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single market in banking. in cases where national legislation goes beyond crd iv, regulatory fragmentation also raises complicated legal questions : what powers does the ssm have in applying national law that goes beyond european norms? under article 4 ( 3 ) of the ssm regulation, the ecb must apply all relevant eu law. and where eu law is composed of directives, the ecb has to apply the national legislation transposing those directives. the question is therefore : what does β transposition β mean? does it just cover national provisions that strictly implement crd iv word for word? or does it cover any national provisions that are rooted in crd iv? in the context of our football match, these two cases might be compared to the following situation. the general rule β i. e. β crd iv β β would be that a foul in the penalty box would require a penalty kick. now there might be some players for whom an additional rule would apply : if they were to commit a foul in the penalty box, they would also immediately be handed a red card. that rule would go beyond a strict implementation of crd iv ; but it would still be rooted in it, in the sense that a foul in the penalty box requires sanctions. so, depending on the interpretation of β transposition β, two supervisory approaches might emerge. the first approach would render the ecb directly competent to apply national legislation. the second approach would require it to apply national legislation indirectly by issuing instructions to national authorities β which, of course, then raises the question of who would be held responsible if such an instruction were to lead to a legal decision by the national competent authority? in my view, the first approach β the direct competence of the ecb β might be warranted when two conditions are met. first, when the power in question falls within the tasks conferred on the ecb under articles 4 and 5 of the ssm regulation. second, when the power in question is linked to relevant eu law : that is, the supervisory framework as defined, in particular, by relevant eu directives and regulations, such as crd iv, the capital requirements regulation, and the bank recovery and resolution directive. in any case, we need a consistent approach towards applying national legislation that goes beyond european norms. returning to our football match, fragmented rules clearly pose a problem for the referee. but they are also a problem for the players and for the game itself. banks in the euro area still do not compete | appears to be rather calm. that β s what i said, we have to look at how things were done, under what circumstances and what its real liquidity is ; it will depend on government liquidity, tax revenue etc β¦ and there are very different tax arrangements involved. in some countries there are tax claims, in others there are assets β¦ these are two different β animals β. there are things that may have been good in certain situations, but when that situation passes the question is whether or not the instrument should become permanent. it is similar with our unconventional monetary policy measures : when the crisis is over, there will be those that say why not carry on with the measures because buying government bonds is a really good thing β¦ and they would like it to become a permanent instrument, but this would go against our initial intention. the same applies to these instruments that were devised during the crisis and thought of as part of the programme, but were not, in my understanding, designed to be permanent. bis central bankers β speeches | 0.5 |
sabine mauderer : structural changes in financial markets and implications for monetary policy implementation speech by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the dz bank international capital markets conference, frankfurt am main, 29 august 2019. * * * welcome & introduction ladies and gentlemen, welcome to the bundesbank β s regional office. it β s a real treat for me to speak to you today. β when the going gets tough β β this conference title was wisely chosen by dz bank earlier this year. looking at the latest ructions in financial markets, the going has already got tough. β navigating the challenges β is the order of the day, and not just for market participants. the same goes for policymakers β especially when it comes to fiscal policy or monetary policy. as far as central banking is concerned, β navigating the challenges β is broad in scope. it includes drawing the right conclusions from financial market signals. the relationship between monetary policy and financial markets is not a one - way street. stock and bond prices reflect expectations on future growth and inflation, but also on monetary policy. these market expectations, in turn, provide valuable information for policymakers. but things have become even more multi - layered. on the one hand we face increasing market complexity and changes. on the other hand we see new players, products and trading patterns. to be honest, keeping tabs on the relevant changes is anything but easy. we have to keep asking ourselves which elements of change have an impact on monetary policy and which do not. so what i am going to do is present some of these changes in the first part of my speech. it would be a bit of a β long shot β to always call them β structural β, since their longevity is not entirely clear. then i β ll use the second part of my remarks to point out what these changes mean for monetary policy implementation. admittedly, iΒ΄ll give you rather a rough sketch than a finished painting, so some items might be left unresolved. fortunately, we will have the opportunity to delve a little deeper into some of the issues later on tonight. but for starters, let β s take a look at my selection of recent changes in financial markets. a β structural changes in financial markets 1 / 5 bis central bankers'speeches i based my choice of changes on how strongly they impact on market dynamics. the first change is a shift in the relative importance | 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511 or 3512, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. 2 ) what happened since the financial crisis? capital flow / default cycles have been around since at least 1800 β if not before. technology has changed, the height of humans has changed, and fashions have changed. yet the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. ( kaminsky and rogoff 2008, p. 53 ) 1. is this time different? have policymakers learned from the recent financial crisis? one key insight of the financial crisis has been that supervision needs to go beyond the individual institution and take a system - wide perspective. macroprudential policy aims to mitigate systemic risks, i. e. risks to the financial system as a whole. it builds on microprudential regulations which are concerned with the stability of individual financial institutions. the need for a macroprudential perspective is a lesson learned from the global financial crisis : even though individual financial institutions may seem stable from a microprudential perspective, the financial system may be highly vulnerable to shocks, and it may amplify these shocks. since 2009, the g20 has implemented a wide range of policies which aim at reducing the probability and the effects of future financial crises ( figure 1 ). these fall into four areas : 2 a first set of policies aims at enhancing the resilience of the financial sector with regard to adverse shocks. these policies include higher capital and liquidity requirements for all banks and in particular for systemically important banks. more resilient financial institutions can better withstand negative shocks and are less likely to amplify them. this mitigates negative repercussions on the real economy. one key insight of the financial crisis has been that large, complex, and connected financial institutions can be particularly systemic and β too big to fail β. large and systemically important financial institutions are thus required to fulfil additional _ _ _ _ _ _ _ _ _ _ _ _ _ reinhart, carmen m. and kenneth rogoff ( 2018 ), β this time is different : a panoramic view of eight centuries of financial crisis β | 0.5 |
. thus, there are compelling reasons to expect the well - entrenched inflation dynamics that prevailed for a quarter - century to reassert themselves next year as imbalances associated with reopening are resolved, work and consumption patterns settle into a post - pandemic β new normal, β and some of the current tailwinds shift to headwinds. 14 i will be carefully monitoring measures of longer - term inflation expectations to ensure they are well anchored at 2 percent. to date, various measures suggest inflation expectations remain well anchored and broadly consistent with our new framework. the index of common inflation expectations moved back to 2 percent in the first quarter, returning to its level in 2018, which is lower than its level prior to 2014. 15 in addition, the term structure of market - based measures of inflation compensation is consistent with market participants expecting a limited period of inflation above 2 percent. a straight read of the difference between the forward nominal treasury curve and the forward treasury inflation - protected securities curve implies inflation compensation is expected details on the cfo survey, which is a partnership of duke university, the federal reserve bank of richmond, and the federal reserve bank of atlanta, can be found on the richmond fed β s website at https : / / www. richmondfed. org / research / national _ economy / cfo _ survey. statistical models estimate that underlying core pce inflation ranges from 0. 1 to 0. 4 percentage point below the 2 percent longer - run target. see the point estimates for 2019 : q2 in table 1 in jeremy b. rudd ( 2020 ), β underlying inflation : its measurement and significance, β feds notes ( washington : board of governors of the federal reserve system, september 18 ), https : / / www. federalreserve. gov / econres / notes / feds - notes / underlying - inflation - its - measurement - andsignificance - 20200918. htm. see hie joo ahn and chad fulton ( 2020 ), β index of common inflation expectations, β feds notes ( washington : board of governors of the federal reserve system, september 2 ), https : / / doi. org / 10. 17016 / 2380 - 7172. 2551. - 9to be higher for the next two years and to decline subsequently and remain stable 5 and 10 years into the future. i will remain attentive to the risk that what seem like transitory inflationary pressures | could prove persistent as i closely monitor the incoming data. should this risk manifest, we have the tools and the experience to gently guide inflation back to our target. no one should doubt our commitment to do so. but recent experience suggests we should not lightly dismiss the risk on the other side. achieving our inflation goal requires firmly anchoring inflation expectations at 2 percent. following the reopening, there will need to be strong underlying momentum to reach the outcomes in our forward guidance. remaining patient through the transitory surge associated with reopening will help ensure that the underlying economic momentum that will be needed to reach our goals as some current tailwinds shift to headwinds is not curtailed by a premature tightening of financial conditions. the outlook is bright, but risks remain, and we are far from our goals. the latest employment report reminds us that realized outcomes can diverge from forward projections and underscores the value of patience. as the economy reopens fully and the recovery gathers momentum, it will be important to remain patiently focused on achieving the maximum - employment and inflation outcomes in our guidance. | 1 |
, that between monetary policy and fiscal policy. in a financial crisis which is partly derived from excessive public debt, monetary policy should avoid covering the liabilities of fiscal policy and printing money to finance the public debt, thereby coming to the aid of the fiscal authorities and allowing them to postpone the adjustment β again a problem of moral hazard. on the other hand, the monetary authority must avoid that liquidity problems in the government debt market will turn into solvency problems hindering the conduct of monetary policy itself. an extreme situation is one in which the central bank intervenes directly in the market for government securities and seeks to systematically influence yields. in this way the central bank actually takes away from the market the ability to assess the credit risk of public debt, turning it into an inflation risk. in a situation of low growth and low inflation, this risk tends to be undervalued by the markets. the budgetary authorities may in turn be led to believe that there is no problem of sustainability of public debt and no urgent need to take corrective measures. in fact, monetary policy takes the place of fiscal policy and over time part of the adjustment takes place through the inflation tax. the more active the central bank is in trying to influence bond yields, the less the incentive for the political authorities to take corrective budgetary measures β a sort of moral hazard in this case as well. at the other extreme is the situation in which monetary policy never intervenes in the market for government securities, even when this is subject to instability. in other words, a situation arises that is similar to that in which public debt is fully denominated in foreign currency and national authorities have no chance to influence the conditions of the issuance. this is a rather unique situation, in which euro area countries find themselves. the separation between fiscal and monetary authorities is optimal if the fiscal authorities are credible and if markets work perfectly and are able to accurately assess the credit risk of each issuer. in this case the market exercises a disciplinary constraint on the public issuers, which have to come to terms with market conditions and contain the debt. there are no problems of moral hazard. bis central bankers β speeches the management of this rather unique system, like that which occurs in the euro area, must take into account two important aspects that distinguish theory from practice. the first is that conditions can be found in which markets do not work as the theory predicts. the second is that in advanced countries such as those in the euro area | , macroprudential policies can be effective in restraining increases in residential property prices, but they are no panacea. lending by foreign - based banks dilutes the effectiveness of capital - based measures. moreover, our current tools are bank - based and therefore exercise little control over the growing role of the non - bank financial sector in lending to households. for example, in the netherlands around a third of mortgage lending to households is now provided by pension funds, insurers and mortgage funds. given these factors, it is worth considering whether the current suite of macroprudential tools remains appropriate. capital measures, while effective at increasing bank resilience, are much less successful at leaning against excessive housing price inflation, in part due to the factors i just mentioned. loan - to - value ( ltv ) and loan - to - income ( lti ) constraints may be more effective since they act directly on borrowers and are more difficult to circumvent. indeed, these measures have proven effective in reducing housing price inflation. ltv limits increase the resilience of the household sector, reducing the risk of households finding themselves with negative equity if housing prices fall. lti limits reduce the likelihood that some households will be forced to reduce non - housing expenditure if interest rates increase. this in turn helps mitigate the potential contagion from falling house prices to a more general economic downturn. yet ltv and lti limits are themselves not without difficulties. the sharp increases in house prices and rents witnessed in recent years have made it expensive to obtain housing. insufficient housebuilding, owing to capacity constraints in the construction sector and regulatory restrictions, has exacerbated the shortage of housing. and the burden is felt most acutely by the poorest in society, who spend a larger share of their income on housing costs than richer households. while ltv and lti limits are relatively effective in slowing housing booms, they work by crowding out marginal borrowers, who are precisely those most affected by the housing shortage. ltv limits crowd out those without a large enough deposit, usually young and / or poor households, while lti limits exclude lowincome households. this distributional impact of ltv and lti limits can render their use politically controversial, and may lead to inaction bias, limiting the effective use of policy measures to counter housing price inflation. dealing with distributional issues lies beyond the remit of central banks and prudential authorities, but we | 0.5 |
##s worth approximately sek 1 billion in february 2000 and loans worth approximately sek 8 billion in october 2000. bokredit, owned by den danske bank, has securitised a stock of mortgage loans to a value of sek 1. 3 billion. a new internet - based issuer of mortgage loans is europeloan, which started up operations in sweden in february 1999. europeloan is financing their internet based mortgage lending by securitisation of the loans abroad, up to now around sek 0, 5 billion. objections that have been expressed against securitisation include the fact that up until now it has been relatively complicated and costly to set up special purpose vehicles, and it has not been possible to invest the bonds at such favourable interest rates as their rating would imply. possible reasons are that the market is underdeveloped and the issues have been few, which has meant that liquidity in the bonds has been low. securitisation of mortgages is common in the usa, where around half of the total outstanding loans stock of secured loans is securitised. in europe, housing financing has mainly taken other forms. if competition in the mortgage market increases as a result of emu, it is likely that the need to finance mortgage loans as economically as possible will also increase. taking this into account, it is not unreasonable to believe that securitisation will become a more attractive option. increased competition can thus lead to a growing market for securitisation. alternatively, the opposite may apply, ie that improved opportunities for securitisation will increase competition. this is what happened in australia, where the mortgage market was deregulated during the 1990s. legislation facilitating securitisation reduced the previously high market entry barriers, paved the way for new players and reduced costs for borrowers by as much as a couple of percentage points. conclusion overall, most factors point to an increase in competition on the mortgage market. new forms of financing, new technology and possible emu participation will contribute to reducing costs for new players trying to enter the mortgage market. since mortgages are standardised products, lenders will compete on price, ie the rate of interest on the loan. the financing issue will therefore be a decisive one for issuers of mortgages. traditionally, mortgage institutions have financed their operations by borrowing using their entire balance sheet as collateral. this method of financing is relatively expensive for mortgage institutions and as competition on the mortgage market increases | . deposits 13 % 1 % dedicated savings mortgage bonds 19 % 62 % securitisation 5 % other source : the european mortgage federation the european mortgage bond market. shares by country by the end of 1999. 15 % 2 % 29 % 1 % denmark germany spain 7 % france 1 % austria sweden norway 45 % source : the european mortgage federation the european market for housing bonds is currently dominated by three countries - germany, denmark and sweden. together, these countries account for around 89 % of this market ( figure 4 ). switzerland 0, 7 germany spain italy belgium netherlands france 23, 84 11, 44 6, 8 1, 54 0, 9 0, 65 0, 03 uk billion us $ abs / mbs securitisation transactions by country, 1997. source : oecd competition for customers although mortgages are a relatively straightforward and standardised financial product that should be well suited to sell abroad, international mortgage sales have been limited to date. one probable reason is that the mortgage market mainly targets private clients, which are hard to reach without using a local distribution network. in this respect, the internet should be able to lead to greater transparency and competition, both by the credit issuers themselves supplying information and credit services over the internet and by internet - based brokerage sites finding the cheapest mortgages for borrowers. while internet - based mortgage services are still a relatively new phenomenon, they are likely to increase competition on the mortgage market. however, if we look at the spread between the cost of borrowing and the lending rate for mortgage institutions, there is no indication that the interest margin for mortgage institutions has fallen as a result of increased competition ( figure 5 ). mortgage institutionsΒ΄ long term interest margin. % sep mar sep mar sep mar sep mar sep mar sep 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 interest rate on mortgage institutionsΒ΄ borrowing, 5 years mortgage institutionsΒ΄ insterast rate on lending, 5 years. the new internet - based players on the mortgage market are made up of those who mediate loans via the internet and those who issue credit over the internet. players such as blockbid, bolaneborsen, comboloan and e - loan search for and mediate the cheapest mortgages for borrowers. europeloan, on the other hand, is an internet - based credit issuer that has operated in sweden since february 1999. the company, which also operates in belgium and germany, finances mortgages through securitisation. as | 1 |
burden. these and a few other factors have led the basel committee to recommend a separate capital for operational risk. 3. definition of operational risk has evolved rapidly over the past few years. first, it was commonly defined as every type of unquantifiable risk faced by a bank, which has been refined considerably to include modern day risks. according to the basel committee on banking supervision, operational risk is the β risk of loss resulting from inadequate or failed internal processes, people and systems or from external events β. this definition is based on the underlying causes of operational risk at the broadest level and includes legal risk, but it excludes strategic and reputational risks. the basel committee has also asserted, β the most important types of operational risk involve breakdowns in internal controls and corporate governance. β that β s why basel ii aligns with a variety of other regulations and supporting frameworks for enhancing corporate governance.'management of operational risk is thus taken to mean the'identification, assessment and / or measurement, monitoring and control of mitigation of this risk. while many of these risks are inherent and visible in day to day operations of banks, some components are applicable to supervisors and regulators. 4. the banking industry β s awareness of operational risk and efforts to manage it have accelerated in recent years, driven in part by an increasing desire to improve operating efficiency, reduce earnings volatility, rationalize the allocation of capital between competing businesses. it is not easy to get banks to identify and assess the operational risk inherent in all material products, activities, processes and systems and in particular to follow such practices when new products are introduced. to encourage banks to focus attention on assessment of operational risk on products and processes, regulators should be aware of new products, improvements in management information systems and computing technology that have opened the way for improved operational risk measurement and management. in the next few years, financial institutions and their regulators will continue to develop various approaches for operational risk management and capital budgeting techniques. 5. let me focus on some key areas of operational risks and regulatory responsibility in the interest of financial system stability. 6. sound management of operational risk is particularly important in payment, clearing, and settlement systems as such risks can spread across systemically. all owners and operators of payments, clearing and settlement systems face operational risks but the degree may vary from system to system and from country to country. operational problems in a payment, clearing, and settlement system may impede the control of, or even ex | ##acerbate, other types of risk such as market, liquidity, or credit risk in an unanticipated way that could pose a systemic risk, resulting in participants incurring significant losses. it may not stop there. payment and settlement related operational risks could filter into businesses of banks β clients, governments and the country β s international correspondents as well. this aspect of banking operations was ignored for many years and it is fairly recently that regulators and banks started addressing payment and settlement related operational risks. today β s consensus is that payments, clearing, and settlement systems must be safe, reliable, efficient, and secure, which are critical to financial system stability. that β s why most regulators, the central banks in particular, have become owners and operators of clearing and settlement systems. although the tendency is to outsource this function, many regulators at some stage or other have owned or operated these systems. 7. another technology related risk is the desire of banks to acquire the leading edge with propriety systems, stand alone systems and specific it systems. banks tend to hang onto this short - lived approach. individual systems are costly not only to banks themselves, but also to customers. the norms should be not attracting customers, but reducing their operational risks and reduction of transaction costs to customers. both are often forgotten or ignored by banks and continuous reminding has become a regulatory responsibility. despite moral suasion banks in many countries have not realized the gains of having common atm platforms, back - up sites, disaster recovery sites and sharing of costs. 8. it may also be necessary to for banks to recognize that different risks matter in different lines of businesses. a comparison of business unit economic capital requirement by risk type indicates that operational risk is highest in fund management, private banking, and in retail banking when compared to corporate banking, insurance business ( if banks are allowed to engage in ). the new operational risk element is expected to hit banks specializing in areas - such as custodian arrangements and asset management. the regulators should be mindful of high operational risks in these businesses and bring them to the attention of banks. 9. uncertainties, regulatory challenges in promoting banks in a lighter vein, operational risks can be categorized into two, i. e. man - made risks ( mistakes, faulty models, frauds, terrorism, wars etc., ) and god - made risks ( earthquakes, floods, tsunami disasters, electrical blackouts, telecom interruptions etc. ) some of these are well known | 1 |
bond rates reflect a drop in risk premiums because inflation has become better anchored and the volatility of the real economy has fallen. but let me also note that other factors would seem to work in the opposite direction β for example, our large and growing federal budget and trade imbalances could be raising risk premiums. another possibility is that low long - term rates reflect unusually strong demand for long - term securities, for example, by pension funds seeking to improve the match between the durations of their assets and liabilities, by holders of mortgage - backed securities seeking to maintain the durations of their portfolios, or by foreign central banks that have been acquiring dollars. china may have been playing an especially large role, as its central bank has intervened in foreign exchange markets to peg the renminbi at a low level against the dollar. of course, last week the people β s bank of china announced that it had revalued the renminbi against the dollar by 2. 1 percent, with the stated intention of managing the renminbi β s exchange value against an unspecified currency basket. this is not a large revaluation, but some observers think that it is the beginning of a much bigger move over time. if this is the case, we may gain a better understanding of the impact, if any, that chinese exchange rate policy has had on u. s. bond rates. an alternative to β special factors β as an explanation for the low level of long - term yields is the possibility that the flat yield curve reflects the market β s assessment that bad news is on the horizon. in other words, investors may expect only modest increases in the funds rate in the future because they think that the drags i β ve described will keep demand on the weak side for some time to come. we probably won β t know the most important sources of this β conundrum β until more time passes, but the causes of the conundrum do matter to monetary policy. if the first class of explanations turns out to be correct, the federal funds rate probably needs to be somewhat higher than would otherwise be appropriate to offset the additional stimulus due to the flat yield curve. if the latter explanation fits the bill, and the market is correct that the drags going forward will be unusually strong, a somewhat easier policy may be appropriate. housing whatever the source of the conundrum, clearly low long - term rates have contributed to the continuing boom in the housing market. the share | rapid gains in house prices. this growth has had to rest on the backs of just a few interest - sensitive sectors β business investment, consumer durables, and housing. from this perspective, it β s not all that surprising that housing markets have been hot. my point is that to offset the β drags β we β ve needed to give the economy a strong dose of stimulus β which inevitably boosted the housing sector. as i β ve discussed, if a sizable reversal in house prices were to occur, it probably would affect the economy mainly through the lagged effects of declines in wealth and increases in interest rates, rather than through widespread financial disruptions. this would give monetary policy time to react to any resulting economic weakness by lowering interest rates. in addition, the magnitude of the potential house price overvaluation may be only around half that of the earlier stock market overvaluation. in conclusion, policy still appears to be somewhat accommodative, and given the recent inflation performance and the dwindling of slack, it makes sense to continue the process of removing that accommodation. i hope i β ve provided you with some insight on the issues that i think are important to focus on as the fed goes through this process. i look forward to taking your questions. this bis review is available on the bis website at www. bis. org. | 1 |
estimates on a sample of the largest banks suggest that once fully implemented, the cet1 ratio will be lower by around 70 basis points, as against the eba β s estimate of 140 points for the leading european banks. the impact would mostly derive from the treatment of operational risk ; the rule on the minimum requirement for banks that use internal models ( known as the β output floor β ) is expected to have a very limited impact in italy. this could be reduced further by the steps that the banks will certainly take to adapt to the new rules during the long transitional period prior to full implementation. banks must make good use of the time available before the introduction of the new rules. measures to strengthen their balance sheets and improve profitability are fundamental, continuing the action undertaken in recent years. in the first three months of this year, the profitability of italy β s largest banks improved, continuing the trend observed in 2017. for the significant institutions, annualized roe rose to 8. 4 per cent, from the 5. 1 per cent recorded in the first quarter of last year ; the cost - to - income ratio fell by around 5 percentage points, to 65 per cent. the average profitability of the less significant institutions is lower : in 2017, the last period for which complete data are available, their roe amounted to 1. 3 per cent, against 4. 7 per cent for the significant institutions. for all the banks, and especially for small banks, successfully meeting the challenges posed by stronger competition, regulatory pressures and new technologies, requires incisive action to increase operational efficiency. the reform of the mutual banking sector, which i mentioned earlier, is one of the responses to these challenges. but undoubtedly more must be done, especially in relation to technological change. with the advent of fintech, marking the marriage of high tech and high finance, the framework of reference is changing rapidly. new players are creating alternative and more efficient business models, often superseding functions traditionally carried out by banks, such as the provision of payment, asset management and securities investment services. based on market analyses, traditional banks believe that, over a five - year horizon, a number of their activities, corresponding to around a quarter of profits, are at risk. compared with the new entrants, incumbent banks enjoy advantages stemming from stable relationships with customers and the wealth of data collected over the years. by exploiting these advantages better through the use of new technologies, they can expand the range of services offered, improve | creditworthiness of firms, impairing the quality of bank loans. it would be illusory to think that the link between sovereign risk and banking risk can be broken with measures that push banks to drastically reduce their direct exposures. moreover, in the most difficult years of the crisis, italian banks, like those of other countries, swam against the tide, and made a profit, buying government bonds when tensions rose and yields increased. when the conditions changed, they began to sell them. last may, italian banks held slightly more than β¬300 billion worth of domestic government bonds in their portfolios, compared with the β¬400 billion reached at the beginning of 2015. loan quality the continued economic growth has led to a gradual improvement in the quality of bank credit. the ratio of non - performing loans, net of loan - loss provisions, to total loans system - wide, which had fallen by about 4 percentage points between the peak of 2015 and the end of last year, decreased by almost 1 percentage point more in the first quarter of this year, to stand at 5. 3 per cent. the total amount of net npls fell to just over β¬110 billion, down from β¬200 billion at the end of 2015. about half of the amount comprises exposures classified as unlikely - to - pay, some of which could become performing again. for the less significant banks the share of all npls ( 7. 1 per cent ) remains higher than that recorded by the significant banking groups ( 5. 1 per cent ). the development of the secondary market is making an important contribution to reducing the number of npls. this market in turn benefits from the state guarantee on senior debt issues deriving from the securitization of bad loans ( gacs ). the gross value of the bad loans securitized under the gacs system was approximately β¬32 billion and it is expected to increase considerably in the months to come. in the last few days, the government has asked the european commission to extend the possibility of using gacs beyond the current deadline of september. the improvements made thus far should be consolidated and strengthened. more active npl management on the part of banks remains fundamental, including in the light of the regulatory changes proposed by the european commission and the new supervisory expectations of the single supervisory mechanism supplementing the guidelines on npl management published in march 2017. the strategies proposed by the banks will be assessed on a case - by - case basis as part of ordinary supervisory activity and | 1 |
β particularly on the part of pension funds, which needed to hedge their long - term commitments. in november and december 2008, the danish government took the extraordinary step of issuing 30 - year bonds. as a result, danish pension funds restructured their portfolios from foreign to domestic securities. this supported the krone. last β but not least β it was equally important that the government, at short notice in early october 2008, decided to issue a guarantee for all deposits with and loans to danish banks. it is impossible to say exactly what the impact of this measure, known as bank rescue package i, was. non - residents withdrew krone deposits totalling dkk 70 billion from danish banks in october 2008. this package contributed strongly to keeping capital outflows during the crisis at a manageable level. timing and determination were essential elements in terms of ensuring confidence in danish banks. as i see it, the danish banks would have been far worse off without this guarantee, and danmarks nationalbank β s ability to keep the krone stable might have been called into doubt. but while the government provided bank guarantees totalling around 2. 5 times denmark β s gdp, the potential claims on the foreign - exchange reserve increased. if a bank failed, the guarantee might be called in at short notice. if loans had been raised abroad, this would have affected the foreign exchange reserve. therefore, the need to increase the reserve was even more important. the turning point in the krone crisis came in late october, when stabilisation of the krone market enabled us to buy back foreign exchange. large scale buy - backs took place from 4 november 2008. partial normalisation of the situation made it possible for us to follow suit when the ecb lowered its interest rates by 0. 5 per cent on 6 november. in december, the monetary - policy spread gradually narrowed by a total of 0. 75 percentage point. conclusion ( chart 8 ) during 2009, danmarks nationalbank gradually reduced interest rates so that the spread to the euro area narrowed again. today, the monetary - policy spread is only 5 basis points. but the actual money - market spread is around 50 basis points, mainly due to the substantial amount of excess liquidity in the euro area. over the last year, danmarks nationalbank has built up the foreign exchange reserve to a much higher level than it used to be. it now exceeds dkk 400 billion. the dollar swap line with the federal reserve has expired. so, in | growth. there is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. these uncertainties were heightened by market confusion earlier this year over china β s exchange rate policy. a second concern relates to the prospects for commodity prices, particularly oil. for the united states, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. but the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. in the case of countries reliant on oil exports, the result might be a sharp cutback in government spending ; for energy - related firms, it could entail significant financial strains and increased layoffs. in the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the global economy. if such downside risks to the outlook were to materialize, they would likely slow u. s. economic activity, at least to some extent, both directly and through financial market channels as investors respond by demanding higher returns to hold risky assets, causing financial conditions to tighten. but at the same time, we should not ignore the welcome possibility that economic conditions could turn out to be more favorable than we now expect. the improvement in the labor market in 2014 and 2015 was considerably faster than expected by either fomc participants or private forecasters, and that experience could be bis central bankers β speeches repeated if, for example, the economic headwinds we face were to abate more quickly than anticipated. for these reasons, the fomc must watch carefully for signs that the economy may be evolving in unexpected ways, good or bad. risks to the inflation outlook the inflation outlook has also become somewhat more uncertain since the turn of the year, in part for reasons related to risks to the outlook for economic growth. to the extent that recent financial market turbulence signals an increased chance of a further slowing of growth abroad, oil prices could resume falling, and the dollar could start rising again. and if foreign developments were to adversely affect the u. s. economy by more than i expect, then the pace of labor market improvement would probably be slower, which would also tend to restrain growth in both wages and prices. but even if such developments were to occur, they | 0 |
, the pandemic created unprecedented disruptions to global supply chains. second, the - 8pandemic is having a long - lasting effect on labor force participation rates. third, the credibility of the central bank is higher now than it was in the 1960s and 1970s. fourth and most importantly, unlike in the late 1960s and 1970s, the federal reserve is addressing the outbreak in inflation promptly and forcefully to maintain that credibility and to preserve the β well anchored β property of long - term inflation expectations. finally, economic models are important tools but need to be used with careful interpretation and judgment when history does not speak to the current situation. sound decisionmaking requires that their findings be complemented with additional analytical tools, including careful scrutiny of real - time data. thank you! - 9references ball, laurence ( 1994 ). β what determines the sacrifice ratio? β in n. gregory mankiw, ed., monetary policy. chicago : university of chicago press, pp. 155 β 93. cecchetti, stephen g., michael e. feroli, peter hooper, frederic s. mishkin, and kermit l. schoenholtz ( 2023 ). β managing disinflations, β paper presented at the u. s. monetary policy forum, new york, february 24. kohn, donald ( 2008 ). β lessons for central bankers from a phillips curve framework, β remarks given at the federal reserve bank of boston β s 53rd annual economic conference, chatham, mass., june 11, https : / / www. federalreserve. gov / newsevents / speech / kohn20080611a. htm. macklem, tiff ( 2022 ). β opening statement before the standing senate committee on banking, trade and the economy, β ottawa, ontario, november 1, https : / / www. bankofcanada. ca / 2022 / 11 / opening - statement - 011122. powell, jerome h. ( 2022a ). β nomination hearing, β testimony before the committee on banking, housing, and urban affairs, u. s senate, washington, january 11, https : / / www. federalreserve. gov / newsevents / testimony / powell20220111a. htm. β β β ( 2022b ). β monetary policy and price stability, β speech delivered at β reassessing constraints on the economy | since the peak in july, the price of food has fallen by 10 % and the price of crude oil has fallen by over a quarter, and that is consistent with other indicators that point to a slowing in growth in both emerging and advanced economies. that good news on commodity prices has been offset somewhat in the uk by a falling exchange rate. sterling has been trading at around 1. 8 against the us dollar β a year ago it was 2. 0. but the same arithmetic applies : such price level shocks need have no long - term impact on the inflation rate. in the medium term the real upside risks to inflation lie at home β in whether we see β second round β rises in wages and prices in the domestic economy. it is to counter those pressures that the mpc have judged it necessary over the last year for growth to slow and create a margin of spare capacity in our economy. that makes it more difficult for companies to raise prices and puts more pressure on them to restrain their costs. it also re - emphasises our determination to get inflation back to the 2 % target and thus influences the expectations of financial markets, price setters, wage negotiators and households generally. and expectations themselves have an important impact on inflation. broadly, the higher households β expect inflation to be, the less they are likely to save today. inflation expectations also shape workers β wage demands as they try to protect their standard of living. and companies β expectations will shape the prices they set as well as their willingness to concede cost increases. we know from the inflations of the 70s, 80s, and early 90s that raising interest rates will in time bring inflation down, even when expectations of future inflation are high. but we also know how painful that process is. it works through the increased threat of bankruptcy and unemployment. that forces a change in peoples β behaviour and their hearts and minds and expectations follow. conversely, the more confident people are that inflation will fall back the less we have to rely on slowing the economy to force them to hold prices and wages down. that is why the risk of inflation expectations drifting up has been such a central concern of the mpc over the last year. in my view it has been particularly important through recent months, when each forecast has been higher than the one before and each inflation figure has exceeded the earlier forecast, not to confuse the central message that we will set policy to bring inflation back down to target. we have seen households β near - term expectations of inflation rise | 0 |
alan greenspan : the september 11 tragedy and the response of the financial industry remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the american bankers associationaβ¬β’s virtual annual convention ( taped statement ), 23 october 2001. * * * i am pleased to speak once again to an american bankers association convention. this conference was rescheduled in respect for the loss of our colleagues and fellow citizens in the tragedy of september 11. but the fact that the conference is going forward in cyberspace is a testimony to american perseverance, to our technology, and to our flexibility. it is a metaphor for the ability of our economy to circumvent difficulties and innovate around obstacles and - - most of all - - for our decentralized and diversified economic structure. our financial system has exactly such a structure. it still has thousands of banks, with hundreds of foreign competitors, including some of the largest banks in the world. in addition, market developments, regulatory relief, and, most recently, legislative reform have ensured that the banks, the insurance companies, the securities firms, the finance companies, and the host of other participants, from pension funds to hedge funds and from trusts to mutual funds, are all, in effect, in each other's business. and this listing does not even take into account a capital market where lenders and borrowers deal directly and where increasingly the instruments and risks originated by financial intermediaries come to rest. these activities could be done much more efficiently in a technology sense by far fewer entities, but our seemingly crazy quilt structure creates a different kind of efficiency - - one that emphasizes constant cost minimization, innovation, and flexibility. and that is exactly what we saw a couple of weeks ago, when literally within hours of the attack on the world trade center - - with many of the participants still grieving and with the loss of extraordinary personnel and resources - - our financial system was finding ways to return to operation. some examples will clarify this creativity of our system. with borrowers and lenders uncertain whether the financial markets were open and with communications among issuers, their banks, and the settlement system impaired, there were difficulties in rolling over maturing commercial paper. the resulting shortfalls in the coverage of billions of dollars of maturing paper were managed by rolling fails into the next day's settlement or by drawing on bank lines, causing bank assets to balloon for a few days. similarly | , disruptions in the connectivity of communication lines and the shift to backup sites caused delays in payments and settlements, with billions in funds building up at a small number of participants unable to send out funds covered by similar amounts of federal reserve open market operations, overdrafts, and loans to those who could not receive. to facilitate the channeling of dollar liquidity to foreign financial institutions operating in the united states and to meet all appropriate demands for dollar liquidity, thirty - day currency swap lines were arranged with major central banks, again in record volume. fed and bank balance sheets ballooned with the maldistribution of reserves, and domestic and foreign operations, but there was no fear of either credit or liquidity risk. fed funds borrowers and lenders, forced to deal directly because brokers were temporarily unavailable, quickly reached agreements to trade at the targeted federal funds rate. similarly, in response to losses of personnel and equipment at some participants, dealers agreed voluntarily to extend settlement in the treasury market to t + 5. crucially, lenders - - banks in particular - - stepped up to meet their commitments, real and implied, to avoid the disruptions that were a large part of the terrorists'objective. the list of adjustments and innovations goes on and on. but the point is clear that we are blessed with a financial system that is creative, that is flexible, that is innovative. banks - - including the central bank - were there when they were needed and did what was required with dispatch. we should be proud of the banking system's role in minimizing the economic fallout of that tragic day. | 1 |
invest their funds safely by making deposits and there are those who want to increase their investment profits by taking certain risks. it is necessary to enhance the capability of financial and capital markets as a whole to convert a variety of fund management needs into economic growth, while utilizing each characteristic of indirect and direct finance. iii. three conditions required for securities markets based on what i have said, now, i will focus on the securities markets in which analysts are directly involved, and from the viewpoint of strengthening power that creates economic growth and developing securities markets themselves, i will mention three conditions for a desirable form of markets. first, a high degree of efficiency and fairness. securities markets can function efficiently only after proper pricing for risks and returns is made. therefore, it is deemed desirable that many investors who have a variety of evaluation criteria should participate and that the markets should be highly liquid. to that end, first of all, offers of versatile solutions for each fund raiser and fund investor as well as securities trading in the secondary markets have to be made at low costs, namely, the markets need to be a place of efficient financial transactions. in addition, in order for the markets to be a place in which many investors feel safe in participating, the fairness of transactions based on proper governance and high ethical standards has to be guaranteed. in japanese securities markets, especially after the burst of a bubble, various kinds of system reform have been made in order mainly to achieve a sound competitive environment. however, securities markets have recently been exposed to harsh global competition. in order to maintain the international competitiveness of japanese securities markets, it is critical to unflaggingly implement efforts to enhance the markets β efficiency and fairness in the future. in that regard, a move to establish asia β s number one stock exchange by merging the tokyo stock exchange and the osaka securities exchange is highly expected as a new start of japanese securities markets. second, the existence of investors who aim at increasing their medium - to long - term returns. of course, i do not deny that aiming at short - term trading profits is one of investment strategies or that it enhances market dynamism and liquidity. however, not only to chase short - term profits but, for example, for investment institutions, including pension funds and bis central bankers β speeches insurance companies, to make utmost efforts to raise medium - to long - term returns will enhance securities markets β function of selecting promising firms and projects and eventually contribute to achieving sustainable growth of japan β s economy. | securities analysts stimulating each other from different perspectives, β production of information β in the markets as a whole will be elevated both in terms of quality and quantity. what i especially expect is the β production of information β that contributes to exploring growing companies. although the growth potential of japan β s economy has been declining, if looked at individually, there are many firms with high profits and growth, and there will be further more potentially growing firms. finding out such promising investment opportunities one by one and nurturing them, while it seems a roundabout approach, will offer a potent breakthrough for eventually increasing growth potential of japan β s economy. second, maintaining full communication with firms. while the role of securities analysts is basically to provide investors with analysis on firms, cherishing connection with firms that are the subject of analysis eventually means that securities analysts will ask those firms their unique questions. namely, securities analysts can contribute to the process, in which firms constantly develop their business strategies while incorporating investors β perspectives. in other words, securities analysts play a valuable role as an interactive connecting point between firms and investors. third, playing an active role as global human resources. while currently a slowdown in emerging economies has become somewhat protracted, those economies have high bis central bankers β speeches growth potential in the medium to long term and, on the financial front, it is likely that especially asian securities markets will expand substantially. just like today β s conference, information exchange and interaction of people at a global level will become increasingly active in the future. in order to improve the attractiveness of japan β s securities markets and attract overseas investors, and also to utilize expanding overseas investment opportunities in the asset formation of japanese households, i expect securities analysts to play an active role with the key words β asia β or β global. β concluding remarks from the perspective of strengthening growth potential of japan β s economy, today i have talked about the importance of the role securities markets and securities analysts play. i think the aforementioned term β production of information β illustrates how financial business is a knowledge - intensive industry. in japan β s economy, in which the labor force has been declining in association with aging, increasing the growth rate of added - value per capita is a necessary condition for economic growth. if the typical knowledge - intensive industry of financial business enhances the ability of creating added - value and grows, it will itself contribute to strengthening the growth potential of japan β s economy. i have high hopes that securities analysts, while holding their strong intellectual curiosity and sen | 1 |
these issues into consideration, the snb decided in august 2012 not to issue an immediate proposal to the federal council for activation of the ccb. it will reassess the situation regularly. the second key question pertaining to the functioning of the ccb is whether it is an effective instrument to strengthen the resilience of the financial system and thus help to limit negative spillovers ( slide 7 ). the impact of higher capital ratios and more provisions on the resilience of banks is self - evident. this is also the case from a system - wide perspective. to assess the effectiveness of the ccb in strengthening resilience, we can draw some lessons from historical experience, namely the swiss real estate crisis in the early 1990s. internal calculations suggest that, had the proposed ccb regime been in place in the run - up to that crisis, the resilience of the system as a whole would have increased significantly. from an aggregate perspective, this additional capital would have absorbed a large portion of the losses that were reported as a result of the crisis. the third key question is : to what extent the ccb is able to contain the build - up of excesses? imf ( 2011 ), drehmann et al ( 2011 ). namely, domestic mortgage volume indicators and domestic residential real estate price indicators. for a detailed description of this principle of β guided discretion β, cf. snb ( 2012 ). both measures are designed to have a dampening effect on house prices and mortgage volume momentum. the former will be effective from january 2013, the latter already from july 2012 with a transition period until november 2012. bis central bankers β speeches here, international empirical evidence suggests that tighter capital requirements have, on average, a dampening impact on credit volume. this impact of tighter capital on lending is greater when the implementation period is shorter. 17 moreover, the increase in capital requirements may lead to a significant reduction in the likelihood of a systemic crisis. 18 expectations concerning the effectiveness of leaning against the credit cycle must remain realistic, however. there is no guarantee that activating the ccb will fully eliminate future imbalances in the swiss mortgage and real estate markets. inherent uncertainty regarding the strength of its impact and hence the appropriate calibration remains. moreover, if banks hold significant capital cushions even before the ccb is activated, the desired countercyclical effect on credit growth may be weakened. we can note, however, that even if the ccb has no effect on aggregate | ). bis central bankers β speeches blinder, alan s. and reis 2005 : understanding the greenspan standard. prepared for the federal reserve bank of kansas city symposium, the greenspan era : lessons for the future, jackson hole, 25 β 27 august 2005. cgfs 2010 : macroprudential instruments and frameworks : a stocktaking of issues and experiences. crowe, christopher et al 2011 : policies for macrofinancial stability. options to deal with real estate booms. imf staff discussion note, sdn / 11 / 02. danthine, jean - pierre 2012 : reconciling price stability and financial stability. speech held at the alumni conference, university of zurich, 24 january 2012. danthine, jean - pierre 2011 : after the crisis : improving incentives in the financial sector. speech held at the founding event of the school of finance, university of st. gallen, 20 may 2011. de nicolo, gianni et al 2012 : externalities and macroprudential policy. imf staff discussion note, sdn / 12 / 05. drehmann, mathias et al 2011 : anchoring countercyclical capital buffers : the role of credit aggregates. bis working papers no 355. haldane, andrew g. 2010 : the $ 100 billion question. comments at the institute of regulation & risk, hong kong, 30 march 2010. imf 2011 : global financial stability report 2011. grappling with crisis legacies. swiss national bank 2012 : implementing the countercyclical capital buffer in switzerland. concretising the swiss national bank β s role. fact sheet, june 2012. white, william 2009 : should monetary policy β lean or clean? β federal reserve bank of dallas working paper no. 34. bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches bis central bankers β speeches | 1 |
a deterioration in the prospects for the economy, and notably the housing market ) and supply - side factors ( such as increasing funding difficulties for banks ) ( slide 1 ). incidentally, these developments masked significant cross - country heterogeneity, as some countries saw an increase in flows supported by government measures aimed at the housing market. the annual growth rate of loans to non - financial corporations declined as well, reflecting particularly weak quarterly flows ( slide 2 ). there was considerable cross - country heterogeneity in this case too, with net redemptions taking place mainly in certain countries and loans to non - financial corporations continuing to grow in others. the worrisome picture of monetary developments was confirmed by the results of the bank lending survey for the fourth quarter of 2011. euro area banks tightened credit standards compared with the previous quarter for both loans to non - financial corporations and loans to households, and to a lesser extent for loans for consumer credit. furthermore, survey participants expected a further tightening of credit standards in the first quarter of 2012. even bis central bankers β speeches if the tightening was slower than during the 2007 β 2008 financial turmoil, it was starting from considerably tighter credit standards. although it is always tricky to disentangle supply - side from demand - side factors, banks explained their changes in credit standards mainly by primarily referring to increased funding costs and balance sheet constraints, which were compounded by a rapidly deteriorating economic environment. the funding situation of euro area credit institutions worsened noticeably in the second half of 2011, as shown by the rise in withdrawals of deposits held by non - euro area residents with euro area banks and difficulties in issuing longer - term debt securities. this caused banks to make greater recourse to eurosystem operations. the decline in credit to the private sector was accompanied by an increasing reluctance on the part of the euro area private sector to invest in financial assets ; it severely hampered banks β access to financing via the secured money market, due to an increase in haircuts and a deterioration of the available collateral. while market - based funding was becoming ever scarcer for banks in the euro area ( as investors were growing increasingly nervous about the escalation of the sovereign crisis ), banks were also facing regulatory and market pressures to strengthen their capital position. in short, back in december 2011, even though there was significant cross - country heterogeneity, the overall picture was rather gloomy. there were clear signs that supply - side factors were making banks | bank of japan β s may review of monetary and economic trends in japan bank of japan, monthly economic review, 20 / 5 / 97. japan β s economy continues on a moderate recovery trend despite some fluctuations caused by the rise in the consumption tax rate, with private demand showing underlying firmness. with respect to final demand, public - sector investment has decreased, and housing investment has declined, reflecting the reversal in the stepped - up demand which took place ahead of the rise in the consumption tax rate. however, net exports have continued to rise and business fixed investment is increasing steadily. despite the reversal in the stepped - up demand caused by the consumption tax rate hike, the recovery in personal consumption has not been hindered, given the moderate but firm recovery in labor market conditions and income formation. in these circumstances, industrial production has been firm to recover the level of inventories which declined owing to the temporary surge in demand ahead of the rise in the consumption tax rate. meanwhile, prices have stopped declining, and growth in monetary aggregates has continued at around 3. 0 per cent. with regard to personal consumption, outlays for travel have continued to increase moderately. with respect to goods, sales particularly in expensive goods surged in march 1997 ahead of the rise in the consumption tax rate, followed by a decline in april as its reaction. passenger - car sales recorded buoyant two - digit growth year - to - year for six consecutive months between october 1996 and march 1997, but showed a two - digit decline year - to - year in april. although sales of electrical appliances, as well as sales at department stores and supermarkets, rose significantly in march 1997, april figures available for department stores in tokyo are significantly below the previous year β s level. however, the recovery trend in personal consumption do not seem to have been hindered, as labor market conditions as well as household income formation are improving steadily, albeit moderately. among leading indicators of business fixed investment, machinery orders have increased steadily. construction floor area has also continued to recover moderately. with respect to housing investment, housing starts in terms of the seasonally - adjusted annual rate reached a significantly high level in the fourth quarter 1996, partly reflecting the stepped - up demand ahead of the rise in the consumption tax rate. later, they declined as the surge in demand reversed. regarding public - sector investment, the amount of public works contracted has quite recently picked up somewhat, reflecting orders included in the supplementary budget for fiscal 1996. however, public - sector | 0 |
us growth portends a softening elsewhere, or whether other regions are big enough and internally vibrant enough to carry on growing reasonably well in the face of the us slowdown. to a large extent this will hinge on how widely the slowing extends within the us economy itself, and how long it lasts. to date, it has been largely confined to a reduction, albeit a pretty large one, in construction of dwellings, after a period of unusually strong activity in that sector. people have been asking whether it will spread further, especially given the recent travails in the sub - prime mortgage market, which had at the peak accounted for about 15 per cent of mortgage loans made to us households. a decline in credit standards during 2006, as lenders sought to keep business growing in the face of the slowing demand for loans and a change in trend in house prices, has since resulted in a rise in loan arrears. in turn, this has resulted in a blow - out in spreads on the low - rated tranches of the securities issued by some of the us lenders active in this market, and a number of loan originators in the sub - prime space went out of business. there was understandably a concern that this sequence of events could prompt a pulling back by lenders for housing generally, which would deepen the downturn in construction. there was also a possibility that there would be a more widespread reassessment of risk and a tightening in credit across the us economy, so dampening growth more generally. but so far, the us economy and financial system seem to be absorbing the sub - prime problems pretty well. there has been a significant tightening in credit standards in the sub - prime area, as there had to be, but no widespread withdrawal by lenders more generally. while the us housing sector has yet to show much convincing sign of a pick - up in construction, the softness in the us economy does not seem to have spread to consumer spending, as incomes have been supported by ongoing gains in employment. that does not necessarily mean we have seen the last of concerns about us weakness but, at the moment at least, adjustments to the growth outlook are at the margin, rather than amounting to a wholesale re - think of economic prospects. it is also noteworthy, and very important from a global perspective, that underlying inflation appears to have come down in the us somewhat over the past six months, having drifted higher for the previous six months. low and stable inflation has | glenn stevens : overview of the australian economy and future challenges opening statement by mr glenn stevens, governor of the reserve bank of australia, to the house of representatives standing committee on economics, canberra, 26 november 2010. * * * when we last met with the committee in february this year, it was becoming clear that the recovery in the global economy was proceeding faster than many had expected. it was also clear that the strongest performance was in the emerging world, while recoveries in countries that had been at the centre of the financial events of 2007 and 2008 were relatively subdued. global financial markets had continued to improve, but were paying close attention to the rise in sovereign debt in a number of countries. at that time, people were talking about an expansion in global gdp of something like 4 per cent in 2010. as it turns out, it looks like the outcome will be stronger than that : current estimates for the year are about 4ΒΎ per cent, which is above trend. the pattern of growth is still rather uneven. the additional strength has been concentrated in the emerging countries, with growth in china and india running at a pace of around 10 per cent in 2010. in contrast, growth of about 2Β½ per cent for the g7 group, after a contraction of around 3Β½ per cent in 2009, will leave a considerable margin of spare capacity and particularly of unemployed labour. financial markets and policymakers have maintained, and indeed increased, their focus on issues of sovereign debt sustainability. first greece, and now ireland have sought financial assistance from european partners and the imf, after a change in economic circumstances and a large rise in market borrowing costs left authorities with little other option, even with deep cuts to spending. across continental europe and the united kingdom, governments are embarking on a path of fiscal consolidation, in order to put public finances on a sounder footing in the face of increased obligations and reduced revenues. these programs will unavoidably have some short - term dampening effects on economic activity, which will likely become clearer during 2011. but the scope of alternative possibilities open to the governments concerned is really rather limited. in this environment it is no surprise that the major central banks are mostly maintaining very low interest rates and in some cases increasing the sizes of their already expanded balance sheets via asset purchases. these actions are designed to impart some further stimulus through reducing long - term interest rates even further or via effects on private - sector balance sheets. yet at the same time many other countries have moved to tighten | 0.5 |
christopher kent : foreign investment in residential real estate opening statement by mr christopher kent, assistant governor ( economic ) of the reserve bank of australia, and mr david orsmond, deputy head of economic analysis of the reserve bank of australia, to house of representatives standing committee on economics inquiry into foreign investment in residential real estate, sydney, 27 june 2014. * * * thank you, chair, for the opportunity to discuss this topic with you today. as summarised in our submission, 1 foreign residential investment has been a feature of australia β s housing sector for many decades. foreign demand for housing has supported the local construction industry, while foreign - based developers provide access to alternative sources of financing and add a degree of competition to the sector. some recent housing purchases have also been associated with the increase in the number of families, particularly from asia, that want to educate their children in australia. more broadly, foreign residential demand in australia is linked to the rise in income and wealth globally, but particularly in asia, which is adding to business opportunities as our economy becomes more integrated with others in the region. this is welcome and to be expected. an underlying theme in much of the commentary has been whether foreign residential investment has increased the demand for australian housing by more than it has increased supply, and hence whether it has led to an increase in housing prices, especially for first home buyers. the data clearly show an increase in the level of approvals for foreign residential purchases over time, but it is difficult to know how much this has boosted net demand for australian housing. while varying a bit from year to year, the data published by the foreign investment review board ( firb ) suggest that foreign purchase approvals have been fairly low as a share of national housing turnover. specifically, the firb data suggest that the value of foreign residential approvals has generally been around 5 β 10 per cent of the value of national housing turnover. using several assumptions, we estimate that the number of foreign approvals has been around half of that range. in its submission to this committee, firb included data covering the first three quarters of this financial year, which show a rise in approvals, especially for new dwellings. nonetheless, it is important to remember that the share of actual residential purchases by foreign and temporary residents is likely to be much lower than the firb data suggest because not all approvals lead to a purchase. this point is outlined in our submission and in a recent article published in the bank β s bulletin. | 2 it is worth emphasising that the purchase of a property by a foreign citizen or temporary resident may not contribute one for one to net housing demand in australia. for instance, there would be little effect on net demand if the property purchased is used to house foreign students who would otherwise have needed to rent during their stay here. similarly, net demand for housing would be little changed if an investment property is subsequently rented out. there is no comprehensive information on the magnitude of these types of transactions. so, while it seems likely that foreign residential purchases have added somewhat to net housing demand in australia, there is no way of knowing the exact extent to which this has been the case. whether an increase in net housing demand β be it from foreign or domestic sources β leads to higher housing prices depends on the responsiveness of supply. this subject has been see rba ( 2014 ), β submission to the inquiry into foreign investment in residential real estate β, 9 may. see gauder m, c houssard and d orsmond ( 2014 ), β foreign investment in residential real estate β, rba bulletin, june, pp 11 β 18. bis central bankers β speeches especially topical of late, with housing prices nationally rising by close to 10 per cent over the past year. the rise in prices has primarily reflected increased housing demand from australian residents and citizens, partly owing to low interest rates. the supply of housing is responsive to a rise in housing demand but, given the time needed to plan and build new housing, this typically occurs with some lag. however, several factors can accentuate this lag, including : β’ a shortage of well - located land and geographical constraints in our capital cities β’ the complexity of the planning and approval process, which adds to the time and costs of new housing developments β’ concerns of existing residents in regard to new development projects in their vicinity. these are not easy issues to address, although it is widely agreed that an appropriate balance needs to be struck if housing is to be provided at a reasonable cost. through the bank β s business liaison, we hear from housing market participants that impediments to increasing the supply of housing in some greenfield areas have eased in recent years. also, there has been interest in converting some of the older office buildings in central business districts into residential use, which may ease the shortage of land in highly sought after areas. however, our contacts also report that more could be done to increase the responsiveness of housing supply to demand. | 1 |
, central banks cut off the negative loop between financial markets and the real economy. we have certainly made full use of our experience in the global financial crisis. the second feature is the coordination of fiscal and monetary policies. while central banks provided liquidity lifelines, governments strengthened safety nets such as income - support and job - retention measures. the division of labor between fiscal and monetary policies has generated synergy effects and contributed to preventing the economy from sliding into a free - fall. looking to the future, the challenges facing policymakers will likely change. the initial phase has been liquidity support. this will likely change to solvency and corporate viability problems, and then to resource re - allocation in response to structural changes in the economy. at the same time, policymakers face the additional challenges of the economic inequality that has become even more apparent during this health crisis, and the response to increasing worldwide concerns over climate change. likewise, the nature of the policy responses will also shift from temporary first aid measures to medium - to long - term structural policies. to one degree or another, this set of challenges is related to the stability of inflation, the real economy, and the financial system. in this sense, we are seeing a widening in the scope of issues that central banks should take into account. iv. adapting to the new normal so far, i have touched on the economic perspectives and on policy challenges. these factors will in part shape the post - pandemic new normal, although exactly how remains to be seen. one thing for certain, however, is that the world we live in will not be the same as that before the pandemic. after more than a year of living with the pandemic, we have seen a drastic change in the way our society works. in particular, the expansion of digital technology has led to a fundamental transformation in society, in ways that we could not have imagined. as i noted earlier, the shift from in - person to online activities has taken place in all aspects, such as of work, business, education, and health. expansion in the areas of remote working, online shopping, remote learning, and telemedicine is just a few examples. i myself have participated in many online 2 / 3 bis central bankers'speeches international meetings over the past year. i have benefited considerably from digital technology that allows me to reach people in different places all over the world, all at the same time. indeed, it is thanks to the online format of | . the second trend is an increase in economic inequality. the impact of the pandemic appears to be uneven and regressive, as the negative impact has been more tilted toward low - income earners and young workers. there are therefore concerns over an increase in income and wealth inequality. the third trend is an increase in debt. be it public or private, borrowing is essential to smooth economic activity and to mitigate the negative impact of the pandemic. as a result of the necessary response to tackle the pandemic, debt has been mounting in many countries. the trio of increased saving, inequality, and debt is considered to be intertwined in practice and may theoretically reduce the natural interest rate. academic research on this topic is already underway. further research and discussion is to be encouraged to promote our understanding of the new economy that will emerge after the recovery from the health crisis. b. structural change 1 / 3 bis central bankers'speeches besides these three trends, another important area to consider when we look at the postpandemic economy is the underlying structural changes emerging in technology and industry and the accompanying changes in the behavior of households and firms. perhaps the most important change we have seen during the health crisis is the wide and rapid spread of digitalization. many areas of the economy have been affected by the shift from in - person to online activities. while the movement of people across national borders has almost completely stopped, digital technology has removed geographical restrictions and eased the potential economic downturn caused by the health crisis. new businesses that use digital technology have been emerging in a wide range of areas. looking ahead, the important point is whether these structural changes lead to a wide - spread increase in productivity in the economy, and whether the fruits of growth are widely shared throughout the society. advances in digitalization are expected to enhance productivity and benefit a wide range of individuals and firms by promoting innovation and efficient resource allocation. on the other hand, it is necessary to pay attention to the possibility that, if the fruits of growth are concentrated in a small fraction of society and inequality increases, it may be difficult to achieve inclusive economic growth. iii. policy challenges next, i would like to review the policy challenges facing central banks. there are two features common to the policy responses implemented during the pandemic. the first feature is the speed of the policy responses. major central banks immediately provided massive amounts of liquidity in response to the dislocations in domestic and foreign financial markets. by doing so | 1 |
##s with each bank planning to use the irb approach have begun so that problems can be identified and resolved, while the preparations of banks intending to use the standardized approach will be reviewed at a later stage - sometime before the end of 2006. an important issue for the bank of greece is to evaluate not only the technical aspects of the banks β internal systems and the methodologies used to validate their output, but also to ascertain whether the output of these systems is utilized in managerial decision - making in such areas as loan approval and pricing, provisioning, and capital allocation. at this stage it is difficult to determine the overall impact of basel ii on the total capital requirements of the greek banking sector. the impact will depend not only on the alternative approaches adopted by the banks, but also on the composition and quality of their assets, both of which are affected by economic conditions. however, one limited preliminary indication was provided by the result of the 2003 quantitative impact study. for the 6 greek banks that participated using only the standardized approach at that time, there was a 7. 5 % net increase in the combined capital requirement for credit and operating risk compared to the corresponding requirement under the existing framework ( a 2. 5 % decrease of the requirement for credit risk and a 10 % increase for operating risk ). pillar ii on supervisory review requires the conduct of risk - based supervision and the existence of detailed systems and policies at each bank to determine, maintain and allocate economic capital in accordance with its risk profile. this increases the pressure on supervisory resources as well as banks. in greece, supervision has traditionally focused more on examining the accuracy of supervisory returns submitted by the banks, on a point - in - time evaluation of the quality of loan portfolios, and on the technical calculation of capital requirements to cover credit and market risk. in recent years, however, increasing emphasis has been placed on the assessment of internal control and risk - management systems, taking into account the risk profile of each bank. in this respect, the bank of greece found it necessary to impose a minimum capital adequacy ratio above the statutory minimum of 8 % on some banks. to enhance its ability to conduct risk - based supervision, the bank has taken steps to improve the skills of existing supervisory staff through specialized training and has also recruited personnel with skills in quantitative risk analysis. the banks have also strengthened their risk management units, but, in order to successfully implement pillar ii further efforts will be required. pillar iii enhances market discipline | relaxing existing restrictions and preconditions β that allow, inter alia, the single resolution fund to contribute only after 8 % of total liabilities and own funds have been written down to absorb losses of failing banks β could also facilitate the use of funds already in place. 2. second, financial stability concerns must have an equal weight in the management of crises. the potential use of deposits to absorb losses or recapitalize failing banks merely provides incentives for national authorities to avoid intervention or add to the plethora of national exceptions that seek to bypass the framework. policy makers must ask themselves whether the reluctance of national authorities to implement the european framework is an attempt to avoid short - term political costs or something more fundamental. i think it is the latter. european citizens seek a safe asset β and that is a bank deposit. this is not just crucial for retail depositors but also for smes which contribute considerably to the backbone of the real economy. 3. third, the framework would benefit from a harmonization of national insolvency frameworks to reduce uncertainty and facilitate a level playing field for creditors when conducting the public interest assessment especially for cross - border cases. the recent case of sberbank where different legal frameworks ( austrian, croatian and slovenian ) came into the frame when ensuring the orderly closure of banks because of nonbank issues ( russian sanctions ) is a case in point. moreover, the common eu administrative insolvency procedure for medium - sized banks could ensure open - bank transfers in liquidation just as the sale - of - business tool works in resolution or us / fdic - style purchase and assumption transactions supported by deposit insurance guarantee schemes can preserve banking assets to the benefit of depositors. 1. before a bank is declared as failing ; 2. in the case of resolution ; 3. to ensure the orderly exit of the bank from the market. once again national legislation in this area is fragmented and the deposit guarantee scheme directive should also aim to put in place a broader and enhanced role for a european deposit insurance scheme, making it fit for purpose for banking union. impediments for cross - border integration in the deposit guarantee schemes directive should also be addressed. my focus on banks and the supervisory / regulatory framework that surrounds it does not imply that attention does not need to be paid to capital markets. however, i consider it paramount that we move banking union forward. from when it was first agreed, eight years on, banking union remains incomplete. this circumstance has not | 0.5 |
dimitar bogov : the needs analysis programme for the national bank of the republic of macedonia address by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the presentation of the needs analysis programme for the national bank of the republic of macedonia in the process of accession to the european system of central banks and the eurosystem to the public, skopje, 22 january 2013. * * * your excellency ambassador orav, honorable director general of the international and european relations at the ecb, mr moss, ladies and gentlemen, distinguished guests, media representatives, it is my great pleasure and honor to greet you today at the national bank of the republic of macedonia for the public presentation of the needs analysis programme for the national bank of the republic of macedonia in the process of accession to the european system of central banks and the eurosystem. first, i would like to thank the eu for the financial assistance provided and to express my special gratitude to the eu delegation in our country for the given support in obtaining the project. also, i would like to express my gratitude to the ecb for the efforts and readiness to carry out the project with the nbrm and to the national central banks of the eurosystem involved in the project for their willingness to contribute to its implementation. taking into account the strategic commitment of our country for eu membership, a few years ago, the nbrm initiated this project of cooperation with the ecb in order to identify the necessary changes in the national regulation, and the needed organization and human resources of the nbrm towards achieving eu central banking standards. the realization of the project, and hopefully, obtaining of a subsequent project for the implementation of the recommendations that will arise from this programme, should enable the nbrm to carry out the process of joining the european system of central banks, and later the eurosystem more easily and efficiently, once the republic of macedonia meets the eu accession criteria. over the past three months, experts from the ecb and the national central banks included in the project, in collaboration with the experts from the nbrm, carried out the activities planned with the first stage of setting the benchmarks according to the european standards and best practices for the operations of the nbrm in ten areas : monetary and exchange rate policy, economic analysis and research, statistics, payment systems, banknotes, accounting, legal services, internal audit, information technology and human resources. as a result of the | good cooperation of the experts, their commitment and dedication to the project, at today β s first meeting, the steering committee adopted the benchmarks in all planned areas, whereby, i am pleased to say that the first stage of the project has been successfully completed. in the forthcoming period, the eurosystem experts should assess the legal framework and the nbrm β s practice in these areas and identify β the gaps β against the agreed benchmarks, to which the nbrm is fully committed and ready for open collaboration. the recommendations and directions that will be presented in the form of the report at the third and final phase, will be the basis for designing the future strategy of the nbrm for strengthening its institutional capacity ladies and gentlemen, the implementation of the european standards and best practices by the nbrm is of utmost importance, as it will not only enable the process of accession of the nbrm to the european system of central banks, but it will also contribute to the providing of bis central bankers β speeches price stability and stability and efficiency of the financial system in the country, in general, which is a precondition for eu membership. rest assured that the management and the employees of the nbrm will address this challenge in a professional manner and will use this project to further strengthen the capacity and credibility of our institution. finally, let me wish all the participants in the project a successful cooperation in their future work, believing that the cooperation with the ecb and the national central banks of the escb will further deepen in the future. i would once again like to thank the eu delegation for enabling the implementation of this project with the hope for further support in providing subsequent project for the implementation of the recommendations, and thank the other guests for their presence. bis central bankers β speeches | 1 |
secular fall in liquidity ratios ( chart 3 ). in the language of insurance, the excess on the central bank policy needs to be raised materially. the fsa β s proposed new liquidity regulation provides a good starting point. 21 second, central bank liquidity insurance frameworks need explicitly to recognise the possibility of drastic times requiring drastic measures. the key is to prevent such drastic action becoming disorderly on the one hand, and permanent on the other. the first can be achieved by having a pre - defined framework which recognises the need for abnormal liquidity provision, whether in size, collateral quality or term. the second can be achieved by setting prices ( fees and collateral haircuts ) for liquidity provision which discourage abnormalities from becoming regularities. the bank of england β s new sterling monetary framework, announced last october, seeks to apply those principles in practice. 22 β’ time - consistent deposit insurance : deposit insurance schemes have been stretched in many countries, to the point of offering blanket coverage of retail deposits. those actions are already damping the risk senses of depositors, who have rationally reacted by seeking out the highest - yielding accounts. this has contributed to a competitive frenzy in the retail deposit market. in the uk, retail deposit rates have risen over the past year from 100 basis points below base rate to 100 basis points above. in general insurance markets, distorted risk choices are guarded against by sharing the risk between insurer and insuree, ex - ante ( through risk - based premia ) or ex - post ( through co - insurance devices ). deposit insurance regimes in some, but not all, fsa ( 2009 ). bank of england ( 2008 ). countries have such features. in the uk, deposit insurance premia are not riskbased. private risk incentives would be better aligned with the public good if the uk β s deposit insurance regime had such a feature. β’ time - consistent capital insurance : in historical terms, capital insurance to the banking system is the newest of the state support mechanisms for banks. partly for that reason, its framework is least well advanced. indeed, give or take, there is no framework at present. whether one is needed will depend importantly on the levels of private capital held in future by the banking system β the degree of self - insurance. that debate has some distance still to travel. but there are complementary measures which could serve a similar purpose. for example, some academics have proposed private sector capital insurance schemes, funded ex | , provided effective resistance to inordinate developments. importantly, signalling vigilance proved instrumental in reaching a common understanding with the markets : the ecb, though observationally inactive, was at any time ready to start action. our policy course was rightly seen as always contingent on the arrival of new information. given the information available each time the governing council meets, the standing assumption in the markets should always be that the policy decision is aimed at positioning the stance of policy appropriately. no history of past monetary policy decisions could ever be taken as an indication of a commitment, on our side, to enact a sequence of interest rate moves in the future. unconditional β or β quasi - unconditional β β talk about future policy would have impaired the difficult balance that we maintained between supportive credit conditions and persistently anchored inflation expectations. active emphasis in communication upon β alertness β required keeping all options open to a β possibly quick β change in policy. pre - commitment to a policy path would certainly have made that reversal of policy difficult to execute and / or to justify, and therefore non - credible. the markets seem to have internalised these strategic principles with an increasing degree of precision. incoming data which, since the autumn of 2005, have indicated more persuasive signs of a recovery in an environment of abundant liquidity and elevated commodity prices were correctly mapped into expectations that the stance then prevailing would not be consistent with controlling inflation over the medium term. markets anticipated in good time that the ecb would soon begin reversing the extra easing that had been put in place. in retrospect, market expectations have aligned well with our intentions. since december, consistent with our remit to be alert and pre - emptive, the monetary policy of the ecb has been perceived to be in a mode of progressive withdrawal of monetary accommodation. indeed, this withdrawal has been and remains conditional on the evolution of our analysis with respect to our objective of price stability, but it has not been predicated on any single short - term indicator of the macroeconomic state. in the last few months, the ecb has not measured the state of the economy by the strength or weakness of any particular piece of incoming news. it has continued to extract the macroeconomic trend from the another way to state this notion is that in an economy such as the euro area, where prices and wages are as rigid as they prove to be, the β sacrifice ratio β is probably large. this means that the action | 0 |
to our common realizations. thank you for your attention. 3 / 3 bis central bankers'speeches | however, the rapid increase in the volume of financial flows was accompanied by a rise in their volatility, which represents a new source of risk. the sudden withdrawals of international capital have played a major role in triggering and spreading financial crises over the past fifteen years. this is the main concern of the french presidency of the g - 20 and it appears crucial to me to examine it, not only from the narrow perspective of the management of capital flows, but also from the wider perspective of global liquidity. indeed, the increase in global imbalances is not confined to current account positions. in addition to the growth in net international capital flows, the very sharp rise in gross positions in international portfolios, not exclusively but largely linked to the accumulation of foreign exchange reserves by the major emerging economies, is one of the most significant developments of the past few years. the striking synchronisation of the recent economic crisis across the major economies is certainly in large part a result of this. bis central bankers β speeches in any case, the issue of the appropriate level for the supply of safe and liquid international assets and the international monetary and financial system best able to provide this has yet to be resolved. as you know, this issue is at the heart of france β s presidency of the g - 20. the second major topic is international economic and financial coordination and i will briefly touch on its two main components. the first component concerns the framework for strong, sustainable and balanced growth. this initiative has been given wide media coverage since its adoption at the g - 20 summit in pittsburgh in september 2009. however, i am inclined to think that it has sometimes been distorted and that its scope has been underestimated. this initiative is indeed a promising and ambitious one : promising as it could be the impetus for genuinely enhancing international economic cooperation through the combination of economic policies taking greater account of externalities and structural reforms, in order to achieve the jointly defined global objectives. ambitious, of course, as it involves countries making explicit commitments on measures to be taken and discussing the outcomes with their peers, as part of what is known in g - 20 jargon as the mutual assessment process ( map ). under the korean presidency, whose efficacy and vision i would like to praise, an initial exercise resulted, in late 2010 in seoul, in the adoption of a detailed country - by - country action plan and the commitment to tackle more specifically the global imbalances identified by the indicative guidelines. far from me the idea of | 0.5 |
today, we envisage many benefits to both countries. trade relationships between papua new guinea and fiji will be strengthened. we will see increased competition for banking services and products. there will also be an opportunity for capacity building as fiji staff work in other bsp branches and vice versa. we at the reserve bank of fiji look forward to working closely with bank of south pacific limited to ensure that fiji β s financial system is dynamic and sound. i look forward to your contribution to the economy and the financial system. once again, i congratulate you on the official opening of bank of south pacific limited and wish you every success in your operations. thank you. | savenaca narube : brief look at the commercial banking sector in fiji opening address by mr savenaca narube, governor of the reserve bank of fiji, at the official opening of bank of south pacific limited, suva, 18 december 2006. * * * your excellency, mr. peter eafeare mr. noreo beangke, chairman bank of south pacific mr. garth mcllwain, managing director bank of south pacific mr. kevin mccarthy, general manager, papua new guinea mr. greg watson, general manager, fiji mr. irfan rabbani, habib bank limited distinguished guests ladies and gentlemen : i am glad to be here this morning and thank you for the invitation to the official opening of the bank of south pacific branch in fiji. it is always pleasing to see a new bank join the financial sector in fiji. over the years we have seen several banks come and go. this of course is a commercial reality. i am particularly glad that the new entrant that we are welcoming today is a strong regional bank. it is also encouraging that, in our current political climate, the bank of south pacific has decided to go ahead with its plans to enter fiji. i warmly congratulate you on this new venture and wish bank of south pacific limited all the best in your operations in fiji. fiji is going through some turbulent times. we in the reserve bank of fiji have moved quickly to safeguard financial stability. we have asked the commercial banks to freeze their loan books. we have tightened exchange controls. but let me explain here that we have not stopped any foreign transactions. we have just asked the commercial banks that they seek our approval first before they make these deals. i must thank the commercial banks for their support and cooperation for the measures that we have put in place. bank of south pacific limited has a long history of banking in papua new guinea going back as far as 1957. bsp is listed on the port moresby stock exchange and has 54 percent market share of the total assets of the papua new guinea banking system making it the largest bank in the country. it operates a network of 39 branches across papua new guinea and one branch in niue. bsp is increasing its overseas presence β here in fiji today and in the solomon islands. bsp has satisfied all the licensing requirements of the reserve bank of fiji and we are pleased to issue the bank with a licence. with the commencement of bank of south pacific limited β s operations | 1 |
, the government adopted a socioeconomic strategic assessment, and then approved a series of government decisions to adopt directions of action in response to various issues, and to integrate them into the detailed work plans of the ministries, and into their budgets ( decision 145 ). the strategic issues that were defined were : cultivating and maximizing human capital, productivity and competition, financing infrastructure, housing strategy, regional economic development, preparedness for the aging of the population, and β digital israel β. an analysis of the performance of all items in the government decisions in the various fields, which was done by the national economic council in the past few months, shows a positive picture in the performance of most of the decisions. these are mainly decisions to create the frameworks and processes, such as establishing teams, presenting and formulating programs, and progress reports to various forums. of course, the most important test will relate to the formulation and implementation of detailed plans, and achieving the targets over time. at this stage, it is too early to assess the extent to which they will be realized. examples of issues that require a strategic plan that were included in the government decision in 2015 human capital β as early as the israel 2028 plan, the area of education and professional training was identified as a main component in providing the basic values and skills required in the modern labor market. this is one of the areas where the importance of a strategic plan is clear β a plan that formulates targets, defines work plans for achieving them, and allocates budgets is essential in order to achieve an education system that is tasked with providing values, abilities and skills that will enable its graduates to deal β as workers and in 2 / 6 bis central bankers'speeches general as citizens β with the challenges of a changing labor world, for many years to come. the low achievements and the gaps in scholastic achievement and in the abilities relevant for the labor market are constantly being raised by the findings of pisa and piaac tests. despite the increase in the average number of years of schooling, literacy, numeracy and functioning in a digital environment among the adult population in israel β at all levels of education β are lower than those in most of the advanced economies, and the situation is no better among students. the need to deal with low abilities and skills is also shown by an analysis of labor productivity trends in israel relative to the other advanced economies, and by productivity and wage gaps between various groups. improvement is needed in the education system and in professional training | northern africa countries joining us lately. allow me to extend my sincere appreciation to the vice governor maja kadievska vojnovic and to igor velichkovski, head of the payment systems department within the nbrm for successfully turning this conference into a truly international one. over the years, delegates from central banks of 30 different countries have attended the conference. this growing international attendance makes particular strength of the conference showcasing diverse experiences from very different areas of the world driven by the common interest in payments and market infrastructures. equally appreciated is our domestic audience that continues to valuably contribute to the conference each year. focusing on current issues in the payment systems, the conference agenda is each year carefully designed to cover the latest trends and feature the main challenges in the area. variety of interesting topics has been on the menu so far including the european payment landscape and legislation with a special focus on psd and psd2 ; topics related to payment systems and payments oversight ; the eu payment integration initiative known as single european payment area ( sepa ) ; then, innovations ; security and efficiency of retail payments. we have elaborated 1 / 3 bis central bankers'speeches on instant payments, financial inclusion and accessibility of payment services, financial structures resilience and many more. this year β s agenda covers themes related to digital banking, cryptocurrencies and their regulation, the new technologies such as dlt and blockchain β all of them being topics of considerable relevance at the moment, and will only become more important over time. bracketing this jubilee edition we had the pleasure of hosting many distinguished speakers from various affiliations starting from central banks, through relevant international institutions, commercial banks, clearing houses and custodians etc. we express our deepest gratitude and appreciation to all speakers and conference delegates for the great impact you make, keeping the conference alive and growing. the engaging social events are another important hallmark of the conference as they make an excellent opportunity to network and reconnect and finally to amuse and entertain. moreover, ohrid, the home of the conference, a charming city surrounded by water and mountains, known as a jerusalem of the balkans and protected by unesco for its natural and cultural heritage, is a unique experience by itself. as we celebrate our 10th jubilee we are proud to be able to host a conference that certainly evolves into important meeting place for the payment system community in the region and beyond. this success would not have been possible without the wholehearted support of our | 0 |
johannes beermann : annual accounts 2020 speech by dr johannes beermann, member of the executive board of the deutsche bundesbank, at the press conference presenting the annual report 2020 of the deutsche bank, virtual, 3 march 2021. * * * ladies and gentlemen, i would now like to take this opportunity to present the bundesbank β s annual accounts for 2020 in a little more detail. you will also find all the figures in the annual report, which contains the bank β s balance sheet and profit and loss account as well as notes thereon, starting on page 43. and as always, we will be happy to take any questions you may have afterwards. with that in mind, i would like to focus my attention on a small number of standout points in our annual accounts. let us first take a look at the bundesbank β s balance sheet for 2020. in a reflection of the bank β s monetary and foreign exchange policy operations, total assets grew considerably in 2020, expanding by β¬747 billion, or 42 %. not only is the growth rate potentially record - setting, but the figure of β¬2, 527 billion in total assets is β¬685 billion higher than the previous all - time high of β¬1, 842 billion reached in 2018. looking at the medium - term picture spanning the past five years, the bundesbank β s total assets are currently up by β¬1. 5 trillion, or 150 %, compared with five years ago ( end - 2015 ). on the assets side, the main reason for the increase in total assets in 2020 was lending related to monetary policy operations. this item recorded growth of β¬265. 6 billion, owing not least to the tltro - iii operations offered to credit institutions at particularly favourable terms since the end of june in response to the coronavirus crisis. however, holdings of euro - denominated securities resulting from purchases made under the monetary policy asset purchase programmes also expanded significantly, with growth of β¬221. 0 billion due, in particular, to the temporary pandemic emergency purchase programme, or pepp. liquidity inflows from other european countries were the third factor contributing to balance sheet growth, reflected in an increase of β¬240. 8 billion in the target2 claim on the ecb to a total of β¬1, 136. 0 billion. the target2 claim has thus risen by 27 % over the past 12 months. on the liabilities side of the balance sheet | human resources for eldercare. therefore, demand for low - skilled labour in advanced countries is expected to grow. this could result in more upward pressure on wages as well. goodhart and pradhan reasoned at the onset of the pandemic that the surge in inflation that would follow the pandemic would be more than a β temporary blip β and would mark β the dividing line β between the disinflationary forces of the last decades and the new regime. 5 up to now, there is no clear evidence to suggest that their conclusion is wrong. the economic impact of the russian invasion of ukraine is in part similar to that of the pandemic. looking at the international supply chains, we are again experiencing a massive supply shock, which might reinforce the tendencies sparked by the pandemic. furthermore, both shocks β the pandemic and the war in ukraine β are fostering deglobalisation tendencies and therefore directly undermining one of the major forces that goodhart and pradhan see behind the disinflationary pressure of the past. the uk weekly newspaper the economist recently called the war in ukraine β the third big blow to globalisation in a decade β. the first setback was former president donald trump β s trade wars. the second was the coronavirus pandemic, which briefly saw cross - border flows of capital, goods and people dry up almost completely. 5 the economist estimates that a retreat by the west to cold - war spheres of influence would be equivalent to writing off us $ 3 trillion of investment and thus lead to less efficient production, hurt living standards, and heat up inflation. history has taught us that turnarounds in inflation tendencies commonly occur when the authorities and economists are either not seeing the risks or denying them. a good example of this is the meeting of the federal open market committee in washington on 15 december 1964. the minutes from that meeting contain a series of interesting passages. one section reads : β so far, the supply of labor has been adequate to meet expanding demands without any strong general upward pressure on prices. β and another notable section states : β with prices of industrial materials increasing little [... ] prices of finished goods have not been subject to pervasive upward cost pressures. β 6 to sum up : inflation did not seem to be a problem. it was around that time that the great inflation era began, and it was to last for the next 17 years. this period led economists to re | 0.5 |
the region here. in this regard, the recovery of the economic situation in the euro area is good news for montenegro and the western balkans generally. links will grow as a result of the banking union which is being established in the eu. the new institutional set - up involves new responsibilities for the ecb, which became the banking supervisor of the entire euro area last november. the establishment of this single supervisory mechanism consolidates our relationship with the western balkans in view of the ownership structure of the banking sector. the ecb will at the same time become the home supervisor of a large part of the banking sector in montenegro and other countries in the region. the main reason, however, for our focus on the countries in the western balkans and their central banks is the prospect of eu membership. for one, the eu central banking community considers it important to support its sister institutions in this region as they seek to apply best practices for the benefit of their country and their people. this is also in the interests of all eu central banks as one day the central bank of montenegro will join the european system of central banks and, at that time, will need to meet all relevant standards and be able to function properly within the system. moreover, strong, stable and independent institutions are a prerequisite for sound macroeconomic policies and financial stability, which in turn are a condition for sustainable convergence. this is in the interests of montenegro but, again, also in the interests of the euro area and the rest of the eu. joining the european union and eventually the euro area is not an end in itself. they are a means to an end, namely to enhance the welfare of the member states and their citizens. in this regard, one of the key lessons of the recent crisis in the euro area is that in order to benefit from membership, countries need to achieve sustainable convergence. convergence must not only be reached in the run - up to joining. to sustain it requires constant policy efforts in the areas of fiscal, financial and, in particular, structural policies. bis central bankers β speeches pursuing growth - promoting structural reforms while maintaining financial stability and fiscal sustainability need to be key policy priorities for economic policy - makers in this context. this applies both prior to and after eu accession. the best contribution central banks can make is to ensure price stability and to remain focused on their mandate, while having a sound institutional framework that ensures their independence. there is one point that i would like to mention which makes the central bank of montenegro a special case | makers, to be able to get their act together whenever something bad happens to the eurozone. and yes, the risk today is not that much political risk in individual countries. it β s a risk that the ministers, eurogroup, will not find the strength to unite, to put their heads together and act as one, if anything bad happens to the eurozone. so that β s a concern. the only answer is to -, step by step to make the eurozone stronger, and to create this sense of commonality, a sense of the need for common action. we are very divided, the eurozone is very divided at this moment, and there β s obviously elections this year. do you worry about a lost year? i wouldn β t say the eurozone is divided. it β s just a risk of being too inward looking. do you worry about a lost year, in terms of policy? it β s not a lost year, i mean, there are reforms in countries, reforms are continuing in different countries, but certainly there is a need to take a step to make the eurozone significantly stronger. at some point there will be a need for a quantum leap into making the eurozone more united, stronger, but that β s not going to happen this year. or next year, or the year after, because no one wants that anymore. the voters don β t want that anymore. well, the burden of proof is on us. it β s on european institutions. the burden of proof cannot be on voters, that β s not how democracies work. let β s talk about brexit. the president of the eurogroup said yesterday that the uk β s looking at massive unemployment, and that it will go back to the 1970s. i am not going to comment on the economic consequences of brexit. what we are really focused on, and we are very close to the bank of england, we are exchanging views, sharing notes with the bank of england. they know what will be the consequences, so i will entirely defer to mark carney to pass that kind of judgment, and i fully trust him. what we start considering is the structural consequences of brexit. how is that going to impact the landscape for financial services? the infrastructures that we need in the eurozone to create growth, etc. it β s probably too early to tell, but it β s shaping up, i would say, so we have to start | 0.5 |
sunil mendis : creating a challenging and stimulating work environment new year message 2005 by mr sunil mendis, governor of the central bank of sri lanka, to all employees of the central bank of sri lanka, colombo, 1 january 2005. * * * i issue this traditional new year message at a time when the whole of sri lanka has been engulfed by a national tragedy caused by β tsunamis β that hit the country on 26th december, 2004. i take this opportunity to express our deepest condolence to the members of the families of bank employees who have lost their lives and to our employees and their loved ones who have suffered by this calamity. at the same time, i wish to share the sorrows of those employees who have lost their property. words are insufficient but hope that they would move forward from this tragedy. with the magnitude of the disaster, there is no question that our nation needs to be rebuilt. hence, as employees of a state organization which is at the apex of the country β s financial system, we have an invaluable task to perform. in this context, i place my message before you with the plea that we take part in the nation - building task by offering our maximum efforts. i have been greatly encouraged by the positive response which all the employees have demonstrated towards the provision of relief to victims and rebuilding of the nation. you would recall that in my first message to you on assuming the office of the governor of the central bank on the 01st july 2004, i stated that i was deeply conscious of the great honour attached to my appointment to this august post. now, i address you with 6 months β experience at the helm of this unique institution which is responsible for safeguarding the price stability and the country β s banking and payments system. during the last decade, the staff of the central bank faced several traumatic events and challenging situations. the central bank bomb blast, which took away the lives of 41 employees and caused injuries to nearly 1000 employees, was the most traumatic event. however, i understand that even those seriously injured joined the unaffected employees to offer their best efforts to the bank and as a consequence, the bank was in a position to resume normal work without an interruption within a short period of time. this reflects the resilience of our staff. thereafter, the bank was subject to a modernization and restructuring scheme. a major feature of the restructuring process was the offering of a voluntary retirement scheme ( vrs ) for certain categories of the staff | of the then prevailing exchange rate system and the crawling band regime to sustain themselves. immediately after the float, the market experienced some volatility as is usually expected. however, this volatility has been contained overall since then. this, not only brought confidence to the market, as evidenced by increased foreign exchange inflows, but also allowed greater flexibility and market opportunities to foreign exchange dealers of commercial banks. subsequent to the float, the central bank became a net buyer of foreign exchange from the market, in sharp contrast to its experience in the period prior to that. our objective with regard to the foreign exchange market is to ensure an orderly adjustment of the exchange rate, without excessive volatility. such adjustment should reflect the emerging economic fundamentals of the country. we should ensure that demand and supply mismatches are addressed on time so that there is no excessive volatility in the exchange rate. turning to the theme of this year β s conference, i. e. β is it time for a common currency in the saarc region? β, i believe that it would give rise to much interesting and thought provoking discussion and debate. we know that the saarc was established in 1985, with the objective to provide a platform for the peoples of south asia to work together in a spirit of solidarity, trust and understanding. it aims at accelerating the process of economic and social development of member countries. i believe the considerations of the timeliness to introduce a common currency for the region will be supportive towards the objectives and aims of saarc as well. while taking note that deliberations such as these would definitely lay the foundation for future developments in the saarc region, i take great pleasure in inaugurating this conference today and wish you all success with the conference. and i would also like to urge you to take a little time off to visit some places of interest, while you are in this beautiful country, sri lanka. thank you. | 0.5 |
richard w fisher : policies needed to restore american prosperity concluding remarks by mr richard w fisher, president and chief executive officer of the federal reserve bank of dallas, before the dallas and fort worth chapters of financial executives international, dallas, texas, 11 february 2014. * * * the views expressed by the author do not necessarily reflect official positions of the federal reserve system. related slides can be found on the federal reserve bank of dallas β website : slides ( pdf ). for far too long, the greatest obstacle to the nation β s economic prosperity has resided here : an editorial in today β s financial times encapsulated in 11 words an argument i have been making repeatedly : β fiscal policy is still not an ally of u. s. growth. β 1 i β ll conclude by making the argument once more. earlier i showed you the gaping hole in the heart of our prosperity : if you remove the jobcreating machine of texas from the u. s. economy, the nation has experienced job destruction that has occurred over the past 12 years in the middle - income quartiles. let me show you that chart again : see β yellen must not be bullied by congress, β financial times, p. 8, feb. 11, 2014. bis central bankers β speeches i never refer to β classes β ; i do not believe status in a democracy should be defined by the hidebound concept of β classes. β but no matter : the most vital organ of our nation β s economy β the middle - income worker β is being eviscerated. this is the pathology i worry most about. so i ask : can my colleagues and i at the fed cure this with monetary policy? obviously, businesses cannot create jobs without the means for investing in job - creating expansion, so, yes, monetary policy is necessary to propel job creation. but as i have shown you tonight, the store of bank reserves awaiting discharge into the economy through our banking system is vast, yet it lies fallow. take a look at this chart of total reserves of depository institutions : they have ballooned from a precrisis level of $ 43 billion to $ 2. 5 trillion. bis central bankers β speeches there is plenty of money available for businesses to work with. consider this : in fourth quarter 2007 the nation β s gross domestic product ( gdp ) was $ 14. 7 trillion ; at year - end 2013 it was estimated to be $ 17. 1 trillion. had we continued on | native - born hispanics in texas age 25 to 64 are high school dropouts. no matter how you slice it or dice it, it is glaringly clear that hispanics in texas are failing at school. this must be corrected. if not, they will continue to trail in economic achievement. and all of us β white, black, asian - american, hispanic or non - hispanic β will suffer the consequences of economic underperformance. texas is a remarkable place. we embody the β can do β spirit. my favorite texas historian is t. r. fehrenbach. i recommend his book, lone star : a history of texas and the texans, to anybody who wishes to understand what makes this place unique. as fehrenbach puts it, the key to overcoming the odds in the lone star state has been that β the texas ethic and texas society rewarded enterprise, β... β work was the real virtue. β β¦ β we chose this land ; we took it ; we made it bear fruit. β we are a people, in fehrenbach β s words, for whom β the cult of courage was obvious. β 1 and he distills the texas spirit that prevails to this day in one sentence : here, β men who exist get overrun by men who act. β 2 it is time for our great latino population to have the courage to face the facts : they must do a better job as families and within their communities to dedicate themselves to educational achievement. and it is time for all texans, hispanics and non - hispanics, to act to create the conditions that will safeguard and nourish the prosperity of all our children and that of our children β s children. Β‘ andale pues! delve into the hispanic experience. help us understand through this conference and your various studies how to advance hispanic prosperity. for in doing so, you are helping us advance texas and the nation. thank you. lone star : a history of texas and the texans, by t. r. fehrenbach, new york : macmillan publishing co., 1985, pp. 708 β 12. see note 1, p. 717. bis central bankers β speeches | 0.5 |
firms and particularly the uncertainty surrounding their economic outlook also made banks increasingly reluctant to grant loans to smes. moreover, the financial crisis has put a strain on banks β balance sheets, leading them to increasingly tighten the terms and conditions for granting credit. therefore, the combination of lower demand for loans, on the one hand, and tighter credit supply conditions, on the other hand, has led to a decline in the annual growth rate of loans to enterprises. in the euro area loan growth declined from 17. 5 % in the last quarter of 2008 to about 2 % in the third quarter of 2009. so how bad has the situation been for smes? let me briefly give you the answer to this question based on the evidence from our sme survey conducted on cooperation with the european commission. our survey evidence reveals that, amid exceptionally adverse economic and financial conditions, 77 % of smes that applied for a bank loan in the first half of 2009 received some or whole amount they had applied for. as i mentioned, this is a new survey. so, it is not yet possible to compare these data over time, and hence, makes it difficult to assess whether the bank loan rejection rates indeed indicate severe supply constraints. in fact, even at times of sound economic growth, some bank loan applications will be rejected, for instance owing to the lack of a convincing business plan. nevertheless, the survey has also shown that 43 % of euro area smes that had applied for a bank loan reported a deterioration in the availability of loans in the first half of 2009. this seems, in particular, point to increases in charges, fees and commissions or tighter procedures, collateral requirements and other types of required guarantees. interestingly, large firms were somewhat more negative in their assessment of bank loan availability, with nearly 50 % reporting a deterioration. still, i believe, it has become clear that firms β access to finance came certainly under pressure during the current financial and economic crisis. looking further ahead, we expect that the growth of loans to enterprises is likely to moderate further before starting to recover. this, however, is in line with past recession patterns. we know that the growth of loans to non - financial corporations normally tends to lag real gdp growth by about three quarters. this is usually linked to the fact that firms tend to make use of their internal funds first before turning to external financing. so overall, once the severity and duration of the economic slowdown are taken into account, recent credit developments appear to be broadly in | ##ment of interest ; restructuring of msme loans, etc. ( b ) liquidity augmenting measures : ltro / tltro / refinance schemes for various sectors including stressed sectors ; reduction in crr, and other measures totalling about βΉ12. 81 lakh crore ( 6. 3 per cent of nominal gdp of 2019 - 20 ). ( c ) countercyclical regulatory measures to ease stress on borrowers and the banking system β relaxation in regulatory compliance ; conservation of capital by banks ; relaxation in group exposure norms, etc. ( d ) measures to ensure uninterrupted flow of credit - significant interest rate cuts ( 115bps ) ; assuring markets of easy financing conditions ; exemption from crr maintenance for incremental retail and msme loans ; extension of priority sector classification for bank loans to nbfcs for onlending ; rationalisation of risk weights for regulatory retail portfolio and individual housing loans, etc. ( e ) framework for resolution of covid - related stress for individuals and businesses. ( f ) closer surveillance of supervised entities focusing on business process resilience and continuity, proactive management of risks, stress tests and proactive raising of capital, etc. 11. our principal objective during this pandemic period was to support economic activity ; and looking back, it is evident that our policies have helped in easing the severity of the economic impact of the pandemic. i would like to unambiguously reiterate that the reserve bank remains steadfast to take any further measures, as may be necessary, while at the same time remaining fully committed to maintaining financial stability. iii. adaptations and learnings : way forward 12. the recent period has given us an opportunity to learn and adapt and decide on the way forward. in today β s lecture, i would like to focus on three key areas : ( i ) stability of the banking and non - banking financial sector ; ( ii ) external sector stability ; and ( iii ) fiscal stability. let me first focus on the banking and non - banking financial sectors. governance reforms 13. integrity and quality of governance are key to good health and robustness of banks and nbfcs. recent events in our rapidly evolving financial landscape have led to increasing scrutiny of the role of promoters, major shareholders and senior management vis - a - vis the role of the board. the rbi is constantly focussed on strengthening the related regulations and deepening its supervision of financial entities. 14. | 0 |
sabine mauderer : welcome note - euro finance week - 10th china day welcome note by dr sabine mauderer, vice - president of the deutsche bundesbank, at the euro finance week - 10th china day, frankfurt am main, 18 november 2024. * * * check against delivery ladies and gentlemen. i am delighted to be here today! i would like to underline the vital and close economic relationship between china and germany. in july, i was in china to visit my dear collegues from the people's bank of china. this did not only emphasize our close ties with our colleagues at the pboc. no, it was overall an enriching experience. the hospitality and professionalism i encountered were truly impressive. i was particularly struck by the speed and innovation capacity demonstrated by the chinese and international corporates i visited, both, in beijing and shanghai. international corporates often referred to china as their " training or fitness centre ". germany and china can look back on a long history of economic cooperation, marked by mutual respect and a shared commitment to the economic development of our countries. these close ties have contributed to growth, created jobs, and fostered innovation in both countries. last year, the trade volume between china and germany surpassed β¬250 billion. 1 naturally, in any relationship there are challenges that need to be addressed to ensure its continued success. i am strongly in favour of a rules - based approach that ensures a level playing field in international trade. for this, but also generally, close dialogue and open communication are more important than ever. this holds especially in times where our economies are facing multiple headwinds and the global political landscape is increasingly uncertain. in this context, allow me to emphasise today how important economic cooperation is for our shared future. as we all remember, we encountered hard times just a couple of years ago. hard β yet insightful. i am referring to the covid - 19 pandemic. 1 a brief look back at a fragmented world β supply chains in the covid era 1 / 4 bis - central bankers'speeches i would like to elaborate briefly on how the covid - 19 pandemic exposed both the vulnerabilities of an interconnected global economy and its strengths. global supply chains were severely hit, as production sites had to close and transportation and distribution across various industries came to a halt. these disruptions had strong adverse effects on the german economy, which relies on efficient and smooth global supply | chains. supply shortages were particularly noticeable in electronic components such as semiconductors, household goods and construction materials. supply bottlenecks also occurred in china, where cars and their components, as well as machinery and industrial tools were affected. let us put some numbers to it. what did that mean for the german economy as a whole? bundesbank analysts estimated that in april 2020, nearly one - quarter of the decline in production in germany was due to supply chain disruptions related to china. 2 this was because the manufacturing sector is highly interconnected through the trade of intermediate goods. for sure, the supply chain shortage had negative effects. and, based on this experience, it was rational for corporates to diversify risks connected to these supply chains. besides diversification, international cooperation also proved its benefits during the crisis and in its aftermath. our economies were able to quickly provide the goods that suddenly found skyrocketing demand. test kits, respirators, respiratory masks and vaccines all were produced in large scale and the world benefitted from that. with its strong links between our countries, the german manufacturing industry was able to quickly adapt to the pandemic - related shifts in demand. so, despite the significant short - term consequences of the supply shortfalls in the early phase of the pandemic, the clear benefits of upstream integration are evident. globally. the abrupt interruption of supply chains during the pandemic was β after all β only temporary. it was, in essence, an unintended test for the global system. 2 lessons for the future what lessons did we learn? the disruptions to global supply chains underlined the urgent need for strengthening resilience. here, strong connections between our industries can be an important element. a fragmentation of the global economy has no winners. we all know that protectionism typically leads to a decline in growth. and protectionism would be particularly harmful at a time when we in china and germany are facing similar changes : we need to give our economies fresh impetus. currently, growth rates in our economies are lower than they used to be. 2 / 4 bis - central bankers'speeches with inflation pressures receding, the eurosystem has lowered its deposit facility rate by 75 basis points to 3. 25 %. in china, the pboc has lowered its key interest rate further and the 7 - day reverse repo rate now stands at 1. 5 %. longer - term interest rates have also come down somewhat in both currency | 1 |
if left unchecked, global heating and nature degradation will contribute to increased macroeconomic volatility as 1 / 4 bis - central bankers'speeches climate and nature events become more frequent and have a greater impact on the economy. a successful transition to a green and sustainable economy, meanwhile, will require vast investment flows that will alter the way our economies function. second, the economic benefits of a timely transition far outweigh the costs, especially when considered against the alternative scenarios of doing nothing or doing too little too late. 1 third, climate - related risks translate into financial risks. early work by the basel committee on banking supervision ( bcbs ) shows that climate events are a driver of each traditional type of risk considered in the regulatory framework, from credit risk, liquidity risk and market risk to reputational and operational risk, including legal risk. 2 floods, for example, could damage a company's production facility, which could affect its ability to repay a loan, in turn leading to higher credit risk for the bank that provided the loan. or consider what might happen if your house is built in an area vulnerable to wildfires. your home could fall in value, leaving the bank that granted you the mortgage with higher risk on its balance sheet. and these financial risks are not related solely to climate change. last year, when looking at more than 4. 2 million individual companies that account for over β¬4. 2 trillion in corporate loans, we found that nearly 75 % of all bank loans in the euro area are to companies that are highly dependent on at least one ecosystem service. 3 examples of these services include the products we obtain from ecosystems, such as food, drinking water, timber and minerals ; protection against natural hazards ; or carbon uptake and storage by vegetation. if these ecosystem services continue to experience the level of degradation they are currently facing, the stability of individual financial institutions and the broader financial system will be at risk. international standard - setting bodies driving global action recognising the relevance of climate and nature - related factors for the economy, including the financial system, international standard - setting bodies are increasingly turning their attention to this topic. this has resulted in substantial progress at the global level, although more work lies ahead of us. for example, the bcbs has a dedicated task force on climate - related financial risks, whose meeting this week is kindly hosted by the banco central do brasil. based on the work of this task force, the bcbs has taken concrete steps to | mario draghi : atlantic council remarks speech by mr mario draghi, president of the european central bank, at the 2015 atlantic council global citizen award, new york, 1 october 2015. * * * ladies and gentlemen, thank you for honouring me today with this global citizen award. and thank you also for honouring, through me, all those who have worked β and continue to work β to maintain the cohesion of the european union, and to bring its integration process closer to completion. the fate of europe is naturally of immediate interest to its citizens. but it is also indeed of direct relevance to the world at large. the european union and its monetary union are regional projects with global implications. this is firstly due to the size of europe in the global economy. though the euro area has not made a major contribution to world growth over the past seven or eight years, it nonetheless accounts for 17 % of global gdp and 16 % of global trade. when the integrity of the euro area was under threat, so too was global prosperity. christine lagarde, who has chaired many imf gatherings where the first topic under discussion was the euro area, can testify to that. by the same token, the return of the euro area economy to sustained growth, under the impulse of our monetary policy, is good news for everybody, everywhere. to my mind, however, there is another reason why the euro area is crucially relevant to the global economy. it comes from the fact that european integration is by far the most advanced experiment in managing issues that cut across borders, through a combination of international and supranational arrangements. 65 years ago, the founders of the eu decided that we could only achieve results if we were united in facing common problems. at the time, the problem was war and the objective was peace. and it worked. but now, the nature of the many challenges we face shows how right this approach fundamentally was : think of migrants seeking refuge in our countries, the threat of terrorism, the consequences of climate change, the recent succession of financial and economic crises. and these challenges are not specific to europe. they are global. i am certainly not suggesting that the path followed by europe to manage them is replicable at a global level. but the experience we have gathered, the experimentation with supranationalism, the failures and the successes, all carry invaluable information for those involved in managing global issues. it may seem at times that we in europe | 0.5 |
increases imports. this has a bearing on the proposed budget for 2002 : the greatest part by far of the increase in expenditure over the level in 2001 is in current expenditure, with only a small part directed towards increasing investment, and the proposed rise in total government expenditure will almost certainly exceed the rate of economic growth. in other words, the budget for 2002 proposes to increase the government debt by at least nis 12 billion, and to burden it, and the following budgets, with additional interest payments close to nis 1 billion a year, and all this just to increase the government β s current expenditure. it is thus possible to contribute to growth by increasing the budget deficit thereby raising the standard of living, both public and private, for a time, but this cannot be maintained, because the rise in the budget deficit creates inflationary pressure, pressure on financial markets, and a rise in the foreign - currency deficit. this is a short - term policy, with part of the bill presented for immediate payment and part carried forward. eventually the outstanding balance of the bill has to paid, and it always comes out very expensive. the composition of the government debt additional damage is caused to the economy, not deriving directly from the existence of the deficit but from the fact that almost half of the government β s domestic debt is not tradable. as the government moves to raising unindexed loans, the share of its tradable indexed debt in its total debt falls. in 1995 it made up 30 percent of the total debt ; in the middle of 2001, it is down to 23 percent. the market for tradable indexed government bonds is drying up, and that is the market which determines the longterm rate of interest in israel. a two - pronged course of action is required : 1. the process of extending the term of unindexed government bonds from 10 years to 30 years already started by the ministry of finance must continue, to provide an additional benchmark for long - term interest rates, in addition to the disintegrating benchmark provided by indexed bonds, to encourage the development of long - term unindexed uses in the mortgage market and other long - term projects. 2. at the same time, the chapter of earmarked bonds in pension savings should be brought to a close, as has been done in all other savings channels, to deepen and stabilize the tradable bonds market. this should not be applied to existing funds, including those | national script about recessions and recoveries, financial behaviour and policy frameworks. recessions will occur, as they always have. financial behaviour matters greatly and can, if we are not careful, contribute to instability. in our thinking about the future, we all need to remember that. but if we do, and act with due prudence during the upswings, recessions need not be bad ones and, when they come, we can recover. signposts to that effect ought to be erected along the road to prosperity. applying the lessons the task before us now is to manage a new expansion. of course, we are still in that period when we cannot be absolutely certain that the expansion will gain full momentum. every upswing starts with that uncertainty. the conduct of macroeconomic policies in the near term must grapple with that uncertainty, as it always must do. even so, it is not too early to think about issues of a medium - term nature. the key question is : having had a fairly shallow downturn, how do we make the upswing long and stable, and relatively free of serious imbalances? at least part of the answer is that we will need to re - invest in the same policy discipline, and the same careful private - sector management, that paid dividends in the recent episode. that means keeping tested frameworks in place, amended as necessary in the light of experience. it means unwinding temporary measures as appropriate. it means keeping a focus on flexibility. and perhaps most of all, it means resisting the temptation to assume prosperity is easily achieved, or easily managed. in that spirit, let me offer three observations. first, we start this upswing with less spare capacity than some previous ones. after a big recession, it usually takes some years for well - above - trend growth in demand to use up the spare capacity created by the recession. this time that process will not take as long. most measures of capacity utilisation, unemployment and underemployment are much more like what we saw after the slowdown in 2001, than what we saw after the recession in the early 1990s. this is not a problem. in fact, it is good. it is a goal of macroeconomic policy to try to keep the economy not too far from full employment. and some spare capacity does exist, and will do so for a little while, which is why we think underlying inflation will probably come down a little more in the period ahead | 0 |
yves mersch : interview in hospodarske noviny interview with mr yves mersch, member of the executive board of the european central bank, in hospodarske noviny, conducted by ms kristina votrubova on 11 january 2019. * * * there are rumours about the ecbΒ΄s plans to raise interest rates, however there are also voices that it is not a good idea, as the situation is changing. what is the ecbΒ΄s position? the ecb β s position is that we will continue with our policy of monetary accommodation for as long as necessary. we are confident that what we have done is helping us to get inflation in line with our objective at levels below, but close to, 2 % over the medium term. so no date has been established for raising the interest rates. we never announce in advance how, when or by how much we intend to use different instruments. that is not how central banks work. we give broad forward guidance on the direction of our monetary policy. but we always look at incoming information and evaluate whether it is in line with how we expected the economy to behave. what is currently happening to the economy is still broadly in line with our baseline scenario. we had already anticipated a slowdown in growth when we announced these baselines. now that the slowdown is materialising, we do not have to take it into account for a second time in our policy response. fundamentals have not changed but political uncertainty has increased. slovakia would need interest rates to rise as household debt is increasing alarmingly. what is the ecb β s view of the situation in slovakia? first, we conduct monetary policy for the euro area as a whole rather than for individual countries. second, if we raised interest rates to curb household debt, the effect would also impact the corporate sector and investment. that is why there are macroprudential instruments at the disposal of national authorities. and i have seen that the competent authorities in slovakia, including the national central bank, have taken action to tackle the dynamic rise of household debt. i think once you have put such instruments into action, you would like to see also what the effect of these instruments is. do they work as is expected? and, as i have been told, there seems to be a positive reaction. in the majority of european countries, the economic cycle has already reached its peak and the euro area economy is slowing down. how does the ecb view the situation and what are | you going to do about it? as i said, we take the expected path of the economy into account in our policy decisions. however, a slowdown does not mean that we will slide into a recession. what is happening right now is what we expected to happen. so are you reconsidering plans to end quantitative easing? at each meeting of the governing council we assess whether the economy is in line with our expected baseline scenario. if we identify a deviation, we analyse the reasons for it and the impact it is likely to have on inflation. let me remind you that our sole objective is to maintain price stability. the german economy, which is the largest economy in the euro area, has underperformed expectations. what does this mean for the euro area as a whole? the slowdown in the third quarter was mainly caused by the automotive industry, which was 1 / 2 bis central bankers'speeches affected by the diesel scandal and related aspects. but a slowdown in one quarter in one country is not sufficient to prompt a monetary policy response at the euro area level. we would have to see whether a slightly deeper slowdown in one quarter might not be followed by a slightly better performance in the following quarter. once the relevant data are available, we will assess the trend and the future path of the euro area economy. we will then judge whether it is still in line with our inflation expectations, as price stability is the only needle in our compass. how will brexit affect the euro area economy? the uk economy has been deeply integrated into the european one in very diverse sectors. inevitably, brexit will have some consequences. however, it is unclear which players will be relative winners or losers, as the consequences will not be evenly distributed. obviously, we would have preferred not to have brexit, because we are not eager to see unnecessary shocks to the economy. for me, the main concern is uncertainty, which has a negative impact on all sectors of the economy and on all countries. 2 / 2 bis central bankers'speeches | 1 |
in this field. however, there is another, wider concept of proportionality that we should consider : that is, proportionality in the sense, not merely of a technical standard of administrative law, but of a broad constitutional ideal, which should guide all official actions in the union. this wider notion, which is more congenial to the thinking of economists like me, is explicitly entrenched in the text of the treaty on european union. indeed, article 5 of the treaty states clearly that β [ t ] he use of union competences is governed by the principles of subsidiarity and proportionality β. the same provision further clarifies that, β [ u ] nder the principle of proportionality, the content and form of union action shall not exceed what is necessary to achieve the objectives of the treaties. β the provision was inserted in the treaty primarily with the intention to regulate the union β s legislative and general policy - making measures, rather than the administrative decisions, through which the european rules, standards or policies are applied to individual cases at the supranational and national levels. 1 / 5 bis central bankers'speeches this wider concept of proportionality as a regulative principle of european standard - setting, requires careful and responsive policy - and rule - making. more to the point, it requires the selection of the least burdensome or restrictive approach in order to achieve our regulatory objectives. this can only be achieved through a careful balancing of interests β the promotion of public objectives versus the rights and legitimate interests of private individuals and enterprises ; the exercise of european competencies versus the preservation of the policy autonomy of the member states β and the weighting of the potential costs against the benefits of particular policies and tools. to put it differently, proportionality requires properly calibrated european responses to well - identified problems and is inimical to heavy - handed, blanket, one - size - fit - all approaches to legislation and regulation. in this demanding but valuable sense, proportionality is closely linked to notions of equality and equity, also including the notion of proportional equality, which requires us to treat similar cases in the same manner, but to differentiate between dissimilar ones. it is also linked to the need for respect for fundamental rights and treaty freedoms, including the right to property and the freedom of economic activity. proportionality, then, stands here as a short form for a constellation of closely related principles and values, which, we, as regulators and supervisors, | the positive outcome of the stress tests, the major challenges are still there : for instance the drastic reduction of the non - performing loans and the ability to provide liquidity to the greek real economy ( new loans to businesses ). in view of the end of the current programme in august 2018 and a return to european normality, the greek people look into the future with optimism, which i also share, provided that there is no complacency, no slackening of effort, and authorities do not let up on reforms, especially in the public sector, cutting red tape, etc. the overwhelming majority in greece still want to be within the core of europe. this is our legacy as a nation that goes back to our history and our tradition. after all, the name of our continent europe comes, in the first place, from an ancient greek mythological figure, a beautiful young lady with whom zeus, the father of the twelve greek gods, fell in love, but since she was refusing his advances, he decided to transform himself into a bull to catch her and bring her to mount olympus, the mountain of gods in northern greece, where i come from! concluding remarks in closing, i understand that public sentiment in central and eastern european countries is not very strong right now in favour of joining the single currency and that euro area accession is seen by some as a byword for the loss of sovereignty. the crisis has certainly made the euro area look less attractive for future members. in my view, the issue is ultimately, on the one hand, for the eurozone to persist with completing the emu project and, on the other hand, for candidate countries to be at a par with the rest of the eurozone on all fronts ( sustainable convergence ). after all, cee member states have considerable discretion over the timing of their accession into the euro area. amid the uncertainty about the euro area β s architecture, a wait - and - see approach for final outcomes is perhaps the safe - bet policy, given that any decision to adopt the single currency, once made, is irreversible, since the costs of exit by far outweigh the benefits. thank you very much for your attention. | 0.5 |
areas benefit from financial stability and stable prices, conflicts of interest can surface. 4. central bank independence is protected by institutional safeguards. in europe, primary law assigns a strong role to central bank independence, central bank governors have terms of office which are decoupled from the regular electoral cycles, and central banks enjoy a high degree of operational independence. in addition, complementary institutional frameworks and clear rules are needed that delineate the role of monetary, fiscal, and macroprudential policies. absent such frameworks, monetary policy can come under fiscal or financial dominance. 5. transparency, accountability, and communication are equally important to sustain public support of independence. this can be a balancing act : on the one hand, transparency requires a structured policy cycle. evaluation frameworks are needed to link policy objectives to policy instruments and to analyse the intended and unintended consequences of policy choices. such evaluation frameworks are of a rather technical nature and tuned to an expert audience. on the other hand, the general public needs to be convinced that the central bank acts in the public β s best interest and that non - elected technocrats protect the public good β stability β. translation from the language spoken by technocrats to the language spoken by the general public is an art rather than a science. this translation and a continuous dialogue with the public are crucially needed though β in particular in times of structural change and a high degree of uncertainty about the future. 1. ( new ) challenges for central bank independence [ 3 ] with inflation rates running up to 10 % in the euro area, the core mandate of central banks β price stability β is a key policy issue today. [ 4 ] according to a eurobarometer poll conducted in the fall of 2022, 42 % of respondents in europe mention rising prices and ( high ) costs of living as the most important issues facing the eu ( european union ). [ 5 ] this number has increased by 8 percentage points since the summer. other main risks such as energy supply ( 29 % ) and the international situation ( 20 % ) rank second and third. the macroeconomic situation has indeed changed quite radically, which has implications for the perception of central banks. over much of the past decades, as inflation was low, central bank independence has hardly been at the centre of public policy debates. there has been " rational inattention " with regard to inflation and the core mandates of central banks. central bank independence mitigates direct political intervention into their policy objectives | ) on top of own fund requirements to support transfers in fdic - like insolvency proceedings? β’ can the srf and dgss work as complementary instruments according to the envisaged crisis management solution? www. bportugal. pt β’ should recourse to resolution funds and dgss continue to be considered state aid on the basis of a pure administrative decision ( by dg comp ) with the ensuing consequences? until there is the political will to decide and implement the required structural solutions and establish a clear roadmap to revise brrd and complete banking union ( including a fullyfledged edis ), small technical steps must be made in order to mitigate the big stability risks that are hidden by the false sense of security that prevails. a credible path must be progressively built towards strengthening trust among member states, namely through reasonable and balanced regulation that reduces to a minimum its potential disruptive spillovers. xiii let me conclude. as jean monnet once wrote, β i have always believed that europe would be built through crises, and that it would be the sum of their solutions. β xiv however, we have only half - implemented the lessons learned from the biggest crisis affecting the common currency. as president juncker recently reminded us, β [ w ] e should not wait for the next crisis to do what we know we have to do. β xv as described before, we do know what remains to be done. only by delivering it can we truly be accountable to european citizens. thank you for your attention. as prepared for delivery. evidenced by the eurogroup president β s letter to the president of the euro summit of 15 june 2019, on the deepening of the economic and monetary union : β we recognise that further technical work will be needed on defining a transitional path to the steady state banking union for relevant elements and their sequencing, adhering to all the elements of the 2016 roadmap. this work should include a roadmap for beginning political negotiations on a european deposit insurance system. we have therefore mandated the hlwg to continue this work and report back by december 2019. β, available at https : / / www. consilium. europa. eu / media / 39769 / eurogroup - president - letter - to - euro - summitpresident. pdf, and the high - level working group chair report on the strengthening of the banking union, including edis available at https : / / www | 0 |
the evidence suggests that the degree of accommodation delivered by the federal reserve β s securities purchase program is determined primarily by the quantity and mix of securities that the federal reserve holds rather than by the current pace of new purchases. thus, even with the end of net new purchases, maintaining our holdings of these securities should continue to put downward pressure on market interest rates and foster more accommodative financial conditions than would otherwise be the case. it is worth emphasizing that our program involved purchases of securities, not government spending, and, as i will discuss later, when the macroeconomic circumstances call for it, we will unwind those purchases. in the meantime, interest on those securities is remitted to the u. s. treasury. when we began this program, we certainly did not expect it to be a panacea for the country β s economic problems. however, as the expansion weakened last summer, developments with respect to both components of our dual mandate implied that additional monetary accommodation was needed. in that context, we believed that the program would both help reduce the risk of deflation that had emerged and provide a needed boost to faltering economic activity and job creation. the experience to date with the round of securities purchases that just ended suggests that the program had the intended effects of reducing the risk of deflation and shoring up economic activity. in the months following the august announcement of our policy of reinvesting maturing and redeemed securities and our signal that we were considering more purchases, inflation compensation as measured in the market for inflation - indexed securities rose from low to more normal levels, suggesting that the perceived risks of deflation had receded markedly. this was a significant achievement, as we know from the japanese experience that protracted deflation can be quite costly in terms of weaker economic growth. with respect to employment, our expectations were relatively modest ; estimates made in the autumn suggested that the additional purchases could boost employment by about 700, 000 jobs over two years, or about 30, 000 extra jobs per month. 4 even including the disappointing readings for may and june, which reflected in part the temporary factors discussed earlier, private payroll gains have averaged 160, 000 per month in the first half of 2011, compared with average increases of only about 80, 000 private jobs per month from may to august 2010. not all of the step - up in hiring was necessarily the result of the asset purchase program, but the comparison is consistent with our expectations for employment gains. of course, | on nri rupee deposits, interest rates in the last couple of years have been in line with interest rates on deposits by residents, and are currently even lower than domestic interest rates. so far as other non - debt creating inflows ( i. e., foreign direct investment, portfolio investment or remittances ) are concerned, such inflows by their very nature are commercial in nature and enjoy the same returns and risks, including exchange rate risk, as any other form of domestic investment or remittance by residents. the cost to the country of such flows is the same whether they are added to reserves or are matched by equivalent foreign currency outflow on account of higher imports or investments abroad by residents. on the whole, under present conditions, it seems that the β cost β of additional reserves is really a non - issue from a broader macro - economic point of view. indian interest rates have come down substantially in the last three or four years. they are, however, still higher than those prevailing in the u. s., europe, u. k. or japan. this provides an β arbitrage β opportunity to holder of liquid assets abroad, who may take advantage of higher domestic interest rates in india leading to a possible short - term upsurge in capital flows. however, there are several considerations, which indicate that β arbitrage β per se is unlikely to have been a primary factor in influencing remittances or investment decisions by nris or foreign entities in the recent period. among these are : Β· the minimum period of deposits by nris in indian rupees is now one year, and the interest rate on such deposits is subject to a ceiling rate of 2. 5 per cent over libor. this is broadly in line with one - year forward premium on the dollar in the indian market ( interest rates on dollar deposits by nris are actually below libor ). Β· outside of nri deposits, investments by foreign institutional investors ( fiis ) in debt funds is subject to an overall cap of only $ 1 billion in the aggregate. in other words, the possibility of arbitrage by fiis in respect of pure debt funds is limited to this low figure of $ 1 billion ( excluding investments in a mix of equity and debt funds ). Β· interest rates and yields on liquid securities are highly variable abroad as well as in india, and the differential between the two rates can change very sharply within a short time depending on market expectations. | 0 |
more advanced - - and more feasible - - in some types of activities than in others. in the payment services areas, the reserve banks have measured their performance through various financial measures for many years. for example, the monetary control act of 1980 imposes market discipline on the federal reserve by requiring it fully to cover its costs of providing services to depository institutions, and compliance with this requirement is monitored closely. frequently private competitors provide or could provide these services, and our ability to recover our costs, adjusted to include a factor for imputed profits, taxes and cost of capital, help determine whether it is beneficial for the economy that we stay in the business. in addition, the federal reserve has traditionally measured unit costs for its financial services and has developed various indices that allow a reserve bank to measure its cost performance over time and in comparison to other reserve banks. private sector benchmarks are also being developed. the federal reserve also tracks quality measures for many reserve bank services. finally, the federal reserve monitors the progress of the reserve banks against various strategic objectives. similarly, in bank supervision, the federal reserve has long used a variety of measures of the effectiveness of its examination process, but the measurement challenge has taken on new importance as supervision becomes more automated and more focused on analyzing risk. to meet this challenge, the federal reserve is working closely with other regulators to standardize and improve examination techniques, and has established a steering committee to oversee implementation of a risk - focused examination program and to design a management information system that will permit the board to evaluate better the efficient use of examination resources among the reserve banks. for instance, supervisory data are used to determine in advance of on - site examinations what factors ( camels rating, asset size, location, and loan types ) are most predictive as to the resources needed for examinations, and which institutions, particular lending areas or other service lines may require more intensive review. such programs are low - cost because they use information that we already collect, and are effective and cost - saving because they provide a systematic way to plan and prioritize our time and resources. in other areas, such as the research and statistical analysis on which monetary policy is based, performance measurement is - - and will remain - - far more problematic. the performance of the economy itself is not so hard to measure and right now is highly positive. but it is not clear how much of the economic progress can be attributed to monetary policy, and even less clear how particular monetary policy actions are related to | the most prominent examples of for example, the survey of consumer finances ( scf ) data show that the average wealth of individuals in low - and moderate - income areas declined on a percentage basis more than that in higher - income areas ( 21 percent versus 17 percent ). see the 2007 - 09 scf panel data. raven molloy ( 2013 ), β long - term vacant housing units : an aggregate view, β speech delivered at β renters, homeowners, and investors : the changing profile of communities, β a conference sponsored by board of governors of the federal reserve system and federal reserve banks of philadelphia and cleveland, washington, february 26. alan berube ( 2012 ), β the continuing evolution of american poverty and its implications for community development ( pdf ), β in federal reserve bank of san francisco and low income investment fund, investing in what works for america β s communities : essays on people, place, and purpose ( san francisco : frbsf and liif ), pp. 55 β 71. bis central bankers β speeches well - meaning but misguided efforts to revitalize decaying inner - city neighborhoods. in practice, these policies often devastated neighborhood cohesion, leading their critics to argue for local, bottom - up solutions. perhaps the most influential critique of urban renewal and top - down planning was jane jacobs β s 1961 book, death and life of great american cities. 4 in that book she celebrated the complexity and organic development of city neighborhoods in which intricate social networks enhance safety, quality of life, and economic opportunity. in jacobs β s view, a police force was not as effective at maintaining order as a neighborhood filled with β public actors β such as storekeepers, doormen, and interested neighbors acting as street watchers at all hours. the development of this sort of community self - monitoring is most likely to emerge, she argued, in neighborhoods with a rich mixture of activities taking place in buildings of varying age, character, and use. for the most part, social science research has vindicated jacobs β s perspective. for example, sociologists studying community resilience in the wake of natural disasters mapped deaths caused by an extreme heat wave in chicago in 1995. 5 they found, not surprisingly, that death rates were higher in poor areas where air conditioners were scarce. but they also noticed a remarkable difference in the fatality rate in two adjacent neighborhoods β englewood and auburn grisham β on chicago β s south side. these neighborhoods | 0.5 |
accurate, frequent and timely statistics on assets and liabilities of investment funds from early next year ( based on an ecb regulation adopted in july 2007 ) ; 3. compiling frequent, timely and harmonised statistics on insurance corporations and pension funds, which will become increasingly important in our ageing society ; 4. compiling comprehensive statistics on the securitisation of bank loans and the financial vehicle corporations which handle these securitisations, as well as improving the measurement of credit risk transfers, including credit default swaps, in close cooperation with bank supervisors ; 5. enhancing statistics on bank credit lines, bank balance sheets and interest rates on deposits and loans, for instance by gaining more insight into loan collateral ; and 6. looking at user requirements for micro - data, for example for household consumption and finance. in addition, the ecb has the following high - priority requirements concerning the euro area statistics compiled by eurostat and the nsis : 1. more comprehensive and timely statistics on services, labour markets and housing markets ; 2. better use of available data through the compilation of regular euro area supply and use tables and the integration of labour accounts into the national accounts, which see β recent developments in consumers β inflation perceptions and expectations in the euro area β in the november 2007 issue of the ecb β s monthly bulletin. are needed both for productivity and growth analysis and for updating the euklems data ; and 3. closer coordination of national statistics with regard to seasonal and working day adjustments, revision policies and release calendars. as regards the process innovations, the governing council of the ecb last year endorsed a long term vision for statistics produced by the eurosystem : β’ concerning input, the same data should be collected only once ; β’ concerning data processing, the eurosystem β s statistical function should operate as an efficient production network ; and β’ concerning output, the fitness for use of eurosystem statistics and statistical communications should be further enhanced. as regards the collection of data, the escb β s statistics committee ( stc ) and banking supervision committee ( bsc ) will, in cooperation with the committee of european banking supervisors, look at means of better aligning supervisory and statistical concepts, definitions and reporting formats, with the aim of reducing the reporting burden for financial institutions in the case of overlapping data requirements. the stc will also investigate the feasibility of reusing and sharing available micro - data for eurosystem statistical purposes β particularly data contained in central credit registers, central balance sheet offices and | a large extent the stimulative effect of the very low level of interest rates. against the background of subdued domestic inflationary pressures, and with inflation expectations for the euro area as a whole solidly anchored at levels in line with price stability, the governing council concluded during the first half of 2005 that it remained appropriate to keep interest rates at their historically low levels. at the same time, it emphasised that the cross - checking of the economic analysis with the monetary analysis supported the case for continued vigilance with regard to the materialisation of risks to price stability over the medium to longer term. in the second half of 2005, economic activity gradually strengthened and hicp inflation rates rose to levels significantly above 2 %, peaking at 2. 6 % in september, mainly as a result of rising energy prices. in addition, it became increasingly apparent that the upward shift in oil prices would be protracted. accordingly, in the course of the second half of 2005, the likelihood that average annual hicp inflation would remain above 2 % over the medium term increased. moreover, this scenario of elevated inflation rates remained subject to previously identified upside risks posed by possible further increases in oil prices, a stronger pass - through of past oil price increases, additional rises in administered prices and indirect taxes, and potential second - round effects in wage and price - setting. furthermore, the monetary analysis continued to point towards increasing upside risks to price stability over the medium to longer term. monetary growth gained momentum in the third quarter of 2005 and credit expansion to the private sector remained very robust. consequently, in the second half of 2005 the governing council expressed increasing concern about upside risks to price stability and emphasised the need for strong vigilance with regard to these risks and developments in longer - term inflation expectations. indeed, by december a first adjustment of the very accommodative stance of monetary policy was clearly warranted. in view of the risks to price stability that had been identified in the economic analysis and confirmed by cross - checking with the monetary analysis, the governing council decided on 1 december to increase the key ecb interest rates by 25 basis points, after having kept them unchanged for two and a half years at the historically low level of 2 %. turning next to more recent developments and assessments, in early march 2006 the outlook for growth and inflation over the medium term that had emerged at the time of the december 2005 decision was confirmed by the incoming data. hicp inflation rates were expected to remain above 2 % | 0.5 |
as migration, terrorism, climate change or the vagaries of an increasingly interconnected economy. returning to my starting point, in order to make our way forward we may need to look back at our history, cherish the good we see in the past and jettison the bad. the roman β economic and monetary union β was strong because it was backed by political union, and we should strive to achieve such a union β by peaceful means, of course ; at the same time it was weak, because it was designed for the benefit of a few to the detriment of many, a mistake that we should certainly try to avoid today. | . without detracting from the importance of economic and monetary policies or of the action of the bodies entrusted with safeguarding macrofinancial stability, the fundamental aspect consists in the steps banks take to strengthen their risk - management policies and procedures and to counter the pressure on their margins arising from the growth in competition in national and international markets. in europe the presence of many large global firms of high standing, the dismantling of the barriers inherent in the denomination of securities in different currencies and the possibility of referring to a single yield curve will foster the development of the market for private sector securities. for large companies, whose operations cover several national markets and whose financial management involves several different currencies, the new single currency regime will reduce the need to do business with a plurality of banks. a reduction in the demand for credit from prime companies appears possible, the spread of private sector securities may cause problems for fund - raising. though marked by national traits in legal and fiscal matters, the configuration of the financial system of the european union will becorne more similar to that of the anglo - saxon systems. the profitability of traditional lending to enterprises is likely to come under pressure ; the need to develop business with different categories of customers and to look for profit opportunities in foreign markets will involve both old and new credit risks. the changes under way make it necessary to grasp the growth opportunities offered by corporate finance services ; this will give further impetus to the spread of financial techniques for the management of risk and to the growth of the securitization market. the ability to manage risks, above all credit risk, efficiently, will be a competitive strength of crucial importance ; it requires intermediaries to adopt the innovations made possible by today β s statistical models and financial techniques, to integrate them into their internal organizations, and to develop the necessary professional skills. active management of the loan portfolio, frequently indicated as the new frontier in lending, cannot be independent of the effectiveness of the traditional procedures, from the assessment of creditworthiness to the constant monitoring of loan performance. in a market such as italy β s, in which very little recourse has been made to rating by specialized agencies, banks lacking an internal rating system sound enough to be approved by the supervisory authorities would find themselves at a competitive disadvantage. businesses of high standing would stand to obtain better conditions from other banks able to apply capital charges more consistent with the riskiness of the financing. the revision of the capital adequacy framework is | 0.5 |
harvesh seegolam : banking resilience - global and domestic perspectives keynote address by mr harvesh seegolam, governor of the bank of mauritius, on the maiden edition of the bank of mauritius thought leadership series on β banking resilience : global and domestic perspectives β, 23 july 2021. * * * first deputy governor second deputy governor chairman of omfif members of the bank of mauritius advisory committee chairperson and ceo of the mauritius bankers association ceos of banks ladies and gentlemen a very good morning and afternoon, depending from where you are joining us today. it is my pleasure to welcome you all to this maiden edition of the bank of mauritius thought leadership series. an initiative that the bank is bringing to the banking community and other stakeholders in general, on topical matters in this fast changing world in which we are today living. i wish to thank the omfif for partnering with the bank of mauritius for this inaugural edition. the bank β s thought leadership series will allow us to gain from the precious insights of worldacclaimed experts and personalities on key topics impacting, directly or indirectly, the banking and financial world. it will serve as an ongoing platform to generate ideas on how we need to adapt or re - adapt ourselves and our value propositions. this becomes even more important for highly open small - island economies, like mauritius, dependent on tourism and financial services. the bank of mauritius will make its thought leadership series a regular feature on topical matters. our choice of the theme for the debut of the thought leadership series β banking sector resilience : global and domestic perspectives β is explained by the importance of preserving stability and resilience of the banking and financial system amidst the global covid - 19 pandemic that has struck us since march last year. as a matter of coincidence, i started my governorship at the bank of mauritius with the outbreak of the pandemic. this theme is attracting significant attention globally. the bis, imf, oecd, omfif and many central bankers are relentlessly reflecting on how best to maintain stability and resilience of the banking sector. i am more than determined to continuously engage with our international partners as well as our local stakeholders in this ongoing reflection exercise. my objective has been to ensure that our banking and financial system stands the test of this unprecedented crisis that mauritius is facing. maintaining trust and confidence in the banking sector is a very high priority on my agenda. the more so that sound banks | forward to interactive discussions from ceos of all banks present in this room. i have also taken note with satisfaction that the entire banking industry is following this discussion today through virtual means. for our first edition of the bank of mauritius thought leadership series, i would like to thank our panellists also. we are indeed privileged to have with us professor the lord mervyn king, dr vera songwe, dr natacha valla, dr robert wardrop and mr daniel essoo. i also thank mr david marsh, chairman of the omfif who has kindly accepted to moderate today β s panel discussion. on this note, i wish you all successful deliberations. ladies and gentlemen, thank you for your attention. 3 / 3 bis central bankers'speeches | 1 |
should be a normal activity in all countries. our study helped to clarify the need for international attention to this topic. consolidation, and especially any resulting increased complexity of financial institutions, appears to have increased both the demand by market participants for and the supply by institutions of information regarding a firm's financial condition. the resulting rise in disclosures has probably improved firm transparency and encouraged market discipline and has thus lowered individual firm risk and perhaps increased financial stability. however, the increased complexity of firms has also made them more opaque, and their increased size has the potential to augment moral hazard. thus, the net effect of consolidation on firm transparency and market discipline is unclear. indeed, we conclude that there appears to be considerable room for improvement in disclosures by financial institutions. our study suggests that both crisis prevention and crisis management could be improved by additional communication and cooperation among central banks, finance ministries, and other financial supervisors, domestically and internationally. indeed, the study strongly supports existing efforts in these areas. in our view, the most important initiatives include proposals to improve the risk sensitivity of the international basel capital accord and bank supervision and efforts aimed at improving market discipline. a critical element of improved risk - based supervision is risk - based capital standards that are tied more closely to economic risk. capital standards provide an anchor for virtually all other supervisory and regulatory actions and can support and improve both supervisory and market discipline. for example, early intervention policies triggered by more accurate capital standards could prove to be important in crisis prevention. payment and settlement systems financial consolidation is affecting the market structures for payment and securities settlement as well as banks'internal systems and procedures for payment and back - office activities. our study concludes that, on balance, financial consolidation has led to a greater concentration of payment and settlement flows among fewer parties. fortunately, our analysis indicates that the greater concentration of payment flows does not appear to have decreased competition in markets for payment and settlement services. however, we suggest that it would be advisable for government authorities to continue to monitor competition in the payment system. in contrast, our work indicates we should closely monitor the risk implications of consolidation in payment and settlement systems. on the one hand, consolidation may help to improve the effectiveness of institutions'credit and liquidity risk controls. for example, increased concentration of payment flows may allow institutions to get a more comprehensive picture of settlement exposures or create a greater ability to net internal payment flows. in addition, central banks have made major efforts over recent decades to contain and reduce systemic | . 4 % of gdp in 2016, bringing down the share of public debt in gdp. this helped achieve the three - year objectives of the fiscal consolidation programme, a year earlier than planned. at the same time, fully covered by foreign direct investment for the second year in a row, the current account deficit declined from 6. 0 % in 2014 to 4. 0 % of gdp in 2016. the influence of external factors and the increased resilience of our economy are also evident in the fx market β through maintenance of relative stability of the dinar exchange rate, which is no longer news for anyone. depreciation pressures, emerging late last and early this year, were in part generated by uncertainties in the international financial market and in part by the seasonally higher demand in foreign currency for the purchase of energy products. in an effort to ease excessive shortterm volatility of the exchange rate, the national bank of serbia intervenes in the fx market and will continue to do so, regardless of the direction of pressures. this means intervening on both sides. in so doing, we do not target any particular level of the exchange rate nor do we intend to influence its trend. ladies and gentlemen, dear colleagues, as is well known to you, the task of the national bank of serbia is to preserve not only price, but financial stability as well. the bank has been striving to strengthen the capacity of banks to resolve the npl issue and to encourage the development of the npl market. as a result of measures taken under the npl resolution strategy, the share of npls in total loans declined significantly β according to preliminary data, from 21. 6 % at end - 2015 to 17. 0 % at end - 2016, their lowest since 2011. this only serves to confirm once again that a systemic, interinstitutional and coordinated approach yields results in this area. while my associates from the directorate for economic research and statistics will present in detail our assessments of macroeconomic developments and our latest projections, i would like to highlight several key messages. the national bank of serbia will continue to keep a close eye on and to assess the developments and trends in the domestic market and the international environment. as so far, we shall use all available instruments to ensure that inflation stays low and stable in the medium run. this is the best way in which a central bank, while at the same time maintaining financial stability, can contribute to economic growth. growth is expected to accelerate | 0 |
, and a pick - up in investment activity, as uncertainty about the political situation diminishes. after widening to 3. 6 % of gdp in 2018, the current account deficit will range between 3 % and 4 % of gdp in 2019 and 2020. in 2019, the deficit will narrow to 3. 1 % of gdp, due to the 2018 bumper corn harvest and a drop in energy prices. in 2020 β 2021, the current account deficit will widen slightly, on the back of a decrease in gas transit, a poorer grain harvest, and a rise in investment imports after the elections. a widening in the trade deficit will be offset by greater private remittances, supported by the higher incomes of labor migrants. a key assumption of the macroeconomic forecast is that ukraine will continue to cooperate with the imf and enjoy relatively favorable access to the international capital markets. 2 / 3 bis central bankers'speeches at the same time, reasonably high interest rates will contribute to the inflow of debt capital, which, together with continued inflows of foreign direct investment, will finance the current account deficit. external official borrowing and the government β s placement of eurobonds will make it possible to repay external public debt, the repayments of which will peak in 2019 β 2020. this will improve the expectations of economic agents and promote macrofinancial stability. as a result, international reserves will hover around usd 21 billion in 2019 and 2020. the usual increase in uncertainty during presidential and parliamentary elections poses the main risk to the said macroeconomic forecast, including ukraine β s ability to meet its inflation target in 2020. this, in turn, could affect inflation expectations. external risks are also important. these include : a more significant slowdown in the global economy, including in the economies of ukraine β s main trading partners ; a drop in the global prices of the commodities exported by ukraine ; persistently strong labor migration and the resulting pressures on wages ; geopolitical risks, such as an escalation of the azov sea conflict, which could cut export earnings ; uncertainty over the volume of gas transit through ukraine starting in 2020, as pipelines bypassing the country are being built to deliver gas to europe. why did the board decide to leave the key policy rate unchanged? taking into account the updated macroeconomic forecast and the above risks, the nbu board deems it necessary to maintain the existing reasonably tight monetary conditions in order to ensure that inflation returns to its target range in q1 | 2020. what will the nbu β s monetary policy stance be in future? any further changes to the key policy rate will depend on inflation developments, as well as on whether or not risks to price stability materialize. the board sees reasons for launching a monetary easing cycle, as risks of inflation decrease steadily, and inflation returns to its target, along the trajectory outlined in the central bank β s new macroeconomic forecast. however, if underlying inflationary pressures rise and risks that inflation may not return to its target increase, the nbu could raise the key policy rate. a new detailed macroeconomic forecast will be published in the inflation report on 7 february. a summary of the discussion by monetary policy committee members that preceded this decision will be published on 11 february. the next meeting of the nbu board on monetary policy issues will be held on 14 march. thank you for your time! 3 / 3 bis central bankers'speeches | 1 |
) β how does capital affect bank performance during financial crises? β, journal of financial economics. blum, j ( 2008 ), β why basel ii may need a leverage ratio restriction β, journal of banking and finance, 2008, vol 32, issue 8, pp 1699 β 1707. blundell - wignall, a and atkinson, p ( 2011 ), β global sifis, derivatives and financial stability β, oecd journal : financial market trends, vol. 2011, issue 1. blundell - wignall, a and roulet, c ( 2013 ), β business models of banks, leverage and the distance - to - default β, oecd journal : financial market trends, vol. 2012, issue 2. brealey, r, cooper, i and kaplanis, e ( 2011 ), β international propagation of the credit crisis : lessons for bank regulation β, journal of applied corporate finance, vol 24, no 4, pp36 - 45. brown, s and vitter, d, β ending too big to fail : terminating bailouts for taxpayer fairness act β, http : / / www. brown. senate. gov / download / tbtf - bill - summary cihak, m, demirguc - kunt, a, martinez peria, ms and mohseni - cherghlou, a ( 2012 ), β bank regulation and supervision around the world : a crisis update β, world bank policy research working paper series, no 6286. demirguc - kunt, a, detragiache, e and merrouche, o ( 2010 ), β bank capital : lessons from the financial crisis β, policy research working paper series, no 5473. fisher, r ( 2013 ), β ending'too big to fail': a proposal for reform before it's too late β, remarks before the committee for the republic, washington d. c., available on : http : / / www. dallasfed. org / news / speeches / fisher / 2013 / fs130116. cfm furlong, f ( 1988 ), β changes in bank risk - taking, federal reserve bank of san francisco economic review, spring, pp 45 - 56. gigerenzer, g ( 2007 ), gut feelings : the intelligence of the unconscious, penguin / allen lane. goodhart, c ( 2011 ), the basel committee on banking supervision : a history of the early | , as of β all times β β. 1 indeed, turner β s legacy endures today through his influence on art for over two centuries, to the prize that bears his name to celebrate british contemporary art, to this magnificent gallery, the turner contemporary. soon turner β s work will feature on another 2 billion works of art β the new Β£20 notes from the bank of england. the champion, newspaper article, published 7 may 1815. all speeches are available online at www. bankofengland. co. uk / news / speeches banknote design the new Β£20 note celebrates turner, his art and his legacy in all their radiant, colourful glory. the design features turner β s self - portrait, from 1799, alongside one of his most eminent paintings, the fighting temeraire. 2 this painting is a tribute to the hms temeraire β which battled with distinction during nelson β s victory at trafalgar in 1805 β and an elegy to the decline of sail, showing the great warship being pulled by a steam tug to her last berth to be broken up for scrap. the novelist william makepeace thackeray called it β as grand a painting as ever figured on the walls of any academy, or came from the easel of any painter β. 3 the public clearly agrees, voting it britain β s greatest painting in a bbc poll in 2005. 4 the fighting temeraire exemplifies turner β s innovative use of light, shade, colour and tone. these contributions to the visual arts are captured in the quote β β light is therefore colour β β which is from an 1818 lecture by turner. turner rarely signed his paintings, so the signature on the banknote was taken from his will. that is fitting because, in a codicil to that testament, he bequeathed his paintings to the nation, and in doing so made a significant contribution to british society. few turners are locked away in private collections or spread to the four winds. the vast majority are free for the british public to see across some of our greatest galleries. the note references several of these galleries. a small purple foil on the reverse side of the note echoes the spiral staircase at tate britain, which holds most of the turner bequest in the clore gallery. the main foil of the note contains an image of turner contemporary in blue. and the shape of the window around the foil is based on the trafalgar fountains, which are an iconic feature in the square outside the national gallery where the | 0.5 |
##ider, what type of monetary policy implementation framework suits best for the eurosystem in the longer run. as a result of our framework review, the eurosystem will move back towards a system in which marginal liquidity is eventually supplied through short - term credit operations at a fixed rate and with full allotment procedure. hence, the new framework can be seen as a move from a supply - driven balance sheet towards a demand - driven one. in some sense, this marks a natural return towards our original thinking that led us to design a demand - driven system based on refinancing operations, and a liability driven balance sheet. we have started a journey to normalize our balance sheet, but its size will be different from what it was before the series of crises started some 15 years ago. the natural size of our balance sheet has doubled thanks to the increase in the autonomous liquidity factors. furthermore, we will continue meeting the banks'demand for reserves in full also in the future. hence, this demand will be an important driver of the overall amount of liquidity and thus also the size of the central bank balance sheet. yet, even if there 2 / 3 bis - central bankers'speeches are uncertainties in the way, our direction is clear, we will be unwinding the legacy monetary policy outright portfolios, and this process will take quite some time before we introduce new ways to provide the banks with their structural liquidity needs. as there are many uncertainties around the monetary policy implementation landscape today, we must stand ready to react and calibrate the size and composition of our balance sheet also in the future if and when monetary policy does not transmit smoothly. after all, monetary policy operational framework needs always to serve our monetary policy ultimate goals β price and financial stability needs will always dominate in our thinking about the optimal balance sheet. so, in the eurosystem, we will carefully monitor the evolution of all the relevant markets and indicators and stand ready to adjust the framework design and parameters if necessary. thank you for your attention. i am looking forward to our discussions in which we may dig deeper into the design of central bank operational frameworks. 1 one could add gold and imf receivables to the natural central bank assets, but when netted with their liability side counterparts ( revaluation accounts and imf special drawing rights ), their volume would not change the big picture. 3 / 3 bis - central bankers'speeches | , i would conclude that the liability side dominates the determination of the natural size of the eurosystem balance sheet size. thus, it would be natural for the euro area banking sector to operate in a liquidity deficit, and for the eurosystem to cover this structural liquidity gap by providing central bank reserves with its monetary policy 1 / 3 bis - central bankers'speeches instruments. accordingly, originally the main refinancing operations were used as the marginal tool for liquidity provision, and the mro rate was setting the starting point of the euro yield curve. this framework lasted until the global financial crisis. now, even if we can derive rather easily this kind of a natural starting point for the central bank balance sheet, it is not the end of the story. natural balance sheet size does not need to equal its optimal size. from time to time, the quest for price stability and the need to facilitate financial stability, may call the central bank to make nonstandard monetary policy interventions, resulting in liquidity provision beyond the structural liquidity needs of the banking sector. in such a case, at some point, the asset side starts to dominate the size of the balance sheet, and the rate at which the excess liquidity is drained becomes the instrument for setting the interest rates. this has been, as you well know, the case for the eurosystem for a decade or so. first to address the risk of entering into a deflationary spiral, and then to address the financial stability concerns posed by the pandemic, the governing council engaged in large scale asset purchases. accordingly, for more than a decade now, the asset side has dominated our balance sheet, and we've been steering money market rates with the rate applied to banks'deposits with us. the switching from liquidity provision to draining it, was not a deliberate decision based on monetary policy implementation aspects nor the optimal balance sheet structure. monetary policy implementation changed fundamentally as the world around us changed, requiring monetary policy responses that strongly shaped our balance sheet. the need to guarantee financial stability when the global economy is being hit by a pandemic clearly increased the optimal central bank balance sheet to levels significantly larger than the natural size would imply. now that those forces are no longer prevailing, we've been able to return to setting monetary policy stance with our standard tool ( interest rates ), and to scale back the extraordinary provision of credit to banks. this has been an opportune moment for us to recons | 1 |
the real estate in japan, the capacity of monetary policy to stimulate demand and inflation is bound to be severely impaired. even if such strategy had proved to be successful, it would only have delayed the inevitable adjustment between the asset prices and economic fundamentals. 13. if central bank's predicting ability of post - bubble developments has to remain less than perfect, would it better once again to consider aggressive tightening when a bubble is perceived to be growing? this is the question i talked about three years ago here. i remain skeptical as i was. however given the fact it is always the preceding massive flows of credit that become worthless once the tide is reversed, leaving severe damages on the balance sheets of parties concerned, it might be worth considering possible ways to focus on restraining β excessive β credit flows during asset market upswings ( see chart 6 for the development of credit and asset prices in japan ). chart 6. credits and asset prices in japan notes : real aggregate asset price indices are a weighted average of equity and residential and commercial estate price indices deflated by consumer prices. the weights are based on the composition of private sector wealth. sources : bank for international settlements, quarterly review, international banking and financial market developments, august 1999 14. let me conclude by adding a few observations in somewhat broader context. it is ironic that, as the track record shows ( chart 1, chart 2 ), the bank of japan followed a path in the 1980s and early 1990s that could be regarded as fully consistent with some policy rule such as taylor rule, and yet suffered from the wildest swings of asset markets. suggestions have been made that the bank should have deviated from such implicit rule - based path both in times of upswing as well as downswing. from my perspective, for discussions on policy rules to be more relevant and robust, they should at least take into account major swings of asset prices. our experience shows that price stability, by making low interest rate possible, can pave a way to a major asset price bubble when it is coupled with excessive optimism for the future. 15. finally, what matters most in the post - bubble development is the magnitude of the lost capital and its distribution ie who in the system has to absorb the loss. in japan, that magnitude has been overwhelming and has concentrated in the banking sector. when an economy is faced with the size of lost capital as japan was, well - functioning financial infrastructure is crucially important for its prompt resolution. infrastructure in this context includes proper accounting | inflation rate required to offset the negative shock generated by collapsing asset bubbles should well exceed the target if the country in question were pursuing an inflation targeting. the central bank pursuing such a strategy would have to be fully convinced, substantiated by quantitative analyses, and strongly concerned about the risk of deflation a few years into the future. without such a superb insight, it would be hardly possible for a central bank to abandon a price target, explicit or implicit, at a stage when deflation is yet a remote potential risk. 9. economic predictions are inevitably clouded by uncertainties. what makes economic reading in the post - bubble period uniquely difficult is the great uncertainties associated with the asset market developments. first, we cannot be sure how the asset markets will develop and where an equilibrium with the real economy will be restored. in addition, different asset segments can show divergent price patterns, as was the case in japan's stock and real estate markets in 1990. such divergence can emerge at an early stage when bubble - day inertia of wishful thinking lingers with the confusing effects on expectations. thus the possible size of capital loss and its harm on the financial health of businesses and households is extremely difficult to estimate. 10. second, uncertainty also exists in the transmission mechanism between asset prices and real activity and inflation. in an economy like japan where banks dominate financial intermediation ( chart 3 ), capital losses tend to gradually accumulate in the banking system. indeed there was a presumption that shocks would be contained within the financial sector and would not spread to the real side of the economy. therefore, there was a widespread belief that the situation would turn around if business could be sustained until land prices started to rise again. when bank capital was eroded to a critical threshold, however, an acute credit crunch erupted. it is against such uncertain setting that economic forecasting must incorporate the timing and magnitude of the β headwind β generated by the deteriorating balance - sheet conditions of businesses, households and particularly banks. chart 3. financial structures [ 1 ] financial liabilities held by non - financial corporations ( ratio to total financial liabilities ) [ 2 ] financial assets held by households ( ratio to total financial assets ) notes : 1. figures are those for the end of 1999. 2. regarding financial debt for enterprises, stocks are evaluated at the market value, and, thus, do not necessarily correspond to the accumulated funding by enterprises. it should be noted that u. s. for equi | 1 |
##n memberi kesan positif kepada usaha - usaha kita untuk menjadikan malaysia sebagai pusat kewangan islam serantau. tuan - tuan dan puan - puan, usaha kita ialah untuk membangunkan sebuah sistem kewangan islam sebagai satu proses perantaraan yang dapat menyumbang kearah memperkayakan sumber ekonomi secara menyeluruh bagi menjana pertumbuhan dan pembangunan yang lebih besar. selaras dengan perkembangan semasa, institusi kewangan islam perlu bersedia untuk menghadapi cabaran dan peluang dalam memenuhi kehendak ekonomi yang sentiasa berubah. prospek masa depan dan kejayaan industri perkhidmatan kewangan islam bergantung kepada gandingan usaha semua pihak iaitu pengawalselia, industri, peserta pasaran dan masyarakat umum. sehubungan ini, saya ingin mengucapkan syabas dan tahniah kepada aibim di atas usaha berterusan untuk menganjur ekspo perbankan islam dan takaful ini sebagai acara tahunan. dengan lafaz bismillahirrahmanirrahim, saya dengan sukacitanya merasmikan pelancaran β ekspo perbankan islam dan takaful 2004 β. terima kasih. | of takaful in the eyes of the public and further widening the industry β s growth prospect. with this aim in mind, it is critical for industry players to leverage on the readily available channels to reach to the masses and employ agents and bancatakaful to the fullest to maximise its potential. the third dimension of growth which is integral to the nation β s high income agenda relates to the opportunities to be harnessed under the initiative to consolidate malaysia β s position as an international islamic financial centre ( mifc ). as industry is well aware, the mifc initiative seeks to enhance the international dimension of malaysia β s islamic finance. the prospect is most compelling for the takaful industry. malaysia is already at the forefront in the development of takaful, particularly family takaful, compared to other market. building on our strengths, experience and achievements, the malaysian takaful industry with the highest number of takaful and retakaful operators, is well - positioned to seize the enormous opportunity to export takaful benefits to the estimated 1. 5 billion muslims around the world whom are currently underserved by the insurance industry. this presents a huge window of opportunity for our takaful operators to accelerate their regional and global orientation and move up the global value chains. it is therefore important for strategic international partners such as ing to explore all possible avenues to elevate the business potential of takaful internationally. a critical factor that will determine the success in taking the industry to the next level of development is the existence of players with the right quality and calibre, as well their readiness in terms of capacity and capability to formulate and execute successful strategies in response to new market opportunities. in this rapidly evolving environment, responsiveness to consumer needs is a crucial test that defines success. the takaful industry in malaysia has never been about shariah conformity being its only value proposition. with consumers becoming increasingly discerning and the market being more competitive, factors such as innovative product design, price competitiveness, transparency and service quality have all been important determinants in winning and securing customer loyalty. the ability of takaful operators to deliver such value propositions has been, and will continue to be, amongst the key success factors to successfully position takaful in malaysia to appeal to both muslim and non - muslims, whether corporates or individuals. it is our earnest aspiration that the entry of ing public takaful ehsan will further add | 0.5 |
to this action would likely be lost if implementation were significantly delayed, as private securitization activity would likely be inhibited in the interim. implications for financial markets and monetary policy most recently, as i am sure committee members are well aware, subprime mortgage losses that triggered uncertainty about structured products more generally have reverberated in broader financial markets, raising concern about the consequences for economic activity. as i noted in a speech last month at the economic symposium hosted by the federal reserve bank of kansas city, the turbulence originated in concerns about subprime mortgages, but the resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans. these wider losses reflect, in part, a significant increase in investor uncertainty centered on the difficulty of evaluating the risks for a wide range of structured securities products, which can be opaque or have complex payoffs. investors also may have become less willing to assume risk. some increase in premiums that investors require to take risk is probably a healthy development on the whole, as these premiums have been exceptionally low for some time. however, in this episode, the shift in risk attitudes combined with greater credit risk and uncertainty about how to value those risks has created significant market stress. on the positive side of the ledger, past efforts to strengthen capital positions and financial market infrastructure places the global financial system in a relatively strong position to work through this process. in response to these developments, the federal reserve moved in early august to provide reserves to address unusual strains in money markets. on august 17, the federal reserve board announced a cut in the discount rate of 50 basis points and adjustments to the reserve banks'usual discount window practices to facilitate the provision of term financing for as long as thirty days, renewable by the borrower. the purpose of the discount window actions was to assure depositories of the ready availability of a backstop source of liquidity. the federal reserve also took a number of supplemental actions, such as cutting the fee charged for lending treasury securities. earlier this week, federal open market committee lowered its target for the federal funds rate by 50 basis points. the action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. recent developments in financial markets have increased the uncertainty surrounding the economic outlook. the committee will continue to assess the effects of these and other developments on economic prospects and will act as needed | david dodge : summary of the latest monetary policy report update opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report update, ottawa, 24 january 2008. * * * good morning. i'm pleased to be here with you today, for my final press conference as governor of the bank of canada, to discuss our january monetary policy report update. the canadian economy continues to operate above its production capacity, despite some slowing in growth and inflation in the fourth quarter of 2007. financial conditions have deteriorated since october, leading to tighter credit conditions in industrialized countries. given this, and a deeper and more prolonged decline in the u. s. housing sector, the outlook for the u. s. economy in 2008 is now significantly weaker than at the time of the october mpr. the weaker u. s. economy will lead to additional downward pressure on canada's export growth. despite tighter credit conditions, domestic demand in canada is expected to remain strong, supported by continued income growth associated with the increase in commodity prices seen since october. overall, the bank now projects that the canadian economy will expand by 1. 8 per cent in 2008 and 2. 8 per cent in 2009. this growth profile implies that the economy will move into excess supply in the second quarter of this year, and then return to balance in early 2010. inflation is projected to fall below 1 1 / 2 per cent by the middle of this year before returning to 2 per cent by the end of 2009. this reflects a price - level adjustment related to increased competitive pressures in the retail sector stemming from the level of the canadian dollar, as well as the recent reduction in the gst. excluding the impact of the gst reduction, total cpi inflation is projected to average close to the 2 per cent target throughout 2008 and 2009. of course, there are a number of upside and downside risks to the bank's base - case projection for inflation. but overall, we judge these risks to be roughly balanced. on 4 december and on 22 january, the bank lowered its target for the overnight rate by onequarter of one percentage point, bringing it to 4 per cent. further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance, and to return inflation to target over the medium term. | 0 |
, namely the establishment of financial backstops for the euro area. the european financial stability facility ( efsf ) was introduced as a temporary mechanism in 2010. two years later, the european stability mechanism ( esm ), a permanent mechanism that may funnel, under effective strict conditionality, financial assistance to euro area member states experiencing financing difficulties was established under an intergovernmental agreement. the efsf and the esm, which together have a combined lending capacity of β¬700 billion have, so far, disbursed about β¬250 billion of financial assistance to five member states. in december 2014, the esm board adopted the direct recapitalization instrument ( dri ), which provides the esm with the capacity to directly recapitalize banks in the euro area under certain conditions, thereby contributing to severing the link between banks and public finances. iv. the way forward : a longer - term view let me now briefly highlight two areas that could be of overriding importance for the more longer - term future design and functioning of the european union and the euro area, i. e. the capital markets union and the way towards a type of β fiscal union β. the capital markets union the capital markets union ( cmu ), which is high on the agenda of the luxembourg presidency, is a major undertaking, a genuine european - wide project. the cmu is welcomed by the eurosystem, which delivered its opinion several months ago. on 30 september 2015, the european commission issued its action plan on building a capital markets union. 11 it aims to put in place the building blocks of a well regulated and fully functioning cmu in the eu by 2019. while the details of the design of the cmu remain to be defined, given the complexity of the undertaking and the potentially far - reaching implications, a thorough stock - taking of the issues at stake should be followed by prioritized and targeted outcomes. the cmu is intended to deepen the integration of capital markets in the european union. deeper integration would foster the efficiency of capital markets by providing businesses with access to a wide range of sources of capital from all over the european union and by offering investors and savers additional investment opportunities, thereby enhancing economic growth and job creation. in this context, let me recall that the eurosystem is particularly supportive of measures aimed at reviving securitization. it welcomed the draft eu regulation introducing criteria for simpler, more transparent and standardized asset backed | of these were of an external origin. this said, let me take a step backwards to the period after world war i. after world war i, the german zollverein was dissolved and luxembourg had to look for a new economic partnership. in a referendum organized in 1919, a large majority of the luxembourg population expressed a preference to enter into an economic union with france. however, such an interest was not reciprocal and luxembourg finally turned to belgium, which led to the establishment of the belgo - luxembourg economic union. the economic union, mainly based on a customs union, became effective in 1922. it included elements of monetary cooperation, which led to the establishment of a monetary association between belgium and luxembourg in 1935. the monetary association was highly asymmetric. luxembourg was not granted a central bank and was not directly involved in monetary policy decisions. in a nutshell, it had no monetary sovereignty. carlo hemmer. bis central bankers β speeches with the introduction of the euro, the monetary association was dissolved. as requested by the maastricht treaty, luxembourg established a national central bank in june 1998, before the introduction of the euro. this very succinct overview shows that economic and political integration have throughout luxembourg β s history been a key factor for the development of the luxembourg economy, a very small open economy, which is export - led and partly import - driven. i mentioned the zollverein, followed by the creation of the belgo - luxembourg economic union2 and monetary association. that process was followed by european integration, starting with the european coal and steel community ( ecsc ), and followed later by the creation of the european economic union and the european union. the symbiotic relationship with europe has served the country well and the pro - european public opinion in luxembourg towards europe has remained unscathed despite the challenges the country, the european union, and, more specifically and recently, the euro area have been facing over the years, especially the global financial crisis that started unfolding some eight years ago. this brings me to the luxembourg presidency β s programme, which is ambitious and based on seven pillars : β stimulating investment to boost growth and employment, β deepening the european union β s social dimension, β managing migration, combining freedom, justice and security, β revitalising the single market by focusing on its digital dimension, β placing european competitiveness in a global and transparent framework, β promoting sustainable development, β strengthening the eu β s presence on the | 1 |
. see harris interactive poll ( 2011 ). see corelogic ( 2011 ). i have argued that financial institution leverage undercuts financial stability. however, in practice, i believe that it would be administratively challenging to have different tax treatments for given corporations based on whether they are β financial β or β nonfinancial. β hence, my suggested policy proposal applies to all corporate debt. bis central bankers β speeches i regard these two proposals for the tax code as being entirely natural ones to consider in light of the recent financial crisis. but i would also encourage policymakers in the tax arena to ask broader questions about the mortgage interest and corporate interest tax deductions. what are the social benefits associated with these deductions? can these social benefits be achieved using an approach that does not undercut the stability of the financial system? for example, suppose that a policymaker likes the mortgage interest deduction because he or she believes that it encourages home ownership. that policymaker could consider replacing the mortgage interest deduction with a tax credit that offsets part of a buyer β s down payment toward a home purchase. such a tax credit would encourage home ownership without simultaneously providing more incentives for households to accumulate more debt. similarly, a policymaker may like the corporate interest tax deduction because it stimulates business investment. that policymaker could consider replacing the corporate interest tax deduction with a lower corporate income tax rate. the lower corporate income tax rate would encourage business investment without simultaneously providing incentives for corporations to acquire leverage. let me wrap up. in a speech last october, janet yellen, the vice chair of the board of governors of the federal reserve system, gave a speech about the roots of the recent financial crisis. 9 as i have done today, she emphasized the critical role played by excessive household and financial institution leverage in generating the crisis. she described how the changes in supervision and regulation contained within the dodd - frank act would put new and important brakes on these kinds of build - ups. i agree with her completely about these benefits of the new supervisory and regulatory regime. but i also agree with her statement that β systemic risk surveillance will demand herculean efforts by the regulatory agencies. β in my view, this observation means that other elements of the policy environment need to be as supportive as possible of the regulatory agencies. it is for this reason that i believe that policymakers should be willing to reconsider the extent of leverage subsidies within the u. s. tax code. that brings me | amando m tetangco, jr : the central bank of the philippines β supporting academic excellence speech by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the bsp up centennial professorial chairs launching ceremony, quezon city, 7 october 2008. * * * senator angara, president roman, chancellor cao, our friends from the up community, fellow supporters of up, special guests, good afternoon. on behalf of the bangko sentral ng pilipinas, i am here to launch the seven bsp - up centennial professorial chairs. we believe that setting up professorial chairs is the best way to institutionalize our support to academic excellence that is the hallmark of the university of the philippines. as i said before, the concentration of up alumni in legal, political and government circles as well as in the scientific pool speaks volumes about the university β s central role in nationbuilding. by helping mold the minds of the nation β s best and brightest or what we call iskolars ng bayan, by stoking the engine of innovation, and by providing an intellectual compass and healthy critique to public policymaking, up has contributed and continues to contribute to the advancement of our country. the bsp - up centennial professorial chairs managed by the up foundation inc. are professorial chairs donated by the central bank of the philippines in 1982 - 1983 during up β s diamond jubilee celebrations. the original endowments for these chairs was p150, 000 each. we raised each endowment to p1, 500, 000 by donating an additional p1, 350, 000 per chair. meanwhile, the bsp up centennial professorial chair in business administration has an endowment of p1. 5 million from several donations made by the cbp and the bsp since 1981. we raised the endowment to p3 million through an additional donation of p1. 5 million. the terms also have been enhanced to maximize the benefits to the chairholder. since 1983 when the professorial chairs were first awarded, they have been held by distinguished scholars whose research and public service have contributed significantly to the shaping of policy decisions, the enactment of landmark legislation and the formation of institutions, both in the government and private sectors. the decision of the bangko sentral to establish additional professorial chairs namely, the bsp sterling professorial chair in monetary and banking economics at the up school of economics and the bsp sterling | 0 |
euro area economy remains depressed. only if all economies act with the necessary force to contain the recession will the loss in output for the entire eurozone be minimized. then there β s the risk of political spillovers if responses are asymmetric. any perception that common action is absent in times of desperate crisis would dilute public support for the european union β an effect that is already visible in countries on the frontline of the health crisis. unchecked, these perceptions will weaken centripetal forces in the union and strengthen centrifugal ones. ultimately, they could erode trust in the euro. so it β s clear why a forceful, symmetric european response is needed. failure to act now will not insulate taxpayers from the costs of this crisis. quite the opposite : it will amplify those costs when they finally come due. it will also weaken the policy responses already being undertaken. 1 / 2 bis central bankers'speeches for example, without visibility on future sovereign funding costs and rollover risks, government guarantees on bank loans will either be priced differently across countries β or fewer such loans will be extended. either way, the result will be fragmentation and a more persistent loss of economic potential. a european fiscal response must be based around three principles. first, the size of the fiscal reaction should be proportionate to the magnitude of the shock. second, it should not aggravate fragmentation stemming from differences in initial fiscal positions. third, it should not skew the playing field within the european single market. viable firms should be able to withstand this crisis no matter where in the eurozone they are located. the fiscal response of european countries has thus far been inconsistent with these principles. the countries least affected by the pandemic have enacted the largest fiscal responses, while the worst - affected countries have taken the smallest steps. this appears to be, in part, because the latter fear being unable to shoulder the debt burden that an optimal response would entail. the threat to the single market is clear : uneven fiscal support implies that a firm β s location, rather than its business model, will be the decisive factor in determining whether it survives this crisis. rather than transfers between member states or a mutualisation of existing debts, what is needed now is for countries to use their collective strength to ensure that the european response is commensurate with the size of the shock and that all countries can benefit from low funding costs and zero rollover risk. as policymakers debate the | technicalities that allow for a combination of adverse scenarios ; - started to execute fixed - price ( unlimited amount ) weekly reverse repo transactions and longer term reverse - repo transactions, and extended the list of eligible collateral for these transactions, to better suit the liquidity needs of the banks ; - doubled the usage rate of the required reserves in order for banks to use more of their reserves with the central banks, should they need it during the maintenance period ; - prepared and forwarded to parliament changes in the deposit insurance legislation. the approval of these changes has provided our depositors with a significant and permanent increase in the maximum amount of their deposits that is fully insured ; - lowered in january 2009 our policy interest rate by 50 basis points, to 5. 75 percent, on the back of declining inflationary pressures. since then, concern about the exchange rate developments and potential impact on inflationary expectations and financial stability have been dominating the discussions ; in addition, in an improved framework of the internal discussions and decision - making, we are reviewing our β back - up β plans, to assess the possibility of new actions, should we encounter a worsening scenario. now is the time to introduce policies that will strengthen the economic environment and the financial stability in our region... in a global level, it has now become clear that the recent crisis was a consequence of wrong incentives that supported unbalanced financial activity development and misconception of risk assessment, pricing and management. the supervisory institutions, trapped sometimes in situations of complicated structures, insufficiency of resources, inability to follow and understand market financial innovations and risk location, were not able to correct the situation in due time. the need to restore and maintain financial stability during this unprecedented crisis, has called for swift, coordinated and extraordinary measures by the public authorities, both in the area of monetary and fiscal policies. central banks have abandoned almost any restriction and have even adopted unconventional measures in providing liquidity to the financial markets. governments have shown a very strong commitment to reduce systemic risk by saving important financial institutions, provide guarantees for inter - bank lending, raise the level of deposit guarantees for the public etc. this crisis is providing the public authorities and markets wherever in the world, with the best opportunity to identify deficiencies and correct those for preventing a similar crisis in the future. such task requires strong and visionary measures, which in the medium term will enable the strengthening of the supervisory architecture in different levels, but also will create conditions, including macroeconomic and | 0 |
welcome address by bank of greece governor yannis stournaras at a formal dinner in honour of jean - claude juncker, former president of the european commission and former prime minister of luxembourg 18 / 05 / 2022 - speeches on the occasion of his election as honorary member of the academy of athens. it is a great pleasure and privilege for the bank of greece to welcome president jean - claude juncker, on the occasion of his election as honorary member of the academy of athens. we welcome a great european statesman and a great friend of greece. a man who has contributed so much to greece staying in the eurozone in 2012 and 2015, as i have witnessed first - hand in these difficult years, first as minister of finance and then as governor of the bank of greece. a statesman who, during his long years of service in senior government positions both in luxembourg and at european institutions, proved to be one of the staunchest champions of european integration and one of the strongest leaders who handled successfully the crises that the eurozone faced over the last several years. a visionary leader who contributed enormously to the creation of our common currency, the euro, who strongly believed in it since its inception and fought hard to ensure its stability throughout these years. born in luxembourg, a country in the heart of europe, our dearest jean - claude realised at a young age that the future of europe lies in the close cooperation of its member - states and mainly in the gradual integration of national policies and rules. having left his mark on his country β s politics, he rose to top positions in the european union and, in this capacity, worked hard on european integration. he is one of the great europeanists, following in the footsteps of helmut kohl and francois mitterrand, with his firm conviction that european integration is the only way forward and that this path is irreversible. president juncker was one of the most consistent and influential advocates that greece could solve its fiscal problems within the eurozone, rather than outside, as some sadly wanted at the time. he strongly resisted the idea that greece should be sacrificed like iphigenia to allow the fleet to sail. this was due not only to his expressed love for greece and its heavy cultural heritage, but mainly to his strong belief in the european values and in the basic principle of keeping the eurozone together. he fervently defended greece β s place in the european family, by deeply understanding and recognising the efforts that the | per cent of gdp in 2008. these large and growing imbalances should have sounded warning alarms to the financial markets, but they did not do so for some time. despite relatively low spreads on greek sovereigns following the outbreak of the global financial crisis, as early as in 2008 the bank of greece began warning of the dangers inherent in the twin deficits. bis central bankers β speeches outbreak of the crisis these dangers became evident β belatedly β to the financial markets in the fall of 2009 with the news that the fiscal deficit for that year would be much higher than had been earlier projected. interest - rate spreads began a relentless upward climb and the sovereign became cut off from the global financial markets. in may 2010, the government agreed to an adjustment programme with the imf and greece β s euro - area partners in order to meet its financing needs. this adjustment programme was built around two key pillars. a. fiscal consolidation b. structural reforms ( including privatizations and measures to combat tax evasion ) the government placed more emphasis on the first and less emphasis on the second pillar. moreover, the fiscal mix relied more on tax increases than on spending cuts. the bank of greece had advised that the mix should include 1 / 3 revenue increases ( mainly through broadening the tax base ) and 2 / 3 spending cuts. fiscal consolidation led to a recession that was deeper than expected, partly because it relied heavily on increases in tax rates and was not combined with structural reforms to boost growth prospects. what had started out as a sovereign debt crisis spilled over to the banking system. prior to the outbreak of the sovereign crisis, the banking sector had sound fundamentals β with high cars, low loan - to - deposit ratios, and essentially no toxic assets of the kind that set - off the 2007 global financial crisis. the size of the banking sector at the outset of the crisis β at 200 % of gdp β was much smaller than in other countries that experienced crises. in contrast to what happened in other countries, in greece it was the sovereign crisis that led to a banking crisis, not the other way around. how did that happen? first, in terms of liquidity. a series of sovereign downgrades, and then bank downgrades, forced the banks out of the global financial markets. uncertainty led to large deposit outflows. banks had to resort to central bank funding, at first through eurosystem monetary policy operations, but gradually, due to the lack of eligible collateral, to emergency liquid | 0.5 |
, the ecb will continue to play an active role in safeguarding financial stability in europe. the ecb vice president will go into greater detail at tonight β s conference dinner on how we are preparing for that task. the main challenges that i see ahead in the area of regulating systemic risk are as follows : first, determining the perimeter of regulation. it is important that the regulatory web is cast wide enough to ensure that all systemically important institutions, markets and products are captured. caution is also necessary to avoid that tighter regulation simply shifts activities to unregulated market segments or entities. therefore, the steps taken towards more harmonised banking supervision as well as the progress made in europe towards a directive on alternative investment fund managers, which affect financial markets through their tight web of interlinkages with the financial sector, are appreciated. second, ensuring the availability of information and data. the detection and the early warning on systemic risk crucially depends on the quality and the availability of relevant data as well as on the adequate assessment of the risk bearing capacity of the system. therefore it is important that information is made available that can feed into future assessments of systemic risk, especially in view of this being a key input into the working of the newly founded esrb. in this regard, it will be equally important that the use of qualitative data and market information is strengthened and that this information will be fed into the regular analysis of systemic risk in a more systematic way. and third, measuring systemic risk. a basic difficulty in regulating system risk relate to the difficulty in measuring the contribution of individual institutions to systemic risk. the importance of an institution for systemic risk is a function of its size, interconnectedness and substitutability. one way for regulators and private markets to be able to monitor financial institutions and to assess their systemic reach, is to assess the risk of multiple defaults. measuring such risk is difficult, as measures may be too backward looking or face data limitations. i am happy that after the break we will have the chance to hear about the latest advances on how to measure systemic risk in the keynote speech by professor robert engle from new york university. he has developed a measure of systemic risk capturing the systemic impact of an individual institution β s shortfall and which is published in the so - called nyu stern systemic risk ranking. the keynote speech will be followed by two outstanding papers on measuring systemic risk. kim and giesecke will present a paper estimating systemic risk on the basis | fixed and the banking union completed. otherwise, market participants will continue to fear that local vulnerabilities could eventually spread and destabilise the european banking system before all the firefighting tools are ready to be deployed. the aim must be to move forward swiftly on both risk reduction and risk sharing. risk sharing involves both the public and private sectors, for example by ensuring the same level of deposit protection through a european deposit insurance scheme, but also by continuing to build a capital markets union in europe. the eu and emu also need to face up to their institutional weaknesses. on average, people β s trust in both national and eu political institutions is very low. as regards the national level, we know from the economic literature that strong institutions are crucial for sustainable economic growth and governance indicators suggest that there is room for improvement in many member states. as regards the european level, the gap between people β s expectations and the eu β s institutional setup is widening : β’ first, the perceived legitimacy of the eu remains low. the eu is not regarded as β efficient β and only a minority of citizens feel that their voice counts in the eu. β’ second, opinion polls suggest that citizens are not opposed to european decisionmaking. specifically, they want the eu to concentrate on their key concerns, notably to protect them better from economic and security risks, and to provide solutions. when responding to these expectations, the eu and emu face however two challenges : β’ the first has to do with subsidiarity : it should be made clearer where the eu has an advantage over member states in terms of exercising competence and where not. a better demarcation of competences between the european and national level is desirable β but not easy. loose coordination at european level may give the impression that a competence has been passed to the european level, when in fact it continues to be exercised by member states. the result tends to be that the eu gets blamed for apparently seeking to interfere in national affairs when in fact it does not effectively have the power to do so. it should not be so surprising that in such situations the practical result is a lack of coherent action across the eu. this, in my view, means that responsibilities and accountability lines should be more clearly defined and assigned, as europe has done with the single monetary policy and the creation of the european central bank. β’ the other challenge has to do with intergovernmentalism. the rationale for the intergovernmental approach is to ensure that decisions | 0.5 |
hope to stay in business for the long term, my concern will be that my customers get the best home they can truly afford. i will not encourage them to take a mortgage that requires a payment that their incomes cannot support, even if i can benefit from it in the short term, because i want to preserve my relationship with my client. they will be receptive when i market other services to them, and they will spread the word about my services. relationships build customer loyalty, and loyal customers stick with you in hard times. when going into business for yourself, it seems best to start with a sizeable equity commitment, and try to keep it intact, as your buffer against lean times. it is not a good idea to start a business with borrowed money, because you invariably start with no customers and therefore no revenue. you will need to fund yourself, start - up costs and much of the initial running costs, all out of your own resources, until you have built revenues to the breakeven level. what is more, things do go wrong, and you may find yourself losing some of the start - up capital as a result. if, in addition to all of this, your new venture has to meet bank service charges on a loan from the first month of operation, the chances of a successful launch are much reduced. indeed, your best bet is to launch your business while you are still in salaried employment, if possible, so that there is already a revenue stream to cover early expenses. bis central bankers β speeches i admit that this advice is not helpful to most of this audience, who are already in business, and suffering through some very trying times. i do think that those who may have lost their jobs and are seeking ways to employ their skills and experience in remunerative ways might bear these realities in mind. your best bet is to package your experience and expertise into a product or service which stands out in the crowd that you can sell from home, and to depend on marketing by word of mouth. for all of you who are struggling through the hard times the message is to make a realistic adjustment plan, based on pessimistic assumptions about the future, but with an eye to your long term survival. exactly what that involves will have to be worked out on a case by case basis, because there will be trade - offs, and the options available depend on your starting point. for example, for almost all of us, adjustment means having to shrink our operations | financial centres to the detriment of the caribbean. barbados was more fortunate in 2009. however, while barbados was in the top tier of the recent list of financial centres issued by g20, and therefore had no problem, the principle being applied was one of encouraging compliance through the power of reputational risk. as a consequence many countries within the region have hastened to put corrective actions in place. it now becomes clear that insurance companies are now being more closely monitored as entities which have significant potential for impacting financial system stability. following developments in the us, we in the caribbean have realized this to our chagrin. indeed one of the results of this realization was an extension of support by government to a major insurance company in the us and more recently in trinidad and tobago in not too dissimilar circumstances. indeed, it is interesting to note that the bis has included a unit in its office in basel for monitoring the financial stability of insurance companies, entities which were not formerly included in the financial institutions covered by the bis. other developments in terms of the widening scope of regulation are evident from the fact that whereas central banks in most developed economies previously had stated objectives of price stability and monetary stability, today many central banks who primarily focussed on a price stability objective are widening their expressed mandates to include financial stability. however, as a consequence some central banks are concerned that there is a disconnect between the responsibility for maintaining financial stability and the dependence on others for oversight of a number of financial entities which can influence that stability. however, the jacques de larossiere report presented recently to the imf comes down squarely on the side of placing responsibility for financial stability on the central banks. these developments underscore the importance of the synergies between regulation and compliance. we cannot defer compliance until all the needed revisions to oversight systems are put in place. it must be a simultaneous task. we must work with what we have even though there is need for adjustments. we must ensure that the guidelines we issue continue to be relevant and are framed to best achieve the desired objectives. given the rapid changes in technologies and instruments now available we must be sure that we are targeting the correct regulatory goals. much of my presentation has tended to deal with compliance in financial institutions. however i am aware that today β s seminar is a joint seminar with institute of accountants, so your concerns will not only be about financial firms. compliance in the corporate world will be high on your agendas. in this | 0.5 |
a lack of stability orientation in other policy areas. our task today is therefore to build on our strengths, to take what has worked and to reinforce it. this does not require that we map out an entirely new vision for europe. it requires that we complete our original vision β to fulfil the economic and monetary union ( emu ) based on price stability that we set in motion in 1999. where europe works so what has worked well in europe? first and foremost, the single market supported by the single currency. bis central bankers β speeches the benefits of having a single market and a single currency have been proven, especially in this country. germany β s trade with the rest of the euro area increased from around 25 % of gdp in 1999 to almost 40 % of gdp in 2012. and contrary to a popular perception outside of germany, its trade with its euro area partners is now broadly balanced. similarly, almost 65 % of foreign direct investment in germany now comes from the euro area, and half of german foreign direct investment goes to other euro area countries. over this period, value chains have also extended across europe. on average, around 40 % of foreign value added in euro area exports comes from other euro area countries. this means that increasingly we can talk about goods being β made in europe β β with the german mittelstand standing at the centre of those supply chains. this economic deepening means that it makes less and less sense to think of competitiveness in terms of countries β or of countries being better off alone. each eu country, even germany, is too small to get along in a globalised world. it is connections between firms across europe that will create our industrial strength and competitiveness in the future. and by the same token, the success of german firms is an asset to the rest of europe. our single currency, the euro, has been vital in reaping the gains of the single market. and it has put an end to competitive devaluations and trade wars between our countries. a key condition supporting this process of economic integration has been price stability. the ecb has delivered price stability continuously since 1999. and we will do so in the future. we have been successful in delivering price stability because we have a clear alignment of objectives and instruments β what is called by economists the β tinbergen principle β after the dutch economist jan tinbergen. we have a primary objective of euro area price stability that is established in the eu treaty. and we have | benoit cΕure : the future of europe β building on our strengths introductory remarks by mr benoit coeure, member of the executive board of the european central bank, at the plenary session on β the future of europe β, during the fifth german economic forum, frankfurt am main, 6 december 2013. * * * summary : the crisis has raised some fundamental questions about europe and the future of the euro area. we need to go back to first principles and complete our original vision β to fulfil the economic and monetary union based on price stability. we know what has worked in the euro area : an allocation of tasks based on the primacy of price stability. and we know what has not worked : a lack of stability orientation in other policy areas. the ability of the central bank to deliver price stability ultimately depends on other policies being oriented towards stability as well. also, the ecb needs stable banks to be able to implement its monetary policy successfully. banking union will not be achieved by mutualising risks. on the contrary, banking union reduces risks for taxpayers. our common future cannot be found in the past. the world has changed too much in recent decades to go back. none of our countries are strong enough to survive alone. the euro area needs solidarity mechanisms for extreme events that are out of reach of national policies. but beyond that there is no strong case for further fiscal centralisation. fiscal discipline starts at home. governments have to take responsibility for delivering sound budgetary policies. germany also has challenges to confront to maintain its economic performance. one challenge is the effect of an ageing society on the workforce. another challenge is to raise domestic demand with reforms and investment. ladies and gentlemen, thank you for inviting me to speak to you today. it is an honour for me to speak in this place that played such an important role in german history. our intention today, however, is to reflect on the future β and the future of germany is tied to the future of europe. the crisis has raised some fundamental questions about europe and the future of the euro area. how can we restore stability and sustainable growth? what are the mutual responsibilities between different european countries, especially when they share a common currency? how can we take the people along? my main message today is that we need to go back to first principles. we know what has worked in the euro area β namely, an allocation of tasks based on the primacy of price stability. and we know what has not worked β namely, | 1 |
bank. that means we say, we announce to everybody that we target inflation rates so that they stay within 2. 0 percent and 4. 0 percent. that is a big help. because of those targets, we are able to anchor expectations. otherwise, expectations may get out of control, and you get very large second - round effects. by being able to anchor inflation expectations, we are able to manage the secondround effects. so, that is our strategy. that is monetary policy strategy in what we call a " supply - shock economy. " so, that seems to be working. on friday, the next inflation number will come out, and we are crossing our fingers that it will be a good number. but that is where we are. by the way, people say that we are tightening too much. that is a very difficult challenge because we want to make sure that we do not tighten unnecessarily. we do not want to cause a loss of output that is not necessary. 2 / 6 bis - central bankers'speeches sometimes, we make a mistake, and we tighten too much. but even when we make a mistake and we tighten too much, the loss of output tends to be temporary. so far, i think, we have been okay. we have been doing just the right amount of tightening. if you look at our gdp [ gross domestic product ] growth in 2023, [ it is ] 5. 5 percent. that does not look so high compared to 2021 for example. but 5. 5 percent is the highest growth rate within the fastest - growing region, southeast asia. china is doing 5. 2 [ percent ], and we are doing 5. 5 [ percent ]. so, that is not so bad. there are more jobs with that kind of growth rate. the unemployment rate is down to 4. 2 percent. the underemployment rate is down to 11 percent ; it used to be 14 percent. so, in terms of growth, in terms of employment, we seem to be managing reasonably well in the face of supply shock. strong banking system the banking system, i think, is in good shape unlike in previous crises. many of us remember in the 1980s, our banking system got into trouble in the 1980s along with latin american countries. in fact, we call that the latin american debt crisis. we were part of it. and so, when we tried to recover around 1989 from the latin american debt crisis, the | to be prone to hallucinations. they tend to imagine things that never happened. they are prone to herding. they tend to make the same recommendations to different institutions regardless of specific circumstances. so, those are some of the dangers, but we think that generative ai will still be used. they are just irresistible to banks and to ourselves. if you used chatgpt, you know how irresistible that is. serving the unbanked and then, finally, we want to make use of the digital payment system to serve the unbanked. we have two strategies in this regard. we have a local strategy in which we are using e - wallets [ electronic wallets ] - you know, your gcash or your paymaya - and what we call basic deposit accounts ( bdas ), which are deposit accounts that allow you to open an account in the bank in a very simplified way. together, in these two things, the e - wallets and the bdas, we have found some successes that will lead to bank credit and other forms of financial services, including investments. our efforts where we should get the unbanked to be part of the formal financial ecosystem - that is our domestic strategy. we have an international strategy. the one we do with our neighbors, the asean [ association of southeast asian nations ] central banks, singapore, thailand, malaysia, and indonesia. we are working on a project called nexus. this is to connect the fast payment systems of each individual central bank for each individual country. we have a fast payment system ourselves ; it is called instapay. other countries have their own fast payment systems, and nexus is designed to connect all those fast payment systems. so, we can go from pesos into baht, baht into ringgit, almost instantaneously. maybe, it will take 0. 5 seconds but not so bad. the goal is, when this is in place, to transfer money not costing more than 2. 0 percent. the g20 goal is 3. 0 percent ; our own goal is 2. 0 percent. 5 / 6 bis - central bankers'speeches and the nice thing about nexus is that it is designed to be very scalable. it is going to be easy to add more participants as long as they have a fast payment system. the united states ( us ) is not ready. the us does not really have a fast payment system like instapay. they have the fed | 1 |
in the society learn to make the right financial decisions. and thus i invite those of you here who have not yet got involved, to join the programme. i urge you to get your friends and colleagues, who are not here, to also get involved. it can be done in many ways. β’ get your employers to sponsor lunch and learn sessions, in the workplace. β’ volunteer to organize and provide financial literacy classes to your community groups ; your church groups ; and your social clubs. β’ teach your kids good financial habits and seek to get financial literacy as part of the school curriculum. we will provide or arrange for the training, the materials and other back - stopping support. we continue to look for financing for the programme. the three year budget calls for an expenditure of $ 10 million of which about one - half is earmarked to come from the central government and the central bank. we would like to raise the remainder from stakeholders. as i said, financial literacy is a national imperative and we would hope to convince a broad cross section of the community to get on the national financial literacy bandwagon. at this point, i would now like to share some of the results of the base - line national literacy survey which was initiated to give us a general idea of the current level of financial literacy in the country. the survey results will also help us to make more targeted interventions as we move forward. we plan to conduct follow - up surveys to track the progress being made under the programme. the survey was conducted β¦. | ewart s williams : national financial literacy programme of trinidad and tobago opening remarks by mr ewart s williams, governor of the central bank of trinidad and tobago, at the launch of the national financial literacy programme, port - of - spain, 22 january 2008. * * * ladies and gentlemen, i am delighted that you are able to join us in recognizing ( and celebrating ) the one - year anniversary of the launch of the national financial literacy programme ( nflp ). we are also taking the occasion of the anniversary to release the results of the national financial literacy survey conducted last year. roughly one year ago ( on january 31, 2007 to be exact ), following the announcement of the programme by the honourable prime minister in his budget speech, the bank launched the nflp whose major objective is to provide citizens of trinidad and tobago with the knowledge and skills to enable them to make informed financial decisions. one year along the way, we can be pleased that we have made an auspicious start but we can also confirm that this is going to be a long journey. if there are two things that stand out from the first year experience, they are : ( i ) the recognition that financial literacy must be a critical element for successful monetary policy implementation and financial market development ; and ( ii ) that we have increased the awareness of the population of the need to become more financially literate. ladies and gentlemen, as you all know, inflation has been one of our principal economic challenges. one of the main contributors to our current inflationary momentum is the continued significant growth in credit expansion, particularly credit expansion for consumer purposes. this has happened in the face of increasing interest rates, induced by central bank liquidity absorption measures. the figures show, for instance : β’ consumer credit has been increasing at a rate of 24 percent a year, compared with 9 percent a few years ago ; β’ credit for automobiles has risen by about 52 percent in the past year ; while β’ outstanding credit card debt has more than doubled since 2000. ladies and gentlemen if there is a silver lining to the high level of food inflation, it is that it is beginning to force consumers to be more discerning and more price conscious in their purchases. i am also told that backyard gardening is making a comeback. we would hope that the financial literacy programmme would bring an even greater level of consumer awareness into people β s financial dealings. over the past year we have been able to make a number of important interventions under the national financial literacy programme. | 1 |
, thus strengthening existing trends towards securitisation, as well as consolidation and / or disintermediation in this sector. securitised financial instruments are easier to trade internationally. furthermore, the unprecedented size of mergers and acquisitions within the euro area is encouraging the development of a large domestic market for corporate bonds. even a high - risk market segment comparable to the us β junk β bond market is likely to emerge within the euro area over time. it should be acknowledged, however, that a number of obstacles to the full integration of euro area financial markets still remain. separate national fiscal policies lead to discrepancies in credit and liquidity risk premia across the area. equity markets and securities settlement systems are still segmented. differences in financial market conventions persist. hence, the short - term liquidity and efficiency gains are smaller than a simple aggregation of national markets would suggest. most of the potential gains will only materialise fully over time. 3. the impact on cooperation at the global level the introduction of the euro also has implications for the international cooperation process. by reducing the number of key global players, the emergence of the euro area in principle simplifies international cooperation, as it facilitates the exchange of views and the formulation of common understandings on economic and financial issues. a more balanced relationship between the three major players - the united states, the euro area and japan - is helping to encourage each of these to take responsibility for contributing to a stable global environment. the european single currency may also foster the emergence of a tripolar monetary framework based on the us dollar, the euro and the japanese yen. policy coordination at the global level, however, is likely to continue to be of a non - binding nature in the future. following the collapse of the bretton woods system, larger countries have always refrained from committing themselves to formal exchange rate arrangements or other pre - defined rules. in this respect, the introduction of the euro has not changed the current picture. this does not mean that exchange rate stability is not desirable worldwide. in my view it is, not least because abrupt changes in exchange rates may generate calls for protectionism and for restrictions on capital flows, which eventually erode free trade and capital mobility. stable exchange rates, however, cannot be achieved by setting ranges of fluctuation for the major currencies ( target zones ). the key to sound international monetary relationships has to be found, instead, in sound domestic policies and institutions. efficient and effective international cooperation | been a substantial decline in the volatility of long - term interest rates as compared with that recorded in the past decade. in the 1990s, for example, the standard deviation of long - term interest rates ( monthly data ) was around 2 percentage points ; in the past six years, this measure has fallen to a little more than Β½ a percentage point. it is striking that, while the volatility of long - term interest rates in the euro area was still around twice as high as that in the united states in the 1990s, the situation has reversed in the last six years, with euro area interest rate volatility now being below that observed in the united states. anchoring inflation expectations is not only important for low medium - and long - term market interest rates. it is also crucial for reducing macroeconomic fluctuations in response to economic shocks. there are some hints that the persistence of inflation in recent years has been lower than before. it is likely that this has resulted, at least partly, from the improved anchoring of inflation expectations which may, in turn, have led to a more forward - looking behaviour on the part of those setting prices and wages. less indexation of wages and prices to current and past inflation would tend to contribute to lower volatility of employment and output in response to macroeconomic shocks. importantly, the achievements in the area of monetary stability have not come at the cost of higher unemployment. on the contrary, the unemployment rate has averaged around 8Β½ % over the past six years and has therefore been more than one percentage point lower, on average, than in the 1990s. annual employment growth ( in terms of persons employed ) has doubled from an average of around Β½ % in the 1980s and 1990s to slightly above 1 % since the start of the single monetary policy. average real gdp growth has been 1. 9 % in the past six years, which is close to the average of 2. 0 % in the 1990s ( 1990 - 1998 ). moreover, there are no visible signs of costs in terms of higher real macroeconomic volatility ; on the contrary, in recent years the volatility of some real variables has also declined relative to the averages observed during the 1980s and 1990s. for example, the standard deviation of quarter - on - quarter percentage changes of real gdp growth has fallen from around 0. 5 percentage point in the 1990s to around 0. 4 percentage point in the last six years. the volatility of employment growth has also fallen from over | 0.5 |
, in formulating and implementing their reform programme, iran has maintained a constructive engagement with the ifis. i am particularly pleased that the bank of england will be involved with an imf - world bank led technical assistance team on financial sector restructuring and supervisory and regulatory frameworks for banks in iran during the coming year. another key element of efforts to strengthen the international financial architecture has been the development and implementation of a range of international standards or codes of good practice. these codes are not meant to lay down strict or inflexible rules. they are designed, however, to promote best practices, while recognising that financial systems are likely to differ across countries and across time. the imf and the world bank, working together with the relevant standard - setting bodies, have been helping economies undertake assessments of their observance of some of these standards. iran is currently working towards the adoption of internationally accepted best practice standards in a number of areas. the central bank is developing a new bank accounting framework, which represents a move towards international accounting standards, while taking account of the special features of islamic finance. the authorities are also developing an action plan for implementing supervision reforms. these developments ought to be good news for prospective investors in iran. they also help illustrate that international best practice standards can be flexible enough to accommodate individual country circumstances. the move to a more market - oriented environment brings with it new challenges. for example, liberalising exchange controls and freeing the exchange rate to market forces brings risks as well as opportunities. a sequenced approach to capital account liberalisation helps mitigate these risks and that is the route iran has pursued. but that is not to say reform has stalled. since mid - 1999, the central bank has taken important steps to improve and simplify the foreign exchange market, including allowing the exchange rate to depreciate to market clearing levels. in march 2000, requirements to surrender non - oil export receipts to the central bank were abolished. the intention now is to introduce a direct, interbank foreign exchange market, and to eliminate an advance import deposit requirement by march 2001. these will be important further steps in increasing iran β s exposure to international competition which in turn can contribute to its productive efficiency. exchange rate unification and the partial liberalisation of trade and exchange controls will make greater demands on the effectiveness of monetary policy. for example, monetary expansion may arise from the phased reduction in banks β reserve requirements. it will be important for the central bank to develop effective monetary instruments to | largest producer and has the second largest reserves of gas in the world. it has benefited from the recent rise in oil prices and is playing a positive role in promoting the stability of the oil market. president khatami recently noted that opec may need to raise output in proportion to the increase in global oil demand to stabilise prices. the government has taken positive steps to encourage foreign investment in the petroleum sector. for example, they have facilitated foreign participation in contracts to redevelop oil fields, and they have also signed an agreement with a consortium of nine leading international oil and gas companies to study iran β s potential as an exporter of gas. the government is, moreover, actively seeking to cushion the economy from future fluctuations in the oil price. establishing an oil stabilisation fund, which ensures that the government balance sheet is strengthened when oil price movements are favourable, should help insure against the type of debt servicing problems faced by many emerging market economies during the difficult international environment of 1997 - 98. iran was able to maintain an excellent debt service record through this period, and prudent debt management policies should help preserve this record going forward. total external debt is expected to decline to around 10 % of gdp this year, and short - term debt to only about 40 % of reserves, having fallen from around 65 % in 1999 / 2000. the strong external position has encouraged the world bank to approve loans of some $ 230 million this year. importantly, it should hold iran in good stead in attracting inflows of private capital, which are so crucial to a country β s long - term growth prospects. the international financial crises of 1997 - 98 stemmed largely from vulnerabilities within countries β financial systems. in the aftermath of the crises, the official community has been assisting the financial sectors in emerging market economies through technical assistance and improved surveillance. this has been an area of notable success in the redesign of the international financial architecture. a key step in this regard has been the joint imf - world bank initiative of financial sector assessment programs, or fsaps. the fsap process is designed to identify and assess strengths and weaknesses in financial systems from a best practice standpoint including : assessing financial institutions β structure and soundness ; reviewing systemic risks in payment systems ; examining the legal framework and the system of official oversight and prudential regulation and supervision ; and assessing institutional arrangements for crisis management, including financial safety nets. iran is addressing these aspects of the financial infrastructure and | 1 |
speeches the global economy has probably already regained its pre - pandemic level of output. in fact, the global economy could potentially surprise on the upside. one, vaccination rates are rising in many advanced economies, allowing them to re - open earlier and more fully. some of them may effectively suppress domestic transmission by the end of q3 2021. two, even if there are mobility restrictions on account of new outbreaks of the virus, businesses and households have become better at adapting to such restrictions. a review of the evidence by mas 6 has found that economic activity has become less responsive to movement restrictions over time. three, the ebbing of the pandemic could lead to a bigger surge in business and household spending than currently expected, reflecting pent - up demand. a third feature of the global economic recovery is that downside risks remain significant. the main downside risk is the emergence of more infectious or lethal virus mutations. even if most countries can vaccinate their populations and significantly reduce the incidence of the virus, continued spread in the remaining countries may offer a rich environment for the emergence of new virus variants. if a variant emerges that proves resilient to the vaccine, the world is at risk of sliding back into widespread lockdowns, with their associated impact on economic activity. no country is safe until all countries are safe. another source of downside risk is a sharp pick - up in inflation in the us. us consumer price inflation reached a stronger than expected 5 % year - on - year in may, the highest rate since 2008. the rise in inflation reflects transitory factors to a significant degree, especially base effects from last year. us policymakers expect inflation to ease by the end of this year. the rapid pace of economic recovery in the us has, however, tilted the balance of risks towards a pronounced and persistent rise in prices. if the pandemic has caused some scarring of the economy, there may not be much spare capacity to absorb the sharp pick - up in demand. signs that the inflation momentum was becoming too strong could force the federal reserve to withdraw policy accommodation sooner than currently indicated or expected. markets might then react by driving up long - term interest rates. the premature tightening of financial conditions could then trigger increased volatility in financial markets, especially in economies that have yet to emerge from the pandemic and those with higher fiscal or external funding needs. in sum, while the global economy is in a much better place compared to last | ##vid world might look like. i think it is a bit too early to tell, but some broad trends are discernible. first, the financial sector needs to be able to operate effectively with safe management. it is going to take quite a while before we find a vaccine or treatment for covid - 19. this means the virus is going to be with us for a while and, with it, the risk of renewed outbreaks of infections. 2 / 3 bis central bankers'speeches so, the financial industry must prepare itself to operate in a safe manner, amid the ongoing risk of pandemic. this could include changes in office layouts, the way transactions are carried out, everything we do has to take into account public health considerations. second, and an obvious one, is digitalisation. there has been more digitalisation in the last two months than people had expected to see over the next five years. this acceleration is going to be with us. once people have gotten used to live digitally β remote working, e - commerce, telemedicine β the economy and society are going to change in a variety of ways. the financial sector is well - plugged into digitalisation. those financial institutions that adopt deeper end - to - end digitalisation, who are able to use digital platforms for their business operations that today are conducted in person or on paper, are going to have a strong competitive advantage. new opportunities in particular areas of financial services are harder to tell. impact investing may become a stronger growth opportunity. we have already seen some financial institutions launching impact funds to seek higher returns by investing in companies which are focused on combating the pandemic or providing solutions to deal with the associated health risks. healthcare and supply chain resilience have taken on added importance, and there seems to be interest among asset managers to invest in these areas. pandemic risk insurance is another area that might see good growth. there is now a much heightened awareness of pandemic risks. although pandemic risk insurance has been around for some time, it never really took off. i think you are going to find demand for risk management and insurance solutions to address some of these pandemic - related areas of risk. the financial sector is fundamentally in the business of risk management. covid - 19 represents the materialisation of an extreme kind of risk. to the extent there is greater recognition of risks of all kinds and consequent demand for effective risk management solutions, the financial sector | 0.5 |
, in particular the slowdown in the euro area economy is a cause for concern. in conclusion, taking the latest available evidence into account, at today β s meeting the governing council confirmed its assessment regarding the outlook for price developments. the governing council therefore decided to keep ecb interest rates unchanged at the levels currently prevailing. i should now like to inform you about some other matters considered today. the auction technique for the longer - term refinancing operations was reviewed by the governing council today. in its first two longer - term refinancing operations ( settled on 14 january and 25 february 1999 ), which are as a rule conducted by means of variable rate tenders, the eurosystem applied the single rate ( β dutch β ) method of allotment. the single rate method was chosen in order to encourage less experienced counterparties to participate in the tender. the governing council takes the view that all interested counterparties should by now be sufficiently accustomed to the longerterm refinancing operation also to be in a position to participate in this type of operation under the more market - oriented multiple rate ( β american β ) method of allotment. against this background, the governing council has decided that the multiple rate method of allotment will be applied starting from the next longer - term refinancing operation ( to be settled on 25 march 1999 ), until otherwise indicated. finally, let me inform you that the general council today discussed the monetary policies of the central banks of the non - participating member states against the background of the monetary policy set by the eurosystem. as you will know, the general council has taken over those tasks of the european monetary institute ( emi ) which still have to be performed during stage three because of the derogations of some member states. one of these tasks relates to strengthening the co - ordination of the monetary policies in the community with the aim of ensuring price stability. the general council intends to conduct these co - ordination exercises biannually in future. | inflation. food price inflation and underlying price pressures across the economy have strengthened and will persist for some time. amid exceptional uncertainty, eurosystem staff have significantly revised up their inflation projections. they now see average inflation reaching 8. 4 per cent in 2022 before decreasing to 6. 3 per cent in 2023, with inflation expected to decline markedly over the course of the year. inflation is then projected to average 3. 4 per cent in 2024 and 2. 3 per cent in 1 / 4 bis - central bankers'speeches 2025. inflation excluding energy and food is projected to be 3. 9 per cent on average in 2022 and to rise to 4. 2 per cent in 2023, before falling to 2. 8 per cent in 2024 and 2. 4 per cent in 2025. the euro area economy may contract in the current quarter and the next quarter, owing to the energy crisis, high uncertainty, weakening global economic activity and tighter financing conditions. according to the latest eurosystem staff projections, a recession would be relatively short - lived and shallow. growth is nonetheless expected to be subdued next year and has been revised down significantly compared with the previous projections. beyond the near term, growth is projected to recover as the current headwinds fade. overall, the eurosystem staff projections now see the economy growing by 3. 4 per cent in 2022, 0. 5 per cent in 2023, 1. 9 per cent in 2024 and 1. 8 per cent in 2025. the decisions taken today are set out in a press release available on our website. i will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions. economic activity economic growth in the euro area slowed to 0. 3 per cent in the third quarter of the year. high inflation and tighter financing conditions are dampening spending and production by reducing real household incomes and pushing up costs for firms. the world economy is also slowing, in a context of continued geopolitical uncertainty, especially owing to russia's unjustified war against ukraine and its people, and tighter financing conditions worldwide. the past deterioration in the terms of trade, reflecting the faster rise in import prices than in export prices, continues to weigh on purchasing power in the euro area. on the positive side, employment increased by 0. 3 per cent in the third quarter, and unemployment hit a new historical low of 6. 5 per cent in october. | 0 |
active than before in extending loans, while carefully evaluating the credit risks involved. however, credit demand for economic activities such as business fixed investment remains weak. in addition, some firms have recently been repaying their loans using their on - hand liquidity. as a result, credit demand in the private sector has continued to be weak, and thus private banks β lending has remained sluggish. furthermore, the pace of issuance of corporate bonds and cp has generally been slowing. money stock ( m2 + cds ) has shown a year - to - year increase of about 4 percent partly due to an increase in fiscal expenditure. in this financial environment, credit conditions have eased somewhat. the following continue to warrant careful monitoring : how actively investors will take risks ; how far private banks will ease their lending stance ; and how these changes will affect economic activities. | wholesale prices are leveling off due to the progress in inventory adjustment as well as an increase in prices of some products closely related to international commodities, such as those of petroleum products. consumer prices continue to be unchanged. corporate service prices are still falling, although the pace of the decline is slowing. for a while, movements of overall prices are likely to be flat, as the decline in this report was written based on data and information available when the bank of japan monetary policy meeting was held on 9 september 1999. the bank β s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on 9 september as the basis of monetary policy decisions. domestic commodity prices has come to a halt reflecting the rise in import prices to date. however, substantial narrowing in the output gap led by a recovery in private demand is unlikely for the time being, and wages continue to decline. thus, downward pressure on prices is expected to remain. in the financial market, the overnight call rate has stayed at nearly zero and financial institutions have been confident about the availability of overnight funds. as for interest rates on term instruments, short - term rates such as those of three months have weakened. however, longer - term rates maturing beyond the year - end continue to be relatively high partly due to market participants β concern over the year 2000 problem. the japan premium has continued to be nearly zero for short - term transactions. yields on long - term government bonds rose to 2 percent in late august, but have recently fallen to 1. 8 - 1. 9 percent. the yield spread between government bonds and private bonds ( bank debentures and corporate bonds ) has stopped narrowing. stock prices recovered the 18, 000 yen level in late august, but subsequently declined against the background of the appreciation of the yen and the weak tone in us stock prices. currently, the prices are around 17, 500 - 18, 000 yen. the yen has appreciated further against the us dollar since mid - august to the current level of around 110 yen. the amount outstanding of funds in the call money market has remained generally stable since the middle of june. to date, this has not led to any difficulty in funds settlement, but close attention should be paid to future market developments. with regard to corporate finance, private banks have basically retained their cautious lending attitude. however, constraint that had been caused by severe fund - raising conditions and insufficient capital base has eased considerably. under these circumstances, major banks have gradually become more | 1 |
calibrates regulation according to the risks that the specific payment activity poses, rather than applying a fixed set of regulations to all payment service providers. while we have expanded the regulatory scope to address emerging risks in payment developments, regulations are also right - sized to the risks posed. 11. first : as individual e - wallets, how do we keep them safe to use? when we look at ewallets, we find that they face very similar risks as digital banking products. firstly, as online services, both are dependent on technology and face cyber risk β so mas expects them to manage these technology and cyber risks well. second, they both hold retail customer monies, so they need to safeguard these monies. the differences however, are that an e - wallet is used for day - to - day payments, and so needs to be very liquid to meet customer demands, and ewallet issuers don β t give loans with the float. so it β s important to right - size our regulations to their business model, and not to stifle innovation by loading them with bank - like requirements. taking these into account, mas sets out proportionately simple options for e - wallets to safeguard customer monies, for example, holding it as a deposit with a bank. mas may also prescribe further safeguarding measures in liquid and low - risk assets. second : collectively, how do we manage risks that e - wallets pose to the financial system? our role as central banks is to protect the stability of, and confidence in, the financial 12. system. to achieve this, we need to develop regulations that, while addressing key risks, do not obstruct the industry developments. in the case of payments, that key risk is money laundering and terrorist financing ( ml / tf ), and the balance that we have to strike is to allow new e - wallet businesses to start quickly, but also ensure that ml / tf risks are managed before they get too large. in this context, while kyc continues to be a key requirement, we allowed smaller wallets holding funds of no more than $ 1, 000 to carry out simplified kyc requirements. this framework is similar to those used in other markets like hong kong, india, australia and the uk. finally, as a market, how do we ensure that e - payments function smoothly with each other and the financial system? many of us think of smooth functioning as having liquidity 13. providers in capital | commercial bank. after these use cases are developed, a technical proof - of - concept will be conducted, building on the success of jasper and ubin, which are the dlt platforms from the bank of canada and the mas respectively. if successful, this will provide alternatives for cheaper, safer and faster cross border transactions. benoit and my respective committees took a hard look at general purpose cbdc, β and there are many implications - including cost of bank funding, credit provision, and financial 26. stability with the risk of deposits possibly taking flight to central banks during stress periods. these are issues that will have to be addressed should a central bank be deliberating on issuing digital currencies to its wider population. the cpmi and mc study is a reminder that even as we push the boundaries of payments and aim to utilise the latest technologies, central banks need to carefully assess each change and the larger impact to financial stability as well as monetary policy, before jumping on the bandwagon. e. conclusion these are some of the issues that central bankers are grappling with in asia, and how singapore thinks about regulating this innovative area of payments through innovative regulation. with the fast - paced and global nature of changes, cooperation and 27. dialogue between central banks are more crucial than ever before. i am glad to see many familiar faces from various central banks here today. the conference today is a useful forum for us to continue our dialogue, share important perspectives and keep tabs on the latest developments. 28. thank you, and i wish all participants here today a fruitful two days ahead. 1 1 capgemini, world payments report 2017 ( developed / mature apac includes australia, japan, singapore, and south korea. emerging asia includes china, hong kong, india, malaysia, thailand, indonesia, philippines, taiwan, pakistan, sri lanka, and bangladesh. ) 2 4 ey, asean fintech census, 2018 3 2 statista, digital payments highlights, cagr 2018 β 2022, 19 june 2018 4 3 ey and dbs, the rise of fintech in china, 2016 5 5 world bank, global findex database, globalfindex. worldbank. org, 2017 6 6 oliver wyman, winner - takes - all in battle for e - wallet supremacy, 2018 7 7 researchandmarkets. com, global and china mobile payment industry report, 2018 8 8 bis. org, statistics on payment, clearing and settlement systems in the cp | 1 |
is how most people think of it, and my story about globalization and value chains clearly envisioned a complex product, like a car or a smartphone. tangible goods also include products like oil, nickel, canola, pork or lumber. we sell over $ 500 billion in merchandise to the world each year. natural resources and agriculture will always be an important base for our economy, as the folks here today from the mining sector know full well. despite recent difficulties, energy products remain our number one export category, at over $ 80 billion per year. we can continue to find new customers for these products and grow those businesses over time. but, as we just saw, economies are constantly evolving. growth in canada β s economy, which was based on trade in natural resources in its early years, is now driven mainly by service industries. roughly 80 per cent of canadians are now employed in services, and trade in services has been growing at a much faster pace than goods. today, we sell about $ 120 billion per year in services to the world. for example, canada is a world leader in the mining services sector, with almost 4, 000 companies providing engineering, environmental and other professional services. these categories had exports worth about $ 12 billion last year. canada has long been an important exporter of financial services β last year these totalled about $ 13 billion and supported many wellpaying jobs in canada. tourism exports are worth around $ 25 billion per year. this category includes exports of education services to visiting students β valued at about $ 8 billion annually. and on the cutting edge, canada is becoming known as a global heavyweight in video games, employing more than 21, 000 canadians, with above - average salaries. many service sectors saw exports growing at near double - digit rates or faster, including financial services, the telecom, computer and information sector, intellectual property and tourism. as large as these numbers sound, services trade is difficult to track and probably underestimated. for example, many manufactured products include a large services component that is buried in the price. by some estimates, as much as 30 per cent of the value of goods exports is actually created through services. consider a smartphone. the parts and labour needed to assemble it might constitute less than half of what the consumer will eventually pay for it. most of the difference represents the cost of all the software that is loaded on the phone. here is another example. many companies today purchase back - office computing services on the cloud. previously, a company | and this weakness is extending into 2019. part of this is due to developments in our oil sector and in our housing sector, but the broader effects of trade uncertainty on investment are clearly there. fortunately, our economy also has areas of strength that are providing a cushion. some services exports have been growing strongly. more than 350, 000 jobs were created over the past year. indeed, labour income grew by almost 5 per cent in the fourth quarter. the data are currently giving us a mixed picture and need to be carefully monitored. but the deeper question we face is whether canada can continue to thrive as a trading nation. trade and globalization to address this question, we need to put recent trade developments into context. trade growth has generally fallen short of expectations since the global financial crisis a decade ago. to understand this, we must first understand why international trade grew so rapidly in the years before the crisis. 1 / 6 bis central bankers'speeches international trade began to accelerate during the 1990s as companies took advantage of opportunities provided by new technology and trade liberalization. many firms found efficiencies by breaking down their products into components. this allowed for unprecedented levels of manufacturing specialization, with components sourced from wherever in the world it made the most sense. instead of a domestic assembly line, you had a complex international value chain. a final product, like a car made in oshawa or a cellphone assembled in mexico, might have contained many components that were traded internationally several times. then the final product was exported, too. this is why international trade rose relative to gross domestic product during this period. as economists would put it, the trade intensity of goods increased. global trade really took off after china joined the world trade organization in 2001. with a massive supply of low - cost labour, china became key to many companies β value chains, and trade intensity grew even further. this gave rise to concerns that all manufacturing would move to developing economies. but there was always a natural limit to this offshoring process. a manufactured product can be fragmented only so far, and some pieces require more labour than others. this is what determines where best to produce each component. a manufacturing process that requires many workers and only a bit of machinery can often be made cheaper by moving it to a country where wages are low. but a process that has a lot of complex machinery and relatively fewer workers is much less likely to move to a lower - wage country. importantly, companies must also take into account the relative productivity of | 1 |
they inflict significant damage. to be sure, considerable uncertainty attends the near - term outlook for the u. s. economy, and recent readings on production and employment have been disappointing. however, a balanced assessment would also take into consideration the fact that the reduction in iraq - related uncertainties and some recent positive news regarding corporate earnings have caused the tenor of financial markets to improve noticeably : equity prices have risen, risk premiums of corporate debt have fallen, crude oil prices have declined sharply, and consumer confidence has rebounded since the early spring. whether this improvement in overall financial conditions is a precursor to sustained recovery in the broader economy is unclear. fortunately, for the longer term, productivity growth in the united states has remained remarkably robust. rapid growth of output per hour boosts expectations of future advances in wages and profits, leading eventually to higher aggregate demand. another key difference between the two countries is that the u. s. financial system continues to function smoothly. domestic commercial banks are very profitable overall and are well capitalized, and bank regulators have shown a willingness to move quickly to address problems. in contrast, japanese banks remain saddled with a significant volume of nonperforming loans. accordingly, the process of financial intermediation through banks has been constricted, hampering the bank of japan β s attempts to increase liquidity and to stimulate the flow of credit. on a related point, the existence of highly developed and integrated u. s. financial markets means that the proportion of financing flows intermediated by the banking system in the united states is considerably smaller than in japan β s bank - centered financial system. as a result, the transmission of monetary policy in the united states operates through multiple and complementary channels. japan β s dependence on the banking system, a system that has largely ceased to function, represents a further constraint on the transmission of monetary policy in that country. thus, it seems appropriate for japan to continue its efforts to develop deeper and more liquid capital markets. demand for business and consumer credit in the united states is stronger than in japan, and corporate balance sheets are in better shape. the continued rapid pace of technological innovation is likely to create expanding opportunities for profitable investment and thereby strengthen further the demand for credit. although business spending on fixed capital has yet to stage a convincing comeback, firms eventually will have to increase such outlays, given the relatively high rates of depreciation on certain types of capital. finally, as mentioned earlier, by the time the bank of | laurence h meyer : controlling the safety net remarks by mr laurence h meyer, member of the board of governors of the us federal reserve system, at the 37th annual conference on bank structure and competition of the federal reserve bank of chicago, chicago, illinois, 10 may 2001. * * * thank you. it is my pleasure to participate in this distinguished conference. i look forward to a fruitful and stimulating discussion with both my fellow panel members and the audience. the federal safety net for depository institutions β by which i mean deposit insurance, access to the federal reserve's discount window and payment system guarantees, and the implicit certification of soundness that counterparties believe accompanies federal supervision and regulation β has been a potent force for ensuring the stability of the u. s. banking and financial system. we should preserve these benefits. however, as we learned to our chagrin in the late 1980s and early 1990s, this system can impose serious costs because of the unintended consequences of " moral hazard " β the incentive to take excessive risk and the consequent reduction of market discipline. moreover, these costs can be especially large if supervisors tend to delay, or forebear, in resolving troubled and insolvent institutions. in my remarks this morning, i will first review the lessons that i believe we learned from the last banking crisis regarding how best to control the unintended consequences of the safety net ; i will then look forward to what i believe still needs to be done. in the course of my presentation, i will expand on a number of the themes in chairman greenspan's remarks and suggest priorities for our current and future efforts. lessons from the past the banking crisis of the late 1980s and early 1990s led to a number of key reforms that were designed, individually and in total, to limit the unintended consequences of the federal safety net. in 1988, bank supervisors from the united states and the major industrial nations adopted what has come to be known as the basel capital accord. the accord, which had been under development for several years, helped to focus supervisors and the industry on the importance of adequate capital for bank safety and soundness. it was a de facto increase in capital standards for a number of depository institutions, particularly large firms with significant risks from off - balance - sheet activities. in the parlance of finance theory, higher capital standards reduced the value of the put option provided by federal deposit insurance and lowered the exposure of the safety net as a whole. the | 0.5 |
fund sector to significantly disrupt the smooth functioning of the financial system. this of course calls for an adequate regulatory and supervisory framework so as to avoid the vulnerabilities to materialise in the future. we therefore welcome from the financial stability point of view the project of the european commission to provide a new prudential framework for insurance companies to which the ceiops is currently contributing. 3. the role of ceiops 3. 1 general consideration on the state of achievement of the internal market in the different financial sectors let me now turn to the current regulatory and supervisory framework at the european level. more specifically, today i would like to make some reflections : first about the existing differences in the eu regulatory framework among financial sectors ; second, on the lamfalussy framework and the specific work carried by ceiops in the insurance sector ; thirdly, on cross - sectoral issues. i will start with the remark that the pace of the harmonisation process had a different speed among the three sectors. although the general principles enshrining the internal market for financial services, namely the mutual recognition and the home state control as basis for the european passport, have been common to all the three sectors, the level of community - wide harmonisation has been different. this was due to both historical and political reasons. for the banking sector the role and contribution of the basel committee which provided an internationally accepted common framework is to be acknowledged. as we all know, the european capital adequacy rules for banks β which in the eu are also applied to investment firms β draws largely on the basel framework. to also note that the recent revision of the basel accord had prompted the review of the european prudential framework, and the new capital requirements directive has been adopted in a quite short time considering the technical complexities involved. the committee of european banking supervisors ( cebs ) is now working on a number of projects related to the implementation of the new regime. in the securities sector the pace of regulatory harmonisation accelerated thanks to the political impetus given for the completion of the ambitious agenda laid down by in the financial services action plan ( fsap ). also the committee of european securities regulators ( cesr ) has been very effective in helping the commission to settle difficult technical issues. with the adoption of the remaining level 2 measures for the mifid and the transparency directive, a brand new regulatory framework will be in place. the fsap was initially less focused on other financial sectors, such | note : 2017 includes the 5 retail banks and 2 retail credit firms. % change % change total roi mortgage lending β¬5, 728 β¬7, 430 30 % 29, 893 35, 472 19 % pdh - in scope ftb lending ssb lending β¬5, 094 β¬2, 611 β¬2, 482 β¬6, 708 β¬3, 618 β¬3, 091 32 % 39 % 25 % 26, 159 13, 974 12, 185 31, 618 17, 453 14, 165 21 % 25 % 16 % btl lending β¬173 β¬197 14 % 1, 408 1, 517 8 % exempt from regulations switcher negative equity other β¬462 β¬331 β¬99 β¬31 β¬525 β¬408 β¬87 β¬29 14 % 23 % - 12 % - 6 % 2, 326 1, 459 2, 337 1, 713 0 % 17 % - 32 % - 20 % source internal central bank reports. see enda keenan and martin o β brien ( 2018 ) β new mortgage lending activity in a comparative context β, central bank of ireland economic letter, vol 2018 no 5. see sharon donnery, trevor fitzpatrick, darren greaney, fergal mccann, and micheal o β keeffe β resolving non - performing loans in ireland : 2010 - 2018 β in quarterly bulletin 2018 q2. central bank internal loan level data for the five main retail banks in ireland. engagement is defined along three criteria : either the borrower has filled out a standard financial statement, has a permanent restructure to the terms of their loan in place, or is currently in a temporary restructure arrangement. see 2016 eu - wide stress test results see sharon donnery, trevor fitzpatrick, darren greaney, fergal mccann, and micheal o β keeffe β resolving non - performing loans in ireland : 2010 - 2018 β in quarterly bulletin 2018 q2. see central bank of ireland code of conduct on mortgage arrears. june 2013, 182, 840 mortgage accounts in arrears, december 2017, 92, 949 mortgage accounts in arrears. see mortgage arrears statistics. see mortgage arrears statistics. see central bank internal guideline - sustainable mortgage arrears solutions see fergal mccann ( 2017 ) β β mortgage modification in ireland. a recent history β central bank of ireland economic letter, vol | 0 |
carolyn wilkins : at the crossroads - innovation and inclusive growth remarks by ms carolyn wilkins, senior deputy governor of the bank of canada, at the g7 symposium on innovation and inclusive growth, montebello, quebec, 8 february 2018. * * * ooh, standin'at the crossroad, tried to flag a ride ooh - ee, i tried to flag a ride didn't nobody seem to know me, babe, everybody pass me by β cross road blues β by robert johnson, 1936 introduction welcome to canada β and to a snowy montebello. this day is dedicated to a discussion about innovation and inclusive growth. it is great to have so many experts with us today. thank you. we know that technological advances are key to improving an economy β s potential to grow. they have raised living standards in g7 countries and across the globe, and have helped lift more than one billion people around the world out of extreme poverty since the second world war. 1 the current wave of innovation β digitalization and automation β promises to raise trend growth in the economy even more. however, as we are discussing today, technological advances can leave people behind. it is perhaps only in the last decade or so that mainstream macroeconomists have sharpened their focus on how income distribution may affect long - term growth and macro dynamics. there is compelling evidence that innovation has been an important reason behind rising income inequality in advanced economies in recent decades. 2 research also finds that rising inequality can result in weaker and less - stable macroeconomic outcomes. this places us, as policymakers, at a crossroads. do we choose to stay on the same road and repeat the past? or do we apply fresh thinking to policy and choose a new road where innovation delivers even stronger and more - inclusive growth? this is the challenge that the g7 countries have set for themselves for 2018. canada is proud to lead the g7 β s work this year to better understand the issues so that we can set priorities for policy. the context we are working in matters. the global economy is enjoying the most robust and synchronous growth we β ve seen in close to a decade. businesses and consumers are feeling more confident. yet, we know that many people in advanced economies are also anxious about what digitalization and automation might bring. they are worried about being left behind. for workers in some industries, such as manufacturing, this may seem like old news. for drivers, lawyers, investment advisors and many | you that the digital economy is a promising way to raise trend growth and overall living standards. we cannot be satisfied, though, if some of the potential gains are left on the table, because many people will be left behind and important markets will be virtually uncontestable. it does not have to be this way if we choose a road for policy that effectively manages the 5 / 7 bis central bankers'speeches downsides of innovation without stifling it. of all the areas where we could develop and implement a better strategy, here are my top three : ( i ) develop a dynamic workforce with the skills to match the jobs, and encourage more labour force participation ; ( ii ) keep market power in check, particularly the power that comes from control of consumer data, to encourage competition and limit monopoly profits ; and ( iii ) manage the growing operational risks associated with the digital services that are provided by a concentrated set of firms to systemically important financial institutions. we will need to judge wisely when it is best to use public policy tools to manage risks and when to let private enterprise work its magic. we β ll need to work together and in the field to inform these judgments. i am confident that, together, the g7 will show leadership and will build with the private sector a shared sense of responsibility for the future. i would like to thank gurnain k. pasricha, lori rennison and eric santor for their help in preparing this speech. 1 the data for this calculation are taken from m. roser and e. ortiz - ospina, global extreme poverty ( 2018 ). poverty is defined as a consumption level below int $ 1. 90 per day, adjusting for price differences and inflation. 2 see international monetary fund, world economic outlook, chapter 3, β understanding the downward trend in labor income shares, β april 2017 ; and g. michaels, a. natraj and j. van reenen, β has ict polarized skill demand? evidence from eleven countries over twenty - five years, β review of economics and statistics 96, no. 1 ( march 2014 ) : 60 β 77. 3 according to mckinsey & company, 46 per cent of tasks could be automated in the united states using current technology. in canada, the share is slightly lower ( 42 per cent ). see c. lamb, β the talented mr. robot : the impact of automation on canada β s workforce, β brookfield institute, june 2016. 4 data | 1 |
banks β research is that competition with the academic world ensures adequate monitoring of the quality of models and analytical tools used for policy. for instance, the new area - wide model is a structural macroeconomic model for the euro area that has been developed by staff in dg research for simulation tasks and scenario analysis. the model is also regularly used to produce research papers that are widely presented in academic conferences and central banks workshops. this provides a quality check and guarantees that a model used for policy analysis is kept up to the highest standards. finally, a fourth reason for investing resources in research is that the policy process sometimes requires research output not yet available at universities or other research institutes. the ecb has at times identified issues of fundamental importance for understanding the impact of monetary policy in the euro area, upon which limited information was available. as a consequence, the ecb has decided to lead and co - ordinate research efforts through eurosystem networks, which involved the ecb and the national central banks of the euro area. the monetary transmission network pursued for three years empirical analyses of the transmission of monetary policy in the newly formed euro area. macroeconomic time series data were used to estimate a variety of econometric models of the transmission at euro area and national level, while microeconomic data were used to measure the effects of monetary policy on investment of non - financial firms and on the lending behaviour of commercial banks. the inflation persistence network worked for two years at understanding the patterns and determinants of inflation persistence. the network availed itself of an unprecedented data set. the individual price records underlying the construction of both consumer and producer price indices was made available in a large number of euro area countries. moreover, the network conducted surveys on price setting behaviour in nine countries of the euro area. these databases enabled to understand the behaviour of price setters, to investigate the determinants of nominal rigidities and to empirically test alternative price setting models for the euro area. finally, the ongoing wage dynamics network aims at identifying the sources and features of wage and labour cost dynamics that are most relevant for monetary policy. it aims at clarifying the relationship between wages, labour costs and prices both at the firm and macro - economic level. the ecb trusts that research is enhanced by exposure to external ideas and latest advances in the field. this exposure is mainly achieved through regular seminars and conferences. on top of internal seminars given by staff, the ecb weekly organizes an invited speaker seminar and, jointly with the center | the ecb β like many other central banks β has decided to develop its own research capability from its start. first, central banks need research - oriented economists to follow the latest developments in economics and to recognise their potential relevance for policy - making. let me provide an example based on the sustainability of a country β s external imbalance β a topic that greatly benefited from the work of professor rey. the literature has recently pointed to the limits of traditional approaches to the balance of payments, where currency depreciation provides the bulk of the adjustment needed to correct a country β s current account deficit. traditional approaches fail to realize the consequences of financial globalization for the sustainability and adjustment of the external position. in the presence of variation in asset returns, cross - border asset holdings introduce valuation effects that decouple the dynamics of net foreign assets from that of current accounts, altering the role of the trade balance in correcting a country β s external position. recent research at the ecb has been very enlightening in this respect. a second reason for conducting research in a central bank is that a major task of central bank research is to bridge the possible gap between academics and policy makers and to create occasions for interactions with the academic community where the diversity of views can be expressed and discussed. for instance, at the ecb we are convinced that a thorough analysis of monetary developments β our β monetary pillar β β is important for the conduct of monetary policy and for the anchoring of inflation expectations. our view is supported by the strong empirical link between money growth and inflation over the long - run and by theoretical considerations relating to the ability of monetary and credit aggregates to point at imbalances in the financial system and inflationary risks. looking at the historical experience, the analysis of monetary developments has helped the ecb to assess the risks to price stability, to identify the nature of the shocks impacting on the euro area and to signal its medium - term orientation. this has been a key factor in anchoring agents β expectations and in establishing the high credibility of the ecb. to broaden and deepen the monetary analysis we trust that it is important for us to have an ongoing, direct and candid openness to discussion with the academic world. an example is provided by the 4th ecb central banking conference on " the role of money and monetary policy in the twenty - first century ", where the ecb engaged in an open debate with academics on this important topic. a third argument to invest in central | 1 |
million. the financial services and fintech sectors created 2, 500 net jobs last year. we expect the financial sector to continue to create good jobs this year. financial institutions expect to create about 6, 500 new hiring opportunities 12 this year, with strong demand in areas such as technology, wealth management, corporate banking, and insurance. 13 the financial services sector has exceeded both the value - added and employment targets set by the industry transformation map ( itm ) for 2016 β 2020. growth in value - added during this 5 - year period averaged 5. 4 % per annum, above the itm target of 4. 3 %. the sector, together with fintech, added an average of 4, 700 net jobs per annum, above 7 / 9 bis central bankers'speeches the target of 4, 000. mas has started reviewing the itm strategies and targets for the next 5 years. mas has been studying in depth how the financial services landscape will transform and what singapore must do to remain competitive in the coming decade. technology will reshape financial services in the next 10 years, much more profoundly than it has in the last 5 years. sustainability will become an increasingly central focus for financial services as the world strives towards a low - carbon future. jobs in financial services will transform, with growing skills requirements across multiple domains. technology, sustainability, and jobs are three areas that mas has focused on intensely in recent years, working closely with the financial industry. over the last two years, mas has put out about 70 reports, speeches, and media statements on just these three subjects. together with our industry partners, mas facilitates discussions and provides updates, on technology through the green shoots series, and on jobs through the growing timber series. and just three weeks ago, we issued our inaugural sustainability report which covered not only the green finance action plan for the financial industry but also mas β efforts to reduce its own carbon footprint and to make the official foreign reserves more climate - resilient. so, important as these three areas are, i will not touch on them today. there will continue to be ample opportunities to talk about them in future. mas β financial position before i wrap up, let me provide an update on mas β financial performance. the investment return from the official foreign reserves was s $ 8. 2 billion in fy2020 / 21. this comprised : investment gains of s $ 22. 8 billion, mainly from interest income and realised capital gains. this was largely offset by a negative | year, uncertainty remains as elevated. what has changed is the nature of the uncertainty. last year, we were uncertain how far down the economy will go, in the face of an unprecedented pandemic. this year, the uncertainty is in both directions : a much stronger recovery or a much 2 / 9 bis central bankers'speeches dampened one. singapore economy the singapore economy had recouped in the first quarter of 2021 the aggregate output loss incurred during the pandemic. the recent tightening of domestic restrictions and border controls will cause a near - term setback to segments that make up about 8 % of the economy. the consumer - facing industries ( retail trade, food & beverage, and land transport services ) will be most affected by the tightening measures. the travel - related industries ( air transport, accommodation, arts, entertainment & recreation ) are likely to see further delay in their recovery. construction and marine & offshore engineering activity may be hindered by labour shortages from the border restrictions on the entry of foreign workers. but the economic impact of the current restrictions will be significantly less severe than during the circuit - breaker last year. the majority of businesses remain in operation. the broader economy should see a recovery in the second half of this year alongside strengthening global demand and further progress in our vaccination programme. trade - related activities such as manufacturing and wholesale trade will be supported by resilient global trade flows and robust upswing in the global tech cycle. modern services, particularly the financial and ict sectors, are set to expand at a firm pace this year, amid a pickup in credit intermediation activities and the ongoing digitalisation of business processes which has been accelerated by the pandemic. moreover, compared to a year ago, singapore is much better equipped to handle the pandemic, with more effective testing and tracing, swift isolation of infected cases, and vaccination. singapore β s gdp growth could exceed the upper end of the 4 to 6 % forecast range, barring a setback to the global economy. last month, the official forecast range was maintained at 4 to 6 % in light of the deterioration of the domestic covid - 19 situation and consequent phase two ( heightened alert ). mti, together with mas, will review the forecast range in august when preliminary estimates for q2 gdp are available. the resident unemployment rate should continue to gradually decline. total employment expanded by 14, 000 in q1 this year, the first expansion after four consecutive quarters of | 1 |
the fed has been communicating for some time already. financial market expectations, however, are split between one group foreseeing cuts in the policy rate and another that now foresees rises. the main source of uncertainty originates in the future course of growth and inflation. the second quarter should feature a strong increase in measured growth, but future growth is still a question mark. about the euro zone, the market anticipates that, in order to hold inflation around the target β annual inflation below but close to 2 % β the ecb will need to raise the policy rate a couple of times during the next 12 months by 25 basis points each. in the case of japan, markets also project two rises in the policy rate over the next 12 months. on the other hand, long term interest rates are on the rise in industrial economies, mainly reflecting increased real rates rather than an increase in inflation expectation or of duration premiums. the increases in long - term interest rates may be indicating better growth prospects in the u. s. now that a soft landing is more likely. however, overall global financial conditions are very accommodating, with risks premium that, although beginning to rise, are very close to their record lows. this, despite the flight to quality phenomenon observed in the past several weeks as a result of perceived risk increase because of the market status of low - quality mortgage loans in the u. s. in any case, the levels of market volatility in emerging economies are significantly smaller than they have been in earlier episodes. the dollar has depreciated against the currencies of industrial economies, responding to the evolution of the business cycle. in the past few days, this has been aggravated by concern about how the u. s. housing market situation will unfold. the chilean peso, similarly to currencies in the rest of emerging economies, has also appreciated against the u. s. dollar due to weakness of the latter. exporting or import - substituting sectors that are selling their produce at a dollar price not too different from the price they were getting towards the end of 2001, have possibly endured a large loss of profitability. this is directly associated with the multilateral depreciation of somewhat more than 40 % suffered by the dollar in the world since then. in connection with the expansionary cycle of the world economy, and also with the depreciated dollar, prices of copper, oil and derivatives β especially gasoline β are picking up | are being bailed out by other, much - stronger, partners. it is not clear whether any african countries are either prepared, or indeed able, to bail out their peers in case they confront similar difficulties. a fiscal union and a transfer union cannot be far behind monetary union. we must therefore proceed cautiously. we should not rush into a monetary union. financial integration can very well take place without monetary union in the first instance. limiting our sights to regional financial integration, does not imply any lack of ambition. it does bring many benefits for africa. first, it would provide incentives for domestic financial reforms. second, it would increase the scale of operations. third, it would spur competition. fourth, it would increase fdi inflows. and it would enable african systems to become regional, and ultimately global, players in financial markets. but, to achieve regional financial integration, there are certain conditions that must be met and a key requirement is macroeconomic stability. and this is a pretty tall order, if you take into account the fact that african economies are so vastly different on so many counts. there are problematic asymmetries ranging from production structures to institutional effectiveness β such as democratic accountability, the incidence of corruption, and government efficiency. all these contribute to major disparities in economic performance, including public finance, and dependence, public debt, balance of payments performance, inflation, and growth. between 2000 and 2007, annual growth in sub - saharan africa was around 6. 5 percent β the highest rate in more than 30 years. this was accompanied by low or moderate inflation and growing macroeconomic stability. then the region was hit by two global economic shocks, the sharp increases in food and energy prices of late 2007 and early 2008, and the onset of the recession later in 2008. the crisis came at a time when subsaharan africa was in a much better shape than it had ever been before, and was resolutely heading for higher growth and faster poverty reduction. although, at the beginning, the effects of the crisis were not felt, given the limited integration of the african financial system with the global financial system, their second round impacted negatively on macroeconomic convergence and regional financial integration efforts. this led many to argue that the process of regional financial integration should be delayed or put on hold while awaiting better times. this view has been reinforced by the recent geopolitical tensions in the north african region, which has added grist to the mill of the confirmed africa - sk | 0 |
benoit cΕure : interview in barron β s interview with mr benoit cΕure, member of the executive board of the european central bank, in barron β s, conducted by mr pierre briancon on 5 february 2019 and published on 7 february 2019. * * * why did the european central bank both warn against increased risks for the eurozone economy and choose to do nothing at its last meeting? at this stage, we don β t think that we have enough elements to conclude that we β re facing a lasting and serious slowdown of the eurozone economy. that said, we have a duty of transparency, we have to communicate on the way we see the economy. forward guidance implies that you β re being honest on the risks ahead. hence our conclusion that risks have moved to the downside. and these elements are? the slowdown itself is not a surprise. growth in 2017 β 18 was fast, boosted by world trade and somewhat artificially by the us fiscal stimulus, and we knew this was not sustainable. what we β re seeing now is that the slowdown may be broader and longer - lasting than originally forecast. that β s mostly due to the uncertainty linked to a possible slowdown of emerging economies, especially china, and another source of uncertainty created by the tense trade relationship between the united states and china, and in general between the united states and the rest of the world. we don β t see increased risks mainly coming from within europe at the moment. if the risks are piling up, why not act more aggressively? you must remember that the mere fact of changing our communication by itself triggers some monetary easing. because we changed our vision of the risks ahead, markets drew their conclusions and the eurozone yield curve is flatter than it was in december. markets that were anticipating our first rate hike in january now see it coming in may / june 2020, whereas we have said that we expect our rates to remain at their present low levels at least through the summer of 2019. so communication is in itself a monetary policy instrument. if we have to do more, it will have to be based on data. is what you call your β tool box β of monetary instruments complete now? or would you have to invent new ones? we are now well equipped to face many different types of situations. as of today, we have interest rates at the zero level, or even negative for our deposit facility. our net purchases of bonds stopped in december but we will keep reinves | run your models and you crunch your data. it β s less quantifiable. so markets turn to central banks to seek some reassurance on what lies ahead. do you have the feeling that among the political risks you mention could be various threats to the independence of central banks? that β s not my impression. the importance of independent central banks is well understood. but there may be some tensions, because there may be a level of expectation for central banks that is too high after years of financial crisis. there may be a temptation to make central banks responsible for things that governments should address through fiscal policy, for example. just because central banks had to invent new monetary policy tools to face unexpected shocks in the last decade doesn β t mean they can do everything. it β s very important for central bankers to refrain from hubris. central bankers are technocrats with narrow mandates ; the counterpart of their authority is that they strictly abide by their mandates. ours is to maintain price stability. some things we shouldn β t and can β t do, for example redistributive policies, or tackling our economies β productivity slowdown. market operators wonder about what will happen to europe β s monetary policy once mario draghi is gone next november. how much does continuity matter here? our own monetary policy committee is the 25 - strong governing council. just like the fed, and contrary to other central banks, we have many people taking part in the decision, so that in and of itself is an element of continuity. most of our decisions in recent years have been taken unanimously, or by large consensus. the president has an important role, of course, but the overall approach and philosophy of the ecb is unlikely to change at the end of the year. some european politicians deplore that the lack of speedy progress on eurozone reform means that the monetary union is ill - equipped to face another potentially serious shock. do you share their pessimism? ever since the euro β s creation we β ve had economists predicting the end of the euro for the next year, and it β s still here. and investors know by now that it β s always a mistake to underestimate the strength of the european project. it is a long - term political construction. it being political doesn β t mean it is easy, and it has both positive and negative consequences. on the positive side, it means that it is resilient when tested by short - term economic shocks. on | 1 |
by the big banks, while the smaller banks are still lagging far behind. so the project aims to provide a possible solution also for the longstanding problem of the non - resolved non - performing loans that are still present at a number of banks. the aim is to make them more resilient for future shocks but also free the time of banks'management and enable them to focus on their core banking business and improve their banking offer and service to their clients. it is therefore of equal importance that the banking sector steps up its efforts to address its structural weaknesses in order to build a sustainable business model. in doing so, banks need to elevate their service levels. in the changing business environment, banks must utilise the opportunities that technology offers in order to enhance their service channels, train their employees in this direction and reduce response times. i have made this point a number of times to the banking sector leadership and stressed the importance for cyprus banks to promote and facilitate more efficient ways of doing business. in this respect, banks are currently engaged in transforming their business models towards technologically more advanced services, with digitization being the focus of this effort. investment in technology can become the catalyst in the effort to strengthen efficiency and build sustained profitability. this should ultimately bridge the current gap that exists with the rest of the eu area banks. in order to further encourage, promote and support domestic financial innovation, the cbc announced last december the operation of its innovation hub. the innovation hub aims to become an official platform for communication between the cbc, as a supervisory and regulatory authority, and businesses or start - ups active in financial technology sectors, in other words fintech, that is, combining innovative technology with financial services. 3 / 4 bis - central bankers'speeches thus, the innovation hub is a crucial step in the broader context of the supervisory objectives and priorities that we have set at the cbc, which include innovation, digital operational resilience, digital transformation and cybersecurity. additionally, as i announced in my last year's speech here, the cbc took the initiative to formulate and implement the'digital onboarding'project. as a reminder, this project's goal is to establish faster, more flexible and efficient banking services by developing the technological platform to allow the digital onboarding of clients and the digital monitoring and renewal of information of clients. we undertook this initiative despite the fact that it is not the responsibility of the cbc. we have nevertheless recognized the multiple benefits that such | you know, the basel committee has established a separate subgroup to deal specifically with cross - country implementation issues. the basel accord implementation group ( aig ) comprises line supervisors directly involved in the supervision of large, complex banks in member countries. the aig has already begun to explore and develop solutions for some of the complex issues arising from cross - border implementation. in addition, the members of the aig have already established a constructive dialogue with a working group representing non - g10 jurisdictions on the practical challenges of implementation. as i noted, we anticipate that u. s. banking organizations that account for 99 percent of the foreign assets and two - thirds of all assets of our domestic banking system will be under the a - irb and ama version of basel ii and thus will be fully compliant with the letter, and certainly the spirit, of the new basel accord. u. s. institutions operating under basel ii will apply the framework to the consolidated organization, so that the foreign branches and subsidiaries of these u. s. organizations thus will be in full compliance with the home country rules of the new accord. we anticipate that these institutions, by operating under a - irb and ama, will also be in compliance with the regulatory capital rules of any host country in which they operate. of course, foreign branches and subsidiaries of u. s. organizations will also have to comply with any special rules applied in the host country. in addition, some u. s. organizations engaging in a relatively small amount of cross - border activity may decide to remain on basel i - based rules in this country. we anticipate that, so long as their capital position remains strong and they present no supervisory issues, these entities will be able to continue their cross - border activities. in effect, we believe that our well - capitalized standards, combined with our strong supervisory framework, will allow u. s. banks to meet any requirements for consolidated capital requirements in foreign countries and that those standards result in capital requirements at least as prudent as basel ii approaches for their home country banks. in this case, too, any foreign subsidiary of a u. s. bank would naturally have to adhere to the host country rules applied to bank subsidiaries there. we acknowledge that some of these details still have to be clarified - exactly the task that the aig has undertaken. but i would like to emphasize that these issues relating to basel ii are not necessarily new, since we have been dealing with differences in capital rules | 0 |
refer to. further, the climate of uncertainty which took hold on international financial markets and the subsequent fall - off in financing flows had a more marked impact on those economies, such as spain, which are more reliant on external saving. nor can we forget that the 2009 recession also disclosed a series of weaknesses in the institutional arrangements for the euro. membership of the economic and monetary union provides for extra stability and resilience. unsurprisingly, then, at the height of the crisis when the very survival of the monetary union and the euro were in doubt, the wave of mistrust affected us most forcefully. that said, strictly domestic factors played a substantial role in the source and development of the crisis in our economy. this was because unsustainable imbalances built up, even in the absence of an international crisis, and our vulnerability to external shocks thereby increased. bis central bankers β speeches i shall now briefly review some of these imbalances. during the prolonged expansionary phase before the crisis broke, heavy losses in competitiveness built up as a result of the growing divergence of our prices and costs relative to those of the euro area countries, with which the exchange rate had been set at the onset of monetary union. this was the outcome of the continuous pressure exerted by domestic spending on plant capacity, driven by very loose financial conditions, whose expansionary effects were not countered by a more restrictive economic policy stance, most specifically in respect of budgetary policy or supply - side policies. the financial counterpart of this excess spending was the accumulation by spanish households and firms of excessive debt. this over - indebtedness was moreover accompanied by a strong bias towards the construction and real estate development sector and, inevitably in an economy as strongly banked as spain, this also led to excessive growth in bank lending and excesses in banks β risk concentration. the relative ease with which these debts built up and their subsequent effects on activity, employment and financial stability were not, in any event, an exclusively spanish phenomenon. indeed, these and other similar developments have given rise to widespread initiatives at the international level to strengthen the economic policy tool box, with a new instrument β namely macroprudential supervision β being incorporated to head off this type of situation. in any event, the losses in competitiveness and excessive debt led to a large - scale imbalance in our foreign trade, resulting in a deficit of 10 % of gdp in 2007 and requiring the resort to large volumes of external | . the development of these new services will require adjustment of the regulatory perimeter. thus, for example, the new payment services directive already covers new services not previously regulated, such as payment initiation and account aggregation. another case is that of crowdfunding platforms, which seek to put lenders and borrowers directly in touch with each other, without the need for banks β the traditional intermediaries. the development of these services and their resilience in situations of stress might require further adjustments to current regulations. 3. third, it is important that the price of services charged to the customer reflects their cost. currently, a large part of the technological improvements offered do not seem to have an additional cost for the user. for example, immediate access to data through mobile devices, automatic repetition of consultations every few seconds, or the dispatch of instructions or data requests en masse, are offered without any apparent cost to the customer. however, the new services do have costs and these must be clearly and transparently passed on to customers. 4. finally, it should not be forgotten that the benefits promised by new technologies are neither cost - free nor risk - free. there may be costs arising from investments in innovation that fail to bear fruit or from investments with payback cycles that end up being much longer than expected, as apparently may be the case, in principle, of some of the initiatives being developed in relation to distributed ledger technology. and risks relating, inter alia, to personal information privacy, fraud or cyber - attacks. in addition, the proliferation of new technologies may also lead to the financial exclusion of those users at a distance from them, who could be adversely affected if the continuity of service provision through traditional systems is not guaranteed. in short, we are facing great technological change in the banking industry, the effects of which are still not clear. the development of new services is a great opportunity for renewal for the more dynamic banks, as it may provide them with efficiency improvements and mean that they can offer greater services to their customers. and, improving customer service is precisely one of the main challenges facing the banking industry, which brings me to the final point of my address : the importance of maintaining the confidence of bank customers. 5 / 7 3 confidence confidence is the most important and the most fragile of a bank β s assets and determines the nature of its relationship with its customers, beyond the ambit of mere commercial transactions. bank customers deposit their savings with credit institutions, trusting that they will return | 0.5 |
rates among their currencies or, even better, by forming a currency union. 4 however, in practice, empirical analyses have generally been unsuccessful at identifying multi - country regions of any size that meet the criteria for an optimum currency area. indeed, some studies have concluded that even the united states and the european union, the largest currency unions, are themselves not optimum currency areas. 5 plausibly, political rather than economic considerations - namely, the desire to form a more perfect union - underlay the decisions of each of these entities to adopt a common currency. 6, 7 besides countries well - suited for a currency union, a second group of countries that might conceivably be better off with a fixed exchange rate, at least for a time, are the very poorest and least developed countries, which may lack the institutional infrastructure to effectively operate an independent monetary policy. in these countries, a hard peg or even the adoption of the currency of a major trading partner - sometimes known as dollarization, although the term also refers to cases in which the currency adopted is one other than the dollar - may be policy options worth considering. ( i want to be clear that i am speaking generally and am not advocating that other countries adopt the u. s. currency. ) although dollarization has the advantage of making monetary policy essentially automatic and should be an effective device for controlling inflation, one is struck by the fact that so few countries have chosen this approach. costs of dollarization include the loss of revenue from money creation and the reduced ability of the central bank to serve as a lender of last resort. but perhaps the most important impediment to dollarization is that, in giving up their own currency, the country β s citizens may feel that they are losing an important symbol of the nation β s sovereignty and pride. for other developing and emerging - market countries, i would argue that the best course is generally to let the exchange rate float freely and to make low and stable inflation a principal focus of monetary policy. as i have already suggested, this approach makes the targeted inflation rate, and not the exchange rate or some other variable, the nominal anchor of the system. an important reason for making the inflation rate ( more precisely, the price level ) the nominal anchor is that the general price level is more directly linked to economic welfare than is the exchange rate. domestic price stability improves the operation of markets, reduces the costs associated with economizing on money holdings and with | for instance, we have emphasized to banks the importance of stress testing to help detect risks not identified by more - typical statistical models, such as abnormally large market moves, evaporation of liquidity, prolonged periods of market distress, or structural changes in markets. as i noted in a speech last month, financial innovation can benefit consumers, the financial system, and the broader economy, but it also has risks that must be properly understood. 6 indeed, as you know, financial innovations in areas such as structured credit products and mortgage lending in some degree helped precipitate the current crisis. accordingly, we are requiring banks to evaluate more comprehensively the possible unintended consequences of proposed new financial instruments as well as how those instruments are likely to perform under stressed market conditions. counterparty credit risk is another area in which the federal reserve has been working for some time, and, as the crisis has unfolded, we have intensified our monitoring of how firms manage this type of risk. institutions are being pushed to further improve their understanding ben s. bernanke ( 2009 ), " financial innovation and consumer protection, " speech delivered at the federal reserve system's sixth biennial community affairs research conference, washington, april 17. of key linkages and exposures across the financial system. they are also being asked to analyze how their own defensive actions during periods of stress might put pressure on key counterparties, especially when other market participants are likely to be taking similar measures. a critical component of risk management is understanding the links between incentives and risk - taking, such as in the design and implementation of compensation practices. bonuses and other compensation should provide incentives for employees at all levels to behave in ways that promote the long - run health of the institution. the federal reserve has been working in international forums on compensation and incentives issues ; one product of those efforts was the publication last month by the financial stability board of new principles for sound compensation practices. 7 certainly, an important lesson of the crisis is that the structure of compensation and its effect on incentives for risk - taking is a safety - andsoundness issue. in this and other areas, one of the key lessons for bankers has been the need for timely and effective internal communication about risks. we are putting a high priority on ensuring that management and board of directors are well informed about the various risks that confront the organization and that they are actively engaged in the management of those risks. as we have worked with financial institutions to strengthen their governance and risk management, | 0 |
presumably had consequences for assessments of swedish and international economic activity. although the effects are difficult to gauge exactly, it seems clear that cyclical developments will be altered. an upturn will be postponed and the slowdown will be accentuated in the short run. in the aftermath of the attacks there has been some uncertainty in the financial markets as well as extensive portfolio adjustments. the pattern from similar periods in the past is clear : some currencies weaken while others, large currencies in particular, appreciate, share prices fall, long bond rates are unchanged or rise, short - term interest rates fall and the price of gold moves up. in order to mitigate the negative effects on the global economy and the financial markets, the major central banks lowered their instrumental rates and the riksbank, as you know, did the same. in addition, the central banks have, for example, taken steps to contribute liquidity to the financial system. the riksbank will be presenting a new inflation report next week. as usual it will contain a main scenario and a spectrum of upside and downside risks. considering the circumstances i have outlined earlier, the main scenario is inherently uncertain. the risk spectrum will therefore be particularly important to monitor in future as new information is obtained and events unfold. which direction will cyclical activity take? how will the exchange rate develop? what are the underlying factors here? and how will inflation expectations move? these are critical questions for the riksbank β s future action this autumn and winter. unfortunately there are no clear answers. | and consumption rose. so did share prices. production plans were revised upwards. in time, imbalances arose in the american economy between investment and saving, as well as between current and more fundamental stock market valuations. although optimism everywhere else did not become as excessive as in the united states, decisions were no doubt made about consumption, investment and shareholdings that possibly would not have occurred if more lasting economic considerations and more realistic expectations had prevailed. importance of learning from history history teaches us that in business, euphoric phases tend to be followed by a clear change of mood. the fact is that a similar wave of over - optimism attended the era of railway - building in the nineteenth century. the invention of the electric motor and the combustion engine likewise generated a high degree of over - confidence in the early twentieth century. in sweden it was the possibilities of using the new technology to reap large profits from such natural resources as hydroelectric power, timber and ore that were exaggerated. in the late 1990s the jubilance was about the huge profits that were going to be reaped instead from computer and telecom technology. once again, the expectations of rising profits and incomes overshot the mark. we should bear in mind, however, that the major innovations did play a tremendous part in the emergence of industrialised society and the welfare state. railways have been of lasting importance, not least in sweden. without those investments in the early twentieth century, the mining and forest industries could hardly have done what they did to launch norrland and other parts of our country on the world market. sweden is one of the world β s best examples of the forces for growth that are generated by innovations, experimentation and creative processes. companies like ericsson, aga, skf, atlas copco and electrolux are just a number of the instances of inventions that have contributed to our country β s long - term growth. the old austrian school of economics, with its roots in the period before world war i, had an analytical focus on growth and the business cycle that is relevant for an understanding of the present situation. one insight is the crucial part innovations play for the path of long - term growth. this has been elucidated not least by joseph schumpeter and erik dahmen. however, the significance of innovations and technology for growth is not a straightforward matter. they often raise productivity and generate windfall profits. the new products that result from innovations give some firms a monopoly, while other firms | 1 |
rajeshwar rao : role of statutory auditors in emerging financial landscape remarks by mr rajeshwar rao, deputy governor of the reserve bank of india, at the conference of statutory auditors and chief financial officers of commercial banks and all india financial institutions ( aifis ), mumbai, 9 july 2024. * * * i am delighted to be here today to convey my thoughts on the issue of statutory audit of commercial banks and aifis. in many ways, we, as regulators / supervisors and you as auditors, share a common goal. auditors play a very crucial role in ensuring the health of the financial system as they assist in maintainance of regulatory oversight by ensuring that the financial statements present a true and fair picture of the affairs of the regulated entity. the statutory auditors play a significant role in maintaining stakeholder confidence in audited financial statements and this is particularly important in the case of banking industry where the entire edifice is built on'trust'and the biggest external stakeholders, i. e., depositors are fragmented and unorganised. therefore, the reserve bank has a strong interest in promoting sound and high quality accounting and disclosure standards for the banking and financial industry as well as in having transparent and comparable financial statements that strengthen market discipline. auditors are important stakeholders financial reports of an entity offer a window into its financial performance as well as risk profile and therefore, financial reporting is often referred to as the " language " for " communication " between an entity and its external stakeholders. the " communication " can be effective only if both the management and the stakeholders speak the same " language ". for this, we need a common language, in the form of a set of rules and principles, which is where the accounting standards come into play. financial statements prepared on the basis of a set of common codified principles and standards reduce information asymmetry ; enhance comparability and transparency between entities and across jurisdictions ; and make the information provided through the financial reporting ecosystem relevant and reliable. the financial statements prepared in this manner help users and stakeholders to understand and assess the resource position of the entity, the claims held against these, the sources of changes in resources and claims, and timing and uncertainty of future cashflows which enables them to hold management to account in running the affairs of the entity concerned. regulators are important stakeholders in this process. the financial position of an entity informs into the regulator's assessment of its health. audited financial statements also form the basis | beneficiary bank accounts, thereby drastically reducing leakages and pilferages in social welfare schemes. thus, financial inclusion could be an instrument to provide monetary fuel for economic growth and is critical for achieving inclusive growth. further, expanding the reach of financial services to those individuals who do not currently have access would be an objective that is fully consistent with the people - centric definition of inclusive growth which attempts to bridge the various divides in an economy and society, between the rich and the poor, between the rural and urban populace, and between one region and another. an analysis of world bank development indicators implies a strong link between financial access ( measured in terms of commercial bank branches per 100, 000 adults and deposits per 1000 adults ) and economic development. empirical evidence indicates a distinct rise in income level of the countries with higher number of branches and deposits of commercial banks. higher number of bank branches per 100, 000 adults and more number of deposit accounts per 1000 adults are observed in high income countries than countries in the low and middle income categories. though the cause - effect relationship could be the subject of detailed research, the fact that there is a progressive increase in income levels of the countries as financial access increases is empirically evident. source : world development indicators 2010, world bank just as it is difficult to envisage continuing financial stability without financial inclusion, especially in the long term, it is difficult to envisage the success of policy efforts to expand the reach of financial services unless banks and other financial services providers are sound, the financial markets are functioning smoothly and financial market infrastructure is robust. a recent world bank report shows4 that nearly 60 percent of the economies experienced a contraction in real per capita income in 2009 as a result of the deepening of the global financial crisis. worldwide volume of deposits and loans shrank, with a median decrease of 12 percent in the ratio of deposit value to gross domestic product ( gdp ) and a median decrease of 15 percent in the ratio of value of loans to gdp. i have discussed how financial inclusion and financial stability need to co - exist if policy measures pursuing either objective have to achieve any degree of success. let me return now to the key question i flagged at the outset β whether financial inclusion and financial β financial access : the state of financial inclusion through the crisis β, consultative group to assist the poor ( cgap ) / the world bank group, 2010. bis central bankers β speeches stability are two sides of the same coin and mutually reinforce each | 0 |
of growth. the pressure on various economic entities to adjust their balance sheets has more or less disappeared since the beginning of 2000. however, the prolonged period of weak domestic demand has been compounded by the recent onset of population decline, pushing down economic entities β expectations for economic growth and forestalling forward - looking expenditure. the lehman shock in 2008 dealt another serious blow to demand and its impact continues to this day. one reason that supply capacity has not been sufficiently adjusted despite stagnant demand is that, as a result of various regulations and protection measures, factors of production have remained in areas from which demand has shifted away. there is a possibility that inflation expectations will lessen if expectations for future economic growth continue to decline and the output gap does not narrow steadily. in this case, consumers of goods and services may put off spending, while suppliers may cut prices further to stimulate demand. under these circumstances, although the output gap remains unchanged, prices may fall further and deflation may become even more difficult to quell. at present, medium - to long - term inflation expectations remain stable and it is important to make sure that they do not decrease. b. overcoming deflation in order for japan β s economy to overcome deflation, it is necessary to narrow the negative output gap. to this end, demand has to be expanded. the task is not impossible and there are various areas with potential demand to be tapped, such as sectors related to the provision of healthy and safe food, the environment, and population aging. an example of such latent demand is the recent government measures that sharply increased demand for environment - friendly durable goods. needless to say, it is also important to follow developments in overseas demand. as i mentioned earlier, economic growth in emerging and commodity - exporting economies has been astounding, and it is very likely that their demand for japanese goods and services still has much room for growth. the issue at stake is how to tap such demand. the government β s β new growth strategy β and β fiscal management strategy, β both announced in june, may provide some pointers. the β new growth strategy β aims to create a strong japanese economy on the basis of the measures for demand creation that i just mentioned, together with steps to overcome constraints on the supply of goods and the circulation of funds to be implemented in accordance with a specific timetable. the β fiscal management strategy, β meanwhile, aims to restore a sound and sustainable fiscal structure in a way that is consistent with | . this is because, even as euroscepticism rises, the external case for working together has rarely been stronger or more visible to the public. it is now plain to see that the rules and norms which have governed international relations since the second world war are being challenged β replaced by a new power politics where large economies try to impose their will on smaller ones. in such a world, it is undeniable that the eu amplifies the sovereignty of its members. in parallel, brexit has served to underline the pros of membership and the cons of being outside. it is now established that leaving the eu presents a trade - off : countries either have to follow the rules they could once set ; or they have accept a diminished level of market access, and ultimately lower welfare for their people. this renewed visibility presents an opportunity for the eu to reconnect with the european public 1 / 2 bis central bankers'speeches and re - find its raison d β etre. in this spirit, with the ep elections approaching, those who believe in europe have two imperatives : to promote and defend the eu where it is working ; and to fix it quickly where it is not. i hope this conference can help carry that debate forward. 2 / 2 bis central bankers'speeches | 0 |
area of concern has been the possible exclusion of a large section of population from the provision of services and the statement pleads for financial inclusion. it states : β there has been expansion, greater competition and diversification of ownership of banks leading to both enhanced efficiency and systemic resilience in the banking sector. however, there are legitimate concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, in particular pensioners, self - employed and those employed in unorganised sector. while commercial considerations are no doubt important, the banks have been bestowed with several privileges, especially of seeking public deposits on a highly leveraged basis, and consequently they should be obliged to provide banking services to all segments of the population, on equitable basis. β operationally, it has been made clear that rbi will implement policies to encourage banks which provide extensive services while disincentivising those which are not responsive to the banking needs of the community, including the underprivileged. the quality of services rendered has also invited attention in the current policy. i quote further, β liberalisation and enhanced competition accord immense benefits, but experience has shown that consumers β interests are not necessarily accorded full protection and their grievances are not properly attended to. several representations are being received in regard to recent trends of levying unreasonably high service / user charges and enhancement of user charges without proper and prior intimation. taking account of all these considerations, it has been decided by rbi to set up an independent banking codes and standards board of india on the model of the mechanism in the uk in order to ensure that comprehensive code of conduct for fair treatment of customers are evolved and adhered to β. it is essential to recognise that, while these constitute contextual nuanced responses to changing circumstances within the country, the overwhelming compulsion to be in harmony with global developments must be respected and that essentially relates to basel ii. basel ii and india rbi β s association with the basel committee on banking supervision dates back to 1997 as india was among the 16 non - member countries that were consulted in the drafting of the basel core principles. reserve bank of india became a member of the core principles liaison group in 1998 and subsequently became a member of the core principles working group on capital. within the working group, rbi has been actively participating in the deliberations on the new accord and had the privilege to lead a group of six major non - g - 10 supervisors which presented a proposal | ahead. what has been the impact? these reform measures have had major impact on the overall efficiency and stability of the banking system in india. the present capital adequacy of indian banks is comparable to those at international level. there has been a marked improvement in the asset quality with the percentage of gross nonperforming assets ( npas ) to gross advances for the banking system reduced from 14. 4 per cent in 1998 to 7. 2 per cent in 2004. the reform measures have also resulted in an improvement in the profitability of banks. the return on assets ( roa ) of the banks rose from 0. 4 per cent in the year 1991 - 92 to 1. 2 per cent in 2003 - 04. considering that, globally, the roa has been in the range 0. 9 to 1. 5 per cent for 2004, indian banks are well placed. the banking sector reforms also emphasized the need to review the manpower resources and rationalize the requirements by drawing a realistic plan so as to reduce the operating cost and improve the profitability. during the last five years, the business per employee for public sector banks more than doubled to around rs. 25 million in 2004. continuity, change and context we lay considerable emphasis on appropriate mix between the elements of continuity and change in the process of reform, but the dynamic elements in the mix are determined by the context. while there is usually a consensus on the broad direction, relative emphasis on various elements of the process of reform keeps changing, depending on the evolving circumstances. perhaps it will be useful to illustrate this approach to contextualising the mix of continuity and change. the mid - term review in november 2003, reviewed the progress of implementation of various developmental as well as regulatory measures in the banking sector but emphasised facilitating the ease of transactions by the common person and strengthening the credit delivery systems, as a response to the pressing needs of the society and economy. the annual policy statement of may 2004 carried forward this focus but flagged major areas requiring urgent attention especially in the areas of ownership, governance, conflicts of interest and customer - protection. some extracts of the policy statement may be in order : " first, it is necessary to articulate in a comprehensive and transparent manner the policy in regard to ownership and governance of both public and private sector banks keeping in view the special nature of banks. this will also facilitate the ongoing shift from external regulation to internal systems of controls and risk assessments. second, from a systemic point of view, inter | 1 |
remain sound. profitability has been sustained, employment growth has been robust and the unemployment rate has fallen to levels not seen for 25 years. these factors are also reflected in the december 2007 eurosystem staff macroeconomic projections. annual real gdp growth is projected to lie in the range of 2. 4 % to 2. 8 % in 2007, and be between 1. 5 % and 2. 5 % in 2008, and between 1. 6 % and 2. 6 % in 2009. in comparison with the september ecb staff projections, the range projected for real gdp growth in 2008 has been revised slightly downwards, whereas for 2007 the new range lies within the upper part of the previous one. available forecasts from international organisations broadly confirm this outlook. the scenario of sustained real gdp growth broadly in line with trend potential is based on the expectation that the global economy will remain resilient, with the slowdown of economic growth in the united states partly offset by the continued strength of emerging market economies. external demand should therefore provide ongoing support to euro area exports and investment. consumption growth should also contribute to economic expansion, in line with developments in real disposable income, as continued employment growth provides supportive conditions. that said, in view of the potential impact of ongoing financial market volatility and re - pricing of risk on the real economy, the level of uncertainty remains high. in the governing council β s view, the risks surrounding this outlook for economic growth lie on the downside. they relate mainly to the potential for a broader impact from the ongoing reappraisal of risk in financial markets on financing conditions and confidence and on world and euro area growth, possible further oil and commodity price rises, as well as concerns about protectionist pressures and possible disorderly developments owing to global imbalances. 50 as regards price developments, according to eurostat β s flash estimate, the annual hicp inflation rate increased sharply again in november 2007, to 3. 0 % from 2. 6 % in october. oil prices have risen strongly in recent months, and food prices have increased substantially, reflecting higher global demand. in addition, as emphasised on previous occasions, we are currently in the midst of a period in which unfavourable effects from energy prices are having a strong upward impact on annual hicp inflation rates, owing to the marked decline in oil prices a year ago. looking ahead, the hicp inflation rate is expected to remain significantly above 2 % in the coming months, and | these include : the appointment of a chief operating officer, enhancing the communications function, encouraging the culture of debate within the bank, strengthening the role of research, and continuing to invest in leadership and management capabilities. these recommendations make sense and have our support. we will now develop an implementation plan under the leadership of a small team of experienced people. to conclude, i would like to again thank the review panel for their work. it is not often that central banks are reviewed, so it is important the job is done well and thoughtfully, and that the process is constructive. this is exactly what has been done here. it also 2 / 3 bis - central bankers'speeches makes sense, as the panel recommends, for regular reviews to be conducted every five years. as the panel notes, the review has been about strengthening a well - functioning institution and ensuring the bank is in a good position to meet the challenges of the future. monetary policy has become more complex, as have the bank's operations in the banking and payments areas. the recommended changes in this review will help us do our job in this changing world and are consistent with our internal staff values, including serving the public interest and achieving excellence. i look forward to working with the government, the parliament, the board and the bank's staff on how we can best live up to those important values. i am happy to answer your questions. 3 / 3 bis - central bankers'speeches | 0 |
very flexible and inexpensive short - term financing offered by triparty repos to be extremely attractive. to the extent that this borrowing appeared riskless to lenders, broker - dealers were potential suppliers through triparty repos of the safe, liquid assets that were in such demand. broker - dealers who borrow in the triparty repo market want to have access to their securities for routine trading purposes β for example, to make deliveries to clients during the day. to allow for that, the market developed a critical operational feature called the β daily unwind β. each day, the clearing banks β unwind β all repo trades, returning securities to borrowers and cash to lenders, even for longer - dated term transactions. however, the securities still require financing during the day. to this end, borrowers rely on intraday overdrafts at the two major clearing banks. at the end of the day, the transactions are β re - wound β. thus, the risks associated with the portfolios of securities are fully transferred twice each day. the lenders in this market widely believed that the two clearing banks would always unwind their maturing trades in the morning, returning cash to their account, despite no contractual provision requiring that the clearing banks do so. the fact that lenders believed they were protected in this way by the clearing bank helped perpetuate the illusion that, particularly when lending overnight, they were invested in a money - like asset that would always be highly liquid and safe, even though in reality the borrower was usually an entity that could go bankrupt. this illusion faded as the financial crisis progressed. significant strains were created by concerns about the financial strength of the broker - dealers, uncertainty about the value of the underlying collateral, and belated recognition that the clearing banks were not contractually obligated to unwind maturing trades. only when the prospect of dealer failures became very real β for example, in the case of countrywide β s broker - dealer affiliate in august 2007 and bear stearns in march 2008 β did the lenders appear to see these risks clearly. in addition, the presumed stabilizing function of collateral was weakened, since a default by a dealer or clearing bank could leave lenders with securities posted as collateral that they had no desire, operational capacity, or even, in some cases, legal authority to hold, or at least liquidate in an orderly way. the response at that point was to flee, ignoring the protection putatively afforded | β s overall financial performance. this would allow for more - informed decision - making, thus contributing towards greater competitive advantage. moving forward, there will be increased expectation for more efficient use of internal resources. a more enhanced and integrated risk management framework, and the adoption of a risk adjusted performance management model would serve to further facilitate shareholders β activism and drive greater efficiency among banks. risk management however does not operate in a vacuum or in isolation and it should not be viewed merely for the purpose of regulatory compliance. priority should be given to ensure that the risk management framework is well - aligned and well - integrated with the strategic business directions of the banking institution. the benefits of refined risk quantification and more robust risk management should be translated into improvements in business operations and more effective functioning of the institutions. this will in turn ultimately bring benefits to the consumers and the economy at large. implementation challenges and considerations ladies and gentlemen, given the complexity of basel ii, the ability to comply appears to be the main concern within the banking community. this is truly a major undertaking with respect to the irb approaches or the internal rating based systems. the resources involved and data constraints are often cited as the two main challenges in implementing the irb approach, particularly for banks in the emerging markets. at this stage, data on default and credit migration for certain market segments is too limited to facilitate any meaningful analysis. it is therefore recognized that some lead time would be needed for banking institutions to produce a robust and meaningful validation of internal estimates of probabilities of default and loss given default. however, this does not mean that banks should wait until all the requisite data is in place. banks can initiate work to establish the framework for analytical functions. while the industry survey conducted by bank negara malaysia revealed a strong preference among malaysian banking institutions to adopt the irb approach, many had indicated the need to further strengthen their business case and undertake more comprehensive gap and impact analysis. this is indeed a critical process. of importance is to be able to extract the benefits out of the new accord. this would however, take time even for large and internationally active banking institutions that have made substantial enhancements over the years. standardised approach offers benefits with much less complexity while capital savings from the adoption of the standardized approach may be relatively lower than the irb approach, the benefits to be gained under the standardized approach are still considerable compared to the current accord. it includes the lower risk weights to be assigned to the mortgage portfolio, which would be reduced | 0 |
jan f qvigstad : outlook for the norwegian economy address by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at sparebank 1 fredrikstad, 4 november 2009. the text below may differ slightly from the actual presentation. the speech is based on the assessments presented at norges bank β s press conference following the executive board β s monetary policy meeting on 28 october and monetary policy report 3 / 09. * * * the operational target of monetary policy in norway is low and stable inflation, with annual consumer price inflation of close to 2. 5 per cent over time. in recent years, average inflation has been close to, but somewhat below 2. 5 per cent. consumer price inflation has generally been somewhat below target since 2003 and monetary policy was then oriented towards pushing up inflation. in 2007 and 2008 inflation picked up to slightly above target. inflation expectations were firmly anchored and the key policy rate was gradually raised to a more normal level. inflation close to target and firmly anchored inflation expectations were essential for monetary policy to be effective when substantial cuts were made in the key policy rate in autumn 2008 and the beginning of 2009. it has been a year since financial turbulence developed into a full - blown crisis and resulted in the most severe downturn in the global economy since the second world war. the financial crisis eroded confidence in banks, counterparties and contractual partners. the measures implemented by central banks and governments have had a stabilising effect on financial markets. credit and money market premiums have decreased and activity has picked up. daily fluctuations have become less pronounced. with the improvement in financial markets over the past six months and the increase in the credit supply, global trade is now picking up slightly, albeit only gradually and from a low level. manufacturing output has recently risen in the us, japan and many emerging economies, while it continues to fall β albeit at a slower pace β in many euro area countries. manufacturing output in japan and the us is still at a very low level. despite the pickup in growth, capacity utilisation in advanced economies will remain very low for the next two - three years. uncertainty in equity markets has eased and risk premiums are lower, reflected in a rise in leading us stock indices of more than 50 per cent since equity markets bottomed out at the beginning of march 2009. oslo bΓΈrs has risen by about 70 per cent since the beginning of march. the price of oil has risen somewhat since the june report | however cognisant of the current cost - push pressures and the potential of these to filter through to more generalised price pressures. these pressures will be closely monitored, and the mpc will take timeous action to ensure that second round effects do not take hold and that inflation pressures are kept in check. 6. conclusion to conclude, uncertainty in the global environment has not abated, as reflected by increased volatility in financial markets. while the global recovery has proceeded at a moderate pace, it remains unbalanced and uneven. to this end, the g20 is addressing issues of global imbalances and also reflecting on the future global monetary system. such developments will have an impact on south africa and policy developments going forward, as we are part of the global economy and one of the more liquid amongst emerging market financial markets. south africa β s growth outlook has improved, although it remains below pre - crisis levels and below that of other emerging and developing countries. inflation has recently trended higher, and while the bank β s forecast shows that cpi will breach the upper end of the target range, based on current information the mpc expects that this will be a temporary breach. however, developments will be closely monitored for any second round effects which could result in broader based price pressures. thank you. bis central bankers β speeches | 0 |
##uritized products were very difficult to trade, in part, because they were very difficult to value. the cessation of new asset - backed securitizations has been problematic because banks have not had the capacity to keep credit flowing freely. this is especially true given that bank balance sheets were already under strain β bank capital has been depleted by credit losses and bank balance sheet capacity has been strained by an inability of banks to securitize new loan originations and by the need for banks to honor their off - balance sheet obligations. for all these reasons, the federal reserve determined that it was important to augment the balance sheet capacity of the financial system by supporting the abs market. this was the purpose of the talf. by providing non - recourse, term financing for new aaa - rated consumer asset - backed securities to investors, the talf essentially provides the balance sheet capacity necessary to facilitate the continued flow of credit to households and businesses. the talf offers three attributes that the private sector has had difficulty providing during this time of financial and economic distress : 1 ) leverage to purchase highly - rated, low - risk assets, 2 ) term financing and 3 ) protection against very adverse economic outcomes. talf loans are leveraged β haircuts against the aaa - rated collateral average about 10 % ; the loan terms are three or five years ; and the loans are non - recourse, which means that if the economy performs very badly and the securities fall sharply in value, an investor can put the collateral that secures its talf loan back to the fed, only losing the collateral haircut. the loan is then extinguished. because term, non - recourse financing is not readily available from the private sector currently and the spreads on asset - backed securities remain elevated, talf provides an opportunity for investors to purchase aaa - rated consumer asset - backed securities and earn relatively high returns. although some observers are concerned by the prospect of talf investors achieving relatively high returns, i think that concern is misplaced. investor participation is absolutely essential in order for the talf to improve the availability of credit and to bring down the cost of credit for households and business. the prospect of relatively high expected risk - adjusted returns is precisely what gives investors an incentive to participate in the program. as investors begin to take advantage of the attractive talf terms, spreads on abs securities contracts, and rates of return go down, and most importantly, the costs of funds for the issuers | william c dudley : brief remarks about the centennial β the fed at 100 β exhibit introductory remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the museum of american finance, new york city, 25 september 2013. * * * thank you all for being here to commemorate the opening of the centennial exhibit for the federal reserve system and the federal reserve bank of new york at the museum of american finance, just a few blocks from the new york fed β s landmark head office at 33 liberty street. i would like to say thank you to our friends at the museum for their work and interest in the fed and for supporting us in organizing this event. before making some brief remarks about the centennial, i would also like to acknowledge some of the people in attendance tonight. we have two former new york fed presidents here this evening : jerry corrigan and bill mcdonough. i met jerry, the seventh president of the bank, when i was still wet behind the ears. i was just out of graduate school at the board of governors in washington, but jerry was already a force to be reckoned with and a part of paul volcker β s inner circle. jerry β s tenure as president had many memorable moments, including the october 1987 stock market β break β. jerry, of course, was instrumental in working with then chairman alan greenspan in devising a response to provide liquidity to the market, and an episode that could have ended in financial crisis soon passed. jerry also tackled many other difficult issues during his tenure, including the latin - american debt crisis and the development of the first basel accord. we also have bill mcdonough, the eighth president of the bank, who built on the accomplishments of jerry β s tenure, and made great strides in connecting the new york fed to the broader region. at the same time, he helped ensure that the federal reserve was prepared to face new, salient challenges presented by developments in the global economic and financial landscape. during his tenure, the city, the country and the bank experienced a very significant crisis on september 11, 2001. under bill β s leadership, new york fed staff worked tirelessly on liberty street, supporting the efforts of first responders, while ensuring that financial markets continued to operate and serve their vital function in the u. s. and global economy. a number of the members of our board of directors, including chairwoman rafferty, are with us, as is one of | 0.5 |
β by comparison with instant payments β 30 times more slowly, and is about 10, 000 times more expensive. the inefficient processing makes transactions costly not just from a financial perspective, but also in terms of the environmental impact. bitcoin in particular has a large carbon footprint due to the electricity consumption required for its creation and transfer. in addition, because virtual currencies do not have a trusted issuer behind them, they may become worthless at any time. it is not surprising, then, that virtual currencies are not widely accepted as a means of payment. conclusion the future of payments is instant and most countries in the euro area are moving with the times. this is a natural development, following the rise of real - time services in other industries. the industry ( with the support of the eurosystem ) has stepped up to the challenge and developed a scheme and an infrastructure that enable such services to become the new normal for euro payments. now it is time to go one step further and provide efficient and innovative end - user solutions that allow consumers and businesses across europe to make instant payments in any payment situation, especially at the point of sale, where the majority of retail payments are made. i encourage new and existing service providers to take the opportunity to develop pan - european point - of - sale solutions based on instant payments. these solutions should be efficient, userfriendly and secure. as you are all aware, high security standards are essential to retain public trust. i therefore reiterate my call to payment service providers to adhere to the psd2 regulatory technical standards on strong customer authentication and common and secure communication as soon as possible, even before they are legally required to do so. by providing services that are safe, as well as fast and convenient, the payments industry will succeed in meeting the needs of a digitalised society. 3 / 3 bis central bankers'speeches | what i mentioned earlier, customers must be able to easily initiate an instant payment from an online shopping environment and the merchant must instantly receive confirmation that the payment has been executed. the revised payment services directive ( psd2 ) provides a stable legislative framework for such services and aims to foster innovation and competition in this field. the erpb, taking the revised psd2 and the close - to - final regulatory technical standards as a basis, has supported the industry in its endeavours to reach agreement on the necessary technical, operational and business elements to ensure the pan - european provision of innovative and competitive payment initiation services. this work is well under way and will be concluded by june this year. in parallel, the european commission has encouraged a group of market actors to evaluate application programming interface ( api ) technical specifications to ensure that they will meet market needs and will be fit for purpose when accessing customer accounts to initiate payments. security the psd2 provides many opportunities for innovative services, including, but not limited to, ecommerce payment solutions. such solutions require standardised access to accounts, but also security throughout the payment chain. the psd2 regulatory technical standards on strong customer authentication and common and secure communication strike a good balance between the needs of consumers, third - party providers and banks. they will probably not be applicable until september 2019 at the earliest. since the main provisions of the psd2 have been in effect since last month, i call on payment service providers to fulfil the requirements of the regulatory technical standards, even if they are not yet legally required to do so, during the transition period until these standards enter into force. it is in their own interests to do so, as this will guarantee the high security levels that are necessary to retain public trust in the payment system and payment services. instant payments versus virtual currencies smart, pan - european instant payment solutions meet the needs of end - users in the digital age, being fast and easy to use as well as safe and reliable. the sct inst scheme and the underlying market infrastructure are subject to eurosystem oversight, and settlement takes place in central bank money. by contrast, so - called virtual currency schemes such as bitcoin, which have been 2 / 3 bis central bankers'speeches touted by some as the payment method of the future, cannot achieve that. first, bitcoin is not a currency but simply a speculative digital asset. it tends to be processed inefficiently and | 1 |
david clementi : risk sensitivity and the new basel accord speech by david clementi, deputy governor of the bank of england, at a financial services authority conference : β reforming capital adequacy for banks, building societies and investment banks β, london, 10 april 2001. * * * introduction it is a great pleasure for me to be adding my remarks today to those of bill mcdonough and howard davies. i would first like to congratulate bill, as chairman of the basel committee, on the very real achievement that this new capital framework represents. products that are'designed by committee'normally come in for some fairly trenchant criticism, but this one represents a new milestone in financial regulation, one which i believe will strongly influence how all financial firms, not just banks, come to be regulated in the future. i know it has been a lot of hard work, and i don't just mean the shoulder - strain involved in carrying the document onto airplanes! unfortunately the hard work is not over yet, both for the authorities and for the banking community - even looking beyond finalisation of these proposals, supervisors and banks will of course have to see through a long and complex implementation process. but this is not to underestimate the progress that has been made and it is certainly a good moment to take stock of the proposals as they stand. although underpinned by the straightforward proposition that capital requirements should be more sensitive to risk, the new basel proposals are frequently referred to as a'package '. i would describe the components as, first, some very difficult technical thinking, which has addressed questions regarding the purpose of capital that were barely even thought of back in 1988. the second component is, unsurprisingly, pragmatic compromise. the result is, i think, a reasonably coherent whole ; i know that those involved have tried to think about the sum of the parts as well as the individual parts. and it is this question of the overall, long - term impact of the new accord that i would like to focus on today. the bank of england has as two of its three core purposes maintaining the stability of the financial system and seeking to ensure the effectiveness of uk financial services. both are relevant to the discussion of capital adequacy. the bank, participating in the discussion of the new accord as a member of the basel supervisors committee, has looked at the proposals, not only from the perspective of financial stability but also with regard to the efficiency of the banking | left by the decline of the wholesale lenders, so that there has not been a material constraint on the quantity of housing credit available in australia throughout the crisis. there has, however, been some tightening in lending standards, with several banks reducing their maximum lvrs on prime, full - doc loans for new borrowers from 95 β 97 per cent to relative to equivalent maturity swap rates ( and by more relative to the cash rate because of the current slope of the yield curve ). about 90 per cent during 2009. banks have also raised their interest rate buffers and increased their β genuine savings β requirements. low - doc and non - conforming loans have become much harder to obtain. this has seen a decline in the share of new owner - occupier housing loans with a lvr above 90 per cent, from a peak of 27 per cent in the march quarter 2009 to 17 per cent by the end of the year. the share of low - doc loans has declined to about 7 per cent. there has been a decrease in the shares of new investor loans that are being written with higher loan - to - valuation ratios ( lvrs ) or lower documentation standards. there has also been a decline in the share of interest - only loans, though it is still the case that close to half of all new investor housing borrowers are opting to not make any principal repayments, reflecting the tax advantages of this funding strategy. the future looking forward, the competitive state of the current market is reflected in the fact that home lending rates have not risen by as much as funding costs. moreover, the outlook for the smaller lenders has improved since mid 2009. the securitisation market is starting to recover, with the volume of issuance to non - aofm investors picking up and secondary market spreads decreasing. securitisation is once again becoming a more viable funding source for lenders, with spreads on newly issued rmbs β around 130 to 135 basis points over one - month bank bills for nonaofm supported deals β a little below our estimated break - even spread of around 160 basis points. however, our estimate of the break - even spread, and hence the profitability of the issue, does not take into account different degrees of subordination across issues. to the extent that that the degree of subordination required by investors is greater than it was previously, the overall profitability of the issue will be lower. this is because a greater share of the security | 0 |
perspective. in a low or negative inflation environment, consumption could be postponed in the expectation of further price reductions, putting pressure on firm revenues. given the downward rigidity in wages, firms cannot easily adjust through lower wages in a deflationary environment. so a deflationary environment could lead to higher unemployment and stagnation. also, low inflation increases the burden of servicing debt. indeed, with deflation the real interest rate starts rising. when nominal policy rates are close to the zero lower bound, higher real rates cannot be corrected by reductions in policy rates. the prolonged period of low inflation in the euro area since 2014 has prompted the ecb to introduce unconventional monetary policy measures ( see chart 6 ). chart 6 β hicp inflation these complement the reductions in the main policy rate so as to maintain an accommodative monetary stance. in january 2015 the ecb announced the launch of the asset purchase programme ( app ), first encompassing abs and covered bonds, and later extended to the purchase of sovereign bonds. at the euro area level, the ecb β s monetary policy strategy has gradually improved financial and credit conditions, as well as the ongoing economic recovery. the non - standard measures have resulted in higher equity and bond prices, higher liquidity and improved lending conditions. since june 2014 the transmission of policy rates to lending rates has improved, with declines in lending rates becoming more pronounced and more widely distributed across euro area countries. the bank lending survey confirms the improvements in broader credit conditions since the introduction of the app. as a result, credit to the private sector in the euro area has shown signs of recovery and registered a positive growth since may 2015, the first time in 36 months, as shown in chart 7. bis central bankers β speeches chart 7 β m3 and main counterparts on the inflation front, however, results continue to disappoint on the downside. the harmonised index of consumer prices in the euro area is just 0. 1 % in october 2015, following a period of negative or close - to - zero inflation. on the other hand, the latest inflation rate for malta, at 1. 6 %, is within reach of the ecb β s below but close to 2 % target ; it attests to the buoyancy of the economy. it also indicates that the app has had positive effects on malta β s economy. the main transmission channel has worked through the exchange rate. the depreciation of the euro against other major currencies has | have welcomed this opportunity to say something about brexit. however, in view of the coincidence between this event and the ongoing saga, i will not do so today. page | 5 document classification : public | 0.5 |
markets group also maintains close contact with financial market participants in australia and elsewhere, and the reserve bank gains valuable intelligence as a participant in both local and offshore markets. in the lead - up to the board β s meeting, all this material is carefully evaluated. at a meeting of the most senior officers in the week preceding the board meeting, discussion occurs about what should be recommended to the board. papers for the board containing the factual information available, the staff β s judgements about issues of interpretation in the data, the outlook and any topics of special interest are prepared. a four to five page paper, containing a high - level summation of the issues for policy and the recommendation, is completed on the thursday afternoon ahead of the meeting. board members receive the papers on the friday. at the board meeting, the most senior staff present the key messages from the papers. there is extensive discussion, and plenty of questions from the members about the material. the board, i can assure you, is no rubber stamp and its members are no group of shrinking violets. they come from a diverse set of backgrounds. they bring their own experiences and their own independently gleaned pieces of information about what is going on. the analysis and arguments put by the staff and management of the bank are well and truly tested. any weaknesses will quickly become pretty clear. this discussion usually takes about three hours. it is, i would think, the most intense regular discussion of the state of the economy that occurs anywhere in the country, as of course it should be. at the end of the discussion, the governor, as chairman of the board, will sum up and introduce the policy question. each member has an opportunity to give their view and their reasoning on the decision at hand. typically, a consensus emerges, and the decision is then taken. it then remains to issue a statement. the board meeting is not a drafting session β the members are usually content to leave the precise wording to the chairman, on the understanding that the statement will be consistent with the discussion at the meeting. the statement is then released at 2. 30pm and the community is thereby informed very quickly what the decision is and why we have taken it. subsequently, the draft minutes of the meeting are prepared. these are finalised after members have the opportunity to comment on the draft during the following week, and are released publicly on the tuesday two weeks after the meeting. a few days after this, the whole sequence begins over again. in addition | these exceptional microentrepreneurs not only survive they thrive! their stories give us confidence that our micro, small and medium enterprises ( msmes ) will continue to be a vital, resilient, and viable foundation for sustaining economic growth throughout our country. it is noteworthy that one of the country β s pioneer mfis β card - mri β is a 2008 awardee of the prestigious ramon magsaysay award foundation for public service under its theme β pathfinders in a changing asia. β it was honored for its " successful adaptation of microfinance in the philippines, providing self - sustaining and comprehensive services for half a million poor women and their families. " indeed, real - life success stories of microentrepreneurs and hard data on hand prove beyond reasonable doubt that microfinance truly has the power to liberate our entrepreneurial poor from poverty and to give them a better life. as of june 2008, there were 802, 092 microfinance borrowers who have accessed loans worth p6. 5 billion from 230 banks. these borrowers have also accumulated roughly p1. 6 billion in deposits with the banks. it is also evident that our banks have successfully taken their strategic place in providing financial services to the previously unbanked. since 2006, rural banks have consistently accounted for a significant portion of the winners. in fact, both of our national winners this year are clients of rural banks. i believe this trend will continue as more banks provide microfinance services. i also see more successful microentrepreneurs being nominated in the years ahead as partner institutions who have become fierce advocates of microfinance get more supporters and more microentrepreneurs on board. synergies developed between and among partner institutions should result in a further broadening and deepening of the microfinance sector. the case of citi awardees are a case in point. i understand our 11 awardees have attended financial education lectures to boost their ability to sustain profitable operations. the members of our national selection committee have also been generous in terms of giving guides to growing their business and providing marketing outlets for consumer goods. on our part, the bangko sentral will continue to provide a policy environment conducive to broader participation of banks in the microfinance sector. rediscounting of microfinance loans will also continue. and so, ladies and gentlemen, let us continue working together to ensure the continuing success of microfin | 0 |
helmut schlesinger, one of my predecessors as president of the bundesbank held the eighth homer jones memorial lecture. in his speech on β on the way to a new monetary union β he explained to the european central bank ( 2010 ), reinforcing economic governance in the euro area, http : / / www. ecb. int / pub / pdf / other / reinforcingeconomicgovernanceintheeuroareaen. pdf, p. 4. bis central bankers β speeches audience in st. louis the historic dispute between β monetarists β and β economists β. 19 in the particular context of european monetary integration, these terms had a totally different meaning to our general understanding. β monetarists β, he explained, β believed that monetary integration has to start first and that economic and political integration would follow. β β economists β, however, β believed that economic convergence between the national economies must occur before β¦ a monetary union. β the β monetarists β prevailed, but they erred in their belief that the introduction of the single currency would automatically act as a locomotive for the political union of europe. there is no political union so far and there is little expectation that this might change significantly in the foreseeable future. therefore, national executive and legislative branches will remain responsible for economic and fiscal policies over the medium to long term. intergovernmental fiscal transfers beyond the rather moderate and earmarked payments from the eu budget ( approximately 1 % of gnp ) are hardly acceptable ; overburdening the financial solidarity of the people might jeopardise the idea of european integration. the β economists β, on the other hand, had a point in demanding more economic convergence. their worries were, by the way, taken into account by the implementation of convergence criteria that have to be fulfilled before a country can join the euro area. the underlying problem of the current crisis is, however, not a lack of convergence ex ante or heterogeneity per se ; rather it is the lack of willingness on the part of a number of member states to meet the requirements of the membership in a monetary union. if they fail to correct these deficiencies swiftly and thoroughly, stability oriented monetary policy in emu will become increasingly difficult, all the more so as monetary policy has been profoundly challenged by the financial crisis. the major lessons that central bankers in the euro area and elsewhere should take to heart are the following : firstly, monetary | a a weber ( 2010 ), der iwf spielt mit dem feuer ( the imf is playing with fire ), financial times deutschland, 25 february, 2010 ( available in german only ). see c walsh ( 2010 ), the future of inflation targeting, university of california, santa cruz, mimeo. see deutsche bundesbank, price - level targeting as a monetary policy strategy, monthly report, january 2010, pp 31 β 45 ; c gerberding, r gerke and f hammermann ( 2010 ), price - level targeting when there is pricelevel drift, deutsche bundesbank research centre, discussion paper, series 1, no 23 / 2010. bis central bankers β speeches of unconventional measures during the crisis give no cause for viewing the lower bound of the interest rate as a binding restriction on the effectiveness of monetary policy. 3. particular lessons for monetary policy in the euro area all the issues i have been talking about up to now concern more or less all central banks and every monetary policymaker. for the remainder of my speech, i would like to focus on the particular challenges for monetary policy in the euro area. these arise from the sovereign debt crisis, which is the major challenge for economic and monetary union. the circumstances surrounding the debt crisis are aggravating the conduct of the eurosystem β s common monetary policy, which is geared towards maintaining price stability in the euro area as a whole. 3. 1 heterogeneity as a challenge for monetary policy one of the aggravating factors is heterogeneity in terms of growth, inflation and competitiveness. with regard to the euro - area countries β economic performance, we are currently observing a widening divergence. broadly speaking, there is a considerable growth gap between the core and the periphery, or to put it more precisely, some peripheral countries of the euro area. in my view, the economic heterogeneity of the euro area is a non - issue. why should heterogeneity be a problem for the single monetary policy? after all, the dispersion of growth rates, as measured by the weighted standard deviations of quarterly growth rates, is not significantly greater than in the first years of emu. with regard to inflation variance, we see even lower values than then. furthermore, the us economy is characterised by considerable heterogeneity, too, and that does not impede the federal reserve β s monetary policy, either. and | 1 |
i would like to brief you on the work of the people β s bank of china ( pbc ) in practicing sound monetary policy in a more flexible and appropriate manner and implementing the requirements of the government work report on securing market entities in the fight against the covid - 19 pandemic since the beginning of this year. first, by leveraging quantitative monetary policy tools, we expanded aggregate supply with a focus on easing financing difficulties. in h1 2020, with respect to monetary policy, we rolled out a mix of forceful supporting measures, including three rounds of required reserve ratio ( rrr ) cut, additional rmb1. 8 trillion quotas for central bank lending and central bank discount, a program for supporting credit - based loans to micro and small businesses ( msbs ), and the phased deferment of loan principal and interest repayments for micro, small and medium - sized enterprises ( msmes ). these measures have yielded solid results. at end - may, the growth rates of broad money ( m2 ) and the aggregate financing to the real economy ( afre ) reached 11. 1 percent and 12. 5 percent respectively, both remarkably higher than those of last year. the stock market, bond market, foreign exchange market and rmb exchange rate were generally stable. since q2 2020, china β s major macroeconomic indicators have displayed favorable signs of recovery. in h2 2020, we will continue to keep liquidity adequate at a reasonable level through monetary policies, which is expected to bring about expansion in rmb loans by nearly rmb20 trillion and growth in afre by over rmb30 trillion throughout the year. second, by advancing the market - based interest rate reform, we guided a continuous decline of market rates and promoted the financial sector to reasonably mark down profits to support enterprises, in an attempt to alleviate high financing costs. since the beginning of 2020, the financial sector has marked down profits to support enterprises in three ways, namely lowering interest rates, adopting monetary policy tools that can directly support the real economy, and reducing banks β charges. it is estimated that, with these measures, the financial system will mark down rmb1. 5 trillion worth of profits to support enterprises throughout the year. 2 / 3 bis central bankers'speeches third, by strengthening write - offs and disposal of bank non - performing loans ( npls ), we made efforts to solve the sustainability problem related to the support of the financial sector for the real economy. under the impact of the | imprecise exercise, and all the more so for a country ( such as sa ) with such a high rate of inactivity and where the responsiveness of wage and price inflation to changes in unemployment is low. in addition, in recent years the task has been further complicated by uncertainty over the extent to which electricity supply limitations have constrained potential output growth in south africa β. 4 replicating work by borio, disyatat, and juselius ( 2013, 2014 ) at the bank of international settlements ( bis ), which incorporates financial cycle characteristics into the estimation, some estimates suggest that south africa β s potential growth rate declined from 4 per cent in 2007 to around 2Β½ per cent in 2013, compared to earlier estimates which suggested that current potential growth rates was around 3 to 3Β½ percent5. this development is not unique to south africa as several studies show that potential growth may have been over - estimated in many emerging market economies. monetary policy response the operating environment for south africa β s monetary policy has become increasingly complex, with growth and inflation dynamics being influenced by a range of global and domestic factors, which call for delicate trade - offs in terms of policy settings. recent developments suggest that the period of relatively low volatility has come to an end. market participants and policy makers now have to grapple with the possibility or risk that the lift - off of rates in us may occur sooner than they anticipate, while in japan and the eurozone more easing seems to be on the way, while risks assigned to geo - political risks, which the oecd ( 2013 ), oecd economic surveys : south africa 2013, oecd publishing. see http : / / www. oecdilibrary. org / economics / oecd - economic - surveys - south - africa - 2013 _ eco _ surveys - zaf - 2013 - en. anvari, v., r. steinbach, and n. ehlers ( 2014 ). a semi - structural approach to estimate south africa β s potential output. south african reserve bank working paper wp / 14 / 08. bis central bankers β speeches market seems relatively relaxed about, may intensify. all these factors are likely to increase volatility. recent experience has shown us how sensitive our domestic market are to the international backdrop. against the background of south africa β s elevated current account deficit, which is expected to only correct slowly, the risk of abrupt swings in capital | 0 |
ambitions would be tempered and targeted to meet the specific needs of the market. furthermore, requiring matching funds not only ensures the private sector is willing to risk its own money but also tests the potential of the technology or investment firm. several venture capital programs such as israel β s yozma, the new zealand venture investment fund, and brazil β s inovar seed fund have all developed successful matching mechanisms for private investors. in this regard, i throw out a challenge to the caribbean private sector. tamana intech park is an opportunity to get off the sidelines and into the game. bring your money, bring your technology and, like all risky ventures, you may or may not have the opportunity to reap substantial rewards. my third and final lesson is that small, open caribbean economies need to favor scale - up rather than start - up ventures. here is a thought - provoking question : would you allocate more of society β s resources to giving birth to more babies or to raising children well? many parents in the audience might agree that the long, complicated and often thankless job of growing a healthy, educated and moral child seems more challenging than giving birth. in the context of enterprise creation, there has been a dramatic proliferation of start - up programs around the world : start - up america, start - up chile, start - up russia and dozens of others. i believe this sends two flawed messages. the first is that the most difficult task of the entrepreneur is to launch the venture. the second is that the more start - ups, the more successful the program. since small size is the major constraint to economic growth in the caribbean, there is a compelling argument for policymakers to stop treating the quantity of start - ups as an indicator of success and to start looking at the quality of those start - ups that grow and eventually scale - up. one high - potential venture which grows to 100 people in five years does create the same number of jobs as 50 bottom - of - the - pyramid ventures which stagnate at 2 people. but many experts argue that the high - potential venture has a much greater economic impact than the small - scale venture. contrary to popular opinion, high - potential is not always synonymous with high - tech. and it is not the surest path to competitiveness and prosperity. in fact, caribbean economies may get more development β bang for the buck β by supporting β low tech β sectors such as food processing and forestry than by trying to develop a | , which drags on growth and creates a climate of uncertainty. we need to restore confidence to bring about a recovery in investment, particularly through clear announcements. the finance minister was talking recently about β good finance β. i would add that good finance can β t do anything if the fundamentals are not good. what mechanisms do we need to act on? i think that certain reforms should be made a priority in some countries to boost the potential for growth. in italy, for example, emphasis is placed on the judicial framework to ensure that relationships between creditors and debtors are safeguarded, and on the reform of the italian senate, which must improve its decision - making. equally, measures could be taken in the labour market β as happened two and a half years ago in spain, where the results can now bis central bankers β speeches be seen. the important thing is to honour our commitments. promised reform is all too often delayed or, sometimes not even implemented at all. so do you think that the stability pact doesn β t actually offer increased flexibility? the stability pact offers enough flexibility to take the short - term cost of structural reform into consideration. however, we should not go off course to such an extent that we lose credibility. unlike growth, the inflation figures are not in line with your scenarios. how do you explain this? we have had to significantly revise our inflation forecasts for 2014, trimming them from 1. 1 % to 0. 7 % since december 2013. low inflation is no longer caused purely by adjustments in certain euro area countries, and by lower energy and food prices. normally, a fall in prices would be able to support purchasing power and, therefore, domestic demand. but demand has remained weak, including in the biggest euro area economies. how does all this affect the ecb? with rates of inflation that are too low month after month, our comfort zone for reaching the target of price inflation close to 2 % over the medium term has shrunk. faced with this risk, we were obliged to act as we did in june. are the actors in the euro area already expecting inflation to be a long way from your medium - term target? medium - term expectations remain well anchored. and if you were to ask me about the probability of a deflationary scenario becoming a reality, my response would be that there is very little risk of this happening in the euro area. nonetheless, the risks of a prolonged period of low inflation have been identified by the ecb | 0 |
by effective cross - border supervisory and regulatory institutions. a third argument is that banking union membership should benefit participating countries through the removal of an incentive for deleveraging on the part of banks with foreign capital. the on - going cross - border deleveraging process, while reflecting balance sheet repair in host countries, as well as constrained demand for new borrowing, must be monitored carefully. to give you an idea of the size of the phenomenon, as compared to the beginning of the crisis, external funding from parent banks has decreased in romania by 35 percent, about half of the reduction occurring last year. the rebalancing of bank funding away from parent - subsidiary lines of credit and more towards domestic funding is necessary and appropriate ( inter alia, it reduces loan - to - deposit ratios and the stock of foreign private indebtedness, both processes impacting financial stability favourably ), but must not be unduly accelerated in the short and medium term, especially when superimposed on an on - going fiscal consolidation effort, as this puts excessive downward pressure on economic growth. as a fourth argument for banking union membership, there are also potential benefits which relate to eliminating the possibilities of jurisdictional arbitrage ( for example, by preventing the widespread potential conversion of foreign - owned bank subsidiaries into branches ), as well as to creating a more competitive market by reducing distortions and entry barriers. there is a lot of potential for increased efficiency of the banking sector by virtue of being a member of the banking union. a more efficient banking sector cannot but bolster the long - run growth potential of an economy. a single supervisor with a single rulebook entails that supervisory and regulatory activities should be implemented in a harmonized and consistent manner, therefore lowering or eliminating the current cost of compliance for banks with cross - border operations. bis central bankers β speeches currently, there are widespread differences in terms of the interpretation and application of regulatory and prudential definitions across member states, and especially in what concerns supervisory forbearance. in terms of the latter, the national bank of romania has chosen a very transparent and tough approach, with the result that non - performing loans indicators have soared. at the moment, the non - performing loan ratio calculated based on prudential regulations stands above 22 percent. however, considering the new indicator on asset quality defined by the european banking authority, which covers both government and non - government exposures, the ratio declines to around 17 percent and is seen falling even further | second, repairing and restructuring the financial sectors to put them on a healthier footing ; third, regaining competitiveness by pursuing structural reforms. when giving advice as part of the troika, we always attached importance to ensuring social fairness. this meant, in particular, an equitable sharing of the adjustment burden across society and overcoming powerful vested interests. i am acutely aware of the social hardship in the programme countries. many citizens have suffered and are still suffering from policy mistakes in the run - up to the crisis and the subsequently unavoidable adjustment process. these are real people losing their jobs. real people getting their wages or pensions cut. this concerns all of us. but we should not jump to the wrong conclusions and blame the fire brigade for the fire damage. let us always keep in mind what would have been the alternative. a disorderly default would have resulted in a meltdown of the financial sector and in a collapse of the real economy. social hardship would have hit the citizens of the programme countries much harder. and let us also not forget that in one case there was an extensive debate on the potential exit from the euro area. instead, what have we experienced these last four years? tremendous efforts have been made to repair financial sectors, improve the functioning of the economy and consolidate public finances. that ireland has just exited from its programme and regained market access is a demonstration of this hard - won achievements. in all the programme countries we have seen major progress, especially as regards fiscal adjustment and the stabilisation of banking systems. cost and price competitiveness are being regained step by step ; structural reforms are showing first results. market access has improved. nevertheless, unemployment remains unacceptably high and the recovery is fragile. therefore, governments should not undo the progress made. instead, they should keep bis central bankers β speeches going down this difficult path. incidentally, this applies not only to the programme countries, but to all euro area member states. lessons to be learned i would like to draw three conclusions from what i just explained. first, the programmes were the necessary answer to some member states finding themselves on the brink of default. second, the troika was the best available instrument in the given circumstances. and third, with hindsight and taking into account the difficult situation as well as the imperfect information available at the time, the troika has provided sound advice. where does this leave us? i believe the experience of the last four years offers some important lessons. the | 0 |
where non - banks undertake banking business, are also on the increase. the global experience can be segregated into broadly three models. there is the swedish or hong kong type model in which the banking corporate engages in in - house activities associated with banking. in germany and the uk, certain types of activities are required to be carried out by separate subsidiaries. in the us type model, there is a holding company structure and separately capitalised subsidiaries. in india, the first impulses for a more diversified financial intermediation were witnessed in the 1980s and 1990s when banks were allowed to undertake leasing, investment banking, mutual funds, factoring, hire - purchase activities through separate subsidiaries. by the mid - 1990s, all restrictions on project financing were removed and banks were allowed to undertake several activities in - house. in the recent period, the focus is on development financial institutions ( dfis ), which have been allowed to set up banking subsidiaries and to enter the insurance business along with banks. dfis were also allowed to undertake working capital financing and to raise short - term funds within limits. it was the narasimham committee ii report ( 1998 ) which suggested that the dfis should convert themselves into banks or non - bank financial companies, and this conversion was endorsed by the khan working group ( 1998 ). the reserve bank β s discussion paper ( 1999 ) and the feedback thereon indicated the desirability of universal banking from the point of view of efficiency of resource use, but it also emphasised the need to take into account factors such as the status of reforms, the state of preparedness of the institutions, and a viable transition path while moving in the desired direction. accordingly, the mid - term review of monetary and credit policy, october 1999 and the annual policy statements of april 2000 and april 2001 enunciated the broad approach to universal banking and the reserve bank β s circular of april 2001 set out the operational and regulatory aspects of conversion of dfis into universal banks. the need to proceed with planning and foresight is necessary for several reasons. the move towards universal banking would not provide a panacea for the endemic weaknesses of a dfi or its liquidity and solvency problems and / or operational difficulties arising from undercapitalisation, non - performing assets, and asset liability mismatches, etc. the overriding consideration should be the objectives and strategic interests of the financial institution concerned in the context of meeting the varied needs of customers, subject to normal pr | by 2016 β 17 from 12 per cent of gdp in 1990 β 91. along with stable form of capital flows such as fdi that come with relatively long - lasting interest in domestic entities, foreign portfolio ( both equity and debt ) capital flows have also increased making the economy ( like that of other open emerging markets ) susceptible to enhanced volatility and sudden stop or reversal risks. 9. therefore, as india β like other emerging markets β has undoubtedly benefited from globalisation, we are also more exposed than before to vulnerabilities that come in its wake. our increasing dependence on the external world is reflected in outstanding external liabilities ( both debt and non - debt ), which increased from about 30 per cent of gdp in march 2005 to 41 per cent of gdp in march 2017. india β s net international investment position ( i. e., outstanding assets minus liabilities ) has moved over the period from about β 7 per cent of gdp to β 17 per cent of gdp. this is consistent with a prolonged phase of running current account deficits which have been financed by increasing net liabilities to the rest of the world. with easing of limits over the years, there has been a rise in foreign portfolio capital flows. ( of course, this has to be appreciated in the context of the obvious economic benefits from international financial flows into 2 / 4 bis central bankers'speeches capital scarce countries ). 10. movement of capital in and out of the country is often linked to policy cycles in other countries which throw up the challenges of international policy spillovers. with every new tail event, the churn becomes larger, the volatility ever higher, threatening to overwhelm the modest defences that emerging markets are able to muster. how does one protect policy independence in such a world? do we need meaningful and deeper international policy coordination? or, universal financial safety nets rather than the asymmetric ones available at present only to a small number of countries, which is more reminiscent of apartheid rather than universality. meanwhile, emerging markets that are at the receiving end of global financial turbulence, are systematically denied access to such risk sharing. the time has come to end this sectarian approach and to make the access to swap lines equally available rather than only for the privileged. 2 while emerging markets have shown a degree of resilience to the turmoil of recent years, they remain vulnerable to liquidity and bridge financing gaps that are debilitating even if transitory. 3 against this background, building up | 0.5 |
β speeches therefore, the stimulus should be prioritized and carefully planned to leave some policy space for future needs. ladies and gentlemen, i would like to end my talk today by stressing that we now live in a different and difficult world. current global risks from the slowdown in advanced economies have clearly heightened. given good economic fundamentals, the thai economy should be resilient enough to cope with such risks. i would like to urge investors not to swing between over pessimism and over - confidence and behave in a herd - like manner. instead, all parties, public and private, should be cautious and prepared for the global risks in moving the country forward. it is my firm believe that protecting domestic purchasing power and let everyone have equal chance to benefit from the economic growth can strengthen the future well being of the thai economy in a sustainable manner in years ahead. without further delay, may i officially open the fitch ratings ( thailand ) β s 2011 10th anniversary annual conference and wish everyone a fruitful deliberation. thank you for your attention. bis central bankers β speeches | revision. a consequence of this is that the official cash rate ( ocr ) may be less predictable simply because the world in which we are making our decisions is less predictable. another challenge of uncertainty and low investment both globally and domestically is the downward pressure this creates on the global and domestic neutral interest rate. as a small open economy, our neutral interest rate is heavily driven by the global rate and we cannot escape this. a falling neutral interest rate will increasingly push the reserve bank to the limits of conventional monetary policy space, as we need to lower rates by a greater degree in order to achieve the same amount of stimulus as when the neutral rate was higher. so, what can monetary policy do to offset the effects of global uncertainty and support our long - term prosperity? monetary policy response to uncertainty the reserve bank can contribute to a stable economic environment by continuing to focus on fulfilling its dual - mandate. firstly, maintaining low and stable inflation enables organisations and individuals to carry out meaningful financial planning, by reducing overall uncertainty. this is something that is nearly impossible when prices are high and volatile or falling uncontrollably. secondly, when employment is near its maximum sustainable level, firms have a stronger incentive to make productivity - enhancing investments that raise their capacity. 5 this is hard to identify precisely, but is partly associated with the ongoing shift from manufacturing to services within the economy, with services contributing relatively lower measureable investment. 6 see nolan, pomeroy, and zheng ( 2019 ). uncertainty can affect the monetary policy response through the execution of this dualmandate. in particular, it is now more suitable for us to take a risk - management approach. in short, this means we look to minimise our regrets. we would rather act quickly and decisively, with a risk that we are too effective, than do too little, too late, and see conditions worsen. this approach was visible in our august ocr decision when we cut the rate by 50 basis points. it was clear that providing more stimulus sooner held little risk of overshooting our objectives β whereas holding the ocr flat ran the risk of needing to provide significantly more stimulus later. we can also address uncertainty through our communication and forward guidance, which are broad - ranging. we reveal our assessment of the economy β good or bad β to the public, so they can make decisions based on the best possible information amid the prevailing uncertainty. we voice the types of policies we believe may be needed to sustain long and prosperous growth β | 0 |
treasury bonds. for instance, the average size of the issues has increased. the editions have also become increasingly standardised. other means used to maintain liquidity are repurchases and bond swaps. on the other hand, the cross - border diversification in investors'portfolios has increased at a much slower rate than anticipated. rapid expansion in the euro stock market with regard to the stock markets, stock exchange trading in the euro countries was converted into euro right from the start of the emu in 1999. this means that approximately three - quarters of share trading throughout europe and one - quarter of international share trading is now in euro. if one examines this development a little more closely, it becomes clear that the increased degree of financing outside of the banking sector that can now be perceived on the interest rate markets is also visible in the stock market. it is possible to measure this development in slightly different ways, but all measures show the same picture. if we look at the development over the past ten years, we can see for instance that market capitalisation in relation to gdp has grown from approximately 20 per cent in 1990 to almost 90 per cent in 2000. this means that according to this measure, the euro countries have passed japan, while the usa is still ahead of them. it is interesting to note that the eu countries outside of the euro area are at approximately the same level as the usa, or at just over 150 per cent. however, the stock markets in the euro countries are growing rapidly. between 1995 and 2000 the value of the listed companies in the euro area grew by 276 per cent. the corresponding figure in the usa was 206 per cent. looking at the number of new issues and number of listed companies also gives a picture of a strong development in europe. all in all, there is a clear picture that companies in the euro zone use risk capital to a lesser degree than those in the usa, but that the differences are rapidly declining. the rapid developments have also put greater pressure on structural changes in the infrastructure of the stock markets. since the introduction of the euro, we have seen several examples of co - operation and mergers between stock exchanges in europe. euronext, the merger between the stock exchanges in paris, amsterdam and brussels, is one example. but, as with the interest rate markets, there are still important barriers to a complete integration in the stock market. barriers to further development of the euro market despite the positive development in trade in securities in the euro area, developments | an open mind, but without losing touch with reality. 3. german market migrates to t2s t2s showed us just how complex innovations can be in the settlement world. we all breathed a huge sigh of relief when the german market, with its central securities depository clearstream banking ag, migrated to the single shared platform ( ssp ) as scheduled at the close of business on 6 february 2017. transition work went smoothly, as did the first days of business. it truly was a resounding success β a masterpiece in cooperation across an entire industry. it β s always the case that success has many fathers, and that bon mot really is quite apt when it comes to the settlement of securities which, after all, is a network industry. every single stakeholder β the 4cb, clearstream, all the banks and other customers of clearstream β had to migrate simultaneously and adjust their systems accordingly. that β s why thanks are also due to everyone involved. i firmly believe it was an impressive accomplishment. all in all, 18 central securities depositories and their markets have now migrated to t2s since the platform was launched in june 2015. this means that t2s is a major step closer to the vision of it becoming a hub for european securities settlement. this migration was particularly noteworthy because the size of the german market effectively doubled the volume of business settled via the t2s platform. t2s has demonstrated that it can cater for whatever standards market participants expect a european securities settlement platform to meet. for german market participants, the ssp not only eases settlement by standardising and harmonising procedures but also offers them opportunities to optimise their liquidity and collateral management. 4. invitation to reception ladies and gentlemen 3 / 4 bis central bankers'speeches today β s focus session was a very special one for me. we made a conscious decision to host this session, following the german market β s transition to t2s, here in frankfurt am main. the migration of wave 4 to the ssp marks a huge step forward for each and every one of us. of course, that β s an achievement we need to celebrate. however, today β s session did more than just dwell on past achievements β we also looked to the future and the challenges it holds in store. because as a chinese saying goes, the roads of tomorrow must be built today. we, the central banks, organised this focus session for you, the market participants. you engaged with | 0 |
credit risk related to the specific borrower. this turns out to be important for two reasons. first, the growing popularity and liquidity of libor indexed contracts led to an expanded use of libor to circumstances in which the credit risk of large banks was not clearly relevant. for example, a speculative position about the future of short - term rates is predominately based on one β s view about the path of short - term interest rates, rather than how bank counterparty risk might change and affect borrowing costs. despite this shortcoming, libor remained popular because the benefit of its deeper market liquidity was viewed as more important than the added complication that libor included an element of counterparty risk. 4 second, variations in libor submissions across the submitting banks at a point in time for a given maturity should mainly reflect differences in the counterparty credit risk, since the riskfree component is common to all submitters. this is important because it means that variations in submissions may be interpreted as reflecting variations in underlying counterparty risk. this is particularly important when the libor submissions process is transparent and the market is under stress, which was the case during the financial crisis. how libor worked in practice now that i have described how libor was intended to work in concept, how did it work in practice? it turns out that unappreciated design weaknesses and incentive structures at certain large submitting banks, in combination with the phenomenal success of reference rates, undermined the system. conflicts and problems emerged both at the bank level and at the individual submitter level. investigations are on - going to determine the scale and full extent of these problems, but i would like to discuss a few of the well - documented problems. let β s start at the level of banks that submit estimates. the enforcement actions and investigations into potential libor manipulation have shown that, at times, individual institutions faced incentives to understate their hypothetical borrowing rates in order to avoid the perception that they might have higher counterparty credit risk. some of the reported misdeeds occurred during the heart of the financial crisis when market participants faced considerable uncertainty about the health of particular institutions. this uncertainty was manifest in a wide range of financial market prices for financial institutions β low and volatile equity prices, record cds spreads and greater variation in borrowing costs across different libor - submitting banks. at that time, the bba was publishing firm - specific contributions to libor from submitting banks. given this | interbank premiums in developed markets. the peso, with swings, stands now close to its levels at the statistical cutoff of june β s report. in light of these developments, output figures for the second quarter and advanced indicators for the third β which are still weak in developed economies β, the baseline scenario revises downward by 0. 2 percentage points the world growth estimate for 2011, and by half a percentage point the one for next year ( table 1 ). the biggest change is for the u. s., where, aside from the low growth seen thus far, there is the incidence of foreseeable fiscal adjustments after the approval of the higher limit for public borrowing. growth in the eurozone is still expected to be slow. also, it is foreseen that the weakening of the developed world will have an impact on emerging economies which, in any case, will continue to outperform their developed counterparts. this projected world growth forecast is lower than consensus, which at the closing of this report probably does not reflect the full effect of current financial turmoil. nonetheless, incoming reports by investment banks do carry significant downward corrections for these developed economies, in line with the assumptions that make up our baseline scenario. as i said, concerns about an overheating of the emerging world and its consequences on inflation have subsided. adjustments already made to the monetary policies of several economies, the weakening of the global economy, and the recent drop in commodity prices are behind this assessment. so, several countries have already suspended their cycles of policy rate increases and, in general, market expectations have adjusted to expect a flattened rate. in the developed economies, it is most likely that monetary policy will hold on to β or possibly even intensify β its current degree of expansiveness for some time. the federal reserve has just announced its intention to keep the fed funds rate at a minimum at least through mid - 2013 ( figure 11 ). all these facts combined will result in that the external impulse that the chilean economy will be receiving over the coming quarters will be milder than previously estimated. on one hand, the worsened global performance will have a negative impact on our trading partners β economies. however, they will continue to grow above their 2000 β 2007 average. the change in composition and weight of this group of countries, where emerging economies β especially china β have sharply increased their share, explains this result. while in 2000 emerging economies weighed less than one third in the group of chile β s trading partners, | 0 |
rate target against which bets can be laid, the pressures that build up can be quite formidable. even when the exchange rate is freely floating, and therefore theoretically free of any precise exchange rate target, when sentiment is one - sided, which is often the case in financial markets, exchange rate overshooting can be quite common. 18. largely against the background of financial crises in the 1990s, in which the choice of exchange rate regime has been a prominent issue, there has been a clear trend in thinking on what constitutes an effective and credible choice. this choice boils down to two options, in what is now commonly referred to as the two corner solutions : either an exchange rate target that is perceived to be impregnable or a regime that does not involve any exchange rate target, as in a free float. neither solution is, admittedly, immune to crisis, particularly in the case of open and liquid markets. and the precondition has to be that any exchange rate regime, if it is to be credible, is built upon sensible economic policies, strong institutions and robust market infrastructures. 19. clearly, no exchange rate regime can be perfect, and no simple regime can suit all. the present trend is towards floating regimes, though these seem to work best for the larger economies, whose foreign exchange markets are big enough to absorb voluminous capital flows, and for the smaller economies where controls and restrictions are practised. for hong kong, we have in our linked exchange rate system the most extreme case of an exchange rate target that is perceived to be impregnable β and has been proved to be impregnable under the most adverse of conditions. the link, in combination with sound fundamentals and well managed banks, has helped us through the recent crisis : not without hardship, it must be acknowledged, but with considerably less damage and uncertainty than we would have experienced had it not been in place. the tight discipline it exerts on our economy is helping to propel improvements in productivity, an important element in our current robust recovery. indeed, the evidence to date suggests that hong kong experienced one of the fastest rebounds in productivity growth in the region. labour productivity, measured in terms of gdp per person employed, registered the strongest gains of 10 % in the post - crisis period, well above other asian economies, whose gains were in the range of 5 to 8 %. because the exchange rate link suits an externally oriented, entrepot economy, it will continue to serve hong | for short - term gains. there is also the temptation, for some, to engage in manipulative behaviour, amplifying volatility and vulnerability to financial instability. 13. i do not want to give the impression that the size of a financial market can substitute for sound macroeconomic policies as a guard against volatile capital flows. indeed, i take it for granted that the authorities in the region are committed to prudent monetary, exchange - rate, and fiscal policies. but i am convinced that expanding the effective size of asian financial markets through greater integration across jurisdictions, can increase the ability of our economies to absorb the volatility of international capital, as effectively as the us and european markets. it is therefore heartening to observe that several official initiatives towards greater financial linkages in the region are bearing fruit, notably the chiang mai and the asian bond fund initiatives. i note that my colleague julia leung will describe the latter in some detail in the afternoon session. 14. having made the economic case for increased financial integration allow me to spend a few moments outlining some practical steps that may be taken to achieve it. first, it is necessary to establish linkages between jurisdictions across the whole spectrum of financial infrastructure β the trading, payment, clearing, settlement and custodian systems for money and for financial instruments. this would facilitate the movement of savings between jurisdictions and make cross - border transactions more efficient. in this age these linkages are neither difficult nor costly to establish as the technology, in the form of electronic messaging platforms of acceptable security, is already available and in international use. 15. the second element concerns the relaxation of non - supervisory restrictions, where they exist, against access by foreign financial intermediaries to the domestic financial markets. the size of financial intermediaries, measured for example in terms of capital, is often a barrier to market access ; but, as we know, size is not necessarily a good indicator of quality. capital adequacy, assessed objectively by reference to risk, provides a better safeguard. greater competition, wherever it comes from, also enhances efficiency, although allowances should be made for the weaker domestic institutions to enable them to cope and find viable long - term solutions, in the interest of financial stability. 16. the third element concerns the harmonisation of standards in the financial system. a degree of harmonisation, at least the adoption of minimum acceptable international standards, is essential for improving investor confidence and enriching the flow of capital within | 0.5 |
market which have been gradually phased out in collaboration with the federal government. the measure is helping the government β s efforts towards documentation of the economy. i would urge upon the leaders of the banking community present here, to avail this opportunity of learning from the international and regional experiences and highlight concerns, if any. your involvement is vital for success of the seminar and the subject matter itself. we are fortunate to have with us today resource persons who are professionals of international repute. at the same time, state bank, in its capacity of regulator, welcomes suggestions and recommendations for improving regulatory and supervisory systems for a clean and healthy banking sector. in conclusion, i would like to acknowledge that the prime minister β s presence has provided us tremendous support and confidence. this is reflective of the government β s resolve and priority in tackling the issues of money laundering and terrorist financing. i would like to acknowledge the support and cooperation of world bank and imf in hosting this seminar. | ishrat husain : seminar on anti - money laundering welcome speech by mr ishrat husain, governor of the state bank of pakistan, at the anti - money laundering seminar, islamabad, 29 - 30 march 2005. * * * mr. prime minister, distinguished guests, ladies and gentlemen : good morning. i am honoured to welcome you all to this international seminar on anti - money laundering. i am grateful to the prime minister for taking time out of his busy schedule and inaugurate this seminar. i would like to extend a special welcome to the foreign visitors and wish them a pleasant and productive stay in our country. the topic of the seminar is of great importance in today β s world. one of the main objectives of this seminar is to discuss the core issues, which significantly involve financial sector in the fight against money laundering and terrorist financing. i hope the seminar comes up with practical suggestions for effective tackling of money laundering and terrorist financing. while the speakers would be highlighting the technical aspects of money laundering and terrorist financing, i would like to mention a few general observations about the menaces. the process of laundering dirty money by way of placement, layering and integration is harmful for each and every segment of the society. its ill effects on society, institutions and governments have been enormous. the tainted money adversely affects productive sectors of the economy in multifarious ways. the financial sector is particularly hurt if used for laundering of ill - gotten proceeds. the adverse consequences for financial institutions include reputational risk, operational risk, legal and concentration risks. it costs the financial institutions, in the following ways : β’ loss of profitable business β’ liquidity problems through sudden withdrawal of funds β’ termination of correspondent banking facilities β’ investigations costs and fines / penalties β’ assets seizures β’ loans losses β’ use of senior management β s time in doing damage control. β’ declines in the stock value of the financial institution concerned. society, as a whole, bears the costs of money laundering in multiple ways. unchecked money laundering enables criminals to enjoy the profits of their crimes who in turn commit more crimes. when there are more frauds and robberies in banks, depositors will receive less return on their deposits and will have to pay high rates on their loans. when public projects are inflated by corruption, citizens have to pay in the form of more taxes. these acts further distort equitable distribution of wealth and, hence, increase in the incidence of poverty. terrorism in its all forms | 1 |
income compared to that of western europe. the seven countries considered here as south eastern europe have a combined population of around 53 million people, while the combined gdp in 2003, at nominal exchange rates, amounted to around 120 billion euro. this gives an average gdp per capita of around 2, 300 euro. even when one adjusts for purchasing power standards, income per capita across the region stood in 2003 at only 26 % of the eu average ( compared to the equivalent figure for the new member states of around 48 % of the eu average ). another feature common to the countries in the region is the relatively fast growth that has been experienced in recent years. annual real gdp growth in the region has been above 4 % since 2001 and catching up in real incomes is taking place. in 2003, for a third year in a row, the economies of the countries of south eastern europe grew faster, on average, than the countries in central eastern europe and the baltics that joined the eu last may however, estimates suggest that, in real gdp terms, the economies from south eastern european countries are still below from where they stood fifteen years ago, reflecting slow progress in transition in the early 1990s and economic disruptions due to wars and political turmoil. thus, in order to catch up with living standards in the eu strong growth is needed to foster real convergence. within the context of this conference south eastern europe is understood to comprise the following countries : albania, bosnia and herzegovina, bulgaria, croatia, fyr of macedonia, romania and serbia and montenegro. monetary performance across the region has also seen significant improvements in the recent past. up until 1998 no fewer than four countries in the region ( out of 7 ) had inflation rates that exceeded 20 % annually. after 1998 disinflation has proceeded and the median inflation rate among the countries in the region has remained in the single digits ever since. this is not to say that there are no challenges ahead on the disinflation front. in some cases inflation remains high and the challenge remains to continue bringing inflation down. in other cases, adjustments to administered prices and indirect prices may still cause a pick up in inflation. in those circumstances, the challenge is to avoid that temporary spikes in the inflation rate translate into increases in inflationary expectations. progress in bringing inflation down is being accomplished through a variety of monetary and exchange rate frameworks. one can classify the regimes in place in three different groups : ( i ) euro - based currency boards ( bosnia and herzegovina and bulgaria ) ; | global growth outlook is likely to persist for some time, and we need to be mindful that the prevailing financial crisis has already lasted five years, with no end in sight, the challenges facing the domestic economy are daunting. but not all of our problems can be ascribed to these global factors. there are numerous underlying structural problems in the economy which are exacerbated, but not necessarily caused, by these global developments. in line with the weak and deteriorating global outlook, the bank has been progressively downgrading its economic growth forecasts over the past year. growth in 2012 is expected to average around 2, 7 per cent, down from 3, 1 per cent in 2011. the most recent forecast for bis central bankers β speeches 2013 is a growth rate of 3, 8 per cent, but the risks are seen to be on the downside. according to reuters, the market consensus forecast for 2013 is 3, 3 per cent. growth rates of this order of magnitude will not have an appreciable impact on south africa β s unemployment rate which currently stands at 24, 9 per cent. it is instructive that during the high growth years between 2004 β 2007, when growth averaged around 5 per cent, unemployment declined to 21, 9 per cent but this was quickly reversed following the crisisinduced recession in 2009. so if these patterns are to be repeated, we would need a number of years of significantly higher growth than we are currently expecting simply to get back to pre - crisis levels of unemployment. however, the sustainable growth rate itself is constrained by the potential output of the economy, which, in turn, is determined by capacity and other structural constraints. at a simple level that implies that if we have unemployed resources or spare capacity in the economy, output can be increased in a non - inflationary manner. research done in the bank prior to the crisis showed that the potential output growth of the economy was between 4 and 4, 5 per cent. since the crisis, that has declined to around 3, 5 per cent. this decline may have been due in part to some destruction of capacity and we also now know that growth will be constrained by the lack of adequate electricity provision until sometime next year at the earliest. i should note that this does not imply that a growth rate in excess of 3, 5 per cent would necessarily be inflationary. currently the economy still has a negative output gap, which we estimate to be around 3, 5 per cent, which is indicative | 0 |
of the debate on impediments to more balanced growth. this is not to say that the necessary global adjustment process will not have repercussions on surplus countries like germany. but these processes β which are currently going on to a significant extent ( germany alone will nearly halve its net exports by roughly 80 bn euros ) β should also remain market - driven. fine tuning regional demand with pre - crisis global growth rates as a benchmark will not prove successful in my view. from a political economy perspective, it seems that the debate about reigning in imbalances through more surveillance and policy coordination risks drawing political commitment away from the efforts to reform financial markets i have just outlined. if this were to happen, we would have cause to be truly concerned. imminent challenges : exit from the rescue measures finally, i would like to make a few comments on the question of exit strategies. given the macroeconomic outlook, there is surely no need to rush for the exit at the current juncture. however, to stabilise expectations and to safeguard public confidence it is essential to develop a credible exit framework now. the challenge in terms of communications will be to make clear the difference between developing and implementing an exit framework. as a central banker, i would like to stress first that maintaining price stability has always been and will continue to be the primary objective of monetary policy in the eurosystem. hence, the monetary policy stance is determined by risks to price stability, which are fortunately currently not present at the policy relevant time horizon. our non - standard instruments allow a flexible exit which takes into account any remaining fragility on financial markets, if needed. therefore, i am fairly confident that monetary policy in the euro area will manage an orderly exit. given the enormous rise in public deficits and the strain this will put on future budgets, the fiscal exit strategy will have to kick in as soon as the recovery has firmed up, which means no later than 2011. reigning in deficits will require significant improvements in the structural balance ratio. within the european monetary union, the stability and growth pact will play an essential role in guiding fiscal consolidation. and even after correcting excessive deficits, rapid consolidation will have to continue to reach medium - term budgetary objectives and to substantially reduce debt ratios from their earlier extraordinarily high levels. we must not forget that early and decisive consolidation is not an end in itself : it will help to restore and maintain confidence in financial markets, recreate fiscal room for | this increased emphasis reflects changes both in financial markets and in the consumer population. the number of financial products and financial service providers has grown dramatically. a widening array of financial choices offers the potential for great benefits to the public, but also poses temptations. more and more people are gaining access to credit ; indeed, a host of lenders is probably inundating them with solicitations. the public can also select from a wide variety of savings vehicles, each with its special features. ideally, the result of this increase in choice is lower costs and products that more closely match consumer needs. but some consumers are not prepared to confront this array of choices. they lack the financial knowledge to evaluate the alternatives and to see future consequences. they may be too trusting of lenders that present a friendly face and promise quick and easy access to funds, and too suspicious of those that are more deliberative but offer much better deals. newcomers to this country and populations who were previously denied access to credit markets particularly need assistance in coping with the increasingly complex financial system. the federal reserve system recently launched a financial literacy campaign that includes a public - service announcement by chairman greenspan. we have developed a personal financial education web site that contains links to a large number of national, state, and local consumer education resources. on that site one can find information on such topics as on - line banking, how to http : / / www. federalreserveeducation. org / fined / index. cfm. buy a home, and accessing credit reports. individual reserve banks have also developed complementary web sites that include resources specific to their districts. the federal reserve bank of boston β s video and booklet on identity theft are among the highlights of the system β s financial education offerings. the booklet, in particular, is a best seller. the new england economic adventure continues this rich tradition and also breaks new ground. the adventure, together with the auxiliary lessons and web materials, teaches important economic principles. in particular, it emphasizes the central role of productivity growth in raising standards of living and illustrates what goes into such growth. this is an especially timely lesson right now. as you may know, over most of the past ten years u. s. productivity growth has been about double that of the previous twenty years. over the long term, productivity growth is the key to economic advancement. by way of illustration, the pickup in productivity growth from an average of just under 1 - 1 / 2 percent from 1973 to | 0 |
patrick njoroge : the role of banks and the securities markets in curbing the movement of illicit financial flows remarks by dr patrick njoroge, governor of the central bank of kenya, at the 2nd annual general meeting and conference of african organization of public account committees ( afropac ), nairobi, 30 august 2016. * * * it is a privilege for me to join this panel to discuss the role of banks and the securities markets in curbing the movement of illicit financial flows. i would like to take this opportunity to thank the african organization for public account committees ( afropac ) for inviting me to speak on this topical issue. i would also like to recognize and appreciate afropac β s role in promoting transparency and accountability in the governance of public resources. it is apt to note that the topic of illicit financial flows was recently highlighted at the 14th session of the united nations conference on trade and development ( unctad ) that recently convened in nairobi about a month ago, a meeting that brought together heads of states and governments, and key stakeholders from the business world and civil society. the damaging effects of illicit financial flows on the african continent are now welldocumented and it is only fitting that afropac has brought the issue to the fore. stemming illicit financial flows from developing countries has emerged as one of the key issues shaping the global development agenda. as you are aware, goal no. 16 of the sustainable development goals ( sdgs ) under the united nations 2030 agenda for sustainable development, commits to β significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organised crime β 1. there are good reasons for this : β’ first, the amounts involved are massive. with assistance from the imf and the world bank, the advocacy group global financial integrity ( gfi ) has estimated that africa loses about us $ 50 billion annually to illicit financial flows 2. additionally, according to the report of the high level panel on illicit financial flows, between 1970 and 2008, africa lost an estimated us $ 854 billion in illicit financial flows. 3 this amount is equivalent to the development assistance received by the continent over the same period. β’ second, illicit financial flows have far - reaching effects, particularly on the african continent. these flows and the activities that support them have been shown to lead to increasing inequality in the source countries, in addition to undermining the economic and social institutions, discouraging transparency, and undermining international development cooperation. | β’ third, all countries are involved in this fight, and there are no winners if illicit financial flows are not dealt with. it is noteworthy that the financial sector is the most common conduit for illicit financial flows. this is largely attributed to the interconnection between national and international financial united nations sustainable development goals ( september 2015 ). available at : https : / / sustainable development. un. org /? menu = 1300. global financial integrity ( 2010 ) illicit financial flows from africa hidden resource for development. available at http : / / www. gfintegrity. org / storage / gfip / documents / reports / gfi _ africareport _ web. pdf. stop it! track it! get it! report of the high level panel on illicit financial flows from africa ( 2015 ). available at http : / / www. uneca. org / sites / default / files / publicationfiles / iff _ main _ report _ 26feb _ en. pdf. bis central bankers β speeches systems, which can thereby provide a wider geographical reach through which illicit financial assets are moved and laundered. the financial sector, therefore, has to be at the forefront of the agenda to stem illicit financial flows. nevertheless, in order to develop and implement policies that would appropriately address the issue of illicit financial flows it is important to appreciate the vulnerabilities of african financial systems. more importantly, to understand how they enable or facilitate the movement of illicit financial flows. most of our economies are characterized by the presence of informal financial systems that are primarily cash based. however, significant gains have been made in increasing the level of financial inclusion, most notably in sub - saharan africa, where countries like kenya and tanzania have embraced mobile and financial products and services. but the overall level of financial inclusion in africa remains low. only a small percentage of the population has bank accounts, and the percentage of those owning insurance policies and securities is even lower. this is relevant given that it serves to hamper efforts to trace illicit financial flows from the continent. weak banking regulatory and supervisory frameworks has largely hindered the effective implementation of initiatives aimed at reducing illicit financial flows from africa. this is reflected at the national level, given that most african countries are yet to fully adopt and implement the 2012 financial action taskforce ( fatf ) recommendations, the international standards on combating money laundering and the financing of terrorism. the fatf standards are a comprehensive framework of preventive measures | 1 |
non - performing loans, which will inevitably increase the costs of the foreclosure process. this will also initially have negative effects on the overall level of non - performing mortgage loans. clearly, banks, like any other firm, can only survive if they are profitable. consequently institutions must be able to measure the costs and risks associated with each new transaction. i would like to stress here that, to guarantee their viability and to be able to adequately remunerate their capital, each individual institution must have an appropriate pricing policy allowing it to cover all the costs and risks associated with each loan, and must establish governance structures and management processes that ensure effective management of such risks. when assessing solvency and assigning an appropriate price to each new transaction, institutions will have to optimise the use of the information available on their customers. for this purpose they need to have technological solutions enabling such information to be appropriately collected and used efficiently subsequently. finally, we must remember that the application of strict standards, as required by the law, will, at least in the short term, limit the access to owner - occupied housing of certain low income groups. i sincerely believe that in the medium and long - term the effect will be more positive, by fostering greater price stability over the business cycle. we should remember that runaway growth of prices is the main factor that ultimately restricts access to owneroccupied housing. in any event, it is up to public authorities to shape the social measures that aim to guarantee decent homes for the less well off. it should be noted that construction of subsidised housing is currently at low levels, despite the economic recovery. certain initiatives in our neighbouring countries are of interest, such as the role played by the deposits and consignments fund in france or the state guarantee arrangements in the netherlands for housing up to a certain value. it is true that banks must not forget to apply strict economic criteria in their business, but it is just as true that a fair and responsible society should not be guided by economic criteria alone. 11 / 15 use of the new macroprudential tools. in the last part of my speech i would like to depart a little from the real estate credit law to discuss the new macroprudential tools recently introduced by royal decree - law 22 / 2018. as i have already mentioned, the crisis highlighted the insufficiency of microprudential supervision to identify, prevent and mitigate the materialisation of systemic risk. in | of supervision, the problems it faces, the procedures to which it resorts, the means it assigns and the resulting measures drawing the foregoing elements together. in order to meet this - in my view - fully legitimate demand, and to foment knowledge and discussion on these matters, a banking supervision report, which is at an advanced age of preparation, is shortly to be released. this will complement the new publication " estabilidad financiera " ( " financial stability " ) launched in september last year. in our capacity as a eurosystem central bank to which additional functions of great importance are entrusted, we continued to make progress in 2001 along the lines marked out for the future last year. major changes have been initiated in the areas of human resources management and technology, and the directorates banking supervision, internal audit, administration and works, note issuance and circulation, and control and accounting have been reorganised. in all these changes, the collaboration of the bank's staff has been excellent. i should thus first thank the deputy - governor and the directors - general for their support and co - operation and, on their behalf, express our profound gratitude to all the bank's staff for their positive attitude and hard work. particular acknowledgment is due to all those who, directly or indirectly, participated in the physical introduction of the euro. without their dedication and effort, the success of the changeover would not have been possible. finally, let me convey my gratitude to all the members of this council for their invaluable support and co - operation. their contributions have been fundamental in ensuring collegiate decision - making, adding depth and quality to the process. | 0.5 |
with a significant fall in its unemployment rate. today, french reforms are heading in the right direction, [ slide 5 ] in particular the tax credit for competitiveness and investment ( cice ) and the responsibility and solidarity pact ( rsp ) that enhance the competitive strength of the french economy. a policy of administrative simplification, the so - called β simplification shock β, and a new law to sustain economic growth and entrepreneurship ( β loi macron β ), are also being conducted in order to rebuild business confidence. however, we are not there yet and a number of reforms need to be complemented. in particular, in the labour market : hopefully renewed progress will be made with the draft law under discussion in parliament. finally, in the euro area, fiscal policy is now more balanced since significant adjustment has already been achieved. structural efforts and a growth recovery have led to a reduction in deficits and to a stabilisation in the ratio of debt to gdp. this more balanced policy mix is an opportunity to engage in new ways of thinking and to strengthen the recovery via stronger economic coordination in europe. the room for manoeuvre in economic policy is highly heterogeneous across european countries, and each country should use its capacity to improve the overall situation [ slide 6 ]. european countries have done quite a lot on their own, but now we can and must do more to coordinate demandside policies and structural reforms at the european level. to do so, i would like to make two proposals. 4 / strengthen investment first, we need to improve investment financing [ slide 7 ]. our efforts should be put towards financing growth and innovation and towards finding the right mix between debt and equity financing solutions, while still preserving financial stability and consumer protection. in the eu, the european commission has launched several initiatives to serve these objectives, particularly the investment plan and the capital markets union. bis central bankers β speeches second, we need to focus on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. the european fund for strategic investments ( efsi ) drives the investment plan for europe. it supports strategic investments in key areas such as infrastructure, education, research, innovation, as well as risk finance for small businesses. through the use of limited public guarantees, it aims to foster private investments totalling eur 315 billion in three years. for the first year, the plan managed to trigger around eur 76 billion of | β s approach has been that has been β too little, too late β. i would submit that the test of this is yet to come. it is well - known that monetary policy acts with a lag. it could be anywhere between 6 and 12 months, even longer before demand side pressures abate in response to an action. given this, actions taken during january β july 2010 should start to show their impact on inflation over the next 6 to 12 months. the fact that the non - food manufacturing inflation rate went up sharply during the first half of the year is in and of itself cannot be attributed to the absence of monetary actions during this year. to address that, actions would have had to be taken in the second half of 2009. but, at that point even the domestic recovery was at best in its early stages and its trajectory was quite uncertain. an anti - inflation stance in those conditions would have been rather risky. finally, as i have already mentioned, an important lesson from the crisis was the critical role of liquidity in the financial system in maintaining economic stability. the policy approach over the past few months has been very conscious of the need to balance the exit from an abnormally high liquidity situation, which the response to the crisis created with the current liquidity requirements of both the public and private sectors. conclusion to conclude, the management of current inflation requires both supply - side and demand - side approaches. monetary policy has addressed the latter with a gradual, calibrated set of actions on both interest rates and liquidity management. the pace and sequencing of the actions has been influenced by both persistent global uncertainties and the need to support the domestic recovery. this has required a balancing act between reining in inflationary expectations and adequate liquidity in the domestic financial system. while the current rate of inflation is a legitimate concern, the results of this policy stance should become visible over the next few months. | 0 |
the task of evolving our liquidity insurance framework will not end, but given the substantial reforms made to it over recent years, it is likely that the focus will shift to monetary policy implementation, as and when the mpc decides to move policy away from its current settings. as the head of the markets directorate it is not my role to speculate when the policy setting might change, but it is my job to ensure that decisions of the mpc are implemented effectively. that involves, in particular, ensuring that we have the tools needed for effective monetary control ; that is, keeping overnight market interest rates in line with bank rate. the bank β s current approach is to pay bank rate on the full balances held in reserves accounts. this is known as the β floor β system. as set out in the smf annual report, this approach remained successful at keeping sterling overnight market rates close to bank rate during 2014 β 15, with the β wedge β between policy rates and market rates relatively small over the past year. but over the year, activity in the sterling money markets remained low as the floor system, alongside a large - scale injection of reserves through qe, reduced the need for banks to transact in money markets. in the near - term, i expect that this system will remain effective at moving market rates in line with any change made to policy rates by the mpc. nevertheless, in the spirit of being prepared, and drawing on feedback from previous meetings of this committee 2, staff have developed plans should market rates persistently settle below bank rate, to such an extent that the bank decided it was necessary to intervene in support of monetary control. in such a scenario, the presumption is that the bank would issue one - week bank of england bills, draining reserves from the system. that would tend to put upward pressure on market rates, reducing the wedge that had opened up and tightening the link between policy and markets rates. the bank has a history of issuing these instruments successfully : bank of england bills were first issued in 2008, to drain excess reserves following the increased size of longterm repo operations. and bank of england bills also have the advantages of being widely tradable, offering a close substitute to deposits for most participants in the money markets, and of providing additional supply of high quality collateral. i have no particular expectation that the bank will need to issue bills in the foreseeable future, but the tool is ready if required. the move to the current floor regime | . 70 ). β’ by prioritising an international playing - field that is as level as possible and as sound as possible, speed is sacrificed. β’ second issue β some key policy discussions end up being away from home, away from the westminster parliament. mainly global in fact. β’ that global process is pretty transparent β consultative papers, speeches and so on. but perhaps not covered in any national media, including here in the uk, as much as one might expect. bis central bankers β speeches β’ but there is a deeper question here about the compatibility of domestic and global objectives. in the monetary sphere, it is well known that one cannot combine capital mobility, monetary policy focused on domestic price stability, and fixed exchange rates. solution in post - bretton woods world has been floating exchange rates. this does not mean there are no spillovers. hence information sharing in basel meetings etc. β’ there is a financial trilemma too. cannot combine cross - border banking, and an integrated international financial system more generally ; financial stability ; and national policies focused solely on domestic stability. β’ came home to roost in the crisis : global banks were, as mervyn king put it, β international in life but national in death β. financial autarky is not the answer. β’ solution : co - ordination and co - operation on the resolution of global banks. g20 financial stability board has led the way here. real progress. β’ means foreign countries have a stake in our banks, and vice versa. means the key policies are unavoidably international, global. as a trading nation we should welcome that. i hope these brief remarks provide the basis for a good discussion. in short, the traditional roles of central banks β for the first time ever reflected in uk legislation β touch every household and business in this country and, in truth, more widely. we need to be clear about what we can do and what we cannot do ; we need to operate consistently within our remit ; and above all we must be sufficiently transparent to make proper accountability realistic. that is what trust requires, and we are in the business of trust β trust in the value of money. bis central bankers β speeches | 0.5 |
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