the region must manage realistic expectations and get ahead of the curve. this cannot and should not be done by brussels ( eu ) or washington ( imf / wb ). politicians in most of the countries do look down to the local population although they are pretty much aware how this crisis will affect them. it is finally time to be proactive, serious and stop spreading false expectations. the situation today in the region, to some extent, is even more serious than at the beginning of the transition process : this time tough reforms must be made just for, in the best case, to maintain the current standard of living! | 0 |
12. 43 % in spain ), 36 bp above its level at end - 2023. net interest income reached 1. 62 % ( 2. 90 % in spain ), with low levels for the cost of risk, at 0. 50 % ( 1. 15 % in spain ). these developments ought to be seen against the backdrop of weak credit among banks supervised by the ssm. indeed, the amount of loans to households increased by just 0. 1 % in the last quarter and by 0. 6 % over the past year. lending to firms rose by 0. 3 % in the last quarter and remained stable over the last year. spanish significant institutions also continued to improve their profitability as the increase in net interest income offset both the growth in operating costs and credit impairments and the outlay of the bank levy. net interest income was mainly driven by the price effect as lending volumes remained somewhat subdued. on the other hand, net fee and commission income grew at an annual rate of 9. 6 %, mainly among international banks. notably, there was a 34 % increase in the bank levy, to β¬1, 652 million ( from β¬1, 236 million in 2023 ) owing to growth in the base used to calculate the levy ( net interest and fee and commission income ). naturally, domestic banks were relatively more affected. moreover, overhead costs increased above inflation ( 7. 7 % year - on - year ), driven by staff costs ( up by 10. 9 % ). these figures must be understood in the context of a european banking system that is generally traditional in nature, with loans constituting the bulk of the balance sheet ( 60. 8 % ), followed by cash and balances at central banks ( 12. 3 % ). loans are principally concentrated in lending to households ( 37. 9 % of loans ) and firms ( 34. 9 % ). in turn, spanish banks subject to ssm supervision operate with an even higher share of retail customers, who constitute a higher share of lending ( 65. 5 % of the total balance sheet ), centred around credit to households ( 48. 2 % of all loans ). by business type, global systemically important institutions account for 44 % of assets, while universal banks account for 34. 3 %. following this overview of the current context of the most significant banks in europe, let us now look back at the path trodden. over the past ten years, this road has not been easy | damage on the human, social and economic fronts. there are currently over 43 million active cases worldwide and around 1. 2 million deaths across the globe. despite hitting our economy hard, i am pleased to highlight that fiji has had no covid community transmissions for almost 200 days now. furthermore, while some countries are reimposing lockdown measures in response to the second wave of the virus, here in fiji we are blessed and privileged to be able to gather for functions like this, attend soccer and rugby matches in person with other fans as well as meet for religious functions. let us not take this for granted and we appreciate the good work done by our agencies. 1 / 3 bis central bankers'speeches economic updates the imf estimates the economic impact of the coronavirus to reach us $ 28 trillion by 2025. unemployment has spiked in all countries and the global economy is projected to contract by 4. 4 percent in 2020, with 90 million people falling back into extreme poverty. this is a crisis like no other and the outturn is expected to be worse than the global depression of the 1930s. unfortunately, the fijian economy has not been spared from the wrath of the pandemic. with international borders closed, tourism, the mainstay of our economy, has come to a standstill. given that tourism cuts across many sectors and accounts for 30 β 40 percent of fiji β s gross domestic product, the fijian economy is forecast to contract by 21. 7 percent this year β our largest contraction since the 6. 3 percent decline in 1987. we are currently reviewing our economic forecasts and it is encouraging to note some improvements in domestic economic activity since the onset of covid - related restrictions in the first quarter. mobility and consumption indicators have picked up in line with the easing of the restrictions domestically while cane, timber and some manufacturing outputs have recovered somewhat from their lows recorded in the first half of the year. in this regard, i am pleased to highlight that positive developments in the partial indicators that we monitor point towards a softening of the contraction that was projected earlier. our official forecast will be released later next month. monetary policy objectives despite losing close to a billion dollars in tourism related foreign exchange income over the past 6 months, our foreign reserves remain at comfortable levels of just above $ 2. 2 billion and sufficient to cover 8. 2 months of retained imports. rumours of a devaluation were rife on social media sometime back, and there are some who continue to speculate | 0 |
regulated. generally speaking, this group includes institutions with total assets of over β¬20 billion. nothing will change for these institutions : all of the basel iii requirements will still apply, as will the additional capital buffer, the total loss absorbing capacity, and so on. a second group would include institutions which are not large and systemically important, but which are also not small and low - risk, which is why it is not possible to make any extensive simplifications for them. nonetheless, the proposal does include for this middle group some targeted relief measures which could be achieved by making specific amendments to the current regulations. finally, the third group is made up of small and non - complex institutions β the banks that are most affected by the fixed costs of regulation without their systemic importance being considered individually. this group β the largest in numerical terms β is to have its cost burden alleviated radically by means of a separate regulation : the small banking box. the burning question now, of course, is which institutions belong in which group β and particularly, which banks could be included in the small banking box. i will say right off that i am not able to conclusively answer this important question today. these classifications have to be balanced carefully, and we will do this as part of european - level discussions. 6 / 13 bis central bankers'speeches i would, however, like to give you an initial idea of how this classification might look. by talking of small institutions, this suggests that a qualification criterion for the small banking box would be relatively modest total assets. for example, in germany, a total assets threshold value of β¬3 billion could put more than 80 % of institutions into this category. what constitutes large and small in other member states is completely different, however. to account for this heterogeneity, absolute size would have to be supplemented with relative size. 7 / 13 bis central bankers'speeches this could be the ratio of the bank β s total assets to its home country β s economic power or the size of the domestic banking sector, though in this case, too, size isn β t everything. i β ve already said that not only do institutions in the small banking box have to be relatively small, they also must not be too complex. this is why we need additional criteria. first, only institutions that we believe would be subject to insolvency proceedings in the event of resolution may be part of the box. second, candidates for the small banking box must not engage | naturally depends on who these creditors are β if they are other financial institutions, the chances are high that regulators will shy away from resolution. within the framework of the financial stability board, work is ongoing at the global level to define a minimum standard on liabilities in terms of both quality and quantity that are eligible for bail - in. in order to tackle the issue of contagion, this standard should discourage other financial institutions from holding these liabilities. european commission ( 2013 ), β the euro area β s growth prospects over the coming decade β, quarterly report on the euro area 12 ( 4 ). bouis, r and r duval ( 2011 ), β raising the potential growth after the crisis : a quantitative assessment of the potential gains from various structural reforms in the oecd area and beyond β, oecd economics department working paper no. 835. bis central bankers β speeches the euro area already has a minimum requirement for such eligible liabilities. but so far, these liabilities can be held by other institutions without restriction. in the interest of financial stability, europe should lead the way and change this. resolution is obviously only the last line of defence against a bank failure. higher bank equity is the first. basel iii with its more stringent requirements reduces the likelihood that losses will run a bank into trouble. and as the banks β shareholders have more β skin in the game β, their risk appetite should moderate, which reduces the likelihood of losses in the first place. the new capital requirements are not exactly loved by bankers. their argument is straightforward : equity is expensive. this is undoubtedly true. but as franco modigliani and the university of chicago β s merton miller already pointed out in the late 1950s, in theory, the total cost of a bank β s capital stems from the riskiness of its assets, not from the composition of its liabilities. this theorem, however, obviously does not hold today, and mainly for one simple reason. interest on debt is tax - deductible ; pay - outs on equity are not. how sensitive are banks to this difference in tax treatment? a study3 by imf economists suggests that they are as sensitive as any other firm. what does this imply for the leverage of banks? imf economists estimate that abolishing the preferential tax treatment of debt would raise average unweighted bank equity by 2. 2 to 4. 2 percentage points. even though the authors caution that the effect is likely to be lower | 0.5 |
). however, studies that examine national data tend to find somewhat larger effects, with a 10 percent increase in the share of immigrants in the total population reducing the wages of low - skilled natives 3 percent to 5 percent ( borjas, 2006 ). international trade, another aspect of globalization, may also have differential effects on the economic well - being of u. s. workers even as it tends to raise real wages and incomes on average. for example, some empirical research suggests that, in the 1980s and 1990s, increased international trade reduced the profitability and hence the demand for labor in a number of industries that employed relatively recently, the red sox paid $ 51 million simply for the right to negotiate with the japanese pitcher daisuke matsuzaka ; they later signed matsuzaka for an additional $ 52 million over six years. illustrating some of the effects of globalization on baseball economics, the city of boston anticipates that increased interest by japanese tourists will bring in some $ 75 million, aside from what the red sox will earn from signing matsuzaka ( reed, 2006 ). more low - skilled workers ( borjas, freeman, and katz, 1997 ; sachs and shatz, 1994 ). of course, trade has increased the potential markets for other domestic industries, leading to higher demand and thus higher real wages for workers in those industries. a related development has been the outsourcing abroad of some types of services and production activities. because labor markets are adaptable, outsourcing abroad does not ultimately affect aggregate employment, but it may affect the distribution of wages, depending on the skill content of the outsourced work. at least until recently, most such activity appears to have involved goods and services that use relatively more low - skilled labor, which ( all else being equal ) would tend through the workings of supply and demand to slow the growth of wages of domestic low - skilled workers relative to those with greater skills ( feenstra and hanson, 1996 ). 9 unfortunately, much of the available empirical research on the influence of trade on earnings inequality dates from the 1980s and 1990s and thus does not address later developments. whether studies of the more - recent period will reveal effects of trade on the distribution of earnings that differ from those observed earlier is to some degree an open question. overall, i read the available evidence as favoring the view that the influence of globalization on inequality has been moderate and almost surely less important than the effects of skill - biased technological change. finally, | indeed, with the well - being of most people in the world today. although average economic well - being has increased considerably over time, the degree of inequality in economic outcomes has increased as well. importantly, rising inequality is not a recent development but has been evident for at least three decades, if not longer. 2 the data on the real weekly earnings of full - time wage and salary workers illustrate this pattern. in real terms, the earnings at the 50th percentile of the distribution ( which i will refer to as the median wage ) rose about 11 - 1 / 2 percent between 1979 and 2006. over the same period, the wage at the 10th percentile, near the bottom of the wage distribution, rose just 4 percent, while the wage at the 90th percentile, close to the top of the distribution, rose 34 percent. 3 in 1979, a full - time worker at the 90th percentile of the wage distribution earned about 3. 7 times as much as a full - time worker at the 10th percentile. reflecting the relatively faster growth of wages of higher - paid workers, that ratio is 4. 7 today. the gap between the 90th and 10th percentiles of the wage distribution rose particularly rapidly through most of the 1980s ; since then, it has continued to trend up, albeit at a slower pace and with occasional reversals. the long - term trend toward greater inequality seen in real wages is also evident in broader measures of financial well - being, such as real household income. 4 for example, the share of income received by households in the top fifth of the income distribution, after taxes have been paid and government transfers have been received, rose from 42 percent in 1979 to 50 percent in 2004, while the share of income received by those in the bottom fifth of the distribution declined from 7 percent to 5 percent. the share of after - tax income garnered by the households in the top 1 percent of the income distribution increased from 8 percent in 1979 to 14 percent in 2004 ( congressional budget office, 2006 ). 5 even within the top 1 percent, the distribution of income has widened during recent decades. 6 the measures of inequality i have cited reflect " snapshots " of a single time period, usually a year. consequently, they may not tell a complete story about the extent of inequality or its trend. for example, the fact that an older, more - experienced worker earns more than a newly hired employee will this result is calculated using the data on compensation | 1 |
out of 38 in 2021. improvements to universal child care may narrow these differences, though the full effects will take time. other populations may also benefit from improved labour market access, including indigenous people, who have a younger and faster - growing population than many other groups. potential for remote work, as well as training to develop skills in areas with critical labour shortages, may open new opportunities for groups facing local labour market challenges. and companies need to do their part to attract and retain new segments of the labour force. by adjusting to and taking advantage of structural changes in the labour market, canada can increase the sustainable growth rate of our economy. an aging population reduces the participation rate, and higher immigration is becoming increasingly important for canada β s potential growth. changes brought by globalization and technological change, especially digitalization, will also continue to affect labour demand and the skills employers need. the net effect on maximum sustainable employment is something we will be working to assess. an increased supply of workers raises the rate the economy can grow without generating inflationary pressures. but enhancing supply takes time. it also creates new demand. new workers will have new incomes, and that will add to spending in the economy. that β s why increasing supply, while valuable, is not a substitute for using monetary policy to moderate demand and bring demand and supply into balance. conclusion it β s time for me to conclude. since the onset of covid - 19, the labour market has been in tremendous turmoil. the pandemic caused a surge in unemployment and had a terribly uneven impact, exacerbating the inequality already faced by women, youth and marginalized workers. we were very concerned about widespread job losses, deep cuts in consumer spending and, ultimately, deflation. but the recovery was swift and across the board, with the fastest rebound in employment ever. now the economy has gone too far in the other direction. the economy is in excess demand, the job market is too tight, and inflation is too high. monetary policy has begun to have an impact, but it will take time for the effects of higher interest rates to spread through the economy and reduce demand and inflation. once we get through the slowdown, growth will pick up and our economy can grow solidly again with healthy employment and low inflation. how much employment growth we can achieve while maintaining low inflation will depend on the growth of labour supply. this is the fundamental concept that maximum sustainable employment captures. it is not maximum employment β it β s how much employment | amounts to about 27 percent of gdp, one of the lowest ratios among emerging markets. surprisingly, manufacturing makes a stagnant contribution to growth in aggregate productivity. inadequate infrastructure may help explain this. finally, labor productivity gains in agriculture, given emigration, are lower than expected. institutional rigidities which inhibit scale and technological adoption could play a role. 5 the negative implications of the absence of competition are evident in the energy sector, which until recently was the exclusive terrain of government - owned enterprises. in the last few years, despite ample natural fields, mexican crude oil and natural gas production has been declining. this contrasts with a revolution in production in countries such as the united states. even further, mexico cannot import enough natural gas cheaply because of a limited pipeline network. due in part to lack of availability of cheap natural gas supplies, mexican electricity prices, on average, approach twice u. s. rates. 6 another example is the telecoms sector, which has faced limited competition. as a result, the penetration of fixed - line and mobile phone services is still low by international standards. additionally, indicators for internet services suggest that the services are inferior to those available in many nations. mexico β s current reform agenda seeks to tackle many of these inefficiencies. the agenda covers a wide range of sectors, including labor, education, finance, telecoms, and energy. generating the most interest for investors are the changes in the telecommunications and energy sectors. in telecoms, reforms now allow players to offer triple - play services, provided market non - concentration requirements are met. limits on fdi have been reduced. in energy, the gates are now open to private agents, with contracts in exploration and extraction for oil and hydrocarbons allowed. permits in gas processing and oil refining, transportation, storage, distribution, and commercialization are also provided for, as is participation in electricity generation and sales. well implemented, these reforms could boost productivity in laggard sectors in the medium term. to the extent that some of them provide essential inputs to the economy as a whole, overall efficiency gains may be realized. to reap the full benefits from the reforms, other complementary measures should be taken, such as strengthening the rule of law, improving public security, and fortifying infrastructure. economic developments and outlook after a year and a half of weakness, the mexican economy started to pick up this year. second - quarter figures were strong, and several recent indicators suggest momentum is sanchez, m. ( 2013 | 0 |
that cannot be recouped from the failing firm itself. to avoid pro - cyclical effects, such assessments should be collected over time. establishing a resolution regime with these characteristics is, i would suggest, one of the most important financial regulatory reforms for every country that does not already have such a mechanism in place. it would lend substance to the idea that market discipline can be a solid third pillar of financial regulation, along with stronger prudential requirements and improved supervisory oversight. still, as is implicit in the foregoing discussion, an untested regime will probably not acquire complete credibility until it is actually applied successfully. for this reason, among others, it is important to ensure that other regulatory tools will help compensate for the uncertainties associated with an essentially untested mechanism. international efforts on resolution issues the looming or actual failure of a large, internationally active financial firm inevitably complicates the already challenging process of resolution. mismatches in the amounts and maturities of assets and liabilities held by the firm in the various countries in which it operates can lead host governments to take special action to protect the interests of depositors and creditors. and different insolvency regimes apply to separately incorporated subsidiaries across the world. some of those regimes may be substantively inconsistent with one another, or may not account for the special characteristics of a large international firm. a natural response, which one can find peppered through various law journals over the years, is to propose an international treaty that would establish and harmonize appropriate insolvency regimes throughout the world. just to state the proposition is to see the enormous hurdles to its realization. the task of harmonizing divergent legal regimes, and reconciling the principles underlying many of these regimes, would be challenge enough. but an effective international regime would also likely require agreement on how to share the losses and possible special assistance associated with a global firm β s insolvency. despite the good and thorough work being undertaken in both the basel committee on banking supervision ( basel committee ) and the financial stability board, we must acknowledge that satisfyingly clean and comprehensive solutions to the international difficulties occasioned by such insolvencies are not within sight. 2 it would certainly be useful if jurisdictions could at least broadly synchronize both standard bankruptcy and any special resolution procedures applicable to a failing financial firm. but even this significant advance would not settle many of the nettlesome problems raised by a cross - border insolvency. it thus | daniel k tarullo : toward an effective resolution regime for large financial institutions speech by mr daniel k tarullo, member of the board of governors of the federal reserve system, at the symposium on building the financial system of the 21st century, armonk, new york, 18 march 2010. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system β s website. * * * two years ago this week, bear stearns succumbed to severe liquidity stress. it was rescued, and eventually absorbed by jpmorgan chase, with financing assistance provided by the federal reserve. although it would take another six months before the accumulating stress and uncertainty posed an immediate threat to nearly all of our major financial institutions, it is clear in retrospect that this arranged marriage, and its accompanying dowry of government financing, set off an expansion of the universe of firms perceived as too big to fail. during the financial crisis, government authorities in the united states and elsewhere believed they had only two realistic options in the face of serious distress at a large financial firm. first, they could try to contain systemic risk by stabilizing the firm through capital injections, extraordinary liquidity assistance, a subsidized acquisition by a less vulnerable firm, or some combination of these supports. second, they could allow the firm to fail and enter generally applicable bankruptcy processes, risking in those times of fear and uncertainty a run on similarly situated firms. the bear stearns deal was an example of the first policy option. lehman brothers was an example of the second. when its bankruptcy set off a firestorm in the exceedingly dry tinder of financial markets in the fall of 2008, the u. s. government decided that further failures of large, interconnected financial institutions risked bringing down the entire financial system. it responded to the situation with the troubled asset relief program to provide capital, and the temporary liquidity guarantee program to extend debt guarantees, to large financial firms. indeed, faced with the possibility of a cascading financial crisis, most governments around the world selected the bailout option in most cases. but if the costs of this approach are less dramatic during a crisis, they are no less significant afterward. entrenching too - big - to - fail status obviously risks imposing significant costs on the taxpayer. it undermines market discipline, competitive equality among financial institutions of different sizes, and normal regulatory and supervisory expectations. the desirability of a | 1 |
national payment infrastructure would not only support payments specific to poland ( such as zus β social insurance institution payments and payments to tax offices ), but also bring unquestionable benefits to polish citizens and companies. ladies and gentlemen, the implementation of sepa is a huge challenge for the polish banking system, for companies that make up the polish payment infrastructure and for many large clients of banks, including clients from the public finance sector. such a huge challenge requires the creation of the vision of sepa, the vision that will unite activities of all stakeholders of this process β from banks, through its clients up to infrastructural and telecom companies. the vision should treat the interests of the clients of the polish and european payment infrastructure as a priority. all stakeholders should remember that only those companies will be successful in the global economy of the 21st century that deliver value to their clients. companies that use cyclical market trends to gain benefits at the expense of their clients are doomed to fail. i would like to call on all those who develop the vision of sepa poland to analyse the functioning of payment systems in the most advanced parts of the world and to benefit from the experience of such countries as singapore, as expressed in the vision entitled β intelligent nation 2015 β. let us use the sepa poland process to create a payment system for the 21st century. let us inspire others, including public administration, to act and implement eadministration and e - economy so that poland and europe can be successful in the global economy of the 21st century. thank you very much for your attention. see www. in2015. sg | risk posed by an ageing population. a majority of pension schemes are built on the premise that the government is able to support the defined benefit pension payments as and when they become due. in simple terms, this essentially means that i will be financially taken care of by the government when i'm old. however, this notion may not be financially sustainable anymore as most pension schemes have not imputed the impact of longevity risk at the outset. longevity had resulted in a higher number of retirees drawing pension benefits vis - a - vis the gainfully employed tax - paying persons, thereby contributing to untenable fiscal deficits. in response to this challenge, some countries are shifting towards the defined contribution ( dc ) schemes. however, while a dc scheme could address the issue of sustainability, it would not adequately cater the need to provide a stream of benefit payment throughout the lives of retirees, especially for those who outlived their retirement savings. in malaysia, for example, most of those employed are mandated to contribute to a defined contribution ( dc ) scheme known as the employees provident fund ( epf for short ). a recent survey conducted revealed that a bout 72 % of epf contributors spend their entire epf savings within 3 years of retirement, i. e., by the age of 58, an average retiree would have all his retirement savings depleted. in the case of a man, he has to be financially self - supporting for the next 17 years of his life, assuming he lives till 75. presumably, his retirement needs will be met by family members. however, with diminishing β extended family β values, it is uncertain if this will eventually happen. another significant challenge is to modify the structure of mandatory pension schemes itself, of which many are based on a full - time employment model. most countries in this region do not have extensive pension schemes to cover both the formal and informal sectors. i understand that in thailand and china, for example, only about 4 % and 60 % of the labour force is respectively covered. the full - time employment model does not adequately address the profound changes in employment patterns, which economies are now experiencing, such as the increasing number of women in the workforce. then again, most pension schemes are also designed for workers with full and uninterrupted careers. this does not reflect the experience of women, as we see more and more today, who may leave their jobs to become full time housewives or homemaker. breakdown of marriage | 0 |
if it were to occur, it would be an example of the type of imbalance that could threaten the end of the expansion, and therefore threaten the downward trend in unemployment. wage surges ended two of the past three expansions - it is important that it does not happen again this time. i think good sense will prevail, and that anyone who is encouraging β double compensation β will think again. conclusion i think we have still got a long way to go in this expansion. it is already longer than its predecessors, and if we as a community are sensible and do not allow short - term thinking to overcome our long - term interests, it could rival in length the expansions of the 1950s and 1960s. as for monetary policy, we think it can play a very important part in achieving that end. inevitably, there will be those who agree and those who disagree with what we are doing. we think, however, that monetary policy should be judged, not by any particular movement in interest rates, which will always be surrounded by some element of controversy, but by its performance over the whole of the expansion. | 91 q2 to 99 q3, for us 91 q1 to 99 q3. talk today, but before i get into it, i would like to ask your indulgence to detour through the age - old subject of the business cycle. the business cycle economists have been analysing the business cycle for a century or more. from time to time after a long expansion, a few feel emboldened enough to suggest that perhaps we have seen the end of the business cycle. this happened in the very early - 1970s, and a few people are canvassing the idea now as part of the concept known as the β new economy β or β new paradigm β. while there is undoubtedly substance in these ideas, some of you may be disappointed to know that i am not a member of the school that thinks the business cycle has been banished, although i am happy to recognise that increased productivity growth in the 1990s has made the task of macro - economic management somewhat easier than formerly. the most obvious benefit of this from the monetary policy perspective is that the overall rise in interest rates needed to prevent a potential inflationary situation developing now seems to be a good deal smaller than previously. there are two main mechanisms that lie behind the business cycle : 1. a business cycle of some sort may be the inevitable result of interactions involved in a complex dynamic system such as an economy. we know that cycles are the norm for such natural phenomena as the weather and animal populations, and some tendency in this direction is also probably intrinsic to economic behaviour. the first nobel prize in economics was awarded to ragnar frisch for work on how business cycles can be propagated in simple models of the economy, and others such as samuelson and hicks expanded on this. 2 more recently, the real business cycle3 school of economists have taken this in a new direction by regarding all cycles as being a natural result of changes in the supply side of the economy. i do not want to take any of this too literally, but i would agree with one conclusion that comes out of all this work, namely that it is probably unrealistic to expect a dynamic system like a modern economy to expand in a smooth line ; its natural progression is probably characterised by some element of cyclicality. 2. a business cycle may be viewed as resulting from policy mistakes. in this view, policy is kept expansionary for too long during the upswing, resulting in the build - up of serious distortions or imbalances - principally inflation | 1 |
njuguna ndung β u : the role of the central bank of kenya in kenya β s economic transformation talking notes by prof njuguna ndung β u, governor of the central bank of kenya, at the nesc workshop on the role of central bank in economic transformation, kenya school of monetary studies, nairobi, 29 may 2007. * * * hon. amos kimunya, minister for finance, republic of kenya amb. francis muthaura, permanent secretary, head of civil service and secretary to the cabinet, permanent secretaries, mr. byung hwa kim, deputy governor, bank of korea, mr. muhammad ibrahim, assistant governor, bank negara malaysia, mr. hemraz oopuddye jankee, director of research, central bank of mauritius, distinguished guests, ladies and gentlemen i take this opportunity to warmly welcome you all to the kenya school of monetary studies. it is also a pleasure to specifically welcome our esteemed visitors from korea, malaysia and mauritius who have joined us on this occasion. i also wish to thank the national economic and social council ( nesc ) for their effort so far in developing the vision 2030 that provides a roadmap for kenya to attain middle income status by the year 2030. the vision, as we have witnessed presented is well thought out. but there are still some building blocks required and this forum is one of those. the importance and significance of it is to situate the role of central bank into the vision. the central bank of kenya is a key institution in this vision and like other key institutions, should learn from other successful countries. central banks in the eastern african region seem to face similar challenges β but the important role the cbk is expected to play in the vision 2030 is critical but some challenges are evident : β’ effectiveness of monetary policy instruments and fighting inflation. β’ thin markets ; foreign exchange and financial markets. β’ problems of exogenous shock particularly those arising from bad weather and volatility in oil prices complicates for price stability. β’ financial sector stability in a global setting. this workshop is timely and provides an opportunity for the cbk to re - evaluate its role in the kenyan economic transformation in the context of the vision 2030. i will come back towards the end to tie up what experiences the cbk will learn and adopt from the experiences of those successful cases. ladies and gentlemen, let me wish you productive deliberations and hope that we will find the | exactly the new normal looks like is still being analyzed and discussed at the fed. we have indicated that we plan to shrink the balance sheet to the smallest size consistent with the efficient and effective conduct of monetary policy, and that, in the long run, the asset side of the balance sheet will consist primarily of treasury securities. 9 that β s our strategy, but its execution will depend on the operating framework of monetary policy, among other factors. here, the fed basically has two choices. we could return to a system similar in spirit to that used before the financial crisis, in which the supply of reserves in the banking system was kept relatively scarce, and the interest rate was set by adjusting reserves on a frequent basis through open market operations. alternatively, we could continue with the system that we β ve been using since the crisis, in which bank reserves are abundant and the federal funds rate target is achieved through adjustments to administered rates. as i said, this approach is working very well at controlling interest rates and has proven to be easy to communicate and adaptable. 10 the fed will be looking closely at these options in the coming months and will subsequently make a decision on the future operating framework. and, as is our standard practice, we will be sure to communicate our thinking and decisions on this issue as soon and as thoroughly as practicable. conclusion monetary policy - making has perhaps never been more challenging than it was following the financial crisis. but, as we move toward more β normal β conduct of monetary policy, we shouldn β t rest easy and think we won β t confront our own fair share of future challenges. the most important one in front of us today is sustaining the long economic expansion without allowing risks to grow that ultimately undermine economic prosperity. whatever the future may bring, i will be guided by our dual mandate, a heavy dependence on data, and a steadfast commitment to transparency. thank you. 1 1 see fomc statement and implementation note, september 26, 2018. 2 2 see minutes of the federal open market committee, march 17 β 18, 2015. 3 3 see fomc communications related to policy normalization, and simon potter, money markets and monetary policy normalization, april 15, 2015. 4 4 see fomc statement and implementation note, september 26, 2018. 5 5 see fomc issues addendum to the policy normalization principles and plans, june 14, 2017. 6 6 see simon potter, confidence in the implementation of u. s | 0 |
inflation, sharply higher interest rates in response to higher inflation, and a subsequent recession. as a result, my guess is that if we avoid the boom - bust scenario, we shall have avoided the most serious of the other imbalances or at least will be in a better position to absorb and respond to the unwinding of other possible imbalances. that leaves the possibility that there might be cases when we face market / sector imbalances in the absence of any aggregate demand / supply imbalance. in such a case, the level and growth of output are sustainable in the sense that they are not putting pressure on inflation ; but this aggregate balance might be threatened subsequently by a spontaneous unwinding of a market / sector imbalance. alternatively, the depth and duration of a downturn in response to some future adverse shock might be aggravated by the unwinding market / sector imbalances. what role can and should monetary policy play in such a case? policymakers will, i expect, be reluctant to undermine macroeconomic performance in the short run in an attempt to unwind a perceived market / sector imbalance that might not be serious or might unwind in a gradual and nondisruptive fashion on its own. furthermore, it is not obvious how to unwind an excessive debt burden, to raise the personal saving rate, or to narrow the current account deficit in a sustainable way through monetary policy. as a result, monetary policy, in my view, needs to focus on achieving balance between aggregate supply and aggregate demand. in pursuing this course, monetary policy is confronted by two competing challenges. the first is to allow the economy to realize the benefits of any decline in the nairu and any increase in trend growth. supporting maximum sustainable growth is very much the business of monetary policy. but achieving maximum sustainable growth also is about ensuring the sustainability of an expansion and hence avoiding overheating. this is the second challenge today. i view the efforts of the fomc as precisely focused on balancing these considerations. | issuance with increased demand from municipal investors, including very strong inflows to municipal bond funds, and improved secondary market conditions. ultimately, the increased availability of credit to municipal borrowers helped them maintain employment and capacity by avoiding forced cutbacks in payrolls and other critical operations. the term asset - backed securities loan facility the term asset - backed securities loan facility ( talf ) supported the issuance of securities backed by newly and recently originated student loans, auto loans, credit card loans, commercial mortgages, loans backed by the small business administration, and certain other assets. the announcement and presence of the talf substantially helped improve liquidity in the asset - backed securities markets, including those for commercial mortgage - backed securities and collateralized loan obligations, and contributed to rapid improvement in credit markets for consumers and businesses. ultimately, the talf helped promote the longer - term, market - based financing that is critical to the real economy. summary of section 13 ( 3 ) facilities using cares act funding ( billions of dollars ) peak amount of assets2 14. 1 16. 6 6. 4 4. 1 current amount of assets2 12. 8 13. 6 5. 4 1. 6 treasury equity remaining3 13. 9 16. 6 6. 3 3. 5 maximum facility announced closed capacity1 corporate credit facilities mar. 23, 2020 dec. 31, 2020 main street lending program apr. 9, 2020 jan. 8, 2021 municipal liquidity facility apr. 9, 2020 dec. 31, 2020 talf mar. 23, 2020 dec. 31, 2020 note : the data are current as of june 17, 2021. 1. the maximum authorized amount of facility asset purchases. 2. current and peak outstanding amounts of facility asset purchases. β’ for the corporate credit facilities ( consisting of the primary market corporate credit facility and the secondary market corporate credit facility ), includes exchange - traded funds at fair value and corporate bonds at book value. asset balances from trading activity are reported with a one - day lag after the transaction date. β’ for the main street lending program, includes loan participations, net of an allowance for loan losses updated as of december 31, 2020, at face value. β’ for the municipal liquidity facility, includes municipal notes at book value. β’ for the talf ( term asset - backed securities loan facility ), includes loans to holders of eligible asset - backed securities at book value. 3. the amount of the treasury contribution to the credit facilities. source : for | 0.5 |
same way, savings contracts that are long - lived and provided by life insurers, and are often an individual β s primary pension provision, are critical financial services that are difficult to replace without unacceptable cost. there is therefore a common feature of banking and insurance in terms of continuity of access to critical financial services. the pra has the general objective of ensuring the safety and soundness of the firms under its regulation. safety and soundness is defined in terms of the resilience of the financial system, which in itself is closely linked to the access of users to critical financial services on a continuous basis. but for insurance we have a second objective, namely the protection of policyholders. why do we have a second objective for insurance? for me, the reason is that continuity of insurance protection β of risk transfer and long - term savings products β requires a greater assurance that the policyholder has access to their contract β in other words, it is quite contract specific, and in some cases those contracts are long - term in nature. for banks, depositors want continuity of access to funds, but they have less need of access to the exact contract β deposits can be moved. put another way, most of the underlying risks to banks arise from their assets, whereas for insurers they arise from liabilities and assets. so, we need somewhat different objectives for prudential supervision. the traditional model of supervision has been quite industry specific. the fsa regime introduced in 1997 created a single authority, but within the fsa the framework of rules bis central bankers β speeches applied to insurance supervision was unique to the industry. it is true that in the run - up to the start of the crisis, and for some time thereafter, the fsa mingled insurance and bank supervision in terms of its operating units, but i think that did not work effectively, and the fsa and now the pra moved to a clear distinction, with insurance supervision headed by julian adams. insurance supervision is a skill of its own, and while our supervisors do move roles between insurance and banking in both directions, we want to ensure that we have groups of truly expert insurance and banking supervisors. recently, we have taken a further step on insurance supervision by formalising two directorates, for general and life insurance, reporting to julian, and headed by chris moulder and andrew bulley respectively. chris and andrew bring a wealth of experience of insurance supervision and for chris auditing. alongside julian, chris and andrew is a | because they are least able to absorb income shocks ( honohan ( 2005 ) ). this crisis appears to have been no different. meanwhile, the crisis - induced narrowing of wealth inequalities has been at least partially reversed as asset prices have reflated rapidly over recent years. the occupy movement. they took up the baton for the 99 % in 2011. at least at first, occupy were treated with all of the seriousness of a local student protest. but rather remarkably occupy became a global outfit, albeit a rather loosely - fitting one. occupy touched a moral nerve among the many. the 1 % ers in davos had inequality as their main theme this year. in the words i used when addressing occupy in 2012, there is now a broader acceptance that β they were right β in their diagnosis ( haldane ( 2012 ) ). criticism of occupy today tends to focus not on their diagnosis, but on their lack of prescription for curing the ills of inequality. bill de blasio. he was elected mayor of new york in november 2013 on a signature theme of tackling widening inequality in the city. his campaign slogan was β a tale of two cities β. and this was no ordinary victory. bill de blasio won with a remarkable 73 % of the popular vote. and finally, thomas piketty. enough has already been said and written about a book bought by many, read by few and understood by even fewer ( piketty ( 2014 ) ). i am guilty on all three charges. i suspect never, in the field of human endeavour, has so bis central bankers β speeches simple a line chart done so much to fuel the debate among so many, not just in the salons of paris but in the starbucks of london and new york. suffice to say, the inequality issue seems unlikely to be a french fashion. it is a global public policy trend and a rising one. inequality is emerging after a half - century in the wilderness. the surprise may be that it has taken so long. it is well - known, from survey and experimental evidence, that a sense of β fairness β is a deeply - held and richly - valued psychological trait in humans ( bowles ( 2012 ) ). and if piketty is right, inequality trends are self - perpetuating as wealth begets wealth. economic and financial stability that naturally begs the question of whether anything should be done. on the face of it, this is not the business of a central | 0.5 |
bundesbank, vigorously opposed it. what β s your position? without knowing the future concrete circumstances underlying a decision on the potential activation of the omt, it is difficult to answer this question. overall i am a little bit critical about the incentives structure offered by the omt. i do see some legal questions coming up. but to get the concrete answers on those questions you need concrete circumstances : the economic conditions ; what you buy ; how much you buy, mitigating factors like the conditionality etc. wsj : how important is it that monetary policy decisions are not influenced by the state of the banking system? what is important is that you have to make sure that the decisions in the banking supervisory arm are not influenced by your monetary policy task and vice versa, and that you can do. but you cannot have a chinese wall in your head. as a central banker, you should be very well familiar with what is happening to banks within in the euro area, after all they constitute one of the biggest monetary policy transmission channels. but rest assured we will implement strict rules and practices to ensure separation between both tasks. currently, we are examining best practices of other central banks around the world, which are also tasked with banking supervision. the decision making procedure for supervisory decision is a very special one : the supervisory board of the ssm will draft the decision and the governing council, the ultimate decision making body, adopts it through a non - objection procedure. wsj : does there need to be a response from the european union to the federal reserve β s new rules for international banks? we have an agreement between the u. s. and europe that there is a certain kind of reciprocity in accepting the regulatory regime as equal. the next half year should be a period bis central bankers β speeches where we ask our colleagues from the fed, how they want to implement the new foreign bank rules. and then we need to talk in the european arena how we want to react in particular when we are talking about reciprocity. wsj : isn β t the asset quality review process for euro - zone banks too late? the u. s. addressed problems with its banks several years ago. no, it is not too late. the aqr and the stress test will be tough. they will be credible, stringent and consistent. it β s the last chance to clean up. we are a little bit late, but then again, the situation in the u | orders, which have historically been closely associated with industrial production3, remain in negative territory. so we are now seeing a more persistent deterioration of external demand. but a β soft patch β does not necessarily foreshadow a serious slump. during the four euro area business cycle expansions since 1970, there have been 50 soft patches β defined as a two - quarter growth slowdown β and only 4 recessions. 4 in fact, the euro area faced an analogous situation in 2016, when the economy also went through a soft patch triggered by a contraction in world trade. at that time, the strength of the domestic economy was able to shield the recovery from external uncertainties. the key question is whether, with monetary policy continuing to support the expansion, domestic 1 / 6 bis central bankers'speeches demand will remain as resilient today. the demand component typically affected most by a weaker global environment is investment. ecb internal analysis shows that the more exposed euro area listed firms are to foreign markets, the more sensitive they are to uncertainty when making their investment decisions. and there are some signs that external demand may be affecting investment via manufacturing value chains within the euro area. in particular, both extra and intra - euro area trade slowed steeply last year, whereas in 2016 intraeuro area trade was robust to the external slowdown. such a recoupling of intra - and extra - euro area trade growth in a downward direction has not occurred since the start of the global financial crisis. intra - euro area exports of intermediate and capital goods were hit particularly hard, with capital goods exports registering their strongest contraction since the sovereign debt crisis. a further rise in global uncertainty could therefore lead to a deceleration in trade and investment. but for now expectations for investment remain relatively robust. though professional forecasters have slightly downgraded their projections for investment growth this year β from around 3 % to around 2. 5 % β the fundamentals are in place for investment to rebound, if global growth stabilises. capacity utilisation stands close to its long - term maximum, financing conditions remain very favourable and corporate leverage5 ( as a percentage of total assets ) has fallen to levels last witnessed in the early years of emu β although gross corporate indebtedness6 ( as a percentage of gross value added ) still stands above its pre - crisis level. the latest surveys also suggest some recovery in business sentiment. while consumption is typically less affected by external developments, its growth rate has slowed over the | 0.5 |
philip lowe : australia'a bank review speech by mr philip lowe, governor of the reserve bank of australia, at a media briefing, sydney, 20 april 2023. * * * good afternoon. i would like to take this opportunity to welcome the conclusions of the review into the reserve bank and thank the review panel for their excellent work. the review has been timely, with the rba facing an increasingly complex world and operating environment. the recommendations will help us deal with this more complex world and will strengthen the monetary policy process and governance of the rba. the review concludes that the rba has a strong reputation domestically and internationally. it also concludes that we have played an important role in the economic success that australia has experienced over recent decades. the panel also notes that the rba has a highly dedicated and professional staff who are focused on serving the public interest. but as times change, we need to change too. this review will help us do this as we strive to promote the economic welfare of the australian people. i would like to particularly welcome the panel's support for the current monetary policy framework in australia. australia was an early adopter of flexible inflation targeting and this approach has served the country well. the 2 β 3 per cent target range is understood in the community and helps anchor inflation expectations. the flexible nature of the inflation target is also important and the panel has some helpful suggestions as to how we can be clearer about how, and when, this flexibility is used. i would also like to welcome the support for the operational independence of the bank. this is a cornerstone of our monetary policy framework and it is pleasing to see the strong endorsement for independence and the suggestions for strengthening it. it is also pleasing to see the support for the council of financial regulators and the ideas for improving current arrangements. i also welcome the explicit recognition of the bank's long - standing responsibility for financial stability. a major change recommended by the panel is the establishment of separate boards for monetary policy and the governance of the bank. i have thought for some time that there was a strong case to strengthen the governance of the rba as an institution. the rba is responsible for many nationally important functions in addition to monetary policy. these include being the banker to the government, the operator of critically important payments infrastructure, the printer of banknotes and passports, and the manager of australia's foreign exchange reserves. so there is a lot more than just monetary policy. under the reserve bank act 1959, i, | ( 2012 ), β bank regulation and the future of banking β, remarks to the 41st australian conference of economists, melbourne, 11 july. bis central bankers β speeches so, to conclude. there have been a number of significant changes to the structure of financial markets over the past five years, in terms of pricing as well as the composition of funding and lending. regulatory reforms have certainly played a role in those changes, but one of the main points i hope to leave you with today is that the regulatory reforms have often served to reinforce changes resulting from a self - reassessment or resulting from market pressures. while these forces have all been working in the same direction in the current environment, the regulatory reforms will aim to ensure that these changes to a more stable financial structure endure when the environment is less conducive to self - discipline and as market pressures abate. bis central bankers β speeches | 0.5 |
could be a successful mode of credit delivery. hence, there is a need for promotion of self - help groups ( shgs ) with greater linkage with banks. in this regard, nabard has an important role to play, not only in promotion of shgs, but also in capacity bis central bankers β speeches building, along with sidbi and concerned state government agencies. another area where there is substantial scope for expansion is low - cost housing. expansion of housing loan remains poor as mortgages cannot be created in many parts of nes. however, banks can explore innovative structures for housing loans with a greater emphasis on group lending. seventh, in any plan for financial sector development, the physical presence of a bank branch is important. but the topography of the region, the dispersal of population, transport bottlenecks and law and order conditions in some areas inhibit branch expansion other than in certain commercial centres. hence, all the stake - holders β banks, state governments and the reserve bank β need to work in close co - ordination for increasing banking penetration and promoting financial inclusion in the region. conclusion to conclude, the north - eastern region has immense potential. the need, therefore, is to identify the opportunities and recognise the challenges to work towards a sustainable and inclusive growth of the region with greater penetration of the formal financial sector. bis central bankers β speeches | simulating policies have helped in reducing risk in the short run, but they cannot address structural changes, which have been noted from times now or which are directly related to the pandemic. a β new normal β is expected to guide the need for the adaption of the private sector and a re - thinking of the institutional government paradigms. 2. challenges of the future policy - making institutions are expected to tackle complex structural challenges, which will determine the shape and content of a new reality within a not too far future. the increase of barriers in international trade, the population ageing, international migration, decrease of innovation, global warming, the growth of inequality and increasing social tensions, are critical global issues. public authorities, in their response, should engage, without losing time, in coordinated structural reforms β among others β bolstering innovation and reallocation of sources among the sectors of economy, free trade, stability of pensions system and maintenance of social consensus. further, a β new normal β would call for a prudential coordination of public policies, for reaching an optimum balance between the economic growth and the economic, monetary and financial stability. allow me to elaborate somewhat further on this issue. the global financial crisis and the pandemic renewed attention to the indispensable role of fiscal policy : an instrument for the stabilisation of the economy and mitigation of crises. this lesson is expected to be relevant β both in medium - term and long - term - by paving the path to a more active role of fiscal policy in the future. nevertheless, it should in no case skip the need for preserving the fiscal stability. in contrary, fiscal stability remains a precondition to long - term 2 / 4 bis central bankers'speeches growth and enables the establishment of the necessary premises for the amortisation of shocks. in the area of central banking, the β new normal β will continue to be characterised by a flatter phillips curve, where wages, employment or economic growth will continue to have a weak relation to inflation. challenges to maintaining price stability will continue to be present. it dictates the need for the improvement of transmission mechanism of monetary policy by making indispensable the exploring of unconventional instruments as feasible and valuable alternatives for managing future shocks. all these challenges lead to the need for enhancing the flexibility of public institutions making them more able to evolve, adapt to changes around them, and to boost innovation. in this context, i am proud that the bank of | 0 |
own shares will diminish, and they will reduce their consumption. it will also be less attractive to invest in new production capacity. share price movements may also have a negative impact on business and household expectations. registered unemployment has edged up over the past year, to 3. 3 per cent in october ( seasonally adjusted 3. 5 per cent ). unemployment has risen in all counties and among all occupational groups, except in primary industries. in sΓΈr - trΓΈndelag unemployment was 3. 7 per cent. unemployment is highest in oslo, aust - agder and finnmark. it has increased most in oslo and akershus in the course of the past year. even though unemployment in manufacturing has edged up in recent months, the increase in unemployment so far is primarily the result of restructuring and reduced activity in some service sectors. unemployment has increased most in eastern norway, where there is a heavy concentration of these industries. the aviation industry is undergoing restructuring. the ict industry has reduced activity considerably over the last year. in spite of the slight increase in unemployment, household borrowing has been high over a long period. over the past year, growth in credit to households has stood at over 11 per cent. house prices remain high. household financial saving ( net lending ) has dropped to almost zero in the past couple of years. strong growth in household consumption will exert continued pressures on prices and wages. there are clear indications that household income is rising substantially. at the same time, the level of financial saving appears to be low. all in all, this suggests that growth in household demand for goods and services will remain high. there will probably be a shift in demand towards imported goods and services. in the central government budget for 2003, the allocations for the purchase of goods and services and for transfers show underlying growth of 4. 6 per cent and estimated real growth of 0. 5 per cent. the effect of the draft budget on demand is estimated to be mildly positive. the central government budget includes a proposal to increase the use of petroleum revenues by nok 2 billion in real terms in 2003. the structural deficit in 2002 appears to be higher than was assumed this spring. the projections for the use of petroleum revenues up to 2010 have been revised downwards considerably since the long - term programme, the national budget for 2002 and the revised national budget for 2002 were presented. the krone has appreciated considerably since summer 2000. there may be several reasons for this. relationships in the foreign exchange market | in the private service sector and the retail trade. productivity growth in the private sector was higher in norway than in the us through the 1990s, for example. high productivity growth in many service industries has contributed to this. the growth rates for the 1990s must to some extent be seen in connection with cyclical developments during this period which started with a recession and ended with a tendency towards overheating in the labour market at the end of the period. productivity growth has been particularly strong in the retail sector, financial services and postal and telecommunications services. these are industries that have undergone extensive changes in structure, technology and market adaptation. it has not been as strong in transport and commercial services. these changes have been associated with productivity gains - and thereby higher wages and income growth - for larger groups. in addition, this has contributed to keeping inflation at a low level and spurring large new investment projects. this may also have amplified the strong expansion in the norwegian economy at the end of the 1990s, which could imply that the sharp growth in services has contributed to the relatively high real rate of interest in norway in recent years. we know that variations in productivity can influence the real exchange rate. when an economy goes through a period of high productivity growth and high returns on many investment projects, real interest rates will normally increase. over time, the real interest rate must reflect the economy's longterm growth potential. when real interest rates rise in our country relative to other countries, we have to expect that the real exchange rate will move in line with the same pattern that can be observed when we increase the use of petroleum revenues in the domestic economy. there is symmetry here. a decline in productivity growth will have the opposite effect. developments in the 1990s may, over a very long time horizon, prove to have been an episode - and the considerable structural changes in the services sector a one - off event. this would imply that the economy will tend to return to its previous path. but it is also possible that we will see a new round of pronounced productivity gains thanks to new technology and new structures. | 1 |
price stability. inflation is currently very low. where β s the harm in that? it is, above all, a question of confidence. the ecb is committed to maintaining price stability, by which we mean keeping inflation below, but close to, 2 % β and we have achieved this objective. average inflation since the introduction of the euro is 2. 03 %. this has contributed to economic stability in europe. if we were to miss our objective, people would start to question our commitment. that also holds if we were to tolerate inflation rates that were too low. we cannot risk such a loss of confidence. the main reason for the current low level of inflation is price and cost adjustment in the crisis countries, thereby enabling these countries to become more competitive. it is good that the economies needing to regain competitiveness adjust. but the adjustment is much easier if inflation in the euro area as a whole stands at 2 %, rather than, say, 1 %. bis central bankers β speeches why? we know from experience that, at least in europe, it is very difficult to cut nominal wages. if prices are rising, you get the desired effect β the cost of labour declines in real terms β just by holding nominal wages constant. this is why there is no major central bank in the world that seeks to eliminate inflation completely. inflation should be at a low, but positive level. the inflation rate in the euro area is currently at 0. 9 %. if we take you at your word, the ecb is in fact not doing its job. it is true that, as a result of the weak economy, there is little scope for prices to increase. but we expect the rate of inflation to come back to 2 % over the medium term. according to your staff projections, inflation will be below the target until 2015. what do you mean by medium term? we are not giving a more precise time frame, but we are certainly not talking about a decade or a generation. if the countries in the south have lower inflation rates and the ecb wants to keep overall inflation at 2 %, then that means logically that germany has to accept higher inflation. it is not a goal of our policy to artificially increase inflation in germany. but if the german economy keeps doing well, and wages increase, inflation will naturally also increase somewhat. that is a result of market decisions. what is important for us is that average inflation in the euro area as a whole returns to our objective. and what | benoit coeure : interview in die zeit interview with mr benoit coeure, member of the executive board of the european central bank, in die zeit, conducted by mr mark schieritz and published on 9 december 2013. * * * mr cΕure, do you know what the interest rate on savings accounts in germany is? very low, probably close to 0 %. that β s correct. some banks pay 0. 25 % or even less. can you relate to savers in germany being annoyed that the european central bank ( ecb ) is making them foot the bill for the crisis? rates are very low because the euro area economy is weak. take the example of low long - term interest rates on german government bonds, which are important for life insurance contracts and pensions. why exactly is the weak economy responsible for low rates? if growth is weak, there are few profitable investment opportunities. as savings need to be invested in order to achieve returns, this means that returns are low. low market rates also, however, create the conditions for new growth and this will also boost future returns on savings. so you are saying that german savers benefit from the ecb β s low rates? my message is : it is important to differentiate between long - term rates for savers and the policy rate of the ecb. long - term rates are low because the economy is weak. in such circumstances, the ecb has to set its policy rate in such a way as to ensure price stability. thereby we support the economy and create the conditions for profitable investment opportunities β and this is also of benefit to german savers. so what would you say to germans who are worried about their retirement provision? i would tell them that the best way to improve the return on their savings is for the crisis to be solved as quickly as possible. this means that the economic reforms have to be implemented in the stressed countries, but it also means that we have to complete the measures designed to make the euro area as a whole safer. we need, above all, a functioning banking union so that german government bonds are not the only safe haven assets in the euro area anymore. if germany still had the deutsche mark, interest rates would be higher. i don β t want to speculate on hypothetical issues. our currency is the euro. but look at switzerland : the country has its own currency and interest rates are extremely low nevertheless, namely because investors consider it a safe haven like germany. you mentioned | 1 |
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