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amending the act, the bank β s primary role was solely β to formulate and implement monetary and supervisory policies that will ensure the maintenance of price and financial system stability β. this was deliberate, as experience world - over has shown that you can only achieve sustained and high economic growth in an economic environment characterised by low and stable inflation. thus, by working to ensure price stability as well as maintenance of a safe, sound and efficient financial sector, the bank is contributing to the achievement of sustainable economic growth and, ultimately, poverty reduction. in a nutshell, following the amendment of the bank of zambia act in 1996, the bank β s main responsibilities comprise price and financial system stability. the bank ensures financial system stability by licensing, supervising and regulating the activities of banks and non - bank financial institutions so as to promote the safe, sound and efficient operations and development of the financial system. ladies and gentlemen, i trust that, as members of unzabeca, you have actively participated in these series of lectures and expanded your knowledge of the functions of the bank of zambia. on our part as bank of zambia, we strongly encourage investment in education, which has been demonstrated by the sponsorship of these lectures. in this regard, i wish to take this opportunity to call upon other institutions to support our university by either sponsoring a series of lectures, like the bank of zambia has done, or rendering any financial assistance. as many of you may be aware, most of the companies in zambia have benefited, in one way or the other, from the services offered by our universities. as for the bank of zambia, most of its management members of staff, including myself, are graduates of this university and were members of unzabeca. therefore, as a token of their appreciation to unzabeca, they have made a generous donation in the sum of k9. 5 million. this donation, i hope, will go a long way in supporting unzabeca programmes. however, may i caution you to manage these funds prudently and ensure that they are applied towards the attainment of the intended unzabeca objectives. please, do not be wasteful now that unzabeca coffers are liquid! in conclusion, as patron of unzabeca, i look forward to being involved in unzabeca activities. in this regard, i undertake to promote your activities, at any slightest opportunity, to other institutions, which would benefit from your services. with these
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ways. first, we could improve the resolution mechanisms for large, complex institutions and thereby reduce the costs associated with failure. a more robust resolution regime would make it more feasible to allow the failure of a large financial institution without that failure threatening the stability of the entire financial system. second, we could impose higher capital requirements on large, systemically important institutions to offset the advantages such as lower funding costs that these institutions may garner by their perceived β too big to fail β status. this would recognize the interconnectedness of the financial system and the fact that the failure of a systemically important institution generates significant externalities, which are not, at present, borne fully by the equity and debt holders of such institutions. increasing the size of the capital buffer would make the system more stable by reducing the incentive for firms to get big just to capture the perceived benefits from achieving β too big to fail β status. the first change β an improved resolution mechanism β would presumably reduce the number of institutions that β at any point in time β would be systemically important. the second change β the imposition of higher capital requirements on large, systemically important institutions β would reduce the likelihood of failure of such institutions. however, in assessing the efficacy of such changes, we need to be realistic about the difficulties in building a resolution regime that would be sufficiently robust to allow the failure of any institution under any circumstance and in designing a capital regime that imposes differential requirements on large, systemically important institutions. on the resolution regime side of the ledger, it is particularly difficult to build resolution regimes that can operate effectively across different geographic jurisdictions. legal regimes are different ; national authorities have different incentives ; and coordinating resolution across multiple geographies in a way that treated counterparties in different jurisdictions equivalently would be a daunting mission. similarly, designing an effective capital surcharge for systemically important institutions will be very challenging. broadly, there are two approaches. we could either require a set of firms identified to be systemically important to hold additional capital or we could introduce a capital surcharge for firms linked to measures of systemic risk. in broad terms, the factors that could be used to identify systemically important financial institutions would be related to a firm β s interdependence with the financial system and the impact on market confidence should the firm become distressed. measures of size, leverage, liability structure and importance in credit formation and liquidity provision could all be indicators of systemic importance. developing a consistent, objective set
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or the system, on the other. the case for simplifying regulations, removing fine prints associated with procedural prescriptions and elements of discretion are also important from the perspective of reducing compliance burden and facilitating flexible and nimble footed responses by authorised dealers and stakeholders. 27. but for a principle - based regulatory framework to work and work effectively, there are certain β rules of the game β. first, the shift presupposes that all participants including authorised dealers accept and adopt the change in letter and in spirit and ensure that the regulations are implemented in a fair and transparent manner and the benefits of the flexibility provided in the regulatory framework reaches the end users of the financial system. second, there has to be trust. the regulator needs to be able to trust that regulated entities will not abuse the flexibility provided in the regulations. third, the shift to a principle - based framework also entrusts a much higher level of responsibility on the authorised dealers. in fact, the more we move towards a principle - based framework, the greater will be the responsibility of the authorised dealers. for instance, under the new overseas investment regime, all transactions relating to odi ( or financial commitment ) by an eligible resident entity in a foreign entity is required to be routed through the designated ad bank. the ad bank is not only responsible for ensuring bona fides of the transactions and compliance with kyc / aml guidelines, but also compliance with fema provisions. we had earlier come across instances of ad banks permitting remittance towards overseas investment without receiving the requisite returns from the investor entity. though, it was always implicit in terms of section 10 ( 5 ) of fema, that such oversight by ad banks makes them liable for penal action under sections 11 and 13 of fema, the new directions have stated it unambiguously. new actors, new products, new markets - a new playing field 28. the foreign exchange arena, in particular, the foreign exchange market, has in many ways been a sheltered playing field for authorised dealers. but this is changing and changing fast. as an authorised dealer, till recently, you had to deal in a small suite of products. simple. easy to understand. easy to price. now that there is scope for authorised dealers to innovate and design new products, there are challenges. you need to think about whether a product is permissible. you need to understand the product. you need to be able to price it independently. you need to assess the client base
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at breakneck speed. industrial goods, steel, automotive components, resource extraction, beverages, cosmetics, pharmaceuticals, mobile communications, software and financial services are some of the sectors where considerable interest has been shown by indian corporates. the bcg research has shown that 88 % of the emerging market global players are driven by the need to gain access to new markets and profit pools. overseas markets are expected to bring higher margins, revenue and volumes, besides opportunities for further growth. energy security is another driving force behind global acquisitions. β’ liberalised guidelines for overseas investment coupled with lower interest rate hitherto facilitated indian corporates to invest overseas β’ the capex undertaken by indian industry coupled with buoyancy in economy has strengthened the balance sheet of corporates enabling them to look for inorganic growth by way of acquisitions outside india. β’ the confidence shown by the global business community, particularly, availability of foreign funds at competitive rates and acceptance of managerial skills of indian workforce has led to surge in lbo activities. β’ another trend which is prominent in india β s overseas investment is market access. by undertaking overseas acquisition transactions, indian corporates are gaining entry into regulated market of developed countries. the best example is pharmaceutical industry, where indian corporates equipped with usfda approved facilities are looking for acquisition in the regulated market for ease of registration processes. the manufacturing activities will still be in india entailing low cost advantage. β’ transfer of technology is another issue driving for overseas investments. the manufacture of certain products requires technology that is not available to the indian companies. by acquiring companies abroad, they also acquire advanced manufacturing technologies that further help reduction in the cost of production. β’ indian companies are also going abroad to obtain a new product mix or to acquire products that will otherwise require huge investments and a long time to manufacture indigenously. β’ deployment of excess production resources or better yield on assets is another driving force. the indian corporates engaged in oil exploration / drilling / rig manufacturing are getting good returns on their assets by deploying their assets in the companies acquired in the high yield market. β’ development of natural resources like mining, oil exploration etc. has given an opportunity to indian corporates, rich with cash and need for energy, to expand their wings in unchartered territory. β’ post quota regime has also given an impetus to indian corporates to look for overseas ventures for enhancing their r & d and logistics to cater to developed markets. indian textile industry with scalable capacities to cater developed markets is feeling handicapped because
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to openly debate this draft act and share opinions which the bank can benefit from in its effort to develop a comprehensive law. with these words, i declare this stakeholders workshop open and wish you a fruitful debate. i thank you.
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tukiya kankasa - mabula : stakeholder β s workshop on the draft bank of zambia act opening remarks by dr tukiya kankasa - mabula, deputy governor of the bank of zambia, at the stakeholder β s workshop on the draft bank of zambia act, lusaka, 21 september 2010. * * * chief executive officers and representatives of stakeholder institutions ; distinguished invited guests ; directors and staff of the bank of zambia ; members of the press ; ladies and gentlemen. on behalf of the bank of zambia, and indeed on my own behalf, i welcome you to this workshop which is entitled β the stakeholder β s workshop on the draft bank of zambia act β. as the name rightly suggests, it is a workshop facilitating the meeting of minds of key stakeholders affected by the bank of zambia act. on the one hand we have those administering the act, the bank of zambia representatives and on the other hand those whose operations stand to be affected by the administration of the act, the financial service providers. we have also cast the net wide to include other key stakeholders such as government ministries, other regulatory entities and professional bodies representing lawyers, accountants and economists. the bank of zambia is charged with the responsibility of formulating and implementing monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in the republic of zambia. to give you a brief background on the central bank legislation, since its inception in 1964 the bank has operated under 3 different bank of zambia acts ; the boz act of 1965, the boz act of 1985 and the current boz act of 1996. each of these acts has responded to the era of its time. for example, the acts of 1965 and 1985 were characterised by high government involvement in the operations of the bank. the bank administered exchange control regulations. it also determined and regulated the frequency and rates of fees, commissions and interest rates etc charged by financial institutions. the economic reforms that swept the country in the 1990 β s saw the ushering in of the current boz act of 1996 which supported the government β s free market policies. the bank β s mandate was made clearer, exchange control regulations were suspended and the bank β s regulation of interest rates etc was removed. there was also improved transparency and accountability. since the enactment of the boz act of 1996 two issues have precipitated the need to have the act reviewed again ; 1. in 2002, the imf and the world bank conducted a joint assessment
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board, european commission, single supervisory mechanism, and ecb in its monetary policy function : that cooperation has worked very well, in a very swift way, which is what you want to see in the case of resolution. would that be the case for any other bank? i don β t know. all banks are different, and, well, you know that quote from leo tolstoy, who said that all happy families are alike, and every unhappy family is different. so every failed bank is different. very diplomatic. one very last question, because we haven β t talked about china at all : when it comes to external factors, how should we look at china? 4 / 5 bis central bankers'speeches china remains a major area of interest for us. i would not say of concern, or risk, because so far the chinese authorities have been able to steer the transition in the chinese system very well, and to provide stability to the world economy. that said, there are issues to be addressed : shadow banking, corporate debt, transition towards domestic demand, transition towards a decarbonised economy. these are daunting challenges that will stay with us in the years to come, but so far the chinese authorities have been very successful in steering the economy and not making china become an issue for the global economy. we β ve got enough issues, so we don β t want china to become one of them. 5 / 5 bis central bankers'speeches
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picture terms, following the leadership core and keeping in alignment β, strengthen β confidence in the path, theory, system and culture of socialism with chinese characteristics β, and uphold β general secretary xi jinping β s core position on the party central committee and in the party as a whole as well as the party central committee β s authority and its centralized and unified leadership β. moreover, we will thoroughly implement the guidelines of the fifth plenary session of the 19th cpc central committee and the 2020 central economic work conference, practice the new development philosophy at the new development stage, focus on promoting high - quality development, and pursue financial supply - side structural reform as our main task, so as to build a modern central bank system. we will also press ahead with our efforts to ensure β six stabilities β and β six guarantees β to provide strong and effective financial support for speeding up the building of a new development paradigm and commemorate the centenary of the founding of the party with remarkable achievements! 2 / 2 bis central bankers'speeches
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mario draghi : hearing of the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, at the econ committee of the european parliament, brussels, 24 september 2018. * * * mr chairman, honourable members of the economic and monetary affairs committee, ladies and gentlemen, it is a pleasure to be back at the european parliament before your committee. ten years ago, the euro area entered a severe recession. that crisis exposed structural weaknesses and forced us to address them. the work is not yet over, but we are reaping the benefits of our efforts : growth has been positive for more than five years, and the unemployment rate is at its lowest level since november 2008. in my remarks today, i will discuss the current economic environment and the role that the ecb β s monetary policy plays in it. at the request of your committee, i will also discuss central bank communication, which nowadays forms an integral part of monetary policy. the euro area outlook the information that has become available since my last visit in july broadly confirms an ongoing broad - based expansion of the euro area economy, which grew by 0. 4 % in the second quarter of 2018. despite some moderation following the strong growth performance in 2017, the economy continues to exhibit high levels of capacity utilisation, and labour markets are tightening with signs of labour shortages in some countries and sectors. this is reflected in the unemployment rate in the euro area, which stood at 8. 2 % in july. since reaching a trough five years ago, euro area employment has increased by about 9. 2 million. on account of the improving labour market and overall conditions, households β disposable income in the euro area is currently growing at the highest rates observed in the last ten years. higher income supports private consumption, which is expected to increase by 1. 5 % in 2018. these factors, together with business investment being fostered by the favourable financing conditions, rising corporate profitability and solid demand, continue to support spending. looking ahead, the latest ecb staff macroeconomic projections confirm the outlook for continued broad - based growth of the euro area economy. average annual growth is foreseen to be 2. 0 % in 2018, 1. 8 % in 2019 and 1. 7 % in 2020, with a slight downward revision for 2018 and 2019, mainly reflecting weaker global trade. risks surrounding the euro area outlook can still be viewed as broadly balanced, although the
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jean - claude trichet : europe at the crossroads speech by mr jean - claude trichet, president of the european central bank, at a dinner on the occasion of the frankfurt european banking congress, frankfurt am main, 20 november 2003. * * * ladies and gentlemen, it is a great pleasure to speak to you tonight. this is a special occasion for me. it is the first time that i address - as president of the european central bank - the european banking community. as european bankers, you are of great importance for our work at the ecb and - if i may say so - the ecb is of relevance for your work. it is good to be here tonight with you and it is nice to see many familiar faces and good friends. thank you very much for the invitation. i am particularly grateful that this dinner takes place so close to my new home, frankfurt. please let me, in the presence of the mayor, mrs petra roth, express my gratitude and admiration to this city. as member of the ecb β s governing council and previously of the emi council, i have been coming to frankfurt regularly over the last nine years. by and by this city has become dear to me. it is a pleasure to see to what extent frankfurt accommodates its banking community. the city provides us with the amenities and attractions of a truly modern and international life. β identify europe β is the title of the congress that provides the occasion for our dinner tonight. it is a title which reminds me of essays that i had to write at school, such as β characterise the renaissance β or β explain the rise of the roman empire β. β identify europe β comes as an imperative - almost an order. it urges us to define what europe is about. there are, of course, many ways of approaching this question. we can define europe geographically, culturally, historically or economically. please allow me to reflect upon the issue from an institutional perspective. as president of the european central bank, i will interpret the term europe as the european union. thus, i will take the title of the congress as an encouragement to discuss the eu β s main characteristics. i think it is the right time to reflect upon the key features of the eu. europe stands at the crossroads. it needs to take the right decisions now in order to maintain its major qualities in the coming years. what are the main tasks facing the eu? first, the union needs to give itself an institutional foundation - a solid constitution -
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in the fourth quarter of 2017, following similar growth in the previous quarter. this resulted in an average annual growth rate of 2. 4 % in 2017 β the highest since 2007. the latest economic indicators suggest some moderation in the pace of growth since the start of the year. this moderation may in part reflect a pull - back from the high pace of growth observed at the end of last year, while temporary factors may also be at work. overall, however, growth is expected to remain solid and broad - based. our monetary policy measures, which have facilitated the deleveraging process, should continue to underpin domestic demand. private consumption is supported by ongoing employment gains, which, in turn, partly reflect past labour market reforms, and by growing household wealth. business investment continues to strengthen on the back of very favourable financing conditions, rising corporate profitability and solid demand. housing investment continues to improve. in addition, the broad - based global expansion is providing impetus to euro area exports. the risks surrounding the euro area growth outlook remain broadly balanced. however, risks related to global factors, including the threat of increased protectionism, have become more prominent. 1 / 2 bis central bankers'speeches euro area annual hicp inflation increased to 1. 3 % in march 2018, from 1. 1 % in february. this reflected mainly higher food price inflation. on the basis of current futures prices for oil, annual rates of headline inflation are likely to hover around 1. 5 % for the remainder of the year. measures of underlying inflation remain subdued overall. looking ahead, they are expected to rise gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth. turning to the monetary analysis, broad money ( m3 ) continues to expand at a robust pace, with an annual growth rate of 4. 2 % in february 2018, slightly below the narrow range observed since mid - 2015. m3 growth continues to reflect the impact of the ecb β s monetary policy measures and the low opportunity cost of holding the most liquid deposits. accordingly, the narrow monetary aggregate m1 remained the main contributor to broad money growth, continuing to expand at a solid annual rate. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to non - financial corporations stood at 3. 1 % in february 2018, after 3. 4 % in january and 3. 1 % in
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december 2017, while the annual growth rate of loans to households remained unchanged at 2. 9 %. the euro area bank lending survey for the first quarter of 2018 indicates that loan growth continues to be supported by increasing demand across all loan categories and a further easing in overall bank lending conditions for loans to enterprises and loans for house purchase. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households, access to financing β notably for small and medium - sized enterprises β and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for an ample degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2 % over the medium term. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to raising the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. against the background of overall limited implementation of the 2017 countryspecific recommendations, greater reform effort is necessary in euro area countries. regarding fiscal policies, the ongoing broad - based expansion calls for rebuilding fiscal buffers. this is particularly important in countries where government debt remains high. all countries would benefit from intensifying efforts towards achieving a more growth - friendly composition of public finances. a full, transparent and consistent implementation of the stability and growth pact and of the macroeconomic imbalance procedure over time and across countries remains essential to increase the resilience of the euro area economy. improving the functioning of economic and monetary union remains a priority. the governing council urges specific and decisive steps to complete the banking union and the capital markets union. we are now at your disposal for questions. 2 / 2 bis central bankers'speeches
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brian wynter : bank of jamaica modernisation and independence - a new central bank for the new jamaican economy speech by mr brian wynter, governor of the bank of jamaica, at the 3rd caribbean finance & investment forum " bank of jamaica modernisation and independence - a new central bank for the new jamaican economy ", organised by latinfinance, kingston, 1 november 2018. * * * mr chairman, mr taimur ahmad, chief executive officer, latinfinance, distinguished ladies and gentlemen, good afternoon. last week, the government tabled in parliament a bill to amend the bank of jamaica act and related legislation. if passed, this would make bank of jamaica the first central bank in the english - speaking caribbean to have legislative independence. it is interesting to note that this potentially seismic shift in jamaica's economic fortunes was broadly met by quizzical faces and comments like : " i thought they were already independent ". to shed some light on why people reacted in this way and why i have referred to it as a potentially seismic shift, i will sketch a map of bank of jamaica's transformation and draw a picture of the intended destination. i would like to show you, in short, why we are doing what we are doing. bank of jamaica has enjoyed de facto independence since the 1990s and the process of modernisation can perhaps be dated back to the early 2000s. modernisation began with the bank operating with what the imf refers to as an inflation - targeting'lite'regime. inflation - targeting is a monetary policy regime where the inflation objective is announced to the public and the central bank uses various monetary policy tools to guide inflation outcomes towards the preannounced inflation objective. the bank was initially able to reduce inflation from 9. 2 percent in 1997 to 7. 3 percent in 2002 using a base money targeting approach. since then, the bank transitioned to using interest rates as the primary operating tool. if you examine the success of that transition, particularly in the last decade or so, you would note that we are now in an era of lower inflation that has been more stable and more predictable than it was in the past. at september 2018, 12 - month inflation was 4. 3 per cent, within the bank's target of 4. 0 per cent to 6. 0 per cent, having fallen to as low as 1. 7 per cent in 2016. in effect, the bank has been operating independently using modern approaches for quite a long time and it has
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caselli, francesco and john wilbur ii coleman. 2006. " the world technology frontier. " american economic review,. ciccone, antonio, and elias papaioannou. 2005. " human capital, the structure of production and growth. " centre for economic policy research ( london, uk ) discussion paper 5354 and ecb wp 623. ciccone, antonio, and elias papaioannou. 2006. " adjustment to target capital, finance and growth. " centre for economic policy research ( london, uk ) discussion paper 5969. ciccone, antonio, and elias papaioannou. 2007. " financial development and intersectoral investment : new estimates and evidence. " mimeo european central bank and upf. ciccone antonio and giovanni peri. 2006. " identifying human capital externalities : theory with applications. " review of economic studies, 73 ( 2 ) : 381 - 412. cohen, daniel, and marcelo soto. 2007. β growth and human capital : good data, good results β, journal of economic growth, springer, 12 ( 1 ), pp. 51 - 76, march de la fuente, angel and antonio ciccone. 2002. " human capital in a global and knowledge - based economy. " european commission ; directorate - general for employment and social affairs de la fuente, angel and rafael domenech. 2006. " human capital in growth regressions : how much difference does data quality make. " journal of the european economic association. fisman, raymond, and inessa love. 2007. " financial development and growth in the short and long run. " journal of the european economic association papers and proceedings. griliches, zvi. 1969. " capital - skill complementarity. " review of economics and statistics, 51 ( 2 ), 465468. guiso, luigi, tullio jappelli, mario padula, and marco pagano. 2005. " financial market integration and economic growth in the eu. " economic policy, 19 ( 40 ) : 523 - 577. guiso, luigi, paola sapienza, and luigi zingales. 2004. " does local financial development matter? " quarterly journal of economics, august, 119 ( 3 ) : 929 - 969. guiso, luigi, paola sapienza, and luigi zingales. 2007. β trusting the stock - market β.
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employees. measured in terms of person - hours worked, employment growth was solid last year. inflation was low in 2004. underlying inflation rose by 0. 3 per cent from 2003 to 2004. the unusually low rise in prices for imported consumer goods over the past few years is partly due to structural developments, primarily changes in norwegian import patterns. it is difficult to estimate how long the effect of these changes will last. high capacity utilisation, a tighter labour market and higher wage growth imply that the rise in prices for domestically produced goods and services will move up in the years ahead. the projections for the years ahead are based on a gradual rise in the interest rate. this is in line with financial and foreign exchange market expectations. a gradual rise in the interest rate will after a period curb the strong growth in demand, and capacity utilisation in the economy will decline and then stabilise. economic policy tasks the various components of economic policy have varying effects. this is why they have different functions : β’ monetary policy steers inflation in the medium and long term and can also contribute to smoothing swings in output and employment. β’ the central government budget β growth in public spending β influences the krone and the size of the internationally exposed business sector in the medium term. government expenditure and revenues must be in balance in the long term. β’ wage formation, the structure of the economy and incentives determine how efficiently we use our labour resources and other economic resources. there is also an interaction : β’ in its budget resolutions, the government authorities will attach importance to the effects of the budget on the norwegian economy and will therefore take account of interest rate effects. in this way, they avoid a situation where growth in public spending and the interest rate push the economy in different directions. β’ with a known monetary policy response pattern, the social partners can take into account interest rate effects when wage increases are agreed. β’ moreover, the parties to public sector negotiations can take into account that the higher pay increases are, the fewer people can be paid over government budgets. the interaction here came into clear evidence when employment in the general government sector fell after the expensive wage settlement in 2002. the authorities can achieve better economic policy results if they can commit in advance to a set of credible policy rules. households, enterprises and capital markets are forward - looking in their decision - making. it is therefore important that the authorities do not create doubt, but on the contrary act in a long - term and predictable manner. there must be consistency between plans
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different. the high inflation expectations that were built into long - term interest rates no longer exist and a further marked fall does not seem likely, nor for that matter does any substantial inflation - driven increase in long - term rates. purchasing a home is a long - term investment. a fixed - rate mortgage reduces borrowers β uncertainty about expenses over the life of the loan. longer - term financing in banks banks play an important role in the economy. their task is to convert short - term deposits into long - term loans. in times of crisis, fulfilment of this task is put to the test. a century ago, depositors could lose confidence in the banks and rush to withdraw their savings. however, deposits stabilised when guarantee schemes were established in the 1930s. loans to households make up a third of banks β assets. residential mortgage loans are longterm loans. at the same time, funding for norwegian banks has changed. market funding has assumed a more important role. in recent years, both short - term market funding and funding in foreign currency have grown in norwegian banks. banks have increasingly transformed short - term deposits from international money markets into long - term domestic lending. this is the main reason for the strain on liquidity experienced by norwegian banks when foreign funding came to a halt in 2008. for norwegian banks, the financial crisis has primarily been a liquidity crisis and not a solvency crisis. the authorities all over the world are currently reviewing the regulation of banks β liquidity. the basel committee on banking supervision presented recommendations on quantitative liquidity requirements in december 2009. the uk, switzerland and new zealand have introduced, or are in the process of introducing, stricter rules. norwegian banks must also expect the regulation of liquidity to be more stringent in the future. it will be more difficult to base housing finance on short - term funding. issuing covered bonds may be an alternative. the collateral pool for covered bonds may comprise residential mortgages or mortgages for holiday homes with a loan - to - value ratio ( ltv ) of up to 75 per cent, commercial property mortgages with an ltv of up to 60 per cent or loans to public sector entities with an ltv ratio of up to 100 per cent. these instruments are highly collateralised, carrying lower risk premiums than ordinary bank bonds, and are well suited to pension fund investment and other investments with a long - term horizon. according to the rules for the issue of covered bonds, the value of the cover
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monetary dynamics β slow growth of broad monetary aggregates and very weak credit β suggests that inflation pressures, beyond the ups and downs of short - term price adjustments, will likely remain subdued for an extended period of time. some odyssean elements are evident as well in the ecb β s statement. but, again, in the following sense : with forward guidance the governing council has meant to re - assert β not to suspend β its strategy. we have clarified how our strategy is going to guide us in the difficult conditions that we expect to prevail going forward. we will be guided by two elements of our strategy, in particular. first, our primary objective. by its objective, the ecb is mandated to the pursuit of a positive inflation rate below 2 %. in accordance with our strategy, this means aiming for inflation rates below but close to 2 % over the medium term. the 4 july forward guidance is an expression of commitment to this objective and of determination to apply the policy prescriptions which descend from it. the second element of our strategy which will give us a sense of direction is the strategy β s binary analytical framework. as i said, inflation and the economy need to be interpreted : falling inflation in conditions of surging productivity and a booming economy is not bad news. falling inflation when aggregate demand is persistently dragging, and credit and money are consistently unsupportive of households β consumption and firms β investment can be a problem for a central bank that is devoted to price stability. the monetary part of our analysis is there β in our forward guidance formulation β to robustify our assessment of the inflation outlook and convey the appropriate monetary policy implications that derive from that assessment according to our strategy. against the conditions that we see prevailing over a meaningful horizon, our guidance includes an easing bias. this conveys the notion that we have not reached the lower bound on our key interest rates. we have not run out of ammunition. further cuts in policy rates remain an option for the ecb if the outlook on price stability so warrants. the ecb β s forward guidance has contributed to more clarity over our assessment of the outlook and our reaction function. our forward guidance has contributed to more stable money market conditions and has helped to anchor market expectations more firmly. it also ensures that our monetary policy stance is not excessively vulnerable to shocks that are disconnected from the underlying economic and monetary conditions in the euro area. references blinder, a., m. ehrmann, m
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##ring. we will take any measures necessary to ensure that we deliver on our inflation target of 2 % over the medium term. that is why, at our last governing council meeting, we recalibrated our policy measures, allowing for a step - by - step reduction in the pace of our net asset purchases, moving gradually from around β¬80 billion per month to β¬20 billion per month over the course of 2022. 2 we also ensured that we have the flexibility to respond to a range of circumstances. at the same time, we concluded that monetary accommodation is still needed for inflation to settle at 2 % over the medium term. strengthening supply monetary policy works on the demand side of the economy by stabilising output around its potential level. but the level of potential output is mostly affected by the actions of other policymakers, besides the hard work of people and the strength of businesses. and this brings me to the second area on which we need to build : strengthening supply. there are structural changes taking place in the economy today which could have a profound impact on the supply side of the economy. the green transition, the digital revolution and demographic shifts have all been accelerated by the pandemic. if we are to achieve sustainable growth in the future, supply and demand need to move together as the economy adjusts to these changes. for example, the economy is already becoming greener as consumers change their behaviour and new regulation bites. and i am confident that this will ultimately provide a new source of growth for europe : nine of the top 20 global players developing green - digital patents are european. 3 but if supply capacity cannot adjust quickly enough, the transition could be bumpy. one possible consequence, as i have discussed elsewhere, is greater volatility in energy prices, as bridge technologies like natural gas have to be used to fill gaps in energy production. 4 and there is a risk that this could affect public confidence in decarbonisation. so the solution has to be to accelerate investment in renewables β and other green technologies β so that they come 2 / 5 bis central bankers'speeches online faster. we are fortunate in europe that our policy response has not only focused on stabilising demand, but also on redirecting supply towards the sectors of tomorrow. ngeu is a unique tool that can provide the investment impetus we need. it is critical that it becomes a complete success. you, national parliamentarians, now have the opportunity to ensure a swift and effective implementation of the reform
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is retained on the book of the issuer, or sold at a higher cost to another investor, reducing the return from the deal. ( however, this effect on overall profitability is much smaller than the increase in spreads since the crisis. ) the cost of long - term and short - term wholesale funding has also decreased since mid 2009, though the cost of deposits remains high. consistent with this, the smaller lenders β market shares have risen slightly over recent months, though they are unlikely to return to pre - crisis levels any time soon. the pre - crisis level of rmbs activity, which these institutions relied more heavily on, was supported by demand from offshore sivs which is no longer there. but as the major banks have increased their lending rates to recoup increased funding costs, and as funding costs for securitisation have fallen, the smaller participants have become increasingly more competitive. while interest rates on mortgages have increased relative to the cash rate, the reserve bank is able to take account of those changes in its policy deliberations. the cash rate determined by the reserve bank is still the major determinant of the interest rate structure in australia, including that of mortgage rates. with the securitisation market showing greater vitality in recent months, the housing loan market remains contestable. any widening in margins is likely to attract new competitors into the market. already, the improvement in securitisation has encouraged some of the smaller lenders back into the market and encouraged some brokers to again look to increase their own mortgage lending. with these developments, the provision of mortgage credit in australia is likely to continue to be adequate in a competitive marketplace.
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##c statement, september 16, 2020. 3 / 3 bis central bankers'speeches
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volatility that provides the incentive for profit - seeking market participants to spring up, offering a narrower bid - ask spread inside the central bank's spread. it is the balance sheets of these profit - seeking entities ( mainly banks ), not the balance sheet of the central bank itself, that provides the barometer in a modern system. if the central bank announces its interest rate rule β either explicitly or through its actions and stance β and traders are convinced of its commitment to follow that rule, then the standing facilities are options that are good not just until the next intervention or the next meeting of the monetary policy committee ( mpc ), but for much longer than that. true, the precise strike price will change over time, but we know exactly how it will change because the central bank has told us via its monetary policy stance. hence, the relationship between financial markets and the central bank conducting monetary policy cannot be encapsulated in nash equilibrium scenarios such as the prisoner's dilemma. i will suggest that the relationship is one of emotional intimacy in a dispassionate world, the seeking of mutual comfort in the unknown, a quiet and meaningful relationship. these are the sentiments used to express the academy's appreciation of the 2003 movie which won the oscar for best screenplay. it was titled lost in translation from which i derive the inspiration for the theme of my talk today. a popular adage about monetary policy is that it operates with long and variable lags. in normal times, a rate change takes up to one year for its peak impact on growth and up to two years for its peak impact on inflation. this is an empirical result validated on high by ben bernanke, nobel prize winner for economics in 2022, as well as on the earth by the reserve bank's economists in the report on currency and finance, 2021 - 22. these lags in transmission pose an existential dilemma for the central bank. for instance, seeing inflation rising in the future in its forecasts, it raises interest rates. a few months later, the economy goes through a phase of slowdown. societal pressures build up on the central bank to support growth and it gives up on inflation control. price pressures persist, get elevated and out of control, eventually killing growth. this is the classic problem of time inconsistency that haunts all central banks all the time. a seminal contribution of two economists β fynn kydland and edward prescott β who won the nobel
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support to making the euro a truly international currency.
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family which is caring and providing for its members. for many of us, former communist countries, being part of this constituency has offered a unique opportunity to benefit from the expertise of western specialists, in the great effort of institutional development. an example is the romanian central bank in the early β 90s. thus, the supervision department of the national bank of romania was set up with technical assistance from the nederlandsche bank. also, forex and market operations developed from the co - operation with our colleagues from the belgian central bank. another form of cooperation between the member states of the constituency was the fact that since 1993, a second constituency meeting at the level of ministers and governors was held annually in one of the member countries, on a rotating basis. the imf management and senior staff were invited to speak on issues of interest. i have participated to almost all constituency meetings since 1990. i could testify that each of them was interesting and bis central bankers β speeches fruitful. as a veteran i cannot help but remember the first meeting after the fall of communism, in september 1990. at that time i met three not only impressive tall men, but also, outstanding personalities : governor wim duisenberg, minister wim kok and executive director goddard posthumus. i have to say i had the honour to collaborate with all the executive directors of our constituency. thus, it is a pleasure to remember the extraordinary relationships developed with onno wijnholds, age bakker, jeroen kremers, governor nout wellink and minister gerrit zahn. dear colleagues and friends, i am proud to say that the constituency meeting held in june this year, in romania, where both belgium and luxembourg representatives were invited, was a step forward towards this formal outcome. it was as if the engagement was held in bucharest and now, the official marriage is being celebrated here, in tokyo. it was not an easy journey. the national bank of romania has shown its support and loyalty from the very beginning. many of you, present here, played an essential role in making it happen : minister jan kees de jager, governor knot, executive directors menno snel and ruud treffers. i want to extend my thanks to them and to each and every one of you. now we are a big family where trust is vital. i wish we have the opportunity to meet again in the future, look back on this day and be proud of our accomplishments. thank you.
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mugur isarescu : establishment of a new 15 - county imf - wb constituency that already includes romania speech by mr mugur isarescu, governor of the national bank of romania, at the establishment of a new imf - wb constituency that includes romania, at the annual meeting of the international monetary fund and the world bank group, tokyo, 12 october 2012. * * * your excellences, ministers, governors, ladies and gentlemen, i am honored to have the opportunity to address you all on this special occasion and to welcome our new partners from belgium and luxembourg. this moment, when the establishment of a new, 15 - country constituency, is formally announced, has several historical meanings, already presented by minister de jager. let me add something from the experience of my country. romania joined the international monetary fund and the world bank in 1972 and has been a member of the dutch constituency ever since. it is worth mentioning that this constituency had only five members in those days : the netherlands, israel, cyprus, yugoslavia and romania. after 1990, i saw how, in a few years, the memberships grew to 13 countries. despite this rapid enlargement with such diverse configuration and the huge transformation happening in all the countries in the last two decades, our constituency has remained remarkably stable and has operated well. this is why i share the views of minister de jager that we have been able to find strength in our diversity. more than this, i could say that based on diversity and stability, this constituency has gradually emerged, as one supporting the interests of small open economies such as our countries. and today, with belgium and luxembourg joining, we are one of the largest and diverse constituencies among european chairs, with a substantially higher voting weight and a voice to play an even stronger role in the imf board in the future. not only do we count nearly a quarter of all the eu members, but we have among us countries with broad experience in the world of finance. i wish to remind you that the first managing director of the international monetary fund was camille gutt, the distinguished belgian economist. the fifth managing director, johannes witteveen, was a dutch national. the first deputy managing director for a long period of time, during the last twenty years, was stanley fischer. the historical lesson that a country like romania has learned for the past forty years as a member of the dutch constituency is the importance of continuity. continuity has given us the feeling of belonging to a great
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benefit from credit growth, for as long as and provided that such growth is based on firm structural and institutional premises. it is our common duty not to let this opportunity pass. this conclusion leads me naturally to the precondition i mentioned earlier. the albanian economy offers positive business prospects, coupled with a high crediting potential and reduced credit risk. this reality dictates the need and the possibility for a bolder approach toward crediting. i have had the opportunity to elaborate β on a continuous basis β our standpoint on the economic development perspective. i would like, however, to bring today to your attention again that, in cooperation with the albanian association of banks and the government of albania, we are implementing an ambitious plan of measures for reducing non - performing loans. from a strategic point of view, the objective of this plan was not only to simply clean banks β balance sheets, but also to provide for a qualitative improvement of the crediting environment in albania. in this context, the banking industry now has a more adequate legal and regulatory framework on protecting the interests of the creditor, repossessing collateral and executing it, and a more transparent environment for assessing the risk of individual borrowers. on this basis, the bank of albania deems that the banking sector, should : pay additional attention to crediting as a commitment that generates mutual benefits both for it and the albanian economy ; empower internal structures and its analytical and managerial capacities in terms of crediting ; ensure prioritized implementation of outstanding commitments under the plan of measures for reducing non - performing loans ; and, be more vocal and more transparent in identifying obstacles or deficiencies it finds in the crediting environment, both in legal and in regulatory aspects. these recommendations should not be addressed separately from the second challenge. 2. efficient allocation of bank loans as a precondition for sustainable and long - term development increased attention to crediting does not imply merely increased attention to the volume of credit, but also additional attention to its quality. these two aspects are complementary and do not contradict each other in the long run. the history of credit in transition economies, including albania, features some problematic elements which we need to avoid in the future. first, credit has been notably concentrated in non - tradable goods and services, such as residential buildings and services, which are oriented solely β or primarily β toward the domestic market. clearly, this trend reflects, at the same time, the lack of managerial knowledge and capacities in
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territory of the country and has introduced bank products and payment instruments in line with global developments in this sector. in brief, the banking industry has contributed to the development of the albanian economy by encouraging savings and generating credit. it has also contributed to the development of financial markets and the expansion of payment instruments, by offering advice and expertise to enterprises and providing for risk diversification in the economy. in return to these contributions, the banking sector β now entirely privately owned β has constantly generated positive returns and has experienced relatively low volatility in its profitability indicators. it has offered and continues to offer a positive business prospect for all investors that have a long - term vision and are dedicated to accompanying albania on its journey toward progress and european integration. 1 / 5 bis central bankers'speeches the banking sector has been and remains the backbone of the financial system and the most professionally avant - garde segment of the albanian economy. i am confident that β irrespective of the trend for expansion and diversification of other segments of the financial market β the banking sector will continue to play a unique role in the near and distant future. in this context, i would like to share with you the vision of the bank of albania on development challenges. 1. credit as an instrument that brings together the interests of both the economy and the banking sector sustainable development of the banking sector requires increased attention to its primary role : transforming savings into financing instruments to the economy. in practical terms, the banking industry should ensure that the credit supply concords in terms of time and diversity to the needs of the economy, while factoring risk in directly and responsibly. before i elaborate on this topic, let me emphasise two key moments. the first moment pertains to a misunderstanding we often encounter in the public opinion, even within the professional discourse, that is the albanian banking sector is not lending. this is not true. our data show that, excluding the accounting effect of the exchange rate and the write offs, the portfolio of bank loans has recorded 6 % annual growth in the last year. moreover, the pace of growth has shown an improving trend, in line with the overall context of the performance of the economy. in parallel, the expansion of the bank loan portfolio has shown a more balanced composition in terms of both the currency structure and the destination of funds. i would also like to underline that the term to maturity of the bank loans portfolio is short, which means that it is renovated frequently. thus, regardless of
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country, and partnerships between uwi and industry. barbados has additional competitive strengths, beyond those mentioned in the global competitiveness report. important for attracting investment is the fact that english is the native language. barbados β cultural and historical ties with north america have undoubtedly been a factor in making that region the main source of investment in the barbadian ibfs sector. the barbadian climate is excellent and the society offers cultural variety and convenience that makes for a high quality of life. an important source of competitiveness for barbados is the fact that the country maintains a sound, comprehensive and up - to - date regulatory framework for all ibfs activity. joint teams from the world bank and imf confirmed the soundness of overall regulation in the most recent financial system stability assessment ( 2013 ). peer reviews are underway for barbados under the global forum for the exchange of tax information, and under the aegis of the caribbean financial action task force on money laundering. this regulatory framework is a competitive strength for barbados, in an international market where it has become vital for companies and financial institutions to protect their good name. barbados is proactive in international fora, including the steering group of the global forum, the regional consultative group for the americas of the financial stability board and the working group on financial issues of the cfatf. another competitive aspect in which barbados has an edge is the country β s large and growing network of double taxation agreements ( dtas ) and bilateral investment treaties bis central bankers β speeches ( bits ). the list of countries with whom barbados has dtas and bits is given in tables 1 and 2. table 1 : double taxation agreements ( dtas ) double taxation agreements in force dtas awaiting ratification β’ austria, 2007 β’ ghana β’ bahrain, 2013 β’ italy β’ botswana, 2005 ; protocol, 2015 β’ portugal β’ canada, 1980 ; protocol, 2013 β’ rwanda β’ caricom, 1995 β’ uae β’ china, 2000 ; protocol, 2010 β’ cuba, 2000 β’ czech republic, 2012 β’ finland, 1989 ; protocol 2012 β’ iceland, 2012 β’ luxembourg, 2011 β’ malta, 2002 ; protocol, 2014 β’ mauritius, 2005 β’ netherlands, 2007 β’ norway, 1990 ; protocol, 2012 β’ panama, 2011 β’ qatar, 2013 β’ san marino, 2013 β’ singapore, 2014 β’ spain, 2011 β’ sweden, 1991 ; protocol, 2012 β’ switzerland, 1963 β’ uk, revised 2012 β’ usa, 1984 ; protocols 1991, 2004 β’ venezuela, 2001 bis central bankers β speeches table 2 : bilateral investment treaties bits in
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delisle worrell : the barbados ibfs sector and the efficiency of international commerce lecture by dr delisle worrell, governor of the central bank of barbados, at the carleton university, ottawa, 17 september 2015. * * * small international business and financial services ( ibfs ) centres like liechtenstein, guernsey, the caymans and barbados β to take a random selection β have an enduring place in international commerce, because they serve to make the international system more efficient. through the services that international companies locate in these centres, companies are able to offer products and services to the global market more cost effectively than they would otherwise be able to do. it is because of this economic reason that the foremost centres have proven so resilient, in the face of repeated waves of misrepresentation. the truth, as i will show in this presentation, is that international firms that use subsidiaries in ibfs centres to locate appropriate aspects of their global operations, are more competitive than those that do not. the sources of ibfs competitiveness vary by country, and include the expertise available in the centre, its global interconnectedness, the local penetration of information and communications technology ( ict ), the quality of life available in the centre, the quality of infrastructure, and many others. importantly, most centres will offer local expertise that is on par with london, new york and singapore, at significantly lower costs than would be the case for the large global financial centres. in this essay we cite evidence of barbados β competitive standing in international financial markets. how ibfs centres contribute to global efficiency the main factors which make international firms that use well regulated, well networked ibfs centres more efficient than the competition include : β’ such centres may reduce market frictions and information costs to the international firms whose subsidiaries they host ; β’ they are able to offer internationally comparable skills at lower wages and other costs ; and β’ they offer a corporate tax regime which provides for lower taxes on value added in the export of goods and services. because of these factors the ibfs centre is able to offer benefits to producers and consumers of ibfs goods and services, while at the same time providing an economic benefit to the host country. the investing company is able to produce the services located in the ibfs centre for sale in third countries at significantly lower cost, with no sacrifice in quality. the third country receiving the finance, product and / or service is able to access the output at a more attractive price. the benefit to the ibfs
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is precisely what happened, for example, on the announcement of the gdp figures for the march quarter of 1998 at the end of june, for the june quarter at the end of september, and for the september quarter near the end of december. in each case, monetary conditions moved in a broadly appropriate direction. conclusion at the beginning of my address i asked what new zealanders can expect of monetary policy in the long term. i would hope that they can expect monetary policy to become so totally predictable as to be boring β stable average prices year after year after year β because that is the best environment for growth in output and employment. interest rates will still move up and down to some degree of course, reflecting changes in the balance between savers and borrowers. but the week - to - week volatility of short - term interest rates should be diminished by our move to implement monetary policy through an official cash rate, and our progressively longer track record of low inflation should make it unnecessary ever to push interest rates to the levels seen in the early stages of disinflation in the mid - eighties. the new zealand dollar will also fluctuate of course, certainly against individual currencies and even against the trade - weighted index. as i discussed in a speech to the canterbury employers β chamber of commerce at the end of january, that appears to be a fact of life which nobody has yet found a way of avoiding. so i suppose that, with interest rates and the exchange rate still moving up and down, monetary policy will never seem totally boring. but with luck monetary policy will at least come to be seen for what it is when it is formulated with skill, namely a useful contributor to a prosperous society, but not nearly as important as a whole host of other matters β policies on education, policies on the labour market, policies on taxation, our access to international markets, the quality of our managers, and all the rest. those are the things which will really determine our longer - term prosperity.
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. wadsworth, a ( 2018c ) β the pros and cons of issuing a central bank digital currency β reserve bank of new zealand bulletin, vol 81. no. 7. weber, w ( 2015 ) β government and private e - money - like systems : federal reserve notes and national bank notes, bank of canada staff working paper 2015 - 18.
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- banking activities are exposed not just to credit and market risks which are the primary risks of their business, and which the banks should assess and manage as part of their core competence. these banks will also be taking on the business risks of their non - financial activities. if their non - financial activities run into trouble, the banks may feel compelled to support them beyond normal commercial considerations, to protect their own reputation. in so doing the banks may undermine their own soundness ; yet if they did not extend the rescue, the problems of the affiliates may trigger a loss of confidence in the bank itself because of the close association. secondly, with banking and non - banking activities inter - meshed within a conglomerate, there will be a strong tendency to stretch any safety net intended for the banking system also to cover non - bank operations in the group. if failure of an associated non - bank threatens the bank and systemic stability, the regulator or government may be forced to rescue both. we have seen this happen in the recent asian crisis. an implicit safety net for the banking system may be a necessary evil ; but extending it to non - banks compounds the problem of moral hazard. it also tilts the playing field against non - bank competitors who are not associated with banks. thirdly, separation minimises the risk of non arms - length transactions between banks and their nonbank affiliates. when a bank lends to a related entity at more favourable terms than market, or invests in an affiliate in order to control it even though the investment does not perform, minority shareholders of the bank are disadvantaged, and so are depositors. some economists have argued that in less - developed financial markets, it is in fact a rational and practical strategy for a group of companies sharing common ownership or cross - shareholdings to lend to and invest in one another. information about companies is often less than complete, and company accounts and business plans are hard to interpret. family networks or guanxi are then efficient ways to establish a basis of trust for doing business, and to avoid the high costs of obtaining reliable knowledge about the other party β s activities and finances. but the non - transparency of this approach can lead to serious difficulties and abuses. cross - shareholdings diminish the influence of minority shareholders, dilute market pressure on the companies in the group, and weaken the internal discipline to appraise rigorously the risk of each investment. the ongoing reforms in many asian countries are as much about tightening corporate governance
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gan kim yong : keynote speech - ibf golden jubilee ite scholarship keynote speech by mr gan kim yong, deputy prime minister and minister for finance, and deputy chairman of the monetary authority of singapore, at the launch of institute of banking and finance ( ibf ) golden jubilee ite scholarship, singapore, 14 may 2024. * * * ms low khah gek, chief executive officer, ite, ms carolyn neo, chief executive officer, ibf, financial industry partners, distinguished guests, students, ladies and gentlemen, introduction 1. good morning to all of you. it gives me great pleasure to join you today to launch the ibf golden jubilee scholarship for ite students. 2. the institute of banking and finance, or ibf, was established in 1974 to develop the professional competencies of the financial industry. over the last 50 years, it has dedicated itself to growing a skilled and resilient financial sector workforce aβ¬ β a cornerstone of singapore's position as a vibrant and trusted global financial centre. as ibf celebrates its golden jubilee, it is timely and meaningful to launch this scholarship. expanding the talent pipeline for the financial sector 3. since its founding in 1992, ite has served as a key provider of technical and vocational training to equip our students with relevant skills and to support singapore's economic growth. over the years, the government has expended significant resources to develop ite and invest in its students. it has a strong focus on practical skills and industry partnerships, to equip its students with industry - relevant skills. ite also offers work - study diplomas to its graduates, so that they can continue to upgrade and upskill. this has helped our ite graduates to have successful careers. 4. the financial sector has created well - paying jobs, offering the highest median gross income amongst employed residents. a ) and it continues to offer promising employment opportunities. over the past five years, the sector's workforce has grown by 16 % to 194, 000. of this 16 % increase, more than 9 out of 10 were residents. 5. we expect the sector to continue to grow, and we want to see more singaporeans from diverse backgrounds pursue fulfilling careers in the financial sector. ite graduates are part of this talent pipeline, and this scholarship will allow them to gain industry exposure and explore career opportunities in the financial sector. 1 / 3 bis - central bankers'speeches expanding possibilities, catalysing partnerships,
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asia economic policy conference. okina ( k. ), shirakawa ( m. ) and shiratsuka ( s. ) β the asset price bubble and monetary policy : japan β s experience in the late 1980s and the lessons β, monetary and economic studies 25, no. s β 1 : 395 β 450. bank of japan institute for monetary and economic studies. bis central bankers β speeches shirakawa ( m. ) β revisiting the philosophy behind central bank policy β, speech at the economic club in new york. shirakawa ( m. ) β advanced and emerging economies β two - speed recovery β β, speech at the bauhinia distinguished talk in hong kong sar. bis central bankers β speeches
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no single indicator which can identify emerging imbalances, let alone unsustainable global imbalances. a sufficiently flexible policy framework which can adapt to rapidly changing economic and bis central bankers β speeches financial conditions is required. the process through which crises unfold is unique for each crisis. we must learn from past experience, but strategies for the last war do not assure success in future battles. keeping an open mind is important. chart 12 financial account of emerging countries as policymakers work to develop a framework for identifying and dealing with unsustainable global imbalances in a rapidly evolving economic and financial environment, they need to be cognizant of three key elements : two longer - term trends and one element unique to the current environment. first, though needless to say, we are experiencing a further acceleration in economic and financial globalisation. in addition, due to technological advances, the interlinkages between financial markets and among market participants are becoming increasingly complex. shocks in one part of the world will swiftly spillover to other parts and often through unexpected channels. the effects of the risk - taking channel of monetary policy can be larger and more widespread than in the past. search - for - yield behaviour by global investors is one such example. second, the share of emerging market countries in the world economy is increasing. their share in the world economy which was 20 % in 1990 and 2000 has increased to 31 % in 2009 on a current price basis, and they are expected to account for seven - tenths of global economic growth in 2010. emerging economies have become the drivers of global growth, and consequently their responsibilities as members of the global community have increased. for example, it needs to be recognised that the implications of inflexible exchange rates in major emerging economies on the global economy have become larger. the perspective of an orderly structural adjustment process for domestic industries may warrant a gradual shift from fixed exchange rates to a more flexible exchange rate system and a controlled appreciation of the home currency. but, at the same time, policymakers in emerging economies need to recognise that such a policy both hampers the flexible implementation of domestic macroeconomic policies including monetary policy, and exports the cost of the adjustment to other countries. if other countries follow and take similar measures to delay the appreciation of their currencies, the impact on economies which allow flexible exchange rate movements could be magnified. bis central bankers β speeches third, we are now in the unique situation where some advanced economies are recovering from the
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accomplishments over the last two decades in islamic banking and finance. the robust growth of islamic finance industry today augments the collaborative efforts within the industry to move in tandem to strengthen the position of islamic finance in malaysia. as islamic banking and finance in malaysia journeys towards global integration and international acceptance, there are key areas in the banking industry that needs to be enhanced to progressively support future development moving forward. of importance, is the need to effectively engage other stakeholders through various means and approaches including promotional activities and strategies. it is imperative that the approaches adopted to be dynamic and innovative so as to ensure consistency and relevancy with the rapid development of the industry. the kliifex 2006 is well - positioned to be the platform to effectively engage with key stakeholders ; i. e. consumers, relevant agencies, scholars and intermediaries. communication and direct interface with these key stakeholders will advance towards effective dissemination of information to promote greater awareness and appreciation on islamic finance to create a more literate society on the virtues and benefits of islamic banking and finance. the organising of kliifex 2006 has some embedded key values and essence that need to be strengthened moving forward. the most significant is the strong alliance among the players within the industry as well as with the relevant institutions including educational, training and research institutions, knowledge centres and other professional bodies in promoting the development of the industry. islamic finance will achieve greater heights with the collaborative efforts of all relevant parties, especially those outside the industry. the existence of these networks and linkages is a catalyst towards strengthening the landscape for future innovations and advancements in islamic banking and finance at the domestic and international fronts. the second essence of kliifex 2006 is the involvement of international players, particularly with the participation of foreign exhibitors in this year's event. as the cross border trades and international islamic finance activities intensify, strong interlinkages among the domestic and international players are crucial. leveraging on the significant inroads and growing global recognition enjoyed by malaysian players, this event will accord opportunities for the players to understand each other's strength and capabilities that would lead to more strategic alliance in the area of islamic finance. this is certainly relevant in our effort to enhance the position of malaysia as an international islamic financial centre ( mifc ). the players should seize the opportunity to increase interactions towards finding the right partners and exploring strategies and that are able to capitalise on tax incentives and other operational flexibilities accorded under mifc to position malaysia as an
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asian economies have increased with an accompanying rise in cross - border financing activities. there has already been an increase in cross - border mergers and acquisition activity among asian financial institutions in order to reap emerging opportunities. the transformation in the financial landscape in the current environment has not been confined to the asian region but has also involved growing ties with other emerging regions. of significance is the rising trend of trade and financial linkages between asia and the middle east and other parts of the world. malaysian banks now have the capacity to take advantage of these trends. the trends towards regional financial integration also present significant opportunities to tap into the enlarged pool of savings in asia. besides institutional pools of wealth, the rapidly expanding middle class has been a key factor sustaining the high savings rate. in asia alone, we now have more than 2. 6 million high net worth individuals who collectively control an estimated usd8. 4 trillion in financial assets. these trends underpin the increasing demand for more sophisticated consumer finance and wealth management products. there is also potential to tap the appetite for growing international diversification among the more developed economies in asia, to meet the rising demand for regional financial assets. furthermore, the continued growth momentum in the region has created demand for infrastructure. it is estimated that asia needs usd 1 trillion worth of infrastructure investment over the next 5 years, offering huge potential for financing opportunities. third, reinforcing the move towards regional financial integration, authorities across the region have encouraged greater financial sector development and progressively liberalised their capital accounts. many regional countries are moving beyond financial restructuring to promote more diversified and vibrant financial systems that embrace a broad range of service providers and asset classes, including private equity, hedge funds, structured products and islamic finance. in malaysia, the gradual but progressive liberalization of foreign exchange administration rules undertaken since 2003 has led to significant benefits in terms of providing enhanced refers to japan ( rank : 2 ), china ( 4 ), india ( 10 ) and korea ( 12 ) based on 2005 nominal gdp in usd terms. gdp based on purchasing power parity ( ppp ). flexibility of the financial sector, contributing to reducing the cost of doing business as well as expanding the scope of activities of the financial sector. in april this year, several liberalization measures were implemented to further increase international investors'participation in the malaysian capital market, provide greater flexibility for resident investors to diversify into non - ringgit investments in malaysia and overseas, and to facilitate the expansion of the domestic banks'foreign currency business. fourth,
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i am happy that we have come so far today. such a project can only become reality if the city authorities, too, prove their commitment. so, i would also like to express my gratitude to lord mayor petra roth and the different departments of the city of frankfurt, especially the urban planning department, for the unstinting work and support they provided from the time of the purchase of the site to the architectural competition and the urban development plan, which was developed in parallel to our own planning, and also with the issuance of the building permit in may 2008. this is no time for complacency. we still have many challenges to face, and we have to make sure that the construction work proceeds smoothly. i am looking forward to seeing the restoration of the market hall and the rise of the office towers. i have full trust in all of you who are involved in the project working for our new headquarters, and in your expertise and knowledge to ensure the successful finalisation of our building β within schedule and budget, of course, as we are responsible for using our resources effectively and efficiently. i have advised our team, the new ecb premises project office, to monitor the works carefully and to keep a close eye on the quality, on the scheduling and on the costs of the project β the budget has to be respected. this is essential. today, i want to thank my dear colleague on the executive board, lorenzo bini smaghi, who has overseen the project remarkably well for the executive board over the past few years, as well as gerald grisse and thomas rinderspacher in their capacity of project coordinator and project manager β also as representatives for the entire team β for the excellent work achieved thus far, the development of the project within the expected and required quality and costs estimate and for the successful tendering of the construction works. i wish all of those who will either be continuing to work or who are just starting to work for our new building all the best and good endeavours!
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##tilist in our outlook. as the city β s long history shows, that has never been the outlook of people in the city ; rather it has been to trade freely and compete and grow new markets, to face outwards. we see that today for instance in the embrace of fintech. the uk β s financial markets and its financial system are therefore open for trade to all who will abide by our laws and act consistent with our public policy objectives. the question then arises of what sorts of safeguards and rules should apply to that trade? i mentioned earlier that one of the offspring of bretton woods was the gatt, subsequently the w to. the focus of activity was for some considerable time on trade in goods not trade in services. both goods and services trade depend on robust standards and the regulation of those standards, but trade in services is almost entirely about such standards. this trade has been substantially supported by the global standards to which i referred earlier, and which has allowed countries to defer to each other in terms of the prevailing rules and regulations. this means deferring to the rules of others to protect our citizens or firms when they choose to do business there. there is no doubt in my mind that the work done on global standards since the financial crisis has made this process easier to support and safer and improved the level of trust we have in each other. the european union has pursued the approach of so - called equivalence, which on the face of it allows for deferring to other authorities where appropriate. the eu β s framework of equivalence in financial services is a patchwork across many different pieces of financial services legislation, taking different forms in different sub - sectors, and in some not present at all. nor do the equivalence measures prescribe how the judgement should be made. as is well known, the post - brexit equivalence process between the uk and eu has not been straightforward. it is, of course, two distinct processes β one for the uk to recognise the eu as equivalent to the uk, and one for vice versa. the uk has granted equivalence to the eu in some areas, but the eu has not done likewise to the uk. in a few areas β involving central clearing and settlement β there has been agreement by the eu to extend temporary equivalence to the uk, recognising, i think, the clear risks to financial stability that would have arisen had this not been done at the outset. it would be reasonable to think that a common framework
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fundamental for the efficient use of capital and sustained growth. progress in corporate governance, enhancement of the legal and supervisory frameworks that support the banking sector, and the fight against money laundering, are also crucial. * * * in conclusion, let me make three remarks : Β§ first, you might remember that two months ago there still were a lot of opinions and articles forecasting enormous difficulties associated with the euro changeover. these catastrophic predictions proved wrong again. the euro notes and coins changeover has not only been a great technical success, but it has also been accompanied and illuminated by genuine popular enthusiasm. in my view this is a very important and positive phenomenon which has to be reflected upon thoroughly all over europe, including in the uk. Β§ second, the assessment produced by some economists on the international economy is today as bleak as it was buoyant yesterday, both postures being equally excessive. let us try to remain serious, lucid, serene and balanced in our analysis, in our judgements, in our decisions. let us all beware of the herd instinct which is always a very bad counsellor. let us beware of fashion. as regards the present situation, we must remain prudent and cautious, but we have some signs indicating a bottoming out in the us and in europe, including in my own country. and i see absolutely no reason why the european economy pick up would not be as early as in the us, taking account of the strong european fundamentals. Β§ third, confidence is of the essence in the present situation. confidence in our currency, confidence in its capacity to be a good store of value, confidence in its medium and long - term solidity, confidence in the capacity of the european central bank and the eurosystem as a whole to deliver price stability. this confidence β which is warranted by the central bank β is a very precious asset for the europeans. it is a very important ingredient for fostering growth through consumer confidence and therefore consumer demand which is presently the main driving force behind the european economy. i thank you for your attention.
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caleb m fundanga : access to finance β corporate governance and sustainability opening remarks by dr caleb m fundanga, governor of the bank of zambia, at the official opening of the microfinance and small to medium enterprises conference on β access to finance : corporate governance and sustainability β, lusaka, 17 june 2008. * * * β’ honourable felix mutati, mp β minister of commerce, trade and industry ; β’ mr michael mundashi β non - executive director standard chartered bank ; β’ mrs mizinga melu β managing director standard chartered bank β’ mr prashant thakker β global head of microfinance institutions of standard charteredbank β’ distinguished guests, ladies and gentlemen i am honoured to have this opportunity to make keynote remarks at this conference on microfinance institutions and small to medium enterprises organised by standard chartered bank, whose theme is β access to finance : corporate governance and sustainability β. i wish to extend a warm welcome to all participants, particularly those that have travelled from outside the country. i hope that you will find time to see some of the tourist spots of lusaka and experience the warm hospitality that zambia has to offer. distinguished guests, following the liberalisation of the zambian economy in the early 1990 β s, the number of small - and medium - scale enterprises ( smes ) has increased significantly as the government divested from running business in the economy to pave way for increased participation of the private sector. for instance, in the mining sector, the supply of goods and services has been taken up by private companies including those that can be classified as smes. similarly, the transport sector, which was dominated by government through the united bus company of zambia ( ubz ), zambia railways and zambia airways, etc, is now largely run by the private sector, consisting mostly of small and medium entrepreneurs. one can go on to mention the tourism, manufacturing, real estate, construction and others. this development is of great benefit to the economy in general and individual entrepreneurs in particular. therefore, small - and medium - scale enterprises have the potential to make a significant contribution to the growth of the economy, thereby improving the economic welfare of the population. as you may know, smes in zambia often have a direct impact on community development. since they are usually based in places where the owners live, they draw upon the community for their workforce and rely on it to do business. they provide employment, particularly for low - skilled workers, as well as women and the
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to see the ever increasing interest of youths, their teachers and professors in our educational activities. we are surprised with the particular interest of universities related to the current issues and their impact on the albanian economy, and the large number of projects, videos and drawings that pupils and high school students have presented at the bank of albania. today, we will see and award some of them. nevertheless, i would like to point out that the participation and engagement of all participants was impressive. concluding, i would like to thank all participants and the collaborators of the bank of albania in its educational initiatives and programmes, particularly for the global money week. we are grateful that in this week, as participants, you have become partner of the central bank, joining us in the work to face important challenges to the society. also, we are aware that these themes, like prudential and proactive approach to the world of finances, are a precondition for a safe and prosperous future, and the ever increasing participation in such annual activities makes as optimistic for this new generation being aware and interested for acquiring a better education. the bank of albania, as the central institution in these fields as well, is ready and committed to collaborate with every institution aiming at bolstering the financial literacy and financial inclusion of the public. i avail this opportunity to extend may heartiest thank you for your contribution, wishing all participants success in everything they do! 3 / 3 bis central bankers'speeches
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and react to policy makers β messages. thus, the supportive polices undertaken will become more effective and support more strongly the mitigation of negative shocks. being aware and making the right financial selections, everyone β banks, institutions, enterprises, households and individuals β may play an important role in dealing with the consequences of extraordinary situations that the world is suffering. this educational campaign of global money week is an excellent event to recall certain messages that the bank of albania has addressed extensively, turning them into an important part of its efforts for meeting the objectives and preserving the economic and financial stability. i would like to point out three main messages, which nowadays, due to the geopolitical and financial situation become more meaningful. first, i would like to emphasise the importance of using the national currency against foreign currencies. lek plays a crucial and direct role in transmitting the positive effects of monetary policy to our economy. the higher the use of lek, the bigger is the part of economy which feels the effects of the central bank β s policies. furthermore, the use of the national currency helps to amortise the shocks that steam from external sector through minimising the shocks on income, consumption and investments. the broad use of foreign currencies alongside the national one has important negative impacts, on both the effectiveness of economic policies and financial stability. particularly, in this period, while global developments, ambiguity and the change in monetary policy stance may give rise to additional risks to the exchange rate. these risks destabilise and expose the balance sheets of private sector against the fluctuations of the exchange rate. in simple words, the less you use the foreign currency ; the lower is the exposure to the exchange rate risk, which nowadays is even higher. the stability of financial institutions, enterprises and households contributes in the monetary policy pass through and macroeconomic stability. second, i would like to re - emphasise the importance of growing and promoting financial literacy as a counter - response to informality. this objective belongs to the central banks, and to all economic agents, educational institutions and media, to enhancing financial awareness and ability of public. these joint efforts, in addition to strengthening the monetary policy effectiveness, directly affect the financial inclusions of population. it means that : an increase in the number of users of safer financial products and services and at low cost drives to an increased access in financial sources, and consequently the growth of possibilities, income, and the quality of life. formal markets are the sole possibility
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stability. even though the latter is certainly a precondition for price stability, this change could raise potential conflicts between the two objectives, undermining the credibility of central banks and the effectiveness of their policies. preserving financial stability should instead be the main task of macroprudential action. the same considerations apply to regulation and microprudential supervision : each policy can work well only if it has clear objectives and targeted intervention tools to achieve them. the deterioration in the international outlook has also had a strong negative impact on the italian economy : economic activity progressively weakened in 2018, recording a slight contraction β a so - called β technical recession β β in the second half of the year. overall gdp growth was just 0. 9 per cent last year, around half the level recorded in 2017 ; all the main international forecasters expect it to decelerate further this year. the slowdown of activity in germany, with which we share close economic ties, and the fall in business confidence, have been especially important factors in the weakness of aggregate demand and, especially, the marked deceleration in investment by italian firms. our surveys confirm that weak capital accumulation reflects greater cautiousness on the part of enterprises in the face of uncertainty about economic and political factors, and the persistent trade tensions. economic activity returned to slightly positive growth in the early months of this year : according to the preliminary estimate gdp increased by 0. 2 per cent in the first quarter of 2019. this trend could continue, especially if the global rebound in investors β confidence observed since late 2018 proceeds and continues to exert its effects in italy too. but to fully recover the path of sustainable growth, italy must tackle its two main structural problems : the stagnation of productivity observed since the 1990s and the high level of public debt. italy has been growing on average by around 1 percentage point less than the rest of the euro area since 1999. this is the result of the country β s delayed response to the big changes of our era : globalisation and the technological revolution. a short - lived relief provided by fiscal or monetary policy, albeit important, is not enough to solve this problem. to address it, italy must quickly adopt a consistent growth strategy combining measures to support innovation, with those to improve the quality of human capital, and to create a more favourable environment for β doing business β. following the double - dip recession associated with the two financial crises that erupted in the past decade ( the global financial crisis of 2007 β 09 and the euro
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our monetary policy. should we go further, below r *? i wouldn't exclude it in the future, if growth were to remain subdued and inflation at risk of falling below target. but as a pragmatist, let me stress that these two questions are not urgent : the first part of the journey till the " confidence zone " of r * is clear and still significant ; we will then have time and additional data to adjust for the second part. and this brings me to the pace of this first part. which pace to remove the restrictive bias? the name of the game here is and remains full optionality, combining the two dimensions of pace which are the frequency of rate cuts and their size. we'll discuss in each of our next meetings, and look at data β be they actual or forecasts. that said, let me give two indications : seen from today, there is every reason to cut on december 12th. optionality should remain open on the size of the cut, depending on incoming data, economic projections and our risk assessment. optionality also means that, for the following meetings, we shouldn't exclude any of them for possible cuts. stating so the obvious, i don't mean to precommit to cut " back to back " in each of these meetings : this would be a renewed and excessive 2 / 5 bis - central bankers'speeches forward guidance. we should stick, as we did in october, to what i call an " agile pragmatism ", data driven but not timid. ii. some thoughts about our unconventional toolkit looking back now to the last 10 years, let me turn to some personal reflections on the two broad sets of " non - conventional " instruments. it will be a focus of our next strategy review. by the way, we should avoid the possible trap of the " immediate weather forecast ". in the previous 2021 review, we were just exiting the period of lowflation and even the risk of covid deflation, and we were unconditionally positive about our nonconventional toolsvi : " [ the ] assessment [ conducted as part of the strategic review ] found that each of the instruments ( including negative interest rates, forward guidance, asset purchases and longer - term refinancing operations ) has been effective in raising output, employment and inflation, and that the different instruments have reinforced each other. " let us be careful not to make a symmetrical one - sided assessment today :
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tem. 08 may. 08 mar. 08 oca. 08 kas. 07 eyl. 07 tem. 07 may. 07 mar. 07 oca. 07 kas. 06 eyl. 06 tem. 06 may. 06 mar. 06 oca. 06 kas. 05 eyl. 05 tem. 05 may. 05 mar. 05 oca. 05 source : cbt. since the central bank can directly control new turkish lira liquidity, it can support smooth functioning of financial and credit markets by providing the required liquidity. as for foreign exchange liquidity developments however, external conditions are more influential. in fact, in a period when uncertainties surrounding the global economy are at high levels, the central bank adopted the strategy to use foreign exchange reserves to primarily support the foreign exchange liquidity of our banking system. within this framework, the central bank resumed its activities as an intermediary in the foreign exchange deposit market ; lending rates of this market was reduced and maturities were extended. besides, during periods of ailing price movements, foreign exchange liquidity was injected via foreign exchange selling auctions. moreover, it has been declared to the public that if deemed necessary, additional measures might be taken to ensure that the financial markets function efficiently. all these measures have helped contain the effects of the global financial turmoil on the domestic economy. the central bank will continue to take the necessary measures, provided that they do not conflict with the price stability objective. in the last quarter of 2008, global financial conditions have been tighter than required by the stance of monetary policy, owing mainly to the intensification of the global financial crisis. turkey has also been undergoing a similar process. in this context, the central bank recently made a measured cut in short - term interest rates, in order to offset the extra tightening in monetary conditions. in order to be able to comprehend the monetary policy decisions of the central bank, the nature of the shocks to the economy should be analyzed properly at the outset. for instance, while an unexpected and strong monetary tightening was implemented in the face of capital outflows in the may - june 2006 period, an expansionary monetary policy was adopted following capital outflows in the last quarter of 2008 ( chart 4 ). the contradiction between these two responses can be explained mainly by the significant differences between the said two periods in terms of both economic conjuncture and the sources of the shocks. as both domestic demand and external demand were strong
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come out of thin air. they were born out of the disastrous economic performance of the region during the 1980s, and β 3 β the realization that only dramatic improvements in economic policies would suffice to allow growth and prosperity to take hold. first, there has been a general acknowledgment, and recent reinforcement of the lesson, that prudent fiscal policy is crucial to economic stability, and several of the economies of the region have made significant strides in this direction. while much is left to do in this sphere, it does appear that many countries have learned the benefits of prudent fiscal policy. fiscal deficits in most countries in the region have dropped, and in cases where they have not yet declined, serious attention toward achieving improvements is being mustered. improvements in budget balances have not been achieved without pain. in many countries government payrolls have been slashed, generous transfer and subsidy programs have been cut, and social expenditures have had to be reduced. on the other hand, the realization has become widespread that in the absence of such budget - cutting measures, employment and wages would become even more depressed. moreover, people have found that many of the actions taken to cut budgets, including privatization of money - losing state enterprises, has led to better service and an improved quality of life. second, there has been a substantial dismantling of the controls imposed by government over private sector prices and wages. it is now widely understood that excessive budget deficits and money creation are the root causes of inflation, and controls over private prices have been generally abolished. governments also have largely scaled back their role in private wage negotiations as well. public controls on privately contracted interest rates and other financial market prices also have been eliminated for the most part. finally, exchange rates in many latin american countries have become more flexible, and where the government still intervenes in foreign exchange markets, there is a greater understanding that such intervention must be underpinned by appropriate fiscal and monetary policies. third, the role of the government in other aspects of the economy has been substantially diminished, with an accordingly greater scope allowed for private activity and for competition from abroad. internally, many countries have privatized major businesses. the privatization of telebras, the brazilian telephone company, is a prominent recent example, and privatization has proceeded even further in other latin american countries. such privatization has in many cases been complemented with legislation opening particular sectors to greater and fairer competition. additionally, trade barriers have been removed in many
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equity investment, but now a considerable portion of capital inflows is invested in local currency - denominated longerterm bonds β this change has made foreign capital flows much more stable. on the other hand, the development of fixed income markets in the region has also brought new difficulties. first, as foreign investors hold a greater share of bonds in the region, bond yields are greatly affected not only by domestic economic developments or monetary policy, but also by global economic conditions. in addition, there are increased concerns about financial and foreign exchange market unrest in the event of a sudden reversal of capital inflows to the regional bond markets. there have recently been dramatic changes in global economic environment, including the continuing monetary policy normalization by the u. s. federal reserve and the rising trade tensions between the u. s. and china. in fact, some emerging market economies with weaker fundamentals have experienced large - scale capital outflows, resulting in more volatile stock prices, exchange rates and interest rates. so far, we have seen that the development of the fixed income market in the asia - pacific region has greatly contributed to better market functioning and a better policy environment, while 1 / 2 bis central bankers'speeches creating no small difficulties. against this backdrop, allow me to suggest some policy tasks that countries in the region must first pursue to enhance financial and economic stability. to begin with, we must enhance the overall resilience of the regional economy so that sudden changes in capital flows triggered by external shocks do not lead to systemic risk. to this end, we must reinforce our capacities and policy space to properly respond to external risks. this may be done by improving current account balances, holding sufficient foreign reserves, and enhancing exchange rate flexibility. next, we must continue our international cooperation to reinforce financial safety nets. asiapacific countries have striven to establish regional financial safety nets and develop fixed income markets through the chiang mai initiative multilateralization ( cmim ), the asian bond markets initiative ( abmi ), and the asian bond fund ( abf ). we also need to continuously expand our cooperation not only within the region but also with international organizations such as the imf and bis to strengthen global financial safety nets. last but not least, we have to continue our policy efforts to strengthen fixed income market infrastructure and functioning, such as by seeking diverse investors, making corporate bond markets more vibrant, and improving the processes for bond issuance and trading. i believe that these efforts would expand both
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new year speech january 2, 2019 juyeol lee governor the bank of korea dear fellow members of the bank of korea! today we start our first tasks of 2019, filled with new hope and resolve. i would like to begin by expressing my heartfelt gratitude to all of you, for so faithfully carrying out your duties throughout the last year. the korean economy went through some difficult times last year, due to the heightening of uncertainties at home and abroad. volatility in the international financial markets increased frequently, in line with the worsening of the global trade environment and with the financial instabilities suffered by some emes amid the series of policy rate hikes by the us federal reserve. thanks to our strong international credit standing we were fortunate enough to maintain stability in korean markets overall, but we still had to remain vigilant. looking at the real economy, the rate of growth did not deviate far from its potential level, but employment remained sluggish and economic agents β sentiments weakened. the growth in household debt continued to outpace that in household income, leading to concerns that this could undermine financial stability. in these circumstances the bank of korea maintained the degree of its monetary policy accommodation, mindful of the diverse risk factors that could negatively affect the real economy, until in november it then raised the base rate by 25 basis points in consideration of the possibility of the financial imbalances worsening. 1 / 8 dear members of the bank of korea! this year the korean economy appears likely to maintain a pace of growth similar to last year β s. but there still seems to be a tough road ahead of us, both at home and abroad. there are possibilities that the uncertainties about the monetary policy normalization in the us and the us - china trade conflict could lead international financial market volatility to increase and undermine global economic growth. with its high degree of capital market openness and heavy dependence on external trade, korea could be particularly vulnerable to the impacts of changes in external risks. we will need to be mindful of and prepared for these possibilities. we should also pay close attention to the fact that the growth potential of the korean economy is continually weakening. the productivity growth in our major industries is slowing, while accumulating capital through investment has become difficult as our economy now enters its mature stage. the reduction in our workingage population in consequence of low birthrate and aging population is also weakening our growth potential. i think the concerns about our economy β
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will leave to others the question of whether every detail of the laws passed in this period was equally effective, in the short or long term, in promoting macroeconomic stability. but we should recognize that rules to promote financial stability and a healthy economy have deep roots in the american legal tradition. the post - crisis international consensus arguably, the history of law and macroeconomics has even deeper roots. prior to the banking act of 1935, congress had passed the national bank act of 1863 in response to the financial crisis that emerged during the early days of the american civil war. its purpose was to create a national banking system and establish a national currency. the following year, congress passed the national bank act of 1864, which established the office of the comptroller of the currency and gave the federal government the authority to supervise commercial banks. some might even characterize the first and second banks of the united states as early efforts at law and macroeconomics. - 4building upon that strong tradition, i would like to focus this morning β s remarks on the role that law and macroeconomics has played since the financial crisis in promoting a more stable economy. i am, of course, referring to macroprudential financial regulation. let β s rewind the tape. after many decades of remarkable financial stability in the united states since the 1930s, the focus of financial oversight had moved away from systemic risks. prior to the financial crisis, the better part of our regulatory framework was microprudential in nature β individual laws geared toward mitigating the fallout from idiosyncratic shocks to firms. this framework was designed to protect investors and depositors, viewed negative shocks as not originating from the financial system, and did not take into account risks that might be shared by financial firms. 2 this is not to say that regulators did not understand the consequences of an interconnected system and the potential of contagion. for instance, the u. s. government, under the able leadership of treasury secretary nicholas brady, recognized and responded to the financial stability risks of the latin american debt crisis of the 1980s. the united states had interests in stabilizing allies in latin america, but a central part of the motivation was to contain potential risks to the u. s. economy. the events of 2008 β 09 redefined our mission by more explicitly connecting macroeconomic and financial stability, as in the 1930s. congress and the executive branch embraced a sweeping response, designing a system of laws to reflect a recognition that the cumulative
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important banks ( g - sibs ), which are subject to stricter capital requirements in the form of a capital surcharge. these banks must meet this higher capital standard based on the judgement that their potential failure would have a larger, systemwide impact on the board of governors of the federal reserve system, 2019 supervisory scenarios for annual stress tests required under the dodd - frank act stress testing rules and the capital plan rule ( washington : board of governors, february 2019 ), https : / / www. federalreserve. gov / newsevents / pressreleases / files / bcreg20190213a1. pdf. - 8economy. the goal, therefore, is to reduce a g - sib β s probability of failure so that its expected impact on the economy would be the same as that of a non - g - sib. similarly, to reduce the risks of interconnectedness and contagion, the united states and other jurisdictions have implemented rules that limit the exposure that one bank may have to a single counterparty. finally, research on optimal bank capital levels by staff at regulatory and supervisory bodies around the world have factored in macroeconomic costs and benefits. specifically, these models assume that higher capital requirements would reduce the probability of a financial crisis occurring but would increase the cost of bank lending, thereby lowering gdp growth. not surprisingly, these models have produced a wide range of capital estimates given the wide range of underlying assumptions. combating pro - cyclicality the third paradigm shift at the fed is combatting pro - cyclicality. to be sure, none of the regulatory developments that i have discussed so far screams macroeconomics quite as loudly as a time - varying, discretionary regulatory regime the express goal of which is to fight pro - cyclicality. cyclicality β in this case, fluctuations in the economy based on the business cycle β is a concept that is near and dear to every macroeconomist β s heart. in fact, theoretical studies of economic cycles go back to the early 1800s, and the national bureau of economic research β s tracker of the u. s. business cycle dates economic contractions and expansions back to the 1850s. quite impressive. there β s also more than just a handful of volumes of articles and book chapters written on the business cycle and countercyclical fiscal policy. - 9in the context of macroprudential regulation, pro - cyclicality represents a problem because banks tend to build
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the boj, contributed to the containment of crossborder spillovers during the initial stages of the global financial crisis. looking back at the history of central banks, most of those established before the second world war were brought into existence for the purpose of restoring order to a financial system in turmoil. macro - prudential perspectives are therefore nothing new to central banking. rather, macro - prudence might be part of the original reason why an economy needs a central bank. ultimately, it could be argued that all the activities of central banks, from issuing banknotes to operating payment and settlement systems, acting as the lenderof - last - resort and implementing monetary policy, cannot be pursued without a β macroprudential perspective β. thank you for your attention.
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- 19 pandemic. frankfurt. financial stability board ( 2020 ). evaluation of the effects of too - big - to - fail reforms : consultation report 2020. basel. imf, eurostat, deutsche bundesbank ( 2020 ). second phase of the g20 data gaps initiative ( dgi - 2 ) β status report on the implementation of recommendation ii. 20 β promotion of data sharing β. 1 for more information on the international banking research network, see : 2 for details on the international 3 see the status report on the implementation of recommendation ii. 20 β promotion of data sharing β 4 the idea of such a standard was also expressed at the 8th imf statistical forum : measuring the economics of a pandemic : 4 / 4 bis central bankers'speeches
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) jun. 15 mp report sep. 15 mp report dec. 15 mp report 2016 ( f ) sep. 15 mp report 2016 ( f ) dec. 15 mp report 2, 0 - 3, 0 gdp 4. 2 1. 9 2, 25 - 3, 25 2, 0 - 2, 5 2. 1 2, 5 - 3, 5 domestic demand 3. 7 - 0. 6 2. 6 2. 0 2. 3 3. 1 2. 6 domestic demand ( w / o inventory change ) 4. 6 0. 5 2. 2 1. 4 2. 0 3. 0 2. 5 gross fixed capital formation 2. 1 - 6. 1 0. 7 - 1. 2 0. 7 1. 9 1. 7 total consumption 5. 5 2. 5 2. 7 2. 1 2. 4 3. 3 2. 7 goods and services exports 3. 4 0. 7 1. 3 - 1. 7 - 1. 7 1. 2 1. 0 goods and services imports 1. 7 - 7. 0 1. 1 - 2. 3 - 1. 4 2. 2 1. 6 current account ( % of gdp ) - 3. 7 - 1. 2 - 0. 4 - 0. 7 - 1. 7 - 1. 5 - 2. 6 gross national savings ( % of gdp ) 20. 6 20. 3 21. 0 20. 8 20. 0 20. 0 19. 1 nominal gross fixed capital formation ( % of gdp ) 23. 8 22. 0 21. 6 21. 5 22. 0 21. 5 21. 9 ( f ) forecast. source : central bank of chile. bis central bankers β speeches figure 4 lending interest rates ( 1 ) ( percent ) ( 1 ) weighted average rates for all operations performed each month. ( 2 ) dashed horizontal lines show ten - year average for each series. ( 3 ) interest rates on credits in ufs. source : central bank of chile based on sbif data. figure 5 sovereign risk premiums in emerging economies ( 1 ) ( basis points ) latin america europe asia chile ( 1 ) the dotted vertical line marks the statistical cutoff date for the september 2015 mp report. ( 2 ) measured by 5 - year cds premiums. simple average of countries in each region. ( 3 ) includes brazil, colombia, mexico, panama and peru. ( 4 ) includes bulgaria, croatia, the czech republic, hungary and turkey. ( 5 ) includes
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has its limits too, which we must respect if we do not want this essential pillar of price stability to weaken. this is why, after having higher and more persistent inflation levels than we had foreseen, we have decided to withdraw part of the monetary impulse, with the objective of bringing inflation to the target within a two - year horizon. monetary policy will remain expansionary, with the real rate below its neutral level for a prolonged period of time. with that, we are certain that we will continue to contribute to the recovery of growth and hold unemployment within boundaries. but, at the same time, we will also ensure the achievement of price stability. i would like to conclude by emphasizing that, despite the pessimistic atmosphere associated with the developments in the world economy, plus the cases of collusion and other legal issues and, i will say it, the stress that has pervaded some important local discussions, from a macro standpoint the conditions to resume strong growth are present. however, we must be ready to confront a more complex scenario. this means that every aspect that i have mentioned has to improve. as for monetary policy and our role as financial regulator, we will continue to work to pursue the objectives that we have been entrusted, namely to safeguard price stability and ensure the normal functioning of internal and external payments. thank you. bis central bankers β speeches figure 1 inflation indicators ( * ) ( annual change, percent ) services efe cpi cpiefe good efe - 2 - 2 - 4 - 4 - 6 - 6 jul. jul. jul. jul. jul. ( * ) as from january 2014, the new indexes with annual base 2013 = 100 are used, so they are not strictly comparable with earlier figures. sources : central bank of chile and national statistics institute ( ine ). figure 2 labor market ( percent ; annual change, percent ) unemployment rate wages employment - 2 - 2 ( 1 ) spliced series using monthly variation in february 2010. ( 2 ) for nominal wages, average ulc and irem were used. spliced series using monthly variation in february 2010. sources : central bank of chile and national statistics institute ( ine ). bis central bankers β speeches figure 3 gdp, domestic demand and components ( annual change, percent ) domestic demand consumption gdp gross fixed capital formation ( right axis ) - 3 - 7 - 6 - 14 source : central bank of chile. table 1 domestic scenario ( annual change, percent ) 2015 ( f
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investments. β’ these reforms will provide incomes to our rural communities. β’ reforms will provide our grandchildren with more employment opportunities when they leave school. β’ and improve the standards of living of all our people. β’ on the whole, these reforms will provide the basis for β growing a sustainable economy for our future β. i fully share these views of the minister for finance. for the private sector, reforms is not only a word for the public sector. undertaking organizational reforms at the micro or firm level is necessary. learning new and more efficient ways of using existing technology can result in lower unit costs. better working conditions and training are essential. considering the significant influence of industrial relations in the productivity of the work force, i am hopeful that all tripartite parties including the trade unions will realise the win - win potential of promoting productivity in the work place. while i agree that industrial action is the right of workers, the cost of such actions to everyone including the workers themselves must be clearly identified and factored into people β s choices. it is therefore important that the partnership between government, employers and workers is strengthened further in fiji bearing in mind that at the end of the day our goals are mutual. what if we do not raise productivity? on a macro level, we will fail to realize our gdp growth potential let alone reach our growth target. this means there will be fewer jobs available for many of our children and grandchildren. this means more unemployment, and less income. poverty will rise leading to social problems. eventually, everyone pays for the low productivity as we are already doing. but unfortunately, the burden of that cost will be borne more by low - income earners and the poor in our communities. they are the most vulnerable. they are the first to go in a job redundancy situation and the little asset they have are not usually protected from inflation. in addition, as consumers they will again face higher prices. concluding comments is higher productivity going to solve all our problems? definitely not. but it will go a long way in removing efficiencies in all levels of the economy. this efficiency will have significant favourable ramifications throughout the economy. and in fijis case of low long - term growth potential, higher productivity will launch us to a high growth orbit. my guess is that if we raise productivity growth by one percent, our growth potential will rise by two percent. that will make a lot of difference to everyone. raising productivity is not the responsibility of tpaf or government only
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barry whiteside : regulation and supervision of non - bank microfinance institutions opening speech by mr barry whiteside, acting governor of the reserve bank of fiji, at the regional off - site & on - site technical workshop on non bank microfinance institutions, suva, 12 β 14 april 2011. * * * my fellow governors, mr. denton rarawa ( cbsi ) and mr. loi bakani ( bpng ) central bank representatives from the region mr. tillman bruett, regional financial inclusion advisor and project manager, pacific financial inclusion programme mr deva de silva, senior operations officer, international finance corporation workshop facilitators mr. mark flaming and dr. mohamed nasir fellow colleagues from the reserve bank of fiji ladies and gentlemen introductory remarks bula vinaka to you all. it is with great pleasure that i welcome you all to suva for the first regional technical workshop on regulation and supervision of non bank microfinance institutions. it is an honor to help host this very important workshop that brings together regulators from around the region who are interested in the microfinance and financial inclusion agenda. microfinance and financial inclusion have become very topical issues on the global agenda, and a priority in many developing countries. it has been acknowledged that inclusive financial systems, where people regardless of income level, have easy access to various financial services, are critical for a country β s sustainable long term economic growth. in the region and in our individual countries we can attest that there are still significant numbers of our people excluded from basic financial services. in this regard, our active role in financial systems regulation, reform and policy development is important to set the scene and successfully implant the microfinance and financial inclusion agenda in our countries. an important element of inclusive finance is the institutions directly involved in extending financial services to the financially excluded. most of these institutions may operate outside the boundaries of central banks β regulatory and supervisory scope. in this workshop you will get to learn and devise practical approaches and methods that can be designed and adopted to effectively regulate such institutions. i wish to acknowledge the support and funding of the alliance for financial inclusion ( afi ), the pacific financial inclusion programme ( pfip ) and the international finance corporation ( ifc ), whose kind assistance have made this regional workshop possible. regulation and supervision of fiji β s financial system in fiji, the reserve bank is responsible for regulating and supervising the local financial system. this consists of the banking, insurance,
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indicators have suggested that the economy has been slowing, after a period of excessively strong growth in demand that had pushed up inflation. absent the sudden recent deterioration in the global outlook, i think we would in due course have looked back and seen that the slowing had been similar to that observed in 2001, albeit with differences by sector. but with recent international economic and financial events, the economy will probably now experience a more significant slowing than was otherwise going to occur. that is barely detectable yet in some of the key official datasets. employment, for example, remained quite solid, and unemployment very low, through into october, consistent with the gradually moderating growth of mid year, but not yet showing the effects of the more cautious mood in the business community that is now taking effect. nonetheless, in the period just ahead, we are likely to see, for a time, growth at quite a slow pace. that is the outlook embodied in the reserve bank β s statement on monetary policy released last week. this means that, over time, the extent of capacity utilisation will decline and pressure on prices will abate, though that could take some time to be apparent. the lower exchange rate will tend to push up prices for traded goods, though the weak global environment may mean this effect could be muted somewhat. lower raw material prices will also be of considerable assistance in slowing manufactured prices β again subject to the exchange rate. of course, many of the items pushing up inflation in australia of late have been in the services sector, but the likely moderating trend in labour cost growth over the next couple of years should help here. overall, our view is that after a fairly extended period of above - target inflation, we will see the cpi inflation rate moving back to its target over the next two to three years. should demand in the economy weaken further than we expect, that would be likely to be accompanied by a downward revision to the inflation outlook. given this outlook, the reserve bank has been lowering the cash rate. we have chosen to do so quite quickly, well before a decline in inflation is evident in the data, in recognition that the international circumstances had changed quite sharply, which have increased the risk of a more abrupt slowing in demand. that is, we have been pursuing the inflation target in a forward - looking way, and paying due account to economic activity considerations. in the period ahead, we shall be seeking to strike the right balance between, on the one hand, the need to
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have taken, equity stakes in key financial institutions, up to and including full nationalisation in some cases. as far as confidence is concerned, measures have been taken by a number of governments to secure retail deposits by a guarantee, and to offer a guarantee of eligible wholesale obligations of banks willing to pay for it. this ought to alleviate concerns about riskiness of the institutions concerned, allowing them access to term funding. these measures are bearing some fruit. markets are beginning to thaw. spreads between expected central bank policy rates and term funding costs have come in from the extraordinary levels seen in september and october, though they remain high by historical standards. the actions taken to inject equity are stabilising a situation on solvency that could otherwise have unravelled quickly. there have been substantial issues of wholesale securities using the priced guarantee, mainly by uk banks, suggesting that term markets are opening again. what is needed now is for policy - makers everywhere to specify as quickly as possible the parameters of their various guarantees so that market participants have a degree of certainty about how things will work β while retaining, within reason, the capacity to adjust the parameters in the light of experience. so a good deal has been done already towards addressing the financial problems themselves. these measures cannot avert a significant slowing in the global economy β it is fairly clear that a recession in the major country group, the g7, is under way. that, in turn, means that credit losses will be incurred by the lenders in those countries as typically happens in a business cycle downturn. but the measures averted, in my judgment, potential systemic collapses that would have had massive repercussions throughout the world. that leaves an international business cycle event to be addressed. so what are the ingredients for doing that? the slower growth in demand occurring now, and likely to be seen over the coming year, has had the effect of lowering the most flexible set of prices, namely those for raw materials and energy. the price of crude oil has fallen, measured in us dollars, from nearly us $ 150 a barrel at mid year to under us $ 60 today. prices for metals and soft commodities have also declined considerably. it now looks as though prices for iron ore and coal, critical cost components for steel and electricity, are declining too. other prices around the global economy are typically slower to respond to the shifting balance between demand and potential supply, but with global output expected by the imf to be growing during 2009 at its slow
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commoditizing information that is perhaps not yet susceptible to such commoditization. a key question that has emerged from the current developments in financial markets relates to the role of monetary authorities in the context of such a crisis. this issue is of concern to all of us in central banking. over the last decade or two, it would appear that the focus of central banks has been narrowing, relative to the more complex responsibilities that they have traditionally shouldered. a great deal has been written on this issue, a great deal has changed in terms of practices and, in some countries, the regulatory structure itself has been altered to move central banks to being relatively pure monetary authorities. according to this view, central banks should focus largely on keeping inflation low and stable, and in doing this also contribute to financial stability. to quote harvard economist kenneth rogoff : " indeed many economists believe that central bankers could perfectly well be replaced with a computer programmed to implement a simple rule that adjusts interest rates in response to output and inflation. but while [ this ] view is theoretically rigorous, reality is not " ( businessworld, september 17, 2007 ). although some central banks, such as the us federal reserve, have an explicit mandate to also promote growth, a good deal of thinking in recent times tends to argue that inflation control by itself would promote growth and that central banks would be better off to concentrate on this objective alone. it is instructive to examine what central banks have done in the current context. the responses of the central banks to the recent events in financial markets have shown that concerns for financial stability can assume overriding importance, irrespective of the legislative mandate handed down to central banks as part of ongoing reforms. this is evident in the fact that central banks initially reacted through the injection of liquidity, including through special facilities and the expansion of list of eligible collateral. discussions involving central bankers in various fora indicate their willingness to consider other courses of action in favour of protecting growth. as we all know, the us federal reserve has gone further in cutting interest rates to promote both growth and in the interest of financial stability ; the u. k. authorities have had to provide liquidity to a specific institution, while giving a blanket guarantee to depositors on the safety of their deposits. accordingly, it is becoming evident that central banks do have a role beyond inflation targeting. evidently, both growth and financial stability matter for central banks. when it comes to the crunch, in their roles as lend
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currency and money markets, the reserve bank β s policy approach has been to be increasingly vigilant and proactive to any incipient signs of volatility in financial markets. notwithstanding the progress made since the early 1990s, the reserve bank recognises that domestic financial markets need to develop much further, especially in order to support the recent acceleration in growth momentum of the indian economy and in the context of the envisaged move towards fuller capital account convertibility. the indian experience demonstrates that development of markets is an arduous and time consuming task that requires conscious policy actions and effective implementation. without real sector development in terms of the physical infrastructure and improvement in supply elasticities, the financial sector can misallocate resources, potentially generate bubbles and possibly amplify the risks. hence, financial sector reforms have complementarity with the pace and process of reforms in the real sector in india. given the large weight on stability, especially in view of low income levels for a large segment of the population, the careful and cautious approach to development of financial markets followed so far would need to be pursued in the coming years. the pace of further progress would depend upon the development of the necessary expertise in the public sector banks, further expansion of private sector banks and foreign banks. we recognise the need to develop further various segments of the domestic financial market to help in better risk management by various market participants. the demand for various risk management tools could be expected to increase, especially in the presence of potentially larger fluctuations in exchange rate and interest rates in the future. in recognition of the need to widen the range of instruments available to market participants, the reserve bank has placed draft guidelines on introduction of credit derivatives in the country. more recently, a draft report on the introduction of currency futures in india has also been put in the public domain for comments and feedback ; and work is in progress on the introduction of interest rate futures. summing up, it is widely recognised that the indian financial sector over the last decade has been transformed into a reasonably sophisticated, diverse and resilient system delivering a wide variety of financial services efficiently and profitably, with a spectrum of financial market segments in which financial institutions are able to participate with operational and functional autonomy in an environment of increasing deregulation and international competition. the acceleration of growth in the real economy suggests that the financial system has served well the overall needs of the economy. during this period, while the global financial environment has become more risky in the wake of new instruments
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population in advanced economies and in the world at large.
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task. it requires the ability to assess the quality and quantity of the skills available among the population, determine and anticipate those demanded by the labour market and implement efficient strategies to maintain and update them throughout workers β lifecycles. data on available skills is, however, of poor quality and the demand for skills, present and future, is often a black box. in developing countries challenges are even greater as access to basic - level schooling remains an issue for a sizeable share of the population : action will have to be taken to carefully balance equal access to and completion of lower - secondary education with further learning both for school - age children and for adults. these strategies require coherence and co - operation among schools, the private sector and social partners : the world of learning and the world of work must be linked. formal education attainments do indeed display high complementarity with on - the - job training and other initiatives intended to increase the coherence between the supply and the demand of skills. human capital investment is key not only to boosting productivity but also to tackling inequality and promoting social mobility, enhancing social capital and maintaining social cohesion. adults with low levels of education have a higher likelihood of reporting poor health and a lower participation in community groups and organizations. at the same time, more qualified adults are much more likely to feel that they have a voice that can make a difference in social and political life. these results are consistent across a wide range of countries, confirming that skills have a profound relationship with economic and social outcomes in many different contexts and institutions. investing in skills is far less costly, in the long run, than paying the price of poorer health, lower incomes, unemployment and social exclusion that could lead to political aversion towards technological advancement and progress. finally, i would like to stress the important role of international cooperation in the management of the long and uncertain transition phase. an institutional synoptic design encompassing all policies ( fiscal and welfare, antitrust, and structural reforms ) is highly desirable. greater attention must be paid to the coordination of policies at a supranational level and to the sharing of data and statistics in order to correctly measure and interpret the economic variables as well as the channels through which the effects of these policies will meet their intended target. let me conclude by thanking the organizers β emanuela ciapanna, fabrizio colonna and paolo sestito from the bank of italy as well as ciro avitabile
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measures to enhance the availability of collateral, were pivotal in preventing a disorderly process of lenders β deleveraging and a large - scale credit crunch. this action was instrumental in maintaining price stability. later in 2012, a renewed confidence crisis, in part reflecting unwarranted investor fears about the reversibility of the euro, caused a severe deterioration in financial markets. sovereign bond and bank lending rates in some countries increased dramatically, thereby impairing access to financing of the real economy. bis central bankers β speeches to safeguard the singleness of monetary policy and to ensure an effective transmission of the ecb β s policy intentions to the broad economy, in august, the governing council announced its readiness to undertake outright monetary transactions ( omt ). omts have proven to be an effective backstop against unfounded fears of reversibility. strict conditionality contains moral hazard on the side of governments. it ensures that they will adopt the reforms that are necessary to secure their solvency and to foster conditions of steady growth for their economies. as i said before, the repair of the transmission channel cannot be done by the central bank alone, governments need to do their part. let me therefore turn to the on - going adjustment in member states, and the euro area more generally. 2. the adjustment in the euro area during the past five years, a number of euro area countries have seen a significant correction of their external and domestic imbalances. in ireland, greece and portugal current account balances improved by more than 7 per cent of gdp between 2008 and 2012. a large part of this adjustment has been driven by a contraction in domestic demand, triggered by the unwinding of long accumulated unsustainable developments and by the cyclical downturn. at the same time, in ireland, spain and portugal export performance has been very strong compared with the pre - crisis period. this is a sign that a genuine structural correction is taking place and resources are being moved from the non - tradable sector to the production of traded goods. we have also seen some improvement in cost competitiveness, which has contributed to the external adjustment. between 2008 and 2012, in the three programme countries the cumulated unit labour cost growth was about 10pp below the euro area average. the adjustment has been mainly driven by an increase in average productivity, largely reflecting labour shedding, rather than by a reduction in nominal wages. the latter adjustment has been much more limited so far. this has contributed to increasing the
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real cost of adjustment and the burden borne by the more vulnerable members of society. it calls for greater determination in further addressing rigidities in wage setting and increasing competition in many segments of the economy. reducing rents is not only a matter of efficiency in the adjustment process : it is also a matter of equity in sharing the burden of adjustment. 3. the outlook for emu prior to the crisis, member states did not internalise fully what it means to be part of emu. fiscal and economic policies were not sufficiently geared towards the conditions of being a member of a single currency zone. but the lessons of the crisis have been learnt. eu heads of state and government have taken action and strengthened the governance framework. the current deepening of emu is essential, in particular as regards banking union. it is of utmost importance that the legislation on the single supervision mechanism ( ssm ) is finalised before the summer break now that a political agreement has been found. this is an absolute prerequisite if we want to embark upon our preparatory work in a timely and effective fashion, so that the ssm is operational by mid - 2014. equally important is the swift set - up of a single resolution mechanism ( srm ) : it is a necessary complement to the ssm and a key element of banking union. the commission β s intention to put forward a legislative proposal before summer is highly welcome. in the meantime, the directive on bank recovery and resolution will hopefully be adopted and provide for a coherent eu - wide set of rules. deeper economic union means more than fixing the financial system. we therefore welcome the proposal to conduct ex - ante coordination of structural reforms initiatives, which should be implemented as a best - practice benchmarking exercise. in the same vein, reform contracts, bis central bankers β speeches in which member states commit to concrete reforms with specific timelines, would also facilitate the recovery of competitiveness. but new rules are only as good as the commitment to actually implement them. it is of key importance that the existing legislation is applied forcefully during the ongoing european semester : this represents a true test of the credibility of emu β s governance framework. i thank you for your attention and stand at your disposal for questions. bis central bankers β speeches
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the coronavirus crisis phase is over. we will reinvest the principal payments from maturing securities purchased under the pepp until at least the end of 2022. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. net purchases under our asset purchase programme ( app ) will continue at a monthly pace of β¬20 billion, together with the purchases under the additional β¬120 billion temporary envelope until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. we will also continue to provide ample liquidity through our refinancing operations. in particular, 1 / 3 bis central bankers'speeches the latest operation in the third series of targeted longer - term refinancing operations ( tltro iii ) has registered a very high take - up of funds, supporting bank lending to firms and households. the monetary policy measures that we have taken since early march are providing crucial support to underpin the recovery of the euro area economy and to safeguard medium - term price stability. in particular, they support liquidity and funding conditions in the economy, help to sustain the flow of credit to households and firms, and contribute to maintaining favourable financing conditions for all sectors and jurisdictions. at the same time, in the current environment of elevated uncertainty, the governing council will carefully assess incoming information, including developments in the exchange rate, with regard to its implications for the medium - term inflation outlook. it continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp contracted by 11. 8 %, quarter on quarter, in the second quarter of 2020. incoming data and survey results indicate a continued recovery of the euro area economy and point to a strong rebound in gdp growth in the third quarter
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area we have certainly not been loose or lax! i trust that the ecb did well and took the right decisions in the past. let me give you an example : you know that when we decided to increase rate in december 2005 ( editors note : after almost two and a half years at 2. 0 % ), we were advised by the imf not to increase rates ; we were advised by the oecd not to increase rates ; we were advised by a number of other eloquent voices not to increase rates. we did it nonetheless, because our monetary analysis in particular strongly suggested that we should. today nobody suggests that we were wrong in our analysis and in our decision, on the contrary. 3. inflation in the united states is now around 4 %. would you say that the risks to price stability are now greater in the euro area than in the us? i certainly will not judge the policies that are pursued by other central banks. we all have our own responsibilities in our economies and we have to face different challenges : the shocks are not of the same nature and the same amplitude ; the economies themselves exhibit different structural features, including as regards their degree of flexibility. those different challenges are explaining why interest rates are different from country to country. do you know that interest rates in britain as well as in australia, new zealand, sweden and norway for example are higher than in the euro area? i trust that all central banks are doing what is necessary to counter inflationary pressures and to be credible in the delivery of price stability over time. to deliver price stability in the medium term is necessary for five reasons : first, it is what the european democracies have asked us to do when they created the ecb ; second, it is what our fellow citizens are asking us to do in the present circumstances ; third, it is particularly necessary for the most vulnerable and the poorest segment of society ; fourth, it is a necessary precondition for sustainable growth and job creation and fifth it is particularly important to solidly anchor inflation expectations in a period of financial market tensions and volatility. 4. why did the recent statement by the governing council lay so much emphasis on the need to suppress second - round effects in order to quell inflationary expectations? indeed, our message is that we should avoid second - round effects. we cannot change today the prices of oil and commodities. but we must avoid that prices that depend on us β for instance prices of services or the wages and
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of prices, in shekels, of imports to israel indicates a decline in the past two years, both because the composition of our imports included groups of goods that declined in price, and because a marked share of imports are from countries using the euro, which as known weakened markedly against the shekel. another factor acting in recent years to moderate price increases is a change in israeli consumption patterns, reflected in, for example, an increase in consumer purchases from abroad primarily via the internet. this became stronger with the expansion of the customs exemption on personal imports in 2012 and again at the end of 2014. beyond its direct impact, personal imports act to increase competition among domestic manufacturers and marketers of many consumer goods. although price reductions initiated by the government diminished in 2016, they still contributed to a decline of approximately 0. 2 percent in the 2016 cpi. despite the labor market being near to full employment, in recent years the decline in inflation expectations was reflected in an only moderate increase in nominal wages, which together with the decline in the cpi essentially became an increase in real wages at a solid pace. this was reflected in a marked increase in consumers β purchasing power, and supported the continued growth in private consumption. from the perspective of its impact on inflation, producer prices increasing while consumer prices decreased were reflected in β until recently β unit labor cost which did not increase, so that labor costs did not create pressure for increasing prices, while at the same time the increase in purchasing power as a result of the increase in real wages supported growth of private consumption. fiscal policy in the past two years the deficit in actuality was about 2 percent of gdp, considerably lower than the deficit ceiling. with that, it is important to look at the estimate of the cyclically adjusted deficit β an estimate that takes into account the effect β on tax revenues and on some components of expenditure β of where the economy stands in the business cycle. from this viewpoint, the deficit increased in 2016, as a result of a real increase of 5. 6 percent in expenditure while reducing tax rates, and it is high by international comparison. that is, budget policy also supported, alongside monetary policy, the expansion of economic activity. the share of debt in gdp continued to decline in 2016 as well, in contrast to the trend in most oecd countries, and this welcome trend acted to continue providing sources in the budget due to the decline in interest payments on the debt. in recent years, various factors acted to reduce 2 / 4 bis central
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is well known that the sme sector is a key contributor to growth and employment, including and perhaps especially in the transition countries. it is equally well known that in most countries this is a difficult sector to finance : the financing of small and medium scale enterprises requires detailed local knowledge of the relevant companies and entrepreneurs, and is likely to be very labor - intensive. this work is best done by local financial institutions, which are more likely to have developed branch networks that enable them to understand both the economic conditions facing these companies and the quality of the firms'management. the ebrd has been successful in promoting sme financing in several countries, including in russia, through onlending to local financial institutions. the bank's work and familiarity with financial intermediaries throughout the region has increased its effectiveness in assisting smaller enterprises in its countries of operation. it is highly desirable that the bank continue to promote sme lending, especially in the countries of this region, both through its lending and by helping create a business environment in which the private sector can flourish. at the same time, let me put in a plug for the potential role of microfinance in helping even smaller businesses than the smes to obtain financing, and also in helping the poorest consumers to obtain access to the financial sector. governments can contribute to this process by ensuring that their regulatory framework does not discriminate against microfinance institutions. private sector financial institutions can contribute by working together with microfinance institutions, for instance by helping them gain access to financing and by assisting in the development of microfinance products. the ebrd has been successful in promoting sme financing in several countries, including in russia, through onlending to local financial institutions. the bank's work and familiarity with financial intermediaries throughout the region has increased its effectiveness in assisting smaller enterprises in its countries of operation. it is highly desirable that the bank continue to promote sme lending, especially in the countries of this region, both through its lending and by helping create a business environment in which the private sector can flourish. 2. local currency financing governments in several regions have been attempting to develop local currency bond markets in which foreign investors and institutions participate. in part this is designed to deal with the so - called problem of " original sin ", according to which developing countries are able only to borrow internationally in foreign currencies, and consequently suffer financial losses in their own currency if forced to devalue. despite the belief that original
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global rise in the interest rates, there is always a lurking fear in the emes, that the level of capital flows may not be maintained. thus, the comfort level of reserves should not be viewed with respect to the current situation alone but should also reckon the assessment of the emerging risks. moreover, at this moment, the global economy has not been tested on the eventuality of a not - soorderly correction of the current global imbalances. in that eventuality, as the experts caution, disruption in financial markets in the form of large cross - currency volatility and sharp rise in interest rates are not unlikely in the global economy. to sum up, several factors impinge on the comfort level of reserves and the relative weights assigned to safety, liquidity and return. when, how and through whom should the search for higher returns be pursued, depending upon the level of comfort, is a matter of convenience and context, and options, as appropriate, should always be kept open. thank you.
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is important to identify the sources of reserve accretion in this latest episode. there are some countries like russia where the reserves are built out of current account surplus. in countries like china, korea and taiwan, the surplus, in both current and capital account, led to accumulation of reserves. on the other hand, there are countries like india, where the reserves accretion was driven more by capital account surplus and not due to current account surplus, broadly implying that capital inflow was more than what could be normally absorbed in the domestic economy. net capital flows have remained much larger than the current account deficit in india as well as in most of latin america and central & eastern europe. in case the reserve accumulation is due to large capital flows, it may be useful to distinguish between debt and non - debt flows as also between foreign direct investment and generally less stable portfolio flows. in fact, the stock as well as flow in each category would be relevant for reserve management. while the marking - to - market of the assets and liabilities may be difficult, it might not be irrelevant. thus, while the traditional indicators of adequacy of reserves are based on trade, debt and monetary indicators, or even the β guidotti rule β or β liquidity at risk β rule suggested by alan greenspan may help explain the adequacy of reserves, they need to be supplemented with, what may be described as, multiple indicators to assess the adequacy of reserves of any country at a given juncture. ( iii ) difficulties in computing quasi fiscal cost of reserves a simple method of calculating net cost of carrying reserves to the central bank is the difference between the interest rate on domestic securities and the rate of return earned on the foreign exchange reserves adjusted for any exchange rate change. the magnitude of the cost, which is often difficult to estimate, varies with the extent of sterilisation and the yield differentials. these are termed β quasifiscal β costs in the literature since the costs to the central bank are passed on to the sovereign through a lower transfer of profits. in countries where local interest rates are well above international levels, such carrying costs could be positive, while if the reverse is true such carrying costs could be negative. a recent study by the bis has shown that carrying costs are negative in a number of countries at current interest rates. the study states that in china, for instance, the one year interest rate in june 2006 was less than half the comparable us treasury bond
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but remains a flexible tool that can be used to understand the implications of a range of macroeconomic and financial conditions. that includes conditions that few could have imagined, such as those that descended last spring. the temporary shutdown of large segments of the economy caused an unprecedentedly large and swift drop in economic activity. equally unprecedented was the degree of uncertainty, both downside and upside, about how the economy would progress throughout the remainder of 2020. we responded to that abrupt change in environment by adapting stress testing to conduct a sensitivity analysis, an application of the stress testing models used to inform the board of governors about risks to bank solvency during those rapidly changing conditions. the sensitivity analysis we conducted was possible because we routinely collect standardized data from banks on their exposures and have developed our own loss and income models at the fed. thus, we were able to conduct this analysis purely internally, without putting additional burdens on banks during an already - difficult time. that analysis used the same models as the regular stress test, but we made several changes with the goal of gaining a real - time understanding of the implications for bank capital of quite plausible downside scenarios. the sensitivity analysis included three additional scenarios that reflected the potential economic implications of the covid event, as we understood them at the time. we also incorporated targeted adjustments to account for material changes to bank balance sheets resulting from the covid event, such as large drawdowns on corporate credit lines. at that time of great uncertainty, this sensitivity analysis helped sharpen our understanding of how banks might fare under the wide range of possible paths of the economy. we published that analysis to bolster public confidence in the financial system by providing a rigorous and timely assessment of the condition and prospects for the banking sector, based on data and wellestablished analytical methods. the additional analysis gave the public a view into the intellectual underpinnings of the policy actions the board took, which included special limitations on β but not a complete elimination of β capital distributions and a requirement for all firms to re - assess their capital needs and submit another capital plan in late 2020 in light of the economic uncertainty. the december round of stress tests that followed informed an adjustment to and extension of the distribution limitations into the first quarter of 2021, and we are continuing to use insights from the stress tests as we consider when to lift the limitations. throughout the covid event, the stress test has provided analysis necessary to tailor our actions to the risks we faced, and we have used the results from
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members, small business owners, residents of low - and moderate - income communities, retirees, and others. we want to hear your perspective on maximum employment and price stability β the monetary policy goals congress has assigned us. now is a good time to conduct the review. unemployment is near a half - century low, and inflation is running close to, but a bit below, our 2 percent objective. while not everyone fully shares economic opportunities and the economy faces some risks, overall it is β as i like to say β in a good place. our job is to keep it there as long as possible. while we believe our strategy and tools have been and remain effective, the u. s. economy, like other advanced economies around the world, is facing some longer - term challenges β from low growth, low inflation, and low interest rates. while slow growth is obviously not good, you may be asking, β what β s wrong with low inflation and low interest rates? β low can be good, but when inflation β and, consequently, interest rates β are too low, the fed and other central banks have less room to cut rates to support the economy during downturns. so, in this review, we are examining strategies that might better allow us to symmetrically and sustainably achieve 2 percent inflation. doing so would help prevent inflation expectations among 1 / 2 bis central bankers'speeches consumers, businesses, and investors from slipping too low, as they appear to have done in several advanced economies. more - firmly anchored expectations, in a virtuous circle, would help keep actual inflation around our target, thus preserving our ability to change interest rates as appropriate to meet our mandate. we are also looking at whether our existing monetary policy tools will be adequate when the next downturn comes. finally, we are asking whether our communications practices can be improved to better support the effectiveness of our policy. after today, we have two fed listens sessions remaining, both later this month : one in kansas city and another in chicago. at the july meeting of the federal open market committee, my colleagues and i began discussing what we β ve learned so far from the fed listens events. we continued that discussion at our september meeting and have a lot left to do. we plan to publicly report our conclusions during the first half of next year. one clear takeaway of the sessions so far is the importance of sustaining our historically strong job market. people from low - and moderate - income communities tell us this
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chart 2a : typical household energy bill smaller of ofgem energy price cap and energy price guarantee this next chart illustrates what is going on. the blue line on the left - hand chart shows the evolution of the β typical β household energy bill. nobody actually pays the typical energy price bill, of course, but it has become an industry standard as a measure of what households pay on average. it is generally determined by ofgem β s cap on the price that energy suppliers can charge consumers. in turn, ofgem bases its calculation of the cap on the wholesale prices energy suppliers are expected to pay in european energy markets. since october, the cap has itself been capped by the government β s energy price guarantee ( shown in orange ). chart 2b : typical household energy bill smaller of ofgem energy price cap and energy price guarantee you can see that the typical energy price bill went up in a few big strides as russia β s assault on ukraine drove up wholesale energy prices. in october, as the energy price guarantee was put in place to moderate what would have been an even higher increase in ofgem β s price cap, the typical energy price bill was nearly twice as high as a year earlier. as shown in the right - hand chart, annual inflation in the typical household bill was nearly 100 %. even if electricity and gas only accounted for about 3Β½ per cent of the consumer price index, this increase had a big impact on the overall inflation rate : a 100 % price increase in 3Β½ per cent of the consumption basket adds 3Β½ percentage points to inflation. chart 2c : typical household energy bill smaller of ofgem energy price cap and energy price guarantee looking ahead, with the announced adjustment to the energy price guarantee, the typical energy price bill is set to rise further to Β£3, 000 in april. but to calculate the annual inflation rate at that point, we have to compare with the april 2022 bill, which had already risen significantly. because of this base effect, even if the bill itself goes up to a higher level, it goes up by less over a year than it did in october. the annual inflation rate therefore falls sharply from 96 % to 52 %. the contribution to consumer price inflation from the energy bill will nearly halve. chart 2d : typical household energy bill smaller of ofgem energy price cap and energy price guarantee looking further ahead, say to april 2024, the outlook is more uncertain. wholesale energy prices have come down markedly over
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financial stability by around half. the timing was unfortunate. the financial system was riding a credit wave as banks β balance sheets and leverage ballooned. every major financial crisis in the past has been presaged by credit waves of this type. 16 but this time, it was said, was different. risk had been dispersed and diversified to the four winds, courtesy of an ever - more interconnected global financial system and ever - more sophisticated financial instruments. 17 the great moderation in the economy also meant finance faced fewer shocks than in the past. haldane and kruger ( 2001 ). fischer ( 1999 ). evanoff et al ( 2015 ). taylor and schularick ( 2012 ). greenspan ( 2002 ). all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice when it came to assessing risks to the financial system, unlike with monetary policy, there was no off - the - shelf model. in pursuit of one, i started looking to other disciplines for inspiration. from the mid - 2000s, i began discussion with a set of scientists β physicists, evolutionary biologists, epidemiologists β on the models they used to understand complex, adaptive systems. i was hoping they might provide some analytical clues when it came to modelling the complex, adaptive world of finance. i was in luck. there was a well - developed field of complexity science, with applications in most of the natural sciences and some of the social sciences. economics and finance was a notable exception. once i had retro - fitted these models to the financial system, i wrote a note and sent it to the governors in 2005. it was titled β public policy in an era of super - systemic risk β. it made some bold claims about financial system resilience, most of which jarred with the prevailing orthodoxy. 18 financial integration, it argued, was a double - edged sword. it was fantastic for risk - dispersal when the good times rolled. but interconnections could switch from friend to foe when shocks were large. connectivity then amplified, rather than dispersed, risk ; it spread contagion. the more connected the system β s nodes β the larger the number of β super - spreaders β - the greater this fragility. this β robust - yet - fragile β property of complex webs struck a cautionary note about the true stability of modern finance. 19 when it came to managing systemic risk
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in this post - crisis world, the competitive financial landscape is being redrawn by the evolving international regulatory reforms, changing operating models, rising consumer expectations and increased competition. in this more challenging environment, the success of sustaining the momentum of islamic finance as a transformative agent for the economy, will hinge on the ability to keep raising the bar in the pursuit of an effective functioning and sound islamic financial system. post - crisis, the increased emphasis for inclusive and sustainable products as well as responsible corporate behavior provides clear potential for islamic financial players to demonstrate leadership by capitalizing on core value propositions of islamic financial intermediation. there is also scope for greater leverage on the advances of technology and new institutional arrangements that can enhance operational excellence, particularly distribution channels for extending outreach to the range of users from households to microenterprises and small and medium scale enterprises. in addition, innovations in islamic financial solutions will need to take into account the higher regulatory expectations for more transparency, and the need for the effective management of risks and capital. this involves strengthening the resilience of the islamic financial system in alignment with the evolving international regulatory developments thus raising the bar of industry performance. the ifsb has made significant advancements in leading the efforts to review specific measures put forward by the basel committee for possible adoption in islamic finance. further to this is the imperative to cultivate a strong risk culture within institutions. reinforced by a robust shariah governance framework, it will ensure that innovation for furthering the development of islamic finance is harnessed within the boundaries of the shariah, which would avert overzealous innovative activities that could undermine financial stability. let me conclude my remarks. much has been achieved, both in terms of the role and contribution of the ifsb, and the advancement made by islamic finance in this recent decade. this has been an outcome of cumulative efforts to strengthen the foundations of the islamic financial system. as the industry gears itself for the next phase of growth in the more challenging environment, our commitment and strategies to keep raising the bar to bring islamic finance to a new level will enhance its prospect to contribute to achieving our shared vision of inclusive growth in an environment of financial stability. bis central bankers β speeches
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zeti akhtar aziz : raising the bar for the next phase of growth and development β sustaining transformative momentum welcoming address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 10th ifsb ( islamic financial services board ) summit 2013 β the future of the islamic financial services industry β resilience, stability and inclusive growth β, sasana kijang, kuala lumpur, 16 may 2013. * * * it is a great pleasure to welcome you to this 10th ifsb summit, on the β the future of the islamic financial services industry : resilience, stability and inclusive growth β. bank negara malaysia is most honored to host this year β s summit, which is held in conjunction with the 10th anniversary of the islamic financial services board ( ifsb ). it was here in kuala lumpur 10 years ago that we witnessed the momentous occasion of the ifsb inauguration, that was the culmination of international collaboration among the founding member countries with the support of several key international and multilateral institutions. its landmark establishment in 2002 as the international prudential standard setting body for the islamic finance marked a major milestone in the effort to strengthen the international infrastructure for the islamic financial system, steering the path for its successful integration as a viable component of the global financial system. a decade on, the work of the ifsb in ensuring a cohesive cross - border regulatory framework and the international best practices that are attuned to the intrinsic characteristics and peculiarities of islamic financial intermediation, have served to underpin the development of a sound and stable islamic financial system, ushering in a phase of rapid growth and greater internationalization of the industry. indeed, 10 years since the founding of the ifsb have been a period of significance, during which the islamic financial services industry has grown impressively with its landscape dramatically evolved. this growth acceleration has been accompanied by the widening of its geographical reach transcending its traditional borders in muslim majority countries to the more established financial centres. in addition, islamic finance has evolved as a comprehensive system of intermediation servicing all segments of society, including governments, businesses and households regardless of scale of businesses and income levels. in this decade, islamic finance has also evolved from being domestic - centric to become increasingly internationalized, intermediating funds across borders and becoming a new vehicle that bridges economies and fostering closer financial linkages, particularly among emerging and developing markets. as a form of financial intermediation that
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sector. favourable financing conditions provide the pepp with bearings to counteract the pandemic - induced downward pressure on projected inflation. to this end, the ecb governing council considers the financing conditions for all non - financial sectors β that is, for enterprises, households and the public sector. it also observes various stages of the transmission process of monetary policy to the economy. as well as monitoring various indicators, it β s also important to analyse the reasons that led to a change in those indicators, because it β s not a matter of using monetary policy to cement a particular interest rate level. the aim is merely to prevent a premature deterioration in the funding environment, which would drag on the economic recovery and thus on the inflation outlook as well. considering what might be behind the change in the indicators is particularly relevant, not least in 3 / 5 bis central bankers'speeches the current situation. you see, nominal yields on government bonds are up in the year to date. to a large extent, though, that β s due to inflation expectations, which are moving towards our target. higher yields on government bonds, then, are also a sign that our monetary policy is working. furthermore, better economic prospects usually also go hand in hand with higher real interest rates. financing conditions therefore always have to be assessed in combination with economic developments. and it is indeed the case that financing conditions are still favourable, all things considered. advances on the vaccination front mean that the economy in the euro area, too, is now probably making its way out of the crisis. this has implications for the pepp, because the programme is clearly tied to the pandemic and must come to an end once the emergency situation has been overcome β that has been a hugely important point for me ever since the pepp was introduced. at that time, in march 2020, ecb president christine lagarde summed up the contingent nature of the programme when she tweeted : β extraordinary times require extraordinary action β. 8 but when is the emergency situation over as far as monetary policy is concerned? ultimately, it β s up to the ecb governing council to answer that key question. i see two preconditions for discontinuing net purchases under the pepp altogether. one is the expiry of all key measures introduced to contain the pandemic which restrict economic life. that, you see, would be a sign that enough has been done to suppress the pandemic or to overcome the
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problem, no legislative changes are currently being envisaged, because the legal system is flexible enough to cope with these problems. ladies and gentlemen, the turning of the clock at midnight on december 31, 1999 cannot be postponed - as you all know. time is a scarce asset with regard to the necessary preparations. as all credit institutions are depending on each other to be sufficiently prepared, the issue is hardly a factor of competition. on the contrary, an exchange of experience and information is crucial in order to enhance the efficiency of the changeover work. therefore, the federal banking supervisory office and the deutsche bundesbank have been playing a proactive role in coordinating the efforts across the financial institutions : at their instigation, the central credit committee ( zka ) established a forum comprising several banking associations for exchanging experience on the year 2000 problem at the expert level. the federal banking supervisory office and the deutsche bundesbank are involved in the forum β s work. supporting the banking industry in its efforts to solve the y2k problem is an ongoing process that will continue until the crossover takes place. nevertheless, i must reiterate that the ultimate responsibility lies with the management of the individual institutions themselves. this is why handling the year 2000 problem responsibly is a criterion for the federal banking supervisory office when assessing whether or not banking business is being conducted properly. iv i could go on and on about the supervisory aspects of the y2k problem. however, a luncheon speech does not seem to be the appropriate setting to go into too much detail. furthermore, when i look at the impressive programme of this conference, it seems to me that all the important elements of this topic will be covered by this morning β s and afternoon β s panels. however, looking at a lunch as a social event, one aspect of the y2k problem comes to my mind that is not covered by today β s programme and that might be worth bringing to your attention - if nothing else, at least as a potential problem in the course of the century date change that deserves thought. let me call it the social aspect of the y2k problem. new year β s eve 1999 / 2000 will be a social event of major proportions, according to some people even an event of biblical significance. millions of people will drive either to one of many organised new year β s parties or to pay a visit to relatives or friends in order to celebrate the new millennium. are you aware of the fact that there are about
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priority sector. resultantly, the priority sector vertical is reduced to a data collection and statement generating vertical. further, i am also not sure how many bank boards discuss priority sector strategy in the board meetings. 6. it is necessary that all these verticals evolve within themselves and come together as a cohesive group, prepare a strategy and then take it to the board for broader discussion and guidance. the priority sector activity should not remain confined to being a mere data collection exercise. is there a linkage between plan approved by slbc and plan of the priority sector vertical? 7. there are several agencies involved with priority sector activities of banks. there is the slbc structure wherein district credit plan ( dcp ) is prepared and the lead bank offices operate at district level. nabard prepares the potential linked credit plan ( plp ), slbc adopts it and then it is distributed amongst all banks. i have a suspicion that between the overall priority sector strategy and what happens at the slbc and dcp level, there may not necessarily be any logical linkage. in rbi we are looking at revamping the entire structure of slbc and as such, some of these will undergo a change. data extraction and its implications for priority sector 8. currently we have a project underway within rbi which would enable extraction of data directly from banks β core banking systems ( cbs ). in the entire credit planning exercise data infirmity has been a major factor and in some sense, has become an impediment for banks in arriving at right conclusion and right strategies. this project is at a fairly advanced stage now. however once this is implemented, it should not once again be seen as a data cleaning and compliance exercise. this is a great opportunity for banks because they can use the data, apply analytics and prepare the right sort of strategy. they can decide on their focus area and product once this robust set of data is available. it is important that the senior - level functionaries appreciate this exercise in that sense. research 9. the last point that i would like to make on the broader policy and strategy aspect is that time has come for individual banks to also invest in research - not very intense academic researchbut research to the extent that is helpful in making policies and business strategies relevant for their own purpose. 2 / 7 bis central bankers'speeches 10. let me now come to some recent changes and emerging opportunities in the priority sector. diversified universe 11. in the last revision the scope of
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tool to lvrs that will enable us to more efficiently target financial stability risks. we've continued the mahi around implementing the new deposit takers act, which will transform our approach to the regulation of banks and other deposit takers, while helping to ensure the safety and soundness of deposit takers. the act introduces a new depositor compensation scheme ( dcs ) so depositors can have confidence that their deposits, in the event of a deposit taker failure, are eligible for compensation up to $ 100, 000 per depositor, per institution. a substantial work programme is underway to implement the new prudential framework for deposit takers. parts of the current banking ( prudential supervision ) act 1989 relating to the regulation and supervision of registered banks and the non - bank deposit takers act 2013 will remain in force until the remaining parts of the dta have been fully implemented. we've also continued our collaboration and engagement with industry around improving mori access to capital. we are working collaboratively with retail banks to help them understand the flexibility of the regulator regime, and it's been heartening to see some banks delivering innovative ways to support mori to build homes on their whenua / land. we look forward to our continued engagement with finance and expenditure committee and we welcome your questions. 2 / 2 bis - central bankers'speeches
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rising real and nominal wages which have emboldened private consumption expenditures. of course, the data underlying this picture, does not come in smoothly, and aside from the labor market data that were consistently strong, we had plenty of fluctuations, including significant revisions of quarterly national account data and despite a robust current account surplus, we faced a clearly underperforming export sector. the lull in export was in part due to the slowdown in world trade, but we were keenly aware of the continuing strengthening of the shekel, beyond what we could estimate would be the normal adjustment reflecting the relatively good performance of the israeli economy. so unemployment was at an all - time low, wages were rising and yet inflation remained low, compelling us to dig deeper into its sources in order to disentangle its underlying β core β trend, from a series of exogenous shocks that pushed inflation down. these were many and varied, from importing β deflation β from abroad, to decreasing energy prices, to successive reduction in administered prices such as water, electricity, children daycare, a cut in vat, to welcome structural reforms that enhanced competition in industries such as communication. these came in addition to a backdrop of social protests concerned about the cost of living that increased the public β s price awareness and changed consumer habits enhancing competition in the retail sector, particularly with the increased use of internet buying. this phenomenon is 1 / 2 bis central bankers'speeches shared by other countries, but there is ample evidence that the level of prices in israel is higher than its other advanced countries, thus leaving more space for price reductions through enhanced competition and consumer savvy. throughout this period, of now about 3 years, all forecasts and market expectations systematically underestimated the downward forces on prices, and thus overestimated forthcoming inflation. the discussions in the mpc reflected our challenge of on the one hand allowing for a welcome reduction in the level of prices, and on the other maintaining the overall price stability environment β a hard won anchor that allows for the good functioning of the economy. we lowered the bank of israel β s rate as inflation was dropping, to reach 0. 1 % in march of 2015 when 12 month inflation reached what turned out to be its lowest point at β 1 %. in addition, whenever the shekel appeared to embark on what we viewed as excessive momentum not justified by fundamentals, we intervened in the fx market, and still do so, not only because of its impact on prices
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but also to avoid the unwarranted impact on export industries, particularly of goods which tend to be more sensitive to the exchange rate. one could look at it as the qe of small open economies. a year passed, and still the inflation rate was below target and still in negative territory and we observed that the same forces were at play, and expected to continue to be due to the global economic and monetary environment and because of our own domestic conditions. it was clear that we needed to show our patience with the price environment. we did so by introducing nonconditional forward guidance β there were clearly too many elements behind the low inflation to allow us to turn some into conditions β which we reiterated more recently, and in our view was correctly interpreted by the market. patience has its virtue but must not be confused with inaction, the boi has been patient with inflation to return, but quite active to ensure that the crucial broader environment of price stability remains intact. inflation expectations of the medium and longer term are still well anchored within the target range bestowing credibility to the monetary policy. to conclude in the spirit of this forward looking conference, i would draw 3 points from the recent israeli experience. first, protracted periods of below target inflation do not entail an automatic loss of monetary policy credibility. for the latter to be maintained, we need to better understand, and better explain, how the transmission mechanisms operate β through short term interest rates, long term rates, exchange rate and asset prices. this will lead us to use more tools and more targeted tools when available. second, the israeli experience does not lead to the need of changing the inflation target : an important anchor for the economy must not be amenable to easy change unless there is strong evidence that it is no longer at the appropriate level. inflation in israel is also strongly impacted by global inflation, and while the debate on changing the inflation target is also taking place globally, there is no reason for israel to be a pioneer in this change, if the change takes place. third, monetary policy must take into account financial conditions as signaled daily, if not hourly by the markets, but as upholder of a necessary and crucial nominal anchor it must be able to withstand noise and remain forward looking. this in turn requires the central bank to engage in discussions and better explain its interpretation of sometimes contradictory data on the one hand, and to withstand β flavor of the day β pressures. β 2 / 2 bis central bankers'speeches
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levels for a while and may need to follow a low course for an extended period. in the first quarter of 2010, central banks mostly implemented exit strategies from expansionary monetary policies and therefore the global monetary policy outlook became partially tighter. in the said quarter, a limited number of central banks tightened their monetary policy stance by increasing policy rates, while most of them kept their rates unchanged at low levels. in the meantime, these central banks started to terminate the expansionary monetary policy implementations, which are conducted with the use of unconventional policy tools. accordingly, while drawing attention to the risks regarding pricing behaviors and taking account of the normalization in both money and credit markets ; we decided to gradually withdraw some of the measures taken in the foreign exchange and turkish lira markets during the crisis. owing to the importance that we attach to transparency and predictability, i would like to remind you that we informed the public about the general framework of our exit strategy in our press release of 14 april 2010, before putting the strategy into practice. 3. inflation and monetary policy outlook now, i would like to share with you the monetary and financial conditions, as well as the economic outlook underlying our forecasts. then, i will outline the central bank β s inflation forecasts presented in the inflation report that will be posted on our website shortly. in the first quarter of 2010, as perceptions regarding recovery in the global economy became more pronounced, the trend of increase in risk appetite in global financial markets continued. accordingly, as had been the case since the second half of 2009, emerging markets attracted more capital through increased portfolio movements. on the other hand, risk premium indicators in most developing countries remained below those of pre - crisis levels. in this period, turkey β s risk premium indicators continued their positive trend and did not differentiate from the general trend except for short periods when developments specific to our country were pronounced ( figure 21 ). the improvement in global risk perceptions in the first quarter led the currency of many developing countries to appreciate. in terms of changes in currency values, the turkish lira did not significantly differ from currencies of other emerging markets in this period and the relatively stable course of the turkish lira in the crisis period continued throughout the postcrisis process as well ( figure 22 ). national income data of the last quarter of 2009 were consistent with the outlook we presented in the january inflation report. in this period, while the mild recovery in private sector demand continued, public sector consumption expenditures increased more than envis
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the 2001 crisis. the declining public debt burden and the diminishing fiscal dominance in turkey put an end to the crowding - out of the real sector. that boosted the supply of loanable funds. banks have returned to their traditional role of financial intermediation instead of financing government expenditures. share of public securities in turkish banking sector assets declined by onethird to 28 % in the last 5 years ; while share of credits to private sector more than doubled and reached to 49 % during the same period. the credits extended to the small and medium enterprises by turkish banking sector have also increased significantly to usd 95 billion as of 2007. this corresponded to almost 20 % of the gdp. as a further note, 32 % of these credits were in the category of credits extended to micro enterprises. the ratio of private sector credit used by households and firms to gdp has also rapidly increased, though it is still low in international standards. of course, raising the share of private credits in the financial system does not necessarily mean that each and every segment of the population would gain access to financial services. the low - income segment of the society, in particular, may not have access to capital and that would have two principal adverse effects. first, they may not be able to raise the expected value of their income and therefore of consumption and future investment and asset accumulation. second, due to lack of access to credit, the poor would face high variation in their income and consumption, and the downward risk on income threatens their ability to satisfy basic consumption needs. increasing the funds available for entrepreneurs that have micro - scale business plans but do not have access to credit, have merits such as contributing to the production level and unemployment ratio while also strengthening the social structure of a country. of course, it should be noted here that while the benefits from financing these activities are more or less common, selection of main business areas where these funds should be used obviously depends on country specific circumstances and needs. dear guests, in the last part of my speech, i would like to share with you my thoughts on the external sources of β access to finance β. as i touched upon initially, financial innovation and financial integration have led to explosive growth in the international movement of capital. these flows serve as an important catalyst for domestic financial market development, as reflected both in the size of the banking sector and equity markets, as well as the quality of institutions for supervision and regulation. in recent years, attention has been given on how macroeconomic policies should respond
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finances over the business cycle, and avoid the destabilizing effects of fiscal policy procyclicality. creation of a central fiscal capacity of all eurozone member states, by making ngeu a permanent fiscal instrument, in order to meet the high investment needs, which are required to address the challenges of climate change, energy and digital transition of our economies. such a framework should rest, i think, on three pillars : 1. first, a revised fiscal framework should give priority to strengthening debt sustainability, in line with the spirit of the β 6 - pack β reform. in the post - pandemic period, the adoption of credible and effective fiscal policies aimed at public debt sustainability is more urgent than ever. high levels of public debt : ( i ) limit the room for flexibility to address future challenges ; ( ii ) make public finances vulnerable to interest rate increases ; and ( iii ) undermine the ecb β s ability to respond to rising inflationary pressures. lower public debt also contribute to reducing divergences between member states, as debt ratio differentials lead to variations in the fiscal space available to each country to stabilize the economy after a shock and to finance growth - enhancing expenditure. therefore, in such an uncertain economic environment, it is imperative to strengthen fiscal sustainability and increase the resilience of public finances to adverse shocks. 2. the second pillar should reinforce the incentive of national authorities to increase the resilience of their economies by strengthening their fiscal buffers in good times. so, the principle of fiscal policy counter - cyclicality should be promoted in the sgp reform. what is crucial is to safeguard ( and even promote ) economic recovery and restore fiscal sustainability in a sustainable way. therefore, in this regard, i believe that three elements should be highlighted : firstly, country - specific rate of debt reduction. a uniform rate of debt reduction is inappropriate for a monetary union with large dispersion of debt - to - output ratios among member states. importantly, the key determinants of debt sustainability, such as the implicit interest rate and the natural rate of growth, are primarily country specific. secondly, a country - specific speed of adjustment is crucial for credible, medium - term, fiscal consolidation plans that account for counter - cyclicality concerns. thirdly, an expenditure rule which determines a cap of the medium - term growth of nominal expenditure, excluding automatic stabilizers on the expenditure side, and net of interest payments and new permanent taxes, with the objective to sustain the agreed primary
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home / news and media / newsroom / news list / news speeches remarks by governor of the bank of greece yannis stournaras at the 22nd rencontres economiques, d β aix - en - provence 10 / 07 / 2022 - speeches β beyond risk reduction and risk sharing : remarks on the transformation of economic governance in europe β the russian invasion of ukraine on 24 february 2022 has brought the european union ( eu ) and the western developed world as a whole in front of the greatest challenge since the end of the cold war. the military conflict has unpredictable consequences not only for the global and the european economies, but also for international geopolitical stability, security, peace and cooperation. it triggers tectonic shifts in world politics and urgently calls for an update of the eu β s security architecture, as well as for action to defend european values and institutions. shoring up the european economy against the effects of this new shock and preventing an interruption of the ongoing recovery are key priorities for the current economic policy at the european level. the magnitude and duration of these effects will depend on how the war unfolds, on the impact of the current sanctions and possible further measures and on the response of fiscal and monetary policies. the rupture in eu - russia relations will inevitably have lasting and far - reaching impacts on the european economy, particularly in terms of energy, defence and security, while the largest refugee crisis since 2015 is unfolding, this time with flows coming from within the european continent. russia β s war against ukraine is heightening the geopolitical tensions between the us and the eu, on the one hand, and russia, on the other. it is a new, major exogenous supply - side shock to the economies of the eu member states that also affects, through various channels, aggregate active demand. it occurred at a very critical time, when economies were rebounding globally from the two - year health crisis and the ensuing severe recession. apart from the incalculable human cost, the conflict has significant adverse effects not only on the economy in the wider region, but also on the global economy. it exacerbates the already strong inflationary pressures through further rises in energy prices and a new wave of medium - term price increases in metal commodities and basic consumer goods, notably in the food supply chain ; it erodes investor and consumer confidence and disrupts global trade and the international financial system. globalisation is in fact reversing.
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expenditure total capital expenditure total expenditure of which : excluding interest payments 10. 5 5. 0 2. 5 16. 1 6. 2 3. 3 43. 7 37. 4 2. 4 1. 8 4. 2 47. 8 41. 6 10. 6 5. 1 2. 6 16. 5 5. 6 3. 4 43. 6 38. 1 1. 7 1. 9 3. 6 47. 2 41. 7 10. 8 5. 2 2. 6 16. 7 5. 1 3. 6 44. 0 38. 9 2. 5 1. 9 4. 3 48. 4 43. 2 10. 7 5. 3 2. 7 16. 8 4. 7 3. 6 43. 9 39. 1 2. 4 1. 5 3. 9 47. 8 43. 1 10. 9 5. 4 2. 8 16. 9 4. 6 3. 7 44. 2 39. 6 2. 4 1. 7 4. 1 48. 3 43. 7 10. 9 5. 1 2. 8 16. 9 4. 6 3. 6 44. 0 39. 3 2. 4 2. 7 5. 0 49. 0 44. 3 10. 6 5. 1 2. 7 17. 0 5. 0 3. 7 44. 1 39. 1 2. 3 1. 7 4. 0 48. 2 43. 2 10. 8 5. 4 2. 7 17. 6 5. 2 3. 8 45. 4 40. 3 2. 2 1. 5 3. 8 49. 2 44. 0 11. 2 5. 9 2. 9 19. 1 4. 6 4. 2 47. 9 43. 3 2. 5 1. 9 4. 4 52. 3 47. 7 11. 1 5. 8 2. 9 19. 2 4. 5 4. 1 47. 5 43. 0 2. 1 1. 4 3. 5 51. 0 46. 5 source : based on istat data. ( 1 ) rounding may cause discrepancies in totals β ( 2 ) the figure for 2009 includes the extraordinary refund of the personal and corporate income tax overpayments made by firms in connection with the omitted deduction of 10 per cent of the regional tax on productive activities ( irap ) in the tax period up to 31 december 2008 ( article 6 of decree law 185 / 2006 ). table 4 general government consolidated accounts on a current
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fighting temeraire hangs. the purpose of design features like these is not simply to make the banknotes beautiful but also to strengthen their security. the new Β£20 will be our most secure note yet, featuring several innovative elements. for example, rather than having a single foil element β the turner contemporary in blue β there is an additional foil in a second colour : the margate lighthouse in gold. and there is a second transparent element in the bottom corner of the note, inspired by the windows of tintern abbey, which was a popular tourist spot in turner β s times and which he memorialised in another of his great watercolours in 1794. these security features are made possible by printing the new Β£20 on polymer, rather than paper. polymer banknotes also remain in good condition for longer, meaning the new Β£20 will be safer, cleaner and stronger. the self - portrait is currently on display in tate britain, and the fighting temeraire can been seen in the national gallery. p. ackroyd, turner ( vintage, 2006 ) page 136. see : http : / / news. bbc. co. uk / 1 / hi / entertainment / 4214824. stm. all speeches are available online at www. bankofengland. co. uk / news / speeches the varied colour of our banknotes also plays an important role in making the nation β s money as inclusive as possible. features like the differing colour palettes, differing sizes and raised print enable those who are visually impaired to recognise different notes. as with the new polymer Β£10, the new Β£20 will also include a tactile feature β a series of raised dots in the upper left - hand corner β to improve accessibility further. conclusion banknotes are meagre pieces of paper β or more accurately polymer β of no intrinsic value that serve vital economic functions. they facilitate trade. they store value. they act as a unit of account. as the man whom turner will replace on the Β£20 adam smith observed, banknotes may be mere barren tokens but they are the β universal instrument of commerce β. 5 and money serves as a collective memory for a country and its people ; it has cultural value as well as economic. as the new turner Β£20 testifies, money can be a work of art in everyone β s pocket. far from being β barren β, 6 our banknotes celebrate uk β s heritage, salute its culture and testify to the great achievements of its most notable citizens. that
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year ago of β 1 per cent. that is, the level of real gdp today is nearly 4 per cent higher than had been anticipated. for 2009 as a whole, we estimate that nominal gdp was about $ 45 billion higher than our forecast a year ago. measures of business confidence and conditions in most of the surveys carried out by private organisations have for some time been at levels that are suggestive of something like average rates of economic growth. the reserve bank is of course aware that the picture is not uniform across every region or industry. moreover, the upswing is likely to have particular features that mean that differences across sectors and regions may widen. not everyone will feel its benefits in the same way or to the same extent, though this is true of all economic cycles. but it does not in any way diminish those concerns to say that there has been a good outcome for the national economy in a difficult international environment. managing the upswing our task now is one of trying to ensure, so far as we can, that the new economic upswing turns out to be durable and stable. there are many factors about which we can do little. the speed and composition of global economic growth for example, or the behaviour of international financial markets as they grapple with uncertainty and risk β these and other factors may turn out to our benefit or detriment. we cannot change them ; we can only try to be alert to them, and maintain some capacity to respond to them. for the time being, at least, the global economy is growing again. forecasters expect an outcome something like trend global growth in 2010 and 2011, which is much better than 2009 but not as strong as 2006 or 2007. those were exceptional years for growth and that pace could not have been sustained for long, even absent the crisis. in the region to which the australian economy is closely linked, growth has been very strong over the past year. almost certainly it will need to slow somewhat in the coming year. demand for natural resources has returned and prices for those products are rising. we have all read of the recent developments in contract prices for iron ore. as a result of those and other developments, australia β s terms of trade will, it now appears, probably return during 2010 to something pretty close to the 50 - year peak seen in 2008. as usual with these things, we cannot know to what extent this change is permanent, as opposed to being a temporary cyclical event. however, the fact that we will
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degree of formal co - ordination β for example, most g10 central banks reduced their interest rates by 50 basis points on 8 october 2008. beyond that there was a fairly consistent set of responses stemming from a common assessment of the seriousness of the potential threat. so the global downturn could have been much worse than it eventually was, but policy makers everywhere supported financial systems where needed, eased monetary policy and eased fiscal policy, to support demand. the responses, by and large, were quite quick. in the countries at the centre of the crisis, these policy efforts have borne fruit. but they have been working against the powerful headwinds of private sector de - leveraging. hence in those cases the recovery thus far has been quite hesitant. economic activity remains well below the peak level seen in 2007 or 2008, and in some of these economies it may not regain that level for another year or two. it is in this sense, actually, that the downturn in parts of the advanced world may well turn out to be the most costly in generations : the forecast slowness of the recovery implies a very large cumulative amount of lost income in some cases. in other episodes of serious recession, once conditions for recoveries were in place, they proceeded quite strongly. people are not confident of those sorts of outcomes this time ( indeed many forecasters and financial markets will be seriously wrong - footed if a rapid recovery in the crisis - hit countries does occur ). observers in some countries even wonder whether their trend growth rate may have been impaired for a lengthy period by what has occurred. but most countries did not have a bank solvency crisis. they had an acute liquidity crisis for a couple of months in september and october 2008 when the global financial system went into cardiac arrest, but thereafter those problems began to ease β mainly due, it must be said, to actions of governments and central banks in the major countries. since in most countries banking systems were generally sound, the headwinds have not been blowing as strongly in asia or latin america as in some other regions. accordingly, the policy stimulus applied in these countries appears to have been pretty effective in supporting demand. once money markets and trade finance began to thaw, recovery proceeded at a very strong clip. in east asia outside japan and china, industrial production is now a little above its previous peak. in china, it surpassed the 2008 peak in the middle of last year and kept rising, while in india it never really fell. despite the slow growth of
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janet l yellen : regulatory landscapes β a us perspective speech by ms janet l yellen, vice chair of the board of governors of the federal reserve system, at the international monetary conference, shanghai, china, 2 june 2013. * * * thank you. i don β t want to delay what i expect to be a lively discussion, so my opening remarks will be brief. i β ll summarize the considerable progress since 2008 to make the global financial system more resilient, and then offer my views on what more should be done. a brief retrospective on financial regulatory progress it β s useful to divide the regulatory reform work of the past few years into three categories : strengthening the basic bank regulatory framework, reducing the threat to financial stability posed by systemically important financial institutions ( sifis ), and strengthening core financial markets and infrastructure. bank regulatory basics the financial crisis revealed that banking firms around the world did not have enough highquality capital to absorb losses during periods of severe stress. the basel iii reforms promulgated in 2010 by the basel committee on banking supervision will increase the amount of regulatory capital required to be held by global banking firms and improve the loss - absorbing quality of that capital. u. s. banking agencies issued proposals last summer to implement basel iii β s capital reforms, have reviewed comments, and are preparing the final regulation. we also were reminded during the crisis that a banking firm β particularly one with significant amounts of short - term wholesale funding β can become illiquid before it becomes insolvent, as creditors run in the face of uncertainty about the firm β s viability. the basel committee generated two liquidity standards to mitigate these risks : a liquidity coverage ratio with a 30 - day time horizon and a net stable funding ratio ( nsfr ) with a one - year time horizon. the u. s. banking agencies expect to issue a proposal to implement the liquidity coverage ratio later this year, and we are working with the basel committee now to review the structure and parameters of the nsfr. special measures for sifis the financial crisis also made clear that international bank rules should focus more on the potential threat to financial stability posed by sifis. in this arena, the efforts of the federal reserve and the global regulatory community have focused principally on ( 1 ) producing stronger regulations to reduce the probability of default of such firms to levels that are meaningfully below those for less systemically important financial firms, and ( 2 ) creating a resolution
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go beyond the capital surcharges put forward by the basel committee. as they suggest, fully offsetting any remaining too - big - to - fail subsidies and forcing full internalization of the social costs of a sifi failure may require either a steeper capital surcharge curve or some other mechanism for requiring that additional capital be held by firms that potentially pose the greatest risks to financial stability. improving sifi resolvability there are at least three key obstacles that policymakers must overcome to maximize the prospects for an orderly resolution of a global financial firm. first, each major jurisdiction must adopt a statutory resolution regime for financial firms consistent with the fsb β s key attributes. 1 the united states has been a leader in this regard, and i hope that other countries that have not yet adopted a compliant resolution regime will do so promptly. second, policymakers need to ensure that all sifis maintain a sufficient amount of total prefailure and post - failure loss absorption capacity. in consultation with the federal deposit insurance corporation, the federal reserve is considering the merits of a regulatory requirement that the largest, most complex u. s. banking firms maintain a minimum amount of long - term unsecured debt outstanding. such a requirement could enhance the prospects for an orderly sifi resolution. switzerland, the united kingdom, and the european union are moving forward on similar requirements, and it may be useful to work toward an international agreement on minimum total loss absorbency requirements for global sifis. third, it is time for policymakers to find concrete and credible solutions to the thorny cross - border obstacles that impede the orderly resolution of a globally systemic financial firm. reducing systemic risk in the shadow banking system important as banking reforms may be, it is worth recalling that the trigger for the acute phase of the financial crisis was the rapid unwinding of large amounts of short - term wholesale funding that had been made available to highly leveraged and / or maturity - transforming financial firms that were not subject to consolidated prudential supervision. many of the key problems related to shadow banking and their potential solutions are still being debated domestically and internationally. but i believe the path forward is reasonably clear. we need to increase the transparency of shadow banking markets so that authorities can monitor for signs of excessive leverage and unstable maturity transformation outside regulated banks. we also need to take further steps to reduce the risk of runs on money market mutual funds. in addition, we need to further ameliorate risks in the
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by far the world β s largest issuer. towards green cmu i must stress, however, that the continued growth of green capital markets will not happen by itself. we will at some point hit the same limits that now restrict the integration of our broader capital markets β missing cross - border infrastructures and national constraints. if the eu cannot provide the services that foreign investors and issuers are looking for, they will go elsewhere. in fact, we know from history that deep and liquid capital markets are key to a currency gaining global status. if others move faster than we do, the euro β s advantage as the global green currency could fade and be lost. the euro would miss an opportunity to strengthen its international role. so in my view we should reinforce the cmu agenda by supporting the development of green cmu. specific initiatives under the cmu action plan should be fast - tracked β even if they are applied only to sustainable finance for now. a key element is indeed the commission β s proposal on corporate sustainability disclosures. i strongly welcome this proposal and believe it can finally address the main data gaps currently afflicting the eu β s sustainable finance landscape. it will also be a key pillar of the commission β s forthcoming proposal for a european single access point. by integrating sustainability disclosures with financial data, we would create a β one - stop shop β for all critical information about a company, including its green credentials, which would be immensely useful for investors. but more fundamental reforms will also be necessary. we need proper european supervision of green financial products with official eu seals such as the forthcoming eu green bond standard. 10 this is key to ensuring compliance and to identifying systemic links and associated risks within the cross - border market. we also need harmonised tax treatment of investments in sustainable finance products, so as to prevent fragmentation of green investments along national lines. and we need further convergence in the efficiency of national insolvency frameworks, even carving out special procedures for green investments. these initiatives can be seen as an engine for the cmu project generally, testing and putting in place some of the measures that are needed to advance wider capital market integration. if we succeed, there will be very positive knock - on effects for european capital markets. in short, green cmu not only gives us a tremendous opportunity to craft something genuinely european and with immediate impact, but it also has the potential to transform the eu as a 3 / 4 bis central bankers'speeches whole. it would allow us
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is important for the ecb, as they affect the transmission of our monetary policy across the euro area. they require parallel efforts on many different fronts. but a common thread is the need to enhance the contribution of the financial sector, in particular by taking significant steps towards a capital markets union in europe. integrated capital markets are at the heart of building resilience, because they encourage europeans to invest in debt and equity irrespective of home country considerations. that, in turn, helps share the costs of local recessions, because financial losses in one part of the union can 1 / 4 bis central bankers'speeches be offset by gains in another. scale and depth matter, as does a common regulatory framework. at present, however, financial markets are less integrated in the euro area than in other large economies. only around 20 % of shocks in the euro area were mitigated through cross - border debt and equity holdings between 1999 and 2016, compared with at least 60 % in the united states. 3 capital markets are also vital to fund the transformation of our economies. we need to see investment of around β¬330 billion every year by 2030 to achieve europe β s climate and energy targets4, and around β¬125 billion every year to carry out the digital transformation. 5 while banks can and should provide a good share of this funding, capital markets can provide innovative tools to close the investment gap. capital markets are better suited to financing projects with a defined purpose, directly linking investors to the impact they intend to achieve. and they are also better at drawing retail investors towards supporting transformative activities. 6 although we are making progress, thanks to the work of the commission, completing a fullyfledged cmu will take time. capital markets have developed nationally, so we first have to open them up and harmonise those markets in order to integrate them further. this begs the question : how do we deepen capital markets faster? are there market segments where fewer obstacles exist and where we can achieve high levels of integration quickly, but that also encourage the funding of future - oriented projects? developing european green capital markets to my mind, europe β s green capital markets meet all these criteria. green capital markets are dynamic and growing in europe, and they are already relatively well integrated. this means that as they deepen further, so will europe β s resilience. europe is established as the location of choice for green bond issuance, with around 60 % of all green senior unse
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these trends are representative of the composition of the uk population, as reported in the 2011 census. ( a ) participation trends female participation in the workforce has been on a broadly upward trend in the uk. elsewhere across the g7, trends have been more disparate ( chart 1 ). based on oecd labour force statistics, uk rates of female participation are second only to canada across the g7, having recently overtaken the us. chart 1 : g7 female participation rates per cent canada france germany italy japan uk us sources : ons labour force survey, oecd labour force statistics and bank of england calculations. this paper does not aim to produce better estimates of the gender and ethnicity pay gaps than the official ones published by the ons. ashe data is the best source for estimating the overall gaps, but the lfs has a rich set of individual and job characteristics allowing the type of analysis showcased here. all speeches are available online at www. bankofengland. co. uk / speeches the increase in female participation has been accompanied by an opposite trend among the male population, which has fallen from 70 % to 65 % over the sample. in other words, the gender β participation gap β between males and females in the uk has fallen by around 10 percentage points over the past 25 years, though it remains positive at around 8 percentage points. the participation of ethnic minorities in the uk labour force has also been on an upward trend since the 1990s, reaching around 64 % in 2019. labour participation by the white population was, by contrast, on a slightly downward trend prior to the gfc, after which it has flattened off. that leaves participation rates for ethnic minorities today slightly above the levels of the white population. there have been some striking gender - related shifts in the pattern of work. the share of part - time employment among females has been declining, with a corresponding larger share of females working full - time. the opposite is true among males, with the share of men working part - time increasing by 5 percentage points over the sample. for ethnic minorities, part - time employment has steadily increased, with a pronounced pick up following the crisis. next, we look at three variables which are often used to capture aspects of β human capital β : the highest qualification achieved, the occupation of a person, and the sector in which they are employed. for illustrative purposes, we split the sample into four sub - groups β white men, white women, ethnic minority men,
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appetites agreed by their boards. possible ways of achieving this include : introducing robust wording exclusions, offering explicit cover with additional premium and attaching specific limits to cover. finally, we have also been considering how we might respond to a large loss affecting many insurers that could change market conditions. we have worked closely with the industry and lloyd β s over the past few months following our consultation last year. turning to life insurance, a potential concern is that the shift towards direct investments might in future lead to a concentration of exposure to uk property. excluding unit - linked business, uk insurers β property - related exposures grew significantly over the course of 2016 to stand at 11 % of non - linked assets. the most rapid growth has been in mortgages and loans secured on property, particularly equity release mortgages. our analysis of insurers β equity release exposures suggests that a stress roughly aligned to the fpc β s banking system stress test ( a 30 % fall in house prices and 0 - 0. 5 % growth per annum thereafter ) could lead to industry - wide losses of Β£2 - 3 billion ( see table and chart below ). the prudent person principle in solvency ii is an important safeguard against concentration risk. it requires insurers to invest only in assets whose risks they can β properly identify, measure, monitor, manage, control and report β. moreover, assets must be β properly diversified β so as β to avoid excessive reliance on any particular asset, issuer or group of undertakings or geographical area and excessive accumulation of risk in the portfolio as a whole β. assets not admitted to trading on a regulated financial market are required to be kept to β prudent β levels. the illiquid direct investments i described earlier would typically fall into this category. later this year, we plan to set out in a supervisory statement our expectations of how uk insurers should invest their assets in accordance with the prudent person principle. these include losses as a result of both malicious acts ( eg cyber attack, infection of an it system with malicious code ) and non - malicious acts ( eg loss of data, accidental acts or omissions ) ; and involving both tangible and intangible assets. http : / / www. bankofengland. co. uk / pra / pages / publications / ss / 2017 / ss417. aspx from around Β£84 billion to nearly Β£99 billion. data
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, the canadian dollar, and the norwegian krona. by absorbing exchange rates shocks, the euro thus contributes to stabilizing external payments of countries trading with both the eu and the us. ( b ) the autonomy of swiss monetary policy financial market developments over the past 5 years have also demonstrated that the monetary autonomy of the swiss national bank has not disappeared. the amplitude with which the snb has reacted to changes in the economic environment since the end of 2000 lies in between the reactions of the federal reserve and the european central bank, with more aggressive interest rate cuts by the federal reserve and a relatively modest reaction by the european central bank. the different responses of those central banks reflect their institutional framework as well as the economic circumstances of the respective countries. on one hand, the snb has been more flexible than the ecb. the ecb is a new institution without historical record. moreover, the ecb has a strict mandate of maintaining low inflation, and there have been upward inflationary pressures in certain european countries due to the convergence process. those factors induced a less aggressive easing of monetary policy in an uncertain environment. in contrast, with traditionally low inflation, the credibility of the snb is strong, which allows it to react quickly to economic shocks without creating turmoil in financial markets. in the past few years we have thus been able to act in a flexible way, with our own timing, in order to respond to the global economic slowdown and pressures on the swiss franc. on the other hand, the snb reacted less strongly than the federal reserve to the deterioration of the international economic environment. the united states is a relatively closed economy where the federal reserve mandate is broader than price stability. in contrast, our freedom to maneuver is limited by the openness of our economy. in a small and open economy, monetary activism cannot fine - tune economic activity. institutional and economic characteristics of the different countries and central banks have thus implied differentiated monetary policy profiles. 5. conclusion let me conclude by first emphasizing the positive global influence that the euro has had since its introduction in 1999. not only does the common currency contribute to the integration of the european market, but the appearance of a counter - weight to the us dollar has helped stabilize the international monetary order. exchange rates around the world can thus evolve closer to their economic fundamentals, and the impact of exchange rate fluctuations on capital flows and foreign trade are dampened. developments in the financial markets over the past 5 years have shown us that although highly integrated in
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ahmet ismaili : banks, fintechs and businesses - building synergies to accelerate access to finance welcoming speech by mr ahmet ismaili, governor of the central bank of the republic of kosovo, at the conference " banks, fintechs and businesses : building synergies to accelerate access to finance ", co - organised by the central bank of the republic of kosovo and the united states agency for international development ( usaid ), pristina, 14 november 2023. * * * honourable mr. albertine, director of the office for economic growth, usaid kosovo honourable chairman mr. nurboja and member of the cbk board honourable representatives of local and international institutions honourable managers and representatives of banks and other financial institutions honourable business representatives respected panelists ladies and gentlemen i am pleased to welcome you to this forum co - organized jointly by the central bank of the republic of kosova and usaid entitled " banks, fintechs and businesses : building synergies to accelerate access to finance ". the fact that the cbk is a co - organizer of the conference and my participation today in this occasion, demonstrates the importance for the cbk of access to finance, financial inclusion, digitalization of payment services and alternative financial products. therefore, the compatibility of the usaid ipaf project with the cbk strategy and goals constitutes a synergy in itself. we are witnesses that the financial system has continuously evolved over the years, especially in recent years, a more accelerated dynamic towards digitization and access to financial services has been observed. from an economic perspective, an efficient financial system supports the development of financial intermediation, financial markets and positively affects financial stability. the advancement of financial services towards the transformation of electronic payments ( non - cash transactions ) would contribute to increasing financial inclusion, increasing competition, reducing informality and increasing effectiveness, reducing costs, as well as providing quality services to citizens from financial institutions, as well as the integration of our citizens and businesses with the region and eu countries. in this regard, cbk is committed to : 1 / 3 bis - central bankers'speeches develop and create opportunities for access to the payment system of non - bank service providers, increasing competitiveness and enabling the possession of iban, to increase access to finance, within the concept of " payment account " ; develop the technical infrastructure for enabling fast payments 24 / 7, the creation of the national qr code and the standardization of the api for the interconnection
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a funding source β was limited. nevertheless, securitisation of retail loans, both abs and rmbs reported a 61 per cent increase in volume in 2009 β 10. 16. while the securitisation market has remained concentrated with a handful of originators and limited investors, the asset classes have continued to diversify, the latest additions being gold loans, microfinance loan receivables and loan against property. trends in structured finance volumes ( rs. billion ) type 2001 β 02 2002 β 03 2003 β 04 2004 β 05 2005 β 06 2006 β 07 2007 β 08 2008 β 09 2009 β 10 abs 12. 9 36. 4 80. 9 222. 9 178. 5 234. 2 313. 2 135. 8 209. 7 mbs 0. 8 14. 8 29. 6 33. 4 50. 1 16. 1 5. 9 32. 9 62. 5 cdo / lso / slsd 19. 1 24. 3 28. 3 25. 8 21. 0 119. 0 318. 2 364. 4 145. 8 others 2. 3 0. 5 β β 11. 6 7. 9 total 36. 8 77. 8 139. 3 308. 1 249. 6 369. 3 650. 3 544. 7 425. 9 ( cdo : corporate debt obligations, lso : loan sell off, slso : single loan sell - down ) source : various rating agencies like icra, crisil etc. rbi guidelines 17. rbi had issued comprehensive guidelines on securitization in february 2006 based on international best practices. the main focus of the guidelines was to encourage securitization in manner that ensures true sale - real risk transfer and banks do not retain risks in the transferred assets beyond a point. to this end, limit was placed on banks β exposure to ptcs and concentration of entire credit enhancement in the originating bank was discouraged by making second loss facilities more costly through higher capital adequacy. banks are however permitted to invest outside the prescribed limit for non - listed investments in abs and mbs which are rated at or above the minimum investment grade. 18. another feature of the 2006 guidelines was the requirement that the gain on securitization of assets should not be recognized upfront and should be amortised over the life of the securities issued. this requirement was put as a conservative measure to avoid securitisation being used to inflate profits even while banks exposures in
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aml / cft systems. to broaden our exposure, we assigned representatives to act as apg experts to perform similar evaluation on other apg members. through participating in aml related activities, we have established good communication and close working relationship with the related international bodies and their members. apart from reinforcing financial supervision, the amcm also dedicated efforts to foster financial development. all along, we have been maintaining good communication and close working relationship with the participants, who have shared with us many opinions in relation to business development and supervision. our collaborative effort helps to facilitate the stable and healthy development of the macao financial market. internationally, we have been maintaining communication with relevant overseas supervisory authorities in sharing constructive ideas relating to the introduction of cross - border financial business, cooperation on cross - border supervision and the establishment of cross - border financial facilities. apart from regular bilateral meetings, we executed a β financial cooperation arrangement β with the shenzhen central sub - branch of the people β s bank of china and a β letter of intent for the cooperation in the development of payment and settlement system β with the shenzhen financial electronic settlement centre in 2006. besides, we were entrusted with the mission to organize a msar government delegation and an entrepreneur delegation to participate in the β pan - pearl river delta region financial services forum β held in hong kong. we joined force with the macau insurers β association, the macau insurance agents and brokers association and the federation of macau professional insurance intermediaries to organize the third insurance exhibition. furthermore, we jointly organized the β mainland, hong kong and macao onsite / offsite inspection seminar β in yunnan with the state administration and foreign exchange and the hong kong monetary authority. we are confident that the economic growth of macao will sustain and the business of the financial sector will continue to flourish. however, the international economic and financial ecology is undergoing some changes. macao is receiving more and more attention internationally. the financial sector is expected to encounter more challenges after the flying colours achieved in past few years. challenges do not necessarily arise from the limitation of business development. they may also come from the continued requirement in risk management enhancement or even external factors beyond our control. despite the tremendous challenges ahead, we believe that all financial institutions have already mapped out strategies to enhance risk management, swiftly adapt to changing market environment, provide more financial products and services that would be conducive to the development of the local economy and society, facilitate the sophistication and stable
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##ks have also come from the high savings economies including from asia and the middle east. as a new asset class, it has generated demand from both conventional as well as islamic financial investors. the sukuk is therefore not only an attractive instrument for investment but it is also a competitive means for raising long term funding needs. strengthening synergies between financial centres two important trends have increased the integration of islamic finance into the international financial system β the accelerated development of the islamic financial markets and increased liberalisation. the development in the islamic financial markets has contributed to the availability of a wide spectrum of islamic financial instruments that has ranged from instruments to manage liquidity, to structures for financing of mega investments. the higher level of foreign participation in the islamic financial markets which has resulted in the increase in cross border flows in the international islamic financial system thereby, enhancing international financial linkages between financial systems. liberalisation has also brought greater foreign institutional presence in islamic financial systems resulting in greater diversity of players and strengthening further the international financial linkages. malaysia has very much been part of this process. in 2003, the islamic financial system was liberalised to allow for increased foreign presence. in 2007, the sukuk market was liberalised to allow the raising of funds by eligible corporates from any part of the world in any currency. and this year, the first foreign currency sukuk of usd1. 5 billion was successfully issued by our petroleum corporation with a significant over subscription by investors from europe, middle east and asia. as the international dimension of islamic finance gains momentum, it is necessary to facilitate the potential for liquidity management across borders. as part of an international collaborative effort, a task force on liquidity management was set up by the ifsb and the idb early this year to develop solutions to enhance the efficiency of islamic financial institutions in managing liquidity at both the national and international levels. a further area of international collaboration is towards promoting value - added investment in human capital building as a long term solution to sustainable growth of the islamic financial industry. the establishment of talent development and research institutions in islamic finance are now increasingly wide spread in several jurisdictions with several strategic alliances across borders being entered into. the international centre for education in islamic finance ( inceif ) in malaysia was set up by the central bank with programmes for practitioners and post - graduate studies to ensure the continuous supply of talent in islamic finance. the current enrollment in inceif are from more than 60 countries attracting students including from the uk, canada
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is already a broad international consensus on the prudential areas that need to be enhanced, different regulatory parameters may be necessary to address the specific risks and unique characteristics of islamic finance. the islamic financial community thus needs to effectively respond to this, by strengthening their internal capability to make sound assessments on the need for making similar regulatory reforms that are specifically attuned for islamic finance to achieve the common objective of financial stability. with this in mind, i am pleased to inform you that following the recent completion of the work by the task force on islamic finance and global financial stability, that was jointly formed by the islamic development bank ( idb ) and the ifsb in 2009, the report has now been released following the endorsement by the ifsb council in khartoum, sudan, in april this year. the report examines the conceptual elements inherent in islamic finance that form the foundation of its strengths and contribution towards financial stability. the report also provides a preliminary assessment on the performance of islamic finance during this recent international financial crisis. the final part of the report outlines eight key recommendations to further strengthen the foundations of the islamic financial system in a more challenging global environment. although the islamic financial services industry has generally performed well in the face of the recent global financial turbulence, there are clear lessons to be learnt from the crisis. the recommendations were therefore developed upon careful reflection on the conditions and financial practices that have contributed to the global crisis, as well as the current direction of the global regulatory reform. a central theme of the recommendations in the report is the need for greater collective efforts to be given to putting in place eight building blocks for strengthening the financial infrastructure of islamic finance and its institutional capacity both at the national and international levels. the building blocks identified in the report relate firstly to the global implementation of the ifsb prudential standards ; second, the development of systemic liquidity management infrastructure ; third, the establishment of strong financial safety nets ; fourth, putting in place an effective crisis management and resolution framework ; fifth, strengthening the accounting, auditing and disclosure standards ; sixth, the development of an effective macro - prudential surveillance framework ; seventh, having in place credible rating institutions ; and eighth, to institute close international cooperation and coordination among countries in achieving financial stability. this also includes cooperation in the area of capacity building and talent development. addressing these eight areas are highlighted in the report as being fundamental to ensuring the continued development of a robust and resilient islamic financial system, that can effectively preserve financial stability and contribute
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in 2001, the industry generated $ 10 billion in earnings, or a return on assets of about 1. 09 percent - - both about five times the comparable figures for 1992. the extent to which the banking and thrift industries are intertwined may be best reflected by the fact that 34 percent of savings institution deposits are now bif - insured. the banking industry too has experienced consolidation, as the number of insured commercial banks declined from about 11, 450 in 1992 ( with total assets of $ 3. 5 trillion ) to about 7, 960 in june of this year ( with total assets of $ 6. 7 trillion ). interestingly, the average bank then, as now, was about $ 120 million smaller than the average thrift : $ 310 million in 1992 compared with $ 840 million as of this june. banks have grown both organically and by merger, in many cases combining multiple bank subsidiaries of the same bhc for efficiency. these aggregate figures mask some significant differences between large and small banks. total assets at the largest banks - - that is, those larger than $ 10 billion - - grew most rapidly, reaching $ 4. 7 trillion compared with $ 1. 4 trillion in 1992. that represents an annual growth rate of nearly 14 percent. one has to be a little careful when comparing size categories over a period of this many years. over this period the number of banks over $ 10 billion grew by half - - from 51 to 77 - - because some smaller institutions were able to grow or merge their way into this largest - size class. the advent of interstate banking provided important impetus to this process, as noted earlier. in contrast, total assets at all community banks - - that is, those with less than $ 1 billion in assets - - have remained essentially unchanged since 1992, at just a bit above $ 1 trillion. total assets at regional banks - - those between $ 1 billion and $ 10 billion - - actually declined over this ten - year period, falling from about the same level as community banks, to about $ 900 billion. the number of regional banks fell just slightly over this period, to about 320, while the number of community banks fell quite sharply under the influence of consolidation. despite the consolidation in the banking industry, more than 8, 000 separate banks [ and 1, 000 thrifts ] remain, and for every four bank charters that have disappeared through consolidation, one new de novo charter has been approved. while the number of banks has declined, the
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quality primary, secondary and tertiary education. what is crucial to educational success in 5 to 50 years is that we increase public spending on qualified personnel. moreover, active labour market policies shall support the jobless in their efforts to qualify for other professions. 6. conclusion ladies and gentlemen the euro area β s economy has made it through the rain and is now under relative sunny skies. yet clouds still hover over the less - than - complete recovery β a lot remains to be done. the germany economy, on the other hand, has been in the sun for quite some time now, and even the short term outlook is quite promising. yet, serious medium - term risks loom. a vital euro area requires more reform : the monetary union must be reformed β but it is not a matter of simply more β or less β european integration. instead we need problem - oriented reforms of its institutional design. moreover, member states must embrace reform. for example, germany has to face the demographic challenges, and its economic policy has to strike the right balance between fostering the competitive dynamics of market economies and ensuring the social cohesion that is necessary for democracies. 5 / 6 bis central bankers'speeches i am confident that this is possible β but policymakers have to take their responsibility to reform very serious. thank you for your attention. 1 gdp projection by imf : 2017 : 2. 1 % ( + 0. 2 pp ) ; 2018 : 1. 9 % ( + 0. 2 pp ) ; gdp projection by ecb staff ; 2017 : 2. 2 % ( + 0. 3 pp ) ; 2018 : 1. 8 % ( + 0. 0 pp ) ; 2019 : 1. 7 % ( + 0. 0 pp ). 2 european central bank ( 2017 ), assessing labour market slack. ecb economic bulletin 2017 ( 3 ) : 31 β 35. 3 deutsche bundesbank ( 2017 ), design and implementation of the european fiscal rules, monthly report, june 6 / 6 bis central bankers'speeches
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tonight i β ll focus on one of the most important : monetary policy. eight times per year, the federal open market committee β the fomc β meets to set the path of interest rates over the next six to seven weeks. all 12 presidents of the various regional federal reserve banks β including me β and the governors of the federal reserve board participate in these meetings. how does its regional structure help the federal reserve system make better monetary policy? the answer lies in the nature of the regional bank presidents β contributions during fomc meetings. during the course of the meetings, the presidents typically comment on the behavior of their district economies β in my case, the economies of the six states that make up the ninth district. this region - specific information helps to provide a granular, more forward - looking foundation for the making of national monetary policy. bis central bankers β speeches where do the presidents get this region - specific information? there are many answers to this question. but we are especially indebted to the members of our boards of directors and advisory councils, who use their extensive contacts in the local community to provide us with valuable economic intelligence. the reserve banks know that our district economies are all complex systems, and so we need β intel β from a wide range of perspectives. accordingly, the reserve banks work hard to ensure that the members of our boards and advisory councils come from many walks of life β farming, banking, fortune 500 companies, nonprofits, labor unions and start - ups to name but a few β and many parts of our districts. so, the 12 presidents contribute to monetary policy deliberations by providing local economic intelligence about their districts. but the presidents also often make comments about economic research being done within their banks that helps shed light on national economic conditions. hence, the geographic diversity within the system is important for another reason : it generates valuable intellectual diversity across the system. for example, back in the 1970s, the minneapolis fed research department played a key role in fostering the β rational expectations revolution β that has helped transform the making of monetary policy around the world. i β d love to take a few hours to explain this important development in policymaking β but it β s a friday night. the relevant point is this : would these economists have played this same role had they been working in washington, or anywhere else in the system, for that matter? i believe that the answer to this question is no. the ideas in the research department were generated by synergistic
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why would the fomc want to use price level targeting? there are two reasons β and they are closely related to the concerns about low inflation that i raised earlier. the first reason is that price level targeting makes long - term contracts safer for borrowers and lenders. for example, suppose a family took out a 30 - year mortgage in 2012, under the expectation that the fomc would deliver on its commitment to keep inflation at 2 percent. because inflation has been so low over the past two years, the borrower β s current repayments are now surprisingly expensive in real terms. ( by β real terms, β i mean that the borrower has to give up a surprising amount of goods and services to be able to afford the repayments. ) the fomc can β t solve that problem today, of course. but if the fomc uses inflation targeting, the borrower β s repayments are likely to remain surprisingly expensive in real terms even in 2042, 30 years after taking out the mortgage. in contrast, if the fomc uses price level targeting, the borrower β s repayments in 2042 are likely to be close, in real terms, to what the borrower expected when originally taking on the loan. the second reason that the fomc might want to use price level targeting is that it would serve as an automatic stabilizer for the economy. as i described earlier, when demand is low, inflation tends to be below target. with price level targeting, the fomc makes up for low inflation by using monetary policy to stimulate higher future inflation and higher future demand. but this prospect of higher future demand is an incentive for businesses to hire and invest more now. thus, with price level targeting, the fomc β s anticipated future policy choices automatically offset current adverse shocks. 1 i β ve framed the decision about inflation targeting versus price level targeting in terms of its impact on the fomc β s future policy decisions. as i β ve just talked through, though, these future decisions have the potential to affect near - term macroeconomic outcomes. in particular, if the fomc were to decide today to follow price level targeting, then businesses would anticipate more stimulative future monetary policy and, consequently, higher future demand. that expectation of higher demand would provide an additional incentive for them to hire and invest today. in this way, the fomc β s decision about price level targeting β a decision
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in encouraging thrift behaviour in the economy, helping it grow faster. it is possible that it may temporarily affect banks β net interest margins, especially in case of the high casa banks. yet, there is no reason to believe that these banks will not be able to make the necessary adjustment by better asset - liability management, reducing intermediation costs and providing more value added services to emerge stronger, resilient and efficient banks. at the same time, the low casa banks have an opportunity to grow and improve their scale economies turning indian banking into a more competitive space. i have been told by some bankers that the time for deregulation was perhaps not right as the npa cycle is on the upswing. we all know the truth that there never will be a completely appropriate time for such reforms. at least, today we have the comfort that banks have substantially got rid of the asset - liability mismatches that were created earlier by credit growth outstripping deposit growth. as regulators, our job is to support financial stability and the health of the banking system, but not to unduly protect banking business at the cost of welfare of those who consume financial services. intermediation costs in indian banking have stayed high. we need to develop new paradigm for creating a competitive edge in the indian banking that drives down intermediation costs. iii. 2 reduced barriers to entry to spur competition banks already operating in india need to prepare themselves for competition from new players as the barriers to entry are reduced. there is a need to extend the geographic reach of banking in hitherto under - banked areas and improve access to banking services for those who are hitherto excluded or inadequately served. the extant policy has been that industrial houses are not permitted to promote new banks. this had good logic in restraining the risks of connected lending that had created banking problems in a number of countries. in india, individual companies, directly or indirectly connected with large industrial houses were permitted to own only 10 per cent of the equity of a bank, but without any controlling interest. however, the reserve bank has now guided a more open regime but this regime would need to be developed with lots of checks and balances and not sacrificing the essential safeguard principles. the reserve bank has also guided that it would be open to more foreign banks coming into india through the wholly owned subsidiary route. reduced entry barriers and resultant increase in competition could be an important driver for existing banks to change. bis central bankers β speeches
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. as i have enunciated earlier also, the overarching goal of the reserve bank is to ensure that risks to financial stability are minimised and contained, be it from a sector or an entity. 7 | page regulatory expectations 19. let me now turn to what we envisage as four key cornerstones which i feel not only nbfcs, but every financial entity needs to adopt to become a resilient, customer centric and responsible organisation contributing to economic growth of the country. responsible financial innovation 20. the non - banking financial space has been a hotbed of financial innovation. the inherent structure of nbfcs as an agile force makes them capable of and likely to experiment with innovative technologies and devise newer ways, methods, and vehicles to deliver financial products and services to every nook and corner of the country. the nbfcs have been in the forefront in the adoption of innovative fintech based products and services which are transforming the ways of carrying out credit intermediation and extending financial services. as an enabling regulator, the reserve bank has also been on the forefront of creating an environment for growth of digital technology. peer to peer ( p2p ) lending, account aggregator ( aa ) and digital - only nbfcs are cases in point where the regulations are helping the segment and entities to grow in a systematic and orderly manner. 21. however, point of caution here is that the innovation should not be at the cost of prudence and should not be designed to cut corners around regulatory, prudential and disclosure requirements. responsible financial innovation should always have customer at its centre and should be aimed at creating positive impact on the financial ecosystem and the society. one should therefore consider the impact of new ideas on the financial fabric at the conceptualisation stage itself. this is somewhat similar to the concept of evaluating the impact of business on the environment or greening the financial system but applies to every new innovative idea floated by buzzing entrepreneurial energy of financial entities. accountable conduct 22. second point which i wish to highlight is the imperative need for accountable conduct by financial entities. on the digital finance front, the pandemic gave us several 8 | page new learning points. during the pandemic there was surge in digital credit delivery, with lenders either lending through their own balance sheet and in - house digital modes or using third party apps to onboard customers. while the benefits accruing from digital financial services is not a point of debate, the business conduct
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christian noyer : is inflation set for a comeback? speech by mr christian noyer, governor of the bank of france, at deutsche bank, paris, 19 march 2008. * * * with inflation surging everywhere, it is quite natural to wonder if we could have reached the end of this worldwide era of β great moderation β in both output and price volatility which has characterized alan greenspan β s tenure of office. true, one could argue that we are just experiencing one - off shocks in commodity and food prices whose inflationary consequences will wane rapidly thanks to the increased flexibility of our economies. but other possible scenarios are more worrying. second - round effects could, after years of relatively well contained wages, be triggered by shifts in inflation expectations ; through the catching - up of developing economy, the globalisation process could have become inflationary ; the ageing of our developed european economy, the necessary fight against global warming could structurally add inflationary pressures,.... and the room for monetary policy decisions could be restricted by the state of the financial and banking system and by the risks of slowdown of growth. i would like to review these issues. in order to avoid any misunderstanding let me immediately make my point. even if it is clear that inflationary pressures have both increased and changed in their nature, i firmly believe that monetary policy can still ensure price stability, over the medium term. my central scenario for the short term is a scenario where after a couple of months inflation will recede in the euro area and come back β below but close to 2 % β in accordance with our definition of price stability. it is not unusual to witness commodity and consumer prices acceleration in the initial phase of an economic slowdown, as there is some inertia in employment and commodity prices dynamics with respect to activity. this has happened previously at the end of the 1990s, with a subsequent moderation in inflation. in the short run, recent inflationary shocks are likely to maintain inflation at a high level for most of 2008 as we may expect a significant degree of persistence in energy, industrial commodity or some food price increases ( such as meat ). in the euro area, hicp inflation has reached 3. 3 % in february. it might remain well above 2 % in the coming months but ebbs later this year according to ecb staff forecasts. these projections rely on a scenario of global economic slowdown and moderation in commodity prices, which would contain pressures on capacity utilis
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including other banks. given reduced confidence in their ability to quantify and price risks, balance sheet capital remained a scarce commodity. as a result, both overnight and term interbank - funding markets were pressured considerably. even today, some banks face potentially large needs for dollar funding, and their efforts to manage their liquidity may be contributing to pressures in global money markets and foreign exchange swap markets. more broadly, many financial institutions appear hesitant to put opportunistic capital to work. the next phase β revaluation β requires that the new prices be established in accordance with the new financial environment. the process of price discovery appears to be quicker and more assured among corporate credits. think, for example, of the markets for high - yield and leveraged loans, in which risk spreads have returned to more moderate levels. we have seen significant evidence that the process of revaluation in other previously disrupted markets is also under way. investors are differentiating risks, for example, among assetbacked commercial paper programs, and many spreads have moderated. revaluation, however, may be a slower, tougher slog in the mortgage markets for those vintages in which the underlying asset quality is less certain. how quickly asset markets substantially complete the revaluation phase depends on the speed with which stakeholders regain comfort in their ability to value these assets. financial markets rarely normalize in a steady, linear fashion. more often, as market sentiments sway between fear and greed, asset prices fluctuate and seek support ( volume ) before establishing new trading ranges. that pattern is particularly pronounced when the underlying economic fundamentals are less certain. hence, the next phases β review and refinement β are the hardest to predict with precision. as circumstances dictate, some financial institutions will review and refine their capital ratios, risk metrics, and business imperatives and proceed forward. others may find that, in the course of review, they return to the phases of retrenchment and reliquification. central bankers are prudent to stay alert to these changes. without a doubt, then, this is a time of testing. stakeholders will need to discern whether they are witnessing some impairment of the financial sector, or merely a realignment of the competitive landscape. moreover, i suspect that some of the more complex structured products and investment strategies will be substantially modified ; others will die. but, in the end, an improved understanding of how to create, bundle, distribute, and assess
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##bi denominated funds and securities transactions. on the retail payment front, measures are also geared towards enhancing the efficiency, accessibility and quality of retail payment infrastructure and services. to this end, bank negara malaysia has focused on creating the enabling environment to accelerate the country β s migration to electronic payments ( e - payments ), to enhance economic efficiency and increase our competitiveness. this has been done by establishing a conducive pricing and incentive structure, enhancing the e - payment infrastructure and promoting awareness and confidence in the use of e - payments. these initiatives to modernise our financial system has already begun to yield results bringing about the desired cost savings. in concluding my remarks, let me congratulate swift on this occasion of the expansion of their operations here. i also wish the management and staff of the kuala lumpur corporate services centre every success in your endeavours and look forward to its contribution to our economy as we advance forward in this significantly challenging and rapidly evolving economic environment. bis central bankers β speeches
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standards of financial and business practices. this is encouraging as ultimately, both the industry and bank negara have a common interest in promoting an efficient and stable insurance market in malaysia. at bank negara, we are continuing to strengthen our regulatory and supervisory capabilities as well as sharpen our focus. as those from malaysia would be familiar, we are now into the fourth month of the bank β s new regulatory and supervisory structure. the new organisational structure for the regulatory and supervisory functions within the bank were realigned back in november last year to move from the previous sectoral approach to regulation, to one that will integrate the bank β s regulation of the different financial sectors under its purview along functional lines. as a result, the functions previously under the former insurance regulation department have now been assumed by the newly established financial sector development department, the prudential policy department, the consumer and market conduct department and the financial surveillance department. on the supervision side β or better known to you as the examiners that come and pay you a visit every now and then β a new department known as the financial conglomerates supervision department has also been established to facilitate the integrated supervision of financial service groups that include both banks and insurance companies under their umbrella. the new cross - sector regulatory structure allows us to modernise the regulatory framework for both the insurance and banking sectors at a more equal pace. the increased synergies created will enable the bank to apply the best regulatory practices in the banking sector to the insurance sector, and vice versa. regulations in the area of market conduct, for example, are more advanced in the insurance sector than they are on the banking sector. on the other hand, the regulatory framework for risk management and capital adequacy is generally more developed on the banking side. under the new structure, the bank is able to leverage on the more advanced developments in either sector to enhance the regulatory framework for both sectors simultaneously if possible. this, in turn will promote a more consistent and comparable regulatory regime for the banking and insurance sectors. substantial resources have already been allocated to this effort, particularly in the areas of corporate governance, product regulation and financial reporting which have an important bearing on banks and insurers that are within the same group. the rationalisation of current regulations will also take into account international developments which will help to reduce the compliance costs for internationally active insurers operating in malaysia. the transition to the new structure has, so far, been smooth. as expected, the industry is
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region tried to adapt through offshore banking, the financial action task force and new regulatory standards ensured the death of another promising avenue of potential diversification. but many of our countries have continued to adapt and to remake themselves. and grenada is one of those that has shown the ability to adapt. your success in exporting tertiary educational services is a case in point. grenada has a world class medical school that caters for students from the us and the caribbean region. some experts think that grenada could capitalize on this platform and its current tourist industry, to expand into medical tourism and assisted living geared, for example, to the aging us population. and while light manufacturing on a large scale may be out of the question, there is still room to exploit your comparative advantage in niche industries, like organic spices β nutmeg and mace. you as business people know better than i ever can, that the current global environment will not provide you a free lunch. rather, you will have to earn your keep through your ingenuity, by continually adapting and by continuously becoming more competitive and efficient in what you do. ladies and gentlemen, one lesson that the current crisis should teach us is that we need to enhance the region β s competitiveness, in order to survive. this crisis should also provide additional impetus to the regional integration movement. former barbadian prime minister owen arthur, who has been a leading proponent of the csme recently reminded us that β delays in carrying out regional economic and financial integration, as contemplated under the csme, will compromise severely the region β s capacity to take advantage of new economic partnership agreements with our major trading partners, or to fit the regional economy into the evolving global economy β. while he recognized that the recently signed epa was not a perfect agreement, he defined it as an important instrument of economic engagement and cooperation, which if used properly, would help the region build new competitive industries. i noticed that the theme of your banquet and awards ceremony this evening is β fostering development through partnership β. i am not sure which partnerships you had in mind. i nevertheless invite you to seek to build partnerships, throughout the region, to ensure the implementation of the csme and the epa, since it may be the best way of guaranteeing the development of grenada and the region as a whole. thank you for inviting me and i wish your organization all the best.
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5 - 4. 3 - 4. 3 n. a. trinidad and tobago 1. 6 - 0. 1 0. 3 2. 7 2. 7 6. 6 5. 7 3. 3 chart 13 total debt / gdp ratio ( % ) bahamas 40. 2 40. 4 43. 6 57. 4 47. 5 42. 4 49. 7 n. a. barbados 63. 2 72. 6 79. 8 75. 2 75. 3 79. 1 76. 6 76. 1 eccu 101. 7 112. 4 124. 9 129. 3 141. 8 126. 9 124. 1 121. 6 jamaica 98. 2 130. 3 137. 1 151. 1 140. 7 134. 9 148. 9 140. 0 trinidad and tobago 54. 4 54. 1 58. 3 49. 9 44. 6 37. 6 30. 5 28. 3
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not been needed. that is all i wish to say about oil prices, other than to add the caveat that i am only talking about the increases to date. obviously, if we enter a new round of similar increases, the situation would have to be reassessed. world interest rates it is well known that the world has recently gone through a phase of exceptionally low interest rates, but i am not sure that people appreciate how low they were by historical standards. in fact it is not much of an exaggeration to say that interest rates in mid 2003 were at their lowest level for a century. this was the time when official overnight rates β the ones set by central banks β were 1 per cent in the united states, 2 per cent in the euro area, and zero in japan. the only qualifications i have to make to my earlier generalisation is to concede that rates may have been slightly lower during the second world war in some countries such as the united states and united kingdom when quantity rationing was the norm, but they have not been lower in peace time. we can construct an indicator of world interest rates for a century or more using a weighted average of the rates for the united states, united kingdom, germany and japan. graph 1 shows the results for official overnight interest rates or their nearest equivalent since 1860. although the graph is dominated by the high interest rates during the great inflation of the 1970s, the readings for 2002 and 2003 are lower than any other time in this long span of years. 1 part of the explanation is that inflation was low, but it was only low compared to the post - war standard β it was not low compared to most of the period covered by the graph. in fact if we construct simple measures of real interest rates ( based on realised inflation rates ), they were also low by the standards of earlier low inflation periods. 2 in table 1, real interest rates in the first five years of this decade are lower than in any previous decade apart from those containing the two world wars and the 1970s. graph 1 the observation for 1923, the year of the weimar inflation in germany, had to be deleted because it did not fit on the scale. the problem with most measures of real interest rates is that they become negative during periods of unanticipated rises in inflation such as the 1970s. for this reason, meaningful comparisons of real interest rates ( using realised inflation rates ) should only be made for periods of low and stable inflation such as the present.
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glenn stevens : america, australia, asia and the world economy address by mr glenn stevens, governor of the reserve bank of australia, to the american australian association 2011 annual spring lecture lunch, new york, 14 april 2011. * * * thank you for the invitation to speak in new york. new york city remains one of the world β s dominant financial centres, on any metric. its stock exchange is by far the largest in the world in terms of market capitalisation. the us corporate debt market similarly eclipses that of other countries and the city is home to some of the world β s largest financial institutions. likewise, the united states remains the world β s largest national economy by a substantial margin. but the world is changing, and quite quickly. the rise of china ( and, very likely, india ) is a transformative event for the global economy. unless something pretty major goes wrong, we are likely to see much more of this trend for quite a long time yet. as recently as 1990, the united states accounted for a quarter of the world economy. the european union was just a little over a quarter. japan, east asia and india combined made up roughly another quarter ; japan on its own was about a tenth of global gdp. ( australia was then, and still is, just over 1 per cent of global gdp. ) in 2010, the us share was about 20 per cent of world gdp, about the same as the european union. by then, asia was making up just under a third of the total. china alone had raised its share of global gdp from less than 4 per cent in 1990 to over 13 per cent β quite a change in the space of 20 years. india β s share, which had been the same as china β s in 1990, had been little changed until about 2004. it has started to increase more noticeably since then, though it remains well below china β s at the moment. but given that the demographics for india are more favourable than those for china, we could expect that in another 20 years india β s prominence will have grown a great deal β assuming that country continues the process of reform that has helped it to generate impressive growth over recent years. these figures are all based on the imf β s purchasing power parity estimates for countries β respective gdps. some might find them a bit abstract β if you doubt that, try explaining purchasing power parity to your mother. but we can appeal to various other β real β indicators to chart the
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cleviston haynes : redefining our " how " in barbados'financial services sector speech by mr cleviston haynes, governor of the central bank of barbados, at the domestic financial institutions conference, bridgetown, 28 march 2019. * * * today we celebrate the 10 th seminar for domestic financial institutions hosted this year by the central bank of barbados and the financial services commission. as regulators, we recognise that the financial services industry is dynamic and that, together with industry practitioners, we need to constantly reflect on emerging developments and new challenges. this seminar provides an opportunity for us to exchange ideas, to learn from experts, to learn from each other, to develop new ideas and to think of solutions for our challenges. it supports our financial stability initiatives and creates the pathway for building a resilient financial system that supports economic growth through efficient mobilization and allocation of resources. above all, it promotes our quest to develop more robust stakeholder engagement. as we meet today, government is implementing a recovery and transformation programme that is targeted to restore fiscal and debt sustainability, foster growth and rebuild the foreign reserves. it does so in the context of a financial system that features substantial excess liquidity in an environment of weak private sector credit demand and historically low interest rates. in recent months, our financial institutions have shared in the economic adjustment through the domestic debt restructuring. at the same time, implementation of the new ifrs 9 accounting standard has also adversely impacted the profitability and capital of banks and insurance companies. however, the financial system remains stable and adequately capitalized. many persons focus on the stabilization aspect of the programme but this morning i wish to highlight that the process of transformation particularly as it relates to financial services has started. first, the domestic and international banking and insurance sectors each now operate under one act, the financial institutions β act and the insurance act, respectively. this convergence of legislation represents the first step towards simplifying the regulatory regimes for these sectors. secondly, the bank and the government are undertaking initiatives to modernise the payments system as we transition to a more digital economy. the initial focus is on reducing the use of cheques and cash in the financial system. government already makes salaries, pensions and debt payments through the electronic rtgs system and their goal is to use the automated clearing house ( ach ) and the rtgs for payments to its suppliers. apart from enabling greater efficiency within government, this should allow suppliers to receive payments on a more timely basis. extending this initiative
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to the national insurance, a major issuer of cheques, should result in further efficiency in the financial system. it is envisaged also that facilitating electronic transfers to government for the payment of taxes and fees will enhance efficiency and productivity within both the public and private sectors. third, credit unions have become an important element of the financial sector and the bank will facilitate access to the automated clearing house ( ach ) for direct debits, subject to the completion of legislative, technological and administrative arrangements. fourth, in the past year, the bank and the fsc partnered to develop a sandbox arrangement for companies interested in experimenting in new technologies. the first company to participate featured the use of an electronic wallet. growth of this medium, whether by traditional players or new entrants has the potential to reduce substantially the use of cash and create flexibility in the choice of instruments available to citizens. 1 / 3 bis central bankers'speeches we anticipate that specific payments legislation and regulation will emerge from our efforts in these areas. finally, we have transitioned to the issuance of government securities in a dematerialized format, with the expectation that secondary trading of securities will be made easier. we did have some initial technology issues, but our team is working to resolve these problems. arrangements are now in place to facilitate transfers of securities. the bank too is part of this transformation. my vision is to create a bank that facilitates business in the efficient provision of our services. we have therefore committed to leverage technology to transform the delivery of the bank β s services and to enhance our communication about what we do. later this year, we will strengthen our governance model to better align it with international best practices and we are in the process of modifying our exchange control regime to better facilitate business and bolster long term growth. it is in the context of these developments that today, i encourage you to reflect on leadership guru simon sinek β s challenge to never lose sight of your why, of your purpose. as i reflect on our conference theme, β repositioning the financial services sector β, i conclude that while our why has not changed, our what and our how are facing disruptive challenges, including : internationalisation of services technological advances and disruptions consumer pressure for cheaper financial products, convenience, and caring service tough competition the demand for simplicity in a world of complexity stricter international rules and standards how can and must we respond to these circumstances? what must we do to reposition the sector? it
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to share our assessments and to offer our technical expertise. our commitment is to make supervision and regulation more effective in preserving bank resilience. 1 the ratio for each eu member state is calculated by summing the non - performing loans and total loans of all banks in the sample within each member state separately and then dividing the two figures. for more details, see methodological note for the publication of aggregated supervisory banking statistics for significant institutions ( sis ). 2 see ecb ( 2023 ), it and cyber risk β key observations. the results of the 2024 edition are set to be published by end of this year. 3 see ecb ( 2024 ), " ecb concludes cyber resilience stress test ", press release, 26 july. 4 see elderson, f. ( 2024 ), " you have to know your risks to manage them β banks'materiality assessments as a crucial precondition for managing climate and environmental risks ", the supervision blog, 8 may. 3 / 4 bis - central bankers'speeches 5 see ecb ( 2024 ), " ecb consults on governance and risk culture ", press release, 24 july. 6 see buch, c. ( 2024 ), " reforming the srep : an important milestone towards more efficient and effective supervision in a new risk environment ", the supervision blog, 28 may. 4 / 4 bis - central bankers'speeches
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bis central bankers'speeches distinct business cycle. after the crisis, supervisors are given many powers and large numbers of staff. but then it tapers off, and it becomes increasingly difficult to push things through. would you say that your experiences during the financial crisis have made you a tad tougher and more strict? oh yes, definitely. ms lautenschlager, this is our interview box, we always use it in our interviews. i β ll pass it over to you. for each guest we have on the programme, we put something appropriate into this box. would you like to open it? ah! boxing gloves? yes, small boxing gloves that you can hang on your car mirror. lovely, thank you. they β re a fitting gift for you, aren β t they? yes. could you sometimes use such boxing gloves when dealing with bank managers? but don β t boxing gloves actually soften the blows? they probably wouldn β t be suitable... but i wouldn β t only think of them in connection with bank managers. but simply.. so you would prefer to be bare - fisted? no, i prefer transparency, in the first instance, and precise instructions. and i think if you β re working in a kind of authority, i. e. with the competence to take administrative measures β sorry, but i am a lawyer, after all β you must give precise instructions. you should not be vague, but that doesn β t have to be forbidding. the underlying tone does not have to be nasty ; the message must simply be very clear : that is not good enough. you have to remedy the issue. i will give you a certain period of time in which to do so, otherwise.... and i think that every supervisor needs to have that capacity if they want to succeed. staying with the boxing metaphor for the moment, could we say that you had to fight your way up from modest beginnings. no, i would not say that. your father was a pastry chef? yes, my father is a pastry chef. my mother was a waitress. so, in that sense, i suppose it β s fair to speak of modest beginnings. what kind of upbringing did you have? i was brought up in the firm belief that i could do anything if i put my mind to it. my parents set great store by me having the good education that they never had themselves. there β s something else for you in the box, could you take
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. that is, we need to take into account, while investing, first, the security of the reserves, second, their liquidity and, then, return. foreign exchange reserves are part of a country β s macroeconomic toolkit, and are considered a key indicator of the strength of the economy. so it is fundamental that we judiciously manage them for the benefit of the country. it is but natural for me to start by giving you an overall perspective on the role of the bank in the mauritian economy. of course, monetary policy formulation is a key function of the bank, but the public attention, at times, obscures the other important tasks that the bank undertakes. in this respect, i will brush on some major achievements during the year and point on how they have assisted in maintaining the stability and efficiency of the mauritian economy and financial system. we do not perform our work in isolation. we require the participation and contribution of various stakeholders in our decision - making process. 2018 has been quite an eventful year, as it coincided partly with our 50 th anniversary celebrations. i dare not dwell too much into our contributions to the economy over these 50 years, but you will appreciate that we are here to serve society and ensure that macroeconomic conditions are conducive to economic prosperity. we marked our golden jubilee β s existence with the opening of the bank of mauritius museum to the public. the museum displays over five hundred artefacts related to the history of our monetary system. we released the book β from piastres to polymer β, which provides for a comprehensively researched work on the history of banknotes of mauritius. i strongly recommend you and your family a visit to the museum and to own the book, which is available in the main libraries. 2 / 6 bis central bankers'speeches ladies and gentlemen, banknotes are part of a defining symbol of a country β s identity. we encourage our people to cherish and respect our banknotes and know their characteristics and features. on this count, the bank has issued a β know our banknotes β leaflet incorporating the security features of all banknotes currently in circulation. to address counterfeiting issues, we intensified media campaign on banknote security features and maximised public awareness on how to detect fake banknotes. we even brought over specialists from uk - based de la rue to conduct a two - day seminar on β counterfeit detection β for our stakeholders, a first of its kind! in view of
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leading the change : climate action in the financial sector speech given by sarah breeden, executive director, uk deposit takers supervision executive sponsor for climate change uk finance webinar held during london climate action week 1 july 2020 i am grateful to zane jamal and theresa lober for their assistance in drafting these remarks all speeches are available online at www. bankofengland. co. uk / news / speeches good afternoon everyone. i would like to thank uk finance for inviting me to speak today during london climate action week on what i consider to be the defining issue of our time β climate change. i realise that this may seem an odd claim for a central banker to make in the middle of a global pandemic that has already led to the largest fall in uk growth in over three hundred years. 1 but our economy and financial system, with the right support, should eventually recover from covid - 19. in contrast, climate change, left unchecked, will lead to irreversible harm for generations to come. that demands our continued attention even as we deal with the current crisis. we are at the start of a critical decade for climate action where the decisions we take today will shape the future of our planet for decades to come. β action β being the key word. if the previous decade was marked by a β call to action β, then this coming decade must answer it. that means an economy - wide orderly transition to net - zero emissions. we all have a role to play in that. and the financial sector should be instrumental in driving that change. today i want to move us from aspiration to action, and set out how we can achieve this in practice - both at a micro - level, through the decisions each of you make as individual financial institutions, and at a macro - level, across the financial system as a whole. risks from climate change but first, a reminder of why climate change matters to you as financial institutions and to us as the central bank and supervisor. clearly, climate change matters for the environment and for our planet. but what has become self - evident now, even if it was not five years ago, is that climate change creates financial risks. 2 these can arise from physical risks, whether acute weather events like floods and wildfires, or longer - term climate trends like the rise in sea level and record - breaking temperatures in the arctic circle3. they can also arise from transition risks β the changes in government policy, technology and consumer preference
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% in 2015, 1. 5 % in 2016 and 1. 8 % in 2017. in comparison with the december 2014 eurosystem staff macroeconomic projections, the inflation projection for 2015 has been revised downwards, mainly reflecting the fall in oil prices. in contrast, the inflation projection for 2016 has been revised slightly upwards, also reflecting the expected impact of our recent monetary policy measures. the governing council will continue to closely monitor the risks to the outlook for price developments over the medium term. in this context, we will focus in particular on the passthrough of our monetary policy measures, geopolitical developments, and exchange rate and energy price developments. when discussing the economic outlook and the new projections, the governing council acknowledged that the staff projections are conditional on the full implementation of all our policy measures. moreover, the march staff projections extend the horizon to 2017. in this context, the governing council again stressed that the degree of forecast uncertainty tends to increase with the length of the projection horizon. turning to the monetary analysis, recent data confirm the gradual increase in underlying growth in broad money ( m3 ). the annual growth rate of m3 increased to 4. 1 % in january 2015, up from 3. 8 % in december 2014. annual growth in m3 continues to be supported by its most liquid components, with the narrow monetary aggregate m1 growing at an annual rate of 9. 0 % in january. the annual rate of change of loans to non - financial corporations ( adjusted for loan sales and securitisation ) was β 0. 9 % in january 2015, after β 1. 1 % in december 2014, continuing its gradual recovery from a trough of β 3. 2 % in february 2014. the three - month cumulated net lending flows were positive in january for the second consecutive month, compared with sizeable net redemptions still recorded a year ago. despite these improvements, the dynamics of loans to non - financial corporations remain subdued and continue to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non - financial sector balance sheets. the annual growth rate of loans to households ( adjusted for loan sales and securitisation ) increased further to 0. 9 % in january 2015, after 0. 8 % in december 2014. our recent monetary policy measures should support a further improvement in credit flows. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the appropriateness
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in the treaty. if all policy areas concerned respect the aforementioned allocation of objectives and responsibilities and act accordingly, they will already be making the best possible contribution to the community objectives. 3. a sound institutional arrangement a clear allocation of responsibilities is essential for well - designed policy - making, especially in a complex institutional set - up as the one governing monetary union in europe. at the same time, a continuous dialogue between different policy actors on the basis of the allocation of tasks is also important for effective governance. an open exchange of views and information between individual policy actors - without any commitment or mandate to take and implement joint decisions - will strengthen economic governance if it manages to improve the common understanding of the objectives and responsibilities of the respective policy areas and does not dilute accountability. the central legal basis for economic policy co - ordination among member states within monetary union is specified in article 99 ( ex 103 ) of the maastricht treaty, which states that β member states shall regard their economic policies as a matter of common concern and shall co - ordinate them within the council. β on the basis of this principle, the framework for the definition of economic policy priorities is provided by the β broad economic policy guidelines β adopted by the council each year. these channels for policy co - ordination among member states do not involve the independent monetary policy of the ecb. any form of exchange of views and information, however, should clearly be distinguished from an attempt to co - ordinate macro - economic policies ex ante, which would give rise to serious information, incentive and enforcement problems. ex ante co - ordination among different policy actors would blur the fundamental responsibilities of the respective policy areas under the treaty. this, in turn would reduce accountability of individual policy actors and ultimately increase uncertainty about the policy framework. given the eurosystem β s monetary policy strategy, there should be no ambiguity how the single monetary policy will respond to developments in fiscal policies and wage settlements to the extent that they will affect the maintenance of price stability. as a result, national governments and wage setters alike should be able to design and implement the policies under their responsibility in a manner that allows for the interdependencies of these policies with the single monetary policy. obviously, if they take the single monetary policy β s credible commitment to maintain price stability as given, this will help to align expectations and condition their behaviour in a favourable way. national governments and wage setters, in turn, are reassured that monetary policy will respond
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total assets of less than Β£xb and who are also : not systemically important ; 6 in fact, the financial services and markets act 2000 ( as amended ) is explicit that it is not our role to ensure that no firm fails. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice not internationally active ; not involved in trading activities ; not approved to run an internal model for capital requirements ; and capable of exiting the market in an orderly way, for example through solvent wind - down or an insolvency procedure. now i β m quite sure that our disgruntled bank chair will be spluttering over their coffee at one or other of the items i just listed. indeed each of these elements could be hotly debated, and doubtless will be if we proceed to a consultation. for example, what should the β x β in β Β£xb β be? on the one hand it would be good to have as many firms as possible benefit β but on the other hand, as β x β gets higher the scope to simplify will probably diminish. and to give you a sense of the distribution, out of the pra β s current population of 110 uk deposit - takers a cut - off of Β£1b would capture 48 firms, Β£5b 78 firms, Β£10b 84 firms, Β£20b 91 firms and so on. of course in thinking about these thresholds one immediately runs into two issues. first, the barriers to growth problem β by creating a new step in the regime we might add to the difficulty of growing. one solution to this could be to make the simple regime optional β firms that have no great ambitions to grow could opt in, while those who want to become large and prefer to get to grips with the whole regime early could opt out. second, those firms who don β t meet the definition might feel hard done by and lobby against it, or lobby for other changes which make the overall regime less strong. there is no avoiding this, other than to appeal to the greater good. the second design question is how to simplify. there are two main options, which are not mutually exclusive : replace existing requirements with simpler versions ; and / or narrow the set of applicable requirements. on the first of these options, we would want to look at which requirements the smallest firms find the most complex. for example, if it turned out that small
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shamshad akhtar : islamic finance β its sustainability and challenges closing keynote address by dr shamshad akhtar, governor of the state bank of pakistan, at georgetown university, washington dc, 18 october 2007. * * * introduction in the closing session for this event on islamic finance, i propose to reflect on the growth and trends in islamic finance, its size and dimensions and prospects which are now evolving from regional to global scale and impacting the private capital flows. the renewed interest and hype in islamic finance is unprecedented. since it coincides with commercial interest of western financial institutions to attract flows generated from oil revenues and other savings, there is a degree of skepticism regarding sustainability of interest and trends in islamic finance industry within and outside muslim jurisdictions? also there are concerns echoed on whether the industry will persevere the competition from the global financial world nurtured by the conventional system backed by strong legal, policy, regulatory and institutional framework. in my assessment, the islamic finance now seems to be a reality and is on its way to be institutionalized, albeit at different levels in different countries, and the western world is also now selectively and cautiously positioning to invest in this system. there are promising signs that islamic finance trends are sustainable. it is entrenched in a well conceptualized islamic economic system whose mysteries are being unfolded with renewed academic interest in the subject. while undeniably faith driven, the islamic finance system has great potential to meet the financial gaps and requirements of development and society at large and as such its demand would be robust going beyond religious grounds. islamic finance has to be recognized as a parallel system which will augment and be augmented by the deeper knowledge and experience of the conventional financial system. as such, the key challenge going forward to its growth and sustainability would lie in how it interfaces and benefits from complementing and supplementing the conventional system and how it adapts and conforms to the international regulations and supervision adequately refined in line with the technicalities and nuisances of the islamic financial instruments and their associated risks. exploiting properly the unique features of islamic finance with appropriate adaptability, without compromising shariah principles, will be critical to the growth and promising future of islamic industry. touching on some of these debates, i propose to first discuss the trends in islamic finance, lay the case for sustainability of islamic finance and finally discuss some of the key challenges facing the industry which the islamic financial community at large is now trying to address. global and regional
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housing market. for the inflation target to be achieved on a sustained basis in 2016, the economy must reach and remain at full capacity. closing the output gap over this time frame is reliant on continued stimulative monetary policy and hinges critically on stronger exports and business investment. weighing these considerations within the bank β s risk - management framework, the monetary policy stance remains appropriate and the target for the overnight rate remains at 1 per cent. the bank is neutral with respect to the timing and direction of the next change to the policy rate, which will depend on how new information influences the outlook and assessment of risks. and now, with that, carolyn and i would be pleased to answer your questions. bis central bankers β speeches
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the accomplishment of inflation target over the medium term period, and provides at the same time the needed monetary conditions to support the sound development of economy. looking ahead, bank of albania shall continue to observe carefully the developments in inflation and in the other indicators of the economic progress, by analysing the need and time span in terms of a reaction from the monetary policy.
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c ) the increased rate of participation in the labor market is evident in all parts of the country, including outlying areas ( the northern and southern districts ). d ) the rate of employment of israelis is rising in all industries, including the lowtechnology ones ( such as construction, agriculture, hotels and catering, and electricity and water ). e ) the average real wage is rising in all industries, including the low - technology industries. what conclusion do we draw from this? it β s very simple : the longer we stick to the path of rapid growth, the more people will be absorbed in the labor market, and the standard of living of all segments of the population will rise. hence the importance of rapid and continuous growth to the economy, society, and the country, as everyone enjoys its benefits. the need to maintain fiscal discipline in order to achieve rapid and continuous growth, the government β s strategy β which enables the economy to continue to grow and economic and financial stability to be maintained β must be adhered to. the essence of this strategy is fiscal discipline, alongside the bank of israel β s interest rate policy, and the continued process of structural reforms in areas that promote growth and improve the country β s social fabric. one such area, possibly the most important, is without doubt education ; hence the vital importance of a comprehensive reform in this field. i turn now to fiscal discipline. in order to escape from the recession that gripped the economy in the early 2000s, the government adopted a fiscal strategy aimed at reducing both the share of its expenditure in gdp, which had reached 52 percent, and also the budget deficit. there were two good reasons for doing so : the need to free resources for the private sector, which is the main source of growth, and the need to reduce the debt burden, which in 2003 had reached 102 percent of gdp and was threatening to undermine economic stability. the situation was so serious that we had to obtain us government guarantees so that we could borrow on the international markets. as a result of that policy, and with the extra advantage of global economic growth, since mid2003 the economy has been growing at an impressive pace of more than 5 percent a year, the debt burden has been reduced to 82 percent of gdp, the government β s interest payments on its debt fell by more than nis 10 billion, the government β s share of gdp has fallen to below 45 percent, exports are expanding swiftly, the current account of the balance of payments is showing a surplus
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against climate change will be won or lost. energy demand in asia is expected to double by 2030 on the back of economic growth, urbanisation, and rising affluence. some 45 million people in southeast asia still do not have access to electricity. fossil fuels will continue to play an important role in meeting the energy demands of asia, at least for the next few years. the key to addressing the tension between development and decarbonization lies in credible and inclusive transition pathways, based on strong public - private partnerships. transition plans should enable progressive decarbonisation that is aligned to net zero goals while taking account of developmental needs and providing support for communities to pivot to new growth opportunities in a green economy. the gfanz asia - pacific network has the potential to spearhead this effort in asia, mobilising banks, insurers, asset managers, and service providers in this part of the world, and facilitating alignment in a credible and inclusive transition towards net zero. i am pleased to be part of this effort as chair of the advisory board of the gfanz asiapacific network, from two perspectives. first, as chair of the network of central banks and financial supervisors for greening the financial system ( β ngfs β ), i look forward to opportunities for collaboration between the ngfs and gfanz, exploring further how financial regulators and financial institutions can work together to address climate related risks and advance the net zero agenda. second, from the perspective of the mas, which is actively working with the financial industry to develop green finance solutions, markets, and infrastructure, i look forward to opportunities for partnership between mas and the gfanz asia - pacific network to promote a vibrant green finance ecosystem here in asia. the task ahead is daunting. asia is diverse β across stages of economic development, and across a variety of climate related risks and transition challenges. but the task is hugely purposeful, and if we succeed, transformative. for if we can successfully help asia transition to net zero, it will go a long way in getting the world to net zero. thank you very much. * * * * *
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concerns the settlement in central bank money of securities issued on new distributed ledger platforms, which will be governed by the pilot scheme from 2023. new technologies offer opportunities to facilitate the trading of financial securities and improve the functioning of markets. however, central banks are careful to ensure that they do not lead to market and liquidity fragmentation. following the example of what has been done for target2 - securities, the eurosystem could therefore adjust the means of access to its settlement asset to secure trading of tokenised assets. - the second area concerns the improvement of cross - border payments, which international bodies have rightly made a priority. last year, we demonstrated the advantages of cbdm to optimise the payment chain by reducing the number of intermediaries and improving the security of settlements. alongside these discussions on interbank cbdm, the issuance of retail mnbc is being examined. the launch of a possible digital euro by the eurosystem would meet several objectives : 1 - reaffirm the anchoring role of central bank money in the digital world, much like the role that banknotes play today in the physical world. 2 - contribute to strengthening europe's strategic autonomy in the field of payments, in a publicprivate partnership approach. we are aware of the impact that a digital euro could have on financial intermediation and monetary and financial stability. this means that these issues must be addressed at the design stage of a digital euro, for example by introducing holding limits or by developing a model in which intermediaries will play a central role in the distribution of the digital euro and in the management of relations with users. this is why we are now initiating a dialogue with stakeholders, which should be stepped up in the coming weeks and months. but there should be no doubt that, besides regulators and central banks, the private sector also has a key role to play in digital innovation. from this point of view, i would like to highlight the strategic importance of the european payments initiative ( epi ) project, which currently represents the only project for a joint solution rather than an interoperability of heterogeneous domestic solutions. we, at the banque de france, therefore hope that the launch of the first epi solutions, scheduled for 2023, will convince other banks to join this initiative which offers europe a great opportunity to build an independent european payments market for the future. to conclude, in the face of the many short and medium - term risks and challenges, i would
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spending. i think it is a very sensible move, having a minimum income requirement and also making sure that once you have a credit card, you can β t spend too much compared to your monthly income. this is something we have strengthened recently. as some of you may know, we have a total limit on what individuals can borrow on all their credit cards and unsecured facilities combined, with all the banks. the total limit will be capped at 12 months β of income, which is still a very high borrowing on an unsecured basis. but mas started with this limit because we are aware that some singaporeans β borrowings currently exceed 12 months of income, and we have to give them time to bring their borrowings down. mas will monitor the situation, and tighten the credit limits further, if necessary. 9. for insurance, our main challenge is to ensure that all singaporeans have access to the right products, at an affordable rate. that is our main priority for insurance. we must help consumers to meet their insurance needs for themselves and their families without paying for something they do not need. 10. that β s why we have the financial advisory industry review or fair over the last year. two of the initiatives of fair will help consumers by making insurance products more affordable and their pricing more transparent. first, consumers will be able to buy basic life insurance products directly from the insurer, without paying commission. second, consumers will be able to use the internet to use a web aggregator to compare prices and coverage of similar insurance products offered by different insurance companies. so they can choose what is suitable to their needs, and at the most affordable rate. the competition that comes about because of this transparency will also help keep costs low for consumers. financial education 11. the second approach is reaching out to singaporeans through moneysense. this is the work of our partners, not just the mas β including the community, the media, financial industry associations, advocacy groups like case and sias, our educational institutions which will play a larger role in the future, and a whole set of government agencies, all working with mas to propagate financial education to as many singaporeans as possible. over the last 10 years, moneysense has reached out to singaporeans through many prelec and simester, β always leave home without it : a further investigation of the credit card effect on willingness to pay β, marketing letters 12, no. 1, february 2001. bis central bankers β
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out a loan to start a business or to buy consumer goods. has it damaged growth and the battle against unemployment? the euro has acted as an economic shock absorber β and i would add that france has weathered the financial crisis very well β but it has also revealed the strengths and weaknesses of each economy. in 1999 the unemployment rate was higher in germany than it was in france. now it β s the other way around. yet the two countries have had the same currency for18 years. the unemployment rate has nothing to do with the euro, it is linked to the success or failure of employment policies. the famous maastricht criteria are often referred to as a brake on the economy and job creation. is the famous 3 % deficit limit still of interest today? 1 / 3 bis central bankers'speeches the question the french ought to be asking is : would increasing public debt that is close to 100 % of gdp create more economic activity? i don β t believe it would. it is difficult to explain that the 3 % deficit is a straightjacket when france has not respected the criterion once since 2007. in your view, what would happen if france exited the euro, as the front national is proposing? that β s not a scenario i want to contemplate as it β s not what the french want. when asked if they think the euro is a good thing, the answer is an unambiguous β yes β. according to the eurobarometer, a survey carried out twice a year for the european commission, public support for the euro last december was 70 % in the euro area and 68 % in france. but if you do pursue that thought, leaving the euro would mean taking risks which have unpredictable consequences. what are they? leaving the euro would threaten savings and jobs in france. it would certainly lead to a rise in interest rates. debts incurred by french businesses and households would increase. inflation, which would no longer be restrained by the ecb, would eat into savings, the fixed incomes of households and small pensions. it would be to choose impoverishment. does the euro have a future? yes, of course, the euro has a future. but the euro area has to undertake reforms. more coordination between governments, more reforms at national level, more solidarity and perhaps a kind of common euro area budget are necessary. in other words, a greater sense of the responsibility which comes with belonging to the single currency. the imf is calling for a loosening
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decisions, policy - makers must make every effort to diagnose the state of the economy and seriously evaluate all risks ahead. only then should they draw up a carefully considered prescription. references altissimo, filippo, ehrmann, michael, and smets, frank ( 2006 ), β inflation persistence and price - setting behaviour in the euro area β a summary of the ipn evidence β, ecb occasional papers series no. 46, june 2006. see jarocinski and smets ( 2008 ). see for example taylor ( 2007 ) and eickmeier and hofmann ( 2009 ). atkins, ralph, and barber, lionel ( 2007 ), β under fire, on target β, on the financial times, 18 may 2007, page 9. barro, robert j., and gordon, david ( 1983a ), β a positive theory of monetary policy in a natural rate model β, journal of political economy, 91 ( 4 ), 589 - 610. barro, robert j., and gordon, david ( 1983b ), β rules, discretion, and reputation in a model of monetary policy β, journal of monetary economics, 12 ( 1 ), 101 - 121. batini, nicoletta, and nelson, edward ( 2001 ), β the lag from monetary policy actions to inflation : friedman revisited β, international finance, 4 ( 3 ), 381 - 400. bernanke, benjamin, reinhart, vincent., and sack, brian ( 2004 ), β monetary policy alternatives at the zero bound : an empirical assessment β, finance and economics discussion series 2004 - 48, federal reserve board. blanchard, olivier, and giavazzi, francesco ( 2005 ), β credibility does not require dogmatism β only clarity of purpose β, at : http : / / www. voxeu. eu / blinder, alan ( 1998 ), central banking in theory and practice, cambridge, the mit press. blinder, alan s., ehrmann, michael, de haan, jakob, fratzscher, marcel, and jansen, davidjan ( 2008 ), β central bank communication and monetary policy : a survey of theory and evidence β, journal of economic literature, 46 ( 4 ), 910 - 945. boivin, jean, and giannoni, marc ( 2006 ), β has monetary policy become more effective? β, review of economics and statistics, 88 ( 3 ),
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vitor constancio : macroprudential stress - tests and tools for the non - bank sector remarks by mr vitor constancio, vice - president of the european central bank, at the european systemic risk board ( esrb ) annual conference, frankfurt am main, 22 september 2017. * * * 1. introduction : systemic risks in the non - bank sector assessing the impact of a large shock on financial soundness of non - bank financial institutions, stress testing can improve measurement of the risks and can help in the calibration of instruments mitigating those risks. there is a need to further develop these policy tools while at the same time adaptation of stress test models towards integrating different agents into a system - wide tool is important. the esrb β in its strategy paper on macroprudential policy beyond banking1, for example, emphasises the need to develop a wider financial stability toolkit, including top - down stress tests, for example, for asset managers, the need to operationalise macroprudential instruments for which a legal basis has already been created or the need to investigate the potential for increasing the consistency of available macroprudential instruments across sectors. 2 in its report on stress test analytics for macroprudential purposes in the euro area, the ecb also outlines the plans for extending stress testing into other sectors, most prominently the shadow banking sector, but also into the stress testing of central counterparties and insurance and pension funds. 3 let me first set the stage by reiterating the two main systemic risks stemming from the non - bank financial sector. first, the increasing size and growth of the euro area investment fund sector has the potential to amplify financial stability risks, both in terms of liquidity and leverage. as an example of the structural change in the european financial sector, it is worthwhile noting that the size of the money market and investment fund sector represented only 17 % of banks β total assets in 2008 but is now at 40 %. whereas the banking sector shrank by 18 % since the crisis, the fund sector more than doubled since 2008. the continued inflows into bond funds for example, may raise concerns about sudden redemptions in response to a more widespread repricing in global fixed income markets, if it were to occur. large redemption calls can have widespread amplification effects in financial markets. there are signs that fixed income investment funds have increased their risk taking in recent years via a higher asset allocation to lower -
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behaviours of different types of agents and on analysing the increasing pool of data. one enhancement is about fire sales mechanisms stemming from interactions between banks and shadow banks. 9 another example worth mentioning is about systemic aspects of liquidity and its links with solvency conditions accounting for pertinent interactions between market participants captured in an agent - based modelling fashion. 10 though, what is still required is further strong support from the research community to provide theoretical foundations for the various components of the stress test apparatus. 3. macroprudential tools to address the risk stemming from the non - bank sector despite these limitations, we should also note the progress made in understanding how stress testing exercises, in particular, have the potential to support macroprudential policy in the design, calibration and assessment of the impact of macroprudential tools. let me now turn to the state of play regarding the implementation and progress made for some of the specific macroprudential instruments that authorities would need, should systemic risks materialise. on the global level, the 2017 fsb policy recommendations on asset management structural vulnerabilities11, now being operationalised by iosco, are expected to reduce liquidity mismatches in open - ended funds. importantly, recommendation 8 captures the potential macroprudential role for authorities to provide direction on the use of liquidity risk management tools ( e. g. suspension of redemptions ) by funds in extraordinary circumstances. in the area of liquidity mismatch, the recommendations also address the potential use of system - wide stress testing by authorities. leverage recommendations focus on the measurement and monitoring of leverage within investment funds, including data for synthetic leverage calculation. on the european level, on - going work of the expert group on investment funds ( egif ) develops recommendations that are addressed to funds and asset managers. given that the investment fund sector is growing relative to the financial system as a whole, the esrb is analysing systemic risks posed by liquidity mismatch and leverage in the types of investment funds exposed to these risks. to highlight the importance of this work, let me preview results of an ecb occasional paper12 to be published soon. the study shows, for a large sample of european alternative investment funds ( aifs ), that open - ended leveraged funds experience greater investor outflows after bad performance than unleveraged funds. this can be explained by investors expecting proportionally larger valuation losses when remaining invested in leveraged funds.
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best take action in these areas. thank you for your attention. 1 this work covers issues such as collateral mobility and cross - border interoperability ( i. e. collateral messages, workflows, cut - off times, settlement cycles, etc. ). 2 with regard to the conflict of law issue, the ecb welcomes the commission β s β legislative initiative β to determine with legal certainty which national law should apply to security ownership. the ecb will contribute to the forthcoming public consultation with a view to strengthening the legal environment for cross - border settlement services. with regard to the withholding tax procedures, the eurosystem welcomes the commission β s announcement that a code of conduct on withholding tax procedures will be published in 2017. the ami seco predecessor β t2s advisory group β has contributed substantially to the work of the commission in analysing the possible harmonisation on withholding tax procedures and stands ready to further contribute to this work, if required. 3 / 3 bis central bankers'speeches
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and conditions of living. it has enabled all nations to produce on a higher efficiency scale. it has helped increase productivity. it has allowed the instant spread of knowledge and ideas so that the range of choices available to consumers has expanded continuously. trade and globalization have without doubt brought enormous benefits to many countries and citizens of the world. we might disagree on the exact modalities and the sequencing of trade and tariff reforms, but few of us would dispute that international trade has been a major driver of global economic growth since the end of the second world war. trade expansion boosted post - war economic recovery in the leading economies of today ; germany and japan are notable examples that come to mind. it figures large in the β growth miracles β of the asian tigers, mauritius, but also china! but this has not happened without those countries facing their own crises. the impact of the crisis on trade finance today we are facing the worst economic crisis in generations and this crisis is threatening to undo the economic development that many countries have achieved so far. undoubtedly world trade has been one of the worst casualties in the global financial crisis. this is even threatening to β erode people β s faith in an open international trading system. β the negative impact on world trade finds its way through two main channels. first the credit crunch resulting from the financial market turbulences has led to a fall in the supply of trade finance, which has rightly been described as the oil of the wheels of international trade ; and secondly the spillover of the financial crisis into the real economy has caused the worst recession since the great depression and fuelled a contraction of trade volumes. and those of us who believe in open trade almost as an article of faith, have watched with growing disbelief as the threat of protectionism started to rear its ugly head. as economic activity collapsed and unemployment soared in many countries, protectionist sentiment has risen along with the attraction of other trade - distorting policies. many countries have implemented domestic stimulus packages aimed at protecting their businesses and industries, favouring domestic goods and services sometimes at the expense of imports. policy - makers are perfectly aware that such policy actions have international implications β in the short term they can boost domestic demand but in the long term, they undermine the international trading system and global wealth and welfare. outlook for world trade for 2009 if we look at the prospects for world trade for 2009, we see that the world bank has predicted that the volume of world trade in goods and services will decrease by around 6 percent.
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at 4. 4 percent for 2022, largely exceeding the past average of 3. 5 percent. the recovery in overseas economies becoming clearer recently is attributable to the economic measures in the united states and the acceleration in vaccinations in advanced economies. economic activity, including services consumption, has improved in the united states and europe amid progress with vaccinations. such improvement, along with a continuing recovery in the chinese economy, has been pushing up the global economy as a whole through trade activity. turning to the corporate sector in japan, exports and production have increased steadily, supported by the recovery in overseas economies ( chart 2 ). according to the june 2021 tankan ( short - term economic survey of enterprises in japan ), while many firms in the face - to - face services industry have continued to view their business conditions as " unfavorable, " overall business conditions have improved for four consecutive quarters. on the back of improvement in corporate profits as a whole, business fixed investment has picked up, mainly for machinery and digital - related investments, albeit with weakness in some industries. the business fixed investment plans in the june 2021 tankan indicate that the year - on - year rate of change in such investment for fiscal 2021 is likely to show a steady increase of 9. 4 percent. thus, in the corporate sector, a virtuous cycle from profits to business fixed investment has been seen, triggered by an increase in external demand that reflects the recovery in overseas economies. as for the outlook, corporate profits are likely to continue improving on the whole on the back of a recovery in domestic and external demand, despite being pushed down by cost increases due to a recent rise in international commodity prices. under these circumstances, an uptrend in business fixed investment is expected to become clear. turning to the household sector, the pace of improvement has been slower than in the corporate sector. private consumption has been stagnant with public health measures remaining in place ( chart 3 ). consumption of durable goods has been steady, partly on the back of an expansion in stay - at - home demand. on the other hand, that of services, including eating and drinking as well as accommodations, has remained well below the pre - pandemic level. for the time being, private consumption, mainly of face - to - face services, is likely to be at a relatively low level due to the impact of covid - 19. that said, the situations in other countries where vaccination
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financial institutions. i hope that the private sector's efforts on climate change will be further encouraged through the bank's new measure, which could be the world's first such attempt, in that it ensures flexibility while avoiding involvement in micro - level resource allocation as much as possible. conclusion lastly, i would like to talk about the economy of niigata prefecture. while the economy of niigata prefecture has remained in a severe situation due to the impact of covid - 19, it has been picking up. it is expected to continue recovering, but there is still a need to be aware of downside risks as the future course of covid - 19 remains uncertain. however, looking at the development trajectory of the economy, i believe that niigata prefecture is well equipped with the innovative capabilities to weather the uncertain post - pandemic era. for example, niigata's rice and sake, which are famous throughout japan, are not simply products of nature ; their production has grown into high value - added industries that were developed through research and development to make the most of the local climate and water quality. there are also many examples of technologies and know - how handed down in the region that have become the basis of world - renowned local industries, such as metal processing in the tsubame - sanjo area, which developed from the casting of japanese nails in the edo period, and hemp fabric in the uonuma region, which is famous for its " snow bleaching " during the agricultural off - season. speaking of the accumulation of experience and facilities, niigata, which has produced oil and natural gas from long ago, is also one of japan's leading energy prefectures, equipped with technology for resource development and recycling, and pipelines that connect to the tokyo metropolitan area. while the society as a whole is making efforts to address climate change, i hope that niigata will take advantage of its environment to boldly take on the challenge of entering new businesses and thereby lead the country in terms of making such efforts. next year will mark the 100th anniversary of the opening of the ohkouzu diversion channel on shinano river. japan's first weir equipped with modern technology has protected the echigo plain from devastating damage caused by the overflowing of shinano river and has supported the development of niigata. i would like to close my remarks by expressing my respect for the great innovations of our ancestors and my hope for the further
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driven corrections in the housing market. at the international level, the risk factors that i discussed earlier may generate higher mortgage funding costs and / or a downward revision in the prospects for income and employment growth in ireland. at the domestic level, a desirable expansion in the supply of housing would put downward pressure both on rents and house prices. as the national macroprudential authority, we are committed to ensuring that the domestic financial system remains resilient in the event of a reversal in house prices. the ceilings we have placed on loan - to - income ( lti ) and loan - to - value ( ltv ) ratios on mortgage loans are essential in limiting systemic financial risk emanating from the mortgage market. by guarding against excessive mortgage debt at the household level, these measures also serve a vital consumer protection function while also limiting the risk that a house price reversal is amplified at the macroeconomic level through deleveraging pressures on over - extended households. in relation to the financial health of the banking system, the mortgage measures are reinforced by the higher risk weights associated with mortgage lending in ireland under our capital requirements, together with the capital buffers we impose on systemically - important institutions. in discussing the risks associated with the housing market, it is essential also to maintain our focus on the legacy issues from the crisis. i next turn to discussing the management of npls, before turning to the financial conduct concerns that have been brought into sharp relief by the mis - handling of tracker mortgages across the irish banking system. non - performing loans the central bank β s work on mortgage arrears and npls spans its financial stability, prudential supervision and consumer protection mandates. within the remit of the central bank β s responsibilities, the approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework, while ensuring that banks are sufficiently capitalised, hold sufficiently conservative provisions, and have the appropriate strategies and operational capacities to resolve arrears. while there has been progress in recent years in reducing the stock of npls in ireland and across the euro area, significant challenges remain. in the absence of pro - active management, the remaining npl stocks may adversely affect the medium - term supply of bank credit and pose financial stability risks through elevated uncertainty regarding the true health of the banking 4 / 7 bis central bankers'speeches system. importantly, these risks render banks especially vulnerable in the event of a future downturn in the economy, such
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faced with the substantial costs of redressing misconduct. in relation to the tracker mortgage examination, the main lenders have already made combined provisions of about β¬900m in respect of the examination, broken down as approximately β¬600m for redress and compensation and β¬300m for costs. 6 / 7 bis central bankers'speeches we expect the boards and senior management at our lending institutions to take the lead in rebuilding trust with their customers, their shareholders and the wider public by ensuring that they do not focus on short - term gain at the expense of the long - term interests of the business, its customers and shareholders. conclusions let me conclude. in this speech, i have conveyed the views of the central bank on some of the key economic and regulatory issues that loom large in our 2018 work programme. in relation to macro - financial prospects, we welcome the ongoing flow of strong economic data, which is helping ireland to move beyond the legacy of the crisis. at the same time, we think that ireland is especially exposed to some prominent international tail risk factors. managing this high - growth but high - volatility profile is a major challenge for fiscal policy. turning to the housing market, the same analysis helps to explain why the recovery in house prices has been substantial but that, at the same time, there are material fundamentals - related downside risks. we view our macroprudential policy framework as vitally important in managing these risks. in addition, we are fully committed to ensuring that the high npl stock that remains a legacy of the crisis is worked through in order to build systemic resilience in advance of the next downturn. our mission to safeguard stability and protect consumers means that we are also intent on improving the conduct of lenders, including through the completion of the tracker mortgage examination and our current work on the culture of banking in this country. 7 / 7 bis central bankers'speeches
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albania has always been and remains frontrunner of change. 3. bank of albania, an evolving institution throughout the transition history, the bank of albania has shown able to change and embrace better contemporary and most effective practices. the nature and functions of the institution were fundamentally transformed in 1992, when the albanian economy started the transition process towards a free market economy. within a short period of time and in the presence of a shortage of an institutional heritage, the bank of albania succeeded to establish the contours of an independent monetary policy, being empowered in the presence of a free - floating exchange rate, regulate and supervise a private banking sector that functions based on the market principles. the qualitative transformation of the bank of albania towards a modern central bank evolved further with the approval of the new law on the bank of albania in 1997, which lays down the primary objective β to achieve and maintain price stability β. this law sets out the decision - making, financial and operational independence of the central bank in the pursuit of its objectives, in line with the best international practices. in addition, it is encouraging that this institutional independence enjoys a broad social consensus. during these years of transition, our monetary policy has marked a notable progress towards : developing a theoretical framework ; building up the completion of our knowledge with empirical studies ; perfecting the instruments for its implementation ; and the transparent communication with the public. since 2015, we have formally adopted β the inflation targeting regime β. this regime provides the adequate incentives, discipline and flexibility to the maximisation of the longterm social welfare. in parallel with the evolution of the monetary policy, the bank of albania, in years, has built on a modern and effective regulatory banking framework, in line with the best international practices. from time we have implemented the regulatory standards incorporated in basel i, ii and iii. then, we have helped the establishment of the albanian deposit insurance agency ( adisa ) and the resolution framework. these two elements are crucial for the stability of the financial system. in addition, we have been working in collaboration with other public authorities, on the development of the complete supervisory and regulatory architecture. i would like to mention in this regard the establishment of the financial supervisory authority ( fsa ) and the financial stability advisory group ( fsag ). in the light of such a historical background of development and evolution, the bank of albania has shown itself an institution able to be adapted and change to keep up with the times. in parallel, the gradual, well -
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we still can't be sure exactly what living with covid - 19 will look like in australia. another factor underpinning the view that the economy will bounce back is the substantial income support being provided by the australian government and by the states and territories. while this support is different to that provided earlier, for many individuals the value of that support is similar to that provided earlier. so with consumption restricted by the lockdown, it is likely that the aggregate household saving rate will increase again in the september quarter ( graph 4 ). while the increase won't be as large as that of last year, it will mean that many people have more money in the bank than they did pre - delta. graph 4 household net saving rate * quarterly % % - 5 - 5 * estimate for the september quarter 2021 sources : abs ; rba it is also relevant that broader measures of household wealth have increased recently ( graph 5 ). housing prices are 19 per cent higher than they were before the pandemic and australian equity prices are around 10 per cent higher. this lift in the net wealth of the household sector is one of the things that suggest that once the restrictions are eased, households will be well placed to start spending again. https : / / www. rba. gov. au / speeches / 2021 / sp - gov - 2021 - 09 - 14. html 5 / 14 9 / 14 / 21, 1 : 55 pm delta, the economy and monetary policy | speeches | rba graph 5 real household net wealth * year - ended growth with contributions % % financial assets consumer durables dwellings liabilities - 10 - 10 total - 20 - 20 * includes estimates for june and september quarters 2021 sources : abs ; rba for businesses, it is a mixed picture. many of the businesses we talk to are expecting an easing of restrictions later this year. they also remember that the labour market was tightening just a few months ago and are alive to the possibility that this could be again the case next year. this possibility is creating a strong incentive to keep in close contact with employees ; it doesn't make much sense to let workers go, only to have trouble hiring when restrictions are eased. many large firms also have balance sheets that are in good shape and they have expansion plans based on the expected easing of restrictions. business investment was on an upswing pre - delta, and it is reasonable to expect that we will return to this as restrictions are eased, demand picks up again and uncertainty starts to
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connect people with technology. in other words, we need to equip pete with the necessary tools and capabilities. working as a single team with shared technology 3 / 6 bis - central bankers'speeches the first cluster in the technology pillar concerns our core it systems. on the one hand we will continue to future - proof our core systems and data infrastructure by making them more modular, scalable and innovation - friendly while keeping them secure. we aim to optimise the it landscape by integrating and consolidating systems across european banking supervision. on the other hand, we will decommission legacy systems to maximise the use and impact of existing applications. working as a single team across the ecb and ncas with access to shared technology will allow pete to collaborate more intensively with european central banking colleagues. olympus is a notable project in this regard. through olympus, we aim to proactively shape our it landscape and make it ready for the upcoming challenges and opportunities offered by new technologies. this ambitious project reviews the full it landscape and sets out a roadmap and action plan for the future of it in european banking supervision. for this project, we have identified four high - level targets rooted in our supervisory needs that guide all activities. our first target is to strengthen our data - driven work. imagine having easy access to data and efficient processing within a few clicks. this will empower our teams to make informed decisions swiftly and effectively. the second target is to provide common and connected tools and systems. using integrated systems to foster collaboration among all european banking supervisors, we will create a cohesive working environment that allows everyone to work together smoothly. the third target is to ensure seamless access and navigation. by unifying access and identity management, we will make it easier for our staff to find and use the resources they need, free from technical obstacles. lastly, we will establish common it standards and delivery. by adopting consistent it standards, we will drive rapid and user - friendly digital innovation, ensuring our technology keeps pace with the latest advances. under the olympus project we have set out the concrete action needed to reach these targets. what does this mean for pete, though? let me give you an example. pete will be able to use the ssm cockpit to navigate through supervisory tasks. the ssm cockpit will provide a user - centric platform integrated with core systems to facilitate access and navigation to various tools and systems. by design, it will be a flexible solution that meets the
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inflation and thus into the danger zone. spiegel : how do you intend to react to it β should interest rates fall further? draghi : at the moment we see no need for immediate action. we don β t have japanese conditions. there, the expectation of falling prices became entrenched. in the euro area, market participants are convinced that inflation will rise to close but below 2 % again. in bis central bankers β speeches addition, japan for a long time did not respond so resolutely in terms of its monetary policy as did the ecb. and finally, banks and companies in japan were in a worse condition than those in the euro area today. spiegel : the condition of european banks is bad enough. so the banking union is going to come now and create a level playing field for all banks in the euro area. how important is the project for the monetary union? draghi : extremely important. europe β s financial system is still fragmented. although the gap in funding costs for banks within the euro area is no longer as wide as it was two years ago. but in lending the differences are still very large, and in some countries the credit flow is disrupted. the banking union can help to restore confidence in cross - border lending. the most important objective of the asset quality review is transparency. we want to shed light on what is hidden in the banks β balance sheets. spiegel : the eu has just agreed on a procedure how to handle banks that are not viable. does the new resolution mechanism meet your wishes? draghi : i really want such a mechanism to work. we, as a supervisory body, decide only whether a bank is viable or not. then the resolution authority has to decide what to do with the bank : close it, split it up or sell it. the problem is, when we say that the bank is not viable, steps then have to be taken extremely quickly. and it is certain that it does not work when hundreds of people across europe have to discuss what needs to be done. spiegel : but is that certain with the decision taken now? draghi : if urgent action is needed we β ll have a fast - track procedure that gives the council and the commission 24 hours to decide on proposals of the board of the resolution mechanism. if they don β t decide a bank faces liquidation, so there will be enough pressure to find a solution. spiegel : what condition are european banks in? draghi
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data. this data could be potentially utilised to chart customer needs, behaviour and repayment capacity and help in digital inclusion. one specific area where digital lending has the potential to be a catalyst for economic growth is cash - flow based lending to msmes. msmes are an important engine of growth for the indian economy as they contribute around 45 % of exports and provide employment opportunities to more than 11. 1 crore people. the provision of appropriate credit for msmes through seamless and digital cash - flow based lending will provide them with the much - needed impetus. it would enable lenders to leverage real time cashflow data to reimagine end - to - end lending process and β sachetisation β of products. on the other hand, additional measures recommended by the working group on digital lending, viz., establishment of digital india trust agency ( digita ), a self - regulatory organisation ( sro ) and the recommended / proposed legislative interventions like restricting balance sheet lending through digital mode to authorized entities only by framing a legislation styled as banning of unregulated lending activities ( bula ) act on the lines of banning of unregulated deposit schemes ( buds ) act, 2019 would go a long way in creating a digital lending ecosystem which is safe and sound. conclusion the challenge for the regulator in a fast - developing economy like ours is to keep pace with the market innovations and strive to strike a balance between ensuring safety without stifling innovation which is never an easy task. responsible financial innovation requires balancing innovative products with necessary safeguards for ensuring financial system stability and customer protection. therefore, while appreciating and recognising the benefits emanating from digital credit, we need to take cognizance of the attendant risks such as data privacy, disruptive business models, aggressive recovery methods, and exorbitant interest rates. as a regulator, we have been following a nuanced approach for industry / market development and this is reflected in bringing out an appropriate regulatory framework for digital lending. by empowering individuals and firms to cultivate economic opportunities, digital credit can be a powerful agent for a sustainable and inclusive growth. we must remember that financial inclusion is not just a goal but also a means to an end as an enabler for sustainable economic growth, reduction of inequality and eliminating poverty. financial inclusion has been identified by the united nations as an enabler for 7 of the 17 sustainable development goals. at its best, digital credit need to be responsible
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other segments of the financial system. the need to constantly monitor international developments and take appropriate and often, preemptive action add an entirely new dimension to the progress of our banking system towards its longer - term vision. we have made considerable progress in implementing banking and financial sector reforms. there is also some improvement in the financial performance of the banking system in terms of various indicators of operating efficiency. nevertheless, there are several areas regarding the efficiency of our banking system β rather than its stability β that raise concerns, especially during a period of generalised uncertainty. the level of non - performing assets ( npas ) continues be high by international standards, preempting funds for provisioning and eating into the performance and profitability of financial intermediaries. the response to the debt recovery and asset restructuring initiatives undertaken as part of financial sector reforms has also been slow. in the period ahead, our financial system will also have to prepare for a tightening of the prudential norms as the new basel accord becomes effective and a fuller response to the current financial environment emerges. our financial institutions continue to be susceptible to financial market turbulence, especially in the equity market. upgrading technical skills, technology, research and human capital, developing effective β front - office β strategies and fortifying internal rules of governance and responsibility assumes a renewed priority in the fast changing scenario. the face of banking, as we have known it, is also changing rapidly. india is approaching an era of financial conglomorisation and β bundling β in the provision of financial services. besides infusing heightened competition, there are implications for the regulatory and supervisory regime. banks and financial institutions have to prepare for changes in the regulatory framework towards a more focussed, comprehensive and efficient environment that eschews regulatory forbearance. legal reforms accordingly will have to ascend the hierarchy of priorities in the reform process. against this background, in this talk, i propose to focus on the main challenges facing indian banking, such as, the role of financial intermediation in different phases of the business cycle, the emerging compulsions of the new prudential norms, and benchmarking the indian financial system against international standards and best practices. i will also say a few words about the changing context of regulation and supervision of the financial system in india, the need for introducing new technology in the banking and financial system, and the importance of strengthening skills and intellectual capital formation in the banking industry. recent macroeconomic developments and the banking system for a greater
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among adults aged 25 or older, 31 percent in metro centers hold at least a bachelor β s degree, versus 17 percent in rural areas ( u. s. census bureau, 2006 ). in some cases, growing urban areas like charlotte are the beneficiaries of a positive dynamic : the city β s modern, service - oriented economy attracts skilled and educated workers ; the presence of a skilled workforce attracts new firms to the area and also promotes the development of amenities such as high - end restaurants and cultural activities ; these opportunities and amenities then attract additional highly skilled workers. the challenge of education in north carolina cities like charlotte will probably continue to attract highly educated and skilled workers from other areas of the country, but improving the skills of local workers β especially those displaced by industries in decline β remains critical for both urban and rural areas in the state. four - year institutions play an important role in meeting that challenge, but they are not the sole means for developing workforce skills. for example, in the 2004 - 05 school year, the north carolina community college system served nearly 780, 000 students in fifty - eight institutions. the average community college student in the state is thirty years old and likely working while attending school ( north carolina community college system, 2006 ). because they offer education closely tailored to employer demands in the local workplace, community colleges in north carolina, as elsewhere, play an essential role in training and retraining workers. moreover, they do so at a relatively low cost. in general, we must move beyond the view that education is something that takes place only in k - through - 12 schools and four - year colleges, as important as those are. education and skills must be provided flexibly and to people of any age. i will close my comments on education with a pitch for financial literacy. in today β s complex financial marketplace, a basic understanding of financial tools and markets and an appreciation of the need to budget, save, invest, and borrow wisely are critical to the financial health of every individual. the federal reserve is advancing financial literacy locally through the charlotte branch of the federal reserve bank of richmond. the branch has active partnerships with organizations involved in financial literacy and economic education, including among others jump $ tart, junior achievement, lifesmarts, communities in schools, the north carolina council on economic education, and the north carolina bankers association. in short, advancing financial literacy is a high priority at the federal reserve. conclusion i β d like to conclude by again expressing my
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commentators in recent months. no : raising bank rate will not directly dampen global inflation. but it can ensure that it does not lead to high and persistent domestic inflation. the second upside risk to inflation that i would highlight is if the prolonged period of above target inflation erodes the public β s confidence that the mpc will keep inflation close to target. inflation has been above target for 49 out of the past 60 months. over that 5 year period, inflation has averaged 2. 8 %. inflation is likely to remain above target for the next year or so. this suggests that by mid 2012, inflation is likely to have been above target for the best part of six and a half years. yes, it is perfectly possible to explain why inflation has been so high for so long. and yes, there are good reasons why monetary policy did not try to keep inflation closer to target during this period. but just like the judge looking down on me earlier, to some people, at some point, this may just start to sound like a series of excuses. this risk is heightened by the fact that the mpc has consistently under - predicted inflation during this period. it is much easier to be wise after the event. for many people, the one thing about inflation they know with certainty is by how much their cost of living has increased in recent years. and if they take any signal from that about the path of future inflation, this could have significant implications. discussions of mpc credibility are often framed in terms of a set of binary arguments. has the mpc lost its credibility or not? are inflation expectations anchored or de - anchored? this approach encourages a focus on measures of medium - term inflation expectations. the rate of inflation expected over the next year or so may consistently move around since the mpc does not attempt to bring inflation back to target over very short time horizons. but this in the extreme, the law of one price ( loop ) suggests that, in the absence of transport costs and trade barriers, the price of a given commodity will be the same all over the world. even though the loop is unlikely to hold perfectly, the mechanisms underpinning loop might cause a sterling depreciation to lead to an increase in the prices of some domestically produced goods and services. bis central bankers β speeches line of argument suggests that the stability of inflation expected 5 or 10 years ahead provides a good metric for judging the credibility of monetary policy. the evidence on medium and long - term measures of inflation expectations
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and redesign our processes, but also to play a role in the development and support of our ecosystem, through a participatory approach. ladies and gentlemen, to conclude, i would say that we may have taken some time to grasp the scale of the digital revolution, but the numerous initiatives and interactions, such as this meeting, leave us with the hope that the backlog will be quickly cleared and that this revolution will effectively contribute to sustainable and inclusive development in our countries. in this respect, we are pleased to note the willingness of international organizations, including the imf, main interlocutor of central banks, to upgrade their means and human resources with a view to providing support to their member countries. as such, i suggest, if you deem it suitable, that we request the fund to institutionalize such a meeting in our region, at the frequency most appropriate to us. hence, we would be able to continue the debates and exchanges, assess the progress made, ultimately unite our efforts, and capitalize on our mutual experiences in order to better address the current and future challenges of digital transformation. thank you.
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zhou xiaochuan : capital return of state - owned enterprises speech by mr zhou xiaochuan, governor of the people β s bank of china, at the 2005 annual meeting of china enterprises β leaders & the 20th anniversary of < china entrepreneurs >, beijing, 11 december 2005. * * * ladies and gentlemen, fellow participants, good afternoon. it is my great honor to discuss issues of common interest with many entrepreneurs in this gathering. in the same gathering two year ago, i expressed my hope to have more dialogues with entrepreneurs. i regret that i couldn β t attend yesterday and this morning β s discussions and listen to your marvelous speeches, since i just came back from a business trip. today, i would like to take this opportunity to share with you my opinions on capital returns of enterprises. nowadays, it is already natural for private enterprises to distribute dividends. but are state - owned enterprises willing to pay dividends? should the state accept dividends? those questions draw attentions from many and are worthy of discussion. here, i also wish to exchange my personal views with you. 1. background of the issue economic development has produced different backgrounds for the issue. background one : many state - owned enterprises including state - holding companies have more profits than before. some enterprises have even higher profits due to high energy prices, particularly oil prices. background two : to promote reform process, government needs huge amount of funds to dissolve historical burdens. in the aftermath of asian financial crisis, sources of fund were needed to help enterprises in distress, establish a safety net and to relieve enterprises off social functions. background three has a lot to do with public companies. many people criticized listed companies because they seldom paid dividends. as listed companies, i think they should reward their investors after raising funds in the capital market. background four : reform of state - owned commercial banks. currently, china construction bank, bank of china and the industrial and commercial bank of china have undergone financial restructuring and recapitalization. furthermore, china construction bank has become a listed company. as their holding company, the central safe investment co. ltd. has made it clear that it expects dividends. however, since 1994, state - owned enterprises have never paid dividends to their investors. people will ask why there are such differences. 2. dividend distribution or not : my personal view i think owners have the right to receive dividends. first, in terms of corporate governance, this will set a clear operational target for management
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impact to the world we live in. this calls for the reinvention and reimagination of the shariah profession in a number of ways. first, enlarging our worldview. no doubt, theology is core to ascertaining the integrity of islamic finance transactions, rooted in the principles of the quran and sunnah. however, islam offers so much freedom for intellectual and cultural explorations. such explorations β to experiment with new ideas and critically assess existing norms β are in fact, highly encouraged. it is this intellectual and cultural freedom that has characterised the long line of great islamic traditions throughout history ; from ibn battutta who traveled the world and eventually produced his famous work the β rihlah β, to ibn khaldun who challenged the existing traditions and wrote the acclaimed β muqaddimah β. hundreds of years after they were written, these works are still revered and widely used as a reference today. speaking of freedom allowed in islam, i am reminded of a famous episode in the early days of islam during the battle of khandak. it was during the eve of the battle when the prophet received a suggestion from one of his companions1 to employ a novel battle strategy β one that is, as 1 / 3 bis central bankers'speeches many of you know, based on digging trenches around the city. this new strategy, generally unheard of among the muslims and arabs at the time, was in fact, borrowed and imitated from the persians2. regardless, the prophet agreed to and pushed for the unconventional strategy and as a result, secured an emphatic victory. in line with the significant flexibility afforded in islam, i believe that shariah must not be confined to a rigid framework. the way i see it, shariah should not and cannot, be applied in a vacuum. rather, it has to be contextualised and applied into business realities. we can learn valuable lessons from the practices of great muslim thinkers of the past such as al - farabi and ibn sina who drew strong influences from the writings of greek philosophers such as aristotle, but revolutionised and updated the knowledge into the context of islam and their contemporary times. the benefits are immense. it allows knowledge to thrive and develop further as it becomes more applicable and easier to grasp. it is therefore wise for us to widen our " peripheral vision " to encompass business considerations in interpreting and applying the principles of shariah. this is essential, if we aspire
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for the appointment and re - appointment of shariah committee members. this applies as well for key shariah personnel in islamic financial institutions, including islamic windows. the aim is to ensure shariah advisors and personnel are equipped with the necessary knowledge that 2 / 3 bis central bankers'speeches transcends across various disciplines including legal, finance and taxation matters. the timeline for compliance will be decided later. my final point is to engage the world more openly. issues of shariah are complex and sometimes difficult to discern. but they are important, and matter very much to a wide range of stakeholders. as imam ash - shafi β i reportedly said, β knowledge is that which benefits, not that which is memorised β 3. hence, in keeping with the changing landscape of the industry, engaging more openly and transparently about views and decisions will enhance understanding and acceptance. views and opinions are man - made and should be challenged, questioned and debated through civil and intellectual discourse. during the islamic golden age, such discourses and challenging of ideas were commonplace to assess the veracity of knowledge. al haytham, who wrote the influential β book of optics β, once said : β the duty of the man who investigates the writings of scientists, if learning the truth is his goal, is to make himself an enemy of all that he reads.... he should also suspect himself as he performs his critical examination of it.. β the goal for us today should be to forge greater understanding and acceptance. contentious differences in shariah opinion is a given but it must not hold us back, but rather be resolved through debate and discussion with a view to find truth and justice. in setting an example to inspire such exchanges, beginning january 2018, bank negara malaysia β s website will feature an enhanced version of the sac microsite, starting with the bahasa version to provide more detailed disclosure of the sac β s works. over the years, the sac has accumulated a treasure trove of knowledge which has been shared through various publications. in this digital age, it is high time that this be made even more accessible to the whole world. this new microsite will among others, serve as a repository for key discussions on fiqh matters and underlying reasoning of shariah rulings. this is expected to promote greater understanding and appreciation of the thought process and rationale in arriving at a ruling by our learned scholars. i trust that this repository of knowledge will encourage
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way that this central body becomes the nerve centre of the ips. the second pillar comprises the mutual liquidity and solvency pacts between the participating savings banks and the pooling of results, to extents that should exceed 40 %. and the third pillar is a commitment to stability of the agreements, which must run for a minimum term of 10 years, and which cannot be broken without the banco de espana first analysing the viability of the various institutions resulting from the fragmentation process. it should be stressed that, in all cases, the agreements so far reached go further than these minimum legal requirements, in the extent of pooling of solvency, liquidity and results. this is because, if so approved by the general meetings convened for next week, the extent of pooling will reach 100 %. this solidarity arrangement contributes to providing firm foundations for a common project and giving it substance, since objectives are unified, more efficient management arrangements are set in place and the markets and all intervening agents can more readily perceive the project β s cohesiveness and viability. from the standpoint of banking regulation, by using this design ipss become consolidatable groups of credit institutions dominated by a central body. actually, however, they are more than a group ; they are de facto mergers ( β cold mergers β as they have been called ) since, for economic β not legal β purposes, each participant has forgone the individuality proper to a separate legal person. full mutual liability between the parties to the agreement has been achieved, going beyond what the law governing corporate groups provides for in spain. hence, in practice, the participating savings banks become, from a merely economic and managerial standpoint, what are veritable retail banking β regional heads β of the ips regarding their operational capacity and the way in which they contribute solvency, liquidity and results to the group ; yet, from the legal standpoint, they retain their personality and their sovereignty in the agreed distribution of welfare fund assets. i also pointed out how, like any new product, ipss must pass muster in respect of the third and most important step of the evaluation process, namely the β use test β, i. e. proof of their adaptation to reality. ipss have to obtain the same improvements in organisation, efficiency, economies of scope, diversification and quality and unity of management as traditional mergers. they must do so in the same length of time as a normal merger, and they must strive
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economies ( slide 5 ). the japanese economy has recovered at the fastest pace among the advanced economies, and one of the main reasons for this has been the significant increase in exports to asia. now, what projections can we make about future global economic developments? while the future of the global economy is fraught with uncertainty, i focus particularly on the following three points in making a projection. the first point relates to the advanced economies, especially to an assessment of their balance sheet adjustments. the credit bubbles in the mid - 2000s were on a very large scale, particularly in the u. s. and the u. k. economies, and for that reason, it may well take some time for them to recover. assessment of the effectiveness of macroeconomic policies in advanced economies is also an important element. there is already very limited room for deployment of monetary and fiscal policy in these economies. given these circumstances, when can we expect the advanced economies to return to a full - fledged recovery path, and how robust will this return be? the second point i wish to raise relates to the growth prospects for the emerging economies. the growth potential of emerging economies may seem very large, but without the appropriate policy taken, the risk of a bubble cannot be ruled out. in addition, although this is not a pressing concern, the smooth transition from a high - growth economy to a mature economy will become one of the important policy challenges for the emerging economies in the longer term. the third point, which interlinks with the above two points, is the issue of capital flows and exchange rates, or more simply, the currency conflict under the β two - speed recovery. β iii. perspectives from the experience of the japanese economy japan β s experience over the past few decades offers a range of ideas when considering these three points. one of the most debated topics of economic policy over the past several months has been the large - scale asset purchase program implemented by the federal imf β world economic outlook, β october 2010. asian emerging economies are here defined as china, india, korea, taiwan poc, hong kong sar, singapore, thailand, indonesia, malaysia, philippines, and vietnam. reserve. meanwhile, many commentaries by economists and policy makers suggest that the program was intended to avoid β japanese - style deflation β or β the lost decade in japan. β incidentally, if you search the keyword β japanese - style deflation β on google, the results have increased rapidly from about four hundred thousand entries during the
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i j macfarlane : what is the biggest risk to financial and economic stability? introduction by mr i j macfarlane, governor of the reserve bank of australia, to the panel discussion on financial stability - consilium, coolum, 9 august 2003. * * * from the perspective of a developed oecd ( organisation for economic co - operation and development ) economy, what is the biggest risk to financial and economic stability? i suspect that at various stages over the past few decades, we would have come up with different answers. for much of the period, we would point to our apparent inability to control inflation, or to oil price shocks, or to governments β inability to control their finances. at other times, people would point to more purely financial vulnerabilities, such as fragile under - capitalised banking systems, excessive short - term international capital movements, poor prudential regulation or inadequate systems of governance. others would point to the tendency of governments, central banks or the imf ( international monetary fund ) to bail out failed systems and so create a moral hazard, as the main risk to future stability. you can make a good case for most of the candidates i have put forward. however, i think there is one other risk that we have become aware of that now seems to be larger than those i have listed above. i refer to asset price booms and busts. while the existence of these was recognised, they were usually regarded as historical curiosities, or at least very low frequency events ( e. g. once or twice a century ). the us experience in 1929 and its aftermath was the classic case until recently. but now that we have seen the world β s second largest economy - japan experience one in the 1980s, and the world β s largest one - the united states - experience one in the 1990s, they seem to be not quite so β low frequency β. we should also not forget that many other economies, including our own, experienced an asset price boom and bust in the late 1980s and early 1990s. although they were not of the size of the japanese one, or of the international significance of the us one, they were very costly to their respective economies. what can be done about this tendency of otherwise well - managed economies to exhibit periodical asset price booms and busts? one response would be to give the task to monetary policy, so you will probably expect me to expound on this subject. unfortunately, i must disappoint
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for release on delivery 10 : 00 a. m. edt may 19, 2021 statement by randal k. quarles vice chair for supervision board of governors of the federal reserve system before the committee on financial services u. s. house of representatives may 19, 2021 chairwoman waters, ranking member mchenry, members of the committee, thank you for the invitation to testify today. last may, my colleagues and i came before you β in a virtual format for the first time β discussing our actions to maintain a strong banking sector as a source of support for consumers, households, and businesses. i β d like to thank the committee for its flexibility and its commitment to ongoing, open dialogue, especially in the course of such a challenging year. my remarks one year ago came after the onset of sudden and pervasive financial stress. 1 early turmoil in overseas financial markets quickly crossed borders and, within days, had reached almost every asset class and corner of the financial system. from the beginning, the causes of this strain were clear, rooted in the policy measures taken to address the outbreak of covid - 19. but at that time, the full implications of the covid event remained unclear, and the costs would continue to mount. the american economy and banking sector then remained at the edge of the storm, with one wave of stress behind us and others yet to come. today, the storm waters are receding. the economy is beginning a strong recovery, which owes much to an extraordinary, coordinated, and sustained campaign of support, by both congress and the federal reserve, that helped clear a path to the other side of the covid event. as the federal reserve β s recent reports detail, banking organizations have remained an important source of strength in this recovery. 2 entering the covid event, the banking system randal k. quarles, β supervision and regulation report β ( testimony before the committee on banking, housing, and urban affairs, u. s. senate, washington, d. c., may 12, 2020 ), https : / / www. federalreserve. gov / newsevents / testimony / quarles20200512a. htm. board of governors of the federal reserve system, supervision and regulation report, april 2021 ( washington : board of governors, april 2021 ), https : / / www. federalreserve. gov / publications / files / 202104 - supervision - andregulation - report. pdf
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, to ensure that obstfeld - rogoff findings hold even in a world of integrated financial markets, we must ensure that capital markets are indeed effective in delivering risksharing. thus, the less we believe in formal coordination, the more we should strive to make international capital markets work. and this is a collective duty : central bankers should not leave this agenda to regulators and lawmakers, let alone to market participants, because it is crucial for the effectiveness of our monetary policies. in the same vein, those of us who also are bank supervisors should endeavour to recognise and overcome possible conflicts of interest. there is a temptation to ring - fence our domestic financial systems under our domestic financial stability mandates. but the more we ringfence, the more we limit financial risk - sharing channels, and the less efficient our monetary policies ultimately become. there are many other fields in which central banks can fruitfully cooperate. we can work together to improve the understanding of spillovers and shocks. we can prepare the instruments which will allow us to act together in times of crisis, such as foreign currency swaps. and we should all strive to design transparent policy frameworks and clearly communicate our reaction functions. thus, scepticism about formal coordination should not extend to pessimism about cooperation. going forward, a practical challenge i see is that the crisis has sizeably broadened the set of standard and non - standard monetary policy instruments, making the universe of central banking more complex than before. there will thus be a premium on clear communication, especially given the expected divergent monetary policy cycles across the atlantic. in my view stanley fischer β s recent speech on β the federal reserve and the global economy β, which discusses the global implications associated with the normalisation of fed policies, provides a very good example of how this can be done. bis central bankers β speeches the euro area aspects of the policy mix if we move from cooperation at the global level to cooperation ( or the policy mix ) within the euro area, the arguments about formal coordination change. this is not so much a question of monetary policy coordination, as a question of the coordination of other policies to be consistent with monetary policy : the maastricht treaty enshrines the principle of monetary dominance. indeed, price stability in the region as a whole is the single most important coordination device for other economic policies, reaching out into various policy domains across the member states of the euro area. despite this potentially wide remit for coordination, debates on
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over the long run. let me elaborate on our reform programme, which is nearing its final stage of completion. my focus will be on strengthening the global capital framework and introducing a global standard for liquidity. ii. capital reform quality of capital base i will start with capital since raising the level, quality, consistency and transparency of the capital base is one of the committee β s primary objectives. it is only through higher levels of loss absorbing capital that the banking sector will be in a stronger position to shield the economy from future shocks. the thrust of our work is to improve the level and proportion of the core elements of tier 1 capital, namely common equity and retained earnings. under the existing standard, banks could hold as little as 2 % of risk - weighted assets as common equity. it is even less if you consider the need for additional regulatory adjustments. this situation is unacceptable and must change. at its meeting on july 26th, the basel committee β s governing body β the group of central bank governors and heads of supervision β reached broad agreement on a fundamental strengthening of the definition of capital, with a focus on the core elements of capital instead of debt - like substitutes that are of questionable quality. moreover, virtually all deductions from capital will now occur at the level of common equity, instead of tier 1 capital, as has been the case under the current standard. this will ensure that banks cannot show strong capital ratios and, at the same time, recognise assets that diminish the quality of capital. let me be clear : the change to the definition of capital represents β by itself β a substantial strengthening of the global capital regime. this is the case before we even begin to discuss an increase in the level of minimum capital requirements or the introduction of buffers. capturing all the risks in addition to raising the quality of the capital base, we need to ensure that all risks are captured. during the crisis, we learned that many risks were not covered in the risk - based regime. in particular, these include the complex, illiquid credit products which found their way into banks β trading books without a commensurate increase in capital to support the risks. the committee has since strengthened substantially the rules that govern capital requirements for trading book exposures as well as for complex securitisations and exposures to off - balance sheet vehicles. the revised trading book framework, on average, requires banks to hold around three to four times the old capital requirements. controlling leverage an additional and β as recent
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information and communication. the non - performing loans ( npl ) ratio and non - performing assets ( npa ) of universal and commercial banks ( u / kbs ) have significantly declined since 2001, to less than 2 percent by june 2017. at the same time, banks β capital adequacy ratio ( car ) of 15. 8 percent as of march 2017 remains well above the minimum norms. meanwhile, the external debt situation has also continuously improved. outstanding philippine external debt stood at us $ 73. 8 billion as of end - march 2017, equivalent to just 24 percent of gdp. this is a significant decline from 60 percent in 2005. at this stage, the country is seeing a reversal in its overall balance of payment ( bop ) position which as of july 2017 posted a deficit of us $ 1. 4 billion β¦ the balance of payments deficit can be attributed in part to stronger growth in imports and as well as to rebalancing of portfolio capital flows in line with monetary policy changes in advanced economies. this is manageable and sustainable. we shouldn β t forget the positive factors going for the economy. business process outsourcing ( bpo ) receipts reached us $ 5. 5 billion as of q1 2017, growing by 9. 9 percent relative to the same quarter last year. remittances from overseas filipinos ( ofs ) continue to flow in β¦ the inflow of cash remittances from ofs coursed through banks remain steady, reaching us $ 2. 5 billion in june, a 5. 7 - percent increase from the level posted in the same period a year ago β¦ merchandize exports grew by 13. 6 percent in the first half of 2017, faster than projection. as a result, the country β s gross international reserves ( gir ) remained ample as of end - july 2017 at us $ 81. 1 billion. this is more than enough to cover 8. 7 months of imports of goods and services and 5. 5 times the country β s short - term debt obligations. 2 / 5 bis central bankers'speeches need for vigilance : macroeconomic headwinds despite this favorable economic backdrop, the philippine economy, like other economies, continues to face challenges on both global and domestic fronts. after years of protracted subpar growth, the global economy is finally experiencing a β firming recovery. β in its latest world economic outlook ( weo ) in july, the international monetary fund ( imf ) projected global
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based capital requirements. the federal reserve and the 2 / 4 bis central bankers'speeches other agencies also raised the threshold for when an appraisal is required for residential real estate loans and tailored safety - and - soundness examinations of community and regional state member banks to reflect the levels of risk present and minimize regulatory burden for banks. these improvements in regulation and supervision have helped right the balance i spoke of earlier between safety and soundness and consumer protection, on the one hand, and the ability to provide financial services and best meet the needs of their customers. we have also considered the impact of our actions, seeking to revise rules that impose significant costs to community banks but provide limited benefit to safety and soundness, consumer protection, or financial stability. as a part of this approach, i have also prioritized efforts to improve the consistency, transparency, and reasonableness of regulation and supervision. one of those efforts is promoting greater consistency in supervisory practices across the federal reserve system. for example, we are actively working to improve the timeliness of providing banks with consumer compliance exam findings. further, we are exploring ways to strengthen our ability to understand, monitor, and analyze the risks that are affecting community banks. a key aspect of consistency is ensuring the same supervisory approach and outcomes for similarly situated institutions, with the goal of ensuring, for example, that a β one β composite or component rating in a particular region would be the same for an institution with similar activities and practices in another region. this applies to all areas of our supervisory responsibility, whether safety and soundness, consumer compliance, or analyses of financial stability risk. i β d like to expand on one important area of focus, which is essential to the future success of the community banking sector : accessible innovation and technology integration. this subject is one that i speak about frequently with stakeholders and our staff at the board. we are committed to developing a range of tools that will create pathways for banks to develop and pursue potential partnerships with fintech companies. this includes clearer guidance on third - party risk management, a guide on sound due diligence practices, and a paper on fintech - community bank partnerships and related considerations. these tools will serve as a resource for banks looking to innovate through fintech partnerships. technological developments and financial market evolution are quickly escalating competition in the banking industry, and our approach to analyzing the competitive effects of mergers and acquisitions needs to keep pace. the board β s framework for banking antitrust analysis hasn β
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of our business contacts across the nation report greater success in passing these cost increases through to customers, including other business customers. judging from a few months of data, which is always risky, consumers may also be experiencing a slightly faster rate of increase in prices, even excluding the effects of rising energy prices. the direct contribution of rising commodity, energy, and other import prices to consumer inflation is likely to lessen considerably, however. commodity price increases have slowed ; the dollar has flattened out in recent months, which should damp import price increases ; and, if they conform to the expectations implicit in futures markets, oil prices should level off and then drop back a bit. but the indirect effects of these sorts of price increases are still a potential concern. to contain inflation pressures, upward adjustments to the levels of these prices must not get built into higher inflation expectations. a rise in inflation expectations would induce people to seek protection against an expected erosion of their purchasing power by raising prices and wages even faster. the evidence regarding inflation expectations has been mixed. since last fall, expectations of inflation over the next year or so have risen notably. however, surveys and readings from financial markets indicate that expectations for inflation rates several years out remain stable ; in fact they have not changed materially for several years. people apparently view the near - term changes in inflation as temporary, perhaps associated with rising energy prices. given that perspective, they are less likely to change their behavior in labor and product markets in ways that perpetuate short - term variations in inflation. over time, both inflation and inflation expectations will be determined not by adjustments of particular prices but by fundamental factors - the competitive environment in labor and product markets that in turn reflects the extent of resource utilization, and the pace of productivity growth and its effect on costs. the recent news on both fronts suggests that inflation pressures will remain contained, but substantial uncertainty surrounds that outlook. as i noted earlier, resource utilization has risen substantially as the economy has expanded. naturally, as the margin of underutilized labor and capital is drawn down, some resources - particular skills in labor markets and certain goods and services - come into short supply. but, judging from aggregate measures of wages and labor compensation, the economy is still operating a little below its long - run sustainable level of production. the growth of compensation in 2004 was not much different from that in 2003 ; some measures registered a little faster growth, some a little slower. these flat compensation gains occurred along with an erosion of purchasing power from rising
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##cipated economic shocks. over the last few years, the fiscal authorities have cut federal spending and raised taxes, and our congressional budget office estimates that these fiscal headwinds will reduce real gdp growth by about 1. 5 percentage points this year from what it otherwise would have been. nevertheless, as a nation, we have not yet addressed in a fundamental way our longer - term budget challenges, particularly those associated with federal health - care programs. so i have no doubt that fiscal policy issues will retain an important and highly contentious place on the political agenda for many years here in the united states, as in europe. i will turn for a moment to monetary policy. the congress has tasked the federal reserve with conducting monetary policy to foster stable prices and full employment. today, inflation is well below our 2 percent longer - term objective, as measured by prices for personal consumption expenditures. and although the unemployment rate has declined notably since its peak in 2010, it remains well above our estimate of a longer - run, more normal level. i expect that inflation will return gradually to our 2 percent objective, and that we will continue to make progress in reducing unemployment. in the meantime, the case for continued support for our economy from monetary policy remains strong. views expressed in this speech are mine and may not represent those of the fomc or any of its members. bis central bankers β speeches with these fiscal headwinds and the lingering effects of the recession, growth has remained in the range of 2 percent since 2009. but today, our private sector shows real signs of underlying improvement. auto sales are strong, as is activity in our energy sector. our housing market, which was at the heart of the crisis, is now recovering strongly. house prices are rising, and that is supporting improvement in household net worth and consumer attitudes. homebuilders are responding to this price signal with rising housing starts, which will support job growth. together, these and other factors give grounds to hope for the kind of self - reinforcing cycle of economic growth that we have been waiting to see. and as our economy has gradually improved, it has become possible, and appropriate, for the federal reserve to provide clearer guidance on the path of monetary policy. in all likelihood, this path will involve continued support from accommodative monetary policy for quite some time. meanwhile, financial regulators around the world are engaged in a historic and sweeping renovation of the global financial architecture. the scope of this global regulatory project is enormous
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- rate corridor and the tight liquidity policy we have been implementing played a major role in shielding the economy against global shocks. moreover, our structural and cyclical measures supporting fx liquidity, core liabilities and long - term borrowing strengthened the economy β s resilience. 1. monetary policy and financial conditions in view of the uncertainty over global markets and the volatility in food and energy prices, we maintained a cautious monetary stance in the second quarter of 2015. in this period, we kept interest rates unchanged, but continued with the tight liquidity policy to contain risks to core inflation and inflation expectations. to meet the recently growing liquidity need, the weight of marginal funding was increased and, as a result, the cbrt average funding rate increased ( chart 3 ). the cbrt average funding rate has been hovering around 8. 5 percent since midjune ( chart 4 ). the bist interbank overnight rate, on the other hand, remained close to the upper bound of the corridor as in the previous reporting period. bis central bankers β speeches thanks to the cautious monetary stance, the yield curve remained nearly flat. although the yield curve has remained basically unchanged since the publication of the previous inflation report, there was a slight increase in the market rates with more than two - year maturity ( chart 5 ). thus, the spread between the overnight repo rates at the bist interbank money market and 5 - year market rates has narrowed somewhat ( chart 6 ). i would like to reiterate that we will monitor inflation expectations, pricing behavior and other factors that affect inflation closely and maintain the cautious monetary policy stance by keeping a flat yield curve until there is a significant improvement in the inflation outlook in the upcoming period. the wide interest rate corridor and the tight liquidity policy that we have been implementing reduce the economy β s sensitivity to global shocks, thus supporting financial stability and facilitating the attainment of the price stability objective. in the post - crisis period, the unconventional policies of advanced economies and the ongoing uncertainties over global monetary policies caused long - term interest rates in these economies to fluctuate. in addition, emerging - market rates have become extremely sensitive to global monetary policy developments. to contain repercussions on the turkish economy, we designed a monetary policy framework composed of a wide interest rate corridor and an active liquidity policy. the cbrt β s wide interest rate corridor and the tight liquidity policy strengthened the resilience of the turkish economy against global shocks
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addition to the flexible monetary policy strategy implemented by the central bank as of the end of 2010, the prudent measures adopted by the brsa accompanied by the safeguarded fiscal discipline strengthened the central bank β s hand. we firmly believe that we will attain very positive results with respect to price stability and financial stability by the end of 2012. along with national macroprudential measures introduced by countries, some international criteria have also been developed for the sake of safeguarding financial stability. for example, the basel iii accords bring about new arrangements reinforcing the capital structures of financial institutions. these arrangements will ensure a more resilient financial sector against unforeseen risks and will contribute to financial stability. the recent efforts clearly point to a consensus among countries on the critical importance of safeguarding financial stability. despite the consensus among policy - makers on the importance of financial stability, the economic literature lacks adequate theoretical and empirical studies on the details of the transmission mechanism from financial stability to macroeconomic stability. at this point, academia is expected to do their share in this respect. the two - day conference will stage parallel sessions, panel discussions and presentations on these issues. banking sector dynamics, macroprudential measures and their impact on macroeconomic stability, systemic risk issue and sovereign debt dynamics are among the topics that will be addressed at the conference. two of our distinguished guests, mr. ricardo caballero and mr. franklin allen, will be delivering speeches. mr. caballero will be presenting a speech on the first day of the conference and mr. allen β s presentation is scheduled for the second day. on the second day of the conference, the panel discussion titled β how did the crisis challenge the central banking as we knew it? what should ( not ) change? β will be held, at which senior central bankers will be sharing their country experiences. i think this panel discussion will be very interesting and beneficial for all the participants. the studies that will be presented throughout the conference will contribute to better understanding of the factors threatening financial and macroeconomic stability and developing policies to achieve these two objectives simultaneously. i believe that the conference will also serve as a forum for the participants for exchanging views. in this respect, i would like to thank the organization committee for their efforts in bringing these very interesting and enlightening studies under this conference. i wish the conference a complete success and i would like to thank all our guests for their participation. bis central bankers β speeches
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the governments with their high debts were weak. was i weak myself when i explained to all floor leaders in the german bundestag just why it was important to decide rapidly? was i weak when i informed the heads of state and government in full independence that the situation was grave and that they had to live up to their responsibilities? we took our decision on sunday in full independence. spiegel : thus far, the ecb has been strong and independent because it had repeatedly rejected demands from the political domain for lower interest rates or too expansionary a monetary policy. you have now consented for the first time. trichet : we have consented nothing to the heads of state and government. we always take our decisions taking into account only our own assessment of the situation and not the β recommendations β of governments, markets or social partners. we decided on 9 of august 2007 to supply β¬95 billion of liquidity in a few hours because our money market was being disrupted. and i could give many such examples. as i have already said, if there has been any direction of influence, it has been more in the opposite direction, from the ecb to governments, when making recommendations to them. and, let me tell you that those who took very significant responsibilities were those not applying the spirit and the letter of the stability and growth pact. and neither were those who did not carry out their surveillance as they should have, and as we constantly asked them to do. spiegel : in a talk he gave to the spiegel a few months ago, jurgen stark, the ecb β s chief economist, said that the ecb was not permitted to buy government bonds. who is right? trichet : i have already said that this is explicitly authorised by the treaty. over the past 11Β½ years, we have ensured price stability in europe and have successfully met our target of keeping inflation below, but close to, 2 %. we have done a good job fully in line with what the best central banks in europe were doing before the euro. those who believe β or, even worse, are suggesting β that we will tolerate inflation in the future are making a grave error. the governing council of the ecb did not hesitate to increase rates in july 2008 in a period of financial turbulence in order to ensure price stability. we were criticised at the time by the markets. this is a measure of our inflexible determination. spiegel : the germans react particularly sensitively
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because the bundesbank had always refused, even in times of crisis, to purchase government bonds. can you understand these specific german concerns? trichet : i fully understand the particular sensitivity of my german friends. but facts are facts : inflation in germany has never been as low as it has been over the past 11 Β½ years. the german fellow citizens can see that the euro has indeed been a good store of value over time. spiegel : but people are concerned about the future. they fear that inflation will return and that their savings will lose value. trichet : at one time the bank of england and the federal reserve decided to embark on β quantitative easing β, namely the purchase of public bonds in order to supply as much liquidity as possible to the market. what we are doing at present is totally different. we will withdraw all the additional liquidity that we supply. spiegel : many germans also fear that their government is becoming the paymaster of europe. trichet : i understand the germans β fear of inflation, and their anxiety about their budget and their contribution to europe. in france, i have occasionally been called the β ayatollah of the franc fort β β¦ spiegel : β¦ what has two meanings : frankfurt and a strong euro β¦ trichet : β¦. because i advocate a strong currency policy. inflation is destructive for societies and democracy. inflation is a tax on the poor and the weak. that is my very firm conviction. spiegel : there is always a great temptation for politicians to spend more money than they have. inflation helps them to reduce their debt. trichet : of course, we must now demand extensive adjustment programmes from the governments, which the heads of state and government committed to the friday before last. they are committed to accelerating the consolidation of their budgets. they know what is at stake now. spiegel : would it not be good if a country such as greece were able to leave the euro area? trichet : no. this is excluded. if a country joins the euro area, it shares a common destiny with the other members. there is a need for a quantum leap in the governance of the euro area. there need to be major improvements to prevent bad behaviour, to ensure effective implementation of the recommendations made by β peers β and to ensure real and effective sanctions in case of breaches. the ecb is calling for major changes, and i will explain this in the task force chaired by mr. van rom
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by 10 or so of our staff continue to be available, and our global initiative program ( gip ), to which world - renowned figures are invited and which we attend together with staff from other central banks, is also being actively promoted. our overseas representative offices moreover deliver useful information to headquarters in a timely manner, and at our regional branches as well various high quality joint research is being conducted β all of which things were hard to foresee in the past and of which i am very proud. self - praise that others might not agree on should of course be cautioned against. the significances of the changes that i have mentioned could be found in the context of their being actual supporting evidence of your potentials coming to be recognized in communities at home and abroad. needless to say, these changes should be regarded as outcomes produced through the joining of all of our forces, to heighten our organizational strength, rather than through the efforts of only a few people. since last summer, and for the first time since the bank β s foundation, gatherings of all of our almost 200 team heads have been held twice. at these meetings changes in our roles in line with the revision of the bank of korea act were discussed, and medium - to long - term visions pledging the bank of korea β s development were established on our own and announced. last month an athletic meet was held that brought together all staff from our headquarters bis central bankers β speeches and 16 regional branches β also for the first time since our foundation. i believe that this was an opportunity for all of our members to meet one another and an occasion to confirm our being β one family β. the most prized reward of these gatherings was the instilling of a strong sense of belonging in all employees. in addition, we developed the administrative capacity to organize and run such large events, and together shared an awareness that there are always people serving and sacrificing for the sake of this whole organization β important rewards that i must say cannot be overlooked. we must renovate our thoughts and behavior, to bring ourselves closer to the international community while at the same time avoiding isolation from domestic society. the korean economy is no longer small in world society now. we need to develop our abilities to present to the world our ideas for world development and lead international society in the directions that we desire, rather than remaining at the level only of understanding the words that others speak. and our opinions should not be limited to those concerning the impacts of the international
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choongsoo kim : 62nd anniversary of the bank of korea speech by mr choongsoo kim, governor of the bank of korea, commemorating the bank of korea β s 62nd anniversary, seoul, 12 june 2012. the following is an unofficial english translation. * * * dear fellow members of the bank of korea, we are all gathered here today to commemorate the 62nd anniversary of the bank of korea β s establishment. we take pride in the bank of korea's dedicated performance of its role as the central bank of the republic of korea during our economy's achievement of remarkable economic development in the world over the past half century, rising from the level of one of the poorest countries to reach the threshold of advanced country status, and there cannot be even the slightest wavering in our resolution to continue sincerely carrying out our duties going forward as well. exactly one year ago today, in this place, we pledged to make the following year β s anniversary ceremony an occasion to confirm the bank of korea β s heightened stature. we also solemnly expressed it as our call in this age to set up a new stature of the bank of korea, standing tall in the world upon the foundation of the enduring history and tradition built up over the many years since our bank β s establishment by those who served before us. i in addition appealed to you to set out together to create a global bok, with the resolve to be reborn β as the bank had come to complete what is comparable to a 60 - year life cycle in the orient and embarked on a new one. each year we have used this anniversary ceremony as an opportunity to straighten our backs and reaffirm our determination. and at this year β s ceremony i would like to look first into the domestic and external conditions surrounding us, to examine secondly the changing role of central banks called for since the global crisis, and to then finally examine the waves of change that all of us are together now seeking to push forward. i should like to take this opportunity to reflect once again on our vision and resolution, with a β new self each day and the next β ( ζ₯ ζ₯ ζ° [UNK] ζ₯ ζ° ) conviction embodying the self - discipline to always ceaselessly develop oneself further. dear friends and colleagues, first of all, let us look at the international economic environment surrounding us. despite the efforts on the parts of individual countries over the past five years the global economy remains unable to pull itself out of the global financial crisis, referred to
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hermann remsperger : emerging markets, the us dollar and the euro β reflections on the global monetary system speech by professor dr hermann remsperger, member of the executive board of the deutsche bundesbank, at an economist seminar hosted by the bank of finland, helsinki, 18 april 2008. * * * i would like to start by thanking the bank of finland for hosting this seminar and providing me with the opportunity to share with you some thoughts on developments in the global monetary system. 1 my focus today will be on emerging markets. this may be at odds with most recent events in financial markets which suggest that the spotlight should be turned on the group of advanced economies. but as many speeches and papers have already been devoted to the financial market turmoil, i think it is useful to redirect attention to emerging market economies, not least given their growing importance for developments in the global economy. my remarks will attempt to address three questions. 1. how has emerging markets β participation in the global monetary system evolved in recent years? 2 2. can emerging markets sustain the current form of their participation in the global monetary system? 3. what do potential developments in emerging markets imply for the future role of the main international currencies, the us dollar and the euro, in the global monetary system? i. the international monetary system since the early 2000s let me first turn to the question on how emerging markets have been participating in the global monetary system in the past few years. i shall answer it by looking at the three main building blocks of the β impossible trinity β hypothesis β exchange rate regimes, financial integration and monetary policy. exchange rate regimes about ten years ago, in the wake of the financial crises of the mid - and late 1990s, the β impossible trinity β became the main pillar of what has been called the β bipolar view β of exchange rate regimes ( fischer 2001 ). with an increasingly open capital account, emerging i wish to thank adalbert winkler for his input in the preparation of these remarks, and karlheinz bischofberger, ulrich grosch and sabine herrmann for their valuable comments and suggestions. in the literature, this question has been at the core of the debate on the β bretton woods ii β system with a core being the united states, and a periphery consisting mainly of the emerging asian economies ( dooley, folkerts - landau and garber, 2003 ). according to this view, core and periphery are linked through pegged or managed exchange
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##vening a forum of financial stability. what is the philosophy behind that proposal? firstly, there is the conviction that sweeping institutional changes are not necessary. instead, a process to improve coordination between existing national and international authorities and groupings is important for improving the functioning of the market and, in doing so, promoting the stability of the financial system. secondly, a permanent body which brings together major experts on supervisory issues, either technical or political representatives, either at the national or at the international level has more potential to be a driving force for practical change than several ad - hoc - groups may have. how is the forum composed? members of the forum are : representatives of the ifis, the bis and the oecd, representatives of key international regulatory groupings, namely the basel committee on banking supervision, iosco, the international association of insurance supervisors, central bank experts concerned with market infrastructure from the committee on payment & settlement systems and the committee on the global financial system and β not least β representatives of the national authorities β the ministries of finance, central banks and senior supervisory authorities β initially of the g - 7 countries. what is the forum β s field of activity? the g - 7 report identifies three areas where improvement is necessary. the first potential area concerns the assessment of vulnerabilities affecting the global financial system. these kinds of information - pooling - and - processing activity must be clearly separated from normal macro - economic policy assessment. the forum should obviously not attempt the imf β s systematic surveillance of individual countries, although cases may arise where financial vulnerabilities in individual counties merit the forum β s attention. a second potential area of activity for the forum is identifying and overseeing actions needed to address the vulnerabilities affecting the global financial system, including encouraging the development or strengthening of international best practice and standards and defining priorities for addressing and implementing them. a third potential area of activity for the forum is improving mutual coordination and the exchange of information among the various authorities responsible for financial stability ( a sort of permanent round - table ). in this respect, the forum should be a vehicle for the regular in - depth exchange of information among the international financial institutions and the international regulatory groupings. how should the forum work? the forum should not duplicate work being undertaken elsewhere. the forum should, rather, work through its members, taking due account of their comparative advantages. specifically, the forum should bring together information about activities taking place in diverse groupings and coordinate overlapping activities. in
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to illustrate that for banks to move to the next orbit, they have to realise their true strengths and weaknesses. they need to build on their strengths and rectify their weaknesses to prepare and adapt themselves for the challenges which these external, regulatory and internal drivers are going to entail. in this, a very relevant and critical issue which emerges is whether the regulatory and supervisory processes are also geared up for the next orbit. iii. how equipped are the supervisors? the existing supervisory framework for commercial banks in india has fared rather well over the years and drawn praise from peer supervisory agencies, global standard setters and the fsap assessors for the regulatory and supervisory regime as the indian banking system remained largely stable during the global financial crisis. however, as supervisors, we face challenges. the growing complexities of the banking business coupled with significant cross - border and cross - sector expansion has rendered the system increasingly vulnerable to the threat of β contagion β. the paradigm shift in the banks β business processes, products and systems with an ever - growing reliance on ict, as delivery channels pose immense challenges before the banking supervisor. while on the one hand, the banking landscape has witnessed considerable changes, the supervisory processes within the reserve bank have remained more or less static. this has necessitated a review of the supervisory processes and rationalisation of the organisational structure for bank supervision. additionally, lessons from the financial crisis which have manifested in form of new regulatory and supervisory benchmarks like basel iii, revisions to the core principles for effective bank supervision, increased focus on systemically important banks also have to be factored in for making the supervisory processes and mechanism at the reserve bank more robust and capable of addressing emerging issues. the present supervisory processes followed by the reserve bank are focused on elaborate transaction testing and compliance monitoring and do not provide a forward looking measure of risk that the supervised entities pose to the supervisory objectives. we need to move away from transaction based to risk based and from incidence based to theme based supervision. the on - site assessment and the off - site surveillance processes also need rationalization so that efforts made by the external / internal auditors of banks could be effectively utilised and duplication avoided. supervision has to be intrusive and decisive. the basic underlying theme should be that supervision must facilitate good business and must obstruct bad business. another issue worth pondering is whether the reserve bank β s supervision adds value for the supervised entity or is it an β unnecessary evil β that they have to endure
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offset the current account deficit. for a few months during the 2008 β 09 financial crisis, the position was reversed and, when that happened, the rupee behaved much like it did over the past several weeks ( chart 1 ). between july 2008 and february 2009, the rupee depreciated by nearly 17 per cent. essentially, when capital stops coming in, the current account drives the exchange rate and, naturally, the pressure is to depreciate in the face of the deficit. with the kind of volatility we have seen in global capital flows over this period, virtually all eme currencies faced pressure to depreciate. however, the eventual magnitude of change reflected differences between countries in current account conditions as well as policy responses. bis central bankers β speeches for the past few years, the exchange rate regime in india has been what might be best described as a β bounded float β. there are virtually no restrictions on foreign direct investment ( fdi ), except for limits on specific sectors, and portfolio investment in equities. however, there are restrictions on debt inflows, driven by considerations of external stability. these limits relate to quantity, tenor and pricing. short - term debt is the least preferred, because it is seen as most vulnerable to sudden reversals, while long - term debt, despite risk concerns, is seen as contributing to the resource flow into infrastructure, so is viewed more favourably. these controls on debt might be viewed as β structural β or β strategic β capital controls ; they are altered relatively infrequently in response to changing macroeconomic conditions and not with a view to impacting the daily movement of the exchange rate. while we do not target the level of exchange rate, nor do we have a fixed band for nominal or real exchange rates to guide interventions, the capital account management framework helps in the bounded float. if volatility increases, appropriate tools, including those in the realm of capital account management are used. within these overall boundaries, the exchange rate is determined by daily variations in demand and supply. in the recent episode of depreciation, as i indicated earlier, a sharp fall in capital inflows led to a drying up of supply, while demand on account of the current account deficit continued unabated, leading to the outcome we saw. there has been a long - standing debate on the merits and de - merits of this exchange rate policy, which has returned to centre - stage in the
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, for those countries with a government debt - to - gdp ratio of over 90 %, see in particular christiano et al. ( 1999 ). see in particular christiano et al. ( 1999 ). see aizenmann and marion ( 2009 ). see skidelsky ( 2009, chapter 8 ). median gdp growth tends to be about one percentage point lower than it would be otherwise. although at first sight this may appear small, when cumulated over decades it leads to significantly lower standards of living. empirical evidence also shows that higher deficit - to - gdp and debt - to - gdp ratios lead to higher interest rates even when there are no doubts about fiscal solvency. a study by thomas laubach 20 based on us data, for example, estimates that every percentage point increase in the projected deficit - to - gdp ratio results in an increase in long - term interest rates of 20 to 29 basis points, whereas a percentage point increase in the debt - to - gdp ratio is associated with an increase of about 3 to 4 basis points. once again, although such effects may seem tiny, when cumulated over long periods of time their impact becomes significant. another fundamental problem of fiscal policy is its lack of timeliness, or, to put it differently, its implementation lags. whereas automatic stabilisers such as unemployment benefits are built into the system, and therefore have no implementation lags to speak of, decisions concerning taxation and expenditure are legislated by parliament. as a result, as extensively discussed in standard macroeconomic textbooks, a fiscal stimulus may come to be implemented with a potentially significant delay. a conceptually related problem with using fiscal policy as a stabilisation tool is that its need to β pass through the political process β inevitably decreases its predictability. fiscal stimulus packages, quite inevitably, become part of a larger bargaining process between competing interest groups, so that not only the timing, but also the extent and composition of the fiscal stimulus become comparatively uncertain. monetary policy has also its limitations when it comes to stabilisation purposes. one problem is that low interest rates, if protracted, may fuel new imbalances, in particular bubbles in asset markets, increasing uncertainty across the board, rather than decreasing it. once again, this is nothing but an illustration of the same general point i previously made with reference to the need to guarantee fiscal solvency : the fundamental limit to government stabilisation policies is that such interventions should never increase overall uncertainty, and they should rather decrease
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close to balance, compared with sustained deficits in the us and sustained surpluses in japan. of course, remaining competitive is a continuous challenge. over the past two decades, as low - cost competitors have emerged elsewhere in the world, the euro area β like other advanced economies β has recorded some decline in export market shares. these losses partly reflect the mechanical effect of the new entrants. nevertheless, the euro area does need to adjust the range of goods, services, sectors and industries in which it specialises. euro area countries have changed their specialisation over the last two decades, but not all did so to the same extent. as a consequence, the specialisation of the euro area as a whole has not changed much. we could have expected that the euro area would have shifted more towards higher quality products and products that are more skill - intensive and capital - intensive. the fact that there has not been more progress overall might reflect structural rigidities that constrain firms β ability to adjust rapidly and to make substantial changes in their specialisation β particularly towards high - technology products. in particular, rigidities in the product and labour markets make it difficult for firms to adjust costs and prices to changing conditions. the ability of countries to adopt the appropriate specialisation may also be limited by structural issues related to the quality of education and the incentives for innovation. internal competitiveness the general picture for the external competitiveness of the euro area is positive. but this general picture does not necessarily hold for each member of the euro area. overall, looking at competitiveness within the euro area, there have been substantial differences across countries. indeed, the strains in some sovereign debt markets have been compounded by the severe competitiveness differentials that have emerged within the euro area. a convenient way to identify competitiveness differentials is simply to look at the current account balances of each country. current account imbalances could be justified for any country, including those participating in a monetary union, and they do not necessarily reflect a loss of competitiveness. but increasingly, larger current account deficits have resulted from significant losses of national competitiveness, signalling domestic macroeconomic imbalances and deeper structural bis central bankers β speeches problems. these losses of competitiveness limit the country β s growth potential and hinder its participation in the global trade integration. against this background, rather than financing productive investment in the tradable sector and fostering export performance, capital inflows in some countries with excessive current account deficits
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6. see β implementing the fsb principles for sound compensation practices and their implementation standards : fourth progress report β at http : / / www. fsb. org / wp - content / uploads / fsb - fourth - progress - report - on - compensation - practices. pdf all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx taken together, these reforms will further strengthen the alignment between risk and reward, and ensure greater accountability for risk management failings over a longer timeframe. complementing β hard law β with β soft law β the authorities can implement rules and regulations, but they can also play a broader role by promoting good behaviour. the fixed income, currency and commodity ( ficc ) markets are covered by a patchwork of poorly understood codes of conduct and market practices. to address this, the fair and effective markets review recommended the creation of a ficc markets standards board ( fmsb ), with a mandate to : to improve the quality, clarity and market - wide understanding of wholesale ficc trading practices ; produce guidelines, standards and other materials to promote good conduct ; and, undertake horizon scanning by periodically reviewing wholesale ficc markets for emerging risks. the fmsb has already made significant progress in engaging a wide range of market participants, which is a testament to the leadership of elizabeth corley as interim chair and mark yallop who took over as chairman in july. over 50 firms have signed up including 17 g - sibs, some of the largest asset managers in the world, and many corporates and treasurers who are major users of ficc markets. the fmsb has published draft guidance on β reference price transactions in fixed income rates markets β and β binary options in commodities markets β that members must adhere to on a comply or explain basis ; and other jurisdictions are starting to take note β the australian financial markets associations β members have agreed to implement the fmsb β s standards and the south african reserve bank has been in touch about setting up its own fmsb equivalent. many global banks are telling us they intend to apply these standards to all their operations. the internationalization of these market standards is critical for creating a level playing field and preventing β ethical drift β across different jurisdictions. it is also vital for sustaining public support for open and global financial markets. the fmsb is not self - regulation. the laws and regulations governing conduct apply and will continue to be enforced. but
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one of the two main potential economic benefits of the single currency, the other, of course, being the positive effect of nominal exchange rather certainty within the eurozone on trade flows of goods and other, non - financial, services and its impact in more efficient resource allocation. it is also the field in which the uk, through london, has been able to make a positive contribution to the development of the euro even from outside the eurozone. so i do not at all underestimate the contribution that the euro has made, and is making, to improving the efficiency of the eurozone financial systems. but the point i have tried to emphasise this morning is that it is just one important factor among a number of others affecting our financial systems, so that one should not perhaps expect that it would have had a dramatic overall impact β certainly not in so short a period of time. and my message is that there are many other things beyond the introduction of the single currency that we can and should do, whether from inside or outside the eurozone to improve the functioning of our financial systems. nationally, certainly within the uk, apart from continuing to try to find the right balance generally between competition and necessary regulation, we need also β through the authorities and the financial markets working together β to continue working to ensure that the financial system reaches those parts of the economy that are traditionally most difficult to get at, including particularly the encouragement of smaller and medium - sized businesses and new enterprises as well as community development and regeneration. regionally, within europe, as i said earlier, we need to work away at developing the single financial market, pressing on with the financial services action plan. most immediately, in line with the lamfalussy recommendations, we need to address some of the regulatory obstacles to greater integration of securities markets. and we need to encourage the markets to find more efficient solutions to trading, clearing and settlement systems, particularly in securities markets, but also more generally. the main driver in this last context, certainly from the point of view of those who use these systems, is the wish to reduce costs. it is often pointed out that there are thirty plus exchanges in europe and probably at least as many settlement systems β which are linked to a greater, but often to a lesser, degree, which operate under different legal and regulatory regimes and which all incur their own running and development costs. the fragmentation also means that market participants incur indirect costs because it is harder for them to manage their liquidity and
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been growing reasonably is that housing activity has been very strong. q : you are term - limited to 2015. if i could sign a law giving you a third term β would you want it? would you take it? a : i believe very strongly in term limits. i have hardly seen anybody get better after ten years on a job. i believe very strongly in this ten year term limit for governors. i thought that i should stop teaching when i stopped being sick to my stomach when i went in and lectured. i lost my fear of the students, i really don β t want to lose my fear of these people and the journalists among them, by being on the job too long. it is still extremely challenging, and it β s a great privilege to have that job. q : will you stay in israel after your term is up? a : i very much want to stay strongly connected with israel, we have family in the states and we β ll have to decide what we do. but i β m not going to disappear from the local scene, that β s for sure. bis central bankers β speeches q : i β m choosing my words carefully here β¦ do you have a desire to play a public role in israel after you have been governor of the bank of israel? a : there are a few jobs that i would prefer over this one and i don β t think any of them are available, or likely to be available. q : what brought you to israel? a : my wife and i, and my family, have been involved with israel since we were young. we visited pretty regularly β¦ spent sabbaticals here, we knew israel reasonably well. in 1983 β 85 i had the privilege of working with george shultz when the united states and the israeli government cooperated to stabilize the israeli economy we β d always been close to israel, somebody gave me the opportunity to try to contribute something to israel, and i said well, i β d always wanted to do that, and i β ll never get another opportunity like this the current prime minister was very influential and persuasive, he was the finance minister at the time. we are extremely happy we did it ; it β s been a wonderful experience. q : is it fair to say that after 2015 we will not have heard the last from you? a : i hope my voice will still be heard. bis central bankers β speeches
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will encourage them requires a transparent and credible long - term policy.
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in its own right? the eu has always been a system β sui generis β β a set - up unlike any other, which means, it has always been subject to change. the underlying question is this : which competencies need to be at the eu level, which should be kept at the intergovernmental level and which at the national level? in my opinion, before we plan any concrete reforms, we first need a clear economic and political analysis of past crises : to better understand what led to the crises, and to identify, from today β s perspective, which policy measures worked, and which ones didn β t. building on these insights, we can design tailor - made reforms. from my point of view, there are three key questions we have to discuss and resolve : first, there is the conditionality of cross - european support as an underlying principle. we have the stability and growth pact which sets out the fiscal surveillance rules and limits for government deficits and debt. in the bundesbank β s opinion, monitoring activities under the stability and growth pact should be independent of political institutions, if the assessment is to be a neutral one. for example, the european stability mechanism could give such an assessment. currently, there are debates about reforming the esm into a β european monetary fund β, which might also provide assistance in times of asymmetric economic shocks. in the bundesbank β s view, it is important to grant financial assistance only subject to proper conditionality. if support is granted with no strings attached, as it were, fiscal stability and responsible budgetary policies will be undermined. second, we need to sever the sovereign - bank nexus. in the recent crises, struggling sovereigns brought banks to their knees, because european banks hold quite substantial stocks of domestic sovereign bonds on their balance sheets. but the nexus worked in the other direction as well : struggling banks needed government assistance. we need to fix this β doom loop β. serving as a backstop for the single resolution fund, the european monetary fund could help in taking sovereigns out of the liability cascade. such a fiscal risk sharing would, however, require a further reduction of legacy risks in bank β s balance sheets. however, we need further steps. the bundesbank is proposing to reconsider the regulatory treatment of government bonds on bank balance sheets. we are calling for a phasing - out of the current zero - risk weighting and exposure limits for government bonds. third,
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7 % the previous year. in the 2 / 7 bis - central bankers'speeches euro area, it went up by 5. 4 %. after 8. 4 % the previous year, this is the highest figure recorded since the launch of monetary union 25 years ago. however, these annual averages mask the marked decline in inflation over the course of the year. in germany, it fell from more than 9 % at the start of the year to less than 4 % at the end of the year, and in the euro area, from over 8 % to under 3 %. this was mainly due to lower energy prices. government relief measures and lower market prices for fuels were dampening factors here. food prices grew by double digits on average during the year. but here, too, we can see that price pressures eased significantly over the course of the year. core inflation excluding energy and food continued to rise in 2023, at 5. 1 % in germany and 4. 9 % in the euro area. services prices, in particular, rose more sharply than in the previous year. at first, pent - up demand for services that were unavailable during the pandemic still played a role here. think, for example, of travelling or eating out. this allowed some sectors to expand their profit margins. in addition, wages rose sharply in response to inflation, which also put pressure on prices. comparing today's situation with the situation a year ago, the nature of inflation has changed significantly. back then, inflation was mainly being fuelled by high energy and food prices. on an annual average for 2022, headline inflation was more than twice as high as core inflation. in the meantime, the picture has changed. of late, the core rate was significantly higher than the headline rate. what does this mean? energy and food prices play a key role in headline inflation. these prices typically fluctuate more strongly. by contrast, core inflation is much more stubborn and persistent. it is shaped largely by developments in wages, productivity and firms'profit margins. in january, euro area headline inflation was only around 1 percentage point higher than its pre - pandemic average. meanwhile, at 3. 3 %, core inflation was still 2 percentage points higher than its average rate between 1999 and 2019. when analysing the headline rate, we take a detailed look at core inflation. this is because, as a measure of underlying price pressures, core inflation helps us to assess future inflation developments. it
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at the regional level, many of our economic education specialists offer training seminars to help educators teach economic and personal finance topics in their classrooms. in general, higher education is one of the strong points of the u. s. educational system. we must work diligently to maintain the quality of our educational system where it is strong and strive to improve it where it is not. in particular, we must find ways to move more of our students, especially minorities and those from disadvantaged backgrounds, into education after high school. the historically black colleges and universities have long played a vital role in this regard. they have proud record of accomplishment, dating back to 1837 with the founding of what is now cheyney university of pennsylvania. slavery and segregation cast long dark shadows on our nation's history and our society, and the historically black colleges and universities served as beacons of knowledge in the darkness. today, they are no longer the only places a young african american woman or man can obtain an education, but they are very fine choices for many students, and not just african americans β indeed, 90 four - year and 13 two - year institutions enroll more than 300, 000 students, including more than 50, 000 who are not african americans. in 2006, these institutions conferred more than 30, 000 undergraduate degrees and nearly 9, 000 advanced degrees. they have maintained their relevance by building on their tradition of educational excellence and by harnessing the loyalty and support of alumni. there are indeed many distinguished alumni of hbcus, including media personality and philanthropist oprah winfrey, professor and nobel prize - winning author toni morrison, former u. s. surgeon general david satcher, brown university president ruth j. simmons, and major general dennis via, among many others. i wish you a very successful conference. you have much to celebrate and, doubtless, much to discuss as you strive to find ways to carry the rich heritage of the historically black colleges and universities into the future.
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investors, as doing so would only encourage excessive risk - taking. one must also consider adverse selection ; programs that provide credit to only the weakest eligible borrowers are likely to be more costly than those that serve a broader risk spectrum. risk - based insurance premiums or tighter screening and monitoring by lenders can mitigate adverse selection. but ultimately such mechanisms have their limits, and no government program will be able to provide meaningful help to the highest - risk borrowers without a public subsidy. whether such subsidies should be employed is a decision for the congress. the government - sponsored enterprises ( gses ) fannie mae and freddie mac are, to a limited extent, assisting in subprime refinancings and should be encouraged to provide products for subprime borrowers to the extent permitted by their charters. however, the gse charters are likely to limit the ability of the gses to serve any but the most creditworthy subprime borrowers. indeed, if gse programs remove the strongest borrowers from the pool, the risks faced by other programs β such as a modernized fha program β could be increased. some have suggested that the gses could help restore functioning in the secondary markets for non - conforming mortgages ( specifically jumbo mortgages, those with principal value greater than $ 417, 000 ) if the conforming - loan limits were raised. however, in my view, the reason that gse securitizations are well - accepted in the secondary market is because they come with gse - provided guarantees of financial performance, which market participants appear to treat as backed by the full faith and credit of the u. s. government, even though this federal guarantee does not exist. evidently, market participants believe that, in the event of the failure of a gse, the government would have no alternative but to come to the rescue. the perception, however inaccurate, that the gses are fully government - backed implies that investors have few incentives in their role as counterparties or creditors to act to constrain gse risk - taking. raising the conforming - loan limit would expand this implied guarantee to another portion of the mortgage market, reducing market discipline further. if, despite these considerations, the congress were inclined to move in this direction, it should assess whether such action could be taken in a way that is both explicitly temporary and able to be implemented sufficiently promptly to serve its intended purpose. any benefits that might conceivably accrue
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the bank to use such information as part of its data for policy decisions. i do not think that this is particularly controversial. a related, but more complicated issue, is the question of whether the bank should follow the market when it comes to setting interest rates. in other words, should monetary policy simply set interest rates on the basis of market expectations? today it is generally accepted that monetary policy should be sufficiently transparent so that the market can discount changes in monetary policy in advance. if the market correctly anticipates monetary policy actions, there will be little reaction to monetary policy announcements. one way of achieving this favourable outcome is to simply follow market expectations. however, if there is effective communication, market expectations of central bank actions will not be independent of bank actions and signals. indeed, an important dimension of monetary policy is to influence market expectations. under such circumstances, interest rate expectations are not formed independently of the view that the market has of central bank actions. in other words, if we signal a change in the monetary policy stance, this will be reflected in current market rates ahead of the actual change in the policy stance. under such conditions, although it could appear that we are following the market, we are in fact leading it. blinder, in his book β the quiet revolution β, also warns against central banks becoming too respectful of markets. he argues that slavishly following the market could lead to poor policy for a number of reasons. firstly, there is the problem of herd behaviour, which may or may not be rational, in speculative financial markets. this results in overreactions to stimuli whereas monetary policy makers need to proceed with caution and prudence. secondly, speculative bubbles are a fact of life. as blinder graphically puts it, β central bankers must steadfastly resist such whimsy and inoculate themselves against the faddish behaviour that so often dominates markets. that may be why central bankers are not much fun at parties β. finally, he argues that market traders tend to have much shorter time horizons than central bankers. this is even the case where long - term bonds are traded, but are in fact treated as shorter - term instruments. the result is that by following the market, monetary policy could land up having a short time horizon and be prone to overreaction. it is important for monetary policy to maintain a focus on the medium term. we have to see through the short term noise and not be blinded by it. 4. communication
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price stability. it should, however, be realised that the interest rate is the price for money. the reserve bank can only influence short - term interest rates through the application of monetary policy operational procedures. although shorter - term interest rates influence the level of longer - term interest rates, other factors are also important when determining these rates. for example, at times you may find that the reserve bank reduces the repo rate, which lowers money market interest rates but leads to higher longer - term interest rates because of expected higher inflation. the reserve bank therefore only has an indirect influence on the level of the long - term interest rates that affect investor decisions. moreover, the reserve bank cannot arbitrarily set short - term interest rates without taking careful note of underlying economic and financial conditions, and it is not the function of the bank to promote economic growth in an artificial manner. at most, the reserve bank can only create stable financial conditions, which are generally regarded as an important precondition for high sustainable economic growth. this we have attempted to do over the past decade in a way that would have the least harmful effect on real economic activity. the policies followed by the bank, together with fiscal and other policy measures, succeeded in creating greater price stability in south africa. in 1998 and 1999 the rate of increase in the consumer price index excluding mortgage interest costs ( cpix ) averaged 7 % a year. this rate of increase can be compared with inflation rates fluctuating around 15 % in the 1980s and early 1990s. the endeavours of the reserve bank to create these stable financial conditions were at times seriously hampered by exogenous shocks, particularly by volatile capital movements. in the past year we were again influenced dramatically by this volatility in foreign portfolio investments in south africa. non - resident investors sold large amounts of domestic securities because of socio - political events in africa, a shift of funds away from commodity - based countries to high - technology and manufacturing - oriented economies, a rearrangement of portfolios as a result of surging energy prices and higher international interest rates. after being net investors in south african bonds to the amount of r16. 5 billion from the beginning of 1999 until the end of january 2000, non - residents became net sellers of bonds totalling r15. 3 billion in the next six months up to the end of july 2000. moreover, the net purchases of shares by non - residents on the johannesburg stock exchange fell from r40. 6 billion in 1999 to only r
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citizens in the banking sector, which remained stable, sound, highly capitalized and liquid throughout the entire period, showing high capability for successful handling of shocks. higher growth in the denar deposits and the acceleration of growth of the long - term savings is especially positive, which strengthens the banks'capacity for long - term placements and the support for investment projects. the deposit growth provided a solid basis for increase in the lending activity and deepening of financial intermediation2 by around 8 p. p. in the past ten years to the level of 48 % of gdp in 2017. however, despite the positive trends, the need for further increase in the total domestic savings is evident, which is a common feature of the cesee countries. thus the imf analysis of may 20163 mainly indicates " insufficient " domestic savings4 in cesee countries, i. e. the average savings rate ( as a difference between gross domestic product and consumption ) of about 20 % of gdp, which is lower than the current investment rate, lower than the estimated optimal rate of investment ( 25 % of gdp ), as well as the rate in countries with a relatively faster process of real convergence in the past ( 28 % of gdp ). the rate of total domestic savings is particularly low in 1 / 3 bis central bankers'speeches the see countries, where in 2017, on average, it is 17 % of gdp, including in the republic of macedonia where it is close to the average in the region. the relatively low domestic savings are an obstacle for stronger investment support, partly explained by the fact that, even after more than 25 years from the beginning of the transition, the level of accumulated capital per capita in most cesee5 countries is still relatively low, corresponding to about one - third of the levels in developed european economies. in rm the capital level per capita is lower than the average of the eu - 28 countries, and it equals around 24 %. moreover, as in most countries, even in our country the gap is deeper in the part of the private accumulated capital than in the public capital. however, according to the dynamics, a characteristic of the macedonian economy is that, unlike most of the economies in the region which registered significantly reduced investments ( an average of about 10 p. p. in gdp ) in the post - crisis period, until 2017 in our country their share registered an increase. this was underpinned by the stable inflow of foreign direct investment, the country's investments in
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a period of significant credit expansion. it should be underlined that according to the supervisory examinations of the nbrm, the newly extended credits are granted to good clients. in december 2000, compared to the same month of 1999, the banks β foreign currency placements to the nongovernment sector decreased by denar 1, 421 million, or by 17. 2 %. the fall was primarily due to the higher attractiveness of the banks β denar credits due to the higher interest rates. at the end of march 2000, the nbrm continued with further reforms of the monetary policy instruments, where the abolishment of the credit ceilings being the most significant one. hence, the transition to indirect market - oriented instruments for monetary regulation has entirely been completed. moreover, the existing monetary instruments have been improved in order to be modern and closer to those used in developed market economies. within the framework of continuous and intensive efforts to lower the banks β interest rates, the nbrm, in april 2000, decreased the discount rate and the lombard credit interest rate by one percentage points, thus reducing them to 7. 9 % and 17. 5 % p. a. respectively. on december 30, 2000, according to the new methodology, the nbrm gross foreign exchange reserves equaled usd 478. 1 million. domestic and international payments liquidity in the republic of macedonia in 2000, the liquidity of the banking system considerably improved. in january β december 2000, compared to the same period of 1999, the average daily liquidity of the banking system was by 42. 1 % higher. this resulted in decrement of the demand for liquid funds by the banks, which was reflected upon the movement of the interest rate on the money market. in december 2000, the average weighted interest rate on the money market amounted to 7. 1 % and was by 4. 5 percentage points lower compared to the same month of 1999. the international liquidity in the payments is visible through the ability of servicing the external debt. on september 30, 2000, the external debt of the republic of macedonia, based on disbursed medium - term and long term foreign credits, amounted to usd 1, 400. 8 million. compared to the end of 1999, the external debt of the republic of macedonia was reduced by usd 37. 7 million, as a result of the repayment of the regular liabilities, as well as the exchange rate differentials. according to the payment schedule, lia
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andrew bailey : speech at the lord mayor β s banquet speech by mr andrew bailey, deputy governor of prudential regulation and chief executive officer of the prudential regulation authority at the bank of england, at the city banquet, london, 16 october 2014. * * * lord mayor, thank you once again for inviting us round to dinner. events at the mansion house never cease to be special, with an aura that sets them apart. it is a true story from some years ago that a very senior official from another country came to a lunch at the mansion house, at which he spoke, and after which he came to visit the then governor of the bank. he had been impressed by the grandeur of the surroundings, the food and drink, the speeches ( in plural ), but he had just one question for the governor. how does anyone make money in the city if that is how they carry on? the governor was wise and slightly avuncular in his answer, to the point of remarking that it is not a question that anyone in the city would ask. lunches may have become shorter, but dinners remain a place to take stock over good food and wine and with good company. and, for martin and me it is a chance to take stock after just over eighteen months of the new arrangements. the pra is responsible for the prudential supervision of banks, insurers and major investment firms. we take all of our responsibilities very seriously, as of course we should. across the board, there have been developments over the last year that give me a sense of cautious satisfaction β by the way, that is at the happier end of the spectrum of emotions for a central banker seriously, i am afraid that we must not get carried away here. we are in many ways in the second phase of the financial crisis. the first phase was a prudential one, while the second phase has revealed past misconduct. fixing the financial system requires more than just fixing capital and liquidity standards. standards of governance, conduct and the right incentives structures are all extremely important. after commenting on two material development this year i want to use the rest of my time to set out four areas where we are either taking action, or watching very carefully to determine whether action may be required. let me start by describing two developments which point to some cautious satisfaction. first, the capital position of uk banks has strengthened. market conditions have supported actions to raise capital and reduce non - core assets, and
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currencies including rmb. ladies and gentlemen, we have made good progress on rmb internationalisation. the future trajectory depends on the joint effort of policy makers and, more importantly, market participants including both the real sector and the financial sector. the hkma will continue to proactively engage with the various stakeholders to maintain a conducive environment that supports this journey. with that, i wish you all a fruitful and insightful event. thank you. 3 / 3 bis - central bankers'speeches
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β s incomes highly volatile. apart from private investment being a stimulus for job creation, development of local suppliers, skills transfer ; it can be a critical source of long - term capital for driving economic diversification. i urge you to reflect on all these issues so that the final document that is produced from this effort will be comprehensive and point to viable strategies that will promote economic diversification through directed private investment. the end result of this workshop will be posted on the website of the bank of zambia and zambia development agency. the zambia development agency will incorporate the recommendations submitted from this exercise into its policy recommendations on how to improve the investment climate in the country. with these few remarks, i wish you good deliberations. i thank you β¦ bis central bankers β speeches
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bwalya k e ng β andu : improving the investment climate in zambia opening remarks by dr bwalya k e ng β andu, deputy governor ( operations ) of the bank of zambia, at the foreign private investment & investor perception survey 2011 dissemination workshop, lusaka, 22 december 2011. * * * permanent secretaries ; chief executive officers ; distinguished participants ; ladies and gentlemen. i would like to welcome you all, on behalf of the bank of zambia, the zambia development agency and the central statistical office, to this foreign private investment and investor perceptions 2011 survey dissemination workshop. i want also to take this opportunity to thank the companies that participated in the survey which was conducted by the three institutions in the third quarter of 2011. the insights and the various valuable revelations on the investment climate in zambia contained in the survey report were only made possible by their co - operation and support to the process. we want to thank them most sincerely. this dissemination workshop is built around two objectives. the first one is to give representatives of respondent companies the chance to comment on the contents of the report. in this sense, this can be considered as a validation workshop from which inputs into the final version of the report will be received. the second objective is to give the three institutions that commissioned the survey the opportunity to receive feedback on what the community of investors considers to be the main issues in investment. specifically, it should help the government through zambia development agency to understand the concerns of investors and formulate, if possible, better strategies for improving the investment climate. as we discuss this report, it is important that we put into perspective some of the reasons why it was decided that a survey of investor perceptions should be carried out. the first reason has been to do with the fact that the perceptions of investors are a good proxy for measuring the investment climate. this arises from them being actively involved in implementation and are, if you like, at the receiving end of existing investment policy. more importantly, existing investors are a country β s most important promoters of investment. their views on the investment climate are more likely to be trusted by prospective investors than even those of the official investment promotion agencies such as zambia development agency. some prospective investors may take the view that official investment promotion agencies paint a rosy picture of the investment climate. existing investors, on the contrary, are presumed to present factual position based on their own experience. investor perceptions, therefore, are important because where the perceptions are positive, it can reasonably be assumed that those
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output. 3 governments and central banks took unprecedented action globally in response to the perils originating from the financial market turmoil. euro area governments, for instance, increased their deficits on average by more than 5 percentage points of gdp in 2010. this was a joint consequence of rescue packages for financial institutions, cyclical stimulus packages and operations of automatic stabilizers. in 2010, ireland recorded a deficit of over 30 percent, resulting from a one - off support for its banking sector. debt - to - gdp ratios in advanced economies have increased on average by about 25 percentage points since 2007. central banks around the world expanded their balance sheets, though to different extents and with different asset - liability structures. it is clear that in our democracies, such measures taken by fiscal and monetary authorities can only be an exception. they are not at all repeatable, neither in nature nor in scale. the disasters that we witnessed in the financial system must not repeat themselves. it all leads to one conclusion : reforms are urgent! the basel iii framework means some progress on the way towards a more sound and resilient financial system and in my view it is at the core of financial regulation. nonetheless, to complete the g20 action plan, further policy actions need to be taken. let me just highlight three initiatives that i consider as key elements of the new regulatory framework : ( i ) the regulation of credit rating agencies, ( ii ) the regulation of the shadow banking system, including hedge funds, and ( iii ) the establishment of effective bank resolution regimes. concerning credit rating agencies, the fsb published in october 2010 a set of principles that aim at reducing reliance on external credit ratings. international standard setters and national authorities now have to translate these principles into specific policy actions. however, the work in this field remains at an early stage, and the progress has to be accelerated significantly in several jurisdictions. but let me also mention that important steps have already been taken in this field. for example, the dodd - frank act in the us requires authorities to remove all references to or requirements for credit ratings from regulations. an important challenge for authorities, however, is to develop alternative standards that could reliably indicate the creditworthiness of borrowers. see oecd ( 2010 ), β economic policy reforms β going for growth β, part 1. bis central bankers β speeches concerning the regulation of the shadow banking sector, it is important to close the gaps between strengthened banking regulation and the non - regulated entities.
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##metric shocks, there was no compensation by other countries. it is a problem that is quite difficult to solve, but it is a fact that emu hasn β t functioned very well in this respect. one worry is that the fundamental reflection about how to make emu work better is not advancing sufficiently. not all is negative, of course. we have managed to set up better mechanisms to deal with sovereign debt crises, but you are still in an unclear position when dealing with issues of sovereign debt. and we have banking union, we are especially advanced in terms of supervision, but we have not finished it. the fact that banking union is not finished, doesn β t that lead to small banks in small countries being bought by big banks from big countries? i know this is a big discussion here in portugal. i always have problems in understanding why that would be a problem. i experienced the crisis in belgium with fortis, and that bank represented a huge risk for that country. now, it is part of bnp and this has been absolutely instrumental in avoiding a catastrophe. for europe, this is an important question. you see the banking systems are in general more national than they were. not in portugal, but in many countries. the banks, even when they have subsidiaries, are tending to manage by way of separate entities more and more. banks today are exposed to country risk because most of the assets are related to the country. this means that, if you have a shock in the country, the banking system is not diversified enough. of course, the fact that we are in a monetary union limits the room for manoeuvre : you don β t have the exchange rate instrument, you have a single monetary policy. so it is absolutely vital to evolve towards pan - european banks, banks that are geographically diversified and also that would be backstopped by emu as a whole. so what you are saying is that, in a monetary union, if small countries want to have safe banks, they have to forget the ownership question? i think what matters in banks is good governance, not national ownership. you can always have local banks, that β s not the problem, but having the whole banking system exposed to the local economy in a monetary union like ours is a dangerous combination. we have two problems in the euro area : a fragmented banking market and the lack of common backstop. it cannot be done in one day, but you have to spell out how you make the transition to it
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place today in the world. another significant aspect has to do with our foreign exchange policy. in recent weeks the peso has appreciated against the dollar, prompting some sectors to demand intervention by the central bank. i think that some clarification is in order. in the first place, i reaffirm the validity of a flexible exchange rate for the chilean economy. our economic history is full of examples in this area. so far, the scheme that has yielded the best results for economies similar to the chilean is a floating exchange rate regime. when policy makers sought to artificially control the value of our currency, imbalances were generated that ended up being very costly for the country. the adoption of exchange rate flexibility in 1999 has allowed us to wade subsequent complex moments. the worst was the world recession of 2009, when the floating exchange rate policy allowed accommodating the sharp changes in the external scenario, both via the depreciation of the peso and an active monetary policy to stabilize demand. in turn, the creation of instruments designed to shield the economy from short - run fluctuations in this variable, permits to bound its effects on hedged agents. certainly more can be achieved in this sense, but there have been important advances. still, the central bank has always reserved the right to intervene the forex market. we have done it four times since 1999. however, this type of measures, which are used only exceptionally, must be based on solid grounds. in the past, these interventions have been justified by the central bank β s international liquidity position and by obvious and persistent deviations of the real exchange rate from its medium - to long - term fundamentals. in the present circumstances, it is not evident that these criteria apply. in the first place, it is important to note that the current level of the real exchange rate, while low compared to some months ago and also with respect to the average of the last fifteen to twenty years, is within the range believed to reflect its underlying fundamentals. it is certainly in the lower part of the range, but still consistent with its long - term fundamentals ( figure i ). as i said, the elements behind the peso appreciation are manifold. on one hand there is the favorable level of our terms of trade. despite the downturn of the developed world and the deceleration in china, commodity prices have remained high, especially for copper. this has driven today β s terms of trade, despite a drop this year,
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will be higher than assumed in june, because of supply - side problems and increasing geopolitical risks in the middle east. on top of this is β also because of supply - side problems β the increase in food prices in the world markets, especially for grains. the copper price projection does not change from june. finally, despite the observed calm, the baseline scenario considers new episodes of stress in global financial markets, similar of those of the past year. this, because of the events foreseen for the coming months and the difficulties of advancing towards a more long - lasting solution to the problems in the eurozone ( table 1 ). in chile, the greatest news is stronger - than - expected growth in output and demand in the second quarter of the year. output owes its dynamism to sectors linked to domestic demand, such as construction, trade and services. the better result of the manufacturing industry is also worth noting, which, although growing less than aggregate gdp, still exceeded expectations, also driven by the lines associated with demand, especially investment and specific export - oriented activities. on the expenditures side, inventory accumulation intensified with respect to previous months. ( figure iii ). this seems to respond to an attempt to rebuild inventory levels after the reduction of late 2011 and that, at the time, was linked to the expected negative effects of the external scenario on final sales. also worth noting was the renewed strength of consumption and gross fixed capital formation. consumption continues to rely on the evolution of the labor market and fairly stable financial conditions. regarding investment, the contribution of construction and infrastructure works stands out, relating mainly to mining and energy projects, but also to a strengthened real - estate sector, which reflects on the performance of commercial loans. the behavior of output, especially of sectors other than natural resources, and domestic demand intensified the utilization of installed capacity. although y - o - y growth in employment and nominal wages has dropped, the labor market remains tight ( figure iv ). however, the increased domestic demand pressure, especially from investment, together with lower copper prices compared with 2011, have led to a widening of the current account deficit. in the moving year ending the second quarter of 2012 this deficit rose to 2. 7 % of gdp, from 1. 3 % at the close of 2011. in the past few months, y - o - y inflation has continued on a downward path, influenced by fuel prices. core inflation, which excludes foodstuffs and energy ( cpiefe ) has stabilized
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to firm types. we have worked hard, including through the meeting varied people initiative launched in 2021 [ 3 ], to broaden individual representation on the committee, and our market intelligence network, to ensure we benefit from the widest possible range of views and input. just as the customer base has broadened, the technology used to service it has fundamentally changed. the early minutes of the fxjsc are dominated by descriptions of detailed disputes that could only arise in a voice - execution market. however sophisticated chatgpt and the like may become, i am doubtful they could ever disentangle the misunderstandings of that era! at the same time, few members of the 1970s committees could have foreseen how the market would be revolutionised by the technology to come β from the early reuters terminals via the introduction of the internet, to today β s world of algorithms and vast automated market - making systems marshalling petabytes of data. today β s market structures have the capacity to meet consumer needs in ways undreamt of decades ago. but such decentralisation, dare i say fragmentation, also poses daunting challenges for the unwary, in terms of understanding where they can find the best liquidity, and on what terms. as the market structure gets more complex, transparency has never been more important. [ 4 ] part of the answer here lies in centralised data gathering : the fxjsc itself took an early initiative in the late 1980s to develop the first london market - wide survey, later globalised via the bis. bespoke technologies, including transaction cost analysis ( tca ) tools can also help. but this is an area that will need ongoing attention if we are to reap the potential gains from technological advances of recent years. the evolving toolkit for maintaining safety, soundness and financial stability my final theme relates to how central banks should think about the relationship between fx markets and financial stability. that relationship is not one - way of course : exchange rates, particularly floating ones, can be important buffers against unanticipated shocks, allowing economies to adjust without more painful corrections in less flexible domestic prices. but fx markets can still dry up in stress periods, particularly in the presence of material imbalances in currency demand. that is why the major central banks established a permanent network of standing swap lines in the wake of the global financial crisis. those swap lines proved vital in our fight against the global β dash for cash β following the covid lock
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of market participants, and the trading and settlement technologies they use ; and the evolving toolkit needed to maintain safety, soundness and financial stability. the role of currencies in macroeconomic frameworks the fxjsc was forged against the backdrop of the collapse of the bretton woods system, in which the major currencies fixed to the dollar, which in turn fixed to gold. the system operated effectively for a quarter century after world war 2, but ballooning deficit spending to fund the vietnam war made defence of the gold peg increasingly untenable for the us authorities. in august 1971, president nixon unilaterally suspended convertibility. heroic efforts to recalibrate the system, via the smithsonian agreement, were abandoned by spring 1973. it is sometimes said that 1973 was the beginning of the β free floating currency β era β and certainly many countries headed in that direction, albeit the route was often indirect. here in the uk, we retained extensive capital controls from 1973 to 1979, including during the sterling crisis of 1976. in the late 1980s and early 1990s we informally, and then formally, shadowed european currencies. since exiting the exchange rate mechanism ( erm ) in september 1992, we have embraced a free float. table 1 : exchange rate arrangements ( % of imf membership, april 2022 ) source : international monetary fund others have taken equally circuitous routes. industrialised countries came together to lean against the level of the dollar twice in the 1980s β first, via the plaza accord in 1985, the year i joined the bank of england, in an attempt to bear down on the 44 % appreciation in the previous five years ; and then, via the 1987 louvre accord, to do the reverse. the 1990s saw a concerted push by many continental european countries to fix their bilateral exchange rates, first through the erm and later through the formation of the euro. but the majority, indeed fully two thirds of countries, still operate today some form of hard or soft peg, often against the dollar ( table 1 ). the changing shape of market participants and technology a second key theme is the changing shape of fx market participants, and the technology that serves them. looking back at the early fxjsc minutes, committee membership was limited exclusively to banks and brokers. fast forward to 2023, we now have representation from infrastructure providers, the buyside, non - bank liquidity providers ( an unheard of concept in 1973 ) and the corporate sector. diversity is not limited
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, uses repo to finance its holdings of treasury securities or agency mortgage - backed securities, assets that generally have only modest risk weights when held as trading positions. the second is when the dealer acts as an intermediary and has a matched repo book. in both cases, the sfts blow up the firm β s balance sheet and, hence, the denominator of the leverage ratio, even while having little impact on risk - based capital or lcr calculations. the crucial issue here, however, is whether the leverage ratio does, in fact, bind. a traditional view among regulators has been that the leverage ratio should be calibrated so as to serve as a meaningful β backstop β for risk - based capital requirements, but that under ordinary circumstances it should not actually be the binding constraint on firms. for if it were to bind, this would put us in a regime of completely un - risk - weighted capital requirements, where the effective capital charge for holding short - term treasury securities would be the same as that for holding, say, risky corporate debt securities or loans. recently, u. s. regulators have issued a proposed rulemaking that seeks to raise the basel iii supplementary leverage ratio requirement to 5 percent for the largest u. s. bank holding companies, and to 6 percent for their affiliated depository institutions. while this increase might be considered a parallel shift that preserves the backstop philosophy in light of the fact that risk - based requirements have also gone up significantly, it does increase the likelihood that the leverage ratio may bind for some of these firms at some times β particularly for those firms with a broker - dealer - intensive business model in which the ratio of total assets to risk - a similar comment applies to the net stable funding ratio ( nsfr ), which requires regulated firms to fund illiquid exposures with some amount of long - term debt or other form of stable funding. like the lcr, the nsfr effectively treats matched - book repo as creating no net liquidity exposure, and hence imposes no requirement on it. even from a microprudential perspective, the lcr can be said to have a flaw in that it is blind to maturity mismatches within the 30 - day window. for example, if a dealer borrows on an overnight basis from a money fund, and then makes a 29 - day loan to a hedge fund, the lcr deems it to be fully matched, and to have no incremental liquidity
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dobrislav dobrev and ernst schaumburg ( 2015 ), β the liquidity mirage, β federal reserve bank of new york, liberty street economics ( blog ), october 9, https : / / libertystreeteconomics. newyorkfed. org / 2015 / 10 / the - liquidity - mirage -. html. see bank for international settlements, markets committee ( 2018 ), monitoring of fast - paced electronic markets ( basel, switzerland : bis, september ), https : / / www. bis. org / publ / mktc10. pdf. - 12 federal reserve staff analysis reveals that the 3 p. m. spike in trading volumes tends to be fairly evenly divided between the dtc and idb market segments, suggesting that both dealers and proprietary trading firms play an important role during this narrow window of activity. in the dtc market, the increase around 3 p. m. would be consistent with trading related to mutual fund daily and end - of - month portfolio rebalancing. in the electronic idb market, the increase around 3 p. m. would be consistent with the increased role of proprietary trading firms in intraday intermediation and the possible closeout of positions toward the end of the main part of the trading day. from a market resilience perspective, it would be valuable to analyze these systematic intraday spikes in trading volumes, particularly as they may influence price formation and liquidity provision in the treasury market. the large spike in flows toward the end of the trading day points to a financial stability consideration that is worth flagging. the treasury market practices group ( tmpg ) has done valuable work in mapping out clearing and settlement patterns in the treasury market. one issue that this analysis highlights is the currently limited potential for same day, or t + 0, settlement on transactions conducted near the end of the day. the flash events we have seen in the treasury market so far have occurred early enough in the day to allow time for prices to recover before market close, and they have not been accompanied by any participant β s failure to perform, let alone a major participant, platform, or exchange. as the tmpg β s work shows, most transactions in the treasury market settle the next day, or t + 1. as can be seen in figure 8, federal reserve staff analysis based on the transactions recorded in trace shows that same - day settlement volumes, on average, - 13 represent only about 4 percent
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