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bank of japan ’ s december report of recent economic and financial developments1 bank of japan, 20 december 2001. * the bank ’ s view * * japan ’ s economy is deteriorating broadly, as private consumption is weakening in addition to a decline in exports and business fixed investment. with regard to final demand, net exports ( real exports minus real imports ) continue to decline and business fixed investment is also decreasing. housing investment remains sluggish and public investment is on a downward trend. moreover, private consumption is weakening recently. industrial production continues to decline considerably, reflecting these developments in final demand and the still strong excessiveness in inventories mainly in materials. corporate profits are falling and business sentiment keeps on worsening. the weakness in household income is becoming noticeable amid the decrease in the hours worked and the rise in unemployment, and consumer confidence is becoming cautious. turning to the outlook, as for exporting conditions, inventory adjustments in it - related goods worldwide are showing steady progress, and this has strengthened the view that adjustments will be mostly completed by around next spring. however, as final demand of it - related goods still remains stagnant, a distinct recovery in exports of the sector is unlikely for the time being. moreover, the world economy has decelerated further since the terrorist attacks of september 11, and there is considerable uncertainty about future economic developments especially for the u. s. therefore, such concern still exists that downward pressure may be exerted on japan ’ s exports and production once again depending on the developments in overseas economies such as the u. s. meanwhile, with respect to domestic demand, business fixed investment is expected to follow a downward trend amid the fall in corporate profits. private consumption will also continue to be weak along with deteriorating employment and income conditions and the more cautious consumer sentiment. government spending is basically projected to follow a downward trend while domestic private demand generally weakens on top of the uncertainty about exporting conditions. consequently, it may take quite a while for economic activity as a whole to stop declining, even though the decrease in industrial production may moderate somewhat in line with the progress in inventory adjustments such as of it - related goods. overall, japan ’ s economy will inevitably continue to deteriorate for a while. in this situation, continuous attention should be paid to the risk of a negative impact on the economy induced by developments in foreign and domestic financial markets. with regard to prices, import prices continue to decline reflecting the softening of international commodity prices. domestic wholesale prices are declining
you because the subject is too complex to cover in the short time i have available, and besides, we at the reserve bank are hosting a conference on the subject in about a week ’ s time. instead, i want to follow a different path and ask are there factors that contribute to asset price booms, that can be identified and eliminated or, at least, reduced? i have in mind various incentives, informational deficiencies and dubious practices which occur during the boom, but which we always seem to discover well after the bust has occurred. we realise then that these practices allowed distorted views of the profitability of businesses and investment strategies to remain in place long after they should have been corrected. each boom is different and the lessons we learn after the bust has occurred are also different. for example, after the asset price booms of the late 1980s collapsed, we learned that a lot of the problem was due to very poor banking practices - connected lending, concentrated risks, weak credit committees, forbearance whereby new loans were made to service existing debt, etc. in response to this, there have been enormous improvements in banks ’ risk management, accounting practices and bank supervision. partly as a result, or partly due to good luck, banks do not figure prominently in the wash - up of the latest boom - the us equity boom. instead, we discovered a new set of dubious or unsavoury practices. Β· first, were features of the system that gave a very strong incentive for the major players to push up asset prices. the use of equity - based remuneration, particularly options, gave management a huge incentive to concentrate on short - term increases in share prices, particularly as they knew that the investment community demanded it. Β· second, there were many means available to make profits look larger than they really were. the non - expensing of options being the most obvious, but others would include the use of special purpose vehicles and other off - balance sheet entities, the non - recognition of deficiencies in company - sponsored defined - benefit pension funds and the bringing forward of revenue recognition. in this country, we saw some very creative things being done with financial re - insurance, which basically had the aim of inflating recorded profits. Β· thirdly, there was a failure of the counterweights in the system to limit the excesses. in particular, the conflicts of interest in the auditing profession and the lack of independence or forcefulness of boards of directors meant that excess
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ΓΈystein olsen : the conduct of monetary policy introductory statement by mr ΓΈystein olsen, governor of norges bank ( central bank of norway ), at the hearing before the standing committee on finance and economic affairs of the storting ( norwegian parliament ), oslo, 21 may 2013. * * * please note that the text below may differ from the actual presentation. i would like to thank the chairman of the committee and thank you for this opportunity to report on the conduct of monetary policy in connection with the storting ’ s deliberations on the government ’ s financial markets report. my statement here today is based on the bank ’ s annual report, but also on the executive board ’ s assessments for the period to the most recent monetary policy meeting and new information. when i was here last year, the key policy rate had been reduced by 0. 25 percentage point to 1. 5 percent in march. the key policy rate has since been kept unchanged. the key policy rate is low because inflation is low and because external interest rates are at very low levels. the year 2012 was characterised by weak growth among norway ’ s trading partners and turbulence in financial markets. uncertainty about global economic developments, particularly in europe, was high. key rates in many countries were close to zero, and both the european central bank ( ecb ) and the federal reserve announced that key rates would be kept low for a long period. economic developments in many advanced economies remained weak into 2013. global growth is being driven by rapidly growing emerging economies. in the euro area, activity has slowed in several of the largest economies, and there are prospects that the downturn may persist for somewhat longer than previously envisaged. unemployment is high and rising in a number of countries. in spain and greece, unemployment now exceeds 25 percent, and among young people, more than half are jobless. the economic situation is better in the us, but growth is moderate. oil prices have fallen somewhat in the course of spring, but are still at a high level. with key rates close to zero, several central banks have adopted unconventional measures to stimulate growth and support inflation. measures that change the composition and size of a central bank ’ s balance sheet differ from the usual monetary policy operations in that instruments other than the key rate are deployed to influence market rates and economic activity. the ecb and the central banks in the us, the uk and japan have implemented such balance sheet policies to directly influence long - term interest rates and
##ical capital buffer will come on top as a capital requirement that can be increased in good times and removed in bad times. the countercyclical buffer is to consist of common equity tier 1 capital and will normally be set between 0 and 2. 5 percent of a bank ’ s riskweighted assets. the countercyclical buffer is intended to counteract the procyclical effects of substantial changes in credit and asset prices. the buffer will help contain the risk of deleveraging in bad times. but an increase in the buffer can also dampen rapid credit growth in good times. the effect will depend on banks ’ reaction when the buffer is increased. norges bank will have primary responsibility for elaborating the basis for decisions on the countercyclical capital buffer. in drawing up the basis, the bank will collaborate and exchange relevant information with finanstilsynet ( financial supervisory authority of norway ). the buffer will be set by the ministry of finance. once the regulation is in place, most likely in late summer, norges bank will issue concrete advice to the ministry of finance on the level of the buffer. thereafter, the bank will issue bis central bankers ’ speeches advice on the buffer four times a year. the criteria on which the bank ’ s advice is based were presented in the march monetary policy report. norges bank will present analyses and issue advice on the size of the countercyclical capital buffer in conjunction with the decision basis for monetary policy. the aim is to ensure that the analytical basis is consistent with the formulation of monetary policy. the objectives of the countercyclical capital buffer and the key policy rate are different. the objective of the buffer is to strengthen banks ’ resilience to losses in an economic downturn, while the objective of monetary policy is low and stable inflation over time. the inflation target is weighed against the aim of smoothing fluctuations in output and employment. the new instrument will be taken into account in monetary policy. both the key policy rate and the buffer work through banks ’ responses. the buffer will be set on the basis of an assessment of the risk that financial imbalances may trigger or amplify an economic downturn. capital adequacy requirements, and their effect on bank lending rates, will be one of many factors underlying the monetary policy analysis and interest rate setting. the countercyclical capital buffer will strengthen the resilience of the banking sector during an upturn. it may also,
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william c dudley : the challenges ahead remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the center for the new economy 2010 economic conference, san juan, puerto rico, 19 february 2010. * * * thank you very much and good morning. although this is my first visit to puerto rico in my current role, i have been here a number of times, going way back to a childhood visit with my parents. it ’ s a beautiful and special place, but i must admit that coming in february has some special advantages. i welcome this opportunity to talk with business leaders, workers and educators. my goals are to hear what issues are on the minds of people here and to let you know what the federal reserve has been doing to help improve the economy. so i ’ m very grateful to the center for the new economy ( cne ) for giving me the opportunity to speak to – and learn from – you. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee or the federal reserve system. i want to start by talking about the implications of the close economic ties between the mainland and puerto rico. since the economies of the mainland and the commonwealth are very tightly linked, what happens on the mainland has important consequences for puerto rico, as well. in the aftermath of the financial crisis, we anticipate that the mainland recovery will prove to be sustainable, and that this will ultimately benefit the economy here. but puerto rico faces some significant challenges beyond its ties to the weaknesses in the broader u. s. economy, including problems in its own financial sector. dealing with these problems forcefully and expeditiously is crucial to ensuring that puerto rico benefits fully from the expected economic recovery over the next few years. the fed is assisting in several ways : by setting the stage for a resumption of world economic growth, by helping to resolve problems in the u. s. mainland and commonwealth financial sectors and by partnering with puerto rican groups to make meaningful contributions toward resolving some of the commonwealth ’ s other underlying issues. puerto rico ’ s special economic relationship with the mainland puerto rico has what economists often call an β€œ open economy. ” what this means is that puerto rico is especially dependent on external trade, so what happens to the puerto rican economy is greatly affected by what is going on with its major trading partners. when demand from puerto rico ’ s export customers is weak, then sales and prices
past 13 years. β€’ the first lesson is that our policy responses need to be holistic. in the heat of the battle, the right mix of fiscal, monetary and financial policies is needed. all of them need to play their part. interactions between them are important, as in earlier crises. β€’ the second lesson is that within this holistic approach, fiscal policy must be in the lead in order to minimize scarring of our production capacity. it is important that the fiscal stimulus is not prematurely withdrawn but rather remains geared towards supporting ailing businesses. it may even have to be scaled up to buffer the effect of the renewed containment measures. timely and correct use of the next generation eu recovery package can and will play an important role in this respect as well. β€’ the third lesson is that monetary authorities have to stand ready to act and contribute to tackling any escalation of the corona crisis. but beyond that, there are limits to what monetary policy can achieve. β€’ with renewed fears about a resurgent corona pandemic and renewed restrictions imposed to contain it, aggregate demand is inelastic with respect to financing conditions. in such a situation, it would seem more fruitful to directly focus on financing conditions to ensure that demand can display its full elasticity once no longer constrained. the best that monetary policy can then do in support of the economic outlook, is to continue to neutralize the tightening effect that the pandemic would otherwise have on the highly accommodative financial conditions that were already in place pre - corona. β€’ we have announced that at our december meeting we will recalibrate our monetary instruments. this will also include a reflection on the efficiency of the use of these instruments, with a view to providing effective support for the euro area economy. β€’ the fourth and last lesson is that for the post - crisis recovery phase in the euro area, growth - enhancing structural reforms are key, because they attack problems at their roots. the inevitable but unprecedented fiscal spending will raise public deficits and debts substantially. future generations can only bear and redress such debt burdens if simultaneously structural measures are taken to protect the public investments needed to boost potential growth. β€’ and with this, let me conclude.
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benoit cΕ“ure : euro cyber resilience board for pan - european financial infrastructures introductory remarks by mr benoit cΕ“ure, member of the executive board of the european central bank, at the second meeting of the euro cyber resilience board for pan - european financial infrastructures, frankfurt am main, 7 december 2018. * * * it is a pleasure to welcome you back to frankfurt. since our last meeting in march, we have been very busy at the ecb and across the eurosystem, and we have made considerable progress in our work to enhance the cyber resilience of the financial sector. the cyber threat facing the financial sector continues to be a challenge. from banking trojans affecting individual customers to systemic threats posed by ransomware and targeted attacks from advanced persistent threat ( apt ) groups, the landscape is evolving on a daily basis. at our previous meetings, we shared with you the eurosystem cyber strategy for financial market infrastructures ( fmis ) 1. this strategy rests on three pillars : individual fmi resilience, sector resilience and strategic regulator - industry collaboration. i am pleased that in the last few months, the ecb and the eurosystem have made significant progress in putting in place the building blocks for enhancing the cyber resilience of the european financial ecosystem and operationalising the strategy. we have developed two key tools to improve fmi resilience : the cyber resilience oversight expectations ( croe ) 2 and the tiber - eu framework3. the croe serves three key purposes : ( i ) it provides fmis with detailed steps on how to operationalise the cpmi - iosco guidance on cyber resilience for financial market infrastructures4, ensuring they are able to make improvements and enhance their cyber resilience over a sustained period of time ; ( ii ) it provides overseers with clear expectations against which to assess fmis under their responsibility ; and ( iii ) it provides the basis for a meaningful discussion between the fmis and their respective overseers. the public consultation on the croe provided some very useful feedback, which we carefully considered, and the final version was published earlier this week. the central banks of the eurosystem will work closely with the various financial infrastructures to enhance their cyber resilience, with the croe serving as a good basis for this work. enhancing cyber resilience is of crucial importance. equally important, however, is to test whether the enhancements that have
##es. the imf staff has taken these developments into account in the april 2017 world economic outlook ( weo ) and forecasts that world gdp growth will be noticeably higher over the next two years than in 2016 β€” a slight upward revision relative to the october 2016 weo. 5 there may well even be some chance that foreign economies kick into gear enough that u. s. and foreign business conditions become reasonably well aligned, as occurred during the u. s. monetary tightening cycles that began in 1999 and in 2004. in both of those episodes, u. s. exports grew substantially against the backdrop of a brisk expansion in foreign activity and a stable or even slightly depreciating dollar. of course, it is hard to predict whether foreign economies continue to strengthen so that the global economy will move more in sync β€” as i hope β€” or if a substantial gap will remain between the business cycle positions of the united states and our foreign trading partners. however, even if monetary policy divergence remains substantial, there is good reason to think that spillovers to foreign economies will be manageable. first, i expect that the fed ’ s removal of accommodation will be driven by a continued expansion of the u. s. economy ; thus, foreign economies are likely to benefit from the developments that induce the fomc to tighten. second, most foreign central banks should be able to mitigate an undesirable tightening of their own financial conditions through appropriate policy actions. an important lesson of the taper tantrum was that effective communication and actions by major central banks, including the european central bank and the bank of england, were helpful in quickly pushing bond yields down to levels that these central banks regarded as appropriate to their economic situation. third, many emes have markedly improved fundamentals β€” including smaller current account deficits and more anchored inflation expectations β€” that should allow them to better withstand the effects of u. s. tightening, though some vulnerabilities remain. finally, i expect that u. s. policy normalization will be gradual under likely scenarios for the evolution of output and inflation. a gradual and ongoing removal of accommodation seems likely both to maximize the prospects of a continued expansion in the u. s. economy and to mitigate the risk of undesirable spillovers abroad. references ammer, john, michiel de pooter, christopher erceg, and steven kamin ( 2016 ). β€œ international spillovers of monetary policy, ” ifdp notes. washington :
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in a higher real capital stock, raising per capita income over time. but such ready provision of liquidity would trouble many people including, i suspect, most of my central banking forebears. an asset can be illiquid for several reasons, including genuine uncertainty about its underlying value. if private institutions took on additional liquidity risk, confident that the central bank would always help them out if liquidity conditions tightened, they could easily end up taking on more of these other risks as well. this would leave both them and the central bank in an awkward position at some future time should things take a turn for the worse. and for the central bank to act as a market maker of last resort in markets for more exotic instruments would be a very big step, potentially with many unforeseeable consequences. these are pretty big questions. i suspect that they will increasingly be debated over time. my own view, given what we know at present, is that in periods of particularly unusual market duress, central banks should be prepared to move beyond the normal scope of operations to provide liquidity against a broad range of assets and over a longer maturity than might normally be considered. there are two provisos. first, the central bank has to be able to make a reasonable valuation decision about the underlying asset, and take sufficient excess collateral ( a β€œ haircut ” ) to protect its own position. this probably rules out exotic instruments except under the most dire of circumstances. second, a preparedness for forceful intervention in a crisis situation has to be balanced with some thinking about ways of restraining developments in the other direction when risk appetite is high. that, needless to say, is no easy matter. the β€œ lender of last resort ” having talked about normal liquidity operations, we must then turn our attention to the role of lender of last resort, where the central bank lends to one specific entity, when no one else will. the first question is : why do we need it? the reason is the possibility – albeit a very remote one – that a panic could put overwhelming pressure on a perfectly sound institution that, though prudently managed, cannot possibly hold enough liquid assets to withstand the pressure unaided. some entity has to be prepared to lend in such a situation if the market will not, otherwise the panic can imperil the institution concerned, and perhaps the financial system as well. 5 the notion has quite a history. the earliest use of the term seems to have been
of such fundamental things as financial intermediation, credit growth, the exchange rate and real convergence in general. these are all very important factors that have to be taken into account when making a decision on the euro strategy or indeed on erm ii entry itself. it is therefore worth waiting with setting out very specific euro adoption plans for hungary until the dust settles at least a little bit. in the meantime, the slovakian experience with the euro, starting next year but showing its implications already in the recent unfolding of the crisis, will provide a good natural experiment for the other new member states, and will no doubt be closely watched.
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, the continuing recession creates an unfavourable climate and feeds social tensions. nevertheless, we are now at a turning point. there is no doubt that 2013 will be a difficult year, mainly due to the continuing recession and high unemployment. but we can expect recessionary forces to weaken gradually and the greek economy to return to positive growth rates in the course of 2014. positive effects are expected from : β€’ a boost to liquidity and confidence as a result of the recapitalisation of banks and the return of deposits to the banking system ; β€’ a further improvement in cost competitiveness – expected in 2013 to more than offset the competitiveness losses of 2001 – 2009 – and a resulting increase in exports ; β€’ a speeding - up of the privatisation process, leading eventually to investments several times larger than the initial ones ; β€’ progress in the deregulation of markets ; β€’ the restarting of major infrastructure projects such as highways ; β€’ the implementation of private investment projects, with the support of the national strategic reference framework ( nsrf ) and european investment bank funds ; β€’ the planned repayment of public sector arrears. in order to ensure that the above factors will deliver the expected results, it is necessary to safeguard the recent improvement in confidence. any extreme or untimely demands put forward by different social groups would be counterproductive. society as a whole stands to make a lasting gain when the economy gets back on its feet again. it also goes without saying that unlawful incidents against business operations – no matter how isolated – are particularly harmful to the investment environment and undermine the prospect for a recovery in employment. pressing ahead with the implementation of the programme is a prerequisite for recovery where we stand today bodes well for the future. it can be reasonably expected that real economic recovery will come fairly soon, provided that certain conditions are fulfilled. the most important is the continued implementation of the adjustment programme, with strict adherence to the targets and timetables set. this will ensure continued funding and eliminate once and for all the risk of exit from the euro area, consolidate confidence in the economy ’ s future, attract new investment and convey a clear message that the worst is behind us and an exit from the crisis is in sight. bis central bankers ’ speeches implementation of a new model of outward - looking growth the rebasing of the country ’ s productive capacity on new foundations must be driven by strengthening its export orientation. this, in turn, requires shifting resources towards the production of competitive, internationally
realistic approach to regulation. competition in the provision of innovative payment solutions, especially where such solutions are turned into practical products that are responsive to the needs of the financially excluded, is healthy. although we expect banking institutions to continue to serving as the core of the payment system, it is non - banking institutions such a nam - mic payment solutions that will be contributing to the competitive environment in the establishment of payment methods and delivery channels thus serving as an impetus to innovation. bis central bankers ’ speeches electronic payment solutions and thus mobile payment solutions is one of many initiatives that the bank is promoting to increase financial inclusion. in this connection, this initiative of enabling money to be transferred across the country from person to person through a mobile solution at affordable costs will go along way in increasing access to financial services in line with broader national objectives. in conclusion, director of ceremonies, ladies and gentlemen we have come a long way in establishing a safe, sound and efficient payment system in namibia. the challenge is to make them accessible, affordable and inclusive. payment systems issues are perpetual on the bank ’ s agenda and we all need to contribute to achieving the twin goals of financial inclusion and provision of speedy, efficient, robust, accessible, safe and affordable modern payment methods. let me once again congratulate nam - mic payment solution for coming up with this innovative mobile payment services for their members. at this juncture, i now declare the β€œ nam - mic cellcard ” officially launched. i thank you for your kind attention. bis central bankers ’ speeches
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##s is suspended tonight. dinner will be served and i prophesy it will be good, and taste good too. thank you! edmund burke, reflections on the revolution in france. isaac asimov, ( 1994 ) a memoir, published posthumously by new york, doubleday. bis central bankers ’ speeches
five years, households in relative poverty, defined as half the median household income per adult equivalent, increased from just below 8 % of the total in 2006 / 07 to 9. 4 % in 2012. the distribution of income by quintile paints an even starker picture : the bottom 20 % of households witnessed a fall in their share of total income of a full percentage point, from 6. 4 % in 2001 / 2 to 5. 4 % in 2012 ; this went hand - in - hand with a rise of more than three percentage points ( 3. 4 % ) in the share of the topmost 20 %, bringing it to 47. 4 %, not far from half the total income. put differently, in still starker terms, between 2001 / 2 and 2012, the richest 20 % of mauritian households enjoyed an eight per cent oxfam ( 2014 ), still the lucky country? the growing gap between rich and poor is a gaping hole in the g20 agenda : https : / / www. oxfam. org. au / wp - content / uploads / 2014 / 06 / 2014 – 66 - g20 - report _ fa _ web - 2. pdf. christine lagarde ( 2014 ), challenges of job - rich inclusive growth, http : / / www. imf. org / external / np / speeches / 2014 / 100814. htm. thomas piketty ( 2014 ), capital in the twenty first century, translated by arthur goldhammer, harvard university press, http : / / piketty. pse. ens. fr / en /. forbes list : http : / / www. forbes. com / sites / luisakroll / 2014 / 03 / 03 / inside - the - 2014 - forbes - billionaires - list - facts - andfigures /. bis central bankers ’ speeches increase in their incomes while the poorest 20 % suffered a steep decline of twice as much. and, again, the same question arises : is this our idea of a just society? 18. there is much talk of faster economic growth paving the way to a higher - income status for the country. there has been learned, if often uninformed, debate about giving a monetary stimulus to push growth from its current 3. 5 % to the 5 % of pre - crisis years. there has been much less concern over the quality of growth. this is dangerous. in a small country, with a heritage
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i have alluded to in my remarks in the recent past at other fora. the use of agents by banks should lower service delivery costs as they do not have to put up β€œ brick and mortar ” structures to expand their footprint across the country. it is the central banks ’ expectation that savings from such innovations will be passed on to customers in the form of lower charges and lending rates. as i draw to a close, i wish to briefly dwell on credit products. competition in the recent years coupled with aggressive marketing has increased personal loans by banks. as we have seen from the survey presentation this morning, the cost of credit is not just the lending rate but also includes other costs such as commitment fees, negotiation fees, legal, valuation and insurance fees. the challenge that we must then face is disclosure to consumers of the total effective cost of loans. in this regard, i would urge kba to require in its ’ code of conduct that banks disclose the total all inclusive β€œ annual percentage rate ” of credit facilities to enable customers make informed choices and avoid β€œ debt overloads ”. the recent years have produced results that we will quote for many years to come : a ) lowering barriers to entry : threshold of minimum balance, loan requirements, etc, improves access to financial services. b ) lowering transactions costs attracts potential micro - savers to banks. c ) banks can make profits in downstream activities. let me end by reiterating that the central bank remains committed to continued consumer education and sensitization on banking products and services in conjunction with banks, the media and other like minded players. we are convinced that this will bring on board more kenyans into the formal financial sector, uplifting their well being and enabling them to participate in and benefit from our national development aspirations. i thank you all once again for honouring our invitation and it is now my pleasant duty and honour to officially launch the survey on bank charges and lending rates. thank you.
cbk to recognize the payment of a return rather than interest on government securities with the aim of opening up a spectrum of shariah compliant investment in the country. similarly, section 16 of the banking act was amended to allow for payment of a return rather than interest on savings products in the banking industry. i therefore urge all the players in this sector to come up with innovative products and services so that kenya may achieve her ambition of becoming a financial hub in the region. the central bank of kenya will work with all the players in facilitating the achievement of this dream. ladies and gentlemen : sharia compliant banking, although still in its infancy in our country, has a lot of opportunity for growth. the two fully sharia compliant banks as at the end of february 2013 had a total of kshs. 15. 4 billion in loans and advances and kshs. 19. 5 billion in total deposits. furthermore, these two banks together with other conventional banks offering sharia compliant banking window had total deposits of sha. 27. 8 billion as at bis central bankers ’ speeches 31st december 2012. these numbers just show how sharia compliant banking is gradually becoming a major player in the banking sector. ladies and gentlemen : the introduction of these specialized products in the kenyan banking industry no doubt comes with its challenges. these include limited short term liquidity management products, lack of experienced human resources in this specialized banking & finance area, lack of product standardization which can be a cause of ambiguity and source of disputes to mention but a few. the central bank is currently formulating policy and regulations to regulate the sharia compliant products and therefore depart from the current practice of subjecting sharia compliant banking to conventional banking regulations. i urge all the shariah boards to work together to help find solutions or come up with suggestions on how to address these challenges. we at the central bank will be willing and happy to provide the necessary facilitation and share our views. ladies and gentlemen : the future of sharia compliant banking and finance in kenya is bright but the challenges that exist need to be tackled collectively. i urge all players in the sharia compliant banking to embrace the spirit of cooperation and competition as they come up with ways of product and service standardization. kenya has pioneered in sharia compliant banking in this region but other countries in the region are headed in that direction, with tanzania already having two fully sharia compliant banks. somalia is another country keen on modeling its emerging financial system predominantly along sharia compliance as it rec
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i j macfarlane : geography, resources or institutions? talk by mr i j macfarlane, governor of the reserve bank of australia, to β€œ the bottom line ” luncheon, melbourne, 25 august 2004. * * * it is always a pleasure to be in melbourne, particularly when i am in these gracious and peaceful surroundings and contributing to such a good cause as the bottom line luncheon. by a strange coincidence the patron of the foundation is hugh morgan, my fellow board member of the reserve bank, and the chairman is professor adrian polglase, an old school friend. how could i refuse the invitation to speak today? i notice on the invitation that i am listed as speaking about the economic outlook. i am afraid the author of the invitation took a few liberties here, and so i will disappoint those who are expecting an analysis of current economic conditions and prospects. we at the reserve bank put out an exhaustive account of these earlier in the month and my deputy elaborated on them a week ago. a third rendition within a month would be counter - productive, so i will speak on a different topic, although it could be considered my views on the economic outlook in a very long - term sense. i would like to look at the factors that shape the economic success of a country in the very long run that is, over the centuries - and, of course, i will pay particular attention to australia. i propose to do this by briefly examining four factors which influence growth, and which can be summarised by four distinctive catchphrases : the tyranny of distance, geography is destiny, the resource curse, and institutions matter. ( a ) the tyranny of distance the first factor is a country ’ s position on the map - its distance from other countries or its degree of isolation. my remarks on this will necessarily be heavily influenced by geoffrey blainey ’ s classic study which originated the term. we have always assumed that australia was at a disadvantage because of its relative isolation from the world ’ s great centres of commerce. this has certainly been true from the beginning. the late start of european settlement was not just because they took so long to find us, or that for the first two hundred years europeans only sighted the barren north west coast. even if they had found the temperate east coast two hundred years before cook, there would not have been an economic reason to occupy the land. there were no valuables to be exchanged with the native population, such
the more widely quoted standard share price index. the difference comes from the fact that the australian listed company sector has maintained a dividend yield of around 4. 5 per cent, on average, since 2007. bis central bankers ’ speeches about future returns. that ’ s what we need if we are to experience a long and sustainable expansion in housing investment that houses our growing population at acceptable cost, and pays reasonable returns on the capital deployed. that ’ s the sort of outcome we want, as part of the more balanced growth path for the economy we are seeking over the years ahead. another part of the balanced growth path would involve an expansion in some of the tradeexposed sectors that have been squeezed by the high exchange rate. the foreign exchange market is perhaps another area in which investors should take care. while the direction of the exchange rate ’ s response to some recent events might be understandable, that was from levels that were already unusually high. these levels of the exchange rate are not supported by australia ’ s relative levels of costs and productivity. moreover, the terms of trade are likely to fall, not rise, from here. so it seems quite likely that at some point in the future the australian dollar will be materially lower than it is today. the high exchange rate has also had a significant impact on the reserve bank ’ s own balance sheet. it led to a decline in the value of the bank ’ s foreign assets and hence a diminution in the bank ’ s capital, to a level well below that judged by the reserve bank board to be prudent. this has been a topic of some interest of late. our annual reports have made quite clear over several years now that, while this rundown in capital in the face of a very large valuation loss was exactly what such reserves were designed for, we considered it prudent to rebuild the capital at the earliest opportunity. it has been clear that the bank saw a strong case not to pay a dividend to the commonwealth during this period, preferring instead to retain earnings, so far as possible, to increase the bank ’ s capital. that rebuilding could in fact have taken quite a few years, given the low level of earnings. that is the background to the recent decision by the treasurer to act to strengthen the bank ’ s balance sheet, in accordance with a commitment he made prior to the election. the effect of this is that instead of it taking many years to rebuild the capital, it will occur in the current year
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have - consumers - long - run - inflation - expectationsbecome - un - anchored. - 10 nonparticipation is 7. 5 percent. employment is still a bit short of the mark on what i consider to be substantial further progress. but if progress continues as i hope, it may soon meet the mark. while inflation has been well above target for the past six months, affecting consumers and businesses alike, it previously spent roughly a quarter century below 2 percent. there are good reasons to expect a return to pre - covid inflation dynamics due to the underlying structural features of a relatively flat phillips curve, low equilibrium interest rates, and low underlying trend inflation. while the playbook for guiding inflation back down to target following a moderate overshoot is well tested and effective, experience suggests it is difficult to guide inflation up to target from below. once covid constraints recede, i see no reason the labor market should not be as strong or stronger than it was pre - pandemic. the forward guidance on maximum employment and average inflation sets a much higher bar for the liftoff of the policy rate than for slowing the pace of asset purchases. i would emphasize that no signal about the timing of liftoff should be taken from any decision to announce a slowing of asset purchases. we have learned this summer that it is important to remain highly attentive to the data and to avoid placing too much weight on an outlook that remains highly uncertain. in implementing policy step by step, we must remain faithful to our new framework and attentive to changing conditions in order to ensure sufficient momentum as fiscal tailwinds shift to headwinds to achieve our maximum employment and inflation goals.
the united states, the growing role of the banking sector in the economy : they all made it clear that a sound functioning of the banking system was too important to be arranged informally. in this respect it is noteworthy that supervision on the insurance sector was formalised even further back in time and exists almost 80 years now. but, of course, in the decades that have passed since then the financial environment has kept on changing, and with it the challenges that supervisors face. two trends have been particularly prominent in the past decades. the first is the enormous increase in cross - border activities made possible by the liberalisation of capital markets. the second is the blurring of the borderlines between banking, insurance and securities activities. these fundamental developments are the driving force behind the increasing need for convergence of supervisory practices across borders and sectors. let me illustrate by looking at our experiences in the netherlands. the international dimension of our major financial institutions has increased dramatically. as a result, in some cases nowadays more than half of assets and profits are related to activities in foreign countries. there are no signs that the internationalisation of the financial industry will slow down, rather on the contrary. in a world where national financial systems and institutions are increasingly dependent upon one another, it is obviously crucial for financial stability that high and comparable supervisory standards are maintained everywhere. this has long been recognised in the field of banking regulation. indeed, it was reflected in the establishment and the work of the basel committee, as well as in the work of the european committees in this field. in this context i would like to express my great respect for the leadership shown by bill mcdonough in steering the ship β€˜ basel ii ’ through stormy seas to a save haven. this difficult task could not be in better hands than those of a former us navy officer! importantly, as part of basel ii, there is wide recognition that besides having convergence in regulation, it is equally important that supervisory practices ( the implementation of the rules! ) converge. the creation of the accord implementation group by the basel committee, and the work being done by the groupe de contact in europe reflect this understanding. it is important to keep in mind that the importance of cross - border convergence is not confined to the banking industry. it equally applies to other parts of the financial sector, such as insurance. this brings me to the other main trend that i mentioned, i. e., the blurring of the borderlines between banking, insurance and securities activities. here too, the
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clear and settle all types of transactions among themselves. some central banks have been working on similar systems collaborating with private banks. the ubin project is continuing in singapore whereas, last may, the bank of canada concluded that its own jasper project showed that the technology was not sufficiently mature. in some countries, the use of cash, notes and coins is declining at fast rates and we cannot disregard its possible disappearance in the future. in most jurisdictions however, that possibility is very far away, if it ever occurs. in the euro area, issuance of bank notes has more than tripled since 2001 and is still growing at about 5 % a year. all the developments i mentioned would not materially change the nature of our financial system, the concept of money or the effectiveness of central banks ’ monetary policy. the so - called private β€œ crypto - currencies ” can never prevail as general money substitutes. their designation is a misnomer as they are not a currency but just a commodity used as a speculative asset and as a restricted medium of exchange in very special circumstances, comprising criminal activities or failed states with collapsed institutions. instead, the use of the blockchain by central banks to create digital currency open to all citizens without limits would be really disruptive. this would be a radical political choice that could end banking as we know it and is therefore unlikely to happen. ignoring that possibility and regarding current banking activity, fintech has penetrated mostly into payment systems. banks ’ payment - related income has decreased but some is retained as bank accounts are still the ultimate way of settling. where fintech can have a big impact is in cross - border payments by using the blockchain technology to eliminate several intermediate steps, speed up global transfers and promote worldwide financial inclusion. concerning credit, peer - to - peer ( p2p ) or crowdfunding, fintech lending is still very small in general, with the exception of the u. s. where mortgage origination is significant, even if the online firms do not keep the exposures in their small balance sheets. 16 this progress is naturally due to the fact that fintech firms are much less regulated than traditional institutions under the presumption that it is good to allow new competition. the hope of fintech enthusiasts is that its spread will lead to much lighter financial regulation. however, new technologies generate new risks and do not eliminate the old ones which provide the rationale for financial regulation in the first place. asymmetries of
to allow mortgage abs to be used for repos and the 2005 legal amendment excluding repos from bankruptcy processes led to the increase of the repo market. similar changes took place at the same time in europe. 35 as stated in perotti ( 2010 ) β€œ these privileges were granted to overnight secured credit and derivatives, and essentially allowed these lenders to β€˜ front run ’ all other investors in case of default. this made such lending safer for the lenders, and thus cheap for the borrowers. the result was fantastic growth of unstable funding to the detriment of stability ”. we know what happened in the crisis, once again proving the statement by douglas diamond : β€œ financial crises are everywhere and always about short - term debt ”. 36 the crisis itself made securitisations and repos shrink significantly. in the u. s., broker - dealers changed into banks, making the shadow banking sector smaller. post - reform, securitisations became less attractive being now subject to higher capital charges, securities vehicles were consolidated with bank sponsors and repos and otc derivatives have become subject to central clearing. the overall progress in reducing risk in stfs and derivative markets has been significant, but might not be sufficient. very little has been done to prevent the expansion and misuse of those instruments in any future euphoric episode. the recent recommendations by the fsb are in my view not sufficiently far - reaching regarding the re - hypothecation and re - use of securities in repos. 37 regarding the use of margins and haircuts, the fsb recommendations to introduce minimum initial levels are also quite narrow : they exclude sovereign paper and transactions between regulated institutions and apply only to non - centrally cleared operations. going forward, more may have to be done. in regulatory circles, the potential for setting margins and haircuts as a policy tool to address systemic risks in derivatives and sft markets was already identified shortly after the global financial crisis. indeed, the bis committee on the global financial system ( cgfs ) concluded, already in 2009, that margining practices in otc derivatives and haircut - setting in sfts are a source of procyclicality in the financial system, and recommended enhancements to these practices in order to dampen the build - up of leverage in good times and soften the system - wide effects in bad times. 38 furthermore, the cgfs encouraged macroprudential authorities to consider measures that involve countercycl
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janet l yellen : semiannual monetary policy report to the congress testimony by ms janet l yellen, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 24 february 2015. * * * chairman shelby, ranking member brown, and members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report to the congress. in my remarks today, i will discuss the current economic situation and outlook before turning to monetary policy. current economic situation and outlook since my appearance before this committee last july, the employment situation in the united states has been improving along many dimensions. the unemployment rate now stands at 5. 7 percent, down from just over 6 percent last summer and from 10 percent at its peak in late 2009. the average pace of monthly job gains picked up from about 240, 000 per month during the first half of last year to 280, 000 per month during the second half, and employment rose 260, 000 in january. in addition, long - term unemployment has declined substantially, fewer workers are reporting that they can find only part - time work when they would prefer full - time employment, and the pace of quits – often regarded as a barometer of worker confidence in labor market opportunities – has recovered nearly to its pre - recession level. however, the labor force participation rate is lower than most estimates of its trend, and wage growth remains sluggish, suggesting that some cyclical weakness persists. in short, considerable progress has been achieved in the recovery of the labor market, though room for further improvement remains. at the same time that the labor market situation has improved, domestic spending and production have been increasing at a solid rate. real gross domestic product ( gdp ) is now estimated to have increased at a 3 – 3 / 4 percent annual rate during the second half of last year. while gdp growth is not anticipated to be sustained at that pace, it is expected to be strong enough to result in a further gradual decline in the unemployment rate. consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices. however, housing construction continues to lag ; activity remains well below levels we judge could be supported in the longer run by population growth and the likely rate of household formation. despite the overall improvement in the u. s. economy and the u.
in a range of surveys of households and professional forecasters have thus far remained stable. however, inflation compensation, as calculated from the yields of real and nominal treasury securities, has declined. as best we can tell, the fall in inflation compensation mainly reflects factors other than a reduction in longer - term inflation expectations. the committee expects inflation to decline further in the near term before rising gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate, but we will continue to monitor inflation developments closely. monetary policy i will now turn to monetary policy. the federal open market committee ( fomc ) is committed to policies that promote maximum employment and price stability, consistent with our mandate from the congress. as my description of economic developments indicated, our economy has made important progress toward the objective of maximum employment, reflecting in part support from the highly accommodative stance of monetary policy in recent years. in light of the cumulative progress toward maximum employment and the substantial improvement in the outlook for labor market conditions – the stated objective of the committee ’ s recent asset purchase program – the fomc concluded that program at the end of october. even so, the committee judges that a high degree of policy accommodation remains appropriate to foster further improvement in labor market conditions and to promote a return of inflation toward 2 percent over the medium term. accordingly, the fomc has continued to maintain the target range for the federal funds rate at 0 to 1 / 4 percent and to keep the federal reserve ’ s holdings of longer - term securities at their current elevated level to help maintain accommodative financial conditions. the fomc is also providing forward guidance that offers information about our policy outlook and expectations for the future path of the federal funds rate. in that regard, the committee judged, in december and january, that it can be patient in beginning to raise the federal funds rate. this judgment reflects the fact that inflation continues to run well below the committee ’ s 2 percent objective, and that room for sustainable improvements in labor market conditions still remains. the fomc ’ s assessment that it can be patient in beginning to normalize policy means that the committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of fomc meetings. if economic conditions continue to improve, as the committee anticipates, the committee will at some point begin considering
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christine lagarde : hearing of the committee on economic and monetary affairs of the european parliament introductory statement by ms christine lagarde, president of the european central bank, at the econ committee of the european parliament, brussels, 2 december 2019. * * * madam chair, honourable members of the economic and monetary affairs committee, ladies and gentlemen, i am very happy to be back before this committee for my first regular hearing as ecb president. i want to express my personal and sincere gratitude to this house for the support i received during the appointment process. and i look forward to a constructive and positive relationship between our two institutions going forward. the connection between the ecb and the european parliament is especially valuable today as a means to reinforce trust in european institutions. in the euro area, support for the single currency has grown steadily in recent years, rising from a low of 62 % in 2013 during the crisis to an all - time high of 76 % today. trust in the ecb has grown in that time as well – but its recovery after the crisis has been less dynamic. 1 my predecessors at the ecb were alert to this and already acted to address the challenge. the ecb ’ s accountability practices have evolved2, as has its communication strategy. and the ecb ’ s transparency, ethics and good governance frameworks have been harmonised, strengthened and extended to all members of the governing council and supervisory board. 3 but it is important to me that our focus on connecting with the people we serve continues and grows stronger – in particular by improving the ways in which we communicate with the general public. and this is why your role in the parliament is so important : you make sure that the people ’ s voice is heard by the ecb and the ecb ’ s voice is heard by the people. communication is a two way street and it is vitally important for democracy, a founding principle of europe. it is in this spirit that i will approach this hearing – and those we will have together in the future. the current economic situation and monetary policy let me start by looking at the current economic situation in the euro area, before moving on to the longer - term questions for monetary policy about which you have enquired. euro area growth remains weak, with gross domestic product growing by only 0. 2 %, quarter on quarter, in the third quarter of 2019. this weakness has been mainly due to global factors. the world economy outlook remains sluggish and uncertain. this
fact that the federal reserve has delayed its interest rate increase. they are saying that these two issues point to the ecb ultimately having to extend its programme or indeed deepen it. do you think that those institutions are making a mistake by jumping to that conclusion? i guess we are all in the same place here. the global economy is growing modestly and the euro area economy is recovering modestly. we don ’ t want to waste that recovery, so we have to be very careful. certainly, in our judgement, in our analysis, the risks come from the outside. so we see a downside risk to recovery. that downside risk doesn ’ t come from inside the euro area, it comes from outside, and in particular from emerging market economies. we are following this very carefully and, of course, we have got to be ready. if anything were to happen, we want to know what we would do. here in lima we are very much in fact - finding mode. we are listening. we are listening to chinese colleagues, listening to the imf very carefully. if anything were needed, we would need to be ready. but it is too early to pass that kind of judgement. so we shouldn ’ t prejudge here. i wonder if part of the reason is that there ’ s still a lag effect in the existing qe programme? of course, we have only executed, delivered, one third of the programme. we are also benefiting from these lag effects of the previous measures : targeted liquidity tenders, forward guidance, low interest rates. it is all feeding into the economy at a slow pace, so it is certainly too early to measure the full extent of what we have done over the last couple of years. so, is it premature to start thinking about another qe programme? it ’ s premature to discuss it. but it is certainly our duty to be prepared to cope with all kinds of contingencies. the oil price has been fascinating recently. we are back at usd 50 a barrel here. so we are starting to ask the question whether inflation expectations are being pitched too low, because people are fixated on a continuation of a very low oil price. inflation expectations are well on course in the long term, so the whole discussion is about how fast they will come back to 2 %, how fast inflation will come back to 2 %? the faster, the better, obviously, so if the oil price were to stabilise
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international financial support and measures to mobilize internal resources should help the government finance the budget deficit without resorting to monetary financing the war is grinding on. the russian aggression continues to put significant pressure on public finances. given the need for large expenses on defense capability, budget expenditures for 2024 have been raised considerably. the draft state budget for 2025 envisages that expenditures will remain high – the budget deficit will exceed 19 % of gdp. the budget expenditures are planned to be financed on account of further increases in budget revenues, financial support from international partners, and more domestic borrowing though selling domestic government debt securities, made possible thanks to efforts of the government with the nbu's assistance. this will enable the country to mobilize necessary resources and avoid returning to monetary financing over the forecast horizon. the course of the full - scale war continues to be the key risk to inflation dynamics and economic development the time needed for inflation to return to the 5 % target and the sustainability of ukraine's economic development will strongly depend on the nature and duration of the war. the russian aggression continues to generate the following risks : the emergence of additional budget needs, mainly those to maintain defense capabilities the likelihood of an additional hike in taxes, which – depending on its parameters – might spur the pressure on prices further damage to infrastructure, especially energy and port infrastructure, which will limit economic activity and put supply - side pressures on prices a deepening of adverse migration trends and further widening of labor shortages on the domestic labor market. the uncertainty also persists over the volumes of international partners'further support for ukraine. among other things, this is due to many countries being focused on their internal election cycles and russia making sabotage attempts in other countries and at the level of international institutions. at the same time, a number of positive scenarios might also materialize in relation to large inflows of funds to ukraine coming from frozen russian assets. these scenarios may also be related to a further expansion of export opportunities, the acceleration of european integration processes, and a faster pace of repairs in the energy sector. 2 / 3 bis - central bankers'speeches taking into account the balance of risks, the need to bring inflation back to its 5 % target in the coming years, and to ensure the sustainability of the fx market, the nbu board decided to keep the key policy rate at 13 % in recent months, interest rates on hryvnia instruments have been declining, reflecting the impact of previous monetary easing measures. however, the
andriy pyshnyy : national bank of ukraine press briefing - monetary policy decisions speech by mr andriy pyshnyy, governor of the national bank of ukraine, at a press briefing on monetary policy decisions, kyiv, 19 september 2024. * * * dear colleagues, the board of the national bank of ukraine has decided to keep its key policy rate at 13 %. this decision will help gradually bring inflation back to the target of 5 % in the coming years and support the sustainability of the fx market. inflation has expectedly accelerated in recent months in august, consumer inflation rose to 7. 5 % in annual terms, which was close to the forecast the nbu made in july. the underlying inflationary pressure, measured by core inflation, also increased to 6. 5 %. the growth in consumer prices was driven by the impact of lower harvests, businesses'larger expenses, and the effects of the weakening of the hryvnia in the previous months. however, inflation expectations remained rather sustainable. the pressure on prices will persist in the near future, but inflation will slow next year inflation will rise moderately in the coming months due to an increase in aggregate demand against the backdrop of budgetary spending, businesses'larger expenses on wages and electricity, and higher excise taxes. however, the nbu's prudent monetary policy and lower external price pressures will contribute to a gradual decline in inflation and its return to the target of 5 % in the coming years. to meet the target, the nbu will, in particular, maintain a manageable situation on the fx market. international reserves are being kept on a level sufficient for ensuring the sustainability of the fx market in august, ukraine received a large amount of international financial assistance. at the same time, the nbu's interventions to sell foreign currency declined substantially on the back of a decrease in net demand from businesses and households. as a result, ukraine's international reserves exceeded usd 42 billion as of the start of september. the staff level agreement on the fifth review of the imf program reached in september was another positive signal that volumes of international assistance will continue to be sufficient and macrofinancial resilience will be maintained. 1 / 3 bis - central bankers'speeches considering the above and the sufficient set of available instruments, the nbu will remain fully capable of supporting the sustainability of the fx market, prevent excessive exchange rate fluctuations, and ensure that the exchange rate moves both ways.
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global challenges affecting russia are concerned, we should first of all highlight a long - term reduction in hydrocarbon prices and the slowing economic growth in china. these challenges nourish each other with regard to having an adverse impact on commodity prices. as a result of the β€˜ shale revolution ’ opec has lost its opportunity to influence oil prices. the latter started to be determined by the profitability threshold of the majority of shale projects. moreover, energy - saving technologies and an active use of alternative energy sources will also affect oil prices in the long run. one cannot brush aside this prospect the way it was with the β€˜ shale revolution ’. a quick return to high oil prices is not expected, so the russian economy must learn to live amid low prices for oil and gas. overall, we should abandon the habit of connecting optimistic target forecasts with growing oil prices, rather than own efforts to restructure the economy. the second external challenge facing russia is the changed growth model and the slowing economic growth in china, which also affect the russian economy due to the downward pressure on commodity prices. according to our estimates, 1 percentage point of china ’ s slowing gdp may cause a loss of almost 0. 5 percentage points in annual rates of economic growth in russia in the medium term. it should be noted that this is true if the current structure of our relationship and the current structure of trade turnover persist. the chinese economy now ranks second in the world and the role played by that country in the global economy and financial markets has increased considerably. the challenge for russia is to reorient to the fast growing sectors of the chinese economy related to consumption and post - industrial economy ( the so - called tertiary sector ). low growth rates of the world economy intensify the need to carry out structural and institutional reforms in many countries to remove the obstacles to a faster economic growth. insufficient attention was paid to such transformations over the past decade. it seemed that nothing should be changed and the global economy showed a confident growth. structural reforms are a formidable challenge. they are often painful, infringe on somebody ’ s interests, and face counteraction. each country should judge for itself what structural reforms are the most important ones and which of them may be implemented with due account of political, cultural and other factors. bis central bankers ’ speeches a special emphasis should be made on monetary policy challenges facing the central banks throughout the world. easy monetary policies helped stabilise the situation in advanced countries, but the quantitative easing
point of the corridor system. second, the marginal lending rate is the interest charged on overnight lending from the eurosystem to banks. it constitutes the ceiling of the corridor system. third, the deposit facility rate governs the remuneration for excess reserves that our counterparties hold with the eurosystem as overnight deposits. it constitutes the floor to the corridor system. moreover, it also provides the floor on interbank market rates as banks have no incentive to lend funds below this rate in the market. setting the deposit rate to a value below zero would imply that the remuneration for excess reserves in the euro area is negative. in other words, banks are charged for making overnight deposits with the ecb. from a technical point of view, we are ready to implement a negative deposit facility rate. and, in general, there are constellations conceivable where the eurosystem could deploy such a negative rate, if it is deemed required by our mandate to safeguard price stability. so what are the pros and cons? theoretically, a negative deposit rate may provide additional accommodation. in the current environment of excess liquidity, the relevant overnight interest rates have shifted close to the deposit rate. in this situation, reductions in the deposit rate could push down overnight interest rates further. at the same time, possible caveats and unintended side effects of this move have to be kept in mind. in particular, crossing the zero line can set off actions in the market that may run counter to the central bank ’ s policy easing intentions. for example, there can be a substitution by private actors towards cash which becomes the highest yielding short - term asset. similarly, the money - holding sector may promote financial innovations that could emulate currency and allow tax avoidance. these actions may undermine the underlying purpose of the move towards negative deposit rates. overall, the consequences are subject to considerable margins of uncertainty as such a move has never been observed in the eurosystem or in any other major currency area in the world. how do these considerations differ from those underlying the move by denmark ’ s or the swiss central bank? both countries apply a fixed exchange rate policy vis - a - vis the euro area. in contrast, the ecb does not consider the euro exchange rate as a policy target. this adds an additional complexity to the monetary policy objective function. what could be the effects of introducing a negative deposit facility rate on the euro exchange rate? one can in principle single out three factors that would
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need to assess risk in banks ’ business models and have a reasonably accurate assessment of the balance between the risk taking capacity of a financial institution and the appropriate level of capital available to absorb unexpected losses and intervene early when there is an imbalance. inadequate assessments and imbalances as also delays and unpreparedness for timely and decisive interventions can make the financial system highly vulnerable leading to potential loss of confidence. 45. on the other hand, excessive capital requirements could drive risk to less regulated entities which may pose potentially new risks to the system. the crisis revealed, blind spots in supervisor ’ s assessment of bank risks, as under highly stressed and largely unforeseen circumstances, they were found to be inadequately capitalized. the timely and accurate supervisory assessment of capital levels is critical. given the systemic impact of sifi failures, there is also the need for continuous and intense supervision of sifis. supervisors need to bis central bankers ’ speeches have a through the cycle mentality as times of economic serenity breeds complacence. supervisors need to stay hungry and not necessarily foolish. 46. supervisors also need to have a result oriented approach, focussing on outcome of stress tests and risk management processes within banks. they need to review whether they are commensurate with their assessment of the bank ’ s risk profile. the lessons from the financial crisis showed that considerable supervisory attention was focussed on the governance frameworks and processes in areas such as risk management, credit risk approvals, board oversight, and capital adequacy assessments, without enough analysis to confirm that the outputs of the processes, given the business model of the bank and its products in terms of the risk profile and exposures were consistent with supervisory expectations. the crisis underscored flaws in bank ’ s risk management practices and insufficient understanding by supervisors of the risks posed by increasing complexity of products and systems in banks. 47. the use of stress tests tools and its outcomes in understanding areas of risk and remedial action has emerged vital to the re - engineering processes in supervision. data integrity and aggregation are key to effective risk management for banks and critical for ongoing supervision of sifis, as is consolidated supervision. there is also a need for wider customer education, and stringent customer suitability and appropriateness policies in place while selling structured products. this underscores the importance of a strong governance framework and compliance culture in banks. stress testing also forms a critical part of the banks ’ internal capital adequa
unlocking new growth frontiers in the digital age 1 i. introduction this year ’ s nobel prize in physics celebrated the role of artificial intelligence ( ai ) in revolutionising the way we work and live. it is widely believed that ai and robotics will usher in a new wave of secular innovation, much like past breakthroughs in steam power and personal computers. 2 silently, new technologies are offering a way out of the cross currents of diverging macroeconomic and policy pathways, geopolitical tensions, geoeconomic fragmentation and climate change in which the global economy is transfixed. accordingly, these technologies are heralding a brighter future, arguably holding the key for many emerging and developing economies to escape the middle - income trap. 3 it is estimated that generative ai itself could increase global gdp by $ 7 - 10 trillion over the next three years. 4 large language models are estimated to increase the productivity levels of workers by 8 to 36 per cent. 5 inaugural address delivered by michael debabrata patra, deputy governor, reserve bank of india ( rbi ) at the depr conference on β€˜ digital technology, productivity and economic growth in india ’ on november 13, 2024 at jaipur. valuable comments received from sakshi awasthy, sreerupa sengupta, ashish khobragade, himani sekhar, akshara awasthi, swastik yadav, rajib das and editorial help from vineet kumar srivastava are gratefully acknowledged. brynjolfsson, e., and mcafee, a. ( 2014 ). the second machine age : work, progress, and prosperity in a time of brilliant technologies. ww norton & company ; haldane, a. ( 2017 ). productivity puzzles. speech at the london school of economics. world bank. ( 2024 ). the middle - income trap. world development report. jp morgan. ( 2024 ). is generative ai a game changer? kalyani and hogan. ( 2024 ). ai and productivity growth : evidence from historical developments in other technologies. federal reserve bank of st. louis. over the past three decades, the digital revolution has been transforming the world, eclipsing all past revolutions. it is estimated that the global digital economy accounts for more than 15 per cent of global gdp 6. digital technologies are reshaping our lives through their impact on economic growth, employment, consumer welfare and living standards. these technologies are democratising
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m r pridiyathorn devakula : consumer finance opening address by mr m r pridiyathorn devakula, governor of the bank of thailand, at the β€œ fitch rating ’ s annual conference 2004 an consumer finance ”, bangkok, 16 september 2004. * * * distinguished guests, ladies and gentleman i would like to welcome all of you to this highly relevant conference an consumer finance and securitization appropriately organized by fitch ratings thailand. i would also like to show my appreciation to fitch for inviting me to give today ’ s opening remarks. ladies and gentleman although consumer finance has long been a staple of banking in the west and developed economies, it is still a relatively new and open frontier for thailand. as i thought of my opening remarks, i am reminded of two stories that can capture the reality and the impact of this new world in the context of thailand ’ s dual economy. it is not all from my memory since as you may agree i am still too young for historical anecdotes. as a university student some 30 ycars ago, i met two fellow classmates that came from completely opposite family backgrounds. the first came from a well - off family that supplied him with cars, expensive clothes and a lot of disposable income. tbe second one was from a poor family and had just enough money for food and public transportation. the wealthy friend did not graduate from college and was later sent to the us to finish his bachelor ’ s degree, while the second successfully earned his bachelor ’ s degree and won a scholarship for graduate school also in the us. neither man changed his ways while living abroad. the first continued his unencumbered spending spree with cars, expensive apartment, and credit cards. the second, more studious and frugal of the two, worked long and hard and was able to bring home his masters degree on time. his hard work ethic stuck with him as he got older, and today he is one of thailand ’ s successful business entrepreneurs. the other person however, left the states without any degrees but with a trail of unpaid credit card bills for his parents to repay. he started working in bangkok but could not stay in any place for long. he started his own small business which loss money and ultimately failed. unable to change his spending habits, he had to sell his assets and house in order to make good on his debts. to this day, he has no stable income, and must rely on the kindness of
will work together towards preserving thailand ’ s existing savings culture, in order to keep it an integral part of thailand ’ s economic development for tomorrow and beyond. thank you.
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how do you intend to rule out something similar repeating itself in europe? draghi : we, the governing council of the ecb, are committed to safeguarding price stability and avoiding systemic asset bubbles. so far we have seen some rising prices in a few asset markets at the local level. such phenomena must be dealt with regionally by the relevant political and supervisory authorities, for example by asking banks to hold more capital against their real estate exposure. spiegel : what would you say to german taxpayers who fear inflation? draghi : at present i do not see any risks to price stability. the ecb remains committed to safeguarding price stability as it has always done in the past. we firmly expect the inflation rate in the euro area to fall next year to below our target of close to 2 %. spiegel : at the start of monetary union, germans were promised that the ecb would behave like a second bundesbank. many people here now speak of a new banca d ’ italia, which tolerated double - figure inflation rates in the 1970s. draghi : i consider such accusations, to put it mildly, inelegant. for two reasons : in the 1970s, the banca d ’ italia was not independent. today, the situation is completely different. but there is also a personal reason. because of inflation, my family lost a large part of its savings at that time. you can therefore rest assured that i am personally and not only professionally committed to delivering price stability. spiegel : two german members of the ecb ’ s governing council have stepped down in protest, and the head of the bundesbank jens weidmann openly opposes your policy. does that not make you think? draghi : of course. that reflects concerns which we incorporate into our decisions. you can be assured that, in taking measures, we stick strictly to our mandate. spiegel : your former colleague jurgen stark, who resigned, sees it differently. draghi : his reasoning is not shared by the governing council of the ecb. spiegel : but the fact is, you are doing things that would have previously been inconceivable. draghi : we are also currently in a crisis that was previously inconceivable. it is therefore not very helpful to compare our measures with the past. when we speak of the bundesbank culture, we mean a culture of independence and price stability. i am deeply attached to both principles and can
risks, particularly for the german taxpayer ; second, provide support unconditionally ; or third, provide support under certain conditions. the ecb chose the third option because that was the best way to combat the causes of the crisis. governments must commit to sound economic and financial policies. this is how we ensure reform in the euro area – and our independence. spiegel : experience teaches us somewhat differently. if you artificially lower interest rates, it makes it easier for governments to become indebted and decreases the pressure for reform. draghi : high interest rates are the most significant source of pressure for a government resisting reform, i agree with you there. this is exactly why we insist on adherence to strict conditions. moreover, we do not want to completely eliminate differences in interest rates between countries. we will only intervene if the differences become excessive. spiegel : many experts doubt that you can make a clear distinction in this regard. draghi : we would disagree. there are models and indicators available that will help us to make an informed judgement. spiegel : when you announced your programme, interest rates in spain, for example, stood at 6. 5 %. what proportion of this was speculative? draghi : i will not tell you that : we have decided not to give exact figures for our programme that we could later be pinned down to. what i can tell you is that a good analysis will provide you with the necessary indications regarding at which point the differences give cause for concern. spiegel : we fear that you are getting entangled in hopeless political discussions with the european governments. in order to put monetary union on a firm footing, you are in favour of, for example, greater centralisation of economic and financial policy. up to now we have seen little of this. draghi : this is not how i see it. governments are on the right path. they have committed themselves to transferring more competencies for budgetary and financial policy to the european level. they need to take the necessary decisions on this at their summit meeting in december. spiegel : up to now, governments have only been ready to concede greater powers to the commission regarding the control of their budgets. the actual decisions will continue to be taken at the national level, however. draghi : the governments have taken decisions that would have been inconceivable even one year ago. this is progress, but it is not enough. spiegel : why not? draghi
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the market, no matter where they were based. then, in the second phase of the crisis, the obstacles to liquidity provision became linked to territory. the banking sector and financial market in the euro area gradually fragmented along national borders. these borders separate banking sectors which, irrespective of the intrinsic quality of their intermediaries, are considered robust, because the country in which they are based is able to cope with a banking crisis, from those considered to be fragile, where the markets consider this capacity to be lacking. these borders thus separate countries that are competitive and have sound balance sheets from those characterised by fragile balance sheets and a lack of capacity for growth. the measures decided on by the ecb ( fixed rate full allotment, ltros, omts, assessment and quality of collateral, guidance on the duration of fixed rate full allotment ) helped to overcome, to a large extent, this fragmentation that characterised the funding of the banking system until mid - 2012. the dispersion in the growth rate of bank deposits has now returned to 2007 levels. progress on the lending front has been much slower. in the first group of countries, we are generally seeing normal or accommodative financing conditions for firms and households. in the second group, we are seeing a persistent tightening of credit, possibly decreasing in intensity in some countries, with retail bank loan rates that are much higher than those applied by banks located in the first group of countries and more stringent collateral requirements for loans. the ecb ’ s recently published β€œ survey on the access to finance of smes in the euro area ” 1 provides a clear picture of the difficulties this sector, so crucial for the euro area economy, finds itself in. among the principal causes for concern cited by the smes interviewed, access to credit was second only to the difficulties encountered in finding customers for their products. the obstacles to obtaining credit ( linked to the refusal to grant credit ) persist, and represent one of the main factors of heterogeneity between countries in the euro area, though they are not confined to those countries under stress. in fact, in addition to smes in greece, ireland and spain, a large number of smes operating in the netherlands are encountering significant obstacles ( around 45 % of the firms surveyed ). these figures reflect the considerable heterogeneity in borrowing conditions, as also shown by the most recent bank lending survey. this fragmentation is all the more troublesome in an
and four million conversion cards, which show prices converted into euro as well as the most important security features of the 20 euro banknote, will be sent to all slovak households in december. the national bank of slovakia will be able to ensure that everyone will be well prepared for the euro changeover. i am confident that all of these efforts and activities will make the euro introduction a success in slovakia. as i arrived in bratislava i was most impressed with the facade of the national bank of slovakia and its banner showing the euro banknotes and coins, which is clearly visible from all over the city. governor sramko, it now gives me great pleasure to invite you to symbolically unveil what i believe is the biggest banner ever displayed in slovakia! to mark this festive moment, i am also very happy to hand over the traditional euro star to governor sramko to symbolise narodna banka slovenska ’ s joining of the eurosystem. i feel most honoured to open the euro exhibition, which houses a presentation of the euro banknotes and coins and contains interesting information about the euro for people of all ages. there are also many interactive games for children. i now declare the euro exhibition open! we very much look forward to welcoming slovakia into the euro area.
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immune from loss - sharing ) large banking outflows and spreads exceeding five per cent made recourse to official assistance inevitable. ( figure 3 shows the plot with some relevant news stories flagged ). perhaps the most significant take - away from the sequence of spikes and troughs is the fact that some of them clearly relate to news that is country - specific, some of them to euro area general news. the same is doubtless true for all of the stressed sovereigns. default risk vs. devaluation risk vs. redenomination risk it ’ s worth pausing to recall that raw sovereign spreads such as we are seeing today in the euro area are not remotely unprecedented in pre - euro history. on the contrary, they were the norm as is illustrated by figure 1. the difference is that these spreads reflected a combination of default risk and currency risk. during the last fiscal crisis of the 1980s irish sovereign spreads ballooned out also. but that was for local currency denominated debt. eurobond borrowing by the irish government remained at fairly tight spreads despite the high overall debt ratio ( higher than today ), and the fact that almost half of the national debt was denominated in foreign currency. the high spreads reflected devaluation expectations and currency risk generally. and there were devaluations, though less than was baked into the spreads – by between 250 and 300 basis points on average during the last ten years of that ill - fated regime, the narrow - band ems. it is not that default and devaluation are close substitutes ; not at all, and for several reasons. for one thing, default has potential reputational consequences for the issuer qualitatively different to those of devaluation. in addition, though, devaluation affects not only the international value of the government ’ s debt promises, but also that of all other contracts denominated in local currency ; as a result, depending on the speed of price - resetting ( pass - through ) it can affect competitiveness throughout the economy. these differences have not been sufficiently emphasised, i feel, in recent discussion. as an example, i could mention the irish devaluation of august 1986. the main goal of this important action was restoration of wage competitiveness, not a lowering of the real value of the local currency - denominated debt. ( indeed, i recall that some domestic policymakers were confused on this point and thought that the debt burden would actually increase as a
loan - to - income or loan - to - value limits. the flexibility of the framework enable banks to take individual borrower circumstances into account. there is an ongoing public debate as to the impact the mortgage measures might have on the demand for owner - occupied housing. but prices have risen substantially, and are now back to 2005 levels in nominal terms, or 2003 in real terms. so the demand is there. what is needed is a sustainable level of supply. supply has started to respond, but it ’ s still below estimates of what is needed. 33 the fact is, a higher level of credit by itself will not build more homes. however it risks the re - emergence of a credit price spiral. if supply is not responding to prices, then any move to increase the level of credit is likely to lead to higher housing costs and higher indebtedness. even if supply were to respond more strongly than we expect, new homes take time to build. we could see a rapid spike in prices, followed by an equally rapid decline. higher indebtedness also brings with it more risk. as i ’ ve discussed today, a lot of demand for housing in ireland comes from people who have moved to find work. ireland ’ s position as a small, open economy means that we are more vulnerable to structural shocks emanating from abroad. 34 it is important that households and borrowers are resilient to shocks that can have quite large, sudden effects on irish employment and wages. we need to ensure that if such a shock does occur, it does not trigger a repeat of 2008. the five years up to 2008 saw the same kind of growth rates we are seeing now. over that time, house prices grew by over 40 per cent for example. 35 the difference is that with that growth came an unsustainable increase in credit. the subsequent crisis dramatically reduced the demand for housing, and over - indebted irish households were left β€˜ holding the bag ’, as it were. many of these households had taken on very large debts in order to be competitive in the home purchase market. this was the credit price spiral that mortgage measures today are trying to prevent a re - emergence of. many of these households were financially devastated, indeed continue to struggle, even today. households in mortgage arrears was one effect of the credit price spiral. recall, that in september 2013, one in eight private home dwelling loans were more than three months in arrears on their repayments
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project standardization and securitization will contribute to attracting investors and accelerating the wbg's portfolio turnover, thus making capital more efficient. the poorest countries are facing the greatest hardships, and 700 million people worldwide are still trapped in extreme poverty. it is our duty to help them overcome challenges and build a more equitable future. as the largest international development fund in the world, ida has a major responsibility to help low - income countries return to the path of recovery and sustainable growth, as well as transition out of conflicts, poverty, and deprivation. this year, ida21 negotiations are creating a new architecture in order to better integrate ida into a one wbg and strengthen its alignment with the evolution agenda. ida must continue to be centered on concessional financing, meaningful policy commitments, and result - oriented targets. 2 / 4 bis - central bankers'speeches at this crucial juncture, we are committed to ensuring that ida remains the largest and most impactful partnership between borrowers – at different income levels – and donors. highly concessional resources are a vital source of financing for low - income ida countries, especially those lacking significant access to capital markets. at a time of heightened debt vulnerabilities, higher interest rates, and lower fdis, this is even more important. we should collectively deploy all efforts to mobilize adequate concessional finance for ida21. in this collective effort, the rule - based formula to increase ibrd transfers under better financial conditions and higher incomes – agreed upon in 2018 – is playing a crucial countercyclical role, and it should make shareholders proud of the ibrd's increased role among the key contributors to ida. the 2018 agreement remains a sign of solidarity and mutual responsibility for a poverty - free world. we also commend the further efforts of ida itself to stretch its own balance sheet with new caf measures. these measures allow for more efficient deployment of resources belonging to ida beneficiaries. we support their full engagements in this decision to best calibrate the appropriate balance between the degree concessionality and volumes, should a trade - off emerge. our ultimate goal is to spur long - term development through an effective ida21. the ida model is well tested in delivering complex and transformative projects in key sectors, based on country ownership. mission 300, in partnership with the african development bank, is an excellent model for using ida resources through regional multiphase approaches, building partnerships and – together with ifc and miga – mob
denis beau : emerging technologies in financial services opportunities and challenges speech by mr denis beau, first deputy governor of the bank of france, at the at the rbi @ 90 global conference on " digital public infrastructure and emerging technologies ", bengaluru, 26 august 2024. * * * good afternoon ladies and gentlemen, i am very pleased to speak today, at this event celebrating the 90th anniversary of the reserve bank of india. i would like to thank the organizers for providing me with the opportunity to speak about a major topic for central banks and supervisors today, that is : emerging technologies, their opportunities for the financial sector and the challenges they represent for us all. i would like to focus my remarks on two emerging technologies, which i believe may transform deeply financial services : tokenisation ( i ) and artificial intelligence ( ii ). 1. tokenisation of assets and payment services in the financial sector, the emergence of crypto - assets has paved the way for the tokenisation of finance. it allows the issuing, recording and exchange of financial assets in the form of digital tokens on dlt such as blockchain. such tokenisation has the potential to drive deep changes in the way our financial system works. these potential changes present opportunities for market participants and the general public, as they could bring greater simplicity, transparency, effectiveness and speed while also lowering transaction costs of financial transactions. but they also raise challenges, especially for institutions such as the banque de france and rbi, whose mandate includes preserving financial stability. in this respect, we are, at the banque de france, guided by two convictions : 1. confidence requires a regulatory framework that is suitable, clear, sufficiently demanding and fair ; 2. central bank money ( cebm ) must remain at the heart of settlements between financial intermediaries, which are the most sensitive from a systemic perspective. as regards regulation, france blazed a trail in crypto - assets with the adoption in 2019 of the pacte act, which created the classification of digital asset services provider. europe's lawmakers have drawn heavily on the french framework. in 2023, the european union adopted its markets in crypto - assets ( mica ) regulation, a specific regulatory framework covering the issuance of crypto - assets and stablecoins and the provision of related services. mica's goal is to address the major risks to market integrity and provide greater protection to users. 1 / 4 bis - central bankers'speeches while mica represents a vital regulatory
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currently conducts a vulnerability assessment to assess the potential impact of climate change and other environmental risks in bsp offices and branches. at present, the bsp, in collaboration with several development partners and interest groups, conducts a series of capacity building activities to deepen understanding and to equip banks to better manage environmental and social risks. the bsp is also working closely with the department of finance and other key government agencies to embark on the development of a principles - based taxonomy in order to facilitate the mobilization of funds towards green or sustainable projects. meanwhile, the industry associations, in collaboration with the worldwide fund for nature philippines, are developing an analytical framework to assess the impact of climate physical risks on the loan portfolio of banks. cognizant that an efficient and skillful workforce is the lifeblood of any organization, the bsp has again raised the bar in advancing human capital when it earned the civil service commission ’ s gold award for human resource management. this award is exclusively given to a government agency that achieved the highest maturity level or β€˜ level 4 ’ of the civil service program which denotes that the bsp ’ s operations and internal processes are designed to continually improve performance through incremental and innovative enhancements. in providing a safe, healthy and future - proof workplace that will ensure the physical and mental well - being of our people, promote work - life balance, and provide opportunities for professional development, the bsp has rolled out a customized annual health check, an occupational health program, on - site gym facilities and virtual physical fitness courses, activities for retiring staff, and a mental health program which include awareness campaigns, counseling, psychotherapy, and external referral. the bsp also rapidly shifted to new work arrangements such as work - from - home and flexible work hours, with the imposition of community lockdowns and travel restrictions. through the bsp covid - 19 task force, our organization continues to bolster its preventive measures to combat the adverse impact of pandemic in the workplace. the bsp conducts quarterly covid - 19 tests screening and provides additional medical coverage for affected employees. the bsp will also roll out a covid - 19 vaccination program for its employees and their dependents. the bsp has also implemented various programs when it comes to providing continuing professional development for its employees such as competency trainings, mentoring arrangements, and scholarships. we have recently launched the β€œ mentoring and inspiring learning experiences program ” or bsp miles program, which aimed
benoit coeure : savers aren ’ t losing out opinion piece by mr benoit coeure, member of the executive board of the european central bank, published in handelsblatt on 11 november 2013. * * * complaints about the european central bank ( ecb ) favouring borrowers over savers with its low - interest - rate policy are getting ever louder. in countries such as germany there is even talk of a β€œ cold expropriation ” of those who save money for their old age. i don ’ t think this assumption is appropriate. the current low returns for savers are mainly an ongoing result of the recent deep recession and of the fragmentation of the financial market in the euro area. against this background, low interest rates are a tool to maintain price stability. and price stability is a pre - requisite to bring the economy back onto a sustainable growth path. higher key interest rates would have exacerbated the recession, delayed the recovery and contributed to deflationary risks. higher interest rates would therefore hurt savers. they are not the losers under the ecb ’ s monetary policy, as many are claiming. it ’ s true that the ecb ’ s interest rates have never been as low as they are today. the main refinancing rate – the rate at which banks can borrow money over the short term from the central bank and which is perceived by the public as the β€œ key rate ” – now stands at 0. 25 %. what matters more to german savers, however, is that interest rates for long - term investments that are considered safe have fallen to their lowest level since the establishment of the monetary union. investors in ten - year german bonds currently get an interest rate of around 1. 76 %. the main reason for this is that because of the european sovereign debt crisis investors prefer investments which they consider to be particularly safe. in the end, it can be said that the ecb with its monetary policy has, above all, kept the interest rate low for very short - term loans. but the returns on longer - term investments considered safe have fallen so much primarily as a result of the increased demand. there remains the question of whether the key rates in the euro area are unreasonably low. what would be the level if interest rates could freely form on the market, without monetary policy intervention? this so - called β€œ natural ” interest rate would fall in a shrinking economy over a prolonged period and rise again during a recovery.
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bank ad skopje. dear guests, the fact that the leaders of this fund offered to present their financial services in the republic of macedonia, the central bank certainly encouraged and supported this initiative, shows that these important partners consider the republic of macedonia a friendly environment for launching various mutually beneficial business initiatives and projects. yet, we do not forget though, that some of these institutions had no doubts whatsoever about the republic of macedonia even in the most difficult periods for us after gaining the independence, since when nobody else was coming, they were here. we certainly appreciate that. regardless of all above, we still have many reasons that urge us to notice and convince others why is it good to invest in the republic of macedonia and to develop partnership with our economic agents and, of course, to inform on the activities that all of us in our country perform, directed towards increasing the attractiveness of the republic of macedonia as investment destination. hence, we definitely need such financial offers. the economic growth could be accelerated by more investments, competitive offer of financial instruments and products, which are likely to eventually bring about lower costs for borrowing capital. the potential investors should be aware that the macedonian financial sector is booming, but that the room for investments is yet to be opened. the gross national savings is low, not more than 12 - 17 % of gdp, over the recent several years. the gross domestic savings have been even lower over the last five years, swinging around 2. 5 % of gdp, on average. since 1995, the gross investments have virtually never exceeded 20 % of gdp. the foreign investments, except in the years of large privatizations by foreign companies, are also low, barely 2 % of gdp, on average, in the last 4 years. the total bank assets, even though registering a fast growth over the last years, making up roughly 50 % of gdp, still shows low level of financial intermediation in the country. the above figures were target of a deep impact of the external shocks the country suffered, besides, of course, the inexcusable delay of many essential reforms of the vital sectors of the country. but, eventually, the potential investors and creditors have to believe that : - the political and security shocks in the region and inside the country are behind us, - the economy accelerates its growth, which over the recent years is not below 4 % real gdp growth, - we preserve high macro - economic stability that implies exceptionally disciplined monetary and fiscal policies, which in turn result in low
##ning, instead of improving the balance of goods and services. to the same end are the different, but more emphasized arguments based on empirical studies : the competitiveness of the macedonian economy is not reduced and the research of the effective exchange rates continuously shows their adequacy. this policy of stable exchange rate has caused the inflation in the republic of macedonia in the last fifteen years to average 2. 1 percent, versus 1. 9 percent in the countries of the eurozone. with a difference of only 0. 2 percentage points, the republic of macedonia is among the most successful countries in transition. in this context, it is worth emphasizing one more comparison from the past fifteen years. the republic of macedonia has avoided the continuous appreciations of several years that during the crisis were followed by depreciations, a cycle to which the countries of the region of central and eastern europe with fluctuating exchange rates had been exposed to. thus we avoided the illusion of increased productivity – an illusion that these countries had to pay for in the crisis years. given this background of successful monetary independence and the denar as a means for building confidence, i believe it is fair to point out that in the past fifteen years, the attracting of savings in denars and the impartial and rigorous channeling of those savings to the most efficient and most effective economic projects by the commercial banks have also been achieved to the extent possible. this " to the extent possible " is partly a result of the trauma caused by the numerous devaluations of the domestic currency in the not so distant past, when savings became almost worthless. but this past means that in the previous fifteen extremely successful years for the monetary policy, there is an expected, though irrational stigma on the denar, which however becomes rational because it is rewarded. in other words, depositors believe that they need very high nominal interest rates in denars, in order to have a real return on savings, which leads to high interest rates on loans. this phenomenon was not and is not a result of the mistrust in the banking system. mistrust of depositors comes from the fear that due to possible devaluation followed by inflationary transmission effects, saving in denars would be insufficiently compensated if interest rates on savings deposits in denars come too close to the interest rates on deposits in euros. the stability of the exchange rate which established the idea that price stability is a public good one cannot live without, is the reason why depositors
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and the loss of confidence in the building blocks of the financial system, its impact was magnified through quick transmission to other economies as well. monetary authorities in the advanced economies were the first to resort to aggressive monetary easing first by reducing policy rates. however, key channels of conventional monetary policy were severely impaired during the crisis as policy rates in most advanced economies approached zero lower bound ( chart 1 ). bagehot walter ( 1873 ), lombard street : a description of the money market, king & co., london ; reprinted wiley, new york 1999. bis central bankers ’ speeches taking cognisance of the severity of the crisis and concerns of economic recession, central banks used their balance sheets in unconventional ways to augment liquidity ( table 1 ). the qe programmes initially attempted to alleviate financial market distress, but this purpose soon broadened to include achieving inflation targets, stimulating the real economy, and containing the european sovereign debt crisis ( fawley and neely, 2013 ) 2. now let us discuss a little about the rationale for unconventional policies undertaken across major economies. table 1 fawley, brett w. and christopher j. neely ( 2013 ), β€œ four stories of quantitative easing ”, federal reserve bank of st. louis review, january / february, vol. 95, no. 1. bis central bankers ’ speeches in the us, immediately after the collapse of lehman brothers, when slow growth and high unemployment emerged as major concerns, the fed announced the policy of quantitative easing ( qe ) in november 2008. the first two rounds of qes reactivated financial markets, but failed to spur growth. under β€œ operation twist ” instituted in september 2011, the fed took initiative of buying longer - term treasuries and simultaneously selling some of the shorterdated securities to bring down long - term interest rates which continued till december 2012. with a view to putting in place a stronger version qe, it launched qe3 in september 2012. under qe3, the fed started purchasing us $ 85 billion of fixed - income securities per month. the fed intended to keep qe3 in effect until unemployment falls to 6. 5 per cent or inflation rises to 2. 5 per cent. in addition to qe3, the fed gave a forward guidance that it would keep short - term rates low through 2015. as economic parameters showed improvement, the fed started talking about exit, popularly known as the tapering of bond buying in may 2013. subsequently, it announced to
, their policy responses became more synchronised with global efforts ( mohanty, 2011 ) 5. while both developed economies and emes resorted to conventional and unconventional monetary measures, there were certain differences in terms of their timing, types and magnitudes. first, while in the advanced economies the switchover was from conventional monetary tools to unconventional measures due to policy rates approaching zero, in many emes, unconventional foreign exchange easing and domestic liquidity augmenting measures mohanty, deepak ( 2011 ), β€œ lessons for monetary policy from the global financial crisis : an emerging market perspective ”, rbi bulletin, april. bis central bankers ’ speeches preceded the conventional measures of policy rate cuts. second, while central banks in emes relied mostly on direct instruments such as reserve requirements to ease domestic liquidity, central banks in advanced countries resorted to various liquidity providing operations through relaxation of counter - parties, collaterals and maturity. third, central banks in advanced countries extensively used credit and quantitative easing measures which led to large expansion of their balance sheets unlike in emes. fourth, while in advanced economies fiscal support aimed at rescuing the financial sector from the crisis situation, in emes they were generally meant to address the deficiency in aggregate demand. let me now turn to some of the consequences of unconventional policy. impact of unconventional policies as most of the unconventional monetary policy measures were undertaken keeping in view the domestic economies, the attendant increase in global liquidity appears to have impacted a range of asset classes in both advanced and emerging economies ( chart 5 ). there are studies which find significant impact of qe. they suggest reduction in us treasury yields around 100 basis points, corporate bond yields by 80 basis points, and reduction in the range of 20 – 80 basis points in other advanced economies6. in case of some emes, the evidence suggested high capital inflow pressure, rapid domestic credit growth and domestic inflationary pressures. chen, q., a. filardo, d. he and f. zhu ( 2012 ), β€œ international spillovers of central bank balance sheet policies ”, in bis papers no. 66. bis central bankers ’ speeches furthermore, indications about the possible withdrawal since the talk about us taper in may 2013 has caused volatility in financial markets in emes and impacted currency valuations as capital retreated back to the us in anticipation of higher interest rates. emes, particularly with large current account and fiscal deficits, were severely impacted. let me turn to our experience
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of providing retiree health benefits – though certainly consequential – appear to be somewhat smaller than unfunded pension liabilities. for example, one recent estimate suggests that state governments have a collective liability of almost $ 600 billion for retiree health benefits. 4 not all of the longer - term issues facing state and local fiscal authorities involve closing budget gaps. for example, in light of the recent experience, an important question is whether see alicia h. munnell, richard w. kopcke, jean - pierre aubry, and laura quinby ( 2010 ), valuing liabilities in state and local plans ( chestnut hill, mass. : center for retirement research at boston college, june ) ; and robert novy - marx and joshua d. rauh ( forthcoming ), β€œ public pension promises : how big are they and what are they worth? ” journal of finance. see jeffrey r. brown and david w. wilcox ( 2009 ), β€œ discounting state and local pension liabilities, ” american economic review, vol. 99 ( may ), pp. 538 – 42. it should be noted that future pension accruals generally seem to be accorded a lower level of protection. see pew center on the states ( 2010 ), the trillion dollar gap : underfunded state retirement systems and the road to reform ( washington : pcs, february ). bis central bankers ’ speeches anything can be done to reduce the sensitivity of state and local budgets to the business cycle. as the past couple of years have shown, the balanced - budget rules under which most states operate can force sharp cuts in services and increases in taxes during recessions, which is just the time when many people in the state are economically most vulnerable. moreover, the instability in funding streams and tax rates associated with the business cycle can impede planning by both the public and the private sectors. by and large, the evidence suggests that balanced - budget rules provide valuable fiscal discipline for states, and i do not advocate eliminating them. 5 however, even with these rules in place, the question remains whether the effects of the business cycle on state budgets can be mitigated in the future. one strategy used by many governments is to build up a rainy day fund during good economic times. measured as a percent of general fund expenditures, the aggregate reserve - fund balances for all state governments stood at a record 11 - 1 / 2 percent at the end of fiscal 2006. these comparatively high reserve - fund
85 ( november ), pp. 1063 - 70. lewis, kurt f., and francisco vazquez - grande ( 2017 ). β€œ measuring the natural rate of interest : alternative specifications, ” finance and economics discussion series 2017 - 059. washington : board of governors of the federal reserve system, february ( revised may 2017 ), https : / / dx. doi. org / 10. 17016 / feds. 2017. 059. lubik, thomas a., and christian matthes ( 2015 ). β€œ time - varying parameter vector autoregressions : specification, estimation, and an application, ” federal reserve bank of richmond, economic quarterly, vol. 101 ( fourth quarter ), pp. 323 – 52, https : / / dx. doi. org / 10. 21144 / eq1010403. - 16 mankiw, n. gregory, and ricardo reis ( 2018 ). β€œ friedman ’ s presidential address in the evolution of macroeconomic thought, ” journal of economic perspectives, vol. 32 ( winter ), pp. 81 – 96, https : / / dx. doi. org / 10. 1257 / jep. 32. 1. 81. nelson, edward ( 2018 ). β€œ seven fallacies concerning milton friedman ’ s β€˜ the role of monetary policy, ’ ” finance and economics discussion series 2018 - 013. washington : board of governors of the federal reserve system, february, https : / / dx. doi. org / 10. 17016 / feds. 2018. 013. phelps, edmund s. ( 1967 ). β€œ phillips curves, expectations of inflation and optimal unemployment over time, ” economica, vol. 34 ( august ), pp. 254 – 81. poole, william ( 1970 ). β€œ optimal choice of monetary policy in a simple stochastic macro model, ” quarterly journal of economics, vol. 84 ( may ), pp. 197 – 216. priebsch, marcel a. ( 2017 ). β€œ a shadow rate model of intermediate - term policy rate expectations, ” feds notes. washington : board of governors of the federal reserve system, october 4, https : / / dx. doi. org / 10. 17016 / 2380 - 7172. 2056. svensson, lars e. o. ( 1997 ). β€œ inflation forecast targeting : implementing and monitoring inflation targets, ” european economic review,
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benoit cΕ“ure : interview in liberation interview with mr benoit cΕ“ure, member of the executive board of the european central bank, in liberation, conducted by mr jean quatremer on 14 january, published on 16 january 2015. * * * why has the euro area become a black hole for growth? the trend of slow growth is not only affecting the euro area, but all developed countries. in europe, it is also linked to insufficient technological innovation and a lack of dynamism and openness in the economy, and even in societies themselves. isn ’ t the single currency partly to blame for the weak growth? no, not the euro itself. it has even provided protection. but we must recognise that if the financial and economic crisis of 2007 – 8 became particularly serious in the euro area, it is also because of design flaws in economic and monetary union. the euro was built on an imperfect institutional framework, envisaged by the 1992 maastricht treaty and the 1997 stability and growth pact. the framework ’ s principles may well have been appropriate in calm weather, but when the storm broke they proved inadequate. we lacked the instruments for coordination, solidarity and responsibility which would have allowed us to handle the crisis and bounce back more quickly, as was the case in the united states or the united kingdom. this error has been progressively rectified since 2010 with the creation of the european stability mechanism ( esm ) and the banking union, the strengthening of economic governance and, in terms of monetary policy, the omt programme, which allows the ecb to repurchase public debt if needed and has just been validated by the advocate general of the european court of justice. but we still have a long way to go, and the human cost, in terms of unemployment and poverty, of these design flaws, compounded by too little potential for growth, has been considerable. only six months ago the ecb dismissed any risk of deflation. yet prices have begun to fall … the euro area is not in deflation. but there is a risk, which got worse last summer, that growth and inflation remain weak in the long term and that we fall into a β€œ 1 % economy ” : growth at 1 % and inflation at 1 %. this outlook is dangerous enough to be a concern to everybody. european leaders must mobilise all instruments ( monetary, budgetary, structural reforms ) so that growth picks up in a sustainable way. it ’ s imperative that we,
to the technological frontier, and, in order to grow, a country has to know how to innovate. in the 1950s and 1960s, growth meant learning how to use and replicate well - known technology. this is no longer enough. we have to innovate and to do this we need two things : education and competition. * * * allow me to conclude these few brief remarks by reiterating my gratitude for having selected me for this award. i would like to wish the rector, professor carlo carraro, lecturers and the students at this university a year filled with success ; my warmest wishes and all the very best. bis central bankers ’ speeches
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speculation in the first episode or on house price increases in the second. and larger adjustments would incur greater incremental costs. as a consequence, using monetary policy to damp asset price movements could lead to more variability in output and inflation around their objectives, at least in the medium term. among other things, greater variability in inflation could lead inflation expectations to become less well anchored, diminishing the ability of the central bank to counter economic fluctuations. we simply do not have good theories or empirical evidence to guide policymakers in using short - term interest rates to limit financial speculation. given our current state of knowledge, my preference at this time would be to use regulation and supervision to strengthen the financial system and lean against developing problems. monetary policy would be used only if imbalances were building and regulatory policies either were unavailable or had proven ineffective. the homework assignment is to improve our ability to identify incipient financial imbalances and understand their interactions with changes in policy interest rates. a related issue, which i ’ ll assign for extra credit, is critical for the conduct of policy in the future. some observers have attributed the bubbles observed in some asset prices in recent years to a decades - long downward trend in real interest rates. in this view, the decline in interest rates has caused investors to reach for yield by purchasing riskier assets with higher returns, driving the prices on riskier assets above fundamental values. many critics of central banks ascribe the drop in real rates to monetary policy decisions that kept rates unusually low, on average, over the business cycle from my perspective, the decisions the central banks were making about their policy rates were shaped by the underlying determinants of the balance of saving and investment, including, in the past decade or so, the high saving propensities of the newly emerging asian economies and the sluggish rebound in investment globally after the recession early last decade. nonetheless, it is important that we understand the reasons for the decline in average real rates and whether low rates are likely to persist – and that very tough problem is the extra credit assignment. for one thing, as the economic expansion gains traction and central banks back off the current highly accommodative stance of policy, policymakers will need to understand how the longer - term trend in real rates has influenced the point at which the policy rate becomes restrictive. for another, if rates are going to continue to be low by historical standards, regulators will need to be especially alert to any signs that a
reach for yield by investors is contributing to excessive risk - taking. inflation objectives the final homework assignment concerns the inflation objectives of central banks. central banks have widely chosen to target inflation rates near 2 percent. the federal reserve is required by law to conduct monetary policy to achieve maximum employment and stable prices. we haven ’ t announced an explicit inflation rate target consistent with that dual mandate, but the federal reserve governors and reserve bank presidents publish our individual forecasts for inflation over the longer run, conditional on our individual views of appropriate monetary policy. those forecasts indicate that most of the fomc participants believe that inflation should converge to 1 – 3 / 4 to 2 percent over time. recently, some prominent economists have called for central banks to raise their inflation targets to about 4 percent. shifting inflation targets up would tend to raise the average level of nominal interest rates and thus give central banks more room to lower interest rates in response to a bad shock to the economy before running against the zero bound. although i agree that hitting the zero bound presents challenges to monetary policy, i do not believe central banks should raise their inflation targets. central banks around the world have been working for 30 years to get inflation down to levels where it can largely be ignored by businesses and households when making decisions about the future. moreover, inflation expectations are well anchored at those low levels. increasing our inflation targets could result in more - variable inflation and worse economic outcomes over time. first of all, inflation expectations would necessarily have to become unanchored as inflation moved up. i doubt households and businesses would immediately adjust their expectations up to the new targets and that expectations would then be well anchored at the new higher levels. instead, i fear there could be a long learning process, just as there was as inflation trended down over recent decades. second, 4 percent inflation may be higher than can be ignored, and businesses and households may take inflation more into account when writing contracts and making investments, increasing the odds that otherwise transitory inflation would become more persistent. for both these reasons, raising the longer - term objective for inflation could make expectations more sensitive to recent realized inflation, to central bank actions, and to other economic conditions. that greater sensitivity would reduce the ability of central banks to buffer the economy from bad shocks. it could also lead to more - volatile inflation over the longer run and therefore higher inflation risk premiums in nominal interest rates. it is notable that while the economic arguments for raising inflation targets are well understood, no major central bank
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policymakers and program implementers, we must verify that our actions are indeed achieving inclusion objectives. we can only claim true success if we have incontestable proof that global partnerships and national goals adequately empower our ultimate stakeholders. bis central bankers ’ speeches conclusion as i end my term as chairman of the steering committee, allow me to extend deep appreciation to my distinguished colleagues in the committee, all member institutions, our strategic partners and donors, and the afi management unit, for your unwavering support. your active and thoughtful participation in the committee, and in afi processes, has made our work much more manageable and gratifying. i am pleased to announce that the steering committee will be led by incoming chair daniel schydlowsky of peru. as i contemplated an appropriate end to my opening remarks, tnt came to mind ; not only because it resembles the initials of our host country trinidad β€œ n ” tobago ; but also because of the massive force of change that we want to take place in our respective countries. let us all keep the three cs of afi aglow to see forceful initiatives in afi ’ s future – to catapult financial inclusion to greater heights around the world. thank you and good morning. bis central bankers ’ speeches
i am sure that other afi members also have interesting stories to tell about their kx experiences. collaboration and cooperation likewise characterize afi ’ s engagement with external stakeholders. this approach has resulted in rewarding partnerships and increased global attention on financial inclusion. let me cite some examples : we have initiated, and will continue to deepen the engagement with standard setting bodies ( ssbs ) thru a structured peer learning program. global standards greatly affect the level of exclusion, as well as the range, quality and affordability of financial products available to clients at the bottom of the pyramid. afi is in a unique position to contribute value to the ssb discussions ; given the wealth of experience that the membership has in practicing the proportionality principle ; in a manner that is conducive for financial inclusion. presently, the bsp chairs the basel consultative group workstream on financial inclusion. this working group aims to form an overall risk picture on financial inclusion that would be of particular relevance to banking supervisors around the world. afi members provided invaluable inputs to the workstream thru their participation in the range of practice survey. as implementing partner of the g20 global partnership for financial inclusion ( gpfi ), afi has gained stature as the voice of the developing world in the area of financial inclusion. we significantly contributed to the development of the g20 principles for innovative financial inclusion. finally, afi ’ s regular collaboration with the g24 in conducting policy forums, continues to deepen awareness on financial inclusion issues, and inspire action among g24 member countries. commitment, collaboration and cooperation are necessary, but insufficient to beget success. these factors must translate into a third c – concrete results. the results - oriented culture of afi ensures that policy solutions, regulatory enhancements and program interventions always benefit the ultimate stakeholder whom we all target to serve : the financially - excluded. to date, we have seen policy solutions that resulted in : β€’ 16. 7 million mobile money accounts for 15 percent of adults, achieved within 2. 5 years in bangladesh β€’ 7 million mobile money accounts for 67 percent of adults, achieved within 7 years in kenya β€’ 19. 4 million basic bank accounts for 27 percent of adults, achieved within 5 years in mexico β€’ 26. 7 million mobile money and cash card accounts, achieved within 4 years in the philippines β€’ 1. 7 million savings accounts for 25 percent of adults, achieved within 4 years in rwanda this sampler data from selected afi members reinforce the importance of impact measurement and monitoring. as responsible
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challenges. one is maintaining credibility in light of perceived low and decreasing policy effectiveness. not only has expansionary monetary policy faced difficulties attaining the intended objectives, including support for growth, but lately, such as in japan and the euro zone, even their financial effects, in terms of exchange rates and other asset price movements, seem to be the opposite of those expected. the other challenge is to deal with the consequences of asset price distortions as a result of monetary accommodation and consequent financial stability risks. for this and other reasons, future amplification of uncertainty and volatility cannot be ruled out. to date, heightened risk aversion has not greatly affected mexico ’ s key financial quantities, such as non ‐ resident holdings of peso ‐ denominated government securities. these foreign portfolio investments are among the highest in emerging markets, a fact which could be interpreted as a sign both of strength and possible vulnerability, for instance, if a sudden change occurs in market sentiment towards emerging markets or mexico. these holdings have been relatively stable in absolute terms during the last few years, largely reflecting lower short ‐ term asset positions, namely zero coupon cetes, while those of long ‐ term m bonds have increased persistently. this behavior may suggest that investors ’ positive long view on mexico remains firm. caution is appropriate, however, as international conditions can always change. the adverse international environment has exerted a clear effect on mexico ’ s asset prices. in particular, market interest rates, especially those of medium duration, have been rising, along with risk perception. consistently, spreads against the united states have been widening, as interest rates in that country have either fallen or stayed flat. more notably, the value of the dollar in peso terms has been trending upward sharply, along with its value in terms of a basket of emerging ‐ market currencies. however, so far in 2016, the mexican peso has decoupled from other currencies, with a further substantial weakening, while the others, on average, have appreciated. the obvious question is why the mexican peso has been hurt more severely. 4 several factors could be behind peso underperformance, in particular, three possibly interrelated causes. one is rather mechanical and refers to the fact that the mexican peso is a highly liquid currency in international markets. this characteristic leads investors to see the peso as an attractive vehicle for hedging against an ample set of risks. a second, deeper reason may
slower sector in mexico. a significant driver of weakness in u. s. manufacturing can be found in foreign trade, in the context of a global tendency in recent years of smaller international flows of goods, extending to the united states. in particular, both u. s. manufacturing imports and exports have been shrinking, and statistical evidence suggests that reduced foreign trade is sapping vigor from the manufacturing sector in that nation. 2 a warning sign comes from forward ‐ looking indicators for u. s. manufacturing, such as those estimated as diffusion indexes based on surveys. the manufacturing pmi, see banco de mexico ( 2016 ). informe trimestral abril ‐ junio 2016, august, box 2, pp. 30 ‐ 33. calculated by the institute of supply management, recently touched contraction territory and since then has stayed close to it. against this backdrop, mexico ’ s annual gdp growth has been relatively stable during the last three years at around its long ‐ term average of 2. 3 percent, with a dip in the second quarter of 2016. this development has resulted from two opposing forces : expansion in services and a weaker industrial sector. weakness in industrial production reflects both domestic and external restrictions. on the one hand, mining has been dropping significantly, mainly due to a longstanding decline in oil extraction. this, in turn, reflects near depletion of the most profitable oil fields, as well as insufficient investment by the state ‐ run oil company, pemex, and poor results from exploration projects. on the other hand, slower manufacturing is linked to softening u. s. production, as suggested earlier. mirroring developments in the united states, mexican manufacturing exports, especially those directed to that country, are subdued at negative growth rates, largely explaining trends in manufacturing output. this has occurred in spite of substantial real peso depreciation vis ‐ a ‐ vis the u. s. dollar. although peso competitiveness has allowed mexican exports to gain some market share in the united states, this price effect has been more than offset by a negative effect associated with lower external demand for mexico ’ s goods. in contrast, services are still relatively robust, constituting the most significant engine of recent economic growth. however, expansion in the services sector has stalled lately, partly reflecting spillover from contracting foreign trade. for example, slower trends are present in both commerce and trucking, which are tightly linked to external trade. on the demand side, private consumption has continued to increase at relatively high
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provides assurance to stakeholders ( management committee, the president, and the board ) who delegate risk - taking authority to the business lines. from first - line businesses and support functions, risk information flows to the second line, and then to the risk subcommittee of our bank ’ s management committee. the risk subcommittee discusses significant emerging and existing risks, provides perspectives on managing and mitigating risks, and supports management committee review and decision making. the audit and risk subcommittee of the bank ’ s board of directors and the board of directors itself are at the top of the governance chain, although there are limitations on their roles with respect to supervisory and monetary policy issues. 3 operational risk management the bank ’ s operational risk approach sits within, and is shaped by the bank ’ s overall risk framework. roles and responsibilities as well as escalation and reporting follow the general structure i previously described. at this point, though, i can drill down into operational risk specifics. in the first line of defense, operational risk management is conducted by staff in the front line units with support from first - line ’ s centralized risk management resources ( usually as part of a business ’ shared services function ). the first line is responsible and accountable for the identification, analysis, management, and monitoring of the operational risks that arise as a result of its activities. second line operational risk management is led by the central operational risk function in the risk group. central operational risk provides independent assessment and oversight of first - line operational risks and risk management practices and is responsible for maintaining and enhancing the bank ’ s operational risk framework. our third line, internal audit, assesses the design and implementation of the operational risk framework and provides feedback on risk issues as an observer on governance committees. the foundations of the bank ’ s operational risk program are the risk event reporting process and the risk and control self - assessment process. these processes are central to risk identification, analysis, and response. the risk event reporting process involves real - time collection, classification, analysis, and escalation of operational risk events including establishment of root causes and determination of remediation plans. you are all likely familiar with reporting risk events that have impacted your institution and categorizing them as low, moderate or significant. we do this as well. in addition, we require reporting of near miss events, which is when a control failure has occurred but we ’ ve been fortunate that there was no impact to the bank. these near miss events are a window into vulnera
functioning banking system for encouraging, collecting and deploying society ’ s savings in a fair and impartial way into productive investments, there would be little hope for our economy, or any other, to mobilize the real resources necessary for economic growth and stability. with this in mind, one of my major concerns going forward is the quality of bank lending. banks are now at a critical phase in the credit cycle. after years of high quarterly profits, low delinquency rates and comfortable capital ratios, it is easy to forget the fundamentals of sound lending. and, as any good coach will tell you, it ’ s the fundamentals, the basics, that make or break your performance. the most important of the fundamentals is maintaining rigorous credit standards, especially in an environment of increased competition for new and existing customers. experience teaches us that the worst loans are often made in the best of times. and because things are awfully good at the moment, i can ’ t help but remind bankers and supervisors alike that the sun doesn ’ t always shine so brightly. indeed, sometimes it even rains. to paraphrase mark twain, reports of the business cycle ’ s demise are greatly exaggerated. in circumstances this favorable, loan officers must make doubly certain that there is every reason to believe that the loans they make are collectible. this is especially important for younger bankers who, given the length of this expansion, have never experienced a serious recession and may mistakenly view current conditions as ordinary rather than as exceptional. lending granted on that erroneous basis would have grave consequences for the industry ’ s ability to weather weaker economic conditions which are, to be sure, inevitable. from a supervisory perspective, i believe it is time for us to exercise an extra measure of caution. we must ensure that banks ’ lending decisions continue to reflect a disciplined approach, one that matches a clearly defined risk appetite - and a well understood risk capacity - with a real sense of the returns that are necessary to cover that risk. i see such a supervisory approach as increasingly essential to counterbalance the pressures of the fiercely competitive markets in which banks are operating. maintaining sound credit standards is one of several significant challenges banks currently face. another is that the spectacular rise in equity values and mutual funds has put competitive pressure on the core deposit base. as these lower - cost funds have been replaced with funding from the capital markets, principally commercial paper, pressures on interest margins and liquidity have intensified. such funding shifts raise the
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meantime, our external liquidity position has been robust. we have been running current account surpluses for 13 years now, allowing us to beef up fx reserves to an all - time high of us $ 85. 5 billion as of end - july 2016. all - told, ladies and gentlemen, the philippine economy continues to enjoy a position of relative strength. and this has not been unnoticed by global investors. we have had our share of surges in capital inflows in search of yield. and while, some of these have β€œ come and gone ”, a large portion of the inflows have stayed and remain invested in our domestic assets. but what i wish to emphasize this morning is that the philippines is a destination not only for flighty capital. the philippines is, more importantly, a destination for serious investment. i am able to say this with conviction because we do not only have a solid macroeconomic track bis central bankers ’ speeches record, we also have the institutions that are critical to sustaining such a strong economic performance. good institutions are indispensable for more than two decades now, we have been putting in place structural reforms that have liberalized key industries, including utilities, the power sector, and the banking system. we have adopted legislation aimed at improving governance in government corporations ( gcg ) and public procurement ( gppb ) ; as well as ensuring fair competition in industry and vital services ( pcc ). these reforms have helped raise the country ’ s total factor productivity ( tfp ) and are seen to help further reduce incremental capital output ratios ( icor ). these efforts complement the ongoing reforms to further improve β€œ ease in doing business ” and lessen β€œ frictions ” for investments in the philippine economy. in parallel, the bsp, in collaboration with market participants and other regulators, is continuing to roll out specific market reforms under our capital market reform agenda. the reforms which include, among others, developing a benchmark governance framework and creating a repo market should further deepen our domestic capital market and align its functioning with global standards. alongside these, the bsp has also put out banking regulations that will enhance corporate governance and credit and it risk management among banks, in tandem with the adoption of the other components of basel 3. furthermore just last month, the bsp embarked on a significant liberalization of foreign exchange rules. these measures aim to encourage the public to transact their fx needs more with banks by, among others, increasing the
##dging products that are already available. in this regard, i welcome the australian financial sector ’ s efforts to support the development of an rmb market here in sydney, in particular, by ensuring that the current and future rmb product needs of australian corporates are met, and that clients have ready access to information. another encouraging sign is the recent announcements by two chinese banks operating here in sydney regarding rmb clearing services. conclusion the internationalisation of the rmb – and china ’ s associated move towards a liberalised capital account and more flexible exchange rate regime – has the potential to create a seismic shift in the international monetary and financial landscape. and while china clearly has an interest in getting this process right, the rest of the world – including australia – also has a strong interest in the outcome. history teaches us that financial deregulation is an inherently risky process, but that there are substantial payoffs if it is done well. conferences like this are an important part of understanding this whole process and i wish you all the best in exploring the challenges and opportunities that lie ahead. for an overview of the results of this survey, see ballantyne a, m garner and m wright ( 2013 ), β€œ developments in renminbi internationalisation ”, rba bulletin, june, pp 65 – 74. bis central bankers ’ speeches
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jean - claude trichet : how can we increase growth potential in europe? speech by jean - claude trichet, president of the european central bank, at the suomi areena 2007, pori, finland, 20 july 2007. * * * dear governor liikanen, i would first like to thank you very warmly for inviting me on the occasion of the β€œ suomi areena 2007 ” event. it is a pleasure and a honour to be here today and to share with you my views on β€œ how can we increase growth potential in europe ”. in light of the partly disappointing euro area economic performance in the past, it is a major policy issue. by contrast, the impressive performance of the finnish economy, with output and productivity growth over the second half of the 1990s among the highest in the european countries, [ real gdp and hourly labour productivity grew on average by 3. 8 % and 2. 7 % respectively between 1996 and 2006 ], offers a good illustration of what could be done to increase growth potential in europe. the transformation of the finnish economy over the last decades represents one of the examples of the β€œ knowledge based - economy ” taking hold in europe. against this background, i will first review the past economic growth performance of the euro area in comparison to the us and focus on some of the underlying factors of potential output growth. then i will elaborate on the reforms which i consider essential to increase the potential growth rate of europe. the economic performance of the euro area since the mid - 1990s since 1996, the annual growth rate for the euro area has averaged 2. 1 % per year compared to 3. 3 % in the us. what are the fundamental causes of this unsatisfactory low trend growth in the euro area? the answers can be found by looking at the factors that determine potential or long - term economic growth, namely 1 : β€’ the degree of labour utilisation, β€’ productivity growth, β€’ and the demographic trends. - over the period 1996 - 2006, the euro area witnessed a slight improvement in the utilisation of labour, which increased on average by 0. 4 % per year ( compared with 0. 1 % in the us ) when defined as the total annual hours worked divided by the total population. labour utilisation reflects the extent to which the potential labour resources in an economy are actually utilised and therefore have a direct influence on output growth. this improvement in labour utilisation mainly reflects the significant rise in the euro area overall employment rate
potential. v. current and future conduct of monetary policy a. decisions made at the mpm held on january 21 and 22, 2013 at the mpm held on january 21 and 22, 2013, the bank decided to take additional steps to provide monetary accommodation decisively by introducing two measures : the β€œ price stability target ” of 2 percent in terms of the year - on - year rate of change in the cpi ; and the β€œ openended asset purchasing method ” for the asset purchase program ( hereafter the program ). in addition to these two measures, another important decision was the strengthening of policy coordination between the government and the bank. the bank, together with the government, decided and released β€œ joint statement of the government and the bank of japan on overcoming deflation and achieving sustainable economic growth. ” the bank had previously adopted a β€œ price stability goal in the medium to long term, ” judged to be in a positive range of 2 percent or lower in terms of the year - on - year rate of change in the cpi, and set a goal at 1 percent for the time being. as i will explain in detail later, the bank replaced this goal with the β€œ price stability target ” of 2 percent for the following reasons. first, there is an increasing awareness among the general public that even if the bank were to use the term β€œ price stability target ” it would not conduct monetary policy in an automatic manner in pursuit of a certain inflation rate. and second, as progress is achieved through efforts by a wide range of entities – such as those by the government to strengthen the competitiveness and growth potential of japan ’ s economy – an increase is likely to occur in the inflation rate at which firms and households perceive price stability – the basis for their economic activity. there is uncertainty with regard to how the strengthening of the growth potential of japan ’ s economy will proceed, but the bank expects the setting of this very ambitious target to have the secondary effect of encouraging efforts by a range of entities. in this regard, the β€œ price stability target ” of 2 percent could serve in a sense as a kind of β€œ slogan ” for the general public in the revitalization of japan ’ s economy. moreover, the bank has introduced the β€œ open - ended asset purchasing method ” without setting any termination date, to clearly show its strong determination to achieve the β€œ price stability target ” of 2 percent, which it considers will result in greater policy effects. under the current purchasing method – which makes a commitment in terms
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##ization of finance. the bundesbank has put this topic on the agenda of the g20 during germany ’ s presidency last year. one important aspect of this issue we weren ’ t able to look at in the framework of the g20 is the possibilities and risks that come with the issuance of digital tokens or even digital central bank money. the question whether new technology changes fundamentally the foundations of central banking is increasingly discussed amongst central bankers. agustin, your talk today is highly welcomed because it will contribute to an objectification of the debate and will constitute an important input for our policy deliberations. i am very happy that we were able to attract such a distinguished speaker for this task. fire away. the floor is yours. 1 agustin carstens ( 2013 ). the quest for successful policy responses to sovereign crises. speech at the monetary authority of singapore lecture 2013, 5 february 2013. 2 / 2 bis central bankers'speeches
apec sme financing forum in iloilo city last september, one of the key priorities of the summit is β€œ fostering smes participation in regional and global markets. ” one of the proposals is the promotion of inclusive growth through sustainable and resilient smes with support from the csf program. similarly, the csf has advocates in congress who seek to institutionalize the csf program. at the senate, senator bam aquino is its principal author and congressman cresente paez at the house of representatives. their bills were unified during the bicameral conference committee meeting last month and will be submitted for approval by president benigno c. aquino iii. and so, ladies and gentlemen, the story of our csf program continues to evolve and produce positive results for our msmes, their owners and their employees. with paranaque joining our csf community, we look forward to generating more benefits from financial inclusion, this time within metro manila. congratulations to paranaque under the leadership of mayor olivarez, for taking this major step forward to empower msmes in their city, to help improve lives through entrepreneurship and in generating jobs in their community. maraming salamat sa inyo at mabuhay po tayong lahat! bis central bankers ’ speeches
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less rapidly. firms had built inventories at a rapid clip in 2004 and the first part of this year, and by late winter many businesses seemed to have been more satisfied with their inventory positions. consequently, they scaled back rebuilding efforts and trimmed the growth of production accordingly. still, activity rose rapidly enough to further erode margins of economic slack. the unemployment rate fell from 5. 4 percent at the end of last year to 4. 9 percent in august, and the rate of capacity utilization continued to rise toward its long - run average, though that increase was slowed with the production adjustment in the spring. measures of labor compensation have given somewhat mixed signals about how tight labor markets have become. the rate of increase in the measure of compensation per hour derived from the national income and product accounts moved up appreciably over the four quarters ended in mid - 2005 compared with the preceding year. this rise was apparently due in part to bonuses and stock options that may be only loosely related to labor market slack, however. moreover, according to the employment cost index, which is based on a survey of firms, and to the growth in average hourly earnings in the payroll employment report, compensation pressures remained quite subdued. on balance, i do not believe conditions in labor markets have become excessively taut, but experience suggests remaining humble in making any such assessment. i would like to thank stacey tevlin, lawrence slifman, vincent reinhart, and david stockton, of the board's staff, for valuable comments. 1 / 4 measures of core consumer inflation eased some over the late spring and early summer, even as headline inflation was pushed higher by rising energy prices. in addition to the favorable news on core inflation, observations from the financial markets showed that forward measures of inflation compensation beyond the next few years - - the difference between distant forward rates on nominal and indexed debt - - moved down over the spring, despite the rising energy prices. even so, core inflation had moved higher in 2004, interest rates were still low, and the economy seemed to be expanding at a pace that over time could threaten to impart added upward pressure on inflation. as a consequence, the fomc indicated in its august announcement that its intention, in the absence of unexpected developments, was to continue to remove monetary policy accommodation at a measured pace. hurricanes are obviously the very embodiments of unexpected developments. among other effects of hurricanes katrina and rita, they have materially increased uncertainty about the economic outlook. the questions
alan greenspan : empowering communities, attracting development capital and creating opportunities remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the 2005 national community reinvestment coalition conference, washington dc, 18 march 2005. * * * it is a pleasure to join this group that is dedicated to developing strategies for ensuring that opportunities for economic advancement are available to all americans, including members of lower - income families and communities. in a couple of years, we will celebrate the thirtieth anniversary of the community reinvestment act ( cra ). to date, this act has brought many successes, but much remains to be accomplished. before passage of the cra, lending to underserved populations was often considered an act of goodwill, not good business. i do not disparage benevolence, but i believe that one of the most enduring achievements of the cra has been that lenders, often to their surprise, have found low - income community lending to be a normal extension of their outreach for profitable business. mortgage and consumer lending is driven by credit analysis, and for small - business lending, also by a belief in the potential success of the business venture. because it is critical that low - and moderate - income lending be, and be perceived as, an extension of regular business practice, we have been building a substantial database on low - income credit experience and business opportunities. this information has been critical to the successes in low - income lending. but information collection and analysis must reach further. if communities are going to be empowered, they need hard evidence of their successes and, yes, hard evidence of their failures, which, as you know, can point the way toward success. accordingly, i would like to emphasize the important role of program assessment in the community development process. success of these programs can be understood only through measurement and critical analysis. to date, systematic research on community economic development programs has been limited. one of your challenges then is to expand the information about the impact of your activities so that you can demonstrate the viability of your efforts and replicate local models of success for the benefit of other communities and families. measuring the impact of community economic development programs the overarching objective of community economic development and empowerment is to help underserved populations accumulate assets and improve their economic well - being. measuring the results of programs dedicated to this objective is essential to effectively managing scarce resources and maximizing the impact of these programs.
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are coherent. regulators have dealt with the under - pricing of liquidity risk in part by remedying inadequate capital requirements. but, as i said earlier, it is quite conceivable that given the range and speed of regulatory reforms, there are parts of the framework that might not work in the way we intended. as i mentioned, the open forum on 11 november will be another opportunity to assess this issue. the aim is to bring stakeholders together from across financial markets to discuss how we build markets for the public good. second, changes in market structure and the ability of technology to connect buyers and sellers may increase liquidity. there are a number of suggestions that with the growth of assets under management asset managers and institutional investors may in future need to deal more bis central bankers ’ speeches directly with each other and might be better placed to take on some of their risks. technological change would certainly make this increasingly feasible. it remains for me, however, an open question whether such liquidity would be resilient in times of stress. automated markets may have driven down costs, but are possibly less resilient. dealer - intermediated markets, on the other hand, may have become more costly, but possibly more resilient. in a forthcoming speech, my colleague minouche shafik will discuss the changes in market structure that we have seen since the financial crisis and what they mean for market functioning. and, of course, the higher costs of assets with poor liquidity characteristics may have changed the economics for issuers of liabilities such as corporate treasurers which may encourage more standardisation of terms to improve liquidity and reduce costs. it is, however, important to look not only at how to improve the resilience of markets to imbalances between sellers and buyers at times of stress. we need also to look at whether and how the features of financial markets can amplify these imbalances by creating selling pressure. correlated trading is one example. such trades arise when the demand for an asset ceases to fall materially as prices rise, and vice versa. they turn the law of supply and demand on its head. this may be caused by the prevalence of algorithmic momentum traders in a market or the use of industry standards and benchmarks that influence asset allocation and peer assessment. consensus trades are another example. they occur when investors take positions on the basis of prevailing market norms as opposed to conviction in their view of the future path of economic fundamentals. consequently,
finance is no longer limited to muslim nations and muslim communities. the world realizes the economic clout of 1. 5 billion people is a market that cannot be ignored. the islamic finance market offers an enormous potential for future growth. long established financial centers such as london, hong kong, tokyo and singapore have already begun the first steps to enhance their respective centers into vibrant islamic financial centers. opportunities in islamic finance this would raise several implications and opportunities for the development of islamic finance. the increased competition where non - traditional players will enter the industry bringing with them superior system, management skills, established r & d and risk management system with proven track record globally will spur growth or at least maintained at an already phenomenal growth in islamic finance. there will be more innovative products, new concepts and new structures, as the new players bring with them new value proposition to attract or entice their customers. demand will grow for services related to islamic finance in the areas of consultancy, accounting, trust, shariah, legal advice and it services. new shariah concepts will emerge and this will require scholars to rethink some of the structures that had been well established. in addition, new demand for standardization and harmonization of shariah standards would intensify as cross border transactions increases. this will also result in an increase in demand for financial products that can be sold between markets. malaysia ’ s islamic financial industry malaysia is well positioned to take on this competition. the path for the development of islamic finance started as far back as 1983. from the building of the foundation of legal, regulatory and shariah framework, the islamic banking act ( 1983 ) to the formation of the first islamic bank and takaful company to instituting islamic windows concept for banking institutions and encouraging competition amongst the islamic financial institutions in the nineties ( 1990s ), to establishing key infrastructures and institutional arrangements such as the shariah advisory council and the islamic money market, we are on a mission to be the center for islamic finance. today we have a comprehensive system for islamic finance but as you would expect, because of competition and the fast changing pace of the banking industry, we must continue to strive to maintain the lead in this industry. there are a few pre requisite to maintain this competitive edge. it is the ability of the industry to meet the evolving and discerning needs of the users of islamic finance and the ability to meet those needs in a timely and comprehensive manner. the solutions to customer needs must be
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erkki liikanen : towards more balanced growth - past experiences and current challenges speech by mr erkki liikanen, governor of the bank of finland, at a high - level seminar between the executives ’ meeting of east asia - pacific central banks and the eurosystem, frankfurt, 8 - 9 november 2005. * * * - looking at the world economy, one is struck by the pronounced differences in gdp growth rates of different countries and country groups as well as by the expansion of current account deficits and surpluses. some of the rapidly growing economies, notably the usa, have had to face increasing imbalances. this has intensified concerns over worsening problems and how to manage them. - as always, such unbalanced developments arise from a host of problems that are difficult to spell out. this is clearly reflected in the international debate concerning these problems. one must be wary of oversimplifying the problems and their solutions. careful analysis of the problems will clearly help us decide on an appropriate policy strategy. - current account problems should be viewed from several different angles. the logic behind macroeconomic variables presents three fundamental perspectives from which to analyse a current account deficit : 1. foreign trade and the services and income accounts of the balance of payments 2. the balance of savings and investment in the economy 3. developments in the economy's external assets and liabilities - analysis is usually dominated by the foreign trade aspect, so that policy debate tends to focus on trade barriers and exchange rates. this is also typical of recent discussions of the us current account deficit and the surpluses of many other countries, particularly in asia. - it is important to examine the current account also from the perspective of savings and investment. current imbalances in the global economy are largely due to the low level of savings and high level of consumption in some western economies, particularly the usa, and the abundant savings and modest private consumption particularly in several asian economies. recently, savings rates have also inreased sharply in oil - producing countries, with the boost in income from high oil prices. - one should also emphasise the factors related to indebtedness and financial investment. by definition, the increase in an economy's indebtedness is the counterpart of its current account deficit. often mentioned as determining factors in international capital flows are the depth of us financial markets and the us dollar's position as major reserve currency. these factors draw investment funds into the usa and so provide the financing for us
realized that gathering data was a necessary first step. starting earlier this year, they embarked on an ambitious study to determine the total cost resulting from vacancies. the city will then use the findings from the study to support enactment of tougher code enforcement to recover lost revenue, including assessment of fines against owners who fail to maintain their properties. this combination of new measurements and old tools to develop solutions should serve as an example to many β€œ traditional suburban ” areas around the country that have experienced, and will continue to experience, vacancy issues. ohio attorney general ( 2012 ). β€œ attorney general launches moving ohio forward demolition grant program to remove blighted residential structures, ” press release, april 13. for example, the β€œ restore our neighborhoods act β€œ ( h. r. 4210 ), sponsored in 2012 by representative steven latourette ( r - oh ) would authorize creation of β€œ qualified urban demolition bonds ” to support demolition costs. russell claus, director, planning department, city of oklahoma city. interview by paul wenske, senior community development advisor, federal reserve bank of kansas city. august 2012. bis central bankers ’ speeches conclusion the potential fallout of high rates of vacancy – blight, crime, lowered home values, and decreased property tax revenue – is the same for every neighborhood and community. but there is no one - size - fits - all solution to the vacancy problem. i ’ ve used some examples of communities around the country that are facing high vacancy rates in order to illustrate their different characteristics and the different origins of their vacancy problems. taking account of such differences will be important in crafting solutions to the problems caused by those vacancies. hopefully, these examples and other ideas that have been shared throughout this conference will inspire new and creative solutions to the difficult issues faced by communities. certainly, different housing markets will recover in different ways and at different paces. in some areas, the private market will lead the way, while in others, government will have to use precious resources wisely to catalyze recovery. the examples i ’ ve discussed also illustrate the value of using data to understand vacancy issues, to determine which neighborhoods are experiencing which challenges, and to design appropriate policy solutions. solving the problems of long - term vacancies will require the best efforts of public, private, and non - profit leaders locally and across the country. i can assure you the federal reserve system will continue to support recovery through the use of all its policy tools and research capacity. thank you.
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on central bank independence. independence grants central banks significant leeway in their actions. but it also requires central banks to be held accountable – a point that stefan ingves highlighted in a speech last year. [ 8 ] we need to justify the course of action that we consider as most appropriate in achieving our mandate. this is what i intend to do in my remarks today. i will argue that failing to arrest high inflation in a timely manner would jeopardise the green transition more fundamentally, and that a restrictive monetary policy stance today will benefit society over the medium to long run by restoring price stability. i will also stress that fiscal policy needs to remain in the driving seat and accelerate the green transition, and that the decline in the ecb ’ s balance sheet as part of our monetary policy tightening requires us to make additional efforts to align our actions with the objectives of the paris agreement. green transition can only thrive with price stability over the past year, we have moved forcefully to contain inflation by first stopping net asset purchases and then by raising our key policy rates by a cumulative two and a half percentage points. we have also announced that the eurosystem will no longer reinvest all of the principal payments from maturing securities in the asset purchase programme ( app ). we judge that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to our 2 % medium - term target. as interest rates rise, financing investments in green technologies will become more expensive, generating the risk that higher costs of capital may slow down the pace of decarbonisation. there are, however, three interrelated reasons why tighter financing conditions are the appropriate response to the challenges we are facing today. first, current high inflation is a tax on investment. in many countries, it raises the user cost of capital by raising the effective tax rate on business investment. [ 9 ] high inflation also increases uncertainty and distorts relative price signals relevant for investment decisions. and it may slow down productivity growth, as occurred in the united states in the 1970s. therefore, the green transition would not thrive in a high inflation environment. price stability is a precondition for the sustainable transformation of our economy. second, inflation will not subside by itself. what started as a relative price shock has gradually morphed into a broad - based increase in the general price level. preliminary inflation data for december point to a persistent build - up of underlying price
european central bank : press conference – introductory statement introductory statement by mr jean - claude trichet, president of the european central bank and mr lucas papademos, vice - president of the european central bank, frankfurt am main, 5 june 2008. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. this week we celebrated the tenth anniversary of the ecb, marking an important milestone in the development of this institution and of the single monetary policy. on that occasion i expressed my sincere thanks to all those who have helped to build a solid foundation for the euro. let me also extend these thanks to you who play such an important role in transmitting our decisions and explanations to the financial markets and to the public at large. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by the president of the eurogroup, prime minister juncker. on the basis of our regular economic and monetary analyses, we decided at today ’ s meeting to leave the key ecb interest rates unchanged. at the same time, we noted that risks to price stability over the medium term have increased further. inflation rates have risen significantly since the autumn of last year, owing mainly to strong increases in energy and food prices. hicp inflation is now expected to remain high for a more protracted period than previously thought. upside risks to price stability over the medium term are also confirmed by the continuing very vigorous money and credit growth and the absence of significant constraints on bank loan supply up to now. at the same time, the economic fundamentals of the euro area are sound. against this background, we emphasise that maintaining price stability in the medium term is our primary objective in accordance with our mandate. the governing council is monitoring very closely all developments. it is in a state of heightened alertness. by acting in a firm and timely manner, we will prevent second - round effects and ensure that risks to price stability over the medium term do not materialise. it is our strong determination to secure a firm anchoring of medium and long - term inflation expectations in line with price stability. allow me to explain our assessment in greater detail, starting with the economic analysis. at a quarter - on - quarter rate of 0. 8 %, real gdp growth in the first quarter of 2008 was well above expectations. in part, this strength reflected temporary factors, notably the unusually mild winter in many parts of europe, which appears to
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incomes where almost 66 % of population and agriculture offers employments to 45 % of work force. concrete efforts are underway to enhance complementarity and synergies between the agriculture and industry by exploiting backward and forward linkages. third, pakistan ’ s corporate sector has been quite vibrant and highly profitable which is driving slowly contribution of industry to value added – risen by over 3 % between fy99 - 06. the private sector has been a key driver of this with the support of over 170 mncs 6 that have had a long standing presence in pakistan in financial services, chemicals, engineering and industrial products, pharmaceuticals and more recently in energy, shipping, trading and other services. barring few exception, most industry sub - sectors have been operating at near or full capacity utilization which has triggered an interest in additional capacity enhancement. consequently, gross fixed capital formation in the manufacturing sector has almost doubled in the past five years and 97 % of this is private investment. shifts in industrial production structure though slow are now emerging. while textile remains the major forte of industry, demand for consumer products catalyzed by rising income and accessibility to consumer finance has helped double the production of automobiles, white goods and electronics and construction demand has boosted cement production. together, corporate sector profitability in 2005 reached record highs estimated to be ranging around 6 % 7 ( net profit margin ). fourth, pakistan ’ s engagement in world trade reached $ 42 billion reflecting the pakistani companies ’ integration with the global standards of quality, productivity and efficiency. prospects for export that have reached $ 16. 5 billion in fy06 ( double the level of fy00 ) is to receive impetus as the government concludes free trade agreements with united states, china, malaysia, and sri lanka and hub ’ s like planned special economic zones and if joint ventures that would integrate pakistan in the international production network become a reality. pakistan has been able to somewhat diversify its exports : share of textile has fallen from 65 to 59 % over last few years and within this sector there has been growth in higher value addition products in particular in home textile where pakistan has a leading edge. concurrently, the share of manufactured goods has increased from 62 percent in fy96 and 72 percent in fy01 to 78 percent in fy06. aggressive regional competition supported by subsidization is, however, hurting textile export prospects even though pakistan private sector has well positioned itself by enhancing its capacities and upgrading its facilities and technology. to mitigate risks
ishrat husain : pakistan ’ s economic turnaround - an untold story article by mr ishrat husain, governor of the state bank of pakistan, reproduced from the pakistan supplement global agenda, world economic forum annual meeting 2005, davos, january 2005. * * * pakistan has come a long way since 1998 / 99 crisis when the country was on the brink of default and international reserves had been depleted, economic growth was anaemic, debt ratios were alarmingly high, confidence of the investor community was at its lowest ebb and credibility among international financial institutions was eroded. in a critical and fragile regional and domestic environment with constant threats to security, ( as a result of playing a key role as frontline state in the war against terrorism ), a prolonged and severe drought and high oil prices pakistan has made an impressive economic turnaround within a short period of five years. economic growth rate has reached solid 6 percent plus, inflation has been contained to 5 percent or so, exchange rate has been stabilized, fiscal deficit has been drastically reduced, domestic interest rates have declined dramatically, international reserves have jumped twelve times their 2000 level, debt ratios have fallen significantly and investment is booming. pakistan ’ s creditworthiness has been upgraded to b + by s & p. it is one of the few developing countries that has graduated from a successful completion of an imf program to directly accessing international financial markets. how has this remarkable turnaround taken place? amidst the hot news of al - qaeda, osama bin laden, assassination attempts on president musharraf, nuclear proliferation by dr. abdul qadeer khan and tension with india, the story of pakistan ’ s economic achievement remains confined to a small segment of informed observers around the world. this turnaround has not occurred all of a sudden but is the outcome of deliberate and carefully designed program of economic reforms undertaken over last five years, some of them still ongoing. the comprehensive strategy announced by president musharraf in december 1999 consisted of four key elements : ( a ) restoration of macroeconomic stability and pakistan ’ s relationship with the international financial institutions. ( b ) structural reforms to remove distortions. ( c ) improving economic governance and reviving key institutions. ( d ) poverty alleviation through targeted interventions and social safety nets. the interconnection between economic growth, poverty reduction, structural reforms and improved governance is fairly strong in the case of pakistan. macroeconomic stability and the consequent rapid economic
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off - shore funds into idfs, government of india is contemplating the reduction of withholding tax on interest payments on the borrowings by the idfs from 20 per cent to 5 per cent. income of the idfs is also expected to be exempt from income tax. the idfnbfc can raise resources through issue of either rupee or dollar denominated bonds of minimum five year maturity. idfs are expected to channelize funds from insurance companies, pension funds and other long term sources into infrastructure sector. this will provide an alternative source of foreign currency funds for the infrastructure projects. however, certain dimensions need to be kept in mind while assessing the success of the model. infrastructure financing presents quite a few challenges viz., little tangible security, high debt equity ratio, long implementation and repayment periods, etc. banks and financial bis central bankers ’ speeches institutions have over the years gained experience and expertise in assessing and pricing these risks. idfs are likely to face severe challenges on these issues. therefore, these funds have been allowed to invest only in ppp and post commencement operations date ( cod ) infrastructure projects which have completed at least one year of satisfactory commercial operations. of course, idf - mfs can also be set up in respect of non - ppp projects under higher risk - return framework. if a bank has a mutual fund, then it can float an infrastructure debt fund, mop up resources from investors, including private equity and strategic investors, and invest the proceeds in the equity of infrastructure projects. thus, idfs could be game changers in the way infrastructure projects are being financed. tapping the retail investor base through infrastructure bonds to provide further impetus to infrastructure financing, government of india has permitted ifci, idfc, lic and infrastructure finance firms to issue long - term infrastructure bonds providing for tax benefit of up to rs. 20, 000 in the year of investment, under the income tax act. the tax - free status has been granted by the government to these bonds issued only by designated financial institutions. by introduction of such instruments, the retail base can be tapped for raising funds for infrastructure projects. of the proposed rs. 30, 000 crore funds to be raised, national highway authority of india ( nhai ) & the railway finance corporation are raising rs. 10, 000 crore each and hudco another rs. 5, 000 crore. major steps taken by the reserve bank the reserve bank has initiated a number of regulatory measures / concessions for facilitating increased flow of credit to
. 3 per cent at end march 2006, while the net non - performing assets have declined from 4. 0 per cent to 1. 2 per cent during the same period. financial markets development of financial markets received a strong impetus from financial sector reforms since the early 1990s. the reserve bank has been engaged in developing, widening and deepening of money, government securities and foreign exchange markets combined with a robust payments and settlement system. a wide range of regulatory and institutional reforms were introduced in a planned manner over a period to improve the efficiency of these financial markets. these included development of market micro structure, removal of structural bottlenecks, introduction / diversification of new players / instruments, free pricing of financial assets, relaxation of quantitative restrictions, better regulatory systems, introduction of new technology, improvement in trading infrastructure, clearing and settlement practices and greater transparency. prudential norms were introduced early in the reform phase, followed by interest rate deregulation. these policies were supplemented by strengthening of institutions, encouraging good market practices, rationalised tax structures and enabling legislative and accounting framework. ii. a review of monetary policy challenges the conduct of monetary policy has become more challenging in recent years for a variety of reasons. many of the challenges the central banks are facing are almost similar which could be summarized as follows : challenges with globalisation first, globalisation has brought in its train considerable fuzziness in reading underlying macroeconomic and financial developments, obscuring signals from financial prices and clouding the monetary authority ’ s gauge of the performance of the real economy. the growing importance of assets and asset prices in a globally integrated economy complicates the conduct of monetary policy when it is focused on and equipped to address price stability issues. second, with the growing integration of financial markets domestically and internationally, there is greater activism in liquidity management with a special focus on the short - end of the market spectrum. there is also a greater sophistication in the conduct of monetary policy and central banks are consistently engaged in refining their technical and managerial skills to deal with the complexities of financial markets. as liquidity management acquires overriding importance, the evolving solvency conditions of financial intermediaries may, on occasions, get obscured in the short run. no doubt, with increasing globalization, there is greater coordination between central banks, fiscal authorities and regulatory bodies governing financial markets. third, there is considerable difficulty faced by monetary authorities across the world in detecting and measuring inflation, especially inflation expectations. recent experience in regard to
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between 2008 and 2016 the number of euro area banks declined by around 25 per cent, with spain being one of the countries where the reduction was greatest. the number of branches is also decreasing and the use of resources is generally becoming more efficient. overall, this set of structural changes is delivering positive results. the european banking system is enhancing its resilience and all actors involved are contributing : regulators, banks, and supervisors. there is, however, no room for complacency. as i will discuss next, legacies from the crisis still linger and remaining vulnerabilities call for continued vigilance and unwavering determination on all sides. out of the woods? not yet : some crisis legacies are still with us the issue that epitomises the problems left on the table is low profitability. on the aggregate, the return on equity of euro area banks has not yet recovered since the financial and sovereign crises, and remains low by historical and international standards. there are, however, important heterogeneities : small and medium - sized banks are still suffering, while larger intermediaries are recovering. in 2017, net interest income improved for some intermediaries, while fee income, supported by the asset management business, increased more broadly. profitability is also well below estimates of the cost of equity for most banks. despite the differences across banks and jurisdictions – in spain, for example, the gap is relatively smaller than elsewhere – the problem extends across europe. the causes of the phenomenon can be traced back to both transitory factors – such as the legacy assets from the adverse cyclical developments – and structural elements, including the need to adjust the business model to technological change and to the new regulatory environment. the ongoing recovery of the global and the euro area economies contributes to addressing the transitory impediments. however, analyses and simulations from various sources seem to suggest that for a non - negligible part of the european banking sector this may not suffice to recover adequate levels of profitability. going forward, the target for banks ’ profitability may actually prove to be lower than the one deemed appropriate by some international institutions, such as the imf. indeed, once the transition to the new regulatory regime is completed, and a safer banking system has emerged from the reforms, investors might reduce the returns that they expect to receive from banks. in other words, in future months the β€œ reform dividend ” may translate into a lower cost of equity.
american institute of certified public accountants ( aicpa ), the us and public company accounting oversight board ( pcaob ) etc made significant efforts to enforce the sox act. among the regulations and guidelines, auditing standard no. 2 has the most significant impact on it governance. the it governance requires testing of ( i ) it general controls, ( ii ) checking it process element at the time of each period - end financial reporting ( iii ) examining the it process flow control of actual transactions and ( iv ) measuring the effectiveness of it general controls over financial reporting. thus, sox had effectively mandated it governance over financial reporting and operational control. the basel accords, basel ii and basel iii, factored operational risk controls in aligning capital adequacy requirement and hence, it governance in banks was a direct fall out of these accords. in the indian context, we have elaborate clauses relating to corporate governance under the indian companies act with the companies bill 2004, various regulatory guidelines from the regulators. recently, the reserve bank appointed the gopalakrishna committee to look into various aspects of it in the financial sector. the recommendations of the committee – the report of the working group on electronic banking – had exhaustively covered the issue of it governance in banks what do we mean by it governance? all the governance principles and practices are generally top down and the it governance is no exception to this hierarchical initiative and responsibility. it governance, as a subset of corporate governance, also requires to be driven from the board level. the core of the it governance is to create it strategy that forms part of the effective corporate strategic planning process and thus ensuring alignment of it design and its controls with the business goals. the basic objectives of the it governance can be summarized as follows : aligning it strategy with business strategy it as strategic resource to deliver value it risk management it resource and financial management it performance management bis central bankers ’ speeches it policies and procedures before we begin to discuss some specific issues of the it governance, let me caution that sometimes it governance is confused with it controls and operations. it needs to be appreciated that while it governance is a strategy initiative, it implementation, operations and control mechanisms are the means to ends. alignment of it strategy with business strategy it is imperative that the business strategy and it strategy should go hand in hand, else the means would not lead to logical and planned ends. it is the business strategy which should necessitate and seek appropriate it requirements and therefore, should clearly define how the it
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disposal. only then, and as a last resort, should it have access to a temporary and fiscally neutral public backstop, the contributions to which should be paid by the private sector either via ex post levies or, more normally, as a result of the reprivatisation of the intermediary institutions ( e. g. bridge banks ) or other good assets resulting from the resolution process. progress in these elements of a future banking union is very important in the present economic environment of low growth. part of the european problem has to do with the situation of the banking sector : pressed for capital, intending to deleverage and risk averse in bis central bankers ’ speeches managing credit risk. consequently, credit is being contained although it is virtually impossible to disentangle the contribution of supply restrictions versus weak demand in explaining the average decline of credit to the economy. in the markets there is the suspicion that banks ’ balance - sheets need more repair with full recognition of potential losses and that is also affecting the lending behaviour of banks. no one has provided clear evidence that this is true and that is why the balance - sheet assessment that the ssm has to conduct before actually starting supervision is so important to re - establish market confidence in our banks to reduce their funding costs. therefore, the establishment of the ssm, the possible use of direct european recapitalisation and the creation of a single resolution mechanism will decisively contribute to the desirable separation of banks and sovereigns. to regain market confidence, restoring full banking sector health must be a priority in order to create improved growth prospects. this is why the banking union project is crucial at this particular moment. economic growth in europe is now essential to complete the adjustment and the rebalancing that have been going on. therefore, it is of paramount importance that the momentum is maintained towards implementing structural reforms at national level and towards building a stronger economic and monetary union through european institutional reforms. i trust that the european parliament will continue to play an active and positive role in this process. i thank you for your attention and stand at your disposal for questions. bis central bankers ’ speeches
support employment, wage - setting should become flexible and aligned with productivity. these reforms will help to regain competitiveness, increase employment, set the foundations for sustainable growth and support the return of confidence. it is worth noting that several stressed countries already did significant reforms which are reflected in the competitiveness gains since 2008 in terms of relative unit labour costs ( ucls ). in fact, since then and in relation to other euro area members, ireland reduced its unit labour costs by 19. 4 %, spain by 9. 5 %, greece by 8. 9 % portugal by 6. 6 % and italy by just 0. 1 %. the reductions achieved against their more significant 36 trading partners were even higher and, more importantly, the gains since 2008 sizably reduced the cumulative evolution of their ulcs since 1999. the significant losses of competitiveness from the inception of the euro and the beginning of the crisis in 2008 have been meanwhile corrected. in fact, relatively to the other euro area members from 1999 to the end of last year greece reduced its ulcs by 5. 8 % and portugal by 2. 4 % whereas spain increased theirs by only 2. 9 % and ireland by 1. 6 %. these improvements in competitiveness were also reflected in significant reductions of the external accounts of all the stressed countries. the latest commission economic forecast indicates that for 2013 all stressed countries will have an external surplus with the exception of greece with a deficit 2 % of gdp well below previous results. the adjustment efforts of the countries under market stress have been positive and certainly have also contributed to the improved financial market conditions. looking back at 2012, reforms at the european level implied that significant progress has been made in putting in place the necessary building blocks for a deeper and more stable emu. europe ’ s leaders recognised the need to complement emu with a banking union, a fiscal union, a genuine economic union and eventually a deeper political union. we now have bis central bankers ’ speeches an ambitious agenda and a clear long term vision. the progress towards sound public finances has been underpinned by institutional reform. new rules were applied to strengthen oversight of budgets and to monitor emerging macroeconomic imbalances more effectively. the signature of the fiscal compact was a significant milestone in this regard. looking ahead we need to remain ambitious, with the ultimate aim to secure stability and prosperity for the euro area. this year should be aimed toward putting these decisions into practice by focusing on their proper implementation. completing banking union i would now like
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ewart williams : restoring competitiveness and growth in the caribbean feature address by mr ewart williams, governor of the central bank of trinidad and tobago, at the 4the biennial international business, banking and finance conference, university of the west indies, st augustine, 22 – 24 june 2011. * * * salutations : let me first of all thank the sponsors for their kind invitation to deliver the feature address at this 4th biennial international business, banking and finance conference. the organizers need to be commended for bringing together such an excellent group of academics and practitioners from the region and further afield to exchange views with us on – many hot - button economic issues. this forum is particularly timely since our caribbean economies find themselves at a critical inflection - point, with the legacy of the international financial crisis not yet behind us and with our region facing a global environment, which in many ways is markedly different from what obtained at the beginning of the last decade. a few days ago in its mid - year world economic outlook assessment, the imf warned that the global economy had run into a speed - bump arising from greater than anticipated weakness in us economy and renewed financial volatility arising from concerns about the depth of fiscal challenges in the euro area periphery – particularly, the greek debt problem. the imf report noted that although emerging market economies in asia and latin america continue to experience robust growth, they are now facing the risk of over - heating with inflation increasing at a faster rate than could be explained by rising commodity and food prices. our caribbean economies are still digging themselves out of the global crisis of 2008 and unfortunately the recovery of the region is lagging behind that of other developing countries. this most recent slide is, however, part of a longer - term trend in which countries in the region have not been keeping pace with growth rates in emerging markets around the world. according to the world bank statistics, in 1980, the caribbean ’ s average per capita income was twice as high as the average for developing countries ; today it is only a third higher. countries in the region have been growing at an average rate of 2 per cent per year while small island states have been growing at an average rate of 3. 6 per cent per year, roughly the average for the world economy. as we seek to reverse this trend and address the challenge of long - term viability, the region faces the reality that it has lost some comparative advantage at a time when the global economy has become less friendly. the following examples
promotion could make the region more attractive for foreign investment and reduce the fiscal cost attached to expensive and sometimes wasteful tax concessions ; regional planning could facilitate the exploitation of production integration opportunities, through clusters of economic activities ; and the integration model also presents opportunities for joint marketing in extra - regional markets, joint research and development, and joint purchasing arrangements. if the focus of our regional development strategy is the private sector, the sector would need to undergo a cultural re - orientation. foreign direct investment to the region has been on a steady decline over the past several years. while policy changes may help to reverse this decline, countries should also think about diversifying their targets for investment promotion, with the brics registering the fastest growth in the global economy they must be potential sources of foreign direct investment. so also must be brazil. bis central bankers ’ speeches some people feel though that our domestic private sector needs to be more aggressive, to get beyond their comfort zone, and to be more prepared to take risks. this is of utmost importance since the country is depending on our entrepreneurs to expand, create jobs and contribute to the general welfare. in this context, there is a case for targeted partnerships between the private sector and government to enhance international competitiveness, to identify and promote opportunities for greater economic diversification and to develop new export markets. these partnerships should also incorporate tertiary educational institutions that must be at the center of our efforts to promote research and development. unfortunately, i have spent my entire time outlining the many challenges that the caribbean economies face in their quest for sustainable growth over the medium - term. but these challenges are not destiny and difficulties can become opportunities for change. our region is at a cross - road of opportunity where the right combination of leadership, vision and commitment is needed to overcome a plethora of challenges. i am convinced that closer regional integration must be part of the solution and then we would need partnerships between the public and private sectors and other stakeholders including labour and our tertiary education. we need all hands on deck. bis central bankers ’ speeches
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as a whole, the reserve bank presidents bring specialized information about their regional economies to the fomc discussion. before each fomc meeting, reserve bank presidents consult with their staff of economists as well as their boards of directors, business contacts in their districts, and market experts to develop their independent views of appropriate monetary policy. the fomc works to achieve a consensus policy by blending inputs from the members of the board of governors and from the reserve bank presidents under the leadership of its chair. by tradition, the chair of the board has been chosen as the chair of the fomc and has had a central role in setting the agenda for the fomc and developing consensus among the committee ’ s members. in addition, the chair is the most visible public face of the federal reserve system. for a discussion of the federal reserve ’ s dual mandate, see the fomc ’ s statement on longer - run goals and monetary policy strategy, which the committee first issued in january 2012 and reaffirms annually, in note 26. in addition, for a discussion of how the fomc prepares for its meetings, see elizabeth a. duke ( 2010 ), β€œ come with me to the fomc, ” speech delivered at the money marketeers of new york university, new york, october 19, https : / / www. federalreserve. gov / newsevents / speech / duke20101019a. htm. for a discussion of these issues, see marvin goodfriend ( 1999 ), β€œ the role of a regional bank in a system of central banks, ” carnegie - rochester conference series on public policy, vol. 51 ( december ), pp. 51 - 71. - 11 the fed is accountable to congress and the public for its activities and decisions. historically, the activities of central banks were shrouded in mystery. montagu norman, the famously secretive governor of the bank of england from 1920 to 1944, reportedly took as his personal motto, β€œ never explain, never excuse ” ( figure 11 ). 21 in the modern era, all that has changed, as central banks have come to see transparency both as a requirement of democratic accountability and as a way of supporting the efficacy of their policies. over recent decades the fed has significantly augmented its public communications, as have other major central banks. the chair testifies before congress twice each year about the u. s. economy and the fomc ’ s monetary policy in pursuit of its
system, all too often has contributed to conceal the true level of leverage and risk. it may be that, as in other economic activities, innovation in finance will inevitably entail increasing complexity. in most cases, whether we think of the pharmaceutical industry or big utility networks, the risks attached to this complexity have been identified and mastered. this may be more difficult when human behavior is directly involved, as in financial or epidemiological systems, thus adding another, and different layer of complexity. both the industry and regulators will have to rise up to this formidable intellectual and operational challenge and i am convinced that your conference to day will provide invaluable help in this regard. thank you. references caballero, krishnamurty " collective risk management in a flight to quality episode " the journal of finance vol. lxiii, no. 5, october 2008. caballero, simsek : complexity and financial panics, nber working paper 14997, may federal reserve bank of new york " new directions for understanding systemic risk " economic policy review volume 13, number 2, november 2007. gorton : the panic of 2007. paper presented at the economic symposium of the federal reserve bank of kansas city. jackson hole. august 2008. haldane andrew : " rethinking the financial network ", speech delivered at the financial student association, amsterdam, april 2009 ( available on the boe website ). kashyap, rajan, stein : " rethinking capital regulation ", paper prepared for federal reserve bank of kansas city symposium on β€œ maintaining stability in a changing financial system ”, jackson hole, wyoming, august 21 - 23, 2008. landau : β€œ extreme events in finance : some reflexions ”, remarks at the conference on extreme events jointly organised by the banque de france and toulouse school of economics ( tse ), september 3, 2008.
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going to default on our obligations. in fact, in times of extreme uncertainty and heightened risk aversion, the conditions in private repo markets deteriorate quickly and our operations become more attractive. by not adjusting our risk control framework in a pro - cyclical manner, and therefore by maintaining or even enlarging the collateral available to our counterparties facing greater financial distress, we achieve two policy goals. on the one hand, we facilitate the implementation of a monetary policy stance consistent with the crisis environment. on the other hand, we contribute to restoring the value of certain assets by attributing them a liquidity status that the market would not have permitted. the eurosystem risk position : common misunderstandings let me address en passant two issues that have received attention from some analysts recently. first, some commentators have stated that, since the ecb ’ s balance sheet is expanding and is allegedly taking on large risks, the ecb may be turning into a β€œ bad bank ”. 3 this argument is based on a clear misunderstanding of the type of operations conducted by the eurosystem and of the risk control measures applied to those operations. the description of the risk control measures and of the specificities of the capital position of the ecb that i just provided should help dispel such misunderstanding. the data have actually confirmed that the eurosystem ’ s financial results have proved resilient to the global financial crisis, and its total capital position has even increased. 4 the numbers i have provided in terms of overall capital and reserves of the eurosystem should help a better understanding of the situation. second, some analysts have tried to show that the eurosystem had taken on too much risk, at the detriment of the ecb major shareholder, by looking at the net balances of individual a minimum aaa rating at issuance by two rating agencies is required. over the life of the instrument, it should retain a second - best rating of at least a –. see, for instance, the interview to t. mayer in faz, 14 june 2011, β€œ die ezb droht zur bad bank zu werden ” ; m. persson, 8 june 2011, β€œ europe ’ s bad bank, ” the wall street journal. from 5 september 2008 to 3 june 2011, capital and reserves have increased by 13. 2 % ( from €71. 7 to €81. 2 billion ) and revaluation accounts have increased by 100
i mentioned earlier, much of the focus on basel ii has been on irb, and thus on pillar 1. now, credit risk remains, of course, one of the most fundamental risks in banking. however, we in the hkma determined at an early stage in the basel ii process that it would be desirable to broaden the focus so as to bring into the equation the various " pillar 2 risks. " the case for this is, in our view, self - evident, as risks such as concentration risk, interest rate risk in the banking book, and liquidity funding risk can be every bit as devastating for the financial health of a bank as credit risk can be. in the run - up to final agreement on basel ii, therefore, we issued a series of guidance notes to give encouragement to ais to upgrade their ability to manage these risks appropriately. we knew that for the coming few years ais and their risk management specialists were likely to be preoccupied with pillar 1 and thus we wanted to make sure that these " pillar 2 risks " were adequately addressed as a priority, and not as an afterthought. in theory, pillar 2 requires banks to have a formal process for allocating internal capital against the wide range of risks that are not explicitly part of pillar 1. this formal process is sometimes referred to as the capital allocation assessment process or " caap ". however, it has to be acknowledged that very few banks currently have such a process in place, and only the largest and most sophisticated institutions have been able to devote the resources necessary to building these types of formal capital allocation systems. consequently, as a regulator, we do not plan to require all banks to develop internal capital allocation models, at least initially. the need for such models must be commensurate with each institution's scale and sophistication. in place of requiring all ais to develop these models, the hkma has developed its own internal supervisory review process, or " srp ". as you may know, the hkma has for a long time set capital ratios on a bank - by - bank basis. this has been with the aim of trying to ensure that the capital ratio reflects the risk profile of an individual ai, taking into account the full range of risks to which it is potentially exposed. we intend to use the srp to bring greater rigour into the process of setting ai - specific minimum capital ratios. in effect, the srp is our own credit scoring system.
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spending, especially in an environment of high levels of household debt. a pick - up in income growth, by way of ongoing increases in jobs and stronger wage growth should help here. we continue to look carefully at household balance sheets. on balance, our assessment is that there has been some containment of the build - up of risk in this area. this is a positive development. lending standards are stricter than they were previously and there has been a welcome decline in the share of interest - only loans, following measures taken by apra. housing credit growth has also slowed a bit, especially to investors. in the property market, prices are no longer rising in sydney, and have fallen for higher - priced houses. the melbourne market has also cooled somewhat. increased supply of housing, changes in the nature and availability of financing, and some reduction in foreign demand have all played a role. while the reserve bank does not target housing prices or household debt, it would be a good outcome if we now experienced a run of years in which the rate of growth of housing costs and debt did not outstrip growth in our incomes in the way that they did over the past five years. in terms of cpi inflation, the picture is pretty much the same as it was when we met six months ago. inflation, in headline and underlying terms, is still running at a little under 2 per cent. this is higher than the inflation rate a year ago, but inflation does remain low. the most recent data confirmed themes that we have been seeing for some time. strong competition from new entrants and changes in retailers ’ business models are putting downward pressure on the prices of consumer durables and groceries. the prices of many of these goods are lower than they were a few years ago. this is good news for consumers, although not for some retailers. we do expect to see some lessening of this downward pressure on prices at some point, although not for a while yet. the second ongoing theme is higher prices for utilities and tobacco. both of these have added materially to the cpi over the past year, and further increases are expected. the third theme is the subdued increase in wages feeding through into subdued price increases, particularly for a range of market services. this, too, is likely to continue for a while yet. we have discussed on previous occasions the reasons for the subdued wage increases. these 2 / 4 bis central bankers'speeches include the continuing spare capacity in the economy after the unwinding of the mining
on the federal reserve bank of new york ’ s website at www. newyorkfed. org / tripartyrepo / margin _ data. html. bis central bankers ’ speeches in their portfolios. while some investors have also apparently boosted returns by increasing leverage, we see little evidence at present that this behavior is occurring on any significant scale. second, additional funding is reportedly broadly available to traditionally levered investors such as hedge funds. to the extent that investors choose to take advantage of the readily available funding for less liquid assets, their use of leverage could rise quickly, increasing the risks of a disorderly deleveraging. a case study : the syndicated leveraged loan market i mentioned earlier that strong demand has been pushing prices higher in the syndicated loan market and figure 7 shows recent developments : inflows into this asset class have indeed been robust and prices have been rising quite rapidly. an important characteristic of syndicated loans is that they are floating rate instruments, priced at a fixed spread to libor ( the london interbank offered rate ). in an environment where interest rates may be expected to rise, this characteristic may partly explain such strong investor interest. to assess the potential financial stability ramifications of these developments, we have focused initially on two key questions. first, to what degree would financial intermediaries be exposed to a rapid change in investor sentiment? recall that prior to the financial crisis, a number of important financial institutions, in their role as lead arrangers of syndicated loans, amassed significant β€œ pipelines ” of very large deals, which effectively represented commitments to provide financing. when investor interest waned, banks were left with notable positions in β€œ hung ” deals, which resulted in substantial mark - to - market losses. today, in contrast, banks report that they have significant risk mitigants in place to protect their balance sheets. in particular, deals are smaller, financings are reportedly arranged on a β€œ best efforts ” basis, and banks are said to maintain considerable contractual flexibility postcommitment to adjust the pricing and structure of loans, at the expense of borrowers, to market - clearing levels. 6 a second question is whether leveraged loans are being funded on any significant scale using mechanisms, such as repo funding, total return swaps and other otc derivatives, and collateralized loan obligations, or clos, that were prevalent before the crisis. during the market disruption in 2007 – 08, the significant leverage deployed through these channels, and the operation of the associated
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willem f duisenberg : tacis β€œ central bank training ” contract project introductory statement by dr willem f duisenberg, president of the european central bank, on the occasion of the signing of the tacis β€œ central bank training ” contract and of a protocol between the european central bank, the delegation of the european commission in russia and the central bank of russia, moscow, 13 october 2003. * * * it is a pleasure for me to be here in moscow today. while the european central bank is among the youngest central banks in the world, we have been actively setting up working relations with foreign central banks since our establishment in july 1998. in particular, we have already established contacts with the central bank of russia, the central bank of a prominent country in what we call the " euro time zone ". in this context, i should like to stress that today's signing of the tacis " central bank training " contract and of the related tripartite protocol mark a crucial step in the co - operation between our institutions, which i very much welcome. this brings me to the tacis project funded by the european union for the training of around 400 experts of the central bank of russia over 24 months. our project will concentrate mainly on the areas of banking supervision and regulation, inspection and licensing, as well as bank rehabilitation. there are two main points that i would like to emphasise : first, the eurosystem's approach to the tacis project and, second, the focus on the important issue of banking supervision. first, the eurosystem – which comprises the ecb and the euro area national central banks – is fully committed to the tacis project. the project, which will start on 1 november, will be implemented jointly by the ecb and nine national central banks ( ncbs ) of the euro area ( the central banks of austria, finland, france, germany, ireland, italy, the netherlands, portugal and spain ) on the basis of what we call a " eurosystem approach ". by " eurosystem approach ", we mean the following. the project will be co - ordinated by an ecb team consisting of mr. boris kisselevsky, who will be the project co - ordinator in moscow, and mr. michael olsen, senior financial supervision expert, and an administrative assistant in frankfurt. the ncbs as well as the non - central bank supervisory authorities of the united kingdom, finland and sweden will provide the experts for
benoit cΕ“ure : interview with europe 1 interview with mr benoit cΕ“ure, member of the executive board of the european central bank, and europe 1, conducted by mr patrick cohen on 15 june 2018 and broadcast on 15 june 2018. * * * for three years the ecb has been purchasing huge amounts of public and private debt. almost €2. 5 trillion has been injected into the euro area economy. yesterday, the ecb announced that all this would come to a stop at the end of the year. does that mean the crisis is over? indeed, we plan to stop these purchases after december. why? for two reasons. first, europe is seeing strong growth. at the beginning of the year this growth slowed a little, but we feel that it remains robust and will bounce back and continue. and second, inflation is returning towards 2 %, which is the ultimate goal of everything we do. but the policy was working, and now you ’ re stopping it? we ’ re stopping it precisely because it has worked. but it ’ s the asset purchases that we ’ re stopping. €2. 5 trillion is not an insignificant amount, and our asset purchases have been very effective. however, we ’ re going to keep interest rates very low, at their current levels, in other words close to zero, at least through the summer of 2019. so we ’ ll be sticking with a monetary policy that will support the economy for a very long time. you haven ’ t raised interest rates since 2011, and they remain very low. so they won ’ t rise before the summer of 2019 at the earliest? something else could happen, but we don ’ t anticipate raising rates before the summer of 2019, as you say, because the economy still needs some support. but if growth picks up, could interest rates for individuals and businesses increase? long - term interest rates for individuals and businesses are naturally increasing because global growth is picking up and because us interest rates are rising. so yes, people have to be prepared. and, inevitably, government borrowing rates will also increase, and so governments will also have to be prepared. you say that people will inevitably have to be prepared. does that include our personal loans, our mortgages, for example? yes, but as i said, not right away – short - term rates will remain very low, close to zero, for a very long time, and at least until the middle of 2019. yesterday the banque de france
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will seek to focus our resources on addressing the biggest risk to, or opportunities for enhancing, financial stability. collaborative and transparent : we will work collaboratively within the reserve bank and with industry. we will work closely with our cofr partners in pursuing shared or interlinked objectives, including those related to climate, financial inclusion, financial innovation, and in understanding our impact on firms, consumers and the financial system. effective prioritisation : we will prioritise on an ongoing basis, recognising trade - offs and targeting our resources to where we can have the biggest impact on the outcomes we are seeking. this includes working through cofr on system wide priorities. continuous improvement : we will seek to monitor and review our performance on a continuous basis and incorporate these lessons into future actions. the relationship charter to deliver our approach to prudential regulation and supervision, our relationships with our regulated entities remains key. our relationship charter is a core part of how we manage our relationships. 21 the charter itself provides the aspiration to build and maintain the best β€˜ regulator / regulated ’ supervisory relationships possible with all the different regulated entities by outlining how we will behave and communicate with one another. 22 _ _ _ _ _ _ _ _ _ _ _ _ 21 this section draws on our relationship charter document, available from the rbnz website : https : / / www. rbnz. govt. nz / regulationand - supervision / cross - sector - oversight / our - relationship - charter - with - regulated - entities 22 we have introduced the relationship charter to banks and insurers, and will be discussing it with our other regulated sectors over time. our transformation as a prudential regulator unclassified ref # x798971 v1. 2 unclassified it represents a mutual undertaking of how we will work together to achieve this aspiration. the charter commits us and the financial sector to a mutual understanding of appropriate conduct and culture. it is underpinned by the principle of ’ te whakatopu ’ – to assemble, consolidate, and combine our efforts. our behaviours will be : honest : positions are openly stated, constructively, freely and frankly ; achievement focused : work together to achieve sound and efficient outcomes ; diligent : provide clear expectations and deliver on them ; open - minded : each other ’ s perspective is constructively sought and understood ; and professional : disagreements can happen on issues, not people. our communication will be : clear : easily understood,
liquidity management : principles for liquidity provision and the end of an abundant era by karen silk, reserve bank assistant governor on 22 october 2024 a speech delivered to cba global markets conference in sydney ref # 21748793 v1. 4 introduction e nga mana, e nga reo. e nga karanga maha o te wa. tena koutou, tena koutou, tena koutou katoa, good morning. it ’ s great to be back in sydney representing te putea matua, the reserve bank of new zealand. i want to thank cba for hosting this event and inviting me to speak with you today. over the past year or so we have undertaken significant work reviewing both the composition and use of our balance sheet in delivering our objectives. in prior speeches i have addressed both the reviews of our foreign reserves ’ framework and our financial resources, plus the multiple roles we play in ensuring stable financial markets. 1 in my comments today i will focus on how we are considering the future use of our balance sheet to manage liquidity in the financial system and the principles that will inform that. we manage liquidity to support financial stability not only during periods of market dysfunction, but also to ensure the efficient settlement of payments and anchoring of short - term interest rates near the official cash rate ( β€œ ocr ” ). there are three key messages i would like you to take away from my remarks today. first, the reserve bank is resourced and ready to provide liquidity to support market functioning when necessary to meet our objectives. second, we will apply a principles - based approach to the provision of liquidity to financial markets. the intention of our principles is to preserve incentives for market participants to seek market - based solutions to their own liquidity needs in the first instance and not rely on the reserve bank as a β€˜ lender of first resort ’. 2 third, our liquidity management framework will ensure we have the right facilities and operations in place to maintain settlement cash at an ample level, as we decline from the post - covid abundant levels. however, market participants should also be prepared to be more active in the management of their own liquidity. a principles - based approach to addressing domestic market dysfunction in march 2020, at the onset of the covid - 19 pandemic, the reserve bank deployed a range of balance sheet tools in response to dysfunction in the new zealand government bond ( nzgb ) market and the
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year, i noted that an instant pay product was needed in ghana. ghipss took the matter up and has put in place the necessary structures for this product to be deployed. we are looking to going live early next year. i will, therefore, urge you to get your systems ready for the take - off. even if three or four banks finalize their developments, we will go live and that will give those banks a competitive edge over the rest. mr. chairman, two guidelines on electronic money have been finalized. these are guidelines for e - money issuers and agent guidelines. these guidelines are to promote electronic money as a retail payment medium with the potential to increase financial inclusion. they also specify necessary safeguards and controls to mitigate risks associated with e - money business and ensure consumer protection safeguards. the two guidelines will come into effect in december 2014. banking sector initiatives mr. chairman, a critical review of our banking sector indicates that while banks have weathered the recent macroeconomic challenges well, there are some red flags appearing in the horizon. the non - performing loans ratio of the banking industry has stagnated around 12 percent over the last one year in spite of loan write - offs and banks undertaking a number of loan re - structuring / re - scheduling. the results of stress tests conducted by our financial stability department, which was recently discussed with banks, also show that credit bis central bankers ’ speeches delinquency is a major threat to banking sector solvency. in the absence of an explicit recapitalization program steps have to be taken to conserve internally generated capital by minimizing the distribution of profits, improving risk management and efficiency of resource use. mr. chairman, in order to build the buffers that will cushion banks against the likely deterioration in bank ’ s solvency position, the central bank encourages all banks to observe the prudential capital adequacy buffer ratio of 13 percent in making their dividend pay - out decisions. banks whose cars are below 13 percent must ensure that in addition to making the appropriate statutory provisions and full provision for non - performing loans, they restrict their dividend payments to no more than 50 percent of distributable profits in the year. this is to allow them build the necessary buffers to contain any unanticipated shocks to the banks ’ capital. furthermore, banks that currently benefit from single obligor waivers, implying they do not have sufficient capital for the risks they underwrite, should
institutions as competing with their products that are offered by them to the same clients. a number of initiatives have been introduced in the market infrastructure to facilitate securities trading among primary dealers. these include : – the central securities depository which provides custodial services to investors in government securities. this brought to an end the issuing of certificates for government securities – the electronic bidding system for the auction of government securities on the primary market which replaced the manual system for the submission of bids – the ghana inter - bank settlement system ( gis ) which has facilitated the settlement of government securities. i wish to encourage you all to discuss the proposed guidelines dispassionately and contribute positively to fashion out an efficient primary dealer system that a dynamic economy requires. thank you for your coming and i wish you success in your discussions.
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, but great actions speak to all mankind ”. this pandemic is going to test our humanity. the actions that we will take today will define the future of this country. as leaders in your respective fields, you have the ability and the means to take swift and purposeful action ; thus, we should take advantage of this window of opportunity to transform the green shoots of today into a greener, better and sustainable future. thank you and i wish everyone a productive and successful conference. 5 / 5 bis central bankers'speeches
similarly encouraging is the swing of foreign direct investments ( fdis ) to a growth of 39. 1 percent in may and 7. 1 percent in june. imports made some headway, with the year - on - year contraction slowing down from 65. 3 percent in april to 24. 4 percent in july. lastly, recording a similar trend, the year - on - year decline in exports eased to 9. 6 percent in july from 49. 9 percent in april. we expect our recovery process to continue as more industries re - open following the relaxation of the quarantine measures. 1 / 5 bis central bankers'speeches six months into the pandemic, we are learning how to live with the virus. that is, we are learning how to strike the delicate balance between saving lives and protecting livelihoods and businesses. let us now turn to the path that we will chart in terms of the following key areas : on growth, we expect the gross domestic product ( gdp ) to swing from a range of negative 7. 0 to negative 9. 0 percent this year, to a range of positive 6. 5 to 7. 5 percent next year and in 2022. on prices, we expect inflation to remain manageable and settle within the government ’ s 2. 0 - 4. 0 percent target range by next year and in 2022. inflation is expected to average at 2. 3 percent for 2020, 2. 8 percent for 2021, and 3. 0 percent for 2022. bsp has injected hefty liquidity into the financial system to soften the impact of the covid - 19 crisis on the economy. this liquidity injection will be aided in part by the bsp ’ s newest liquidity management tool of the bsp β€” securities issuance. with it, we will be able to further improve our ability to manage liquidity in the system, consistent with our price stability mandate. on fdis, we expect net inflows to improve from us $ 4. 1 billion this year to us $ 6. 5 billion next year as more industries will have reopened and as business confidence globally will have started to bounce back. on overseas filipino remittances, we forecast a turnaround to 4 percent growth next year from a decline of 5 percent this year. year - to - date, overseas filipino remittances contracted by 2. 4 percent. on external accounts, we expect these to remain robust. as of end - august, the gross international reserves
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bank of japan ’ s january report of recent economic and financial developments1 bank of japan, communication, 22 january 2001. * the bank ’ s view * * japan ’ s economy continues to recover gradually, but the pace is slowing due to decelerating export growth. with regard to final demand, business fixed investment is on an increasing trend. the recovery in private consumption continues to be weak as a whole through lack of notable improvements in employment and income conditions, but there are somewhat positive signs in some indicators. as for public investment, the pace of decline is slowing. meanwhile, net exports ( real exports minus real imports ) are starting to decrease reflecting a slowdown in overseas economies such as the u. s. and east asia. housing investment is declining gradually. reflecting such developments in final demand, industrial production remains on a rising trend, but the pace is slowing considerably. inventories of some materials and electronics parts, of which demand from overseas is declining significantly, become somewhat excessive, but inventories as a whole still remain at a low level. meanwhile, corporate profits continue to improve. income conditions of households still remain severe but are not deteriorating as employment conditions are on an improving trend and wages are slightly above the previous year ’ s level. as for the outlook, public investment is expected to start increasing with the implementation of the new economic stimulus package by the government. in the corporate sector, firms still strongly feel that they have excess capacity and that they should reduce their debts to restore financial soundness. however, it is very likely that fixed investment in high - growth sectors, including those related to information technology services, will increase as corporate profits continue to recover. moreover, the improvement in corporate profits will increase household income and this in turn is expected to boost private consumption. however, the pace of recovery in household income will be modest for the time being, since firms ’ perceptions of excess employment still persist, and thus significant changes have not been observed in their efforts to reduce personnel expenses. reflecting the overseas slowing economies, a temporary decline in exports seems to be inevitable. imports are projected to continue increasing, particularly those of consumer goods, and capital goods and parts. hence, net exports are expected to decline. mainly due to these developments in exports, industrial production is expected to slow down and remain at around the current level for a while. overall, it is likely that the economy will continue a gradual upward trend led mainly by business fixed investment. in addition, the favorable financial environment created partly by the
late december and is currently being traded in the range of 117 - 120 yen to the u. s. dollar. with regard to corporate finance, private banks continue to be more active in extending loans, mainly to blue - chip companies, while carefully evaluating the credit risks involved. there seem to be no significant changes in the fund - raising conditions of firms in the markets for such instruments as corporate bonds and cp. on the other hand, the improvement in economic activities has not stimulated corporate demand for external funds, since firms ’ cash flow is at a high level in parallel with the recovery in profits. moreover, firms continue to reduce their debts as part of their balance - sheet restructuring measures. as a result, credit demand in the private sector has continued to be basically stagnant. in view of this, the underlying tone of private banks ’ lending remains sluggish, although the expansion in the year - on - year decline is ceasing. meanwhile, the amount outstanding of corporate bonds issued is slightly above the previous year ’ s level. the amount outstanding of cp issued was at a high level as the year - end approached. money stock ( m2 + cds ) continues to grow at around 2 percent on a year - on - year basis. as for funding costs for firms, short - term funding rates basically remain flat but long - term funding rates seem to be declining reflecting the developments in market interest rates. in this financial environment, the lending attitude of financial institutions and corporate financing conditions remain easy. however, the effects of the decline in stock prices on the fund - raising conditions of firms need to be carefully monitored.
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supply chains make the euro 1 / 4 bis - central bankers'speeches area vulnerable to foreign shocks, with potential trade barriers posing threats to manufacturing and investment. turning to inflation, headline inflation increased further to 2. 3 % in november from 2. 0 % in october, according to eurostat's flash estimate. the increase in the last two months – following a deceleration in previous months – was driven mainly by a moderation in the fall in energy prices and an increase in food inflation. core inflation – excluding energy and food – remained unchanged at 2. 7 % in november and is expected to hover around current levels until early 2025. services inflation remains the biggest contributor to inflation and stood at 3. 9 % in november, driven in part by recent high wage growth. overall, growth in labour costs has been moderating in recent quarters – notwithstanding the volatility of negotiated wage growth over the summer – and is set to continue easing. domestic inflationary pressures are also receding as profits have been buffering still elevated labour cost developments. looking ahead, inflation is expected to temporarily increase in the fourth quarter of this year, as previous sharp falls in energy prices drop out of the annual rates, before declining to target in the course of next year. let me now turn to our monetary policy stance. in october the ecb lowered its key interest rates by 25 basis points, following the previous rate cuts in june and september. the information available at our october meeting confirmed that the disinflationary process was well on track. our deposit facility rate, the rate through which we steer the monetary policy stance, now stands at 3. 25 %. we will review our stance again next week, following our data - dependent and meetingby - meeting approach. we are therefore not pre - committing to a particular rate path. the new economic governance framework let me turn now to the second topic you have chosen for our hearing today – the eu's new economic governance framework. fiscal policy is essential to address the multiple challenges europe is currently facing, ranging from the green and digital transitions to economic security and defence. but for fiscal policy to be credible and powerful, it also needs to rest on strong foundations. the eu's new economic governance framework strikes a balance between ensuring medium - term fiscal sustainability and fostering strategic investments and growthenhancing reforms. if implemented effectively, it will provide three major benefits. first, it can help address the challenges related to elevated debt levels, which
have partly arisen from policies designed to buffer the impact of recent crises across the economy. the framework focuses on debt sustainability, thereby also supporting monetary policy transmission. 2 / 4 bis - central bankers'speeches second, the framework strives to balance gradual and sustained fiscal consolidation with incentives for much - needed investment and structural reforms. it introduces the possibility of extending fiscal adjustment paths from four to seven years. such extensions are contingent on growth - enhancing investments and reforms being implemented, which would in turn further strengthen debt sustainability by raising potential growth. reducing high debt levels also increases the space for strategic investments at the national and european levels. third, the new framework can help to make the fiscal stance more countercyclical, smoothing out economic fluctuations and thereby supporting long - term growth in conditions of price stability. implementing the revised economic governance framework fully and transparently is thus key to safeguarding member states'capacity to invest now and in the future. the challenges we face also require us to rethink the eu's role in addressing strategic investment needs. as enrico letta and mario draghi observed in their reports, europe is currently falling short of its potential. a key idea running through the reports is that europe is bigger than its constituent parts. well - defined joint eu investments would boost potential growth and contribute to macroeconomic stability. they would allow us to harness economies of scale and address cross - border challenges, to the benefit of all europeans, adding value beyond what national investments could achieve alone. they would also send a strong signal of unity to private investors within and outside the eu. such investments must be accompanied by coordinated and ambitious reform efforts. at the eu level, completing the capital markets union, which we discussed in my previous hearing before this committee, and deepening the single market are essential. member states also play a crucial role in reducing obstacles to entrepreneurship, helping firms to innovate and grow and aiding the efficient allocation of capital and labour. progress towards closer european integration paired with national reform efforts is essential for a more dynamic and competitive economy – one that supports citizens'standards of living and enables businesses to thrive. conclusion let me now conclude. europe's geopolitical and structural challenges require coordinated and determined action from policymakers. as the greek storyteller aesop wisely said, " in union there is strength ", and citizens'trust in the european union is at its highest level in over 15 years. 1 the commission has set an ambitious policy agenda to tackle these challenges
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asian central banks have been, and continue to be, explored and developed. the bis has made important contributions in this area, with its research providing useful information and insight for policymakers in the region. a : avenue for meetings – to promote discussion and policy analysis among central banks, the asian office has hosted and supported numerous meetings and events in the region, collaborating with other organisations such as the financial stability institute, emeap and seanza. r : reserves management – the asian office plays a vital role in the management and administration of asian bond funds 1 and 2 that aim to broaden and deepen regional and domestic bond markets. the dealing room of the asian office also provides asian central banks with ready access to bis banking services, helping facilitate their liquidity and portfolio management of foreign reserves. over these 10 years, i have seen the asian office play a significant role in helping to strengthen financial sectors, develop financial infrastructure, and promote stability and financial integration in this region. and since its establishment, the hkma has stepped up its participation in the bis'wide range of activities, sometimes co - hosting seminars and meetings, fostering an even closer relationship between us. let me take this opportunity to acknowledge with thanks the great work of the bis management and its staff, who have made the asian office a success. in particular, i would like to thank bob mccauley who has contributed significantly to the achievements of the asian office in the past decade. the accomplishments of the bis in asia over the past 10 years call for celebration. with this in mind, let's celebrate these achievements and anticipate even greater endeavours to come. i propose a toast and wish the asian office continued success for the next 10 years and beyond. thank you.
workers and contribute 32 % of our gross domestic product. in fact, msmes are considered as a seedbed for nurturing entrepreneurial skills and new ideas. msmes therefore are critical engines of economic growth and development. the entry of large banks to the sme sector therefore... is a most welcome development. globally, providing smes access to finance is gaining renewed momentum. for instance, the association of the world ’ s biggest economies... under the so - called g20... has created a global partnership for financial inclusion... which is working on principles for innovative financial inclusion... as well as sme finance. while the philippines is not a member of the g20, the bangko sentral ng pilipinas has been invited to join this important global undertaking. at first glance, the msme sector may not seem to be a natural market for large banks, given the high transaction costs relative to small loans and their lack of familiarity with the msme landscape. nevertheless, we have seen many jurisdictions address these concerns... in a timely and cost - effective manner. bis central bankers ’ speeches the philippine microfinance sector is one such success story. developing innovative product design and delivery channels have proven to be a viable and sustainable model to serve a sector.... previously seen as difficult to serve. rcbc itself has made inroads into microfinance. moving forward, we at the bsp will continue to create an enabling policy and regulatory environment that will allow both the financial institutions and the msmes to grow... on a sustained basis. to achieve this, the bsp will develop and adopt more market - oriented solutions to promote sme lending. so far, the bsp has instituted certain regulatory incentives, among which, are the reduction in the risk weight for sme loans from 100 % to 75 % and the extension to december 31, 2014 of the exemption of micro - and small - enterprises from the submission of additional documentary requirements, such as income tax return and / or audited financial statements... when they apply for bank loans. within the bsp, we are implementing a capacity building program for bsp examiners to familiarize them with the many methodologies and technologies banks can use to effectively lend to smes. the bsp also actively supports the development of a comprehensive credit information bureau and the creation of a collateral registry to spur the growth of msme lending. finally, the bsp
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erkki liikanen : is a reform of banking structures necessary? speech by mr erkki liikanen, governor of the bank of finland and chairman of the highlevel expert group on reforming the structure of the eu banking sector, at a meeting with finance watch, brussels, 20 november 2012. * * * costs of the crisis and the public outcry the global financial and economic crisis which started in 2007 is by far the worst in the western world in the post - war history. the european commission estimates that from october 2008 until october 2010, it has cost 13 % of the european union ’ s gdp in the form of public support to the region ’ s banks. 1 moreover, the present value of lost economic output is probably bigger by orders of magnitude than the direct support. 2 the crisis has caused a public outcry which is justified. regulators are responding to the pressing need to establish a financial system in which losses, not only gains, fall on the private risk takers, not on the tax payer. in order to find appropriate solutions, we need to understand the developments leading up to the global financial crisis. changes in banking in the run - up to the crisis the new landscape in the years preceding the global financial crisis, the landscape of banking had gone through major changes. the banking sector had grown rapidly and global financial institutions had grown ever bigger in size. especially, european banks appear very large when measured in terms of total assets in relation to the domestic gdp. further, the scope and the organizational complexity of global financial institutions had increased, adding to their opacity. there was a trend among the biggest banking institutions to strengthen their focus on investment banking, including trading operations. part of this trend was driven by the growing demand by non - financial firms for risk management services. partly, it was a search for new revenue streams, higher profitability and economies of scale and scope. the flip side of the coin was strong incentives for risk taking. commercial banking moved increasingly away from customer relationship - based banking where loans are granted and then held until maturity to the β€œ originate and distribute ” model where granted loans are pooled, then securitized and sold to investors. as result, banks became strongly interconnected via increasingly long chains of claims as well as correlated risk exposures, arising from increasingly similar investment strategies. this the final report of the high - level expert group ( 2012 ). see e. g. haldane ( 2010 ) : β€œ the $
symptoms are of excessive risk - taking, the more likely it is that monetary policy needs to carry a substantial part of the responsibility. the views i have described are by no means novel. in fact, they are not too far off the emerging post - crisis consensus in the central banking community. over the last few years, β€œ leaning against the wind ” has won many hearts and minds among central bankers and academic economists. my reading of the two papers by brunnermeier and sannikov3, distributed for this event, enforce the points made by woodford : since risk - taking is endogenous, just clearing up the damage in crisis times is not enough, there needs to be some leaning to control the build - up of risks. i don ’ t think we have yet learnt all there is to be learnt about the role of financial stability in monetary policy making. i do however believe that we have learnt enough to know that we should not return to where we were before the crisis. an increased role for financial stability considerations in monetary policy making is likely to be one of the lasting legacies of the crisis. markus k. brunnermeier and yuliy sannikov : β€œ the i theory of money ” and β€œ a macroeconomic model with a financial sector ”. manuscripts, 2012. bis central bankers ’ speeches monetary policy stance and implementation another boundary that has been completely redrawn during the crisis is the one between monetary policy stance and implementation. this is the boundary where jose - manuel has been most directly involved during the crisis as the executive board member responsible for market operations since june 2006. before the crisis, monetary policy stance was about setting the key policy rates. everything else was seen as operational implementation with the focus on money market liquidity management. the ecb even had a name for it : the separation principle. according to this principle, the experts working on implementation issues should be separated from the ones assessing the stance, so that the liquidity conditions and shortest market rates would not convey any signals on forthcoming stances. the age of innocence came to an end with the return of liquidity and credit risks to the markets ’ often narrow radar screens. before the crisis, banks ’ demand for liquidity was predictable ; it was set by reserve requirements. during the turmoil, unpredictable precautionary liquidity hoarding emerged as the dominating factor behind the demand. there were two important consequences. first, accurate measurement of the neutral level of aggregate liquidity became impossible ; and
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that will help small businesses as they work through some of the more subtle issues constraining their overall growth. going forward, we will coordinate a series of regional forums for financial institutions and cdfis on the use and deployment of small business programs authorized in the small business jobs act and on sharing information about issues and successful practices at a national level. the forums are being organized with participation from the opportunity finance network ( ofn ), the trade organization for cdfis ; the sba ; the treasury ; the cdfi fund ; and our partner regulatory agencies. in addition to providing information to regional forum participants, we will seek to use these forums to gather information on best practices, trends, and any barriers to the successful implementation of these federal programs. this year ’ s work will culminate with a november conference at the board of governors, in partnership with the federal reserve bank of atlanta, to discuss small business credit and workforce training issues facing entrepreneurs – particularly women and minority entrepreneurs and those living in low - and moderate - income communities. because jobs and the needs of low - and moderate - income communities remain a priority for us, we will continue to foster collaborative efforts in hopes of additional innovative responses. community data initiative the federal reserve has a long history of using anecdotal information gathered from businesses within the reserve districts to better understand underlying regional economies and economic conditions. one of the lessons to be learned from the role of subprime lending in the recent crisis is that it is equally important to pay attention to underlying trends in segments of the economy, such as low - to moderate - income communities or small businesses. the anecdotal information we collect from community advocates and development professionals is quite valuable, but it will be even more actionable if we have a framework for systematically collecting, studying, and disseminating the information. to address this need to identify early warning signs of future economic challenges, we are testing several initiatives to collect information from practitioners and others working directly in the communities. this effort, known as the β€œ community data initiative, ” is intended to provide a systematic approach to gathering and disseminating on - the - ground intelligence on current conditions and emerging challenges facing low - and moderate - income communities. insights from the data will inform existing processes at the fed and provide useful information to low - and moderate - income communities. in order to achieve this new data collection and analysis objective, a number of the reserve banks are leveraging their own research resources to survey,
poll, or otherwise collect information about communities in their district. at the board, we are also conducting our own surveys to help validate the district results. although the project is in its infant stage, i would like to share some initial findings from two of the reserve banks that are already participating in the process. the federal reserve bank of san francisco ’ s β€œ community indicators project ” is a quarterly survey tool that includes a collection of open - ended questions to inform community development policy and practice in a richer way than quantitative data alone. leaders from banks, nonprofits, community - based organizations, foundations, local government, and the private sector are asked about the conditions and trends affecting low - income households. the lack of jobs was the dominant theme in the first year of data collection, with the majority of respondents identifying unemployment as the primary cause of new distress in the housing sector as increasing numbers of residents struggled to make mortgage or rent payments. one survey participant stated that β€œ prolonged unemployment and underemployment are causing a huge bis central bankers ’ speeches growth in the number of low - and moderate - income individuals and communities. unemployment is now the driving force behind most of the other crises we are facing. ” 11 similarly, the federal reserve bank of richmond has been using their emerging issues surveillance tool ( eist ) to identify the most significant current and emerging community development issues in the district ’ s diverse communities. the top three issues in the spring 2011 data release were employment opportunities, access to housing, and home foreclosures. the jobs issue surfaced again, with a focus on the need for training, when a participant stated : β€œ employment is the key to sustained self - sufficiency. there are jobs available in the washington, d. c., market, but mostly high - skilled jobs for which low - income residents are unqualified. ” as with the san francisco survey, the results from this tool provide useful data for richmond policymakers and district stakeholders. virtual collaboration the growth in survey and other tools is intended to expand the federal reserve ’ s outreach efforts and to ensure that we are responsive to the entire population. as we continue to improve the tools we use, we hope to continue to engage each of you in the conversation. in the past, collaboration often required outlays of scarce time and financial resources to attend face - to - face meetings. we are increasingly exploring ways to use technology to effectively expand our reach. for example, the system is using live web -
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. data released last month show that, despite the financial crisis and great recession, net worth rose noticeably across all age groups from 1999 through 2012. now, let ’ s bring the boomers into the picture. they ’ re called the boomers for a reason. the huge wave of that generation simply overwhelms the charts. born between 1946 and 1964, bis central bankers ’ speeches the youngest boomers are turning 50 this year. and so, right now, we are seeing a very predictable demographic bulge of more people, putting away more savings. this is mother nature at work, and it ’ s where things get interesting. why does a central banker care? first, the financial decisions made by individuals are of course important to those individuals. but when a large swath of the population is making similar decisions, the impact on the broader economy can be significant. second, where individuals decide to store their wealth also matters a great deal. allocation matters canadians, it won ’ t surprise you, love their houses. we hold a lot of our wealth in real estate. this practice preceded the crisis, and it was reinforced by it. you may recall – it even may have been your experience – in the 1990s, the share of household wealth in financial assets, such as equities, was increasing faster than that in real estate. but since then, real estate has become more attractive and has grown as a share of total household assets. with the β€œ dot - com ” bust and enron and other corporate scandals in the rear - view mirror, with low interest rates helping keep mortgage payments manageable, and with cocooning taking hold, housing was increasingly seen as a safe and attractive investment. for the sector as a whole, real estate assets accounted for 40 per cent of total wealth in 2012, up quite a bit from 32 per cent in 1999. economists have their own way of interpreting these trends. we see some forms of assets primarily as β€œ stores of value, ” while others work through the system to fund investments and add to the productive potential of the economy. savings that fund infrastructure and business investment are β€œ being put to work, ” which can help improve productivity, while savings that go into housing are seen as contributing less to productive potential. this shift toward housing was also evident in many developed countries before the crisis hit and could have contributed to a slower growth rate for productivity. layering on the crisis importantly, the fallout from the financial crisis has worked to magnify some of these
jorg asmussen : economic convergence across central, eastern and south eastern europe – achievements and challenges speech by mr jorg asmussen, member of the executive board of the european central bank, at the conference on european economic integration ( ceei ) 2013 β€œ financial cycles and the real economy – lessons for cesee ”, vienna, 18 november 2013. * * * dear ewald, good evening ladies and gentlemen, it is a pleasure to be here with you tonight. i would like to thank the oenb for the invitation to share some thoughts on the region, on which the oenb has developed analytical excellence that is beneficial to the entire eurosystem. i will focus my remarks on selected experiences of countries in central, eastern, and southeastern europe on their path of economic and institutional convergence towards the rest of europe. i will argue that both the successes and the challenges associated with the convergence process point to two basic lessons. first, that we should never relax in the pursuit of domestic policies oriented towards financial stability and sustainable growth. and second, that we need not just more, but also better european integration. in what follows, i will use the term western balkans to refer to the six eu candidate and potential candidate countries in the region : albania, bosnia and herzegovina, kosovo, the former yugoslav republic of macedonia, montenegro, and serbia ]. i will use the term central and eastern european countries to refer to seven eu member states outside the euro area, namely bulgaria, croatia, the czech republic, hungary, lithuania, poland, and romania. and i will refer to the two groups of countries taken together as central, eastern and south - eastern europe. i. the good experiences with convergence if you had to pick three β€œ good experiences ” which countries in the region have made over the years in terms of convergence, what would your choice be? 1. increasing living standards for me, the first good experience i would bring home is the improvement in the region ’ s living standards : between 2000 and 2012, real per - capita gdp, adjusted for differences in purchasing power, increased on average by close to 50 per cent both in central and eastern europe and in the western balkans. in lithuania, per capita income, measured in this way, increased from 35 per cent of the euro area average in 2000 to 65 per cent in 2012. on the other side of the spectrum, the living standard in the former yugoslav republic of macedonia increased only from 24 per cent of the euro area average in 2000 to
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service housing loans. second, the level of gearing in the united states housing market is noticeably higher than in australia. this may reflect the fact that australian households are more active in paying down their loans after buying a home, possibly because owner - occupied mortgage interest rates are not tax deductible here as they are in the united states. the faster pay - down of mortgage debt in australia reduces the risk of borrowers subsequently getting into financial difficulty. overall, the experience of the last few years suggests that the australian household sector as a whole appears to have the financial capacity to sustain a relatively high ratio of housing prices to income. that capacity may not, however, be evenly distributed through the population. many 50 – 60 year olds, having benefited from the prolonged economic expansion over almost 20 years and the accumulation of superannuation savings, are in a strong financial position. this has encouraged a change in financial behaviour, with many households in this group being more inclined to stay geared up later in life, using the funds to upgrade or expand dwelling investments. it is likely that this changed behaviour has been a significant factor in the housing developments we have seen over the past 10 – 15 years. in contrast, the typical first - home owner cohort – those under 35 years of age – has experienced a noticeable decline in home ownership over the past 10 – 15 years ( graph 9 ). it may be that this is being driven by demographic factors – such as the fact that young people are staying in education longer and delaying the formation of new households – but it may also be financially driven. graph 9 home ownership rates in australia % % total under 35 years source : abs survey of income and housing ( sih ) a particular problem for first - home owners is that the rise in the ratio of house prices to income has substantially increased the deposit needed to get into the market. on plausible assumptions, the deposit needed by first - home owners may now be around one and a quarter years ’ income, almost twice what it was 15 years ago. at one stage, lenders were responding to this by lowering the deposit requirement, but this carried the risk of buyers subsequently getting into difficulty. also, various governments have sought to provide concessions to first - home owners through grants or tax relief. however, while these measures assist the first wave of buyers who are able to take advantage of them, the benefits diminish over time to the extent that these concessions become capitalised into higher house prices. conclusion i am conscious
projections, force of action of the monetary policy transmission mechanism and other financial stability considerations, the bank of albania deems that the monetary policy will maintain a similar stimulating direction and range within similar parameters, over the medium term. bis central bankers ’ speeches
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2009 ) : β€œ banking : key driver for inclusive growth ”, address delivered at the mint ’ s β€œ clarity through debate ” series in august 2009 at chennai. government of india ( 2006 ) : report of the working group on savings eleventh five year plan, planning commission, december. government of india ( 2007 ), eleventh five year plan document, planning commission. government of india ( 2008 ), the committee on financial inclusion ( chairman : c. rangarajan ). inclusive growth analytics : framework and application ( 2009 ). elena ianchovichina and susanna lundstrom, world bank. reserve bank of india ( 2008 ), report on currency and finance 2006 – 08.
##di for domestic investment, growth and employment need to be examined against the benefits that domestic companies derive elsewhere in terms of expanded market base, backward and forward vertical integration and cheap skilled labour. in a globalised business environment, establishing an overseas presence becomes inevitable on account of a country ’ s policy on outsourcing, emphasis on on - shore presence, protectionism, etc. hence, the indian companies have to balance the need for domestic business expansion with the compulsions of overseas investments. likely impact of devolvement of contingent liabilities it has been observed that in the recent years, the non - fund exposure in the form of guarantees issued by indian companies towards their jvs / wos has been rising ( table 1 ). given the uncertain global environment, exponential rise in issuance of guarantees could be a potential concern for banks ( who often provide back to back guarantees ) and the indian companies concerned. impact of economic downturn of foreign economies another important aspect that has to be borne in mind is that the overseas business model could go awry due to a variety of reasons, such as, sudden downward trend of the economy as experienced during the recent global financial crisis and the eurozone sovereign debt crisis. such events may adversely impact the financials of the indian companies with a spill - over effect on the domestic corporates and banking sectors. during the periods of global crisis, indian companies may face challenges to their overseas investments. this would be on account of moderation in internal accruals and also due to the funding constraints that maybe faced by indian jvs / wos arising out of faced by the multinational investment banks and financing institutions. indian corporates who had acquired overseas assets at much higher premium in a bullish phase of business cycle or did not undertake intensive due diligence before such acquisitions in anticipation of future growth, potentially risk huge valuation loss during the downturn. ensuring security through strategic acquisitions the emerging economies are becoming increasingly conscious of ensuring security in the fields of energy, commodity and food for the future generations. this has led to a spate of strategic acquisitions in the recent past, notable among them being acquisition of coal mines, oil fields etc. proposals for acquisition of overseas assets, particularly in the energy sector through special purpose fund or through the psus in the related field are now being discussed for long term strategic benefit of the country. various options of funding are also being debated. given the nature of our foreign exchange reserves, which have not been built out of surplus,
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mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 12 january 2012. * * * ladies and gentlemen, the vice - president and i are very pleased to welcome you to our press conference. let me wish you all a happy new year. we will now report on the outcome of today ’ s meeting of the governing council. based on its regular economic and monetary analyses, the governing council decided today to keep the key ecb interest rates unchanged, following the 25 basis point decreases on 3 november and 8 december 2011. the information that has become available since early december broadly confirms our previous assessment. inflation is likely to stay above 2 % for several months to come, before declining to below 2 %. at the same time, the underlying pace of monetary expansion remains moderate. as expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. the economic outlook remains subject to high uncertainty and substantial downside risks. in such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy - relevant horizon. overall, it is essential for monetary policy to maintain price stability over the medium term, thereby ensuring a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2 % over the medium term. such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. a very thorough analysis of all incoming data and developments over the period ahead is warranted. the provision of liquidity and the allotment modes for refinancing operations will continue to support euro area banks, and thus the financing of the real economy. the extensive recourse to the first three - year refinancing operation indicates that our non - standard policy measures are providing a substantial contribution to improving the funding situation of banks, thereby supporting financing conditions and confidence. in addition, we are actively working towards the implementation of all the measures announced at our december meeting, which should provide additional support to the economy. as stated on previous occasions, all the nonstandard monetary policy measures are
democratic legitimacy. the european parliament could, for instance, assemble in a variety of compositions. going for intergovernmental rather than federal solutions thus generates path dependencies. following the intergovernmental path in monetary policy would have led to the implementation of the uk ’ s proposal back in 1990 of parallel competing currencies rather than a single currency. the perceived lack of input legitimacy in the current institutional set - up also implies a high standard of output legitimacy ; that is, policy - makers need to generate outcomes that are in the voters ’ interest. if they fail to do so, they risk putting the stability of monetary union into question. rules versus discretion – a question of space and time? a monetary union is stable as long as its members find it more beneficial to be in that union rather than outside it. this stability is easier to achieve if everybody plays by the same rules. in a monetary union, economic well - being is not simply a domestic question. member states ’ economies influence each other, which is why a monetary union is more attractive if all its members are prospering. accordingly, europe ’ s decision - makers have given themselves common rules to guide fiscal and economic policies. bis central bankers ’ speeches these rules have repeatedly been broken. this suggests that while decision - makers favour a common set of rules to generate trust and credibility among member states, they have sometimes preferred more flexibility than the rules allow. in essence, we are facing an issue of time - inconsistent preferences : in the long run, governments have an interest in strict rules that foster trust and credibility among member states. in the short run, they might well prefer more discretionary decision - making that allows them to flexibly adapt their policies to circumstances. in addition, election cycles sometimes encourage myopic policy choices that are not necessarily in the union ’ s long - term interest. this is especially relevant in the eu ’ s multilevel governance framework with staggered election cycles at the various national and subnational levels. i respect that governments are bound by their voters ’ will. that will might well differ between jurisdictions in general, and between creditors and debtors in particular. at the same time, i see a risk that governments are making it too easy for themselves when they claim that they cannot make any further concessions at international level because of domestic political pressures. survey data shows that an unquestioning belief in opinion polls is not necessarily in the longterm interest of voters. for instance, support for the euro
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kerstin af jochnick : a springboard for the monetary policy meeting in september speech by ms kerstin af jochnick, first deputy governor of the sveriges riksbank, at a meeting at danske bank, stockholm, 21 august 2012. * * * it has become something of a tradition for us members of the executive board of the riksbank to hold a speech at the end of august about the current economic situation and developments during the summer. i think that this is a tradition worth upholding. true, not many people here today manage to completely cut themselves off from world events during their holidays. we still manage to maintain a watchful eye on the inflow of news and statistics. however, although i believe that many of us follow the economic news coverage during the summer months, it may be useful to have a round - up of what has happened. it provides an overview and can act as a β€œ springboard ” for starting work in the autumn. a natural starting point for me is the assessment of economic developments described by the riksbank in the monetary policy report published in early july. i therefore intend to run through this assessment briefly and comment on my own thoughts at the meeting in july. i shall then try to summarise developments since then. of course, this concerns to a large extent the crisis in the euro area, although some interesting statistics have also been received. i will also mention the on - going discussion on libor and stibor as this has been a major news item during the summer. i have chosen to call this a β€œ springboard ” for the monetary policy meeting in september. this is not intended to direct one ’ s thoughts to sporting achievements, which can easily happen, given that the olympics are still fresh in our minds. what i mean to indicate is that this is a status report on which to base the start - up of a new process, which for the riksbank is a process that will lead to a new joint economic assessment. i will not be presenting this type of assessment today. this will be released in connection with the next monetary policy meeting on 5 september. the assessment in the july monetary policy report great uncertainty over future developments perhaps the most difficult question we had to deal with at the most recent monetary policy meeting was how an unexpectedly strong outcome in sweden at the beginning of the year should be viewed in relation to increased concerns over poorer developments in the euro area. when we executive board members gathered
spanish and italian government bonds remained high. the uncertainty concerned how to implement and design a joint banking supervision in the euro area, something that is a very large step for the member states. joint banking supervision is, according to the agreement reached at the meeting, a necessary condition for the european stability mechanism, esm, to be able to recapitalise banks directly. the uncertainty was fuelled by the criticism of another agreement reached at the meeting that the european relief funds should be able to buy government bonds to hold back countries ’ interest costs. more details on the loan to the spanish banking sector more details of the loan of up to eur 100 billion to the spanish banking sector were released after the meeting of the eurogroup finance ministers in july. a memorandum of understanding with spain states, for instance, that the exact size of the loan will be determined after a revision of the spanish banking sector during the second half of september. however, eur 30 billion is to be made available this summer as a preliminary bailout for urgent measures. once the joint banking supervision facility in the euro area has been established, the idea is that the esm will take over from the efsf and the loan can be channelled directly to the spanish banks. this will break the links between the crisis banks ’ finances and the spanish government ’ s finances. the european commission has signalled that a proposal regarding banking supervision will be announced in early september. one condition for the esm to be able to take over the loan is, of course, that the mechanism is actually activated. this requires approval from countries that together account for 90 per cent of the capital paid into the mechanism. at present, approval is yet bis central bankers ’ speeches to be given by germany – which is awaiting a verdict from its constitutional court in mid - september. the memorandum of understanding regarding support to the spanish banks makes it clear that the spanish government is expected to carry on with its work on reducing its budget deficit to just below 3 per cent. the time limit they have been given to reach this has been extended by one year to 2014. spain has given an account of its budget plans and the savings to be implemented to reach the target. during the summer the imf has also given strong support to spain ’ s efforts. concern over the situation in spain and italy the market ’ s reactions to the agreement on banking support to spain can be described as cautiously positive. but during the second half of july, concerns increased again when reports were
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will raise interest rates at the detriment of growth. ” this answer is wrong, and i would like to explain why the optimal policy reaction to a shock as the one we are currently experiencing does not depend on the mandate that the central bank has. the argument is wrong because it does not take into account expectations and, more generally, uncertainty and the functioning of markets. before doing that, let me recall something that should be clear to everybody : a permanent rise in the price of oil leads to a reduction in the terms of trade ( the ratio of export to import prices ) and therefore ciccarelli and mojon ( 2005 ) compute an index of β€œ global inflation ” comprising a large selection of oecd countries from 1961. the global inflation rate in the most recent years has been the lowest or very close to the lowest of the whole sample period. 1 / 6 to a permanent reduction in the equilibrium level of income ( at least for oil importing countries ). this is a fact. some may not accept this conclusion and may try to do something about it. for instance, if a central bank tries to counteract the effect of the higher oil price by stimulating aggregate demand, as most central banks did in the mid - 1970s, the only result will be to increase inflation. inflation will rise as long as monetary policy will remain expansionary in trying to avoid the adjustment of income to its new level. the closer is the economy to full employment, the quicker the oil shock will spread to other prices into an inflation spiral. if economic agents, consumers and firms, know that the central bank will react in this way to an oil shock, trying to stimulate income and employment, inflationary expectations will increase very rapidly, reducing expected real income and thereby nullifying the effects of the monetary expansion. if the central bank persists in this policy, the only result will be a price - inflation spiral, with no positive impact on growth. if the economy embarks in such a path, bringing back inflation will require a substantial tightening of monetary policy that will produce a substantial output loss. this is the experience of the monetary reactions to the oil shocks of the 1970s, in particular in the us, with the volcker disinflation of the early 1980s, but also in many european countries. the first conclusion that i would draw to your attention is that if monetary policy aims primarily at stabilizing income in the face of a permanent supply shock, it will produce the opposite result, i. e
vulnerable member states loans are still contracting compared to a year ago. but the pace of contraction has slowed considerably in these economies. this reflects both improved funding conditions for banks thanks to the tltros and app, and strengthening demand for loans amid an improving economic outlook and lower lending rates. loan supply can be expected to benefit further from the staggered impact of tltros. the app should also continue to support credit growth going forward. banks gain additional liquidity from the app either through selling marketable assets or through rising customer deposits, which they can in turn use for refinancing, purchasing assets or granting loans. in their responses to the october 2015 bank lending survey, most euro area banks indicated that they had used the additional liquidity from the app for the latter – granting loans ( about 30 % ) – and over the coming six months, this pattern can be expected to continue. banks also indicated a net easing impact from the app on their credit standards over the past six months ( loans to enterprises : – 4 %, housing loans : – 2 %, consumer credit and other lending to households : – 1 % ). and over the next six months, banks expect a continued easing impact on credit standards for loans to enterprises ( – 2 % ), while the effect on credit standards on housing loans and consumer credit is expected to remain broadly unchanged. altavilla c., g. carboni, r. motto ( 2015 ) asset purchase programmes and financial markets : lessons from the euro area, ecb working paper no. 1864. bis central bankers ’ speeches chart 1 use of additional liquidity and impact of the app on bank lending notes : the net percentages are defined as the difference between the sum of the percentages for β€œ tightened considerably ” and β€œ tightened somewhat ” and the sum of the percentages for β€œ eased somewhat ” and β€œ eased considerably ”. the results shown are calculated as a percentage of the number of banks which did not reply β€œ not applicable ”. bis central bankers ’ speeches the effects of app appear to be stronger still when looking at the impact on credit terms and conditions ( loans to enterprises : – 29 %, housing loans : – 13 %, consumer credit and other lending to households : – 22 % ; see chart 24b ), and the reported easing in terms and conditions for enterprises is generally larger than reported in the previous survey round. this favourable impact is also expected to continue over the next six months. one should keep in mind, however, that these
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##tailed wrenching economic, financial and social change. and the path has not been smooth. indeed, about one - and - ahalf years ago the economy was close to cardiac arrest. the patient required life support – kept alive with the substantial assistance from international lenders, as well as the continued levels of extraordinary support from the eurosystem. but progress since then has been good : the programme is on track. so far, ireland has delivered. i am confident it can be a β€œ success story ”. nonetheless, substantial challenges remain. ambitious structural and financial reforms are still needed : to put unemployment on a downward trajectory ; to ensure that government finances are put on a sustainable path ; and to secure a banking sector that can stand on its own feet again and support the irish economy. bis central bankers ’ speeches and that last item – financial sector repair – is absolutely crucial. the support from the eurosystem in the form of monetary policy and emergency liquidity loans to irish banks has been extraordinary by any measure. with these considerations in mind, i would like today to start by considering, first, the origins of the crisis. i will then discuss some macro - fiscal aspects of the adjustment process. however, i want to spend the majority of my remarks discussing, thirdly, financial sector issues and the role of the ecb. i would like to present a clear view on how the ecb has supported ireland through the adjustment process, working as a true partner to help this country resolve its problems. 1. the origins of the crisis a somewhat colloquial, description is that when the bubble burst, the economy was lacking competitiveness, that it was unfit and overweight. is that really a fair description of the irish economy around 2007? it is perhaps a little harsh – it clearly misses some of the important strengths that still underpin the irish economy and which will be crucial components of the recovery in the years to come. yet we can see many elements of the irish situation in the years 2007 and 2008 in that description. lacking competitiveness : clearly, wages and prices had risen much too fast since the start of monetary union. from 2000 until 2008 wages ( compensation per employee ) in ireland increased on average by nearly 6 % per year, more than twice the rate seen in the euro area. this eroded ireland ’ s competitive position. unit labour costs had risen by 50 % between 1998 and 2008 while they had risen by only 19 % in the euro area during the same time
its treaty mandate, and this is above all to secure price stability in the euro area as a whole, which consists of 17 countries. and there are clear limits to what the central bank is entitled or even able to do. it is impossible for the ecb to provide guarantees or assurances concerning future funding amounts or interest rates over the medium term. certain tasks should and can in europe only be dealt with by the member states, and not by the ecb or the central bank of ireland. our common objective therefore must be to reduce over time the reliance of irish banks on central bank funding and in particular on the emergency liquidity assistance. the irish government has the capacity to further consolidate and implement the necessary reforms, so that there will be no lingering doubts about the sustainability of government debt. i am thus confident that ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, member states will continue to show solidarity towards ireland. i understand that minister noonan has said that champagne corks will be popped on the night the troika leaves dublin. as long as ireland continues to implement fully its programme and preserves its credibility as a state that honours all its obligations, i think that day will come in the not too long future, at the end of this programme in 2013. and what will the ecb be doing on the day the troika returns home? well, we won ’ t perhaps be engaging in similarly wild celebrations – we are central bankers, after all. but i suspect that i, and my fellow board members, may raise a quiet toast to the achievement of a country in so admirably fighting its way back to solvency and stability. i wish you continued success in meeting that goal and we stand ready to work with you in achieving this goal. bis central bankers ’ speeches
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bonds to cover losses in the financial system. today, the thai bond market is therefore much larger, at 38 % of the gdp. we have a much more active market. what does an active bond market mean to monetary policy? i will highlight three points. first is the implication on transmission mechanism. when the central bank wants to change stance in monetary policy, it changes interest rate up or down. but it does not directly change the interest rates along the whole spectrum of the yield curve. it only affects the key policy rate, which in the case of thailand is the very short - term 14 day rate in the repurchase market. however, to have an impact on the real economy, there must be a way to transmit this signal all the way to the financial activities that determine economic transactions, such as business capital formation, household consumption and savings. the traditional channel is through commercial banks. and now we have another channel through the corporate bond market. this channel is poised to grow more rapidly in the future. the second aspect is that central bank also operates in the government bond market in its conduct of monetary policy. it can sell and buy bonds to pump money in or out of the system, through their open market operations. an efficient, deep and liquid bond market therefore will not only help make the intermediation process competitive and active - but also allow the central bank to transact in the market more effectively. the third aspect is the function of the bond market in managing the capital flows. emerging market economies when they are successful tend to attract capital inflow very quickly, and in very large quantity. unfortunately, if things turn bad, the outflow of capital can also be equally quick and in as large a quantity. how can one better manage this volatile capital flow? to some extent, i think the risks can be mitigated with a well functioning bond market. if we can make it function as a temporary reservoir to store the incoming water, and more slowly releasing it to the various users of fund within the country, at the right pace for absorption - if the market selection process can be made such that only the projects with really viable, economic prospects are granted the fund - and, if the foreign owners of fund can be persuaded to hold the instruments denominated in borrowers ’ own currency, thereby shifting the position on the foreign exchange risks from the borrowers to the investors, then the bond market can be a safer channel for capital flows than the commercial banks. at this point
prasarn trairatvorakul : limitations of monetary policy – the context of thailand speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the foreign correspondents ’ club of thailand ( fcct ), bangkok, 17 june 2013. * * * good evening ladies and gentlemen, i would like to thank the foreign correspondents ’ club of thailand for the invitation. it is my honor and pleasure to be back here again to share with you my views on thailand ’ s economic outlook and monetary policy. we indeed live in a volatile and uncertain world. just a few months ago we still talked about a two - or three - speed global economy as a fact of life, with robust growth expected of emerging markets and sluggish recovery to remain with the major economies. today, with some possibility of an earlier - than - expected tapering off of qe, coinciding with the apparent slowdown in many emerging market economies, the convergence of the world economy is already expected by some. one obvious consequence is the market overreaction to these premature signs of the convergence. the unsettled sentiments over a potential end of cheap money may have contributed to sizeable outflows of capital from emerging markets during the past few weeks. as a consequence, emerging market currencies including the thai baht depreciated sharply, reversing gains since the beginning of the year. one lesson from this recent episode is that, expectations can go a long way in influencing people ’ s behavior, and often with implications for policymakers. specifically, it reminds us how powerful the expectations channel of monetary policy transmission can be. it is therefore of utmost importance that central banks properly manage expectations so as to maximize monetary policy effectiveness and maintain policy credibility. this draws me to the focus of my talk this evening : the limits of monetary policy, namely, what monetary policy can and cannot do. given unprecedented economic headwinds of various sources, monetary policy around the world has been under immense demand. but these expectations, if unrealistic and not met, could damage central bank credibility, and end up diminishing central banks ’ influence, with unnecessary costs to the economy. thus, it is important that central banks establish realistic public expectations on their policy. but before i turn to that topic, let me first review current economic conditions, the outlook for the thai economy, and recent monetary policy response. recent economic developments and monetary policy response despite robust
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. the interest rate at which it provides in the liquidity needs of the banks. in such a framework there is no target for the exchange rate of the rand. the external value of the rand forms part of the results obtained in the economy. 5. decision - making process in view of the growing complexity of functional relationships between the various economic and financial variables, a detailed and careful analysis has to be made of the underlying economic conditions. a large number of economic indicators are therefore monitored by the bank to arrive at its monetary policy stance, such as developments in price indices, the level of interest rates, the shape of the yield curve, changes in nominal salaries and wages, nominal unit labour costs, the gap between potential and actual domestic output, money market conditions, the overall balance of payments position, the net open position in foreign exchange and the public sector borrowing requirement. to evaluate the results of such an analysis of the economy a monetary policy committee was created in the reserve bank. the monetary policy committee consists of the governor and deputy governors as voting members and senior officials of the bank as non - voting members. the first meeting of the monetary policy committee was already held in october 1999. at the meetings of this committee an evaluation is made over a two - day period of international and domestic economic conditions, the expected behaviour of the inflation rate and the current stance of monetary policy. although the governors of the bank are the only members with voting rights on the committee, consensus decisions are normally made. the final decision - making power on monetary policy matters nevertheless is still vested in the governor ’ s committee, i. e. a subcommittee of the board comprising the governor and three deputy governors. after the completion of every meeting of the monetary policy committee a statement is issued to the public. this statement summarises the more important aspects that were discussed at the meeting and the conclusions that were made. in this statement the monetary policy stance of the reserve bank is also formulated. for example, in the last monetary policy statement of 2 march 2000 it was concluded that after taking cognisance of the current economic circumstances and consistent with the inflation target set by the authorities, the monetary policy committee is of the opinion that the current level of the repo rate is appropriate. in accordance with the decision taken at the previous meeting, the reserve bank will therefore continue to manage the banks ’ daily liquidity requirement in a way that will result in a repo rate at or around 11. 75 % ”. 6. conclusion as
in the production structure of the country envisaged in the president ’ s state of the nation address on 4 february 2000, the outlook for the south african economy indeed looks very promising.
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' s updated central forecasts, which were released last week in our quarterly statement on monetary policy. those central forecasts have the australian economy staying on that narrow path that i spoke about. they have : inflation returning to target over the next couple of years ; the economy continuing to grow, albeit at a fairly slow rate ; and unemployment rising, but remaining below the prepandemic low. 2 / 5 bis - central bankers'speeches our assessment is that inflation is likely to have peaked around the end of 2022 and will now start declining. the central forecast is for cpi inflation to decline to 4ΒΎ per cent over 2023 and to around 3 per cent by mid - 2025. we have not yet seen evidence of a moderation of goods price inflation in australia, but we have seen it elsewhere around the world and we expect the same to take place here. supply chain problems are being resolved, shipping costs are normalising and oil prices are off their peaks. these lower prices, or lower rates of inflation in global markets, should flow through into prices in australia. while this will help inflation return to target, it is unlikely to be enough without also observing some ongoing moderation in demand. in terms of economic growth, our central forecast is for gdp growth to slow to around 1Β½ per cent this year and next. the bounce - back in spending following the pandemic has largely run its course. more broadly, the combination of higher interest rates, costof - living pressures and the decline in housing prices is expected to weigh on household spending. a contraction in residential construction is also expected following the pandemic - related boom. in contrast, the outlook for business investment remains reasonably positive, with many firms operating at a high level of capacity utilisation. the labour market remains tight, with the unemployment rate near a 50 - year low. the share of working - age australians with a job has never been higher than it has been recently, youth unemployment has declined and underemployment is the lowest it has been for decades. these are good outcomes for our country. job vacancies remain at a very high level, although some firms report that it has been less difficult to find workers recently than it was a few months back. the central forecast is that the unemployment rate gradually increases from here due to slower growth to reach 4Β½ per cent by mid - 2025. this rate of unemployment is below that prevailing in the years prior to the pandemic. if
bis central bankers ’ speeches policy struggles for promoting productivity given that productivity expansion is crucial for economic growth, its promotion constitutes a natural target for policy making. countries vary in terms of geography, cultural heritage, and other conditions that may affect economic efficiency differently. at the same time, in any nation, room for enhancing productivity growth can almost always be claimed. the pursuit of this objective faces significant challenges. while some are common to other policy decisions, the difficulties encountered here may be greater due to the following four reasons, at the least. first, there is no silver bullet for resolving the problem of productivity. the economic literature referred to and the discussions held in this conference make it clear that a number of elements may interact. second, there is no well - defined list of factors that could ensure high productivity growth in all cases. for example, economists know that reliable institutions, fully operating markets, and competition may provide incentives for investment, human capital accumulation, and productivity growth. however, many other policy decisions may also contribute to the same end, and their combination may vary. there is no recipe, let us say, based on some composite indicator, with which policy makers should try to maximize results. the best policy mix and the need for concrete institutions may depend on history and the initial conditions of specific countries. third, even if we had a clear - cut list of elements for productivity expansion, the relative importance of their components would hardly be undisputed. the consequence of this is that there is no roadmap that is obviously superior to alternative paths for economic reform. fourth, though a trajectory did exist that would dictate a preferable sequence of measures, democratic societies require some of these changes to be legislated. international experience demonstrates that political feasibility does not necessarily coincide with economic desirability. these four difficulties illustrate the fact that our understanding of productivity and our capacity to prescribe changes are necessarily limited, pointing towards the need for caution. perhaps in no other area, given its breadth, should economic advisers and policy makers exert a greater deal of judgment while, at the same time remaining humble. in any case, policy makers are expected to use all the information on hand, including the best estimates of theoretical models, to foment a favorable setting for productivity. sometimes, this may simply mean incrementally removing obstacles, thereby allowing private participants to strengthen the existing institutions that facilitate economic activity. 6 additionally, implementation of measures to fuel efficiency must not be considered in isolation. the
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hard work and perseverance, anything is possible. while this is a wonderful achievement, it is also the beginning of a new journey. your children will face new challenges and opportunities in secondary school : bullying, teenagers'crises, difficulties in keeping up with an increase in subjects, new subjects, and the list goes on. as they step into this next phase of their education, your continued encouragement will be essential. celebrate their successes, no matter how small, and reassure them when they encounter difficulties. be their sounding board, their cheerleader, and their source of strength. encourage them to set new goals and strive for excellence. help them understand that success is a journey, not just a destination. remind them that it's okay to make mistakes and that every challenge is an opportunity to learn and grow. your belief in their abilities will empower them to keep pushing forward, no matter what. your children look up to you more than you might realise. show them the value of education, hard work, and kindness through your actions. let them see how you handle challenges and be the example of resilience and integrity that they can emulate. teach them that success is not just about personal achievements, but also about helping others and making a positive impact in the world. by supporting your children's education and dreams, you are helping to break the cycle of hardship and creating a path to a brighter future. education is a powerful tool that can open doors to countless opportunities. by ensuring that your children have the best possible start, you are setting them up for success in life. you are not just changing their lives ; you are changing the future for your entire family. the values you instil in them, the encouragement you provide, and the support you offer will resonate for generations to come. today, we celebrate your children's achievements, but we also celebrate you - the parents who have stood by their side, guiding them, believing in them, and giving them the courage to succeed. your children's success is your success, and together, you have shown that no challenge is too much. continue to love, support, and honour them finally, to you, the students, remember this : you are strong, you are capable, and the future is yours. believe in yourself, work hard, and go after your dreams. you've already shown that you can do incredible things. now go out there and be the best you can be because you can achieve even
must also ensure that there is just enough money in circulation to meet the requirements of the country. the amount of money in circulation must not be too low that it could lead to higher interest rates and slower economic growth. on the other hand, money supply must not be too high that it will be inflationary and reduce the purchasing power of the peso. this is a complex and challenging balancing act. as mentioned before, it is imperative that the banking sector remains sound and healthy as it provides the funding requirements of the economy, using essentially money entrusted to it by the people. in fact, funding for more than 70 % of the resources of the banking system come from deposits which, as of june 2006, had reached p3. 2 trillion. ensuring the stability of our payments and settlements system is equally important. as the bank of banks, the bangko sentral serves as an effective clearing house for high value inter - bank transactions as it holds cash balances of the banks. for this purpose, the bangko sentral operates a real - time gross settlement system which we call the philippine payments and settlements system or philpass which processes about 2, 000 transactions with a total value of about 300 billion pesos …. daily. this is therefore a vital service as it minimizes settlement risks for high value transactions that may adversely affect the stability of the financial system. i hope that you will continue to support bangko sentral's policies and programs ; in the same manner, you can depend on our support …. if there is convergence on what our respective institutions want to accomplish. indeed, with appropriate programs of cooperation and complementation, the government and the private sectors can unleash the synergy which could sustain growth and development of our economy ; jobs and income for the man on the street ; as well as peace and prosperity for our country. let us therefore work together to sustain our growth momentum and continue to implement our reform agenda. remember, in the face of increasing global competition and millions of filipinos who remain mired in poverty, we either innovate …. or stagnate. let us choose to innovate … together. maraming salamat sa inyong lahat.
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kwesi bekoe amissah - arthur : risk management in well - capitalized banks speech by dr kwesi bekoe amissah - arthur, governor of the bank of ghana, at the launch of the pricewaterhousecoopers ghana banking survey, accra, 10 june 2010. * * * country director and staff of pricewaterhouse coopers ( pwc ), chief executives of banks, invited guests, ladies and gentlemen it is a pleasure to be part of the launch of the 2009 banking survey. the publication of the survey is valuable and contributes to the process of providing a better appreciation of developments in our banking institutions. pwc deserves commendation for producing this document consistently over the last ten years. i am told that investors have found it a useful source of information for making investment decisions ; and in deciding which banks they should do business with. the methodology analyzes the published financial statements of banks ( i. e. information already in the public domain ) and draw conclusions based on parameters such as asset size, deposit liabilities, profitability and capital adequacy. pricewaterhouse coopers gave me absolute liberty to choose my topic. since we are launching a report on banking sector developments and performance, i have chosen to focus on the subject of risk management. from as far away as the united states of america we know the recent financial sector crisis originated from the sub - prime mortgage sector of the banking system. the impact has been felt around the globe and has left, in its wake, major financial institutions on their knees. the developments have affected hitherto remotely related economies and have left lessons for policy makers and bankers. not very far from here, nigeria averted a major crisis in its banking sector in 2009, requiring the central bank injecting liquidity into a number of banks and installing turnaround management teams to steer these banks out of trouble. what lessons are there to learn from financial crisis especially as we re - capitalize our banks to make them stronger and therefore better endowed for effective financial intermediation? are well - capitalized banks necessarily a good thing, especially where this is not complemented by strong risk management? i propose to share with you some perspectives on these issues. rationale for well - capitalized banks the banking system has three major functions : taking deposits, making loans and investing in securities. through its financial intermediation function, banks facilitate capital formation and promote economic growth. however, the ability of banks to eng
and this led to most of the foreign lenders cutting off their credit lines to the bank and recalling their credits thereby creating serious liquidity squeeze to the bank. also, very high executive compensation schemes were being operated by the affected banks which were not commensurate with their operations. the risk and earnings profile of the banks could not support the compensation schemes. non - executive directors of the banks compromised their independence and fiduciary duties to serve as checks on executive directors. this was because rewards such as 9 | page business class air tickets were being granted to them annually. interference by non - executive directors in the day - today administration of the banks weakened the management oversight function of executive directors. some non - executive directors were also acting as consultants to the same banks with no clear mandate, which gave rise to conflict of interest situations. non - adherence to credit management principles and procedures as the banks were heavily exposed to insiders and related parties. there was also no evidence of interest payments on these investments. the investments were therefore impaired, but some members of the board at the time accepted the responsibility to pay off the said amount through a board resolution. diversion of funds to holding companies and their related parties was wide - spread. in the case of one bank, placements could not be traced to the bank ’ s records though some customers showed proof of their investments with the bank. 10 | p a g e irregular board meeting also accounted for the weaknesses in the board oversight. in all of these cases, one thing was clear, and that is, the banks could not delineate themselves from their past practices as finance houses. they followed the same practice of borrowing from high net worth persons at a very high costs without any plans to bring themselves in line with the industry norm. 19. certainly, it is for these numerous reasons that the central bank is seeking, among others, to enhance corporate governance practices as well as risk assessment frameworks across all banking institutions. this will contribute significantly to improve overall performance as well as the reputation of banks and credibility of the entire financial sector. 20. some may ask, what were the banks supervisors doing during all this time with such gross violations going on in the banking sector. 21. upholding the highest ethical standards and professionalism in the performance of our supervision function cannot escape my watch going forward, and i 11 | p a g e demand same from you all. we shall employ an appropriate mix of both on - site supervision and off - site surveillance
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rasheed mohammed al maraj : brief review of bahrain ’ s financial market developments speech by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the tradequest challenge awards presentation and luncheon, manama, 28 april 2007. * * * your excellencies, distinguished guests, ladies and gentlemen, good afternoon. assalam alaikum wa - rahmatullahi wa barakatuh it is a pleasure for me to be here today, and to show my support for the tradequest challenge programme. i should like to take this opportunity to thank all those who have supported this initiative, be they the financial community, the schools, or the participants and their parents. programmes such as these are collective efforts, and require the support of many. however, i should like to thank in particular the bahrain institute of banking & finance and the american association of bahrain, for their efforts in jointly establishing and managing this annual competition. special congratulations are of course also due to the students who took part in this year ’ s competition, for their commitment to learning about the world of financial markets and investment. before we start presenting the students with their well - earned certificates, i hope you will allow me if just say a few words about the significance of this programme, and its relevance to the development of bahrain ’ s financial markets. bahrain, as i am sure you are all aware, has a long and distinguished track record as the leading financial centre in the gcc. today, financial services accounts for almost 27 % of the country ’ s gdp, and creates an equally significant share of high value added employment in the economy. it is no exaggeration to say that the health of the financial services industry is of strategic importance to the continued economic well - being of this country. a key element in our success as a nation in this field has been the emphasis placed on developing our own human resources. international and regional institutions come to bahrain, in part, because there is a relatively strong supply of well qualified bahrainis whom they can hire. in turn, this country benefits from the wealth that is created by these financial institutions, and the training and experience gained in the workplace. fundamental to this human resources equation, is that we have people who understand finance and develop an interest in working in this industry. programmes such as these, therefore, play a valuable role in introducing young people to the world of finance, and hopefully giving them an interest in possibly pursuing a
responsibility for regulating and supervising the banking sector rested with central banks. this reflected, of course, the pattern typically established around the world, with central banks taking on banking supervision as an extension of their responsibilities for maintaining orderly payment systems and monetary policy. in most cases, the regulatory mandates of central banks in the gcc also extended beyond banks, to cover certain types of related non - bank institutions ( such as money changers and sometimes investment firms ). however, insurance supervision was separately regulated by commerce ministries, whilst stock markets ( and their broking members ) were run as self - regulatory organizations. in bahrain, the above model changed in may 2002, when the government announced the transfer of regulation of the insurance sector and capital markets to the bahrain monetary agency – the organization which at the time undertook the functions of a central bank and banking supervisor. this process culminated in september last year, with the passage of new legislation and the replacement of the bma with a new organization – the central bank of bahrain. this was a far reaching reform, creating the first integrated regulator in the region, and bringing together under one roof both prudential and conduct of business regulation for the whole financial sector. in addition to its comprehensive regulatory responsibilities, the cbb very much remains of course a central bank, responsible for systemic stability ( including oversight of the payments system and monetary policy ), as well as for other central bank functions such as currency issue, reserves management and the provision of banking services to government. other gcc countries, of course, have also initiated a variety of institutional changes. sama, for instance, has assumed responsibility for regulating insurance, and a separate capital markets authority has also been established. both qatar and dubai, meanwhile, have established integrated regulators for the separate jurisdictions established inside their territories, although existing regulatory structures largely remain unchanged for the rest of their financial sectors. qatar, however, recently moved regulation of the doha stock market out of the exchange, into a separate qatar financial markets authority. in short, this region is seeing a period of significant regulatory reforms, reflecting a variety of different approaches. however, they all share a common desire to see regulatory standards increased. different countries, of course, need to develop the institutional structures that work best for them, depending on the state of development of their markets and institutional considerations. in our case, we strongly believe that the single regulator model has worked well for us, for a number of reasons. the key advantage for bahrain has been the economies of scale and
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15 : more household debt than ever before ] finnish households have more debt than ever before. in parallel with this, total interest expenditure has fallen throughout almost the entire period since 2000. but now, interest rates on housing loans, too, have started to climb briskly, which narrows the consumption opportunities for many households. the high level of household debt has long been a central concern for the bank of finland in regard to financial stability. a majority of household debt – around three quarters – comprises housing loans and housing company loans. new housing loans are larger and loan periods are longer than before. indeed, more than one fifth of new housing loans are for more than 26 years. [ slide 16 : indirect risks to the economy may be greater than banks'direct credit risks from housing loans ] 5 / 8 bis - central bankers'speeches the bank of finland considers that in terms of financial stability, the stability concerns over household debt arise more through risks for growth in the economy in an indirect manner than directly as housing loan credit risks. higher interest rates, together with an increase in essential consumption expenditure and uncertainty in the labour market, could reduce the financial headroom for households. if debt - servicing becomes more difficult, households might reduce their consumption of goods and services. a contraction in consumption will then be reflected in the readiness of businesses to employ workers. this could add to bank losses from both corporate and household loans. currently, in spite of the decline in residential property prices, there are no signs of a rise in credit risks. the quantity of non - performing loans has remained low, and no growth in risk premia has been observed in bank funding. added to this, the capital adequacy and profitability of nordic banks are comparatively good. based on stress tests performed in recent years, the loss - absorbing capacity of nordic banks is at a good level to meet even a serious crisis in the real estate market. [ slide 17 : financial stability risks increasing – finland's crisis resilience at a fairly good level ] at the end of september, the european systemic risk board issued a warning about increased financial stability risks in europe. the purpose of the warning was to focus attention on the seriousness of the risks and to encourage all participants – and especially credit institutions and supervisors – to be prepared for any problems arising from the materialisation of risks. in finland the banking sector is an important financial intermediary for businesses and households. during downturns and disruptive situations in the economy, it is more
started reviewing its strategy six months ago and won ’ t be finished until early 2020. in our case, i ’ m sure there will be different views about certain aspects, but i hope that we will be able to agree on a common position in the end. will there be greater clarity in the future about what the medium - term inflation aim of β€œ below, but close to, 2 % ” means? some governing council members seem to think that levels of 1. 5 % or less would be acceptable, while others wouldn ’ t go much below 1. 9 %. you ’ ll have to be patient, we haven ’ t even really started discussing it. but i ’ d like to make another point here. the big question at the moment has to be why it is proving difficult to raise inflation. but there ’ s no question that the unconventional monetary policy measures have been successful. when we started taking those measures, there was a risk of deflation. that dangerous situation has been averted ; there ’ s no longer a risk of deflation. does the fact that inflation is low worldwide suggest that the aim should be lower? i don ’ t see any convincing reason to lower our aim. it ’ s also important not to confuse what ’ s happening now with what the medium - term aim should be. 4 / 6 bis central bankers'speeches but are you of the view that the ecb ’ s inflation aim is symmetric? bundesbank president jens weidmann said recently that the current formulation of the objective is not symmetric. there has always been symmetry in the implementation of our monetary policy – we have always acted decisively whenever inflation has shown signs of deviating from our medium - term aim. and it doesn ’ t matter whether it is too high or too low – we act with the same decisiveness. does that also mean that after years of inflation being below the objective, rates will need to be above the level of below, but close to, 2 % for a longer period? that will be part of our discussion of the strategy. there are also discussions about the relationship between monetary and fiscal policy. some people, including renowned experts, have been saying that the strict separation and the independence of central banks was the right approach when inflation needed to be dampened, but that more cooperation or even coordination is needed when inflation is too low. what is your view? monetary and fiscal policy are of course related and interact with one another. but that mustn ’ t affect the
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both traditional as well as new business models, according to the risks the activity poses. for example, in the new payment services bill that mas has consulted on, regulatory requirements for payment activities will be differentiated according to the risks that specific activities pose rather than apply a uniform set of regulations on all payment service providers. regulation comes in when the risk posed becomes material or crosses a threshold. the weight of regulation must be proportionate to that risk. singapore is one of the first jurisdictions to have established regulatory sandboxes where firms can experiment their innovative solutions in a contained environment, with access to a limited pool of actual customers. what we will diligently protect is the trust and credibility in our financial system. we will also be paying closer attention to financial institutions ’ management of cyber - threats and to new forms of financial stability vulnerabilities as digitisation blurs the boundaries across geography and industries. recently, we have created an enhanced role of a chief cybersecurity officer as well as appointed a new chief data officer. i believe there is much we can share and learn from other central banks, financial regulators and even law enforcement agencies, such as our european counterparts. looking ahead finally, there are other areas that should matter to all of us amidst the ongoing transformations in the banking industry. one is the important issue of financial inclusion. in the quest to innovate and as banks develop the sophistication to sharpen the profile of each customer, we should not overlook the need for financial inclusion – especially access to basic banking and financial services for under - served communities. another area is in the responsible use of technology tools. earlier this month, mas announced the setting up of a regulator - industry grouping to co - create a guide to promote the responsible and ethical use of ai and data analytics by financial institutions. this committee is known by its acronym feat – which stands for fairness, ethics, accountability and transparency. this gives you a good idea of its mandate. the key is as technology and data analytics usage become more prevalent, the responsible use of these is equally paramount. conclusion to conclude my remarks, allow me to resurrect a quote from a speech by president kennedy in 1966, which i thought is apt even in current times. [ quote ] there is a chinese curse which says β€˜ may he live in interesting times ’. like it or not we live in interesting times. they are times of danger and uncertainty ; but they are also more open to the creative energy of men
to support the wide range of financial needs related to the belt and road initiative. a. as an international financial centre in the heart of asia and one of the largest offshore rmb centres in the world, singapore can play a key role in financing and advancing belt and road projects, particularly in southeast asia. singapore signed the guiding principles on financing the development of the belt and road during premier li ’ s recent visit to singapore. these principles advocate for inclusive participation, mutual benefits and risk - sharing as participating countries work together to build a long - term, stable, sustainable financing system that is well - placed to manage risks. singapore set up infrastructure asia this year to catalyse stronger partnerships for infrastructure development across the region. infrastructure asia harnesses the networks and collective capabilities of public sector agencies and private sector firms across the region to meet asia ’ s infrastructure needs by ( i ) connecting partners in the 2 / 5 bis central bankers'speeches ecosystem ; ( ii ) building capacity in demand markets ; and ( iii ) providing top - level project advisory to improve bankability. infrastructure asia provides an open platform for chinese ( including shanghai - based ) infrastructure developers and financial institutions to partner players in singapore in regional infrastructure projects. b. furthermore, as infrastructure demand and foreign investments along the belt and road region increase, we expect a boost in demand for commodities and growth in commodity trade. singapore ’ s strategic location in the crossroads of key trade flows has enabled commodity traders in singapore to capture such opportunities. shanghai pudong development bank ( β€œ spdb ” ) opened its first overseas commodity centre in singapore in october this year, providing global commodity businesses with commodity - related financial services and solutions. c. singapore banks are also embarking on bri collaborations with shanghai banks. uob signed a mou with spdb in september this year to serve companies hoping to tap on bri opportunities, providing financial solutions covering investment advisory, cross - border rmb transactions, syndicated loans, project and trade finance, and cash settlement. ocbc bank signed its second mou with bank of shanghai in april this year, leveraging each other ’ s strengths, networks and platforms to support customers in their bri expansion plans, including access to ocbc ’ s funding and risk management solutions for bank of shanghai ’ s corporate clients. this builds on existing cooperation areas under the first ocbc - bank of shanghai mou such as cross - border trade finance, investment banking and treasury solutions. capital market connectivity and rmb international
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, acting as a catalyst for trade. finally, with regard to labour markets, the wage formation process shows signs of increased flexibility and labour market reforms are starting to go in the right direction. overall, the single currency contributes forcefully to more integration and competition, acting as a powerful driver for the further enhancement of the single market and creating an environment which – i am sure – schumpeter would have enjoyed. thank you very much for your attention.
it is important that reforms in network industries are accompanied by an appropriate regulatory framework which ensures non - discriminatory access to the bottleneck infrastructure and more generally, a " level playing field " for all market participants. the quality of the regulatory framework has a considerable impact on the extent to which potential price falls due to structural reforms in network industries will be achieved. another instrument available to reduce distortions to competition is state aid policy. state aid subsidies weaken the incentives for companies to improve their efficiency, enabling the less efficient to survive at the expense of the more efficient. although there are still substantial differences between euro area countries, the overall trend is towards a reduction in state aid levels. another positive development is that the transparency of state aid policies has improved as a result of the publication of a new state aid register and a state aid scoreboard by the european commission. the impact of the euro on these processes, which has led to more competition, cannot be overestimated and goes far beyond the mere abolition of intra - european exchange rates and the introduction of common notes and coins. the single currency opens up the euro area product markets further and will be a major impetus to competition and integration by increasing the transparency of prices across borders. investment will also benefit as euro area companies no longer have to insure against exchange rate movements within the euro area and there are indeed indications that direct investment into the euro area has strongly increased since the start of emu. overall, the euro will give new impetus to the initiatives taken in the 1980s to establish a truly integrated internal market. labour markets progress with labour market reforms has become evident from the increase in employment - intensive growth in the euro area. it is very interesting to note that job creation has held up reasonably well over recent years. during the first three years of emu, some 6 million jobs have been created in the euro area versus 3. 5 million in the us. the unemployment rate in the euro area has declined from almost 11 % in 1997 to slightly more than 8 % in 2001 ( which is still too high ). on the supply side, the employment rate, particularly in the case of women, has increased considerably, along with the proportion of part - time jobs and temporary contracts in total employment. euro area average participation rates are, nevertheless, still below those of the us or the scandinavian countries. the explanations for this job - rich growth lie in structural changes in the labour market and wage moderation. government policies have generally improved labour market performance in euro
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their domestic banking system. policy - makers didn ’ t fully understand the risks associated with new forms of financial intermediation – complex instruments like collateralized debt obligations. and they didn ’ t comprehend how interconnected the global financial system had become, and how easily shocks can be amplified and transmitted. responses to some of these lessons are already being put into practice, and there is considerable supporting research, both at the bank and in academia. at the regulatory level, the g - 20 countries recognized the need to make the world ’ s financial system safer. the financial stability board was given the task of coordinating the development of minimum global standards around capital, liquidity and resolvability, as well as for market infrastructure, to reduce the risk and severity of any future financial crisis. by and large, the fsb has delivered and countries have begun to implement the new standards. on the monetary policy front, central banks must, at the very least, understand emerging financial stability risks when conducting monetary policy. all central banks have upgraded their capacity in this area. the bank of canada now takes a more structured approach to our analysis in our semi - annual financial system review. specifically, we use more and better data to assist our financial system monitoring, backed by deeper conversations and models where appropriate, to make more informed judgments about financial stability risks. we ’ ve added other potential sources of vulnerability, such as the balance sheets of households, companies and banks, to our macroeconomic models. bis central bankers ’ speeches we ’ re also making progress toward a better understanding of how monetary policy actions influence risk taking. for example, when a central bank cuts interest rates to cushion the economy from a shock, the hope is that people will borrow more at that lower interest rate and spend more money. what this means is that financial imbalances are a necessary byproduct of monetary policy action, especially if the action is prolonged, so these additional adjustment dynamics must be fully taken into account when conducting policy. clearly, though, incorporating financial stability into our monetary policy framework remains a work in progress. as a practitioner, it still feels to me like we are adding various rooms onto a house we love, rather than creating a new, elegant and coherent structure. we need to make sure there ’ s enough flexibility and clarity about the role of financial stability in our monetary policy framework. we need to better understand how macroprudential policies – such as mortgage insurance rules – that are aimed at promoting financial stability interact with monetary
##f until 2007, showing how global savings – investment imbalances have played a fundamental role that must not be neglected. 8 these imbalances were ultimately the symptom of the creation of excessive international liquidity by countries like the united states and of excessive savings by countries like china, and were associated with a reduction in the cost of capital and interest rates, in particular in the united states. this spurred an unsustainable boom in consumption as well as excessive risk - taking, both among consumers and financial institutions. these imbalances contributed to the large financial distortions and bubbles in global financial markets, which created the preconditions for today ’ s crisis. neglecting imbalances as a source of risk is not the best way to improve the crisis prevention arm of the imf. how can we expect the international monetary order to develop? and how can we strike a better balance between financing and adjustment? there is a risk that the forces favouring earlier and more effective adjustment of imbalances, and thus helping to avoid financing crises, have been weakened. in the current discussion on the reform of the international financial system, not many are suggesting that the imf should play a stronger role in preventing the accumulation of excessive external imbalances and in fostering more disciplined domestic policies. just to give an example, the decision on bilateral surveillance over members ’ policies, aimed at identifying fundamental exchange rate misalignments, has been modified to allow greater discretion in surveillance, especially exchange rates. this might look like a tactical choice, but i doubt that it will result in a tougher hand for the imf. while emerging and developing countries are requesting a stronger voice in the imf, they also seem to be suggesting that they would like this institution to be less intrusive, imposing less conditionality while at the same time providing more and cheaper financing. advanced economies seem to be supporting this view, having inundated the imf with funds, most of them available with very little conditionality or none at all. this might be appropriate in times of systemic crisis but cannot be sustainable in normal times. some thought should perhaps also be given to the need for a strategy to exit from cheap and unconditional imf financing. overall, most of the imf ’ s shareholders seem to favour making imf financing easier. the idea of enhancing the role of the sdr, or another world reserve currency, goes towards facilitating the financing needs of both deficit and surplus countries
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theory and practice closer together. 5 in general, it seems that investors ’ preferences for different types of assets are affected not just by the risk and return of those assets. equity investors seem to want higher, more volatile returns. they like their equity to be equity - like. so making it safer doesn ’ t reduce its cost as much as it should. and for banks, whose short - term debts are the money used by the real economy, the effect is compounded. depositors want a stable liquid store of value for a rainy day. they don ’ t want equity. so they understandably take some persuading to swap their rainy day fund into bank equity. 6 regardless of its cause, the evidence that higher capital requirements can push up bank funding costs can ’ t be ignored. the costs will be borne by real borrowers – in higher cost of funds, and real savers – in lower returns. in theory, monetary policy may be able to offset the overall effect of that on inflation. but it can ’ t alter the fact that the costs will be higher of matching lenders with borrowers, capital providers with capital seekers, and risk takers with risk hedgers. miles et al ( 2012 ) presents a central estimate that the reduction in the volatility of equity returns and riskiness of debt offsets about half the increase in funding costs that would, other things equal, result from switching debt to more expensive equity funding. elliott ( 2013 ) sets out areas of disagreement in the debate about the economic costs of higher bank capital requirements. the low risk anomaly, whereby lower risk stocks generate no lower and in some cases even higher stock returns than higher risk stocks, is documented for banks by baker and wurgler ( 2013 ). the impact of depositor liquidity preference is discussed in kashyap et al ( 2010 ). bis central bankers ’ speeches that ’ s not just a private cost. it ’ s a social cost too. at the margin, it will force a change in the mix of economic activity. the ability to turn future cashflows into today ’ s investments will be curtailed. spending will replace investment. investment projects will have lower returns. that holds back future economic potential. although it ’ s impossible to be precise, it seems that once a baseline degree of resilience has been established, more capital could actually cost the economy. we estimate that a 100bps increase in capital requirements across a banking system could result in an economic
gdp and 35 per cent of our exports, so it is important. reflecting this, this is my third trip to, and public speech in, perth in the past year. this morning we heard that while the western australian economy is still feeling the effects of a decline in the level of mining investment, there are some positive signs. the level of mining investment has further to fall as some large liquefied natural gas projects are completed. but elsewhere in the resources sector things are looking brighter. sustaining capital expenditure, particularly in the iron ore sector, is picking up with positive spillover effects. higher prices for a number of minerals have also led to increased exploration activity, including for gold and lithium, and an expansion of some existing mines is taking place. for the first time in a number of years, we are hearing reports through our liaison program in western australia that it is difficult for firms to find workers with the right skills, including project engineers and related occupations. business conditions – as measured by surveys – have also risen significantly and are now above average. at our meeting, we also discussed the population dynamics here in western australia. at the peak of the resources boom, annual population growth reached almost 3Β½ per cent, which is very fast. people moved here from overseas and from the rest of australia to meet the needs of your rapidly growing economy. in contrast, over the past year, population growth has slowed sharply, to around ΒΎ per cent, which is almost the slowest of any state in the country. there is now a considerable net flow of people from western australia to the eastern states. this change in population dynamics has had a significant effect on housing markets in western 3 / 4 bis central bankers'speeches australia. the earlier strong growth in population contributed to a sharp rise in housing prices and rents, and then a bit later to a surge in housing construction. with the resources boom now in the past, some of the earlier increases in prices and rents have been reversed and residential construction activity has been low. western australia has seen this type of cycle before, and i expect it will see it again at some point in the future. our liaison, though, suggests that a stabilisation of conditions is in prospect. if so, this should help support consumer confidence and household spending and reinforce the recent more positive news from the resources sector. finally, as i mentioned earlier, we are currently upgrading australia's banknotes. i am pleased to be able to announce that the new $ 50 note will
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capacity utilisation, an increase in per capita employee compensation of 2. 9 % is expected. but it was not primarily my assessment of the need for action which made me sceptical about qe, but more the combination of the need and the instrument at hand – government bond purchases. i do not expect qe to have no impact on inflation. but the effects are difficult to gauge, and it can be assumed that they will be weaker than in the us, for example, because interest rates in the euro area today are already much lower than in the us, especially when the first qe programme was launched. moreover, the funding of us companies is much more capital market - based than that of european businesses, and wealth effects are generally smaller, too. and government bond purchases involve the fundamental risk of mutualising sovereign liability risks via the central bank ’ s balance sheet. while this risk can be more or less ignored for countries with their own currency, it can be a major problem for a monetary union – especially so for one which, like the european monetary union, is not a fiscal union. at the end of the day, it could introduce common liability through the back door. and in this regard, i am a guy who prefers to use the front door. that is to say that it ’ s up to elected governments and parliaments to make such far - reaching decisions. i do acknowledge that the adopted sovereign bond purchase programme partly takes into account some of the concerns related to earlier programmes : only a small part of the programme is subject to risk sharing among the central banks of the eurosystem. additionally, the governing council decided on limits for the eurosystem ’ s purchases of individual bond issues and for its overall purchases of debt of one single country. this is designed to ensure that governments continue to rely on the capital markets for their funding. despite all these measures, which obviously make the qe programme less problematic than earlier sovereign bond purchase programmes which aimed to reduce the risk premia of individual countries, one important risk nonetheless remains : the national central banks will become the most important creditors to their governments, which might ultimately put the independence of monetary policy at risk. the purchases will make life easier for finance ministers. they will not be amused when the governing council considers exiting its ultra - loose monetary policy. and they might be tempted to put political pressure on the eurosystem. in the european monetary union, however, fiscal discipline is absolutely essential because the set - up of
, cooperation and knowledge exchange. today we have the presence of 300 leaders from various sectors including finance, architecture, building and construction engineering, project management and consulting, project development and operation as well as professional services, many of you being the senior management of your leading organisations in the field. indeed, hong kong possesses a critical mass of financial professionals which can support the operations of aiib in areas such as project financing, bond issuance, investment, financial management and foreign exchange management. moreover, hong kong has expertise in project negotiation, works contracts preparation and management, international law as well as professional arbitration services, enabling us to take part in the planning, implementation and operation of such projects. the steadfast implementation of the belt and road initiative also creates opportunities for hong kong to make best use of its strengths as the global offshore rmb business hub and an aspiring infrastructure investment and financing platform. the setting up of iffo would provide a platform for pooling the efforts of investors, banks and the financial sector to offer comprehensive financial services for various infrastructure projects. 1 / 2 bis central bankers'speeches since the launch of iffo by the hkma in july 2016, work has progressed very quickly and significant progress has been made on all fronts. just last week, our list of partners expanded from 41 to 54, bringing in new additions from the insurance, banking and legal sectors, as well as international business council and corporation which are experts in the infrastructure development field. iffo is also an active participant at various industry forums promoting the use of hong kong ’ s platform for infrastructure investments and financing both locally and overseas. this morning, president jin will share with us his views on aiib ’ s operations, project planning and management. this seminar will be a useful platform for constructive dialogues among the financial industry, infrastructure - related business sectors, and aiib, to exchange views on the latest infrastructural development trends, and how we can harness the opportunities arising from the establishment and projects under aiib. i shall now hand over the time to president jin for his most anticipated speech. thank you. 2 / 2 bis central bankers'speeches
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preserve price stability and contravened the singleness of monetary policy. the possibility that financial claims may be redeemed in a different unit of account than the one in which they were denominated at issuance – that is, the euro – was the prime source of panic that fractured transmission of monetary policy a year ago. omts priced that risk out of market values and act as a deterrent against a resurgence of fundamentally unjustified redenomination fears. but their role is cast within a robust framework in which the ecb can fulfil its primary task of ensuring stable prices in steady financial conditions. and the fiscal authorities can take care of their solvency conditions and concentrate on structural adjustment. one concern that has been raised with regard to omts is that they may discourage reform at the national level. quite the opposite is true. omts can be applied only if governments accept policy conditionality that leads to reforms. at the same time, it was the requirement of effective conditionality embedded in omts discourages governments and parliaments from requesting a programme unless strictly necessary. they can either reform without omts and retain economic sovereignty or they can reform with omts but give up some of their economic sovereignty. either way, they have to persevere in their reform efforts. so it is quite misleading to compare omts to historical episodes in which governments relied on central bank support to replace fiscal consolidation. another concern made against omt was that conditionality weakens the independence of monetary policy. the reality is that omt ’ s are not tied to political decisions since the governing council retains its full discretion, even after a country has engaged in a programme. in addition, that same conditionality ensures that the governments remain solvent, which in turn protects the freedom of action of monetary policy. a third argument made against omts suggests that they would reintroduce excessive compression of euro area bond yield spreads, as observed prior to the crisis. this too is inaccurate. bis central bankers ’ speeches omts are designed to keep government bond yields just below β€˜ panic ’ levels, as previously defined, not to bring them down to levels that would somehow help government solvency. as we have seen, the mere existence of omts keeps government bond yields from rising excessively : the market expects that if yields rose too much, governments would apply for the programme and ecb purchases would bring yields back down. omts have therefore had a self - fulfilling downward effect on yields, just as
all other indicators show that our monetary policy is working : credit is improving significantly, both in the volume and cost of loans, and economic activity is recovering. not strongly enough, but it is steadily increasing. bis central bankers ’ speeches you said you are ready to act with all available instruments, if needed. should you be doing more? and which instruments, as you have ruled out helicopter money and interest rates seem near their lowest levels? let me first reiterate that helicopter money is not something we are discussing or even considering. we announced a very strong package in march and have not implemented all the measures yet. all conventional and non - conventional instruments are available, but we are not having that discussion now. you have relied on negative interest rates, which by your own admission are β€œ complex ” and have a long - term impact on the financial sector. they are also harshly criticised in germany … we need to look beyond banks. our action is not about supporting any particular industry. and even for banks there is evidence that the net interest margin has been rising, not falling. the effect of a low and flat yield curve is offset by expanded volumes and lower risk, which reduces loan loss provisions. this will continue with the recovery. in the long term, if interest rates continued to be this low, that would not be good news for the euro area. but that has nothing to do with monetary policy. it would mean that growth and potential growth had not picked up, which would affect the real return in the economy, the return of investment projects. we don ’ t want to be in that situation. that is why the eurozone needs to support investment as much as possible. monetary policy can only contribute to this. we have seen some public initiatives, like the juncker plan, that go in the right direction. the imf is more outspoken than the ecb in asking countries with fiscal space, i. e. germany, to invest more. we agree on that. and we have said that fiscal policy and structural reforms should support growth, to alleviate the burden on monetary policy and enhance its effectiveness. fiscal space can be used for investing in socially valuable projects or, for example, cutting taxes on labour. but we are not in the business of giving detailed advice to governments. that is the job of the european commission. on germany, we note that they are spending money to address the flow of refugees. countries that do not have fiscal space, on the other hand, should not try to
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yves mersch : dinner speech at eui - nomics speech by mr yves mersch, member of the executive board of the european central bank, at eui - nomics, florence, 24 april 2015. * * * ladies and gentlemen, the crisis in the euro area has painfully exposed the weaknesses of the euro area ’ s institutional set - up. a lot of progress has since been achieved in making its governance structure more resilient. but further action and reflection are needed. in theory several ways of further developing this governance structure are conceivable. they range from loose cooperation among member states to the creation of a federal state ; from high levels of discretion to strictly binding rules ; and from legitimacy that mainly stems from national elections to legitimacy at the european level that is strong enough to speak of a political union. i am aware that across this wide range some ideas are politically less feasible than others. and it is up to those democratically legitimised to do so to decide how to adjust the union ’ s governance structure to best meet the objectives of the eu as enshrined in our treaties. in my remarks today, i will focus on how the different dimensions of further developing the euro area ’ s governance structure fit together, bearing in mind that they influence each other. these dimensions are : β€’ first, the method of governance, β€’ second, the source of legitimacy, and β€’ third, the decision - making methods. getting governance right in 1992 europe ’ s heads of state and government committed to creating a monetary union. sharing a currency implies sharing sovereignty. it requires further integration, including governance structures which go beyond those of a single market which might work based on loose coordination among independent nation states. striving for supranational solutions in those policy areas that affect the smooth functioning of a monetary union would thus have been the logical consequence of the maastricht commitment. but we all know that reality often takes no notice of logic. and we have seen the consequences. today, financial policy is more compatible with the requirements of a monetary union than it was at the beginning of the crisis. we now have a european approach to banking supervision and resolution, independent of any national bias. and the creation of a capital markets union will help to better integrate europe ’ s financial markets. obviously, an integrated financial policy is an important complement to a single monetary policy. but economic and fiscal policies also play a crucial role in the smooth operation of a monetary union.
democratic legitimacy. the european parliament could, for instance, assemble in a variety of compositions. going for intergovernmental rather than federal solutions thus generates path dependencies. following the intergovernmental path in monetary policy would have led to the implementation of the uk ’ s proposal back in 1990 of parallel competing currencies rather than a single currency. the perceived lack of input legitimacy in the current institutional set - up also implies a high standard of output legitimacy ; that is, policy - makers need to generate outcomes that are in the voters ’ interest. if they fail to do so, they risk putting the stability of monetary union into question. rules versus discretion – a question of space and time? a monetary union is stable as long as its members find it more beneficial to be in that union rather than outside it. this stability is easier to achieve if everybody plays by the same rules. in a monetary union, economic well - being is not simply a domestic question. member states ’ economies influence each other, which is why a monetary union is more attractive if all its members are prospering. accordingly, europe ’ s decision - makers have given themselves common rules to guide fiscal and economic policies. bis central bankers ’ speeches these rules have repeatedly been broken. this suggests that while decision - makers favour a common set of rules to generate trust and credibility among member states, they have sometimes preferred more flexibility than the rules allow. in essence, we are facing an issue of time - inconsistent preferences : in the long run, governments have an interest in strict rules that foster trust and credibility among member states. in the short run, they might well prefer more discretionary decision - making that allows them to flexibly adapt their policies to circumstances. in addition, election cycles sometimes encourage myopic policy choices that are not necessarily in the union ’ s long - term interest. this is especially relevant in the eu ’ s multilevel governance framework with staggered election cycles at the various national and subnational levels. i respect that governments are bound by their voters ’ will. that will might well differ between jurisdictions in general, and between creditors and debtors in particular. at the same time, i see a risk that governments are making it too easy for themselves when they claim that they cannot make any further concessions at international level because of domestic political pressures. survey data shows that an unquestioning belief in opinion polls is not necessarily in the longterm interest of voters. for instance, support for the euro
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speech urgent and vitally important : 2023 as a key milestone in stepping up the management of climate and environmental risks keynote speech by frank elderson, member of the executive board of the ecb and vice - chair of the supervisory board of the ecb, at the foreign bankers ’ association ( fba ) 30th anniversary amsterdam, 27 march 2023 thank you for inviting me to the fba ’ s 30th anniversary event. as i speak to you today, the global financial system is going through turbulent weeks. in the confluence of multiple challenges, often the very urgent trumps the similarly vitally important. it is tempting and frankly quite human to focus the attention on the most immediately pressing challenges. climate - related and environmental ( c & e ) financial risks might thus not seem the most obvious topic for a keynote speech at this moment. however, exactly one week ago the intergovernmental panel on climate change ( ipcc ) published its synthesis report, according to which temperatures have already risen to 1. 1 degrees celsius above pre - industrial levels. this worrisome observation reminds us that addressing the increasing risks from the ongoing climate and environment crises is both highly urgent and vitally important. this is the reason why in this keynote i want to stress that β€œ we have no time to lose regarding the sustainable transformation ” ; that we need to β€œ step up the global ambition to meet the paris agreement goals ” ; that our world needs β€œ more ambition to accelerate the change towards a net - zero economy ” ; and that β€œ financial institutions can and must play a key role in driving the world towards net - zero carbon emissions ”. i want to talk about the importance of β€œ aligning credit portfolios with the objectives of the paris agreement ” and β€œ managing climate - related risks as a priority action ”. these words don ’ t beat around the bush. these words express clear ambitions. these words cut to the heart of the matter. however, these words did not come from the ecb, the basel committee on banking supervision ( bcbs ) or the ipcc. these are your words. and by this, i mean literal quotes from the ceos of banks that have signed the net - zero banking alliance – a group committed to achieving net - zero emissions by 2050, in line with the paris agreement. most of these banks are also members of the fba. these words show that you want to play a pivotal role in the transition to net zero. these words articulate your ambition
to make climate - related and environmental considerations a key pillar of your strategy. in this keynote speech, i would like to give you an update on where banks under ecb supervision currently stand relative to their stated ambitions, and what still needs to be done to adequately address c & e risks from a prudential point of view. but first, a few words about regulators and supervisors. just as it is the case for banks, a broad global consensus has also emerged in our community on the need to make c & e considerations an integral part of our dna. evolving international supervisory consensus regarding c & e risks let me first very briefly revisit the simple guiding principle driving prudential regulators around the globe : ensuring that no material risks are left unaddressed. it is enshrined in the bcbs core principles and has been a legal requirement for decades. according to this principle, banks must identify and adequately manage the risks they are exposed to. just as for any other material source of risk, this also holds true for c & e risks. to be clear, it is not for us as supervisors to tell banks how green their lending policies must be. however, we insist that not taking into account the transition towards a more sustainable economy is no longer compatible with sound risk management. to this end, the ecb has strongly supported a rapidly growing global coalition in acknowledging that c & e risks form an integral part of our mandate. a key motivation to address this risk at the global level was to create a level playing field for banks to tackle what everyone agrees is a material source of financial risk. to ensure that european banks are indeed in a position to manage c & e risks, as early as in 2020 the ecb published a guide on c & e risks [ 1 ] for banks. the guide demonstrated the ecb ’ s commitment to making the financial system more resilient to these risks. it set out 13 supervisory expectations for how the banks under our supervision should integrate c & e risks into their business models and strategies, governance and risk appetite to increase the resilience of their portfolios. in doing so, we were moving very much in lockstep with the global principles for supervising c & e risks, building on the prevailing best practices identified by the global network of central banks and supervisors for greening the financial system ( ngfs ). during the two years following the publication of the ecb supervisory expectations, we conducted several supervisory exercises on banks ’ approaches to managing
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( ii ) introduce a regime of macro - prudential indicators and a framework to be used as an early warning system for an emerging crisis ; and ( iii ) formulate agreed strategies for the timely and orderly intervention into the affected institutions so as to limit the impact on the regional financial system. while we can never rule out another regional financial crisis we can certainly be more prepared than we were, when it happens again. let me end where i started with reference to the movement – occupy wall street – i think there is a message there for us ( and i think that public reaction to the clico crisis underscores this message ). the message is that banks and other financial service industries have a responsibility to the country ’ s development and a sacred obligation to consumer wellbeing, even as they keep an eye on their bottom line. i think that regional regulators need to listen to and be responsive to the voices of consumers of financial services if trust in the regional financial system is to be maintained and strengthened. thank you. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches
could potentially invest about $ 1. 1 billion in equities, if they so chose. they have not done so because of their own investment preferences. this proposed scheme would free up another $ 1. 5 billion for equity investments. this amount compares with $ 700 million which was taken out of the equity market by pension funds since the end of 2005. in our discussions with the stakeholders it was felt that pension funds desirous of making use of this option should ( i ) prepare an investment policy, in accordance with the central bank ’ s guidelines on prudent person approach to investment and lending which was issued in may 2005 ; and ( ii ) submit quarterly reports to the central bank. the proposed approach – which is a liability - based approach – is not without its implementation problems. a major implementation challenge will be to ensure the accuracy of the liability data and consequently the calculation of the pension fund ’ s surplus, on an ongoing basis. liability information will always be out of date given that investment management operates on a continuous basis but actuarial valuations are done at fixed dates, typically once every three years. it will be very costly ( and a major challenge ) to require annual actuarial valuations. however, a possible fall - back will be to operate on the basis of estimated annual liability figures ( following the three - year actuarial exercise ), based on the assumptions utilized to produce ias 19 figures ( that ’ s the calculation of the pension surplus that feeds into the sponsoring company ’ s annual balance sheet ). one would need to examine the feasibility and implications of using this estimation procedure more carefully. another issue is that as of now, there is no standardized actuarial regime in trinidad and tobago, for pension funds. actuarial liabilities depend on the actuarial methods and assumptions used to determine them and as you know, there is a range of acceptable methods and assumptions. this has important consequences if liability values are used as a basis for equity limits. let me end with some thoughts on considerations to be taken into account in the preparation of the permanent investment regime for pension funds ( the new legislation that we expect to have in place in a period of eighteen months to two years ). the current orthodoxy is that pension plans should be free to invest as much or as little as they want in equities provided that it is done on a β€œ prudent person ” basis and is done within the framework of a proper investment policy. this investment policy should
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at 6. 6 % in october 2013, slightly down from 6. 7 % in september. or they diversify away from short - term deposits and marketable instruments towards better remunerated – but riskier and less liquid – instruments. to the extent these instruments are outside m3, this dampens the growth in the broader monetary aggregate. bis central bankers ’ speeches on a positive note, we are observing some strong net inflows of capital from outside the euro area that support monetary dynamics. since these inflows are directed at both, stressed and non - stressed euro area countries, they help mitigate financial fragmentation. at the same time, it remains important to reinvigorate sources of money creation also from inside the euro area as the recovery takes hold. in this context, we have to acknowledge that the provision of credit to the real economy continued to contract, even if the pace of that contraction has levelled off recently. the annual growth rate of loans to households stood at 0. 3 % in october, broadly unchanged since the turn of the year. 1 at the same time, the annual rate of change of loans to non - financial corporations was – 2. 9 % in october, compared with – 2. 8 % in september. but on the other for larger firms other sources of financing have been more available. these weak loan dynamics for non - financial corporations continue to reflect primarily their lagged relationship with the business cycle, the overall heightened credit risk and the ongoing deleveraging and overall adjustment of financial and non - financial sector balance sheets, also related to past excesses. the ecb ’ s comprehensive balance sheet assessment, including asset quality review and stress test, should lead to greater clarity on the state of the banking sector. combined with appropriate resolution strategies and backstops, this will strengthen banks ’ balance sheets and ultimately improve the prospects for bank lending in the future. implications for monetary policy how should monetary policy act in these conditions? assessed against our price stability objective, the subdued inflation outlook, on the back of weak economic and monetary dynamics, clearly warrants an accommodative stance. it is against this background that we lowered rates in november. and it is against this background that we expect our key interest rates to remain at present or lower levels for an extended period of time. taking stock of the effects that our recent policy measures have had on economic and financial conditions, we see positive signs emerging. the november rate cut has been followed by a pronounced and persistent
mario draghi : europe and the euro – a family affair keynote speech by mr mario draghi, president of the european central bank, at the conference β€œ europe and the euro – a family affair ”, organised by the bundesverband der deutschen industrie and bundesvereinigung der deutschen arbeitgeberverbande, berlin, 16 september 2013. * * * ladies and gentlemen, thank you for inviting me to speak to you today. it is a great pleasure to be part of an event that brings together entrepreneurs and family businesses from across the euro area. such a gathering reflects many of the reasons why europe established a single currency in the first place – to deepen the integration of our economies by making it easier for firms and households to exchange across national borders ; to encourage the small - and medium - sized enterprises that are so important for growth and job creation ; and to give citizens across europe an impetus to work together. reading the resolution that you plan to adopt at this conference, i am very encouraged by the determination that you show to take the euro area forward – and i naturally support your central objectives of promoting sustainable growth. today, i would like to share with you some thoughts on how to achieve sustainable growth in the euro area from an ecb perspective. there are two main components. the first component is stabilising the euro area, as without a stable foundation there can be no growth. the second component is strengthening the euro area – by ensuring sustainable economic policies in all member countries, by increasing the competitiveness of our economies and by completing the institutional architecture of economic and monetary union ( emu ). my main message is that we have made significant progress on the first step, stabilising the euro area. but there is still work to do to transform this achievement into higher growth and employment. strengthening the euro area through sustainable policies, higher competitiveness and stronger common institutions is therefore our priority for today. stabilising the euro area let me begin by reviewing the measures that have been taken to stabilise the euro area. last year, the euro area faced difficult circumstances. fears about extreme events were leading to severe tensions in financial markets. borrowing costs for some governments had risen to very high levels. and market sources of financing for banks in some countries were drying up : for example, between april and july 36 billion euro of spanish bank bonds matured, but no more than half a billion euro could be newly issued during that period
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the assumption that the snb policy rate is 1. 25 % over the entire forecast horizon. without today ’ s rate cut, the forecast would have been lower. global economic outlook let me now turn to the global economic outlook. global economic growth was solid in the first quarter of 2024. in europe, the economy gained momentum somewhat following the stagnation of previous quarters. in the us, economic activity remained robust despite a slowdown in growth. inflation largely moved sideways over the past months, and remained above central banks ’ targets in many countries. however, the underlying inflationary pressure continued to page 2 / 6 zurich, 20 june 2024 thomas jordan, martin schlegel and antoine martin news conference decrease slightly. against this background, some central banks eased their monetary policy for the first time following the tightening cycle of the past two years. however, monetary policy remains restrictive in many countries. inflationary pressure abroad is likely to continue to ease gradually over the next quarters. at the same time, the global economy is likely to pick up somewhat. consumers ’ purchasing power should gradually recover and the dampening effect of the monetary policy tightening should ease slowly. however, for the coming quarters we expect only moderate growth in global economic activity by longer - term comparison. our scenario for the global economy is still subject to significant risks. inflation could remain elevated for longer in some countries, necessitating a tighter monetary policy there than expected in our baseline scenario. equally, a renewed increase in geopolitical tensions could result in weaker development of global economic activity. swiss economic outlook how does the economic situation look in switzerland? gdp growth was moderate in the first quarter of 2024. the services sector continued to expand, while value added in manufacturing stagnated. this stagnation was above all attributable to the subdued momentum in the manufacturing sector globally. there was a further slight increase in unemployment. the utilisation of overall production capacity was normal. growth is likely to remain moderate in switzerland in the coming quarters. we anticipate gdp growth of around 1 % this year. in this environment, unemployment is likely to continue to rise slightly, and the utilisation of production capacity is set to decline slightly. over the medium term, economic activity should improve gradually, supported by somewhat stronger demand from abroad. we currently expect growth of around 1. 5 % for 2025. our forecast for switzerland, as for the global economy, is subject to significant uncertainty. developments abroad represent the
with the rise in interest rates, growth in mortgage lending has declined and price momentum on the real estate market slowed. at the same time, however, mortgage affordability risks persist. moreover, the vulnerability of the real estate market to price corrections remains elevated. third, last year ’ s bank crises highlighted liquidity risks. even when banks have large liquidity buffers, they can still face substantial liquidity risks due to their short - term funding. banks finance themselves largely through deposits, which can be rapidly withdrawn. regulations should provide incentives for longer - term funding. in addition, banks should prepare more collateral for obtaining liquidity assistance. more stable funding and better preparation for obtaining liquidity strengthen the resilience of the banking sector. and finally, let me turn to operational risks in the financial system. banks and financial market infrastructures are increasingly exposed to cyber risks. moreover, a rise in the outsourcing of functions to third - party providers can lead to banks becoming more dependent on unregulated providers. it is important that financial market participants adequately manage their operational risks. i will now hand over to antoine martin. page 4 / 6 zurich, 20 june 2024 thomas jordan, martin schlegel and antoine martin news conference continuation and expansion of project helvetia pilot i would now like to give you some news about the snb ’ s project helvetia iii. as you know, since 1 december 2023, the snb has been providing wholesale central bank digital currency ( wholesale cbdc ) as part of this innovative project. it issues this wholesale cbdc on the regulated six digital exchange ( sdx ), which uses distributed ledger technology. digital ( token - based ) swiss franc bond transactions can thus be settled in central bank money directly on sdx. with project helvetia iii, the snb is playing a globally leading role in deploying wholesale cbdc in a live production environment. six banks are participating in the current project helvetia iii pilot : banque cantonale vaudoise, basler kantonalbank, commerzbank, hypothekarbank lenzburg, ubs and zurcher kantonalbank. these banks have to date settled six digital bond issuances. the cantons of basel - stadt and zurich, the cities of lugano and st gallen, as well as ubs and the world bank have each issued a bond on sdx as part of the pilot project
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chuchi g fonacier : opening remarks - pesonet media forum opening remarks by ms chuchi g fonacier, deputy governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the pesonet media forum, manila, 7 august 2018. * * * ppmi chairman justo ortiz, our partners from e - peso headed by chief of party mamerto tangonan, deputy governor chuchi fonacier and fellow bsp colleagues, representatives from the participating financial institutions, with their pilot corporate users, friends from the media, guests, ladies and gentlemen. good afternoon and welcome to the pesonet media forum. three years ago, we had a vision : for every filipino to have easy access to accounts to safely make payments and receive or transfer funds to other accounts anytime, anywhere, at a reasonable price, from any digital device. thus, the national retail payment system or nrps was envisioned to create an interoperable payment ecosystem that is safe, efficient, and affordable. through collaborative efforts of the bangko sentral and the industry, we have achieved significant progress. in november 2017, we have transitioned batch interbank fund transfer service of the philippine clearinghouse corporation ( pchc ) into pesonet, allowing funds to be received by the beneficiaries, in full amount, within the day. tagged as a viable electronic payment alternative to paper - based checks, pesonet is one of the achs prioritized for implementation by the bangko sentral. pesonet holds a lot of promise, given its potential to be an efficient channel for collections and disbursements by government and corporate users. with pesonet, we can achieve lower cost, better liquidity management and increased economic activity through immediate availability of funds. for corporates, in particular, some use cases are supplier payments, payroll and loan and dividend payouts. since the launch of pesonet, the bsp has turned over the reins to the industry through the philippine payments management inc. or ppmi, which includes the pesonet steering committee. in support, the bangko sentral now provides active oversight and guidance through a regulatory environment that promotes the growth of electronic payments and, ultimately, the development of a safe and efficient national payment system. in today ’ s forum, we shall have the opportunity to listen to progress updates from the industry and learn from the stories of pilot pesonet
. the bank of albania judges that the central projection on total revenues is acceptable, although remaining on the upside of our expectations. in the expenses side, the 2023 draft budget forecasts public expenses at the level of all 687 billion, or 31. 6 % of gdp. this prediction factors in the increase of wages and pensions, the rising costs of debt servicing, maintaining a high rate of capital expenses, and the significant reduction of subsidies to the energy sector, underpinned seemingly by the expected improvement of domestic production and the reduction of prices in international markets. in principle, the bank of albania supports a consolidation process led by the growth in budget revenues. this action, which is based on the continuous elimination of informality and tax evasion, boosts competition and efficiency in the economy. it also preserves the space necessary for public spending, particularly for emerging countries, 3 / 6 bis - central bankers'speeches which are in the process of converging to the eu standards as well, such as albania. simultaneously, we support a controlled growth of current expenses in the short term, to address - in a targeted manner - the shock of inflation to the people most in needs. however, the bank of albania estimates that the balance of risk in the budget is on the side of deficit expansion. these risks stem from the downside risks on economic growth and the realisation of forecasted revenues, as well as the uncertainties of predictions related to the degree of improvement of taxation efficiency and the balances of the energy sector. to address these risks, the bank of albania suggests : to provide a higher level of contingency funds in the budget, in order to increase operational efficiency and implement the spending plan, as a priority ; to continuously monitor the performance of the financial balance of the albanian energy sector, and to intervene in a timely manner in order to avoid potential costs springing from rising prices in foreign markets or production issues in the domestic market ; to regularly monitor the performance of revenues and the public investments plan, in order to take the measures that keep the budget deficit within the planned parameters. 2. strengthening the effectiveness and sustainability of public finances the efficiency and flexibility of the fiscal policy are the two most desirable features of public finances. the efficiency of fiscal policy means to establish a direct balance between its redistribution function - the fiscal instruments which mitigate social inequality and protect the vulnerable members of society - and its function as an instigator of economic development. the flexibility of public finances implies their
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india as well as states while considering fiscal responsibility legislations. the point of harmony between fisc and monetary policy is, therefore, well taken and i would stress, on the basis of our experience in india, the value of coordination between fiscal and monetary authorities in matters of structural transformation, specially legislations relating to the economy. thirdly, on the emphasis placed upon the tool of short - term interest rate, the real interest rate is, in some ways, an outcome of policy implementation in containing inflation expectations. shifts in inflation expectations are indeed the proximate cause of the changes in the mean level of inflation and the policy makers do, therefore, focus on maintaining credibility by carefully monitoring inflation expectations for any indications that they are rising. this forward - looking approach has helped india in bringing down inflation rates from over eight per cent to about four to five per cent in recent years. there is also a need to recognise the importance of inflation perceptions. in other words, if the prices of commodities, which are purchased frequently, rise, the perception of inflation would be different from say, a rise in the price of television set. while recognizing the overlap, the distinction between inflationary expectations and inflation perceptions in the context of inflation policy is worth bearing in mind. for example, inflation perceptions tend to harden if prices of frequently purchased goods increase. there is an interesting issue here on delicate distinction between monitoring and influencing inflation expectations on the one hand and giving forward indication on the other. in practice, it is a delicate task to make such distinction but it is critical to bear such a distinction in policy - making and communication. as governor mervyn king eloquently argued in his speech yesterday at the lord mayor ’ s banquet in the city, there are dangers of a central bank trying to give forward guidance in this highly uncertain world. governor king said, β€œ the monetary policy committee ( mpc ) reaches a new judgment each month, made afresh in the light of all the new information about the prospects for inflation. we don ’ t decide in advance. so trying to give direct hints on the path of interest rates over the next few months risks deceiving financial markets into believing there are definite plans for the next few months when no such plans exist ”. in fact, the fed announced a few days ago that chairman ben bernanke had established a subcommittee to examine a number of communications issues. more generally, the appropriateness of a central bank doing the thinking on course of markets for the market -
development. what will the exchange rate do? under the floating exchange rate regime, the sri lankan currency can no longer be regarded as a steadily and continuously depreciating currency. with the maturing domestic foreign exchange market, the exchange rate is now more responsive to, and determined through, market forces of supply and demand, while the intervention by the central bank is limited to mitigate excessive volatility in the market and to build up official external reserves. the stabilization of the sri lanka rupee utmost underlines the need for the export and import competing sectors to focus more on productivity improvements and market access in order to maintain external competitiveness. instead of waiting for the exchange rate to depreciate and then for our businesses to become competitive, it is time for all of us to improve our productivity in whatever manner we can. the garment sector, i hear is trying to gain from higher productivity and also through cost efficiencies. how does inflation and productivity affect each other? increased productivity is an important prerequisite to achieve low and stable inflation levels in the long - run. the lower productivity allows cost increases that flow through to product prices and thereby raises inflation. therefore, the lower productivity growth thus represents a negative supply shock that generates inflationary pressures. in such context, it is necessary to pay due attention to improving the productivity in order to prevent potential inflationary pressure associated with high income arising from faster nominal growth and cost - push factors that raise the cost of production. the long run containment in inflation necessarily relies on containment of monetary expansion and increase in production in the country, particularly by improving productivity. as the central bank, what we can do? obviously we cannot produce goods or services for the consumption of the economy, but certainly we can create the right conducive environment enabling the country ’ s economic performance. why should the central bank be interested in productivity? our role is to maintain economic and price stability and financial system stability. we also provide necessary payments and settlement infrastructure. we advise the government in economic affairs and policy making, and we provide important agency services such as exchange control, public debt management, provident fund management and regional development activity. in all these functions, our mission is to β€œ contribute to sri lanka ’ s prosperity ”. at the same time, the central bank widely pronounces the theme of β€œ success through productivity ”. but, obviously this cannot be done by ourselves … the success through productivity needs a consolidated national effort. that is why
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60 % since their trough in 2009, outperforming euro area exports as a whole. Β· the volume of tradable goods and services in the economy increased cumulatively between 2010 and 2017 by approximately 14 % relative to non - tradables in terms of gross value added. 3. the outlook for the greek economy following the stagnation of 2015 – 2016, gdp growth returned to positive territory in 2017 ( 1. 5 % ) and picked up to 1. 9 % in 2018. recent real gdp data point to continued expansion in the second quarter of 2019 ( 1. 9 % y - o - y ). thanks to the improved economic conditions and to the reforms implemented since 2010, the unemployment rate, though still high, fell to 16. 9 % in the second quarter of 2019, from 27. 8 % at the end of 2013. looking forward, the bank of greece expects that economic activity will remain on a positive growth trajectory, expanding by 1. 9 % in 2019 ( that is by 2. 3 % year - on - year in the second semester of 2019 ) and above 2 % in 2020. 3 / 14 bis central bankers'speeches the outlook is subject to downside risks, related both to the external and the domestic environment. the global growth and trade slowdown due to the imminent trade war could affect export growth more markedly, while the disorderly brexit, geopolitical tensions and the recent increase in oil prices are further significant downside risks. a possible sharp correction in global capital and financial markets could increase the cost and reduce the availability of funding, particularly for the private sector. there are also downside risks on the fiscal front, associated with ongoing court rulings on pension cuts, which could weigh on debt sustainability. in addition, an exacerbation of the refugee crisis could hurt tourism and trade. however, there are also domestic opportunities, relating to a rapid implementation of structural reforms in greece and the reduction ( both direct and indirect ) of the primary surplus fiscal targets. the fact that greece still lags behind its peers and competitors in almost all indices of structural competitiveness, is a huge opportunity for a rapid catch - up which should be exploited. 4. future challenges despite the progress made so far, major short - and medium - to long - term challenges and crisisrelated legacies remain. a ) medium - to long - term challenges the main medium - to long - term challenges are the following : Β· the high public debt (
an exceptionally strong pace, but the external sector was subtracting from growth. inflation at this time was also above 3 per cent. even so, we did not use monetary policy to rein in the rapid growth of domestic demand because, for the economy as a whole, growth was not excessive and was not threatening our inflation objective over the medium term, despite being above it in the short run. while monetary policy is directed at the economy as a whole, it does not mean that we have to direct an equal amount of attention to each of its components. those parts that are obviously exhibiting a serious imbalance will attract more of our attention than those that are relatively well behaved. this explains why we have spent so much time talking about, and researching, the excessively rapid growth in housing credit and, until recently, house prices. while other economic variables were more important for the overall macro - economic outlook, for example consumption and wage growth, their behaviour was not as clearly aberrant and therefore not in need of such intensive study. the forecast for gdp growth in 2004 that i presented before is based on the view that domestic demand will slow from its former rapid pace, but at the same time the subtraction from growth due to the external sector will gradually diminish. consumption has recently slowed a bit, although it continues to be supported by strong employment growth and will benefit from the tax cuts later in the year. business fixed investment, particularly in building and structures, will add to growth but not to the same extent as in recent years. residential investment is expected to subtract from growth and government spending will add to it. overall, expected gdp growth of 3ΒΎ per cent would be a good outcome. at this stage, we are not assuming a significant drought effect over the coming twelve months, but this remains a downward risk, given the dry conditions prevailing in some parts of the country so far this year. on the inflation front, we do not see a problem over the next twelve months. beyond that, the picture is of necessity more difficult to quantify. last time we met we were slightly troubled by the fact that inflation in the non - traded sector was over 4 per cent, and that if this continued it might imply a medium - term outlook for inflation somewhat above 3 per cent. this is still a risk, but we have taken some comfort from the fact that some of the sectors that were pushing it up - such as house - building and property services - should slow as
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##bratory fireworks of 30 april still fresh in our minds, is the eu enlargement and the future entry of our new member states into the euro area. this represents challenges, but it will also bring major opportunities for our european economy ; if one remembers the concerns expressed when spain and portugal joined the european union in 1986, and if one considers all the benefits that this integration brought to europe as a whole, there is certainly room for hope and high expectations with this new enlargement. ladies and gentlemen, i thank you for your attention.
large. this affirmation has often been reinforced by the granting of operational independence to the central bank to achieve that goal most effectively. an important effect of such public acceptance of price stability is that it erodes the standing of those who would direct central bank action toward other ends. in such an environment, workers, businesspeople, and investors can make plans with the expectation that nominal magnitudes will be predictable and so devote their attention to more productive matters. for the european central bank, this framework was established by treaty. in most other instances, the adoption of an inflation target involved laws and mutual understandings, not constitutional changes. the early adopters of inflation targets were parliamentary democracies, which is not too surprising given that in such a system a single branch of government can enact laws and put them into effect. with regard to an inflation goal, the parliament can erect the formal apparatus and the finance minister can serve as the government's point of contact with the central bank. the system in the united states is different in that two independent branches of government are responsible for economic policy making, making agreement on a single goal problematic. moreover, those two branches have already spoken as to the appropriate aim of the nation's central bank : the congress, in a law the president signed, has given the federal reserve a dual mandate that directs us to foster maximum employment and stable prices over time. this instruction is not an accident of history, in that, in the past, the congress has shown no appetite to amend its legislation. nor is this instruction unreasonable, in that the dual mandate has come to be interpreted as assigning us the responsibility for attaining price stability in the long run, which will bring with it maximum employment, and of being mindful of resource utilization in the succession of short runs that make up the long run. the dual mandate seems proper and fitting, given that economic costs are incurred both by having inflation stray from its long - run goal and by having output deviate from the economy's potential to produce ; and it seems to produce results not too different in practice from those associated with central banks that are flexible inflation targeters. as i said earlier, anchoring expectations has value, in that it makes planning easier, reduces resources spent on predicting and protecting against unexpected variations in nominal magnitudes, and grants a central bank greater scope to lean against fluctuations in output while keeping inflation contained. the latter is particularly attractive given our dual mandate, in that better - anchored inflation expectations
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jerome h powell : opening remarks opening remarks by mr jerome h powell, chair of the board of governors of the federal reserve system, at the gender and the economy conference, a symposium hosted by the division of consumer and community affairs, board of governors of the federal reserve system, washington, d. c., ( via webcast ), 8 november 2021. * * * good morning. i am pleased to welcome everyone to today ’ s conference on gender and the economy. thank you for being here, for participating, and for lending your expertise on this important topic. we have gathered an impressive lineup of speakers and panelists, who will address a range of timely and important issues. to open the conference, i will give a brief tour of the important research on display here, then discuss how the pandemic has affected the economy along gender lines. research the speakers and panelists will be exploring a wide range of topics, from a historical review of gender issues and the economy to how someone ’ s education options β€” and the financing of those choices β€” affect that person ’ s early career and financial stability. speakers and panelists will also be looking at the influence of family and caregiving on career advancement and will discuss timely topics of wealth and retirement. the pandemic and gender the pandemic widened deep - rooted inequities in our economy. along racial, gender, and socioeconomic lines, those least able to bear it, unfortunately, were those who were most affected. women make up the majority of frontline workers, who have been under substantial strain β€” and subject to personal risks β€” during the pandemic. additionally, women took on the majority of caring responsibilities, for older relatives and children alike. as schools closed and childcare services shuttered during the worst of the pandemic, that added responsibility and stress made working more difficult for some and took many away from their jobs. these burdens are real and have been an additional challenge during an already challenging time. in a reversal of previous recessions, women suffered more from job losses in the covid - 19 recession than men. in april 2020, the unemployment rate for women was 16. 1 percent, compared with 13. 6 percent for men. the gap persisted until september of that year, and while it has since reversed, it does not account for the many women who left the workforce entirely. 1 increased childcare responsibilities during the pandemic also affected many parents ’ working lives. mothers of small children
ben s bernanke : some thoughts on monetary policy in japan speech by mr ben s bernanke, member of the board of governors of the us federal reserve system, before the japan society of monetary economics, tokyo, 31 may 2003. the references for the speech can be found on the board of governors of the federal reserve systema€ℒs website. * * * i am delighted to address this meeting of the japan society of monetary economics. i would particularly like to thank professor shimizu both for inviting me and for helping to arrange a series of meetings with officials at the bank of japan, the ministry of finance, and the financial services agency. those meetings have given me a first - hand look at the difficult challenges that the current economic situation poses for japan's leaders and for the japanese people. the economic situation here is indeed enormously complex. it involves not only structural, monetary, and fiscal problems but also underlying political and social forces, which have at times limited the flexibility of policy. the sometimes frustratingly slow pace of change in japan is all the more reason, however, for this nation's economists to speak out and present clear, persuasive arguments that will help guide the policy debate and urge leaders to effective action. at stake is not only the economic health of your country but also, to a significant degree, the prosperity of the rest of the world. from my side of the ocean, it seems that many people are looking to the united states to take the responsibility for leading the world into economic recovery. clearly, however, faster growth in japan and other major industrial countries would support a stronger, more balanced, and more durable recovery than one driven by u. s. growth alone. although changes in macroeconomic policy in japan during the past decade have generally been slow and deliberate, there has also been some willingness to experiment, not least by the bank of japan ( boj ). for this reason, the recent appointment of a new leadership team at the boj has stimulated considerable interest and expectation around the world. although governor fukui and his colleagues have so far not made radical breaks with previous boj policies, there is reason to hope that they will be open to fresh ideas and approaches. in that spirit, my remarks today will be focused on opportunities for monetary policy innovation in japan, including specifically the possibility of more - active monetary - fiscal cooperation to end deflation. in focusing primarily on macroeconomic policies and the deflation problem, however
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1980s and 1990s ) could be a way of making sdrs more attractive as reserve assets and expanding the sdr ’ s role as a unit of account in trade and finance. the ultimate goal would be to create the conditions for an expanded role of the sdr in the international monetary system. to jump - start this process, public authorities could undertake coordinated actions such as issuing sdr - denominated debt, helping create market infrastructures and providing legal certainty. – i believe that in order to have a chance to work in practice, such actions would need to be part of a long - term strategy supported by a strong political commitment. my understanding of the experience of the private ecu is that a key factor of its success was the link to the long - term process of european monetary integration, which provided not only a legal, economic and institutional frame of reference but also a strong political constituency. by analogy, making the sdr a credible reserve asset and unit of account for both official and private agents would probably require a commitment to eventually transform it into something more than a basket, i. e. a currency in its own right. as we know, we are still very far from having a broad consensus on such a prospect. bis central bankers ’ speeches 4. the reform of the international monetary system : the role of the g20 and of the imf to summarize, we have an international monetary system that lacks an effective mechanism for ensuring the mutual consistency of national policies. the costs of this in terms of distortions and instability are already evident, and will probably be further exacerbated as the world becomes more integrated economically and financially. on top of this, as we move toward a multipolar system we will need even greater cooperation to manage this process and contain the risk of instability. indeed, the need to review the functioning of the international monetary system was put on the g20 agenda early on after the crisis. following some bold g20 statements, there was even hope that a β€œ new bretton woods ” system could be shaped under the aegis of the g20. in this spirit, a group of former senior policy - makers assembled by michel camdessus, alexandre lamfalussy and tommaso padoa - schioppa ( the palais - royal initiative ) chose to emphasize in their report the great urgency of tackling the reform of the international monetary system, and proposed a number of significant and far - reaching changes in the current arrangements. but despite
board to strengthen the resilience of banks and financial intermediaries and to discourage excessive risk taking ; the implementation of the wto ’ s doha development agenda to preserve an open, multilateral and rule - based trading system ; the commitment to establish a new multilateral reserve asset – hopefully with a more appealing name than the sdr – to become the β€œ safe asset ” that financial markets demand and that could be the anchor and the standard of a more stable international monetary system. is this agenda β€œ politically acceptable ” to the g20 leaders? probably not, but it may become soon the only available alternative to the present slow - moving, incremental approach to reform, if they want to prevent more serious troubles for the world monetary and financial system and for the world economy. bis central bankers ’ speeches
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drop in credit demand in the second quarter, as reported in our latest bank lending survey. moreover, credit standards for loans to firms and households tightened further, as banks are becoming more concerned about the risks faced by their customers and are less willing to bear these risks. tighter financing conditions are also making housing less affordable and less attractive as an investment, and demand for mortgages has dropped for the fifth quarter in a row. against this background, the annual growth rate of lending continued to decrease in june, falling to 3. 0 per cent for firms and 1. 7 per cent for households, with annualised growth rates of 0. 0 per cent and - 0. 2 per cent in the second quarter respectively. amid weak lending and the reduction in the eurosystem balance sheet, the annual growth rate of broad money fell to 0. 6 per cent in june, with an annualised growth rate of - 1. 1 per cent in the second quarter. conclusion inflation continues to decline but is still expected to remain too high for too long. the governing council therefore today decided to raise the three key ecb interest rates by 25 basis points. 3 / 4 bis - central bankers'speeches our future decisions will ensure that the key ecb interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our two per cent medium - term target. we will continue to follow a data - dependent approach to determining the appropriate level and duration of restriction. in particular, our interest rate decisions will continue to be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. in any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation returns to our medium - term target and to preserve the smooth functioning of monetary policy transmission. we are now ready to take your questions. 4 / 4 bis - central bankers'speeches
. 1 i will then turn to the current state of the economy to extract inferences about the effectiveness of our strategy. i will then conclude looking forward. monetary policy responses to the crisis in the euro area, the crisis has evolved through three phases. the first phase was triggered by the abrupt liquidity strains that almost paralysed the global financial system in the immediate aftermaths of the collapse of lehman brothers. banks – both in the euro area and elsewhere – suddenly became very uncertain about the underlying health of other banks and stopped lending to each other. the ecb was very swift in its response, faithful to its responsibility to guarantee appropriate liquidity conditions to solvent banks. together with other major central banks, the ecb stepped in with forceful and coordinated interventions to provide essential liquidity to the banking sector. in the euro area, liquidity was made available in virtually unlimited amounts – against eligible collateral – and at increasingly longer tenors, which helped those banks that were being negated access to market refinancing to remain in business and continue their key intermediation function. without this response, the financial system would have imploded and a far deeper contraction would have occurred. 1 / 6 bis central bankers'speeches the second phase of the crisis came as a consequence of the loss of confidence in some sovereigns. it brought on the development of redenomination risk and thereby threatened the integrity of our currency. the sovereign debt crisis found impulse in some cases from a weak fiscal position, whereas in others from a weak banking system. but irrespective of its initial impulse it quickly became a two - way interaction through the β€œ bank - sovereign ” nexus. banks remained dependent on fiscal authorities for solvency assistance, and the financial obligations vis - a - vis banks that this responsibility created on the side of some national fiscal authorities with weak fundamentals further undermined their credit standing. as the cost of borrowing for certain governments increased, banks with exposures to this debt came under intense market pressure, ultimately leading to entire national banking systems losing market access. this in turn resulted in financial fragmentation and a serious disruption to the monetary transmission mechanism. the ecb had not remained inactive in the face of such vicious feed - back loop, as it saw the implications that such dynamics could have for price stability. but, as the ecb lowered interest rates, these reductions were not being passed on to firms and households in a large part of the euro area, signalling an unusual disconnect between expanding
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turnover, primarily in the uk and to a lesser extent, the us. the growth in the uk was principally on electronic broking platforms, while that in the us was mostly on ecns. given the electronic broking platforms reuters and ebs are uk - based and the ecns, mostly usbased, this is consistent with hft being a significant contributor to the increase in turnover, given their preference to trade in these marketplaces. in the report, we calculate an upper - bound estimate for hft. this estimate is based on the fact that around 45 per cent of trading on ebs and reuters ( depending on the currency pair ) is automated. given that electronic trading itself is around 50 per cent of spot foreign exchange trading, this would imply that hft could be around 25 – 30 per cent of all foreign exchange turnover. 5 haldane a ( 2011 ), β€œ the race to zero ”, speech at the international economic association sixteenth world congress, β€œ approaches to the evolving world economy ”, beijing, 8 july. see the 2010 bis triennial survey on foreign exchange market activity and particularly m king and d rime ( 2010 ), β€œ the $ 4 trillion question : what explains fx growth since the 2007 survey? ”, bis quarterly review, december, pp 27 – 42. the increased market presence of hft and the impact it is having on the market structure does, however, highlight the need to reassess the way that we are measuring foreign exchange turnover in the bis survey. bis central bankers ’ speeches effect on price discovery and liquidity what has been the effect of hft on the market? the most obvious impact is that spreads are tighter in normal times, particularly at the top of the book. there are questions about the quality of liquidity, however, with claims that liquidity has been impaired for larger orders. moreover, as we note in the report, the quality of a bid or ask is determined by more than just its price. the size of the quote and its longevity matters too. the effect of spread compression and depth of book, however, is mostly an issue of redistribution of profit around the marketplace. a number of complaints levelled at hft firms often reflect the fact that they are taking margin from the party complaining. one example of this is the accusation of predatory pricing. this is sometimes mislabelled front - running. but front - running implies advance β€œ insider ” knowledge of a trade. hft firms don ’ t have advanced
to the subprime market or to complex structured products in domestic financial systems has surely helped in this regard, but there are more structural reasons. in particular, there has been an important reduction of the financial vulnerabilities that were widespread in the past, and which led to costly crisis with important output losses and poverty increases, as the asian crises ten years ago crudely demonstrated. many emerging market economies have reduced their financing needs and improved their debt management. many more run current account surpluses which reduce their reliance on external funding. most have accumulated massive international reserves, well in excess of what would be needed for precautionary reasons. all in all, this paints a very different picture as compared to past episodes of global turbulence, when these economies used to be not only β€œ influenced ” by the ups and downs of the changing risk preferences in global financial markets, but simply β€œ driven ” – even β€œ drowned ” – by them, sometimes regardless of their economic fundamentals. in my view, this separation from the main stream of the turbulence constitutes an achievement in itself. from other stand point, it is certainly striking that in this period of global financial turbulence inflation is identified as the key economic challenge for emerging economies. indeed, the rise of inflationary pressures on food prices derived from the commodity boom, is becoming a very worrying concern. the large change in relative prices that underlies this prolonged boom is having a stronger impact on developing economies, with very negative and substantial effects on the well being of the poorest portions of their populations. therefore, as inflation creeps up the concern of policymakers deepens, not only in the sphere of macroeconomic stability, but beyond. in connection with this, the fact that monetary policies have remained focused on inflation stability in most emerging market economies is an additional novelty to mention in the context of the present turmoil. going a step forward, it is also noteworthy that emerging market economies, and in particular asia – with china at its centre – may become some kind of a β€œ spare engine ” to world growth, buffering the impact of the turbulence on global activity. this idea of a β€œ second pillar ” for growth relies mainly on the observed strength of domestic demand in asia, and the key issue here is whether this strength could be self - sustaining. maybe, we will not be able to answer this question thoroughly until the macroeconomic impact of the turbulence unfolds completely and the trade channel works itself out. but, one aspect that is clear – even now
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are increasing are by their nature usually situations where demand in the economy is running ahead of the economy ’ s long - term capacity to supply, so that monetary policy aimed at restraining those inflationary pressures inevitably tends to dampen down booms. and conversely, those situations where demand falls short of the economy ’ s long - term capacity to supply are usually situations where inflationary pressures are falling towards zero, so that monetary policy aimed at preventing inflation falling below zero ( as required by my agreement with the treasurer ) inevitably tends to work to mitigate those downturns. in determining the stance of monetary policy, we are inevitably trying to assess what future inflation pressures will be. that means we are always trying to assess how demand pressures will evolve relative to the economy ’ s ability to supply. are we primarily trying to smooth business cycles? no, we are trying to maintain consistently low inflation within the target we have agreed with government, but one of the corollaries, one of the ancillary benefits, is that, if we get it right, the business cycle will be somewhat moderated also - less vigorous booms and less recessionary busts. as one of america ’ s leading monetary policy economists, larry ball of johns hopkins university, has recently argued, even if you were mainly concerned to smooth output and employment cycles, focusing monetary policy on delivering predictably low inflation would be the most sensible way of running monetary policy. so let ’ s make this abundantly clear. the reserve bank has not had some sort of road - to - damascus experience. we have not decided that inflation matters less and that we have to β€˜ go for growth ’. we have not decided to fix the current account. we have not decided to get the farmers back in the black. and we have certainly not, as columnist chris trotter put it, anticipated β€˜ the national government ’ s political needs ’. the easing process that is now underway is absolutely intrinsic to, and an inevitable result of, the monetary policy framework that has applied in new zealand since the passage of the 1989 reserve bank act. more precisely, it is the inevitable result of an inflation target which has an upper and a lower limit. recent events are therefore just β€˜ business as usual ’. recent changes in interest rates and the exchange rate but, you ask, hasn ’ t the reserve bank just deliberately knocked down the exchange rate and increased interest rates? doesn ’ t that suggest that the bank has taken its eye off the price stability ball,
can debate whether the bank ’ s monetary conditions index is correctly calibrated, whether a 2 per cent fall in the exchange rate is equivalent to a 100 basis point movement in 90 day interest rates. one can debate whether the bank ’ s trade - weighted index correctly measures movements in the new zealand dollar. one can debate whether the 90 - day interest rate correctly measures movements in new zealand interest rates. and i am familiar with all of that debate. ( we dealt with several of these issues in the march 1998 economic projections, and in my speaking notes for journalists in releasing that document. ) but if we accept, as i believe we must, that in a small, open economy monetary policy works to affect the real economy and, in that way, inflation through both interest rates and the exchange rate, then i don ’ t have the slightest doubt that overall monetary conditions have eased in new zealand in recent months, and indeed have eased quite considerably. that easing has taken the form of a sharp fall in the exchange rate which has been partly offset by an increase in short - term interest rates ( the increase in longer - term interest rates has been much more moderate ). i have often conceded that the mci is not a perfect measure of monetary conditions. we will continue to seek ways to improve it. but as a rule - of - thumb to guide financial markets between quarterly projections it has proven enormously useful. it has assisted us through a very major rebalancing of monetary conditions at a time of great turbulence in financial markets internationally, with an absolute minimum of drama. yes, interest rates have gone up, but given our balance of payments deficit - or in other words, our huge appetite for borrowing and our national aversion to saving - that should not be a matter for surprise or regret. if as a nation we become less enthusiastic about borrowing or more enthusiastic about saving, we can expect interest rates to decline to the levels which would seem to be justified by our low inflation. in conclusion, i think it is important that we all look at recent events objectively. right now, the new zealand economy is having to adapt to a complex set of circumstances, including an increase in government expenditure, a reduction in taxation, a changing housing market, and, coming rapidly over the horizon, the negative implications of the asian financial crisis. yet what we see is adjustment to these new circumstances, taking place within existing structures, without great drama. monetary policy, with its single focus on price stability and
1
conference calls upon us to assess these first two decades of the euro as well as to reflect on its future : 1. which are the main challenges ahead? 2. how should emu evolve? 3. what should we aspire for the future role of euro at the global level? these are very important questions, which we must all reflect upon in order to contribute to further strengthening the european project, bearing in mind the profound and rapid changes, at all levels, that have been taking place in the world in the last few years. in the current globalised, competitive, digitalised and interlinked environment, there is an increased need for euro area countries to work together to exercise sovereignty and make their voices heard. we should always bear in mind that sharing sovereignty is not a synonym of loss of control or power. internal cohesion and β€œ teamwork ” will help protect member states from external pressures and spillover effects, and empower their policy choices. member states must therefore persist in working together in a committed way to continue the journey that started in 1999, so that european citizens can fully reap the benefits of their common currency. cooperation within emu will also support an increased role of europe and the euro in the world. i am sure that today ’ s discussion will be very fruitful and will bring new, good ideas to help equipping the euro area with the tools it needs to withstand headwinds and to prosper. quoting robert schuman : β€œ europe will not be made all at once, or according to a single plan. it will be built through concrete achievements which first create a de facto solidarity ". and it goes without saying that solidarity must go hand - in - hand with responsibility, which entails rules and mutual surveillance institutional mechanisms. before giving the floor to jean - claude trichet, i consider it both an honour and a duty to underline the important role he has played at several stages during the emu creation and consolidation process, notably in the pre - maastricht political negotiations and as president of the ecb. dear jean - claude, the floor is yours. thank you. 1 speech by mario draghi, president of the european central bank, at the session of the plenary of the european parliament to mark the anniversary of the euro in strasbourg, 15 january 2019. 2 for a survey of literature on oca theory see dellas, h. and tavlas, g. s. ( 2009 ), β€œ an opt
michael c bonello : the adaption of the euro welcome address by mr michael c bonello, governor of the central bank of malta,, during the concert held to mark malta's membership to the euro area on saturday, valletta, 12 january 2008. * * * you have joined us here today to mark a major milestone in our country ’ s economic history. during more than two millennia the maltese people have used many different currencies in circumstances most often reflective of malta ’ s status as a dependency of some larger and more powerful nation. the adoption of the euro, however, is a change of currency with a difference. this time it has taken place because malta, out of its own choice, has joined fourteen other sovereign member states of the eu in an economic and monetary union designed to complement the single market, a venture that could rightly be described as an epoch - making development in the history of our continent. for malta, as for the other new members of the euro area, the euro offers the prospect of enhancing the economy ’ s potential to grow faster. the elimination of exchange rate risk and currency conversion costs should result in increased trade, while the low interest rate and inflation environment of the euro area should make for reduced business costs and greater macroeconomic stability. combined with the fiscal discipline associated with monetary union, this should translate into higher credit ratings and improved investment prospects. the significance of having as our own the world ’ s second most important currency is not lost upon a central banker. for, beyond its proven economic benefits, the euro signifies the virtual elimination of the potential risk of an exchange rate crisis to which the currencies of small, open economies are exposed on a daily basis in a world characterized by the free movement of capital. we have now traded in this vulnerability for the greater security and credibility afforded by a major international currency. the euro has indeed been a success story in many respects. the disciplines of economic and monetary union ( emu ) were intended to promote the creation of a macroeconomic environment in which countries could thrive in an increasingly competitive market place. the euro area ’ s track record in terms of price stability, trade expansion and employment creation suggest that these expectations have been largely fulfilled. the central bank of malta is, therefore, proud to have become a member of the eurosystem. from an institution charged with the preservation of price stability in malta and with safeguarding the integrity of our national currency, the bank now shares responsibility with the other members of
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new areas, such as fund and wealth management, also gaining increased significance. in the more recent period, domestic islamic financial institutions have ventured on business opportunities beyond the domestic shores to tap the tremendous potential markets abroad, particularly, in the asian region. banking institutions therefore, need to build their capacity to be able to take advantage of these potential markets that are still relatively untapped. ladies and gentlemen, against the backdrop of the rapid expansion of the islamic finance sector, there is also the need to intensify efforts to provide adequate training at all levels - technical and frontline staff, middle management and senior management levels. this is important to ensure a sustained supply of human talent to support the long - term growth of islamic finance. to meet this requirement, a complete training infrastructure has been established. islamic banking and finance institute malaysia ( ibfim ), which is an industry - owned training institute, will now focus on providing technical programmes in islamic finance. the recently launched international centre for education in islamic finance ( inceif ) will provide professional certification as well as postgraduate programmes. the inceif flagship programme, the certified islamic finance professional certification programme, is scheduled to begin on 1 june 2006. for leadership development programmes, iclif will play its role in developing leaders to serve the industry, providing facilities for education in islamic finance to not only support the development of the domestic islamic financial system, but to also position malaysia as an international centre for education in islamic finance. and in so doing, this will contribute towards the global development of islamic finance. industry players therefore have the opportunity to assist their staff to acquire the necessary skills at these institutions. the islamic financial institutions also require forward - looking leaders to steer the industry in the more demanding and challenging environment. ladies and gentlemen, the huge potential in islamic finance can only be realised if sufficient resources and drive are accorded to it. in conclusion, let me take this opportunity to congratulate the ambank group on the initiative to establish its own islamic banking subsidiary and provide the necessary resources and support to ensure its success. it is our hope that amislamic bank would be able to contribute effectively in the development of the islamic financial system. i wish amislamic bank berhad every success in its endeavours. dengan lafaz bismillahirrahmanirrahim, saya dengan sukacitanya merasmikan pelancaran amislamic bank berhad. terima ka
caleb m fundanga : strengthening the zambian banking sector address by dr caleb m fundanga, governor of the bank of zambia, at the commissioning and official opening of access bank ( zambia ) ltd, lusaka, 24 september 2008. * * * β€’ h. e, acting president of republic of zambia, mr. rupiah banda m. p ; β€’ honourable ministers ; β€’ h. e nigerian high commissioner to zambia ; β€’ access bank group deputy managing director ; β€’ access bank zambia chairman ; β€’ access bank zambia managing director ; β€’ distinguished guests ; β€’ ladies and gentlemen. i am greatly honoured to be given this opportunity to make brief remarks at this formal commissioning and opening of access bank ( zambia ) ltd. i wish to extend a warm welcome to all of you gathered here today, particularly those who have travelled from outside the country. your excellency, honourable ministers, today ’ s event is a crowning moment and demonstrates the fruits of the economic reforms that the government has continued to implement in the financial sector in particular and the economy in general. indeed it is a landmark achievement in the government ’ s concerted efforts aimed at attracting foreign investors. it is also gratifying to note that access bank zambia limited is the first bank to be registered in the country since 1999. i am also happy to inform you, ladies and gentlemen, that the bank of zambia is currently reviewing other applications for banking licenses. in this regard, we expect a few more banks to be registered in the near future. this interest we are witnessing in the financial sector is due to the favourable economic environment that has been created in the last seven years. during this period, the economy has performed relatively well as reflected in the overall macroeconomic stability, which has been underpinned by sustained positive growth rates in the real gross domestic product averaging over 5 % in the last five years. i do hope that access bank zambia, will play a special role in taking this growth to an even higher level. in the financial sector, stability has continued to characterize the financial system with all banks being adequately capitalised and non - bank financial institutions performance being satisfactory. i am convinced that this stability, among other factors, will continue to contribute to the attraction of international investors such as access bank to invest in zambia. it is my hope that with new entrants in the banking sector, the provision of financial services to the public will become more competitive both in terms of the variety of services offered, efficiency and pricing. the
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seeing millions of workers unemployed or underemployed for many years. as a society, we should find that outcome unacceptable. monetary policy is working in support of both economic recovery and price stability, but there are limits to what can be achieved by the central bank alone. the federal reserve is nonpartisan and does not make recommendations regarding specific tax and spending programs. however, in general terms, a fiscal program that combines nearterm measures to enhance growth with strong, confidence - inducing steps to reduce longerterm structural deficits would be an important complement to the policies of the federal reserve. global policy challenges and tensions the two - speed nature of the global recovery implies that different policy stances are appropriate for different groups of countries. as i have noted, advanced economies generally need accommodative policies to sustain economic growth. in the emerging market economies, by contrast, strong growth and incipient concerns about inflation have led to somewhat tighter policies. unfortunately, the differences in the cyclical positions and policy stances of the advanced and emerging market economies have intensified the challenges for policymakers around the globe. notably, in recent months, some officials in emerging market economies and elsewhere have argued that accommodative monetary policies in the advanced economies, especially the united states, have been producing negative spillover effects on their economies. in particular, they are concerned that advanced economy policies are inducing excessive capital inflows to the emerging market economies, inflows that in turn put unwelcome upward pressure on emerging market currencies and threaten to create asset price bubbles. as is evident in figure 6, net private capital flows to a selection of emerging market economies ( based on national balance of payments data ) have rebounded from the large outflows experienced during the worst of the crisis. overall, by this broad measure, such inflows through the second quarter of this year were not any larger than in the year before the crisis, but they were nonetheless substantial. a narrower but timelier measure of demand for emerging market assets – net inflows to equity and bond funds investing in emerging markets, shown in figure 7 – suggests that inflows of capital to emerging market economies have indeed picked up in recent months. to a large degree, these capital flows have been driven by perceived return differentials that favor emerging markets, resulting from factors such as stronger expected growth – both in the short term and in the longer run – and higher interest rates, which reflect differences in policy
liquidity crises ” to introduce in sovereign bond contracts collective action clauses. the g7 endorsed this recommendation. efforts undertaken recently by the g10 deputies to design concrete steps to implement this proposal should also be supported. another way to promote private sector implication is the voluntary roll - over or restructuring of short - term debt coming to maturity. the korean experience has been replicated, yet in different conditions, with success in the case of brazil. such a solution worked well after the brazilian authorities committed firmly to, and implemented, fiscal adjustment. the use of financial innovative techniques should also be considered : for instance, the introduction of roll - over options in debt contract ( buiter proposal ) or put options associated with significant debt reduction. as to the role of the international community : the imf has a central role to play in macroeconomic surveillance which is its main mission. the conditionality associated with financial assistance is essential to give economic agents a clear assessment of the efforts made by members committed to implement adjustment programmes. furthermore, the imf can improve its action as regards prevention. improvements in the sdds and more transparency regarding article iv reports, letters of intent and policy papers will certainly improve risk assessment. this could help prevent economic problems from turning into crises and to prevent contagion to other countries. progress has to be made as regards incentives for sound management. the creation of the ccl is a step in this direction. designing appropriate incentives is the more effective way to make members adopt more prudent debt management, effective banking supervision … given the large number of institutions and fora involved in the efforts aiming at a better global financial architecture, the creation of the financial stability forum reflects an important effort to coordinate work in progress and identify issues not yet addressed. the european monetary union will yield a substantial contribution to better economic and monetary equilibrium in the world the introduction of the euro six months ago is the other major event i would like to deal with now. the irreversible nature of this change has convinced an increasing number of political and economic actors that the success of the euro is a necessity for europe. it is a keystone of the single market. it is clear that, now and for the future, we have to face a number of challenges to make this success sustainable. i would like to draw your attention to the following issues : i first, the euro area will have to face up a number of challenges to confirm its initial success ; i second, the success of the euro will make a contribution towards
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needed before we can assess to what degree such breathing space would have facilitated a more orderly and less costly episode than the complete collapse that took place. at any rate, it is clear that this limited ability was one of the factors behind the decision not to grant glitnir a loan of last resort amounting to €600 m, which it requested on 25 september in order to cover a loan repayment in mid - october. instead, the government, on the advice of the central bank, announced on 29 september that it was taking a 75 % equity stake in glitnir valued at €600 m. this implied a big fall from what such a stake was valued at in the market the week before. in the following week, the equity price collapsed further, ending the week 75 % below its value at the end of the preceding week. this action did not boost market confidence in the icelandic banking system. on the contrary, it intensified the run. on the following day, both the sovereign and the banks were baba, naohiko, frank packer and teppei nagano, ( 2008 ). β€œ the spillover of money market turbulance to fx swap and cross - currency swap markets ”, bis quarterly review, march 2008, 73 – 86 ; baba, naohiko, and frank packer, ( 2008 ). β€œ interpreting deviations from covered interest parity during the financial market turmoil of 2007 – 08 ”, bis working papers, no. 267. see also box iii - 1, β€œ the recent turmoil in the icelandic foreign exchange swap market ” in the central bank of iceland monetary bulletin 2008 / 1, pp. 26 – 29. downgraded by two notches, followed by widespread margin calls and closing of credit lines. the foreign deposits that had helped to alleviate the foreign liquidity squeeze experienced outflows. and the equity loss involved in the glitnir takeover created a domino effect within the icelandic financial system. it was becoming clear that the entire system was on the brink of collapse, and on 6 october 2008, the icelandic parliament passed emergency legislation with the objective of ensuring continued domestic banking operations. the following day, the icelandic financial supervisory authority ( fme ) intervened in the operations of glitnir and landsbanki. on october 8, following perfunctory exchanges between the uk chancellor of the exchequer and the icelandic minister of finance, the uk government froze the assets of icelandic banks in the uk and took over singer & fried
probably a scramble to get usd liquidity through fx swap markets, with the result that those markets became dysfunctional as well. this problem was significantly mitigated with the fx swap lines that the us fed negotiated with the ecb and other major central banks, especially after these became uncapped in some cases. but the problem was not confined to currency pairs involving the us dollar, and a similar kind of dynamic played out for smaller currencies in europe vis - a - vis the euro, especially where banking systems had significant short - term foreign refinancing needs, or what can also be called rollover risk in terms of foreign currency. in some cases, fx swap lines were granted vis - a - vis the dollar, the euro and the yen, and in some cases not. where swap lines were granted, it helped. and for some of the smaller players, it might not have mattered terribly much which of the major international currencies they hooked on to in this sense, especially after the uncapped swap lines had been established. what we observed during this peak of the crisis was thus a run on cross - border banking operations. we know how to solve such problems domestically by letting central banks lend to markets and / or institutions through their almost unlimited short - run capacity to expand their domestic balance sheet. however, when it comes to foreign currency, a central bank ’ s capacity to help banks to refinance the foreign liquidity denied them on the market is limited by the size of its reserves or the willingness of its big neighbours to help. this is what did the icelandic banks in. at that point, their balance sheet was almost 11 times gdp, with the foreign currency part constituting β…”, or almost 7Β½ times gdp. and as is always the case in banking, there was a significant maturity mismatch between the asset and liability sides. compare these numbers to the reserves of the central bank of iceland, which were 21 % of gdp at the time ; a swap agreement with the nordic countries amounting to €1. 5 bn, or around 12 % of gdp ; and committed credit lines of around 2 % of gdp, or a total of around 35 %. this is dwarfed by the foreign currency liabilities of the banks, even if some of them were, of course, longer - term. these defences could only buy limited breathing space in the face of a full - scale run on cross - border operations of banks this size. further research is
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- related risk estimates, how central banks can assess the impact of their reserves on the co2 emissions, as well as the possibility of mitigating the effects of climate change on local financial markets through central bank investment portfolios. dear all, we are at a point of no return. there is only a way forward, and that way must be green. the coronavirus pandemic has demonstrated that people can change their habits, if needed. governments can take determined actions that change economic prospects. we can green our economies as well as manage the risks of transformation to a more climate - friendly economy. we know that we can identify the employees and regions most affected by such an economic transformation and we must create compensatory mechanisms, ensure effective retraining, and create new jobs in climate - friendly activities. however, economies cannot become entirely green until the green thinking does not prevail in our societies. environmental, economic, and financial literacy here plays a crucial role. therefore, we have set economic and financial education as one of strategic objectives at the bank of lithuania. it ’ s symbolic that today, during our main yearly economic conference, we present a gold collector coin dedicated to the social sciences. this coin completes the β€˜ lithuanian sciences ’ series. the design of the coin reflects the multidisciplinary nature and interconnectedness of social sciences, economics being their integral part. the reverse of the coin, which contains a carved geometric symbol of separate cubes, forming the common societal construction, demonstrates that only by acting together, we can overcome the challenge of climate change and implement the vision of a sustainable future. 4 / 5 bis central bankers'speeches today ’ s discussions bring together many competent and professional participants from lithuania and abroad. i am glad that this topic draws the attention of the representatives of seimas, ministries, and non - governmental organisations. i believe that our conversation can give an impetus to make better use of emerging opportunities when creating pathways towards the green economy. thank you for your attention and i wish you a meaningful discussion. 1 17 % directly and 14 % through land use. 5 / 5 bis central bankers'speeches
economic models created an opportunity for countries to return to the starting line. to thrive, we must have a clear policy vision and help businesses discover new profitable business models that would reflect the green needs of the consumer and be a part of a circular economy. we must make every effort to ensure that the green transition in lithuania is a success story. we must ensure that the funding under the eu recovery and resilience facility – almost 1 billion euros earmarked for lithuanian green goals – is absorbed fully and in a targeted way, bringing lithuania among the leaders of sustainable economic growth. the topics of the economic aspects of the green transformation will be covered during the second session of the conference this afternoon. ms rasa tumaseviciute and ms jurgita girzadiene will share their insights on how the lithuanian businesses can become more competitive in seeking green solutions, and the honourable minister of environment of the republic of lithuania simonas gentvilas will give a more in - depth explanation of a long - term vision for curbing climate change and energy policy. ms rasa and jurgita, honourable minister, i am glad you agreed to join our discussions today. dear colleagues, the transformation of the economy is only feasible with the creation of an adequate incentive system. international institutions, including the international monetary fund, claim that taxes, especially the co2 - related taxation is the most efficient tool for combating climate change. unlike investments or the regulation of pollution, the benefits of taxation on exhaust gasses are twofold : they not only correct the market failures but also generate tax revenues. the co2 - type of taxation is not yet in place in lithuania. on the contrary, we have quite a few tax reliefs for fossil fuels. i will be honest : to achieve our climate targets, lithuania must explore ways to change its taxation system and impose a bigger levy on pollution. it is important to stress here that all taxes must be imposed in compliance with the principles of justice and promoting sustainable economic growth. on the other hand, taxes will only be effective provided the possibility to manipulate them is curbed. for that the eu contribution is vital. in particular, we have to agree on the carbon border adjustment mechanism ( cbam ) of the eu. i am thrilled that today mr ian parry, principal environmental fiscal policy expert of the international monetary fund, will tell us more about the role of fiscal policy in mitigating climate change. although fiscal measures play the main role in fighting the global warming
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even without the political pressures those governments face. one final note on the financial system. the global financial system is in the process of very dramatic change. the changes of even just the last five years are extraordinary, in terms of the size, and strength, and scope of the major global firms, the role of private leveraged funds, the extent of risk transfer and the increase in the size of the derivatives market, the change in the structure of the credit market, the increase in and changes in the pattern of cross border financial flows. these changes, and others, seem likely to have made the financial system both more effective in moving capital to its most productive use and more stable and resilient over time. but they do not, of course, mean the end of systemic risk in financial markets. they could in some circumstances work to magnify rather than mitigate stress. central banks, supervisors and those running the major private financial institutions need to continue to work to ensure that what jerry corrigan calls the β€œ shock absorbers ” in the financial system - capital and liquidity and the operational infrastructure - are sufficiently strong and robust to withstand economic and financial conditions more adverse than we have seen in the recent past. thank you.
budget deficits to open up – this always happens when a decline in economic activity leads to a sharp drop in revenue and increased spending on the safety net – but instead is more due to the fact that these deficits generally have a very large structural component. by structural, i mean that the deficits are projected to be persistent – absent changes in tax and spending policies – even after the individual economies have recovered and the unemployment rates in these countries have fallen as low as is possible, consistent with price stability. fiscal stimulus measures undertaken to support demand have been responsible for much of the recent deterioration in the structural budget deficits. for example, in the united states, the congressional budget office estimates that the structural federal budget deficit rose by nearly $ 1 trillion between fiscal 2007 and fiscal 2009, to $ 1. 1 trillion or 7. 3 percent of potential gdp. obviously, different people have different views as to how much stimulus was needed and the form of that stimulus. but to me it is clear that an accommodative fiscal stance was the appropriate policy response given the circumstances. in the case of the united states, without substantial fiscal stimulus, the economy would have been even weaker and the unemployment rate considerably higher. given the fact that the federal funds rate could not be pushed any lower, fiscal stimulus was indeed important in stabilizing the economy. going forward, however, market participants are worried that many countries are now on unsustainable fiscal paths. by unsustainable, i mean a scenario in which persistently high deficits cause the amount of outstanding debt to rise relative to gdp indefinitely, even if the economy performs well in the future. the concern is that at some point, investors worried about the potential for default would balk, and this would lead to sharply higher interest rates and a fiscal crisis. just as there needs to be a credible exit strategy for monetary policy to anchor inflation expectations, there also needs to be a credible exit strategy from fiscal policy stimulus to anchor expectations about the risks of sovereign debt default. this is not going to be easy for several reasons. even abstracting from considerations involving political will – it is never easy to vote for higher taxes or lower spending – there is also the important issue of timing. the economic recovery is still very fragile. this means that premature fiscal retrenchment could jeopardize the recovery and push a convalescent economy into a double - dip recession. given this risk, why not just wait and see how things go
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in ation aim is. having a target that everyone understands and believes in is ultimately a question of communication. various options for the interpretation of price stability will be considered in the review ( largarde 2019 ). 16 it has been argued that since central banks are unlikely to hit a point target on a regular basis, having one makes it harder to explain policy to the public and that a range, with or without a focal point, may be more realistic and therefore provide the central bank with more credibility ( financial times 2020 ). 17 the current situation also sets central banks an unusual challenge. for most of recent central banking history, our focus has been on communicating why we should avoid high in ation. it seems that across developed economies, central banks have won this argument, although it was painful to bring in ation expectations down in the wake of the high in ation experienced in many economies in the 1970s and 1980s. today, the task is to explain why low in ation and de ation are also something central banks want to avoid. this is a new challenge. raising in ation expectations which have fallen below target will pose different challenges than reducing in ation expectations did in the past, although it may prove equally, if not more, dif cult to achieve in light of the constraints posed by the effective lower bound ( eggertsson 2003 ). 18 now, more than ever, effective communication is needed. we have to avoid target shortfalls leading to a de - anchoring in in ation expectations from the central bank ’ s aim. however, we must bear in mind that, while the ability to gain trust and shape expectations through public statements is one of the most powerful tools the central bank has, the cost of sending the wrong message can also be high ( bernanke 2015 ). 19 designing effective monetary policy communication for the future these considerations bring us to an important question, namely how to design effective monetary policy communication? we could discuss at length various re nements to current monetary policy communications. for example, should the accounts continue to be anonymised? indeed, should we publish a voting record from governing council meetings? ( visco 2019 ). 20 should the eurosystem consider publishing an equivalent to the federal open market committee ( fomc ) dot plots? in many ways, these re nements would be aimed at smoothing communication with nancial markets and informed observers. however, what i would like to focus on here today is our communication and
s overall objectives and their consistency with the mandate, the monetary policy strategy ( or β€˜ reaction function ’ ), the rationale behind the policy decisions undertaken, the assessment of the macroeconomic outlook that informed such decisions, and the expected future course of monetary policy action. communicating monetary policy in the post - crisis era following the global nancial crisis, the need for open and transparent communication in each of these different aspects of monetary policy has become even more important. in the face of the unprecedented challenges produced by the crisis, central bank remits expanded dramatically. central banks had to provide a thorough assessment of the negative shocks hitting the economy, as well as their foreseeable consequences. they had to explain their actions carefully and the expected transmission channels of new monetary policy instruments. they had to reassure a confused public of their ability and enduring commitment to tackling these challenges. central banks around the world combined interest rate reductions with new non - standard monetary policy tools. as central banks approached the effective lower bound on interest rates, it became necessary to affect the entire yield curve and not only shortterm rates. monetary policy could successfully achieve this thanks to the use of forward guidance – that is, communicating the explicit commitment to a certain path of future policy rates – complemented with large - scale asset purchase programmes. with forward guidance, therefore, communication has shifted from being the medium by which monetary policy decisions are explained to the public, to being a monetary policy instrument in itself. this makes trust, credibility, and effectiveness even more important. during the crisis and its aftermath, the use of communication as a powerful crisis management tool was seen even beyond the usual boundaries of forward guidance. in 2012, the european sovereign debt crisis was at its peak. government bond yields of more vulnerable countries of the euro were soaring, and investors doubted that national and european institutions could join forces in time to avert the collapse of the euro area. in july of that year, the then - ecb president mario draghi spoke about the economic conjuncture and the policy response, making the historic remark : β€œ the ecb is ready to do whatever it takes to preserve the euro. and believe me, it will be enough ” ( draghi 2012 ). 10 those words were so effective that the programme to purchase sovereign bonds of more vulnerable countries announced shortly afterward ( the outright monetary transactions, omt ) was never required. draghi ’ s earlier assurance succeeded in removing market expectations of a collapse of the euro area and redenomina
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under such market conditions – the temporary inability of banks to provide refinancing leads to insolvency and thus to a situation of widespread default. in neither of the two cases – normal times or crisis periods – can the central bank be considered responsible for the survival of bank counterparties that are close to bankruptcy. ] in a recent paper entitled β€œ a monetary policy strategy in good and bad times : lessons from the recent past ” ( ecb working paper, no 1336, may 2011 ), s. fahr, r. motto, m. rostagno, f. smets and o. tristani simulated a β€œ counterfactual ” monetary policy strategy which did not include credit and money among its variables of observation and reaction. the authors found that as a consequence of the shock caused by the collapse of lehman brothers, the euro area would have entered into a protracted period of deflation and the level of gdp at the end of 2010 would have been 2 percentage points below that which was observed. bis central bankers ’ speeches the two long - term refinancing operations achieved the purpose for which they were intended. in an environment of a near - shutdown of private credit markets, banks were not able to refinance their assets and were unable to maintain their level of exposure to households and businesses. the extensive long - term refinancing allowed for the partial and temporary substitution of private credit with central bank money and thus avoided a disorderly process of credit to the economy running dry. nevertheless, these operations were not without their criticism. these can be summarised in three points : 1. the growth in liquidity following the two operations will ultimately lead to inflation ; 2. the eurosystem ’ s balance sheet is exposed to unprecedented and uncontrollable risks ; 3. such operations have reinforced the perverse link between banks and sovereign debtors and may be considered a violation of the prohibition of financing public debt with central bank money, laid down in article 123 of the treaty. and, the opposite – but conceptually equivalent – criticism that these operations did not provide the economy with finance. as regards the first point, it is again pertinent to refer to strategy : in the medium to long term, the inflation dynamic reflects developments in broader monetary aggregates. conditions that encourage the creation of inflation or speculative bubbles are generated by strong and sustained growth in money and credit, not necessarily as a result of an increase in liquidity granted by the
to preserve the local operations. the fourth impediment is the need to preserve global payment operations. the cash management, cash payments, securities settlement and custodial services that some firms offer to wholesale and retail clients are essential to the functioning of clients, the economy and the financial system, but such services have high switching costs for customers. these services often represent core business lines with stable profitability and thus valuable assets for financial firms, but they are also often entwined with other businesses in the firm. the fundamental nature of these activities and their importance to the financial and real economies make them of special interest to the financial authorities reviewing recovery plans and developing resolution plans. the four impediments are all related to institutional complexity. a financial firm organized as a single legal entity would certainly face many complexities, but far fewer than organizations today. this clearly raises the issue of whether the extraordinary organizational complexity of financial firms today imposes social costs that are too burdensome, especially in resolution, relative to its benefits. the economists dick herring and jacopo carmassi earlier this year documented the reasons for the vast number of subsidiaries at large financial firms, reasons such as regulatory requirements, regulatory arbitrage and tax avoidance. if such organizational complexity imposes a high social cost by impeding recovery plans and resolution, providing incentives to reduce complexity may be warranted. for example, collateralization or capital requirements on intragroup exposures or parent guarantees could internalize for the firm some of those social costs. alternatively, more direct supervisory requirements may be necessary for addressing the improvement of information systems or the separability and preservation of critical payment systems. but such measures have costs and i would argue increase the relative benefit of efforts to identify the no doubt very difficult changes necessary in both the private and the public sectors to reduce organizational complexity in financial firms. i note that the cbrg report not only has recommendations largely addressing the four impediments to recovery i described, but also a recommendation to simplify financial firm organizational structures. a final benefit of recovery planning is that it is a prod to concrete action in the near term, when the institution is healthy and provides a ready - made menu of options when the firm is distressed. moreover, the impediments to recovery are also impediments to resolution. if the recovery plan does not succeed in averting failure, but the firm has acted on the plan, it will enter resolution with better information systems, a reduced risk profile and
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stanley fischer : conducting monetary policy with a large balance sheet speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at the 2015 us monetary policy forum, sponsored by the university of chicago booth school of business, new york city, 27 february 2015. * * * accompanying charts can be found at the end of the speech. thank you. it is a great pleasure to be here to discuss some of the important issues facing the federal reserve and other central banks in conducting monetary policy with a large balance sheet. i will focus on two main sets of issues that the fed has faced and will continue to face for some time. the first involves our ongoing assessment of the effects of the asset purchases. the second concerns policy normalization in the presence of a very large balance sheet. to set the stage, consider the size of the fed ’ s balance sheet over the past several years. assets have risen from about $ 900 billion in 2006 to about $ 4. 5 trillion today, or – as seen in figure 1 – from 6 percent of nominal gross domestic product ( gdp ) to about 26 percent of nominal gdp. the net expansion over this period reflects primarily our large - scale asset purchase programs. of course, many other central banks have expanded their balance sheets substantially over recent years as well. for example, assets of the bank of japan have increased from about 20 percent of nominal gdp to more than 60 percent of nominal gdp over this period, and assets of the swiss national bank have increased from 20 percent of nominal gdp to more than 80 percent of nominal gdp. the net increase in assets of the european central bank has so far been more modest, with assets increasing from less than 10 percent of nominal gdp to more than 20 percent of nominal gdp – but their quantitative easing ( qe ) program is not yet under way. for the remainder of my remarks, i will focus on the fed, beginning with some remarks about the asset purchase programs. the federal reserve asset purchase programs the nature of our purchase programs has changed over time. in the early programs – that is to say, qe1, qe2, and the program we call the mep, or the maturity extension program, otherwise known as β€œ operation twist ” – the federal open market committee ( fomc ) specified the expected quantities of assets to be acquired over a defined period. early in the crisis, this strategy seemed to help bolster confidence that the fed was acting aggressively to offset the tightening in credit
testing to date suggests that on rrp operations have generally been successful in establishing a soft floor for money market interest rates. 6 the fed could also employ other tools, such as term deposits issued through the term deposit facility and term rrps, to help drain reserves and put additional upward pressure on short - term interest rates. we have been testing these tools and believe they would help support money market rates, if needed. finally, with regard to balance sheet normalization, the fomc has indicated that it does not anticipate sales of agency mortgage - backed securities, and that it plans to normalize the size of the balance sheet primarily by ceasing reinvestment of principal payments on its existing securities holdings when the time comes. as illustrated in figure 4, cumulative repayments of principal on our existing securities holdings from now through the end of 2025 are projected to be about $ 3. 2 trillion. as a result, when the fomc chooses to cease reinvestments, the size of the balance sheet will naturally decline, with a corresponding reduction in reserve balances. see board of governors of the federal reserve system ( 2014 ), β€œ federal reserve issues statement on policy normalization principles and plans, ” press release, september 17. policymakers have discussed benefits and costs of an on rrp facility. for further discussion on this topic, see, for example, the fomc minutes for june 2014, july 2014, and january 2015 available on the board ’ s webpage β€œ federal open market committee : meeting calendars, statements, and minutes ( 2009 – 2015 ) β€œ ; and josh frost, lorie logan, antoine martin, patrick mccabe, fabio natalucci, and julie remache ( 2015 ), β€œ overnight rrp operations as a monetary policy tool : some design considerations ( pdf ), ” finance and economics discussion series 2015 – 010 ( washington : board of governors of the federal reserve system, february ). bis central bankers ’ speeches conclusion i will close by highlighting that the fed ’ s asset purchases have been a critical means by which the fomc has provided policy accommodation at the zero lower bound on nominal interest rates. in other words, the fed – and other central banks – can implement an expansionary monetary policy even when the policy interest rate is at the zero lower bound. the current high level of securities holdings will present some challenges for policy normalization, but we are confident that we have the tools necessary to remove accommodation at the appropriate
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pleased to inform that the jc3 is one of the collaborators with cgm, together with the institute of corporate directors malaysia ( icdm ) and islamic markets in organising today ’ s forum. the bank envisions that financial industry players and others from the private sector will play more proactive roles in increasing funding pathways for green and sustainability related projects. by stepping up such efforts, there would be more innovative financial instruments or alternative financing, sustainable or green bonds or sukuk that would support the government ’ s climate change agenda. ladies and gentlemen, the severity and abruptness of the current health crisis do not make climate crisis any less pressing. the resilience of our future economy and financial system will depend on the actions we take now in building climate and societal resilience. this is a sobering reality, one we must take full accountability of, and pledge strong commitment to. this pandemic has not only provided valuable lessons to us on the grave consequences of being ill - prepared when facing a crisis. it is also a strong reminder that sustainability must play a crucial role in our economic recovery and reset. as a central banker, it is not often that i talk about global health – but the current pandemic has challenged me to be more conversant of such issues. the same applies to the topic of climate change which was not in the central banks ’ dictionary until recently. but that is the reality of development – we will continuously be called upon to respond to new and unfamiliar challenges and to effectuate changes wherever we can. i am optimistic that we can all contribute to do our part to make the change that is required. global awareness on climate change and its risks being showcased today and during this climate week is reflective of a world that is determined to rise to the immense challenges before us. thank you again to the organiser of this event and to all participants. i look forward to more meaningful engagements on this issue as we continue this onward march for a better life and a better future for our children and for mankind. thank you. 3 / 3 bis central bankers'speeches
whilst climate challenges often come and go with climatic events. given the latter, oftentimes our intensity to tackle climate change also ebbs and flows. but despite all this, the single biggest common point is the devastation that both covid - 19 and climate change bring to our lives and livelihood. hence, there is a silver lining to this current health crisis. the pandemic was once a distant issue or someone else ’ s problem. now, everyone from australia to zimbabwe is experiencing its full brunt. it is therefore an opportune time to reflect, reset and reprioritise. the world now has a unique opportunity – an opportunity to galvanise a deeper appreciation and understanding of the issues that affect us all – globally and simultaneously. policymakers tackling the health crisis have been encouraged to pursue policies that can alleviate the economic shocks caused by the pandemic and in the same instant help address climate issues and challenges. we can leverage the opportunity presented by the current crisis to put the world on a new trajectory with a lower risk of future climate calamities. 1 / 3 bis central bankers'speeches collective responsibility this brings me to my second c that is β€œ collective responsibility ”. the former managing director of imf, madam lagarde once remarked that β€œ tackling climate change is a collective endeavour, it means collective accountability and it ’ s not too late ”. malaysia, together with its asean counterparts, has been responding to climate change by developing national sustainable roadmaps, principles and guidelines. such actions are even more relevant now. despite a more pressing public health crisis at the moment, the world health organization has warned that β€œ climate change is a gradually increasing stress that may be the defining public health threat of the 21st century ”. now why is this? that ’ s because temperature and weather extremes, floods, and pollutants can impact human health, directly and indirectly. the pandemic thus stresses the need to progressively continue collective global climate change actions to reduce risk of future epidemics. commitment this brings me to my third c, which is β€œ commitment ”. we need strong commitment to combat climate change and take immediate actions to take charge of future economic growth. for corporations and businesses, over and above concerns on regulation and legal risks, is the need to commit to invest in doing the right thing for β€œ people, profit and planet ”. corporations and businesses that align their policy and advocacy agenda to climate action have an important role in averting a path towards
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the aim is for all the key stakeholders to come together and discuss the best way to provide financial and credit facilities to the rural poor specially those who are termed as β€œ unbankable ”. road shows i believe that constant, effective and quality communication is extremely vital to the success of policies. this will ensure that key players are fully informed and have a good grasp and understanding of the policies implemented by the reserve bank and how they themselves fit into the β€œ bigger picture ”. i sent a team of my senior staff to go out and explain to all the key stakeholders, the policies that were put in place by the reserve bank and the reasons behind these policies. i believe people must be fully informed of why the fiji dollar was devalued as it affects each and everyone of us. to date the road show team has made around 30 presentations around the country – to the business community, commercial banks and organizations, statutory corporations, nongovernmental organizations and other interest groups. feedback has been very positive and queries and issues raised by people who are not in the area of the rbf have been taken up with the appropriate authorities. reforms our country is at the juncture where we need to direct all our energies to making the economy grow sustainably. to make the economy grow and grow sustainably, we need to reform. i mentioned earlier that a number of our traditional industries have been in decline for a number of years. there are a number of issues to deal with in terms of the public sector delivery of services. not only in the civil service but also in statutory bodies as well. this also holds true in the private sector. if you look closely at the reasons behind the poor performance of some of our industries and poor service deliveries in the public sector, you will find that the most common problems are linked to human resources and governance issues at institutional and at national level. i am therefore very pleased to see that the fiji human resources institute is addressing some of these key human resources issues during this conference. corporate governance and effective human resources management are two critical issues closely linked to the success or failure of any institution or country. with my experience in the rbf and also in my role as chairman and member on several boards, i have developed a good grasp and appreciation of human resources and governance challenges faced in fiji. these issues are interlinked and are complex in nature. every organization is trying to grapple and address human resources and corporate governance issues in their own way. sharing ideas and experiences
##tagion assessments, and systemic risk surveys to provide valuable insights into potential vulnerabilities that affect the financial sector. apart from inter - regulatory coordination, rbi also actively engages with the industry through regular engagements / interactions including conferences with the boards of supervised entities, periodic meetings with the mds & ceos, heads of assurance functions as well as interactions with auditors. having discussed the importance of domestic coordination, i would also like to emphasise the significance of global supervisory cooperation. historically, crises have acted as catalysts for bringing supervisors together to address shared challenges. for instance, the basel committee on banking supervision was formed in the aftermath of the herstatt bank failure, highlighting the necessity for a coordinated response to systemic risks. however, we should not wait for crises to play out before strengthening international collaboration. greater engagement for proactive horizon scanning of potential risks and vulnerabilities, along with discussions on strategies to mitigate and address these challenges, can enhance our collective resilience and crisis preparedness. indeed, as a part of our agenda for the next decade, rbi @ 100, the reserve bank intends to engage more with the central banks of the global south. the reserve bank also aims to establish a global model of risk - focused supervision by fostering a strong 2 / 3 bis - central bankers'speeches risk discovery and compliance culture, building a " through - the - cycle " risk assessment framework. reserve bank is working to create a comprehensive data analytics ecosystem to support its supervisory functions. with these thoughts in mind, i look forward to a rich and insightful panel discussion on how central banks can continue to enhance financial stability and build a resilient global financial system. thank you! 3 / 3 bis - central bankers'speeches
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finally, let me make a few remarks about inflation. fears are regularly expressed about the possible inflationary impacts of euro adoption. our evidence suggests that this was positive but very small and one - off, similar to what was seen in older euro area members where euro introduction effects accounted for about 0. 2 – 0. 3 % one - off increase in prices, mostly in services sectors, but no measurable effect on inflationary expectations or in terms of core inflation. over the past few years, our inflation has indeed been higher but we believe that this can be largely explained by a range of other factors not directly related to euro adoption, including the catching - up effect, commodities prices, the specific timing of changes in tax policy, and so on. most importantly, the ecb has built up a very strong track record in keeping inflation in the euro area near our targeted level, and our commitment to continue on this path is very strong. bis central bankers ’ speeches in conclusion, estonia ’ s two - year euro area experience has affirmed our belief that our place is within the euro area, not outside. our economy, which once was very much out of balance, is now in balance and developing about as well as could be expected in difficult circumstances. furthermore, and this is very crucial, opinion polls show that public support for the euro appears to be rising and has clearly been above 50 %. if one also considers recent improvements in the outlook for the euro area as compared to 6 or 12 months ago, i believe the support will continue rising in the future. never in our history has estonia been engaged in shaping europe to such an extent. we have a say in the processes affecting us, from monetary policy decisions to the euro area ’ s future. for us, it is a matter of economic security, future prosperity and international credibility. i wish latvia determination and success in following the same path. thank you! bis central bankers ’ speeches
3 percent in the same period last year, bringing the average inflation for the first six months of 2008 to 7. 6 percent. of late, we have started to see stronger signs of second - round effects, with core inflation rising and inflation expectations trending upwards. to prevent these inflation pressures from further feeding into the price - and wage - setting behavior of economic agents, we raised our policy rates by 25 basis points on 5 june and 50 basis points on 17 july. in both instances, the bsp ’ s baseline inflation forecasts showed more elevated inflation numbers for 2008 and 2009. sustained high inflation can unseat inflation expectations and potentially create a repeating cycle of lingering inflation and wage pressures that could prove costly to the economy. in response, we believe that the series of policy adjustments will help in steering inflation towards its desired path for the medium term. it is important to note that the challenges facing us are largely external in origin. a key issue therefore is the philippines ’ ability to weather these shocks. on the upside, the country was able to build up cushions that serve as sources of resilience for the economy against potential shocks. let me cite some of these buffers and how exactly these have insulated the economy from external risks. first, the philippine economy continued to grow notwithstanding the tougher operating environment. in the first quarter of 2008, gdp grew by 5. 2 percent, led by the strong performance of services on the production side, and by consumption spending, on the expenditure side. the strong growth of net factor income from abroad ( nfia ) pushed gnp to grow by 7. 3 percent. there is resilience here because growth is broad - based and notwithstanding the difficult times, the magnitude of growth is quite respectable. second, the banking sector has become stronger as a result of the reform measures that have been implemented over the past years. there is resilience here because our major financial intermediaries have remained strong enough to continue channeling savings into investment, and therefore supporting production and more sustainable employment. the philippine banking system ’ s asset base has grown steadily. the overall asset quality of banks continued to improve as well, with the npl ratio now moving closer to the pre - crisis level of around 4 percent. with healthier balance sheets, banks have been able to post a steady growth in lending. the banking system ’ s overall capital adequacy ratio remained strong, shored up by the increased issuance of hybrid financial instruments to bolster
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