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such as trade, industrial and fiscal policies and political factors too. 2. south africa prepares to open its markets compared with other regional groupings, the idea of a european union - like economic union is still some way off for the sadc, although progress is being made towards implementing a free trade agreement. a target implementation date has been set for january next year to begin the process of lowering trade barriers, streamlining customs and border procedures, and harmonising external tariffs. sadc trade and industry ministers are due to meet soon for negotiations on the trade protocol in the run - up to the start of implementation next year. there have been suggestions that south africa might extend market access concessions on a unilateral basis after certain key agreements have been reached. we understand that south africa plans to eliminate most duties on imported goods from other sadc countries by 2004 and the region could ultimately develop into a free trade zone. the free trade discussions and negotiations have received some attention in the media. generally speaking, it seems that people welcome the progress made by the sadc as a sign that it is finally getting down to business. also in the development programmes are infrastructure developments in the region, such as the maputo corridor which has spurred investments into various economic sectors estimated at r35bn. one example of a big investment is the mozal aluminium smelter, which has triggered the renewal of the maputo harbour. a very welcome development indeed. far less immediately newsworthy, but also very important for the establishment of a regional economic bloc, has been the work done by the committee of central bank governors. the work is an important building block towards the creation of a free trade zone. one cannot implement free trade in goods and services without having the proper financial systems in place ; the work of the committee of central bank governors can be seen as providing the oil that makes the wheels of commerce turn faster in the region. the implementation of a free trade agreement is made easier if national payments systems function properly and are compatible with individual states in the region. in addition, investors who want to take advantage of the liberalisation of trade will feel more comfortable if there is a high and uniform standard of bank supervision ; in other words, legal familiarity, certainty and a good sense of a stable, well regulated and properly supervised banking system. similarly, investors and potential business partners usually want easy access to reliable basic macroeconomic information of countries in the region. for goods to flow smoothly across borders, it is also important that capital | β 2011. during this time, the nominal credit growth was in excess of 20 % y - o - y and far in excess of the nominal growth in industry. 1 / 9 bis central bankers'speeches 5. as may be seen from the graph, stressed assets have registered a steady growth since 2011 ; but if we were to look at npas, the growth was muted until 2014 and has been more dramatic, particularly after 2015 β 16. this is because, the reserve bank undertook an asset quality review ( aqr ) that led to recognition as npa of several loans, which banks had then considered to be standard assets. indeed, npas went up from 4. 62 % in 2014 β 15 to 7. 79 % in 2015 β 16, and were as high as 10. 41 % by december 2017. asset quality review 6. in february 2014, the reserve bank issued the framework for resolution of stressed assets. an important part of the framework was the setting up of the central repository of information on large credits ( crilc ). crilc captured all exposures of banks above rs 50 million. the data was accessible not just to the reserve bank but also to banks. for the first time we created a supervisory database of this nature, which gave reserve bank a comprehensive view of the banking system β s exposure to a large borrower and how the exposure to the same borrower was classified differently by different banks. while our stand has been that asset classification should be based on the record of recovery with individual banks, crilc gave us the wherewithal to objectively assess whether the divergent classifications were indeed justified. it also gave us a better insight into movement of funds from one bank to the other to keep an account standard. 7. this way, the aqr, backed by crilc, enabled us to get a banking system - wide view of large bank credits and make a holistic assessment of the true state of health of those exposures. together, they led to identification of npas that had not been recognized as such by the banks and also of accounts that would require to be downgraded over various timelines, if necessary closures such as resolution or account upgrade were not achieved. the resulting recognition of true asset quality at banks largely explains the spurt in npas during the last three years. evolution of resolution frameworks in india 8. before i come to the framework enunciated in the circular of february 12, 2018 | 0 |
weigh on productivity, which further increase unit labor costs. 3. the high - inflation period ( 2021 β present ) : the post - pandemic recovery brought a sharp return of inflation, driven by global supply chain disruptions, shifts in demand, and energy price surges following russia's brutal invasion of ukraine. while euro area inflation has averaged 5. 3 % in this period, finland's inflation has been slightly lower at 4. 1 %. key contributors to this divergence include finland's milder energy price increases and smaller labor cost pressures. inflation drivers in the euro area and finland the overall picture during covid and the subsequent inflation spike was quite similar for finland and the entire euro area. initially, inflation declined due to falling energy and service prices, driven by reduced demand and lockdowns. however, as global supply chains were disrupted, some prices began to rise. the shift in demand from services to goods and then back to services also had a noticeable impact on inflation. a mix of supply and demand effects interacted, causing inflation to exceed the target for the first time in over a decade. additionally, energy and other raw material prices surged sharply due to russia's brutal invasion of ukraine, which also led to rising food prices. on the demand side, prices were pushed up by increased consumption, fueled by household savings accumulated during the lockdowns and the strong fiscal and monetary stimulus measures implemented in response to the pandemic. recently, persistent service inflation has been the main factor sustaining inflation. now, lower increases in labor costs and differences in the energy mix are the two main reasons for the finnish inflation deviating from the common trend. let me next dive a bit deeper into the drivers of these inflation differences. mortgage rates in finland vs. euro area i am an old - school central banker. to me, inflation is always and everywhere a monetary phenomenon. therefore, when analyzing inflation dynamics, one should not overlook the role of monetary policy. as finland is part of the euro area, we share the same single monetary policy with the rest of the euro area. however, even though we share the risk - free rate, the transmission of monetary policy can vary from one country to another, impacting monetary conditions in each jurisdiction. one significant difference between finland and many other euro area member states lies in the housing market. in finland, almost all housing loans are floating - rate mortgages, typically using the 12 - month euribor as a reference rate. in | together with the esas, the ssm, the fsas and the central banks, continues to play a strong role in safeguarding the stability of the eu financial system. our work will focus on the evolving systemic risk and will be based on comprehensive data and research, high - quality analysis and wide - ranging cooperation between different authorities. i look forward to continuing to work with you towards this immensely important goal of maintaining financial stability in europe. thank you for your kind attention! 6 / 6 bis - central bankers'speeches | 0.5 |
christian noyer : the euro, a stabilising factor at home and abroad speech by mr christian noyer, governor of the bank of france, at β paris europlace " a financial meeting in hong kong, 21 march 2005. * * * introduction β’ the legal basis for the single monetary policy is the treaty on the european community, whose article 105 states that β the primary objective of the european system of central banks shall be to maintain price stability β. β’ price stability, combined with the convergence of euro area economies, is the key issue enabling the euro to become a stable international currency. β’ thanks to a strong macroeconomic framework and to the convergence of euro area economies, the introduction of the euro has limited the risks of disequilibrium inside the euro area ( part 1 ). furthermore, the international role of the euro as a vector of stability has increased ( part 2 ). part 1 : the euro has been a key factor for maintaining stability inside the euro area the efficient macroeconomic framework of the euro area ( a ) has made the economies of the euro area more homogeneous and reduced the risks of macroeconomic disequilibrium ( b ). as a result, the euro area is characterized by strong economic fundamentals ( c ). a the macroeconomic framework of the euro area is an efficient framework β’ for the past six years, the eurosystem has been responsible for defining and implementing the single monetary policy. the primary objective of the eurosystem is to maintain price stability, which has been defined as a year - on - year increase in the harmonised index of consumer prices ( hicp ) for the euro area of below 2 % in the medium - term. in may 2003, the ecb governing council confirmed this definition and specified that, in the pursuit of price stability, it will aim to maintain inflation rates close to, but below, 2 % over the medium - term. the monetary policy conducted by the eurosystem has led to a low level of inflation, which averaged 2 % between 1999 and 2004, and to very favorable financing conditions as both short - term and long - term interest rates have reached very low levels. β’ moreover, in principle, fiscal policies cannot undermine the objective of price stability as the treaty prohibits monetary financing and as member states are committed to implementing the stability and growth pact. however, the lack of fiscal discipline in some euro area countries and the recent debate at the eu level have illustrated the fact that it is still necessary | market transparency experience shows that uncertainty and incomplete information are determining factors in mimetic behaviour. these shortfalls in market transparency make mimetic behaviour seem rational to agents, who prefer to follow bigger participants, who are thought to be better informed, rather than develop their own analysis. strengthening transparency therefore continues to be a priority. one of the objectives of transparency is to enable better differentiation of borrower creditworthiness. a key feature of mimetic behaviour is that all borrowers are " tarred with the same brush ". so when one emerging economy encounters difficulties, all neighbouring countries, or countries that share common characteristics, are treated in the same way β regardless of their actual economic and financial situation. the same applies to businesses operating in the same economic sector. transparency has substantially increased since the asian crisis, thanks to a solid global consensus. let us continue and reinforce these efforts. take into account the medium and long - term perspective of some market participants some investors, such as pension funds and insurance companies, have to invest funds in order to enable their customers to build up wealth over the medium and long term, notably in preparation for retirement. consequently, these types of investors are supposed to behave differently from traders and short - term investors, who are working on a very different time horizon. but at times it seems that they are all pushed to behave in much the same way, on the basis of a very short - term horizon. to preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short - term pressures. this objective raises considerable difficulties, because it touches on the way in which the performances of medium and long - term funds ( including pension funds ) and life insurance companies are assessed. in other words, this objective concerns the accounting standards and practices they use. it implies that some rules and standards would be adapted to the medium and long - term horizon used by these entities. i have no answer at this stage. i am only asking the question. diversify the risk management tools of financial institutions as i mentioned earlier, even the best techniques can have adverse effects when used by too many participants. to some degree, this is perhaps what has happened to value - at - risk based techniques, which have been massively adopted by the financial industry. because they use more or less similar parameters and suffer from the same weaknesses β for example, they took inadequate account of market liquidity at the time of the 1998 crisis β, such tools tend to give con | 0.5 |
g padmanabhan : payment system issues and challenges speech by mr g padmanabhan, executive director of the reserve bank of india, at the foundation day β catholic syrian bank, thrissur, 26 november 2011. * * * assistance rendered by s / shri g srinivas, k sivaraman and saswat mahapatra gratefully acknowledged. mr v. p. iswardas, managing director & ceo, catholic syrian bank ( csb ), mr nandakumar, president, thrissur management association, mr anantharaman and mr bobby jose, board members present here, other office bearers of the thrissur management association, ladies and gentlemen. i deem it a privilege to be invited to speak on this important day in the bank β s history. it is a matter of pride to each one of you that the bank which had a modest beginning in november, 1920, is completing commendable 91 years of service and achievement. i have very fond memories of csb, as this was the one of the private banks which had a presence in thiruvananthapuram, which is my home town, as i was growing up. i must say the bank has grown from strength to strength, imbibing the enterprising spirit inherited from its founding fathers, adapting admirably to the far - reaching social, political and economic changes that have been happening around us. today it has a client base of more than 15 lakh customers. it established its first contact point with rbi in the year 1969, when it got the status of a scheduled bank, under the rbi act. in 1972 it came out of its traditional bastion and opened its first branch in chembur, mumbai. the bank entered the field of international banking in 1975. currently, i am told the bank has 364 branches spread across 16 states. of the 364 branches 242 are in kerala and of this nearly 80 % are in rural and semi urban areas. i am also informed that with the intention of making the right proposition to the right customer at the right time, tailor made banking products have been designed to cater to the specific banking needs of various sections of the society like students, women, senior citizens, farmers etc. a bank which has customer focus, has to continuously endeavour to retain customer confidence in its capabilities and deliveries. when i was extended the invitation, i was told that it is customary for the speaker to talk about any financial sector | k c chakrabarty : contemporary issues in banking β reflections on viewpoints of a bank economist remarks by dr k c chakrabarty, deputy governor of the reserve bank of india, at a book release function organised by the indian overseas bank, chennai, 30 december 2012. * * * dr. m. narendra, chairman and managing director, indian overseas bank ( iob ) ; shri a. k. bansal and shri a. d. m. chavali, executive directors of iob ; shri n. viswanathan, regional director, rbi ; smt. indira padmini and other general managers of iob ; shri m. ramaswamy, retired secretary of auroville ; shri s. muthiah, historian ; shri m. ct. p. chidambaram, grandson of the founder of indian overseas bank ; shri b. j. krishnan, environmentalist ; shri bhakther solomon, chief executive officer of development promotion group ; shri dharmalingam venugopal, who is the reason for our assembling here today ; serving and retired members of the banking fraternity, other invited dignitaries whom i have not specifically named ; ladies and gentlemen. it is a matter of great pleasure for me to be present here today on the occasion of release of shri d. venugopal β s book β indian banking reforms and after : a bank economist β s take β. based on my interaction with shri venugopal and reading of his articles, my assessment of him is of an individual with an incisive mind and an ability to dispassionately analyse diverse subjects of concern to the economy. the book being released today is an anthology of articles written by him in various national and financial dailies over a period of time. it deals with an impressive array of subjects and provides a bank economist β s perspective on various issues, which certainly makes an interesting reading. i congratulate shri venugopal for the book, of which i had the privilege of writing the foreword, and hope the book gets all the success and accolades that it, so richly, deserves. the first thing that strikes about the collection of articles featured in the book is the wide time horizon over which the articles were penned. the book succeeds in providing a panoramic view of issues that have confronted the economy over the last two decades, a period that has been exciting for the indian economy with the country moving from the th | 0.5 |
gertrude tumpel - gugerell : retail sales from a euro area perspective speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the world retail congress, berlin, 25 october 2010. * * * it is a great pleasure for me to be here in berlin today at the world retail congress. retail sales constitute about 45 percent of private consumption, which in turn amounts to a share of almost 60 % of gdp. thus, retail sales alone explain around 30 percent of aggregate demand in the euro area. these impressive figures are enough to underline the importance of the retail sector for the overall economy. as you know, the primary objective of the ecb β s monetary policy is to maintain price stability. the governing council of the ecb aims at keeping inflation rates below, but close to, 2 % over the medium term. in order to reach this objective we must assess the inflation outlook continuously. we form our view on future inflation by closely following and monitoring a wide range of indicators that affect inflation and the economy β s output of goods and services. retail sales is one of those indicators and certainly β as the figures above show β an important one. in my presentation i would like to briefly touch on three questions : 1. how was the retail trade sector affected by the crisis? 2. how do β in general β financial variables and monetary policy affect private consumption and retail trade? 3. and, what is β in our view β the future outlook for the retail trade sector? let me turn to the first question on how sales in retail shops and stores were affected by the crisis. in chart 1 you see the annual rate of change in the volume of euro area retail sales alongside with private consumption and gdp. you see that retail sales move clearly in tandem with private consumption and gdp. as gdp and consumption declined in the recent recession, so did retail sales. during the crisis, households drew back on consumption, hence private consumption growth slowed down on the basis of lower growth in incomes, reflecting mainly weak employment growth. we can see in chart 2 that the low growth in real disposable income was mainly driven by the decline in overall employment. real compensation per employee, in contrast, contributed positively in 2009 β mainly due to the low inflation rates during that time β before stagnating again in the beginning of this year. in addition, financial wealth declined in 2008, thereby further depressing consumption growth. another key deter | 1 january. it is because europeans have seized the opportunity to play an active part in the euro changeover that we can already pronounce this unprecedented move a tremendous success. with the introduction of the euro banknotes and coins, the euro has ceased to be a currency familiar only to the financial markets, to financial institutions and large enterprises. on 1 january at 00. 00 hour, the introduction of the euro banknotes and coins marked not only the completion of economic and monetary union, which is a crucial achievement in itself, but one of the major, if not the major step forward in the history of european integration. i am convinced that 1 january 2002 will appear in the history books in all our countries and beyond as the start of a new era for europe. | 0.5 |
london, i said that one of the mistakes many people make is to underestimate how much political capital has already been invested in the euro. i was very much aware of that fact. just before i made that statement, the political leaders had fully committed themselves to the euro at the european summit, within the scope of which the banking union was created. β are the omts some kind of nuclear bomb, a threat that will never be carried out? β the markets reacted in a way that made it unnecessary to use the programme. the spreads between the interest rates [ on bonds ] of southern euro area countries and germany narrowed sharply. that was something that could not have been achieved by any other monetary policy measure. β were you surprised by this effect? β by the magnitude of the effect? yes, certainly. we were all surprised. β or were you relieved that you had merely had to promise action without following through with it? β in order to be credible, we also had to be sure that we could actually use the instrument. we were not bluffing, most certainly not. β the other side to the coin is that you bought so much time for politicians that they no longer needed to implement reforms so rapidly. do you also see this other side? β yes and no. we have a mandate to safeguard price stability. we are not responsible for how politicians make use of the time they have. i do not want to mix the responsibilities of the central bank with those of governments. but look at the extent of the reforms undertaken by governments since 2012. you will then need to admit that considerable progress has been made. take spain, for example, which has restructured its banking sector and reformed the labour market. portugal is another example and ireland yet another. and even in greece progress has been remarkable. β you have said repeatedly that the euro is an irreversible project. it is understandable that you say that, but is this not something for politicians to decide? β our mandate is to ensure price stability. there was more than enough evidence that a collapse of the euro would endanger price stability, and therefore our action was squarely within our mandate. β you saved the euro. in doing so, did you not take a political decision? β no, certainly not. the issue is by no means political. my statement in july 2012 was aimed at price stability. there was unjustified uncertainty about the future of the euro, not political uncertainty but a financial one. | also broadly reflected in the december 2017 eurosystem staff macroeconomic projections for the euro area, which foresee annual hicp inflation at 1. 5 % in 2017, 1. 4 % in 2018, 1. 5 % in 2019 and 1. 7 % in 2020. compared with the september 2017 ecb staff macroeconomic projections, the outlook for headline hicp inflation has been revised up, mainly reflecting higher oil and food prices. turning to the monetary analysis, broad money ( m3 ) continues to expand at a robust pace, with an annual rate of growth of 5. 0 % in october 2017, from 5. 2 % in september, reflecting the impact of the ecb β s monetary policy measures and the low opportunity cost of holding the most liquid deposits. accordingly, the narrow monetary aggregate m1 continued to be the main contributor to broad money growth, expanding at an annual rate of 9. 4 % in october, after 9. 8 % in september. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to non - financial corporations increased to 2. 9 % in october 2017, after 2. 4 % in september, while the annual growth rate of loans to households remained stable at 2. 7 %. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households, access to financing β notably for small and medium - sized enterprises β and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need for an ample degree of monetary accommodation to secure a sustained return of inflation rates towards levels that are below, but close to, 2 %. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to strengthening the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in all euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. regarding fiscal policies, the increasingly solid and broad - based expansion strengthens the case for rebuilding fiscal buffers. this is particularly important in countries where government debt remains high. all countries would benefit from intensifying efforts towards achieving a more growth - friendly composition of public finances. a full, transparent and consistent implementation of the stability and growth pact and of the | 0.5 |
required to deliver our mandate. at the same time, an extended phase of below - target inflation poses a communication challenge in maintaining focus on the medium - term inflation goal. it is obvious that it is easier to demonstrate commitment to the target if the actual track record of inflation outcomes corresponds more closely to the declared objective. accordingly, it is essential that a central bank shows consistency in its monetary policy decisions by proactively responding to shocks that might delay convergence to the target or move inflation dynamics in an adverse direction. to this end, especially in a world of non - standard measures and an essential role for forward guidance, it is also vital that a central bank demonstrates that it is always seeking the most effective methods to deliver on its mandate. references albertazzi, ugo ; altavilla, carlo ; boucinha, miguel and di maggio, marco ( 2018 ), β the incentive channel of monetary policy : quasi - experimental evidence from liquidity operations β, mimeo, first annual rtf workshop, frankfurt am main. altavilla, carlo ; canova, fabio and ciccarelli, matteo ( 2016 ), β mending the broken link : heterogeneous bank lending and monetary policy pass - through β, journal of monetary economics, forthcoming. benetton, matteo and fantino, dadvide ( 2018 ), β competition and the pass - through of unconventional monetary policy : evidence from tltros β, banca d β italia working paper no 1187. bottero, margherita ; minoiu, cameli ; peydro, jose - louis ;, presbitero, andrea and sette, enrico ( 2019 ), β negative monetary policy rates and portfolio rebalancing : evidence from credit register data, β imf working paper wp / 19 / 44. brunnermeier, markus and koby, yann ( 2018 ), β the reversal interest rate β, nber working papers 25406, national bureau of economic research. 17 / 19 bis central bankers'speeches cΕure, benoit ( 2019 ), β the effects of app reinvestments on euro area bond markets β, closing remarks at the ecb β s bond market contact group meeting, 12 june 2019. demiralp, selva ; eisenschmidt, jens and vlassopoulos, thomas ( 2019 ), β negative interest rates, excess liquidity and retail deposits : banks β reaction | and turkey. ( 2 ) dotted vertical line shows march 2016 monetary policy report 2016. ( 3 ) includes brazil, colombia, mexico and peru. ( 4 ) includes brazil, colombia, czech rep., korean rep., israel, mexico, philippines, poland and turkey. ( 5 ) includes australia, canada, new zealand and south africa. ( 6 ) weo's april 2016 weights. sources : central bank of chile, bloomberg and emerging portfolio fund research. table 2 international baseline scenario assumptions 2015 ( e ) mar'16 report jun'16 report 2016 ( f ) mar'16 report jun'16 report 2017 ( f ) mar'16 report jun'16 report terms of trade trading partners'gdp world gdp at ppp world gdp at market exchange rates developed ec's gdp at ppp emerging ec's gdp at ppp united states china eurozone latin america ( excl. chile ) external prices ( in us $ ) - 1. 8 3. 4 3. 4 2. 7 1. 7 4. 8 2. 4 7. 3 0. 9 1. 1 - 0. 9 - 4. 5 2. 9 3. 1 2. 4 1. 9 4. 0 2. 4 6. 9 1. 5 - 0. 7 - 9. 7 - 4. 5 3. 0 3. 1 2. 4 1. 9 4. 1 2. 4 6. 9 1. 6 - 0. 5 - 9. 8 - 4. 2 2. 9 3. 1 2. 4 1. 8 4. 0 2. 3 6. 4 1. 5 - 0. 9 - 5. 8 - 3. 9 2. 8 3. 0 2. 3 1. 7 4. 1 1. 9 6. 5 1. 5 - 1. 0 - 3. 8 0. 7 3. 1 3. 3 2. 7 1. 9 4. 5 2. 4 6. 1 1. 6 1. 3 1. 0 0. 1 3. 2 3. 4 2. 7 1. 9 4. 6 2. 3 6. 2 1. 6 1. 5 0. 6 lme copper price bml ( us $ cents / lb ) wti oil price ( us $ / barrel ) brent oil price ( us $ / barrel ) gasoline parity price ( us $ / m3 ) libor us $ ( nominal, 90 days ) 0. 2 0. 3 0. 3 0. 7 0 | 0 |
svein gjedrem : ten years of inflation targeting strategy in poland compared with the experience of other countries presentation by mr svein gjedrem, governor of norges bank ( central bank of norway ), at the conference " 20 years after the collapse of the socialist economy. transformation, economic growth and convergence in poland and other central and eastern european countries ", national bank of poland, warsaw, 5 june 2009. * * * thank you for the invitation to speak at your conference. it is a pleasure for me to be here in warsaw on this occasion. norges bank was given an inflation targeting mandate in 2001. inflation expectations have been well anchored around the 2. 5 per cent target rate in recent years. we practice flexible inflation targeting. the credibility of our inflation target has enabled monetary policy to support a stable economic growth path. however, like other countries, norway was hit by the international economic downturn that followed the financial crisis. the estimated growth rate for 2009 is minus one percent. preceding the downturn, we went through a long period of low cpi inflation. headline cpi in norway is strongly affected by fluctuating energy prices. an inflation measure that instead includes trend energy prices, cpixe, illustrates how the inflation rate gradually has been approaching our target of 2. 5 per cent. in this β until the fall of 2008 β rather benign macroeconomic environment, rising property prices, high credit growth and a low saving ratio posed a policy challenge β as in many countries. a high leverage ratio makes the financial system, and in effect the whole economy, more sensitive to fluctuating asset prices. the present downturn in norway was not triggered by moving asset prices, but rather by the international downturn. still, the effect of the international downturn on our economy is probably stronger than it would have been with a better regulatory framework. a consensus is emerging internationally that new tools are needed in order to make the financial system more robust with respect to macroeconomic fluctuations. moreover, the financial system should help dampen rather than amplify or even cause fluctuations. the new tools β macro - prudential policies β are needed regardless of the monetary policy regime in place in any given country. for norway, as a small eu outsider, it is hard to see any better option than inflation targeting. indeed, it has been a strength in the current downturn to have a credible inflation targeting regime in place. we have tried to have a long - term perspective on attaining | the target. this was especially important when the economy was hit by a supply shock, and we needed to trade off reaching the inflation target and closing the output gap. inflation was below target until last year. now, hit by a demand shock and looking ahead, we know that a trade - off is absent β the economy needs stimulus. but in the face of an unusually high degree of uncertainty, and given an unusually large shock, i believe that it is sensible to continue to be patient. we still try to have a long - term perspective, and we will carefully consider the effects of measures already taken as we move along. even with monetary policy able to counteract cyclical fluctuations to some extent, there is a limit to how much the one tool at the central bank β s disposal β the key policy rate β can accomplish. regulations need to underpin the robustness of the financial system with respect to cyclical fluctuations. supply side policy needs to support the capacity of the economy to absorb asset price fluctuations. as for regulatory reform of the financial sector, i believe we both need to reconsider the structural elements and we need some new discretionary features. in order to limit excessive credit growth, the leverage ratio of banks should be contained, with higher capital requirements. the procyclical effects of such capital requirements need to be addressed. since profits fall during a recession, capital requirements then tend to be more binding, reducing credit availability when it is most needed. the work aimed at changing the procyclical effects of capital requirements is still in its infancy. banks β incentives to increase loan provisions during upturns could be strengthened. this would smooth profits and hence make capital requirements less procyclical. ideally, loan provisions should internalise some of the cyclical risk by being based on longer term risk assessments. in addition, one could reduce the procyclical effects of capital requirements more directly by making the capital requirements themselves more flexible over the cycle. imposing capital requirements always involves a trade - off between financial stability concerns and efficient capital allocation. in a downturn, when concern about the availability of credit may be greater than in an upturn, a temporarily reduced capital requirement may be justified. the condition must be that the buffer is built up again during the upturn. such time variant capital requirements would also be demanding to implement, however. it would leave the relevant authority with the discretion to assess the cyclical situation and impose appropriate capital requirements. the time horizon over which the | 1 |
. 6. the operation attracted harsh criticism from various quarters, with arguments that the government β s intervention to prop up the markets was contrary to the basic principles of a free market economy. nevertheless, the operation has proven to be a success. during an extraordinary time of market failure, our resolute and extraordinary measures stabilised the hong kong dollar and the local stock and futures markets, restored confidence of hong kong people and investors, and helped preserve the stability of hong kong β s financial system. but this is only half of the story ; equally important is success in engineering a smooth exit. our biggest challenge was to release the huge amount of hong kong stocks amassed during the operation to the market with minimal impact on market stability. this was no easy task. in a clear message issued promptly to the market when the operation ended, the hkma made two pledges. first, the operation was only an extraordinary measure taken at an extraordinary time. the hkma would arrange to dispose of the stocks as soon as possible. secondly, the hong kong sar government would not intervene in the daily operations of the listed companies concerned through its shareholdings. we fully respect and uphold the clear division of labour between the public and private sectors under the market economy. indeed, i can still remember that following the operation, my colleagues and i worked very hard on explaining at international forums and on other occasions the rationale behind the operation and our intention to start disposing of the stocks quickly. after much careful study and bis central bankers β speeches planning for a year, the hkma launched the tracker fund, an open - ended exchange - traded fund, in november 1999 and resold hk $ 33. 3 billion worth of stocks to 180, 000 investors. we continued to recoup over hk $ 100 billion in the next three years through the same mechanism. ultimately, our market operation turned in a profit of nearly hk $ 100 billion at prevailing stock prices at that time. 7. the experience of hong kong clearly shows that market failures do occur. in the example i have just outlined, market intervention by the hkma proved to be bold and effective in securing the safety and soundness of hong kong β s monetary and financial system. it was, indeed, undertaken in a life - and - death but smokeless war on the financial front. hong kong prides itself on being one of the world β s freest and most open markets. nevertheless, as a much smaller market compared with our american and european counterparts | just to name a few : u. s. β 19 %, uk β 23 %, spain β 29 % and ireland β 67 % between 2007 and 2012. recently, there are signs of stabilisation or even an upward trend. however, a rapid rebound of cre prices in most g20 countries to a pre - crisis level seems unlikely in the short - term. if i look at the development of prices and the annual investment activity at once i can see certain coherence between the two. ( slide ) while global invested volumes fell by two thirds from 2007 to 2009, they almost doubled after that in only two years to almost 400 billion u. s. dollars. unsurprisingly, invested volumes for asia - pacific have gained tremendous market share over the last few years and are now at the same level as for europe and twice as high as for north america. ( slide ) having the pleasure of welcoming all of you here in frankfurt β germany β s banking city β i would like to take the opportunity to briefly give you some insights into the german cre market. germany has seen a moderate development of cre prices over the last decade. bis central bankers β speeches however, the cre market and consequently cre prices β unlike most other european markets β have benefited from the economic conditions here. foreign investors have stepped up their investment activity over the past two years. leaving germany and taking a global view again the question is, what is the state lenders and investors are in? ( slide ) obviously, falling prices have not failed to leave a mark on both. an enormous half of investors in emea and 75 percent in north america are in talks with banks on loan amendments and / or loan extensions. if restructuring or extension of the loan is not possible, investors must find other sources of capital for equity injections or partial loan repayments and if this fails even asset sales are on the agenda. clearly challenging times for investors and following them, the lenders. ( slide ) the latter have chosen a very selective path in financing cre, lately. a more cautious underwriting practice and tighter lending standards can be observed. according to the survey of lenders for dtz β global research, a preference for less risky investments was identified. prime assets are in favour of lenders, whereas speculative developments and non - prime assets are currently not part of their strategic agenda. this trend of consolidation is also reflected in new lending, where only a minority of survey respondents expected expansion | 0 |
guidelines were indeed treated as guidelines only. a further guideline for growth in total bank credit extension of around 10 percent was also adopted. but when these guidelines were exceeded by considerable margins, this was on occasion tolerated without strong policy adjustments, on the basis of developments in other variables. in practice it was quite apparent that growth in the money supply could sometimes be a misleading indicator of current and future inflation. accordingly, a number of other variables were also analysed in deciding upon the appropriate monetary policy stance. these included the pace of growth in the banking sector β s credit extension, movements in consumer price and production price inflation, domestic production and expenditure, the balance of payments and exchange rate situation, and the fiscal policy stance. the inflationary potential of developments in all these and many other variables was assessed on an ongoing basis. accordingly, growth in money supply was not really the pivotal variable around which monetary policy revolved - although excessive growth in money supply certainly did signal the need for additional caution. however, money supply growth was deemed to be important and was formally recognised as the intermediate target variable. what has since changed? instead of targeting guidelines for intermediate objectives, the reserve bank now directly targets inflation. it monitors and analyses a whole range of factors that can affect the rate of inflation. the inflation rate, or more specifically cpix, which is the headline consumer price index excluding mortgage costs, has to fall between 6 and 3 percent by the end of the calendar year 2002 and 2003. it is within this target and this monetary policy framework that the south african reserve bank will strive to achieve in the short term what we are mandated to do : that is to achieve price stability. such a framework for monetary policy ensures that monetary policy is transparent, in that the authorities have a definite and measurable aim in their conduct of monetary policy. and at the same time, it should give the citizens of this country an aspect of clarity about the future as it makes clear the bank β s intentions. in so doing, inflation targeting should also ease the burden and take the β guesswork β out of many of the decisions that businesses have to make when planning for future expansion and investment. it should also provide an anchor for inflation expectations and guide both employers and employees when undertaking forward - looking negotiations. however, it must be emphasised that at least some of the success of the inflation targeting framework rests on whether it is fully understood by labour, business, the private sector and the other sectors of the economy. if these | great recession, and a slow recovery in consumer spending ( ibid ). today, consumer spending is almost back at pre - recession levels, providing significant support for domestic demand and, crucially, employment ( cso 2019 ). although, i note that this time spending growth is not accompanied by a build - up in household indebtedness. in fact, since 2016 β a period when consumer spending growth has averaged around three per cent per year β household debt - to - income ratios have fallen by 31 percentage points, from 151 to 120 per cent ( central bank 2019 ). beyond the aggregate, distributional effects in economic outcomes is now a key theme in macro modelling ( moll, 2017 ). issues like the distribution of income, wealth and debt are increasingly discussed in central banking circles. it is important that we understand how different shocks and policy choices affect different groups in society, and how these differences influence aggregate outcomes ( ampudia et al, 2018 ). and this is possible now, precisely because of the advent of better data like the household finance and consumption survey. not only does it bring macro theory more into line with reality, but it also allows for differences in behaviour across the income and wealth distributions to be better reflected in the models. one interesting finding is the extent to which a monetary stimulus reduces income inequality by boosting the incomes and employment of lower income households ( lenza et al, 2018 ). i look forward to hearing more in philip β s lunch - time remarks, as well as in the conference tomorrow. and while here we refer to micro household finance data in monetary policy, we have of course had lengthy discussions on the role of micro data in monetary policy more widely ( donnery, 2016 ). a house purchase is for many the largest asset they will buy over their lifetimes. in ireland, we have seen excessive swings in house prices, and so had different wealth effects on households depending when they purchased. through data analysis we know how debt affects households β responses to income and wealth shocks. a lack of resilience spills over to the real economy making for longer, and deeper, recessions. the irish experience over the last two decades paved the way for us to collect loan level data and develop what are now critical macro prudential instruments. the data we collect allows analysis of both bank and borrower balance sheets which contribute to our policy framework. good data is key to understanding both the origin and transmission of shocks, and to develop policy to | 0 |
some downward momentum. but with gasoline prices rising, cpi inflation is likely to remain around 3 % in the coming months. it is then expected to ease below 2aΒ½ % in the second half of this year and reach the 2 % target in 2025. as always, there are risks around our forecast. inflation could be higher if global tensions escalate and this boosts energy prices and further disrupts international shipping. house prices in canada could rise faster than expected. and wage growth could remain high relative to productivity. on the downside, economic activity globally and in canada could be weaker than expected, cooling demand and inflation too much. we don't want to leave monetary policy this restrictive longer than we need to. but if we lower our policy interest rate too early or cut too fast, we could jeopardize the progress we've made bringing inflation down. overall, the data since january have increased our confidence that inflation will continue to come down gradually even as economic activity strengthens. our key indicators of inflation have all moved in the right direction and recent data point to a pickup in economic growth. i realize that what most canadians want to know is when we will lower our policy interest rate. what do we need to see to be convinced it's time to cut? the short answer is we are getting closer. we are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained. in the months ahead, we will be closely watching the evolution of core inflation. we remain focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour as indicators of where inflation is headed. to conclude, we've come a long way in the fight against inflation, and recent progress is encouraging. we want to see this progress sustained. with that summary, the senior deputy governor and i would be pleased to take your questions. 2 / 2 bis - central bankers'speeches | trade can affect labour productivity through two main " channels " : the exchange rate and the reallocation of resources across sectors. the currency appreciation associated with an improvement in the terms of trade lowers the relative price of imported physical capital, particularly machinery and equipment, and encourages the substitution of capital for labour, which should contribute to higher labour productivity over time, other things being equal. while the effect of the reallocation of resources on real income is always positive, its effect on aggregate labour productivity is less clear. for one thing, the rise in commodity prices can be expected to lower productivity in the primary sector, as higher - cost - that is, less - productive - activities become more profitable. on the other hand, the reallocation of capital and labour away from the production of manufactured goods toward the production of commodities should raise overall labour productivity, since labour productivity levels are higher in the more capital - intensive primary sector. as for the shift from tradables to non - tradables, no generalization is possible, since the non - tradable, services sector is very broad and very diverse, with some industries ( like finance and wholesale trade ) showing high productivity levels and others ( like retail trade ) showing much lower productivity levels. at any rate, these are long - run effects. in the short run, the adjustment process can be expected to exert a transitory drag on productivity growth. for instance, workers with skills tied to a particular industry may require retraining in order to become fully functional in areas of the economy that are expanding. once in new jobs, it may take them some time to develop the firm - specific skills often associated with productivity gains. furthermore, investment in new machinery and equipment may involve new technology, which may necessitate retraining or reorganization of the workplace before the full productivity gains materialize. 8 now, to the extent that a terms - of - trade shock affects productivity growth, there will also be an effect on the growth of potential output. if i were to generalize about the likely effects of the current terms - oftrade shock on potential output through productivity, i would say that we would expect to see an increase in the long run, but a possible dampening in the short run, owing to transitional dislocation costs. the gain over time would come primarily from the " capital deepening " that results from changes in the relative costs of labour and capital and from increased exploration in the primary sector. while closed mines | 0.5 |
the regulations of 28 countries when exporting across the union. second, it would incentivise countries to put in place efficient and well - functioning legislation. in addition, the single market for services should be expanded to additional sectors : there is, for instance, no good economic reason for excluding health care. as i said earlier, reforms are also about improving economic governance. when the first european semester was launched in january 2011, it marked a sea change in the economic governance of the euro area. with this new tool, europe recognised that ex ante coordination of economic policies β and not only fiscal policies β at european level was necessary. later in the same year, the macroeconomic imbalance procedure ( mip ) strengthened the european semester further. for the euro area, the corrective arm of the mip even foresees sanctions in case of non - compliance. the european semester and the mip are powerful tools that no doubt have made the euro area stronger. yet β five years later β we have to admit that the sun does not shine everywhere. the implementation record for country - specific recommendations ( csrs ) was not very high from the start and has declined further recently. in 2015 only 4 % of csrs were fully implemented, down from 7 % in 2014. in some countries excessive economic imbalances bis central bankers β speeches persist and could harm other member states. more can be done to improve national implementation and i see a lot of merit in the imf's proposal that csrs should be linked to outcome - based benchmarks that are concrete, measurable, and clearly linked to the ultimate reform objective [ 28 ]. the dismal implementation record of the csrs nevertheless suggests that a governance framework that envisages european economic policy priorities being legitimised and implemented at national level has its limits. looking forward, we will need to engage in a process at european level, based on shared institutions, that provides both economic resilience and the appropriate legitimacy. in such a process, consensus would be needed on ( i ) the policy areas that are crucial to preserve the resilience of the euro area, and on ( ii ) designating those policy areas as shared competences with democratic legitimisation at european level. and as i have said before, getting there will require both economic and political convergence. the success of the single market is one of the few uncontroversial achievements of the eu. it has shown that shared competences | significant corrections if events trigger a change in investors β assessment of risk. particularly, a revision concerning future inflation, no matter how unlikely, could lead to significant increases in term premia and higher yields. 9 / 20 bis central bankers'speeches nevertheless, taking into account the present market configuration and modelling fair value valuations, excess corporate bond premia in the euro area cannot be detected ( figure 10, rhs ). the excess bond premium is given by the deviation of the corporate credit spreads relative to the measured default risk of the issuer and the duration risk of the bond. the estimates show that β excess premia β have declined since end - 2015 and are currently negative, implying that investors require no premium to hedge against adverse economic scenarios. 10 / 20 bis central bankers'speeches looking now to another asset class, our analysis indicates that on the aggregate, residential property prices are broadly in line with the fundamentals, using various different methods to assess whether there are overvaluations in the market ( see figure 11 ). the situation is different in the case of commercial real estate. in specific areas and large cities, housing prices have however increased at a faster pace than households β incomes and may show signs of overvaluation. 11 / 20 bis central bankers'speeches on the other hand, property prices and transaction volumes have grown strongly in recent years and have already reached historical highs in many euro area countries ( see figure 12 ). nominal growth of residential property prices accelerated to around 4 % y - o - y in q1 2017 but remained below its historical average growth rate and well below pre - crisis values. in real terms, price increases moderated due to inflation picking up. residential property prices are demand - driven and increasingly supported by the recovery in personal income which is expected to continue. 12 / 20 bis central bankers'speeches potential impact of asset price shocks the analysis of the situation in different asset markets illustrates that generalised overvaluation does not exist in the euro area. tensions in some real estate markets are being dealt with by macroprudential instruments in many countries. to assess possible financial stability risks we should however try to gauge the possible impact of the materialisation of an interest rate or yields correction. in the following paragraphs, i will explore the effects of such a shock calibrated at 100 basis points. estimates suggest that the impact of this sizable increase on the non - financial private sector is relatively small, in particular for euro area households ( see figure 13, l | 0 |
trends and cycles in the euro area : how much heterogeneity and should we worry about it? β, ecb working paper no 595. from : ludwig erhard, β die ziele des gesetzes gegen wettbewerbsbeschrankungen β ( speech to the german bundestag on 24 march 1955 ), in ludwig erhard, deutsche wirtschaftspolitik, dusseldorf, 1962. 3. adjustment processes in the euro area economic integration is a clear prerequisite for the smooth functioning of the euro area. all the more because the euro area is continuously confronted with adverse events or shocks, for instance in the fields of global competition or energy price developments. in addition, individual euro area economies or regions may be affected by specific sectoral developments, for example in real estate markets. it is therefore important to make sure that adjustment mechanisms function efficiently. why is an efficient adjustment mechanism important in the euro area? as national monetary and exchange rate policies are no longer available options, it is important to make sure that other mechanisms of adjustment to shocks function properly within the euro area. this is needed to avoid a situation where a country or a region, after suffering a specific or asymmetric shock, enters either into a period of protracted low growth and high unemployment, or in a long period of overheating. there are many factors that can improve the resilience of the euro area economies to adverse shocks. but before addressing this issue, let me stress that the ecb β s single monetary policy contributes to the proper functioning of adjustment mechanisms within the euro area by ensuring price stability, i. e. by anchoring price stability in economic agents β decisions. i believe that this is a very important contribution. in other words, the social partners when agreeing on wage increases, and also national authorities when preparing their budgets or designing policies in their fields of responsibility, should be, and, as a matter of fact, are fully confident that we at the ecb and in the eurosystem will deliver price stability. on this issue, ludwig erhard said that β it is a great mistake for a people, or a state, to believe that it can introduce and pursue an inflationary policy, yet insure itself against the results. this is to try to lift oneself by one β s own bootlaces. on the contrary, it is essential to concentrate all efforts to prevent an inflation [ β¦ ] β. 11 and let | internalising the repercussions of wage settlements on competitiveness and thus employment at their company and in their industry, sector or region. 12 sufficient wage differentiation would improve employment opportunities for less skilled workers and in regions or sectors with high unemployment. in this respect, excessive wage regulations are undermining job creation, in particular for young and less qualified workers as well as for all those who face problems entering the labour market. allow me to mention also that corporate governance should ensure that executive board remuneration is properly set, in line with the performance of the board members and conditions at the respective company. as seen in the german case, the period of adjustment can be painful, but reforms and unit labour cost moderation is paying off and contribute to robust growth and impressive economic records, like the one currently observed in germany. i remember some observers arguing that much stronger wage increases were needed for higher growth. the recent evidence does not confirm this view. as seen in germany since last year, past moderation of unit labour costs has very significantly contributed to declining unemployment and higher growth. the competitiveness gained by the german economy was an important prerequisite for sustainable job creation and sound and long - lasting growth. the proper functioning of adjustments through labour markets also requires the completion of the single market. in particular, all existing barriers to labour mobility within the euro area β in particular as regards slovenians β must be removed. as to product markets, let me stress that it is essential that the single market must be fully completed, particularly in services and network industries. a deeper integration of markets would stimulate price flexibility by fostering competition and open product markets. greater cross - border competition and the integration of markets across the euro area countries would contribute to lower prices. it could also enhance the adjustment processes in the individual countries in the event of asymmetric shocks or differing cyclical developments. 13 another important market - based mechanism in a monetary union that can help to attenuate the impact of shocks in a country or region is well - integrated financial markets and readily available opportunities for portfolio diversification. well - integrated financial markets and diversified portfolios reduce the dependence of firms β and households β saving and spending decisions on economic and financial developments in a specific country, region or sector. this mechanism is known as the β credit and risksharing channels β. in essence, it means that consumption does not need to follow movements in regional output, first because consumers can borrow abroad and second because their financial wealth is less | 1 |
##amat sa inyong lahat! mabuhay ang pilipinas! | . it is fitting that we are implementing these changes just a week after the assumption into office of president benigno aquino iii. he stood for change and received an overwhelming mandate from our people with a landslide win. palakpakan po natin si presidente benigno aquino iii! ladies and gentlemen, let us unite and join president aquino in making the changes our country needs to become a better place for all. as our theme says, let us keep β moving forward through stronger partnerships. β indeed, we should take our theme to heart, given the many challenges and uncertainties ahead. why do i say this? first, we are looking at varying and uneven pace of recovery across the globe. given global interdependencies and linkages, it could lead to slower growth over the medium term. second, the potential heavy influx of capital inflows, as risk appetites perk up, can also complicate monetary management. additionally, the rebound of the global economy could create upward pressures on commodity prices and fan inflation. there could be positive surprises to investor confidence, which could foster a stronger - than - expected improvement in market sentiment and prompt a strong rebound in investment and demand. third, there are risks to the inflation outlook. for these reasons, the bsp is watchful of emerging signs of inflation that could be disruptive to consumption and investment, and ultimately have a corrosive impact on the economy. one clear strategy in addressing these challenges is to forge and nurture greater partnership between the bsp and its stakeholders, through open communication. this is where your inputs, through your responses in the business expectations survey, come in. your responses enable us to discern public expectations on the general direction of economic indicators, particularly inflation, a crucial element in the bsp β s monetary policy settings. as in a jigsaw puzzle, each institution represents a piece whose absence will leave gaps that could adversely affect our proper appreciation of particular scenarios. this could potentially lead to weak or even wrong policies. it is important therefore that we keep on working together to gain clear perspectives that give rise to appropriate and timely policies. indeed, sound macroeconomic policies provided our economy with some insulation against the worst global crisis in post - war history. among the key elements that enabled the bsp to calibrate well - informed and well - guided policies during the crisis was the constant supply of information from you, our partners in the bsp β s programs. for this, we | 1 |
which switched with much acclaim to the market paradigm during the past decade or so. another example of the ascendancy of market - based economics can, i would argue, be found in the realms of corporate governance. at times during the 1970s and 1980s, when the so - called anglo - saxon model of relatively unbridled financial markets was not delivering particularly good results in terms of economic growth, there was some envy of what one might depict as the institutional model of corporate ownership, as evident in germany and japan for example. in this model much of the equity of major businesses is closely held by friendly groups of long - term investors including one β s bankers and associate companies. it has been argued that this arrangement provides the best environment for long - term growth and stability, in contrast to the situation where businesses are exposed fully to the cut and thrust of the stock markets, which are characterised as being populated by people seeking only short - term profit and ever alert to opportunities for takeovers, asset stripping and the like. but experience of the 1990s does not support that view. germany and japan have been the laggards of the decade. the true cost to japan of the longstanding cosy relationships between banks, industrial corporations and government ministries has become apparent. and we watch in some amazement the reaction among some sections of the political and business communities in germany to the vodafone / mannesmann takeover battle an almost unprecedented ( for germany ) hostile bid, no more palatable for being from abroad - along with the government β s efforts to save the holzmann construction group, not to mention the authorities β stout defence of the largely state - owned domestic regional banking network there. thus, the more open and aggressive equity market environment of the anglo - saxon model seems to have delivered ultimately the fitter economy. but we should remember that the stock market doesn β t serve everyone who is looking for equity finance. there is a large population of smaller and mediumsized businesses which cannot aspire to access the market. nevertheless they are important contributors to the economy and need equity funding. few, if any, economies have been able to match the usa when it comes to enterprise culture and the relatively abundant sources of funding available to smes. even in hong kong, where we pride ourselves as being highly market - oriented and enterprising, we cannot claim that life is a bed of roses for smes. but i am encouraged by the launch of the growth enterprise market - the stock exchange β s | clients. the ( a ) professionalism and integrity of the financial institutions and the practitioners are crucial in earning the confidence and trust of their customers. without such trust, the prospects of hong kong as an ifc are doomed. financial firms should avoid getting carried away in boom times. motivated by big and growing profits and bonuses, many financial firms are minded to undertake very rapid ( b ) expansion without building the necessary risk management capability. excessive risk taking or overly aggressive expansion usually lead to rather unhappy endings, as the financial history is littered with so many such failure cases. as for the regulators, they should stay true to the risk - based approach with the right sense of proportionality and should adopt an open mind on how the risk can be addressed. the regulators should stand ready to discuss with the industry to see if ( c ) there can be alternative ways of dealing with the risks identified. the industry is always closer to the markets and the clients they serve and should therefore have a better sense of how to get things done in a way that would cause less disruption or inconvenience. the regulators must not fall into the trap of complacency, and should constantly stay on alert and maintain a sense of unease even in good or peaceful times. banking and ( d ) financial crises can never be avoided all together, but we can at least build sufficient buffers to lower their chance of occurrence or when they happen, the damage can be reduced or contained. the industry should stand ready to challenge the regulators if the severity of the risk is overstated or there are better alternatives than what has been put on the table. on the ( e ) other hand, the industry must avoid over - interpreting or gold plating the regulators β requirements in such a way that is safe from the compliance point of view but would create bad customer experience without enhancing the underlying risk management outcomes. 16. all in all, the financial industry should seek to collaborate with the regulators, more as partners than as adversaries, in developing risk management framework and practices that are most suited for hong kong β s circumstances and needs. there is no one - size - fits - all solution for risk management and hong kong must find its own path to success by learning from the best practices elsewhere and by striving to upgrade on a continuous basis. finally, may i wish all of you a fruitful and productive time in today β s treasury markets summit! thank you. 4 / 4 bis central bankers'speeches | 0.5 |
upon the foreign exchange rate system in east asia. for companies vigorously engaged in business in east asia, the stability of east asian currencies is a prerequisite for expansion. as i have often stated elsewhere, foreign exchange rates should be determined in a stable manner reflecting economic fundamentals. in an open economy, we cannot simultaneously achieve a fixed foreign exchange rate, free capital flows, and independent monetary policy. for example, many industrialized countries, including japan, enjoy free capital flows and independent monetary policy at the expense of having floating foreign exchange rates. on the other hand, china seeks a de facto fixed foreign exchange rate and independent monetary policy at the expense of regulated capital flows. although china is gradually easing regulations on capital outflows, the deregulation of capital flows may cause instability if unaccompanied by reform of the domestic banking system, as the experience of the asian currency crisis shows clearly. one orthodox way to achieve sustainable economic growth is to gradually remove capital controls and make the foreign exchange rate system more flexible in tandem with reform of the domestic banking system and strengthening of the financial system. v. role of the bank of japan finally, let me discuss the role of the bank of japan in the context of deeper interdependence between japan and the rest of east asia. in brief, what the bank can do is to provide japanese companies with a stable financial and economic environment to support their innovative business activities under globalization. let me elaborate. first, needless to say, the sound development of the japanese economy is one of the most important prerequisites for stable economic growth in east asia. to this end, the bank is working to overcome deflation and put the economy back onto a sustainable growth path by maintaining the current quantitative easing policy. second, the bank is strengthening regional financial cooperation with central banks in the rest of east asia. such a direction has gained further momentum since the asian currency crisis of 1997 - 98. in the wider context of ensuring the stability of the international financial system, the importance of establishing a collective and regional financial support system has been widely recognized among east asian economies. in this regard, japan has already entered into currency swap agreements, in the form of liquidity support, with korea, thailand, the philippines, malaysia, china, and indonesia. discussion on developing bond markets in east asia is underway in various international forums. the bank has taken an initiative in such discussions in close cooperation with the japanese government. recent examples include the bank | ##al pigou effect, β which is independent from the portfolio rebalancing effect. or, it can be called the β intertemporal walras law β because it focuses on the effect on budget constraint of the fact that the discounted present value of the real balance of debt of the government sector, which is equal to the discounted present value of the real balance of financial assets of the private sector, will not become zero even in the distant future. this effect is created because the private sector anticipates an increase in its wealth in the future. another prescription similar to the one proposed in the speech is a combination of non - ricardian fiscal policy and the policy of increasing the monetary base by k percent as suggested by benhabib et al. ( 2002 ). my prescription differs from the prescriptions of eggertsson and woodford ( 2003 ) as well as benhabib et al. because it focuses on the trend change in the income velocity of the monetary base, which is influenced by interest rate fluctuations, the rate of change in inflation, and the progress of nonperforming loan disposals. the decrease in the trend change in the income velocity of the monetary base is currently around minus 11 percent. adding a desirable nominal growth rate as well as the difference between the desirable nominal growth rate and the actual nominal growth rate to the 11 percent would produce a desirable rate of increase in the monetary base, which would achieve the desirable nominal growth rate. to the extent necessary to achieve medium - to long - term policy targets, the private sector will feel less uneasy about increasing spending, which, in turn, will make monetary policy more effective. the bank of japan clarified its commitment to continue its quantitative easing policy, which began in march 2001, specifying the following from the viewpoint of enhancing transparency. the bank will continue its current quantitative easing policy until, ( i ) the underlying trend of the year - on - year rate of increase in the core cpi marks zero percent or higher for a few months, and ( ii ) the majority of policy board members forecast that the prospective year - on - year rate of increase in the core cpi will register above zero percent during the forecasting period. these two conditions are necessary conditions. in some cases, the bank may judge it appropriate to continue quantitative easing even if these conditions are fulfilled. to overcome deflation, the bank aims to stabilize not only short - term interest rates but also longerterm rates through its commitment to | 0.5 |
recent strengthening of auditing rules for evaluating the use of deferred tax assets as bank capital is a step in the right direction. however, insufficient capital continues to plague the banking sector, and without the cushion of a strong capital base, banks give evidence of remaining extremely risk averse. commercial bank lending has thus continued to decline, while banks β holdings of less risky long - term government bonds have soared. because banks play an even more crucial role in japan β s financial system than in other industrialized countries, problems in its banking sector are particularly damaging to the transmission of monetary policy and to the economy more generally. finally, demand for business and consumer credit in japan is weak according to the results of various surveys. in a deteriorating economic environment, businesses as well as banks appear to have pulled back from risk - taking. as evidenced by very low long - term interest rates, expectations of future economic growth seem bleak. capital - output ratios are still high, returns on assets are low, corporate profits are poor, and the economic outlook is fraught with uncertainty. it is not surprising then that firms are not borrowing to finance new investment. rather, observers argue that much bank lending will keep ailing and inefficient firms afloat and further crowd the field against the dynamic, innovative enterprises needed to fuel sustained expansion. japan appears to have become a society in which economic agents - banks, insurance companies, corporations, and households - have lost their appetite for risk. this risk aversion has hurt japan β s economic performance, since risk - taking is critical to growth in a market economy. these crucial factors have limited the effectiveness of both conventional and unconventional monetary policy measures in japan. in the united states, economic and financial fundamentals are much sounder than those prevailing in japan when the bank of japan started to implement unconventional measured inflation, even after adjustment for the hike in the value - added tax in 1997, showed small positive rates during 1996 and 1997. but changes in the consumer price index are widely considered to be biased upward, suggesting that true inflation probably remained negative. measures. the available evidence suggests that the u. s. real economy is currently stronger, better balanced, more productive and more dynamic than the japanese economy was at a comparable period. the economy β s ability to weather the adverse shocks of recent years reflects flexible and efficient markets for labor and capital and dramatic gains in information technology, which have markedly improved the ability of businesses to address incipient economic imbalances before | japan implemented the quantitative easing framework in march 2001, yields on long - term government securities had already reached a very low level. in the united states today, by contrast, the relatively steep treasury yield curve affords greater scope for reducing longer - term interest rates. in conclusion, the risk of deflation, a decline in the general price level, appears remote in the united states. although the near - term outlook is uncertain, the fundamentals are sound. furthermore, i am confident that, in the unlikely event a harmful deflation emerges in the united states and the federal reserve needs to turn to a broader range of monetary policies, such tools will be effective in boosting aggregate demand and putting the economy back on track to sustainable growth. we at the federal reserve have been able to glean much from the bank of japan β s experience with monetary policy at the zero bound. in particular, the bank of japan β s implementation of many innovative policy measures has enhanced our understanding of the monetary transmission mechanism in a low - inflation environment, a valuable ingredient in monetary policy decisionmaking today. for that reason, i am pleased to have had this opportunity to address the japan society today. | 1 |
and growth was not satisfactory. aside from short - lived periods of relative stability, loose fiscal policies along with accommodative monetary policies were the main causes of high inflation. under these circumstances backward indexation became a common practice in pricing behavior ; inertia evolved in inflation, which was very difficult to eliminate. as inflation increased, inflation expectations also increased and a self - nurturing inflation cycle began. in the meantime, there were number of attempts to get out of this impasse. first, there was a monetary program introduced in 1990. this was very important in that it reorganized and re - structured the central bank balance sheet and explained to the financial community and to the general public how the monetary policy operated. it was the first time when certain monetary concepts like base money or central bank money were brought to the attention of the public. however external developments like the first gulf war brought this program to an end. the second major program for disinflation was the exchange rate based stabilization program of 2000 under the imf support. this program collapsed for known reasons in february 2001. at this juncture, one might wonder why turkey was not successful in her disinflation attempts. i believe the answer lies, as already mentioned, in the lax fiscal policies. as i have already mentioned the very first law of the central bank did not have any provision for financing the government. however the amendment made to the law just before the second world war to extend temporary short - term advance facility to the government, in order to smooth out the difference between timing of taxes and expenditures, was firmly incorporated in its law in 1970. the provision stipulated that the government had the access to the central bank financing to the tune of 15 % of the total budget spending. although this facility was phased out after the 1994 crisis, it was one of the reasons of fiscal indiscipline and high and persistent inflation in turkey. as we all know, tough times call for tough decisions. the collapse of exchange rate - based stabilization program in 2001 was, in one sense, an opportunity for turkey to β put her house in order β. the fiscal cost of the crises brought every individual in the economy to his senses. fiscal discipline and tight monetary policy were the immediate answers to the chronic problems of turkey. but how would this discipline be achieved? the answer lied, and still lies in building a chinese wall between the central bank and the treasury in terms of government finances, by means of an independent central bank. | the stable prices : the central banks. therefore the bottom line of the inflation - targeting regime is the management of the expectations. if expectations are anchored to the target, wage earners and price setters will behave in such a way that, at the end of the period, the target will be reached. then the question is, how can we anchor expectations? the answer is : by building credibility through delivering what is promised. once this is achieved, the volatility in interest rates, inflation and output would be lower. how do we build credibility? central banks can do this by anchoring inflation expectations through establishing a good track record and by demonstrating that the central bank adjusts its policy rates appropriately in response to the changes in the inflation outlook. this behavior is known as the central bank reaction function. that is to say, in order to keep the inflation in line with the target, the central banks react to economic news in a more or less predictable manner. as economy changes over time, the available data set also changes. we get some of our guidance from the analysis of these data by using models or econometric tools. models are useful but they are not sufficient ; in formulating our decision we do and must put some weight on judgments as well. this is known as the art side of the monetary policy. central bank of turkey has been able to bring down inflation from 70 % in 2001 to 7. 7 % at the end of 2005. although the structural reforms over the last five years have been critical in the fight against inflation, the new monetary framework of inflation targeting also played an important role. inflation expectations have somewhat been successfully anchored to the target, notwithstanding some deviations and deteriorations lately. at the end of may 2007, the central bank of turkey is faced with a considerable credibility gap. our strong reaction in 2006 have contained inflation expectations and we predict that inflation expectations will continue to move towards the medium term target of 4 percent as the headline inflation comes down in the next couple of months. however, it should be noted that there are also other important factors in determining the inflation expectations, such as incomes policy and the course of fiscal policy, or political aspects, etc. apart from short - term interest rates, communication skills are also critical tools in guiding the expectations towards the target. what we do is important, but equally important is how we convey this to our target audience. that is not only what we communicate but also to whom we communicate. of course the target audience of | 1 |
petersburg. however, one thing should be clear : when we develop regulatory proposals, we need a thorough understanding of their implications. let me briefly touch upon repo markets, an important source of leverage and pro - cyclicality. in order to thoroughly assess the effects of envisaged numerical floors on haircuts for the securities lending and repo market, a quantitative impact study is just being launched. i strongly support this approach. it facilitates early recognition of inadequate measures and unintended side - effects. it therefore allows us to introduce effective measures. the shadow banking system will constantly challenge policy makers because it adapts very quickly in order to evade regulatory measures. regulatory arbitrage is a reality we have to face. it is therefore essential that we make sure regulatory measures are consistent β not only across sectors as i already pointed out but also across jurisdictions. regulatory measures must be developed and agreed upon in international cooperation. in addition, i expect the financial industry to set in train a rethinking towards more risk awareness. only in bis central bankers β speeches this way can the weaknesses that were exposed in the financial system be remedied in the long run, and the financial system be made more resistant to future crises. my brief excursion into the shadow banking sector and the challenges it presents for regulators illustrates that the elimination of systemic risks is not easy. and in doing so, we face obstacles and challenges. thus, i end almost where i began : reality requires ambition. thank you very much for your attention. bis central bankers β speeches | ##18 10 / 10 | 0.5 |
0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. ing risk sharing via financial markets β particularly with regard to international risk sharing. better risk sharing does not imply calling the european bank - based financial system into question. rather, it is about finding a good mix between debt and equity finance, between financing via banks and markets. this contributes to an improved allocation of risks across the financial system and to its resilience. this is because profits of corporate firms or of banks automatically accrue to the owners of these firms who, in turn, also bear potential losses. claims of creditors, by contrast, do not depend on the economic success of a firm, and they bear losses only if the firm in question becomes insolvent. equity capital can, in addition, make a special contribution to the financing of young and innovative firms. despite all the differences between the german and the french financial systems, markets for venture capital remain underdeveloped in both countries, as they are in other parts of europe. which specific measures can enhance the contribution of financial markets to growth, innovation, and stability? the capital markets union β a project which was launched about two years ago β provides answers to this question. reforming insolvency legislation and β where relevant β harmonizing rules can contribute to cross - border investments and to dealing with non - performing loans. minimum harmonization in terms of the collection of collateral and in terms of creditor rights can be useful in this regard, particularly as it would make shifting losses ex post more difficult. moreover, the capital markets union can contribute to relaxing financial constraints so that strong small and medium - sized enterprises and start - ups obtain access to finance. international investment can be attracted by harmonizing investor protection legislation within the eu and removing barriers to cross - border mergers and acquisitions. central banks in europe have been supportive of the capital markets union project, as it can contribute to growth while, at the same time, enhancing the resilience and stability of the financial system. seite 7 von 10 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511 or 3512, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only | . global supply chain is undergoing significant shifts ; companies and various authorities have to be nimble enough to capitalise on these opportunities. automation and robotics will threaten lowskilled workers and those in the contact intensive sectors. the shift to online have also created new opportunities and challenges for employment - intensive sectors like travel, hotels, restaurants and recreation. some of these changes are going to stay beyond the pandemic. these structural changes need to be kept in mind while formulating strategies for participative growth process. 6. at another level, the pandemic has affected the poor and vulnerable more, especially in emerging and developing economies. daily wage earners, service and informal sector workers were badly hit. their employment and income opportunities were curtailed. the lasting damage inflicted by the pandemic on these segments is of serious concern for inclusive growth. in the medium to long - run, both efficiency and equity will greatly matter for sustainable growth and macroeconomic performance. 7. technology adoption which was earlier limited to core sectors has now permeated to several 1 / 5 bis central bankers'speeches other areas, viz. education, health, entertainment, retail trade and offices. the pandemic has also caused disruptions and induced reallocation of labour and capital within and across sectors. the firms which were quick to adopt technology and were flexible in working from off - site are attracting more capital and labour. on the other hand, firms which were not up for the challenge and competition will have to leave the space for the more dynamic ones. these forces of β creative destruction β are expected to boost productivity by encouraging greater competition, dynamism and innovation in several sectors of the economy. the indian scenario 8. let me now turn to the indian scenario. in the post - pandemic world, india β s prospects are underpinned by several dynamic sectors. i wish to briefly touch upon some of them. 9. first, information technology ( it ) services and information technology - enabled services ( ites ) backed by entrepreneurial capabilities and innovative solutions have emerged as key strength of the indian economy over the years. there is a growing league of unicorns in india reflecting its potential for technology - led growth. the country has added several unicorns over the last year to become the third largest start up ecosystem in the world. underpenetrated indian markets and large it talent pool provide an unprecedented growth opportunity for new age firms. further, the covid pandemic has provided a | 0 |
our proposal that would seek to ensure that underwriting practices and loan terms on higher - priced loans do not present unwarranted risks to consumers. there is another potential source of risk to consumers that i want to address that is related to " steering " - - the risk that when they use the services of a mortgage broker, they do not appreciate the extent to which the broker's interests may diverge from the consumer's interests because of " yield spread premiums. " 6 the growth of the market for brokerage services has no doubt increased competition in the market for mortgage loans, to the benefit of consumers. moreover, the yield spread premium, a payment from a lender to a broker based on the loan's interest rate, is sometimes the best way for a consumer to fund the cost of a broker's services. however, when a lender pays a broker for a loan that has a higher rate, that payment can create a conflict of interest between the broker and the consumer. this conflict is problematic if the consumer does not know it exists or assumes, incorrectly, that the broker is obligated to put the consumer's interests first. in such cases, the consumer cannot protect his or her own interests, and competition for loans and for brokerage services does not work effectively. therefore, we have proposed to prohibit a lender, for both prime and subprime loans, from paying a broker any more than the consumer had expressly agreed that the broker would a β yield spread premium β is the present dollar value of the difference between the lowest interest rate the wholesale lender would have accepted on a particular transaction and the interest rate the broker actually obtained for the lender. this dollar amount is usually paid to the mortgage broker. it may also be applied to other loan - related costs, but the board β s proposal concerns only the amount paid to the broker. receive. this agreement must be executed up - front, before the consumer has submitted an application and become invested in closing the deal. the combination of stricter regulation and better disclosure that we are proposing should help reduce a broker's incentive to steer a consumer to a higher rate, empower consumers to shop and negotiate among brokers, and preserve consumers'option to use the services of a broker. better and earlier information for consumers lastly, to protect consumers and promote competition, our proposed regulation would prohibit misleading mortgage advertising and require that consumers receive loan - specific disclosures early in the application process, | of course, price stability is one of the objectives for monetary policy set by the congress and, indeed, is highly desirable in its own right. and, of course, the price level is the macroeconomic variable over which a central bank exerts the most direct control in the long run. second, in the long run price stability promotes high employment and low nominal interest rates - the other objectives set by the congress - as well as productivity and throughout this talk i follow a common fed practice in using the core personal consumption expenditure ( pce ) deflator to measure inflation. relative to the more familiar consumer price index ( cpi ), the pce deflator ( 1 ) has broader coverage, is believed to be based on more accurate expenditure weights, ( 3 ) is constructed in a manner that reduces so - called substitution bias, ( 4 ) is measured more consistently over time, and ( 5 ) arguably does a better job measuring medical inflation. the core pce deflator excludes volatile components, notably the prices of food and energy. core inflation measures in general are probably better indicators of the underlying rate of inflation, with which central banks are typically most concerned. standard inflation measures probably overstate increases in true inflation by about 1. 0 percentage point. for example, lebow and rudd ( 2002 ) estimate that measured inflation using the consumer price index overstates the actual change in the cost of living by about 0. 9 percentage points per year, with a confidence interval ranging from 0. 3 percentage point to l. 4 percentage points per year. ( the bias in the pce deflator, which is chain - weighted, may be a bit less. ) in addition, as i discussed in a previous talk, aiming for an inflation rate modestly above zero provides a useful buffer against deflation risk. stock and watson ( 2002 ) note that the standard deviation of annual growth rates in real gdp fell from 2. 7 percent during 1960 - 83 to only 1. 6 percent in 1984 - 2001. they attribute 20 to 30 percent of this reduction in volatility to improvements in monetary policy. arguably, however, stabilizing factors that stock and watson treat as exogenous, such as the reduced variability of commodity prices ( other than oil ), are actually in part the result of more stable policies. economic growth. third, and most subtly, in the short run a record of consistently low inflation increases central bank credibility and stabilizes inflation expectations, effects that in | 0.5 |
needs to be understood here is that while businesses can be adventurous and inclined to take on greater risks in pursuit of profits and investor returns, the regulators have the responsibility to protect depositor and customer interests and preserve financial stability. the role of the regulator is to establish guardrails or a balanced framework that encourages innovation while ensuring that risks are managed prudently. 3 / 5 bis - central bankers'speeches for example, the fintech platforms often provide customers with a seamless, efficient experience. by leveraging digital public infrastructure, these platforms can reach a wider customer base, including those who previously had limited access to financial services, thereby advancing financial inclusion and empowering underserved communities. they help reducing the cost of customer acquisition as well as transaction costs. digitisation also allows banks and nbfcs to leverage data for greater insights into their customers requirements and behaviour which can be used for developing bespoke products apart from facilitating better risk management and compliance. reserve bank has been playing an encouraging role all through such initiatives. however, this digital shift also introduces risks that must be properly identified, mitigated and managed to maintain a stable and secure financial ecosystem. the integration of disparate entities delivering a digital product, often results in complex structures with overlapping responsibilities. in many instances, the actual lender may not even be visible to the borrower, despite regulatory requirements for transparency. while fintech platforms drive innovation and revenues, credit, and operational risks along with consequent losses still primarily rest with the regulated lenders who collaborate with these platforms. this can create a disconnect between the service providers and those bearing the risks, leading to potential vulnerabilities for the individual lender as well as the financial system collectively. for instance, while loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a'feet on the street'and empathetic approach. many fintech platforms operate on a business model that involves extending small - value loans to customers often times with poor credit profiles. unfortunately, this is often followed by aggressive recovery tactics, such as invading customers'privacy by accessing their contacts and personal data. these practices can seriously damage the reputation of the regulated lenders associated with these platforms. according to rbi regulations on outsourcing, even though a regulated entity may rely on third parties to perform certain activities, it remains ultimately accountable for the actions of its outsourced agents. another narrative i would like to address today | robust regulatory structure. 25. however, new entrants into the financial services space, including fintech and bigtech firms are altering the universe of financial service providers. a range of new lending platforms, including p2p and marketplace lenders, have appeared in jurisdictions around the world. highlighting some of the related challenges and opportunities, the recent annual economic report of the bank for international settlements ( bis ) states that such firms can collect large amount of data at nearly zero costs, which can be used to better assess the riskiness of borrowers and could reduce the need for collateral to assure repayment. these new players have also made inroads in the provision of payment services, remittance services and crossborder payments. moreover, they have the potential to grow very quickly and become large and systemically important financial institutions, raising concerns over financial stability and consumer protection. 26. faced with such profound changes, the policy makers β dilemma is more than walking the middle path between innovation and regulation. the public policy approach here needs to be more comprehensive and holistic, taking into account issues such as financial regulation, competition policy and data privacy regulation. coordination among various authorities β such as financial regulators, competition authorities and data protection supervisors β becomes critical at this juncture. 27. the reserve bank β s vision - 2021 for payment and settlement systems in india visualises empowering every indian with access to a bouquet of e - payment options that is safe, secure, convenient, quick and affordable. the committee on deepening of digital payments under the chairmanship of shri nandan nilekani has suggested to increase the volume of digital payments by 10 times in the next three years which can be facilitated by initiatives such as removing transaction charges on digital payments, simplifying kyc processes, and reducing kyc costs for banks. the reserve bank is taking necessary action based on the committee β s recommendations. concluding observations 28. at the end, i would like to highlight the significance of consumer protection which is not only important from the point of view of access but also from a broader context of stakeholders β trust. the trust of the consumers that the services are fairly priced, the trust of the investors that the stakeholders are acting in their best collective interest, the trust of the regulators that the audited financial statements do represent a fair and reasonable assessment of the activities of a firm β all have intangible but substantial contribution to national savings and financial stability. post 5 / 6 bis central bankers'speeches lehman | 0.5 |
much as banking and finance. it has become the most important factor for dealing with the intensifying competition and the rapid proliferation of financial innovations. it has enabled, in general, raising the efficiency of financial intermediation in the face of ever - rising volumes of transactions, falling margins and more empowered customer expectations. in particular, there are four or five key areas in which the financial system has experienced the benefits of the technology revolution : product development, market infrastructure, risk control and market reach. the interaction of technology with globalisation has contributed to the expansion of financial markets beyond national borders, heralding the end of geography. in the process, technology has changed the contours of three major functions of financial intermediaries : access to liquidity, transformation of assets and monitoring of risks. the indian financial system is quickly adapting itself to these developments and is acquiring a customer - centric focus. the proliferation of automated teller machines ( atms ), networking of these atms and shared payment network based atms is a feature that has been welcomed by the banking public. other innovations already within the domain of banks and financial systems in india include internet banking, electronic funds transfer and β anywhere / anytime banking β, all of which have a high level of technology embedded in the systems offering these services. many of the older banks are migrating towards the implementation of core banking or clustered solutions which would contribute significantly towards increasing customer satisfaction. in all this, business process re - engineering becomes an essential concomitant to ensure best results in technology upgradation. in recent years, the reserve bank has assigned priority to the upgradation of technological infrastructure in the indian financial system. efforts have been made to modernise clearing and payment through micr based cheque clearing, electronic clearing services and funds transfer ( ecs and eft ) and the centralised funds management system. for the traditional paper - based cheque systems, introduction of cheque truncation and imaging of cheques is envisaged to reduce the time lags in realisation of cheques. substantial efforts have gone into developing what has been described as the β plumbing β in the financial architecture - a modern, efficient, integrated and secure payment and settlement system for the financial services industry in india. significant milestones in this path are the negotiated dealing system for transactions in government securities and the clearing corporation of india. in order to establish an efficient, cost - effective and dependable communication backbone, the infinet has been set up | conditions. under the present circumstances, improvement in the cost structure of the banks and work culture are important priorities. in order to enable the public sector banks to deal with the new capital requirements as per international guidelines, recapitalisation was initiated in 1993, aggregating rs. 20, 446 crore by the end of the 1990s. the verma committee β s recommendation that recapitalisation of β weak β public sector banks be accompanied by conditionality relating to managerial and operational aspects of the banks β functioning was endorsed in the union budget, 2000 - 01. accordingly, in 2001 - 02, a sum of rs. 1, 300 crore was provided to one of the weak nationalised banks. two of the weak banks have already turned around and are reporting profits and a capital adequacy ratio of 9 per cent. the last one is also going through a turnaround. recapitalisation is associated with a monitorable reform programme and operational restructuring to ensure that flow problems in a bank β s performance are dealt with. mergers have reflected efforts to reap economies of scale and scope through joint production of financial services and one - stop delivery wherever synergies in service supply can be exploited to lower costs of production. in general, these mergers have come about as a result of government efforts to restructure inefficient national financial systems. market - driven consolidation is a relatively new phenomenon in these countries. a critical issue in almost all emerging economies is a reassessment of the ownership of the state in the financial system and a redefinition of the role of state - owned banks and financial institutions. the changing structure of the banking and financial systems in emerging economies has implications for systemic stability and the supervisory regime. a major structural change in our financial system is the infusion of competition. the enabling conditions for a more competitive environment initially took the form of shifts in the policy regime. statutory pre - emptions were progressively lowered, interest rates were deregulated and restrictions on entry and exit were eased. financial markets were developed to enable financial intermediaries to deal in assets and liabilities of varying maturities and risk profiles. activity restrictions were eased and banks can now undertake various types of activities reserved earlier for development financial institutions. likewise, the term - lending financial institutions have been allowed to undertake working capital financing. elements of this growing convergence have determined the pace and sequencing of the approach to universal banking in the recent years. within the banking system, there | 1 |
it should also be ensured that the cost / benefit ratio of such an exercise remains adequate. | 35 β 64 age range. qualitatively, the profile is similar almost everywhere ; the clear exception is germany, where the unemployment rate among 15 to 24 year olds in the first quarter of 2012 was 8 % ; in italy it was 34. 2 %, in spain 50. 7 % and the euro area average was 21. 9 %. these trends reflect a fundamental question : they confirm the particular vulnerability of this essential part of our workforce. the unequal sharing of the β cost of flexibility β, only affecting young people, an eternal flexibility with no hope of stabilisation, leads among other things to companies not investing in young people, whose skills and talents often decline in jobs with low added value. the underuse of their resources reduces growth in various ways : it makes the creation of start - ups less likely β and they are on average more innovative than others β it causes a decline in skills in the long run, slowing down the assimilation of new technology and acting as a brake on efficient production tiberi, m., β ricordo di federico caffe β, in rivista italiana degli economisti, april 1997, p. 132. caffe, f., la solitudine del riformista, edited by acocella, n. and franzini, m., bollati boringhieri, turin, 1990, p. 258. bis central bankers β speeches processes. in addition to undermining society β s sense of fairness, it is a waste that we cannot afford. i think it β s essential to ask how economic policy conducted in various member states has done its duty in the way desired by caffe. social progress is one of the key objectives of the european integration process : β the union shall work for the sustainable development of europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress β¦ it shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child β. ( article i β 3 of the draft european constitution ). welfare is not only a remedy for the failure of insurance markets, but also a tool to promote inclusion, solidarity and a sense of fairness. in the three post - war decades ( the so - called β golden age β ), which especially in europe were marked by high growth rates, use of advanced technologies, high growth employment, | 0 |
global mean temperatures to 1. 5 degrees, physical risks are likely to dominate the potential impacts of transition. and if instead we continue on our current trajectory, losses just from the impact on productivity could be as high as 13 % of gdp. 8 in addition, many of the leading studies, including those we used in the ngfs, start from past correlations and so find it hard to put an accurate number on the type of low - probability, high impact events that will become more common. as high levels of warming will be unprecedented, we don β t yet fully understand the delicate balance between the climate, living conditions, ecosystems and the economy - for example, the level at which ice melts might accelerate ; or methane stores under permafrost might be unlocked. what is clear is that investment is needed now to help adapt to these inevitable changes. and that we should recognise the gaps in our understanding of how large changes to our climate might affect our economies. challenges in applying scenarios while these key themes are clear, i know from our own experience, and from the firms we supervise, that applying the scenarios in practice is not straightforward. the models, data and analytical frameworks are new, and the transmission channels are complex and subject to much uncertainty. the results can be sensitive to input assumptions and type of model used. this leads to a tendency to focus on a limited number of transmission channels and pockets of risk β for example, focusing on the costs of emissions in the most carbon - intensive sectors and ignoring other channels like changes to demand or costs of energy and materials. but these are important channels too. we need to capture all potential dependencies and feedback loops. there are obvious dangers too in relying on past data and historical correlations for what is an unprecedented challenge. we need to re - examine existing models and consider whether climate change will cause some of these relationships to shift. there are perhaps parallels to the financial crisis where models provided false comfort. the most obvious case for this is in physical risk where we know there are non - linearities that are not well captured. all of these factors lead me to believe that financial firms and businesses are significantly underestimating the potential impacts, and β green swan β events are not just possible but likely until capabilities, understanding and management of these risks are greatly improved. preliminary analysis for the updated ngfs climate scenarios. i would offer a few pieces of advice to users of scenarios. don β t get bogged down in a spurious amount of | andrew sentance : getting back to business speech by mr andrew sentance, member of the monetary policy committee of the bank of england, at the lunch hosted by the bank of england and the confederation of british industry ( cbi ), belfast, 24 november 2010. * * * i would like to thank tomasz wieladek and matt corder for research assistance and i am also grateful for helpful comments from other colleagues. the views expressed are my own and do not necessarily reflect those of the bank of england or other members of the monetary policy committee. it is a great pleasure to be back here in northern ireland for the fourth time in my capacity as a member of the monetary policy committee. as a former business economist, i greatly value the opportunity to visit individual businesses and meet with business groups in different parts of the uk, as i am doing on this two - day visit to northern ireland. and i would like to thank frances hill and her colleagues at the bank β s northern ireland agency for all the work they do with the business community here and for organising this visit. it is over twenty years since i first came to belfast when i was working for the cbi in the late 1980s. it was so long ago that nigel smyth was not yet then the cbi director here in northern ireland! and it may even have been before nigel joined the cbi as deputy director to alasdair maclaughlin, over twenty years ago. indeed, i would like to acknowledge in particular today the very substantial contribution that nigel has made to the business community here in northern ireland over the past two decades, in the face of many challenges and over a period of great change and opportunity. the northern ireland economy has made great progress since those days in the late 1980s and early 1990s when i came here with my cbi economist hat on. through the 1990s and in the 2000s prior to the financial crisis, northern ireland achieved an average rate of growth of 3 % a year β significantly above the growth rate recorded in the uk as a whole. 1 unemployment fell by two - thirds, from over 12 % of the labour force in the early 1990s to just 4 % in the mid - 2000s. as in the rest of the uk, the unemployment rate here in northern ireland has risen in the recession. but it remains below the uk average β in contrast with the 1980s and 1990s when unemployment here was significantly above the national average. there are clearly some particular challenges facing the economy here in northern ireland as we move | 0.5 |
economies themselves. similarly, the banking union will not directly limit the share of banks β assets tied to sovereign debt. placing strict limits to banks β sovereign holdings would rather be a separate regulatory matter and would warrant careful, longer - term deliberations. that said, the comprehensive assessment should enhance confidence in the european banking sector and add impetus to banks β efforts to improve their capital adequacy. in this respect, much has already been achieved in the run - up to the exercise. the improved confidence, in turn, promotes provision of healthy credit to the economy and thereby contributes to europe β s recovery prospects. β’ from a longer - term perspective, the banking union will help us prevent and at least mitigate potential distortions and their destabilizing effects on the european financial markets. the ssm will be a key element in addressing banking sector risks before they materialize and, like the ecb in the area of monetary policy, lend credibility to national banking supervision by conducting it with a supranational bis central bankers β speeches perspective. i argue that this is a fundamental change in the culture of how european supervision and resolution are conducted. we move from national efforts to prop up domestic banks to appropriate pan - european supervision, i. e. to a system where the structure of decision making matches the international character of the banks and markets. the change does not only include the improved supranational banking supervision, but also other elements. the ssm will be complemented by the bank recovery and resolution directive ( brrd ) and the single resolution mechanism ( srm ). the new legal framework will allow early intervention in troubled banks. it will also make possible the bail - in of banks β shareholders, and so creditors help to dissolve the expectation that banks β resolution costs would fall on the tax payers. this new resolution regime is backed up by the cross - border risk - sharing via the single resolution fund, which will be financed by the banking industry itself. all this will alleviate concentration of the ultimate liability for troubled banks on any single sovereign. as an important result, the arrangements could decouple the banking industry from the fiscal condition of the sovereigns concerned. why does all this matter for the central banks? financial stability and the central banks β key objective of price stability are obviously connected, both directly and indirectly through the real economy. but a stable financial system also fosters greater integration of the financial markets. and the more integrated the financial markets are in the | ##4 ) and instructions for crisis resolution ( the brrd ) provides a good basis for this. but we also need to make sure that our national financial stability decisions pay due regard to their effects on other countries. ladies and gentlemen, the main benefit of the banking union is that through it we will correct one weakness in our european financial market structure ; the supranational institutional supervision and resolution set - up will match to the real operational scope and scale of the banking industry. in addition, let me summarize some key benefits for the european central banks ; β’ monetary policy transmission mechanism made more secured, β’ prospects for financial stability and efficient functioning of financial markets are improved and β’ we get a world class banking supervision in europe. bis central bankers β speeches | 1 |
of confidence in the stability - oriented macroeconomic policies of the euro area. conclusions summarising almost two years of experience with the euro, one might consider that it has started playing an international role in line with the economic and financial size of the euro area in a rather smooth manner. as i have highlighted today, developments in the international use of the euro are, of course, only gradual. nevertheless, looking ahead, one can expect the international role of the euro to develop further. an established track record of the eurosystem with reference to its primary objective of price stability and continuing integration of financial markets in the euro area will undoubtedly contribute to the further internationalisation of the euro. | international currency. this encompasses the use of the euro for official reserve holdings and as a reference currency for exchange rate arrangements. statistics related to official reserves were published in the most recent international monetary fund annual report, and indicated that the share of the euro was around 13 % at the end of 1999. this is comparable with the weight of the legacy currencies one year earlier. the fact that stability is prevailing is consistent with the notion that central banks tend to be conservative in managing their reserve holdings. remaining in the sphere of international official reserves, the international monetary fund has recently decided on a new valuation method for the special drawing rights ( sdrs ), which comes into force on 1 january 2001. the sdr basket traditionally comprised five currencies of individual countries, including the deutsche mark and the french franc. the weight of each currency in the basket was determined on the basis of trade and financial data of these countries. in order to reflect the new economic area resulting from the introduction of the euro, the sdr basket will henceforth include the euro, instead of the deutsche mark and the french franc. its weight will be based on the importance of the euro area as a single economic entity. similarly, the euribor will be substituted for the german and french national interest rates in the determination of the sdr β s interest rate. these modifications underscore how the official international financial community is gradually adjusting to the new reality of the euro. as a last point, let me deal with the use of the euro as a reference currency for exchange rate regimes adopted by third countries. today, over 50 countries are managing exchange rate arrangements that include a reference to the euro. this involves a variety of regimes, ranging from very tight pegs ( ie currency boards ) to managed floating policies. geographically, these countries are located on the european and african continents. this is a difference with the us dollar, which is also used by a few countries outside the western hemisphere. the intensive trade and financial links with the euro area are the main factor behind the choice of the euro in the definition of exchange rate policies. for some countries, the european union accession process provides an additional impetus to select an exchange rate arrangement based on the euro. i should highlight that the choice of a euro - based exchange rate arrangement is a unilateral decision, and does not involve any commitment on the part of the ecb. however, this use of the euro as a reference currency may be seen as a sign | 1 |
on the government β s expenditure plans, it has maintained expenditure on key priority areas of education, health, law and order, and infrastructure. the government β s focus on free education and primary health care are commendable as it strive to address the poor social indicators in the country. redirecting the focus of government resources to agriculture, tourism and small to medium enterprises ( smes ) will broaden the economic base of the country, reduce reliance on imported food and create employment opportunities for the majority of the population. serious investment in these sectors will assist in reducing the economy β s dependence on the mineral sector and increasing its resilience to adverse shocks, such as falling mineral prices or unexpected adverse weather conditions. let me turn to the area of financial system development. the central bank undertook two major financial sector reforms. the first was in 2000 as part of the structural reforms undertaken by the png government to address serious shortcomings in the financial system. this was followed by reforms towards the end of 2000 to broaden the financial sector, increase competition and improve accessibility to financial services, and to create a sound and stable financial system. the reforms in 2000 involved the following : banking sector β strengthening governance of banks with prudent management standards and guidelines superannuation funds β introduce voluntary superannuation and increase wider participation by the workforce ( reduce employees to 10 from 15 ) life insurance β introduced good governance and management practice standards and guidelines savings and loan societies β enhance market - oriented institutions and improved management ( reduced from 100 to 21 ) major legislations enacted were : a. central banking act 2000 making the central bank independent ; b. banks and financial act 2000, superannuation act, life and insurance act c. life insurance act 2000 bis central bankers β speeches d. superannuation ( general provisions ) act 2000 there were other financial sector reforms : β’ exchange control liberalisation for ease of doing business with exchange contracts broaden to allow residents to remit more abroad ( 1992 ), restrictions on ( kina ) lending to non - resident companies from domestic banks liberalised in 2004, current account transactions liberalised in 2005 and capital account transactions in 2007. there are now only a few controls in place. β’ financial inclusion towards the end of 2000s, there were further reforms striving towards financial inclusion and interconnectivity. these included : o establishment of centre of excellence for financial inclusion ( cefi ) to promote growth of microfinance o reach out to the large non - | time of independence and poverty has come down substantially. of course, some countries like south korea that were in a similar situation then are far better off today but many others have done far worse. indeed, one of the advantages of a vibrant democracy is that it gives people an eject button which prevents governance from getting too bad. democracy has probably ensured more stable and equitable economic growth than an authoritarian regime might have. yet a dispassionate view of both our democracy and our economy would suggest some concerns. even as our democracy and our economy have become more vibrant, an important issue in the recent election was whether we had substituted the crony socialism of the past with crony capitalism, where the rich and the influential are alleged to have received land, natural resources and spectrum in return for payoffs to venal politicians. by killing transparency and competition, crony capitalism is harmful to free enterprise, opportunity, and economic growth. and by substituting special interests for the public interest, it is harmful to democratic expression. if there is some truth to these perceptions of crony capitalism, a natural question is why people tolerate it. why do they vote for the venal politician who perpetuates it? bis central bankers β speeches a hypothesis on the persistence of crony capitalism one widely held hypothesis is that our country suffers from want of a β few good men β in politics. this view is unfair to the many upstanding people in politics. but even assuming it is true, every so often we see the emergence of a group, usually upper middle class professionals, who want to clean up politics. but when these β good β people stand for election, they tend to lose their deposits. does the electorate really not want squeaky clean government? apart from the conceit that high morals lie only with the upper middle class, the error in this hypothesis may be in believing that problems stem from individual ethics rather than the system we have. in a speech i made before the bombay chamber of commerce in 2008, i argued that the tolerance for the venal politician is because he is the crutch that helps the poor and underprivileged navigate a system that gives them so little access. 1 this may be why he survives. let me explain. our provision of public goods is unfortunately biased against access by the poor. in a number of states, ration shops do not supply what is due, even if one has a ration card β and too many amongst the poor | 0 |
of hitting the lower bound of short - term interest rates. the room for manoeuvre for conventional monetary policy would thus be narrowed. in addition, fragmented interbank markets could hamper the pass - through from conventional policy rates to longer - term interest rates. another argument points to non - banks playing a more important role in the transmission of monetary policy and highlights the divergence of short - term rates for banks and non - banks. and, finally, the demand for safe assets is said to have risen markedly. ladies and gentlemen, i do not rule out the possibility that structural shifts and frictions in financial markets and the broader economy may require some tinkering with the operational framework. but it is too early to draw such conclusions now at the beginning of the normalisation process. it is quite obvious that the non - standard monetary policy measures themselves have created β or at least added to β the perceived challenges i have just highlighted. let me give you three examples. with the app, the eurosystem itself reduced the amount of safe assets in the hands of the nonbank private sector. secondly, by creating large quantities of excess liquidity, the eurosystem has contributed to persistently weak interbank market activity. and, thirdly, the ultra - expansionary monetary policy compressed long - term interest rates for a prolonged period of time, which may also feed into natural rate estimates. apart from that, a bundesbank analysis has stressed β and other studies have come to the same finding β that those natural rate estimates are highly uncertain. 5 for a figurative comparison, let β s look at hospitals. critically ill patients often receive mechanical ventilation. after some time, this can weaken their respiratory muscles. in order to prevent this, 3 / 5 bis central bankers'speeches best practice suggests not prolonging support unnecessarily, as it involves increasing risks for the patient and a reduced quality of life. instead, physicians apply a gradual liberalisation from mechanical ventilation, the so - called β weaning β. 6 admittedly, medical reality is much more complex than economists and bank managers may think. hence, my wife β a practising physician β has advised me to refrain from medical analogies because we are prone to misinterpreting them. thus, i risk trouble at home β kind of disregarding her advice β, but i think you get the point. 3. 3 reconciling effectiveness and efficiency it goes without saying that monetary policy implementation | implied by an overly prolonged period of low inflation. 1 / 5 bis central bankers'speeches today, ten years after the financial crisis escalated, policy rates are still at historic lows. the eurosystem has accumulated a huge portfolio of securities of various kinds, and refinancing operations offered to banks have remained more than generous. as a result, excess liquidity stands at a level nine times higher than after the lehman collapse, and monetary policy is roughly as expansionary as it was when the crisis was raging. put differently, the remaining policy space is rather limited. 3 where are we going? given where we are now, a well - known joke comes to mind : a tourist in a big city asks one of the locals for directions to the train station. the local replies, β well sir, if i were you, i wouldn β t start from here β. but where are we going? or to be more precise, where should we be going? to some observers, our destination, the β new normal β, should not look that different from the status quo. among other things, they argue that non - standard measures such as large - scale asset purchases proved their worth during the crisis. therefore, they should remain in the monetary policy toolbox and be applied under normal conditions as well. 3. 1 guiding principles ladies and gentlemen, the scottish philosopher david hume postulated that we cannot derive the β ought β from the β is β, the so - called hume β s law. admittedly, we all know that β the normative force of the factual β can be strong. but this force arises from a general acceptance of the current state. instead of pre - determining details of the new normal or ruling out potentially relevant alternatives based on the status quo, we need to resort to guiding principles which are well - established and generally agreed upon. admittedly, acting in accordance with a principle should not be viewed as an end in itself. but at a time when many european citizens seem to be falling prey to scepticism about the historical project of european integration, i would like to highlight the positive and optimistic guidance that is laid out in the european treaties. the european union aims at promoting the well - being of its citizens, ensuring economic and social progress, and improving the living and working conditions of our peoples. to achieve these broader aims, the treaties provide guidance for policymakers by setting objectives and principles such as price stability, sound public finances, and market orientation. in | 1 |
context, although estimation methods may vary. how we organise our payment system has consequences beyond the system. direct debiting and electronic invoicing will, for example, involve substantial savings for businesses. thus the potential savings for banks and the rest of society of moving towards more efficient payment systems are considerable. payment cards and internet banking have not only replaced cheques and mail giros, they have also contributed to a reduction in the use of cash. estimates from our recent survey indicate a sharp drop in the use of cash over the last 15 years. estimates of the exact level of cash use vary according to data sources and methodology. however, it is fair to say that cash is still an important means of payment. notes and coins will also remain important as symbols of money. i believe that there have been two very important factors behind the rapid transition to electronic payment services in norway. banks have cooperated on standards and payments infrastructure while competing on the supply of services, and banks have charged for the use of payment services. prices that reflect relative differences in production costs encourage users to choose the most cost - effective services. research ( by humphrey, kim and vale ) has shown that a relatively high price per transaction for paper - based payment services and a low price for electronic payment services have accelerated the trend towards an increasing share of electronic transactions. without incentives for consumers or merchants to move to more efficient instruments, banks and other payment service providers will more likely be left trying to improve on old solutions. payment systems are networks for the exchange of values between payers on the one hand and beneficiaries on the other. in two - sided markets like this, the benefit to existing users increases when new users join up. these kinds of externalities are similar to those studied in the cluster theory that has successfully been applied to explain the geographic location of economic activities, the field of economics for which paul krugman received this year β s nobel prize in economics. it used to be common knowledge that the potential for productivity growth was highest in the manufacturing sector of the economy. this is no longer the case. over the past decades, we have seen substantial productivity growth in the service sector. since 1990, productivity growth in the norwegian financial sector has been around twice that of the total economy including the manufacturing sector. in 1988 banks in norway employed around 33 000 people, had 2200 branches and processed just under 400 million payment transactions. today banks in norway employ around 20 000 people, have 1260 physical branches and | carry out around 1. 6 billion transactions. however, the development of payment instruments and services are not β just β technical developments ; they also pose some real challenges to us economists. for central banks, it is important that our payment system policies are founded on sound economic theory and research. an event such as this conference is thus important for norges bank and other central banks that wish to promote the use of efficient payment services. as mentioned, safe payment systems should continue to serve the markets even in periods of market turbulence. in my opinion, most large - value payment systems have operated very reliably in the ongoing financial situation. safe and efficient clearing and settlement have been in demand as banks β trust in each other has weakened. in norway, our systems have had to handle major problems in two icelandic banks operating in our country. these problems have been handled smoothly. times of crisis can also be a turning point, providing the opportunity for change. during the norwegian banking crisis in the late 1980s and early 1990s, norges bank and other public authorities put pressure on banks to increase their income from bank charges, including payment services. i believe that as banks have to focus even more on running a costefficient business, the incentives for developing the payment system further will be strong in times to come. for this conference we have received a large number of high - quality papers. i know that the selected conference speakers represent some of the best researchers in this field. we are especially pleased to have as keynote speakers two of the leading scholars in the economics of payments systems : david humphrey from florida state university and jean - charles rochet from toulouse school of economics. let me also extend my thanks to the three other members of the programme committee : gabriela guibourg from sveriges riksbank, eirik gaard kristiansen from the norwegian school of economics and business administration, and bent vale from norges bank. as i mentioned earlier, i visit nice in the south of france quite often. and from my direct observations, i notice that france has developed very fancy methods of processing cheques. however, when i go shopping in nice, i can β t help noticing that writing these cheques still creates rather long queues at the checkouts. hopefully the knowledge we gain from the research you produce will improve efficiency in the payments systems β and shorten checkout queues! i hope you will all enjoy the conference. i now give the floor to bent vale, who will chair | 1 |
. the continuing fall in sheep numbers in the eu, and residual anxieties about bse and cjd in britain, have pushed lamb prices to new highs. at the same time, the bse outbreak in the us, which was traced back to a canadian herd, has resulted in north american beef being virtually shut out of the world market. with demand for beef from north asia continuing to be strong, world beef prices have risen sharply. while the outlook for agriculture remains positive, it is too early to say that prices for the commodities that we produce have shifted up a level and will stay there. it can be argued, for example, that increasing demand for dairy products from china means that our dairy prices will move to a higher level. even if this was the case, it would be unwise to think that commodity price cycles would disappear altogether - prices will continue to cycle, even if they cycle around a higher level. the national bank, in its rural report of march 2004, suggested that even now rural land might be too expensive. the national bank notes that the value of an asset in economic terms is the present value of future expected income discounted at the required rate of return. the national bank estimates that for the future income stream to equal the current price of rural land a discount rate of around 4 per cent is required, which is very low. provided that the future income stream is being estimated correctly, this suggests that rural land is currently overvalued. analysis that we have undertaken at the reserve bank indicates that the ratio of rural land prices to agricultural operating surplus is now above its long run average value. however, the ratio is not yet out of line with the values that it reached in the mid 1990s. whether there will be a downward adjustment in prices presumably depends on whether market participants also reach the conclusion that rural land is overvalued. rural dwellers often remind us that non - economic factors - lifestyle considerations in particular - are also important reasons for wanting to hold rural land. industrial and commercial property the prices of industrial and commercial buildings rose sharply in the mid 1980s during the growth surge that followed the first moves to deregulate the economy. by industrial buildings i mean factories, cool - stores, warehouses and the like. by commercial buildings, i mean offices, retail buildings, hotels, and other similar places of business. looking back, we can see that we had a price bubble. ( bubbles are often difficult to identify when they are occurring, but are clearly | . the value of the building stock that a firm uses can be large relative to the annual output that the firm produces. hence a rise in output can result in a change in demand for building stock that is even larger, in value terms, than the initial rise in output. we know that the amount of new building work that can be put in place in a short time period is limited. for one thing, new buildings, and even alterations, involve design time, and time to get through the planning process. second, there is always a limit on the building industry β s ability to meet demand. such bottlenecks have been in clear evidence over the past couple of years as the demand for new housing and apartments has accelerated. because supply often lags demand in the property market, there is the potential for a mismatch between the supply and demand, and this can work in both directions. when demand for property cools, due to a slowing economy, it β s hard to switch off new supply in the pipeline. so a rapid rise in prices can be followed by quite significant declines later on. all property sectors tend to exhibit price cycles, with these cycles reflecting this mismatch between demand and supply. demand for most kinds of properties over recent years seems to have outstripped increases in supply - prices and rentals across most property classes have generally been moving upwards and vacancy rates downwards. we can attribute much of that strength directly to developments in the broader economy. whilst it hasn β t been all plain sailing, this year the new zealand economy entered its fifth year of unbroken growth. just as that expansion has drawn heavily on the economy β s surplus labour and productive capacity, so too has it fuelled the demand for property. when you consider some of the causes and consequences of that growth, it β s not hard to see why the property sector has fared pretty well over this period. some of the following statistics may help to put some perspective around the demand for property. since 1998 / 1999, when the business cycle caused by the asian crisis and drought bottomed out : β’ the total output of the economy has expanded by about 20 per cent ; β’ the volume of retail sales has expanded by about 25per cent ; β’ export volumes have risen by nearly a third, driven heavily by the primary sector ; β’ the annual operating surplus in the agricultural sector has risen, in real terms, by around 35 per cent ; β’ the number of people employed, either full time or part time | 1 |
. the ottawa group has a crucial role to play in discussing and addressing current challenges for price statistics. its contributions are important to central banks, given their mandates for monetary policy and financial stability. digitalisation has a profound two - fold impact on price statistics. digitalisation changes product characteristics and alters consumer behaviour. this is a challenge for price 6 / 8 bis central bankers'speeches measurement. digitalisation also brings with it new data sources. we need to develop new methodologies and tools to fully exploit this potential for statistics, surveillance, and policy analysis. improving our understanding of developments in real estate markets and their connection with financial stability is crucial. this is well recognised around the globe, and several initiatives, including one launched by the g20, are working on the various aspects of this issue. the contribution of statisticians is to provide more comprehensive, reliable, and timely statistics on property markets and financing conditions. both the presentations and poster sessions may lay the groundwork for an intensive exchange of views among participants and beyond. this will stimulate further research and foster better informed statistical practices. references : astin, j. ( 1999 ), the european union harmonized indices of consumer prices, paper presented at the 5th meeting of the ottawa group, reykjavik, 1999. boskin, m. j., e. r. dulberger, r. j. gordon, z. griliches, d. w. jorgenson ( 1996 ), final report of the commission to study the consumer price index, u. s. senate, committee on finance, washington dc : gpo. broda, c., d. e. weinstein ( 2008 ), understanding international price differences using barcode data, nber working paper 14017. destatis ( 2013 ), turnusmaΓige uberarbeitung des verbraucherpreisindex 2013, wiesbaden, 2013. destatis ( 2016 ), auswirkungen der digitalisierung auf die preisstatistik, wiesbaden, 2016. deutsche bundesbank ( 2013 ), commercial property prices in germany : conceptual considerations and statistical status quo, monthly report, may 2013, pp 53 β 55. deutsche bundesbank ( 2017 ), housing prices in germany, monthly report, february 2017, pp 51 β 53. ecb ( 2012 ), new standards for hicp weights, monthly bulletin, april 2012, pp 36 β 39. ecb ( 2014 ) | ##s of financial intermediaries. the bsp also actively seeks to widen the investor base of the local financial markets through a number of new investment products which would better reflect market prices. these will help encourage more institutional investors such as insurance companies, mutual funds and pension funds to participate in the capital market. future reform measures will eventually lead to the introduction of exchange - based products that can further stimulate market activity and deepen liquidity. the continuing challenge let me sum up by saying that the near - term economic outlook suggests more vibrant economic activity, but there are potential obstacles on the way to sustainable growth. the critical task ahead is for us to focus, not just on macroeconomic stabilization in the short - term, but also on preserving the momentum for economic reforms to ensure sustained growth in the years to come. consistent with map β s marching order, we need to act outside of ourselves. most of the items on the must - do list will take time before these come into fruition. reforming an economy is an enormous task, one that the government, even in theory, cannot do by itself. governments govern, or better still, guide. but it is the economic and business community that creates commodities and services, builds the economy and competes in the global market. i take heart in the fact that our business leaders in map remain a stalwart partner of the government in making economic progress possible. personally, i am optimistic that our hard work and resourcefulness will allow us to overcome our remaining economic problems. as a people, they say filipinos have a knack for turning adversity into opportunity. my caution is that we should not always welcome adversity to be able to turn it into opportunity. i believe that by responding to the challenges with a deeper sense of purpose, by adhering to β country above self β as a guiding principle, we can reach our full potential. by all means, we have what it takes to succeed. the outgoing officers and board members of the map, congratulations on a job well done, and to the new officers, i wish you all the best! thank you very much. mabuhay tayong lahat. | 0 |
only draws from lessons learnt from the crisis, but also aims at addressing corporate governance weaknesses identified in financial institutions during on - site examinations conducted by the bank of mauritius and which have not been remedied in line with the recommendations of the bank of mauritius. while the 2001 guideline recommended for a rotation of directors, it was noted that this recommendation has not been implemented to the satisfaction of the bank of mauritius. it was found that some boards remained β pale, male and stale β as governor bheenick remarked during the first workshop. to remedy that, we had no other alternative than to limit the term of office of non - executive directors of local banks to 6 years with a cooling - off period of two years before a possible re - appointment. this would allow for more fresh blood in the boardroom with new ideas, new mindset and, why not, bolder initiatives. renewal of board members allows new thinking on the board. nevertheless, we are alive of the need to maintain continuity at the board level and banks have been granted a transitional period to comply with that provision. in addition, on the issue of directorship, it needs to be highlighted that while the bank of mauritius is mandated under the banking act 2004 to allow a director to sit on the board of more than one financial institution, we have taken the view that there is a potential risk of conflict of interest, if we were to allow this. we also believe that all directors should allocate sufficient time to perform their board responsibilities effectively. the chairperson of the board must be an independent director under the guideline. this requirement is based on the principle that effective board debate and discussion require independent board leadership. a strong presence of independent directors implies independent judgment, free of any external influence. the board is further encouraged to appoint a lead independent director. the lead independent director has a potentially major role to play within the board, if there is a potential or actual tension between the chairman and ceo or, alternatively, where the closeness of the chairman and the ceo might inhibit the ability of nonexecutive / independent directors to challenge and to contribute effectively to the works of the board. as regards the various sub - committees of the boards, the guideline makes it mandatory for financial institutions to have an audit committee, a conduct review committee for related party transactions and a risk management committee. board sub - committees represent the arm of the board for those issues that require special competencies. the sub - committees should report regularly and formally to the | the participants as well as the judging panel for their hard work in making the competition such a success. let me finish by emphasising that the science is already very clear that carbon reduction has to happen much faster. to do so, technology is indispensable, and all of us here today have a role to play to bring about that change. i do hope that you will make the most of today's event to connect, exchange ideas, share knowledge and most importantly, begin to act. on this, perhaps we can borrow a line from the late professor stephen hawking, one of the greatest scientists of our time. he said, " climate change is one of the great dangers we face, and it's one we can prevent if we act now. " 4 six years have passed since he made that statement, so time is of the essence for actions to begin in a more meaningful manner. as the theme of this conference suggests, let's work together to accelerate the net - zero transition through technology. thank you very much! 1 https : / / climate. copernicus. eu / 2023 - track - be - hottest - year - ever - whats - next 2 / 3 bis - central bankers'speeches 2 https : / / press. un. org / en / 2023 / sgsm21730. doc. htm 3 https : / / www. unep. org / resources / emissions - gap - report - 2023 4 https : / / www. bbc. com / news / science - environment - 40461726 3 / 3 bis - central bankers'speeches | 0 |
pessimism is one of them and has permeated many economic circles and is in itself a worrying phenomenon. this is reflected in the fact that the recent recovery, instead of being compared to stronger previous cyclical recoveries, is compared to the worst phases of the cycle - the declining output towards the end of 2002 and the first half of 2003. in the same vein, a very low potential rate of growth of barely above 2 % per year for the euroarea is considered by many as a normal benchmark against which outcomes are measured. therefore, a 0, 5 % shortfall, i. e. a rate of growth in the euroarea of about 1. 5 % as is projected for 2004, is implicitly considered broadly satisfactory, despite the fact that there is still a negative output gap. given the interaction between actual gdp growth and potential growth, a sharper rebound of the euroarea, as was the case in cyclical upturns in the past, would by itself have raised the rate of growth of potential gdp. indeed, if assisted by bold structural reforms the rate of growth of potential in the euroarea could be raised to over 2. 5 %, the same rate as in the 1980s and a rate more normal for mature economies. the potential rate of growth of the us has averaged just over 3 % over the last twenty five years. if too much pessimism regarding the potential rate of growth dampens actual growth and, therefore, may to some extent be self - fulfilling, equally dangerous is over - optimism, or better ( to use the famous words ) irrational exuberance, that is quickly disproven. what is needed is a sober assessment of the situation and the introduction urgently of appropriate structural reforms, so that not only macro - but also micro economic policies are geared to supporting a stronger non - inflationary growth than today. though the cause of to - day β s ills in the euroarea are essentially of domestic origin, i hinted earlier that exchange rate policies followed by certain heavy weights in international trade have resulted in a real effective appreciation of the euro more than is warranted and, moreover, it seems that from a dynamic point of view the appreciation is much greater than the published figures show, which are necessarily based on past data. as a result, whereas the euroarea, one of the richest regions of the globe should have had a sizeable current account surplus so as to fulfill its natural world role as | and no one did before the fact β the rise in inflation that followed. nevertheless, we have managed to chart a path through this uncertainty. the challenge ahead is to ensure that inflation continues to fall and approaches our objective in a timely way, while at the same time growth strengthens to reach sustainable levels ensuring full employment. the nature of the risks we are facing is however unusual. increasingly, volatility in growth and inflation will be driven by a pair of major structural forces such as 2 / 3 bis - central bankers'speeches geopolitical fragmentation and climate change, that we have next to no experience of. these risks are particularly difficult to quantify and forecast. they present a unique challenge for central banks β a challenge that calls for a different type of response. in this new and highly uncertain environment, we look to academics and researchers to guide us through uncharted waters. it is through path - breaking research, that policymakers'knowledge can grow. furthermore, from my perspective, it has become apparent that aggregate data are not enough, and policy makers need more granular data. micro data firstly improve our understanding of the transmission mechanism of monetary policy and secondly allow us to better understand the aggregate data and thus better forecast their evolution. the combination of methodological developments and the increased availability of granular data may facilitate much richer analysis and more informative quantitative estimation of the impact of various types of shocks and, crucially, the impact of various types of policy measures. that said, the european system of central banks is actively conducting research with the aim to deepen our understanding of how monetary policy transmits to the european economy. the bank of greece has an active research department which pursues several avenues of economic and financial research, both theoretical and empirical. in addition to its own research, the bank of greece is involved in research projects carried out within the wider context of the european system of central banks through its participation in various research networks. i would also like to point out that the bank of greece is one of the first central banks worldwide to engage in climate change and sustainability issues, having set up as early as in 2009 the climate change impacts study committee ( ccisc ). concluding, a major task of central bank research is to bridge the possible gap between academics and policy makers and to create occasions for interactions with the academic community. we trust that research is enhanced by exposure to external ideas and latest advances in the field. once again, it is a pleasure to host today's | 0.5 |
2. 2 %. second, when looking forward from now until the early part of 2003, although recent developments in oil prices have lowered short - term price pressures, there are still some factors that could keep annual inflation rates above 2 % for several months to come. yet this short - term outlook is related both to base effects and to indirect taxes and administered prices, i. e. to temporary developments. third, when looking beyond the short term, we consider that both the overall economic environment and the euro exchange rate, which has strengthened since early this year, will contribute further towards reducing inflationary pressure. moreover, we expect the indirect effects of previous increases in oil prices and other factors to further unwind. although wage - related risks remain in place, they are judged less likely to materialise as long as the economic environment does not change substantially. the assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2 % in the course of 2003 and to remain in line with price stability thereafter. our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. the most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. moreover, we expect an improvement in world demand. this, and the low level of interest rates, should benefit investment. let me point out that, with today's decision, the key ecb interest rates have reached a very low level by historical standards. the governing council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. the outlook for the euro area economy will also very much depend on visible progress in other policy areas. regarding fiscal policies in the euro area, i would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of gdp and employment. therefore, sound fiscal positions, as enshrined in the treaty and further developed in the stability and growth pact, are in the interest of all the member states. given the disappointing fiscal developments in some countries and the challenges which have emerged to the eu fiscal framework, we welcome the moves to correct or prevent excessive deficits, i. e. the implementation of | workers could do this because of the nature of their work. of those that could, some firms were already well prepared for flexible working, but for many it was a huge shift. over time, though, people adapted. for some, working from home has been a struggle. but most businesses we speak to as part of our liaison program report that when they made the switch their operations continued reasonably effectively. a small number of firms even report that productivity rose. other firms adapted in how they dealt with their suppliers and customers. existing trends towards greater use of e - commerce and home delivery were greatly accelerated. another way people adapted was shifting the pattern of demand. around the world, restrictions on activity constrained services industries in particular. so consumer spending shifted away from services to goods, as the australian data clearly show ( graph 2 ). this went beyond the obvious substitutions, such as from restaurant meals to groceries to cook at home. sports equipment substituted for closed gyms, toys and games for organised children's activities. and with more time at home, people renovated, redecorated and kitted out home offices. graph 2 household consumption december 2019 = 100 index discretionary goods index ( 20 % ) essential services essential goods ( 44 % ) ( 16 % ) discretionary services ( 20 % ) m j s d m j s d m j s d m sources : abs ; rba as this switch in spending was a global phenomenon, it supported a swift recovery in global trade ; goods trade is now above pre - pandemic levels. strong demand for manufactured goods has been a positive for economies with large export sectors, including china and some economies in east asia. it has also increased demand for many commodities as well as for other components, such as semiconductors. this has boosted prices in many cases. overall, these price rises have tended to add to incomes in australia. the ratio of the prices of things we export to those of things we import β known as the terms of trade β is approaching the peak reached a decade ago, itself a 150 - year high. our inherent adaptability doesn't mean that all adjustments are smooth, though. this shift in demand has contributed to bottlenecks and delays throughout global supply chains ( graph 3 ). our liaison contacts and others in the business community have certainly seen the effects of this. shipping costs are up sharply, and so are some other costs ( graph 4 ). it is hard to know how long these disruptions will last. | 0 |
speech central bank of the republic of turkey prof. sahap kavcΔ±oglu, governor cbrt 89th ordinary meeting of the general assembly 30 march 2021, ankara esteemed shareholders, distinguished guests on the occasion of this meeting, i would like to express my pleasure to be here with you today as the governor of the central bank. i believe that we will duly fulfill our responsibility with all my colleagues at the central bank in the period ahead, and i wish that the new period will be beneficial to our country, our nation and our bank. today, we are holding this meeting under safety measures due to the coronavirus pandemic going on for the past year, which has deeply affected both our daily lives and world economies. i salute all the stakeholders and audience attending our general assembly meeting either in this hall or in front of their screens. the pandemic that has been going on for over a year has caused, among other things, economic challenges and uncertainties all over the world. as you know, the measures that have been put in place to curb the spread of the pandemic since the first quarter of 2020 have adversely affected growth performance of economies all over the world. for this reason, countries have tried to mitigate the potential impact of the pandemic on their economies through expansionary monetary and fiscal policies. at this point we see an improvement in the global growth outlook and an increase in international commodity prices on the back of positive developments in the vaccination process, in addition to expansionary policies. however, despite the ongoing vaccination efforts, the ongoing uncertainties regarding the vaccination process and the course of the pandemic keep the risks to the global economy alive. distinguished guests, at my first general assembly meeting, let me briefly share with you some important issues regarding the monetary policy. under the duties and powers set forth by law and in line with its main objective of achieving a permanent fall in inflation, the central bank of the republic of turkey will continue to use the monetary policy tools effectively. we are strictly committed to the medium - term inflation target of 5 %, defined as price stability and set jointly with the government. we are going to use the monetary policy tools appropriately to achieve this target. i would like to underline that we are determined to bring inflation down to 5 % in 2023 and keep it there permanently, consistent with the medium - term framework we set out in the january inflation report. i am aware that the | an earlier and stronger recovery in the turkish economy, compared to that of the global economy. accordingly, since the height of the crisis, by mid - 2009 turkey β s gdp and industrial production have increased by 11 percent and 21 percent, respectively, while the unemployment rate has dropped by approximately 3 percentage points. although the level of production is still below its pre - crisis level, we expect that it will exceed this level in 2010. meanwhile, we envisage that it will take an extended period for the labor market to recover. the global economy has displayed a mild recovery since the second half of 2009. yet, european economies have recently shown signals of deceleration. although problems in the credit markets of advanced economies have attenuated, they have not been completely eliminated yet. as a matter of fact, credit developments in the usa and the euro area suggest no significant increase in credit volume. the unresolved issue of troubled assets in the banking sector of advanced economies impedes proper functioning of the credit mechanism. meanwhile, soaring and persisting high unemployment rates in many countries reduce household expenditures and negatively affect the aggregate demand. soaring budget deficits and public debt stocks stemming from loose fiscal policies implemented in developed countries are an important risk factor that may adversely affect private demand by increasing long - term interest rates in the years ahead. the risks that i have mentioned above also have the potential to affect the turkish economy in a negative way. considering that our largest exports market is the european union, problems prevailing in european economies pose an important risk for our economy, too. as a matter of fact, external demand indicators have recently indicated a partial slowdown. global turbulence also has the potential to affect the turkish economy negatively through the channel of expectations. problems in the global financial markets are likely to restrain the accessibility of external financing. in conclusion, in an environment where the resource utilization has yet not reached pre - crisis levels and no demand pressure is observed, we anticipate that core inflation indicators will remain consistent with medium - term targets and economic recovery will be slow and protracted. 2. turkey β s long - term growth performance and potential growth rate in the second part of my speech, i would like to share with you my views on the necessary reforms for the establishment of strong and sustainable growth in turkey as well as those to increase its long - term potential growth rate. the growth rate of a country is determined by three factors. these factors can be summarized as : capital deepening employment growth and total | 0.5 |
a big change in attitudes and perceptions about financial risk. although confidence in global markets has partly returned, risk appetite now is clearly not what it was. and certain kinds of financial activity, particularly in wholesale, securities and derivatives markets have settled at much lower levels than they were in the pre - crisis period. all of this raises the question as to what the new normal might look like in our financial systems. has the world changed forever? to what extent can we expect the earlier causal factors driving financial change to reassert themselves? in thinking about this, i find it useful to categorise these causal factors into three groups. i see these as being conceptually distinct even though they are likely to interact in complex ways in practice. in the first group are the long - run forces driven by trends in incomes, technology and demographics. viewed in the abstract, there are a number of reasons to think that financial activity might be able to grow faster than the general economy for sustained periods, and even that this configuration might be some kind of norm. on the demand side it seems plausible that, as people get richer, more of their income can be spent on financial services, including debt servicing, as proportionately less needs to be spent on necessities. associated with this, the relative value of scarce assets that are financed by debt might be expected to rise over time. and the combination of increasing wealth and greater longevity in our societies is likely to generate rising demand for services in the wealth management and retirement income sector. on the supply side, the key point is that finance is an information - intensive industry. its key outputs depend on the capacity to store, analyse and transmit information securely. we β re not actually very good at measuring the real value of financial outputs and hence not good either at measuring productivity in the sector. but it would be surprising if the ongoing advances in information technology were not generating significant growth in finance industry productivity relative to that in less information - intensive sectors. this is a process that can continue as long as the technology itself goes on improving. so there are some valid reasons to think that both supply and demand for financial services can grow faster than nominal incomes over time, other things being unchanged. the second set of forces to consider are the one - off factors that made this particular quarter century, in financial terms, unique. one of these i have already alluded to : the financial deregulation that took place around the world mainly in the late 1970s and early 1980s. fundamentally | of banking assets to gdp, australia β s ratio is about 2, which is well within the international range and well below those in the euro area, the uk and japan. so to the extent that any generalised financial overhang exists, it is less likely to be a problem here than elsewhere. β’ that said, attitudes to risk and debt accumulation in the australian household sector have clearly changed. saving rates are up, the appetite for new debt is down, and attitudes to both the level and composition of household saving have become more conservative ( graph 4 ). bis central bankers β speeches graph 4 so what of the future? to return to my three sets of causal factors : β’ there are some reasons to think that longer - run trends in income and demographics can contribute to further growth of the financial sector over time. β’ however, much of the expansion over the pre - gfc quarter - century was driven by one - off factors, notably the adjustments to deregulation and low inflation. these adjustments have now run their course. β’ and, while we can β t be definitive, it is plausible that the world financial system has overexpanded in relative terms and needs a period of readjustment, though this is less likely to be a major factor in australia than elsewhere. the ongoing development of the financial system in the post - crisis period will depend on the interplay of those three factors. on any reading, it seems clear that this will be an environment where it is harder in general for banks and for the system as a whole to grow. while it is difficult to specify what that might mean in numerical terms, a return to financial sector growth rates consistently higher than the growth of nominal gdp seems unlikely for the foreseeable future. that is my first concluding comment. my other comment concerns the nature of competition. the pre - gfc quarter century was an unusual period, in that competition in financial intermediation came to be focused mainly on the lending side of the balance sheet. that now looks to have been an aberration, and we seem to be entering a period where significant competition on both sides of the balance sheet becomes the norm. it might take some time to get used to this new reality. but in general i see it as a healthy development because it will mean banks being under greater market discipline to manage their risks. and of course, regulators will be doing their part on that front as well. bis central bankers β speeches | 1 |
_ may16. pdf >. 2 see < www. bis. org / press / p150511. htm >. 3 see < www. bis. org / mktc / fxwg / am _ may16. pdf >. see also c salmon ( 2016 ), β rebuilding trust through the β fx global code β : reasons for optimism β, available at < www. bankofengland. co. uk / publications / documents / speeches / 2016 / speech924. pdf >, speech given at the aci uk square mile debate, london, 7 september ; and s potter ( 2016 ), β the role of best practices in supporting market integrity and effectiveness β, available at < www. newyorkfed. org / newsevents / speeches / 2016 / pot160907 >, remarks at the 2016 primary dealers meeting, federal reserve bank of new york, new york city, 7 september. 4 see < afxc. rba. gov. au / news / afxc - 26052016. html >. 5 see < www. bis. org / press / p160526a. htm >. 3 / 3 bis central bankers'speeches | a chance on a new product, a new investment or a new worker. in the case of households, according to surveys sentiment is neither particularly weak nor particularly strong at present. it is reasonable to expect that households will play a role in driving demand over the years ahead β and in due course that will help to lift business confidence. but in thinking about that role we need to understand the ways in which household behaviour has changed. the credit boom the title of this talk, β economic policy after the booms β, uses the plural quite deliberately. there were two β booms β. before the mining boom, or at least before its full flowering from about the middle of last decade, there was an earlier boom. it was global, but australians took part in it. i am referring of course to a boom in credit, which saw a very significant increase in borrowing by households in particular, and a rise in asset values, especially dwellings. this was associated with a lengthy period of unusually strong growth in consumption. bis central bankers β speeches this boom did not end in australia as painfully as it did in some other places, but end it did. consider two charts i showed at the anika foundation lunch two years ago in july 2011. these have been updated, and use revised data. 5 graph 1 graph 2 the level of household financial assets from june 2002 has been revised almost 15 per cent higher on average, predominantly reflecting upward revisions to estimates of households'holdings of unlisted equity. as a result, the debt - to - assets ratio has been revised lower by 0. 8 percentage points on average. trend growth in household assets was also revised slightly lower. in contrast, growth in household disposable income was revised slightly higher, leading to a small upward revision in the saving ratio in the 2000s. bis central bankers β speeches it is even clearer now than it was two years ago that the behaviour of households has changed in a very important way. real consumption per person had risen faster than real income per person for 30 years, from the mid 1970s until about 2005. ( only the last third of that period is shown here. ) that changed some years ago now, and after a noticeable fall in consumption in late 2008 and early 2009, spending and income have grown roughly on parallel tracks. since 2009, trend growth in per capita consumption has been about 1. 4 per cent per annum, half what it had been from 1995 to 2005. one contributing factor is seen in the second of the | 0.5 |
the crisis, still ongoing, since 9 august 2007 led to us taking even more impressive decisions almost immediately, for example the decision to provide the financial system with a 24 - hour loan of eur 95 billion in the summer of 2007. this decision appears to have strongly increased the ecb β s global and european visibility. we were the first central bank to react immediately when the international financial turbulence first appeared. today, the eurosystem provides considerable support to the european financial system, since we refinance, with full allotment and at fixed rates, the euro area β s commercial banks in a week, a month, three months and six months. this was something that was unthinkable before the financial turbulence intensified. i would also like to underline the speed with which the public authorities as a whole, including governments and parliaments, reacted. together, they showed that europe was able to take decisions, even in the most difficult circumstances. le figaro magazine : the financial times named you β personality of the year β in 2007. do you see this as a way of getting back at those who criticised the ecb β s β psychorigidity β in the past? jean - claude trichet : these criticisms turned out to have no basis, as we saw, and have, it seems to me, largely disappeared. those who systematically sung the praises of the most accommodative monetary policies have come to realise, over the last 18 months, that this was too simplistic a view. the ecb β s governing council does what the treaty on european union asks it to do, on behalf of 329 million european citizens in the euro area. while i was governor of the banque de france, there was also a public debate on the decisions of the monetary policy council, which some 70 % of french citizens approved, across all public sensibilities. i have noticed that public support for the ecb's policy of price stability is also very strong and is an element of trust which is important for the economy as a whole. le figaro magazine : was the euro not responsible, in part, for inflation? jean - claude trichet : on the contrary. over the last ten years, we have managed to maintain a stable rise in prices of 2. 2 % per annum on average in the euro area. this is a good result given the spectacular rise in the prices of raw materials and energy which has been recorded over this period. nevertheless, | . why cigarettes, not milk or fruits? the answer is, it is hard to hold so many fruits in your pocket. also, fruits and milk are not standardized. what happened was that cigarettes emerged as the currency of choice in the camps. but then, many problems came out later. a smoker knows a bad cigarette from a good one. so, he will keep the good cigarettes and trade the bad ones. 1 / 3 bis - central bankers'speeches so, we expect that all these problems will happen as well to virtual currency. there are many competing ones, and even the ones that survive will have problems because of all these issues. the limits of decentralization : when should regulation step in? if the goal is to use them as stablecoins, clearly, that is banking. because then, you are taking money - taking deposits and guaranteeing deposits to support the currency. therefore, you should be treated like a bank and regulated like one. if you are issuing a stablecoin, maybe the requirement should be at least 50 percent of the assets that back it up should be very liquid assets. maybe you should have a reserve requirement. maybe you should have a liquidity coverage ratio, and so on and so forth. therefore, this avoids the very purpose of why these currencies were created to begin with. for them to be useful and safe, they have to be regulated. i think that this is the story of ftx [ failed cryptocurrency exchange ]. encouraging responsible and cautious innovation nonetheless, we should be open to new developments, especially [ in ] a country [ like ours ] that is dependent on remittances. therefore, we have to have an open mind. at the same time, as [ mbm ] eli [ remolona ] said, regulation should be a cautious one. we do not want to regulate without asking what the private players think and the role that they envision for virtual currencies. are they for remittances? are they for speculation? we are clearly, more likely to give [ virtual asset service provider ( vasp ) ] licenses to banks that already exist if, at all, there will be trading ; if they will be allowed to trade in these virtual currencies. by the way, if virtual currencies were to replace gold - if you believe google - the overall supply of gold is us $ 7. 5 trillion globally. if this can displace just | 0 |
2nd conference β solvency ii and small and medium - sized insurers β welcome address salvatore rossi β president of ivass bank of italy β s congress centre rome, 3 march 2017 ladies and gentlemen, i am delighted to welcome you all to this conference. i want to thank gabriel bernardino, president of the european insurance and occupational pensions authority ( eiopa ), and all the other panelists, for kindly accepting our invitation. this is the second conference we hold in ivass on solvency ii. this time we decided to focus on a specific topic, the effects of the new prudential framework on small and medium - sized insurers β smis from now on. after gabriel β s keynote speech we will have two panels : the first one will have a more international flavor, while the second one, opened by bianca maria farina, president of the italian insurance association ( ania ), will be focused on the italian market. the panelists are well known representatives of both the supervisory community and the industry. the moderators will be karel van hulle, one of the founders of the solvency ii framework, former head of the insurance unit at the european commission, and ferdinando giugliano, journalist and economic commentator. alberto corinti, member of the board of ivass and of the management board of eiopa, will offer some concluding remarks. why a conference on small and medium - sized insurers? i gave some hints last june, when presenting ivass annual report. at that time only few months had passed since solvency ii entered into force, but we could already notice how difficult this new world had become for small companies. solvency ii pursues the objective β i said in june β of creating a risk - sensitive prudential regime for all and of incentivizing good corporate governance. to this end it has introduced three pillars of new rules : 1 ) some very complex methods for calculating the capital requirement ; 2 ) a minimum, but still high, level of organizational requirements ; 3 ) and a detailed information system, over and beyond balance - sheet reporting obligations. smaller firms are finding the investment consequently needed in human, technological and organizational capital something of a burden. even the imf has many concerns. its report the insurance sector : trends and systemic risk implications issued in april 2016 1 saw a clear tendency by small companies to run more risks, also in an attempt to cover the growing costs of compliance with rules that have | authorities and of the private sector, and to take concrete action. to protect the financial system from the threats posed by quantum computing, the bank of italy is proposing β in the context of the ongoing work on risks from emerging technologies affecting the financial system that is being carried out in the g7 finance track β that g7 member countries jointly develop a'common roadmap for quantum resilience ', providing a unified policy framework for the actions needed to steer the transition to a quantum - safe financial system through an international cooperation approach. the roadmap should include all initiatives that are essential for a quantum - resilient financial system and could be implemented under the responsibility of different multinational organizations. the monitoring, coordination and governance of the overall roadmap should be undertaken at the highest political level. for example, a shared response at the level of g7 countries would provide a benchmark that could outline the way forward for other jurisdictions so as to cover, eventually, the global financial system. whichever migration path we decide to adopt, it has to fulfil certain requirements. first, it needs to build on existing regulation in order to capitalize on best practices and, possibly, avoid over - regulation. second, it will entail the standardization of the approaches taken to risk mitigation across jurisdictions, so as to enable synergies and speed up the transition, as the suppliers of technical solutions will work based on shared guidelines. 4 / 5 bis - central bankers'speeches third, financial industry players as well as hardware and software providers must participate in the design of the strategy. their involvement is necessary in order to devise a way forward that hinges on the best and most up - to - date technologies in a field where innovation is characterized by sudden accelerations. fourth, preservation of interoperability and quality of services must remain the guiding principle of this transition process together with its gradual and safe implementation and with the principle of proportionality, to strike a balance between short - term fixes and long - term solutions. continuous monitoring of the progress achieved and of the resources absorbed in this endeavour will be important : on this basis, the roadmap commitments can be reassessed along the way, including with respect to the timeline, by accelerating or delaying some milestones as needed. finally, international coordination is a key aspect. the g7 cyber expert group could be the right forum for operatively managing the quantum resilience migration roadmap, as well as for drafting policy guidelines | 0.5 |
finance and digital banking frameworks to accelerate digital transformation and financial inclusion. the open finance framework promotes consent - driven data portability, interoperability, and collaborative partnerships among entities that adhere to the same standards of data security and privacy. in line with our digital transformation roadmap, the bsp has issued licenses to six purely digital banks. the bsp has also commenced initiatives in the digitalization of offshore payments. we are prioritizing the establishment of interoperable cross - border real - time retail payment systems among asean member states. moving on to sustainable finance... for us at the bsp, sustainability will serve as our guidepost in rebuilding the post - covid 19 economy. it is crucial that sustainability principles are part of how institutions are governed. as such, the bsp is actively collaborating with government agencies and regulators through the interagency technical working group on sustainable finance or what we call the β green force β to form a cohesive action plan to institutionalize and accelerate the growth of sustainable finance. data shows that 24 percent or 119 out of 499 banks have adopted their respective sustainable transition plans. banks have issued around 1. 15 billion us dollars and 152. 9 billion pesos worth of green, social and sustainability bonds since 2017. in leading by example, the bsp has invested 550 million us dollars in the green bond funds of the bank for international settlements to promote investments in sustainable or green finance assets. we also acknowledge the critical legislation complementing our regulatory reforms and initiatives. these bills include financial consumer protection act, which will afford the financial sector regulators the authority to enforce prudent and customer - centric standards of conduct, including the power to adjudicate customer complaints. the fcpa is in the office of the president for signature. the agri agra bill is seen to enhance access by rural communities to private sector financing. this bill is pending for bicameral conference. meanwhile, the digital payments bill seeks to promote digital payment systems, particularly in all government agencies. this is currently approved in the house of representatives on third reading and pending in the senate committee on banks. the government financial institutions unified initiatives to distressed enterprises for economic recovery act or the guide bill seeks to strengthen the capacity of the landbank and development bank of the philippines to provide access to credit to distressed enterprises as a result of the pandemic. this bill is approved in the house of representatives on third reading and pending in the senate committee on banks. there is also the | felipe m medalla : supporting the continued growth of the fund management industry speech by mr felipe m medalla, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the fund managers association of the philippines ( fmap ) general membership meeting and induction of officers, manila, 20 february 2023. * * * note : this speech mentioned inflation figures from december 2022. the bsp has since released updated inflation numbers and increased its policy rate by 50 basis points in february 2023. to the outgoing and incoming officers of the fund managers association of the philippines ( fmap ), thank you for inviting me. events like these give me a good chance to explain what the bangko sentral ng pilipinas ( bsp ) does and why it does them. the importance of communicating the central bank's actions and intentions in my view and our view, as always, the better understood we are and the more predictable we are, the more effective we are [ in carrying out our mandates ]. there is a saying in standard macroeconomics, " the only reason monetary policy works is [ because ] it surprises people. " and the way it goes is : you [ the central bank ] increase the money supply when markets are not expecting it. prices are relatively sticky, and therefore, the increase in money supply increases output. but then, the only way you only did it is by fooling people. [ by the ] next time you do it, it is not going to work anymore. [ what is ] worse, even if you are not thinking of doing it, they [ the market ] think you will do it. therefore, they put it at a premium. in other words, it works once and costs you a lot later. the bsp is very much aware of this. that is why we want to be as transparent as possible. in fact, if we know where we are going, we will tell you where we are going. but how does one communicate the uncertain? the fact that we are not telling you where we are going is [ because ] we, ourselves, are not sure where we are going, especially in this environment that is so unpredictable. for instance, who could have predicted just six months before that the fed [ united states federal reserve ] will do four 75 basis points ( bps ) [ policy rate increases ]? in other words, you cannot do forward guidance when your forward guidance may add | 0.5 |
su ning : the evolution of a credit information system for china speech by mr su ning, deputy governor of the people β s bank of china, at the international seminar on the application of credit information products in managing credit risks of commercial banks, tianjing, 20 june 2007. * * * distinguished guests, ladies and gentlemen, good morning. i am very pleased to attend the international seminar on the application of credit information products in managing credit risks of commercial banks. first, on behalf of the people β s bank of china, i would like to express gratitude to our co - sponsor of this seminar, the international finance corporation. also, i would like to extend warmest welcome and gratitude to experts from abroad countries and delegates presenting here. taking this opportunity, i would like to share with you my observations on several aspects. i. credit information services have started to play a role in promoting china β s economic and financial development. credit information system serves as a solid foundation for the performance of modern financial system and an indispensable infrastructure for credit market development. in recent years, in order to meet the needs of global credit market development, 122 countries and regions have established credit reporting agencies that provides credit information registration services. the international community has reached a consensus in developing credit information, preventing risks and expanding credit services to promote economic development. building up a credit information system according to a country β s specific circumstances and with reference to international best practice constitutes an important part in improving economic and financial system. at present, while developing countries have started to build credit information systems, some developed countries also steadily improve their credit information systems, in particular on how to establish a centralized credit information registration system to comprehensively collect both positive and negative financial or non - financial information from enterprises and individuals, and protecting the rights of borrowers in legal forms in terms of access to such information and etc. in recent years, to fulfill the obligation assigned by the state council of β regulating credit information sector and promoting the construction of a social credit system β, the people β s bank of china ( pbc ) has set up the national unified enterprise and individual credit information databases with joint efforts of banking institutions. the individual credit information database was founded from scratches, while enterprise credit information database was upgraded based on the bank credit registration and consultation system established in 1997. the two databases were officially put into operation in january and july 2006 respectively, which greatly improved china β s credit environment. measured by the benchmark in the doing business | shock therapy β to russia and eastern european countries, but later on this was described as β shock with no therapy β. we should be cautious to offer the same prescription again, so as not to have credibility jeopardized. china will only consider to take the gradualist reform approach that wins the trust of the masses of the chinese people, rather than a β shock β, not to mention that the us has not taken the lead to use β shock β to adjust its imbalances. global imbalances and the role of exchange rate 14. the chinese government has already started to apply a mix of policy measures, including expanding domestic demand, lowering down saving rate, opening up the market, floating the exchange rate and increasing import, so as to improve the balance of payments. with the implementation of these policy measures, the pbc anticipates that it needs a time span of 2 - 3 years to achieve an approximate trade balance. however, what is worrisome is that, according to the analysis by the chinese economists, even china basically realized a global trade balance, the united states might still incur large trade deficits and it would still be very difficult to achieve a bilateral trade balance between china and the us. so the ball would be actually not in china β s court. 15. the us and china should make joint efforts to address the trade imbalance between the two countries. when the chinese government has been making an efforts as mentioned above trying to relieve the problem, complaints are also heard that the us has been slow in taking concrete measures to reduce its twin deficits and improve saving rate. 16. some us economists assume that the exchange rate is the key to fixing the trade imbalance, while on the chinese side there are economists from different schools and some also tend to believe in this assumption. however, such assumption failed in statistical test by using the trade data and real effective exchange rate recorded in china over the years. besides, empirical knowledge about many other countries also does not support such a judgment. therefore, we should be cautious to rely solely and excessively on exchange rate function to realize current account balance. 17. according to the articles of agreement of the imf, β member countries shall have the right to choose exchange rate regime, either free floating, managed floating or fixed exchange rate, at their own discretion β. in this sense, there exists no such an exchange rate regime that can be labeled as β manipulating exchange rate β. china β s gradual shift | 0.5 |
reserve system, november, https : / / doi. org / 10. 17016 / feds. 2022. 081. okun, arthur m. ( 1973 ). β upward mobility in a high - pressure economy, β brookings papers on economic activity, no. 1, pp. 207 β 52, https : / / www. brookings. edu / wpcontent / uploads / 1973 / 01 / 1973a _ bpea _ okun _ fellner _ greenspan. pdf. orchard, jacob ( 2021 ), β cyclical demand shifts and cost of living inequality, β working paper, february ( revised september 2022 ). oreopoulos, philip, till von wachter, and andrew heisz ( 2012 ). β the short - and longterm career effects of graduating in a recession, β american economic journal : applied economics, vol. 4 ( january ), pp. 1 β 29. do noninflationary economic expansions promote shared prosperity? evidence from the u. s. labor market philip n. jefferson vice chair, federal reserve board swarthmore college, february 5, 2025 disclaimer : the views i will express today are my own and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. roadmap of talk β’ the labor market at the end of 2019 β’ the labor market following the pandemic β’ the current labor market β’ strong labor markets and shared prosperity β’ persistent benefits of long expansions β’ conclusion figure 1. unemployment rate : 1990 - 2019 figure 2. unemployment rate by race and ethnicity : 1990 - 2019 figure 3. unemployment rate by education attainment : 1990 - 2019 figure 4. prime age labor force participation rate, by gender : 1990 - 2019 figure 5. nominal wage growth, by earnings quartile : 1998 - 2019 figure 6. unemployment rate : 2019 - present figure 7. quits rate figure 8. available jobs and available workers figure 9. unemployment rate, by race and ethnicity ( difference from 2019 averages ) figure 10. labor force participation rate, by gender ( difference from 2019 averages ) figure 11. nominal wage growth, by earnings quartile figure 12. nominal wage growth, by race figure 8. available jobs and available workers figure 13. initial claims ( thousands ) f notes : for exposition purposes the vertical axis stops at 10 million. during the pandemic continued claims reached over 6 million in | michael atingi - ego : launch of the banking industry guidelines for mitigation of fraud and the revised code of conduct remarks by mr michael atingi - ego, deputy governor of the bank of uganda, at the launch of the banking industry guidelines for mitigation of fraud & the revised code of conduct, kampala, 19 february 2024. * * * chair, executive director, and members of uganda bankers'association ; distinguished guests ; ladies and gentlemen, good morning. thank you for inviting me to the launch of the banking industry guidelines for mitigation of fraud and the revised code of conduct. this initiative is a critical stepping stone towards restoring the bedrock of trust and confidence that underpins our financial institutions. " a typology study on internal frauds in the banking sector in uganda ", by the financial intelligence authority in june 2022 showed that fraud was rampant and increasingly sophisticated, with cyber fraud accounting for over 50 % of all high - value fraud cases under investigation and annual fraud losses more than doubling from 2020 to 2021. the banking industry has always faced the pervasive threat of fraud, a shadow that stains its reputation and erodes public trust. this threat manifests in diverse forms, from deceptive schemes by external attackers to criminal activities perpetrated by insiders and outsiders. fraud in the banking system fundamentally undermines the trust principle it relies on. when customers entrust their hard - earned money to financial institutions, they expect it to be safeguarded responsibly. however, when fraud occurs, it erodes this trust, leaving individuals feeling exploited and vulnerable. furthermore, the far - reaching consequences of fraud in the banking industry extend beyond immediate victims. it distorts market mechanisms, diverts crucial resources from productive investments, and can even cascade across entire communities, leading to economic hardship and social unrest. fraud is a termite that relentlessly eats into the foundation of trust upon which banks are built. and today, this threat is more widespread and sophisticated than ever before. cyber / internet - related frauds are rising in uganda, alongside loan scams, impersonation, identity theft, forgeries, and cash suppression. just look at the numbers. globally, losses topped a shocking usd 11 billion last year, led by the growing threat of account takeover ( ato ) frauds. account takeover fraud, where thieves steal login credentials to access victims'accounts and wreak havoc, is increasing in uganda, causing significant financial losses and | 0 |
zamani abdul ghani : building a progressive takaful sector in the overall islamic financial system keynote address by mr zamani abdul ghani, deputy governor of the central bank of malaysia, at the 2nd seminar on regulation of takaful, langkawi, 23 february 2006. * * * bismillahirrahmanirrahim. his excellency dr. bassel hindawi vice chairman, director general of the commission insurance commission of jordan mr. anwar khalifa ebrahim al - sadah deputy governor, bahrain monetary agency professor rifaat ahmed abdel karim secretary - general, islamic financial services board distinguished guests and participants, assalamualaikum warahmatullahi wabarakatuh and good morning. 2. it gives me great pleasure to be here this morning to welcome you to malaysia and to this beautiful island of langkawi. i am also pleased to be invited by the islamic financial services board ( ifsb ) to address this major event that brings together those among us who share deep interest in the development of global takaful and islamic finance. alhamdulillah, we have among us today distinguished market players, regulators, scholars, consultants as well as participants from almost twenty ( 20 ) countries around the world. i also wish to congratulate the ifsb for its efforts in organizing, for the second consecutive year, this international seminar focusing on the regulation of takaful. let me at the outset reiterate the importance of this seminar as a source of collaboration for ideas, sharing of knowledge and exchange of experiences for the continuous developments and improvements of the islamic finance industry. this event is especially important as it touches on new areas such as the regulation and supervision of the takaful industry as only minimum guidance is currently available. ladies and gentlemen, 3. before i continue with this keynote address, let us all take a moment to remember allahyarham dr. mohamed aboulkhair zaki badawi, a great thinker and collaborator for the cause of islam, and particularly in the area of islamic finance. he has devoted so much of his time and energy for the benefit of the ummah. we will always remember his numerous contributions to the development of islamic finance. we cherish his involvement, among others, in the introduction of shariah - compliant mortgage, the establishment of the shariah council to reconcile conflicts between islamic and conventional laws and the establishment of the first islamic financial institution licensed in the united | attach relatively little importance to the krona when assessing what would be a well - balanced monetary policy. this means that i instead place greater importance on the improved economic prospects. however, despite the fact that prospects now seem a little brighter, it is still the case that resource utilisation is expected to be significantly below normal over the next few years. this means that there is still a need for monetary policy stimulation to stabilise the real economy. nor does it appear that such stimulation will conflict with the inflation target. inflation measured in terms of the cpif is expected to be slightly below the target of 2 per cent in the next few years. all in all, there is therefore nothing at the moment that calls for a tightening of monetary policy at a faster rate than in our assessment in july. nor can i see, as economic activity has improved, any weighty reasons for making monetary policy more expansionary by reducing the repo rate even further. the adopted line, with a repo rate of 0. 25 per cent that is expected to remain unchanged for several quarters, represents a very expansionary monetary policy. my view is that this policy should only be changed if inflation and / or the economic situation change considerably compared to our current forecasts. concluding remarks i have now shared with you some of my experiences during my early months as a member of the executive board of the riksbank. i realised already when i accepted the job that it would not be easy. however, the fact that monetary policy decision - making is not as straightforward as it appears in theory only serves to make the job even more exciting. a well - balanced monetary policy presupposes that we arrive at a reasonable balance between achieving the inflation target and stabilising the real economy. a reasonable balance requires in turn that we can effectively measure how much inflation deviates from the target and how resource utilisation relates to its normal level. we have fairly good measures of inflation, although it has been a problem recently that our main measure of inflation, the cpi, is so highly affected by our own repo rate decisions through their effects on housing costs. consequently, at our most recent monetary policy meetings we have almost exclusively focused on alternative measures from which housing costs are excluded. the problems concerning how measures of resource utilisation relate to the normal level are, however, greater. it is difficult enough to measure resource utilisation, but it is even more difficult to measure what its normal level is. instead we | 0 |
restate financial results because of inappropriate accounting. both corporate financial officers and outside auditors failed to effectively evaluate the sophisticated nature of the underlying transactions and arrive at the appropriate accounting policy. at a few banks, the evaluations were ineffective for special - purpose entities and derivatives. you have all read accounts of these incidents, and i will not dwell on them. rather, i want to illustrate operational risk in relation to a basic accounting concept by discussing another area of weakness that bank regulators determined needed attention - accounting for subprime credit card activity. the accounting concept is not new or esoteric. rather, the nature of the subprime credit card business, compared with that of the prime card business, is to rely much more on fee income than on interest income for revenue. for subprime accounts, rapid growth of the account base can mask underlying revenue trends. some financial institutions did not have management information that allowed them to track the percentage of delinquent accounts that were not paying late fees and other charges that had been billed. in such situations, the accounting is very straightforward. even if you have billed a customer for services, if you do not think you are going to collect the fee, you should not recognize the revenue and should set up a reserve for bad debt. some financial institutions with a large subprime client base did not have adequate accounting systems to disclose that a significant amount in fees was not being collected. by recording revenue on the basis of billed fees, these institutions were overstating income. new guidance issued jointly by the bank regulators clarifies these accounting standards. further, at some subprime banks, management information did not reflect the level of charge - offs of fees and advances as accounts aged. by relying on charge - off reports for the portfolio as a whole, portfolio growth was masking the increasing amount of loan losses. this is a good example of how changes in the customer mix and profit drivers of an existing product can lead to unintended loss exposures if management information and accounting do not reflect the economics and risks of the product when it is altered. fdicia : internal controls other areas of operational risk have come to light as a result of the events and debate surrounding the sarbanes - oxley act. i want to talk about a couple of these areas - internal control assessments and the role of outside auditors. since 1991, the federal deposit insurance corporation improvement act ( fdicia ) has required that the chief executive officer ( ceo | susan s bies : managing business risks speech by ms susan s bies, member of the board of governors of the us federal reserve system, before the oregon bankers association, independent community banks of oregon, and idaho bankers association ; sunriver, oregon, 16 june 2003. * * * thank you for inviting me to participate in the joint annual convention of the oregon bankers association, the independent community banks of oregon and the idaho bankers association. one of my responsibilities as a governor on the federal reserve board is to chair the board's committee on supervisory and regulatory affairs. in that role i apply my knowledge of banking to the continuing task of adapting the federal reserve's supervision process to meet the needs of the evolving financial services industry. today i want to explore some issues of joint interest to us, as bankers and supervisors, and to think about how we can better manage the risks inherent in banks. first i'll focus on some of issues arising from events at public companies and banks in the past eighteen months that have shown weaknesses in risk management practices. and then i'll talk about how operational risk management is evolving into a discipline that can strengthen the corporate governance process at banks. bank earnings and performance banks in the united states have experienced two consecutive years of record earnings, despite the recession and slow recovery, losses due to exposures to bankruptcies arising from corporate fraud, and record low interest rates. in 2002, the return on assets rose 16 basis points, to 1. 33 percent, the highest level in three decades. the improvements in earnings and roa are even more remarkable in that they occurred while banks were strengthening their capital ratios. thus, banks'performance was driven by increased net interest margins, lower relative costs and comparatively constant loan loss provisions. the ability of bankers to achieve record earnings during a recession and the early part of the recovery reflects the improvement in risk management that occurred in the 1990s. this is especially true in relation to credit and asset / liability risks. operational risks are a different matter : banks have had to deal with losses arising from operational issues, as a few well - publicized events have shown. operational risk " operational risk " is a relatively new term that has no unique definition. in the mid - 1990s the concept began to receive attention at banks and nonfinancial firms as enterprise - risk management began to evolve. for purposes of my talk today, i am going to refer to operational risk as any risk that arises from inadequate or failed internal processes, people, or | 1 |
mr. greenspan presents the federal reserve β s semi - annual humphrey hawkins monetary policy testimony and report to the us congress testimony of the chairman of the board of the us federal reserve system, mr. alan greenspan, before the us congress on 24 / 2 / 98. mr. chairman and members of the committee, i welcome this opportunity to present the federal reserve β s semi - annual report on economic conditions and the conduct of monetary policy. the us economy in 1997 the us economy delivered another exemplary performance in 1997. over the four quarters of last year, real gdp expanded close to 4 percent, its fastest annual increase in ten years. to produce that higher output, about 3 million americans joined the nation β s payrolls, in the process contributing to a reduction in the unemployment rate to 4ΒΎ percent, its lowest sustained level since the late 1960s. and our factories were working more intensively too : industrial production increased 5ΒΎ percent last year, exceeding robust additions to capacity. those gains were shared widely. the hourly wage and salary structure rose about 4 percent, fueling impressive increases in personal incomes. unlike some prior episodes when faster wage rate increases mainly reflected attempts to make up for more rapidly rising prices of goods and services, the fatter paychecks that workers brought home represented real increments to purchasing power. measured consumer price inflation came in at 1ΒΎ percent over the twelve months of 1997, down about 1Β½ percentage points from the pace of the prior year. while swings in the prices of food and fuel contributed to this decline, both narrower price indexes excluding those items and broader ones including all goods and services produced in the united states also paint a portrait of continued progress toward price stability. businesses, for the most part, were able to pay these higher real wages while still increasing their earnings. although aggregate data on profits for all of 1997 are not yet available, corporate profit margins most likely remained in an elevated range not seen consistently since the 1960s. these healthy gains in earnings and the expectations of more to come provided important support to the equity market, with most major stock price indexes gaining more than 20 percent over the year. the strong growth of the real income of workers and corporations is not unrelated to the economy β s continued good performance on inflation. taken together, recent evidence supports the view that such low inflation, as closely approaching price stability as we have known in the united states in three decades, engenders many benefits. when changes in the general price level are small | economy beyond those mentioned already regarding asian developments. without doubt, lenders have provided important support to spending in the past few years by their willingness to transact at historically small margins and in large volumes. equity investors have contributed as well by apparently pricing in the expectation of substantial earnings gains and requiring modest compensation for the risk that those expectations could be mistaken. approaching the eighth year of the economic expansion, this is understandable in an economic environment that, contrary to historical experience, has become increasingly benign. businesses have been meeting obligations readily and generating high profits, putting them in outstanding financial health. but we must be concerned about becoming too complacent about evaluating repayment risks. all too often at this stage of the business cycle, the loans that banks extend later make up a disproportionate share of total nonperforming loans. in addition, quite possibly, twelve or eighteen months hence, some of the securities purchased on the market could be looked upon with some regret by investors. as one of the nation β s bank supervisors, the federal reserve will make every effort to encourage banks to apply sound underwriting standards in their lending. prudent lenders should consider a wide range of economic situations in evaluating credit ; to do otherwise would risk contributing to potentially disruptive financial problems down the road. a second area of concern involves our nation β s continuing role in the new high - tech international financial system. by joining with our major trading partners and international financial institutions in helping to stabilize the economies of asia and promoting needed structural changes, we are also encouraging the continued expansion of world trade and global economic and financial stability on which the ongoing increase of our own standards of living depends. if we were to cede our role as a world leader, or backslide into protectionist policies, we would threaten the source of much of our own sustained economic growth. a third risk is complacency about inflation prospects. the combination and interaction of significant increases in productivity - improving technologies, sharp declines in budget deficits, and disciplined monetary policy has damped product price changes, bringing them to near stability. while part of this result owes to good policy, part is the product of the fortuitous emergence of new technologies and of some favorable price developments in imported goods. however, as history counsels, it is unwise to count on any string of good fortune to continue indefinitely. at the same time, though, it is also instructive to remember the words of an old sage | 1 |
by more than the bank had expected, with more muted price pressures across a wide range of goods and services, consistent with the unexpected increase in excess capacity. bis central bankers β speeches β’ total cpi inflation has also been lower than anticipated, reflecting developments in core inflation and weaker - than - projected gasoline prices. β’ total cpi inflation is expected to remain around 1 per cent in the near term. it is expected to rise gradually, along with core inflation, to the 2 per cent target in the second half of 2014 as the economy returns to full capacity and inflation expectations remain well - anchored. β’ despite the reduction in global tail risks as a result of a series of actions by european and american authorities, the inflation outlook in canada is still subject to significant risks. β’ the three main upside risks to inflation in canada relate to the possibility of stronger - than - expected growth in the u. s. economy, higher canadian exports and renewed momentum in canadian residential investment. β’ the three main downside risks to inflation in canada relate to the european crisis, more protracted weakness in business investment and exports in canada, and the possibility that growth in canadian household spending could be weaker. β’ overall, the bank judges that the risks to the inflation outlook in canada are roughly balanced over the projection period. β’ reflecting all of these factors, the bank, on 23 january, maintained the target for the overnight rate at 1 per cent. β’ while some modest withdrawal of monetary policy stimulus will likely be required over time, consistent with achieving the 2 per cent inflation target, the more muted inflation outlook and the beginnings of a more constructive evolution of imbalances in the household sector suggest that the timing of any such withdrawal is less imminent than previously anticipated. with that, tiff and i would be pleased to take your questions. bis central bankers β speeches | mark carney : summary of canada β s january 2013 monetary policy report opening statement by mr mark carney, governor of the bank of canada and chairman of the financial stability board, presented to the house of commons standing committee on finance, ottawa, ontario, 12 february 2013. * * * good morning. tiff and i are pleased to be here with you today to discuss the january monetary policy report, which the bank recently published. β’ while the global economic outlook is slightly weaker than the bank had projected in october mpr, global tail risks have also diminished. β’ the economic expansion in the united states is continuing at a gradual pace, restrained by ongoing public and private deleveraging, global weakness and uncertainty related to fiscal negotiations. β’ europe remains in recession, with a somewhat more protracted downturn now expected than in october. β’ growth in china is improving, though economic activity has slowed further in some other major emerging economies. β’ supported by central bank actions and by positive policy developments in europe, global financial conditions are more stimulative. β’ commodity prices have remained at historically elevated levels, though temporary disruptions and persistent transportation bottlenecks have led to a record discount on canadian heavy crude. β’ in canada, the slowdown in the second half of 2012 was more pronounced than the bank had anticipated, owing to weaker business investment and exports. β’ caution about high debt levels has begun to restrain household spending. β’ the bank expects economic growth to pick up through 2013. β’ business investment and exports are projected to rebound as foreign demand strengthens, uncertainty diminishes and the temporary factors that have weighed on resource sector activity are unwound. β’ nonetheless, exports should remain below their pre - recession peak until the second half of 2014, owing to a lower track for foreign demand and ongoing competitiveness challenges, including the persistent strength of the canadian dollar. β’ consumption is expected to grow moderately and residential investment to decline further from historically high levels. the bank expects trend growth in household credit to moderate further, with the debt - to - income ratio stabilizing near current levels. β’ relative to the october mpr, canadian economic activity is expected to be more restrained. following an estimated 1. 9 per cent in 2012, the economy is expected to grow by 2. 0 per cent in 2013 and 2. 7 per cent in 2014. the bank now expects the economy to reach full capacity in the second half of 2014, later than anticipated in october. β’ core inflation has softened | 1 |
help stimulate and enhance domestic financial reforms. actually, in the absence of the challenge created by foreign competition, domestic financial reforms may not be broad and fast enough. moreover, in terms of best practices dissemination, the presence of foreigners in the capital of domestic banks may ensure a faster adoption of international standards and codes, especially concerning the monitoring, control and management of financial and operational risks. this is crucial for the resilience and the stability of the financial system. the report of the cgfs working group on " fdi in the financial sector of emes " highlighted that a lasting benefit of these fdi was their effects on the financial sector efficiency, thanks to the generally associated technology transfers and innovations in products and processes. in addition to their lower volatility, this is one more reason why attracting long - term capital flows, such as fdis, seems preferable to catching short - term flows, although the lessons from the chilean experience versus some asian misadventures suggest there is no unique model for all. but i saw that the size of fdis in india which had been hitherto rather low is rising significantly ( 16 billions usd in 2006 - 07 ) which is good sign of its attractiveness. in france also we pay a lot of attention to inflows of fdis ( above 60 billions in 2006 ) as they matter as well in a more mature economy. so when setting the pace of internal versus external liberalisation, the authorities have to strike the right balance and rhythm between the two sides. in this respect, let me evoke briefly the way we managed this process in france in the 1980s. financial liberalisation started with the domestic side by : β’ modernising the money market ; β’ deepening the bond markets, using the public sector as a benchmark ( in order to price risks through a full yield curve for risk - free assets ) ; β’ broadening the basis of the equity markets ( including privatisations ) ; β’ last but not least, creating new financial markets ( futures, options β¦ ). meanwhile, but sometimes with lags, the french capital account was liberalised. we switched from a situation, in 1983, where the exchange rate controls were at their tightest, following speculative attacks and three devaluations in 18 months, to a gradual removal of these controls beginning in 1984 and completed in 1990. trade - related operations were gradually liberalised, followed by most financial transactions and, finally, residents were allowed to freely open foreign | there are inefficiencies in the current payment arrangements, in particular β but not only - in the cross - border context, and that some innovations will help address them, if we do not strongly commit to fix the roots of inefficiencies. β’ this leads me to my main argument : we in europe face urgent and strategic choices on payments that will have implications for our financial sovereignty for decades to come. i see it as a β strategic square β, the four parts of the system to be solved for delivering a european strategy : i ) cross border payments shortcomings, ii ) bigtech β s global projects in the financial sector ( including stablecoins ), iii ) the developing european payment initiative and iv ) the potential central bank digital currency ( cbdc ). β’ indeed, the current digitalization triggers at least two important risks. o the risk ( in red ) that bigtechs, leveraging on their global reach, will build private financial 1 / 3 bis central bankers'speeches infrastructures and β monetary β systems, competing with the public monetary sovereignty since they will position themselves as issuers and managers of a universal β currency β. cbdc could then be issued but at the β backend β of this β currency β. o the symmetric risk ( in blue ) that some jurisdictions judge that the only way to respond to the otherwise overwhelming private payments β wave would be to issue and spread on a domestic but also a global basis, β their β cbdcs. this could, if not sufficiently coordinated within the global financial community, set precedents as to the features of the cbdcs and their articulation with the private projects, with no say for other central banks. the way forward for europe ( in green ) could be different and could rather disseminate central bank money in a retail form with the intermediation of the private sector and ensure interoperability between epi and other non - european payment solutions. 2. in this fast - changing environment, public policies should be agile and should help build innovation and growth β’ the success of the payment services directives ( psd1 & 2 ) has illustrated that the european legislation can accompany new trends and trigger innovation. with new settlement assets such as global stablecoins, the adaptation of existing regimes will have to fit into a larger regulatory framework, to be adopted at a global level. β’ central banks need to have an in - depth understanding of innovation and souldn β t be | 0.5 |
louis kasekende : strengthening economic links between china and uganda remarks by dr louis kasekende, deputy governor of the bank of uganda, at the dinner in honour of dr. zhou xiaochuan, governor of people β s bank of china, kampala, 19 may 2014. * * * honourable minister responsible for finance, mrs. maria kiwanuka the governor of the peoples β bank of china the ambassador of the peoples β republic of china to uganda board of directors, bank of uganda permanent secretary / secretary to the treasury permanent secretary, ministry of foreign affairs chairman, uganda bankers association chairman, uganda manufacturers β association the president, uganda chamber of commerce and industry executive director, private sector foundation executive director, uganda investment authority chairperson, association of uganda foreign exchange bureaus chairperson, kampala city traders association ( kacita ) distinguished delegates from the peoples β bank of china management staff of the bank of uganda ladies and gentlemen good evening the purpose of this dinner is to welcome the governor of the peoples β bank of china dr. zhou xiaochuan and his delegation. dr. xiaochuan, it is a great honour to welcome you to uganda, on your first visit ever to this country. it marks the growing importance of china to uganda and our hope is that your visit will cement the relationship between the peoples bank of china and bank of uganda and also boost trade and investment between china and uganda. over the last decade, china has become a very valuable partner for development in uganda, as evidenced by the increasing bilateral trade between the two countries, project aid, and the significant investments by the chinese government in the areas of infrastructure development such as road construction, hospitals, railway, electrical power and communications, and oil. apart from strengthening trade and direct investments between china and uganda, i believe that there is a great deal to learn from china β s achievements, which include steady and robust growth for two decades, often with the highest annual growth rates in the world ; a record in poverty reduction that is unparalleled in human history ; and among the world β s top 2 in economic size, trade, technology, science and other areas of the 21st century. china has been very successful in structural transformation, modernisation and economic growth. let me highlight three major lessons of china β s development which are of relevance to uganda and africa : first, the structural transformation has involved shifting huge numbers of bis central bankers β speeches workers from low productivity agriculture to modern industries, while simultaneously increasing agricultural production | . central to this impressive trend has been high rates of private investment in labour intensive industries. the second lesson is the importance of the demographic transition in driving development. the structural advantage of the demographic dividend has contributed to more than 30 percent of china β s total economic growth. china cut its total fertility rate to slightly under 2 children per woman and, as a result, was able to reduce the age dependency ratio to only 36 per 100 workers. in contrast, uganda has a total fertility rate and age dependency ratio of 6. 1 and 104, respectively, among the highest levels in the world. therefore, a reduction in the fertility rate and the age dependency ratio would contribute to driving structural transformation and economic growth in any developing country. third lesson i would like to draw from china is the maintenance of a competitive real exchange rate that supported export led growth. this is in marked contrast to some economies in the sub saharan africa region where the exchange rates have often been overvalued, thereby reducing incentives in the export sector. an undervalued exchange rate that increases the size of the tradable sector would stimulate economic growth. this morning, the bank of uganda senior management had the opportunity of meeting the governor with his delegation. we shared the economic experiences of the two countries and a number of issues came out, which would be of great interest to the investor and banking community in uganda. i will share with you the following : 1. over the last 10 years, foreign exchange management in china has been transformed extensively leading to lifting restrictions on the use and international settlement of the renminbi and that the currency is now fully convertible ; 2. the peoples β bank of china has a number of swap arrangements with several central banks in advanced, emerging, and developing economies ; 3. china permits direct investment into the chinese bond and securities markets through an agent correspondent bank ; 4. china is open to correspondent relationships with financial institutions ; 5. a number of windows have been developed for medium to long term financing of trade and investments and that the governor will soon be signing a us $ 2 billion joint investment fund with the president of the african development bank. the opportunities for trade and financing are many and the ugandans can position themselves to take advantage of these opportunities. further, the peoples β bank of china and the bank of uganda agreed this morning on staff and information exchanges to pursue issues of common interest in central banking. we look forward to a continued collaboration and dialogue between the peoples β bank of china and the | 1 |
a set of aggregate integrated financial accounts that measures sources and uses of funds for major sectors as well as for the economy as a whole. 10 these accounts allow us to trace the flow of credit from its sources, such as banks or wholesale funding markets, to the household and business sectors that receive it. the federal reserve also now monitors detailed consumer - and business - level data suited for picking up changes in the nature of borrowing and lending, as well as for tracking financial conditions of those most exposed to a cyclical downturn or a reversal of fortunes. for example, during the housing boom, the aggregate data accurately showed the outsized pace of home mortgage borrowing, but it could not reveal the pervasive deterioration in underwriting that implied a substantial increase in the underlying credit risk from that activity. 11 more recently, gains in household net worth have been concentrated among wealthier households, while many households in the middle or lower parts of the distribution have experienced declines in wealth since the crisis. moreover, many homeowners remain β underwater, β with their homes worth less than the principal balances on their mortgages. thus, more detailed information clarifies that many households remain more financially fragile than might be inferred from the aggregate statistics alone. conclusion in closing, let me reiterate that while the effective regulation and supervision of individual financial institutions will always be crucial to ensuring a well - functioning financial system, the federal reserve is moving toward a more systemic approach that also pays close attention to the vulnerabilities of the financial system as a whole. toward that end, we are pursuing an active program of financial monitoring, supported by expanded research and data collection, often undertaken in conjunction with other u. s. financial regulatory agencies. our stepped - up monitoring and analysis is already providing important information for the board and the federal open market committee as well as for the broader regulatory community. we will continue to work toward improving our ability to detect and address vulnerabilities in our financial system. vol. 7 ( december ), pp. 189 β 240 ; and rochelle m. edge and ralf r. meisenzahl ( 2011 ), β the unreliability of credit - to - gdp ratio gaps in real time : implications for countercyclical capital buffers, β international journal of central banking, vol. 7 ( december ), pp. 261 β 98. the flow of funds data are available on the federal reserve board β s website. see matthew j. e | of deleveraging and further asset liquidation. to monitor intermediation by broker - dealers, the federal reserve in 2010 created a quarterly senior credit officer opinion survey on dealer financing terms, which asks dealers about the credit they provide. 6 modeled on the long - established senior loan officer opinion survey on bank lending practices sent to commercial banks, the survey of senior credit officers at dealers tracks conditions in markets such as those for securities financing, prime brokerage, and derivatives trading. 7 the credit officer survey is designed to monitor potential vulnerabilities stemming from the greater use of leverage by investors ( particularly through lending backed by less - liquid collateral ) or increased volumes of maturity transformation. before the financial crisis, we had only very limited information regarding such trends. we have other potential sources of information about shadow banking. the treasury department β s office of financial research and federal reserve staff are collaborating to construct data sets on triparty and bilateral repo transactions, which should facilitate the development of better monitoring metrics for repo activity and improve transparency in these markets. we also talk regularly to market participants about developments, paying particular attention to the creation of new financial vehicles that foster greater maturity transformation outside the regulated sector, provide funding for less - liquid assets, or transform risks from forms that are more easily measured to forms that are more opaque. a fair summary is that, while the shadow banking sector is smaller today than before the crisis and some of its least stable components have either disappeared or been reformed, regulators and the private sector need to address remaining vulnerabilities. for example, although money market funds were strengthened by reforms undertaken by the securities and exchange commission ( sec ) in 2010, the possibility of a run on these funds remains β for instance, if a fund should β break the buck, β or report a net asset value below 99. 5 cents, as the reserve primary fund did in 2008. the risk is increased by the fact that the treasury no longer has the power to guarantee investors'holdings in money funds, an authority that was critical for stopping the 2008 run. in november 2012, the fsoc proposed for public comment some alternative approaches for the reform of money funds. the sec is currently considering these and other possible steps. the senior credit officer opinion survey on dealer financing terms is available on the federal reserve board β s website. the senior loan officer opinion survey on bank lending practices is available on the federal reserve board β s website. bis central bankers β speeches with respect to the triparty | 1 |
amendments to the law on payment services and payment systems have been prepared which are due to be adopted by the end of 2019. 1 commission delegated regulation ( eu ) 2018 / 389 supplementing directive ( eu ) 2015 / 2366 of the european parliament and of the council with regard to regulatory technical standards for strong customer authentication and common and secure open standards of communication 2 directive ( eu ) 2015 / 2366 of the european parliament and of the council on payment services in the internal market 3 regulation ( eu ) 2019 / 518 of the european parliament and of the council of 19 march 2019 amending regulation ( ec ) no 924 / 2009 as regards certain charges on cross - border payments in the union and currency conversion charges 3 / 3 bis central bankers'speeches | , around 1 / 6 of the country β s gdp growth was contributed by this sector, which is largely dominated and represented by the banks. besides being a factor of economic growth, the banking system has played a significant role for attracting foreign direct investments to bulgaria. a total of bgn 76. 6 billion in foreign bis central bankers β speeches direct investments inflow was registered over the period from 1998 to 2011, of which over 1 / 6 ( bgn 11. 9 billion ) were direct investments in the banking sector in particular. not lastly, the banking sector accounts for a large part of the β brightest β share in bulgaria β s economy. the role of banks in bulgaria should not be considered in isolation from the fact that they are among the biggest and most immaculate employers. in 2011 the number of full - time employees in the banking system reached 33 677 at year - end. with the bgn 77. 6 million in tax costs and bgn 722. 8 million in personnel costs paid in 2011 only, for example, the banking sector ranks among the largest taxpayers and contributors to the social security system in bulgaria. please note that these numbers do not even take into account the contribution by the central bank. therefore, all that is good for the banking system and allows it to perform its traditional functions, is also good for the bulgarian economy. our country can ill afford to do without the banks β considerable positive contribution to economic growth β which will be the effect, unfortunately, if the policymakers succumbed to certain populist sentiments that have been promoted recently by some figures who would use every occasion to come onto the media stage. there is no reason for the banks in bulgaria to be additionally burdened by ill - considered administrative regulations and the related costs. quite the contrary, the weight of such additional burden would turn back as a boomerang against the interests of our society and the bulgarian economy in general. the nihilistic attitudes to our own achievements in the past hold back enterprise and the ability to plan for the future. that slows down the economy. simply not knowing one β s own economic history, however, could lead to making decisions with very adverse implications. therefore, the best we could wish ourselves for the future with regard to the sector and the economy as a whole is that in the future the public interference in the banking area in bulgaria continues mainly within the confines of prudential and conservative regulations and supervisory practices. undermining the good name of the sector is a no | 0.5 |
economy is very complicated, and in many cases not fully understood. the famous black box monetary economists talk about. finally, the problem of time inconsistency applies to monetary policy as well. monetary authorities may be tempted to create unexpected inflation to stimulate the economy in the short run. eventually, economic agents will revise their expectations and the result will not be a higher growth rate, but a higher rate of inflation instead. hence, playing the monetary piano is perhaps even more difficult than playing the fiscal violin. fiscal policy co - ordination against this background, let β s turn to discussing economic policy co - ordination in the context of emu, starting with the co - ordination of fiscal policies. as i have already argued, playing the fiscal violin is very difficult. by definition, it is even more difficult to prevent fifteen eu fiscal violinists to play out of tune. do my critical observations rule out any co - ordination, at any time? no, under certain special circumstances, fiscal policy co - ordination can be welfare - improving. this assertion is based on a conventional game - theoretical model : fiscal policy - makers maximise independently of each other - a welfare function in which the spillovers of their actions to other players are neglected. the joint welfare of the economies involved increases if fiscal policies are subsequently co - ordinated and policy makers take into account the consequences of their actions on the other players of the game. however, given the caveats mentioned, we have to conclude that the scope for active fiscal policy - making is limited. only in very specific circumstances, the ecofin council should consider the possibility of fiscal policy co - ordination. for instance, when there is a risk of overheating or a common recession, or when the euro area is faced with a persistent balance - of - payments deficit. the basis for the co - ordination of fiscal policies is the multilateral surveillance procedure provided for in article 103 of the ec treaty. in my view, it is possible to elaborate the so - called broad guidelines of the economic policies of the member states, which the ecofin council adopts in conformity with article 103, and include fiscal policy co - ordination. so far, these broad guidelines have been very broad indeed. in the future, they should address individual countries more specifically. when a member state does not comply with the broad guidelines, specific policy recommendations can, and should, be given to the member state concerned. when appropriate, these recommendations should be published. the multilateral surveillance | of things since i thought the world was flat. one is that the objectives of monetary policy should be modest. fine - tuning economic growth has always been a too ambitious goal in a world with long and variable lags in monetary transmission. a clear focus on low and stable inflation can safeguard central banks against the temptation of activism. given current uncertainties, monetary authorities must be particularly cautious in interpreting the output gap. they have to remain firm in reaction to actual inflation and other relatively reliable indicators of inflation risks, such as excessive wage growth. as a side remark, i add that, in theory, capital account liberalisation and trade openness warrant a sharper focus of monetary policy on price stability rather than output stabilisation. 7 international capital mobility, as well as broader access to financial markets, creates new opportunities for households to smooth consumption over the years. free international trade allows for specialisation in domestic production. as a result, it might be possible to disentangle consumption and production to a higher extent than in the past. in other words, households can cushion changes in production without intervention by the central bank. i would like to conclude with a warning. a focus on price stability is more complicated than it sounds. low and stable consumer price inflation is no reason for complacency. in spite of consumer price stability, asset price inflation may signal underlying imbalances, such as an overoptimistic risk assessment by financial market participants that keeps long - term interest rates at unwarranted low levels. monetary policymakers must be forward - looking, and assess possible divergences between real and nominal factors in the area of monetary aggregates, credit and asset markets. how this should be done in practice is a difficult question that deserves further elaboration. i won β t answer it now. time is running out. sometimes it is better to stop before one has finished. athanasios orphanides ( 2003 ) the quest for prosperity without inflation, journal of monetary economics, vol. 50, nr. 3. assaf razin and prakash loungani ( 2006 ) globalization and equilibrium inflation - output tradeoffs, nber working paper nr. 11641. | 0.5 |
studies, volume 35 ( 11 ), pp. 4859 β 4901, 2022. see p. angelini, β portfolio decarbonisation strategies : questions and suggestions β, banca d β italia, questioni di economia e finanza ( occasional papers ) 840, 2024 ; and f. ferriani, a. gazzani and f. natoli, β flight to climatic safety : local natural disasters and global portfolio flows β, banca d β italia, temi di discussione ( working papers ) 1420, 2024. see c. brunetti, b. dennis, g. kotta, c. norris, c. shin and i. zer, β climate risk networks and banks β exposures β, mimeo, 2024 ; and m. a. aiello, β climate supervisory shocks and bank lending : empirical evidence from microdata β, banca d β italia, temi di discussione ( working papers ) 1465, 2024. the markets in crypto - assets regulation ( micar ) introduced a harmonized framework across the european union for the issuance and offering to the public of crypto - assets and the provision of services involving crypto - assets. it aims to reduce regulatory uncertainty in digital assets markets and foster sustainable innovation in the financial sector by establishing a uniform regulatory environment for the following types of crypto - assets : i ) electronic money tokens ( e - money tokens - emts ), which purport to maintain a stable value by referencing the value of one official currency ; ii ) asset - referenced tokens ( arts ), which purport to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies ; iii ) crypto - assets other than emts and arts. the rules on the issuance, public offering, and admission to trading of arts and emts have been in force since 30 june, while the remaining provisions will be fully applicable by the end of this year. operational resilience act ( dora ) 8 and the review of the alternative investment fund directive ( aifmd2 ). 9 much work remains to be done on climate risk, and more generally on esg issues, including on new forward - looking analytical tools and methodologies for designing sound climate β related stress testing models aimed at assessing the resilience of the financial system over short and very long horizons. 10 | ; after the outbreak of the war it was even higher, with a peak of 20 times the level of january 2020, before returning somewhat closer to the previous average in the last few days. this is particularly worrying due to the special role of gas in determining retail prices not only for heating and industrial uses, but also for electricity at large. it is consequently important to assess the effects of europe β s energy crisis on consumer prices, also beyond their direct effects on headline inflation. a significant share of the rise in core and food inflation, in fact, is due to higher energy prices ; in particular, we may estimate that, absent the energy shock, headline inflation in february this year would have been 3. 5 percentage points lower, at a level, therefore, only slightly above the ecb β s 2 per cent target. the failure of inflation forecasts in 2021 has been repeatedly highlighted : however, indirect effects stemming from the increase in the costs of production β mostly due to unpredictable geopolitical factors that are outside the realm of economics β explain almost entirely the upward surprises recorded on core inflation in the euro area in the second half of the year. the energy shock has also relevant consequences for aggregate demand in energy importing economies, where it translates into a drag on domestic resources. in the euro area, the deterioration of the terms of trade, mostly due to the rise of energy prices, has reduced the purchasing power of domestic incomes ( which includes all sectors of the economy ) by about 1 percentage point in 2021, and is expected to have an even larger impact in 2022. the repercussions of the energy shock are likely to be especially severe for households. in the euro area, should gas and oil prices remain at the exceptionally high levels currently implied by future contracts, the increase in consumer prices would cumulatively curtail their disposable income by around 4 percentage points in 2021 and 2022. these losses are asymmetrically distributed across families, hitting more heavily the less well - off who typically devote a larger portion of their incomes to energy purchases. the second key factor is related to the labour market. in the us the growth of nominal wages ( measured as average hourly earnings ) amounted to more than 4 per cent last summer, nearing 6 per cent in january 2022 ( figure 5 ). in the euro area, instead, the increase in wages ( as measured by negotiated wages, which tend to grow broadly in line with actual earnings, but are much less volatile ) still | 0.5 |
, and is now a national strategic priority. women's micro bank's services successfully address several financial inclusion objectives : 1 / 3 bis - central bankers'speeches providing deposit - taking and lending opportunities to people who would otherwise be unbanked promoting financial literacy and business development skills by supporting training encouraging people in the informal sector, such as market vendors, to graduate into the formal economy, through access to banking services, financial assistance and capacity building supporting the msme and sme sectors helping grow the agriculture sector value chain, particularly for coffee, vanilla, cocoa and copra businesses. from bpng's point of view, each of these activities makes a significant contribution to achieving the broader objective of building sustainable economic growth. i also acknowledge women's micro bank's willingness to collaborate with other organisations, including government agencies, and national and international development partners, to achieve meaningful and valuable results. these practices reflect a clear recognition by the leadership of mama bank that operating a successful enterprise in our modern world requires partnering, cooperation and effective communication. as the regulator of the png financial system, the bank of papua new guinea welcomes this attitude in participants in the financial services sector. i mentioned mama bank's reputation as an innovator. this is of particular interest to me. as some of you may know, in my previous role as assistant governor, one of my key responsibilities was to create a favourable environment in which financial technology, fintech, could be developed to help bring basic financial services to all png citizens. one of the successful initiatives bpng has implemented is the regulatory sandbox. this is a system where products are put through rigorous testing to make sure they will work in the real world and will comply with the applicable rules and regulations, without the cost and risks associated with launching a new product to the marketplace. the sandbox's first graduate, a digital id product that provides certainty of identification without the need for mains power or internet access, has now been adopted by mama bank and implemented as an id card, in partnership with the fintech developer digizen. the digital id innovation is not the first time mama bank has led the way with fintech to reach customers. i note that women's micro bank introduced biometrics back in 2018 to enable its customer enrolment process, the first of its kind in png. with this strong tradition of bringing simple and effective financial services to the unbanked, it is obvious that women's | tobin said that we know little about predicting inflation. that remains true today. in a world prone to supply disruptions and susceptible to political uncertainties, monetary policy can only try to buffer the effects of external shocks on the real economy and on inflation. the past two years have seen an escalation of violence, with russia's unjustified war against ukraine and the unfolding of the middle east crisis last autumn. 2024 is a year of increased electoral activity. there are five months to go to us elections, the outcome of which could alter the course of the global economy. nationalist parties made major gains across the euro area in the european parliament elections, challenging leaders in germany but also france, where snap elections have been called. monetary policy has navigated in the turbulent waters of heightened uncertainty in the past several years. it will continue to navigate in those turbulent waters in the period ahead. 4. climate change challenges at the ecb we have a very clear mandate, which is enshrined in the treaty and has a focus on price stability. we also have an important role to play in addressing the challenge of climate change, always within the limits of our mandate. physical and transition risks can threaten price stability, but also become a source of instability and vulnerability for the financial system, thereby also affecting the transmission of monetary policy. at the same time, in addition to the risks created by climate change, adapting to climate change can bring opportunities, as required investment will bring new, 4 / 7 bis - central bankers'speeches more efficient and more sustainable forms of development, towards a more resilient and green economy. the financing of these investments is also an opportunity for the financial system and the more efficient use of the savings of european citizens. at the ecb we have different sets of actions, from risk management to better macroeconomic modelling and to including climate change risks and mitigation measures in many aspects of our work. 5. policy challenges related to recent political developments monetary policy has a single anchor in price stability, and that anchor is immune to political influence. as an independent institution, the ecb will continue to conduct its monetary policy to attain its price stability objective. the ecb has earned its credibility by focusing on this objective, and not being diverted by political pressures. it will continue to be led by its mandate in the future. the economic agenda of some of political parties is disconcerting, because it includes such policies as increased protectionism and highly expansionary fiscal | 0 |
households. the purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. this allows us to effectively stave off risks to the smooth transmission of monetary policy. second, we decided to extend the horizon for net purchases under the pepp to at least the end of june 2021. in any case, we will conduct net asset purchases under the pepp until the governing council judges that the coronavirus crisis phase is over. third, the governing council decided to reinvest the maturing principal payments from securities purchased under the pepp until at least the end of 2022. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. fourth, net purchases under our asset purchase programme ( app ) will continue at a monthly pace of β¬20 billion, together with the purchases under the additional β¬120 billion temporary envelope until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. 1 / 3 bis central bankers'speeches fifth, we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. sixth, we decided to keep the key ecb interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 % within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics. together with the substantial monetary policy stimulus already in place, today β s decisions will support liquidity and funding conditions in the economy, help to sustain the flow of credit to households and firms, and contribute to maintaining favourable financing conditions for all sectors and jurisdictions, in order to underpin the recovery of the economy from the coronavirus fallout. at the same time, in the current rapidly evolving economic environment, the governing council remains fully committed to doing everything necessary within its mandate to support all citizens of the euro area through this extremely challenging time. this applies first and foremost to our role in ensuring that our monetary policy | to eurostat β s flash estimate, euro area annual hicp inflation decreased to 0. 1 % in may, down from 0. 3 % in april, mainly on account of lower energy price inflation. on the basis of current and futures prices for oil, headline inflation is likely to decline somewhat further over the 2 / 3 bis central bankers'speeches coming months and to remain subdued until the end of the year. over the medium term, weaker demand will put downward pressure on inflation, which will be only partially offset by upward pressures related to supply constraints. market - based indicators of longer - term inflation expectations have remained at depressed levels. while survey - based indicators of inflation expectations have declined over the short and medium term, longer - term expectations have been less affected. this assessment is also reflected in the june 2020 eurosystem staff macroeconomic projections for the euro area, which foresee annual hicp inflation in the baseline scenario at 0. 3 % in 2020, 0. 8 % in 2021 and 1. 3 % in 2022. compared with the march 2020 ecb staff macroeconomic projections, the outlook for hicp inflation has been revised downwards by 0. 8 percentage points in 2020, 0. 6 percentage points in 2021 and 0. 3 percentage points in 2022. turning to the monetary analysis, broad money ( m3 ) growth increased to 8. 3 % in april 2020, from 7. 5 % in march. strong money growth reflects bank credit creation, which is driven to a large extent by the acute liquidity needs in the economy. moreover, high economic uncertainty is triggering a shift towards money holdings for precautionary reasons. in this environment, the narrow monetary aggregate m1, encompassing the most liquid forms of money, continues to be the main contributor to broad money growth. developments in loans to the private sector continued to be shaped by the impact of the coronavirus on economic activity. the annual growth rate of loans to non - financial corporations rose further to 6. 6 % in april 2020, up from 5. 5 % in march, reflecting firms β need to finance their ongoing expenditures and working capital in the context of rapidly declining revenues. at the same time, the annual growth rate of loans to households decreased to 3. 0 % in april, from 3. 4 % in march, amid consumption constraints due to the containment measures, declining confidence and a deteriorating labour market. our policy measures, in particular the very favourable terms for our targeted longer - term refinancing operations | 1 |
growth drivers are gaining momentum. this gives us confidence to say that the indian growth story remains intact. private consumption, which is the mainstay of aggregate demand with a share of around 56 per cent in gdp, has rebounded to 7. 4 per cent growth from a feeble 4 per cent growth in the second half of the previous year. this reconfirms the revival of rural demand. the other important driver of growth, i. e., investment, which accounts for around 35 per cent of gdp, grew at 7. 5 per cent, keeping up with its recent momentum. thus, more than 90 per cent of gdp expanded at a robust pace and materially above 7 1 / 6 bis - central bankers'speeches per cent. the headline number, however, came lower against the backdrop of muted government expenditure of both the centre and the states, perhaps due to the lok sabha elections. excluding government consumption expenditure, gdp growth works out to 7. 4 per cent. on the supply side, while agriculture grew modestly at 2 per cent in q1, it is likely to perform better, going forward, on the back of good progress of monsoon, improved kharif sowing, and good moisture conditions for rabi crops. industry and services recorded a growth of 7. 4 per cent and 7. 7 per cent respectively in q1, underscoring continued strength in economic activity. construction activity remained robust growing at 10. 5 per cent. 1 according to the rbi's latest data2, bank credit to agriculture and allied activities remained robust and increased by 18. 1 per cent ( y - o - y ). credit to industry surged by 10. 2 per cent ( y - o - y ) in july 2024 as compared to 4. 6 per cent in july 2023. within industry, credit to msmes also grew at 14. 4 per cent ( y - o - y ). bank credit to industries such as chemicals and chemical products ; food processing ; petroleum, coal products and nuclear fuels ; and infrastructure has been quite strong in july 2024. the enhanced credit flow to industry along with an all - time high - capacity utilisation points to an upturn in the investment cycle, as reflected in the nso data. it is evident that india is on a sustained growth path. consumption and investment demand, the two main drivers of growth, are growing in tandem. government expenditure of the centre and the states is likely to pick up pace | shaktikanta das : india at an inflection point - some thoughts inaugural address by mr shaktikanta das, governor of the reserve bank of india, at the annual financial institution benchmarking and calibration ( fibac ) 2024 conference, organised jointly by the federation of indian chambers of commerce and industry ( ficci ) and the indian banks'association ( iba ), mumbai, 5 september 2024. * * * i am happy to be back at the fibac annual conference. this conference is special as it brings together industry leaders, financial sector players and regulators on a single platform to discuss vital issues of contemporary relevance. i would like to congratulate the ficci and the iba for organising this annual conference. the indian economy is now at a critical juncture. massive changes are taking shape in various economic sectors and markets ; and the country is geared for orbital shifts. our nation's journey towards becoming an advanced economy is drawing strength from a unique blend of factors : a young and dynamic population, a resilient and diverse economy, a robust democracy, and a rich tradition of entrepreneurship and innovation. in this background, i have chosen to speak on the topic " india at an inflection point : some thoughts ". i have structured my talk under four major themes. first, i would speak on india's growth prospects and the approach that we need to follow going forward. second, i would dwell upon recent developments in inflation and monetary policy. third, i propose to highlight certain issues relating to strengthening our financial sector. finally, i would spell out certain expectations from the financial sector. i. growth prospects the indian economy rebounded strongly from the covid - 19 induced contraction, growing at an impressive annual average rate of 8. 3 per cent during the last three years. for the current financial year, the reserve bank has projected a growth rate of 7. 2 per cent. the imf has also revised india's gdp growth upwards to 7. 0 per cent, citing improved prospects for private consumption, particularly in rural areas. two days ago, the world bank has also upgraded india's growth forecast to 7. 0 per cent for 202425. the national statistical office ( nso ) has placed india's gdp growth at 6. 7 per cent in q1 of 2024 - 25. notwithstanding the moderation in growth from the previous quarter and below our projection for q1, the data shows that the fundamental | 1 |
between nafta's 46 percent and the eu's 62 percent. asia's export - led growth has increased its absorption, thereby stimulating its imports from abroad. this is particularly true of china where huge domestic demand has yet to be saturated. because of its large population, china presents itself as both an international production hub and a big consumer market. for instance, china accounted for 7 percent of global trade in 2004. combined with hong kong and taiwan, it captures 11 percent, only slightly below the us. against this background, china is exerting a strong influence on the global economy. also note india, which is becoming the major off - shoring destination for foreign multinationals, particularly in the service sector. this strong performance of asian economies might possibly be affected by the recent spike in oil prices. in fact, some asian currencies, like the indonesian rupiah, came under pressure when oil prices reached a record high this august. however, the economic fundamentals of most asian countries are much stronger than in the 1970s when they were hit by the worst oil market turmoil ever. in addition, asian countries responded swiftly this time by raising interest rates or slashing public fuel subsidies. these prompt actions have helped them minimize potential disruptions to their economies. furthermore, asian countries have large volumes of foreign reserves and only a small amount of external debt in comparison to both their own past and developing countries in other parts of the globe. for mutual liquidity assistance in times of external stress, countries in this region are working toward an expanded network of bilateral swap arrangements, to which i will come back in a few minutes. in short, asian economies are better equipped with both the will and capability to fend off sources of disturbance to their sound economic growth. 1 / 4 iii. rising regional cooperation under these circumstances, we have seen increasing drive for regional cooperation in asia, especially among the " asean + 3 nations " consisting of the ten asean countries plus japan, china, and korea. as i said earlier, these countries are strengthening their trade links. but similar attempts are being made in other fields as well where progress has been less impressive, such as finance, environment, energy, and scientific technology. collaboration in these areas is proceeding in a functional and pragmatic manner. closer trade links in asia, as symbolized by the web of free trade agreements ( fta ), are likely to promote trade liberalization and catalyze fdi flows in and out of the region | issue debt to finance a loan or an asset purchase, there is an immediate impact on government debt in the official statistics. but no impact on the deficit will be recorded unless or until there is clear evidence that the interest on the loan or the price paid for the asset does not reflect market conditions. in cases where a privately owned special entity is established to provide loans or purchase assets, there may be no immediate impact on the government accounts, even if the debt issued by this entity is backed by a government guarantee. only if and when this guarantee is called will the corresponding amount be recorded as government spending. at the current juncture, it is impossible to assess the amount of the guarantees that will be called or what the final scale of the losses will be. as eurostat put it, the cost of the public support to banks is a large cloud on the horizon, but at the moment we do not know how much it is going to rain! the fiscal exit strategy faced with the prospect of large deficits in the coming years and uncertainty regarding the final costs of bank rescue packages, the priority for fiscal policy must be to set out a clear and credible plan for restoring order to the public finances over the medium term. just as central banks are mulling their exit strategy from non - standard monetary policy measures, governments need to develop their exit strategy too. * * * in this respect, the first hurdle to overcome is to be honest and transparent about the scale of the problem. as i already mentioned, much of the support given by governments to the banking sector will not be reflected, for the time being, in the government accounts. but this does not mean it can be overlooked. eurostat has announced that it intends to establish a supplementary reporting table to collect data on guarantees, liquidity support measures, and the operations of special purpose entities relating to the financial crisis. this reporting must be taken seriously. public authorities cannot call on banks to be more transparent about the scale of their liabilities, if they exploit statistical conventions themselves to keep debt off of their balance sheets. beyond this, there is a risk that the increase in government borrowing during the crisis is viewed as being purely the consequence of the operation of the automatic stabilisers and fiscal stimulus packages. cyclical effects should cancel out over time. stimulus measures are supposed to be largely temporary. so once the crisis is over and the stimulus measures unwind, we should be more or less back where we started. this is wishful thinking. the sharp | 0 |
functions, as well as adequate resources. on governance we must also take into account what is called β political economics β. the most efficient theoretical solution may not be achieved if it contradicts interests of power and influence. how should we structure the decision - making process in order to take account of the nexus between monetary policy and financial stability? central banks have adopted different approaches : some have a separate board for monetary policy, others also have a separate board for financial stability. most central banks have the same board for both, but may have separate deputy governors responsible for each of the two strands. what matters, as i see it, is that β the buck stops somewhere β. there must be a decision at some high managerial level which balances the interests of monetary policy and financial stability as well as other central bank responsibilities. the organisation and processes of the central bank must also be structured so that they facilitate the analysis preceding the decision leading to a balanced view, based on both monetary and financial stability considerations. for instance, there should be inter - departmental working groups. financial stability lies within the riksbank β s mandate the importance of having a well - structured framework for monitoring overarching financial system stability and identifying potential weaknesses is relatively new compared to the structures for conducting monetary policy. in sweden ( probably also in norway ), it started as a result of the banking crisis in the early 1990s. the riksbank sees system stability as being in our remit. the riksbank act states that we shall β promote a safe and efficient payment system β and we interpret β payment system β in a broad sense including not only the narrow payment infrastructure but also major banks and other institutions and markets that are necessary for the intermediation of payments. bis central bankers β speeches should the responsibility for financial stability rest with the central bank? yes, i think so. the supervisory agencies are structured to focus on the microprudential aspects, but the central banks are organised and staffed for macroprudential analysis, which is also needed for the conduct of monetary policy. the supervisory work needs to take the overall systemic situation into account but the macro analysis they need could well be performed elsewhere and shared with the supervisors. the next question is what kind of mandate the central bank needs for its financial stability work. this is a tricky issue. an inflation - targeted monetary policy is relatively straight - forward, but how to define β financial stability β? a seemingly precise definition, without matching tools, could lead to failures | the group has subsidiaries or branches. for sweden, this situation is accentuated since our banking system is four times larger than our gdp, and since our major banking groups depend on bis central bankers β speeches funding in international markets to a high degree. the financial stability analysis will have to expand to identify threats early on and to deal with them. we must be alert to potential contagion between unsustainable monetary and fiscal policies in other countries and their potential repercussions on the stability of our own country β s financial groups. β the crisis showed the need for clear roles and mandates for the authorities involved in crisis management, in particular for resolving problem banks. the riksbank, the financial supervisory authority, the national debt office and the ministry of finance had frequent contacts throughout the crisis and coordinated their actions. that said, the division of responsibilities is not clear in all situations and the riksbank has asked parliament to clarify the legislation on this and a number of other crisisrelated issues. matching goals with tools the riksbank has a fairly well - developed structure for macro - prudential analysis. but if we do identify deficiencies, how can we implement the necessary changes? winston churchill once pleaded, in a famous world war ii speech, to president roosevelt : " give us the tools, and we will finish the job! " so far, the riksbank has lacked specific β hard β tools for financial stability. we have relied on communication and moral suasion, hoping that our arguments will convince financial system actors to change their behaviour. our experience is mixed. before the crisis, our banks reduced their credit expansion to the baltic countries, warned by us, but they did too little and too late. one conclusion is that we must be even clearer and more forceful in our communications. the riksbank is presently analysing its tool kit with the aim of arriving at a proposal in the near future. i do not think it is necessary that the tools should be vested with the central bank. for instance, there could be a rule implying that if the central bank sends a recommendation to the supervisory authority, they must β act or explain β. the supervisors could then use microprudential tools such as increasing bank capital requirements for certain activities or jurisdictions or reducing the maximum level of loan - to - value ratios. as in my previous discussion on monetary policy versus regulation, i believe that monetary policy and promoting financial stability are mutually interdependent. during the recent | 1 |
rapidly, with most business borrowers still connecting with savers over the balance sheets of financial institutions. some of these commentators have also lamented the fact that superannuation funds β who they see as a natural buyer of corporate bonds β seem to have had only a limited appetite for these bonds. see financial system inquiry ( 1997 ), financial system inquiry final report ( s wallis, chairperson ), australian government publishing service, canberra, p 159. bis central bankers β speeches given this background, i thought it would be useful to briefly discuss recent developments in the australian non - financial corporate bond market as well as the role that superannuation funds have come to play in intermediating between borrowers and savers. i would then like to discuss the role that market - based corporate financing can play in providing a form of insurance against stresses in the banking system and the possibility of a lack of competition in the banking system. the australian corporate bond market by international standards, the australian corporate sector makes relatively little use of the bond market, especially the domestic bond market. since the mid 2000s, the available internationally comparable data suggest that average annual bond issuance by australian corporations has been the equivalent of just under 1 per cent of gdp, with around two - thirds of total issuance taking place offshore, rather than in the domestic market ( graph 1 ). in most other countries with which we normally like to compare our financial markets, the corporate sector makes greater use of bond funding. graph 1 the relatively high reliance of australian issuers on the offshore market is evident in the data on the composition of corporate bonds outstanding ( graph 2 ). currently, bonds that were issued offshore account for around 80 per cent of the outstanding value of bonds issued by australian - based corporations. a decade ago, this figure was considerably lower at around 50 per cent. the offshore market is favoured by companies that want to raise foreign currency funding as a natural hedge against their foreign currency revenue. it has also proven easier to issue large amounts and at longer tenors in the offshore market than it has in the domestic market. bis central bankers β speeches graph 2 another perspective on recent trends can be gained from looking at the data on the number and credit ratings of the individual bonds that have been issued domestically and offshore ( graph 3 ). graph 3 bis central bankers β speeches a number of observations stand out : 1. the number of australian companies issuing bonds is quite small. on average, over recent times, only around 30 bonds have been issued in | the more nebulous concept of β confidence β, at times, dominates the fundamentals. β in a matter of just a few months, the asian economies went from being the darlings of the investment community to being virtual pariahs. there was a touch of the absurd in the unfolding drama, as international money managers harshly castigated the very same asian governments they were praising just months before. β¦ but, as often happens in financial markets, euphoria turned to panic without missing a beat. suddenly, asia β s leaders could do no right. the money fled. β 12 this is not, of course, the first time this has happened. alan greenspan, describing this reaction in capital flows as β a visceral, engulfing, fear β, went on to say β the exchange rate changes appear the consequences, not of the accumulation of new knowledge of a deterioration in fundamentals, but of its opposite : the onset of uncertainties that destroy previous understandings of the way the world works. that has induced massive disengagements of investors and declines in asian currencies that have no tie to reality. in all aspects of life, when confronted with uncertainty, people tend to withdraw. β¦ at one point the economic system appears stable, the next it behaves as though a dam has reached a breaking point, and water ( read, confidence ) evacuates its reservoir. the united states experienced such a sudden change with the decline in stock prices of more than 20 per cent on october 19, 1987. there is no credible scenario that can readily explain so abrupt a change in the fundamentals of long - term valuation on that one day. such market panic does not appear to reflect a simple continuum from the immediately previous period. β krugman ( 1998a ) has suggested a possible reason for this big shift in confidence. foreign investors thought they were working in a riskless world, and made their investment decisions accordingly. then, quite suddenly, they realised the risk, and underwent a fundamental adjustment in expectations. this explanation has some attractions but does not seem to fit the overall reality closely. there were not too many explicit guarantees around, leaving aside bank sachs ( 1997 ). and sovereign debt ( which remained guaranteed ), so there was not a rational reason for re - evaluation. the more intuitively appealing explanation ( at least to me ) is that investors simply changed their minds. they had not known much about the countries ( or projects ) they invested | 0.5 |
, as of β all times β β. 1 indeed, turner β s legacy endures today through his influence on art for over two centuries, to the prize that bears his name to celebrate british contemporary art, to this magnificent gallery, the turner contemporary. soon turner β s work will feature on another 2 billion works of art β the new Β£20 notes from the bank of england. the champion, newspaper article, published 7 may 1815. all speeches are available online at www. bankofengland. co. uk / news / speeches banknote design the new Β£20 note celebrates turner, his art and his legacy in all their radiant, colourful glory. the design features turner β s self - portrait, from 1799, alongside one of his most eminent paintings, the fighting temeraire. 2 this painting is a tribute to the hms temeraire β which battled with distinction during nelson β s victory at trafalgar in 1805 β and an elegy to the decline of sail, showing the great warship being pulled by a steam tug to her last berth to be broken up for scrap. the novelist william makepeace thackeray called it β as grand a painting as ever figured on the walls of any academy, or came from the easel of any painter β. 3 the public clearly agrees, voting it britain β s greatest painting in a bbc poll in 2005. 4 the fighting temeraire exemplifies turner β s innovative use of light, shade, colour and tone. these contributions to the visual arts are captured in the quote β β light is therefore colour β β which is from an 1818 lecture by turner. turner rarely signed his paintings, so the signature on the banknote was taken from his will. that is fitting because, in a codicil to that testament, he bequeathed his paintings to the nation, and in doing so made a significant contribution to british society. few turners are locked away in private collections or spread to the four winds. the vast majority are free for the british public to see across some of our greatest galleries. the note references several of these galleries. a small purple foil on the reverse side of the note echoes the spiral staircase at tate britain, which holds most of the turner bequest in the clore gallery. the main foil of the note contains an image of turner contemporary in blue. and the shape of the window around the foil is based on the trafalgar fountains, which are an iconic feature in the square outside the national gallery where the | tradition continues with the new Β£20. jmw turner will circulate alongside winston churchill on the Β£5, and jane austen on the Β£10. in 2021, alan turing will soon replace boulton and watt on the Β£50. these individuals have advanced british thought, demonstrated exceptional leadership, and more generally helped to shape this diverse society and forge our common values. i β m delighted to be joined today to celebrate turner β s continuing influence by one of our most eminent artists, someone whom turner has influenced and one of margate β s own. as precocious and prolific as turner, a fellow royal academician, the master of confessional art and fittingly, past winner of the turner prize, please welcome tracey emin. book i, chapter 4 β on the origin and use of money β of smith, a ( 1776 ), an inquiry into the nature and causes of the wealth of nations. a moniker used by kocherlakota. see kocherlakota, n ( 1998 ), β money is memory β, journal of economic theory, 81 ( 2 ). all speeches are available online at www. bankofengland. co. uk / news / speeches | 1 |
of the ongoing financial crises in the united states and europe on overseas economies and on japanese financial conditions. ii. the financial crises in the united states and europe and their impact as you all know, the current financial crises stemmed from the emergence of the u. s. subprime mortgage problem. since then, the severity of the situation has intensified with pessimisms rising and falling in a repetitive pattern. in particular, the situation changed drastically just after the bankruptcy filing of lehman brothers, which led to a continuation of the intensified strains in global financial markets. looking back, the problem surfaced as " liquidity constraints " when conduits and aggregators of securitized products and financial institutions faced difficulties in raising funds, which were triggered by declines in prices of securitized products backed by subprime mortgages. the next stage was a development of the " credit crunch " ; losses incurred by financial institutions that possessed a large amount of securitized products expanded, and their capital bases were impaired. as a result, financial institutions tightened their credit standards and their lending attitudes, and this started to exert strong downward pressure on the economy. and now we face the current situation, where the negative feedback loop operating between financial and economic activities has intensified. delinquency rates of not only mortgage loans but commercial real estate loan and consumer loans have risen reflecting the weaker u. s. economy. consequently, capital bases of financial institutions have been further impaired, and their lending attitudes have become even tighter. in addition, firms'fund - raising conditions in the markets have deteriorated, as seen in the difficulty faced by firms in issuing cp and corporate bonds and the extreme rise in issuance rates. they have ultimately had an adverse impact on economic activity β the emergence of a negative feedback loop operating between financial and economic activities. meanwhile, the federal reserve has lowered its target for the federal funds rate from 5. 25 percent to 1. 0 percent since last september. in spite of this monetary easing, the issuance rates of corporate bonds have risen compared with the level observed in the summer of 2007. in addition, we can point out the worldwide propagation as one of the features of the current financial crises. there were some failures of major financial institutions in the united states following the bankruptcy filing of lehman brothers, and failures started to be seen also in europe. furthermore, the financial crises in the united states and europe are starting to affect emerging economies, and the inflow of funds to these economies has decreased | world output is projected to fall substantially to 2. 2 percent. this is significantly lower than the world growth of around 5 percent registered for four years in the mid - 2000s. the timing of the recovery in overseas economies depends on several prerequisites for recovery, and with regard to the u. s. economy the key questions are how adjustments in the housing market will progress and when the financial system will regain stability. i must admit that the timing of the recovery in the growth rate of overseas economies as a whole is highly uncertain, but given the current severe situation it seems appropriate to assume that the growth rate of overseas economies taken as a whole is likely to show a clear recovery only after the middle of 2009. as overseas economies are expected to continue to face a difficult situation, japan's economy, which recorded negative growth in the second and the third quarter of this year, is likely to continue to show increased sluggishness over the next several quarters. the primary reason why the bank takes this view is that the effects of developments in overseas economies and of the turmoil in global financial markets, which i mentioned earlier, have been steadily spreading to japan's economy. i will elaborate on this later. the price situation has also changed significantly. looking back to about a year ago, the year - on - year rate of change in the consumer price index ( cpi ) for all items excluding fresh food was around 0 percent, but then rose at a rapid pace, especially in petroleum products and food, due to the pass - through of higher commodity prices, and reached 2. 4 percent this summer. however, most recently it began to decline due to the drop in commodity prices. given recent developments in commodity prices, it is projected to fall at a rapid pace going forward. the major factor behind the drastic change in the trend of the cpi is changes in import costs. in addition, changes in aggregate supply and demand conditions and in the expected inflation rate also affect prices. aggregate supply and demand conditions will likely ease, as growth in real gdp is expected to continue to fall short of the potential growth rate for the next several quarters. although it depends on developments in prices of petroleum products and materials, the rate of change in the cpi may, for a brief period, turn negative in fiscal 2009. bearing in mind these developments in japan's economy, i will now move on to the factor that i regard as most important when discussing future developments in japan's economy and overseas economies β the impact | 1 |
growth achieved so far and the one projected ahead has many facilitators, but implementation and leveraging of technology is, by far, amongst the biggest enablers in the context. i have divided my talk today into three parts. in the first part we would look at core banking, the journey so far and the need to look β beyond core banking β. in the second part i would be touching upon the initiatives taken by idrbt and the areas and technologies that the banks should set their focus on. in the concluding part i would be speaking on the initiatives taken by the reserve bank of india in the area of information technology. part i core banking solution β an assessment core banking systems ( cbs ) have facilitated building up customer - centric, service oriented architecture of banking services at front end and also created the capacity to efficiently handle large volumes of transactions, data and book - keeping requirements. cbs is positioned as an integrated solution to the basic banking operations pertaining to deposits, withdrawals, credit delivery, and attendant backend jobs, mainly in the retail and small business segments. it has enabled the introduction of efficient and convenient delivery channels like atms, net banking, tele banking etc. so, when the banking industry has reached, so to say, a critical mass as far as using cbs is concerned, what β s next? do we bis central bankers β speeches need to go β beyond core banking β and if so, what should be the areas and technologies that the banks need to focus on? let us now look at the banking services in india from a different perspective. it is said that india lives in its villages. then, isn β t it strange that only 5 % of them have proper banking services and that there β s only 1 branch per 15, 000 persons. it is also a fact that although banking in india is fairly well developed in certain areas, it is fairly under - penetrated and grossly under - served in other areas. if one views the areas which have not been served, it may be said that that until now, banks have not seen banking in rural areas as an attractive business, although, in the recent past, the opportunity and growth in rural markets is equalising with urban markets. the fact that there is tremendous potential for inclusive banking is, now, making banks recognise rural banking as economically - viable, at least to a certain extent. to make this become attractive, technology provides solutions. banks need to utilise technology to harness this potential by | change management strategy and decisions. emerging trends the big bang β mobile banking revolution when it comes to revolution in mobile technology, i think of two types of revolutions. one is the mobile revolution as such and the other is mobile banking revolution. mobile revolution refers to rapid innovations in mobile devices with customers being overwhelmed with a slew of new handheld devices right from google β s android operating system, research in motion β s blackberry os and apple β s latest ios iphone platform, tablet computer etc. mobile banking revolution refers to a buffet of potential services that a banker can provide leveraging on mobile technology. in the usa for example, the value provided by banks with mobiles is the remote deposit capture i. e. where the customers increasingly use online mobile services to deposit paper checks. although it is a driver for mobile banking adoption, increasing efficiency in usage of checks is an important value addition particularly to be noted from the indian perspective. bis central bankers β speeches cloud computing β β pay only for what you use β it is becoming evident that cloud computing is getting cost effective in setting up it infrastructure. the big and medium enterprises are now migrating to hybrid cloud models. while non - financial industry has taken huge strides in this arena, the banking sector, at least in india, also seems to be moving in this direction. security is often quoted as a concern for the banks adopting cloud computing, but with robust and modern security devices and software available, the bankers β security concerns regarding protection of data can be addressed. the cloud concept is here to stay and therefore, the focus should be rather on how to use the technology in a secure manner. virtually automate branch? although the trend towards online banking through internet or mobiles is evident, in a country like india the core of the banking habit is personal banking, meaning visit to the bank branch. hence a parallel shift towards smarter, more efficient, friendlier and more automated brick and mortar experience is the need of the hour. integrating self service capabilities into bank branches would be a smart way. why not make the customers walk virtually into their β home branch β? why not think of using collaboration technology to have video chats with the valued customers? this leads me to the next line of thought. how about social media? we have been active in social networking among peer group through various social networking sites like facebook and twitter etc. the customers have been discussing about the services good and bad about their banks and sharing their banking experiences too. but have the banks thought of, | 1 |
speech europe as a common shield : protecting the euro area economy from global shocks keynote speech by fabio panetta, member of the executive board of the ecb, at the european parliament β s innovation day β the eu in the world created by the ukraine war β brussels, 1 july 2022 i am very pleased to be taking part in this event, even though i unfortunately cannot do so in person. i would like to thank european parliament secretary - general klaus welle for his kind invitation. as an eu institution, the ecb is accountable to the citizens of europe via the european parliament. and our two institutions have quickly learnt one of the key lessons of the covid - 19 crisis : physical distance need not imply intellectual distance. thanks to technology, since the outbreak of the pandemic i have participated in several virtual hearings of the committee on economic and monetary affairs to discuss the ecb β s work on a digital euro. the digital euro is a key innovation for serving the interests of europeans in a digital world. it would provide easy, costless and safe access to central bank money for daily digital payments, just as cash does for physical transactions today. co - legislators can ensure that the european union supports modernisation and progress in a way that is fully aligned with european values and interests. for the digital euro, they will legislate on key aspects such as the protection of privacy and legal tender status. but the digital euro is just one example. promoting socially desirable innovation does not only apply to technology. it also applies to institutions. we need to continuously modernise the β technology β that underpins the functioning of our union, from its governance to its economic architecture. this is crucial if we are to enhance our resilience to global shocks and safeguard european sovereignty. ultimately, this is about protecting our society and guaranteeing that it can continue to enjoy peace, freedom and prosperity in spite of the geo - economic disruptions that we are facing with russia β s aggression against ukraine, the commodity and energy price shock and the threats to international cooperation and multilateralism. if we are to overcome these formidable challenges, we must be united. the lesson of history is that when our actions are inspired by selfishness, and we waste our human, economic and political capital on fuelling internal disputes instead of solving them, we are defeating europe. we are dividing it, weakening its ability to face shocks and shape global outcomes. unity, not fragmentation, makes us strong. two years ago, at | , in india, financial inclusion has become a national policy with the prime minister and, hence, the government taking the lead and the rbi being the most important institution involved in the policy. issues recent developments in regard to the emphasis on financial inclusion and the responsibilities assigned to or assumed by central banks raise several issues and these have been well documented. i will flag them here to facilitate deliberations in the meeting. first, how far are the central banks going to the other extreme, from a β one target - one instrument β to a β multi target β multi instrument β approach to central banking? how much would this result in a dilution of the focus of central banks? what should be the relative emphasis between the various objectives? second, under the new dispensation, there is a widening of central bank mandates. how much would this widening result in a dilution of the independence of central banks? third, in view of recent developments relating to the responsibility for and response to global financial crisis, the independence of central banks and, more importantly, the credibility of central banks is under stress. at the same time, the central banks, by and large, are already in uncharted waters in handling the exit from the global financial crisis. how far would the acceptance of financial inclusion as a major responsibility at this juncture threaten the effectiveness of central banks β core function, namely, monetary policy. fourth, there is evidence that very high expectations have been created for a positive outcome for the programme of financial inclusion. it is being described as a win - win game. national targets that appear to be quite ambitious have been adopted. to what extent would the central banks face reputational risks in the event of the expectations not being met? fifth, there is increasing recognition that there are limits to what monetary policy can achieve, and there is acute awareness of complexities of regulation of financial sector. in such an environment, how far could a central bank deliver some of the laudable objectives of financial inclusion, such as poverty alleviation, reduction of inequality and environmental improvements? sixth, do central banks have the expertise to be closely involved in a wider programme of financial inclusion since the demand factors are difficult to assess, even assuming that the central bank can ensure the supply of financial services? seventh, what are the lessons that could be learnt from experience in regard to programmes for financial inclusion, including those from the us housing bubble, credit facilities to government employees in south africa, and microfinance in india | 0 |
christopher kent : australia's economic transition - state by state address by mr christopher kent, assistant governor ( economic ) of the reserve bank of australia, at the australian business economists conference dinner, sydney, 22 november 2016. * * * i thank sean langcake and merylin coombs for invaluable assistance in preparing these remarks. introduction i am grateful for the opportunity to address you all this evening. it is fitting for my final speech in my capacity as the bank β s chief economist to be in front of such a pre - eminent group of australia β s business economists. i want to talk about australia β s economic transition following the end of the resources boom. my focus will be on developments affecting broader economic conditions, and the labour and housing markets more specifically. a key theme of my discussion is that aggregate, economywide variables β such as investment, unemployment or housing prices β often mask important differences across the states. understanding those differences can give us a better appreciation of how the australian economy is performing and is likely to evolve. before focusing on those differences, though, i β ll start with an overview of the overall economy. about two weeks ago, we published our updated forecasts. the flow of data over recent months had been broadly in line with our earlier expectations and so the forecasts were generally little changed. the economy continues to adjust to the end of the resources boom ( graph 1 ). our expectation is that gdp growth will be close to potential growth over the next few quarters and pick up to be a little above potential thereafter. the unemployment rate, which has declined over the past year by more than expected, is likely to edge just a little lower over the next two years. that implies that there will be some spare capacity in the labour market for a time. inflation is low. in year - ended terms, we expect underlying inflation to remain around 1Β½ per cent for a few quarters before gradually increasing to more normal levels. that profile follows from the forecast for the growth of labour costs to rise gradually and is consistent with the medium - term inflation target. 1 / 14 bis central bankers'speeches two key forces shaping developments over recent years have been the large fall in mining investment and commodity prices. mining investment has a bit further to fall, but by our estimates about 80 per cent of the adjustment is now behind us. resource exports still have further to grow. meanwhile, growth of activity in the non - mining sector has risen gradually over recent years. that improvement | little over the past year. that is, there has been a rise in the share of employees who would like to work more hours than they do. they represent additional spare capacity. a rising share of part - time employment has been a structural feature of the economy over recent decades, reflecting both demand - and supply - side factors. 5 but the growth of full - time employment has been quite subdued since 2012, rising only briefly above its 20 - year average of 1. 3 per cent per annum. 7 / 14 bis central bankers'speeches once again, the national outcome obscures contrasting experiences across the mining and nonmining states. during the mining investment boom, full - time employment grew strongly in the mining states, whereas it was little changed across the rest of the country ( graph 7 ). 6 labour was going to where it was in greatest demand and being paid relatively handsomely β in both mining and non - mining sectors in the mining states ( see below ). 8 / 14 bis central bankers'speeches since 2012, however, the situation has reversed. full - time employment in western australia and queensland hasn β t increased and the unemployment rate across those two states has risen noticeably. that makes sense. from 2012, mining investment and commodity prices were in sharp decline. in addition to the retrenchment of mining - related employment, those forces have also had a noticeable knock - on effect to non - mining industries in those states, as the buoyant effects of strong growth of the population and household expenditure have been unwound in concert with conditions in the mining industry. the decline in full - time employment over 2016 appears to reflect a further decline in demand conditions within the western australia economy. one important part of that, the property market, has become progressively weaker, as i β ll discuss in a minute. moreover, wages appear to be adjusting to bring wage levels back towards those of the other states ( graph 8 ). part of that adjustment is occurring via a decline in wages in the mining sector relative to wages in other sectors. liaison reports suggest that wage pressures will be quite subdued in the mining states for a time. as that adjustment occurs, it will weigh on the growth of nominal demand in the mining states. 9 / 14 bis central bankers'speeches interestingly, full - time employment in the non - mining states remained weak up until about 2014. thereafter, those states have benefited not only from the decline in interest rates, but also from the positive effect on their tr | 1 |
source and nature of the disturbances and their expected persistence. it also depends on whether energy price shocks fuel inflation via second - round effects on other prices and wages, for instance through inflation expectations. failing to respond to secondround effects, we may risk persistent overshoots of our inflation target and ultimately, a deanchoring of inflation expectations. on the other hand, wrongly interpreting temporary movements in energy prices as persistent, we could have larger output losses in the short term and may even increase inflation volatility. moreover, changes in relative prices, for instance due to higher carbon prices, are effective signals that push the transition in the right direction. an appropriately flexible and forward - looking monetary policy would help those necessary changes in relative prices to feed through. but flexibility must not come at the expense of a loss of credibility. in periods of structural change and large uncertainties, such as those created by climate change, well - anchored inflation expectations remain as important as ever. references aastveit, k. a., bjΓΈrnland, h. c., & cross, j. l. ( 2023 ), β inflation expectations and the pass - through of oil prices β, the review of economics and statistics, 105 ( 3 ), 733 β 743. aastveit, k. a., bjΓΈrnland, h. c., & thorsrud, l. a. ( 2015 ), β what drives oil prices? emerging versus developed economies β, journal of applied econometrics, 30 ( 7 ), 1013 β 1028. auclert, a., monnery, h., rognlie, m., & straub, l. ( 2023 ), β managing an energy shock : fiscal and monetary policy β, unpublished manuscript. baumeister, c., & hamilton, j. d. ( 2019 ), β structural interpretation of vector autoregressions with incomplete identification : revisiting the role of oil supply and demand shocks Β», american economic review, 109 ( 5 ), 1873 - 1910. bjΓΈrnland, h. c., larsen, v. h., & maih, j. ( 2018 ), β oil and macroeconomic ( in ) stability β, american economic journal : macroeconomics, 10 ( 4 ), 128 β 151. bloom, n. ( 2009 ), β the impact of uncertainty shocks β | with a debt of nok 2 million even after the interest rate has increased by 3 percentage points. the household with the lowest income will have a tight margin. principal payments will have to be deferred and, even with a deferral of a few years, this household will have little leeway after basic expenses have been paid. in order to increase its financial leeway, it will either have to increase its income, or reduce housing consumption and dispose of its debt. both households will be vulnerable should one member lose income from employment and have to rely on benefits. with an income loss of 10 per cent, even the household with the highest income level would have to make considerable spending adjustments. although these households have higherthan - average debt, this debt level is not uncommon. based on the analyses in inflation report 3 / 05 and the assessments provided in the press release following norges bank β s monetary policy meeting on 25 january 2006. however, for most households, it will be relatively easy to cope with gradually higher interest expenses. the outlook for the norwegian economy is favourable. output has picked up, although so far not to such a degree that there are visible signs of inflation. as long as the rise in prices is slow, it will be appropriate to maintain a low interest rate. but when capacity utilisation increases, the interest rate will have to be raised gradually towards a more normal level. even though price inflation has deviated from the target for a period, there are no indications that economic agents have changed their view of future inflation. expectations are stable. when households and businesses make their saving and investment decisions and set prices, they can safely ignore the possibility of sustained, marked increases or decreases in the general price level. the business sector can base their decisions on the assumption that wage and cost inflation will not revert to the level seen in the 1970s and 1980s. employees also know that their pay increases will not be eroded by inflation. low and stable inflation is a credible objective. 4. are we equipped for the future? norwegian enterprises have access to new markets and are encountering increasing competition. new businesses are emerging while others are scaling back and closing down. we have behind us 15 - 20 years of fairly sound macroeconomic management, which provides a good basis for growth in the norwegian economy. the banking system and securities markets are highly developed. generally, only unprofitable projects lack financing and capital. in a take - over, new owners completely re - haul poorly run | 0.5 |
face a situation of rising debt and excessive tax burdens. in the 2000s, we generally had revenue a little under 25 % of gdp and spending slightly over 26 % of gdp. now we raise less than 24 % of gdp in revenue, despite higher taxes, and then spend about 29 % of gdp. 16 this is an unsustainable situation, not least because the efficiency of government spending has been low. 17 much as i wish we had a strong state that could deliver high quality public goods at reasonable prices, the facts reflect otherwise. relative to the 2000s, we have a weaker state, spending a larger share of gdp. the result is an economy barely capable of growth faster than 1 %, with a shrinking tax base and a weak outlook. in these circumstances, trying to deal with social needs simply through more spending, more debt and higher tax doesn β t really cure the patient, but rather limits the pain while accepting continued decline. living standards cannot rise materially without growth. the problem goes deeper. if investment did rebound, and government borrowing continues at around current levels, we would then hit a binding balance - of - payments constraint. we have had an investment rate of around 14 % of gdp recently, against for 2001 to 2009, revenue averaged 24. 8 % of gdp and expenditure averaged 26. 2 % of gdp. for 2012 to 2021, revenue averaged 23. 9 % of gdp and expenditure averaged 28. 9 % of gdp. these periods correspond to the most recent ten years as well as the preceding decade. alternative samples yield comparable results. theo janse van rensburg, shaun de jager and konstantin makrelov. β fiscal multipliers in south africa after the global financial crisis β sarb working paper. no. 21 / 07. available at : https : / / www. resbank. co. za / en / home / publications / publication - detail - pages / working - papers / 2021 / fiscalmultipliers - in - south - africa - after - the - global - financial - cr a savings rate of 15 % of gdp. 18 a reasonable investment rate would be over 20 % of gdp, and for fast growth probably 30 %. 19 but given savings levels, this implies borrowing between 5 % and 15 % of gdp from the world β very large sums. current account deficits of those magnitudes would simply become too unsustainable, if not impossible, as in the uk currently. to achieve balanced growth, rather | vigorous comment. the effective apr reflects the cost of interest and certain other finance charges imposed during the statement period. as an example, a cash advance carries an effective apr that reflects both interest assessed on the balance in the billing period and any fee charged by the creditor for the cash advance. the effective apr can be quite high, often much higher than the nominal apr, in part because it amortizes the cost of credit, including fees, over one month. although consumer groups argue that the resulting " sticker shock " helps consumers make better credit shopping and account management decisions, creditors argue that it confuses consumers and misleads them to think the cost of credit is higher than it is. consumer testing conducted for the board suggests that many consumers have a limited understanding, if any, of the effective apr, but it also suggests that clearer presentation of the disclosure can improve understanding. thus, the proposal seeks to present the effective apr more clearly to consumers with more straightforward terminology and better formatting that promotes understanding. in addition, the proposal seeks to improve consumer understanding and reduce creditor uncertainty by specifying more clearly than the present regulation which fees are to be included in the effective apr. however, because of inherent limitations of the calculation β such as the need to assume the repayment period β and continued concern that adequate consumer understanding may be difficult to achieve, the board is also seeking comment on an alternative proposal to eliminate the disclosure. when evaluating these two alternatives, and any others the public comments might suggest, the board will consider the comments as well as the results of additional consumer testing. conclusion madam chair, in closing, let me emphasize the federal reserve's commitment to ensuring that consumers get key information about credit card terms in ways they can understand, in formats they can use, and at times when it is most helpful. we appreciate efforts in the congress and among consumer groups and the credit card industry to ensure that disclosure practices are in line with the needs of consumers. as my testimony this morning indicates, more complex pricing and continuous change in the marketplace make the task of writing rules for effective disclosure challenging. nevertheless, the combination of extensive review, substantial public input, and systematic consumer testing has enabled us to propose changes that we believe will further the original goals of the truth in lending act to promote economic stability and competition through the informed use of credit. i look forward to our continuing efforts in this regard, and i am happy to address any questions you might have. appendix i summary of proposed changes | 0 |
to msmes seeking financing during the covid - 19 pandemic period, primarily for short - term working capital needs and medium - term productive business investments. these programmes have been fully disbursed, and the central bank is currently collaborating with the government of barbados to negotiate a third round of funding from the idb for usd 50 million, which will have an expanded focus of : 1 / 2 bis - central bankers'speeches 1. enhancing export readiness and diversification, innovative investment, food security, and climate adaptation ; 2. increasing the financial inclusion of women - led / owned business and persons with disabilities ; and 3. leveraging technical assistance to support capacity building and training of msmes. since the launch of the ecgf a decade ago, i can confidently state the operation of the ecgf has achieved its general objective of enhancing msme's access to muchneeded loan funding. in fact, during this period, the central bank has approved 326 guarantees totalling over usd 65 million for loans from eight participating financial institutions. furthermore, during the second loan programme to provide financing support during the covid - 19 pandemic, there was an increased demand for guarantees on loans to the renewable energy sector, which represented one - third of the total guaranteed amount. i am hearted that this sector is also posed to receive additional support in the third round of idb funding support. it is evident that idb continues to be a valuable development partner that is instrumental to barbados achieving its sustainable development goals. we will endeavour to maintain our strong collaboration into the future, and to provide the required support for our small business sector. we are heartened by the participation of the msmes and their financial institutions, including the enterprise growth fund limited, which has a mandate of providing financing to small businesses working capital purposes across the various economic sectors, including the renewable energy sector. i look forward to hearing first - hand the financial institutions'and businesses'experiences with the ecgf and to a lively dialogue on the important topic of access to financing for msmes. once again, welcome to everyone. 2 / 2 bis - central bankers'speeches | kevin greenidge : micro, small, and medium - sized enterprises are the backbone of our economy address by dr kevin greenidge, governor of the central bank of barbados, at a visit of the president and delegation of the inter - american development bank to the central bank of barbados, bridgetown, 13 december 2024. * * * i am deeply honoured to welcome president goldfajn and the esteemed idb delegation to the central bank of barbados. it is a privilege to host this important conversation today with both your team, the participating financial institutions, and the beneficiaries of the idb's impactful funding over the past decade. in this regard, the idb, as a leading multilateral organisation, has played a critical role in the development of local small and medium - sized businesses, particularly through its steadfast support of the central bank's enhanced credit guarantee fund ( ecgf ). for this, we remain deeply grateful and committed to our continued collaboration. micro, small, and medium - sized enterprises ( msmes ) are widely recognised as the backbone of our economy. the idb's funding has assisted our msmes to deal with the structural barriers to accessing finance, which is critical to the enhancement of their competitiveness, productivity, and resilience. these are all keep elements to the growth of msmes and provide a means to bolster their economic and financial contribution in small countries, like barbados. since 2015, the ecgf, which is a partial credit guarantee scheme that we at the central bank of barbados manage, was established with the support of united states dollar ( usd ) loan funding from the inter - american development bank to the government of barbados. this idb's assistance has contributed to msme's productive business investments in barbados by helping them to secure financing from domestic financial institutions. under the ecgf, the central bank issues partial credit guarantees of up to 80 percent of the total loan amount, which are intended to collateralise various categories of loans from eligible financial institutions up to us $ 1 million for a maximum period of 10 years. we have overseen two of these loan programmes from the idb to date. the specific objective of the first round of loan funding in 2015 was to boost the productivity and competitiveness of smes. the scope of the second loan programme in 2021, i. e., the global programme for safeguarding the productive sectors and employment, built on the momentum of the first by providing collateral support | 1 |
, outsourcing arrangements involving certain customer information will be subject to a higher standard of care. β’ third, a greater focus on fis β outsourcing risk management framework. fis were previously expected to pre - notify mas of any material outsourcing arrangements, and mas would impose prudential requirements on the fi, where necessary. with the growing prevalence and complexity of outsourcing arrangements, such a caseby - case approach has become less tenable. instead, mas will continue to assess and monitor the robustness of fis β outsourcing risk management frameworks while fis will continue to be responsible for ensuring the safety of all of their outsourcing bis central bankers β speeches arrangements. the revised guidelines will no longer require fis to pre - notify mas of any outsourcing arrangements. 24. the guidelines are not intended to be exhaustive. mas recognises that the diverse range of outsourcing arrangements and rapid pace of progress in digital technology preclude a prescriptive approach to risk management practices for outsourcing or a one - size - fits - all set of rules. mas will adopt a risk - based approach in implementing the guidelines. conclusion 25. let me conclude. 26. a tougher macrcoeconomic environment and growing complexity of operational and technology risks will place greater demand on banks β risk management and compliance systems. even as banks continue to upgrade their systems and processes to strengthen their risk resilience, it is equally important that banks regularly test the robustness of their contingency plans and capability to manage tail risk events. i am glad that the industry continues to demonstrate its commitment to sound risk management with your investments in systems, technology and in your people. mas appreciates your close co - operation to develop and update our risk management guidance, and your active participation in iwst exercises. thank you. bis central bankers β speeches | future direction. 29. in addition, asean is positioning itself to ride on the growth of china and india. asean's total trade with china and india has grown significantly over the past decade, and in 2004 amounted to us $ 80 billion and us $ 17 billion respectively. 30. asean is working hard to ensure that its free trade agreements ( ftas ) with china and india are completed and fully implemented by 2010 and 2011 respectively. besides china and india, asean is also negotiating ftas with other major economies like japan, south korea, australia and new zealand. japan's role and response 31. in the past decades, japan has led the growth of china, south korea and many other countries in the region in a'flying geese'formation. japan has been an important source of investments, capital and technology, and a major export market for many asian countries. after a decade of stagnation, japan is firmly back on the path of healthy sustained growth. prime minister junichiro koizumi's leadership and overwhelming victory in the recent election give cause for hope that his reforms will be sustained. as the second largest economy in the world, japan will remain an important global player. 32. japan, together with the us and china, form the strategic triangle that undergirds regional stability. with india's rise, a new strategic triangle of us - china - india will, in time, be superimposed upon it. stable relations amongst the key players will be critical for regional peace and development. 33. recent tensions in sino - japanese relations are of concern. such strains are part of the deep ambivalence with which beijing and tokyo view each other. both china and japan have their respective positions on the history issue. china's attitude towards japan is coloured by japan's reluctance to come to terms with its world war ii history, while japan's attitude towards china is shaped by its anxiety over how china's rise will alter the regional balance and affect japan's interests. domestic politics and rising nationalism in both countries are complicating factors. 34. fortunately, both countries want to avoid a collision. there are strong incentives for china and japan to deepen ties. china needs investments, technology and know - how from japan, while japan needs the markets and production base in china. 35. the tensions in sino - japanese relations are understandable because there has never been a period in history when china and japan are simultaneously strong powers. today, | 0.5 |
indeed legitimate questions to be asked of the global financial system. at all events, the international community would do well to give careful consideration to how it can improve the way in which the financial markets work. now, in a tempest it is especially important to maintain a clear sense of direction. for every serious analysis, the following two insights should provide the guiding lights : global financial markets bring significant benefits overall. free capital movements are an important and worthwhile achievement. the free movement of capital has been crucial in promoting the global integration of output and trade. it has been instrumental in bringing about a marked increase in international direct investment and has led to a rapid spread of know - how. free capital movements have made the world more prosperous overall. capital is being used more efficiently because the pool for gathering and allocating resources has become larger. and investment decisions are geared more closely to the economic yield of projects. finally, the free movement of capital has helped policymakers in many countries to maintain internal economic discipline. the fact that there is a comparatively high degree of price stability in many parts of the world is undoubtedly also due to open borders and more competition from abroad. no one should forget those benefits, let alone want to sacrifice them. - 2on the other hand, it is nevertheless correct to say that the global markets are not easy players and partners. they pose internal challenges which may sometimes be hard. and the international financial markets are prone to exaggerate at times, on occasion with great severity. nowadays, many market players are very short - termist in their actions, which can considerably heighten risks. there is herd behaviour in both euphoria and in moments of doubt. above all, financial crises give rise to risks of contagion. countries may be infected even though they have very few economic links with the original location of the crisis. naturally, it is understandable that market players regard a crisis in one country as a reason to re - examine opportunities and risks across the board. problems are caused, however, if the markets do not make enough distinctions and fail to take adequate account of conditions which are specific to the individual country. i hope very much that the international financial markets will note and take due consideration of the evident structural progress made by many countries over the past few years, especially in latin america. apart from that, exaggerations in one direction or the other are ultimately dangerous for the players in the financial markets themselves - as has been revealed yet again precisely here during the past few | payments. while these are indeed noteworthy developments, we know that the work is far from finished. beyond account ownership, financial inclusion entails the availability of a range of products that meet the diverse needs of the population, particularly the minorities and the vulnerable sectors. to create a truly inclusive financial system, we need to ensure that the needs of the muslim filipinos who are excluded due to religious reasons are being addressed. a world bank study showed that approximately 9 % of the population exclude themselves from the formal financial system due to religious reasons in muslim majority countries. this is where islamic banking and finance comes in. islamic finance can deepen financial inclusion not only because it delivers shari - ah - compliant products for the muslim communities but also because its very essence is based on the principles of social justice and equality. islamic finance products are specifically created to support the needs and protect the rights of the poor and underserved. islamic finance and financial inclusion, therefore, share a common end - goal. as you may know, in islamic finance, products such as sadaqah, waqf, and qard are called social solidarity instruments because they are designed to uplift the plight of the less privileged through the wealth of those who have more in life. as the name suggests, social solidarity instruments provide wealthy individuals and businesses a channel through which they can financially support the poor in the community. other shari β ah compliant products can also support not only individuals but also small business owners such as sale - based contracts ( i. e. murabahah, salam etc. ), lease - based contracts ( i. e. ijarah ) or guarantee contracts ( i. e. kafalah ). providing the appropriate products and services to the small and medium enterprises is key to broad - based growth. islamic finance can also help the country attract funds from islamic investors looking for opportunities to support infrastructure requirements particularly in the bangsamoro. poverty alleviation efforts have necessitated development of critical rural infrastructure that can support 2 / 4 bis central bankers'speeches the quality of life and the livelihood of the rural folk. simply put, we cannot afford to overlook the role of islamic finance in promoting social equity, not when there are still predominantly muslim provinces β like the bangsamoro that have poverty incidences as high as 68 %. in fact, in the 2018 bangsamoro organic law, the bangsamoro government, the bsp, department of finance and the national commission on muslim filipinos are | 0 |
easier producing goods and services for both retirees and active workers will be. immigration policy will, therefore, be a key component of baby - boom retirement policy. the rate of saving - - for retirement and other purposes - - may not directly affect either the number of retirees or the size of the workforce. but it surely affects capital investment, which it finances, and the productivity that it engenders. besides the total amount of saving and investment, changes in the allocation of those funds among different types of capital also appear to influence the growth of labor productivity. a dollar of new saving flows through financial markets to firms that allocate it among different types of capital investment. clearly, firms'choices about the types of investments to make matter crucially for how much labor productivity ultimately is boosted. in the late 1990s, for example, businesses allocated much more of their investment dollars toward high - tech, higher - return capital than they did in earlier years. businesses made this shift and are continuing to move further in that direction in response to the extremely rapid decline in the prices of high - tech assets and the new opportunities that these assets have afforded. according to one set of calculations, of the roughly 2 - 1 / 2 percent annual rate of increase in output per hour, or labor productivity, between 1995 and 2001, perhaps a quarter of that growth could be attributed to on - going shifts in the composition, as distinct from the dollar level, of capital. improvements in the quantity and quality of our workforce β s education enhance workers'skills and contribute importantly to the growth of labor productivity. but far more important over the past six years have been the gains in output attributable to technological innovation, especially information technology and improved managerial organization, and, as i noted in testimony last week, the greater flexibility and resilience of our economy stemming from deregulation, primarily in finance. notwithstanding these more - intangible contributions, the level of saving remains a key ingredient of economic growth. but we need also to know whether the source of that saving is sustainable and, beyond that, whether the type of financial assets in which our saving overall is accumulated affects our productivity. during the past six years, about 40 percent of the total increase in our capital stock in effect has been financed, on net, by saving from abroad. this situation is reflected in our ongoing current account deficit, which, by definition, is a measure of our net investment in domestic plant and equipment financed with foreign funds, | september 11 and the unemployment rate rose sharply. however, layoffs diminished noticeably in january, and employment turned up last month. moreover, initial claims for unemployment insurance have decreased markedly, on balance, providing further evidence of an improvement in labor market conditions. the dynamics of inventory investment and the balance of factors influencing consumer demand will have important consequences for the economic outlook in coming months. but the broad contours of the present cycle have been, and will continue to be, driven by the evolution of corporate profits and capital investment. the retrenchment in capital spending over the past year and a half was central to the sharp slowing we experienced in overall activity. on balance, the recovery in spending on business fixed investment is likely to be only gradual ; in particular, its growth will doubtless be less frenetic than in 1999 and early 2000 - - a period during which outlays were boosted by the dislocations of y2k and the extraordinarily low cost of equity capital available to many firms. nonetheless, if the recent morefavorable economic developments gather momentum, uncertainties will diminish, risk premiums will fall, and the pace of capital investment embodying new technologies will increase. even a subdued recovery would constitute a truly remarkable performance for the american economy in the face of so severe a decline in equity asset values and an unprecedented blow from terrorists to the foundations of our market systems. for if the tentative indications that the contraction phase of this business cycle has drawn to a close are ultimately confirmed, we will have experienced a significantly milder downturn than the long history of business cycles would have led us to expect. although there are ample reasons to be cautious about the economic outlook, the recuperative powers of the u. s. economy in the recent past have been encouraging. one important ingredient in that resilience has been the performance of productivity. even discounting somewhat the phenomenal strength of the growth of output per hour of late, one cannot help but be impressed with how well productivity has held up in the face of the abrupt slowing of the economy in late 2000 and in 2001. that performance has been encouraging because the nation β s fortunes, to a very great degree, will depend on the evolution of the growth of productivity. in particular, productivity will play a central role in determining the nature of the economy β s response to the aging of the population soon upon us. most economic forecasts are subject to significant uncertainty. at least by | 1 |
, 000 members, is the second largest accounting institution in the world. it is not sufficient that the institute merely responds to and adopts global standards. it should, in fact, go further and actively participate in the formulation of these standards. 14. i am happy to learn that the president of icai has recently been elected as a member of the board of the international federation of accountants ( ifac ) and that there is an indian member on the iasb. i also want to commend the institute for its active participation and involvement in several international committees and projects aimed at improving accounting systems and processes. i would only urge that going forward, icai should proactively take the lead in the formulation of accounting standards in areas where we have specific concerns as an emerging market economy ( eme ). 15. another task the profession needs to address in regard to managing globalization is how it will select, from within its membership, persons of the requisite competence to participate in the global forums, and how it will provide them both financial and professional support to make this participation rewarding to them individually and to the profession more broadly. needless to say, the process of selection of persons for representing the institute in international forums should be strictly meritocratic and transparent. information technology ( it ) 16. next on my list is the challenge of information technology. in the past, one of the main objectives of audit was ensuring the arithmetical accuracy of financial statements. with the advent of it, this task has now been taken over by machines. this has both nudged and facilitated the profession to move up the value chain. the main task of the profession has now shifted to judgments of value, and to discharge this task, auditors have to demonstrate much higher levels of maturity, integrity, independence and balanced judgment. the development of these qualities will be a major challenge in the future. 17. let me make a comment with regard to it in banking. over the past decade, most commercial banks have successfully implemented core banking solutions. this has created both opportunities and challenges for auditors. challenges come by way of lack of visible evidence, risk of undetected system errors and bugs and frauds hidden in a labyrinth of data. retrieving information in the computerized environment and assessing the implementation of computer related processes will also be critical to the audit process. opportunities come by way of increasing use of computer assisted audit tools ( caats ) to access databases beneath the accounting software to create queries, write | jan f qvigstad : lessons from the crisis for monetary policy and financial stability speech by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at the annual money, macro and finance conference, limassol, 3 september 2010. * * * first i would like to thank you for inviting me and giving me this opportunity to comment on lessons from the crisis. i will concentrate my talk around three lessons and two questions. what i am going to highlight is by no means revolutionary, rather it reflects a growing consensus on experiences from the crisis. 20 minutes only allows me to briefly touch on the different subjects. for a more in depth analysis and discussion of similar issues that i raise here today, i can recommend the jackson hole paper by charles bean et. al. transmission mechanism was affected by the financial crisis the first lesson is that monetary policy is more than setting the key policy rate. we also need to monitor the transmission mechanism closely. the transmission mechanism was affected by the financial crisis. constraints on banks β access to funding and a heightened level of perceived risk led to higher lending margins and higher bond spreads. the chart shows developments in our key policy rate and banks mortgage lending rates from august 2007 to november 2008. the widening spread between these two interest rates was not unique to norway, but occurred in several countries. banks also tightened their credit standards in response to the crisis. in norway, as in most other countries, this was particularly distinct for credit to enterprises. both higher spreads and tighter credit standards can have potentially strong contractionary effects on the economy and needed to be counteracted. liquidity and capital support was necessary to restore credit flows the contractionary forces from the financial sector were addressed by providing liquidity and capital to banks, through both regular and unconventional instruments in many countries. government actions enabled banks to continue to provide credit to households and enterprises. the crisis demonstrated that the transmission mechanism is important for the effectiveness of monetary policy. it also demonstrated that the relationship between price stability and financial stability must be given due attention. in norges bank there is close integration between the two areas norges bank monetary policy and norges bank financial stability. norges bank financial stability participates at all meetings in the monetary policy process. this ensures that sufficient attention is given to developments in the financial system. it also provided the necessary insight to make wellinformed assessments of the transmission mechanism during the crisis. considerable revision of the interest rate forecast during the crisis the | 0 |
. here in kansas city, and in all of our districts, the bank and branch directors have played an important role since the federal reserve's inception. as you might expect, at last night's dinner, we talked to some degree about the bank's history, our current challenges, and the future. in preparing for this event, i read a little bit about the dedication ceremony for the previous kansas city fed headquarters at 925 grand boulevard. one of my predecessors as chairman, william p. g. harding, spoke at its dedication on november 16, 1921, and i am happy to follow in his footsteps. considering the federal reserve's history, this location is a most appropriate site for a federal reserve bank, with its new neighbor being the national world war i museum at liberty memorial. those who have an appreciation of u. s. history know that the federal reserve played an important role in support of the funding of the first world war and that the war forced the early federal reserve to contend with an uncertain global environment with wide - ranging monetary and economic ramifications. the federal reserve has faced many such challenges since its founding, and the system has evolved in response. ours must be a dynamic institution if it is to successfully fulfill its mission in a changing financial and economic landscape. when the federal reserve bank of kansas city opened in 1914, it operated out of leased office space before moving to the building it is now vacating. in the more than nine decades since, the world has changed dramatically, especially in the areas of banking and finance ; however, the federal reserve's purpose, mission, and goals remain unchanged. and while the bank's former home on grand boulevard served it well, today we celebrate the opening of a building that will well serve this country, and this region. looking at the federal reserve more broadly, while we must continue to change, we also must recognize that one of the federal reserve's key strengths continues to be the strong regional connections fostered by the reserve banks. to quote from the federal reserve board's first annual report, published on january 15, 1915 : " it should never be lost to sight that the reserve banks are invested with much of the quality of a public trust. they were created because of the existence of certain common needs and interests, and they should be administered for the common welfare β for the good of all. " in that spirit, let us use this ceremony to recognize the federal reserve's unique structure with | ben s bernanke : dedication of the new federal reserve bank of kansas city building speech by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the federal reserve bank of kansas city, kansas city, missouri, 12 june 2008. * * * it is my pleasure to be here today to help dedicate this state - of - the - art facility. president hoenig, i commend you and your staff, as well as the designers and builders, of this impressive structure. it will serve kansas city and the entire 10th district well. permit me to start with a bit of history that i hope will underscore the crucial role played by the regional reserve banks. when the federal reserve was created in 1913, it was the nation's third attempt at a central bank. the first bank of the united states, chartered in 1791, and the second bank of the united states, chartered in 1816, did not last. they both failed to gain the trust of a public fearful of concentrated power. to address this concern, the creators of the federal reserve crafted a plan for a central bank with a unique structure : what some have called a decentralized central bank. an independent federal agency in washington, d. c., the board of governors of the federal reserve system oversees 12 regional banks, which serve as the operating arms of the system and blend public and private elements. importantly, the presidents of the reserve banks participate, along with the washington - based board members, in the monetary policy deliberations of the federal open market committee. the presidents bring a wealth of knowledge acquired from their regional contacts. thus, in making policy, we are able to view the economy not just from a washington perspective, or a wall street perspective, but also from a main street perspective. this system has served the central bank and the nation well for nearly a century. last night i attended a dinner with the bank's current directors as well as many former members of the bank's board. nationally, 278 private citizens β including business people, bankers, nonprofit executives, and community, agricultural and labor leaders β serve on the boards of our 12 banks and their branches. these individuals provide us with extensive and current information about economic conditions from a unique local perspective. often, they provide an early warning of shifting economic conditions before they show up in official government statistics. i commend them for their service to both the central bank and our nation | 1 |
inflation. additionally, an accelerating rise in the producer price index also reveals an impact from peso weakening. see bis ( 2014 ). β triennial central bank survey of foreign exchange and derivatives market activity in 2013, β detailed tables. see shcp ( 2016 ). informes sobre la situacion economica, las finanzas publicas y la deuda publica, segundo trimestre de 2016. see bis ( 2016 ). bis statistical bulletin, june, table f2. 3. bis central bankers β speeches medium - term inflation expectations, as measured by analysts β surveys, have remained relatively stable, albeit above the target. market - derived expectations appear to show a recent spike. 8 in this context, monetary policy has been preemptive, with interest rate hikes seeking to avert deviations of inflation expectations and to anchor them on the target, particularly in the face of significant peso depreciation. the resulting flattening of the yield curve seems to reflect confidence that inflation will continue to be contained. it is worth emphasizing that the bank of mexico does not target any level of the exchange rate. its primary objective is maintaining low inflation, and mexico adheres to a freely floating exchange - rate regime. this does not mean that movements in the exchange rate have no impact on inflation. in fact, as mentioned, moderate pass - through has occurred from the exchange rate to consumer prices, concentrated in durable goods. but this may change, and monetary policy should remain vigilant. some risks to the consolidation of convergence of inflation to the 3 percent permanent target prevail. the most notable danger is more weakening of the peso with a generalized impact on prices, knocking inflation expectations off track. also, rises in noncore prices could accelerate, returning to historic rates, possibly producing second - round price effects. finally, given uncertainty on the level of potential gdp, aggregate demand pressures could surface. conclusions over the course of many years, mexico and the united states have benefited from increased integration, both cultural and economic. mexican economic activity, however, has recently decelerated and confronts downside risks, among them, the possibility that the u. s. industrial sector β s performance will turn out to be softer than anticipated. other dangers are weaker consumer and producer confidence, a steeper - than - expected fall in oil output, and possibly more volatile financial markets. the latter might squelch financing for the government and private firms. greater risk ave | be applied in this context, too : there should be no explicit or implicit government guarantees regarding the solvency of the respective banking system ; temporary liquidity crises should be resolved, wherever possible, before government intervention becomes necessary ; the private sector should be comprehensively involved both in crisis management and in loss - sharing. β’ international support measures must always remain an exception and never become the rule. under no circumstances should private investors be able to rely on public bodies to assume their losses in the end. instead, i believe it would be desirable to create an international liquidity safeguarding fund made up of the major global players, which would also have the most to gain from a largely deregulated and sound financial system. this will not be an easy undertaking, since there seem to be few incentives for a bank to assume other institutions'risks. nevertheless this road should be taken in order to strengthen market discipline. i believe that membership in a club comprising the major global players would be a special quality which could actually become attractive for those institutions. besides, it seems quite conceivable that banking supervision might be willing to grant those institutions more selfregulatory powers. the case of the hedge funds ltcm proves that the private sector can find solutions without having recourse to public funds. at that time, the federal reserve bank of new york was only acting as an intermediary to bring national and international financial institutions together, which then provided the necessary funds. the same principle applies both nationally and internationally : moral hazard problems can only be prevented by emphasising and requiring that responsibility be taken by financial market participants, and by limiting the intervention of public bodies. avoiding moral hazard will also increase the stability of the system and improve crisis management. * * * | 0 |
bank of uganda remarks by louis kasekende ( phd ) deputy governor, bank of uganda at the 2017 financial reporting ( fire ) awards kampala serena hotel ; november 09, 2017 ceo of capital markets authority, president of the institute of public accountants of uganda all captains of industry, and sponsors of the fire awards, ladies and gentlemen good evening! i would like to begin by thanking the ceo of the institute of certified public accountants in uganda for inviting me to be chief guest at this wards dinner and to commend the institute and the other organisers and sponsors β the capital markets authority, the uganda securities exchange and the new vision β for this very commendable initiative. i hope it will lead to a greater understanding among the business community in uganda of the benefits which firms can derive by preparing financial accounts that comply with best practise and global reporting standards. i want to reflect in these remarks on the contribution which financial reporting makes to a developing economy and in particular the growth of a modern business sector. the business sector in uganda is dominated by small and medium scale enterprises ( smes ) ; the most recent comprehensive data which are available from the census of business establishments indicates that the average number of employees of a registered business is only 2. 3. as is the case elsewhere in africa, smes in uganda struggle to expand. the vast majority of them never expand enough to become large firms. of the approximately 460, 000 registered businesses in uganda, less than 1, 000 have more than 50 employees. one of the reasons why smes struggle to expand is the nature of these firms. the majority are owned by a single proprietor or by a group of related family members. the proprietor of the firm is often the manager. the governance of these firms, including financial governance, tends to be informal, without transparent rules, records and procedures. this type of informal governance may be adequate for small companies but it is a major barrier to their growth and expansion. firms cannot expand without mobilising capital for investment. beyond a relatively small size, the investment needs of a firm outstrip the financial resources of a sole proprietor or a single family. hence finance must be mobilised from outside sources ; i. e. from outside of the firm β s immediate ownership. from a business perspective, the ideal form of finance for firm expansion is equity capital, because this is long term finance and its returns are linked to the performance of the firm. equity capital from outside sources can be mobilised through private | 2018 which has been circulated to the various stakeholders, many of whom have submitted their comments. it is therefore a good opportunity for us to go through the draft bill, to clarify on the comments received and to receive additional inputs from the stakeholders. we hope that the draft bill will be submitted to the minister this month ( october 2018 ). in addition, in february 2018 cabinet approved amendments to the bou act ; to empower bank of uganda to regulate and oversee the payment systems. the draft bank of uganda amendment bill is being reviewed by a select technical team. the passing of the two ( 2 ) draft bills will greatly enhance the bou supervisory oversight on the national payment systems. while most of the payment systems in uganda are provided by the central bank, the market has recently experienced an upsurge of systems operated by the private sector with powers to control access and set prices. examples of systems operated by private providers include : points of sale ( pos ) for debit and credit cards, automated teller machines ( atms ), the switch and mobile payment systems. the mobile money services have especially experienced an exponential growth. at the regional level, the east african payments system ( eaps ) has been implemented to facilitate cross - border payments within the east african community ( eac ) region. under the common market for east and southern africa ( comesa ), the regional payments and settlement system ( repss ) has also been implemented to facilitate regional payments. although the legal issues were partly addressed by the above mentioned measures implemented by the central bank, a comprehensive nps law to provide an oversight framework for payment services providers, operators and instruments is urgently required. the payment systems are a vital part of the economic and financial infrastructure. the law is therefore intended to provide an overall framework for ensuring safety and efficiency of the payment systems. the nps law will provide for the licensing, regulation, and oversight of payment systems by specifying : the licensing criteria and procedure. the regulatory power of the bou concerning the imposition of norms and standards, rules and regulations on operators of payment systems, and the bou β s power to call for information, to conduct on - site examinations, and take enforcement actions. the administrative sanctions in case of violations of the law, regulations or orders from the central bank. we believe that your contributions will help in the finalisation of this long awaited bill. specifically, i would like to thank the following ministries and government institutions for the efforts put in the drafting process ; 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klaas knot : central bank capital - of capital importance? speech by mr klaas knot, president of the netherlands bank, at the dnb - risk management workshop on " central bank capital in turbulent times ", amsterdam, 12 april 2024. * * * good morning everyone. welcome to the second day of this workshop on'central bank capital in turbulent times '. and this title really does sum it all up. central banks around the world are going through some pretty turbulent times these days. with huge losses. and the dutch central bank is no exception. the last time the dutch central bank faced a similar turbulent situation was roughly a century ago, in 1931 to be exact. the turbulent times that caused significant losses back then, had to do with the gold standard. after the first world war, the netherlands and the united kingdom agreed that, for the dutch gold held in the uk, the dutch central bank would accept pounds sterling. as a result, the dutch central bank had a vast amount of british pounds on its balance sheet. but by the 1930s, the british economy was in stormy weather β with high unemployment and an overvalued currency hindering export. and even though the dutch central bank got guarantees from the bank of england that they would not leave the gold standard β they did so overnight, and effectively devalued the pound. as a consequence of this devaluation, the dutch central bank was left with huge losses. losses that were one and a half times the size of its capital. today, almost a hundred years later, in a world that looks a lot different, we find ourselves again in a situation with huge central bank losses. the dutch central bank had to report a loss of 2. 3 billion euros for 2023 β and our projected cumulative losses over 2023 until 2028 are 9 billion euros. our neighbours at the bundesbank reported a loss of 21. 6 billion euros in 2023. and across the atlantic, the us federal reserve published a loss of 114. 3 billion dollars last year. we know how we got here. and we know we have lessons to learn. so, let me begin by taking a step back. up until a few years ago, and especially since the 2008 global financial crisis, inflation was persistently low. in response, and with the aim of countering deflation risks, stabilising our economies and safeguarding monetary policy transmission, central banks around the world expanded their toolkits to include | it was argued that capital requirements applicable to loans to these firms, especially under the irb approach, would increase compared to the existing framework, leading to an increase in their financing costs or, possibly, to a decrease in the amount of credit supplied to them. both these factors would adversely affect their financial condition. this, in turn, would have negative consequences for economic growth and employment and would impact on financial stability, particularly in countries such as greece, where smes account for a large share of total output and employment. i believe, however, that the final version of basel ii substantially alleviates these concerns. in greece, the majority of banks will adopt the standardized approach. for the significant part of their total exposures to smes, which will qualify as retail exposures, the applicable risk weight will actually decrease compared to the existing framework. for most of the remainder, the risk weight will remain unchanged. even in the case of banks adopting the irb approach, most of their sme customers are expected to derive some benefit either from the firm - size adjustment for corporate exposures or from the generally lower risk - weight function for retail exposures. increased disclosure under pillar iii is expected to strengthen market discipline by increasing transparency. this will have a positive effect on stability to the extent that anticipated market reaction dampens banks β incentives to assume excessive risks. however, the influence on bank behavior of the direct market discipline exercised by depositors, other creditors, and shareholders, is often limited either because these stakeholders lack sufficiently strong incentives or because, in some cases, the interests of the different stakeholders do not coincide. in particular, the actual or presumed existence of public safety nets may dampen the incentives of depositors to exercise discipline. wider and more pertinent public disclosure is expected to enhance the information content of listed banks β share prices and of interest spreads on subordinated bank debt. this will increase the accuracy and predictive power of fragility indicators based on market data, such as the distance to default, an indicator derived from market prices of bank shares. at this point, i may mention that the 10 banks whose shares are listed in the athens stock exchange account for over 75 % of the total assets of all credit institutions operating in greece. based on empirical evidence, changes in the distance to default represent a useful forward - looking indicator for stability assessment purposes, especially if based on weighted average values for the entire banking sector rather than for each individual bank. in general, marketbased fra | 0 |
putting our responsiveness to the test. the war broke out at an already delicate juncture for the world economy, with the various regions emerging from the pandemic at different speeds and amid much uncertainty, inflationary tensions and global production chain disruptions. the russian invasion of ukraine has exacerbated some of these factors, amplifying the challenges that the world economy, and therefore the economic and monetary authorities, will now have to contend with. but beyond the impact on the global economic outlook, the war has struck the largest blow to the international economic order since the second world war. this dramatic event has thrown into relief the need to reinvigorate and bolster the foundations of multilateralism, which are the set of rules and values that we have established to ensure peace and prosperity. but we should also view this as a chance to give fresh impetus to international cooperation, which has contributed so much to global progress in recent decades. such impetus means strengthening the international institutions, many of which date back to the mid - 20th century, so that they can respond more effectively to the new crises, such as the global financial crisis and the pandemic crisis, which are more global in nature than the typically regional crises of past decades. international institutions should equip themselves, in their respective field of competence, with the appropriate tools to prevent and respond to systemic crises. in addition, the global nature of processes such as the green transition and digitalisation means these institutions must adapt in readiness to deal with these challenges and help attain the goals and fulfil the commitments we have set ourselves in these areas. the agreement for a minimum corporate tax rate for multinational enterprises, spurred by the g20 with the oecd β s invaluable support and ratified by more than 130 countries that account for more the 90 % of world gdp, is a good example of the benefits that international cooperation can generate in the digital era. furthermore, supply issues, which have led to shortages and strains on prices during both the pandemic and now the war in ukraine, strengthen the case for boosting international cooperation. in its latest world economic outlook, the international monetary fund concluded that these supply issues should not lead us to lessen our economic openness. on the contrary, its analyses point to the international diversification of imports and improved substitutability of the sources of inputs from different countries to boost value chains β resilience. signing new bilateral and multilateral trade agreements and strengthening | pre - existing ones, which would afford greater certainty to trade relations while reducing their cost, would also help attain this goal. to conclude, i believe that, by sharing experiences and outlooks, fora such as this one help gain a deeper understanding of the challenges that we, the economic and monetary authorities, must face. i hope that you are able to benefit fully from the discussions held over the coming days and wish you a pleasant stay in seville. | 1 |
sector is working for them. our experience has shown us the importance of listening to these views and using insights from retail investors to inform our annual risk assessment. they also inform our understand of what should be done to mitigate these risks. as such, tomorrow we will be publishing findings from our most recent consumer research which looked at the experience of retail investors interacting with investment firms, their views of the sector and the issues they have faced. we undertook this research along with a mystery shopping exercise. both of which informed a thematic review which looked at the use of marketing and advertising by investment firms. we will also be publishing the findings from this review tomorrow. the insights from the research are of real value. investors are telling us that they still find engaging with the sector challenging in some ways. they highlight disclosures and the provision of information as a challenge for them, saying that while benefits about products are often explained in plain language and illustrated using graphs and visuals, important disclosures and regulatory information ( including risks, warnings and fees ) tend to use language that is more technical, and text based. this view is similar to what we saw in previous supervisory work by the central bank which looked at fees and charges. that found there is more that could be done by firms in providing clarity and detail on the fees charged to retail investors. the research also shows that investments are now more accessible, mainly through digital channels. nevertheless, retail investors with very limited experience continue to have a number of preconceptions about investing which may adversely affect engagement levels. this includes a sense that getting involved with investments is only for those who have a high level of knowledge and keep abreast of the market on a regular basis. 3 / 6 bis - central bankers'speeches the research provides valuable perspectives to understand the challenges that investors are dealing with. it tells us that while a firm may be meeting all its obligations in providing prescribed information to investors, there are real questions on the clarity and usefulness of some of this information. firms need to consider if they providing information in a way that helps investors to make decisions. does the information require an established knowledge base or is it accessible to someone who has never invested before? if the information is a challenge or difficult to understand at the outset, does that instil confidence with investors or is it more likely to attract them to products with a simple message but less regulatory protections. firms that consider and act on what investors are telling them and make changes that support and inform retail | including cost control ) ; and 3. entrust oversight of their investments to a professional investment manager. significantly, in terms of facilitating better outcomes for investors, an investment fund allows an investor to participate in a diversified portfolio of holdings with a view to mitigating concentration risk. we are reminded once more unity creates strength. on a broader, system level basis, the sector has an important role to play in reducing the reliance on the banking sector. i have spoken about this on previous occasions so will not dwell on it today. 4 however, traditional forms of finance, including bank funding, imposes certain costs and can lead to fragilities where an economy is overly dependent on it. on a sectoral basis, we know that the funds sector has generally demonstrated high levels of resilience, even during periods of stress such as the covid market shock. nevertheless, we of course must be mindful that an expanding and more interconnected financial sector may pose risks that need to be managed. 2 / 6 bis - central bankers'speeches we must also be alert to the risks from frauds and scams. we are all aware of the emergence of increasingly sophisticated scams targeting retail investors. in ireland, the gardaa recorded that fraud incidents increased by 95 % between 2019 and 2022, with the investment fraud element increasing by 358 % during that period. 5 this is a risk to each customer but also an issue of trust and confidence. conscious of this growing risk the central bank has recently announced that the first theme of our new innovation sandbox programme will be'combatting financial crime '. we will be looking at what technological solutions can help to deliver positive outcomes for consumers and firms in this area. we are equally conscious that the solutions to this issue do not lie solely within the financial sector. this is why we have been engaging with a number of large tech firms since the start of the year, including google, encouraging them to do more to ensure they are not facilitating consumer harm. i am pleased that progress has been made in this regard and welcome google's announcement that they will introduce a verification process for financial services advertisers. an effective financial services verification policy is a key disruptive tool in the fight against online financial scams. how do we respond to these challenges? at the central bank of ireland, core to informing our approach to respond to these challenges, is to take a broader perspective. we must consider the views of retail investors and how the asset management | 1 |
adopt basel ii. members of the basel committee believe that it is beneficial to move in the direction of basel ii, but no country should adopt basel ii if it feels that it is not yet ready. if a country does decide to adopt basel ii, the timing should be determined by its own circumstances, not the timetable for basel committee members. i hope you will pardon my pronunciation, but i am told that there is a turkish proverb that says β hamama giren terler, β or β he who enters a turkish bath sweats. β if i understand correctly, the point of this proverb is that you should understand the consequences of your actions. if the result is to be very positive, some work and thus some sweat is required. i don β t know whether adopting basel ii is similar to entering a turkish bath, but i do know that it is important to understand that this is a high - quality and demanding standard. unlike the 1988 accord, which was relatively simple to adopt, basel ii is more complex and demands more of banks and supervisors. therefore, we don β t expect basel ii to be adopted as widely and quickly as the 1988 accord, at least at the outset. however, we do believe it is appropriate for all economies, and we expect and hope that the number of countries that adopt the new framework will grow over time. we believe that countries should adopt the options and approaches that are most appropriate for the state of their markets, their banking systems, and their supervisory structures. basel ii is not a β one size fits all β framework. supervisors can adopt the framework on an evolutionary basis and use elements of national discretion to adapt it to their needs. for any country that is considering adopting basel ii but may not yet be ready, i like to suggest a three - stage approach towards building a foundation for the new framework : ( 1 ) strengthening the supervisory infrastructure ; ( 2 ) introducing or reinforcing the three pillars ; and then ( 3 ) making the transition from the 1988 accord to basel ii. the first stage is strengthening the supervisory infrastructure. basel ii is not intended simply to ensure compliance with a new set of capital rules. rather, it is intended to enhance the quality of risk management and supervision. one of the things that i strongly encourage for all countries is a review of implementation of the basel committee β s core principles for effective banking supervision. these principles are key to laying a successful supervisory foundation. likewise, sound accounting and provisioning standards are critical to ensuring | grown by 1 % in the second quarter of this year. this growth rate highlights the dynamism of the current recovery phase, now under way for two years. recent indicators suggest this expansionary trajectory will hold in the second half of the year. on the latest banco de espana estimates, gdp growth should be slightly over 3 % this year and somewhat below that figure in 2016, meaning that growth in our economy will continue to outpace the euro area average. in terms of composition, national demand has continued to expand strongly. after several years of containment in household spending plans, the favourable course of their disposable income coupled with brighter job prospects and readier access to credit have been conducive to the growth of consumption. real estate market indicators show a recovery in the sector which, while moderate and uneven across market segments and regions, is also contributing to rekindling household spending. the buoyancy of final demand and the progressive normalisation of financial conditions have continued exerting a positive effect on business investment. the firming of the recovery in the euro area economy has helped compensate for the recent loss of momentum in some non - community markets, meaning that exports maintain high growth rates. ongoing contributing factors are the gains in competitiveness in our economy, which reflect the containment of costs in recent years by spanish firms and, more recently, the depreciation of the euro. nonetheless, imports have responded forcefully to the pick - up in domestic spending ( we should remember that gains and losses in competitiveness are felt abroad but also at home, in respect of imports ), which has led, in net terms, to external demand generally not contributing to the increase in activity. the recovery in output has come in step with a more expansionary behaviour of employment than might have been foreseen on past patterns. according to official spanish labour force data, from the second quarter of 2014 to the same period this year numbers employed are estimated to have increased by more than half a million, making for an appreciable reduction in the unemployment rate. bis central bankers β speeches the greater flexibility enjoyed by firms, following the reforms approved in 2012, in adjusting their working conditions to the macroeconomic and competitive setting has no doubt provided for the creation of new jobs and, therefore, for the expansion of economic activity. if the dynamics of the past 18 months hold, the increase in employment might place the unemployment rate at around 20 % in the fourth quarter of 2016. as to prices, the | 0.5 |
rostagno, m., altavilla, c., carboni, g., lemke, w., motto, r. and saint guilhem, a. ( 2021 ), β combining negative rates, forward guidance and asset purchases : identification and impacts of the ecb β s unconventional policies β, working paper series, no 2564, ecb ; and altavilla, c., lemke, w., linzert, t., tapking, j., von landesberger, j. ( 2021 ), β assessing the efficacy, efficiency and potential side effects of the ecb β s monetary policy instruments since 2014 β, occasional paper series, no 278, ecb. 2 / 2 bis central bankers'speeches | monetary policy statement press conference christine lagarde, president of the ecb, luis de guindos, vice - president of the ecb frankfurt am main, 8 september 2022 good afternoon, the vice - president and i welcome you to our press conference. the governing council today decided to raise the three key ecb interest rates by 75 basis points. this major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to our two per cent medium - term target. based on our current assessment, over the next several meetings we expect to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations. we will regularly re - evaluate our policy path in light of incoming information and the evolving inflation outlook. our future policy rate decisions will continue to be data - dependent and follow a meeting - by - meeting approach. we took today β s decision, and expect to raise interest rates further, because inflation remains far too high and is likely to stay above our target for an extended period. according to eurostat β s flash estimate, inflation reached 9. 1 per cent in august. soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation. price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term. as the current drivers of inflation fade over time and the normalisation of our monetary policy works its way through to the economy and price - setting, inflation will come down. looking ahead, ecb staff have significantly revised up their inflation projections and inflation is now expected to average 8. 1 per cent in 2022, 5. 5 per cent in 2023 and 2. 3 per cent in 2024. after a rebound in the first half of 2022, recent data point to a substantial slowdown in euro area economic growth, with the economy expected to stagnate later in the year and in the first quarter of 2023. very high energy prices are reducing the purchasing power of people β s incomes and, although supply bottlenecks are easing, they are still constraining economic activity. in addition, the adverse geopolitical situation, especially russia β s unjustified aggression towards ukraine, is weighing on the confidence of businesses and consumers. this outlook is reflected in the latest staff projections for economic | 0.5 |
lorenzo bini smaghi : the reform of the international monetary system speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the conference in memory of tommaso padoa - schioppa, rome, 16 december 2011. * 1. * * introduction it is a great pleasure to attend this conference today in honour and memory of tommaso padoa - schioppa and to be a member of the panel discussing the reform of the international monetary system. that was a field tommaso bore responsibility for at the ecb and which i inherited from him. i would like to focus my remarks on his main critique β which he shared with robert triffin β that the international monetary system remains incapable of imposing an acceptable macroeconomic discipline on the world economy. i also wish to examine the reservations he expressed about international policy cooperation being enough to ensure stability. i would like to organise my remarks as follows. first, i would like to explore the theoretical underpinnings of international policy collaboration, and explain why in practice it seems to fall short of what is needed in today β s global world and why countries remain trapped in shortterm policy - making. i will then review some proposals made by tommaso to correct today β s international monetary system, including the provision of an anchor and an exchange rate mechanism, and consider the consequences of maintaining the status quo. in conclusion, i will argue that it is better to prevent volatility than to cure it. the deployment of ever larger official resources to cope with potential crises cannot be the solution β neither conceptually nor practically. the policy implications are that there are three key areas where preventive action could and should be taken, and which require structural change by major economies : first, financial developments in emerging market economies ( emes ) ; second, further financial and economic integration in europe ; and third, reforms to ensure that financial markets serve the real economy and support stability. 2. analysis let me start with the global financial crisis. there is a broad consensus on some of the main factors underlying the global financial crisis β such as the growing and persistent current account imbalances, inadequacies in financial regulation and supervision, the systemic risk caused by excessive leverage combined with risky financial products, and so on. as tommaso argued, there is also some lack of recognition of the fundamental flaws in the present monetary arrangements, or rather non - arrangements. being a policy | the governments to take steps before we do what we have to do as a central bank. that would be an easy way ; it is not my idea of the ethics of responsibility for those who bear public responsibilities, and this is not in accordance with the text of the european treaties, which require us to fulfil our mission whatever may happen. the eurosceptic parties are gaining strength at each election and it shows that people are fed up with current policies, which are reflected in social decline. isn β t there a risk that the states are politically paralysed? that they are fed up is no surprise! one cannot blame the people for that ; it β s a moral and democratic question. it β s up to the european authorities and the governments to show that they can create growth and push down unemployment β something they haven β t managed to do convincingly since the crisis started. now the risk is that this fed - up sentiment creates a spiral of defiance : if there are no convincing results, people β s confidence in european institutions and in the community construction is undermined. there is no solution without europe : one cannot sustainably boost french growth if there β s no strengthening of german and italian growth. in some area it β s even necessary to have β more β europe. but to achieve this, it β s necessary to restore people β s confidence in europe and to do that growth is needed. hence the symbolic importance of the juncker plan, which shows the determination of the governments to create growth. if syriza wins the election in greece on 25 january, will there be a risk that greece leaves the euro as some in germany seem to be thinking? it β s not a question of greece exiting the euro. what β s at stake in the election lies elsewhere : it β s the composition of the mix of reforms which will allow this country to come out of the crisis once and for all, and to reintegrate the european economies β concert. depending on the result [ of the election ], the reform strategy in greece will be different, that β s normal. that β s democracy, and it β s up to the greeks to decide. greece has fully benefited from european solidarity : whatever the election result may be a discussion is needed between this country and europe to know how these reforms will fit into the european framework and how they will put greece on a path of sustainable growth which will permit the country to repay its debt to europe one day. bis central bankers β | 0.5 |
devaluation, and the snb β s activities during the second world war. peter bernholz of the university of basel is the author of the second chapter within this first part. he devoted himself to the period from 1945 to the early 1980s, including the return to convertibility, the bretton woods period, the transition to flexible exchange rates and initial experiences with an autonomous monetary policy. i am pleased to point out that the doors of the snb β s archives were opened unreservedly to these authors. the second part of the publication is more traditional. it is devoted to the last twenty - five years and deals with various aspects of the snb β s activities and its nature, ranging from monetary policy to the governance of the bank and including the new emphasis placed on financial stability, changing international relations, the renewed statutory framework in which we operate, and the adoption of a modern approach to managing our currency reserves. this second section, divided into eight chapters, was penned entirely by bank staff. we did not want a purely descriptive text. on the contrary, we asked the authors to adopt an analytical, critical approach, concentrating on key issues. in order to recognise the authors and their contribution to the book β and this is a departure from the previous commemorative works β they have been personally named at the beginning of each article. some forty in - house authors contributed to the work. for the third and last part of the book, which looks to the future, we took a step back. we called on the services of eight swiss and foreign economists, all specialists of global renown, asking them to discuss those issues of greatest concern to today β s central banks. we asked ernst baltensperger of the university of berne to provide a more academic assessment of the snb β s monetary policy over the last twenty - five years. we called upon marvin goodfriend of carnegie mellon university to give his views on the optimum inflation rate, frederic mishkin of columbia university to write about the policy of inflation targeting and to tell us to what extent it is truly a new phenomenon, and william white of the bank for international settlements in basel to address the difficult question of whether price stability is really enough. manfred neumann from the university of bonn was asked to provide an assessment of fixed and flexible exchange rate systems, peter kenen of princeton university to give us his opinion on the need for foreign exchange reserves in flexible exchange rate systems, martin hellwig from the max planck institute | the national central banks will be the shareholders in the ecb and the role of the governors of the national central banks, both in the system decisions and in monetary policymaking will be a central one. influence in decision - making will be based first on the one - person - one - vote principle but above all on the expertise, professional skills and activeness of each central bank committee representative and eventually of the governor. this means that the national central banks will need to be able to carry out all the analysis and operations that have been required so far but, in addition to that, to expand their expertise and analyses to the euro - area level. * * * [UNK] one of the most important matters that the ecb β s governing council will have to decide once it starts operating, is of course its monetary policy strategy. credibility in monetary policy requires clear targets, so that the aims and objectives of the ecb can be explained ex ante and the implementation of those aims can be explained ex post. a clear target is an important means of achieving transparency and accountability, i. e. of communicating with the financial markets, policy - makers and the general public. defining the objective will not be an easy matter in the new circumstances. the emi has sketched two alternative strategies for monetary policy in emu, one based on monetary aggregates and the other on a direct inflation target. the former has historically worked well in germany whereas the latter has produced good results in recent years in countries such as the united kingdom, sweden and finland, where demand - for - money functions have not been stable enough for targeting purposes. although theoretically pure forms of the two strategies can be distinguished, in practice most central banks rely on elements of both. thus, in the light of the internal decision - making process of the central bank, the strategic choice is not as crucial as it seems on the surface. both strategies are forward - looking and both aim at the same ultimate goal - price stability. a big challenge concerning the efficiency of the monetary policy is the credibility of the escb. besides our lack of empirical evidence on the europe - wide transmission mechanism, we have no evidence on the behaviour of the ecb, i. e. the ecb has no track record of its own. fortunately however, the ecb need not be built up from scratch. first, it will inherit credibility from the present ncbs, which have all conducted monetary policies aimed at price stability and convergence in accord with the principles of the maast | 0 |
system. going forward, the pace of asian regional economic and financial integration will gain momentum, driven by structural factors, by the conscious policy to put in place the enabling environment and by the benefits derived that are mutually reinforcing. the evidence in this decade has demonstrated that a more integrated and cohesive asia contributes towards more balanced global growth, while a more resilient asia contributes to greater global financial stability. while a more connected world in this new phase of globalisation will bring new vulnerabilities, it also brings with it the promise of new opportunities, new relationships and partnerships in the world economy, and thus, new prospects for a greater shared prosperity. | management responses to misconduct or non - compliance. the rightcontextual setting can exert a powerful influence on individual behaviour. we believe this begins with setting and clearly communicating expectations of desired behaviour. without clarity on what is acceptable in the first place, it would not be possible to encourage, much less enforce, these expectations. the fspb serves an important role in this regard through its work in defining and developing codes of behaviour for financial institutions. given the stronger focus of financial regulators on conduct and culture, such professional codes will matter greatly going forward as an important complement to regulatory standards. the fspb is well placed to lead and support initiatives to establish standards of conduct for the financial industry. its standards not only serve as useful frameworks for financial institutions and professional bodies to develop specific guidance for their own employees and members ; they also serve to embody the industry β s collective commitment to socially responsible values and 1 / 3 bis central bankers'speeches ethics. for example, i noted with interest that the professional code being launched today commits to dealing with counterparties, including suppliers and agents that β subscribe to sound ethical principles β. matters such as the environmental footprint or human rights record of third party providers are not typical obligations currently found in regulatory standards, yet, these are matters of great importance. they are a reflection of the values of the industry, and they matter to many conscientious consumers in this age of increasingly accessible information. given the central role of financial services in any economy, these are issues likely to move from the periphery to increasingly important business considerations. at the global level, we are already seeing greater attention given to sustainable and responsible finance. in many cases, it will require the industry to draw on experience beyond the traditional core competencies of most financial services providers. the industry, through fsbp, can demonstrate much needed business leadership in addressing broader ethical questions that will increasingly confront us as a society and as global citizens. apart from what ends up in written codes, there is also important value in simply having frank conversations about shared ethical challenges. in the united kingdom, senior bankers got together to discuss ways to reform organisational culture following the widespread ppi misselling scandals, but some would consider this β too little too late β. we need to bring such discussions forward and actively encourage a process that would allow the industry to get in front of emerging issues around professional conduct and ethics. these include examining issues like how institutions might go about gaining a pulse on culture at various | 0.5 |
norman t l chan : bond connect β enhancing hong kong as an international financial centre remarks by mr norman t l chan, chief executive of the hong kong monetary authority, at the bond connect launch ceremony, hong kong, 3 july 2017. * * * the honourable carrie lam cheng yuet - ngor, deputy director huang liuquan, deputy director qiu hong, financial secretary paul chan, deputy governor pan gongsheng, mr ck chow, distinguished guests, ladies and gentlemen, 1. good morning. 2. i am very pleased to join you today for the launch of bond connect. bond connect marks another milestone of mutual access of capital markets between the mainland and hong kong, following the shanghai - hong kong stock connect and the shenzhen - hong kong stock connect. it is also another important measure of the central government to support hong kong β s development as an international financial centre. 3. a key function of hong kong as an international financial centre is financial intermediation, providing efficient and safe conduits for fund flows. the establishment and smooth operation of these conduits shall be underpinned by suitable and sound financial infrastructures. over the years, the hong kong monetary authority ( hkma ) has endeavoured to build our financial infrastructures, from the real time gross settlement system to the central moneymarkets unit ( cmu ) for debt securities settlement, which have laid a solid foundation for hong kong β s development as an international financial centre. 4. bond connect is a new financial infrastructure established through the connection between hkma β s cmu and the relevant central securities depositories ( csds ) on the mainland. under bond connect, eligible overseas investors can settle and hold their mainland bonds through cmu using nominee holding arrangement. nominee holding arrangement is widely used by investors in international capital markets as it provides greater convenience and flexibility to investors and market participants. cmu also adopts nominee holding arrangement and provides nominee holding services for more than 200 local and international banks, trust companies and custodians through its linkages with euroclear, clearstream and other regional csds. the continued liberalisation of the mainland β s capital account and rmb internationalisation will progressively raise demand from overseas investors for rmb asset allocation, while the mainland has been proactively rolling out measures to facilitate overseas investors β access to its bond market. we believe that bond connect would enhance overseas investors β participation in the mainland bond market. 5. i wish bond connect a great success. | economy and society. this necessitates islamic finance moving beyond being perceived as mere imitations of conventional finance. a step up is to have distinct modifications made to the products, services, business practice and operations of islamic finance. the desired level of innovation is however β to significantly improve the offerings of islamic finance and to build a sustainable business model to meet the unfulfilled β real β needs of the economy and customers. the delivery of products and services to smes for example, can be remodelled to reflect deep understanding of their needs and circumstances. this paves the way for tailor made financial services solutions that can better assist aspiring entrepreneurs. to illustrate, the financing model of islamic banks for smes can be more holistic β to include provision of entrepreneurship training and consulting services, as well as infrastructure support. this model not only leads to greater sustainability, but also provides more 2 / 5 bis central bankers'speeches meaningful customer experience. within the islamic capital market, we already see good examples of innovation in the form of green sukuk, an innovative financing vehicle to combat climate change. the recent issuances of the world β s first green sukuk by two energy companies in malaysia have kicked start the growth of green sukuk market and will significantly boost the β cleantech β movement. fundamentally, islamic finance is well positioned to advance the green agenda, as environmental protection and sustainable growth objectives are already embedded within its principles. the structures of sukuk make it well - suited to channel global shariah - compliant capital to fund renewable energy and climate change projects. socially responsible investment ( sri ) sukuk has also made its debut with the unique vaccine sukuk programme launched in 2014 that raised funds worth usd500 million for children β s immunisation in a number of poor countries. these are proofs of new ways of mobilising resources to increase sustainable humanitarian financing to reach nontraditional donors and responsible investors. innovation within the islamic social finance space can also assist to address a number of issues facing the ummah and society at large. waqf, sadaqah and zakat have large potential to become important additional sources of financing for people in need of aid. each year, muslims worldwide generously donate through these channels. the global volume of zakat itself, collected each year through formal mechanisms is estimated to be in the tens of billions of dollars. a conservative estimate by islamic development bank indicated that there is at least usd600 | 0 |
7d2a7eb68a2bcb39 / cmu + reboot + informal + ecofin + final + issues + note + 2019 β 09 β 09 _ s4. pdf ) and the next cmu high - level group ( joint initiative between finance ministers of germany, france and netherlands : minefi. hosting. augure. com / augure _ minefi / r / contenuenligne / download? id = 7aefaf36 β 7449 β 471f - b86f08e8b9e1ce71 & filename = 1470 % 20 % 20savings % 20and % 20sustainable % 20investment % 20union % 20joint % 20press % 20release % 20 ( 004 ). pdf e www. economie. gouv. fr / files / 2019 β 10 / the _ next _ cmu _ hl _ do. pdf ). 6 costa, c. ( 2010 ), address on the occasion of his taking office as governor of banco de portugal, 7 june, available at : www. bportugal. pt / en / intervencoes / address - mr - carlos - costa - occasion - his - taking - office - governorbanco - de - portugal. see www. bankingsupervision. europa. eu / ecb / pub / pdf / ssm. srep _ methodology _ booklet _ 2018 ~ b0e30ced94. en. pdf p. 9. 4 / 4 bis central bankers'speeches | the need to restore the public's faith in the foreign exchange market and the value of the global code in assisting that process and also in helping improve market functioning and confidence in the market. 1 see www. bis. org / mktc / fxwg / gc _ may16. pdf. 2 see www. bis. org / press / p150511. htm. 3 see www. bis. org / mktc / fxwg / am _ may16. pdf. see also c salmon ( 2016 ), β rebuilding trust through the β fx global code β : reasons for optimism β, available at www. bankofengland. co. uk / publications / documents / speeches / 2016 / speech924. pdf, speech given at the aci uk square mile debate, london, 7 september ; and s potter ( 2016 ), β the role of best practices in supporting market integrity and effectiveness β, available at www. newyorkfed. org / newsevents / speeches / 2016 / pot160907, remarks at the 2016 primary dealers meeting, federal reserve bank of new york, new york city, 7 september. 4 see afxc. rba. gov. au / news / afxc - 26052016. html. 5 see www. bis. org / press / p160526a. htm. 3 / 3 bis central bankers'speeches | 0 |
musch, former secretary general of the basle committee. i hope this institute will make an important contribution to disseminating best supervisory practice and supporting the effort to strengthen banking systems. i now turn to the lessons to be learned in the industrial countries from the rather extraordinary episode of market turbulence that began in mid - august. the russian debt moratorium of 17 august sparked a widespread flight to quality, which was followed by a generalised drying - up of liquidity in many markets. this prompted fears that lenders would β disengage β, leading to a credit crunch. fortunately, markets have more recently gained a certain measure of stability. but we should certainly try to understand what went wrong and how we can avoid such episodes in the future. one problem was that lenders had unrealistic expectations about the extent to which their loans to emerging markets would be protected. it is therefore important that cross - border lending be assessed on a stand - alone basis, and that supervisors make sure that the pricing and management of such exposures are not undertaken on a false basis. in other words, a tightening - up of credit risk procedures is called for. another source of difficulty was that the models used to assess market risk were based too simplistically on established statistical correlations. they did not take adequately into account other types of risk, such as liquidity, volatility and event risk. widely used value - at - risk models caused financial intermediaries to liquidate assets when volatility in asset prices increased. this selling, in turn, caused volatility to increase further and resulted in additional selling. the fact that most market participants used the same basic model led to common reactions, amplifying herd - like behaviour. consideration therefore has to be given to ensuring that common behaviour by market participants does not exacerbate market instability. β 3 β it has to be recognised that all model - based approaches to controlling market risk embody assumptions, explicit or implicit, about market liquidity. the drying - up of liquidity in periods of market turbulence, as market participants seek to disengage from exposure, invalidates a basic premise on which risk management is built. it is therefore all the more important that var - based approaches to risk containment are supplemented by stress - testing. how do you think national governments have fared in implementing bis rules? the scorecard in this connection is not very good. if one looks back at the history of the past 10 | mr crockett considers what regulatory consequences should be drawn from the most recent crises in financial markets remarks by the general manager of the bank for international settlements, mr andrew crockett, to the european banking congress in frankfurt / main on 20 / 11 / 98. you have asked me to talk about the regulatory implications of recent crises. before i do so, it is important that we understand the relative roles of regulators and bank management in avoiding excesses and managing risks appropriately. as you all know, the regulatory and supervisory focus has shifted in recent years from quantitative controls and explicit rules to monitoring bank soundness through the quality of internal controls and the banks β risk management culture. with this, greater emphasis has been placed on responsibility of bank management and stakeholders, through market discipline, to ensure prudent operations. i think we all agree that bank managers and market participants are better equipped and β incentivised β for this task than supervisors. and there is no going back to a world of quantitative controls. at the same time, it is understandable that the ability of banks to repeatedly walk open - eyed into massive overexposure should lead to questions being asked about the wisdom of this change in regulatory and supervisory focus. i will not address this question here. but if the banking and wider financial community is to resist pressures for re - regulation, it is necessary that it should pay much greater heed to the responsibilities for prudent operations that are now more explicitly theirs and theirs alone. what regulatory consequences should be drawn from the most recent crisis in the financial markets? coming to the question you asked, i think it is useful to distinguish between the crisis in emerging markets and the recent heightened volatility in financial markets in advanced economies. even though there are undoubted linkages between them, the regulatory implications to be drawn are rather different. concerning what has happened in emerging markets, there are at least three basic lessons from recent experience. the first is that structural weaknesses in the financial system can be very costly. the second is that there are important feedbacks between macroeconomic instability and problems in the financial sector. and the third is that financial instability can spread contagiously from country to country. the asian crisis began when the overvalued thai baht had to be devalued. the currency crisis then interacted with financial system weaknesses to produce a deep economic recession. and the difficulties in thailand were rapidly propagated across the region and beyond. from this experience | 1 |
bandid nijathaworn : regional financial supervision β challenges and the way forward for asia remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at a conference on β macroeconomic and financial stability in asian emerging markets β, organised by the central bank of malaysia and the asian development bank institute, kuala lumpur, 4 august 2010. * * * first, let me thank bank negara malaysia and the asian development bank institute for the invitation. it is a pleasure to be here. since the first session this morning, we have covered many important issues facing asian emerging markets, and i can not agree more that they are the important policy issues for asia in the period ahead. in this concluding panel on coordination of regulatory practices, i want to make a few observations on the challenges and the way forward for asia, focusing on cross - border financial regulation and supervision. a good way to begin is to note that the global financial crisis not only offers important lessons for monetary policy and financial regulation, it also points to the need to further strengthen policy coordination on cross - border financial supervision and resolution amongst regulators in the region, as well as between home and host regulators, in order for us to be able to react better to the risk and the global - wide impact of a systemic financial distress. this issue, as we know, is a complex one, and implementing the new reform or the new standards proposed, whether for crisis prevention or crisis resolution, will pose an important challenge for the region. turning specifically to the issue of cross - border supervision, i think it is clear from the experience of the current crisis that a number of observations were important. first, systemically important financial institutions ( sifis ), which include internationally active banks, do have significant implications for global financial stability, not least for the asiapacific region. when in distress, their operations and the uncertainties that they propagate can significantly impact confidence, market liquidity, and the real economy through a credit crunch and the drying up of international trade financing as we have seen, while prolonged market anxiety about how the problem is going to be resolved can heighten volatility in global financial markets. second, over such period, as was seen in the current crisis, host regulators in emerging markets in asia had limited room and information to respond to the sifi β s distress. the dominant role in managing the crisis was played by the home regulators. what followed was a lack of balance in addressing | opening remarks veerathai santiprabhob, governor of the bank of thailand bangkok sustainable banking forum 2019 13 august 2019, bangkok, thailand distinguished guests, ladies and gentlemen, good morning and welcome to the bangkok sustainable banking forum 2019. this forum was first started last year to promote sustainability practices in the thai financial sector and to highlight the potential role of the financial sector in addressing common challenges facing the thai society, such as income inequality, environmental degradation, excessive household debt, and the persistent problem of corruption. certainly, addressing the challenges around environmental, social, and governance ( esg ) aspects are critical for the sustainability of the thai economy and to some may seem far beyond financial institutions β core mandates. nevertheless, as main intermediaries of financial resources, the financial sector can influence how these resources are allocated and, hence, can influence how the economy and society progress over the longrun. many people may view that the concept of sustainability for the financial sector generally encompasses financial institutions partaking in charity or corporate social responsibility projects. i am afraid that the concept is often misunderstood. the core concept of sustainability needs to be considered first in the context of the long - run sustainability of the financial business itself. when financial institutions focus mainly on short - term gains, neglecting the potential long - term effects or negative spillover of their activities, this can in fact increase 1 / 7 financial institutions β risks ; risks that can impair their credibility, public trust, and financial positions in the long - run. allow me to highlight three well - known incidents in particular. first, in 2016 the us consumer financial protection bureau fined wells fargo usd $ 185 million after uncovering that employees of the bank had created millions of fraudulent customers β bank and credit card accounts over a period of many years in order to achieve annual sales targets. driven by poor internal controls and short - term incentive compensation programs, employees signed up new accounts without customers β consent, moved funds from their existing accounts, and charged fees on accounts and services customers had not signed up for. according to a report by the bureau, β more than 1. 5 million bank accounts were created, of which around 85, 000 accounts incurred usd $ 2 million in fees. 1 β not surprisingly, public confidence in the bank plummeted. a survey of retail banking customers conducted in late 2016 suggested that 30 percent of customers were actively exploring alternative service providers2. second, between 2013 and 2015 many countries in our asean region were affected by haze pollution caused | 0.5 |
rameswurlall basant roi : β the growing role of human resource managers in modern business organisations β address by mr rameswurlall basant roi, governor of the bank of mauritius, at the annual congress of the association of human resource professionals of mauritius, balaclava, 5 august 2016. * * * mr areff salauroo, president of the association of human resource professionals of mauritius professor donald ah chuen professor mckenna distinguished guests ladies and gentlemen good evening i am delighted to be here with you this evening. thank you, areff, for having invited me for the celebration of the 40th anniversary of the association of human resource professionals of mauritius. my warmest congratulations to you all. i understand you are also having your annual congress over two days carrying the theme β the growing role of human resource managers in modern business organisations β which, i believe, fits well in the current social and economic context. as you are aware i re - joined the bank as governor again after a long break of eight years which i spent mostly overseas. having seen the human resource landscape in mauritius after so many years and the quality of human capital relative to the exigencies of the day, i should express my appreciation to the association for having chosen this topic. there is an unprecedented gap between the quality of human resources we have at our disposal and the quality of human capital needed to escape the middle income trap we find ourselves in. humans are slow learners. it takes longer for humans to reach maturity as a percentage of their lifetimes than any other species. having had the experience as a director of a department at the central bank and as a governor for several years, i am more than convinced that getting human resources in the country do what needs to be done for enterprises in the private sector and institutions in the public sector to survive in an increasingly competitive world must be a daunting challenge for human resource managers. how do we get people give their best shots when the character of the modern individuals is threatened by an economic system that has shifted from capitalism to turbo - capitalism? how do we get people give their best shots when the feelings of authenticity have become more and more scarce? how do we get people give their best shots in times of individualization and a serious lack of true and sincere connection with each other within a team in an organization? how do we get people give their best shots if they lack insight, quickness and a can - do attitude? and how do we get people deliver | for having brought the olympic medal. β the idea of someone running barefoot to catch a wild impala seems impossible. the kenyan runners make the impossible possible. the power of positive thinking, rather than getting sunk into a world of impossibilities, which allows the kenyans to go beyond what appears to be an ultimate frontier has lessons for the business world as well. 2 / 3 bis central bankers'speeches right from the day we are born, we pick up ideas, attitudes and convictions from the world around us. friends, parents, teachers and so many other agents sell to us their version of the truth. the one we accept, consciously or unconsciously, forms our belief as to what is possible and what is not. the problem is that many people end up accepting a β truth β that limits rather than open up the frontiers of possibilities for them. what we need to hammer on our people is that, whether one is a business executive, an employee or someone running a sandwich shop, if anything extraordinary is to come out, then something extraordinary must go in. and if something extraordinary has to go in, then our people need to have extraordinary qualities. i am here reminded of the qualities of the russian woman who can stop a horse in full strides. she can walk into a house on fire and come out with the beauty of a queen. so much is the hunger for success and a bold commitment to make a difference. hunger to win, to improve and a willingness to do whatever it takes. these are the intrinsic qualities of outstanding performers. do not ruin the raw materials in people. it takes a lot for a human resource manager to get that right. bear in mind one thing : nothing is more common than unsuccessful people with talent. may i wish you a happy 40th anniversary and plenty of success in your endeavours. thank you. 3 / 3 bis central bankers'speeches | 1 |
term growth expectations against the backdrop of domestic and overseas economic growth declining to a level lower than that realized before the current recession. as you can see, there are various risks to the outlook for the japanese economy both on the upside and downside. on balance, the bank's present assessment is that risks to the economy still remain greatly on the downside. in either case, the bank will continue to carefully examine economic developments, while paying due attention to various risks surrounding the economy. iii. developments in the financial environment in parallel with the pickup in the japanese economy that i have just explained, the financial environment, with some lingering severity, has increasingly been showing signs of improvement. i would now like to explain in some detail developments in japan's financial environment since last autumn. in japan, the acute pain caused by the financial crisis emerged markedly last autumn in securities markets such as the corporate bond and cp markets, in which large firms, banks, and institutional investors are major participants. after the collapse of lehman brothers, japan's stock prices fell sharply and defaults of corporate bonds started to be observed. in these circumstances, the excessive anxiety of market participants prevailed in the corporate bond and cp markets, and this made investors excessively cautious about taking on issuers'credit risk. in addition, market functioning deteriorated significantly : transactions decreased sharply, and the average market rates did not reflect the market fundamentals but rather were influenced strongly by specific circumstances of individual transactions. as a result, conditions for corporate bonds and cp issuance deteriorated significantly. in the corporate bond market, the credit spread ( the yield differential between corporate bonds and government bonds ) on bbb - rated corporate bonds was at around 1 percent in summer 2008 but expanded rapidly thereafter, and exceeded 4 percent around the end of fiscal 2008. in fact, almost no issuance of bbb - rated bonds was observed at the time. even the spread on a - rated corporate bonds, which have been recognized as medium - rated bonds, expanded and exceeded 1. 5 percent around the end of fiscal 2008, although it was at about 0. 7 - 0. 8 percent in summer 2008. there was almost no issuance of such bonds from october through november 2008. issuance rates on cp also rose substantially. in november, cp issuance rates ( 3 - month ) exceeded banks'lending rates ( in terms of the average contracted interest rates on new short - term loans ) for the first time, although this entirely unprecedented phenomenon was observed only in | hit a multi - year high at the beginning of november. this rise in yields receded again in response to another dip in risk sentiment at the beginning of december. most recently, the yield on 10 - year us treasuries stood at almost 2. 9 % β close to the level recorded at the end of june. in europe, on the other hand, yields have been more stable. yield differentials between us and european government bonds thus also reached a multi - year high in november. since then, differentials have narrowed again somewhat due to a more pronounced decline in the us. the yield on ten - year confederation bonds last stood at β 0. 15 %, virtually unchanged versus midyear. let me now turn to the foreign exchange markets. compared to the turbulent developments on the equity markets, the currencies of the major advanced economies traded within fairly narrow ranges in the second half of the year. on a trade - weighted basis, the us dollar has gained 2. 5 % since mid - year thanks to a buoyant economy and rising interest rates. the tradeweighted euro, however, lost almost 1 % over the same period due to weaker economic momentum in the euro area recently and uncertainty linked to italy β s budget issues. the swiss franc remains vulnerable to changes in risk sentiment on the international financial markets. it strengthened moderately, by 2. 5 %, in the second half of the year ( cf. chart 4 ). this appreciation is primarily due to the period between august and mid - september, when concerns about emerging markets β and possible consequences for europe β s finance sector β caused a renewed spike in risk premia on european financial securities. from mid - september, the swiss franc depreciated again slightly, particularly against the us dollar which has become more attractive to investors due to the greater interest rate advantage. furthermore, emerging market currencies stabilised noticeably. overall, developments on the foreign exchange markets show that the situation remains fragile and that the swiss franc continues to serve as a safe haven in times of heightened uncertainty. thomas jordan also referred to this phenomenon in his remarks on exchange rates. replacing libor with saron i would now like to update you on the work that is under way to replace libor with saron as a reference interest rate. since the uk financial conduct authority announced nearly a year ago that it would not guarantee the continuation of libor beyond 2021, this topic has attracted significant public interest. alternative reference interest rates | 0 |
. in particular, it could raise concerns of potential conflicts between the prudential supervision of european banks and the primary goal of price stability. this was foreseen in the institutional design of european supervision, assigning to the supervisory board β a new body within the european central bank β the planning and execution of the supervisory tasks. in consequence, separation between monetary policy and supervision was a key pillar for the conferral of supervisory tasks on the european central bank. regarding macro - prudential supervision, the european institutional setting promotes its independence as the european systemic risk board recommends central banks have a prominent role in national macro - prudential authorities. 9 10 in the spanish set - up, the banco de espana is entrusted with deciding independently when macro - prudential tools regarding see core principles for effective banking supervision β basel committee on banking supervision ( september 2012 ) https : / / www. bis. org / publ / bcbs230. pdf for more information about the key standards for sound financial systems, see the fsb website : https : / / www. fsb. org / work - of - the - fsb / about - the - compendium - of - standards / key _ standards / for more information about fsaps, see the world bank website : https : / / www. worldbank. org / en / programs / financial - sector - assessment - program see article 19 of council regulation ( eu ) no 1024 / 2013 of 15 october 2013 conferring specific tasks on the european central bank concerning policies relating to the prudential supervision of credit institutions : 1. when carrying out the tasks conferred on it by this regulation, the ecb and the national competent authorities acting within the ssm shall act independently. the members of the supervisory board and the steering committee shall act independently and objectively in the interest of the union as a whole and shall neither seek nor take instructions from the institutions or bodies of the union, from any government of a member state or from any other public or private body. 2. the institutions, bodies, offices and agencies of the union and the governments of the member states and any other bodies shall respect that independence. https : / / eur - lex. europa. eu / legal - content / en / txt / pdf /? uri = celex : 32013r1024 & from = en see recitals 7 and 12 and sub - recommendation b3 of β recommendation of the erb | of 22 december 2011 on the macro - prudential mandate of national authorities β ( esrb / 2011 / 3 ) : https : / / www. esrb. europa. eu / pub / pdf / recommendations / esrb _ 2011 _ 3. en. pdf see recital 24 of regulation no 1092 / 2010 of the european parliament and of the council on european union macroprudential oversight of the financial system and establishing a european systemic risk board : the ecb and the national central banks should have a leading role in macro - prudential oversight because of their expertise and their existing responsibilities in the area of financial stability. national supervisors should be involved in providing their specific expertise. the participation of micro - prudential supervisors in the work of the esrb is essential to ensure that the assessment of macro - prudential risk is based on complete and accurate information about developments in the financial system. accordingly, the chairpersons of the esas should be members with voting rights. one representative of the competent national supervisory authorities of each member state should attend meetings of the general board, without voting rights. in a spirit of openness, 15 independent persons should provide the esrb with external expertise through the advisory scientific committee. https : / / eur - lex. europa. eu / legal - content / en / txt / html /? uri = oj : c : 2016 : 202 : full & from = en 5 / 9 the banking sector should be activated or deactivated. accordingly, other sectoral financial regulators are given responsibilities for activating their own tools. in particular, the banco de espana is now empowered to require that banking institutions establish countercyclical capital buffers by credit segment, limits on concentration in relation to economic activity sectors, and limits and conditions when underwriting new loans ( in terms of loan - to - value, loan - to - income and debt service - to - income ratios, and also the maturity, the currency in which the operation is denominated and whether the interest rate is fixed or variable, among others ). these new instruments complement those previously available to the banco de espana and included in the european legislation : 11 the countercyclical capital buffer, the systemic risk buffer and the buffer for systemic banks, among others. in addition, this year saw the creation of the macroprudential authority financial stability council, whose main goal is to contribute to the promotion of coordination and the exchange of information on financial stability issues among | 1 |
price risks correctly. they are mark - to - model instead of mark - to - market. to put it bluntly, if my pension is invested in long - term illiquid assets, i would prefer my pension company to be run by a younger ceo. that way, i would be able to hold him or her accountable for how these investments pan out β avoiding moral hazard problems. a second risk relates to liquidity. a larger share of illiquid assets in portfolios increases liquidity risks. from 2023, pension companies'liquidity needs will become even larger when the requirement for central clearing of interest rate swaps and other derivatives is introduced. central clearing reduces the systemic risks of derivatives transactions. but potentially large liquidity needs require sound liquidity management in order to avoid the risk of forced sales of assets. setting aside more liquid assets to cover liquidity risks also means fewer funds available to invest countercyclically. pension funds will then have less flexibility to buy assets traded at distressed price levels. this may also be side 5 af 7 unfortunate from a systemic perspective, if pension funds are less able to play a stabilising role in periods of market stress. as a central banker, i am not β as many of you β burdened with promises of delivering certain levels of return to pension scheme members. however, i am tasked with keeping tabs on the stability of the financial system as a whole. therefore, i would have serious concerns about investment strategies based on continuously increased risk - taking in the search for yield. in its recent financial stability report, the imf also identifies increasing holdings of riskier and more illiquid assets by institutional investors as a key vulnerability in the global financial system. expectations and behaviour should be adjusted to avoid insecurity this brings me to my last and most important point today. going forward, there is no substitute for ( 1 ) acknowledging the conditions we face today, ( 2 ) increasing transparency about implications for pension plans, and finally, ( 3 ) adjusting expectations and behaviour accordingly. a growing number of pension plans are recognising the impact of the low rate environment and adjusting expected return assumptions. in denmark, the council for pension projections recently reduced their return assumptions over a ten - year horizon for eight out of ten asset classes. by reducing the stock of defined benefit plans, pension funds have transferred a large share of the risk from the low yield environment to present and future pensioners. today, many pension savers have a higher | degree of freedom when planning their retirement income. individuals are better able to match their savings and investment plans with their desired income, as well as their risk temperament. but this assumes that individual savers are well - placed to make informed investment decisions. with options come responsibility and trade - offs. allow me to use an illustrative example. a danish pensioner β let's call him lars β pays 15 per cent of his real constant salary during all 40 years of his working life to save for 20 years of retirement. with an annual real rate of return at 5 per cent, lars can look forward to annual retirement payouts at nearly 100 per cent of his annual income as a wage - earner. on the other hand, if real returns decline to 1 per cent, lars'payout would drop to about 40 per cent, all else equal. clearly, if yields are declining, something has to give. side 6 af 7 ultimately, pension savers will be faced with the following choice going forward : increase contributions, delay the age of retirement, or accept lower payout. put simply : pay more now, work longer, or spend less later. not a popular set of choices. on the first option, it is clear that increasing contributions to secure future income is an important step. mandatory savings programs have become widespread. micro studies from danmarks nationalbank show that mandatory programs are a better instrument for boosting pension savings than tax deductions. the latter tend to be inefficient and expensive. from a macroeconomic perspective, it is worth noting that increasing savings may dampen economic growth, as private consumption is reduced. especially in countries like my own, where savings ratios are already historically high. turning to option two : work longer. increasing the official retirement age has been an important part of labour market reforms in many countries. these reforms are often politically difficult to implement and are constantly under threat of being rolled back in some countries. but they are necessary to maintain long - term sustainability of public finances in the face of ageing populations. finally, the third option. accepting lower post - retirement income is not an easy sell. this has been clearly exemplified in recent developments in the netherlands. yet, in some countries it may be necessary to re - evaluate what we can accept as a reasonable standard of living. with more transparency and fewer unrealistic guarantees, it will be easier for pension savers to adjust savings and consumption patterns at an earlier stage. this leads to | 1 |
mechanism that has been put in place. whenever β as a reaction to the brexit - vote β calls are made for greater mutualisation of debt, i think it β s rather like a ship that is listing : when the passengers β eager to help β rush to the lower side of the ship then, contrary to their good intentions, they are not helping to remedy the unfortunate situation at all but are, in fact, making it worse. the second way to restore the balance between liability and control, meanwhile, would be to strengthen the maastricht approach based on individual responsibility. this would leave economic and fiscal policy, as well as ultimate liability for public debt, in the hands of the individual member states. but how could such a decentralised approach work better in future than it has done in the past? although the rules were changed after the crisis, the european commission was granted more flexibility in interpreting them. and it has used this flexibility quite a few times so far β and always to interpret the rules very loosely. as a result, the binding force of the budgetary rules is weaker than ever before β as we can see, for instance, in the budgetary developments in france, spain, portugal and italy. one way of ensuring that the rules are binding would be to install a new and independent authority, a fiscal council. this institution would not be exposed to the same political conflicts of interest as the commission, which has to assess whether national budgets comply with the stability and growth pact and hammer out political compromises between the interests of the different member states. of course, the european council ultimately holds the key to the success of any budgetary control. its determination to enforce the rules and support the commission in a strict interpretation is all - important. β debt is a two - edged sword. used wisely and in moderation, it clearly improves welfare. but, when it is used imprudently and in excess, the result can be disaster. β this statement by former bis chief economist stephen cecchetti and his colleagues madhusudan mohanty and fabrizio zampolli is directed not only at private debt but at public debt as well. 10 they show that excessively high private and public debt is a risk not only to financial stability but also to economic growth. according to their estimations, in the euro area we are already in the danger zone β at least with regard to corporate debt, at 105 % of gdp, but also in terms | say an expectations - driven downward wage - price spiral. financial market participants seem to have a similar take on it : the probability, derived from inflation options, that the inflation rate will be negative in the next five years is now at its lowest point since the summer of 2011. personally, i have always deemed such a deflation scenario highly unlikely. third, some of the unconventional measures, which were taken in order to loosen the monetary policy stance, come with a different risk - reward calculus than the standard instruments of monetary policy. i am sure that it will come as no surprise that i am rather critical of government bond purchases. this is because, in a monetary union of sovereign member states with a single monetary policy and largely autonomous economic and fiscal policies, government bond purchases are not a monetary policy instrument like our policy rates, for instance. government bond purchases are increasingly blurring the line between monetary and fiscal policy, and government funding costs are depending to an ever greater extent directly on monetary policy decisions. euro - area central banks are now the largest creditors of their member states. all governments ultimately pay nearly the same interest rate on the debt in central banks β balance sheets, regardless of the country β s creditworthiness. what β s more : the larger the part of the debt that central banks withdraw from the market, the less markets will exert their disciplining forces, sanctioning unhealthy public finances with higher risk premiums. this is all the more worrisome as the low - interest - rate environment offers few incentives for governments to consolidate their budgets. and indeed, fiscal policy in the euro area has been loosened noticeably over the past few years. in contrast to what would be needed given the still high debt levels in many euro - area countries, governments β savings in interest payments aren β t being put towards the urgent goal of reducing debt, but instead are being spent to a significant extent. john f kennedy once said : β the time to repair a roof is when the sun is shining. β this is most certainly true. but if you don β t want to risk permanent damage to your house, you sometimes have no choice but to repair the roof when it β s raining. i fear the danger of finance ministers becoming more and more comfortable with the high levels of debt the longer these favourable financing conditions exist. this could lead to a situation in which fiscal policy takes the bait of a sustainability illusion. and, when the monetary policy reins have to be tightened due to increasing | 1 |
mario draghi : imfc statement statement by mr mario draghi, president of the european central bank, at the thirty - eighth meeting of the international monetary and financial committee, bali, indonesia, 12 october 2018. * * * the euro area economy continues to expand in a broad - based manner, across countries and sectors, despite some moderation following its strong growth in 2017. the economy grew by 2. 1 % year - on - year in the second quarter of this year. it continues to exhibit a high level of capacity utilisation, and labour markets are tightening in several countries and sectors. the unemployment rate in the euro area has dropped to its lowest level since 2008, and the number of people in employment has increased by more than nine million since mid - 2013. the latest economic indicators suggest that, overall, this broad - based growth in the euro area will continue. our monetary policy measures continue to underpin domestic demand, which remains the mainstay of the ongoing expansion. private consumption is being supported by employment gains and rising wages. business investment has strengthened amid improvements in corporate profitability, favourable financing conditions and solid demand. in addition, the expansion in global activity is expected to continue, benefiting euro area exports. the latest ecb staff projections put annual real gdp growth at 2. 0 % in 2018, 1. 8 % in 2019 and 1. 7 % in 2020. at the same time, uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently. headline inflation in the euro area has lately been hovering around 2. 0 %, somewhat higher than the levels observed in the first months of this year, mainly reflecting a higher annual rate of change in energy prices. while measures of underlying inflation remain generally muted, they have been increasing from earlier lows. uncertainty around the inflation outlook is receding. looking ahead, underlying inflation is expected to pick up towards the end of the year and then increase gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion and rising wage growth. the latest ecb staff projections foresee annual euro area headline inflation at 1. 7 % in 2018, 2019 and 2020. overall, recent developments vindicate the governing council β s earlier assessments of the medium - term inflation outlook. incoming information continues to support our confidence that the sustained convergence of inflation to levels below, but close to, 2 % will proceed, and will be maintained even | after a gradual winding - down of our net asset purchases. accordingly, at its last monetary policy meeting the governing council confirmed that it continues to expect the key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. the governing council also decided to reduce the monthly pace of the net purchases under the asset purchase programme ( app ) to β¬15 billion from october until the end of december 2018 and anticipated that, subject to incoming data confirming our medium - term inflation outlook, net purchases will then end. finally, the governing council also confirmed its intention to reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. significant monetary policy stimulus is still needed to support the further build - up of domestic price pressures and headline inflation developments over the medium term. this support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ecb interest rates. in any event, the governing council stands ready to 1 / 3 bis central bankers'speeches adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council β s inflation aim in a sustained manner. the financial health of the euro area banking sector has continued to improve. although showing a slight decrease from 14. 6 % at the end of 2017, the aggregate common equity tier 1 ratio of euro area significant institutions stood at 14. 1 % at the end of the first quarter of 2018. banks have made progress in reducing their stocks of non - performing loans ( npls ). in the first quarter of 2018, the npl ratio for euro area significant institutions dropped further, to 4. 8 %, compared with 5. 9 % a year earlier. however, euro area banks β profitability remains subdued. the average return on equity of euro area significant institutions declined to 6. 6 % in the first quarter of 2018, from 7. 1 % a year earlier. in this context, eu and national authorities are still following up on a comprehensive action plan for dealing with legacy asset quality issues | 1 |
β the impact of sovereign credit risk on bank funding conditions β, bis, cgfs papers, no. 43. lanotte, m., g. manzelli, a. m. rinaldi, m. taboga and p. tommasino ( 2016 ), β easier said than done? reforming the prudential treatment of banks β sovereign exposures β, banca d β italia, questioni di economia e finanza ( occasional papers ), 326. angelini p., g. grande and f. panetta ( 2014 ), β the negative feedback loop between banks and sovereigns β, questioni di economia e finanza ( occasional papers ), 213, banca d β italia. bis central bankers β speeches markets are prone to self - fulfilling crises : if investors believe a sovereign faces fiscal problems, required yields will be higher, which can exacerbate, or even create, the fiscal problems. 9 probably the clearest recent example of this pattern is the surge in β redenomination risk β in the euro area, connected with undue fears of a break - up of the monetary union. to the extent that banks act as contrarian investors ( selling assets when markets overheat and buying when they are excessively bearish ), purchases of sovereign debt when the sovereign experiences difficulties notwithstanding relatively solid economic fundamentals are actually beneficial to financial stability. there is clear evidence that domestic investors played such contrarian role during the eu sovereign debt crisis, buying sovereign bonds as foreign investors were fleeing ( fig. 2 again for the italian case ; similar patterns have been documented for spain ). 10 imposing risk weights or setting large exposure limits on domestic sovereign exposures would impair this shock - absorption ability. exposure limits, in particular, could act as a coordinating device for speculative attacks. since a change in banking regulation would likely herald a similar change in other parts of the financial system ( most notably the insurance sector ), the entire domestic financial sector could be affected. finally, a system which differentiates the risk weights according to the sovereign β s credit risk could end up relying upon ratings issued by the credit rating agencies ( cra ). even advocates of a change in the prudential treatment of sovereign exposures admit that credit ratings of sovereigns have serious shortcomings. in particular, they tend to be backwardlooking and to foster herd behaviour. as such, they could exacerbate pro - cyclic | have taken place since our meeting in lima to fruition. with these goals in mind, we recognize that negotiations have been intense and complex, and represent a valuable effort by all parties, including management. in the spirit of compromise, we are prepared to join the emerging consensus and to ensure the world bank group remain fully legitimate vis - a - vis its diverse stakeholders. | 0.5 |
the great pleasure together with dr. farouk el okdah, governor of the central bank of egypt to host tomorrow, 27 november, in alexandria a high level euromediterranean seminar, brining together eurosystem and mediterranean central banks. i look very much forward to the seminar, which is a very useful platform for discussions and exchanges of views with our friends and colleagues from mediterranean central banks on issues of mutual interest from a central banking perspective. | jean - claude trichet : interview with al - ahram interview with mr jean - claude trichet, president of the european central bank. questions answered in writing in response to ms inas nour of the egyptian newspaper, al - ahram, on 24 november 2008. * * * question : ten years have passed since the establishment of the european central bank and next january, we will celebrate a decade since the launch of the euro. how do you evaluate both experiences? are they factors of stability within the european union market? trichet : indeed, the european central bank β the ecb β as well as the european system of central banks, which comprises the ecb and the central banks of all the eu's member states, were established on 1 june 1998. the euro was introduced first on 1 january 1999, while the euro banknotes and coins were put into circulation on 1 january 2002. as you may remember, the euro area first comprised 11 member states, then 12, 13, and currently 15. it will comprise 16 countries as of 1st january 2009, when slovakia will join the euro area. the ecb β s governing council is presently taking monetary policy decisions for 320 million fellow citizens and as of next year for 325. 5 million. the primary objective of the ecb and the national central banks of the euro area, which together form the eurosystem, is to maintain price stability in the euro area over the mediumterm. concretely, the ecb aims at maintaining inflation rates below, but close to, 2 % over the medium term. we have been able to broadly achieve this objective since the creation of the euro. this record compares favourably with the average inflation rate of 3 % that was achieved in the member countries during the nine years preceding the introduction of the euro. therefore, the euro enjoys that same level of stability and credibility as the most successful legacy currencies that it replaced. nevertheless, there is no place for complacency. the success achieved so far needs to be complemented and consolidated. question : do you think that the euro pays a stability factor in the world economy? trichet : the euro which will be ten years old next january, has rapidly achieved a wellrecognised status worldwide as a stable anchor also in turbulent times. this certainly is of utmost importance in the current circumstances. question : do you see a united european role in the global financial crisis, especially between members of the euro zone and non - members | 1 |
gov. rafael buenaventura. but it was during gov. amando tetangco's 12 - year term, from 2005aβ¬ β 2017, that key reforms to the central bank's inflation - targeting regime were implemented and put in place. 2 mbm bruce tolentino was not present during the event. 4 / 4 bis - central bankers'speeches | also in the light of the recent financial turbulence : deposit insurance and management of liquidity risk. banks are typically among the financial intermediaries which, on the one hand, have liquid liabilities and, on the other hand, illiquid assets. transformation of liquidity is part of their raison d β etre. however, it is also the basis of their vulnerability. doubts felt by creditors, particularly by depositors, about the quality of the bank β s assets ( whether justified or not ), can lead to a hasty withdrawal of the liquid liabilities of the bank and therefore to its insolvency ( bank run ). in order to prevent this scenario, the authorities have provided for liquidity requirements ( ex ante ) and deposit insurance schemes ( ex post ). the latter also have, if not above all, a consumer protection function. in europe deposit insurance schemes are still very diverse. the relevant directive only calls for minimal harmonisation. 9 such diversity can complicate the resolution of crises. it has to be noted, however, that there are no harmonised procedures to follow in the case of a banking crisis. in some countries the general law is applied to insolvency and there are no specific procedures for the failure of a banking enterprise as such ; while in others countries ( such as ours ) there are appropriate procedures. the european commission is studying a review of the directive on the reorganisation and winding up of credit institutions. 10 it is interesting to note how the funding difficulties of the british bank northern rock have forced the uk treasury, the bank of england and the financial services authority to review some fundamental aspects of the regulatory framework for managing banking crises. as mervyn king, governor of the bank of england, has also observed, the northern rock crisis has highlighted the need to reform the system of banking supervision in order to include ( i ) a special insolvency regime for banks, ( ii ) a credible deposit insurance scheme with sufficient cover able to refund depositors quickly. these remarks may be useful for reflection at community level. another example of the impact of the legislative divergence on financial stability concerns legislation on liquidity risks, which is not harmonised at european level and is applied nonuniformly to cross - border bank groups internally, at the very time when banking activity, in terms of stability and profitability, depends increasingly on the flow of liquid financial instruments between the various countries. the legislative discrepancy prevents an efficient cross | 0 |
timothy lane : financial stability in one country? remarks by mr timothy lane, deputy governor of the bank of canada, to the weatherhead center for international affairs, harvard university, cambridge, massachusetts, 11 february 2013. * * * introduction during the years since the global financial crisis, financial reforms have been moving forward on two distinct levels. the g - 20 leaders β commitment to build a more stable and resilient global financial system is being advanced through an ambitious global reform agenda. at the same time, policy - makers in each country are implementing reforms intended to establish more stable and resilient systems in their respective jurisdictions. financial stability in each country is, of course, an essential ingredient of global financial stability : policies to achieve financial stability in different jurisdictions are in most cases highly complementary, as a stable global financial system is made up of stable national financial systems. but tensions do sometimes arise between these two objectives. at the root of these tensions is the pervasiveness of cross - border spillovers β both from the risks affecting financial stability and from some of the reforms designed to mitigate those risks. in canada β an open economy where the financial system is closely linked with those of the united states and other countries β we have a privileged vantage point on these issues. our experience during the global financial crisis and its aftermath is a reminder that financial stability at the national level cannot be fully secured in the face of economic and financial shocks originating elsewhere. financial instability speaks all languages and carries many passports. furthermore, financial reforms have important cross - border implications that need to be addressed to ensure that these reforms have their intended benefits. thus, financial stability is a shared responsibility that must be advanced through international cooperation. reforms agreed to at the global level need to be implemented fully and consistently in each jurisdiction. in my remarks today, i am going to draw on canada β s experience of the past few years to illustrate these points. first, i will review how canada fared during the financial crisis. second, i will discuss the risks to canada β s financial stability that have emerged in the wake of the crisis. third, i will focus on some important cross - border elements of the reform agenda. canada and the crisis it β s now well known that canada came through the financial crisis better than many other major advanced economies, with a relatively short and shallow recession and a relatively strong recovery. it is now over two years since canada regained its pre - recession level of both real gdp and employment ( chart 1 ) | , supported by firm commodity prices, high employment levels, and the effect of the cumulative easing in monetary policy. we at the bank project that the canadian economy will grow by 1. 4 per cent this year, 2. 4 per cent in 2009, and 3. 3 per cent in 2010. the emergence of excess supply in the economy should keep inflation below 2 per cent through 2009. both core and total inflation are projected to move up to 2 per cent in 2010 as the economy moves back into balance. there are both upside and downside risks to the bank's new projection for inflation ; these risks appear to be balanced. in line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. given the cumulative reduction in the target for the overnight rate of 150 basis points since december, including the 50 - basis - point reduction announced last week, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in canada. with that, paul and i would now be pleased to answer your questions. | 0.5 |
remain at high levels, which is worth for an in - depth analysis. the world bank survey conducted in 2016 concluded that the reasons for the limited use of the banking channels are the high costs on money transfers and the perceived cumbersome and complex procedures. to illustrate my point, according to this survey, the costs of remittances toward albania are estimated at 9. 4 per cent of the amount sent, compared to the 7. 2 per cent average in the region. we are all aware that the more financial channels are used, the more finances penetrate in the economy. moreover, the increase in the use of financial channels contributes to enhancing financial inclusion, increasing the opportunities for savings and productive investments. taking into account the benefits from the formal penetration of remittances in the economy and 1 / 2 bis central bankers'speeches the insofar contribution to the banking and financial sector, the bank of albania suggests added attention with regard to reducing transfer costs and improving or designing afresh products and services / targeted to this segment of the population. from its side, the bank of albania is engaged to further modernise the payment system infrastructure and align the legislation to the eu directives for an open, barrier - less, and competitive market. in the last two years, the bank of albania has been engaging in concrete projects with the world bank, related to remittances and financial inclusion. the first project consists in an assessment of the compliance with the β general principles for international remittance services β designed by the world bank and the bank for international settlement and a concrete action plan, with many stakeholders involved, to comply with those fields that need further improvement. another noteworthy project is the greenback of the world bank dedicated to remittances, implemented in several countries across the world. this project comes now to albania as a receiver of remittance and aims at enhancing the efficiencies in the market for remittances and raising the awareness and financial education, and has bank of albania β s endorsement until its completion. the other project consists in assessing the compliance with the criteria set out in the framework of the β payment aspects of financial inclusion β. by complying with the criteria from the involved stakeholders, it aims to increase the number of households and enterprises ( mainly the small ones ) that have a bank account or a payments account to conduct various transactions. in addition to the above, for a broader review of the remittances across all its dimensions, the bank | of albania commits today in the framework of this meeting to produce a dedicated publication, which will be presented every june, a period which coincides with the international day of family remittances, 16 june. last but not least, considering the coordination among state authorities as very important, as well as the constant communication with the private sector, we are signing today the memorandum of understanding. it is aimed at raising the awareness, facilitating dialogue and fostering effective cooperation between the parties on issues related to remittances from the albanian diaspora, contributing to economic development. the joint engagement we are initiating today is the first necessary step of a development platform for the empowerment and effective use of remittances. in conclusion, i would like to underline once again that it is time that we show more care, appreciation and gratitude to tens of thousands of albanians abroad, who, through sacrifice, continue to contribute to the welfare of our nation, sending a part of their savings to their families back home. we invite the banking industry and other actors in the financial system to contribute to this initiative, with concrete vision and products, taking into account that you can play a special role in effectively mobilising remittances. reasserting our institutional support and commitment for this initiative, i am confident that this will be an on - going dialogue to facilitate every undertaking in the aspect of remittances. thank you for your attention! 2 / 2 bis central bankers'speeches | 1 |
will be published and posted on the bank's website on 11 december. strengthening resiliency at the beginning of my remarks, i spoke briefly about the need to strengthen the resilience of our financial system. as i have already noted, in canada we have taken many of the correct steps, some beginning 20 years ago, as we worked to strengthen the supervisory system for individual financial institutions. the coordination among domestic agencies with an interest in the financial services sector is based on a long history of effective collaboration and on a common understanding of where mandates interact. yet there is still work to do so that we can be even better prepared the next time a crisis crashes onto our shores. history shows this is inevitable, given the difficulty investors have in going against the crowd and resisting the extremes of heady optimism in good times, and fear and even panic in bad times. we also have statutory responsibility for the oversight of risk containment measures in systemically important clearing and settlement systems. this infrastructure has continued to function very well throughout the global turmoil. given that inevitability, it is imperative that we address the weaknesses in the global financial system and in the regulatory and supervisory architecture that were exposed by the current crisis, if we are to increase the resiliency of the financial system to shocks and better support economic stability. the financial stability forum has examined lessons from the current crisis and made a number of recommendations earlier this year aimed at enhancing market and institutional resiliency. work continues under the guiding principles of the fsf, to encourage a financial system that : β’ operates with less leverage ; β’ is immune to the misaligned incentives that contributed to the current crisis ; and β’ has stronger oversight and greater transparency so that risks can be more readily identified and dealt with. collectively, we must find ways to improve the transparency of complex products traded in financial markets, so that investors are better able to assess the risks they take on. we must also examine how best to strengthen macroprudential regulation ( as opposed to institutioncentered microprudential regulation ) by : β’ bolstering controls on leverage ; β’ encouraging the buildup of adequate capital buffers in good times that can be drawn upon in bad times, thus dampening the credit cycle ; β’ developing mechanisms to provide liquidity to core financial markets so that they remain open ; and β’ expanding the amount of financial infrastructure that is properly risk - proofed, for example, custodial banks and clearing houses for credit default swaps ( cds | . the delors report of 1989 already highlighted that in a single market for financial services within a monetary union, a single monetary policy could make a positive contribution to financial market integration. 2 i consider the banking union to be an important and necessary extension of monetary union. it closes a vulnerable gap in the single currency by harmonising rules for the supervision and resolution of credit institutions at the european level and establishing european supervisory authorities. this is important, regardless of whether you wish to continue monetary union in the spirit of a β maastricht 2. 0 β with decentralised responsibility for fiscal policy or to develop it into a fiscal union with mutualisation of liability and control. in the eurosystem, the ecb provides banks with liquidity in its capacity as lender of last resort. supervision organised purely along national lines is no longer fitting with the times. liquidity assistance from national central banks can have an impact on the single monetary policy. the restructuring or resolution of financial institutions can overstretch the individual member states β financial means. the banking union does not mean an extension of joint fiscal liability, however β its aim is anything but that. rather, the banking union can play a role in establishing the liability principle at the european level in a better way than before. in future, private investors will have to shoulder losses. by contrast, public funding mechanisms may only be used in very tightly restricted exceptional cases, for example if the stability of the entire financial system is at risk. and if public funds have to be used, these should be national funds in the first instance. in this sense, the comprehensive assessment serves to ensure that apparent legacy risks do not fall within the scope of the new supervision and resolution regime. they should instead remain where they arose β at the national level and under national control. so is the banking union the solution to our problems? it could be an important part of the solution. but further steps are needed to make it a success. first, we must β as previously addressed β ensure that private investors are adequately liable for losses incurred. second, the banking union on its own is not the key to better separating the risks of banks and governments. we must also make further progress in regulation and put an end to the preferential treatment afforded to government debt instruments. third, earlier reforms of the financial markets in europe have focused on the banks. it should not be overlooked here that the integration of the markets for capital can make an important contribution to sharing opportunities and risks in | 0 |
in contrast to the typical pattern early in previous business - cycle recoveries, firms have appeared reluctant to take on new workers and have remained focused on cost containment. as opposed to the lingering hesitancy among business executives, participants in financial markets seem very confident about the future and, judging by the exceptionally low level of risk spreads in credit markets, quite willing to bear risk. this apparent disparity in sentiment between business people and market participants could reflect the heightened additional concerns of business executives about potential legal liabilities rather than a fundamentally different assessment of macroeconomic risks. turning to the outlook for costs and prices, productivity developments will likely play a key role. the growth of output per hour slowed over the past half year, giving a boost to unit labor costs after two years of declines. going forward, the implications for inflation will be influenced by the extent and persistence of any slowdown in productivity. a lower rate of productivity growth in the context of relatively stable increases in average hourly compensation has led to slightly more rapid growth in unit labor costs. whether inflation actually rises in the wake of slowing productivity growth, however, will depend on the rate of growth of labor compensation and the ability and willingness of firms to pass on higher costs to their customers. that, in turn, will depend on the degree of utilization of resources and how monetary policymakers respond. to date, with profit margins already high, competitive pressures have tended to limit the extent to which cost pressures have been reflected in higher prices. productivity is notoriously difficult to predict. neither the large surge in output per hour from the first quarter of 2003 to the second quarter of 2004, nor the more recent moderation was easy to anticipate. it seems likely that these swings reflected delayed efficiency gains from the capital goods boom of the 1990s. throughout the first half of last year, businesses were able to meet increasing orders with management efficiencies rather than new hires. but conceivably the backlog of untapped total efficiencies has run low, requiring new hires. indeed, new hires as a percent of employment rose in the fourth quarter of last year to the highest level since the second quarter of 2001. there is little question that the potential remains for large advances in productivity from further applications of existing knowledge, and insights into applications not even now contemplated doubtless will emerge in the years ahead. however, we have scant ability to infer the pace at which such gains will play out and, therefore, their implications for | i will have confidence that inflation is moving sustainably toward that objective. for the reasons i have outlined today, i believe economic conditions are moving in the right direction. if the economy evolves as i am expecting, it will likely become appropriate to begin easing policy sometime later this year. but, as always, my judgment will be guided by the data. let me conclude by acknowledging that the surge in inflation over the past few years means that prices are now significantly higher than they were just a few years ago, even as the rate of price increases has slowed dramatically since mid - 2022. while i am heartened by data showing that nominal wages are now growing at a faster rate than prices, i know many americans are still struggling with high costs. i also know that many americans are facing high borrowing costs. that's why i will be watching the data carefully in the months ahead to ensure that we are on track to achieve both sides of our dual mandate. 1 the views expressed here are my own and not necessarily those of my colleagues on the federal open market committee. 2 these facts are from hugh montag and daniel villar ( 2023 ), " price - setting during the covid era, " feds notes ( washington : board of governors of the federal reserve system, august 29 ). i thank the authors for providing me with updated data through early 2024. 3 for research on firms'price - setting and inflation expectations, see felipe f. schwartzman and sonya ravindranath waddell ( 2024 ), " inflation expectations and price setting among fifth district firms, " economic brief 24 - 03 ( richmond, va. : federal reserve bank of richmond, january ). with regard to overall measures of inflation expectations, anchored longer - run inflation expectations are apparent in the university of michigan surveys of consumers, where 5 - to - 10 - year - ahead expectations remain close to values seen a decade ago ; in the survey of professional forecasters, where 10 - year inflation expectations are close to pre - pandemic norms ; and in other sources. 5 / 6 bis - central bankers'speeches 4 for example, the ratio of the producer price index ( ppi ) for final demand goods to the employment cost index for private goods industries rose roughly 20 percent from the end of 2020 to the middle of 2022. in services, this ratio rose roughly 5 percent. the ratios for both sectors have come down from their peak levels but were still above their end - 2020 levels | 0.5 |
per cent. over half of the comesa members are in the process of opening accounts. the live - mode pilot earlier this month ( october ) has proved a success. and i trust, before the year is out, all our central banks will have signed up as full participating members. for repss is not only the springboard for further liberating trade within the region, but also the point from which we can make that final leap from convergence to monetary union. it is an essential point for the take - off for us to emulate in africa the economic and commercial achievements of our partners in europe, whose proven experience is a continuing source of inspiration to us. this process of institutional capacity - building is essential for promoting overall regional development. this was indeed the foundation of the prosperity of the european common market, as it picked itself up in the 1950 β s, and provided regional support to the poorest countries so that they could also step up as local partners and develop the wider market. post - war europe and our neck out of the woods have this much in common. regional integration under comesa offers a valid way through some of the global challenges that confront us. who can deny the enormous synergy packed in a regional group like comesa, with its combined market access of more than 415 million people? the larger economic space is already encouraging increased inter - and intra - regional trade. in 2008, intra - regional trade within comesa stood at over us $ 15 billion ; it has more than doubled since 2003, and quadrupled during the decade. moreover, with repss, we not only offer faster settlement of payments but we also cut the transaction costs by more than a half, thus giving a further boost to trade. with repss in place, each member - state will have cheaper access to bigger markets and with the common investment area, it will stimulate foreign direct investment in our region. it will help to diversify our productive export base. this must go hand in hand with progress towards the achievement of the millennium development goals on poverty, education, gender challenges, better health, a sustainable environment and more effective partnership for sustainable development. exploiting the economies of regional scale is already strengthening our national resilience to exogenous shocks, reducing the prevalence of conflicts, enhancing our voice in international fora, and improving our terms of trade with other regions, on top of expanding intra - regional trade. in this process, the monetary cooperation programme, ultimately to achieve the goal of | bank financial institutions suggests that a liberal view of what commercial banks are allowed to do is appropriate from the standpoint of financial market development. on the other hand, prudential objectives often favour restricting bank activities to traditional commercial banking β taking deposits and making loans β where the risks are at least relatively well understood. the ugandan banking legislation β the financial institutions act β generally restricts banks to the traditional bank activities. for example, the financial institutions act does not allow banks to engage in the insurance business nor does it allow banks to underwrite shares or act as a securities broker or to deal in securities on their own account, other than for government or bank of uganda securities. i believe that there is a strong case for allowing banks to offer to their customers financial products for which there is a clear market demand from the household and the corporate sectors, provided that this does not undermine prudential standards and, critically, that the risks of these activities can be understood and managed. as such the bank of uganda has recommended to the government that the financial institutions act should be amended to allow banks to provide β bancassurance β and islamic financial products, and if these amendments are enacted by parliament the bank will issue prudential regulations applicable to these products. i hope that this will promote the growth of the insurance market and the market for islamic financial products, which should benefit bank customers in the real sectors of the economy. permitting banks in uganda to offer these products will also align the ugandan banking laws with those in other african countries which have already moved, or are moving, in a similar direction. we should be much more cautious about liberalising our banking legislation to allow commercial banks to engage in proprietary securities trading or brokerage activities. as the global financial crisis has demonstrated, proprietary trading carries potentially large risks for banks ; risks both to the value of their assets and to their liquidity. furthermore, a banking system which is heavily engaged in proprietary trading may be more vulnerable to systemic risk, because of the pro - cyclical impact of marking securities to market and because of the heightened liquidity risks created by proprietary trading. moreover, as was made clear by the global financial crisis, it is very difficult to quantify market and liquidity risk of this nature, which is partly endogenous to the financial system ; financial institutions tend to underestimate these risks and often have powerful incentives to do so if trading activities are very profitable. it is also less evident that all of the proprietary trading activities of | 0 |
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