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trust. let me quote from him : “ the mistake that neo - classical theories make is to consider money a commodity. instead, it is really an institution that is held up by trust : trust in its future purchasing power and trust in the continued convention that payment is complete when money changes hands ( even if this is now something of a metaphor ) ”. trust is important not only as an end in itself, but also because it contributes to economic efficiency. this view, which is now shared by many economists and that curzio expressed in particularly eloquent terms, stipulates that the ultimate objective of institutions such as central banks is to reduce transaction costs. high public trust, by reducing transaction costs, raises economic efficiency and citizens ’ welfare. a high degree of trust by citizens is ultimately the most important safeguard of central bank independence in the long term. legal provisions for central bank independence are important, but not as important as public trust over the long term. 3 with a high degree of trust, central banks will be able to successfully deal with any potential risks for central bank independence stemming from the use of non - standard measures, for example. transparency and accountability are also important pillars of central bank independence and the ecb places a high value on them. together with delivering on the mandate, they also form the cornerstone of public trust in central banks. the ecb enjoys a high degree of independence in the international comparison, which is matched by stringent transparency and accountability requirements. indeed, we regard accountability as just “ the other side of the coin ” of central bank independence. looking ahead, central banks should get used to receiving closer scrutiny and in my view should not eschew even higher standards of transparency. it is not surprising that the use of new and non - standard tools attracts closer attention and sometimes even criticism. how do these considerations apply to the unique case of the euro area? the monetary union is an example of what curzio called a “ consortium regime ” where monetary sovereignty is permanently transferred to a supranational level. as a consequence, price stability is defined for the euro area as a whole. the challenge for the ecb is to maintain public trust in a multinational environment, in particular when there is a significant degree of heterogeneity in economic structures and preferences. trust is intimately linked to acting within the mandate. the ecb is operating and shall operate only within this mandate. a key part of the ecb ’ s aim to retain and build | mr heikensten speaks on the euro and european economic policy speech by mr lars heikensten, first deputy governor of the sveriges riksbank, the swedish central bank, at merita - nordbanken in malmo, sweden on 16 june 1999. the single european currency, introduced at the beginning of this year, marks a major change for the economic policies of countries in the euro area. the clearest example is, of course, the transition to a single monetary policy. the proper functioning of the monetary union in the long term presupposes that the new european central bank succeeds in making its policy and the euro understood and credible. important factors in this context are how the new central bank chooses to work, how monetary policy is continuously formed and how it is communicated to the general public and to markets. however, a well - constructed monetary policy and a central bank that acts wisely are not sufficient to ensure that the union functions in the longer run. if growth and employment in the euro area are to be as high as possible without jeopardising price stability, all the components of national economic policies will have to pull together. the fiscal, structural and labour market policies of the individual countries influence both the conditions under which the new central bank is operating and, to the highest degree, europe ’ s future prosperity. a framework exists for this joint effort. some common rules, for example the stability and growth pact, have been constructed to ensure that national fiscal policies do not pose problems for the union as a whole. there is also a continuous discussion of economic policy in various fora, of which the foremost are the ecofin council, made up of the ministers of finance and economy, and its subordinate committee, the economic and financial committee, which also includes representatives of the national central banks. the euro countries ’ ministers of finance and economy also meet in what is know as the euro 11 council. this framework has been finalised in principle but is being reassessed continuously in the light of new challenges. economic activity in the euro area this spring has been weaker than anticipated and this has been accompanied by growing disparities between national growth rates, budget balances and inflation. as a result, a number of central questions about how the monetary union functions have quickly come to the fore in the member states ’ discussions. although sweden is not participating in the euro area, developments there will affect us. this is a large currency area in our immediate vicinity with which we have | 0 |
you can count on it : happy new year to you all and to our country! 3 / 3 bis central bankers'speeches | . i would like to welcome the efforts that you have made to anticipate these consequences. the banque de france and the acpr, in liaison with the european authorities, will by the end of march take all necessary measures in the framework of the draft law “ empowering the government to take steps to prepare for the withdrawal of the united kingdom from the european union ”, which will be re submitted to the french senate tomorrow. beyond brexit, each sector faces its own regulatory issues : basel iii and solvency ii. for banks, the key issue of the crr / crd package is the transposition into european law of the basel iii agreement, which was obtained after much wrangling on 7 december 2017 and properly completed with market risks on monday in basel. it will have to take into account european specificities – including those of french banks – while maintaining the principle of maximum harmonisation, which is essential to the deepening of the banking union. for insurers, the challenge for this first half of 2019 is to prepare the 2020 solvency ii review. the acpr and the ministry of the economy and finance will coordinate an open and comprehensive assessment in order to identify avenues for reform : on equity holdings and long - term investment, on excessive volatility, on simplifications of the prudential framework, including its reporting, etc. however, this supposes a collective involvement of professionals, which i call for tonight, and european convergences, which we will endeavour to achieve. i would like to come back to a 2018 innovation, which contributes to financial stability : the decision taken in june to introduce a “ countercyclical buffer ” for banks at the minimum rate of 0. 25 %. it is not a matter of curbing credit today, but rather of building up reserves that would be available in the event of a reversal of the cycle tomorrow. fortunately, annual credit growth has remained very dynamic since june – at 5. 5 % of which 6. 1 % for smes : the french high council for financial stability is therefore ready to raise this “ buffer ” moderately as soon as necessary. however, the new risks are technological as well as financial. cybersecurity must be a concern for all public and private players. this will be a priority of the french presidency of the g7. 3 – my third and last wish is for inclusive finance the yellow vests movement has given rise to unacceptable violence – including against bank and insurance | 1 |
serious questions about what bank regulators and other government authorities - most notably law enforcement agencies - expect of bankers. today, i want to provide some background information and describe what the federal reserve is doing, in coordination with the justice and treasury departments, to clarify expectations and dispel misconceptions about compliance with the bank secrecy act. but first i want to emphasize an important point about the bank secrecy act : implementation of the act has traditionally been accomplished through a partnership among banks, supervisors, and law enforcement authorities. the law requires reports and recordkeeping that is useful to all these entities. further, the law capitalizes on the role of banks in payment systems. as collectors of financial information, banks are in a good position to identify questionable or suspicious payments or activities. for the past decade, the key obligation of banks within this partnership has been the filing of suspicious activity reports, or sars, in accordance with regulations issued by the u. s. department of the treasury and all of the federal banking and thrift regulators. the agencies'rules require banking organizations to file sars to alert law enforcement authorities and federal bank supervisors about a known or suspected violation of law, or about any suspicious activity being conducted at, by, or through a bank, thrift, or credit union. by filing sars, banking organizations put critical information into the hands of the proper law enforcement authorities in a timely and effective manner. since the sar system was started in 1996, banking organizations have filed more than 1. 7 million sars. that is an enormous amount of cooperation and information sharing. however, recent criminal investigations and prosecutions based on bank secrecy act and sar reporting violations have attracted significant industry attention. most importantly, these cases have generated complaints from the financial industry about the increased burden of bank secrecy act compliance, as well as the uncertainty of future requirements - particularly for the filing of sars. believing that regulators and law enforcement authorities have set a zero - tolerance level for sar - filing deficiencies, banking organizations are concerned that in certain situations failing to file a sar could result in a criminal prosecution. bankers are telling us that regulatory criticism and criminal prosecutions based on sar - filing deficiencies can produce collateral consequences. for example, banks are tending to avoid customers, such as money transmitters and check cashers, who present perceived heightened risks. yet the closing of accounts for these types of businesses is effectively a denial of banking services to many categories of legitimate customers. banking organizations have also begun to file " | . for a more complete discussion of the greatly distilled account here, see the sources in note 9. - 10 believing that signs of rising inflation would soon appear. and meeting after meeting, inflation gradually declined. in retrospect, it may seem odd that it took great fortitude to defend “ let ’ s wait one more meeting, ” given that inflation was low and falling. conventional wisdom at the time, however, still urged policymakers to respond preemptively to inflation risk - - even when that risk was gleaned mainly from hazy, real - time assessments of the stars. with the experience in the new - economy period, policymakers were beginning to appreciate that, with inflation expectations much better anchored than before, there was a smaller risk that an inflation uptick under greenspan ’ s “ wait and see ” approach would become a significant problem. risk management in the face of shifting stars given what the economy has shown us over the past 15 years, the need for the sort of risk - management approach that originated in the new - economy era is clearer than ever before. that approach continues to evolve based on experience and the growing literature on monetary policy and structural uncertainty. experience has revealed two realities about the relation between inflation and unemployment, and these bear directly on the two questions i started with. first, the stars are sometimes far from where we perceive them to be. in particular, we now know that the level of the unemployment rate relative to our real - time estimate of u * will sometimes be a misleading indicator of the state of the economy or of future inflation. second, the reverse also seems to be true : inflation may no longer be the first or best indicator of a tight labor market and rising pressures on resource utilization. part of the reason inflation sends a weaker signal is undoubtedly the achievement of anchored inflation expectations - 11 and the related flattening of the phillips curve. 14 whatever the cause, in the run - up to the past two recessions, destabilizing excesses appeared mainly in financial markets rather than in inflation. thus, risk management suggests looking beyond inflation for signs of excesses. these two realities present challenges. the literature on uncertainty reviewed at the 2003 symposium - - and much refined since then - - provides important advice for how policy should respond, although not yet, in my view, an explicit recipe or rule that a prudent central bank should follow. 15 the literature on robust rules, such as so - called difference rules, for | 0.5 |
need for re - typing data in the payment order. we have also enabled instant payments at merchant pos, both physical and online. several online traders have enabled instant payments in their web shops ( including stores selling technical devices but also, to my great pleasure, local publishing houses and bookstores ). financial service consumers in the republic of serbia are among the first in europe to be able to conclude distance financial contracts, with full transparency, security and protection of their rights. it is now possible to open a payment account, apply for a payment card or loan without going to a bank. in 2020, we had 71. 5 thousand distance contracts, which is roughly 62 % more than in 2019, with over 6, 000 of these contracts concluded using video - identification of the consumer. and yet, let me add another thing. innovations make life easier. innovations save time, our most valuable resource. but technologies should be in the service of people, and not the other way round. they are a means to an end, and not an end in themselves. technology alone is not able to solve major economic challenges : it cannot set priorities or make decisions on spending or investment. i believe you will agree that knowledge and human capital are among the key drivers of development and change in the 21st century. dear friends, timely measures taken as soon as the covid - 19 crisis broke out prevented a spiral of negative events triggered by psychological effects and panic reactions of market participants from happening. and we were able to respond vigorously because in the prior period we have made serbia stronger and reinvented serbia ’ s image in the world. 3 / 4 bis central bankers'speeches it is our view that the successful mass vaccination, owed to the efforts of president vucic, will help preserve the health of our citizens and contribute to an even faster recovery of our economy. we can and must be proud of the fact that in this most important respect – because human lives are at stake, serbia has demonstrated full solidarity. as so far, the nbs will at all times be there for our citizens and businesses, so that we can last long and prosperously. once again, congratulations on the successfully organised conference! i wish you all the best in your future work! 4 / 4 bis central bankers'speeches | radovan jelasic : provision of credits to small and medium sized enterprises in serbia speech by mr radovan jelasic, governor of the national bank of serbia, at the roundtable organized by “ ekonomist ” magazine on provision of credits to small and medium sized enterprises in serbia, held at the national bank of serbia, belgrade, 13 june 2007. * * * ladies and gentlemen, allow me to welcome you on behalf of the national bank of serbia on the occasion of conference on medium and small size enterprise crediting in serbia. i would like to discuss two related subjects – stability of prices, i. e. inflation, and the role of the nbs in providing credits to finance small and medium sized enterprises. stability of prices and business environment represent one of the key conditions for the success of economy as a whole and particularly so for the success of small and medium - sized enterprises. in contrast to large enterprises that have “ connections ”, access to insider information and are more than aware of their economic and political power, medium and small sized enterprises are usually treated as an ornament, more as a social than economic category – and that serves them no purpose. as for stability in prices, it is currently at the level most people do not remember ever having seen before because, back than, they were either not yet born or were not really very much interested in such matters at all. inflation today, after 44 years to the day, matches the level recorded in 1963. in may this year, year - on - year, the rate of headline inflation equalled 4. 4 % and core inflation reached 3. o %. at the same time, our economy has been growing at the rate of around 7 % ( first quarter 2007 over the same period a year earlier ) and displaying a greater abundance and variety of cheap credits than seen in serbia in a long time, the exchange rate for the dinar has been floating freely for over three months now without any interventions from the nbs, and our foreign exchange reserves have grown in excess of us $ 12. 2 billion. stability seems to have brought about a number of unexpected effects of “ operating in a normal business environment ”, which almost whole of our economy has kind of grown unaccustomed to in the course of these last 44 years, such as the facts that : • market implies competition, glorifies success and puts a persistent pressure on increase in productivity. one can no longer get by with phrases like : | 0.5 |
an exploration of several avenues for mitigating them and this should, to my mind, not exclude the possibility of monetary policy actions. i ’ m not saying that a central bank should target asset prices per se. stock prices and real estate prices rise and fall for many reasons. in my view, however, a central bank needs to be observant when notable increases in asset prices are one of several imbalances that are building up even if inflation in goods and services does not show any sign of rising. such imbalances could be a combination of strong credit growth, rapidly rising investment and a marked deterioration in the private sector ’ s financial balance. i do not mean to imply that determining when such a situation is on the way is particular easy. my point is that monetary policy should not be excluded a priori in a scenario like this. there are many other difficult assessments that central banks have to make. here i am thinking about variables like the economy ’ s potential growth rate, the output gap and the nairu etc. why should identifying asset market misalignments, excessive credit growth and a rapid decline in private financial balances be more difficult than forming an opinion about variables such as these? my view about monetary policy in this respect is of course closely bound up with my experience of the swedish banking crisis, but it is also in line with a central bank ’ s mandate to achieve long - run price stability. if anything, a financial crisis substantially increases the risk of outright deflation after some time. the central bank could manage this risk in two ways : by at least trying to prevent the bubble from building up by tightening monetary policy at an early stage, and then by loosening monetary policy aggressively if a bubble builds up and bursts anyway. to my mind, both such actions would be in line with focusing on long - run price stability, whether the central bank follows an explicit or an implicit inflation targeting approach. although i will be leaving my job as governor of the bank of sweden towards the end of this year, i have no qualms about forecasting that financial stability will remain on the agenda and be a key challenge for financial authorities for many years to come. | years. this leads to my third question : is all of this monetary stimulus simply sowing the seeds of the next financial crisis? the side effects of aggressive and prolonged monetary stimulus are well known – it promotes excessive risk - taking in financial markets and excessive borrowing by individuals. these are the very ingredients that led to the 2008 financial crisis in the first place. accordingly, this question merits a serious response. to begin, we knew back in 2008 that stimulative monetary policies would encourage people to borrow more to buy more homes and cars. that is why we do it – to buffer the downturn in the economy. this happens in every business cycle, not just this one. what distinguishes this cycle is its duration, which is leading to a buildup of financial stability risks over time. we study these risks in detail in our financial system review, which is published twice a year. the next issue will be released on 10 december. importantly, the world has changed since 2008. a key commitment of the g - 20 in 2008 was to strengthen the global financial system. that work is very well advanced, and the system is far better capitalized and more resilient today. furthermore, there have been a variety of macroprudential policy changes that have made the system safer. here in canada, for example, we have strengthened the rules around the mortgage market in several ways. those changes, combined with very high - quality underwriting even before those changes were made, make the canadian situation very different from what we saw in the united states just before the crisis. that being said, some critics would still say that we are running the risk of creating the next financial crisis through our actions. i might ask in response : what is it you would have us do, then? as the central bank, we only have one real channel of influence, which is to set short - term interest rates. right now, we are providing monetary stimulus sufficient to bring inflation sustainably to our target within a reasonable time frame, around two years from now. to argue that we should instead set interest rates in a way that reduces financial stability risks, then, is clearly a call for higher interest rates. let ’ s walk through a thought experiment together. what would our world look like today if, instead of keeping interest rates low to stimulate the economy, both canada and the united states had moved their policy rates back up to neutral at the beginning of 2011? we bis central bankers ’ speeches estimate that the neutral rate | 0 |
were unwilling to reduce it below zero. therefore, banks have been reluctant to increase the remuneration of retail deposits until the margin between market and deposit rates has returned to more normal levels. additionally, the current ample liquidity available to commercial banks reduces the pressure on them to increase the remuneration of retail deposits. 14 it should be noted, however, that a slower pass - through this result, ho wever, masks a significant degree o f hetero geneity acro ss co untries : th e share o f ho useho ld debt with interest rates that reset within a year stands at 76 % in italy and 71 % in spain, but just 9 % in france and 11 % in germany. in spite o f the sluggish respo nse o f the remuneratio n o f retail depo sits, the pass - thro ugh o f market rates to retail lending rates in the euro area has been similar to in the past fo r mo rtgages, whereas in the case o f lo ans to non - financial co rpo ratio ns it has been mo derately faster, acco rding to banco de espana staff analysis. to deposit rates may also have dampening effects on household spending, by slowing down the increase in savers ’ financial income. on the other hand, certain factors point to a potential faster monetary policy transmission compared to past episodes. first, the current hiking cycle comes after the negative shock prompted by the pandemic, which adversely impacted the financial situation of firms by increasing their debt levels. this leaves them more vulnerable to interest hikes rates and their expenditure decisions may be more sensitive to monetary policy changes. second, there is some evidence that monetary policy tightening is now impacting firms ’ financing conditions more forcibly than in the past. in particular, there has been a shift from bank to bond funding in the last decade, with bond debt increasing from 16 % to 24 % of non - financial corporations ’ total debt. the faster policy pass - through to bond rates than to bank rates implies faster transmission. moreover, loan origination is contracting rapidly judging by the short lag from the first rate hike. the evidence available shows a strong econometric relationship between bank lending survey ( bls ) credit standards and a so - called credit impulse a couple of quarters later, and likewise between the credit impulse and gdp growth. 15 the first link in the chain – between the bls and the | 17. 1 % year - on - year due to the uneven passthrough of higher interest rates to loans and deposits. in the european comparison, the main spanish banks stood out for their strong net interest income ( above the 75th percentile in the country distribution ) and for fee and commission income and operating expenses in line with the european median. - impairment losses rose considerably in 2022, driven by higher provisions in banks ’ business abroad. in spain, impairment loses continued along the downward path of recent years, decreasing by 20. 7 % in 2022. as a result, the ratio of impairment losses to operating income in spain stood at one of its lowest levels in recent years. - return on equity ( roe ) excluding extraordinary items was 10. 2 % in 2022, 140 bp higher than in 2021 and up almost 300 bp on its 2019 level ( and therefore higher than the cost of equity ). - ordinary profit from business abroad rose significantly, driven by the strength of the business in latin america. thus, the ordinary profit obtained by the spanish institutions with the most international activity exceeded prepandemic levels. - revenue from the windfall tax on banking sector profits in 2023 is expected to amount to 5 % of the 2022 net consolidated profit. - dividend payments exceeded €7. 2 billion in 2022, with a payout ratio of 40 %, similar to before the pandemic. the rise in the profit ratio per share and the sharp increase in share buy - backs made by some banks also stand out, the aim being to subsequently cancel the repurchased shares and reduce share capital, thus providing additional remuneration for shareholders. banking sector solvency - the cet1 ratio decreased by 25 bp in 2022 with respect to 2021, albeit holding above pre - pandemic levels. the decline in 2022 was on account of the growth in total assets ( 2. 6 % ) and the increase in risk - weighted asset ( rwa ) density ( 53 bp ), which could not be offset by the 2. 1 % rise in cet1 capital. - the change in cet1 ratios in 2022 was also uneven across banks. the three largest banks, which at december 2022 accounted for 76 % of rwas, saw their ( rwa - weighted ) average cet1 ratio fall by 33 bp, 5 while at other banks it increased by 8 bp. - spanish banks ’ cet1 ratios remain at the low | 0.5 |
##hang of unsold homes, building activity will remain subdued through most of this year or longer. nonresidential construction will likely continue to contract this year, due to high vacancy rates in that sector. these are important negatives but by themselves should not derail the recovery. looking at the economy more broadly, inflation has drifted lower in recent months, which is typical following a recession. while energy prices have kept consumer price inflation around 2 percent, inflation in non - food and non - energy prices – which is core inflation – has been running at rates of around 1 percent. these inflation rates are likely to continue for the next year or so. however, as the economic recovery continues or picks up momentum, i expect inflation to drift higher. as for risks to this outlook, there are several. the fluid situation in greece and europe reminds us to be wary. the european debt problems have increased uncertainty and a renewed aversion to risks, and are causing investors to flee riskier assets such as stocks and junk bonds for safer assets such as u. s. treasury debt. these shifts will have a modest negative net effect on u. s. economic growth in the near term. as an aside, i would note this episode illustrates the longer run danger of running persistent budget deficits – a situation that we must soon address in the united states. monetary policy it is within the context of this outlook and its longer run implications that the federal open market committee must balance its objectives of supporting short - run economic growth and long - run stable growth and low inflation. it also is within the context of this outlook and these objectives that policy must be normalized, as reflected in the level of real interest rates and the size and composition of the federal reserve ’ s combined balance sheet. achieving such multiple objectives requires deft handling. but most certainly, the first step toward a more normal policy is to move policy rates off zero, back toward neutral. in saying this, i have no illusions about the challenges of moving away from zero. but in my judgment, the process should begin sooner to avoid the danger of having to over compensate later, as so often happens in policy. i would begin the normalization of policy by outlining for the public a two - step process : first, the federal reserve would continue to unwind its extraordinary policy actions implemented as a response to the financial turmoil that began in the fall of 2008. the market ’ s need for these facilities has eased and we have closed most of | ‘ disaster risk financing : the role of insurance in new public - private partnerships ’ speech by luigi federico signorini president of ivass ania insurance high level conference rome, 20 september 2024 ladies and gentlemen, once again we are seeing dramatic images of floods, damages and losses. the images that we just saw in the walk - in video for this conference are surely older, but could have been taken yesterday. our hearts and thoughts are with those that have been hit, not just this time but also in the previous months, some repeatedly. we must hope that human life has been spared this time, although i understand that as of this morning some are still missing. this is another reminder of the seriousness of the climate issue. we cannot be in denial. the accelerating change in the earth ’ s climate has increased the frequency and intensity of river and coastal floods, landslides, droughts and forest fires worldwide. europe, in particular, is warming quite fast ; according to copernicus ( the european satellite monitoring system ), the average temperature for european land in august 2024 was more than 1. 5°c above the 1991 - 2020 average for the same month. in addition to climate - related events, other natural disasters such as earthquakes, tidal waves, volcanic eruptions and bradyseism can have a dramatic impact on the economy and society. the issue of natural disasters and, more generally, catastrophe risks, once confined to scholars of the ‘ hard ’ sciences, such as physicists and biologists, has become an area of concern for economists, sociologists and lawyers as well. as a consequence, one sees among other things more and more attempts at measuring the economic impact of natural events in a reliable way. the 2023 european state of the climate report estimates the direct damage to property generated in 2023 by floods, inundations and fires ( disregarding, that is, indirect effects ) at more than €13 billion, and the human toll at 151 deaths1. over the past few years, there has also been a growing attention see the european centre for medium - range weather forecasts - ecmwf - 2023 european state of the climate. in international fora2 to natural disasters as a potential source of systemic financial stability risk. the literature on disaster relief suggests that a purely ex - post approach to damage repair and loss compensation is likely to be sub - optimal. prevention is of course necessary at various levels. in my speech, as befits the occasion and | 0 |
s s mundra : research imperatives for the indian banking sector inaugural address by mr s s mundra, deputy governor of the reserve bank of india, at the 1st banking research conference, organized by gokhale institute of politics and economics and ibs ( icfai business school ) in collaboration with ibs hyderabad, hyderabad, 29 january 2016. * * * assistance provided by smt. rekha misra, shri sanjeev prakash, shri radheshyam verma and ms. anwesha das is gratefully acknowledged. introduction 1. dr. j. mahender reddy, vice chancellor, icfai foundation for higher education ( ifhe ) university ; shri s. v. seshaiah, director, ibs, hyderabad ; members of faculty from gokhale institute of politics and economics, pune and ibs, hyderabad ; delegates of the research conference ; ladies and gentlemen! i am grateful to gokhale institute of politics and economics, pune and ibs, hyderabad for inviting me to deliver the inaugural address at the 1st banking research conference this morning. both are premier educational institutions of the country. ibs hyderabad has made important contribution in the field of management education and research in a very short period of time. gokhale institute of politics and economics ( gipe ), pune, is one of the oldest research and training institutes in economics in the country and continues to be an institute of repute for economic research. i complement their efforts towards education and research. 2. banks are the bedrock of financial system in all emerging economies and india is no different. the banks in india have been quite effectively performing the vital function of financial intermediation. the health of the banking system and that of the economy share a symbiotic relationship and at this juncture when the global growth is still stuttering, the banking system also faces a multitude of challenges. each of these challenges has different genesis and probably different solution. but, challenges also throw up opportunities. in order to overcome current and impending challenges and also to exploit emerging opportunities, it is imperative that the sector devotes adequate time and resources in conducting meaningful research. at this stage, when the banking sector is on proverbial “ crossroads ”, i feel this banking research conference is very timely. i am sure that the deliberations in the conference would provide new insights into the issues facing the banks and also pave the way for further research which would generate fresh ideas for improving the efficiency | incentives. protocols and best practices for such eias may have to be drawn up taking into account the work done in the area of ascribing monetary values to the costs of threats to ecosystem and biodiversity and the benefits from such ecosystem services and biodiversity. i would like to take this opportunity to draw attention to hon ’ ble union finance minister ’ s budget speech for 2010 – 11, in which he announced a number of measures for addressing environment / climate change issues and preserving biodiversity. i am sure all concerned will take advantage of these announcements, actively support and involve in the initiatives for protecting ecosystems and preserving biodiversity. finally, i would like to close with a quote from the speech that hon ’ ble prime minister dr. manmohan singh delivered on june 30, 2008 while formally launching india ’ s national action plan on climate change : “ india has a civilizational legacy which treats nature as a source of nurture and not as a dark force to be conquered and harnessed to human endeavour. there is a high value placed in our culture to the concept of living in harmony with nature, recognizing the delicate threads of common destiny that hold our universe together. the time has come for us to draw deep from this tradition and launch india and its billion people on a path of ecologically sustainable development ”. it gives me great pleasure to inaugurate this teeb d2 workshop and wish it all success. thank you. | 0.5 |
broader public policy aspects. one is that as a dominant owner, the conduct of the government will play an important part in these changes. second, and more important, the type of signals that are required to build a consensus with the trade unions will arise out of public policy in general and public policy not necessarily restricted only to banks. in this context, how the public policy aligns itself towards efficiency and incentive / disincentive measures becomes relevant. there is a need for a clear signal from public policy and we have to actively seek such an appropriate policy. we must not hope that we will be in a position to fix things in an isolated manner for too long. in a way fixing things in banking, especially restricted to a few banks, in an isolated manner may limit or even jeopardise the extent to which we can move forward in the future. a reference was also made by dr sushil chandra to work practices. once we accept the work force as “ given ” in indian conditions, i do not see a very practical way of telling a large work force that they should simply “ go home ”. i strongly believe that the quality of human resource is very high in public sector banks. there is hardly any banking system in the world which is so highly involved in retail banking and which has such high quality manpower as the indian public sector banks. in a way, the tragedy is that the work atmosphere, especially work - practices, have not been very conducive to efficiency. between reduction in manpower and expansion of business, the latter is a better option ; and banks have to create an environment in which they will be able to ensure expansion of business through more redeployment, more training and better incentives. if labour force is given, there is an imperative need to find business to afford their wages, and so public sector banks may have to diversify, namely, sell insurance policies, or sell private mutual fund certificates or do any permissible non - fund based business. since banks have the manpower, they have to learn to treat it as a resource and ensure that it pays for itself. the whole issue again reverts to work practices and unless restrictive practices are addressed to impart flexibility to enable rapid expansion of business through diversification, there may be a threat of decay. the flexibility and autonomy for each bank to find unique solutions is important because there is no “ fixed solution ” for all institutions and all problems. for instance, i hear that there are | sort of peep into the future. unlike thailand or korea, our bank restructuring will be a lot more domestically led and the enabling environment will have to be created by the government and the rbi. in the presentation on bank restructuring in india in terms of tables and graphs, one finds both banks and financial institutions participating together. in other words, when we talk of restructuring in the banking system, perhaps it is necessary to focus on restructuring in the financial sector and the financial system as a whole and not look at the banking industry alone internally. almost all the illustrations, which have been presented, except the two cases of mergers, have such a mix and in future perhaps the coverage would include the insurance sector, also to which a reference was indeed made. chairmen ’ s session during the session, discussion of the chairmen of banks, two major points or themes came up very openly and one more not so openly. one, there was virtual unanimity on the need for flexibility in dealing with the staff, in dealing with issues, in dealing with operational procedures such as signing of drafts, etc. the second theme was on the need for autonomy, especially in areas such as recruitment of personnel. the most critical issue obviously is to ensure the necessary operational flexibility and autonomy, which are imperative if banks are to be in a position to face the future confidently. more importantly, the implied suggestion was that in a very broad sense, both the government and the rbi as regulators, should attempt some sort of regulatory refocusing in the direction of greater flexibility and autonomy. concluding remarks i will conclude by commenting a little more on these three aspects, namely flexibility, autonomy and regulatory refocus. as you have discussed, be it the use of it or hr, bank managements require flexibility. the more one listens to the various discussions, the more one is convinced that most of the suggestions fall under the category of flexibility. second, is the autonomy ; and, one question here is how does a business executive operate with a small degree of autonomy and compete with others in the non - public sector. this is operational autonomy, which could be accorded by making the public sector banks genuinely board - run companies. the other question, and a more important one, relates to autonomy to ensure some organisational transformations. for instance, there was a hint in the discussion that in rural areas, existence of bank branches, cooperatives, rrbs and local players results in avoidable duplication. in my view, these | 1 |
##ness of european banks at the international level. the other major initiative at the european level to strengthen financial integration is the capital markets union project which aims to boost investment in the eu. speeding up this union will not only foster growth but will also enhance risk - sharing across european countries and mitigate the procyclicality of bank financing. we, at the banque of france, support in particular three initiatives which should have a decisive impact on cross - border investment : first, the harmonisation of the insolvency procedures framework and its implementation by companies to promote investment in equity across europe. second, the development of pan - european individual retirement savings products to increase workers ’ mobility and offer a new source of long - term financing for european companies. third, the reinforcement of esma which is necessary to supervise capital markets in a harmonised way, while duly involving national authorities when appropriate. completing the banking union and accelerating the capital markets union will therefore be essential in order to lay the basis for a sound, diversified and integrated financial intermediation. yet, we should go even further and achieve a real “ financial eurosystem ”, made up of stronger and pan - european financial institutions and shared market infrastructures. brexit, in this sense, represents an opportunity. let ’ s be clear : there will not be a single city for the continent, but rather an integrated polycentric network of financial centres, with specialisations based on areas of expertise. our ability to adequately regulate and supervise these changes in financial intermediation will be determinant for growth and innovation. europe must effectively transform its own savings, in order to enhance its ability to finance the real economy. this is what governor villeroy de galhau calls the financing union for investment and innovation. this involves better steering the euro area ’ s abundant savings to absorb shocks within the euro area more effectively and 8 / 9 to meet investment and innovation needs in fields such as digital technology, energy transition and the equity financing of smes. i would like to conclude my speech by quoting bill gates : “ we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. don ’ t let yourself be lulled into inaction ”. 3 the banque de france tries to heed this warning. although we do belong to the ( very ) “ old world ” – the banque de france was created more than 200 years ago by | amse | aix - marseille school of economics marseille, 11 december 2018 speech by denis beau first deputy governor “ trends in financial intermediation and implications for the regulation and supervision of the european financial sector ” 1 / 9 ladies and gentlemen, dear students, it ’ s a pleasure to be at the aix - marseille school of economics today to discuss the trends affecting a key channel of the financing of the real economy : financial intermediation. this topic is well chosen the year of the tenth anniversary of both lehman bankruptcy and nakamoto ’ s paper underlying the bitcoin. this is not just a coincidence. for crypto - assets ’ proponents, the “ old world ” of bank - centric financial intermediation failed in 2008 and had to be replaced by disintermediated peer - to - peer systems like bitcoin. where do we stand now? central bankers, regulators and supervisors have worked to strengthen the traditional bank centric model of intermediation, and the highly intensive finalisation of basel iii has concluded ten years of regulatory efforts in that field. banks are stronger and more resilient than before 2008. at the same time, quite ironically, the bitcoin itself has generated the biggest bubble ever, which is now bursting. so, in 2018, are there new developments in financial intermediation? yes, indeed. a number of factors contribute to push the european bank - centric model towards a more diversified, unbundled financial intermediation model. hence, i will focus the first part of my presentation on those drivers and their impact on financial intermediation ( i ). i will then highlight the financial risks that go hand - in - hand with the changes underway ( ii ). finally, i would like to emphasise that a safe move towards a more diversified intermediation model as we see it developing cannot be achieved without further financial integration at european level. to that end, advancing the european regulatory agenda is of prime importance ( iii ). 1. from bank - centric financial intermediation towards unbundled financial intermediation in the digital era to date, in europe, we have been accustomed to a bank - centric intermediation model. however, this model is being increasingly challenged by new players emerging in the digital era, the so - called fintechs and bigtechs, as well as by the growing weight of the asset management industry. we thus need to prepare to new intermediation models, | 1 |
dimitar bogov : what could sepa bring for the banking and the real sector in the republic of macedonia speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the event “ what could sepa bring for the banking and the real sector in the republic of macedonia ”, organized by the banking association at the economic chamber of macedonia, in cooperation with the european banking federation ( ebf ), skopje, 13 may 2014. * * * honorable mr. stavreski, vice president of the government of the republic of macedonia and minister of finance, honorable mr. janchevski, chairman of the banking association of the macedonian economic chamber distinguished guests from the banking sector in the czech republic dear representatives of the banking and the real sector in macedonia ladies and gentlemen, one of the primary functions of each central bank is to create conditions for stable, reliable and efficient operation of the payment systems. to achieve this function, and according to the best practices of central banks of the eu member states, the national bank performs four basic roles in the payment systems : operational, supervisory, development and catalyst role. the successful performing of these functions is closely related to the importance of payment systems for a national economy. the proper functioning of the systems for large payments, which are owned and managed by central banks, is important for the effective monetary policy conduct. in circumstances of permanent changes in the infrastructure of financial markets, the supervisory role of the central bank regarding the payment system contributes to the maintenance of financial stability. additionally, the systems for large payments contribute to the coordination of the direct participants in the national payment system, such as the treasury of the ministry of finance, banks and clearing institutions, ensuring finality of all payments in the national economy. in this way, the national bank maintains the vitality of the payment systems as one of the most important components of the financial and economic infrastructure. in terms of achieving the development and catalyst role, allow me to affirm the strategic approach of the national bank, the ministry of finance and the banking association in the development of the national payment system of the republic of macedonia through the adoption and implementation of the strategy for the development of the payment system of the republic of macedonia for the period 2013 – 2017. our shared vision for the development of the payment systems of the republic of macedonia until 2017 is the modernization and improvement of the operations of payment systems through the application of high - tech achievements and gradual harmonization with the standards and | . a common feature for the current surroundings are disinflationary or deflationary pressures around the globe in light of the fall of oil prices, with potential impact on the monetary policy cycle, additionally increasing uncertainty about external environment. at this point, monetary policy must broaden its scrutiny to involve every important aspect from the external environment, domestic economic cycle as well as structural features important for the future monetary policy stance. the bottom line is that in a dynamic external environment we must take care about structural bottlenecks, regardless of whether they are related to the transitional stage of our economies or induced by the global crisis. i have tried to tackle some of them, which i believe will be discussed further on the high level governors panel or additionally elaborated in the next sessions within the research papers. as i mentioned at the beginning, this is a broad topic, which is very important for the monetary policy transmission effectiveness. therefore, i appreciate your attendance and contribution to our conference, in sharing experiences and broadening our overall knowledge on these issues. i wish you interesting conference and fruitful discussion! bis central bankers ’ speeches | 0.5 |
ahead, the rate of growth can still be expected to accelerate in the world economy and in swedish export markets. developments in equity markets also indicate expectations of a continued strengthening of economic activity in the period ahead. the rise in equity prices around the world, which began in the spring last year, has continued. at the same time, long - term international interest rates have fallen recently. it is difficult to determine how much of this is due to lower optimism about growth in the coming years or if it perhaps is more indicative of lower expectations of inflation. looking ahead, there is reason for some concern regarding developments in long - term interest rates, partly against the background of the weak us public finances. upswing also evident in sweden, but the picture is not entirely clear with that, i am now ready to discuss the swedish economy. allow me to begin by noting that the swedish economic outlook last year changed in approximately the same way as internationally. during the first half of the year, the economic outlook became increasingly pessimistic. in sweden, it was mainly investment that was weaker than expected. the weak economic activity was also reflected in the riksbank ’ s forecasts of inflation. this in turn was a contributory factor in the riksbank ’ s decisions to cut the repo rate on three occasions for a total of one percentage point. during the latter part of the year, however, the outlook became somewhat less pessimistic. in sweden, the weak investment was countered by favourable growth in consumption, both private and public, and a rise in exports. the assessment at the end of the year was that growth had increased gradually in 2003 and would reach 1. 5 per cent. growth in 2004 and 2005 was forecast to be approximately 2. 5 % both years, which on the whole is somewhat faster than what the riksbank considers to be possible in the long term without giving rise to inflation. new swedish data support this scenario, but the picture is still not entirely unambiguous. the national accounts for the third quarter showed higher growth compared with previous quarters. household consumption also rose, as did exports. at the same time, business tendency data are indicating growing optimism among firms during the latter part of the autumn, while retail sales continue to grow at a historically high level. but growth in industrial production was relatively weak in october and november while there was a reduction in the number of new orders. moreover, new estimates of the public finances indicate that public consumption this year may | be somewhat weaker than assumed in december. this is mainly due to the financial situation of municipalities. the municipal sector as a whole is running a deficit, which must be redressed in the years ahead. one issue that has been debated recently is the effects on the swedish economy of the weaker dollar. it is true that the dollar ’ s performance has been weak, but this is not the whole picture. in tradeweighted terms ( tcw ), the krona has not strengthened recently. this is mainly because the krona quite contrary to what many had expected - rather has weakened slightly against the euro. so for foreign trade as a whole, the currency developments should not constitute any great problem. another issue of course is if the weaker dollar, primarily in relation to the euro, could jeopardise the revival in the world economy. neither does this appear likely as long as the adjustment is fairly orderly. as i mentioned earlier, it is probable that growth in europe will be slowed down somewhat, but on the other hand it is likely to be more robust in the us. moreover, the most recent data for the national accounts and foreign trade indicate that we so far rather have been slightly too pessimistic about swedish exports. the most palpable concern is the labour market, where growth has been weaker than expected particularly towards the end of 2003. employment was indeed somewhat higher in 2003 as a whole than we expected at the beginning of the year. but this was primarily because the unexpectedly robust growth in the public sector countered weak growth in the private sector. we have no reason to expect any such pattern during 2004. the strained financial situation in the public sector points to weak employment growth in the public sector, while the economic upswing is likely to be reflected to a rather small extent in a rise in employment during 2004 in the private sector. of course there is a risk that the weak labour market growth will affect households ’ expectations of the future and propensity to consume, which is a risk that we highlighted back in december. the higher the rate of unemployment, the more cautious households are likely to be when it comes to purchasing and consuming. this in turn could entail a risk of lower growth in 2004. nor as regards domestic economic activity is there now reason to make any large revisions compared with our assessment in december. a number of factors are indicating possibly weaker growth, but at the same time there are factors that are pointing in the opposite direction. compared with the picture we had in | 1 |
. 3 the committee must take action to avoid this outcome, specifically through the committee ’ s standards implementation group ( sig ). the sig is initiating this year a peer review process, through which teams of experts will assess the extent to which countries have implemented basel committee standards. while these reviews will focus initially on standards other than capital, such as stress testing, the process should nevertheless provide insight into how approaches and outcomes related to the implementation of basel iii can be meaningfully monitored and compared. the sig has already begun sharing information on the status of basel iii implementation by member countries and is in the early stages of planning comparative work on risk - weighted assets across jurisdictions and banks to promote consistent implementation. as the basel committee moves into this next phase, we will urge the committee to take a comprehensive approach to monitoring processes that includes three elements. first, the committee should begin work as soon as possible to develop mechanisms to implement effective cross - country monitoring. second, this process should go beyond traditional stocktaking exercises to include a careful assessment of the methodologies national regulators use to determine the appropriateness and acceptability of bank practices. third – and here is where the real work will lie – the committee must develop a mechanism to validate the actual risk - weighted assets calculated by individual banks under international capital standards. there are several possibilities for conducting this work. one that has been discussed in the basel committee would be to use tools such as benchmarks and test portfolios, in order to provide an accurate, quantifiable comparison of standards implementation across jurisdictions. another, more far - reaching option would be to use validation teams working under the auspices of the basel committee itself to verify the methodologies used at individual banks to ensure their compliance with international standards. they could use expertise gained through horizontal reviews of institutions to make assessments of individual banks in different jurisdictions. a less far - reaching variant of this option would entail national supervisors collaboratively participating in examinations of specific institutions. as a result of these monitoring and validation processes, outliers ( i. e., banks whose risk weights for comparable assets differ materially from those of other banks ) could be identified so that national supervisors might perform more in - depth analyses of their banks ’ processes and outcomes. this would lead to a greater understanding of the disparity in results for certain institutions or jurisdictions based on their assumptions, data, or risk profiles. there can be legitimate reasons that banks may have different risk estimates for similar portfolios. where di | . the anpr is built on ideas advanced by a broad set of stakeholders, including the nba and mdis. it has been 25 years since we last reformed cra, so it is important that we get it done right. the cra is a critical law, enacted along with other complementary federal civil rights laws during the late 1960s and 1970s, to address redlining and systemic inequities in access to credit and other financial services for minority communities that contributed to dramatic differences in economic access and overall financial well - being. even with these critical laws, the legacy of discriminatory lending and systemic inequity in credit access remains in evidence today. a foundational goal for the anpr is to advance the core purpose of the cra statute. right at the outset, the anpr asks for open - ended feedback on a foundational question : how should cra ’ s regulatory implementation be modified or changed to address systemic inequity in credit access to minority individuals and communities? as leaders in this field, we welcome your feedback on how to strengthen cra implementation to further the statute ’ s core purpose. advancing the cra ’ s core purpose includes strengthening the regulations to ensure that a wide range of low - income and minority banking needs are being met. as part of this objective, cra modernization provides a unique opportunity to carefully - 6examine the mdi provisions in the cra statute to ensure proposed changes to the regulation maximize the benefit and impact for mdi banks and the customers and communities they serve. in the anpr, we placed a priority on strengthening the special consideration for mdis, women - owned financial institutions, and low - income credit unions in the current regulation, as well as adding new proposals based on your feedback. the board believes that any provisions to assist mdis should be clearly defined and applied in cra performance assessments. we consistently heard from mdis and larger banks that there is a lack of awareness of the existing mdi provisions in the cra regulations or a lack of understanding of how collaboration with mdis ultimately “ count ” in a cra examination. in response, the board plans to highlight all mdi special provisions and make the credit they receive more prominent and clear in revised regulation, examination guidance, and other public documentation. in addition, in the anpr, we proposed four specific new mdi provisions. first, the anpr proposes giving banks credit for activities with mdis, women - owned financial institutions, and low | 0.5 |
types of information that was not expected and vast data for investment decisions and market analyses has started to become widespread. 1 it is expected that in the future more information will become available for utilization and will facilitate enhancements in market efficiency, accompanied by initiatives for ensuing privacy and information security. anomalies in the markets it has been well known that, as long as it can be assumed there are efficient markets that do not leave arbitrage opportunities unexploited and there are rational investors, phenomena referred to as anomalies that are not rationally explainable can be observed in financial markets. some of them are market development matters : the calendar effect that finds regularity in market developments according to the specific month or the day of the week, and the small - firm effect that indicates a tendency of difference in expected returns by market value. there are also other anomalies that are to a certain extent understandable as haruhiko kuroda ( 2017 ), " ai and the frontiers of finance, " remarks at the conference on ai and financial services / financial markets, bank of japan. investor psychology, such as " investors'expectations tend to be biased by their past experiences " and " investors'risk appetite could vary significantly depending on their performances up to that point. " there are some fields where instead of being simply regarded as irrational phenomena, an interdisciplinary approach using, for example, psychology, has led to the creation of new theory, such as behavioral economics. changes in market structure apart from daily price movements in the markets, how to identify structural changes including market infrastructures and to incorporate them into analyses has long been an issue. on this point, from the perspective of a practitioner, i feel that there are fields in which, even with an evident structural change, it is difficult to receive support from a systematic theoretical approach, in part due to the high level of expertise required to correctly recognize the relevant facts. for example, as trading through electronic platforms has become mainstream, along with the significant decrease in trading through human brokers such as floor and telephone trading, the time required for the execution of each market transaction has shortened dramatically. under these circumstances, the execution of transactions based on algorithms has become widespread and the weight of high - frequency trading has been increasing in some markets. on the other hand, some institutional investors such as sovereign wealth funds and pension funds, in addition to traditional financial intermediaries and investment trusts, have increased their presence as market participants ; as a result, | development. let me focus on one aspect, which i believe is essential to achieve sustained economic growth : to development of a long - term market in local currency. particularly in the case of economies in transition towards its long - term equilibrium, central banks include on their agenda other specific tasks that their policy actions cannot ignore : the need to increase the depth of the financial system, develop new financial instruments and complete existing markets in local currency becomes a priority. there is a strong consensus about how important this is for the emerging countries. different kinds of factors, at both the macroeconomic and microeconomic levels are noteworthy. among the macro factors, progress in the de - dollarization of the economy and the reduction of vulnerabilities associated with the possibility of sudden stops stand out. this is of special significance because the presence of currency mismatches has been at the root of the most important financial crises ( or has at least contributed to amplify them ). a significant dependence on debt in strong currencies means that countries are more vulnerable to depreciations of their currencies ( which are severely contractive ). also, the development of markets for debt in domestic currency tends to be associated with a better liability management. in fact, the development of a yield curve that serves as the base to develop new products ( like derivatives ), makes it easier to mitigate risks. of the micro factors, it is fundamental to develop a yield curve in domestic currency that reflects the opportunity costs of funding at different maturities, collaborating to achieve more efficient resource allocation. the development of these markets is a more stable source of funding for the financial system. in addition, the countries with deeper domestic markets face a broader variety of policy instrument choices. therefore, the lender of last resort role avoids the limitations observed in a highly dollarized context, for example. likewise, less reliance on external capital flows ( usually at short terms ) allows for more control over the monetary policy. despite the achievements observed during this decade, there is still significant progress to be attained, which is even clearer for latin america. especially as regards the terms of the issues ( so that the change from issuance in hard currencies to soft currencies does not imply excessive currency risk for interest rate risk ) and a larger share for the nominal fixed rate issues ( with the aim of reducing the interest rate risk ). in addition, although the liquidity of the secondary markets for debt has increased in recent years, it remains limited | 0 |
suhaimi ali : leading the change - empowering small businesses to tackle climate change opening remarks by mr suhaimi ali, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the greening value chain ( gvc ) programme rollout, kuala lumpur, 7 march 2023. * * * assalamu'alaikum and a very good morning to distinguished guests. let me begin by congratulating kossan rubber industries berhad and pantas sdn. bhd. for the timely rollout of the greening value chain programme. it is no doubt that climate change is accelerating. dangerous weather events are becoming more frequent and extreme, and global co2 emissions are starting to rise as economies pick up speed post - pandemic. as we gather here today, floods caused by heavy rainfall have been reported across several states in malaysia. with the climate crisis upon us at such a pace, accelerating our actions in responding to climate risk becomes all the more urgent and necessary. ladies and gentlemen, we are on the edge of a climate precipice, close to reaching a 1. 5c tipping point, beyond which the damage to our environment would be irreversible. the increasing frequency of natural disasters also provides a grim teaser of what lies ahead if we do nothing. recognising this urgency, more than 70 countries have set net zero greenhouse gas ( ghg ) emissions targets1, and more and more businesses are also making commitments to reach net zero ghg emissions by mid - century. based on projections, climate inaction would cost the global economy usd 178 trillion over the next 50 years2. it is evident that businesses must transition to be sustainable to keep pace with the global race towards net zero. as an exporting nation, malaysia must also prepare for tightening of climate - related regulations that may be imposed by our trading partners. small and medium enterprises ( smes ) that form 37. 4 % of malaysia's economy3 are the most susceptible. according to report findings by the sustainable finance institute asia 2022, smes stand to lose rm292 billion in revenue due to non - esg compliance4. the silver lining behind these adversities is the immense growth opportunities. studies have shown that sustainability investments reward businesses through higher premiums 5, better brand value, and lower operating expenses6. without the necessary support, the ambition to achieve net zero would be a tall order for smes, which | the technical issues that central banks are working on. it has to be endorsed, among others, by policymakers. they have to make key decisions. a proper legal basis for issuing a digital euro is currently under preparation, with the european union working on an agreement on this crucial topic. 4 future challenges of course, there are obstacles to be overcome before a digital central bank currency can be introduced. let me mention just the most prominent one. the digital euro will be a riskless asset issued by the central bank. therefore, its availability could create incentives for enterprises and households to shift deposits out of the banking sector into digital euros. if bank customers gradually transfer large volumes of their deposits into digital euros, this could have an adverse overall effect on the supply of credit and thus on the real economy. in times of financial turbulence or heightened uncertainty, we 2 / 3 bis - central bankers'speeches might see abrupt and substantial outflows of money from the banking sector, which would also endanger financial stability. to avoid that, there are plans to set a holding limit for the digital euro. the eurosystem will not take over the role of banks. we are planning to issue a digital euro, but not to distribute it. banks will continue to maintain important relationships with their customers. and the digital euro will be a platform for banks to provide additional services. 5 concluding remarks ladies and gentlemen, let me conclude. after launching the preparation phase, we still have a long way to go before we decide whether to issue the digital euro. if we decide in its favour, i would expect it to take four to five years'time until we have introduced a digital euro. if robert c. merton is to be believed, we should not hurry the process. he wrote : " separate and discrete innovations in products and services can be implemented in an entrepreneurial way and rather quickly. innovations in financial infrastructure, however, must be more coordinated ; they therefore take longer to implement and will occur more gradually. " 3 in my view, this statement may well hold for payment infrastructures as well. today, many people still have only a very vague understanding of the goals and framework of the digital euro project. therefore, we have a lot of work ahead of us convincing the public and gaining its trust. i am firmly convinced that the digital euro will be a success. 1 ecb, study on the payment attitudes of consumers in the euro area ( space ), december 2022 2 ecb, a stocktake | 0 |
mr. carse reviews the impact of the asian crisis on the hong kong banking sector speech by the deputy chief executive of the hong kong monetary authority, mr. david carse, at the sixth conference on pacific basin business, economics and finance in hong kong on 28 / 5 / 98. i am pleased to have the opportunity to talk to you about the impact of the asian financial crisis on the hong kong banking sector. the asian financial crisis is one year old this month, though this is a birthday that we do not want to celebrate. the crisis can be dated from late may when the thai baht came under severe pressure. a renewed attack in early july, while we were celebrating the success of the handover in hong kong, led to the floating of the baht, which promptly plunged in value. the contagion then spread to neighbouring economies, and although hong kong was for a time immune, it eventually reached us too. explaining the origins and causes of the asian crisis has become a major growth industry and i have no intention of adding to the debate today. suffice to say that one point on which almost all the commentators are agreed is that weakness in banking systems in the region has been one of the main reasons which explains the intensity of the crisis and the speed with which it took hold. in the words of alan greenspan, “ what turns otherwise seemingly minor imbalances into a crisis is an actual or anticipated disruption to the liquidity or solvency of the banking system ”. when banks are already weak, for example because of a high level of non - performing loans, an external shock such as an attack on the currency will further damage confidence in the banking system. banks will lose domestic deposits and will find themselves unable to rollover short - term external borrowing. the resultant capital outflows will put further downward pressure on the exchange rate, force up interest rates and drive down asset prices. the customers to whom banks have lent will get into financial difficulties, further weakening the position of the banks. with their capital and liquidity impaired, the banks are in no position to lend, and this leads to the “ credit - crunch ”, and resultant shrinkage of the real economy that we are seeing in so many countries in the region. the reasons for the banking sector weaknesses are various. lending excesses drove up asset prices and allowed companies to become over - leveraged. poor risk management on the part of the banks themselves was compounded by ineffective banking supervision and lack | the currency of a payment obligation should be determined by the law of the country of that currency. this means for example that a payment obligation payable in french francs would become payable in euros after the introduction of the euro because that is the situation that applies under the law of france. however, despite this general principle, concerns have been expressed that parties to contracts might argue that the introduction of the euro represented a fundamental change of circumstances, bringing the contract to an end or requiring its terms to be adjusted. in addition, another feature of the introduction of the euro is that it will replace the ecu at a rate of one for one on 1 january 1999. the ecu is a currency basket but not a currency in its own right. the “ lex monetae ” principle does not apply in this case and therefore the euro will not automatically substitute for the ecu in contracts. it is to remove uncertainty on these points that we have decided to legislate. we believe that this is appropriate for an international financial centre such as hong kong. the financial and legal community in hong kong strongly supports this view. this is just one specific example of how hong kong is affected by the introduction of the euro. there will undoubtedly be more far - reaching effects on our economy and our financial system as the single currency takes root. this is why this seminar is timely and important. i hope that you will find it enjoyable and useful. | 0.5 |
njuguna ndung ’ u : workshop on the compilation of banking statistics in kenya address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the opening of the workshop on the compilation of banking statistics, kenya school of monetary studies, nairobi, 12 june 2007. * * * mr. kevin o ’ connor, consultant imf mr. oliver chinganya, regional advisor, gdds project the representatives of : kenya banker ’ s association ( kba ), institute of certified public accountants of kenya ( icpak ) and central bureau of statistics distinguished participants, ladies and gentlemen, let me first and foremost welcome you all to the kenya school of monetary studies and to this very important workshop on the compilation of banking statistics. i must thank you for taking time off to attend this function. i wish to thank the imf consultant in particular for finding time to participate in this workshop as a resource person. as you may be aware, the imf has played a major role in the development of monetary statistics in kenya and in countries around the world. in particular, the fund, in collaboration with the department for international development ( dfid ), continues to support the general data dissemination system ( gdds ) project which aims at improving the availability and quality of data in developing countries to conform with international standards. kenya, as a country, being part of the gdds project, provides an important avenue for database improvements. this workshop is therefore part of the greater plan towards the improvement of statistics in kenya with the support of these organisations. i thank them for this contribution. ladies and gentlemen, my task today is to open this workshop but before i do that let me draw your attention to the importance of this workshop and statistics in general. you will recall that the financial crisis that hit the asian economies in the early 1990s was partly occasioned by lack of sufficient statistical information on what was going on in the banking system. i am glad therefore that thereafter, the world economies have taken initiatives to ensure that statistical capacities and developments are at the forefront so as to inform decision making at all levels. we at the central bank have not been left behind. over the past few years, the bank has been working on the improvement of monetary and financial statistics to meet the international compilation standards guided by the recommendations of the imf mission on report for observance of standards and codes ( rosc ), and plans for improvements under the gdds project | . implementation of some of the recommendations cannot be done without a joint effort with statistical officers in the financial sector, most of whom are present here today. ladies and gentlemen, there are varied uses of the banking data. the government uses it, among other data, for economic planning. the central bank uses it for the formulation and implementation of monetary policy and monitoring of the financial system. the challenge currently for example is to monitor portfolio capital flows and disentangle from remittances. i am sure all the institutions represented here make use of data in one way or another. for example, consolidated banking statistics are normally shared with the banking industry. this is not to mention other users of our statistics including the private sector, international investors and researchers. with such an immense use, it is important that the data collected is accurate and reliable. secondly, the dynamic nature of our economies necessitates that we become dynamic in our approach to data compilation. new innovations, for example, new financial instruments, which impact on the monetary policy formulation and implementation, continue to come up. it is in this regard that the central bank has produced a revised draft data reporting form which will be discussed in this workshop. ladies and gentlemen, besides the accuracy, and reliability time is of the essence in data compilation and dissemination. data must be up to date and accurate. i therefore urge you all to observe cbk deadlines for the submission of the various returns as indicated in the various banking circulars. as far as having accurate and reliable data is concerned, we are all together, not just as a country, but with the rest of the world. as i conclude, let me welcome you once again to ksms. to get maximum benefits from this workshop i urge all the participants to actively contribute in discussions and raise with the resource persons any issues that you think present grey areas. it is now my pleasure to declare the workshop officially open. thank you. | 1 |
adoption in poland needs to be periodically repeated in order to make sure that we take into account all important factors of the fast changing global economy. the national bank of poland is willing to play a key role in stimulating the public debate about the costs and benefits of the euro adoption. today ’ s panel is a good opportunity to contribute to this debate, and i would like to thank the american chamber of commerce for offering this opportunity. let me begin with the benefit side. economists typically concentrate on three sources of economic benefits related to monetary union. these are : - lower transaction costs, - lower interest rates, - trade creation. transaction costs is an issue of particular relevance for people who sit today in the audience. everyone exchanges currencies, knows what spreads are and could even possibly calculate how much his company would save on transaction costs if there were no exchange rates. this is also relatively unsophisticated for the whole economy, and has been estimated to be approximately 0. 2 % of gdp in poland ( nbp 2004 ). not much, but worth saving. lower interest rates induce investment, thus strengthening the productive capacity of the economy and making higher output and consumption possible. we expect that in the case of poland the interest rate adjustment after eurozone accession will reduce long - term rates by more than one percentage point. any estimation of the exact impact on investment, output and consumption is subject to several assumptions. nevertheless the nbp ’ s analyses show that an interest rate reduction will be the main source of benefits from joining the euro ( borowski 2003 ). the benefit we know the least about is related to trade creation. in a groundbreaking study rose ( 2000 ) estimated that joining a currency union may boost cross - country trade by over 200 %. most economists agreed with the direction and mechanism behind this – the single currency eliminates the uncertainty related to exchange rate movements and thus diminishes the risk related to foreign trade. however, the estimated scale seems to be much exaggerated. one problematic issue is related to the fact that before the eurozone, we did not have examples of currency unions between developed countries. so the rose study was based on data on currency unions involving poor and / or small countries. as noted by micco, stein and ordonez ( 2003 ), “ one does not need to be a eurosceptic to wonder whether such findings are directly applicable to europe ’ s single currency ”. follow - up studies ( e. g. rose and win | shock. additionally, there are also economic forces which can bring the economy back to equilibrium. the most prominent is wage adjustment – after a negative shock falling wages can help reduce the cost of production and as a consequence prices. this will increase demand and help the economy return to equilibrium. a crucial prerequisite for this channel to operate smoothly is a flexible labor market – only if wages adjust immediately can increasing unemployment and an economic slowdown be avoided. we know, however, that this downward wage flexibility is rarely seen in real life. regarding asymmetric shocks one thing seems certain. we are not able to foresee if serious asymmetric shocks are going to affect the polish economy after joining the euro or not. we can only speak in terms of probabilities, and given the data, it seems that the probability of huge shocks seems limited. the polish economy is strongly integrated with the eurozone, with a majority of exports going to the common currency area. moreover, most studies ( e. g. fidrmuc, korhonen 2003, eickmeier, breitung 2005 ) show a relatively high correlation of business cycles between poland and the eurozone. this substantially reduces, but does not eliminate, the risk of asymmetric shocks. looking ahead one can see potential risk factors. one of them is production clustering. if the recently observed trend for country specialization ( e. g. slovakia specializes in producing cars, india in business process outsourcing ) holds on, it may increase the risk of asymmetric shocks in the future ( de grauwe 2003 ). another example of a possibly distant future asymmetric “ shock ” is global warming. a recent report cited by financial times ( ft, 6 january 2007 ) shows that the northern members of the eurozone are likely to profit and the southern members to suffer from the climate change. nevertheless, whatever the likelihood of shocks, it remains of crucial importance to maintain a balanced fiscal perspective and flexible labor market which can absorb shocks, should they arise. now let me move to the possibility of rising micro - and macroeconomic imbalances. such imbalances can take the form of lending booms, current account deficits or increasing inflation pressure. such a set of symptoms in a monetary union member country reveals in most cases one common cause – real interest rates that are too low. economists have for a long time argued that each economy has an appropriate, long - run level of the real interest rate | 1 |
news conference berne, 13 december 2018 andrea m. maechler introductory remarks by andrea m. maechler i will begin with a review of developments on the financial markets and look at the status of the swiss franc. after that i will say a few words about the upcoming transition from libor to saron as the new reference interest rate in switzerland and inform you about progress being made on this front. situation on the financial markets so let me start with developments on the financial markets. in the second half of the year, sentiment on the financial markets darkened considerably at times, despite the fact that the economic situation in many countries remained sound. nonetheless, the economic data did weaken slightly in some regions. this caused investors to focus on a number of risks – most notably, ongoing concerns about protectionist tendencies, but also the currency crises unfolding in several emerging economies and italy ’ s budget dispute with the eu. as a result, volatility on the financial markets has increased significantly since mid - year ( cf. chart 1 ). this is particularly true of the equity markets, where prices fluctuated substantially at certain points. thanks to strong economic data and solid corporate earnings growth, us stock exchanges performed better than their counterparts in europe and the emerging markets ( cf. chart 2 ). despite suffering sizeable losses in october, the s & p 500 recently closed only moderately lower than it had at the end of june down 3 %. in europe, the stoxx 600 lost around 9 % over the same period. various factors contributed to the weak performance of european stocks. economic momentum has weakened of late and corporate earnings growth remained below expectations in the third quarter overall. moreover, currency turmoil in turkey and the budget dispute between italy and the eu weighed on europe ’ s stock exchanges. in switzerland, the smi has managed to gain around 1 % since mid - year. this page 1 / 5 berne, 13 december 2018 andrea m. maechler news conference above - average showing was predominantly due to a strong performance in july, which in turn was mainly driven by positive corporate news in the pharmaceutical sector. on the interest rate markets the picture initially remained mixed due to uneven growth momentum in the major economic regions since mid - 2018 ( cf. chart 3 ). in the us, the federal reserve confirmed that it intended to maintain its policy of gradual interest rate rises. against this backdrop, yields in the us continued to rise and the yield on 10 - year us treasuries | markets. they have produced robust profits and their capital position is very strong. among other things, this has been shown by a stress test applied by the fme [ financial supervisory authority ] and the central bank ’ s assessment of possible loan losses. these studies indicate firmly that the commercial banks ’ capital position is strong enough to withstand a significant economic crisis entailing several large shocks in tandem. their financial foundations are therefore strong. an important part of the exceptionally high bank profitability in 2005 and the first months of 2006 stems from trading gains, but even if these items are excluded, their operating profit would still be very healthy. dynamic operations by icelandic banks and the upgrading of their credit ratings and those of the republic of iceland have ensured easy access for them to international capital markets in recent years. this access has been used liberally and the banks have become more dependent on market financing. the commercial banks ’ funding in international bond markets has changed recently. it was first noticed in the pricing of credit default swaps in the autumn of 2005. subsequently, yields rose on icelandic bank bonds in the secondary market. these new conditions prompted extensive discussion by analysts with international banks and others about the position of the icelandic banks. attention focused in particular on the banks ’ business model, i. e. their high degree of leverage. it was pointed out that deposits account for a smaller share of the banks ’ funding that is customary among comparable banks in other countries. thus icelandic banks are more dependent on access to credit than is the norm. also, the banks ’ enormous expansion has been noted and some observers wondered if it has not been unduly rapid. whether or not the banks ’ positions and strategies deserve to be called into question is immaterial. the banks must take this dialogue seriously, by providing much more transparent information, correcting obvious misrepresentations and responding earnestly to criticism that may be justified. this is precisely what they have been doing in various ways and the results are already beginning to appear. macroeconomic imbalances, rapid banking sector growth and recent negative press prompted foreign investors to raise iceland ’ s risk profile. higher required yields in the secondary market for bank bonds and for credit default swaps indicate that the banks ’ financing costs have risen, at least for the time being. while there is nothing unusual about such a development, what is surprising is how much wider spreads have been required relative to the terms offered to banks with comparable credit ratings. required yields have now fallen again in the | 0 |
foreign capital not because its national saving ratio is low, but because its investment ratio is high by the standards of developed economies ( table 2 ). in the past decade, for example, the national savings rate in australia has averaged 22 per cent, much the same as in europe and well above the figure of 15 per cent in the us and uk. over the same period, the investment ratio in australia averaged 27 per cent, whereas in most developed economies it has averaged around 20 per cent. this high ratio of investment to gdp d ’ arcy p, m shah idil and t davis ( 2009 ), “ foreign currency exposure and hedging in australia ”, rba bulletin, december, pp 1 – 10. is, i believe, an indication that australia is using foreign capital productively, and sustaining the capacity of the country to service that capital. third, credit standards, by and large, have remained robust and the amount of capital wasted through bad loans has remained limited. foreign borrowing by banks within australia ’ s total foreign liabilities, the proportion accounted for by the foreign borrowing of australian banks has increased. virtually all this rise took place through the decade of the 1990s. banks accounted for a little over 20 per cent of australia ’ s foreign liabilities in 1990 but, by 2001, this had risen to around 40 per cent. it has not changed much in the past decade ( graph 9 ). part of this trend was the result of banks adjusting their balance sheets following financial deregulation and the growth of financial markets. these developments gave banks the opportunity to move from deposit funding to various forms of funding through markets, as a way of diversifying funding sources or reducing funding costs ( graph 10 ). the growth of the superannuation industry, following government decisions to promote compulsory superannuation, probably contributed to this trend. firstly, it meant households became less inclined to hold their savings as bank deposits, and second, the pool of funds created by superannuation increased demand for securities such as bank securities. within this trend away from deposits to funding through securities markets, there were also forces that resulted in banks increasing their use of offshore funding. as an example, a substantial proportion – about 20 per cent – of superannuation savings flow offshore, mainly into foreign equities. this reduces the pool of savings available domestically to banks and, other things equal, increases the amount of offshore funding banks need to undertake. it is also an inescapable fact that, | profitability in the internationally exposed sector. it is important to be aware of the relationships between employment, output and inflation. if there is a shortage of labour and other economic resources, a tight monetary policy stance will reduce inflation by affecting aggregate demand. conversely, when unemployment is high, low interest rates stimulate demand, which will contribute to stable wages and prices. a monetary policy stance that is aimed at stabilising inflation will thus also contribute to stabilising aggregate output and employment. in the long term, monetary policy determines the average level of inflation. output is determined by the supply of labour, capital and technology and by productivity growth. attempts to increase output beyond the total capacity of the economy will lead to inflation in the long run. what monetary policy can do is to maintain stability without unnecessary fluctuations in output and employment. overall employment is also influenced by wage formation. if wages increase at an unsustainable pace, employment will decline and unemployment will gradually increase. monetary policy cannot prevent an increase in unemployment that is due to a wage - driven cost shock. when there is confidence that monetary policy will contribute to low and stable inflation over time, it can contribute in the short term - under certain conditions - to smoothing fluctuations in output and demand. in the short term, there is a trade - off between the objectives of inflation stability on the one hand, and output and employment stability on the other. an aggressive monetary policy will rapidly bring inflation to the target. this will cause wide fluctuations in the real economy. the interest rate can also be changed more gradually, which will have less impact on the real economy but cause more pronounced fluctuations in inflation. by influencing inflation over time, we can ensure that an overly aggressive monetary policy does not in itself cause unnecessary disturbances to the economy. the impact of monetary policy occurs with considerable and variable lags. our analyses indicate that a substantial share of the effects of an interest rate change will occur within two years. two years is thus a reasonable time horizon for achieving the inflation target. it is nevertheless conceivable that in a situation where a very high rate of inflation is accompanied by sluggish economic growth, norges bank may decide to apply a somewhat longer time horizon than two years to reach the inflation target of 2½ per cent. the choice of monetary policy time horizon reflects the fact that there are real economic costs associated with bringing inflation rapidly back to the target. this horizon is thus an indirect expression of the trade - off between the objectives of, on | 0 |
peter praet : financial cycles and monetary policy speech by mr peter praet, member of the executive board of the european central bank, in the context of a panel on “ international monetary policy ”, beijing, 31 august 2016. * * * i would like to thank federic holm - hadulla for his contributions to this speech. financial asset prices and credit creation in the global economy are characterised by pronounced and recurrent ebbs and flows – a pattern we have come to refer to as the financial cycle. 1 in my remarks today, i will discuss the role of monetary policy and other policy domains in steering this cycle. financial cycles derive from two closely related factors. the first is a natural tendency towards occasional bouts of “ irrational exuberance ” – for instance in response to promising scientific discoveries or technological advances – that lead investors to radically upgrade their future income expectations. the second factor is the capacity of financial intermediaries to transfer this expected increase in future income into the present through credit creation, thus establishing a financial upswing that constitutes the real - world counterpart to the upswing in economic optimism. but when some of the expected benefits that investors ascribed to the new discoveries or technologies do not come to pass, this process goes in reverse. a period of collective retrenchment ensues and the financial cycle enters into a downswing. such cycles, while certainly painful for individual investors, are not necessarily harmful for the economy as a whole : productivity growth and technological progress rely on investments in promising but risky ventures, which are driven by entrepreneurial zeal and often financed by credit. as such, financial exuberance often acts as a by - product of economic progress. 2 but this is not always the case : some asset price bubbles, for example in housing markets, may go along with a misallocation of resources and lower productivity growth. and in all instances the flip - side of financial exuberance is an increased risk of regular, and potentially violent, reversals 3 – a pattern we have seen repeatedly in history, going back at least to the dutch tulip mania in 1636. 4 hence, for policymakers concerned with financial stability, financial cycles present two related questions. first, how should they identify when it is justified to intervene in the cycle? and second, if intervention is justified, which policy domain should act? criteria for policy intervention a key criterion to identify the case for pre - emptive policy intervention is the presence of systemic negative externalities. | . you mean deliver more than 1 % deficit reduction per year? a. “ for some it is a necessity that has already been agreed upon by the ecofin. ” q. greece has had problems ever since the beginning of the euro. does that mean sgp - sanctions are not effective? a. “ in that particular case, it ’ s up to the euro group, the commission and the greek authorities to first of all improve definitively the way the figures are produced, the way they are computed, the way they are certified and stamped by the national authorities and by the european authorities. that is essential. we must work on the basis of reliable figures. on top of that the stability and growth pact has to be applied fully and rigorously for all countries, as i said earlier. ” q. some economists call a loose monetary policy the real cause for the crisis. in let ’ s say 2005, did you see the danger of that policy? a. “ the governing council of the ecb has demonstrated its dedication to its mandate during this period. we refused to decrease rates when we were called upon to decrease rates, in the beginning of 2004 by the chancellor of germany, the president of france and the prime minister of italy. in december 2005 we decided to increase rates. this decision was criticised by ten out of twelve governments that belonged to the euro area at that time. not by the dutch government, by the way. the international institutions and many economists were calling upon us not to increase rates. in 2006 and 2007 we mentioned publicly that global finance had to prepare for a correction due to a marked underassessment and underpricing of risks. i was public myself in january 2007, before the start of the turbulences, expressing the sentiment of most central bankers, who were diagnosing this underpricing of risk. ” q. some economists say interest rates are so low for so long, that the new bubble is being born now? a. “ the governing council of the ecb has always taken decisions commensurate with the challenges we had to cope with, and quick and expeditious when exceptional circumstances were requiring it. at the same time we have always been dedicated to our mandate and did not hamper, in any respect, our capacity to deliver price stability in the medium term. we can tell our 330 million fellow citizens : you can have confidence, we will deliver price stability. our credibility has helped us solidly anchoring inflation expectations which | 0.5 |
3 bis - central bankers'speeches relevance to the banking sector. the items on the agenda are practitioner - focused and facilitated by highly experienced personnel who offer first - hand knowledge and experience. i will, therefore, urge all of you to extract maximum benefit and make the different sessions as interactive as possible. i am confident that the three days intensive training will enrich your knowledge and widen your perspective. the topic of the day, namely basel iii reforms, is highly seminal as it germinated from a sad reality of modern finance : the 2008 global financial crisis. basel iii represented a long - running but fundamental overhaul of the global regulatory capital regime and focused on quality of capital. while parts of the basel iii standards have already been implemented, some have been refined over time and are sometimes referred to as basel 3. 1. the new standardised approach introduces more granularity and risk differentiation to the capital requirement calculations. other amendments pertain, among others, to market risk, credit valuation adjustment, leverage ratio framework and operational risk. the primary objective of the revisions to the current framework is to improve the reliability of capital ratios, by making standardised approaches more risk - sensitive, addressing limitations of internal models, and restricting the benefits that internal models can provide by introducing an'output floor '. this would improve both the measurement of risk and the comparability across firms. these changes are set to fundamentally alter the market dynamics and might require banks to reassess their strategies to ensure optimal use of capital. as with major reforms, the bank of mauritius favours a consultative approach with its regulatees. the presence of commercial banks over the three days bears ample testimony to this. all of us will be provided with the crux of the reforms as well as the possible challenges and impact. as commercial banks will be required to implement same, i would expect that their representatives raise the practical issues that they could potentially face with the experts for their opinions. i wish to underline that, as an international financial centre of repute, mauritius subscribes to the adoption of international standards and best practices. basel iii is the norm for the banking industry, and it is imperative for us to complete the necessary reforms to maintain our competitive edge and preserve the reputation of our jurisdiction. ladies and gentlemen, the banking sector has remained resilient despite the impacts of the pandemic, volatile currency markets, regional liquidity issues in hard currencies and rising interest rates. i am convinced that part of the secret | harvesh seegolam : current economic conditions and outlook statement by mr harvesh seegolam, governor of the bank of mauritius, at the post monetary policy committee ( mpc ) press briefing, port louis, 3 april 2024. * * * ladies and gentlemen, members of the media, good morning. i welcome you all to this press briefing for the 70th sitting of the monetary policy committee, the first for 2024. this year shall be remembered for many reasons. the efforts spearheaded by the authorities in the previous years to overcome the crisis, to further consolidate our underlying economic structure and to top it up with the right policy mix, have borne fruits. our economic agility and recent performance have been largely praised by international organisations. let me share some of the upshots of the latest reports of the mauritian economy undertaken by major international institutions : the imf, following the 2024 article iv consultations, stated in its press release that the prompt deployment of pre - pandemic buffers has helped the mauritian economy rebound strongly from the pandemic and that growth prospects remain favourable. inflationary impulses have subsided in 2023 and are projected to ease further this year. moody's, in its january 2024 credit opinion, has maintained the country's baa3 credit rating with a stable outlook. this stable rating outlook reflected mainly the agency's favourable assessment of the country's fiscal and debt metrics as well as sizeable foreign reserves which provide a cushion against external vulnerability risks. the march 2024 country report of the economist intelligence unit also paints a very optimist outlook for mauritius, with growth expected to remain buoyant in the near term and inflation maintaining a downtrend. d. fitch ratings, in its 2024q1 banking and financial services report, assessed that mauritius ranks high relative to its regional peers for being politically stable, coupled with an improving internal balance amidst recovery in the tourism sector and subsiding price pressures. these plaudits have one common thread. they all point towards favourable growth and inflation outlooks for 2024. they also enunciate on the key role played by the bank of mauritius in macroeconomic stabilisation and safeguarding our financial system. before i zero - in on our diagnosis for 2024, let me first walk you through the latest global and domestic economic and financial developments. after that, i shall conclude with the decision taken by the mpc today | 0.5 |
michelle w bowman : high inflation and the outlook for monetary policy speech by ms michelle w bowman, member of the board of governors of the federal reserve system, at the american bankers association community banking conference, palm desert, california, 21 february 2022. * * * before we get to our conversation on community banking, i would like to briefly discuss my outlook for the u. s. economy and my view of appropriate monetary policy. 1 as i see it, the main challenge for monetary policy now is to bring inflation down without harming the ongoing economic expansion. inflation is much too high. last year i noted that inflationary pressures associated with strong demand and constrained supply could take longer to subside than many expected. since then, those problems have persisted and inflation has broadened, reaching the highest rate that americans have faced in forty years. high inflation is a heavy burden for all americans, but especially for those with limited means who are forced to pay more for everyday items, delay purchases, or put off saving for the future. i intend to support prompt and decisive action to lower inflation, and today i will explain how the fed is pursuing this goal. in the near term, i expect that uncomfortably high inflation will persist at least through the first half of 2022. we may see signs of inflation easing in the second half of the year, but there is a substantial risk that high inflation could persist. in january, the consumer price index rose to a 12 - month rate of 7. 5 percent, which, consistent with other recent monthly readings, was even higher than expected. employment costs for businesses, as measured by average hourly wages, also rose last month. and continued tightness in the labor market indicates that upward pressure on wages and other employment compensation is not likely to moderate soon. my base case is that inflation will moderate later this year, which will depend, in part, on appropriate actions by the federal open market committee ( fomc ). but with wage growth lagging behind inflation for the past year, many families may find it challenging to make ends meet and continued rising home prices will likely prevent many from entering the housing market. in addition, rising costs and hiring difficulties continue to be burdens for small businesses. turning to the labor market, which continues to tighten, indications are that the omicron infection surge earlier this year has not left a negative imprint on the economy or slowed job creation. i expect to see continued strength in the job market this year, with further gains | many financial holding companies are either entering or expanding merchant banking activities. in particular, examiners have been encouraging banking organizations to expand formal valuation policies and documentation. without these policies, risks may not be estimated in a consistent and timely fashion and communicated to the board and shareholders. such estimation and communication are, of course, of paramount importance in the current environment, where venture capital earnings of more than $ 7. 7 billion at the largest banks in 2000 turned into a loss of more than $ 4. 5 billion in 2001. policies and procedures that promote timely, consistent, and accurate valuations of risk help institutions to identify problems earlier than otherwise would be the case. they also help focus attention on any changes in strategies or limits that might be needed to avoid similar problems in the future. the importance of the third fundamental element, appropriate risk measurement and reporting systems, is well illustrated by the challenges presented by securitization activities. in some cases, securitizations are simple off - balance - sheet financings, where much of the risk of the underlying assets is retained. in other cases, a small portion of the risk is retained, and in still other cases, such as most residential - mortgage securitizations, virtually all the risk is transferred. we expect institutions engaged in this activity to have advanced measurement and information systems to define the underlying risk related to these transactions, including their effect on the institution's overall credit -, liquidity -, and market - risk profile. we also expect institutions to estimate the economic capital needs arising from their securitizations and ensure that they are factored into their own evaluation of capital needs. finally, we expect institutions to have adequate reporting systems that allow them to disclose to the marketplace and regulators the nature of these exposures. as many of you know, the federal reserve has long advocated better disclosure, particularly regarding more - complex risks, in both the domestic and the international arenas. in fact, it is one of the key requirements in the proposed revisions to the basel accord. the test now will be to see if recent events will provide motivation or if the markets will require organizations to more aggressively and creatively educate the marketplace about their true underlying exposures. recognizing the heightened need for disclosure of securitization transactions, the banking agencies, starting in 2001, required banks and their holding companies to disclose the type and amount of assets securitized, the risk exposure retained, and the charge - offs and delinquency | 0.5 |
which contains rules how institutions have to calculate regulatory capital, principle 1 of pillar 2 focuses on banks ’ internal methods and processes. thus, banks have, apart from some qualitative requirements, which i will address next, significant leeway to design their internal capital adequacy process. conversely that also means, that there are no standardised methods or specific guidelines for institutions. the basel ii paper elaborates the main features of a rigorous process, which have to be in place in order to fulfil principle 1 of pillar 2. namely they are • board and senior management oversight. the ultimate responsibility for the risk management processes and the internal capital adequacy assessment process is with the senior management. it has to set the strategic goals for capital needs, capital levels and so forth. • sound capital assessment. this is the core feature of the internal process and states the requirement to relate capital to the level of all material risks not only as of today but also for a certain planning horizon. • comprehensive assessment of risks. different to pillar 1 the list of risks under pillar 2 is not limited but should be adequate to fit the individual needs of every institution. a bank would have to cover liquidity risk and interest rate risk in the banking book or even further types addition - ally to the well known risks covered under pillar 1 ( credit risk, market risk and operational risk ), e. g. reputational and strategic risk. the remaining two features are “ monitoring and reporting ” and “ internal control review ”. taking into account the comprehensiveness, the internal process has to guarantee, and its planning function, obviously, the requirements will be best met by implementing an economic capital model. such a mathematical model relates the capital of an institution to the risks it takes within its business activities taking into account diversification effects between risk types. only internationally active banks have the resources to set up a system as complex as that. and indeed, some of the largest german banking groups are using already an economic capital model. i am turning to the relevant requirements for supervisors in basel ii. while principles 3 and 4 are related to regulatory capital ratios, the qualitative part of the supervisor ’ s duty under the supervisory review process is formulated in principle 2 of pillar 2. it states : principle 2 : supervisors should review and evaluate banks ’ internal capital adequacy assessments and strategies, as well as their ability to monitor and ensure their compliance with regulatory capital ratios. supervisors should take appropriate action if they are not | the implementation of basel ii? the main conclusions are twofold : first, for level playing field reasons basel ii will be made available for all banks, not only for the internationally active ones. second, although german banks compete to each other, they differ significantly in size and risk management. in order to allow them appropriate flexibility in implementing basel ii we are going to implement the full set of credit risk and operational risk approaches that is available in basel ii. we do not require the big banks to use either the foundation or the advanced irb - approach. it is up to the banks to make their choice. of course, we think that for those banks the advanced irb approach would be adequate without having any legal instruments to require certain types of approaches. a survey amongst all german institutions performed last summer indicated that most of our internationally active banks ( deutsche, dresdner, hvb, commerzbank, westlb, dz bank ) are preparing for implementing the advanced approach at least on a sub - portfolio level by implementation date. as far as the smaller banks are concerned we expect about 460 of them to use an internal ratings approach right from the beginning of basel ii. you might ask yourself how there can be such a big number of institutions using the internal ratings approach. the answer is that banking associations are providing centrally developed risk measurement methods, it services, default information etc. to member institutions. this turned out to be a very efficient way for the institutions to avoid development cost and to share information, e. g. default data. this combined effort of the institutions and their associations contributes to en - sure the credit supply all over the country. let me compare our case with the situation in the united states where about 20 of the largest us banks will have to use the most advanced approaches to measuring their credit and operational risk. the rest of the us banking system, which are thousands of smaller banks, have to remain under the existing 1988 accord. recent developments in the united states show the importance of taking into account the structure of the banking market when implementing basel ii. many of the smaller us banks fear that they may be left at a competitive disadvantage after the adoption of the basel ii by their larger rivals. in - deed, a recent federal reserve study revealed for some types of small business loans unintended competitive advantages and disadvantages. us regulators therefore signalled their readiness to adjust the basel i provisions to protect smaller us banks from unintended problems. i will now focus on the implementation | 1 |
- a dream of success - and work like hell. " uncle sam believed people need guides, role models, and taskmasters to take advantage of the greater opportunities he helped to make possible. we call those guides, role models, and taskmasters " mentors " for short. i found many mentors along my academic journey, and i would like to give special thanks to those i met through the diversity initiative for tenure in economics, which sandy darity started at duke in 2008. the initiative is a research mentoring workshop that pairs junior faculty with mentors who can help them navigate the path to tenure. it has seen 53 initiative fellows being promoted and tenured at institutions of higher learning. 1 / 2 bis - central bankers'speeches i am grateful to all the mentors who took my ideas seriously, including art goldsmith who was a dite mentor, helped me sharpen the hypotheses that emerged from them, and pressed me to think hard about the best data and methods to test these hypotheses. graduate and undergraduate students from many backgrounds ask me how to find mentors that share their background. i tell them they will need more than one mentor and to seek out mentors who have different backgrounds and expertise such that they will be exposed to a wide range of views and experiences. for just one paper on violence and patents, i had several mentors, among them george akerlof, ken arrow, sandy darity, barry eichengreen, milton friedman, alan krueger, paul romer, and jeff wooldridge. most importantly, make sure your mentors challenge you and hold you accountable. and when the time comes, it is incumbent on you - on all of us, really - to become a mentor. that is what uncle sam did. that is one reason i was grateful to lead the american economic association's summer program, to receive the aea mentoring program's impactful mentor award for working with graduate students, and to participate in and support other initiatives to train young economists. mentors help convert hope and promise into action, enabling those who come after us to build a better future. as i learned from uncle sam, there is no higher calling. in closing, let me express my hope that accepting this career achievement award does not mean i am officially retired. but more seriously, i am very grateful to be recognized and in the company of colleagues who have stood by me and fought with me to improve our field. i accept | lisa d cook : hope, promise, and mentors speech by ms lisa d cook, member of the board of governors of the federal reserve system, at the samuel dubois cook center career achievement awards ceremony, the university club, washington dc, 1 april 2024. * * * thank you, dr. darity, for your kind introduction. i am profoundly moved to be surrounded by family and friends, and it gives me another opportunity to tell all of you that i would not be where i am today without your support. i include in that circle my fellow award recipients today, drs. cecilia rouse and peter blair henry. i am beyond humbled and honored to receive this career achievement award from the samuel dubois cook center on social equity at duke university, and i am inspired by what it represents. of course, to me, samuel dubois cook was simply " uncle sam. " my uncle sam was a korean war veteran, a political theorist, an activist, and the first african american tenured professor at duke and any major southern university. he then went on to become president of dillard university... the list goes on and on. now that was a lifetime of achievement. at morehouse college, uncle sam was a classmate of a young man named martin luther king, jr. before that, they picked tobacco together during the summer to earn the money they needed for their studies. uncle sam led the campus chapter of the naacp at morehouse and went on to become student body president ( twice ) and valedictorian. along with my mother mary murray cook, his brother and my dad rev. payton brailsford cook, my cousin and civil rights leader floyd mckissick, sr., and a host of other relatives, he instilled in me the deep belief of the civil rights movement that with faith, preparation, and great effort, things could and would be better. when i was beaten and suffered verbal assaults while desegregating my schools in georgia, i drew strength from the example set by my uncle, my aunts, my parents, and by dr. king and their conviction that there is great hope and promise in the world. it was - and remains - the duty of everyone in and who embraced and was inspired by the civil rights movement to make good on that hope and promise and to build a better future. i mentioned great effort. that was always paramount for my uncle sam. the new york times quoted his advice : " have a vision | 1 |
the programme. new directions the approaches that we took in monetary policy, financial supervision and development have served singapore well. we maintained low inflation and a macroeconomic environment favourable to growth. our capital markets have grown rapidly over the past few years, while our forex market is one of the largest in the world. with over 200 banks and merchant banks, 150 insurance companies and 160 investment advisors in singapore, we have become a major financial centre. but past achievements will not extrapolate into future successes, unless we update our policies to meet changing conditions. policies that worked in the 1970s and 1980s needed rethinking by the 1990s. in 1997, we began a comprehensive review of mas ’ policy framework and approach, which has led to fundamental changes. our work is far from done, and we anticipate many challenges ahead. credibility and dynamism – mas ’ approach to future challenges monetary policy in monetary policy, certain verities are not likely to change. we will continue to manage the exchange rate as our principal policy variable. the primary objective will still be to maintain price stability and the purchasing power of the singapore dollar, over the medium term. we will continue to guard against destabilising speculation in the singapore dollar. however, the international environment has changed. we are witnessing larger capital flows and more volatile financial markets. g3 currencies have tended to undergo prolonged periods of misalignment, followed by sharp corrections. for a while after the asian crisis, when currencies that were quasipegged to the us dollar collapsed in a disastrous contagion, a consensus was growing that the only sustainable exchange rate regimes for emerging markets are either a hard currency peg or a totally free float. in 1973, we reduced the corporate tax for acu interest earnings from overseas loans from 40 % to 10 %. we extended this to fees and commissions received by acus in 1976. these corner solutions are not suitable for singapore. a free floating exchange rate would mean relinquishing our most effective inflation - fighting instrument. on the other hand a fixed exchange rate, pegged say to the us dollar, would lock our economic fortunes to us monetary policy, with no assurance that it would be appropriate to the state of our economy. the intermediate option of a managed float remains the best approach for us. in our experience, a managed float helps to buffer the adverse effects on the economy of short - term financial volatility, and to avoid sustained currency misalignments | ##tilled confidence and kept inflation low. price stability provided the foundation for sustained economic growth, which in turn provided the basis for continued strengthening of the singapore dollar. we benefited immensely from this virtuous cycle. over the past two decades since 1981, the singapore dollar has risen steadily by more than 70 %, on a trade - weighted basis. domestic inflation has been among the lowest in the world, averaging 2. 0 % per annum compared to 6. 5 % for the oecd countries. in real terms, gdp growth averaged 7. 6 % a year, while gdp per capita in 2000 was two and a half times the level in 1981. financial supervision mas ’ second responsibility is oversight of the financial sector. mas was an integrated supervisor long before this became internationally fashionable. when it was formed in 1971, mas was responsible for both monetary policy and the supervision of banks. it took over supervision of the insurance industry in 1977, and the securities industry in 1984. from the beginning, mas ’ approach to supervising the financial sector was centred on a strict admission policy, high prudential requirements, and rigorous enforcement. we sought not only to maintain systemic stability, but also to protect individual institutions from failing, and the public and investors from losses. lacking any track record, this approach was necessary to establish credibility with international financial institutions and their home regulators. when it emerged that singapore had been spared the fallout from the collapse of bcci because mas had steadfastly refused bcci entry despite persistent lobbying, mas ’ reputation as a thorough and uncompromising regulator went up. but despite our best efforts, we did have one major failure – the pan - el crisis in 1985. pan electric industries, or pan - el, was a holding company with interests in hotels, property and marine operations. it went into receivership in november 1985, threatening the solvency of many stockbroking firms with whom it had forward contracts. mas closed the stock exchange for 3 days while a lifeboat fund was organised. the four major local banks agreed to provide a standby line of credit, to aid the affected stockbrokers and restore market confidence. pan - el showed up certain weaknesses in our regulatory framework. following pan - el, mas revamped the securities industry act, raising standards and putting in place mechanisms for the proper regulation of the market. mas considerably tightened its supervision of the stock exchange and the securities industry. to some extent this tighter approach permeated beyond the securities industry to other parts of | 1 |
. currency crashes amplified the adverse effects as capital fled the region in a drove. the asian miracle went bust. the capital flows that had once fertilised the impressive growth eventually caused a capsize when the asian financial crisis hit us in 1997 – a lesson that we all still vividly remember. 4. the asian financial crisis gave us a much - needed wakeup call at a dear price. yet, looking back, the crisis also has its silver linings : the painful adjustments that followed prompted governments to strengthen economic fundamentals, enhance banking systems, deepen local bond markets, and build up foreign reserves to cope with potential external shocks. because of these developments, the region has been able to emerge from the recent global financial crisis relatively unscathed and is now one of the key driving forces supporting the global economic recovery. 5. but we cannot afford to be complacent, as we are now confronted with a new round of challenges in uncharted waters. the unprecedented monetary easing in the advanced economies has led to global excess liquidity. and with the robust recovery of the emerging bis central bankers ’ speeches markets, there are powerful push and pull factors driving investors to search for yields in developing economies including asia. from q3 2009 to q4 2010, the net capital inflows to emerging asia1 amounted to us $ 541 bn, the largest inflows in recent years. 6. the strong capital inflows and resultant abundant liquidity have led to exchange rate appreciation, fuelled credit growth and driven up asset prices in the region. with output gaps closing, inflationary pressures are accelerating in a number of asian economies. capital flows also complicate the macroeconomic policy responses. while exchange rate appreciation and monetary tightening could theoretically cool down the economy, in practice, they may attract even more speculative inflows to profit from interest rate arbitrage and currency appreciation. 7. so how should we cope with these challenges presented by the unprecedented scale of global excess liquidity? given the global nature of fund flows and the increasing interconnectedness of the global financial system, it is obvious that national policies alone are insufficient to tackle the challenges. we need greater international and regional cooperation to manage risks posed by volatile capital flows to global financial stability. i believe there are three main areas for cooperation. 8. first is enhancing the resilience of the global and regional financial systems through financial regulatory reforms. a large amount of work in this area is under way at the | francois villeroy de galhau : new year wishes 2023 new year wishes to the paris financial centre by mr francois villeroy de galhau, governor of the bank of france and chairman of the autorite de controle prudentiel et de resolution ( acpr ), paris, 5 january 2023. * * * allow me to extend my warmest wishes for 2023 on behalf of the banque de france and the acpr. i don't know if i dare wish you, or wish us, a year free of shocks after those of 2020, 2021 and 2022. this past year has been marked by a climate of uncertainty, exacerbated by russia's war in ukraine and the energy crisis. it has also seen increased financial market volatility, compounded by the turmoil in the cryptoasset universe. in this unstable environment, i would like to make two double wishes for 2023 : 1 ) less inflation and more stabilisation. activity has, until now, proved more resilient than expected, which is good news ; however, inflation must not become entrenched. it is the number one concern for french people, and defeating it is our number one mission. it fell in december to 6. 7 %, which is encouraging but still not enough. it should peak in the first half, before declining towards 4 % by the end of this year. but our forecast, and our commitment, is that inflation should be brought down towards 2 % by end - 2024 to end - 2025. to achieve this, after raising interest rates to close to the " neutral interest rate " of 2 % in december, we are now embarking on the second phase towards monetary stabilisation : ideally, it would be good to reach the right " terminal rate " by next summer, but it is still too early to say what that level will be. we need to remain pragmatic and to be guided by observed data, including on core inflation, without getting fixated on overly mechanical rate hikes. we will then be prepared to remain at this terminal rate for as long as necessary : the sprint to raise interest rates in 2022 is now becoming more of a long - distance race, and the duration will count at least as much as the level. in parallel, we shall continue to focus on maintaining financial stability, helped by the strong resilience of french banks and insurers. in europe, 2023 | 0 |
workers. maximum employment also promotes business investment that boosts productivity and long - run economic potential. and the full participation of all see board of governors of the federal reserve system ( 2020 ), “ federal open market committee announces approval of updates to its statement on longer - run goals and monetary policy strategy, ” press release, august 27, https : / / www. federalreserve. gov / newsevents / pressreleases / monetary20200827a. htm. video provided by the king center of coretta scott king speaking at “ overcoming the barriers to full employment ” at ebenezer baptist church, atlanta, january 13, 1978. - 7segments of society should be expected to result in more ideas, including more diverse ideas, more invention, and more innovation. these are the benefits of the fed ’ s maximum - employment goal and part of the legacy of coretta scott king. in closing, i want to thank interim president fulton and the board of the joint center for the great honor of this award, as well as the opportunity to review some important history that shaped the federal reserve ’ s efforts to promote a healthy economy. | for release on delivery 6 : 55 p. m. edt october 18, 2023 the evolution of the federal reserve ’ s employment mandate remarks by lisa d. cook member board of governors of the federal reserve system at the louis e. martin awards ceremony at the 2023 future of black communities summit joint center for political and economic studies washington, d. c. october 18, 2023 thank you. i am rarely at a loss for words, as my friends, family, and colleagues know all too well. 1 but i do find it a little hard to express everything i am feeling, to be given the louis e. martin great american award in honor of a truly great american who did so much to make ours a more perfect union. tough to find the words, but i will try. louis martin did not lack for words. he was prolific, writing and publishing millions of words in newspapers as a key figure in the heyday of black publishing in the 1950s and 1960s. there were also the words, and i would love to know what they were, that he spoke to the advisers of presidential candidate john f. kennedy, who helped free the rev. dr. martin luther king from a georgia prison and arguably changed political history. 2 and there were those words he whispered, in the ears of presidents and politicos, that moved the nation forward on civil rights. when i think about everything louis martin accomplished, including the creation of the joint center for political and economic studies, and i consider the distinguished men and women who have earned this award before me, i am humbled and very grateful. one way i hope i can show my gratitude is by using this occasion to tell the wider world a story about the civil rights movement that should be better known and that is additionally meaningful to me for two reasons. the first reason is that this is a story about how the federal reserve, where i am a policymaker, came to be the first central bank in the world to make maximum employment a primary and explicit goal, coequal with its goal of price stability. and the second reason is that i had the memorable the views expressed here are my own and not necessarily those of my colleagues on the federal reserve board or the federal open market committee. louis martin was among the civil rights leaders who sought help from the republican and democratic presidential campaigns in 1960 when king was sentenced in dekalb county to 30 days of hard labor on trumped - up charges. - 2experience, as | 1 |
mr. george looks at the prospects for the city of london - in or out of emu speech by the governor of the bank of england, mr. e. a. j. george, at the royal institute of international affairs conference in london, on 24 / 10 / 97. prospects for the city - - in or out of emu mr. chairman, you have asked me to speak specifically about “ the prospects for the city - or out of emu ”. you - - very kindly in recent circumstances - - did not ask me to discuss the wider pros and cons, either of the project as a whole, or of uk membership. but perhaps i might nevertheless begin by making a more general point. perfectly reasonable people can legitimately disagree about emu, both in principle and about the appropriate timing and pace of monetary integration. on the project as a whole, most analysts would acknowledge that there are real potential benefits, but that there are also real risks to be set against them ; and most would acknowledge that those risks will increase if the politics of emu are allowed to run ahead of the economics, so that countries are allowed, or even encouraged, to participate, without first having achieved genuine, and sustainable, economic convergence - - in substance and not just some technical accounting form. on the question of british membership the new labour government has spoken of ‘ formidable obstacles ’ to this country joining emu in the first wave. but one thing is clear : everyone, in or out, has an unambiguous interest, if emu does go ahead, in doing everything we can to make it a success. and it is equally clear that those countries that participate in monetary union have a similar unambiguous interest in the economic prosperity of countries remaining, at least for the time being, on the outside. larry summers, the deputy secretary of the us treasury, writing about emu in the financial times on wednesday, said : “ the us is well served when europe is vibrant economically and working to open its markets and strengthen its ties with the global economy. ” he might have been speaking for all of us here in europe, in or out, recognising that we have a mutual, and reciprocal, self - interest in each other ’ s economic well - being. so my general point is this. whatever the outcome on emu, it is vitally important that we continue to maintain, and strengthen, positive and constructive relationships throughout the european union area - - | mervyn king : monetary policy developments speech by mr mervyn king, governor of the bank of england, at the lord mayor ’ s banquet for bankers and merchants of the city of london at the mansion house, london, 17 june 2009. * * * my lord mayor, mr chancellor, my lords, ministers, aldermen, mr recorder, sheriffs, ladies and gentlemen, it has been quite a year. a year to remember, but not to repeat. since we last met, a financial panic swept through markets in september, several major financial institutions failed, and a remarkable collapse of confidence around the world led to unprecedented declines in industrial production and national output. world trade fell by almost 15 % in six months, a faster rate of decline than in the great depression. faced with this crisis, the bank of england took extraordinary actions. bank rate was cut virtually to zero, and the monetary policy committee embarked on a programme of £125 billion of asset purchases. and in your own businesses you too have had to deal with what some have called a once - in - a - century event. since the panic last autumn, overall output has fallen by around 3 % in the united states and the united kingdom, 6 % in germany, and 7 % in japan. the collapse of spending in these economies is having painful consequences. in less than a year, over 5 million jobs have been lost in the united states, almost 2 million in the euro area, and almost half a million here in the united kingdom. despite those unprecedented falls in activity, there are some signs that the british economy is beginning to stabilise, and financial markets have improved markedly. there are three solid reasons for thinking that a recovery in activity was likely to occur at some point this year. the first i call the “ honda effect ” – many firms, as honda did last year at its plant in swindon, cut back production and met demand from stock, resuming production this year once inventories had been reduced. the second factor is the level of sterling which, despite its recent rally, is still some 20 % lower than in the summer of 2007. that will encourage a switch in spending, at home and abroad, towards goods and services produced in the uk. finally, and perhaps most important, is the enormous policy stimulus that has been injected into the economy. bank rate was cut by four percentage points in four months. but the monetary policy committee judged that even that was insufficient to prevent inflation falling below our 2 % | 0.5 |
interest rate generated by qqe helped stimulate potential demand for mortgage loans. conversely, an increase in housing prices caused by rising construction costs partially discouraged residential investment by ordinary households. nonetheless, let me stress that the economic growth rate for fiscal 2014 could have been even lower without qqe. corporate profits as well as the employment and income situation might have been less favorable than at the current level. qqe has brought negative real interest rates and promoted the following : ( 1 ) the wealth effect, for example through stocks and real estate ; ( 2 ) the diversification of financing sources for firms ; and ( 3 ) a correction of the yen ’ s excessive appreciation ( chart 4 ). these effects, in turn, have given rise to various positive developments by activating firms ’ fixed investment and pricing behavior, financial institutions ’ lending and investment behavior, individual investors ’ incentives to manage financial assets, and inbound tourism. therefore, although there were downward revisions to the bank ’ s economic outlook, i believe that the effectiveness of qqe should not be questioned. upward revisions of growth forecasts for fiscal 2015 and 2016 by contrast, the bank ’ s forecast on economic growth for fiscal 2015 was adjusted upward significantly from 1. 5 percent in the april 2013 forecast point to 2. 1 percent in the most recent forecast. the upward revision is natural since it reflects the adjustment process of returning from the bigger - than - expected decline in the previous year. in addition, as for reasons why degree of upward revision was particularly large in the latest january 2015 forecast, i personally view that the following four factors were incorporated : ( 1 ) improvement in corporate profits and the resultant greater active business fixed investment ( owing to a crude oil price drop and the lagged impact of the yen ’ s further depreciation since november 2014 ) ; ( 2 ) gradual recovery overseas ( owing to a crude oil price drop ) and the resultant positive effects on exports from japan ; ( 3 ) an increase in real income and resultant expansion of private consumption ( driven by a crude oil price drop and the postponement of the second round of the consumption tax hike ) ; and ( 4 ) expected positive effects from the government ’ s economic measures based on the supplementary budget for fiscal 2014. the most recent bis central bankers ’ speeches forecast on economic growth for fiscal 2016 was also revised upward to 1. 6 percent, partly because of a shift of the front - loaded increase in spending from fiscal 2015 to fiscal 2016 as a result of the post | it another way, financial institutions cannot take risks exceeding a certain level that is calculated based on the amount of capital they hold. given that no firm is guaranteed never to fail, some degree of risk is always attached to loans that financial institutions extend to firms. they are required to control the amount they lend so that the total amount of risk they take does not exceed the level permitted. if a bank's capital decreases as a result of it incurring a large amount of losses due to a decline in stock prices or a failure of a firm it has lent to, the total amount of risk the bank can take will decrease accordingly. in this case, the bank will become more cautious than before in extending loans that are accompanied by risk. from the standpoint of firms, loans will become less available. should this lead to a reduction in business operations at a large number of firms, overall economic conditions will deteriorate in consequence. some of these firms may go bankrupt due to a deterioration in their business conditions. if this occurs, banks'capital will decrease further due to resolution of the losses incurred through the failures of the firms the banks lent to. this will lead to a further tightening in banks'lending attitudes and bring about further failures and deterioration in economic conditions. thus, tighter lending attitudes resulting from decreases in capital lead to a deterioration in economic conditions, and this in turn brings about a further deterioration in economic conditions through further decreases in capital and tightening in lending attitudes. this vicious circle is the phenomenon described by the phrase " adverse feedback loop operating between financial and economic activity. " in addition to bank loans, which i have just used as an example, firms, especially large ones, sometimes acquire funds in the cp and corporate bond markets. in addition, in the case of small to medium - sized firms, they sometimes acquire funds from business partners and parent companies – so - called trade credits. investors that provide funds in the cp and corporate bond markets and firms that provide trade credits to other firms also cannot take excessive risks in order to maintain their financial soundness. in other words, an adverse feedback loop may be initiated not only through bank loans, but also through practically every channel of financial activity, including financial markets and trade credits. the current world economic downturn is to a considerable extent due to the adverse feedback loop operating between financial and economic activity. financial institutions in the united states and western europe, already faced with a substantial deterioration in their financial positions after the emergence of the subprime | 0.5 |
and portfolios. it is commonly observed that hedge funds are " opaque " - - that is, information about their portfolios is typically limited and infrequently provided. it would be more accurate to say that the opacity of hedge funds is in the eye of the beholder ; the information a fund provides may vary considerably depending on whether the recipient of the information is an investor, a counterparty, a regulatory authority, or a general market participant. from a policy perspective, transparency to investors is largely an issue of investor protection. the need for counterparties to have adequate information is a risk - management issue, as i have already discussed. much of the recent debate, however, has focused on the opacity of hedge funds to regulatory authorities and to the markets generally, which is viewed by some as an important source of liquidity risk. liquidity in a particular market segment might well decline sharply and unexpectedly if hedge funds chose or were forced to reduce a large exposure in that segment. concerns about hedge fund opacity and possible liquidity risk have motivated a range of proposals for regulatory authorities to create and maintain a database of hedge fund positions. such a database, it is argued, would allow authorities to monitor this possible source of systemic risk and to address the buildup of risk as it occurs. various alternatives that have been discussed include a database maintained by regulators on a confidential basis, a system in which hedge funds submit position information to an authority that aggregates that information and reveals it to the market, and a public database with nonconfidential information on hedge funds. i understand the concerns that motivate these proposals but, at this point, remain skeptical about their utility in practice. to measure liquidity risks accurately, the authorities would need data from all major financial market participants, not just hedge funds. as a practical matter, could the authorities collect such an enormous quantity of highly sensitive information in sufficient detail and with sufficient frequency ( daily, at least ) to be effectively informed about liquidity risk in particular market segments? how would the authorities use the information? would they have the authority to direct hedge funds or other large financial institutions to reduce positions? if several funds had similar positions, how would authorities avoid giving a competitive advantage to one fund over another in using the information from the database? perhaps most important, would counterparties relax their vigilance if they thought the authorities were monitoring and constraining hedge funds'risk - taking? a risk of any pre | needed that would subject all systemically important financial institutions to the same framework for consolidated prudential supervision that currently applies to bank holding companies. such action would prevent financial firms that do not own a bank, but that nonetheless pose risks to the overall financial system because of the size, risks, or interconnectedness of their financial activities, from avoiding comprehensive supervisory oversight. besides being supervised on a consolidated basis, systemically important financial institutions should also be subject to enhanced regulation and supervision, including capital, liquidity, and risk - management requirements that reflect those institutions'important roles in the financial sector. enhanced requirements are needed not only to protect the stability of individual institutions and the financial system as a whole, but also to reduce the incentives for financial firms to become very large in order to be perceived as too big to fail. this perception materially weakens the incentive of creditors of the firm to restrain the firm's risktaking, and it creates a playing field that is tilted against smaller firms not perceived as having the same degree of government support. creation of a mechanism for the orderly resolution of systemically important nonbank financial firms, which i will discuss later, is an important additional tool for addressing the too - big - to - fail problem. the federal reserve is already the consolidated supervisor of some of the largest and most complex institutions in the world. i believe that the expertise we have developed in supervising large, diversified, and interconnected banking organizations, together with our broad knowledge of the financial markets in which these organizations operate, makes the federal reserve well suited to serve as the consolidated supervisor for those systemically important financial institutions that may not already be subject to the bank holding company act. in addition, our involvement in supervision is critical for ensuring that we have the necessary expertise, information, and authorities to carry out our essential functions as a central bank of promoting financial stability and making effective monetary policy. the federal reserve has already taken a number of important steps to improve its regulation and supervision of large financial groups, building on lessons from the current crisis. on the regulatory side, we played a key role in developing the recently announced, internationallyagreed improvements to the capital requirements for trading activities and securitization exposures, and we continue to work with other regulators to strengthen the capital requirements for other types of on - and off - balance - sheet exposures. 1 in addition, we are working with our fellow regulatory agencies toward the development of capital standards and other supervisory tools that would be calib | 0.5 |
and benefits of the regulations we impose. finally, we need make access to finance easier. i have spoken about that in other contexts, and will not dwell on it here. before i move on, let me add some caveats. there is a danger when we discuss “ make in india ” of assuming it means a focus on manufacturing, an attempt to follow the export - led growth path that china followed. i don ’ t think such a specific focus is intended. first, as i have just argued, slow growing industrial countries will be much less likely to be able to absorb a substantial additional amount of imports in the foreseeable future. other emerging markets certainly could absorb more, and a regional focus for exports will pay off. but the world as a whole is unlikely to be able to accommodate another export - led china. second, industrial countries themselves have been improving capital - intensive flexible manufacturing, so much so that some manufacturing activity is being “ re - shored ”. any emerging market wanting to export manufacturing goods will have to contend with this new phenomenon. third, when india pushes into manufacturing exports, it will have china, which still has some surplus agricultural labour to draw on, to contend with. export - led growth will not be as easy as it was for the asian economies who took that path before us. i am not advocating export pessimism here – india has been extremely successful at carving out its own areas of comparative advantage, and will continue to do so. instead, i am counselling against an export led strategy that involves subsidizing exporters with cheap inputs as well as an undervalued exchange rate, simply because it is unlikely to be as effective at this juncture. i am also cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for china. india is different, and developing at a different time, and we should be agnostic about what will work. more broadly, such agnosticism means creating an environment where all sorts of enterprise can flourish, and then leaving entrepreneurs, of whom we have plenty, to choose what they want to do. instead of subsidizing inputs to specific industries because they are deemed important or labour intensive, a strategy that has not really paid off for us over the years, let us figure out the public goods each sector needs, and strive to provide them. for instance, smes might benefit much more from an agency that can certify product quality, or | jorgovanka tabakovi : development of financial industry in the digital economy era address ( via video ) by dr jorgovanka tabakovi, governor of the national bank of serbia, at the opening ceremony of the 20th china international finance forum, 14 december 2023. * * * esteemed hosts, esteemed participants of the china international finance forum, it is a great honour to address you for again on behalf of the republic of serbia and the national bank of serbia, at the helm of which i have been for more than eleven years. dear friends, three years ago i said that it was not easy to speak about financial services in the digital economy era to you who are leaders in this area. but, it is not difficult either, because china is the type of leader who helps and encourages others to make progress as well. serbia is a good example of this, which is also reflected in the economic and financial cooperation underpinned by the mutual respect and friendship of the serbian president aleksandar vui and the chinese president xi jinping. in the past ten years, china has become serbia's important foreign trade partner. our cooperation has strengthened for an entire decade, ever since we signed the joint statement on deepening strategic partnership, making serbia the first country in central and east europe to set up strategic partnership with the people's republic of china. during this year's belt and road forum for international cooperation, we also signed 18 important agreements, of which the free trade agreement between our two countries is the most important one. china was the second - largest foreign investor in serbia in 2020 and 2021, and the largest foreign investor in 2022, with investments worth usd 1. 5 bn. thus, a third of the record - high fdis to serbia in 2022 came from china. trade in goods increased as much as 5. 4 times in the past ten years, with china becoming serbia's second most important trade partner in 2022. in january 2015, the national bank of serbia included the chinese yuan in the list of currencies traded in the serbian fx market. in 2021 and 2022 the chinese yuan was among the four top currencies traded between domestic banks and their clients in the serbian fx market, which is another important indicator of the strength of our economic and overall relations. with the people's bank of china, we concluded the memorandum of understanding on designating a clearing bank for chinese yuans in serbia, creating conditions | 0 |
operation at the micro level, sometimes moving in different directions. for instance, when the general price level increases, there could be sectors where prices are coming down ; the same is the case with employment, consumption, production and investment. therefore, the micro foundations of macroeconomic analysis would not mean a one - to - one correspondence between the two. this relationship is somewhat nebulous but very important and should be viewed seriously with its significance as well as inherent limitations in mind. secondly, excessive leveraging in any conditions of financial markets is a source of potential instability. since leveraging is influenced by the cost of financing, the decisions affecting the cost and availability of credit do influence aggregate demand conditions. even if the source of financing is not bank funding, the interest rate conditions in the market definitely influence the opportunity cost of even internal resources of firms. the effectiveness of interest rate and exchange rate channels, no doubt, depends upon the depth and vibrancy of the debt and foreign exchange markets. in india, special efforts have, therefore, been made to develop these markets so that the efficacy of the transmission channel improves. in general, it may be held that in less developed financial markets, by using direct monetary instruments in conjunction with market - based instruments, the overall policy effectiveness can be improved. nominal rigidities arise in different segments of the market due to a variety of factors : the existence of organised and unorganised markets in parallel, tax regime, labour and income policies and trade union strength, level of competition or market imperfections, etc. for example, since nominal rigidities are high in less developed and relatively imperfect and underdeveloped markets, it should not lead to a conclusion that monetary policy is more effective under these conditions. of course, in india recent events in equity markets are not easily explicable and so we can appreciate the comment that equity markets have a mind of their own. as a group, the central bankers could take some credit for little explicit indexation in recent periods. however, the indian conditions on indexations are worth noting. the indexation is available only to workforce in the organised sector, which accounts for less than ten per cent of the total workforce, and within that, mainly to those in the public sector. having secured the principle of indexation, it is not given up by the organised work force, whatever be the level of inflation. no doubt, at the margin or incrementally, there could be less pressure for indexation, but | existing privileges are not easy to be eliminated. on the policy actions, under relatively more stable economic environment, the need, the extent and the duration of the policy interventions becomes less and less. central banks are now taking baby steps – sometimes more frequent steps and at other times after a long gap, and in both directions – to respond to, what appear to be, ripples rather than huge waves in the sea of economic activity. for instance, what is considered as a ‘ neutral rate ’ of interest in the present period appears to be much lower compared to several years before. the issue of significance here is whether the neutral rate in respect of emerging market economies, which has been coming down in tandem with global rates, will tend to be distinctly higher than in developed economies. if so, how much higher would be appropriate? thank you. | 1 |
daniel mminele : thoughts on south africa ’ s monetary policy address by mr daniel mminele, deputy governor of the south african reserve bank, at the jp morgan investor conference, washington dc, 16 april 2011. * 1. * * introduction good afternoon ladies and gentlemen. thank you to jp morgan emerging markets research group for inviting me to share with you some thoughts on south africa ’ s monetary policy. in the years prior to the most recent global financial crisis, central banks in general appeared to have almost perfected the conduct of monetary policy. 1 inflation targeting central banks were given operational independence to vary the short - term interest rate in order to achieve an inflation target. while this worked very well for some time, the global financial crisis showed us that achieving price stability by no means equated to achieving financial stability. this has resulted in somewhat of a paradigm shift for traditional monetary policy, and it seems we may be on the cusp of a new era in central banking. i would like to briefly discuss global economic developments and the changing role of central banks, highlighting the challenges and lessons learnt from the global financial crisis. i will then talk about south african monetary policy, as that is the reason for which i was invited to speak to you today. 2. global economic developments and monetary policy the international monetary fund ’ s ( imf ) latest world economic outlook ( weo ) reflects a similar picture to that of a few months ago. the global economic recovery proceeds at an uneven pace and although it is broadening, the divergence in economic activity remains wide. the growth momentum in advanced economies is gaining traction, but is insufficient to meaningfully impact on unemployment. emerging markets, on the other hand, are characterised by robust growth with signs of overheating in certain economies. the imf projects that global growth will moderate in 2011 to 4, 5 per cent from 5 per cent in 2010. advanced economies are forecast to expand by 2, 5 per cent and emerging economies by 6, 5 per cent. the imf has also identified a number of old and new risks, including the threat of spill overs from the euro area periphery to core europe, exacerbated by continuing weakness among many european financial institutions, a lack of clarity on exposures and weak sovereign balance sheets. this last point is not confined to europe, but a risk to advanced economies in general and the us and japan more particularly. it is plausible that this state of affairs, if not addressed, could result in | louis kasekende : bank of uganda ’ s instruments to respond to inflationary pressures remarks by dr louis kasekende, deputy governor of the bank of uganda, at a dinner hosted by dfcu bank, kampala, 5 may 2011. * * * the chairman and board of directors of dfcu bank limited ; senior management of dfcu bank limited ; chief executives of various institutions ; distinguished guests ; ladies and gentlemen the profile of dfcu bank limited reveals a common transformation process that has occurred in uganda ’ s banking industry over the past 10 years ; upon acquisition of the then gold trust bank limited by dfcu limited, dfcu bank limited was licenced as a commercial bank in 2000 ; over the last three years, dfcu bank limited witnessed impressive growth in the following key performance indicators : item deposits ugx. 127. 0 bn ugx. 220. 8 bn ugx. 489. 7 bn assets ugx. 209. 4 bn ugx. 493. 5 bn ugx. 817. 0 bn ugx. 276. 9 bn ugx. 405. 0 bn ugx. 40. 9 bn ugx. 68. 9 bn ugx. 13. 6 bn ugx. 21. 1 bn loans / advs core capital ugx. 21. 7 bn net profit branches atms dfcu bank limited has all through the past period maintained full compliance with statutory requirements on capital adequacy, which is a key performance indicator ; dfcu bank limited has been able to roll - out a number of financial products, which include ; i ) savings plus foreign accounts ( diaspora ) ; ii ) women in business accounts ; iii ) access plus loans ; iv ) tax loans ; v ) contract finance ; vi ) commodity finance ; vii ) working capital loans ; viii ) internet banking ; bis central bankers ’ speeches behind this impressive performance of dfcu bank limited is the financial support in terms of short to long - term loans drawn from committed partners under the umbrella of the parent company, dfcu limited. these shareholders include ; i ) proparco ; ii ) norfund ; iii ) cdc ; iv ) fmo ; v ) eib ; vi ) kfw the above impressive performance has qualified dfcu bank limited into a major contributor in the development of uganda ’ s financial sector, with a sizeable portion | 0 |
of such fundamental things as financial intermediation, credit growth, the exchange rate and real convergence in general. these are all very important factors that have to be taken into account when making a decision on the euro strategy or indeed on erm ii entry itself. it is therefore worth waiting with setting out very specific euro adoption plans for hungary until the dust settles at least a little bit. in the meantime, the slovakian experience with the euro, starting next year but showing its implications already in the recent unfolding of the crisis, will provide a good natural experiment for the other new member states, and will no doubt be closely watched. | an influence on one another. still, there is only one participant that is sufficiently large and has the coordination potential to break the negative spiral : the government itself. individual banks by themselves are unable to do this ; even if any of them started lending, it would have no noticeable effect at the macroeconomic level. the government, on the other hand, might be able to provide incentives to the banking sector to boost lending by reducing and stabilising the burdens on the banking system and making the regulatory environment more predictable, which could eventually place the system onto an equilibrium path. consequently, a “ compromise ” is called for between the government and banks, or else we cannot expect lasting growth to emerge. and the first move must be made by the stronger player by restoring the climate of trust. and finally, the third task : the central bank must achieve price stability similarly to other public entities, pro - growth monetary policy also needs to play its part in creating a predictable environment with the lowest possible risk level for economic agents. the central bank can contribute to this most efficiently by achieving price stability. this is also a precondition for reducing long - term interest rates and avoiding excessive exchange rate volatility. what does a central bank need to do to create price stability? over the past two decades, price stability has been achieved in almost all developed countries and a number of less developed ones. the experience of these countries shows that the most important element of success is the transparent and systematic operation of the central bank. inflation expectations become anchored, that is, lasting price stability and monetary policy itself become credible, if the central bank clearly states its inflation target, and economic agents see that the central bank will act to curb any developments threatening to result in a persistent deviation from that target. this conduct is greatly facilitated by a supportive fiscal policy. expectations of exchange rate devaluation due to the increasing fiscal imbalance and the expected adjustment measures, bis central bankers ’ speeches unknown as yet in every detail, can unsettle inflation expectations despite the best efforts of the central bank, and thus offsetting inflationary shocks may cause an output loss. it is no accident that in most countries the adoption of inflation targeting coincided with the strengthening of fiscal discipline or the compliant nature of fiscal policy. in hungary, ever since the introduction of inflation targeting in 2001, the central bank has unfortunately had to work against a headwind in its effort to achieve its statutory objective of price stability, against a backdrop of fiscal policy which fuelled | 0.5 |
a direct result, overall welfare in the economy. furthermore, joining the labor supply has an impact on the next generation, including values, education, and more. there is further potential for increasing employment rates, among older workers. it is important to implement policy measures that support the ability of such workers to reach their full potential, and in this regard i again note the need to increase the retirement age. human capital should be increased, with an emphasis on education and professional training • improve the education system and the schooling infrastructure • furnish the skills that are critical to successful integration into the labor market, such as math, science, and english, to the ultra - orthodox population as well • reduce the high - school drop out rate, strengthen science and technology abilities, and improve hebrew language skills in schools in the arab sector • there is room to markedly expand the technological professional education. at the high school level, general scientific and technological content should be provided, which will allow a choice between a professional track and an academic track at a later stage, and to concentrate the professional education primarily on focused training after military service ( and not by placing students in specific tracks ). in the dynamic modern labor market, professional training in school is likely to be obsolete by the end of youths ’ military service. factors supporting growth and productivity should be dealt with : • infrastructure • improve the business environment and reduce regulation • competition – in those industries that are not exposed to domestic or foreign competition • promote reforms ( ports, electricity, and the energy and gas industry ) • improve and increase efficiency of public services systems – education, health ( with a view to the aging population ), welfare ( by improving employment tests that allow increased focus of support ) expand export industries and destinations. we have seen that in export industries, the need to compete vis - a - vis abroad leads to higher productivity. • new markets : israel ’ s exporting has gone a long way to gain access to new markets, and we should continue to work to expand the range, especially against the background of the low potential growth of our traditional export destinations. bis central bankers ’ speeches • new exporters : we should provide assistance to small / medium manufacturers to deal with difficulty of breaking into global markets, through already existing government mechanisms as well. • encourage r & d not only for high technology industries, but also for low and medium technology industries in which innovation can make the difference between success or failure, and to improve the ability to export and compete abroad. against | differences can be seen in the productivity level of different industries. in industries in which a large part of output is export oriented, and that are exposed to competition from abroad, there is a positive productivity gap – that is, their level of productivity is greater than the oecd average. in contrast, in industries that are oriented to the domestic market and are less exposed to competition from abroad, or to any competition, such as construction, electricity, water, and food, the level of productivity is lower than the oecd average. as such, i will focus on an attempt to answer the question of what has caused the output per hour of labor in israel to grow relatively slowly and to be lower in israel than in other advanced economies. i ’ ll present now a schematic diagram of the factors impacting on productivity and on gdp. gdp is affected first by factors of production – capital, human capital, and labor. these enter the production function – technology – and are affected as well by frictional factors, such as regulation, the business environment, etc. all these ultimately impact on output per hour of labor, which is the main factor in determining wages. likewise, each one of the components in the production function is likely to be affected by policy. thus, for example, the quantity of production factors available to the economy is impacted on by the level of investments, the labor input is impacted on by the government ’ s labor market policy and by the quality of education, and policy can also influence the production function itself – on the adoption of technology, and of course on the business cycle as well. capital stock per employee in israel is markedly lower than in advanced economies – and not only is there a gap in the stock of capital, but the gap is not closing because the rate of investment is lower than in advanced economies. the level of investment in infrastructures is also low, and in most years is around 2. 5 – 3 percent of gdp. extensive government investment in infrastructure is a complementary factor to investment by the business sector in productive capital. in a recent report, the international monetary fund found that investment in infrastructure makes a marked contribution to gdp growth. as such, the low level of investment adversely impacts labor productivity in israel. the relatively poor investment in infrastructure is also reflected in the poor level of quite a few infrastructures in israel, particularly in the areas of transport and shipping, and perhaps surprisingly, even the share of internet users in israel is low in comparison with other | 1 |
may ), pp 60 - 65. - - - - - - - - ( 2016 ). “ the age of secular stagnation : what it is and what to do about it, ” foreign affairs, vol. 95 ( march / april ), pp. 2 - 9, https : / / www. foreignaffairs. com / articles / united - states / 2016 - 02 - 15 / age - secularstagnation. appendix here we review the simulations that underlie the estimates of the effects of various economic disturbances for their implications for the long - run equilibrium real federal funds rate, using simulations of the staff ’ s frb / us model. we first provide background on the methodology we use. we then review the nature of the shocks that are discussed in the speech and show the effects of those shocks on the long - run federal funds rate. finally, we provide details about the results shown in the figures. 1. background our point of departure is a definition of the equilibrium interest rate that corresponds with the neutral rate of interest. in particular, we use the definition of the neutral rate of interest that chair yellen used in a 2015 speech : “ the real rate consistent with the economy achieving maximum employment and price stability over the medium term, ” which, in an elaboration in a footnote, is said to be “ usually thought of as independent of the cyclical disturbances that routinely buffet the economy... [ that ] fade away after a few years. ” 1 the sort of disturbances being captured under the rubric of shifts in r * are thus rarer and more persistent than the usual business cycle phenomena and are associated with the “ various adjustment processes that are unusually drawn out by historical standards... [ and have ] slow - moving influences on both aggregate demand and supply. ” 2 this definition corresponds reasonably closely with the ( possibly timevarying ) intercept of a taylor - type rule in that the standard arguments of the see yellen ( 2015a ), paragraph 15 and footnote 4. see yellen ( 2015a ), footnote 4. other definitions of the neutral rate used by the chair in her public communications include the short - term real interest rate “ that would be neither expansionary nor contractionary if the economy was operating near potential ” ( yellen, 2015c, 2016 ) and the short - term real interest rate “ that would be consistent with real gdp expanding in line with potential ” ( yellen, 2015b ). | - as we all know - economic growth lies at the heart of our nation ’ s, and the world ’ s, future prosperity. a second concern is that low interest rates make the economy more vulnerable to adverse shocks that can put it in a recession. that is the problem of what used to be called the zero lower bound on interest rates. in light of several countries currently operating with negative interest rates, we now refer not to the zero lower bound, but to the effective lower bound, a number that is close to zero but negative. operating close to the effective lower bound limits the room for central banks to combat recessions using their conventional interest rate tool - - that is, by cutting the policy interest rate. and while unconventional monetary policies - - such as asset purchases, balance sheet policies, and forward guidance - - can provide additional accommodation, it is reasonable to think these alternatives are not perfect substitutes for conventional policy. the limitation on monetary policy imposed by low trend interest rates could therefore lead to longer and deeper recessions when the economy is hit by negative shocks. and the third concern is that low interest rates may also threaten financial stability as some investors reach for yield and compressed net interest margins make it harder for some financial institutions to build up capital buffers. i should say that while this is a reason for concern and bears continual monitoring, the evidence so far does not suggest a heightened threat of financial instability in the post - financial - crisis united states stemming from ultralow interest rates. however, i note that a year ago the fed did - 3issue warnings - - successful warnings - - about the dangers of excessive leveraged lending, and concerns about financial stability are clearly on the minds of some members of the federal open market committee, fomc. those are three powerful reasons to prefer interest rates that are higher than current rates. but, of course, fed interest rates are kept very low at the moment because of the need to maintain aggregate demand at levels that will support the attainment of our dual policy goals of maximum sustainable employment and price stability, defined as the rate of inflation in the price level of personal consumption expenditures ( or pce ) being at our target level of 2 percent. that the actual federal funds rate has to be so low for the fed to meet its objectives suggests that the equilibrium interest rate - - that is, the federal funds rate that will prevail in the longer run, once cyclical and other transitory factors have played out - has fallen. 2 let | 1 |
the overly expansionary monetary policy amply documented by john taylor. it was obvious to virtually all economists that the country needed a permanent budget shift as vietnam spending increased, but what came out of that was a delayed temporary tax increase. anything else would have made the war less popular, and by then the vietnam war was pretty darn unpopular. quite possibly, our intellectual understanding was not where it should have been in the late 1960s, but 90 percent of the policy problems were political, with the policymakers themselves. these days the board staff makes a baseline forecast and grafts on frbus to get the results for alternative scenarios. we actually began to do these types of experiments once our model was put together in the late 1960s. i was dying to present the results to the board, but never could get past lyle gramley, our sponsor but also our gatekeeper. he didn ’ t trust the model enough when it was used as a pure forecasting device. then, as i suppose now, we had the most trouble forecasting equipment investment - most of the other final demand sectors worked pretty well. the investment accelerator was also the reason our dynamic simulations ran off - track. when we would suspend the investment equation, things would work reasonably well. i have heard the modern day staff complain about estimating an accelerator effect for equipment and software and, believe me, i am sympathetic. another place where the intervening years have made a real difference is the way in which the baseline forecast itself was put together. in our day it was totally anticipations data - leading indicators of this or that, for a quarter or two ahead at most. today i hear dave stockton describe the baseline forecast in very model - oriented terms - this effect, that coefficient, and so forth. nowadays the baseline forecast also runs out a few years, something the judgmental forecasters of earlier days would never have attempted, and it even has measures of forecast uncertainty. all of these are real improvements, far beyond what was done in the 1960s. for me, this work all came to an end in may 1970. at the time i felt we had brought the model as far as i thought we could bring it, at least for a while, and i really wanted to do some other kind of economics. whether the external pastures were in fact greener i will never know - they just seemed greener at the time. so i left the board staff, confident that i would never return either to the board or to large - scale macro | improved training schemes and sufficient flexibility in labour contracts are required in order to avoid an increase in structural unemployment. at the same time, existing competitiveness problems, as well as domestic and external imbalances, need to be urgently addressed by the countries concerned. to that end, wage - bargaining institutions that allow wages to adjust appropriately to losses in competitiveness and the unemployment situation are indispensable. likewise, measures that increase price flexibility and non - price competitiveness are essential. finally, an appropriate restructuring of the banking sector should play an important role. sound balance sheets, effective risk management and transparent, robust business models are key to strengthening banks ’ resilience to shocks and to ensuring adequate access to finance, thereby laying the foundations for sustainable growth and financial stability. we are now at your disposal for questions. | 0 |
wu xiaoling : improving monetary policy transmission, creating a sound financial environment speech by ms wu xiaoling, deputy governor of the people ’ s bank of china, at the annual conference of china economic forecast, analysis and outlook, beijing, 20 march 2005. * * * in the first two months of 2005, the economy ran smoothly as the supply of money and credit grew steadily. by the end of february, m2 increased by 13. 9 percent yoy ; the rmb loans went up by 13. 4 percent with newly issued mid - and long - term loans accounting for 46. 7 percent, or 4. 5 percentage higher yoy, but 13. 8 percentage points lower than that of last year as a whole, indicating some structural change. during january and february, the fixed investment in the urban areas increased by 24. 5 percent yoy. real estate investment grew by 27 percent, lower than that of the same period last year, but still at a rather high level. new starts continued to grow and projects under construction were of large scale. in january and february, the cpi went up by 2. 9 percent. according to the statistics of the nbs, the ppi jumped by 7. 2 percent yoy. with prices of raw materials, labor and land trending upward and their downstream impacts growing, the inflation pressure is on the rise, even though inflation is still seen as can be controlled within 4 percent for the year. the people ’ s bank of china ( pbc ) will do its best to maintain a stable growth of money and credit through using a range of monetary policy tools. in 2005, the pbc will improve monetary policy transmission to increase the effectiveness while strengthening the preemptive and scientific approach in conducting monetary policy. being an important part of the monetary policy transmission process, the commercial banks shall enhance promptness in responding to macro - developments and contribute to financial stability when maximizing profits and controlling risk. i. the commercial banks shall respond to macro - developments promptly a. generally speaking, legislation and macro - policies aim at maintaining fair competition and efficient allocation of resources, reflecting the overall interests of the whole society. under this framework, a positive interaction is formed among the legislative bodies, macro - adjustment departments and the public, which would also contribute to cushioning big shocks to the economic and social development. policy circumvention may in some cases reflect the reactions of micro - entities to the deficiencies in macro - policies. however, with the goals | in order to create a certain kind of tenancy and leasing market for the housing industry, and in order to ensure the housing mortgage loans be backed by indisputable securities, the real estate developers must utilize equity financing as the main form. as the real estate industry is a high - risk as well as a high - return industry, the problem of matching risks and returns shall only be better resolved with equity financing mode taking the dominant position. according to information provided by the report on china ’ s real estate market 2003 ~ 2004, the leverage ratios of china ’ s real estate enterprises are relatively high. the leverage ratios of the top five listed companies in hong kong are basically kept at a level between 30 % to 40 %, while those of domestic real estate companies stand at around 75 %. the report also shows that among the 24. 6 % of the self - raised capital 13. 3 % belongs to self - owned capital. such a high leverage ratio could bring huge loss to debtors once the market risks arise. according to the report, the return on self - owned capital is 21. 17 %, which does not match the risk borne by debtors when compared to the cost of financing. with the maturing of financial markets, the principle of matching risks with returns shall be absorbed into the financing mode for real estate industry, and it is an inevitable trend that the ratio of developers ’ equity financing will be increased. china ’ s economy is now in a transition period when many reforms are not compatible with each other perfectly. when we put forward the reform of housing commercialization and monetarization, the state reduced or halted direct input into the housing industry but failed to open the equity - financing channel to real estate developers. a multi - level capital market has not developed not only to real estate developers but also to all the enterprises, leading to the result that many enterprise flocked to get listed in the stock market. if they did not succeed in the direct financing market but have to develop, the financing burden thus completely falls on banks. in order to support the housing monetarization reform and promote the development of the real estate industry, the people ’ s bank of china has issued a series of credit policies to contribute to the development of real estate credit since 1998. the rapid development of the real estate industry should be a benefactor of the housing credit policy formulated by the pbc, otherwise the real estate industry shall not be so sensitive to the adjustment of the pbc ’ credit policy. | 0.5 |
from operational failures in many businesses or entities at once, some banks argue that capital requirements for a large and diversified firm as a whole might be less than the sum of capital requirements calculated for each individual entity. the committee acknowledges the technical and practical challenges associated with developing and implementing amas for large, diversified firms. we are working to reduce unnecessary burdens on banks adopting them. while we have not made any decisions yet, this is an issue that we are still discussing actively with the industry. but we face even tougher questions if we consider the allocation of capital across not just legal entities, but also across national borders, as some have requested. this is a very difficult question to address in the basel context. the committee must respect the legal responsibilities charged to national supervisors in regulating locally chartered banks, branches, or subsidiaries. all bank supervisors must have access to sufficient, comprehensive and detailed information on a bank ’ s operational risk control structure, including its ama, to evaluate the quality of risk management at banks they supervise. that may include a need for banks and other supervised entities to demonstrate the adequacy of their capital resources on a stand - alone basis. we are giving significant thought to the international implications of this issue, but i should caution that we may not be able to find a completely satisfactory solution at the committee ’ s level. consistency in application of ama standards the challenges of implementing the new accord across borders raise concerns as well about consistency in the application of ama standards. these concerns also address more broadly competition between ama banks, which is the final theme i ’ d like to mention today. while many banks welcome the flexibility to use their own methodologies under the ama, some are concerned that too much flexibility might allow competitors at home or abroad to employ methods that are subject to less rigorous supervision. ensuring the consistent application of the new accord in its entirety is a critical concern for the committee. the minimum standards were developed to help ensure that global competition in banking markets will be driven by each bank ’ s strengths, rather than by differences in each country ’ s rules. moreover, pillars two and three were created to a great degree to promote a more level playing field for banks. for example, incorporating supervisory review - or pillar two - into the international guidelines represents a genuine breakthrough for all of us. by developing guidelines for the supervisor ’ s evaluation of a bank ’ s internal capital allocation process, the committee believes that supervisors and banks will engage in more focused, more consistent, and less burdensome | multiple interrelated drivers and, moreover, that it depends on the area we are considering, whether asset management, the investment industry, corporates or benchmarks, but we can conclude that a common element in greenwashing is the lack of transparency. the quality of the indicators and the assessment of investments will further improve as more and better data sources become available. see esma ( 2023 ). progress report on greenwashing. may. several regulatory initiatives in the european union will make new data available as a result of new climate and sustainability reporting requirements for financial and non - financial institutions. currently we have the sustainable finance disclosure regulation ( sfdr ), that sets mandatory environmental, social and governance ( esg ) disclosure obligations for financial markets participants, and the corporate sustainability reporting directive ( csrd ). with regard to the latter, the european financial reporting advisory group ( efrag ) is working on the details of the thematic standards for collecting information on esg aspects, trying to reconcile csrd with the recommendations of the task force on climate - related financial disclosures ( tcfd ) and the work of the international sustainability standards board ( issb ). as you know the tcfd issued a set of recommendations to disclose climate - related risks and opportunities, grouped into four categories : i ) governance, ii ) strategy, iii ) risk management and iv ) metrics and targets, but again they are voluntary. the issb is working on a global framework for sustainability but it has a different approach from efrag. for example, the issb considers single materiality while efrag considers double materiality. as you can see we have an alphabet soup to negotiate in the drive for transparency. in reality, there is as yet no global standard for disclosure, and it will take several years to achieve a complete framework. according to an analysis conducted by eurosif, through a quantitative survey and qualitative interviews of asset managers and owners operating in europe, one of the most frequently mentioned challenges is a lack of data necessary to comply with european union regulations. some respondents commented that they currently use sfdr - related data merely for compliance reasons and do not consider them to be decision - useful information. however, the responses gathered during the qualitative interviews indicate that this view could change as the coverage and reliability of these data increase. 6 see eurosif ( 2023 ). climate - related data : the investors ’ perspective. report, may. we have a new challenge | 0.5 |
. it is conceivable that banks cease to exist as integrated multi - product businesses. they become instead product specialists in a rather fragmented landscape, finding it tough to earn more than commodity profits even in areas where, in the case of the longer established banks, they used to enjoy niche advantages. the other scenario emanates from the same starting point of intense competition. but in this case the new entrants do not have the resources to continue with their generous initial terms for long enough to secure a firm business foundation. the established banks reluctantly but necessarily take on the newcomers aggressively, utilising their financial strength and making extra efforts to build robust relationships across a broad range of services and to exploit the underlying inertia that customers may exhibit. in other words, they use the internet to consolidate their relationships and to see off the competition. customers are persuaded that it's not worth sacrificing the relationship for the sake of a few basis points. some customers may be lost, but some of these may anyway be ones which the banks can afford to say goodbye to. as a variant to this model, the banks may adopt different brands for their internet services, exploiting any opportunities available from product differentiation and market segmentation, but retaining the capacity from their standpoint to manage multiple relationships with any individual customer as one. one can envisage many other outcomes besides these examples. i know of no sure way of predicting what will happen, but my personal view is that the internet is likely to emerge more as a channel to build on existing relationships and to increase the efficiency of basic services than as something which changes the landscape of the banking industry. but perhaps i am guilty of thinking that everyone else possesses the same inertia as i do when it comes to changing one's habits. concluding remarks i have skimmed over a few issues which can rather loosely be said to fall under the heading of banking and development. there are many experts attending this symposium who will, i am sure, offer much deeper and more provocative insights into the economic outlook in general, and the relationship between financial development and growth in particular. i wish you all a fruitful and enjoyable couple of days. | agus d w martowardojo : the future of asia ’ s finance – financing for development welcoming remarks by mr agus d w martowardojo, governor of bank indonesia, at the joint imf - bank indonesia conference “ the future of asia ’ s finance : financing for development ”, jakarta, 2 september 2015. * * * • honorable managing director christine lagarde, the co - host of this conference ; • honorable minister bambang brodjonegoro, • honorable governors, deputy governors, ambassadors, representatives from regional and multilateral institutions, business community, our colleagues from academics, distinguished panelists, • ladies and gentlemen, good morning and warm welcome to all of you. 1. it offers me great pleasures to welcome you to this conference jointly co - hosted by bank indonesia and the imf with the topic of “ the future of asia ’ s finance : financing for development. ” the topic is indeed crucial considering wide financial gaps still exist in the region. in this regard, searching for an optimum financing would be challenging in the midst of current circumstances. 2. before i share my views on financing issues, allow me to discuss the global economic development. asia ’ s finance is now facing great challenges. in the near term, we may still confront an episode of heightened capital flows volatilities as consequences of unfavorable global economic condition. sluggish global economic growth continues to depress production and outlook. strong u. s. dollar following partial u. s. recovery and easing in europe and japan have tested some of asia ’ s economic buffers. weak commodity price has significantly hurt exports of some key regional economies. and more recently, china ’ s decision to rejuvenate its moderating growth through exchange rate policy has made the risk of external funding intensified. in fact, the increasing, yet again, global financial volatility, in a tune of 2013 global tantrum, is happening as we are sitting here, and it has led to a pull - back in capital flows from some emerging markets, including in asia. 3. while asia has remained broadly resilient to the risks, and it has led global growth for the past thirty years, its role to support global economic recovery seems to be weakening a little bit. a number of emerging market economies in the region are experiencing a declined economic growth and facing increased financial vulnerability, mostly related to capital reversal. 4. asia definitely needs the right policy mix to secure growth and | 0 |
thank you! 3 / 3 bis - central bankers'speeches | kamau thugge : launch of the chora plan financial literacy campaign remarks by dr kamau thugge, governor of the central bank of kenya, at the launch of the chora plan financial literacy campaign, nairobi, 11 june 2024. * * * mr. john gachora, chairman, kenya bankers association ( kba ) mr. raymond molenje, acting chief executive officer ( ceo ), kba ; ceos herepresent ; distinguished guests ; ladies and gentlemen : good morning! i am pleased to be here at the launch of the chora plan financial literacy campaign. let me express my gratitude to the kenya bankers association ( kba ) for the invite and organizing this launch event. i note that the campaign themed claim your financial freedom is designed to empower individuals and businesses in the economy with knowledge and skills necessary to make informed financial decisions on banking, insurance and pension services. i am also informed that today's launch will pave the way for a month - long sensitization drive focusing on building a saving culture and financial planning. this will in turn enhance the financial health of businesses and households. before delving into the theme of today, let me briefly set the context in which we meet this morning. globally, growth has continued to recover, while inflation has moderated but has continued to be sticky downward in advanced economies. this generally positive global outlook is subject to downside risks, mainly from a potential escalation of geopolitical tensions and if interest rates remain higher for longer to fight the sticky inflation rates in advanced economies. domestically, we have experienced relative macroeconomic stability this year with inflation oscillating at around 5. 0 percent in april and may, which is the mid point target range of the central bank of kenya ( cbk ). the foreign exchange market has also stabilized, and the shilling is one of the best ( if not the best ) perfoming currencies this year vis - a - vis the major currencies. on the growth front, the recently released economic survey 2024, shows that the kenyan economy recorded strong growth in 2023 of 5. 6 percent, driven by the rebound of the agriculture sector and robust performance of the services sector including the finance and insurance sector. while the recent flooding in parts of the country, caused considerable damage to lives and livelihoods, the economy is expected to remain strong in 2024. this will be supported by the resilient services sector, continued robust | 1 |
, where in december 2022 the level of total deposits was 5. 55 billion euros, an increase of 2. 19 billion euros or 65. 1 percent in the 2022 time horizon compared to 2018. the banking sector throughout this period, despite the continuous double - digit growth of lending, has continued to be well capitalized and liquid. the liquidity ratio of the banking sector continues to be high and above the regulatory requirements of the cbk. the banking sector had the highest level of liquidity during the pandemic period, in 2020, which was 39. 8 percent, while in december 2022 this ratio was 36. 5 percent, higher than the required regulatory minimum of 25 percent. the 2 / 5 bis - central bankers'speeches liquidity coverage ratio ( lcr - liquidity coverage ratio ) is at the level of 212. 1 percent, which is much higher than the required level of 100 percent ( in the third quarter of 2022, this indicator in the eurozone countries was at the level of 162 percent ). the banks'own capital has continued to increase, despite the approval of the distribution of dividends individually for the banks during the last 5 years. as of december 31, 2022, the capital value of the banking sector is 699 million euros from 497 million euros at the end of 2018. while the capital adequacy indicator continues to be above the required regulatory minimum throughout this period, or about 14. 8 percent in end of 2022. in addition to the banking sector, the mfi - nbfi have also recorded a stable performance, where at the end of 2022 the value of the assets of this sector was 387. 7 million euros, an increase of 146. 1 million euros, or 60. 5 percent compared to 2018. as in banks, the main item also among mfi - nbfi are loans that in december 2022 marked the value of 351 million euros, or an increase of 128. 9 million euros or 58. 0 percent, compared to 2018. the stable and qualitative growth of loans is also confirmed by the level of non - performing loans in relation to total loans that at the end of 2022 was 1. 8 percent, lower compared to 2018 when it was 2. 2 %. in relation to this sector, in 2019 the cbk withdrew the registration ( license ) of two institutions, iutecredit and monego. both of these institutions have made numerous court appeals | fehmi mehmeti : during my mandate, the insurance sector was stabilized speech by mr fehmi mehmeti, governor of the central bank of the republic of kosovo, at the end of the mandate press conference with journalists, pristina, 27 march 2023. * * * dear representatives of the media, dear citizens, allow me to thank you for your presence in this last conference, at the end of the 5 - year mandate of the governor of the central bank of the republic of kosovo. also, allow me to thank you for the continuous and effective cooperation that we have cultivated during the last five years and informing the public about the activities of the cbk, as well as the economic and financial developments in the country. communication with the media has been and i hope will be an important part of cbk's activity. through your reporting, we have managed to keep the public well informed about developments in the country's financial system and economy. therefore, i would like to take this opportunity to express my high appreciation for the professionalism shown during this period of time. * * * despite all the difficulties we have faced as an institution, but also me personally as governor, i am happy and proud to inform you that during the last five years the central bank of the republic of kosovo has managed to implement its objectives, providing a stable financial system, and, especially in recent years, managed to successfully cope with the crises caused by the covid 19 pandemic and now the russian aggression in ukraine, but also to be one of the main pillars of support for businesses and individuals, and with this also the country's economy. * * * now, allow me to present before you a summary of the developments that characterized the country's financial system during this period. * * * since march 2018, on the occasion of my decree as governor, we have managed to successfully fulfill our constitutional and legal role through professional decision - making based on good standards and principles of corporate governance, independence and accountability. the financial system in the country during this five - year period has been characterized by positive developments and continuous growth in all its indicators. through the licensing policy, the cbk has continuously aimed to provide the best possible conditions for access to finance in kosovo, enabling the operation in our 1 / 5 bis - central bankers'speeches financial market only of institutions that contribute to the stability and development of the financial system, consequently and sustainable economic development of the country. under my leadership as | 1 |
vitor constancio : we need a coordinated european npl strategy. how to deal with europe ’ s market for lemons? opinion piece by mr vitor constancio, vice - president of the european central bank, 5 july 2017. * * * one of the most pressing issues for euro area banks is the nearly €1 trillion of non - performing loans ( npls ) on their balance sheets. while the average euro area npl ratio has declined gradually from a peak of 8 % in 2013, it still remains at 6 % and differences across countries are marked : six countries still have npl ratios of more than 10 %, significantly more in some cases. this is not just a problem for banks. the flip side of npls is over - indebtedness among households and firms, and this poses a macroeconomic challenge – banks restrict credit supply and distressed firms curtail investment, which in turn hampers economic growth. asset quality issues were exacerbated by the global financial crisis. when the crisis hit, the surge in npls blocked the ability of many banks to deal with distressed debt. npl resolution, though not a panacea for all banking problems, could bring significant benefits. it is not easy to estimate the effects of resolving npls. however, scenario - based analysis indicates that replacing npls with performing assets could increase the aggregate return on equity of euro area banks by more than 1 percentage point, with some countries ’ banking sectors gaining up to 5 percentage points. it is therefore essential to find a solution to the npl problem, but we must recognise that it will take time and no single instrument is likely to be a “ magic bullet ”. rather, it will require a comprehensive strategy involving a panoply of instruments. the ecb is already working on this and has issued clear guidance to the banks it directly supervises. but supervisory action is not enough on its own. the private sector and national and european authorities also have roles to play. several significant impediments affect the prices of npls, to varying degrees across euro area countries. the market for distressed debt can be characterised as a “ market for lemons ”. this is a situation where investors demand a premium to protect themselves from the uncertainty that better - informed banks will try to sell them assets whose credit quality is worse than it may seem on the surface. this results in limited market activity, as the prices that investors are prepared to pay for npls are much lower | sabine lautenschlager : cross - border banking since the crisis – lessons for supervisors statement by ms sabine lautenschlager, member of the executive board of the european central bank, at the 10 years vienna initiative - anniversary conference 2019, vienna, 27 march 2019. * * * the crisis has shown that the banking sector is deeply interconnected worldwide, and that a banking crisis can quickly spread from one country to another. it also laid bare a number of weaknesses in the global regulatory framework. but after long and tough negotiations, we agreed on the basel iii framework, which addresses most of the weaknesses found in global regulation. it will help make global financial markets safer by ensuring that global banks and banks with cross - border activities have to comply with a common framework of minimum capital, liquidity and risk management standards. the crisis clearly showed that supervision should not stop at national borders. and it also showed us that cooperation between home and host supervisors is key to understanding the risks banks are exposed to when doing business across borders. in recent years, cooperation between supervisors has increased significantly, on the back of new global and european standards for home / host cooperation. cooperation between supervisors has become natural ; in fact, it has become essential. this cooperation has been institutionalised via supervisory colleges and crisis management groups. standards now apply when information is exchanged between host and home supervisors, and when joint fact findings and assessments are due. and various criteria now apply when supervisors from different countries have to agree on joint action regarding banks. of course, it is easier to cooperate in theory than in practice. and it is easier to cooperate in normal times than in times of crisis. the vienna initiative was an important example of cooperation in crisis times. and with the vienna initiative 2. 0 in particular, we have seen how important it is to provide structures and platforms for home / host cooperation. it is undeniable that, in times of crisis, the interests of home and host supervisors may diverge. but without cooperation, it would be very difficult to maintain financial stability. breaking this kind of prisoner ’ s dilemma requires trust. but trust cannot be built over a few days of talks at the height of a crisis. trust requires us to understand each other ’ s priorities and constraints. and this takes time. in a way, this should be seen as an investment. as a supervisor, you should invest your time in building trust with other authorities. it will pay off. in practice, the fact that this lesson has | 0.5 |
imf was there when ireland, portugal, greece and cyprus were under attack. in an unstable world, the imf is more necessary than ever. our crisis management tool, the european stability mechanism, deserves to be strengthened. it could become a true european stability fund, with greater resources and an independent advisory capacity. european crises would also have to be managed in a more transparent way, involving the european parliament more closely. protectionist and populist movements are gaining support among voters in europe. how should we respond to this frustration? europe was a great success when it came to building the single market and the euro, and welcoming the former communist countries. but it was unable to help workers facing globalisation and technological change. we need to take advantage of the return of growth to create a space for european rules which foster the mobility of employees, protect their rights and enable them to be educated and trained across europe. why are the ecb and the national central banks ignoring bitcoin and other cryptocurrencies, which are being increasingly used for trade? we aren ’ t ignoring them. at the moment crypto - currencies don ’ t pose any monetary risk because the amounts involved are marginal. they are speculative financial instruments which create risks of a financial or even criminal nature. the central banks are following their development very closely because they can spread very rapidly, especially in countries which are moving away from banknotes and coins. and if tomorrow the future president of the ecb was a german national, would that be a serious matter? the nationality of the ecb ’ s president is irrelevant. what matters is that the person can do the job. 2 / 2 bis central bankers'speeches | recovery takes hold, the quality of jobs will improve and allow wages to rise, but this will take time. are the reforms undertaken by the euro area countries going in the right direction? it ’ s not the ecb ’ s job to give lectures. our mandate is to protect the purchasing power of the people of europe. growth has returned in all the euro area countries and consumer confidence across europe is at its highest for 16 years. the priority now is to achieve greater convergence between the countries and thus create a more resilient economic bloc. every country must continue with its reforms : in particular france, but also germany. does the economic transformation of france promised by emmanuel macron go far enough? it will enable france to make up for lost time. the return of growth in europe is offering france a 1 / 2 bis central bankers'speeches unique opportunity to pursue a coherent set of reforms in order to rectify its weaknesses : persistent unemployment, inadequate training, deficits in public finance and external trade. but this is happening at a time when globalisation and technological change are creating uncertainty. more flexibility is needed, it ’ s true, but we shouldn ’ t forget those who get left behind by this model. and the level of france ’ s public debt? on the budgetary front, france still faces a predicament. its deficit is falling, but mainly because the economy is growing again. if the economic climate changes, where will the room for manoeuvre be? it ’ s now high time that france, the second - largest economy in the euro area, let go of the ecb ’ s monetary policy. what institutional reforms will be needed to consolidate the euro area? that ’ s a matter for the heads of state and government. for a long time i have favoured the establishment of a euro area finance ministry. provided it was given the right financial tools, this would facilitate the handling of the next crisis without having to rely excessively on the ecb, which was mainly the case these past few years. but for the ministry to come into being, a degree of trust has to be recreated between the countries. in this discussion, the reforms and the serious nature of france ’ s budget are a test case. let ’ s also prevent the common budget from absolving governments of their budgetary responsibilities. would a european monetary fund make sense? i am not one of those who think that europe should get rid of the international monetary fund ( imf ). the | 1 |
2 global pmi di, % pts. global manufacturing pmi output index global services pmi business activity index cy 2013 note : figures are from the j. p. morgan global pmi. figures above 50 indicate improvement and below 50 show deterioration on a month - on - month basis. source : ihs markit ( © and database right ihs markit ltd 2019. all rights reserved. ) chart 3 real gdp growth and breakdown by component ann., q / q % chg. - 5 private consumption private business fixed investment, etc. government spending exports imports change in inventories, etc. real gdp - 10 - 15 - 20 cy 2013 cy source : cabinet office, " quarterly estimates of gdp for october - december 2018 ( first preliminary estimates ). " 18 18 chart 4 outlook for economic activity and prices ( january 2019 outlook report ) medians of policy board members'forecasts, y / y % chg. real gdp cpi ( all items less fresh food ) ( reference ) excluding the effects of the consumption tax hike and policies concerning the provision of free education fiscal 2018 [UNK]. 9 [UNK]. 8 forecasts made in october 2018 [UNK]. 4 [UNK]. 9 fiscal 2019 [UNK]. 9 [UNK]. 1 [UNK]. 9 forecasts made in october 2018 [UNK]. 8 [UNK]. 6 [UNK]. 4 fiscal 2020 [UNK]. 0 [UNK]. 5 [UNK]. 4 forecasts made in october 2018 [UNK]. 8 [UNK]. 6 [UNK]. 5 note : the direct effect of the consumption tax hike on the cpi for fiscal 2019 and fiscal 2020 is estimated to be 0. 5 percentage points for each year. the direct effects of policies concerning the provision of free education on the cpi for fiscal 2019 and fiscal 2020 are estimated to be minus 0. 3 percentage points and minus 0. 4 percentage points, respectively. source : bank of japan, " outlook for economic activity and prices ( january 2019 ). " chart 5 household consumption consumer confidence index consumption before and after tax hikes apr. 1996 and apr. 2013 = 100 105. 1 s. a. 104. 6 103. 9 100. 0 99. 4 improved worsened tax hike in april 2014 ( from 5 % to 8 % ) tax hike in april 1997 ( from 3 % to 5 % ) 96. 7 13 fy 1996 14 fy 2013 note : the latest figures are as of december 2001 and december 2018. source : cabinet office, " synthetic consumption index. " 13cy 2013 14 note : households of two or more persons. consumer | confidence index is composed of four categories : " overall livelihood, " " income growth, " " employment, " and " willingness to buy durable goods. " there are discontinuities between march and april 2013, and between september and october 2018, due to changes in the survey method. source : cabinet office, " consumer confidence survey. " chart 6 consumer prices measures of underlying inflation consumer price index 2. 0 y / y % chg. y / y % chg. % points 1. 0 1. 5 1. 0 0. 5 0. 5 0. 0 0. 0 - 0. 5 - 1. 0 - 0. 5 trimmed mean cpi ( all items less fresh food ) - 1. 5 weighted median cpi ( all items less fresh food and energy ) diffusion index ( right scale ) - 2. 0 - 1. 0 cy 201112 12 13 13 14 14 15 15 16 16 17 17 18 18 note : figures are adjusted for changes in the consumption tax rate. source : ministry of internal affairs and communications, " consumer price index. " - 50 cy cy112011 1212 notes : 1. the latest figures are as of december 2018. 2. the diffusion index is defined as the share of increasing items minus that of decreasing items. the share of increasing / decreasing items is the share of items in the cpi ( less fresh food, consumption tax adjusted ) whose price increased / decreased from a year earlier. sources : bank of japan, " measures of underlying inflation " ; ministry of internal affairs and communications. chart 7 output gap and inflation expectations output gap %, % points y / y % chg. 5. 07 % ( 1990 / 4q ) 1. 78 % ( 1997 / 1q ) 2. 02 % ( 2007 / 4q ) 2. 0 synthetic indicators of inflation expectations y / y % chg. firms, households, and experts ( consensus forecasts ) 1. 57 % ( 2018 / 2q ) firms, households, and experts ( quick survey ) firms, households, and markets ( inflation swap rate ) 1. 5 1. 0 - 2 0. 5 - 4 0. 0 cy 10 - 2 - 4 labor input gap capital input gap - 6 output gap reference : cpi ( all items less fresh food and energy ; right scale ) - 8 cy 1985 notes : 1. the data of the output gap in the left - hand graph are the estimates by the bank's staff as of january 30, 2019 | 1 |
for those borrowers unable to access other sources of financing. and while there are potential gains from a shift to market - based financing, whether or not they are realised will depend on how the financial system adapts. as part of its responsibility for identifying, monitoring and taking action to remove or reduce systemic risks, the fpc will monitor any implications of a shift to market - based finance for uk financial stability. there could also be implications for money markets. the smooth functioning of these markets is important for the bank to meet its objectives. any large - scale reallocation of cash around the financial system has the potential to impact how money markets function. hence, there is a risk of some disruption to money markets in the short - term, as new forms of digital money emerge. but in the long run, these markets should adapt to the introduction of new forms of digital money. i have talked so far about the impact of innovation in digital money in normal conditions. but, during a system wide stress, the availability of new forms of digital money could increase the proportion of banks ’ deposits that are withdrawn. private liquidity insurance is calibrated to help mitigate liquidity risks. and, in aggregate, given existing liquidity resources, the banking system should be able to withstand sudden deposit outflows. but there is significant uncertainty around how smoothly such a deposit outflow would unfold, emphasising the importance of banks ensuring they have access to the bank ’ s liquidity facilities. i hope from this you can get the sense of how important this potential innovation in digital money is, and why we must – both domestically and working with international partners – ensure that we understand and respond to the public interest issues that arise here, so that we can do our job of protecting stability, but also so that innovation can happen in a world where the public interest is well defined and protected. i am going to end – since time is up – by merely listing the other elements of public interest that i could, and probably should have covered, with respect to the innovation of digital currency, but which will have to wait for another day. i could have talked about monetary policy and controlling interest rates in a world of digital money. i could have talked about the public interest in competition in the financial system, about financial inclusion, and about data protection and privacy. i could have talked about the potential for digital money to speed up and reduce the transactions cost of international payments and transfers. and, finally, we cannot | throughout this development and in adopting the most effective instruments for addressing them. in this regard, let me emphasize that altogether : the albanian government, bank of albania and abb, have carried out a great work in realising certain fundamental structural reforms over the last decade. allow me to be specific. first, the plan of measures for reducing non - performing loans and improving the lending environment. the non - performing loans ratio peaked at almost 25 % credit portfolio in 2014, posing a major challenge for the development of the banking system and a serious obstacle to credit growth. to address this problem, in 2015, the bank of albania together with the albanian government and the aab adopted the national plan for the reduction of nonperforming. a set of important reforms have been implemented in the framework of this plan. these reforms enabled non - performing loans in banks'balance sheet reduce currently to 4. 64 %. also, these reforms paved the way for the rapid, stable and sound growth of bank credit. credit growth to private sector - stated in figures and referring to the same five - year horizon – has increased with a cumulative value of 40 %. only in the last year, credit to the private sector recoded an average growth of 8 %. in the first quarter of 2024, this growth has climbed close to 12 %. second, the consolidation of banking system, as an instrument for enhancing its competitiveness and reorganisation, was concluded successfully. this process, while taking place as dictated from the strategies and policies of european banking groups, presented many challenges. nevertheless, ultimately, it resulted in a more sound competition, an increased share of the domestic capital and improved financial intermediation. third, the enhancement of financial inclusion – though an ongoing process – has brought significant benefits to the albanian economy. as a result of joint implemented reforms in payment systems and the continuous investment to increase financial education, we have achieved a remarkable progress over the last years : around 171, 654 adult citizens or around 78 % of the adult population have access to bank accounts ( 2023 ) ; access to bank accounts via internet has increased by around 17 times ( 11, 108 accounts in 2008 - 1, 096, 402 accounts in 2023 ) ; currently ( 2023 ), transactions carried out via banks amount around 7. 7 million ( from only about 88. 000 in 2008 ), accounting all 2, 004, 180 or 88 % of gdp in 2023 ) ; the number of bank cards has almost triple | 0 |
to enjoy confidence and legitimacy. to summarise, i consider it extremely important that independent central banks should be assessed. to ensure that this is carried out in a purposeful manner, the central banks ’ forecasts and other information on which decisions are based should be well - documented and reported openly. it also requires a reasonably coherent explanation as to why the forecasts look the way they do. this means that we need to constantly develop our methods for making and assessing forecasts. however, it also requires that an institution actively commits itself to making thorough analyses of the information compiled so that the assessments and debate can be serious and constructive. what happens if low inflation persists? not only the riksbank, but also several other central banks have in recent years faced a situation where the economy has grown strongly, while inflation has been below target, despite very expansionary monetary policy. let me therefore go on to discuss an important issue that has arisen due to developments in recent years, namely how to deal with a situation where structural changes contribute to inflation remaining low over a long period of time. in sweden, the upswing in world trade has contributed to strong growth in swedish exports. over the past year, domestic demand has also developed strongly, partly due to stimulation from expansionary monetary policy. at the same time, inflation has been kept down by high productivity growth and weak growth in import prices. this is partly related to developments in economic activity. however, there also appear to be factors of a more structural nature behind the low inflationary pressure. this is probably to some extent connected to the fairly comprehensive investment in new technology. however, it is clearly also largely concerned with the effects of increased global competition. our analyses thus indicate that the low inflation rate has in many cases been the result of a number of changes in the supply side of the economy. our forecast is that growth in the swedish economy will remain high over the coming years. we also envisage inflation rising as capacity utilisation increases. our most recent inflation forecast indicates that inflation will approach the target a couple of years ahead, on condition that the repo rate is gradually increased. however, forecasts are of course uncertain. in addition to the usual uncertainty regarding developments in economic activity, it is very difficult to determine the durability of this type of structural change. is, for instance, the upswing in productivity we have seen in recent years only temporary or is it a more permanent improvement? there is a discussion that | . against this background, let me just say a few words about the monetary policy strategy we have chosen in sweden and the changes we have recently made to our analysis framework. the strategy has of course developed gradually during the period we have applied inflation targeting and is primarily the result of practical experiences of inflation targeting in sweden and in other countries. new findings in academic research in this field have also had significance. the riksbank ’ s monetary policy strategy in sweden, the riksdag ( the swedish parliament ) has delegated the responsibility for monetary policy to the riksbank, through the sveriges riksbank act, which came into force in 1999. according to this act, the objective of monetary policy is to maintain price stability. the riksbank has specified this as an inflation target, which states that the annual rate of change in cpi should be 2 per cent, with a permitted deviation of ± 1 percentage point. the riksbank shall also promote a safe and efficient payment system. the preliminary work to the sveriges riksbank act also makes clear that the riksbank as a public authority under the riksdag, without neglecting the price stability target, should support the general economic policy objectives of sustainable growth and high employment. the sveriges riksbank act also established increased independence for the riksbank. since 1999, decisions on the repo rate have been made by the executive board of the riksbank and the members of the board are expressly forbidden from seeking or receiving instructions when carrying out their monetary policy tasks. price stability is thus the objective of swedish monetary policy, but like norges bank and most other inflation - targeting central banks we conduct monetary policy that also to some extent takes into account activity in the real economy. the fact that the interest rate is often adjusted in relatively small and predictable steps can partly be regarded as an expression of this. if the aim had instead been to bring back inflation to the target as quickly as possible, without any other considerations, it is probable that larger and more frequent adjustments would have been warranted. a more gradual change in the interest rate can also be justified by the uncertainty of the forecasts and statistics. monetary policy is normally aimed at attaining the inflation target within two years. this horizon is justified by the fact that monetary policy's impact comes after a time lag, but also by the desire to contribute to subduing fluctuations in activity in the real economy. by aiming to allow | 1 |
way to enabling this innovation with the renewal of the bank's real time gross settlement system, the largest infrastructure programme the bank has undertaken, under the leadership of victoria cleland. this puts us in a very strong position to deliver solutions which can integrate central bank digital money in rtgs with tokenised transactions. we think this is the fastest and most efficient route to take. last month we migrated the wiring of rtgs with the outside world successfully. we have moved from copper to fibre optic so to speak. can i thank all of the many firms involved in making this a success. you now have a much improved financial messaging system with the ability to transmit much wider data which starts to enable greater programming and enhance domestic and cross - border payments. next year we will introduce the new settlement engine. our ambition does not stop there. this will create the platform for change and enhanced digitalisation. last year we consulted on what industry would like to see next in terms of wholesale payment capability, and victoria and her team are now working with industry to develop an ambitious world - leading roadmap of future payment innovations we will introduce in the uk. this is all very exciting and puts us on the threshold of what can be major changes. so, let me finish with one thought. what the history of the city suggests is that there is a great capacity to move on from past successes and seize the opportunity to get out in front again. we have that opportunity again with the digital world, but we need to take it. now i said i was finishing, but i have one more thing to do. [ toast ] the lord mayor and lady mayoress. 6 / 7 bis - central bankers'speeches i am grateful to jamie bell, sarah breeden, nick butt, victoria cleland, jon cunliffe, ed dew, andrew gimber, andrew hauser, robert hills, karen jude, ali moussavi, nick mclaren, tom mutton, matthew osborne, rhys phillips, huw pill, aniruddha rajan, vicky saporta, martin seneca and sam woods for helpful comments and assistance in helping me to prepare these remarks. 7 / 7 bis - central bankers'speeches | ##i, and takaful uk ltd respectively. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice table 2 : islamic finance in the uk – selected timeline 1970's london market brokers offer wholesale liquidity management using commodities swiss - based dar al mal al islami opens london office offering investment management services establishment of first islamic bank, albaraka bank ( ceased 1993 ) establishment of first uk islamic insurance ( takaful ) company, takaful uk ltd islamic mortgages offered in the uk by united bank of kuwait ( now ahli united bank ) hsbc amanah launches islamic mortgages and bank accounts in the uk authorisation of al rayan bank plc ( formerly islamic bank of britain ) court case of beximco vs. shamil bank of bahrain establishes principle that secular authorities cannot opine on shari'ah compliance bank abc offers islamic mortgages under al buraq brand children's mutual launches shari'ah compliant child trust fund lloyds tsb offers shari'ah compliant current account authorisation of european islamic investment bank plc ( ceased in 2018 ) first sukuk listed on the london stock exchange ( tabreed, $ 200m ) authorisation of bank of london and the middle east plc authorisation of investment firm amiri capital ( ceased 2018 ) fsa outlines regulatory approach to islamic finance in : " islamic finance in the uk : regulation and challenges " authorisation of qib ( uk ) ltd ( formerly european finance house ) authorisation of gatehouse bank plc authorisation of british islamic insurance holdings / principle insurance ( ceased 2013 ) consultation paper cp08 / 22 establishes liquid asset buffer requirement for all uk banks authorisation of adib ( uk ) ltd ( ceased 2020 ) hsbc amanah exits uk market authorisation of cobalt underwriting london hosts the world islamic economic forum, the first time outside the muslim world uk government issues its first sovereign sukuk authorisation of investment firm arabesque asset management tam asset management launches shari'ah compliant investment funds islamic insurance association of london established bank of england commences shari'ah compliant facilities ( scf ) project authorisation of shari'ah compliant crowd funding firm yielders columbia threadneedle investments launches shari'ah compliant global equity fund authorisation of shari'ah compliant home finance firm strideup homes al rayan bank issues first sterling denominated residential mortgage backed su | 0.5 |
been extended to other areas, such as the review of the basel committee core principles for effective supervision, in which hong kong is heavily involved. successful implementation of basel ii depends not just on the standard - setters and the regulators, but also on the banks themselves. the enthusiasm with which the hong kong banking community has taken to basel ii has been impressive. as a senior member of this community, our discussant today is particularly well equipped to provide the perspective from the banks. we are fortunate in having secured david eldon ’ s presence today. after more than 40 years in banking, many of them in hong kong, he is about to retire from the field. he is thus currently much in demand among his many friends within the financial community, who wish to fete him on his retirement. he is also receiving bookings in his new, risk - taking career as popular singer and entertainer – a field in which we wish him every success. i take this opportunity to pay tribute to david for his outstanding contributions to hong kong during difficult and challenging times, not just in the financial sphere, but also in the many community and charitable activities in which he is involved. ladies and gentlemen, it is an honour to welcome governor jaime caruana as speaker, and mr david eldon as discussant. i now have much pleasure in inviting governor caruana to deliver the seventh hkma distinguished lecture. | the new accord, but also because this city has one of the highest concentrations of banking institutions in the world, with a strong presence of international banking groups. many people all over the world have been involved in basel ii. but there is no - one more qualified to speak on the subject than our guest today. governor caruana is the current chairman of the basel committee on banking supervision. he is also governor of the banco de espana, and a member of the governing council of the european central bank. governor caruana has extensive experience in both the private and public sector in spain, and is the author of several publications on the spanish financial system. we are greatly honoured that he has accepted our invitation to speak on basel ii today. the basel ii project was already several years old when governor caruana took over its leadership, as chairman of the basel committee, in may 2003. but he has put his own stamp on this project, and has made three special personal contributions. first, he has brought the formulation process to a successful conclusion with the publication last june of the definitive document on the revised framework. producing this necessary road - map was no easy achievement given the differing views that had to be taken into account, and the considerable degree of scepticism in the industry. secondly, he has, through persuasion and advocacy, managed to convert scepticism towards basel ii into a positive and constructive attitude. he has done this in particular by stressing that, when you look beneath the surface, basel ii is not so much about how capital adequacy ratios are calculated, as about how banks can improve their risk management and, thereby, how the efficiency of the banking system can be improved. he has also placed emphasis on the point that basel ii applies not just to advanced banking systems but to banking systems in all stages of development – an observation of particular relevance to this region. thirdly, and of no less importance to us in hong kong, governor caruana has personally supported greater involvement by non - g10 members in the basel ii process. within this region, central bankers have been increasingly active in recent years in trying to ensure that our voice is heard in the process of policy formulation and standard - setting in basel. governor caruana has on a number of occasions spoken out on the need to ensure that our voices are indeed heard, and that our views are actually taken into account. and there are signs that this practice is turning into a tradition : it has | 1 |
s financial system, first as a commercial banker and now as a central banker, i intend to use this opportunity today to share my perspectives on the approach adopted by rbi as the regulator of indian banks for making the indian banking bis central bankers ’ speeches sector more inclusive and relevant to a large cross - section of the indian economy and society. i shall also delve on the challenges which the banking system is encountering in realizing the goal of universal financial inclusion and the innovation and reforms that may be necessary to overcome some of these challenges. i also wish to emphasize that having bright and innovative ideas do not have any meaning until and unless they are acted upon. i, therefore, compliment the organizers for including “ implementation ” as an element of the theme for the conference, as i believe that rigor in implementation is extremely important for realization of the dream of universal access to financial services and products. why is financial inclusion necessary? 9. the ilo declaration of philadelphia in 1944 proclaimed that “ poverty anywhere is a threat to prosperity everywhere. ” it is universally agreed now that financial inclusion helps build domestic savings, bolster household, domestic and financial sector resilience and stimulate business and entrepreneurial activity, while exclusion leads to increasing inequality, impediments to growth and development. thus, financial inclusion is an important tool for poverty alleviation as it not only connects individuals to the formal financial system, but also inculcates savings habit among them. hence, financial inclusion or inclusive banking is a precursor for inclusive and sustainable economic growth. financial exclusion : dimension of the problem 10. an accusation that has come to be levied against the banking sector in the aftermath of the financial crisis is that it has failed to be “ inclusive ”. let me tell you that the indian banking system is not alone in failing the “ inclusion ” test. it is only the degree of exclusion that varies between different jurisdictions. the financial inclusion action plan ( fiap ) developed by the g20 global partnership for financial inclusion mentions that the universal financial inclusion initiative requires bringing the 2. 5 billion people ( or about half the working age population ) currently excluded, into the formal financial system. 11. that brings us to the question how inclusive is the indian financial system? census 2011 gives us some answers. out of 24. 67 crore households in the country, only about 14. 48 crore or 58. 70 per cent households had access to banking services. further, of the 16. 78 crore rural households only about 9. 14 | alan greenspan : jackson hole conference - closing remarks closing remarks by mr alan greenspan, chairman of the federal reserve board of governors, at a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, 27 august 2005. * * * the federal reserve will almost surely face as many uncertainties over the next eighteen years as it has over the past eighteen. technology continues to bring rapid change and, hence, considerable uncertainty, to the global marketplace. monetary policy, supervision and regulation activities, and payments system operation will need to be calibrated to respond to the influences of that technological change. other forces will be at work on the economic environment as well. the inexorable aging of our population will markedly influence the policy milieu in the years ahead. monetary policy, for example, cannot ignore the potential inflationary pressures inherent in our current fiscal outlook, especially those that could arise in meeting commitments to future retirees. however, i assume that these imbalances will be resolved before stark choices again confront us and that, if they are not, the fed would resist any temptation to monetize future fiscal deficits. we had too much experience with the dangers of inflation in the 1970s to tolerate going through another bout of dispiriting stagflation. the consequences for both future workers and retirees could be daunting. nearer term, the housing boom will inevitably simmer down. as part of that process, house turnover will decline from currently historic levels, while home price increases will slow and prices could even decrease. as a consequence, home equity extraction will ease and with it some of the strength in personal consumption expenditures. the estimates of how much differ widely. the surprisingly high correlation between increases in home equity extraction and the current account deficit suggests that an end to the housing boom could induce a significant rise in the personal saving rate, a decline in imports, and a corresponding improvement in the current account deficit. whether those adjustments are wrenching will depend, as i suggested yesterday, on the degree of economic flexibility that we and our trading partners maintain, and i hope enhance, in the years ahead. on monetary policy, i envision a continuous refinement of our risk - management paradigm. i presume maximum sustainable economic growth will continue to be our goal, with price stability pursued as a necessary condition to promote that goal. to date, we have chosen not to formulate explicit inflation targets, in part, out of concern that they could inhibit | 0 |
purchasing power of money relatively constant and predictable. yes, sometimes it required unorthodox policies. in conservative societies, people tend to fret about too much money being “ created ”, but they typically have no idea whatsoever about how much money there actually is in circulation, how large the effective money supply is. when i ask about the size of the money supply even in front of well - educated audiences, i often get estimates that are wildly off the mark. in contrast, i obtain very precise answers on the rate of inflation. price stability, not money supply, matters. bitcoin nicely illustrates the very essence of the current monetary policy, which relies on elastic money. it is a policy of nominal stabilisation of prices, of the purchasing power of money. in consequence, the impact of shocks does not require tough adjustments through wages and employment. so, as long as central bankers abide by the principle of purchasing power stabilisation, i ’ m not afraid that any newly invented fixed money system will spontaneously prevail and become dominant. the fact that current money is fiat, not really in line with my libertarian friends ’ dreams, is less important than price stability, i would say. what is really interesting and potentially useful about cryptocurrencies ( beyond the mere intellectual stimulus, of course ) is distributed ledger technology and the idea of digital money being issued by mainstream central banks themselves. the two are bound together by a common feature : a reduction of the importance of intermediaries. the distributed ledger technology behind bitcoin brings the attractive notion that, in principle, we don ’ t need any centralised settlement systems, any standardised systems that settle payments. the settlement system can be decentralised, thus potentially saving time. but let ’ s not forget how the system of payment confirmation works when distributed ledger technology is in play. bitcoin makes many users confirm that a transaction has taken place. the process is very energy - demanding, akin to actual mining : it resembles all the processes employed in the past when we were dealing with physical money. using classical commodity money requires physical investment ; using bitcoin requires energy investment. so far it seems that distributed ledger technology would consume much more energy than standardised central clearing houses. that ’ s why we now use non - physical money without any intrinsic value – it is more efficient. going back to any physical money would be like going back from pcs to typewriters. maybe this is one of the reasons | that while the recent experience may have made us a bit more confident about detecting bubbles, it has not resolved the problem of doing so in a timely manner, nor has it shown that small - to - modest policy actions will reliably and materially dampen speculation. an extra policy reaction to changes in asset prices thus still remains questionable. the second frontier to be mentioned tonight is related to the monetary policy implementation, current situation on the money market and financial stability of the banking sector. for years the monetary policy implementation was not an issue and central banks were able to tighten the short - term money market interest rates such as for instance 3m pribor closely to the key policy rate. unfortunately, this changed in august 2007 for the us interest rates when the 3m libor for the us dollar denominated funds started to deviate significantly from the federal reserve target for funds. a year later following the second round of the financial crises that peaked during the bankruptcy of lehman brothers also the czech short - term money market rates started to elevate well above our policy rate, the two week repo rate. quoted from speech of vice chairman donald l. kohn : “ monetary policy and asset prices revisited ” at the cato ’ s institute 26th annual monetary policy conference, washington, d. c., on november 19, 2008. what we know is that all these movements were caused by principal uncertainty among the commercial banks worrying about their solvency and financial stability. the banks were not sure among themselves about to what extent they were hit by the collapse of the market with asset - backed securities and consequently about their counterparts ’ ability to stay in the business over a longer period than one day. central banks reacted and extended the money market operations in order to narrow spreads between the market rates and key policy rates. for instance, the czech national bank introduced a new liquidity providing repo operation despite the fact that the money market as a whole operates with huge surplus and on average the czech national bank has to withdraw roughly 400 billions czech crowns from the money market to be able to control the market interest rates. while introduction of this new operation made the money market participants less nervous, unusual spread between the market rates and the key policy rate still persists. this is not only the case of the czech economy or other central european economies but we observe the same also in the eurozone. commercial banks operating in the eurozone are willing to borrow around 250 billions euro from the european central bank paying the key policy | 0.5 |
six or twelve month horizons. this could, of course, be entirely driven by the expectation that there would be no move in non - inflation report months : in the extreme, if the distribution of surprises in those months is degenerate ( i. e. so that no one expected a change in rate and this was what actually happened ) then the statement that surprises are bigger in inflation report months is no different from the statement that rates are only expected to change in these months. the closer the distribution comes to being degenerate, the more weight should be attached to that interpretation. but both the average surprise and its variance are significant. on closer inspection, this finding seems to relate to the decision in inflation report months – not the publication of the report itself a week later, or the minutes the week after that ( panel e shows that the market reaction to the policy decision is, on average, significantly bigger than the reaction to the report and the minutes ). this might imply that it is the rethink during the preparation of the inflation report that counts. but, once announced, the decision itself ( and the accompanying press notice, if rates have changed ) provides most of the information the market needs to understand the committee ’ s approach. this would be consistent with a fairly high degree of policy predictability. it is worth emphasising that the observed tendency for interest rate changes to coincide with the publication of an inflation report does not imply that interest rate changes are tied in any mechanical way to the central projection for inflation. the assessment of risks is always a material factor in determining policy, as well as an important aspect of the presentation of the forecast. for example in our latest inflation report we published a central projection which showed inflation rising gently but steadily above the 2 % target, assuming a nearly flat profile of interest rates out to three years. but the report noted that the balance of risks was to the downside and singled out some key near term risk areas, such as the household sector. this provided a nuanced background to the mpc ’ s february decision to hold rates unchanged. forecasts and public communication all inflation targeting central banks use their forecasts as a communication tool. they provide a coherent statement of policymakers ’ thinking about the economic outlook and the policy stance. together with the minutes of the policy meetings ( in our case published with individual votes after two weeks ), this helps to discharge the committee ’ s democratic duty to explain itself, as well as supporting its credibility and helping | system, and probably beyond what was reasonable. we need to quit pointing the finger, alternatively, at global macroeconomic and financial system causes, and accept that it was both. the turner report does that. a few points on micro regulation the report and accompanying fsa discussion paper ’ s principal focus is, of course, micro regulation. i have just three points to add or emphasise on that this morning. effective prudential supervision of individual firms relies on the line supervisors being prepared to substitute their views for those of management when they have good reason to believe that the viability or stability of a bank otherwise may be in peril. they need the confidence, when necessary, to face down management, and even boards ; and also to be prepared to take the risk of being overruled on appeal. a respected, self - confident but restrained line supervisor, with the forensic skills to get to the heart of things, can do a very great deal for stability. it is terrific that adair and hector are renewing the emphasis on line supervision. ( but, by the way, when supervisors do their job, their achievements are invisible and they get no thanks. ) second, it is important to remember that most bank failures have their roots in large or concentrated exposures. this crisis is in some respects no exception. it is, therefore, good news for the future that, ahead of this crisis, the eu was already planning to extend the bar on large credit exposures to interbank deposits. line supervisors must additionally look for concentrated exposures to sectors or instruments ; to give just one of many possible examples, large holdings of super - senior cdo tranches just might have been a pointer to the vulnerabilities at some large internationally active banks. and the possibility of fateful concentrations in bank funding structures should be given similar weight. if all that requires more reporting by banks, it would be worth it. third, effective prudential supervision is seriously impeded by complex group structures. that was a headline lesson from the failure of bcci nearly two decades ago ; and eu directives were amended to make unsupervisable structures a ground for withholding or withdrawing authorisation, and so for exercising regulatory powers. but complexity is not just a convenient shield for wickedness. it can also make it hard for management and supervisors to figure out what is going on in a perfectly honest business. the explosion of what i referred to a couple of years ago as vehicular finance | 0.5 |
harmonise consumer protection in particular relating to purchase of digital content products and in cross border transactions. how are we placed in terms of consumer protection and responsibilities of banks and customers in an electronic banking environment where physical transaction is replaced by electronic transaction, physical trail is replaced by electronic trail, and a physical signature is replaced with a digital one? how can we define the roles and responsibilities of banks and customers in such an environment to achieve a win - win situation for all? is the customer really aware of his / her rights and responsibilities, or does the “ fine print ” put all the liability on the customer? does the regulatory requirement of “ authorisation ” provide a sufficient safeguard for users of electronic payments? are the existing consumer protection act, banking ombudsman act, and other grievance redressal mechanisms really up to handling issues arising out of payments systems arena which is increasingly getting electronic? or does the law need to be strengthened further while focussing exclusively on consumer protection issues arising out of electronic transactions? is there a need to dovetail consumer protection with consumer awareness as well since there is a lot of synergy between these two requirements? for instance, even as the rbi is taking steps to make card present transactions more secure, customer awareness can go a long way in enhancing customer protection while using magstripe cards at a pos terminal. a simple case in point is how many of us really pay attention to the fact whether the merchant is checking the signature on the card during a transaction at the pos terminal? today, matching the signature on chargeslip with that on the card is perfunctory. should not this become a more serious exercise? i would encourage the bankers ’ club to arrange a round table to debate on these issues and come up with a technical paper. as i conclude, let me also take this opportunity to provide some inputs on two other areas which will see vast improvements in large value payments as well as bring in additional messaging avenues – i am referring to the next - gen rtgs and the proposed entry of swift for domestic messaging in india. the existing rtgs system was commissioned in 2004. the volume of rtgs transactions have grown over the years and currently settles approximately a volume of around 3 lakh transactions a day. this raised issues of scalability of the existing rtgs system which was developed to handle a volume of 50, 000 per day. further, it is a well known fact that rtgs, being a gross settlement system, is liquid | 9th global alliance for banking on values ( gabv ) conference kathmandu / 7 - 9 march 2017 address by dr. chiranjibi nepal, governor, nepal rastra bank rt. honorable prime minister mr. pushpa kamal dahal, chairman of global alliance for banking on values and ceo of triodos bank mr. peter blom, executive director of gabv dr. marcos eguiguren, chairman of nmb bank mr. pawan kumar golyan, ceo of nmb bank mr. upendra poudyal, my friends from the financial community in nepal media friends, distinguished guests from nepal and abroad ladies and gentlemen, it gives me immense pleasure to address this 9th global alliance for banking on values ( gabv ) conference, being held here in kathmandu. i would like to thank nmb bank and other members of the gabv for providing me this privilege. i believe the theme of this conference entitled " shifting the financial paradigm - courage to act together " encompasses the work of the global alliance targeted at changing the world of finances to put people before profit. in this respect, i appreciate this laudable effort of the members of gabv who are focusing on strengthening local communities and entrepreneurs to become self - reliant. ladies and gentlemen, the challenge of building a sustainable financial system is to develop one which is a servant of the real economy, not its master, and which enables the sustainable intergenerational increase of common welfare and environmental resilience. the ultimate aim of the financial system should be to cater to people ’ s needs. there may be differences in values with respect to geography and time, but human welfare will always remain the principal value across different cultures. it was in the aftermath of the global financial crisis that a number of sustainability - focused or values - based banks had exhibited the ability to provide steady risk - adjusted financial returns by focusing on the real economy, and acting as financial intermediaries dedicated to supporting economic, social and environmental impact. these banks that put people before profit have gained credibility and recognition and are growing in strength and number. these banking institutions are united by the principles of sustainable banking that are based on certain values including sustainability, transparency, diversity, fairness and inclusion. in this banking model, profit is a result of sustaining and growing value in the real economy and healthy communities, not an end goal. ladies and gentlemen, allow me now to share with you a few words on financial sector development of nepal which would | 0 |
c. williams, federal reserve bank of san francisco working paper no. 2013 - 15, july 2013. bis central bankers ’ speeches multiyear contracts is a multiyear nominal stability. a policy that “ lets bygones be bygones ” from year to year may not achieve this kind of stability, especially when policy options can become constrained, in the short term, by the zero bound. a policy that takes a longer - term perspective and is properly communicated and executed – so as to instill confidence that monetary policy will hew to a 2 percent inflation target rather than fixate on the run - rate of the past four quarters or the outlook for the next four – may better supply the longer - term comfort that households and businesses need to plan and budget. such a policy would reduce the uncertainty that monetary policy as it is currently conducted spawns and would be more effective in doing its part to assist in economic expansion. 8 a dime between two nickels i hope this is enough to get a conversation started. i will now turn the microphone over to john taylor. in doing so, i am reminded of ross perot ’ s quip when he was placed between bill clinton and george h. w. bush for a predebate photograph in the 1992 presidential election. noting that mr. perot was substantially shorter than the other two men, a reporter asked him how he felt. his reply : “ i feel like a dime between two nickels. ” in contrast, compared to john taylor, i feel like an intellectual dwarf – a mere penny sitting on the dais next to john ’ s $ 100 bill brain. and i ’ m talking about the new, difficult to replicate $ 100 bill that will be released next tuesday. please join me in welcoming john taylor to the podium. for more information about tightening control of inflation expectations by putting a five - year inflation rate, in place of the usual four - quarter inflation rate, in the taylor rule, see “ all in the family : the close connection between nominal - gdp targeting and the taylor rule, ” by evan koenig, federal reserve bank of dallas staff papers, no. 17, march 2012. bis central bankers ’ speeches | the san francisco fed, john williams, produced a formal study that posited that the aggressive use of unfamiliar policy tools like quantitative easing and operation twist add to aggregate economic uncertainty and, if applied at all, should be deployed more cautiously than our more familiar tools. 7 large margins of error in general, the objective of monetary policy is to provide households and firms with an economic environment that makes it attractive to use money as medium of exchange and store of value. since many private contracts, including labor and debt contracts as well as capital expenditure commitments, extend out several years, a multiyear policy perspective is needed. a multiyear perspective is especially important when the economy may encounter the zero bound. the explanation is that by interfering with the normal conduct of monetary policy, the zero bound increases the likelihood that policy will miss its objectives year after year in the same direction, so that the errors accumulate over time. over the past five years, for example, pce inflation has averaged 1. 2 percent per year. the fomc ’ s announced long - term inflation objective is 2. 0 percent. over a single year, the difference between 1. 2 percent and 2. 0 percent inflation is inconsequential. over five years, though, that small difference cumulates to a 4. 26 percentage point difference in the price level, which is not insignificant, perhaps, if back in 2008 you took out a mortgage with a fiveyear balloon. alternatively, nominal gdp growth over the past five years has averaged 2. 4 percent per year, when ordinarily one might have expected 4. 5 percent average annual growth ( 2. 5 percent real growth plus 2. 0 percent inflation ). again, the difference is inconsequential in any given year. accumulated over five years, though, the level of nominal income today is fully 12 percent below what might reasonably have been expected when mortgage and auto loan agreements were made back in 2008. kindly note that i am not advocating any change to the fomc ’ s 2 percent inflation target. my point is simply to highlight the longer - term consequences of what might appear to be smallish, shorter - term deviations from the norm. business operators plan capital expenditure and payrolls not in one - or two - or even three - year increments ; they plan and budget over longer - term horizons. the nominal stability that people need if they are going to negotiate see “ a defense of moderation in monetary policy, ” by john | 1 |
##ncies between 1990 and 1998. 4 the amounts outstanding by non - euro area residents increased even more sharply from 56 billion euros to 120 billion euros in 1999. 5 consequently, the euro topped the us dollar as an issue currency for international bonds in the private sector for the first time in the same year. 6 low interest rates and a weakening currency might have stimulated borrowing in euro. a closer look at debt financing shows that corporate bonds have gained in popularity in the euro area during the past few years. growth rates for the outstanding amount of domestic debt securities by corporate issuers of 23 % in 1998 and 14 % in 1999 were higher than the increase in bank loans to nonfinancial corporations, although the latter had started from significantly higher levels. 7 the increase in bond issues was accompanied by a change in the structure of issuers. whereas bonds had formerly been a financing instrument almost only for large, top - rated “ blue chip ” companies, an increasing share of bonds has been issued by lower - rated companies to capitalise on the growing readiness to accept credit risk among investors in the euro area. the average bond rating consequently declined from aa + to aa - and approached that in the united states in 1999. 8 to provide a more complete picture, bonds issued by financial institutions declined slightly in 1999 following an expansion in 1998. 9 however, financial intermediaries are still the largest borrowers in the private bond market. their debt in the form of bonds amounts up to nine times the domestically issued corporate debt. source : euro. nm. the new market segments in europe in belgium, france, germany, italy and the netherlands are tailored to the requirements of a group of issuers which carries a high risk, is short on collateral and is in need of large financial resources. all three characteristics seemed to match investors ’ demand in 1999 quite well hence the demanddriven record issue values. source : fibv. see bis ( 2000a ), p 133, for market capitalisation data and deutsche bundesbank ( 1998 ), p. 58, for european differences. see bis ( 2000a ), p 128. source : ecb. see bis ( 2000b ), p 17. sources : bis, ecb, own calculations. note that due to reclassifications the growth rates for the ecb bank loans statistic suffer from comparability for different time periods. see bis ( 2000a ), p 130. source : bis, own calculations. looking at differences in the | less recent studies by imf or oecd staff also find evidence of a significant undervaluation. 38 looking for possible causes for the recent weakness of the euro, it will soon become apparent that the euro ’ s exchange rate reacted asymmetrically to macroeconomic events on each side of the atlantic. thus, the successful passage of the tax reform bill in germany was barely acknowledged in exchange rate movements while the surprisingly large growth in us gdp in the second quarter was reflected rather quickly in a corresponding fall in the euro exchange rate. apparently, the uncertainties associated with the euro area received more attention than those affecting the us economy. exchange rates do not, however, consistently move in only one direction. cyclical developments may revive the diversification argument as a strategic consideration. moreover, empirical studies support the view that the composition of foreign exchange reserves to some extent reflects the structure of external trade and financial ties. if the euro were to become more popular among private market participants, it might also significantly improve its fortunes as a reserve currency. see dooley, m p, j s lizondo and d j mathieson ( 1989 ). these ten countries account for more than one - half of the world ’ s foreign exchange reserves. they are all either asian or latin american countries whose economies are oriented more towards the dollar area than towards the euro area. ecb ( 1999b ), table c, pp 52 - 53. see clostermann, j and b schnatz ( 2000 ). see macdonald, r ( 2000 ). see alberola, e et al. ( 1999 ), and coppel, j, m durand and i visco ( 2000 ). iii. banking competition before introducing the euro, investors in europe dealt mainly with banks in their country of origin. the market share of branches and subsidiaries of foreign banks as a percentage of total assets of the banking system was below 11 % in most emu countries. 39 this suggests that competition from outside was somewhat constrained. the currency union was consequently expected to foster competition in the banking sector. 40 in particular, a reduction in excess capacities and an increase in efficiency was expected. 41 a single monetary policy and a single currency could partly take away some of the informational and funding advantage of domestic banks and therefore diminish the need to maintain banking relationships in every country. 42 this might lead to a reduction of branches and increased cross - border competition within the euro area. whereas there is some evidence that | 1 |
and which can include changes in either investor sentiment or risk aversion, price movements due to forced selling by either levered investors or convexity hedgers, and a variety of other effects that fall under the broad heading of internal market dynamics. this observation reminds us that it often doesn ’ t make sense to try to explain a large movement in asset prices by looking for a correspondingly large change in expectations about economic fundamentals. so while we have seen very significant increases in long - term treasury yields since the fomc meeting, i think it is a mistake to infer from these movements that there must have been an equivalently big change in monetary policy fundamentals. nothing we have said suggests a change in our reaction function for the path of the short - term policy rate, and my sense is that our sharpened guidance on the duration of the asset purchase program also leaves us close to where market expectations – as expressed, for example, in various surveys that we monitor – were beforehand. i don ’ t in any way mean to say that the large market movements that we have seen in the past couple of weeks are inconsequential or can be dismissed as mere noise. to the contrary, they potentially have much to teach us about the dynamics of financial markets and how these dynamics are influenced by changes in our communications strategy. my only point is that consumers and businesses who look to asset prices for clues about the future stance of monetary policy should take care not to over - interpret these movements. we have attempted in recent weeks to provide more clarity about the nature of our policy reaction function, but i view the fundamentals of our underlying policy stance as broadly unchanged. thank you. i look forward to your questions. bis central bankers ’ speeches | role as a reserve currency globally. moreover, we have a robust and diverse banking system that provides important services along with a widely available and expanding variety of digital payment options that build on the existing institutional framework with its important safeguards. circumstances where the central bank issues digital currency directly to consumer accounts for general - purpose use would raise profound legal, policy, and operational questions. that said, it is important to study whether we can do more to provide safer, less expensive, faster, or otherwise more efficient payments. some jurisdictions are likely to move in this direction faster than others, based on the particular attributes of their payments and currency systems. at the federal reserve, we look forward to collaborating with other jurisdictions as we continue to analyze the potential benefits and costs of central bank digital currencies. most immediately, the federal reserve is actively working to introduce a faster payment system for the united states, to improve the speed and lower the cost of consumer payments. in many countries, consumers are already able to make real - time payments at low cost. this summer, the federal reserve announced the first new payment service in more than 40 years — the fednow service — to provide a platform for consumers and businesses to send and receive payments immediately and securely 24 hours a day, 365 days a year. - 9as the public and private sectors work to reduce payment frictions, one of the most important use cases is for cross - border payments, such as remittances. current cross - border payments solutions are often slow, cumbersome, and opaque. authorities in many jurisdictions, including the united states, recognize the importance of cooperating across borders with each other and the private sector to address these cross - border frictions. 13 technology will continue driving rapid change in the way we make payments and the concept of “ money. ” as central bankers, we recognize the power of technology and innovation to transform the financial system and reduce frictions and delays, and the importance of preserving consumer protections, data privacy and security, financial stability, and monetary policy transmission and guarding against illicit activity and cyber risks. given the stakes, any global payments network should be expected to meet a high threshold of legal and regulatory safeguards before launching operations. the work ahead is not easy — the policy issues are complex, the coordination challenges are significant, and there are likely to be few simple fixes. because the road ahead is complicated and challenging, i am especially pleased that benoit will continue to help us navigate these issues as the new | 0.5 |
to make a substantial reduction in systemic risk. or, to be more precise, how to reduce systemic risk without restraining or patronizing financial markets but rather by improving their functioning. a lot of work is under way to find ways of doing this. improved transparency should foster the self - control and self - discipline of the markets. that includes different aspects such as : more and better data on the debt structure of individual countries, the application of standards for banking supervision, improved disclosure of risk positions of market participants. of course, in the case of a national sovereign crisis, financial assistance too might play a role. therefore, we have agreed to fill up the imf ’ s reserve tanks. such assistance, however, has to be bound to conditionality, to an incentive to redeem the official credits and to a fair burden - sharing between official and private sectors. if the talk of a lender of last resort means only that kind of financial assistance, i don ’ t mind. even though that expression might not be absolutely accurate. but we should not argue about words. but if lender of last resort in a broader sense means that draining liquidity and offering generous or even unlimited credit lines should be regarded as main response and that the international community should place its highest priority on such measures, i would be strongly opposed. a lender of last resort of that kind may be of intellectual interest for academic textbooks. in reality, such a role for the imf or another institution would severely hamper the functioning of the markets. the main point is : whatever the international community intends to do, the measure should — as far as possible — avoid creating incentives for moral hazard behaviour. for domestic policy - makers, this means that international assistance must not be seen as insurance either against dangerous exchange rate experiments or against a loss of credibility. for the markets, there should as few incentives as possible to underrate country - specific risks based on the hope of a later bail - out. so, in the first place, financial crisis and systemic risk do not lead to the question of the lender of last resort. instead, they lead to the question how to improve the framework. and that was the background to my report i presented to the group of seven ( g - 7 ) ministers and governors at their meeting in bonn on february 20, 1999. professor illing asked me to add some remarks on that report. i will follow that suggestion. iii as you know, my proposal to the g - 7 included con | addition, the forum should identify gaps in existing work, and propose appropriate means of filling such gaps. finally, the forum should, wherever possible, aim to produce concrete, implementable recommendations, as distinct from analytical reports stating alternative views. and it should monitor the implementation of those recommendations. iv two particular points have to be addressed further. firstly, the involvement of the private sector. the forum is asked to find flexible ways of drawing on private sector expertise. one way is for the forum to meet with the private sector immediately before or after the meeting. it would also be possible for sub - groups of forum members to meet the private sectors on other occasions. secondly, countries outside the g - 7 should be more involved. that can be done either be inviting qualified experts from outside the g - 7 to contribute to the activities of the working groups. or by inviting representatives from national authorities as guests in the forthcoming regular meeting of the forum. in the meanwhile, the first meeting has taken place. upon my proposal, the g - 7 ministers and governors have appointed andrew crockett to be the chairman of the forum for three years. that guarantees the necessary experience as well as continuity. three working groups have been established : - the working group on highly leveraged activities and institutions ; howard davis ( uk ) has the chair. the working group on short - term capital flows ; mario draghi ( italy ) has the chair. the working group on offshore centres ; john palmer ( canada ) has the chair. the second meeting is scheduled for mid - september. i am personally following the work of the forum with great interest, of course, but also at some distance because from september 1st onwards i shall be only an outside observer, but an interested one. and let me end with the following remark : if the forum can help to improve the international financial framework, it may make a greater contribute to coping with systemic risk than a lender of last resort ever could. | 1 |
an exception was made for developing countries, whose debt had always been a bit dicey, with many of them becoming serial defaulters. the west could lecture the south on getting their economic policies straightened out before they could grudgingly extend some much - needed debt - relief. “ it ’ s the economy, stupid! ” as us president bill clinton famously put it. that was then. now that the us itself is drowning in debt, and runaway sovereign debt is raising the spectre of a eurozone break - up, it suddenly looks as if clinton should revise his stand : “ it ’ s the politics, stupid! ” would be closer to the truth. silvio berlusconi and george papandreou have already paid the price to placate the bond vigilantes. others may follow if they fail to navigate the treacherous waters between citizen and taxpayer revolt, on the one hand, and investor rebellion, on the other. france faces a threat of downgrade. even fiscally - upright germany failed to place nearly half the amount of ten - year paper on offer at a recent auction. moody ’ s is now threatening a generalized derating of eurozone debt. the us has lost its triple - a rating, as standard & poors derated it. to rub in the point, the agency berated washington politics and the fiscal brinkmanship characterising the us response to the crisis. in the words of standard & poors, the politicians have become “ less stable, less effective, and less predictable. ” and where ’ s mauritius in all that? we can count ourselves lucky that we are not hooked on foreign commercial debt. we do not face any rollover risk. we are not at the mercy of unforgiving markets. and all of us, and not just our politicians, can sleep easy on this score. how many of us know that, in their monumental work on economic and financial crises, this time it ’ s different, kenneth rogoff and carmen reinhart, paid mauritius – and a handful of other countries – an ultimate accolade when they called us “ debt default virgins ”? and, while we are on this subject, may i invite you, when you get the time, to cast a glance at the shape of the yield curve for government rupee debt? you may be surprised to discover how we have actually smoothed the curve and reduced volatility – and that, too, during a crisis. we do not know | at present, the maintaining of basic balances, i. e., the macroeconomic balance and the financial one, is our major objective. these two pillars represent our legal mandate. therefore, we must do the utmost to consolidate the inherited balances, by making cautious analyses and taking appropriate measures to best absorb all the risks posed to the country ’ s macro - financial stability. currently, the fulfilment of our legal mission has become a difficult and challenging task, full of surprises. our countries represent small economies, whose share and influence can not play an active or imposing role in the international arena. moreover, i am increasingly convinced that our economies are net importers of both material goods and international crisis. bis central bankers ’ speeches personally, i think that the moments we are currently experiencing constitute an historic opportunity for all of us, to leave a good name as competent managers in times of the great crisis. as long as things go well, we fail to understand the need for ongoing adaptation, for constant correction. this is the reason that mostly leads to creation of “ financial bubbles ” in the economy. apparently, decision - makers lack the ability or the willingness to stop blowing bubbles, and hence they burst. from this viewpoint, i assess that the bank of albania ’ s experience carries over elements of preliminary correction, i. e., preventive elements. let me be more specific. since early 2005, we have addressed the interplay between macroeconomic stability and financial stability prudentially. while there was a historic stability in keeping inflation in check, there existed many unclear things in the banking system stability. i would like to remind you, briefly, of the fact that we are talking about a period when the banking system was transformed into a 100 % private capital and when credit expansion dominated the banking business. since 2005, the outstanding credit to the economy has expanded by 7 – 8 percentage points of gdp. moreover, 75 % of credit was denominated in foreign currency and the hedging against exchange rate risk was frequently overlooked. it was the time when competition for market share increased tremendously among banks, even at the expense of credit quality. periodic examinations conducted by banking supervision identified several vulnerabilities that could threaten the financial stability of the system. i would mention : lack of an electronic credit register ; risk management weaknesses, structural weaknesses in internal audit ; lack of transparency in dealing with customers about the supplied products. one of the most important issues worth mentioning is bank management in | 0 |
. our research is conducted in accordance with data principles recognizing the important responsibilities associated with collecting and analyzing indigenous data to ensure that indigenous data sovereignty and governance are respected. the third, and perhaps most important, is empowerment. our research and programs enable our reserve banks to assist indigenous communities through information and resources to plan their own economic futures. for example, our native economic and financial education empowerment program works with indigenous communities to provide free economic and personal finance education that incorporates indigenous language and culture. our working communities challenge facilitates local collaboration to increase economic opportunity in rural areas. this program serves as a first - of - its - kind venue to connect tribal leaders, nonprofit organizations, and private - and public - sector leaders around economic development efforts. most recently, leaders convened to understand data gaps across the full partnership and how they can better leverage data across organizations as they work toward expanding the number of living - wage jobs and reducing rates of childhood poverty within the community. indigenous voices and perspectives are a critical part of this effort. we're also developing new data tools and research partnerships that help indigenous communities conduct research on economic opportunities. for example, our native american funding and finance atlas is a publicly available interactive map tool that identifies the financial institutions, lending activity, and economic development programs in their tribal community and surrounding areas. i'm proud of the federal reserve system's efforts to further indigenous financial inclusion, and i'm grateful for this opportunity to learn from the dedicated efforts of our network partners. there is so much important and impactful work happening, and i look forward to the progress that we will continue to make together. thank you. 1 the views here expressed are my own and not necessarily those of my colleagues on the board of governors of the federal reserve system or at the reserve banks. return to text 4 / 4 bis - central bankers'speeches | michelle w bowman : panel remarks - 2023 symposium on indigenous inclusion panel remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at the 2023 symposium on indigenous inclusion, the central bank network for indigenous inclusion and the reserve bank of new zealand - te ptea matua, auckland, 27 september 2023. * * * governor bowman was asked to make remarks responding to two questions. below are the questions and her responses. panel question 1 : why should indigenous financial inclusion be a core focus for central banks? i'd like to thank the reserve bank of new zealand and governor orr for hosting this symposium and for the invitation to participate. 1 it is an honor to join my network colleagues for this important discussion. as the federal reserve board's representative to the network, i recognize and acknowledge that the united states and the foundation of its economy were built on land enriched by its original indigenous inhabitants and their stewardship of its natural resources. recent natural disasters affecting indigenous communities in network countries highlight the importance of our work. those harmed by the recent wildfires in hawaii and canada, as well as cyclone gabrielle here in new zealand, face substantial economic headwinds. i hold these communities close in my thoughts. i see two fundamental reasons why central banks should focus on indigenous financial inclusion. the first is our responsibility to foster an economy that works for everyone. second is the wisdom we can gain from community - led approaches to expanding financial opportunity. in order to effectively support inclusive economic growth, we need to understand the economic conditions of indigenous communities. the federal reserve's ongoing research and outreach enable us to gain insight about economic barriers that indigenous communities face. our recent research notes several challenges, including those related to labor market conditions, affordable credit and financial services access, homeownership, and broadband access. our efforts to understand these challenges support our ability to provide information and resources that can help address the needs. for example, our research has found that indigenous communities have less access to high - speed internet. during the pandemic, indigenous communities participated less in remote work - which may, in part, reflect this lack of access. in addition to our research, we will convene a conversation among indigenous communities, federal policymakers, and researchers to discuss the challenges and opportunities to advance broadband service networks. 1 / 4 bis - central bankers'speeches our research has also shown that on average, indigenous borrowers pay more for home loans. while there is | 1 |
lot of the work needed to keep inflation on a reasonable track was done in the period from 2002 to 2005, when unusually low interest rates, which had been appropriate for the earlier part of the decade, were gradually lifted towards normal. they were raised a bit further, to be slightly higher than normal, during 2006. without that sequence, we would today have been in a much less comfortable position. whether or not further instalments in that sequence will be needed is a question the board will continue to address over the months ahead. the board ’ s judgement will, as usual, be informed by all the relevant data and an assessment of the risks we face over the coming couple of years. conclusion we are living though a period of profound change in the world economy, which is offering a rare chance to improve further the economic success australians have enjoyed over the past decade and a half. historically, australia often did not manage periods of prosperity very well, as our institutional and policy structures were not sufficiently flexible and long - term in their orientation. the chances of success are much higher on this occasion, and the evidence so far is that we are doing much better, but the situation is not without risks. i trust that on some future visit to queensland we will be able to look back and find that the risks had been effectively managed. if so, then monetary policy will have played its part in furthering the prosperity and welfare of the australian people. | banks of the group of ten countries, bank for international settlements, 2001. in sweden, as in most other countries, the principle for all securities trading ( shares, interestbearing papers and derivatives ) settled in vpc, is delivery versus payment ( dvp ). this eliminates credit risk. the remaining counterparty risk is known as replacement cost risk – the risk of having to pay more for a transaction that replaces a failed trade. this risk is normally just a fraction of the credit risk but can be sizeable when prices are volatile. in sweden, transactions in shares and interest - bearing securities are normally settled within three days after the trade. the replacement cost risk for such business largely depends on the state of the market. when market rates are notably volatile, failure to deliver can result in substantial replacement costs. the introduction of a central counterparty service next year will make it possible to manage the counterparty risks in share trading on the swedish market. moreover, it is now possible to trade swedish shares on the new european trading facilities that are linked to central counterparty clearance. this points to a future reduction of the counterparty risks in swedish share transactions. the counterparty risks in the derivatives market are considerably larger and harder to manage than they are in the spot market. this is because the duration of risk exposures is longer in the derivatives market, often as much as several months. the swedish derivatives market already provides the possibility of managing counterparty risks by means of a central counterparty. turning now to market transparency, what is the situation in sweden? mifid entails the introduction of rules for transparency before and after share trading. the requirement applies to all trading facilities and involves the publication of prices and volumes. so for shares there are no deficiencies concerning transparency in these respects. there may, however, be shortcomings in over - the - counter trading in interest - bearing securities and derivatives. a large proportion of fixed - income trading in sweden is done by telephone rather than on a market. derivative instruments can also be traded off - market. 8 if trading is arranged instead with an electronic facility, each order is matched against the best price and market access can be improved for new players. still, there may be financial markets whose functioning is not improved by increased transparency. it should therefore be up to each market, including the swedish fixed - income market, to decide which approach is most effective. what are the lessons from this argument? well, in times like these, coloured | 0 |
ida wolden bache : soon appropriate to begin easing monetary policy introductory statement by ms ida wolden bache, governor of norges bank ( central bank of norway ), at the press conference following norway's announcement of the policy rate, oslo, 19 december 2024. * * * presentation accompanying the speech chart 1 : policy rate kept unchanged at 4. 5 percent the monetary policy and financial stability committee has decided to keep the policy rate unchanged at 4. 5 percent. norges bank is tasked with keeping inflation low and stable. the operational target is inflation of close to 2 percent over time. we are also mandated to help keep employment as high as possible and to promote economic stability. in recent years, we have raised the policy rate significantly to tackle high inflation. since december last year, the policy rate has been held at 4. 5 percent. the interest rate has contributed to cooling down the economy and to dampening inflation. inflation has fallen markedly and moved closer to target but is not expected to fall as fast ahead. if the policy rate is lowered too quickly, inflation could remain above target for too long. at the same time, the committee does not want to restrict the economy more than needed to bring inflation down to target within a reasonable time horizon. since the previous forecasts presented in september, economic activity has been a little higher than expected, while inflation pressures appear to have been slightly lower. the committee judges that a restrictive monetary policy is still needed, but that the time to begin easing monetary policy is soon approaching. if developments turn out as we now envisage, the committee will reduce the policy rate in march next year. chart 2 : policy rate will likely be reduced in march the committee projects a gradual reduction in the policy rate in the years ahead. the policy rate forecast presented today is consistent with a reduction in the policy rate to 4. 25 percent in march, with a further decline to 3. 75 percent by the end of 2025. even though the time is soon approaching to begin easing monetary policy, we must be prepared for a higher interest rate level than we had been accustomed to over the past decade. given the current policy rate path, the average interest rate on housing loans is projected to decline from 5. 6 percent today to just below 4. 5 percent in 2027. i want to emphasise that a forecast is not a promise. there is a large degree of uncertainty around the economic outlook. we are likely to see a period of increased trade | , and that the senior officers in those roles can speak freely on issues that need to be addressed. audit committee members should have regular time in meetings to talk with the outside auditors without managers present. best practices for audit committee processes have been laid out many times, including in the 1980s by the treadway commission and in 2000 by the blue ribbon committee. beyond that, boards of directors and managers should periodically test where they stand on ethical business practices. for example, they should ask, “ are we getting by on technicalities, adhering to the letter but not the spirit of the law? are we compensating others and ourselves based on our contributions to the organization, or are we taking advantage of our positions? ” my intent today is to remind everyone of the importance of maintaining sound ethical practices to help protect the reputation of your bank. as recent events have demonstrated, if we fail to do so the market will enforce the discipline. and that discipline can be harsh. quality of accounting practices the current framework of financial reporting in the united states effectively represents the performance of most corporations most of the time. indeed the high quality of accounting standards in this country is one critical reason why capital markets are so efficient. but the lessons of the past few months remind us that accounting rules can be bent. for six years i was a member of the emerging issues task force of the financial accounting standards board. this is the rulemaking body that deals with divergence in practice. the eitf ’ s role is to provide timely financial reporting guidance where divergence in practice is developing. in the time i served on the eitf i came to understand that professionals could and did disagree on the best accounting standard to apply to a new type of transaction. that is at the very heart of the struggle to keep accounting standards current. the rapid pace of business innovations makes it impractical to have a rule in place to anticipate every business transaction. rather, the more complex and dynamic the world of business becomes, the more important it is that accounting be based on strong principles that are sufficiently robust to provide the framework for proper accounting of new types of transactions. further, we need to insist on higher professional standards and not permit financial officers and auditors to benefit from “ gaming ” the rules - based accounting standards that are increasing in complexity, particularly in the united states. the core of these basic accounting principles should be professional standards followed by every corporate accountant and every outside auditor that would insist that they can | 0 |
their decisions mainly reflect other considerations, such as the choice of a currency as a nominal anchor for the conduct of monetary policy, the currency composition of external debt or trade invoicing. in this context, allow me to draw your attention to the fact that some 25 countries use the euro as a reference currency for their exchange rate polices. 1 as those factors relate to long - term policy choices or economic developments, they can be expected to result in strong inertia in the allocation and management of reserves by central banks. there are, however, exceptions : for example, the authorities in russia announced in december 2005 that they had increased the share of the euro in foreign exchange reserves to 40 % ( from 33 % in mid - 2005 ). to some extent, this decision may have been linked to a more prominent role of the euro in the bank of russia ’ s currency basket for the management of exchange rate volatility. at the same time, in some countries, notably oil - or other commodity - exporting countries, an increasing proportion of the “ official ” foreign currency assets is held outside central banks by public investment agencies. these agencies may invest in a wide spectrum of assets denominated in various currencies, with the aim of maximising the expected return on their holdings. iii. prospects for the further development of the international role of the euro given these observations, what can be expected with regard to the relative importance of the euro in global official reserves in the future? as is well - known, prediction is very difficult, especially about the future. and you will understand that i will not speculate on this. that said, i will explore, more generally, the prospects for the further development of the international role of the euro. on this point, allow me to make a general pertinent remark. clearly, a necessary condition for fostering the international role of a currency is its credibility, as determined by the stability of its internal value. the ecb, by preserving price stability in the euro area, “ sets the stage ” and establishes a necessary condition for the wider international use of the euro. but whether or not the international importance of the euro will further increase depends on many other factors as well, in particular the investment decisions of private agents and public authorities. traditionally, a key determinant of the international use of a currency – especially as a means of exchange – has been trade, the very theme of this year ’ s european banking congress. from the dr | anchored at levels consistent with our definition of price stability. in the spirit of ludwig erhard, the ecb is making its contribution to the social market economy. the ecb ’ s response and instruments having the same objective does not necessarily mean using the same instruments. the ecb has inherited its objective from the bundesbank, but it is operating in a new and different environment. bis central bankers ’ speeches today ’ s economic and monetary union is larger and more diverse than a single country, such as germany. it is highly integrated but still at times fragmented. and it comprises a very large number of policy - makers on fiscal, structural and other economic matters. all policy - makers have to recognise that we belong to emu together and that policies as well as policy inaction create spillovers for other members. this is an enormous responsibility for governments and other economic policy - makers. for the ecb to operate in this environment, and to be responsible and effective in accomplishing its objective, we have to use a wide range of instruments. some instruments are standard, some non - standard, but all are based on the ecb statutes. the use of these instruments has been essential in safeguarding our objective during the financial and sovereign debt crisis. in the run - up to the crisis, inappropriate fiscal, structural and other economic policies fostered an excessive build - up of risk in the financial sector and created vulnerabilities on a global scale. when the crisis erupted, these vulnerabilities placed a heavy burden on central banks. in particular, the threat of a financial meltdown jeopardised their capability to counteract downside risks to price stability. the ecb acted on that threat according to our unambiguous mandate to deliver price stability. we have reduced our main policy rates to historical lows. this contributed to stabilising investment and consumption decisions in the euro area. our actions prevented a steeper fall in aggregate demand and ensured the conditions for stable prices in the euro area. in a bank - based economy like the euro area, monetary policy works through banks, and banks lend to each other, based on mutual trust. in the crisis, that trust got lost, and the banks no longer lent to each other. facing the threat of a euro - area wide funding crisis, they turned to the central bank. we, the central bank, provided liquidity to banks because we have to work through them. they are our counterparts – and we had to act | 0.5 |
nout wellink : on the euro and exports, speculation and global trade speech by dr nout wellink, president of the netherlands bank and president of the bank for international settlements, on the occasion of a luncheon conference of the limburgse werkgevers vereniging, herten - roermond, 26 january 2005. * * * i shall speak to you about the euro and the consequences of its rising rate for the exports sector. but i shall also dwell on the global causes as well as the macro - economic effects of the strong euro. consequences of a rising euro rate for businesses exchange rate movements may have considerable impacts, in particular at the level of industrial operations. while perhaps it was not the low dollar rate that finished fokker, adverse exchange rates did play a role in that company ’ s fate. this stiff westerly wind rose just when fokker was most in need of the right updraught. and, if you will allow me to use an example from your region, oce – which over the course of time has proved a rich source of supervisory board members for dnb – realises much of its turnover in us dollar. in addition, many of its competitors are based in the united states or in countries whose currencies are pegged to the dollar. small wonder that they keep a sharp eye on the exchange rate of the euro. on the one hand, exporters are recording declining sales and are compelled to settle for lower profit margins as a result of the high euro rate, whereas, on the other, citizens and businesses are benefiting from cheaper products from abroad. a case in point is the moderating effect of the rising euro rate on the increasing oil price. since early 2003, the dollar price for a barrel of crude oil has gone up by 48 %, while expressed in euro the price increase amounts to 21 %. also some of the activities of financial institutions profit from exchange rate fluctuations. an increase in the number of businesses hedging against – or speculating for – exchange rate fluctuations leads to higher commission income from currency translations and future contracts. the euro exchange rate not only influences the proceeds from business activities, like imports and exports. exchange rate movements also work through to the value of assets and liabilities expressed in foreign currencies. the 20 % fall of the dollar rate in 2003 translated into a eur 4 billion loss for dutch businesses, approximately 1 % of dutch national output. the net wealth effects of exchange | realise a substantial rise in productivity. if markets function properly, the chance of that increase materialising will be greater. let us hope that the implementation of the kok committee proposals for structural reforms within the scope of the lisbon agenda will get off the ground. conclusion considering all this, how are we to look upon exchange rate fluctuations? what it amounts to in simple terms is that highly integrated economies forming, so to speak, one economic block, benefit from fixed exchange rates. economies that differ widely from each other and do not interact much, profit from mutually flexible exchange rates. admittedly, exchange rates sometimes tend to move too uncontrollably, creating a breeding ground for speculation. but if exchange rate changes arise from structural factors, we should welcome them. it is satisfying that these days there are fewer complaints about the euro exchange rate than before. at the macro level, this is appropriate. rather than with the rock - bottom level seen several years ago, the current level of the euro / dollar rate should be compared with the average level over a prolonged period. to assess our competitive position, it would therefore be better to take the exchange rates with all trading partners into account and correct them for mutual inflation differences. this so - termed real effective exchange rate of our currency is now 8 % above the average for the period 1980 - 2000. moreover, there is little reason to complain about the euro exchange rate as its consequences are not that overwhelming. to the extent that the netherlands is a small, open economy, the vast majority of its trade is confined to countries that also calculate in euro. on a corporate level, some operations are obviously sensitive to the exchange rate. they must adopt strategies that anticipate the adverse effects of exchange rate fluctuations. this is just what they are doing. the german car manufacturers bmw and mercedes are cases in point. and judging by the parking area outside this building, they are successful enterprises. the fact that both costs and revenues would be expressed in dollar played a weighty role in their decision to set up production facilities in the us. with this move, both companies have covered themselves against exchange rate fluctuations in a natural manner. another much - used way to do so is by means of financial instruments. i suggest that we send the euro rate as scapegoat for wrong economic moves into the desert, just as happens in the jewish tradition at the time of the day of atonement. | 1 |
( pdf ), ” brookings papers on economic activity, fall, pp. 215 - 65. – – – – ( 2012 ). “ why an mbs - treasury swap is better policy than the treasury twist ( pdf ), ” kellogg insight. evanston, ill. : kellogg school of management, july. li, canlin, and min wei ( 2012 ). “ term structure modelling with supply factors and the federal reserve ’ s large scale asset purchase programs, ” finance and economics discussion series 2012 – 37. washington : board of governors of the federal reserve system, may. meaning, jack, and feng zhu ( 2011 ). “ the impact of recent central bank asset purchase programmes ( pdf ), ” bank of international settlements quarterly review, december, pp. 73 – 83. meyer, laurence h., and antulio n. bomfim ( 2012 ). “ not your father ’ s yield curve : modeling the impact of qe on treasury yields, ” macroeconomic advisers, monetary policy insights, may 7. pandl, zach ( 2012 ). “ talking down the term premium, ” goldman sachs ecs research, us economics analyst, no. 12 / 19. swanson, eric t. ( 2011 ). “ let ’ s twist again : a high - frequency event - study analysis of operation twist and its implications for qe2 ( pdf ), ” brookings papers on economic activity, spring, pp. 151 – 88. woodford, michael ( 2012 ). “ methods of policy accommodation at the interest - rate lower bound, ” speech delivered at the federal reserve bank of kansas city economic symposium, held in jackson hole, wyo., august 30 – september 1. bis central bankers ’ speeches wright, jonathan h. ( 2011 ). “ what does monetary policy do to long - term interest rates at the zero lower bound? ( pdf ) ” nber working paper series 17154. cambridge, mass. : national bureau of economic research, june. bis central bankers ’ speeches | corporate - finance example is also consistent with what we have observed in markets in recent months. issuance of both investment - grade and high - yield bonds has been robust. indeed, domestic nonfinancial corporate bond issuance is on pace to set a record in 2012, and the speculative - grade segment may also register a new high for the year. at the same time, a large fraction of issuance has been devoted to refinancing – either to retiring existing debt or to payouts to equity holders via dividends and share buybacks. these uses of proceeds have accounted for about two - thirds of all issuance by speculative - grade firms so far this year. such patterns are what one would expect in a world of segmented markets and negative term premiums. 12 this caveat about the diminishing effectiveness of lsaps can be thought of as a specific version of goodhart ’ s law. 13 it may be that under normal circumstances, changes in 10 - year rates have significant explanatory power for economic activity, perhaps because they are a proxy for the expected future path of short rates or other aspects of financial conditions. but it doesn ’ t follow that when one sets out to influence the 10 - year rate directly, via asset purchases – without changing the future path of short rates – the usual historical relationships will continue to apply. while we should acknowledge these doubts, it is important to keep them in perspective. in addition to lowering interest rates, lsaps also boost equity prices and other asset values. taken together, these effects of lsaps seem likely to be meaningful, even if the benefits of an impetus to rates are less than in the baseline scenario sketched earlier. and to be sure, there is a wide confidence interval around any estimate we might make of the benefits. moreover, it is worth repeating a point made earlier : whatever direct hydraulic effects lsaps create by pushing down term premiums and discount rates, their overall impact may be reinforced via a signaling effect, whereby they enhance the credibility of our forward guidance about the future path of the federal funds rate. indeed, this signaling benefit strikes me as an important part of the argument in favor of lsaps in the current environment. let me turn now to the cost side of the equation. several potential costs of lsaps have been discussed. one is the exit problem – that a large balance sheet may make it harder for the fomc to raise rates when the time comes. | 1 |
of this amount more than k4 billion was deposited with the commercial banks, while the rest was deposited at the bank of papua new guinea. the budget deficits in 2008 and 2009, coupled with the fast draw downs of funds from the trust accounts, resulted in the balances declining to below k1 billion in august 2010. to those of us dealing with the sovereign wealth fund ( swf ) there was an opportunity to commence it during the recent mineral boom. establishing a swf to manage large windfall revenues from high commodity prices is talked about for some years. the decision to park the surplus revenue in trust accounts was not a good solution. i have no doubt that a swf would have managed the surpluses in a much better way. as a consequence, we now have one more bad experience of the management of excess revenue from mineral resources, on top of the mineral resources stabilization fund. the recovery in commodity prices in 2009 and 2010 might entail a further opportunity to establish the swf earlier than the production stage of the lng project in 2014. the monetary aspects of the developments in the period were very large inflows of foreign exchange as mineral and petroleum taxes. these flows increased the foreign exchange reserves from around us $ 500 million in 2005 to a historical high of above us $ 2. 8 billion in august 2010. the bank of papua new guinea paid the government kina for the tax receipts it received in foreign currency. through this process the infusion of liquidity into the financial system increased. the government instead of re - depositing the kina in trust accounts with the bank of papua new guinea, decided to deposit most of it with the commercial banks, at a very substantial cost to the government and the people of papua new guinea. to avoid the huge amount of liquidity from impacting on the exchange rate and inflation, the central bank had to defuse it by issuing central bank bills ( cbb ). the amount of cbb ’ s outstanding as of today exceeds k4 billion. in the previous years the cbb ’ s were issued at a relatively high interest rate of 6 percent to 8 percent, but this has declined in 2010 to below 3 percent, mainly due to excess liquidity in the financial system. this way the commercial banks managed to arbitrage between the government trust accounts and the cbb ’ s, and earn a relatively high income on those deposits. i am very pleased that the minister for finance and treasury the honourable mr. peter o ’ | december 2002 was us $ 340. 0 million, sufficient for around 4. 6 months of total and 6. 6 months of non - mineral import cover. the balance of payments for 2003 is projected to show a further deterioration in the overall balance reflecting a deficit in the capital account and narrow surplus in the current account. the projected surplus in the current account is attributed to increases in production and prices for the major agricultural and mineral exports. the declining trend in the current account surplus, which commenced in 2000, is a worry and reflects the decline in non - mineral sector exports and higher imports. fiscal operations of the government the 2002 supplementary budget introduced in august 2002 aimed to achieve a deficit of 3. 4 percent of nominal gdp, but is now estimated to be higher due to payment of unbudgeted expenditures relating to the national elections and general goods and services. with no draw down in exceptional or program financing during 2002, the government relied on new issues of domestic debt to finance the budget deficit and net external loan repayments. the 2003 national budget, aims to consolidate the fiscal adjustments introduced in the 2002 supplementary budget and restore it to a sustainable fiscal position. the adjustments would assist in achieving macroeconomic stability and provide the conditions necessary for sustainable economic growth. the budget deficit is projected at 2. 0 percent of gdp with reductions to 1. 0 percent of gdp in the medium term. to achieve a sustainable budget deficit, a financing gap is required to be filled from external sources. exchange rate during 2002, the depreciation of the exchange rate was influenced by the following factors : high government expenditure ; persistent current account deficit in the non - mineral balance of payments, due to sustained import demand mainly fuelled by fiscal expansion, low export receipts from the agriculture sector and high net overseas remittances by individuals and companies ; increased forward transactions by importers ; uncertainties created by the delay in the announcement of government macroeconomic policies, and disruption to the mineral projects ; increase in reserve money as a result of net maturity of treasury bills by the non - bank public ; downgrading of png ’ s credit rating by an international ratings firm ; and negative real interest rates, which contributed to the high net remittances overseas. since december 2002, the exchange rate has generally stabilized and is steadily appreciating due to inflows of export receipts and supported by low import demand. inflation the upward trend in the rate of inflation that began in 2001 continued into the june and september quarters of 2002 | 0.5 |
. debt levels range from close to non - existent in estonia, to 175 % of gdp in greece, though we know that headline number to be somewhat inflated. of course, while public debt levels offer a useful indicator of the fiscal space governments have available to fight the crisis, they are a narrow indicator of countries ’ overall resilience. this also depends on other factors, such as growth potential and household and corporate debt levels. these also differ widely across the euro area. looking at banks, we know that, in terms of capital buffers, banks are in a better position than in 2008. yet, the banking sector remains heterogeneous. non - performing loans as a share of total loans outstanding, for instance, still vary significantly across countries. this is a legacy of the previous crisis, which we will need to keep a serious eye on to prevent new problems from emerging. the diverging resilience of households, firms, banks and governments implies that there is no onesize - fits - all policy advice as to how best preserve and restore the economy. in some cases, it might be possible to tap into the balance sheets of stronger sectors, to help the weaker ones. such withincountry solidarity can be welfare - enhancing but will not always be possible, or sufficient. moreover, we fout! onbekende naam voor documenteigenschap. need to carefully guard the stability of our financial system. no - one benefits when the coronavirus crisis evolves into a financial crisis. this implies that we need to be cautious with, for instance, proposals for large - scale debt forgiveness. such proposals are only viable when financed by governments. a pan - european policy response is needed to help the hardest - hit countries. recent policy announcements offer a step in the right direction, but this crisis is clearly not one that will be solved overnight. global economic challenges in the new normal beyond the recovery phase, the coronavirus might also change the behaviour of economic agents, affecting the structure of the global economy more fundamentally. one particularly relevant example concerns global supply chains. in today ’ s world very few companies produce their products from start to finish. instead, the production process is highly fragmented and takes place all over the world. this design of the global economy has enabled companies around the world to specialise and has created efficiency gains. the coronavirus, however, also shows how vulnerable the global economy has become due to firms ’ reliance on these highly fragmented global supply | ##nated swaps and other eurodenominated transactions once the uk has formally exited the eu. these are just two of the most prominent examples of the regulatory uncertainty that is troubling the financial sector in the wake of the ukreferendum. further questions such as the free movement of labour, goods and services affect the uk economy as a whole and with it all the clients of banks. given that formal negotiations have not even started yet between the euand the uk, there are still plenty of plausible scenarios for their future relations, and thus for the environment banks will have to operate in. this uncertainty surrounding brexit will stay with the financial sector for some time to come, and there is no easy way around it. let ’ s move on to the second issue, which concerns regulation more generally. earlier this week, i was in santiago de chile to meet with my colleagues from the basel committee, where we discussed details for completing basel iii. the rules based on this regulatory regime are currently being finalised and phased in. important aspects of the current negotiations are the revisions made to the level and the calculation of capital requirements. the need to adapt to, and comply with these new requirements is imposing costs on banks and causing headaches among bank managers. this holds for european financial institutions in particular. in comparison to brazil, for example, the use of internal models for calculating riskweighted assets and thus capital requirements is widespread in europe. consequently, any changes to this approach – as currently discussed – have much stronger implications for european banks than for their counterparts elsewhere. it is therefore crucial that the final result of our current negotiations will be regionally balanced and does not undermine the risk - oriented approach of the basel framework. the committee was not able to reach such an agreement yet. we will continue our negotiations with the goal of ending regulatory uncertainty as soon as possible. and we will work towards finding a compromise before the committee ’ s oversight body – the group of governors and heads of supervision – will meet in january. 2 / 5 bis central bankers'speeches in parallel with reforming basel iii, in europe we have established the banking union with a whole new supervisory architecture at its core – the single supervisory mechanism. this supervisory mechanism is still relatively new territory for banks, as it has just recently celebrated its second anniversary. as you can see, the regulatory and supervisory world is changing significantly and rapidly for banks. keeping up with these developments is a challenging task. on top of that, we are currently | 0 |
reducing banking spreads. sbp is further developing capacities to monitor operational risks associated with weak internal control systems, delays in adoption of information technology solutions and outsourcing of processes by banks. | metropolitan corporations. microfinance the role of microfinance in poverty alleviation and employment generation has been widely accepted. the government has established a micro - credit bank ( khushali bank ), as a prototype institution for providing credit access to poor households. this bank has so far reached out to 200, 000 poor households throughout the country. the work of this bank has been reinforced by the pakistan poverty alleviation fund, which through a network of partner organizations in non - governmental sector has reached out to another 300, 000 poor families. education and health pakistan ’ s poor educational outcomes have become a major constraining influence on its quest for integration in the global economy. high rates of illiteracy, particularly among women, low educational attainment of the labour force, and lack of qualified technical and scientific manpower have impeded economic growth. the strategic thrust of education sector reforms ( esrs ) consists of ( a ) achieving universal primary education and adult literacy ; ( b ) improving the quality of education ; ( c ) renewed focus on technical and vocational education. higher education and science and technological research capacities are also being bolstered in the country. madarassahs are being brought into the mainstream educational system so that their products can find gainful employment in the economy. the national commission on human development is mobilizing community volunteers to bring out - of - the school children into the system. female educational enrolments have jumped in the province of punjab since the girl students were awarded monthly stipends to support their education. the new health policy follows a “ health for all ” approach based on accessibility, affordability and acceptability of health services by the general population. the health strategy places greater focus on a continuous shift from curative services to preventive health services by improving the primary health care system. improvements in health status are taking place mainly through maternal and child health, communicable and infectious disease control and elimination of nutrient deficiencies. the budget for the expanded program of immunization has been increased and coverage is being expanded in rural areas as well as among women. a sound tuberculosis control program, hiv / aids program, and anti - malaria program are also under implementation. the shift of public expenditures from tertiary to primary and secondary health care and devolving and decentralizing financial and administrative powers to local tiers form the crux of the health sector reforms. this new approach provides a clear signal that preventive rather than curative health care will | 0.5 |
three months, we would see a fall of six percentage points. these are fairly reliable calculations. what do you think of the government ’ s “ i order, you foot the bill ” approach? meaning that employers cannot lay anyone off but have to keep paying ; maintain their expenditure while receiving no income. could this result in the destruction of spain ’ s, and possibly other countries ’, business infrastructure? 1 / 4 bis central bankers'speeches i mustn ’ t get into analysing specific policies. the spanish government has taken a decision to introduce stricter lockdown measures in the hope that this will in fact help to shorten the pandemic ’ s life cycle and break the chain of infection. ultimately, although this will come at a certain cost, hopefully it will be outweighed by the benefits. this public health crisis will lead to a very severe recession. the assumption is that businesses will stop billing. and what we must do is try to keep as many of our businesses as possible afloat so that, after a certain period, economic activity can bounce back again. when companies stop billing, measures should be taken to try and keep their expenditure to a minimum. if their expenditure is fixed at a certain level, the only way out is for businesses to go bust. and that is what we must avoid. the spanish government – i don ’ t know about other european governments – is providing guarantees for loans to continue paying, but it ’ s not helping businesses with a moratorium on labour costs or on certain taxes. the issue of guarantees is a crucial one. the ecb has provided lots of liquidity to the banks. the banks have to pass this liquidity on to customers, namely smes and the self - employed. so guarantees are important. we also need to allow tax liabilities, social security payments and the like to be deferred. what ’ s important is that businesses that were entirely profitable before the start of the pandemic survive it and become profitable again once it ’ s over. that goes for spain and for all the countries in the euro area. are the €120 billion of debt purchases kind of like the coronabonds that people are calling for? or is this something different? no, this is completely different. it ’ s direct intervention by the ecb. i ’ m in favour of coronabonds ; i think they show solidarity. what would coronabonds involve? coronabonds would be mutualised debt issuance | campaign ". this campaign focuses on four main themes : the visual appearance of the banknotes, their security features, their denominations and the common changeover modalities. it is designed to complement the other information campaigns on the euro, particularly those run by the national authorities in each euro area country. naturally, and as i mentioned earlier, we are also relying on the efforts of the banking community in this regard. at the end of the day, no television advertisement or billboard can replace the direct and immediate advice which competent bank employees can give to their customers. ladies and gentlemen, roughly a year from now, we shall finally be using the new euro banknotes and coins and our national currencies will no longer be in circulation. however, even then, the euro area will still not completely function as a truly unified currency zone. as i mentioned earlier, euro area financial markets are not yet fully integrated. i would also like to draw your attention to another area, which directly concerns the banking community, and where the potential benefits of the euro have yet to be fully exploited. i am referring to the price differential that continues to exist between cross - border retail payments within the euro area and those within individual member states. like the cash changeover, this is another area where the banking community has a crucial role to play in securing the full benefits of the common currency. i appreciate that this also represents a substantial task. however, once european businesses and citizens are using the euro for their everyday transactions, the provision of low - cost, efficient cross - border retail payment services will undoubtedly become a clear policy priority. finally, returning to the title of my speech " where are we 11 months before e - day? ", i would say that so far we are well on track. even before the introduction of euro banknotes and coins, the euro has already delivered much of what was expected. we regard these achievements with some satisfaction. nonetheless, this does not mean that we are complacent. the enormous challenge of the cash changeover still has to be met and, despite all past and ongoing work, a lot remains to be done. even after the changeover, the ecb does not anticipate settling down to " business as usual " anytime soon. our objective is to make the euro a lasting success. i am confident that - by also building on our good working relations with the banking community - we shall continue to succeed in this endeavour. thank you ladies and gentlemen. | 0.5 |
and crypto - assets – as the two techniques of key encapsulation and digital signature currently used are both based on asymmetric encryption, which is vulnerable to the quantum threat. it will be of outmost importance to factor in the risks stemming from quantum computing when designing the central bank digital currencies. this risk is already on the table with the practice of'harvest now, decrypt later'used by malicious actors. information embedded in contracts currently in force needs to be kept secret for years to come. even just the possibility that some of it will be exposed – as soon as the technology becomes available – is already a potential blow to trust. 2 / 5 bis - central bankers'speeches 2. the state of the art : one problem, many potential technical approaches as we will see through the lunch session, some solutions to mitigate cyber issues are already available. the heart of cybersecurity lies in cryptography, which – from encrypting data to securing online transactions – is the guardian of our digital world. as the financial industry and governments prepare to protect against quantum threats, it is necessary that they become'crypto - agile ', adopting a multifaceted security strategy that incorporates a range of easily upgradable quantum - resistant solution. the showcase exercise that will be performed in this session will demonstrate that there are two different but complementary approaches that can be used in order to deal with quantum - safe cryptography. on the one hand, we can take advantage of quantum properties to establish secure communication channels between parties, where any attempt to eavesdrop or intercept the exchange of encryption keys is detected. on the other hand, considering that the cryptography involves the use of mathematical algorithms to transform readable data into encrypted data and vice versa, it is possible to replace the current algorithms ( unbreakable now, but solvable with quantum computing ) with others that are more difficult to solve, even for a quantum computer. each one of these technologies – or a combination of them – will allow full end - to - end security in our digital communications. at the same time, however, these technologies are all extremely demanding in terms of time and resources. at the current state of the technology, embracing the quantum physics approach is estimated to impose costs of a higher order of magnitude, though it appears to provide a definitive solution to the quantum threat. the showcase exercise will demonstrate how some solutions already available to the market work, leveraging the points | . other multinational institutions already involved in the adoption of quantum technologies in the financial system, such as the bis and the standard setting bodies, could contribute proactively in defining guidelines and standards as cornerstones of the migration. due to their critical role, financial markets and payment infrastructures, including those that will be supporting the central bank digital currencies, deserve particular attention. the cpmi - iosco could be the right organization to lead the work for the quantum resilience of these crucial nodes of the financial system. * * * let me conclude by thanking you all for gathering today to discuss this extremely important topic. hopefully, the discussion that we initiated today will continue in a fruitful way in the immediate future to deliver as quickly as possible a migration roadmap which can be embraced by all g7 members and possibly also shared with g20 and other countries for wider adoption. * i would like to thank silvia vori, valerio paolo vacca, giuseppe bruno, lorenzo bencivelli, mauro de santis, cristina andriani, sabina marchetti, antonio castellucci and giovanna piantanida for their contributions to this speech. 1 mckinsey & company, quantum technology monitor, 2023. 5 / 5 bis - central bankers'speeches | 1 |
prevalent practice of commission - based compensation, it is not surprising that the industry is still often perceived as one that pushes products, rather than provide solutions. the introduction of the balanced scorecard, which is currently being piloted among financial advisers, is to help address this perception. with the scorecard, remuneration of intermediaries will be more closely aligned to the suitability of products for prospective customers and the overall quality of service. i believe that such a shift in incentive structures will encourage advisers to build more enduring relationships with customers. more can be done beyond the realm of regulation. in other countries – such as australia, united kingdom and india – financial advisers are voluntarily adopting a fee - based model. the combined effect of increased customer awareness and bargaining power are also pushing financial advisers to reduce their commission - based income. in india for example, several firms have successfully shifted to largely fee - based models. this is, however, not a painless transition. in doing so, some have parted ways with customers who were unwilling to pay these fees. i believe that the move towards a fee - based model is an important signal that the advisers ’ incentives are aligned with those of their customers. to ensure a successful transition to a feebased model, financial advisers will need to enhance their value proposition to ensure that customers receive the standard and breadth of advisory services that would be worth paying for. 3 / 5 bis central bankers'speeches this is no easy undertaking, but i am confident that it is one that our financial advisory firms will be able to achieve. adaptability to change at the beginning of my remarks, i had highlighted three key trends affecting the industry. how well financial advisers respond to these developments will determine the industry ’ s relevance in the years to come. this brings me to the third feature of a trusted financial adviser – the adaptability to change. traditionally, financial advisers have been a staple for high net - worth individuals. gen ys have rarely been reached, reinforcing the unfortunate perception that financial advisory services are an “ outdated ” concept, or simply not for younger generation. this must change going forward, as this generation represents a large untapped market for financial advisers, and will continue to grow in importance as their wealth increases over time. whether financial advisers adapt successfully in reaching out to gen ys depends on their ability to understand the unique characteristics of this demographic. gen ys actively compare products using a wide range of information, such as online research, social media and peer | to these players. players, therefore have the option in participating in the mifc either by being licensed under bank negara malaysia to benefit from the tax holiday for 10 years under the income tax act and fully benefit from the double tax agreement, or alternatively to be licensed under lofsa and be taxed accordingly under the labuan offshore business activity tax act. the second strategic objective is activities generation - that is, to promote malaysia as the preferred choice as the centre for the offering of islamic financial services. associated with this objective is building the pool of talent and expertise, and to ensure that the environment is cost competitive and conducive for product innovation and product offering. the measures to address this include : • first, setting up the international centre for education in islamic finance ( inceif ). this represents the malaysia's investment in human capital to support the global development of the islamic financial services industry ; • second, establishing a shariah endowment fund for scholarships, research and international shariah dialogues for the regional and international shariah communities to enhance the harmonisation of shariah interpretation and practices ; • third, an additional 20 percent exemption in stamp duty on islamic financial instruments on top of the stamp duty exemption that is currently available to ensure tax neutrality ; • fourth, encouraging malaysian - owned banks including islamic financial institutions to expand their operations abroad by allowing the profits of the newly established branches overseas or remittances of new overseas subsidiaries to be given income tax exemption for 5 years. this is to enhance market access and business networking, and also to widen the customer base and to generate new sources of businesses in uncharted territories ; • fifth, liberalising the foreign exchange administration rules to allow multilateral development banks and multinational corporations to issue ringgit denominated instruments in our domestic bond market. in further liberalising the market, i am pleased to announce that resident and foreign issuers will now be able to raise foreign currency - denominated bonds, in particular, islamic bonds, in the malaysian capital market. the foreign issuers eligible to take this opportunity are the sovereigns, quasi - sovereigns, multilateral development banks, multilateral financial institutions and multinational corporations, while resident issuers are the local mncs. this represents part of bank negara malaysia's continuous efforts to promote the development of the malaysian bond market, and to enhance malaysia as a centre of origination, distribution and trading of sukuks. the issuance of foreign currency denomi | 0.5 |
over into the cpi eventually. given what i have just outlined, let me interpret the bank's baseline scenario for the price outlook mentioned earlier using the framework of " sticky " and " flexible " consumer prices. it can be said that sticky consumer prices are expected to rise gradually along with wage growth ; however, as the spillover of a fall in import prices to a decline in flexible consumer prices fully takes hold, the rate of increase in overall prices is projected to be pushed down for the time being. 3. upside risks to prices next, i will discuss risks to the outlook for prices. in my view, upside risks require attention for the time being, but thereafter, more attention should be paid to downside risks. i will first focus on the upside risks to prices. it is assumed that sticky consumer prices will continue to rise, but also that, in contrast to the baseline scenario, there is a risk that the rate of increase in flexible consumer prices will not cool down. earlier, i said that flexible consumer prices tend to track movements in import prices with a time lag. however, this is simply an observation based on the fact that such a relationship existed in the past. as i mentioned earlier when talking about price developments in japan, the latest opinion survey on the general public's views and behavior, along with other reports, points out the possibility that households'perception of inflation that prices will not rise, which has been deeply entrenched, may be on the verge of changing. from the standpoint of firms, they may consider that the time has come to rethink the price - setting behavior that took root during the past period of deflation. in other words, in setting product prices, firms may think along this line : " when prices of raw materials eventually come down, sales may not contract even if we do not lower product prices. " if an increasing number of firms adopt such price - setting behavior, they will not reduce selling prices even if import prices decline. as a result, the rate of increase in flexible consumer prices may not cool down as much as expected. meanwhile, if firms continue to raise wages by tapping into higher margins, the rate of increase in sticky consumer prices could also rise. in relation to upside risks to prices in japan, i would now like to touch on the points i am focusing on in terms of the price change distribution by item in the cpi. let us take as an example the united states, which has already experienced an ups | ( s & l ) crisis intensified in the late 1980s and after the global financial crisis in 2008. that said, even if financial stress arises, it is not easy to accurately predict its impact on the real economy. monetary tightening is intended to curb overheating of the economy and return it to a " goldilocks " situation. however, if financial stress increases before the economy returns to a proper level of economic growth, it will become difficult to provide an outlook for economic activity and prices, and policymakers will face a hard decision : whether to continue monetary tightening, to halt it, or to shift to monetary easing. for example, if the shift to monetary easing is premature, there is concern that an insufficient curbing of an overheated economy may lead to the entrenchment of high inflation. on the other hand, if the shift to monetary easing is put off and financial stress intensifies significantly, the adverse impact on the economy could increase. although the united states has experienced multiple bank failures since march 2023, the financial market seems to have regained stability, owing to swift responses by the u. s. authorities. a review by u. s. supervisory bodies and other analyses have pointed out that bankruptcies were attributable to the peculiar structure of the financial institutions'balance sheets and the poor level of risk management, such that these institutions were unable to adhere to basic practices for managing interest rate and liquidity risks. it seems to be widely recognized therefore that these bankruptcies were basically caused by factors at the level of individual institutions. the downside risks to the u. s. economy that i explained, if they were to materialize, could have a significant impact on japan's economy. it is therefore imperative that the bank carefully monitor the course of developments, including financial conditions. ii. conduct of monetary policy basic idea i would like to present my views regarding the bank's conduct of monetary policy, based on the current economic and price developments and the future scenario i have explained so far ( chart 12 ). since 2022, particularly in the face of rising prices, some have suggested that the time has come for the bank to revise its monetary policy. indeed, with observed inflation rates increasing at a fast pace and expected rates showing a moderate rise, i consider that a change has started to take hold in the deflationary mindset or people's perception of inflation that prices will not rise. in that sense, we are coming closer to | 1 |
foreign exchange swap market, which made it difficult to obtain funds in foreign currency, regardless of individual financial institution ’ s creditworthiness. smooth liquiditiy management by a financial institution cannot be achieved only by using its own cash, deposits, and borrowing capability. it also depends on the condition of market liquidity of financial assets. however, if a financial institution tries to secure its liquidity level sufficient enough to cope with an extreme stress situation, the financial institution has to hold sizable amount of risk free and short - term financial assets and thus cannot pursue its intrinsic function of financial intermediation. in that context, liquidity management by a financial institution itself, market - level efforts to maintain market liquidity, and proper exercise of the lender of last resort function by a central bank, would be the three indispensable factors. with respect to liquidity management by a financial institution itself, the basel committee on banking supervision released a guidance paper on liquidity management last september, and there it presented sound practices for enhancing liquidity management by conducting appropriate liquidity management, including that of foreign currencies, according to the characteristics of each market in which financial institutions operate. importance of improving market infrastructure the third lesson is the importance of improving the infrastructure of the market and the payment and settlement system, which is derived from the aforementioned perspective of maintaining market liquidity. the sudden collapse of lehman brothers brought a state of turmoil into the japanese financial markets. in particular, the number of settlement failures increased in the jgb repo market, which contributed to declining liquidity in the jgb market. however, without the efforts in recent years by the market participants and the central banks to improve the infrastructure of the market and the payment and settlement system including the establishment of clearing mechanism in the securities market such as the japan government bond clearing corporation ( jgbcc ), default in the repo market might have had a contagion effect on the entire jgb market and the market turmoil could have been much more severe. a good example is the scheme for foreign exchange settlement, which is called “ cls, ” or continuous linked settlement. the cls links the payment systems of countries and makes a simultaneous payment of a pair of currencies associated with foreign exchange trading, which reduces foreign exchange settlement risk. while it is hard to win understanding in normal times, the experience since the collapse of lehman brothers suggests the importance of a scheme to properly manage counterparty risk. given the current situation, its | optimal way and utilizing the fruits of technological innovation. the function of financial intermediation supports that process from the financial side. given this line of thinking, it is important to steadily understand how funds are used for what purposes and, in doing so, whether financial institutions are conducting proper liquidity management. the bank of japan conducts both on - site examination and off - site monitoring, and for the central bank as a lender of last resort, the current crisis obviously showed the importance that the central bank has hands - on knowledge. in that regard, close liquidity monitoring by the bank has been effective in maintaining the relative stability of japan ’ s financial markets. in the case of international banks, the bank ’ s on - site examination and off - site monitoring are conducted for their japanese branches. however, to find out the potential risk factors and to properly evaluate their impact, the bank needs to deepen the understanding of the financial groups ’ entire management policy and risk management strategy, the status of the bases in japan within the group, and the governance structure. for those who are here today, i would like to seek your understanding and cooperation, more than ever, on the importance of the bank ’ s on - site and off - site monitoring. international cooperation third is the importance of international cooperation. major central banks have been closely exchanging views and information not only at governor levels but also at staff levels with respects to various areas such as market operation, financial supervision, and settlement system. such cooperation has become greater in the current crisis. the close cooperation is not only with the united states and europe, but also with asian countries. as expressed in the word “ globalization, ” it is true that financial markets are heading toward standardized and seamless ones. at the same time, it is also another fact that plenty of seam and lumpy factors remain. for that reason, the importance of information exchange and cooperation in the area of central banking business would be increasing further. the bank of japan would like to communicate closely with you, conduct appropriate policy responses, and actively support market participants ’ efforts toward financial system stability. your cooperation is highly appreciated. thank you very much. | 1 |
##ewing their balance sheets further towards low - yielding housing assets. holdings of financial assets now look very low compared to what we see in other countries. " overall gearing was not substantially increased. households were apparently not worried about their greater indebtedness, about low rental returns, or about saving all their eggs in one basket. " by 2005 new zealand's normal short - term interest rates were looking high by oecd standards ( though not, despite some media confusion, the highest ). the difference in yields was attractive to some investors, and that is one of the factors that contributed to the persistently strong new zealand dollar. ( another key reason, we should not forget, was the strong terms of trade. ) " this was certainly a factor weighing on the reserve bank's mind over the last couple of years, and a reason why tightening took place gradually and moderately. ( as an aside, although some export industries came under significant pressure as the exchange rate rose, the sector as a whole appears to have managed the strong kiwi dollar better than in previous cycles. ) " the beginning of 2006 marked something of a turning point. the reserve bank finished its tightening cycle. new zealand's terms of trade started to soften. other oecd monetary policies started to catch up. and the trade weighted index fell by around 18 per cent between december 2005 and june 2006. at the same time the ` pipeline effects'of the official cash rate on fixed mortgages are continuing to come through. " this marks a rebalancing of economic growth from domestic sector - driven to export - driven. in this stage of the cycle our monetary policy has become a more effective brake on domestic spending. " even during the best of times, monetary policy affects activity and inflation with a significant lag. however, as we look back on 2004 / 05, we see a ` spongier'monetary policy than would be the case normally. applying the brake took longer to slow things down. this is similar to a two - year period in the mid - 90s, when our domestic / international interest rate differential was quite marked. " clearly, this could occur again at some stage in the future. it becomes more of a problem when new zealand's business cycle is significantly out of step with the oecd's, or when the latter have focused their monetary policy on a quite different issue. arguably, we have also had times at the opposite end of the cycle, when | it has been harder than we might have wished to stimulate consumption. " the reserve bank and the treasury now have a work programme focused on whether there are ways to reduce the likelihood of finding our economy out of sync again ; or on handling it differently if we do. " what is clear is that in a globalised world most of the government's economic policies, including fiscal, industry and immigration policies, are all constrained by other countries'policies and by international pressures on them. with financial markets so interconnected, any small country's domestic monetary policy also now needs to be seen in an international setting. " nevertheless, there is no question that we can run an independent monetary policy. we have control of our ship. if global winds are not behind us or our economy is out of sync with influential economies, then our progress becomes more difficult, and things can get uncomfortable. we may have to modify our chosen course. " but with major economies now raising their interest rates, global conditions are becoming aligned to containing inflation. in these conditions, new zealand monetary policy is increasingly effective. indeed in some respects we are in a more comfortable position than some other countries, having already raised interest rates. " in the meantime, we are starting to see some other countries, especially small open commodity economies, realising this too as they start to face the same pressures. they have been following the new zealand experience with interest. " | 1 |
this year ). it will be expanded further over the longer term, in concertation with companies themselves and their representatives. its benefits are twofold. for companies, it is a single, objective measure, based on recognised methodologies, that will avoid the need to submit numerous different declarations, and allow them to gauge how far advanced they are in their transition compared with their sector average. for banks, it will be an additional, reliable and independent source of information. our contribution to greener finance will be a stimulus for other initiatives, from innovators in the ecosystem – fintechs or greentechs – who have the skills to develop tools to facilitate information - sharing, decision - making and ultimately the emergence of a financial world that is commensurate with our environmental ambitions. * * * i shall conclude my speech with a quote from rene magritte, the belgian artist who, granted, was not a specialist in finance : “ surrealism means banishing the ‘ deja vu ’ and looking for the ‘ not - yet seen ’ ”. you, the fintechs, are firmly page 6 sur 6 anchored in the real world, but are also playing a definitive part in its transformation by looking beyond established models. we, the acpr and amf, are realists but also have an eye firmly on the “ not yet seen ”. it is up to us, collectively, to make the most of technological innovations. thank you for your attention. page 7 sur 6 france fintech, etude, 25 july 2023. ernst & young, barometre du capital - risque en france : 1er semestre 2023 iii for example, for summarising, extracting and classifying data, or for generating computer code or text. iv la banque de france cloture son appel a contributions sur l ’ ia generative, press release, 21 september 2023. v or distributed ledger technology ( dlt ). vi regime pilote pour les infrastructures de marche dlt | banque de france ( banque - france. fr ) vii villeroy de galhau, f., wholesale cbdc : as decisive as retail cbdc, and actively experimenting, speech, 3 october 2023. viii estimate of the number of active users in the world, on a monthly basis. ix tradingview, marche des cryptos x chainanalysis, 2023 crypto crime report xi this is why the banque de france | this means that you can hardly expect to obtain a european passport if you do not accept the single market's rules. third, we share a common social model which combines high standards of public service, relatively low levels of inequality – much lower than in american society – and a good intensity of social dialogue. and this has been achieved in a market economy. at a time when globalisation may leave many behind in advanced economies, when the debate about inequalities is coming back to the forefront – and these are real challenges behind the populist wave –, now is not the moment to give up our social model. europe and japan are quite close in their choices. how to move forward : four accelerators of the economic union. the assets that i have presented constitute a valuable achievement for europe. now, we must actively build on them, and not lazily rest on our laurels. i will now present some avenues of improvement. indeed, we have clearly succeeded in building a monetary union, but this is not sufficient. it is now time to make concrete progress on economic union, on which we have not been very effective yet. we are in agreement on the " why ". monetary policy cannot be the only game in town, and therefore we should not overburden it. furthermore we aim at greater stability, to counter the risk of a new crisis befalling an unprotected euro area, with all its damaging political and economic repercussions ; and page 5 sur 6 greater growth, to catch up our past lag on the united states and finally treat the fatal disease of mass unemployment in europe. as for the “ when ”, we obviously have a unique historic opportunity : with the economic recovery ; with the new french president and also stable governments in the netherlands and hopefully in germany. with this objective in mind, how, concretely, can we make progress on economic union? there is an absolute prerequisite : the implementation of national reforms. let me say, as an independent central banker, that the new french government, under mr. macron ’ s presidency, has already made decisive steps in that direction [ slide ]. a substantial labour market reform was approved last summer and has already been implemented. a forthcoming reform of vocational training and apprenticeship is expected next year. moreover, measures have been taken to keep public deficits below the threshold of 3 % of gdp. for the first time in 10 years, the government deficit should be below this threshold in | 0.5 |
##p ) to capture all the material risks, including those that are partly covered or not covered under the other two pillars. the icaap of the banks is also required to be subject to a supervisory review by the supervisors. the pillar 3 prescribes public disclosures of information on the affairs of the banks to enable effective market discipline on the banks ’ operations. enhancing risk management under basel ii ; remarks by ms. susan schmidt bies ; at the risk usa 2005 congress on june 8, 2005. 10. as you are aware, rbi has already issued the guidelines for the new capital adequacy framework in regard to pillar 1 and pillar 3 on april 27, 2007. as regards pillar 2, the banks have been advised to put in place an icaap, with the approval of the board. a two - stage implementation of the guidelines is envisaged to provide adequate lead time to the banking system. accordingly, the foreign banks operating in india and the indian banks having operational presence outside india are required to migrate to the standardised approach for credit risk and the basic indicator approach for operational risk with effect from march 31, 2008. all other scheduled commercial banks are encouraged to migrate to these approaches under basel ii in alignment with them, but, in any case, not later than march 31, 2009. it has been a conscious decision to begin with the simpler approaches available under the framework, having regard to the preparedness of the banking system. as regards the market risk, under basel ii also, the banks will continue to follow the standardised - duration method as already adopted under the basel i framework. for migration to the advanced approaches available under the framework, prior approval of the rbi would be required. pillar 2 considerations 11. while the implications of pillar 1 and pillar 3 are fairly well known in the banking community, the importance of pillar 2 in the new framework is perhaps not that well understood. i would, therefore, like to take this opportunity to dwell a little more on the criticality of effective implementation of pillar 2 by the banks while adopting the new framework, in view of its importance. 12. as i mentioned earlier, the pillar 2 of the framework deals with the “ supervisory review process ” ( srp ). the objective of the srp is to ensure that the banks have adequate capital to support all material risks in their business as also to encourage them to adopt sophisticated risk management techniques for monitoring and managing their risks. this, in turn, would require a well - | role as a source of information and as such will indicate the value of the company at the moment of the statement of accounts. fair value for prudential purposes is more forward looking in its approach as it includes not only incurred losses but also expected losses. this tension can be addressed by the regulators addressing the regulatory and prudential aspects in the case of banks. keeping in view the systemic implications of the standards, regulators will have to carry out an indepth assessment of the concepts and tools relating to valuation. ( ix ) great emphasis is now being laid on implementing a central counterparty for otc derivatives particularly for credit default swaps. well regulated counterparties reduce potential for disruption in financial markets and promote operational efficiencies and transparency. in india as early as in 2001, the clearing corporation of india was set up to settle interbank spot forex transactions and all outright and repo transactions in government securities whether negotiated or order driven systems. ccil has also introduced a collateralised money market instrument called cblo which is also settled through the ccp. ccil has also commenced non - guaranteed settlement of otc trades in interest rate swaps on 27 november 2008. guaranteed settlement of these trades will commence later once we clarify the exposure requirements. in the near future it will also act as central counterparty for forward contracts which will mitigate risks releasing counterparty exposure limits. the margins are in the form of cash and government bonds ensuring the quality and liquidity of the settlement guarantee fund ( x ) recent developments will also pave the way for more effective regulation rather than reliance on self regulation, credit rating agencies assessments or setting of standards by industry participants. ( xi ) lastly, on the issue of selling of complex products, we have to collectively work towards a viable framework. what is the solution? in this context i would like to recount the application of a surprisingly simple idea to the realm of public policy that has received tremendous attention after being advocated by richard thaler and cass sunstein in their international bestseller “ nudge ”. the authors advocate the use of " choice architecture " by businesses or governments to influence choices in ways that encourage choosers to make decisions in their best interest. they call it " libertarian paternalism ". this involves utilizing " nudges " such as the wording of choices in ways that influence individual actions, designing default choices ( in the absence of action ) that do not penalize individuals, limiting choices to those that are more comprehensible | 0.5 |
20 / 10 / 2020 the federal reserve ’ s corporate credit facilities : why, how, and for whom - federal reserve bank of new york speech the federal reserve ’ s corporate credit facilities : why, how, and for whom october 20, 2020 daleep singh, executive vice president remarks at the u. s. chamber of commerce ’ s center for capital markets competitiveness ( delivered via videoconference ) as prepared for delivery thank you, tom, for the invitation to join this event. as all of you know, in march the federal reserve — with backing from the u. s. treasury — created a set of facilities to purchase corporate credit for the first time in its history. many observers have credited the facilities with repairing market functioning in the corporate bond market and restoring the ability of many businesses to finance themselves through the pandemic. but my focus today is not the corporate bond market, credit spreads, or wall street. rather, i ’ d like to connect the dots by explaining why these facilities were necessary to support jobs and the economic recovery on main street, and why transparency, access, and accountability were so critical to their implementation. before i review the initial success of these programs, i want to acknowledge the painful realities that many firms, employees, and households continue to face. for millions of americans, it ’ s a long road back to normal. i should also make it clear that these remarks are my personal views and not necessarily those of the new york fed or the federal reserve system. 1 the shock to u. s. businesses and employees let ’ s start with some context and recall why unprecedented action was necessary in march. amid a synchronized global demand shock of uncertain length and severity, access to credit takes on outsized importance. companies that issue public bonds and commercial paper depend on financing to make investments and meet their obligations, including payrolls, and together likely account for nearly one - fourth of all u. s. private sector employment and just under 50 percent of u. s. output. 2 even companies that do not themselves have public bonds are closely linked through the supply chain, as they receive trade credit from or sell to large corporate bond issuers. research suggests that shocks impacting large businesses spill over to smaller firms, perhaps accounting for 10 percent of the reduction in employment at small firms during the last recession. 3 the unusually high level of uncertainty about the pandemic shock was reflected in the functioning of markets that finance large u. s. employers. market liquidity | engaged in the meticulous work of finalizing the legal structure of the lending arrangement that had been agreed to in principle, including defining the precise pool of collateral and related hedges that would secure the $ 30 billion loan. at the same time, several infirmities became evident in the agreement between jpmorgan and bear during the week of march 17th that needed to be cured. negotiations between the two sets of counterparties proceeded almost immediately between the new york fed and jpmorgan chase on the one hand, and between jpmorgan chase and bear stearns on the other. the new york fed and jpmorgan discussed the details for the secured financing. bear stearns and jpmorgan continued to negotiate changes to the merger agreement that would tighten the guarantee and provide the necessary certainty that the merger would be consummated. all the parties shared an overriding common interest : to move toward a successful merger and avoid the situation in which they found themselves on march 14. the extended easter weekend saw intense sets of bilateral negotiations among the three parties. the deal, finally struck in the early morning hours on march 24, held benefits for all parties. that deal included a new, more precise guaranty from jpmorgan, which lifted the cloud of default risk that had been hanging over the transaction. bear stockholders were to receive a higher share price. in addition to fixing the guaranty, jpmorgan gained assurance that its merger with bear would take place. and the new york fed obtained significant downside protection on the loan and a tighter guaranty on its exposure. the new fed financing facility will be in place for a maximum of ten years, though it could be repaid earlier, at the discretion of the fed. this is an important feature : the assets that are being pledged as collateral can be managed on a long - term basis so as to minimize the risks to the market and the risk of loss. they can be held or disposed of at any time over the next decade. a summary of terms and conditions is attached as annex iii. in keeping with the traditional role of a lender of last resort, the extensions of credit to bear stearns that the fed made to facilitate the merger were secured by collateral. the $ 29 billion loan will be extended only when and if jpmorgan chase and bear merge. we will be protected from loss by three different risk mitigants : first, a substantial pool of professionallymanaged collateral that, as of march 14 | 0.5 |
developments in line with norges bank ’ s mandate. bis central bankers ’ speeches | debt has continued to grow faster than income, which may indicate that the vulnerabilities that built up prior to the crisis are still present. an assessment of systemic risk must include an analysis of both the probability and consequence of a crisis. if the costs associated with a crisis are sufficiently large, systemic risk can be considerable even if the probability of a crisis seems small. as underlined in the theoretical literature, the economy can be vulnerable to substantial deleveraging when debt is at a high level. previous economic downturns provide confirmation of this. the costs of a crisis may then be substantial. the empirical models can provide support when we assess financial imbalances and whether a crisis is emerging. at the same time, humility is required and we must recognise that our ability to provide a precise estimate of systemic risk is limited. no two financial crises are alike, and the financial system is constantly evolving. there are many sources of systemic risk and new ones may emerge – not least when new regulations are introduced. we must be prepared for possible changes in the predictive power of the indicators. norges bank will therefore always have to exercise professional judgment in its assessment of systemic risk. the aim of macroprudential regulation is to strengthen the resilience of the financial system and dampen the build - up of financial imbalances. the purpose of the countercyclical capital buffer is primarily to increase banks ’ resilience to loan losses in a future downturn. if the bis central bankers ’ speeches buffer functions as intended, banks will tighten lending to a lesser extent in a downturn than would otherwise be the case. in addition, the buffer may to some extent dampen high credit growth during an upturn. the buffer rate will be increased when financial imbalances are building up or have built up, thus bolstering resilience when we need it most. the countercyclical capital buffer can thereby have an impact on both the probability and the costs of a crisis. the buffer may thus also reduce fluctuations in the economy. we are now in a phase where banks are facing a number of new capital requirements. banks can choose to adapt to the higher capital requirements by, for example, increasing lending margins or by tightening lending. thus, higher capital requirements could curb economic activity in the short term. as the new requirements are phased in, the buffer will have to be adjusted to the economic situation and other requirements applying to banks. this does not mean that the counter | 1 |
mario draghi : on the importance of policy alignment to fulfil our economic potential text of the 5th annual tommaso padoa - schioppa lecture by mr mario draghi, president of the european central bank, at the brussels economic forum 2016, brussels, 9 june 2016. * * * the footnotes can be found at the end of the text. in a speech in vienna last week, i explained why monetary policy could deliver the appropriate level of stimulus to the economy, even in a setting where interest rates are close to their effective lower bound. [ 1 ] as inflation is ultimately a monetary phenomenon, a committed central bank can always fulfil its mandate. and that is true independently of the stance of other macroeconomic policies. but monetary policy does not exist in a vacuum. the situation of central banks is better described as independence in interdependence, since other policies matter a great deal. they can buttress or dilute the effects of our policy. they can slow down or speed up the return to stability. and they can determine whether stability is accompanied by prosperity, which is directly relevant to the social cohesion of the euro area. it is these interactions, and why they matter, that i would like to talk about today. policy interactions in stabilising the economy the objective of the ecb is defined as delivering a rate of inflation below but close to 2 % over the medium term. but the medium term is not a fixed period of time. when faced with adverse shocks, the pace at which monetary policy can bring inflation back to the objective depends on two factors : the nature of the shock itself, and the conditions in which monetary policy operates. some types of disturbance will inevitably depress inflation for longer than others and make the return to the objective slower. the recent succession of global oil supply shocks is a prime example. in that context, the job of monetary policy is not to fight short - term shocks to prices, but to prevent them from feeding into longer - term inflation dynamics – or put another way, it is to make sure that the effect of shocks on inflation is no more persistent than it needs to be. so when we talk about returning inflation to our objective without undue delay, this is what we mean. the return to price stability should take no longer than implied by the nature of the shocks we are facing. but this is not entirely dependent on our actions, due to the second factor – the conditions in which we operate. | in the domestic economy, are currently insignificant ; overseas economies are likely to continue expanding ; and there has been progress in structural adjustments. the economy is likely to emerge from the current temporary pause and continue to recover. with time, the economic outlook visualized by the bank will gradually take more concrete shape, as the economy moves more clearly onto a sustainable recovery path. v. assessment of the decline in prices japan's economy is experiencing its third recovery phase since the 1990s, during which period the bank has been conducting an accommodative monetary policy. in the four years between 1991 and 1995, the official discount rate was cut from 6 percent to 0. 5 percent ( it currently stands at 0. 1 percent ). faced with continuing weakness in the economy, however, and with prices still falling, the bank embarked on the zero interest rate policy in 1999. now, in a situation where short - term interest rates are constrained by the zero bound, the bank is providing more ample liquidity to financial institutions through its " quantitative easing policy, " and has made a commitment to continue with this policy until the year - on - year rate of change in the consumer price index ( cpi ; excluding fresh food, on a nationwide basis ) registers zero percent or higher on a sustainable basis. by implementing drastic monetary easing, the bank has sought to avert the risk that a vicious cycle, involving the translation of price declines into reduced corporate profits, depressed economic activity, and hence further price declines, could impair the monetary policy goal of price stability over the medium to long term. when general prices, which are the yardstick for evaluating individual prices, fluctuate on a large scale, households and firms have difficulty in accurately distinguishing a price fluctuation caused by changes in the supply and demand balance of an individual good / service from a fluctuation caused by a change in the general price level. this results in distortions in the efficient allocation of resources in the economy as well as increasing uncertainty about the future. moreover, a decline in prices generates the following three problems. first, real wages adjust slowly when there is downward rigidity in nominal wages, and this impacts negatively on corporate profits and unemployment. second, a rise in deflationary expectations produces an equivalent rise in real interest rates. typically, nominal interest rates would be reduced to counteract this rise in real interest rates, but when an economy comes up against the zero bound on nominal interest rates, it is possible for real interest rates to | 0 |
it might also be beneficial to further the development of funded pensions in order to enlarge and deepen european capital markets. another long - term objective could be to harmonise insolvency laws across europe. in any case, we should not exclusively focus on the institutional and legal framework in our efforts to create a european capital markets union. there might also be soft factors at play, such as cultural preferences for certain forms of funding or the level of financial education. we also should address these issues in order to achieve our objective. 5. conclusion ultimately, the path towards a european capital markets union will be long and arduous. there will certainly be resistance, and there will be difficulties. therefore, we should remain realistic about what can be achieved. nevertheless, we embarked on the path of financial integration by adopting a single currency in 1999. and we must not stop there but deepen integration in order to make the european monetary union work. in november 2014, we took a major step by establishing a single european mechanism for banking supervision ; now, we should consider taking another key step by forming a european capital markets union – one that not only includes the euro area but extends to the entire european union. i would therefore like to conclude with a quote that is attributed to robert kennedy, although he allegedly borrowed it from his brother john f kennedy, who – according to his advisor ted sorensen – borrowed it from someone else. in any case, the quote goes like this : “ some see things as they are and say “ why? ”. others dream of things that never were and say “ why not? ”. with regard to the european capital markets union, i suggest we should join the latter group. thank you for your attention. bis central bankers ’ speeches | thomas jordan : monetary policy and government debt – different perspectives summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the 13th zermatter symposium, zermatt, 28 august 2007. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the effects of fiscal and monetary policy overlap. fiscal policy can have a cyclical effect, while monetary policy can also generate income for the government. however, theory and practise have shown that, first and foremost, monetary policy must be used to ensure price stability and – to a limited extent – to dampen economic fluctuations. the principal aim of fiscal policy, however, must be to ensure that the national budget is financed as efficiently as possible. when government debt levels are high and budget deficits get out of hand, they pose a significant threat to a monetary policy that is geared to stability. misusing monetary policy as an instrument of fiscal policy inevitably leads to a loss of purchasing power. many episodes of high inflation have come about, ultimately, as the result of funding requirements on the part of the state. nowadays, the independence of many central banks shields them – to a large extent – from the fiscal greed of politicians. nevertheless, time and time again, when government finances have fallen into disarray, central banks have been seen to come under political pressure. from a monetary viewpoint, however, government debt is not entirely unwelcome. on the contrary, government debt is a vital ingredient of modern monetary policy. a liquid market for government bonds is a prerequisite for a modern and efficient financial market. functioning financial markets, in turn, are necessary for an efficient monetary policy : a liquid market for governments bonds enhances the efficiency of the monetary transmission mechanism. yields on government bonds and indicators derived from these yields are an important source of information for the monetary policy decision making process. finally, in implementing government policy, government bonds serve as collateral. sound government finances are a prerequisite for the long - term success of monetary policy and for maintaining price stability. however, healthy government finances do not necessarily imply zero government debt. for the functioning of financial markets and an efficient monetary policy, a liquid market for government bonds is a considerable advantage. | 0 |
the extent that banks and market participants rely on such models for internal pricing, capital allocations, and other decisionmaking purposes, this is a problem for us all. the fact is that we - - both supervisors and bankers - - do not yet know the right answers with high confidence. in these circumstances, the basel ii process could lose momentum unless we can agree to go forward with something that seems reasonable and with the understanding that reasonable people may differ and that changes may be needed as we gain experience. the problem becomes even more complex when we recognize that market economies are cyclical and have crises. in a risk - sensitive system, we expect that the risk measures in the capital formula will have worse values at the trough than at the peak, so capital requirements will move somewhat as macroeconomic conditions change. this is often called the problem of procyclicality of capital requirements. if the minimum capital requirements rise as the economy weakens, it can be argued that a system of risk - sensitive capital requirements may lessen credit availability at just the wrong time. the jury is still out on just how procyclical the basel ii framework ultimately will be, or whether it may, in fact, be less procyclical than the current system in which the lack of rigor in credit evaluations itself creates a procyclical pattern of reserving and charge - offs. we have already taken some steps to address procylicality concerns since issuance of the january 2001 consultative package. for example, we've improved the proposal's treatment of expected losses - - and other measures are in train. finally there is the problem of making the pieces of the new accord fit together. the basel committee has said it wants modest capital relief incentives for large, international banks to move from the standardized to the foundation version of the irb approach and similar, perhaps larger, additional incentives to move from the foundation to the advanced version. but as i noted, these approaches and versions were designed for banks of very different levels of complexity and sophistication and for different regulatory regimes. the basic risk - weight functions are the same across the foundation and advanced versions of the irb approach. because of the conservatism built into the foundation version, capital requirements for a given bank under the advanced version, at least in this country, could be considerably less than under the foundation version. if the revised standardized approach is calibrated to yield capital similar to that of the current accord and advanced | that means that the rules will be complex in order both to be fair and to avoid unintended consequences. one of the complexities of unbundling risk - related capital charges is, in the view of many basel committee members, the need for an explicit capital charge for operational risk. devising such a charge has proved extremely difficult because of a lack of both an agreed - upon methodology and credible industry data. this has required the adoption of a strategy to permit banks to use their own internal measurement approaches - - subject to quantitative and qualitative criteria and, on a transitional basis, to a minimum or floor capital charge. sound - practice guidelines are also being developed for the pillar ii supervisory review process. the interval before final implementation in 2005 provides time for both the industry and supervisors to develop the database and to develop explicit operational risk charges better linked to the real risk at each bank. the federal reserve, and i believe the other u. s. agencies, have been, and will continue to be, committed to developing and applying a truly risk - based capital framework and supervisory process for both operational and credit risks. as with any such massive effort, timetables are required in order to motivate and to coordinate broad organizational efforts. but we have a prior commitment, one that discussions with the industry suggest that you share. that commitment is : to get it right. if we imposed a flawed structure on the industry, we would be doing a disservice to the banking industry and shirking our public responsibilities. thus, we will continue to try to get it right, even if it means more delay and modification to time schedules than either group wants. of course, we also understand that the capital framework will continue to evolve as market practices change and supervisors learn more about the strengths and weaknesses of what we develop. getting basel ii right does not mean that it can or will be perfect, even on the day the initial rule becomes final. critical to getting it right is a genuine interaction of the regulators and the banking system. we simply cannot develop basel ii correctly without your help. that does not mean dropping every feature that some entity believes is too costly or too burdensome or would put a crimp in a particular activity. but it does mean that, given our objective of creating a risk - based capital system to promote better risk management and a safer banking system, we need your operational skills and counsel. the industry's initial assistance and subsequent comments on this year's january | 1 |
) its exchange rate must be determined by market forces of supply and demand ; ( c ) a significant portion of the world trade must be invoiced in the aspiring reserve currency ; ( d ) in order to enjoy the exorbitant privilege of issuing the reserve currency, the issuing country must accept the “ exceptional responsibility ” of maintaining sufficient liquidity in the currency ; ( e ) its financial markets must be open, deep and robust ; ( f ) the policies of the country must inspire trust and confidence. china and india 11. i believe i have raised a lot of questions. but let me conclude with some thoughts on india - china comparison which has almost become a national obsession. 12. for us in india, china means many things – an object of envy, a challenge and an inspiration. 13. note that in 1700, india, with a population of 165 m, was the world ’ s largest economy, followed by china with 138 m people. even a century later, in 1820, as industrial revolution was gathering pace, india and china accounted for half of world gdp. the pecking order completely changed after that. china and india got relegated to the bottom of the league of nations. and over the last 25 years, we are fighting our way back up. 14. but china is ahead of us by miles. china is already a low middle income country, whereas india is still a low income country and home to the largest number of poor people in the world. as recently as 1990, india was 30 places ahead of china in the global competitiveness index. we are now 30 places behind china. as recently as 2000, there was at least one indian university / institution in the top 100 global institutions while china had none. today china has five and india has none. as measured by patents registered or research publications, china is moving up, and india is moving down. 15. i am making this comparison not so much in despair, but to trigger some introspection about what india should do to regain the glory that we enjoyed as the world ’ s pre - eminent global power 300 years ago. china has demonstrated what is possible. to that extent china is an inspiration. the task for us in india is to match up to that record, or even surpass it, but by doing it the indian way. 16. i am sure listening to arvind about china ’ s rise to the top will answer many of these questions and also provide us answers for our own way | forward. 17. please join me in welcoming arvind subramanian. bis central bankers ’ speeches | 1 |
, and new areas of concern have emerged both internationally and domestically. [ slide 7 ] the recovery in industrial output has progressed at a very different pace in different industries. the chemical industry appears to have already recovered from the recession. metal industry output, too, began to grow during the course of 2010, with particularly rapid growth in fabricated metals in response to export demand. there was only slow growth in electrical engineering and electronics, with output still almost 20 % below the level of 2008. there was brisk growth in forest industry output, but cuts in production capacity mean there is no imminent prospect of a rapid return to the pre - recession level of output. industrial output as a whole grew rapidly, particularly in the second and fourth quarters of 2010. the prominence of capital goods in finland ’ s export structure meant that exports did not immediately respond to recovery in the export markets. the main drivers of finnish exports in 2010 were forest and chemical industry products and fabricated metals. consumer confidence levels recorded in finland in 2010 reached a record high, even though the euro area debt crisis did at times cause uncertainty among finnish consumers. the stronger confidence and continuation of low interest rates continued to encourage the taking out of new housing loans. the pace of price rises eased in the second half of the year. the labour market situation has been improving, but rather slowly. growth in the number of employed was slower than expected at the end of 2010, and the unemployment rate has remained around 8 % since last september. the key challenge for economic policy in finland is to restore the sustainability of the public finances, weakened by the recession. the recession caused a deep reduction in both central and local government tax receipts and increased the level of government debt. in addition to the cost of servicing the debt, the general government balance will also be compromised in the future by increasing age - related expenditure. conclusion recent months have seen signs of a renewed pick - up in world growth. despite the heightened uncertainty and increased downside risks, stock prices and various confidence indicators are still at high levels. it thus looks that these shocks are not enough to derail the recovery of the world economy. however, uncertainty is exceptionally high, as highlighted by the recent developments in portugal. despite the brisk gdp growth numbers many advanced countries are still well below their pre - recession production levels. looking forward, they are struggling with population ageing, structural problems, and the accumulation of public debt. all this is clearly visible in the public finances. therefore for most advanced countries the key challenge is | pentti hakkarainen : economic outlook – still uncharted waters ahead speech by mr pentti hakkarainen, deputy governor of the bank of finland, at the norwayfinland trade association, helsinki, 11 april 2011. * * * the world economy has been recovering from the deep financial and economic crisis. recently the rapid increase in energy prices, the natural disaster in japan, and the once again heightened sovereign debt crisis have all casted a shadow over the global economic prospects. should we be optimistic or pessimistic on the current outlook? as winston churchill has stated, “ a pessimist sees the difficulty in every opportunity ; an optimist sees the opportunity in every difficulty. ” today, i ’ ve chosen to be on the positive side, trying to be still a realist. i ’ d like to briefly discuss the trends in the world economic outlook and the current situation in europe. there are quite a number of positive signs. thereafter i ’ d like to say a few words on the long - term fiscal policy challenges that the recent crisis has posed to most advanced countries. finally, i ’ ll present the bank of finland ’ s forecast of the finnish economy. the global outlook the world economy has been recovering from the economic crisis during the latter part of 2010 and early months of 2011. according to the bank of finland ’ s march 2011 forecast, the world economy and world trade will continue to grow at a brisk pace. however, growth has remained highly divergent in different regions, with the emerging economies under china ’ s lead still firmly at the forefront. [ slide 2 ] advanced economies, in turn, have witnessed continued slow recovery by historical standards, and unemployment has remained high. recently, differences in growth have also started to appear across the advanced economies. while the economic outlook for the united states and partly for europe has improved, prospects have remained very weak for some european countries. the forecast was finalised before the latest increase of uncertainty : the rapid rise of oil price, the tsunami and the nuclear disaster in japan, and the recent heightening of the sovereign debt crisis. it is still too early to say the full impact of these but the sign is clear : it is negative. markets are relatively optimistic : stock indices outside japan have rebounded [ slide 3 ]. on the other hand, the march pmi ( survey ) indices show some signs of taming. on balance, it currently looks that these shocks are not enough to derail the recovery | 1 |
doubted the uk ’ s commitment to monetary stability in the absence of a willingness to remove operational decisions on interest rates from the political arena. long - term interest rates contained a risk premium to reflect the possibility that the timing and magnitude of interest rate changes might reflect political considerations. the “ ken and eddie show ” was probably nearing the end of its run. and both principals needed their own show. so when gordon brown announced radical changes to the bank of england and the monetary policy framework two years ago they were widely welcomed because they offered the basis for a durable commitment to price stability. what, then, is the substance of the main reforms announced in may 1997? first, there is a clear and unambiguous objective for monetary policy – an inflation target of 2½ %, set by the government, with inflation defined as the increase in retail prices, excluding mortgage interest payments, over the previous twelve months – rpix inflation. second, decisions on interest rates are taken by a monetary policy committee, or mpc, comprised of nine individuals with expertise in monetary policy – five executive members of the bank and four non - executives – who operate on the basis of one person one vote. third, the process is characterised by a high degree of transparency and accountability, both to provide the public with explanations of the mpc ’ s actions and to hold members of the mpc individually accountable for their decisions. have these reforms made a difference to the uk economy? my aim this evening is to pose and begin to answer three questions about the mpc two years on. ( 1 ) what is the track record of the mpc after two years? ( 2 ) what has the mpc learnt during that period? ( 3 ) what are the challenges for the next two years? what is the mpc ’ s track record? because of the infamous “ long and variable ” lags between changes in interest rates and their impact on inflation, the mpc does not yet have much of a track record in terms of inflation outturns. but since the target given to the mpc is for inflation, let me start there. between june 1997 and march 1999 ( the latest month for which inflation has been published ) rpix inflation averaged 2. 7 %. during that period, inflation ranged from a low of 2. 4 % to a high of 3. 2 %. over the past nine months it has remained within 0. 2 percentage points of the target, a remarkable degree of stability. it is | , is an integral part of a global and orderly rebalancing strategy. that wisdom is best embodied in one of governor hu xiaolian ’ s speeches, last july, where she demonstrated how domestic factor price and exchange rate adjustments are both substitutes and complementary. many interactions between our economies occur through capital rather than good markets ; this is normal in a “ multipolar ” world given the diversity of countries, with different preferences, demographics and levels of development. some of us save more than we spend. others need capital to finance their growth. many are aging and want to secure their future income through good and safe returns on their investments. we therefore share a common interest in well functioning global capital markets. asymmetries in financial development prevent us from reaping all the benefits of our savings efforts. these asymmetries exist for good reasons. in many emerging economies, the memories of the 1997 – 98 crisis are still there. they lead to precautionary behaviors and a very cautious approach to capital market liberalization. obviously, the case for unrestricted financial development and market liberalization has been somehow weakened by the crisis. nevertheless, we might be paying a heavy price for the disorganized state of our global financial and monetary system. while real interest rates are historically low, many investments with high returns are not undertaken. poor and emerging economies growth is, in many cases, constrained by lack of infrastructure. we may face future shortages in many essential commodities because of insufficient investment in the current period. differences in financial systems also exacerbate capital flows and exchange rate volatility, especially when, as is the case today, monetary policies are widely divergent across countries. surely, we can do better in the future. full harmonization and total convergence in financial development between different countries is neither desirable nor feasible. but ensuring that our different financial systems interact harmoniously should be a priority. there are four possible avenues for progress. first, greater convergence in financial regulation approaches between advanced and emerging economies. significant advances are being made. china, together with brazil and india has been, for a year, a full member of the financial stability board, and as, such, participates in steering and leading the effort to build a more resilient and efficient global financial system. second, we may start thinking about ways of dealing with international capital flows volatility. for one given country, capital controls may temporarily reduce the pressure on its capital account or even permanently limit the vol | 0 |
situation. for some unlisted cooperative banks, conversion into joint stock companies will be part of a broader transformation of governance also comprising stock exchange listing. these interventions will greatly enhance access to capital markets and help overcome the problems with the current process of share price determination, which the law reserves to the shareholders ’ meeting. stock exchange listing will also ensure the liquidity of the investments of shareholders who wish to dispose of their holdings. the banca popolare di vicenza is one of the cooperative banks that have embarked on this process as part of the measures required by the supervisory authorities. as the explanatory note published on our website yesterday describes in more detail, in 2014 evidence emerged that this bank had committed irregularities in share buybacks. in agreement with the new european supervisory bodies, which were about to start operating, we scheduled a targeted inspection for immediately after the european comprehensive assessment. this intervention, conducted by bank of italy inspectors as part of the single supervisory mechanism, revealed other practices not in compliance with the rules. as soon as the initial findings of the investigations begun last february started to emerge, the bank of italy and the ecb concurred fully on urging the banca popolare di vicenza to adopt immediate corrective measures. the top executives and almost all of the senior management were replaced ; a capital strengthening plan was drawn up, the success of which is ensured by the presence of an underwriting consortium ; and a radical reform of corporate governance is planned for the cooperative ’ s conversion into a joint stock company and its simultaneous stock exchange listing. a reform of the mutual banking sector is also needed now. self - financing, the main source of funds for increasing these banks ’ capital, has essentially dried up as a result of the recession. in the absence of any decisions, the necessary increase in provisions to cover bis central bankers ’ speeches non - performing loans would lead to a further reduction in the capacity for self - financing ; a significant part of the mutual banking system would incur negative evaluations by the supervisory authorities and might not be able to meet the need for a larger capital endowment. this could give rise to situations that would be difficult to manage within the new crisis resolution framework, also considering the constraints of the regulations on state aid. mutual banking systems in other euro - area countries have long since instituted highly integrated organizational structures capable of realizing economies of scale, unitary risk control mechanisms, and safety nets for the liquidity and solvency of the participating banks. some of these | accordingly, in this area the esas should involve the colleges closely, taking their cue from the structures developed in the last few years. the information centralized in databases operated by esas should enable supervisors to conduct effective peer group analyses. in addition to basic supervisory data, it could be most useful for supervisors to share the results of stress tests on the main banking groups and their consequent risk assessments. the best way to achieve this is to have the esas themselves conduct the stress tests at european level, using common scenarios and methodologies and providing for mechanisms to determine the sources of differences between single financial groups. to make this possible, access to the data must be restricted to a small group of supervisors and strict rules must be enacted to safeguard the confidentiality of such sensitive data. 3. 5 colleges of supervisors with the reform, the esas are given a central role in coordinating the activities of the colleges of supervisors. the first step should be setting standards for the functioning of the colleges based on today ’ s best practices, to enhance consistency within the union. in this regard, the two colleges instituted by banca d ’ italia for the top two italian banking groups represent an especially positive experience. rules are already in course of application establishing the legal basis for the colleges, broadening their tasks – including in crisis situations – and creating joint decision - making processes for supervisory controls, which may eventually result in specific capital requirements for the groups and for their individual components. so far, the colleges have worked well where the law is sufficiently stringent in defining their tasks, as for instance in the validation of the intermediaries ’ internal risk measurement models. the results have been less satisfactory where the functioning of colleges is based on voluntary commitments. to achieve a truly integrated system of controls on cross - border groups, in which the colleges can act as promptly and as effectively as national supervisors now do, it would be necessary to create the conditions for expanding the scope for concerted decision - making by the supervisory authorities. consideration should be given to enacting community legislation on banking groups patterned after the italian law, which recognizes the coordinating role of the parent company and institutes a clear framework for the proper attribution of rights and responsibilities to all the components of the group. the parent company could be made responsible for interacting with the college of supervisors and making sure that the latter ’ s indications are complied with by all group members. 3. 6 legislation and agreements on the management of crises in line with the recommendations of the | 0.5 |
##fc to be a significant vulnerability of the banking system and we were keen to reduce this risk as soon as possible. our aim was to be in line with basel thinking but we wanted to move promptly and did not wait for final decisions on the basel standards. it was also evident early on that the basel emphasis on hqlas was going to be an issue in new zealand where some two thirds of government securities are held offshore, contributing to a general lack of liquidity in debt markets. the rbnz ’ s liquidity mismatch ratio3 is very similar in concept to the lcr. we have a oneweek ratio which requires banks to hold sufficient primary liquid assets4 to meet net outflows under a one week name crisis. there is also a one month mismatch ratio requirement where primary and secondary liquid asset holdings must be sufficient to meet potential outflows under a 30 - day crisis. there is a close alignment between the eligibility of assets to meet the rbnz liquidity standards and the eligibility of those assets as collateral in rbnz operations. the nsfr is designed to ensure that banks maintain a stable funding profile in relation to the characteristics of their on - and off - balance sheet activities. in particular, the nsfr limits over - reliance on short - term wholesale funding, encourages better assessment of funding risk, and promotes funding stability. bis “ basel iii : the net stable funding ratio ” january 2014. see appendix 2 for definitions. bis central bankers ’ speeches this acknowledges the role of central bank eligibility in underpinning private market liquidity as well as the central bank ’ s ultimate role as lender of last resort to the banking system. restrictions are placed on holdings of the lower quality “ secondary ” liquid assets in order to ensure that banks hold a majority of primary rather than secondary liquid assets. more importantly, from an overall funding risk perspective, rbnz introduced a core funding ratio4 ( cfr ) similar to the proposed nsfr. the current minimum requirement of 75 percent was phased in over a three year period. the cfr requirement has promoted a significant improvement in the stability of the new zealand banks ’ funding base, with short term wholesale funding falling from 35 percent of total funding in 2008 to 15 percent in 2013. while the cfr was introduced as a micro - prudential requirement, the rbnz has more recently nominated the cfr as a potential macro - prudential instrument. this means that the cfr could be adjusted through the financial cycle with a | g20 countries and elsewhere are on the rise. economies are grappling with the spillovers from unconventional monetary policies and heightened political uncertainty has also been making households and businesses more cautious. ii ) the current expansion is longer, but also weaker than previous expansions at 28 quarters, the current economic expansion is the second longest in the past 40 years. annual real gdp growth has averaged 2½ percent during the expansion, making it the weakest expansion during that time. over the past year however, annualised gdp growth has accelerated to a little over 3½ percent ( figure 2 ). figure 2 : real gdp growth over new zealand business cycles index recession gdp ( log levels, indexed mar2010 = 100 ) 39 quarters at 0. 91 % quarterly growth 18 quarters at 0. 74 % quarterly growth 28 quarters ( to date ) at 0. 62 % quarterly growth 24 quarters at 0. 99 % quarterly growth 18 quarters at 0. 71 % quarterly growth source : statistics new zealand, rbnz. recessions are defined as two or more consecutive quarters of negative quarterly growth. iii ) the drivers of the expansion have changed initially the expansion was driven by improving terms of trade ( which improved steadily from september 2009 and reached a 40 - year high in june 2014 ), growing trade with china under the free trade agreement, and the stimulus from the 575 basis point decline in the official cash rate ( ocr ) between mid - 2008 and mid - 2009. increased construction investment, initially linked to canterbury earthquake reconstruction, and the strong surge in migration and tourism have offset the effects of the 8 percent fall in the terms of trade since mid - 2014 and contractionary fiscal policy since 2012. monetary policy continues to be accommodative with the ocr remaining well below the estimated neutral interest rate, which is currently just below 4 percent. these factors continue to be the main drivers of the expansion, although canterbury reconstruction is no longer a contributing factor. iv ) record migration, record tourism, and historically high labour force participation in annual terms, net immigration has been the strongest since 1860. net permanent and long - term migration of 172, 000 working age people has increased the labour supply by 5 percent since 2012. annual potential gdp growth has more than doubled to around 2. 9 percent from its 2010 trough of 1. 2 percent, primarily because of this labour force expansion. private consumption is being boosted by the strong growth in migration, record tourist inflows and the 11¼ percent increase in employment over the | 0.5 |
public authorities can contribute to financial integration by developing a common technical infrastructure. it is no coincidence that in the areas where such common infrastructure is missing, then integration is less well developed. the repo market, which is still hampered by a multitude of securities clearing and settlement systems, gives a still unfortunate example of that phenomenon. another example is the adoption of the eonia rate, which underscores how market participants play an important role in fostering financial integration through the adoption of market conventions. the eonia rate, which stands for euro over - night index average, is the effective interest rate in the euro unsecured overnight interbank market. the technical definition and the procedures for calculation of the rate have been defined by market participants through a series of market conventions, which were key for the integration of this market segment. in this respect, i should also mention that ecb has a role in the process because it fixes the eonia rate as a service to the banking sector. this illustrates that public bodies can indirectly foster financial integration by acting as a facilitator in private sector initiatives. the third challenge is the design of public standards for risk management. weaknesses in clearing and settlement arrangements can be a source of systemic risk. it is therefore paramount that effective risk management standards are applied by clearing and settlement systems. however, competition entails the risk that the service providers might try to improve competitiveness by applying more lenient risk management standards. given the potential systemic effects of the failure of a major clearing and settlement system, the operators might assume that central banks will eventually bail it out and they might therefore not have sufficient incentives to address risks effectively. against this background, the ecb takes the view that the establishment of public standards for risk management is essential. in fact, the eurosystem has set such standards that securities settlement systems need to comply with in order to be eligible for the use in our credit operations. all interested parties should be actively involved in the development and implementation of such standards. at the g10 level, standards for securities settlement systems have been developed by a joint task force in which both the committee on payment and settlement systems ( cpss ) and the international organisation of securities commissions ( iosco ) are represented. the fruitful experience gained in this co - operation has encouraged similar work at the eu level. for this purpose, the escb has established a framework for co - operation with the committee of european securities regulators ( cesr ), primarily aimed at assessing how the | duvvuri subbarao : the imf and economic developments in the indian subcontinent statement by mr duvvuri subbarao, governor of the reserve bank of india, to the international monetary and financial committee ( imfc ), washington dc, 24 april 2010. statement on behalf of mr pranab mukherjee, finance minister of india and member imfc representing the constituency consisting of bangladesh, bhutan, india and sri lanka. * * * mr. chairman : 1. confounding our worst fears, the turn around in the global economy has been much faster than we had anticipated as recently as only a few months ago when we met in istanbul. the global economy has experienced three quarters of positive growth following the sharp declines in the first quarter of 2009 and in the preceding quarter. there is, however, considerable heterogeneity in the pace of the upturn in different countries with emerging and developing countries leading the way. the global economy 2. although the global outlook is more reassuring than it was a few months ago, uncertainty about the shape and pace of global recovery persists. while macroeconomic risks have decreased, vulnerabilities remain. there is growing concern about the deterioration in the sovereign risk profile and dangers posed to financial stability in some countries. it is often said that every financial crisis is followed by a sovereign debt crisis because of the public sector ’ s support to affected parts of the economy. will this time be different? recent developments have shown the merits of a gradualist approach to allowing external financing of fiscal deficits. the crisis and the post - crisis experience should usher in some rethink on how and by how much debt markets be opened up for external financing. 3. volatile capital flows have been a central issue during the crisis, and continue to be so now as the crisis is ebbing. emerging market economies ( emes ) saw a sudden stop and reversal of capital flows during the crisis as a consequence of global deleveraging. now the trend has reversed once again, and many emes are seeing net inflows – a consequence of a global system awash with liquidity, the assurance of low interest rates in advanced economies over “ an extended period ” and the promise of growth in emes. capital flows can also potentially impair financial stability. the familiar question of how emes can maximize the benefits and minimize the costs of volatile capital flows has returned to haunt the policy agenda. 4. the recent crisis has clearly been a turning | 0 |
elizabeth a duke : stabilizing the housing market – next steps speech by ms elizabeth a duke, member of the board of governors of the us federal reserve system, at the global association of risk professionals ’ risk management convention, new york, 11 february 2009. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * in the summer of 2007, the u. s. and global economies entered a period of unprecedented financial turmoil, which has since led to a significant slump in macroeconomic activity. problems in both the housing sector and the housing finance sector played a central role in precipitating the crisis, and ongoing weakness in housing activity, along with persistent strains in mortgage markets, continue to inhibit a broader recovery. in particular, we have entered a cycle where high levels of default on mortgage debt have led to a reduction in the availability of mortgage debt as well as a tightening of terms for it. this situation has led to lower levels of home sales and prices paid for homes, which, in turn, contributes to yet more defaults by borrowers. as financial risk managers, i am sure you are aware of the important steps that have already been taken to try to break this cycle, but that you also recognize the need to do more. my remarks today will focus on the next steps – efforts to increase demand for homes, efforts aimed at further reducing preventable foreclosures, and efforts aimed at limiting the costs imposed on households and communities by foreclosures that cannot be avoided. both the government and the private sector have important roles in these efforts. these suggestions and recommendations are my opinion alone and do not reflect the views of other members of the federal reserve board or any other government entity. the current weakness in housing markets housing activity remains extraordinarily weak. sales of new and existing homes have been running at a pace that is 60 percent of that seen at the peak in 2005. single - family housing starts are now less than one - quarter of their peak level. with the cutbacks in construction, inventories of unsold new homes have declined, but the months'supply – that is, inventories relative to sales – is still very high by historical standards. the inventory of existing homes for sale is also quite elevated – and it would be even higher if not for would - be sellers that have withheld or withdrawn their homes from the market amid poor selling conditions. we | indicators should be looked at to determine whether we had met the ‘ substantial further progress ” criteria we laid out in our december 2020 guidance. some of us concluded the labor market was healing fast and we pushed for earlier and faster withdrawal of accommodation. for others, data suggested the labor market was not - 7healing that fast and it was not optimal to withdraw policy accommodation soon. many of our critics tend to focus only on the inflation aspect of our mandate and ignore the employment leg of our mandate. but we cannot. so, what may appear as a policy error to some was viewed as appropriate policy by others based on their views regarding the health of the labor market. third, one must account for setting policy in real time. the committee was getting mixed signals from the labor market data in august and september. two consecutive weak job reports didn ’ t square with a rapidly falling unemployment rate. later that fall, and then with the labor department ’ s 2021 revisions, we found that payrolls were quite steady over the course of the year. as shown in table 2, revisions to changes in payroll employment since late last summer have been quite substantial. from the original reports to the current estimate, the change in payroll employment has been revised up nearly 1. 5 million. as the revisions came in, a consensus grew that the labor market was much stronger than we originally thought. if we knew then what we know now, i believe the committee would have accelerated tapering and raised rates sooner. but no one knew, and that ’ s the nature of making monetary policy in real time. finally, if one believes we were behind the curve in 2021, how far behind were we? in a world of forward guidance, one simply cannot look at the policy rate to judge the stance of policy. even though we did not actually move the policy rate in 2021, we used forward guidance to start raising market rates starting with the september 2021 statement, which indicated tapering was coming soon. the 2 - year treasury yield, which i view as a good market indicator of our policy stance, went from approximately 25 basis points in late september 2021 to 75 basis points by late december. that is the - 8equivalent, in my mind, of two 25 basis point policy rate hikes for impacting the financial markets. when looked at this way, how far behind the curve could we have possibly been if, using forward guidance, one views rate hikes effectively beginning in september 2021? slides for “ reflections on monetary policy | 0.5 |
andreas dombret : financial regulation as a global challenge introductory statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at a roundtable discussion organised by the canon institute for global studies and the ehess, tokyo, 15 july 2014. * * * ladies and gentlemen thank you for having me today ; it is a pleasure to be here. for me, one of the central lessons from the financial crisis is this : the financial system is global in scope, and it therefore requires global regulation. to push this idea further, i would define the term “ global ” in at least three dimensions and argue that regulation should be consistent in all of them. first, regulation needs to be consistent across borders and regions. where regulation varies from country to country, there is a danger of regulatory arbitrage – of banks moving their business to countries with the lightest - touch regulation. the problem with this behaviour is that the risks that are transferred could potentially affect the entire financial system. this is why the g20 have made the issue of financial market regulation a priority. in cooperation with the financial stability board and the basel committee on banking supervision, they are working to develop a consistent regulatory framework at the global level. even so, i ’ m concerned to see that some countries outside europe are adopting their own regulatory initiatives which breach the principle of cross - border consistency. i believe that the danger of banking regulation one day returning to the principle of “ every man for himself ” needs to be taken seriously. we must not let this happen. second, regulation not only needs to be consistent across borders and regions but also across different sectors. here, too, the central issue is the danger of regulatory arbitrage. one current example is the growth of the shadow banking industry, where financial enterprises conduct business which creates bank - like risks but is either regulated insufficiently or not at all. with banking regulation being tightened, banks have even more incentives to move their business to the shadow banking system. thus, the shadow banking industry may become a source of systemic risk. we therefore need to expand the regulatory framework in this area to ensure that it is consistent. third, regulation needs to be consistent across asset classes. take the regulatory treatment of government bonds as an example. unlike for all other forms of credit, banks do not have to hold capital against government bonds in line with the risks that they carry, and this inconsistency has dangerous side - effects. since the euro - | andreas dombret : global reforms and the market economy system welcome address by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the reception given by the deutsche bundesbank at the annual congress of the verein fur socialpolitik, frankfurt am main, 6 september 2011. * 1. * * welcome ladies and gentlemen, members of the verein fur socialpolitik, on behalf of the deutsche bundesbank, i would like to warmly welcome you to this reception. i am especially delighted to accept the role of host at the bundesbank ’ s reception once again this year. the bundesbank is a true friend and supporter of the verein fur socialpolitik – and not without a certain degree of self - interest. the bundesbank considers science and research to be fields of great importance, since the work of central banks is today – more than ever – research and knowledge - based. time and again, research work has been the starting point for central bank policy decisions. conversely, problems we are currently witnessing in the central banks ’ various areas of operation stimulate new research projects. moreover, central banks offer an attractive research environment. i am therefore convinced that a close exchange with research institutions and universities benefits all concerned. the bundesbank maintains contacts and works together with a wide range of institutions and academics at the goethe university. one such example is the institute for monetary and financial stability ; it is financed by the monetary stability foundation, which in turn is run by the bundesbank. but cooperation also takes place on a less formal level, for instance with the center for financial studies and the graduate school here in frankfurt, to name but two examples. 2. lessons from the crisis – comments on the g20 agenda the topic of this year ’ s congress is “ the order of the world economy : lessons from the crisis ”, and the scope of the programme demonstrates the range of the related questions and answers. what are the right lessons to be learned from the crisis? this question was the subject of debate even before the first escalation of the crisis, namely the collapse of lehman brothers in september 2008. initially, it was thought by more than just a few that technical improvements in financial market regulation – notably concerning the securitisation market – would be a sufficient response to the crisis. however, when the most severe global economic crisis in decades took hold in the autumn of 2008, two points became | 0.5 |
øystein olsen : the role of monetary policy revisited – welcome address welcome address by mr øystein olsen, governor of norges bank ( central bank of norway ), at the norges bank conference “ the role of monetary policy revisited ”, oslo, 26 september 2013. * * * it is a great honour and pleasure for me to welcome you all to this norges bank conference : the role of monetary policy revisited. in his famous 1967 presidential address before the american economic association, milton friedman set out to answer three interrelated questions. what should be the role of monetary policy? what can it contribute to achieving the major goals of economic policy? and how should it be conducted to contribute the most? five years after the onset of the global financial crisis, these questions are yet again at the forefront of our minds. the crisis and subsequent recession have presented substantial challenges to monetary policy. central banks have responded with great activism and have resorted to unconventional policies such as quantitative easing and an increasing use of forward guidance. and the crisis has led to a review of monetary policy frameworks. successful as monetary policy has been in safeguarding low and stable inflation, many argue that it should take risks to financial stability into account. moreover, a new set of macroprudential policy tools has been proposed to address systemic risks in financial markets directly. in norway, inflation targeting was introduced in 2001. since 2005, we have published a projection of the future path of our key policy rate. this path reflects our view on the role of monetary policy. we consider an interest rate path to be appropriate when it meets three criteria. first, the interest rate should be set with a view to stabilising inflation at our 2. 5 percent target. second, the interest rate path should provide a reasonable balance between the path for inflation and the path for overall capacity utilisation. this implies that inflation targeting is flexible. notwithstanding new macroprudential tools, we see a need to add a third criterion : the interest rate should be set so that monetary policy leans against a build - up of financial imbalances. at norges bank, we remain firmly committed to our flexible inflation targeting framework. but the global financial crisis has taught us to be both modest and inquisitive. experience with new macroprudential policy tools is limited, and institutional frameworks are still in the making. leaning against financial winds remains subject to debate. it is therefore important that we actively seek knowledge. it is | be deployed judiciously, within a regulatory framework, which rbi has suggested. guarantees increase government ’ s contingent liabilities, and add to risk premia for its own borrowing. guarantees per se at the end of the day have limited utility in solving important sector issues. for example, for small scale enterprises, perhaps non - pecuniary and transaction costs related to clearances, inspections and the taxation bureaucracy are more important. 12. second, since 2013, the central government has successfully embarked on a fiscal consolidation path. even then, our general government deficit ( that is borrowing by the centre and states combined ) is, according to imf data, amongst the highest in the group of g - 20 countries. in conjunction, the level of our general government debt as a ratio to gdp is cited by some as coming in the way of a credit rating upgrade. we have to take cognisance of these comparisons and facts as we go forward to make progress. specifically, this will help us to better manage risks for ourselves, and thereby mitigate financial volatility. in the context of an already adverse external environment that i mentioned earlier, this assumes more importance. 13. borrowing even more and pre - empting resources from future generations by governments cannot be a short cut to long - lasting higher growth. instead, structural reforms and reorienting government expenditure towards public infrastructure are key for durable gains on the indian growth front. investment in public transport, specifically railways and urban mrts can lead to reduced costs and productivity gains as also help us to lower our oil import bill, and, as collateral benefit, improve air quality in our cities. 14. third, the continuing support towards recapitalisation of public sector banks. a wellcapitalised domestic banking system enhances the comfort of the various stakeholders to conduct business in the offshore ifsc as well. it is therefore critical that efforts towards developing an attractive offshore financial centre should also include measures for adequate provision of capital to the domestic banking system. we have to ensure that our banks continue to conform to international capital standards as a member of the g - 20 and the bcbs. let me turn to ifsc - related sector issues. c. micro ecosystem 15. the other dimension that is critical to gift ’ s comparative competitiveness is, as i mentioned 2 / 3 bis central bankers'speeches earlier, the micro ecosystem within the ifsc. here, there is the need for a modern complementary legal infrastructure. we need to do | 0 |
was introduced, is it working? as it turns out, there have been improvements in financial markets, economic activity and prices, and people ’ s expectations, and the qqe has been powerfully exerting its effects. let me point out some examples. bis central bankers ’ speeches in the financial markets, stock prices have risen by more than 30 percent since the beginning of the year. this substantially exceeds the rate of increase not only in europe, of around 13 percent, but also in the united states, of around 16 percent. on the real economy front, real gdp has marked high growth since the turn of the year of around an annualized 4 percent for two consecutive quarters. the unemployment rate has recently declined to the levels seen prior to the lehman shock of around 4 percent. people ’ s expectations have also changed. consumer confidence indicators clearly have tilted upward since around the end of last year. looking at business confidence indicators, according to the boj ’ s business survey, called the tankan survey, the diffusion index ( di ) for business conditions bottomed at minus 9 percentage points in the last december survey and has improved to plus 2 percentage points in the latest september survey – the same level as that in december 2007, prior to the lehman crisis. turning to price developments, expected inflation rates have increased as a whole, according to market indicators and various surveys. the break - even inflation rate ( bei ) has increased to close to 1. 7 percent, from around 0. 70 a year ago. in the opinion survey on the general public ’ s views and behavior conducted by the boj, in which consumers are asked their views on the inflation rate one year from now, the proportion of consumers who answered that prices would increase was just over 50 percent in the last december survey, but increased to above 80 percent in the september survey. in addition, the di for selling prices in the tankan survey, which is calculated based on a question firms were asked of developments in selling prices of their own products and services, have improved for large firms from minus 15 percentage points in the last december survey to zero in the september survey. looking at the observed inflation rates, the cpi inflation rate turned positive in june for the first time in 14 months, and accelerated to 0. 8 percent in august. as explained, stock prices have been rising and the real economy has been improving steadily. the inflation rate has turned positive and inflation expectations have risen. such improvements in economic activity, prices, and people | in tokyo is boosting the level of people ’ s sentiment. at the time of the olympics, seven years from now, we will welcome you to a japan that has regained its brightness. however, i am afraid that you may not be able to ride subways in tokyo at a minimum fare of 160 yen at that time. thank you for your attention. bis central bankers ’ speeches | 1 |
education. through a number of activities, educational publications, lectures, films, and applications, irrespective of their age, visitors learn about financial products and system. the history of money originates long ago and its developments are closely related to the people that have produced it. its role is not limited to the economic functions ; it is also a historic evidence of the minting or issuing country. it speaks about periods of economic crisis or downturns, of peace and prosperity, of successes and injustices. in this context, we decided to dedicate the first conference of the museum of the bank of albania to two main topics, which we think are the gist of its exhibitions and educational activities. 1. findings, researches and discussions in the area of monetary production and circulation, the history of the economy and banking activity in albania and albanian historic territories, which contribute to accurate interpretation and updating of information transmitted to the visitors 1 / 2 bis central bankers'speeches through museum collections. 2. the educational role of central bank museums in getting to know the history of money, and banking activities and enhancing financial literacy through exhibitions, education and innovation. for this purpose, we aim, therefore, to bring together foreign central bank experts to share their perspective on the management of central bank museums, collections and educational activities. this conference certainly underlines the commitment of the bank of albania to earnestly engage in both research and educational activities. we are very interested in enhancing cooperation with researchers, academia, peer museums, and specialised institutions in economic, historic and cultural heritage research. such cooperation is an excellent opportunity to bank of albania employees, who may benefit from valuable skills and expertise for our museum. it would also contribute to new networking and collaboration in research activities. in light of promoting and furthering cooperation, we are committed to turning our conference of the museum of the bank of albania into an annual event. also, in 2017, the museum of the bank of albania will organise a cycle of lectures dubbed as “ nights of the museum ”, which will address a variety of topics, such as numismatics, banking history, economic and financial education, philately, art and architecture. these projects aim at developing another aspect of our work at the museum, which would focus on social developments vis - a - vis museum objects. dear participants, the first conference of the museum of the bank of albania coincides with the 25th anniversary of the establishment of the modern central bank of the republic of albania and a two - | tier banking system. in these 25 years, the bank of albania has served to the country ’ s economic and financial development, supporting successfully the development of an efficient and stable financial system. it will continue to remain an institution with ambitious objectives in the field of european integration and approximation with the european central bank. today, it is undertaking a new challenge : opening to the public, not only to communicate clearly its primary objectives, but also to contribute to helping the public learn about the history of money, art and tradition that it represents. we will work hard, so that all the interested persons, whether in albania or abroad, will be able to learn about the history of banking, money and people that have dedicated their life and work to it. i am certain that very soon the museum of the bank of albania will be a place to visit the exhibition, and exchange opinions and ideas about banking and money concluding, i would like to thank you for your participation and contribution to the conference and wish success in these two days of the conference. thank you! 2 / 2 bis central bankers'speeches | 1 |
implementation. and as i have just argued, the current approach to crisis management has not helped to remedy this. against this backdrop, it might be consoling to take a look at the german experience because it illustrates how reforms eventually pay off. 4. the german experience in the first half of the 1990s, the price competitiveness of the german economy declined dramatically because a number of domestic imbalances had built up during reunification. among these were an oversized construction sector and strong wage and price increases despite a decline in average labour productivity. on top of this, the deutsche mark appreciated strongly. the loss of competitiveness put germany in an extremely unfavourable position on international markets. consequently, the corporate sector responded with a painful, but eventually successful, restructuring process which included innovation, outsourcing, wage moderation and a balance sheet clean - up. the german government was also forced to act. just after the turn of the millennium, the burst of the “ new economy ” bubble caused an economic downturn and led to a protracted period of meagre gdp growth : unemployment was persistently high while overburdened social security systems led to big fiscal deficits. in 2003, bold labour market reforms were introduced. these reforms were accompanied by fiscal consolidation and adjustments in the social security systems, in particular the pension system. in any case, the reforms put germany in a position to cope comparatively well with the crisis. although it was hit rather hard when the world economy went into recession, the labour market proved to be quite resilient and private consumption remained robust at the height of bis central bankers ’ speeches the financial crisis. thus, germany could serve as an anchor of stability for monetary union. for this to remain the case, it would be advisable to now stick to the original plans to consolidate the budget. consequently, the recently envisaged tax cuts would have to be counter financed, for example by cutbacks in tax expenditure. leaving these current events aside, the question that remains is : can other countries learn something from the german experience? i believe it provides a very simple and straightforward lesson that could be summarised by something the famous german author erich kastner once said : “ es gibt nichts gutes außer man tut es ” or in english : “ actions speak louder than words ”. at the last summit of eu leaders, promising reforms were announced by several countries – now they have to be implemented. 5. conclusion ladies | sovereignty to the european level – at least temporarily. only a clear decision for either of the two options lays the bis central bankers ’ speeches foundation to preserve monetary union as a stability union in the long run and to safeguard its role in the global economy. it is up to governments in europe to make this decision. hence, i welcome the german government ’ s attempts to press for greater political integration, including transfers of national responsibilities. let me be clear : it will be a lengthy and arduous process requiring important legal changes. however, a credible commitment to this process could have beneficial effects right away. however, so far there is no consensus on this, and so an “ in - between approach ” is being pursued. national fiscal policies are still decided at the national level while the resulting costs are borne by all member states. this approach lacks credibility because of its inconsistency. the lack of success in containing the crisis does not justify overstretching the mandate of the central bank and making it responsible for solving the crisis. however, a clear commitment to our mandate is an indispensable element of a prosperous future for the euro. it was only for this purpose that the eurosystem was granted independence and this independence is not only a right but an obligation. i am convinced that the current crisis of confidence can not be overcome if trust in the legal and economic framework is lost. i am also convinced that the economic costs of any form of monetary financing of public debts and deficits outweigh its benefits so clearly that it will not help to stabilise the current situation in any sustainable way. apart from the institutional framework of monetary union, the second aspect that has to be addressed is structural deficiencies in a number of member states. these deficiencies include a lack of competitiveness, rigid labour markets and the failure to seize opportunities for growth. solving the crisis also requires addressing these deficiencies : the labour markets in the relevant countries have to be reformed and made more accessible to a larger share of the population ; the efficiency of administration has to be increased in many areas ; opportunities for new businesses have to be created by facilitating the access to domestic markets for goods and services. undertaking the necessary reforms is not only indispensible to overcome the sovereign debt crisis, it would also help to benefit from globalisation and the “ big shift ”. to sum up : the necessary measures are obvious and uncontested. the only thing that we are short of seems to be their | 1 |
’ s annual central bank seminar and specialized training courses, and other federal reserve cooperative training arrangements with african central banks on bank supervision topics. participation in this gathering will hopefully only strengthen and deepen these relationships. second, the federal reserve and african central banks maintain direct operational ties through the u. s. dollar correspondent and custody accounts that many central banks in this room hold at the new york fed. african countries represent approximately one - quarter of the total number of the federal reserve ’ s foreign official accountholders, the second largest regional representation, with some very long - standing account relationships. let me speak for a moment about the role of our services to the global central banking community. the federal reserve ’ s provision of u. s. dollar account services to the global official community stems from our recognition that central banks around the world have a mutual need for correspondent banking and custody services to execute on core central banking functions in which the safety, confidentiality, and reliability of service provision is essential. given the global 1 / 2 bis central bankers'speeches role of the u. s. dollar as a reserve currency, we recognize the special role that our account infrastructure plays in supporting policy implementation by central banks around the world. as such, we devote significant attention and resources to maintaining a robust operational and risk management culture. this allows us to continue to provide these services for the benefit of the global central banking community. this brings me to the third reason why enhancing relationships with african central banks is a high priority for us, and that is the need for stronger dialogue on the evolving risk environment in cross - border payments. undoubtedly, there has been a significant shift in global perceptions of the seriousness of cyber threats across the board, be they in the realm of politics, business, finance, or the media. for financial institutions, while cyber threats at one point may have been regarded as a relatively minor cost of doing business, it is not an exaggeration to say that they are now viewed as potential existential threats, not just to individual firms but also to the broader financial system and critical infrastructures that support it. as central banks with broad mandates for financial stability, this is certainly a concern for us all. for the federal reserve, a cyber breach at one of our central bank customers last year led to authenticated yet fraudulent swift messages being sent to us to wire out substantial sums of money. while neither swift nor federal reserve systems were breached, this incident was a strong reminder that the robustness of our customers ’ | policymakers, their very virtue – their simplicity – is also a significant shortcoming. policy rules, especially those with fixed values for r *, cannot capture all of the information that is relevant for policymaking. in particular, such rules do not capture the fact that the linkage between the federal funds rate and both financial markets and global conditions can be very loose and shift over time. this is a critical shortcoming because this looseness affects the stability of the relationship between monetary policy and economic outcomes. if the relationship between monetary policy, financial conditions and the real economy were tight and stable over time, then following a relatively simple and unchanging policy rule would likely generate acceptable results. however, if the transmission of monetary policy to the real economy is more variable and uncertain, as i believe it is, then monetary policy cannot be put on autopilot guided only by a fixed policy rule. as an example, one significant conundrum in financial markets currently is the recent decline of forward short - term rates at long time horizons to extremely low levels – for example, the 1 - year nominal rate, 9 years forward is about 3 percent currently. my staff ’ s analysis attributes this decline almost entirely to lower term premia. in this case, the fact that market participants have set forward rates so low has presumably led to a more accommodative set of financial market conditions, such as the level of bond yields and the equity market ’ s valuation, that are more supportive to economic growth. if such compression in expected forward short - term rates were to persist even after the fomc begins to raise short - term interest rates, then, all else equal, it would be appropriate to choose a more aggressive path of monetary policy normalization as compared to a scenario in which forward short - term rates rose significantly, pushing bond yields significantly higher. in closing, i agree with the authors that it is very much premature to accept the hypothesis that we have entered a sustained period of secular stagnation. that said, however, i do think that the real potential gdp growth rate will be lower over the medium term, held down by much slower growth of labor input and an anticipated continuation of lackluster productivity growth performance. if i am correct, this does have implications for the longer - run value of r *. my point estimate is that the longer - run value of the federal funds rate is 3½ percent, well below its long - run historical level of 4¼ percent. at the | 0.5 |
financial literacy. we also consider accessibility of financial services to be an important condition for proper functioning of the financial market. another field of our concern is the development of the national payment system. in less than a year after the decision was taken, a processing and clearing centre was created and interrussian transactions of international payment systems were transferred there. currently, we are actively developing our own payment card. in conclusion i would like to say that the integration of crimea into the russian financial and payment system became an important part of our job last year. we implemented accelerated transfer of settlements from hryvnias into rubles. initially, in compliance with the law, we had to complete this process by 1 january 2015, but it became evident that such a long period of circulation of two currencies is unreasonable. as a result the transition was implemented in two months. as many as 530 branches of russian banks have been opened on the territory of crimea and are ready to offer their customers a complete range of services. cash circulation has been arranged and the necessary amount of coins and banknotes has been delivered. a few words about internal changes in the bank of russia. in 2014, the organisational structure of the bank of russia underwent serious changes aimed at increasing our efficiency and optimising the workforce. the improvement of the bank of russia territorial structure initiated in 2014 was completed in january 2015. as many as 79 main branches and national banks were transformed into seven main branches with subordinated divisions. due to the accession of the republic of crimea and bis central bankers ’ speeches the federal city of sevastopol to the russian federation, in 2014 a division for the republic of crimea and a division for the city of sevastopol were established. resulting from the structural optimisation held in 2014, the bank of russia cut 3, 500 jobs or 5. 3 % and its workforce amounted to 61, 800 employees as of early 2015. i would like to note that the number of employees was reduced, while the bank of russia obtained vast powers as a megaregulator. however, we will continue reducing the workforce. in conclusion i would like to say that the bank of russia faces challenging tasks in a challenging period in the country ’ s history. we completely assume our responsibility. i am convinced that there are all the prerequisites to put the economy on the track of sustainable growth while ensuring the necessary macroeconomic and financial stability in joining our efforts. thank you very much for your attention. bis | regulation and supervision will be more focused on development and stimulation. 5 / 11 bis central bankers'speeches by introducing proportional regulation, we envision that it will stabilise small banks and enhance the solvency of their business models. i would like to highlight that while proportional regulation limits the risks that small banks can take on, but they will be subject to simpler regulation. this will ensure a fairer competitive environment. the second innovation we also announced a year ago here at the congress is the transition to a new bank resolution mechanism and the creation of a fund for banking sector consolidation. we are now ready, both from a legal point of view and in terms of management, to apply the new bank resolution mechanism. we hope that, as the market progressively clears and there is improved early detection of problems, there will be more cases where it is more beneficial to try to recover banks ’ solvency than simply revoke their license. moreover, the new bank resolution mechanism itself could promote the development of competition in the banking sector : consolidation will allow relatively large banks to return to the market. we are currently observing the lowest competition rate among the largest banks. thus, we have made progress in two of the three major objectives we announced at last year ’ s congress. the third objective we spoke about last year was establishing qualitative supervision over financial groups – we have prepared a draft bill that is being discussed in the government. we hope this innovation will be introduced next year. i would now like to address the objectives that we are yet to complete. the most pressing problem is lending to business owners. the standard n25 restricting financing of one ’ s own projects was introduced this year but is still only applied in a preferential mode. lending to owners is dangerous for two reasons. first, the bank will turn a blind eye to risks linked to its own company when issuing it a loan i. e. the risk of non - return. second, our practice has shown that if the owner ’ s project really experiences difficulties the last place it returns money is the affiliated bank. these are not marketable loans but loans extended by unwritten rules. banks cannot refinance or resell them. in the end, this is the cause of bankruptcy for many banks. it is one of the factors that led to the collapse of relatively large banks, whose licenses we revoked. we want the banking community to know that our intentions in this field are serious and we will continue to take a tighter stance. therefore, i | 0.5 |
bank of uganda remarks by prof. emmanuel tumusiime - mutebile, governor, bank of uganda at the breakfast organised by the institute of corporate governance uganda theme : “ governance as a core pillar for economic development ” at sheraton hotel. november 25, 2016 institute of corporate governance of uganda : corporate governance breakfast with the theme “ governance as a core pillar for economic development ” president, institute of corporate governance uganda ( icgu ) the executive of the icgu governing council our host, pwc ladies and gentlemen, good morning i would like to begin by thanking the institute of corporate governance of uganda for inviting the governor to give a key note speech at this breakfast and to commend the institute for the excellent work that it is doing to promote good corporate governance in uganda. the theme of this breakfast is corporate governance as a core pillar for economic development. the link between corporate governance and economic development is probably not intuitively obvious so i will offer you my own perspective on how corporate governance can contribute to development. a key driving force of sustainable development is the harnessing of positive externalities to private sector activities and the minimising of negative externalities. positive externalities occur when social rates of return to investment exceed the purely private rates of return. examples of positive externalities include the spillovers of benefits which occur when firms train workers, invest in research and development and adopt new technologies which generate “ learning by doing ’ benefits. examples of negative externalities include pollution or collusive or abusive manipulation of markets. given that investable resources are scarce, long term development requires that social rates of return are high. hence rapid economic development is more likely to be realised in a society which can enable the private sector to generate high private rates of return to investment while at the same time yielding positive externalities so that social rates of return are even higher. conversely, economic development will be held back if private sector activities create negative externalities, thus depressing social rates of return to investment. why should corporate governance have any impact on positive or negative externalities of private investment? in any firm there is an inherent tension and potential conflict of interest between what are often termed the “ insiders ” of firms – dominant shareholders and senior managers – and the “ outsiders ” who include small shareholders, the creditors of the firm, its employees and customers and the general public. the insiders are those who have actual control over the form, but without effective restraints insiders may abuse their control over the firm | ##igate the conflicts of interest in financial institutions and avoid negative externalities, governments impose prudential regulations, such as minimum capital adequacy requirements for banks, and mandate a public agency to supervise financial institutions and enforce the regulations. but we also recognise that statutory bank regulation and supervision by a public agency such as the bank of uganda cannot be expected, on its own, to guarantee the sound management of banks. moreover, excessively heavy handed regulation, although it might protect depositors, can also stifle innovation and risk taking in banks, which would be detrimental to economic development. in a market economy, the onus for sound management, including the proper management of risks, must lie with the banks themselves. bank regulators cannot be a substitute for bad bank managers. as such good corporate governance is an essential complement to good bank regulation and supervision. the financial institutions act, 2004, includes a framework for good corporate governance in financial institutions, which is supplemented by a set of corporate governance regulations which were issued by the bou in 2005. uganda ’ s corporate governance regulations for financial institutions were influenced by the guidelines published by the basel committee on banking supervision, based at the bank for international settlements, which is responsible for formulating global standards for bank regulation and governance. the corporate governance regulations for deposit taking financial institutions in uganda focus on four key themes : i ) the fiduciary responsibilities of the board of directors ; ii ) the importance of independent oversight of bank management ; iii ) the priority which must be attached to risk management ; and iv ) the need for independent audit functions. these are also themes which receive emphasis in the king iv report, which i believe should be viewed as a complement to the corporate governance requirements which are already in place for the ugandan financial sector. the king iv report also includes features which, although not specifically covered in our own corporate governance regulations because they fall outside the ambit of prudential concerns, are nevertheless relevant for financial institutions as well as non financial corporations ; these include the importance of corporations establishing responsible and transparent tax policies and organisation wide remuneration policies. the king iv report should help to strengthen standards of corporate governance both in the financial sector and in the non financial corporate sectors of our economy. thank you for listening. prof. emmanuel tumusiime mutebile governor | 1 |
per child in compulsory and tertiary education as a share of gdp is not low by oecd standards, and in some cases is higher. but when we see the decline in pupil achievement over the years, compared to other countries, then we must conclude that the israeli education system is not effective. to improve the situation, it is important that we examine the reasons for this ineffectiveness and that we act to put it right. why? because we are referring to our most important investment, the investment in our young, who are our future source of labor, enterprise and growth. in the field of higher education too there is room for special concern. it is sufficient to see the lists of israelis on the faculties of the leading universities of the us and other countries. this is a difficult situation to accept. the shochat committee, which reported earlier this year, has done sterling work on advancing higher education in israel and it is important that its recommendations be implemented, including granting wage differentials in order to reward the best academic staffers. another area that has been neglected in recent years is that of technological education. i hear this from various sources : in the educational system, and from industrialists who need individuals with technological qualifications. this is also a field that needs cultivating and promoting. as is well known, education is the best way of reducing poverty in the long run. and this leads me onto the next topic, that of welfare. b. welfare a very important way of alleviating poverty is by integrating those who can work into the field of employment, and at the same time raising the compensation that poorly paid people receive. in this context i am delighted that the subject of earned income tax credits is on the government's socioeconomic agenda and i hope that it will be implemented soon, along with the other subjects found on this important agenda. i will not elaborate today on the ways to integrate the poor into employment and to support those who cannot work. rather, i would like to refer to the topic of the composition of israeli society. according to data from the central bureau of statistics, most of the poor in israel are concentrated in two sectors : the ultra - orthodox and the arab. while the incidence of poverty among the non - ultra - orthodox jewish population was only 12 percent in 2006, the incidence of poverty among the ultra - orthodox and arabs was 57 percent and 58 percent respectively. this is connected to the low rates of employment in these two sectors, particularly among ultra - orthodox men | the various reforms interacted with one another, are they coherent, what are their larger social benefits and costs? this work is especially important in the current context : as memories of the crisis fade and the burden of regulatory reforms comes into sharper focus, the pressure to unwind the reforms will grow. it is important for the credibility of the reforms that their impact be objectively evaluated. it is also incumbent on us as regulators to be accountable for the substantial changes that we have put in place over the last eight years. fostering a culture of trust in the financial industry a second growing focus in the supervisory agenda is to help foster a culture that motivates the right ethical behaviour and responsible risk - taking in our financial institutions and markets. but it will require different and novel approaches because there are limits to what externally imposed rules can do to promote the right values in financial firms. the financial industry continues to be plagued by egregious misconduct, nine years on from the global financial crisis. in the us and uk, major retail banks are still settling charges against them for mis - selling investment and insurance products in the run - up to the financial crisis. across financial centres, traders at several banks were found to be involved in flagrant manipulation of key financial benchmarks. internationally, regulators have been cracking down on illicit fund flows, with several financial institutions being penalised for lapses in money laundering controls. in singapore, we have taken decisive actions against financial institutions that fell short of our anti - money laundering standards. mas shut down two banks and fined several others, and culpable individuals have been charged in court and sentenced. reform of the financial industry will not be complete until this issue of trust and ethics is addressed. we need to “ get the culture right ”. this will require collective effort by regulators, the industry, and financial institutions. the fsb and iosco have been driving international efforts to reduce misconduct risk, focusing on governance and incentive structures, conduct standards in wholesale markets, and the reform of financial benchmarks. national regulators have been stepping up engagement with financial institutions on issues pertaining to culture and conduct. the industry must itself take collective responsibility to promote good practices and develop codes of conduct, and hold institutions accountable to their peers. here in australia, you have set a good example. the australian bankers ’ association has commissioned an independent review of sales commissions and product - based payments in retail banking that is now in its final stages. banks have also agreed to share information among themselves | 0 |
. there was undoubtedly also political interference in banks, in terms of both policy lending and pressure on supervisors not to take action against well - connected owners of banks. another fundamental problem was weakness in the infrastructure of business laws that made it difficult for banks to take and realize collateral and to put insolvent companies into liquidation. we must also bear in mind the fact that the ultimate responsibility for poor lending and risk management practices must rest with the management of the banks themselves. however, having said all this, there have undoubtedly been failures in supervisory policies and practices, as demonstrated by the reform measures that are now being put in place in a number of countries. the basle core principles 13. reform is not an easy task. but at least supervisors in individual countries are now in a position to tap into an international network of technical cooperation and assistance to help them to bring their systems up to scratch. at the centre of this international effort is the basle committee on banking supervision which is taking on a leadership role in devising supervisory standards that can apply to all countries and not just the g - 10 countries which sit on the committee. in particular, the committee has produced a set of core principles that are intended to provide a set of minimum requirements for effective banking supervision. supervisory authorities around the world are being encouraged to endorse the core principles and to implement them as quickly as possible. the imf will have a role to play in checking that countries are indeed taking serious steps in this direction. 14. the core principles are not earth shattering. they have not unveiled some new secret of how to supervise banks. all they do is to summarize what are generally agreed to be the fundamentals of a sound system of supervision. this includes the following main elements : [UNK] • clear responsibilities and objectives for the supervisor set out in a suitable legal framework • operational independence for the supervisor and the necessary resources to do the job • a proper licensing regime for banks • sound prudential regulations and requirements that address the main types of risk faced by banks • the means to enforce supervisory requirements and gather information through on - site examination and off - site review • the power to take action against problem banks, including closure • the ability to conduct consolidated supervision and to cooperate and exchange information with other supervisors at home and abroad 15. these may seem like statements of the obvious. but the necessary measures were evidently not fully in place in a number of countries in the region. reforms are now being implemented, in some cases with the | ##dc. 1 / 3 bis - central bankers'speeches e - hkd pilot programme today's event marks the commencement of the e - hkd pilot programme, which is a key component under rail 2. it is a tremendous opportunity for the hkma to work with the industry to consider different use cases and design choices, and co - create new payment functionalities and infrastructures that could add value to society. we look forward to this public - private partnership in shaping the future of money in hong kong. we will follow an iterative process for the pilot programme. each iteration will last for about a year and it will help enrich our perspective and refine our approach to a possible implementation of e - hkd. given the already vibrant retail payment landscape in hong kong, we understand clearly that the decision to implement e - hkd would very much depend on whether it can make payment more efficient and convenient than the existing payment methods and whether it can unlock new business opportunities. this is why the experiences from the pilot programme would be crucial in informing our policy decision. selected pilot programme participants i am very excited to see that the pilot programme has attracted immense industry interest. 16 companies have been selected to participate in the first batch of the pilot programme for 2023. these participants, some in groups, will work on 14 pilots which will span across six major categories, covering programmable payments, " dual offline " payments, and other new developments with the use of blockchain technology, such as settling web3 transactions and tokenised assets. these innovative use cases proposed by the industry truly open our eyes to new possibilities of what central bank money can do, and how e - hkd can potentially benefit the general public and businesses in hong kong. we will invite selected participants to come on stage shortly to give a brief overview of their proposed use cases. we also aim to share the key learnings of the pilot programme at the hong kong fintech week in november this year. i trust that the outcomes and insights gained from each of the above pilots should help enrich our perspective and refine our focus and priority of the pilot programme in subsequent years. cbdc expert group besides the pilot programme, the hkma is also fostering closer government - industryacademia collaboration on cbdc research. we plan to form a cbdc expert group to bring together leading professors from local universities, who will come from different fields, such as computer science, business and law. i am glad to tell you | 0.5 |
customized services to users, thereby increasing economic welfare. in view of such potential benefits of new technologies to the economy, public authorities, including central banks, should be cautious not to deter the development of new information technologies by focusing solely on their negative side effects. we, policymakers, should always try to maximize the benefits of new technologies while minimizing their negative impacts, and i firmly believe we can do so by taking the appropriate actions. moreover, it is also essential for us to constructively consider desirable ways in which humans and ai complement, rather than confront, each other. for instance, human judgment is not completely free from existing paradigms, and thus is sometimes negligent to changes. in this regard, ai could adjust our bias by neutrally analyzing and finding new correlations among a myriad of data. meanwhile, humans could compensate for ai's weakness with their intuition, common sense, and imagination. iv. concluding remarks when i think about ai and human beings, i think of blaise pascal, a french philosopher and mathematician of the 17th century, as the forerunner who expressed advanced ideas, such as automated processing of large numbers of data and innovative algorithm, which took the lead in developing today's information technology. almost 400 years ago, pascal invented the first computing machine, an ancestor of today's computers. pascal also came up with an idea of an omnibus coach as the first public transportation in the world. this was based on an algorithmic idea to efficiently transport many people by establishing routes that crisscrossed and surrounded the city of paris. this should have been a much more epoch - making idea in those days than today's idea of car - sharing. at the same time, pascal emphasized the importance of independent thinking for human beings in his famous phrase : " man is a reed, the weakest of nature, but he is a thinking reed. " i believe this phrase has great implications for us in dealing with new technologies. if there is any risk the role of human beings are overwhelmingly replaced by ai, that would be when human beings stop thinking independently and autonomously. from a financial perspective, it is most important for us to think independently and positively on how to make an efficient and effective use of new technologies such as ai and big data analytics to further develop and improve financial markets and services. from this viewpoint, today's conference is a great opportunity, where numerous experts with various backgrounds gather to discuss the most advanced issues in finance, such as the | brian wynter : modernizing jamaica's foreign exchange market - the pivot to inflation targeting keynote address by mr brian wynter, governor of the bank of jamaica, at the 7th annual national asset - liability management americas conference, santiago, 25 may 2018. * * * introduction buenos daas, chile, que'onda?! chairperson, mr alexandre tombini, fellow speakers and panellists, our hosts, central banking publications, colleagues, ladies and gentlemen, good morning and greetings from jamaica. i am happy to be here in chile, not just for the beauty of the country or to brush up on my spanish, but also with an ulterior motive. bank of jamaica is preparing to implement full - fledged inflation targeting and, given that banco central de chile has been a pioneer in this area since the 1990s, we are looking forward to learning from their experience. in addition, central banking publications has been an invaluable source of information, training and networking for central bankers around the world. so i am grateful and happy to take part in an event organised by them and to have the opportunity to address this national asset - liability management americas conference. jamaica's economic reform programme and central bank modernisation for several years, the central bank in jamaica has been operating an'inflation targeting lite'policy regime. i am sure our colleagues in chile will confirm that full - fledged inflation targeting is not something to jump into all of a sudden unless you already have the good fortune of a conducive economic environment. that environment is now emerging in jamaica with the remarkable successes of an ambitious economic reform programme that is now beginning its sixth year. for jamaica to be in a position to consider adopting price stability as the central bank's primary objective and the use of the interest rate lever as its main policy tool, several things had to happen first. since high public debt and fiscal dominance will undermine the effectiveness of any central bank, fiscal sustainability is critical to allowing the central bank the breathing space it needs to conduct an effective monetary policy. once fiscal operations begin to crowd in the private sector and net export earnings increase, a sustainable current account balance becomes possible. then, the political economy limitations on exchange rate flexibility in a hyper - open economy like jamaica's diminish considerably thereby improving the central bank's ability to manage internal and external shocks. in the short space of a few recent years, jamaica has lived through 1 / 5 bis - central bankers'speeches | 0 |
amando m tetangco, jr : opportunities in financial inclusion and financial integration speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the baiphil induction of directors and officers and first general membership meeting, makati, 21 july 2015. * * * this is an auspicious time to be involved in baiphil. your term covering fiscal year july 2015 - june 2016 coincides with baiphil ’ s 75th anniversary! by any measure, this is a significant milestone. congratulations baiphil! and congratulations to your officers and members, past and present! by tradition, diamonds symbolize 75th anniversaries. this is because diamonds represent a highly prized quality – which is, enduring fidelity. faithfulness. commitment. i am pleased to know therefore, that the theme you selected for this year ’ s induction of officers is – “ building capacity for financial inclusion and integration. ” the industry is in the midst of so many facets of change that the concept of “ capacity building ” takes on new dimensions. it is no longer enough that you position yourself as a trainor for your peers. baiphil itself must navigate through a fast - evolving market landscape, appreciate and relate all the strands of change, if you are to become an effective venue for continuing education. training and education cannot be just about holding lectures and workshops. it is more akin to telling a good story with different chapters. in financial inclusion, we see the dimension of access and calibration so that the financial system itself is responsive to the diverse needs of differentiated stakeholders. how much more appropriate can this be than in an archipelago such as the philippines. this literally forces us to think out of the box, that comfort zone that we refer to as “ traditional banking ”. in financial integration, we bring together the collective aspirations of a regional community. this materially changes the landscape but more importantly, it does so at the same time that global best practices are themselves being re - set to a higher and more prescriptive bar. this forces us to think within the box, examining what we have, how we wish to position ourselves in this sea of change and what we need to do to remain competitively in the service of our respective constituents. in each of these two facets, we have a lot that needs to be covered. taken together, the strategic and tactical implications are | significant. at the level of each bank, choices must be made today so that you can maximize competitive advantages that you expect will be your strength in the future. at the level of the industry, this requires an unwavering commitment to continuing education, to appreciate nuances without losing sight of the overall policy agenda of institutionalizing change that can strengthen the system and its institutions. indeed both financial inclusion and financial integration pose challenges as well as vast opportunities. to dimension what exactly lies ahead of us, perhaps we need to step back a bit. let me share some indicative figures that came out of our national baseline survey on financial inclusion done early this year. i am sure you will find these useful in crafting your way forward : • only 4 out of 10 filipinos save. of those who save, roughly 30 % save in banks while nearly 70 % keep their money at home. bis central bankers ’ speeches • 6 out of 10 adults with bank accounts indicated that the bank ’ s reputation is their number one consideration in opening a deposit account. around 50 % of respondents mentioned interest rates as another major consideration, followed by minimum maintaining balance ( for info only – 45. 9 % ), proximity of the banking office ( 39. 8 % ) and the way the bank employees treat their clients ( 34. 8 % ). • 47 % of filipinos borrow money, of whom 72 % borrow from family, friends and informal lenders. banks as source of borrowing stood at only 4. 4 %, lower than lending / financing companies ( 12 % ), cooperatives ( 10. 5 % ), microfinance ngos ( 9. 9 % ) and government entities ( 6. 1 % ). • the main purpose for borrowing money is to buy food ( 59. 5 % ), school related expenses ( 38 % ) and to finance emergencies ( 32. 7 % ). • the primary considerations in borrowing money are interest rates ( 57. 5 % ), loan amount ( 41. 7 % ), period to pay for the loans ( 35. 0 % ), ease of loan application ( 33. 1 ), reputation of the credit institution ( 24. 5 % ), amortization ( 14. 9 % ), collateral ( 14. 3 % ), fees and other charges ( 11. 4 % ), and processing time ( 11. 0 % ). • more than 50 % of adults who have transacted with banks and atms are just somewhat satisfied with their transactions | 1 |
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