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this. one way to do this is to increase basic votes. there is a need to change our way of dealing with crises secondly, is the question of the way we prevent and handle crises. the fund β s success in preventing and handling crises is not measured by the amount of finance it disburses. precautionary arrangements have become more and more common in recent years. i have noted the latest suggestion to create a so - called policy monitoring arrangement. however, it is an open question whether there would be demand for such an arrangement or whether the existing tools can serve the same purpose that a policy monitoring arrangement is supposed to do. another interesting discussion has centred on the exceptional access framework and on considerations of its proper functioning. in general, i feel that the existing framework with early board involvement should be left unchanged for the time being. we should make sure that we apply the exceptional access criteria, as they are defined, in order to have a predictable and equitable framework in place. the call for a strong exceptional access framework is reinforced by the fact that there has been limited progress on other aspects of the crisis resolution framework. issues related to private sector involvement have been put on the back burner for too long, making the current system still tilted towards bailing out the private sector. it is a welcome development that the use of collective action clauses has become so widespread, but we should also develop other tools to involve the private sector. the fund β s lending into arrears policy provides guidance on how to react in such a situation, but i believe that the policy would benefit from more operational criteria that would make the policy easier to apply. well - defined rules on debt restructuring do not have to lead to easier defaults but rather to a more predictable and orderly process. stepping up our efforts to reduce poverty in low - income countries thirdly, is the question of the international community β s efforts to reduce poverty in low - income countries and on the role the fund can play in this, without compromising its core function. the attainment of the millennium development goals depends on sound policies, good governance, and adequate financing. trade liberalization especially in agricultural products would give a boost to low - income countries. ensuring better and equal access to basic services such as education and health care, reducing poverty and underpinning a more equal income distribution, would help to enhance and sustain growth. an operational framework for debt sustainability would enable both the countries themselves and the donors to better tailor policies
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to be consistent with the countries β long - term debt sustainability. further work on a debt sustainability framework would also facilitate our discussion about what is needed beyond the present hipc initiative. the decision to extend the initiative for two more years was a welcome move in order to ensure equal treatment of eligible countries. however, there is a need to consider new ways of addressing long - term growth and sustainability issues in both hipc as well as in other low - income countries.
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overall net positive, there are also negatives to the decline in the oil price. a number of our export partners in africa, such as angola and nigeria ( which are oil - exporting countries ), have been severely affected by the decline in oil prices. reduced export revenues and growth in these economies will adversely affect their trade with south africa. added to this has been the generally weak global growth outlook, particularly in some of south africa β s major trading partners, including the eurozone and china, which also offsets the positive impact arising from the decline in oil prices. furthermore, a lower oil price may strengthen disinflationary pressures in places like the eurozone and japan, further weakening their growth prospects 1 with adverse implications for countries like south africa which are reliant on these export markets, although we are encouraged by the most recent assessment of the outlook for the eurozone and japan as contained in the april 2015 weo. on balance, for an oil - importing country like south africa, the positives of an oil price decline outweigh the negatives. however, we cannot afford to be complacent. in south africa, the risk to the inflation outlook is tilted to the upside for a variety of reasons. firstly, oil price developments are uncertain. secondly, while expectations of us monetary policy normalisation appear to have been moved out, any surprises to the contrary could increase the already high volatility in financial markets, and particularly in foreign - exchange markets. finally, the current decline in inflation rates as a result of the recent oil price movements, in effect, means that inflation outcomes in a year β s time will be subject to strong adverse base effects. the policy challenge is to ascertain the future path of oil price developments β this is a formidable task! it is uncertain whether the lower price levels that we are currently experiencing are transitory or permanent. put differently, could oil prices increase again as quickly as they went down? while there seems to be consensus that we would not return to the most recent peaks, unfortunately, these questions do not lend themselves to easy and clear answers. according to imf β s world economic outlook update, january 2015, despite substantial uncertainty about the evolution of supply and demand factors, futures markets suggest that oil prices will rebound but remain below the level of recent years. experience to date does, however, show that futures prices have been poor predictors of spot prices on the oil market. it is clear that
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in march 2008 to around us $ 712 in november, but is currently trading above us920 per ounce. however other commodities have not fared as well. from a high of us $ 2250 per ounce in march 2008, platinum prices declined to us $ 771 per ounce, before recovering to current levels of around us $ 1130 per ounce. aluminium prices reached levels in excess of us $ 3300 per ton in july 2008, but by february 2009 the price had declined to below us $ 1300 per ton and currently around levels of us $ 1540 per ton. similar trends are evident in the behaviour of other commodity prices. of course, oil price developments have benefited us. having reached levels of almost us $ 150 per barrel in july last year, international oil prices declined to below us $ 35 per barrel, and are now at levels around us $ 57 per barrel. commodity prices in general are likely to remain subdued in line with global growth 2. 6 the turmoil on the international financial markets has also impacted on the destination and size of capital flows. not surprisingly, capital flows to the developing and emerging market economies have declined, with the international institute of finance expecting flows to emerging markets to decline from over us $ 900 billion in 2007 to around us $ 165 billion in 2009. this has implications for exchange rates and the financing of current account deficits in these countries, at a time when export markets are under pressure. capital is in fact flowing back to the us, the source of the current crisis. we are told that this is a β flight to quality β or β risk aversion β. an irony indeed. 3. the implications for the south african economy 3. 1 given south africa β s close trade and financial links with the global economy, it is not surprising that the south african economy would be affected by these adverse developments. after 4 years of gdp growth around or in excess of 5 per cent, the growth rate declined to 3, 1 per cent in 2008, with a contraction of 1, 8 per cent in the fourth quarter. current indications are that the negative trend continued in the first quarter of this year. the high frequency data indicate that the manufacturing sector in particular remains under pressure : recent data from statistics south africa show that manufacturing output in the first quarter of 2009 declined by 6, 8 per cent relative to the previous quarter, while mining production declined by 12, 8 per cent over the same period. the utilisation of manufacturing productive capacity declined to its lowest level
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dimitar radev : eurozone slowdown likely temporary publication in the mni based on an interview with mr dimitar radev, governor of the bulgarian national bank, conducted by mr luke heighton and published on 17 may 2019. * * * the eurozone slowdown may prove temporary, the governor of the bulgarian national bank told mni, but whether europe emerges from the current soft patch by the second half of 2019 is uncertain. " the euro area β s economy beat many economists β expectations in the first quarter. but the pace and direction of the economy over the coming months and quarters are yet to be seen, β said dimitar radev, a member of the european central bank β s general council since his 2015 appointment, noting the persistence of global trade tensions and β political developments β in europe. " recent data may be interpreted as signs that the region β s slowdown may be temporary, β he said in an emailed response this week to questions. asked whether slow eurozone growth pointed to β japanification ', he replied : β comparisons with previous historical episodes and other economies do come to mind when we observe prolonged periods of slow growth, very low interest rates and aging population in europe. " " policy responses may be effective only as long as they target structural areas, such as education, labour market and pension reforms. the focus needs to remain clear : to stimulate productivity and competitiveness, β he said, calling for more growth - oriented fiscal policies. " this does not necessarily mean higher spending. moreover, higher spending would be counterproductive in countries with no fiscal space. " β policy review radev, was circumspect regarding recent calls for a review of the ecb β s monetary policy strategy. he also expressed caution in response to suggestions the institution should lower its mandated medium - term inflation rate target from close to but below 2 % to around 1 %. " there may be reasons to start thinking if an overhaul needs to be considered, β he said. but he added : β whatever, if anything, the ecb decides in this regard should be shaped into a carefully communicated process. i cannot but fully agree with a recent comment by peter praet who warned that such public announcements may be misread and, furthermore, interpreted as the ecb admitting to having failed on its mandate, which is not the case. " the ecb has β plenty of instruments β at its disposal in the event of a severe economic down
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is a strong pre - condition for full integration into the european structures and for making maximum use of the potential of our country's participation in the single european market, including by eliminating the need to convert levs to euro and eliminating transaction costs. the data and experience of the countries that joined the euro area earlier show that the introduction of the euro accelerates sustainable development and the convergence with the average european incomes. in conclusion, i would like to once again welcome the guests at this high forum and the speakers participating in it, and i wish interesting and productive discussions to all participants in today's conference. 2 / 2 bis - central bankers'speeches
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national supervisory authorities will act as agents of the ecb in the supervision of smaller banks. the creation of the single supervisory mechanism is well under way and it will start operations in november this year. the transition to the banking union will be preceded by a review, the so - called β comprehensive assessment β of the euro area banking system in order to ensure that banks which come under the ecb supervision are adequately capitalized. the second component is the new bank recovery and resolution framework. it will give the authorities early intervention powers which make it possible to take decisive action in problem banks before the banks β own funds are exhausted. the framework will also give authorities new bail - in powers which should ensure that the taxpayer is only the last in line to recapitalize banks and normally not needed at all. in addition to the new harmonized rules on bank resolution, europe also needs a unified resolution authority, called the single resolution mechanism, with access to a resolution fund. the design of these institutions is under intensive negotiation. most likely they will start bis central bankers β speeches as an intergovernmental structure but the eu community elements will be reinforced over time. the third component of the banking union, in addition to single supervision and single resolution mechanisms, will be the harmonization of deposit insurance systems. i should mention yet another reform in the area of banking, regarding the structure of banks and the regulation of proprietary trading. a month ago, the european commission presented a legislative proposal which, if enacted, will give the authorities powers and under some conditions also an obligation to require of banking groups the separation of the riskiest trading activities from deposit banks. in the euro area, the competent authority will be the ecb. this proposal for structural regulation follows, at least partly, the recommendations of the eu expert group which i chaired and which submitted its report about a year and a half ago. the commission β s legislative proposal would also include an outright prohibition of proprietary trading, resembling the u. s. volcker rule. * * * the institutional developments which i have reviewed were not mainly directed towards managing the recent crisis, which fortunately seems to be gradually abating in europe. they are meant to prevent future crises, to avoid the repetition of the painful experiences of the last five years. but the reforms have served a purpose also in the present situation. they have contributed to the restoration of confidence in the financial markets so that tensions in the bond market, which peaked in 2011 and 2012, have reduced and the interest
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the euro area has been 1. 97 % per annum. so, judging by the primary objective, we can say that the common currency has not disappointed the expectations of 1992. it must be emphasized that price stability has also been maintained relatively well during the recent financial crisis. in the early phase of the crisis, there was an imminent danger of a financial collapse and ensuing deflation. to keep the monetary situation under control, the ecb complemented its interest rate policy with a variety of unconventional or non - standard measures. these improved the liquidity of the banking system and the bond markets. the measures included, among other things, the much discussed bond purchases under the so - called securities market programme. these actions should be judged by the results. the euro has remained strong, the financial meltdown has been avoided, and inflation expectations have remained consistent with the ecb β s price stability objective. so, the crisis of the last years has not been a crisis of the euro as a currency. the currency has remained stable, and also strong in the international context. this achievement is remarkable, but it does not mean that there is cause for complacency. present challenges to monetary policy in the area of monetary policy, our fundamental task is to ensure that euro area citizens and the economy can put their trust in the euro, also in the future. in this task, there are two major challenges. the first challenge is the worldwide rapid increase in prices of raw materials and energy. this is quickly reflected in the inflation statistics, and monetary policy cannot do very much to stop it. but what monetary policy must do is to ensure that the cost impulses from the raw materials prices do not trigger second - round effects in domestic costs. in order to avoid second - round effects, it is crucial to keep inflation expectations well anchored to the ecb β s price stability objective. this is all about trust. ecb policy and the supporting communications must inspire public trust in price stability. the more firmly the inflation expectations can be stabilized, the better monetary policy can support recovery of the euro area economy. bis central bankers β speeches communications are really effective only if monetary policy lives up to its commitment to price stability. and this is why the independence of the ecb is important. central bank independence was the key to the success of the bundesbank, it has been the key to the success of the ecb, and it must be the key to future success. the second and more acute challenge to the
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in the supply of the other components of money, that is, so - called inside money, which has been supplied exclusively by the private sector. until just recently, inside money consisted exclusively of bank deposits which were supplied competitively by banks. however, governments have nevertheless restricted the supply of means of payment and stores of value by the private sector in the past. but this has been very substantially liberalised over the last 20 years or so. the result is that the availability of efficient means of payment that can also serve as good stores of value ( and thus as a hedge against inflation ) has improved almost beyond recognition compared with what was available during the period of financial repression. although governments have retained a monopoly on the production of high - powered money, they have always permitted and indeed increasingly encouraged competition in the production of inside money. the upshot of this is that outside money now comprises only a rather small fraction of total money balances ( taking, say, a broad definition of the money stock ). after undergoing a dramatic decline, particularly in the period following the second world war, it now ranges from about 1 % in the united states and about 5 % in the united kingdom to about 6 % in germany. 16 governments have retained a monopoly over the production of high - powered money. there are very good reasons for this. notes and coin issued by the central bank and, in some cases, by the government are unique in the following sense : they are the only instrument that can mediate a transaction and settle it with finality at one and the same time, which it does by virtue of its legal tender status. currency is also unique in that it supplies the unit of account for the whole economy. although privately supplied inside money and publicly supplied outside money compete with one another as transaction media and stores of value, there is nevertheless a kind of symbiotic relationship between the two. this is, first, because inside money ( predominantly bank deposits ) may owe its acceptability to the fact that its issuers promise, and indeed are legally bound, to redeem it [ either immediately ( sight deposits ), upon maturity ( time deposits ) or after a period of notice ( savings deposits ) ] in outside money and, second, because outside money provides the unit of account for the whole system without which inside money might be less acceptable in the absence of a single ( commodity ) numeraire. seen in this light, it appears that hayek was correct in arguing that efficiency and ( price )
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the size of the total system declined slightly in 2008 but increased subsequently to reach usd 67 trillion in 2011 ( equivalent to 111 per cent of the aggregated gdp of all jurisdictions ). the global estimate for the size of the shadow banking system has increased by some usd 5 to 6 trillion since last year. β’ the shadow banking system β s share of total financial intermediation ( which includes banks, insurance and pension funds, public financial institutions and central banks ) has decreased since the onset of the crisis and has remained at around 25 per cent in 2009 β 2011, after having peaked at 27 per cent in 2007. in broad terms, the bis central bankers β speeches aggregate size of the shadow banking system is around half the size of banking system assets. β’ there is also a considerable diversity in the relative size, composition and growth of the non bank financial intermediaries across jurisdictions. for example, the size of the shadow banking system in us and a number of other jurisdictions continues to be large relative to the regular banking system. the us has the largest shadow banking system, with assets of usd 23 trillion in 2011, followed by the euro area ( usd 22 trillion ) and the uk ( usd 9 trillion ). β’ there is also considerable divergence among jurisdictions in terms of : ( i ) the share of non - bank financial intermediaries ( nbfis ) in the overall financial system ; ( ii ) relative size of the shadow banking system to gdp ; ( iii ) the activities undertaken by the nbfis ; and ( iv ) recent growth trends. β’ even during the period immediately following the global financial crisis ( 2008 β 11 ), the shadow banking system continued to grow, although at a slower pace, in seventeen jurisdictions ( half of them being emerging market and developing economies undergoing financial deepening ) and contracted in the remaining eight jurisdictions. β’ among the jurisdictions where data is available, interconnectedness risk tends to be higher for shadow banking entities than for banks. shadow banking entities seem to be more dependent on bank funding and are more heavily invested in bank assets, than vice versa. shadow banking in india notwithstanding the data constraints in actual evaluation of its size, the shadow banking sector in india is still small in size compared to its counterparts in advanced economies. in 2011, assets of other financial institutions ( ofis ) in india were usd 375 billion vis - a - vis bank assets of usd 1518 billion and gdp of usd 1766 billion. the assets of the shadow banking system accounted for 21 percent of
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share of gdp, also accounts an even larger share of employment. tourism, both directly and indirectly, accounts around 20 percent of total employment in thailand. hence, employment and income were severely hit as a result of covid - 19, which will be another factor that will characterize both the slower and the uneven nature of the recovery going forward. while we have been hit hard, the economy has proven to be resilient. thailand is an economy where despite the big shocks from covid - 19, the downside risks to the economy remain quite limited. that is the result of our low vulnerabilities in a lot of critical areas. first, our external position : the thai economy has a very low external vulnerability. we are very resilient to the balance - of - payment - type shocks because we have a very low level of external debt and a relatively high amount of foreign reserves relative to external debt. recently, we have seen a weakening of the baht by about 10 percent year - to - date, which has outpaced other regional currencies. nonetheless, the resiliency of the thai economy and the external front remains solidly intact. the reason underpinning the weakening of the baht is due to the current account, which traditionally has been in surplus, that has swung into a deficit as a result of the contraction in tourism. meanwhile, the size of the current account deficit relative to the amount of international reserves is not worrisome. this year, on the current account side, we have observed a current account deficit of around 9 billion us dollars. on portfolio flows, we have seen outflows from the equity markets of around 3. 2 billion us dollars. at the same time, there were inflows into the bond markets of 2. 2 billion us dollars. thus, on the net of portfolio side, there were outflows of around a billion us dollars. adding together the current account deficit of 9 billion us dollars, there have been outflows of around 10 billion us dollars year - to - date. nonetheless, comparing that with our net international reserves of 280 billion us dollars, this shows that our external vulnerability is extremely low while our stability on the external front remains intact. another example of our resiliency on the external front is our low vulnerability to the possibility of another taper tantrum or a yield spike. a yield spike in the global financial markets is not likely to have a high impact on the thai economy
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seen, for example, vendors using qr codes for payment purposes. i think that has been a welcomed development in trying to address our long - standing issues in trying to improve inclusion on the financial front. aside from qr codes, we have made a very good progress in terms of promptpay, which is our electronic payment system and we have seen a very high uptake in usage of promptpay, especially during the covid crisis. the number of transactions per person per year increased and reached an all - time high. we have also extended to cross - border payments. we now have in place cross - border payments using qr codes with many of our neighbors such as cambodia, vietnam, as well as japan. most recently, we have connected our payment system, promptpay, with that of singapore, paynow. this was the first global fast payment linkage and we have also seen a very satisfactory uptake on that front. another opportunity for us in this area, building upon the digital infrastructure that we put in place, is mobile banking. we have seen a very rapid rise in the usage of mobile banking applications in thailand. thai people love their mobile phones and we have seen thailand ranked number one globally in terms of usage of mobile banking applications for three years in a row. i think this is an example of opportunities that may arise and will come about as a result of putting in place the right kind of digital infrastructure to enable these things to happen. aside from the initiatives i mentioned on the digital front, another important initiative that we have been undertaking is on cbdc or central bank digital currency. we started off with the wholesale cbdc project and later undertook the cross - border cbdc pilot program with the hong kong monetary authority, which has now been extended to include the people β s bank of china and the uae along with the involvement of the bis. the next phase on the cbdc front is to undertake a retail cbdc pilot program. we think that this will be an important program to address our long - standing pain points in the financial sector, especially with regard to efficiency, high fees in certain areas, and more importantly, in the areas of access and inclusion. page 8 of 9 i believe our initiatives on green and digital fronts are examples of what we are doing, not only to address the immediate problems facing us in getting out of the crisis, but also to look ahead, trying to put in place and lay foundations for thailand and the financial sectors to be
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profitability. to illustrate the effect of lower lending growth on banks β income, we have carried out a simple calculation where the interest margin is held constant. if lending growth among banks had only been 3 per cent in 2006, banks β net interest income and pre - tax results would both have been approximately 6 per cent lower this year. the composition of banks β income has been fairly stable in the past ten years, even though net interest income has become less important since 2002. one reason for these developments is that net price gains on securities have increased in this period. bearing in mind that this was a favourable period for securities markets, it will be difficult to maintain the income share from price gains in periods of more normal returns in securities markets. with a slower rise in house and commercial property prices and lower lending growth, combined with a normalisation of loan losses, banks may find it more difficult to maintain the high level of profitability that we have witnessed in recent years. the new capital adequacy rules have had a strong impact on norwegian banks and will continue to do so in the years ahead. how banks choose to utilise capital freed up as a result of the reduced minimum capital requirements, may have an impact on both competition and structure in the norwegian banking sector. freed - up capital may be used to finance lending growth, acquire other institutions or pay back capital to shareholders and other stakeholders. on average, norwegian banks β capital adequacy is solid. however, the substantial reduction in minimum capital requirements, even though there are transitional arrangements, also entails some risk that banks will reduce their capital to such an extent that the buffer needed to meet unforeseen events may become smaller than advisable. banks β profitability may also depend on the duration and severity of liquidity problems in international financial markets. although norwegian banks are probably somewhat less exposed than banks in many other countries, the impact may nonetheless be felt. it must also be expected that there will be strong focus on liquidity risk by financial institutions and supervisory authorities, and not least in the work on international regulations in the period ahead. thank you for your attention.
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far more moderate scale than for subprime - backed securities. in the last half of july, the turbulence spread to other financial market segments. the risk premium required by investors rose, and equity prices fell sharply. the contagion was due to uncertainty as to the risk subprime - backed financial products represented for the financial system, and to a lack of information about who had invested in such products. conduits and structured investment vehicles ( sivs ) were among the investor groups investing in the financial products based on subprime mortgages. as a rule, these investment companies were wholly or partially owned by banks. they invested in assets with a high rating, such as the senior tranche in subprime - backed securities. these investments were debt - financed, primarily in the short - term money market through asset - backed commercial paper ( abcp ). high ratings on these assets gave investment companies favourable funding rates. due to the turbulence in the subprime market, interest rates for abcp have risen sharply and maturities have been reduced. the flow of money to investment companies through money markets has dried up. banks have to a large extent had to finance the investment companies themselves. however, this increases banks β liquidity requirements. there have been examples of banks that did not have the capacity to finance their investment companies. due to uncertainty as to which financial institutions were exposed to the subprime market, many operators became very cautious about extending loans, and this eventually also led to liquidity problems in the interbank market. on 9 august and in the days ensuing, many central banks offered extra liquidity to safeguard liquidity in the banking system. norges bank supplied liquidity to the norwegian banking system through ordinary market operations on 9 august. in many countries, the money market is still dependent on injections of extra liquidity from the central bank. the banking system β s capacity and willingness to redistribute funds is still moderate. this increases banks β financing costs. the turbulence in the financial markets has also led to a sharp rise in prices for transferring credit risk, i. e. credit default swaps ( cds ), for both banks and other companies. cds prices for us banks rose for the first time in march and began to rise again at end - june. developments in cds prices for european banks lagged behind somewhat, but in the last half of july cds prices rose sharply for both us and european banks. this also affects norwegian banks and enterprises
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federalreserve. gov / boarddocs / speeches / 2007 / 20070523. a leveraged loan is commonly defined as a syndicated loan, typically to a riskier borrower, with an interest rate of at least libor plus 125 basis points. through securitization, while holding only nominal exposures themselves. although defaults and other indicators of borrower distress still remain low, and banks β exposures are so far quite manageable, supervisors are mindful that high levels of leverage can lead to credit problems relatively quickly for both borrowers and lenders when conditions turn. we want to ensure that any adverse events do not materially affect the banking industry and hope to encourage market participants to employ morerealistic expectations and structures in underwriting riskier corporate loans. turning to inflation risks, the high level of resource utilization continues to have the potential to put additional upward pressure on inflation. and, of course, higher oil prices and the possibility of further increases also pose an upside risk to inflation. with these concerns in mind, the latest statement issued by the federal open market committee again highlighted the risk that inflation could fail to moderate as expected, and i believe that the risks to the inflation outlook are primarily to the upside. the statement also noted that future policy adjustments will depend on the evolution of the outlook for inflation and economic growth, as implied by incoming information. i will continue to monitor these developments, as well as those in financial markets, very closely. this bis review is available on the bis website at www. bis. org.
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ben s bernanke : the importance of financial education welcoming remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the greater washington jump $ tart coalition financial education event, washington dc, 25 april 2007. * * * good morning. i am pleased to be able to be here today, at the greater washington jump $ tart coalition's inaugural event, to celebrate financial literacy month 2007 and to say a few words about the importance of financial education. i join other jump $ tart partners as well as professionals from the fields of banking, finance, government, and law who will be speaking to nearly 2, 000 public high school students about financial literacy. it is a special privilege to be with the students here today, the juniors and seniors of washington's own woodrow wilson high school. you are ambassadors of your school and indeed of washington, our nation's capital. i know that this is a school committed to academic excellence. as you think about the time, not so far away now, when you will leave wilson high, i hope that you will resolve to keep, throughout your life, the habits of learning and of thinking for yourself that you have gained in your years here. as you think about your future, don't forget the importance of financial literacy. although financial matters are probably not at the front of your minds today, the day will come when you will be responsible for managing your own or your family's budget or when you will find that you need to save to get the things you want β a college education, a new car, or even your own home. to achieve these personal goals and to build financial security, you will need to understand the fundamentals of budgeting, banking, saving, and investment. it is also essential that you know how to use β properly and responsibly β the many types of credit that will be at your disposal, such as credit cards. later this morning, my colleagues from the federal reserve will be talking with you about how to manage your credit. because credit has become such an integral part of our economy, and because there are so many sources and forms of credit available, much more financial sophistication is required today than when i attended high school. as a parent of two young adults myself, i believe that helping young people become financially literate is critical for their future economic well - being and should be a high priority for educators. in
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liability to the customer. let me now turn to the issue of technology and cost. before i speak my mind on the issue, let me make it very clear that rbi does not support the argument that cash transactions in this country will disappear rapidly or that all paper based transactions would turn electronic if the financial sector was to offer electronic transactions free of cost. in fact, we firmly believe that anything that is offered free of charge can never be scaled up and that it cannot become bis central bankers β speeches robust and efficient unless it offers commercial viability to those who offer the product / service. having said that, i also do not support the principle, ostensibly being followed by some of the institutions, to recover a large part of technology expenses from the customers. i was amused at the action of banks deciding to waive charges on β inter - core β transactions hitting headlines in the media. it should have never happened in the first place. in fact, such charges, rather than their removal, should have hogged the limelight. further, in an electronic banking scenario, ad valorem charge to customers is an issue which needs to be relooked. in fact, in a country like ours, part of the cost efficiencies achieved through technology must be passed on to the smaller customers. this calls for a rejig in the way in which banks approach technology. in a technology led financial sector, collaboration among all stakeholders, including competitors, could prove to be the big cost saver. with rapid strides in security standards and capabilities, such a collaboration and sharing of it infrastructure is feasible on a much larger scale than is happening today. it is always perceived by the industry that the handholding / intervening by rbi is necessary for the systems to be operational in an efficient manner. i am unable to understand why collaborative approach cannot be the guiding force for success in adoption of shared it infrastructure. reserve bank has contributed to the fostering of innovative methods to improve access to financial services through mobile and opened up and clarified the issue of business correspondent ( bc ) interoperability. leveraging technology for making financial inclusion possible and a success prior to the enablement of bc interoperability, the banks and technology providers had made a case that it was the lack of interoperability, that was a deterrent for financial inclusion and hence, much headway had not been achieved. according to the technology providers, investment in a non - interoperable technology would be a costly proposition and they did not see
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well as to actively promote the role of the market players. development of a wider range of islamic financial instruments for islamic financial institutions to effectively manage its funds, there is a need to have diversity in the type and the maturity of the islamic financial instruments. this is one area in islamic finance that offers formidable challenges and opportunities to market participants in malaysia. a broader range of products and services is vital in this fast changing global financial landscape. in today's marketplace, there are only a number of islamic financial instruments that have been developed to cater for this need which for the most part constitutes straight private and government islamic papers. in a bid to deepen and broaden the islamic bond market, the government has been regularly issuing islamic and conventional securities with different maturities, enabling the creation of a benchmark yield curve. this was further enhanced with the introduction of an auction calender in the year 2000. in the 2000, government investment issues or giis were introduced, followed by islamic negotiable notes, private debt securities, treasury bills and sukuk. furthermore, following the amendment to the government investment act in year 2005, the government has started issuing shorter - term islamic treasury bills and longer - term sukuk or islamic bonds with a maturity of 10 years in order to further diversify the islamic financial instruments available for investors. under the act, the government is able to issue islamic instruments under various shariah principles and for different tenures ; short and long term, to meet the varying needs of investors. islamic private debt securities ( pds ) too have been fast growing in importance and size, accounting for 50 % of the total pds market in 2004. despite these developments, there has been an inadequate supply of short - term islamic instruments thereby providing less flexibility to the institutions in managing their asset and liability profiles. this is important as the islamic banking institution has, to a large extent of its portfolio, long - term assets that include long - term islamic housing mortgages and long - term islamic financial instruments. these two asset classes constitute approximately 80 % of their portfolio. this over - concentration warrants the need to have effective risk mitigating techniques and instruments as to avoid any potential adverse consequences that could occur in volatile market conditions. on major importance is the elimination of uncertainties from a particular transaction. the need for islamic hedging instruments in the islamic financial services industry has therefore become increasingly important. thus far, significant progress in this area has yet to be made. it is
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a dramatic development if we recall that only at the beginning of 1996 this yield spread amounted to as much as 500 basis points in the case of some countries that are taking part in the eurosystem today. in the absence of exchange rate risk, spreads nowadays only reflect perceived differences in credit risk and liquidity. increasingly, it is the latter prevailing over the former. i want to illustrate this point with an example : it would be very hard β if not absurd β to argue that it is a higher credit risk which is forcing the netherlands to regularly pay about 15 basis points more on its long - term government debt than germany. clearly, it is the lower liquidity of the market for dutch government bonds which is causing this spread. it has been suggested recently that national governments in the euro area should pool their debt issuing in one central agency, acting on behalf of borrowing governments. this suggestion was made with reference to the greater liquidity that such a procedure would create for the euro - denominated government bond market and the savings in borrowing costs it would allow. you will be hardly surprised that i do not agree with this proposal. admittedly, there may be a few basis points that could be saved in the debt management of some governments of small countries and / or countries with low debt levels over the short run. however, by pooling debt issuing one would also pool risks and liabilities of the debtors. this would be a violation of article 103 of the european union treaty ( ex - article 104b of the maastricht treaty ), the so - called β no - bail - out clause β, which prevents governments from assuming any liability for other governments β debt. such sharing of liabilities, in my view, could create moral hazard that would undermine the credibility of the new currency. the result would be higher rather than lower long - term interest rates, leading to higher borrowing costs for member states. the upshot of this is that for the time being we will not be able to create a euro - denominated government debt market of the same liquidity and homogeneity as the market for treasury bonds in the us, unless we were to get a fully fledged political union with a supranational european government issuing substantial amounts of debt. i cannot see that happening in any foreseeable time span, although it could be the long - term result of a sustained evolutionary process of political integration. ii. let me return from the future to the present. we
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mr stark discusses how the euro will change the world of finance opening speech by dr jurgen stark, deputy governor of the deutsche bundesbank, to the ferma β s risk management forum, held in berlin on 25 october 1999. * * * i. ladies and gentlemen, it gives me great pleasure to address this forum of european risk managers here in berlin today. with the introduction of the euro at the beginning of this year european financial markets have entered into a new era of rapid and profound change. the single currency will affect every segment of the financial services industry in the euro area in one way or another, although this impact and the pace of change will be different in various market sectors. the most rapid change has already taken place in the euro money market, which, within a matter of weeks after the launch of the single currency, developed into a wholly integrated transnational market, providing the very basis for the money market operations of the european system of central banks, the eurosystem. this was made possible by target, a system which allows large - volume payments on a real - time basis throughout the euro area and which, after a few technical difficulties at the start, is in full and smooth operation now. transnational payments within target reached a daily average of 350 billion euro in july this year. target thus ensures that cross - border arbitrage will eliminate short - term interest rate differentials. as a result, the eonia rate and national overnight rates have entirely converged. money markets have also adopted euribor as the single short - term benchmark in euro, to which the short - term futures market and the long term swap market are linked. transnational integration is a much more gradual process in capital markets. nevertheless, this process has already, within the first months of the new currency, acquired considerable momentum. in fact, the development of broad, deep and liquid capital markets covering the whole of the euro area is one of the great potentials of european monetary union. it is the elimination of exchange rate risk that is driving this process of market integration, the major feature of which has been a far - reaching convergence of long - term interest rates. this process started well before the launch of the euro, when markets gradually began to anticipate that emu would become a reality. as a result, interest rate differentials between 10 - year government bonds of euro member states have narrowed to a range that, usually, does not exceed 40 basis points these days. this is
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our authorisation requirements, i hope that these can be in operation quite soon. one of the main tests that these applicants will have to satisfy is that they have adequate security to prevent unauthorised access to their systems and to protect customer information. weak internet security puts the financial position and the reputation of the bank at risk, and concerns about security are the major barrier to more widespread customer acceptance of e - banking. it is essential therefore that the banks get this right. we have tried to help by issuing guidelines to the banks on various aspects of security, including the need for senior management to commission periodic independent assessments of the security aspects of their e - banking services. we have recently provided further guidance on how such assessments should be conducted and the areas they should cover. however, we also need to be in a position to conduct meaningful on - site examinations of our own. this requires us to build up our own in - house teams of it experts and to provide them with the proper training and guidance on what to look for. we are currently trying to do this and have recently hired an external consultant to help us to develop the right processes and techniques. this is part of a more general move to enhance our supervision to make it more sensitive to the various types of risk with which our banks are faced, and more focussed on the processes used for managing those risks. this becomes all the important in the new economy, because although technological change presents obvious new opportunities to the banks, it also magnifies their risks in certain respects and increases the complexity of their business. security risk is one clear example of this, as i have already mentioned. but increased liquidity and credit risk could be added to the list - the former because the internet will make it easier to move funds between banks at the touch of a button and the latter because banks may in future have a more transitory relationship with their customers. technology risk is also a concern. with technology changing so rapidly, it becomes more vital that banks invest wisely in new systems and choose the right moment to do so. early movers run the risk of being saddled with systems that do not work as promised, or which quickly become obsolete. equally, there is the risk of being left behind by competitors if you wait too long. such considerations mean that it is essential that banks have a sound strategy and good systems of risk management. the main responsibility for this rests with the board of directors and with senior management, although the regulators also have a
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false starts and failures before the business models that can successfully exploit the new technology emerge. this period of uncertainty poses important strategic challenges and increased risks for the banks in their role both as major users of the technology and as providers of funds to the companies which are putting that technology in place. banks, like other companies, need to discover what will or will not work in the internet world. they are thus exposed to their own mistakes. but they are also exposed to the potential mistakes of their customers. for example, if the telecom companies in europe really have taken too big a gamble on 3g, this would have repercussions for the banks that have financed them. these challenges are also confronting banks in asia as they recover from the hangover of the asian crisis. i do not think that bankers anywhere would ever claim that they have an easy life. but certainly the existence for banks in asia before the crisis was easier than it is now. if i take hong kong as an example, the banks here have always competed actively. but that competition was taking place in a buoyant market, whereas business is currently much harder to find. a few simple statistics illustrate the point : in the six years from 1992 to 1997, domestic lending by the locally incorporated banks grew at an average rate of 21 % per annum, and pre - tax profits rose at an annual rate of 15 % during the same period. in contrast, the equivalent annual figures for the three years to mid - 2000 were 1ΒΌ % and 4Β½ % respectively. it is true that bank profits staged a sharp recovery in the first half of this year. but growth in bank lending has remained sluggish. bank liquidity remains at historically high levels, and this, coupled with the fierce competition for new lending business, has pushed down lending margins, particularly in the all - important mortgage portfolio. it is not only that the market is not growing as fast as it did. the traditional, local players are also beginning to encounter more pressure from global firms, non - bank entrants and competing sources of finance. the competitive environment is giving added impetus to the need for banks to consider how they can use the new technology, and particularly the internet, to drive down costs and broaden income sources. in hong kong around 20 banks have introduced transactional banking services for retail customers. many have already introduced corporate banking services through the internet, or will shortly do so. so far the take - up of these services seems in general to be
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source : ecb.
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jurgen stark : the global financial crisis and the role of central banking speech by mr jurgen stark, member of the executive board of the european central bank, at a meeting hosted by the institute of regulation & risk, north asia, hong kong, 12 april 2011. * * * it is a pleasure for me to address this distinguished audience. in my remarks today, i would like to share some thoughts with you on how the global financial crisis could shape central banking in the future. crises are often associated with deep - seated changes in both the mandates and functions of central banks β this is a well - established regularity in contemporary economic history. for example, central bank inaction was widely held responsible for worsening the economic downturn during the great depression of the 1930s. the result was that monetary policy was placed under the control of fiscal authorities for nearly two decades afterwards. the great inflation of the 1970s had the opposite effect. the failure of weak monetary regimes to reign in high inflation led to the establishment, in the early 1980s, of monetary policy frameworks solidly anchored by price stability mandates, and safeguarded by independent and autonomous central bankers. will this crisis β which is still ongoing β have any implications for the tasks of central banks in the future? to shed light on this question, i will, first of all, look back on the salient features of the monetary policy paradigm prevailing before the crisis. then i will review how central banks responded in practice to the crisis, focusing on the ecb β s policy actions in this regard. and finally, i will discuss whether certain aspects of the pre - crisis monetary policy paradigm need to be reassessed on the basis of the recent experience, and outline the likely challenges for central banks that lie ahead. * * * 1. the monetary policy paradigm before the crisis we do not know yet to what extent the pre - crisis consensus macroeconomic framework has been de - constructed by the crisis. but we do know that the β hubris β of the intellectual paradigm on which that framework was erected has completely vanished. some aspects of the framework, in my view, will undoubtedly survive the crisis. one is the great and increasingly shared emphasis on central bank independence. another is the centrality of price stability for monetary policy. these were the twin foundations of the dominant monetary policy paradigm before the crisis, and the crisis has not challenged or discredited either of them. i will return to the issue of price stability towards the end of my remarks. beyond these
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understanding of the structure of the canadian economy, i can say that while the income trust structure may be very appropriate where firms need only to manage existing assets efficiently, it is definitely not appropriate in cases where innovation and new investment are key. to the extent that the system was favouring the use of the income trust structure in these cases, the incentives for innovation and investment were reduced, and the potential for future productivity growth was reduced. finally, members of the committee should realize that the different risk - return characteristics of income trusts may not enhance market completeness if they arise from differences in tax treatment. clearly, there has been a very significant tax incentive to use the income trust form of organization in cases where this would not have been the appropriate form of organization from a business efficiency point of view. by giving incentives that led to the inappropriate use of the income trust form of organization, the tax system was actually creating inefficiencies in capital markets, inefficiencies that, over time, would lead to lower levels of investment, output and productivity. while we at the bank have not done any research on how the rules of the tax system could be designed so that they do not give inappropriate incentives that would bias the choice of firms to operate either as an income trust or as a corporation, the changes proposed by the government last october would appear to substantially level the playing field. for the income trust sector to deliver efficiency benefits through the enhancement of market completeness, it's important that the tax system provide a level playing field.
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lawrence schembri : getting down to business - investment and the economic outlook remarks by mr lawrence schembri, deputy governor of the bank of canada, to the greater vancouver board of trade, vancouver, british columbia, 21 march 2017. * * * i would like to thank russell barnett for his help in preparing this speech. introduction thank you for the invitation to speak here today. my colleagues and i routinely consult the business community, and i welcome the opportunity to share our economic outlook with you and listen to your views. this consultation process is an important ingredient in our policy making. to achieve our monetary policy goal of low, stable and predictable inflation at the 2 per cent target rate, our economy should operate at, or close to, its productive capacity. however, most advanced economies, including ours, have been running well below full capacity since the great recession of 2008 β 09 owing to a persistent deficiency in demand. after years of serial disappointment, recent data suggest that the recovery in the global economy appears to be gaining traction. notably, growth in the us economy is expected to remain solid, supported by robust fundamentals, including a strong labour market with gradually rising wages. for the canadian economy, estimates of the growth of gross domestic product ( gdp ) from statistics canada for the fourth quarter of 2016 came in somewhat stronger than we had anticipated in our january monetary policy report ( mpr ). while the headline number is welcome news, a more detailed analysis suggests continued scope for caution. exports continue to face ongoing competitiveness challenges. and despite recent gains in employment, subdued growth in wages and hours worked continues to reflect persistent economic slack in canada, in contrast to the united states. in particular, one component of gdp that remains concerning is business investment. while investment in the energy sector now appears to be stabilizing after a painful adjustment to the decline in oil and other commodity prices that began in 2014, overall business investment in the economy remains weak. statistics canada also reported that non - residential business investment spending contracted by more than 15 per cent in the fourth quarter of 2016 and by almost 8 per cent for the year as a whole. the current elevated level of geopolitical uncertainty, and the related prevailing uncertainties around the economic outlook, are likely contributing importantly to this continued underperformance in business investment. therefore, it is still too early to assume that the worst is behind us. so business investment is the topic i want to focus on today. it is, i am sure, top
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bank would like to see the west new britain savings and loan society operating, enabling the people of this province to benefit from other financial services. this will involve the support and commitment of the provincial authorities. as part of the central bank β s educational efforts, besides giving talks to high school students, we also distribute books to high schools in those centres the board visits. on behalf of the board, i am presenting to the provincial education authorities some textbooks to the value of k1, 000 for each high school in the west new britain province. on behalf of the board, the deputy governor, the management and staff of the central bank, i would like to once again thank the provincial authorities, the chamber of commerce, and the management and staff of the kimbe bay hotel, liamo reef resort and walindi resort for making our stay here in kimbe a pleasant one. thank you and god bless.
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focused on the area of financial service and financial inclusion as a vehicle to empower our people in the informal economy to participate in the development process as this area concerns the bank. but as we all know there are other areas of services - education, transport infrastructure, health, etc - that needs to be improved as well for our rural population. this is the responsibility of other agents in the country. indeed, the vision 2050 calls for a better service delivery model in the country. improvement in these areas together with improvement in financial inclusion and literacy will go a long way in empowering the people in the informal economy and the whole economy to realize their potentials in contributing to the development of the country as aspired in the national constitution, and now the vision 2050. while the informal economy is being recognized through the act of 2004 and now the launching of the policy, there are others who can pick on some negatives, as in many initiatives. in particular, some may view the urban squatter settlements as the source for those who participate in informal activities. port moresby for instance has seen an increase in the number of settlements and expansion of existing ones. many of the informal sector street vendors, for instance, come from settlements. the informal activities occur outside shops and at bus stops and provide an avenue for opportunists to steal / pick pocket from people of both formal and informal economies / sectors. mothers and school children have fallen victims. these negative aspects must be minimized as stated in the mission statement. on the whole, there should be more positives that would outweigh the negatives if done and enforced properly. other agents such as the law enforcement bodies must play 3 / 4 bis - central bankers'speeches their part in controlling the daily negative aspects of informal activities on the streets and weed out those who resort to petty crimes to earn a living, while also not unreasonably chasing mothers and stealing their items ( like betelnuts ) for sale. the launching of the informal economy policy will provide the necessary step for the development of the informal economy towards the realization of that dream - of greater participation of the mass of our population in economic activities that will improve their income and life style, and contribute to the growth and development of the economy. thank you. 4 / 4 bis - central bankers'speeches
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to 5, 1 per cent by the end of 2017. any sign that underlying price pressures remain contained would facilitate the task of the bank in dealing with the current conflicting risks facing real economic growth and inflation. of course, vigilance will be needed in the coming quarters, as the secondary effects of earlier shocks ( in particular on the exchange rate ) are still being felt β and there is no guarantee that inflation expectations will remain stable. so far, evidence on these fronts is mixed. expectations for cpi inflation one year ahead β as measured by the bureau for economic research among analysts, businesses and unions β drifted marginally higher over the past year but, at 6, 2 per cent, they are still very close to the 6, 0 per cent average of the past five years. break - even inflation expectations, derived from inflation - linked government bonds, are significantly higher ( around 7, 0 per cent as of 21 june for the five - year rate ), but this measure is highly volatile and sensitive to exchange rate fluctuations. as for wage developments, it is encouraging to note that the andrew levy measure of average annual wage settlements, at 7, 8 per cent in the first quarter of 2016, is little changed from the 7, 7 per cent gain observed on average in 2015. however, several key wage negotiations lie ahead, with a possibility that wage demands may take cognisance of the recent acceleration in inflation. with respect to both inflation expectations and labour costs, the next few months could be crucial. 6. investment - grade ratings, the rand, and inflation one important element in securing the stability of inflation expectations, in part because of the influence it is likely to have on the level and volatility of the rand, will be the ability of south africa to maintain its investment - grade rating β and this leads me to my concluding points. i do not need to stress how thoroughly the south african reserve bank has been monitoring the evolution of south africa β s sovereign debt ratings. a sovereign rating can have an impact on monetary policy because of how it influences the availability and cost of external financing, the yields on domestic debt and, in turn, the performance of the rand β both in absolute terms and relative to its emerging - market peers. south africa, being a structural net capital importer, needs to secure the best possible β terms and conditions β under which it accesses global sources of funding. any adverse developments on this front would probably further complicate the challenges of weak growth and
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the extraordinarily large β moral hazard β that has arisen over the past year is to require banks and possibly all financial intermediaries to hold contingent capital bonds, that is, debt which is automatically converted to equity when equity capital falls below a certain threshold β. β however, should contingent capital bonds prove insufficient, we should allow large institutions to fail, and if assessed by regulators as too interconnected to liquidate quickly, be taken into a special bankruptcy facility β. so, he supports the second approach, and in that light is the latest legislation in the usa which is about to be adopted, as well as the proposals in europe which envisage measures of this kind. namely, β restoring american financial stability act β, which was passed in the us senate on may 20, would impose significant new obligations and restrictions for the sifis, envisaging a possibility for the fed to introduce rising strict rules for capital, leverage and liquidity. on the other hand, on may 26, the european commission proposed the member states to establish national funds, financed from taxes imposed on the financial sector, in order to assist in closing or reorganizing the unsuccessful banks. the macroprudent tools mentioned so far, do not by any means exhaust the list of suggestions. exploring adequate instruments continues, and we are all waiting to see what will be delivered both in the form of ideas and in the form of operational tools. iii. the crisis has proved that the price stability is not sufficient to achieve financial stability. basically, with small exceptions that have no impact on the adoption of political decisions, the dangerous influence of the growing imbalances in the financial system was not conceived. the central banks were happy for registering low inflation rates, so it seemed to sidetrack the rapid credit growth ; the lower risk aversion ; the increase in asset prices, and consequently, the mounting vulnerability on the financial market. that is why, o. blanchard and others, ( 2010 ) say that : β the crisis has made clear that policymakers have to watch many targets, including the composition of output, the behavior of asset prices, and the leverage of different agents. it has also made clear that they have potentially many more instruments at their disposal than they used before the crisis. the challenge is to learn how to use these instruments in the best way. β recently, petra m. geraats ( mΠ°y 2010 ), concluded in the same direction : β recent financial crises
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impact in considering the strength of economic activity. all in all, it seems like output growth is moderating as i had hoped it would, supporting continued progress on inflation. the labor market is also cooling off. job creation is down this year from the high rates of 2022, and the unemployment rate has risen from a more than 50 - year low of 3. 4 percent in april to 3. 9 percent in october. the ratio of job vacancies to people seeking work has fallen, and so has the rate of people voluntarily quitting their jobs. average hourly earnings, which grew at an annual rate of more than 5 percent last year, have decelerated more or less steadily in 2023 to 4. 1 percent in october. these are all signs of a loosening labor market. but for all of the measures i have mentioned, they are still at levels that, historically, would be associated with a fairly tight labor market. we have 10 months of data on job creation in 2023, and for the 5 months through may, the monthly average was 287, 000. even with the strong month in september, the average for the past five months has been 190, 000, which is close to the 10 - year average from 2010 through 2019. 3 that's a significant slowing, but job creation is still happening at a rate that is higher than what would be required to absorb new entrants to the labor force, factoring out changes in labor force participation. and while 3. 9 percent unemployment is higher than the april low, it is still basically as low as unemployment got during the booming job market of the late 1990s. members of the national federation of independent businesses ( nfib ) report job vacancies are down significantly from 2022, but still at a level that is higher than the late 1990s or any time in the 36 years of the nfib survey. 4 the bottom line here is that the labor market is still 2 / 5 bis - central bankers'speeches fairly tight and i will be watching closely to see whether it continues to moderate in ways that keeps inflation moving toward 2 percent. so, let's talk about that progress on inflation. consumer price index ( cpi ) inflation for october was what i want to see. for the month, there was no inflation, prices were virtually flat, and unlike earlier moments where improvements were concentrated in some goods and services, the moderation in inflation was broadly distributed. over the previous 12 months, cpi
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the first half of 2023, when real gdp grew at a little more than a 2 percent pace. growth in consumer spending, which accounts for most of gdp, was strong in the third quarter. data on economic activity in october indicate that consumer spending is cooling from its pace in the third quarter. retail sales fell 0. 1 percent, the first drop since march. spending was down on motor vehicles, an interest - sensitive sector, which may be evidence that that the fomc's tightening of monetary policy is having some effect. spending was also down at gasoline stations, mostly because of a sizable decline in gas prices, often a larger factor for this segment of retail than shifts in demand. but 1 / 5 bis - central bankers'speeches even without motor vehicles and sales at gas stations, retail sales barely increased in october, which may reflect a broad - based moderation in demand. beyond consumer spending, there are indications that manufacturing and nonmanufacturing activity by businesses slowed in october. if we factor out a big drop in motor vehicle and parts production due to the united auto workers strike which ended october 30, manufacturing output edged up only 0. 1 percent last month. 2 surveys of purchasing managers by the institute for supply management indicated that both manufacturing and non - manufacturing activity slowed in october. nowcasting models that forecast gdp based on available data are predicting a significant moderation in economic activity in the fourth quarter. after the retail sales report for october, the atlanta fed's gdpnow model is forecasting a 2. 1 percent pace of increase for these three months, nearly identical with the actual growth rate for the first half of the year. something that significantly boosted gdp in the third quarter was a buildup in inventories, which are quite volatile from quarter to quarter. this volatility reflects how businesses manage their inventories by building them up and drawing them down at other times to manage cash flow and anticipate swings in demand. private inventory investment contributed 1. 3 percentage points to gdp in the third quarter and that likely won't be sustained. inventory swings could even subtract from gdp in future quarters. one thing to bear in mind is that the gdpnow estimate does not include the effects of the auto workers strike. a range of estimates suggest the strike will cut roughly half of a percentage point off the gdp growth rate in the fourth quarter and then boost gdp in the next quarter around the same amount, so i will tend to look through the strike
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financial instruments. as already underlined on the occasion of previous hearings in front of you, this calls first for much more transparency, without any consideration of vested interests ; second for much less short - termism in the decision - making processes, contrary to the most recent trends ; and third for a systematic elimination of the procyclical aspects of our regulatory, prudential, accounting and taxation rules, which are amplifying considerably the fluctuations that are inherent in the functioning of market economies. the financial stability forum ( fsf ) has identified the main avenues for such reforms. what we now need is strategic lucidity and, where appropriate, a great deal of political energy to counter considerable vested interests. the g20 and the imf are and will be decisive in this respect. but a much better functioning of the financial sphere does not suffice. we also need sound macroeconomic policies that are sustainable in the medium and long run. in particular, we need to avoid the creation of the large domestic and external imbalances which are very much at the root of the present difficulties. an effective surveillance of macroeconomic policies of the major systemically important economies is of the essence. only the imf can perform this decisive function, provided its mandate is strengthened. in terms of institutional set - up, we need two major improvements : β’ first, the international financial architecture requires a strengthening of the informal groupings, in particular the fsf and the g20. the fsf is unique in that it links all the authorities and institutions that have a systemic influence on financial markets, which are very largely decentralised and β for many of them β independent from the political sphere. the necessary enlargement of the fsf is key. particularly important in a time of global crisis has been the new authority of the g20, which is a truly global informal grouping in comparison with the g7, which itself continues to be useful in a situation where the turbulence comes from the industrialised countries. β’ second, on top of the imf β s strengthened surveillance mandate, the governance of the international financial institutions, particularly the imf but also the world bank, should become more effective and representative. in particular, a full representation of emerging market economies, commensurate with their importance in the global economy, is indispensable. * * * by way of concluding my introductory remarks, i would like to stress two points. first, as regards euro area policies, persistent wage growth
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the exchange rates and the prosperity of the global economy that chairman ben bernanke, treasury secretary tim geithner and president obama underline β that a strong dollar is in the interest of the us β. i trust that it is not only true but that it is also very important for the global economic stability. β which limitation to boni do you favour? β i β m in agreement with the fsb terms of reference which seems to me very appropriate. seen from a central bank perspective, what is decisive is that the boni should not create incentives for taking absurdly high levels of risks that would materialise in a crisis of the type we are experiencing. the main problem, seen from our perspective is to be sure that the structure of remunerations is conducting to sound and wise decisions justified in the medium and long - term. β are you satisfied with the commission β s proposal for the european surveillance system? β the commission has now presented its proposals to the council, which is under the swedish presidency. as regards the ecb and its general council we stand ready to do all what we can for the european systemic risk board to fulfil its very important systemic responsibilities in the best fashion possible to the service of the european financial stability. β are you satisfied with the outcome of the g20 meeting in pittsburgh? β as this stage i would only make three short observations : first, we central banks appreciated that it is said that β a sense of normalcy should not lead to complacency. β second, i noted that it is also in the preamble that β we will prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support (.... ), maintaining a commitment to fiscal responsibility. β third, it is particularly important that the g20 is designed to be the premier forum for international economic cooperation ; that the imf is asked to play a key role in the multilateral surveillance, that the financial stability board includes major systemic economies, and that the communique welcomes the key measures agreed by the oversight body of the basel committee. β
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needs must be crafted. through effective and sincere communication, customers can be convinced to participate in the formal financial system as we build a critical mass of users. the network effects will draw in even more participants. 4 / 5 bis central bankers'speeches it is through these sustained efforts that we can bring about a payment ecosystem that we can all be proud about... an ecosystem that is a symbol of digital ingenuity. in this regard, we are all disrupters and enablers. on the part of the bsp, we remain strongly committed to creating an enabling and supportive environment for our shared vision to come into full fruition. we look forward to working with all of you as we take our leap to bring about a safe, efficient, reliable, and affordable retail payment system supportive of inclusive growth. congratulations to all of us! mabuhay ang peso net! mabuhay ang nrps. mabuhay ang pilipinas. salamat po. 5 / 5 bis central bankers'speeches
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almost certainly be weak at present also. and of course almost nobody on the australian side of the tasman is talking about a currency union, and almost nobody on the new zealand side is talking about our simply adopting the australian dollar. the likelihood of a currency union any time soon therefore seems extremely low, whatever the merits and demerits of such a union. no, there is no quick or easy way to reverse the recent decline in the new zealand dollar. we need to recognise that a significant part of the depreciation since early 1997 has simply been the reversal of an over - valued currency at that time, and as such has been desirable. we need to recognise that another significant part of the depreciation is simply a reflection of the strength of the us dollar, and as such may not continue indefinitely. and in part we need to recognise that the depreciation is a market adjustment to our longstanding tendency to spend beyond our means, borrowing the savings of other countries to do so. our best course of action, indeed perhaps our only sensible course of action, is to continue doing the things which will make us a prosperous economy - continue to run fiscal surpluses, continue to keep inflation low, continue to improve the flexibility of the economy, continue to remove regulatory barriers to resource mobility, continue to improve incentive structures so that investment goes into those areas with the highest social and economic return, continue to ensure that governance structures in the banking and corporate sectors encourage prudent behaviour, continue to improve the education system, continue to welcome foreign investment, and do everything possible to encourage a culture which values initiative, innovation, hard work, saving and all the rest. sound policies across the whole breadth of the economy are the best way of ensuring that the exchange rate recovers over the medium term, and of course the best way of ensuring prosperity for all new zealanders as well. a prosperous new zealand, with low inflation, will enjoy a strong currency over the long term, and productivity growth to justify that strength. the pros and cons of currency union : a reserve bank perspective, a speech to the auckland rotary club on 22 may 2000.
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policy action ; 6. public authorities play a role in three fields : removing obstacles to consolidation, setting standards, and ensuring an integrated regulatory and oversight framework.
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big, complicated, and interconnected, because they reap any benefits β for example, in terms of economies of scale and scope β but don β t bear all the social costs. how can we do better? some have argued that the current policy path is not working, and that we need to take a fundamentally different approach. 4 such an alternative approach might include, for example, outright caps on the size of individual banks, or a return to glasssteagall - type activity limits. my own view is somewhat different. while i agree that we have a long way to go, i believe that the way to get there is not by abandoning the current reform agenda, but rather by sticking to its broad contours and ratcheting up its forcefulness on a number of dimensions. in this spirit, two ideas merit consideration : ( 1 ) an increase in the slope of the capitalsurcharge schedule that is applied to large complex firms, and ( 2 ) the imposition at the holding company level of a substantial senior debt requirement to facilitate resolution under title ii of dodd - frank. in parallel with the approach to capital surcharges, a senior debt requirement could also potentially be made a function of an institution β s systemic footprint. to illustrate my argument, let us take as given the central premise of those who favor size limits : namely, that society would be better off if the distribution of banks were not so skewed toward a handful of very large institutions. ( to be clear, i am using the word β size β as shorthand for the broader concept of an institution β s systemic footprint, which in addition to size, might reflect complexity, interconnectedness, and global span of operations. ) in other words, let β s simply posit that a goal of regulation should be to lean against bank size, and ask : what are the best regulatory tools for accomplishing that goal? as in many other regulatory settings, this question can be mapped into the β prices - versus - quantities β framework laid out by martin weitzman nearly 40 years ago. 5 here a size cap is a form of for example, in june of 2012, moody β s described its ratings process for bank of america, citigroup, and jp morgan chase as follows : β [ their ] ratings benefit from three notches of uplift from the standalone credit assessment at the bank level, and from two notches of uplift at the holding company, reflecting moody β s assumptions
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and leisure and hospitality categories. when we look at the northern part of the state, we see a greater concentration of jobs in finance, particularly in hudson county. also prominent are goods distribution jobs related to the ports, rail lines, trucking and warehousing. other large sectors include pharmaceuticals manufacturing and research and development, as well as private education. looking at recent trends in northern new jersey, the recovery in the economy in general β and in employment in particular β is lagging the nation and is not going as well as we would like. the garden state β s economy lost a quarter of a million jobs during the recession, and employment didn β t begin to recover until 2011, and even then it was slow getting started. however, the latest annual employment revisions β released just a few weeks ago β show job gains in 2013 and 2014 were a bit stronger than previously reported. nevertheless, four years into the recovery, employment has recovered less than two - thirds of the job losses from the recession. this contrasts notably with both new york state and the u. s. as a whole, where employment has far surpassed its earlier peaks. moreover, here in essex county, there has yet to be any significant upturn in jobs, although neighboring hudson county has seen a fairly strong rebound. bis central bankers β speeches that β s not to say that there aren β t any strong industry sectors here in new jersey : job growth has been quite robust in health services, transportation and warehousing, construction and a number of business service industries. there has also been steady job creation in retail trade and leisure and hospitality, though these tend to be low - paying sectors. on the other hand, employment remains depressed in other industries such as finance, publishing, telecommunications and manufacturing. so why is new jersey not keeping pace with new york in terms of job growth? well, much of the strength in new york state has been driven by new york city ; other parts of the state have seen similar, if not weaker, job growth than new jersey. of course, this raises the question : why has new york city β s economy been so much stronger? in fact, there is a body of research suggesting that the long - term drift of economic activity and jobs from cities to suburbs has subsided, and that there is a growing trend toward re - urbanization β a preference for both people and businesses to locate in cities, like new york. yet there is also a strong tendency for persistent strength in an urban hub to
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##ncy? a common denominator for all policy makers at the moment is the lingering uncertainty. many scenarios are in place, from smooth and orderly recovery, through strong rebound with price pressures, ending to stalled recovery amidst new and more virulent strains. from a central bank perspective, our advantage is that there is still policy room for maneuver, although narrowed. our policy rate is still in a positive territory at a level of 1. 25 %, alternative instruments are available for targeted actions, the level of foreign reserves remains comfortable and the banking system stable with npls ratio of only 3. 4 %, despite the pandemics shock and closure of a bank in the midst of the pandemics. of course we have to be vigilant, and not only of conventional side effects of " too loose for too long " stance, but also of the possible adverse feedback 1 / 2 bis - central bankers'speeches loop between real and financial sector, as well as of the so called " zombification " risk. as complacency is not an option, shielding against those risks asks for further strengthening of the financial safety net, which will remain one of our priorities. thus, although still overwhelmed with the current challenges and the need for further policy support, we must not remain oblivious to the pre β pandemic strivings to increase the potential to grow faster, but in a sustainable and inclusive way. this requires gradual shifting of the focus back to the pre - crisis structural bottlenecks such as the quality of institutions, strengthening the rule of law, investing in human capital and in the potential to innovate, as well as to new structural hurdles that will be left as a legacy of the pandemics, which might not be even well known at the current juncture. clearly, we as central banks cannot play a main role in these segments, but perhaps a supporting one. in this context, despite many burning issues, we have managed to keep the focus on more structural issues such as digitalization by working on the first national fintech strategy, and on green finance by becoming a member of the international network for greening the financial system and conducting the first survey on the current status of the green finance. all these should ensure sustainable and inclusive recovery, while confirming our strong commitment to adopting the eu standards and best practices that should enable faster convergence. thank you! 2 / 2 bis - central bankers'speeches
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including those that are most relevant for the transmission of monetary policy impulses. in this sense, we will act whenever we anticipate that higher costs and price increases pose upward risks to price stability over the medium term. 8. the non - standard measures by the eurosystem have been necessary to enhance its support of credit flows to the economy and to ensure a proper functioning of the transmission of monetary policy impulses to households and firms. indeed, this approach has served the euro area economy well. money market spreads have come down significantly [ slide 2 : euribor / ois spread ], banks β funding risks have been reduced, and the lowering of our policy interest rates has led to lower bank lending rates, largely as intended [ slide 3 : bank lending rates ]. 9. yet, keeping policy rates at very low levels for a protracted period and at the same time generously providing liquidity to banks entails significant risks. as outlined in the 2010 annual report of the bank for international settlements ( bis ), asset price developments and risk spreads indicate that once again a β search for yield β may have started to play a role in an environment of near - zero rate policies. in particular, such a situation has the potential to increasingly over time distort market participants β perception of risks, such as liquidity and interest rate risk. a renewed under - pricing of such risks could again lead to misallocation of resources and to asset price bubbles. the period immediately preceding the start of the financial turmoil in august 2007 is a case in point. new financial fragilities may emerge which, in turn, may hamper the normalisation of rates. finally, maintaining interest rates very low for too long may reduce activity in money markets, delay necessary balance sheet bis central bankers β speeches adjustments by firms and households, set disincentives to governments for their efforts to consolidate public finances. 7 the ecb ( like other central banks ) faces a difficult balancing act between doing what is necessary to maintain a properly functioning monetary policy transmission mechanism and doing too much for too long, thus reducing incentives for market participants to make markets work as they should. in japan, the combination of zero interest rates and quantitative easing, while successfully containing liquidity problems of financial institutions, have had some detrimental effect on the intermediary function of the money market and on corporate bond issuance. 8 in our case, we saw that transaction volumes in the short term ( eonia ) money market increased and e
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zero over the entire calendar year 2023 ( slide 12 ). the tpi, by contrast, is a new instrument in the ecb β s toolkit. its targeted orientation and conditionality ensure the smooth transmission of monetary policy, even in times of heightened uncertainty and volatility, thus enabling monetary policy to pursue its key task of maintaining price stability. by announcing possible interventions or, if necessary, by carrying out targeted, temporary interventions, the central bank can quickly restore confidence and prevent destabilising interest rate spirals, which might otherwise drag the euro area into a severe crisis. in this respect, the tpi is an expression of monetary rather than fiscal dominance. indeed, the announcement of the tpi is likely to have been an essential precondition for the ecb to be able to increase rates to such a large extent and so avoid a deanchoring of inflation expectations and ensure price stability. under the tpi, the ecb cannot counter persistent tensions that are due to country fundamentals. it could only do so in combination with a macroeconomic adjustment programme under the outright monetary transactions ( omt ) programme. these precautions ensure that market discipline is preserved. within the tpi there is no interest rate level that is targeted ; this level remains fully determined in the market, with the substantial differences in sovereign bond yields across euro area countries reflecting different fundamentals. the tpi can only be used to tackle disorderly dynamics that temporarily prevent price determination in the market. these conditions preserve the incentive for sound fiscal policies. fiscal discipline and structural reforms are the best protection against fiscal dominance the best protection against fiscal dominance is therefore a future - proof fiscal policy. this is precisely why the european treaties provide for a fiscal framework that permanently guarantees the central bank β s independence. the challenges for fiscal policy are likely to increase in future. as long as the yields on newly issued sovereign bonds surpass the average yields on outstanding debt, the interest burden will increase. for example, a prolonged period of high interest rates will gradually affect the interest - growth differential ( r - g ), which, in addition to the evolution of government primary balances, determines the development of public debt ratios ( slide 13, left - hand side ). whether ( r - g ) will become a burden in the medium term will largely depend on how fiscal policy will tackle the multiple structural challenges facing our economies. an ageing society, the need for higher defence spending in view of the changed geopolitical situation,
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. in fact, the one is a pre - condition for the other. i do not deny that there are negative demand effects in the short - term. but for the longer - term, sound fiscal policies are essential to lower borrowing costs and encourage investment. moreover, in those countries experiencing severe sovereign debt tensions, fiscal consolidation is unavoidable to maintain market access. that said, there is clearly a need to take measures to strengthen the growth potential of the euro area β s economies. these measures also need to have effect in the short - term so as to soften the short - term impact of fiscal consolidation. recognising this, the european council on 28 β 29 june agreed on a β compact for growth and jobs β. this compact aims to free up to 120 billion euro for growth and investment, representing roughly 1 % of euro area gdp. this comprises a 60 billion euro increase in the lending capacity of the european investment bank ; 55 billion through the reallocation of structural funds to growth - enhancing measures ; and 4. 5 billion of investment financing through a β project bond β pilot phase. on top of that, the european council took a number of measures to improve the functioning of the single market and facilitate adjustment within monetary union. the single market in services will be completed, which is expected to yield economic gains of up to 330 billion euro. to improve labour mobility within europe, an eu - wide recruitment tool will be developed and measures taken to strengthen the portability of pension rights and the recognition of professional qualifications. this strategy confirms an important evolution in the thinking of european policymakers. they are acknowledging that the smooth operation of the single currency requires flexible markets for goods, services, and labour. they are aiming to maximise the gains of the world β s largest single market, rather than acting as 27 national markets. and they are exploiting eu funds as a tool to support aggregate eu growth, rather than for quid pro quos between member states. reaping the full gains from economic integration in europe, combined with structural reforms at the national level, will help lay the foundations for more sustained growth going forward. 3. future of emu some observers, of course, question whether such a forward - looking perspective is relevant. this is due to the third criticism i outlined : the belief that economic and monetary union cannot work due to institutional flaws. in the view of these critics, the euro area is too decentralised, too diverse and too disunited
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benoit cΕure : short - term crisis management and long - term vision β how europe responds to the crisis speech by mr benoit cΕure, member of the executive board of the european central bank, at cemla β s 60th anniversary commemorative conference β central bank cooperation at the beginning of the 21st century β, mexico city, 20 july 2012. * * * i wish to thank jonathan yiangou for his contribution to this speech. i remain solely responsible for the opinions contained herein. ladies and gentlemen, thank you very much for inviting me to speak at this session on central bank cooperation in times of crises. from the euro area perspective, central bank cooperation has worked very well during the crisis. we have had continuous dialogue since the early stages of the crisis in 2007, which continues to the present day. our network of currency swap lines with the federal reserve, the bank of england, the swiss national bank, the bank of japan and bank of canada have helped ensure foreign liquidity for the euro area and euro liquidity abroad. there has also been successful international cooperation through the imf. overall, these measures have played an important role in easing strains in financial markets. as the success of this cooperation is broadly recognized, i would like to use my intervention today to discuss a different and more contested issue : the management of the crisis by the euro area authorities. when i travel outside of europe, i am often struck by the level of misunderstanding of the euro area β s approach. the euro area is widely perceived as lacking a coherent strategy to calm markets and stabilise economic activity. it is also seen as the prime source of shocks affecting the global economy. indeed, i sometimes have the impression that global volatility is solely attributed to the shortcomings of europe, and that challenges to the sustainability of growth in other large economic regions are conveniently downplayed. at present, three critical views are particularly prevalent. β’ the first is that europe does not have the right tools to fix the crisis. β’ the second is that europe focuses only on fiscal consolidation and not on growth. β’ the third is that the euro cannot overcome its design flaws. while i acknowledge the reasoning behind these views, you will not be surprised to learn that i fundamentally disagree with them. in all three areas the reality is more complex. looking only at the outcomes of the european council and euro summit on 28 β 29 june, these critiques do not hold up. europe is making more progress than many
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attractiveness of these instruments in their portfolios. however, there are early signs of a more active secondary market beginning to resurface as turnover has increased in the past year. 4. conclusion the stable inflation environment means that the fixed income structure of bonds has become relatively more attractive to investors with risk profiles that demand a steady real rate of return. also, economic growth has been more robust in recent years amid heightened investor optimism about the country's future prospects. improved economic fundamentals translate into enhanced growth prospects for south african corporates and a concomitant need for long - term debt financing. the development of this sector of the bond market offers borrowers in the private sector access to long - term finance from the capital markets. i am aware that some of south africa β s important corporates are here to participate in this conference. we look forward with keen interest to your contributions to the growth of this sector of the market. i wish you well during your deliberations. thank you for your attention.
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to more explicitly include financial stability. following the global financial crisis, it became clear that price stability is a necessary, but insufficient condition for financial stability and it has now become a more explicit mandate of central banks in many countries. while the price stability mandate of the sarb is clearly defined and measureable, its mandate for financial stability is much broader and is a shared responsibility with other stakeholders. national treasury published a policy document in february 2011 titled a safer financial sector to serve south africa better, which outlined government β s decision to shift to a twin peaks model of financial sector regulation. the twin peaks model of financial sector regulation represents a move away from a fragmented regulatory approach which was based on the institution or activity towards a regulatory and supervision model based on objectives. it is envisaged that, once fully implemented, the twin peaks system of regulation will focus on a more harmonised system of licensing, supervision, enforcement, customer complaints, an appeal and review mechanism, and consumer advice and education. national treasury published the second draft of the financial sector regulation bill in december 2014. this bill proposes to confer upon the bank the responsibility for financial stability and the oversight of market infrastructure and payment systems. it further proposes the establishment of two regulators, namely a prudential authority within the bank and a new financial sector conduct authority. the prudential authority would supervise the safety and soundness of banks, insurance companies, and other financial institutions, while the market conduct authority would supervise the way in which financial services firms conduct themselves and treat their customers. this reform forms part of the current broader overhaul of the global regulatory system which aims to address the too - big - to - fail problem of systemically important financial institutions, building resilient financial institutions, reducing the opacity of over - the - counter derivatives markets, mitigating the impact of shadow banking on financial stability, enhancing financial benchmark transparency, and promoting the convergence of accounting standards. within each of these themes there are a number of regulatory initiatives, such as the regulation of systemically important financial institutions under the too - big - to - fail problem, basel iii and proposals for a basic capital requirement for insurers to strengthen the theme of building resilient financial institutions. the bank β s main activities in the financial stability arena currently include developing and implementing recovery and resolution plans for systemically important financial institutions, introducing a macroprudential toolkit of policy instruments to contain risks associated with imbalances in the financial system, and
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repo rate should therefore be raised ( lowered ). the time has not yet come for an increase in the repo rate, but when it does, our action will hopefully be seen as a natural ingredient of a monetary policy for price stability. our ambition is to take predictable and timely measures so that sizeable interest rate movements can be avoided. still, it is hardly surprising that the direction of monetary policy is being discussed. at present swedish monetary policy β s overall impact can be described as expansionary at a time when activity is becoming stronger. the short - term real interest rate is between 2 and 2. 5 per cent, depending on the exact maturity and how inflation expectations are measured. how a neutral monetary stance translates into the short real rate is difficult to determine precisely but it can be said that the current rate is comparatively low, with an impact on total demand that should be stimulatory. in addition, the level of the real exchange rate is weak in relation to a reasonable long - term equilibrium. this means that its effect is stimulatory, too. the combined effect of the short interest rate and the exchange rate is therefore tending to support the economic upswing. all else equal, an expansionary monetary stance leads to a successive acceleration of demand. in time, this may generate a growth rate that exceeds the economy β s long - term potential. the ability of the economy to cope with a high demand trend is not unlimited. as unutilised resources are activated and the output gap closes, bottlenecks of various kinds arise in the labour market or in real capital. it is in such a situation that inflation may accelerate. in order to avoid the occurrence of shortages and accelerating inflation, the monetary stance must not remain too expansive for too long in an upward phase. instead, a timely adjustment - - bearing in mind the lag associated with monetary policy - - must be made to a more neutral position before the output gap closes. this promotes a continued growth of demand at a rate the economy can absorb - - for instance with the help of new investment, improved efficiency and labour supply - - without generating inflationary bottlenecks. the purpose of such a monetary adjustment is not to break the expansionary trend but to achieve growth that is more sustainable. in other words, a shift from an expansionary stance to one that is more neutral is designed to bring the economy onto the growth path that matches its structure - - not to bring growth to a halt. neither should
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for monetary policy. this holds unless transitory price effects influence inflation expectations. in a setting where inflation expectations are firmly anchored to the inflation target, monetary policy has some room for manoeuvre. but if expected inflation starts to rise, we must be on the alert, particularly in that the current monetary stance is stimulatory. the importance of expected inflation for price and wage formation was evident not least in connection with the 1995 round of wage negotiations. at that time, expectations of future inflation seem to have been a bit above 4 per cent, which probably contributed to the excessively high level of the ensuing wage agreements. now that the swedish economy is on the threshold of very important wage negotiations, there must be no doubt that the riksbank is truly serious about the inflation target. future wage formation is yet another risk factor that the riksbank has to consider. there are some encouraging signs that wage formation is moving in the right direction, even though the parties have gone in for a certain amount of bidding. this tends to be a process that conveys a varying degree of realism. it is important to bear in mind that wage formation is not just a matter of the level of wage agreements. the outcome for wages is also conditioned by the wage drift that mirrors labour supply and demand. the less efficiently the labour market works, the sooner bottlenecks arise that generate increased wage drift. tendencies to labour shortages in certain sectors are already discernible, despite the high unemployment. conclusion : monetary stance well balanced ; changes in the spectrum of risks a monetary policy that aims for sustained price stability is not at odds with good economic growth. this presupposes that the supply side functions so well that growth does not give rise to inflationary impulses. but if the structure of the economy is such that only moderate growth is feasible, demand and accordingly the monetary stance must be adjusted accordingly. the alternative is demand growth that exceeds what the economy is capable of producing without inflationary bottlenecks. accelerating inflation is a threat to sustainable growth and may even result in serious economic setbacks, as history has taught us. as economic activity becomes stronger and monetary policy adjusts its sights on the future picture, the riksbank β s monetary stance will have to gradually move away from its current expansionary position. the timing of such a move has to be assessed in the light of new information and today one cannot say when it will happen. our present assessment is that the monetary stance is well balanced
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the recession. but the relationship between the economy and the financial system also works in the opposite direction and, evidently, if the necessary measures for reactivating employment growth within a reasonable time frame are not adopted, bad debts will continue to mount and there will be more financial institutions facing difficulty in providing the financing needed for economic recovery. that our banking system has proven reasonably resilient during the international financial crisis is due to various factors. these include prudent regulation, more intensive supervision than that of other countries, a business model geared essentially to retail banking and sound management at most banks. but let me also stress β as it seems to me an example of what could be done now with the labour reform β that the government and the opposition, which has supported it in parliament, have expeditiously agreed on a series of high - quality financial system reform measures that have proven most effective in preventing credit institutions β problems from bringing the country β s economy to its knees. we should not forget that if, for instance, the legislation on the funds for the acquisition of financial assets and on guarantees for bank and savings - bank bond issues had not been approved, we would no doubt have witnessed a shut - down of wholesale funding on global markets and an abrupt contraction in credit that would have led to a deep recessionary spiral. fortunately, this did not occur. that does not mean that credit standards are the same now as before the crisis. one of the most notable consequences has been the increase in risk aversion, which stood in the previous upturn at very low levels. this increased risk aversion translates into much stricter lending policies. as a result many companies, particularly small and medium - sized ones ( for various reasons, such as the fact that they are not audited and are generally less capitalised than large companies ), have seen their ability to obtain funding restricted, occasionally beyond what may be considered reasonable. the official credit institute β s programmes, aimed at smoothing small and medium - sized companies β access to credit, have attempted to correct this market failing. further work along these lines should be pursued, improving where possible the workings of these programmes and increasing their volume if necessary. yet i must urge credit institutions to be responsible, as i have on previous occasions. evidently, at a time such as the present, they must be particularly careful and, naturally, not extend credit to companies that are not solvent ; but nor must they forget that should they fail to lend but a single euro
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##ive hours of discussion with the committee, its working groups and member authorities. above all, banks and other private sector bodies helped us to ensure that supervision would be more closely aligned to sound industry practices. a second group would be those supervisory agencies, central banks, multilateral financial institutions, and other public authorities around the world who shared with us the perspectives and needs of banking systems that are based in many different markets, economies, and legal systems. thanks to discussions with these colleagues, such as through joint working groups like the core principles liaison group and through regional consultations and meetings, the committee was better able to ensure that the new framework would be relevant to many different kinds of banks and economies that are in various stages of growth and development. the cooperation of so many public authorities worldwide has helped to make basel ii a truly global product. the committee will continue to seek opportunities to deepen its relationships, and its opportunities for discussion, with other supervisors and central banks in the months and years ahead. of course, this work would have been impossible without the sponsorship of the bank for international settlements. i would like to offer my sincere thanks to malcolm knight, the general manager of the bis, for his institution β s support of our work on basel ii. the bis has been a staunch ally and advocate for our work over the entire thirty - year history of the committee. with regard to basel ii itself, the bis is fostering a greater understanding of the new framework among central bankers and supervisors worldwide through programs organised by its financial stability institute, the β fsi β. the committee looks forward to continued collaboration with the bis on matters related to financial stability. basel ii represents a genuine success story in international cooperation. and we know that our need to cooperate and to collaborate does not end when we release this framework. indeed, under basel ii, supervisors and central bankers will need to work even more closely together in the future, especially in view of the evolutionary nature of basel ii. and the committee has a full agenda ahead of it. we must, of course, continue to work on the specifics related to the implementation of the framework and its calibration. we must also ensure that the new framework keeps pace with market developments and advances in risk management practices. as we carry out this work, the committee intends to continue its discussions with the industry and other supervisors in the same open and transparent manner as we have to date. it has been an honour for me to participate in and help to lead this process
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reliable estimates of the size and portfolio composition of major counterparties were lacking and that improved credit risk management techniques were needed in two key areas : credit and market exposure measurement, and counterparty due diligence. let me be a bit more specific about some of the weaknesses found in credit risk management techniques. for example, some institutions routinely performed credit assessments using sparse, often unaudited financial information from valued customers, some of which had recorded substantial profits in previous years. moreover, institutions that received intermittent financial statements and had infrequent contacts with these counterparties were left to make periodic credit assessments using stale information in a rapidly changing market. this insufficient information impeded the setting of prudent credit limits and terms, including collateral requirements and contract covenants. many risk managers also failed to account fully for the risks involved in new financial products. non - traditional products, such as equity repos and credit derivatives, challenged existing credit β 2 β analysis systems and methodologies. in addition, relatively few financial institutions attempted to stress test credit exposures and even fewer anticipated a market environment as adverse as what we experienced in the third quarter. for these and most other institutions, the rush to mitigate and reduce their exposures, particularly to highly leveraged institutions such as hedge funds, quickly resulted in the widespread withdrawal of all lending activity to some troubled sectors, regardless of an individual counterparty β s financial condition. while these decisions undoubtedly were intended to reduce risk and avert losses, they also served to exacerbate already extraordinary financial market fragility. given that the task of assessing and managing risk is not going to get any easier as we move into the 21st century, let me now turn to some of the issues that i believe will challenge financial institution managers in the coming year and beyond. one issue is the increasing integration of banking, securities and insurance services ; a second is the increasing pace at which capital moves across international borders ; a third, the year 2000 problem ; and a fourth, the challenge of bringing improved risk management techniques to business operations as a whole, including the trading rooms. this is particularly important for participants in the rapidly changing fixedincome markets. first, the integration of previously separate financial services means that institutions must be prepared to manage risks across a far wider range of products, business units, and counterparties than they have been accustomed to doing. in the securities lending markets, for example, an increasing number of firms are accepting equities as collateral for financing
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jerome h powell : introductory comments β roundtable on the interim report of the alternative reference rates committee introductory comments by mr jerome h powell, member of the board of governors of the federal reserve system, at the roundtable on the interim report of the alternative reference rates committee, sponsored by the federal reserve board and the federal reserve bank of new york, new york city, 21 june 2016. * * * i want to thank you all for coming today, and i also want to thank the alternative reference rates committee ( arrc ) for all its work in developing its interim report. this report marks a new stage in reference rate reform. 1 reference benchmarks are a key part of the financial infrastructure. about $ 300 trillion dollars in contracts reference libor alone. but benchmarks were not given much consideration prior to the recent scandals involving attempts to manipulate them. since then, the official sector has thought seriously about financial benchmarks, conducting a number of investigations into charges of manipulation, publishing the international organization of securities commission β s ( iosco ) principles for financial benchmarks and, through the financial stability board ( fsb ), sponsoring major reform efforts of both interest rate and foreign exchange benchmarks. 2 the institutions represented on the arrc have also had to think seriously about these issues as they have developed this interim report. now, we need end users to begin to think more seriously about how they use benchmarks and the risks they are taking on by relying so heavily on a reference rate β in this case u. s. dollar libor β that is less resilient than it needs to be. in saying this, i want to make it clear that libor has been significantly improved. ice benchmark administration is in the process of making important changes to its methodology, and submissions to libor are now regulated by the united kingdom β s financial conduct authority. however, the term money market borrowing by banks that underlies u. s. dollar libor has experienced a secular decline. as a result, the majority of u. s. dollar libor submissions must still rely on expert judgement, and even those submissions that are transaction - based may be based on relatively few actual trades. this calls into question whether libor can ultimately satisfy iosco principle 7 regarding data sufficiency, which requires that a benchmark be based on an active market. that principle is a particularly important one, as it is difficult to ask banks to submit rates at which they believe they could borrow on a daily basis if
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institutions. we are way behind other developing countries in these two aspects. one of the most gratifying aspects of our reforms in the financial sector during the last five years has been broadening access to financing by the middle and lower income groups. the banking sector which dominates our financial system ( it controls more than 90 per cent of financial assets ) had traditionally catered to the needs of the government for meeting their deficit financing, or to the large and well established corporate sector and also financed international trade. through the reforms undertaken in last 5 years we have tried to open up the financial sector by promoting and encouraging non - bank financing companies which through leasing, modarabas, mutual funds etc. can reach out to new type of borrowers and savers. as most of the poor derive their livelihoods from agriculture, smes or have no tangible assets, the state bank of pakistan is facilitating flow of agriculture credit, sme loaning and microfinance to help them. four years ago, ztbl was the only major provider of credit to agriculture. today, the commercial banks have overtaken ztbl as the main sources of agriculture credit. during this period the volume of credit to agriculture particularly small and subsistence farmers has almost tripled and this year we hope to cross rs. 85 billion. similarly, from a modest start the outstanding loans for smes now account for 18 to 19 per cent of all private sector loans. khushali bank, pakistan poverty alleviation fund and other microfinance institutions and ngos are now serving about half a million poor mostly the women in rural areas. our aim is that 50 per cent of our agricultural households should be able to obtain bank credit in the next five years while we plan that microfinance institutions should reach 3 million borrowers from the current level of half a million borrowers. in small and medium enterprises the banks β efforts will be focused on financing at least two million enterprises throughout the country. interestingly, the banks find it profitable to lend for microfinance, smes and agriculture as their target group is small holders, small businesses and the poor particularly the women. their track record in loan recovery is far superior to that of the large business houses and large farmers. the default rate was 25 per cent when the banking system in pakistan was serving the traditional target group of corporates and large holders. today, the default rate is less than 5 per cent when the banks are gradually shifting their lending to the underserved sectors
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, underprivileged households and undercapitalized enterprises. the experience with the banking sector reforms in pakistan has therefore exploded the myth that the formal finance can only be made available to the organized firms and well - to - do families and individuals. the conventional wisdom that the banks will lose money if they broaden their access to rural population or small enterprises does not hold any grounds looking at the results achieved by the banks in the last few years. for the middle class who form the backbone of any economy, we have allowed the commercial banks to offer mortgage financing, auto financing, consumer financing and islamic banking. there has been an impressive response to these products. most of the autos are now purchased through bank or lease financing. the banks have attracted million or so new customers from the middle and lower income groups who have availed of financing in these new areas. i fully endorse the view of the learned authors of the report that large incumbent companies in developing countries can stifle entrepreneurial energy and initiative but a dynamic financial sector, in which new entrants and incumbents can get finance under competitive terms, can create competitive pressures in the market. this is exactly what pakistan is trying to do. we have done away with effectively subsidizing large private sector firms which were selling low quality products at high prices under a regime of controls. we have allowed liberal entry and sale of imported goods and inputs and also removed high tariffs and quotas so that small firms can also produce goods domestically at low prices. least that i am misunderstood that we have reached nirvana i wish to make it clear that we have just made a modest beginning in this journey towards reaching out to the poor and the middle class. the journey is long, tortuous and the road ahead is full of stones and boulders. we have to work hard to remove these impediments on our way and continue marching towards our destination without getting fatigued. i hope the recommendations of the report will not only be disseminated widely but also acted upon faithfully.
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of the current account and overall external payments position. we also expect bop deficits to the mitigated by robust overseas filipino remittances, bpo revenues, tourism receipts, and fdi flows. recent weakness of the peso is also being spotlighted. we assure that the peso β s recent modest and controlled depreciation is consistent with the economy β s structural shift from being consumption - led to being more investment - led. this is driven by strong imports demand, residents β increased direct and portfolio investments abroad for expansion and risk diversification ; as well as public and private sector debt prepayments to manage foreign exchange risks. there is also outflow of hot money. we believe these developments are fundamentally healthy and help improve price competitiveness. second : capital markets capital market development also gives more reason to invest in the philippines. the bsp is working hand - in - hand with the department of finance ( dof ), the bureau of the treasury ( btr ), and the securities and exchange commission ( sec ) on a local currency debt market development roadmap, where reforms to deepen the market will be undertaken over an 18month time frame. the reform agenda will officially unfold with the launch of the government securities repo program later this very afternoon ( nov 27 )! indeed exciting and transformative times! the roadmap includes initiatives to 1 ) increase the volume of treasury bills, 2 ) provide stable, predictable and transparent issuance of government securities, 3 ) develop a systematic set of obligations, rights and incentives for market - makers, 4 ) establish a reliable yield curve, 5 ) introduce a repo program, and 6 ) strengthen regulatory oversight over the repo and fixed income market. these reforms in the government securities market will translate into increased market efficiency, lower borrowing cost, more dynamic and increased participation. as the domestic debt market develops rapidly, there will be more alternative sources of funding for economic activities besides the banking sector. risks will also be better managed. 2 / 4 bis central bankers'speeches third : infrastructure building we are in a period of build, build, build! this will be driven by massive key infrastructure investments. these will enhance competitiveness, support the economy β s rising growth trajectory, and spread development across the country β s regions. under the national government β s program, spending for big - ticket infrastructure projects is set between $ 160 billion and $ 170 billion in the next five ( 5 ) years. with this,
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amando m tetangco, jr : banking sector developments in the philippines speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the ilf moa signing ceremony, manila, 25 march 2008. * * * members of the monetary board, undersecretary roberto tan, bap president ramon sy, mr. paul favila, fellow bankers, special guests, good morning. i am glad we now have this memorandum of agreement for the enhanced intraday liquidity facility. this moa will help the philippine banking sector adapt and respond better and faster to increasingly dynamic and challenging developments in the financial markets. congratulations are therefore in order to all those involved in the process that has led to this moa signing today. let us give everyone a well - deserved round of applause. indeed, operational adjustments in the ilf provide participants greater flexibility in the use of their securities. for instance, instead of earmarking the securities for ilf use for the whole week, participants can now make daily changes in their securities pool. in addition, availments will be made only when the need arises. furthermore, availment costs have been reduced to encourage more participation to the ilf. ladies and gentlemen. these are challenging times and now, more than ever, we need to close ranks to address the issues that concern the banking sector in a coordinated and comprehensive manner. on our side at the bangko sentral, we assure you that our lines of communication are kept open at all times for discussions and consultations. i expect the same from your end, particularly when it concerns programs that will benefit the financial system in particular and our economy in general. i will be the first to say that we have done a lot to strengthen our banking sector. this has been validated and repeatedly acknowledged here and overseas. however, we should continue our reform agenda to keep in step with global developments. let us choose innovation, over stagnation. united, we can make further improvements in our banking sector as well as our payment and settlements system to make it stronger, more efficient, and consistently aligned with worldclass standards. mabuhay ang philippine banking sector! maraming salamat sa inyong lahat.
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##raisal of financial status of insurance companies were also strengthened. in addition, via the supervision of adequacy of technical reserves of insurance companies, the risk - resistance and indemnity payment capability of insurance companies was enhanced. in the year, supervision and onsite inspection of insurance companies, pension funds management companies and insurance intermediaries were strengthened with a view to appraising their compliance and implementation of provisions under compulsory insurance regulations, aml / cft guidelines and internal supervision applicable to various insurance institutions. with the benefit of the recovery of the overall economic vitality, coupled with appropriate and effective supervision, the insurance sector of macao operated in a stable manner last year, various premiums registered stable growth, profits were up to expectation. as per the end of 2010, total premiums for the insurance sector reached mop3. 78 billion, a year - on - year growth of 15. 7 %, of which life insurance premiums were mop2. 69 billion, a year - on - year growth of 15. 3 %, while non - life insurance premiums reached mop1. 09 billion, a year - on - year growth of 16. 7 %. on the other hand, pension funds management institutions also displayed their function in providing social protection and maintaining social stability. as per the end of 2010, total assets of funds under the management of such institutions exceeded mop6. 2 billion, which covered more than 80, 000 employees, the growth rates were 24 % and 6. 7 % respectively. the pace of economic recovery for advanced industrial nations remained slow. headed by the fed of the us, central banks of western nations took one step further in quantitative easing in formulating their monetary policy. as a result, interest income derived from major overseas financial markets stayed at a historically low level all year round. at the same time, in the face of sovereign debts of the eurozone and financial crisis arising therefrom, prices of financial products and currency exchange rates exhibited greater volatility. against such a backdrop, amcm adopted a more prudent investment strategy for the exchange reserves and the msar reserve fund. as per the end of 2010, our exchange reserves stood at mop190. 2 billion, a year - on - year growth of 29. 8 %, or mop43. 6 billion. the msar reserve fund also grew by mop300 million to mop13. 1 billion, or a growth of
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or those who had recently joined the labor force but could not find jobs also poses the risk of permanent unemployment for such people. in this respect, the implementation of structural reforms to improve the labor market will prevent a permanent rise in long term unemployment during the global crisis and underpin the increase in the potential growth rate of the economy. 4. productivity after sharing my views on the labor market, i would like to move on to total factor productivity, the third factor that influences the potential growth rate. total factor productivity in an economy arises from the interaction and combination of a number of elements. the leading one is the establishment of macroeconomic stability by alleviating the uncertainties that economic agents are confronted with. the prerequisite of macroeconomic stability is fiscal discipline and price stability. public balances that have improved thanks to prudent monetary and fiscal policies coupled with the inflationary gains following the deep economic crisis in 2001 are noteworthy steps on the road to establishing macroeconomic stability. economic welfare only increases along with sustainable growth. sustainable growth implies price stability. the growth rate we attained with the high inflation in the 1980 β s did not last long and had been replaced by higher inflation rates and economic recession. meanwhile, between 2002 and 2007, high growth rates were attained while a remarkable decline was recorded in inflation. in this scope, we are of the opinion that the monetary policy implemented by the central bank of turkey, which is consistent with the main objective of price stability, has supported the establishment of price stability in turkey and contributed to the permanent increase of the competitive power of the whole economy and the exports sector. i would like to emphasize that the quality of fiscal adjustment is crucial for both the struggle with inflation and the permanence of the high growth rates. the fiscal rule, which is to be enforced in the near future will enhance predictability and create confidence for the future. fiscal rules play a critical role in the establishment of fiscal policies consistent with sustainable debt dynamics and foster a more prudent and permanent implementation of fiscal discipline. however, in the light of country experiences, in order that fiscal rules can function as expected, these rules should be implemented in a transparent way as per the required institutional and legal framework to be established. 5. exchange rate as you may have noticed, in my speech regarding how to increase the potential growth rate of turkey, i have not mentioned the issue of foreign exchange rates. economic literature besides country experiences has shown that the value of the currency of a country is the
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so, do the advantages outweigh the costs? i believe these are important questions. while it is not for central banks to answer them, i think that they provide a strong motivation for the central banking community β s interest in the dlt. let me be more specific. a key motivation has to do with the safety of market infrastructure. without adequate solutions for the dvp settlement in central bank money of the tokens traded on dlts, the latter could never achieve the level of safety that is typical of traditional securities trading and settlement systems. for instance, target2 offers efficient and secure settlement in central bank money, but it would be unable, without the development of ad hoc interfaces ( or the issuance of central bank money in the form of tokens ) to simultaneously settle the cash leg of financial transactions happening on a dlt. financial intermediaries are successfully issuing securities on dlt and settling trades in dvp mode using tokenized commercial bank money. these exciting developments offer an opportunity to test the dlt and get practical feedback about its benefits ( and disadvantages ). in my view, however, dvp in central bank money is no longer optional for market participants. few if any would trust a large market infrastructure that would the list of snags could go on. permissionless dlt systems must continuously generate enough fees for anonymous validators to ensure the integrity of the ledger in the absence of a central authority. ultimately, this creates significant inefficiencies and risks for users. for example, when the value of luna went to zero in the recent terra - luna collapse, the incentive for miners to validate transactions evaporated ( as they were remunerated in luna units ), and the blockchain stopped for several hours. a similar problem could materialize for any blockchain managing securities. see p. lee, β has tokenization β s time finally come? β, euromoney, march 03, 2023. in dlts based on proof of work, mining is highly energy - and hardware - intensive ; this has tended to concentrate mining activity, with the attendant risk of collusion and forks. dlts relying on proof of stake tend to concentrate decisions on few holders of governance tokens, reintroducing the governance problems that are typical of traditional intermediaries. banca d β italia is actively promoting research on the topic of β smart contracts β including their implications on cyber - security. a memorandum of understanding
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tensions experienced in recent weeks reflect banks β attempts to exploit regulatory arbitrage permitted by the basel 1 framework, transferring outside their balance sheets, to unregulated entities, activities that would have required substantial capital otherwise. searching for the direction to follow in addressing the issues that have emerged, we can advance the following considerations : β’ the basel 2 framework will certainly mitigate the problem, as the risks associated with the innovative, complex activities undertaken by banks in recent years will be easier to capture. with respect to capital requirements, for example, basel 2 improves on the treatment of mortgage exposures and introduces a capital charge on liquidity lines extended to conduits funded through asset - backed commercial paper. additional capital will be required to match operational risks in order, for example, to cover legal losses. to enhance market discipline banks will be induced to disclose information about their risk management policies and systems. this will include the risks associated with securitization exposures. as a development of the new regulatory approach, before the turmoil the basel committee had begun a review of the existing supervisory approaches to liquidity risk. β’ while the basel 2 framework will represent a considerable improvement on the previous discipline of capital requirements, steps need to be taken in other areas to avoid excessive risks and make banks more resilient to shocks. to improve transparency on risk exposures, particular attention must be paid to the obligation to consolidate the accounts of financial vehicles, even if not affiliated, whenever banks exercise substantial control and bear the ultimate risk. to take account of the effective risk for prudential purposes, vehicles that are largely controlled by banks should also be consolidated when capital requirements are established. in order to contain model risk, additional efforts must be directed at refining the methods used to value sf products. banks β liquidity management must also be improved, with reference to liabilities no less than assets, to increase our understanding of the relation between market liquidity and banks β funding liquidity risk. also, public authorities and market participants should thoroughly review existing incentives in the financial industry at large, to find ways to prevent the accumulation of excessive risks. an additional area of policy intervention that is becoming as important as the regulation and supervision of markets and intermediaries is financial literacy. as individuals become increasingly responsible for their retirement income and the allocation of wealth, so their financial needs are becoming increasingly complex. the financial industry is responding with a wide range of instruments, many of them complex as well. a few remarks on this point are
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and deposits continued to be guaranteed on a second scheme which has been rolled forward on a six - monthly basis. this is still in force, but it is probably no longer necessary, and will likely be discontinued in the near future. as i have noted, during the pre - crisis credit expansion, banks became increasingly reliant on shorter - term wholesale funding. the guarantee was introduced in the belief that the main problem facing the banks was merely difficulties attracting funding following the collapse of lehman brothers. that the system faced a solvency problem was not recognised at the time. however, as doubts emerged about the solvency of the banks in light of increased property losses and the ability of the sovereign to backstop such a large guarantee, the irish banking system suffered a massive withdrawal of funding. over time, irish banks were shut out of almost all debt markets, while a flight of retail and, particularly, corporate deposits also occurred. to fund the resulting liquidity deficit and ensure the irish banking system β s ability to function, the ecb has provided an unprecedented level of liquidity support. as the property market continued to decline it became clearer that the banking system needed capital to remain solvent. the initial step to recapitalise banks in december 2008 marked the beginning of a series of injections over the following years, as estimates of the capital needs were made in a highly uncertain environment characterised by systematic loan underwriting errors, inadequate management information and intrinsic uncertainties about borrowers β ability to repay loans in negative equity. an initial independent assessment of the banks covered by the guarantee was already undertaken in 2008. based on the results, the government decided to recapitalise the banking system and to nationalise anglo - irish bank in early - 2009. by june of that year, the government had injected β¬10 billion into the three major banks. despite already receiving a 4 billion injection, by the end of 2009, it was clear it is important to note that as judged by the fiscal criteria of the maastricht treaty, ireland β s record before the crisis was exemplary : it was exceeded the deficit criteria only in 2008 and the debt criteria in 2009. the policy responses to the banking crisis are reviewed by governor honohan in the address on β recapitalisation of failed banks : some lessons from the irish experience β given at the 44th annual money, macro and finance conference, trinity college dublin, september 2012. see www. centralbank. ie. the initial guarantee scheme covered a broad range of
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, its causes and consequences for the irish economy. next i will review the main policy measures adopted by the irish authorities in response to the crisis. finally, i will review what the most pressing challenges are this year. 2. the crisis ireland experienced a massive housing bubble, whether measured in terms of prices, credit or the scale of construction activity within the economy. unfortunately, this appears to have been one of the worst boom - bust cycles on record. 3 the exceptional size of the shock is of course the main reason why it is so difficult to overcome. the bubble took the form of a very large increase in residential and commercial property prices which rose almost four - fold between 1997 and 2007. like many other bubbles, it started from strong growth, which in ireland β s case began around 1990 and largely resulted from greater economic integration with europe. during the 1990s, growth was underpinned by fundamentals, as exceptional export performance was accompanied by moderate wage and price inflation and healthy public finances. the expansion was aided by eu structural funds of up to 3 per cent of gdp per annum. of course, the large fall in irish interest rates as part of the move to monetary union also exerted a powerful force. for instance, mortgage rates fell from over 11. 5 per cent in 1990 to lows of close to 3. 5 per cent in 2005. in the early 2000s, however, as the economy approached full employment and technological constraints began to bind, the nature of the boom changed from one that reflected strong fundamentals to one that was fuelled by excessive credit expansion. strong economic growth and lower interest rates led to an increase in both the demand for and price of housing and rapid growth in credit. both domestic and foreign - owned banks with branches or subsidiaries in ireland participated in this expansion, lending heavily to developers and retail mortgage borrowers. as a result, the fraction of non - financial private - sector lending that went to the property sector β that is, mortgages and lending for commercial property β rose from 60 per cent in 2000 to 80 per cent in 2007. 4 the boom was not just a price bubble, but involved a huge expansion in lending and construction activity. a recent imf working paper by laeven and valencia ( 2012 ) assesses the size of banking crisis since 1970 in a number of countries and in a number of ways and concludes that the irish crisis has been one of the costliest. figures are exclusive of residential mortgages securitisations. bis central bankers
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financial markets that already has taken place or is likely to come in the near future. let me next turn to the debate about the european regulatory framework. the economic and financial committee ( efc ) has only recently provided an assessment of existing arrangements in the brower report. a central result of this assessment was that the current framework that strongly relies on national responsibilities is appropriate. the report found that there is at the same time a need to enhance arrangements for cross - border and cross - sectional co - operation, to improve the alignment of supervisory practices and to reinforce the collaboration between supervisory and central banking functions. i want to point out that developments have already started that implement some of these recommendations. let me just mention the activities of the banking supervision committee ( bsc ) of the european system of central banks ( escb ). these activities strongly rely on the close cooperation between central banks and banking supervision authorities. not only in the area of banking supervision, but also in recent attempts to implement the lamfalussy recommendations in the field of security market regulation considerable progress has been made. consistent and efficient implementation of regulatory rules has been promoted by new institutional arrangements delegating rule - making powers to a committee or regulators whereas implementation at the national level is undertaken through a committee of supervisors. these two examples, which i have briefly touched here, illustrate that initiatives are under way and debate is ongoing. however, not all of the recommendations of the brower report have been implemented and many other issues still need further investigation and debate. but developments show that we are heading in the right direction. i have argued that policy makers and central banks are well aware of the regulatory challenges for european financial markets. they have already tried to find some practical answers to these challenges. these answers are based on the principles of national responsibility, transnational co - operation and the close involvement of central banks into the supervision of the banking system. clearly, many issues in this process are still open and need further discussion. but i am sure that your conference will make an important contribution towards a deeper understanding of those issues and to point out directions, where further activities are needed. cepr / esi price for the best central bank research paper ladies and gentlemen, it is a great pleasure now for me to announce the winner of the newly established cepr / esi prize for the best central bank research paper. this price shall promote high - quality research at european central banks, both within and outside the eurosystem. it is important to acknowledge research
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. 3. the key tasks of the eurosystem let me now turn to the key tasks of the eurosystem. the treaty establishing the european community ( article 105. 2 ) clearly defines the community responsibilities in the area of monetary policy. accordingly, the basic tasks to be carried out by the eurosystem are β’ to define and implement the monetary policy of the euro area ; β’ to conduct foreign exchange operations consistent with the monetary policy of the euro area ; β’ to hold and manage the official foreign reserves of the member states ; and β’ to promote the smooth operation of payment systems. in addition, there is a very strict rule prohibiting the monetary financing of the public sector that makes clear that monetary policy and fiscal policy should be two separate areas of policy. furthermore, the eurosystem contributes to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system. moreover, the national central banks may continue to carry out other tasks and activities, provided that they are in line with the single monetary policy. the decision - making bodies of the eurosystem are the executive board and the governing council of the ecb. the general council is constituted as a third decision - making body of the ecb for as long as there are member states which have not yet adopted the euro. the executive board of the ecb comprises the president, the vice - president and four other members, all chosen from among persons of recognized standing and professional experience in monetary or banking matters. as you know, former oenb deputy governor tumpel - gugerell is a member of the executive board of the ecb. the members of the executive board of the ecb are appointed by the eu heads of state or government after a hearing before the european parliament. the main responsibilities of the executive board are to implement monetary policy in accordance with the guidelines and decisions laid down by the governing council of the ecb and, in doing so, to give the necessary instructions to the national central banks. the governing council comprises the six members of the executive board and the governors of the national central banks of the member states which have adopted the euro. the governing council takes decisions with a simple majority according to the β one member, one vote β principle. the responsibilities of the governing council are : β’ to adopt the guidelines and take the decisions necessary to ensure the performance of the tasks entrusted to the eurosystem ; β’ to formulate the monetary policy
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this will require the nbu to maintain an active presence on the fx market β both to meet the structural demand for foreign currency and to smooth out significant exchange rate fluctuations. as proper macroeconomic preconditions are created, the nbu will increase the flexibility of the exchange rate and step up its role as the means for the economy to adapt to external and internal shocks. in addition, the nbu will continue to take measures to support the attractiveness of hryvnia savings instruments : deposits and domestic government debt securities. this will restrain demand for foreign currency and, together with fx interventions, will help maintain exchange rate sustainability. such policy will allow keeping inflation moderate throughout the next year. international reserves remain sufficient for supporting exchange rate sustainability the nbu's international reserves were close to usd 39 billion as of the end of november. in the past several months, the reserves decreased only slightly, despite irregular arrival of external financing. the current volume of international reserves is much larger compared to both the start of this year and the period before the invasion. the way the war develops remains the key risk to inflation and the economy. risks to international aid have also increased the war is grinding on. great uncertainty over the duration and intensity of the war persists. as before, the nbu predicts that there will not be any significant reduction in security risks until 2025. if hostilities last longer, the nbu expects additional economic losses and stronger inflationary pressures. the risks to the regularity of external financial assistance have also materialized in part. that said, the nbu expects that external financing will become regular again in the near future. the reasons for optimism include, among other things, the successful completion of the second review of the extended fund facility, as well as assurances in that regard from ukraine's international partners. these assurances are an integral part of this program. the nbu also takes into account the high adaptability of ukrainian businesses and households to wartime challenges. this adaptability largely offsets the negative effects of certain risks. an example of this is the much faster - than - expected increase in exports via the new sea corridor. the expansion of maritime logistics has fully replaced the suspended 2 / 3 bis - central bankers'speeches " grain corridor " and mitigates the effects of the trade and transportation restrictions imposed by some countries. taking into account the successful adaptation of market participants to the new exchange rate regime, the further decline in inflation and improved inflation expectations, the nbu
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board decided to cut the key policy rate and other interest rates on nbu operations by 1 pp. previous steps taken to ease interest rate policy resulted in a moderate decline in nominal market interest rates on hryvnia instruments, which was in line with the nbu's expectations. at the same time, given the decline in inflation and improved expectations, interest rates on hryvnia instruments even rose slightly in real terms. as a result, hryvnia instruments continue to be an attractive instrument for savings. a cut in the key policy rate will not pose any risks to the attractiveness of hryvnia savings thanks to the further decline in inflation, improved inflation expectations, and the fx market's successful adaptation to the new exchange rate regime. therefore, the nbu is continuing its interest rate easing cycle. starting from 15 december 2023, the key policy rate and the interest rate on the nbu's main operation β the overnight placement of certificates of deposit β will be 15 %. the interest rate on three - month certificates of deposit and that on refinancing loans will be also cut by 1 pp, to 19 % and 21 % respectively. looking ahead, the nbu stands ready to adapt its interest rate policy flexibly, factoring in changes in the balance of risks to exchange rate sustainability and inflation any further changes in the key policy rate will depend on the development of inflationary processes, the state of the fx market, how regularly international aid arrives, how sufficient international aid is, how security risks evolve, and other factors. thank you for your attention! 3 / 3 bis - central bankers'speeches
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volatility of short - term interest rates around a given level of official interest rates. i would also emphasise that the actions undertaken were not in any way motivated by an attempt to mitigate losses for those who had taken excessive credit market risks. rather, the substantial injections of liquidity by central banks were intended to contribute to stability in the interbank market at a time of significant strain. the situation in ireland in the recent financial stability report of the central bank and financial services authority of ireland, we have concluded that while the risks to financial stability have increased since last year, the stability and health of the banking system here remain robust when assessed by the usual indicators of financial health such as asset quality, profitability, solvency, liquidity and credit ratings. however, like their international peers, irish banks have been operating in an environment where liquidity is not as readily available as heretofore. in addition, notwithstanding the fact that the larger institutions have diversified their businesses outside the irish economy, the banking sector is operating in an economy where growth will be slower by comparison with recent years. investor sentiment towards the banking sector globally has been negative in recent times and irish banks have not been immune from this. however, the current situation and outlook for irish banks, based on an assessment of developments so far, is positive. firstly, the sector's shock absorption capacity has been largely unaffected by the turbulence in international financial markets. a survey of the exposures of irish banks published in the financial stability report shows that the domestic banking system has no significant direct exposures to us sub prime mortgages and essentially negligible exposures through investments and through links with other financial companies or special purpose vehicles. in addition, the exposure of domestic institutions to hedge funds and private equity is very low by international standards. secondly, given the extent of the disruption to normal market functioning internationally in recent months, it is inevitable that access to liquidity in the interbank market by irish banks, like all banks, would be affected. however, the comprehensive liquidity framework within the eurosystem and the significant volumes of collateral held means that irish banks are well positioned to access eurosystem liquidity. also, a fuller assessment of the funding patterns of irish banks indicates that there is a significant medium - term element to much of their funding, as well as a relatively wide range of funding options available to them. finally, our stress - testing of the banking system and our extensive financial stability analysis indicate that irish
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elisabeta gjoni : role of money in wartime opening remarks by ms elisabeta gjoni, first deputy governor of the bank of albania, at the second conference of the museum of the bank of albania, tirana, 20 september 2018. * * * dear guests, participants, researchers, academics, numismatists, collectors, students, welcome to the bank of albania! it is a special pleasure for me to open the proceedings of the second conference of the museum of the bank of albania on β role of money in wartime β. the rich collection of coins and banknotes and other items exhibited in our museum becomes more meaningful when supported by the historic background of the period of the country of issue. the organisation of this conference, an annual one, contributes to the both the historic and educational role of the museum. this conference is also an excellent opportunity to share experiences with representatives of the main institutions of culture in albania and museums of central banks and other prominent foreign institutions in this field. i am happy to see in this room both old and new collaborators, whom we wish to be β permanent consultants β of the bank of albania. we aim to create and cultivate a solid and productive relationship with the best experts in numismatics, museology, cultural heritage and research. dear participants, today β s presentations will address the mutual, complicated and multi - dimensional relation between money and war. wars have had an impact on the economy and development of human kind from the birth of civilisations to modern times. meanwhile, in the words of the socrates, the greek philosopher, β all wars are fought for money β. we heard some good examples that illustrate this relation in last year β s conference. we heard from prof. picard about king monunius, who is known thanks to the respective coin. he had it minted for the sole purpose of raising a strong army, convinced that his might rested with the army. from prof. egro, we learned that mahmut pashe bushatlliu and ali pashe tepelena tried to introduce their coins and banknotes, independently from the ottoman empire, not for financial purposes but as a token of rebellion or an attempt to break away from the empire. later on, in ww1, we see the banknotes of the republic of korca, which are a rare phenomenon not only in terms of numismatics, but also a materialisation of the early issues as a result of the war
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also made many important decisions aimed at attracting foreign investments and continued opening of the markets which will be reflected on the competitiveness of the national economy. all these positive developments are an incentive for investment in the kingdom in general and in the housing sector in particular. dear brothers, this conference is held at a time when the kingdom has achieved outstanding development results in all sectors of the economy. in 2006, the real gdp ( at current prices ) grew by 12. 4 percent and by 4. 2 percent ( at constant prices ). it is expected that strong growth rates will be maintained in the medium term. this will contribute to increasing the production capacity of the national economy and have a positive impact on all its sectors. international credit rating agencies have raised the credit rating of the kingdom to advanced grades, and commended the efficiency and soundness of the national economy and the economic reform programs. this climate has made domestic and international investors more interested to participate in and benefit from the various investment opportunities in the saudi economy. the banking system in the kingdom has exercised a vital role in boosting the national economy. it has made great progress, using the latest technologies and various banking products, under a supervisory system keen to meet domestic requirements and legislation as well as international standards. the contribution of the banking sector to housing finance is expected to increase as soon as the real estate mortgage law is enacted. it is worth mentioning that the size of real estate finance provided by commercial banks reached rls 13. 4 billion at the end of the second quarter of 2006. sama has permitted a number of banks to offer products for real estate financing. banks are constantly working to develop innovative products to meet the needs of the housing market. dear brothers, a review of the topics addressed on the first day of this conference by the distinguished speakers shows that they touched upon important issues and gave a future vision of housing in the kingdom, and how to benefit from the experiences of different countries in this area. today will be an extension of those topics that are directly related to housing finance. in general, i find that the conference broadly covers all aspects of housing finance in the kingdom. in conclusion, i thank the audience and the organizers of this conference, and wish you all success in your deliberations.
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hamad al - sayari : housing finance in the kingdom of saudi arabia speech by his excellency hamad al - sayari, governor of the saudi arabian monetary agency, to the β conference on housing finance in the kingdom β, riyadh, 17 january 2007. * * * dear audience, it gives me a great pleasure to inaugurate the activities of the second day of the β conference on housing finance in the kingdom β. i would like to thank euromoney and all other entities organizing this important and vital conference in the kingdom at a time when we need, more than any time before, to shed more light on the issue of real estate finance, exchange views and benefit from the experiences of other nations in this area. undoubtedly, this will contribute to developing the proper strategies and mechanisms to overcome the challenges of finance in this significant sector. dear audience, as everybody knows, the saudi economy, in general, and the housing sector, in particular, have witnessed strong growth during the past years. the accelerated population growth rate in our country is considered among the highest growth rates in the world, calling for more financing needs for various development sectors, especially the housing sector. the government of saudi arabia, represented by the real estate development fund, has made, and continues to make, great efforts, under its development plans, in order to provide necessary finance to ensure the provision of appropriate housing for saudi citizens, especially those of limited income. the government has enhanced its efforts in this area by raising the capital of the fund by rls 9. 0 billion to rls 92 billion as from 2006. however, the accelerated population growth and the rising demand for housing have urged the creation of other real estate financing mechanisms in addition to the government β s financing mechanism. more finance and contribution by the private sector and reducing reliance on the government will give the private sector an opportunity to play a key role in this area which offers lucrative investment opportunities. nonetheless, it is fair to say that the private sector in general and the banking sector in particular seek to obtain more guarantees to enter as financers in this vital sector. this demands working effectively by all relevant entities to develop mechanisms for meeting the rising demand in this sector. dear brothers, over the preceding years, the kingdom of saudi arabia has undertaken many economic reform measures, updated and streamlined its laws and regulations, restructured the national economy, approved a number of mega development projects, and joined the world trade organization ( wto ). it has
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chang yong rhee : welcoming remarks - international conference on green finance welcoming remarks by mr chang yong rhee, governor of the bank of korea, at the opening ceremony of the international conference on green finance, co - hosted by the 2050 presidential commission on carbon neutrality and green growth and the bank of korea, seoul, 20 june 2023. * * * good morning, ladies and gentlemen. i am chang yong rhee, governor of the bank of korea. i wholeheartedly welcome all the attendees here at this conference jointly organized by the 2050 presidential commission on carbon neutrality green growth committee and the bank of korea. i would like to express my sincere gratitude to cochairman sang - hyup kim, who passionately serves as a " green man, " to mr. daeyoung kwon, standing commissioner of the financial services commission, for his keynote speech on " strategies to pursue korean - style green finance, " and to ms. benedicte nolens, head of the bis innovation hub hong kong centre, for accepting our invitation to give a presentation. i would also like to welcome all the government officials, bankers, and corporate representatives who will be presenting and discussing in the sessions, and all those who are attending this event. last, but not least, i would like to express my deep gratitude to imf managing director kristalina georgieva for sending a very special congratulatory video. today, it holds special significance for the bank of korea that we are hosting this conference with the carbon neutrality green growth committee. as we celebrate our 73rd anniversary, it is a fresh experience for the bank of korea to move into a new building and to hold our first conference with a government agency. furthermore, the climate change response, the theme of today's conference, is a global issue that demands individual roles and collective efforts from us all. in my speech at the bank of korea's anniversary ceremony on june 12, i mentioned the need to prepare for changes in the economic structure, namely the new normal after the pandemic. it is a well - known fact that the climate change response is one of the key challenges to prepare for this new normal. i would like to explain the reasons for this with three points. first, the environmental challenges posed by climate change directly impact our quality of life. over the past 20 years, approximately 4 billion people worldwide have been affected by climate disasters, resulting in over 500, 000 deaths, and estimated economic
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andreas dombret : banking on big data β different policy issues? statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the third frankfurt conference on financial market policy β digitizing finance β, frankfurt am main, 6 november 2015. * * * thank you for giving me the opportunity to briefly state my opinion on data - based banking and policy issues. first of all, i would like to talk about one received idea in connection with new technologies flooding the financial sector that i find somewhat misleading. it is a common perception that fintechs have been set up purely in opposition to banks. as a matter of fact, their distinctive features are the all - embracing use of it and, in particular, internet - based technologies and their business structure and appearance. they may look different from traditional banks and they may care about customers β needs, such as 24 / 7 accessibility, ease of use and individualised services, but that doesn β t render the basic financial functions of banks obsolete. some fintechs have even already acquired a banking license. although the appearance of banking business and its technical implementation may very well change across the entire sector, banks as they are defined by regulation are still necessary and important players in our financial system. you cannot grant loans to businesses or offer deposits without adhering to the prudential requirements regulators impose on banks. our financial system relies on licensed monetary intermediaries, and computer algorithms don β t change this fact. nevertheless, banks are definitely coming under pressure with respect to their profitability and visibility. fintechs naturally focus on the most profitable areas of banking. this implies that banks have to deal with new competitors, and it is conceivable that we will encounter substantial changes in the composition of the sector over the next decade. but banks are not destined to become obsolete. first of all, banks have built up trusting relationships with customers, which includes knowing about the business and also knowing about changes in regulation over the past decades. and there is not only a competitive relationship between banks and technological innovators. from what i gather from the sector, fintechs are frequently approaching banks as soon as their ideas have matured. banks are not likely to be as innovative and as quick off the mark as newcomers, although many cooperative arrangements are possible. with regard to regulation, this means that we should stop drawing an imaginary line between technology - driven and traditional approaches to financial services. regulation by no means serves to
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of the payment system. it was felt and agreed between the government and the state bank of pakistan that major deep rooted reforms had to be undertaken as cosmetic changes have not achieved anything tangible. as a regulator and supervisor as well as adviser to the government, the sbp carried out diagnostic studies, prioritized the constraints facing the banking sector, designed the reform strategy and action plan, sought the assistance of the government of pakistan and international financial institutions, monitored the progress and made policy, regulatory and institutional changes to facilitate the process. where does the government come in the picture and what did it do? the musharraf government made some critical policy decisions, i. e. they will not keep the banks under government ownership and control but privatize them. politically tough problems such as reducing the labour force and closing down redundant and unprofitable branches were dealt with boldly. the government injected rs. 30. 7 billion to offset the losses incurred by these nationalized commercial banks and recapitalize them. professional bankers were appointed as chief executives and persons from private sector enjoying reputation of competence and integrity on the board of directors. i must say that the nawaz sharif government in 1997 had initiated some of the reform measures by appointing chief executives, boards of directors on non political, nonpartisan basis for the first time. that government had also injected fresh equity to strengthen the capital base of the nationalized commercial banks. both sartaj aziz sahib and ishaq dar sahib were very much committed to put these banks on sound footing. they did away with the undue interference of labour unions in decision making process of the banks, abolished the pakistan banking council and gave autonomy to the state bank of pakistan. the point i would like to highlight in this context is that continuity of reforms and sound policies that transcend political partisanship and survive political regime changes are good for the country and also for these political parties. what were the major reforms that had been implemented during the last seven years? i would not go into the details of each one of them, but summarize some of the salient features : ( i ) privatization of ncbs : all the nationalized commercial banks, except one, have been privatized. as a consequence their domination of the banking sector has been reduced from almost 100 percent in 1991 to about 20 percent by june 2004. even in the case of national bank of pakistan 23. 5 percent shares have been floated through stock market mainly aimed at small retail investors
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connected. to facilitate networking opportunities, a special section has been created on iclif β s website to cater for the activities of the alumni association. this would include the facility to disseminate information among its membership, including the publication of an alumni directory, highlights of important events and latest developments that may be of interest to its members. the centre will serve as the secretariat to support all activities undertaken by the alumni association. as we advance forward, the reputation, image and stature of the centre will depend on the performance of its participants and their contributions to the environment and the organisations they represent. iclif regards its alumni members as important and looks forward to your continuous support to building iclif into a regional centre of excellence for leadership development in financial services. while iclif has put in great efforts in working with leading international consultants and the best schools in the design and delivery of its leadership development programmes, we see this as an evolving process. in this context, we see alumni members as an important sounding board in providing feedback to enhance the relevance and effectiveness of iclif β s programmes. as beneficiaries of iclif β s programmes, the alumni members are the best intermediaries in making iclif better known to the industry. ladies and gentlemen, iclif leadership competency model one of the first initiatives by iclif upon its inception is to develop a unique leadership competency model that will analyse and enhance the understanding of what makes for great corporate leaders in the regional context. the competency model was developed through a participatory process involving strategic insights by industry leaders in the country and the region. this was achieved through behavioural - event interviews as well as benchmarking exercises based on literature research and the database of leadership competency models of world class companies. the preliminary model was further refined in a validation seminar attended by visionary and prominent leaders with proven track record of business performance excellence from both the private and public sectors. the model forms the foundation to guide the philosophy and drive the design and delivery of iclif β s leadership development programmes. i wish to take this opportunity to express our appreciation to the industry luminaries who have given so much of their time in participating in the validation seminar for the iclif leadership competency model. let me share with you some of the interesting findings of the consultants in assessing our leaders based on the competencies identified in the model. among the positive findings of the exercise was the observation by
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ratio has been on a declining trend, from 73. 2 % in 2006 β 07 to 66 % in 2012 β 13 ( and the central government β s debt / gdp ratio is only 46 % ). moreover, the debt is denominated in rupees and has an average maturity of more than nine years. bis central bankers β speeches india β s external debt burden is even more favorable, at only 21. 2 % of gdp ( much of it owed by the private sector ), while short - term external debt is only 5. 2 % of gdp. india β s foreignexchange reserves stand at $ 278 billion ( about 15 % of gdp ), enough to finance the entire current - account deficit for several years. even if you count all of trade credit as well as maturing deposits held by overseas indians as short term debt, india β s reserves can pay them all down and still have money left over. that said, india can do better β much better. the path to a more open, competitive, efficient, and humane economy will surely be bumpy in the years to come. but, in the short term, there is much low - hanging fruit to be plucked. for instance, we are committed to developing our financial system, and carefully expanding access to finance can be a source of tremendous growth in the years to come. we are also embarked on large infrastructure projects. for example, the delhi mumbai industrial corridor, a project with japanese collaboration entailing over $ 90 billion in investment, will link delhi to mumbai β s ports, covering an overall length of 1483 km and passing through six states. this project will have nine mega industrial zones of about 200 β 250 sq. km., high speed freight lines, three ports, six airports, a six - lane intersection - free expressway connecting the country β s political and financial capitals, and a 4000 mw power plant. we have already seen a significant boost to economic activity as india built out the golden quadrilateral highway system, the boost from the delhi mumbai industrial corridor can only be imagined. the best of india is yet to come. back to the cricketing analogy, india is an open argumentative society. but we are prone to mood swings, perhaps more so than other societies, perhaps in part driven by our excitable competitive and very young press. stripping out both the euphoria and the despair from what is said about india β and from what we indians say about ourselves β will probably
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not structural problems. they are all fixable by means of modest reforms. this is not to say that ambitious reform is not good, or is not warranted to sustain growth for the next decade. but india does not need to become a manufacturing giant overnight to fix its current problems. the immediate tasks are more mundane, but also more feasible one : clearing projects, reducing poorly targeted subsidies, and finding more ways to narrow the current - account deficit and ease its financing. over the last year, the government has been pursuing this agenda, which is already showing some early results. for example, the external deficit is narrowing sharply on the back of higher exports and lower imports. the government and the reserve bank said it would $ 70 billion this fiscal year, down from $ 88 billion last fiscal year, but recent data suggests it could be lower still. this leads me to another point. because analysts keep looking for major structural reforms to fix the deeper economic challenges, they ignore smaller steps or dismiss them as β band aids β. but strategically placed small steps β strategic incrementalism for want of a better term β taken together can deal with the immediate problems, thus buying time and economic and political space for the major structural reforms. put differently, when the indian authorities said they would bring the fiscal deficit below 5. 3 % last year, no one believed them. the final outturn was 4. 9 %. similarly, while we project the cad to come down to 3. 7 % this year, i think we could be pleasantly surprised. not all the actions we have taken are pretty, and not all are sustainable, but they have done the job. indeed, despite its shortcomings, india β s gdp will probably grow by 5 β 5. 5 % this year β not great, but certainly not bad for what is likely to be a low point in economic performance. the monsoon has been good and will spur consumption, especially in rural areas, which are already growing strongly, owing to improvements in road transport and communications connectivity. the banking sector has undoubtedly experienced an increase in bad loans, often owing to investment projects that are not unviable but only delayed. as these projects come onstream, they will generate the revenue needed to repay loans. india β s banks have the capital to absorb losses in the meantime. likewise, india β s finances are stronger than in the typical emerging - market country, let alone an emerging - market country in crisis. india β s overall public debt / gdp
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tiff macklem : managing risks in the new global economic landscape remarks by mr tiff macklem, senior deputy governor of the bank of canada, at the national insurance conference of canada, vancouver, british columbia, 27 september 2011. * * * it is a great pleasure to be speaking here in vancouver at the annual national insurance conference of canada. few industries know more about the personal, economic and financial impacts of disasters β or β extreme events β as insurance experts like to call them. and few know more about risk management. today i want to talk about both topics β an extreme event and private and public risk management in its wake. this morning you discussed earthquake insurance. earthquakes, like other natural disasters β tsunamis, hurricanes and ice storms come to mind β are entirely exogenous, extreme events β acts of god, if you will. they are not preventable, although their impact can be reduced by building resilience and by timely and effective disaster response. your industry, of course, plays a vital role in helping households and businesses to mitigate the consequences of natural disasters. other extreme events are endogenous β or manmade. the recent financial crisis falls into this category. the crisis that began in august 2007 and exploded in the autumn of 2008 was self - inflicted. the financial system was fragile and it failed. we are still paying. we will be paying for many years to come. the global recession that followed the financial crisis was the deepest since the great depression. and today, we are two years into what is shaping up to be the weakest recovery since the great depression. this is the new economic and financial landscape we find ourselves in. and while it may be less than we desire, it should not be terribly surprising. the lesson from history is that the recessions that follow financial crises are bigger than normal recessions. on average, the loss in output in a recession after a financial crisis is two to three times the loss in a normal recession. output falls further in a recession after a financial crisis. normally, the deeper the recession, the sharper the recovery. not so with the recoveries after financial crises. recoveries after a financial crisis are slower. typically, it takes output twice as long to return to its pre - recession level after a financial crisis than in a normal recovery, and output is permanently lower compared with its pre - crisis growth trajectory. the essential reason for this is that the legacy of a financial crisis is a lot of debt,
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delivering on fiscal austerity in key countries and full implementation of announced measures to make the european financial stability facility more flexible. but more is required. the immediate priorities are to provide a funding backstop for vulnerable european sovereigns that is sized to the scale of the problem and a comprehensive capital plan for european banks. in our opinion, this can be done by using existing european resources more efficiently. these steps must be complemented by governance reforms and credible fiscal arrangements within the european monetary union. in other advanced countries, the priority must be to agree on credible, concrete and executable plans to restore fiscal sustainability consistent with the commitments made at last year β s g - 20 leaders summit in toronto. in many emerging - market economies, greater exchange rate flexibility is necessary to better manage demand pressures and inflationary risks, while facilitating a global rebalancing of demand. greater exchange rate flexibility between the united states and china is required to help the recovery in the former and control inflation in the latter. finally, advanced and emerging countries alike must implement agreed financial sector regulatory reforms to build a more resilient financial system that better serves the needs of households and businesses. in the face of a difficult external environment, the bank of canada will continue to support canada β s economic expansion by keeping inflation low, stable and predictable. bis central bankers β speeches since the crisis erupted four years ago, the bank has demonstrated its nimbleness in the conduct of monetary policy. we reacted quickly and forcefully during the downturn. as the canadian recovery has progressed, we have emphasized that we would be prudent with respect to the possible withdrawal of any degree of monetary stimulus. conclusion i must conclude. recoveries after financial crises feel more like a convalescence. for private sector investors, the fundamentals of sound portfolio management have not changed, but the economic landscape has. sovereign debt is no longer a risk - free asset, the shift in the economic centre of gravity to emerging - market economies has accelerated, and low - for - long interest rates are changing behaviours and straining some business models. the private sector bears much responsibility for the excesses at the heart of the 2008 β 09 financial crisis. risk management can and should be strengthened, and adapted to new realities. public policy has a critical role to play in mitigating systemic macroeconomic risks. more action is needed to contain sovereign risks, promote a rebalancing of global demand and implement financial regulatory reform. the distant horizon of the new
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was bulging, markets concluded that interest rates would change ; if it was thin, they concluded that no change was likely. in the end, such ways of gauging what the central bank is up to are quite unreliable. markets might easily draw the wrong conclusions and this might lead to unwanted volatility and turbulence. that is one of the reasons why today, almost everyone agrees that central banks need to be transparent. it helps them to steer the expectations of markets and make their policies more effective. at the same time, it helps them be more accountable. both of these things have become even more important against the backdrop of our unconventional measures. so we need to communicate very carefully on our next steps. we must help markets get an idea of what the exit will look like. and we mustn β t confuse them with vague or ambiguous ideas. we have to strike a delicate balance. and in my view, we need to find this balance now. as of today, it is clear which sequence the exit will follow. bond purchases will come to an end, while interest rates will remain low, well past the horizon of net asset purchases. but we still need to decide on a timeframe. from my point of view, it is important that we really move towards the exit β step by step, but steadily and in a clear direction. conclusion ladies and gentlemen, i began by saying that the days of β boring β central banking are over. and i do hope that i have shown that to be true. what is safe to say, though, is that central banks have stepped into the limelight and become a focal point of public debate. and it is a controversial debate. some argue that the ecb handled the crisis well. others are much more critical. who is right? today i have argued that, given the low inflation, monetary policy needed to be expansive. admittedly, the appropriate degree of expansion and the necessary tools are moot points. in any case, we must bear in mind that some of the ecb β s more unconventional tools also have side effects. and these side effects will grow in magnitude the longer the tools are used. so, the future holds the final answer to our question of whether monetary policy was optimally calibrated. if we manage to put the unconventional tools back into the box when the time comes, we will be able to claim that the ecb successfully achieved its objective. and in my view, this time has come. we need to
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every 6 to 7 anti - dumping cases were filed against chinese companies. by the end of 2003, a total of 540 anti - dumping cases had been filed against china β s products. third, competition in the service industry has intensified. one weakness of the chinese economy lies in the underdeveloped service industry. growth of china β s service industry failed to match that of the manufacturing sector. the service industry accounts for 65 percent of the world gdp. it averages 70 percent for developed countries and 50 percent for developing nations, but lingering around 30 percent for china. china β s major telecommunications companies have long been constrained narrow business scope, resulting in persistently weak competitiveness. in the retail market, foreign companies like wal - mart and carrefour, have obvious advantages in terms of capital, management, procurement and distribution. the gap is even larger with the developed countries with regard to financial services. the chinese financial institutions are plagued by poor asset quality, capital inadequacy and less diversified products. there exists a big gap between the chinese and foreign financial institutions in terms of business operation, management skills and staff quality. in the 2nd quarter of 2004, non - performing loans recorded by the state - owned commercial banks reached rmb1. 8898 trillion yuan, accounting for 19. 2 percent of their credit assets. for the time being, the fiercest competition between the domestic and foreign institutions is over the so - called β high - end β clients as 80 percent of the profits of the financial industry is generated from business with these high - end customers. meanwhile, competition over quality staff is also becoming ever intense. in a broader perspective, the chinese economy has been growing at a fast speed since the beginning of reform and opening up, but its competitiveness has unfortunately not recorded the same impressive improvement. the global competitiveness report published by the world economic forum in november 2003 ranks china β s growth competitiveness the 44th among 102 economies in the survey while its commercial competitiveness the 46th among 95 economies. and of the β fortune 500 β, only 14 companies are from china ( if those from hong kong, taiwan and macao are not included ). iii. deepening reform and opening wider to improve china β s corporate competitiveness in face of all these challenges, we did not blame other countries, but have resorted to more aggressive reform to improve our competitiveness. the 3rd plenary session of the 16th national congress of the communist party emphasized the strategic objective of improving socialist market economic
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emerging countries enjoy better coverage ratios from their fx reserves, even if historical experience reveals that, when other fundamentals are weak, high reserves may not offer much protection against market volatility. second, inflation expectations now appear better anchored in a broad range of emerging countries, as a direct consequence of the growing credibility of inflationtargeting regimes. in several cases, public debt is also better managed than in the past, with countries extending the average maturity of their debt and increasingly relying on local currency - denominated issues. finally, the real effective exchange rates appear to be mostly fairly valued or even undervalued after their widespread depreciation in 2018. this said, endogenous sources of vulnerability to future global market turbulence still exist in emerging countries. they need to be addressed if future bouts of local market volatility are to reduce in both size and duration. i would like to mention, in particular, the growing indebtedness of the corporate sector and, to a lesser extent, also of the household and government sectors, which means that, for most of the emerging page 7 of 10 countries, total debt ( public plus private ) is now well in excess of the levels that prevailed before the global financial crisis. similarly, an increase in fx liabilities ( mostly by the private sector ) and, in several cases, growing mismatches between fx - denominated assets and liabilities poses risks in some countries. indeed, even if there is no such mismatch at present, the levels of both fx assets and liabilities are often large relative to gdp, which means that any changes in valuations can quickly generate important swings in a country β s net international investment position. finally, the experience of south africa also highlights the dangers linked to an increased financial fragility of state - owned enterprises ( soes ), as the hard - currency liabilities of soes can rise quickly, eventually turning into additional credit risks for the sovereign. policy options to deal with turbulent times in the beginning of these remarks, i pointed to the support which emerging market currencies and fixed - income assets have received from the rising expectations of us interest rate declines and the fall in long - term bond yields, both in the us and in other advanced economies. such developments ensure that the yield differentials between emerging countries and their advanced counterparts remain relatively wide, offering some buffer against capital outflows. however, this equilibrium is fragile. if the world economy proves more resilient
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financial requirements are becoming increasingly more sophisticated. this has resulted in a major reorientation of the banking industry to become consumer driven and to become more focussed on consumer needs. this has brought new financial products and services for consumers. the rise of consumerism demands that products and services can no longer be just generic but must now be tailored to meet consumers'evolving needs. with the rise of consumerism, the need to create informed consumers is even more important. as the financial sector continues to rapidly evolve, offering sophisticated products and services to cater for greater and more diverse needs, consumers need to become even more financially savvy. while the consumer has an important responsibility to become more informed, financial service providers, the regulators and the authorities have an important role to provide the enabling and conducive environment that nurtures consumer empowerment. indeed, consumer empowerment begins with financial awareness and consumer education. this in part can be achieved through greater disclosure and by increasing the education outreach to consumers thereby enhancing their ability to make informed financial decisions. ladies and gentlemen, this exhibition aims to provide an enabling platform for consumer empowerment. myfex2007 is a conscious effort to raise financial awareness by bringing together the various entities in the financial system that includes the industry, regulators and other agencies that provide information, the avenues for redress and financial advice with the aim of creating financially informed consumers. in essence, this one stop centre creates a comprehensive opportunity for consumers to improve their financial literacy and for the financial players to engage the consumers. an important thrust of our policies at the central bank is financial inclusion. this is to ensure that every economic activity, geographical region and segments of society have access to financial services thereby promoting a more balanced growth. financial inclusion is supported through a number of strategies amongst which includes increased access to financial services, access to financial information and advisory services and consumer education. currently, 98 % of the adult population in malaysia have a savings account. given this greater financial inclusion, banks need to recognise their role and their special relationship with their customers. customers expect banks to provide relevant financial information to them to ensure that they will be able make informed judgments. avenues for the public to seek redress is also an important part of the financial safety net. the financial mediation bureau provides an alternative redress mechanism between the service providers and consumers on financial disputes. in addition, with the objective of promoting prudent financial management, the credit counselling and debt management agency offers free advisory services. this is to ensure the
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the federal reserve and changed the composition of the types of assets it holds. market monitoring and the knowledge of market functioning has been crucial for the effective translation of broad policy directives for these purchase programs into concrete operational plans. in the case of agency mortgage - backed securities ( mbs ) purchases, initially the federal reserve used external investment managers, acting at the direction of the desk, as a means of implementing mbs purchases. this was necessary because the desk had not transacted in mbs prior to the crisis and thus did not have either the systems or the market knowledge needed to execute purchases efficiently. as the markets group staff developed the operational capacity and analytical expertise, partly by working closely with the investment managers, it began to execute mbs purchases and assumed full trading responsibility in march 2010. prior to assuming their trading role, staff gained an in - depth understanding of the fundamental aspects of the mbs market and technical trading conventions. this expertise allowed the staff to effectively synthesize numerous market indicators and apply them to its trading. for example, understanding supply and demand factors affecting the mbs market is essential in helping to ensure that operations can be executed smoothly. in addition, mbs have an embedded prepayment option, which affects the risk and prepayment characteristics of these securities, and consequently the way in which purchases of these securities influence policy objectives and the federal reserve β s balance sheet over time. the scope of the desk β s market expertise has had to expand in ways beyond supporting new modes of operation. as the financial crisis revealed the importance of maintaining a wide range of financial market knowledge, desk staff covered a broader set of financial markets and instruments compared to the pre - crisis period. we also more explicitly focused on linkages between markets and underlying, longer - term trends that could present financial stability risks in the future. with the expansion of monetary policy into less conventional territory, our analysis of monetary policy expectations had to evolve as well, as evidenced by an increasingly comprehensive survey of primary dealer economists each fomc cycle4. lastly, our own internal analytical capabilities have also deepened, for instance with the creation of a portfolio analytics unit to better assess the risks and outlook associated with the federal reserve β s expanded asset holdings. 5 i anticipate that as the economic and policy environment changes, the desk β s interactions with the market will continue to evolve, both in terms of its operational capabilities and the focus of its market monitoring and analytical responsibilities needed to support federal reserve operations and the
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economy.... to restore trust, we need a shift toward greater integrity and accountability. we need a stronger and systematic ethical dimension. β ) ; mark carney, rebuilding trust in global banking, speech at 7th annual thomas d β aquino lecture on leadership, ontario, february 25, 2013, ( β the real economy relies on the financial system. and the financial system depends on trust. indeed, trust is imbedded in the language of finance. the word credit is derived from the latin, credere, which means β to have trust in. β β ) ; dudley, supra n. 1 ( β unless the financial i see generally onora o β neill, a question of trust 15 β 17, 23 β 24, and 43 β 47 ( 2002 ) ( distinguishing trust from trustworthiness ). ndustry can rebuild the public trust, it cannot effectively perform its essential functions. for this reason alone, the industry must do much better. β ). see generally onora o β neill, a question of trust 15 β 17, 23 β 24, and 43 β 47 ( 2002 ) ( distinguishing trust from trustworthiness ). bis central bankers β speeches untrustworthy or disloyal, will they choose to work in that firm? and, if they do, how will they behave toward the firm and its stakeholders? i am encouraged that the industry seems to understand the importance of reforming its culture. consider for a moment the following data points. in september 2013, shareholders of a major u. s. bank requested that the bank prepare β a full report on what the bank has done to end [ its ] unethical activities, to rebuild [ its ] credibility and provide new strong, effective checks and balances within the [ b ] ank. β that request was forwarded, by the way, by a catholic nun. the bank responded through its attorneys that the nun β s proposal was β materially false and misleading β and β impermissibly vague and indefinite. β 9 fast forward to may 2015. the federal advisory council - a panel of bankers that advises the federal reserve system - reported that β regulators and the banking industry have worked extensively to restore financial stability through a series of mechanisms and rules that establish appropriate levels of capital, liquidity, and leverage.... as often as not, however, the challenges faced in recent years have been behavioral and cultural ; post - crisis episodes such as libor and foreign
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guidelines are derived from the forty recommendations and the subsequent recommendations, in particular applying the principle of β know your customer β, monitoring suspicious transactions, and informing competent security authorities ( financial investigation unit ) of suspicious activities. these guidelines were updated once in 2003 and again in 2008. 5. for the past ten years, sama has collected information on the methods and techniques of money laundering, and provided banks operating in the kingdom with such information for the purpose of building a database in this regard to be linked automatically with the goal of tracking money laundering activities. 6. sama β s inspection team makes periodical inspection visits to banks to insure their proper application of instructions and regulations. any irregularities are detected and reported to concerned authorities to take actions for continually checking that they are corrected. 7. sama has established a permanent committee for regular monitoring of financial crimes in general and money laundering crimes in particular. the committee is made up of members from sama and banks to review the instructions and procedures taken in this regard so as to be applied as required. 8. sama has attached great importance to training in the field of combating money laundering. sama β s iob held 47 training courses benefiting 800 trainees during 2009. several government authorities, which are concerned with anti - money laundering issues, have also made great efforts to train their employees. a number of conferences and symposiums at the domestic and regional levels have been hosted to raise awareness of the issue of money laundering and strengthen human and technical capabilities to combat it. your meeting today in this symposium is only part of sama β s efforts to raise the level of compliance and anti - money laundering. dear audience, despite considerable efforts made to promote the principle of compliance and anti - money laundering that have had a significant positive impact, money laundering criminal activities always seek new techniques to be able to continue. hence, we always need to be alert and cautious, and we should enhance our capabilities and do our utmost to fulfill the tasks entrusted to us. achieving success also requires cooperation among all concerned authorities and exchange of information that would help achieve our goal of dealing positively and effectively with the challenges we face. dear audience, i have looked into the program of this symposium and found it packed with a range of important and useful topics which will be presented by an elite of specialists in this area, and i call on everyone to benefit most from this symposium which will in my view, be reflected positively on our efforts to enhance the principle of compliance and anti money -
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##lding, 15 january 2016. see cΕure, b., β the future of europe : building on our strengths β, speech at the plenary session on β the future of europe β during the fifth german economic forum in frankfurt am main, 6 december 2013. see cΕure, b., β structural reforms : learning the right lessons from the crisis β, speech at the economic conference organised by latvijas banka in riga, 17 october 2014. public investment in the euro area was 3. 2 % of gdp for 1995 - 2005 compared with 2. 6 % projected for 2016, while private investment in the euro area was 18. 7 % of gdp for 1995 - 2005 compared with 17. 3 % projected for 2016. see european commission, annual macroeconomic database, 2015. bis central bankers β speeches the same logic applies to emu. risk reduction on its own will not be sufficient ; we will need to better share the remaining risk as well. the two are complementary. for banking union, this means reducing risks in banks in parallel to establishing a common deposit insurance scheme and a robust fiscal backstop. this is what the commission has proposed, and this is why we support their approach. when we speak about fiscal and economic policies, combining risk sharing and risk reduction means that more pooling of fiscal resources β which i believe is ultimately necessary to provide better insurance against shocks β will have to be accompanied : ( i ) by a new convergence process which ensures that all economies have a similar resilience to shocks ; and ( ii ) by initiatives to restore the credibility of our fiscal rules. these two elements are all about preventing risk sharing from becoming a one - way street, in other words preventing risk sharing from turning into risk shedding. joint decision - making on matters of common concern the second principle we might be able to agree on is that there are policy domains where coordination via rules has run its course and is no longer a viable substitute for joint decisionmaking within common institutions. the argument here has two parts : on the one hand, there should be no doubt that the rules that are in place have to be respected. this is not some kind of theological dogma. this is because it is economically and politically the right thing to do β not only to avoid the macroeconomic instability stemming from excessive imbalances, but also to re - establish mutual trust, which is the precondition for progress. think about the high public debt levels of many member states.
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reviews and stress testing of the banking system, and based on the results of these, develop and implement recapitalization plans together with the banks. 7. eu integration perspective 5 / 7 bis - central bankers'speeches in addition, it's crucially important to have a vision for ukraine's future, and here we have very clear anchor β eu membership. in that respect, landmark steps have already been taken, including the provision by the eu of candidate member status to ukraine. the consequences of this provision should not be underestimated, as we have seen how over the past 30 years or so the eu accession anchor has enabled successful transitions across emerging europe. we understand that the road to full membership could be long and uncertain, but ukraine needs a vision of integration with the eu, which can be of benefit to it in the near term. from our point of view, access to the european single market could be a core element of support. in practical terms, it would create enormous development opportunities for ukraine within the next few years. indeed, the very promise of rapid access to the european single market could increase private investment into ukraine almost immediately β particularly in those areas that have been less affected by the war. certainly, many reforms still have to be implemented. for our part, the nbu is committed to doing everything necessary to bring our regulation of the financial sector into line with eu standards as soon as possible. in fact, in recent years, we have made significant progress in implementing the respective eu acquis, through supporting the adoption of fundamental legislation on banking regulation, insurance, and payment services. in addition, with consultancy support from the ebrd, the nbu aims to align our banking regulatory and supervisory framework with eu standards. the ebrd is also supporting our efforts to achieve equivalence with eu requirements in confidentiality and professional secrecy in the banking system. we also see joining the single european payments area as an important element of our integration with the eu. the nbu has conducted a self - assessment of its compliance with the area's membership criteria, and is now identifying the optimal solution for integration with sepa systems β taking into account the challenges that ukraine faces at the moment. we plan to finalize preparations very soon, and initiate consideration of our case by the eu. 8. concluding remarks in conclusion, i wish to underline the following : there has long been a debate among economists over which type of investment provides the highest yield to the wellbeing of
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to some preconceived notions about germans ) β ordnungspolitik β does not mean that policy makers will put everything in order. precisely the opposite is true! at least theoretically. the state is supposed to create a framework within which market forces are to interact and unfold their dynamism under competitive conditions. in this respect, however, the united kingdom seems to have made more progress than germany in the last decade. while our country has expanded the already overburdened welfare state further and has not sufficiently corrected the overregulated parts of the markets, this country seems to have changed many things radically in the 1980s nowadays, the united kingdom has very flexible structures and markets. and - if i see it aright - there is actually some consensus about the basic stance of such a policy in your country today. in particular, the united kingdom is attaching increasing importance to monetary stability. the bank of england has made great headway on the road towards independence. and the chancellor of the exchequer, gordon brown, has rejected short - termism in terms which even please the president of the bundesbank. so, all in all, it is not unfair to ask whether, in terms of the german postwar yardstick of β ordnungspolitik β, the united kingdom has not now distinctly outstripped its former mentor in this discipline. [ in a way, just the opposite of developments in soccer. ] iii the relationship between good economics and anglo - saxon thinking is also reflected, in a sense, in the history of the german view as to how european integration should be structured. it was certainly no accident that ludwig erhard ( the neo - liberal economist and architect of the social market economy in the postwar years ) sought to include the united kingdom in the european integration process at an early stage. but konrad adenauer, the wily politician, attached overriding priority to the franco - german relationship. this was motivated by different goals and hence different strategies. adenauer β s prime target was to overcome the franco - german conflict by making progress in political integration. in his view, the establishment of european institutions in the framework of a closely - knit community - even if, or more exactly when, the latter comprised only a few of the free states of europe - was an appropriate means of durably safeguarding the political integration of the two large continental rivals, which had been enemies for centuries. erhard adopted a different approach.
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mugur isarescu : romania and the eib after 25 years opening speech by mr mugur isarescu, governor of the national bank of romania, at the eib conference " investment and investment finance in romania ", bucharest, 4 december 2018. * * * vice president mcdowell, distinguished guests, ladies and gentlemen, i would like to welcome you all at the national bank of romania. allow me to extend a warm greeting to mr. andrew mcdowell, vice president of the european investment bank and to ms. debora revoltella, chief economist of the european investment bank. it is a privilege for the national bank of romania to co - host with the european investment bank this conference on investments and investment finance. the european investment bank celebrates this year its 60th anniversary since its creation in 1958, under the treaty of rome. allow me to congratulate this important institution and the teams of the eib office in romania and the eib office in luxembourg, for their outstanding work and diligence in promoting strategic investment projects for europe and romania. the topic proposed for today β s conference outlines the fact that 2018 has been rich in lessons for the future, showing the impact of policy decisions upon the economic development. the economic growth is strongly linked with the economic cycle, but its durability is dependent on long - term strategic investments by far more than short - term consumption boost. i invite you all to debate the subject of investments and investment finance in romania during the two panels of today β s conference. the first panel will be moderated by mr. liviu voinea, deputy governor and will approach the theme of investments and investment finance in 2018. the second panel will be moderated by ms. lara tassan zanin, head of the european investment bank office in romania and will focus on the support of sustainable growth in romania, shifting from consumption to investments. ladies and gentlemen, romania and the european investment bank share a long and fruitful cooperation that started in 1990. it got closer in 2007 when romania became a member of european union and implicitly of european investment bank. this joint partnership has boosted investments in romania in areas of significant importance for the national economy, such as the infrastructure, small and medium enterprises, environment and innovation. these coordinates are totaling more than 13 billion eur allocated to around 130 projects financed by the european investment bank, besides other 70 projects financed by the european fund for strategic investments. these figures alone speak about the priorities, however i would
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european developments, includes an average increase in bond yields of 75 basis points unevenly distributed across countries ( no increase for germany and more than 200 for some more vulnerable countries ), accompanied by an average drop of 10 % in equities. the outcome of the two scenarios indicates a negative impact on banks β common equity tier 1 ( cet1 ) capital hovering around 200 basis points in terms of deviation from the baseline scenario. this impact has to be considered against the comfortable present average cet1 ratio of 14 % enjoyed by the euro area banks. it is also important to recall that market sentiment towards euro area banks has continued to improve, despite some gyrations that broadly reflect developments in interest rate expectations ( figure 16, lhs ). while contagion from the recent events of bank resolution and liquidation remained contained, these events have also highlighted the important challenges regarding the resolvability of weak banks. notwithstanding some recent progress in non - performing loan ( npl ) disposals, the large stock of npls remains a key structural concern in several countries. in addition, overcapacity and cost inefficiencies continue to weigh on bank profitability in certain banking markets. 16 / 20 bis central bankers'speeches the economic recovery, the expected steepening of the yield curve and even the progress being made in reducing the npl level from the average peak of 8 % in 2013 to the more recent average of 5. 5 %, have improved the market assessment of future banks β profitability. analysts β earnings forecasts for 2017 and 2018 have been revised upwards since the u. s. elections, even if net interest income expectations have changed only marginally, despite improving economic conditions ( volume effect ) and ( prospective ) higher long - term interest rates ( price effect ). analysts revised their earnings forecasts between october 2016 and january 2016 ( see figure 16 black dot in left bar ) and between august 2017 and november 2016 ( black dot in right bar ) with the respective contributing factors. while forecasted net interest income was a drag on net income in the first period it contributed positively in the second period. forecasted loan loss provisions contributed positively in the second period because they became less negative over the period november 2016 β august 2017 while forecasted operating expenses increased. macroprudential policy let me now turn to the role of macroprudential policy in this risk environment. the objective of macroprudential policy is to prevent and mitigate systemic risk by strengthening the res
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harnessing big data & machine learning technologies for central banks closing remarks by the deputy governor of the bank of italy luigi federico signorini rome, 27 march 2018 ladies and gentlemen, this two - day workshop on β harnessing big data & machine learning technologies for central banks β is now drawing to a close. let me begin by thanking all the speakers, discussants and participants who have contributed to the success of this initiative. i have the pleasure of sharing with you some thoughts on the main issues. the papers presented during this two - day workshop have left no doubt as to the actual and potential value of big data and their importance for economic analysis. the present wave of data warehousing and business analytics confirms this, with big data poised to deliver topline research and statistical applications in a cost - effective way. huge amounts of data can provide substantial insights for the private and public sectors, enabling them to transform these data into new products and services for customers and citizens. big data are already changing some aspects of business in the financial industry with regard to banks, hedge funds, broker - dealers, and other firms. central banks and supervisors are also interested. the widespread adoption of digital technology has increased the number and depth of information sources of interest to economic analysis and financial stability, two of the core concerns of financial authorities. we are not only voracious data users, we are also big data producers. we collect terabytes of granular data in the fields of banking supervision, oversight of financial markets and payment systems. central banks can and should harvest the benefits of new technologies. we should select the best technology and exploit its power in turning ideas into actual applications and improved statistical and computing efficiency. the potential is huge, but there are, as usual, pros and cons. there are important trade - offs that must be kept in mind. i see two main issues, or rather groups of issues. one is technical, and some papers in this workshop have pointed to it. we need to keep analysing and experimenting in order to be able to assess the real information value of big data bases. β n = all β, as in the popular definition by mayer - schonberger and cukier 1, may sometimes be illusory. sometimes big data turn out not to be representative of the whole population. for example, groves ( 2016 ) 2 argues that big data often contain few variables and extracting their value requires linkages to other data ; furthermore, they lack representative
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advanced liquidity management facility ; bis central bankers β speeches extensible markup language ( xml ) / iso 20022 / swift compatible based messaging system conforming to international standards ; and real time information and transaction monitoring and control system. conclusion to summarise, indian banks have traversed a long way in their journey to provide efficient, customer centric services. banks have to adapt to greater regulation, competition and consolidation as also meet increasingly diverse and demanding customer expectations. in such a scenario, adoption of information technology and cbs in particular has been immensely useful in the progress made, so far. but, there is need to look beyond cbs for leveraging technology for still better and efficient growth. while the advent of state - of - the - art technologies and global best practices undoubtedly offer improved agility, efficiency, and faster implementation cycles, banks need to be mindful of the challenges associated with deployment of it. these challenges, once understood and mitigated properly, are perfectly manageable. the times to come will require much more professional and sophisticated it leadership with vision than ever before. as history indicates, successful banks are those that have understood the potential of new technologies and aligned themselves to fully leveraging its power. these are banks that have focused on the adaptive change that made the technology transformation process successful. while talking of challenges, one of the challenges that the entire banking industry and service providers will increasingly face is the ability to provide required services to customers in an uninterrupted manner in normal times, and more so while facing adverse circumstances like catastrophes, sabotage, war, riots, power supply failures, endemics etc. extensive use of technology has also lead to significantly increased infrastructure sharing and interdependence. moreover, since financial markets are in a state of high integration, problems in one segment like payment and settlements can lead to severe impact in several other areas, particularly if some problems occur at some significant market participant / service provider β s end. business continuity management and disaster recovery preparations, therefore, need to be given high importance. gone are the days when bcp and dr were generally documented, but not effectively monitored and dr was understood to be limited to data backup arrangements. recently, there was an incident where a large number of customers in a large bank had to face inconvenience as the working of the bank was impacted for considerable time due to technical issues. it is possible that something important might have been missed out in the planning, implementation or testing of bcp
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( bpl ). majority of these will be in this sub - continent and banks will have an opportunity to participate in this process, which will bring sustainable peace and prosperity to the mankind. for achieving the goal of financial inclusion, experts have recommended the business correspondent / facilitator ( bc / bf ) model. however, some recent studies have pointed out that the bc model at the initial stage, may not be commercially viable due to a high transaction cost for the banks and customers. here, the appropriate use of technology can help in reducing the transaction cost. the need of the hour is to develop and implement scalable platform independent technology solutions which, if implemented on a larger scale, will bring down the high cost of operation. technology, thus, really holds the key for financial inclusion to take place on an accelerated scale. the need of the hour is leveraging technology in indian banking for providing affordable and cost - effective banking services to the masses through multi - delivery channels. all of us know that apart from traditional business, banks nowadays provide a wide range of services to satisfy the financial and non - financial needs of all types of customers from the smallest account holder to the largest company and in some cases of non customers. the range of services offered differs from bank to bank depending mainly on the type and size of the bank. the key enabling factor has been the adoption of technology. banking industry is fast growing with the use of technology in the form of atms, on - line banking, telephone banking, mobile banking etc., plastic card is one of the banking products that cater to the needs of retail segment has seen its number grow in geometric progression in recent years. the internet banking is changing the banking industry and is having the major effects on banking relationship. retail banking in india is maturing with time ; several products, which further could be customized are in the retails segments of housing loan, personal loan, education loan, vehicle loan, etc. being convinced that technology is the key for improving in productivity, the reserve bank took several initiatives to popularize usage of technology by banks in india. periodically, almost once in five years since the early 1980s, the reserve bank appointed committees and working groups to deliberate on and recommend the appropriate use of technology by banks given the circumstances and the need. even as global financials face growth and asset - quality issues, indian banks continue to offer a healthy growth trajectory with minimal balance - sheet risks. despite the high growth rate of the past decade, penetration
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k c chakrabarty : banking and finance in india β developments, issues and prospects inaugural address by dr k c chakrabarty, deputy governor of the reserve bank of india, at the 62nd international banking summer school ( ibss ), jointly organized by the indian institute of banking & finance and indian banks β association, new delhi, 31 august 2009. the assistance provided by dr. deba prasad rath and mr. sujit k arvind in preparation of the address is gratefully acknowledged. * * * mr. m. v. nair, chairman iba and chairman and managing director of union bank of india ; mr. bhaskaran, chief executive officer, indian institute of banking and finance ; representatives from ebtn, distinguished participants from different parts of the globe, invited guests, ladies and gentlemen : i am delighted to be here amidst all of you at the 62nd international banking summer school ( ibss ) being organised by the indian institute of banking and finance ( iibf ) jointly with the indian banks'association ( iba ). i am thankful to the organisers and sponsors for providing me an opportunity to share my views and interact with you at a forum which i personally rate very high. central bankers talk among themselves in various fora, it is high time that the bankers talk with each other. the school, open to senior bankers and financial professionals, as we are aware is a 10 days'brisk academic exercise that provides a platform for the practitioners of banking and finance to learn and share the latest developments in the banking and finance field, best practices and products available in today's fiercely competitive global banking arena. in the present situation of global turmoil that we have been going through in the last two years, this forum will provide opportunities to the bankers and finance professionals for understanding each other better. the exchange of views and the ideas which are going to be generated here during the next ten days will certainly throw useful insights and better understanding on how to overcome such problems in future which will be of great relevance in shaping the banking operations in future. i am saying so, as i am sure, in times to come, many of you are going to occupy high positions in banks and financial institutions including positions of chief executive officers ( ceos ). the takeaway from the school is, therefore, of great importance. considering the theme of ibss this year and more focus on managing banks in the era of turbulence, i think it would be appropriate if
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since 1916, when many australians left our shores to fight in the first world war. graph 3 population growth % % projection - 2 - 2 sources : abs ; australian treasury ; rba the fast population growth of recent decades has been a major factor shaping our economy. it has underpinned our relatively fast growth in gdp compared with other advanced economies. it also slowed the ageing of the population, given that the new arrivals have been fairly young. the large number of students coming to australia has also boosted our education sector. and the effects of fast population growth have also been felt in our housing market and in pressure on some of our infrastructure. so the effects have been widespread. looking to the future, it remains hard to predict when the borders will open again and when they do, what the rate of new arrivals will be. if population growth is to be noticeably slower in a post - covid world, the trajectory for our economy will look different too. a changed property market a third area where the pandemic is having a marked effect is on our property market. it is a complex picture here, with the market simultaneously adjusting to : a recession ; lower population growth ; record low interest rates ; substantial government incentives to support residential construction ; and changes to the way that people work, shop and live. so there are a lot of moving pieces at present and the effects are very uneven across different types of property and across the country. the effects of the pandemic are most obvious in the market for retail properties in our cbds, where vacancy rates have increased sharply ( graph 4 ). not surprisingly, rents and the capital values of these properties have both fallen. there has also been an impact on the cbd office market, as people work from home. the national office vacancy rate has increased sharply this year and further increases are expected ( graph 5 ). but even here, there is considerable variation across our cities, with the biggest increase in cbd office vacancies in sydney and melbourne. in contrast, the markets for industrial property have been stronger, with increased demand for warehousing and distribution facilities as people increasingly shop online. graph 4 retail vacancy rates * by property type % % cbd retail 10. 0 10. 0 7. 5 7. 5 5. 0 5. 0 regional * * 2. 5 2. 5 0. 0 * * * vacancy rates for specialty stores centres anchored by department stores source : jll research 0. 0 graph 5 office vacancy rate
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, but all over the world, have been insufficient, was to take care of the distributional consequences of reforms that basically were positive for growth, but not necessarily for equity. back to the italian elections : aren β t you worried about the fact that in one of the most pro - european countries traditionally, the anti - european forces have gained more than 50 % of the votes? what does this mean for the european project? don β t you think that it 7 / 10 bis central bankers'speeches could jeopardise even the euro area reforms? it β s the third biggest country in europe, in the eurozone. my second question is on this day, it β s 8 th march, it β s women β s day. don β t you think it is a little bit sad, with all respect for mr de guindos, that there are always men appointed for the ecb and that the presence of women in the governing council is still so rare? draghi : on the first question, i really don β t want to comment. i can only say that the euro is irreversible and progress on deepening β and i just read it in the introductory statement, where the governing council β s view about this can be found β the governing council says that deepening 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. now, on what you said, certainly i think the gender balance ought to be improved. this ought to happen at all levels. by the way, let me congratulate mr de guindos because the governing council approved him. i am absolutely confident that he is going to be a very, very good colleague for all of us. as far as the ecb is concerned, there will be a press release because we are also working on improving our gender balance situation. there will be a press release stating what sort of initiatives we β ve undertaken and the board has approved recently. these initiatives are undertaken because we β ve made significant progress since we set explicitly our targets β explicit targets which had not been set before. still, this progress is less than what we wished for. the numbers now fall short of our interim targets. we introduced the gender targets in 2013 and the interim now, right now β actually at the end of last year β 27 % of management positions were held by women compared with an interim target of 29 %. for the most senior management
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charter commitments. as at the end of the 2021 / 22 financial year, regulated banks rated our relationship highly. 93 % of bank participants gave a rating of 4 or 5 out of 5, compared to 91 % in 2021 and 68 % in 2020. no bank participants gave a low rating. in this the second year the insurance sector has been surveyed, 72 % of insurer participants rated their relationship with us highly ( 4 or 5 out of 5 ), which was an increase from 67 % last year. overall, banks and insurers'responses to the 2022 survey indicate that we have continued to build on the gains made on our key performance measures. our people and capability we have also been in a period of deliberate growth in people to build the capacity and capability where we need it. and at the same time we've been working to ensure our people are well supported, appropriately paid, and feel valued and included. i want to take this opportunity to acknowledge my colleagues for their many, significant, contributions during this period. growth and transformation 4 / 7 bis - central bankers'speeches our transformation strategy has been well planned so as to keep pace in a changing operating environment. our funding proposal 2020 - 25 identified the need for significant investment in people, technology, and systems, and has detailed information on what it means for each area of our work. the formal questions included in your pack also contain a wealth of facts, figures, and five - year history. i will summarise by saying we are implementing the new reserve bank of new zealand act that maintains our mandates while modernising the way we operate. the act has significant implications for our broader legislation ( the deposit takers act currently in consideration in parliament ), as well as governance, digital capability, business services, and capacity and capability development. during the year we completed a bank - wide function and leadership review, and resulting reorganisation. this included the creation of reshaped business units, an expanded executive leadership team, and a supporting tier of operational leaders undertaking 28 functions in total. the roles are designed to have balanced portfolios and an appropriate span of control to improve efficiency and depth of knowledge. we are pleased that many of our existing senior leaders filled these new or reshaped positions. overall, the turnover rate for te ptea matua as at 30 june 2022 was 21. 7 %. this aligns with the overall public sector rate of 21. 7 % for the same period, but includes the necessary bank
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subsequent rise in international food and energy prices would still have led to headline consumer price index inflation exceeding 6 % now. in an absolute sense, actual and expected inflation is too high and needs to be reduced. subsequent monetary policy committee decisions have seen the ocr rise from 0. 25 % in august 2021 to the current rate of 4. 25 %. our actions display the monetary policy committee's determination and confidence in returning annual inflation to within our 1 % to 3 % target range. our focus on low and stable inflation is the best contribution we can make to the overall wellbeing of new zealanders. in a relative sense, new zealand is in a strong macroeconomic position relative to most oecd nations. we are around the lowest quartile for both inflation and unemployment relative to other oecd nations. we have a stable and well - functioning financial system that is resilient to a wide range of interest rate and employment shocks. and, as outlined in our most recent monetary policy statement, we have resilient household, public, and business sector balance sheets in aggregate. new zealand has a near record low unemployment rate of 3. 3 % and exceptionally high labour force participation rates. households have accumulated financial savings, with average household incomes rising in line with inflation. nominal wage rates have risen, with incomes further bolstered as people moved jobs to earn more, worked longer hours, or gained promotions. average hourly earnings growth for the private sector was 8. 6 % 1 in the year to september 2022, compared with consumer price index inflation of 7. 2 % in the same period. as interest rates rise, we expect spending to slow and unemployment levels to increase as more people join the workforce over the coming year. even with the expected slowdown in the period ahead, it is anticipated that the level of employment will remain high. large scale asset programme 2 / 7 bis - central bankers'speeches i'd like to briefly comment on the large scale asset purchase and funding for lending programmes which featured during the 2021 / 22 financial year. the review and assessment of monetary policy over the past five years showed that the large scale asset programme was highly effective in response to the liquidity crisis that emerged in early 2020 and in lowering longer - term interest rates. the funding for lending programme also gave banks confidence that a stable and secure funding source was available during a period of heightened financial market uncertainty. banks were able to continue their business of financial intermediation, avoiding a credit
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##rs, issuers have been able to place new securities in the market in large volumes, which suggests that liquidity has not been materially affected by our actions. thus the most difficult part of our programme is our corporate bond purchases, since they extend into less liquid markets and increase the risk of distortions in relative prices β in particular between larger and smaller firms. but our activities cannot be evaluated in separation ; they must be judged in a holistic manner. indeed, up to now the decline in bank lending rates for small loans to euro area companies β which are mainly for small and medium - sized enterprises ( smes ) β has been stronger than for large loans to bigger companies. this suggests that bank lending conditions have improved disproportionately for euro area smes since the announcement of our credit easing measures two years ago. as a result, fewer smes are reporting that credit has been a limiting factor for their businesses. this should only continue as our measures are fully rolled out and reach their maximum bis central bankers β speeches impact. in other words, the app, coupled with our other credit easing measures, has reduced distortions caused by market fragmentation in the euro area. still, we know that the longer unconventional policy lasts, the greater the risk of distortions appearing and diminishing its effectiveness over time. the principle of proportionality also implies that we should only use such measures for as short a time as is necessary to fulfil our mandate. that is why, when the economy improves and inflation returns to our objective, we will have to reassess, adjust and ultimately phase out our purchase programmes and other non - standard measures. but the surest way to reach that point is to stay true to the course we are on now. if we were to change speed or direction too soon, it would only set back the recovery of inflation and delay the day that interest rate normalisation can happen. we will decide upon this in full independence, in the interests of price stability, impervious to the wishes of any interest group with any partial agenda. other policies can support the speed with which inflation returns to 2 % can other policies help in this endeavour? in the inflationary days of the 1970s, some central bankers were so hesitant about the scope of their responsibility that they let price stability depend on others. for example, in the late 1970s the then fed chairman reported to the fomc that β inflation is going to be left to the federal reserve and that β
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process in the euro area. consequently, trade of goods and services among euro area countries will continue to grow at a sustained rate, thereby contributing to increased competitive pressure on product markets that would otherwise only have been achieved through reforms on the level of each individual member country. this further integration will put pressure on euro area member countries to provide the most appropriate framework for employment and enterprise creation and the development of the productive forces and therefore to adjust also their labour and capital markets to the new reality of the single currency. in this context fiscal policy can make an important contribution. first, it can contribute to macroeconomic stability by providing economic agents with expectations of a predictable economic environment. this reduces uncertainty and promotes longer - term decision - making, notably investment decisions, and economic growth. furthermore, it is important to keep in mind that fiscal policy can also promote growth and employment via appropriate adjustments of the level and composition of government taxes and expenditures. reducing inefficient public spending can for example help to finance tax cuts or be redirected towards productivity - enhancing physical and human capital accumulation. changes in the monetary policy regime and changes in price and wage setting the creation of a single currency and the introduction of the euro not only raises pressure to speed up the structural reform process but will also change profoundly the behaviour of the euro area economies and in particular the way prices and wages are set. i have already mentioned the increasing integration and growing intra - euro area trade resulting from the introduction of the euro. in addition, the commitment of the ecb to price stability creates the conditions for low inflation across the euro area. both will increase competition among european producers, limiting their pricing power and helping to keep inflationary pressures confined. additionally, with increasing competitive pressure and reduced scope for pricing power, enterprises are led to look for alternative ways to increase their resilience and to enhance their competitiveness. this will provide an additional boost for productivity growth and raising potential output growth. similarly, the introduction of the euro has an important impact on the dynamics of wages, helping to keep them in line with productivity developments. on the one hand, increased competitive pressure among european firms reduces any rents they may have been able to earn in the past and increases their labour demand elasticity. this will tend to increase real wage flexibility. on the other hand, the low - inflation commitment of the ecb provides a stable anchor for low inflation expectations and a lower inflationary bias on the side of labour. moreover, the absence of specific monetary policy
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. given the bank β s large portfolio holdings in us dollar and euro government bonds, the liquidity requirements are currently more than met. this creates a certain amount of leeway for investing in instruments that are less liquid but generate a higher return. the investment criterion β security β must be seen in the context of the monetary reserves as a whole. the national bank incurs risks on its investments that cannot be hedged based on monetary policy concerns. losses from gold and foreign currencies in particular can be significant. an adequate volume of reserves allows the national bank to bear these risks, especially since such fluctuating values tend to correct themselves over the long term. greater diversification of both the currencies and the investment instruments can bring about the necessary growth of monetary reserves. diversification effects permit investments in higher - yielding and - from an individual perspective - riskier investments such as equities and corporate bonds without substantially increasing the overall risk. the return potential of monetary reserves depends on the liquidity and security requirements of the investments in terms of monetary policy considerations. pursuing an efficient investment policy for the national bank means achieving a return potential that is as high as possible within the existing restrictions. under the new act, the national bank will pursue a broader diversification of its investments and, in particular, also invest in equities and corporate bonds. because of the national bank β s special position as a central bank, the exposure to equities and corporate bonds is subject to some specific considerations : first, a conflict of interest may arise between monetary policy and investment policy. for instance, interest rate hikes by the national bank can have a negative impact on a company β s profits. second, owing to its responsibilities in the area of system stability, the national bank has insider information in the financial sector. and third, the national bank β s investments in equities and corporate bonds can have a noticeable impact on risk premiums on the capital markets, especially in illiquid markets. these considerations primarily concern equities and bonds issued by swiss firms. they are therefore excluded from the national bank β s investment universe. holdings of foreign equities and corporate bonds do not present a problem in this regard. a passive management strategy based on indices with liquid, listed securities is followed for equities portfolios. consequently, we do not engage in stock picking or sector picking. as a rule, we do not exercise our voting right at annual general meetings. in the case of corporate
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- resource economy continues to grow at a moderate pace. and within that, non - resource exports are clearly gathering momentum. by the time we reached the new year, there was a clear sense of anxiety among many financial market participants. the outlook for global growth was being downgraded again, and commodity prices were plumbing new lows. at the bank, we had new intelligence that canadian energy companies would be cutting investment even more than previously thought. in this context, we said that we entered deliberations for our january interest rate decision with a bias to easing policy further, but decided to wait to see details of the government β s fiscal plan. since january, we β ve seen a number of negative developments. first, projected global economic growth has once again been taken down a notch for 2016 and 2017. this includes the us economy, where the new profiles for investment and housing mean a mix of demand that is less favourable for canadian exports. second, investment intentions in canada β s energy sector have been downgraded even further. true, oil prices have recovered significantly from their extreme lows. but canadian bis central bankers β speeches companies have told us that even if prices remain around current levels, there will be significant further cuts beyond what we foresaw in january. by convention, we incorporate the average oil price from the few weeks before we make our forecast, letting us look through variability in markets. because of this, our oil price assumptions are only $ 2 to $ 3 per barrel higher than they were in january. third, the canadian dollar has also increased from its lows. our assumption in our current projection is 76 cents us, four cents higher than in january. while there are many factors at play, including oil prices, most of the increase appears to be due to shifts in expectations about monetary policy in both the united states and canada. the higher assumed level of the dollar in our projection contributes to a lower profile for non - resource exports, as does lower demand from the united states and elsewhere. as the bank β s governing council began its deliberations for this month β s interest rate announcement, we saw that these three developments would have meant a lower projected growth profile for the canadian economy than we had in january. this may sound counterintuitive, given the range of monthly economic indicators that started the year strongly. however, some of this strength represents a catch - up after temporary weakness in some areas during the fourth quarter, and some of it reflects temporary factors that
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will face global recession. ultimately i believe the number and extent of computer system disruptions will not be used as the measure of our success in addressing the year 2000 problem. instead, our success will be measured by our ability, and the public β s confidence in our ability, to conduct business operations effectively for the balance of this year, on january 3, 2000, and thereafter. current state of international year 2000 efforts some foreign governments and institutions started their year 2000 program years ago, while others were initially reluctant to recognize that a problem even existed. this reluctance hindered efforts to take early action. in some areas, already limited resources were dedicated to other activities, such as the euro conversion or attempts to restructure weakened economies. those countries that recognized the problem early and had sufficient resources assembled technical experts from whatever source was available. recognizing these challenges, in april 1998 the bank for international settlements hosted a year 2000 roundtable to raise international awareness. at the close of the conference, the sponsoring organizations, the basle committee on banking supervision, the g - 10 committee on payment and settlement systems, the international association of insurance supervisors, and the international organization of securities commissions established the joint year 2000 council. the council was formed as a direct result of the recognition of the complexity of the global financial services industry and the need to communicate proactively with regulatory and supervisory authorities. as chairman of the joint year 2000 council, i work with other members of the council to ensure that a high level of attention is given to the challenge within the global financial supervisory community and to serve as a point of contact with national and international private sector initiatives. to that end, the council operates with the participation of central banks, insurance and securities regulators, and banking supervisors. it is the first international body that brings together such a range of financial regulators. it is important to note that the joint year 2000 council is not the β international year 2000 enforcement agency. β we do not have on - site examiners, nor are we meant to replace the efforts of national regulators. the council established an external consultative committee, or ecc, to enhance the degree of information sharing between the public and private sectors. this committee includes representatives of internationally - oriented organizations including the global 2000 coordinating group, the international monetary fund, the world bank, and financial service providers, such as s. w. i. f. t., euroclear, and cedel. our most important role may be to provide a forum to facilitate information sharing
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reserve β s contingency planning for the year 2000. banks are urging their regulators and other government officials to promote public confidence by speaking clearly and forcefully about year 2000 preparedness. regulators can play a constructive role in making sure that year 2000 information disseminated to the public is factually accurate, balanced, and broadly distributed. communications are a shared responsibility. research tells us that customers want to hear directly from their bank and that the public is interested in specifics, not generalities, about our preparations. the federal reserve is expanding its program of outreach, with every reserve bank working on an aggressive program of local communications. i urge you to do the same. the public needs to know that the year 2000 is like other challenges we have met through careful preparation, risk reduction, and contingency planning to allow us to work around any problems that might occur. public obligations and patterns of behavior as we get closer to the century date change, there will no doubt be more sensational coverage in the media. it is our obligation to be smart consumers of information and to listen to responsible, not alarmist, voices. remember, as with anything that has a degree of uncertainty, there will always be those who predict the most dire outcomes. they have generally been wrong in the past, and i expect that they will be wrong again. there are likely to be some disruptions from the century date change ; nothing this large and complex can be perfectly faultless. we should remember, however, that there have been serious disruptions to service in daily life before, from storms, temporary power outages, disruptions of telephone service, etc. in general, these prove to be annoying and inconvenient, but nothing more. we also need to maintain reasonable and responsible patterns of behavior. it is possible that market participants may reduce clearing and settlement activity on december 31 and january 3. several participants, however, have indicated plans to reduce activity over a substantially longer period, up to a month. while such a reduction may appear to be prudent to an individual firm, such action by multiple participants raises the possibility of thin markets with accompanying erratic price behavior. our perspective has been to encourage market participants, especially those who hold themselves out as intermediaries, to consider carefully the overall implications, including for market liquidity, of reductions in trading volume so that risks and benefits of such initiatives are appropriately balanced. i understand that some organizations that normally make payroll or other payments using the ach are thinking
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the infrastructure readily assessable. please note that the introduction of the new currency series will be a gradual process, as the banknotes will circulate simultaneously with the old series until they are fully withdrawn from circulation. therefore, there would be no urgent need for exchange of the old for the new banknotes by the general public for as long as the old banknotes are in circulation, they will remain legal tender. gentlemen of the press, this is an overview of our currency restructuring exercise, known as β project cure β. i request that you join us in our effort to provide our country with a befitting currency structure that will be an effective facilitator of economic activities. thank you for your kind attention. bis central bankers β speeches
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challenges, most african central banks recorded relative success in keeping inflation within a tolerable threshold, which could be attributed to effective and proactive monetary policy stance. 7. however, there is still room for improvement, especially, in the achievement of the primary convergence criteria for sub - regional integration. in this regard, all member countries are advised to strive to meet their respective sub - regional convergence criteria, which is a precursor to african monetary cooperation and adoption of single currency. 8. the theme of this meeting is in tandem with the conference theme, and the agenda for deliberation is structured to elicit discussions that are invaluable in shaping policies in the bis central bankers β speeches region. the agenda that will form the basis of today β s deliberation include β the appropriateness of the mandates of the central banks for africa β s industrialization β, β the need for payment system inclusiveness for financial stability and transformative development in africa β, β central banks β strategies for promoting investor confidence and industrial development in africa β, and the role of central banks in financing infrastructure for industrial development β. 9. first, we will deliberate on the appropriateness of the mandates of the central banks for africa β s industrialization agenda. one major issue in africa is whether the attention of central banks should focus on price stability and financial stability only or should central banks in the region be concerned about developmental goals. although the focus on price and financial stability has served us well in containing inflation and deepening the financial sector, it has not been able to bring down unemployment or achieve inclusive growth on the continent. this has led to many social problems and general restiveness. as central banks, we must find a way to work together to solve this problem, suggesting developmental role must be part of the agenda of central banks on the african continents. programs such as improving access to finance, promoting financial inclusion and have targeted interventions in the economy must be considered. 10. second, we need to access the need for payments systems inclusiveness for financial stability and transformative development in africa. realistic economic transformation and industrial development would entail greater participation of the private sector in the process of development, through improvements in the payments system and improved access to credit. recent technological innovations in mobile banking have provided opportunities for financial inclusion, with clear implications for financial stability. 11. the third focuses on central banks β strategies for promoting investor confidence and industrial development in africa. the most effective channel for industrial development is greater private sector
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tend to limit economic fluctuations. overall, the policy framework has delivered strong results. compared to most other countries, we have enjoyed a stable macroeconomic environment. the long history of the exchange rate peg means that all agents in the economy make decisions based on its existence : page 4 of 8 firms and households set wages knowing that a loss in competitiveness will not be offset by a depreciation of the exchange rate. this has ensured price and wage stability β and firmly anchored inflation expectations. banks implicitly support the peg by engaging in what you could call β stabilising speculation β : they take positions, if the exchange rate starts to fluctuate. this illustrates the credibility of the peg in financial markets. the government also knows that monetary policy will not β correct the mistakes β made by fiscal policy. also, as an overly expansionary fiscal policy may reduce the credibility of the fixed exchange rate. this β to some extent β disciplines fiscal policy. the tendency to fiscal pro - cyclicality during the strong economic expansion in the mid - 2000s might well have been worse under a different monetary regime. to summarize, the peg to the d - mark / euro has served denmark well for more than three decades. from time to time the framework is, however, put to a test by strong capital in - or outflows. one such test occurred in january and february 2015 when denmark experienced a very large inflow of capital. the inflow started as the swiss national bank announced on 15 january that they would no longer prevent the swiss franc from appreciating against the euro. to prevent the krone from appreciating, danmarks nationalbank responded by intervening in the fx market followed by interest rate reductions. with effect from 6 february, the rate on certificates of deposits was reduced to - 0. 75 per cent. this was a level that had not been seen previously. as the inflow of capital started, its width and depth was not known. this induced us to reduce rates gradually. danmarks nationalbank's monetary policy interest rates were transmitted to money - market interest rates. control of the difference between money - market rates in the euro area and denmark β the interest - rate spread β is crucial for controlling the exchange rate. and the experience clearly showed that the interest rate spread is also effective during episodes of negative interest rates and appreciation pressure on the krone. these conventional measures were supplemented by extraordinary measures such as the temporary suspension of the issuance of government bonds
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was cut from almost 9 to just over 4 per cent, was largely a question of confidence in the inflation target become established and enabling a substantial cut in the policy rate. the substantial rate cut in connection with the global financial crisis, from 4. 75 to 0. 25 per cent within the course of a year, was also special, as crises of this kind are fortunately rare ( see figure 3 ). in the united states, which has a longer history of a floating exchange rate, it is usually estimated that the policy rate is cut by around 5 percentage points in economic downturns. 5 it is reasonable to assume that in sweden, which is a small open economy, a larger share of the adjustment in an economic downturn will come through the exchange rate than is the case in the united states. let us say, without claiming any scientific exactness, that it would be desirable to cut the repo rate by 2. 5 β 3 percentage points in a normal economic downturn. if the downturn were to occur at the beginning of 2021 and the policy rate were cut 4 rudebusch ( 2016 ) shows that the probability of an economic upturn being broken does not now increase in proportion to the time it has lasted. however, this was the case with the economic upturns prior to the second world war. 5 see, for example, summers ( 2018 ). 3 from 0. 75 to β 0. 5 per cent, the cut would be 1. 25 percentage points, that is much less than the estimated 2. 5 β 3 percentage points. 6 raising the repo rate to have ammunition ready? here i should like to briefly touch on a particular question before i go on. if one is concerned that the repo rate will not be sufficiently high when the next economic downturn comes, can one not just raise it to a suitable level now, as a preventive measure β so that there is ammunition available when needed? this is an argument sometimes put forward in the general debate. but unfortunately there are a number of problems with this argument. firstly, the economy will of course be affected by interest rate increases. growth would slow down and inflation would fall. if one raises the rate quickly and substantially, one might even cause the economic downturn one was ultimately aiming to prevent. but even if this was not the case then, secondly, a very probable scenario would be that inflation nevertheless fell substantially, perhaps down to 1 per cent or lower, that is, to the
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the symposium last year, we could not have foreseen that the subject would assume such importance as to attract this splendid attendance. governors will recall that we did discuss financial inclusion as far back as 2007. in truth, our choice of this aacb agenda converges with its development through the g - 20 process. many countries worldwide are actively engaged in reforms and programmes for the provision of affordable banking services, which makes the topic of our symposium particularly pertinent. the slow recovery from the global crisis forces us to revisit our growth strategies and take a closer look at their impact on the whole of the societies we are expected to serve, not just the prosperous, but also the poor and the excluded β who are showing increasing signs of impatience as they wait for the elusive magic of trickle - down to improve their lot. africa is changing fast. from the gloom and the conflict of the last decades we now have new hope and opportunity spreading across the whole continent. in some parts, it is not just a wind of change but a veritable tempest. indeed, in certain places, such is the pace of change that some fear that we are moving straight from the african spring into a wintry period of discontent. we are here, therefore, to address the issue of what can the world of banking do to push back this spectre. with 77 % of our population still having no access to formal finance, we have our work cut out for us. bis central bankers β speeches today, as we open our discussions on inclusive finance and banking, we must frankly admit that in an environment where only a small minority of people ever set foot in a bank, and where banking itself is hardly part of the greater political debate, we face a daunting prospect to find a pathway for promoting the best use of the capital resources available to the continent, to ensure balanced and sustainable growth with social stability, hand - in - hand with price stability, financial stability, and monetary stability. stable currencies and control of inflation figure high among pro - poor policies. to maintain our focus as central banks and to remind ourselves of the distance we still have to travel, it is sobering to note that we are reaching the time when we should embark on stage iv of the african monetary cooperation program, which reduces the annual inflation target from the current 5 % to 3 % β a bar which is too high for many of us at this juncture. the wider agenda, when the present troubles have been overcome,
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and co - chaired by myself and the director - general of the independent commission against corruption to develop and coordinate the strategies, policies and actions to ensure the implementation of the recommended actions in the 2018 mutual evaluation report. the core group now has the mandate to ensure the sustainability and continuity of the aml / cft reforms and to take appropriate actions for any emerging aml / cft risks. i must here express my deep - felt gratitude to the eu global facility which has been instrumental in the process for mauritius to exit the fatf list. continuous support and assistance have been provided by the eu global facility since september 2019 when they came to mauritius to carry out a scoping mission for delivery of technical assistance, the objective of which was to help mauritius implement relevant actions with respect to aml / cft. in this respect, i would like to enumerate some of the specific fields where support was provided to mauritius : i. technical assistance to the gambling regulatory authority to implement the risk - based supervision framework, capacity building for staff and provision of outreach to the gambling sector ; ii. assisting mauritius in conducting the npo terrorist financing risk assessment, training of the npo regulators, the law enforcement agents, including the mauritius revenue authority ; iii. training on the requirements of beneficial ownership for the financial sector and banking sector and dnfbp supervisors. this includes the formulation of a specific guidance and supervisory manual on beneficial ownership for bank of mauritius β licensees and staff. these two documents provide more granular guidance for alignment with international standards on bo information ; and iv. coaching the mauritian authorities for reporting to fatf on the icrg action plan. this is indeed to mention just a few of the projects where we have collaborated. many others are in the pipeline also. ladies and gentlemen, given the exit of mauritius from the fatf list of countries under increased monitoring ahead of its timeline, the country is now being looked upon to provide assistance and sharing experience with other countries in the icrg process. in this regard, jordan and panama are among the first countries to have benefited from the experience of mauritius. this will not have been possible without the support of the eu global facility team. i am equally pleased to share that at the level of the bank of mauritius, we are in discussion with a number of other central banks across the african continent on the topic of aml / cft and will soon be starting sharing expertise and experience in this field. ladies and gentlemen, the exit from the
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period a year earlier and stood at 6. 2 %. this figure is lower than current estimates of the cost of capital, which, subject to their characteristic uncertainty, are somewhat above 7 %. 6 / 29 in any event it should be borne in mind that profitability levels vary considerably across banks, both in spain and in other european countries. this shows that profitability issues affect the sector unevenly because of the heterogeneity of banks β business models across countries and within each jurisdiction, and also because of the multiplicity of explanatory factors. factors explaining low bank profitability to better understand the factors behind the low profitability of spanish banks compared with pre - crisis levels, i intend to focus on their business in spain. this is because profitability figures as per the consolidated financial statements are influenced by the growing share of international exposure in recent years, which complicates the interpretation of earnings as they are affected by significant changes in composition. furthermore, only a small number of banks have significant international exposure, so the performance figures based on consolidated financial statements may not be very representative of the majority of the banking sector. 7 / 29 the profitability data based on individual financial statements of business in spain are also highly cyclical, even more so than those from the consolidated statements. this reflects the greater severity of the crisis in spain than in other economies in which spanish banks had exposures and highlights the benefits of diversification. also apparent is a marked recovery in recent years, despite which in 2018 both roe and roa were still lower than before the crisis. the breakdown of the return on assets shows that the main determinant of the current low profitability of business in spain compared with the pre - crisis period is a weakening of net interest income expressed as a proportion of assets, or net interest margin. this fall, concentrated between 2009 and 2013, was from 1. 4 % to 0. 9 %. the indicator then steadied at around 1 % of total assets. the fall was attributable to several factors. 8 / 29 one factor is the increase in the relative share of non - performing assets, i. e. those that do not earn interest, such as npls or foreclosed assets. specifically, between 2007 and 2013 the npl ratio of business in spain rose by nearly 13 pp. it then fell gradually, against a background of decreasing loan volume, and at mid - 2019 stood at 5. 3 %, more than 8
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very low, or will even be negative for a further period pose challenges of at least two types for credit institutions. first, this macroeconomic context will represent a challenge for deposit institutions to recoup levels of profitability more in line with the cost of capital. indeed, in the last few months market expectations for growth of bank profits have declined. second, this context of β low interest rates for longer β may provide greater incentives for economic agents to take risks, which could heighten the risk to financial stability. today i would like to devote my address to the analysis of these two matters, focusing on their impact on the spanish banking sector. i will also present the results of the latest stress test exercise conducted by the banco de espana. 1. low bank profitability profitability is one of the main variables characterising the financial position of banks and the first line of defence against adverse shocks. indeed, the volume of a bank β s profits determines the return its owners can earn on the capital invested. this, duly adjusted for the risks assumed, will affect the bank β s valuation. moreover, profit levels determine the margin these agents have to address shocks. indeed, low profitability reduces the possibility of generating capital internally through retained earnings. note that banks β capital acts as a buffer that allows potential losses to be absorbed in adverse scenarios, so that they can continue to offer financial services to households and 3 / 29 firms, thus contributing to smoothing β rather than amplifying β negative shocks to the economy. 1 since the international financial crisis the profitability of the european banking sector has remained very low and below the cost of capital. and this, despite a drop in the cost of capital, mainly due to the lower risk - free interest rate of the economy, but also to banks β improved risk profile, manifested, among other variables, in higher solvency ratios. by contrast, us banks have managed to achieve very high levels of profitability ( in 2018, 11 % in the usa compared with 6 % in europe ) more in line with the cost of capital ( between 8 % and 10 % in 2018 ). our analyses indicate that this is one of the reasons why the market value to book value ratio of us banks significantly exceeds that of european banks, which remains at values below one. also, a high level of capital entails a stronger link between the personal wealth of the owners and the economic performance of the banks, thus contributing to mitigate the risk profile that the latter are prepared to
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. au / speeches / 2017 / sp - dg - 2017 - 11 - 13. html 7 / 13 13 / 11 / 2017 business investment in australia | speeches | rba while the mining investment boom was in progress, there were very apparent positive spillovers to non - mining business investment in western australia and queensland. at the same time, this was creating headwinds to investment in the rest of the country, particularly new south wales and victoria, not least because of the very elevated level of the exchange rate at the peak of the commodity boom. [ 6 ] one area of the economy where the negative effect of the high exchange rate on investment was evident was tourism. our liaison with the tourism sector highlights that the low level of investment while the exchange rate was at its peak is having an impact on the industry now that tourism demand has increased with the lower australian dollar. as these forces have reversed, non - mining investment in queensland and western australia has declined along with the decline in mining investment, while it has risen noticeably in new south wales and victoria. these spillovers are evident in the blade database. the data show that investment by firms in mining - exposed industries in queensland and western australia has declined sharply since 2012, whereas investment by firms in other industries has remained broadly unchanged. that is, the effect of the mining investment rise and fall has been larger than we initially anticipated because of the spillovers to other parts of the local economies. firms'and shareholders'reduced appetite for ( and assessment of ) risk investment could be held back if firms have become more risk averse or if they have reassessed the likelihood of bad outcomes. while it is difficult to differentiate between these two, there are some signs that suggest that one or both have changed post - crisis. liaison suggests some managers are less willing to take risks, and have tightened investment criteria since the crisis. companies have reduced their gearing and increased their cash holdings, and hurdle rates remain relatively high despite falls in borrowing rates. related to the latter point is that there are some indications that the stock market is rewarding cost reduction rather than investment spending where the payoffs are multi - year rather than immediate. that is, the risk aversion may be coming more from shareholders than a company's executive or board. there appears to be a desire to have β excess β capital returned to shareholders through buybacks and dividends, rather than utilising that capital for investment with uncertain returns ( graph 7 ). http : /
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sector and so much stronger than investment in other advanced economies? fairly obviously, it is because mining companies expected that demand in the future was going to be strong. the other factors affecting these investment decisions were generally comparable with those in other parts of the economy. funding was as cheap and readily available ; uncertainty was not obviously any more or less. indeed, the long horizons for these projects meant that uncertainty was at least as large as in other sectors. non - mining business investment now i will turn to investment in the non - mining sector. the sharp contraction in business investment during the financial crisis, and the subsequent weak recovery, has primarily been a phenomenon of advanced economies. [ 1 ] a large body of literature has attempted to explain the underwhelming pick - up in investment and has attributed it to a range of factors, which i will spend some time discussing. australian non - mining investment ( in real terms ) is currently around 17 per cent higher than it was at q1 2008. by way of comparison, investment spending in the us has increased by about the same amount, while in the uk it has risen by 13 per cent, by 3 per cent in japan but in the euro area it is still 4 per cent lower than in 2008. in all of these cases, this is a disappointingly low level of investment spending. what has been holding investment back? there are a number of possible explanations, some of which i will discuss here. [ 2 ] in doing so, in a number of cases i will use evidence from a new database from the abs called blade ( business longitudinal analytical data environment ). the blade database contains matched administrative and abs survey data for ( almost ) all australian firms with data available from 2002 to 2015. it includes annual data on capital purchases, sales, capital stock, wages and a number of other variables. the data on capital purchases are well aligned with investment spending in the national accounts and coverage is considerably larger than that in the abs capital expenditure survey ( graph 5 ). http : / / www. rba. gov. au / speeches / 2017 / sp - dg - 2017 - 11 - 13. html 5 / 13 13 / 11 / 2017 business investment in australia | speeches | rba graph 5 weak economic growth an obvious candidate to explain the post - crisis behaviour of investment is weak aggregate demand. research finds that much of the weakness in global investment since the crisis can be explained by slower economic growth. [ 5 ] however, when we look at
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the bank β s two most important tasks at present, and in fact at all times. the first concerns the inflation target and figures connected with it. the second is the position and performance of financial companies. as it happens these two issues are generally interlinked, because decisions by financial companies have a strong impact on the first task, and imbalances in the icelandic economy can affect international analysts β assessments of the position of the financial sector. but be that as it may. i was interested to note that my cautious predecessor as chairman of the board of governors described in his last address to the annual meeting how the strong growth in lending by the banks showed that they have overstepped the mark. those were the words he used. he was discussing the impact on growth, overheating and inflationary pressures in the economy. i quote : β the surge in lending over the past two years is a cause of concern both for financial stability and the central bank β s inflation target β¦ lending by the credit system as a whole increased by 16 % in real terms last year. β unfortunately these cautionary words had no effect, because on top of the 16 % increase in lending in real terms in 2004 came a further 25 % increase in lending in real terms in 2005. this must be changed. the board of governors of the central bank has held productive meetings with leaders of the banking sector to discuss this question among others. statements have been issued in these meetings boding a more cautious approach in the future. the board of governors has no reason to doubt the integrity behind these promises. however, lending has continued to grow in the first months of this year, and at a faster pace than in 2004. the difference in practice is explained by the time it takes to clear promised loans which are in the pipeline. the central bank still has faith that these planned improvements will materialise, since a great deal is at stake. in his address last year that i quoted from, the former chairman of the board of governors also said that changes in their activities and strategies have left the banks more exposed to shocks originating in foreign markets. recently we have seen instances of this. admittedly, a lot of what was said in the much - quoted reports by international analysts is misrepresented, and some of it based on misunderstandings, wrong information and, occasionally, obvious antipathy towards the icelandic banks and their activities. this is all regrettable and, in some cases, deserves to be condemned. but these cases
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1998 when that function was merged with the insurance supervisory authority in a new and unified financial supervisory authority, with which the central bank cooperates quite closely on financial stability issues. while the central bank had responsibility for banking supervision, its attention was necessarily focused on individual institutions and overseeing that their operations complied with existing laws and regulations. before banking supervision was transferred elsewhere, the central bank had also begun to focus its attention on broader financial stability issues along the lines that many other central banks were doing at that time. a logical part of that process was that in 2000 the bank began to publish semi - annual financial stability analyses in its quarterly monetary bulletin. one reason for the increasing focus of the bank on systemic financial stability issues in the late 1990 β s was the growing perception in a liberalised financial market that a weak financial system could undermine economic and monetary stability just as much as economic imbalances and weak policies could undermine an otherwise sound financial system. a sound financial system, including safe and secure payment and settlements systems, is also an important precondition for the effective implementation of monetary policy. capital movements were fully liberalised in the 1990 β s, as was the domestic financial market which also underwent significant structural change, including the withdrawal of the government from direct ownership in banking institutions. these developments stiffened competition at home and linked the domestic financial system much more closely to international markets. consequently, in its analyses, the central bank consistently draws attention to the potential vulnerability of the domestic financial system to changes in the external environment, including the ready availability of foreign credit for refinancing purposes, and its vulnerability to sudden changes in the exchange rate. the developments in the icelandic economy towards the end of last decade and into this one resembled in many ways those experienced in some of the other nordic countries a decade earlier. needless to say, and in view of the experience of other nordic countries, these developments caused considerable concern about the underlying stability of the financial system. the central bank candidly expressed these concerns in its financial stability reports, most notably in the spring of 2001. at that time the imf also issued its financial stability assessment which questioned the strength of the financial system in iceland in view of the tremendous imbalances in the economy and what was perceived to be an underlying weakness in the banking institutions. the imf identified a potential risk of a rapid depreciation of the currency, which it felt could further weaken the banks and pose a threat to them. early on in the upswing, amidst a rapid
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challenge of adjusting to open trade is a serious issue that has not received the degree of attention it fully deserves. this may partly reflect the fact that the burden has been borne unequally and spread out over a long time period. it also may reflect the fact that the winners from trade have often tended to have a stronger voice than those who have been the losers. 3 / 6 bis central bankers'speeches research has documented that the effects on individuals of job dislocation β including those resulting from trade β can be significant and long lasting. older workers tend to suffer larger earnings losses, and may face larger transition costs. displaced workers may not have the appropriate skills to find good jobs in other areas of the economy, including in growing export sectors. when the affected industry represents a large share of the local economy, the damage is often magnified. in this case, the burden is more widespread because wages across the community are likely to be hit as well. and, this doesn β t begin to capture the full human toll β including the impact on workers who have lost confidence in the future and the poorer health outcomes that occur because of increased stress. for too many individuals in the united states, for instance, the american dream has been put at risk, with parents increasingly pessimistic about whether their children will have the opportunity to do better than they did. we should find better ways to help communities that are struggling because of the effects of free trade. in the united states, we have historically experienced a high degree of geographic labor mobility β much higher than in other advanced economies. the ability to move in search of better opportunities, when possible, has helped to mitigate some of the adverse effects of trade. but, mobility has declined in the united states in recent years, implying that the adjustment costs to trade may have increased. protectionism is not the answer given these costs of global integration and more liberalized trade, what is the best path forward? protectionism can have a siren - like appeal. viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term. viewed more broadly, it would almost certainly be destructive to the economy overall in the long term. countries need to compete better, not compete less. trade barriers are a very expensive way to preserve jobs in less competitive or declining industries. they blunt opportunities in export industries and they reduce the affordability of goods and services to households. indeed, such measures often backfire, resulting in harm to workers and
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is working with isda, lch and others to ensure this change is implemented smoothly. these reforms, including to the timing of sonia publication, will take effect from march / april next year. working group on sterling risk - free reference rates let me now turn to the issue of forging a market consensus on the appropriate risk free rate. all speeches are available online at www. bankofengland. co. uk / speeches here the bank set up the risk free rate working group with the objectives of identifying an rfr and promoting its use as an alternative to sterling libor. we used our convening power to do this because we recognised that individual market participants, acting alone, cannot overcome network effects. only coordination and cooperation across a broad spectrum of market participants can create the conditions for change. we also believe that the solution must come from the market β that is why the group is market - led. as you know, and having considered the merits of two secured benchmarks alongside sonia, the group has now reached a decision to recommend sonia as the rfr. this is welcome progress : the main priority from the bank β s perspective was for the market to coalesce. we were committed to supporting whatever decision the group made. that is what having a market - led process means. as it happens we were not surprised by the outcome because the transition path to a secured rate would clearly be much more difficult than it will be for sonia. a consequence of the group β s decision is that sonia will grow in importance. administering a systemically important benchmark is a new departure for the bank β but it is a role we accept given our statutory ability to collect the underlying data. we will administer sonia as a utility, for the benefit of the market, on a cost - recovery basis. i know francois will say more about how the sterling working group made its decision. for my part, i would like to take this opportunity to thank francois, members of the working group, and their institutions, for their commitment and hard work in getting to this point. however the task is not yet finished. attention now turns to the adoption of sonia as an alternative to sterling libor. the working group has an important ongoing coordination role to play. the main focus so far has been on the derivatives markets. indeed we invited dealers to form the working group in the first place because our experience of derivatives reform suggests they can be most influential in catalysing a transition. but it is stating the obvious
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with the process of financial deregulation that has taken place in the asian countries over the last 10 years or so is that it was driven partly by doctrine. this doctrinal imperative reflected two separate forces, which came together more or less by accident. the first of these forces was the dominance in academic circles of the β efficient markets paradigm β. this is a powerful analytical device, which has taken thinking in economics down very useful directions. but it, like all paradigms, is an imperfect representation of the real world. perhaps more seriously, in the course of academic debate, it became quasi - religious, with beliefs and facts becoming confounded. this made it hard to leaven the efficient markets paradigm with some real - world facts β principally, that markets are imperfect. the second force was a simple commercial imperative on the part of foreign financial institutions to gain access to new markets and compete in the most vigorous way. this commercial imperative was successfully transplanted into the political processes, so we saw, for example, the oecd insisting on capital market deregulation as a condition of korea β s membership of the organisation. these forces combined to form powerful rhetorical pressures, to deregulate as fully as possible, with special virtue being attached to those who opened their markets at the most breakneck speed. one of the notable manifestations of this was the bangkok international banking facility, whereby small thai businesses were presented with a frictionless conduit to international financial markets, where they could borrow at attractively low interest rates, in foreign currency. in australia, we know, from our small taste of the swiss loans in the 1980s, how dangerous it is to have relatively unsophisticated borrowers given the opportunity and incentives to take on sophisticated products involving foreign exchange risk. but in australia this was relatively modest in macro - economic terms. in thailand, the inflow through the bangkok international banking facility was not far short of 10 % of gdp. with this change of attitude, it should be easier to insert some common sense into the process of deregulation, and have the courage to say β no β ( or β not yet β ) to some aspects of deregulation which seem to make countries more vulnerable. so it may be quite sensible, from this viewpoint, to put various restrictions on short - term capital inflows, and on foreign - currency borrowing. this is compatible with free - market principles, because these are properly seen as transition measures, to be modified and
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don β t amount to a return to pre - crisis conditions. loan impairment rates are still high and property markets in the us and europe are still weak, and these things have contributed to some ongoing nervousness in global credit markets. in addition to all that there is a particular focus at present on sovereign debt. a number of countries are running with very high levels of government debt in relation to their gdp and large fiscal deficits ; and there is obviously considerable focus on the sustainability of those positions and the risk of default. i β m not going to make any predictions as to how that might evolve, partly because the situation is subject to ongoing change and policymakers in the various countries are still developing their responses. but i would make two points regarding potential implications for australia : first, the australian banks have only limited direct exposures to sovereign debt in the countries regarded as being most at risk. so potential effects on australian banks β overall asset quality are not an issue. a second channel of possible effect would be if there were some generalised disruption in global wholesale funding markets. here it is important to note that, in the post - crisis environment, the australian banks have significantly strengthened their positions. they have increased their reliance on domestic deposit funding, lengthened the average term of their wholesale funding, and correspondingly reduced their reliance on short - term wholesale debt. these changes will help to bis central bankers β speeches make them more resilient to any disruptive event in international credit markets, should it occur. let me make a few more general remarks about the australian financial system in the current environment. i β ve already made the point that australian banks came through the crisis in good shape. bank profits did decline during the downturn but they have since recovered, largely as a result of declining loan loss charges. arrears rates in some areas have continued to creep up, but asset quality generally remains good ( especially by international standards ). despite the uncertainties about europe that i β ve already referred to, conditions in funding markets for the australian banks have improved since the crisis, and so has system - wide growth in deposit funding. domestic securitisation markets have been recovering. these developments have helped smaller lenders to regain some of the market share lost during the crisis period. aggregate lending by banks has been relatively subdued in the past few years. lending to the housing sector has continued to expand, but at a slow pace, while business lending has tended to fall, with businesses relying more on internal
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to relocate your business in the eu. i am convinced that, in the years to come, an even closer network of european capital marketplaces β maybe with the centre of gravity in frankfurt β will provide added value to global financial markets. all capital marketplaces together linked by a strong single currency, a balanced european legal framework and a profitable and resilient financial industry in a capital markets union will be of increased global relevance. let me share another thought with you : the british referendum β and the refugee crisis β were a wake - up call to work harder on convincing ideas for the future design of the european union and for the division of labour between the european union and its member states. recent developments have made it very clear to everyone that we need to put more effort into creating a realistic vision for europe that its citizens will support. discussions on the future set - up of intra - european relationships and the relationships with our partners abroad have been gaining momentum recently. this debate will help to improve the architecture of europe. people currently appear to be rediscovering the advantages of close political ties and of an integrated economic area with a common currency. if the member states work in concert, the european union can act as a major economic player and will be in a better position to influence further globalisation. today, there appears to be no majority for deeper european integration. there is a belief, however, that we should consolidate our achievements and improve the finer points. it is necessary to reflect on how we benefit from europe, the european union and the euro. for many eu citizens, the 60th anniversary of the european union as a peace project was a chance to express their support for a democratic european union. for the first time in years, we are now seeing demonstrations in favour of the european union and not against the β bureaucracy in brussels ". frankfurt marks the epicentre of a movement called the pulse of europe, as part of which citizens are gathering on a weekly basis and expressing their belief in the fundamental idea of the european union and its ability to be reformed. this movement is intended as a countermovement to the negative and destructive voices that are often heard in public. the pulse of europe has spread to other german and european cities. 4 / 5 bis central bankers'speeches during my years in the european parliament, i learned that europe has never been an easy issue. quite the contrary, it is a complicated and demanding project. but i am convinced that it is a project worth fighting for
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speed are needed to achieve this goal. this is fundamental for the further development of european payment markets. the work won β t be done by the end of the german presidency, but needs to be continued. we all should keep going and deliver. 2021 will be a decisive year for the future of european payments! but for now, let me close by thanking you all for your attention. my special thanks are reserved for the speakers. and an extra - large virtual round of applause goes out to our host, valerie haller, for her inspirational and professional moderation of today β s conference. 1 eurosystem retail payments www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp191126 ~ 5230672c11. en. html strategy : 2 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions on a retail payments strategy for the eu com / 2020 / 592 final, brussels, 24 september 2020. 3 / 3 bis central bankers'speeches
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excellence in service. it is all about self - confidence. the social partners know what we must do to grow the economy, and each and every barbadian must remind ourselves that we have the power to contribute to our future prosperity. the private investment projects that will grow the economy are known, the government infrastructure has been identified, the financing is being put together, and the fiscal correction package is being stitched together in meetings between government and the other social partners. what remains is the piece that is up to each and every one of us, that is, to increase worker productivity and commitment to excellence. i am confident that we will each resolve to put our best efforts into playing our part in the revival of our economy, and to sustainable economic growth in the future. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches
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bust in several ways. first, the collateral calls generated by sharp movements in the mark - to - market value of the otc derivative trades drained liquidity buffers and provoked the fire sales of assets. these fire sales increased volatility and provoked still greater margin calls. this dynamic was one reason why the market prices of these assets overshot to the downside β that is they fell more than needed simply to reflect the increase in expected credit losses. in other words, the illiquidity risk premiums embedded into the prices of these assets became very large. second, the bilateral nature of the otc derivatives market β between the two parties to the contract β be it dealer and customer or dealer and dealer β created its own set of difficulties. when counterparties became concerned about the health of a particular dealer, they often moved their trades β via novation β to other dealers. they did this to protect themselves should the dealer subsequently fail. but this process was difficult to carry out quickly and in size. the cumbersome nature of the process disturbed market liquidity and function. it also tended to drain off the liquidity from the troubled dealers because these dealers often used the counterparty cash collateral to fund their own operations. when customers moved their bis central bankers β speeches business, the collateral balances departed with them and this worsened the funding crunch on the troubled dealers. third, when a large counterparty, lehman brothers, filed for bankruptcy, it could no longer meet its obligations. the claims of lehman β s customers, including those open otc derivatives positions in which lehman owed them money, were frozen. the lack of adequate segregation of the customers β assets from the lehman estate and the inability to move the outstanding obligations to other dealers β which we refer to as the lack of portability β created large problems for lehman β s counterparties. often lehman β s clients were in the position that one side of a trade executed with lehman was frozen, but the offsetting side remained open and exposed to volatile financial markets. this asymmetry contributed to the sharp increase in market volatility, the dramatic reduction in market liquidity, and the impairment in market function following the lehman failure. fear that this could happen again if another firm failed, encouraged flight from other dealers perceived by market participants to be relatively weak that might have large potential exposures. of course, as if this were not bad enough, the opaqueness of the otc derivatives market made the situation much worse. no one
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to meeting the ambitious target deadlines set out in the fintech charter. this allows us to respond to the first criticism levelled against us : the lack of visibility over the application procedure and the amount of time they take. we shall continue our efforts to ensure we gradually get closer to our target deadlines, and not just in average terms ( we have already met it this year ), but for all individual cases. ii. in france and europe, we need to keep pace with the digital transformations under way our attention is focused in particular on another aspect of the digital evolution : crypto - assets. the β crypto winter β caused by the crashes of terra - luna followed by celsius network, by no means signifies that cryptos are over ; it β s more of a weeding - out process. the share of stablecoins that are, in principle, backed by mechanisms to stabilise their value has risen fivefold in 20 months. ensuring a lasting future for stablecoins β which is a legitimate goal β means remaining vigilant with regard to the associated risks. because, in reality, the name covers a wide range of different forms : - β crypto - backed β stablecoins, where the word β stablecoin β is a misnomer as the coins are backed by other crypto - assets ; or algorithmic stablecoins, a category to which luna belonged ; - stablecoins backed by a basket of assets held in reserve, for example commodities or monetary assets, such as money market funds and commercial paper ; in reality these are similar to investment tools and should be treated as such ; - last, stablecoins backed by bank deposits denominated in a single currency, which are designed to be used as global payment instruments. page 4 of 5 regardless of what form they take, stablecoins are, at this stage and in the majority of cases, denominated in dollars and have been developed outside europe. their widescale use within europe would therefore pose a dual challenge, for our strategic autonomy and for our monetary stability ; indeed this is one of the reasons why the eurosystem has launched an investigation phase on a retail digital euro. we are also looking very seriously into the possibility of a wholesale central bank digital currency : it would play a key role as the safest settlement asset, and would thus continue to anchor the monetary and financial system, even as the latter becomes partially tokenised. this is why the ban
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activity indicators have been weak. an escalation in trade tensions could lower chinese gdp growth by up to 1. 5 percentage points6 over a two year horizon. the slowdown could also encourage authorities to stimulate the economy, leading to increases in already high levels of corporate debt ( 155 % of gdp compared with 106 % in the euro area ) 7 and in the risks to financial stability. our second challenge is impatience. thirty years ago, independence was conceived as a response to the temptation to make trade - offs between growth and price stability. but the real temptation, which is even stronger today, is to trade off long - term interests in favour of the short term. financial markets are frequently characterised by short - termism and bouts of extreme volatility. but, more importantly, there is a political pressure towards it, driven by populist impatience that would like to have a lot, right away. for a number of years this impatience has been hindering long - term efforts in the form of fiscal consolidation and structural reforms, and these have unfortunately slowed in g20 countries. when we compare the performances of our different european member states, it is clear that debt and public spending are not the engines of growth. there is a need today for fiscal stimulus in those countries that have surpluses, and for structural reforms across the board : without this there can be no sustainable growth. on this issue, i would just like to say a word on france, which has stood out as a positive exception over the past two years : the gilets jaunes ( yellow vest ) crisis provided justification for an emergency β package β to bolster purchasing power ; but i do not think it should or even could halt the transformation efforts already underway. lastly, and this is our third challenge, isolationism, characterised by the escalation of trade tensions, constitutes the biggest short - term threat to global growth. even before the tariff hikes, the uncertainty caused by protectionist stances, essentially on the part of the united states, already appears to be threatening growth via its impact on business investment. more broadly, uncooperative economic strategies β including within europe β are on the rise. if each country 3 / 6 bis central bankers'speeches seeks only to protect its own national interests, then everyone risks losing out β a phenomenon economists call β the prisoner β s dilemma β. according to a banque de france study, a more collective fiscal and structural strategy could have boosted euro area gdp growth by between
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of shocks β both internal and external. our economies rely too much on mineral resources and agriculture. they also face significant infrastructural gaps and have fragmented markets. regional integration is also relatively low. africa is far more dependent on overseas trade than any other economic region or global player. the fact is that africa is integrated asymmetrically in global trade. originating mainly from 1 / 3 bis central bankers'speeches resource - rich countries, african exports are concentrated in raw materials and agricultural products. these range from crude oil, gold and diamond to cocoa and timber, fruits and nuts, copper, natural gas, cotton, iron ore, uranium, just to name a few of these. imports are mainly dominated by capital goods. openness to trade brings many benefits to the supply side of the economy. that is why we cannot but welcome the african continental free trade area agreement which, once completed, will establish a market of 1. 2 billion people with a combined gdp of 2. 5 trillion dollars. the agreement could significantly boost intra - african trade whilst promoting foreign direct investment and technology transfers. this can potentially raise the competitiveness of african economies and enhance their integration into the global economy. before the global financial crisis, trade growth has been a major engine of global growth and an enhancer of living standards worldwide. the integration of economies into global trade, notably through participation in global value chains, has improved incomes. it has also moved millions of people out of poverty. since the crisis, trade has generally lagged behind output growth. some economies have borne the brunt of open trade. a number of them have been running a persistent trade deficit and have been facing intense competition. we have also witnessed scenarios of protectionism resulting in an increase in non - tariff barriers. the anti - globalisation sentiment which emerged since the crisis has been gradually cemented through what has been termed a β trade war ", leading to a broader reversal of globalisation. some economies have even announced retaliatory measures. recourse to trade protectionism has been posited to foster recovery from economic downturns. this, by creating barriers aiming at protecting the economy from the negative impacts of open trade and improving their trade balances. ladies and gentlemen, protectionist measures impact on the free movement of goods and services and they obviously affect economic performances across the world. higher tariffs have an effect on growth and inflation whilst influencing financial conditions, expectations and confidence in the near to medium term. for us central
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would like to mention three important dimensions along which i think the approach could be further improved. first, the boundary between the effects of micro and macroprudential policies is more artificial than real. the two, while different in purpose, share instruments and are directed to the same participants in the financial markets. indeed, it is the overall level of micro and macroprudential requirements that affects the ability of the financial system to finance the real economy, both in normal and stressed times. consequently, a narrow notion of the macroprudential stance should, in my opinion, be replaced with the more comprehensive one of an overall prudential stance, one that would account for how both categories of prudential measures affect the economy. let me emphasise that this is not just a question of semantics. microprudential capital requirements, for instance, have been substantially increased after the crisis. in the short run, the contractionary effects on the credit cycle associated with such an increase were, directionally and qualitatively, of the same nature as those associated with the activation of a cyclical buffer. this of course does not mean that it was wrong to do it ; an increase in the quantity and quality of bank capital was required to strengthen the banking system, in light of all the shortcomings of the old supervisory rules that the crisis had exposed. however, it was clear to all that there was a 1 / 3 bis central bankers'speeches price to pay for this, in terms of tighter credit : at least temporarily, during the transition to the new standards. an overall prudential stance measure would capture this policy tightening ; a narrower perspective misses it. had the former existed, it would have supplied valuable input, for instance, to the discussion on transitional arrangements. the discussion took place anyway, because regulators were qualitatively aware of the issue, but in a sort of informational vacuum. i would thus suggest to devote further thought to such issues of definition. the conceptual framework should also more explicitly capture the idea that one central aim of macroprudential policies is to limit the endogenous pro - cyclicality of the financial sector. risks tend to be underestimated by market participants during booms and overestimated in busts, resulting in an amplification of cycles. to lean against this procyclical pattern in risk perceptions, the framework for the macroprudential stance should have a clear cyclical perspective. one might also note that
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are, however, problems that the single monetary policy is not in a position to address. it is the task of national economic policies to avoid and to counteract such situations. i will come back to these issues later. inflation differentials may also be induced by economic or policy shocks which affect the euro area countries and regions in different ways and at different times. also, local economies may respond dissimilarly to a common shock because of their individual economic structures. especially in the run - up to stage three of emu, the quantitative relevance of asymmetric shocks has attracted a lot of attention both among analysts and among economic observers. the economic framework they had in mind, known as the optimum currency area theory, predicts that the creation of a common monetary area becomes more costly the more the participating countries experience idiosyncratic shocks, in terms of size, nature and frequency, and the more varied their responses to such shocks are. while asymmetric shocks and adjustment mechanisms have to be recognised as realities, they also have to be seen in a more general framework, within which all gains from stage three of emu are taken into account. these gains are sizeable. from a political point of view, monetary unification, as part of a more general process of european integration, should be seen as bringing long - lasting peace and a higher level of co - operation between participating countries. from an economic point of view, monetary unification should be seen as bringing greater prosperity and stability. there is no doubt in fact that stage three of emu has, and will have, a net positive impact on france and all other participating countries. it is, however, worth examining its potential effects resulting from asymmetries. to what extent do these asymmetries still exist and are they a concern? one useful way of approaching this problem is to compare the euro area with the united states. the us appears to be a fairly natural benchmark. its economy is similar in several ways to that of the euro area, not least in the size of its economy and population. one line suggested by this approach is to compare the degree of synchronisation of economic activity among euro area countries with that of us states or regions. one interesting finding that emerges from the empirical literature is that asynchronous fluctuations also take place in the us. we therefore should not be surprised to observe a similar fact in the euro area. however, the evidence resulting from several studies carried out in
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willem f duisenberg : why price stability? welcome speech by dr willem f duisenberg, president of the european central bank, at the first ecb central banking conference, held in frankfurt, 2 - 3 november 2000. * * * ladies and gentlemen, it is with great pleasure that i welcome you to frankfurt on the occasion of the first ecb central banking conference entitled β why price stability? β. this new series of conferences that starts today and will be organised every second year is the ecb β s contribution to a process of open interaction between economists concerned by central banking issues. the conference series should serve as a vehicle for signalling the role of the ecb as a key player in central banking, by bringing together researchers from leading academic and international institutions, including the european parliament, and economists from ministries of finance, central banks in the escb, accession countries and also from non - european central banks. one of its main purposes is to launch a process of exchanging views and information on topics that are highly relevant for the policy objectives of the ecb. the topic chosen for this first conference - why price stability? - is particularly relevant for the policy objective of the ecb. this is because price stability in the euro area is a fundamental obligation assigned to the ecb by the maastricht treaty. moreover, by maintaining price stability, monetary policy makes its best possible contribution to the achievement of a high level of growth and employment in the long term. an important feature of this conference series is that it welcomes the presence of the press. participation by journalists in this type of conference should provide them with additional background information on monetary policy issues. this should serve to enhance the public β s knowledge of policy - making at the ecb, as well as to further consolidate the ecb β s openness, transparency and accountability. last, but not least, the ecb conference series should make a contribution to economic literature through the publication of the conference proceedings in a book. it is also intended to publish even more extensive proceedings on the ecb β s website. less than a year ago we organised, together with the centre of financial studies at the university of frankfurt, the first large, open conference of the ecb on β monetary policy - making under uncertainty β. on that occasion, i had the opportunity to signal clearly our commitment to a continuous and active exchange of information between the ecb and the academic world. today, with a track record of almost two years of monetary
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##ity risk show that indian banks are generally resilient. given the ongoing financial crisis and its likely impact on the indian economy, the cfsa conducted stress tests for the end of september 2008. under the worst - case scenario ( 150 per cent increase in gross npas ), the overall capital adequacy position of the banking sector would have declined to 10. 6 percent in september 2008 β still well - above the regulatory requirement of 9 per cent. thus, even under the worst case scenario, crar remains comfortably above the regulatory minimum. growth in bank credit remained strong up to october 2008 but has decelerated since. the financial system is working normally and accordingly there has been no need for any enhancement of government guarantee for bank deposits or banks β other liabilities. in view of the strong balance sheets and the transparency in the operations, there is no mistrust between banks and the inter - bank money market has been working throughout the period normally ( table 7 ). volumes in the money market have in fact grown over the past few months. there was some volatility in the call money rate, but this resulted from the sudden reversal in capital flows and resulting tightening of liquidity in september - october 2008. thus, the indian banking system is displaying none of the distresses that the western banking system has exhibited since the start of the sub - prime crisis. the resilience of the indian financial sector in the face of the worst global financial crisis since the 1930s can also be attributed to our approach to financial globalization. the key features of our approach have been reflected in a full, but gradual opening up of the current account but a more calibrated approach towards the opening up of the capital account and the financial sector. as far as the capital account is concerned, whereas foreign investment flows, especially direct investment inflows are encouraged, debt flows in the form of external commercial borrowings are generally subject to ceilings and some end - use restrictions. macro ceilings have also been stipulated for portfolio investment in government securities and corporate bonds. capital outflows have also been progressively liberalized. along with the calibrated approach to opening of the capital account, we have also practised prudential regulation, particularly of banks to manage financial instability. the financial sector, especially banks, is subject to prudential regulation, with respect to both liquidity and capital. a number of initiatives have been taken by the reserve bank over the past 5 - 6 years with a view to mitiga
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industry : issues, remedies and impacts β dealing with issues relating to data quality and has suggested a new framework towards achieving this ; this may prove beneficial for banks. bis central bankers β speeches 14. though one may be tempted to think that a term like data management is more apt for technologically agile sectors like it, the truth is that good data management practices can bring a huge benefit to the banking industry as well. further, the benefits arising out of this are not generic in nature, but rather deal with the core challenge today β s financial industry is facing β regulatory compliance. defining data quality 15. the broad components of data quality are precision, consistency, completeness, reliability and accessibility of standardised data across variety of platforms. but how do we define data quality? the meaning of the word β quality β depends on the context in which it is applied. we generally use it to indicate the superiority of a manufactured good or at least to a high degree of craftsmanship or artistry. however, it is difficult to define quality for data. unlike manufactured products, data does not have the physical characteristics that allow quality to be easily assessed. quality has therefore to be seen as a function of certain intangible properties such as β completeness β and β consistency β. 16. the question that logically follows is what is it that makes the quality of data a suspect? there could be variety of reasons such as duplication of data, maintenance of multiple data sets / standards, sluggish response and time to retrieve, polish and make it presentable, creation of redundancy within systems etc. the poor data quality always necessitates reconciliation, manual process of neutralisation or β torture the data β before it could be used. this low reliability, on account of poor quality of data often leads to time and cost over runs to reaffirm the reliability. the poor quality of data not only emanates from it but from business streams as well. this poor quality is further sustained by ambiguous roles and responsibilities in data management governance and oversight. this cost, both in monetary and time terms, impairs the business decision or the missed opportunity ceded to a better prepared competitor. 17. the basic issue as regards the computerisation of the indian banking system was that we migrated from the branch banking software to a core banking solution in which every activity / transaction processing is centralised. at the time of migration, since a variety of platforms were used for capturing different business activities,
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and eastern europe and 25 per cent per annum in western balkan economies. this experience now sounds very much as something that belongs to the past, but we have all learned the hard way that complacency is the best recipe for future disasters. 2. impaired lending channels and bank deleveraging complicate the recovery second, the pre - crisis credit booms turned into post - crisis credit busts. the resulting impairment of the bank lending channel has been a stumbling block for the economic recovery ever since. double - digit npl ratios are now more the norm than the exception across the region. banks have responded by setting aside provisions to cover expected losses and tightening credit eligibility standards to prevent new loans from going bad. these developments have limited banks β ability and willingness to lend. the post - crisis behaviour of euro area banks in central, eastern and south - eastern europe has been generally cautious, but also responsible. the vienna initiative played an important role in preventing a β run for the exits β scenario. on the one hand, euro area parent banks kept their local subsidiaries sufficiently capitalised to avoid bank failures. on the other hand, they have been unwinding in an orderly fashion their creditor positions towards the region. this deleveraging has contributed to the tightening of credit conditions in many countries in the region. local subsidiaries were gradually weaned off cheap parent bank funding and forced to compete for the more limited pool of domestic deposits. a new banking business model is emerging in response to these developments, but it will still take some time before we can clearly identify a new β steady state β. 3. when real convergence grinds to a halt finally, the most worrying development is that real convergence has come to a virtual halt in the wake of the global financial crisis in many countries in the region. the average annual growth rate of real per capita gdp, adjusted for differences in purchasing power, slowed from around 4 per cent per annum before the crisis to 0. 6 per cent in its aftermath in central and eastern european countries β and half that in the western balkans. unemployment has soared throughout the region, at times to unacceptably high levels of close to 30 per cent in bosnia and herzegovina and 17 per cent in croatia. iii. some policy lessons let me now draw two broad policy lessons from the good and bad experiences which i briefly outlined. 1. first, the need for more β and, even more importantly, better β european integration is for me the core policy lesson. let
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manuel sanchez : emerging markets amid heightened uncertainty remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the credit agricole central bank seminar, rome, 23 october 2014. * * * i am honored to join you here today in the magnificent city of rome, a cradle of western civilization, one of europe β s great cultural centers, and a muse for poets and artists throughout the centuries. thank you for the invitation to share a few words with you on the topic of emerging markets. emerging economies now confront a new reality, one in which some apparent certainties have disappeared, and different challenges have arisen. i would like to touch on three subjects in this context, starting with the performance of emerging economies, moving on to financial market conditions, and concluding with a brief overview of mexico in particular. as always, my views are entirely my own and do not necessarily reflect those of the bank of mexico or its governing board. developments and the outlook for emerging economies two distinctive trends characterize developments in emerging economies during the last few years. the first is higher growth since the beginning of this century, relative to the previous decade. economic expansion has surpassed that of developed nations substantially, with china and india playing prominent roles. what forces have driven this phenomenon? although emerging economies are not all alike, as a group they seem to have benefited from generally sound policies implemented in the 1980s and 1990s. these include the strengthening of macroeconomic and financial frameworks and the liberalization of markets, reduced regulations, and greater openness to international trade. additionally, high and rising commodity prices and ample access to external credit during the 2000s have helped. by and large, better policy and institutional settings seem to be responsible for the fact that emerging economies were relatively resilient to the shocks of the great recession. indeed, in 2009, while the advanced economies contracted more than 3 percent, the emerging economies grew slightly above 1 percent. 1 nonetheless, since 2011, growth in emerging economies has been declining, the second notable trend for the group as a whole. although still above that of advanced nations, average output change in the last four years has been less than that observed prior to the crisis in this century. several factors may contribute toward an explanation of the slowdown. one possibility is structural. some emerging economies such as china may be reaching the production frontier derived from their reforms. they cannot grow at constant extraordinarily high rates indefinitely. another possibility, which could be complementary to the first, is that
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significant gains in growth. as a result, 1997 was the year of fastest growth in 25 years. this same process led to unprecedented resiliency in the face of serious challenges during 1998 - 99. in fact, with the exception of ecuador, fiscal discipline was maintained, inflation was tamed, and there was no uncontrolled currency crisis, widespread banking crisis, or external payments crisis. the reforms are solid : they were not rolled back, but withstood the 1998 - 99 recession. much has been said about an alleged reversal of reforms. such a reversal has not taken place. in spite of the serious difficulties caused by the international financial crisis of 1998 - 99, virtually all countries of the region continued to deepen the structural reforms instituted in earlier years. of 14 countries evaluated by the bank, 10 promoted major fiscal or tax reforms in 1999, 7 were discussing significant reforms in their social security systems, 4 had made major progress in their privatization programs and 4 were discussing deep labor reforms. the review noted an additional 25 cases of reforms in financial systems, in legislation to promote competition and in other areas of economic and social policy in those countries. 2. recent experience with financial turmoil if reforms were so effective and fundamentals so strong, why did latin america have a serious growth slowdown and recession during 1998 - 99? the answer is the combination of negative external shocks, to which the region remains quite vulnerable. in their absence, the region was poised to maintain a path of relatively high growth. international terms of trade and commodity prices deteriorated substantially in 1998, in large part as a result of the east asian crisis. most latin american countries are still quite vulnerable to changes in commodity prices. some countries were severely hit by natural disasters, including el nino. these external shocks could have been accommodated with additional external financing, but it was not available. worse yet, normal external financing dried up and became the main problem. not only were international capital markets not there for latin america when they were most needed, but they actually aggravated the problem. unfortunately, this procyclical pattern with external financing, drying up when external conditions ( such as terms of trade or interest rates ) deteriorate, is typical in latin america. right there you have a core problem in our region : precarious access to external financing that disappears when it is most needed. that is why our hosts, our mexican friends, decided to arrange a special stand - by financial package under the umbrella of the imf, β
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enrique v iglesias : economic trends in latin america β the context of a globalized economy statement of mr enrique v iglesias, president of the inter - american development bank, at the meeting of the bank for international settlements, in mexico city, mexico, on 13 november 2000. * * * dear governors and friends : i am honored that bis invited me to speak to this distinguished audience of central bank governors from so many countries. that our host, the bank of mexico, is celebrating its 75th anniversary makes this a particularly special occasion. as you may expect, my topic today is latin america. i would like to use this opportunity to convey the views of the inter - american development bank on the state of economic affairs in the region and also to share with you some of our concerns about the future. i hope that some of these concerns may be of interest to the bis as they relate to its important work of strengthening financial systems. i shall divide my remarks in three parts. first, i shall briefly talk about the deep reforms that our region undertook in the past decade, which have radically transformed for the better the economic landscape of latin america. however, despite the strong policies and institutions that were put in place, as you know, our economies were overwhelmed by the external shocks suffered in recent years. second, i shall tell you how our region has experienced recent international financial turmoil and how it is currently recovering from a growth slowdown. the key question now is whether changes have been made to prevent the same experience from happening again and, after this painful episode comes to an end, whether growth and stability will prevail. i certainly hope so, but, finally, i shall close with some of my concerns about our continuing vulnerability to a sometimes hostile external environment, which i think are of interest to the bis and others involved in reforming the international financial architecture. 1. the reforms undertaken by the region in the last decade the reforms were deep : in the last decade, latin america embarked on a broad range of macroeconomic stabilization efforts and structural reforms that radically changed the economic environment. macroeconomic stabilization has been the result of a very important effort to correct our traditional fiscal imbalances throughout the region. fiscal deficits larger than 3 % of gdp were common in the eighties and are now exceptional : the average fiscal deficit in the last ten years has been just 1. 4 % of gdp. fiscal consolidation has been supplemented with sound monetary policies, which has resulted in much lower levels of inflation in most
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loi m bakani : recent review of papua new guinea β s economy speech by mr loi m bakani, governor of the bank of papua new guinea, to the international education agency ( iea ) college of tafe port moresby graduation, port moresby, 19 february 2016. * * * acknowledgement β executives of the international education agency, board of directors, staff, invited guests, parents and guardians and students, and graduands of the 15th graduation ceremony. let me first of all thank the iea for the invitation to be the key note speaker at today β s important occasion marking another stage in the graduands β educational life. you graduands will be entering the workforce or pursuing further education at an exciting time in our young country β s history that is experiencing rapid changes. you only have to look around port moresby and the rest of the country to see the transformation change that is taking place. papua new guinea as a nation has grown and transformed into a modern, sophisticated economy. this year, 2016, marks the fourteenth year of continuous economic growth as measured by growth in real gross domestic product ( gdp ), the longest streak of growth since independence in 1975. the construction of the us $ 19 billion png lng project has transformed the png economy, with spin - off benefits into other sectors and place png on the world map as a suitable investment destination that can host world - class multi - billion dollar projects. as a small, open and developing economy, our economic fortunes are intertwined with developments happening elsewhere around the globe. with the subdued global economic growth, volatility in international financial markets and geo - political uncertainties, international prices for our major export commodities remain low. the slowdown in china has also affected global growth. let me briefly outline the current state of the economy, as reflected in the main economic indicators. economic activity β growth in real gdp is expected to slow down in 2016 reflecting lower international commodity prices, including oil, and the adverse effects of the el nino weather phenomenon. this resulted in lower export receipts and government revenues. employment β according to the bank β s private sector employment index, over the year to september 2015, the total level of employment declined by 2. 6 percent, while excluding the mineral sector, it declined by 2. 8 percent. the decline reflected the slowdown in economic activity. balance of payments ( bop ) β preliminary balance of payments data for the eleven months to
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in life with all the pressures that come with it. you have acquired a technical skill here that has prepared you well for a working career in a competitive job market. png is posed to experience continuous economic growth and no doubt you will all play your part in our country β s development. but also make the effort to invest in your financial education to enjoy the fruits of your labour. you deserve that β for you as well as for your family. in concluding, i wish you all every success in your career opportunities and best wishes for a rewarding career and a safe financial future. thank you for the invitation to speak and god bless you all. bis central bankers β speeches
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. as michael reminds us in this book, the industrial structure of banking was very stable in ireland for a century or more. with the shift towards joint stock, deposit - based banking, the private banks faded away and just seven firms, which became known as the β associated banks β dominated the scene. each had its dublin head office in the dame street / college green area and we are standing in one of them, that of the royal bank, today. the royal was β like the hibernian β a dublin - based bank, one of those which decided it could survive despite being precluded from issuing its own banknotes by the existence of the bank of ireland β s monopoly. others began with headquarters in belfast ( ulster bank and northern bank ) or london ( the provincial and the national ) ; and the munster and leinster had its origins in cork. each of the banks had its own cultural and social make - up, which explains why daniel o β connell crops up as promoter or supporter of three of them, though he is most associated with the national bank. i was surprised a few years ago when visiting the main london office of the royal bank of scotland to find a full length portrait of daniel o β connell in a prominent position at the top of the grand staircase. tracing through the genealogy of the component banks of that group i realised that the portrait must have come from the old national bank which sold its uk offices to williams and glyn in the 1960s, which in turn became part of the natwest group subsequently acquired by rbs. continuity and tradition long remained the watchword. bis central bankers β speeches the 19th century saw a transformation in the design of banking halls, and michael gives an illuminating account of the key elements. illumination was indeed a major goal of the architects as they sought to bring light into the interiors through devices such as the clerestory β another echo of church architecture emphasised by michael. although many of the buildings are no longer used by the banks that built them, if you look closely enough in this neighbourhood, original bank names spring out at you from facades. the national irish bank on dame street carries the name β hibernian, 1824 β ( in this case there is no continuity, as the hibernian became part of bank of ireland, whereas nib is a descendant of northern bank ) ; β provincial bank chambers β clearly inscribed over a door at the westin hotel in college street reminds us where one forerunner of aib used to be. and
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patrick honohan : risk β banks and government address by mr patrick honohan, governor of the central bank of ireland, at the international centre for monetary and banking studies, geneva, 15 march 2011. * * * from the start of the global crisis, perhaps the most salient feature has been the jump in the appreciation of risk and in risk aversion. to be sure, in the previous years, the reverse was true : market appetite for risk was very high and risks were under - estimated. indeed, i have long maintained that credulity in mechanical risk management models is likely to have been the most important of the several factors that were at the root of the imbalances and excesses that occurred in the run - up to the crisis. believing that their risk models β and the financial engineering built on these models β worked better than they did ( and lured by the high rewards for assuming risk ), market participants piled into trades that were much riskier than they believed. the revulsion that set in once the shortcomings of key parts of the financial engineering edifice, and the associated failures of risk management, were revealed to its users also played a part in the speed with which the collapse occurred in the leading markets in september and october of 2008. accordingly, some of the pricing changes that then occurred represented a normalisation, in that risk premia for many classes of assets had been too low, but for a while there was an overshoot. since then, normality has returned to many key markets. indeed, some observers are fretting about the growing risk appetite that begins to be evidenced by some securities market prices in recent months. but for other asset classes, normalisation has not occurred ; risk premia have not narrowed. indeed they have widened. one conspicuous example is the pricing of peripheral euro area government debt, including the case of ireland, which is best known to me and which, when the dust has settled, is likely to be the country case most studied by future generations of students of this crisis. i could dramatise this situation by listing the emerging countries which have the same sovereign debt ratings and yield spreads as the european peripherals. but that is a rather painful exercise and i will dodge it on this occasion. by the way, it is worth recalling that, before the crisis, spreads on euro sovereigns were rather insensitive to the ratings. not so today. market participants obviously want to protect themselves against the risk that
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foreseeing any slowdown in growth in 1998 is because of the asian crisis there was nothing in the domestic economy that pointed in that direction - in fact, it pointed to higher growth. i suspect that in the future evolution of our policy, asia will be the major influence. as you know, the board of the reserve bank met on tuesday and did not make any change to the setting of monetary policy. there had been some speculation over the preceding month that we might ease, but the majority of observers expected no change. our on - balance view is the same as the majority of outside observers : that is, we judged that the present setting is the right one. as we see it : β’ the present stance of monetary policy provides a low interest rate environment which is working to support, rather than restrain, growth. credit is readily available, borrowers seem to regard current interest rates as attractive, financial wealth is rising, as is private sector leverage. β’ developments in the exchange rate and interest rates charged by financial intermediaries since the last reduction in the cash rate in july last year have worked to magnify the effects of lower official rates. the exchange rate has come down against major currencies, and competition among banks has reduced interest rates to business and personal borrowers. β’ the most likely outcome over the next 12 months at the present policy setting is for inflation to return to its target range and for domestic demand to remain at or above trend growth. with a significant reduction in net exports, gdp will probably grow below its trend rate, but some growth slowdown in the short run is an unavoidable result of the external shock. β’ our measured approach to date has served us well in that it has maintained confidence in australian financial markets. that, of course, does not rule out further changes in policy, but it does impose a constraint in that it means monetary policy has to be adjusted credibly. we do not wish to jeopardise australia β s current good international standing or revive memories of when australia was regarded as a β boom and bust β economy. we gain a lot from our current reputation for stability - not only does it reduce our borrowing costs, but we can raise equity more cheaply, and we have become a more attractive place for direct foreign investment. of course, we recognise that it would also be a mistake to stick too long to a setting of policy in the name of stability if there were good reasons to move. we have to be
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the regulatory reforms that have already been broadly agreed, but being wary of adding further reforms to the work program. absent some major new development, which brings to light some major reform need not hitherto visible, to task the regulatory community and the financial industry with further wholesale changes from here would risk overload. lest this be considered too weak a position, let us remember how much is being attempted. and since we are already seeing the need to β tweak β some earlier agreed proposals, it is surely clear that the details of implementation should increasingly be our focus over the next few years. the g20 will need to remain open to the possibility β the likelihood even β that as experience is gained with implementation and we grapple with the inevitable difficulties, and as we learn more about how the financial the relevant standards are the fsb β s key attributes of effective resolution regimes for financial institutions. work is also underway by cpss - iosco to establish how best to apply the key attributes to financial market infrastructures. bis central bankers β speeches system is likely to operate in a new world, we will want to make occasional adjustments to the rules. none of that ought to be seen as a retreat from the high level objectives that have guided efforts to date : the desire for a more stable, more resilient and simpler financial system, that is better able and more inclined to play its β handmaiden of industry β role and better able to withstand failures of individual institutions. but in pursuing these goals, it is important that we : β’ strike the right balance between more regulation and more effective enforcement of existing regulation. inadequate enforcement and supervision was as big a problem as deficient rules β’ recognise the cross - border aspects of the financial system, with the associated need for cooperation and, yes, compromise. recognition of the legitimate interests of smaller markets is clearly of importance to australia but many other jurisdictions as well. this often coincides with the role of pushing for a principles - based approach instead of a one - size - fits - all heavy - handed, rules - based approach. it may also involve working to develop a β regional voice β on some issues β’ consider the combination of reforms in their entirety, and keep a lookout for unintended consequences. given the breadth and speed at which reforms have been introduced in recent years, careful analysis of how the various initiatives will interact is becoming more important. keeping the regulatory structure fit for purpose across a broad range of jurisdictions around the world is in fact a
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agency is not a substitute for sound corporate governance practices. ultimately, banking system risks are most likely to be reduced to acceptable levels by fostering sound risk management practices within individual banks. instilling sound corporate governance practices within banks is a crucial element of achieving this. as the commonwealth secretariat's report notes, there are a number of ways in which corporate governance in the financial sector can be strengthened. these include : Β· having a well designed and enforced company law ; Β· having codes of principles developed by professional or industry associations, setting out desired attributes of corporate governance, and associated educational and consciousness - raising initiatives ; Β· maintaining high quality disclosure requirements for banks and other companies, based on robust accounting and auditing standards ; Β· adopting measures to strengthen market disciplines in the banking sector, including by promoting a contestable and competitive banking system and seeking to ensure that bank creditors are not fully insulated from loss in a bank failure ; Β· effective banking supervision arrangements, with particular emphasis on policies that encourage sound governance and risk management practices ; and Β· leadership by example, including the adoption of sound governance, accountability and transparency practices by central banks and regulatory agencies. new zealand's approach to financial stability against this background, let me briefly summarise the new zealand approach to promoting financial stability. this has three main strands : Β· promoting self discipline by banks in the management of their risks ; Β· fostering effective market discipline on the banking system ; and Β· supervising banks for the purpose of promoting financial stability, but seeking to avoid supervisory practices that might erode market discipline and weaken the incentives for bank directors to take ultimate responsibility for the management of risks. let me elaborate on each of these in turn. banks'self discipline in managing risks banking supervision in new zealand places considerable emphasis on encouraging banks'self discipline in managing risks, primarily by reinforcing the role of bank directors in taking ultimate responsibility for the stewardship of their banks. since the mid 1990s, when a new public disclosure framework was introduced for banks, a key mechanism for encouraging banks to manage risks prudently has been the need for banks to issue public disclosure statements each quarter. the disclosure statements are in two forms : a brief key information summary, which is aimed at the ordinary depositor ; and a more comprehensive general disclosure statement, which is aimed principally at the professional analyst. the key information summary contains a short summary of information on the bank, including : Β· the bank's credit rating ; Β· the bank's capital ratio, measured using the
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##ence in the cash system and its vulnerability to outages of power, data and roading networks. given the increased likelihood of extreme weather events in the future as a result of climate change, this resilience needs to be enhanced. we will continue to explore synergies between inclusion and stability as we develop our approach to financial inclusion. we are doing so in concert with our council of financial regulators partners, for which'financial inclusion'is one of 5 priority themes. 2 / 2 bis - central bankers'speeches
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labour supply but also on the demand for services. the 2005 pension reform in finland was designed to ease ageing pressures on the sustainability of the pension system and labour markets. the increasing old - age population together with the increasing demand for welfare and health services set also a pressure on the public economy. the nordic social model is based on the idea that people are in different phases of their life cycle net beneficiaries and net contributors of the social system. when the number of net contributors decreases in relation to the number of net beneficiaries this causes a serious financing problem. at same time the room for higher taxation is limited because of an already heavy tax burden, increasing tax competition and declining trend of gdp growth. it would be also politically unsustainable if the contributing population felt that the welfare society means for them only costs but not benefits. public services need to provide a good match with the preferences of a median voter. without such a match, the funding base of the public sector ( taxes ) will inevitably start to erode. this could lead to a vicious circle that would be difficult to reverse. this underlines the need to keep the welfare services universal ( open to all ) and high quality. a good example of this is the school system. when the labour contribution to growth will be small or even negative, the role of productivity will grow in weight. even though it is difficult to measure productivity in the public sector, in aggregate terms it appears to be lower than in the rest of the economy and in particular in the open sector ( baumol effect ), and grows more slowly if at all. still i am convinced that there are ways to increase productivity in the public services, too. the use of information technology and parallel re - engineering of work processes and organisations, as well as incentive based wage systems and benchmarking with best practices can bring improvements also in the productivity in the public sector. one way is to expose part of the public services to private competition, when provision of public services does not require that they are all produced by public sector. however, the main question is, whether the economic growth will be strong enough to bear the heavy cost burden that the ageing causes. the smaller number of working age population must be able to bake a cake big enough to feed the increasing share of population that is outside the labour force. 4. meeting the challenges β the nordic model and finnish experiences the nordic model includes a large government sector, high tax rates, generous
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s roles and that they will work together to overcome deflation and achieve sustainable economic growth. d. making use of accommodative financial conditions : providing a boost through the loan support program given the bank β s aggressive monetary easing i described earlier, financial conditions in japan are extremely accommodative both in historical and international comparison. to be specific, in terms of firms β funding costs, both short - and long - term average interest rates on new loan contracts have hit 1 percent β an unprecedented level. in terms of households β borrowing costs, variable mortgage rates are below 1 percent and even 35 - year fixed mortgage rates are around 2 percent. moreover, financial institutions β lending attitude remains accommodative, issuing conditions for cp and corporate bonds remain favorable on bis central bankers β speeches the whole, and an environment has been maintained in which households and firms can feel secure that they can gain access to funds. meanwhile, even at a time when there were strong headwinds generated by the great east japan earthquake and the european debt problem, extremely accommodative financial conditions have been firmly maintained. in order for japan β s economy to achieve sustainable growth with price stability, it is important that firms and households actually make use of the accommodative financial conditions for funding and increase investment and spending, which in turn will lead to an improvement in the aggregate supply and demand balance. as for recent developments in credit demand, although firms have shown signs of increasing their demand mainly for working capital and funds related to mergers and acquisitions, business fixed investment has been financed from cash flows, indicating that accommodative financial conditions have not been used to the fullest possible extent. to promote full use of the accommodative financial conditions, the bank has established the loan support program, consisting of the fund - provisioning measure to support strengthening the foundations for economic growth ( hereafter the growth - supporting funding facility ) and the fund - provisioning measure to stimulate bank lending ( hereafter the stimulating bank lending facility ). these facilities are offered for your use. 1. the growth - supporting funding facility the growth - supporting funding facility was introduced with the aim of supporting the flow of funds to areas with growth potential. with this facility, the bank provides long - term funds at a low interest rate to financial institutions for their lending and investment to areas that are expected to contribute to strengthening japan β s growth potential, such as medical and nursing care ; environment
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remarks by mr. javier guzman calafell, deputy governor at the banco de mexico, on β emerging markets in an era of dollar appreciation and volatile capital flows β, at the state street global advisors ( ssga ) - official monetary and financial institutions forum ( omfif ) roundtable β policy rupture : challenges and opportunities for public investors β. london, april 4, 2017. 1 i would like to start by thanking the organizers for the invitation to speak at this panel. several years after the outbreak of the global financial crisis, the world economy continues to display a weak performance, despite the recovery that has taken place since then. following the rebound observed in 2010, the growth rate of global gdp has been on a declining trend, averaging 3. 5 percent annually during the period 2011 - 2016, a full percentage point below its precrisis trend. it should be noted that the above owes to a large extent to developments in the advanced economies ( aes ), whose sharp gdp contraction and slow recovery in the aftermath of the crisis limited the increase in real gdp from 2007 to 2016 to a mere 10 percent. even though cyclical factors explain to some extent the aforementioned trends, the markedly low speed with which activity has recovered, as well as the perceived fragility of the process, point in the direction of important structural forces at play. indeed, global demand for both capital and the opinions and views expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. consumption goods appears to remain subdued due in part to an excess of savings over investment, further compounded by the long - lasting deterioration of balance sheets across sectors and economies as a result of the crisis. on the supply side, factors such as low productivity growth and demographic trends, especially in the aes, in combination with so - called hysteresis effects from the crisis, are considered to be exerting downward pressure on growth. all in all, this has given rise to concerns about the possibility of secular stagnation and therefore a much less dynamic outlook for the global economy. 2 the situation is further clouded by parallel and reinforcing trends in international trade flows. not only is the global trade volume of goods and services estimated to have recorded last year its lowest pace of expansion since the height of the crisis, but its average rate of growth has been cut by over one half between 2000 - 2007
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manuel sanchez : mexico and texas β ties and mutual benefits remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the centennial lecture series, the university of texas, el paso, texas, 10 september 2015. * * * i would like to thank you for the opportunity to participate in the centennial lecture series of the university of texas at el paso. it is a great honor to speak in this distinguished academic center, which has contributed considerably to closer relations between mexico and the united states. i congratulate those of you who have been an essential part of the success story of this institution. the university of texas at el paso has grown at an impressive pace during its first century. after starting out as a small school specialized in mining and metallurgy in 1914, today it is a full - fledged branch of the university of texas, offering a wide range of degrees. el paso now leads in programs on border issues and the relationship between the united states and mexico. enrollment has increased notably over the years, with the hispanic community accounting for a large majority of the student body. today, i would like to focus on mexico and texas as two increasingly integrated economies. i will begin with a review of how their links have expanded over time, yielding significant mutual benefits. i will then briefly describe recent developments in and the outlook for the mexican economy, in a context in which the united states and texas play important roles. finally, i will discuss monetary policy and inflation in mexico. as usual, my remarks are entirely my own and do not necessarily reflect the views of the bank of mexico or its governing board. mexico and texas mexico and texas have a deeply interconnected history of growth. the state of texas can be rightly viewed as one of the largest economies in the world, and its geographic proximity to mexico makes it all the more logical for the two to exploit mutually advantageous opportunities. their symbiosis is a natural consequence of a common cultural heritage, and, in economic terms, includes trade, investment, human capital, and many other areas. in particular, texas is mexico β s main trading partner within the united states, and mexico is the state β s main partner as well. in fact, texas accounts for more than twice as much of total mexican trade volume as china. as with the united states as a whole, commercial linkages were deepened by the north american free trade agreement, perhaps the most profound structural change ever undertaken by mexico. 1 mexico purchases many goods from texas
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bank is whether of an advance or a developing country. this aspect is of utmost importance for developing countries that still have a relatively weak taxation regime, with lingering suspicion of fiscal dominance hovering most of the time. in pakistan, the government does not have a broad revenue base and the domestic financial markets do not have enough depth to absorb placements of public debt. so, although the precondition of central bank independence is met for pursuing inflation targeting the other conditions is missing. for example, selection of an appropriate price index itself to define the target is problematic in the choice of exchange rate regimes. as the role of market forces is expanding due to liberalization, deregulation and privatization of the financial sector there are changes taking place in the transmission mechanism of monetary policy also. the redefinition of the regulatory role of the sbp, the revision of the prudential norms, the revamping of the bank supervisory tools, the shift towards automation and electronic banking and financial innovations in products and services are contributing to the emergence of a different financial system. i now turn to the exchange rate regime in pakistan. pakistan has adopted the floating inter - bank exchange rate as the preferred option since 2001. sbp has attempted to maintain real effective exchange rate at a level that keeps the competitiveness of pakistani exports intact. but, like other central banks, it does intervene from time to time to keep stability in the market and smooth excessive fluctuations. the managed float has served us quite well as it has conferred a degree of certainty and predictability to the economic agents to make informed judgments about the relative movement of the exchange rate. the accumulation of reserves during the last four years has underscored the credibility of the exchange rate policy and minimized excessive speculative activity. at the same time and until mid 2004 β the exchange rate stability also helped contain inflationary expectations as unlike in the decade of the 1990s when the rupee was depreciating at an average of 120 per cent per year vis - a - vis the dollar, the rupee became strengthened. the current framework of monetary - cum - exchange rate policies and the underlying economic analysis in pakistan can, thus, be broadly characterized as judgment and discretion based rather than model or rule based. the main justification for the current practice is that the economy is undergoing fundamental structural transformation and thus the behavioral relationships among the variables and the time lags influencing the behaviour are in a state of flux and transition. an added complicating factor is that measuring and predicting
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companies. under the prevailing legislative structure the supervisory responsibilities in case of banks, development finance institutions ( dfis ), and microfinance banks ( mfbs ) falls within legal ambit of state bank of pakistan while the rest of the financial institutions are monitored by other authorities such as securities and exchange commission and controller of insurance. in pakistan, while the overall assets of the financial sector have increased from rs. 5. 202 trillion in 2005 to rs. 11. 107 trillion in 2011, the share of the financial sector in terms of gdp is very low at 57. 4 percent. in 2011, banks held 74 percent of the financial assets while the share of nbfis was only 4. 7 percent of the total financial sector assets which was around 7. 6 percent in 2005. the low financial sector to gdp ratio and nbfis shadow banking : scoping the issues : a background note of the financial stability board, 2011. bis central bankers β speeches declining share in financial sector assets clearly underscores the need for financial sector development and diversification of financial sector assets to attract investors with different return expectations and risk appetite and channelize financial resources for the economic development of the country. therefore, today β s conference is very important and we should use this opportunity to understand the key bottlenecks in the way of financial sector development and also come up with concrete measures to address these shortcomings in a sustainable manner. alan greenspan identified the role of nbfis in strengthening an economy, as they provide β multiple alternatives to transform an economy β s savings into capital investment [ which ] act as backup facilities should the primary form of intermediation fail β. 2 on the other hand, the nbfis offer an alternative to typical commercial banking saving - investment products. however, in pakistan, nbfis other than investment banks and leasing companies which offer saving and investment products on a relatively small spectrum need to develop appropriate and affordable products to increase its market share. the key negative outcome of this is that there remains limited access to funding resources and relatively higher risk avenues to earn spreads. here i would like to briefly touch on the major constraints that the nbfi sector in pakistan is beset with : first, although there has been an increasing effort by nbfis to broaden the range of their business activities and product base, thereby diversifying their revenue streams, the sector is yet to make a breakthrough in this regard. second, the sector is fragmented and each nbfi
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bojan markovic : desirable capital inflows in serbia speech by mr bojan markovic, vice - governor of the national bank of serbia, to dealers at the bloomberg conference, belgrade, 27 april 2010. * * * deliberating consequences and policies of capital inflows seems perhaps inappropriate against the backdrop of recession and depreciation pressure on dinar. yet, the situation may change rapidly, as the recent experience of the emerging europe attests. just a year ago poland, czech republic and romania were concerned about capital outflows and weakening exchange rate β as was serbia. now there are increasing signs that capital starts flowing again into the emerging europe and these countries are finding it difficult to cope with the consequences. a similar turnaround in capital flows can happen in serbia anytime soon too β we are not doing worse than these countries as regards the macroeconomic performance or financial system stability. one such trigger could be the planned issue of medium - term t - bonds that are likely to attract much attention of international investors. it is perhaps wise to use this occasion and review the thinking about capital flows from the perspective of the national bank of serbia. we feel it is important for traders and other players in the financial markets to understand the central bank β s attitudes so that they could anticipate our policies and feel comfortable in their activities. capital inflows are welcome! they have been a necessary backbone of our growth model, helping the serbian economy to realize its catch - up potential in the absence of domestic savings. before the crisis foreign savings financed most of our investments ( the investment share was 28 % of gdp and domestic savings around 8 % ). hand in hand went large productivity gains and terms of trade improvements, which were mostly associated with foreign direct investments ( share in gdp of 7 % was relatively high ). capital flows also contributed to improving financial sector infrastructure, increasing the resilience of the financial system to shocks, and allowing for a smoother and efficient allocation of resources. however, by drawing on foreign savings capital inflows also allowed our consumers and government keeping high consumption levels. practically the entire serbian income was consumed in the period before the crisis. such a model of growth was therefore socially attractive, but economically unsustainable. the prospects of repaying the ballooning external debts were dim against the backdrop of low competitiveness and exports of our economy. and although the investment ratios looked high, even higher were necessary, especially given that the investment structure did not support
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. but who was the most important carry trader in serbia? a large number of households β not a shrewd financier from london. and who bore most of the currency and maturity risk? again domestic entrepreneurs and partly households β not the foreign investors. it is because of this unbalanced risk sharing that policy makers have to remain cautious about capital inflows. our macroeconomic and financial stability was put in danger during the crisis not because we had been borrowing abroad to finance growth, but because foreign investors did not carry adequate share of the risks involved in these activities. those businesses that were financed by foreign direct investment did not suffer so much from the lack of financing during the crisis, nor did those who borrowed in dinars, when the currency depreciated. in both these cases the foreign investors ventured into the future prospects of our economy β hoping to enjoy benefits but also sharing the risks. those foreign investors who bought into dinar denominated financial instruments took the fair burden on their shoulders, while those who had a stop - loss deposit with a local bank left the damage here. this discussion gives a background for our thinking about capital inflows in the future. we welcome all kinds of inflows, but as long as the financing risks involved rest fairly with the investor and not only with the local economy. that of course favors long - term flows to shortterm, because most investment projects require long - term financing. foreign direct investments or joint ventures are the most preferred examples here β also because they bring other positive externalities in terms of know - how and technology. such investors clearly demonstrate their long - term commitment to the prospects of serbian economy. but we also encourage pure financial flows β even short - term, if they match the financing needs. for many reasons explained earlier, they contribute to financial market development and help risk diversification. in particular, we are hoping the issue of dinar - denominated t - bonds will attract much attention of foreign investors, and the program will be success, eventually allowing the government to reduce the fx part of its debt. we are also hoping that higher volumes will help spur secondary trading and develop a dinar yield curve for benchmarking of other dinarbased instruments. for all these reasons we encourage foreign investors β involvement in local currency t - bonds β but we have clear preferences as regards specific forms of such an involvement. we prefer the forms in which the foreign investors take most of the credit and fx risks,
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growth and reducing poverty rates. modern economic analysis has confirmed much of what adam smith inferred from a far less impressive set of data. today's economists generally point to three important characteristics influencing growth : ( 1 ) the extent of a country's openness to trade and its integration with the rest of the world, ( 2 ) the quality of a country's institutional infrastructure, and ( 3 ) the success of its policymakers in implementing the measures necessary for macroeconomic stability. by openness and integration we generally mean the ability for goods and services, capital, and more broadly, the flow of information, people, technology, and ideas to move across the borders of a country. this freedom of movement may enhance growth by intensifying competitive pressures, increasing specialization, and allowing access to larger markets. free trade allows the more efficient use of resources which, in turn, raises both the productivity of the domestic workforce and the level of national income. adam smith cited comparative advantage. he observed : if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. one recent study of the effects of openness on growth demonstrated that when countries are divided into two groups - - those with generally open economies and those with generally closed economies - open economies have experienced average growth that is 2 Β½ percentage points higher than the growth of closed economies. furthermore, when developing economies are ranked according to their historical record of openness, economies such as hong kong, malaysia, singapore, and thailand are near the top of the list. these asian economies are some of the same ones that participated in the region's so - called growth miracle. for another example of a country that has benefited from free trade, we need look no further than mexico - - our host today. during the early 1980s, mexico's non - oil merchandise exports were running a bit below $ 10 billion a year, or about 5 percent of its gross domestic product. by 2001, however, mexico's exports of such goods had soared to more than $ 145 billion, or nearly 24 percent of gdp. the strength of exports has contributed importantly to the ongoing transformation of mexico's economy. a good portion of this export growth has occurred in the context of the north american free trade agreement, but the most important effects of nafta may be the increased openness of mexico '
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that market incentives had been reduced and that we were losing the dividend of efficient uses of resources that such incentives provide. even those observers who derided the more unbridled forms of capitalism became increasingly aware that attempts to tame the market could be costly in terms of economic growth and the average living standards of a nation. over the past thirty years, as many countries have struggled to liberalize their economies and improve the quality of their policies, global per capita income has steadily risen. i recognize that poverty rates are notoriously hard to quantify, but according to a recent study, the share of the world's population living on less than $ 1 per day, a commonly used poverty threshold, has fallen dramatically over the past three decades - - from 17 percent in 1970 to 7 percent in 1998, representing a decline of 200 million people. in addition since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily over the past thirty years, and literacy rates are up. smith ( 1776 ), vol ii, book iv, chapter v, p 43. world bank ( 2002 ) - - gdp per capita ( constant 1995 dollars ). sala - i - martin ( 2002 ). the $ 1 per day threshold is measured in 1985 dollars on a purchasing power parity basis. world bank ( 2002 ). while, from a global perspective, wealth and the overall quality of life have risen, that success has not been evenly distributed across regions or countries. the economies of east asia are often - repeated success stories. some, including china, malaysia, south korea, and thailand, stand out not only as growing very strongly, but also as having seen the greatest declines in poverty rates. overall, over the past three decades, asia's $ 1 per day poverty rate fell by one measure from 22 percent in 1970 to just 2 percent in 1998. moreover, asia was not alone. per capita incomes in latin america also expanded during the period, and poverty rates fell, although progress was somewhat slower. but, sadly, the story in africa has been quite different. levels of per capita income in that continent have actually fallen. the poverty rate, which in 1970 matched the rate in asia at the time, is estimated to have doubled to 40 percent by 1998. while africa's performance has clearly been subpar, some african countries have had some success. for example, botswana, lesotho, and more recently uganda have made some progress in raising per capita income
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will edge closer within the target band by end year as inflationary pressures decline in the quarters ahead. the bank also stands ready to implement sound monetary policies and take appropriate measures aimed at consolidating macroeconomic stability. 29. thank you for the attention. bis central bankers β speeches
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the ministry of finance. currently the bank of ghana and the ministry of finance have reviewed and approved the terms of reference for the legal consultants to draft a deposit insurance law for industry. it is our expectation that the deposit insurance agency would become operational by end december 2014 and that could afford some protection to all depositors. 20. the key challenge going forward to the banking industry is how to maintain the continued high levels of profitability over the medium to longer - term and more particularly, when the interest rate environment begins to shift its course. it appears to us at the bank of ghana that, among many other avenues for maintaining the bottom line like massive cost cutting and growing non - fee - based income, the answer could lie in taking up the sme challenge β which in the words of a recent banking survey means harnessing the sme potential. 21. although the banking sector has not witnessed new entrants this year, the number of microfinance institutions licensed by the bank of ghana has more than doubled to 228 by june 2013, from 90 in december 2012. the increasing trend in acquisition of licenses by microfinance institutions signals the increasing demand by economic agents at the lower echelon of financial service provision. bis central bankers β speeches 22. traditionally, banks are known to focus largely on corporate as well as personal and consumer banking. thus, the increasing number of microfinance institutions suggests a broadening of the scope of financial service provision at the micro level. this leaves a wide financial services gap, which has been referred to as the β missing middle β and constitutes mainly small and medium enterprises ( smes ). 23. mr. chairman, the critical role that this segment of society plays in any economy cannot be overemphasised. various studies show that promoting the development of smes can be used as a catalyst for economic growth, employment and poverty reduction. and yet, by their nature, smes are constrained from accessing financial services, especially through the major banks due to lack of proper governance, weak management systems, technical knowledge, and poor labour skills. although most banks are aware of the potentials of smes, venturing into the sector requires painstaking efforts to help them overcome these constraints. nevertheless, sme financing can be a good business for banks and a better understanding of the sector should provide enough incentives for banks to start and build business relationships with them. this is an investment that can be done now within the environment of high bank profitability. 24
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on euro area bond yields. in my view, there is much to be said, then, for soon setting aside the practice of replacing all maturing bonds. this additional tightening signal would underscore our commitment to ensuring that inflation returns to the medium - term target of 2 % in a timely manner. if we act too hesitantly, we run the risk of having to tighten monetary policy even more severely further down the road. past experience, too, has taught us that if monetary policy gets behind the curve, medium - term inflation expectations adjust upwards. and that would make it far more difficult for monetary policy to achieve price stability. 2 / 5 bis - central bankers'speeches this is why it would be wrong to now hold back on further steps towards normalisation for fear of a downturn. on the contrary, unrestrained inflation is itself a burden on the economy. the longer inflation remains high, the more of a strain it places on consumption and investment. and the greater the risk of it becoming entrenched at a high level in the medium term. that has to be prevented from happening. for my part, it is important that we be honest : curbing inflation also comes with a price tag. it is likely to temporarily be an additional dampener on growth. but the main culprits behind the economic weakness are the supply bottlenecks caused by the pandemic and the war. honesty also means acknowledging that the lift - off in interest rates will make interest rate risk materialise on balance sheets. this also affects us as a central bank : we hold a high stock of low - interest securities with, in some cases, very long residual maturities. the counterpart to these on our balance sheet is mainly short - term deposits of commercial banks. the interest on these is now rising. as a result, this may weigh on our annual results. the provisions on our balance sheet are available as an initial buffer against potential losses arising from financial risks. 4 fiscal policy : targeted softening of hardships we have to recognise that the path to price stability is not a sprint but a marathon. unlike the runners in the berlin marathon, we do not know from the outset how much longer we still have to run until we reach our goal. this is especially true since monetary policy measures do not have their full effect on inflation immediately, but only after a delay. to make rapid progress on this route, fiscal policy can also play a part. it is an enduring principle that sound public finances
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/ 5 bis - central bankers'speeches inflation stood at 4. 8 % in september. in other words, price pressures are now broadbased. there is also some evidence to suggest that inflation in the euro area will remain high for the time being, with the latest ecb staff macroeconomic projection putting it at 5. 5 % next year. while most forecasts assume that inflation rates will move towards 2 % again in the medium term, merely converging on this target cannot be enough for the eurosystem β after all, it is vital to achieve the 2 % rate in the medium term. moreover, forecasts could lull us into a false sense of security. past projections have, after all, underestimated actual price dynamics on multiple occasions. caution is therefore warranted here, especially as uncertainty is extremely high and risks are clearly tilted to the upside. for example, tensions in energy markets could persist for longer than assumed in the forecasts. still - high commodity prices might be passed on to consumers on a greater scale than usual. wages could rise more sharply than previously anticipated. 3 monetary policy needs to step up to the plate to safeguard price stability in this situation, all eyes are focused on monetary policy, and rightly so. whilst it may not be able to lower gas prices or make butter cheaper, what it most certainly can do is prevent high inflation from becoming entrenched. this could happen if households, enterprises and wage bargainers keep expecting higher inflation rates in the future. monetary policy in the euro area now needs to step up to the plate β and that's what we are doing. the ecb governing council initiated the lift - off in interest rates at our meeting in july, and in september we followed this up with an even bigger interest rate hike. these decisive interest rate steps are important for achieving price stability, which is why i very much welcome the decisions. but it is also clear that we cannot stop here. short - term real interest rates are still very low, in some cases even negative. in other words, monetary policy is not yet dampening inflation, but is still driving it. further steps along the path to monetary policy normalisation need to be taken, then. how large the individual interest rate steps will be and how far we raise interest rates will be dependent on the data. it is also important to look into the high levels of bond holdings. these currently amount to almost β¬5 trillion and continue to exert considerable downward pressure
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##evate ethical or reputational concerns to appropriate levels of management without fear of retribution. reputational and legal risks pose major threats to financial services firms because the nature of their business requires maintaining the confidence of customers, creditors, and the general marketplace. importantly, legal and reputational risk can negatively affect the profitability, and ultimately the viability, of a financial firm. enterprise - wide compliance program a strong compliance program is an integral part of the risk - management function. for the reasons i will discuss, the best practice in complex financial firms is to conduct risk management on an enterprisewide basis. as a result, compliance activities should be managed on an enterprise - wide basis as well. traditional risk management has focused on quantifiable risks, such as credit and market risks. recent events have demonstrated the need for greater focus on the risks that are harder to quantify - that is, operational, legal, and reputational risks. indeed, legal and reputational risks are significant risks facing some financial firms today. the compliance area is critically important in identifying, evaluating, and addressing legal and reputational risks. given the significance of these risks, a strong enterprise - wide compliance program is a necessity for complex financial firms. a well - executed compliance program can also highlight operational problems. as an integral part of an enterprise - wide risk management, an enterprise - wide compliance program looks at and across business lines and activities of the organization as a whole to consider how activities in one area of the firm may affect the legal and reputational risks of other business lines and the enterprise as a whole. it considers how compliance with laws, regulations, and internal policies, procedures, and controls should be enhanced or changed in response. this approach is in marked contrast to the silo approach to compliance, which considers the legal and reputational risks of activities or business lines in isolation without considering how those risks interrelate and affect other business lines. the silo approach to compliance has prevailed for far too long in financial firms. we are overdue for a paradigm shift to an enterprise - wide compliance structure as we also shift to enterprise - wide risk management. why is an enterprise - wide compliance program so important? recently, in an interview with the wall street journal, the independent board chairman of a prominent mutual fund company involved in the market - timing scandal identified as one of the firm β s compliance breakdowns the bifurcation of compliance responsibilities within the firm. that is, no one had the 25, 000 - foot
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r basant roi : treasury and risk management address by mr r basant roi, governor of the bank of mauritius, at the financial markets association of mauritius workshop on treasury and risk management, 10 september 2003. * * * president and members of the financial markets association of mauritius ladies and gentlemen good morning. thank you chairman for the invitation to briefly address this gathering of financial market participants this morning at the opening ceremony of the treasury and risk management workshop. as far as i recall, this is the first time that such a workshop is being organized by your association for the benefit of its members and for professionals involved in treasury and risk management. since the breakdown of the bretton woods system in the early 1970s treasury management has assumed an increasingly greater importance in our economic life. with the globalisation of financial markets treasury management has become more demanding than before. until five years ago treasury management was not assigned the same importance that ought to have been given by corporate bodies in mauritius. it is absolutely essential that in today β s world efficient treasury management occupies a seat of importance in the management of enterprises. i congratulate your association for having taken the initiative to hold this workshop. i strongly believe that we should keep ourselves abreast of the latest developments in asset and liability management, risk management techniques and derivative instruments. this workshop is positively a first step forward. i would first and foremost like to make an observation. treasury management is not specific to banks and other financial institutions. it does concern all of us who are in the business of managing financial resources in a globalised financial market. enterprises producing goods and services, exporters, importers or any other economic agent that has got to manage its finance necessarily requires expertise in treasury management. in 1999, i was surprised to learn that an exporter with a turnover of over rs2 billion did not have any expertise at all in managing its own finance. in a world economy characterized by stiff competition, every enterprise needs to be good in treasury management. in the last few years i have stressed a lot on good corporate governance as the basis for best business practices and highlighted the urgency for restructuring and consolidation of individual firm so as to enhance micro - economic efficiency. traditionally much of the knowledge and skills of professionals in the wholesale financial markets has been learned on the jobs. this approach has varied from the simple β sit, watch and learn β approach to the sophisticated mentoring system used by some large financial institutions. today treasury operations have grown into one of the key administrative areas of financial
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or the fed's preferred measure of personal consumption expenditures, it is still much too high and so my job is not done. i interpret these data as indicating that we haven't made much progress on our inflation goal, which leaves me at about the same place on the economic outlook that i was at the last fomc meeting, and on the same path for monetary policy. because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened 3 / 4 bis - central bankers'speeches further. how much further will depend on incoming data on inflation, the real economy, and the extent of tightening credit conditions. another implication from my outlook and the slow progress lately is that, as of now, monetary policy will need to remain tight for a substantial period of time, and longer than markets anticipate. but there are still more than two weeks until the next fomc meeting, and i stand ready to adjust my stance based on what we learn about the economy, including about lending conditions. other data such as those on the housing sector, personal income, and surveys that provide managers'views of economic conditions in april will come in over the next few weeks. i would welcome signs of moderating demand, but until they appear and i see inflation moving meaningfully and persistently down toward our 2 percent target, i believe there is still work to do. thank you, kathy, and i'm happy to take a few questions. 1 the views expressed here are my own and not necessarily those of my colleagues on the federal reserve board or the federal open market committee. 2 one can find the senior loan officer opinion survey on bank lending practices at the following link. https : / / www. federalreserve. gov / data / sloos. htm. 3 for a given level of tightening in various financial market data, estimates of the equivalence in tightening of the policy rate vary widely, and, as the shift in financial conditions since early march showed, financial conditions themselves are a moving target. 4 / 4 bis - central bankers'speeches
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christopher j waller : financial stabilization and macroeconomic stabilization - two tools for two problems speech by mr christopher j waller, member of the board of governors of the federal reserve system, at the graybar national training conference, san antonio, texas, 14 april 2023. * * * thank you, kathy, it's a pleasure to be with you today. i am going to focus my remarks on the economic outlook, including how the recent turmoil in banking has affected that outlook. 1 relative to the federal open market committee's ( fomc ) economic objectives, data for the first quarter indicate that economic output and employment are continuing to grow at a solid pace while inflation remains much too high. the fomc raised its target range for the federal funds rate to 4 - 3 / 4 to 5 percent at its march meeting, and our statement noted that recent banking developments are likely to result in tighter credit conditions and to weigh on economic activity, hiring, and inflation. we didn't know then, and still don't know, the extent of these possible effects. so, perhaps even more closely than usual, i will be watching the data to evaluate the appropriate path of monetary policy. the sudden failure of silicon valley bank ( svb ) and signature bank, which contributed to stresses felt by other mid - size banks, was a classic bank run, in which the rapid withdrawal of funds by depositors created severe liquidity problems. svb was a specialty bank serving the tech sector. unlike other banks, where a substantial share of deposits is insured and verifiably safe, more than 90 percent of svb's deposits were above the $ 250, 000 - per - account limit for deposit insurance. additionally, those deposits were largely from many of the same types of businesses, resulting in additional risk. chair powell has directed vice chair for supervision barr to report by may 1 on svb's failure, including the federal reserve's supervision and regulation of the bank. based on what is already in the public record, svb seems to have done a terrible job managing its risks. a bank run that undermines confidence in other banks is the most fundamental risk to the financial system, and the fed, serving as the lender of last resort, was created in part to prevent such a development. the job of the lender of last resort is to provide sufficient funds to the banking system so that depositors can be confident they will be able to withdraw their funds on
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rules cannot substitute for character. in virtually all transactions, whether with customers or with colleagues, we rely on the word of those with whom we do business. if we could not do so, goods and services could not be exchanged efficiently. even when followed to the letter, rules guide only a small number of the day - to - day decisions required of corporate management. the rest are governed by whatever personal code of values corporate managers bring to the table. market transactions are inhibited if counterparties cannot rely on the accuracy of information. the ability to trust the word of a stranger still is an integral part of any sophisticated economy. a reputation for honest dealings within a corporation is critical for effective corporate governance. even more important is the reputation of the corporation itself as seen through the eyes of outsiders. it is an exceptionally important market value that in principle is capitalized on a balance sheet as goodwill. reputation and trust were particularly valued assets in freewheeling nineteenth - century america. throughout much of that century, laissez - faire reigned and caveat emptor was the prevailing prescription for guarding against the wide - open trading practices of those years. a reputation for honest dealings was thus a particularly valued asset. even those inclined to be less than scrupulous in their private dealings were forced to adhere to a more ethical standard in their market transactions, or they risked being driven out of business. to be sure, the history of business is strewn with fisks, goulds, and numerous others treading on, or over, the edge of legality. but they were a distinct minority. if the situation had been otherwise, the united states at the end of the nineteenth century would never have been poised to displace great britain as the world β s leading economy. reputation was especially important to early u. s. bankers. it is not by chance that in the nineteenth century many bankers could effectively issue uncollateralized currency. they worked hard to develop and maintain a reputation that their word was their bond. for these institutions to succeed and prosper, people had to trust their promise of redemption in specie. the notion that β wildcat banking β was rampant before the civil war is an exaggeration. certainly, crooks existed in banking as in every business. some banks that issued currency made redemption inconvenient, if not impossible. but they were fly - by - night operators and rarely endured beyond the first swindle. in fact, most bankers competed vigorously
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new era β, in evolution or revolution : rethinking macroeconomic policy after the great recession, o. blanchard and l. h. summers ( eds. ), cambridge, the mit press. cΕure, benoit ( 2018 ), β monetary policy and climate change β, speech at a conference on β scaling up green finance : the role of central banks β, berlin, 8 november 2018. eichenbaum, martin s. ( 2019 ), β rethinking fiscal policy in an era of low interest rates β, mimeo, department of economics, northwestern university. swedish ministry of finance ( 2019 ), β uppdrag till riksgaldskontoret att genomfora en emission av grona obligationer β ( swedish national debt office tasked with issuing green bonds ), government decision, fi2019 / 02708 / s. ngfs ( 2019 ), β a call for action. climate change as a source of financial risk β, network for greening the financial system, first comprehensive report, april 2019. rachel, Εukasz and laurence h. summers ( 2019 ), β on falling neutral real rates, fiscal policy, and the risk of secular stagnation β, brookings papers on economic activity, spring 2019. reichling, lucrezia, adair turner and michael woodford ( 2019 ), β helicopter money as a policy option β, voxeu column. shirai, sayuri ( 2019 ), β modern money theory and its implementation and challenges : the case of japan β, voxeu column. sou ( 2017 : 115 ), β att framja grona obligationer β ( promoting green bonds ), report from the inquiry into green bonds, swedish government official reports. sveriges riksbank ( 2019 ), monetary policy report, october 2019. 7
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they may find their customers going elsewhere - for example, to internet - based financial institutions. as we have seen from some recent incidents, the banks in hong kong have been lagging behind in the provision of clear information to their customers about the cost of some financial products such as credit card advances. moreover, there has been recent controversy about the provisions in credit card agreements that entitle the lenders to reclaim from debtors the full legal costs and expenses of recovering overdue debts. in a recent court case, the judge ruled that the relevant provisions were unconscionable and therefore could not be enforced. we have written to authorised institutions to ask them to review their terms and conditions in the light of the court β s ruling and to ensure that they are consistent with hong kong law. we have also initiated a review of the code of banking practice with a view to strengthening the provisions on such issues as transparency in the provision of banking services and the proper and responsible use of debt collection agents. these issues are already addressed in the code to some extent, and perhaps if the spirit of the code had been more closely adhered to, some of the recent bad publicity for the banks could have been avoided. however, it is evident that the code needs to be made more specific in some areas, and the issue of how to ensure compliance must also be addressed. the code of banking practice is not part of our reform measures, but i have digressed to talk about it for two reasons. first, as already indicated, it becomes all the more important in a deregulated environment to ensure that there is a fair and balanced relationship between banks and their customers. second, the fact that we are going to have to devote resources to this issue for the rest of this year means that one of our reform measures, namely a review of the current three tier system of authorisation, will be postponed from this year to next. this will also allow us to take into account the results of our forthcoming review of deposit protection arrangements, which may have a bearing on the minimum size of deposits that authorised institutions which are not licensed banks should be allowed to take. safety and soundness of the banking system deposit protection is part of what might be called the safety net arrangements for the banking system. as the name suggests the safety net is there to catch banks that are in trouble or, if not the banks, then at least their depositors. this is part of the other aspect of our reform measures that are aimed
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- committee of the exchange fund advisory committee, mature and arrangements put in place, in collaboration with the industry. allow me to conclude with a commercial targeted at retail investors. the exchange fund notes are a very safe investment β you are putting your money with the exchange fund, which is managed by the hkma. the exchange fund notes provide you with a steady stream of fixed - interest income that is higher than interest on bank deposits. the exchange fund notes are highly liquid β you can sell them any time you want. there are 26 market - makers appointed by the hkma to make a market in exchange fund paper. the exchange fund notes have a transparent and efficient price discovery system β up - to - date prices and yields can be easily found in newspapers and the financial media. but we all should not forget, of course, that the prices of exchange fund notes can go up as well as down, depending on the level of interest rates. end of commercial. thank you.
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glenn stevens : recent issues for the conduct of monetary policy speech by mr glenn stevens, deputy governor of the reserve bank of australia, to the australian business economists and the economic society ( nsw branch ), sydney, 17 february 2004. * * * thank you to the abe and the economic society for putting on such an enjoyable occasion and inviting me to speak. i don β t intend to say much about current economic conditions or the short - term outlook. the bank has just released its statement on monetary policy, and there is no end of discussion at this time of year in various conferences about what may lie ahead. instead, i want to make some observations about several issues which have been important in the conduct of policy over the past couple of years. these issues of principle are worth clarifying as they are likely to be of more enduring importance than comments about the current state of the economy. background the past two or three years have seen some highly unusual circumstances for the conduct of monetary policy. internationally, we saw in 2001 and 2002 the weakest economic conditions in the major countries as a group for about twenty years. several of them encountered recession - and recovery tended to be rather halting, which seems related to the unwinding of the share market bubble and associated excesses in the us and elsewhere. it has also been a period of very low and declining inflation, as conventionally measured by cpis. the long disinflation which began in the early 1980s has resulted in price stability in most countries, and the possibility of inflation falling too far - becoming deflation - was openly talked about around the world last year in a way which had not happened in half a century. a result of all of this has been that interest rates in the world β s key financial centres have fallen to exceptionally low levels. at present, the average short - term interest rate in the β big three β economies is 1 per cent, the lowest in a hundred years. there have also been major changes in exchange rates over the past year or two. the us dollar, formerly very strong, has weakened considerably against the euro and other major floating currencies ; most asian currencies have depreciated against other currencies roughly pari passu with the us dollar. through all this, the australian economy has to date maintained a pace of growth envied by most others, in the face of some pretty unfavourable shocks. it is the first time anyone can recall the us having a
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the effect of the improvement in macroeconomic conditions and asset prices 4 / 6 bis central bankers'speeches resulting from our monetary policy measures shows that the overall impact of our measures on bank profitability was positive. 14 let me also underline that there remains ample room for a large part of the financial sector to improve profitability by increasing efforts to improve operational efficiency via organic costcutting : euro area banks β cost efficiency has not improved since 2010 and, by standard metrics, compare unfavourably with many of their international peers. 15 finally, what about the effects on institutional investors? our latest financial stability review, which was published today, states that over the past few years some institutional investors, including insurance corporations, pension funds and investment funds, have shifted their asset allocation from higher to lower - rated debt securities. 16 such developments need to be closely monitored. to mitigate their risks, these institutions may have to adapt their business models, for instance by continuing to reduce their reliance on guaranteed - return schemes. 17 conclusion let me conclude. the macroeconomic environment is improving. the monetary policy measures put in place in recent years have proven to be effective at sustaining a resilient recovery that is increasingly broad - based across countries and sectors. this recovery in turn contributes to greater financial sector resilience. the breadth of our monetary policy measures and the length of the time they are in place are necessary for achieving our objective of price stability. these policy settings have been made possible because the financial system is more resilient than in the past. today we have a suitable β and active β macroprudential framework to address potential negative side effects. this, together with stronger banks and stronger supervision, has enabled us a longer period of low interest rates unmarked by a build - up of financial stability risks. nonetheless, we remain vigilant. when we introduced unconventional policy instruments in order to secure a return of inflation towards our objective, we were aware that those new instruments could result in somewhat more pronounced side effects than conventional instruments. these side effects have remained contained, but we take them into account in the formulation of our policy, in the sense that we try to minimise them, without prejudice to our ability to achieve our objective. and this is reflected also in the logic underpinning our forward guidance about the sequencing of the withdrawal of monetary stimulus. indeed, as i said in my speech at the ecb watchers β conference, 18 in a multi - country monetary union such as
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a lower contribution to the economic growth during 2010. public expenditure reduced by about 5 % year - on - year, while the budget deficit reduced by about 4 p. p. of the gdp. the bank of albania has always highlighted that fiscal stability is a fundamental precondition for a long - term economic growth. in this context, we deem that respecting objectives on budget deficit and public borrowing during 2011 will yield a positive contribution to the country β s economic development. maintaining relative levels in budget deficit will eliminate a direct negative effect on economic growth, while relatively low levels of public borrowing will have an impact on the control of long - term interest rates and reduction of risk premia in financial markets. these developments were manifested during the second half of 2010 and are expected to stimulate domestic demand during 2011, as well. external sector of the economy continued to be characterised by a positive, though falling, contribution of foreign demand to economic growth. the correction pace of the trade deficit was slower in this quarter. trade deficit reduced by 1. 2 % compared to two - digit correction rates recorded in the first half of 2010. this situation of the trade deficit is determined mainly by the acceleration of imports, which marked a year - on - year increase of 10. 8 % in the fourth quarter of 2010, recording a growth for the third consecutive quarter. on the other hand, albanian exports increased by 48. 8 % year - on - year, maintaining high rising rates. the bank of albania holds that the albanian economy will find it difficult to maintain the same growing rates of exports during 2011 ; among other things, this projection reflects temporary factors that influenced on 2010 growth and is in line with the global economy situation and basic statistical effects. nevertheless, external demand is expected to generate positive contribution to the economic growth during 2011, as well. bis central bankers β speeches monetary indicators, financial markets and inflation performance of monetary indicators continues to generate controlled monetary inflationary pressures on the domestic economy. money supply increased by 12. 5 % in december 2010, reflecting a good performance of deposits in the banking sector during the second half of the same year. our assessments indicate that monetary expansion is in line with the private sector demand for real money. a good progress of the economic activity and falling risk premia are also reflected on the upsurge of demand for loans by the private sector. satisfactory parameters of the banking system in terms of liquidity and capitalisation have enabled additional support to the private sector with bank loans. in december,
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under control, contributing to keeping a steady macroeconomic environment in the country. at the same time, the commission also evaluated the reliable monetary policy followed, highlighting particularly the measures taken by the bank of albania in terms of gradually changing its monetary policy strategy towards explicit inflation targeting regime, aiming at enhancing transparency and credibility of its monetary policies. the report highlighted also the positive developments in the banking sector of the country and assessed the progress achieved regarding the establishment of the loans register, free movement of banking and financial services, freedom of establishment of foreign banks and further liberalization of capital movement. on 27 january, 2006, the executive board of the imf adopted the three - annual agreement with albania, at sdr 17. 045 million. the main targets of the new program have to do with the maintaining of macroeconomic stability, as a prerequisite for economic growth, and the improvement of financial institutions. under reserves advisory and management program ( ramp ), during 2006 the world bank β s group provided consulting and technical assistance to the bank of albania for foreign reserve management. during 2006 the bank of albania established constant contacts with the ebrd, mainly in terms of providing information and statistics for the development of the albanian economy in general and financial sector in particular. the transition report 2006 assessed positively the maintaining of inflation within the bank of albania β s target and the consolidation of the banking system over 2006. the bank for international settlements ( bis ) is another institution with which the bank of albania kept close contacts during 2006. the bis has been particularly active in providing technical assistance to the bank of albania, through workshops and training courses organised by the institute of financial stability, which promotes the international financial stability through information sharing and cooperation in financial system supervision area. during 2006 the bank of albania enhanced the mutual relations with the central banks of the region and beyond it. personally, i have paid official visits to many central banks of the region and europe, discussing about latest developments in the albanian economy and further extension of mutual cooperation and technical assistance that these banks can provide to the bank of albania. in june the governor of the bank of greece, mr. nicholas c. garganas paid a two - day official visit to albania. it took place in the light of mutual relations between both institutions, laying special emphasis on sharing of information and experience in banking supervision area. enhancing relations with central banks of the region reached the peak in the round table of october 2006 held in tirana, where the governors of the central bans of
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levels, desertification, greater risk of wildfires, etc. in the case of spain, the national plan for adapting to climate change 2021 - 20303 suggests that these risks have already started to materialise. also, according to the european environment agency, extreme weather and climate events have already caused direct economic losses in spain totalling more than β¬60, 976 million since 1980. 4 the https : / / www. ipcc. ch / report / sixth - assessment - report - cycle /. strategy for financing the transition to a sustainable economy, european commission, july 2021. plan nacional de adaptacion al cambio climatico ( pnacc ) 2021 - 2030, ministerio para la transicion ecologica y el reto demografico, september 2020. economic losses from climate - related extremes in europe, european environment agency, february 2022. european commission estimates, in its 2020 report, 5 that a global temperature increase of 3Β°c could result in an annual welfare loss of around 1. 4 % of gdp in europe, with the greatest impact arising in southern europe. meanwhile, transition risks relate to the costs that may arise during the transformation of the economy needed to mitigate climate change and minimise the impact of the physical risks. the implementation of public policies necessary to achieve these objectives, the development of less contaminating technological innovations and changes in consumer preferences in favour of lower - emission goods and services will lead to a reallocation of resources between sectors. if this is not a sufficiently smooth process there could be significant economic disruption. channels of transmission to financial institutions financial institutions are exposed to the above - mentioned risks both directly and indirectly. this issue has been addressed by various studies and institutions. for example, in the banking field, the basel committee on banking supervision ( bcbs ) published a paper in april 20216 dividing transmission channels into two groups : microeconomic and macroeconomic. microeconomic channels refer to the effect that the above - mentioned risk factors may have on institutions β counterparts ( borrowers ). macroeconomic channels refer to the negative effect that physical and transition risks may have on economic growth, which would also affect financial institutions. to illustrate these channels, transition risks may, for instance, arise from the introduction of green taxes, which would raise energy costs. this increase in costs may, in turn, drive up the prices of those goods whose production requires more energy and, subsequently, a decrease in the demand for them, affecting firms
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is part of the minimum capital pillar 1, and is directly reflected in the solvency ratio. elsewhere, reputational aspects, which are very important for the banking sector, are also evaluated as part of pillar 2. both pillars of the capital framework repeatedly mention the concept of β risk β. a quick search of the text of the european solvency regulation will bear this out : the word risk appears no fewer than 1, 500 times. however, there are clear differences between so - called financial risks ( such as credit and market risk ) and non - financial risks, which by their nature are more difficult for credit institutions and supervisors to address. non - financial risk is directly related to malpractice or non - compliance proper to conduct risk ; but going beyond this conference β s theme, it also refers to it events, reputation, governance and cyber security. unlike credit or market risks, non - financial risk is unconnected to specific financial decisions, is much more difficult to quantify than traditional risks and can only be reduced or mitigated. despite all these difficulties, or perhaps precisely because of them, non - financial risk has been firmly on regulators β and supervisors β radar screen since at least 2004. this followed the approval of basel ii which, as i indicated earlier, included a capital requirement for operational risk. today, the measurement and management of these risks remains equally complicated, but their importance for banking business has in fact increased. evidence of this is the map of risks and vulnerabilities annually published by the single supervisory mechanism ( ssm ). viewing the snapshot for 2021, we can see how a large portion of the sector β s weaknesses are related to non - financial risk. this is not really anything new. in previous exercises the ssm has also included these components. and logically so. allow me a few examples : ( i ) reporting systems and technological platforms have become essential, and as any banker can confirm, they have become a key component of any viable business model ; ( ii ) the prevention of money laundering has taken on a most significant dimension in europe, following various scandals and cases of fraud. indeed, an overhaul of the attendant regulatory and supervisory framework is on the table ; ( iii ) finally, given what has been discussed in this conference, i need not convince you that the nature of the retail banking business calls for great care as regards conduct towards customers. on this last point, there have been many scandals in recent years. in fact, calculating all
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##aging and paring of business lines β are likely to prove highly consequential to the near - term outlook for the real economy. changing forms of financial intermediation are expected, given higher volatility and less leverage, in some cases building on old - fashioned banking products. commercial and thrift deposits, for example, backed by a loyal customer base, may offer greater franchise value. investment banks may reconfigure capital structures and core trading businesses to maximize benefits in a higher volatility environment. asset - gatherers, whether in the form of traditional money - management firms or hedge funds, that survive this time of testing may rely more on term funding and seek equity returns across beaten - down classes of structured and debt products. and dependable, recurring revenues, even at lower levels, may warrant a premium valuation in the public markets. the case for opportunistic capital is improving. some curative steps by incumbent financial institutions are in the offing. financial institutions should continue to reassess their sources and uses of funding, their risk - management systems, risk tolerance, and human capital. generally, they should not hesitate to pare their dividend and share repurchase programs. and, they should raise new capital to strengthen their balance sheets. these actions, in my view, are important signs of strength, and will ensure that financial institutions thrive in the emerging financial architecture replete with new opportunities. these actions will have concomitant benefits on real economic activity. plot line 3 : federal reserve's policy formulation the central bank's responsibility is not to individual firms but to financial markets, and only then, to the extent that financial market stresses affect the real economy. given the fragility evidenced in financial markets, and the toll it is taking on real activity, the federal reserve agreed to take center stage. this is a role for which we did not volunteer, but one in which we are prepared to serve. the role has been thrust upon us by a loss of confidence in our existing financial architecture. hence, we should remain at center stage as long as is necessary, but no longer. the fed responded aggressively to mitigate spillovers to the real economy, exercising some authorities for the first time in decades. to prevent more serious financial fallout, the fed established and expanded various lending facilities to depository institutions and primary dealers. 7 some facilities allow daily access to variable amounts of funding, and others primary dealers are banks and securities broker -
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liquidity that engendered complacency among investors and counterparties. the financial architecture grew increasingly impervious to skeptics and dissenters, perpetuating insufficient transparency and under - informed risk - taking. it was commonly believed that short - term, secured credit markets would perpetually remain open to finance high - quality assets. and the notion of liquidity risk management was anachronistic, or so it seemed. market participants now seem to be questioning the financial architecture itself. the fragility of short - term credit markets is a powerful manifestation of that loss of confidence. there are some encouraging, early signs of repair, but regaining the confidence that markets require will take time, and perhaps uncomfortably to some, patience. it may also require new forms of credit intermediation. plot line 2 : transformation of financial institutions the rise and fall of liquidity is not only changing fund flows in financial markets. it may also be transforming the business models of financial institutions themselves β no matter their size, regulatory structure, peer group, funding status, or geography. the period that preceded the recent turmoil was marked by abundant liquidity, high transaction volumes, and remarkably low volatility. that environment proved exceptionally hospitable to significant profits across classes of financial institutions. it also was supportive of high leverage, and correspondingly high returns on equity for financial intermediaries. of no less consequence, it drove a conflation of roles among commercial banks, investment banks, and asset managers. the core functions of credit intermediation β creating, distributing, and owning risk β remained constant, but more institutions came to believe that there were inescapable synergies by operating across all three primary functions. from 2002 to mid - 2007, many large financial institutions did just that, and to great effect β creating products by aggregating and reconstituting assets, distributing bespoke risks across institutional and retail channels, and retaining certain preferred positions for proprietary accounts. a changing paradigm of financial intermediation may well be on the horizon. from the market's perspective, financial institutions overproduced goods and services that now have to be warehoused or liquidated. from the perspective of financial institutions themselves, the old business models may be in the process of being upended. and from the perspective of a dispassionate central banker, the contemporaneous changes in balance sheets and income statements by incumbent financial institutions β most notably, delever
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annual inflation rate in the euro area over the past 12 years has been 1. 97 %, and in germany only 1. 5 %. the average annual inflation rate in germany in the 1990s prior to the introduction of the euro was 2. 2 %. in the 1980s it was 2. 8 %, and in the 1970s it was even higher. zeit : it has been like that in the past, but will it be like that in the future? trichet : it has been like that in the past, despite the fact that we have had to cope with difficult challenges over the last 12 years, because the governing council of the ecb has taken the appropriate decisions. and we are determined to always take the necessary decisions. but on top of that, we need a quantum leap in terms of economic governance : better coordination between countries, clear rules for economic policy and sanctions for misbehaviour which are as automatic as possible. some major changes must be made here. that β s the lesson of this crisis. before it erupted, governments thought they could practise benign neglect. now it is obvious that that is no longer the case. and we are telling them that. zeit : what happens to democracy if more and more decisions are taken in brussels? the eu does not have the legitimacy that a nation state has. trichet : it is true that a functioning economic and monetary union presupposes that part of the sovereignty of the participating countries is exerted at the level of the union. it is obvious as regards monetary policy, which is a single policy decided by the governing council of the european central bank. but it is also true as regards fiscal policy. the stability and growth pact, with its sanctions, constrains budgetary decisions and therefore limits national sovereignty in terms of fiscal policy. as long as the transfer of sovereignty to european institutions has been decided by our own democracies, it is fully legitimate. zeit : and we β ll end up with a european super - state? trichet : the people of europe will decide where they want to go in terms of the political and institutional framework. they will decide whether or not to create a fully fledged federation, a united states of europe. but we are a long way from that at the moment. zeit : for you personally, that β s not fast enough, is it? trichet : speaking as a european citizen and not as president of the european central bank, i am convinced that
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we should go further than planned. but in any case, we should never forget that it is our people who will decide. the concept of modern state sovereignty was devised in europe. it goes back to the peace of westphalia, which reorganised the continent bis central bankers β speeches politically after the thirty years war. with the european union, we are drawing up a new concept : together, a number of sovereign states have decided to exert part of their sovereignty at the level of the european union. this is the current european response to a question which is not just european, but global, with the rapid integration of global finance and the global economy. zeit : the scepticism felt by many people also has to do with their fear of inflation, which recently has risen sharply. are we now paying the price for the crisis policy? trichet : the one has nothing to do with the other. we are observing a global increase in the prices of oil and commodities. that β s a result not of the crisis, but of the current rapid economic recovery in emerging markets. zeit : so you will have to raise the interest rate? trichet : as i said at the last two press conferences in january and early february, all observers know that we will always take the decisions necessary to deliver price stability in the medium term. what is essential is to avoid what we call β second - round effects β : namely a situation where a transitory oil shock becomes entrenched in other prices, particularly through a wage - price spiral. zeit : in the 1970s such a spiral of increasing wages and higher prices led to inflation getting out of control. how will you stop history from repeating itself? trichet : a central bank must do this β and can, if it is credible and takes the appropriate decisions. the last 12 years have seen prices surge in commodity markets time and again. we have ensured price stability by taking the necessary decisions. zeit : even if you continue to do so, this will not solve the problem of increasing commodity prices. trichet : first, we, as central bankers, are responsible for avoiding second - round effects. but the international community is not powerless when faced with such global phenomena. people in large emerging economies are changing their consumption patterns, which is fuelling food prices. it is quite possible that this will continue for a while longer. however, at the same time, there are huge expanses of land in africa which could be used for agricultural
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publish a β financial inclusion index β ( fi index ). the index will have parameters across the three dimensions of financial inclusion viz., access, usage and quality. work on fi index is underway and the index will be published shortly by the rbi. conclusion 20. as i conclude, i would like to reiterate that financial inclusion promotes inclusive growth by way of making financial services including credit and other safety nets available to the bottom of the pyramid. lessons from the past and experiences gained during the covid - 19 pandemic clearly indicate that financial inclusion and inclusive growth reinforce financial stability. greater financial literacy and education, together with sound consumer protection mechanisms will ensure that people at the bottom of the pyramid are empowered to take informed financial decisions. this will also enable banks, nbfcs, mfis, etc. to enhance their customer base and products and diversify their balance sheet. 21. i would like to emphasise that we must continue our efforts for greater financial inclusion in pursuance of the goal of sustainable future for all. there is need for accelerated universal reach of bank accounts along with access to financial products relating to credit, investment, insurance and pension. it is the responsibility of all stakeholders to ensure that the financial ecosystem ( including the digital medium ) is inclusive and capable of effectively addressing risks like mis - selling, cyber security, data privacy and promoting trust in the financial system through appropriate financial education and awareness. these efforts have to be supported by a robust grievance redressal mechanism. i look forward to interesting ideas and thoughts emanating from this forum which would enhance the process of financial inclusion in the country. thank you. namskar.
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0 - 25. 0 per cent in 2007 - 08 from the average of 29. 8 per cent over 2004 - 07. the fiscal position of the government, both central and states, is undergoing consolidation in terms of targeted reduction in fiscal deficit indicators. the improvement in the fiscal position of several states is particularly impressive, which augurs well for the sustained growth of the economy and lower inflation. the union budget for 2007 - 08 has placed the fiscal deficit at 3. 3 per cent of gdp for the year 200708, as against 3. 7 per cent in the previous year, in keeping with the spirit of the frbm act, 2003. way forward β challenges and strengths there are, undoubtedly, many challenges for the indian economy, but it is useful to focus on more urgent of these. first, the poor state of the physical infrastructure, both in terms of quantity and quality is considered by many to be the most critical hindrance for india β s progress. the most important issues here are regulatory framework and overall investment climate, which are being addressed by the government. second, the most complex and challenging issue relates to development of agriculture. while over 60 per cent of the workforce is dependent on agriculture, the sector accounts for barely 20 per cent of the gdp. further, the gdp growth generated from agriculture is only marginally above the rate of growth of the population, which is not adequate to ensure rapid poverty reduction. the results of recent surveys on poverty in india, however, provide grounds for some optimism in regard to accelerated reduction in absolute poverty since the reform period. third, delivery of essential public services such as education and health to large parts of our population is a major institutional challenge. it is strongly felt that education will empower the poor to participate in the growth process and the large gaps in availability of health care, in terms of minimum access to the poor, need to be filled. there are reasons to believe that these challenges will be met, with some assurance of success, on account of many inherent strengths in the indian society. i will narrate a few of these, relevant to this gathering. first, india is a country of great diversities but with incredibly harmonious co - existence of various religions, languages and a unified culture. the familiarity with multiple languages in india prepares the people to adapt better to multi - lingual environment, making it easier for them to fit into international systems very smoothly. also, a vast and growing pool of science and technology graduates and the millions
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earned see for instance f. mishkin, β not all bubbles present a risk to the recovery β, financial times, 9 november 2009. by euro area large and complex banking groups in the second quarter of 2009. this was the highest level seen in the past five years. the increase in revenues from the core banking business and the considerable cost - cutting have nevertheless boosted profitability this year. income from trading has recovered strongly in this period, also improving banks β performance. the restored profitability has recently enabled some european banks to start repaying the capital injections provided by governments, suggesting greater robustness in the system. however, the trend worsening of non - performing loans should not be considered over yet β it might turn out to be worse than projected. banks shouldn β t assume that it β s time to go back to previous practices, using their profits primarily to remunerate staff and reward shareholders. they need first of all to give priority to further improving their capital position, as a buffer against worst - case scenarios. supervisory authorities should keep an eye on banks for this reason. banks need also to plan for more stable and sustainable long - term sources of financing. it β s interesting to note that non - financial corporations have successfully made large bond issues, while monetary financial institutions have been much more timid, compared with their precrisis levels ( see chart 4 ). since mid - 2008, the annual growth rate of debt securities issued by monetary financial institutions roughly halved to around 4 % in september. by contrast, the growth rate of debt securities issued by non - financial corporations increased over the same period from around 3 % to 15 %. the support mechanisms provided by governments have not been fully utilised, in particular with respect to guarantees ( see chart 5 ). in any case, the situation remains imbalanced. some banks are still very reliant on unlimited central bank financing. these cases have to be addressed rapidly by the responsible national authorities. otherwise they will create a burden on the other banks, by overbidding for and hoarding liquidity. the exit strategy let me turn to the exit strategy. this is an issue on which many have spoken recently. i won β t repeat the arguments which have already been expounded very clearly. the exit strategy has two dimensions. one concerns the non - standard measures which have been implemented to improve the functioning of the transmission mechanism. the other relates to the stance of monetary policy, which can be calib
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holders have also seen their wages go up. some have proactively adjusted their spending to help offset higher debt payments. many also report higher levels of savings available to offset increased payments. 2 / 3 bis - central bankers'speeches overall, the evidence suggests that households have the flexibility to continue servicing their debt at higher rates. we will be watching the data closely for signs of increased financial strain among households, both mortgage holders and non - mortgage holders. we'll also be watching how the labour market evolves, since the biggest factor that determines whether someone can service their debt is if they have a stable income. higher interest rates are also affecting businesses. higher rates are slowing demand for the goods and services that businesses sell, while also increasing their financing costs. so far, the financial health of large businesses appears solid. but smaller businesses are showing more signs of financial stress. insolvency filings by smaller firms have recently jumped after several years of below - average filings. there is some indication that this recent increase could be a catch - up or normalization, and the timing could be driven in part by the expiry of government support programs put in place during the pandemic. turning to canadian banks, overall, credit performance remains strong. banks are proactively contacting customers who are facing payment increases at renewal and working with them on a payment plan. they have also been putting more money aside to cover future loan losses, and they continue to maintain healthy capital and liquidity buffers. this means that even if financial conditions and credit performance deteriorate, banks are positioned to absorb losses and continue to provide credit. in the non - bank financial sector, more frequent volatility in financial markets in recent years has led to an increased focus on liquidity risks. at the same time, some firms are increasingly using leverage, or borrowed money, to fund trading activities. this makes them more vulnerable in the event of large market swings. let me close by repeating an important point the governor made at the beginning : the connections in the financial system mean that if risks materialize in one sector, they can spread quickly. this puts a premium on preparedness. the proactive steps taken by financial system participants have been positive. and they need to continue. a stable and resilient financial system benefits all canadians. the governor and i will now be happy to take your questions. 3 / 3 bis - central bankers'speeches
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is most effective when the policy objective is clearly understood and accepted. when consumers and savers, business owners, and financial market players, all understand the bank of canada's policy objective β and believe that it is attainable β then they can make better long - term plans and decisions. and when everyone expects this target to be maintained, and acts accordingly, then the target becomes self - reinforcing. but the benefits of transparency don't stop there. i believe that transparency also helps us to make better decisions. the extra rigour that comes from holding the rationale behind our decisions up to external scrutiny leads to better results. finally, the bank of canada is a public institution β funded by, and accountable to, the taxpayer. information and analysis gathered in the context of the bank's business should be considered a public good β except when the release of such information would compromise the implementation of the bank's mandate. are there limits to transparency? in general, more transparency is better than less. but this does not mean that there are no limits. first, there is the need to protect the confidentiality of some information and analysis that is given to the bank by outside parties, be they public - or private - sector institutions. indeed, public release of third - party, confidential information would jeopardize the central bank's ability to get all the information it needs to make good monetary policy decisions. second, there is the need to protect the integrity of some internal policy deliberations. for example, the public release of policy advice and recommendations could stifle the free debate and consensus building that is necessary for sound policy - making. we want to hear all aspects of an argument, but it could be hard for staff members to play devil's advocate, knowing that such a position will be made public and could be taken out of context. and certain information should not be released while policy is still being developed, or has not yet had its full effect. in such cases, premature transparency could lead to misinterpretation or be acted on inappropriately, which could derail good policy intentions and could potentially be damaging to canada's economic interests. third, there is the need for good quality information. providing useful, relevant information is far more important than dumping a large quantity of information of questionable quality. too much information can actually cloud what is important. as a result, actions and decisions can become less transparent, because the really important, effective, and
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relevant information gets lost in the minutiae. good quality information must not only be accurate, it must also be communicated clearly and simply, so that it won't be misunderstood. this is especially germane when we try to be transparent about our assessment of the outlook by publishing our economic projections, along with the risks and uncertainties surrounding them, and forward - looking statements about possible future policy actions. transparency in setting monetary policy debates about the limits to transparency for effective monetary policy are certainly not unique to the bank of canada. central banks around the world are still learning the best ways to communicate monetary policy. this is an important element of the art, rather than the hard science, of central banking. i believe that we at the bank of canada have made great strides in this area. so let's now take a closer look at the issue of transparency in setting monetary policy from the three perspectives that i mentioned at the outset : transparency about our policy framework ; transparency about the inputs, the processes, and the reasoning behind monetary policy ; and transparency about our assessment of the outlook. the bank made a major leap forward in increasing transparency about our policy framework when we adopted an explicit inflation target in 1991. this target provides a clear objective for monetary policy, which has helped to anchor financial and economic decisions. it makes it easy to measure the success of monetary policy and to hold the bank accountable for its actions. canadian individuals and firms can align their savings, investment, and spending plans with a common inflation - control objective. if inflation persistently deviates from the target, we are committed to explaining the reasons why, what we will do to return it to target, and how long we expect the process to take. previously, when we targeted monetary aggregates, for example, there was ambiguity about what the bank was trying to achieve, and we were not always clear about the implications of such a target for output, inflation, and interest rates. now, as well as being clear about our objective, we are also being transparent about our assessment of the factors that influence inflation and about how we implement monetary policy. we conduct monetary policy in a symmetric way, worrying as much about the trend of inflation falling below target as we do about it rising above target. to keep inflation on target, we try to keep the economy operating near its full capacity. when the demand for goods and services pushes the canadian economy against the limits of its capacity, and inflation is poised to rise above target, the bank will raise
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time now. we have redesigned this report to coincide with today β s monetary policy assessment. the aim of the new design is to allow readers to interpret the results of the talks at a glance. in addition, the text is supplemented by charts to enable comparisons over time. a structured approach, both with regard to conducting the surveys and to selecting the companies, forms the basis for the compilation of such time series. in redesigning the report, we also changed the title from β business cycle trends β to β business cycle signals β. i am pleased to be able to present you with the delegates β new β business cycle signals β report today. it will continue to be published as part of the snb β s quarterly bulletin. ladies and gentlemen, thank you for your attention. it is now my pleasure to give the floor to fritz zurbrugg, who will present this year β s financial stability report. page 4 / 4
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six months. in the run - up to the french presidential election, there were episodes of increased upward pressure. after the decision in france, the franc again weakened somewhat against the euro. by contrast, it appreciated slightly against the dollar. in real terms, the franc has virtually remained unchanged on a trade - weighted basis over the last half - year and is still significantly overvalued. interest rates in switzerland have remained virtually unchanged in recent months. the interest rate differential to the euro area has remained stable as well. short - term rates in the us, on the other hand, have risen slightly, reflecting the tightening of monetary policy there. inflation expectations for switzerland have increased somewhat over the past half - year. households, companies and financial analysts are now expecting an inflation rate of just above zero, also for the short term. in the longer term, meanwhile, expectations are around 1 %. a similar view is substantiated in the company talks conducted by the snb β s delegates for regional economic relations. inflation expectations are in the range that is consistent with the snb β s definition of price stability. monetary policy outlook ladies and gentlemen, let me summarise my key points. inflation remains very low and capacity utilisation continues to be unsatisfactory. the swiss franc is significantly overvalued. in periods of uncertainty, it is still subject to increased upward pressure. the two elements of our monetary policy ease this pressure. the negative interest rate makes swiss franc investments less attractive, by at least partially restoring the traditional interest rate differential against other countries. interventions in the foreign exchange market supply the market with additional swiss francs when demand for our currency is particularly strong. page 3 / 4 berne, 15 june 2017 thomas jordan news conference our expansionary monetary policy remains necessary in order to ensure price stability, while taking due account of economic developments. newly designed β business cycle signals β report to conclude, i would like to draw your attention to an additional document in the media pack. it is the preprint of the β business cycle signals β report. the snb β s delegates for regional economic relations regularly conduct talks with managers of companies throughout switzerland. these talks provide us with a first - hand account of the latest cyclical and structural developments in our economy and are an extremely valuable source of information for the governing board in its assessment of the economic situation. a summary of the information gathered from these talks has been published in a quarterly report for some
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housing β the quiet decade speech given by sir jon cunliffe, deputy governor financial stability, member of the financial policy committee, member of the monetary policy committee and member of the prudential regulation committee the law society property section convention, london thursday 20 may 2021 i'm grateful to kristina bluwstein, rand fakhoury, lewis kirkham, lisa panigrahi, sarah venables and matt waldron for their assistance in preparing these remarks. i'd also like to thank richard donnell, robert gardner, geoff meen and christine whitehead for sharing some of their insights with me. all view represented here are my own. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice one of the many unusual features of the covid - driven economic contractions in advanced economies has been the behaviour of housing markets. housing markets typically slow and house prices fall in severe economic contractions. but despite very adverse economic conditions after the initial covid lockdown shock last spring, housing markets have been buoyant in many advanced economies and house prices have been rising. house prices grew by 5. 7 % on average across advanced economies in 2020, the sharpest increase since 20071. of course, what we have experienced over the past 12 months or so has been very different to a β normal β business cycle contraction or even to the more extreme contractions that follow financial busts. economic developments have been driven by wholly exogenous health developments and governments have provided massive fiscal support to incomes, employment, the corporate sector and in some cases like the uk, to housing markets. it remains striking however, that following some of the sharpest economic contractions in modern history and amid great uncertainty and indeed, initially fear, about the future, housing markets have been strong. in the uk, over the 12 months to february, house prices have risen by 9. 1 %, the highest growth rate since october 2014. this compares to an average annual growth rate of under 4 % in the 10 years prior to the pandemic. mortgage approvals have averaged around 85, 000 per month and total transactions 111, 000 per month since housing markets opened in june 2020, compared to around 60, 000 and 90, 000 in the prior decade, respectively. the pre - pandemic decade, however, may not be the right comparator. the 10 years following the financial crisis appear unusual
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review of the housing tools in the december 2019 financial stability report. tripathy et al, β macroprudential policy, mortgage cycles and distributional effects : evidence from the uk β show that constrained banks issued fewer high lti mortgages after the fpc β s policy was introduced. they also find evidence supporting the macroprudential benefits of the policy. the local areas with greater exposure to constrained lenders experienced smaller declines in house prices in the aftermath of the eu referendum in june 2016, when house prices fell across most uk regions. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice the distinction between expectations effects and credit constraints matters in another way. to the extent that demand for housing is simply subdued by dampened household expectations about the future, there is no β loss β to households. if however, demand for housing is held back by credit constraints, transactions which are desired are β lost β. one needs to be careful however about assuming that relaxation of credit constraints will lead to all otherwise β lost β transactions taking place. the thought experiment i carried out earlier suggested that almost 10 million additional transactions would have occurred from 2007 to 2020 had transactions remained at their - pre financial crisis level. but this assumed that house prices remained at the actual levels we saw over the period. in the absence of increased supply, the evidence suggests that much of the additional demand would have fed into higher prices, raising indebtedness in the short term but eventually choking off the additional demand. i want to look at one other aspect of the market over this quiet decade β distributional impact. distributional effects are not a part of the bank β s statutory primary objectives of price and financial stability. this is not because they do not matter. they certainly do, and access to housing is included in the government β s economic policy, which the bank has a secondary objective to support16. it is because these are issues primarily for elected authorities rather than technocratic ones, and there are more effective tools to address them. one cannot ignore that housing booms shift wealth towards existing and generally older homeowners and can therefore widen intergenerational inequity. the large increase in house prices in the decade leading up to the financial crisis came with a large expansion in mortgage debt. much of the Β£664bn increase in household mortgage debt over that period represented borrowing by first time buyers and those moving up the housing
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did not see inflation coming and they did not understand it when it did. in emerging markets, we have taken some satisfaction in the verdict of many in the policy community4 that some of us did better here than the developed countries. but the big central banks are high - quality organisations and they demonstrate that quality, not by avoiding mistakes but by dealing with them and being honest about their errors. in the 1970s β the last big global inflation surge β central banks made many mistakes, gave many excuses and lost control of inflation. in the 2020s, i am confident we will do better, with far fewer excuses and much more success. 5 we are going to deliver on our mandates. of course, i am not a municipal manager. i doubt that my challenges, and the challenges of my profession, map directly to your challenges. that said, there is one area where our work overlaps, and that is the issue of inflation. at the sarb, our fundamental mission is to protect the buying power of the rand, and we specifically aim to protect it from increases in the cost of living, as measured by the consumer price index from stats sa. if you go to that index, you see some significant components where prices are set at the municipal level. think of water, think of rubbish collection, think of municipal rates. this discussion draws on amy edmondson. right kind of wrong : the science of failing well. 2023 an example is https : / / www. piie. com / publications / working - papers / central - banks - and - policy - communicationhow - emerging - markets - have https : / / www. federalreserve. gov / newsevents / speech / powell20220826a. htm unfortunately, these prices are often rising by more than headline inflation. in the latest inflation report from stats sa, for example, water inflation was 9. 6 %. housing assessment or municipal rates was 8. 4 %. these numbers should be much closer to the midpoint of the sarb β s target of 4. 5 %. high municipal inflation eats away the incomes of our people, keeps our inflation rate elevated, and makes it harder for us to lower interest rates. it β s ok for prices to keep up with inflation ; it β s not ok for some prices to always be rising by more than inflation. and we need you to take the lead to tackle this. let me conclude by summarising the main points i have made
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- makers and by the financial industry, aimed at restoring confidence and addressing the weaknesses that have been revealed by the market turmoil should contribute to strengthening the resilience of the financial system. i would like to stress particularly the importance of the new basel ii capital accord, which is to be fully implemented by january 2008. indeed, the new accord strongly relies on significantly improved risk management in determining the appropriate level of capital buffers for banks. nevertheless, and despite these improvements, the degree of sophistication of financial markets also calls for constant investment in stress - testing methods and practices in order to ensure that banks have full understanding of the potential losses they might incur in highly unlikely but plausible scenarios and that they are adequately prepared to address the associated risks.
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an increase in their population reduces total national savings and pushes interest rates up. on the other hand, if population aging is accompanied by an increase in longevity, this will positively affect savings. since world war ii, longevity has been increasing in developed countries through advances in medical technology, and we are now likely to live longer than our parents and grandparents. therefore, even if the proportion of elderly people increases, they may spend less than before or work longer to earn income, both of which will contribute to pushing interest rates down by reducing spending or by increasing savings. how about the impact on investment? a declining and aging population can again either increase or decrease investment, although this also depends on the prospects for the economy and technological progress. a decrease in working - age population and thus in labor input raises the level of capital stock per labor input, and makes capital input relatively abundant. 2 this reduces the need for additional investment. investment is also reduced when firms expect that the population, and therefore the future demand for production, will decline. these are the factors that push interest rates down. meanwhile, when technological progress or labor - saving investment is prompted to compensate for decreased labor input, this pushes interest rates upward. in this way, a declining and aging population can either push up or push down interest rates. recent studies suggest that the equilibrium real interest rate in the medium to long run is on a decreasing trend in advanced economies, and a declining and aging population has contributed to this trend to some extent. 3 based on the discussion so far, we can assume that a declining and aging population is likely to increase savings, or decrease investment, or both, at least for the time being. 2 the situation where the level of capital stock per labor input increases is referred to as " capital deepening. " 3 sudo and takizuka ( 2018 ) suggest that about 270 out of the 640 basis points decline in real interest rates over the past 50 years in japan can be attributed to demographic changes. sudo, n. and y. takizuka " population aging and the real interest rate in the last and next 50 years, " bank of japan working paper series 18 - e - 1, 2018. ii. impact on banking business since inflation expectations in advanced economies have moved around a small positive value with some variations across countries, a decreasing trend in the equilibrium real interest rate is translated into a decreasing trend in nominal interest rates. let me now turn to how the demographic changes accompanied by a decreasing trend in nominal
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at japan's low growth from an international perspective. in what follows, i will divide growth into growth in capital input ( information and communication technology [ ict ] capital as well as other capital ), labor input, and tfp. the reason for dividing growth into these three factors is that considering each factor individually provides some understanding of how the growth rate could be raised. let us take a moment to have a look at the estimates for member countries provided by the organisation for economic co - operation and development ( oecd ). specifically, chart 1 presents the average growth rates for three subperiods for each of the seven major oecd economies and the averages for these economies as a group. 1 the blue line in the charts shows that, while japan still enjoyed comparatively high growth during 1985 - 95, growth subsequently stalled, and from the mid - 1990s it registered slower growth than the other countries except italy. however, following the introduction of bold monetary easing - - quantitative and qualitative monetary easing ( qqe ) - - in 2013, japan's growth rate recovered somewhat, and with growth in the other countries slowing, japan's low growth is no longer that conspicuous. 2 data provided by the oecd are also employed in chapter 1, section 3 of the 2018 white paper on information and communications in japan released by the ministry of international affairs and communications. figure 1 - 3 - 2 - 2 of the white paper arrives at similar conclusions to my speech today. using the dataset employed by the bank of japan's research and statistics department and the cabinet office to estimate the output gap and potential gdp, somewhat different results from those using the oecd data are obtained regarding the contribution of growth in tfp and capital input. 2 to simplify the chart, the period 1985 - 95 is shown. since the high growth registered in japan during the second half of the 1980s was due to the bubble, combining this period with the first half of the 1990s, when the bubble burst, provides a better representation of the underlying growth trend. see harada yutaka, " jissho keizaigaku wa ikanaru shinjitsu o terashi dashi taka, " in ushinawareta 10 nen no shinin wa nanika, ed. iwata kikuo and miyagawa tsutomu ( tokyo : toyo keizai, 2003 ). chart 1 decomposition of structures of economic growth in major countries based on growth
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speech low inflation : macroeconomic risks and the monetary policy stance keynote speech by philip r. lane, member of the executive board of the ecb, at the financial markets workshop of the economic council ( finanzmarktklausur des wirtschaftsrats der cdu ) berlin, 11 february 2020 in the period between the end of the bretton woods system in the early 1970s and the global financial crisis in 2008, the main challenge for central banks was to tackle excessively - high inflation and guard against its resurgence by counteracting pro - inflationary shocks. more recently, anti - inflationary shocks have dominated and addressing excessively - low inflation poses new challenges. in my remarks today, i therefore plan to focus on the conduct of monetary policy when inflation is below target and explain why the ecb is maintaining an accommodative monetary policy stance. i will also discuss why it is necessary to adopt unconventional monetary policy measures when the conventional monetary policy instrument β the central bank β s policy rate β is constrained. macroeconomic risks of excessively - low inflation from a macroeconomic perspective, excessively - low inflation poses several dangers. one danger is that low inflation that persists over the longer term provides only a small buffer against deflation : if inflation is low, it only takes a relatively small shock to tip the economy into deflation. the macroeconomic implications of deflation are well known. first, the expectation of falling prices delays purchases and investment. second, the combination of falling output prices and downwardly rigid nominal wages damages the profitability of businesses and reduces the demand for labour. third, deflation means that the real burden of nominal debt increases over time, making debt repayments more difficult for households, firms and governments. however, even in the absence of pronounced risks of deflation, there are substantial macroeconomic costs to persistently undershooting the inflation objective. first, excessively - low inflation can hamper beneficial macroeconomic adjustments. the stickiness of wages that hampers their adjustment to the downside is deep - rooted and pervasive. as a result, an insufficiently positive inflation rate means that a negative area - wide shock is more likely to result in higher unemployment than a smooth adjustment in real wages. similarly, in the event of asymmetric shocks that have differential effects across member states, low inflation also makes it more difficult to facilitate competitiveness adjustments in a monetary union. finally, a sufficiently - positive inflation rate smooths the
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##meier, m. and koby, y. ( 2018 ), β the reversal interest rate β, nber working paper series, no 25406, national bureau of economic research. [ 16 ] of course, the importance of non - deposit funding varies substantially across different types of banks. [ 17 ] in relation to the impact of negative interest rates on the bank lending channel of monetary policy, see altavilla, c., andreeva, d., boucinha, m. and holton, s. ( 2019 ), β monetary policy, credit institutions and the bank lending channel in the euro area, β occasional paper series, no 222, european central bank. european central bank directorate general communications sonnemannstrasse 20, 60314 frankfurt am main, germany tel. : + 49 69 1344 7455, e - mail : media @ ecb. europa. eu website : www. ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts copyright 2020, european central bank
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; vii. review and updating of sama regulatory requirements in other related areas. sama β s regulatory initiatives are aimed at protecting the interest of depositors and consumers of banks, besides ensuring the safety and soundness of banks. in conclusion, i would say that in the aftermath of the global financial crisis, the financial landscape has changed substantially and still continues to change at a rapid pace. in order to cope with the challenges ahead, the supervisors and central banks are required to have better management of systemic risks through coordination and cooperation in global standards and policies. we believe that basel iii when fully implemented will contribute significantly in managing the systemic risks and strengthening of global financial system. however, this will require substantial investment in systems and human resources as well as strengthening of governance and risk management frameworks. but this does not mean that we should excessively rely on advanced risk methodologies and models, and undermine the role of sound professional judgment and common sense. in practice, the use of quantitative risk models have proved much more effective when coupled with judgment and institutive thinking. we have been emphasizing upon our banks the value of strengthening risk management frameworks and methodologies along with requiring their boards to institute a strong corporate governance culture to manage the banks effectively. we at sama are also actively monitoring the new developments both globally and in domestic markets, and are fully geared to ensure stability of our financial system. i wish you a fruitful symposium! bis central bankers β speeches
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responsibility increases with the increase in investment awareness and competition among financial institutions. here arises the evident need to develop standards and ethics of the profession and to implement such standards in a very professional and scientific integrity. dear graduates, the responsibility entrusted to you must be borne with professional enthusiasm and competence. the knowledge you have acquired through your training here is only part of the cherished objective. the more important requirement is to conduct yourselves in a sound professional manner, comply with regulations, and invest your capabilities and knowledge to attain real professionalism. may allah render your knowledge useful to you and your country. i wish you all success, and may god bless you.
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caleb m fundanga : innovation for leadership excellency remarks by dr caleb m fundanga, governor of the bank of zambia, at the eastern and southern african management institute ( esami ) launch of mba alumni zambia chapter, lusaka, 12 february 2010. * * * the eastern and southern african management institute ( esami ) director general, prof. bonnard mwape ; the president, esami mba alumni zambia chapter, mr. christopher mulenga ; the ecobank zambia limited managing director, mrs charity lumpa ; esami alumni ; distinguished invited guests ; members of the press ; ladies and gentlemen. it is a great pleasure for me to officiate at the launch of the esami mba alumni zambia chapter. i wish to take this opportunity to welcome prof. bonnard mwape and other esami staff that have travelled from arusha to come and witness this important occasion. i am particularly delighted to be part of this launch because my first interaction with the esami mba alumni members was during the recent summer school event held in arusha, tanzania, where i was invited to present a paper on β the effects of the global economic crisis on zambia β. indeed my memories of that lively interaction are still very fresh and that is why i graciously accepted to officiate at this function when i received the invitation from the president of the association. ladies and gentlemen allow me to congratulate the president and his team for this excellent initiative of bringing together individuals with a common academic background under the alumni umbrella. i am informed that one of the objectives of the association is to utilise the acquired scholarly knowledge and experience to add value to society through leadership in various projects and initiatives. i know that alumni associations world over have existed for centuries and most of them have one basic principle, that of benefiting members wherever they may be and for free. however i am told that your association other than just carryout activities for the benefit of members will go a step further to do benevolent activities for the benefit of society at large. this is commendable and i am looking forward to see what initiatives you have outlined to advance welfare in our society. mr president, the theme for this launch this evening β innovation for leadership excellency β is indeed very timely and appropriate to the norms and beliefs that i am told your association espouses. it is innovations such as yours that gives us the comfort that you are indeed giving back to society following the huge resources that were invested in
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. 9 billion equivalent ) at the end of 2011. meanwhile, the growth of the rmb debt securities market has been phenomenal. in a short space of 5 years, the annual issuance amount lodged with the central moneymarkets unit ( cmu ) in hong kong increased by 16 times from a modest amount of rmb 10 billion ( usd 1. 4 billion equivalent ) in 2007 to rmb 172 billion ( usd 27. 3 billion equivalent ) in 2011. the growth momentum is expected to pick up further after china β s announcement to formalise the use of rmb in foreign direct investment ( fdi ) in 2011. the upside is very significant as china β s total fdi amounted to usd 116 billion in 2011, or rmb 750 billion equivalent. besides facilitating the rapid development of the sukuk and dim sum bond markets, more importantly, the pilot platform will contribute significantly to financial stability in the asian region. with the advanced economies undergoing structural adjustment and fiscal consolidation, the two - speed recovery will continue to entice portfolio flows into asia. the key challenges for asia are to channel such flows to productive use, reduce concentration in short - term positions of the more volatile asset classes, and to avoid such flows spiking up a bis central bankers β speeches property price bubble. channelling the inflows into the bond market will serve these useful purposes as the investors are typically institutional investors who take long - term positions in strategic economic sectors. the global financial crisis has reminded us of the destructive powers of a liquidity crunch and the need for quick access to local currency liquidity in times of stress. in particular, the increased risk aversion arising from the recent financial crises and heightened alertness to the counterparty exposure have raised the demand for secured lending. as an illustration, the average tripartite collateral management deals outstanding administered by euroclear bank increased substantially from eur 76 billion in 2001 to eur 325 billion in 2011. an important function of the pilot platform is to enable financial institutions to make use of securities held in one of the partner systems as collateral to conduct secured borrowing in the local currency of another partner economy. as an example, a european bank can make use of its securities held with euroclear bank as collateral to borrow hong kong dollar to meet the liquidity needs of its hong kong subsidiary. the cross - border and cross - currency collateral management service to be provided by the pilot platform is a timely solution to meet this market need, and
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to crystallize the elements that investors look for : optimized product offerings, high returns, good governance and strong regulatory and legal frameworks. for the 2018 edition, three countries β angola, cameroon and senegal β joined the index, thus bringing the number of countries tracked to 20. the country measures were also broadened to include elements of financial inclusion and levels of investor education. south africa topped the index this year again, followed by botswana, kenya, mauritius and nigeria. while some may dwell on the fact that mauritius ranks fourth among the twenty countries, i invite them to examine the positive elements underlined in the report, and like we say, the glass can also be half - full rather than half - empty : the level of foreign exchange reserves which has grown substantially in mauritius. today, we have a level of gross official reserves of about usd6. 3 billion, representing nearly 10. 6 months of imports of goods and services, which we manage judiciously under a legal mandate of security, liquidity and, then, return. on that point, i would like to stress that mauritius is a notable exception with regard to investment in complex assets. as quoted in the report β there is a wide range of investment options and relatively strong demand for more complex assets, including different types of derivatives products β. [ unquote ]. the report commends mauritius for its strong legal and regulatory framework and highlights that mauritius is amongst the top countries as regards market depth, market transparency, tax and regulatory environment as well as the legality and enforceability of financial markets master agreements. 2 / 3 bis central bankers'speeches the africa financial markets index comes at an opportune time when positive changes are being witnessed on the domestic financial landscape. mauritius aims to double the size of its financial sector as spelt out in the government β s vision 2030 document and the financial sector blueprint. we have broadened the access to the purchase of government and bank of mauritius securities by the public. the development of a secondary market for risk - free instruments has helped individual investors to benefit from the increase in yields registered since the start of 2018. today, treasury bills and bonds are proving to be viable alternative investment instruments to term deposits. increased accessibility and enhanced public awareness has led to a three - fold increase in the amount of securities held by individuals, from rs1. 8 billion as at end - december 2017 to rs6 billion currently. you may recall that the african development bank along with bloomberg
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launched the africa domestic bond fund, which is listed on the stock exchange of mauritius since 18 september 2018. this fund tracks the performance of a bond index, comprising local currency sovereign bonds of eight markets : botswana, egypt, kenya, namibia, nigeria, south africa, ghana and zambia. mauritius is also expected to join the index in the near future with the recent developments on the secondary market of government / bank of mauritius securities. as i conclude, allow me to thank absa for its initiative to launch the africa financial markets index in mauritius. the index will be yet another benchmark that will provide precious insights to our country which is busy positioning itself as a leading international financial centre and a gateway to africa, with a clear vision to join the sphere of high - income countries. ladies and gentlemen, i thank you for your attention. 3 / 3 bis central bankers'speeches
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##banked clients. i am happy to share also that the bsp has made significant inroads with the implementation of the national retail payment system ( nrps ). the nrps implements our commitment to upgrade the country β s retail payment system by promoting electronic retail payments and facilitating inter - operability for faster settlement of transactions. the nrps will facilitate our transition from being a cash - heavy to a cash - lite economy. this will eventually bring benefits to the economy β in terms of speed and efficiency of transactions, reduced costs, improved transparency, enhanced security, and expanded access to financial services. last april, we launched instapay, the second automated clearing house under the nrps following the launch of pesonet. via instapay, filipinos can enjoy safe and affordable accountto - account electronic retail payments in real - time. transactors may send and receive funds or make payments in real time of up to p50, 000 per transaction. the transferred funds are instantly received in full as no fee is charged for the electronic crediting of funds to the receiving party β s account in instapay participating institutions. there is no reason why rural banks should not want to be part of pesonet and instapay. leveraging on technology and value chains with the digital transformation of the banking system, we, at the bsp, are optimistic that the rural banking industry can emerge as a strong and dependable delivery channel in the provision of banking services. it can do so by taking advantage of available technology. opportunities for growth may be seized should you cater to the needs of the young generation. studies show that fintech has great potential to transform financial services given the country β s young demographic profile. according to the world bank findex, 23. 5 percent of our population are composed of young adults ( between 15 to 24 years old ). the domestic digital money ecosystem certainly needs players, big and small, to meet the exacting demands of this new breed of clients. on this note, i am happy to report that one rural bank is already pilot - testing a cloud - based banking solution in managing its day - to - day operation more effectively and serving its clients more efficiently, thereby upgrading its competitiveness. meanwhile, several banks, including rural banks, and non - bank financial institutions are already utilizing the lendr platform to facilitate credit origination processes. still others are hooked up with a commercial bank on a block chain pilot. rural banks
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andreas dombret : the situation in the german banking sector β challenges in striking a balance between weak profitability and the lowinterest - rate environment speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the press conference to unveil the deutsche bundesbank β s financial stability review, frankfurt am main, 25 november 2015. * 1. * * banking supervision : successful first year in the ssm ladies and gentlemen before i delve into the risk situation in the german banking sector, i would briefly like to look back with you on year one of european banking supervision. on 4 november 2014, the ecb assumed direct responsibility for supervising the largest 120 or so banks in the euro area. those included 21 german institutions, although the number has risen to 22 in the meantime. given the sheer scale of the project and the very short time available for preparation, many were doubtful about whether european banking supervision could actually work. my answer after one year of the single supervisory mechanism ( ssm ) is : yes, it is working, and i am confident it will continue to meet the high expectations placed in it. cooperation between the ecb and the national supervisors is running pretty smoothly, and we are indeed observing a gradual europeanisation of banking supervision. so i β m satisfied with the first year of european banking supervision. there are a few points we can improve on. these include, for instance, decision - making structures and processes. in this regard, i believe that an adequate distinction is still not being made between important processes and routine decisions ; having said that, however, my comments are by no means intended to imply criticism. of course, european banking supervision has heralded a lot of changes, especially for the major banks. communication with banking supervisors is increasingly taking place in english, cross - border peer comparisons between banks are growing more important, and the supervisory approach has taken on a more quantitative slant on the whole. these factors all entail more work for the banks, of course ; but the banks, too, ultimately stand to benefit from improved supervision and a europe - wide level playing field. looking to the future, another topic that β s on the table right now is a european deposit guarantee scheme ; indeed, the european commission presented a plan only yesterday. i take quite a critical view indeed of this project because i don β t believe that the groundwork has been laid for such a scheme yet. we have a common currency and a
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